Marx 200: Carney, Bowles and Varoufakis

As the 200th anniversary of Marx’s birth gets closer, a host of conferences, articles and books on the legacy of Marx and his relevance today are emerging – including my own contribution.  The most interesting was a speech last week by the governor of the Bank of England, Mark Carney in his homeland of Canada.

In his speech at a ‘Growth Summit’ to the Public Policy Forum in Toronto, Carney set out to be provocative and headline catching with a statement that Marxism could once again become a prominent political force in the West.  “The benefits, from a worker’s perspective, from the first industrial revolution, which began in the latter half of the 18th century, were not felt fully in productivity and wages until the latter half of the 19th century. If you substitute platforms for textile mills, machine learning for steam engines, Twitter for the telegraph, you have exactly the same dynamics as existed 150 years ago (actually 170 years ago –MR )– when Karl Marx was scribbling the Communist Manifesto.”

Just as the first industrial revolution in early 19th century Britain led to the collapse of traditional jobs and held down real wages for a generation in the first two decades of the 19th century, so in this current Long Depression globally, with the advent of robots and AI, a new industrial revolution threatens to destroy human labour and livelihoods.

In 1845, Engels wrote, The condition of the working class in England, which exposed the misery and poverty engendered by the replacement of manual skills with machines and kept real incomes stagnant.  Now, says Carney, Marxism might again be relevant with a new burst of ‘capital bias’ (ie a rise in machines relative to human labour power).

Automation may not just destroy millions of jobs.  For all except a privileged minority of high tech workers, the collapse in the demand for labour could hold down living standards for decades.

In such a climate, “Marx and Engels may again become relevant”, said Carney.

Without realising it, Carney was reiterating Marx’s general law of capitalist accumulation outlined in Volume One of Capital (Chapter 25), written some 160 years ago, that capitalist accumulation will expand and promote machines to replace human labour but this will not lead automatically to higher living standards, less toil and more freedom for the individual, but mostly to downward pressure on real incomes, not only of those losing their jobs to machines, but in general.  It would also lead to more not less toil for those with jobs, while leaving millions in a state of ‘precarious labour’ – a reserve army for capital to exploit or dispense with as the cycle of accumulation demands. (see Capital Volume One p782-3 and my new book, pp32-37).

Carney’s view of the robot revolution leading to massive job losses has much empirical backing.  However, as Marx pointed out in Capital, it is not a one-sided collapse in jobs.  Technology also creates new jobs and raises the productivity of labour and, depending on the balance of forces in the class struggle between capital and labour over the value created, real incomes can also rise.  This happens in periods when profitability is improving and more labour comes into the market.

Of course, this ‘happy’ side of capitalist accumulation is the one that mainstream economics likes to promote, contrary to Carney’s worries.  For example, Paul Ormerod, commented on Carney’s view of the relevance of Marx. You see, Marx was completely wrong on a fundamental issue.  Marx thought, correctly, that the build up of capital and the advance of technology would create long term growth in the economy.  However, he believed that the capitalist class would expropriate all the gains.  Wages would remain close to subsistence levels – the “immiseration of the working class” as he called it.”

In fact, says Ormerod, “living standards have boomed for everyone in the West since the middle of the 19th century.  Leisure hours have increased dramatically and, far from being sent up chimneys at the age of three, young people today do not enter the labour force until at least 18.”  Apparently prosperity is the order of the day: “every single instance of an economy which enters into the sustained economic growth of the market-oriented capitalist economies, from early 19th century England to late 20th century China.  Once this is over, the fruits of growth become widely shared.”

There are several points here that I have taken up in many previous posts.  First, Marx did not hold to a theory of ‘subsistence wage levels’.  As for the argument that capitalism has taken everybody out of poverty and reduced toil and misery, it is full of holes.  Note that Ormerod talks of “everyone in the West”, thus giving the lie to billions outside ‘the West’ that remain in poverty by any definitions.  See my detailed posts on the level of poverty globally here.

And contrary to Ormerod’s view (as that of Keynes before him), the rise of technology under capitalism has not led to much reduction in toil.  I have shown that most people in “the West” continue to have working lives (in hours per year) much as they did in 1880s or the 1930s; they may work less hours per day on average and get Saturdays and Sundays off (for some), but they still put in over 1800 hours a year and work longer overall (50 years or so).

Ormerod also argues that inequality of incomes and wealth is not getting worse and labour’s share in national income has stopped falling, contrary to Carney.  Well, there is a wealth of evidence that wealth and income inequality is not improving, both globally between nations and within national economies.

Ormerod is right, however, to question Carney’s one-sided model of capitalism.  Labour’s share of total value created can rise and fall in different periods depending on the balance of class forces and impact of accumulation; and Carney’s own graph shows that real wages did not just stagnate in the first industrial revolution or now, but also in the 1850s and 1860s; and in the first quarter of the 20th century.  So there is more to this issue than technology.  The current stagnation in real wages in the UK and the US is more a product of the Long Depression of the last ten years than robots or AI, which have hardly started to have an impact yet (labour productivity growth is low or slowing in most economies).  The profitability of capital itself and the strength of labour in the battle over value created are more relevant.

Unfortunately it is not just mainstream economists who either distort or dismiss Marx’s economic theory.  In an article for Vox, eminent and longstanding Marxist economist Sam Bowles writes on the legacy of Marx’s economic ideas in order to dismiss them.  He agrees with Keynes’ view that Capital is “an obsolete economic textbook [that is] not only scientifically erroneous but without interest or application to the modern world” (Keynes 1925). And he agrees with 1960s mainstream economic guru, Paul Samuelson’s judgement that “From the viewpoint of pure economic theory, Karl Marx can be regarded as a minor post-Ricardian…and who in turn was “the most overrated of economists” (Samuelson 1962).

Bowles considers that Marx’s labour theory of value was “pioneering, but inconsistent and outdated”. According to Bowles, Marx’s labour theory of value as a representation of a general system of exchange and his theory of the tendency of the profit rate to fall “did not resolve the outstanding theoretical problems of his day, but rather anticipated problems that would later be addressed mathematically.”  Bowles reckons that mainstream economics, in particular neoclassical marginalism, went on to sort out Marx’s failures by replacing his value theory.  And this has also led to dropping the idea of social ownership of the means of production to replace the capitalist mode. “Modern public economics, mechanism design and public choice theory has also challenged the notion – common among many latter-day Marxists, though not originating with Marx himself – that economic governance without private property and markets could be a viable system of economic governance.”

Apparently, all that is left of Marx’s legacy is what Bowles calls “despotism in the workplace”, the exploitive nature of capitalist production; which is not due to the exploitation of labour power for surplus value; but the ‘power structure’ where moguls and managers rule the roost over the worker serfs.  Thus we are reduced to a political theory (and even that is not much in common with Marx’s political theory for that matter) as Marx’s economic ideas are ‘outdated’ or false.

Well, all Bowles arguments (and those of Keynes and Samuelson) have been taken up by me in various posts in the past, and more thoroughly in my new book, Marx 200.  In short, we can show that Marx’s value theory is logical, consistent and backed empirically.  It even provides a compelling explanation of relative price movements in capitalism, though that is not its main aim.  Its main aim is to show the particular form that the capitalist mode of production takes in exploiting human labour for profit;  and why that system of exploitation has inherent contradictions that cannot be resolved without its abolition.

Moreover, the Marxist critique of capitalism is based on economics and leads to revolutionary political action; so it is not (just) a moral critique of ‘despotism’ in the workplace or anywhere else.  The market economy (capitalism) cannot deliver the full development of human potential because despotism in the workplace is a product of the exploitation of labour by capital.

Yanis Varoufakis recognises this in his long article on Marx and Engels’ Manifesto of the Communist Party to promote his new introduction to that masterpiece.  Varoufakis writes a colourful, if over flowery, article emphasising one great message of Marx and Engels’ CM: that capitalism is the first mode of production that has become global.  Varoufakis sees this process as only being completed with the fall of the Soviet Union and other ‘communist’ states that blocked globalisation until then. That is probably an exaggeration.  Capitalism from the start aimed to expand globally (as Marx and Engels explain in the CM).  After the end of the depression of the 1870 and 1880s, there was startling expansion of capital worldwide, now named imperialism, based on flows of capital and trade.

While correctly recognising the powerful (happy?) effect of capitalism globally, Varoufakis also emphasises the dark side: of alienation, exploitation, imperialism and despotism: “While celebrating how globalisation has shifted billions from abject poverty to relative poverty, venerable western newspapers, Hollywood personalities, Silicon Valley entrepreneurs, bishops and even multibillionaire financiers all lament some of its less desirable ramifications: unbearable inequality, brazen greed, climate change, and the hijacking of our parliamentary democracies by bankers and the ultra-rich.”

And, contrary to the conventional mainstream view, Varoufakis argues that Marx and Engels were right that class struggle under capitalism can be boiled down to a battle between capital and labour.  “Society as a whole,” it argues, “is more and more splitting up into two great hostile camps, into two great classes directly facing each other.” As production is mechanised, and the profit margin of the machine-owners becomes our civilisation’s driving motive, society splits between non-working shareholders and non-owner wage-workers. As for the middle class, it is the dinosaur in the room, set for extinction.”

And he sees that capitalism must be replaced, not modified or corrected for its faults.  “It is our duty to tear away at the old notion of privately owned means of production and force a metamorphosis, which must involve the social ownership of machinery, land and resources.   Only by abolishing private ownership of the instruments of mass production and replacing it with a new type of common ownership that works in sync with new technologies, will we lessen inequality and find collective happiness.”

Varoufakis recognises the ‘irrationality’ of capitalism as a system for human progress and freedom, but this self-confessed ‘erratic Marxist’ does not present the material explanation for this irrationality, apart from growing inequality and inability to use new technology to benefit all.  Capitalism also suffers from regular and recurrent crises of production that destroy and waste value created by human labour.  These crises are of ‘overproduction’, unique to capitalism and regularly throw human development backwards.  This aspect of capitalism’s irrationality is missing from Varoufakis’ article, although it was expressed vividly by Marx and Engels in the CM.  See the striking passage in CM where Marx and Engels start by explaining “the need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe” and finishes with “paving the way for more extensive and more destructive crises and diminishing the means whereby crises are prevented”.

And a theory of crises is important.  People can live with rising inequality, with relative poverty even, even wars etc, as long as, for them, things improve gradually each year without break.  But gradual improvement in living standards is not possible because capitalism has regular and recurrent slumps in production, investment and employment built into its system, which can last for a generation in depressions – as Carney’s graphs show.  That is a fundamental character of capitalism’s irrationality.

Marx’s economic theories are often trashed or disputed – fair enough in a debate for truth.  But when each critical argument is analysed, it can be found to be weak, in my view.  Marx’s laws of motion of capitalism: the law of value; the law of accumulation and the law of profitability still provide the best and most compelling explanation of capitalism and its inherent contradictions.  And I am leaving out the great contribution that Marx and Engels made to the understanding of human historical development – the materialist conception and the history of class struggle – that lie at the basis of human actions. “Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.”

As the Manifesto says (and Varoufakis echoes in his article), capitalism has taken the productive forces of human labour to unprecedented heights, but dialectically it has also brought new depths of depravity, exploitation and wars on a global scale.  Marx’s legacy is to show why that is and why capitalism cannot last if human society is to go forward to the “free development of each” as the “condition for the free development of all”.  Marx’s ideas remain even more relevant in the 21st century than the 19th.  But understanding is not enough.  As the epitaph on Marx’s tomb in Highgate cemetery, London inscribes from Marx’s Theses on Feuerbach: “The philosophers have only interpreted the world, in various ways; the point is to change it”.

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3 Responses to “Marx 200: Carney, Bowles and Varoufakis”

  1. Tony of CA Says:

    I sincerely believe most rational folks know Marx was ultimately correct in his summary of the capitalistic system structure; they are just afraid to admit it in a public forum.

  2. Tony of CA Says:

    Especially the western political class.

  3. jlowrie Says:

    ” Wages would remain close to subsistence levels – the “immiseration of the working class” as he called it.”

    But of course ‘immiseration’ is not about wage levels at all. It conceptualises the idea that the modern proletariat is ‘without objective capacity for production……The total exclusion of objective wealth remains the essential characterisation of the worker’s situation under the capitalist mode of production” (cf the discussion in Saito, ”Capital, Nature and the Unfinished Critique of Political Economy” Pp44-51). A highly recommended book!

    We can see the wonderfully predictive capacity of Marx’s analysis in the recent expropriation of hundreds of millions of Chinese and Indian peasants, driven into the cities as day labourers’.e. their immiseration. I think in Chinese they are designated as ‘Low-end people.’ What would that be in German now: Untermenschen?

    ”Bowles reckons that mainstream economics, in particular neoclassical marginalism, went on to sort out Marx’s failures by replacing his value theory.” Marginalism, is that not the ‘theory’ that begins the explanation of value with ‘a glass of water in the desert’?

    Maybe it got there on a magical flying carpet. There are certainly more plausible fictions in the ”Arabian Nights,” but one does not get so highly remunerated for recounting them to gullible students. All economists should have to declare their wealth and who exactly is paying them. What are bourgeois economists anyway, but pressstitutes with PH.D’s ? Meanwhile capitalism hurls humanity headlong towards a cataclysm.

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