griffjam
5th April 2009, 16:48
Marxist economics were not necessarily the major advance in socialist economics that some people think. Marx was not the first to use the labor theory of value, itself a development of bourgeois economics, as an indictment against the capitalist system. Neither was he the first to use dialectics to critique the capitalist system. Marx's claim to originality lies in the blending of the labor theory of value into his theory of dialectical materialism. Where earlier socialist economists criticized capitalism because it did not obey its own law of value, Marx argued, on the contrary, that it did, and that ultimately this would lead to its own destruction. What other labor value theorists ignored, Marx claimed, was that the exchange of goods at their labor value went hand in hand with the sale of labor power at its commodity equivalent. Thus any attempt to use the labor theory of value to create a more just society based on the free exchange of goods, was utopian at best, if not totally reactionary.
Marx's economic theory rests on a few central ideas, the labor theory of value, the commodity theory of labor power, and dialectical materialism. If these ideas can be disproved, the marxist theoretical edifice collapses. To begin, let's look at the labor theory of value. Marx's main argument for the labor theory of value is that labor is the thing which all commodities have in common, and that therefore this allows different commodities to be exchanged. There can be little dispute that labor is the major factor in production. Yet labor is not the only thing which commodities have in common. Their production also requires the use of scarce natural resources and energy.
Scarcity does play a role in determining the value of commodities. Commodities which are the products of scarce raw materials exchange at higher value than do commodities made with raw materials of greater availability. Marx unintentionally admitted as much in his theory of land rent. Marx criticized Ricardo's theory of rent because Ricardo pointed out that land rents at different rates based on fertility, without accounting for "absolute rent", the minimum rental rate based upon the least fertile land. The source of absolute rent, Marx argued, is the monopoly of landowners on all fertile land, which prevents capitalist farmers from producing agricultural goods without paying the landlord a fee for using the land. Rent, therefore, is a surplus value extracted from agriculture beyond the surplus value obtained in the production of agricultural commodities. What did not occur to Marx is that since land is not itself a manufactured good and thus has no labor value, the paying of a "surplus value" to the landlord is qualitatively different than the extraction of a surplus through the manufacturing of commodities. It is an acknowledgment of the fact that scarce raw materials, such as arable land, do have exchangeable value, regardless of whether the landlord is entitled to receive that value or not. Energy, like scarce raw materials, also contributes to the value of commodities. As production becomes more mechanized, the amount of human labor required to produce a commodity decreases. However, the non-human energy required to produce the commodity goes up. Energy, since it comes from the consumption of scarce fuels, has value. Unlike other scarce materials, however, energy can not be recycled. Unlike machinery, or "constant capital" it does not accumulate nor depreciate. As production becomes more mechanized, the labor value of the commodity goes down, while its energy value rises, and partially offsets the labor saving involved. The rising cost of energy due to both an increased demand and diminishing supply, will act to prevent the value of commodities from falling close to zero, as predicted by Marx's labor value theory. This trade off between energy and labor, probably explains the rise of the modern "post-industrial" service economy, in which manufactured goods of low labor value but high energy value, are exchanged for labor-intensive services.
There are, of course, other factors besides scarcity, labor, and energy, which affect the value of goods and services. The costs of maintaining the physical and social infrastructure, come into play, as well as aesthetics, culture, and perhaps many other influences. The point is that labor power alone, does not determine exchange value in capitalist society, nor will it in any future society. Without the labor theory of value, however, the main driving force in Marx's theory is lost. Capitalism will not collapse because of its inability to extract a surplus from a diminishing labor force.
On the other hand, Marx did not solely base his prediction that capitalism would collapse on the "falling rate of profit", but also on the increased class conflict due the commodity theory of labor power. According to this theory, under capitalism labor power is exchanged just like any other commodity. Its value is not the whole of the product which it produces, but only that portion necessary to keep the worker alive and to feed his/her children, the next generation of workers. Marx, to distinguish his theory from the so-called "iron law of wages", qualified this theory by saying that the level of necessary wages was "culturally determined". Thus the wage levels of workers must include more than just the bare minimum to stay alive, but also must include the costs of education, and be able to sustain the workers and their families at a standard considered appropriate for that country. Marx acknowledged that the trade unions played a necessary role in keeping up this standard of living. However, the increasing mechanization of industry, would undermine the efforts of the unions by pitting them against a growing reserve army of the unemployed, driving wage levels ever lower, until the desperate workers would overthrow capitalism. Unfortunately, the commodity theory of labor power has even less to back it up than the labor theory of value. The weak spot in Marx's argument is his admission that subsistence wages are "culturally determined" and influenced by union efforts. No longer are we dealing with economic laws, but with a host of other variables like the level of union organization, working class rebelliousness, and cultural expectations about what is an acceptable standard of living. All these exceptions to the rule that wage rates are tied to some minimum, invalidate the rule itself. The history of the past century, the victories won by the union movement and the rise of the capitalist welfare state, demonstrate the fallacy of Marx's argument.
What is more, the labor theory of value and the commodity theory of labor power contradict each other. According to Marx, the labor theory of value must result in a falling rate of profit. Marx tried to prove this mathematically with his equation for profit rate, p.r.=s/(c+v), where s is surplus value, c is the amount of constant capital invested in machinery, and v the variable capital paid out in wages. If the amount of constant capital, c, rises while the other two variables remain constant (ie. a constant rate of exploitation of labor, s/v), the overall rate of profit must fall. However, this ignores the fact that as commodities become cheaper due to improved production methods, workers can purchase more goods with less wages. For there to be a falling rate of profit, workers real wages (purchasing power) have to rise above subsistence level. On the other hand, this would mean that the commodity theory of labor power was invalid.
Marx insisted that both theories were true, regardless of the contradictions, because they were necessary to his theory of dialectical materialism. According to Marx, capitalism must develop the means of production to the point where the private ownership of the means of production is no longer historically necessary. This is an article of faith, however, since there is no reason to conclude that communism must necessarily follow capitalism. Dialectical materialism reduces history to a single cause, the quest for greater economic productivity. Supposedly history can be fitted into so many categories based upon a civilization's increasingly powerful "mode of production", eg. asiatic, feudal, capitalist and, by extension, socialist. This model of historical change leaves out many historical variables, like the role of political institutions, ideology, culture, etc., or treats them as secondary effects or "superstructure". Many historical events have no economic explanation at all, for instance, the conquest of the Roman empire by relatively economically backward invaders.
On the other hand, even supposing dialectical materialism were true, it does not provide a basis for predicting capitalism's successor. According to dialectics, the successor to capitalism must in some way be a negation of capitalism, and in some way a continuation. Marx arbitrarily concluded that what would be negated was capitalism's "anarchic" unplanned, exchange system, but that the technological advances made under capitalism would be preserved. As empirical evidence for his position, Marx cited the growing centralization of production in the hands of corporations and the state. This allowed economic planning to go beyond the single factory, to embrace a global network of factories, industries, and regions. Marx saw this as a dialectical tendency in the direction of communism. As capitalism gave way to more centralized planning, the absurdity of private ownership would become obvious to everyone and the remaining capitalists would be expropriated.
Now that a century has passed since Marx laid down his doctrines, it is clear that the centralization of capital has not brought about progress towards communism. What has occurred is a tremendous growth in economic bureaucracy, both at the government and corporate levels. Instead of disappearing, the capitalists have melded into the ranks of corporate executives. The lower level corporate and state functionaries have joined with the small business people and expanded the middle class. Certainly this bureaucratization is a "negation" of old-style capitalism, but it is not a step closer to communism. A class society, when left to its own dialectic, does not develop into a classless society, but just a different type of class society. The ultimate irony has been in those countries where marxism "succeeded" in overthrowing capitalism for a time. Marxism became the official ideology of a new class society. It became its own negation, an Hegelian joke on humanity.
Marx's real contribution to economics was as a capitalist economist. By concentrating on capitalism's economic "contradictions" and helping to reveal the reasons for economic crises, Marx helped to lay the theoretical groundwork for the welfare state capitalism of the 20th century. State intervention in the economy did not undermine capitalism, but helped it gain stability and entrap the labor movement in a policy of class collaboration. Marxism, with its dialectical faith that the growth of capitalism would eventually lead to socialism, only helped rationalize the political opportunism of its followers. Workers could be sacrificed today as long as it helped develop the means of production to the point needed for communism. History would take care of the rest.
Whatever the merits of dialectical logic, it is useless as a tool for building a new society. The means for building a classless society can not be discovered by criticizing capitalism. Criticism itself, is impossible without some ideas of how things could be made better. Thus dialectics is not free of "a priori" assumptions, which the Hegelians claimed were the problem of empirical science. Marx assumed that communism would be the next mode of production after capitalism, and assumed what its characteristics would be, although he did not draw up a detailed blueprint. He then tried to show that this was the direction in which things were going, and ignored or explained away evidence to the contrary. History has proven him wrong. The quest for increasing economic productivity has not brought about the emancipation of the workers.
The economics of a classless society can only be discovered by studying conscious attempts at creating workplaces and regional economies where workers are not exploited. This means researching co-operatives, communes, and the economies of countries undergoing social revolutions. The successes and failures of these will suggest what the limits and possibilities actually are.
Marx's economic theory rests on a few central ideas, the labor theory of value, the commodity theory of labor power, and dialectical materialism. If these ideas can be disproved, the marxist theoretical edifice collapses. To begin, let's look at the labor theory of value. Marx's main argument for the labor theory of value is that labor is the thing which all commodities have in common, and that therefore this allows different commodities to be exchanged. There can be little dispute that labor is the major factor in production. Yet labor is not the only thing which commodities have in common. Their production also requires the use of scarce natural resources and energy.
Scarcity does play a role in determining the value of commodities. Commodities which are the products of scarce raw materials exchange at higher value than do commodities made with raw materials of greater availability. Marx unintentionally admitted as much in his theory of land rent. Marx criticized Ricardo's theory of rent because Ricardo pointed out that land rents at different rates based on fertility, without accounting for "absolute rent", the minimum rental rate based upon the least fertile land. The source of absolute rent, Marx argued, is the monopoly of landowners on all fertile land, which prevents capitalist farmers from producing agricultural goods without paying the landlord a fee for using the land. Rent, therefore, is a surplus value extracted from agriculture beyond the surplus value obtained in the production of agricultural commodities. What did not occur to Marx is that since land is not itself a manufactured good and thus has no labor value, the paying of a "surplus value" to the landlord is qualitatively different than the extraction of a surplus through the manufacturing of commodities. It is an acknowledgment of the fact that scarce raw materials, such as arable land, do have exchangeable value, regardless of whether the landlord is entitled to receive that value or not. Energy, like scarce raw materials, also contributes to the value of commodities. As production becomes more mechanized, the amount of human labor required to produce a commodity decreases. However, the non-human energy required to produce the commodity goes up. Energy, since it comes from the consumption of scarce fuels, has value. Unlike other scarce materials, however, energy can not be recycled. Unlike machinery, or "constant capital" it does not accumulate nor depreciate. As production becomes more mechanized, the labor value of the commodity goes down, while its energy value rises, and partially offsets the labor saving involved. The rising cost of energy due to both an increased demand and diminishing supply, will act to prevent the value of commodities from falling close to zero, as predicted by Marx's labor value theory. This trade off between energy and labor, probably explains the rise of the modern "post-industrial" service economy, in which manufactured goods of low labor value but high energy value, are exchanged for labor-intensive services.
There are, of course, other factors besides scarcity, labor, and energy, which affect the value of goods and services. The costs of maintaining the physical and social infrastructure, come into play, as well as aesthetics, culture, and perhaps many other influences. The point is that labor power alone, does not determine exchange value in capitalist society, nor will it in any future society. Without the labor theory of value, however, the main driving force in Marx's theory is lost. Capitalism will not collapse because of its inability to extract a surplus from a diminishing labor force.
On the other hand, Marx did not solely base his prediction that capitalism would collapse on the "falling rate of profit", but also on the increased class conflict due the commodity theory of labor power. According to this theory, under capitalism labor power is exchanged just like any other commodity. Its value is not the whole of the product which it produces, but only that portion necessary to keep the worker alive and to feed his/her children, the next generation of workers. Marx, to distinguish his theory from the so-called "iron law of wages", qualified this theory by saying that the level of necessary wages was "culturally determined". Thus the wage levels of workers must include more than just the bare minimum to stay alive, but also must include the costs of education, and be able to sustain the workers and their families at a standard considered appropriate for that country. Marx acknowledged that the trade unions played a necessary role in keeping up this standard of living. However, the increasing mechanization of industry, would undermine the efforts of the unions by pitting them against a growing reserve army of the unemployed, driving wage levels ever lower, until the desperate workers would overthrow capitalism. Unfortunately, the commodity theory of labor power has even less to back it up than the labor theory of value. The weak spot in Marx's argument is his admission that subsistence wages are "culturally determined" and influenced by union efforts. No longer are we dealing with economic laws, but with a host of other variables like the level of union organization, working class rebelliousness, and cultural expectations about what is an acceptable standard of living. All these exceptions to the rule that wage rates are tied to some minimum, invalidate the rule itself. The history of the past century, the victories won by the union movement and the rise of the capitalist welfare state, demonstrate the fallacy of Marx's argument.
What is more, the labor theory of value and the commodity theory of labor power contradict each other. According to Marx, the labor theory of value must result in a falling rate of profit. Marx tried to prove this mathematically with his equation for profit rate, p.r.=s/(c+v), where s is surplus value, c is the amount of constant capital invested in machinery, and v the variable capital paid out in wages. If the amount of constant capital, c, rises while the other two variables remain constant (ie. a constant rate of exploitation of labor, s/v), the overall rate of profit must fall. However, this ignores the fact that as commodities become cheaper due to improved production methods, workers can purchase more goods with less wages. For there to be a falling rate of profit, workers real wages (purchasing power) have to rise above subsistence level. On the other hand, this would mean that the commodity theory of labor power was invalid.
Marx insisted that both theories were true, regardless of the contradictions, because they were necessary to his theory of dialectical materialism. According to Marx, capitalism must develop the means of production to the point where the private ownership of the means of production is no longer historically necessary. This is an article of faith, however, since there is no reason to conclude that communism must necessarily follow capitalism. Dialectical materialism reduces history to a single cause, the quest for greater economic productivity. Supposedly history can be fitted into so many categories based upon a civilization's increasingly powerful "mode of production", eg. asiatic, feudal, capitalist and, by extension, socialist. This model of historical change leaves out many historical variables, like the role of political institutions, ideology, culture, etc., or treats them as secondary effects or "superstructure". Many historical events have no economic explanation at all, for instance, the conquest of the Roman empire by relatively economically backward invaders.
On the other hand, even supposing dialectical materialism were true, it does not provide a basis for predicting capitalism's successor. According to dialectics, the successor to capitalism must in some way be a negation of capitalism, and in some way a continuation. Marx arbitrarily concluded that what would be negated was capitalism's "anarchic" unplanned, exchange system, but that the technological advances made under capitalism would be preserved. As empirical evidence for his position, Marx cited the growing centralization of production in the hands of corporations and the state. This allowed economic planning to go beyond the single factory, to embrace a global network of factories, industries, and regions. Marx saw this as a dialectical tendency in the direction of communism. As capitalism gave way to more centralized planning, the absurdity of private ownership would become obvious to everyone and the remaining capitalists would be expropriated.
Now that a century has passed since Marx laid down his doctrines, it is clear that the centralization of capital has not brought about progress towards communism. What has occurred is a tremendous growth in economic bureaucracy, both at the government and corporate levels. Instead of disappearing, the capitalists have melded into the ranks of corporate executives. The lower level corporate and state functionaries have joined with the small business people and expanded the middle class. Certainly this bureaucratization is a "negation" of old-style capitalism, but it is not a step closer to communism. A class society, when left to its own dialectic, does not develop into a classless society, but just a different type of class society. The ultimate irony has been in those countries where marxism "succeeded" in overthrowing capitalism for a time. Marxism became the official ideology of a new class society. It became its own negation, an Hegelian joke on humanity.
Marx's real contribution to economics was as a capitalist economist. By concentrating on capitalism's economic "contradictions" and helping to reveal the reasons for economic crises, Marx helped to lay the theoretical groundwork for the welfare state capitalism of the 20th century. State intervention in the economy did not undermine capitalism, but helped it gain stability and entrap the labor movement in a policy of class collaboration. Marxism, with its dialectical faith that the growth of capitalism would eventually lead to socialism, only helped rationalize the political opportunism of its followers. Workers could be sacrificed today as long as it helped develop the means of production to the point needed for communism. History would take care of the rest.
Whatever the merits of dialectical logic, it is useless as a tool for building a new society. The means for building a classless society can not be discovered by criticizing capitalism. Criticism itself, is impossible without some ideas of how things could be made better. Thus dialectics is not free of "a priori" assumptions, which the Hegelians claimed were the problem of empirical science. Marx assumed that communism would be the next mode of production after capitalism, and assumed what its characteristics would be, although he did not draw up a detailed blueprint. He then tried to show that this was the direction in which things were going, and ignored or explained away evidence to the contrary. History has proven him wrong. The quest for increasing economic productivity has not brought about the emancipation of the workers.
The economics of a classless society can only be discovered by studying conscious attempts at creating workplaces and regional economies where workers are not exploited. This means researching co-operatives, communes, and the economies of countries undergoing social revolutions. The successes and failures of these will suggest what the limits and possibilities actually are.