Marxist Economic Theory
I suppose it should not be surprising that Marxian economic theory is little studied in the United States; I understand that the works of Paul Samuelson are largely ignored in the Soviet Union. Yet there is a reason for the lack of attention paid to Marxian economics in our universities, beyond their heretical nature. It is because so much of the work of Marx is either impossibly difficult to understand or—to mention the unmentionable—terribly boring to study.
Of course there are parts of the Marxian canon to which these words could never apply: the Manifesto, the brilliant historical essays, the best parts of Capital—above all, the unforgettable picture of the Working Day, the passionate chapter on Primitive Accumulation, and the apocalyptic climax to Volume 1 where the integument bursts asunder and the expropriators are expropriated. But for the student who wants to master the system of Marxian economics, the task of reading the 2,000 pages of Capital is enough to daunt all but a very few. Much of the argument is tediously drawn out and, in critical places, obscure or incorrect, such as the famous transition from value to prices. There is no discernible orderly progression within the work which seems continuously to double back on itself. And the empirical material, however interesting as historical illustration, is hopelessly out of touch with the realities of modern-day capitalism.
As a result, those few intrepid students who set out to discover what Marxian economics is all about are usually forced to revert to a secondary source, of which the best for many years has been Paul Sweezy’s The Theory of Capitalist Development. The trouble with such books, however, is that essentially they are efforts to unscramble and clarify the Master, rather than efforts to restate, de novo, and on the basis of fresh evidence, the theoretical explanation of capitalism inherent in Marx’s approach. Hence the belated appearance of Ernest Mandel’s book (first published in France seven years ago) is an event of great importance. For the purpose of this carefully organized, lucidly written, and strongly argued book is, in Mandel’s italicized words, “to start from the empirical data of the science of today to examine whether or not the essence of Marx’s economic propositions remains valid.”
Mandel is a well-known Marxist writer and critic, the editor of the Belgian paper La Gauche, and clearly a person of great erudition. Thirty-six pages of bibliographic references testify to the breadth of research that has gone into this work. What is more noticeable about the list of citations, however, is the relatively small percentage of standard Marxist works it contains. An inexpressibly refreshing sense of release from the intellectual straitjacket of past Marxology is announced in the Introduction, where Mandel writes:
The reader who expects to find numerous quotations from Marx and Engels or their chief disciples will close this book disappointed. Unlike all the writers of Marxist economic textbooks, we have strictly abstained (with very few exceptions) from quoting the sacred texts or interpreting these quotations. As against that, we quote abundantly from the chief economists, economic historians, ethnologists, anthropologists, sociologists and psychologists of our times, in so far as they express opinions on phenomena relating to the economic activity, past, present, or future, of human societies. What we seek to show is that it is possible, on the basis of the scientific data of contemporary science, to reconstitute the whole economic system of Karl Marx. Furthermore, we seek to show that only Marx’s economic teaching makes possible this synthesis of the totality of human knowledge, and above all a synthesis of economic history and economic theory, just as it alone makes possible a harmonious integration of micro-economic and macro-economic analysis.
Has Mandel succeeded in this ambitious task? Before passing judgment, let me review the main line of his argument by contrasting the view of economic theory as it appears from a Marxian perspective with that of economics as we ordinarily learn it in the “neo-classical” version that is our standard fare in college.
The critical difference emerges at the very outset. “Economics,” writes Paul Samuelson in his famous text (7th ed., p. 5)
is the study of how men and society (sic) choose, with or without the use of money, to employ scarce productive resources, which could have alternative uses, to produce various commodities over time and distribute them for consumption, now and in the future, among various people and groups in society.
The impression is conveyed of a town meeting in which men and “society” deliberate how they shall make the best use of their limited capabilities. Perhaps this is the way things will some day be ordered under some other social system, but I find it a very strained description of the way things are ordered under ours. For the definition smothers the explicit recognition that “society” (and, indeed, “men”) are not timeless abstractions, but constitute in themselves the very first object for a critical and analytic “economic” scrutiny. We begin, in other words, by taking for granted the conditions under which, and the historical institutions by which, “choice” will be made—whereupon neo-classical economics proceeds to apply its formal techniques to such questions as why “society” has fluctuations in output, wide variations in individual incomes, etc.
Marxian analysis (as I shall paraphrase Mandel’s version of it) starts elsewhere, in the anthropological and physical characteristics of primitive societies as we dimly perceive their outlines in prehistory, and then inquires, as the first problem of economics, into the social and material relationships of these elemental social systems. Did primitive man “choose” how to employ his productive resources among alternative uses? Not so far as we can read the anthropological record. In the unremitting struggle against famine that absorbed the overwhelming portion of human energies in the first million years of human existence, only those modes of social and technical organization that met the test of survival were maintained and passed along; those that did not brought extinction.
In this primeval state of mankind, “economics” is inseparable from sociology, technology, and culture in general. Only with the eventual appearance of a social surplus—a quantum of food production over and above that needed for survival—did there arise the possibility of an economic mechanism involving choice, in the sense of alternative dispositions of inputs and outputs. Thus the study of economics, in the Marxian view, coincides with and brings its initial inquiry to bear on the rise and disposition of a surplus of production over the essential requirements of consumption.
With the appearance of a surplus—an appearance probably traceable to the very gradual improvement of skills, material artifacts, and social organization—comes as well the appearance of a “class” division within the society. For the appearance of a material surplus, in nearly all social groups, is accompanied by an unequal appropriation of this surplus among the members of the community. Precisely how this economic stratification of society appears we do not know. Perhaps the capture of prisoners of war, or the armed subjugation of one part of the community by another, provides the original means by which the surplus goods (mainly food) produced by some men are claimed by others. Perhaps the initial uneven distribution follows an older stratification along religious or other lines. All that we do know, as Mandel writes, is that “something which is at first voluntary or intermittent later becomes obligatory and regular. By the application of force, that is to say, by the organization of the state, a social order is established which is founded on the surrender by the peasants of their surplus of foodstuffs to the new masters.”
But the division of early society into surplus-producing and surplus-appropriating groups still does not give us the lineaments of the commodity-producing society that is the “given” of neoclassical economics. That is, the seizure of a portion of a primitive tiller’s output by an armed lord, or the forced labor of a slave whose surplus output is taken by his owner, does not constitute a relationship of exchange. Even trade, as we know it, does not exist in primitive societies where exchanges, as Mandel stresses, begin with fearful contacts among groups, often consummated as “silent barter,” and only gradually develop into collective, tribal interchanges of more or less specialized products. From here it is still a long evolutionary process until we meet the widespread existence of individuals within communities, who will be able to live by specializing their labor, confident that the existence of commonly shared “values” will enable them to exchange what they have made for what they need.
What is this essential common denominator of values that enables exchange to become generalized among men? As a Marxist, Mandel argues that only one such universal calculus exists. This is the expenditure of labor-time, the indispensable, and (at an early stage of society) overwhelmingly most important, input. In the language of modern economics, labor time is by far the greatest opportunity cost of primitive production, and thus labor time becomes the “coin,” so to speak, by which primitive production is measured.
I will return later to the question of whether such a labor theory of value serves equally well as a basic measuring rod in more advanced stages of society. What is essential is to see that Marxian analysis plunges us directly into questions that are obscured from view in an economics that is no longer aware of a surplus transferred from one group to another, but only of the production of a mass of commodities from the “cooperation” of land, labor, and capital. Indeed, from the Marxian view, the main task of economic theory now becomes the elucidation of this very metamorphosis—that is, how a surplus-generating and surplus-seizing society gives way to a commodity-generating and commodity-sharing one.
In particular, Marxian analysis calls to our attention the tremendous period of innovation centered in the late Middle Ages when the mode of surplus-appropriation changes from one of more or less overt force to the much more covert dispositions of the market-place. For as monetary relationships come to be diffused throughout late feudalism (Marx’s famous “cash nexus”) and as commercial and proto-industrial structures emerge in the agricultural setting of life, a profound alteration takes place in the method of transferring the surplus from one group to another. Explicit acts of forcible seizure, such as the corvée performed by the serf for his feudal lord, now begin to disappear from sight. In their place appears a new institution of wage bargains between three equally “free” legal persons: the worker, the capitalist, and the landlord. In this new form of social interaction, laborers and proprietors meet with one another in the marketplace for an exchange of values, during which a portion of the product of society “naturally” gravitates into the hands of the owners of society’s resources.
How is this done? The answer is that land, and more especially capital, have taken on a new guise. Not only do they exist (as they always have and always will) as the physical resources or the stored efforts of the past, serving as such enormously to enhance the productive capability of effort expended in the present, but they now also appear as legal “personages,” claiming (in the name of their owners) their “rightful” share of the increment in productivity attributable to them.
The full bloom of this society is called capitalism—the very same society that we study under a different perspective, in our neoclassical textbooks. But the Marxian approach does more than shift the angle of incidence from which we observe the system; it also brings into focus specific problems within the system of capitalism which arise as a consequence of its special mode of surplus disposition.
The first of these is the famous tendency to a falling rate of profit. At the heart of the Marxian view of capitalism lies the conflict between the claims of the surplus-appropriators and of the surplus-generators—a conflict that takes the form of a struggle between capital and labor, between the shares of profits and wages. Capitalists, seeking to secure and expand their profits, are driven to use their surplus for additional investment—in ordinary language, they seek to expand their businesses in order to make more money. The trouble is, however, that in so doing they create an added demand for labor, with the result that wages rise at the expense of profits. To counteract this threat to profits, capitalists introduce labor-saving machinery into the process of production. But since machines by themselves are not, in the Marxian view, instruments for the production of new surplus, this substitution of capital for labor tends to depress the profit rate and thus to undermine the vitality of the system itself.1
A second source of instability is even more cunningly concealed in the mechanics of the capitalist system. It lies in a hidden “balance of payments” problem in capitalism—not with respect to the rest of the world, but in the relationships of one part of the system to another. For as Marx pointed out, the activities of capitalist production (or for that matter, of the production of any highly specialized industrial society) can be grouped into two “departments” or sectors. One of these sectors produces consumer goods, the other capital goods. Each of these sectors produces more of its own kind of goods than it can use itself: the capital goods department not only turns out machines that will be needed to replace (or expand) its own stock of equipment, but also machines that will be needed for the same purposes in the consumers goods sector; while the consumer good industries turn out not only the various products that will be demanded by those who earn their livelihood in that sector, but also consumer goods that must be sold to the workers and capitalists of the capital goods sector. Thus there must be a flow of “trade” between the two sectors, with the capital goods industries exporting machines and importing consumer items, the consumer goods industries exporting consumer goods and buying machines.
Clearly, unless these flows of trade balance, one sector or the other will be producing more than it can sell, and its capitalists, accordingly, will not be able to “realize” their surplus. But will the trade flows balance? The Marxian answer is that they will not. In Mandel’s words, the “supreme contradiction” of the system lies in the conflict between the increasing need for rationalization, planning, and control, and the continuing absence of any system of social coordination that would not contravene the principles of the capitalist social order. The result is an economic system which is not only “unbalanced” morally—that is, whose production bears too little relation to the priorities of human needs—but which is also unbalanced structurally, in that it is continually threatened with a disproportion between the rates of output of its two main sectors.
The private form of appropriation [writes Mandel] makes profit the only aim and driving force of production. It causes the development of the productive forces to be uneven and spasmodic. Production develops by leaps and bounds, not in the sectors where the most urgent real needs are to be found, but rather in those where the highest profits can be achieved. The production of alcoholic drinks, of “comic books,” and of drugs takes precedence over the struggle against air-pollution, the preservation of natural resources, and even the building of schools and hospitals… Underproduction in one branch regularly coincides with overproduction in another… The distribution of human labor between the different branches of production never corresponds exactly to the distribution of purchasing power for the products of these branches. When this disproportion becomes too extreme, it is resolved by a crisis, which leads to a new equilibrium, itself temporary and emphemeral.
I have thus far paraphrased only a quarter of Mandel’s two-volume work, and my précis has given no indication of the wealth of historical and empirical material that is the most interesting part of the argument. Now, before I turn to a critique, I must quickly indicate the remaining sweep of the book. For Mandel has built up his detailed analysis of capitalism not to examine the system as a museum piece, but to understand its operation in the present. What does his Marxian perspective reveal about the outlook for capitalism in our time?
One thing strikes us immediately. It is the absence of that clash of cymbals that provides the climax to Marx’s historical symphony. In Mandel’s book the expropriators are no longer expropriated in a moment of convulsive justice; it is “long-term stagnation” that impends rather than breakdown and revolution.
This change reflects Mandel’s awareness of the existence of means of staving off crisis that did not exist in Marx’s time, especially the conscious intervention of the state. As Mandel writes, “the development of new industries; ‘aid to underdeveloped countries’; extension of state expenditure both military and nonmilitary; growth of ‘distribution costs’ and of the tertiary sector, all play the same role of safety valves for capitalism in decline. By offering fresh fields of investment to capital they temporarily offset the tendency to long-term stagnation and the plethora of capital without paying investment.”
These safety valves rescue the system from its classic Marxian doom. Instead Mandel sees capitalism moving toward an amalgamation of fascism (militarized, oppressive capitalism) and the welfare state (“more or less real, more or less demagogic, depending on the comparative wealth of the capitalist country involved”). How long this unstable combination can last, Mandel does not say. There are ominous previsions (“The increasing economic role of the state means at the same time the violent compression of social and international contradictions, and so intensifies the advance of capitalism toward explosive outbreaks of war and revolution”), but neither the mechanics nor the timetable of the transformation is clearly given. The implication is that capitalism, however moribund, may last a considerable while.
Finally, socialism. Unlike Marx, Mandel examines in some detail the problems and possibilities of a social order in which commodity production—that is, the production of goods for exchange on a market—will have been largely superseded by a free distribution of most basic goods and services, and in which the surplus produced by labor, working with natural and manmade resources, will be consciously distributed by “men and society” in much the fashion envisaged by Paul Samuelson. Is such a society possible? With the enormous productive potential of industrialism, and on the assumption that this potential was freed from the deformations and misuses presumably stemming from capitalism, certainly the economic basis for such a social order is imaginable. As to what sort of a society it would be, it is more difficult to say. Mandel claims it would be less bored, alienated, primitive than ours. A picture emerges of a community populated by men cast in the image of the socialist hero of our day—not the proletarian, but the intellectual. “[T]hese ‘most gifted persons’ of today, in so far as they have succeeded in devoting their lives to a creative activity which basically corresponds to their inner needs, come closest to what the socialist man of tomorrow would be…”
It must be apparent that I find Mandel’s book not only interesting, but, in its broad historical outlines, persuasive. Perhaps this is only testimony to the fact that all persons interested in historical evolution are “Marxists” these days, if by this we mean, not the promulgation of those dreadful catechisms that have passed for Marxism in the hands of the Russians and the Chinese, but an attempt to relate the surface phenomena of history to deep-seated and often hidden causes, especially causes involving technological processes and economic interests. As a fresh and wide-ranging effort along these lines, Mandel’s work can only command attention and admiration. Yet it is precisely in reading so free a work as Mandel’s that the limitations of Marxism and Marxian economics also stand forth, at least in my eyes—limitations that make it impossible for me to be a formal Marxist, however much I may admire and use certain aspects of Marxian analysis.
The first of these limitations has to do with a certain theological strain that continues to pervade Marxian thought. The basic assumption underlying Marxism is that there is a set of unique “laws” and insights which, once discovered, can be applied to all of human history—how else can one speak, as Mandel does, of a “synthesis of the totality of human knowledge”? Primary among these laws is the presumed “dialectical” nature of historical change, the inherent tension in social relationships that is both the source and the governing agent of that change. And first among these tensions is that of the class struggle over the surplus itself—a class struggle that underlies all human history and that will not be ultimately resolved until classes themselves have been dissolved by an affluent socialist setting.
But is the class struggle the clue to all history? To ignore it is clearly to miss the key to certain epochs, such as the development of Europe during the eighteenth and nineteenth centuries. But to insist upon it seems to me to place large stretches of historical experience on a Procrustian bed of analysis. It is possible also to view many chapters of history through different lenses—those that stress religious divisions or sheer dynastic rivalries, for example—and thereby to discover motives and causal sequences of prime importance that are invisible in an exclusively Marxian approach.
In a word, Marxism as the philosophy of historical change is powerful but also parochial. Moreover, its use can at times lead to serious practical problems stemming from a reluctance to drop certain sacred doctrines, even when (as with Mandel) the sacred texts are allowed to rest unconsulted. The labor theory of value, for example, may be immensely useful in elucidating the mode of transfer of surplus as an historical problem, but it is scarcely useful when it comes to the analysis of the operational problems of a modern state, capitalist or socialist.
Indeed, no small part of the problems of the Soviet Union in devising a smooth-functioning system of prices has been its refusal (until very recently) to assign an interest cost to capital, although a glance at Samuelson’s text would have made it clear that without such a cost there was no way for the planners accurately to assess the relative advantages of various alternatives. But because interest, in the perspective of the labor theory of value, was associated with the specific mode of surplus transfer of capitalism, the assignment of such a cost was ruled out on grounds of ideological heresy—with disastrous consequences for Soviet economic efficiency.
We can explain such rigidity in the case of the Soviets by making allowances for their lack of experience and uncritical socialist ardor. But why, even in Mandel’s book, do we find the clumsy techniques of orthodox Marxian economics retained in lieu of the much more flexible ones of neoclassical analysis? On a larger scale, why do we find even so liberated a mind as Mandel’s failing to incorporate into his analysis of the ills of capitalism and the prospects of socialism the profound insights of Max Weber or Freud? The answer, I believe, lies in a certain theological cast of mind that makes Marxism not a philosophy that truly seeks to embrace and synthesize the totality of human knowledge, but an aprioristic system from which dissonant views must be excluded.
My second point may be related to this theological strain, for it has to do with an element of wishful thinking observable in Marxian analysis. Here I do not refer to the Utopia toward which Marxism faces—actually, I find Mandel quite plausible when he discusses the distant shape of things to come. Rather, I refer to the unwillingness of Marxism, particularly in the hands of a humane man like Mandel, to face squarely the problems of transition from the world as it now exists to socialism.
Here two problems strike me as most important. The first has to do with the means by which socialism may be imposed on the underdeveloped societies in which it now seems most likely to appear. Mandel writes: “No socialization (whether de facto or de jure) of enterprises is justifiable unless the technical conditions make possible a higher output this way than private enterprise can get; and no socialization is justifiable unless the small proprietors agree to it, either from conviction or from material interest, or (what is, of course, the ideal situation) from both motives at once.”
As a declaration of democratic socialist intent, this is admirable, but as a guide for policy I suspect it is delusive. Mandel here elevates considerations of economics over those of politics, whereas in revolutionary fact, experience has shown that the political problem always takes precedence over the economic. Some degree of coercion, expropriation, forced nationalization, or collectivization seems an inescapable course for a newly constituted socialism in a backward society—a course that will inevitably affect the tone and character of the regime’s subsequent political and economic career. This is a moral dilemma to which no Marxist that I know of has yet fully addressed himself.
The same wishful thinking appears when Mandel discusses the advent of socialism within the affluent world. “Present day technique,” he writes, “has…found a ‘final’ answer to the oldest of objections to a socialist society: ‘Who, under socialism, will do the hard, unpleasant, and unhealthy types of work?’ Today the answer is clear: machines will perform all these tasks by themselves.”
But the answer is not clear. The simple fact is that we have not invented machines that can do most of the tasks that society finds hard, unpleasant, or unhealthy. Furthermore, to do so will not only be exceedingly difficult from an engineering point of view, but will be a staggering task of capital-accumulation. To provide robots to do all the “dirty” work would very likely require the full efforts of two or three generations, if we forgot all about the need for capital of the underdeveloped world. During this long period of preparation, what means of coordination, inducement, or sanction will drive the socialist economy?
There is, in fact, one mechanism which, adroitly used, might do the trick—the mechanism of the market (suitably hedged about to avert its worst characteristics). But like many Marxist theoreticians, Mandel turns his back on this mechanism because he fears the “corrupting influence of money” (p. 655) or the incompatibility of the market with socialist objectives. This leaves us, unfortunately, with the necessity of applying some other means of recruiting and allocating the labor of society to the tasks of the transition period, and those other means, once the inducements of the market are ruled out, are either outright coercion or indoctrination. It is curious that many theoreticians of “pure” socialism like Mandel are so obsessed with the corrupting influence of material incentives and money exchange that they never stop to consider the corruption inherent in the other modes of labor mobilization that we know of.2
This leads me to my final point. Marxism is an effort to discover causality in the train of history. But what is the source of this causality? Essentially it seems to be the moving force of dialectics, expressed through the predictable activities of classes in conflict.
But how predictable are classes in their modes of behavior? Do we in fact know how various classes “must” behave in given circumstances? Bluntly, I do not think we do. It may well be (and herein again lies the power of analysis of Marxist analysis when applied to certain time periods or problems) that some classes in some situations are indeed “forced” to behave as they do. The classic example is the behavior of the nineteenth-century capitalist class in Marx’s work—a class pressed by a destructive competition into the behavioral responses that would seal its own doom. But can we ascribe similar irresistible pressures to the economic environment of monopoly capitalism? Are all capitalist classes today pushed relentlessly to the same ideology, the same foreign policy, the same domestic measures? If so, how can we explain the diversity of manifestations of contemporary capitalism observable in different societies, from Sweden through South Africa to the United States, all of which are indisputably “capitalist”?
In this emphasis on the diversity of capitalist states, I do not wish to overlook the similarities of these societies which a Marxian scrutiny would stress—similarities of income distribution, industrial concentration, economic problems, etc. But the fact of difference remains, not only as an immensely important reality for the lives of people in these systems, but as a challenge to the underlying analytic concepts of Marxism itself. In a word it suggests that the variables of geography and military tradition and national culture are at least as important—and at least as independent—as the variables of economics. To put it differently, we can say that the prime motive forces of history, in our day, seem to have moved from the relatively deterministic realm of economics to the relatively undeterministic realm of politics; perhaps we should simply say that after a period during which Marxian analysis was particularly cogent, the ruling determination of history has again reverted toward its original political base. Certainly when the history of the Vietnam war is finally written, the role of the military and the politicians will be far larger than that of the business interests.
Before this politicization (and militarization) of events Marxism is much reduced, not only in its specific predictive capability, but in its general historical relevance. It is surely significant, for example, that Mandel, who discusses the economic preconditions for and the difficulties of socialism so brilliantly, is mute before the problem which, more likely than any other, is apt to prove the undoing of socialism (or, for that matter, of capitalism)—the problem of political representation and responsibility. The word “democracy” recurs constantly throughout Mandel’s book, but as a talisman, not as a term charged with specific meaning. A Marxist, I very much fear, is no more prepared to cope with the “contradictions” of individualism in a society of technologically imposed large-scale organization, or with the irrationalities and terrible dangers of the modern nation-state, than is anyone else.
It is for these reasons that I would find it cramping to call myself a “Marxist”—just as for the reasons previously cited I have no hesitation in expressing my agreement with much of Marxian analysis. What seems necessary now is to leave aside these categories and to search for an approach that both contains and goes beyond Marxism. No doubt such an all-embracing view will have to await another mind as penetrating and encyclopedic as that of Marx himself. In the meantime, however, we must begin to build our tentative syntheses from what knowledge social science has made available to us. For this purpose, the masterful re-presentation of Marxism by Ernest Mandel is as welcome as it will be indispensable.
Why aren't machines capable of producing a surplus? The answer is that workers, who must find employment, come to terms with their employers at a wage that is less than the value of their expended labor power, whereas capitalists (who sell machinery) do not have to settle for a price less than the full value to be derived from the use of their artifacts. In the Marxian model of "pure" capitalism all profit arises from the surplus-value to be had from employing labor; none from the use of land or equipment.↩
I cannot refrain from noting as well another theological attribute of Marxism in its horror of money and exchange, which so resembles that of the Church fathers contemplating sexuality. The inadmissable thought is that trading and bargaining and "shopping," when conducted in an atmosphere free of duress, can be a source of pleasure for buyer and seller alike.↩
Why aren’t machines capable of producing a surplus? The answer is that workers, who must find employment, come to terms with their employers at a wage that is less than the value of their expended labor power, whereas capitalists (who sell machinery) do not have to settle for a price less than the full value to be derived from the use of their artifacts. In the Marxian model of “pure” capitalism all profit arises from the surplus-value to be had from employing labor; none from the use of land or equipment.↩
I cannot refrain from noting as well another theological attribute of Marxism in its horror of money and exchange, which so resembles that of the Church fathers contemplating sexuality. The inadmissable thought is that trading and bargaining and “shopping,” when conducted in an atmosphere free of duress, can be a source of pleasure for buyer and seller alike.↩