Preserving Marx’s Thought without the ‘ism’
Why the search for an alternative development model does not work with Marx alone. But without him either.
With the dissolution of the socialist camp and after the implosion of the Soviet Union at the beginning of the 1990s, Karl Marx was regarded as finished. Capitalism achieved a legitimation bonus. Francis Fukuyama spoke of the ‘end of history’. An entire decade-and-a-half later, the global financial crisis broke out, pulled the real economy into the abyss, and reinvigorated interest in the work of the one who had been declared dead.
Representatives of mainstream economics, the neoclassical school, explained the crisis inter alia as a result of the greed of investment bankers as well as insufficient transparency and control of the financial sector. Such factors have also played a role, but this doesn’t get to the heart of the problem. This lies in the enormous accumulation of financial wealth, which seeks investments that offer the highest possible returns, returns which cannot be realised in the real economy. Hence, in overaccumulation. It is a process described by Karl Marx, which periodically arises in the history of capitalism and experienced its peak up to now in its financial market-driven stage with the billions of dollars roaming around daily. Marx explains this phenomenon with the tendency of capital towards an unlimited increase in supply while simultaneously decreasing wages and thus reducing purchasing power, that is to say the contradiction between production and real consumption. In his words: ‘The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses, in the face of the drive of capitalist production to develop the productive forces as if only the absolute consumption capacity of society set a limit to them.’ (Marx 1981, p 615). The poverty of the masses today has another face than in Marx’s own time. But even in highly developed capitalist countries, the precarity of labour is advancing, full-time workers who are impoverished; the gap between rich and poor speaks volumes. The finance industry is withdrawing demand with purchase power from the real economy. Speculative profits are forcing the redistribution from bottom to top, and the commodification of an increasing number of public services – or to say it as Marx would, their subsumption to the logic of capital accumulation – is continuing to drive over-accumulation.
In capitalism, the satisfaction of needs is not the aim, but rather accumulation
Marx was the first theorist to prove that in capitalism, the satisfaction of needs is not the aim, but rather accumulation. He highlighted the role of consumption as an essential element of total economic demand and demonstrated that without increasing demand there is no investment incentive. He thus laid the foundation for the demand-based theory of the economic cycle later developed by Keynes. This is relied upon today by economists who are not trapped in the mainstream, for example when it concerns overcoming the fatal consequences of austerity policies forced upon the Southern EU countries. Marx’s crisis theory, due to its macroeconomic foundation, is one of his most important contributions to economics. The founding of macroeconomics as a sub-discipline as such is essentially due to Marx. Like no one else before him, he operated with concepts like ‘national income’ as the sum of value of the newly created product, usable for current ‘consumption’ and for the ‘accumulation’ of capital, that is to say for ‘investment’. Together with Friedrich Engels, Marx described capital’s tendency toward globalisation in The Communist Manifesto. It tends to go where the cheapest labour-power, the loosest labour and environmental protection laws and the lowest tax rates can be found. This is a process demonstrated today for example in the massive outsourcing of entire productive units or individual parts to low-wage countries.
Marx emits a certain fascination to this day because he did not examine different microeconomic subareas of the economy but a mode of production. He was the first theorist to profoundly describe the dynamics of capitalist economy and its unrestrained logic of money-making. In M-C-M’, he saw the ‘general formula for capital’. (Marx 1976, p 247) But money, according to his insight, only becomes capital and yields a profit when it is invested and goods are produced that can be profitably sold. Entrepreneurs have to be relentlessly concerned with innovation and invest in new processes and products, if they want to succeed against the competition. They are subject to the ‘coercive laws of competition’. But the only firms that survive the cut-throat competition for ultimately saturated markets are those that produce high quantities most cheaply. As a rule, these are mostly corporations that control entire value-creation chains and sweep away smaller firms from the market. Marx was the first of his profession who saw in this development a tendency toward oligopoly, which becomes a ‘shackle of the mode of production.’ The size structure of enterprises and their share of turnover in Germany as well as other capitalist countries confirms the contemporary relevance of Marx’s predictions about the formation of monopolies.
Only his assumption that capitalism would perish on its own due to capitalists expropriating each other in the course of the concentration process, since the ‘expropriators are expropriated’ (Marx 1976 p. 929) proved not to be true. Marx was convinced of the necessity of a socialist revolution. But measured against his profound analyses of the functioning of the capitalist economy, he left behind little concerning the functional characteristics and effect mechanisms of a new, non-profit oriented democratic polity corresponding to the interests of the majority of the population. It’s no wonder, since in his time there was no corresponding field of analysis, no practical experiences, which could have served as a test for the suitability and realisability of visions and concepts aiming for socialism. The critical thinker, Marx, certainly wouldn’t have liked it if every sentence and viewpoint of his had been carved into stone for all eternity regardless of the time and circumstances around their emergence. He would have certainly recommended further critical thinking. This applies for example to one of his visions which there has been some heavy debate about among leftists for years.
For Marx, socialism could not be reconciled with commodity production
It concerns the role of commodity production, the market, the law of value and the categories derived therefrom in a non-capitalist economy. In the third volume of Capital, Marx writes concerning socialism: ‘Only when production is subjected to the genuine, prior control of society will society establish the connection between the amount of social labour-time applied to the production of particular articles, and the scale of the social need to be satisfied by these.’ (Marx 981, p 288f) In other words: the relationship between the production of commodities and the needs to be satisfied should be directly created, i.e. without reference to value and the market. For Marx, socialism could not be reconciled with commodity production, commodity-money relationships were foreign objects in socialism, regarded as ‘birthmarks of capitalism’.
This interpretation dominated the thinking of many political economists and the activity of party and state functionaries responsible for the economy in the Soviet Union and most other socialist countries. Scholars, such as Jewsei Liberman (Soviet Union), Fritz Behrens or Gunther Kohlmey (GDR), Ota Sik (Czechoslovakia), Oskar Lange (Poland), Janos Kornai (Hungary), who pointed out early on the indispensable utility of market categories and value indicators instead of almost exclusively focusing upon natural indicators in the economic mechanisms of a socialist country, were accused of revisionism, with tough consequences for their professional careers. But how the question is answered as to whether the product of social labour under conditions of a socialist economy takes on the form of a commodity or not, depends upon whether concepts such as value, price, prime costs, profit, credit, interest etc. are economic categories with a possible leverage effect or only serve as aids of technical-organisational importance in economic accounting otherwise bearing the stamp of a barter economy.
The debate among leftists as to whether and how socialist economies can be reconciled with the existence of commodity production, the market, the operation of the law of value as well as the categories derived therefrom, will continue. But it can no longer be conducted in an abstract-theoretical manner and has to incorporate the practical experiences of the imploded real existing socialism. The central state economic planning, in the 70 or 40-year development of the Soviet Union and the other real existing socialist countries (respectively) did not provide a proof of being able to guarantee economic proportions. What was described as a ‘planned economy’ was at its core a centralised dirigisme that ultimately prevented a planned development of the economy. It replaced the commodity-money categories with a flood of administrative surrogates such as fixed prices, subsidies, economic levers, currency conversion coefficients and slope values etc. thus erecting an additional barrier between processes of the real economy and the money economy. Enterprises were primarily given real economy directives such as the volume of industrial production, of exports, the manufacturing of consumer goods etc.
The state cannot let slip from its grasp the power to define how markets should function
The concept ‘bigger is better’ was born. By neglecting or disregarding value indicators, the true costs of production were hidden and an efficient allocation of resources impaired. Genuine information concerning real economic conditions could hardly be obtained. Economic calculation that was internationally commensurable was made difficult. If and when planning the volume of goods and services in a mature phase of development in a future society based upon communal property directly according to the labour-time embodied in them is possible without reference to value categories is a question that cannot be answered today. For a few years, a discussion among leftist economists concerning how a synthesis of planning and regulation by the market might look has gathered strength, whether a ‘socialist market economy’ or a ‘socially managed market economy’ can exist. It has been said that one cannot equate a market economy with capitalism. Economies based upon exchange and commodity production have existed for thousands of years, before their capitalist form emerged four centuries ago. A socialist market economy could arise by linking social property (not state property per se) in the means of production with regulation by supply and demand. It’s not apparent why socialist property owners should not be able to orientate their business policy to the requirements of the market, that is to say the desires of customers, and instead rigidly cling to centrally created plans. I share the notion that the state and the market are not antagonists, but rather the common alternative to anarchy. But the state cannot let slip from its grasp the power to define how markets should function. Above all, they must be liberated from the outgrowths of unfettered financial capitalism.
The point is not whether Marx was wrong or not. The conditions in real existing socialism did not correspond to the preconditions he assumed when making his predictions. Property in the means of production had been nationalised, not socialised. The democratic participation of employees tended to be on a formal rather than real basis. The possibilities of production did not allow for everyone to live according to his or her needs. The picture of human nature that predominated in politics was one-sided. Individual economic efficiency and macroeconomic stability were not connected. That expended social labour is first recognised with its realisation on the market, was not kept in mind. Further search processes and learning processes are necessary towards an alternative economic and social model.