Marxism and Economics; Part I

Is there such a thing as a specifically “Marxist” economics? Until 1918 and the coup that won Bolsheviks the authority to develop and implement economic policy in Russia, this question was, of course, completely theoretical. Until 1918, many economists — more than we might imagine — defended or criticized what they identified as “Marxist” economics; but, lacking an economy in which to implement their theories (or, in the alternative, lacking economy to illustrate how and why “Marxist” economics had failed), “Marxist” economics remained, quite literally, academic.

Nineteen Eighty Nine and the “End of History” (F Fukuyama) might appear to have answered the question once and for all: “Yes, there is such a thing as a specifically ‘Marxist’ economics; and, yes, it failed.” But even were we to conclude, as I do, that the economic policies implemented in the USSR are better described as state capitalist, not Marxist, it is still worth wondering whether there is such a thing as a specifically “Marxist” economics. For the sake of clarity, I would not count specifically “Marxist” an economic policy that displays a preference for the poor, or for workers, or, more generally, for the marginalized or for minorities. Nor would I count specifically “Marxist” economic policies that socialize some — or even all — sectors of the economy. These policies might be advisable or ill-advised. But when we sit down to “run the numbers” and “measure outcomes” (i.e. winners and losers), economists, given the same data, irrespective of their ideological or moral or social or political commitments, will generate the same curves and the same outcomes. Even if we draw different conclusions from the data, which is normal in economics, all economists embrace the same set of models, the same high-level principles.

Again, for clarity’s sake, no one will contest, I am confident, that beginning in the 1970s the Soviet economy began to falter and that in 1989 it failed. Nor can it be said that it “failed” only because it was isolated and targeted by western capitalist powers. Had western capitalist powers adopted the policies that governed the Soviet economy, they too would have failed. They would have failed in the only task any economy should aspire to fulfill: distributing the marginal product in such a manner as to avoid systemic failure. On this scale, the Soviet Union was not the only economy to suffer collapse in the 1980s and 1990s — mostly, but not exclusively, state capitalist. But, more importantly, in all cases mainstream economic analysis has appeared perfectly competent to explain why these economies failed.

So I will repeat what K Marx claimed in his mature social theory; namely that the interpretive categories of “bourgeois economics” were and remained “valid” for analyzing any society whose social relations are mediated by the production and exchange of commodities:

They are forms of thought which are socially valid, and therefore objective, for the relations of production historically adequate to societies whose social relations are mediated by commodity production [objektive Gedankenformen für die Produktionsverhältnisse dieser historisch bestimmten gesellschaftlichen Produktionsweise, der Warenproduktion] (K Marx Capital vol 1:165, translation altered for clarity).

So long as an economy produces and distributes commodities — irrespective of who owns the means of production, the marginal product, or how the social product is distributed — the categories of bourgeois economics will, claims K Marx, maintain their validity.

Is there such a thing as a specifically “Marxist” economics? No.

No? But, then, why all the fuss, the work camps, the Gulag, the centralized planning, the shortages, the bottlenecks, the overproduction? Why 1918 to 1989?

Let me propose that K Marx found the categories of bourgeois economics deficient in one and only one respect: they were insufficiently rigorous. Rather than counting value a socially and historically determinate variable, bourgeois economists were inclined to both transcendentalize and functionalize value; but, in both cases, to place value beyond critical scrutiny. To quote K Marx’s contemporary, William Stanley Jevons:

If there is any fact certain about exchange value, it is, that it means not an object at all, but a circumstance of an object. . . . The word Value, so far as it can be correctly used, merely expresses the circumstance of its exchanging in a certain ratio for some other substance (Theory 1871:77).

Within the universe of bourgeois economics, value is not “a thing or an object, or even . . . anything which lies in a thing or object” (ibid.). More specifically, value is neither derived, nor derivable, from labor:

There are . . . those who assert that labour is the cause of value. I show, on the contrary, that we have only to trace out carefully the natural laws of the variation of utility, as depending upon the quantity of commodity in our possession, in order to arrive at a satisfactory theory of exchange, of which the ordinary laws of supply and demand are a necessary consequence” (1-2; emphasis added).

Where classical economists like Adam Smith mistook labor for the source of all wealth (Wealth 1776:i.v.47), bourgeois economists recognized that labor itself acquired its value only from the ratios in which it was exchangeable for other commodities; other commodities which were, in turn, exchangeable for discrete amounts of every other commodity in direct proportion to the utility these commodities held, not for individual sellers, buyers, or consumers, but for markets in aggregate. Supply and demand, Jevons therefore correctly maintained, were not the cause, but the consequence of “natural laws” governing variations in utility. It follows that observation of the production and consumption of the lone individual will tell us nothing whatsoever about economic value.

But, when we consider the consumption of a nation as a whole, the consumption [of any individual] may well be conceived to increase or diminish by quantities which are, practically speaking, infinitely small compared with the whole consumption. The laws . . . are to be conceived as theoretically true of the individual; they can only be practically verified as regards the aggregate transactions, productions, and consumptions of a large body of people (48; emphasis added).

Value in bourgeois economics is therefore not only “the circumstance of its exchanging in a certain ratio for some other substance” (77; emphasis in original), but, according to Jevons, it is an abstract social substance deemed “theoretically true of the individual.” Or, as Jevons later puts it:

When we speak of the ration of exchange of pig-iron and gold, there can be no possible doubt that we intend to refer to the ratio of the number of units of the one commodity to the number of units of the other commodity for which it exchanges, the units being arbitrary concrete magnitudes, but the ratio an abstract number” (82; emphasis added).

“Marxist” economists will fault bourgeois economics of the sort practiced by William Stanley Jevons for his rejection of “Marx’s” labor theory of value; when, in fact, what he rejected was Adam Smith, David Ricardo, and Thomas Malthus’ labor theory of value: “As to Ricardo, Malthus, Adam Smith, and other great English economists, . . . I am not aware that they ever explicitly apply the name ratio to exchange or exchangeable value” (82). Jevons was right. They do not. But Karl Marx will, most notably in his 1867 Das Kapital. “We have seen,” Marx wrote, “that when commodities are in the relation of exchange, their exchange-value manifests itself as something totally independent of their use-value” (Marx 1982:128).

This sounds very close to Jevons’ claim. It is. But there is a difference. Like Marx, Jevons had denied that value might be a quality found in things. And, like Marx, Jevons too counted value an abstract social substance. But, as we have seen, unlike Marx, Jevons was eager to ground value in natural laws: “we have only to trace out carefully the natural laws of the variation of utility . . . in order to arrive at a satisfactory theory of exchange, of which the ordinary laws of supply and demand are a necessary consequence.” Marx, by contrast, had by 1876 given up on his search for natural laws, whether of history or of economics. To be sure, value, Marx agreed, describes a relationship between exchangeable goods, not in an isolated exchange, but in aggregate across an entire market and, in fact, across global markets. Yet Marx was willing to pursue this line of analysis far more rigorously than Jevons. Abstract value did not halt at the doorstep of labor. Labor — labor in the abstract — was instead value’s “natural,” or, rather, value’s naturalized home.

Jevons was correct. Empirical, individual labor was not the source of value. And to the extent that this was the position of Adam Smith or David Ricardo or Thomas Malthus, then Marx agreed: they were mistaken. But the fault Marx found among classical economists was not their having mistaken labor for the source of value. The fault he found was in their level of abstraction. It was from labor in the abstract, in aggregate, that goods, also in aggregate, acquired their abstract value. In Marx’s view, then, Jevons’ return to utility counted as a theoretical regression. So eager was Jevons to establish the natural and therefore necessaryscientific character of value, that he was willing to ground it empirically in the utilitarian binary pleasure and pain. “As Senior most accurately says, ‘Utility denotes no intrinsic quality in the things we call useful; it merely expresses their relations to the pains and pleasures of mankind'” (Theory 43). But, surely, if anything defies abstraction, surely pains and pleasures do. Pains and pleasures, specifically, cannot be measured in aggregate. And they, most definitely, are not quantities measurable across all of mankind “mankind.”

Marx will agree with the bourgeois economists:

If we abstract from their use-value, there remains their value, as it has just been defined. The common factor in the exchange relation, or in the exchange value of the commodity, is therefore its value. The progress of the investigation will lead us back to exchange-value as the necessary mode of expression, or form of appearance, of value (Marx 1982:128).

Where he differs is in his readiness to consider value not from the vantage point of quasi-natural, empirical qualities such as pleasure and pain, but to count all value, including labor, in the abstract as socially and historically determinate. Bourgeois economists, such as Jevons, insisted that value described a market-wide ratio among values in the abstract. Marx agreed. And it was because he agreed that he found fault with their attempts to ground value empirically, whether in pleasure or pain or in some other (quasi-)natural law of economics.

There is no mystery over why Marx found fault with bourgeois economists. He agreed with GWF Hegel. The world, as a whole, had reached a point where it had become aware of the conditions of its own production. It had reached this point because the subjective principles governing individual social action had constituted a social world adequate to — i.e., in agreement with — individual subjectivity. Where Marx differed from Hegel was in the identity of the Agent each credited with this universal coherence. Hegel credited this universal coherence to a Weltgeist, a world spirit who’s inner principle was to externalize, objectify, itself and then expand to reincorporate this externalization into its own Being. Through this process, spanning all of history, the world had grown conscious of itself as both spirit and objective truth: as objective spirit.

The young Marx, 1843-1850, had differed with this Hegelian interpretation only in one respect. What Hegel had called the Weltgeist, Marx identified as “real man.” To this extent, the young Marx was a humanist and a romantic. Over the course of the 1850s, however, Marx became convinced that the substitution of Man for Weltgeist failed to accurately grasp the social and historical specificity of the spirit at work in the modern age. His conversion to neoclassical economic theory at the end of 1850s has often been counted a regression. But, in our interpretation, it is a step forward. Yes, the integration of the world into a coherent whole can legitimately be ascribed to labor, to labor in the abstract; or — and this is the same thing — to value in the abstract. But we might equally describe this comprehensive integration as the form of domination unique to the contemporary world.

When neoclassical economists characterize the comprehensive, universal coherence of the the dominant social form, are they describing something different than what Marx describes in Capital? Yet because Marx grounds his characterizations historically and socially — when he shows how this coherence is generated by capital — he is also showing the conditions under which this domination might be superseded.

Is this a specifically “Marxist” economics? And in what does its specificity consist?

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