Responding to a recent cross-post here by one Anastasia Fitzgerald-Beaumont, who asserted that Karl Marx was “bloody well wrong in everything,”* I commented:
[N]o, Marx was not “bloody well wrong in everything,” as even some diehard capitalists are willing to concede.
Now comes an article by George Magnus, a presumably hardheaded senior economic adviser at the global financial services firm UBS, who writes:
Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.
The spirit of Marx, who is buried in a cemetery close to where I live in north London, has risen from the grave amid the financial crisis and subsequent economic slump. The wily philosopher’s analysis of capitalism had a lot of flaws, but today’s global economy bears some uncanny resemblances to the conditions he foresaw.
Consider, for example, Marx’s prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in “Das Kapital,” companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.”The process he describes is visible throughout the developed world, particularly in the U.S. Companies’ efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant.
U.S. income inequality, meanwhile, is by some measures close to its highest level since the 1920s. Before 2008, the income disparity was obscured by factors such as easy credit, which allowed poor households to enjoy a more affluent lifestyle. Now the problem is coming home to roost.
Marx also pointed out the paradox of over-production and under-consumption: The more people are relegated to poverty, the less they will be able to consume all the goods and services companies produce. When one company cuts costs to boost earnings, it’s smart, but when they all do, they undermine the income formation and effective demand on which they rely for revenues and profits.
This problem, too, is evident in today’s developed world. We have a substantial capacity to produce, but in the middle- and lower-income cohorts, we find widespread financial insecurity and low consumption rates. The result is visible in the U.S., where new housing construction and automobile sales remain about 75% and 30% below their 2006 peaks, respectively.
As Marx put it in Kapital: “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses.”
Now the solutions the Magnus proposes for this crisis are well within the existing capitalist framework and probably would not have found favor from Marx, who foresaw the eventual overthrow of capitalism. But like others who have no use for Marx’s rather vague vision of the post-capitalist future, Magnus understands that Marx– not Lenin, not Stalin, not Mao, but Marx– had some valuable insights on the nature of capitalism.
*In a later post, which buys into the neo-Confederate argument that the American Civil War was caused by “Northern greed” rather than slavery, Ms. Fitzgerald-Beaumont changes her mind about Marx being bloody well wrong in everything. She quotes Marx as writing “The war between the North and the South is a tariff war. The war is, further, not for any principle, does not touch the question of slavery and in fact turns on Northern lust for sovereignty” and says he was “absolutely right.”
In fact Marx was arguing precisely the opposite. He posited the above argument, favored by the London press, so he could knock it down. See for yourself.