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Is Marxism a solution for the problems of capitalism?

by on 17/09/2018

A dialog between a young student (W) emerging from the occupy wall street movement and an old school economist (E), who became sceptical about the capacity of capitalistic economic system to create a sustainable economic system, that can successfully cope with the major global economic problems of the humanity.

W. I want to approach from the outside and analyze economic analysis from its core: what are the assumptions that underpin economic analysis, and are they valid? (i.e. humans are rational, act to maximize utility, etc.) Are basic economic theories proveable? Are the basic axioms correct? As a quick example, demand curves are supposed to represent consumer utility. Utility is supposed to be reflected in the prices of commodities. Yet utility is not measurable. Utility is supposed to give a product the price at which a consumer would purchase it. Yet we only know a commodity’s utility if we know its price. This circular logic poses the question: is utility theory able to be empirically proved? Utility theory came about through the “Marginal Revolution” in the late nineteenth century in opposition to the classical economics’ labor theory of value. Yet the same question could be asked of the labor theory of value: if price is a reflection of the abstract human labor (labor-time required to produce any commodity under the conditions of production normal for a given society and with the average degree of skill and intensity of labor prevalent in that society), is this measurable? Is it able to be empirically proved?

Economics is a very unusual field. Unlike the hard sciences, economists cannot set up a laboratory and empirically test their theories. Only historical data can be used, and it is often even hard to verify how accurate the data is. Furthermore, many economists are vehemently opposed to each other, and often none of them can make accurate predictions. I am interested in understanding why all of this is.
E. You wrote;

Are basic economic theories proveable? Are the basic axioms correct? Utility is supposed to be reflected in the prices of commodities. Yet utility is not measurable.

I would put the question in a more simple way, “Is utility definable”. Probably on the individual level. After all it is changing with aggregation. This is the second important understanding of the demand curve, the reduced marginal utility as it aggregates in the increased possession of the item by the consumer. But this you have to understand, since it is just a simple derivation. From practical point of you, even the second ice cream doesn’t taste so good as the first one. To speak about utility, it has to be in relative terms to situation in time of purchase of the potential consumer and not in absolute terms of fixed and unchangeable utility measured to product. Let’s take as example utility from the ice cream compared to utility from chicken wings, while the price of both products represented by universal media, called money express their relative value derived from their relative utility. I’m sure if you are hungry, the chicken wings gives you more utility than the ice cream, but if you are full it is in opposite way. Since an average person enters the restaurant hungry, he is ready to pay a lot for chicken wings, and very little for ice cream. But then, when his hunger is satisfied, he still is ready to pay for the ice cream, not because he is hungry, but because he looks for some additional pleasure, this price have to be below the chicken wings price, even if its production cost in terms of labor time input is higher. And this is why the demand curve of menu in restaurant derived from it has downward tendency. The price itself represents the meeting point or equilibrium between marginal utility curve and marginal production cost.
The model starts to be problematic, when the marginal production cost is zero, like in cases of free music, movie, or any other item, already created and exists free for usage on the web? This is the black hole of the market economy, where all the economic laws, as we know them start to collapse.
As to empirical prove of utility theory, don’t expect prove, as proof at level of certainty as of Einstein’s theory of General Relativity. (But even in physics not always you get such a clear verification) . Economics is about human behaviour, and as such, your scientific method approach has to be accordingly. I can make easily an experiment of checking marginal utility of any consumption product. But you will have always exceptions, and on those work the marketing agencies, to persuade the consumers to buy products without or with negative utility.

As to the labour theory of value, it is totally wrong, and never was right, except maybe it seemed to look right in the very first years of the newly emerging capitalistic economy in England in mid 19 century, when Marx lived. Marx didn’t give any value to factors as risk, entrepreneurship, brand value, know how, the differences of character among individual workers and of leaders of the new economy and technology emerging in front of him. He spoke about technology and its impact on the economy, but never admitted, that its development is unpredictable. I remember science fiction movies from sixties and seventies, where people having video phone calls in public phones. No one imagined the existence of mobile phone with the same possibility, and the revolution it will bring to human life.

Today the labour theory of value is even less relevant. I just heard, that Adidas is building a new factory for snickers close to Munich, where 400 employees will produce half million shoes annually. They are also closing a shoe factory in Bangladesh, with thousands of workers, who used to put millions of work hours in those snickers. Buy the way none of these 400 employees works in production line. How much value in your snickers is labour, and how much the abstract issue, that the shoe is called Adidas?

Also if you have politically socialist tendencies, to have intellectual decency, you have to ask yourself, where are the limits of your social responsibilities. Are there within the borders of US, or beyond. Do they include the workers of Bangladesh, Africa or China, who may starve if their work will be transferred back to the US or Germany, where the markets of their products are? Then also there is the question, do you have to buy new snickers, even if the old ones are still ok, just became out of fashion, and justifying it by claim that it gives work to the poorest in this world, while in other hand this over consumption is one of the reasons for global warming.

W. Even though I lean towards a Marxist perspective, I am not fully convinced of anything.

I understand that with utility theory, utility decreases with each marginal unit of consumption, which is why demand curves are downward sloping, and that price comes from the intersection between marginal utility and marginal cost. But price is supposed to be derived from utility. Can you predict price from utility? Utility is a defined concept, but it is not a physical, measurable quantity. An analogy I can think of is: “I posit that there is a feature within all physical objects that causes objects to be black. I’ll call this feature ‘B’. The more ‘B’ within an object, the darker it is. How do we know how much ‘B’ is in an object? We measure how dark it is! And we will base all of our theories on color based on this concept.

If utility theory is correct, a different analogy could be gravity. We know gravity exists but we can’t see it. It can only be measured by measuring things like the acceleration an object experiences because of it. However, the difference is that this theory can then empirically make predictions with very precise accuracy. For example, in the equation for gravity, force = G x mass1 x mass2 / distance^2, where G is the gravitational constant, a constant that is the same everywhere in the universe. This G was not measured directly, but derived. However, we have a value for G, and this value is then used to make very accurate predictions. Are there accurate predictions that are made with the concept of utility? Or, when we make predictions and they are not accurate, do we simply say, “well, the situation is complicated, there were other factors which caused the prediction to be inaccurate”? If predictions are consistently inaccurate, at what point would we start to question the fact that, even if utility theory seems logical, maybe it’s incorrect? Maybe price is not based on a subjective factor (utility, or satisfaction), but comes from some physical observable reality (an objective factor)?

As to labour theory of value, I think an important question is: what do we mean by “value”? You say Marx didn’t ascribe value to these things. But what do you mean by that? He didn’t incorporate these things into price? In what way does utility theory incorporate these factors into price that Marx does not?

Also, Marx did not deny the function of factors such as risk and speculation that go into the fluctuations of prices. Marx was concerned with price in the long-run.
Marx devoted hundreds of pages discussing technology and automation and the role it plays in the development of capitalism. He wrote of the necessity for constant improvements in productivity in order for capitalists to produce more efficiently to extract short-term profits by outperforming competitors, of how capitalism necessitates the need for revolutions in transportation, communication, etc. In fact, when reading Marx, it was pretty incredible to me the level with which he predicted technological innovation. I could come up with an abundance of quotes, but I won’t do this at the moment.
Amongst other reasons, a major reason why profit rates are constant throughout industries is that capital is free to flow across industries, so if one is more profitable, more capital will be attracted to this industry, and the rate of profit will decrease in that industry. Furthermore, it is not simply the number of hours worked that matters. What’s more important is relative amount of value produced by a worker, i.e. how much value a worker produces vs. how much the worker gets paid. With increased technology, a business can extract more labor out of an individual worker, thus leads to greater short-term profits.

Also if you have politically socialistic tendencies, to have intellectual decency……

I disagree with the framing of your last sentence regarding sneakers. Overconsumption is not the reason for global warming. Overproduction is the reason. An economy that depends on infinite growth is the reason. In fact, I read an article of yours from a few weeks or months ago, and you mentioned.
“The price to be paid in terms of global environment, to achieve this continuous economic growth, ignated an unsustainable processes of global ecological disbalance, endangering the very existence of bio-systems. It seems, already we are in the stage, that these processes cannot be stopped, unless a system change will happen.”
I agree with this. “Ethical consumption” (i.e. choosing to consume “environmentally sustainable” products) is not the solution to the ecological crisis. System change is.
E.
1. As to utility theory, gravity is not a good analogy. You have the G constant and it is exact and always the same, even if it came from measurement, or experiment, or what is called induction, and not prove deducted from theory of everything. When you speak about utility, you shouldn’t confuse between individual utility and aggregate utilities. The marginal utility is always a result of all the participants in the market, while all of them have a different utility curve, but all of them together have one aggregate curve. Those with too low utility from the product, will never purchase it, if the very first product price as to him is below the equilibrium price. Also the utility is always in relation too. Utility from beer, is in relation to the money I’m ready to pay for it. It could be in relation to chicken wings, but it is to complicated. The price of the beer in relation to money is not absolute value of the beer but a measure, ruler to express its relative value as to chicken. This is why utility argument is not circulare as you claim. Also the demand and supply curve is always in certain time and specific conditions. So if conditions change, the utility changes too.
I hope my argument is clear enough.

2. In market economy, as the technology is distributed to all the producers, on the long term all the producers products price will be the same, and their profit will be minimized to zero. The only way to be profitable in the market economy is by creating monopolistic advantage and scarcity, even if very temporary one, usually technological, or being the first on the market with product, like iphone. This is why Adidas, that has to compete Nike, Power, etc., but also car producers in spite of their brand, make very little profit, while Apple or Samsung made a lot, until the Chinese will take over the lead. GMs bankruptcy happened because it had to compete with Japanese and Korean car producers. In late sixties no one ever heard that they have any car production. Because every producer tries to adopt the cheapest way to produce, in the long term price in market economy leaves no profit, and in a way it flattens the production cost curve, meaning the first product produced have the same cost as the last one, theoretically to the infinity, and reduces marginal cost close to zero. In modern technology products like IT programs or art production, marginal cost of product is zero, and if distribution costs are zero, the product price has to be zero or close to it. Like the cost of this letter that will be eventually transferred to you.

3. Major problem of Marx are his political, sociological, historical analysis. If we accept the Hegelian dialectics, history is driven by conflicts. Yet, most of the conflicts are about clash of civilisations. Different mythologies, different human values, or lust for subduing and ruling others and not by materialistic class struggle for redistribution of resources. Definitely not in our times. Since Europeans adopted Monotheism, most of the wars were religious wars. The very first was Constantine. Before that the Greek-Persian, the Punic wars of Rome against the Phoenicians, the Romans blamed the Phoenicians of cannibalism (probably truth), the peloponnesian war was also about cultural differences between Sparta and Athens. Then you had medieval wars among the kings, what was struggle for territory in the sense of ownership, but not for economic reasons, but for glory and greatness of the Royal family. With the rise of capitalism colonial wars became about economy, but they were initiated by corporations, like East Indian company. But this is an exception. WWI was about frustration of German elites with the new urban population tending to support socialist parties, and not the conservative traditional elites, who, by the way, have done well for the working class, including first national security system in the world. Of course it was also about stupidity of absolutistic Russian Tzar, who was a retarded dictator, with a crazy wife. And then you had an 80 year old king of Austria. Intermarriage between the European kings made them dumb. Only exception that fits into Marx’s historicism is the French revolution, but it lasted few years, and was followed by Napoleon, the warmonger.
The classes struggle is non sense, and always was, even at times of great victories of this ideology in Russia and China, that was not result of power struggle of classes, but rather successful exploitation of opportunity, caused by political chaos after war, and annihilation of elits. In Russia they were successful in Germany not, even if tried. Why the German socialists were not successful with their revolution after WWI? After all they had much larger popular support than the Russian communists? Because they were less unscrupulous in their drive to political power, than their Russian camarads.

The Russian communist leadership was very effective in propaganda, and very goal minded. The goal was to grab the political power for any price. They fully implemented the slogan, The aim justifies all the means. They succeeded, but the price was huge and was paid by ordinary people. They murdered before the WWII millions of ordinary citizens in pretext of being capitalists, kulaks and bourgeoisie. You will say it is not Marxism. But yes, it is. Marx clearly speaks about the necessary annihilation of the bourgeoisie. And he says clearly, you can’t change them, they always will fight for their class interest. Conclusion, you have to murder them. The idea of proletariat dictatorship is also a very violent idea. Not to speak about the falsity of claim that there is proletariat and class struggle. Is such a claim a scientific claim? When did you meet last time a proletariat, are they the rednecks, who voted for Trump?

4. You wrote: …….. profit rates are constant throughout industries? It is empirically not truth. Maybe you mean interest rate? But even that is not constant. Interest rate is risk related. But above all, interest rate is not a free market price, but directly fixed by Federal Reserve bank.

5. We have agreement, the yield hungry capital driven economic system, combined with democratically elected populist politicians, monitored by specific interests of corporations is not very promising. Obama, who claimed to understand the global problems, had done nothing. He was puppet of big money. The disappointment from him brought Trump, who maybe will be more successful, by destroying the whole American political system. God knows if we will survive him.

Politics is about recruiting the ignorant masses to follow leadership case. Leadership is always elites by definition. The question is what purpose these elites follow. Are they for general utility of people, or fulfilling some hidden psychotic need to control and rule others. Communism under pretext of policy of general utility for all, created system of absolute power and absolute control of all. The Russian communists got all the legitimacy for all the cruelty and abuse of power they made from Marxist ideology.

6. As to labour theory of value, you wrote:
….more important is relative amount of value produced by a worker, i.e. how much value a worker produces vs. how much the worker gets paid….

First, if price is fixed according to labour time input in product, can’t be differentiation between labour value of scientist compared to manual worker. Also the wages according to Marx are according to needs. Kind of consumers basket. What it is i don’t know. Does it include sexy high heel shoes? And if not what about small hight girls that want to compete for male attention the higher ones?

7. Brand is about creating scarcity. When Apple launched one of his new products, he created a scenery of scarcity. Fronts of purchasers in front of its shops. Also the Apple shop chain is about trying to create a feeling of scarcity and ceremony, when you purchase iphone. Apple is fetish, as money, gold, diamond, or collection of art or old car is fetish. Marx spoke about fetish in negative terms. But it is still here. The profit is created out of scarcity, and not from exploitation of workers labour. Land in tiny city centres is scarce, so expensive. Land in vast uninhabited periphery is cheap. And it has nothing to do with labour.

8. I agree that capitalistic economic system has to change and will change. Either by collapse or by evolution. Collapse can be due to mass migration, I’m not speaking about millions but a hundred of millions of people leaving in places uninhabitable in the near future, like Bangladesh, Pakistan, Egypt, etc. due to ecological or political collapse or both, like in Syria. And it was not a result of US Middle East policy, but lack of water due to overpopulation, political corruption, and Turkish dams on the Euphrates. Parts of the world with huge population are becoming uninhabitable.
If to make evolutionary change, definitely materialistic Marxism can’t be the solution. Some new ideas have to be created, that may work, out off classical understanding of what humanity is all about.
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E. Your paper touches many subjects, and i will try to pick up some and comment on them

W. Consider the housing market before rent control. In economic terms, there was no shortage of housing. Yet people were being forced out of their homes because they could no longer afford rising rents – the conditions that fomented the urgency for action regarding rents in the first place. Economics would not consider this market failure, which is a situation in which a market left on its own fails to allocate resources efficiently.

You speak about homelessness. Price control on the rents, may be for some individuals salvation, but still many more others will stay out in the streets, since, what causes the homelessness is insufficient absolute number of apartments available for rent looking for tenants, and it will decrease with the price control.
Here i have to give a general remark, you have to decide what are you into, telling a story of an individual, for example homeless, or trying to analyse the system, its advantages and disadvantages, and try to find solutions. To speak about a general problem, and relating it to a particular problem, as an analogy is the basis of populist demagogue.

W. Nevermind the fact that the drive for profits has pushed governments to pass free trade agreements where capital is free to flow over borders but workers are not, which allows international capital to explicitly exploit the differences in wages in different nations and pit worker against worker. Definitely nevermind the fact that the profit-motive is largely what drove the expansion of slavery to provide the mass production of cotton for English factories. The 5 free market will solve all.

E. A very strong argument. I fully agree, that internationally free flow of capital without free flow of workforce causes discrepancy. But not too many in the unions or the left will accept to open the labor market for foreign workforce, and even less will accept the social class, you probably will call the proletariat opened immigration policy.

W. …..This explains why centrally planned economies never work very well?……

Thats quite an extraordinary claim. For example, in analyzing a country like Cuba, one would have to control for the obvious fact that it has faced a disastrous economic embargo and threats of invasion and infiltration from the most powerful country on Earth since its inception, and still managed to survive and build a better healthcare system than the US, eradicate illiteracy, and maintain a higher average annual growth rate since 1970 than the US , (even including the dismal years after the fall of the USSR where Cuba saw growth rates of up to -15%). This explanation provided by Mankiw is not an academic or scientific explanation. It is an ideological one.

E. Cuban experiment is an excellent example. Central planning economy can work well, if the needs are very basic, with very clear aim. It worked for USSR during second World War, when all the economy was recruited for war effort, or in Cuba, while the aim was to solve very basic problems, like illiteracy. But when the economy has many diversified tasks, trying to satisfy many different kinds of products, to satisfy maximum of the demand, it had to fail.

W. Still, its hard not to hear the promises the Bush Administration made when presenting their case for enormous tax cuts on the wealthy and corporations in lines like the following from Mankiw: Taxes are costly to market participants not only because taxes transfer resources from those participants to the government but also 13 because they alter incentives and distort market outcomes.

E. Here i would have a more profound argument against the claim that tax causes distortion to the market, and as such it reduces always the general utility. If divide the economy to two sectors the public and the private. Each sector has different activity (for example: the government produces education and health, while private sector consumer goods and services). Both sectors have to have very different marginal utility curve in certain time. The marginal utility of both activities has downward tendency, it means, if too much private activity is done, its marginal utility has to be less than of the public activity and vice versa. This is happening in US, where investments in private activities bring very little additional comfort, like new brand cars, while the public investments are neglected, and there are not enough roads, trains, etc.

W. These subtleties provide the illusion that the free market provides natural outcomes, and interference with the market is essentially unnatural.

E. Totally agree. And what if natural outcome without intervention results mass murdering of people or ecological disaster, like in case of global warming or water reserve exploitation? Market always allocates activities in certain time and location dimension, and neglects the impact of the economic activity in different dimension. For example, all the ecological problems are on global scale and long term, while market decisions are mostly short term and local.

W. Could it be that an economic mode of production that provides a tiny portion of the population ownership and control over the means of production (i.e. the factories, machinery, and raw materials that are necessary for the production of commodities) naturally produces a class of people (i.e. the capitalist class) that inherently have conflicting interests with the mass of people (i.e. the working class) that must sell their labor in order to survive? Could it be that since business owners necessarily must drive down costs in order to maximize profits to stay afloat in competitive markets, their interests are to keep wages as low as possible and to squeeze as much labor out of workers as they can, and that these antagonistic relations naturally lead to conflicts between workers and capitalists, where workers organize collectively to form unions and fight for higher wages?

E. Yes this sounds very Marxist and i see it very differently. There are no classes in the society, in anthropology sense of word. It is just a marxistic fiction. All you have is political organisations called communist party, where people with lust for political power, try to exploit frustration of certain sector of the society, less educated and less successful, to recruit them to create community of political supporters. Not all the workers are the same and the humanity is not divided to capitalists and workers. There are no social classes, there is no class of proletariat that identify themselves to other working people. No worker in Detroit has any positive feelings, towards a worker in Korean car factory. In contrary, they hate them and want to close for them the US car market. People are by their nature very competitive. Even the losers are failed winners. The workers who are employed and have pension fund investments are capitalists, on the other hand the CEOs can be just employees. You have also educated employees, and non educated ones. You have entrepreneurs and passive workers, asking only to submit themselves to some authority. Etc.

W.The theories stemmed from Marxs and others critiques of capitalism, and the idea that the means of production should not be owned privately by a small group of individuals, but instead should be owned collectively by workers. It is true that communists generally think that the market should not be the force that allocates societys resources, but that does not mean that the pervasive thought was that they should instead be allocated by a select group of government officials. The thought was that societys resources should be owned and distributed collectively and democratically, instead of leaving the distribution up to market forces that fluctuate wildly,….

E. This is a very popular argument of Marxists to defend Marxism, by saying it was not correctly implemented in USSR that’s why it failed. This is false claim. Collective ownership of resources distributed collectively and democratically, means economy is managed rather by political processes than by entrepreneurs competing each other fiercely. The necessary result of political processes is monopolisation of resources and decision processes in the hands of the politically most powerful, who are at the end most powerful because they are the best to manipulate other people and the truth and not because they have the best capacity to create wealth and utility for the society or have higher morality. In 20 century i recognise only 3 successful politicians with high morality, Gandhi, Mandela and Havel. No one else. Collective ownership and management resulted everywhere, even in the kibbutz in Israel the same result. After second third generation, when the founding fathers died, all was left is political struggle, who will be on the top. Remember in any political systems the most evil rule because they are the most evil.
W. …… Yet, today, in the wealthiest country the Earth has ever seen, there are around 550,000 homeless people……

E. You bring up US statistics, that is the result of very bad political processes, implemented in US, that brought to power very stupid and corrupt politicians. Donald Trump is just the top of the iceberg of the stupid political representatives, representing only particular interests, and have nothing to do with capitalistic economy. By the way Hillary Clinton wouldn’t be better than Donald Trump. Proper capitalistic system includes in itself very efficient tools how to cope with problems of inequality, social aid, public services, etc. The question is if these tools are used by the government. But if the political representatives are in payroll of corporations and banks, they don’t represent any universal economic goal, and not even the capitalistic system.

W. Nearly every major policy that has impacted the lives of workers for the better, from the eight hour working day, to social security, to job safety regulations, to medicare and medicaid, have been won off the backs of tremendous struggles of organized labor………

E. It’s not truth historically. The first welfare state was established by Bismarck before WWI, an ultra conservative German nationalist, to strengthen the German nation. Then after WWII it was introduced in GB by the Labour government. The Soviet threat, helped to restrain the criminal tendencies of politicians and their corporate management collaborators. But it has nothing to do with capitalistic or socialistic system of economy. Corporation tend to create monopolies through lobing, that are anti market anti capitalistic economy, that is based on competition.

The weakening of the concept of welfare state is result of increased economically inactive population due to aging, globalisation that by itself brought the distribution of welfare worldwide, and not only to the workers in the most developed nations, and lately the automatisation technology in production and management, that reduces the jobs in growing range of professions.

W. The demise of the Soviet Bloc was an incredibly complex issue. The facile explanation of why communism collapsed seems to suggest that communism is always doomed to fail; eventually the economy will stagnate and the situation will be forced to change. Hubbard explicitly states It is clear that a centrally planned economy could not, over the long run, grow faster than a market economy, leading to the collapse of the Soviet Union. But Mankiw and Hubbard never examine the opposite situation: that capitalism keeps seeming to run into this problem where workers revolt against the economic system and agitate for revolution. Couldnt one make the argument that capitalism, if left to itself, is always doomed to fail? After all, if it wasnt, why would the US have had to spend trillions of dollars over the past century , criminalizing and suppressing socialist and communist movements domestically and brutally crushing movements around the world ? Why would the US have had to overthrow countless democracies and install ruthless dictatorships , invade nations and slaughter millions , fund and arm right wing insurgents and military juntas , and spread anti-communist hysteria all over the world?

E. You put here on the paper a whole range of very weak arguments and i have to cope with it one by one.

1. The solution can’t come in Marxist kind of revolution by non existing proletariat, that by definition has to be employed and not unemployed, but by some system of welfare and employment, disconnected from the production process. I personally would suggest introduction of mandatory whole life education, training, or cultural activities, for the unemployed, while paying them wages, to secure decent living. The habits of waste and overconsumption, propagated by marketing agencies i would put under strict regulations.
2. I do agree that capitalism by itself is destructive and will be doomed, or will bring to the end the human civilisation, but not because of its failure to achieve its goal, the ever increasing yield on capital, but because of being successful in its drive to its goal. Capitalism’s aim predisposition is unlimited global resources, but the globe is with limits, and so the human capacity to comprehend the reality. So such a system eventually must collapse.
3. US post WWII policy of military intervention has nothing to do with capitalistic economy. It’s a result of majority of stupid political representatives, who represent only particular and not universal interests of the capitalism. Wars are too costly to be justified by economic means. Usually they are result of all powerful crazy or stupid leadership. Iraq war was result of very bad misconception of G.Bush junior and his arrogant advisers. Banana fruit company wars in Banana republics happened, but they were rather the exception than the rule. Most of the wars since WWII were result of fierce competition between despotic USSR, and democratic US. They managed to fight these wars in peripheral regions from European-US point of view.

As to your description of Marxist theory of value, if you reread with critical eye what you wrote, you have to come to conclusion that it is an anachronism, that probably never existed. The capitalists were not evil beasts, but real people, most of them run local based enterprises, in communities they were part of. The huge Ford like production line factories, like in Charley Chaplins movie existed only very partially in twenty century until the seventies. Since the eighties the automatisation of production, diminished the phenomenon of throngs of workers leaving by foot their shift. It also reduced the political power of unions.

To base whole economic theory on one temporary phenomenon is mistake. If you speak about scientific methodology, you have to define exactly who is proletariat and who a capitalist. Does such a definition exists? And if yes, do they exist as separate class?

W. Marx’s model was anything but deterministic. Marx’s entire theories were grounded in the philosophy of dialectical materialism, where history is a flow of interactions between ideas and material reality, and nothing is deterministic. Marx’s theories suggest that with a declining labor force, capitalism will be set into a series of crises as the rate of profit falls, and if he was right about many things, his analysis is more relevant than ever. We have yet to see empirically whether this was a correct prediction.
Marx did not deny the role that scarcity plays into short-term prices. He was concerned with prices in the long-term. Here I quote from this excellent source on Marxian economics:
Some people have the mistaken impression that the labor theory of value is some sort of substitute for the laws of supply and demand. This is not the case. All of the classical economists from Adam Smith, to David Ricardo to Karl Marx where aware of the forces of supply and demand. Yet they didnt think supply and demand were sufficient for a theory of value. Instead supply and demand were seen as the mechanism through which value operates.

For Marx, the theory of value is more than just a theory of prices. Price theory might help us make business decisions, but value theory is concerned with deeper social questions like Why do the products of labor take the form of commodities with prices? and What sort of social relations between producers are necessary in order for this to happen? In the process of answering such questions we can build a theory of the social relations of a capitalist society in all of its antagonism and dynamism.

You say most “conflicts” were about clashes of civilization, but your only notion of conflict in this statement is war. Nobody ever said that every single war was about the distribution of resources. In fact probably the overwhelming majority of wars were not simply about the distribution of resources. But this does not mean that many of the same wars you mention arise out of systems of societal organization that function to maintain the balance of classes. Was the Catholic Church’s dominance not necessary to justify and maintain the feudal order and the relations between serfs and lords? And religious wars fought between Protestants and Catholics, where Protestantism arose as a rebellion against the Church’s dominance and coincided with the rising of capitalism and the industrial class that conflicted with the traditional landed aristocracy? You are not mentioning innumerable international conflicts initiated by corporations (quick examples are the US overthrow of Guatemalan Democracy at the urging of the United Fruit Company, overthrow of Iranian democracy at the urging of the Anglo-Iranian Oil Company, etc.), but even those are not important compared to the majority of wars that are not directly attributable to corporations, but to the functioning of nation-states and their goals of preserving political and economic dominance.

Why did nation states arise with the advent of capitalism? Very briefly, the rise of private property and competitive commodity production based on wage-labor necessitates strict juridical frameworks to regulate production, contracts, etc. State force develops to maintain these legal frameworks. The need to regulate relations between capital and labor, and between capital and capital, further develops the functioning of the state. The producing classes, with wealth and power, dominate capitalist nation-states and wield the state to create favorable conditions for production, so states like Britain and the US intervene in foreign countries to ensure access to markets to sell surplus goods and access cheap labor and resources. I would argue that nearly every single war in the past few hundred years ultimately stem from these kinds of dynamics.

About the French Revolution being the only one that fits into Marx’s historical materialism, there are just so many examples I don’t even know where to begin. The Paris Commune in 1872, the Russian Revolution, failed revolutions in Germany, the Spanish Civil War, the Cuban Revolution, China, Vietnam, Chile 1970’s, not to mention countless other examples of mass movements that were not explicitly Communist but still the same light… in all of these places there were enormous worker uprisings. Your claim that the Russian Revolution was not a result of class struggle is completely unfounded. Have you read the testimonies of millions of revolutionaries who fought for revolution? It is books like “Ten Days that Shook the World” by John Reed and “October” by China Mieville that I think make pretty convincing cases that this classic line of “the Russian Revolution was not a mass uprising but an exploitation by the Bolsheviks of the masses” is completely without merit.
I think in your other email you said that the War in Iraq was simply stupid policy by one politician. This is an example of our disagreement. To me, the War in Iraq is not just a result of stupidity. It is part of a global project that has taken place in the past four decades, that we call “neoliberalism”. The War in Iraq was an attempt to dismantle a government that was at times resistant to US hegemony, and to build Iraq as an exemplar of a free-market, neoliberal success story, and it massively failed.

E.

You wrote: Marx’s entire theories were grounded in the philosophy of dialectical materialism, where history is a flow of interactions between ideas and material reality, and nothing is deterministic. Marx’s theories suggest that with a declining labor force, capitalism will be set into a series of crises as the rate of profit falls, and if he was right about many things.

To my understanding his materialistic dialectic historicism and his theory of stages is deterministic. Let me cite Wikipedia:
Marx predicted the breakdown of capitalism, and the establishment in time of a communist society in which class-based human conflict would be overcome.

How could you understand such a theory, predicting the next stages of the socio-economic structure if not as a deterministic one? You yourself wrote, it is surprising that Marx got it right in so many of his predictions. But then, how can you predict anything without to be deterministic? All the hard sciences are deterministic, because they try to predict. Just try to imagine, what would happen if you couldn’t predict the results of the simplest experiment. What if while boiling water on the fire the water would from while to while freeze instead of evaporate. You should check your claim that Marx’s historicism is not deterministic. Even in quantum physics, with its uncertainty principle you are predicting. And dialectics, materialistic or of the spirit is system of cause and effect. Thesis, antithesis – the cause, synthesis -the effect. What it is if not deterministic?

To me the expression, You can’t not to know, what you know”, is the basis of deterministic evolution of the spirit.
Also demographic trends, are deterministic within the existing cultural framework.

The first question is,… is human act out of free will or not, …
The second question
Can human individual act and have influence out if his social political background?
And the last one ……is dialectical materialism deterministic or not…..

To my understanding Marx saw historical processes as result of economic development in form of capital and knowledge accumulation and its ownership and the inter-relations between individuals in the society and individuals and the society, while the division of labour placed each individual to it’s class according to his economic task in the society.

I may be wrong about Marx, but still i believe i have the capacity to summarize the essence of differences between your and mine points of view. After all it’s not important who said what, but what are the ideas we believe in and if they are right or wrong.

To my opinion, the only way to change these deterministic processes is war, mass murdering, social-political upheaval through complete annihilation. If the Bolshevik revolution wouldn’t be successful, the world would be a very different place. Their victory was far from necessity. After all in 1917s election the Bolsheviks got only 24% of the votes, far behind the social democrats.

To my opinion, the major issue in political system is the legitimacy of the government authority. Historically rulers political legitimacy in the pre industrial revolution era was from their family stories about heroism, nobleman status of aristocratic families, etc., meaning fairy tales. If you visited palaces of European nobleman 250 years ago, you would see paintings of all their predecessors on the walls and their great deeds. Also their names included the roots of their families, etc. All this gave to them huge respect among the mostly illiterate rural population, living in the villages in the neighbourhood of their castles, who and their families were part of these stories, and as such could identified with them. Also there were no big concentration of population, that the rulers couldn’t manage. With the beginning of industrial revolution, growth of urban population, literate and concentrated in the cities and the new factories, this tie between master and vassal was broken. Add to it the new growing, well educated middle-class, and the old political power structure was broken. But no ruler, be it aristocrat, capitalist, or communist, gives up his grip on political power voluntarily, just because it lost its relevance. The revolution is the only way to change it. It started in France, the most important country in Europe, where the aristocratic grip to the power was the strongest, and most obscure. Germany, still divided among hundreds of city states the demand came later. To relate these events to clash of different economic classes with different economic interests is oversimplification. Class consciousness doesn’t exists, unless it is arisen by some ideologically motivated, semi-intellectual leadership with lust for political power.

———————
As to utility theory, i accept that the methodology used for the theory is very different from the methodology used by hard sciences. It is the same with all social sciences, psychology etc.

The question of determinism goes to the very core of the philosophical question, if there is free will or there is not. In physics and definitively in classical physics there is no free will, but mechanical obedience to laws of nature.
In sciences of human behaviour all what the scientists try to do is to build a model, that can be quantified, and partially explain certain aspects of human behaviour in certain situations. From this point of view Marx or Marshal are the same. Marx theory failed, not because his scientific method is worse than the alternative theory, but because he wrongly predicted human behaviour, in certain situations. He didn’t give enough importance to individuality, so important today, and on the social level to tribalism and all connected to it like, ceremonies, myths, feelings of belonging to community, fath, religion, casts, and thought it as a temporary phenomena, unless it is based on social class, divided by economic function of the class. He felt contempt to religion, to phenomena of casts in India, etc. and saw it as a temporary phenomena. He didn’t give enough importance to major force that drives the human individual to act, the urge to compete, to posses and to have profit from any opportunity it encounters.

To my opinion humans are result of evolution of hunters gatherers, who had to be opportunistic, trying to create advantage from every situation. This urge had to be restrained by the first agricultural statements about 10,000 years ago, when ownership on land became crucial to the success. With it started also to crystallize the social political structure of the society, all based on ownership. By diminishing the right to private ownership, the whole social-political-economic structure has to change. It is not a technical question. It has deep psychological impact.

Marxism is about materialistic mechanistic social-political processes. Essence of all is labour and capital. For example the spirit of creativity and entrepreneurship, he didn’t emphasise and counted enough, since it is uncountable. And to my opinion it is the most important factor that drives the economy. And now, my opinion on the major questions we have to discuss:

1. I personally believe that accumulated knowledge or in other words human capacity to comprehend reality, is the major force driving the human experience on the social or individual level.

2. Class struggle; i don’t believe there is class struggle between different socio-economic levels of society. As to my understanding, all the conflicts in human history, including civil wars as French or Russian revolution, were opportunistic exploitation of frustrated masses, who expressed their frustration by filling the streets ad hoc, without concrete plan what to do next day, after the masses go home. The very best expressed it Zizek, while participating in student gathering in Greece, during the demonstrations at the break down of Greek economy. He said, I’m with you, I’m left, Marxist, let’s do revolution, but you have to ask yourself, what will happen tomorrow, or the day after the revolution, who will clean up the mess after you?……
And this is the main point. It may seem, as if short term euphoric mood of masses can organise themselves to a political movement and act, within the classes. But maybe the experience shows us that rather some opportunistic charismatic unscrupulous leader, someone like Lenin, Stalin or Khomeini, takes over the political power after the revolution, and the result is more catastrophic in humanitarian terms than the previous regime. Experience and history shows me, collective leadership doesn’t work, but on the very short term and its results are unpredictable. Sometimes revolution may have positive outcome, when out of the revolution comes a leadership with very humanistic, pro community ideology, with deep philosophical and ethical commitment and understanding. That’s what happened to US with its founding fathers, all of them philosophers. But usually this is not what is happening. Usually out of revolution the most unscrupulous despots, with the biggest lust for power comes out as the leader. It will be Lenin and Stalin, Robespierre or Khomeini, and not someone more hesitant, more ethical, who will try to form some system of balances of power between different interest groups, and not just annihilate everybody who is not supporter of the case. This is why Kerensky failed, where Lenin was successful
2. Good government comes always out of evolutionary processes and not from revolution. The American independent war was a very unique exception, and this happened because of the personality of George Washington. Washington as a military leader, supported by the other founding fathers, all of them intellectuals, was an exception. He didn’t grab the political power, even if he had the opportunity to do so, but instead established a democratic system, with president elected by all, and for limited term. This was a precedent. It never happened before in human history. The only working democratic example were the Athenian Greeks and the Romans. Athens was a city state, with 100,000 citizens, and the Romans became dictatorship, very soon after the Punic wars, when it became an imperial power.

But very soon the American experiment became a great success, and England, then France tried to follow. And do not forget, US never became a colonial power, even if it could be. It took to France and England another 100 years to create a democratic system based on universal suffrage. Unfortunately in Germany the leaders of 1848 revolution were too hesitant to overturn the Prussian King, so it took 100 more years and two world wars, US occupation to bring stable democracy to Germany. Today you live in a democratic world, where despotism and dictatorship, as a political system is rather an exception. Of course, you still have most of the Muslim world, China, Africa. Are their dictatorships so successful? Or dictatorship is a result of failure to create a better political system?
3. I believe that history of humans is many times result of accidents and acts of few individuals and not of the acts of social communities, like socioeconomic classes, or nations.
Sometimes there are unstoppable, deterministic trends in the history. Like at present the technological development, that is unstoppable, and unpredictable. The same is with the population growth in third world countries with no or very poor education and social system, that causes mass emigration, that is expected to grow. Other deterministic phenomenon is the global warming. No-one seems to be able to change these trends, even if everyone understands the expected catastrophic consequences of these processes to the humanity and the biological processes in the nature.
4. As to Marxism as an economic model, i don’t think i have much to say about it above what was already said by others. Maybe i would add just, that the Marxistic social-economic model is not for humans as they are, but for the humans as they should be according to the Marxistic ethics. Meaning socially cooperative and responsible and not competitive individuals. This discrepancy between how people should be and how they in reality are, has to be overcomed by continuous revolution, not to overturn the government, but to change the people according the Marxist model. For this purpose all the tools are legitimate. As to Russian experience it included mass murdering and despotic repression by any means. And what is the result, creeping economy that fell apart after 80 years of central planning and despotism of worst kind. After 80 years or 3 generations out of the fragments of collapsed Soviet Empire, emerged the Soviet people, who are the most competitive and egoistic in the world. Why do you think, you will be more successful than all those clever people like, Lenin a professional philosopher, Mao Ze Tung poet, Pol Pot an engineer who studied in France, or Chauchesku a shoe maker.
5. You wrote:
Marx did not deny the role that scarcity plays into short-term prices. He was concerned with prices in the long-term.

Here surprisingly we can agree out of disagreement. It seems, if in modern market economy the competition is not restrained, (not as in reality,) due to technology, the marginal costs tends to become zero or close to zero. The only element of cost is the capital cost for investments. But this too tends to become close to zero. Of course it leaves very little for the labour, when everything is done by machines, but so happens to capital gain too? So who gets the reward? The scarce asset holders, like valuable located premises, the entrepreneurs, technological innovators, highly evaluated artists, etc.

6. Your interpretation of history, is with huge biases, putting events out of context and relevance, and i my even claim, smells from conspiracy theories. Truth is, as i wrote to you already, during the cold war, when the West felt threatened by the Soviet regime, and exaggerated this threat, (i believe, mostly out of intelectual misinterpretation of the power of the Soviet state, that had no legitimacy whatsoever of Russian intellectual elites), acted many times with exaggerated power to any threat from the communists, like in case of Muzadek in Iran. And in fifties it still could happen, that they gave overthrown a democratic regime, for economic interests of a corporation. It was an illegal act even then, as in case of Guatemala. But so since the seventies, since the end of Vietnam war all this changed. The US presidents Jimmy Carter, R. Regen, and above all Bush Junior, don’t show too much expertise in international policy. Clinton and Obama probably knew more, but the political system based on corporate money just flattened them. But at least they didn’t start a war.

Wars initiated by politicians happen mostly out of miscalculation, except if it is caused due to conflict between nations, and not by some president ignorant in international relations.

To my opinion, the reason for revolution is always loss of legitimacy of the regime. Thats what happened in French Revolution, then at 1848 it happened for the same reason. New urban middle class, the bourgeoisie, growing in numbers and in economic importance demanded participation in the political scenery. The French 1872 revolution was result of military debacle of Napoleon III against the Prussians. Lost war always shakes the legitimacy of the government. Very recent and similar cases of loss of legitimacy and power happened in Greece and Argentina, after the military debacle in Cyprus, respectively in Falkland war, or in the case of German and Austrian Kaisers, who lost their power after they lost the WWI. The 1905 revolution in Russia was result of debacle with Japan.

These changes of regime always happen in dictatorships, because loss of war causes weakening of deterrent force of the oppressive regimes, and the people are just not afraid to rise up. The same happened in the Arab spring. By the way, the Soviet Empire collapsed without Revolution. It was enough, that the Russian army was not ready to shoot on civilians, and the retarded alcoholic politburo give up the power without capacity to fight back. Only Ceausescu tried to fight back, with his securitate, recruits of his private army, about 10% of the population. The desperation of the population was so deep, that even murdering thousands innocent people didn’t stop them to turn over his government, and execute him. After this, the remaining communist leaders, whose only concern was not to be executed as Ceausescu, gave up voluntarily power. In Czechoslovakia they tried to fight back, but the army refused to shoot into the crowds, so frightened they stepped down, after 3 days of gathering of the Central committee of the party. Few hundred representatives of the proletariat asked one question, are they going to hang us for our crimes or not. Even if they spoke about different issues as reform etc. the only thing that really bothered them was the rope.

Democratic regimes from this point of view are more resilient, because in the democratic system is incorporated tool for change of government.

As to Russian revolution, the social political situation was too complicated to make it a revolt of proletariat. First of all was revolt of the soldiers who refused to fight on the fronts and Lenin, a German spy, promised them to end the war. Then 87% of Russian population were rural, at 1918. Even according to Marx it was not a proletariat. As i said, the Bolsheviks, who were only 24% of the newly elected duma at November 1917, exploited the naivety and hesitancy of Kerensky, who wanted to create a democratic republic. The Bolsheviks, were unscrupulous unrestrainedly cruel, and it have done, what they couldn’t achieve in the polls. Under the slogan, “who is not with us is against us”, they murdered in few years until 1922 hundreds of thousands of people. No one knows exactly how many. Their faith in Marxism, and belief that the history is on their side, enabled them to destroy opposition. They were just as ISIS today, just more successful. Fanatic in their faith, cruel, unrestrained, ready to destroy anything that stood on their way to power. It is not accident, that out of their lines came so many mass murderers. You are right, among the working class, who were told that they will rull through the Soviets, the revolution had to be a very enthusiastic time. But for how long. As Zizek said, i am for revolution. But what will happen a month after the revolution? He is too clever to support revolution with an aim different than western democracy. By the way, i was in Athens in 1 May the same year the Greek economy collapsed. I spoke to young communist students, and asked them what they want. All they wanted is subsidies from German working class. They said it in different words, but that’s what they wanted. But the German proletariat didn’t want it. This is all as to solidarity of world proletariat.

7. I agree that market-capitalistic democratic system can’t cope with the most urgent problems of the humanity. But definitely communism, in any form is not the solution. Whenever you leave out from political or economic processes competition, it will be disastrous. And today, with technologies that can be used by any individual, i would say, before to act, humanity need to think.

From → ECONOMICS, History, MENUE

2 Comments
  1. I enjoyed reading this discussion, even I don’t a clear understanding of Marx’s and economical theories, by here are some comments I want to make:

    I don’t see a Global Warming as a big threat – there are already some solutions, like spreading sulfuric acid into a stratosphere, producing clouds or big mirrors to reflect sun’s radiation:
    https://www.technologyreview.com/s/511016/a-cheap-and-easy-plan-to-stop-global-warming/

    You wrote: ” Capitalism’s aim predisposition is unlimited global resources, but the globe is with limits, and so the human capacity to comprehend the reality. So such a system eventually must collapse”

    Theoretically you are right, but the earth is so big, that practically we are have unlimited global resources. And if some resources will became scarce, we can replace it by other means. For example – the cars can now use electric energy instead of gas and hopefully very soon we will have a clean nuclear fusing energy. We can create more efficient recycling process, in the US the number of trees is the same for last 100 years:
    https://education.seattlepi.com/rates-deforestation-reforestation-us-3804.html

    Capitalist system will collapse? Capitalism is an economic system based on private ownership of the means of production and their operation for profit, so what will happen after the collapse? The system will forbid to own the means of production? Big corporations can be nationalized – it worked in some countries – but how about smaller businesses like hotels, restaurants or taxi drivers?

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    • The question of scarcity and limited resources touches a much more substantial question of nature, the second law of thermodynamics, entropy. Entropy means processes in the nature, from potential energy, its existence is caused by disbalances of state of particularity, to state of absolute equilibrium or uniformity, irreversible without additional energy input.

      Out of the second law of thermodynamics emerges the following questions: “Is entropy enforced on biological phenomenon or not?”, and if the answer is not, still there is the question, “Can the phenomenon of human consciousness free itself from entropy?”.

      As to biological cycle, it seems on the local level, as a temporary phenomenon, until the conditions on earth and in the solar system are suitable, the life itself doesn’t behave according to law of entropy. Still there remains the question, “Is human consciousness ruled by entropy?”.

      The answer is not obvious. If we investigate human existence since the dawn of the humanity’s impact on the nature was governed by entropy. The very first humanoid acts of regulating fire, that goes back hundred of thousand of years, even long before appearance of homo sapiens, created irreversible processes of diminishing certain forms of flora and animal life, that existed on the earth for millions of years. This process was intensified with introduction of agriculture,  urbanisation, and even more since the industrial revolution.

      Does it mean these processes initiated by humans are irreversible and non cyclical, what would mean, the human phenomena is necessarily doomed? Not necessarily. It seems, the human intellect, does have the capacity to create tools to reverse these irreversible processes. But on the other hand the same technological tools have the capacity to destroy the human life or even the life all together on the earth. The question is, how humanity will use these tools. If to look in the past, the recorded history of humanity doesn’t give big hope. The most advanced technologies, the humans developed, were used for self destructive acts. As those tools get the capacity of global destruction, their usage became more selective and careful. That’s how we still have this discussion. As the technology develops, and it becomes more and more available for wide range of private people, and not only states, can anybody secure, that there will not be misused for destruction?

      Even more, at present the technology is developed by scientists and technology developers, who usually act out of  long term systematic vision, while those in authority to implement these technologies, act out of short term non systematic view of the reality.  

      Still, even if the experience of human history, and the political – economic scenery at present, doesn’t give to much hope for only positive usage of the newly developed technologies, there is chance, that the technology, as a conscious being, will save the humanity from destructing itself. Then the question is, what kind of human existence we can expect in the world, sustained and protected by non human, non biological life forms? Do we want to live in such a world?

      As to economy, the basic assumption of every economic model, be it Marxistic or capitalistic is, that resources are limited. Economy is a profession about efficient and “just” allocation of scarce resources. If no scarcity,  there is no need for economy as a profession.

      In the seventies of twenty century, the energy seemed to be scarce resource, since then, most of the people while speaking about scarcity,  they have in mind energy resources.Maybe in our times, with the new technologies, there is no scarcity of energy any more. But scarcity doesn’t have to be only about basic raw materials, energy resource, or cereals and corn. Scarcity is also about sustainable ecological system, that enables sustainability of human social and political framework,  securing decent human life for every individual. If over exploitation of global resources, and its impact on the environment causes collapse of social political systems, even if in certain parts of the globe, it is also an expression of limited global resources. And in our global world, it hardly can remain a local event. The recent happenings in Syria and some other countries in the globe are result of political-economic mismanagement of despotic regimes, without long term aims and management for sustainability of environmental resources, as water and agrarian land. This kind of political-economic mismanagement, can be observed as today in many other countries. The expected collapse of these countries will have global consequences on a scale, unknown until today.

      Like

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