Marx: wrong and unoriginal

Alan Johnson writes:

I think the special theory of Marxism - the theory of the capitalist mode of production - was wrong from the start, and is now, 150 years on, definitively falsified. So there is no objective basis for the proletarian revolution.

He's right. But what's not sufficiently appreciated is that Marx's theory here was not particularly original. Underneath the sectarian wibble - much of which came from Marx himself - his analysis of capitalism followed his predecessors. For example:
1. The theory of the "increasing misery" of the working class is evident not only in Marx but in Malthus. The idea is that the supply of labour would rise to offset increasing demand, keeping real wages down; Marx and Malthus differed mainly upon the cause of the supply of labour.
2. The tendency for the rate of profit to fall comes straight from Ricardo - it's just the law of diminishing returns. Ricardo - and indeed Smith before him - thought this would lead to a "stationary state (pdf)" in which economic growth ceased.
3. The notion of ever-increasing severity of capitalist crises follows directly from (2), allied to increasing operational gearing, caused by the rise in the capital-labour ratio which Marx thought a central feature of capitalism.
But why were Marx and his predecessors wrong on these points?
Mainly, it's because they all failed - arguably, Marx less so than the others - to foresee the speed and extent of technical progress. Economic growth is a race between technical progress and diminishing returns. And technical progress has won.
However, the classical economists, of whom Marx was just one, shouldn't be criticized too harshly for this. Standard neoclassical economics had little idea about technical progress either: in the Solow growth model which economists of my age were brought up on, technical progress was exogenous "manna from heaven."
It's only quite recently - in endogenous growth theory and in books like this (and I hope this) - that we've begun to understand the origins of technical progress. Marx was refuted long before people knew why he was refuted.

Comments

[Igor Belanov]

Nonetheless, there is a wealth of insight in Marx's writings about the capitalist economy. Much of what he observed about it is more relevant now than in the days he was writing, when industial capitalism still operated on a comparatively local level. The main problem is that he shared the trait of his times in trying to create iron laws of development. Plus, the immiseration of the working class looks less faulty when considered in relative rather than absolute terms.

[Mark Wadsworth]

Who cares who was right or wrong or why?

Simple observation tells us that for centuries now, democracy and capitalism have been steadily increasing the overall wealth and physical comfort of nearly everybody concerned, rich and poor alike.

Yes there are recessions and slumps, Kontratiev said it's 50 year cycles since time immemorial, but nobody knows why he was right or wether he will continue being right in future.

[dearieme]

Clark's book: "a new and provocative way in which culture - not exploitation, geography, or resources - explains the wealth, and the poverty, of nations." Another PhD in the bleedin' obvious.

[ad]

To be fair to Malthus, his ideas would look a lot better today if the fertility rate had not changed since his day.

And as we seem not to have very reliable explanations for this change after the fact, it seems a bit unfair to blame Malthus for not predicting the change in advance.

Returning to Marx, did he not predict a change in the ownership structure of capitalism, so that everyone would own a bit of the nations productive industry?

I cannot help but think of pension funds, shareholder democracy etc.

Perhaps Marx was more right than we think.

[Tim Worstall]

Clark's a very interesting book. His thesis is really that the bourgeios bred themselves (or perhaps the bones of bourgois culture: he's very careful not to say genetic as opposed to cultural evolution) into the society which led to a change in the reaction to the possibilities of innovation (and thus the creation of technological change).
The stability of England 1200 to 1800 is what allowed this to happen. It would eventually have happened in a few other places: Japan and China for example.

[Gavin Kennedy]

Just to set the record straight on Smith’s ‘stationary state’, he reported where the dynamics of his theory of growth would lead, unless something else intervened. Smith foresaw ‘increasing returns to labour in the division of labour’, not Ricardo’s ‘diminishing returns’ which led to a dead end. Smith’s argument for endogenous growth’ was different. That neoclassical economists are changing track on this is encouraging.

The value of his ‘prediction’ was related to the situation when a country had
‘acquired that full complement of riches which the nature of its soil and climate, and its situation with respect to other societies allowed it to acquire; which could, therefore advance not further and which was not going backwards, both the wages of labour and the profits of stock would probably be very low.’ (WN I.ix.14: p 111) This was the ‘logic’ of his model, not a time-bound prediction.

He adds in the next paragraph: ‘But perhaps no country has ever yet arrived at this degree of opulence’ (WN I.ix.14: p 11). And this, plus experience since Smith’s day, shows why Smith did not predict so much as derive the conclusions of his growth model. The technological impact of the 19th-20-21st centuries show that in practice in the real world, there is no danger of a country ‘acquiring that full complement of riches which the nature of its soil and climate, and its situation with respect to other societies allowed it to acquire.’

Smith also noted that a country could deliberately reach such a state of no growth, as China had done to become stationary: ‘China seems to have been long stationary, and had possibly long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions’, which was ‘inferior to what, with other laws and institution, the nature of its soil and climate, and situation might admit of.’ (WN I.ix.15: p 111-2)

Note that the key restrains in Smith’s model were ‘its soil and climate, and its situation’, reflecting the predominantly agricultural base of 18thcentury economies, and also the choices of it makes ‘consistent with the nature of its laws and institutions.’ If it chooses to ‘opt out’, as China did deliberately by whim of the then Emperor in the 15th century (just as the commercial revival began in Western Europe) the rest is history. Chinese advanced technology withered; Western slowly and gradually flourished; China became backward; Western Europe advanced beyond the constraints of ‘soil, climate, and laws and institutions’. China is now catching up, having stagnated under the Marxists, until they switched from Marxism towards capitalism.

[Habu]

Let's call it like it is. Marx is a horrible read. Marx got very few things right, none of an enduring positive nature.
PhD upon PhD writing on almost always have a different take on what he meant...why?..because Marx was incoherent in his writings.
All he's good for now are good capitalist t-shirt makers who sell him right next to Che and lately Mao.

I'll keep my Dutch Reagan shirts, thank you very much.

[Kevin Carson]

Marx himself read a big-ass "ceteris paribus" into the third volume of Capital. He described at considerable length the offsetting tendencies to the falling direct rate of profit. Capital investment overseas in new, undercapitalized regions was one of them. The domestic equivalent was the rise of new industries based on new technology, as a sink for surplus capital. So his predictions aren't as ham-handed and vulgar Marxoid as they're caricatured in the typical Great Ideas 101 lecture on Marx.

[Miroslav Miskovic]

Scientific-technological revolution and the historical consciousness.The way how the mankind developed through last 40 000 years,expressed in terms of semiotics.