Marx was right

[SimpleDon]

Marx was right - at least about somethings.

We have another anniversary to celebrate tomorrow and it is a really big one, the 200th anniversary of Karl Marx's birth.

This article from The Economist offers some advice to the Rulers of the world: read Karl Marx! or Second time, farce.

The article presents Marx as a flawed genius, who had some valuable insights into capitalism but who turned these nuggets of truth into a philosophy that the "40% of humanity who lived under Marxist regimes for much of the 20th century endured famines, gulags and party dictatorships." And then asks the obvious question "Why does the world remain fixated on the ideas of a man who helped to produce so much suffering?" To which they answer, "The obvious reason is the sheer power of those ideas" and "His ideas were as much religious as scientific—you might even call them religion repackaged for a secular age." That

the continuing interest in Marx, however, is that his ideas are more relevant than they have been for decades. The post-war consensus that shifted power from capital to labour and produced a “great compression” in living standards is fading. Globalisation and the rise of a virtual economy are producing a version of capitalism that once more seems to be out of control. The backwards flow of power from labour to capital is finally beginning to produce a popular—and often populist—reaction. No wonder the most successful economics book of recent years, Thomas Piketty’s “Capital in the Twenty-First Century”, echoes the title of Marx’s most important work and his preoccupation with inequality.

The prophet of Davos

Marx argued that capitalism is, in essence, a system of rent-seeking: rather than creating wealth from nothing, as they like to imagine, capitalists are in the business of expropriating the wealth of others. Marx was wrong about capitalism in the raw: great entrepreneurs do amass fortunes by dreaming up new products or new ways of organising production. But he had a point about capitalism in its bureaucratic form. A depressing number of today’s bosses are corporate bureaucrats rather than wealth-creators, who use convenient formulae to make sure their salaries go ever upwards. They work hand in glove with a growing crowd of other rent-seekers, such as management consultants (who dream up new excuses for rent-seeking), professional board members (who get where they are by not rocking the boat) and retired politicians (who spend their twilight years sponging off firms they once regulated).

Capitalism, Marx maintained, is by its nature a global system: “It must nestle everywhere, settle everywhere, establish connections everywhere.” That is as true today as it was in the Victorian era. The two most striking developments of the past 30 years are the progressive dismantling of barriers to the free movement of the factors of production—goods, capital and to some extent people—and the rise of the emerging world. Global firms plant their flags wherever it is most convenient. Borderless CEOs shuttle from one country to another in pursuit of efficiencies. The World Economic Forum’s annual jamboree in Davos, Switzerland, might well be retitled “Marx was right”.

Of course, Marx got most things wrong in his philosophy.

Marx’s greatest failure, however, was that he underestimated the power of reform—the ability of people to solve the evident problems of capitalism through rational discussion and compromise. He believed history was a chariot thundering to a predetermined end and that the best that the charioteers can do is hang on. Liberal reformers, including his near contemporary William Gladstone, have repeatedly proved him wrong. They have not only saved capitalism from itself by introducing far-reaching reforms but have done so through the power of persuasion. The “superstructure” has triumphed over the “base”, “parliamentary cretinism” over the “dictatorship of the proletariat”.

Nothing but their chains

The great theme of history in the advanced world since Marx’s death has been reform rather than revolution. Enlightened politicians extended the franchise so working-class people had a stake in the political system. They renewed the regulatory system so that great economic concentrations were broken up or regulated. They reformed economic management so economic cycles could be smoothed and panics contained. The only countries where Marx’s ideas took hold were backward autocracies such as Russia and China.

Today’s great question is whether those achievements can be repeated. The backlash against capitalism is mounting—if more often in the form of populist anger than of proletarian solidarity. So far liberal reformers are proving sadly inferior to their predecessors in terms of both their grasp of the crisis and their ability to generate solutions. They should use the 200th anniversary of Marx’s birth to reacquaint themselves with the great man—not only to understand the serious faults that he brilliantly identified in the system, but to remind themselves of the disaster that awaits if they fail to confront them.

I do agree with this. In fact. I realized that the economists from whom I have gained the most were either raised under Communism or were socialists and either converted to capitalism or just made astute commentary about it, unfortunately few will reconize these names;  Michał Kalecki (better than Keynes about Keynesian economics),  Piero Sraffa (the Cambridge Capital Controversy),  Nicholas Kaldor (the founder of post-Keynesian economics), and  Karl Polanyi (who explained the roots of neoliberalism). There is something to be said for being on the outside looking in to see something that others are too close to to see. This certainly applies to Marx who first described the impact of class in capitalism.

So the questions I ask are:

Do you accept that Marx got somethings right about capitalism even though his body of work taken as a whole caused immense suffering to millions of people for a century?

Or do you require the authors you look to to be right about most of their assertions before you credit any of their assertions?

Can you give examples of those in economics, that have shaped your outlook? I promise not to list the incorrect ideas that they had. This isn't a set up.

If you do credit Marx with some correct insights into the problems with capitalism, what are they?

 

[rousseau]

As far as I'm concerned Marxist theory represents a valid attempt at criticizing capitalism, but in a time of pseudo-science. A lot of the atrocities it brought came about in a time when, ok, science existed, but the world wasn't particularly scientific or aware of the pitfalls of pseudoscience. And so you got a lot of barely educated people eagerly trying to change the world with ideas that had good intent, but made no sense.

Actually, not entirely removed from what's still going on today.

 

[Bomb#20]

This article from The Economist offers some advice to the Rulers of the world: read Karl Marx! or Second time, farce.

Too-paywalled; didn't read.

The article presents Marx as a flawed genius, who had some valuable insights into capitalism but who turned these nuggets of truth into a philosophy that the "40% of humanity who lived under Marxist regimes for much of the 20th century endured famines, gulags and party dictatorships." And then asks the obvious question "Why does the world remain fixated on the ideas of a man who helped to produce so much suffering?" To which they answer, "The obvious reason is the sheer power of those ideas" and "His ideas were as much religious as scientific—you might even call them religion repackaged for a secular age."

In the words of Raymond Aron, Marxism is the opium of the intellectuals.

That

the continuing interest in Marx, however, is that his ideas are more relevant than they have been for decades. The post-war consensus that shifted power from capital to labour and produced a “great compression” in living standards is fading. Globalisation and the rise of a virtual economy are producing a version of capitalism that once more seems to be out of control. The backwards flow of power from labour to capital is finally beginning to produce a popular—and often populist—reaction. No wonder the most successful economics book of recent years, Thomas Piketty’s “Capital in the Twenty-First Century”, echoes the title of Marx’s most important work and his preoccupation with inequality.

The prophet of Davos

Marx argued that capitalism is, in essence, a system of rent-seeking: rather than creating wealth from nothing, as they like to imagine, capitalists are in the business of expropriating the wealth of others. Marx was wrong about capitalism in the raw: great entrepreneurs do amass fortunes by dreaming up new products or new ways of organising production. But he had a point about capitalism in its bureaucratic form. A depressing number of today’s bosses are corporate bureaucrats rather than wealth-creators, who use convenient formulae to make sure their salaries go ever upwards. They work hand in glove with a growing crowd of other rent-seekers, such as management consultants (who dream up new excuses for rent-seeking), professional board members (who get where they are by not rocking the boat) and retired politicians (who spend their twilight years sponging off firms they once regulated).

Capitalism, Marx maintained, is by its nature a global system: “It must nestle everywhere, settle everywhere, establish connections everywhere.” That is as true today as it was in the Victorian era. The two most striking developments of the past 30 years are the progressive dismantling of barriers to the free movement of the factors of production—goods, capital and to some extent people—and the rise of the emerging world. Global firms plant their flags wherever it is most convenient. Borderless CEOs shuttle from one country to another in pursuit of efficiencies. The World Economic Forum’s annual jamboree in Davos, Switzerland, might well be retitled “Marx was right”.

(Source)

The endlessly recited alleged "fading" of the "great compression" is fictitious! Globalisation and the rise of a virtual economy are producing a historically enormous decades-long decrease in worldwide income inequality. People preoccupied with inequality should be celebrating the progressive dismantling of barriers to the free movement of the factors of production, the rise of the emerging world, global firms planting their flags wherever it is most convenient, and borderless CEOs shuttling from one country to another in pursuit of efficiencies. The Davos jamboree should be retitled “Marx was even wronger than we thought”. The Economist article author appears to have neglected Mark Twain's dictum: Get your facts first, and then you can distort them as much as you please.

 

[laughing dog]

The reduction in the Gini coefficient has not historical context. How abnormal is a reduction of 7 points (0.68 to 0.58) over about 35 years? And, I noticed the data stops before 2010, so we don't know if there has been an uptick.

Finally, I would be interested in the cases of the reduction. Is it due mainly to massive reduction in poverty in places like China and India with virtually no change for anyone above the poverty level?

 

[4321lynx]

In the words of Raymond Aron, Marxism is the opium of the intellectuals.

And now "opium" is the religion of the people.

 

[SimpleDon]

As far as I'm concerned Marxist theory represents a valid attempt at criticizing capitalism but in a time of pseudo-science. A lot of the atrocities it brought came about in a time when, ok, science existed, but the world wasn't particularly scientific or aware of the pitfalls of pseudoscience. And so you got a lot of barely educated people eagerly trying to change the world with ideas that had good intent but made no sense.

Actually, not entirely removed from what's still going on today.

Sorry, I got tied up after I posted this, I wasn't able to properly attend it.

Marx definitely developed a pseudoscience, “scientific socialism” and "dialectical materialism", but these he applied his socialistic solution to capitalism, not to his criticisms of capitalism. He was the first to realize the problem of what would be called debt deflation when Irving Fischer used it to explain what happened in the Great Depression. That ever increasing private debt and its resultant liquidation can create deflation in a capitalistic economy because it leads to a reduction in the velocity of money in the economy as the money is taken out of the economy to pay off the debt, which leads to debt defaults as the economy shrinks and eventually to reductions in property values, which bankrupts banks, what happened in 2008. It didn't cause the Great Recession, it just made it much worse. Basically, debt creates money, paying off debt destroys money.

Debt deflation denies the keystone of neoclassical, mainstream, neoliberal, and free-market economics, general equilibrium, the idea that the economy has a natural tendency to return to the full employment equilibrium.

Marx didn't use his pseudoscience to explain debt deflation, he observed it in the recession of 1857. Google "roving cavaliers of credit Keen" to read about Marx's underappreciated role in the discovery of debt deflation.

 

[Canard DuJour]

The reduction in the Gini coefficient has not historical context. How abnormal is a reduction of 7 points (0.68 to 0.58) over about 35 years? And, I noticed the data stops before 2010, so we don't know if there has been an uptick.

Finally, I would be interested in the cases of the reduction. Is it due mainly to massive reduction in poverty in places like China and India with virtually no change for anyone above the poverty level?

It's almost entirely down to the former. Gini is a very flawed metric which doesn't necessarily measure changes in the gap between rich and poor. Consider two households with incomes of $10 and $90 changing to $20 and $180 respectively. The proportion of national income going to each is unchanged despite the absolute gap increasing substantially.

The absolute gap between rich and poor - i.e. what most people mean by inequality - has increased almost everywhere since about 1980, i.e. throughout the neoliberal era :

WHAT ARE OUR NEW FINDINGS ON GLOBAL INEQUALITY?

We show that income inequality has increased in nearly all world regions in recent decades, but at different speeds. The fact that inequality levels are so different among countries, even when countries share similar levels of development, highlights the important roles that national policies and institutions play in shaping inequality.

How has inequality evolved in recent decades among global citizens? We provide the first estimates of how the growth in global income since 1980 has been distributed across the totality of the world population. The global top 1% earners has captured twice as much of that growth as the 50% poorest individuals. The bottom 50% has nevertheless enjoyed important growth rates. The global middle class - which contains all of the poorest 90% income groups in the EU and the United States - has been squeezed.

http://wir2018.wid.world/

 

[Canard DuJour]

Re the OP, the Economist article is too crap to comment on.

A rough guide to what Marx got right would be to look at every unrealistic assumption of neoclassical economics and ask why anyone would make such unrealistic assumptions.

 

[SimpleDon]

Too-paywalled; didn't read.

If I remember correctly you don't read much even when it is not paywalled.

The economist offers three free articles a month. If you have used up your three articles then go to your anonymous mode in your browser and click the link. In Chrome it is called the incognito window.

In the words of Raymond Aron, Marxism is the opium of the intellectuals.

That

the continuing interest in Marx, however, is that his ideas are more relevant than they have been for decades. The post-war consensus that shifted power from capital to labour and produced a “great compression” in living standards is fading. Globalisation and the rise of a virtual economy are producing a version of capitalism that once more seems to be out of control. The backward flow of power from labour to capital is finally beginning to produce a popular—and often populist—reaction. No wonder the most successful economics book of recent years, Thomas Piketty’s “Capital in the Twenty-First Century”, echoes the title of Marx’s most important work and his preoccupation with inequality.

The prophet of Davos

Marx argued that capitalism is, in essence, a system of rent-seeking: rather than creating wealth from nothing, as they like to imagine, capitalists are in the business of expropriating the wealth of others. Marx was wrong about capitalism in the raw: great entrepreneurs do amass fortunes by dreaming up new products or new ways of organising production. But he had a point about capitalism in its bureaucratic form. A depressing number of today’s bosses are corporate bureaucrats rather than wealth-creators, who use convenient formulae to make sure their salaries go ever upwards. They work hand in glove with a growing crowd of other rent-seekers, such as management consultants (who dream up new excuses for rent-seeking), professional board members (who get where they are by not rocking the boat) and retired politicians (who spend their twilight years sponging off firms they once regulated).

Capitalism, Marx maintained, is by its nature a global system: “It must nestle everywhere, settle everywhere, establish connections everywhere.” That is as true today as it was in the Victorian era. The two most striking developments of the past 30 years are the progressive dismantling of barriers to the free movement of the factors of production—goods, capital and to some extent people—and the rise of the emerging world. Global firms plant their flags wherever it is most convenient. Borderless CEOs shuttle from one country to another in pursuit of efficiencies. The World Economic Forum’s annual jamboree in Davos, Switzerland, might well be retitled “Marx was right”.

(Source)

The endlessly recited alleged "fading" of the "great compression" is fictitious! Globalisation and the rise of a virtual economy are producing a historically enormous decades-long decrease in worldwide income inequality. People preoccupied with inequality should be celebrating the progressive dismantling of barriers to the free movement of the factors of production, the rise of the emerging world, global firms planting their flags wherever it is most convenient, and borderless CEOs shuttling from one country to another in pursuit of efficiencies. The Davos jamboree should be retitled “Marx was even wronger than we thought”. The Economist article author appears to have neglected Mark Twain's dictum: Get your facts first, and then you can distort them as much as you please.

The Economist is not talking about the global economy but about the British and by extension the American economy. No one is responsible for the maintenance of the Global economy, only the economies of the various countries.

The global increase in prosperity has been obtained by a decrease in the prosperity of the workers of the developed countries. There is nothing alleged about the fading of the great compression in the income distribution established after the end of the war. It has been reversed into a new gilded age. Capital is now claiming all of the gains from innovation and the gains from productivity increases. In the era of the great compression, these gains were split fifty-fifty between capital and labor, between profits and wages.

You have told me previously that you don't know anything about economics, that you are just asking questions. So I will ask you a question that doesn't require any knowledge of economics.

If a politician in Washington proposed a bill to send 300 billion dollars a year in foreign aid to the People's Republic of China to generate jobs for the Chinese to alleviate their poverty and to pay for it he was going to tax the middle class 400 billion dollars a year and give the 100 billion dollars a year that isn't needed in China to the wealthy in the world, would you consider this to be fair?

This is a trick question, nobody would consider this to be fair. But it is what we are effectively doing by running a +300 dollar trade deficit with China, by offshoring our production to China at the cost of manufacturing jobs for the middle class and not so much reducing the prices of the products as increasing the profits for the companies that move the production offshore. Why would anyone do this?

Even if you were so altruistic to the suffering of the poor in other countries wouldn't be better to spread the money, not in Communist China, but a little closer to home, say Mexico where it could alleviate some of our problems with illegal immigration? Or here is a crazy idea, use the money to reduce the number of the poor in the US first?

 

[Underseer]

Pretty much all of his criticisms of capitalism were dead-on. He was very good at identifying the problem, the problem comes when we start talking about his solutions which pretty much have the same flaws as libertarianism or anarchy: they rely too much of human beings not being assholes.

 

[coloradoatheist]

Pretty much all of his criticisms of capitalism were dead-on. He was very good at identifying the problem, the problem comes when we start talking about his solutions which pretty much have the same flaws as libertarianism or anarchy: they rely too much of human beings not being assholes.

Which work would actually be best to describe his solution? It's easy to complain about the weather sucking, but if the solution is to kill everyone so no one complains about it....

 

[Loren Pechtel]

Pretty much all of his criticisms of capitalism were dead-on. He was very good at identifying the problem, the problem comes when we start talking about his solutions which pretty much have the same flaws as libertarianism or anarchy: they rely too much of human beings not being assholes.

It's more than that. His "solution" only works in a basically static society.

 

[Canard DuJour]

Which work would actually be best to describe his solution?

Excellent question. There is no such work, and when people like the author of the Economist article allude to some blueprint for the Soviet Union, you can be pretty sure they've read about as much Marx as you have.

 

[Horatio Parker]

The economist Michael Hudson has commented that many have Marx on their bookshelves, but few have read him.

Another economist, Bill Mitchell claims that most of Keynes insights originated in Marx.

I'm among the non Marx readers myself, but I thought those were interesting.

 

[rousseau]

The economist Michael Hudson has commented that many have Marx on their bookshelves, but few have read him.

Another economist, Bill Mitchell claims that most of Keynes insights originated in Marx.

I'm among the non Marx readers myself, but I thought those were interesting.

Like the Bible. Extract the parts that support your world-view, ignore everything else.

 

[coloradoatheist]

Which work would actually be best to describe his solution?

Excellent question. There is no such work, and when people like the author of the Economist article allude to some blueprint for the Soviet Union, you can be pretty sure they've read about as much Marx as you have.

The SU was an attempt to to implement it. Pretty much it is just, "A great miracle happens and continues to happen"

 

[Axulus]

The reduction in the Gini coefficient has not historical context. How abnormal is a reduction of 7 points (0.68 to 0.58) over about 35 years? And, I noticed the data stops before 2010, so we don't know if there has been an uptick.

Finally, I would be interested in the cases of the reduction. Is it due mainly to massive reduction in poverty in places like China and India with virtually no change for anyone above the poverty level?

It's almost entirely down to the former. Gini is a very flawed metric which doesn't necessarily measure changes in the gap between rich and poor. Consider two households with incomes of $10 and $90 changing to $20 and $180 respectively. The proportion of national income going to each is unchanged despite the absolute gap increasing substantially.

The absolute gap between rich and poor - i.e. what most people mean by inequality - has increased almost everywhere since about 1980, i.e. throughout the neoliberal era :

View attachment 15595

WHAT ARE OUR NEW FINDINGS ON GLOBAL INEQUALITY?

We show that income inequality has increased in nearly all world regions in recent decades, but at different speeds. The fact that inequality levels are so different among countries, even when countries share similar levels of development, highlights the important roles that national policies and institutions play in shaping inequality.

How has inequality evolved in recent decades among global citizens? We provide the first estimates of how the growth in global income since 1980 has been distributed across the totality of the world population. The global top 1% earners has captured twice as much of that growth as the 50% poorest individuals. The bottom 50% has nevertheless enjoyed important growth rates. The global middle class - which contains all of the poorest 90% income groups in the EU and the United States - has been squeezed.

http://wir2018.wid.world/

And yet the actual living standards inequality between the $20/day and $180/day household is going to be lower than between the $10/day and $90/day household due to diminishing returns. The $20 household can now much better cover essentials such as nutrution, sending children to school, healthcare, better housing, transportation, etc. compared to the $10 household. The $180 household has more to spend on more frivolous things such as tastier food/eating out, more entertainment, fancier house, newer auto, etc. compared to the $90 household.

This is why the relative gini and the left's obsession with dollar inequality in general rather than physical living standards inequality is itself flawed.

 

[ZiprHead]

This is why the relative gini and the left's obsession with dollar inequality in general rather than physical living standards inequality is itself flawed.

No, what's flawed is people working harder and harder and the benefits of that work going not going to the workers but to the masters.

You have to be blind if you don't see it or a tool of the "betters" if you do see it and downplay it the way you did above.

 

[Canard DuJour]

Which work would actually be best to describe his solution?

Excellent question. There is no such work, and when people like the author of the Economist article allude to some blueprint for the Soviet Union, you can be pretty sure they've read about as much Marx as you have.

The SU was an attempt to to implement it. Pretty much it is just, "A great miracle happens and continues to happen"

To implement what? There's no "it" to implement.

 

[Canard DuJour]

It's almost entirely down to the former. Gini is a very flawed metric which doesn't necessarily measure changes in the gap between rich and poor. Consider two households with incomes of $10 and $90 changing to $20 and $180 respectively. The proportion of national income going to each is unchanged despite the absolute gap increasing substantially.

The absolute gap between rich and poor - i.e. what most people mean by inequality - has increased almost everywhere since about 1980, i.e. throughout the neoliberal era :

View attachment 15595

WHAT ARE OUR NEW FINDINGS ON GLOBAL INEQUALITY?

We show that income inequality has increased in nearly all world regions in recent decades, but at different speeds. The fact that inequality levels are so different among countries, even when countries share similar levels of development, highlights the important roles that national policies and institutions play in shaping inequality.

How has inequality evolved in recent decades among global citizens? We provide the first estimates of how the growth in global income since 1980 has been distributed across the totality of the world population. The global top 1% earners has captured twice as much of that growth as the 50% poorest individuals. The bottom 50% has nevertheless enjoyed important growth rates. The global middle class - which contains all of the poorest 90% income groups in the EU and the United States - has been squeezed.

http://wir2018.wid.world/

And yet the actual living standards inequality between the $20/day and $180/day household is going to be lower than between the $10/day and $90/day household due to diminishing returns. The $20 household can now much better cover essentials such as nutrution, sending children to school, healthcare, better housing, transportation, etc. compared to the $10 household. The $180 household has more to spend on more frivolous things such as tastier food/eating out, more entertainment, fancier house, newer auto, etc. compared to the $90 household.

Any such effect would be down to an increase in available goods and services, not the 20/180 income distribution. Even assuming such an increase, there'd still be less disparate purchasing power with a 10/90 distribution.

Diminishing utility of luxuries is a different matter. "Frivolous" doesn't mean less unequal and, as inequality increases, the rich increasingly buy unfrivolous things like power and influence and elite education for their children, which entrench and exacerbate inequality.