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Reconstituted Socialist Party of Great Britain (1991) Socialist Education Series - Marx’s Critique of Political Economy .

Marx and Academic Economics.

Marx’s critique of political economy has to be seen in his wider study of society and social systems. Marx viewed social systems as historical phenomena which were in constant process of change.

Marx began his study of social systems by looking at the way society makes it’s living, that is, highlighting the material basis of social existence. Law, art, philosophy and politics were ultimately determined by, conditioned and limited by the material boundaries of society. Ideas and beliefs were historically formed and had no life of their own. Ideas, then, come and go; sometimes fast sometimes slow but always within a socially formed context informed by material existence.

There can be no ideas relating to the struggle for trade union rights in Primitive communism. Likewise there can be no political ideas for the abolition of the wages system to be found in Feudal society. And the doctrine of the Divine Right of Kings will not be found within a fully developed capitalist country. Ideas are neither innate nor perennial.

This does not mean that there is an automatic correlation between the material basis of social existence and political ideas and beliefs. It was not until the end of the 19th century that, in Britain, the capitalist class had its first cabinet member when William Henry Smith (of W. H. Smith and Son) was elected Financial Secretary to the Treasury under the Disraeli Government later to become the First Lord of the Admiralty. The appointment gave rise to the character of Sir Joseph Porter, in Gilbert and Sullivan’s opera HMS Pinafore.

W. S. Gilbert's Pinafore lyrics are scathing of this arriviste:

I grew so rich that I was sent
By a pocket borough into Parliament.
I always voted at my party's call,
And I never thought of thinking for myself at all.
I thought so little, they rewarded me
By making me the Ruler of the Queen's Navee!


The political power of the aristocracy to check the will of the capitalist class was not removed until 1911 where they were no longer allowed top prevent the passage of “money bills” and it also restricted their ability to delay other legislation to three sessions of Parliament. And the Hereditary element of the House of Lords did not lose its remaining power until the 1997 Labour Government. For much of the time after the 1850’s the bourgeoisie assimilated into the aristocracy through marriage or aping aristocratic attitudes through reading COUNTRY LIFE and other similar magazines.

Marx and Hegel

Marx was initially influenced by the philosopher Hegel. But Hegel suggested that ideas, or the mind, came before matter; that the material world was ultimately determined by thought. Marx rejected this philosophical view as being obviously at odds with the fact that material existence was a necessary pre-requisite for mental thought.

My dialectic method is not only different from the Hegelian, but is its direct opposite. To Hegel, the life-process of the human brain, i.e., the process of thinking, which under the name of “the idea”, he even transforms into an independent subject, is the demiurgos [Creator] of the real world, and the real world, is only the external, phenomenal form of “the Idea”. With me, on the contrary, the ideal is nothing else than the material world reflected by the human mind, and translated into forms of thought

And again:

The mystification which the dialectic suffers in Hegel’s hands, by no means prevents him from being the first to present its general form of working ion a comprehensive and conscious manner. With him it is standing on its head. It must be turned right side up again, if you would discover the rational kernel within the mystical shell
(CAPITAL VOLUME I: AFTERWORD TO THE SECOND GERMAN EDITION p. 29 London 1974).

From this view of society, Marx recognised that the different ways in which human beings collaborated to produce their material existence was a powerful basis from which to study the differences between social systems, and the motor force which changed one social system into another.

The mathematician, Jacob Bronowski put it this way: “The world can only be grasped by action, not by contemplation. The hand is the cutting edge of the mind” (THE ASCENT OF MAN).

Two factors in Marx’s analysis followed from this starting point. One was the idea of mode of production. The other was his particular concept of the class struggle.

Marx recognised that consumption could not be based upon the “free gifts of nature” other than at an elementary level like blackberry picking or drinking water up-steam. Work or human labour-power had to be applied to the materials of nature for human beings to survive. These he termed means of production; the flint axe and the plough are two examples of the means of production. He then designated the way in which society organises its means of production in order to make a living, together with the social structure that accompanies it, as the mode of production.

Each mode of production is characterized by different social relations of production. A slave in Greece or Rome stood in a particular social relation of exploitation to the slave owner. A wage-worker stands in a particular social relationship of exploitation to an employer or capitalist who owns a factory. Both the worker in capitalism and the slave in Greece or Rome did not own the means of production but had to work for a living. The slave owner and the capitalist owned the means of production but did not have to work.

Marx summed up his study of social systems in the following way:

In the social production of their life, men enter into definite relationships which are indispensable and independent of their will, relations of production which correspond to a definite stage of their material forces. The sum total of these relations of production constitutes the economic structure of society, the real foundation, on which rises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of production of material life conditions the social, political and intellectual life process in general. (Preface TO THE CRITIQUE OF POLITICAL ECONOMY).

Marx’s critique of political economy radically contrasts with the concerns of academic economists, or what Marx called “vulgar” economists; “vulgar” because they dealt with the mere appearances of things.

Academic economics consists of a body of concepts centred on technical relations of commodity production, exchange and consumption. Economists have no interest in how social power is exercised and reproduced through the ownership of the means of production. Academic economics is only really concerned about the question of how individual consumers with infinite demands can maximise their consumption of commodities within a state of universal scarcity. The labourer making commodities is barely visible and in economic textbooks lost within “the factors of production”.

Academic economics proceeds as though its subject matter has no history. Marx’s method is completely different. As the social relations of production differ within each mode of production so will the way in which human beings are organized. In particular, people will relate to the means of production in different ways. In Socialism people will have direct access to the means of production because they will be held in common. Under capitalism workers have to sell their labour-power as a commodity in exchange for a wage or a salary before they can have access to the means of production where they produce commodities which are owned by the capitalists.

Those classes who do own the means of production exercise social power over those who do not. Social power therefore, stemmed from the way in which different groups did or did not control the means of making a living. This is why Marx, unlike academic economists, defines class according to how a particular social group relates to the means of production. And it why Marx wrote that:

The history of all hitherto existing society is the history of class struggle” (Marx, THE COMMUNIST MANIFESTO).

Method

Nothing could be further from the concerns of academic economics than Marx’s critique of political economy. Yet the difference between the two is not merely one of content. There are differences in method, and they arose in the period after David Ricardo’s death in 1823.

Classical Economists before Marx, and Marx himself did not speak of economics so much as political economy. The change in name was closely associated with the rise of neo-classical economics in the 1870’s. To understand the difference between Marx’s method and those of academic economics it is important to focus on a point Marx made at the beginning of CAPITAL VOLUME 1:

In the analysis of economic forms, moreover, neither microscopes nor chemical reagents are of use. The force of abstraction must replace both.” (CAPITAL VOLUME I PREFACE TO THE FIRST GERMAN EDITION p. 19).

Unlike academic economics which presents its subject matter as eternal and timeless, Marx’s study of capitalism and its social relations of production are historically limited. Social “laws” are contingent. The various economic categories to be studied; wage-labour, capital, price, value and so on are tied to capitalism as a historically generated system of class exploitation with a beginning and end in class struggle. Economics, or rather, political economy, lives and dies with capitalism.

While Marx’s point of departure is “an immense accumulation of commodities”, academic economics begins and ends with how capitalism appears to the observer. Mere “facts” coupled with statistics is bought to bear on how capitalism presents itself to the observer. Conceptually, economists, like the former Prime Minister, Harold Wilson, get no further than page I of CAPITAL-or at least the first paragraph. Anything which cannot be quantified like social systems, social relations of production, class ownership of the means of production and class struggle is discarded into the arid intellectual desert of “sociology”.

Marx, of course, did believe that observable “facts” were an essential part of capitalism which had to be explained. But only a part.

Appearances were not everything, especially when they might actually obscure aspects of social reality. Without abstracting we would be incapable of theorizing and incapable of knowing.

As Marx stated:

It should not astonish us that vulgar economy feels particularly at home in the estranged outward appearances of economic relations in which these pima facia absurd and perfect contradictions appear and that these relations seem the more self-evident the more the internal relationships are concealed from it, although they are understandable to the popular mind. But all science would be superfluous if the outward appearances and the essence of things directly coincided” (CAPITAL VOLUME III, p 797).

Consider the case of Malthus’s Population theory.

Marx dismissed Malthus’s population theory which he saw as an “insult to the human race”, and referred to Malthus as “a shameless sycophant of the ruling classes” (CAPITAL VOLUME 1).

Marx saw in Malthus’s ‘principle of population’ an instance of the way in which academic economists turns social relations between classes into relationships between things.

Concrete historical social relations and processes are transformed into universal categories and eternal laws. Economic categories, like capital, competition, commodities, money and so on, are taken by economists to be ‘natural’, not social. Economists claim these have always existed and always will exist.

Likewise with the economic category ‘scarcity’. Lionel Robbins, an economist, asserted that mankind had been expelled from the Garden of Eden of abundance to the harsh wilderness of scarcity (Lionel Robbins, THE NATURE AND SIGNIFICANCE OF ECONOMIC SCIENCE London: MacMillan, 1932, p. 15). He believed scarcity was a natural and universal condition of human existence; a state of affairs that, he argued, required private property ownership and capitalism in order to distribute finite recourses among infinite demands.

This intellectual process of debasing social relations is characteristic of the nature of academic writing under conditions of capitalist production. Marx commented on the error of this thinking when writing about the fetishism of commodities.

... man's reflections of the forms of social life and, consequently, also his scientific analysis of those forms, take a course directly opposite to that of their actual historical development... He begins post festum, with the results of the process of development ready to hand before him ... the categories of bourgeois economy consists of such forms...
Marx, CAPITAL VOLUME I, Chapter 1, pp 80-81

Malthus starts post festum [after the event], that is, with the consequences of capitalist production rather than the cause of these problems - private property ownership. He begins with widespread poverty, hunger, unemployment, and so on, while disregarding the concrete social relations of exploitation and competition which had produced that hungry and unemployed population in the first place. He then draws the fallacious conclusion that the outcome of poverty is the operation of “inexorable natural laws” (Marx, CAPITAL VOLUME 1 Chapter 1 The Commodity section 4 The fetishism of the Commodity and its Secret. Penguin ed. 1990 p. 168)

Malthus debased the specific relations of exploitation which obtained at that time between wage workers and capitalists, and the antagonistic relations between the landed and the industrial interests, changing them into the operation of the natural law of necessity that manifested itself through positive checks to population growth.

Poverty, poor working conditions, hunger, disease, unemployment, scarcity, etc. are depicted as the product of the natural law of necessity which, in that way, checks the functioning of another natural law; the tendency of all animated life to reproduce itself beyond the means of subsistence.

The debasing of social relationships comes to the fore when economists make the claim that ‘scarcity’ is universal, so justifying private property ownership, commodity production and exchange for profit, competition, and the class system. They make the same post festum mistake as Malthus. Capitalism did not come into existence through scarcity but, instead, scarcity exists because of private property ownership of the means of production.

Two quotations by Engels are worth citing in this respect:

If Malthus had not taken such a one-sided view of the matter, he could not have missed seeing that surplus population or labour power is always bound up with surplus wealth, surplus capital and surplus landed property. Population is too great only when productive power in general is too great... His second mistake was to confuse means of subsistence with means of employment....
... I will not accept any defence of the Malthusian theory as competent which does not begin by explaining to me, on the basis of the theory itself, how a people can die of hunger from sheer abundance...
... it is ridiculous to speak of overpopulation while “the valley of the Mississippi alone contains enough waste land to accommodate the whole population of Europe”, while altogether only one-third of the earth can be described as cultivated, and while the productivity of this third could be increased sixfold and more merely by applying improvements which are already known
.
Engels, OUTLINES OF A CRITIQUE OF POLITICAL ECONOMY, 1844;
see MARX AND ENGELS ON MALTHUS,
ed. Ronald L Meek,, pp 60, 62, 63

And

Too little is produced, that is the cause of the whole thing. But why is too little produced? Not because the limits of production... are exhausted. No, but because the limits of production... are determined not by the number of hungry bellies but by the number of purses able to buy and to pay...Bourgeois society does not and cannot wish to produce any more. The moneyless bellies, the labour which cannot be utilised for profit and therefore cannot buy, is left to the death-rate. Let a sudden industrial boom... make it possible for this labour to be employed with profit, then it will get money to spend, and the means of subsistence have never hitherto been lacking. This is the endless vicious circle in which the whole economic system revolves. One presupposes bourgeois conditions as a whole, and then proves that every part of them is a necessary part – and therefore an “eternal law”.
Engels, letter to Lange, 29 March 1865

In a future Socialist society, there will, of course, have to be democratic decisions on how resources are used. Nonetheless, Socialists argue that Socialism will be a society of abundance that can meet the needs of a socialist society since the forces of production will have been released from the constrictions imposed upon production by the capitalist relations of production.

From Political Economy to Academic Economics.

Marx was always at pains to draw his abstractions from the real world. That is why he began with capitalism’s cell form; the commodity. And he insisted that capitalism itself was constantly recognizing as “real” what was “abstract” as well as what was “concrete”. For example, the fact that commodities exchange with one another in capitalism, and do so at regulated, not random, rates of exchange, could only be accounted for, in his view, after the physical, concrete qualities of different commodities had been discarded from consideration.

There is no way that a pint of beer and a car can be directly compared or equated as they exist in their material state. They have different uses, they have different weights, their shapes are different, and they are made differently. By going beyond mere appearances, Marx was able to demonstrate that what they had in common was socially necessary abstract labour.

Given the different starting point between Marx’s critique of political economy and academic economics the way both approached the examination of social world will differ. For the Marx, the capitalist is unimportant except as “personified capital” while for academic economics the capitalist is central to their “rational consumer” inhabiting perfect markets and competition.

Marx’s method led him to decisively break with vulgar economics to which CAPITAL stands in complete opposition.

This can be seen in Marx’s criticism of the “Trinitarian formula” associated with the father of vulgar economics, J. B. Say, at the end of CAPITAL, VOLUME III.

Academic economists claim that the “factor of production” –capital, land and labour-each have their contribution, as interest (profit), rent and wages, according to their “marginal” product. They make capital not labour the dominant category, concealing the real source of value and labour.

Marx notes that as a result:

Capital thus becomes a very mystic being since all labour’s social productive forces appear to be due to capital itself”.

And he concludes: “we have the complete mystification of the capitalist mode of production, the conversion of social relations into things, the direct coalescence of the material production relations with their historical and social determination…this formula simultaneously corresponds to the interests of the ruling classes by proclaiming the physical necessity and eternal justification of their sources of revenue and elevating them into a dogma” (CAPITAL VOLUME III, Ch XLVIII, p. 809).

Marx uses the principle of “inversion” which he first used when looking at the question of religion. In theology we are told that God makes men and women. The reality, for Marx, is the other way round; men and women create God. The same principle applies to economics. Politicians tell us that capital is necessary for the creation of the work force. In fact, it is the work force which creates capital and reproduces its own wage slavery by allowing past labour to live off the labour of the living.

For Marx the social reality of capitalism which needs explanation consists of more than prices and quantities. It also involves the study of the common, social, abstract substance which underlies prices and quantities which, for example, regulates the exchange rate between commodities. That common factor was socially necessary abstract labour. And Marx’s critique of political economy was everything to do with it, such as the conditions of its organization within production; surplus value, absolute and relative surplus value and the rate of exploitation. And not as an academic exercise.

Marx’s critique was to lay bare the social mechanisms of capitalism thereby aiding the working class to understand not only why and how they were exploited but to realise that capitalism could never be run in their interest. As for academic economics, Marx saw its practitioners as hired prize-fighters and apologists. They still are.

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