Socialist Studies Socialist Studies

Reconstituted Socialist Party of Great Britain - Marx Studies - CAPITAL and Vulgar Economics

CAPITAL and Vulgar Economics

Marx’s Capital is subtitled ‘A CRITIQUE OF POLITICAL ECONOMY’. This raises two questions; what is a ‘critique’ and what is ‘political economy’?

To answer these questions, it is important to remember that CAPITAL is not a theory of prices and markets. CAPITAL is not a “superior” economic textbook from which to produce economic policy in an attempt to make the profit system work more efficiently and rationally. Capitalism can never be efficient and rational since it deliberately underproduces and is a system of waste and pollution. Capital, instead, has to be read politically as an “anti-economics” text book.

CAPITAL questions the anti-social process of capitalist production and exchange for profit. At the core of CAPITAL is the explanation of class exploitation. And workers are exploited because of the value-creating ability of labour power. As Marx commented:

In order to be able to extract value from the consumption of a commodity, our friend, Moneybags, must be so lucky as to find, within the sphere of circulation, in the market, a commodity, whose use-value possesses the peculiar property of being a source of value, whose actual consumption, therefore, is itself an embodiment of labour, and, consequently, a creation of value. The possessor of money does find on the market such a special commodity in capacity for labour or labour-power (CAPITAL VOL. 1 Ch. 6 The Sale and Purchase of Labour Power, p 270 Penguin 1990).

The commodity, labour power, is sold by the working class because workers, unlike the capitalists, do not own the means of production and distribution. Workers, those having to live from wages and salaries, are a propertyless class.

What Marx called “surplus value” is extracted from the working class in order to generate and extend the reproduction of capital from one circuit to the next. Once the commodity is sold, the surplus value goes to the capitalist class in the forms of the unearned income of rent, interest and profit. And around the extraction of surplus value rotates the class struggle; a struggle over the intensity and extent of exploitation and politically over the ability of capitalists to exploit workers in the productive process. Yes CAPITAL is political and partisan and it has every right to be so.

Marx used the word ‘critique’ as a prefix to his various mature publications on political economy, although Engels had previously used the same word in his OUTLINE OF A CRITIQUE OF POLITICAL ECONOMY published in 1844. ‘Critique’ had been used previously by the philosopher, Emmanuel Kant in some of his writings, for example, the Critique of Pure Reason (1781). The word ‘critical’ and ‘critique’ were fashionable words among the Young Hegelians, a group of radical students which included Marx and Engels.

Political economy, as a theoretical study of economic categories such as prices, capital and commodities, appeared in France in 1615 with the publication of Antoine de Montchretien’s TRAITE DE L'ECONOMIE POLITIQUE. In David Ricardo’s ON THE PRINCIPLES OF POLITICAL ECONOMY AND TAXATION (1834), for example, the chapters are structured around a series of economic categories; value, rent, natural and market price, wages, profit, price and taxes. And it was the economic categories studied by the political economists, like Ricardo, that were the principle target of Marx’s critique.

So what is the political dimension in CAPITAL? The political is given in the use by Marx of the word Critique. Critique, for Marx, is similar to Hegel’s use of the word sublation or aufheben (see:

In his critique of political economy, Marx negates the superficial appearance of the economic categories he studies, such as value, the commodity and capital, but he preserves and extends the inner reality of these categories. What is preserved and extended by Marx is the social relationship behind the economic categories. This is in contrast with the political economists, like Ricardo, who, for example, never ask the question of why labour is expressed in terms of value.

Politically, Marx’s critique is from the position of the working class and a social formation where men and women control the process of production rather than the other way around. What is preserved and extended beyond capitalism is a single social labour force producing to meet human need. To underscore the centrality of social and co-operative labour acting on nature, Marx strategically introduces into the final section of the first chapter of CAPITAL a discussion of the “fetishism of the commodity and its secret” (pp. 163 to 177) to announce:

An association of free men, working with the means of production held in common, and expending their many different forms of labour-power in full self-awareness as one single social labour force…The social relations of the individual producers, both towards their labour and the products of their labour, are here transparent in their simplicity in production as well as distribution.. (P. 171).

Here, in this short passage, is the reply to those economists who believe there is no alternative to the market. A democratic social does not need price signals if it is consciously aware of what it is planning to produce and distribute to whom and in what quantities.

Classical Economic versus Vulgar Economics

Marx not only showed the shortcomings of Adam Smith’s THE WEALTH OF NATIONS and David Ricardo’s THE PRINCIPLES OF POLITICAL ECONOMY AND TAXATION, both of whom he referred to positively as “classical economists”, but he also showed-up the intellectual poverty of what he denounced as “vulgar economics”, the dominant economic view of capitalism still taught today (see, FFINE MICROECONOMICS: A CRITICAL COMPANION, Pluto 2016 and Fine and Dimakou, MACRO ECONOMICS: A CRITICAL COMPANION, Pluto 2016).

Marx traced the transformation of Classical Economy to vulgar economics with the disintegration of the Ricardian School in the 1830’s (for a detailed account of the period see I.I. Rubin, A HISTORY OF ECONOMIC THOUGHT, Part Five, Disintegration of the Classical School, ch. 31 – ch. 39).

In the preface to the second edition of Capital Marx wrote:

[The] period, from 1820 to 1830, was notable in England for scientific activity in the domain of Political Economy. It was the time as well of the vulgarising and extending of Ricardo’s theory, as of the contest of that theory with the old school

And in a footnote to the chapter on Commodities and Money, he made the distinction between classical economics and vulgar economics:

Once for all I may here state, that by classical political economy, I understand that economy which, since the time of W. Petty, has investigated the real relations of production in bourgeois society, in contradistinction to vulgar economy, which deals with appearances only, ruminates without ceasing on the materials long since provided by scientific economy, and there seeks plausible explanations of the most obtrusive phenomena, for bourgeois daily use, but for the rest, confines itself to systematizing in a pedantic way, and proclaiming for everlasting truths, the trite ideas held by the self-complacent bourgeoisie with regard to their own world, to them the best of all possible worlds (p. 174 – 175)

The honour of becoming the first “vulgar” economist went to J. B. Say with the publication of his Traité d’économie politique, which appeared in 1803. Whereas Ricardo had said that value was created by labour, Say said value was created by “nature, labour and capital”. And in place of an objective theory of value, Say argued for a subjective theory of value.

This vulgar economic theory was to be taken up again by economists after Marx’s death in an attempt to by-pass his own labour theory of value, although the reactionary rot had already set-in with the publication of W S. Jevons’s THE THEORY OF POLITICAL ECONOMY (1871) and Carl Menger’s PRINCIPLES OF ECONOMICS of the same year, both of which went largely unremarked by Marx and Engels. However, it was the second generation of economists of the marginal utility school, the so-called Austrian economists; Bohm-Bawerk and Frederick Weiser (“Ricardo leads straight to Marx”), who set-out to “get Marx” particularly Bohn-Bawerk’s KARLMARXAND THE CLOSE OF HIS SYSTEM (1896).

Marx’s use of the word “vulgar” was deliberately provocative. The word "vulgar, is common in 19th century writings and comes from the Latin “Vulgaris”, meaning "of the people". The use of the word “vulgar” suggests a "sophisticated and well-read” ruling class looking down intellectually onto the "common superficiality" of the "thoughtless masses". Marx reversed this relationship. The working class reader of Capital now looked down on the economists and their patrons with their thoughtless superficiality about the profit system. The recent trend to replace the adjective “vulgar” by “academic” in front of the noun, “economics” loses Marx’s pointed remark regarding class relationships and ruling class ideas.

Vulgar economics not only defends the interest of the capitalist class and the profit system but it also gives an illusionary appearance of capitalism, uncritically treating capitalism as the “best of all possible worlds” and lasting forever. “Vulgar economics” also deals with the appearance of things not the underlying reality of class, class power and class domination. It ignores, as irrelevant, social systems, modes of production, forces of production, social relationships to the means of production and class, class interest and class struggle. It takes as real, “things” like commodities and capital when in fact they are nothing more than diametrically opposed social relationships.

Economics exists only to justify the wealth and privilege of the capitalist class. As theory it wants to imprison labour within the wages system forever. Trade unions as conveniently dismissed as “market monopolies” although nothing is said about the monopoly of the means of production and distribution of the capitalist class. Economics is as servile and obsequious to the privilege and power of the capitalist class as theologians once were to the economic interests of the Feudal ruling class. And just as theologian used God to establish Feudalism lasting forever, so the economists depict capitalism as “natural”, having no history and lasting forever.

The Dishonesty of Vulgar Economics

As Marx noted:

The economists have a singular way of proceeding. For them, there are only two kinds of institutions, artificial and natural. The institutions of feudalism are artificial institutions; those of the bourgeoisie are natural institutions. In this they resemble the theologians, who likewise establish two kinds of religion. Every religion which is not theirs is an invention of men, whole their own is an emanation of God…This there has been history, but there is no longer any (Karl Marx, THE POVERTY OF PHILOSOPHY, quoted as note 23 in CAPITAL VOL.1, The Commodity, p 175)

For economists, capitalism is assumed to last forever. If the labour theory of value is mentioned at all it is dismissed as “old-fashioned” and “out-of-date”. To even admit the validity and soundness of the labour theory of value as a theoretical tool to understand capitalism is to run the risk of becoming an economic pariah.

Who, on a mainstream economics course, is taught about “commodity fetishism”? Instead, economic students are produced in a conveyor belt line of unquestioning orthodoxy for a future in the City, for “fellowships” in free market institutes or for becoming government advisers at the Treasury with that promise of a knighthood and a lucrative directorship in finance, banking and the media.

The lure for economic students appears to be a six figure salary and for the elite of the profession, peerages and the Nobel Prize in economics; certainly not in an understanding of capitalism to be gained by reading CAPITAL. And a prospective applicant for a position in The Bank of England would not be helped in their career move if they presented a meticulous account of topics covered in Marx’s CAPITAL, such as the labour process, the social and cooperative character of labour, and the important distinction between abstract and concrete labour!

Marx’s friend, Frederick Engels had already anticipated the trend of economics in his OUTLINES OF A CRITIQUE OF POLITICAL ECONOMY of 1843:

'The nearer to our time the economists whom we have to judge, the more severe must our judgment become. For while Smith and Malthus found only scattered fragments, the modern economists had the whole system complete before them: the consequences had all been drawn; the contradictions came clearly enough to light, yet they did not come to examine the premises and still accepted the responsibility for the whole system. The nearer the economists come to the present time, the further they depart from honesty

Capital versus Vulgar Economics

CAPITAL shows, in part, that workers are forced into private companies where their labour power is exploited in the production and exchange of commodities for profit. This state of affairs has been defended by a number of economic theories starting with the ‘three factors of production’ of J.B. Say and others, the abstinence theory of Nassau Senior, the wages fund theory of James Mill and so on right up to the economic theories produced in the 20th century to defend the interst of the capitalist class; the most notorious being the “trickle down” theory of economics. Other, more exotic anti-working class economic theories can be found in John Quiggen’s book ZOMBIE ECONOMICS: HOW DEAD IDEAS STILL WALK AMONG US (2012)

Capitalists were, for Marx, the “personification of capital” and have no option but to exploit the working class, re-invest and expand capital or otherwise die. This determination leads to a tendency for machines to supplant labour, the formation of an industrial reserve army of the unemployed during a trade depression (some 21. 084 million in the EU alone according to Eurostat’s report in May 2016), the centralisation and concentration of capital, the tendency of the rate of profit to fall and sequential phases of the trade cycle; from up-turn, boom, crisis to depression and stagnation.

The publication of CAPITAL forced economists to reformulate their subject matter, which they did in the 1870’s shortly after Marx’s death with the subjective theory of value. The questions Marx asked were avoided by presenting economics purely in terms of markets, prices and demand and supply curves. Almost overnight neo-classical economics dominated and directed economic teaching. Alfred Marshall and W. S. Jevons hacked off the adjective “political” from “political economy” and called their doctrine “economic science” so that by the 1930’s the subject was being defined by the economist Lionel Robbins as “infinite needs chasing scarce ends”. Economics has since carried on its descent into apologetic irrelevance.

However, scarcity under capitalism is not natural but social. Production under capitalism is severely constrained by the profit motive, irrespective of whether human needs are met or not. Only buying customers count in capitalism even if it means poverty and death for the barred from the market. The potential to feed, clothe and house the world’s population decently and humanely is denied by the capitalist relations of production.

CAPITAL shows the profit motive not to be immoral and unjust but a motive that has historically outlived its usefulness. The profit motive prevents the rational and planned production and distribution of goods and services to those who need them. Capital needs labour but labour does not need capital. Labour – social co-operative labour - produces along with nature all the social wealth in society while the capitalists produce absolutely nothing.

Studying Economics: “All I’ve learnt is its price”

Vulgar economics deliberately avoided the serious scientific questions Marx asked in CAPITAL. The economics which came after Marx’s death did not want to study “capital in motion”, nor capital accumulation and its consequence. They had no interst in going beyond the mere appearance of reality to see capital for what it was; the social relationship between individuals masquerading as a “thing”. The private ownership of the means of production was sacrosanct; it could not even be questioned. Marx had the distinction of having a whole ‘profession’ arraigned against his “free scientific inquiry” – an opposition Marx had already anticipated in the Preface to CAPITAL - the furies of private interst.

The price mechanism given by market supply and demand was all that mattered to the economists. As the poet Berthold Brecht sardonically wrote in his Supply and Demand Song, (with music added by Hans Eisler):

Don’t ask me what cotton is
Don’t ask me my advice
I’ve no idea what cotton is
All I’ve learnt is its price

Supply and demand, for the trader is the triumph of exchange value over use-value. And to borrow a well-known saying from Oscar Wilde; economists “know the price of everything but the value of nothing” (THE IMPORTANCE OF BEING EARNEST).

After each and every economic crisis, failed economic doctrines have had to be unceremoniously dispatched to the shredder along with the reputations of the economists who put their name to them; whether they were a W. A. Jevons, a Lord Keynes, or a Milton Friedman. As a consequence of this unremitting failure of economic theories to prevent periodic crises occurring, the economic profession is now held in utter contempt and universal ridicule.

Even the Queen wanted to know what had gone wrong to cause the economic crisis when the reputations of so many economists became toast! And not without good reason, since a lot of her wealth at the time was stashed away in the vaults at Coutts, then owned by the Royal Bank of Scotland.

Of course, nothing had gone wrong with the economy in the summer of 2008. Capitalism behaved then just as it had behaved in the past; the trade cycle moved from boom to bust. Capitalism will continue to behave in this anarchic and destructive manner until the working class consciously, democratically and politically abolish the profit system and replace it with socialism. And reading Capital will help the working class in this revolutionary process not the library of vulgar economic text books temporarily blocking the way.

Back to top

Socialist Studies

email: |