A brief excerpt from Capital Vol 1, on the dynamism of capitalist growth (what Marx and the classical economists called accumulation), and the necessary creation of surplus labour, the famous ‘reserve army’ of the unemployed, to long run development. It is ideas such as this and their appearance in reality which make me reluctant to fully embrace the Keynesian notion that full employment under capitalism can be both created and sustained:
“The mass of social wealth, overflowing with the advance of accumulation and capable of being transformed into additional capital, thrusts itself frantically into old branches of production, whose market suddenly expands, or into newly formed branches, such as railways, etc., which now become necessary as a result of the further development of the old branches. In all such cases, there must be the possibility of suddenly throwing great masses of men into the decisive areas without doing any damage to the scale of production in other spheres. The surplus population supplies these masses. The path characteristically described by modern industry, which takes the form of a decennial cycle (interrupted by smaller oscillations) of periods of average activity, production at high pressure, crisis, and stagnation, depends on the constant formation, the greater or less absorption, and the re-formation of the industrial reserve army or surplus population. In their turn, the varying phases of the industrial cycle recruit the surplus population, and become one of the most energetic agencies for its reproduction.” (Chapter 25, p. 785).
The writing is certainly powerful in places, and this short paragraph covers plenty of ideas: growth and business cycles, technological and structural change, and employment and unemployment. Marx was certainly not right about everything, but his extensive yet largely unfinished project should not be ignored by those wanting to understand the modern world, where it came from and where it might be going.
The Political Economy of Development 
Precociously starting at the age of 15, throughout my teens, I was all into Marx. The “older” I got, however, the more difficult I found it to defend his views, having considered myself a Maoist at 15, getting less radical by the year, only to end up a left-wing social democrat at 20.
Approaching my mid-20s, I finally gave up on Marxism for good – ironically under the influence of a Marxist, the best teacher I ever had, John Sender, later to move to your alma mater.
Sender destroyed my mythology about capitalism relying on Third World exploitation, which had been my last resort, as I could no longer convince myself of Marxian type of exploitation going on in contemporary Germany.
An implacable empiricist, Sender cut the last thread on which my belief in Marxism hung. He subscribed to the peculiar, yet rather convincing Marxian line, unfamiliar to me then, that capitalism was serving as a progressive force in the Third World, which was doing better thanks to the spreading of capitalism. I took the clue and the evidence that Sender, the most serious and most capable empirical scholar I ever knew in my student days, “forced” us to look into, and walked off into the arms of PT Bauer, who converted me to the cause of free markets.
Today, I feel that to avail oneself of what is good in Marx – his interdisciplinary approach, his political economy – there is no need to share the things that he considered of the essence to his theory of capitalism. The stuff in his work that lends itself to criticising mainstream economics can be had from other sources and, again, with no need to commit oneself to the system of beliefs he would have wanted one to adopt. I feel strengthened in this view by the excellent recent work on Marx available at
http://socialdemocracy21stcentury.blogspot.de/
Do you think – contrary to my above broad-stroke hypothesis – that there is anything specifically Marxian in what one might find useful in his work?
Incidentally, I understand today is The General Theory’s 70th anniversary.
Thanks for your comment. I attended a few lectures and classes by John Sender at SOAS and I was interested to hear that he taught you as well. One of the things I picked up from my time there was that, as you say, capitalism is vital to improve the living standards of people in poor countries. It may not always be just or fair but it is the best system for increasing material wealth that we have discovered and it is also potentially progressive. However I am also not convinced that free markets on their own will do the job, witness the industrial policies adopted by Japan, South Korea and Taiwan in their rapid growth phases. In fact it seems that most or all of today’s advanced countries protected their infant industries for some time while they industrialised, then adopted relatively free trade once they were already successful. Now they peddle the notion of free trade and its supposed link to successful development on poor countries.
I was also influenced by my MSc course tutor Mushtaq Khan, whose work on rent-seeking, governance and industrial policy in ‘late’ developers I find pretty convincing. I do favour a political economy approach to economics although I don’t always employ it.
These days, although my opinions do change from time to time, I am somewhere between Marx and Keynes, but without the socialism. Capitalism is a dynamic system, but its progress is necessarily uneven and for me the state is a vital part of the system.
Marx’s writings on exploitation and the labour theory of value are rather one-sided although it is fair enough that he finds much to complain about in the awful treatment of workers in particular periods, but then so is the Austrian perspective and even Keynes’s, on the entrepreneur as a driving force. The complete story would surely combine the two in some way. Profit may require surplus labour ie work and output beyond what is required to pay the workers’ wages, but the capitalist/entrepreneur/manager is probably needed to keep the show on the road too.
In Capital, along with a great deal more, Marx writes about the emergence of capitalism from feudalism, the centrality of profit to investment and growth, and his ‘circuits of production’ which were echoed in Keynes and used by Kalecki in their models of demand-driven growth. The tension between firm size and competition as capitalism develops is also useful and remains relevant I feel, in any analysis of large firms in today’s economies. The falling rate of profit is also interesting, although if it is only a tendency with its own counter-tendencies, then it becomes more useful. In fact, it seems as if most of the great classical economists (Smith, Ricardo, Malthus, Marx) subscribed to some version of this ‘law’, and Keynes did too, albeit with different causes. So there is much in Marx which I feel is useful, and perhaps much of it remains ‘Marxian’, although modern authors may often neglect to mention this given the negative aspects of the social systems inspired by his work.
One may not need to read Marx to find all these ideas, but it is helpful to see where they came from. I admit I found Capital hard-going, but I was helped by the little book ‘Marx’s Capital’ by Ben Fine and Alfredo Saad-Filho, also of SOAS.
As an aside, I am nearly done with the book by Anwar Shaikh, which I do highly recommend. He calls his approach mainly ‘classical’, even though he is surely strongly influenced by Marx, who was a critic of classical political economy. The macro models are broadly classical-Keynesian, allowing room for aggregate demand but also for supply, and profit, which he suggests regulates both. It is a certainly comprehensive!
Reblogged this on Radical Political Economy.
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