Thursday, August 18, 2011

Was Karl Marx Right about Capitalism?

Nouriel Roubini, who is an insider's insider and is often correct about government moves (since they tell him), is usually just as wrong when it comes to economic theory.  His comment that Karl Marx was partially right about capitalism is getting a lot of focus, so a closer look needs to be taken at just what Roubini has said and the writings of Karl Marx.

At Project Syndicate, Roubini wrote:
So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand.
Say what? Roubini needs to look a little deeper into what he babbles here.

First off, Marx was in favor of "globalization". In the Communist Manifesto, Marx writes:
The Communists are further reproached with desiring to abolish countries and nationality.

The working men have no country. We cannot take from them what they have not got. Since the proletariat must first of all acquire political supremacy, must rise to be the leading class of the nation, must constitute itself the nation, it is so far, itself national, though not in the bourgeois sense of the word.

National differences and antagonism between peoples are daily more and more vanishing, owing to the development of the bourgeoisie, to freedom of commerce, to the world market, to uniformity in the mode of production and in the conditions of life corresponding thereto.

The supremacy of the proletariat will cause them to vanish still faster. United action, of the leading civilised countries at least, is one of the first conditions for the emancipation of the proletariat.
Marx was also in favor of government influence over financial intermediation, certainly at least at the national level. In the Manifesto, he calls for :
Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.
And currently, rather than wealth being taken from labor and given to capital, we see the opposite in progressive taxes and inheritance taxes, all of which Marx called for:
The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces as rapidly as possible.
Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionising the mode of production.
These measures will, of course, be different in different countries.
Nevertheless, in most advanced countries, the following will be pretty generally applicable...

A heavy progressive or graduated income tax...

 Abolition of all rights of inheritance.

Thus, as more and more Marxist measures are pressed on economies, the more and more they suffocate free market economies. No. it is not Capitalism that has failed, it it the Marxist themes imposed on a free market society that are making for the crashing economic scene that we are now witness to.

As for Roubini's mention of final demand. This is not a Marxian notion but a Keynesian one. Keynes was an even more confused thinker than Marx. As Murray Rothbard once remarked,
There is one good thing about Marx: he was not a Keynesian.
Keynes theory on final demand, when it comes down to it, is that if people aren't bidding up prices high enough for goods (relative to where Keynesians would like to see prices bid up), well then, the government should borrow money and or print money and bid higher for goods then individuals want to bid. Thus, individuals end up without the goods and the "final demand" is diverted to such government goods as drones, TSA naked body scanners and the like. All because individuals are supposedly bidding less than at what prices the government wants to see bidding taking place at.

In truth, Keynesianism is a scam theory designed to create more money flow going into the hands of government.

Thus, Roubini takes this Keynesian scam, mixes it with misunderstood Marxist themes and somehow manages to call this the failure of capitalism. Amazing.

Was Karl Marx right about capitalism? Only in Nouriel Roubini's mind.

Marx was not forecasting an inevitable move toward globalization, etc., as much as calling for an aggressive move toward such. Marx wrote in his Manifesto:
You are horrified at our intending to do away with private property...
We have seen above, that the first step in the revolution by the working class is to raise the proletariat to the position of ruling class to win the battle of democracy.

The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces as rapidly as possible.
Those are the words of a man of action, not someone idly sitting by waiting for things to occur around him. Where Marxist central planning has developed, it has caused great problems for countries and economies. Including the current financial crises. These are not the makings of capitalism, but where the power hungry central leaders have fooled the public by using Marxist rhetoric to gain central control that ultimately suffocates free market economies. At the core, of the current crises is  central bank manipulations of the money supply. This, as seen above, was a dream and plan of Karl Marx, not a product of capitalism. 

18 comments:

  1. You seem to have conclusively proven that Marx was a Marxist. Nevertheless, Marx did accurately predict the end stages of monopoly/corporate capitalism. As much as I'd like otherwise, I'm going to have to score this one for Roubini.

    Don't worry, you're still up by a dozen or so runs.

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  2. No Roubini is wrong. If this is not capitalism, how is capitalism imploding on itself?

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  3. Marx would be right if he predicted capitalism would be destroyed from the inside by marxists taking over and then the system collapsing.

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  4. Anon @ 7:05 and maybe Wenzel-

    Hoppe has shown how Marx was in fact correct in his predictions, but incorrect in his causal analysis- http://mises.org/journals/jls/9_2/9_2_5.pdf

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  5. The current problem is the result of central bank money printing. Marx never made any predictions of a central bank arising out of capitalism, he called for the proletariat to launch a central bank. A major difference. The link above in my post shows Marx calling for the proletariat creating central banks---nothing about a prediction that they must ultimately, magically arise out of capitalism. Read it yourself.

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  6. @ Wenzel: "The current problem is the result of central bank money printing."

    That's a very narrow and reductionist reading of the genesis of the "current problem."

    Kind of like saying the victim of a deadly gunshot to the gut was killed as a result of striking his head against the floor when he fell.

    Gonna still have to score this one for Roubini (and Hoppe, thanks to Mick for the excellent paper).

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  7. These "socialists" are just primitive monkeys the way they desire a "ruling class" of stupid thugs. I guess the world is still full of them...And they vote.

    The State and Statists must be eliminated.

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  8. I hope you cletuses all know that Communism is a scam by the oligarchs to help keep them the kings of the mountain. Marx was their stooge.

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  9. http://www.youtube.com/watch?v=9S3lXDOQ7ec&feature=related

    Let's compare prediction making track records of ron paul vs this or any follower of that idiot keynes! The vid above shows the msnbc people in shock over how accurate ron paul's predictions were.

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  10. I would love to see Ron Paul, Mitt Romney and either Perry or Backman in a 3 person debate on Austrian vs Keynesian economics....narrated by Robert Wenzel!

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    1. I can see Robert Wenzel asking a lot of questions followed by embarrassed silences.

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  11. So Roubini thinks that capitalism is imploding on itself? How can he be right if we do NOT have a capitalistic system in place?

    To me the take home from this one is that our system is larded down with Marxist and socialistic programs and systems that is killing the economy. We haven't had free market capitalism in decades. It was killed by merchantilist ideas in a shroud of democratic socialism.

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  12. What I found most interesting in Roubini's comments were these about an "internal contradiction" relating to "shifting income from labor to capital". Does such an internal contradiction exist? It seems possible to me. If not, what opposes it?

    Roubini said: Marx, among other theories, argued that capitalism had an internal contradiction that would cyclically lead to crises, and that, at minimum, would place pressure on the economic system.

    Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.

    Now, in the current financial crisis, consumers, in addition to having less money to spend due to the above, are also motivated to minimize costs, to save and stockpile cash, magnifying the effect of less money flowing back to companies.

    "Karl Marx had it right," Roubini said in an interview with wsj.com. "At some point capitalism can self-destroy itself. That's because you can not keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually rational ... is a self-destructive process."

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  13. Capitalism is the spread use of indirect processes to bring forth mass production. Although simple it only became possible with the progressive relaxation of several coercitive institutions. The marxist concept of capitalism as a mode of production determined by the interaction between productive forces and relations of production is just jibber jabber that can't resist historical analysis.

    Our financial system, the root cause of recurrent crises IS NOT CONGENIAL TO CAPITALISM. This is blatant. We are subdued to a state monopolized fiat currency, we have a financial GOSPLAN persistently distorting market signals, conceived to cartelize the financial industry, legitimize fraud and provide endless funds for government folly and the best this asshat can come up with to puzzle out all this mess is marxism?

    Marx's trade cycle theory is a collection of mercantilist absurdities he mixed up carelessly to provide at least some assessment about a subject he couldn't make head or tail of.

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  14. "Nevertheless, Marx did accurately predict the end stages of monopoly/corporate capitalism."

    That would be Fascism. A free market by definition cannot centralize power as monopolistic behavior will always encourage new competitors to enter the market. It is only when big companies can "work" with government to block competition that we start to see the bad outcomes that appear to be failures of Capitalism.

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  15. That would be Fascism. A free market by definition cannot centralize power as monopolistic behavior will always encourage new competitors to enter the market. It is only when big companies can "work" with government to block competition that we start to see the bad outcomes that appear to be failures of Capitalism.

    **A question: 1. How can monopolies encourage new competitors when they own a very large chunk of the market share?

    I do agree that big companies do work with the government to block competition. This is why big companies are bad for business. It does not distribute wealth equally as small businesses would which is why economies were better before the tech boom and the need for big box and big corporations to take over the world.

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    1. Without a coercive force to hold a monopoly together, a monopoly price will be charged by the monopoly. Once the price has artificially risen, competitors will enter the market to satiate the excess demand at a lower competing price...Go look at what happened when JP Morgan tried to monopolize the sugar industry without the aid of government force....it is a good case study, I believe written about by M. Rothbard....

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    2. **A question: 1. How can monopolies encourage new competitors when they own a very large chunk of the market share?

      Because, once the competition is gone they raise their price, thus attracting new competitors...to hold a monopoly together, a coercive force, preferably a democratic government, is needed...

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