Wednesday, September 7, 2011

Harvard Business Review Goes Gaga over Karl Marx

Over at HBR, Umair Haque tells us that he is:
...a staunch believer in capitalism
He then proceeds to demonstrate that he knows nothing about capitalism, and is in fact Karl Marx groupie, who thinks Marx got a lot (almost everything) right. He writes:
Marx claimed that capitalism would immiserate workers: he meant that labor would be "exploited" — not just in a purely ethical sense, but in a narrower economic one: that real wages would fall, and working conditions would deteriorate. How was Marx doing on this score? I'd say middlingly: wages in many advanced economies — notably, the most purely capitalist in a financialized sense — have failed to keep pace with productivity; not for years, but for decades.
While there is downward pressure on real wages, not because of capitalism, but because of an ever increasing regulatory environmentt and government created regime uncertainty, Haque has to be joking if he thinks wages have fallen in a world where smartphones, flatscreen televisions and Pot Belly sandwiches are now common consumer purchases.

Haque then tells us:
As workers were paid less and less, capitalism would be prone to chronic, perpetual crises of overproduction — for they wouldn't have the means to purchase or invest in enough goods to keep the economy humming. As Marx put it, there was likely to be "poverty in the midst of plenty." How's Marx doing on this score? Not bad, I'd say: the last three decades have in fact been characterized by global crises of what you might crudely call overproduction (think: too little demand chasing too many disposable widgets, resulting in a massive global debt crisis, as vanishing middle classes took on more and more debt to compensate for stagnant real wages).
The "overproduction" is actually malinvestment, which is the result of central bank caused boom and bust cycles. Central banks being a key foundation of Marx's world---not capitalism.

Here's more Haqueness:
Stagnation. Here's Marx's most controversial — and most curious — prediction. That as economies stagnated, real rates of profit would fall. How does this one hold up? On first glance, it seems to have been totally discredited: corporate profits have broken through the roof and into the stratosphere. But think about it again, in economic terms: Marx's prediction concerned "real profit," not just the mystery-meat numbers served up by beancounters, and chewed over with gusto by "analysts." When seen in those terms, Marx might be said to have been onto something: though corporations book nominal profits, I'd suggest a significant component of that "profit" is artificial, earned by transferring value, rather than creating it (just ask mega-banks, Big Energy, or Big Food).

Here, Haque is confused about what profit is. There is no fixed "real rate of profit". Profit is about entrepreneurs arbitraging opportunities over time and space. Profit can be big or small. There is no overall rate of profit for firms. Over time, when a profit opportunity becomes obvious to all, the rate of return for capital in a given industry is the interest rate.

Haque continues:
 Alienation. As workers were divorced from the output of their labor, Marx claimed, their sense of self-determination dwindled, alienating them from a sense of meaning, purpose, and fulfillment. How's Marx doing on this score? I'd say quite well: even the most self-proclaimed humane modern workplaces, for all their creature comforts, are bastions of bone-crushing tedium and soul-sucking mediocrity, filled with dreary meetings, dismal tasks, and pointless objectives that are well, just a little bit alienating.
What can  I say? Sounds like Haque doesn't like his job. Maybe he should move to a farm, cut off electricity, raise a few cattle and plant a garden.

More Haque:
According to Marx, one of the most pernicious aspects of industrial age capitalism was that the proles wouldn't even know they were being exploited — and might even celebrate the very factors behind their exploitation, in a kind of ideological Stockholm Syndrome that concealed and misrepresented the relations of power between classes. How's Marx doing on this score? You tell me. I'll merely point out: America's largest private employer is Walmart. America's second largest employer is McDonald's.
Oh yeah, unskilled workers, working in a clean, climate controlled environments are being exploited. Maybe Haque can employ them and pay them part of the "exploitation" difference. Then, I'm sure all the McDonald's and Walmart employees will move to work for Haque.

Haque has even more:
Commodity fetishism. A fetishized object is one which is more than a symbol: it's believed to have actually the power the symbol represents (like an idol, or a totem with magical properties). Marx claimed that under industrial age capitalism's rules, commodities became revered talismans, worshipped through transactional exchanges, imbued with mystical powers that give them inherent value — and obscuring the value of and in the very people who've worked labored over them in the first place.  It's one of Marx's most subtle and nuanced concepts. Does it hold water? Again, I'll merely pointing to societies in furious pursuit of more, bigger, faster, cheaper, nastier, now, whether it's the retail temples of America's mega-malls, or London rioters stealing, not bread, but video games.
So suddenly, we are going from a world where wages are declining to a world where the problem is too much consumer demand. 

I again must point out that this Karl Marx lovefest is brought to you by a self-proclaimed capitalist, in the top academic business journal in the country.

In truth, Marx was a very confused thinker, who contradicted himself throughout his writings, and when one looks beyond the surface, the many problems he "foresaw" are problems that are the result of his influence. We are not in a period of failing capitalism that Marx expected, we are in a period of crashing economies because of the application of policies advocated by Marx, such as central banks, that are destroying and suffocating economies.


  1. Kind of depressing that this would be in ANY business journal.

    Marx was so wrong, on such an epic scale, that it's absurd that anyone would still bother to read him. Everything he wrote was garbage. Even if you wanted to bring about socialism, Marx is the last place to look.

    Hague needs better books on economics now, because he needs to read a lot more.

  2. Right on, Wenzel.

    Haque, like another often touted individual whom I will refrain from naming, is an establishment mouthpiece, masquerading as a "different capitalist". I invite your readers to examine his history very closely.

    read and weep

  3. How many years in an Ivy League manger does it take to become this stupid? These elitist twits should at least try to run a business before they run their ignorant and pampered parasite mouths.

  4. Bob- you make some good points, but I think you need to justify the argument on regulation and regime uncertainty as the cause for the decades-long real wage depression. Provide links to credible Austrian scholars who have done research suggesting that. This post has good points, but looks very hasty, and it unfortunately could be very easily attacked. Bring the data, show the research!

  5. @Anonymous 1:08

    You need to visit EPJ more often, RW has discussed regime uncertaintiy and reulatory interference in other posts.

    He is writing a blog, not a book. Visit regularly and you will learn.

  6. I would certainly appreciate understanding how a Central Bank is the agent for communism - when it and its captured government are shoveling money hand over fist to the banking, financial, and favored corporate interests.

    Socialism, yes, but socialism for the banksters (as Wenzel has previously referred to them), leading corporate and financial oligarchs, and elites.

    Perhaps someone can demonstrate how creation of the Fed has furthered the interests of the proletariat or petty bourgeois, as Marx understood and used those terms?

    Or perhaps someone can help to reconcile why the elite bankers of the time came to see and to create a Marxist Federal Reserve as in their interests - which it most assuredly was, has been, and continues to be (see Creature from Jekyll Island)?

    I would appreciate knowing how ABT or any other theory can spread some light on this. Thanks.