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March 31, 2005

Why Marx was wrong about economists

Posted by William Coleman

Karl Marx argued that economists were merely apologists for the ruling class. Marx said of political economy that from 1830:

it was thenceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not.
This view of economics and economists lives on today in much contemporary anti-capitalist writing. Dr William Coleman - the author of Economics and its Enemies: Two Centuries of Anti-Economics - shows why it is wrong.

In the wake of the remarkable electoral victory of Australia's conservative Liberal and National parties in October 2004, a century-old Australian tradition is looking unsteady. The newly-elected government is resolved to break the foundations of the powerful wage tribunals that have dominated wage-making in Australia for 100 years. Now, in that always dangerous pause between the will and the act, the Business Council of Australia has entered, and hoisted its own proposal. It wants to abolish the tribunals, and replace them with panels of economists to make recommendations about minimum wages and conditions.

An abysmal idea! Not the proposal to abolish wage tribunals - that is excellent- but the idea of economists somehow 'planning' wage rates. The free market would do a far better job than any economist in deciding what should be the lowest wage society will offer. But what I wish to take up in the column is a quite distinct objection to such a vision of empanelled economists. I wish to take up the likelihood that this vision will stoke the fire of anti-economics.

My concern is that a board of economists deciding the appropriate minimum wage will inevitably lead to a public display of unions pressing for higher minimum wages for the poorest, and economists resisting. It will necessarily contrive a spectacle in which unions and various 'friends of humanity' are pitched in a contest against economists and business. It will, therefore, provide an exhibit that will animate, and seemingly vindicate, the Left's interpretation of economics: that economics is there to justify, legitimate, and apologise for the rule of wealth, capitalism and plutocracy.

The thesis that economics is no more than an apology for wealth may be called 'Left anti-economics', and it is the most hardy of all species of anti-economics.

Left anti-economics can be contrasted with Right anti-economics. Whereas Right anti-economics assumes the market is destructive of a (good) social order (and is therefore bad), Left anti-economics supposes the market is constitutive of a (bad) social order and is therefore (also) bad. Whereas to Right anti-economics, economists by their advocacy of the market are disruptive of (a good) social order, to Left anti-economics economists, through their advocacy of the market, are merely buttressing a (bad) social order. Whereas to Right anti-economists, economists are the "wretched procurers of sedition", to radical anti-economists they were the "apostles of the rich".

Both Right and Left anti-economics can be easily traced by the historian of thought to the French Revolution. But whereas to the Right, economics was partly culpable for the advent of the Revolution, to the Left, economists were especially culpable for its incompletion. The post-Revolutionary Left was frustrated at the failure of a new world to materialise in 1793, and in that frustration they conceived the notion that the old feudal order had been destroyed only to be replaced by new order; a new order based on wealth.

Such sentiments were first articulated with any effect by the Saint-Simonians in the 1820s. But it was Marx who supplied the classic articulation of it.

To Marx the same binary social order of producer and parasite endured through all ages. Thus to Marx the end of the ancien régime was just a change of parasite. Feudal property became bourgeois property, without any substantive difference. What is the difference between owning the rights to mill in the locality (feudal monopoly), and owning all the mills in the locality (bourgeois monopoly)?

The identification of political economy with this new rule of capital also found its intellectual and rhetorical culmination in Marx. This identification was an application of his sociology of belief. According to Marx, the development of reality ['history'] was at critical points favourable in a material sense to society's subordinate group - sending them 'up' and 'in' - and unfavourable to the superior group. At this critical point the subordinate group have an interest in the recognition of reality, while the superior group have an interest in hiding it. The construction camouflage, distortions, illusions, idols is ordained by the superior group.

In applying his theory of belief to economics Marx contended that from 1830 the newly established superior group (capital) was threatened by the insurgent subordinate group (labour). And it was political economist that served as the priests of the idols of capitalism. Of political economy Marx said that from 1830 [Marx, Capital, 1887]:

it was thenceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested inquirers; in place of genuine scientific research, the bad conscience and the evil of apologetic.
This remains the standard, defamatory, Marxist categorisation of economics.

The Marxist sociology of belief underlying this defamation is open to several criticisms: 'history' (ie the trends in material reality) may favour all groups, or none at all; the recognition of reality best serves no group's interest, since every group will always be better served by some illusion, (and so no group is purely 'on the side of truth'); and that the better perception of reality may better serve all groups than prevailing perceptions (and so all groups may be on the side of truth against the alternative).

Historical particulars also tell against political economy being the 'mere sycophancy of the ruling classes'. Contrary to myth, the political economists did not, in general, oppose the Factory Acts for adults. They did not apologise for certain other blights of the Industrial revolution, such as poverty or child labour. Political economists did not consider child labour a "potent" means of transforming society. They did not believe its prohibition "inconsistent with large scale industry"; or its prohibition "reactionary". The view that its prohibition was "reactionary" was the view of Karl Marx [Marx, Critique of the Gotha Program, 1877]:

A general prohibition of child labour is incompatible with the existence of large scale-industry and hence an empty-pious wish. Its realisation - if it were possible – would be reactionary, since, …an early combination of productive labour with education is one of the most potent means of transforming present day society.

With views like this on the Left, perhaps it is not surprising that political economy was often-times well received by working class interests. E.P. Thompson once described the Wealth of Nations and the Rights of Man as two "handbooks" of working class radicals in the first decades of the 19th century. Other historians of "the rise of the working class" have proposed a category of "Smithian socialists", and have recorded the approving interest of the Trade Union press in Adam Smith in mid-Victorian England; "Adam Smith and Bentham were looked upon with gratitude".

Conversely, some persons who expressly sought economic doctrines favourable to property found classical economics singularly disappointing for this purpose, and adopted an anti-economist posture as a consequence. George Poullet Scrope (1797-1876), the parvenu lord of the Manor House of Castle Combe, is a case in point. He asked [Scrope, Political Economy for Plain People, 1873]:

What lessons were they [ie 'the many'] likely to imbibe from the current doctrines of Political Economy? Were these lessons fitted to reconcile them to the hardships of a condition of almost ceaseless toil for, in many cases, but a meagre subsistence; and this in a country overflowing with wealth enjoyed in idleness by some at the expense (as it might first appear to them) of the labour of others?
Scrope answers his question with regret:
On the examination of the works of the most noted economists of the day, …I could not discover in them any answer likely to satisfy the mind of a half-educated man of plain common sense and honesty of the great disparity of fortunes and circumstances that strike the eye on every side.
To rebut this "mischievous" political economy, Scrope advanced his own economic theory in which he proved to his satisfaction that any material misery that a man may endure "can only be occasioned by their own wilful default".

The Left misfired in its attempt to paint economists as propagandists for capital, because it didn't understand capitalism, or economists.

The basic error is that the Left identifies capitalism with capital. To the economist the critical feature of capitalism is the free market. It is the free market that economists champion. And, contrary to Marxist mythology, a free-market is not some sort of capitalist bliss point. It is, in fact, a point where no capitalist wants to be, if they could help it. Consider various policies that would be part of realising a free market:

Abolition of a wage minimum. This may be improving for capital, but it is never optimal for any capital interest: the capitalist would always prefer a legislated wage maximum to drive wages down below the free-market level.

Free immigration. This is never optimal to any capital interest: they would prefer immigration subsidised, and emigration taxed (or prohibited).

Abolition of a rent maximum. This is never optimal to a landowner: what landlords' want is a rent subsidy, and restrictions on entry into the supply of rental property.

Thus in wanting market friendly policy, the economist is not nearly as business friendly as business would want. Economics does not make a little god of capital to be doted on and sacrificed to. It rejects "investment concessions" to business, as such tax concessions wastefully overcapitalise industry, and wastefully over-tax other factors. It has never favoured privileged tax treatment for capital income. The taxation of capital gains, that constitute an important part of capital income, is a case in point. A survey recorded 95 percent of delegates to the Republican Party convention in 1992 favoured lowering capital gains tax. But only 21 percent of US economists favoured reducing capital gains tax.

Economics, then, is not the party of wealth. It has never adopted that "negative-exposure" of Marxism, that extols capital, or "business", as the source of all value, and dismisses labour as its parasite. It has never extolled this factor, or that factor, or any factor, as the source of wealth. It holds that the great producer of wealth is the free-market.

Dr William Coleman is Senior Lecturer in Economics at the Australian National University and the author of Economics and its Enemies: Two Centuries of Anti-Economics, (Palgrave Macmillan, 2002).

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"Abolition of a wage minimum. This may be improving for capital, but it is never optimal for any capital interest: the capitalist would always prefer a legislated wage maximum to drive wages down below the free market level."

....ok, but only if the abolition of a wage minimum concurrently produces a legislated wage maximum.

Posted by: d at January 24, 2006 05:13 AM

Why Coleman was wrong about Marx:

I think you'll find, if you actually read Marxian works IN CONTEXT, that Marx thought economists were apologists for capitalism in the sense that they defended the CAPITALISTIC MEANS OF PRODUCTION -- which is nothing but the workings of the free market. In actually defending the free market as, in fact some "SOCIAL bliss point", that is, some point where society's welfare is maximized, economists in fact defend capitalism. They in turn support capital, because, as Marx said, "Capital exists and can only exist as many capitals, and its self-determination therefore appears as their reciprocal interaction with one another” (Grundrisse: Foundations of the Critique of Political Economy, Notebook IV, p 414). So Marx was well aware of the effects of competition (i.e. the free market) and its effect on capitalism and hence capital. Thus since economists, as you so emphatically declare in your piece, hold the free-market “as the great producer of wealth”, they are defending competition and since competition IS capital, they are defending capital.

But more to the point of reality, Marx didn’t like the fact that economists, in championing the free market, were actually championing the opportunities capitalists have under the free-market, and how there is always, under capitalism, the bare fact that the MAJORITY of the means of production are owned and controlled by a FEW (i.e. the capitalist class). I hope this clarifies your attempt, Dr. Coleman.

It is important to read Marx in context, and if one does that, one will find there are many non-antagonistic things Marxian economics can teach us about capitalism. There is no point just focussing on the negatives.

Posted by: R at April 2, 2008 09:05 AM

"...and since competition IS capital"

The capitalistic means of production is not the working of the free market. As we can see from the current financial meltdown and government subsidies, capitalists have no allegiance to the free market. They have an allegiance to profit, and perhaps to exploitation, but they have no allegiance to the free market. It is something that they hide behind when it is convenient.

Posted by: m15 at January 29, 2009 01:41 AM

Those who can, go out and get a real job.
Those who can't, become academics.
It's outrageous that people get paid to write piffle like this.

Posted by: Steve Body at April 15, 2009 06:20 AM
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