Thursday, December 05, 2013

Marxian Wealth -- Book

Marx’s ultimate defense of his doctrine is his modeling of capitalist economic system. His work on this modeling that led to the three volumes of "The Capital" has been held up as the ultimate verdict against capitalism. It was thought that his critique of capitalism has laid bare the ruthless exploitation of the workers, which according to Marx is the sole source for the creation of capital, its formation, accumulation and growth.

Even today among the most ardent critics of socialism, the critics back away from Marx's economic theories or they outright think while socialism is a utopian endeavor Marx's criticism of the capitalist system is correct. The latest critic that I read is "Black Mass: Apocalyptic Religion and the Death of Utopia" by John Gray, while he rejects socialism he is very complimentary of Marx's critique of capitalism.  Most critics of Marx's thoughts see him as merely a utopian thinker and I have not seen any who delve into the core of his work. He is thought of a utopian who mostly has been misread or misapplied. You might find my approach a bit different. Well, let's get back to Marx.

Marx thought that this ruthless exploitation of the capitalist system will grow the capital but also bears the nexus of its crisis that will lead to its downfall. Marx thought that as productivity increases smaller and smaller relative value of workers’ labor is imparted to the individual commodities; and for the capital to grow more and more of these commodities have to be produced and sold. This will lead to overproduction, and impoverishment of the workers which in turn will lead to impasses. Eventually it becomes harder and harder for the capitalists to find an exit. The impasses will lead to social upheavals, a revolutionary situation for the birth of the new society, socialism and eventually communism.

Marx rendered his verdict against capitalism early in the 19th century. It began by a detailed study of the working class in England, the most advanced capitalist society of his time, and culminated with his definite conclusions through the declarations of the Communist Manifesto. Yet to backup his verdict he needed a thorough and comprehensive analysis – thus his massive work “Das Kapital”.

It has been fashionable to say, “Marx said lots of good things, but the problem with his ideas is that it does not work” or say that “Marx was a genius but he created an ideology. And ideologies are not practical”. But these declarations hide more than reveal anything about Marxist principles and like any religious principle they will pop up as if somewhat they have any validity. During the discussions of the recent economic crisis, it is not uncommon to hear references to Marx, that maybe he was right about what he said on capitalist cycle of crisis. These declaration seems to want a reconsideration of Marx's ideas, a new resurrection, as if Marx had something to say about our present economic predicament or as if he had foresaw it through the decades. These talks say something about our confusion over Marx's ideas as well as our present predicaments.

As much as capitalist economic cycles, boom and bust, in the popular minds have found connotation with Marx’s ideas, in reality the knowledge of these cycles were known to the economists before Marx. Despite the popular perceptions surrounding Marx and the capitalist economic cycles, Marx himself does not make any claim about this discovery and he says it explicitly. His only claim to discovery is what he called the “dual character of labor”.

By the dual character, Marx meant that labor has a very unique role in the capitalist society, and by labor he meant work of someone who actually manufactures something, a widget, or someone who directly uses raw materials and machinery to produce things, “commodities”. According to Marx the unique role of labor is in its dual character. First for the laborer to survive as a person maintaining the capacity of labor; for this he needs a minimum amount of value, exchange value (money), as wages, to pay for his food and shelter and rearing of the next generation, and to maintain the continuity of labor. The second is that when laborer produces a widget, he imparts more value to the widget than the amount he has consumed; more value beyond the value that he received as wages. Once that widget is sold, by the capitalist, the difference between the price of the widget and his wages is the surplus value that the capitalist expropriates and adds to his capital.

Reading of Marx’s capital is not easy and sometimes this difficulty is attributed to the depth of his ideas. What I have found out is that this difficulty mainly is for the reader to gain a capacity to traverse the mechanical jigsaw puzzle that he has created. Marx’s construct has some semblances to the real world but at every turn fails the test of the reality. There is no doubt that Marx was very smart, he was a genius. He created his model of capitalism, with the scant scientific evidence at his disposal, with a consistency that surpassed all other drives of his time for “Egality”.

French Revolution’s cry of “Liberty, Egality, and Fraternity” ended in disastrous pools of blood. Afterward repeated experiments with building communes practicing the same slogan failed over and over. Following these failures of attaining "egality" it seemed that Marx had found the answer. Overthrow the capitalist system and expropriate the capitalists, abolish the extraction of surplus value and you will achieve what French Revolution and many other experiments following that could not achieve. If nothing else Marx's prognosis probably tells us that if we devise an experiment and enough people get convinced, circumstances will arise to test that experiment. Is this part of our collective nature?

To prove his discovery of the “dual character of labor” Marx begins with his most elemental descriptor of the capitalist societies, commodities. He believed that commodity is the essence of capitalism whereby capitalism recreates the society in the image of this essence, “fetishism of commodity”, that will be overriding everything else defiling all human relationships.

To begin his analysis, Marx states, “The wealth of those societies in which the capitalist mode of production prevails, presents itself as ‘an immense accumulation of commodities,’ its unit being a single commodity. Our investigation must therefore begin with the analysis of a commodity.” This is the mechanical axiom of Marx’s Capital. If one could swallow this axiom, the first piece of the jigsaw puzzle, then he hands you the next piece; “A commodity is in the first place, an object outside us … satisfies human wants”; next piece “The utility of a thing makes it a use value… Use values become a reality only by use or consumption”; next piece, these use values are in addition “the material depositories of exchange value”. By the end of the first few chapters the jigsaw puzzle is complete. The rest of the three volumes are just the splash of paint that if one could endure the pain of reading them helps to hide the cutout lines as any picture does to a jigsaw puzzle when it is completed. I do not know how much Marx was aware of this but let’s take a closer look at what he is saying.

There is little ambiguity that in Marx’s mind, the wealth of the capitalist societies is the accumulation of commodities and the unit of this wealth is a single commodity. For one thing what is this unit, “a single commodity”? In other areas of science and technology all kinds of units are used and each of these units has a particular meaning. For example we have meter as a unit of distance. If the distance between points A and B is 3 meter and between points C and D is 6 meter we know that the distance between C and D is twice the distance between A and B. What is this unit, “a single commodity” that Marx has devised? Does it mean that if a society, A, has six commodities and another, B, has three commodities, then society A is twice as rich as B, even if the six commodities of society A are pieces of craps? This unit does not seem to have much use; it does not tell you anything about the wealth of societies. Marx’s definition of the wealth seems to be meaningless.

Further on, the reader of Capital learns that a commodity in the first place is a “use value” and this “use value” is really the material depository of the “exchange value”. The first question is why does “exchange value” need a material depository? We know that a coat could be exchanged with certain amount of corn, but it as well could be exchanged for a song and we know both happen and the latter does not have a material depository. I will come back to this later.

Let's continue, Marx’s exchange value has two components, both are the result of the labor of the worker who produced that commodity. Within this labor, one portion or component is the source of his wage and another component is the surplus value that the capitalist expropriates. He claims that the measure of this exchange value in the final analysis is time. Marx only substantiates his analysis by some jiggling of simple mathematics. Marx's rejection of money as the only source of exchange value and simply substituting time measured labor is merely a declaration without any substantiation. He declares time as the measure, something more illusory than concrete money. One can trace the measure of time as a tool for measuring productivity of production processes and in turn to know about the stability of the money but Marx cannot trace his time as the measure of exchange value. To him money is just the medium of exchange and a tool for the extraction of surplus value and thus exploitation. So he looks for something else as the measure of true exchange value "embedded" in the use value and for him that is time without any historical justification. That is nothing but an assumption and as historical materialist he cannot trace that. Productivity has something to do with time and as such something to do with the productivity of capital. But exchange value is entirely a social phenomenon and it is defined by the act of exchange itself and it has never been limited to the exchange between things. Furthermore, historically exchange of non-material services probably gave a greater impetus to this social activity. More on this later.

As the reader chases Marx through the pages, it is his deductive reasoning, through assumption after assumption, to impress upon the reader that labor of the workers who produce the commodities is the sole source of all exchange values and thus its accumulation in things, as commodities, is the sum total of the wealth in a society. According to his theory the rest of the society is mooching off these “productive” workers. That includes the workers who are not directly involved with the production. For example the shelf stocker in a grocery store is one of those moochers, albeit a necessary moocher – after all somebody has to stock the shelves! In Marx’s view the biggest offender, the moocher par excellence, is the capitalist who expropriates the giant portion of the value produced by the “productive” worker and this moocher is a useless one that the society needs to get rid of.

As I mentioned in the earlier chapters, Lenin’s experimentation with applying this core of Marx’s theory revealed the failure of this prognosis. Lenin had to revert to capitalist methods in order to revitalize the Soviet economy. Since then the complete dissolution of the Soviet Union and revitalization of China through capitalist methods, failure of Cuba and North Korea in their insistence on the strict state control over economy all have shown that Marx’s theory cannot find any manifestation.

Is there something wrong with Marx’s "discovery" or is it with us. Could it be our failure, that we just have not been able to find a correct systematic method for the implementation of his ideas? I do not think there is anything wrong with us, Marx is simply wrong. I pointed out the meaningless unit that he had discovered, now let’s look at his prime assumption which his whole theory rests on: According to Marx, in our world “the wealth … is the accumulation of commodities”. This is a very strict assumption about the wealth of a society.

Actually Marx in his earlier writings was a bit more cautious. In the "Critique of Political Economy", a few years earlier than his final verdict against capitalism, he writes, “The wealth of bourgeois society, at first sight, presents itself as an immense accumulation of commodities …” In the earlier version he has a little qualifier, “at first sight”, which does not exist in his final treatise, "The Capital". With this qualifier Marx's statement could be meaningful, albeit in a particular context.
If you bring a North Korean communist pedant, or maybe alternatively a commoner, to New York, “at first sight”, he probably would think that the wealth of the United States is in those things that he sees; buildings, cars, stores full to the brim with things; many things, most of them he does not even know what “use value” they might have. It will take great efforts for that pedant to elevate himself beyond that first sight and see other facets, a whole host of social relationships and level of culture that is non-existent back in North Korea. Are these other facets part of the wealth in the United States? To Marx those are bourgeois values, corruption of our “humanity” and not part and parcel of the wealth. To Marx all the wealth is the result of workers labor embedded inseparably in the material substance of the commodities. This is the cornerstone of his thesis where the rest of his manifesto flows from.
So far implications of Marx’s thought has not borne fruit, we know that. But how can we test Marx’s notion of wealth? Well, let’s devise an experiment. Let’s move all the commodities in the United States to North Korea and in return move all of the commodities in North Korea to the U.S.
I see you are chuckling! I bet you are saying that this experiment is impossible! First I ask you to get a hold of yourself so you could continue to read the rest of these lines. Then I encourage you to gain a sense of history. All big and bold experiments seemed impossible at some point.
Christopher Columbus dreamt of a bold experiment, his experiment in the jargon of socio-economic activity is called expedition, to find a sea route to India. I bet there were people in 15th century, like you, who chuckled when they heard about his dream. Columbus’s experiment was expensive and he had a hard time to find someone to underwrite his project. His proposals were rejected by peoples of means who could support him. Only by wetting the greedy appetite of the Spanish crown he received financial support for his trip. Also remember how Lenin was able to conduct his socialist experiment in Russia; nobody believed that they, Bolsheviks, could hang on to the power even for a few days. So in historical context impossible is meaningless. To make ours possible the main task is to convince enough people of the goal of our experiment and if we are consistent the occasion will arise for our test. Just imagine if we could prove positive that Marx was right in his thesis, I am sure then we will find a bigger unprecedented effort, much bigger than Bolsheviks efforts, a real and more convincing one, toward the realization of “scientific socialism”!
The problem is that just trying to imagine the outcome of this colossal experiment totally rejects Marx’s notion of wealth. Here is why. If Marx was correct and the wealth of a society is in its collection of commodities then by this great swap, the new North Korea will be as rich as the old U.S. and the new U.S. will be as poor as the old North Korea. But could anyone in his/her right mind believe that! North Koreans would not even know any of the “wealth” that has poured over them. They do not know what they are for, how to use them and how to consume them or how to run them to produce more “wealth”, or commodities. In a short while all that material wealth will become heaps of crap, cluttering the North Korean peasants path of pushing their plows. On the contrary, the United States understandably with great difficulties will use the accumulated knowledge of its citizens and will begin to move toward producing what it knew how to produce and use.
We may never find the occasion for our colossal experiment, but do not despair, this experiment has been done on a smaller scale many times over. Germany by 1945 was almost completely destroyed, as if someone took away all the commodities (at least an important chunk of it) , but the western part of it was rebuilt very quickly. You might say that it was because of the Marshall plan. It is true, the American credit to Germany helped a lot but the determining factor for Germany was the cultural level of the German people. Soviet Union spent billions of dollars in Cuba and no such thing happened.
After WWII the Soviet Union dismantled and moved many factories from East Germany to the Soviet Union but it did not help the Soviet industry and those factories (commodities) turned into heaps of useless metals. On the contrary East Germany despite the pressures that the Soviet Union exerted on it, recovered much faster than the Soviet Union and by the 70’s was the most advanced economy in the Soviet bloc; the difference is culture.
Marx could not go beyond his “first sight” of a capitalist society and completely misread what constitutes as the source of the wealth of a society. The source of the wealth of a society is in its culture, the relationships of its members first and foremost. The accumulation of things, material production and reproduction is only a part of the wealth of the society, as only one of the means of advancing the culture and the total wealth.
If Marx’s assumption of wealth is incorrect then his corollary that the sole source of the valuation of this wealth which is the labor of Marx’s special class of workers, the ones who directly have their hands in the production of the material stuff, is baseless. I will discuss later that how this discovery of Marx is also ahistorical, which goes against his whole grain of thought, the perspective of historical materialism.
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The above piece is part of a book that I am developing.  If you would like to follow, please read the blogs titled "Perspective..." and then read all the blogs which the title name ends with " -- Book".  As you might have guessed, you have to read from the earlier posts moving to the present.

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