Was Karl Marx right?

[pkpatriotic]

Was Karl Marx right?
By Bernd Debusmann
Thursday, 16 Oct, 2008


Karl Marx predicted that the old brand American-promoted capitalist system was a danger to the world. -Reuters

WASHINGTON: Capitalism as we used to know it is on its deathbed. And those who predicted that the old brand, the unfettered, American-promoted system, was a danger to the world, are being vindicated. They include Karl Marx, whose thinking on banks seems oddly contemporary these days.

The credit crisis that began in August last year and turned into near-catastrophe this month is not over, despite the hundreds of billions of dollars that governments are spending to save banks in the United States and Europe from collapse and thereby prevent a global depression. But there is an emerging consensus that capitalism needs a 21st century overhaul, not just emergency rescues, to save it from itself.

When that will happen is not clear. 'What we are seeing right now looks like a very slow train wreck,' says James Boughton, the historian of the International Monetary Fund, or IMF.

British Prime Minister Gordon Brown has suggested an international meeting on the pattern of the 1944 Bretton Woods conference that resulted in the post-World War II financial order and created the IMF and the World Bank. That system was dominated by Washington.

The United States, from where the credit crisis spread like a virulent epidemic, is not likely to play as large a role in whatever new 'financial architecture" world leaders construct. As Peer Steinbrueck, the German finance minister, put it: "One thing seems probable ... The U.S. will lose its status as the superpower of the global financial system.'

'The world is at risk of losing its anchor ... the United States,' U.S. financial strategist David Smick writes in his just-published book on financial globalization, The World is Curved: Hidden Dangers to the World Economy.

The opening chapter is darkly entitled The End of the World. Smick said in an interview he thought a global depression was still possible despite the steps taken by the United States and Europe to restore confidence.

Those measures included buying stakes in major banks - in effect partial nationalization - and would make Marx smile if he could rise from his grave. In the Communist Manifesto he and his collaborator Friedrich Engels published in 1848, Marx listed government control of capital as one of the ten essential steps on the road to communism. Step five: 'Centralization of credit in the hands of the state ...'

There are not many Marxists left in the industrialized world and not even the most fervent expect the revival of an ideology that failed so dismally in the Soviet Union.

MOMENTOUS BREAK

But as far as the United States is concerned, the events of the past few weeks represent a momentous break with decades of a free market philosophy that abhorred government intervention in (and regulation of) financial markets.

'There is little question that making the government a major investor in
American banks raises thorny questions ... about the role of the public sector in private markets,' Sen. Charles Schumer, a member of the Senate finance and banking committees, wrote in the Wall Street Journal the day the government announced it was planning to take equity stakes worth up to $250 billion in American banks.

It will take time for questions about the public sector in private markets to be answered. But it looks likely that some things will never be quite the same, no matter who wins the presidential election on November 4. For one, the control center of the financial market has already begun shifting from New York to Washington.

The 'big government' that free marketeers identified as something evil is almost certain to make a comeback, although spending on America's crumbling infrastructure, its inefficient health care system, and environmental programs will be limited by the Everest-sized public debt. The U.S. national debt has increased by an average of $3.34 billion a day over the past year and now stands at more than $10 trillion.

Both in the United States and in Europe, officials have stressed that government intervention in the banks will be temporary but whether they will be able to stuff that genie back into the bottle remains to be seen. And 'temporary' has not been defined.

'We will not stand down until we have achieved our goal of repairing and reforming our financial system and thereby restoring prosperity to our economy,' said Ben Bernanke, the chairman of the Federal Reserve.

Amid the gloom and anxiety of the worst financial crisis since the Great Depression, which started in the United States in 1929 and then spread to the rest of the world, there are hopes that Capitalism 2.0 (if it ever comes about) will result in a more equal society. 'There is a tremendous opportunity now to narrow the income gap,' says Sam Pizzigati of the Institute for Policy Studies, a Washington think tank.

That gap resembles the top-to-bottom income distribution just before the Great Depression, according to the Washington Center on Budget and Policy Priorities. Then as now, the top 1 percent of households accounted for around one fifth of the national income. In 1980, their share was 8 percent.

History shows that deep financial crises have helped spur public policy reforms and those pending include legislation that would make it easier for American workers to join labor unions. At present, 7.5 percent of private sector workers are union members, the lowest percentage in the industrialized world.

U.S. unions say they are close to reaching a goal of collecting, by election day, one million signatures supporting the legislation. If passed, it would be part of what some have already started calling the new world financial order.

 

[Imran Khan]

10 Mistakes of Karl Marx
I found this nice piece floating around in the www. Originally published in the ed in The Freeman in 1982.
Some Mistakes of Marx

William Henry Chamberlin

"The evil that men do lives after them." This maxim applies with singular force to the work of Karl Marx. The life of this apostle of socialism, communism, and class war was spent, for the most part, in obscure and sometimes squalid poverty. Marx was unable to make even a humble living as a writer and journalist; he had no other trade or profession. He would probably have had to go on poor relief, in his time less generous in England than it is now, if it had not been for handouts from his disciple and collaborator, Friedrich Engels, who enjoyed the advantage of having a successful capitalist father.

Marx's record of political achievement at the time of his death seemed quite sterile. Because, in a moment of bravado, he renounced Prussian citizenship, he was unable to go to Germany or take any intimate part in the German socialist movement. He played no role in English politics.

To put it mildly, Marx was not a mellow or lovable character. His habits of excommunicating from the socialist movement everyone who disagreed with him kept his circle of friends very limited.

There is an abundance of historical evidence for Max Eastman's caustic profile of Marx in Reflections on the Failure of Socialism:

If he ever performed a generous act, it is not to be found in the record. He was a totally undisciplined, vain, slovenly, and egotistical spoiled child. He was ready at the drop of a hat with spiteful hate. He could be devious, disloyal, snobbish, anti-Semitic, anti-Negro. He was by habit a sponge, an intriguer, a tyrannical bigot who would rather wreck his party than see it succeed under another leader.

But if there were few mourners, literally or figuratively, at the grave of Marx the man, the idea of Marxism, the vision of a world in which the proletariat, oppressed by capitalism, was to become the architect of new millennial. order, marched from success to success.

Before World War I Marx was revered as the founding father of the socialist parties which had sprung up in most European countries. Because a Russian genius of revolutionary action, Vladimir Ilyitch Lenin, swallowed Marx's ideas whole without conscious reservation, Marxism became the creed of the new communist regime in Russia.

William Henry Chamberlin (18971969) was a frequent contributor to The Freeman. Author of the Russian Revolution and numerous other books and articles on world affairs, he was uniquely qualified to discuss Marxian errors by having lived and traveled where such mistakes are obvious.

It is especially timely to review what Chamberlin reported More than twenty--five years ago to be some of the mistakes of Marx. This article is reprinted from the May 1956 Freeman.

This regime, which has never wavered in its belief that someday its power will encompass the entire world, represents a revolt against all the values of Western civilization, against religion and the moral law, against civil and personal liberties, against the right to own property, which is one of the first and most indispensable of human liberties. After World War II communism, the offspring of Marxist teaching, extended its dominion over China, over the countries of Eastern Europe, so that today [19561 it has been imposed as a dogmatic faith on more than one third of the population of the world.

And the influence of Marx is by no means restricted to nations under communist rule. The appeal of Marxian ideas to European socialists, to the half-baked intellectuals of newly emancipated countries in Asia has been considerable. And, although the number of persons who can honestly claim to have read through with comprehension the dry and abstruse Capital must be small, the simplified version of Marxist theory presented in The Communist Manifesto and elsewhere possesses strong psychological appeal. Marx Sets the Proletariat Against the Bourgeoisie

Marx professed to know all the answers, to offer a complete explanation of human activity on the basis of historic materialism. In the Marxian scheme there is a hero, the proletariat, a villain, the bourgeoisie; and the hero is represented as a certain ultimate winner. There is a vision of revolutionary victory that will transform the conditions of human existence and usher in a millennium, of the nature of which, to be sure, Marx offers few and vague hints. To trusting minds which accept Marx's premises and assumptions without question there comes an intoxicating sense of being in step with history, of professing a creed that is based on infallible science.

But it is just this myth of infallibility that is the Achilles' Heel of Marx as a thinker, of Marxism as a system. An examination of the works of Marx and his collaborator Engels reveals ten big mistakes, of which some are so fundamental that they completely discredit, as a preview of the future, the whole superstructure of faith in capitalist misery and doom, and socialist prosperity and triumph, which Marx laboriously reared on a foundation of Hegelian metaphysics and minute research in government reports on the seamy sides of early British capitalism. These mistakes are as follows:

1. The doom of capitalism is assured because under its operation the rich will become richer and fewer; the poor will become poorer and more numerous. To quote one of the more striking rhetorical passages in Capital:

While there is a progressive diminution in the number of the capitalist magnates, there occurs a corresponding increase in the mass of poverty, oppression, enslavement, degeneration and exploitation. But at the same time there is a steady intensification of the wrath of the working class-a class which grows ever more numerous and is disciplined, unified and organized by the very mechanism of the capitalist method of production. Capitalist monopoly becomes a fetter upon the method of production which has flourished with it and under it. The centralization of the means of production and the socialization of labor reach a point where they prove incompatible with their capitalist husk. This bursts asunder. The knell of capitalist private property sounds. The expropriators are expropriated.

These are resounding words, but utterly empty words, in view of the fact that social and economic development in capitalist countries has proceeded along a precisely opposite direction from the one predicted by Marx. What was in Marx's time a social pyramid has become more like a cube. The capitalist system has brought to the working class not increasing "oppression, enslavement, degeneration and exploitation," but an increasing share of new inventions and comforts that did not even exist for the wealthy a hundred years ago: automobiles, radios, television sets, washing machines, as well as money in the bank, stocks, and bonds.

2. Socialism can only come about when capitalism has exhausted its possibilities of development. Or, as Marx puts it in his Critique of Political Economy:

No form of society declines before it has developed all the forces of production in accordance with its own stage of development.

But, of the three countries which, according to Marx, were ripest for the transition to socialism, as most industrially developed, the United States is still, by and large, the freest economically.

The larger free part of Germany, after the terrific shock of the war, has achieved a remarkable recovery by shedding Nazi and Allied controls and resorting to old -fashioned individualistic incentives. Great Britain has settled for a kind of socialistic New Deal, without violence or outright expropriation and well short of Marx's "dictatorship of the proletariat."

On the other hand, the countries where violent revolutions were carried out in the name of Marx, the Soviet Union and China, were, on Marx's own theory, completely unripe for socialism. Capitalism was in a fairly early stage of development in Russia. Much of China lived in precapitalist conditions. Experience has shown that, in precise contradiction of Marxist dogma, capitalism is harder to overthrow as it strikes deeper roots and shows what it can accomplish. A plausible case can be made out for the proposition that, although political and economic change would have come to Russia, there would have been no communist revolution if World War I had been avoided and Stolypin's policy of breaking up the old peasant communes and giving the peasant more sense of individual property had developed long enough to yield results.

3.The "dictatorship of the proletariat" is a just and feasible form of government. This is based on two false assumptions: that the "proletariat," or industrial working class, has some kind of divine right to rule and that governing power can be directly exercised by this group of the population. Both are wrong. Marx never clearly explained why the proletariat, for which he foresaw increasing poverty and degradation, would be qualified to rule. And Soviet experience and Red Chinese experience offer the clearest proofs that dictatorships of the proletariat, in theory, become ruthless dictatorship over the proletariat, in practice. Absolute power in communist states is exercised not by workers in factories, but by bureaucrats, of whom some have never done any manual work; others have long ceased to do any.

4.Under socialism the state will "wither away." This grows out of Marx's belief that the state is an instrument for the suppression of one class by another. In the classless society of socialism, therefore, there will be no need for the state.

Events have played havoc with this theory. Nowhere is the state more powerful, more arbitrary, more of a universal policeman, snooper, and interventionist than in the Soviet Union. Yet it is here that the new regime has abolished private property in means of production, thereby, according to Marx, inaugurating a classless society. One is left to choose between two alternative conclusions. Either the Marxist theory of the state as an instrument of class rule is a humbug or the kind of class rule that prevails in the Soviet Union must be uncommonly crude and ruthless.

5.Capitalism (in the nineteenth century) has exhausted its productive possibilities. This flat statement is made by Marx's alter ego, Engels, in his Anti-Dühring, written before the internal-combustion engine, X-rays, aviation, synthetic chemistry, and a host of other enormously important additions to the productive process, brought into existence by the stimulus of capitalism.

6.All ideas, all forms of intellectual and artistic expression are a mere reflection of the material interests of the class in power. This conception is expressed repeatedly in Marx's writings, notably in German Ideology, where he writes: "The class which has the dominant material power in society is at the same time the dominant spiritual power .... The dominant ideas are nothing but the ideal expression of material conditions." One of the few wisecracks as sociated with the name of Marx is that the Church of England would rather give up all its Thirty-Nine Articles of Faith than one thirty-ninth of its possessions.

The historical record shows that this interpretation of human conduct is crudely one-sided and inaccurate, Men die far more often for ideas than for material interests. The communist victory in Russia was not due to the fact that material conditions for the masses became better after the Bolshevik Revolution. This was emphatically not the case. What did happen was that the organized, disciplined, communist minority acquired an iron grip on the masses by its double weapon of propaganda and terror, kept passions of class hatred and class envy at the boiling point, whipped laggards into line by ruthless regimentation, and thereby preserved their regime through years of civil war and famine. Sometimes the materialistic interpretation of history becomes sheer absurdity, as in the case of a Moscow musical announcer, whom I once heard offer the following bit:

We will now hear Glinka's overture, "Ruslan and Ludmilla." This is a cheerful, buoyant piece of work, because when it was written Russian trade capitalism was expanding and conquering markets in the Near East.

It would seem that, in order to carry any semblance of plausibility, this should have been accompanied by proof that Glinka owned stock in the expanding companies-a highly improbable contingency, if one considers the economic status of Russian musicians.

7.Production depends on class antagonism. To quote Marx, in The Poverty of Philosophy:

From the very moment in which civilization begins, production begins to be based on the antagonism of orders, of states, of classes, and finally on the antagonism between capital and labor. No antagonism, no progress. This is the law which civilization has followed down to our own day.

Like many of Marx's "laws," this is a mere unsupported assertion of a pedantic dogma. No proof is adduced. The greatest human constructive achievements, the cathedrals of the Middle Ages, the great dams and skyscrapers of modern times, are the fruit of cooperation, not of antagonism.

8.Nationalism is a negligible force. Marx and Engels lived in an age of rising national consciousness. Conflicting nationalism was the strongest force that let loose World War I. Yet in all their writings the attitude toward nationalism is one of contemptuous deprecation. As Isaiah Berlin, a fairly sympathetic biographer, writes (Karl Marx, p. 188):

He consistently underestimated the force of rising nationalism; his hatred of all separatism, as of all institutions founded on some purely traditional or emotional basis, blinded him to their actual influence.

9.War is a product of capitalism. This idea has found some acceptance outside the ranks of the Marxist faithful. The temptation to seek an oversimplified scapegoat for war is strong. But while, theoretically, such Marxian motives as struggle for trade, colonies and commercial spheres of influence, might lead to war, there is no serious historical evidence that any major conflict was ever touched off by such considerations. There were differences of economic interest between the industrializing North and the mainly agricultural South before the Civil War. But these could easily have been compromised. What made the fratricidal conflict "irrepressible," in Seward's phrase, were the two big political and moral issues: secession and slavery,

World War I was purely political in origin. There was the clash between Slav nationalism and Austro-Hungarian desire to hold together a ,multinational empire. A system of tight and almost automatic alliances turned what might have been an Austrian punitive expedition against Serbia into a general war.

World War II was the handiwork not of any magnates of capitalism, but of a plebeian dictator, Adolf Hitler, pursuing aspirations of conquest and military glory that far antedate the modem capitalist system. The three countries that were best prepared for war were the communist dictatorship in the Soviet Union, the Nazi dictatorship in Germany, the authoritarian military regime in Japan. Capitalism makes for free trade, free markets, limited governmental power, and peace. And the principal war threat today comes from the expansionist urge of communist imperialism.

10. The worker is cheated because the employer, instead of paying him the full value of his work, holds out on him profit, interest, and rent. Or, as Marx himself states his theory of "surplus value" (Capital, Modern Library edition, p. 585):

All surplus value, whatever particular form (profit, interest, or rent) it may subsequently crystalize into, is in substance the materialization of unpaid labor. The secret of the self-expansion of capital resolves itself into having the disposal of a definite quantity of other people's unpaid labor.

It requires little reflection or research to realize that "surplus value," like many other Marxian catch Phrases, is a myth. How, under any economic system-capitalist, fascist, socialist, communist - could industry expand and provide more goods and more jobs for more people if capital were not withheld from immediate payment to finance future construction? Perhaps the best refutation of Marx's rabble-rousing myth that surplus value is a peculiar dirty trick of capitalists, practiced against workers, is that the extraction of what might be called surplus value is practiced on a gigantic scale in the Soviet Union through the medium of a sales or turnover tax that often exceeds 100 per cent.

A Classic Failure

It is amazing that, with such a demonstrable record of failure to understand either the world in which he was living or the direction in which that world was going, Marx should be hailed as an unerring prophet. The truth is that there is nothing remotely scientific about Marx's socialism. He started with a set of dogmatic a priori assumptions and then scratched around in the British Museum for facts that would seem to bear out these assumptions. Like the Emperor in the fairy tale, Marxism, for all its ponderous appearances, really has no clothes on when examined in light of realities, in Marx's time and in our own. His supposedly infallible system of interpreting history and life is riddled with mistakes, of which the foregoing ten are only the most obvious and the most glaring.

 

[Imran Khan]

Marx and Capitalism...
They Almost Meet in the Dark

The root of all of the evil Marx surveyed was, he concluded, the private ownership of the means of production. The emotional case which he built in favor of a revolution to improve the position of the industrial worker was mountainous. The method of carrying out the revolution, he advocated, was for the workers to seize the government by force and then to use the state to expropriate the ownership of capital. Unfortunately, the moral truth of the massive case which Marx marshaled for improvement of the lot of the industrial worker was dwarfed by the magnitude of his error in assigning as the cause of the maldistribution of wealth, the private ownership of capital.

In the course of his investigation, Marx actually saw, but was prevented by this error from comprehending, the underlying principles of capitalism. Since there can be no doubt about Marx's honest effort and fierce desire to find the key to a workable industrial economy, we are justified in venturing the speculation that had Marx understood the implications of the principles of capitalistic distribution which presented themselves to him as "appearances" only, he might have become a revolutionary capitalist instead of a revolutionary socialist.

Karl Marx, as he reflected upon the causes of economic injustice in the first century of capitalism, came to a conclusion as momentous as it was mistaken. The world was to suffer as much from the critical error of the decision as it had suffered to provoke Marx to make it. Had he not been blinded by a borrowed myth, Marx might well have proclaimed "People of the world, unite! Extend the benefits of capitalism to all mankind." Instead, he exhorted the workers of the world to unite and "throw off the chains" of capitalism.

Had Marx chosen the capitalistic alternative rather than the socialistic one, the world would be a vastly different place in which to live today. Without the false and seductive promises of socialism, Russia, the nation built on Marxism, would be without the principal rhetorical weapon which it uses to seduce the minds of men.

Yet it is a fact that Marx actually considered the problems which should have led him to discover capitalism. But for three basic errors in reasoning, Marx might have been looked upon today as the apostle of capitalism rather than its detractor and tormentor.

The three mistakes that turned Marx away from capitalism rather than towards it, have made Marx the false prophet of the industrial worker. Together with the socialist writers who have followed in his footsteps, Marx deprived generations of workers from realizing that in capitalism--not in socialism--lies their hope for economic well-being, the good life, and political freedom.



--------------------------------------------------------------------------------
Three Mistakes...
The Course of History Changes

The three errors which Marx made were these:

(1) His adoption of the labor theory of value which had previously been advanced by David Ricardo.

(2) His failure to understand that the private ownership of property, including capital instruments, is indispensable to political freedom; in short, his failure to understand the menace to human freedom of the ownership of the means of production by the state.

(3) His mistaking the wealth produced by capital for "surplus value", i.e., value which he thought was created by labor and stolen from the laborer by the capitalist.

Let us examine each of these mistakes. In the course of doing this, we shall see in each case how closely Marx came to acknowledging the actual principles of capitalism. Yet in every case, having grasped the principles, he also rejected them because of his fundemental errors.



--------------------------------------------------------------------------------
Error No. 1:
The Labor Theory of Value.

Except for the few wants which men can satisfy directly by things adequately supplied by nature, human labor, for untold ages, had been the primary source of the creation of wealth. Man, with his hands and his brain, has given value to raw materials found in nature by imparting to them qualities which render them able to satisfy his wants. Similarly, man has performed personal services for himself or for others which have also satisfied needs. Nothing is more obvious than that man must wrest his living from nature through the cleverness of his mind, the strength of his muscles and the skill of his body. Since, at the outset, then, man was the only acting force, the idea that all changes in nature's raw materials were wrought by man alone was both obvious and indisputable. The labor theory of value--the idea that labor is the only agency capable of creating wealth, i.e., adding "value" to raw materials and performing services--must have been approximately correct in primitive times and, to a lesser degree, in pre-industrial economies.

But once men applied their intelligence to constructing tools and machines which were able to produce wealth, or at least to co-operate with human labor in the production of wealth, a basic change occurred, the significance of which was not at once fully appreciated. The fact that all economic value was not created by labor, but rather by labor and capital together, was obscured by the fact that, in the early stages of machine production, machines were usually "operated" by their owners. As a result, the services of the machine were indistinguishably commingled with those of the machine-owner and so there was yet no occasion for recognizing the separate economic functions of each.

The significance of the labor theory of value is more than academic. If labor is the source of all value created in the productive process, then labor has a valid moral claim to all wealth created through production. Then the only moral claim of the owner of capital is to have his capital restored to him, i.e., to get back the value of his capital with compensation for the effects of wear, tear and obsolescence. Honestly to reach his conclusion that the capitalist was thieving from the laborer, Marx had only to believe that labor did in fact create all economic value (i.e., the values added to raw materials found in nature).

But confronted with the fact that capital instruments were actually performing more and more of the functions which added value to raw materials and were even beginning to compete with labor in the performance of purely service activities, Marx could not prove the proposition that labor was the sole creator of value and he did not try. He merely asserted, again and again, that the proposition was historically true and that its truth was of very recent discovery. All commodities, including capital instruments, said Marx, "are only definite masses of congealed labour time" (Capital, Modern Library Edition, page 46, New York.)

"The recent scientific discovery that the products of labour, so far as they are values, are but material expressions of the human labour spent in their production, marks, indeed, an epoch in the history of the development of the human race, but by no means dissipates the mist through which the social character of labour appears to us to be an objective character of the products themselves." (Ibid. page 85; italics added). Marx is here saying flatly what he elsewhere elaborates--that although capital instruments appear to create wealth, this is merely an illusion, and that there is some sort of mysterious "congealed labor" hidden in the capital instrument which enables it to give value to its products.

At this point Marx actually saw one of the basic principles of capitalism: that capital instruments do create wealth, just as labor does. But he rejected the idea as an "appearance" only and held doggedly to his belief that only labor could create wealth. By denying the obvious, that in an ever-increasing number of instances, the performance of particular production tasks may be carried out alternatively either by labor or capital instruments; and by asserting that regardless which method was used, the capital instruments owned by a "capitalist", were in fact, "labour instruments"; and by concluding that whichever method was used, labor in fact created all the value, Marx put the capitalist in the unethical role of getting something for nothing.

Today we are not merely familiar with the phenomenon of machines to make machines, we are also acquainted with the trend to make automated machines with automated machines. Nevertheless, tracing the process backwards through several technological generations sooner or later brings one to the point where the predecessor of a particular machine was made by hand labor. Since Marx regarded human labor not only as an ingredient in an economic product, but as the only ingredient other than raw materials provided by nature, the problem of machines made largely by machines was a disconcerting one for him.

The value of a product, he said, is determined by the amount of labor time it contains. After a few technological generations of producing machines primarily by machines, what could be said of the machine which, although it contained almost no "value" in terms of man-hours and required very little assistance from labor in the form of an operator's man-hours, turned out a vast quantity of products, all of which sold for very good prices?

Marx actually considered this problem. How could he square the labor theory of value with a machine containing very little "value" (in terms of man-hours of labor) which at the same time is operated with very few man-hours of labor, yet which produces a great amount of wealth? Confronted with this problem, Marx might have announced another of the basic principles of capitalism: that the productiveness, the "productivity", of capital instruments, in comparison with that of labor (other than the top echelon of labor consisting of management and technical workers) is steadily rising. But here again Marx rejected the clearly discernible truth and supplemented it with a corollary to the labor theory of value.

In this case, he said, the machine, after yielding up what little "value" it contains, works gratuitously, just as the sun works ripening the corn in the field. Marx here came within a hair's breadth of recognizing the increasing productivity of capital instruments in comparison with that of labor. Had he allowed himself to see the point, it is safe to assume that a man of Marx's sincerity would have cried, "If capital instruments are the source of the increasing production of wealth in an industrial economy, the owners of capital instruments are rightly the persons who should receive the proceeds of the wealth so produced. Let us then set as our goal the greatest possible accumulation and perfection of capital instruments for the greater production of wealth. And let us so regulate our economy as to extend the opportunity of engaging in production through the ownership of capital instruments to an ever increasing proportion of the population."

Marx missed this critical point. Faced with the spectacle of the production of vast wealth through a large contributory effort by capital instruments and a negligible contribution by labor, Marx could merely say: "In modern industry man succeeded for the first time in making the product of his past labour work on a large scale gratuitously, like the forces of nature." (Ibid, page 424). Thus did Marx substitute for objective analysis the dogma he had borrowed from Ricardo.



--------------------------------------------------------------------------------
Error No. 2:
Marx's Failure To Understand the Political Significance of Property.

Before examining Marx's second critical error, it may be helpful to take note of what the concept "property" means in law and economics. It is an aggregate of the rights, powers and privileges, recognized by the laws of the nation, which an individual may possess with respect to various objects. Property is not the object owned, but the sum total of the "rights" which an individual may "own" in such an object. These in general include the rights of (1) possessing, (2) excluding others, (3) disposing or transferring, (4) using, (5) enjoying the fruits, profits, product or increase, and (6) of destroying or injuring, if the owner so desires. In a civilized society, these rights are only as effective as the laws which provide for their enforcement. The English common law, adopted into the fabric of American law, recognizes that the rights of property are subject to the limitations that

(1) things owned may not be so used as to injure others or the property of others, and

(2) that they may not be used in ways contrary to the general welfare of the people as a whole. From this definition of private property, a purely functional and practical understanding of the nature of property becomes clear.

Property in everyday life, is the right of control.

Property in Land. With respect to property in land, we need merely note that the acquisition of an original title to land from a sovereign is a political act, and not the result of operations of the economy. If the original distribution of land unduly favors any group or type or persons, it is a political defect and not a defect in the operation of the economy as such. A capitalistic economy assumes and recognizes the private ownership of land. It may, as under the federal and state mining laws and federal homestead acts, encourage private ownership of land by facilitating private purchasing of mining, timber, agricultural, residential or recreational lands.

Property in Capital. In a capitalistic economy, private ownership in all other articles of wealth is equal in importance to property in land. From the standpoint of the distributive aspects of a capitalistic economy, property in capital--the tools, machinery, equipment, plants, power systems, railroads, trucks, tractors, factories, financial working capital and the like--is of special significance. This is true because of the growing dependence of production upon capital instruments.

Of the three components of production land is the passive1 source of almost all material things except those which come from the air and the sea, while labor and capital are the active factors of production. Labor and capital produce the goods and services of the economy, using raw materials obtained, for the most part, from land. Just as private property in land includes the right to all rents, the proceeds of sale of minerals and other elements or substances contained in land, private property in capital includes the right to the wealth produced by capital. The value added to iron ore by the capital instruments of a steel mill becomes the proeprty of the owners of the steel mill. So in the case of all other capital instruments.

Property in Labor. What is the relationship of the worker to the value which he creates through his work? It has been said that no one has ever questioned the right of a worker to the fruits of his labor. Actually, as was long ago recognized by John Locke and Jean Jacques Rousseau, the right of the worker to the value he creates is nothing more than the particular type of private property applicable to labor. Each worker, they said, has a right of private property in his capacity to produce wealth through his labor and in the value which he creates.

Marx and Property. Marx did not err in his understanding of the dependence of capitalism upon private property. In fact, the Communists, following Marx, appreciate this absolute dependence more than do non-Communists, many of whom, influenced by the conviction that Marx is full of errors, have falsely entertained the idea that this is one of them.

Marx, however mistaken he was in his program for achieving the economic changes he thought were needed, cannot be charged with having intended to worsen the economic and political condition of modern man. The facts of his life and character permit us little doubt that his intention was to eliminate suffering by substituting a fairer distribution of economic goods and services, and through this, a more equitable distribution of leisure and the opportunity to lead a good life. Marx was rightly, if also vehemently, critical of the exploitation of the many by the few.

Had Marx seen that the socialization of capital (i.e., its ownership by the state) would of necessity place the control of capital in the hands of those currently wielding political power, thereby unifying economic and political power, the two basic sources of social power, we can assume that Marx would not have advocated the destruction of private property in capital instruments. If the factory owners of the nineteenth century, having political influence but not unlimited political power, were in a position to exploit the workers, the bureaucrats of the twentieth century in a socialized state, possessing not only unlimited political power, but also unlimited economic power through ownership (i.e., control) of the instruments of production, are infinitely better equipped to exploit workers and other non-bureaucrats. What better proof of this than Russia and the Russian satellites?



--------------------------------------------------------------------------------
The Communist Politician...
A True Tyranical Capitalist

It is the Communist politician who sees in Marxism the opportunity for personal power and wealth which Marx, if we may take him at his word, failed to perceive. The Communist politician perceives in Communism the personal advantage to himself which comes with the transfer of property (working control) in the means of production to the state, and the elevation of himself to a place in the management of the state. The Communist politician is thus able to epitomize in himself the kind of tyrannical capitalist Marx declaimed against, with the further opportunity for unlimited despotism that is inherent in the fusion of political power and economic power in the same hands.

Marx's failure to perceive the political significance of private property has allowed his doctrine to furnish the most perfectly designed ruse for potential tyrants that has ever been devised. In the name of benefitting society as a whole, the actual control of the capital instruments and land is placed in the hands of those wielding political power!

Marx's second great error prevented him from seeing that the ideal "classless society", of which he dreamed, is not one in which a political group in power has the function of distributing wealth. It is rather the political economy in which the individual ownership of property--particularly capital instruments--is spread over the entire population. Only such a broad distribution of private economic power can guarantee individual freedom and the power of the people as a whole to limit or turn out at will a political group in power.

Marx was actually on the verge of recognizing that so long as men are what they are, capitalism is the only possible classless society. His failure to do so derives from his failure to understand the political significance of private property. He consequently also failed to understand the political significance of state ownership in a socialist state. To concentrate control over the means of production in a political group is to establish that administration as a class--an all powerful class--and to remove all possibility, so long as such a group exercises its power fully and ruthlessly, to overthrow such despotism by means other than force.

Marx recognized that the men who were the owners of productive property also enjoyed "individuality", leisure and opportunities for culture and education. (Ibid., page 581). This being so, it is nothing short of fantastic that he brought himself to these illogical conclusions: (1) Destroy private ownership of productive property. (2) Make all men workers. (3) Appropriate all wealth produced in excess of that required to sustain workers, and let it be distributed by the state as its political leaders see fit.

The political commissars, however, who employ Marx's ideas for their own purposes--the exploitation of power and wealth which socialism offers to a ruling bureaucracy--are not so illogical. The destruction of private property in the means of production is their guarantee of self-perpetuation.

There is a Marxian tenet that the nature of a society is determined by the mode of production (whether agricultural or industrial), and the ownership of the means of production. It is sound. The conclusions here are within and consistent with this fundamental insight.

Thus the second great Marxian error caused Marx to seek in socialism what he could have found only in capitalism.



--------------------------------------------------------------------------------
Error No. 3:
Mistaking the Wealth Created by Capital for Wealth Created by Labor and Stolen by the Capitalists.

Each of the three critical mistakes which Marx made in his study of capitalism arose from the fact that he began his analysis with a study of distribution rather than with a study of production. At the distributive end, something less than a tenth of the population, for the most part owners of land and capital, were faring infinitely better--receiving a proportionately greater share--than were the other nine tenths, whose only participation in economic activity was as workers or as recipients of public charity under the poor laws. The pattern of distribution was bad from whatever standpoint it might be judged. Those who were receiving the great share were the capitalists, the owners of the expanding industrial and commercial enterprises.

For Marx, capitalism was simply what he observed in the European world around him, and primarily in Great Britain. Since the distributive pattern was unsatisfactory, capitalists and capitalism, he concluded, must be at fault. Labor had "historically" been the source of all production of wealth, and the workers were now receiving a progressively smaller proportion of the proceeds of production. Down with capitalism!

Had Marx started with an objective analysis of production and a deeper insight into the property-freedom relation, he might well have concluded with a declaration of war against capitalists for hoarding capitalism.

Let us now examine once more the principles of capitalistic production that Marx might and should have used as a starting point. In an exchange economy, and particularly in an economy of freely competitive markets, each service and each commodity is valued for its peculiar ability to satisfy a certain desire of the consumer. Whether the service of commodity is produced by labor alone or by capital alone or by the co-operation of these two, is unimportant to the potential purchaser except as the method of production implants specific characteristics in the thing marketed. It is the finished product which is demanded by the purchaser, not the knowledge that it is produced in one way or another--a mere means by which the product was brought forth. Contrary to what some sentimentalists think, there is nothing sacred about the products of labor that is not equally sacred about the products of capital or those produced jointly by capital and labor.

To effect any change in the nature or position of material goods or to perform any kind of a service, material goods must be acted upon. Marx recognized this; but, because of his obsession with the labor theory of value, he contended that only labor could be credited with the value of material goods produced or services performed. "Useful labor" he said, "is an eternal necessity imposed by Nature without which there can be no material exchanged between man and Nature, and therefore no life." (Ibid. page 50). To effect such changes in matter, or to perform such services, purely physical, i.e., mechanical means, must be used. With rare exceptions, pure thought is not economically compensable. Speech, writings, mechanical action--all these things performed by man, are capable of entering into economic transactions. The thought behind such speech, writings, mechanical action, is not by itself capable of entering into ordinary commerce.

Man as a non-scientific and non-managerial subsistence-laborer is, from the standpoint of economics (aside from his separate nature and position as the consumer), a primitive, low-horsepower engine, relatively clumsy and of brief durability, for the production of economic goods. Man the worker, except in the fields of science and management, has grown steadily less impressive since the onset of the industrial revolution. He can work eight, ten or twelve hours at a stretch and then must rest. His strength and speed of action are quite limited. He is subject to numerous ailments, often adversely affected by climate, temperamental and not infrequently lazy. He makes many mistakes. As a factor in the production of wealth, man is progressively less successful in competing with capital instruments, except, again, as a scientist or as manager.

It is not as a worker that man is master of the earth. It is as the intelligence behind all production and as the consumer--the reason for production and the destiny of the things produced--that he is supreme.

It may well be that confusion between man the worker and man the thinker--the source of all ideas and plans--contributed as much as any cause to Marx's failure to recognize capital as a producer of wealth in the same sense that labor is. Mental activity enters into economic transactions primarily in two ways:

(1) the mental activity of the scientist and manager is responsible for the invention, development, improvement and production of capital instruments, and the supervision of productive activity of both laborers and capital instruments. Scientists and managers are in general the top echelon of labor --the professional level. Their services include entrepreneural activities, in which they provide the initiative in organizing the capital and labor to institute or expand particular business activities. A substantial portion of their services is rendered in improving the productivity of capital instruments, thus promoting the substitution of machines for men and otherwise reducing labor requirements, where to do so will reduce the costs of production and render the businesses in which they are engaged more effifient and competitively better. The steady improvements in capital instruments, systems of production, and organization of productive processes, are the results of the mental activity of the scientists and managers. Their ability to produce in these fields is the secret of their rising productiveness and the increased demand for their services.

(2) Mental activity enters into non-scientific work and non-managerial work in varying degrees. The intelligent direction by the worker of his own activities is incidental to the mechanical work performed by him. Labor is compensated for a particular type of service of a physical nature which could not be rendered in the absence of intelligent direction on the part of the worker himself.

Marx recognized that machines and men are competitors in the sense that scientists and and managers, in carrying out their function to produce goods and services in a competitive market, strive to eliminate labor costs and to improve upon hand methods of production. "The instrument of labour [meaning, of course, machines, the instruments of the capitalist ] when it takes the form of a machine, immediately becomes a competitor of the workman himself." (Ibid. page 470) In speaking of this competition, Marx comes as near as possible to recognizing that capital instruments are active forces in the production of wealth, performing an economic function of the same sort as labor, and frequently performing functions which can interchangeably be performed by either.2

Marx observes that in the case of the handcraft industries, "the workmen are parts of a living mechanism. In the factory we have a lifeless mechanism independent of the workman, who becomes its mere living appendage....By means of its conversion into an automaton, the instrument of labour confronts the labourer, during the labour process, in the shape of capital, of dead labour, which dominates and pumps dry living labour power. The separation of the intellectual powers of production from the manual labour and the conversion of those powers into the might of capital over labour, is, as we have already shown, finally completed by modern industry erected on the foundation of machinery. The special skill of each individual insignificant factory operative vanishes as an infinitesimal quantity before the science, the gigantic physical forces, and the mass of labour that are embodied in the factory mechanism and, together with that mechanism, constitute the power of the 'master'." (Ibid. page 462). It may well have been Marx's failure to recognize that capital instruments in practice supplant not only physical forces, but intelligence, that deterred him from recognizing that capital "works" just as labor works.

Whether Marx could have closed his eyes to the facts of production in the now-dawning age of automation is an interesting speculation. Yet even in Marx's own day it should have been possible for him to recognize that the scientists (engineers) in designing capital instruments build into these instruments the capability of performing operations which, if performed by labor, would require the application of brainwork. His obsession with the labor theory of value rendered him incapable of this insight.

But today, with the development of feed-back, self-correcting and self-programming machines, capable of automatically performing a sequence of logical operations, correcting their own errors as they perform their productive tasks, choosing from built-in instructions or characteristics their proper functions, it is likely that even Marx would have broken through his barrier-obsession that labor does all the work.

Human minds ultimately direct the production of goods and services. This is true of the functions of capital instruments as it is of workers. As a production process uses more and more capital instruments, more of the human mental control of the process of production is shifted away from workers to scientists (and their mechanical progeny) and to management. Thus the private ownership of labor is not, in action, essentially different from the private ownership of capital. Each involves the right of control of an active means of production, the right to take the fruits of such production, to produce where and when the owner desires, and to accept or reject conditions of production. The most significant difference is that the owner of capital instruments is not required to be personally present in the productive process; he produces, or in any event he may produce, vicariously. Mental activity as such is not the basis of the property rights of either labor or capital owners in wealth produced.

What difference would it have made to Marx's theory of capitalistic economics if he had recognized both the power of labor and the power of capital instruments to create wealth? It would have made all possible difference.

If all wealth is created by labor, and if the total wealth created is in excess of that distributed to labor on the basis of the market value of labor, then the excess is "surplus value". This surplus value, according to Marx, is something really stolen from labor by the capitalist. It is elementary that wealth belongs to him who creates it, and if only labor can create wealth and capital instruments cannot create wealth, then the owners of capital have no possible claim to a share in the proceeds of production. The most they could legitimately claim would be to have the value of their original capital, which has been partly or wholly consumed in the productive process, restored to them. In the socialist state, this "surplus value" is something that would belong to society as a whole, to be distributed as the administrators of the state decide.

In short, if labor is the only possible creator of wealth, then capital cannot be a creator of wealth, and there can be no legitimate return to capital other than a return of the original investment. The recognition by Marx of capital as one of the two active actors creating wealth would have exposed the falsity of his own basic theories. More than that, he would have been led inevitably to exactly the opposite conclusions. If labor is entitled to a return in the form of wages for wealth created by labor, then the owners of capital should be entitled to a return for the wealth created by capital.

Strange as it may seem, Marx recognized the technological trend and even acknowledged that it appeared to be the case that the net wealth remaining after payment for raw materials and labor was wealth created by capital. Yet he refused to believe this appearance, and simply asserted again and again that this excess was "surplus value". With regard to the increasing productivity of capital, he noted that "every introduction of improved methods...works almost simultaneously on the new capital and on that already in action. Every advance in chemistry not only multiplies the number of useful materials and useful applications of those already known, thus extending with the growth of capital its sphere of investment.... Like the increased exploitation of natural wealth by the mere increase in the tension of labour power, science and technology give capital a power of expansion independent of the given magnitude of the capital actually functioning." (Ibid. pages 663-664) With respect to the apparent production of wealth by capital instruments, Marx acknowledged that there appeared to be, as Sismondi had said, a "revenue which springs from capital ". But he refused, to the very end, to believe that it was the wealth created by capital--a possibility he saw but never understood or appreciated. To Marx, the wealth created by capital remained "surplus value" to which the owners of capital had no claim--surplus value stolen by the owners of capital from the owners of labor.

 

[mujahideen]

The bottom line for Karl Marx was Capitalism would lead to Communism.