As you open my new textbook, Marxian Economics: An Introduction, you may be wondering, why should I study Marxian economics?
In the United States and in many other countries, Marxian theory, including Marxian economics, is a controversial topic. That’s certainly been true for the past few decades, when the topic was all but taboo. But beginning with the crash of 2007-08—the Great Recession or what some have called the Second Great Depression—the climate has dramatically changed. More and more people, especially young people, have become interested both in Marxian criticisms of mainstream economics and in possible alternatives to capitalism.
Here’s Nouriel Roubini, professor of economics at New York University’s Stern School of Business and the chairperson of Roubini Global Economics, an economic consultancy firm: “So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct.”
And then, from the other side of the Atlantic, there’s George Magnus, Senior Economic Adviser to the UBS Investment Bank: “Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.”
Many of us were surprised, even those of us who have spent decades studying and teaching Marxian economics. I did so at the University of Notre Dame for almost 4 decades.
Living and working in the United States, we had just been through a 30-year period in which Marx and Marxian ideas had been attacked and marginalized, in the discipline of economics and in the wider society. Marx was declared either dangerous or irrelevant (or, often, both).
Capitalism was humming along (with, of course, the usual ups and downs) until. . .the Crash of 2008, when the world economy was brought to the brink of collapse. And Marx, almost in the blink of an eye, was relevant again.
To be honest, it wasn’t that Marxists could take all, or even much of, the credit (or, for that matter, blame). It was actually the spectacular failure of mainstream economics that led to this dramatic change.
Mainstream economists were caught completely unawares. For all their claims to hard science and accurate forecasting, they failed to predict the crash.
Even more, they didn’t even consider a crash even a remote possibility. The chance of a crisis starting with the housing and banking sectors didn’t even exist in their theoretical framework.
And, once the crash happened, mainstream economists didn’t really have much to offer. The policies that stemmed from their models suggested letting the banks sort out the problems on their own, without any kind of government supervision or intervention. Until, of course, the panic that set in with the failure of Lehman Brothers, which brought first the American economy and then the world economy to the brink of collapse.
The kinds of problems building up for decades simply didn’t figure prominently in mainstream economic models and empirical analyses. They paid scant attention to the kinds of problems many others were increasingly worried about, such as:
- the deregulation of banks and the spectacular growth of the financial sector within the U.S. and world economies
- the housing bubble that was supported by subprime bank loans, and then sliced and diced into collateralized debt obligations and other financial derivatives
- the outsourcing of jobs and the decline of labor unions, which if they paid attention at all were seen as freeing up national and global markets
The result of these and other changes in the U.S. economy created, for the first time in American history, a growing gap between productivity and workers’ wages. According to the data illustrated in Figure 1.1, productivity and wages grew at roughly the same rate during the immediate post-World War II period. But, from the late 1970s onward, that changed: while productivity continued to grow (increasing by more than 70 percent), wages increased by much less (only 17.2 percent).
Figure 1.1 Productivity and hourly compensation growth, 1948-2019
The other result was an increasingly unequal distribution of income, reminiscent of the period just before the first Great Depression, when (as can be seen in Figure 1.2) the share of income captured by the richest 10 percent of Americans (the dotted line) approached 50 percent of total income, and that of the bottom half of the population (the dashed line) hovered in the low teens.
Figure 1.2 Income inequality in the United States
Mainstream economists—both neoclassical and Keynesian economists, microeconomists as well as macroeconomists—either ignored these issues or explained them away as the necessary conditions for and outcomes of economic growth under capitalism.
The financial sector needed no oversight or regulation, because of the idea of efficient markets, which meant that participants had all the relevant information, and the risks faced by bankers and investors were already contained in market prices and interest rates. As for inequality, it was either catalyst for growth or, if seen as a problem, it was the inevitable result of technology and globalization, which could be handled by encouraging workers to acquire better skills and more education to compete in the labor market. Moreover, both economic history and the history of economic thought—the history of capitalism and the history of thinking about capitalism—had disappeared as relevant areas of training for mainstream economists. As a result, not only had they never read any Marx; they’d never read Adam Smith, John Maynard Keynes, or Hyman Minsky.
Then things changed, especially as the problems cited above never really disappeared, even as stock markets entered another boom period. Marxian criticisms of both mainstream economic theory and capitalism became appropriate topics of discussion and debate again.
While references to Marxian economics have increased in recent years, there is no indication commentators have actually read the works of Karl Marx. Perhaps they remember reading the Communist Manifesto at some point in their education but not Marx’s magnum opus Capital. And they certainly have not read the scholarly work on Marxian theory. Perhaps they were afraid to or didn’t know how to, or were just too caught up in their own theories and models. But the fact remains the time is ripe for a new reading of Marx’s Capital.
If they did such a reading, what would they find?
They would encounter something quite different from what they—and perhaps you, reading my book—expect. For example, they would not discover a set of predictions about when or how the crises of capitalism would inevitably occur. Nor would they find a blueprint for socialism or communism. In fact, many of the ideas that are regularly attributed to Marx or considered as defining characteristics of Marxian economics simply aren’t there.
What readers would find is a critique of political economy, in two senses: a critique of mainstream economic theory; and a critique of capitalism, the economic system celebrated by mainstream economists. That’s what Marx came up with after spending all those hours reading the classical political economists and the factory reports in the British Museum. In fact, Christopher Hitchens relates the story of a retiree who had worked in the British Museum’s reading room during the Victorian period:
Asked if he could remember a certain Karl Marx, the wheezing old pensioner at first came up empty. But when primed with different prompts about the once-diligent attendee (monopolizing the same seat number, always there between opening and closing time, heavily bearded, suffering from carbuncles, tending to lunch in the Museum Tavern, very much interested in works on political economy), he let the fount of memory be unsealed. ‘Oh Mr. Marx, yes, to be sure. Gave us a lot of work ’e did, with all ’is calls for books and papers’.”
The critiques Marx developed during the course of working his way through all those books and papers are what generations of Marxian economists have been discussing, debating, and further developing ever since, as the content of my book reveals.
It is now available with a 30% off discount using the code PME30 at Polity Books: https://www.politybooks.com/.
Chapter 1, Marxian Economics Today
A Tale of Two Capitalisms
Beyond the Mainstream
Criticisms of Capitalism
Why Study Marxian Economics?
Marxian Economics Today
Is Marxian Economics Still Relevant?
Before We Dive In
Chapter 2, Marxian Versus Mainstream Economics
Economic Theories and Systems
Mainstream Economics Today
Limits of Mainstream Economics Today
Classical Political Economy
Marx’s Critique of Mainstream Economics
Chapter 3, Origins of the Marxian Critique of Political Economy
For a Ruthless Criticism of Everything Existing
Toward Marx’s Critique of Political Economy
Chapter 4, Commodities and Money
The Wealth of Nations
Exchange-value and Value
Concrete and Abstract Labor
Use-Value and Exchange-Value
Language of Commodities
Sale and Purchase
Contradictions in Monetary Exchange
Problems in Commodity Exchange
Chapter 5, Surplus-Value and Exploitation
Credit and Debt
Money as Capital
Labor and Labor Power
Value of Capitalist Commodities
Subsumption of Labor
Exploitation and Real Wages
Appendix 5a, Notes on Absolute and Relative Surplus-Value
Appendix 5b, Real Wages and Exploitation
Chapter 6, Profits, Wages, and Distributions of Surplus-Value
Distribution of Income
Accumulation of Capital
Productive and Unproductive Labor
Struggles over Distributions of Surplus-Value
Concentration and Centralization
Production of Commodities by Means of Capital
Chapter 7, Applications of Marxian Economics
Class Consciousness and Class Struggle
Chapter 8, Debates in and around Marxian Economics
Labor Theory of Value
Monopolistic Finance Capital and Imperialism
Socialism in Russia
Imperialism and Underdevelopment
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