Saturday, December 27, 2008

Marxism wasn't all wrong but when they were....

The Marxists were right --- sort of. Actually it would be remarkable if they were consistently wrong. But Marxism is not consistently wrong. But, often when it is wrong, it is wrong in astoundingly gigantic ways. The clearest example of that is Marx’s labor theory of value. I don’t blame Marx too much for that error, after all he borrowed it from Adam Smith and David Ricardo.

And Smith probably got the idea from John Calvin’s theology on work. However, unlike Marx, Calvin was consistently wrong holding almost a perfect record of monstrously erroneous views.

But the Marxists did get a few things right. Marxists often discuss a situation where a powerful elite exploit the masses for the benefit of the elite. Marx saw a combination of feudal lords using state power to exploit the masses. And that was correct.

Anyone investigating the world of that time would see that there existed an aristocracy which took the wealth produced by the peasant classes for their own benefit. In these cases the productive effort of the masses was truly expropriated via the coercive apparatus of the state.

Marxism went wrong when it assumed that the same held true for any wealthy “aristocracy” including those who became wealthy by voluntary exchange. Marx missed the key difference between the two systems. The feudal lords amassed wealth through involuntary confiscation of the work of others. The entrepreneur, however, combined the various factors of production: labour, capital, resources into a product that had greater value than the individual value of the factors of production.

His value was not derived from exploiting labor by refusing to pay them the full value of their labor. In fact, his profit was derived by creating new value using existing resources and labor. He added to the economic pie, he didn’t take pieces from it. More importantly, as the Marxists entirely missed, this system of production drove up the value of labor. Labor became more and more valuable. Eventually it reached the point where the workers were considered “middle class” and living in relative comfort compared to previous generations.

But, while Marxists have been wrong about the labor theory of value and the economic process of free exchange, their basic description of the exploitation process is not that far off the facts. There always have been a class of exploiters who use state power to confiscate the wealth that others produce.

And, contrary to what the Right says, but consistent with what Marx has said, that class is a wealthy, powerful, politically-connected elite. And they continue to work pretty much the same way the feudal aristocracy worked. They use state power to strip the working many of their wealth in order to benefit themselves.

But this is not inherent in the market system. A depoliticized market is not one where this sort of wholesale plunder can take place. The method by which this exploitation is engineered is through the use of political power. The state intentionally distorts the market through various interventions. These interventions then channel wealth from the masses to the favored few.

We have seen numerous examples of this. For instance, the political elite, including Obama, have actively worked to legislate wealth away from the poor to the wealthy corporate elite who produce ethanol. Worse yet, this results in driving up food prices world-wide and condemning the world’s poor to hunger. I can’t think of another area where state intervention has been so detrimental to so many, outside the armaments industry.

There should be no surprise that a class of individuals would enrich themselves by imposing hunger on others. It has happened before.

Marx saw the businessmen as another version of the aristocracy. And he wasn’t all wrong about that. There are two kinds of businesses. There are those who produce value and voluntarily exchange it with others and there are those who use political pull in order to redistribute wealth in their favor. The aristocrats of the feudal era were what Archer Daniel Midland is today.

Consider the era of the Corn Laws in England. These laws were passed in 1813 and basically put heavy tariffs on imported grains. This, of course, drove up grain prices in England. And most grain was produced on the estates owned by the aristocracy. These individuals had political power and they used that power to drive up food prices in order to line their own pockets with extra profits.

But there arose another group of men who were businessmen but who operated without political favoritism. These merchants and industrialists thought that this protectionism was harmful to everyone but especially to the poor. They demanded the repeal of the Corn Laws. The socialists of the time, unable in theory to distinguish between these groups, sided with the aristocrats and argued that the merchants wanted to lower grain prices so they could pay their workers less. (It should be noted that when repeal came about these merchants did not push down wages, but as labor became more productive, labor earned vastly more, not less.)

The classical liberals of the day, men like Richard Cobden and John Bright, fought hard to repeal the Corn Laws. Of course the aristocracy fought back. The Duke of Richmond founded the Central Agricultural Protection Society in order to defend the politicization of food markets. And, as already noted, the socialists of the day ended up siding with the aristocrats.

Conservatives like Benjamin Disreali said repeal of the laws would destroy the “traditional landowners” and they were right. But classical liberalism is not conservatism.

While the Marxists dream of a working class movement, the reality is that the first successful such movement was the coalition of merchants like Cobden with the workers of England. The socialists, arguing that they were thinking of the workers, while siding with the aristocrats, were unable to attract England’s workers to their side. The working classes instead were strong supporters of the Anti-Corn Law League. They knew they were paying too much for food and knew that repeal would improve their lot.

Out of the movement to repeal the Corn Laws the Liberal Party was formed. Socialists realized that liberalism had captured the imagination of the workers and was a political force. So they decided to capture the Liberal Party for their own use. Where the liberal and the socialists disagreed was that the socialists believed that the use of state power could be used to achieve liberal goals. The liberals believed that the use of state power was inherently conservative in nature and would entrench the status quo--not change it.

Eventually the socialists took over and a series of compromises by the liberals of the day lead to the death of classical liberalism. Socialists now “owned” the term. But the liberalism they created was truly conservative in nature. An interested account of this is found in Oliver Brett’s 1921 book In Defense of Liberalism. The New York Times ran a review of the book in 1921 which captured Brett’s thesis: The Socialist as a Conservative. If you wish to read this review, which I recommend, you can get a pdf version here.

In the United States a similar perversion of liberalism took place as the Progressive gradually took over the term. It was during the Progressive Era that American liberalism was weakened by the socialist rot. And, once again, the socialists ended up in bed with the very aristocrats who were redistributing wealth to themselves. The Left historian Gabriel Kolko argued that the Progressive Era was not a time when government came to dominate business but when the business elite came to dominate government.

He documents how the corporate elite, facing declining profits and declining market share, used the Progressive movement to politicize the marketplace. Once the markets were politicized it was easy for these rich and powerful men to manipulate the political process in order to enrich themselves. And they couldn’t have done it without the help of the Progressive Left.

What the Marxists missed all along is that the problem of exploitation is a problem of political power. Be it the feudal lords of the past, the English aristocracy and the corn laws, or the Robber Barons and the regulations of the Progressive Era, the common thread was not that an elite existed but that political power was concentrated where they could get at it. In each case they used the state to transfer wealth to themselves, and in each case, the socialists, because of their economic fallacies, have been their accomplices.

Of course, the same thing is going to happen in spades with the bailout and “works” projects of Obama. The corporate elite have lined up for the biggest transfer of wealth from workers to the elite in the history of the world. And the Progressives ike Obama are, once again, their willing accomplices. The flaw in Progressive thought is not in their goals, for the most part. The fatal flaw of Progressivism is its worship of the omnipotent state coupled with an almost total lack of understanding economics. As long as Progressives continue to believe that statism is the answer to every problem faced by humanity they will repeatedly be used by the corporate elites. Progressives today have become the perfect anti-Robin Hoods. They use state power to take from the poor and give to the rich. They don’t mean to do this but their policies inevitably lead in that direction.

They do so because they support expanded state power. And, the political process is such that it will always be the rich and powerful who have access to the regulatory system, not the poor and powerless. Thus power created to help the poor ends up being held by the rich and used for their benefit. As long as Progressives believe state power is the answer they will continually be responsible for measures which plunder the very people they want to help.

Labels: , ,