Marxism  and  Capitalism,  the  Inseparable  Two  

   

KIC  Academia                                          

                                     

Heesoo  Park  2011101239  

May  16th,  2013

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Abstract The purpose of this paper is to suggest for the future development model of capitalism by recasting certain aspects of Marxism that are still relevant today. The notion of capitalism and free market has been cherished as the unchallengeable and universal value that lead states to prosperity and economic abundance, yet the inconvenient reality in our contemporary societies suggest otherwise. In this paper, I will revisit Marxism in the wake of the chronic problems inherently present in the capitalist system. Just as Marxists have imprudently forecasted the end of capitalism, capitalism must not hastily conclude Marxism as an obsolete theory unable to capture the realities of our contemporary society. I will firstly state in this paper that Marxism should not be blamed for the rise of the totalitarian states such as the Soviet Union and similarly that the collapse of Soviet Union should not be related to disproving Marxism borrowing ideas from Douglas Kellner ‘The Obsolescence of Marxism?’ Subsequently, I will argue that while certain aspects of Marxism are ‘dead’ and obsolete in our contemporary societies, there are some aspects that are still ‘alive’ and relevant in our capitalist world. The dead aspects of Marxism will include Marx’s normative arguments on the fantasy of super-abundant nature of communist societies and communist societies as teleological and historical direction of human society. The ‘alive’ aspects that are still relevant will include Marx’s micro-economic analysis on the inherent nature of exploitation of capitalist system through labor theory of value and surplus labor theory of value and Marx’s macro-economic analysis on the possible threats to capitalism arising from the contradiction within the capitalist system. This paper will thus have further implications on how Marxism is to be considered in the context of our contemporary world of increasing individuality, liberal democracy and capitalism. I will conclude by stating that Marxism in the twenty first century needs to avoid from teleological, historical, radical view that guarantees the fall of capitalism. Rather more open, tolerant, and flexible view, with full respect for the current democratic processes within the political system, encompassing broader ideas of environment, feminism and other numerous societal issues must be in place. Introduction “Workers of the world unite; you have nothing to lose but your chains!” –Karl Marx Despite the socialist frenzy that engulfed the European society in the 19th century and the rise of the Soviet Union under Marxist ideology, the utopian state that Marx described in his Communist Manifesto was never realized but rather resulted in an infamous Stalinist totalitarian state of Soviet Union. From the fall of the Berlin Wall, followed by the demise of the Soviet Union and the astonishing growth of Chinese society under market economy, it seemed that the world has finally reached the end of history as Francis Fukuyama put it in his writing ‘The End of History and the Last Man’. Yet, with more than two decades passed under the unchallenged notion of capitalism and free market, the hollow dreams of capitalism is starting to uncover bit by bit as the world projects itself deeper into the capitalist system. As capitalism has survived through many crises and has been able to flexibly adapt itself to fit the realities of the current societies, so too will Marxism. This paper will begin by explaining the relationship between orthodox Marxism and Soviet Union then move onto summarize Marxism categorized into philosophical background, micro-economic and macro-economic analysis followed by the criticisms towards Marxist view. It will conclude by rebutting to some of the criticisms towards Marxism and how our contemporary society should deal with Marxism.

1. Marxism and Soviet Union

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Throughout the fierce struggle during the Cold War with the Soviet Union, the endless indoctrination of anti-communist thoughts has rather resulted in distorted view on Marxism. While Marxist thoughts have been basis of Bolshevik Revolution and the Soviet system, it is inappropriate to blame Marxism for the rise of dictatorial and totalitarian Soviet regime. Marxism in many ways has been distorted to fit the realities of the Soviet system and the orthodox Marxism and Marxism practiced by the Soviet Union is fundamentally different.

1-1 Differences between Marx, Lenin, and Stalin To start off, it is important to note that both Lenin and Stalin were different from Marxism and from each other in the way they interpreted Marxism. The orthodox Marxism argues for the genuine people’s democracy and that the liberation of the working class be achieved by the proletariat class itself. For Marx, democracy equated with socialism in that popular sovereignty was voluntarily exercised by the working class itself. Moreover, the state was to run under the dictatorship of the proletariats without any individual or class receiving special privilege and everyone being fundamentally equal. However, in the Leninist model of Soviet Union, power was highly concentrated within the secretive professional vanguard party. The vanguard party composed of small number of professionals and was to lead the revolution then run the state instead of proletariat dictatorship. The Soviet System is well known for its cooptation and divide of special privileges among the leading class in the notion of nomenklatura, which runs opposite to Marxism. Additionally, while the term proletariats encompass the exploited urban industrial workers that are byproducts of intensive development of capitalist system, the Soviet Union was largely agrarian and peasant based society with only a small portion of working class. In other words, intense development of capitalism, which is an essential stage before the rise of socialist revolution was missing in the backward, peasant based Russian society. Also, Lenin expands Marxist analysis on capitalism and associates it with imperialism that was developing and the notion of ‘weakest link’, which Marx never proposed. Socio-economic policies under Lenin such as the ‘Revolution above’ also ran counter to Marxist self-activity of proletariats where communization was achieved not voluntarily by the citizens but rather artificially by the government. Thus it is only fair to argue that orthodox Marxism was fundamentally different from how it was practiced in the Soviet Union. Not only was Marxism different from Leninism but Lenin’s model of a state was also different from Stalinist one-man dictatorial system. Under Lenin, the Soviet system ran with democratic centralism which he allowed democratic process of voting within the party and factions to be formed within the party which sometimes Lenin was outvoted within the party. For Lenin, this type of system was ‘democratic centralism’. On the other hand, Stalin literally eradicated all of his political opponents abusing his authority and creating fear to ensure his dominance in the party. Stalinist model was even a step further away from Marxist dictatorship of the proletariats but more close to the previous dictatorial Czarist regime. Although Stalinist system is criticized and shows a sense of positive change more towards communism described by Marx during Khrushchev era, the subsequent leaders were unable to continue on the genuine notion of socialist state until the entire system collapsed during Gorbachev.

1-2 Philosophical Backgrounds of Soviet System After dislocating Marx as the intellectual and philosophical background of Soviet system, the next question that follows then is ‘who then gave philosophical and ideological backgrounds for the Soviet totalitarian system?’ As mentioned previously it is rather Jean Jacque Rousseau the father of modern totalitarian democracy and the right Hegelians. Rousseau at the first glance sounds highly democratic in his writings of ‘Social Contract and Discourses’. He recognizes the citizens as the only source of sovereign power and political right which is then delegated to the government by everybody equally agreeing to give up some of their rights. He writes, “each of us puts his person and all his power in

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common under the supreme direction of the general will, and in our capacity, we receive each member as indivisible part of the whole” (Rousseau, pg. 122). However, his writings become extremely dangerous when Rousseau includes certain dangerous notions such as individuals being forced to be free, censorship and a unitary civil religion to which all must subscribe. His efforts to create order in society based on citizen support, hence the term ‘indivisibility of sovereign power’, ironically become a source of oppression. Moreover, the Right Hegelians have argued similarly for the submission of individuals to the state, the incarnation of reason and freedom, and that democracy would only produce chaos unless a ‘strong government sanctioned by religion could preserve order and stability’ (Kellner pg.11). This was opposite to Marx and the Left Hegelians who called for democracy and criticizing authoritative states. Consequently, seeing how Marxism was differently interpreted and implemented by Lenin and Stalin away from orthodox Marxism, along with the fact that Rousseau and the Right Hegelians rather have the ideological backgrounds for authoritative states, it can be argued that Marxism should not be blamed for the totalitarian states. Similarly, it also presents the idea that the collapse of Soviet Union cannot be associated with the end of Marxism.

2. Philosophical Backgrounds of Marxism Although Marx may have been at apart with Right Hegelians in the discussion on the role of the state, Marx’s historical materialism is fundamentally based on Hegel’s dialectical process of history. Hegel’s idea of dialectical process was that societies are always in the state of perpetual change because every society contains within itself conflicting elements, which destabilizes the system thus breaking down the old-system to create the new system with the old conflicts being dissolved. However, at the same time, the new system would also in itself contain new conflicting elements, which the process would continue on in cycles throughout history. This is captured in the relationship between the thesis, anti-thesis, and the synthesis, which would also serve to be the new thesis. (see the above picture) One important thing to note here is that this development of history and human societies had a specific linear direction that it developed into. It was not an accidental movement that resulted in random systems with random conflicting problems but a movement in a specific direction towards a specific goal. This goal for Hegel was the greater development towards consciousness of human freedom and freedom from alienation, the process of increasing knowledge of ourselves. For Hegel, it was the ‘Geist’ that was changing throughout society, translated closest in English as the word mind, which was the ultimate reality of our world. In other words, Hegel saw the total reality as being a process of change, which was moving in a dialectical change in which in the ultimate point, the mind (Geist) would realize itself as the ultimate reality. The notion of dialectical process of change and alienation of humans are also the basic foundations of Marxism. What is different in Marxism is that Marx saw economic base of our society in replacement of Geist in Hegel’s dialectical process and the direction of this dialectical change to move towards communism, the ultimate end to alienation and achievement of genuine freedom of the proletariats. Marx analysis on communism was a teleological and historical one, stating that capitalist systems are fundamentally bound to destroy and socialism and communism to arise. History has moved from feudal society (the thesis), to bourgeois society (anti-thesis) and finally towards a communist society (the synthesis), the ultimate end-point of history since at the communist stage. Marx’s philosophical analysis also include the economic base (relations of production) as the basis of all human society and all other elements such as culture, political systems, institutions and so on as the superstructure, which are built as a cause of the economic base,

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the one-way causal relationship. As societies progress and the difference between the changing economic base and the superstructure becomes different, the system will collapse and produce a new system following the dialectical change notion. In regards to alienation, Marx also borrowed this idea to interpret it into his thoughts. Alienation in capitalism was caused by division of labor becoming more and more complex. As alienation for Hegel means an individual getting further away from realizing the reality of whom he is and thus feeling alienated in the context of spirit and the mind, alienation for Marx meant more division of labor, which workers were now getting further away from liberation. As an individual worker’s job becomes more specified, it was more likely that what workers produced cannot be consumed by that worker thus the worker being more alienated from what he is doing. This notion of alienation from division of labor were at direct opposites with capitalism since as Adam Smith argued, division of labor was crucial for increasing productivity, an essential criteria for capitalism.

3. Marxist Economic Analysis of Capital The core values of Marxist thoughts lie in his distinguished and complex analysis of capital. There is a controversy as to whether Marx analysis on finding the ‘value’ of a good is scientific or ideological, that is aside the purpose of this paper. Just as modern neoclassical economics is one way of viewing and analyzing the phenomena of our world, and ‘scientific approach’ itself is also another way to view our world, so too is Marxism whether it is scientific or not. Marxism and his analysis on capital has a value in itself in that it provides an alternative view of capital different from classic liberalists such as Adam Smith. Marx’s economic analysis on capital can be divided into two categories of micro-economic and macro-economic theories. In micro-economic view of classic liberalists where individuals would operate in ‘Pareto principle’ and the workings of each transactions, leading to the invisible hand where individuals by acting out of self-interest will in a bigger picture bring harmony and most efficient outcome. Marx departs in that this invisible hand while it exists, is not a benevolent invisible hand that leads to maximization of efficiency. Rather it moves so that each workers self-voluntarily choose to get exploited under the capitalist system. However, one thing that must be reminded in understanding Marxist analysis on capital is that his analysis always operates in a perfectly competitive capitalist market. This section of the paper will introduce Marx’s micro-economic and macro-economic theory of capitalism.

3-1. Marxist Micro-Economic Analysis Marx’s micro-economic analysis starts from the ‘Labor Theory of Value’. During

back then, all of the classical political economists believed that there was a n inherent value in goods produced aside from the price set by the supply and demand. Prices fluctuated around a certain point accordingly to supply and demand and all of the classic political economists such as Adam Smith, Ricardo, and Marx believed that there was a value in which the prices will fluctuate around. For Marx, this value came from labor through his ‘Labor Theory of Value’. Before discussing the labor theory of value, it is important to understand the ‘Theory of Value’. It states that all the value of a commodity is proportionate to the average of human labor time spent and necessary (socially necessary labor time) to produce that certain good in a perfectly competitive market. One important thing to note here is that the theory of value is based on the average ‘socially necessary labor time’. For instance, even if one person takes ten hours to produce a single camera while the rest of the society can make it at five hours, the camera that took ten hours to produce it would not worth more than the camera that took five hours to produce it because what is measured is the socially necessary labor time which is five hours. In the competitive market which Marx basis his analysis, the additional five hours put into the production of the camera was ‘unnecessary social labor’. In the same context, wage is equivalent to any other type of commodity in that the wage is also

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proportionate to how much labor time was put into producing that specific worker. A person’s wage is determined by the amount of labor time spent in it to make that worker. This is the ‘Labor Theory of Value’. Marx goes a step further in explaining not just labor theory of value but also labor theory of surplus value. He asserts that living human labor power is a unique commodity in that its consumption creates a surplus and a fresh value. For instance, if a man spent his money in buying food, it would simply be consumed and be gone. However, if a person hired a worker to paint a house, it would create fresh value by increasing the price of the house with the paintings, a value that was freshly created. Marx calls this cost associated with human labor variable capital and cost related to anything other than human capital as the constant capital. The human labor capital is called the variable cost because wages change but always it is always driven to the subsistence level. In a capitalist system, it is impossible to ensure a full employment, thus if there are efforts to increase the wage of a worker, they would simply be replaced by another worker willing to work at a cheaper price, thus driving the wage back to the subsistence level. Now that important concepts have been discussed, this paper will now explore on how the exploitation is occurring in capitalist system accordingly to Marx borrowing from lectures at Yale University.

Suppose that individuals are to work for ten hours and in the first four hours of his work, he produces enough products to cover for the wage of the worker. However, in capitalist system, the worker would have to work for ten hours to produce not only enough to cover the wage bill of the worker himself but to produce profit for the capitalist. The remaining six hours become the surplus labor time which most of it are the profit of the capitalist that hired the worker. This situation is precisely captured in diagram A. In this case what is necessary labor time is four while there are six hours of surplus labor. Thus in the diagram A, the rate of exploitation calculated by surplus labor time over necessary labor time is 1.5. However, in a capitalist system, the capitalists have two options of increasing profit. The first is to increase the amount of labor time that worker has to work for from ten to eleven as shown in case B. The worker will work for more hours so that there are more profits for the capitalist. In this case the rate of exploitation would increase to 1.75. The second option is to use improvement of technology and increase the productivity of a single worker while maintaining the ten-hour working day as was previously assumed at ten. The improved technology will improve the productivity of the worker, thus allowing him to shorten his necessary labor time to cover his wage to three hours and surplus labor time of seven. This case is captured in diagram C, where the rate of exploitation would be at maximum of 2.33.

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The interesting part in this micro-economic analysis is that while exploitation rate is the maximized in the diagram C, workers will still choose the second option of working for ten hours with improved technology because in the first option, the worker would have to work for eleven hours. In a capitalist society, individuals voluntarily choose to work at a higher rate of exploitation. The reason for this is that workers compare the case in diagram B and diagram C and choose the second model of technological improvement since their working time has been reduced. It is whether they are better off now than back then, rather than seeing if they are less exploited or not. This very nature of capitalism calls for the very dynamic improvement of technology which always increases productivity in search of more profit which also leads in more higher exploitation that workers voluntarily agrees to work at. This is the micro-level analysis of capitalism in Marx’s view.

3.2 Marxist Macro-Economic Analysis Marx’s micro-economic analysis on capitalism now leads to the macro-economic analysis of capitalism and showing how there is an invisible hand also in Marxist analysis but not necessarily a benevolent one helping capitalism and society to harmoniously function but to fail. Marx states that there are five types of macro-economic crisis that capitalism will face. The first is the crisis related to liquidity. This particular analysis does not necessarily relate to the micro-economic level of analysis but it is still stated that there would be problem of liquidity crisis as market develops and money is used as a means of transaction. In times of economic crisis due to any reasons, anxiety and fear will create people to save money in their pockets which can result in liquidity crisis where banks will not have enough money to function. This will create many problems in a capitalist market where banks play an essential role for financing. The second crisis to occur was declining tendency in the rate of profit. As industries become more and more capital intensive the amount of profit that the capitalist can make will decrease mainly from the intensive capital that is needed for the technological innovation. While innovation of technology would temporarily increase the rate of profit in comparison to others, technology would soon be developed by other companies too, and it will raise the cost of capital needed for further innovation of technology. As this develops into a deeper level, less capital is spent for human labor, which is the only source of fresh value, thus decreasing the rate of profit. Machines only transfer their value to what it produces but never creates a new fresh value. The third crisis is followed in a similar notion that intensive capital industries require a very high entry-cost and this produces a monopolistic industry. Since more capital is necessary for technological innovation and improvement of technology, entry cost for that specific industry gets higher thus creating a difficult environment for new actor to enter in also leading to monopolistic industries. As industries become monopolistic, dynamic innovative characteristics of capitalism is lost thus leading to the third type of crisis where capitalism becomes extremely static. The fourth crisis is related to under-consumption. As industries mechanize in order to raise productivity, more and more human labor becomes unnecessary. This leads to replacement of workers by machine in which workers will not have money to spend for consumption thus leading to under-consumption. While the industry is amplified in productivity levels and more products are produced, there is no one that is able to buy the abundant goods because the workers do not have enough money to buy. The last but not least is the combination of all these crises and chronic problems of capitalism accumulate which at a certain stage the consciousness level of workers in the working class decide for a socialist revolution to overthrow the entire capitalist system. This will be followed by the socialist society and in the ultimate point, communist societies will arise where there will be superabundance of goods. So-called the ideal state will arise that is not in need of a government, free of distributive issue of resource. ‘From each according to his ability to each according to needs’, and ‘to hunt in the morning, fish in the afternoon, rear

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cattle in the evening, criticize after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic’.

4. Criticisms for Marxist view

While there are criticisms for both the micro-level of analysis and macro-level of analysis, this paper will mainly be focused on the micro-economic criticisms of Marxist analysis, firstly because it is the most fundamental and essential aspects of Marxist analysis and what is still relevant in contemporary society. Secondly because vast part of criticisms on Marxist macro-economic view are largely correct and most it are irrelevant to our contemporary society, the ‘dead’ aspects of Marxism.

4.1 Criticisms on Macro-economic Analysis Criticisms toward macro-economic view are largely accurate in the context of contemporary society. Criticisms point to the fact that Marx undermined the role of the states to regulate and serve as a mediator whenever crises occur. For instance in regards to liquidity crises, monopoly problems and under-consumption states can intervene in markets to counter the economic shocks happening at the time. In the case of liquidity crisis as a result of global financial crisis of 2008 and under-consumption, G20 countries worldwide got together to promise for stimulus package and in the case of monopolies, governments intervene for regulation. In answering to decreasing rate of profit, the critics argue that there are always new industries, which can be discovered and, if the productivity rises at a faster rate than human labor being displaced by machines, then there is no need to worry for the fall of capitalism. In the case of increased entrance cost, our contemporary society has changed where it is innovation and idea that is the most important which one can always start from a small company. Most importantly transition to socialism also has a defect in its own way. Even if individuals receive according to their ability, there still is inequality. While individuals may be entitled to what they deserve, the inherent physical differences of workers to work prove that there inherently is inequality in socialist states. Thus one can only be free of such problems only if the notion of entitlement and rights are eradicated as in the communist society. However, even in the case of communist societies, the utopia of superabundance is not likely to rise. For instance, as seen in the phrase ‘from each according to his ability to each according to his needs’, one can see that the term ‘needs’ is a very subjective term. The only fair way to define the word ‘needs’ is the materials fundamentally necessary for survival, since otherwise it becomes a subjective view, which then cannot be defined or theorized. Then, one can see the picture of superabundant society now only granting each person’s needs, which is the basic level of materials for survival. This is the very contradictory reality of communism and socialism.

4.2 Criticisms for Micro-economic Analysis The most fundamental and the core elements of Marxism is Marx’s micro-economic level of analysis on capitalism. Even if the macro theories are to be disproved, unless the micro-economic theories are relevant, one cannot undermine Marxism because the contradictions and exploitation in capitalism will always be present. The first criticism towards Marx’s micro-economic analysis is whether the value of a good only comes from the worker himself. There are many factors that are missing to represent the value of good other than the worker. From the capitalists that are part of managing the process of hiring the worker and running the company, to wives of the workers at home making him dinner and his mother that raised the worker from childhood and so on. Critics argue that labor theory of value cannot be analyzed scientifically but is rather an ideology based on beliefs.

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The second criticism is associated with viewing Marxist micro-level analysis as having a moral judgment in stating that it is only the workers that are being exploited. For instance, the labor theory of value allows for any other commodity to be chosen instead of labor, which would produce the exact same rate of exploitation and exact same results. For instance, if substituting corn or animals instead of a worker and his labor, we can always find the capitalist exploitation of corn or the exploitation of an animal. However, the reason as to why we do not call the latter example exploitation is because there is an inherent moral judgment involved. Critics argue that in Marxist labor theory of value and surplus theory of labor value, there is a moral judgment that goods belong to the workers and are entitled to the workers. Not only is this unscientific but a very subjective moral judgment on viewing that the good belongs to the worker. Even behind the labor of the worker himself, there are huge web of inter-related factors that make it impossible for the worker to be entitled for the good itself.

5. In Defense of Marxism and Its Future The objective analysis on Marxism throughout this paper exposed many aspects of orthodox Marxist view that proved to be untrue and proved to be true. It definitely is not a perfect, master theory without its flaws, but rather a theory, which parts of it are true and parts of it are not. Especially in regards to the criticisms toward the micro-economic analysis of capital, one can only admit that there is a moral judgment involved in claiming the worker to be fully entitled to the products of their work. However, at the same time, these criticisms are not enough to fundamentally disprove Marxism in that the view on labor theory of value and exploitation is a matter of ideological difference and how each individuals view the system. Thus at the same time, Marxism may be right and may be wrong. While it is true that substitution of any other commodity in place of a worker will give out the same formula and the same rate of exploitation, it is also fair for one to think in terms of human-centric view that what is the most important is humans over corn or any other commodities. Once again, evaluation of this analysis requires value judgments on who is entitled to what, which cannot objectively be judged. Moreover, there also is a problem of whether we must always view phenomena around as in a scientific and a rational way. Similarly, scientific and economic analysis is also a certain paradigm for viewing the world around us. The observations made in this paper imply several directions for the reconstruction of Marxism. Marxism must avoid unavoidable and teleological view of history, forecasting the fall of capitalism to be absolute and communism to be supreme over other types of systems as Marx argued in the nineteenth century. Rather, Marxists have to be more an open and flexible system that will be able to gradually adapt itself to the current capitalist system under democratic processes with full respect for rule of law. Marxism needs to encompass greater variety of agendas that cannot be much highlighted within the frame of capitalism such as values on environmental right and females. Conclusion In this paper, many aspects of Marxism have been discussed; the relationship between Soviet Union and Marxism, philosophical grounds of Marxism, economic analysis of Marxism and its criticism and finally the future paths for Marxism. As argued previously, one must not hastily undermine the end of Marxism as Marxists have imprudently forecasted the collapse of capitalism. It is only evident that society is endlessly moving in the dialectical process as Hegel and Marx suggested and so long as we are living in the capitalist world, Marxism will always be relevant. It is yet, too early to proclaim for the end of history.

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Bibliography Whither Marxism?, edited and with an introduction by Bernd Magnus and Stephen Cullenberg, Routledge, 1995 The Opium of the Intellectuals, Raymond Aron translated by Terence Kilmartin, The Norton Library, 1957, 1962 Main Currents in Sociological Thought I, Raymond Aron translated by Richard Howard and Helen Weaver, Anchor Books Doubleday & Company, Inc. 1967 The Moral Foundations of Politics, Yale Open Course, Political Science,