Monday, November 20, 2017

Marx on the dictatorship of the Proletariat -

     Karl Marx wrote very little on what was to occur after the success of the Proletarian revolution.  One thing is clear:  the revolution was expected to occur in a fully developed capitalist country with a high standard of living.  The state was to be taken-over by the proletariat (or the Party acting as the vanguard of the proletariat).  The capitalist class would be expropriated; all industry would  become state-owned and state-operated (exactly how is not specified).  People would begin new forms of communal activity (exactly what kinds are not specified). Social distinctions between people would disappear. People would merge into one class.  Since the state was only an agency of one class to control another class, there would be nothing left for it to do.  The state would wither away!  Marx called this period the “dictatorship of the proletariat”.  To many Western Marxist scholars, Marx was using the word “dictatorship” rhetorically.  To them, he meant that since the capitalists had dominated the workers through the institutions of parliamentary democracy, the workers would now come to dominate these institutions. On the other hand, Marx’s use of the word “dictatorship” has been used to justify the totalitarian dictatorships that existed in “communist” countries.  (Most Americans are unaware of the vitriolic disputes that took place between American Marxists over the issue of democracy vs. dictatorship – especially over the brutal policies of Stalin in the former Soviet Union.)    

     After the transition is complete, there would be only one class --- the proletariat.  They would own all natural resources and all capital goods in common.  Since there would be no more need for imperialist wars, all feelings of nationalism would disappear.  Production would have increased to the point that people could have all of the goods they wanted (all goods would be like air is – everyone can breathe as much as they want without taking anything away from anyone else).  Alienation would be eliminated with the end of capitalism; people would produce because it brought joy and purpose to their lives.  This is the period of communism, in which each person would “produce according to his abilities and take according to his needs”. To Marx, this was the final stage of history – a stage that was certain to be reached at some time.  In that stage, there would be a new consciousness.  People would cease to be materialistic and individualistic and would become primarily concerned with the well- being of society as a whole.

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Marx on the Proletarian Revolution

      Karl Marx did not believe that change could come without revolution.  This was one of the points of considerable dispute amongst Marxists.  Those Marxists who followed Lenin believed that the revolution had to be violent and complete, with the power of the capitalist class destroyed.  Capitalism would create the conditions for the revolution (the “seeds of its own destruction”).  It would make workers increasingly miserable.  It would bring large numbers of these unhappy, alienated workers under one roof.  It would make the working classes larger and larger, while the capitalist class became smaller and smaller.  It would generate continual wars that would only benefit the capitalists. However, the revolution would not happen all by itself.  Mobilizing the workers and instilling revolutionary consciousness in them was the function of the Communist Party – the vanguard of the proletariat!

                         “The communists … openly declare that their ends can be
                         attained by the forcible overthrow of all existing social
                         conditions. Let the ruling classes tremble at a communistic
                         revolution.  The proletarians have nothing to lose but their
                         chains.  They have a world to win.  Workers of the world,
                         unite.”     From the Communist Manifesto

     It should be noted that there have been no proletarian revolutions in history.  The revolutions in the Soviet Union and China were undertaken primarily by peasants and resulted from the chaos in each country following a world war.  Most of the other “communist countries” became communist due to the force of the Soviet army after World War II.  

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Marx on Imperialism

     While Karl Marx wrote a bit on imperialism, it was Lenin who contributed most to this argument.  In this interpretation, capitalists would respond to the falling rate of profit by domination over foreign countries. These foreign countries would provide them cheap labor (to maintain the reserve army) and cheap raw materials. The foreign countries would also provide markets to offset the problem of inadequate consumer spending in the home country (caused by the low wages).  It is true that until the end of World War II, much of the Third World was divided into formal colonies of the capitalist countries.  To Marxists, the domination by the capitalists is the major reason why these former colonies are still poor.  We will consider the influence of these Marxist ideas when we consider China and Mexico later in the course. 

     Since there were many capitalist countries, Marxists believed that there would be conflict as to which country’s capitalists would dominate a specific foreign country.  This would lead to imperialist wars.  For example, Marxists saw the war between the United States and Japan (World War II) as an imperialist war to determine which country’s capitalists would have domination over the countries of the Pacific!  Marxists also saw World War I as an imperialist war; many Marxists refused to participate in it.  They saw it as a war in which the capitalists of the victorious countries would benefit but the workers would get nothing. Because of this, they believed that the workers would refuse to fight.  This belief, of course, did not come true.  Marxists have often overstated the class consciousness of workers and understated their feelings of nationalism.

     But while Marx himself wrote very little about imperialism, he did write about the global expansion of the capitalist economy.  In this, he was very prescient.  The following long paragraph from the Communist Manifesto was written in 1848.  It could have been written today in talking about the global economy.

                “All fixed, fast, frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify.  All that is solid melts into air, all that is holy is profaned, the man is at last compelled to face with sober senses his real condition of life and his relation with his kind. The need for a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe.  It must nestle everywhere, settle everywhere, establish connections everywhere.  The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country.  To the great chagrin of reactionaries, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe.  In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal interdependence of nations. And as in material, so also in intellectual production. The intellectual creations of individual nations become common property.  National one-sidedness and narrow mindedness become more and more impossible, and from numerous national and local literatures there arises a world literature.

                  The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian nations into civilization.  The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate.  It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.”

Marx on the state - summary

To Karl Marx, the “state is but a committee for managing the common affairs of the whole bourgeoisie”.  Marxists usually refer to the capitalists as the “ruling class”.  Even in a democracy, those with access to the financial support of the rich capitalists and corporations will have the only chance of being elected.  The newspapers are television networks are owned by large corporations.  Therefore, the “news” will reflect their corporate perspectives.  Those placed in appointive positions in government will have gone to the “best schools” (such as Harvard and Yale).  These best schools are expensive and out of the reach of ordinary people who have neither the funds nor the connections to gain entrance to them. 

     In the 1930s, it became apparent that the government of the United States (and also of all Western European countries) acted in the interest of the workers.  Unions were legitimated and even helped.  Many social welfare programs were enacted.  At that time, the Marxist interpretation changed slightly.  The government was now seen as acting in the long-run interests of the capitalist class, but not necessarily in its short-run interest. The long-run interest of the capitalist class involved preserving the system of capitalism and the dominant role of the capitalists in that system.  By allowing workers more income (through their unions) and more economic security, the workers became part of the capitalist system.  Today, most American workers support the institutions of capitalism very strongly.  Unions have been allowed to push for better wages and benefits but were not allowed to threaten the authority of management over corporate decisions.

    Marx saw the state as hostile to the proletariat.  As he stated, “workingmen have no country”!  Workers have common interests only with other workers, not with their country.  Therefore, the approach of Marxists has always been international --- to unite workers of many countries according to their common class interest.  (One still sees this in the names of many unions, which start with the word “International”.) Marx and Engels conclude their Communist Manifesto with the cry "Workers of the world, unite!".  

Marx on the Crises of Capitalism

     Marx saw capitalism as being subject to swings of prosperity followed by recessions or even depressions.   He was one of the first people to try to explain the business cycle, as it is now called.  There were two different explanations given by Marx.

     One of Marx’s explanations involved the uncoordinated nature of the market (Marxists call this the anarchy of the market.)  Company A sees a profitable opportunity.  To take advantage of it, Company A buys some new machinery or builds a new factory in order to be able to increase production.  What it does not realize is that many other companies are doing the same thing.  When they all increase production, there is now too much production!  This causes the period of recession.  Some companies go out of business.  Others decrease their production.  When production falls enough, the recession is over.  The periodic recessions and depressions (Marx called them “crises”) that result under capitalism are one reason that Marxists have so strongly supported government planning. 

     The second of Marx’s explanations involves under-consumption.  To Marx, capitalism acts to keep wages at the socially-determined subsistence level so that profits can expand.  But wage earners usually spend all of their incomes while profit earners can afford to save a portion of their incomes.  By transferring income from spenders to savers, capitalism sets up a process by which companies produce goods but consumers do not have enough income to buy them.  Goods that are produced go unsold; this is the recession (crisis).  Eventually, companies are able to eliminate their surplus inventories and the recession is over. 

     One of Marx’s important predictions was that these crises would become increasingly severe.  This was a result of the increasing concentration of capital.  Early crises may cause the failure of small companies; this would have only minor overall effects.  Later crises would cause the financial ruin of giant companies.  The repercussions of this would be much more severe.  To Marxists, the Great Depression of the 1930s seemed to prove this part of the theory.

     Keep in mind that Marx’s description was contrary to the general view of the day.  In that view, recessions could not occur for long.  If recessions did occur, there were built in forces to eliminate them quickly.  (These were falling prices, falling wages, and falling real interest rates)  Everything that could be produced would be bought!  (This statement is usually stated as “supply creates its own demand” and is called “Say’s Law”.)

     Since World War II, there have indeed been periodic recessions in the United States.  The country went ten years without a recession (March 1991 to March 2001) but then experienced a recession in 2001 and then a most severe recession beginning in 2008.  But these recessions have been much less severe than the Great Depression or than the “crises” described by Marx.  That they have been less severe is partially the result of increased government intervention in the economy, a point that was not predicted by Marx.

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Marx on Contradictions of Capitalism - summary

In the Marxian view, all reality is based on contradictions (see dialectical materialism or Class Conflict).  Capitalism is no exception.  In the Marxian view, the capitalist class becomes the “thesis”.  It creates the proletariat as its “antithesis”.  The two have opposing interests and therefore are in struggle.  Capitalism simplifies the class struggle by reducing the number of classes to two.  Two of the contradictions of capitalism can be noted at this point.

     First, the inherent capitalist drive for expansion leads to an increased demand for labor.  This raises wages causing capitalists to substitute machinery for labor, as noted earlier.  However, surplus value (profit) is drawn from labor.  Surplus value can never be drawn from machinery in this view.  Therefore, the base from which profit can be drawn narrows and the rate of profit falls. The contradiction is that each capitalist is acting in the only way that will maintain profits;  however, by these actions, the rate of profit actually falls. In reality, there is no evidence of a falling rate of profit in capitalist countries.

     Second, the drive for expansion and the use of more machinery lead to larger and larger workplaces.  Workers, whose pay is held at subsistence, are brought-together where they can interact.  The use of machinery leads to increased specialization and division of labor, generating more alienation.  The falling rate of profit requires that capitalists intensify their exploitation of labor (such as by running the assembly line faster and faster).  This requires more supervision and a more authoritarian factory.  The workers become more and more miserable.  Karl Marx called this the law of increasing immiseration of the proletariat. By bringing workers together in a situation in which they are more and more miserable, it is much easier for someone to channel their anger and organize them into a strong political force. (Remember that the proletariat is becoming larger and larger.)  Capitalism has created the seeds of its own destruction!

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Marx's Law of Increasing Concentration of Capital

    To Marx, capitalism involved a large number of highly competitive companies, each with a desire to expand.  Profits would not be spent on luxury consumption; instead, profits would be ploughed-back into the company as investment (called accumulation). For Marx the drive for accumulation would cause companies to wish to hire more workers.  This would then drive up wages.  Both the existence of profits and the higher wages would lead capitalists to increase the amount of machinery used in production.  This process leads to what economists of today call “economies of scale”.  Since the costs of the machines are fixed, a company that produces a larger quantity of goods has an advantage over a smaller company.  (As an example, the cost of your classroom is fixed --- that is, the cost is the same regardless of the number of students.  If the classroom is full, the cost per student would be less than if the classroom were half-empty.)  Since larger companies can produce at a lower cost than smaller companies, they can charge a lower price and still make a profit.  With the lower price, the smaller companies cannot make a profit and therefore go out of existence. Their owners (the petit bourgeoisie) become part of the proletariat.  Ownership of capital becomes concentrated into fewer and fewer hands

     It may seem as though this statement of Marx was fulfilled.  A steel industry that once had hundreds of companies became dominated by six.  An automobile company that once had hundreds of companies became dominated by three.  The department store replaced the small store. The grocery chain replaced the “mom-and-pop” store.  After World War II, this concentration of capital occurred as Marx predicted; the proportion of total assets owned by the 50 largest companies grew significantly.  However, this was reversed beginning in the 1970s.  New technologies allowed smaller companies to be able to compete effectively with the larger ones.  In addition, the opening to foreign trade enhanced competition greatly.  This reversal was not predicted by Marx.  Marxists often refer to capitalism as “monopoly capitalism”.  But since the 1970s, the amount of competition has been increasing, not diminishing.

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Marx on The Reserve Army of Labor / Unemployed

     For wages to stay at the subsistence level, Karl Marx held that workers must be in a weak bargaining position in  relation to their employers.  A worker’s source of bargaining power is his or her ability to leave the employer and to go get a new job with someone else.  To Marx, under capitalism, the weak bargaining position of the workers would be maintained by a large supply of unemployed workers.  Workers would have to “obey” their employers because they would know that there were many other workers willing to take their jobs. And they could not quit their jobs because their chances of getting other jobs would be low.  This supply of unemployed workers was called “the reserve army of the unemployed”

     Three forces, according to Marx, would maintain this reserve army of the unemployed.  One was the high rate of population growth of the working classes, as noted above.  Another was what has been called “technological unemployment”.  When times are good and demand is increasing, companies desire to hire more workers.  This desire would tend to bid up wages.  In response to the higher wages, companies develop machines to replace people.  Those who are displaced by the machines become part of the reserve army. (See Part 7 below.)  A third force to maintain the reserve army was that, under capitalism, there is a persistent tendency for large companies to out-compete small companies.  The owners of the small companies (called the petit bourgeoisie) are then forced to become workers, swelling the numbers of people seeking employment.

     While Marx did not mention it, modern Marxists consider another factor that reduced the bargaining power of the workers.  This is called “deskilling”. Capitalists reduced the need for the skills of the craftsperson.  Instead, they created machines and job processes that required a low level of skill on the part of the workers.  One worker becomes interchangeable with another, losing any power that could be achieved by withdrawing labor from the employer.

     In Marx’s analysis of capitalism, this point may be the most relevant.  In the United States since the end of World War II, there have been only a dozen or so years of “full employment”.  When unemployment rates fall, the stock market typically declines!  Does capitalism indeed require a significant number of unemployed people?

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Marx's Value and Surplus Value theory

One of the major questions for 19th century economists was “what determines the value of a product?”.  Karl Marx followed most other economists of his day in accepting the labor theory of value.  In this theory, the value of a product was determined by the socially necessary labor time to produce it.  This was to include both current labor and past labor (that is, the labor that went into building the machines that made the product).  Only “socially necessary” labor time would determine value; one could not increase the value of one’s product by adding unnecessary labor.  Skilled labor was counted as a multiple of unskilled labor in determining value.

Marx then applied this theory to the question:  “what determines the value of the labor power?”.  His answer followed logically from the labor theory of value:  the value of the labor  power was determined by the socially necessary labor time to produce it. This, to Marx, meant subsistence. Marx never defined exactly what he meant by subsistence.  It would seem that he viewed subsistence as determined in relation to the society of the time. Subsistence could mean more than basic physical subsistence.  (Thus, subsistence living would be higher in the modern United States than in Ethiopia.) Yet, it certainly seems that Marx intended subsistence to involve quite a low standard of living.
Marx followed other economists of the day in viewing population growth as the force that
would keep workers’ wages at the subsistence level.  If the demand for workers increased, wages would rise.  Workers were expected to respond to the higher wages by having more children (or at least having more children survive).  This increased number of workers would drive the wages back down to subsistence.  This idea was first stated by David Ricardo and is known as the “iron law of wages”.

     According to Marx, under capitalism, workers were forced to sell their labor power to
capitalists in order to be able to earn a living.  This put them in a weak bargaining position.
Capitalists only had to pay workers subsistence wages.  But in a days’ work, workers would
produce a value greater than their subsistence.  This extra value was then taken by the capitalist. 

Marx called this extra value “surplus value”.  The amount of surplus value as a percent of the wage paid to the workers Marx called the rate of exploitation. So if a worker is paid $8 per hour but produces goods worth $16 per hour, the extra $8 is surplus value and is taken from the worker. The rate of exploitation is $8 divided by $8, or 100%.  The profits of the capitalists are produced by the workers and then taken from them by the capitalists as exploitation of their position of power! The implication is that the capitalists have done nothing to earn the profits!  Today, in Europe and even in the United States, it is not uncommon to see profits (dividends, capital gains) labeled as “unearned income”

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