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Marxist economics – not there to guide capitalists

Like a fourteen year old schoolgirl using the F-word in front of her parents or anyone expressing mild aversion to opera at a north London dinner party, certain capitalist commentators revel in the shock value of adducing Marx in support of their macroeconomic prescriptions.

In recent weeks, we have seen George Magnus, senior economic advisor to Swiss banking giant UBS, urge Bloomberg terminal users to ‘Give Karl Marx a chance to save the world economy’. Meanwhile, Nouriel Roubini – the academic economist nicknamed Dr Doom – insisted in an interview with the Wall Street Journal that Marx was right to assert that capitalism has the capacity to destroy itself. Both gentlemen have subsequently been taken to task by Financial Times columnist Samuel Brittan.

All of them present a simplified summary of Marx’s economic thinking, or at least the underconsumptionist reading thereof. Given that they are writing newspaper opinion pieces for a mainstream audience, that is entirely understandable. At a stretch, what they say can even be seen as valid, in as far as it goes; in the final analysis, all capitalist crises are crises of underconsumption.

But if that was the end of the story, the remedy would be straightforward. As Brittan points out, it would be easy enough to address the lack of purchasing power by throwing money out of helicopters, as Milton Friedman used to joke.

Indeed, while Magnus in opening paragraph advises policymakers to gen up on Marx, his practical proposals are distinctly Keynesian in tone, centring on the need to sustain aggregate demand. There is nothing wrong in principle with such a call, but ‘Marxism’ it is not.

If these writers are serious about applying Marxist categories to the current global economy, they must take into account both problems arising from the realisation of surplus value through the sale of commodities, and those that stem from the capital’s inherent drive to seek out profit, or in the jargon, to ‘valorise’.

Now I am the one resorting to necessary simplification, but let’s put it this way. Even now, there are plenty of opportunities for capitalists to invest in things that humanity needs, not least the provision of clean water, food, education and basic healthcare for the billions that go without even these basics.

Doing so would make far more sense than pumping more into Greek government debt. The trouble is, the starving cannot stump up the double digit returns that Athens can. Yet investors cannot settle for less, as that would risk them being wiped out.

For Marx, there was no way out of this conundrum, and it is just one of the many reasons that he regarded capitalism as historically doomed. But as Magnus, Roubini and Brittan are probably well aware, ‘Capital’ was not written to give WSJ and FT readers a get out of jail free card.

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