A Brief History, Part IV: Marx and all that

For Part III, Click Here.


Everything you ever wanted to know about Karl Marx, but were afraid to ask
Marx remains one of the most influential thinkers of all time, which probably says more about those influenced than Marx himself. In bygone days, before Marxism had proven to be a real-world failure (i.e., before 1989), Marx was primarily admired for those insights he had which were new, and which spoke of the future. This is understandable, for it is easier to rephrase than to create, and easier to describe the past than predict the future. Since 1989, these ideas have been shown, almost without exception, to be total bunk. However, since Marx had become part of The Cannon, and since his brilliance has been for so long acknowledged by all, his latter day admirers have fallen back on those things which Marx got right. However, almost everything Marx got right was inherited and spoke of the present and past, but since few modern academics are familiar with the Whig tradition of economic and political thought, they credit Marx with “insights” that he never implied were original to him.

So what did Marx get so wrong? First and foremost, Marx was a determinist. In Marxism, everything is inevitable. Marx claimed to have discovered the Secret Decoder Ring of human history (this kind of hubris is not uncommon amongst academics, as is evidenced by this document), by which everything must unfold. One of the reasons Marxism could not easily reform in the 1980s was the theory did not allow for failure. Scientific Socialism was as much a law of nature as those proposed by Newton. This iron law of development, according to Marx, will proceed from Feudalism to Capitalism (much as Adam Smith coined the term “mercantilism” to describe the government-corporate fusionism that he opposed, Marx invented the term “capitalism” for the system he opposed), and from Capitalism to Socialism. Here’s The Plan according to Marx:
1. The workers (the proletariat) get exploited by those who own the means of production (the bourgeoisie, which literally means “city dwellers” like “burgers” in Dutch, but figuratively means the merchants, the capitalists, the rootless cosmopolitans, the Jews). This sucks.
2. Profit rates will inevitably fall as the market ages. This will cause the bourgeoisie to squeeze the proletariat harder and harder to maintain their way of life.
3. Eventually the proletariat will reach the point where they can no longer support themselves on the decreased wages resulting from the squeeze, at which point they will revolt to prevent starvation and bankruptcy because capitalism is incapable of resolving its internal contradictions. It cannot bend-it must break.

One can certainly quibble over exactly what it means to be “exploited”. When employers and employees voluntarily enter a contract with no coercion involved, it’s difficult to define exactly what it means to exploit. Since both consider the deal better than no deal, they are certainly exploiting each other to some degree. But let’s ignore that. Point 3 plausibly follows from point 2, and eager Marxists have been awaiting the uprising since Marx wrote the Communist Manifesto in 1848. The problem is, point 2 is totally false. Profit rates are not and have never been in terminal decline, and workers’ real wages have not and have never been under any sort of long-term squeeze. What’s more, these facts should have been apparent to Marx by 1848. Marx actually did a very good job of summarizing the nature of the new capitalist world, and accurately cataloged many of its problems. He did a very bad job of reading trends, and then proceeded to argue that the trends he falsely identified could not be reversed. In other words, Marxist Socialism was the future, and those who stood athwart history yelling “stop” were both reactionary and doomed to failure.
The reality on the ground was quite different from Marx’s perceptions. First, the proletariat was gaining, not losing ground by 1848, at least in Britain, where Marx was writing (much of the Continent lagged behind in this as well as everything else). It should not escape notice that, unlike Adam Smith, whose famous first chapter of The Wealth of Nations resulted from a visit to a pin factory, Marx never did set foot inside a factory, and thus his understanding of the world of the proletariat was somewhat limited, much like latter day college students exhorting Detroit steel workers to Rise Up against the Man. This proletariat had appeared quite quickly, and had come from the farms. I didn’t really talk about food. I guess I need to do that.

Food and the Enclosure Crisis
Starting in the Low Countries in the late Middle Ages, property rights (an absence of feudal barons taking the farmers’ stuff) provided the kick that would enable lots of important innovations in agriculture. In general, trying new things involves risk. This isn’t really worth it if you don’t get to keep the reward, and if the Baron is likely to behead you if trying something new doesn’t produce enough wheat. The advent of windmills (mostly for drainage), new canals (in Holland, especially), and faster ships combined with better agricultural techniques to generate a surplus. This meant that cities could grow, but it also meant that private land generated a lot more food (and hence money) than public land (this is often described as the tragedy of the commons, in which the public commons is always overgrazed, lay fallow, etc.). The result was that, first of all, the landlords wanted to rent their land to cash-paying farmers instead of beating up serfs to steal their stuff. Farmers generated more, and so even though this meant letting the farmers keep a cut, landlords did better taking half of a farmer’s produce than all of a peasant’s produce. So the peasants suddenly found the public land disappearing. They literally had nowhere to go but London. Marx made much of the Enclosure Crisis (so called because the act of taking open public land and subdividing it into private parcels meant enclosing those parcels with fences), as if it were a form of theft (in Marxism, all fortunes result from a crime), and as if it were a sudden event. It actually happened over centuries, and was really the result of an economy shifting gears to a new mode of production. One in which very few people actually needed to do agriculture, and all these excess people went to the towns, just in time to join Dickensian factories. Not surprisingly, with this huge labor surplus, and given that these peasants didn’t know how to do anything but push a plow, they were paid extremely poorly. Marx mistook the initial shock of a sea change in the economy for its fundamental nature. Within a generation, this new class, the “proletariat” was developing real job skills, and the need for labor was rapidly outpacing the flow from the countryside. Wages began to grow. Just as the patient was recovering, Marx pronounced the patient terminally ill.
Not only were wages rising, but costs were falling. In this era, nothing was as big of a piece of the poor man’s budget than food. The enclosures, while they booted a lot of peasants off the land, made a lot more food, which made it cheap. The other thing which caused the price of food to plummet was the repeal of the Corn Laws. The Corn Laws were a series of tariffs which taxed foreign food. A devotee of the new Adam Smith/David Ricardo school of liberal economics, Richard Cobden, argued that these tariffs, by making food more expensive, were impoverishing the proletariat. The notion of free trade, even when the other country didn’t agree to free trade with you was revolutionary. Ricardo had proved that even if it wasn’t reciprocated, it still helped both countries if one unilaterally eliminated their tariffs. But boy was it controversial. The result was unambiguous. The price of food in Britain fell like a stone, and has been falling ever since (with a few exceptions during wars). This was another result of Trafalgar-it took a great deal of confidence for Britain to unilaterally eliminate its tariffs, confidence that only came from sitting atop the world. In the wake of the debate, a magazine called The Economist sprang up to advocate for Liberal market principles. It still does so today. The percentage of income spent on food has gradually reduced from circa 90% in 1800 to circa 20% in the 1950s to about 10% today. Now we are seeing the cost of nearly all industrial technology taking up less and less of our paycheck as manufacturing is following agriculture before it. As manufacturing disappears, we are seeing the steel workers without jobs entering crappy service sector jobs without skills just like the farmers ended up being the factory wage-slaves of Dickens novels. But their kids are working for Microsoft, and more importantly, democracy gives them a voice in government, which prevents the worst abuses.

Democracy: Capitalism’s bridle
Not only was Marx wrong about the state of the workers, which was getting better, not worse, but he was also wrong about capitalism’s ability to adapt and self-correct. According to Marx, this was impossible. Yet in the 1830s, a decade before Marx’s Manifesto, Britain expanded the right to vote. Granted, it only expanded it to about 2% of the electorate, but these expansions would continue throughout the century. It did so not out of simple kindness, but because of political reality. Just as the rising power of the middle class (the bourgeoisie) and the need of the government for the cooperation of the bourgeoisie in taxation to pay for its wars had broken open the gates of political power in The Netherlands, so too did this happen in Britain. The UK was certainly not a democracy in the 1830s, but over the course of the next century, this number would gradually expand to include all adult men, and then would include all adult women by WWII. In the United States, the property qualification to vote varied by state, but with even at the beginning was a much larger fraction of white males. Unlike Britain, the US had no upper class. Alexis de Tocqueville famously observed that the whole country was middle class-America had neither nobles nor peasants, only freemen (free-holding farmers, shop-owners, and fishermen were all considered members of the bourgeoisie, as they worked for themselves, and participated directly in the market). In America, middle class has always meant what it does in The Netherlands (where the term is brede middenstand, or “broad middle-stand”): the vast majority of the people in the middle of the bell-curve. The bell-curve was itself a symptom of an all-bourgeois society. Traditional societies were pyramids, with the vast majority on the bottom, not in the middle. In America, the right to vote begins to expand almost immediately, as there are no barriers to increasing the franchise. With the rise of Andrew Jackson, the new states begin incorporating with universal white male suffrage, and when disaster does not follow, the eastern states follow suit. By about 1830, the US is a democracy as we now think of it (with the crucial exceptions of women and blacks, of course). Note that this was all old news before the Communist Manifesto, and was very old news before Das Kapital (which Marx spent the rest of his life, and most of the rest of the 1800s writing). Democracy allowed the workers to alter the social contract in a way that Marx claimed was impossible because the bourgeoisie would never willingly relinquish power. But they did. The market, economic and political, made them a deal they couldn’t refuse, and they gave up power the same way the nobility had in the Renaissance. This is a key point: Capitalism breeds democracy, not the other way around. Economic liberty has historically preceded political liberty and does so today. The vast majority of new liberal democracies in my lifetime (a time period which has seen the number of democracies on Earth triple) have entered ‘The West” as one-party states that strongly protected property rights: Mexico, Taiwan, South Korea, and Chile to name but a few. Democracy without a strong middle class is often disastrous, and leads to anti-capitalist populism, which breeds dictatorship. Yet we frequently make the same mistake today, worrying about elections where we should be worrying about whether women can get a loan, or whether entrepreneurs get to keep the fruits of their small business. Democracy will come to China, but I’m less sure that Liberalism will come to Nigeria, despite their frequent elections. Broadly, democracy can prevent the captains of industry from getting a lock on political power and arranging the rules of the game to the detriment of the rest of the people, but too much democratic power can undermine capitalism itself, and lead to a populism that impoverishes the whole society. The peace treaty that was eventually signed in the US between these economic classes we call the New Deal.

Mystification
One of the most commonly cited ideas of Marx is that of mystification. According to this doctrine, the interests of the proletariat are defined purely economically. However, the proletariat is easily distracted from their own economic self interest by the bourgeoisie who “mystify” the proletariat with various forms of bread and circuses. This doctrine was necessary to explain why the workers of the world had not already revolted-they were deluded, and only needed the wakeup call, which would come from being “educated” by socialists, and by their deteriorating condition. Of course, those who were (and remain) mystified were (are) not the proletariat, but the intellectuals amongst the children of the bourgeoisie. The interests of proletarians are like those of everyone else-they are only partly economic. Socialists may believe that other issues which speak to the working class are mere distractions, which are not really important, but the proletarians themselves have disagreed. They have understood that there are more important things than money. Socialists should realize this too-they argue such whenever they want to raise taxes. But why the persistent attachment to the idea that the Masses are stupid, grass-chewing sheeple, easily misled by demagogic leaders who keep them from “understanding” what is “really” important? Any small political group in a society must cling to some version of this idea (even classical liberals like me). If you’re so right, why doesn’t everyone see that? How else to explain the fact that auto-workers despise the hippies who claimed to fight on behalf of the working man?
In this, I find myself a hippie (and not a socialist). I think we as a society are much more classically liberal than our political parties, but I think we also have a lot of prejudices which cause Whiggism to remain somewhat of a fringe phenomenon. Why do I say I’m a hippie not a socialist? The hippies and I have faith in individual people-that knowledge and understanding set us free. We blanch at suggestions that The Masses are stupid. We believe in people’s ability to overcome their prejudices, we believe in open exchange and debate of ideas, because we are confident that in this open discussion our ideas will be shown to be right, or at least if they are wrong, we can change our own thinking as we learn from others how better to think about the human conditions. The socialists aren’t hippies. Marxists believe the people are dumb sheeple need to be led by a powerful state and a “vanguard of the proletariat”-that is, the stupid people need to be led by the intellectuals and ruled by the state, that they are incapable of thinking for and taking care of themselves. Where do I part with the hippies? They’re in bed with the socialists, and they need to understand that. Hippies are libertarians who don’t get economics-this deficit causes them to pair with authoritarians with whom they are natural enemies. This is, more than anything else, which makes me a man of the left-I share the wishes of the hippies, not the social conservatives. I agree with the ends of the left and disagree with the means. I may agree with the means of the right, but I have no truck with where they would like to go as a society.

Part V is Here.