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Karl Marx (1818-1883) and Friedrich Engels (1820-1905) [ 1 ]

Karl Marx (1818-1883) and Friedrich Engels (1820-1905) [ 1 ]. Karl Marx (1818-1883) and Friedrich Engels (1820-1905) [ 2 ]. The “Theory of History”: ‘Historical Materialism’ [19] [also known as “Dialectical Materialism”] 2. Capitalism’s “Contradictions” - Three Major Theses:

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Karl Marx (1818-1883) and Friedrich Engels (1820-1905) [ 1 ]

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  1. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [1]

  2. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [2] • The “Theory of History”: ‘Historical Materialism’ [19] [also known as “Dialectical Materialism”] 2. Capitalism’s “Contradictions” - Three Major Theses: (1) Value = (somehow) Labour [6, 13, 25] (2) Exploitation [29] (3) Class Conflict [34] (3a) Ideology [17, 54] 3. Socialism: “all power to the people” - planning ... [47, 56] (a) the “dictatorship of the proletariat” [59] (b) the “ultimate” stateless society: “From each according to his ability, to each according to his need” [52] (c) Marx’s bad economics [68-70]

  3. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [3] • Mature Marx • 1. Marx’s “Historical • Materialism” • * Main elements: BASE: (a) Relations of production (e.g., A owns B’s labor -> A tells B what to produce ..) (b) Forces of production (e.g. steam power ...)

  4. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [4] • SUPERSTRUCTURE: “legal and political”superstructure to which correspond “definite forms of social consciousness” • Thesis: Social productive relations (a) correspond to a definite “stage of development” of (b) material productive forces • Sum of (a + b) constitutes the economic structure of society - the “real foundation” on which rises (3) and (4). • [historical] Materialism: Social Consciousness must be explained from the “contradictions of material life” [“dialectical” Materialism - conflict between the social productive forces and the relations of production -- • -->The mode of production of material life “conditions” the social, political and intellectual life process in general • [‘conditions’? or ‘determines’? Marx says, “Consciousness doesn’t determine our being - social being determines consciousness”]

  5. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [5] • “Political power, properly so called, is merely the organised power of one class for oppressing another.” • capitalist State: a “committee for managing the common affairs of the bougeoisie” • The Key: As productive forces develop, they “conflict with the existing relations of production”; These relations “turn into their fetters” -> an epoch of revolution begins. • Marx’s historical stages: • Primitive Communism Ultra-low tech common ownership • Oriental Despotism slave society • Feudalism peasants go with land... knights rule • Capitalism Private ownership of Means of Production • Socialism Centralized ownership of MP • Communism “From each according to Ability, To each according to his Need” - anarchy on that principle ...

  6. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [6] • Capital [Das Kapital] • - Marx’s magnum opus - his last word on economic/social theory • In 3 (or 4?) volumes - vol. I, 1867 [vol. 2, 1885; vol. 3, 1894 • a “vol. 4”, was not published in their lifetime • see the Wikipedia article - http://en.wikipedia.org/wiki/Das_Kapital • The book is Marx’s Analysis of the “Capitalist Mode of Production”) • Intended as a work of social science, not ethics • Definition: Capitalism = Free Market economy = Everything (labor and productive equipment, and consumer goods) is owned (and therefore able to be bought and sold) by individuals and privately acting groups [acting for their own various interests - presumptively, to make as much money as possible] • ‘Free” market: No legal obstacles to voluntary exchange - only to involuntary (forced) exchanges. [contrasts, say, with feudal society...]

  7. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [7] I. "Theory of Value" • Commodity : object, for sale, that satisfies human wants (all sorts) • (a) Use-value (Utility) -- properties of things making them fit for use (or “consumption”) (“the constitute the substance of all wealth, whatever may be the social form of that wealth”) • (b) Exchange-value (Price): proportion in which values in use of one sort are exchanged (on a free market) for those of another sort • -> Exchange-value is what Marx sets out to explain • This “appears to be purely relative” - intrinsic exchange value “seems a contradiction” • BUT: “Things that exchange must be equal to each other-> exchange-values “express something equal” • [so,] exchange-value is only the mode of expression of something contained in it, yet distinguishable from it -- there is something common to both. The two must therefore be equal to athird, which “in itself is neither the one nor the other” • [Note: why?... ]

  8. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [8] I. "Theory of Value" • The Market is where exchange takes place. • It’s free exchange - prices are not dictated by anybody • Exchange [as affecting price] is characterised by “total abstraction from use-value” • [that is to say: a price attaches to all sorts of things • - it doesn’t matter which use, but only that it has a use for somebody] • Marx says: “Leave out use-value and only one thing remains: being products of labour - human labour in the abstract -- Human labour-power has been expended in their production “as crystals of this social substance” • So: X has value only because human labour in the abstract has been embodied in X- measured by the quantity of the value-creating substance, the labour, contained in it • Note: Aristotle long ago said that “this unit [that “binds all things together” on a market] is in truth demand” • Just where does labour fit into this? Prima facie, labour is supply • The obvious theory is: price is determined by supply and demand - the more it’s wanted and the less there is, the higher the price, and vice versa • But Marx’s answer (which he got from Ricardo) is what we look at first ....

  9. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [9] • 1.The Labour Theory of Value • (1) Simple Version: (Where x and y are individual items, Proportion of Price of X to Price of Y = proportion of Labor in X to Labor in Y • I.e., the price of commodities is directly proportional to the labor it took to make them • [Observation (known to Marx): This would make inefficiently produced objects worth more than efficiently produced ones. • This is obviously false: • for the Consumer, Price is proportional to the thing’s utility, not to its contained labour: [If Utility of x = Utility of y, then consumer will pay the same price for x as for y • -- not different, even if amounts of labour are different. • (2) “Sophisticated” theory, first stage: Averaging • Price of average X/Price of average Y) = Average Labor in x/Average Labor in y • ie., P(av x):P(av y)::L(av x):L(av y) • [comment: but this also is also false - depending on how we measure labour ... ]

  10. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [10] • The Labour Theory of Value (continued) • (3) Final form: Socially Necessary Labour Time • Marx thinks that he fixes the theory with this new version: • The exchange-value of one commodity is to the exchange-value of any other, as the labour-time necessary for the productionof the one is to that of the other - • “Socially Necessary Labour Time”:P (x): P(y):: SNLT (x): SNLT(y) • def: “homogeneous human labour (total labour-power of society), embodied in the sum of all commodities • Each of these units is the same as any other, so far as it has the character of • [1] the average labour-power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is • [2] needed on an average, no more than is socially necessary.

  11. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [11] • example: - “The power-loom reduced by half the labour required to weave a given quantity of yarn into cloth. The hand-loom weavers required the same time as before” - “but for all that, the product of one hour of their labour represented after the change only half an hour's social labour - and consequently fell to one-half its former value” • “The value of a commodity, therefore, varies directly as the quantity, and inversely as the productiveness, of the labour incorporated in it” • “reduction of skilled labour to average social labour (“constantly in practice going on”, and “unavoidable”: e.g., one day of skilled to six days of unskilled labour ..... • [Comment: Notice that the labor “fell in value” -- i.e., the unit used to determine price fell in value! Labor is being measured by output!] • - Marx doesn’t go on to ask how you compare outputs: e.g., how do you compare the labor of a mathematician with that of a bricklayer? • A good answer - and really the only answer possible - is: see how much people want mathematics relative to bricklaying....] • The theory is now circular: it “explains” market prices by “labor” -- but it measures labor on the basis of market price! • - Since some form of the Labor theory is presupposed by the entirety of Marx’s economics, this is a FATAL flaw...

  12. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [12] • Marx’s theory is fatally flawed... • But it isn’t crazy to think that in some sense “labour” plays a crucial role ... • What Marx should have said: When people work on things with a view to selling them, they perform useful services for other people • What makes a thing worth paying for is the service it does the buyer - • in comparison with the buyer’s other options. • (such as making it himself) • Note: there is labour in the narrow sense (manufacturing, production-line work) • But then, there is the activity of all the others - including financiers, who enable the whole production process to get going ... • Marx didn’t see it this way. His idea is that all the value is due to just the first kind of productive activity ... in that he is clearly wrong.

  13. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [13] • The Capitalist [who Marx claims is useless...] • (Note: `M->C->M' refers to `Money into Commodity into Money') • “The expansion of value, M->C->M, becomes his subjective aim” • - the sole motive of his operations • Use-values are not the real aim of the capitalist -- profit-making alone is what he aims at • - the capitalist is a “rational miser” • [Note: Recall from the Early Mss: “labour produces for the rich , palaces -but for the worker, hovels” • [But if the capitalist invests as much of his money as possible -- then he lives in the hovel! • [Marx fails to see the irony: on this picture, the capitalist is, in real terms (i.e., “material” terms) a pure altruist: everything he does benefits others - almost none of it benefits himself!] ...

  14. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [14] • Labour's relation to Capital • “The labourer works for the capitalist instead of for himself” • [note: that is to say, he’s not self-employed. • True: But , still - his motive is to maximize his own income, not the capitalist’s.] • In what sense does the labour “work for the capitalist,” then? • The argument: • If Capitalist [C] pays for a day's labour-power • - the worker’s Product is the property of the capitalist and not that of the worker, its immediate producer • Worker - the sellerof labour-power -parts with his labour power at its value, • so, the right to use that power for a day belongs to W • the use-valuehe has sold [L] in exchange with C is the consumption of the commodity purchased (work, promoting aims of capitalist). • That is: the capitalist consumes (uses) the worker’s labour in production • The labour-process is a process between things that the capitalist has purchased, things that have become C’s property. • The product of this process belongs, therefore, to him.

  15. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [15] 2nd major Marxian theory: Surplus-Value - The source of Profit and “Exploitation” • 1. Marx thinks that things always exchange at their “values” - “equals for equals” • 2. Problem: So, how is profit possible?? • 3. An essential Distinction concerning the “value of labor-power”: • (a) INPUT value: The Value of a day's labour-power: = the value of the means of subsistence required for its production • (b) OUTPUT value: “the living labour that it can call into action” - i.e., power to produce • These, Marx points out [correctly], are two different things • Marxian thesis: The former is the exchange-value of the labour power, the latter is its use-value

  16. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [16] • Surplus-Value: Profit and “Exploitation” (continued) • -- Its exchange-value is less than its use-value • [i.e.: the price of the labour is less than the price of what he produces] • “The difference of the two values was what the capitalist had in view” • Labor is the source not only of value, but of “more value than it has itself” • The seller of labour-power (i.e. the worker) • “realises its exchange-value, and parts with its use-value. • “He cannot take the one without giving the other • - That’s where profit comes from! • and therefore -- Exploitation! • Conclusion: capitalism exploits workers... • Note: this is clearly true. • Question: But, is it a problem??

  17. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [17] • [ ‘Exploitation’ is ambiguous. Two uses: • (a) Pejorative: to exploit is to harm, to ill-use the thing for one’s own gain • (b) Neutral: to exploit is to use, gain some advantage by using - nothing said, one way or the other, about its effects on the exploited. • Point: What Marx calls “exploitation” is (usually) good for you! • Laborer’s options: • product real wage % exploited net gain • cottage 1 1 0 1 • factory 10 2 80% 2 • Worker’s exploitational take-home pay is twice the unexploited payoff • -> Of course, the capitalist makes still more - on a good day, anyway.... • Q: So what? • [the worker looks at it from his own point of view - in which, it’s better!]

  18. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [18] • “General law of Capitalist Accumulation” • The very nature of accumulation excludes every diminution in the degree of exploitation of labour ... • “It cannot be otherwise in a mode of production in which the labourer exists to satisfy the needs of self-expansion of existing values • - instead of, on the contrary, material wealth existing to satisfy the needs of development on the part of the labourer.” • “The industrial reserve army weighs down the active labour-army” • [Note: this is empirical and theoretical nonsense.] • Polarization: Accumulation reproduces the capital-relation on a progressive scale - more larger capitalists at this pole, more wage-workers at that --- • This leads to ....“Immiseration”: • The greater the social wealth, the greater is the industrial reserve army: the more extensive the industrial reserve army, the greater is official pauperism. • “The labouring population always increases more rapidly than the conditions under which capital can employ this increase for its own self-expansion. • This is the absolute law of capitalism....

  19. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [19] • [Marx’s claim here implies that as capitalist economies expand, unemployment must rise, at least over the long run. • But this is not true: In no country has there been a constant increase over long periods • - nor is there any real reason, in his theory, why it should • -> [Narveson says: In contemporary times, unemployment is largely an artefact of government policy: governments buy unemployment. • In the Great Depression, they (inadvertently) caused it. • This is because the price of labour is not allowed to fall as demand decreases • Full employment is where all available labour is purchased economically • - that is, in such a way that it produces something that somebody else is willing and able to pay for] • [This last is not contentious. The former is.]

  20. [20] • 3. Class Antagonism • Claim: Capitalists and Workers are at Loggerheads • Marx’s Thesis in general: • 1. “Constantly diminishing number” of capitalists, who • 2. “Usurp and monopolise all advantages of this process of transformation” • 3. - leading to a “growing mass of misery, oppression, slavery, degradation, exploitation” • 4. - and the growth of working-class revolt (“always increasing in numbers - disciplined, united, organised by the very mechanism of the process of capitalist production itself”) • 5. The “monopoly of capital” becomes “a fetter upon the mode of production” • [that’s expressed in the terms of Historical Materialism] • 6. Revolution: “This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.” • -> In short, “capitalist production begets, with the inexorability of a law of Nature, its own negation. • Socialist revolution is “the negation of negation”

  21. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [21] • Problems with Marx’s argument: • Individual worker A and A’s employer have a partial conflict of interest, yes: more for worker, less for capitalist ... • (though, often, if the capitalist makes his demands too high, the worker quits and goes elsewhere) • BUT is the working class in conflict with the owning class? • No! Capitalists make money byselling the product of mass production. • - And (on Marx’s own account) there isn’t anybody else to sell them to than workers. • -> Therefore, the more his competitor’s workers get paid, the better that is for the capitalist. • Note: all capitalists (and all workers) arein competition with each other • -->Therefore, there is no “class interest” of the kind Marxism proclaims • > And, noclass competition.... • The claim that there is class competition is fallacious

  22. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [22] • [Notes: (1) the real wages of the typical English workman are estimated to have doubled about every twenty years during the industrialization era. (Engels’ study, “The conditions of the English Working Class in 1844”, didn’t benefit from another look in 1864 or 1884...)] • (2) A theoretical Query: why would an employer want his employees to starve??] • --> the more he works, the more he “falls under the dominion of his product, capital” • [Note: In a capitalist economy, the worker normally produces things that he • (a) doesn’t get to keep, as such - but • (b) typically has no interest in even if he could (100,000 ball bearings a day). Is that what he means by ‘alienation’? If so, so what? • > These consequences are “contained in the definition” that • the worker is related to the product of his labour as to an alien object • - ‘alien’ because he doesn’t use it himself? True. • - But, ‘alien’ because its production does him no good? FALSE.

  23. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [23] • There is no entailment relation between these two situations: • (1) Worker (W) works for Capitalist (C), and • (2) C makes W worse off • The major issue here is the appropriate baseline for worsening (or “harming”) • The natural one is: Where W was before • “The more the worker spends himself, the more powerful the alien objective world becomes” [(1) meaning what? (2) does the worker care about this particular kind of “power”?] • [Note that Marx’s dicta ought to apply to an airline pilot making $200,000/yr just as much as to a worker in a shirt factory] • “-- for the rich, intelligence - but for the worker, idiocy, cretinism”] • [>> note: Does it produce “cretinism” for the worker? That suggests that he wasn’t cretinous before, but is now. Is that right?] • “in the very act of production The worker estranges himself from himself” [Does Marx mean that the worker doesn’t particularly like his job? If so, what else is new? • - But, seeing that it is the source of his livelihood, he might well come to like it after all! --- see next slide ....]

  24. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [24] • The Right question: How much does the worker like the job • (a) at the pay he’s getting • (b) compared to the alternatives? • - If he prefers some actual alternative to the one he’s got, then why doesn’t he take it? • [Question: does someone owe him a job? • Evidently Marxists (and many others) think so. But - why?] • >> Marx needs to argue that somehow capitalism is depriving him of desirable alternatives - that it coerces the worker. • We need an analysis of coercion • Coercion: A coerces B = • (1) B prefers x to y at the time the interaction takes place, T0 • (2) A intervenes at t1 such that • (3) B’s doing x at t2 would be worse, rather than better, for B • (4) in consequence of which, B chooses y at t2 • It is not true that job offers or acceptances coerce people • - If you go by people’s own word about it!

  25. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [25] • Marx sees the fabulous expansionary tendencies of capitalism... • - How will he show us that lots of other neat jobs would be available if we didn’t have free ownership of capital? • >> What about such claims as that the work “does not belong to his essential being” • - Is this factor, whatever it is, supposed to be something that workers actually care about?? • But is it true? Is it a complaint that the worker doesn’t have enough leisure time? [Maybe he’d rather have more pay. When Parliament proposed a mandatory limit to the working day, a lot of workers voted against it...] • >> Or that “It makes individual life in its abstract form the purpose of the life of the species, likewise in an abstract and estranged form”? • [Should we say: “Sure, why not?”]

  26. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [26] • Property and Freedom • Communism: abolition, not of property generally, but of bourgeois property • “When capital is converted into common property, it is only the social character of the property that is changed. It loses its class character.” • [The “means” formerly controlled by a subset of people are now controlled by everybody rather than some subset of people. But is this necessarily an improvement? • Aristotle’s insight: people manage their own things better than other people do.

  27. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [27] • [Marx on Socialism, Phase I:] • Between capitalist and communist society lies the period of the revolutionary transformation of the one into the other - in which the state can be nothing but the revolutionary dictatorship of the proletariat. • - “still stamped with the birth marks of the old society” • Accordingly, the individual producer receives back from society--after the deductions have been made--exactly what he gives to it. What he has given to it is his individual quantum of labour. • [Note: ‘same amount of labour’, remember, is now meaningless, since there is no exchange] • “the exchange of equivalents in commodity exchange only exists on the average and not in the individual case • [Which means that many workers will think they are getting gypped, while the inefficient will have a field day!]

  28. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [28] • Phase II. The “higher phase”: Ultimate Communism: • After Phase I, the “withering away of the state” -- • - “antithesis between mental and physical labour has vanished • - labour has become not only a means of life but life's prime want • - “the springs of co-operative wealth flow more abundantly • - The principle, “From each according to his ability, to each according to his needs!” sets in .... • [Question: Why should I care about your needs? • Marx’s answer might be: Well, I don’t now, while we’re under the sway of the bourgeoisie, but when things are done right, I will! • - And how does he know that? • - Probable answer: because the people in power will damn well see to it that I do, like it or not ...!]

  29. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [29] • Marxian version of Anarchism • “The state was the official representative of society-- but not really: actually, only the class which itself represented” • Abolish class rule, - and the state is no longer necessary. • The state is not "abolished". It dies out. • The law of division of labour lies at the basis of the division into classes - still carried out by means of violence and robbery, trickery and fraud • [why do they say that? It’s pretty obviously untrue] • The ruling class consolidates its power at the expense of the working class - an “intensified exploitation of the masses”

  30. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [30] Socialism • if capitalism is private, socialism is public ownership of the “means of production” • Distributively, the public already does, and must, “own” everything [there isn’t anybody else!] • So Marxian socialism = collectiveownership • Each member of the collective has a voice and a vote • regarding what to produce and how to distribute it • So economic decisions are made by voting - not by trading • Why? • - presumably, to make people better off. • - in their own view?? • Or in the view of some special persons • - the Central Committee of the Communist Party? • Not much....

  31. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [31] • [Socialism has been the latter in all Communist states.] • Yet in principle Marx thought that each individual person counted. • And if you don’t count a person’s own view • of what he himself values, then what do you count? • (And if that doesn’t count, then why bother to give him • a vote? • [Socialist countries, of course, saw to it that he • didn’t have a real vote. • When all the other would-be parties are illegal - or exterminated • - what does it mean to have a “vote”?] • But even if the vote is real, is there any reason to think that will • help?

  32. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [32] • The idea : “exploitation of the masses” gets so extreme that they revolt (roughly). • This isn’t what actually happened, nor is it humanly likely that it ever would. • 1. (as we have seen) ‘exploitation’is, to be blunt, bunk, so the basic premise of the theory is false. • 2. The “exploited masses” rising up to shake off their masters • is .... out to lunch. • Two different problems here - both fatal,. • first place: it is not in any given worker’s interest to support the revolution, • even if it would be a good thing for the working class. (which it also isn’t) • Any given worker will be worried about his wife and kids, where the next meal • will come from, and whether he personally will get shot up there on the barricades; most of them will stay home and let the other guys do it. • Unless force is used - • Which it will be, because of the next point.

  33. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [33] • Revolutionary Dictatorship of the Proletariat. • not “the Proletariat,” but their self-appointed spokespeople, in the driver’s seat - • what they had, and any socialism would have, is certainly a dictatorship. • Do we want an ideological gangster who tells us what’s good for us, and to take it • and shut up, or else? • - Rule by the Central Committee? • 2nd phase of communism: Social anarchism ... • “To each according to his Ability, To Each according to his Need!” • That implies that each person regards each other person as his friend, or indeed, his daughter (“Comrade!”) - Good luck, Karl! • The idea that someday we will have so much that distribution - that is, resolving competing desires for it - just won’t be a problem is, when you contemplate this, seen to be in Cloud Cuckoo-Land. • Until then, of course, force will have to be used - right? • “Of course, Comrade Sergeivich!”

  34. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [34] • The point of socialism was to produce to a “plan” • - instead of leaving production to the “anarchy of the market.” • That means a few (supposed) experts sitting around a table, not a • vast meeting of all the people or a ballot. • There are far too many decisions to make to do it that way anyway. • The anarchy of production is in fact the genius of capitalism • Socialist Management: A problem The “Calculation Debate” - question: withoutprices, can rational economic decisions be made? • Socialism calls for direction of the economy for the General Good. • Who will do the planning, the directing? • Answer: Intellectuals - the self-appointed leaders of the Revolution: • Lenin, Trotsky, etc. • They in turn will give way to the Stalins and the Kim Il Sungs. • This is inevitable.

  35. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [35] • And it calls for direction of the economy for the General Good. • Who will do the planning, the directing? • The answer is obvious: it will be done by the Intellectuals - the self-appointed • leaders of the Revolution: Marx, Lenin, Trotsky, etc. • They in turn will give way to the Stalins and the Kim Il Sungs. • This is inevitable. • It is literally impossible revolution to happen as Marx says. • The impossibility of Socialism: • as compared with a mostly free-enterprise economy • - demonstrated decisively by the Eastern Europeans and Chinese • [China under Mao experienced the greatest starvation in history. It was • all due to stupid economics (collective farming....) • The Russian economy was a basket case. North Korea’s and Cuba’s still are. • The theoretical reasons for this are interesting though .... >

  36. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [36] • Ludwig von Mises’ argument: • the kind of information you need to manage an economy from a central agency is in principle impossible to have without markets • Socialist theoreticians argued that you could in principle construct a mimic of capitalist pricing • This could only work “in principle” • Robert Heilbroner, long a sympathizer with Marxism, summed it up in 1990: • “It turns out, of course, that Mises was right.” • That is to say, on the theoretical front, buttressed by what we now know about data (with • computers and so on), the battle is over: socialism is, indeed, impossible. • [See the superlative book by David Ramsay Steele, From Marx to Mises.] • What Marx objected to as the “anarchy of production and exchange” • - is precisely capitalism’s glory!

  37. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [37] • The market is anarchic - decentralized. • It is also, in its way, orderly: • market activities establish prices, which • are knowable and modestly predictable. • But Socialism eliminates the market. • Production decisions are supposed to by a rational “plan.” • But how is the plan made and what is it about? • the forbidding question is whether it would be • possible for socialism to have, literally, a rational plan. • This discussion was called “the calculation debate.”

  38. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [38] • the problem • The “means of production,” - the materials, equipment, organization of labor, and so on, required for production to take place. • It must somehow be decided just what is going to be produced, and how. • If you eliminate the market, you eliminate a huge source of • information - price information, information about how • much various things are worth to the consumers we are • supposedly trying to help. • Given that information, you can make some educated conjectures about what would • sell and what wouldn’t. Moreover, you can organize your production efficiently, minimizing costs by picking the suppliers who give you the best prices. • But how do you make any such estimates if you have no market?

  39. Karl Marx (1818-1883) andFriedrich Engels (1820-1905) [39] • How do you calculate those things? • Answer: very badly • example: the food situation in the USSR. • After the disaster of the first few years, the Kremlin decided to allow the peasant a tiny bit of private land, whose produced could be sold at market. • 3% of the land was set aside for this. • During the Soviet years, fully 30% of all the food produced in the USSR came • from those little plots!

  40. [40] • Marx: • "the realm of freedom actually begins only where labor which is determined by necessity and mundane considerations ceases; • ... Freedom in this field: • socialized man, the associated producers, rationally • regulating their interchange with Nature, • bringing it under their common control • - instead of being ruled by it • Beyond it begins that development of human energy which is an end in itself, the true realm of freedom... . • The shortening of the working day is its basic prerequisite.” • [e.g. in France where the Law confines the work week to 35 hrs...]

  41. [41] • Does Marx mean that production has to have expanded to the point where everybody can have everything he wants, so that there is no conflict among people? • Is this asserted as a necessary condition for the onset of communism? • If so, we may be completely confident that that day will never come. • People’s wants are open-ended. • Socialists are quick to insist that our extravagent lust after more material goods is merely a byproduct of capitalist brainwashing... • [Or is the socialist’s tendency to say what he says the product of socialist brainwashing? ] • It certainly isn’t derived from observation of real people, • Their choice-behavior strongly suggests that they actually like good cars, big houses, trips to Florida, and so on • ... Again, notice the socialist’s real contempt for ordinary people, • -- whose professed preferences and choice-behavior is not allowed to count as evidence of what’s good for them ...

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