Debunking Austrian Economics’ Socialist Calculation Problem

The ‘Calculation Problem‘ is what market economists commonly argue against socialism but there is no reason to be smug about economic calculation under capitalism. Communist workers could hardly do a worse job of allocating investment funds than do highly fluctuating interest rates and exchange rates produced by capitalist finance. And there are good reasons for thinking that economic decision-making would be far superior to that under capitalism. To begin with, the absence of ownership barriers would increase the scope for coordination, and lessen the scope for secrecy and deception.

* * * *

Reprinting this from David McMullen’s site, Simply Marxism. Originally published in May 2017. 

The so-called Austrian school of economics makes much of what they call the socialist calculation problem. They argue that a society based on social ownership could not have an effective price system and therefore could not have the decentralized decision-making we see in a market economy.

The claim was first made by Ludwig Von Mises in the 1920s. Really all he is saying is that transfers between enterprises using a decentralized price system must be market exchanges. Without explaining why, he rules out the possibility of such transfers occurring between socially owned enterprises where there is no exchange of ownership but simply a transfer of socially owned property from one custodian to another. I am thinking here of a transfer between a supplier and user of some component in production. Without predicting what will actually happen in the communist future we could easily imagine production units using decentralized pricing to determine least costs methods of production and assigning output to the highest bidder. We could also easily imagine such a system being ultimately driven by consumer demand.

Then we had the intervention of Frederick Hayek in the 1930s and 40s. He demolished the rather lame decentralized socialist model devised by the economist Oskar Lange. That model confines decentralized price adjustments to consumer goods while price adjustments for intermediate goods are carried out by a central agency that is keeping an eye on inventory levels. Hayek correctly points out the inadequacy of such an arrangement and how it does not represent a fully functioning price system. Discrediting the Lange model is all very well, but Hayek did not then go on to show that an economy based on social ownership would in fact be limited to the Lange model. In other words he did not show that there is something about social ownership that would prevent the use of decentralized price adjustment in the allocation of intermediate goods. So I think I can justly say that all that Hayek has done is refute a straw man.

OK now we come to the final version of the argument and this was developed in the 1980s by Don Lavoie of George Mason University. He conceded that a socially owned economy could have a price system but that it would not be a very good one. In his book Rivalry and Economic Planning, he contends that any price system under social ownership would be inferior to a market based one because it would be unable to reflect the discovery process that emerges from competition between market participants. According to Lavoie, it is important, in the presence of uncertainty, to have numerous participants trying out different approaches to problems, based on their own opinions, guesses and hunches. Those who come up with the best and most highly valued products using the cheapest methods win out in this competitive contest. I fully agree with what he is saying. However, if, as I contend, decentralized custodianship is an important part of social ownership, diversity of approach should not be a problem.

Under social ownership, it would still be very common for an individual enterprise or facility to be just one of many producing the same good or close substitutes and each of them would be free to try out different production methods and product designs. Some would be new entrants who were either existing enterprises moving into a new field with synergies or starts ups established by enthusiasts with ideas that the incumbents were not open to or capable of developing. This diversity would be greatly assisted by having numerous independent agencies being responsible for disbursing funds in each industry and making their own assessment of what were good investments. At the same time, enterprises would be free to choose their suppliers based on cost and quality, and would have to outbid other users of a resource or intermediate good. Discovering and adopting the best methods and products would of course mean that it would be common to see activities abandoned and enterprises closed or reorganized. So, the only real obstacle to a decentralized price system would be the absence of daring and conscientious custodians and this gets us back to the question of whether we can do without the profit motive. Can we do our best just because we enjoy the work and want to contribute? As I argue elsewhere this does not strike me as being all that fanciful if we are sharing high and increasing affluence and all the unpleasant work is performed by robots and computers.

So the calculation argument is not a separate argument from the standard one about whether we need the profit motive.

I think it is appropriate to point out that there is no reason to be smug about economic calculation under capitalism. Communist workers could hardly do a worse job of allocating investment funds than do highly fluctuating interest rates and exchange rates produced by capitalist finance. And there are good reasons for thinking that economic decision-making would be far superior to that under capitalism. To begin with, the absence of ownership barriers would increase the scope for coordination, and lessen the scope for secrecy and deception.

So to sum up. My basic point is that when it comes to economic calculation, communism will be able to do anything capitalism can and do a better job of it.

I have links below to a number of articles that go into more detail on this topic.

https://economsoc.files.wordpress.com/2014/04/re-opening-the-debates.pdf

https://economsoc.files.wordpress.com/2014/04/the-economic-case-for-social-ownership.pdf

A Marxist Response to the the US President’s Council of Economic Advisers’ Report “The Opportunity Cost of Socialism”

Prometheus-Gives-Mankind-Fire

From ‘Simply Marxism‘, excellent new site:

A Marxist Response to the CEA’s Report “The Opportunity Cost of Socialism”

David McMullen

Simply Marxism

June 2019

Summary

Introduction

Communist Famines

Universal Awfulness

The Need for Markets

Economic Calculation

The Green Problem

Venezuela

Economic Freedom

The Nordic Countries

Medicare for All

What could a socialist state do?

Not necessarily all free

Government Revenue

Healthcare under socialism

Summing Up

References

Summary

The Council of Economic Advisers to the President (CEA) in October 2018 issued a report called “The Opportunity Cost of Socialism”. It covers a diverse range of “socialisms”. In this reply I will only be defending socialism in the Marxist sense – a period of revolutionary transition during which capitalism is transformed into communism. I will not be defending “socialism” when it simply means government intervention under the present capitalist system.

The report starts with the “communist” regimes in the Soviet Union and Mao’s China, and zooms in on the famines during the collectivization of agriculture as prime examples of their failings. I suggest that when putting their inadequacies and disasters in perspective, one needs to keep in mind a bit of background. Two things strike me as being particularly important.

First thing, the transition from backwardness to modernity has been, and still is, generally a nasty business. The prime example is western Europe. When it emerged from the Middle Ages and started on the road to capitalism, it managed with the aid of ocean-going sailing ships to devastate every other society on the planet. While this was necessary in order to bring the rest of the world into modern history it was accompanied by a lot of awful behavior such as the slave trade, and the trashing of India and China in ways that brought death and misery to millions. At the same time, on the home front, we saw the expulsion of peasants from the land, and stage one of the Industrial Revolution with its expendable workforce.  

Second thing, a successful socialist revolution requires advanced capitalism to prepare the ground. Both the Soviet Union and Mao’s China had to deal with essentially pre-capitalist societies. They were ready for capitalism not for a transition to communism, and once the regimes were taken over by people who had lost interest in revolution, “socialism” had little trouble in becoming nothing more than a hollow shell.

At the end of the day, these countries did quite well compared with similarly backward countries in the capitalist sphere. Furthermore, the Soviet Union’s feverish industrialization during the 1930s gave it the means to defeat fascism in the 1940s, something from which we have all benefited.

Through its development of industry, capitalism prepares the ground for communism by eliminating the necessity of want and toil. Once we no longer need to compete for decent material conditions, our good side can start  to shine through. We can begin to think about doing without “market incentives” and doing work for its own sake and the desire to contribute while being happy with a shared prosperity. Economists argue that this would be all in vain because of the “calculation problem” while greens claim we are stuck with want and toil because of “limits to growth”. In this paper I respond to both of these views.

The report endorses the claim of the Venezuelan regime that it is socialist when it is clearly just a very corrupt kleptocracy. The involvement of the zombie regime in Cuba is fully in keeping with this assessment. The people are starving, and are inheriting rundown industrial capacity and lots of foreign debt.

Like all “free marketeers”, the CEA attempts to dissociate capitalism from the behavior of its own state. They fail to recognize that “government failure” is endogenous to the system and not some exogenous imposition on an otherwise pristine capitalism.

The report ends with a rather stern assessment of “Medicare for All”. It points to the problems of free government provision and the negative impact of having to raise so much more tax revenue to pay for it.

I make the point that a proletarian government could well make extensive use of user pays and that as health provision increasingly takes on a communist character, care that is both high quality and economical will require less and less material inducement.

As for the increasing need for revenue, a proletarian government would have a range of options that would eliminate or greatly reduce distortions, and would have low collection and compliance costs. With income secure and distribution far more equal, there would not be the present political problems in having a regressive income tax or in employing a poll tax. Then there is Henry George’s land value tax that capitalist countries have failed to make significant use of.

Introduction

The Council of Economic Advisers to the President (CEA) in October 2018 issued a report called “The Opportunity Cost of Socialism”. (CEA 2018.) The term “opportunity cost” is used by economists and simply means the benefit you forgo by doing one thing rather than the best alternative. If what you choose to do has greater benefit you are ahead. If not then you have made a mistake. It is an odd title but does sound more profound and eye-catching than “The Failure of Socialism.”

The report starts with the “communist” regimes in the Soviet Union and Mao’s China, and zooms in on their collectivization of agriculture as prime examples of their failing. We are then brought right up to the here and now and reminded of the disaster that is Venezuela’s “Socialism of the 21st Century”. This is followed by a discussion of the Economic Freedom of the World (EFW) Index which measures an economy’s freedom from government intervention (ie “socialist policies”) and its positive correlation with economic performance. Next we are shown how the U.S. has fared better than the “socialist” Nordic Countries. Last but not least we come to the U.S. itself where there is a looming threat of socialism in the form of free health care. Here the concern is the excess burden of taxation and the perverse effects of having a third-party payer.

In the CEA report, and in popular discourse generally, the term socialism is used for a grab bag of things. For Marxists it can only mean the period of revolutionary transition that begins with the old capitalist ruling class losing its property, power and influence and then proceeds with the proletariat transforming itself and society. At the core is joint or shared ownership of the means of production which enables the typical individual to thrive for the first time. As a Marxist, it is only in this sense of the word that I am interested in defending socialism. I will not be defending “socialism” that is simply government intervention under capitalism.

Karl Marx’s referred to this transition period on various occasions. The most well-known comes from Critique of the Gotha Program (1875):

“Between capitalist and communist society there lies the period of the revolutionary transformation of the one into the other.”

And as a young man, he had this to say in The German Ideology (1846):

“Both for the production on a mass scale of this communist consciousness, and for the success of the cause itself, the alteration of men on a mass scale is, necessary, an alteration which can only take place in a practical movement, a revolution; this revolution is necessary, therefore, not only because the ruling class cannot be overthrown in any other way, but also because the class overthrowing it can only in a revolution succeed in ridding itself of all the muck of ages and become fitted to found society anew.” (Part I, section D)

Socialism in this sense should not be seen as a social system in its own right. It is an unstable transition phase during which both regression and progression are possible. It is a period of struggle between conflicting forces. The more unfavorable the underlying conditions, the more chance of regression, and hence the rocky road travelled in the 20th century. The matters raised in the CEA report will be examined from this perspective.

Communist Famines

First in the line-up we have the “communist” regimes in the Soviet Union and Mao’s China. Famines during their early years come in for special scrutiny. The events are used to highlight the question of property rights and economic incentives given that they occurred at the times when the regimes were trying to collectivize peasant agriculture while increasing the food supplies available either for the increasing non-farm population or for exports in return for investment goods such as machinery.

I am unqualified to comment on the contributing factors or the extent of these famines. So I will confine myself to two key points that should be kept in mind before anything else when looking at these events. Firstly, the transition from a backward agricultural society to a modern industrial one has been and still is a nasty business no matter where you look. Secondly, any attempt to go from feudal backwardness to socialism while circumventing capitalism is bound to have its own serious problems. So let us look at these in turn.

Universal Awfulness

Historically, we should look to Western Europe for the worst case of this universally nasty business. Its emergence from the Middle Ages into the bright shiny day of capitalism was a thoroughly messy affair. Peasants were thrown off the land and made to work in factories where they did not need to survive for long because there was no shortage of fresh “hands” to replace them. The power loom that launched the industrial revolution saw the starvation of handloom weavers. This was just the home front. Elsewhere, it was even worse. While ocean going sailing ships and the creation of a world market were just what were needed to get the west on the road to capitalism, the effect on the rest of the world was total devastation. Of course, things had to be that way unless you think that Europe should have stayed in the Middle Ages. Marx saw the whole business as nasty but necessary. It brought the rest of the world into modern history. This meant that capitalism would eventually catch on there and create an international proletariat that would march together towards world communism.

Marx expresses this globalist point of view in The Communist Manifesto (1848) as follows:

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 civilisation. 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 civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

Then in a letter to Frederick Engels of October 8 1858 he expresses the same sentiment:

The proper task of bourgeois society is the creation of the world market, at least in outline, and of the production based on that market. Since the world is round, the colonisation of California and Australia and the opening up of China and Japan would seem to have completed this process.

Here I will just look at some of the more prominent cases of European beastliness.

We have the African slave trade of course. Millions became slaves and millions died during capture and transportation. With that there was also the economic destruction. The young and fit were the target; and kidnapping or the avoidance of kidnapping was the primary activity of virtually an entire continent.  The subsequent colonial period was also somewhat less than benevolent. Forced labor, mutilation and murder in the Belgian Congo comes readily to mind. At the moment, Africans are still waiting for the benefits of being dragged into the modern world.

Then there was British rule in India where the most notable horrors were the famines.

British policy did much to contribute to the great famines during the dry years of 1876-79 and 1896-1902. Estimates range from 12 to 30 million deaths. (Davis 2007: 7) Most appalling was the fact that grain was exported to Britain while Indians starved. (Davis 2007: 299)  Also, the British created a range of realities that made the country vulnerable to famine. Land was converted from subsistence crops to export crops such as cotton and opium. There was the neglect of rural improvement such as irrigation both by the government and the local elites who were encouraged to be usurers rather than capitalists. (Davis 323ff.)

According to Davis (2007 p.346): “As far back as 1785, Edmund Burke had indicted the East India Company for allowing native irrigation to fall into decay, thereby ensuring higher famine mortality during droughts.” This was still the case a century later.

At the same time the appalling tax and debt burdens on the peasants meant the need for short-term income at the expense of longer-term fertility. And their usurious landlords opposed any improvement work that would reduce peasants’ dependence on them. (Davis 2007: 333)

As for famine relief, the railroad system ensured that grain moved speedily to where it would get the best price, which made things worse for the starving penniless. (Polanyi 2001 [1944]: 160.)

While still on India, we should not pass up the opportunity to mention the handloom weavers crushed by competition from the English power loom. In Capital, Marx quotes the Governor General reporting in the 1830s: “The misery hardly finds a parallel in the history of commerce. The bones of the cotton-weavers are bleaching the plains of India”. (Marx 1976 [1867]: 557)

Writing for the New York Daily News, Marx explained Britain’s dual role. In “The British Rule in India” (June 25, 1853) he wrote:

England, it is true, in causing a social revolution in Hindostan, was actuated only by the vilest interests, and was stupid in her manner of enforcing them. But that is not the question. The question is, can mankind fulfil its destiny without a fundamental revolution in the social state of Asia? If not, whatever may have been the crimes of England she was the unconscious tool of history in bringing about that revolution.

And in “The Future Results of British Rule in India” (July 22, 1853) he made much the same the same point:

England has to fulfill a double mission in India: one destructive, the other regenerating – the annihilation of old Asiatic society, and the laying of the material foundation of Western society in Asia.  

Looking back from the present point in time we can say that the British performed their dual role in a rather lopsided fashion. They were far more efficient at undermining the existing socio-economic system in ways that deepened the misery of the vast mass of people than they were in creating the conditions that would encourage the development of capitalism. As well as discouraging capitalism in agriculture they also discouraged any local industry that would compete with British imports. Capitalist development eventually caught on but even now there is still considerable backwardness with 50 percent of the population employed in agriculture.

When we come to China, we can blame the British once again for death and misery. It all started with the importation of Indian opium that destroyed the lives of multitudes and drained the country of silver. The Qing Dynasty was further weakened economically and politically by its defeat at the hands of the British in the First Opium War of 1841. This laid the ground for the Taiping Rebellion, a civil war from 1850 to 1864 that lead to many millions of deaths through plague, famine and the sword, together with long-term economic damage. The rebellion may have contributed to the necessary unravelling of Old China but was still a very nasty business.

The El Nino weather conditions that struck India in the late 19th century also struck China and caused deadly famines there as well. Prior to its degeneration, the Qing Dynasty had been quite adept at reducing famine and food insecurity. (Davis p. 367) In the 18th century they had budget surpluses, well stocked granaries and the ability to move large stocks of food across long distances. They also had flood control, extensive irrigation, and canal navigation.

When writing about Britain’s role in China, Marx took the same dual nature approach that he did with India. So that in The New York Daily News of June 14 1853 he wrote:

It is almost needless to observe that, in the same measure in which opium has obtained the sovereignty over the Chinese, the Emperor and his staff of pedantic mandarins have become dispossessed of their own sovereignty. It would seem as though history had first to make this whole people drunk before it could rouse them out of their hereditary stupidity. ….

All these dissolving agencies acting together on the finances, the morals, the industry, and political structure of China, received their full development under the English cannon in 1840, which broke down the authority of the Emperor, and forced the Celestial Empire into contact with the terrestrial world. Complete isolation was the prime condition of the preservation of Old China. That isolation having come to a violent end by the medium of England, dissolution must follow as surely as that of any mummy carefully preserved in a hermetically sealed coffin, whenever it is brought into contact with the open air.

In the 20th century, China got a second going-over. This time it was at the hands of the Japanese. Their emergence from feudal seclusion brought a toxic mix of industrial development and militarists who thought stealing resources would be better than buying them. In this case one cannot talk of a dual role. China was already well and truly “opened up”. This was better described as a disemboweling. Total Chinese deaths during the China-Japan War from 1937-1945 have been estimated at between 15 and 20 million. (Ho Ping-ti, 1959, p. 252)

After making a mess everywhere else, the European powers turned in on themselves and committed another major act of depravity, to wit, World War I from 1914 to 1918. This was a war of imperialist rivalries in which 15-19 million died and which some naively believed had been ruled out by the international nature of capitalism. Capitalists instead rallied to the flag, produced lots of guns and made lots of profits. Added to the war toll was the 1918 influenza pandemic made particularly deadly by war conditions. (Gladwell 1997: 55)  This saw the death of 50-100 million people worldwide.

One upshot of this awful affair was the 1917 Bolshevik Revolution in Russia. Increasing military defeats and the economic strains of the war were the final straw for the Czarist regime. And the Czar did not help matters by taking command of the armed forces and leaving his wife and Rasputin to run the government. The collapse of the regime was followed by a four year civil war in which the Reds defeated the Whites. The Whites were Russian nationalists with a penchant for massacring Jews. So the alternative to the Reds were not nice democrats; indeed, many exiled Whites subsequently joined fascist organizations.

The Need for Markets

The CEA report uses the failings in Soviet and Chinese agriculture to argue the  case for incentives and the need for private property and markets to prompt us to work and to produce the things we want. The Marxist view is that once we achieve an advanced level of economic development this is no longer the case because the possibility of eliminating want and toil changes the rules of the game. It is now possible to contemplate social ownership where the prime motivation is mutual regard and the satisfaction obtained from labor, with material reward being of diminishing importance.

The problem with Russia and China is that communists took over in countries that were still extremely backward. Their revolutions were very much historical accidents occurring before their due time. Under these conditions any movement down the communist road was bound to be very limited; and indeed in these cases the obstacles made it unsustainable. The same could be said about the rest of the “socialist camp” that emerged after World War II.[1] 

After dragging their countries out of extreme backwardness, the regimes in these countries lost interest in radical change and became quite reactionary. Socialism became equated with economic development plus the “communist” party in charge. The workers became ciphers rather than actors in their own right.

Notwithstanding this dead-end for the revolution, the efforts to overcome backwardness are nothing to be sneezed at. They fared better than comparable regions that remained under capitalist suzerainty. And in the case of the Soviet Union, feverish efforts in the 1930s meant that it was industrially prepared for the task of defeating fascism, an event best described as the greatest achievement of the 20th century. They are now relatively advanced capitalist societies in the “upper middle income” category, and comparable in terms of GNI per capita to countries such as Turkey, Mexico and Brazil that did not suffer “the scourge of communism”.

The modernizing efforts of the Mao years in China created the conditions the bourgeoisie needed once they took over after his death. Previously they had been confined to sabotaging socialism. Now they were in charge and had free rein to do it their way. They have really gone to town; and we also have India following up the rear. Both these mega-regions are undergoing considerable industrialization and have a shrinking peasantry and growing proletariat. From a Marxist perspective this augurs well for the future.

At the moment, only part of the world has achieved a level of development where the elimination of the necessity of want and toil is within reach. It comprises about 20 percent of the world’s population and primarily includes the United States, Europe and Japan. While some regions are not far out of reach, others still have quite a way to go. So, unfortunately a large section of the world’s population, mainly in Sub-Saharan Africa and South Asia, will take a few generations to get on top of their backwardness.

With increasing productivity under capitalism, a stage is reached where an equal share of the social product ceases to be shared poverty. Under less developed conditions, the prospect of shared hunger and distress impels those who are in a position to do so to exploit others through plunder, slavery, serfdom or the ownership of the means of production. However, as the average share begins to promise an increasing degree of prosperity, the imperative to fare better than others diminishes.

Mechanization and automation, under developed capitalism have done much to reduce the odious or toilsome nature of work. Pick and shovel work and carrying heavy loads are things of the past and much of the remaining menial and routine work in the manufacturing and service sectors will be automated in the next generation. The work we are left with will be primarily intellectual in nature and potentially interesting and challenging. It begins to be something one could imagine doing for its own sake.

We can expect improved ability to perform complex work in a future communist society as many of the conditions that cause stunted development are eliminated. These include lack of family support, peer pressure to underperform and an inadequate education system. Social ownership will end the isolation of education from production and other activities, so uniting learning and doing. Workers will help each other to learn. We will also benefit from an increasing understanding of human development and what causes learning difficulties.

Under these new conditions where we no longer need to compete for a decent material existence, it now becomes possible to base a society on mutual regard and social ownership of the means of production. We can discard the dog-eat-dog world of capitalism where sociopaths are often the biggest winners.

Mutual regard is enlightened self-interest. You only thrive when others thrive. You do the right thing by others because you know that an increasing majority are doing the same. You know you are contributing to a “pool” of well-being that everybody shares.

This will transform work. It will end what Marxists call alienation. We will do what we can to make the work of others productive and rewarding. These relations with our fellows are what make it possible for work to become something performed for its own sake rather than simply a necessary means to an income. At the same time, we are happy with your equal share knowing that others on the whole are doing their best.

The thriving of others is critical in all areas of life. You cannot thrive if those who impact on your life are disturbed, frustrated and poorly functioning.

Mutual regard will not just be a case of caring more. It will have to also mean being willing and able to confront bad behavior directed against ourselves or others. This will require us to cast off passive, submissive and weak-spirited habits engendered by our subordination under capitalism, and acquire a strength of character that gives us the confidence and moral courage to deal with bullies, schemers and people with a whole gamut of behavioral issues. We will not let the worst people set the tone. Top of the list are those who want to lord it over us and become a new ruling class.

Critical to the process is the emergence of a large and increasing number of people who see the revolutionary transformation of the conditions around them as an important mission in life.[2]

Economic Calculation

Most economists would argue that this is all in vain. They tell us that an economy based on social ownership has an inherent economic calculation problem: in the absence of market transactions between enterprises it could not have a properly functioning price system.[3]

While we do not know how economic decisions will be made in the future under communism, we can say that there is nothing about the non-market transfers of custody between economic units that would prevent decentralized decision-making based on prices.

We can also counter the claim that any price system under social ownership would be inferior to a market based one because it would not reflect the discovery process that emerges from competition between market participants. It is true that in the presence of uncertainty, there needs to be multiple participants trying out their own approaches to problems on the basis of their own opinions, guesses and hunches. Those that come up with the best and most highly valued products using the cheapest methods win out in this competitive contest. However, social ownership does not throw up any inherent obstacles to a diversity of approaches.

It would still be very common for an individual enterprise or facility to be just one of many producing the same good or close substitutes and each of them could be free to try out different production methods and product designs. Some will be new entrants who are either existing enterprises moving into a new area with synergies or starts ups established by enthusiasts with ideas the incumbents are not open to or capable of developing. This diversity could be greatly assisted by having a number of independent agencies (‘banks’) disbursing funds in any given industry on the basis of their own assessment of what are good investments. Indeed, diversity could be planned if there is not enough of it emerging of its own accord.

At the same time, it is possible to imagine enterprises being free to choose their suppliers on the basis of cost and quality and having to outbid other users of a resource or intermediate good.

Economists have also spilt much ink on the impossibility of effective central economic planning. However, their view now seem out of date. Quantities for highly disaggregated product codes can be fed into an input-output table in real time with modern computer networks, and numbers crunched using modern computers and appropriate algorithms.[4] 

Collective ownership could do a great job of producing what people want. This is despite the widely held view that it would require some central body to arbitrarily decide on final output.  Individuals could receive vouchers that they could spend on what they choose, with prices responding to changes in supply and demand. Consumer surveys could play a role. There could be democratic decisions on what collective goods to produce and the rate of investment, and these could be funded through taxation. And there would be nothing to stop the use of interest rates to guide investment decisions.

Initially people’s income will mainly be a wage that is a market price for their labor power but even when we get a fair way down the communist path, and income becomes pretty much separated from work performed, you could still have shadow prices for labor power where enterprises put in bids for the various kinds of workers they require.

Not only will an economy based on social ownership work fine. It will do a better job than capitalism. Capitalism may be streets ahead of stagnant pre-capitalist societies, however, the gap between what is possible and what capitalism delivers is wide and getting wider. It is an increasing fetter on the economy’s productive forces that social ownership can remove. The revolutionary transformation of the economy and society will take off the brakes by eliminating economic crises, by vastly increasing the science and innovation effort, and by unleashing the initiative and enthusiasm of workers that capitalism cannot tap.

The Green Problem

While the economists are telling us that eliminating the necessity of want and toil cannot be the basis for communism, the green movement is telling us that want and toil are unavoidable. They say there are limits to growth and we are already exceeding the planet’s carrying capacity. However, I would suggest that prosperity for all is not difficult to imagine with scientific and technological advances. Where land is a constraint, we can build higher into the sky and tunnel deeper into the ground. Precision farming, biotechnology and other innovations will provide far more food while using less land and water, an already established trend that is gathering pace in spite of opposition from greens. There will be limitless supplies of clean energy from a range of resources. We can already be sure that future generations of nuclear power technology would be able to rely on virtually inexhaustible fuel resources. Then there are future technologies we can presently only guess at. For example, biotechnology may open up new ways of harnessing the sun. The mineral resources we rely on are more than sufficient, even without considering future access to extraterrestrial resources and our ability to devise ways to substitute one resource for another. We will protect the biosphere with more advanced and better funded waste and conservation management. Indeed, in many respects we have seen capitalist countries get cleaner as they get richer.

Venezuela

The report provides Venezuela as a present-day example of a country with highly socialist policies. The regime calls itself ‘socialist’ and so do its supporters and opponents. However, it  is, of course, just an oppressive kleptocracy and hated by the vast majority. Like all kleptocracies it places as much of the economy as possible under state control in order to suck it dry. It is a country with 4,000 generals all on the take. Anyone who calls this ‘socialism’ is just being disingenuous, whether they are supporters or opponents of the regime.

Of course, the fact that the regime describes itself as socialist is no great surprise. You could not really have expected Chavez to call his regime “Kleptocracy of the 21st Century”. His socialist rhetoric fitted well with his anti-American demagoguery. Everyone who opposes the regime is an imperialist agent and any problem the regime was having was due to imperialist sabotage.

Kleptocracy was accompanied by the buying of votes from the poorest section of society. However, these bribes did not represent a redistribution away from the rich. Just like the billions stolen by the “boliburguesía”, these benefits were at the expense of future consumption. They were funded by oil revenue that should have gone into maintaining and increasing production capacity and by foreign loans. They have been eating their seed corn.

All Chavez did was create hopes that he then shattered. His education and healthcare schemes are now a burnt-out wreck. There was never any “from below”. Chavez dispensed the cash, and policies were his thought bubbles pronounced from on high.

There are Chavez fans who try to retrieve something by claiming that the present Maduro regime has strayed from Chavismo. In fact, it has simply taken it to the next level.

Then there is the regime’s sinister relationship with Cuba where it receives police state support in return for oil. Cuba has a zombie regime on which Marxism long ago past judgement. It is very much a Soviet clone on the lines of the old eastern Europe. Its socialism is state ownership with their “communist” party in charge. Society is not undergoing a socialist transformation and the best thing the government can do is assist the transition to a more normal bourgeois society by holding free elections, a bit like those that occurred in eastern Europe 30 years ago.

The fact that much of the “left” has some sympathy for the regimes in Caracas and Havana is one of a number of signs that it is part of the problem rather than the solution.

Economic Freedom

The report refers to studies that show a strong positive association between “economic freedom” and economic performance. The former is measured using the Economic Freedom of the World (EFW) Index which measures an economy’s freedom from government intervention (ie socialist policies). (Fraser Institute 2018)

 “The indicators are aggregated to five main categories, which are then given equal weight in the overall index. The first category is the size of the government in terms of spending, taxation, and the size of government-controlled enterprises. The second is the legal system and property rights in terms of the protection of persons having such rights. The third category is referred to as “sound money,” and measures policies related to inflation. The fourth is free international trade, which means that citizens are free to trade with other countries. The fifth is limited regulation, which addresses the freedom to exchange and trade domestically.” (CEA 2018: 24)

They are talking here about government intervention in a capitalist economy.  Of course, Marxists do not have a dog in this fight because they are not interested in tinkering with capitalism only eliminating it. But that being said, free market or “neoliberal” economics has an extensive literature critiquing such tinkering that is fairly sound and represents a real contribution to economic thought. However, it falls short by ignoring the fact that this government failure is a form of market failure. These problems are seen as some sort of exogenous imposition on what would otherwise be a pure pristine capitalism. In fact, they are very much endogenous to the system.

A lot of government interference in the free market serves the vested interests of the capitalists and workers in the favored industries, and the bureaucrats and politicians who make a career out of it. It enhances the value of their property rights – their capital or their job and career prospects – at the expense of society as whole. Vested interest is just another name for bourgeois private property which in turn is just another name for capitalism.

Welfare programs have become great opportunities for bureaucratic empire building, but historically the primary motivator was a desire to save capitalism from itself. There was a concern that if they did not introduce a range of social welfare reforms workers would be seduced by communism. It was an attempt by the system to inoculate itself from that dreaded infection.

The Nordic Countries

The report wants to disabuse American socialists and left liberals of their love affair with the Nordic countries.

They point out that the Nordic countries have abandoned many of their much admired “socialist policies” as measured by their much improved EPW Index. Besides, their higher levels of government spending do not look quite so socialist when you take into account that it is middle income earners rather than the rich who bare the tax burden.

We are also reminded that these countries are poorer economic performers with lower GDP per capita than the US. While not wanting to spend any time defending an “alternative” form of capitalism, it is difficult not to at least suggest that any comparison should also look at how people at the bottom of the heap fare.

The report also claims that the value of their free education is less than the US when measured by earning differential between graduates and non-graduates. They see this as an example of how free provision leads to lower quality. The logic is that there would be a tendency to underfund the institutions and students would be less concerned about the standard of their degree. Determining whether this is the case would require knowing a lot more about tertiary education in Nordic countries and other tuition-free countries. This is a task I am quite unwilling to take on. Furthermore, nothing hinges on it. Any problems of free provision in the Nordic or other capitalist countries tells you nothing about free provision in a society undergoing a proletarian revolutionary transition. And I must add there is nothing preventing such a society from having tuition fees.

Medicare for All

The CEA report criticizes proposals for a universal single payer health system supported by the likes of Bernie Sanders and usually dubbed “Medicare for All” (Sanders 2017).  Such a system would replace all existing private health insurance and would leave the patient with no out of pocket expenses, no copayments or deductibles. The report points to a range of problems with free government provision and to the negative impact of having to raise so much more tax revenue to pay for it.

They describe this as patients and bureaucrats spending other people’s money. Patients would have an incentive to overuse services such as doctor’s visits much like a prepaid all you can eat buffet. The healthier would crowd out the less healthy and there would be no incentive to seek out the cheapest options. At the same time bureaucrats will not have the incentive to economize or make the best purchases.

A government medical insurance monopoly as proposed would be less efficient than having many competing companies. In particular, the government healthcare bureaucracy has shown itself to be very poor at detecting fraud. Efforts to rein in government spending are bound to affect the health budget leading to waiting lists and quotas for particular treatments.

Then there is the fiscal burden of such a program. A free universal healthcare system would require a huge increase in income tax collection unless other government spending was cut drastically.[5] This is not just the same as taking in tax what people would otherwise have spent on their own healthcare because of the so-called excess burden or deadweight loss of taxes in excess of the revenues.

“Earning additional income requires sacrifices (a loss of free time, relocating to an area with better-paying jobs, training, taking an inconvenient schedule, etc.), and people evaluate whether the net income earned is enough to justify the sacrifices. Socialism’s high tax rates fundamentally tilt that trade-off in favor of less income.” (CEA page 12)

What could a socialist state do?

I will leave it to “socialists” of the Bernie Sanders variety to put the case for public provision of healthcare under the present capitalist system. My only concern is whether the CEA’s critique has any relevance for a society undergoing a proletarian revolution.

Not necessarily all free

While a proletarian state could have free provision of healthcare, there would be nothing to rule out significant levels of user pays.

You could have individuals paying for insurance that covers unlikely and unpredictable but high cost health events. There could be a single insurer or mutual insurance schemes owned by their members (friendly societies). At the same time, more routine or predictable health spending could be out of pocket, assisted by health saving and loan schemes. In the case of drugs, you may have patients paying the production cost while research costs are paid for out of taxation.

To the extent that people are financially secure and receiving an adequate wage, training allowance or pension we can move away from healthcare being part of the welfare system. Of course, special provisions will have to be made for people with unusually serious medical needs.

Government Revenue

What about government revenue under socialism? A proletarian state could, for the following reasons, have high levels of taxation without the present distortions.

To begin with income tax would not have to be progressive. Tax could be a constant percentage of income  or you could even have marginal rates that decline or even go to zero. To the extent that wage differences continue, they will be for good economic reasons that should not to be undone by progressive income taxation.

Scope for reducing marginal rates is limited at the moment where the tax system is seen as a means of redistribution in a world where there are some people on extremely low and insecure income and others on extremely high income such as capitalists with the dividends and senior executives pulling in economic rents.[6]

As communism takes root and work is primarily undertaken for its own sake and from a desire to contribute, the incentive effect of income tax would be reduced even further. Also, a proletarian state could make greater use of taxes that do not distort wages or prices and have far lower collection costs.

Firstly, there are poll or head taxes. These are an equal amount paid by everyone on a regular basis regardless of their income. These are unacceptable under capitalism where income for some people is low and insecure. Indeed, it caused riots when Margaret Thatcher tried to introduce one to cover the cost of local government. In the context of medical insurance, it is worth noting that premiums in a compulsory scheme would effectively be an hypothecated poll tax. Collection and compliance costs would be low because the individual simply has to provide their bank account details and authorize regular payments just like a utility bill.

The other non-distorting tax is one imposed on land values. People would pay a tax for the natural and built amenities around where they live. If all land is deemed to be publicly owned one could describe this as a land rent. (Whether people own their residence is a separate matter.) This tax is famously associated with the 19th century economist Henry George.

The tax would be set so as to “ration” a location to those who place the highest value on living there. At the same time, improving the amenity of an area would ensure a tax revenue stream to pay for it. This would include building hospitals and other health facilities.

Collection costs would be low because you cannot conceal or move land and there are well established methods for calculating the tax. The amount that can be collected from this tax will, however, be reduced by other taxes that people have to pay. Anything that reduces their effective income will reduce what they are willing to pay in land rent. Unsurprisingly land value taxes under capitalism are opposed by wealthy landowners.

Healthcare under socialism

Under a proletarian regime, healthcare, like all sectors of the economy, will undergo a stage by stage transformation. Larger capitalist enterprises would have to come fairly quickly under state control. Smaller businesses in many cases would remain under individual or “cooperative” ownership for somewhat longer.

As with all the other sectors of the revolutionary transitional economy, healthcare will display its greater efficiency and effectiveness as it takes on more communist characteristics. Contributing to the best outcomes will become the overriding motivation of medical workers. This will include overcoming all of the authoritarian nastiness found here as everywhere else. There will be no deferring to incompetent or corrupt superiors nor a passive “I just work here” attitude. Everyone will be a “whistle blower” if necessary, except they will be fixing the problems themselves.

Summing Up

By setting out the full range of confusion on the subject of socialism, the CEA report has provided a good opportunity to both explain and defend the Marxist view on the matter.

When Marxists use the term socialism, they mean the revolutionary transition period when capitalism is transformed into communism. Attempts at this transition to date have been defeated by unfavorable conditions and balance of forces, particularly those arising from economic and social backwardness. These defeats have been achieved by means of socialist regimes losing their revolutionary nature and being “socialist” only because the people running the show continued to call themselves communists.

Key to the success of proletarian revolution is full capitalist development. This will eliminate the necessity of want and toil that historically has set all against all. When it comes to “economic calculation” there is nothing that capitalism can do that socialism cannot do better.

A proletarian government would be in a better position to freely provide healthcare and other goods and services particularly as conditions become more communist. However, there is nothing about socialism that rules out extensive user pays.

Most of the CEA report is taken up with government intervention under capitalism. The report calls this socialism, as do a lot of people. However, this is not socialism by the reckoning of Marxists and its success or failure is not their concern.

References

Cottrell, W. Paul and Allin Cockshott 1993. Towards a New Socialism

http://ricardo.ecn.wfu.edu/~cottrell/socialism_book/new_socialism.pdf

Council of Economic Advisers to the President (CEA). ”The Opportunity Cost of Socialism”, October 2018

https://www.whitehouse.gov/wp-content/uploads/2018/10/The-Opportunity-Costs-of-Socialism.pdf

Davis, Mike 2007. Late Victorian Holocausts: El Niño famines and the making of the Third World. Verso. London

Fraser Institute 2018. The Human Freedom Index 2018

https://www.fraserinstitute.org/studies/human-freedom-index-2018

Gladwell, M. (29 September 1997). “The Dead Zone”. New Yorker. (Cited in “Spanish Flu” Wikipedia.)

Ho Ping-ti. 1959. Studies on the Population of China, 1368–1953. Cambridge: Harvard University Press. (Cited in “World War II casualties” Wikipedia.)

Lavoie, Don 1985. Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered, Cambridge University Press,

Marx, Karl 1853. “The British Rule in India” Marx-Engels Collected Works Volume 12

https://www.marxists.org/archive/marx/works/1853/06/25.htm

———.1853. “Revolution in China and Europe.” Collected Works of Marx and Engels, Volume 12.  Lawrence & Wishart. London.  pp. 93-100.

———.1858. “Marx to Engels 8 October 1858” Collected Works of Marx and Engels, Volume 40.  Lawrence & Wishart. London.  pp. 345-7

———.1859. “The Future Results of British Rule in India” Collected Works of Marx and Engels, Volume 12.  Lawrence & Wishart. London.  pp. 217-222.

———. 1875. Critique of the Gotha Programme. Online edition.

https://www.marxists.org/archive/marx/works/1875/gotha/.

———. 1976 [1867], Capital, volume 1 (Penguin).

Marx, Karl and Frederick Engels.1846. The German Ideology, Part 1, Section D

https://www.marxists.org/archive/marx/works/1845/german-ideology/ch01d.htm#d4

———. 1848. The Communist Manifesto. Online edition.

https://www.marxists.org/archive/marx/works/download/pdf/Manifesto.pdf.

McMullen, David (2019) “The Forgotten Message of Marxism”, Simply Marxism

www.simplymarxism.com

Polanyi, Karl (2001 [1944]).  The Great TransformationThe Political and Economic Origins of Our Time.

Beacon Press. Boston.

Sanders, B. 2017. “Options to Finance Medicare for All.”

https://www.sanders.senate.gov/download/options-to-finance-medicare-forall?

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[1] The only industrialized exceptions were East Germany and the Czech part of Czechoslovakia. The regimes were the product of the Soviet Red Army rather than any homegrown proletarian revolution and had no independent existence.

[2] For more on the problem of proletarian revolution see the pages 11 – 14 of the booklet Some Forgotten Marxism which is available to download at www.simplymarxism.com

[3] Lavoie (1985) best sums up this argument. There is also plenty of material at mises.org.

[4] See Cottrell and Cockshott (1993).

[5] The CEA report, does not discuss the possibility of reducing the work incentive problem by the federal government introducing a value added tax (VAT) on goods and services. This is very common in other countries. On the other side of the ledger, they do not mention the incentive to free ride by working less when the government pays for what you would otherwise have to pay for. You have a reduced need for income.

[6] They are paid more than their “opportunity cost” which is what they would be paid if they did an ordinary paying job. Stockholders feel they have to bid for the “best” and also reward them in ways that encourage them to act in their interest.

A Genuine Left Would Support Western Civilisation – by David McMullen

First published at On Line Opinion

… western civilisation is no longer western. It is global and a far better term is modernity. By the end of this century we can expect it to have totally supplanted all pre-existing conditions, even in the most backward regions. This will be a jolly good thing too.

* * * * * *

The pseudo-left wants to stop a multi-million-dollar donation by the conservative Ramsay Centre for Western Civilisation to the Australian National University for a new course on Western civilisation. According to the heads of the staff and student unions at the university it is racist to prioritize western history or culture. It mustn’t be “privileged”.

I guess we are supposed to look back lovingly at all those civilisations that crumbled in the face of the western onslaught, for example, Czarist Russia, Qing China, Mughal India, Ottoman MENA and Aztec Mesoamerica. And then of course there were the remnants of hunter-gathering society that lived in harmony with nature, and from whom we can learn so much, so we are told.

Of course, western civilisation is no longer western. It is global and a far better term is modernity. By the end of this century we can expect it to have totally supplanted all pre-existing conditions, even in the most backward regions. This will be a jolly good thing too.

Western history should indeed be prioritized over other history because that is where modernity began. The history of other regions is still important, but mainly in order to understand how their traditional cultures are an obstacle to modernity.

By studying western history, we get to understand how the connection between the economic, social and political transform the way be live.

The collapse of the Roman Empire is a good place to start. That’s when things slowly began to get interesting. Under the dead hand of Rome, innovation had been forbidden or a matter of indifference. But with the “Dark Ages” came something of a technological revolution in comparison. For the first time we saw the harnessing of horse-power with the adoption of the saddle, stirrups, horse shoes, bridle, horse collar and tandem harness. Water and wind mills sprang up everywhere.  The cranks and gears used in mills would become the basis of modern machinery. Lock gates in rivers and streams appeared for the first time. There were ships that could sail into the wind. And in the meantime, the church was doing a good job preserving literacy for a later time when it could be put to good use.

We gradually saw the spread of the market. This was assisted by the political fragmentation of Europe where the local thugs (sorry, lords) did not have their own raw materials for weapons and finery, and also of course by the development of ocean going sailing ships.

However, the feudal conditions became a fetter that could only be broken by the development of capitalist property relations. Small scale production could not meet the demand of the growing markets. Production carried out with the cooperation of large numbers of workers using machinery replaced small scale individual production. Steam power for machines and locomotion replaced wind and water.

This new economic system was compatible with, indeed required, more freedom of thought and action by the individual. A totally new society sprung up.

Studying the emergence of the modern world also gives an appreciation of how progress can be a messy thing.

When Martin Luther undermined a pillar of the feudal order, the Catholic Church, the achievement did not come cheaply. Notably, the subsequent religious wars killed off a quarter or more of the population of central Europe and half the male population of Germany.  About the same time, we had The English Civil War. This was critical to the creation of modern Britain but was a protracted bloodbath and lead to the death of 40 percent of the population of Ireland. Then it took a century of mucking about for the French Revolution to replace the old feudal regime with a respectable bourgeois one.

And nearer to the present we have seen the rocky road out of feudalism achieved in the former Czarist empire, China and eastern Europe. In the 1940s, we had to resist fascism’s attempt to roll back history, and that struggle cost millions of lives. So, if you think change seems pretty messy in the Middle East at the moment just look back at modern history.

The Ramsay Centre for Western Civilisation will of course want modernity to stop at capitalism. They are aptly called conservative. In their view, not only are capitalist property relations superior to older forms but attempts to move beyond them are bound to be a tragic folly. Exhibit one is the failed attempts in the 20th century to create post-capitalist societies on the back of totally unsuitable pre-capitalist conditions. Exhibit two is the doubtful results of “socialist” tinkering under capitalism. That sort of evidence would not get past a committal hearing but it has wide acceptance.

We then have the revolutionary wing of western civilisation that I belong to. Modernity in its preliminary capitalist form is a vast advance on everything else past or present and lays the conditions for the next stage. We should welcome its global spread.

In a letter to Engels of October 8 1858 Marx wrote: “The proper task of bourgeois society is the creation of the world market, at least in outline, and of the production based on that market. Since the world is round, the colonisation of California and Australia and the opening up of China and Japan would seem to have completed this process.” He was being rather optimistic but his point of view is clear. And notice the reference to Australia. No black armband there. (You may like to check out more Marx at the Marx Engels Archive.)

While capitalism is an advance it is still the exploitation of the many by the few.  But as luck would have it capitalism is an incubator of the next stage, a classless society based on social ownership of the means of production. Capitalism turns most people into workers with no vested interest in capitalism; it unshackles our brains from pre-capitalist, traditional junk; and it creates a level of economic development that makes it possible to imagine equality because it would no longer be a case of sharing want and toil.

We can expect a messy transition. To start with those who want change will be confused about what they want and how to get there while those opposed to change will have a very clear idea on both counts and years of practice. But let’s hope the transition is not as tortuous as the transition from feudalism to capitalism.

However, that is for the future. At the moment there is no revolutionary movement nor any support for revolution. For now, fully entrenching and advancing the present capitalist stage of modernity is the priority. There are still large regions of the world where backwardness and tyranny reign supreme.  MENA is a priority area from the point of view of lifting tyranny from people’s backs. Then in the long hall we have Sub-Saharan Africa. It is the most backward region and has a huge and growing population. Possibly a third of people will live there by century’s end.

Unfortunately, there seems to be an alignment of toxic trends hampering this process. In the US and Europe, “both sides of politics” are heavily infected by isolationism and protectionism. Europe has its disgraceful agricultural policy that adds to Africa’s misery and a limited ability to project military power.  Then we had Obama’s appalling failure to stay the course in Iraq and to intervene in a timely fashion in Syria.

And now nobody is denouncing Trump’s failure to do the right thing and occupy Syria while arranging regime change. Doing nothing is a policy fully endorsed by both the pseudo-left and the alt-right. The former all supported Saddam and now some even support Assad.

The pseudos have also built a whole movement over the last 20 years or so opposing the global spread of capitalism. And even more insidiously, they oppose economic development because it is “unsustainable”. They want the darkies to live in noble simplicity.

To get down to brass tacks, a genuine left would align itself with the neo-cons and support their re-emergence. They stand for an activist foreign policy of regime change, nation building and economic development. There needs to be military support for change where it has a chance of success. (It is worth noting here that the recent Iraqi elections have been surprisingly open notwithstanding the violent efforts of Baathists and Islamo-fascists.)  Diplomacy should be heavily focused on giving kleptocrats and tyrants a hard time.

Australia could play a special role given the failure of the Americans and Europeans. We can pressure them to act and take a much more activist military policy. Being a pipsqueak power, our contribution is limited. However, we can be good at training and deploying special forces.

* * * * * *

David McMullen lives in Melbourne and he can be found at The Communist Manifesto Project.

 

 

 

Marx Supported Capitalist Globalization

Marx Supported Capitalist Globalization

Thanks to David McMullen

Today’s “Marxists” share with the rest of the pseudo left an opposition to capitalist, indeed any, globalization. This puts them totally at odds with Marx. The following quote from The Communist Manifesto leaves no doubt about Marx’s pro position:

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 Reactionists, 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 civilised 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 inter-dependence 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 the 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 civilisation. 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 civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

Then in a letter to Engels of October 8 1858 he wrote:

The proper task of bourgeois society is the creation of the world market, at least in outline, and of the production based on that market. Since the world is round, the colonisation of California and Australia and the opening up of China and Japan would seem to have completed this process.

In his other writings, Marx supported Europe’s colonial conquests, the “process” that got globalization going.  In his view Europe was the only source of capitalism which in turn was the necessary  precursor of communism. Support for this historical necessity did not prevent him from expressing his disgust at the barbarity and hypocrisy of the Europeans as they went about this conquest nor was he impressed with the tardy pace at which the old societies were being replaced by the new. What he was doing was recognizing that capitalism has a dialectical or contradictory nature. Only capitalism can create the conditions for its own demise. You have to support it in order to oppose it.  In “The British Rule in India” New York Daily News of June 25, 1853, he wrote:

These small stereotype forms of social organism [autonomous villages] have been to the greater part dissolved, and are disappearing, not so much through the brutal interference of the British tax-gatherer and the British soldier, as to the working of English steam and English free trade. Those family-communities were based on domestic industry, in that peculiar combination of hand-weaving, hands-spinning and hand-tilling agriculture which gave them self-supporting power. English interference having placed the spinner in Lancashire and the weaver in Bengal, or sweeping away both Hindoo spinner and weaver, dissolved these small semi-barbarian, semi-civilized communities, by blowing up their economical basis, and thus produced the greatest, and to speak the truth, the only social revolution ever heard of in Asia.

Now, sickening as it must be to human feeling to witness those myriads of industrious patriarchal and inoffensive social organizations disorganized and dissolved into their units, thrown into a sea of woes, and their individual members losing at the same time their ancient form of civilization, and their hereditary means of subsistence, we must not forget that these idyllic village-communities, inoffensive though they may appear, had always been the solid foundation of Oriental despotism, that they restrained the human mind within the smallest possible compass, making it the unresisting tool of superstition, enslaving it beneath traditional rules, depriving it of all grandeur and historical energies. We must not forget the barbarian egotism which, concentrating on some miserable patch of land, had quietly witnessed the ruin of empires, the perpetration of unspeakable cruelties, the massacre of the population of large towns, with no other consideration bestowed upon them than on natural events, itself the helpless prey of any aggressor who deigned to notice it at all. We must not forget that this undignified, stagnatory, and vegetative life, that this passive sort of existence evoked on the other part, in contradistinction, wild, aimless, unbounded forces of destruction and rendered murder itself a religious rite in Hindostan. We must not forget that these little communities were contaminated by distinctions of caste and by slavery, that they subjugated man to external circumstances instead of elevating man the sovereign of circumstances, that they transformed a self-developing social state into never changing natural destiny, and thus brought about a brutalizing worship of nature, exhibiting its degradation in the fact that man, the sovereign of nature, fell down on his knees in adoration of Kanuman, the monkey, and Sabbala, the cow.

England, it is true, in causing a social revolution in Hindostan, was actuated only by the vilest interests, and was stupid in her manner of enforcing them. But that is not the question. The question is, can mankind fulfil its destiny without a fundamental revolution in the social state of Asia? If not, whatever may have been the crimes of England she was the unconscious tool of history in bringing about that revolution.

In “The Future Results of British Rule in India” New York Daily News of August 8, 1853, he wrote:

England has to fulfill a double mission in India: one destructive, the other regenerating – the annihilation of old Asiatic society, and the laying of the material foundation of Western society in Asia.

He expressed a similar view when writing about  Britain’s beastly treatment of China. So that  in “Revolution in China and In Europe”, New York Daily News, June 14, 1853 we read:

It is almost needless to observe that, in the same measure in which opium has obtained the sovereignty over the Chinese, the Emperor and his staff of pedantic mandarins have become dispossessed of their own sovereignty. It would seem as though history had first to make this whole people drunk before it could rouse them out of their hereditary stupidity.

and then:
All these dissolving agencies acting together on the finances, the morals, the industry, and political structure of China, received their full development under the English cannon in 1840, which broke down the authority of the Emperor, and forced the Celestial Empire into contact with the terrestrial world. Complete isolation was the prime condition of the preservation of Old China. That isolation having come to a violent end by the medium of England, dissolution must follow as surely as that of any mummy carefully preserved in a hermetically sealed coffin, whenever it is brought into contact with the open air.

In an article published in the Deutsche-Brüsseler-Zeitung No. 7, January 23, 1848, Engels expressed his delight at America’s victory in the war with Mexico and the conquest of California, Texas and areas in between. In their footnotes the editors at Progress Press in Moscow try to make out that both Engels and Marx later took a different view. They cite an 1861 article by Marx called “The Civil War in North America”. Here Marx mentions how expansionism at the time was driven by the slave owners. Although he makes no actual mention of the Mexican-American War. In hindsight we can see that one good thing about the annexations was that they contributed to the outbreak of the Civil War which the slave-owners went on to lose. Their attempt to spread slavery to the new territories was the last straw.  And we can now say without fear of contradiction that capitalist development greatly benefited from the switch in sovereignty. Here is a link to the 1861 article. It is no use on the Mexican-American War but it is a very illuminating exposition of the expansionist threat posed by the slave states and a very good argument against British “neutrality”.

Marx was quite unsupportive of rebellions by reactionary or backward elements in colonial societies. These included the Taiping Rebellion in China and the Indian Mutiny.

In “Chinese Affairs” Die Presse, No. 185, July 7, 1862, Marx has nothing positive to say about the Taiping Rebellion that rocked southern China from 1850 to 1864:

They have no slogans. They are an even greater abomination for the masses of the people than for the old rulers. They seem to have no other vocation than, as opposed to conservative stagnation, to produce destruction in grotesquely detestable forms, destruction without any nucleus of new construction.

“Marxists” have tried to tell a different tale. Over at The Marx and Engels Internet Archive they have a section entitled  Articles on China 1853 – 1860.  It has other articles that deal with rebellion but not the  Die Presse article for copyright reasons. In their introduction they paint the Taiping in glowing colors:

At the same time, the Taiping rebellion broke out in 1850 and attacked the status quo Confucianist Manchu Dynasty — which had ruled since 1644. The rebellion was based in social revolutionary ideas of equality and was popular among the masses. It abolished private property, established sexual equality, and banned drugs (from alcohol to opium). By 1853, it dominated much of SE China. It would not be until 1864 that the Taiping capital of Nanking was captured by the imperial Manchu government.

Progress Press also have this rather gratuitous footnote in Volume I of Capital:

 In 1850-64, China was swept by an anti-feudal liberation movement in the form of a large-scale peasant war, the Taiping Revolt.

The fairly uncontroversial Wikipedia entry on the Taiping Rebellion gives a far less flattering picture.

There is also an attempt to paint the Indian Mutiny as a national liberation movement. The Soviet  Foreign Languages Publishing House in 1959 brought out a collection of articles by Marx on the Indian Mutiny entitled The First Indian War of Independence, 1857-1859. Also the The Marx and Engels Internet Archive has a web page entitled The First Indian War of Independence (1857-1858)  
Marx does not explicitly repudiate the Mutiny in the way that he did in the case of the Taiping Rebellion. However, the total absence of any explicit statement of support is just as telling. He is very concerned to expose British military incompetence and brutality. He is also pleased by the financial and political strain it is placing on Britain.  But that is as far as it goes. It is hard to imagine him supporting a pack of princes who wanted to reinstate the Mogul empire after what we know about his view on the role of the British in India.

The editors of Progress Press were also embarrassed by an article by Engels called “French Rule in Algeria” (The Northern Star January 22 1848). Here he wrote:

Upon the whole it is, in our opinion, very fortunate that the Arabian chief has been taken. The struggle of the Bedouins was a hopeless one, and though the manner in which brutal soldiers, like Bugeaud, have carried on the war is highly blameable, the conquest of Algeria is an important and fortunate fact for the progress of civilisation. The piracies of the Barbaresque states, never interfered with by the English government as long as they did not disturb their ships, could not be put down but by the conquest of one of these states. And the conquest of Algeria has already forced the Beys of Tunis and Tripoli, and even the Emperor of Morocco, to enter upon the road of civilisation. They were obliged to find other employment for their people than piracy, and other means of filling their exchequer than tributes paid to them by the smaller states of Europe. And if we may regret that the liberty of the Bedouins of the desert has been destroyed, we must not forget that these same Bedouins were a nation of robbers,—whose principal means of living consisted of making excursions either upon each other, or upon the settled villagers, taking what they found, slaughtering all those who resisted, and selling the remaining prisoners as slaves. All these nations of free barbarians look very proud, noble and glorious at a distance, but only come near them and you will find that they, as well as the more civilised nations, are ruled by the lust of gain, and only employ ruder and more cruel means. And after all, the modern bourgeois, with civilisation, industry, order, and at least relative enlightenment following him, is preferable to the feudal lord or to the marauding robber, with the barbarian state of society to which they belong.

Progress Press in its footnotes refers to this resistance as a liberation struggle. They also then claim that in an 1844 article Engels had made commendable noises about the resistance and that an article “Algeria” written for the New American Encyclopaedia in 1857 reverses the position expressed in the 1848 article. There is nothing in either article that can be construed in this way. An editor’s footnote to the latter article claims that the relevant material was left out by the encylcopaedia editors and this is conformed by a letter from Engels to Marx on 22 September 1857. The letter shows nothing of the sort. The reader is invited to read those three  pieces to make up their own mind.

These views of Marx are not at odds with support by communists for the 20th century anti-colonial movement. By that stage the movement was primarily lead by western educated elements who sought to modernize their countries rather than take them backwards.  Although there were some oddities such as Mahatma Gandhi, and  independence brought many monsters like Idi Amin in Uganda and Mobutu in Zaire, and the whole process was badly affected by the Cold War.

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To each according to their needs…

The principle of distribution under communism is: from each according to their ability, to each according to their needs. The separation of work performed and income is clear. However, there is misunderstanding on what is meant by ‘to each according to their needs’.

David McMullen elaborates…

The battle for democracy

David McMullen wrote a very good post last month at his new site, Different Wavelength, and has given me permission to republish it below.

Among the best sites for keeping tabs on democratic progress or otherwise are:

Freedom House

Human Rights Watch

Reporters without borders

Amnesty International

Electronic Frontiers

Transparency International

(Let me know of any that should be added to the list!)

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We have had quite a bit of progress on the democratic front in recent decades although there are still some very big and serious challenges.

Let us look first at the progress. Latin America is no longer run by military dictators and they are becoming the exception in sub-Saharan Africa. Then of course there is eastern Europe where most countries are now democracies.

However, the picture is still pretty grim when we consider the continuing extent of tyranny.

In Russia, democracy is more formality than substance and most the other states of the former Soviet Union are rather dodgy or downright nasty.

China is a police state. Dissidents are jailed. The Internet as we know it does not exist. Lots of western news sites are blocked. There is no Facebook, Twitter or YouTube. And they employ an army of censors taking down anything taboo. And by the way, North Korea only exists because of Chinese support.

Then we have the Middle East. It has more than its fair share of tyrannies and authoritarian governments. At the risk of seeming perverse, I would suggest that the present civil war in Syria could indeed be a bright spot on the democratic front. This will depend on the Western powers recognizing that their inevitable intervention can only end the civil war if it brings democracy.

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Marx was no green

The Communist Manifesto Project has just published an article titled ‘Was Marx a green?‘ I’m republishing it below, with gratitude to the writer David McMullen.

In reading a draft of the piece, these thoughts came to mind:

In Mao’s critique of Stalin’s Economic Problems in the USSR Mao says Stalin is wrong to believe that human development is restricted by natural laws. Mao asserts that humans can work out ways to overcome these laws:

(Stalin) 2. Leaving aside astronomical, geological, and othersimilar processes, which man really is powerless to influence, even if he has come to know the laws of their development. . . . (Mao response) 2. This argument is wrong. Human knowledge and the capability to transform nature have no limit. Stalin did not consider these matters developmentally. What cannot now be done, may be done in the future.

To me, this kind of thinking – this spirit – was what attracted me to Maoists in the Left in Melbourne back in the late 1960s. They were the ones drawing critically from previous socialist experience, rather than rejecting it out of hand, and they were the ones really placing human conscious activity centre-stage and understanding the inter-relationship between economic base and cultural superstructure.

Marxists have always wanted progress and revolution and Karl Marx supported capital ‘p’ Progress in his time ­ but those who try to reinvent him as a green steady­-statist reverse his progressive and revolutionary nature and turn him into his opposite.

­As for the town and country divide, Engels nails the distinction between those greens (or ‘utopians’, in his time) who value small-scale craft-based life over the advances brought about by the C19th Industrial Revolution, despite its immediate grimness. In the Introduction to The Condition of the working class in England (1845) he talks about the much healthier, more humane, way of life in feudal rural England but says, no!, it sucks because in such a pre-industrial village and family based way of life, the people’s horizons were so limited. They were ‘comfortable in their silent vegetation’:

Before the introduction of machinery, the spinning and weaving of raw materials was carried on in the workingman’s home. Wife and daughter spun the yarn that the father wove or that they sold, if he did not work it up himself. These weaver families lived in the country in the neighbourhood of the towns, and could get on fairly well with their wages, because the home market was almost the only one and the crushing power of competition that came later, with the conquest of foreign markets and the extension of trade, did not yet press upon wages. There was, further, a constant increase in the demand for the home market, keeping pace with the slow increase in population and employing all the workers; and there was also the impossibility of vigorous competition of the workers among themselves, consequent upon the rural dispersion of their homes. So it was that the weaver was usually in a position to lay by something, and rent a little piece of land, that he cultivated in his leisure hours, of which he had as many as he chose to take, since he could weave whenever and as long as he pleased. True, he was a bad farmer and managed his land inefficiently, often obtaining but poor crops; nevertheless, he was no proletarian, he had a stake in the country, he was permanently settled, and stood one step higher in society than the English workman of today.

So the workers vegetated throughout a passably comfortable existence, leading a righteous and peaceful life in all piety and probity; and their material position was far better than that of their successors. They did not need to overwork; they did no more than they chose to do, and yet earned what they needed. They had leisure for healthful work in garden or field, work which, in itself, was recreation for them, and they could take part besides in the recreations and games of their neighbours, and all these games — bowling, cricket, football, etc., contributed to their physical health and vigour. They were, for the most part, strong, well-built people, in whose physique little or no difference from that of their peasant neighbours was discoverable. Their children grew up in the fresh country air, and, if they could help their parents at work, it was only occasionally; while of eight or twelve hours work for them there was no question.

What the moral and intellectual character of this class was may be guessed. Shut off from the towns, which they never entered, their yarn and woven stuff being delivered to travelling agents for payment of wages — so shut off that old people who lived quite in the neighborhood of the town never went thither until they were robbed of their trade by the introduction of machinery and obliged to look about them in the towns for work — the weavers stood upon the moral and intellectual plane of the yeomen with whom they were usually immediately connected through their little holdings. They regarded their squire, the greatest landholder of the region, as their natural superior; they asked advice of him, laid their small disputes before him for settlement, and gave him all honour, as this patriarchal relation involved. They were “respectable” people, good husbands and fathers, led moral lives because they had no temptation to be immoral, there being no groggeries or low houses in their vicinity, and because the host, at whose inn they now and then quenched their thirst, was also a respectable man, usually a large tenant-farmer who took pride in his good order, good beer, and early hours. They had their children the whole day at home, and brought them up in obedience and the fear of God; the patriarchal relationship remained undisturbed so long as the children were unmarried.

The young people grew up in idyllic simplicity and intimacy with their playmates until they married; and even though sexual intercourse before marriage almost unfailingly took place, this happened only when the moral obligation of marriage was recognised on both sides, and a subsequent wedding made everything good. In short, the English industrial workers of those days lived and thought after the fashion still to be found here and there in Germany, in retirement and seclusion, without mental activity and without violent fluctuations in their position in life. They could rarely read and far more rarely write; went regularly to church, never talked politics, never conspired, never thought, delighted in physical exercises, listened with inherited reverence when the Bible was read, and were, in their unquestioning humility, exceedingly well-disposed towards the “superior” classes. But intellectually, they were dead; lived only for their petty, private interest, for their looms and gardens, and knew nothing of the mighty movement which, beyond their horizon, was sweeping through mankind. They were comfortable in their silent vegetation, and but for the industrial revolution they would never have emerged from this existence, which, cosily romantic as it was, was nevertheless not worthy of human beings. In truth, they were not human beings; they were merely toiling machines in the service of the few aristocrats who had guided history down to that time. The industrial revolution has simply carried this out to its logical end by making the workers machines pure and simple, taking from them the last trace of independent activity, and so forcing them to think and demand a position worthy of men.

Anyway, here is David McMullen’s article, with which I basically agree.

Marx Was No Green
There are Greens who espouse an “ecological Marxism” and claim that if Marx was around today he would support organic agriculture and a steady state economy based on renewable resources that provides everyone with “sufficiency”. In such an economy the poor and rich countries would converge, with the former increasing somewhat and the latter shrinking a lot. The most notable exponent of this view is John Bellamy Foster, the editor of The Monthly Review. (We will call him JBF for short.) He goes through the writings of Marx and tortures them until they deliver a green essence.
JBF draws our attention to a number of Marx’s views that you could use to start building a case that he was a Green. Marx was concerned about the destruction of natural stocks of fertile soil, forests and fish needed by future generations. He also commented on how consumption often included frivolities that reflected people’s alienation rather than real needs and that human thriving requires more than increased consumption. JBF also correctly points out that when Marx talked about mastering nature he did not mean destroying it but mastering its laws and harnessing it accordingly. However, from here on the case begins to unravel.

JBF tries to extract greenness from the fact that Marx was a materialist who believed we lived in a material world where we depended on plants and animals for food, water to drink and air to breath. This is a long stretch.

The greening of Marx of course requires JBF to explain away how Marx and Engels talked about communism unleashing the productive forces. He claims this thoroughly ungreen viewpoint was confined to their youthful less mature writings. This is not true as these quotes from the 1870s attest:

Let us take, first of all, the words “proceeds of labor” in the sense of the product of labor; then the co-operative proceeds of labor are the total social product.
From this must now be deducted: First, cover for replacement of the means of production used up. Second, additional portion for expansion of production [emphasis added]. Third, reserve or insurance funds to provide against accidents, dislocations caused by natural calamities, etc.
Marx, Critique of the Gotha Programme, 1875
The expansive force of the means of production bursts the bonds that the capitalist mode of production had imposed upon them. Their deliverance from these bonds is the one precondition for an unbroken, constantly accelerated development of the productive forces, and therewith for a practically unlimited increase of production itself. Nor is this all. The socialised appropriation of the means of production does away, not only with the present artificial restrictions upon production, but also with the positive waste and devastation of productive forces and products that are at the present time the inevitable concomitants of production, and that reach their height in the crises. Further, it sets free for the community at large a mass of means of production and of products, by doing away with the senseless extravagance of the ruling classes of today and their political representatives. The possibility of securing for every member of society, by means of socialised production, an existence not only fully sufficient materially, and becoming day by day more full, but an existence guaranteeing to all the free development and exercise of their physical and mental faculties — this possibility is now for the first time here, but it is here.
Engels, Anti-Duhring, 1877
JBF also has to misconstrue Marx’s constant reference to the fact that capitalists are compelled by the forces of competition to accumulate  in order to survive, by suggesting that he actually disapproved of the process. For Marx the plowing back of much of the surplus value rather than spending it all on extravagant consumption was what made capitalism superior to previous societies where there was a compulsion to stagnate. It is what delivered economic and social progress.
Under communism, the robust development of the productive forces will lead both to the qualitative improvements in output and also to the use of increasing amounts of energy and materials. This would occur not just through accumulation but also through greater investment in research and development and through making each generation of plant and equipment better than the last. It is not hard to imagine the uses. Increased automation will require millions of robots. People will want ready access to various recreation facilities such as gyms, gardens, artificial ski slopes, master chef kitchens, laboratories, workshops and research facilities. The requirements of an increasing population will also have to be considered. While the population is expected to plateau and then decline later this century, under communism you would expect it to start rising again as the burden of having children will be much less. We need large emergency facilities to deal with super-volcanoes and tsunamis. We will need to prepare for the effects of major climate change such rising sea levels and eventually the next ice age.  Major space programs will among other things protect us from meteors and allow us to start moving off the planet in order to explore, settle and exploit extraterrestrial resources. It will be a long time before we run out of things to do with iron, steel, glass etc. This increasing production under communism will proceed with an on-going decoupling from impacts on the environment. We will see food produced with less and less use of land and water, and the industrial waste streams in extraction, production and disposal cleaned up and reduced.

JBF’s pièce de résistance is to pick up on Marx’s analysis of the contradiction between town and country. In the separation of town and country, Marx was concerned about two things. Firstly it stunted the brains of those in the country and ruined the physical health of those in city. Secondly it meant a break in the nutrient cycle as human waste and food scraps were not returned to the farm but instead dumped in rivers and oceans. This transfer of people from the land to cities was an inevitable part of capitalist development. Capitalist farming needed less workers and the cost to the soil and to workers of concentrating the latter in the cities was of no concern to industrial capitalists.

However, these problems are being resolved without having to spread the population evenly over the landscape. High density living in large cities can now be quite healthy and comfortable. Living in the countryside no longer means being cut off from the world given modern modes of transport and communications. This modern transport can also truck in fertilizer, be it human waste, animal manure or the synthetic kind that is now produced in abundance. Indeed, the present concern is excessive nutrients and resulting emissions into ground water or the atmosphere. The best hope for dealing with this under present capitalist conditions is through increased regulation and better management including greater adoption of precision farming.

The organic farming favored by JBF would just make things worse for the environment. It does not allow the use of synthetic fertilizer and so requires rotations that include nitrogen fixing legumes that are simply plowed back into the soil. So a world of organic agriculture would require far more land being assigned to farming to get the same net crop and less for forests and other natural uses. Magically getting the 7 billion people presently on the planet to become vegetarians would reduce the land pressure given that crops consumed directly provide humans with more calories than if they are fed to animals first. However, that would be undone later this century when we have 2 or 3 billion extra mouths to feed.
It is very important that red and green are seen as being at total odds. Humanity and the environment require economic progress and communism is impossible without it. The sooner we have a vocal Marxism supporting economic growth, and un-green things such as nuclear power and genetic engineering, the better
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REFUTING ‘ANTI IMPERIALIST’ MYTHS: A Review of Bill Warren’s Imperialism, Pioneer of Capitalism.

This article by David McMullen was originally published in September 1993 in the journal “Red Politics”.There was also discussion of the review at the lastsuperpower site in 2006.

 

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Bill Warren’s book, Imperialism, Pioneer of Capitalism, performs a useful service by refuting much of the mythology that the left has embraced in the name of ‘anti- imperialism’. However, on the other hand, he manages to create his own brand of confusion. He does this, firstly, by blaming Lenin’s Imperialism the Highest Stage of Capitalism for many of the left’s erroneous views.

And secondly, he is so busy extolling the historical mission of capitalism, that no effort is devoted to discussing how capitalism is an obstacle to human development and is becoming increasingly obsolete. Neverthelsee, despite these shortcomings it is the myth shattering quality of the book that predominates.

Warren begins by reminding us of the basics of a Marxist attitude to capitalism:

(a) It is an advance in all respects on earlier forms of society.

(b) It develops the productive forces and society generally, so creating the necessary material or objective conditions for future communist society. This development also generates the contradictions which lead to capitalism’s revolutionary overthrow.

The following passage from the Communist Manifesto that Warren quotes (Warren 1980, p 11) says it all.

The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fact-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones becomes antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real condition of life, and his relations with his kind. (Marx and Engels, 1968, pp 34-5.)

This approach to capitalism is at total variance to that prevailing in the “left’, The usual practice is to bemoan the development of capitalist productive relations and productive forces, and to cherish the things that capitalism is destroying. A few examples might clarify this point.

(1) Increased economic concentration and the destruction of the petty bourgeoisie. A classic case of the left’s response is its bemoaning such things as agribusiness, supermarkets and fastfood chains.

(2) The increasing internationalisation of capital and the division of labor, which increases human intercourse on a world scale and lays the basis for a global society. This is denounced for destroying our independence and national heritage and placing us at the mercy of the multinationals.

(3) The destruction of cherished skills by new technologies (cherished, that is, by trendy left sociologists). To a Marxist, technological development is eliminating the technical division of labor which is the material basis of class society. In other words we are moving to a situation where you will have an educated and versatile workforce, on the one hand, and on the other hand, processes of production in which all types of activities can be performed equally by all members of the workforce.

(4) The erosion of traditional culture and social bonds. Traditional life tends to be romanticized, compared with soulless modern living We have lost something. On the other hand, to a Marxist the neuroses and instability of modern life are infinitely superior to the narrow mindless certainty and security of days gone by.

So given that capitalism is a social advance and creates the conditions for social revolution, how are we to view European colonial expansion into pre-capitalist societies?

Warren cites, by way of example, Marx’s recognition of the historically progressive role of Britain’s penetration of India.

England, it is true, in causing a social revolution in Hindoostan, was actuated by the vilest interests, and was stupid in her manner of enforcing them. But that is not the question. The question is, can mankind fulfill its destiny without a fundamental revolution in the social state of Asia? If not, whatever may have been the crimes of England, she was the unconscious tool of history in bringing about the revolution. (S. Avineri (ed.) pp 93-94.)

Not long afterwards, Marx wrote as follows:

England has to fulfill a double mission in India: one destructive, the other regenerating – the annihilation of old Asiatic society, and the laying of the material foundations of Western society in Asia (S. Avineri (ed.) pp 132.)

On the destruction side, they broke up or seriously undermined much of the existing social fabric and pre- capitalist modes of production. On the construction side, political unity was greatly enhanced by the British sword (mainly in the hands of local recruits), telegraph and railways, and embryonic industrialization began to emerge.

It is appropriate that the anti-colonial struggles of the twentieth century have not simply been directed at expelling the foreign oppressor. Rarely was the struggle simply one of returning to the days before colonial rule. For example, the struggle for independence in India was not directed at restoring the Mogul empire and independence in Africa did not mean returning to tribal hunter gathering or slash and burn societies.

In some cases such as in China, the revolution was directed at the total destruction of the traditional conditions that predated colonialism such as the remnants of feudalism. Even where independence from colonialism was not accompanied by fundamental social revolutions, the essential aspect of decolonisation was the establishment of a modern state, and the first steps towards a modern economy.

In the case of Czarist Russia, the modern industrial sector, which spawned the proletariat in the two decades prior to 1914, was primarily the product of foreign investment. At no stage did the Bolsheviks target this foreign ownership as something to be abhorred, an interesting point in the light of the economic nationalist position adopted by most of the Australian left.

To quote Warren:

Between 1896 and 1900 a quarter of all new companies formed were foreign, and by 1900 foreign capital accounted for 28% of the total. By 1914 the proportion had risen to 33%. Foreign capital controlled 45% of Russia’s oil output, 54% of her iron output, 50% of her chemical industry, 74% of her coal output. More than half of the capital of the six leading banks of the country – themselves controlling nearly 60% of all banding capital and nearly half of all bank deposits – was foreign (Warren 1980, p 46.)

The position commonly adopted by the left is to deny that capitalism is fulfilling its historical function in the developing countries. We are told that capitalism is not developing the productive forces nor is it destroying pre-capitalist conditions. The LDCs are supposedly being underdeveloped by the world capitalist system. A major part of Imperialism, Pioneer of Capitalism is devoted to refuting these views. The linchpin of these views is the modern theory of imperialism, dependency and underdevelopment. Typical of the theorists in this area are Paul Baran, Andre Gunder Frank and Samir Amin.

We are told that the people of the Third World have been getting progressively worse off during the modern era (ie since the industrial revolution) and have generally experienced a socio-economic and cultural regression. Capitalism has developed, and continues to do so, in a contradictory fashion, which generates at the same time development in the centre and underdevelopment in the periphery.

The implication is that it is fruitless to expect underdeveloped countries to repeat the stages of economic growth passed through by modern developed capitalist economies whose classical capitalist development arose out of pre-capitalist and feudal society. Hence, the historical role of capitalism in these countries is finished, or at a dead end. It is argued, moreover, that the achievement of political independence has not significantly improved prospects of development in the periphery.

A number of arguments are put forward to support the above position. Warren picks out three as being particularly important.

(a) A drain of economic surplus from periphery to centre is said to arise from the flow of profits from foreign investment in the periphery back to the metropolitan country, and from unequal exchange in trade.

Warren points out “that for such a drain to retard economic development it must be an absolute drain not simply an unequal transaction that nevertheless leaves both sides better off than before …”. For example, the comparison that people make between profit outflow and capital inflow tends to be very misleading. Surplus extraction under capitalism is not comparable to the plunder practiced by the empires of antiquity.
Foreign investment creates the surplus (with the help of local labor of course) before it extracts it; and it does this by developing the productive forces. You can certainly criticise the form taken by foreign investment and trade, and argue that Third World countries would gain if they were better organised. What you cannot argue is that the wealth of Third World countries is being depleted.

Closely related to this surplus gain concept is the idea that developed countries are better off than others because they have more than their share of the world’s resources. In other words the reason why we have better plumbing than people in Bangladesh is because we have more than our share of the world’s supply of pipes and trained plumbers.

Or to put it more generally, there is a fixed quantity of some substance called prosperity and the more that goes to one lot of people the less there is for everybody else. This is a total failure to understand economic development as a process of economic accumulation. Its most negative effect is the implication that the interests of people in the developed and underdeveloped world are at loggerheads.

(b) The ‘traditional’ division of labor between centre and periphery countries whereby the former produce manufactured goods and the latter primary goods, is seen to be imposed by the centre on the periphery and is a source of its backwardness.

Warren argues that the validity of the argument rests on two assumptions, which he sets out to refute. These are first that there was a possible and desirable alternative line of development to primary-product, export-lead growth in the backward countries concerned; and second, that the initial emphasis on the export of primary products actually erected serious impediments to subsequent diversification, especially along the lines of industrialisation.

(c) Imperialism or centre/periphery relations are said to encourage the preservation of precapitalist modes of production. This is discussed at two levels. First, there is the case where capitalist production at one point encourages pre-capitalist production at another point (eg, cotton production based on slavery). Here Warren correctly argues that the destructive force of capitalist relations would far outweigh any conserving tendencies.

Second, there is the claim that imperialism has tended to ally itself with local feudalism at the expense of progressive bourgeois forces. Warren replies thatthis is largely undercut by the almost universal willingness of feudal classes to transform themselves, at least partly, into capitalist industrialisers once conditions are ripe. Where

Warren falls short on this question in failing to emphasise that a thoroughly bourgeois revolution would far more successfully unleash capitalist development.

At a more general and theoretical level Warren attacks dependency theory on a number of grounds.

To begin with it is a static view. While a change in form over time tends to be conceded, the possibility of declining dependency is precluded. Moreover, changes in the centres of power is inadequately allowed for.

The theory is ahistorical in that it assumes the following:

(a) that there were latent suppressed historical alternatives to the development that actually took place; (b) that the failure of alternatives to materialise was primarily the result of external imposition (colonial policy).

The theory is metaphysical in that it basically explains social phenomenon in terms of external causes, rather than as an interaction of both internal and external factors. (Mao spoke of external factors as the conditions of change and internal factors as the basis of change.) Dependency theorists would, for example, explain a country’s backwardness by the fact that foreign capital is only invested in enclaves or cash crops.

A more sensible approach would perhaps be to see cause and effect running the other way – because the country is backward these industries are the only opportunities for investment. The backwardness would then be explained essentially by internal factors, namely a social system and mode of production significantly inferior to, or historically less advanced than, capitalism in developed countries.

Dependency theory has a strong thread of nationalist utopia, which establishes a set of thoroughly dubious criteria of what is good and what is detrimental. The first blossoms of bourgeois society are denounced simply as imperialist cultural penetration (coca cola culture) serving the interests of the mutinationals and reinforcing dependent status.

There is also the concept of articulated economy. Every country has to have its own steel industry, for example. It is argued that if you do not have the full range of industries you are trapped into some narrow and enslaving international division of labor.

This last point touches on a major area of confusion, namely, the distinction between dependence and interdependence. Warren says:

Since national economies are becoming increasingly interdependent, the meaning of dependence is even more elusive, not to say mystical.(Warren, 1980, p 182)

In fact with the increasing importance of international trade and capital movement, it is often the case that dependence on trade and foreign investment is a sign of economic development.

The last section of Warren’s book provides extensive evidence that considerable economic development has occurred in the Third Word during the post-war period. It has been meteoric in comparison with that in western countries. The western countries took centuries to emerge from the Middle Ages and eventually achieve an industrial takeoff in the nineteenth century.

On Lenin’s views of imperialism

In Warren’s opinion, the more recent theories of imperialism, such as underdevelopment and dependency are best regarded as post-war versions of the views expressed by Lenin in Imperialism, the Highest Stage of Capitalism,or at any rate stemming, or continuing, from where he left off. Warren also claimed that in this book Lenin was espousing views that were at variance with his earlier writings on the Narodniks and the role of capitalist development in Russia.

Here Warren is skating on thin ice. Much of his case rests on Lenin’s use of particular words, especially ‘moribund’, ‘stagnant’ and ‘parasitic’. By ‘moribund’, Lenin is referring to the increasing obsolescence of capitalism, exemplified most starkly by two world wars and economic crises of the sort that hit in the 1930s and will hit again in the future. He is not saying that social and economic development ceases.

In his use of the word, ‘stagnation’, Lenin is not saying that capitalism is no longer revolutionising the productive forces – a proposition that would obviously be wrong. He is referring to its increasing tardiness relative to a communist organisation of production – the productive forces are outgrowing the capitalist mode of production.
Warren tries to equate Lenin’s description of monopoly capital and imperialist countries as parasitic with the crude “surplus drain’ view . However, Lenin is not denying that the export of capital develops the productive forces in recipient countries; he is just saying that the centralisation in the ownership of capital shows up geographically.

Places such as London and New York have a far higher than average proportion of the world’s bloodsuckers; they tend to be richer and their ‘portfolios’ span the world. When Lenin explicitly discussed the impact of imperialism on the then colonies, he said that it was developing the productive forces. Warren unjustifiably shrugs this off as lip service to Marxist orthodoxy.

Warren had a number of other criticisms of Lenin’s position. However, they are not central to our present discussion. He claims (a) that capital exports have not increased in signifcance, (b) that Lenin espoused underconsumptionism and (c) that inter-imperialist rivalry was based on trade rather than competing capital. These and other issues could perhaps be looked at on some other occasion in a fuller discussion of Lenin’s book.

Bibliography
Amin, S., Accumulation on a World Scale, New York, Monthly Review Press, 1974.

Avineri, S., ed., Karl Marx on Colonialism and Modernisation, New York, Anchor Books, 1969. Frank, A. G., Capitalism and Underdevelopment in LatinAmerica, Harmondsworth, Penguin Books, 1971.

Greene, F., The Enemy, Notes on Imperialism and Revolution, London, Jonathon Cape, 1970. One of the more readable and also more appalling renderings of the ‘anti-imperialist’ position.

Lenin, VI, ‘On the So-Called Market Question’ Collected Works, Vol. 1, Moscow, 1963.

———– ‘The economic content of Narodism and the criticism of it in Mr Struve’s book’, Collected Works, Vol. 7, Moscow, 1963.

———–, Imperialism: the Highest Stage of Capitalism, Peking, Foreign Language Press.

Marx, K., Pre-Capitalist Economic Formations, London, Lawrence and Wishart, 1964.

———– and Engels, F., Manifesto of the Communist Party, Peking, Foreign Language Press, 1968.

Warren, W., Imperialism and capitalist industrialisation, in New Left Review (1973).

———–, Imperialism and Neo-Colonialism, British and Irish Communist Organisation (March 1977).

———–, Nations and corporations, in Times Literary Supplement, 1 November 1977..

———–, Poverty and prosperity in Times Literary Supplement, 12 December 1975.

———–, Imperialism, Pioneer of Capitalism, Verso, 1980, 274 p.