Letter: Marx’s Economic Theories (1944)

Letter to the Editors from the March 1944 issue of the Socialist Standard

Glasgow

Editorial Committee, the Socialist Standard.

Dear Sirs,

In thanking you for your courtesy in publishing my letter on Marx, I would ask your permission to make the following answer to “H.’s” reply.

My critic states : (1) that the authorities I quoted are, with one exception, not economists, and (2) that they do not always agree with one another.

In reply to this I would say that they are all men who have devoted a lifetime to the study of political and economic questions, and that no one can expect them to agree with one another on every point.

In what branch of science are all the authorities agreed on everything?

As for the statement that they are not “political economists,” if by this term is meant those who are professors of the subject in our universities, I would ask what professor of political economy in any university in the world to-day, outside Russia, does endorse Marx’s theory of value? I have never been able to find the name of anyone who does, though I have questioned many of my Marxian friends on the subject. And it will not do to say that they refrain from doing so from fear of victimisation by the university authorities. In this revolutionary age anyone who came forward as an open champion of Marx would probably make a fortune from the sale of his books. The Dean of Canterbury was not put out of the Church for championing Russia, and his uncritical works (so thoroughly exposed in the Socialist Standard) are circulated by the million.

Moreover, the fact that one authority builds upon the theory of another (another point made by your contributor) does not invalidate his testimony. Sir Arthur Keith stood upon the shoulders of Darwin, but his testimony to the truth of evolution is no less valuable for that. Even Marx was indebted to his predecessors.

I scarcely think it necessary to dwell on Shaw’s remarks on Mallock. As a humorist, Shaw is at times superb, at others just a little tiresome. But surely no one takes him seriously on economic science. His criticism of Mallock is typical-—a man whose shoes, intellectually speaking, he was, in my opinion, never fit to clean.

The authorities I quoted gave reasons for their belief that Marx was wrong, but “H.” has not refuted them. In my opinion, their arguments cannot be disproved.

In his second article your contributor says, “Our critic obviously misunderstands the Marxian theory of value.” If this is so, I err in good company. After a careful, analysis of Marx’s teaching, Prof. Hearnshaw says : “The absurdity of the labour theory of value, stated thus succinctly, is so patent and so appalling that Marx himself was compelled to conceal its naked monstrosity by clouds of Hegelian vapour. He plays upon the word ‘commodity’ until it loses all recognisable features. He juggles with the word ‘labour’—abstract labour, concrete labour, skilled labour, unskilled labour, manual labour, mental labour, human labour, homogeneous labour, socially necessary labour, average labour, general labour, and so on indefinitely—-until the most devoted and most diligent Marxians (e.g,, Kautsky and Trotsky) tear one another to pieces in contradictory assertions as to what Marx means. ‘It is possible,’ said one despairing Socialist—and probably many more than one—’to prove anything from Marx.’ ”

I think my illustration of the fishing boat was quite appropriate, for if the Marxian teaching that rent, interest, and profit are three forms of robbery is true, it should apply not in certain cases but in all cases. The fact that modern industry is run on the joint stock principle does not alter the fact that capital so contributed is as necessary as labour in the production of wealth, and is entitled to an adequate (though not an excessive) return.

The way in which I see the matter is this : A ship requires £10,000 to build. I, as a worker, earn £200 per year—that is to say, I produce £200 worth of consumable goods and receive tickets in the form of money entitling me to draw upon the common store to that extent. I choose to spend only £100, however (that is to say, I draw upon the common store to the extent of only half of my contribution to it). The other half I hand to the directors or promoters of a joint stock company. This they pay, at least to the greater extent, in wages, which entitle the workers who receive them to draw upon, or consume, that half of the consumable goods I have produced but have refrained from claiming. The energy in these goods is converted into the energy of human labour, and the energy of human labour is converted eventually into a ship, since I am but one of 300 investors who act in a similar manner. My investment and the investment of my fellow-shareholders was as necessary as any other factor to the result. If we claim a share of the ship’s earnings (it may, to simplify the illustration, be regarded as a trawler), in what respect are we “robbing the workers?” It will not do to say that all transactions are not on such a clear cut basis. If the Marxian view is sound—if, as your contributor implied in his original article, labour is the only factor in production entitled to reward, it must be shown why this is so. And, as I have already said, this argument, should apply, not in one case, but in every ease.

My illustration of one book selling five times better than another—(I accept the amended version of your contributor, which puts the matter in an even clearer light)—I still consider valid, but considerations of space prevent my entering into a lengthy discussion of this. The example, however, serves to illustrate a further point brought out by almost every critic of Marx—namely, his disregard of demand as a determinant of value.

In conclusion; may I say just this : Quite by chance I came across a modern book by a political economist. “Capitalism, Socialism, and Democracy,” by J. A. Schumpeter, Professor of Economics in Harvard University (published by Allen & Unwin). Mindful of your contributor’s reproach that my authorities were not political economists (though some have spent as long as Marx in study of the subject), I looked up Professor Schumpeter’s view of the matter under discussion, and here it is : “Everybody knows that this theory of value is unsatisfactory” (page 23); “In any case it is dead and buried” (page 25).

But the theory forms the very cornerstone of the Marxian attack on capitalism. Without it, Marxism itself is dead !

Yours faithfully,

H. W. Henderson.

Reply.

(Our critic’s first letter and our reply appeared in the November and December issues.)

The point has already been made that a dispute about economic theory cannot be settled by an appeal to authorities: if it could, Marx’s own statements are more weighty than those of his critics. The real test is that of experience. Our critic asks what professor of political economy in any university outside Russia endorses Marx’s theory of value. The arbitrary exclusion of Russian economists gives away our critic’s whole case. If economic authorities as such can decide the issue, then the Russian have as much authority as any others. It is a tacit admission by our critic that professors are liable to be influenced by those who control the universities and by the environment in which they make their living. Abundant evidence of this is given in Upton Sinclair’s ‘Goose-step,’ a study of the suppression of opinion in American universities. A typical incident among many is that of the professor who declined an invitation to address a student’s club on Marxian theories—he wanted to keep his job (p. 211). Incidentally, Sinclair quotes Laski on the way pressure makes university professors adopt reactionary ideas in order to get promotion, or makes them keep silent (p. 391). Quite recently (Daily Express, November 28, 1942) it was related how the late Sir Arnold Wilson found himself up against a conspiracy of silence at the universities about the ramifications of the insurance companies. Beveridge explained to him why the London School of Economics, “on grounds of expediency,” ignored the subject.

In addition to pressure, there are other reasons why economists reject Marx. One is that they pick up biased and incorrect views of what Marx’s theories actually are during their own training at universities. Another is that the atmosphere of social snobbery makes them reluctant to accept a theory which identifies their own “intellectual” labour with that of the working class.

Our critic, earlier quoted Laski against Marx. Since 1927, when Laski made that criticism, he has been moving more and more towards accepting Marx’s views, and in Reynolds News (March 7, 1943) he wrote:

“It is important to add that Marxism has never been more living than to-day; as the eminent American economist, Thorstein Veblen, said, his is the only socialism that really matters.”

Our critic says there is no branch of science in which all the authorities are agreed about everything. This may be true, but it follows that where they are disagreed the dispute cannot be settled by an appeal to authorities.

He quotes Sir Arthur Keith as one authority who builds upon the theory of another (Darwin). This has no bearing on our point about various anti-Marxian historians and others who simply passed on, parrot fashion, each other’s opinions about Marxian economics. Keith is himself an independent authority who claims that his anatomical experience and his original studies confirm Darwin’s main conclusions.

Our critic quotes Hearnshaw to show that if he errs he does so in good company. This may bring comfort to our critic, but if he persists in thinking that Marx claimed all labour as value-creating, despite Marx’s repeated statement that he was only referring to “socially necessary labour.” then fifty Hearnshaws won’t make it any different.

On the question of the operation of capitalist undertakings, our critic gives another example of what he thinks happens. We are asked to consider a worker who earns £200 a year (in return for his work which produces £200 worth of consumable goods), and who could draw the whole £200 from the common store, but actually saves £100 and invests it. In support of Ins claim that “capital … is as necessary as labour in the production of wealth,” our critic says, “If we claim a share of the ship’s earnings … in what respect are we robbing the workers?”

Here in a nutshell is the fallacy of the whole argument. Labour and capital are claimed to be equally necessary, yet on the basis of this principle of equal treatment our critic claims that the worker who puts in £200 (through his work) is entitled to draw out £200 and no more; while the investor who puts in £100 is entitled, not only to continue owning his £100 investment, but in addition is to receive “an adequate return.”

It may be asked, too, whence comes the “adequate return,” since, according to our critic, the workers get back as wages all that they producer As the investor, as such, produces nothing but merely allows the workers to use the means of production, and as inanimate capital itself obviously cannot add more than its own value to the product, our critic is asking us to accept the theory that there is no surplus value, yet out of this non-existent surplus the investor receives his profit. Actually it can only come from the unpaid labour of the workers. The workers are working, say, half their time to produce their own cost of subsistence (the value of their labour power, their wages), and the rest of the time to produce the surplus value the capitalist takes.

It should be added that under capitalism as it really is the great bulk of existing capital is not the result of current savings, most of it being inherited; still less is it the result of savings by workers. All their savings together do not and could not amount to more than a trifling part of the whole capital.

The capitalists as such are not producers, nor are they “savers” except in the technical sense that their income is greatly in excess of what they need to spend, and can spend, on their own consumption. They are monopolists who, through their control of the machinery of government, are able to exact toll in the form of surplus value on the wealth produced by the workers who operate the capitalist-owned means of production.

As a late after-thought, our critic charges Marx with disregarding demand as a determinant of value. It is quite unnecessary to go into that charge here, for it will be noticed that our critic likewise disregarded demand. When he explained that a worker produces value by his labour (“£200 worth of consumable goods”), he did so without mentioning this after-thought that not the worker but the demand produced the value.

Last of all, our critic asks us to consider Schumpeter’s opinion that “everybody knows that this theory of value is unsatisfactory,” and that “in any case, it is dead and buried.” They both protest too much. If it is dead and buried, and everybody knows it is unsatisfactory, why are Schumpeter and our critic so anxious to kill it again?

Edgar Hardcastle

Letter: Need answering (1957)

Letter to the Editors from the May 1957 issue of the Socialist Standard

Dear Sir,

Although I am not a member of your party, I read Questions of the Day and Socialist Comment with great enjoyment. These pamphlets were well written, and it is a refreshing change to read some political propaganda which has some literary merit. However, two points—one minor, the other major—need answering.

Firstly, when talking of the Class and Colour problems in South Africa your writer says: “Many British clergymen have gained a cheap reputation of liberality by pointing out these evils, although they close their eyes to the exploitation of workers on their own doorsteps; i.e., in Britain. This seems to me to be a rather cheap and ill-founded attack on Father Huddleston, who really is concerned about the plight of the native in South Africa. I should like your correspondent to justify his remark.

Secondly, your definition of the Marxist interpretation of history, although I realise that it has to be compressed for reasons of space, is utterly misleading. The economic interpretation of history does not mean that men are wholly or primarily actuated by economic motives. To use the words of Professor Schumpeter: “The explanation of the role and mechanism of non-economic motives and the analysis of the way in which social reality mirrors itself in the individual psyches is an essential element of the theory, and one of its most significant contributions. Marx did not hold that religions, metaphysics, and political volitions were either reducable to economic motives or of no importance. He only tried to unveil the economic conditions which shape them and which account for their rise and fall."

Finally, the economic interpretation of history has often been called the materialistic interpretation of history. Your writer in Socialist Comment makes this mistake. Marx’s philosophy is no more materialistic than is Hegel’s, and his theory of history is not more materialistic than is any other attempt to account for the historical process by the means of empirical science. It should be clear that this is logically compatible with any metaphysical or religious belief—exactly as any physical picture of the world is. Medieval theology itself supplies methods by which it is possible to establish this compatibility. Several Catholic radicals declare themselves Marxists in everything except in matters relating to their faith.

Thank you again for some interesting reading.
 Yours faithfully,

“ History Sixth.”

An American Professor Looks at Marx (1947)

Book Review from the August 1947 issue of the Socialist Standard

A book which has gone the rounds is Professor Schumpeter’s “Capitalism, Socialism and Democracy.” Discursively spread over 375 pages its criticism of Marx is superficial indeed, at times, almost trivial. Professorially patronising he blue-pencils and underscores Marx after the manner of a tutor ploughing an exercise.

On p.11 Marx loses heavily on his percentages for not calling the Materialist Conception of History the economic interpretation of history, the Professor’s correction being that it is no more materialistic than Hegel’s views, and is compatible with any religious or metaphysical interpretation of the world.

Various forms of an economic interpretation have been advanced by thinkers such as Adam Smith, Sismondi, Thorold Rogers, etc. Unlike Marx, however, they did not regard man’s economic activity as the outcome of certain indispensable social productive relationships into which men are born but as the result of the behaviour of an abstract economic man. Thus the economic factor assumed by some thinkers to be the self-regulating principle of social life, is itself nothing more than a mere manifestation of eternal human attributes. In this way the real concrete productive conditions of social life are dissolved and reconstituted into the mere appearance of an underlying mental process. History is thus treated on an ideological level and the economic interpretation of it is but a species of social idealism. This presumably is Schumpeter's version of Historical Materialism.

Marx, rejecting ideas as the primary factor in social evolution (while showing the part they played in modifying the main trends of economic development), did not, as had his predecessors, the mechanical materialists, make man the victim of economic fatalism or the passive instrument of external Nature. For Marx, a dynamic relationship existed between them. Man by his social labour is integrated into Nature and in transforming it to meet his needs transforms himself. This progressive adaptation by man of the natural force to meet his needs under a given social and economic organisation, constitutes the primary role in social evolution. Man’s social labour since the passing of communal society has assumed different forms of class ownership resulting in inevitable class struggles.

Marx's method is then a materialistic, scientific one, which views social origin and development as a material process in a world of material processes. For the Marxist there can be no a priori ideas or eternal concepts, only laws, theories, etc., which are approximated to a concrete historical situation.

Says Schumpeter (p.19) there are more plausible social classifications than Marx’s division of capitalism into two classes, i.e., capitalist class and working class. Schumpeter, however, fails to produce even one, plausible or otherwise. Now, for Marx history has shown the emergence of different class systems, each phase of the historical process being characterised by a transformation of the productive forces operated by a new productive class, whose interests were bound up in these economic changes. As a result an opposition grows up between these new expanding productive forces and the old social organisation based on and adapted to an earlier mode of production. A new set of social relations becomes necessary if these new economic needs are to be adequately fulfilled. Class antagonism is rooted then in the relationship in which different classes stand to each other and constitutes the basic motive-force for effecting the transformation of different stages of historical development.

Now Capitalism is a class system—the last in a stage of historical procession which divorces the labourer from his productive instruments and converts his working energies into a commodity, labour-power. Marx sought in these class relationships the key to the understanding of the laws of capitalist society. He was thus able to penetrate beyond the superficial analysis of exchange relations in a "free market” with its belief in profit as being something derived from a creative attribute of capital itself and was able to show the real source of this category of capitalist class income, an income derived from the class monopoly of the means of production which enabled the capitalist to appropriate the difference between the value of the workers’ labour-power (his wages) and the total value of the product he produces. This mutually antagonistic character of class incomes, i.e., profits and wages, reveals conflicting class.interests. The capitalist class thus has an interest in perpetuating the institutions of a class society which maintains the working class in a dependent position. Likewise the workers have a corresponding interest in abolishing a system based upon such property rights. This makes nonsense of Schumpeter's assertion (p.19) that the normal relationship between the classes is one of co-operation and even harmony. One, of course, is at liberty to divide society into all kinds of social groups, but the principle of class division as enunciated by Marx is the only one which effectively lays bare the social mechanism whereby profits are extracted, wages regulated, the accumulation of capital extended and the conditions for a new social order determined.

Schumpeter seems no better informed on Marx’s Labour Theory of Value. On p.25 we are told that by eliminating natural agents from his Labour Theory Marx deprived them of their proper place in the process of production and distribution. This betrays utter confusion of thought in respect of Marx’s views. A theory of value which included natural agents as determinants of value would not be a labour theory of value, whatever else it might be. Now for Marx, labour was the crucial productive force of human society, be it slave-labour, serf-labour or wage-labour. As such it is man’s productive energy (as distinct from these natural agents) which is the prime cause for originating all increases and changes in forms of wealth production that have occurred at various historical stages. The form of wealth assumed by capitalism is not typical of all societies but the outcome of certain historical circumstances. Value then is a social relationship in contrast to natural processes and is therefore a quality of human activity. If the value of an article of wealth is to be expressed as a definite objective quantity and as such capable of entering into relationship with others of its kind, i.e., have exchange value, then clearly value must be directly related to the output of this human activity in terms of the expenditure of human brain, muscle and nerve under given socially organised conditions of production. Value, then, is the subject matter of economics, just as the properties of natural agents—in so far as they are useful and necessary for productive purposes—are a matter for investigation by the natural sciences, e.g., physics, chemistry, etc. The using up of human energies in a productively organised fashion and its division by Marx into units of socially necessary labour hours, i.e., an hour of average working intensity normal to the requirements and technique of industry, constitute the cause and unit of value to which varying price movements can be referred.

Marx was thus able to show that profit arises not from selling an article above its value—but at its value—the cost of the social labour contained in it. The value of the worker’s labour-power represents only part of the total labour expended by him in production. The other part, appropriated by the capitalist, is unpaid labour. In selling the article at its value the latter is able to pocket the difference in the shape of surplus value. As Marx says, in “Value Price and Profit," if you cannot explain profits on the supposition that commodities are sold at their value, then you cannot explain profits at all.

Schumpeter dismisses the Theory of Surplus Value on the ground that you cannot produce workmanlike machines according to national cost calculations (p.27). He admits (p.29) that capitalism is in a state of constant technical revolution. He fails, however, to see the connection between this and the purpose it fulfils of securing a supply of labour-power adequate for the requirements of progressive capitalist accumulation. To achieve this the workers must produce more surplus value by becoming more productive; hence the introduction of new inventions, labour-saving machinery, etc. This means that a greater part of capital will be devoted to purchasing these means and henceforth a given unit of capital will offer less employment to wage workers. The workers who are displaced by this constant process of capitalist production thus form a surplus working population surplus that is, to the requirements of capitalism. Should, however, an acceleration in production be such as to warrant additional supplies of labour-power then this surplus population becomes a source of recruitment for the capitalist. With the decline in profit-anticipation a productive slackening takes place. Accumulation of capital is curtailed and the industrial reserve army consequently grows greater. Thus the expansion and contraction of employment is but a corollary and consequence of the expansion and contraction of the productive forces of capitalism. Schumpeter talks vaguely of surplus-value being produced in an un-Marxian way (p.24) but fails to show how this is done.

Schumpeter's contention (p.21) is that expanding capitalist production in the Marxian sense would lead to such increases in the demand for labour-power, and hence the price of labour-power, that profits would be swallowed up. Actually any increase in the price of labour-power beyond a certain point in a particular industry would further increase the capitalist tendency towards labour-saving devices and at the same time the threat to profit-anticipation would lead to a decline in capital investment in that industry. This would lead to increased redundancy of workers and so restore a condition of the labour market favourable to the capitalist. By this double process capitalism regulates wages according to the requirements of a profit-making economy.

Schumpeter says Marx based his theory of value on the assumption of a capitalism in perfect equilibrium (p.24). What Marx actually did in volume I of "Capital" was to make a number of simplifying assumptions in order to present a clear picture of the essential relationship existing between capitalist and worker in a process of simple commodity production, in order to demonstrate that the law of value was the guiding principle underlying a class system based on production for profit. Apart from purely theoretical considerations, but as a matter of practical judgment upon which all theories, hypotheses, and first approximations must be finally judged, Marx's theory alone provides an accurate and dynamic picture of the nature of capitalist development, viz., concentration and centralisation of capital, poverty, unemployment, crises and wars. Moreover, productive time-charts and speed-up processes for reducing the labour-time spent on commodities and thus reducing their value confirm in the real world of capitalist production the practical validity of Marx's Labour Theory of Value.

Schumpeter's own remedy for the evils of capitalism is more capitalism—he calls it Socialism. The workers not controlling the productive forces will, of course, be a dependent class and continue to produce surplus-value. Indeed he tells us that democracy is likely to turn out to be more of a sham under Socialism than it was under Capitalism (p.302). Pathetically he tries to assure us that wages and profits will not, under his scheme, be really wages and profits. The result Is ludicrous. In short, Schumpeter's scheme is only a highly rationalised anti-democratic capitalism which he dubs “Socialism" but which is merely his own term for describing Fascism.

Ted Wilmott

About Books (1954)

Book Review from the June 1954 issue of the Socialist Standard

“William Thompson (1775-1833), Britain’s Pioneer Socialist, Feminist, and Co-operator,” by Richard K. P. Pankhurst (Watts & Co. 15s.)

Is it possible to establish Socialism in one part of the world whilst the remainder stays predominantly capitalist? That question is right in the forefront to-day. One hundred and thirty years ago the topical question was, "Is it possible to establish Socialism in one part of the country whilst Capitalism prevails in the remainder?” The change in the form of this question since the early days of the last century, gives a clue to its answer. The development of Capitalism, with the close knitting together of all the corners of the earth, has caused men to leave behind the parochial outlook of the 1820’s as they will ultimately discard their present nationalist one.

The Socialism of first half of the nineteenth century was a different proposition to the Socialism that we expound to-day. Marx and Engels labelled it “Utopian Socialism.” The amount of literature that the Utopian Socialists turned out and the general extent of their propaganda was astounding. They developed some fantastic pictures of a future society and planned to set up Co-operative communities in various parts of this country, anticipating that these communities would eventually squeeze capitalism out of existence. Such ideas were the product of the early days of industrial capitalism and denote the immaturity of the working class of the time.

But the propaganda of the “Utopians” had a very useful critical element. They attacked every principle and institution of capitalist society and the ideas they propounded were instrumental in forming and clarifying the thinking of their successors, including Marx and Engels.

The foremost names amongst the “Utopians” are St. Simon, Fourier and Robert Owen. But one of the most able and energetic propagandists of the time was William Thompson, an Irish landowner, who devoted his life to the movement.

“William Thompson (1775-1833), Britain’s Pioneer Socialist, Feminist, and Co-operator,” by Richard K. P. Pankhurst, has been published by Watts & Co. at 15s.

Mr. Pankhurst traces the life of Thompson from his birth in Cork in 1775 to his death on 28th March, 1833, at Rosscarbery and in doing so he introduces us to the personalities, the arguments and the struggles of the first co-operative societies. Thompson is shown to be an outstanding thinker of his day and the evidence is presented in the numerous and illuminating quotes from his works that sprinkle the pages of this book. Thompson’s main writings were four books, “An Inquiry into the Principles of the Distribution of Wealth ” (1824), “Appeal of One Half of the Human Race, Women, Against the Pretentions of the Other Half, Men, to Restrain Them in Political and Thence in Civil and Domestic Slavery” (1825), “Labour Rewarded—the Claims of Labour and Capital Conciliated; or How to Secure to Labour the Whole Product of its Exertions” (1827) and, finally, “Practical Directions for the Speedy and Economical Establishment of Communities, on the Principle of Mutual Co-operation, United Possessions and Equality of Exertions and of the Means of Enjoyment” (1830).

The extracts from these works indicate that Thompson was in advance of other prominent economists and philosophers of his time—such as James Mill, Jeremy Bentham, John Stuart Mill and Robert Owen. He was the only one of the “ Utopian Socialists ” who clearly saw the class division of society, the need for the abolition of property and, especially, the need for political action on the part of the workers.

The final chapters of Mr. Pankhurst’s book are devoted to showing the influence that Thompson had on his contemporaries and successors, in particular on Karl Marx. The author quotes many sources from individuals who have claimed at one extreme that Marx absorbed Thompson’s ideas, lock, stock and barrel, to the other extreme that Thompson had but a fleeting influence on Marx. Probably the most level statement is one attributed to Schumpeter:

  "The Socialist thinkers of the nonage provided many a brick and many a tool that proved useful later on. After all, the very idea of a Socialist society was their creation, and it was owing to their efforts that Marx and his contemporaries were able to discuss it as a thing familiar to everyone. Many of the Utopians went much farther. They worked out details of the Socialist plan, thereby formulating problems—however inadequately— and clearing much ground. Even their contribution to purely economic analysis cannot be neglected. It provided a much needed leaven in an otherwise stodgy pudding and stood Marx in good stead.”

We can commend Mr. Pankhurst’s book. It has involved a lot of research and is interestingly written, presenting a heap of information in a pleasurable style. We would suggest that a preliminary reading of Frederick Engels, “Socialism, Utopian and Scientific” and “The Communist Manifesto” by Marx and Engels will ensure that the reader gets this life of William Thompson in perfect perspective.

W. Waters