Tuesday, January 5, 2021

The Ethics of Marxist Economics: A Breakdown

I wrote the following essay a while back in an attempt to deconstruct the Marxist view of political freedom; in the essay, I draw quotes from Marx that can be found in The Paris Manuscripts of 1844.  I decided to share this essay now because I believe it provides a good follow-up to the previous article I wrote on Marxism, back in August.  On that note, I hope you guys find it to be an enjoyable and illuminating read and I look forward to hearing your comments. – YT

From the dawn of the twentieth century, the way in which Karl Marx’s ideas took the world by storm is a clear indication that they touch on something very important and very human.  With the widespread and pervasive alienation brought forth by extreme levels of social inequality as well as feelings of disenchantment towards the elite and ruling class, Marx’s ideas still hold powerful sway in modern times.  Perhaps no thinker in history is as polarizing as Marx, and whether his writing inspires feelings of hope or anger, it is undeniable that Marx’s vision of societal freedom does address very real societal issues and concerns.  It is when we put theory into practice, however, that Marxism proves to be incompatible with human nature; ultimately, it fails to grasp the intimate relationship between political freedom, private property, and individualism.  Marxist critiques of capitalism, as an impediment to freedom, are mostly not invalid in and of themselves and it would be hard to argue with any intellectual honesty that free markets actually provide an even playing field for everyone.  It is when we look at the comparative costs of putting Marxist theories into practice and the real price we pay for socioeconomic equality of outcome, that it becomes clear that Marxism is fundamentally at odds with real political freedom.

Most concepts of political freedom ultimately boil down to ways of preserving people’s natural rights.  Political freedom for the citizen will usually entail some iteration of the following points: The right to live free from frustration, the threat of violence or coercion.  Freedom and the ability to do as one wishes without interference from the state; assuming it does not impose upon the same rights for others. In most accounts, political freedom will also involve, to varying degrees, the citizen’s right to actively participate in the governing of their nation or municipality, usually through some sort of democratic system.  While most political theorists fundamentally want the same thing, the means and methods by which they believe we ought to achieve and preserve these values can vary radically from one theorist to another. 

This was no different for Karl Marx, the German philosopher and political economist who founded the eponymously named school of thought called Marxism – which served as the philosophical underpinning to the economic system of communism.  Marx believed that the acceptance of socioeconomic inequality was incompatible with real political freedom.  He believed that so long as a person’s labour could be exploited for profit, he could never be truly free to be himself.  Marx’s view of freedom is centered largely on the notion that existence precedes over essence and that capitalism is an inherently oppressive essentializing force, in the way it forces us to take on roles that we otherwise wouldn’t in order to survive.  An idea which would later be elucidated by the existentialist philosopher Jean-Paul Sartre in his 1945 lecture Existentialism Is a Humanism.

 For this reason, Marx wanted to create a classless society, a utopia, by which no one would ever find themselves subject to frustration under the power of another individual by virtue of their socioeconomic standing.  In a world where the bourgeoisie owns the means of production, the proletariat can never improve their station in life and are thereby forced to sell their labour to survive.  For Marx, the pathway to liberty would require us to free ourselves from the chains of the capitalists who own the means of production.  Marx believed that the exploitation of the working class’s labour is what ultimately leads to alienation.  The only path for the proletariat to become truly free would be in uniting as workers and seizing the means of production from the capitalist bourgeoisie and building a communist utopia.  

the true resolution of the strife between existence and essence, between objectification and self-confirmation, between freedom and necessity, between the individual and the species. Communism is the riddle of history solved, and it knows itself to be this solution. (Marx, The Paris Manuscripts, 43)

As an alternative to capitalist price theory, Marx proposed instead that we follow his Labour Theory of Value, which is based on the idea that our economy should essentially reward everyone equally according to the amount of labour that they put in.  This is in stark contrast with the Austrian school’s notion that prices are largely irrational and value is subjective and thereby only the market can determine prices, based on supply and demand.  The amount of labour that went into something is only a potential factor in creating something of value, it is not worth anything in and of itself.  For instance, someone could invest hours of labour into building ornate, handcrafted yoyos but if no one wants to buy them then they are ultimately still worthless; the labour that went into producing them means nothing in a capitalist system.

“The worker is not at all in the position of a free seller vis-à-vis the one who employs him…. The capitalist is always free to employ labor, and the worker is always forced to sell it. The value of labor is completely destroyed if it is not sold every instant. Labor can neither be accumulated nor even be saved, unlike true [commodities]… “Labor is life, and if life is not each day exchanged for food, it suffers and soon perishes. To claim that human life is a commodity, one must, therefore, admit slavery.” (Marx, The Paris Manuscripts, 9-10)

Labour, to Marx, is to be viewed as fundamentally unique to other assets and commodities.  With the COVID-19 pandemic, much of our current socio-economic discourse has been dominated by talk of who the “essential workers” are.  With a majority of the population being either temporarily laid off or told they could work from home; this has drawn criticism towards our modern political economy as the workers we’ve deemed most essential, like grocery store clerks and healthcare workers, tend to predominantly fall in the lower quadrant of the socioeconomic hierarchy.

It would be hard to argue that the baker or the farmer is any less important for our society than the financier, yet this is not reflected in their pay scales.  Someone might make the case that the economies of Canada and the United States could not function without capital markets and that the net economic benefits produced via the financier’s savviness in allocating investor capital, is in fact far beyond what one baker can contribute to our economy.  The question of whether that should entitle him to more money for the same amount of labour output is still unclear.  Even if the more specialized or skilled labourer is less easily replaceable and can thus leverage his position for more money, should he be allowed to do this?  Under communism, Marx would contend that a man should not be punished for his preference for baking, nor should another man be overly rewarded for his love of numbers.  

Some will try to make the case that the wealthy work harder than the poor; let us assume for a second that this is true. Does the CEO who earns eight-hundred-thousand dollars each year work twenty times as hard as the elementary school teacher who earns forty? Almost certainly not, in fact, behind closed doors, most CEOs would probably admit, that their gardener works harder than they do.  The strongest argument put forth in justification of this type of massive income inequality is in support of entrepreneurship.  There has been ample evidence put forth by economists that entrepreneurship is and always will be, the primary vehicle for a nation’s economic growth and technological innovation.  Daron Acemoglu and James Robinson make a truly compelling case in their book Why Nations Fail, that a country’s economic success can virtually always be narrowed down to the effectiveness of their policy and institutions in creating a climate that is conducive to entrepreneurship.  In a truly capitalist economy, entrepreneurs who invest their time and capital into their business are fully liable to suffer the consequences of their failures. There is no real safeguard for their investment, and they will normally lose everything.  Thus, for people to want to become entrepreneurs, despite the overwhelming risks, there must also be the incentive of a potential for huge reward, should they succeed. Without these conditions, no one would do it.  Thus, the entrepreneurs who must suffer the losses from their failures must in turn also be free to capitalize on their successes.  Without these incentives, both negative and positive, no one would try to come up with new or innovative business ideas and no one would care if their business is running inefficiently or losing money.  This standard would be impossible to maintain without strong laws preserving the individual’s rights to private property; without this, the incentives would be gone.  This is also why the role of the entrepreneur can’t simply be shifted over to the state-sponsored bureaucrat; any motivation to optimize our industry’s production and efficiency would be gone and any progress in the realm of research and development would probably come at a considerably slower rate.  The best we could hope for in such a case is the status quo.  Ultimately, Marx failed to recognize the importance of capitalistic incentives, entrepreneurship, and the validity in reaping the rewards for one’s risks and efforts.

While this argument mostly holds true for the Chief Executive Officers (CEOs) and venture capitalists who themselves took the risks. Granted not all entrepreneurs started from the same place, if you’re a fry-cook who managed to save ten grand over the course of a few years to finance your idea, your margin for error is considerably less than the entrepreneur who could procure a small loan of a million dollars from his father.   We must also consider the CEOs and business owners who have inherited these positions, or as Marx would put it, the means of production.  One would be hard-pressed to find anyone who could argue that these people earned it.  However, what to do about this brand of income inequality is more complicated than it would appear on the surface.  It is human nature to keep things within the family and those with money tend to find ways around nepotism laws and inheritance taxes.  Should the son of the CEO be unable legally to assume the role when he grows up?  Possibly, but what measures should be made to prevent this from happening?  It’s hard to imagine a way of effectively dissipating this type of patricianship and implementing such legal restrictions without seriously impeding upon one’s fundamental rights to private property, among other freedoms.  For this reason, state coercion would appear to be an inexorable precursor to a Marxist political system.

Any time we try to redistribute the wealth within a society according to what seems fair on the surface, the question should always be, at what cost and who will ultimately end-up paying it?  Marx claims that in a capitalist society only those with money, who own the means of production, can be free.  While it would be difficult to deny that money certainly aids and abets freedom, what is the alternative?  In a capitalist economy, money is needed to acquire things we desire and thus is necessary for certain types of freedom.  Liberty isn’t black and white but rather it is a spectrum that we all fall somewhere along and where we land on that spectrum is contingent on a multitude of factors, not just socioeconomic but also how we were raised, what hand we were dealt genetically, etc.  This idea also presupposes that the “means of production” are a singular and static fixture within our planet and not something that is constantly changing, growing, and adapting at different scales.  Was it not individuals who built the so-called means of production in the first place?  It is undeniable that those privileged enough to inherit means of production are at an advantage but, so long as everyone holds the same legal rights to buy and sell private property, everyone has at least a fighting chance of improving their material station in life under capitalism.  Under communism no one does.

Marx not only claims that in a capitalist society only those with money can be free, he also tries to make the case against capitalist greed by stating that individuals ought to adopt the virtues of asceticism and reject capitalist materialism to be happy. 

“the raising of wages gives rise to overwork among the workers. The more they wish to earn, the more must they sacrifice their time and carry out slave-labor, completely losing all their freedom, in the service of greed. Thereby they shorten their lives. This shortening of their life-span is a favorable circumstance for the working class as a whole, for as a result of it an ever-fresh supply of labor becomes necessary. This class has always to sacrifice a part of itself in order not to be wholly destroyed…  To develop in greater spiritual freedom, a people must break their bondage to their bodily needs — they must cease to be the slaves of the body. They must, above all, have time at their disposal for spiritual creative activity and spiritual enjoyment” (Marx, The Paris Manuscripts, 7)

The statement above almost presupposes that Marx knows that we can never expect great material wealth for the masses to come about through communism. This is somewhat self-contradictory since one of his main critiques of the capitalist system is that he believes it to be virtually impossible for the proletariat to get ahead, materially, so long as the bourgeoisie own the means of production.  Since the capitalists never strictly forced anyone to work, then why not just live like an ascetic in a capitalist society and allow those who should choose to work more to do so?  This argument put forth by Marx could have been valid if we presupposed that under communism we wouldn’t have to work as much as under capitalism to have our basic needs met, however, Marx had no way of knowing whether or not this would be true.  Historically speaking, this could not be further from the truth when we consider the numerous famines that ensued in the Soviet Union after the rise of communism.  Even into the 1980s, people of the Soviet Union regularly saw certain types of food disappear off the shelves for periods of time. Contrary to today, in the capitalist West, where obesity, brought forth by a literal surplus of calories, is considered a major problem in impoverished communities.

While Marx’s vision of freedom may still fall within the purview of negative liberty, according to theorists like Eric Nelson, the principles he espouses would certainly appear to be at odds with the virtues championed by strict negative liberty supporters like Isaiah Berlin, who warned against the dangers of state-sponsored coercion.  Berlin warned us in his short essay the Temple of Sarastro of the dangers of creating a utopia as a means of procuring societal freedom.  He argued that such ambitions inevitably lead to this type of coercion and this would tragically hold true when we consider the vast bloodshed that came fourth under communist regimes. Estimates vary greatly depending on the study, with numbers ranging as high as one-hundred-and-sixty-two million worldwide but, in 2017, historian, Stephen Kotkin was quoted saying that communism had killed at least sixty-five million people since the Bolshevik Revolution in 1917.

To some degree, the institutional use of force as a means of protecting freedom for the masses is unavoidable, even a laissez-faire capitalist economy is dependent on a strong justice system to protect private property and function as it should.  A key ethical difference between Marxism and capitalism is the degree to which the economic system’s function is reliant on the institutional threat of violence.  Capitalism may very well be inherently evil and oppressive, as Marx says

Competition is merely the expression of the freedom to exchange, which itself is the immediate and logical consequence of the individual’s right to use and abuse all the instruments of production. The right to use and abuse, freedom of exchange, and arbitrary competition (Marx, The Paris Manuscripts, 17)

There is something to be said for the fact that all this capitalist oppression comes about, remarkably so, without the use of violence.  It is human nature to be greedy and to want to accumulate wealth.  Because Marxism tries to fight this, it is incongruent with human nature, and thus it will always require considerably more force to implement and maintain than the capitalist system which merely exploits it.

 

To what extent Marx was an idealist whose notions simply could not hold up in practice or a truly sinister manipulator who preyed upon the helpless by creating a common enemy out of the bourgeoisie is open to debate.  Marx viewed communism as the inevitable endgame for society after capitalism would inevitably run its course.  Ironically, even Marx would appear to have underestimated the limitlessness of human greed.  Today in the West with more of our basic needs met than ever before we have only become more consumeristic with production shifting to meet ever-increasing conspicuous demands.  This shows that capitalism is inescapable; humans will always be consumers with new and changing demands and someone will always step up to the plate to supply them.  This is why, without fail, black markets have always emerged in communist countries.  Capitalism is unavoidable.

When left unchecked, free markets and untethered rights to private property can certainly lead to forms of crony and gangster capitalism.  Capitalism may even be inherently essentializing and oppressive but to say that it is more so than Marxism would appear to be fundamentally untrue.  By striving for equality of outcome, we ultimately kill any incentives for people to become entrepreneurs by not only failing to reward them for their risks – but far worse than that – we preclude them from reaping the rewards that they manifested themselves from the fruits of their risk-taking.  Humans will always try to compete and outperform each other and by restricting this we are engaging in an oppressive practice that is essentializing in nature.  By holding equality of outcome as the highest priority, Marxists are fighting with human nature and must transgress the fundamental principle of non-interference so that people conform to its principles.  This inevitably leads to the suppression of freedoms far worse than anything we have seen under capitalism.  It is for these reasons that Marxism is fundamentally at odds with real political freedom and why working towards equality of opportunity may be the best goal for our society.

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