Tuesday, August 30, 2011

Karl Marx and investment banking

George Magnus is a well-known and widely admired economist for the investment bank UBS in London. So it is interesting and surprising he is talking approvingly of Karl Marx in a Bloomberg column:

Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.

Consider, for example, Marx’s prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in “Das Kapital,” companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.”
The process he describes is visible throughout the developed world, particularly in the U.S. Companies’ efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant.

Napoleon and other pigs will be rooting for him.

Accumulation crises are an interesting idea, of course, and just because western countries have persistently refused to behave as Marx predicted for a century does not mean there is not something to it.

Part of what has happened is a trillion people in China and India have been brought into the world economy and are getting richer, once released from the chains of Maoism and Fabian socialism. It is not, as some in the academy would argue, simply an artifact of "late capitalism" but rather - to some extent - its success in spreading even further at the expense of Marxism.

The fact is capitalism adapts and invents new wants and aims. And the state grew in the twentieth century, breaking up monopoly capitalism and providing many public goods.

That said, I have been arguing there IS a phase shift going on because the nature of our needs are changing. Accumulation produces not contradiction and collapse, but evolution. The system adapts, not revolts.

I still plan to watch David Harvey's famous video course on "Marx's Capital" at some point in the interests of open-mindedness, however.

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