An Evalution Of Marxian Theory

An Evalution Of Marxian Theory

There are numerous tests to which Marxian theory might be subjected. Are the purely theoretical parts of the analysis correct and sound? Are they adequately substantiated by inductive data? Are there logical fal­lacies within the system of Marxian thought? Has it continued as the belief of substantial groups of thinkers? Have its predictions of future events been wholly or partially correct? Has it led to any action to rem­edy the ills it dwells upon? Did it lay a substantial basis for later theoriz­ing and action? Does it supplement other analyses of our society and thereby assist us to a more rounded understanding of it? Did it contribute any original thought to our social theories? Are its conclusions those of scientific analysis, or are they the outgrowth of prejudiced hypotheses?

These are all legitimate and pertinent questions, but few of them can be treated here.
Marxian theory may be evaluated in terms of its success or failure in accomplishing what it set out to do. Marx apparently had three major purposes:

1. He wished to set forth an accurate description of the basic processes at work in the capitalist economy. His attempts at this were embodied in his theories of value, wages, and surplus value.
2. He sought to find a simple basic set of causal forces at work
in the world that would enable him to interpret past events and predict those of the future. His fundamental philosophy and economic interpretation of history yielded him this basis for por­traying the future of the capital order.
3. He hoped to establish foundations for the organization of a class-conscious proletariat that would both constitute the intellectual center of and generate the action necessary for the development
of full communism.

Marxian theory should be judged primarily, if not exclusively, in terms of these objectives, to which we now turn our attention.

Theories Of Value, Wages, Surplus Value

Failure to Recognize the Part

Played by Demand in Value Determination

Marx was correct, although not original, in assigning the leading role in the economic drama to value. He saw clearly the crucial function values performed and how they penetrated every cranny of the capitalist econ­omy. What he did not see was the true nature of value determination in the sort of economy he tried to describe—that is, one characterized by the private ownership and operation of competing industrial units for private profit. His theory that, assuming a commodity has use value, the amount of socially necessary labor embodied in it determines its ex­change value is untenable, despite all the efforts of his interpreters and modifiers to make it conform with present-day theories of value. The fact that Marx's value theory was in part the orthodox and accepted theory of his time may excuse him for using it, but that does not justify its later use or the conclusions based on it. Marx failed to note that normal value is no less a result of demand than of supply and that supply is affected by the commodity's embodied content of other factors of production no less than labor time.

While Marx had some insight into the role of demand in value de­termination, he ruled it out as insignificant. In admitting that use value was a prerequisite to exchange value, he touched upon the inadequacy of labor cost as the sole determinant of value. If some use value is necessary to the existence of exchange value, the amount of use value apparently has some relation to the amount of exchange value. This use value, affect­ing consumer bids for commodities, constitutes the pressure to apply the scarce productive agents to the production of respective commodities. The intensity with which the agents are applied has much to do with their phys­ical productivity, with their worth in a society in which they are privately owned, and consequently, with the long-run cost of producing commodities.

This reflection of demand on cost and thus on normal long-run value Marx, along with others of his time, failed to comprehend. His theory of value fails to allow for the fact that as the demand for a commodity in­creases more pressure is put on, say, land to produce that commodity. As more pressure is put on land, diminishing returns may increase the cost and the normal long-run value of this commodity.

It is the same in the case of capital equipment. Even if one were to grant Marx's contention that capital comes from "stolen" funds, demand for goods puts pressure on income receivers to save and thus helps pro­duce capital equipment that can be used in the production of those goods. As long as it is more pleasant to spend for immediate consumption than to save, saving must be rewarded, the value of the saving thus becoming one element in cost that the long-run normal price must cover.

In short, Marx failed to realize that, just as labor is valuable in the capitalist economy only because of demand for the products of labor, so the value of land and capital is reflected from the demand for products they help to produce. The cost of producing these agents—even labor— has no inherent right to be covered by the selling prices of products. It will be met only if these agents produce commodities in quantities that de­mand will absorb at a price equal to the full cost of producing them. Long-run normal value is an equilibrium value determined by the opposing forces of consumers' bids for commodities, on the one hand, and on the other, the scarcities of the productive agents. There appears to be no reason for believing that in a capitalist economy the mere amount of any one of these agents of production plays an exclusive or even dominant part in de­termining exchange values. Hence, the Marxian theory of value does not account accurately for the real values at which commodities exchange for each other in a capitalist economy.

Failure to Recognize the Place of Demand in Wage Determination

The same error permeated Marx's theory of wages. There is no more reason to believe that labor power has value because it is brought into existence by the expenditure of a certain amount of sustenance than there is to believe that a finely carved wooden automobile tire would have value because of the effort expended on its construction. Nor is the amount of value represented by labor or power (the wage) any more determined by the amount of sustenance that went into it than is the value of the wooden tire determined by the amount of effort that went into its production. Labor power, a scarce thing, has value because of the pressure of demand for the commodities labor produces. The greater the demand for the com­modities and the more limited the quantity of labor suitable for use in their production, the greater the value of that labor—regardless of what that labor power cost to produce. The values of inborn talents, or the wages paid for their use, are neither greater nor smaller than the values of like talents acquired by training. The cost of producing the talents has nothing to do with the value of such talent except as it constitutes one type of resistance (for instance, natural scarcity) and is just as much a deter­minant of value as is this cost of producing labor power.

Indeed, Marx seemed to sense this point when he dealt with the translation of units of skilled labor into standard homogeneous time units of unskilled labor. He admitted that the skilled was valued in terms of the unskilled and vice versa by the market processes through which buyers bid for the products of these various skilled categories of labor. However, except for this one implication, which is not carried to its logical conclu­sion, Marx's theory of wages failed to recognize the demand element in the determination of wages.

Inadequate Definition of Subsistence

From still another angle, the Marxian theory of wages is very unsatis­factory. Subsistence, as the cost of producing labor power and therefore the basis of the wage, became an indeterminant quantity in Marx's writings. Whereas on certain occasions he used the term to include only the com­modities necessary to physical health, on others he extended it to include consumption items dictated by the mere desires of workers or by some mysteriously originating social habit or custom that placed the item within their minimum-subsistence living standard. Marx never expained how a sub­sistence living standard could expand to include conventional items during the very time when, according to him, wages were tied down to subsistence living standards without such items.

Although his emphasis on surplus value forced Marx generally to use a purely physical concept of subsistence, he did not adhere consis­tently to it. Only with rigorous acceptance of physical subsistence could the theory of surplus value have been valid at all. But universal adherence to the physical concept of subsistence was impossible, for, even as Marx admitted, normal wages in certain places and times rose above a physical subsistence level. Moreover, the consistent use of the physical concept would have forced Marx to admit that wages could never rise above their existing level. Thus the organization of labor for immediate wage-raising purposes would have been proved ineffectual and could not have been used as the starting point of the organization of a class-conscious proletariat. On the other hand, as soon as Marx admitted that his subsistence level of wages (the cost of producing labor power) could come to include certain conventional items not previously included, he destroyed com­pletely the theoretical base he had established for surplus value. If wages could rise to include items of merely conventional necessity, then why could they not rise to include so many such items that all of what Marx called "surplus value" would be absorbed in a wage high enough to per­mit such subsistence? Thus the adoption of a conventional subsistence living standard as the determinant of the wage level permitted wages under capitalism to rise to indefinite heights—theoretically high enough to ab­sorb all surplus value. This destroys the Marxian thesis that surplus value is an inevitable accompaniment of capitalist production. For the sake of theoretical consistency of his arguments with the theses they were to sup­port, Marx was forced to adopt the physical concept of subsistence. How­ever, his numerous references to existing wage levels and to the possibili­ties of workers' forcing wages up under capitalism indicate that on occasion he sacrificed theoretical consistency to the facts and to his desire to stimu­late workers to organize.

The Problem of Flexible Versus Inflexible Wages

Indeed, if subsistence were to include items not necessary to physical health, wages would have such flexiblity that, under the pressure of cer­tain forces, they would tend to rise so as to absorb all surplus value. These forces were the intense competitive struggles pictured by Marx himself under capitalism. Assuming wages to be flexible, it could be argued that competition among capitalist employers for employees would force surplus value to be paid out as wages. As long as the labor of any employee yielded to his capitalist employer a surplus of the type Marx described, it would pay some other capitalist employer to try to hire him by offer­ing a slightly higher wage. If this competitive situation prevailed on an extensive and intensive scale, the struggle among employers to add to their individual labor staffs in order to increase their individually realized sur­pluses presumably would bid wages up to a point at which no capitalist employer any longer found any surplus attached to the labor of any worker employed by another employer. This type of competition would cease only when wages had absorbed all surplus values formerly going to capitalist employers. Marx assumed keen competition among capitalist employers in the sale of their products but failed to show why there was no similar competition in buying the labor power to which these attractive surpluses were attached. Assuming wages to be flexible and competition among capi­talist employers to exist, forces inherent in the situation would tend to cause surplus value to be squeezed out of owners' incomes and into wages.

It appears that the Marxian theory of surplus value becomes logically untenable unless it is based on a physical subsistence theory of wages; on the other hand, that basis is untenable because wages are known to rise above physical subsistence levels.

Theory of Surplus Value Lacks Theoretical Support

If neither the Marxian theory of value nor the Marxian theory of wages can be accepted, and if these theories are the dual support of the theory of surplus value, what happens to that theory? It is impossible to find in the capitalist system any fund of value possessing the theoretical char­acteristics and coming from the theoretical origins Marx pictured as those of surplus value. Under the capitalist order the values of commodities are not determined solely by their labor content, nor is the value of labor— its wage—determined by the physical necessities of existence. What Marx pictured as surplus value under the capitalist system could just as well be absorbed by wages as by the profit of the capitalist employer or the in­terest of the lender or the rent of the landowner—or all three. There can be no inherent surplus value such as Marx described, unalterably directed under capitalist production into the pockets of the owners.

Unearned Incomes Are the Surplus Value of Capitalism

Thus it would appear that the Marxian theoretical system of value, wages, and surplus value is broken down by its own internal inconsistencies and that the Marxian conclusions hang in midair without support. However, such a conclusion is unwarranted. It is quite possible that if Marx were writing today with the assistance of modern value theory he would de­scribe the value-determining processes much differently and would estab­lish quite different theoretical bases for his surplus value or exploitation thesis.

If Marx should write that in a capitalist society dominated by the private ownership and inheritance of nature-made and man-made produc­tive instruments there will necessarily be some owning-class persons who will gain incomes that are unearned, his thesis would merit further consid­eration. It may be significant that he ended the first volume of Capital with the statement that "the capitalist mode of production and accumula­tion, and therefore capitalist private property, have for their fundamental conditions the annihilation of self-earned private property; in other words, the expropriation of the laborer." Was this the essence of Marx's theory of surplus value?

If one were to grant the assumption that the capitalist system could not prevail without the private ownership of nature-made as well as manmade instruments or without the ownership of inherited property as well as property arising from personal productivity, it would be possible to find inherent in the capitalist order certain personal incomes that come substan­tially close to being what Marx called surplus value. The owner of land or natural resources, purely as an owner, collects what the economist calls economic rent. This is his payment for the use of his land by someone else, or a surplus arising out of his own use of the land over all other ex­penses of production. The owner has not made the land; its productivity is created by nature; but the economic worth of those scarce productive properties that collectively are called land currently flows to the owner.

This income is used by its recipient either for consumption purposes or as a source of capital funds, much as Marx pictured surplus-value funds as being used. If it is used to purchase consumption commodities, these are a portion of the total national income in whose production labor has played its part. There is a surplus in the sense that the owner performs no personal productive effort in return for the real income. Since whatever he uses must have some labor embodied in it, and since he, the owner, furnishes no labor to society, it might be said that he "exploits" the labor of others and that the implement of exploitation is the private ownership of land.

Moreover, the recipient of land rent appears to be in that increas­ingly fortunate position Marx held was occupied by the recipient of a constantly increasing surplus value. Since land is the only agent of pro­duction whose quantity cannot be increased by man's efforts, its owners possess something that grows increasingly scarce relative to expanding popu­lation. As people increase in number and natural resources remain con­stant, more intense competition for the scarce natural agent creates a long-run upward trend in land rents. This trend has no counteracting in­fluence in the form of an increased supply of land induced by the increase in rents. The upward movement of land rents relative to other values, re­calls the Marxian theory that all increased productivity of labor goes to swell surplus value.

The owner of inherited capital occupies a similar position relative to the receipt of unearned income. Even if interest on capital funds is called compensation for willingness to save, the heir who receives interest on inherited funds nevertheless cannot be said to have incurred the irksome efforts for which it is paid. He gains title to social product without adding his personal productive effort to the economic process.

It is only in terms of unearned incomes of this nature, rather than in the theoretical trappings Marx gave it, that anything similar to his sur­plus value can be inherent in the capitalist economy. Certain modernizers of Marx come very close to revamping his theory of surplus value in terms of what is here called unearned income.

Certain Deductions of Marxian Theory are Unsound

Certain deductions that Marx drew from his theories of value, wages, and surplus value are, along with their theoretical bases, unsound. The pro­letariat has not experienced the increasing misery Marx deduced to be its lot. Although there might well be some question as to how workers relative to owners have shared in the increasing national incomes under capitalism, in absolute terms their misery has been alleviated rather than deepened. If wages are not linked rigidly to physical subsistence, the dire consequences for the proletariat Marx drew from his theoretical reason­ing cannot be inherent in the capitalist system. Machinery, as the creator of labor reserve pressing wages downward, may seem at times to act its Marxian role, but its force is neither so completely nor so persistently in that direction as Marx's theorizing led him to believe. Although techno­logical unemployment from time to time has been a major problem, our modern economy has experienced certain recurring and long-run trans­formations of machine efficiency into lower unit costs and lower prices, thus creating new demand for labor that has been more potent and durable than Marx admitted.

The rate of profits has not followed the decline that Marx felt the value processes, coupled with the growth of machinery, would bring. Nor have fluctuations in economic activity turned out to be as completely an overproduction phenomenon as Marx made them. Careful studies indicate that a number of forces, wholly outside his simple overproduction (because of surplus value) theory, are important factors in their causation. More­over, there is a question as to whether business booms and recessions have tended to become more serious, despite the severe depression of the 1930s. The class consciousness of the proletariat and the homogeneity of the owning class under capitalism have not congealed as firmly as Marx believed they would. The proletariat—at least in the United States—can still sire labor organizations that defend actively all the basic institutions of capitalism. Whole sections of the unorganized proletariat in the white-collar and service categories remain desperately sure that their interests are closely linked with those of their capitalist employers. This they dem­onstrate by a refusal to be led into the dangerous paths of "radical" think­ing, acting, and voting. The "bourgeoisie" today includes—again, at least in the United States—such heterogeneous and sometimes opposing inter­ests as those of the small merchant, the chain-store owner, the large indus­trialist, the small-scale farmer, and the powerful banker. The last named— personifying, in Marxian theory, finance capital—probably has not achieved the domination Marx pictured as thrust upon him by inevitable forces at work under capitalism. Professional classes of lawyers, physicians, min­isters, and teachers, aside from the ever-present exceptional individual and minority group, show little tendency to look for their ideals and chief source of support to other than the customary bourgeois sources. The in­dustrial technicians—chemists, engineers, industrial managers, and the like—still react in a bourgeois fashion to political programs, strikes, and "rad­ical" movements.

The tendency for the inherent forces of capitalism constantly to push certain portions of the bourgeoisie into the proletariat and to induce other portions to merge their interests with it has not worked so powerfully as Marx suggested it would. If such a trend has existed in specific sections of the bourgeoisie, there have been counteracting movements in other por­tions, such as the creation of a large group of owners of independent res­taurants, motels, and service facilities at the very time the chain stores and supermarkets have been transforming many small-scale independent bourgeois merchants into hired employees. While competition and the ad­vantages of large-scale production have been concentrating economic con­trol in certain lines of production, modern corporate securities, the devel­opment of insurance, changing techniques, and new products have been spreading ownership and creating a new "petit bourgeoisie" that attaches its strength with no mean loyalty to the central bourgeois owning interests.

There is no question that the inaccuracies and inadequacies of Marx's theoretical analysis led him into certain deductions concerning the conse­quences of capitalist production that, once their theoretical bases are proved fallacious, seem to be left without theoretical support and unproved by empirical observation of the post-Marx capitalist world. The inevitability of the forces inherent in capitalism that would eventually destroy it was a theoretical inevitably. The inductive study of data in the social sciences was wholly undeveloped in Marx's day and even today is entirely inade­quate to act comprehensively as either support or refutation of a theo­retical system as extensive as that Marx constructed. Marx cited volumin­ously from factual material in the realm of economic phenomena, but practically all these citations constitute illustrative rather than inductive quan­tified support for his theoretical points, and none of them meets modern tests of statistical adequacy.

Possible Elements of Truth in Marx's Prophecies

Despite all this, we cannot hastily dispose of Marxian conclusions and predictions by considering them a mere superstructure built on inade­quate and inaccurate theoretical foundations. We have already noted the probability that unearned incomes are inherent in a capitalist society, and the possibility that these, in their essence but not their theoretical source, may be like Marx's surplus value.

Likewise, it is clear that many of the consequences of capitalism that Marx derived from his theoretical reasoning have plagued our capitalist system. Technological unemployment has recurred ever since the capitalist system developed substantial maturity, and it would be foolish to dispose of it on purely theoretical grounds.
The holding company and similar devices have made the control of industry more important than its ownership in relation to sharing its bene­fits. This control has reached monopoly proportions in some important in­dustrial fields, and those who control the credit agencies make many of the basic decisions.

The wages of the masses of workers appear to have risen slowly when the tremendous technical advances in productive methods and in­struments are considered. Although excess production—that is, more out­put than can be sold at cost—is far from being the sole causal factor of business depressions, excess productive capacity in a particular industry may be contributory. Common observation discloses the ills that have often spread cumulatively throughout our economy in the wake of excess produc­tion in some industry or group of industries. Government excursions into the restriction of many agricultural crops during recent decades may not demonstrate the theoretical inevitability of general overproduction in a capi­talist order, but they do mark it as a major problem at times demanding the closest attention of government.

Finally, what can we make of Marx's prediction that capitalism would end in collapse? On first thought this may seem ridiculous. How­ever, we should seriously ponder events since 1929. In the early 1930s capitalism in the United States did collapse, and financial calamity ushered in a prolonged and desperate economic crisis. Although the outcome of the Great Depression was not the socialism Marx predicted, capitalism to­day differs from capitalism in 1929. It is highly probable that only the massive arms expenditures of 1941-1945 managed to pull capitalism, at least in the United States, out of the depression of the 1930s. Furthermore, it is often persuasively argued that the postwar resurgence of capitalism in the United States and Western Europe (especially since European re­covery was for a long period dependent upon the aid of the United States) has been continuously underwritten by large governmental defense expendi­tures. In the absence of World War II and postwar arms spending, what would have occurred? Can it be categorically denied that capitalism might have followed trends similar to those Marx described? Orthodox Marx­ians, of course, insist that history has not yet passed final judgment on the events of our century.

The Dilemma of Marxian Theory

We return to the question, What of the validity of the Marxian theories of value, wages, and surplus value, and the deductions made therefrom by Marx? This becomes a most difficult question to answer. The theo­retical validity and consistency of the Marxian reasoning cannot be de­fended. The errors in the theoretical portion of Marxian thought are so serious and so basic that they cannot be corrected by interpreting or mod­ernizing Marx, nor can they be considered superficial.

This, however, does not destroy the value of Marxian theory. It has been noted that through this theoretical analysis Marx somehow or other discerned the aspects of capitalism that cause defenders of that system their greatest concern—the concentration of industrial control, monopoly, occasional excess production, technological unemployment, fluctuations in industrial activity, unearned incomes, and the relatively low incomes of unskilled workers. The problem is perplexing: How could Marx draw correct or enlightening conclusions from unsound theoretical analysis? This has remained the dilemma of the numerous students of Marx who have found his theoretical reasoning imperfect and unsatisfactory but who never­theless feel that they have been led, at least here and there, to a more com­plete understanding of the process at work within capitalism by viewing them, in part but not exclusively, through Marxian concepts.