Marxism — Another Economic Theory Bites the Dust

Image credit

As we have seen or will see, Classical Economics, Neoclassical Economics and Austrian Economics turn out to be theories that fail to adequately describe and explain the capitalist economy. Marxism joins them in the dustbin, as can be gathered from the below summary of Marx's errors:

We can run through the problems and failed predictions of Marxism as follows:

(1) Marx’s labour theory of value is false. The a priori argument for the labour theory of value in volume 1 of Marx’s Capital is a non sequitur and later contradicts itself, as detailed here and here. There are devastating problems with the very concept of a homogeneous unit of abstract, socially necessary labour time and serious empirical problems with the theory, as I show here. The very concept, as Marx defines it, cannot be accepted or defended as coherent or meaningful, and is contrary to the empirical evidence. The labour theory does not explain price determination (for how most prices are actually determined, see here), and the theory of price determination in volume 3 of Capital is inconsistent with that in volume 1. See here. 

(2) the tendency to monopoly has its limits even in capitalism, and the extreme and increasing degree of monopoly as predicted by Marx goes well beyond anything observed in real world capitalism; 

(3) the size of the working class eventually stabilised and society was swelled by a growing and prosperous middle class and social mobility. Unemployment rates in capitalism are simply a cyclical result of the business cycle: even in the 19th century, unemployment rates did not grow and grow in the long run, as Marx’s theory predicts, but normally simply moved around a point somewhat above full employment, as John Maynard Keynes pointed out:

“our actual experience … [sc. is] that we oscillate, avoiding the gravest extremes of fluctuation in employment and in prices in both directions, round an intermediate position appreciably below full employment and appreciably above the minimum employment a decline below which would endanger life.”  

Keynes, J. M. 1936. General Theory of Employment, Interest, and Money , Chapter 18.
https://www.marxists.org/reference/subject/economics/keynes/general-theory/ch18.htm

(4) Marx thought that the large industrial reserve army is a necessary consequence and necessary condition of capitalism, but this is incorrect. In the Keynesian era of full employment, there was very low unemployment and indeed labour scarcity in the advanced capitalist world, but capitalism continued and thrived – indeed we now call it the “Golden Age” of capitalism.

(5) the long-run tendency of capitalism, even in the 19th century, was to massively increase the real wage, which has soared above subsistence level, even for workers (see here and here).

(6) the growing real wage and rising disposable income even of workers in capitalism also allowed a massive capacity for production of new commodities and new opportunities for employment (e.g., especially in services and middle class employment), which in turn has helped to overcome technological unemployment.

(7) Marx’s claim that machines, generally speaking, are an unmitigated evil in capitalism whose primary effect is to increase the intensity and speed of work by labourers is an outrageous falsehood – a perversion of history and reality. In reality, machines have, generally speaking, tended to decrease the intensity, difficulty and monotony of human labour and often reduced to human labour to lighter work of visual inspection and overseeing of machine work, not physical labour. On this, see here and here. Advanced capitalist nations have also virtually eliminated child labour as well, and in our time have tended to pay women the same hourly wage for the same type of work as men.

(8) highly developed and advanced Western capitalist states like Britain and the US proved the most resistant to communism and Marxism (contrary to Marx’s theory), and when communist revolutions broke out it was in backward Russia and China. Even the communist outbreaks in Germany and Italy at the end of the First World War were more the result of the collapse of those nations under the strain of war, and not in line with the vision Marx had predicted (as I noted here).

In the Keynesian era of full employment from 1946 to 1973, mixed economy capitalism produced a golden age.
 
Of course, since the 1970s we have entered a disastrous and regressive era of Neoliberal economics, but, even so, the consequences of that Neoliberalism are not in line with all of the predictions of Marxism as listed above.

The end of the Keynesian period and the return to revived neoclassical theories from the 1970s brought with it a return to lower growth, higher unemployment, stagnating real wages, and higher income inequality, but, above all, a transnational globalised neoliberal capitalism which has shipped a great deal of Western manufacturing and jobs to the Third World, and allowed legal and illegal Third World mass immigration into the West to lower wage costs, displace native workers and even replace populations.

Make sure to read the entire post and also this intriguing article

Michael Heinrich on the Tendency of the Profit Rate to Fall and Engels’ Dubious Editing of Marx 

suggesting

... that there is not even any coherent, well-developed theory in Marx’s published writings of capitalist crises, or what would now be called business cycle theory ... 

that Marx’s law of the tendency of the profit rate to fall in the long run is both logically flawed and empirically suspect, and he is right ... 

[that Engels] ... mistakenly suggested to readers that Marx thought that all capitalist crises were the result of the tendency of the profit rate to fall, this has caused a gross misunderstanding of Marx’s views ... 

that ... Marx’s mature crisis theory starts to look very much like a Keynesian explanation, with the emphasis on aggregate demand, banking, money and credit cycles.