by Michael Roberts
It’s 200 years today since Karl Marx was born. And it’s just
over 100 years since the great 20th century economist John Maynard
Keynes wrote about Marx’s contribution. Keynes wrote then: “how
can I accept the (Communist) doctrine which sets up as its bible above
and beyond criticism, an obsolete textbook which I know not only to be
scientifically erroneous but without interest or application to modern
world”. I think we can see that Keynes had a low opinion of Marx’s ideas.
And we can see why from the following comment of Keynes. “How
can I adopt a creed which, preferring the mud to the fish, exalts the
boorish proletariat above the bourgeoisie and the intelligentsia, who
with all their faults, are the quality of life and surely carry the
seeds of all human achievement? “
Keynes stood for the preservation of capitalism and its ruling class,
for all its faults, over the ‘boorish proletariat’. This was my
opening salvo in my presentation to the Marx 200 conference in Berlin,
organised by the Rosa Luxemburg Institute. My presentation went on to
cover where I thought Marx and Keynes differed and why Marx’s ideas were
superior as an analysis of capitalism and as a basis for political
action. In my view, it is necessary to spell out these differences
because the dominant analysis of capitalism adopted in the labour
movements of the major capitalist economies, especially by the leaders
of those movements, is Keynesian theory and policy, not Marx. Marx is
ignored or dismissed, on the whole.
However, at the session, Professor Radhika Desai
disagreed with me. For her, the similarities (agreements) between
Keynes and Marx were greater than the differences. It’s a debate that
we could have, because in my view expunging the influence of Keynes (a
supporter of the ruling class) from his dominant influence in the labour
movement is an essential task. Certainly Keynes was determined to
expunge the influence of Marx from the labour movement and from his economics students –as the quotes above show.
But let’s just briefly consider the similarities and differences
between these two great political economists of the last 200 years.
First, the agreements as usually presented by those who see them. Both
Marx and Keynes think there is something wrong with capitalism. Both
Marx and Keynes have a falling rate of profit theory. Both Marx and
Keynes wanted the ‘socialisation of investment’. Both Marx and Keynes
wanted and expected the ‘euthanasia of the rentier’ (Keynes’ words),
namely the disappearance of finance capital.
From this, it sounds that, despite Keynes’ crude dismissal of Marx,
he had a lot in common with Marx’s analysis. But that would be looking
at it very superficially, in my opinion. In my paper to the conference
session, I make a lot of points about how Keynes rejected the labour
theory of value (both classical and Marx’s) and stood by marginalist and
utility theory. Berlin 2018
For Keynes, there was no theory of exploitation of labour power that
extracted profit from the unpaid labour of the working class. Profit
came from ‘capital’ investing. Workers got wages for working; bankers
got interest from lending and capitalists got profit from investing;
each according to his or her own. This is the standard mainstream
‘factors of production’ theory. So from the start, Keynes denies that
there is exploitation in the capitalist mode of production; the market
decides and there is free and fair exchange: profit for capital, wages
for workers.
Of course, if you have followed this blog and read Marx’s ideas, you
would know that this is nonsense and a mere apologia for the rule of
capital. Where does profit come from in this mainstream theory? There
is no explanation. Somebody must pay for it and yet there is free and
fair exchange of commodities in the market –so there can be no profit in
the market, merely an exchange of value (money). Keynes’ and the
mainstream approach really justifies the rule of capital and, for that
matter, inequality of income and wealth by denying the reality that a
small group controls the means of production and forces the rest of
us to work for a living. Indeed, Keynes said that: “For my own
part, I believe that there is social and psychological justification for
significant inequalities of incomes and wealth, but not for such large
disparities as exist today. There are valuable human activities which
require the motive of money-making and the environment of private
wealth-ownership for their full fruition.“
Then there is the rate of profit theory. Those who reckon Marx and
Keynes are allies in their critique of capitalism like to point out that
Keynes had a theory of a falling rate of profit as well as Marx.
Indeed, they were the same. But Keynes’ theory has little to do with
Marx’s. Keynes did see the fluctuation of the rate of profit—or the
marginal efficiency of capital (MEC), to use Keynes’s terminology—as the
main factor that determines the changes in the phases of industrial
cycle: “Now, we have been accustomed in explaining the ‘crisis’ to
lay stress on the rising tendency of the rate of interest under the
influence of the increased demand for money both for trade and
speculative purposes. At times this factor may certainly play an
aggravating and, occasionally perhaps, an initiating part. But I suggest
that a more typical, and often the predominant, explanation of the
crisis is, not primarily a rise in the rate of interest, but a sudden
collapse in the marginal efficiency of capital.
But Keynes’ theory of MEC is based on falling ‘marginal productivity’
due to the growing ‘abundance of capital’ and on the psychological
expectations of capitalists about the future. The rate of profit will
gradually fall as more and more technology is produced; the more
abundant is capital, the less it is wanted and so its marginal value
falls. This is not Marx’s theory. His depends on the continual drive
by capital to replace labour in production with machines. Individual
capitalists compete with each other to drive down costs and in so doing
that pushes up the organic composition of capital by shedding labour.
As labour is the only source of profit, not capital (as in Keynes’
theory), the rate of profit tends to fall. And it is a tendency.
For Keynes, however, the MEC will fall not because insufficient value
is being extracted from labour but because capitalists ‘suddenly’ lose
their appetite for investment: “that marginal efficiency of capital
depends, not only on the existing abundance or scarcity of capital-goods
and the current cost of production of capital-goods, but also on
current expectations as to the future yield of capital-goods. In the
case of durable assets it is, therefore, natural and reasonable that
expectations of the future should play a dominant part in determining
the scale on which new investment is deemed advisable. But, as we have
seen, the basis for such expectations is very precarious. Being based on
shifting and unreliable evidence, they are subject to sudden and
violent changes.”
So the fall in Keynes’ rate of profit is due to individual
capitalists’ subjective views about the future (‘confidence’) not
because of an objective change in the conditions of accumulation of
capital and production (Marx’s view). As Paul Mattick Snr commented 50
years ago, “what are we to make of an economic theory, which after
all claimed to explain some of the fundamental problems of
twentieth-century capitalism, which could declare: ‘In estimating the
prospects of investment, we must have regard, therefore, to the nerves
and hysteria and even the digestions and reactions to the weather of
those upon whose spontaneous activity it largely depends’?
The ‘sudden collapse’ in MEC has caused the slump (because interest
rates are now too high compared to profitability and people ‘hoard’
money instead of investing or consuming). But once that is overcome, we
can return to the ‘normal’ capitalist mode of production. “Economic
prosperity is…dependent on a political and social atmosphere which is
congenial to the average businessman.” Unemployment, I must repeat,
exists because employers have been deprived of profit. The loss of
profit may be due to all sorts of causes. But, short of going over to
Communism, there is no possible means of curing unemployment except by
restoring to employers a proper margin of profit.”
Then there is this ‘socialisation of investment’. Keynes called for
this (a vague phrase) as a ‘final solution’ to the problem of depression
in a capitalist economy. If monetary easing (cutting interest rates
and pumping in money by central banks) or fiscal stimulus (tax cuts and
government spending) did not work in reviving the capitalist economy and
getting capitalist to invest more, then maybe it would be necessary for
the government to step in directly and take over the show. It is not
clear, however, that Keynes meant any expropriation of capitalist
industry and companies – something he would hate. He probably meant
that state operations and even some plan should be introduced –
something similar to Roosevelt’s New Deal projects in the 1930s in the
US. And anyway, it is clear that Keynes saw ‘socialisation of
investment’ as just a temporary measure to get capitalism going again
(perhaps like the war economy 1940-45 eventually did). Once the ‘technical malfunction’
(lack of demand) in the capitalist mode of production had been
overcome, then we could revert to free markets and investment for profit
and end ‘socialised investment’.
In one of his last articles on the capitalist economy as the Great
Depression ended and the second world war began, Keynes remarked that
“Our criticism of the accepted classical theory of economics has
consisted not so much in finding logical flaws in its analysis as in
pointing out that its tacit assumptions are seldom or never satisfied,
with the result that it cannot solve the economic problems of the actual
world. But if our central controls succeed in establishing an aggregate
volume of output corresponding to full employment as nearly as is
practicable, the classical theory comes into its own again from this
point onwards.”
So once full employment is achieved, we can dispense with planning
and ‘socialised investment’ and return to free markets and mainstream
neoclassical economics and policy: “the result of filling in the gaps in the classical theory is not to dispose of the ‘Manchester System’ (‘free’ markets – MR),
but to indicate the nature of the environment which the free play of
economic forces requires if it is to realise the full potentialities of
production.”
Keynes saw all his policies as designed to save capitalism from itself and to avoid the dreaded alternative of socialism. “For
the most part, I think that Capitalism, wisely managed, can probably be
made more efficient for attaining economic ends than any alternative
system yet in sight, but that in itself it is in many ways extremely
objectionable. Our problem is to work out a social organisation which
shall be as efficient as possible without offending our notions of a
satisfactory way of life.” So “the class war will find me on the side of the educated bourgeoisie.” Fear of revolution was central to Keynes’ policies. I don’t need to explain that Marx did not see this way at all.
As for the ‘euthanasia of the rentier’, Keynes reckoned that as
capitalism expanded, it would, through more technology, create a world
of abundance and leisure. Because of that abundance, the return on
lending money to invest would fall as the MEC fell. So bankers and
financiers would no longer be necessary; they could be phased out.
Well, that does not seem to be happening. Indeed, the very people who
claim that Keynes is a ‘progressive’ economist with great similarities
to Marx now argue that capitalism is being distorted by
‘financialisation’ and finance capital – and that is the real enemy.
What happened to the gradual phasing out of finance in late capitalism a
la Keynes?
In contrast, Marx’s theory of finance capital did not foresee a
gradual removal of finance; on the contrary, he describes the increased
role of credit and finance in the concentration and centralisation of
capital in late capitalism. Yes, the functions of management and
investment become more separated from the shareholders in the big
companies, but as I have argued in a previous post,
this does not alter the essential nature of the capitalist mode of
production – and certainly does not imply that coupon clippers or
speculators in financial investment will gradually disappear.
So I reckon that the differences (and there are others in my paper)
between Keynes and Marx are fundamental and any superficial similarities
pale in comparison. That is important because it is Keynesian ideas
that dominate in the labour movement, not Marx 200 years since his
birth.
More on other things at the Berlin conference in another post.
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