The new reading of

Marx’s Capital

David F. Ruccio, University of Notre DameLattelecom International Conference:New Strategies in the New World (October 2011)

Nouriel Roubini

So Karl Marx, it seems, was partly right in

arguing that globalization, financial

intermediation run amok, and redistribution of

income and wealth from labor to capital could

lead capitalism to self-destruct.

George Magnus

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.

Why now?After 30-year campaign to stamp out Marx —within the discipline of economics and in the wider society

Then, CRASH of 2008

Why Marx?Failure of mainstream economics

• Didn’t predict the crash

• Didn’t consider the possibility of a crash

• Didn’t know what to do after the crash

Growing problems

DEREGULATION and growth of finance

Housing BUBBLE

OUTSOURCING of jobs

DECLINE of labor unions

PlusProductivity-wage gap

Unequal distribution of

income

And mainstream economists?

Efficient markets

Inequality good for growthjust technology and globalization

[Also, no economic history or history of economic thought]

problems worse since 2008. . .• high and persistent and long-term UNEMPLOYMENT

• increasing POVERTY and food insecurity

• STAGNANT WAGES and declining average incomes

recovery only in

PROFITS

Renewed interest in MARXUmair Haque“Marx's critiques seem, today, more resonant than we might have guessed.”

“You don’t have to sleep in a Che Guevara T-shirt or throw rocks at McDonald’s to acknowledge that Marx’s thought is worth studying, grappling with, and possibly even applying to our current challenges.”

Peter Coy

But. . .

They haven’t read Marx’s Capital

They haven’t read scholarly work on Marx’s Capital

Marx’s Critique of Political Economy

AlienationCommodity fetishism

ImmiserationCrisis

Stagnation

AlienationMarx argued that workers are divorced from the product of their labor. It confronts them as an alien power, something independent of them.

“Within the capitalist system all methods for raising the social productiveness of labor are brought about at the cost of the individual laborer; all means for the development of production transform themselves into means of domination over, and exploitation of, the producers; they mutilate the laborer into a fragment of a man, degrade him to the level of an appendage of a machine, destroy every remnant of charm in his work and turn it into a hated toil. . .; they transform his life-time into working-time, and drag his wife and child beneath the wheels of the Juggernaut of capital.”

Workers are forced to have the freedom to sell their labor power—in order to purchase food, clothing, shelter, health care, and higher education for their children.

Commodity fetishismHomo economicus is not natural—as Adam Smith proclaimed—but historical and social. Freedom, equality, property, and Bentham must exist for commodity exchange to take place. As Marx puts it, “material relations between persons and social relations between things.”

Commodity exchange is stamped on all other identities. The logic of “the economy”—of private markets, balanced budgets, and economic austerity—is used to rule out all other concerns. Even more so in recent years.

ImmiserationCapitalism would lead to the relative immiseration of workers. This was because laborers were exploited by capitalists and, as a result, the gap between labor and capital would grow. According to Marx, “as capital accumulates, the lot of the laborer, be his payment high or low, must grow worse.”

In the United States, wages have failed to keep pace with productivity for decades. (The median real wage has been stagnant since the mid-1970s, while productivity has soared.) In terms of the macroeconomy, labor's share of income has fallen, while the lion's share of income growth has accrued to those at the very top.

CrisisAccording to Marx, “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses.” Capitalism would be prone to chronic, perpetual crises of overproduction—since workers wouldn't have the means to purchase enough goods to keep the economy growing. Money, the credit system, and capitalist competition create other possibilities for crisis.

For a while, workers attempted to compensate for stagnant wages by working longer hours, sending more household members out to work, and by going into debt. This led to even more production and a debt-fueled bubble in housing and finance, which eventually burst in 2007-08.

StagnationOnce a crisis occurred, both wages and capitalist profits would fall. A recovery of capitalism would only happen once enough capital was “slaughtered” and the rate of exploitation increased. Only then would the capitalists that survived begin to invest in more machinery, purchase more raw materials, and hire more workers.

Profits have, in fact, rebounded in both financial and nonfinancial sectors and, while capitalists are investing in new machinery, they have decided not to hire additional workers—at least not in the United States. The number of unemployed and underemployed American workers now stands at 26 million (16.2 percent of the labor force).

What if there had been a new reading of Marx’s Capital?

Changes in economics: What should be taught? What should role of economists be?

Changes in the wider society: What are the costs of the crises and of the solution to the crises? What are the alternatives to stimulus and austerity?