Howard Richards, Professor of Peace and Global Studies - Chapter 2--The Unavoidable Karl Marx

            If I can make my case, then my themes will connect with each other.   Problem-solving will legitimate authority.   Philosophy will help social science to provide practical advice that will contribute to solving problems. Philosophy will help by always keeping the fundamental questions open --by questioning all assumptions as Plato in The Republic says “dialectic” does. At the same time that philosophy is open and impartial because it questions all assumptions, its very process includes a bias in favor of the sort of methodologies I am recommending.   The sort of activity that Plato’s dialogues depict has become part of the meaning of the word “philosophy.”   It is an activity that promotes self-respect and respect for others. People are treated as rational beings. Philosophical activity itself illustrates the sort of anthropomorphic methodologies I and the people I am citing recommend for social science, the methodologies that recognize that homo sapiens sapiens is an ethical animal who makes up rules and uses them to organize cooperative action.

            I am using the word “legitimate” in a sense a bit different from its mainstream use, as expressed, for example by Seymour Martin Lipset when he says legitimacy is “…the capacity of the system to engender and maintain the belief that the existing political institutions are the most appropriate ones for the society.” (Lipset 1963 p. 64 ).   I am saying that problem-solving will help to persuade people to think that their institutions are legitimate, and I am also saying that their thinking so will be justified.   I am modifying Savigny’s classic definition of a right as a “power conferred by law” to add that the law itself gains rightness (or loses rightness) as it is part of a culture’s successful (or unsuccessful) coping with problems physical reality poses.   Nature judges culture.

            The first reaction of many will be to think that my proposition “nature judges culture” could not possibly make any sense, let alone be true. Their first question may be the Nietzschean one, “Who says what physical reality says?” Or it may be the liberal question whether each person has a right to choose a conception of the good life quite independently of what physical reality may be.   But perhaps there are others whose first inclination will be to agree with me. Why is it, after all, that it is undesirable to live in what Mary Douglas calls a low-grid low-group culture, where nobody can count on support from anybody else ? Is it not because the human body itself needs somebody to count on ? Does she not implicitly judge norms with facts?   (Douglas 1982, p. 208, Douglas 1973)

            In any case,   I will not next fill in the logical gaps in the foundations of my edifice created by the impossibility of nature speaking and telling us what it thinks of culture –if indeed it is a logical gap; or suggested by the idea of rights as moral trumps which trump everything, even ecology. Next I will say more about the rules our culture actually has; although I cannot refrain from saying before proceeding that even if nature cannot speak to culture, it can silence culture; as it will silence our culture, leaving our blue (or formerly blue) planet without human voices if present trends toward the destruction of the biosphere are not reversed.

            Better defining the object I think nature judges seems to me to be a prerequisite to a discussion of the question whether it is possible for nature to judge it; and that requires talking about a specific culture, not just about the general concept that all cultures have rules. The same prerequisite discussion seems to me to be required for making a case that the notion of rights as moral trumps is an ethnocentric one whose very merits (and it is a notion with merits) derive not from simple fiat but from the realities of the human condition, from which it follows, I think, that it is the human condition and not the concept of rights that establishes the ultimate criteria. In this chapter I will discuss our rules, those of our culture, our society.   So far I have been agreeing with Wittgenstein that the games people play are part of the natural history of our species (Wittgenstein 1953, p.12 p.125).   Reading Wittgenstein through Deweyan lenses I see the games people play as part of the evolutionary history of our species; especially, but not only, when Wittgenstein writes of children’s games (e.g.   Wittgenstein 1953 p. 13)     “Play is the work of the child,” according to the biologist-turned-psychologist Jean Piaget.     Young humans, like kittens and puppies and the young of many other species, develop adult coping skills through juvenile play; and in the human case the games of the young, like the adult games of their seniors, include ceremony, ritual, moral development, and rule-following.   (Piaget 1932)    These features of human childhood underline the importance of game playing and rule-following in human adulthood.

Basic Rules

            Now I want to talk about the basic rules that have in fact evolved in the history of the society we actually live in.   I agree with Wallerstein that now there is only one society, only one object for social science to study.   It is the global economy. Wallerstein calls it “the modern world-system.”   To say we live in it is to say we are governed by its rules. (Wallerstein 2001)

            In the midst of the myriad ever-changing congeries of rules that at any given moment on any given day are guiding actions and structuring conversations among the billions of featherless bipeds –I do not leave out the chimpanzees—who inhale and exhale, eat and defecate, drink and urinate, at every inhabited location on earth; there are some rules that are basic. They change slowly. Sometimes it seems that they do not change at all.

            But their stability over time is not what leads me to define them as the basic rules of the world-system.   That is not the concept. It is an empirical characteristic they have. Perhaps in the future they will change rapidly. What leads me to define them as basic is their function. They govern the acquisition of basic necessities. I am like the early biologists described by Michel Foucault (Foucault 1966) who, at the end of the 18^th and the turn of the 19^th centuries, changed the system for classifying plants and animals. Ditching the older systems, they found that it made more sense –indeed it was the only way to make sense—to classify life in terms of function. The sexual organs of plants were for reproducing.   Animals had respiratory systems whose function was to carry oxygen to cells.   Doing organized being.   The classification of living beings has ever since been organized both historically and functionally, historically because it retraces the genealogies of species as they have evolved through time; and functionally because the nature of an organ is defined by its powers, by what it does. So it is with rules.

            Basic rules are so called because they serve a certain function, the function of organizing the provision of life’s basic needs. They are different from one culture to another.   In the modern world economy, as I will elaborate later, some of the most important ones are rules about producing goods and services and about marketing them.

            I admit that my reasoning is almost circular. I am slipping in a concept which says that in the universe of rules a crucial subset is the one composed of those that govern meeting basic needs.   This concept fits nicely with my view that rules should be judged by their contributions to helping culture cope with nature. I am not exactly assuming a conclusion in the definition of one of its premises, but I am paving the way for a conclusion.   Elsewhere I have tried to show that this sort of almost circular procedure is typical of philosophy, and has been throughout its history, and that it is not incompatible with regarding doing philosophy as a useful and necessary social activity. (Richards 1995) I do not disagree with Derrida’s deconstruction of philosophy’s typical procedures, but I nonetheless attribute useful social functions to them.

            I also fear that I am allowing a reader to imagine that first there is a society and then, second, it sets up some necessary rules to govern meeting its members’ needs. And I fear that by referring to physical functions cultures have in common, for example meeting people’s need for water to drink,   I am in danger of underestimating cultural differences.    The following analysis is designed to allay these fears.

Constitutive Rules

            Consider a scene where two or more parties are negotiating a contract.   It is a typical and central ceremonial activity utilizing basic rules our culture actually has.   To make the scene a little more specific, let us say, for example, that the parties are negotiating a real estate sale contract. Charles Taylor asks the question, “What counts as ‘walking out’?” (Taylor 1971)

            To identify the different moves the players can make in a game of contract negotiation it is helpful to think in terms of “constitutive” rules.   “Constitutive” is not the same thing as “basic.”   “Basic” is about the game’s functions.   “Constitutive” is about creating and defining the game.

“Constitutive” is usually contrasted with “regulative.”   John Searle writes, “I am fairly confident about the distinction [between regulative and constitutive], but I do not find it easy to clarify. As a start, we might say that regulative rules regulate antecedently or independently existing forms of behavior; for example, many rules of etiquette regulate inter-personal relationships which exist independently of the rules. But constitutive rules do not merely regulate, they create or define new forms of behavior. The rules of football or chess, for example, do not merely regulate playing football or chess, but they as it were create the very possibility of playing such games.” (Searle 1969, p. 33)

“Constitutive rules constitute (and also regulate) an activity the existence of which is logically dependent on the rules.”   (Searle 1969, p. 34)

Constitutive rules come in systems.   It is not so much a separate isolated rule that creates and defines a game, as a set of rules that makes it possible to play football, chess, or contract negotiation. When you know how to apply the rule, you know not only how to give a piece of behavior its right name, like “walking out,” but also the further consequences for the game that flow from the piece of behavior.   A constitutive rule, like “when there is a meeting of the minds reduced to writing and signed, there is a contract,” may not so much prescribe behavior as enable behavior by defining what counts as an act-in-the-law or as a certain kind of social performance, e.g. making a date or an appointment.

Taylor emphasizes that the game of bargaining, and any activity defined by constitutive rules, requires intersubjective meanings. People participate in meanings that are not their own. The meanings belong to the social order in which the people participate.   They are not just common meanings in the sense that each player privately has the same ones.   Who is the “property owner,” who is the “buyer,” who is the “lender,” and who is the “real estate sales agent,” are defined by rules that existed prior to this particular negotiation, and will return in the future to define and govern other negotiations.

Without the game with its regulative and constitutive rules, the act of “walking out” does not exist. With it, “…leaving the room, saying or writing a certain form of words, counts as breaking off the negotiations;” (Taylor 1971, p. 22)

“The language of our society recognizes states or actions like the following: entering into negotiation, breaking off negotiations, offering to negotiate, negotiating in good (bad) faith, concluding negotiations, making a new offer, etc.” (Taylor 1971, p. 22) If it did not do this, our society would not be the society it is, just as chess would dissolve or become another game if the rules constituting it were changed.

By making constitutive rules visible, we gain a better understanding of what our society is and how it works, and we also become less ethnocentric. By taking notice of our own rules we acknowledge that culture is not nature. We acknowledge that our culture could be different, and perhaps in the future will be.

“Our whole notion of negotiation is bound up for instance with the distinct identity and autonomy of the parties, with the willed nature of their relations; it is a very contractual notion. But other societies have no such conception.   It is reported about the traditional Japanese village that the foundation of its social life was a powerful form of consensus, which put a high premium on unanimous decision.   Such a consensus would be considered shattered if two clearly articulated parties were to separate out, pursuing opposed aims and attempting to vote down the opposition or push it into a settlement on the most favorable possible terms for themselves.   Discussion there must be, and some kind of adjustment of differences. But our idea of bargaining, with the assumption of distinct autonomous parties in willed relationship, has no place there; nor does a series of distinctions, like entering into and leaving negotiation, or bargaining in good faith (sc. with the genuine intention of seeking agreement.”   (Taylor 1971 p. 23, referencing Smith 1959 chapter 5)

Taylor echoes Dewey and Wittgenstein: “It is not just that the people in our society all or mostly have a given set of ideas in their heads and subscribe to a given set of goals. The meanings and norms implicit in these practices are not just in the minds of the actors but are out there in the practices themselves, practices which cannot be conceived as a set of individual actions but which are essentially modes of social relation, of mutual action. …. …the set of ideas and norms constitutive of negotiation themselves. These must be the common property of society before there can be any question of anyone entering into negotiation or not.”   (Taylor 1971 p. 27)

Why Marx is Unavoidable

            Michel Foucault once made the revealing remark that since 1968, the year of a major social crisis in France, his work on the history of psychiatry, which previously had been largely ignored, suddenly became mainstream. (Foucault 1977A, p. 142) He elsewhere remarked that while the misery of the proletariat (and by implication the work of Karl Marx) had made the political thought of the nineteenth century pivot on economics, the emergence of fascism and Stalinism in the twentieth century changed the pivot of political thought.   He credits Deleuze and Guattari with seeing that precisely anti-fascism had become the pivotal issue. (Foucault 1977B p. 132)    Deleuze in turn, credits Foucault with having invented a profoundly political concept of normalization, which, in relation to all leftism, had made it possible to think of power in ways opposed to every theory of the State. (Deleuze 1977, pp. 183-84).   Such intellectual and social shifts, Foucault wrote, “…never would have had their meaning and their intensity if they had not had behind them the two gigantic shadows of fascism and Stalinism.” (Foucault 1977C p. 264)   June 1968 cast a third gigantic shadow over intellectual life in France, which, also somehow moved people to avoid the issues that were pivotal for Marx.

            Karl Marx is, nevertheless, unavoidable, and he will remain unavoidable as long as the world is organized as it is; because he is the most influential critic of certain of the modern world-system’s basic constitutive rules.   He put a central part of society’s basic structure on the agenda for debate. It has stayed there ever since.    Rules many others took for granted or defended, Marx examined and criticized.    He was not the only one to do so, but over time his critique has proven to be the most seminal and the least forgettable.

            To say that Marx is unavoidable still today because the issues he explicitly raised are still burning and fundamental is not to say that patriarchy, compulsory heterosexuality, God, or race are avoidable. It is not to deny the merits of Arundhati Roy’s idea that what is really fundamental in social life is what she calls the “love laws.” (Roy 1997); nor is it necessarily to deny the claim of Pierre Bourdieu and many others that there is nothing fundamental in social life, no valid “totalizing” theory, but only a series of relatively autonomous “fields,” although even Bourdieu holds that among modern society’s “fields” the logic of accumulation (to speak in Marxist terms I will soon translate into rule-centered terms) is crucial and inescapable. (Richards 2006).    My claim (which was also Jean-Paul Sartre’s claim, as will be discussed in the following chapter) is only that whoever else may be on the list of unavoidable authors, Marx must be on that list as long as the world-system has the structure it has. I will suggest in a later chapter that Immanuel Kant is unavoidable for a similar reason. Kant is the most influential source of the concepts of human dignity and respect for persons that are at the heart of modern conceptions of human rights.   I will explain why I believe that he will remain a classic source of indispensable forms of rights-talk as long as the world-system’s basic constitutive rules are what they are.

            Of course, to give as one’s reason for saying Marx cannot be forgotten --and for disagreeing with Talcott Parsons and others who think his ideas are obsolescent (Parsons    1967) -- precisely that Marx changed the moral status of some of modern society’s basic constitutive rules from that of innocent to that of indicted and accused, is to take a stand somewhat different, partly in harmony and partly in discord, with respect to other traditional and contemporary readings of Marx. I will focus on making my positive case, and leave it to the reader to judge its merits vis a vis other ways of reading Marxists and Anti-Marxists.   My interest is in solving problems.   To solve problems we need to think about constitituve rules such as those that constitute the bargaining and negotiation that Charles Taylor discusses. Inevitably we end up raising questions Marx famously raised, although he did not answer them, whatever we may think of the subsequent immense literature generated by Marxists and Anti-Marxists.

            To acknowledge that Marx’s critique of modernity is unavoidable is to acknowledge that in searching for solutions to problems it is conscientious –and that to fail to do so is not conscientious—to consider that an optimal solution, or perhaps any solution, may require modifying basic constitutive rules, such as those governing property rights and market exchange.     To avoid basic structural issues associated with Marx’s name is typically to be a technocrat, that is to say, a person without historical, philosophical, and anthropological awareness of how presently existing institutions have evolved over time, and of what the alternatives to them are.

            In the remainder of this chapter I will mention some selected ideas regarding Marx and issues he raises that I regard as unavoidable.   At the beginning of the following chapter I will endeavor to provide a rationale for the selection; that is to say, an account of why among the infinite things I might say on the topic I have chosen the following things to say.

            The germ of what I have to say has already been said by Jurgen Habermas in the famous footnote 24 at the end of Erkenntnis und Interesse where he shows that what Marx calls “relations of production” can and should always be understood as “social relations.”   It has also been said in Germany by Gustav Schmoller and the historical school of economists, in the USA by Wesley Mitchell and the institutionalists, and in the southern cone by Jose Luis Corragio and the school of thought known as socioeconomía. (Corragio 2004) Amartya Sen also prefers to speak of socioeconomics rather than of economics, acknowledging that economics does not exist without the social rules it presupposes.      (Sen        )   All these and others have shown that economics is not a science analogous to the natural sciences.   In one way or another, using vocabularies more or less similar to mine, many writers have shown that economics is for the most part the working out in practice of the consequence of organizing important aspects of social life according to certain basic constitutive rules. (See Richards 2000)

            The central ideas of the social sciences are, as Wallerstein, Foucault, and others have shown, part and parcel of modern society itself.    In pursuing a philosophical inquiry that questions all assumptions I am (like Foucault and Wallerstein and others) simultaneously questioning the social sciences and the social order in which they are embedded.

               Marx wrote a famous paragraph that includes a summary of what modern society’s basic constitutive rules are.   In a passage in the first volume of Capital, Marx wrote what can be taken as a précis of the operating principles of a society where people live mainly by producing and exchanging commodities.    I will be giving this passage a non-Marxist interpretation, in the sense that I will refocus what for Marx is a prelude to proceeding to an analysis at what Marx takes to be a deeper level, the level of production. I will recommend choosing to talk in a somewhat different way. I regard the rules governing exchange, at what Marx calls the level of circulation, as rules with causal powers that explain basic social phenomena.   I agree with Habermas that the relations (Verhältnisse) that govern production are social relations not generically different from the ones that govern circulation.   The important cleavage, the move to a deeper level, is not between circulation and production but between culture and ecology.

The passage in question is:

“This sphere that we are deserting, within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property, and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents, and the agreement they come to, is but the form in which they give legal expression to their common will. Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own.   And Bentham, because each looks only to himself.   The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all.” (Marx 1867, p.195)

           We know that in this passage Marx is ironic. He is not giving praiseworthy examples modeling human rights and duties as human rights and duties ought to be.   He does not mean that the prevailing jurisprudence stemming from the legal maxim pacta sunt servanda, i.e. contracts should be enforced, which defines the obligations of buyers and sellers in a commercial society, is to be regarded as a source of paragons demonstrating what social norms ought to require of citizens, and would require of them in a good society.   The rules of a good society would provide not only for exchange, but also for gift-giving, for reciprocity in relationships of mutual obligation, for duties of mutual aid and even unilateral aid, and for citizenship rights.   Marx does not mean that the good is defined or served by an ideal of freedom which prescribes that each is to look only to his or her self-interest.

        Marx´s point is rather that in a good society the social norms governing access to resources would not be the Roman law of suum cuique, to each his own, that underlay the concepts of private property found in all European legal systems in the mid nineteenth century when Marx wrote.   We know too that Marx believed that in a good society the mutual obligations governing human relationships would not be limited to those prescribed by contract law.    In the passage quoted the legal principles governing the buying and selling of labor power are examples of what should not be, not examples of what should be.

        (Karl Renner uses the words: “The contract is but the form in which they give legal expression to their common will,” in the course of interpreting Marx to mean that what Renner calls the “economic will” is the fundamental fact, the substance. The legal norm only provides the form. The same legal form would be compatible with a different concrete correlation of economic forces, in which the same forms, the same modern European adaptations of Roman Law, would become the legal forms of social democracy. (Renner 1904.) (Renner, by the way, later became a socialist president of Austria.) I think it is clear that in this passage Marx is speaking in oratio obliqua. I would not gloss him as saying, “economics is the substance, law is the form,” or “economics is the base, law is part of the superstructure.” I think he means, “The norms of exchange appear to bourgeois common sense to be morally and legally valid.” In any case, I prefer to speak in terms of cultures that adapt more or less well to physical reality. My co author and I disagree with Renner’s idea that the same Roman Law principles can be employed without revision to construct social democracy, and hold, on the contrary that social democracy requires that the basic rules of contract law be rethought (Richards and Swanger 2006)).

            The famous passage quoted follows an introductory account of the kind of society that Marx submits to scientific examination: a capitalist society. Marx initially defines a capitalist society as one whose wealth appears as a vast collection of commodities.   That kind of society was not a good society.   It was a society to be transformed by criticism, struggle, and reconstruction. Marx the scientist, Marx who had no sentimental love for pre-capitalist social formations, Marx who regarded capitalism as both the best thing and the worst thing that ever happened to humanity, clearly regarded the form of society where some people hire other people to produce commodities, and then the former sell what the latter produce, as a problem to be solved, not as a solution.

            (The English term “commodities” translates the original German Waren, a cognate of “wares,” an ancient English word employed by Simple Simon when he asked the pieman to let him taste his.   Waren could also have been translated as “merchandise,” i.e. things to sell. Spanish translations of Capital use “mercancias” for Waren.)

            I will be engaging in dialogue with Foucault mainly regarding modern societies whose basic constitutive rules are those of exchange, and whose basic social science is therefore economics.    These are the rules described ironically by Marx in the passage just quoted.   However, my definition of a “basic” rule provides that what makes a rule basic is that it governs the meeting of basic needs. Exchange is basic in any society where people meet a basic need, take sustenance as an example, by going to stores with money to buy food. Those without money do not get food.   However, patriarchy can also be considered basic, where the basic needs of men are met by controlling women, while the basic needs of women are unmet.     Race can also be basic, where being in one race means basic needs are met, while being in another race means basic needs are not met. Nancy Hartsock has argued that capitalism itself is a product of patriarchy, patriarchy being the deeper and historically older form of oppression out of which capitalism grew. (Hartsock 1985) I take the view that the indictment of basic rules Marx makes in the passage quoted is in any event unavoidable.   Whatever one may say about other dimensions of humanity’s main problems, we cannot solve them until we squarely face and deal with the questions he raises.   These are, in sum, the question how humans (the only juridical subjects on the planet) relate to things, i.e. the question of property; and the question how humans relate to other humans, i.e. the question of contract or market relationships as opposed to non-contractual or non-market relationships.

Natural Necessities and Cultural Forms of Life

            Marx knew that in any form of society, capitalist or not, the direct producers must somehow be induced to give up some of the product, if only to provide for those who do not produce (at least the very young, the sick, and the very old), and if only to provide inputs for continued production (e.g. at least saving some grain as seed to plant next year). Nevertheless, he clearly did not approve of the juridical framework of this particular form of society, in which the direct producers are separated from their products because the owners of the means of production are the legal owners of the commodities produced.

In the pages leading up to the famous passage quoted, Marx relies on a distinction made by Aristotle between selling in order to buy and buying in order to sell.

Schematically, the first option, selling in order to buy, is:

C   →      M         →          C

Commodity →    Money    →   Commodity.   The peasant brings a pig to market, sells the pig for money, buys sacks of grain with the money, and then goes home with the grain.   The purpose is use.   The value is in use, in eating the grain, together perhaps with some vegetables the peasant family produced itself, and together perhaps with eating the other pig the peasant kept at home and did not bring to market.   Use is the objective of the C → M→ C series of transactions.

Marx the scientist, Marx the anti-romantic and anti-sentimentalist, Marx the modernist who never advocated regression to older social formations, does not conceal a certain admiration for the humble honesty of the C→M→C pattern that Aristotle before him and Rosa Luxemburg after him called the pattern of the natural economy. Aristotle for all his faults got something right: when accumulating money becomes the objective, something has gone wrong.

But that is just what happens in selling in order to buy.   Schematically:

M        →      C       →       M

The merchant buys the pig not because he intends to eat it, but because he intends to sell it later at a higher price. Money is the alpha and the omega, the beginning and the end.

There are, of course, circumstances in which the merchant’s activity serves some useful purpose.   For example, she or he might move the pig from a pig-surplus area to a pig-deficit area.   But whatever the useful purpose may be, it must, by definition, ultimately be justified, measured, evaluated, and conscientiously revised, because it is useful. The proposition that properly regulated institutions for the exchange of goods and money can be socially useful does not refute Aristotle, Marx, Luxemburg, and the many others who have taken use to be the point and purpose of economic activity. It assumes their premise.

          In the passage quoted above, Marx mocks the civil code. In the chapter following the passage quoted, he does not propose a better civil code. He sets out, ostensibly at least, not to solve a moral or juridical problem, but to solve a scientific problem. His problem was how to explain the existence of profit.   He argued that on the principles of bourgeois economics the observed phenomena, businesses regularly making profits, could not be explained. Since his principles could explain the observed phenomena, and theirs could not, Marx’s economics was scientifically valid, while bourgeois economics was pseudo-science. By deliberately avoiding the path of proposing better institutions to replace those then prevailing in Europe, the path of the Proudhons, the Sismondis, the Robert Owens, the Saint-Simons, and their followers, Marx wisely refrained from advising future generations concerning what institutional structures would best suit their circumstances. He rested his case for socialism on a scientific study of the past and of (his) present. As it has turned out, however, Marx’s demonstration that the basic norms of capitalism are in important ways dysfunctional has outlasted most of his technical contributions to economics.

           Marx’s critics have pointed out that he made rather too much of the alleged inability of bourgeois economists to explain profit.   Marx argues that in the competitive markets described and idealized by bourgeois economics, the price of everything will fall to its value (to its cost of production).   The usual and normal case is that when the merchant buys the pig   M→ C, the merchant will buy the pig at its value, as determined by the market.   When the merchant sells the pig C→ M, the competitive market will force the merchant to sell the pig at its value.    By buying the pig for what it is worth and selling the pig for what it is worth, the merchant will make no profit.    Except for occasional flukes, the merchant will be frustrated.    (If the merchant moves the pig to another place, then the cost of transportation will be added to the costs of production, thus raising the value of the pig, but still frustrating the merchant, since the higher price received will just cover the higher costs.)

            Marx’s argument seems plausible on its face, but the weight of informed opinion today, even the opinion of people like Joan Robinson who sympathized with Marx’s objectives, is that Marx did not get the concept of value quite right. Today people talk about chains of value and about value-added, and do not regard the existence of profits at several stages of the production of a commodity as a mystery that needs to be explained.   For Joseph Schumpeter indeed, who was also in some ways somewhat sympathetic to Marx’s aims, it was no less mysterious that an entrepreneur makes a profit than that a worker makes a wage. But whether or not the analysis Marx offered cleared up a mystery that other social scientists could not clear up, the solution he provided for his problem, or for his pseudo-problem as the case may be, was decisive for subsequent Marxism.   After the passage quoted above, Marx invites his readers to travel with him away from the sphere of the circulation of commodities (i.e. away from the marketplace) and into the sphere of the production of commodities (i.e. into the factory).   In production Marx discovers the secret of profit making.

          The gist of Marx´s scientific explanation of profit making can be expressed by commenting on a simplified version of a diagram that Marx does not use until the second volume of Capital:

M        ®          C             ..........       P    ............         C´        ®         M`

          This diagram again starts with money, M.    The capitalist invests money with the intention of ending up with more money.    Again, like the merchant who bought the pig, the capitalist buys commodities,   C.     Among the commodities purchased there is a peculiar one.    The peculiar one is labor power.

           The labor power sold by the workers to the capitalist has the peculiar property that when the capitalist consumes the commodity he has purchased by putting the workers to work, that particular commodity (labor power) produces a product with a higher value than its own value.

           The letter P in the diagram stands for “production.”   The arrows stand for market transactions. Where there is an arrow, somebody buys something and somebody sells something. The first arrow, the one between M and C, stands for the capitalist buying the commodities needed to run production, whatever they may be, but always including, among others, labor power.   The worker sells labor power. Around P there are no arrows. There is just a row of dots on one side and a row of dots on the other side.

           Production is not a buying and selling transaction.   It is not the circulation of commodities that takes place in markets.   It happens inside the factory. It happens when the peculiar commodity the capitalist has purchased is consumed.   The capitalist consumes the merchandise purchased not as he or she would consume a recently purchased cup of coffee, by drinking it, but rather in the way one consumes labor power one has purchased, by putting it to work.   The outcome is more commodities, C´.    What is remarkable about C´ is that when it is sold for its value it yields a quantity of money, M´, which is greater than the initial M.     The secret of profit making is that labor power is a commodity whose consumption yields a value higher than its cost.    The exact reason why Marx asserts this to be the case is set out in Capital, but in this summary I do not discuss it.   Intuitively Marx´s assertion is plausible because if the capitalist did not believe that the product of labor would be worth more than the cost of labor, the capitalist would not have hired the laborer in the first place. From a legal point of view, both ends of the diagram are applications of contract law.   The center applies property law. (It was a matter of dispute among some early Roman jurists whether the product should belong to the worker who made the product, to the owner who supplied the materials, or to both. Resolving the dispute in favor of the owner was part of the path that led to today’s common sense.)

               In the diagram above one can see the origins of several key Marxist concepts:

1. Surplus value is defined as M`   -    M.   (The – is a minus sign.)   It is the private appropriation of the social product.    The workers produce C´ but the capitalist owns C´ which the capitalist then sells for M´.

2.. Exploitation. This is another word for the extraction of surplus value from labor.

3.. Proletariat.   They are the people who sell labor power in the market transactions M→ C, and who then do the work.

            4.   Marx´s original definition of capitalism, as a form of society whose wealth appears as an immense collection of commodities (Waren) now appears in a different light. The existence of commodities in the kind of society Marx analyzes is an outcome of some people hiring other people to work. The former hire the latter for the purpose of ending up with more money than they started with.

5. Accumulation.    M´ can be reinvested.
            ¬               ¬        ¬              ¬              ¬              ¬   ¬
     ¯
     ¯
    M     ®          C             ………..P…………..       C´      ®      M´


    A cycle is established in which profits are available to pay for the inputs required to make still more profits, which in turn will make still more profits, ad infinitum.

   Where History is Going

            Marx tried to show that the process of capitalist accumulation could not go on forever.   Capitalism had to come to an end because the dynamic that moved it, the accumulation of surplus value, had to come to an end.     The historical trend had to be in the direction of socialism, as the logical outcome of the development of capitalism, for reasons Marx thought of as inherent in concepts connected with the diagram above.    The piling up of profits in the pockets of a few would lead to social tension.   That social tension would be aggravated by a competitive labor market, which would continually drive the price of labor down to the cost of production of labor, i.e. to subsistence.    (This concept was not original with Marx. The classical economists Adam Smith and David Ricardo had already stated it.   Ricardo had advocated repealing the English “corn laws” [i.e. protective tariffs charged on imported grains for the benefit of English farm owners] on the grounds that repealing the tariffs would make food cheaper, which would lower the cost of production of labor, i.e. the cost of subsistence, which would lower wages, which would lower production costs for English manufacturers, which would give English manufacturers a competitive edge when exporting their products.)      Further, since only the money invested in buying labor (what Marx called “variable capital”) had the peculiar quality of producing surplus value as profit for the capitalist, the rate of profit was bound to fall over time.    This was so because to remain competitive capitalists had to invest more and more in non-labor inputs to production (which Marx called “constant capital”), such as advanced technologies.    Since variable capital yielded profits, and constant capital did not, and since the proportion of capital invested in constant capital would go up over time, while the proportion invested in variable capital would go down, the rate of profit would go down.

           The same competitive process would weed out the less efficient capitalists, leading over time to monopolistic tendencies as the losers went out of business and the winners got bigger.   As firms became fewer and larger, it became easier to organize workers, since workers tended more and more to be gathered together in larger numbers in fewer places. Capitalism’s inherent tendency to concentrate the ownership of the means of production would prepare the way for socializing it.

           I will further discuss the alleged instability of capitalism, and its alleged tendency to prepare the way for its own Aufhebung (replacement by a higher form of social organization which keeps its merits and corrects its defects) in the course of outlining Rosa Luxemburg´s theory of the accumulation of capital below.   However, first I want to point out that the same basic diagram

M        ®          C             ..........       P    ............         C´        ®         M`

suggests reasons for believing that capitalism will never come to an end.     In the diagram the movement from M to M´, the investment of money for the purpose of getting more money back, is the only reason why P happens.   Profit is the purpose of production.    But if there is no production, then the workers have no jobs; the consumers have no products to consume, no food to eat, no clothes to wear, no houses to live in; the governments have no income to tax, and therefore no money to pay the army and the police.

             Consequently, whatever needs to be done to keep the rate of profit up, so that capitalists will keep investing, must be done, and therefore it will be done.   There must be what the French school of “regulationist” economists calls a “regime of accumulation.”   That is to say, there must be some combination of economics, politics, and culture which makes it possible for the process of capital accumulation to continue.    It may require wars; it may require a mass culture that makes women feel suicidal if they do not conform to the ideal of beauty promoted by the beauty products industry; it may require fascism; it may require a military dictatorship that tortures and kills labor leaders in order to create a favorable business climate for investors; it may require suburbs, tax breaks for home ownership, freeways, and cheap petroleum.    Keeping going the production everybody depends on may or may not require any of these things at any given time and place, but it does require some regime of accumulation or other.   It can be argued from the working out of the rules of capitalism that Marx describes that its fundamental dynamics cannot be changed.      Any movement in the direction of socialism will weaken the profit motive.   Since everybody’s livelihood depends on keeping the profit motive strong, movements toward change in a socialist direction will be repressed and reversed.

Thus the same schematic description of how the basic constitutive rules of a capitalist economy work that Marx used in an attempt to show that capitalism is unstable and must some day come to an end, can be used to argue that capitalism will always stabilize itself and will never come to an end.

Rosa Luxemburg

         Rosa Luxemburg contributed to the Marxist tradition her own ideas concerning what capitalism does to defend itself from its own instability.   She also had her own theory about why capitalism must come to an end.   For Luxemburg, writing in 1913, there is no possible way to sell the products of capitalist mass production industry within the confines of the narrow market made up by the capitalist owners and the workers employed by them. The workers can only spend their wages, which by definition have a value lower than the value of the commodities they produce.   They cannot possibly buy all their own products.    The owners cannot buy all the remaining unsold consumer products because, for reasons Luxemburg argues in detail, they must keep plowing back some of their incomes into new investments.   The new investments only make capitalism more unstable than it already was, because they result in even more productive powers producing even more consumer goods that it is even harder to sell. According to Luxemburg, the only possible way for capitalism to exist is by continually expanding its markets by seeking buyers in those parts of the earth that are not yet capitalist.   Capitalism can only exist in a world where there are still non-capitalist markets to conquer.   She supplements her logical analysis of capitalism’s requirements with an account of its history, which shows that as a matter of fact capitalism has been imperialist, colonialist, militarist, and racist.   Her theory does not require that capitalism always be all of these things, but it does predict that a capitalist society is likely to be one or more of them at any given point in time. Without selling its products to non-capitalist peoples in some way or another it cannot continue.   Luxemburg gives many historical details concerning how European powers forced the Chinese, the Africans, the Hindus, the Egyptians and other peoples to participate in the kinds of commercial relationships that European capitalism required.. She also gives an account of the internal transformation of the United States during the 19^th century from a mainly natural economy of self-reliant farmers to a nation of employees dependent on capital for employment.   But when the capitalist system has taken over all the earth and all its peoples, then there will be no natural economies left. The system will have to end because it can only exist by modernizing natural economies. At some point in time there will be none left to modernize. Fredric Jameson in the 1990s added another twist. Even when capitalism has brought every square inch of the planet into its marketplace, it still has yet another frontier to conquer. The new frontier is the unconscious mind. Jameson interprets contemporary culture as the commodification of the unconscious mind. Capitalism creates markets where none previously existed by turning every deep need of the human psyche into a need to buy something.   Hardt and Negri in Empire, give Luxemburg’s ideas yet another twist.   It is not enough to make the entire world a market. It is also necessary to make all the world’s peoples into a proletariat, so that they can be exploited both as consumers and as wage laborers.

           The point of departure for Luxemburg’s analysis, from which her illuminating conclusions follow, is another diagram drawn by Marx:

Department One         4000 c        +       1000 v              +     1000 s             =     6,000

Department Two        2000 c        +         500 v               +        500 s            =     3,000

Marx proposed thinking of capitalist production as divided into two departments.    Department One makes production goods, such as tractors and electricity generators.   Department Two makes consumer goods, such as bread and shoes.    The products of Department One are inputs used by Department Two, since the latter cannot make consumer goods without the tools made by the former.      The workers and owners of Department One need bread and shoes the same as everyone else, and so they rely on Department Two to produce the necessities and conveniences of life for them.

Department One         4,000 c        +       1000 v              +     1000 s             =     6,000

Department Two        2000 c        +         500 v               +        500 s            =     3,000

            As Marx fills in the numbers, the books balance.   His schematic example shows hypothetical quantities produced by each department.   Department One makes a total product with a value of 6,000.    The 6,000 is accounted for by spending 4,000 on its own means of production (The c stands for constant capital), by spending 1000 on wages (v for variable capital), and by taking 1000 as profit (s for surplus value).    The 6,000 in production goods is just enough to provide 4,000 for itself, and 2,000 for Department Two, which, in the example, is exactly what Department Two needs.    Department Two produces consumer goods of 3,000 value, which is just the right number for the workers of Department One to spend their wages (1,000) on, plus enough for the owners of Department One to spend their profits (1,000) on, plus enough for the workers and owners of Department Two to spend their wages and profits (500 and 500) on.   Everybody sells enough to acquire the cash to buy the products everybody else has to sell.    Luxemburg argues that the precarious balance here depicted cannot last.

            Department One sells Department Two means for increasing production. It has to. That is the only thing Department One has to sell.   If it fails to make sales, then the workers and owners in Department One will not have any money, and then they will not be able to buy up the unsold products of Department Two.   Then both departments would be in trouble, One because its members would be penniless, and Two because since would lack customers it would be operating at a loss.

           But what Two buys from One --must buy from One to balance the books—is the means to produce even more than it is already producing. (Luxemburg goes into great detail to rule out what might seem to be other logical possibilities.)   If all that new equipment is going to pay for itself, then even more must be produced, and so on and so on.   The resulting overproduction does not mean producing more than the world needs in the sense of more food than there are hungry people or more houses than there are homeless.   It means overproduction in the sense that more is produced than paying customers are able and willing to buy.    As Luxemburg points out, overproduction in this sense has been the fate of most industries most times most places since capitalism began.

         The balancing of the books requires an accelerating process of expanding mass production whether or not there are buyers for the products.   This process sooner or later, and generally more sooner than later, drives the system to recruit consumers outside its own narrow confines, by fair means or foul.

Constitutive Rules and the Logic of Anti-Marxism

        Luxemburg’s text is full of merciless logic reducing to rubble the mistaken theories of other writers.    She had no patience with error, and none with petit bourgeois idealists.   The latter were doubly damned, as alien to the proletariat because they represented the middle class, and as fools because their arguments for socialism were more ethical than scientific. Nevertheless, her own arguments were about the rules of the game.   They were about what can and cannot be sold, given that the rules are what they are.

      Four years after her book was published a theorist she had harshly criticized, not for being a petit bourgeois idealist but for being a superficial thinker, Vladimir Ilyich Lenin, became the head of a revolutionary government in Russia. In response to that historic event, Ludwig von Mises, in 1920, published the first of a series of proofs that it was impossible to construct a rational and efficient socialist economy. Whatever the merits might be of critiques of capitalism,   socialism was not a viable alternative to it.    According to von Mises and the many economists who agreed with him, socialism was a non-starter.

           Von Mises sees capitalism as a rational system for achieving efficiency through what he calls roundabout production.   He does not reject the depiction of the process in Marx’s diagram.

    M     ®          C             ………..P…………..       C´      ®      M´

But he has a lot to say about   P.    It is not just a matter of putting workers to work. On either side of P, he insists that the laws of private property assumed in the diagram, as the prerequisites taken for granted in the buying and selling in M→C   and   C´→M´ are necessary and desirable. The principles of contract law that rule these monetary transactions are also necessary and desirable. Von Mises writes, “…every step that takes us away from private ownership of the means of production and the use of money also takes us away from rational economics.”

              The most important difference between a traditional peasant economy and modern capitalism is that in the first P is direct, while in the second P is roundabout.     In capitalism, here instead of making bread directly yourself,   following the steps your mother taught you, which your grandmother taught your mother, you start by writing a business plan to raise venture capital. (I am updating von Mises’ examples)   You calculate the relative advantages of alternative ways to source flour.   You run hypothetical scenarios with different recipes and ovens.    You hire a marketing research team. You hire baking technology engineers.   You negotiate with distributors. You launch prototype varieties in test markets.

              Roundabout production wins in the end.   The showdown is in sales. Consumers prefer the products of modern bakeries.   Roundabout production wins on price and it wins on quality.   Similarly, other capitalists in other fields are making long, expensive, systematic, and complicated searches for cost/effective ways to bring saleable products to market.   Where Luxemburg sees the capitalist system as destroying natural economies to create the markets it needs to stabilize itself,   von Mises sees the worldwide triumph of superior technologies and superior forms of business organization. Their triumph leads to increased worldwide customer satisfaction.

     Von Mises admits that capitalism has faults.   For example, relying on market forces may not be the best way to protect the natural beauty of a waterfall.   Even with its faults, it has raised human living standards far above those of previous ages.   He denies that socialism could do better.

            Whatever the objectives of a socialist society may be, and whatever may be its processes for determining and revising its objectives, it will require methods for achieving its objectives efficiently, or at least not grossly inefficiently.   (Here I am improving von Mises´ argument for him.   As he states his argument it depends on the debatable premise that socialism must have as its fixed objective maximizing satisfaction of wants subject to given resource constraints.)    For von Mises the terms “efficiently” and “rationally,” are equivalent to each other, and both are in important ways equivalent to the phrase “minimizing costs.”   To be rational is to be efficient.   To be rational and efficient one must find the least costly way to achieve the objective.   (Or, alternatively, achieve the objective to a higher degree at the same cost; or, more completely, simultaneously keep costs down and output up.)

         To minimize costs it is necessary to compare the costs of all feasible alternative ways to make the same product.    On a farm, for example, costs might be minimized by using more fertilizer and less labor, or by using less fertilizer and more labor, or by some other combination of inputs. To be fully rational the farmer should also consider whether to invest more and so produce more, whether to invest less and so produce less, whether to plant a different crop, and even whether to sell his farm and invest his capital in some other line of business.

            A socialist society must try to do something similar to what the profit-maximizing farmer does. But it cannot.   It must rationally decide how much of which resources to deploy to achieve what ends. It can’t.   It must count its costs. It can’t.    It must compare the benefits of alternative uses of the same resource.    It can’t. According to von Mises, socialist planners are inevitably “groping in the dark” and producing “the absurd output of a senseless apparatus.”

          The reason why socialists cannot rationally plan the achievement of their objectives is that under socialism there are no true market prices.   The means of production are socially owned, which implies that there is no marketplace where owners of means of production negotiate with each other to buy them and sell them, and thus achieve a meeting of the minds determining how much each item is worth, i.e. its price..   Without prices, it is not possible to compare alternatives.

            Prices provide a common denominator that makes it possible to compare everything with everything else.    When the rational farmer decides among more or less fertilizer, more or less labor, more or fewer tractors, more or less insecticide, or some combination of these and other factors, money provides the quantitative measure that makes the alternatives comparable.   (Von Mises considers, but rejects, the possibilities that labor time or purely physical quantities, like bushels of wheat, might provide quantitative measures that would make the alternatives comparable.)    Each alternative has a money cost, a price. The projected outcomes, the commodities to be offered for sale, are also measured by money, i.e. the prices at which they can be sold.

            But what is a price?   Price is a legal concept. It is a contract between property owners.    It is the number at which a willing buyer and a willing seller agree to exchange what one owns for what the other owns.   Von Mises´ argument is an argument for keeping intact the legal framework of the civil code that Marx mocked in the passage quoted earlier.   Thus Von Mises too, as also his ally Friedrich von Hayek, can be numbered among those who acknowledge, and in their cases celebrate, that economics is not a natural science, but rather working out the consequences of following certain constitutive rules. Without private property in the means of production there are no independent property owners owning production goods.   Von Mises assumes that under socialism consumers will continue to buy and sell in markets the same as under capitalism, but he sees an insurmountable problem in the lack of markets for the capital goods employed in the sphere of production.   Where there are no independent property owners, there is no bargaining in the marketplace on the terms of exchange.   There are no deals struck. Hence there are no prices.   Since there are no prices, there is no way to be efficient, because there is no way to compare alternatives.

            What von Mises and the many economists who agree with him have done is to define “rationality” and “efficiency” in such a way that they are only possible in societies governed by the legal principles that modern Europe received from ancient Rome, and gave to the rest of the world. Changing the basic constitutive rules of commodity exchange could not possibly lead to any improvements.   Those rules are, on their view, obligatory for a culture that seeks and needs the physical benefits of what von Mises calls roundabout production.

            Now suppose that it is possible for socialist planners to mimic capitalism by calculating what prices would be in an ideal market, and then planning on the basis of such hypothetical prices.   As Oskar Lange, who suggested this, pointed out, the mimicry would be better than the real bargaining among owners that goes on in capitalist marketplaces, since the socialist calculators could assume the perfect competitive markets that apologists for capitalism idealize.   They would bypass the corruption, the force and fraud, the oligopoly and monopoly that prevail in the real world of capitalism.   Subsequent socialist answers to von Mises assert that computerized mimicry of markets and intelligent institutional inventions could produce the socialist equivalent not just of an ideal market, but also a socialist equivalent of ideal innovative entrepreneurs, who rapidly adjust production to changes in technology and to changes in consumer preferences.

            Von Mises has answers for his answerers.   Two of the arguments made by von Mises, his ally Friedrich von Hayek, and his other allies, concern incentives and freedom.

            Capitalist entrepreneurs are, von Mises and von Hayek say, motivated by dreams of wealth and fears of failure. On a smaller scale dreams and fears motivate everybody else in a capitalist economy too. They question whether, as a matter of psychology and culture, it is possible for socialism to generate the incentives needed to get the work of the world done.

            Freedom is an even more important issue. Even if the computers of a planning agency could generate the numerical equivalents of the prices generated by the wheelings and dealings of the multitudes in markets large and small, the cost in human terms is too high to pay.   As Adam Smith famously taught, the market coordinates the work of the multitudes while protecting their freedom.   As if by an invisible hand, markets organize the multitudes to cooperate to supply each other’s needs, while leaving each individual free to own and to buy and to sell as she or he may choose.   A planned economy, even if it brought a higher standard of living, would take away the dignity beyond price of many individuals who now under capitalism craft their own path through life by striking deals in the marketplace.    Friedrich von Hayek in his influential book The Road to Serfdom argued that, in general, every governmental intervention in the economy that places the power to make decisions in fewer hands is a step away from freedom and toward tyranny.

            Von Hayek proved less than he asserted.   He proved, analyzing in detail the cases of Hitler and Stalin, that some political and economic changes away from capitalism and toward socialism make society worse instead of better.   He asserted that all political changes away from capitalism and toward socialism make society worse instead of better.

            Already in 1920, and subsequently in later elaborations and restatements, Ludwig von Mises articulated the terms of debates that still continue. He claimed, in effect, that any socializing movement away from the dominant Roman Law paradigm would lead to irrationality, which was the same thing as inefficiency. It would also lead to the weakening of incentives, and toward, if not to, tyranny.     Subsequently, left wing economists encountered new challenges in addition to ongoing ones like those articulated by von Mises and von Hayek: the Great Depression of the 1930s, the Keynesian Revolution, the rise of the Welfare State in Western Europe, the rise of the Warfare State in America, the rise of development economics in the third world.

Michael Kalecki

            Michael Kalecki had important things to say about all of these new challenges.   Born in 1899, he was a self-educated Pole. He read Rosa Luxemburg in his youth. He immigrated first to Sweden and then to Cambridge where he became a member of the Post-Keynesian inner circle.   He spent the years 1945-1955 working for the United Nations, first for the International Labor Organization in Montreal, and then at UN Headquarters in New York, before returning to his native Poland where he worked for its Communist government.   In 1970 he resigned his official posts in protest against official persecution of colleagues and against anti-Semitism.