Marx's models and actual capitalism

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Blog post about Marx's Capital, what it is and isn't, partially in reply to Joseph Kay.

In my view, Karl Marx's analysis of capitalism is really powerful and important. I think the best formulation of this analysis is in his book Capital, Volume 1. Joseph Kay recently wrote a blog post about a book I've not read yet, by David Graeber, and that post made me want to write this post about aspects of Marx. Joseph described Marx as writing an immanent critique of capitalist economics. I understand this to mean that Marx tried to take on ideas about capitalism on their own terms and show how they have internal problems. I think this is a good way to understand Capital, Volume 1. (I'm just going to call it Capital from here on out.) In this blog post I lay out some further points about what I think Marx is and is not doing, matters that I think are useful for reading Marx.

What Capital presents is a sort of perfected capitalism, it's capitalism without any accidents, capitalism as presented by the ideologues of capitalism. In the Grundrisse Marx uses the phrase "rational abstraction" to mean a useful general model that helps us to think about various things in the world and society. Marx's presentation of capitalism is a rational abstraction: it's a general model of capitalism. This general model has a few uses. For one thing, it helps to show that any form of capitalism will be unjust. Injustice under capitalism isn't an accident, it's at the core of capitalism: capitalism is unjust. A perfected capitalism will still generate immoral outcomes. For another, it shows some of the general dynamics of capitalism as a social system - some things we can expect to see some of the time regularly in capitalist societies.

Both of these things are useful. It's important, though, that we not mistake Marx's model for actually existing capitalism. This is something that Joseph talks about in his post. Joseph quotes Graeber saying that many readers of Marx forget the "as if" quality of Marx's critical analysis of capitalism, which is to say, people forget that Marx's work present a model, not actual capitalism. The model of capitalism that Marx presents is really powerful, but that model is not the same thing as knowing the history of what actually existing capitalism has been, including the range of different forms that capitalist societies and capitalist enterprises have taken.

In the preface to v2 of Capital, Engels says something that can be read as compatible with this. He writes that

“Marx’s surplus value (…) represents the general form of the sum of values appropriated without any equivalent by the owners of the means of production (…) many intermediate links are required to arrive from an understanding of surplus-value in general at an understanding of (…) the laws of the distribution of surplus-value within the capitalist class.” (10.)

Marx's model doesn’t just give us what actually happened in the history of capitalism or present capitalism. It gives us some concepts to use that help us conduct analysis of capitalism.

In the rest of this post I'm going to list a few places were I think we can see Marx suggesting himself that his work is dealing in models, or at least places where Marx seems amenable to that interpretation of his work. There are a few places where Marx suggests or implicitly admits that his model of capitalism is not the same thing as the reality of capitalism. For example, in Wage Labour and Capital, Marx wrote that:

"The actual price of a commodity (…) stands always above or below the cost of production (…) the price of a commodity is indeed determined by its cost of production, but in such a manner that the periods in which the price of these commodities rises above the costs of production are balanced by the periods in which it sinks below the cost of production, and vice versa. Of course this does not hold good for a single given product of an industry, but only for that branch of industry. So also it does not hold good for an individual manufacturer, but only for the whole class of manufacturers."

That is to say, when Marx talks about the labor theory of value and the determination of commodity prices by the labor time required to make commodities, he means it in very, very general terms. The point about the value of commodities was again a matter of Marx dealing with models and rational abstractions. Under a perfected, accident-free capitalism, Marx argues, commodities would be priced at the labor time it took to produce them. And that perfect pricing would be exploitive, because waged labor involves capitalists owning and selling goods that workers make, and the capitalists get to keep the additional value added to the goods by workers' labor. Workers aren't paid the value that we add to the goods and services our employers sell.

Another place were we can see the status of Marx's model as a model is on chapter 26 of Capital. Here Marx writes about the violence that helped make capitalism possible in the first place. He calls this primitive accumulation. He writes that primitive accumulation "in different countries, assumes different aspects, and runs through its various phases in different orders of succession, and at different periods. In England alone, which we take as our example, has it the classic form." The actual history of capitalism has varied tremendously. Marx focused on just one example of capitalist society, that of England, in order to build his model for understanding capitalism in general. This is powerful conceptually, but it makes it hard to tell the difference between traits of English capitalism and capitalism as such. It's also not necessarily the case that Marx always drew that line correctly - that is, it's not always clear that Marx was right when he said something was part of English capitalism or part of capitalism as such.

In chapter 24 of Capital, Marx distinguishes between capitalists re-investing their money in order to make more money and capitalists spending their money for their own enjoyment. The first, investing money to make money, creates more capital. The second "consumes or expends it as revenue." Marx adds that some of the time he analytically treats the same thing differently. That is, he has two different ways of discussing the wealth that capitalists extract from workers. Some of the time he discusses it "solely as a fund for supplying the individual consumption of the capitalist." That's what Marx means by revenue. Other times he treats it "solely as a fund for accumulation," which is to say, solely as a matter of capitalists spending money to make more money. Marx points out that in actual social practice, capitalists' wealth is "neither the one nor the other, but is both together. One portion is consumed by the capitalist as revenue, the other is employed as capital, is accumulated," which is to say, wealth expended to create more wealth for capitalists.

Marx adds that through Capital he treats capitalists "as personified capital." Capitalism as a social system exerts pressures that encourage capitalists to act in certain ways - to live up to the character type of "personified capital" - but no actual people are really just personified capital and nothing more. Marx's point is an analytical one. By creating this character type who is only a capitalist and nothing else - that is, someone who cares only about the creation of wealth for it's own sake - Marx can get at some of the core dynamics of capitalism. In actual social reality we never see this pure capitalism where capitalists are personified capital and nothing more. To the degree that capitalists are personified capital, the money they spend for their own personal consumption - money spent as revenue, Marx calls it - is money wasted, because it's money that could have been spent making even more wealth. Marx writes that "So far (…) as his actions are a mere function of capital — endowed as capital is, in his person, with consciousness and a will — his own private consumption is a robbery perpetrated on accumulation." Of course, actual existing capitalists don't just care about capital accumulation. They also spend their wealth on things they enjoy and which don't add to the creation of greater wealth - the expansion of their wealth is their primary priority in general, but it's not their only priority all the time in all places. To put it another way, actually existing capitalists rarely conform 100% to the logic of the capitalist system. Capitalism is a system which rewards and encourages economistic behavior, and the best of Marx and the marxist tradition is an attack on that.

In chapter 10 of Capital, Marx notes that at this point in the book he has made an assumption that workers under capitalism in general are legally and formally free. He further notes that this assumption isn't really accurate to the history of actually existing capitalism. It's another rational abstraction. He writes that "as far as we have at present gone only the independent labourer, and therefore only the labourer legally qualified to act for himself, enters as a vendor of a commodity into a contract with the capitalist. If, therefore, in our historical sketch, on the one hand, modern industry, on the other, the labour of those who are physically and legally minors, play important parts, the former was to us only a special department, and the latter only a specially striking example of labour exploitation.”

In chapter 15 of Capital, Marx again not this analytical assumption and how it differs from the actual history of capitalism. Here he begins to suggest that this assumption should be abandoned. He notes that in the early part of the book, "Taking the exchange of commodities as our basis, our first assumption was that capitalist and labourer met as free persons, as independent owners of commodities; the one possessing money and means of production, the other labour-power." That is, the first several chapters of Capital assumed that the working class worked for wages under relatively free circumstances, in the sense that they were compelled by the need to have wages and not by external force.

To put it another way, early in Capital the book assumes formally, legally free workers are the normal workers under capitalism. In chapter 15, however, Marx puts this assumption to the test of some aspects of the actual history of English capitalism. Marx notes that the introduction of machinery in various industries led to greater employment of women and children. These workers were not formally and legally free but rather legally disqualified. Marx writes that "now the capitalist buys children and young persons under age. Previously, the workman sold his own labour-power, which he disposed of nominally as a free agent. Now he sells wife and child. He has become a slave-dealer." Marx here claims that there is a growth in the use of legally disqualified workers under capitalism, breaking the assumption of legally and formally free workers. Marx also probably underestimates the degree to which the working class was never all that formally and legally free. It's not clear to me if this underestimation is another methodological assumption on Marx's part or something he just got wrong.

These examples I've listed are moments when Marx seems to let on that he is dealing in models. Marx's models are useful conceptually, but less so if we forget that they're models. Marx used his models in part for this usefulness, but also in part because he was engaged with classical political economists. Political economists dealt largely with theoretical models. (I'm told the same is largely true of economists today, though their models are much more mathematically presented these days.) Marx learned from and criticized political economists and, as Joseph Kay wrote, he conducted an immanent critique of them. This meant dealing in models just as political economists did.

In my view, Marx's models are very useful for thinking about capitalism and people should read volume 1 of Capital. (I recommend starting it with chapter 26 and reading to the end, then starting at the beginning and reading to the end. Or, read chapter 26 to the end, then chapter 4 through 25, then the first three chapters. The first three chapters are like the beginning of the movie The Usual Suspects: the ending totally changes the meaning of the beginning. Except the beginning of Capital is much more dull than that film.) I plan to read that Graeber book that Joseph reviewed. I would like to recommend a few other books here that I find useful alongside Marx. They're not primarily theoretical works, though they're smart sophisticated works.

One is the short book Historical Capitalism by Immanuel Wallerstein. The book collects some talks Wallerstein gave. In the beginning of the book Wallerstein makes a comment that speaks to what I've been saying here and what Joseph and Graeber talk about with regard to Marx and readings of Marx. Wallerstein described a limitation in a lot of things "written about capitalism by Marxists and others on the left," namely the fault of "logico-deductive analyses, starting from definitions of what capitalism was thought to be in essence, and then seeing how far it had developed in different places and times." Wallerstein instead aimed “to see capitalism as a historical system, over the whole of its history and in concrete unique reality.” Wallerstein suggest that Marx moved back and forth between these two approaches. For Wallerstein, this is a “tension in [Marx's] presentation of his work between the exposition of capitalism as a perfected system (which had never in fact existed historically) and the analysis of the concrete day-to-day reality of the capitalist world.” The rest of Wallerstein's book sketches elements of the over-all history of capitalism in his interpretation. It's worth a read, especially alongside Marx's Capital.

In addition to Wallerstein's book, I'd also highly recommend Michael Perelman's excellent book The Invention of Capitalism. Perelman compares the public writings of classical political economists with the journals and letters and the political and policy writings of those political economists during early capitalism and the transition to capitalist society. Their more public writings tended to treat markets as self-constituting and self-regulating but their private writings and their political interventions showed a keen understanding of the role of the state and of violence in creating and maintaining capitalism. The book is useful for its reminder that some capitalist ideologists know full well that their hymns to markets are ideological and false.

I would also highly recommend that people who want to understand the history of actually existing capitalism should engage with some recent-ish writings on the history of slavery, in particular Gavin Wright's short and very readable book Slavery and American Economic Development, Dale Tomich's book Through the Prism of Slavery and Walter Johnson's essay "The Pedestal and the Veil." Often slavery has been conceptually defined as not-capitalist or as pre-capitalist. Marx often discussed capitalism and slavery this way. This assumption is little more than an assertion about how to define the words capitalism and slavery - "if there's slavery it's not full capitalism, because we define full capitalism as not involving slavery" - and it's not an illuminating definition. The reality of the history of slavery and capitalism is that they're complicated - not all capitalism involved slavery and not all slavery was noncapitalist. In particular, the southern United States became a society which was no less capitalist than the north, it was just differently capitalist. The U.S. Civil War was a war between two different capitalist governments.

I'm going to end this blog post in a moment, with two quotes from E.P. Thompson, which I already posted in the discussion on Joseph Kay's blog post. As I read Marx, Marx's work in Capital was motivated by a sense like what Thompson expressed. Marx understood capitalism as a social system that limited human possibilities, and in ways that could and should be done away with. Marx's metaphors sometimes show this, like when he talks about capitalists coining the blood of children into money. As someone who buried several of his children, Marx wouldn't have used that imagery lightly. Marx's judgements motivated his immanent critique of capitalism and the ideas of political economists, and these judgments are pretty clear in Marx's writings, but most of Capital is spent developing the models.

Thompson said “

The injury which advanced industrial capitalism did, and which the market society did, was to define human relations as being primarily economic. Marx engaged with orthodox political economy, and proposed revolutionary economic man as the answer to exploited economic man. But it is also implicit, particularly in the early Marx, that the injury is in defining man as “economic” at all.”

Thompson said elsewhere that

“While one form which opposition to capitalism takes is in direct economic antagonism – resistance to exploitation whether as producer or consumer – another form is, exactly, resistance to capitalism’s innate tendency to reduce all human relationships to economic definitions. The two are inter-related, of course; but it is by no means certain which may prove to be, in the end, more revolutionary. (…) [People] desire, fitfully, not only direct economic satisfactions, but also to throw off this grotesque “economic” disguise which capitalism imposes upon them, and to resume a human shape.”

Posted By

Jan 18 2012 06:56


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Nov 21 2012 18:44

I think this would be more fruitful (or at least easier for me to think clearly about) with some examples. Since you raised the issue of crises and reforms in response, what are some past examples of crises like you're thinking of?

Nov 22 2012 11:21

Yeah, sure.

How about the great depression in the US; did the Roosevelt administration's reforms solve that crisis? I don't think the evidence suggests that they did.

I think another, but somewhat different, example would be Wiemar Republic Germany and subsequently, Nazi Germany. Did Hitlers economic programs (which could be described as Keynesian) 'solve' Germany's economic crisis? A lot of historians, both right-wing and left-wing, believe they did- unless I am totally wrong.

As far as I understand, however, Germany's growth rate- and average profit rate- was rebounding well before Hitler. The massive inflation and bankruptcies of the late German Empire and Revolutionary period set the stage for some impressive growth during the 1920's. Hitlers public works projects were irrelevant.

Does this help? Sorry if I'm not all that clear, I have been writing these responses after working the late shift at my job and enjoying a beer!

Nov 22 2012 15:29
kingzog wrote:
Yeah, sure.

How about the great depression in the US; did the Roosevelt administration's reforms solve that crisis? I don't think the evidence suggests that they did.

I think another, but somewhat different, example would be Wiemar Republic Germany and subsequently, Nazi Germany. Did Hitlers economic programs (which could be described as Keynesian) 'solve' Germany's economic crisis? A lot of historians, both right-wing and left-wing, believe they did- unless I am totally wrong.

As far as I understand, however, Germany's growth rate- and average profit rate- was rebounding well before Hitler. The massive inflation and bankruptcies of the late German Empire and Revolutionary period set the stage for some impressive growth during the 1920's. Hitlers public works projects were irrelevant.

Does this help? Sorry if I'm not all that clear, I have been writing these responses after working the late shift at my job and enjoying a beer!

I wrote a big reply to this but the internet ate it. Suffice to say you have the history (and the interpretation of keynesians of that history) here very wrong.

Nov 22 2012 22:57

George if you wouldn't find it too annoying to reconstruct it I'd love to see a version of that long reply, please.

Thinking about it now, I think a corrollary of (is that the right word? I mean "a thing that goes along with") this post is that some readings of Marx can make people think that economic, policy, and business history are superfluous, when raelly I think reading that kind of stuff is a good idea, and trying to square it with the more general/theoretical stuff. I feel like there's a smarter way to make this point, and that there's a point that's not just historical but about the present as well, but I'm tired and foggyheaded just now.

Nov 25 2012 05:52

I'd like to hear the longer response George. I won't be offended, I swear.

EDIT: I do have one question, George: In your last post, are you implying that the US and Germany, in the 1930's, did not employ what could be described as Keynesian economic policies?

Dec 1 2012 23:20

I suppose, since George never responded, his post did indeed mean to say that the US and German gov't's did not employ Keynesian policies in 1930's:

Suffice to say you have the history (and the interpretation of keynesians of that history) here very wrong.

If by saying that I got "the interpretation of keynsians of that history" wrong, he means to say that Keynsians interpret history differently than I do. Than that is totally correct!