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The term Marxian economics refers to economic theory inspired by the work of Karl Marx (1818–1883). The salient feature of this research program is the idea that all societies in order to reproduce themselves require labor that will be used to produce the material requirements of reproduction. In all societies, a particular social class performs more work than that required for its own reproduction and the excess labor is appropriated by the dominant classes through property relations, traditions, the legal system, and also force. Such exploitative relations are quite transparent in precapitalist modes of production (e.g., slavery and feudalism), whereas in capitalism they are embedded in monetary transactions that give the impression of equal and therefore fair exchanges. Marx was the first to argue that in capitalism workers are exploited not because they are not paid their full wage, but because with the full wage they receive workers are able to pay only for the basket of goods required for the reproduction of their capacity to work (their labor power), which is acquired through what is only a portion of their total labor time. The difference between total labor time and that required to reproduce the workers’ capacity to work is called surplus labor time and its monetary expression, the surplus value, is appropriated by the propertied classes (capitalists and landlords) and the state. The wealth accumulated in a society is directly related to the amount of surplus labor time, which is inversely related to the necessary labor time. Furthermore, Marx argued that labor time also regulates the surface phenomena of capitalism, such as the price of commodities. Hence, the law of value—according to which the socially necessary labor time is directly and indirectly embodied in a commodity—is the regulator of the movement of market prices. Prices are the means through which capitalists realize their profits and losses and regulate their behavior accordingly. In Marx, the role of the law of value is analogous to Adam Smith’s “invisible hand,” for it provides an explanation of how capitalist society reproduces itself and the various scales of its reproduction.
There are many different interpretations of Marx, and this often gives the impression that his work is vague. A careful examination of the history of the socialist movement, the origins of which were inspired to a great extent by Marx himself, shows, however, that those engaged in this movement often ignored Marx’s major work, that is, the three volumes of Capital. More specifically, during the period of the First International (1864–1876), Marxists paid particular attention to the political or philosophical writings of Marx and Engels (e.g., the Communist Manifesto (1848), the German Ideology (1845–1846/ 1932), etc.). Volume I of Capital (1867) was not read as much as one would expect, except for the “historical” chapters that refer to the exploitation of workers and their struggles for the reduction of the length of the working day. The other chapters were difficult to comprehend, let alone to use in any direct way for the needs of the workers movement. The Marxists of the Second International (1889–1916) began using volume I of Capital and to some extent volume II (published in 1885), which was focused on the mechanisms of reproduction. Their discussions focused on whether Marx’s purpose was to demonstrate the possibility of the balanced growth of capitalism, or to reveal capitalism’s instability and predict its inevitable collapse, unless it expanded to incorporate the noncapitalist economies as an additional source of cheap raw materials and a market to dispose of the products. Hence, the foundation for an economic theory of imperialism was developed by a number of radicals. Volume III of Capital was published in 1894, but was considered “too scientific,” as Rosa Luxemburg (1870–1919) once remarked, and only a few Marxists during the 1930s, notably Henryk Grossmann (1881–1950) and Maurice Dobb (1900–1976), read it attentively. The subsequent Keynesian revolution in economics led many Marxists to “keynesify” the economic theory of Capital and “marxify” the economic policy conclusions of Keynesian economics. The idea is that many Marxists of the time abandoned partly or completely the analysis of Capital and adopted the Keynesian analysis, and from that they tried to derive radical policy conclusions with regard to the treatment of monopolies and income distribution. More specifically, Paul Sweezy (1910–2004) and also Paul Baran (1910– 1964) claimed that Marx’s analysis was more appropriate for the conditions of nineteenth-century capitalism, where there were neither monopolies nor a powerful state, than for the current economic situation in which powerful monopolies dominate and together with the state influence economic outcomes. Naturally, many radical economists claimed that once the workers’ party seized power it could use the state for its own purposes. In this context, it has been argued that the law of value no longer holds in conditions of monopoly capitalism and also that Marx’s laws of motion should be revised because the economy is under the control of monopolies and the state. Notable exceptions to this stream of thought were Paul Mattick (1904–1981) and Ernest Mandel (1923–1995), who in the 1970s and 1980s were what Grossmann and Dobb were in the 1920s and 1930s. That is to say, they were from the very few Marxists who consistently used and expanded the analysis of Capital in the conditions of their time.
One might have expected that Marxian economics would flourish during the Soviet era, and it is true that the first decade after the revolution saw the development of theories of medium- and long-term cyclical fluctuations—on the basis of which the technique of material balances was developed. The latter became a tool of national planning and also the starting point for inputoutput analysis and mathematical economics. Soon, however, Marxism and Marxian economics became dogmatic in the Soviet Union and other East European countries. On the other hand, developments in China, together with student unrest in Europe and the antiwar movement in the United States, sparked a renewed interest in Marxian economics. This time there were systematic efforts to comprehend the totality of Marx’s work and in this context volume III of Capital was integrated into a single economic theory that seeks “to lay bare the economic law of motion of modern society” (Marx 1867–1894, Vol. I, p. 10). There were a number of efforts, on the one hand, to clarify and expand Marx’s theoretical scheme and, on the other, to give it empirical content. Thus we find many studies that test the validity of the law of value with inputoutput data. Similarly, inter-industry data is used to test the law of the tendential equalization of rates of profit across industries, as well as the long-run fall of the general rate of profit and its connection to long-term fluctuations in the level of economic activity. Other topics of interest include extensions of Marx’s work into the areas of international trade, exchange rate determination, the theory of effective demand, the state’s redistributive role, and so on. There is no doubt that in recent decades significant progress has been achieved within Marxian economics, creating a theoretical foundation for further, fertile developments.
Even though the renewed interest in Marxian economics started in non-Soviet countries, the demise of the Soviet Union as well as the dissolution of most Communist parties and the weakening of the labor movement in Western countries during the past few decades have all certainly had a negative effect on the development of Marxian economics. On the positive side, though, one may count the demise of doctrinaire Marxism and the emergence of more pluralistic approaches that have brought to the fore important issues such as gender, race, and the environment. In this sense, the rise to preeminence of China (with its strong Marxist tradition), together with the movement against globalization may give new impetus to the Marxian research program worldwide. This research program has always been under attack and, despite its undeniable progress over recent decades, has never really found much support among Western academic economists. In fact, Marxian economics has always been misunderstood and its importance downplayed by mainstream economics; because of its ideological connotations, it has been relegated, at best, to being a mere chapter in the history of economic thought.
In conclusion, Marx’s most important contribution to political economy was the distinction between labor and labor power, on the basis of which he was able to present a consistent theory of exploitation as a source of profits. Furthermore, he argued that the pursuit of profit as an end in itself has created the laws of motion of capitalist society that operate independently of people’s will. These laws create the objective conditions within which the class struggle and wider political intervention take place. Moreover, Marxian economics integrates macroeconomics (falling rate of profit, reserve army of unemployed) and microeconomics (prices of commodities) through the law of value. Because of this integration, Marxian economics will continue to provide a great deal of fertile ground for further research, at least as long as current orthodox economic theory maintains the dichotomy of micro- and macroeconomics. Only in the last few decades has there been a systematic effort to base macroeconomic analysis and conclusions on solid microeconomic foundations.
- Anderson, Perry. 1976. Considerations on Western Marxism. London: New Left Review Books.
- Dobb, Maurice. 1937. Political Economy and Capitalism. London: Routledge & Keegan Paul.
- Marx, Karl. 1867–1894. Capital. 3 vols. Moscow: International Publishers.
- Shaikh, Anwar. 1981. “The Poverty of Algebra.” In The Value Controversy, ed. Ian Steedman, 266–300. London: Verso.
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