Book Highlights: Capitalism, Socialism, and Democracy, Schumpeter, (Part 1: The Marxian Doctrine)

Yes, I do believe that most of the current talk about monopoly, like all the current talk about the dire effects of saving, is nothing but radical ideology and has no foundation in fact.

capitalism is being killed by its achievements.

A study of Marx begins most conveniently with the first volume of Das Kapital

In spite of a huge amount of more recent work, I still think that F. Mehring’s biography is the best, at least from the standpoint of the general reader.]

But it is perhaps superfluous to insist on the shortcomings of a theory which not even in the most favorable instances goes anywhere near the heart of the phenomenon it undertakes to explain, and which never should have been taken seriously.

A little reflection will convince the reader that this is not a necessary or natural thing to do. In fact it was a bold stroke of analytic strategy which linked the fate of the class phenomenon with the fate of capitalism in such a way that socialism, which in reality has nothing to do with the presence or absence of social classes, became, by definition, the only possible kind of classless society, excepting primitive groups.

The exaggeration of the definiteness and importance of the dividing line between the capitalist class in that sense and the proletariat was surpassed only by the exaggeration of the antagonism between them. To any mind not warped by the habit of fingering the Marxian rosary it should be obvious that their relation is, in normal times, primarily one of cooperation and that any theory to the contrary must draw largely on pathological cases for verification.

But nothing in Marx’s economics can be accounted for by any want of scholarship or training in the technique of theoretical analysis. He was a voracious reader and an indefatigable worker. He missed very few contributions of significance. And whatever he read he digested, wrestling with every fact or argument with a passion for detail most unusual in one whose glance habitually encompassed entire civilizations and secular developments.

To his powerful intellect, the interest in the problem as a problem was paramount in spite of himself; and however much he may have bent the import of his final results, while at work he was primarily concerned with sharpening the tools of analysis proffered by the science of his day, with straightening out logical difficulties and with building on the foundation thus acquired a theory that in nature and intent was truly scientific whatever its shortcomings may have been.

Both Ricardo and Marx say that the value of every commodity is (in perfect equilibrium and perfect competition) proportional to the quantity of labor contained in the commodity, provided this labor is in accordance with the existing standard of efficiency of production (the “socially necessary quantity of labor”). Both measure this quantity in hours of work and use the same method in order to reduce different qualities of work to a single standard.

Both answer critics by the same arguments. Marx’s arguments are merely less polite, more prolix and more “philosophical” in the worst sense of this word.

The labor theory of value, even if we could grant it to be valid for every other commodity, can never be applied to the commodity labor, for this would imply that workmen, like machines, are being produced according to rational cost calculations. Since they are not, there is no warrant for assuming that the value of labor power will be proportional to the man-hours that enter into its “production.”

To begin with, the doctrine of surplus value does not make it any easier to solve the problems, alluded to above, which are created by the discrepancy between the labor theory of value and the plain facts of economic reality.

Marx relies on the competition between capitalists for bringing about a redistribution of the total “mass” of surplus value such that each firm should earn profits proportional to its total capital, or that individual rates of profits should be equalized.

If we place ourselves on Marx’s standpoint, as it is our duty in a question of this kind, it is not absurd to look upon surplus value as a “mass” produced by the social process of production considered as a unit and to make the rest a matter of the distribution of that mass. And if that is not absurd, it is still possible to hold that the relative prices of commodities, as deduced in the third volume, follow from the labor-quantity theory in the first volume. Hence it is not correct to assert, as some writers from Lexis to Cole have done, that Marx’s theory of value is completely divorced from, and contributes nothing to, his theory of prices.

For Marx, saving or accumulating is identical with conversion of “surplus value into capital.” With that I do not propose to take issue, though individual attempts at saving do not necessarily and automatically increase real capital. Marx’s view seems to me to be so much nearer the truth than the opposite view sponsored by many of my contemporaries that I do not think it worth while to challenge it here.]

Now this tendency of the capitalist mechanism to equilibrate itself is surely not above question and any assertion of it would require, to say the least, careful qualification. But the interesting point is that we should call that statement most un-Marxian if we happened to come across it in the work of another economist and that, as far as it is tenable, it greatly weakens the main drift of Marx’s argument. In this point as in many others, Marx displays to an astonishing degree the shackles of the bourgeois economics of his time which he believed himself to have broken.]

Finally, the idea that capitalist evolution will burst—or outgrow—the institutions of capitalist society (Zusammenbruchstheorie, the theory of the inevitable catastrophe) affords a last example of the combination of a non sequitur with profound vision which helps to rescue the result.

Or capital in the Marxian system is capital only if in the hands of a distinct capitalist class. The same things, if in the hands of the workmen, are not capital.

Marxists claim that their system solves all the great problems that baffle non-Marxian economics; so it does but only by emasculating them.

Moreover, as every lawyer and every politician knows, energetic appeal to familiar facts will go a long way toward inducing a jury or a parliament to accept also the construction he desires to put upon them. Marxists have exploited this technique to the full. In this instance it is particularly successful, because the facts in question combine the virtues of being superficially known to everyone and of being thoroughly understood by very few.

If however we shake off the blinkers and cease to look upon colonization or imperialism as a mere incident in class warfare, little remains that is specifically Marxist about the matter. What Adam Smith has to say on it does just as well—better in fact.

For instance, the consistent support given by the American people to protectionist policy, whenever they had the opportunity to speak their minds, is accounted for not by any love for or domination by big business, but by a fervent wish to build and keep a world of their own and to be rid of all the vicissitudes of the rest of the world. Synthesis that overlooks such elements of the case is not an asset but a liability.

Big business has been able to take advantage of the popular sentiment and it has fostered it; but it is absurd to say that it has created it.

Matters become infinitely worse if, flying in the face of fact plus common sense, we exalt that theory of capital export and colonization into the fundamental explanation of international politics which thereupon resolves into a struggle, on the one hand, of monopolistic capitalist groups with each other and, on the other hand, of each of them with their own proletariat. This sort of thing may make useful party literature but otherwise it merely shows that nursery tales are no monopoly of bourgeois economics.

The attitudes of capitalist groups toward the policy of their nations are predominantly adaptive rather than causative, today more than ever. Also, they hinge to an astonishing degree on short-run considerations equally remote from any deeply laid plans and from any definite “objective” class interests. At this point Marxism degenerates into the formulation of popular superstitions.7

This superstition is exactly on a par with another that is harbored by many worthy and simple-minded people who explain modern history to themselves on the hypothesis that there is somewhere a committee of supremely wise and malevolent Jews who behind the scenes control international or perhaps all politics. Marxists are not victims of this particular superstition but theirs is on no higher plane.

The badge of Scientific Socialism which according to Marx is to distinguish it from Utopian Socialism consists in the proof that socialism is inevitable irrespective of human volition or of desirability. As has been stated before, all this means is that by virtue of its very logic capitalist evolution tends to destroy the capitalist and to produce the socialist order of things.8

The capitalist or any other order of things may evidently break down—or economic and social evolution may outgrow it—and yet the socialist phoenix may fail to rise from the ashes.

This should also solve the problem that has divided the disciples: revolution or evolution? If I have caught Marx’s meaning, the answer is not hard to give. Evolution was for him the parent of socialism. He was much too strongly imbued with a sense of the inherent logic of things social to believe that revolution can replace any part of the work of evolution.