Marx’s Revenge: The Resurgence of Capitalism and the Death of Statist Socialism by Meghnad Desai. Published by Verso. 358 pages (including bibliography).
Economist Meghnad Desai argues that Karl Marx would in fact be in favour of globalisation as practised in the world today. The popular thought among Marxists and the critics of Marx is the view that Karl Marx was the enemy of markets. In fact, he was a great advocate of them. He believed they were a very efficient way of allocating resources and he has a large amount of respect for markets. Socialism would only arise once scarcity was eliminated. This would be after capitalism had become a global phenomenon.
Desai distinguishes between the Marxist who interpret Marx as the promoter of socialism and communism from the Marxian who praises Marx’s analysis of the capitalist system. Marxians believe that Marx in fact has some rather insightful things to say about capitalism and markets. Marxian’s for instance have claim to the first proposed theory of the business cycle, according to Desai. The idea of surplus value can be attributed to Marx.
Marxians are those who look at capitalism with a very critical eye. Marxists are those seeking to promote a new economic system. It is the Marxians who accurately follow Marx’s thought. The Marxists are concerned with socialism, yet Karl Marx has very little to say about what the socialist society would look like. Socialism was more a prophecy undertaken by Marx to ensure that capitalists never fell under the illusion that they had reached the end of time. That is what Marxists failed to understand.
Marxists such as Stalin, Mao, Pol Pot and Lenin have been the worst enemies of Karl Marx. Not only only did they thoroughly misunderstand Marx’s thought, they ended up associating Marx’s thinking with some of the worst bloodbaths in human history.
Both Marxians and Marxists denounce the Hegelian way of thinking that we are in the final age of time. Marxians and Marxists scoff at theories by the likes of Francis Fukuyama who declare the “End of Time”.
The strength of Marx’s Revenge is not just its iconoclastic portrayal of Marx’s philosophical and economic thinking, but in its historical portrayal economic thinking’s development. Desai covers the rise and fall of laissez-faire capitalism, the rise of marginalism, the rise of Keynesian economics, the rise of monetarist, and the development of differing forms of market socialism.
It is not just mainstream economic theories that are covered, Piero Sraffa’s criticism of both Marxism and marginalsism are explained in the book. In fact, it is this critique which contains the most sustained assault on Marxist thought through out the book. This is less surprising that in it sounds when you consider the thesis of the book is that Marx was in fact sympathetic to laissez-faire capitalism.
The historical narrative of economic thought was brilliantly written and thought out by Desai. It would be hard to read the book and not get a sense of the scope and direction of economic thought. The narrative weaves differing theories all together demonstrating how some theories interacted together while others firmly repelled each other. Both the left and right can gain a great deal of economic thought by reading this book especially those on the left.
My main criticism of Marx’s Revenge is the book is very dismissive of a particular form of market socialism. Near the end of the Cold War, a form of market socialism came into existence which fully embraced the Walrasian equilibrium. This was a liberal market socialism which combined elements of economic liberalism alongside a socialist perspective on the organisation of the firm. Firms would become worker-owned cooperatives operating under a more free market system, rather than having worker cooperatives that were publicly funded with the state setting the level of prices.
The primary criticism of this sort of market socialism was that it would be difficult for businesses to be innovative because innovators prefer great rewards from innovating. A worker-owned cooperative on the other hand would diversify the gains of innovation to even those who never innovated. Thereby, creating less incentives for innovators to innovate.
This criticism is flawed because competition in the market economy drives innovation. Innovation is the only strategy that market agents can act upon to make sure they stay adaptable in the market, other than rigging the market of course. It is this survival constraint that will guarantee that innovation occurs in an economy, even if firms are organised under the principles of a cooperative than a capitalist firm.
The second criticism of this form of market socialism is that it will be difficult to fire workers. Ultimately, if a recession were to occur and it became necessary to sack workers, then how would this be accomplished if the worker is also a shareholder with a right to vote at board meetings.
My reply to this, though abstract and unsubstantiated at the moment, is that property rights can be defined and implemented in law in such a way to make it easy for cooperatives to hire and sack workers. This is an application of the Coase Theorem which stipulates that property rights need to be well-defined, or delineated. If property rights were defined in particular manners, it would make it easy for market transactions in the labour force to occur while ensuring that cooperatives remained adaptable to changes in the market. Even though I have not managed to show that this is a workable possibility at the moment, I see no reason it cannot be theoretically possible to design such a system.
The third criticism of this book is it is slightly outdated. This is primarily because it written before the recent financial crisis and its aftermath. However, the book never really delved into the thought of the post-Keynesian Hyman Minsky. This is one major disappointing aspect about the book because Minsky’s Financial Instability Hypothesis would give credence to Marx’s criticism capitalism’s instability at the fundamental level. Minsky’s Financial Instability Hypothesis is essential for those criticising capitalism because finance is the industry at the very heart of the market economy. Economic activity in capitalism cannot occur unless there is finance backing it up. To state that finance is unstable is to say that the foundations of the rest of the economy is also unstable.
The fourth criticism of this book is that it thoroughly ignores the Georgist critique of the operations of capitalism and socialism. The role land plays in driving inequality gains no mention. The omission of the geonomics from the book is a solemn reflection how the issue of land justice has become cleansed from the political and economic debate.
Marx’s Revenge was a brilliant read which will teach both the left and right about the teachings of Marx as well as the development of economic theory in the last 200 years. I recommend this book to the learned layman who wishes to understand our attempts to understand how the economy operates. I also recommend it those interested in the history of ideas or even just history in general.
*Amendment made to include the fourth criticism.