Economic problems and Marxian analysis

ECONOMIC PROBLEMS AND MARXIAN ANALYSIS by RICHARD D. WOLFF

The last ten years in the United States have seen average real wages fall and the incidence of proverty and homelessness rise. We have had very high rates of inflation, unemployment, interest, and business bankruptcies. Some of these rates were unprecedented in recent United States history, expecting world wars and the Great Depression. Yet, in out very uneven economic system, the Reagan tax cuts and defense spending pumped up many corporate balance sheets and made rich Americans richer still. As happened before, the stock market consequently flared in a speculative frenzy and then crashed. The United States shifted from an international creditor to a debtor status. Basic industries were crippled by foreign competition. Firms that made big profits used them to arrange megamergers rather than to expand to rebuild industrial capacity. The oligopolized banking structure became dependent on massive, uncollectable loans both to foreign debotors and to wild speculators in the domestic energy and real estate sectors. The collapse of medium and small farms remains endemic across the country. The labor union movement declined sharply and now represents barely a sixth of the non-supervisory labor force. The increased inequality of income distribution sharpens social divisions and conflicts everywhere.

Perhaps most significantly, the U.S. economy was and remains extremely unstable (as well as uneven in how it distributes the social costs of its instability). Not just stocks and bonds, but also dollar exchange rates, levels of industrial capacity utilization, real estate values, and so forth, oscillated dramatically. After severe recessions in the 1970s and early 1980s, another is now widely expected for this year or next.

Univeristy and private forecasters missed virtually all of this with few exceptions. Republicans and Democrats did no better. They have now hitched their political wagons to one or another simple-minded "essential cause of our troubles." The culprit is either the budget deficit, long-developing problems are transformed into simple issues susceptible to quick fixes if only this or that character is elected president. The economics profession -- at least that part honest enough to admit it -- has been depressed at its incapacity to understand, let alone fore-see, what happened or what is likely to happen. We face an economy out of control and apparently beyond the reliable comprehension.

I want to argue that one component of this mess is the narrowness of what passes for economic knowledge in the United States today. Of the two basic alternative theories across the world today -- neoclassical and Marxian economics -- only one is taught systematically in virtually all American universities today. The same one is the shared basis of public discussions in the media and debates among liberals and conservatives. Unable to draw upon the insights of the alternative, Americans are left floundering within the narrow confines of an economic theory increasingly inadequate to the problems they face. The alternative, Marxian theory, approches the U.S. economy very differently. However, because of unfamilarity with is basis arguments, we need to devote a few sentences to them. Then we can sketch what the Marxian theory can tell us about the U.S. economic today.

First, Marxian theory does not see that economy as a unified entity. Instead it sees divisions: prosperity for some is recession for others, government policies hut some and help others, inflations bring pain to some, profits to others. Secondly, it focuses attention on a particular division in society because neoclassical theory simply refuses to see or analyze it and because that refusal blinds neoclassical theory to important aspects of U.S. economic and social problems.

The particualr division of interest to Marxists is class, but what they mean by that differs from what most Americans think. Class refers to a kind of process which divides people in almost every society. In any society some people do the "productive labor" to make the goods and services desired by that society. The labor not only to produce the goods and services necessary for their own standard of consumption. They always labor additional time to produce a "surplus" which is distributed to others. This immediately raises the question for Marxian analysis: who gets this surplus and who deicdes what is to be done with it?

In every society, certain people receive this surplus as the obvious, necessary, appropriate behavior in the culture of that society. In slave societies, the fruit the slave labor is automatically appropriated by the slave master. In feudal societies, peasants regularly deliver their surpluses to feudal lords. In capitalist societies, laborers think it perfectly appropriate to pass the surplus they produce to their employers -- as their "profits" - to do with as they please.

Those who appropriate this surplus then distribute it in ways aimed to ensure their continued ability to appropriate surplus. They hire surpervisors to make sure productive workers pump out that surplus. They pay taxes for governments to educate young people to become productive surplus producers and to be satisfied in that position. They also keep part of the surplus to sustain wealthy lifestyles that become the envy of laborers who hope, by being good surplus producers, to earn enough to copy those lifestyles.

In the United States, the basis appropriators of most of the surplus produced are corporate boards of directors. They receive the surplus -- profits -- produced by productive laborers. They decide how to distribute the profits to keep their surplus-generating corporations in business. In the 1960s and 1970s, however, many U.S. corporations encountered several problems in keeping the surplus-producing system going.

They had trouble selling what their laborers produced, because foreign capitalists had succeed in getting their laborers to work for less money with more efficient machinery than U.S. corporations had installed. Fewer sales meant less surplus. They also could keep less of what surplus they did appropriate from their laborers, state, and local governments to finance social programs which, in their view, did not help their profits. They had to use surplus as well to pay for such "government instrusions" as environmental protection regulations.

Led by the major corporations, U.S. surplus appropriators reacted to these problems by moving to reestablish the conditions of surplus appropriation in the United States. They successfully pressured Democrats and Republicans to adopt a program to achieve the following all at once:

-- lower taxes on corporations and wealthy investors

-- lower real wages

-- better terms for competing with foreign capitalists

-- abolition of costly government regulations These steps were implemented in the later 1970s and especially under Reagan. The result was and continues to be just those conditions diescribed in the opening paragraphs of this article. Surplus appropriation has gone up for many corporations. The "Reagan recovery" has been good for them, even while it was a perfectly predictable disaster for so many others.

This all-too-brief sketch of a Marxian analysis suggests two conclusions. First, only systamatic exposure to the subtleties of Marxian analysis will permit Americans to learn, examine and tests its insights for use in dealing with current problems. That would require a genuine opening of schools, college courses, and public discussion to Marxian perspectives.

Second, different groups of the United States have different interests in regard to economic problems. The problems of some are the solutions for others. Government cutbacks may have hurt millions, but they permitted reduced corporate taxes. Falling real wages may have pushed millions of women with children to enter into wage labor and forced them to their families to undergo difficult, painful, and costly adjustments, but they raised corporate surplus appropriation. The Marxian analysis of class reveals such important division within the United States and examines their effects. It also suggests some different ways to change the United States to deal with "its" economic problems.

I do not have the space here to detail these, but one deserve mention. Changing the class structure is necessary to extract the United States from the endless pressure of surplus appropriators (the small minority) who manipulate economic conditions (the lives of the vast majority) to secure their positions as appropriators. Suppose that the appropriators of the surplus were the same people as those who produced it, that they arranged democratic means to discuss how the surplus they produc ed would be utilized their economic power and resulting political influence to make the economic serve their interests above all else.

That dream has motivated many Marxist theorists as they have carefully developed, changed, tested, and refined their complex class analyses over the last 100 years. Their work poses basis, serious questions and challenges to the current state of U.S. economic difficulties. It also offers powerful insights which can help fashion changes adequate finally to overcome those difficulties. Will U.S. universities continue to serve the narrowest of interest by fearfully refusing to allow faculty and students to explore Marxian theory?

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