The following post is by Dealbreaker reader and commenter Infinite Guest.
First Nouriel Roubini, soon afterward George Magnus, and since then the vast and vacuous consensusphere have lately given currency to notion that Karl Marx was right after all. “Marx was right” is just the sort of opinion a person might venture late at night during a navel-gazing undergraduate debate, or at a party -- if he needed some privacy-- or perched on a soapbox in Times Square. A well-heeled literary critic might work it up into a sly, chatty, modestly successful book. It’s difficult to accept at this late date that any serious thinker actually believes that Marx was right. Belief in Marxism serves no one but Marxist thugs. Marxism is dead and buried, and deservedly so, because Karl Marx was wrong.
Both Mr. Magnus and Dr. Roubini have it that we are now in the midst of a textbook crisis of Capitalism. They assert that prolonged income inequality in the United States, being the result of a sustained high return to capital, has led to the weak aggregate demand that underlies all such crises just as Marx described. At that point the two men diverge. Mr. Magnus goes on to prescribe a set of essentially Keynesians remedies. Dr. Roubini, ever the Cassandra, writes off the foreseeable future as incurably depressed, with worldwide “massive social and political instability” as the unemployed masses take to the streets.
It’s not wrong to observe that aggregate demand has fallen in advanced economies, nor is it unusual to put forward Keynesian policy recommendations, nor is it a crime to express disappointment at the impact of the Western world’s fiscal and monetary attempts to prime the pump. It’s reasonable to fear that we’re slipping into a double-dip recession, if we’re not already in one. If Karl Marx had said, “Capitalism has its ups and downs, and it’s difficult to keep everyone happy all the time solely through markets,” then, sure: who would argue? But that’s not what Karl Marx said. He said, “Capitalism contains the seeds of its own destruction.” He said it was inevitable that each successive crisis would be progressively more severe until the whole mess would one day spontaneously collapse in upon itself and burn in the flames of the glorious workers’ revolution. And then every other bad thing would fall away, under a benign and idyllic revolutionary dictatorship of the proletariat, until even that fell away and the brotherhood of man achieved Communist perfection.
None of which will ever happen.
This is no crisis of Capitalism; not in the Marxist sense. People are not rioting in the streets because of over-production or because of rising income inequality in the advanced economies. They’re rioting in the streets because they suffer under terrible governments who have proven themselves incompetent at managing credit and inflation, among other things. They’re rioting in the streets because cellphones and social media have made it easy for people, including criminals, to organize themselves. This is a social crisis. Credit is a social phenomenon. Inflation, whether you view it as a monetary phenomenon or not, is an organizing principle of society. The one degree of freedom in valuing any asset is its future utility in the context of the society that produced it. The fact that credit is a social activity is why we have capital markets. Different participants have different ideas of the relative social value, and implicitly, creditworthiness, of different investable assets. If markets are broken, that’s only a sign that investors are socially too close together in their thinking. We’ve all moved very quickly from a society that rated houses risk-free to a society that rates nothing risk-free while at the same time becoming progressively more risk-averse. Consequently the public, through the monopsony buying of the state, has become the reluctant owner of a massive catalogue of assets that nobody actually wants. When everyone tries to externalize every possible risk, all at the same time, how can anything get done?
Income inequality within the advanced economies has grown over the past thirty years – contingent upon how you measure it. During every economic downturn, fashionable people point to income inequality in the United States as a canary in the coal mine foretelling the impending onset of a bloody class war. No. Real income inequality is between people who live in rich countries and people who live in poor countries. In that dichotomy, the Western working class is a partner to the Western Capitalist in the “exploitation” of third world factory workers. Factory workers who have not overproduced in the Marxist sense. Factory workers who, thanks to Capitalism, have seen their standard of living rise nearly every year since the fall of the Berlin Wall regardless of how you measure it. Income inequality in the United States may or may not be at a concerning level, temporarily at least. But it has not put a dent in corporate profits, which according to Karl Marx, who was wrong, is a necessary precondition for any crisis of Capitalism. The poverty trap that a family making less than $75,000 falls into whether they work or not is a much bigger social problem. That trap is clearly defined and clearly constructed by bad policy. Income inequality is not.
I understand why Dr. Roubini, who is an academic, would want to re-read Marx. I can see where Mr. Magnus would feel that, in order to make his real argument to the state and the people, he could get better traction by saying something a little scary. I’m not surprised, really, that the same medium that circulates videos of cats playing the piano also re-circulates and resuscitates long-dead and discredited ideas like Marxism. Bringing Marx back from the grave is not helpful, though. Marx was wrong because his model society, of human behavior, was wrong.
Haven’t we had enough of the wrong models already?