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{UAH} Is Marx still relevant?

Comrade Lado Lulua,

Is Marx still relevant?

The 19th-century thinker identified exploitation and questioned the automatic self-regulation of a capitalist economy. And, says Marx biographer Jonathan Sperber, there's more
Karl Marx
 'Marx wrote of "crises"; we say "recessions".' Photograph: Popperfoto

Is Karl Marx still relevant? He lived in the 19th century, an era very different from our own, if also one in which many of the features of today's society were beginning to take shape. A consideration of the relevance of Marx's ideas in the early 21st century might start with separating their outdated elements from those capable of development in the present.

Among the former are concepts such as the labour theory of value, or the tendency of the rate of profit to fall, both deriving from the economic theories of Adam Smith and David Ricardo, and pertaining to a now very outdated version of capitalism, characterised by low rates of productivity increase and a large agricultural sector, under pressure from population growth. Marx's idea of human history as the inevitable progression of modes of production, from the "Asiatic mode" in the distant past to a communist future, seems like a relic of positivist theories of stages of history, more befitting the age of Herbert Spencer and Auguste Comte than the historical experiences of the 20th century.

And the ideas capable of development? Three come to mind.

One is the idea that intellectual conceptions and the political movements embodying them are closely tied to social structures and collective economic interests. Marx referred to the latter as the "base" and the former as the "superstructure"; one does not have to agree with this metaphor or with the priority it implies to see that it is a fruitful conception. He first developed this line of analysis to explain different forms of royalism in France during the 1840s, but contemporary politics, with its clash of strongly different political visions all too evidently tied to economic interests or to social groups can be understood in this way as well. The recent US presidential elections, with their rhetoric of the "1%" and the "47%" (the proportion of the population Mitt Romney claimed didn't pay taxes) are a good example, as is the debate about austerity politics in the UK and in the EU, phrased in terms of government debt, although really about which social groups will bear the costs of economic restructuring.

Second, ostensibly free and voluntary market exchanges contain within themselves elements of domination and exploitation. At the beginning of the age of industrialisation in Britain, these elements were very evident: starving handloom weavers and factory operatives toiling for 14 hours a day in stiflingly hot, dust-ridden textile mills. Today, such elements are subtler in more affluent countries – although they remain quite apparent in, say, Bangladesh – but in view of the results of three decades of public policy exalting market exchanges, and ignoring their negative consequences, we might want to take Marx's insight more seriously. He saw the remedy to the situation in violent revolution, followed by decades of civil and international warfare, leading to a utopian realm in which distinctions between individuals and society, and between society and the state, had been dissolved. Efforts to implement this vision in the 20th century, admittedly under circumstances quite different from those Marx envisaged, in the USSR, China or Cambodia, worked out very badly, at times genocidally so. More modest remedies include strong trade unions, generous social welfare programmes and effective regulation of the financial sector – although, in today's world, it sometimes seems as if these solutions are as utopian as Marx's.

Finally, the understanding that a capitalist market economy was not an automatically self-regulating system; rather, it periodically entered periods of self-generated breakdown. Marx called these periods "crises"; today, we use a gentler term, "recessions". The most recent of these, beginning in 2007-08, deserves the older sobriquet, in view of its severity, persistence and global impact.

In Das Kapital, Marx offers a number of explanations for the recurrence of these crises. The most interesting comes from his time as a business and financial correspondent for the New York Tribune in the 1850s, then the world's largest newspaper. In discussing the crisis of 1857, generally regarded as the first worldwide recession, Marx focused on the policies of Crédit Mobilier, the world's first investment bank. He noted, appalled, that the bank's statutes allowed it to borrow up to 10 times its capital. It then used the funds to purchase shares or fund IPOs of French railroad and industrial corporations, greatly increasing output. But when no purchasers were found for the expanded production, the bank discovered that the stocks it had bought had fallen in value, making it difficult to repay its loans. Replace Crédit Mobilier with Lehman Brothers or the Anglo Irish Bank, and French railroad and industrial firms with Nevada or Irish real estate, and we have a fair picture of a major cause of the recent financial unpleasantness.

This is not to imply that Marx was the only thinker to question the automatic self-regulation of a capitalist economy, or even the most prescient. He was part of a dissenting economic tradition that begins with Sismondi and continues with some detours, through John Maynard Keynes and Hyman Minsky, to Joseph Stiglitz and Paul Krugman. For specific policy suggestions, the more recent figures might be more helpful. But Marx's insights of the 19th century still offer interesting ways to think about the 21st.

Jonathan Sperber's Karl Marx is published by Norton.

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