150th Anniversary Why Karl Marx Still Counts

A century and a half after he wrote Das Kapital, the specter of Karl Marx still haunts Europe and the rest of the capitalist West. Maybe it’s because the powers-that-be know that what the late German economist-philosopher and revolutionary had to say, still applies.
Still relevant: Demonstrators at a May day march commemorate Karl Marx.

Karl Marx's brilliance shone when it came to other people's money. But when it came to his personal finances, the man could barely keep his head above water.

An economist, philosopher, journalist and revolutionary, Mr. Marx often complained that he and his wife, Jenny, didn't have two pennies to rub together, and the creditors are becoming “more unendurable” by the day.

For decades, the most prominent thinker for the working class, an analyst of the macroeconomic conditions that gave rise to modern capitalism, was dependent on the generosity of an industrialist, Friedrich Engels. This was mainly due to the fact that Mr. Marx was constantly on the run from the authorities and changed his place of residence often. From 1849 on, he and his family lived in exile in London.

The family's financial woes stemmed from the poor remuneration Mr. Marx received for newspaper articles. His books wouldn't become widely popular until long after his death.

After completing the first volume of his seminal work, “Das Kapital” – in English, “Capital: Critique of Political Economy” - some 150 years ago, Mr. Marx predicted that the work he put into writing it wouldn't even pay for the cigars he smoked while doing so.

The "eternal truths" of the then-socialist order would have been an abomination for Karl Marx.

Even in his most optimistic mood, Mr. Marx could never have imagined that his 2,200-page opus would someday become one of the best-selling books of all time. By now, “Capital” has even made it onto UNESCO's Memory of the World, a register for documentary heritage of exceptional universal value.

A great impact, indeed - but what about all the pain that Mr. Marx's ideologies have caused, and the brutality they have inspired? “Capital,” along with “The Communist Manifesto,” have been used by revolutionaries around the world to justify barbarism. This was just as true for Vladimir Lenin and Josef Stalin in the Soviet Union as it was for Mao Zedong in China and Pol Pot in Cambodia.

The positive influence that Marxism had on the anti-colonial liberation movements of the 20th century did little to outweigh those atrocities. In the states of the former Eastern bloc especially, Marxism degenerated into validation for a totalitarian ruling class. Those leaders may have erected larger-than-life, concrete tributes to Mr. Marx and Mr. Engels, but their misrepresentation of the two thinkers' intellectual musings resulted in nothing less than misery, squalor and a lack of basic freedoms.

Of course, blaming Mr. Marx for what would happen later would be to engage in historical falsification. The same logic would lead one to place the burden of the Crusades, the Salem witch trials and recent pedophilia scandals in the Catholic Church at the feet of the four evangelists and the "good news" of the biblical New Testament. No rational person could possibly come to such a conclusion.

It would be infinitely more reasonable to assume that the Karl Marx, born in Trier, Germany, in 1818, who died in London in 1883, would have been more comfortable with the capitalism of the 20th-century West, than the socialism of the East.

Mr. Marx was at the forefront of the social struggles of his time but he was not a doctrinal nor an authoritarian type; he was a passionate scholar, seeking knowledge. The "eternal truths" of the then-socialist order would have been an abomination for him.

In fact, Mr. Marx even praised the capitalist system at times. And not just in his dispassionate, nuanced scholarly work, "Capital," but also in his later, more aggressive texts, such as the "Communist Manifesto."

Marx Global Debt Compensation

The bourgeoisie “has been the first to show what man’s activity can bring about,” he wrote. “The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.”

But he also understood capitalism, not as the ultimate goal of human development, but as a transitional phase to a more progressive society.

One of the most radical counter-positions to Mr. Marx was formulated more recently, by the American political scientist Francis Fukuyama. He predicted the "end of history" in 1992 after the defeat of socialism and the victory of democracy and the market economy.

By 2007, however, the global financial crisis - the effects of which are still being felt today - had made clear that Mr. Fukuyama's assertions were shaky. All of a sudden, the collapse of the global capitalist system as we know it no longer seemed out of the question. Such a dramatic outcome was only narrowly avoided by unprecedented government intervention, when billions of taxpayer dollars were diverted to failing financial institutions.

If this, and the end of the Soviet era, taught us anything, it is that nobody can predict the future. What was carved in stone yesterday could be irrelevant tomorrow. The only certainty is that there is no certainty - and certainly no such thing as determinism that will ultimately culminate in a free and equal, Communist-inspired society.

More than a quarter century after the fall of the Eastern bloc and a century and a half after "Capital" was published, we can ask: How can Mr. Marx's teachings be applied today? Where are the strengths in his analysis of capitalism? Where are the weaknesses?

One strength was in his understanding of labor as a commodity. To stay competitive, the capitalist producer must extract as much labor from workers as possible, and at the lowest possible cost. That means paying the worker as little as possible. The workers understand that their interest lies in preventing the that sort of exploitation and this eventually gives rise to a class struggle, according to Mr. Marx.

Mr. Marx was the first to recognize that the capitalist system is characterized not only by occasional crises, but by a systemic succession of highs and lows.

The net benefits of work done did not accrue back to society, he argued, rather the benefits went back to the capitalist – for example, the factory owner. The only thing the proletariat had of value was their ability to work, their labor. This was what differentiated working for wages and slavery.

To be sure, back in Mr. Marx's day, there were workers putting in 16-hour shifts and still not earning enough to make ends meet.

On the other hand, wage costs are only one of many expenses that companies have always faced. In his analysis, Mr. Marx largely ignored the fact that entrepreneurs bear a certain amount of risk when they open a business. Losses, as well as any potential profits, are carried by the owner. After all, there must be some incentive to investment, otherwise there can be no growth.

In the third volume of "Capital," Mr. Marx articulated an idea central to his life's work, the law of a "falling rate of profit." Basically, it means that as productivity increased due to technical innovation, a worker's relative value decreased - along with the likelihood that a capitalist could turn a profit. Competition drove capitalists to constantly try and undercut others with lower prices, in order to survive in a market economy. In the end, this tempered their own gains.

Mr. Marx wrote that these decreases could be stopped, but that at some point, companies would cease to invest because expected profits would simply be too low. The result: No more investment, plunging the entire economy into crisis.

Self-proclaimed Marxists are not the only people to subscribe to this theory. The long-standing, former head of the Munich-based Ifo Institute for Economic Research, Hans-Werner Sinn, considers Mr. Marx's theory of gradually sinking profits "highly relevant" today.

Indeed, the argument that the state must compensate for companies' lack of willingness to invest - by means of credit-financed government expenditure - is part of the standard repertoire in contemporary political and economic debate.

Mr. Marx's theory gained new relevance, according to Mr. Sinn, with the European Central Bank's negative interest rate policies.

"Capital's rate of profit has apparently sunk so low that companies can only be persuaded to invest, by practically throwing the money at them," Mr. Sinn said.

Another one of Mr. Marx's undisputed legacies is his role as a pioneer of cyclical analysis. He was likely the first to recognize that the capitalist system is characterized not only by occasional crises, but by a systemic succession of highs and lows. Mr. Marx was pointing to the short-term and long-term patterns decades before they became standard in cyclical analysis.

Mr. Marx was also the first economist to clearly predict that in the not-so-distant future, large corporations would dominate entire sectors. In the first volume of "Capital," he wrote of the conglomeration of many smaller entities into larger, all-encompassing ones. Although the economy up until 1867 was still characterized by countless smaller enterprises, Mr. Marx had already suggested that capitalism was conducive to oligopolies.

History has proved him right.

Researchers at the Swiss Federal Institute of Technology in Zurich published findings in 2011 in which they identified just 147 companies, most of which were financial groups, that they said controlled nearly 40 percent of the value of all multinational corporations. Since that study was published, there has been even more consolidation.

Marx GDP International Dollar

Mr. Marx wasn’t right about everything though. Whatever happened to his prediction that the “forces of production” – what Mr. Marx defined as factories, raw materials and labor – would one day smash the relations of production, defined as the relationship between those who own the means of production and those who do not? Or the grand, revolutionary role Mr. Marx ascribed to the proletariat?

Neither have seemed to come to fruition. If there is still a specter haunting Europe - or other parts of the world, for that matter - it's no longer the specter of Communism, but the specter of right-wing populism.

Back in his day, Mr. Marx had no trouble illustrating his theory. Men worked from the early morning until late at night; there were children laboring and half-starved widows who barely managed to survive.

However, the future expansion of the capitalist system, at least in the Western world, didn't come at the cost of workers. On the contrary, it brought relative prosperity for the masses.

Marxist apologists who try to defend Mr. Marx's impoverishment theory today by arguing that exploitation and unhealthy working conditions have simply been exported to countries like Bangladesh seem like they're grasping at straws. Working conditions in the textile factories of Bangladesh are bad - that's beyond dispute - but it's not a fundamental fault of capitalism.

In his analysis, Mr. Marx focused on mature, capitalist societies - not developing or emerging countries. But even in these countries, once they are integrated into the global capitalist production chain, wages tend to rise, not fall - although some would say too slowly. The best example of this is in the People's Republic of China.

Karl Marx is perhaps one of the most controversial historical personalities of all time, but that's because he's so readily misrepresented. An economist, philosopher, journalist and revolutionary, Mr. Marx would have had little patience for anyone who had the hubris to uphold his theories as if they were ecclesiastical dogma.

Contrary to what many people believe, Mr. Marx wasn't that boring. He wasn’t some insufferable know-it-all. In fact, according to his most contemporary biographer, Franz Mehring, he was often the life of the party - "always a cheerful and witty companion” who liked the ladies as much as he enjoyed a good bottle of wine. Mr. Marx may have been immortalized with concrete statues and fans may hold his theories up as the one true source of economic enlightenment, but the man himself had no such illusions.

Mr. Marx was a thinker, not an ideologue, and he was open to criticism and other points of view. He once famously remarked, with regard to the considerable following that he had accumulated in France: “All I know is that I am not a Marxist."

Despite his criticisms of the inhumane labor conditions of 19th-century European industry, he believed it possible that the working class could achieve its goals peacefully. In 1872, Mr. Marx said in a speech in the Netherlands: "We are aware of the importance that must be accorded to the institutions, customs, and traditions of different countries; and we do not deny that there are countries like America, England (and, if I know your institutions better, I would add Holland), where the workers can achieve their aims by peaceful means."

In retrospect, Mr. Marx's commitment to the rights of the workers deserves admiration and respect. With regard to the mass-scale poverty and dramatic exploitation that were rampant at the time he wrote "Capital," one may well conclude that Mr. Marx was on the right side of history.

After a long illness, Karl Marx died in his armchair in his London apartment in 1883, aged 64. Broke until the day he died, his benefactor Mr. Engels had to spring for the funeral.

"On the 14th of March, at a quarter to three in the afternoon, the greatest living thinker ceased to think,” Mr. Engels said in his eulogy for his friend at Highgate cemetery. “Just as Darwin discovered the law of development or organic nature, so Marx discovered the law of development of human history."

 

Michael Brackmann is an editor with Handelsblatt. To contact him: [email protected]