The Marxian Failure and Legacy

We saw that that notion of superabundance that informs his communist utopia is incoherent in principle, and that means that distributive conflict is endemic to human society no matter how much wealth there is. And some principles for the distribution of income and wealth are going to have to be argued about and defended regardless of what is produced in society, or what could be produced in society.

The second failure of Marxism is well known, but we should, nonetheless, mention it, which is that his historical predictions turned out to be hopelessly wide of the mark. Not only was he wrong in 1830 and 1848 when he thought that communist revolutions were about to sweep through Europe. They were both (a) not communist and (b) quickly reversed, in any event, within a couple of years.

His larger historical predictions were also wrong. He thought communism would come, socialist revolutions, for reasons that you now know because we've worked through the macro theory. He thought that socialist revolutions would occur in advanced capitalist systems that had become uncompetitive because of the replacement of competitive capitalism with monopoly capitalism, and in fact where we saw revolutions bearing the communist label was in peasant societies: in Russia, and in China, or in Eastern Europe in countries where it was actually more or less imposed from the outside by the Soviet Union after World War II. We didn't really see any society go through the sort of path Marx was thinking of in his larger teleological theory of history, namely from feudalism, to capitalism, to socialism, to communism. It simply didn't happen.

And as the reversals of the revolutions of 1830 and 1848 remind us on a smaller scale, Marx's bigger idea that there's some purpose or direction to history seems questionable by the first decades of the twenty-first century. History doesn't go in a single direction, and this is a theme to which we will return, but you can see movements toward more egalitarian systems and then movements away from egalitarian systems. You can see democracy created and then you can see it collapse into authoritarianism, so that there isn't a single teleological or directional focus of history of the sort that Marx was looking for.

So on the big predictions, Marxism doesn't look very good from the vantage point of the twenty-first century. But some of his smaller predictions were also wrong in ways that in some respect is more interesting for our purposes, and so I'm going to go back through some of his arguments and focus on things that were wrong with those arguments that we can, nonetheless, draw some interesting conclusions about as we go on our way in examining the moral foundations of politics.

So if you'll recall from Monday's lecture, Marx's macro theory was an invisible hand theory like Smith's, except it was a malevolent invisible hand whereas Smith's was a benign invisible hand. And one element of it was the argument about the potential for liquidity crises, that there would be the possibility that people would horde money, that money would stop flowing through the system, and the system would thereby become sclerotic.

It is the case that capitalist systems have the potential for liquidity crises, but one of the things Marx greatly underestimated was the capacity of capitalist states in capitalist societies to address things like liquidity crises and other things as well, we'll see. It's almost as if he didn't really take it seriously when he and Engels said, in The Communist Manifesto, that the state in capitalist society is the executive committee of the bourgeoisie. He underestimated what the state could actually do to preserve capitalism.

A good example, in the early years of this system was a huge liquidity crisis in Mexico where the whole Mexican economy was on the verge of complete collapse, but the western governments, led by the United States, put together a fifty billion dollar package to pump liquidity into the Mexican economy until the crisis was over, and they succeeded. And so we didn't see the kind of collapse in the Mexican economy that that liquidity crisis had the potential to create. So the argument about the potential for liquidity crises is valid, but we have no particular reason to think they can't be managed once the sources of liquidity crises are understood, and governments have the levers available to them that were made available to the Mexican government during the Clinton Administration in the U.S.