“Marxian exploitation is the exploitation of people’s lack of understanding of economics.”
Robert Nozick, Anarchy, State, and Utopia
The impetus for this post was provided by two graduate students here at the University of North Florida, Doidos and Solta (not their real names). In conversation with Doidos and Solta, I was made aware that both were rather sympathetic to Marxist political philosophy. (In fact, on more than a few occasions, Solta even claimed to be a Marxist.) Despite their proclamations of capitalism’s “exploitative and oppressive structure” and their palatable antipathy toward the economic system that permits them the luxury of academic pursuit, it occurred to me that neither Doidos nor Solta knew a thing about Marxian economic theory. E.g., they could not for the life of them provide me with a coherent encapsulation of Marx’s conception of surplus-value, use-value, or exchange-value, all of which are necessary for his theory of exploitation. I could only conclude that, for them, “exploitation” and “oppressive” were indicative of a facon de parler rather than an understanding of a political-economic theory. Therefore, it is my hope that both Doidos and Solta read this post (though I am confident that neither will) and listen to the accompanying lecture. Even if they dismiss the critiques of Marx contain herein, perhaps they will learn a bit about their patron saint’s economic thought.
In his famous four volume treatise on political economy, Capital, and his earlier pamphlet, Wage Labour and Capital, Karl Marx claims to have uncovered capitalism’s fundamental “laws of motion” and attempts to show that the capitalist mode of production is, essentially, exploitative. Per Marx, capitalist exploitation will inexorably prompt crises under whose weight the capitalist system will collapse and from which the proletarian revolution will eventually come. As he states succinctly in the Communist Manifesto:
“The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie, therefore, produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.”
The soundness and validity of the economic analysis in Capital and Wage Labour and Capital is imperative, in that, without it, the Marxian theory of exploitation and by hypothesis the so-called inevitable proletarian revolution become vacuous theoretical constructs. In nuce, without his economic theory, the entire Marxist program is impotent. Naturally, then, the question becomes: Is the analysis in Capital (1) sound- that is, does it cohere with known market phenomena- and (2) valid- that is, is it neither inconsistent nor fallacious?
Unfortunately for Marx, his analysis is neither sound nor valid. Indeed, he premises his theory of exploitation upon a defunct theory of value: the labor theory of value espoused by the classical economists. (It should not go without being noted that Marx borrowed heavily upon not only the economic theory of the classical economists, but also upon their sociological theory; this, however, may be deferred to another post.) Moreover, Marx’s analysis simply does not conform to known market phenomena. It is not for me, however, to elucidate Marx’s theoretical shortcomings, because I could say nothing that has not already been said (however, I will note two items below). In the 1880s and 1890s, Eugen von Bohm-Bawerk published Capital and Interest (the first volume in 1884 and the second volume in 1889; the third volume followed posthumously in 1921) and Karl Marx and the Close of His System (1896), wherein he shows, in a rather careful and incisive analysis, that Karl Marx not only failed to uncover capitalism’s “laws of motion” (to be sure, he was largely ignorant of the workings of the free market), but also evidenced an astounding amount of intellectual legerdemain: at various points in Capital, Marx employs circular reasoning, begs-the-question, and imprecisely defines and then freely uses many terms in order to derive the desired conclusion.
What may be worse, Marx willfully neglects evidence that seems to confound his analysis (I have in mind here two examples [there are, of course, many more]: (1) the fact that between 1780 and 1870, real wages, and by extension the standard of living, for English laborers increased appreciably [Floud and Johnson, 2004; Mokyr, 1999; Lindert and Williamson, 1983; Crafts, 1985; Ashton, 1954]; and (2) the value of commodities not produced by labor, such as diamonds, production processes, organizational plans, etc. [to the latter, (2), the idea is quite contradictory to the Marxian labor theory of value when one considers that labor does not give value to diamonds, rather diamonds give value to labor].)
In the lecture linked to presently, Dr. Richard Ebeling, currently professor of economics at Northwood University and former president of the Foundation of Economic Education, first presents Karl Marx’s theory of value and exploitation and then Bohm-Bawerk’s criticism:
Ashton, Thomas S. “The Standard of Life of the Workers in England, 1790–1830.” In Friedrich A. Hayek, ed., Capitalism and the Historians. Chicago: University of Chicago Press, 1954.
Crafts, Nicholas F. R. British Economic Growth During the Industrial Revolution. New York: Oxford University Press, 1985.
Floud, Roderick, and Paul Johnson, eds. The Cambridge Economic History of Modern Britain. Vol. 1: Industrialization, 1700–1860.Cambridge: Cambridge University Press, 2004.
Lindert, Peter H., and Jeffrey G. Williamson. “English Workers’ Living Standard During the Industrial Revolution: A New Look.” Economic History Review 36 (1983): 1–25.
Mokyr, Joel, ed. The British Industrial Revolution: An Economic Perspective. Boulder, Colo.: Westview Press, 1999.