Marxian Political Economy in the Cold War, 1945-91

Most of the significant developments in Marxian political economy in the first two decades after the war came from Western Europe and, to a lesser extent, the United States. Important work was also done in Japan, where Kei Shibata had made impressive contributions in the 1930s and the postwar period saw the emergence of the idiosyncratic and largely non-transferable Japanese Marxism of the Uno School.

Nothing of any consequence emerged in this period from the Soviet Union or from most of its eastern European satellites, although Poland, where Kalecki returned in 1954, was something of an exception to the rule. An influential study by the Frankfurt School philosopher Herbert Marcuse, now living in the United States, stressed the magical and ritual elements in Soviet Marxism (Marcuse 1961). The moribund nature of Stalinism was confirmed by the way in which even its intellectual sympathisers in the West took increasingly heretical positions on questions of political economy. Maurice Dobb, for example, attempted a marriage between Marx and Marshall; Sweezy preferred Mao’s China, and later Castro’s Cuba, to the Soviet Union; and, rather later, Ian Steedman sought to replace Marx’s theory of value with that of Ricardo. The Communist authori­ties did make one valuable contribution, with the publication (at least before 1991 at greatly subsidised prices) of the collected works of Marx and Engels, first in German and then in other European languages.

Most important was the appearance of Marx’s early writings, above all the Economic and Philosophical Manuscripts (1844), and other major unpublished work, including his Grundrisse (1857) and Theories of Surplus Value (1862-63). These writings were a very powerful influence on the distinctively Western variety of Marxism that emerged after 1945 (Anderson 1976). They highlighted the Hegelian influence on Marx’s own think­ing, both in his youth and later, as he prepared to write Capital, and had a profound impact on many Western Marxists. It was not always a benign influence, since it tended to encourage a dogmatically essentialist interpretation of Marxian political economy, especially with respect to crisis theory. Since the tendency for the rate of profit to fall was an essential feature of capitalism, the Hegelian Marxists maintained, it could not be overcome, and therefore capitalism itself could not be seriously reformed. This easily transmuted itself into a fatalism reminiscent of the orthodox Marxism of the Second International, no less debilitating for now being confined to revolutionary Maoists and Trotskyists. Later, once it became apparent that capitalism was here to stay, essentialist Marxism proved a popular road to conservatism and neoliberalism.

This was only one strand of Western Marxism, which was also characterised by a strong reaction against narrowly economistic thinking that minimised the role of social and political institutions, of ideology and values, in the evolution of the capitalist mode of production. Western Marxism was characterised by a pronounced shift in theoreti­cal concerns, away from economics narrowly defined and towards philosophy (again, see Anderson 1976). The Frankfurt School was an important influence after 1945, as (rather later) were the French regulation school and proponents of the social structure of accumulation in the United States.

Earlier theories of imperialism continued to influence Marxian analysis of the prob­lems facing the poor, backward or under-developed countries of the Third World. The most important single text was Paul Baran’s Political Economy of Growth, which was broadly in the Leninist tradition but also contained some notably unorthodox themes, above all the new concept of economic surplus. Baran defined the actual surplus as the difference between current output and current consumption; the potential surplus was the difference between potential output and essential consumption (Baran 1957: 132-3). These concepts were derived from, but not equivalent to, the conventional Marxian notion of aggregate surplus value. Baran used them to criticise advanced capitalism for its propensity to waste a large proportion of the potential surplus, both because actual output was almost always well below its potential level and because actual consumption was invariably much larger than essential consumption.

These ideas underpinned his approach to development economics. Despite the deep and widespread poverty, Baran noted, poor colonial and ex-colonial countries always produced a very substantial (actual) economic surplus; if they did not, the peasants would be unable to pay rent to the landlords. However, this actual surplus was much smaller than the potential surplus, and it was largely wasted - on inessential consump­tion by landed elites, and through being siphoned off by the advanced capitalist countries by means of naked plunder, colonial taxation, super-profits from overseas investments, and unequal exchange in international trade. Formal independence, Baran argued, made little or no difference to this massive process of international exploitation, which was responsible for perpetuating economic backwardness.

The political implications of surplus transfer were profound. It explained both the passivity of the working class in the United States, which had been bought off by a small share in the proceeds of imperialism and constituted a sort of super-aristocracy of labour, and the revolutionary potential of the proletarian and (especially) the peasant masses in the colonial and ex-colonial territories, which really did have “nothing to lose but their chains”. It also gave the world as a whole a revolutionary subject, which was palpably lacking in Sweezy’s earlier work. However, it gave no cause to expect a revo­lutionary upsurge in the advanced capitalist countries, where all classes were benefiting, to a greater or lesser extent, at the expense of “the wretched of the earth”. According to Mao Tse-tung and his supporters, by the 1960s the Soviet Union itself had become an important part of this exploitative labour aristocracy.

Marxian reactions to the remarkable and unexpected success of the advanced capital­ist economies during the Golden Age (1945-1973) were mixed. Had advanced capitalism changed so fundamentally that earlier crisis theories needed to be radically revised? This again raised the question of the relationship between Marx and Keynes. If undercon­sumption was the fundamental contraction of capitalism, and if the social democratic reforms inspired by Keynesian macroeconomics had overcome it, then perhaps the system was no longer seriously crisis-prone.

The regulation school and social structure of accumulation theorists took a rather similar line. They claimed that, in the new “Fordist” stage of development in the advanced capitalist countries, political and social changes had overcome the earlier proneness of the system to underconsumption. The acceptance of collective wage bargaining by trade unions had kept real wages increasing at roughly the same rate as labour productivity, while the big expansion of the welfare state after 1945 had introduced built-in stabilisers that prevented effective demand from collapsing when a crisis broke out (Boyer 1990; McDonough et al. 2010). These essentially revisionist ideas had a profound influence both on European social democrats and on the reformist Eurocommunists who, by the early 1970s, controlled the Communist movement in several nations, including Italy and Spain.

Three objections were raised against them. First, underconsumption was not the only, or the most important, economic contradiction of capitalism. Second, the sup­posed reform of the system was itself contradictory, and therefore unstable and tran­sient. Third, to the extent that underconsumption had been overcome, it was through quite different and much more objectionable mechanisms than those advocated by the Keynesians. The first criticism either relied on the Capital volume III falling rate of profit theory or drew on Marx’s scattered remarks in volume I about the threat to profits posed by the sharp fall in the reserve army of the unemployed in any strong boom.

The third objection came from Baran and Sweezy, in their very widely read book, Monopoly Capital. Here they proposed a law of the rising surplus, according to which both the actual and the potential surplus tended constantly to increase as a proportion of both potential and actual output. Large oligopolistic corporations were continually reducing their costs through technical improvements to the processes of production, but since tacit collusion prevented prices from falling the result was constantly growing profit margins. The growing surplus was clear evidence of the chronic realisation problem faced by advanced capitalism, but also reflected the deeply objectionable ways in which it had been overcome. The surplus had been absorbed through rising consumption and invest­ment expenditure by capitalists, increasing advertising and other marketing expenses, the sales effort, growth in civilian government expenditure, military expenditure and impe­rialism. To the extent that none of these outlets proved sufficient, they concluded, there was a constant danger of economic stagnation in monopoly capital. In practice, they claimed, militarism and imperialism could not offer a permanent cure for stagnation, but their arguments are not entirely convincing. Neither is their blunt rejection of any state capitalist, social democratic or welfare state alternatives to stagnation, even though in the mid-1960s these could be observed, and seemed to be operating quite successfully, in much of Northern and Western Europe. They were on much firmer ground in condemn­ing the irrationality of a system that relied so heavily upon waste; in demonstrating the dependence of monopoly capital on racism, alienation and the fetishism of commodities; and in attacking “the emptiness, the degradation, and the suffering which poison human existence in this society” (Baran and Sweezy 1966: 348-9).

There was an implicit Kaleckian macroeconomic model in Monopoly Capital, which yet again posed the question of the analytical relationship between Marx and Keynes. One possible conclusion was that capitalist economies were precariously balanced on a knife-edge between low wages, which led to underconsumption, and high wages, which caused a profit squeeze. Reform or no reform, the system thus remained fun­damentally unstable. Some post-Keynesians had strong Kaleckian sympathies and were left social democrats or Eurocommunists in politics. However, a rapprochement between Marxians and post-Keynesians faced some significant obstacles, not least the Marxians’ inability to come up with a convincing theory of money and credit. Marx himself had anticipated the endogenous money approach that was being asserted, a century later, by post-Keynesians such as Nicholas Kaldor in their critique of monetar­ism, but he never succeeded in freeing himself from a commodity-money approach that saw the value of money (the inverse of the price level) as being determined by the labour value of gold. Non-commodity money in the form of paper money and bank deposits were merely “tokens” for gold, their value depending entirely on how many units were issued per ounce of gold. This led straight to the quantity theory of money in everything but name (Nelson 1999).

In the highly charged political atmosphere of the late 1960s and early 1970s, all these issues were very widely discussed by students and younger academics, not all of whom were willing to identify themselves as Marxists of any description. Often the less exclusive and more ambiguous label of radical economics or radical political economy was adopted, as it was by the founders of the Union for Radical Political Economics (URPE), established in the United States in 1968. This was a period in which nothing was sacred, including at least some of the fundamental principles of Marxian political economy.

One such principle was the labour theory of value. The increased interest in the Hegelian roots of Marx’s thought led to a reinterpretation of the qualitative aspects of value theory (Faccarello 1997). There was also continuing discussion of the quantitative aspects. Marx had claimed that the transformation problem affected only individual values and individual surplus values. In aggregate, he insisted, the sum of values equals the sum of prices, and the sum of surplus values equals the sum of profits. But these two propositions are true only under very special circumstances: the “borderline” or nume­raire commodity, with an organic composition of capital equal to the social average, must be produced by means of production which themselves have an average organic composition, and so too must their means of production, and so ad infinitum. The “new solution” proposed in the 1980s by Gerard Dumenil in France and Duncan Foley in the United States reformulated the invariance conditions, so that they applied only to the net product and to variable capital, but this carried with it a different set of problems; most obviously, the rate of profit was not unaffected by the transformation process (Howard and King 1992: 276-8).

Piero Sraffa’s important rehabilitation of Ricardian economics, published in 1960, was silent on these questions (as on many others), but eventually a former student of Sraffa’s, Ronald Meek, discovered that it offered a solution to Marx’s problem: Sraffa’s standard commodity was, in fact, the borderline commodity that Marx had been looking for (Meek 1973). Unfortunately, this also pointed to the irrelevance of the entire dis­cussion. Sraffa had provided a rigorous model of profits and prices of production in a competitive capitalist economy without making any reference to either labour value or surplus value. Thus the principle of Occam’s razor could be invoked against Marx, as it soon was by Steedman (1977). A theory of value founded on the objective conditions of production rather than on the subjective preferences of individuals did not require that any reference be made to labour values, Steedman claimed, and the existence of exploitation could be established independently of the notion of surplus value. The sub­versive nature of Sraffa’s work had already been noted by Italian theorists like Claudio Napoleoni (1975), and also by Colletti, who argued that it “implies the demolition of the entire foundations of Marx’s analysis” (Colletti 1974 [2011]: 142).

Even more heretical were the Analytical Marxists who, as the name implies, made a conscious effort to apply the standards of (Anglo-Saxon) analytical philosophy to Marxism, and to eradicate Hegelian influences, or at least Hegelian modes of expression, from Marxian thought. If nothing else, this improved the clarity of the arguments and gave rise to some valuable work, especially Gerry Cohen’s reformulation of the material­ist conception of history (Cohen 1978). Other Analytical Marxists went too far, however, when they adopted a strong version of the principle of methodological individualism and combined it with the theory of rational choice, taken directly from neoclassical econom­ics. Rational Choice Marxists like Jon Elster and John Roemer claimed that all proposi­tions in Marxian political economy must be expressed in terms of (that is, reduced to) statements about the maximising behaviour of rational individuals. This required a substantial revision of the theory of exploitation, with class antagonism between capital­ists and wage-labourers largely disappearing from the analysis. The legacy of Analytical Marxism remains disputed, but few have been convinced by its insistence of the need to provide microfoundations for Marxian economics (Veneziani 2012).