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Thursday, April 2, 2015


Stephen Darling writes:  "It would be great if you could pinpoint what's wrong with the positions of a Krugman and others,  like Jeffrey Sachs. It seems to me that they all want to improve the capitalist system along some kind of Keynesian and Rawlsian line (a more just and fairer society). However, as I see it, they have no clear theoretical understanding of what gives rise to such things as poverty and inequality, for instance (especially Sachs). Have they neither read nor understood Marx's theory of capitalist accumulation? I would love to read your thoughts about what's wrong with their accounts of capitalism."

Well, as readers of this blog know, it takes only one interested reader to set me off, so I shall try to say a few words in response.  Two warnings:  First, although I have read endless numbers of Krugman's blog posts, I have not read any of his books or scholarly articles, so caveat lector.  Second, although I have read a good deal of economics, including some dozens of books on various aspects of the subject, I have read very little in Krugman's field, namely Macroeconomics.  If these two confessions persuade you that I can have nothing of interest to say about Krugman, feel free to watch some old Jon Stewart shows, which will almost certainly yield more enlightenment, and without doubt more pleasure, than anything I may write.

Since I am going to explain why Krugman fails to satisfy, let me begin by praising him.  Krugman seems to me to be a genuinely intelligent economist who tries to take account of, and adjust his opinions to, the facts of the world economy.  He is a proud man, for all his folksy writing style, and he clearly believes he has come by his convictions in the way a scholar ought, by adjusting them to reality and acknowledging his mistakes.  I think he has earned the right to that pride, and I do not in any way fault him for it.  Furthermore, Krugman is politically progressive, by current standards, and he pretty clearly favors vigorous government action to reduce unemployment, raise wages, and reverse the sharp increase in income and wealth inequality.  If one asks what laws he would pass if he were king [so to speak], one is, I think, led to believe that he would impose sharply higher taxes on the wealthy, substitute universal health care for our present hodge-podge, drastically raise inheritance taxes, impose Elizabeth Warren-style controls on Wall Street, and in general move America toward some form of what used to be called Social Democracy.  Since virtually none of this is at all likely in the foreseeable future, Krugman is far to the left of the general political consensus in America at the moment.  What's not to like?

Krugman spends his working hours trying to understand such things as unemployment rates, interest rates, trade balances, flows of capital in and out of national economies, and changes in the gross domestic product, not only in America but in many other nations besides.  He views the world of nation-states as a laboratory in which state governments are testing different hypotheses regarding these matters, and from their successes and failures he draws conclusions of a general explanatory sort.  Lately, his attention has been focused on what happens to a national economy when the effective interest rate falls so low that monetary adjustments by central banks are ineffective [the so-called Zero Lower Bound.]  Krugman believes that he and those who think like him [Brad De Long, Simon Wren-Lewis, Joseph Stiglitz, etc.] have been essentially correct in their analyses and predictions of the past six or seven years, and he is scathing in his denunciation of those who, in his view, have ignored or denied the evidence to defend economic views championed mainly by conservatives here and abroad.  My completely untutored impression is that in this he is mostly correct.

I have on several occasions rather dismissively compared macroeconomics to the efforts by the prisoners in Plato's cave to predict the flow of shadows on the wall of the cave [see The Republic, 514a - 520a.]  Krugman strikes me as one of the shrewdest and most acute shadow-predictors in America today.  He clearly deserved the Nobel Prize in Economics, the highest honor for professional shadow-watchers.

There is a great deal to say about why I find this approach to economics unsatisfactory, and as I am in the midst of teaching a course on Capital, these thoughts are uppermost in my mind.  But rather than try in a blog post to recapitulate many hours of classroom lectures, let me simply ask a question that Krugman never asks in his blog posts and NY TIMES columns, and which perhaps he has never asked himself.  Why do we need capitalists?

We need labor.  Without it, nature would not be transformed purposefully so as to meet the needs and satisfy the desires of human beings.  Hence, we need laborers, for it is laborers who labor [I leave entirely to one side fantasies about robots.  Sufficient unto the day.]

We need capital.  Without it, we would still be running naked across the savannah picking up nuts and berries and scavenging for the leavings of predators.  We need tools and machines and skills and techniques, we need seed for the fields and raw materials for the factories.  We need to consume less than we produce so that some of what we can produce is available for the next round of production.  All of this is capital.  We need capital.

But why do we need capitalists?

Many wrong answers have been advanced by those seeking to justify the ways of capitalism.  I shall be happy to rehearse them another time.  There is an old Bert Reynolds movie, the name of which I have long since forgotten, in which he plays a man who comes out of the joint and travels to Miami [I think.]  When he gets to Miami, he seeks out a local mob boss, who asks him what he wants.  Reynolds says [this is from memory, so forgive me if it is a trifle vague], "I learned in the joint that there is always someone from whom you have to ask permission.  So I have come to ask permission."

Why do we need capitalists?  We need capitalists to give permission.

Capitalists own capital.  They do not, as capitalists, manage capital.  That is done by managers.  They do not as capitalists invent new products or devise new production techniques.  That is done by inventors and systems engineers, some of whom are very handsomely rewarded for their efforts [and God Bless, as Elizabeth Warren would say.]

Capitalists give permission to workers to use capital to transform nature so as to meet the needs and satisfy the desires of human beings.  In return for giving permission, capitalists charge an exorbitant fee called profit.  Why do capitalists get to charge this fee?  Because the entire legal, political, military, religious, philosophical, and artistic world backs them up.  If push comes to shove, they can call out the National Guard, but with a little skill, they can actually persuade the workers that their granting of permission [it is called giving a job] is an act of enormous praiseworthy generosity for which the workers should be eternally grateful.

If there were no workers, to whom would capitalists give permission?  If there were no capitalists, workers would not need permission.

What do I find unsatisfying about Krugman?  He has never, so far as I can determine, asked why we need capitalists?




Chris said...

This is the most startling thing I've heard you say (and I've been reading your work since approximately 2007):

"We need capital. Without it, we would still be running naked across the savannah picking up nuts and berries and scavenging for the leavings of predators. We need tools and machines and skills and techniques, we need seed for the fields and raw materials for the factories. We need to consume less than we produce so that some of what we can produce is available for the next round of production. All of this is capital. We need capital."

Let me concede these obvious points. We need labor. We need ingenuity. We need to allow people to develop themselves and technology, and we need to interact with technology as laborers, producers, and consumers. And I grant your question: why do we need capitalists? (we don’t!).
But why do we need capital!? Your own example shows we don’t need it, unless there’s some form of hostility towards previous forms of human cooperation that existed in the savannah? Of course that’s not the only scenario where non-capital societies have flourished. Even a Feudal society doesn’t have ‘capital’. So why do we need capital? More importantly, without capitalists, how could we even have capital? Capital is – as Marx rightly points out – value in motion, capable of further valorization, and our form of value is predicated upon a particular social relation: capitalists owning the means of production, and workers selling labor power. If we remove one of those necessary conditions (capitalists), how and why should/would we still have capital?

If you want to retain capital, then you must accept that you want to retain ALL the nasty baggage that comes with it. Alienation. Continued crises. Reification. Objectifying people. Treating each other as means to an end. Being calculative instead of empathetic. Allowing ample room for stark inequality. Etc.

But if you define capital as just making things for later, that strikes me as a wholly inadequate definition, and in that case NO SOCIETY has ever existed without capital. But if EVERY form of production is basically capital contingent, than capital as an explanatory phenomenon in unique economic systems is essentially useless. And in that case you might as well throw out all three volumes of Das Kapital.

I’m perplexed. So perplexed.

Robert Paul Wolff said...

Chris, Chris, get a grip. I am criticizing Paul Krugman, so I am using terms as he uses them. If it makes you any happier, you can call this dialectical. You are writing not like a student of society but like a sectarian of some religion who is enraptured by his holy terminology. If you refuse to use language in a way that is comprehensible to those against whom you are arguing, then you end up talking to yourself and your little band of the faithful. I have no interest in doing that. You want to quote Marx to Paul Krugman? He scarcely knows who Marx is.

Chris said...

Let me apologize profusely if I upset you. That's never my intention, but I lack some of the basic virtues of social interaction.

But I do think that even from a Krugman point of view, capital can't just be some excess thing sitting around for later use. So I do think the question remains, if we can ask:
Why do we need capitalists?
We can also ask why do we need capital?

And another variation of this question is:
If we accede that will get rid of capitalists, how could we even have capital? Isn't the former a necessary condition for the latter?

I wasn't trying to make this a sectarian issue (until the second to last sentence I wrote), I was trying to make a point about the necessary relationship between capitalists and capital, and how we can't get rid of one and keep the other.

Robert Paul Wolff said...

Look, suppose come the revolution [as we used to say when I was a boy] we shoot all the capitalists [just kidding.] What is left is factories, tools, raw materials, skills, computer networks, etc etc etc, also money and other financial instruments, which will not simply evaporate. So now we need to decide which productive activities to keep engaging in and which, if any, to cease, and also how to reallocate resources -- for example, reallocating building materials to build fewer McMansions and more well-designed dwellings for workers. Now, if you wish then to stop calling all these resources "capital" that is fine, but we will need them resources, and we will need to craft new ways of allocating them and making decisions about allocating them regardless of what you call them. If Marx is correct [Preface to the Contribution to the Critique of Political Economy] as I think he is, these new ways will have to "grow in the womb of the old" before such a revolution is possible. No?

Chris said...

This is good. Your post helps to clarify where the agreements and disagreements rest. I accede all your points except
“What is left is … money and other financial instruments”.

Maybe you’ll call me sectarian or religious for this – and I’m not sure that’s fair – but I still think money and financial instruments are measuring some kind of value. We seem to disagree on what that value is determined by (I still accept SNLT), but I am not of the mindset that those two things will be picked up and utilized in the post capitalists society.

If the flow of capital is M-C(LP/MP)…P…C’-M’, it’s those insidious surplus values we want to rid to do away with exploitation and other factors. And part of that requires getting rid of M. Why can’t the circuit of social production just be P…C…P of some kind?

If we reform society to be a P…C…P society, then couldn’t we say capital is gone? And couldn’t I then press my question to you again: why do we need capital? Why are we picking up wages and financial instruments?

I prefer the Critique of the Gotha Program, where it’s made clear that we need to kill the law of value, and remove the wage form of social compensation. Otherwise we leave too much room for capital, and capitalists, return.

stephendarling said...

Dear Robert,

Thanks for your splendid and extensive reply. The last chapter of Marx's Capital, Vol. 1, amply explains through the tale of 'Mr. Peel' how capitalists need 'free' workers under capitalism but workers don't need them in order to reproduce themselves. Thanks for the links, Chris.


Magpie said...

"Look, suppose come the revolution [as we used to say when I was a boy] we shoot all the capitalists [just kidding.] What is left is factories, tools, raw materials, skills, computer networks, etc etc etc, also money and other financial instruments, which will not simply evaporate".

So that non-Marxist readers can catch their breaths: think of the Rapture!

Or of a mass migration to meet John Galt.

Magpie said...


"Many wrong answers have been advanced by those seeking to justify the ways of capitalism. I shall be happy to rehearse them another time."

Actually, I am very interested on this subject, as you may have noticed from my own blog. Your views on this would be greatly appreciated.