All entries for Monday 24 March 2014

March 24, 2014

Marxism: My Part in Its Downfall

Writing about web page http://warwick.ac.uk/markharrison/comment/economics_of_capitalism_ver_2.pdf

The news has been so grim on many fronts that I begin to long for something a little lighter. To help things along, here is a story I began to write a long time ago, but never finished until now. It tells how it happened that in 1976 I published a 20,000-word pamphlet called The Economics of Capitalism.

Another stimulus to go back to this was that I got drawn into a discussion about Marxian economics. Not everyone with whom I was debating with would give me credit that I knew much about Marxism in the first place. In that context I mentioned that one day I intended to put my pamphlet on line. Now, here it is -- in two versions. One is the original, scanned as images(therefore large: 30Mb). The other is OCR'd and so 99 per cent searchable(much smaller: 4Mb). (Or, if you insist, a few copies are still available in the second-hand market.)

In the searchable version I've taken care to conserve the original illustrations and page layout. The illustrations were by Richard Hill, whom I never met, so I never got around to telling him what I thought of them. Are you out there, Richard, or anyone who knows you? I just loved the illustrations as soon as I saw them, and I still do.

The origins of the pamphlet were like this. I joined the communist party in 1973. This was for reasons I've discussed elsewhere so I won't go into them here. I was soon drawn into various activities as a student and then as a young lecturer. It wasn't long before I met Betty Matthews, who ran the communist party's education department. This meant she was responsible for producing education material for the party members and their branches.

I certainly wasn't the party's only economist. Others, such as Maurice Dobb and Bob Rowthorn (Cambridge), Ron Bellamy (Leeds), and Pat Devine and Dave Purdy (Manchester) were of longer standing and greater eminence. Dobb was a world-famous scholar. I recall that the party had an economic advisory committee to consider its economic policies. I wasn't a member of that, and I've no idea who was on it, but probably some of these. Anyway, unlikely as it might have seemed at the time, somehow or other I was the one Betty persuaded (or maybe I was the one who offered) to write an economics pamphlet for the purposes of party education.

The previous material that was out there for party members was Sam Aaronovitch's Economics for Trade Unionists, published in 1964. In its time this was a solid introduction, and Sam was a good scholar, but Betty felt it needed updating. So I got to work and The Economics of Capitalism was the result. If you read the acknowledgements, you'll see I had some help, with comments and advice from Pat Devine (see above), from Betty Matthews and Bert Ramelson (see below), and also from Keith Cowling and Ben Knight who were sympathetic colleagues at Warwick. I remain grateful to all these people.

I'd like to break the narrative for a moment to say how much I valued getting to know Betty and meeting and talking with her (and her assistant Deanna, whose family name I've forgotten). Betty always seemed like a thoroughly cheerful person and a kind soul. According to Sarah Benton's obituary she was "unique in the communist world in having no enemies." I'm not surprised. Betty spent her childhood in Southern Rhodesia (Zimbabwe). I'd recently read Doris Lessing's account of a similar childhood. Lessing was sent to church, where the message was brotherly love, and then came out and saw the hypocrisy of the colour bar. She decided that the colour bar must be wrong. I asked Betty if her experience was the same. She laughed and said: "Oh, no. I decided that the church must be rubbish!" Anyway, I thought Betty was a good person and that made her hard to refuse.

As for the substance of what I wrote in the pamphlet, I'm not going to review my own work here. Anyone can read it and decide what they think for themselves. I'm just going to comment on a couple of aspects of the writing. One is about the history in it; the other is about the party and its sensitivities.

First, the history. One question I've sometimes asked myself is: Where on earth did I get the history from? There was a lot of freedom in writing without footnotes, and I am not sure I used that freedom wisely. When I re-read what I wrote then, the history now seems pretty slapdash to me. Probably it was a mishmash of stuff I half understood and borrowed from Dobb, Rodney Hilton, E. P. Thompson, and a few others that I've forgotten. They might not appreciate what I did with their work. I'm pretty sure that today I'd follow a different style of writing, with more respect for facts, including the ones that did not fit. Nowadays even my lecture notes have footnotes for everything.

In contrast to my cavalier approach to history, I tried to be careful with the economic facts. I even put in a statistical appendix.

Second, the party. As a young party member, and at the same time a professional scholar, I was always watchful and curious to find out whether at any point the party would start telling me what to write. I didn't know how I would react if that happened. I felt a commitment to the truth. I felt a commitment to the cause. Politics being what it was, I half expected that at some point these two commitments might clash, and I did not know how I would manage it if that came.

As it turned out, the only aspect of the pamphlet that anyone in the party (other than an economist) really cared about was how it would explain inflation and the role of trade unions. This was bitterly controversial in British society in the 1970s, and the issue was contested within the labour movement and even within the communist party.

Since the 1950s, successive British governments had taken the view that the cause of rising inflation was increases in wage costs, which arose from the excessive wage demands lodged by the trade unions. The appropriate remedy to inflation was therefore wage controls, voluntary or statutory. In recognition that wages were not the only cost of production (although the largest proportion in the economy as a whole), this became known as "incomes policy." From the 1950s through the 1970s, successive governments tried and failed to use incomes policy to control inflation.

At the time I was writing, the British economy was experiencing its greatest inflationary crisis. We didn't know it yet, but it would pave the way to Margaret Thatcher's historic 1979 election victory. Trade union power and wage pressure were huge issues. The "official" position of the communist party at the time, as far as I recall, was that inflation hurt the workers, but wage pressure was not the cause of inflation. A class struggle was in progress in which the organized workers were fighting the employers using the weapon to hand: wage demands, backed up by strike action. Price-setting was the weapon in the hands of the capitalist employers, so inflation was the counter-attack of the capitalist class. Anything that weakened wage pressure favoured the enemy.

This line was much debated. I've probably forgotten a lot of nuances that were important to others, so I'll speak for myself. My own view was something like this: There was a distributional struggle in progress. Suppose the initial distribution of the national income between wages and profits was 70 per cent to 30. The workers wanted to increase their share at the expense of the employers, and would try to achieve this by pushing up nominal wages. The capitalists wanted to raise profits at the expense of the workers, and would aim to achieve this by raising prices. As a result, the implicit claims on the national income would exceed 100 per cent. The workers wanted 75 and the employers wanted 35. If you added up 75 and 35 the sum was 110 percent, so the outcome would be 10 per cent inflation -- a self-defeating wage-price spiral.

Put like that, it was a non-monetary theory of inflation. Nowadays absolutely nobody believes you can understand inflation without thinking about money. Even then, the party's economists had surely all read Milton Friedman, who told us that inflation was "always and everywhere a monetary phenomenon." While we didn't buy this completely, we understood that inflation had to have a monetary dimension. For myself, I thought that the inflation process was contingent on some sort of government commitment to full employment. This was the commitment that enabled workers and employers to push up their incomes against market pressure. A later generation would call this the "soft budget constraint," a term that Janos Kornai developed to analyze Soviet-type economies. In capitalist Britain, the soft budget constraint meant was that the government's fiscal and monetary policies were being relaxed continuously to maintain real demand and keep down real interest rates, and this would also be an essential permissive condition of the inflationary process.

In the trade unions, many communists were not particularly keen on this line of argument. It seemed to give away too much to the idea that trade unions caused inflation. They wanted to say that the capitalist class was on the offensive and the wage struggles of the time were basically workers' self-defence. In other words it was capitalism that caused inflation, not the workers. In my view, even at the time, this was somewhat implausible. The share of profits in British GDP had been declining since the 1950s (and the contribution of domestic trading profits had fallen even faster) so wage militancy looked more offensive than defensive. On that basis, it was very hard to maintain that trade union militancy was not at all complicit in the inflation of the time.

In this context, there was a lot of focus on what my pamphlet should and shouldn't say about inflation. Betty Matthews told me I had to meet Bert Ramelson and talk it through with him. Bert ran the communist party's industrial department. He had played a key role in many episodes of the struggle of Britain's organized workers, most famously the seamen's strike of 1966 and the miners' strike of 1972. The last thing he and other communists involved in the trade unions wanted was that a publication by the party's own education department would be quoted in the media saying that striking for higher wages would end up hurting the workers.

My one and only meeting with Bert took place in Coventry railway station where we talked over a cuppa in the cafeteria off platform 1. I was nervous about it. Bert was a legend of the labour movement; I was a nice middle-class boy who had never done anything much outside school and college. I had the academic qualifications, but Bert had the steel that was tempered in the furnace of the class struggle. I could not anticipate how he would respond to me; I did not know what criticisms he might have, and I did not expect he would swallow them easily.

In fact, our conversation was amicable. I had insured myself to some extent by being even-handed: I wrote in the pamphlet that the causes of inflation were controversial, and I outlined various perspectives, and I suggested that they all contained some unspecified measure of truth. I also wrote that wage militancy was not enough to transform society; this was something that no one would have disagreed with, even then, although there would have been a lot of dispute over how and by how much it fell short. There were certainly those party members that behaved as if they believed wage militancy was 99 per cent of the revolutionary struggle -- at least.

Bert turned out to be concerned more with what I would write about the future of trade unionism than trade unions in the present. Tighter restrictions on trade union rights were in the air. The party was opposing them vigorously. In order to give credibility to the party's defence of unfettered trade union rights in the present, it was also party policy to promise that trade unions would continue to be free and independent, with entrenched rights, in the transition to socialism. Bert wanted me to make this clear.

The result was a passage that read:

Our path will encounter many problems. For example, in the process the state must acquire far more power than ever before. But we seek power for all working people, not for bureaucrats and civil servants. And in fact the struggle for democratic rights is an integral part of challenging the state power of monopoly and ultimately replacing it. Thus if the outcome is to mean more democracy, and not just more bureaucracy, the autonomy of the working class, and of its sectional mass organisations the trade unions, and of its allies, must be strengthened and extended. That is why the freedom of collective bargaining today is a guarantee for tomorrow.

For example, in a socialist economy, for the progress of society as a whole, one group of workers or another may sometimes have to be asked - not ordered - to moderate wage demands, or change jobs. But in a socialist state, for the first time, these processes will be open and subject to democratic control.

Today it may read like wishful thinking. It didn't at the time. at least, not to me; there was nothing there that it was hard for me to sign up to. Bert had been persuasive but not heavy handed or confrontational; he treated me very correctly and I did not feel that I had compromised anything in writing those words. Just in case, however, I concluded with a libertarian flourish:


The most important of society’s productive forces is the working class itself. The British working class today has skills, understanding and aspirations available to it as never before. Capitalist relations today hold back its development, and face it with low wages and stultifying labour discipline at work as the only alternative to unemployment. Beyond it lies the vision of a world in which “the free development of each is the condition for the free development of all”.

Anyway, the pamphlet was finished, went to the printer, and came out. I was very proud of it (and delighted by the illustrations, as I've said). What impact did it have? I've absolutely no idea. Looking back, I think it's remarkable (and not in a good way) that I never had any idea of how many were printed or sold or how widely it was used for its intended purpose, that is, for discussion as educational material. I think I did one or two meetings around the Midlands, based on the pamphlet, but that was all. For all I know, the rest of the stock was packed up and warehoused, or sent out to the branches where it was stored in cupboards up and down the country, and finally ended up in a hundred skips when the party branches closed down.

There's a final question that I'll pose: What would have happened to the British economy if that party programme had been implemented? It's not a completely idle question. In 1976 the late Tony Benn, then a government minister, put something pretty similar to the British cabinet as an alternative to the IMF loan that Denis Healey was after. It was rejected -- but what if it had been put into effect? How would the economic effects have worked out? Not well, I now imagine. Most likely the experience of Belarus or Venezuela would give a few hints.

The moment when my pamphlet appeared, as it happens, was just about the peak of popularity of Marxian economics in the English-speaking world. After that, everything went downhill. This should not be a surprise because the world of the 1970s was about to move strongly to the right. In 1979 Margaret Thatcher became British prime minister, and in 1980 Ronald Reagan was elected US president. Everyone moved on, including, eventually, me.

To prove my point, here's the evidence. This chart uses the Google Ngram Viewer to show the changing relative frequency of three terms that no one would ever use except in connection with seriously discussing Marxian economics: "monopoly capitalism," the "rate of surplus value," and the "organic composition of capital." The what? Yes, it's in my pamphlet.

And here is a link to the same chart in its native location, where you can play with it as you like.

As you can see, everything was going up until my pamphlet came out, and afterwards everything went downhill and never recovered.


I am a professor in the Department of Economics at the University of Warwick. I am also a research associate of Warwick’s Centre on Competitive Advantage in the Global Economy, and of the Centre for Russian, European, and Eurasian Studies at the University of Birmingham. My research is on Russian and international economic history; I am interested in economic aspects of bureaucracy, dictatorship, defence, and warfare. My most recent book is One Day We Will Live Without Fear: Everyday Lives Under the Soviet Police State (Hoover Institution Press, 2016).



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