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“Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws.”     Plato

July 21, 2010

Marxism And Libertarian Exploitation Theory

by Brad Warbiany

I tend to be a stickler for definitions and proper usage of terms. One of those that stick in my craw is the use of “Marxism” to describe a lot of systems that Marx wouldn’t have supported. Marx, as an intellectual, had quite a few pretty strong insights economically, but he had some social beliefs on human nature that led him down the wrong path. While I’m no Marxist, by ANY stretch of the imagination, I find myself sometimes defending Marx from the unfair criticisms. There’s enough about his beliefs that are fair to criticize that it makes no sense to add falsehoods.

The Marxist philosophy, as I understand it, can be boiled down into theories of exploitation. He dealt first with mankind’s defeat of feudalism. Feudalism is the exploitation of the masses by the aristocracy, where all property was owned by the traditional power elite, and the masses (subjects) were given pittance as reward for toiling for those masses. Marx viewed capitalism as the proper, and beneficial, opponent of feudalism. Capitalism offered levels of freedom for the masses that feudalism before it did not, but he believed that it created a new and different type of exploitation. Capitalism offered a more free exchange of labor for property, but there were typically two classes still — the capitalists and the workers. The capitalists had enough of a stranglehold on the means of production that they extracted a surplus from the workers; they paid them too low of a wage compared to the value* those workers produced.

Thus, Marx believed that while capitalism was a positive marker on the road of human social evolution, he didn’t believe it was the end point. Marx saw an end point where the “capitalist class” ceased to exist. At that point the “worker class” would own the means of production, and thus there would be no exploitation of the surplus value. The workers would retain this surplus. But Marx’s vision DID NOT include a totalitarian state to divide the spoils of production. He saw, rightly, that the state itself could easily be an exploitative entity, and thus the Marxist communist vision of society was really anarcho-socialism.

Marx saw that to break the capitalist stranglehold on the means of production, there would likely need to be a period of state socialism. The capitalist class was not willing to give up their surplus freely. They would need to be broken, and to do so an entity with the power to carry out that duty must exist — a state. Once the capitalists had been broken, though, he believed the state itself would wither away out of lack of necessity.

Marx made what I would consider to be three critical mistakes in his analysis:

  • Humanity has far too close of a relationship with property to function in an anarcho-socialist system.
  • The state, once breaking the capitalists, had too many perks to let itself “wither away”.
  • Much of his goals for workers “owning the means of production” are already beginning to occur within capitalism.

The first point is a bit of my own conjecture, but stems from Marx’s treatment of classes as classes rather than the more individualist libertarian treatment of classes as collections of disparate individuals. Marx saw the proletariat seizing the means of production and then finding harmonious sustainable ways to equitably distribute the fruits of such production. The analysis does not take into account individual goals, which is a very human desire to maximize gains for one’s self and one’s own. Humans are cooperative, but we are cooperative individuals. Cooperation can be sustained in a system of mutual benefit, but humans typically have a difficult time sacrificing for the collective over the long haul. Anarcho-socialism relies on such mutual cooperation (and sacrifice) in the absence of a coercive entity, and thus relies on human nature to be compatible with such a system. I do not believe human nature is so constituted — which, of course, is why I’m an anarcho-capitalist.

The second point has been demonstrated in nearly every society which has taken a serious stab at state socialism. The rulers become quite fond of being the rulers, and enjoying the material and societal perks of being at the top of the food chain. Rather than dismantling the exploitive class, they replace it with themselves. If faced with the choice of “withering away” or putting down their opposition by whatever means necessary, they usually opt for the latter. Lord Acton’s old adage about power corrupting holds sway.

Finally, Marx discounted capitalism’s ability for the working class to own the means of production without seizing it — they may merely buy a piece. American corporations don’t limit stock purchases to fellow robber-barons, they let any old average Joe with an E*Trade account have a piece. In 2000, America passed the tipping point, with 50% of households owning stock. The 401K is widely used as a wealth-building vehicle, and rather than discourage this, corporations compete as to how much of a matching contribution will be added. Further, larger corporations often have employee stock purchase plans where, at discounted rates, employees can buy directly into their own company. Modern economics is blurring the line between the “working class” and the “capitalist class”. But in the reverse of Marx’s prediction, it is the inclusion of workers into the capitalist class that is blurring the line.

Interestingly, a recent paper written by Ralph Raico of the Mises Institute (and printed by the Campaign for Liberty here) compares some of Marx’s writings on the exploitation of the state over the masses to those of classical liberals. Marx saw the potential for government to stand independent and against the interest of its subjects; one wonders why he thought a transition through state socialism to pure communism would ever work:

Every common interest was straightway severed from society, counterposed to it as a higher general interest, snatched from the activity of society’s members themselves and made an object of government activity, from a bridge, a schoolhouse and the communal property of a village community to the railways, the national wealth and the national university of France…. All revolutions perfected this machine instead of smashing it. The parties that contended in turn for domination regarded the possession of this huge state edifice as the principal spoils of the victor …under the second Bonaparte [Napoleon III] …the state [seems] to have made itself completely independent. As against civil society, the state machine has consolidated its position …thoroughly. [Quoting Marx from Raico's piece]

At the same time, classical liberal writers denounced the warmaking powers of government as tools of the elite and financial interests, operating on the backs of the masses:

The degree to which one finds the concepts of classes and class conflict used in this sense in 18th- and 19th-century liberalism, once one looks for it, is astonishing. To take two examples: this is clearly what Tom Paine is talking about in The Rights of Man, when he speaks of governments making war in order to increase expenditures; and what William Cobbett is getting at when he terms gold the poor man’s money, since inflation is a device utilized by certain knowledgeable and influential financial circles.

As [John] Bright put it:

The more you examine the matter the more you will come to the conclusion which I have arrived at, that this foreign policy, this regard for “the liberties of Europe,” this care at one time for “the Protestant interests,” this excessive love for the “balance of power,” is neither more nor less than a gigantic system of out-door relief for the aristocracy of Great Britain.”

Later in the century, Bright identified other classes as the promoters of imperialism. In the case of the British occupation of Egypt in 1882, Bright (who resigned from the cabinet on account of it) believed that the City of London (i.e., financial interests) were at work, and, according to his biographer, “he did not think that we ought to involve ourselves in a series of wars to collect the debts of bondholders or find new lands for commercial exploitation.” He agreed with his friend Goldwin Smith, the classical-liberal historian and anti-imperialist, who wrote him that it was simply a “stock-jobbers’ war.” This was long after Cobden had died, but the latter would doubtless have agreed. He once wrote: “We shall offer no excuses for so frequently resolving questions of state policy into matters of pecuniary calculation. Nearly all the revolutions and great changes in the modern world have a financial origin.

It is thus interesting that those today who would call themselves “Marxists” support the very oppressive governments that Marx himself derided, while attacking the classical liberal underpinnings of Adam Smith and the classical liberals, who were likely very influential to Marx’s own thought.

I have little love for Karl Marx and his theories. I do, however, have great interest in him. He has become a caricature of both the left and the right, celebrated or opposed for fictions about what he believed and espoused. As I’ve said, I think there’s a lot to teach about Marxism and its flaws as a theory. It offers the ability to further highlight the classical theories that led to Marx, and show why his “improvements” on said theories are bunk. But if the left equates Marx to Ghandi, and the right equates Marx to Stalin, we’re not going to get anywhere.

* One critical flaw in Marx, and many writers of the time, is the entire Labor Theory of Value, from which his belief in exploitation springs. He saw a difference between the price commanded on the market and the price paid to the laborer in wages as an exploitative surplus. It is a critical mistake, and which must be mentioned, but is tangential to the purpose of this post.


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5 Comments

  1. [...] Marxism and libertarian exploitation theory [...]

    Pingback by Words mean things, “Marxism” edition « Blunt Object — July 21, 2010 @ 12:37 pm
  2. Great write-up. I sharply differ with your view of the concept of common corporate ownership, when it’s applied. Technically Joe Blow owns a common share(s) of Corporation XYZ, but in his budget, not the actually valuable preferred shares. He is not privy to corporate inside news that may crash the common share value. Compared to old style pensions, 401(k)s have recently performed terribly and the stock market sits and a level seen in 2000. It is roughly at the same level as it was a decade ago, while many see the stock getting ready for another scare.

    Not only that, but also the era of the 401(k) “lifeplan” cleverly instills, at times, irrational loyalty of the working people to the larger corporate system. It is that system that I feel is cancerous to general society in several ways. In general, I do not feel that this system is, in any meaningful way, including “the working class” into “the capitalist class.”

    On Marx himself, I admire his stance on the carrying capacity of human populations vs. Malthus. Marx professed that human ingenuity can always solve a resource dilemma through technology while Malthus asserted that humanity is essentially no different than bacteria in a petrie dish.

    On “Marx The Ideal” vs. “Marx The Reality In Practice” yeah that’s spot on. But what else would you expect from an ideal in practice? Capitalism itself is an idealized economic system of supply and demand, yet in practice as corporate systems consolidate over a dozen generations or so, supply/demand is distorted almost beyond recognition and fascism results.

    Comment by Procopius — July 21, 2010 @ 2:54 pm
  3. Procopius,

    Excellent response. I understand where your opinion is differing from mine.

    I would point out that I don’t think the value of preferred shares from an “ownership” perspective are all that useful unless the owner has enough knowledge to meaningfully exert control over the company. As I’ve mentioned many times, I’m not a fan of democracy, because I don’t really believe that the average voter has the incentive or the understanding to set policy. I suspect the same is true of corporations. While owning common stock doesn’t get one closer to the Marxist ideal of true worker control over the means of production (and using those to break the “commodity fetishism” of capitalism), I think it does partially address the recovery of the “surplus value” generated from his labor.

    Regarding insider information, I think that’s a far larger psychological problem than real problem. Many cases where insiders trade on information without disclosure are quickly found. This is not only the case with large or politically visible companies, either. (I’d go into more specifics, but there’s a conflict of interest in publicizing it as it relates to another company in the industry I work in).

    I agree with you that 401K’s have a negative effect tying people to the corporate world. One way this is done is through high taxes and exempting certain “preferred” behaviors, such as 401K’s from that taxation. There are myriad examples of government finding ways to discourage entrepreneurship while encouraging large corporations through policy. As you may have seen through your time reading TLP, I argue against corporatism regularly.

    However, I would disagree that this is not including “the working class” into “the capitalist class”, as we are talking about long-term ways in which ordinary individuals can build real wealth. Not enough take advantage of those opportunities (whether 401K or other non-government options), but far more do so than in the days of feudalism, and all have the access to do so. For most, though, chasing the “commodity fetishism” that Marx derides does get in the way. People choose their own shackles.

    Your final point about Marx idealized vs. Marx in practice, and the fact that capitalism idealized vs. capitalism in practice is well made. As a libertarian, I would suggest that the key point in both is size and scope of government. The problem with corporatism isn’t capitalism — it’s a government large enough and powerful enough to run roughshod over private society, and corrupt enough to be co-opted by corporate interests. Freeing those markets from government are the answer whether you want to go anarcho-capitalist or anarcho-socialist. I believe the latter (Marxian) won’t work, but the common enemy of both creeds is the exploitative State.

    Comment by Brad Warbiany — July 21, 2010 @ 4:03 pm
  4. Socialism goes against the nature of man. Man’s survival depends on his use of his mind to get what he needs to survive. Man can only properly control himself and does a lousy job when he tries to control others. Socialism requires a controlling force outside man’s nature, ie a government. Man controlling himself requires no such force. Natural consequences is the self righting force that keeps man moving forward in a positive creative path.

    Comment by wayne fazio — July 22, 2010 @ 1:55 pm
  5. [...] colleague Brad Warbiarny at The Liberty Papers wrote a piece in which he defended Marx, though not a fan of his, from wrongful detractors. I’d like to do the same, though I may wind up [...]

    Pingback by Rethinking Marx | Gonzo Times — August 10, 2010 @ 5:14 am

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