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Remember Marx for How Much He Got Wrong


By
Noah Smith

On May 5, admirers of Karl Marx celebrated his 200th birthday. Marx didn’t make it to 200, but the ideas he
injected into the global conversation and the ideologies that bear his name far outlasted the German
economist and philosopher.

As socialist ideas grow in popularity in the U.S., and as the memory of the Cold War fades, respect for Marx is
enjoying a bit of a resurgence. In the New York Times, philosophy professor Jason Barker declared that Black
Lives Matter and the #MeToo movement are carrying on Marx’s legacy of social critique (a point of view
shared by conservatives, who are naturally less happy about it). Meanwhile, writing at the Week, Ryan Cooper
said that it was time to normalize the man many consider to be the founder of communism.

But something about this celebration of Marx sits uneasily. For those who have read history or lived through
the 20th century, it’s hard to forget the tens of millions of people who starved to death under Mao Zedong, the
tens of millions purged, starved or sent to gulags by Joseph Stalin, or the millions slaughtered in Cambodia’s
killing fields. Even if Marx himself never advocated genocide, these stupendous atrocities and catastrophic
economic blunders were all done in the name of Marxism. From North Korea to Vietnam, 20th-century
communism always seem to result in either crimes against humanity, grinding poverty or both. Meanwhile,
Venezuela, the most dramatic socialist experiment of the 21st century in a nation with the world’s largest oil
reserves, is in full economic collapse.

This dramatic record of failure should make us wonder whether there was something inherently and terribly
wrong with the German thinker’s core ideas. Defenders of Marx will say that Stalin, Mao and Pol Pot
exemplified only a perverted caricature of Marxism, and that the real thing hasn’t yet been tried. Others will
cite Western interference or oil price fluctuations as the reason for socialism's failures. Some will even cite
China’s recent growth as a communist success story, conveniently ignoring the fact that the country only
recovered from Mao after substantial economic reforms and a huge burst of private-sector activity.

All of these excuses ring hollow. There must be inherent flaws in the ideas that continue to lead countries like
Venezuela over economic cliffs.

The best way to look for those flaws is to follow Cooper’s advice and read Marx with judicious detachment.
My favorite example of this is a 2013 post in which University of California - Berkeley economic historian Brad
DeLong tried to boil Marx’s big ideas down to their essentials, and evaluate each one. While noting some
trenchant and foresighted observations the German thinker made about capitalism, DeLong also chronicles
his mistakes. Marx, DeLong writes, failed to appreciate the degree to which capital investment raises worker
productivity and living standards. He didn’t predict the shift from manufacturing to services. And he
underrated the power and usefulness of the signals and incentives created by the price system in a capitalist
economy.

Those mistakes alone would be enough to hobble an economy and send any economic doctrine to the
rubbish heap. Collectivization of agriculture seems to have been particularly disastrous for farm-based
societies like 20th century China and Russia. But they can’t explain why communism was so often
accompanied by atrocities, or why leaders like Mao and Stalin persisted in failed policies long past the time
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when wise, benevolent leaders would have changed course.

The brutality and insanity of communist leaders might have been a historical fluke, but it also could have
been rooted in another of what DeLong sees as Marx’s mistake — the preference for revolution over evolution.
DeLong writes:

[Marx believed] that even though the ruling class could appease the working class by using the state to
redistribute and share the fruits of economic growth it would never do so…Hence social democracy would
inevitably collapse…and the system would collapse or be overthrown.

But overthrowing the system has usually been a disaster. Successful revolutions tend to be those like the
American Revolution, which overthrow foreign rule while keeping local institutions largely intact. Violent
social upheavals like the Russian Revolution or the Chinese Civil War have, more often than not, led both to
ongoing social divisions and bitterness, and to the rise of opportunistic, megalomaniac leaders like Stalin and
Mao. Even the French Revolution, though it eventually led France to become a stable liberal democracy, only
did do after almost a century of atrocities, short-lived dictatorships and civil strife.

Meanwhile, the most successful examples of socialism — the mixed economies of the Scandinavian
countries, France, Germany, and Canada — came not from the violent overthrow of the old order, but from
gradual change within the democratic, partly capitalist system. These countries have plenty of private
businesses, but also fairly high taxes, universal health care, strong social safety nets and a variety of other
government tools that keep capitalism from resulting in runaway inequality.

Even in the supposedly capitalist bastion of the U.S., the social safety net is a lot stronger than people give it
credit for — thanks to government benefits, America’s child poverty rate is at an all-time low. Meanwhile,
almost all rich countries now have progressive income taxes, universal public education and laws against
child labor — all things that Marx demanded in 1848 in the Communist Manifesto.

In other words, real socialist success has been of the gradual, incrementalist kind, more in line with the
visions of thinkers like Eduard Bernstein than to the dramatic, violent prophecies of Marx. Through repeated
experimentation, societies like those of Denmark, France and Canada have found ways to use government to
make society more equal without killing the golden goose of private enterprise.

So although Marx was far-sighted in identifying some of the problems of capitalism, he got the solution very
wrong. Remembering this is the best way to commemorate his birthday.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:


Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story:


James Greiff at jgreiff@bloomberg.net

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Two New Books Challenging the Consensus on Capitalism

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Opinion

Politics & Policy

Books That Challenge the Consensus on Capitalism


Ideas once dismissed as the ravings of the loony left are breaking into the mainstream of economic and
intellectual debate.

By
Pankaj Mishra

We live in an age of political earthquakes: That much, at least, seemed clear from newspaper headlines
nearly every day of 2018. But intellectual tectonic plates were also shifting throughout the year, with ideas
once dismissed as the ravings of the loony left breaking into the mainstream.

A Western consensus quickly formed after the collapse of communist regimes in 1989. It was widely
believed by newspaper editorialists as well as politicians and businessmen that there was no alternative to
free markets, which alone could create prosperity.

The government’s traditional attempts to regulate corporations and banks and redistribute wealth through
taxes were deemed a problem. As the economist Milton Friedman put it, “The world runs on individuals
pursuing their separate interests.”

Neither individuals nor companies needed to worry much about inequality or social justice. In Friedman’s
influential view, “There is one and only one social responsibility of business — to use its resources and
engage in activities designed to increase its profits.”

Political fiascos in the West, following its largest financial crisis — events accompanied by the emergence of
China, a Communist-run nation-state, as a major economic power, as well as an unfolding environmental
calamity — have utterly devastated these post-1989 assumptions about free markets and the role of
governments.

Confessions to this effect come routinely from disenchanted believers. Take, for instance, Olivier Blanchard,
former chief economist of the International Monetary Fund, who recently posed the once-blasphemous
question: “What comes after capitalism?”

Blanchard was commenting on the recent demonstrations in France against President Emmanuel Macron.
He rightly described a global impasse: “Given the political constraints on redistribution and the constraints
from capital mobility, we may just not be able to alleviate inequality and insecurity enough to prevent
populism and revolutions.”

Nor, for that matter, can we work towards a greener economy. In any case, Blanchard’s admission confirms
that we inhabit, intellectually and culturally, a radical new reality — one in which “neoliberalism,” a word
previously confined to academic seminars, has entered rap lyrics, and stalwarts of the establishment sound
like activists of Occupy Wall Street.

Thus, Martin Wolf, respected columnist for the Financial Times, recentlyconcluded, if “reluctantly,” that
“capitalism is substantially broken.” This year, many books with titles such as “The Myth of Capitalism:
Monopolies and the Death of Competition” and “Winners Take All: The Elite Charade of Changing the World”
blamed an unjust economic system and its beneficiaries for the rise of demagogues.

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It is becoming clear that the perennial conflict between democracy, which promises equality, and capitalism,
which generates inequality, has been aggravated by a systemic neglect of some fundamental issues.

In “The Value of Everything: Making and Taking in the Global Economy,” MarianaMazzucato bracingly
focuses our attention on them. Mazzucato has previously written about the innovative role of governments in
the modern economy. In her new book, she asks us to distinguish between people who create value and
those who merely extract it, often destroying it in the process.

Her targets range from pharmaceutical companies, which uphold a heartless version of market rationality, to
internet companies with monopoly power such as Google and Facebook. Her most compelling example,
however, is the workings of the financial sector, and its Friedman-style obsession with “shareholder value
maximization,” which has infected the corporate sector as a whole.

Reading Mazzucato’s book, it is hard not to wonder just how “neoliberal” ideas and values, which uphold the
rationality of the market and exclude notions of the common good, came to shape the conduct of individuals
and institutions.

In the conventional account of neoliberalism, Friedman looms large, along with his disciple Ronald Reagan,
and Britain’s Margaret Thatcher. Much has been written about how the IMF’s structural adjustment programs
in Asia and Africa, and “shock-therapy” for post-Communist states, entrenched orthodoxies about
deregulation and privatization.

In these narratives, neoliberalism appears indistinguishable from laissez-faire. In “Globalists: The End of
Empire and the Birth of Neoliberalism,” Quinn Slobodian briskly overturns this commonplace view.
Neoliberals, he argues, are people who believe that “the market does not and cannot take care of itself,” and
indeed neoliberalism is a form of regulation — one that insulates the markets from vagaries of mass
democracy and economic nationalism.

Beginning with the breakup of the Hapsburg Empire, Slobodian’s lucidly written intellectual history traces the
ideas of a group of Western thinkers who sought to create, against a backdrop of anarchy, globally applicable
economic rules.

Their attempt, it turns out, succeeded all too well in our own time. We stand in the ruins of their project,
confronting political, economic and environmental crises of unprecedented scale and size.

It is imperative to chart our way out of them, steering clear of the diversions offered by political demagogues.
One can only hope that the new year will bring more intellectual heresies of the kind Mazzucato’s and
Slobodian’s books embody. We need them urgently to figure out what comes after neoliberalism.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:


Pankaj Mishra at pmishra24@bloomberg.net

To contact the editor responsible for this story:


Nisid Hajari at nhajari@bloomberg.net

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