The Marxism of Marx
The Marxian conception of "exploitation" is the central and enduring message of Marxism. As Edmund Wilson said:
"?once we have read Das Kapital, the conventional works on economics never seems the same to un again; we can always see through their arguments and figures the realities of the crude human relations which it is thrir purpose or effect to mask."
Marx and Ezngels themselves likewise saw "surplus value"- the distillation of exploitation- as the major conceptual contribution of Marxism. Yet this crucial concept in the Marxian theoretical framework was insinuated rather than explicitly established, either logically or empirically. As introduced in the first volume of 'Captal', surplus value was defined simply as an "increment or excess over the original value" invested in production. From this definition, Marx glided quickly to the conclusion that labor was the factor responsible for this increment of value or of output. It was an assumption deeply imbedded in classical economics- implicit in literally the first sentence of Adam Smith's 'The Wealth of Nations'. Still it was an assumption, and one devastated by the new conceptions and analysis introduced by neo-classical economics while 'Capital' was in its decades-long process of being prepared for publication.
As a theoretical system, Marxian economics begins the story of production in the middle- with firms, capital, and management already in existence somehow, and needing only the addition of labor to get production started. From that point on, output is a function of labor input, givenall the other factors somehow already assembled, coordinated, and directed a particular economic purpose. Output per unit of labor is then referred to as labor's output, as was traditional in classical econimics long before Marx. But longevity is not logic. Where there are multiple inputs, the division of output by one particular input is wholly arbitrary. More generally, making one entity the numerator and another the denominator is a fraction does nothing to establish a causal relationship between them (though one may exist), much less a special or exclusive causal relationship. Yet this procedure is often successful as insinuation- in many contexts- especially when it transforms a plausible relationship into a scientific-looking quotient, suggesting precision or certainty.
Vulnerable as Marx's exploitation theory ws, part of the marginalist economics' criticism of it missed the mark, for the marginalists argued in terms of the respective contributions and rewards of factor inputs, rather than of people as such. Land may be productive without landlords being being productive. Landlords may be growing richer in their sleep, as John Stewart Mills claimed, earning an income solely because of the institutional artifacts of prooperty ownership. Marx made essentially the same argument regarding the capitalist. The contribution of capital equipment to economic ws not really at issue, for a Marxian revolution was not intended to abolish capital equipment but rather to abolish capital ownership by private individuals. The importance of capital equipment was implicitly recognized when Marx made its public ownership a key feature of his projected new society.
Identifying capital's contribution to the economy with capital owners' contributions clearly invalid in an argument over the desirability of a system of private ownership of capital. However necessary and justified capitalists' revenue may be within the system of capitalism, that is hardly relevant when the issue is wheather that whole should continue or be superseded by a different system. A king may play a vital role in a system of monarchy, but that is irrelevant when debating the relative merits of monarchies versus republics.
Marx argued that capital was not in fact a contribution of capitalists but of labor- past labor. It was a collective product, even if individually owned under the capitalist system. According to Marx, there is "not one single atom of its value that does not owe its existence to unpaid labour." When the capitalist advances part of this capital to the worker in exchange for his labor power, he is using "only the old dodge of every conqueror who buys commodities from the conquered with the money he has robbed them of." In other words, " the labourer himself creates the fund out of which the capitalist pays him."
Marx's analysis concerned the contributions and rewards of people- classes- not impersonal inputs. Yet even within this context, he did not succeed, either logically or empirically, in establishing that present capital is simply the result of past labor. All that he did was to push back into the past the key questionof the source of capital. That way leads to infinite regress, not evidence or proof. Nor is the question of the origin of capital a purely historical question. It is an analytic question concerning the ongoing sources of capital.
Once output is seen as a function of numerous inputs, and the inputs as supplied by more than one class of people, the notions that surplus value arises from labor becomes plainly arbitrary and unsupported. Factually, it is even worse off. The empirical implication of a special or exclusive productivity of labor would be that countries that work longer and harder would have higher outputs and higher standards of living. But the reality is more nearly the direct opposite- that countries whose inputs are less labor and more entrepreneurship tend to have vastly higher standards of living, includin shorter hours for their workers.
Nor is this simply a matter of having more physical capital to work with. Large transfers of physical capital to Third World countries, through nationalization and foreign aid, have often been only a prelude to the deterioration of that capital. Conversely, the apparently miraculous rise of the German and Japanese economies from the rubble after World War II demonstrated that physical capital is only a product of mental capital- organizational and scientific skills, discipline, experience, and habits of mutual cooperation. Despite the offhand assumption if Engels (and later, Lenin) that managing a business was only a trivial skill, countries where that skill is reare are almost universally sunk in poverty, even in the midst of rich natural resources, while countries where such skills are more abundant are typically prosperous, even when lacking most natural resources- Japan being the classical example. Similarly, racial and ethnic groups possessing such skills have at various times in history been reduced to destitution by hostile political decisions, only to rise rapidly to prosperity again at some other time or place- for example, the Jews in Europe and Chinese minorities scattered throughout Southeast Asia.
For all Marx's intricate and ingenious elaborations of the implications of "surplus value," the original postulate on which it is all based was only the common and crude impression that goods are "really" produced by thaose who physically handle production in a routine established by others. The early history of the Soviet Union provided the most dramatic empirical refutation of the Marxian assumption that management of economic enterprises is something to be for granted as occuring somehow. When economic incentives were drastically reduced or abolished in the heady egalitarian period following the Bolshevik revolution, the Soviet economy ground to a halt. Widespread hunger and a halt to vital services forced Lenin to resort to his "New Economic Policy" that restored the hated capitalistic practices. The later nationalizing of all industry under Stalin and his successors did not restore egalitarianism. Quite the contrary. There were highly unequal rewards to management, including today whole systems of special privilege stores to which ordinary Soviet workers have no access. Moreover, the managers of Soviet industry have been disproportionately the descendants of the managerial class of earlier Soviet and czarist times. Many observers have seen these developments as mere betrayals of Marxist ideals, missing the more fundamental point that a crucial false assumption must be corrected in preactice if people are to survive. Its continuing sacredness in theory can only produce hypocrisy. The betrayal may be real, but in Marxian terminology, "no accident." A similar process is occurring in China, to which many Western Marxists transferred their hopes after disillusionment with the Soviet Union. This too is seen as simply a betrayal of Mao by Deng, rather than a nation's painful learning from experience that a key assumption of Marxian economics is false.