Capital blunders: the case of Karl Marx

In 1950 all Hungarian Universities (including the Technical University of Budapest where I studied) had to introduce two new compulsory subjects: The Russian language and Marxism, subjects in which we were examined. One of the topics was “Absolute impoverishment.” It started with David Ricardo’s Iron Law of Wages that maintained that wages can never rise above subsistence level. If they do, the workers available will increase too and that will lead to the reduction of wages, as implied by the iron law. 

We also had on the syllabus  the Marxist theory of Absolute Impoverishment of the working class, according to which wages must always decline not only relative to the wealth of the capitalists, but also in absolute value. Later in their lifetimes even its originators, Marx and Engels, had quietly abandoned it. By 1950, nobody believed this thesis any more: the evidence that most workers were not absolutely impoverished in capitalist countries was undeniable. The sole authority that supported this theory was the ultra-orthodox Hungarian Communist Party. They did not realise that the theory was flawed by a basic contradiction: if wages are already at subsistence level, as the iron law maintained, they cannot be further cut because the working class would not then be able to survive. This contradiction was ignored by the Professors of Marxism at our University and it would have been inadvisable to point it out. People had disappeared for lesser crimes. I would call this Blunder No.1. 

Blunder No.2  I found in Marx’s Critique of the Gotha Programme. Gotha is a city in Germany where the programme of the world’s first Social Democratic Party was promulgated by Ferdinand Lasalle in 1863. Marx did not like Lasalle and did not like the programme. He wrote his Critique in April-May 1871, which was circulated in manuscript form for two decades and published eventually in Die Neue Zeit in 1891. Marx writes there: “A general prohibition of child labour is incompatible with the existence of large-scale industry and hence an empty pious wish.” It is true that child labour was not generally prohibited in Britain until 1933, but by the time Marx was writing child labour had already been regulated and bans were starting to be imposed, for example on under-10s working in factories.

Blunder No.3 is related to Blunder No.2. It is also in the Gotha Critique : “If banning child labour were possible it would be reactionary, since, with a strict regulation of the working time according to the different age groups and other safety measures for the protection of children, an early combination of productive labour with education is one of the most potent means for the transformation of present-day society.” In other words, Marx had no principled objection to regulated child labour. 

Karl Marx was a Political Activist, an Economist, a Historian, a Philosopher, and a lot more. In any of these incarnations he had to discuss the future. He saw in the future the dictatorship of the proletariat, a violent overthrow of the capitalist economic system. He is also famous for predicting that a time will come in the Socialist Heaven when everybody could live according to his needs. But he failed to see something that he personally witnessed in his own lifetime: the vast amount of wealth that capitalism had been able to generate. Why did he miss this obvious fact?

 I think there are two explanations. One of them suggests that if your work covers a wide range, some of your conclusions might not have been well founded. In other words: Saepe et magnus dormitat Homerus. (“Sometimes even the great Homer nods”). This is of course not a proper explanation. It is far too general. It can explain any kind of failure. 

To be more specific we have to look at Marx’ published work, starting with The Communist Manifesto (written jointly with Friedrich Engels). They wanted nothing less than uniting all the workers of the world. The argument was that the workers could and should fight for their rights because they had nothing to lose but their chains. An early attempt to put Marx’s ideas into practice was made in the Paris Commune after the defeat of France in the 1870-71 Franco-Prussian war. Parts of Paris were then occupied by the Communards, who executed the Archbishop of Paris in the company  of another hundred  hostages. The French Army exacted a bloody revenge. After the fall of the Commune maybe up to 20,000 Communards were executed and 44,000 of them were deported to the French Colony of New Caledonia.

At this stage I cannot resist the temptation of comparing the short-lived Paris Commune in France with the equally short-lived 1919 Soviet Republic in Hungary. First of all, let us acknowledge that both governments came to power after defeat in a major war. The dates in power were also quite similar. The Communards ruled from 18 th March to 28 th May, the Soviet Republic lasted from 21 st March to 1 st August. Both governments were dictatorial, both resorted to violence, both were followed by even worse violence. Could one conclude that spring is a favourite time for a Communist revolution? Yes, possibly, but they fall when the weather gets hot. Well, it is a good hypothesis but I would not try to prove it.

Now back to blunders. How could Marx commit them? How, for example, could Marx miss that the future would lie in free full-time education for all children? Marx believed that a bourgeois government would never establish a universal education system. Paraphrasing Montecuccoli, we could say that universal education needs three things: Money, money and money. Marx probably believed that capitalists would 

always try maximising profit. What he did not realise is that universal education is not incompatible with profit maximisation. It is just a different kind of investment that needs time to mature. Marx underestimated the wealth that capitalism can create. In Marx’s lifetime (1818-1883) the GDP per capita of the UK went up by about 80%. Hence England and Wales could afford to introduce universal education from the age of 5 to 12 in 1870.

It is the same with the morality argument. We know that equalising wages, a move towards equality, is not the way to maximise economic output.  They tried it in the early Soviet Union, but soon abandoned it. Instead they introduced the competitive Stakhanovite system. Could purely moral  arguments be the engines of social change? The obvious examples are the abolition of the slave trade and of slavery in the British Empire, in which William Wilberforce and likeminded friends played such a significance role. But even in this case money helped to reach an agreement. Slave owners were compensated for their loss of slaves.

A Message from TheArticle

We are the only publication that’s committed to covering every angle. We have an important contribution to make, one that’s needed now more than ever, and we need your help to continue publishing throughout these hard economic times. So please, make a donation.