Economics

An Introduction to Marxism for Non-Marxists by a Former Marxist – Part 2

Published by:

Dr. Jerry Hionis

In part two of three of  “An Introduction to Marxism,” I’m glad to welcome back Dr. Jerry Hionis to the site. If you missed part one, you can read it here, and for more about Dr. Hionis click here.

An Introduction to Marxism for Non-Marxists by a Former Marxist – Part 2

By Dr. Jerry Hionis, Jr.

Karl Marx (1818-1883) — the well known Prussian philosopher and economist — is probably the most read (both in animus and  admiration) thinkers of the modern-era yet one of the most misunderstood. To the average layperson, Marx represents the most prominent voice of diaphanous anti-capitalist sentiment; in general, the cynosure for any and all non-free market thought. To the more academic minded, Marx is synonymous to the conflict theory of history: all major movements in history are the result of two competing economic groups — namely, the working-class and the capitalists.

The conventional wisdom (especially after the collapse of the Soviet Union) is that Marxism — beyond being akin to atheism — is a failed economic and political system. In fact modern (mainstream) historians have established the consensus that this view of history is largely false; that is, it has been discredited as a standard blueprint for all of history. Of course this neither eliminates Marx’s theory as a whole nor the possibility that some major shifts in the history of political economy have been caused by class conflict. Even so, his ideas have yet to fade away. One may ask why? I would contend that while the economic system put into place by such despotic leaders as Joseph Stalin and Mao Tse Tung has been prove to have failed, Marx’s philosophical analysis of the modern human condition (the analysis and not the solution) still holds. Further, I would be so bold as to argue that this philosophical stance can be congruent to the life of a Muslim ldots but again, this is outside of this essay’s scope.

The common approach to Marx’s work is commonly the exploration through two of his more well known works: The Communist Manifesto and Das Kapital Vols.1-3. Unfortunately these two works are probably the most inaccessible of Marx’s writings to the lay philosopher. To navigate through Das Kapital requires a firm understanding of both economic theory and historical context; even then, much of it is outdated and, honestly, extremely boring. Being only fifty odd pages long, The Communist Manifesto — written by Marx and Engels as a political pamphlet gear towards a mostly illiterate working-class audience — is more political poetry than a philosophic and economic argument. In my humble opinion, to understand Marx’s philosophy, one must begin with his more humanist work Economic and Philosophical Manuscripts of 1844.

To start, let us put Marx and his works into context. Marx came into his serious academic and writing career at a very special time in continental Europe. The Industrial Revolution and its effects on social structure where in full swing. What is now known as “wage labor” became the primary basis of household income. Along with this new payment system came a revolution in both how the realm of the family and the individual was structured.Marx Engels Forum01

In addition, the “revolutions of the 1840s” were giving way to a unification of many future countries — such as Germany and Italy — and the slow eventual decline of the once great Ottoman Empire (thanks in part to the independence of Greece and many others). Although Prussian, Marx identified himself within the German Idealism movement based around, fundamentally, the works of G.W.F. Hegel.

Under this setting, Marx developed his philosophy of Capitalist Alienation. To explain, suppose there are two individuals: a capitalist and a worker. Both of these people define themselves existentially by their relationship. The capitalist is a capitalist because the worker works for him. The worker defines him/herself as a worker because he/she works for the capitalist. Hence, the cycle of exploitation is established and a system is created.

Marx goes further to state that the worker has an out to this relationship: his/her work. The worker is historically a craftsman and an honorable position in society. Since the time of the ancient Greeks, work and being a worker was a “curse from the gods” and the most noble/ideal of pursuits was to be a philosopher. Plato himself established the Philosopher King as the pinnacle of his political system the Republic. This point of view towards work was later adopted by the Catholic church during the Middle-ages and censured by the Protestant Reformation. Marx himself, while promoting the essential positive qualities of work, agreed with the ancient philosophers by claiming that “labor is external to the worker; i.e., it does not belong to his essential being”. Given the increased economic and social importance of non-agricultural wage labor, Marx does claim  that a worker — whether we as humans like it or not — defines him/herself not as a worker-versus-capitalist, but as a creator of some good or service. Unfortunately for the worker, this product is then taken by the capitalist and sold at a price based upon its value in labor.

To ensure a profit, the capitalist then pays the worker a wage less than the price, or actual value of the good or service. Therefore the worker is defining him/herself around the good or service being created but is compensated at a value less than what the product is worth. The worker is left stranded and undefined. As Marx himself puts it,

 

This fact expresses merely the object which labor produces — labor’s product — confronts it as something alien, as a power independent of the producer. . . . Labor’s realization is its objectification. In the conditions dealt with by political economy this realization of labor appears as a loss of reality for the workers; objectification as loss of the object and the object-bondage; appropriation as estrangement, as emph{alienation}.

 

Thus two key foundational points of Marx’s economic theory transpire from this (maladjusted) relationship: alienation and the drive for profits.

So how does Marx’s philosophy translate into his theory of economics. The famed French Existentialist Albert Camus (1913-1960) famously quipped, “The most eloquent eulogy of capitalism was made by its greatest enemy. Marx is only anti-capitalist in so far as capitalism is out of date”. Camus was correct in many ways.

True, Marx had philosophical objections with the capitalist system but actually spoke very fondly of its merits. According to Marx, capitalism could possibly advance technology, increase the economic growth and value of an economy, and excel at the distribution of goods and services. As a prime example, Marx agrees with the classical economists that monopolization of capital and production will only lead to higher prices and inefficiency; hence, prices will lower and efficiency will increase when the number of producers increases:

 

. . . it follows that the sole defense against capitalist is emph{competition}, which according to the evidence of political economy acts beneficently by both raising wages and lowering the prices of commodities to the advantage of the consuming public. But competition is only possible if capitals multiply, and are held in many hands.

 

While the capitalist system could ideally achieve these goals, Marx felt that it had run its course. Capitalists were no longer concerned about the distribution of goods and services. The prime economic objective goal was not production efficiency but profit maximization — these two are not always the same.

Capitalism, according to Marx, was not a system that needed to be fought by some sort of violent uprising. It was only a matter of time before it naturally happened. To Marx, the foundations of the capitalist system were wrought with problems — mainly the illusionary balance of markets and accumulation of capital. To the point: capitalism is a volatile system (a sentiment that many could agree with). It was an inevitable that some economic shock — such as the myriad of recessions in the U.S. in the late 1800’s and the Great Depression of the 1930s — would occur and the static nature of capitalism would be ill-equipped to adjust.

Yet these “doomsday” shocks did, and still do, happen and market-based capitalist systems are still here. Why? Since the Great Depression, economists have learned that markets are much more dynamic than previously thought. The market does not have a problem sharing the spotlight, so to speak. All of the world’s economies — excluding North Korea and a few other smaller economies as outliers — embrace varying degrees of Market Socialism: allowing markets to be the basis of prices and production but realizing that government intervention, in the form of regulations and price controls, are necessary in certain cases.

So where does the Muslim and the field of “Islamic” economics fall in this debate? There are two separate issues to contend with: Marxist economic philosophy and Marxist economic theory.

An Introduction to Marxism for Non-Marxists by a Former Marxist – Part 1

Published by:

Dr. Jerry Hionis

We’re happy to have Dr. Jerry Hionis contributing to the site. Jerry himself is a former Marxist. Jerry holds a PhD from Temple University. His primary research is in conflict theory with an emphasis on civil conflicts and Warlord-like competition. Other research interests include game theory, economic development, Islamic economic theory and history, political theory and African economics. You can read more about him here.

An Introduction to Marxism for Non-Marxists by a Former Marxist – Part 1

By Dr. Jerry Hionis, Jr.

The terms (or concepts of) “Islamic Economics” and “Islamic Finance” have become buzzwords among both lay and academic Muslims. And while the average person has some quasi-educated opinion on the subject of economics, I have found that most do not truly understand what the field actually studies. Some of the most common explanations of what economists actually study are: the stock market; money; banking; taxes and interest rates; and, general business and entrepreneurial methods. True the previous list of topics are covered under the banner of economics, but the field is actually much more encompassing. As a formal definition, Economics is the social science that studies how individuals, groups, firms, governments and entire societies deal the almost existential problem of scarcity, or the inability to satisfy all wants, needs and desires. In short, economics is about human decision making. Therefore it should be of no surprise that Islam — at its fundamental core — approaches economic theory at almost every turn and is not just about banking.

A common question that has been asked since the beginning of the 20th century is where does Islam fall in the debate between market-based capitalism and state-planned socialism? Needless to say this question is not easily answered but an attempt will be made. What I will attempt to do is bring the debate into context by arming the non-economist (Muslim or not) with a little history and background of the two systems.

Let us begin with the market. What is a market? The colloquial usage of the term market will more often than not arouse an image of a physical place where consumerism occurs: a shopping mall, a supermarket, an agora, a bazar and so on. These examples are technically markets but economists hold a much broader definition of what a market is. To an economist, the market is not the physical location where goods and services are exchange but the actual exchange of these goods and services in and of itself.

So when did markets begin? The fact of the matter is that we really do not know. Markets have always — to a degree — been around when ever a group of humans have chosen to stay stationary around each other. Modern anthropologists state that early man (1) tended to either be nomadic or pastoral. This slowly evolved into a settled society where agriculture and the herding of animals became the basis of society. With a settled society comes commerce; and with commerce, comes markets.

This is what makes markets so fascinating. They were not an idea that was developed, created and then implemented but instead they naturally arose. All the great “classical” economists such as Ibn Khaldun, Adam Smith, David Ricardo, Jeremy Bentham and Alfred Marshall wrote about markets but as an observation of what was already going on. It is correct to claim that these economists suggested policies and ways to augment the market for the better, but they did not invent the market itself.

Overtime the study of markets and economics has advanced into many different schools of thought. While theoretically markets will maximize efficiency and the distribution of goods and services, there are many drawbacks. For a market to work at peak performance, many (and I do mean MANY) assumptions need to hold ldots which unfortunately tends to be more rare than not. As a result we run into what is known as market failure. To put it bluntly, markets don’t always work as advertised. In some historical cases, such as in Russia, post-colonial Africa and Latin America, China and Germany, markets failed to the extent that their abandonment was sought. Hence the rise of modern or scientific socialism.

[Check in next Thursday for part 2 of An Introduction to Marxism for Non-Marxists]

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(1) It should go without saying that I am referring here to mankind as a whole and not excluding the female element. In fact, modern sociologists and anthropologists claim that while there existed a division of labor during the nomadic period of humanity, the division was viewed as being more equal than it was under periods of settled agriculture.

(2) The most common cited avenues that lead to market failure are asymmetric information, externalities and non-private goods and services.

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Here’s a bonus, Economic Morality at Radtalks:

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