Capital in the 21st Century


I’m ashamed to say that I’ve never read Karl Marx. I’ve always had the vague impression that Marx was a romantic thinker, that his philosophy failed because he was incapable of grasping the cold, hard truths needed to formulate a robust theory of government, and that if you really wanted to understand capitalism and economics, you’d be better served reading Adam Smith or Friedman or a “traditional” economist. So while I was flipping through American Capitalism: A Reader (I always save the page-turners for Sunday night!), I was slightly surprised to read this:

Marx and Engels probably hoped that the 1848 uprisings against traditional rulers, which anyone could have seen were on the horizon during the months when the two of them were writing the Manifesto, would become a class revolution in which the industrial workers would rise up and take the reins of western European societies. That did not happen, and even the defenders of Communism as an idea and an intellectual tradition would probably concede that in some ways it has never happened. So, why should you read The Communist Manifesto? Well, for one thing, it is one of the most important documents in human history. It helped launch the movement that became capitalism’s biggest challenger and most serious alternative. And although the Marxism-Leninism of the old Soviet bloc now appears to be dead and buried, the Manifesto also contains some powerfully accurate criticisms of industrial capitalism. Marx and Engels were probably right to argue that crises of overproduction, driven by the enhanced technological capacity of the factory system (and the workers who toiled to supply it with raw materials, in the case of the American South’s cotton-making slave-labor camps), were in turn driving a series of historical crises. The Manifesto was also on target when it argued that the emergence of industrial production was one of the most profound transformations in human history.

Although not everyone would agree with the criticisms the Manifesto offered, much less the solutions it proposed, many others agreed with at least some portion of it. Much of its proposed program has been adopted at one point or another by various societies and governments around the globe. Alexander Hamilton and Henry Clay, for instance, had already built their political careers in the United States on the advocacy of central banks and government support of internal improvements that would facilitate commerce and communication. By the early twentieth century, most Western governments had adopted some kind of inheritance tax – as the manifesto suggests – in order to keep capital from stagnating in the hands of a few families who would have no incentive to invest it in truly entrepreneurial or socially beneficial ways. And many people have begun to think about human history along some of the lines proposed by Marx and Engels. Like it or not, the way that the Manifesto proposes we view human social, cultural, economic, and political development has shaped us all. Thinking about the human past as a series of struggles over economic resources, and thinking about processes of production as generators of particular forms of social and cultural order – these are things we now do “naturally,” whether we are leftist, rightist, or somewhere in between. In fact, it was not until the Manifesto was published that people began to call the massive economic forces that were reshaping human history by the one name “capitalism”. So in some ways, The Communist Manifesto is the earliest history of capitalism.

I like the idea of a history of capitalism, as opposed to an explanation of capitalism, like one would find in an Introduction to Microeconomics textbook. They serve complementary purposes: one is a description of how the system ought to work, while the other is a description of how the system actually works. (Otherwise, you have theorists explaining history, with predictably poor results.)

History and economic theory, I suppose, serve complementary roles like scientific experiment and scientific theory. Experimental evidence ensures that theories remain grounded in reality, that theories that fail to comport with reality are discarded in favor of better ones. Something similar should happen with economic theory and economic history, but the connection between the two fields is much, much looser. (History and economics are usually separate departments at a university, of course.) Thomas Piketty remarks on this disconnect in his book, Capital in the 21st Century. In an interview about the book in The New Republic, Piketty comments:

TP: Economists tend to think they are much, much smarter than historians, than everybody. And this is a bit too much because at the end of the day, we don’t know very much in economics.

I think in the social sciences we should all be modest and pragmatic and I feel that if I had stayed at MIT’s economics department I probably would not have done the historical research that I have done because I would have had some incentives to do sort of pure economic theory.

IC: Why do you think some of your research hadn’t been utilized before?

TP: I think it’s partly because the boundaries between disciplines are sometimes too sharp. It was too historical for economists and too economic for historians. So nobody will do it. But good data is much more available today and the book benefits from that. And I have used it to try and give an account of what I have seen.

As Piketty points out, his book tries to do what Marx’s Capital fails to: i.e., provide a data-rich history of changes in income and wealth and power that have resulted from the processes of capitalism. In contrast, the Manifesto’s goal is rather different. From the excerpts I’ve read, it strikes me more as a moral indictment of capitalism, a philosophical critique rather than an economic-historical one. Take, for instance, this passage:

The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It has pitilessly torn asunder the motley feudal ties that bound man to his “natural superiors”, and has left remaining no other nexus between man and man than naked self-interest, than callous “cash payment.” It has drowned the most heavenly ecstasies of religious fervor, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom – Free Trade, in one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation.

At my work, I’ve been increasingly attending meetings with “higher-ups” – people whom you might call “the bourgeoisie.” (For what it’s worth, I’m probably part of the bourgeoisie too, even though I don’t feel sympathetic to them.) Their perspective on how the company works, informed by education at “prestigious” business schools, is illuminating. Every bit of labor at a company is reducible to a number. For every unit we sell, there is some cost from department x, and another from department y. Some of our costs are fixed, and some are variable, but, ultimately, all “personal worth” is resolved into “exchange value”. We recently instituted a policy in which every salaried employee in one department of our company is guaranteed five days of paid sick leave. I was heartened by the move, but the reaction wasn’t universal. The head of that department complained that her employees regularly taking sick days (instead of, presumably, working while sick?), and this was causing staffing problems, reducing our output, and increasing variability and uncertainty. (“Her: Right now, I’m assuming that one or two people won’t show up to work every day, but what if everyone does show up?” Me [silently]: “The horror!”)

I don’t understand this attitude, although perhaps that’s because I don’t have an MBA. Giving people paid sick leave is a moral imperative, not a financial one. While it’s true that paid sick leave produces economic benefits (e.g., the benefit of not having sick people sneeze on you on your daily commute), I think it’s a mistake to conflate moral and economic considerations. America has a duty to pay for its citizens’ healthcare, not because of any GDP-related calculation, but because the purpose of a government is to promote the people’s well-being. Quite similarly, a company should have a responsibility to provide for its employees’ health and happiness. Unfortunately, in many cases, “the icy water of egotistical calculation” intercedes.

The logic of pure, unfettered capitalism is cruel and ineluctable. If everything must be justified in terms of financial benefit to the company, then the only people who will receive respectable benefits (high-quality health insurance, paid sick leave, flexible vacation and working hours, paid maternity leave, etc.) are the people who are highly desirable: the bourgeoisie itself. For the well-paid, in-demand, white-collar employees, the cost of such benefits is justified in a business calculation: the benefits pay for themselves as a recruiting and retention tool. For the poorly paid, interchangeable and disposable employees, the same calculation does not hold. For the proletariat, the cost of the benefits usually outweighs any reward the company might garner. The result is a starkly two-tiered system. As Marx put it, “Our epoch, the epoch of the bourgeoisie, possesses, however, this distinct feature: it has simplified class antagonisms. Society as a whole is more and more splitting up into two great hostile camps, into two great classes directly facing each other – Bourgeoisie and Proletariat.” I think Marx had it mostly right, except for the purported “hostil[ity]” between the camps.

I was reminded of all of this while reading an excellent article by Jia Tolentino in the New Yorker about the “gig economy” (which, as you may know, is a hobbyhorse of mine). Marx predicted that

The growing competition among the bourgeois, and the resulting commercial crises, make the wages of the workers ever more fluctuating. The increasing improvement of machinery, ever more rapidly developing, makes their livelihood more and more precarious; the collisions between individual workmen and individual bourgeois take more and more the character of collisions between two classes. Thereupon, the workers begin to form combinations (Trades’ Unions) against the bourgeois; they club together in order to keep up the rate of wages; they found permanent associations in order to make provision beforehand for these occasional revolts.

So why haven’t these “collisions” happened with the gig economy? In part, it’s because of the forces that Tolentino identifies. Working for long hours at shitty wages and being subjected to the vagaries of capitalism is something that’s celebrated by the bourgeoisie, and sometimes by the proletariat. Tolentino writes about “Fiverr, an online freelance marketplace”.

[It] promotes itself as being for “the lean entrepreneur”—as its name suggests, services advertised on Fiverr can be purchased for as low as five dollars—recently attracted ire for an ad campaign called “In Doers We Trust.” One ad, prominently displayed on some New York City subway cars, features a woman staring at the camera with a look of blank determination. “You eat a coffee for lunch,” the ad proclaims. “You follow through on your follow through. Sleep deprivation is your drug of choice. You might be a doer.

Tolentino drives the point home:

At the root of this is the American obsession with self-reliance, which makes it more acceptable to applaud an individual for working himself to death than to argue that an individual working himself to death is evidence of a flawed economic system. The contrast between the gig economy’s rhetoric (everyone is always connecting, having fun, and killing it!) and the conditions that allow it to exist (a lack of dependable employment that pays a living wage) makes this kink in our thinking especially clear. Human-interest stories about the beauty of some person standing up to the punishments of late capitalism are regular features in the news, too. I’ve come to detest the local-news set piece about the man who walks ten or eleven or twelve miles to work—a story that’s been filed from Oxford, Alabama; from Detroit, Michigan; from Plano, Texas. The story is always written as a tearjerker, with praise for the person’s uncomplaining attitude; a car is usually donated to the subject in the end. Never mentioned or even implied is the shamefulness of a job that doesn’t permit a worker to afford his own commute.

There are many crises in American capitalism, but the principal one is moral, not economic or financial. We have management who believe that workers can be reduced to dollars and cents, that benefits are justified only if they pays for themselves, that we should work even if we’re too sick or too pregnant or too tired to do so any longer, and that “doers” are people who brave the vicissitudes of the markets instead of complaining about them.

The unhappiest part of the situation to me is that many of the people who should be organizing and unionizing and protesting – at least, according to Marx – don’t do so. Perhaps they continue to believe that they, too, will eventually “make it” – that the doer will become the job creator – or, more likely, that white supremacy is worth maintaining even if their own livelihoods are destroyed in the process.


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