In defence of Marxist economics

Date: Monday 27th July
Time: 13:00 - 16:30 BST

Many attempts have been made over the years to ‘update’ Marx’s economic theories. Inevitably, these ideas jettison the revolutionary core of Marxist economics. Instead of applying a dialectical and materialist method to the economy, the revisionists slip into a mechanical and idealist mode of analysis. They do not see the economy as a living, breathing system, composed of human beings and conflicting classes, but as a set of abstract equations. This discussion will set the record straight, show how these revisionist ideas fall short, and give an overview of genuine Marxist economic theory. Our speaker, Rob Sewell, is a leading activist of Socialist Appeal, British section of the IMT.




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Welcome to this session of the IMU. My name is Julien and I’m an activist with Fightback/La Riposte Socialist, which is the Canadian section of the IMT. This is the session on ‘In Defense of Marxist Economics’. If this is the first session you attend, you might notice that I’m pausing between sentences, which is normal and this is because the event is translated into a dozen languages at the same time. So we want to give them a chance to translate.

Before it starts, I’ll briefly explain how the session will go. We will start with a presentation given by comrade Rob Sewell. Rob is the editor of Socialist Appeal, the paper of the British section of the IMT, and Rob is also the author of several books on Marxist theory and history. In particular, one of them might interest you: Rob is the co-author of a book called Understanding Marx’s Capital, Reader's Guide, a very good book with several articles on various aspects of Marxist economics that goes chapter by chunks of chapters of Marx’s capital, explaining them. And this is a book you can purchase on the website of our publishing house: Wellred Books. I strongly recommend you do so.

Before I give it to Rob, I’ll briefly explain the day. So Rob will have 90 minutes to speak including translation for his presentation; following that, we’ll have a 25 minute break and we will come back at 3pm British Summer Time and have an hour of discussion and contributions from other comrades. Following that, Rob will have 30 minutes including translation to sum up. So without further ado, I will give it to Rob to speak.

Rob: Thank you for that. I do welcome all comrades and friends from different parts of the world who are listening into this particular session on Marxist economics. It will be interesting and clearly important. Ever the optimist, I hope to cover the ground in the space of 45 minutes. I’m very hopeful that I can cover all the material I have in front of me in the space of time allocated. I also apologize in advance if I repeat any points from the excellent talk from yesterday by Adam Booth, I will attempt to keep them to a minimum.

First of all, we should say that Marxist economics is more relevant today for obvious reasons. Events on a daily basis are confirming the truth of Marxist economics. Not simply in the pages of Marx’s Capital, but in the real global crisis of capitalism. Of course, the attacks on Marxism and Marxist economics have not stopped. They are continuing at full length. This is particularly in the universities, but not only them. I’ve seen that Donald Trump attacked Marxism in his 4th of July speech.

In particular, they attack Marxism by arguing that capitalism had resolved its problems, contrary to what Marxism says. They have solved this crisis problem of the system, and as a consequence Marxist economics were false as were the ideas of Marx. These arguments were particularly prevalent in the 1950s and 60s during the post-war economic upswing, where it seemed that the views they put forward were supported by the facts. After all, wasn’t there full employment, didn’t they provide reforms, and weren’t there rising living standards? Therefore in contrast they found means, ways of resolving these problems of the capitalist system. And in this period it was the great god Keynes they worshipped at. He was the fountain of all knowledge.

But how things have changed now, we can see the post-war economic upswing wasn’t simply a boom, it was an upswing which lasted a period of 25 years. It wasn’t the norm, but an aberration, a temporary phenomenon. Of course, 25 years seems like a long time, but in the scales of history, it is simply the blink of an eye. Now, the truth of any theory, the acid test of any theory must be measured by how accurately that theory describes the real processes in the economy including its contradictions, and how far that theory can foresee future developments.

On that measure alone, you can say that Marxist economics has been shown to be correct. After all, it explained that crisis was inherent to capitalism and that all the ills of capitalism would once again re-emerge. This has been borne out by reality. Whereas, on the contrary, bourgeois economy and economics has demonstrated its complete bankruptcy.

There are two broad schools of bourgeois economics, one of which is monetarism, which is orthodox economics, and the other is Keynesianism, but neither of which has been able to explain anything or foresee anything, for that matter. You don’t have to take my word for that. According to Paul Krugman, winner of the Nobel prize in economics in 2008, much of the past 30 years of macroeconomics was “spectacularly useless at best, and positively harmful at worst.” 

Barry Eichengreen, a prominent American economic historian, says the crisis has “cast into doubt much of what we thought we knew about economics.”

In other words, they have no idea what is happening. It’s quite funny that in 2008, the Queen visited the London School of Economics, and asked why they did not foresee the 2008 crisis coming. They replied that things are very complicated! It’s quite ironic that compared to the past, these bourgeois economists were very confident; overconfident. In fact, Robert Lucas, Professor of Economics at the University of Chicago and another Nobel Prize winner for economics, stated not so long ago that “the central problem of depression-prevention has been solved.” In other words, there would be no more depressions!

He, like the others, were completely mesmerised by the capitalist system and their so-called “efficient market hypothesis”, that the market left alone had eradicated crises. When that theory collapsed unceremoniously in the crisis of 2008, Alan Greenspan, the former head of the US Federal Reserve, known as the Maestro, said, well of course this is only “a once in a century event.” It will never happen again. Well, here we are a decade later, in 2020, with an even deeper crisis than in 2008, heading for a world depression.

Bourgeois economic theory is so bad that some giant corporations rely, not on economists, but astrologers for predicting the future! Yes, a number of the major corporations and banks employ astrologists to know how the market will do. The astrologers have a better track record, apparently, than bourgeois economists! No surprise there, I suppose. And yet, these bourgeois economists have the audacity to ridicule Marxism! They laughed at Marx’s predictions of crises, the theory of increasing misery, and so on.

But as we say in England, he who laughs last, laughs best! The so-called Golden Age of capitalism in the 50s and 60s saw a colossal upswing of the productive forces. But this was due to special factors arising from the Second World War that will not be repeated again. The key factor for the upswing was the growth of world trade. The tariff barriers of the interwar period were torn down. World trade and world production increased dramatically, like a spiral of growth.

This allowed capitalism to partially and for a temporary period overcome its fundamental contradictions, namely the productive forces (industry, technique and science) were no longer blocked by or hemmed in by the nation state and private ownership. At least for a period of time. This all appeared to invalidate Marxism. If capitalism could “deliver the goods”, then why fight to change the system? What was the point in Marxism?

Of course, this only affected the advanced capitalist countries. The former colonial countries, under the grip of imperialist domination, were left behind. They were more exploited than before with adverse terms of trade. But this so-called golden age of capitalism finally came to an end in the slump of 1974.

This 1974 slump was a turning point in the development of capitalism in the post-war period. Capitalism now began to revert to “normal”. Mass unemployment returned everywhere, there were attacks on the working class (to restore a falling rate of profit which had fallen in the 1960s) and counter-reforms. Keynesianism was abandoned due to the massive rise in inflation affecting the capitalist world. They turned instead to Monetarism, orthodox bourgeois economics, as a solution. But this made matters even worse.

The capitalist system, compared to the past, was now in an impasse. 

Compared to the 1950s and 1960s, everything was lower: profitability, productivity, investment, employment, economic growth… All the industries were lower than before. However, the capitalists were euphoric with the collapse of the Soviet Union and the shift to capitalism in China, which gave them a new lease of life. New markets and new fields of investment opened up. “Globalisation” became the buzzword, and they took full advantage of the situation. 

This, together with other things like credit in particular, allowed capitalism to maintain itself until the crisis of 2008. Then came the terrible shock, of the deepest crisis since the 1930s. Once again, this shock threw bourgeois economics into crisis. All their computer “models”, all their mathematical equations, none of them were of any use. They could not foresee or explain anything. The Economist Magazine, a right-wing economist magazine, 16 July 2009, remarked: “Of all the economic bubbles that have been pricked, few have burst more spectacularly than the reputation of economics itself.”

Bourgeois economics is bankrupt because it has no interest in discovering the real laws of capitalism. Its role is simply to justify capitalism. They are apologists for the capitalist system, nothing more. They believe, superficially of course, that capitalism is driven by confidence and they think that they can maintain or restore confidence simply by pulling a few levers, here and there. At least the early classical economists, such as Adam Smith and David Ricardo tried to understand the workings of capitalism. They took the subject seriously and uncovered quite a lot. Marx paid tribute to them. Above all, they based their ideas on the Labour Theory of Value.

The capitalist mode of production is characterised by “an immense accumulation of commodities”. The common feature of all commodities is that they are products of human labour. The value of a commodity is determined by the amount of socially necessary labour time employed in producing it. Price, in the last analysis, is the reflection of the underlying value of a commodity. This fundamental idea, which was accepted by all the Classical economists, including Marx, was too subversive for capitalism.

Therefore for political reasons, they discarded it. In its place came the mumbo-jumbo of “marginal utility” and other subjective explanations about individual preferences, market relations and so on. It was left to Karl Marx to develop the original ideas of the Classical economists and the labour theory of value. From this Marx was able to discover the origins of surplus value, of where profit comes from. Marx explained that profit comes from the unpaid labour of the working class. It is the basis of exploitation.

Of course, bourgeois economists deny exploitation, they say the labour is simply a factor of production along with land, capital, and enterprise. And because labour receives wages, it gets its just reward, just like capital gets profits. 

This is false. Labour is not simply a factor of production. Labour on the contrary is the only source of increased and new value. You can have a factory but with no workers in the factory, it's not going to produce anything. You can wait for as long as you want, it will simply decay and rot and rust away. But as soon as you have the application of living labour, you have the creation of new value.

What Marx discovered is that the working class does not sell its labour but its labour power for wages. Labour power is their abilities/energies to work, which produce greater value than its own value. Once the capitalist pays for these abilities, he can do whatever he wants with these abilities, therefore he puts them to work. The working day is divided into two: one part the worker produces additional value to cover their wages, then the other part they produce surplus value for the employers, the bosses. 

Of course, under capitalism, exploitation is hidden, it's disguised. But of course, if you compare capitalism to other forms of class society, it becomes clear. After all, capitalism is simply a stage in the development of human history. If you take feudalism for example, exploitation is very clear. The serf works on the lord’s land for free; free labour. That’s quite clear. Under slavery, its also self-evident - the slave is owned by the slave owner. The slave however doesn’t produce completely surplus value, they have to eat and live, to cover their own livelihoods.

Under capitalism, it's more disguised. You have the surplus labour (like the serfs working on the lord’s land for free) and necessary labour are combined in the same working day. When the worker works sufficient time to cover their wages, a bell doesn’t sound in the factory to announce that they’ve covered their wages. The working day continues after this to produce surplus value.

The problem a capitalist economy faces is that they produce for a market without any regard for anything. They are not aware of any limits of the market. They just produce in the hopes that they will sell in the market. And this is a reflection of the anarchy of capitalism. No one plans it, it just happens. But within this anarchy, there are underlying laws which Marx tried to discover. But Marx himself in analysing capitalism didn’t just look at the surface reality, where the bourgeois economists concentrate their efforts. He tried to get to the essence of the matter, the underlying processes.

It appears that the sun navigates the earth, but we know it's the opposite way. The reason why the sun rises in the east and sets in the west is because the earth rotates towards the east. So if we just viewed the surface for a superficial understanding, you wouldn’t understand what’s going on.

Under capitalism, there’s a huge division of labour. Production is geared not to fill an individual’s own wants, but to fill other people’s wants. So exchange becomes central to this question. With the world division of labour, we have the world market which is flooded with billions and trillions of commodities. The question arises, how much should be produced of each commodity? Who decides?

Given the anarchy of the market, no-one decides. There is no conscious decision, no plan. Under bourgeois economics, they say it's the market that decides everything. Marx says it’s the law of value in fact that underpins everything. The capitalists don't know, they simply produce to sell. They’re blind to the process. Therefore, sometimes they produce too much. As a result, the price of their commodity will fall below their value. And if there’s a glut, they won’t sell their goods, or make any profits. And sometimes, they produce too little, and therefore prices rise above the value of a commodity and they make super profits as a result.

Clearly, market prices are affected by the laws of supply and demand. And Marx never denied this, but prices fluctuate, due to the laws of supply and demand, around a certain axis. And this axis is determined by the cost of production. However much the price of a pint of beer varies, it will consistently cost less than a washing machine or a motor car because the cost of production of beer is much less than a washing machine or motor car.

But what constitutes the cost of production? It's made up of commodities or things that are produced by labour time. Therefore, we come back again to the law of value, which underpins this question. This axis around which there is a fluctuation of prices according to supply and demand is something like the sea level which can rise and fall according to the pull of tides. But still, the sea level exists and is central.

Another factor is that Marx made a great distinction between what he called constant capital and variable capital. Constant capital are the money employed into machinery, building, raw materials, all of which transfer their value into a new product. They don’t all do this at once, you have depreciation, wear and tear, the use of materials. But in the production process, their value is transferred into the new products. This constant capital doesn’t product new values, it simply transfers the value from the raw materials into the new products. Whereas Marx explained that there is variable capital, which is invested in wages and the workers. It is this variable capital that produces new value, surplus value. So constant capital simply transfers its value, variable capital adds to and increases value. 

And Marx explained that the rate of exploitation is really the ratio between the surplus created in production and the cost of wages. The more surplus value that can be squeezed out for less wages, the greater the exploitation. This attempt to squeeze more surplus value out of the working class has been a feature particularly for the last 40 or 50 years where it's been intensified.

In fact, that is the whole purpose of capitalist production: the creation of the maximum surplus value, the maximum profit. So you have a whole number of things introduced: just-in-time production, flexibility of labour, zero-hour contracts. All this is used to intensify the exploitation of the working class. So the greater the productivity, the greater the profitability for capitalism.

The problem with capitalism is that it needs to realize these profits; they have to sell the commodities. The problem they have is that markets are limited. Therefore, there’s been a rise of what they call excess-capacity over the past number of years. The productive potential has outgrown the ability of the market to consume the goods.

Clearly 2008 and 2020 came as a terrific shock to the capitalists. They realized that something is fundamentally wrong. All their old theories, including the “efficient market hypothesis” have to be thrown out the window. They not only face a crisis, they face a depression. The monetarists, the orthodox wing, see the solution as improving conditions for profitability, therefore they see the need to reduce costs on business, particularly wage costs. Of course, this cuts demand. While the Keynesians want to improve demand by deficit financing and public expenditure.

In reality, both the monetarists and Keynesians are right and both are wrong at the same time. They are pointing to different sides of the same problem, the basic contradiction of capitalism. Yes, crisis means a collapse in profitability. To get the wheels moving again, profitability needs to be restored. This means wage cuts, which in turn cuts the market. That is why you have the paradox that capitalists want to increase demand by asking other capitalists to give their workers wage rises, but not their own!

Yes, as the Keynesians say, crisis means a collapse in demand, which is true. Therefore the state needs to step in and prop up demand by public spending. But government money comes from taxes. If you tax the capitalists then it cuts investment. If you tax workers then you cut consumption. Borrowing is simply spending tomorrow’s tax revenues. They have to be paid back with interest. They also say workers must get wage raises, which we are also in favour of. On a capitalist basis, these increased wages will cut into capitalist profits. So there’s other problems on that front.

In any case, capitalists are not interested in markets, but profitable markets. Both monetarism and Keynesianism have clearly failed, therefore we have the present deep crisis, a crisis they said would never happen.

In the 1950s and 1960s, the heyday of Keynesianism, some so-called Marxists bought into Keynesianism, such as Paul Sweezy, Ernest Mandel and Tony Cliff. The latter put forward the idea of the permanent arms economy. That military spending would prevent overproduction as any surplus could be creamed off into arms production, which produces junk or is destroyed, so no overproduction could occur.

But theory was shown to be false. Arms expenditure is not an advantage, but a burden on an economy. It is no accident that the two major countries that had no real military spending, Germany and Japan, developed the most, and were the most successful. More importantly, Marx explained, capital was not simply a thing: buildings, machinery and factories and so on, but was a social relationship, based on classes and relationship to the means of production. 

In fact, this relationship forms the basis of the class struggle. The more wages the workers get, the less profit is made, and vice versa. We’ve seen over the past period: the colossal amount of wealth that is being created is being pocketed by the super rich of capitalism. 26 billionaires have more wealth than half of humanity put together. At the same time, the share that has gone to the working class over the past 30-40 years has gone down compared to the capitalists.

Of course, capitalist production is based on contradictions, that’s the problem. On the one hand, the capitalist has to squeeze as much as possible out of the unpaid labour of the working class. They are in a constant battle to reduce costs. At the same time, they need to sell the commodities they produce in the open market to realize their profits.

There is a contradiction between the production of surplus value in the factories and the realization of surplus value in the market, in the sale of a commodity. It is this basis of the contradiction, at which lies the problem of overproduction in capitalist society. Under the laws of competition, every capitalist is in a struggle with all the other capitalists. The only way they can compete is by increasing the productivity of labour.

Marx explained that the laws of capitalism are to drive accumulation. The capitalists are forced to introduce new top technology, new machinery in order to compete. If they don’t do that, they can be undermined, they can be destroyed by their competitors. So the historical function of the ruling class is precisely to invest and to accumulate. As Marx says, it’s “Accumulation for accumulation's sake!”  

This vast increase in productive capacity means an ability to produce more and more commodities. At a certain point, overproduction is reached and you have a slump. Capitalism solves this by destroying this overproduction and the means of production. Factories are closed, workers thrown out of work, production becomes idle. Out of this collapse, there is a further concentration of capital into fewer hands.

“There comes a moment at which the market manifests itself as too narrow for production. This occurs at the end of the cycle. But it merely means: the market is glutted. Over-production is manifest.” (Theories of Surplus Value, vol.2, p.524).

This is not a theory of “underconsumption” as some argue. Theories of underconsumption do exist, but they are linked to Keynesianism. They believe by simply raising wages, the crisis will be resolved. But this is false. Simply increasing wages cuts into profitability as do tax rises. In fact, if you paid workers the full value of their wages, profits would come to a complete end, and capitalist production would come to a full stop. This reveals the inner contradictions of capitalism.

The reason why the system not only survives, but moves forward is because the capitalist class takes the surplus produced by the working class and reinvests it back into production. This in its turn creates a new market and the cycle of capitalism develops. 

There are other contradictions that bear down on capitalism. One of those is the falling rate of profit, which is a tendency under capitalism. As explained earlier, the rate of exploitation is the ratio between surplus value and the cost of wages. But there’s another problem: the rate of profit, which is different from that. The rate of profit is the revenue from sales minus the cost of producing. It is the measure of how much profit grows in a company.

Of course, there are different rates of profit affecting different industries. And there is a tendency to equalize the rate of profit. Where capital employed in a lower profit industry is transferred into a higher profit industry.

But this accumulation of capitalism that we mentioned, more and more increased the constant capital element relative to the variable capital element. More and more is invested into factories, machines, etc, and proportionately less in variable capital, wages, there is a tendency for the rate of profit to fall. There is a push to replace workers by machines. But the problem is, surplus value comes from the workers, not the machines. So this increase in accumulation of constant capital results in a tendency in the rate of profit to decline.

But as Marx explained this is a tendency and there are countervailing factors involved here, which allows them to get around this contradiction. They can lower the cost of constant capital for instance. They can engage in foreign trade. But the main way of getting around it is by intensifying the exploitation of the workers in the factories that remain. This is what we have seen over the last 40 years. In the 60s, you had the declining rate of profit. And then in the 80s and 90s, when you had an intensification of the exploitation of the working class, you had the rate of profit start again to rise.

Some have said this is the real explanation for crisis, but this is not correct. While it can contribute, and aggravate the crisis, at certain times, the real cause as Marx explained many times, is the massive development of capacity and the limits of the capitalist market.

Of course, there are different contradictions at play in this complex system: credit can allow capitalism to go beyond its limits. But today, the mountain of debt will weigh down capitalism. And this limits any real recovery of capitalism. It’s a system based on contradictions. Today, the system is experiencing grave difficulties. Accumulation, which is the driving force of capitalism (that is investment), has practically ground to a halt everywhere.

Today, there is a collapse in investment. In Europe it fell by 20%. In Germany production of capital goods fell 17% in March compared with February; double the fall in consumer goods. Bankruptcies & closures are taking place everywhere. Millions are being thrown out of work. This is not a cyclical crisis of capitalism, it is an organic crisis. The system has reached its limits.

This is where historical materialism comes into play, where Marx explained that a system, having reached its limits, enters decline and its death agony. We are now heading for a massive global depression. There’s no easy escape from this. The 1930s depression was not resolved by capitalism, but by world war. That is now ruled out.

This crisis will last for years and years and years. Of course, there will be ups and downs, but the general trajectory will be downwards. There’s no final crisis of capitalism, it can keep going on indefinitely in that sense. It has to be overthrown, or else it will keep going at the expense of the working class and all the gains of the past will be eliminated. It cannot afford reforms, only counter reforms. Therefore, the working class will fight and there will be class struggle everywhere. The only way to rid ourselves of capitalist crisis is the overthrow of the system. There is no way out on the basis of capitalism. That is the real message of Marxism, which has been confirmed by events. Thank you comrades.


Joe: Hello comrades, greetings from London. In 1960 during the postwar boom, Ted Grant, one of the main founders of our organization, wrote an article Will there be a slump? It was written to explain that during the long period of the capitalist boom, the fundamental laws of capitalist production, distribution and exchange, remain the same. Therefore, inevitably, there would be a slump and a slump did indeed come on a global scale in 1973.

I would like to talk about some of the arguments used by Ted Grant in this article to argue against some of the popular ideas of the left reformists today. Particularly, the policies of UBI and quantitative easing. When I say against UBI, what I in fact mean is to highlight that it is not a solution to the crisis. We are of course not against the idea of everyone receiving a basic level of income, it’s a good thing. In fact, we would support any such campaign, as our tendency did during the great depression - the policy of either giving us work or full pay.

However, we would support the policy while asking the question: who pays for it? And we would answer by saying that the capitalist must pay. We would say that everyone deserves a basic income and the necessities of life and that the capitalists must be expropriated in order to achieve this. In other words, we would turn a campaign for a reform into a campaign for socialist demands.

Because we must explain that universal basic income, as the reformists suggest, where the state pays to somehow stimulate demand, will not solve the economic crisis. The left reformists today and in every period do not understand the cause of the crisis, they only see the system. The cause of capitalist crisis is overproduction, both of consumer goods and of capital goods. And as Rob explained, this is not the same as under consumption.

So the proponents of MMT and UBI, they’re just the same as the Keynesians. They think that UBI can stimulate demand, which they think will turn the economy. They think it will move it from recession and growing inequality, into growth with shrinking inequality. But as Ted Grant explained, by analyzing the period of growth of the post war boom, the reality shows a very different picture. He gives the following statistics about the British economy.

In 1938, at the tail end of the great depression, consumers made up 67.2% of the final demand in the goods economy. By 1957 at the height of the post-war boom, consumers only made up 54.2 % of the final demand. This is 13% less proportionally. So it was in fact an increase in final demand through exports and capital formulation, it was that which coincided with the boom. While the proportion of state demand and of consumer demand had changed or even lowered.

So as Ted Grant explains, these figures demonstrate irrefutably, that the share going to the working class relative to the total production has fallen. Statistics from America, Italy, Japan, and West Germany demonstrate the same thing. And the bourgeois economists understand the same thing.

I now quote a report from the UN in 1959: “the economic upswing has been based primarily on large scale investment and fixed assets, and a rapid growth of private expenditure on automobiles and durable goods … no part was played in this process by rising government expenditure”. 

And then finally, I quote Enoch Powell, former financial secretary to the treasury: “this increase of production in 1959 in Britain was part of a general trade recovery. The recovery, like the recession, has taken place due to other sources of wider and different character,” i.e. Not state expenditure.

So unlike the assertions of MMT, reducing inequality will not automatically stimulate capitalist growth. Increasing the proportion of government spending will not stimulate capitalist growth. On the contrary, a period of growth develops due to increased profitable private investment.

So in every way, we can see that the Keynesians and the Neo-Keynesians are looking at everything upside down. Whatever their intentions, such ideas put forward by so called socialists only serve to confuse the issue and to diffuse the workers’ revolutionary mood. They use it to put on hold the pursuit of genuine socialist demands. We must expose them for this by asking the following question: who will pay - capital or labour? And if not socialist demands now, then when? Thank you.

Stefan: Thank you. The upcoming bourgeoisie based themselves on progressive ideas, in the struggle against the old aristocratic landowners and feudalism. In this period, we had great philosophers like Spinoza and Hegel and classical economists like Adam Smith and David Ricardo.

Marxist economics was the culmination of classical bourgeois economics, but also made the old thinking obsolete. In fact, Marxist economics is not simply economics, but historical materialism applied to capitalism. We understand capitalism as a specific society, as one stage in historical development.

Marx said every child knows that any nation that stopped working not for a year, but let us say, just for a few weeks, would perish. In other words, production is fundamental to human societies and history. It is a self-evident fact that before anything, one has to eat. Of course, production was never carried out by the ruling class, but by slaves, peasants, and workers.

Of course, not all production is capitalist production. When peasants grow crops for themselves or when I cook dinner for my family, this is not capitalist production. We need to clearly differentiate between what is common to all human societies and that which is specific to capitalism.

The bourgeois economists simply assume the categories of capitalism as given, as super-historic and applicable to all societies and all stages of development. So we can almost talk about capitalist production even in earlier human societies, only less developed. They never critically develop or explain money or commodities, for example. Instead, they just assume them as self-evident. But I need money to buy it. In capitalism, the worker has no other means to make a livelihood. They own no means of production, they don’t toil in a farm or own it for example. Workers sell their capacity to work and receive a wage in exchange.

There is a struggle between labour and capital over the distribution between wages and profits, over surplus value. If the workers get higher wages, then profits must suffer and vice versa. This is an irreconcilable struggle, a contradiction where only one side can win. Marx’s analysis shows crucially that there exists a class of people that are forced to sell their labour power by being exploited.

Of course the bourgeois economists shy back from these conclusions and retreat from scientific exploration into what Marx and Engels call vulgar economics. Capital is not a dead thing, but a living thing. Marx wrote that it’s vampire like, it only lives by sucking living labour. And it lives the more, the more labour it sucks.

In academia, they teach this in a completely sterile and apolitical way. As Marxists we need to understand this as political economy. And that eventually the struggle between labour and capital will leave the economic domain and become political. If you look at recent events in Sudan or Lebanon or Chile, these are fundamentally struggles over surplus value. They could revolve around economic demands to start, that spilled out on the streets in revolutionary mass movements.

And in this sense, became the embryo for political struggles for power. Of course, not yet consciously in the minds of the workers or the ruling class. Revolutionaries say that in the natural progression of things, there is a struggle for the power to decide. And it's most advanced when the workers refuse to accept the rule of the bosses and demand full control.

When it's about cuts or counter reforms at the state level for example, it can quickly become a question of state power. And we support a workers state. So that’s the point I want to make. That a scientific analysis of capitalism reveals it as simply one stage in human history, with a beginning and an end. It will necessarily end with a revolutionary overthrow of capitalism by the workers.

These are extremely dangerous ideas for our class enemies, not to be taught in the schools for example. But this is a scientific result, exploitation is an objective fact. Socialism is not just an opinion, it's the culmination of human thought over centuries and millennia. As the culmination of the struggle between classes over the course of human history. We were elevated to a conscious level.

This, I think, is why our tendency takes Marxist economics seriously. Because it has serious implications for revolutionary politics. It gives us the basis to understand the mechanics of this system. In fighting for understanding capitalism, we also struggle to understand the conditions for its overthrow. Thank you comrades.

Adam: Capital was a polemic written in the language of political economy. Marx described it as being the most terrible missile hurled at the heads of the bourgeoisie. He said I hope to deal to the bourgeoisie a theoretical blow from which it will never recover. Now as the picture behind me shows, this was written in 1867, but despite being over 150 years old, Capital is more relevant now than at the time it was written.

Despite what this picture says behind me, Marx wasn’t some sort of prophet. Rather, he had a method, an analytical framework that allowed him to understand and frame the world.

And as Stefan just said, this is a method based on historical materialism, but most importantly, on dialectical materialism. And in fact, Lenin once remarked, in order to understand Capital you had to first read all of Hegel. Now I wouldn’t go as far as to say that, but you definitely shouldn’t just jump into the deep end in terms of understanding Capital.

How many comrades do we know that try to read Capital and after the third chapter, just give up because they’ve never tried to read any other Marxist economics before? It's important to understand the trajectory of marx’s economic thought. Marx began as a philosopher based on the dialectics of Hegel and the materialism of Feuerbach.

But it was actually Engels who alerted Marx to the importance of economic theory based on his experience in the industrial heartland of Manchester in England, because it was here in Britain you saw the highest point of political economy, with the ideas of Adam Smith and David Ricardo. And that’s because it was in Britain that capitalism was most developed and therefore you could see the laws of capitalism in the purest form. But these British economists like Smith and Ricardo were limited by the bourgeois individualistic mindset.

They had a labour theory of value as Rob said, and they had other general economic laws, but their ideas were very reductionist. All they did was look at the individual and individual acts of exchange within the economy. Marx referred to it as the Robinson Crusoe method, because all the thought experiments were about two men on an island. As though capitalist society was all these individuals exchanging with each other without any interconnectivity or motion between them.

For these bourgeois economists, they thought everything was about rational individual agents. And they thought therefore that if everyone acted in their own individual interest, the overall outcome would be good for society because of the invisible hand. And you had others like the French economists like John Baptiste Say, who put forward the idea of the efficient market, that everything would work out as long as the market decided. And this is like the free market libertarians that we see today.

But Marx has a dialectical understanding of capitalism and of the economy. In Capital, he does deal with high levels of abstraction and there are symbols and equations. But then what Marx does is zoom into the workplace and see what these mean in practice, concretely.  Because the economy is not some sort of abstract equation, rather Marx shows the economy fundamentally is made up of living forces, of flesh and blood. As Marx says, capitalism comes into being with blood and dirt dripping from every pore.

And Marx shows that in fact what you have is this chaotic, dynamic system under capitalism. He uses dialectics to look at one part of the system, holding one part constant, uncovers the dynamics and the laws of motion of one aspect of capitalism and then another. And then he brings all these parts together to see how the whole economy interacts. In doing so what he shows is you can have rational agents under capitalism, even if you assume rational agents acting rationally, the overall effect is something completely irrational as a whole, in terms of  capitalism going into crisis.

Marx shows that there are laws to capitalism, laws of motion, but they are a case of order arising out of chaos. It's a case of necessity expressing itself through accident. In other words you have these emergent dynamics, the result of lots of individuals going about their lives, trying to make ends meet.

But the fact is we are not isolated individuals, we are forced to interact with each other, most importantly we are enforced to interact on a class basis. And so it's not a Robinson Crusoe thought experiment, it's a question of class struggle, and the thing is these laws of capitalism impose themselves through competition, they are objective laws independent of the objectives of the individual capitalist. They are laws that impose themselves on the capitalist and force themselves to attack the workers, it's not about morality or benevolence.

But these laws can be uncovered, they might seem mysterious, but we can uncover and discover them. And by understanding these laws we can overthrow them and replace them with new laws, socialist laws. And that's the importance Marxist economic ideas. Thank you very much.

Nelson: Comrades, I'd like to speak about Keynesianism. The ruling class has many methods that it can try to use and get out of a crisis. One of these is increasing government spending, as favoured by Keynesians. Although most left reformists worship Keynes, he was not a socialist. He wanted to save capitalism from itself. I quote “the class war find will me on the side of the educated bourgeois”.

The reason why reformists promote Keynes is that his theory appears to offer a way to make capitalism work without a revolution, i.e. without touching the question over who owns and controls the productive forces. Instead of expropriating the capitalist, all we need to do is increase government spending to boost effective demand, which means ability to pay, and the crisis will be solved.

But there is a big problem. Under capitalism, the state does not have money of its own. As Rob mentioned, either they have to raise it through taxes, which eats into the very demand they are trying to boost, or they borrow the money, but all this money needs to be paid back with interest. Credit is therefore only a temporary means of expanding the market today, but at the expense of the market tomorrow.

As Marx explained, the problem in capitalist crises is not lack of demand, but a lack of profitable markets, and this is linked to the question of overproduction, the ability of capitalists to produce commodities. This tends to outstrip the ability for them to be sold at a profit. As Marx also explained, the methods that the capitalist have for getting out of the crisis, will prepare the ground for an even bigger crisis, and this applies to Keynesianism.

China in the last decade is a perfect example. With the global crisis of 2008 China responded with the world's largest spending program, the equivalent of over half a trillion dollars, mostly on infrastructure and industrial projects. To give an idea of the size of this, more concrete was poured in China every two years than the USA poured in the entire 20th century. It is true that this helped China avoid a recession in this period, and it helped prop up the world economy, but now the effects are turning into their opposite.

China's total debt is now over 317% of GDP. It has more than doubled in only a few years. The system is reaching its limit. Every year the growth of the Chinese economy has slowed down. The stimulus helped in the short term, but it has created enormous problems in the long term, and this comes back to over production. Much of the developments in China have outstripped the ability of the market to profitably absorb it.

There are entire ghost cities where hundreds and thousands of offices and homes are empty because no one can afford them, and they cannot make a profit for developers. The development of Chinese industry makes worldwide overproduction worse.

For example Chinese Steel capacity has massively increased, world demand for steel is about 1.5 billion tons, but global capacity for producing steel is 2.5 billion, nearly half of which is in China. The point is that in order to escape the last crisis, China has massively developed its productive forces, but it must find profitable outlets, which is increasingly difficult with the world market in crisis. 

So Keynesianism has not fixed China's problems, it’s actually made them worse, and now China will not be able to repeat the same policies of the past 10 years. What is true for China is true for all the other countries. Keynesianism will not fix this crisis, there is a limit to the spending. These debts must be repaid. Unlike the reformists, we did not limit ourselves to what is acceptable to the capitalist. We do not celebrate Keynes. We do not try and patch up capitalism. We put forward a socialist alternative which means putting the working class in power. Thank you.

Sum up

Rob: First of all, I thank everybody for participating and I think it has been a very useful discussion. I think the objective of a discussion like this is to create a thirst for comrades going into this subject a bit more deeply. I know Adam mentioned Marx’s Capital, which is obviously the key work, the life work if you will, of Marxist economics, but a word of warning: I don't think perhaps comrades who are new to the movement should jump into Capital, because it is quite a mouthful in one sense.

I remember that Harold Wilson was the leader of the Labour Party in the 1960s. He contemptuously said he managed to read the first line of the first footnote on page one of Capital and that as far as he got. Perhaps we can quote Marx's response: ignorance never helped anybody. And it's a necessity for each and everybody to try and conquer these ideas for ourselves. But there are smaller works by Marx which are more basic introductions which are very good, such as Wage Labour & Capital, and Value, Price and Profit.

I agree with Joel who spoke first about the writings of Ted Grant ‘Will there be a slump?’, which is a brilliant defense of Marxist Economics in the most difficult period of the upswing, where he explains in detail the reasons for the economic boom or upswing at the time. Obviously the downswing took a bit longer than originally thought to develop, but when it came it came with a vengeance.

Of course for us, we have to take the long view of history, and state that capitalism is simply a small development of world history. In fact the whole of class society is only a very small segment of the time in which humans have been on this planet. Classes were only able to come into existence when society was able to produce a surplus in their basic needs. This surplus which was taken by the ruling classes allowed them the free time to develop science, art, culture and so on. And it has been the function of class society, as horrible as it has been, to develop the productive forces.

Capitalism is the highest stage of this form of class society, which has now created a world economy, a world market and created the material basis, which is the most important, for socialism, for a classless society. 

Of course capitalism doesn't disappear on its own accord and it will resist by all its means to depart from the scene of history. But in its turn capitalism has created its own grave diggers in the form of the working class, which is now the dominant force on the planet. And although it is an exploited class, its very conditions of work develop a collective consciousness on basis of events. It develops class consciousness and at times revolutionary consciousness.

And because this is prepared precisely because of the contradictions of the impasse of capitalism, our task is to demystify capitalism. The majority of people are mystified by economic activity and the laws of capitalism, because these laws operate on the back of society and people's lives are dominated by money, by commodities. The market and market relations dominate everything and everyone. Everything is turned into money relations under capitalism.

Only by the liberation of humankind by the socialist revolution will this mystification clear away and even this mystical substance called gold will lose its mysterious grip on people. I see in today's papers that gold has risen dramatically and the dollar has fallen. But it’s only metal, as Lenin said it would be great to decorate bathrooms after the revolution.

It was interesting, one of the comrades, think it was Stephan who talked about the early period of capitalism. In fact it's interesting to note that in Britain anyway, at least at the time of the Chartists, there were a number of socialist economists before Marx, people like John Gray, William Thomson, Thomas Hodgskin, and their ideas were very radical. They were based on the labour theory of value, but they drew revolutionary conclusions. And they came quite close to this idea of surplus value and where it was coming from, but they didn't solve it. It was only Marx who was able to solve it.

But nevertheless it's quite interesting, you take a look at these early socialist economists and they are head and shoulders above today's lefts reformists. Because they drew revolutionary conclusions from economics. I agree with the comrade who raised this question of Keynesianism, comrade Nelson.

Keynesianism is an attempt to patch up capitalism, and it can’t do it, it's impossible. I think it was (Francisco) Largo Caballero who said that you can't cure cancer with an aspirin, and you can't cure capitalism by tinkering with it. And that's what the reformists want to do, tinker with the system and they are terrified by the idea of revolution. Of course they do not offer a way forward.

As Joe explained, it is an idea like Universal Basic Income, but capitalism cannot afford that. It cannot even afford a minimum wage for workers. Of course we are in favour of every advance for the working class, wages conditions, anything, everything. We will fight to improve conditions where we can, we will fight to defend the interests of the working class.

What we say is that if capitalism cannot deliver the basic conditions of life for working people, then to hell with capitalism. Capitalism for the majority of people on this planet is a nightmare situation with difficulties all around; poverty, squalor, homelessness, unemployment. We have all the wonders of science & technology, the enormous possibilities of automation of information technology, of robotics. All this terrifies the working class because it means they are going to lose their jobs.

On a capitalist basis such advances mean mass unemployment, not just unskilled workers but also white collar workers, everybody could be affected by this. It is a nightmare under capitalism but if it was used for the benefit of humankind, for working people it would provide a paradise on earth. Capitalism can no longer develop the productive forces, it's reached its limits. In other words its historical justification for existence is now a dead-end, and the longer its allowed to exist the longer the misery will also exist.

Just like you have forms of society, they’ve risen and they’ve collapsed, or gone by the wayside. Our task of the working class is to overthrow capitalism, in order to end these contradictions and crises that we face. You know we could reduce the working week to what - 10-15 hours a week? It's possible, even less, so that we can enjoy ourselves.

I've got a book by Paul Lafargue, The right to be lazy, arguing that there is more to life than just work, work, work. We live to work and we work to live. That’s what it is under capitalism. Where is the promised leisure time we were promised 50-60 years ago? Things are getting worse, not better. Pension age has been raised again & again & again.

So in other words capitalism wants us to work until we die. That's the real message of capitalism and capitalist crisis. So therefore the private ownership of the means of production is a barrier to the development of society. The market economy is a big barrier to human progress.

Capitalism has done us this favour, it's brought into being the material basis for a new world. But this could only be done and planned on a rational basis, under the democratic control and management of the working class. Where we can plan rationally the plan of society for the interests and needs of society. Where the idea of the environmental disaster can be ended on a basis of a rational plan of production internationally.

Instead of the wastage that we have, of unemployment, people being paid not to work but to remain in idleness. We have those who work longer and longer hours and are full of stress because of the workload that they face. That can be ended, once and for all. And then we can have, yes, not the duplication of capitalism and the overproduction of capitalism (what a crazy idea). 

We can plan things after all, on the basis of what we have now. We have the ability to plan things in a very rational and sensible way. And if that was done, we’d have a society based on superabundance of what we need, higher living standards for everybody, the abolition of nuclear weapons and the paraphernalia of war, and a genuine use of resources to raise our cultural level all around, to abolish poverty, squalor and want.

In other words, what socialism offers us is paradise on earth. A wonderful life. And that’s what we must fight for. An end to the misery of capitalism and barbarism. A life of prosperity, peace, no violence. That's the socialist future and that’s what we must fight for. Thank you.