Groucho Marxism

Questions and answers on socialism, Marxism, and related topics

  • Mathematical Marxian economics

    Consider an economy which produces m commodities using n types of labour. For such an economy we can define a commodity vector as a vector with positive elements of length m, and a labour vector as a vector with positive elements of length n. The economy is defined by an activity set, with the interpretation that an element (x,u,x’) of this set represents a possible configuration of commodity inputs x, labour inputs u, and commodity outputs x’ for the economy. For this economy, a price vector is a vector with positive elements of length m, and a wage vector is a vector with positive elements of length n. The gross profit associated with activity (x,u,x’), price vector p, and wage vector w, is given by the equation: H = p(x’-x)-wu; and the associated profit rate is given by: r = H/px.

    Rearranging the above equations gives: px’ = px(1+r)+wu. The production price vector associated with the activity (x,u,x’), wage vector w, and profit rate vector r, is defined as the price vector p satisfying this equation. Rearranging this equation again gives: wu = px’-px(1+r). The wage-price curve associated with the activity (x,u,x’) and price vector p is the function w() which satisfies this equation, considered as a function of the profit rate: w(r)u = px’-px(1+r). This demonstrates an inverse relationship between wages and profit rates. Note also that our expression for gross profits, H = p(x’-x)-wu, bears a striking resemblance to the expression for the Hamiltonian from physics: H = pdx/dt-L. Here, L is the Lagrangian, defined as the difference between a system’s kinetic and potential energy.

    In physics, the action, S, of a physical system is defined as the integral of the Lagrangian L over a given time interval: S = ∫ Ldt. The principle of stationary action, also known as Hamilton’s principle, states that the physical path taken by a system between two points in time is the one for which the action integral is stationary (either a minimum, maximum, or saddle point). This principle determines the dynamics of the system. If x denotes the state of the system then the conjugate momentum is defined as the partial derivative of L with respect to dx/dt. It can then be shown that the dynamics of the system follows what are known as Hamilton’s equations: dp/dt = -∂H/∂x and dx/dt = ∂H/∂p, where H = pdx/dt-L is the Hamiltonian. This is a reformulation of Newtonian mechanics.

    In engineering, the Hamiltonian describes not the dynamics of a system but conditions for minimizing some scalar function thereof (the Lagrangian) over time with respect to a control variable, u. In this context, the dynamics of the system are given by dx/dt = f(x,u) for some function f(), and the aim is to minimize the action functional S = ∫ Ldt over all control trajectories {u(t)}. The Hamilton is then given by: H = pf(x,u)-L. According to what is known as Pontryagin’s maximum principle, the optimal control trajectory (that is, the control trajectory that minimizes S) must also maximize the Hamiltonian H at all time points t. Furthermore, necessary conditions for the Hamiltonian to be maximized are given by the equations: dp/dt = -∂H/∂x, dx/dt = ∂H/∂p, and ∂H/∂u = 0. The first two are identical to Hamilton’s equations in physics.

    Returning to the economic context set out above, we may identify the control variable u with the labour input; the Lagrangian L with the associated labour cost: L = wu; and the Hamiltonian H with our expression for gross profit: H = p(x’-x)-wu. (Note that we are now working in a discrete rather than a continuous time framework.) We may also define the labour value of the commodity vector y as the minimum value of L = wu subject to the constraint that there exist commodity vectors x and x’ such that (x,u,x’) is an element of the activity set, x’-x is greater than or equal to y, and (x,u,x’) maximizes gross profits. Then, considering Pontryagin’s maximum principle, if {u(t)} is the labour input trajectory that attains the minimum value for each t subject to these constraints, we would expect this trajectory to minimize the functional S = ∑ L; that is, to minimize the sum of all labour values over a given time period.

    This suggests that the striking resemblance between our expression for gross profits and the expression for the Hamiltonian from physics is no mere coincidence. Just as the time evolution of a physical system is governed by the principle of stationary action, our analysis above suggests that the time evolution of an economic system is governed by what might be called the ‘principle of minimum labour values’. By Pontryagin’s maximum principle, a necessary condition for the minimum to be achieved is that profits are maximized at each time step. This should not be a surprise as one of the key characteristics of capitalism – perhaps the defining characteristic – is that firms always aim to maximize profits. The principle of minimum labour values might help shed some light on why this is so.

  • The truth about the American Civil War

    The American Civil War is usually portrayed as a battle of freedom vs. slavery, of good vs. evil. The truth, however, is rather different. The war began in 1861 and lasted four years, ending in 1865. At the time the war broke out, pretty much the entire world had already given up on slavery, or was in the process of giving up on it. In 1792, Denmark became the first country to issue a decree to abolish their transatlantic slave trade, effective from 1803. Haiti (then Saint-Domingue) formally declared independence from France in 1804 and became the first nation in the Western Hemisphere to permanently eliminate slavery in the modern era. Even the British Empire, hardly a bastion of enlightenment in these matters, abolished slavery in 1834.

    The US was therefore something of an outlier in still allowing slavery within its borders in 1861. The likelihood is that, had the civil war not happened, slavery would have been abolished throughout the US soon afterwards anyway, as that was clearly the way the wind was blowing. Why, then, such a bloody war? The reality is that it had little to do with abolishing slavery and everything to do with trying ‘preserve the Union.’ The spark that led the northern states to declare war on the south was the secession of South Carolina, which was closely followed by the secession of Mississippi, Florida, Alabama, Georgia, Louisiana, and Texas. These states then agreed to form a new federal government, the Confederate States of America.

    According to the principle of self-determination, these states should simply have been allowed to secede and form a new country. Instead, Lincoln declared war on the Confederacy. Why did he do this? I can think of three reasons. First, if these states had been allowed to secede, the US would have become a lot smaller and therefore a lot weaker on the global stage. Second, the formation of the Confederacy would have created an equally-sized rival to the US right on its doorstep. And third, as these states seceded in response to Lincoln’s election as president, allowing them to go would have made Lincoln look weak and would have meant him going down in history as the president who caused the break-up of the Union.

    The build-up of tension between the northern and southern states in the lead up to the war was a direct result of the rapid westward expansion of the United States following the Mexican-American war of 1846-1848, which must go down as one of the most one-sided wars in history. Ostensibly, the cause of the war was a border dispute between the US and Mexico; but in truth, this border dispute was deliberately manufactured by the US as a pretext to start a war against a much weaker nation that it knew it would defeat. The reason the US wanted to start a such a war was to annex Mexican territory and fulfill its ‘manifest destiny’: the imperialist belief in the 19th-century United States that American settlers were destined to expand westward across North America.

    This rapid expansion created a dispute between the northern and southern states about whether these new territories would become slave states or free states, and this dispute eventually culminated in civil war. The obvious way to resolve the dispute would have been for the US to simply give the annexed territories back to Mexico; and while they were at it, they could have given the land they had stolen from Native Americans back to them too. But of course that would have run counter to the ‘manifest destiny’ dogma. It is tempting to say that the US got what it deserved in pursuing such an aggressive territorial expansion – except that, as ever, it was ordinary people who suffered most from the civil war, whilst the ruling class came out relatively unscathed.

    Lincoln of course succeeded in preserving the Union, although he paid the ultimate price soon afterwards when he was assassinated by John Wilkes Booth. But his assassination only served to confer on him legendary status, and he has gone down in history as the man who valiantly defeated slavery and reunited the country. As we have seen, though, the idea that Lincoln started the war in order to defeat slavery is a fallacy. In fact Lincoln himself stated: ‘If I could save the Union without freeing any slave I would do, it, and if I could save it by freeing all the slaves I would do it; and if I could save it by freeing some and leaving others alone I would also do that.’ Hardly the words of a committed abolitionist!

    Even though Lincoln didn’t explicitly start the war to defeat slavery, it could still be argued that he deserves some credit for bringing about its demise in the US. After all, he did issue the Emancipation Proclamation in 1863, which declared all enslaved people in Confederate-held territory to be free, although it is generally agreed by historians that Lincoln did this for strategic rather than ethical reasons. The civil war certainly hastened the demise of slavery in the southern states; but as noted above, slavery probably would have ended there soon afterwards anyway. Had the Confederacy been allowed to secede, it might have prevented the US from going on to become the lumbering leviathan it is today – and perhaps the world would be a better place.

  • Defending the labour theory of value

    The labour theory of value (henceforth LTV) posits that the exchange value of a commodity is proportional to the socially necessary labour time required to produce it. In a recent (2021) article, the economist Blair Fix criticised the LTV on the grounds that: 1) most proponents of the LTV simply define it to be true and do not bother to check it empirically; 2) all attempts to validate the LTV empirically so far are fatally flawed; and 3) proponents of the LTV do not pay sufficient attention to what it implies about human nature. In this blog post, I will argue that claim 1) is disingenuous, claim 2) is true, but does not imply that the LTV is false, and claim 3) is based on a conflation of use value and exchange value and is therefore irrelevant.

    Fix begins his polemic with an attack on Marx, stating that ‘Marx proclaimed that value is proportional to labor time’, but ‘never bothered to check if this was correct.’ This is disingenuous, as Marx had no data available to him with which to empirically test the LTV; instead, Marx argued at length that the LTV was true on logical grounds. Fix goes on to state: ‘Beaten back by contradicting evidence, Marxists have largely abandoned the idea that the price of a commodity is proportional to labor time.’ It is not clear what ‘contradicting evidence’ he is referring to here; regardless, it is not true that Marxists have ‘largely abandoned the idea that the price of a commodity is proportional to labor time’ (although it is certainly true that some have).

    Smith and Ricardo are next in the firing line: ‘Both men claimed that prices were proportional to labor time. But neither economist bothered to check the data.’ Again, this is disingenuous, as neither had data available to test the LTV, and the implication that if they had ‘bothered to check the data’ they would have found the LTV to be false is unfounded. Next, Fix sets his sights on economic historian E. K. Hunt: ‘Hunt argues that the labor theory of value can’t be evaluated in the normal way (say, by testing its assumptions). Instead, we must judge the theory by asking whether it gives ‘insight’ into the nature of capitalism.’ But Hunt is simply arguing that the usefulness of the LTV is based on its explanatory power, and explanatory power is what makes any scientific theory useful.

    Fix begins his attack on the empirics of the LTV by claiming that the theory has many exceptions: ‘If the labor theory of value were true, one would expect a striking correlation between prices and labor time. The trouble is, this correlation has always been strikingly absent.’ However, it is not true that ‘this correlation has always been strikingly absent’; it would be more accurate to say that the correlation has not (yet) been convincingly demonstrated. He goes on: ‘Everywhere we look, we find exceptions.’ Fix then provides what he considers such an exception: the fact that art goes up in value after the painter has died. But this can be explained by recourse to the concept of socially necessary labour time, which is central to the LTV.

    Once an artist has died, it obviously becomes much more difficult to replicate one of their paintings. Hence, the socially necessary labour time embedded in the painting, and therefore its exchange value, goes up. Fix follows up his example with another disingenuous claim: ‘Marxists have largely given up trying to test Marx’s claim that commodity prices are proportional to labor time. Instead, they’ve switched to a far weaker test of the labor theory of value. Instead of looking at individual commodities, Marxists look at sectors of the economy.’ It is true that Marxists have not yet attempted to test that commodity prices are proportional to labour time; but this is a reflection of the fact that it is difficult to do this, rather than that Marxists no longer believe that the LTV applies at commodity level.

    As Fix correctly points out: ‘Any correlation between sector value added and sector labor time could easily be spurious – the result of sector size correlating with itself.’ However, whilst this is true, it does not mean that the correlation is necessarily spurious, just that further tests are required. Fix next critiques the Marxist economist Paul Cockshott’s explanation for why we need to test the LTV at sector level, which is that it is invalid to compare the labour times of different commodities as they have different dimensions. But Cockshott’s claim is clearly nonsensical. Commodities are not physical quantities and therefore do not have dimensions. (If you want a physical analogy, it is better to think of different commodities as defining different axes within the same ‘commodity space’.)

    Fix suggests a link between the LTV and human nature by posing some rhetorical questions: ‘If Marx’s theory is true, why do humans judge value in terms of labor time? Do we possess some universal value-judging faculty? If so, how did it evolve? Marxists rarely ask these questions, probably because the answers are uncomfortable.’ It is important to point out that the LTV is a theory about capitalism, not about human nature. Humans clearly do not judge value in terms of labour time. This is why use value and exchange value are incommensurate. Fix continues: ‘Scientists are not allowed to put boundaries on how others should test their theory.’ This is true, but scientists are allowed to put boundaries around the domain of applicability of their theories. In fact scientists do this all the time.

    In conclusion, although Fix makes some valid criticisms the empirical work that has been done in an attempt to validate the LTV, the remainder of his article is full of holes. There is certainly nothing in his article which invalidates the claim that, as a general rule, the exchange value of a commodity is proportional to the socially necessary labour time required to produce it.

  • Why do (most) Jews support Zionism?

    On Thursday this week, two Jewish people were killed and three left in a serious condition after a car ramming and stabbing attack outside a synagogue in Manchester.  The attack occurred during worship on Yom Kippur, the holiest day in the Jewish religious calendar. As I write this details of exactly what happened are still emerging, but it seems that one of the people killed was hit with police gunfire, as was one of those seriously injured. The incident represents the worst antisemitic attack to have occurred on British soil for many years. The motivations of the attacker are not currently known, but it is all but certain that they were related to the ongoing Israeli genocide in Gaza. This once again highlights the importance of maintaining a clear separation between Judaism and Zionism.

    Something that makes maintaining such a separation more difficult than it should be is that the majority of Jews are supportive of Zionism and of Israel. According to the Institute for Jewish Policy Research, an independent institute that specialises in researching the state of contemporary Jewish communities in the UK, 65% of British Jews identify as Zionist, and 77% feel a sense of attachment to Israel. It should be noted at this point that even if these figures were 100%, it would still be perfectly legitimate to criticise both Zionism and Israel. There was probably a time when a majority of Germans would have identified as Nazi and would have felt a sense of attachment to the Third Reich, but criticising Nazism and the German state at that time would obviously not have made you a Germanophobe.

    Much as we might wonder today how an entire nation embraced the poisonous, genocidal ideology of Nazism, we may wonder how an entire religion – or at least, the majority of its adherents – has embraced the poisonous, genocidal ideology of Zionism. The obvious explanation that there is something about Judaism which naturally fosters this kind of ideology must be dismissed, for two reasons: first, because Judaism was around for thousands of years before the advent of Zionism; and second, because similarly poisonous ideologies have developed many times throughout human history that had nothing to do with Judaism. Clearly, human beings have an unfortunate propensity for succumbing to these kinds of ideas.

    A better explanation is that Jews are indoctrinated into Zionism from an early age. There is quite a lot of evidence for this. Take, for example, Habonim Dror, the Jewish Zionist youth movement formed in 1982, which has branches in several English-speaking countries and boasts alumni such as ‘comedians’ David Baddiel and Sacha Baron Cohen,  ‘journalist’ Jonathan Freedland, and génocidaire Mark Regev. One of Habonim Dror’s key principles, ‘Jewish Peoplehood’, is based on the idea that ‘Israel is the central physical, cultural and spiritual space for the Jewish people that demands full participation from Diasporic Jewish communities in shaping its future.’ Habonim Dror claims to be progressive and socialist; but socialism is fundamentally incompatible with a racist ideology like Zionism.

    Organisations like Habonim Dror, innocuous as they may seem at first glance, effectively play the same role in manufacturing consent for Zionism that the Hitler Youth played in manufacturing consent for Nazism (it is surely no coincidence that the Nazi’s also referred to themselves as ‘socialist’). Still, the fact that Jews are indoctrinated into Zionism from an early age is does not completely explain their support for Zionism, as it does not explain why this indoctrination is carried out. To understand the reason for that, I think we need to go all the way back to the Holocaust. It is often said that the Holocaust was a singular evil, and I agree. There have been many genocides before and some since (including in Gaza); but none have matched the Holocaust either in terms of the scale or the manner of the killing.

    The Holocaust resulted in around 6 million deaths, more than any other genocide in history, of whom the vast majority were Jews. The overall death toll is bad enough on its own, but seems even worse when you consider that it represented over a third of the worldwide Jewish population in at the start of the war, and around two thirds of the European Jewish population. Before WWII there around 9 million Yiddish speakers living in Central Europe; today, the language is all but extinct. An entire culture was effectively wiped out. Adding to that the deliberate, mechanized nature of the killing, and the fact that this all happened within living memory, it is hardly any wonder that many Jews today are still traumatized by this event, even if the number who actually lived though it is becoming vanishingly small.

    You might think that, having been victims of genocide themselves, Jews of all people would be reluctant to inflict such suffering on others. But I think that would be naive. Instead, I think we are witnessing an example of transgenerational trauma: the psychological effect that trauma experienced by a group of people has on subsequent generations in that group. It is well known that trauma is often passed down in families from one generation to the next, with the victim inflicting similar trauma on their own children. It seems to me that something similar is going on here, only on a much larger scale. The question, then, is: how do we break this cycle? Because unless we find a way to break the cycle of trauma and violence, it seems destined to continue.

  • The need for a new workers’ party

    It should be clear to everyone by now that the UK Labour Party no longer represents the interests of working people. (They should really change the name.) This raises the question of whether the Labour Party has ever truly represented the interests of working people. It certainly represented the interests of working people in the past far more than it does now. In the aftermath of WWII, the Labour Party expanded the welfare state and set up the National Health Service, which was – and still is, in theory at least – committed to providing universal healthcare for all, free at the point of use. This was considered revolutionary at the time, and was part of the wider ‘post-war consensus’, the social model whereby all the major political parties in Britain tacitly agreed to treat workers a bit more humanely.

    The reason they did this was not altruism, but the threat of communism. Difficult as it is to believe now, at that time the ruling class in the UK and other western European countries genuinely feared that communism might take hold in the west of Europe as it had done in the east. The Soviet Union was ascendant in the post-WWII era and in 1961 effectively won the space race when Yuri Gagarin became the first person to journey into outer space, much to the Americans’ chagrin. But the Americans got their own back on the Soviets by putting Neil Armstrong on the moon in 1969, which was a huge propaganda coup for the West. This event can be seen as the beginning of the end of the communist threat and the beginning of the end of the post-war consensus in Britain.

    The actual end came 10 years later with the election of Margaret Thatcher as Prime Minister in 1979. Thatcher famously tore up the post-war consensus and ushered in the period of neoliberalism. The Labour Party initially responded by electing the socialist and anti-imperialist Michael Foot as leader, who led the party into the 1983 general election. This election did not go well for Labour: the party obtained its lowest share of the vote in 65 years and the fewest parliamentary seats since 1935. In response, the party turned to the centrist Neil Kinnock, an event which marked the beginning of Labour’s descent into neoliberalism. However, Kinnock lost both of the general elections he contested as leader, in 1987 and 1992. Defeat in the latter came as a surprise to many, as Labour had seemed on course to win.

    Nonetheless, the party subsequently turbocharged its journey to neoliberalism by electing Tony Blair as leader in 1994. Labour’s general election victories in the 1997, 2001, and 2005 were seen by many as a vindication of this strategy, the argument being that these victories, along with the heavy defeat under the socialist Foot in 1983, demonstrated that ordinary British people just don’t want socialism. But this is a facile analysis which completely ignores the broader context. Labour didn’t lose in 1983 because it was too left wing; rather, the Conservatives won because of the Falklands War. This is clear from the opinion polls of the time, and Thatcher admitted as much in her memoirs. Blair understood this too, as he reportedly told Robin Cook: ‘The thing I learned … is that wars make prime ministers popular.’

    Although the ‘Falklands factor’ would have been enough win the election for the Conservatives, their resounding victory was assured by the split of the anti-Tory vote. In 1981 Labour right-wingers, disgruntled at the election of Foot as leader, broke off to form the Social Democratic Party (SDP). The effect of the new party was to hand marginal constituencies to the Tories, who won 65 more seats despite receiving 700,000 fewer votes than they had secured in the previous election. If Labour’s left program really cost it the 1983 election, it must follow that the party would have won had it moved right. But Labour moved significantly rightwards for the 1987 election – and lost. It fought the 1992 election from a position still further to the right – and lost again!

    It took until 1997 for the ‘modernizers’ to be ‘proved’ correct, and only once the Tories had been stripped of all credibility by endless scandals and infighting. Labour would go on to lose two more perfectly winnable elections standing on a right-wing platform, in 2010 and 2015. In fact it has lost just as many elections standing on a right-wing platform (1987, 1992, 2010, 2015) as it has won (1997, 2001, 2005, 2024). But the main flaw with the argument that moving to the right is popular with voters is that when Labour moves to the right, there is simply no possibility of a left-wing party winning a general election, as no mass left-wing party then exists. As a point of logic, therefore, it doesn’t make any sense to use Labour’s victories under Blair (or Starmer) as evidence that socialism is unpopular.

    All of the above highlights the dire need for a genuinely left-wing party in the UK with widespread support, that puts the interests of workers front and centre. Thankfully, one is currently in the process of being set up – the still as-yet unnamed party provisionally referred to as Your Party. Unfortunately the launch of this party has been mired by infighting between its two figureheads, Jeremy Corbyn and Zara Sultana, and their respective teams of advisers. But this infighting may actually be a blessing in disguise, as it demonstrates that the party must be built from the ground up rather than from the top down. It is imperative therefore that we socialists join this new party, work to build the party at a grassroots level, and fight to ensure that the party follows a genuinely left-wing program.

  • What is exploitation?

    Marxists often claim that workers are exploited under capitalism. In fact this is usually considered a central tenet of Marxism. But what exactly do we mean by ‘exploited’? In this blog post I will attempt to provide a rigorous definition (actually three rigorous definitions). To kick things off, consider an economy which produces m commodities using n types of labour. For such an economy we can define a commodity vector as a vector with positive elements of length m, and a labour as a vector with positive elements of length n. The economy is defined by an activity set, with the interpretation that an element (x,u,x’) of this set represents a possible configuration of commodity inputs x, labour inputs u, and commodity outputs x’ for the economy.

    For our economy, a price vector is a vector with positive elements of length m, and a wage vector is a vector with positive elements of length n. The labour value of the commodity vector y, given a wage vector w, may be defined as the minimum value of the product wu subject to the constraint that there exists commodity vectors x and x’ such that (x,u,x’) is an element of the activity set, and x’-x is greater than or equal to y. This is quite a technical definition, so let us try to unpack it a bit. In our economy we have n types of labour, and we want to define the labour value of a commodity as a single number. The obvious way to do that is by weighting each type of labour according the wage that can be earned for doing that type of labour. This is where the product wu comes in.

    The product wu can be thought of as a quantity which represents ‘abstract labour’ in the Marxist sense. Minimizing this value can then be thought of as giving us the ‘socially necessary’ part of ‘socially necessary abstract labour’. The constraint in the minimization is simply there to ensure that the commodity vector q can be produced by the economy; to see this, note that x’–x represents the net output of the production process defined by the triple (x,u,x’). Let us denote the labour value of the commodity vector y given the wage vector w by v(y). Now consider an agent i in the economy who provides labour input Li and receives (or purchases) net output yi. We can say that this agent is exploited if wui greater than v(yi), and an exploiter if wui is less than v(yi).

    Again, this is quite a technical definition, so let us unpack it. The quantity wui represents the agent’s labour input, weighted by their wage, and the quantity v(yi) represents the labour value of the net output they receive. Thus, we say that the agent is exploited if their weighted labour input is greater than the value they receive, and conversely we say that they are an exploiter if their weighted labour input is less than the value they receive. This definition of exploitation was first put forward by the Japanese Marxist economist Michio Miroshima in 1973. According to the American Marxist economist John Roemer, however, this definition is flawed as it identifies exploitation based on activities that may never be used by profit-maximizing capitalists.

    The gross profit associated with the activity (x,u,x’), price vector p, and wage vector w, is given by the equation: H = p(x’-x)-wu; and the associated profit rate is given by the equation: r = H/px. Then, according to Roemer, the labour value of the commodity vector y, given the price vector p, and wage vector w, may be defined as the minimum value of the product wu subject to the constraint that there exists commodity vectors x and x’ such that (x,u,x’) maximizes the profit rate, and x’-x is greater than or equal to y. This is very similar to Miroshima’s definiton; the only difference is that activities are now constrained to be profit-maximizing.

    The problem with both of the above definitions of labour value is that they are based activities that might not actually be used in practice. An alternative approach which gets around this problem was recently put forward by the Marxist economists Naoki Yoshihara and Roberto Veneziani. Given an activity (x,u,x’), a price vector p, and a commodity vector y, let s(y) denote the share of py in total nominal net output p(x’-x), so that s(y) = py/p(x’-x). Then, given a wage vector w, we can define the labour value of the commodity vector y as v(y)= s(y)wu. We can then say that agent i is exploited if wui is greater than v(yi), and an exploiter if wui is less than v(yi). This gives us a third definition of labour values and exploitation.

    Yoshihara and Veneziani also introduce something they refer to as the ‘profit-exploitation correspondence principle’. This principle states that aggregate profits are positive if and only if propertyless workers – that is, agents with no initial endowment of commodities who provide some labour – are exploited. They then show that of the three definitions of exploitation given above, only theirs is guaranteed to adhere to this principle. Given the theoretical relevance of profit-exploitation correspondence principle in Marxian theory, this provides strong support for their definition of exploitation being the most appropriate one from a Marxist perspective.

  • Lessons from the Luddites

    The Luddites were a group of workers in the cotton industry who lived in northern England (Nottinghamshire, Lancashire, and Yorkshire) in the early 19th century. They take their name from Ned Ludd, an apocryphal figure said to have smashed machines back in 1799, although he did not share the later Luddites’ motivations. In modern parlance, ‘Luddite’ has come to mean ‘technophobe’, but in reality the Luddites embraced the power loom, which was invented in 1800 and complemented their skills. Their main contention was that this new invention would lead to capitalists paying workers less as workers did not have to be as skilled to use it. They also objected to the alienation this new invention created.

    A machine such as a power loom can only do some of the making of a product, leaving the rest for the worker to do; but the introduction of such a machine means the worker now has a much weaker relationship with the product. Furthermore, the inner workings of a machine are generally unfathomable to the worker, which gives the machine a kind of power. As machines become more and more complicated this power increases, leading to dominion of the machine over the worker, with workers required to work at the pace of the machine rather than the other way round. The Luddites were well aware of this process of alienation as they experienced it first hand. The mill owners were well of it too and used it to increase their control over workers.

    An important lesson we as Marxists can learn from the Luddites is not to make arguments that involve bargaining with capitalists. They didn’t try to argue that the use of power looms and the resulting issues that created was detrimental to capitalism or to the capitalist class. The Luddites were not interested in maintaining a prosperous capitalist economy even within their locale. Their argument was based on human concerns and was not compromised by using the language of the capitalist. Nevertheless, the Luddite movement was a flawed one. This was not entirely the fault of the Luddites: they were working during a period when trade unions were outlawed, which meant they were limited in what they could realistically achieve.

    Although the Luddites engaged in direct action (smashing up power looms), their movement was ultimately defensive and localized, aiming to preserve working conditions rather than overturning the capitalist system. However, the spontaneity of the movement is an example of workers’ understanding of natural justice, which aligns with Marx’s later analysis; although whether they were truly class conscious is open to debate. Moreover, the Luddites’ struggle spurred workers in the West to unionize. Primary and secondary industries in the West were ultimately dismantled due to the power the workers within them wielded. These industries were largely replaced by the retail and service sectors, and we now see capitalists attempting to bring about further automation in these sectors.

    We can use the Luddites’ struggle as a lens through which to view current workers’ conflicts. The parallels between the power loom and modern-day automated plagiarizing systems, such as AI-based text-generation models and image generators, are stark. Both cases involve new inventions being wielded by capitalists to reduce workers’ ability to sell their skilled labour-power. Also, in both cases the quality of outputs produced by automation is generally inferior. The Luddites assumed that the poorer quality products produced by the power loom would be rejected by the consumers of their day, but they were mistaken. It is incumbent on us modern-day consumers to reject sub-par AI-generated goods before they become the accepted norm.

    It seems that whenever and wherever new technology is employed under capitalism, it does not fulfil the promise of a better life for workers. Instead, it is used to drive down wages, decrease the quality of outputs, and lock workers into oppressive systems. This is obviously bad for workers, and it is only good for capitalists in the short term. Usually a temporary reduction in production costs resulting from increased automation leads to a long-term depression of profits across whole sectors, as competing firms also automate their production. A core tenet of Marxism is that profit is surplus value produced by labour, but not by machines. We see this play out with a decrease in the labour content of commodities leading to lower profits, referred to by Marx as the ‘tendency of the profit rate to fall’.

    In 1930, John Maynard Keynes famously predicted that by century’s end, technology would have advanced sufficiently that countries like Great Britain or the United States would have achieved a 15-hour work week. Sadly, that didn’t happen. What happened instead was that greater automation simply led to higher levels of output being expected, with workers being forced to work as hard as ever. In light of this historical context, it is crucial for us to remember that resistance to new technology is not about opposing progress, but about fighting for the dignity and rights of workers. The Luddites’ struggle reminds us that under capitalism, technological innovation serves profit over people. Exactly the same dynamic is at play globally today that was at play in northern England over 200 years ago.

    Our task as socialists is not to critique new technological developments but to organize around a vision of technology that genuinely serves the common good. We must demand that technological advancements empower workers rather than alienate them, and that they enhance workers’ quality of life rather than erode it. The key lesson from the Luddites is to resist false promises of capitalist efficiency, and advocate for a future in which both technology and production are democratically controlled and geared towards collective well-being.

  • What should we do about inflation?

    In a previous blog post, I derived the following simple expression for the price level: p = vw(1+H/wu), where v is the value of labour (that is, the inverse of labour productivity), w is the average wage, H is total profits, and u is the level of employment. I also derived the following expression for total profits, known as the Kalecki profit equation: H = CH+I+G+N–SL–TL, where CH is consumption out of profits, I is investment, G is government spending, N is net exports, SL is saving out of wages, and TL is taxes on wages. From these expressions we can deduce that an increase in the price level can be caused by an increase in the value of labour, the average wage, consumption, investment, government spending, or net exports, or a decrease in the level of employment, saving out of wages, or taxes on wages.

    As an increase in the average wage can cause an increase in prices, many commentators argue against wage increases during times of inflation and point to the possibility of a ‘wage-price spiral’. This is where an increase in wages causes an increase in prices, which causes a further increase in wages, and so on. There are a few problems with this argument however. First, note that we can write p = vw(1+m), where m = H/wu is the referred to as the average markup. As the average wage appears on the denominator of the profit rate, an increase in wages will result in a decrease in the average markup, which will reduce the impact on prices. Second, note that increasing the average wage will also increase saving out of wages, which will reduce profits and also reduce the average markup.

    These technical considerations aside, it is clear that an increase in the average wage will still in general lead to an increase prices. But we need to bear in mind that inflation is bad mainly because it means workers cannot afford to buy goods and services; if wages keep up with inflation, this is not a problem. In fact, if wages were indexed to prices, inflation would arguably be a good thing, as inflation erodes the real value of debts, which means that it is good for debtors and bad for creditors. Debtors tend to be poorer than creditors, so if wages were indexed to prices, inflation would result in a redistribution of wealth. This is the real reason that central banks raise interest rates in times of inflation: to compensate rich creditors.

    The idea that increasing employment will reduce prices runs counter to the logic of the so-called ‘Phillips curve’, named after the economist William Phillips, which posits a positive relationship between employment and inflation. The reasoning behind this is that an increase in employment gives workers more leverage to bargain for higher wages, and, as we have seen, higher wages mean higher prices. (Phillips’ original paper actually only demonstrated the first link, between employment and wages.) The problems with the ‘higher wages implies higher prices’ argument have already been discussed. In addition, the ‘higher employment implies higher prices’ argument ignores the fact that higher employment also means a lower profit rate.

    To see this, note that the level of employment appears in the denominator of the profit rate (see above). In fact, what appears in the denominator is the product of the average wage and the level of employment. But this only strengthens the point, as if wages increase in response to an increase in employment, this product will increase even further, which will result in an even bigger decrease in the profit rate. Intuitively, this makes sense: higher employment means a greater supply of goods and services, and therefore lower prices. Thus, on the one hand, increasing employment will decrease the profit rate; but on the other, it will increase wages, as Phillips demonstrated. It is therefore impossible to say whether an increase in employment will cause an increase or a decrease in prices.

    The preceding argument demonstrates that trying to fight inflation by increasing unemployment – as governments have sought to do for some time now – makes little sense. So what should governments do to combat inflation? We might conclude from the above that the most effective way for a government to curb inflation is to increase taxes on wages. However, as firms set prices, it seems unfair to punish workers if firms set their prices too high. Also, a tax on wages would mean that workers are less able to afford goods and services, which, as noted above, is the main reason inflation is a problem in the first place. There is an alternative though: a government can intervene directly by imposing price controls, an idea put forward recently by the economist Isabella Weber.

    If total profits remain constant, it follows from the analysis above that introducing price controls will result in an increase in employment; conversely, if employment remains constant – for example, if the economy is already at or near full employment – introducing price controls will result in a reduction in total profits. Either of these would be considered a desirable outcome at present. We have seen that the traditional approach to combating inflation by increasing unemployment makes little sense theoretically. Moreover, to the extent that it works in practice, it involves replacing one problem (inflation) with an even worse problem (unemployment). To ensure price stability in a way that doesn’t unfairly impact on workers, governments must take a more direct approach.

  • Why capitalism will inevitably collapse

    Capitalism is a system that requires continuous growth. Under capitalism, firms must compete to survive, which means they need to constantly expand and increase profits. To understand why this is so, we need to consider how firms operate. Any firm needs to invest before it can make a profit, and in order to invest, it needs to get money from somewhere. In theory it can get this money from its savings (i.e. accumulated profits), but in practice these are usually insufficient. Instead, most firms have to rely on either debt or equity finance, or a combination of the two. Debt financing involves the borrowing of money from a bank, whereas equity financing involves selling a portion of equity in the company to shareholders.

    A firm will only be able to get hold of the money it needs to invest if it can convince a bank (in the case of debt funding) or prospective shareholders (in the case of equity funding) that it will make a return on the initial outlay. And it can only do that by expanding and increasing its profits and outcompeting other firms, hence the need for growth. In essence, money is provided today on the promise that more money will be paid back tomorrow. In the case of debt financing, this future money takes the form of interest payments plus repayment of the original loan; and in the case of equity financing, it takes the form of dividends or profits distributed to shareholders, which need to be larger than the original outlay in order for the investment to be viable.

    Thus, under capitalism, firms operate by borrowing money from the future. In this way, firms operate along the lines of a pyramid or Ponzi scheme. These are investment schemes that rely on a continuous stream of new money from new investors to pay returns to earlier investors. In a Ponzi scheme, a fraudster acts as a central hub with victims believing they are investing in a legitimate, non-existent business; whereas in a pyramid scheme, participants are aware they are part of a chain and are directly responsible for recruiting new members to earn money. It is generally understood that both schemes are scams that are doomed to collapse at some point. What is less well understood is that our entire economic system is structured using the same logic.

    Under capitalism, firms rely on a continuous stream of new money to pay returns to earlier investors. Where does this money come from? The answer is: from new investors! To see why, we need to revisit the Kalecki profit equation, which I derived in a previous blog post. In its simplest form, the Kalecki profit equation says that gross profits are equal to gross investment. Moreover, the causality must run from investment to profits, as the former is under the direct control of the capitalist class, whereas the latter is not. This makes clear that profits come from new investments, and therefore that capitalism is structured in exactly the same ways as a pyramid or Ponzi scheme. And just like these schemes, capitalism is doomed to collapse at some point. The only question is: when?

    We arguably already have an answer to that question, as capitalism has already collapsed, not once but twice: once during the great depression of 1929, and again during the financial crisis of 2008. In both cases capitalism ultimately survived, but only after massive government intervention. The end of the great depression is generally attributed to monetary expansion beginning in the mid-1930s and the massive government spending and job creation spurred by WWII; and the 2008 financial crisis ended due to a combination of large-scale government intervention, including bailouts, stimulus packages, and financial guarantees, as well as significant regulatory reforms. On both occasions, it is likely that capitalism would have collapsed entirely had these interventions not been made.

    Marx famously predicted that capitalism would eventually fall and that this would trigger a proletarian revolution that would usher in socialism. The crises of 1929 and 2008 can be seen as a vindication of the first part of his prediction, if not the second. It is worth noting though that the government interventions of 2008 did usher in a socialism of sorts; unfortunately, it was a case of socialism for the rich and capitalism for everyone else! Whilst corporations were being saved by central bank policies and federal government bailouts, workers were left to fend for themselves. As has been pointed out by the Greek economist Yanis Varoufakis, wages shrunk in the aftermath of the crisis, but the price of assets purchased by the rich (and thus their wealth) skyrocketed.

    Thus, far from triggering a proletarian revolution as Marx predicted, the 2008 crises left workers worse off and capitalists better off than ever. A similar thing happened during and after the COVID-19 pandemic. It seems our economic system is rigged towards the capitalist class to such an extent that whenever a crisis occurs, capitalists actually benefit from it! In the terminology of Lebanese mathematician and essayist Nassim Taleb, the capitalist class seems to have made itself ‘antifragile’: volatility and disorder only seem to make it stronger. But I think this apparent strength is an illusion. The capitalists’ grip on power is actually extremely tenuous, and they know it. Furthermore, they must be aware that it is only a matter of time before capitalism crashes again.

    The reason the crises of 1929 and 2008 did not lead to socialism as Marx predicted is that the left was not sufficiently organised to take advantage of them. One thing we can be sure of though is that another crash will happen at some point. Our role as revolutionary socialists is to make sure we are sufficiently organised to take advantage of this crisis when it occurs and get rid of capitalism for good.

  • Ego is the enemy

    Some years ago I was on a work trip to Paris and found myself with some time to kill at St. Pancras station whilst waiting to board the Eurostar. I had no reading material with me, so I decided to buy a book to read to pass the time. Without paying too much attention I selected a book called Ego Is the Enemy by an author I’d never heard of named Ryan Holiday. And I’m glad I did because whereas I can remember almost nothing about the meeting in Paris, it is no exaggeration to say that reading this book changed my life. In fact I consider it to be a watershed moment. Before reading this Ego Is the Enemy I, like many people, was a slave to my ego. Since reading it, although I can’t say that I have conquered my ego entirely, I have become much more aware of my ego and the pernicious effect it was having.

    Ego Is the Enemy puts forth the argument that our biggest problems are not caused by external factors such as other people or circumstances. Instead, argues Holiday, our problems stem from our own attitude, selfishness, and self-absorption. Holiday makes the case that introducing ego into a situation prevents us from being rational, objective, and clear headed. But what exactly does he mean by ‘ego’? The word ego comes Latin and literally just means ‘I’. Both the English and Latin words can be traced back to the same Indo-European root. The word was famously imbued with a clinical sense by Freud, but Holiday’s argument refers to ego in a colloquial sense, which we may loosely define as ‘a propensity to see the world only from one’s own perspective’.

    Given this definition, it might seem strange or even nonsensical to argue that ego is the enemy – after all, surely we can only ever see the world from our own perspective! Perhaps an example from my own life will help illustrate what Holiday means by ‘ego’, how it can be tamed, and the benefits that can result from taming it. Before reading Ego Is the Enemy I used to regularly become anxious in work meetings, to the point where it seemed like a kind of pathology. After reading the book, I started to realize that my anxiety was not being caused by the situation itself (the work meeting), but by my own ego. My ego was telling me that I should be able to make many clever and insightful comments, and if I wasn’t able to do that, I would start to become anxious.

    After waking up to this, I started to approach work meetings differently. Instead of worrying about my contribution, I began to pay much more attention to what was going on around me. The effect was revelatory: not only did I have a much better understanding of what the meeting was actually about, but through observing others I soon discovered that most people in these meetings were just as anxious as I was! My ego was creating a cognitive bias known as the ‘spotlight effect’, whereby I believed others were paying more attention to me than they actually were. The truth, I realized, is that everyone else is fighting a personal battle with their own ego. This revelation led to me becoming much more empathetic towards my work colleagues, and to others in general.

    Increased empathy is one of the key benefits of taming your ego (I say ‘taming’ rather than ‘losing’ as it is very difficult to get rid of your ego entirely). Another is coming to the understanding that human beings aren’t atomic decision-making agents acting out of self-interest, as right-wing ideologues would have us believe. Rather, we are all part of an interconnected whole. One of the central tenets of socialism is a focus on the collective over the individual, and a repudiation of the ‘great man fallacy’ – the idea that human affairs are driven by individual rather than collective action. There is a clear connection with the Buddhist concept of ego death: the process of ego liberation through a deeper understanding of the interconnected nature of existence.

    The flip-side is that if you don’t tame your ego then you can never experience these benefits. In fact, it’s worse than that: failure to get control of your ego means you run the risk of becoming completely consumed by it. Nowhere is this more apparent than with middle-aged celebrities. How many times have we seen a prominent celebrity blight their career by saying or doing something daft, then digging in and refusing to apologize for it because their over-inflated ego won’t allow them admit that they were in the wrong? Perhaps the most egregious example of this phenomenon is Graham Linehan, the Irish comedy writer and creator of multiple sitcoms including Father Ted, Black Books, The IT Crowd. It was the last of these which was the cause of Linehan’s downfall.

    In 2013, an episode Linehan had written for The IT Crowd was publicly re-examined and widely criticized – rightly, in my view – as transphobic.  The episode features a man who, on learning that his girlfriend is transgender, proceeds to viciously beat her up. (Yes, that’s the ‘joke’.) But instead of accepting that he had crossed a line and apologizing, Linehan’s ego kicked in and he became a rabid transphobe. As a result of his transphobic behaviour he has been banned from Twitter multiple times, suffered the break-up of his marriage and estrangement from his family and friends, lost out on work, and had legal and financial problems as well as visits from the police. All because his ego wouldn’t allow him to admit that he was wrong and say sorry.

    The tragic case of Graham Linehan should serve as a warning to all of us of the perils of not getting control of your ego. And Linehan is far from alone. There are dozens of examples of celebrities with careers that have followed a similar downward trajectory because they have allowed their ego to get the better of them (although to be fair, few have destroyed their lives to the same extent that Linehan has). If only they had read Ego Is the Enemy, they might have saved themselves and everyone else a lot of unnecessary misery.