A History of Marxian Economics, Volume II: 1929-1990

A History of Marxian Economics, Volume II: 1929-1990

by Michael Charles Howard, John Edward King


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This second volume completes a critical history of the social, political, and theoretical forces behind Marxian economics--the only work in English to offer such comprehensive treatment. Beginning with Marxian analyses of the Great Depression and Stalinism, it explores the theories developed to explain the "long boom" in Western capitalism after the Second World War. Later chapters deal with post-Leninist theories of imperialism and continuing controversies in value theory and the theory of exploitation. After outlining recent work on the "second slump," the integration of rational-choice theory into Marxism, and the political economy of socialism, the book concludes with a review and evaluation of Marxian theory over the whole period since Marx's death. Praise for the first volume: "Howard and King have done an excellent job.... One comes away with the impression of Marxian economics being a vibrant subject, relevant to the problems of these times and useful in practical matters."--Meghnad Desai, The Times Higher Education Supplement

Product Details

ISBN-13: 9780691604138
Publisher: Princeton University Press
Publication date: 07/14/2014
Series: Princeton Legacy Library , #136
Pages: 438
Product dimensions: 6.10(w) x 9.10(h) x 1.20(d)

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A History of Marxian Economics

Volume II, 1929â?"1990

By M. C. Howard, J. E. King


Copyright © 1992 M. C. Howard and J. E. King
All rights reserved.
ISBN: 978-0-691-04303-6


Marxian Economics and the Great Depression

I The Last Crisis of Capitalism?

The Great Depression was by far the most severe economic crisis in the history of capitalism. In the United States real GNP fell by 9.9 per cent in 1930, a further 7.7 per cent in 1931, and by 14.8 per cent in 1932. In the latter year industrial production in both Germany and the US was no less than 47 per cent below its 1929 level (for the other capitalist powers the collapse was less complete, but nevertheless severe).1 Marxian economists asked two questions about this cataclysm. What did it mean for the future of the capitalist system and the prospects for socialism? And how could it be explained consistently with Marx's theory of crisis? Neither question was simple. Marx's theory of capitalist crisis was nowhere well worked out, nor, indeed, even organised systematically, while the political history of the 1930s involved novel developments. The most notable phenomena were the success of fascism in Germany, the New Deal in the United States and the growth of state intervention elsewhere. They raised once again the question of the state's role in modern capitalism and the basis of mass support for reaction or reform rather than revolution.

There was no agreement among Marxian theorists concerning the nature of the crisis. Initially, at least, German Social Democratic economists found little to be excited about. The Great Depression was 'neither Young-crisis nor rationalisation-crisis, nor total breakdown of the capitalist system nor herald of the world revolution', Fritz Naphtali wrote in 1930, 'but typical crisis of the capitalist system with historical peculiarities, as are revealed by every crisis'. In the following year Karl Kautsky attacked radical elements in the German SPD (Social Democratic Party) who argued that only socialism could end the crisis: 'This view reminds me of people who, in a cool wet summer, assume that it will never get warm and that a new ice age is beginning.' As with all previous crises, a recovery was inevitable; it would increase the economic and political strength of the working class sufficiently to ensure that the current crisis would be the last of its kind. 'We have every reason to expect', Kautsky concluded, 'that the coming prosperity will introduce an era of lasting well-being, lasting security and rapidly progressing adjustment of the production process to the needs of the working class, an era which we must characterise as the proletarian revolution.' Instead fascism triumphed in Germany, while elsewhere recovery was slow and incomplete, but neither Kautsky nor the SPD's leading economic theoretician, Rudolf Hilferding, appear to have revised their remarkably complacent interpretation of the depression.

Most Marxists, however, agreed with Friedrich Pollock of the Frankfurt Institute that the Great Depression was deeper, geographically more extensive and longer-lasting than its predecessors, even that of 1873–9, and that it therefore needed a special explanation. A minority pointed to the existence of 'long waves' of capitalist development. In addition to the accepted 7–10 year trade cycle, it was suggested, there were regular fluctuations over half a century. During the long downswing, cyclical booms were weaker, and depressions stronger and more protracted, than in the upswing of the long wave. This notion originated before the First World War with the Russian Marxist Alexander Helphand (Parvus). In the 1920s it attracted the attention of both German economists such as de Wolff and Wagemann and, in the Soviet Union, the former Social Revolutionary N.D. Kondratiev, after whom the 50 year cycle has come to be named. Very approximately, long upswings were identified with the periods 1851–73 and 1896–1914 (or 1920), and the corresponding downswings were located in 1826–50, 1873–95 and from 1920 onwards. A long-wave explanation of the Great Depression was advanced, somewhat tentatively, by Fritz Naphtali, and with much more confidence by the Austro-Marxist Otto Bauer, both stressing the role of falling agricultural prices in long downswings. But this hypothesis received little support, Pollock, for example, dismissing long waves as 'metaphysical', and as depending upon 'unreliable generalisations' from isolated circumstances.

If the crisis represented neither the downturn of a regular trade cycle nor the amplification of such a depression by the Kondratiev long wave, there seemed to be no grounds for expecting a sustained recovery in the rate of accumulation, or in output and employment. It could be argued, therefore, that capitalism was doomed, either to protracted stagnation or to imminent economic breakdown. In general the breakdown thesis in its strict sense – the assertion that profitable growth would soon become impossible, for narrowly economic reasons – was more widely supported before 1914 than thereafter, though it had been advocated with great vigour by Henryk Grossmann on the very eve of the Wall Street crash. However, by the mid-1930s the official Soviet line, enunciated by Stalin at the 17th Party Congress, referred to 'a depression of a special kind', with a 'limited revival' which amounted to neither a real recovery nor a relapse into the depth of the slump. In the words of the Comintern's leading economic spokesman, Eugen Varga, the Great Depression had 'caused a profound disturbance of the entire capitalist system, initiated a new and higher stage of the general crisis of capitalism and resulted in the maturing of the objective pre-requisites for the revolutionary crisis'. The former theoretician of the Left Opposition, Evgeny Preobrazhensky, temporarily back in favour in the early 1930s, concurred: 'if it does not lead to a world war, or is not interrupted by a technological revolution, a general economic crisis under monopolism must outgrow its economic framework and become a general social crisis of the entire historical system of capitalism'. Renewed expansion in some parts of the capitalist world (for example in the United States) might be possible, but only at the expense of others (especially Britain and France).

More independent Marxists took a similar line. While recognising that 'decline is not collapse', the maverick American Communist Lewis Corey nevertheless saw the Depression as proof of increasing instability and a growing tendency for stagnation, indicating a 'final, permanent crisis' for the capitalist system.

In Germany Natalie Moszkowska interpreted the increasing severity of crises as evidence of the danger of a permanent crisis, which testified to the impending downfall (Niedergang) of capitalism. Her compatriot, Fritz Sternberg, found three reasons for believing that recovery would be exceptionally difficult: new overseas markets were no longer available; the unprecedented impoverishment of salaried employees, civil servants and the independent middleclass had removed an important built-in stabiliser; and the sheer scale of unemployment and real wage cuts made the revival of domestic demand unusually problematical.

A few Marxists went even further. Both Trotsky and the Council Communist, Paul Mattick, referred to the Depression as the 'death agony' of capitalism. 'For the first time', Mattick wrote in 1933 in the programme of the Industrial Workers of the World, 'in the final phase of capitalism surplus value no longer suffices to sustain both a sufficient wage level and the necessary accumulation.' Not only did this represent the objective economic conditions for proletarian revolution, it forced humanity to choose between 'Communism or Barbarism'. In similar vein Trotsky saw the Great Depression as a dramatic vindication of his 'conception of the epoch' inaugurated by the First World War, which signified that the further development of the productive forces in Europe was constrained by the nation-state structure of advanced capitalism. Expressing himself in the language of Lenin's Imperialism, he wrote:

The life of monopolistic capitalism in our time is a chain of crises. Each crisis is a catastrophe. The need for salvation from these partial catastrophes by means of tariff walls, inflation, increase of government spending, and debts lays the ground for additional, deeper and more widespread crises. The struggle for markets, for raw materials, for colonies makes military catastrophes unavoidable. All in all, they prepare revolutionary catastrophes ... there is no doubt that the 'theory of collapse' has triumphed over the theory of peaceful development'.

There was evidently some imprecision here. What is meant by the 'new and higher stage of the general crisis of capitalism'? Is increasing instability consistent with stagnation? What, exactly, is a 'permanent crisis'? These questions were not satisfactorily answered by any of these writers. Trotsky in particular relied on rhetoric and assertion, and failed to provide any solid economic argument to support his view that a new epoch of proletarian revolution had begun in 1917 (see Chapter 13 of volume I of this book). His secretary for much of the 1930s, Jean van Heijenoort, writes of a possible 'lack of confidence on Trotsky's part in his command of economics', an impression confirmed by Sternberg's account of his informal tutorials with Trotsky in 1934.

By far the most coherent theory of stagnation came (in 1942) from the pen of Paul Sweezy. Emphasising mass underconsumption and the curtailment of investment opportunities, it owed as much to liberal theorists like J.M. Keynes and Alvin Hansen as it did to Marx, while also drawing heavily on Hilferding and Lenin. Like many Marxist writers, Sweezy was more interested in qualitative than in purely quantitative economic change, and pointed to the emergence of a new stage of capitalist development. He criticised Hilferding and Lenin for mistakenly generalising, in their notion of 'finance capital', a specific, brief phase of banker dominance over industry to characterise twentieth-century capitalism as a whole (see Chapters 5 and 14 of volume I of this book). Anticipating his later collaboration with Paul Baran, Sweezy proposed the term monopoly capital to encapsulate the era of giant corporations, price rigidity, growing profit margins, sluggish investment and rising selling costs to offset the tendency to underconsumptionist stagnation. Natalie Moszkowska's concept of late capitalism was quite close to this.

By comparison with the European Marxists, Sweezy's treatment was 'economistic', and he paid relatively little attention to the increasing economic role of the state. For Otto Bauer, drawing heavily on contemporary German experience, the Great Depression had been the herald of a new bureaucratically directed monopoly capitalism. The limited industrial recovery in Europe after 1932 had been based upon expanding armaments expenditures, Bauer argued, together with rigid state control of both foreign trade and domestic price and wage formation. Defunct banks had been nationalised, and through its special employment measures the government had gained control over what had become a 'military reserve army' of the unemployed. A return to the liberal capitalism of free competition and free trade was impossible, Bauer believed, and the rise in the state's economic power was irreversible. But the new system offered only the appearance of economic planning, not the reality; it could only suppress the fundamental contradictions of the capitalist economy, and could not overcome them. A new world war was inevitable.

Eugen Varga turned to Lenin's account of wartime capitalism (and implicitly to that of Bukharin) to reach a conclusion similar to Bauer's: 'The principal results of the efforts to overcome the crisis artificially (and of all capitalist economic policy during the crisis) is [sic] the intervention of the state in every detail of economic life in favour of the ruling classes in general, and of monopoly capital and the big agrarians in particular. Monopoly capital makes use of its control of the state machinery to effect a systematic shift of national income in its favour and to rob the state treasury in various ways and under all sorts of pretexts. "State capitalist" tendencies have grown considerably. A transition from monopoly capitalism to a "state warmonopoly capitalism", as Lenin called capitalism in the period of the First World War, is taking place to a certain extent.

'In fact the present situation of capitalism very much resembles that during the World War ... the preparations for the next world war dominate the economic policy of all nations more and more.' State war-monopoly capitalism is thus distinguished by the predominance of military considerations in economic policy, and by a substantial growth in the economic power of the state. Like Bauer, Varga insisted that capitalism remained profoundly contradictory.

Lewis Corey, who used the terms 'state capitalism', 'monopoly capitalism' and 'monopoly state capitalism' interchangeably, denied that the system represented a new social order:

The 'national planning' which accompanies state capitalism is not planning in any real sense, for planning depends upon abolition of the anarchy of private profit relations; it is merely piecemeal aid to capitalist industry and planned limitation of output to prevent complete breakdown and a revolt of the workers. State capitalism is an unworkable compromise between the old and the new (a negative expression of the need for a new social order) and aggravates the antagonisms of declining capitalism.

As we have seen, Trotsky, for all his other differences with both Bauer and Varga, took a similar view. Since the basic contradiction was that the productive forces had outgrown the bounds of the nation state, any solution to the crisis through state economic management was impossible. New imperialist wars were inevitable unless proletarian revolution intervened.

A radically different view was expressed by Friedrich Pollock. Initially Pollock had emphasised capitalists' opposition to planning, which would convert them into rentiers and, by exposing its parasitic nature, threaten the legitimacy of their privileged position. But he soon came to stress the increasing economic functions of the state, citing the Roosevelt National Industrial Recovery Act as a prime example. Neither a new world war nor complete economic breakdown could be regarded as inevitable, Pollock argued. A planned, stable capitalist economy was entirely possible, given a further growth of state regulation and a corresponding transformation of the political system. Power would be increasingly concentrated in the hands of an economic oligarchy. The middle class would lose its independence, while technological unemployment and labour market segmentation would blunt the strike weapon and destroy the proletariat's will to resist. 'What is coming to an end', Pollock concluded in 1933, 'is not capitalism but merely its liberal phase. Economically, politically and culturally, there will in the future be less and less freedom for the majority of mankind.' Parliamentary government would give way to plebiscitary dictatorship, and the burgeoning apparatus of psychological mass control would render the state apparatus independent of all classes, allowing it to assume an autonomous [unparteiisch] position over and above society.


Excerpted from A History of Marxian Economics by M. C. Howard, J. E. King. Copyright © 1992 M. C. Howard and J. E. King. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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Table of Contents

  • FrontMatter, pg. i
  • Contents, pg. v
  • Acknowledgements, pg. ix
  • Introduction, pg. xi
  • 1. Marxian Economics and the Great Depression, pg. 3
  • 2. The Political Economy of Stalin, pg. 24
  • 3. The Soviet Mode of Production, pg. 48
  • 4. ‘Has Capitalism Changed?’, pg. 75
  • 5. Marx and Keynes, pg. 91
  • 6. Monopoly Capital, pg. 109
  • 7. The Falling Rate of Profit, pg. 128
  • 8. The Permanent Arms Economy, pg. 149
  • 9. Capitalism and Underdevelopment, pg. 167
  • 10. Unequal Exchange, pg. 186
  • 11. Critics of Underdevelopment, pg. 205
  • 12. Value Theory Before Sraffa, pg. 227
  • 13. Sraffa and the Critique of Marxian Theory, pg. 245
  • 14. Marxian Value Theory After Sraffa, pg. 265
  • 15. Marxian Political Economy and Surplus Economics, pg. 291
  • 16. The ‘Second Slump’: Theories of Crisis after 1973, pg. 311
  • 17. Rational Choice Marxism, pg. 335
  • Conclusion, pg. 387
  • Index of Names, pg. 397
  • Index of Subjects, pg. 403

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