Early Capitalism’s DiscontentsMarx, Engels, and the Communist Critique

Today�s Class• Brief Review

• The Perils of

Markets

• Capitalism’s

Discontents

Our Story So Far…

Smith Ricardo

CLASSICAL LIBERALISM

List

MERCANTILISM

Marx

MARXISM

Engels

MODERNIZATION

THEORIES

Weber Rustow

ANTI-COLONIALISM &

DEPENDENCY THEORY

Lenin Gunder

Frank

KEYNESIANISM

Keynes

Our Story So Far…

Smith Ricardo

CLASSICAL LIBERALISM

List

MERCANTILISM

Marx

MARXISM

Engels

MODERNIZATION

THEORIES

Weber Rustow

ANTI-COLONIALISM &

DEPENDENCY THEORY

Lenin Gunder

Frank

KEYNESIANISM

Keynes

Brief Review

Medieval Political Philosophy

Classical Mercantilism• Driven by economic

nationalism, competing states restricted imports in an attempt to generate trade surpluses to enhance state wealth and power, and protect domestic constituencies.

Philip III of Spain

Philip IV of Spain

George IIICharles II

Theorists of Nationalism

Alexander Hamilton, USA, 1755-1804

Friedrich List, Prussia, 1789-1846

ProtectionismMercantilism relies on “protectionist” policies that seek to guard national economic interests (e.g. producers) against outside competition.

• Tax laws (e.g., tariffs or duties

on imported goods)

• Regulatory laws (e.g. public

health laws, environmental

protections)

• Quota laws (limits on

quantities of certain imported

goods)

• Anti-dumping laws (laws

prohibiting selling below

production cost)

• Subsidies (e.g., Government-

supported monopolies)

What are the benefits?Why would a country close itself off from competition?

U.S. President Donald Trump (2016-

???)

The Hazards of SpecializationA. National security

concernsB. Implications for

vulnerable domestic producers

C. Protection of national customs and traditions

The original Dukes of Hazzard bought

only American-made products,

preferring protectionism over gains

from trade. At least, I think so.

A. National Security Concerns

lLosing complete self-sufficiency in the production of weapons or food (e.g., rice) may present a national security concern.

B. Domestic Effects of Trade

When a country does not have a comparative advantage in a given factor, imports of that good tend to lower domestic prices of that good.

The Stopler-Samuelson Theorem posits

that trade lowers the price of a scarce

factor of production (e.g., labor), while

protection raises its price.

C. Loss of Traditional Way of Life

lWork is not just about making money, it is a way of life and a part of our identity.

lLosing a job and losing an industry can destroy people’s way of life, and sense of self.

The Perils of Markets

The Industrial Revolution

• The 18th and 19th centuries brought technological innovations in energy(coal to steam), production (machinery), transportation(railroads), and communications.

The invention (or perfection) of the steam engine by Thomas

Newcomen (1712) made it possible to harness the power of

combustion to increase productivity and speed up the transportation of goods in the

economy.

Technological Change and Industrial Restructuring

The Problem with Markets

• Equity

• Public goods

• Sustainability

• Stability

• Morality

Left to their own devices, markets can have

difficulty achieving:

You want a toe?

I can get you a

toe this afternoon.

19th & 20th century

labor strikes

The May 4, 1883 Haymarket Riot in Chicago arose from growing class polarization in the late-19th

century, and is considered one of the inspirations for international May Day observances. Chavez

fought for farm worker rights in the 1960s.

Worker’s Rights

19th & 20th century female

repression

Gender Equality

19th & 20th century child labor

exploitation

Child Labor Laws

19th & 20th century child labor

exploitation

Safety Standards

Public Goods

Public Goods

19th & 20th century

smokestacks and pollution

members.aol.co

m/

captncandlepowe

r/portfolio2.html

Modern industrial emissionsEarly carbon emissions

Environmental Protection

Stock Market Cycles

Market Instability

Brief History of Financial Crises

• Panics of 1819, 1825, 1837, 1847

• Panic of 1857 (Recession)

• Panic of 1873 (Great Depression)

• Panic of 1893 (Bank Failures)

• Panic of 1907 (Recession)

• Panic of 1929 (Great Depression)

• Crisis of 1970s (Oil Crisis)

• S&L Crisis of 1989-91 (Bank Failures)

• Crash of 2001 (DotCom Bubble)

• Crisis of 2008 (Financial crisis)

Amoral Markets

Capitalism’s Discontents

The Communist Manifesto• What was the goal of

the authors of The Communist Manifesto?

• What is their main argument, and against whom or what?

• What is the prescription that follows?

Objective of the Manifesto

Published in 1848, on commission from the Communist League, the manifesto offered arguments and predictions intended to mobilize the proletariat to overthrow bourgeois (capitalist) states to generate a classless, stateless society

1861

1877 1840

1839

A Brief History of Marxist Thought

1843—Outlines of a Critique of

Political Economy (Engels)

1846—The German Ideology (Marx

& Engels)

1848—The Communist Manifesto

(Marx & Engels)

1852—The Eighteenth Brumaire of

Louis Napoleon (Marx)

1853—Capital (Marx & Engels)

1861

1877 1840

1839

Early Works• In his first economic

treatise, Outlines of

a Critique of

Political Economy, Engels examines the history of economic thinking and the emergence of the classical liberal approach.

Critique of Political Economy“Political economy came

into being as a natural

result of the expansion of

trade, and with its

appearance elementary,

unscientific huckstering

was replaced by a

developed system of

licensed fraud, an entire

science of enrichment.

Critique of Political EconomyOn Mercantilism: “The

cardinal point in the whole

Mercantile System is the

theory of the balance of

trade… When more had

been exported than

imported, it was believed

that the difference had

come into the country in

ready cash, and that the

country was richer by that

difference.

Critique of Political Economy

“Was Smith’s system,

then, not an advance? Of

course it was... It was

necessary to overthrow

the mercantile system

with its monopolies and

hindrances to trade, so

that the true

consequences of private

property could come to

light.

Critique of Political Economy

“The term national wealth

has only arisen as a result

of the liberal economists’

passion for generalization.

As long as private

property exists, this term

has no meaning. The

‘national wealth’ of the

English is very great and

yet they are the poorest

people under the sun. (p.

86)

Critique of Political Economy

“The immediate

consequence of private

property is trade —

exchange of reciprocal

requirements—buying and

selling… In every

purchase and sale... Two

men with diametrically

opposed interests

confront each other...”

Critique of Political Economy“[T]he first maxim in trade is

secretiveness… The result is

that in trade it is permitted to

take the utmost advantage of

the ignorance, the trust, of the

opposin party, and likewise to

impute qualities to one’s

commodity which it does not

possess. In a word, trade is

legalized fraud. (p. 87)

Critique of Political EconomyThe second maxim is the

theory of value: ”What cannot

be monopolized has no value,

says the economist.”

Critique of Political Economy“In the struggle of capital and

land against labour, the first

two elements enjoy yet

another special advantage

over labour – the assistance

of science… is directed

against labour. Almost all

mechanical inventions, for

instance, have been

occasioned by the lack of

labour-power”

Expanding the ArgumentHISTORICAL MATERIALISM• History as class struggle• Class struggle as political

struggle & “engine of history”

• Bourgeois seeks to replicate itself, but sows the seeds of its own destruction

• Communists as the true voice of the proletariat

• Communism = end of history

Hegelian Dialectic

Dialectical Materialism

• Mode of production in society sets the

parameters for the political economy

• Economic structure determines social and

ethical relations of society

• Dialectical contradictions between the

forces and relations of production provoke

change

Dialectical Materialism

From primitive communism to slavery, feudalism,

capitalism, socialism, and pure communism

“The bourgeoisie, wherever it has got the upper hand, has put

an end to all feudal, patriarchal, idyllic relations…

The Problem of Modern Industry“Modern industry has converted the little workshop of the patriarchal master into the great factory of the industrial capitalist.” —Marx and Engels

The Worker and the Man“Not only are they [the proletariat] slaves of the bourgeois class, and of the bourgeois state; they are daily and hourly enslaved by the machine, by the overlooker, and above all, by the individual bourgeois manufacturer himself.”

The Re-Gendering of Work“The less the skill and exertion of strength implied in manual labor… the more modern industry becomes developed, the more the labor of men is superseded by that of women.”

Working Poor vs. Filthy Rich“The modern labourer… sinks deeper and deeper below the conditions of existence of his own class… And here it becomes apparent that the bourgeoisie is unfit any longer to be the ruling class in society.”

Average wage:

Wallmart ($11.22)

In 2015, CEO C.

Douglas McMillon

made $19,070,249

Civilized vs. Barbarian Nations“The bourgeoisie, by rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilization.

The Sorcerer’s Apprentice“Modern bourgeois society… is like the sorcerer, who is no longer able to control the powers of the nether world whom he has called up by his spells.”

The End Result“What the bourgeoisie therefore produces, after all, are its own grave diggers. Its fall and the victory of the proletariat are equally inevitable.”

Later Works• To explain the failures

of Communist revolution, Marx studied French revolution in his work, the 18th Brumaire of Louis Napoleon (1952)

• Later he and Engels developed a more expansive treatment in the three volumes of Das Kapital

Men make their own history, but they do not

make it as they please; they do not make it

under self-selected circumstances, but under

circumstances existing already, given and

transmitted from the past. Marx, The 18th

Brumaire of Louis Napoleon

Was Marx Wrong?

• Was Marx�s critique of the capitalist system, and the stranglehold of economic interests on the state ultimately valid?

• What were the problems with Marx�s historical predictions?