In her speech at ‘Why Marx Was Right’, Susan Newman argues that Marx’s analysis of capitalism goes against everything modern economics stands for

Marx developed his theory of value out of his critique of English (and Scottish) political economists Adam Smith and David Ricardo, the founding fathers of modern economics. Indeed, Marx took on many of Smith’s ideas, notably the separation of use and exchange value. But I argue that Marx should not be considered an economist and that his most important contribution to the analysis of capitalism is as antithesis to modern economics.

Marx’s three volumes of Capital provide an analysis of how societies are organised in the production of things (use-values). Marx’s development and application of historical materialism allowed him to specify the nature of capitalism and its implications for its own progress and sustainability as well as its impact on society and the nature. It is precisely his ‘critique of political economy’, his development of the dialectic, and taking history seriously, rather than his adherence to traditions in political economy, that allowed him to develop the most insightful and transformative understanding of capitalism with unrivalled relevance today.

Economics as a discipline (and profession) has developed quite separately from Marx. Marx is almost never mentioned in economics textbooks or within economics journals. Modern economics analysis sees society in relation to an idealised market economy where all activity is oriented around exchange. It is a study of individual behaviour abstracted from society and time where interactions between people (or firms) are limited to bilateral exchange. It resembles the idealised end point towards which Marx predicted capitalist relations would develop but never reach – that is the full subsumption of everything to capital where the relationship between people, society (and nature) appear as nothing but the relationship between things (commodity fetishism). In Capital, Marx gives a number of reasons why this end point of the commodification of everything will never be reached because of the material nature of things. Nevertheless, modern economics views all social interactions as between individuals and in the form of exchange. Anything deviating from this ideal is treated as such, often with an appeal to concepts and explanations from outside the discipline to explain these.

Economists seem always to be ‘discovering’ new social concepts. Economics has an apparently insatiable appetite for breaking off and swallowing concepts from outside of the discipline. This is true of concepts originating in Marx’s analysis of capitalism. Recently, the American economist, Samuel Bowles, reflected on Marx’s contribution to modern microeconomics. Professor Bowles is highly critical of Marx’s relevance to economics. Where he sees some merit in Marx is as a precursor to ‘principle agent theory’ in modern microeconomics. In principle agent theory, economists discovered the importance of power and how the uneven distribution of power informs individual interests and hence behaviours premised upon self-interest and performed through exchange. The approach is used to explain a whole host of relations, e.g. employer-employee, shareholders-manager, parent-child. The analysis informs solutions to these ‘problems’ via various apparatus that align interests without necessarily affecting the root of the power relation which comes from the differentiated ownership of assets. How do you align an employers’ interest in productivity and the intensity of work with that of the worker? One way would be to pay a piece rate. In another example, remuneration for managers that is tied to share prices aligns the interests of shareholders and managers, as the theory goes.

By deracinating Marx’s concepts from his analysis the contribution of Marx to modern economics will always be reduced and limited. This is a bastard Marxism. Economics is devoid of historical and social analysis. It universalises capitalist relations. In this way, economics motivates political conservatism. To quote from Samuel Bowles,“Economists, looking back, have not found much to admire in Karl Marx….Keynes referred to Capital as “an obsolete economic textbook”…Paul Samuelson’s judgement – “From the viewpoint of pure economic theory, Karl Marx can be regarded as a minor Ricardian””.This is true; Marx has nothing to contribute to the “dismal science” because of its methodological foundations and ideological underpinnings. Marx teaches us that power in analysis is to understand things as they are in order that we might change them. To see where the weak points in the system are and toidentify where revolutionary power lies requires a break from the disciplinary silos of academia and not tinkering around the edges of disciplines based on false foundations.

The modus operandi of mainstream economics has been to cut revolutionary ideas from their root in class analysis. But as Marx put it, “to be radical is to grasp the root of the matter”.