Pethokoukis

Inequality is up, and the economy stinks. Does that mean Karl Marx was right?

We seem to be in the midst of minor “neo-Marxism” boomlet, a bit of which I document in my new NRO coumn. Over at the New York Times, its Room for Debate feature is asking the question, “Was Marx Right?”  Some really fascinating discussion follows. These bits really struck me:

AEI’s Mike Strain:

Our tough times now heighten our sensitivity to asymmetries, making Marx’s observations particularly poignant. … But these problems don’t mean capitalism will inevitably unravel, as Marx thought. … The social safety net for the truly needy is the example of how culture and politics can correct the excesses of the free enterprise system. We let the free enterprise system create wealth and give people the freedom to pursue their dreams and to flourish, while letting culture direct the fruits of the market to proper social ends. Finding the right balance is the hard work of responsible politics.

Tyler Cowen:

There is in fact a problem with stagnant wages in today’s developed economies. But in the United States for instance much of the problem lies in our low productivity health and education sectors, which raise the cost of living for everybody, plus the high cost of renting or buying in desirable urban areas and in good school districts. … The problems are very often rooted in our imperfect institutions, such as lack of accountability in our schools, and a health care system which combines the worst properties of public and private sector incentives, leading to more expensive service and lower quality and access. Less zoning and more high-density construction would ease the housing budgets of many lower-income Americans. …

Marx pointed out, again perceptively, that capitalism might be subject to a declining rate of profit, and indeed the rate of productivity growth generally has been lower since the 1970s. But why? I would cite energy price shocks, greater investments in environmental goods (which may well be optimal), political dysfunction, the difficulty of topping the amazing achievements of the early 20thcentury, a bit of cultural complacency, and a generally greater aversion to risk, failure and also the new NIMBY “not in my backward” mentality. Most of Marx’s analytical constructs are convoluted, replete with contradictions, and in any case not ideally suited toward analyzing those problems.

 Brad DeLong:

Marx thought increased investment and capital accumulation diminished the value of labor to employers, and thus diminished the bargaining power of workers — when actually it increased it. But although this third belief was wrong for his day, is it wrong for ours and for our future?

We (1) move things with large muscles; (2) manipulate things with small muscles; (3) use our hands, mouths, brains, eyes, and ears to make sure that ongoing processes and procedures stay on track; (4) via social reciprocity and negotiation try to keep us all pulling in the same direction; and (5) think up new things for us to do. The coming of the Industrial Revolution –the steam engine to power and the metalworking to build machinery — greatly reduced the need for human muscles and fingers for (1) and (2). But it enormously increased (3), for all those machines needed to be minded and all of that paper needed to be shuffled. …

But there is no iron law requiring that technologies of power application and matter manipulation must always advance more rapidly than technologies of governance and control. What happens when our machines take over (3) and leave humans seeking employment with only (4) and (5)? How many and at what wage can we employ people in the social arts of personal services and as inventors and creators? …

The optimistic view is that our collective ingenuity will create so many things for people to do that are so attractive to the rich that they will pay through the nose for them and so recreate a middle-class society. The pessimistic view is that some pieces of (3) will be (a) mind-numbingly boring while (b) stubbornly impervious to artificial intelligence, while (4) will remain limited and for the most part poorly paid. In that case, our future is one of human beings chained to desks and screens acting as numbed-mind cogs for Amazon Mechanical Turk, forever.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

10 thoughts on “Inequality is up, and the economy stinks. Does that mean Karl Marx was right?

  1. I’m pretty sure that when the economy transitioned from agriculture to manufacturing the new jobs were also considered “mind-numbingly boring”. In the 90s-00s there was also waling about inequality (Read Ida Tarbell).
    Somehow the country managed to become better off each subsequent decade.

  2. I’m pretty sure that when the economy transitioned from agriculture to manufacturing the new jobs were also considered “mind-numbingly boring”. In the 90s-00s there was also wailing about inequality (Read Ida Tarbell).
    Somehow the country managed to become better off each subsequent decade.

  3. One can conclude Marx was right about the diagnosis of the patient. However, his cure killed the patient. Obviously Marxism as an economic and political system is a disaster of epic proportions. BUT when one considers that wealth flowing inexorably to the top destabilizes society, certainly there’s a problem in capitalism it’s finding hard to even admit, let alone address

    The recent shift in the conservative US narrative from ‘America is the land of opportunity’ to ‘yeah, we have the highest rate of inequality in the western world and isn’t that great’ shows how much of a shift in thinking has to take place before we can address the problem.

    • If the US is not a land of great opportunity why do so many people want to come here to work? Why aren’t they choosing those other parts of the world where opportunity is greater (and inequality presumably less)? And why aren’t Americans clamoring to emigrate there?
      Which places are those, by the way?

      • Seattle sam, it’s irrelevant that people ‘want to come here’. The fact is US social mobility is the worst in the western world. So the real question is, why don’t you like facts?

        • Then let me rephrase the question. Why do you think so many people want to come here to subject themselves to the worst social mobility in the Western world? As Woody Allen said, “The food here is terrible. And the portions are so small.”

          • Probably because they, like you, still believe the marketing hype even though they, like you, don’t know it’s wrong.

        • But I still want to know this. Assuming everyone was as smart as you are and knew that the United States is not a land of opportunity, what lands are more full of opportunity? That is, to where should people living in the United States emigrate in order to increase their opportunities?

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