Marx' Economics and Lord Desai's "revenge": A response to the book "Marx's Revenge" by Meghnad Desai - Part One

Meghnad Desai has published a book, Marx’s Revenge in which he poses a fundamental question for Marxists – could capitalism go on for ever? The short answer to this is that capitalism will last until such time as it is overthrown through socialist revolution, conscious action by millions of people. So the question needs to be reformulated: is socialism on the agenda? If capitalism is a flawed system, as we argue, then it will offer endless opportunities for its overthrow. Desai, on the other hand, seems to argue that a crisis-free future is possible for capitalism. Talk of socialism is therefore premature. Mick Brooks argues the case for socialism in the twenty-first century.


Potential readers will notice that this is quite a long review article of Desai’s book. They will also observe that Meghnad Desai often disappears from view in the course of the writing. Why bother to read it then?

Desai’s book poses a fundamental question for Marxists – could capitalism go on for ever? The short answer to this is that capitalism will last until such time as it is overthrown through socialist revolution, conscious action by millions of people.

So the question needs to be reformulated: is socialism on the agenda? If capitalism is a flawed system, as we argue, then it will offer endless opportunities for its overthrow. Desai, on the other hand, seems to argue that a crisis-free future is possible for capitalism. Talk of socialism is therefore premature. We argue the case for socialism in the twenty-first century.

Desai is regarded as a significant Marx scholar. As a Professor of Economics at the London School of Economics and Labour member of the House of Lords, he has written two books on Marxist economics (Marxian economic theory and Marxian economics as well as editing a version of Lenin’s economic writings. He is also a prolific writer on economic and political issues, and an influential figure in Labour Party circles.

Desai’s book raises major debates in Marxist political economy. He marshals all the basic criticisms that have been formulated within bourgeois economics. That is why we are dealing with it at such length. Our exposition assumes a basic understanding of Marxist economics.

Orthodox neoclassical political economy is called ‘bourgeois’ economics by Marxists not as an insult, but because we believe it provides an ideological justification of the capitalist system. These apologetics ‘trickle down’ to become pervasive throughout society, not just locked up in economics text books. And Desai’s pessimism for the socialist project exists because, as a professional economist, albeit one who has written extensively on Marxist economics, he is immersed in a neoclassical world outlook that takes capitalism for granted. The review article format is really a peg to assess the debates. It is divided into eight broad sections:

1) Our political differences
2) The case for socialism in the twenty-first century
3) A survey of orthodox economics – monetarism and Keynesianism
4) Equilibrium
5) Welfare economics
6) The socialist calculation debate
7) The meaning of Marx’s reproduction schemes
8) The transformation problem assessed


Part One


Our political differences

Dialectics and economics

It may seem that there is no unifying theme in this review article apart from the issues raised in Desai’s book. The thread that unifies our critique of what we call bourgeois economics is dialectics. This is how Engels addressed the issue of scientific method.

"When we consider and reflect upon nature at large, or the history of mankind, or our own intellectual activity, at first we see the picture of an endless entanglement of relations and reactions, permutations and combinations, in which nothing remains what, where and as it was, but everything moves, changes, comes into being and passes away…This primitive, naïve but intrinsically correct conception of the world is that of ancient Greek philosophy, and was first clearly formulated by Heraclitus: everything is and is not, for everything is fluid, is constantly changing, constantly coming into being and passing away." (Anti-Duhring p 33)

Engels then explains how scientific enquiry came to be dominated by what he calls metaphysics.

"To the metaphysician, things and their mental reflexes, ideas, are isolated, are to be considered one after the other and apart from each other, are objects of investigation fixed, rigid, given once for all…At first sight this mode of thinking seems to us very luminous, because it is that of so-called sound commonsense. Only sound commonsense, respectable fellow that he is, in the homely realm of his own four walls, has very wonderful adventures directly he ventures out into the wide world of research. And the metaphysical mode of thought, justifiable and necessary as it is in a number of domains…sooner or later reaches a limit, beyond which it becomes one-sided, restricted, abstract, lost in insoluble contradictions. In the contemplation of individual things, it forgets the connection between them; in the contemplation of their existence, it forgets the beginning and end of that existence; of their repose, it forgets their motion. It cannot see the wood for the trees." (ibid 34-35) Engels goes on to explain that the German philosopher Hegel revived dialectics in the nineteenth century, but in a mystical form.

It is our central contention that neoclassical or orthodox economics suffers from an incorrect ‘metaphysical’ method that leads to so many errors of analysis. On the other hand Marx proclaimed that his writings on economics were grounded in the dialectical method.

"In its mystified form, dialectic became the fashion in Germany because it seemed to elucidate the existing state of affairs. In its rational form it is a scandal and an abomination to the bourgeoisie and its doctrinaire spokesmen because, while supplying a positive understanding of the existing state of things, it at the same time furnishes an understanding of the negation of that state of things, and enables us to recognise that that state of things will inevitably break up; it is an abomination to them because it regards every historically developed social form as in fluid movement, as transient; because it lets nothing overawe it, but is in its very nature critical and revolutionary." (Afterword to second German edition of Capital Vol I p 20)

What future for us?

Desai poses the question, ‘is there a future for democratic socialism?’ He seems to answer, ‘probably not’. Starting life as a progressive and believing that life was bound to get better for most people as long as the labour movement kept up the pressure on the system for reform, he was forced to confront the difficult decade of the 1980s. Here is his autobiographical musing. "The electoral triumph of the Conservative Party in the midst of severe unemployment posed a real challenge. Even if one explained away their 1983 victory as due to the Falklands War (though I thought even then this was a false consolation) the 1987 defeat of the Labour Party was pretty final." (Marx’s Revenge p vii)

Desai continues, "The 1980s bring us to the crucial decade. In the advanced capitalist countries politicians came to power – Thatcher, Reagan, Kohl – who tackled the crisis of profitability by a deep restructuring of postwar capitalism. It was in many ways a brutal experience…It was a gamble, but it worked: these governments won democratic mandates again and again…democratic socialism also suffered its historic defeat because the prospects of the imminent demise of capitalism were dimmed." (ibid p x). We discuss what the ideology and movement Meghnad calls democratic socialism and Marxists call reformism stands for a little later. But the argument as to the reason for the defeat of ‘democratic socialism’ is frankly incomprehensible. Surely if capitalism is going to go on and on, and is capable of providing relatively full employment and rising working class living standards (as Desai asserts), then that is the best environment for the Labour leaders to wring concessions from the system? Clement Attlee and Harold Wilson did not assume that capitalism was at death’s door when they were striving for reforms in an earlier age.

We shall deal later in more detail with the issue, ‘is there a future for socialism?’ which is another way of enquiring, ‘could capitalism go on for ever? For now we take up the question, ‘is there a future for reformism?’ - as Marxists call it. We have to say Desai’s reaction to episodic setbacks in Britain is absurdly over the top. Meghnad is appalled that 43% of the British electorate were prepared to vote for Margaret Thatcher as Prime Minister. We did not like the fact any more than he did that the British electoral system can turn such an underwhelming vote of confidence into successive Tory landslides. It is also true that the return to mass unemployment was accompanied with defeats to the labour movement, most notably in Britain by the defeat of the miners’ strike in 1985. But, though shaken, the movement remained intact. And no serious political commentator can really transform the unpleasant political reality of the 1980s (which, to repeat, 57% always voted against) as a world historic rejection of collectivism of even the mildest stripe, born of the mass perception that there was no historic alternative to capitalism.

So, Desai concludes the system will go on and on, and the alternative apparently opened up by the 1917 October Revolution was just a detour – from capitalism eventually back to capitalism. We shall deal later with the significance of the collapse of Stalinism.

How does Desai deal with the fact that the same electoral system that favoured Thatcher has since delivered landslides to Tony Blair and Labour? Is there still ‘no future for democratic socialism’? Is the Labour Party fundamentally different from the days when it was led by Wilson and Callaghan? History shows it is still the same Party led by politicians who are cautious, right wing and pro-capitalist to the marrow, but drawing its support from the working class.

Reform and revolution

The real distinction to be made in the labour movement is between revolutionary socialism and reformism. This division was imposed by the Russian Revolution in 1917, the greatest single event in human history. Lord Desai, a New Labour peer, is a representative of reformism. Our present concern is with what he calls ‘democratic socialism.’ Presumably this is to be counterposed to something called ‘undemocratic socialism’. Though Desai does not define ‘undemocratic socialism’ at this point, it is clear he is referring to the whole Bolshevik tradition – including both Stalinism and Trotskyism. Thus he is able to conflate the victims of Stalin and their murderers, the defenders of workers’ democracy and its gravediggers. Incidentally this is a typical Stalinist trick, called an amalgam, to roll together incompatible elements and smear one with the filth of the other. I have used the term reformism or social democracy because it is more neutral than ‘democratic socialism’ (What a wonderful combination of virtues! Who could oppose such a trend?). The problem with the latter phrase is that while Michael Foot, a reformist in revolutionary eyes, is proud to call himself a socialist. Tony Blair would run a mile from such a description. Reformists, as Marxists call them, are not named that because they are committed to reform. Tony Blair, for one, is not. Reformists are committed to the capitalist system. If it is prepared to grant reforms, they are pleased to take the credit. If the system says it can’t afford any reforms then they defend the system.

Let us take the case of Rosa Luxemburg. Rosa was a revolutionary socialist. Even Meghnad would find it difficult to reproach her of being undemocratic. According to his account, "Rosa Luxemburg, a Polish economist who spent her active life in the SPD … died in 1919 at the hands of some disgruntled German soldiers." (Marx’s Revenge p 93)

He makes it all sound like a bad Saturday night in Aldershot! Paul Frolich’s biography tells us what really happened. The Social-Democratic President of the German Republic, Philipp Scheidemann, put a price of 100,000 Marks on Rosa and her comrade Karl Liebknecht’s head in January 1919. The truth of this account was attested to later in a libel trial. Philipp Scheideman, was a Social-Democrat, the German equivalent of a Labour leader, and a reformist. He did not hesitate to move from reformism to death squads. The Social Democrats set up the Reichstag Regiment which co-operated with the Freikorps, a proto-fascist gang who used the swastika as their emblem, in hunting down Rosa Luxemburg. She was shot ‘while trying to escape’ (that lie used by reactionary knaves over the centuries) and her body thrown in a canal. This is the choice reformists are faced with when revolution comes. Democratic space evaporates. They have to choose – revolution or counter-revolution. They always choose counter-revolution. Scheideman probably argued that he was defending democracy and the rule of law. Actually he was violating both of those fine principles to defend the rule of capital. Ironically it was Rosa Luxemburg and her fellow revolutionary socialists who died fighting for reforms, which they knew could only come as the by-product of revolutionary struggle.

Was Marx a Marxist?

Desai goes on to wind us Marxists up. "Indeed, if it came to a choice between whether the market or the state should rule the economy, modern libertarians would be as shocked as modern socialists (social democrats et al.) to find Marx on the side of the market…It would surprise them to know that Marx did not advocate the nationalisation of industries or a replacement of the market by central planning. He did not look to the state, even a ‘Socialist state,’ to alleviate the conditions of the workers. He did not advocate a monopoly of one-party rule and never said that the Communist Party – the party of Marx and Engels - would lead the proletariat. He did not found a political party…The use of terror, of cliquish party rule to gain power was to him an anathema: Blanquism." (Marx’s Revenge p 9)

This needs to be replied to point by point:

1. Against nationalisation? Here’s the Communist Manifesto. "We have seen above that the first step in the revolution by the working class is to raise the proletariat to the position of ruling class, to win the battle of democracy.

"The proletariat will use its political supremacy to wrest by degrees all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State i.e. of the proletariat organised as the ruling class; and to increase the total of productive forces as rapidly as possible." (p 74)

What this means concretely is spelled out in the programmatic points.

"4. Confiscation of the property of all emigrants and rebels" (presumably including any means of production they happen to own)

5. Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly. (nationalisation of the banks, Meghnad)

6. Centralisation of the means of communication and transport.

7. Extension of factories and instruments of production owned by the state…" (ibid p 75)

Against replacing the market with central planning? It is true that there is not a single reference to central planning in the writings of Marx. But that does not detract from his lifelong hostility to capitalism and ‘the market’. In Critique of the Gotha Programme he first discusses the lower stage of socialism (dubbed socialism by Lenin).

"Within a co-operative society based on the common ownership of the means of production, the producers do not exchange their products; just as little does the labour employed on products appear here as the value of these products, as a material quality possessed by them, since now, in contrast to capitalist society, individual labour no longer exists in an indirect fashion, but directly as a component part of the total labour." (p 15)

Marx’s exasperation with the penny pinching which accompanies market relations bursts out when he discusses the higher stage of communism.

"In the higher phase of communist society, after the enslaving subordination of the individual to the division of labour and with it also the antithesis between mental and physical labour has vanished; after labour has become not only a livelihood but life’s prime want, after the productive forces have also increased with the all round development of the individual and all the springs of co-operative wealth flow more abundantly – only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners ‘from each according to his ability, to each according to his needs’." (ibid p 17) Hardly a ringing endorsement of the market!

Did not look to the state to alleviate the conditions of workers? Back to the programme of the Communist Manifesto.

"1. Abolition of property in land and application of all rents of land to public purposes…

10. Free education for all children in public schools. Abolition of children’s factory labour in its present form…" (Manifesto p 75)

If Meghnad means that Marx did not appeal to the capitalist state to improve the conditions of the workers in the interests of the establishment, as Lassalle (his reformist rival in the German workers’ movement) did to Bismarck, then he is right. If he is asserting that Marx did not believe that the working class could mobilise for reforms and put demands upon the existing state, then he is completely wrong. It was Marx who hailed the Ten Hours Act and other reforming factory legislation in Britain as ‘the first victory for the political economy of the working class.’ And if he does not recognise, as Marx clearly proclaims in the Manifesto, that the revolution necessitates smashing the existing state and replacing it with another, then he is completely up a gum tree.

Champion of free trade? In a speech in 1847 on this very topic Marx concludes, ‘But in general the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of proletarian and bourgeois to an extreme point. In a word the free trade system hastens the social revolution. It is in this sense alone, gentlemen, that I vote in favour of free trade.’ (On the question of free trade p 224) Now this can be construed as a defence of free trade. But Peter Mandelson, Trade Commissioner for the European Union, is hardly likely to plead his cause in this fashion.

Did not advocate a one party state? For once Desai has got it right! But neither, contrary to legend, did the nasty Bolsheviks. The only parties that were banned after the October revolution were those engaged in counter-revolution. Parties were declared illegal one by one as they supported the other side in invasion and civil war. The Bolsheviks were actually in a coalition government with another party, the Left Social Revolutionaries, till the latter tried to assassinate Lenin.

Never said the Communist Party would lead the proletariat? Again Meghnad re-treads the myth of the iron disciplined party leading the working class to victory like a herd of cattle from the fairy story of anti-Bolshevism and shows it didn’t apply to Karl. True, but it didn’t apply to the Bolsheviks either - for the simple reason that the working class aren’t cattle. Here’s the Manifesto again, explaining what leadership means to Marxists. "In what relation do the Communists stand to the proletarians as a whole?

"The Communists do not form a separate party opposed to other working class parties." (remember, this is the manifesto of the Communist League)

"They have no interests separate and apart from those of the proletariat as a whole.

"They do not set up any sectarian principles of their own by which to shape and mould the proletarian movement….

"The Communists therefore are on the one hand, practically the most advanced and resolute section of the working class parties of every country, that section which pushes forward all others; on the other hand, theoretically they have over the great mass of the proletariat the advantage of clearly understanding the line of march, the conditions, and the ultimate general results of the proletarian movement." (ibid p 61) Isn’t that clear? This was precisely the position taken by the Bolshevik Party.

Did not found a political party? Again, this is not the whole truth and the statement seems intended to deceive. Marx was not a nineteenth century Meghnad Desai – he was a revolutionary activist. Marx and Engels joined the League of the Just in 1847. Its slogan was ‘all men are brothers’ (a thought inspired by the book of Genesis). Under their inspiration the group changed its name to the Communist League and took as its central slogan ‘workers of all countries unite’. That was effectively the refoundation of the League. It represents the transition from utopian to scientific, Marxian socialism.

Can capitalism go on for ever?

Marx seems quite an obsession for Desai. The reader will be right in thinking that his book is yet another contribution to the ‘Marx was wrong’ industry. Meghnad turns to speculate on what Marx would have thought of the continued existence of capitalism into the twenty-first century. The title of Desai’s book, Marx’s Revenge, is an attempt at irony. "But Marx had the last laugh. He was not wrong, not simplistic. Capitalism would not go away until after it had exhausted its potential. The information technology revolution has just begun. What more may come we do not know – biotechnology, new materials, outer space as colonisable land. The whole world is not yet fully integrated…Sub-Saharan Africa is still to be globalised." (Marx’s Revenge p 9) This is plain wrong. As we explain below, Sub-Saharan Africa is poor and wretched not because it is outside the grip of capitalism (‘globalisation’), but because it is firmly in its maw. Imperialism keeps Africa poor and wretched.

Desai goes on, "There are three strands of analysis of the dynamics of capitalism in the three volumes of Capital…one has to assume that these are not just mistakes in revisions but consistent aspects of the same model. There is also – as we shall see later – an apocalyptic vision practically repeated from the Communist manifesto, which sits uneasily with the rest of Capital." (And, again on p 67) "Thus Marx has three responses, not altogether contradictory, to the question of the dynamics of capitalism." Desai posits three Karl Marxes, each of which is conveniently associated with a volume of Capital. The Marx of Volume I is a fiery revolutionary idealist, who believes capitalism is not long for this world. The Marx of Volume II, on the other hand, seems to think capitalism is a perpetual motion machine that will go on for ever. That, at least, is Desai’s interpretation of Marx’s reproduction schemes. The Marx of Volume III is a more contradictory fellow. He is not prepared to set a date for the demise of capitalism but sees the system’s development as contradictory and crisis-ridden. It might be worth noting at the outset, lest the reader believes Desai is observing the ‘natural’ tendency of radicals to mellow as they grow older, that Volume I was actually drafted in its final form in 1867. Volumes II and III, though published by Engels after Marx’s death, were for the most part written earlier.

Desai claims, "The power of Marx’s style in the Communist Manifesto, as in parts of Capital Volume I, made many of his followers think that the transcendence of capitalism was imminent. Even Marx himself, during his prolonged efforts at writing what became Capital, feared (especially in 1857) that capitalism might disappear before he had finished his critique." (There is no evidence for this – MB) "This wild hope receded after 1871, and he turned his mind to the periphery of capitalism – to Russia in particular. But his German followers – along with French, Russian and some Italian ones – were convinced that capitalism had reached its limits, and its demise was not far away. But then, after Marx’s death, Engels published in 1885 the second volume from Marx’s notes, and it appeared that the same theory could be used to illustrate a very long and sustained period of capitalist expansion without crises. A terrifying controversy broke out. The third volume, published in 1894, talked of the tendency of the profit rate to fall, heartening the doom-mongers. How could one then see the future of capitalism? Could it sustain itself despite its exploitative nature? Could it escape punishment by subtle devices – colonies, for instance – which would rejuvenate the ailing system?" (Marx’s Revenge p 41)

We are Marxists. We think Marx was an inspiration and a guide for socialists today. That does not mean we think he was always right. Marxism is not a religion but a scientific method. We are not taking up Desai’s critique because we think it is novel or original. On the contrary we discuss it because it runs through all the longstanding debates and criticisms involving Marxism. And the common thread that binds all these issues is Desai’s conclusion, hinted at but not stated. ‘Capitalism could go on for ever.’ This fundamental critique of socialism and Marxism has a profound contemporary resonance.

(to be continued...)