Marxist Institutionalism

Transcription

1 University of California, Riverside From the SelectedWorks of HOWARD J SHERMAN December, 2002 Marxist Institutionalism HOWARD J SHERMAN, University of California, Los Angeles Available at:

2 MARXIST INSTITUTIONALISM By Howard J. Sherman Professor Emeritus of Economics, University of California, Riverside And Visiting Scholar in Political Science, University of California, Los Angeles ADDRESS: MAILING ADDRESS PROFESSOR HOWARD J. SHERMAN Department of Political Science University of California Los Angeles, California

3 1 MARXIST INSTITUTIONALISM This is a review article of Phillip Anthony O'Hara, Marx, Veblen, and Contemporary Institutional Political Economy: Principles and Unstable Dynamics of Capitalism, Northampton, Massachusetts: Edward Elgar, 2000, Price $100. O'Hara has fashioned a new synthesis of institutionalism and Marxism, which may be called Marxist Institutionalism. MARXIST INSTITUTIONALISM What is Marxist Institutionalism? It is an integration or synthesis of Marx and Veblen, though different people may emphasize more of one than the other. A number of people have written powerful, excellent articles comparing the similarities in Marx and Veblen and finding many fundamental similarities (see, e.g., Sweezy, 1958; Hunt, 1979). Many more people have integrated parts of Marx and Veblen in their own work (see, e.g., Baran and Sweezy, 1966; Sherman, 1991). There is a book-length dialogue comparing Marx and Veblen on social evolution (Dugger and Sherman, 2000). But O'Hara is the first to try and actually do a book-length synthesis of Marx and Veblen in both theory and application.

4 2 This is an ambitious project, but O'Hara has succeeded in laying a foundation and doing some pioneering work. First he examines in some detail Marx and Veblen, emphasizing the similarities, but noting some differences. Then he shows in detail the integration of the two views in much of contemporary US Marxism and US institutionalism. His conclusion would have been different if he had written in the 1950s. Marx and Veblen have not changed, but in the 1950s Marxists and institutionalists were on the warpath against each other. The pervasive repression and right-wing gloom in the United States pushed many institutionalists to the right in that period, with a major anti- Marxist element in their writing. At the same time, the dominant Marxism around the world reflected the dogmatic official Marxism of Joseph Stalin, dedicated to the justification of a one-party dictatorship by means of various sophistries and distortions of Marx. Stalinist Marxism casually attacked institutionalism as petty bourgeois apologetics. All of this has changed. As O'Hara shows with extensive evidence, some people now consider themselves to be both Marxist and institutionalist, many in both camps respect each other, and their views

5 3 have converged on many basic subjects. After giving a broad synthesis of the Marxist Institutionalist approach in the first half of the book, O'Hara applies that methodology to current issues of political economy in the last half of the book He concentrates on presenting the historical dynamic of capitalism since the Second World War. HOLISTIC EVOLUTIONISM According to O'Hara, contemporary institutionalism is holistic and evolutionary. A holistic approach sees the entire social organism as an interconnected whole -- and views no problem in isolation from the rest of society. This is opposed to neoclassical economics that views all social processes as a one-way relationship from a given psychology, which may be stated in isolation from the rest of society -- and indeed must be stated initially in isolation if neoclassical economics is to have a firm foundation. Holism is also opposed to the old official Soviet Marxism that in the final instance reduced every explanation to a oneway causal process from economics and technology, in which technology was stated autonomously from the rest of society. An evolutionary view sees society moving as a whole from one stage to another by various internal dynamics -- and always views institutions in

6 4 their proper historical setting at a particular stage of evolution(see, e.g., Veblen, 1898). This is contrary to neoclassical economics which views the economy and society in equilibrium or adjusting to equilibrium and states eternal laws of economics, good in all space and time. The most advanced neoclassical ideas on evolution include only the development of a single enterprise or the adjustment of institutions from some dis-equilibrium form back to capitalism. Although the Soviets denounced Hegelianism, they embraced an inverted form of it which included predetermined and inevitable evolution of society. Evolution must arrive at the undemocratic Soviet form of socialism (whereas contemporary Marxists emphasize democracy, see, e.g., Bowles and Gintis, 1986). Contemporary Marxists mostly take a relational approach, which means examination of all of the relations of society in a single matrix, with no problem taken in isolation and no one-way causation. This relational approach is indistinguishable from a holistic approach. Contemporary Marxists are mostly historical in the sense that they examine the internal dynamics leading from one stage of history to another -- and view each social phenomenon within the matrix of a

7 5 particular historical stage. Many concentrate on the concrete mechanisms of transition from one stage to another. This historical view is indistinguishable from an evolutionary view. DICHOTOMIES, CONTRADICTIONS, AND CONFLICT According to O'Hara, Veblen is famous for his dichotomy between business and industry. Industry is the production process, including physical capital, land, labor, and technology. But industry is held in the grip of business, which sometimes encourages it and sometimes sabotages it, as in depressions and slowdowns. Business is the system of institutions constituting the capitalist economy. There is disproportion and friction and prevention of industrial progress whenever business holds back industry for institutional reasons. For Marx there is a dichotomy between the forces of production and the relations of production. The forces of production are land, labor, capital and technology. The relations of production are the relationships between groups in the economy, such as the class relation between labor and capital in capitalism. Those class relations sometimes rigidify and hold back the forces of production, causing great tensions in society. The dichotomy between business and industry is

8 6 very similar, if not identical, to the dichotomy between relations and forces of production within capitalist institutions. In Veblen's view, industry is held back by the vested interests of business, while it is promoted by the community and the common man or woman (see Veblen's book, The Vested Interests and the Common Man, 1920). The resistance to institutional change by the vested interests gives rise to conflict with the common man and woman. Similarly, Marx argues that when the class relations of production hold back industrial progress, the capitalist class is holding back production for its profit interests, while the working class is pushing for rapid progress to enhance its standard of living. The result is class conflict, which may or may not lead to revolution and new class relations. APPLICATIONS The above two sections on general methodology contain many controversial statements, none of which are proven, illustrated, or documented in this review for lack of space. All of these statements, however, are rigorously stated, illustrated, and documented at great length in O'Hara's book. (Also, the Marx and the Marxist literature on

9 7 each of these subjects are stated in detail in Sherman, 1995). The entire first half of O'Hara's book is devoted to a very detailed exposition of the views on these subjects in Marx, Veblen, contemporary Marxists, and contemporary institutionalists, with a very interesting discussion of the literature. The last half of O'Hara's book is devoted to the application of the Marxist-Institutionalist theory to the long run economic development of US capitalism in the period since the Second World War, utilizing all of the contemporary Marxist and institutionalist literature on this subject. He makes considerable use of the so-called social structures of accumulation approach (with plentiful citations in O'Hara), which boils down to a theory of stages in US capitalism, characterized by different relations of capital and labor, different technology, different culture, and different ideology and mythology -- a concept which is equally appealing to both Marxists and institutionalists. Of course, we will all disagree on the details; a similar general approach does not guarantee agreement on detailed empirical analysis. Another application of Marxist Institutionalism is the theory and facts of monopoly. Veblen wrote much on economic concentration and

10 8 its consequences, including waste (see, e.g. Veblen, 1923). Similarly, Marx wrote about monopoly and,any of his followers have stressed it. The most famous Marxist book on the subject is Paul Baran and Paul Sweezy, Monopoly Capital (1966), which had an enormous impact on a whole generation of Marxists. At the beginning of the book, they clearly and explicitly attribute the theory of monopoly capital to Veblen (not Marx). The entire book emphasizes and develops in detail the notions of economic concentration, waste in all of its aspects, and conspicuous consumption. A more fruitful example of the synthesis of Marxism and institutionalism cannot be found. Another important area of application is that of inequality and exploitation. From Thorstein Veblen (1920) to William Dugger (see Dugger's section in Dugger and Sherman, 2000, Chapter 2), there has been an intense analysis of inequality in institutionalist literature, concentrating on its institutional bases. All institutionalists agree on the importance of inequality, though they do not all give it the same centrality in their analysis of its causes and effects on society. But in Marxism a violent battle has been waged over inequality, though most agree on its centrality. It is clear that Marx attributed

11 9 inequality to exploitation and that he explained exploitation in terms of a labor theory of value. But there is not agreement on the meaning of the labor theory of value or just how it applies to exploitation. Dogmatic Marxists have used abstract, unproven assumptions and speculative, deductive logic, reminding one of neoclassical economics. They argue that all commodities are exchanged according to the labor embodied in each of them. They argue that labor power is a commodity, so it sells at its value, which is the value of the goods necessary to sustain a worker's family. Since it is assumed that a worker produces more in a day (say, 8 hours) than he or she consumes as necessary subsistence (say, 4 hours), it follows that there is a surplus, which goes into the pocket of capitalists as profit. Many contemporary Marxists argue that one must start from relationships embodied in institutions rather than such unproven assumptions and purely speculative reasoning. Many contemporary Marxists argue that the dogma that labor power is valued like any other commodity is incorrect (this argument is stated beautifully in Bowles and Gintis, 1986). Unlike all other commodities, labor power is not produced by a capitalist enterprise, it is not sold by a capitalist

12 10 enterprise (at least, its original seller is the worker), and it does not produce a certain amount in a given time as a machine will do. On the contrary, both the wage rate and the intensity of labor are determined by class conflict within given institutions and environment. So some contemporary Marxists are arriving at an institutionalist view of inequality. Finally, an institutionalist theory of the business cycle was stated and investigated empirically by Wesley Mitchell (see, e.g [1913]). A similar Marxist theory was stated in concise terms by Michael Kalecki and later expanded by other Marxists (see the extensive discussion of these views in Sherman, 1991). The Marxist-institutionalist theory of the cycle argues the following propositions, compatible with either Marx or Veblen. First, the business cycle appears only in the capitalist business economy because it has institutions of market exchange, money and credit, and production for private profit. Within those institutions, the internal dynamics of capitalism have thus far turned every expansion into a slowdown, recession, or deep depression, depending on many variables. The institution of the labor market is such that wages always lag behind profits in every expansion, causing

13 11 an eventual limitation on consumer demand. The institution of the commodity market is such that the prices of raw materials rise faster than other prices in almost every expansion. The institutions of finance capital are such that interest rates rise in every expansion. All of these reasons -- and others -- cause an eventual leveling off and decline of profit. Given the institutions of capitalism, a decline in profit inevitably leads to a decline in investment. CONCLUSION O'Hara's book states a methodology which can be shared by contemporary Marxists and institutionalists. It also shows how that approach can fruitfully be applied to empirical research. This review indicated some of the fruitful avenues of application of the approach. O'Hara's book is clear and reads very easily. It is a useful reference for undergraduate courses, a good text for graduate courses, and will be an important reference for professionals for decades. It will lead to many other works of Marxist institutionalism. FOOTNOTE TO PAGE 1 I am grateful to Bill Dugger for his extremely useful comments.

14 12 REFERENCES Baran, Paul, and Paul Sweezy Monopoly Capital. New York: Monthly Review Press. Bowles, Samuel, and Herbert Gintis "Structure and Practice in the Labor Theory of Value," Review of Radical Political Economics, Vol. 12, No. 4 (Winter), pp Bowles, Samuel, and Herbert Gintis Democracy and Capitalism. New York: Basic Books. Dugger, William and Howard Sherman Reclaiming Evolution. New York: Routledge. Hunt, E. K "The Importance of Thorstein Veblen for Contemporary Marxism," Journal of Economic Issues, Vol. 13, pp Mitchell, Wesley Clair Business Cycles and their Causes. Philadelphia, Pa.: Porcupine Press. Reprint of Part III of W. C. Mitchell Business Cycles. Berkeley, California: University of California Press. Sherman, Howard J Reinventing Marxism. Baltimore: Johns Hopkins.

15 13 Sherman, Howard J. The Business Cycle: Growth and Crisis Under Capitalism. Princeton, New Jersey: Princeton University Press, Sweezy, Paul. 1958a. "Veblen on American Capitalism," in Douglas F. Dowd, ed., Thorstein Veblen: A Critical Reappraisal. Ithaca: Cornell University Press. + Veblen, Thorstein "Why is Economics Not an Evolutionary Science?" Quarterly Journal of Economics, July, pp Veblen, Thorstein The Vested Interests and the Common Man. New York: Huebsch. Veblen, Thorstein Absentee Ownership and Business Enterprise in Recent Times: the Case of America. New York: Huebsch.