Policy Paper: A Rejoinder of Marxian Principles

Craig Duddy
Category:
Economic Policy

The Marxian formulation of exploitation and their further class analysis has been hit with some critiques over the time in which it was presented by Marx and further developed into a more modern and pragmatically applicable thesis within modern society by more modern Marxists.


While some of the analysis Marx presents, especially regarding his thesis of exploitation upon history, would, in essence, be considered correct, it is a derived from a false fundamental premise that Marx misuses and misconstrues into a distorted version of a true analysis of exploitation.


To outline in logical premises what the Marxian thesis would be, I will use the premise by premise description that Hans Herman Hoppe gave in ‘Economics and Ethics of Private Property’ (Chapter 4, P 117-119)


  1. The history of mankind is the history of class struggles, it is the history of struggles between a relatively small ruling class and a larger class of the exploited. The primary form of exploitation is economic; The ruling class expropriates part of the productive output of the exploited or, as Marxists say, “it appropriates a social surplus product and uses it for its consumptive purposes.”


  1. The ruling class is unified by its common interest in upholding its exploitative position and maximizing its exploitatively appropriated surplus income. Instead, any loss in power or income must be wrestled away from it through struggles, whose outcome ultimately depends on the class consciousness of the exploited, i.e., on whether or not and to what extent the exploited are aware of their status and are consciously united with the other class members in common opposition to exploitation.


  1. Class rule manifests primarily in specific arrangements regarding the assignment of property rights or, in Marxist terminology, in specific “relations of production.” To protect these arrangements or production relations, the ruling class forms and is in command of the state apparatus of compulsion and coercion. The state enforces and helps reproduce a given class structure through the administration of a system of ‘class justice,’ and it assists in the creation and the support of an ideological superstructure designed to lend legitimacy to the existence of the class rule.


  1. Internally, the process of competition within the ruling class generates a tendency toward increasing concentration and centralisation. A multipolar system of exploitation is gradually supplanted by an oligarchic or monopolistic one. Fewer and fewer exploitation centres remain in operation, and those that do are increasingly integrated into hierarchical order. Externally (i.e., as regards the international system), this centralisation process will (and all the more intensively the more advanced it is) lead to imperialist interstate wars and the territorial expansion of exploitative rule.


  1. Finally, with the centralisation and expansion of exploitative rule gradually approaching its ultimate limit of world domination, the class rule will increasingly become incompatible with the further development and improvement of ‘productive forces.’ Economic stagnation and crises become more and more characteristic and create the ‘objective conditions’ for the emergence of revolutionary class consciousness of the exploited. The situation becomes ripe for the establishment of a classless society, the ‘withering away of the state,’ the replacement of government of men over men by the administration of things, and, as its result, unheard-of economic prosperity.


This is a logical description of Marxian thought, outlined premise by premise, it is undeniable that some of this analysis indeed is correct, each of these premises disregarding a few things could be given perfectly valid justification, however it is the Marxian interpretation and pragmatic application that has continually done more and more to discredit these premises and create an ‘alienation’ so to speak, with what otherwise could have been considered a true description of reality, the state, exploitation and class antagonism.


What I will attempt to demonstrate in this paper is first how the first principles of Marxian exploitation are categorically false, and how this thesis of class antagonism that follows afterwards also falls from the invalidation of first principles.


Then I will attempt to demonstrate how a categorically differing thesis of exploitation and class analysis would be the correct approach, that being one within the framework of a Misean-Rothbardian tradition.


First Principles of Class Analysis, Exploitation Theory:


First, it is important to distinguish the fundamentals of Marxian class analysis, which rests upon the Marxian conception of exploitation. 

So what is this ‘exploitation theory’ within the pragmatically applicable framework to modern society? 


According to Marxians, this ‘capitalist’ categorisation of exploitation is due to this expropriation of full output while only being compensated a discounted rate of the full output. 


In essence, this is described by looking at the factor prices, specifically the wages and observing that the compensation for the input labour, is lower than that of the full output produces by that labourer’s labour, meaning the capitalist has expropriated a surplus income, from labour that was not his own.


For example, if the labourer is paid compensation in the form of wages that reflect a consumption good that can be produced within one week, but he works for two weeks and produces an output within those consumption goods that exceeds his compensation, the capitalist would have expropriated a surplus income from that labourer, as the factor prices in the form of compensation are lower than the output generated.


This extra weeks worth of generation of consumption goods, in Marxian terminology, is what we infer as surplus income on behalf of the capitalist, they appropriate this good in which does not belong to them, and thus Marx deduces, this must be exploitation of the labourer. 


So from this description, I can attempt to provide the fatal flaw in Marx’s analysis, which are almost wholly derived from the first principles of surplus capitalist exploitation.


Refutation to Surplus Exploitation:


First, we must consider within which ideological constraints would make this labourer agree to such an ‘exploitative deal’ to begin with, as of course, both employment and unemployment for those who are physically capable, are in essence voluntary, and as such it would be a logical absurdity to claim otherwise.


So then to explain this voluntary interaction we consider what these wage payments represent, that being these payments represent a formulation of present goods, while the productive output of his labour services represents future goods.


The universal law of time preference dictates that each individual must value more present goods to less future goods, this is axiomatic by the very nature of action, independent of empirical justification, that is, a priori true.

Any attempt to disavow this economic law would just result in the user being in a status of performative contradiction by making the argument that one does not prefer more goods in the present, to fewer goods in the future.


By the very essence of one acting, they are demonstrating this preference, as all points in time within the reference frames of individuals are always reset at any moment of observation, both the passage of time and any change in position will always result in an observation of T = 0 on the part of the individual.


This is what Einstein laid out in his thesis of Special Relativity, and the reason this is meaningful to this scenario is that if man did not fit this law of time preference, man would never act.


As the purpose of action is one deploying means to achieve the highest valued ends within an ordinal value scale and evaluated through opportunity costs, this demonstrates that in any moment of action, man is using these means to reach those ends at that moment, or necessarily that in which demonstrates man prefers more of that good, as to a lesser amount later.


This in essence makes this economic law irrefutable.


But what makes this law meaningful to this description of exploitation? When we consider that the labourer still has other productive methods in society we can observe a preference being put forward, the worker still has the option of self-production in which he could map the full value of his labour to himself.


However we do not see this occur all too often at this point because of first, the labourer would have to wait for the full length of the period of production to receive this compensation, whereas the labourer under the capitalist receives this wage payment lets say weekly for example.


And second, the uncertainty involved within the position of capitalist or self-producer is far greater than what would have been for a labourer under a capitalist, workers are always guaranteed some form of payment unless they are laid off which generally will also harm the business, thus the uncertainty in the labourer’s position is reduced.


Whereas the self-producer or the capitalist is fully dependent on the output of that labourer and its relation to fulfilling demand within the marketplace. Without this, there would be no profit to be derived. 


In a world free from things like government bailouts this puts increasing pressure on a highly competitive business model to outcompete its competitors, not only in its quality but also with a sufficient quantity to maximize profit.


After all, this is the unrestricted formulation and praxeological consequence of supply and demand curves. 


But to get back to the original point, with the labourer demonstrating this law of time preference and gaining benefit from using the capitalist to receive more goods sooner rather than fewer goods later, we must ask then why the capitalist, on the other hand, is willing to partake in this voluntary exchange.


This can be categorised within the later gain in output that the capitalist gains from this temporary investment into the factor prices, by abstaining from one's own consumption one frees up their resources by saving capital, and thus accumulating more than what would have been present for investment, further saving, etc


For the capitalist to even reason why he should strike this deal, it falls that he must perceive a profit to be made, i.e., having a lower input paid to the factor prices than ones gained output directly applicable to the usage of these factors.


If one were to perceive of an exchange in which the perceived no self-gain, or ‘profit’ from this exchange, one would not partake in it. 


For example, if one had $200 in cash and another asked him to lend this $200 in return for the same amount back in 50 years, one would not partake in this exchange purely because there is no profit to be made by partaking in this exchange.


This has direct implications on not only the nature of exchange but also that of interest, the only logically formulated position that can be taken from this description in regards to exchange is that all exchange, is some way subjectively benefits each participant so long as they are free from coercion to enter this, to begin with.


Why would the capitalist not partake in endless investment?


This would seem self-explanatory but I will attempt to outline in the most coherent way I can formulate my thinking why someone who possesses the role of a capitalist then would not partake in endless investment if profit were always to be perceived.


The answer to this question would essentially be deduced when we consider another of Marx’s concepts which prescribe the dual role of the capitalist.


A capitalist just like everyone else would be subject to the role of a consumer, invariably constrained by the law of time preference, being subject to nature and thus being subject to the necessity of consuming consumption goods, even if to a lesser degree than the average labourer.


The rate in which one can save, invest, exchange, etc is limited by the necessity of their consumption, a capitalist synonymous with that of the labourer also requires a subsequent stock in goods sufficient to that of his ego to fulfil the state action intends to do, and as this law of time preference is always in play, the capitalist is constrained in his investment. 


Review of ‘Exploitation Theory:’


So what then, in essence, has this first section of this paper attempted to outline to the reader? It is that in which exploitation theory falls when we consider the constraints placed by first, what this factor price in the formation of wage compensation represents, second the universal law of time preference and third the reason for exchange occurring.


This thesis presented by Marx and modern-day Marxians is fundamentally flawed in it does not consider this invariable law of time preference, which would essentially just deduce surplus income to a thesis of interest income, the full value output is discounted by the rate of time preference and the capitalist is compensated for his previous format of abstaining from consumption to compensate these labourers before the profitability from that labourer’s output rolls in.


Quite the contrary to exploitation, this is closer to cohesive compensation so to speak for roles that must be fulfilled by certain categories of society within the framework of the division of labour.


This has nothing to do with exploitation, but rather more to do with the fact that the full output is discounted against time preference, it is merely a reflection of what must occur to exchange present goods against future goods, that of interest. 


Conclusion to the First Section:


Our conclusion can be summed up like this, what Marx presents as a thesis upon exploitation is miscategorised and misused, it is pragmatically applied to the wrong areas and thus has done more to discredit the analysis of history and class which is pragmatically applied correctly could be used for a correct formulation of truth premises, but unfortunately for Marx and his followers, this was not the approach taken, and thus we must consider the first principles to be fundamentally incorrect.


To clarify, however, this does not necessarily make all of Marx’s conclusions to his analysis’s incorrect some can be justified with great validity, however, we must be consistent in showing that the way these propositions came to be, were derived from a false starting point.


As I will attempt to show later in this paper, we can justify something like that of Marx’s analyses from a Misean-Rothbardian tradition.


Implications on Class Antagonism:


I will try to keep this section short but sweet, from the very foundations of Marxian class analysis lays the exploitation thesis we previously described, so as this was Marx’s starting point he then deduced that there was an inherent conflict between these two roles, as one was interested in the continued exploitation of the labourer, and the other interested in receiving the full value of what is ‘rightfully theirs’ as Marx seems to infer.


The issue that falls within assuming these economic roles however again falls within Marx discrediting the existence of time preference.


These time preferences, in the overall scale of things, are intrinsically opposed, but this does not necessarily mean they are antagonistic of one another, I would argue this is a necessity for the continued survival of an economy, not only concerning the Austrian Business Cycle but also concerning the production and continued functioning of a corporation.


The labourer demonstrates through the formulation of choosing the capitalist over self-production that he has a higher effective rate of time preference, and that he prefers a smaller amount of present goods over a larger amount of future ones, hence rather than expropriating the full value of his labour through only producing consumption goods in self-production, he chooses a discounted rate of his full value.

Whereas the capitalist, on the other hand, has the interest of a higher productive output at a later date, or higher output of goods over lower future goods, hence why the capitalist can abstain from his consumption and pay the factor prices while waiting for labourers service to be rendered complete to make that interest income.


Having this reversed order of time preferences cannot be classed as ‘creating conflict’ as such, but no less than ‘harmonious’ 


Without the labourer’s time preference present, that of which they prefer less future goods over more later goods, the capitalist would be worse off as they would have to resort to less efficient, shorter and less roundabout production methods than those in which the capitalist would desire for maximized output.


For the case of the labourer if the capitalist did not expect to derive this interest income there would be no basis for that labourer’s employment to being with, and thus the labourer would have to resort to a longer production process in which they would have to wait longer than one wishes to derive this income, which of course is antagonistic to the interests of the labourer.


As I have demonstrated, without these effective reversed rates of time preference there would be a worse outcome for each individual within society, only under a harmonious system in which these characteristics each class of people desires are fulfilled inadvertently by chasing one’s self-interest from another class can a harmonious, civil society function.


To Marx’s claims about the capitalist function being a constraint among the productive forces of society, we can deduce from all that has previously been described that this system of productive functions and harmonious class fulfilment, productive forces are nothing less than an inducement toward further economic prosperity.


But this is not all we can address this claim with, as I will further attempt to show, this system of socialized productivity comes with, inherent fatal flaws.


Fatal Flaws in Socialised Production:


There are a few ways we can address this, I will attempt to point out two of the strongest refutations to socialized production within the purely economic field here.


Of course, there are other philosophical refutations in which I would more than happy to address in a later paper, but for the moment let us stick to a purely economic prescription upon a thesis of socialized production.


So first, we have to consider where property appropriations that generate capital accumulation are derived from, that being a homesteader partaking in an act of homesteading, thus establishing an intersubjectively ascertainable link between the individual and the object, thus establishing it as one’s property. 


Only with individuals in a saptio-temporal framework can this homesteading occur at defined points within spacetime.


This capital accumulation can also occur after the fact through saving and/or production.


But we need to look at why this capital accumulation occurs in the first place, which can be answered within the context of value attachments. When an actor partakes in action to accumulate capital, we see this individual must desire this capital through a value attachment but why does this occur?


Value attachments to capital would generally occur under the framework of the expected productive output as a directly attributable proposition to the ownership of that capital itself, or to phrase it differently, the profitability caused by the private possession of that capital.


Of course, this direct output of future goods is discounted by one’s rate of time preference as always, as it would be impossible for man to exchange present goods with future goods within the context of non-coercive exchange without one party deriving some form of interest disregarding externalities.


As is the case under a production method that is within the status of ‘socialized’ this value to be attached to the specified unit of capital is thus decreased as all future goods attributable to this capital are decreased as it is assigned to non-producers, non-savers, non-homesteaders, etc.


When a specific actor is no longer granted exclusive control over all profitability of the income derived from his possession of that capital, the value attached thus must always be decreased, to claim otherwise is a logical absurdity.


From this point we can Praxeologically deduce an analysis of the consequences of all actors attaching less value to specific units of capital, that being in which one’s effective rate of time preference is to rise, less homesteading is to occur, productive forces are diminished and the periods of production become shorter, and thus a further induction of barter.


Not only this, but the roundaboutness of production will also be diminished, in favour of shorter, more hyper-specific production format. 


From this, we can see that a relative impoverishment of the populace will follow.


Misean Economic Calculation Problem:


Another fatal flaw that is present within socialized production is that of one Mises very formally presented, that of the economic calculation problem.


This is very often misconflated with that of Hayek’s thesis upon the Knowledge Problem, or otherwise named the ‘Computation Problem’


The Misean case to this day remains unanswered, rather only sidestepped by using strawman arguments and misconceptions of the original formation of Mises’s format of argumentation.


So what is then the Misean case of the ECP?


The case I will present will hopefully be substantial enough, if not a more fundamental in-depth analysis upon the nature of economic calculation can be found in Mises’s revolutionary essay back in the 1920s entitled ‘Economic Calculation in the Socialist Commonwealth’


First, to start this analysis we must consider what acting man does in his everyday judgment, this can be described in the formation of acting man must always make choices, there are always alternative uses to his scarce deployment of means, and thus he must always establish the Praxeological ordinal value scale at all times for any purposeful action to occur. 


This reflects that man tends to value from goods of a lower order, and then upon goods of a higher order within the production process. 


Under something like a Crusoe economy, man would not have much difficulty in evaluating his choices regarding higher-order goods, but this status of affairs undeniably becomes complicated when their implications and analytical status becomes near indiscernible, and thus subtler means must be deployed to reach a ‘correct,’ rational evaluation of these higher-order goods.

For example, Crusoe who resides in a completely independent ‘household’ economy so to speak, can evaluate whether it is more economically viable to his value scale to use a stick or a rock to get this banana, or ‘produce this lower order good’ 


However, when Crusoe is put in a modern economy this severely complicates things, how is he to be able to determine this economic viability without the usage of monetary calculation?


With the immense usage of roundabout production structures, there is just no way to determine in which usage these higher-order goods should be allocated to, unless we have the monetary calculation to relay the information necessary to producers about consumer demand curves, through supply and demand. 


In a subset of a very intrinsic and complicated economy, we need very specific forms of evaluation mainly through a universal medium of exchange in which we can deduce everything to one common unit from to determine with the greatest accuracy the most efficient distribution of resources under consumer demand.


This can only be evaluated in the formation of exchange value, there are no deductible units to evaluate use-value. As Mises says, “Marginal utility does not posit any unit of value, since it is obvious that the value of two units in a stock is necessarily greater than, but less than double, the value of a single unit.” (Economic Calculation in the Socialist Commonwealth, Chapter 2, P 8-9)


Within this monetary calculation is limited to evaluation based on exchange value, however, this bears no significant impact when we consider that supply and demand, and by extension, prices take into account all the ‘extra-economic’ or ‘physic-evaluations’ of each individual within the economy. 


They just do not enter into competitive exchange relationships, but by no means does this mean they are not covered by Monetary Calculation


To have rational economic calculation two conditions must first be met, those being that first, all goods within the production process are subject to open exchange relationships, this includes both lower-order and higher-order goods. 


It is a necessary consequence of the state of the universe itself to be subject to uncertainty and imperfect knowledge and thus by logical deduction we can say that no one man can master all frontiers of the production process, only with the aid of the monetary system and correct pragmatic application can we have reflected the most effective information about market conditions, without this, making decisions about the distribution of resources is no less than arbitrary marks, or ‘groping in the dark’ so to speak 


The second condition governing monetary exchange is that of a universal currency for the expression of prices, without this not all goods could be deduced to one common denominator. 


Only in the position that one is situated in a ‘household’ economy system can one dispense of monetary calculation, but quite obviously in modern society to apply everyone to this model, would quite frankly, be impossible.


But where does the relation to socialized production come specifically?


The main observation to take from all that has previously been said is this, for rational calculation of production costs to occur, one must thus be able to establish monetary information surrounding higher-order goods, and as production has been socialized, an exchange between this to establish prices is thus impossible, making it so this formation of an economy can only embrace consumption goods.


The implication of this inability to assign monetary formations to higher-order goods is that rational economic calculation regarding profits, losses, misallocations, production costs, etc become completely impossible as a concept.


This fundamental inability to determine production costs poses a great problem for the socialist production method, and one that has yet to be overcome.


A Rejoinder to Exploitation, the Misean-Rothbardian case:


From this point I will now attempt to outline the case for another thesis of exploitation, that which formed from the Austrian school in the Misean-Rothbardian view, this is by no means the same as the Marxian view, rather there are consistencies, it just attempts to present a more pragmatically true explanation of ‘real exploitation.’


First, we can start from the historical account, that in which the consistency between the Austrian analysis of history and the Marxian analysis exists.


When we look at previous systems of production, those characterized by systems of ‘slave and master’ or those within the framework of ‘serf and feudal lord’ we can see an exploitative system. But how do we categorize and define this exploitation?


It is a fairly simple answer but it is one that is a very fundamental answer to the analysis of not only class and exploitation, but also that of history.


Exploitation in essence is then derived purely from the non-recognition of the Lockean principle of homesteading, so this is how we then follow in our historical account.


The ‘slave and master’ relationship would be exploitative on the basis that the master is within the context of non-recognition to the homesteading principle, the slave owns himself, and has homesteaded his ‘self’ with his ‘body.’ 


As the slave, in this case, does not have full control over his own homesteaded body, or his own ‘property’ it must be categorized by exploitation, to claim otherwise would be nonsensical. 


In the case of the ‘serf and feudal lord’ relations, this also would be an exploitative procedure based on the non-recognition of the homesteading principle.


The reason specifically for this is in essence that the peasant is exploited because that individual does not have exclusive control over the land that he homesteaded by mixing his labour with land. 


Contrary to this, however, if a society functions, operates and proceeds with no violations to this private property ethic then to categorize this societal function as ‘exploitation’ is absurd, just as it is absurd to say that the voluntary exchanges between these homesteaders are exploitative.


No reduction in the stock of the previously possessed stock has occurred to any individual all that has been done is that additional goods have been created in the process of homesteading.


Exploitation only occurs when any deviation from the homesteading principle occurs, and thus the introduction of the modern-day tax and regulatory states can be classed as nothing but unethical appropriations of property, and thus exploiting homesteaders in their sustained goal for world domination to expand counterfeiting and exploitative powers through not only traditional imperialism but through the use of Fiat currency and monetary imperialism such as what we have seen with the dollar.


Exemptions of the Ruling Class:


When we consider what is to be then the distinction between competitive, private, free enterprise and that within the subset of the ruling class, or the state enterprises the distinction and exemptions the ruling classes enterprises gain becomes clear.


Free enterprise is heavily constrained by competitive markets and consumer demand to make profits, we continually observe the rise and failure of numerous free enterprise businesses because of either the failure to reach consumer demand or the absence of consumer demand entirely, one cannot say the same thing about state enterprise.


They are almost wholly exempt from this fulfilment of consumer demand, there is no demand at all for state produce, no individual is demanding that the fruits of their labour be coercively taken against their property rights, rather all we can assume is that minimum they must be coerced in passive resignation by state powers.


A ruling class is exempt from the powers at be which could bring down free enterprise, that is abstaining from investment into that companies’ products, a state, on the other hand, gives the individual no choice in their evaluation upon how to spend their money, rather coercively takes it and leaves the exploiters victim no say in the matter.


However, something else must be taken into consideration here, that being the class consciousness of the victims. As any parasite is reliant on its host for survival, the exploiter, in this case, is also reliant on its victims for survival.


Without at minimum a passive resignation on behalf of the exploited, the popular opinion that the state requires for its survival in all cases would not be present, and thus the state would cease to function.


This leads us into our next topic in this analysis of state behaviors.


Why has the ruling class democratised its powers?


This section of the analysis will be very brief as it does not require much explanation, but in essence to explain why the state would have democratized their powers over this full control they previously would have had we must consider one of the very few requirements the state needs to function and continue is exploitative property appropriations against homesteaders, that thing being popular support.


When the very functional nature of a state is exploitative and requires a parasitic relationship on private individuals, and thus will inevitably create victims within its exploitative and parasitics endeavours. 


Thus the state must come up with some system of governance to reduce this effect, not only by Orwellian esk ideological control but also through democratisation, this change was not out of the kindness of the states heart to transfer from one tyrannical system to another, but rather, it is within their interest to transfer to democratisation based on the psychological impacts it can have within the framework of increasing popular support.


Through implemented democracy as a system of governance the state can assure the citizens that every last one of them has a say in what the government does, that the government is for the people and thus reducing the distinct nature of this governmental exploitation by saying to its victims in essence “this is within your control, and you chose to do nothing about it, this is no longer a fault of the ruling class, but a fault of homesteaders for not changing the system when it was within their power to do so.”


Of course, this is nothing more than Orwellian thinking at it’s finest, the civilian while very slightly involved in the process the system itself constrains this to very conservative transformations in which the individual is subject to about as much control as one who has a tiny share of the stock is over the management of a company.


This is the reason for state democratisation, the expansion of their expropriative powers by subjecting the subject to a false reality they are in control when really, they are just being controlled like everyone else.


Conclusion:


There has been a lot covered here, but it can be summed up fairly simply, the Marxian analysis of class can in some respects be a correct categorization if approached from a Misean-Rothbardian tradition, same with the analysis of history, however as Marx derived this from his thesis upon exploitation, when the fundamental starting point of his analysis falls, so do the deductions,


This paper didn’t even delve into an analysis of something that has also been heavily critiqued, and that is the labour theory of value.


For exploitation theory to be true the labour theory of value must also be true, which I ardently disagree with both propositions made, however, for the presentation I did presuppose the labour theory of value to be correct just to show, that even on Marx’s groundings, Marxism still falls.


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Craig Duddy

Guest Writer