Category Archives: History of Economic Theory

Economist Dr. Richard Wolff On Basic Economic Theory from a Comparative Perspective, as a Corrective for the Intellectual Dishonesty Built Into Most American Economics Curricula

24 Fri Feb 2017

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usdayofrageLUMPENPROLETARIAT—On free speech radio’s Economic Update, host and heterodox economist, Dr. Richard D. Wolff discussed various economics topics, as he does every week.  And, this week, Dr. Wolff devoted the second half hour of the broadcast to breaking us out of the dominant ruling class/Wall Street paradigm of economics, which we are all force-fed in most economics textbooks in most American schools, colleges, and universities, and which permeates our newspapers, our radio, TV, and internet news reports.  Thankfully, there is more than one way to approach the economy and questions of economics.

The dominant version of economic theory (dominant, in terms of geographic footprint, not intellectual superiority), which saturates, at least, the English-speaking (and Western) world is known as neoclassical economics, which is merely one theoretical approach to economics.  By contrast, heterodox economics considers alternative approaches to economic theory and practice from a comparative perspective.  The New School (where Dr. Richard Wolff currently teaches) and the UMKC Department of Economics at the University of Missouri-Kansas City (where your author studied) are two examples of the few heterodox economics departments in the USA, which offer a comparative approach to economics.  Most economics departments around the nation are modeled after the conservative/neoclassical Chicago school of economics.  Indeed, the Chicago school has essentially colonised most economics departments around the nation and stifled alternative perspectives, such as Marxian economics (which has been suppressed and even criminalised), Keynesian economics (which has been co-opted by neoclassical economics), Post-Keynesian economics (which has sought to remain true to the original spirit of Keynes‘ work), and institutional economics (which has sought alternative ways of viewing the economy, from broader perspectives beyond simply money, business, finance, and trade).

As a result of the stifling hegemony of neoclassical economics, the field of economics has been rendered deliberately abstruse, opaque, dull and uninteresting, and completely removed from all human/social context by an overly mathematised and rigid adherence to neoclassical assumptions.  The interesting professors of economics employ a comparative approach and make real-world connections, such as Dr. John Henry, who taught us at UMKC, among other things, about the History of Economic Theory (or, somewhat derogatorily, the History of Economic Thought) as well as microeconomic analysis.  Another interesting, indeed awesome, UMKC professor of economics was Dr. Fred Lee, who was respected for his level of knowledge and vast reading.  Dr. Fred Lee was always one of my favorite participants at UMKC economics presentations because he didn’t mince words and he always called it like he saw it.  He was very outspoken and very passionate about heterodox economics and socioeconomic justice.  Indeed, if memory serves me, Dr. Lee coined the name heterodox economics.  For economics professors, who are not confined within neoclassical dogma, economic theory must always be first and foremost descriptive before prescriptive.  Notably, Dr. Henry also taught Post-Keynesian economist Dr. Stephanie Kelton, who continues to teach the world, as do other MMT advocates, how our money system works and why the government can afford to spend for public purpose, such as effectively ending involuntary unemployment through an MMT-based job guarantee programme.

It’s a shame that the American people are not taught to understand their own economy and economic system, or how the two-party system of Democrats and Republicans locks in place a capitalist system, which is misunderstood and confounded by myths, perpetuated by bad, or narrow and dogmatic, economics curricula.  But our U.S. Constitution encourages us to speak freely and for each one to teach one, and to help our neighbors survive and prosper.  That’s where the politics of education come in, which might involve base human drives, such as ego and greed, but also altruism and a deeper underlying philosophy of education.  Even Pope Francis uttered a few years ago, “Injustice is not invincible.”  To help us better understand our world, Dr. Richard Wolff disabuses us of many harmful myths regarding our economy, economics and economic theory, and how those economic myths harm our working class lives. [1]  Listen (and/or download) here. [2]

Messina

***

[Working draft transcript of actual radio broadcast by Messina for Lumpenproletariat and Economic Update.]

Economic UpdateECONOMIC UPDATE—[24 FEB 2017]

[A critique of the working conditions and pay scales of so-called ‘adjunct’ professors at post-secondary educational institutions.]

[KPFA paid-staff member Mitch Jeserich appeals for KPFA listener-sponsorship, membership, and support in the context of KPFA’s Winter Fund Drive (February 2017).]

[A brief comparative analysis of wealth inequality around the world.]

[KPFA paid-staff member Mitch Jeserich appeals for KPFA listener-sponsorship, membership, and support in the context of KPFA’s Winter Fund Drive (February 2017).]  (c. 31:51)

On basic economic theory, from a comparative perspective.

DR. RICHARD WOLFF:  “Okay.  Much of the time, that remains for me today, is going to be used to talk about economic theory.  Don’t worry.  This is not gonna be an abstruse lesson of the sort you might get in a bad class in a bad school.  I’m gonna try to make it clear.  And I’m gonna try to make it interesting.  But we have to deal with this.  (c. 31:58)

“Economics is not like fixing a car.  If you wanna fix a car, you go to a place where they teach you:

This is the carburetor. This is the engine. This is how it works. This is how it breaks down. And this is how you fix it, when it breaks down, so that it works again.

“Things are kind of understood.  They’re fairly universal, car engines being what they are.  And, so, you can become a mechanic and a skilled worker by learning how the engine is put together, what goes wrong, and how to fix it.  Economics is not like that.  (c. 32:56)

“What do I mean?  The economy is part of the mystery of how human beings interact with one another.  You know other parts of that mystery because we all confront those mysteries.

Why do I find that person attractive, rather than the other one?

Why did I marry him, or her, rather than that other one?

Why am I friends with this person, but not with the other one?

“These are mysteries of relationships.  And we spend much of our time trying to figure them out.  And we make progress.  We learn how or why, at least part of how or why we [for example] marry the way we do, and we have friendships the way we do, and this job works for us, and that one doesn’t, and this neighborhood is attractive, and that one isn’t, etcetera.  (c. 33:47)

“Well, the economy is like that.  We don’t experience the economy in the same way.  If you are the head of a big corporation, you do not experience the economy in the same way, that a person does, who drives a truck.  If you’re a farmer, you do not experience the economy the way you do, if you’re an office worker.  You don’t.  And that’s not a fault or a failure.  That’s the way the world is.

“But it’s even more complicated.  If you were educated in certain ways, you were taught to think about the economy in certain ways.  And if someone else taught you with a very different approach, then you learned that approach.  It turns out that economic systems are understood, and experienced, differently by different people.  And it has always been that way, just like human beings understand love, sex, friendship, and all the other relationships in life in very different ways.  And, indeed, one of the fascinating and interesting things about life is to encounter, to discover other ways of looking at the world.  It will change us.

“If I look at it one way, and I encounter a person, who looks at it in a different [way], my perspective will be changed.  I will now be more sensitive.  I will understand, even if I don’t agree with other ways of thinking about the world.  It’s a little bit like discovering that there are other kinds of food preparation, than the one you grew up with.  You don’t have to like them as well; but they’re interesting; they’re tasty.  From time to time, you would like to taste it again.  So, here in New York, one restaurant offers sushi and one restaurant Tex-Mex and another restaurant Chinese food and so on.  And people in New York love that about this city, that you can literally go to a different corner of the world whenever you want to taste how differently human beings have understood the relationship between us and the food we eat.  (c. 36:08)

“So, let’s do the economics.  How do we get into it?  Well, I give that a lot of thought because, when I teach economics, I teach it in what we call a comparative perspective.  I don’t teach economics as if it were carburetor or car engine studies.  The economy isn’t a thing, that it works in this and this way, that we can learn and figure out how to fix.  That makes economics boring, mechanical, and technical, when what is exciting about it is precisely how differently [for example] people eat.  Imagine, if I gave you a course about food, and all I talked about was how you cook the hamburger, here’s how you cook the french fries, and, therefore, here’s how you make food.  Eventually, you’d figure out that that isn’t about food.  That’s about one kind of food.  And you don’t want to be limited to just that kind.  You want to, at least, know what the other ones are. (c. 37:19)

“It would be as if I taught you a course on religion, but the only religion I told you about was, let’s say, uh, Unitarian Universalist religion.  After a while, you’d say to me:  Look, I’m perfectly happy learning about Unitarians and Universalists. But aren’t there other religions, too? Like Roman Catholicism or Muslim religion or Jewish religion? Or and-so-on-and-so-on?  You want to understand that people engage with divinity, God, the spiritual, if you like, in different ways, just like they engage with food in different ways.  Well, friends, your education is narrow, stunted, and inadequate, if you think economics is one way to go.  (c. 38:10)

“Now, why do I stress that?  Because that’s how it’s taught in the United States.  And that’s how it’s been taught for most of the last 50 years.  We do not admit to most of our students in most of our colleges and universities that there are alternative ways of understanding what an economy is, how it works, what’s wrong with it, and how to fix it.  There are multiple ways of doing that, just like there are multiple ways of dancing or singing or eating or dressing or praying or anything else, particularly anything else that really matters in life.  And our economy matters, just like our eating matters and our religions matter and so on.  (c. 38:57)

“So, I am now, in the time that I have, going to try to address the different ways you can understand the economy.  One last reason, before I do it, why: because economics has been so narrowly taught in the United States, because only one way of thinking about it dominates almost to the exclusion—not quite, but almost to the exclusion—of other ways.  Our economic leadership in companies, in the government, has been poor.

“We have had, for example, [an economic] crash in 1929, a terrible [economic] crash, that gave us [an economic] depression—that’s what it’s called—that lasted eleven years, roughly, from ’29 to ’41.  One of the reasons we had that terrible crash is we didn’t have the insight, the understanding, to see it coming.  We didn’t understand, once it came, why it was there.  And we didn’t understand real well what to do about it, which is why it lasted eleven horrible years.

“And did we, at least, learn after that?  Not really very well. [3]  The narrowness of our economics prevented us from asking, and answering, crucial questions.  And that’s part of the reason why, in 2008, capitalism in the United States and beyond crashed again.  And, once again, the profession didn’t see it coming. [4]  And, once again, when it hit, they didn’t understand why.  And, once again, they couldn’t fix it, which is why here we are, eight years, nine years later, in 2017, a crash that happened in 2008, and we’re still, most of us, living with the consequences, the terribly damaging consequences.  That should have been more than enough evidence to suggest that the way we were teaching, studying, learning, and using economics was inadequate, was too narrow, missed too much.  But it didn’t.

“It didn’t.  And that’s because there are reasons why we teach what we teach, even though it doesn’t work very well.  A dangerous way to run your society.  But it’s the one, that has dominated in our society.”  (c. 41:38)

[KPFA paid-staff member Mitch Jeserich appeals for KPFA listener-sponsorship, membership, and support in the context of KPFA’s Winter Fund Drive (February 2017).] (c. 43:18)

DR. RICHARD WOLFF:  “So, what is that way?  [What is that single, narrow, way in which economics is taught at most schools, colleges, and universities in the United States?]  It’s called neoclassical economics.  We don’t have enough time to go into why it has this funny name.  But it does.  That’s a matter of the history of how it arose.  And, in this view, capitalism is a magnificent economic system.  Neoclassical economics is not neutral about capitalism.  It loves capitalism.  It doesn’t just love capitalism.  But it loves a particular kind of capitalism; it’s the kind with very little government intervention in the economy. [5]  Indeed, from a neoclassical perspective:

All we want from the government is to make sure that nobody interferes with this beautiful system called capitalism, a system, which is perfect, which rewards everybody in proportion to what they contribute.  If you’re rich it’s ‘cos you contributed a lot.  If you’re poor, it’s because you haven’t.

“It’s very morally loaded this way.

It’s a system, in which what gets produced is what everybody wants.  So, it’s kind of fair.  It’s kind of responsive.  It’s consumer-oriented, if you like that language.  It’s a system, that’s self-healing.  If anything goes wrong, it fixes itself.  You don’t need the government to come in.  You just let it be. [6]  Let the private individual buy and sell—buy the goods and services, that he or she wants—sell whatever they have to contribute to production, their labour (if that’s all they have) or some capital (if they have some wealth) or their land (if they own some).  You contribute what you wish and have.  And you get in proportion to what you contribute.  Fairsies, you might call it.  A wonderful system, that is the best way to organise an economy, that the world has ever achieved.  And, therefore, it should be celebrated, which is what neoclassical economics does.  And it should not be interfered with, which is the message, that neoclassical economics gives to the journalists, who write about the economy, to the politicians, that run the government, and to the leaders, who own and operate the enterprise.  (c. 45:50)

Neoclassical teaches: The private economy is what should dominate, is the best thing, that could happen, should be left alone, and works perfectly.  Nobody has anything to complain about.  Your income is your reward for what you contribute.  Don’t complain.  If you want more, contribute more.  And, if you don’t have more to contribute—you don’t have more labour you could do; if you don’t have more capital, you could offer; if you don’t have more land, you could make available—then, it’s your fault.  And you have to live with whatever rewards you get for what contribution you make.  (c. 46:26)

“This [i.e., neoclassical economics, or pro-capitalist dogma] is a celebratory system.  This is what is taught in American colleges and universities 95% of the time.  5%, not quite.  I’m gonna get to that in a minute.  But this is what is taught.  Therefore, you shouldn’t be surprised that journalists, when they write about economics, write as if we live in this wonderful system, that works really beautifully; and that the government should keep its hands off; and nobody should break the rules; and, if there’s a problem, the market, the system will solve it itself.

“And you shouldn’t be surprised if corporate leaders love this because it says they’re in charge of an enterprise, which can do everything it wants.  The government is not gonna interfere because that would only make things bad.  This is what the people, who run the society, want.  Politicians are told to think like this.  That’s why you can hear politicians so often saying these weird things, like:

Let the market decide.

Let the private enterprise system work its way out.

“These [neoclassicals or capitalists] are people, who believe this [economic mythology].  And, after all, they were taught it over and over again.  They got it from their newspapers and TV.  They get it from their political leaders.  Of course, they believe it.  (c. 47:47)

“But is this the only way to look at the economy?  And the answer is an absolute, unqualified, no, no, no.

“To imagine that this is the only way to understand an economy is the same thing as imagining that the only way to have a meal is to eat hamburgers and french fries, or the only way to pray is in the manner of the Unitarians and Universalists.  It is to misunderstand a part of the story for the whole story.  And that does you no service and is no complement to your smarts.  (c. 48:26)

GrantKeynes“So, here we go.  Here’s the first alternative [to neoclassical economic theory or capitalist ideology].  The first alternative is called Keynesian economics [7], named after John Maynard Keynes, a British economics professor at Cambridge University, who in the depths of the Great Depression of the 1930s looked around him and said:

I see a quarter of the people unemployed.  I see poverty and misery all around me.  Don’t tell me capitalism is a wonderful system, that works beautifully, that produces wealth, prosperity, economic growth, that gives everybody what they deserve.  Stop it!  You’re describing an economy, that may be a utopian dream you may have.  But it does not describe and, therefore, it is not gonna help us fix an economy, that is clearly not working well.

“This was a bombshell for many.  This was a man, John Maynard Keynes, who had been an accomplished practitioner of neoclassical economics, but who was realistic about what he saw in the Britain of his time, which was as devastated by the Great Depression as the United States was.  And he said:

Capitalism, private enterprise, markets, left to themselves can and, here, clearly have produced social and economic disasters, crashes, poverty, unemployment, misery, inequality, economic instability.

“Should I go on?  And Mr. Keynes didn’t waste a minute.  He developed an explanation for how private enterprise capitalism can produce these disasters and what should be done about it.  And, to make a long story short, he said there were mechanisms, normal and natural to capitalism, that could and regularly would produce economic horror stories, disasters, failures, miseries, inefficiencies, depressions.  And the solution, he said, was for the government to step in.  Systematically, the government should pump money into the economy when it turned down to build it up again, that the government should, when the private sector wasn’t spending enough money to keep people in their jobs working and producing, well, then, the government should step in.  It didn’t even matter to Keynes.  (c. 51:15)

Buy anything you want.  Take in each other’s laundry.  Build national parks.  Do whatever it is, that has to be done.  Keep people working by having the government buy whatever it thinks might be useful to build.  But the government has to come in, otherwise capitalism self-destructs.

“This is a very different economic theory.  Most schools in the United States don’t teach it.  And, if they do teach it, they have one or two faculty doing that, everybody else is parroting the old neoclassical song and dance.  But is Keynesian the only alternative?  Not at all.  (c. 51:58)

marx_and_engels“The third big one: Marxian economics.  And here’s the big difference about it.  Neoclassical economics celebrates private capitalism.  Keynesian economics says private capitalism is good, but only if it’s controlled, regulated, supplemented by government intervention.  Otherwise, the bad parts of it drown out the good parts of it.  But Keynesian economics likes capitalism.  It just likes it with a heavy dose of government involvement, which freaks out the neoclassicals, who don’t want any government.  And, so, that’s been the debate between them—more or less government, more or less government intervention.  (c. 52:35)

“Marxian economics: completely different.  For Marxian economics, the problem isn’t more or less government.  The problem is capitalism, itself.  This system of organising production, so that a tiny group of people at the top, the board of directors, make all the decisions; and the mass of employees do what their told.  That, for Marxists, is the problem.  You have an undemocratic economic system.  And it undermines democracy everywhere else.  You have a system, that gives a small number of people the dominant say.  They’ll make the system work for them and not for everybody else.  And that’s why you get the inequality, that we talked about in the first half of today’s programme. (c. 53:24)

“No, no, no.  The Marxian argument is:

You have to change the economic system at the foundation. You have to, finally, bring democracy to the workplace.  All the workers together, collectively and democratically, decide what happens in the enterprise, not a handful of shareholders, not a handful of board of directors elected by the shareholders.  No, no, no.

The autocracy, the non-representative nature of the leadership of enterprises, that’s the core problem.  And that has to be fixed.  Otherwise, you will have recessions and depressions and crashes.  The government coming in, as Mr. Keynes proposed, wasn’t enough to stop us from having another crash in 2008, not having learned what the Marxists want us to see, which is the Crash of the 1930s was also a problem of the underlying system.

“Why would a country like ours be this way?  Why would we continue to teach one way of thinking, when it hasn’t worked real well and the alternatives are obvious?  And the answer is: fear.

“For 50 years, the Cold War between the United States and the Soviet Union made Americans fearful about the Soviet Union.  It talked about Marxism.  So, they [i.e., the Americans] didn’t want to talk about that at all.  If you talked about it, you lost your career; you lost your job; you were in trouble.  A little bit like James Joyce trying to write his novel.  He was censored.  You were pushed away.  It’s a tragedy.  It’s intellectually dishonest.  It’s a tragedy for our country.  We need all the insights and all the theoretical avenues available to our people to solve our problems.  Shutting us out of two of the three major theories in the world today is self-destructive.  It’s only done to fearfully support the status quo, what the corporations now like.

They are not the problem.  It’s the government intervention.  It’s this.  It’s something else.  It’s immigrants.  But it’s not the system, itself.

“Thank you for your attention.  Thank you for your partnership.  I look forward to speaking with you again next week.”  (c. 55:53)

[Economic Update theme music comes in momentarily]

[KPFA paid-staff member Mitch Jeserich, then, closed out the broadcast with appeals for KPFA listener-sponsorship, membership, and support in the context of KPFA’s Winter Fund Drive (February 2017).]

[snip] (c. 59:59)

Learn more at ECONOMIC UPDATE.

***

[1]  Unfortunately, Dr. Richard Wolff seems to perpetuate at least one myth, the myth that federal taxes pay for federal government spending.  Dr. Wolff seems to deliberately avoid informing the public about MMT.

[2]  Terrestrial radio transmission, 94.1 FM (KPFA, Berkeley, CA) with online simulcast and digital archiving:  Economic Update, this one-hour broadcast hosted by Dr. Richard Wolff, Friday, 24 FEB 2017, 10:00 PST.

[3]  After the Great Depression of the 1930s, which was triggered by the economic crash of 1929, Keynesian policies prevailed, which involved increased government interventions to attempt to stabilise the economy.  These economic reforms, however, meant reductions in the extreme wealth accumulation of the ruling classes.  In other words economic reforms, in the context of economic collapse, invariably mean restraints on unbridled financial, business, and labour relations; and such restraints are restraints on capitalism, which are restraints on profit motive.  The ruling classes prefer inequality because obscene wealth depends on obscene poverty.  As the celebrated abolitionist (and former slave) Frederick Douglass presciently articulated:

Power concedes nothing without a demand.  It never did and it never will.  Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted with either words or blows, or with both.

During the mid-20th century, ruling class elites, with their well-funded think tanks and connections, eventually managed to undermine Keynesian reforms and usher in a conservative backlash to progressive politics.  By the late 1970s, neoclassical economics struck back in the forms of right-wing elections of President Ronald Reagan (in the USA) and Prime Minister Margaret Thatcher (in the UK).  Then, we saw the rise of Wall Street, reflected in Oliver Stone’s 1987 blockbuster movie.  At the same time as neoclassical economics was restoring and galvanising its stifling hegemony over the discipline of economics, the ostensibly liberal, or progressive, Democratic Party (USA) was effectively co-opting labour unions and turning them into ‘Gomperist’ business unions.  Such unions today, which are most unions, narrowly focus on individual work site issues, shirk their working class solidarity, and ignore broader societal and political issues, whilst remaining predominantly loyal to the Democratic Party, despite the Democratic Party’s unresponsiveness to working class issues.  Indeed, unions have even lost their legal right to engage in wildcat strikes or general strikes, especially since the passage of the anti-labour Taft-Hartley Act, which labour leaders called the “slave labour bill“.  Even President Truman had to admit that the anti-labour Taft-Hartley Act was a “dangerous intrusion on free speech”, which would “conflict with important principles of our democratic society.”

Today, the fire of organised labour is almost entirely extinguished in the USA; and it poses no political resistance to the anti-working class abuses of capitalism.  And heterodox economics has lost almost all influence in American government and institutions.  Dr. Stephanie Kelton (former chair of the Economics Department at the University of Missouri-Kansas City, or UMKC, and one of your author’s former economics professors) is an exception, as she was hired by Senator Bernie Sanders to work as chief economist, first, in the Senate Minority Budget Committee, then, on his campaign trail.  Unfortunately, Bernie Sanders wasn’t as courageous as FDR was in backing economic reforms to remedy the economic hazards of capitalism.  If Bernie Sanders had been courageous, he would have allowed Dr. Stephanie Kelton to lend her expertise on the campaign trail to explain to the American people, for example, how an MMT-based job guarantee programme could provide real jobs to a faltering economy, stimulate a depressed economy, and even end involuntary unemployment as we know it.  The ideas are out there, only they are being suppressed, not only by the corporate media, but even, apparently, by the cowardice of our ostensible political heroes.  (Even Dr. Richard Wolff seems to refuse to speak honestly about MMT, or even mention it.  He continues, for example, to perpetuate the economic myth that taxes pay for federal government spending, as if the USA’s monetary system (or money system) were still on the gold standard.  It’s impossible to imagine that Dr. Wolff isn’t informed about MMT, as he is personal friends with faculty members at UMKC.  But, then, who knows?  We’ll have to reach out to him and ask.)

As far as economists not having had the foresight to see the Global Financial Crisis of 2007/2008 coming down the pike, as Dr. Richard Wolff points out, we observe that heterodox economists, such as Dr. Hyman Minsky, did provide very cogent analyses and clear warnings of the cyclical economic disasters, which are produced by capitalist modes of production.  For example, see Dr. Minsky’s financial instability hypothesis, in which Minsky argued that a key mechanism, which pushes an economy towards crisis is the accumulation of debt by the non-government sector.  Minsky identified three types of borrowers, which contribute to the accumulation of insolvent debt: hedge borrowers, speculative borrowers, and Ponzi borrowers.  As one of my UMKC economics professors, Dr. L. Randall Wray (himself, a graduate student of Dr. Hyman Minsky) taught us, the only thing, which prevented Dr. Minsky from a more accurate prediction of the Global Financial Crisis, was that nobody counted on such a high degree of creativity, which the financial sector would engage in to extend the Ponzi phase of the so-called business cycle.

We can also look back to the work of heterodox economist Dr. Abba Lerner and his theory of functional finance, which is based on effective demand principles and chartalism.  It states that government should finance itself to meet explicit goals, such as taming the so-called business cycle, achieving full employment, ensuring economic growth, and low inflation.

Lerner’s ideas were most heavily in use during the Post-World War II economic expansion, when they became the basis for most textbook presentations of Keynesian economics and the basis for policy.  Thus, when Keynesian policy came under fire in the late ’60s and early ’70s, it was Lerner’s idea of functional finance, which most people were attacking.  During the post-war period, U.S. unemployment reached a low of 2.9% in 1953 when the inflation rate averaged at 1.1%.

Other economists, such as Dr. L. Randall Wray (UMKC), Dr. Michael Hudson (UMKC), and others have also written critically about the inevitable economic boom-and-crash cycles, which result in widening inequality and worsened economic instability.  What all economists, left of center, agree on is the fact that capitalism demands, at the very least, strong government interventions to prevent mass unemployment and economic misery.  That is the opposite of the laissez faire, or let it be, approach of neoclassical, or free market fundamentalist, economics.  The more radical economists admit, as Dr. Michael Hudson often does, that all economies are planned.  That means that capitalist economic crises are expected and allowed to happen, such as the USA’s subprime mortgage crisis, which caused millions of people to lose their homes, their jobs, and their life savings, but which allowed bankers and profiteers to capture a greater share of wealth.  It’s true, all economies are planned, as Dr. Hudson reminds us, the only questions are:  Will the economy be planned by private for-profit banks and Wall Street for ruling class interests?  Or will the economy be planned by Main Street for working class interests?

[4]  Again, we recall exceptions to the general rule that economists didn’t see the Global Financial Crisis coming, such as Dr. Hyman Minsky and the relevance of his work around financial theory.  In the wake of the subprime mortgage crisis of the late 2000s, The New Yorker labelled the subprime mortgage crisis “the Minsky Moment“.

[5]  Again, here we come to the neoclassical economic principle of laissez-faire economics, which ostensibly argues for very little government intervention in the economy.  Of course, this is only a symbolic principle on the part of neoclassical economists.  They don’t really mean laissez-faire.

To wave the banner of laissez-faire economics, or free market economics, is to make it easier for neoclassical economics to saturate the minds of the public and popular notions about economics.  The unassuming non-economist will readily associate popular buzz words, such as free market and the invisible hand and laissez faire capitalism, with notions of liberty and freedom, if only freedom to choose what one can afford.  But, in actuality, this politically conservative economic principle of laissez-faire economics, where the government is supposed to stay out of the economy, really, is only meant to apply to government interventions, which may help or improve working class interests.  As we saw with the huge government bail-outs of Wall Street interests in the wake of the Global Financial Crisis, making insolvent institutions whole again, resuscitating them to life as zombie banks.  So, what is actually meant by laissez-faire economics is: no government interventions on behalf of the working classes, only for the capitalist asset-owning classes.

It’s important to keep in mind that, when we hear pro-capitalist arguments about keeping the government out of the economy, we cannot overlook the many ways in which government intervenes to safeguard the interests of the ruling capitalist classes.

[6]  Dr. Richard Wolff uses the words, let it be, which is a common American translation of laissez-faire, as in laissez-faire economics, or neoclassical economics.  Laissez-faire is an alternative spelling of the French, laissez faire, which means let it be or leave it be, or which literally translates to let do.

[7]  Students of economics will find, today, that Keynesian economics has been largely supplanted by Post-Keynesian economics, at least at the leading edge of heterodox economics.  As economic historian Lord Robert Skidelsky (whom your author has met occasionally around the UMKC campus as well as attended his presentations) argues, the post-Keynesian school has remained closest to the spirit of Keynes’ original work.  Lord Skidelsky, a British economic historian of Russian origin, is the author of a major, award-winning, three-volume biography of British economist John Maynard Keynes (1883–1946).  Lord Skidelsky is, perhaps, the most authoritative biographer of Keynes.

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[1 MAR 2017]

[Last modified at 07:41 PST on 8 MAR 2017]

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“The Slippery Concept of ‘Lumpenproletariat'” by Dr. Joshua Moufawad-Paul

17 Thu Nov 2016

Posted by in Anti-Capitalism, Anti-Imperialism, Critical Theory, Dr. Karl Marx (1818-1883), Free Speech, History of Economic Theory, Marxian Theory (Marxism), Philosophy, Political Economy, Political Science, Social Theory, Sociology, Underclass Debate

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lumpenproletariat_material_hat-p148784260820553134z8rrm_210LUMPENPROLETARIAT—GONZO:  They used to say, if the shoe fits…  Do you possess class consciousness?  I guess, if one has no interest whatever in revolutionary struggle, well, then…

The people’s free/collaborative encyclopedia offers us the following useful definition:

Lumpenproletariat is a term, which was originally coined by Dr. Karl Marx to describe the layer of the working class, which is unlikely ever to achieve class consciousness and is, therefore, lost to socially useful production, of no use to the revolutionary struggle, and, perhaps, even an impediment to the realisation of a classless society.[1] 

Imagine.  How tragic is it to think that any layer of the working class, that any one of us, may be so hopelessly ignorant as to be unlikely ever to achieve class consciousness?  Depending on one’s disposition, perhaps, it’s disappointing enough when one has a measure of class consciousness, but given to political inertia.  With or without class consciousness, we do not lead revolutionary lives.  This seems inevitable in the USA, given our largely uncritical educational standards and hedonistic culture. [1]  So, we draw attention to the lumpenproletariat precisely because of the contentiousness of the debate over its meaning and role for revolutionary struggle and emancipatory transformation.  We need to shake up complacent liberals and uncritical progressives and reactionary proletarians.  Is one revolutionary or counter-revolutionary?  [2]  Is one’s political agency and/or conduct conducive to human emancipation?  Helping us make sense of these philosophical questions, from an MLM perspective, of course, the excellent M-L-M Mayhem! archives offer us some clarity in an article originally published for a popular audience, entitled “The Slippery Concept of ‘Lumpenproletariat’“, by Dr. Joshua Moufawad-Paul (or JMP, as he signs his blog posts). [3]

I may have decided against naming this website Lumpenproletariat had my favourite Marxian theorist, thinker, and colleague (and friend), someone I respect, not given it favourable feedback.  Lumpenproletariat is, indeed, a slippery concept.  It seems Dr. Marx has not written very much about, nor defined very sharply, this socioeconomic class he coined as the lumpenproletariat.  But, as Dr. David Harvey has said, there are things Marx helps us understand; and, then, there are things we’ll have to figure out for ourselves.  At the time, back at the University of Missouri-Kansas City at their heterodox economics department, I had concluded that the lumpenproletariat represented the greatest untapped potential for revolutionary transformation.  This lumpenproletarian seemed best exemplified by the street personality known as Detroit Red, but after expanding his consciousness in prison under the influence of the Nation of Islam, he came to be known as Malcolm X.  This was, to me, a perfect example of the revolutionary potential of the lumpenproletariat.  As Malcolm X evolved and matured beyond the limitations of The Nation of Islam, he came to be known as el-Hajj Malik el-Shabazz.  JMP cites “Ali La Pointe“,

the protagonist of Battle of Algiers, who began as a street hustler, was politicized in prison when he realized that the main reason for his imprisonment was his status as colonized, and who eventually became a disciplined cadre because, once given the opportunity, he abandoned his criminal behaviour.

This is not unlike Malcolm X.  Perhaps, we may think of Ernesto “Che” Guevara as a lumpenbourgeoisie turned revolutionary.  But the lumpen are a slippery lot, indeed.

Messina

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marx_and_engels

Dr. Karl Marx and Mr. Friedrich Engels

M-L-M MAYHEM!—[3 JUN 2012]  Marx and Engels‘ categorization of the lumpenproletariat as a counter-revolutionary class is well-known by those familiar with the term.  In The 18th Brumaire of Louis Bonaparte, Marx refers to the lumpenproletariat as “the refuse of all classes” and points out how they were connected to reactionary, counter-revolutionary forces in France.  And then there is the famous passage by Engels, in The German Revolutions, that is clear about the class consciousness of the lumpen:

The lumpenproletariat, this scum of the decaying elements of all classes, which establishes headquarters in all the big cities, is the worst of all popular allies.  It is an absolutely venal, an absolutely brazen crew.  If the French workers, in the course of the Revolution, inscribed on the houses: Mort aux voleurs! (Death to the thieves!) and even shot down many, they did it, not out of enthusiasm for property, but because they rightly considered it necessary to hold that band at arm’s length.  Every leader of the workers who utilises these gutter-proletarians as guards or supports, proves himself by this action alone a traitor to the movement.

Aside from these historical assessments and the odd throwaway quote, Marx and Engels did not spend very much time trying to establish a scientific assessement of lumpenproletariat as a class category, as they do with proletariat and bourgeoisie for example, using the concept only in their analysis of historical moments, as a classification for an underclass that consisted of swindlers, gangsters, thieves, and criminal elements in general.  Their “gutter-proletariat” was not in itself a precise class positionality because, at the same time, it was also composed of “the refuse of all classes” or “the decaying elements of all classes.”

If the class categories that Marx and Engels spent a lot of time trying to establish scientifically (proletariat and bourgeois) have led to innumerable confusions and debates, often being reified into essential identities, then the categories they did not spend very much time theorizing, such as lumpenproletariat, are even more historically slippery.  The term is often misapplied, or taken as a universal class category, just as often as it is clumsily reclaimed.

Reclaimed and celebrated with hats even!

I would imagine that Marx, when he was speaking of this disparate underclass, was thinking of the character “Thenardier” in Victor Hugo‘s Les Miserables: a gangster who controlled a band of impoverished thieves––a vicious counter-revolutionary.  Clearly, this type of criminal does exist as a counter-revolutionary force; we only need to think of drug traffickers who have infiltrated and ruined revolutionary movements, sexual predators who lurk around movement circles, thieves who only want to get rich at the expense of other poor victims of capitalism, pimps who profit from the oppression of women.

At the same time, however, we cannot claim that, if we were to define lumpenproletariat as “criminal underclass”, it would be universally counter-revolutionary.  Take, for example, Frantz Fanon‘s discussion of this class in The Wretched of the Earth.  Although Fanon agrees that the criminal underclass composed by the colonized in a settler-colonial society can be counter-revolutionary (and we must remember that the FLN, the group Fanon supported, went to great lengths to stamp out criminal behaviour amongst the colonized), he also argued that they possessed great revolutionary potential.  If they are condemned to an underclass only because colonialism has excluded them from society, Fanon argued, then the colonized criminals possess some conscious understanding of their oppression, marginalization, exclusion––a consciousness that is possibly revolutionary.  Here, we only have to think of the “Ali La Pointe“, the protagonist of Battle of Algiers, who began as a street hustler, was politicized in prison when he realized that the main reason for his imprisonment was his status as colonized, and who eventually became a disciplined cadre because, once given the opportunity, he abandoned his criminal behaviour.

Of course, Fanon never argued that engaging in the sort of “lumpen” activity critiqued by Marx and Engels was universally revolutionary.  While it might not be counter-revolutionary to rob and cheat the colonizer, it was not automatically revolutionary to do so… and it was clearly counter-revolutionary to turn this behaviour upon other colonized peoples.  Unfortunately, however, there have been various attempts to argue that this sort of criminal behaviour, since the very concept of “crime” in capitalism is based on bourgeois law and because cops are pigs, that such lumpen activity is essentially revolutionary.  Assuming that this sort of behaviour is revolutionary, when it is so often performed out of selfishness and at the expense of the proletarian in general, is extremely utopian: the Thenardier-style gang chooses the easiest targets, the already-existing victims of bourgeois society rather than bourgeois society itself, and thrives through its parasitism.  Gangsters, the mob, pimps, street hustlers: these illegal vocations, though themselves symptoms of bourgeois law, are not revolutionary.

What I find more troubling than these utopian attempts to reclaim lumpenproletariat are the hasty generalizations of this concept across entire sectors of the population that are used to dismiss those who might not easily fit into a neat definition of proletariat.  For there are those who, by defining the proletariat as only the “industrial working class”, will imagine that this working class’ underclass must be the lumpenproletariat despised by Marx and Engels.  According to this slipshod definition of lumpenproletariat, impoverished colonized people, migrant workers, contingent labour, sex workers, the entire jobless and desperate poor––basically any worker or out-of-work worker who is not a member of some Platonic industrial working class––is part of the lumpen.  Thus, anyone who seeks to organize this supposed “underclass” is a lumpen organization.

Such a definition of the concept, however, is little more than a mindless dogmatic adherence to one of Marx and Engels least theorized class categories––as the regular reader will be aware, I have little patience for this religious form of marxism.  It also ignores, especially when it categorizes contingent workers and homeless populations as lumpenproletariat, much of what Marx said about the proletariat in Capital that contradicts this spurious definition of “lumpen politics”.  Take, for example, Marx’s concept of the “reserve army of labour” that is a key component for the composition of the proletariat as an exploited class:

The labouring population therefore produces, along with the accumulation of capital produced by it, the means by which it itself is made relatively superfluous, is turned into a relatively surplus-population; and it does this to an always increasing extent… But if a surplus labouring population is a necessary product of accumulation or of the development of wealth on a capitalist basis, this surplus-population becomes, conversely, the lever of capitalist accumulation, nay a condition of existence of the capitalist mode of production. It forms a disposable industrial reserve army, that belongs to capital quite as absolutely as if the latter had bred it at its own cost.  Independently of the limits of the actual increase of population, it creates, for the changing needs of the self-expansion of capital, a mass of human material always ready for exploitation. (Marx, Capital vol. 1, chapter xxv, section 3, emphasis added)

And it is not difficult to recognize that a large portion of this reserve army will dabble in supposedly lumpen activities––petty theft to get more money and things, drug abuse because it’s shitty to be jobless––just as exploited workers have engaged in similar activities due to their frustration and exploitation.  Indeed, it would make no sense to claim that this disparate population that often engages in criminality is Marx and Engels’ lumpenproletariat considering the current trend of labour casualization at the centres of capitalism where there is an attempt to push every worker back into contingency (a reality for workers everywhere else in the world) and thus more like the working class that Marx had in mind when he was writing Capital and never thought of as the same as his concept of the lumpenproletariat.  That “mass of human material always ready for exploitation” is not at all the same as “gutter-proletarians”; the former is essential to Marx’s concept of the proletarian, the latter is a vague definition belonging to various non-rigorous statements that seems more to be about a class consciousness than a concrete class position.

Moreover, we need to recognize that––along with, and not mutually exclusive to, the reserve army the reserve army of labour––there is a massive working “underclass” upon which the existence of the supposedly “proper” proletariat rests.  The now trade unionized working class, the predominantly white and first world working class, depends on the more exploited labour of this working underclass.  The latter outnumbers the former, both abroad and at home, just as the former’s wages are dependent on the labour of the latter.  And if this is a fact, though it may also be a fact that contingency is becoming more widespread, then this supposed “underclass” has more of a legitimate claim to the title of proletariat than this traditional sector.

What really seems to be the problem with this spurious and rigid definition of lumpenproletariat is the fear, amongst some marxists, of being unrespectable.  That is, it is far better to associate with the respectable members of the “proper” working class (i.e. unionized workers) then this supposed “lumpen” who are sometimes desperate, criminal, and frightening.  These types of “communists” would run screaming from the working class of Marx’s day, then, and probably define them as lumpen as well even though Marx and Engels did not.  Terrified by some supposed lumpen politics, these marxists embrace bourgeois respectability, hiding amongst a petty-bourgeoisified class that they imagine is the proletariat.

Clearly, a certain type of criminality is a problem for any revolutionary organization: stealing from other members of the proletariat, endangering the movement unnecessarily, putting comrades at risk through drug abuse––all these are issues of discipline that any properly revolutionary organization, from the days of Marx and Engels, has had to deal with.  At the same time, though, there is the type of criminality, wrongly called “lumpen” by those marxists who seek respectability, that is actually the proper and militant behaviour required of a communist.  The claim that criminal dissent is lumpen behaviour is becoming less and less tenable now that the sphere of criminality drawn around dissent is widening.

Those who speak negatively about lumpen behaviour and lumpen organizations, then, do not realize that their anxiety about this supposed counter-revolutionary problem really only exists to mask the actual counter-revolutionary problem: that they themselves, in their pursuit of petty bourgeois respectability (a problem that so many of us, including myself, face), are the ones who are actually courting counter-revolution.  Thus, the danger at the centres of capitalism is not the lumpenization of a movement, or lumpen communist organizations that do not (no matter what some groups might claim) exist, but the very real and existant fact of petty-bourgeois consciousness.

 

View comments

  1. i suggest you read hal draper’s section in vol 2 of karl marx’s theory of revolution. the lumpen is a definite social group, not consciousness, which is reactionary. you are right, however, in saying that many times the concept is used too loosely to describe itinerant or marginalised work.
    the lumpen are actually the ‘refuse of all classes’, those people who have dropped out or fallen out from the social structure and are not longer integral to it, serve no purpose within it except to be parasitic on it. it is not a moral category, and includes certain ‘working’ lumpens such as tinkers, organ grinders, prostitutes, day laborers (the kind of person who works an odd, random job for a meal but doesn’t contribute to the labor process overall or generates value) as well as more parasitic and victimising elements such as tricksters, gamblers, racketeers. It also includes upper class elements (lumpen bourgeos or lumpen aristocracy), such as bohemians, gamblers, certain pimps etc
    Of course, it is not a matter of profession or criminality. a prostitute who works in a giant brothel with many others is functionally working class. a prostitute who roams the streets alone is lumpen. an actor as part of a touring crew or movie set is working class, a street performer working for spare change is lumpen. a drug plantation owner moving thousands of pounds of cocaine is bourgeois, the petty dealer selling out of their car is lumpen.
    the essence of it is they are not part of society functionally speaking. and this is what makes the lumpen counterrevolutionary, for they have no concept of the social, an individualistic life process, and are for that reason easily bought out by reactionary forces. marx provides a wealth of evidence to support this in his writings, suggesting he did think of them as a definite social category.

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  2. Unfortunately (or maybe fortunately) I do not find Draper’s analysis convincing or even half-ways scientific––as with most of Draper’s work, it is rather unremarkable and divorced from practice. My point is not that the lumpenproletariat should be defined as a “consciousness” only that it is not a scientific concept and those like Draper who would suggest otherwise is simply an attempt to take the claim “refuse of all classes” to mean something scientific, and load it up with empirical data, aren’t doing a very good job. Take, for example, all of the analyses of the lumpenproletariat that were happening before, during, and after Draper in his social context that he is largely ignorant of. What of the importance placed on this concept, loaded up with much the same categories of people, by black nationalists and the new communist movement? There was something more substantial there even if it also failed to produce a fully scientific concept. What of Fanon’s analysis of the lumpen in the context of colonialism of which Draper was largely ignorant? Or later Gunder Frank’s conceptualization of lumpenbourgeoisie? Why you think I was claiming it was a moral category, though, is strange. An approach to this category, either rightly or wrongly (and always messily), may indeed communicate to an ethical practice, but how this makes it a “moral category” is implicature.

[End of blog post; only the aqua-coloured embedded web-links above were originally included by the author; red-coloured web-links were included by Lumpenproletariat to aid understanding and encourage further reading.]

Learn more at M-L-M MAYHEM!.

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[1]  Of course, all of this is assuming the validity of the premise of class consciousness, which views the working class as a class for itself, which self-aware of the class dimensions of our lives and orientates its political theory, such that it becomes organised in active pursuit of its own interests.

[2]  Interestingly, the Marxian term lumpenproletariat is being ‘reclaimed’, sometimes clumsily, as Dr. Moufawad-Paul comments, and as exemplified by the ‘Lumpenproletariat material’ hedonist baseball cap.

In Chicago, interestingly, Lumpen.com states that they have been:  “Operating a Front for The Left in the Arts since 1991”.  This apparently Marxian website is a project of the Public Media Institute, a “non-profit 501(c) 3, community based, art & culture organization located in the  neighborhood of Bridgeport in the city of Chicago.  Lumpen.com is to be commended that they emphasise “gentrification, development and revitalization in our communities” through a cultural perspective, which employs a Marxian language.  But it’s uncertain whether their ‘reclaiming’ of the lumpen terminology fully understands the actual concept they are employing.

[3]  Coming soon to Lumpenproletariat, we’ll discuss the concept behind the neologism[1] lumpenbourgeoisie, which is a term often attributed to Andre Gunder Frank in 1972[1][2] [a] (although the term is already present in Paul Baran‘s The Political Economy of Growth from 1957) to describe a type of a middle class[1] and upper class[3] (merchants, lawyers, industrialists, etc.);[4] one who has little collective self-awareness or economic base[1] and who supports the colonial masters.[1][3] The term is most often used in the context of Latin America.[2][4]

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[Image entitled “Marx and Engels” by the original uploader Σ at English Wikipedia – Transferred from Wikipedia to Commons (Public Domain). 

[17 NOV 2016]

[Last modified at 19:18 PDT on 19 NOV 2016]

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