What Economic System did Marx and Engels Advocate?

And here I don’t mean their utopian classless, stateless society (which they called “pure communism”), but the transitional system they advocated in The Communist Manifesto (English trans. 1888 edn., based on the 1872 German edn.; the first German edn. was published in 1848).

Here is what they advocated:

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

Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionising the mode of production.

These measures will of course be different in different countries.

Nevertheless, in most advanced countries, the following will be pretty generally applicable.

1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all rights of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.
6. Centralisation of the means of communication and transport in the hands of the State.
7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
8. Equal liability of all to work. Establishment of industrial armies, especially for agriculture.
9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.
10. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production, &c, &c.” (Marx and Engels 1985 [1888]: 104–105).

The essence of the transitional Communist system was the complete nationalisation of all industry and business: the state would itself own all capital goods, and by implication centrally plan production and consumption of commodities, even the media (by point (6)).

But, in addition to this, the state would abolish private property rights in land and housing, and even the right to inherit private property (with the exception of insignificant personal family property), as in points (1) and (3) above. Indeed, according to Marx and Engels, this is essence of the Communist system:

“In this sense, the theory of the Communists may be summed up in the single sentence: Abolition of private property.” (Marx and Engels 1985 [1888]: 96).

Point (5) also requires the abolition of private banks, and state monopoly on banking.

In point (10), we find a strong opposition to child labour, which Marx and Engels were passionately opposed to. They stressed this in The Communist Manifesto in these words:

“Do you charge us with wanting to stop the exploitation of children by their parents? To this crime we plead guilty.” (Marx and Engels 1985 [1888]: 100).

But the disgust at the economic exploitation of children was hardly unique to Marxism: for example, even deeply Christian, 19th century Tory radicals and paternalists in the UK were vehement opponents of child labour, and were a driving force behind legislation to outlaw it.

Point (9) stands as a very strange, anti-urban – and even deluded – idea: to reduce the population of cities and redistribute population to rural areas.

It is obvious how all this requires an authoritarian, even totalitarian, political system, and it is not surprising that Marx and Engels advocated a “dictatorship of the proletariat”: abolition of democracy, freedom of speech, the rule of law and legal and civil rights. For these reasons alone – even before we get to economic objections – Marxism stands as just another decidedly evil and monstrous authoritarian doctrine.

It can be seen how radically different the Marxist transitional state is from a modern economy with Keynesian macroeconomic management:

(1) The Marxist transitional state requires complete nationalisation of all production; by contrast, a Keynesian system is one where the vast majority of all production is done privately.

(2) Private property rights are extensive and a fundamental part of the legal and social organisation of states with a Keynesian heritage. In the Communist system, even private ownership of land, housing and the right to inheritance are abolished.

(3) In many modern states, even when central banks exist, banking is largely conducted by private financial institutions. The Marxist transitional state would have all banks nationalised. A further observation is that Marxism would essentially abolish developed markets for financial assets, especially secondary financial asset markets.

(4) Communication media tend to be largely privatised in modern states with a history of Keynesian macroeconomic management. Even in states with one nationalised television or media network (e.g., the UK with the BBC), all other media are privatised. In the Marxist state, all media are controlled by the state.

(5) Keynesianism requires no bizarre commitment to shifting population to rural areas.

(6) Keynesianism requires no “equal liability of all to work,” even though I dare say there are many people, even in Western countries, who might feel intuitively that this idea has some appeal.

At most, modern states do resemble the transitional Marxist state in point (2) (the progressive income tax) and point (10) (free or subsidized public education for children and abolition of child labour). But there are so many other differences (and significant ones to boot) that anyone who asserts, for example, that the modern UK or Canada must be communist because they have public education and no child labour is just guilty of stupid and lazy reasoning: committing the fallacy of hasty generalization and possibly the fallacy of composition.

Above all, what distinguishes capitalism ameliorated by Keynesianism historically from Communism is the commitment to democracy, freedom of speech, freedom of religion, the rule of law and civil liberties. Although one can certainly find authoritarian states that practised Keynesianism in the past (e.g., fascist Japan and modern China), I say “historically” because the broad sweep of nations where Keynesianism has existed over the past 70 years have been overwhelmingly democratic and in the liberal tradition. To illustrate what I mean here, note how Chicago school monetarism was practised by Augusto Pinochet’s Chile (a dictatorship), but it is a bad mistake to think that monetarism is inherently authoritarian or requires authoritarianism. Most nations that have implemented monetarist ideas have been democratic: monetarism as a macroeconomic theory and practice is essentially neutral with respect to the political organisation of the nation where it is implemented. The same can be said of Keynesian economics, which in fact presupposes a very significant amount of private enterprise and private production.

One of the more interesting verdicts of Keynes on Marxism was that the doctrine was a “sickness of the soul” (Skidelsky 1992: 517), and, while Keynes was in a conversation with T. S. Eliot in 1934, Virginia Woolf described Keynes as he commented on Marxism:

“[sc. Keynes adressed] The economic question: the religion of Communism. [sc. Marxism was the] ... worst of all and founded on a silly mistake of old Mr. Ricardo’s which M[aynard] given time will put right.” (from the diary of Virginia Woolf, quoted in Skidelsky 1992: 517).

The “silly mistake of old Mr. Ricardo” was nothing less than the labor theory of value, an important point.

The judgement of Keynes on the Soviet Union is given by Skidelsky:

“unlike the Webbs, he [sc. Keynes] could never think of Soviet Russia as a serious intellectual resource for Western civilisation. In the 1920s he had said that Marxism and communism had nothing of scientific interest to offer the modern mind. The depression did not alter his view. Russia ‘exhibits the worst example which the world, perhaps, has ever seen of administrative incompetence and of the sacrifice of almost everything that makes life worth living ...’; it was a ‘fearful example of the evils of insane and unnecessary haste’; ‘Let Stalin be a terrifying example to all who seek to make experiments.’” (Skidelsky 1992: 488).

The opposition of Keynes to Marxism was both economic and political. In reply to George Bernard Shaw in 1935 on the issue of Marx, this is what Keynes said about Marxism:

“Thank you for your letter. I will try to take your words to heart. There must be something in what you say, because there generally is. But I’ve made another shot at old K.[arl] M.[arx] last week, reading the Marx-Engels correspondence just published, without making much progress. I prefer Engels of the two. I can see that they invented a certain method of carrying on and a vile manner of writing, both of which their successors have maintained with fidelity. But if you tell me that they discovered a clue to the economic riddle, still I am beaten – I can discover nothing but out-of-date controversialising.

To understand my state of mind, however, you have to know that I believe myself to be writing a book [viz., The General Theory] on economic theory which will largely revolutionalise – not, I suppose, at once but in the course of the next ten years – the way the world thinks about economic problems. When my new theory has been duly assimilated and mixed with politics and feelings and passions, I can’t predict what the final upshot will be in its effect on action and affairs. But there will be a great change, and, in particular, the Ricardian foundations of Marxism will be knocked away.

I can’t expect you, or anyone else, to believe this at the present stage. But for myself I don’t merely hope what I say, – in my own mind I’m quite sure.”
(Keynes to Shaw, 1 January, 1935, quoted in Skidelsky 1992: 520–521).

And Keynes, as a progressive liberal, was adamant that civil rights and democracy were the most important things that any Western nation needed to preserve:

“... [sc. Keynes] could both love the communist generation for their idealism, and despise them for their muddle-headedness. If Keynes could not solve the ‘primal question’ of how to live, he felt he could solve the secondary question of what to do. His assault on the scientific pretentions of Marxism and the horrors of the Soviet system was unremitting, and needed no revelation of mass murder. He insisted on the supreme importance of ‘preserving as a matter of principle every jot and tittle of the civil and political liberties which former generations painfully secured.’” (Skidelsky 1992: 518).

BIBLIOGRAPHY

Marx, K. and F. Engels. 1985 [1888]. The Communist Manifesto (trans. S. Moore). Penguin Books, London.

Skidelsky, R. J. A. 1992. John Maynard Keynes: The Economist as Saviour, 1920–1937 (vol. 2), Macmillan, London.