Part 2 of this series can be found here.
John Stuart Mill
I have written about John Stuart Mill in another article but in that article I focused on his contributions to political philosophy and to politics. Here I will be concentrating on his contributions to economics. Mill was without a doubt, the preeminent economist of the mid-19th century. The natural successor to David Ricardo, who we came across in the previous article in this series. Mill was also seen to compare favorably with the great Adam Smith himself.
Mill’s contribution to economics are mainly two. The first is his masterpiece on the subject, titled Principles of Political Economy, published in 1848. The book was a beautiful survey of all the achievements in the field up to his time. His second contribution was an insight original to him about the possible future of industrial capitalism that was contained in his masterpiece. Mill’s insight on the nature of the economic system provided a solution to a burning question about industrial capitalism’s “natural” tendency to exacerbate social inequality and offered hope for redress.
At the time, apologists and defenders of industrial capitalism suggested capitalism’s distribution of wealth were the result of natural economic laws and so that capitalism’s penchant to reward relatively few members of society with great wealth while the vast majority having to make do with subsistence wages is as natural as the law of gravity, and society at the time generally accepted this explanation (though of course there were those who railed at the seeming injustice of it all).
Mill in a moment of characteristic brilliance, pointed out that while what the apologists said was true about the production of wealth, it wasn’t necessarily true about the distribution of wealth. He further noted that what really the distribution of wealth depended on was the laws and customs of the society in question, which in different times could take different forms. In a nutshell, a society could distribute its wealth in whatever way it saw fit. If it didn’t like the natural results of capitalist activity, it had a number of economic tools at its disposal to change them. Examples include progressive taxation, subsidies, expropriation (this is admittedly extreme) and redistribution. And with that, apologists could never again talk about impersonal forces determining the distribution of wealth.
Mill wrote other masterpieces on Logic, Liberty, Representative Government, and Utilitarianism. He would live until 1873, widely regarded as coming closest to being a secular saint than anyone else at the time.
Karl Marx
Karl Marx, again, is a personage I have treated in a previous article on political philosophy. As this is an article on political economy, I will focus here almost exclusively on the detailed (some would say overly tedious) analysis of the capitalist system carried out in his magisterial tome, Das Kapital.
Marx’s main contention in Das Kapital is that capitalism is a system of economic production ridden with internal contradictions, and as a result of these contradictions will ultimately implode. We are going to take a detailed look at how Marx arrived at this conclusion.
Marx started off by asserting that every society is built on an economic base. That base may differ from society to society. For instance, it could be primarily agrarian, like what obtains in virtually every sub-Saharan African nation, or it could be primarily industrial (or even post-industrial) like what obtains in the western nations. It could even be based on hunting and gathering, like what obtained the world over thousands of years ago before the transition to agriculture began.
Okay, nothing controversial so far. Marx now further points out that for every economic base, there is a corresponding superstructure. By superstructure, he meant a matrix of laws, governance, religion and philosophy. There was a caveat however, and that caveat was that the superstructure couldn’t be chosen at random. The superstructure and the economic base had to be in harmony, and this is where, said Marx capitalism had a problem. Marx asserted that capitalism’s base and superstructure were incompatible. This incompatibility, he said, assured capitalism’s ultimate demise.
The reason Marx gave for this incompatibility was that the economic base of capitalism, industrial production, required social planning while capitalism’s superstructure, its system of private property detested social planning. This conflict he said would inevitably lead to capitalism’s demise, and proceeded to give a detailed description about how it would happen:
In a nutshell, what Marx said was that capitalism would move inexorably towards its own destruction because capitalists are in competition with one another and try to expand their businesses at the expense of one another. In a bid to expand, capitalists compete with one another for workers. This drives up wages thus reducing profits. Key to his argument is the source of profits. Marx said they came unpaid for labor. This happened because a worker might be contracted to work for 10 hours but was only paid for 8 hours. The remaining two hours is unpaid for labor and thus pure profit for the capitalist. Now recall that capitalist expansion puts pressure on profits. In a bid to increase profits, the capitalist is forced to introduce labor-saving machinery. In doing so he comes up against a serious problem. He cannot get free labor out of a machine. Whatever labor that is to be got out of a machine, it would have been fully paid for upfront, so in introducing machinery, the capitalist narrows the base from which he can get free labor and thus profit, and this he must do, because he can be sure his competitors will, thus hastening his ruin.
In Marx’s scheme, each successive round of cost-cutting leads to dwindling consumption as machinery replace men and the number of the employed fail to keep up with output. This leads to the dumping of goods and the liquidation of the smaller enterprises. The industry experiences a temporary reprieve as the bigger enterprises acquire the assets of the ones going out of business at bargain prices, but this reprieve is only temporary as the cycle begins afresh, with each industry failure being worse than the last one, and the misery of the working class, both employed and unemployed only increasing, which he said would ultimately lead to the revolt and usher in the age of communism.
Marx must have obviously got some things wrong because capitalism is still here though vastly changed from the time of Marx with some of the changes ironically inspired by the writings of Marx and other left-leaning reformers. But that he was ultimately wrong should not blind us to the brilliance of his analysis. Marx analysis lent itself to prediction, and many of the predictions it made became features of 20th century capitalism and beyond. Some of these features include the never-ending quest for new production techniques, the emergence of large firms, etc. Whatever the ultimate fate of capitalism, Marx’s analysis will remain an invaluable tool for analyzing it weaknesses, which will almost certainly rear their ugly head from time to time.
John Hobson
John Hobson is decidedly a minor figure in the history of economic thought, and I probably wouldn’t have included him, if not for the fact that he had much to say about the African continent and colonialism in general, though of course from the perspective of the west, thus perhaps making it more accurate to say that he had a lot to say on the subject of imperialism.
Hobson witnessed the “European Scramble for Africa” and other acts of western imperialism in the late 19th century. A lot of what he saw gave him pause for thought. Like Marx before him, he peered into the heart of capitalism and was troubled by what he saw. What he saw was that capitalism had a natural tendency to create an unequal distribution of wealth, and this led the capitalist system to turn to imperialism as a way out of the dilemma brought on by the unequal distribution of wealth.
The nature of the dilemma was that there wasn’t enough demand for goods because neither the poor nor the rich could consume enough goods, the reasons being that of course, the poor were too poor to have enough disposable income and the rich had only so much appetite despite being able to afford much more than was needed to satisfy their appetites. To offset the reduction in demand at home, capitalists were being forced to find new markets abroad.
This in Hobson’s mind was what was driving the west’s imperialist expansion, and that was a situation he felt could easily lead to war. The truth was a bit more complicated. There were other economic motives driving imperialism like the quest for raw materials and some political factors too. Nevertheless, Hobson’s analysis found a great deal of resonance with some sections of western society, particularly the Marxists.
The imperialist days are arguably, long over. In Africa, it ended with the pro-independence movements of the 1960s/70s. Some would argue that it is still with us albeit in new forms. Rather than the political/economic imperialism of the past, some say that imperialism is now cultural in form, with the emergence of ICT helping to fuel a new global cultural order made in the image of the west that is snuffing out local cultures. That discussion would require another post and perhaps another author.
Bibliography
- Heilbroner, Robert. 1965 The Worldly Philosophers: The Lives, Times and Ideas of the great Economic Thinkers. New York: Simon and Schuster
