Sunday, November 3, 2013


There is a fine line between erudition and incoherence.

Even world-class thinkers have trouble with that--just try reading Marx or Lenin. We lesser lights are usually even less successful, especially when writing outside of school.

The excerpt from one of Jack Barnes' books published in the latest Militant is a case in point. Mr. Barnes--a man of some erudition--clearly knows nothing about economics. The result is pure gibberish. Now I also am not a professional economist--what I know is self-taught--but at least I'm interested enough in the subject to learn something new, as Mr. Barnes is not.

For The Militant, progress in economic thought ended in 1924 when Lenin died. As Trotsky himself had little interest in the subject, and since no "Marxist" in the Stalinist tradition can be trusted, there has been no new thinking. Accordingly, any analysis of macroeconomic trends usually reduces to a rehash of something Lenin said a century ago. The current article is no exception.

The article in question is a reprint from one of Mr. Barnes' periodic books, this one published in 1999. (You can buy a used copy for a penny.) Of course any 14-year old article will fail on some predictions, but this one is so wrong that they should be ashamed to republish it.

Consider the lede paragraph:
No Third World country can or will develop today into an economically advanced industrial power with the class structure of the United States, Canada, the countries of Western Europe, Japan, Australia, or New Zealand. No new centers of world finance capital are going to emerge. That has been settled by history. That is one of the great lessons of the twentieth century. It hasn’t changed since Bolshevik leader V. I. Lenin summed up the scientific conclusion of the communist workers movement seventy-five years ago. The imperialist world, Lenin said, has been “divided into a large number of oppressed nations and an insignificant number of oppressor nations, the latter possessing colossal wealth and powerful armed forces."...
Since that was written, Hong Kong has become a world financial center. Singapore is the world's leading trading entrepot. Both cities boast a per capita income larger than the US (though not larger than comparable geographic regions, such as metro New York or San Francisco). South Korea has become a leading industrial and technological power, on par with most countries in Europe. Taiwan, Israel, and Silicon Valley play essential roles in the tech industry.

Quoting again from Mr. Barnes:
As I was leaving to catch the plane to come out here this morning, a comrade in New York handed me a copy of Lenin’s Imperialism. He urged me to reread it during the flight. Given what had begun happening in Mexico, he said, I was bound to find something useful in preparing for this meeting. He was right.   
Imperialism, Lenin explained, is the final stage of capitalism. He described its features. Reading Imperialism, I discovered once again, is well worth the effort. The chapter that struck me in a new way this time is the one entitled “The Parasitism and Decay of Capitalism.”
So I have gone back and skimmed Lenin's Imperialism, especially that last chapter. Regarding our modern economy it is completely irrelevant. He makes statements about the way things were in 1916--I am not enough of a historian to disagree with him, but somehow I can't regard Lenin as a reliable reporter. The book is simply not worth reading except as a historical artifact.

Still, to explain the utter silliness of Mr. Barnes' thesis I need to summarize Lenin's theory in bullet points.

  • The world economy is increasingly the province of monopoly capital.
  • Since monopolies can arbitrarily set prices, they reap profits beyond market rates.
  • The European countries were colonial (imperialist) powers, and they could lend money to their colonies at usurious rates.
  • This enabled the rise of a rentier (parasite) class in England that simply lived off coupon clipping from money extorted from the colonies. The imperialist powers depended on keeping the colonies in debt.
  • Some of these rent checks were used to buy off the British proletariat, which is why there was no Marxist revolution in England. A similar argument holds for Germany.
  • The proof of the argument was that the income from bondholders was multiples the income of trade (so says Lenin).
Lenin was clearly talking about the old fashioned imperialism--the word neo-imperialism had never occurred to him. But if imperialism depends on keeping the colonies in debt, then we've failed miserably. Unlike in Lenin's day, the biggest debtor nation today is not China, not India, and nowhere in Africa, but instead the United States. So whatever applicability Lenin's model may have had in 1916, it clearly means nothing now.

But that doesn't stop Mr. Barnes, who apparently doesn't know how to read. He writes that Orange County (in 1999) owed lots of money to bondholders. Since Lenin called bondholders rentiers and parasites, Mr. Barnes assumes that they must have exactly the same role today as they supposedly did in 1916. That is the sum total of his argument--it's stupid.

It is that kind of absurd reasoning that leads Marxists to claim that finance is just a casino. They are completely wrong. Finance makes things cheaper for consumers. This is obviously true, since financial crises have huge implications for the real economy. The bankruptcy of a Las Vegas casino is nowhere near as important. Without finance, nobody could get mortgages, farm prices would be much, much higher, businesses couldn't borrow money, etc. Indeed, without finance, we'd pretty much be reduced to a barter economy. So to suggest that bondholders are no more than rentiers and parasites is just ignorant.

I'm not much of one for calling people stupid--it's an ad hominem attack that is beneath my dignity. Accordingly, I try to take The Militant seriously. Frequently they deserve that--their reporting on the labor movement has been stellar. But on macroeconomic issues they are--I'll say it again--dumb.

Further Reading:

1 comment:

  1. Good read, Professor. I have seen these Marxist/Leninist economic arguments so many times around the internet that it is simply mind-numbing. You are precisely correct. Their thinking is stuck in an era we have long passed and evolved from. I'm not even sure the argument had any real validity at the turn of the 20th century, however like you, I am not an economist.

    The truly sad thing is that we now have an indoctrinated generation of horribly uneducated, faulty minds; secure in their unearned esteem and convinced that they are the best and brightest. Our current situation is the result. Thank you, for that article.