“KARL Marx is not exactly back, but he is being mentioned far more frequently these days, and not just on the steps of St Paul’s. I was even asked recently (by an accountant whose pay probably put him in the UK’s top one per cent of earners) whether I thought that elevated levels of unemployment meant that Marx had a point.
My short-answer was no – my longer one was that name-dropping the author of Das Kapital has become a cheap, lazy and morally indefensible way of pointing out that the present system is failing to produce enough jobs and growth, which of course is true. It is also a facile way of declaring empathy with the St Paul’s protesters, without actually having to grapple with difficult questions.
It is evident there are massive problems in our society. The question is not whether something needs to change – that is obvious. What isn’t is what exact reforms are needed. Marx is hardly the only thinker to have predicted business cycles – and given the rest of his agenda, you would have thought that those seeking answers to our woes might actually spend a little more time reading other economists who actually appreciated the astonishing growth that well-functioning capitalism could deliver.
Communism has been tried repeatedly. It doesn’t work. Most people just about remember this (though most youngsters will have forgotten by the time the next crisis comes about). Communism’s degree of failure is utterly incomparable with the failure of our present, mixed economy system (what we have is not pure capitalism or “neo-liberalism” but a weird and unstable combination of markets combined with a large public sector, high and graduated taxes, hugely powerful monetary authorities and a huge amount of regulation). Communism leads to collapse, starvation and dictatorship. For those who have forgotten about this, I would recommend the Black Book of Communism: Crimes, Terror, Repression, written by a group of French authors led by Stephane Courtois. The book details how at least 94m people lost their lives as a result of communism in the twentieth century, especially in China, the Soviet Union, Cambodia and North Korea but also in Africa, Afghanistan, Eastern Europe, Vietnam and Latin America. Communist regimes were defined by repression, executions, torture and labour camps; one gruesome episode led to the death from starvation of 4m Ukrainians in the 1930s.
The broader failings of communism, which delivered a miserable standard of living for ordinary folk, is easier to document. Two natural experiments were run last century: an unusually pure version of capitalism in Hong Kong versus real communism in China; a slightly more diluted but still highly capitalist model in post-war Germany versus a socialist system in East Germany. In both cases the triumph of capitalism was complete.
Instead of wasting time investigating the views of an economist whose overall system failed disastrously, we should be learning from those who understand that a free-market is the only possible system but who also grasp that current institutions tend to lead to booms and busts, especially if the price system is distorted by underpriced credit or underpriced risk as a result of central bank or government actions. If you are into dead economists, try reading Ludwig von Mises or F.A. Hayek. The latter predicted the crash of 1929 and the stagflation of the 1970s; their followers predicted the dot.com bubble and the collapse of 2008. Marx should remain buried.”
