Much may have changed in the structures of capitalism since Marx, but the exploitation survives – more now than ever.
Branko Milanović is an economist specialised in development and inequality. His newest book is “Capitalism, Alone: The Future of the System That Rules the World”
Cross-posted from Branko’s blog Global Inequality
Karl Marx is back in the West. After having done a tour du monde that took him from a German émigré philosopher to a maître à penser of German social-democracy to global revolutionary thinker, his influence is back in the parts of the world that he studied and where he lived. The current crisis of capitalism, provoked at first by the financial sectors’ swindles (something which would not have surprised Marx), and then exacerbated by rising inequality, pandemic and seemingly unsolvable climate issues is making Marx’s readings more relevant than they were to several past generations, and his ideas more attractive to the young.
But is Marx’s capitalism at all similar to the capitalism of today? Can his ideas be relevant now, more than a century since they were formulated and during which time the world’s per capita income was multiplied by seven, and US per capita income by more than eight times?
The main differences between the classical capitalist world of the 19th century and today is not however that wages are higher (Marx would not have been much surprised since he held that wages reflect “moral-historical” conditions of each country) or that the welfare state is much broader. The main differences are in the nature of the ruling class, and the effects on the middle classes in the globally dominant countries.
Today’s top of income distribution in advanced economies consists of people who have high incomes both from labor and capital. This was not the case in the past. Landlords and capitalists were the top class under classical capitalism, and they hardly had any incomes other than what they derived from their property. Many of them would have probably found it unthinkable or even insulting to complement their incomes by wages.
This has changed. Currently, among the richest ten percent of Americans, one-third also belong to the richest capital owners and richest workers. Less than fifty years ago, that share was less than one in five; previously, probably even lower (Berman and Milanovic). This makes the class conflict very different from what it was. There are no longer two groups, markedly different by their income levels and the origin of that income, whether it was obtained through work or property; only the former (inequality) remains, and in an attenuated state. Moreover instead of the books dealing with the leisure class (Thorstein Veblen, Nikolai Bukharin), coupon-clipping elite (“to grow richer was nothing more than a passive activity for the wealthy”, wrote Stefan Zweig about the pre-World War I European rich), the top class today is more likely to be chided for working too much: “[t]oday’s Stakhanovites are the one-percenters” in words of Daniel Markovits in “The Meritocracy Trap”.
The hard-working rich who either inherit their original capital or build it up through savings over their working lives, marry each other, and play an increasing political role through political donations, are a new elite. They wish to transmit their advantages to offspring by paying expensively for the best education. That they have succeeded is seen in numerous studies that find decreasing inter-generational income mobility. Thus both the origin of elite’s income and their behaviour are different from the capitalist class with which Marx was familiar.
The second major difference is international and has to do with globalization. In the latter part of the 19th century, British real wages were increasing. Marx’s explanation for the increase was largely based on hegemon-led globalization, the Pax Britannica. The British elite was willing to share some “crumbs from the table” from its imperialist plunder with lower classes, and to use workers’ rising standard of living as a tool to exact quiescence or sullen acceptance of the existing order.
Would not then Marx think that the US elite, exercising today a similar role to that of the British, would pursue similar policies? He would have been surprised that it did not. The American elite was largely indifferent as its own county’s middle class was hollowed out by globalization, and middle-class incomes kept stagnant. Unlike the British elite, the American elite probably did not think that its political power could be challenged from below. Whether it thought so because it believed that it would be able to manipulate the political process or because it thought that the losers of globalization would never be able to organize themselves, or perhaps because it was blinded by its ideology, is impossible to tell. All elements, and probably many more, played a role.
But the awakening came in the form of so-called populist protests in France, Spain, UK, Germany and in the United States too where Donald Trump mounted, perhaps largely by accident, a coalition of “malcontents”. It took a special effort by the elite and a worldwide pandemic to take the control back.
These two developments show how much today’s capitalism in leading capitalist countries has evolved. The developments are ambiguous, from political or philosophical perspective. Breaking the explicit class distancing and having an upper class that does not privilege its own nationals, could be considered an advance. But having an upper class whose position is invulnerable to the movements in the labour market (because it can fall upon its capital assets) and in the stock market (because it has high level of skills and high labour earnings), and is keen to transmit these advantages across generations, may show the same developments in a much less positive light.