What is theory in Economics?

September 29, 2017
Malls, shopping centers

Marxian economists do, it is true, pride themselves on thinking they have a better and deeper understanding of capitalism than do non-Marxists. After all, we live in an age in which the economy is Marxian.

Theirs—ours—is not the mainstream economics. It is not the one that focuses upon how individual behavior tends to generate the best possible world (except in the case of the occasional market failure), upon how that interaction within the market produces the appropriate rewards to the owners of all factors of production (except when interfered with), which sees economic crises as accidents (or as the result of perverse individual behavior), and which views capitalism (or, rather, the “free market”) as the end of history. Its concern is not the determination of prices and the behavior of rational individuals in response to ceteris paribus hypothetical changes in variables. Rather, Marxian economics is the original systems theory: How does this particular system work? What makes it grow (or shrink)? Under what conditions does it grow (or shrink) and at what social and environmental costs? And how might it be transformed into something better?

Marxian economists tend to look at global capitalism as a system based upon imperialism and colonialism (a permanent war in the Third World which continues to this day), and which rather than closing the gap between First and Third Worlds has only deepened the divide and contradictions between the First and Third Worlds ushering in new forms of rent extraction. Capitalist market economies reward and encourage behavior that is profitable, and imperialism and colonialism can be very profitable to be sure. Global capitalism can be predatory. Destroying the original sources of wealth in human beings and nature can be a very profitable way of appropriating them. And few today who still live in the shadow of 2008 will deny that Marx was right in Capital (Vol. I-III; 1867) to argue that capitalism has an inherent tendency to generate increasing worldwide crisis.

In fact, Marx predicted a century and a half ago that as capitalism expanded globally, its degree of what he called “monopolization” and what we would tend to call “rent extraction” would also grow. He was right. It has reached an unprecedented level today. And that gives contemporary global capitalism three distinguishing characteristics:

  1. Modern multinational corporations control key value-flow and decision-making choke points of the world economy—in not just the economic but in the political and cultural spheres as well.
  2. The growth of modern multinational corporations has been strongly encouraged and supported over the past 30 years by the push for “neoliberal” policies that have pushed privatization and deregulation of international trade and investment at nearly any cost.
  3. These global rent-extraction organizations are, today, fully financialized. It is no longer useful to think of a purely “financial” sector of banks, insurance companies, and so forth on the one hand, and a “productive” sector of workers, engineers, technologies, and capital goods on the other.
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