ON THE ESSENCE OF ECONOMICS

 

The antinomy between freedom and necessity, between choice and need applies both to Neoclassical Economics and to Classical Political Economy, of which Marx’s critique is an overlapping extension. As we have seen with Lenin’s dictum, it is only in a scientistic sense that the notion that “politics is a concentrate of economics” can be held. Lenin’s insistence on this notion of “concentrate” harks on a conception common to both Classical and Neoclassical economics that its subject-matter, its essence, is more real, more material, hence more objective than politics or culture or ethics because it involves the satisfaction of human needs and, consequently, the reproduction of society. The implication here is that given a certain level of technological development, there is a necessary minimum of material production for the satisfaction of human needs required to ensure the survival of a society and its population of individuals. The notion of “necessity” is indispensable and crucial to both theories for grounding their claim to scientific objectivity. But whereas Neoclassical Economic Theory entirely circumvents and elides the aspect of economic production and seeks to ground the scientificity of economics on the subjective utility involved in exchanges between individual economic agents or else on formalistic mathematical equivalences, Classical Political Economy relies instead on the essentialist or absolutist quantitative concepts of “labour” or, in Marx, of “labour-power”.

Tawney’s profound incomprehension of this Weberian problematic is exemplified by his dismally petty observation that Marx was a better sociologist than he was an economist. It is a fact that in his early Neo-Kantian phase, Weber had stressed the specificity of the subject-matters of individual scientific disciplines consistent with his narrow aetiological approach in the Ethik. Kant’s inability to bridge the hiatus irrationalis gaping between his epistemology (knowledge, the intellect) and his ontology (the impenetrable thing-in-itself) meant that each “object” or subject-matter of human knowledge had to be regarded as hermetically separate. But again, this early epistemological and methodological orientation experienced a significant transformation by the time Weber came to compose the Vorbemerkungen. Weber’s own interpretation of Marx (see above all his Viennese lecture on ‘Sozialismus’) evinces unqualified admiration for his predecessor’s theoretical bonding of economics and sociology in an indissoluble compound – a judgement that will be keenly reprised later by Schumpeter throughout his later work.

 

To prove and exemplify the futility of attempts to circumscribe economics from politics in a broad sense, let us examine closely and scrutinise the concept of economic activity to see whether we may be able to isolate a hypothetic “essence of economics” distinct from sociology or, more broadly, history. (For a lengthy and incisive exploration of the dependence of "economics" on philosophical notions, and hence on realities and concepts that go beyond the narrow meaning of "economic", see Julien Freund's brilliant monograph L'Essence de l'Economique. Freund is, to our mind, indisputably the most perceptive and acute interpreter of Weber’s epistemology and methodology.)

We begin with the simple reality and assertion that human being or ec-sistence necessarily involves activity or doing – what we may call “labour”. This activity or labour is evidently an objectification of human being whereby humans turn ideas or plans or objectives into “objects” physical or mental. Certainly, this objectification or activity – the ineluctable aspects of human ec-sistence whereby to exist is to act in the lifeworld – must include the provision of means of sub-sistence to enable humans to survive and even reproduce themselves. Yet, this does not mean that subsistence can be distinguished from recreation or invention. Nor does it mean that economic activity can be restricted or confined to subsistence! The crucial point here is that it is conceptually and scientifically impossible to separate and distinguish, even analytically, human activity or production or labour into sub-sistence and recreation for the simple reason that both activities are simultaneously forms or aspects of human objectification – so much so that it is impossible to distinguish pro-duction from creation because every human activity is a “doing” whose productive and creative aspects are impossible to separate except where the activities of some humans are coerced by other humans whereby the activity or objectification of the former is transformed from labour into toil.

As an epitomic instance of the reductionist determinism that has plagued the study of economic activity, let us take a close look at two of the greatest social theoreticians and their approach to “the essence of economics”, that is to say, to the epistemological distinctiveness or unicity of economic theory and practice – Karl Marx and Max Weber. Starting with Marx, it is true that he had intended “the Law of Value” – that economic value could be measured by labour content, specifically “labour-power” – to apply only to a capitalist economy and not to any other “historical formations”, let alone to a socialist one. Indeed, Marx considered his greatest discovery to be undoubtedly the notion of “labour-power” – in other words, the notion that it is not “concrete labour” that measures the value involved in capitalist production but rather “abstract labour” or “labour-power”, the abstraction of human living activity coerced by capitalist employers into a measurable time entity (“man-power”).

But here Marx was trying to have his cake and eat it, too. For if the measure of capitalist value is labour-power and labour-power cannot be measured  scientifically because it is strictly the institutional effect of political coercion, then it is inconsistent to call Marx’s theory “scientific”, as he himself sought to do! Throughout his works, Marx was torn between his search for economic determinism, that is the historical inevitability of the supersession of capitalism by socialism, and the simple reality that by its very nature history is not and cannot be an inevitable process – history is not destiny, there is no telos. Specifically, Marx’s theorization of capitalist industry as dependent on market competition between and within the capitalist and working classes meant that the overall operation of the capitalist mode of production was independent of political factors such as strategies and organizations not immediately related to the process of production that could affect the operation of capitalism as a whole and more particularly the stratification and composition of social classes, including the working class and the proletariat more broadly, and the segmentation of the working class itself through incomes policies and through the labour process.

This difficulty may be illustrated most effectively by examining the most fundamental components of the Law of Value – the notions of socially necessary labour time and that of labour-power. For these notions to lend themselves to practical economic use in the calculation of the value of commodities and then of their individual prices, it is obvious that the particular living labour that goes into the production of the commodities, of dead labour, must be capable of homogenization or “real abstraction” (the phrase was coined by Alfred Sohn-Rethel in Intellectual and Manual Labour) so that what are incommensurable living labours may be rendered equivalent and thence measurable in an abstract manner. But how can such an “abstraction” of living labours be achieved? Either it is done politically, that is, through an institutional process that consciously directs the processes of production of commodities and their distribution through pricing and the market process – or else this is achieved mechanically through the market process itself, in which case it may be said that the capitalist market is capable of co-ordinating the entire process of capitalist production and distribution automatically (whence comes the notion of "the self-regulating market"). Of course, the latter option is the one also propounded by bourgeois political economy through the theory of "economic equilibrium”.

What we find in Marx is the impossible attempt to show that the Law of Value applies to capitalist production through the exercise of coercion over living labour so that it is reduced to its “real abstraction” as labour-power in the process of circulation of capital (from valourization in the process of production to realization in the market) to ensure the expanded reproduction of capitalist industry. But we ask, once again, how is this possible? If indeed the abstraction of living labour is achieved by means of political coercion, it is then impossible for this coerced living labour to be homogenized as an abstract entity, as labour-power, by “impersonal market forces”, that is, by means of a market process that is independent of conscious political manipulation or direction or management. In other words, it is impossible for capitalist industry to be at once decentralized – so that no political agencies determine or ensure the co-ordination of the productive system through market-clearing prices – and centralized so that living labour can be coerced into its abstract form, homogeneous labour-power, as “socially necessary labour time”! (We may recall here that Gyorgy Lukacs, in History and Class Consciousness, perhaps sensing the incongruity of the Marxian position, resorted to describing this “real abstraction” as a “necessary illusion” – conceding inadvertently its pleonastic inconsistency, given that there can be nothing “necessary” about an “illusion”, and nothing “illusory” about a “necessity”! Of course, the same applies to the equivalent phrase “real abstraction” because an abstraction is not objectively, as against politically, real; and political reality is certainly not abstract!)

One of two things: either labour power and socially necessary labour time are politically-coerced abstractions, in which case the capitalist system is directed by specific political institutions and historical agencies (the capitalist class, the capitalist State), or else they are real objectively measurable and quantifiable entities that can be co-ordinated through an “impersonal”, “self-regulating market-pricing mechanism”. But in the latter case it is obvious that the capitalist market mechanism would be an entirely “scientific” institution whose anarchical crises of overproduction or underconsumption with consequent underemployment can be avoided easily, contrary to what Marx envisaged in his critique. Conversely, in the former case, it is impossible to see how the Marxian Law of Value could apply to the capitalist system of “independent” or “decentralized” production for the market! Even if we agree with Marx that the Law of Value, where commodity values and prices are determined by socially necessary labour time, applies only to capitalism as a historically specific form of class exploitation, it is impossible to conclude that such a mode of production could ever co-ordinate itself in any manner other than by conscious political direction – and therefore that any such “law” of value could ever be possible, let alone be effectual.

To recapitulate: if, as Marx contended, the Law of Value applies only to the capitalist mode of production, then it follows conclusively that the notion of “socially necessary labour time” on which that of Value depends is just as necessarily the effect of political coercion. But then, in that event, the homogenization of living labour as labour-power “embodied” in commodities can be effected only by means of political measures and institutions and certainly not by “impersonal market forces” or “decentralised decisions” that result in an objectively and scientifically calculable quantity! If, conversely, the Law of Value is an absolute standard applicable to all societies, then the difference between capitalism and socialism becomes merely one of the just distribution of Labour Values – a question of Ethics, not one of systematic class exploitation and oppression.

Ronald Meek, in his impressive Studies in the Labour Theory of Value, reviews Bernstein’s objections to Marxian theory and rightly points out that Marx intended the Law of Value to apply only to capitalism. But he remains ambivalent over whether Marx’s theory is to be considered “scientific”, in which case it is clearly a vicious circle, which Meek does not concede, or political, in which case it makes perfect sense from a practico-historical viewpoint, but Meek considers to be insufficient to qualify as "theory". Whilst he opts for the political theory that the Law of Value applies only to capitalism, Meek then gets entangled in the insistence that such a “theory” would be scientifically indeterminate or unprovable:

But surely there are two salient points which a theory of distribution appropriate to our own times should concentrate on explaining: First, how is it that unearned incomes continue to be received in a society in which the prices of the great majority of commodities are determined on an impersonal market by the forces of supply and demand, and in which the relation between the direct producer and his employer is based on contract rather than on status? And second, how are the respective shares of the main social classes in the national income determined in such a society? Unless one is content to rely on some sort of explanation in terms of “force” or “struggle” (in which case again one could only with difficulty speak of a theory of distribution), it is impossible to give adequate answers to these questions without basing one's account on a theory of value.2 (Meek, Studies, p.250.)

Evidently, like Marx before him, Meek is trying to circle the square, that is, attempt the impossible, because he is looking for a precise scientific theory of distribution, how a capitalist economy can co-ordinate itself as a market economy, without resorting to “force” or “struggle”, when in fact such co-ordination can only be politically regulated, and certainly not be the product of “impersonal market forces”! Meek’s retort is that such a “theory” is not distinguishable from a general theory of exploitation:

A “theory of distribution” which said only that unearned income was the fruit of the surplus labour of those employed in production would hardly qualify as a theory at all; and the mere fact that it expressed input and output in terms of embodied labour would not make it any more likely to qualify as one. At the best, such a “theory” could be little more than a generalised description of the appropriation by the owners of the means of production, in all types of class society, of the product of the surplus labour of the exploited classes. (ibid.)

In other words, Meek is insisting that a theory of capitalism based solely on the “unjust distribution” of social wealth would not distinguish the capitalist mode of production from all other modes of production. Yet what he neglects is the fact that capitalism involves a specific historical form of exploitation of living labour that can clearly be distinguished from other modes of exploitation without resorting to a “theory” that leaves out the reality of political coercion specific to capitalism! Repeatedly, Meek reverts to the notion that for Marx “socially necessary labour time” referred to an absolute standard or measure by means of which the capitalist “transformation” of labour-time values into market prices, and therefore the calculation of profit as surplus value, was to be determined. (See above all his discussion of Benedetto Croce's critique of Marx's labour theory in Studies.) But this is simply false, because in Marx the concept of “socially necessary labour time” refers to “labour-power” not in a theoretical society analysed scientifically or objectively but specifically to the abstraction of human concrete labour achieved by means of capitalist political violence and coercion! Throughout his Studies, Meek overlooks the fact that for Marx, as for us, capitalism is a specific mode of production operating according to historically specific modes of exploitation or “social relations of production”, into which we will inquire presently. The essential point to Marx's critique was not to determine the distribution of value in a capitalistic society on scientific grounds but rather to show that capitalist production was conceivable only through the violence of the reduction of concrete labour to abstract labour or labour-power. The problem then becomes one of discovering how such an abstraction or homogenization of concrete labour or living labour can take place in a politically sustainable manner, albeit one not immune to severe and often catastrophic crises.

It is true that Marx often deviates from this position in a misguided attempt to give his critique of capitalism the (Darwinian!) status of a natural science (a science of history in the Engelsian distortion of historical materialism re-baptized as dialectical materialism). Yet, this cannot detract from the essential validity of Marxian theory when interpreted in its politico-practical, historico-materialist dimension. No greater claim need be made for the originality and greatness of Marx’s critique and theory of capitalism than that it discovered the precise historico-political mode of exploitation specific to capitalist enterprise! Once again, the residual problem then remains of how it is possible for capitalist enterprise to regulate and calculate values and prices to ensure at least partially the co-ordination of social production. As we shall discuss later, this exakte Kalkulation at the heart of capitalist enterprise will become the political measure or rule of Weber’s entire theorization of Western capitalist “rationalization”.