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Sackrey, Schneider, Knoedler: Introduction to Political Economy

By Levi Clancy for Student Reader on

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Political economics

The mainstream view of how human beings shop in modern capitalist cultures is, to put the best light on it, quixotic. Sackrey, Schneider and Knoedler, p 11

In the view of political economists, the unrealistic treatment of how people behave in capitalist societies is a critical flaw in mainstream economics. The essential assumption of neoclassical economics is that people are utterly selfish, pleasure-seeking automatons who respond in predictable ways to all stimuli. This theoretical creature is called "economic man," or sometimes "rational man," and this man is not the kind of human being the rest of us would ever know, want to be, or take home. Sackrey, Schneider and Knoedler, p 10

A painfully weak argument is made that barter, trade and exchange -- in essence, proto-capitalism -- is not a natural instinct.

The chief information is drawn from the Bible, a religious document.

Economics vs political economics.

The book begins with a contrast between "mainstream economics" and "political economy."

There is a critical distinction between all versions of mainstream economics and what we call political economy. This distinction is a matter of methodology, or "method of analysis"." Mainstream economists are trained to limit the scope of their analyses -- that is to limit the breadth of knowledge they bring to bear on an issue -- compared to political economists. Sackrey, Schneider and Knoedler, p

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Sackrey, Schneider and Knoedler, p

Adam Smith

Sackrey, Schneider and Knoedler, p

Sackrey, Schneider and Knoedler, p

Karl Marx and the Contradictions of Capitalism

The chapter has two parts: the first concerns Marx's theory of historical change; and the second, how he applied his theory to capitalism.

There are many loose and unclear ends. I was constantly forced to sift through shapeless bloat to get to the point. I don't mean historical anecdote, I mean redundant, inefficient, ineffective passages. Also, the author includes useless quotation marks, likely a relic of a conversational tone of writing (which does have its advantages, as the chapter is vivid and not stuffy).

The author omits some of Marx's arguments "because they do not have a great deal to say about our own world" and others because "they are now so commonly accepted" Sackrey, Schneider and Knoedler, p 77


Historical materialism

"Marx came to believe that conflict between the classes was the source of most major changes in human society" Sackrey, Schneider and Knoedler, p 54

Karl Marx and Friedrich Engels (spelled Frederick in the Sackrey text) co-authored The German Ideology in 1845-6, and it was posthumously published in 1932. The first part was likely written by Marx and encapsulated his take on history. Marx applied this to capitalism most succinctly in the first volume of Capital.

Marx found that the social activity of production took many different forms throughout history, with stages of social organization corresponding to techniques of production. He noted that European society passed through a number of different modes of production, including primitive communalism, slavery, and feudalism, on its way to capitalism. He concluded that capitalism is simply the latest in a series of modes of production and that it, too, will yield to some other mode of production in the future. Sackrey, Schneider and Knoedler, p 53

Marx sought to understand the forces that cause the economy to change over time. He believed that change resulted from the struggle between opposing, or "dialectical" -- what we might think of as "contradictory" or competing -- forces inherent in all societies. ... All economic systems produce hierarchies of social classes, with a top and a bottom, and endless competition and resentment at every level in between. ... Social classes are inherently contradictory, inherently opposing forces, in every society. Sackrey, Schneider and Knoedler, p 52 - 53

The history of all hitherto society is the history of class struggles. Freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a revolutionary re-construction of society at large, or in the common ruin of the contending classes Marx and Engels, The Communist Manifesto, 1848, p 34-35;
via Sackrey, Schneider and Knoedler, p 54

"Another principal argument in Marx's material conception of history is that every mode of production fundamentally shaped other aspects of society" Sackrey, Schneider and Knoedler, p 54

Political, religious and legal institutions as well as the ideas, the images, the ideologies by means of which men understand the world in which they live, their place within it, and themselves -- all these are reflections of the economic basis of society. C Wright Mills, The Marxist 1962, p 82;
via Sackrey, Schneider and Knoedler, p 54

The author links this to the assertion that "government at every level is for sale to the highest capitalist bidder" (are there specific examples? what about labor unions? what about state monopolies? what is a capitalist bidder?) Sackrey, Schneider and Knoedler, p 54. Also, the author cites Marx's correlation between the emergence of capitalism and the early Protestant teachings, which emphasized that "one should accept one's lot in life and that all would be better hereafter" (is this not the story of Job? what about the fact that European society was predominantly feudal?). "Such a belief, of course, made people more willing to accept the dislocations and deprivations so many experienced in early capitalism" Sackrey, Schneider and Knoedler, p 54-55

Analysis of capitalism

Marx's critique of the capitalist mode of production is largely contained in Capital and The Communist Manifesto.

After Marx and Engels developed their materialist conception of history, sporadically between 1845 and 1857, Marx began work on a longer project to describe and explain the "laws of motion" of capitalism. The overall structure of that explanation had been presented compactly in the first part of The Communist Manifesto, but its dozen or so pages gave only a fleeting glance at the complete story. The expanded version was published in 1867 in the first volume of what was to be a multi-volume project, and Marx gave it the title Capital: A Critical Analysis of Capitalist Production. The book was first published in German, and later editions in French (1872) and English (1886) made his critique available to most parts of the industrialized world. Marx was emphatic that the purpose of this book, and of all his analysis, was not just "to understand the world, but to change it." Sackrey, Schneider and Knoedler, p 57 - 58

The first volume of Capital was the only one published during Marx's life. Volumes II and III were prepared by Engels from Marx's notes, and Volume IV, more a massive compendium of economic ideas than an expansion of his critique, was edited by a German Marxist, Karl Kautsky, between 1905 and 1910. Sackrey, Schneider and Knoedler, p 58

Capitalism's origin

In the last six chapter of Capital, Marx makes two connected claims. The first is that capitalism arose from plunder, pillage and murder.

The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turn of Africa into a warren for the commercial hunting of black-skins, signalized the rosy dawn of the era of capitalist production. Marx, Capital, chapter 31, (1967, p 703);
via Sackrey, Schneider and Knoedler, p 79 - 80

Enclosure was the process in which the crown joined with land barons and the church to drive most of the agricultural work force, comprised of the peasants and the yeomanry of Britain, off the land and into the cities as vagabonds or wage laborers ... starting in the sixteenth century and continuing up to Marx's time. ... For British peasants whose livelihood was stolen, enclosure was brutality, and it led Marx to argue that capital originated in plunder and violence. It had been seized from the whole population, he wrote, first by the nobility and the Church, then by the emerging capitalist class. Because wealth and power are passed down from generation to generation, this early pillaging remained the foundation of the distribution of wealth and power in Marx's time. Sackrey, Schneider and Knoedler, p 80

Capitalism as an oppressive system

In the last six chapter of Capital, Marx argues that capitalism arose from plunder and then argues that it exists as a system of violence and oppression against working people. The author outlays the "benign meritocratic view of capitalism" where "inequalities of opportunity and outcome can be justified with the claim that it has always been an open system in which all who genuinely make the effort can rise to the top" Sackrey, Schneider and Knoedler, p 80.

Central to modern capitalism are owners and managers who by definition live off surplus value produced by someone else; who must create mindless task for most of their workers; who must withhold loyalty to their workers; who must fire, or replace, or even harm their workers' health if doing so will increase their surplus value; and who must monitor their workers' efforts to keep them on jobs which many hate. This is a language of force and oppression, and to a Marxist it is also the language of plunder and pillage. Surplus value, stolen from the workers only because the capitalists control the productive system, is the means by which these owners build their fortunes, amass their political power, and dominate the capitalist world. And capitalist's quest for surplus value requires them to do damage to everything in their path. Sackrey, Schneider and Knoedler, p 81

According to Marx: capitalism spreads, and drains morality.
"Marx also argued that capitalism would eventually demean and devalue all that is pulled under its spreading wings" Sackrey, Schneider and Knoedler, p 55

Less industrial societies will have their "walls battered down by cheap commodities," as Marx put it in the Manifesto, for no mode of production can compete with capitalism in its capacity to drive down costs and shape the world after its own image. Sackrey, Schneider and Knoedler, p 59

Whereas mainstream economists see competition as the "invisible hand" that gives capitalism great moral authority over other economic systems, Marx saw competition as an unrelenting pressure that threatens to drag all capitalists down to the moral level of the most unscrupulous ones. As an example, Marx emphasized in Capital that without laws against child labor, some capitalists will hire children if doing so will lower costs, and the advantage thereby gained will force competitors downward into a squalid moral abyss. Sackrey, Schneider and Knoedler, p 60

With adequate profit, capital is very bold. A certain 10% [profit] will ensure its employment anywhere; 20% certain will produce eagerness; 50% positive audacity; 100% will make it ready to trample on all human laws; 300%, and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged. T J Dunning;
via Marx, Capital, p 760;
via Sackrey, Schneider and Knoedler, p 61

Money abases all the gods of mankind and changes them into commodities. Money is the universal and self-sufficient value of all things, It has, therefore, deprived the whole word, both the human world and nature, of their own proper value. Money is the alienated essence of a man's work and existence; this essence dominates him and he worships its. Marx and Engels, On the Jewish Question, p 55;
Sackrey, Schneider and Knoedler, p 55

In Marxist language, alienation derives primarily from a process called "commodification." All things -- flesh and blood, inanimate objects, music, poetry, everything -- ultimately are 'for sale' in the capitalist marketplace. We all know countless examples of commodification. Each Christmas, to suggest an obvious one, most of us in Christian countries celebrate the birth of Jesus with an avaricious, competitive, often depressing orgy of consumption of mostly unnecessary products. What was once a simple affair of gift giving to exemplify Christian charity has become in advanced capitalism a gruesome distortion of the original idea. Capitalism, as well all know, incessantly works on all of us to buy things we don't need. However, capitalists pull out all the stops for Christmas. By the time it is over a substantial minority of us need anti-depressants as an antidote to the lack of Christmas joy that millions of advertisements told us the gifts, the cards, and the family gatherings would bring. Sackrey, Schneider and Knoedler, p 55

The author distills this as: "money could transform all things, until money itself was all that was important in life" Sackrey, Schneider and Knoedler, p 55. The author detours into Michael Jackson's prostitution of the Beatles' own songs, after outbidding Paul McCartney himself (were the songs not themselves a commodification of a genuine social movement) Sackrey, Schneider and Knoedler, p 55.

"To Marx, the most costly form of commodification occurs when capitalists buy labor power in labor markets" Sackrey, Schneider and Knoedler, p 56

Capitalists want ordered work from conforming, non-complaining bearers of crucial labor power. They want a "thing," rather than a human being. This is the commodification of labor -- a linchpin of Marxist analysis. Sackrey, Schneider and Knoedler, p 56

The author criticizes globalization, as yet another detour from the core discussion of Karl Marx Sackrey, Schneider and Knoedler, p 57. There appears to be a clear thesis at the start of the chapter, but it is cluttered over the next several pages.

Social classes
Capitalism has two dominant classes: proletariat and bourgeoisie.

One of the more intriguing aspects of life in U.S. society is that those who shape opinions, including many professors, deny the existence of social classes. Instead of concepts such as "working class" or "ruling class," they have substituted entirely different ideas and metaphors, such as "social status" or the "melting pot." The "American Dream" anchors a mythical understanding of ourselves, and in it any lad or lassie can, by trying hard enough, make it to the top. Those who actually have done so are paraded through our media and our history books as proof of typical experiences, though they are not that at all. Research debunks the myth with a crashing finality by showing that the best way to get to the top is to be born to parents already there. Sackrey, Schneider and Knoedler, p 74

The author leaves the argument's veracity by the wayside in favor of something that reads like it was typed at 11:30pm while wearing pajamas at home and listening to Led Zeppelin or The Doors. Do professors really deny the existence of social classes? No citations here. What about the overused terms poverty, lower class, middle class and upper class/high-income? Furthermore, since when have those who made it to the top been paraded as proof of typical experiences? They are celebrated as wunderkinds, I thought. And what about athletes? News media seems to focus on athletics more than entrepreneurs. And what research debunks the myth? What sources is the author citing? What exactly is the myth? What exactly is trying hard enough? All this is left unanswered, leaving behind a hollow husk of an argument. It is not that I disagree with the argument, it is that the author is a failure.

How could there not be social classes in our society when even small children know that the people who own or control the businesses also own houses, cars, food, clothes, and all the rest, that are better than those of the people who work for them? Sackrey, Schneider and Knoedler, p 76

Marx often wrote about social class ... however, his theory is quite undeveloped, and he never abandoned what he argued early on in the Manifesto that society is ultimately divided into the two great camps of the bourgeoisie [capitalists and managers] and the proletariat [wage-laborers]. In his system other classes were fated to extinction. "Petit bourgeoisie" is Marx's term for owners of small firms, intellectuals, and all others who did not hire wage laborers. He also referred to those truly outside the production system as the "lumpenproletariat," a term very close to the current idea of the "underclass." Marx believed that smaller firms would ultimately compete with big firms and the petit bourgeoisie would be "hurled into the proletariat" along with all those intellectuals who did not end up apologists for capitalism. Sackrey, Schneider and Knoedler, p 74 - 75

The major players on the capitalist field are capitalists hustling profits and workers hustling a wage or salary. ... The term "capitalist" refers to someone who hires "wage laborers," that neither can exist without the other. Their relationship to each other produces the central dramatic action of the capitalist mode of production. Like all good dramatic action, this one is a waxing and waning struggle, and, in this case, what is being fought over is what Marx called "surplus value." Sackrey, Schneider and Knoedler, p 64

There are the capitalists and their managers, or what Marx called the "bourgeoisie." Their identifying trait is that they own or manage the capital equipment of society, the buildings, furniture, materials, and everything else needed to produce commodities (goods and services) for sale. Sackrey, Schneider and Knoedler, p 59

Most of us work for wages or salaries in positions where the following conditions prevail: we do not control what we produce, how it is produced, or how it is priced; we have nothing to say about whether our workplace will be open tomorrow; we must take the wage offered us, even if it is not enough to live on (unless we can easily get another job or are part of a union that will collectively fight for higher pay). And, our labor is "divided" as a matter of course, and it will be sub-divided into ever-smaller tasks as long as it is profitable for owners to do so. If these are the conditions of your job, you are a worker in the Marxian version of the capitalist world. On the other hand, if you do have some control over these matters, you are a capitalist, or a high-ranking official in a capitalist firm; that is, you are in the capitalist class. Sackrey, Schneider and Knoedler, p 75

"Some later thinkers have criticized Marx's division of society into two classes as overly simplistic. A crucial question arises: Who is truly a worker, and who is not?" Sackrey, Schneider and Knoedler, p 75

Pat Walker's Between Capital and Labor (1978) describes a "professional managerial class" made up of professionals such as doctors, lawyers, academics, and others who have some control over their working environment but who do not typically hire wage laborers and earn surplus value. Other scholars have, in this same vein, tried to account for these "in between" classes. In their accounting for professionals, these theorists are not abandoning the Marxist framework but are trying to modernize it so that it remains a viable paradigm in which to think about capitalism. Sackrey, Schneider and Knoedler, p 75

Within capitalism, the only roles available are those shaped by capitalism. Sackrey, Schneider and Knoedler, p 76

"It is not possible to be a "shining knight, or a provincial duchess, or a hardy English yeoman, or a plains Indian warrior, or a ..." blah blah blah "... it is not possible to play these, or any number of other roles, if one resides in modern capitalism, because you can only be an owner, a worker, a government servant, or someone else inhabiting a role shaped by capitalism." Sackrey, Schneider and Knoedler, p 76 If one lived outside modern capitalism, one could not be a shining knight, either. Knights in shining armor do not exist anymore outside of Renaissance fairs.

Is this supposed to be a critique of capitalism? Because in any culture, there are limitations to what roles you can have.

The capitalist class has a capacity to accomplish enormous tasks.

Like the classical economists before him, such as Adam Smith and David Ricardo, and mainstream economists in our time, Marx believed capitalists have the single goal of accumulating and maximizing profits from their investments in machines, materials, and labor power. And, like those before him, he had a high regard for the power of this capitalist accumulation process to accomplish gigantic tasks. Sackrey, Schneider and Knoedler, p 59

The author says first and then describes the capitalist class, then forgets the second, the proletariat.

[The capitalist class] during its rule of barely one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of nature's forces to man, machinery, application of chemistry to industry and agriculture, steam navigation, railways, electric telegraphs, clearing of whole continents for cultivating, canalization of rivers, whole populations conjured out of the ground -- what earlier century had even a presentiment that such productive forces slumbered in the lab of social labour? Communist Manifesto, p 40 - 41;
Sackrey, Schneider and Knoedler, p

Marx says elsewhere in the Manifesto that capitalists can be depended upon constantly "to revolutionize the means of production," by which he meant that the owning-managing class will never stop imagining ways to make their production more efficient and therefore less costly. Sackrey, Schneider and Knoedler, p 59

The proletariat, and estranged labor, is largely described in Marx's Economic and Philosophic Manuscripts.

This section is horribly organized, despite some helpful bold subheaders. The contents do not always follow the subheaders; and clear, succinct definitions are given at the end or not at all.

Divided labor

The capitalist mode of production, by necessarily and systematically dividing labor to the greatest extent possible, denies most working people the opportunity to do the kind of creative work that Marx thought was essential to their humanity. Sackrey, Schneider and Knoedler, p 63

Controlled labor

Owners want brisk, timely, committed work, done as quickly as quality standards will allow. They want workers to be there promptly in the morning, to stay as long as they are supposed to, and longer if possible, and to perform flawlessly, efficiently, and without complaint. Workers, though, compelled to make a living, would prefer a friendly, flexible environment, over which they have some measure of control. Thus, workers keep their noses to the grindstone only when forced to do so by managers, supervisors, electronic monitors, spies, or whatever else the owners can use to compel them to greater productivity. Sackrey, Schneider and Knoedler, p 64

A ----- B ----- C
"Marx defined surplus value simply as the difference between the value of what a worker produces and what he or she is paid." Sackrey, Schneider and Knoedler, p 64

For example, a worker earns $10 per hour. That worker is paid $80 for eight hours of labor, and is expected to add more than $80 of value during that time. The surplus value, meaning the value of the worker's output above the $80 wage, is reaped by the capitalist as profit Sackrey, Schneider and Knoedler, p 66. Marx elaborates on this in The Working Day, chapter 10 of Capital. The working day comprises two parts: A ----- B; and B ----- C. Let us assume that the worker adds $160 the the firm's value, in a single working day Sackrey, Schneider and Knoedler, p 67. That is $20 of value per hour.

In that sense, the worker earns the wages within just five hours (the A ----- B part of the workday); Marx called these five hours the necessary labor. After the wages have been earned in five hours, the last three hours (the B ----- C part of the workday) are the capitalist's profit; Marx called these three hours the surplus labor. Thus, the workday is broken into a section where the worker is earns a wage, and a section where the worker toils to produce a capitalist's profits.

Absolute surplus value and relative surplus value are two forms of additional surplus value.

The capitalist will seek to extend surplus labor hours, and minimize necessary labor hours. Absolute surplus value is generated when the workday is extended. Instead of working eight hours to generate $80 surplus value ($160 total value minus $80 wage), a ten hour workday results in $100 surplus value ($200 total value minus $100 wage). The $100 surplus value is $20 more than the $80 surplus value. That $20 is absolute surplus value.

Relative surplus value is gained without extending the workday; the work is restructures and efficiencies are introduced so that the necessary labor completes quicker, and surplus labor comprises evermore of the workday. Examples include technological advances, which Marx discusses in detail in chapter 15 of Capital. Increasing productivity with machines means that workers pay for their wage earlier in the day.

When Marx was writing Capital in the 1860s, both British and U.S. laborers were engaged in protracted and often bloody battles with owners over the conditions of work in virtually every industry. To Marx, this struggle over the length of the working day was an inevitable outcome of the capitalist mode of production, and focusing on the B ----- C part of the day made it obvious why this was the case. Both parties, owner and worker, have diametrically opposed needs: the former has strong incentives to work the worker as long as possible, while the latter will typically do anything to make the workday shorter. Sackrey, Schneider and Knoedler, p 68

To sum up Marx's arguments about "relative surplus value," he showed that confining the length of the working day to a maximum number of hours did not change the essential dynamic of the capitalist mode of production. It simply mandated that capitalists "intensify labor," to use Marx's term, in order to maximize surplus value. Concretely, this meant cutting wages, speeding up work, replacing workers with machines, and marching around the globe in search of low-wage workers. Sackrey, Schneider and Knoedler, p 72-73

[In] chapters 13 and 14, Marx had demonstrate, as he had in The Communist Manifesto, a genuine appreciation for the ability of the bourgeoisie to develop technology rapidly enough to transform the world with a previously unprecedented breadth and speed. He remained committed to the idea that machines could, in a mode of production designed for "free men," deliver people from the drudgery that has been the lot of most of them throughout human history. Yet, with the emergence of a system whose central dynamic is the production of surplus value, the machine becomes the agent of the worker's displacement, it promotes the exploitation of women and children, and, most horribly, it crushes workers between its moving wheels. Sackrey, Schneider and Knoedler, p 70

Displacement to where? Exploitation of women? If the women are doing equal work as men, that is not exploitation specifically of women. Women are entitled to equal employment opportunities as men. Exploitation of children? Crushes workers between its moving wheel? "In 1995 for example, 5,300 people were killed on the job in the United States and another 3.9 million received disabling injuries, meaning that the mechanized capitalist workplace remains a threat to life and limb." Sackrey, Schneider and Knoedler, p 70 The author tosses out vivid rhetoric but the numbers fail. Examining CDC statistics, the workplace is one of the safer places for a worker. People are most likely to accidentally die outside the workplace.

Value of products.

Marx adopted what he calls "socially necessary labor time" as his standard of value for products exchanged in the market. The exchange value of a good or service is determined by the average number of hours of labor time that went into its production. ... Adam Smith and David Ricardo were only the most prominent among the many who had earlier put forward this kind of "labor theory of value." ... Marx attempted to prove that the labor theory of value could be used as a basis for determining market prices. However, many critics have not been persuaded, and the debate continues. Sackrey, Schneider and Knoedler, p 65

Industrial reserve army

In chapter 25 of Capital, Marx theorized about the debauched conditions endured by so much of the working class in Britain. ... Marx paid particular attention to the nature of what we call "unemployment" and the reasons that it regularly occurs in capitalism. ... Marx called those without jobs in capitalism "the industrial reserve army." Sackrey, Schneider and Knoedler, p 73

Marx does not use an abstract term like unemployed, which is merely the absence of employment. While unemployment suggests the absence of a role in capitalism, the term industrial reserve army posits that the so-called unemployed are in fact an essential component of the capitalist system. Army reflects that "those without jobs are foot soldiers in some capitalist's army and, like their counterparts in the real army, utterly at the mercy of "generals" directing the struggle" Sackrey, Schneider and Knoedler, p 73. More importantly, "the unemployed are 'in reserve' in the sense that capitalists always need a pool of them in order to make surplus value."

Capitalism absolutely depends upon a class of people at the bottom who can be fired without explanation and who also are not able to organize resistance to the system that has tossed them out. Instead of resisting, capitalism demands that these workers graciously blame their lot on themselves, rather than blame a production system that makes their unemployment necessary and predictable. Further, capitalist systems need the reserve army to hold down wages: a pool of unemployed, financially desperate workers reminds those who remain they can easily be replaced if they make demands on their employers. And finally, the reserve army serves the needs of capitalism in times of economic growth. When the economy starts expanding, it won't grow for long unless there are people "in reserve" who can be absorbed back into the system. Naturally, the capitalists' hope is that those in reserve will not have made themselves into a real "army" in the meantime. Sackrey, Schneider and Knoedler, p 73 - 74

In mainstream economics, unemployment is hardly considered a moral issue, but a short-term failure of the system or a long-term failure of hopeless individuals. The relationship between joblessness and the political system is also generally ignored because, as is usual in mainstream economics, politics and questions of power are cavalierly ignored. Sackrey, Schneider and Knoedler, p 74

Centralization and concentration
"Marx was the first major social theorist to predict that capitalism would lead to a growing centralization of power in the hands of a few capitalist" Sackrey, Schneider and Knoedler, p 78

Marx was the first major social theorist to predict that capitalism would lead to a growing centralization of power in the hands of a few capitalists. Marx meant what we call horizontal, vertical and conglomerate mergers (firms merging, respectively, with one of their competitors, suppliers, or firms from a completely different industry. [The author never closes this parenthesis.) Sackrey, Schneider and Knoedler, p 78

In Chapter 25 of Capital [no longer italicized], Marx explained how capitalists' need to mechanize production would produce ever more costly machinery and buildings. These expensive new technologies would drive down costs, and smaller firms not able to buy the newest machinery would be driven out of business or gobbled up by the bigger ones. The financial industry, too, would verge toward centralization. Ultimately, both it and these large financial and industrial firms would shape business regulations in capitalist states to allow for more centralization in the future. Sackrey, Schneider and Knoedler, p 78

Booms and busts

In mainstream economics, John Maynard Keynes is generally considered to have founded the modern study of the business cycle in the mid-1930s. However, the history of economic thought is now rarely taught in graduate schools, and thus economists usually do not know that others, including Marx, had developed complex and persuasive theories of the business cycle. One problem is that Marx scattered arguments about the instability of capitalism throughout all four volumes of Capital, and few readers have taken the time to compile and assess his claims. Marx's arguments are also largely unknown to mainstream economics for ideological reasons, and, as we have pointed out, economists have gradually come to ignore all that he wrote. Despite their ignorance, Marx made a series of strikingly modern arguments about the business cycle. Sackrey, Schneider and Knoedler, p 77

The ultimate reason for all crises [recessions/depressions] always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to [produce as much as possible]. Marx 1981, p 484;
via Sackrey, Schneider and Knoedler, p

In the second and third volumes of Capital, Marx developed other intriguing theories of the business cycle. One of them was a clear precursor to Keynes, and in it, Marx argued that there is interdependency between the investment and consumption sectors of a capitalist economy. In Volume II, he showed with fine logical consistency that over- or under-production in one of these can produce a "realization" crisis, or what we call a recession or depression. It is only because British economists, who with Keynes developed modern macroeconomics, were not reading Marx that they did not see that much of their own work only extended what he had already written about. Sackrey, Schneider and Knoedler, p 77 - 78


Marx tied the centralization of capital to the eventual collapse of capitalism, because he thought that as monopolies grew in power, they would hurl more and more workers, and the owners of small firms, into an increasingly immiserated proletariat. The result, he predicted, would be unrest and then revolution. Sackrey, Schneider and Knoedler, p 78

I have used excerpts from this section here.

Pertinence in the United States

According to the most recent data compiled by Edward Wolff, the richest 10% of the U.S. population owns nearly 90% of all stocks and over 90% of all bonds (Mishel, Bernstein, and Allegretto 2005, 287, Henwood 1997). Since owning the stocks and bonds of companies means owning their "means of production," the wealth-producing capital of the United States is almost all owned by one tenth of the population. In order to make a living, most of the other 90% who work do so either for these richest 10%, their manager, or in the non-profit sector of the economy. Sackrey, Schneider and Knoedler, p 53

The author rambles. It is not that I disagree, it is that the author takes on a ranting tone without providing specific examples or counter-arguments. For example, this sentence is dropped in then abandoned, "The interests of Wall Street rarely coincide with those of Main Street, and the conflicts between them can be powerful" Sackrey, Schneider and Knoedler, p 53. Or when the author says "these class struggles emerge" but does not explain which struggles, and waits until later to define exactly is a class struggle (all out of order, likely a symptom of reckless editing).

Consider the effect of the immense Wal-Mart chain. Its monopolization of retail sales has made it ever more difficult for main street merchants to compete with it. Wal-Mart has two principal advantages over its smaller competitors: its huge stores spread the overhead for each sale over hundreds of thousands of products in the typical store. And, Wal-Mart now directly purchases almost one quarter of the total output of another giant, Proctor & Gamble. This gives it the market leverage to buy at volume prices considerably lower than those charged to smaller outlets. Direct purchases such as these immediately wipe out whole strata of small wholesalers and threaten all retailers that compete with the giants. Millions of small business owners, particularly those who are not highly educated or do not have professional skills, hurled into jobs with low pay and no control over their work. [Are hurled or get hurled. Why does the author make so many grammatical errors?] Sackrey, Schneider and Knoedler, p 78 - 79


Charles Sackrey, Geoffrey Eugene Schneider, Janet T. Knoedler, Hans Jensen. 2010. Dollars and Sense, Economic Affairs Bureau.