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Marxism’s Relevance in the 21st Century1

Garry Piepenbrock (JMG) D-Block Introduction This year marked the 200th anniversary of the birth of Karl Marx, one of the most controversial, yet influential political philosophers in the past two centuries.2 During this time, the political economy has seen a battle between the ideologies of Marxism on the Left and capitalism on the Right.3

Figure 1: Marxism v Capitalism

In this essay, I will utilise recent empirical academic research4 and I will draw on my previous Eton prize essays.5 In the process, I hope to make a small theoretical contribution to Marxist scholarship using dynamic modelling.6 First, I will briefly characterise capitalism and its critique in Marxism. Second, I will briefly characterise the evolving context of the 21st century. Finally, I will evaluate Marxism’s relevance within the context of the 21st century.

1"2018 Lower Boy Politics Prize, question 7: “In the 21st century, Marxism is as relevant as ever.”"2" Marx is ranked as the second most influential economist of all time, behind Adam Smith."https://www.thecompleteuniversityguide.co.uk/courses/economics/the-ten-most-influential-economists-of-all-time/?entry=2"3"Adam Smith (The Wealth of Nations, 1776) was an early intellectual thought leader of capitalism."4"For example, Thomas Piketty’s Capital in the 21st Century (2014) and Piepenbrock T. (2009)."5"Piepenbrock, G., “Trumponomics”, 2017 Eton Lower Boy Economics Prize essay (Highly Commended Award). Piepenbrock, G., “Populism and Globalisation”, 2017 Eton Lower Boy Politics Prize essay (Runner-up Award). Piepenbrock, G., “Solving the Problem of Global Inequality”, 2018 Eton Lower Boy Economics Prize essay (Highly Commended Award). Piepenbrock, G., “The Importance of Reducing Global Inequality”, 2018 Eton Lower Boy Geography Prize essay (Highly Commended Award). Piepenbrock, G., “The Cold War”, 2018 Eton Lower Boy History Prize essay (Highly Commended Award)."6"This modelling, “System Dynamics”, was developed at the Massachusetts Institute of Technology."

Garry Piepenbrock (JMG D-Block) • Eton College 2018 Lower Boy Politics Prize Essay

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Capitalism (and its discontents)7

“Capitalism is an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.”8

In capitalism, self-interested wealth-creation arises from innovation which arises from competition, and which gives rise to inequality, as Keynes noted:

“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”9

Capitalism is both a cause and consequence of Liberal Market Economies10 like the UK and US, which have given the world the Industrial Revolution and The Wealth of Nations, Wall Street and Silicon Valley.11

Figure 2: Capitalism: from the Industrial Revolution to Wall Street

After over 200 years of dominance however, capitalism is at a crossroads today, with the 2008 financial crisis, the increasing income/wealth inequalities and the rise of populist movements12 of Brexit in the UK and Trump13 in the US. As Marx initially predicted, varieties of capitalism have evolved which embrace aspects of socialism.14 However, a more extreme ideology in the form of Communism, appears to have been an abject failure.15 But is the story of political and economic evolution over and will it involve revolution?

7"This title was borrowed from The Economist, 1 October 2015."8"Oxford English dictionary."9"The quote has been attributed to"Old Etonian and renowned economist, John Maynard Keynes."10"Liberal Market Economy (LME) is one of the Varieties of Capitalism of Hall and Soskice (2000)."11 As I was born in the US and raised in the UK, I have come to gain a reasonable understanding of the politics and economics of these great democratic Liberal Market Economies of the West. Nonetheless, it can be rather daunting to confront the allegedly subversive and heretical works of radical thought-leaders, with one of the foremost being Karl Marx. In this time, when my “snowflake” generation seeks “safe spaces” protection from dangerous speech and disorientating ideas, I have chosen to confront uncomfortable truths and their thought leader head-on. 12"Piepenbrock, G., “Populism and Globalisation”, 2017 Eton Lower Boy Politics Prize essay."13"Piepenbrock, G., “Trumponomics”, 2017 Eton Lower Boy Economics Prize essay."14"Coordinated Market Economies (CME) like Germany, France and Japan, are one of the Varieties of Capitalism (Hall and Soskice, 2000)."15"This was"epitomised by the fall of the USSR in 1989."


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Defining Marxism First, Marx saw the “economic substructure” of a society both creating and created by the “political superstructure” in a reinforcing feedback as shown in the figure below.

“The totality of production constitutes the economic structure of society, the real foundation, on which arises a political superstructure.”16

Figure 3: Marx’s model of capitalist society

Second, Marx saw that capitalism’s economic substructure was causing class conflict between the bourgeoisie capital owners and the proletariat working-class labourers in the political superstructure.17

“Society is more and more splitting up into two great hostile camps, into two great classes directly facing each other - bourgeoisie and proletariat.”18

Figure 4: The mirror images of Capital and Labour19

16"Marx, K., A Contribution to the Critique of Political Economy, 1859."17"Marxism was defined by 19th century Prussian/German philosophers, Karl Marx and Freidrich Engels, primarily in their works: The Communist Manifesto (1848) and Das Kapital (1867). While the former is reported as being the second best-selling book of all time (after the Bible), I focus more on the latter in this essay."18"Marx, K., and Engels, F., The Communist Manifesto (1848)."19"Cartoon: anonymous, c. 1887. The Transnational World of Australian Radical and Labour Cartoonists.

Capital Labour

Economic Substructure

Political Superstructure


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Even Right-leaning contemporaries of Marx, like US Republican President Abraham Lincoln, echoed the importance of labour over capital:

“Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed.

Labor is the superior of capital, and deserves much the higher consideration.”20 Another Right-leaning politician, Winston Churchill, highlighted the tradeoffs between capitalism and socialism:

“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”21

Finally, Marx predicted that this class struggle would lead to evolution (or more accurately revolution22) in society from capitalism to socialism to communism.23

Figure 5: Marx’s (R)evolution from Capitalism towards Communism

Having briefly defined Marxism, I will next explore empirically how the struggle between capital and labour has manifested itself in inequality between these classes over the past 200 years.

20"US President, Abraham Lincoln, 3 December 1861, First Annual Message to the US Congress. 21"Winston Churchill."22 Keen, Steve, “Marx sacrificed logic on the altar of his desire for revolution.” 23"Note that I do not consider Marxism to be completely synonymous with Communism."

Communism Capitalism Socialism


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Inequality: when Capital growth exceeds Labour growth Building on Marx, economist Thomas Piketty explores the causes of this inequality in his book, Capital in the 21st Century.24 Piketty has shown that for much of the past 2,000 years, capital growth has exceeded output or labour growth, resulting in rising inequality (shown in yellow in the figure below). One brief exception to this trend occurred in the middle half of the 20th century (shown in green in the figure below).25

“The period from about 1914 to the 1970s was an historical outlier

in which both income inequality and the stock of wealth fell dramatically. Two world wars, the Depression and high taxes

pushed down the return on wealth in the 20th century, while rapid productivity and population rises pushed up growth.”26

Figure 6: Inequality and Growth of Capital vs Growth of Output

Note that Piketty projects continued slowing of output or labour growth rates in the 21st century. Therefore, as we return to a world where capital growth exceeds labour growth, rising inequality will continue at a faster pace. I will next explore the changing conditions of the “economic substructure” in the 21st century, to determine their influence on the “political superstructure”, in order to understand what the future holds for capitalism and Marxism.

24"Note that Picketty’s title, “Captial in the 21st Century” echoes Marx’s “Das Kapital.”"25"During this period, output growth exceeded capital growth. In this situation, “a rising tide lifts all boats”, meaning that rich and poor all benefited, especially the poor."26 The Economist, “A Modern Marx”, 3 May 2014.


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Dynamic Relationships between Capital and Labour: Virtuous or Vicious? As shown below, the feedback between capital and labour forms a reinforcing loop: the more/less profit growth that capitalists experience, the more/less wage growth that labourers experience. Both Smith and Marx agreed on this.

Figure 7: The Reinforcing Feedback between Capital and Labour This capital-labour reinforcing loop can be either “virtuous” or “vicious”. If capital experiences profit growth, it would make investments in productivity so that labour would experience wage growth, which feeds back to ensure even more capital profit growth. This “virtuous” reinforcing feedback, leads to exponential growth of GDP as Adam Smith argued (see below). If, however, capital experiences profit decay, it would make less investment in productivity so that labour would experience wage decay, which feeds back to further profit decay. This “vicious” reinforcing feedback, leads to exponential decay of GDP, as Karl Marx argued (see below).

Figure 8: Virtuous Exponential Growth versus Vicious Exponential Decay

Labour (wage growth)

Capital (profit growth)

+

+

R

Global GDP Time

“Vicious” reinforcing loop

(exponential decay)

“Virtuous” reinforcing loop

(exponential growth) Capital and Labour

Cooperate

Capital and Labour Compete


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How can we resolve this dilemma of who is right: Smith or Marx? Are capital-labour relations inherently virtuous (as Smith believed) or vicious (as Marx believed)? I put forth a dynamic causal model which posits that both are right (and wrong), depending on the growth rates of the global market. In order to do this, I will first introduce an intermediary variable to my simple capital-labour model, namely global GDP. As can be seen from the figure below, both capital and labour contribute to global GDP in reinforcing loops which can form either virtuous or vicious “figure eights”.

Figure 9: The Reinforcing Feedbacks between Capital, Labour and GDP

Finally, I introduce an important constraint to this causal system: the finite “carrying capacity” of the global economy, which is a function of the global population times productivity. Note that both of these have limits to growth, which have been demonstrated in recent years. This carrying capacity brings two balancing loops, which control the growth of capital and labour.27 “Anyone who believes that exponential growth can continue forever in a finite world

is either a madman or an economist.”28

Figure 10: The Balancing Feedbacks between Capital, Labour and global GDP

27"Balancing loops close gaps, e.g. between total number of people on the earth today (c. 7 billion) and the total number of people which the earth has the capacity to carry (c. 10 billion). As this gap closes, it reduces interest rates on capital profit growth and inflation rates on labour wage growth. Finally note that while reinforcing loops amplify changes, balancing loops dampen changes."28"Oxford economist, Kenneth Boulding."



+ +

GDP (output growth)

+ +

R R



+ +

GDP (output growth)

+ +

RC RL

Carrying Capacity

Interest Rate

Inflation Rate Gap

+ +

BC BL

+ + +

-


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This causal model contains both reinforcing and balancing loops and results in “S-shaped” growth as shown below.

Figure 11: Rapid Reinforcing Growth followed by Slow Balancing Growth Smith is correct in the early economic growth phase, where the gap between the global GDP and the carrying capacity is large and the reinforcing loops dominate: capital and labour work with each other in a virtuous way. Marx is correct in the later economic growth phase, where the gap between the global GDP and the carrying capacity is small and the balancing loops dominate: capital and labour work against each other in a vicious way. Using similar models, scientists have long-predicted that global population and global GDP growth rates would slow down in the 21st century as shown below in the “red world”.29 In this environment, capital and labour now compete against each other in a zero-sum game.

Figure 12: Limits to Growth impacts Politics30

29 When the world’s economies experienced unrestrained economic growth - the “blue world” - it appears that Adam Smith’s ideology and Liberal Market Economies, with their individualism and short-termism, were the winners, as capitalism repeatedly dominated Communism. It can be argued that Marxism was the wrong ideology for the time (and the high growth environment). However, as the world’s economies are beginning to experience slowing economic growth – the “red world” – it appears that the dominant ideologies of Smith and Liberal Market Economies are beginning to struggle systematically, and the Coordinated Market Economies, with their collectivism and long-termism are beginning to dominate. Marxism, therefore, seems better adapted to 2067 than 1867. 30"Source:"Meadows, D., et al. (1972, 1992, 2004), adapted by Piepenbrock, T. (2009)."

Global GDP

Time (year)

Carrying Capacity

1800 2000 2200

Reinforcing loops dominate

Balancing loops dominate

1900 2100


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Conclusion: Marx on the mark? Marx’s critique of capitalism seems on the mark and still relevant today.31 It is also noteworthy that China, the world’s fastest-growing (and soon to be largest) economy, has been run by its Communist party for nearly 100 years.

Figure 13: Achieving top Marx

However, Marx’s prescriptions have not been impressive, at least as implemented by those dictators who have murdered in his name.32 It appears that Marx’s proposed cure may be worse than the disease.33

“Under capitalism, man exploits man. Under communism, it's just the opposite.”34

Although my own analysis shows that the low growth economic environment of the 21st century is likely to put socialist pressures on capitalist societies, it is still not clear that the extreme move towards Communism is either feasible or desirable. I give the last word to Marx:

“Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.”35

It appears that Marx was right (Groucho, if not Karl).

Figure 14: Political Philosopher, Marx (the other one)

31"While Marx’s critique of capitalism seems in retrospect to have been prescient, analysis is different from synthesis. To explain problems is often easier than to propose solutions, or at least it requires different capabilities. Marx clearly had stronger analytical skills than skills of synthesis."32"Josef Stalin in Russia, Mao Zedong in China, Ho Chi Minh in Viet Nam and Kim Jong-il in North Korea."33 While Marx’s Communist ideal has never been truly and fully implemented, the fact that so many who have allegedly tried have failed so miserably, might point to the futility of its implementation. 34"Canadian economist and US diplomat to India, John Kenneth Galbraith, A Life in Our Times (1981)."35"Attributed to the American comedian,"Groucho Marx, c. 1944."


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Word Count 1,498 words (1,500 word limit) including quotations, but excluding footnotes, acknowledgements, bibliography/references and appendices. Acknowledgements I would like to thank my parents for their recommended reading and their many conversations on this topic, for teaching me the basics of System Dynamics, and for reviewing and critiquing my drafts of this essay, especially over the Michaelmas Half long and short leaves. I would like to thank Professor Darius Ostrowski and Professor Steve Keen for coming to Eton this Half to give interesting talks on Marx and heterodox economics respectively. I also appreciated Professor Keen’s correspondence, recommendations and kind words of encouragement for this paper (see Appendix B). Finally, I would also like to thank Eton College, Mike Wargel, Professor Elena Lombardi and the Balliol Society Educational Trust for their generous support of my studies at Eton.


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Bibliography / References (*denotes key references)

Boulding, K. Energy reorganization act of 1973: Hearings, Ninety-third Congress, first session, on H.R. 11510. p. 248. The Economist, “Capitalism and its discontents.” (1 October 2015). https://www.economist.com/business/2015/10/01/capitalism-and-its-discontents *The Economist, “Labour is right - Karl Marx has a lot to teach today’s politicians.” (11 May 2017). https://www.economist.com/britain/2017/05/11/labour-is-right-karl-marx-has-a-lot-to-teach-todays-politicians *The Economist, “Rulers of the world: read Karl Marx!” (3 May 2018) https://www.economist.com/books-and-arts/2018/05/03/rulers-of-the-world-read-karl-marx *The Economist, “Rousseau, Marx and Nietzsche: The Prophets of Illiberal Progress.” (6 September 2018). https://www.economist.com/schools-brief/2018/09/08/the-prophets-of-illiberal-progress *The Economist, “Was Karl Marx Right?” (4 May 2018). https://www.youtube.com/watch?v=TMmDebW_OBI The Economist, “The next capitalist revolution” (15 November 2018). https://www.economist.com/leaders/2018/11/15/the-next-capitalist-revolution Forrester, J., World Dynamics, Pegasus Communications,1971. Galbraith, John Kenneth. A Life in Our Times, Houghton Mifflin, 1981. Hall, P and Soskice, D. (2001). Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. *Jeffries, Stuart, The Guardian, “Why Marxism is on the rise again.” (4 July 2012). https://www.theguardian.com/world/2012/jul/04/the-return-of-marxism *Jeffries, Stuart, The Guardian, “Two centuries on, Marxism feels more revolutionary than ever.” (5 May 2018). https://www.theguardian.com/commentisfree/2018/may/05/karl-marx-200th-birthday-communist-manifesto-revolutionary Keen, Steve, “Hyman Minsky and financial instability.” Lecture at Eton


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College, Michaelmas 2018. Keen, Steve, “Marx sacrificed logic on the altar of his desire for revolution.” https://www.rt.com/op-ed/426249-karl-marx-capital-labor/ Keen, Steve, “How Marx was wrong on revolution.” https://www.youtube.com/watch?v=2b1JETZ6-Ck Keynes, John Maynard. *Marx, Karl, and Engels, Friedrich, The Communist Manifesto (1848). *Marx, Karl, “The Eighteenth Brumaire of Louis Napoleon” (1852). https://en.wikipedia.org/wiki/The_Eighteenth_Brumaire_of_Louis_Napoleon *Marx, Karl, Das Kapital: Kritik der Politischen Oekonomie (Capital: Critique of Political Economy), Volume 1 (1867). Meadows, D., Meadows, D., Randers, J., and Behrens III, W., The Limits to Growth, 1972. Meadows, D., Meadows, D., and Randers, J., Beyond The Limits to Growth, 1992. Meadows, D., Randers, J., and Meadows, D., The Limits to Growth: The 30-year Update, 2004. *The New Yorker, “Karl Marx, Yesterday and Today.” (10 October 2016). https://www.newyorker.com/magazine/2016/10/10/karl-marx-yesterday-and-today Dr Marius Ostrowski, “Marx at 200.” Lecture at Eton College, Michaelmas 2018. Jordan Peterson and Bret Weinstein, “Marxism is ignorant of the Pareto principle” (8 September 2017). https://www.youtube.com/watch?v=i0iL0ixoZYo Jordan Peterson, “The only reason Marxism will fail”. https://www.youtube.com/watch?v=1lTGu35BpZs Piepenbrock, G. “Trumponomics”, Eton College lower boy Economics Prize essay (Lent 2017), highly commended. Piepenbrock, G. “Populism and Globalisation”, Eton College lower boy Politics Prize essay (Michaelmas 2017), runner-up. Piepenbrock, G. “The Problem of Global Inequality”, Eton College lower boy


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Economics Prize essay (Lent 2018), highly commended. Piepenbrock, G. “The Importance of Reducing Global Inequality”, Eton College lower boy Geography Prize essay (Summer 2018), highly commended. Piepenbrock, G. “The Cold War and Large-Scale Conflict”, Eton College lower boy History Prize essay (Summer 2018), highly commended. Piepenbrock, T. F., “Toward a Theory of the Evolution of Business Ecosystems,” PhD dissertation, Massachusetts Institute of Technology, 1,325 pages (2009). Piketty, T., Capital in the Twenty-First Century, 2014. http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014FiguresTablesLinks.pdf http://www.hup.harvard.edu/catalog.php?isbn=9780674430006 The School of Life, “Political Theory – Karl Marx” (19 December 2014). https://www.youtube.com/watch?v=fSQgCy_iIcc Smith, A., The Wealth of Nations (1776). Sterman, J. (2000). Business Dynamics: Systems Thinking and Modelling for a Complex World. *Varoufakis, Yanis, The Guardian, “Marx predicted our present crisis – and points the way out.” (20 April 2018). https://www.theguardian.com/world/2012/jul/04/the-return-of-marxism https://en.wikipedia.org/wiki/Marxism


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Appendix A: Definitions Defining terms for this essay is quite challenging, as there are different meanings across disciplines (e.g. economics and politics) and across nationalities (e.g. US and UK). See my typology summarised in Table 1 below.

Table 1: Political and Economic Typology

36"Piepenbrock, T. (2009)."37"Hall, P. and Soskice, D. (2001)."38" The convention of the “Left” denoted by the colour red and the “Right” by blue was reversed in the 2000 US Presidential election. See Wikipedia: “Red States and Blue States.”"39"Based on data in Wikipedia: “Historical rankings of Presidents of the United States”."40"Based on data in Wikipedia: “Historical rankings of Prime Ministers of the United Kingdom”."

The “Left” The “Right”

Focus Collectivist (we/us) Individualist (I/me)

Interactions Cooperative Competitive

Time Horizons Longer-term Shorter-term

Strategies36 Stability Growth

Ideologies Socialism (& Communism) Capitalism

Economic Inequality Low High

Market Economy37 Coordinated Liberal

Factor of Production Focus Labour Capital

Economic Sector Emphasis Production (Supply) is concentrated

Consumption (Demand) Is diffused

Focus of Growth Quality (e.g. Productivity) Quantity (e.g. GDP)

Locus of Power Top-down Bottom-up

Size of Government Big Small

Social Dimension Liberal (or Progressive) Conservative

Economic Dimension Social Liberal (Neo-Liberal)

Economic thought-leaders

Karl Marx (1818-1883) John M. Keynes (1883-1946)

Paul Krugman (1953-)

Adam Smith (1723-1790) Friedrich Hayek (1899-1992) Milton Friedman (1912-2006)

US Political Parties38 Democrats (blue) Republicans (red) Key US Presidents39 F.D. Roosevelt (“New Deal”) R. Reagan (“Supply-side”) UK Political Parties Labour (red) Tories / Conservatives (blue)

Key UK Prime Ministers40 C. Attlee (“welfare state”) M. Thatcher (“Supply-side”) Fiscal Policies Tax and spend

(deficits are o.k.) Low tax, low spend

(deficits are not o.k.) Fiscal (Tax) Policies Benefit the Poor

(“pump-up”) Benefit the Rich (“trickle-down”)

Monetary Policies Active Passive Trade Policies Protectionist,

Multi-lateral Free-trade, Bi-lateral

Government Regulation High Low


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Appendix B: Correspondence with Professor Steve Keen From: Piepenbrock, Garry (JMG) <[email protected]> Sent: 21 November 2018 21:57 To: Keen, Steve <[email protected]> Subject: Thank You Dear Professor Keen, My name is Garry Piepenbrock and I am a 15-year-old student at Eton College who is interested in economics and politics. I wanted to thank you for coming to Eton last night and sharing your ideas with us. As I am interested in learning both orthodox and heterodox views of economics and politics, I found your talk interesting. I am particularly interested in system dynamics, and have begun to use it in my Eton essay prize competitions, for which I have been fortunate to have been commended. Although I am only at the stage of developing causal loop diagrams (and not yet in maths modelling using stocks and flows), I have still found it to be powerful in showing how variables relate and change over time. Last year, I wrote an essay on populism and globalisation, and I am currently writing an essay on the relevance of Marxism in the 21st century. Both essays attempt to use system dynamics thinking to develop insights into these issues. As there is a 1,500 word limit on these essays, it is sort of challenging to explore these topics in any depth. I saw on your Wikipedia entry that you are influenced by Marx, and I attach my draft essay on Marxism in case you had the time or interest to read it. Your thoughts and critique would certainly be welcomed. Either way, thank you once again for taking the time to come to Eton to share your interesting work with us. Kind Regards, Garry Piepenbrock


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From: "Keen, Steve" <[email protected]> Subject: RE: Thank You Date: 21 November 2018 at 21:46:55 GMT To: "Piepenbrock, Garry (JMG)" <[email protected]> Cc: "[email protected]" <[email protected]> Dear Gary, Thank you for your feedback and your essay; I skimmed through it and I am impressed by your fluency with system dynamics methods (it also seems that you chose your parents well!). Marx is one of my interests as well, and as you might expect, I take a non-standard approach to him. I don't think you need to read my works for this particular essay, which is quite innovative on its own merits. But you might find even more affinity between Marx's analysis as I perceive it and system dynamics than you found with more conventional perspective on Marx. The model that I showed last night, of business cycles leading to a financial crisis, was originally built on a system dynamics interpretation of a verbal model of cycles by Marx in Chapter 25 of Volume 1 of Capital BTW. I've included that model in my Minsky software (which you can download from https://sourceforge.net/projects/minsky/), in several different forms. I've also cc'd my other email address, [email protected], since this email will cease being valid next year when I retire from Kingston University. All the best for your future studies, and please feel free to get in touch with me in future. Best, Steve

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