ECON 4337 Comparative Economic Systems

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ECON 4337 Comparative Economic Systems

• Lecture 4
• February 3, 2009

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The Theory and History of Marxism and Socialism
Karl Marx (1818-1883)?
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The Theory and History of Marxism and Socialism

• The Marxian Worldview
• Karl Marx (1818-1883)?
• Personal history notes
• Hegelian dialectic
• Georg W.F. Hegel German philosopher
• Dialectic
• All phenomena reflect a conflict between
  thesis and antithesis whose opposition
  evolves over time to generate something brand
  new synthesis

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The Theory and History of Marxism and Socialism

• The Marxian Worldview
• Karl Marx (1818-1883)?
• Historical materialism
• Marx Driving force of history is the dialectic
  between conflicting socioeconomic classes
  bourgeoisie (capitalists) and proletariat
  (workers)?
• Forces of production
• Relations of production
• Mode of production

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The Theory and History of Marxism and Socialism

• The Marxian Worldview
• Karl Marx (1818-1883)?
• Class struggle changes the mode of production
  over time
• Revolutionary transformation into socialism
• State ownership, planning, dictatorship of
  proletariat
• Ultimate ideal system communism
• All classes and state disappear

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The Theory and History of Marxism and Socialism

• The Marxian Worldview
• Karl Marx (1818-1883)?
• Labor Theory of Value
• Capital is dead labor, which, vampire-like,
  lives only by sucking living labor, and lives the
  more, the more labor it sucks. (Das Kapital,
  1867)?
• Long run value determined by
• amount of labor used to produce the good
• indirect labor through capital and intermediate
  inputs
• capitalists surplus

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The Theory and History of Marxism and Socialism

• The Marxian Worldview
• Karl Marx (1818-1883)?
• Labor Theory of Value
• Capitalists are driven to accumulate capital in
  order to replace labor with capital
• As labor is replaced with capital, the organic
  composition of capital rises
• As the organic composition of capital rises, the
  rate of profit falls
• Capitalists try to keep up rate of profit by
  exploiting labor more and more

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The Theory and History of Marxism and Socialism

• Revisionism
• Who is a revisionist?
• A socialist who denies the necessity of the
  collapse of capitalism and its violent overthrow
  by a revolutionary proletariat

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The Theory and History of Marxism and Socialism

• Revisionism
• Began after the death of Engels in 1895
• Associated strongly with Germany social
  democratic movement
• Proponents of social reform of capitalist society
  and promotion of participatory democracy to
  achieve gains for the working class
• Not much tolerated by the Soviet socialist state
  and orthodox Marxists

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The Theory and History of Marxism and Socialism

• Revisionism
• Eduard Bernstein (1850-1932)?
• Breakdown of capitalism is no longer inevitable
• Instead of a revolution, voluntary transition to
  socialism
• Mikhail Tugan-Baranovsky (1865-1919)?

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The Theory and History of Marxism and Socialism

• Revisionism
• Karl Kautsky (1854-1938)?
• Working class might achieve a balance of power
  with their class opponents through the growth of
  democracy

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The Theory and History of Marxism and Socialism
Vladimir Illich Lenin (1870-1924)
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The Theory and History of Marxism and Socialism

• Marxism-Leninism
• Vladimir Illich Lenin (1870-1924)?
• Politics of revolution and practical problems of
  governing the first socialist state
• Imperialism The Highest Stage of Capitalism
  (1916)
• Final stage of capitalismMonopoly Capitalism
• 5 characteristics
• In mature capitalist countries, proletariat is
  corrupted exploitation of working class is
  exported to foreign countries ? imperialism

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The Theory and History of Marxism and Socialism

• Marxism-Leninism
• Vladimir Illich Lenin (1870-1924)?
• The theory of uneven development
• Russia as the weakest link

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The Theory and History of Marxism and Socialism

• Marxism-Leninism
• Official Soviet doctrine after 1917
• Refocusing revolutionary expectations on less
  developed countries (China, Cuba, Vietnam)?
• What is to be Done? (1902) 
• The Revolution could not be carried out in
  daylight, but would instead require a secretive
  vanguard of professionals under authoritarian
  leadership. (Idea of a proletarian
  dictatorship)?
• Bolsheviks (majority)?
• Mensheviks (minority)?

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The Theory and History of Marxism and Socialism

• Anarchism
• Founded in 1793 William Godwin
• Without government, people will peacefully
  organize themselves into a harmonious,
  non-oppressive order
• Pierre-Joseph Proudhon, What is Property?
  (1840)?
• linked anarchism with communism
• Prince Michael Bakunin

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The Theory and History of Marxism and Socialism

• Syndicalism
• 1890s
• Society should be run by trade unions
• Influences on both left and right-wing

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The Theory and History of Marxism and Socialism

• Some Divisions of Socialism since 1917
• Trotskyism (Soviet Union)?
• Leon Trotsky
• Need for an international permanent revolution
• Influence on the New Left in the U.S. and Western
  Europe

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The Theory and History of Marxism and Socialism

• Some Divisions of Socialism since 1917
• Titoism (Yugoslavia)?
• Marshall Tito
• Inspired worker-managed market socialism

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The Theory and History of Marxism and Socialism

• Some Divisions of Socialism since 1917
• Maoism (China)?
• Mao Zedong
• Centrally planned command industrialization
• Rural-agricultural development

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• The Socialist Planning Controversy
• 1908 Enrico Barone, The Ministry of Production
  in the Collectivist State
• Walrasian general equilibrium concept
• Collective maximum is solved by a social
  planner (the ministry of production) where the
  cost of production is minimized and price would
  equal the cost of production

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• The Socialist Planning Controversy
• 1920 Ludwig von Mises, Economic Calculation in
  Socialism
• The artificial market of the experimenting
  socialist central planner can never generate
  rational prices because of insufficient
  incentives (profits)?

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• The Socialist Planning Controversy
• 1936 Oskar Lange, On the Economic Theory of
  Socialism
• Most famous theoretical model of market
  socialism
• Central Planning Board (CPB) sets
• producer goods prices
• level of overall investment
• and distributes the social dividend
• Consumers goods are allocated by the market

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• The Socialist Planning Controversy
• 1940 Hayek, Socialist Calculation The
  Competitive Solution
• Decentralized capitalist market is the best
  information transmission system available

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• The Socialist Planning Controversy
• 1980 Janos Kornai, The Economics of Shortage
• State-owned enterprises in a decentralized market
  socialism operate under a soft budget constraint

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• The Theory of Command Socialist Central Planning
  (CP)
• CP appeared in Soviet Russia in 1920
• CP authority Gosplan
• Material balance method
• Total amount of inputs should be just what is
  required to produce the total amount of outputs
  resulting in a general equilibrium

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• The Theory of Command Socialist Central Planning
  (CP)
• 5-year plans
• Input-output matrix
• Ratchet Effect

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• The Theory of Command Socialist Central Planning
  (CP)
• Wassily Leontief Input-output analysis
• Leonid V. Kantorovich Linear Programming

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The Theory and History of Marxism and Socialism

• The Theory of Economic Socialism
• Cooperative (Participatory) Economy
• Third way between capitalism and socialism
• Introduced by Tito in Yugoslavia
• Market socialism
• Vaneks five characteristics
• Criticisms