Comments to Karl Marxâs Theory of Capitalism by Guillermo J. EscudĂ©
VĂctor A. Beker[1]
Guillermo J. EscudĂ© is a distinguished economist who has followed the path of leading Argentine theoretical economists such as Julio H. G. Olivera and Rolf Mantel. The book we comment is dedicated to the memory of the former (Guillermo J. EscudĂ©. Karl Marxâs Theory of Capitalism. Exposition, Critique, and Appraisal. ISBN 978-620-4-18468-5. 2021 LAP LAMBERT Academic Publishing, 590 pages).
EscudĂ© endeavors to make an exhaustive exposition of Karl Marxâs theory of capitalism as it is presented in Capital, correcting some imprecision and approximations owing both to Marxâs lack of mathematical training and to the inexistence in his time of some mathematical tools âsuch as the theory of Perron and Frobenius on non-negative square matricesâ that facilitate a clearer exposition of his theory.
After an introduction to the philosophical and methodological foundations of Marxâs works in Part I, including an exposition of his âmaterialist conception of historyâ, EscudĂ© dedicates the 15 chapters of Part II to a detailed presentation of Marxâs theory of capitalism.
The author covers a large portion of the themes addressed in Capital, such as Marxâs theory of labor-value and its relation with exchange values and prices, his monetary theory, his theory of surplus value, his theory of âprimitive accumulationâ, the turnover of capital, the roles of financial capital, commercial capital, and ground rent, and the âlawsâ of capitalist accumulation.
In Part III, which comprises the following 3 chapters, EscudĂ© develops his critique of Marxâs theory, especially to his theory of surplus value and his interpretation of entrepreneurial work. He dedicates a whole chapter to the comparison between the basic structures of Marxâs theory of capitalism and Walrasâ theory of general equilibrium under âperfectly free competitionâ. For this he imposes restrictions on the generality of Walrasâ setup so as to adapt it to the class structure of Marxâs theory and puts it in the same type of dual matrix equations setup he uses to express Marxâs various models: a âquantities systemâ that includes the quantities of commodities produced and the populations of the social classes involved, and a âprices and incomes systemâ which is its dual. Whereas Marx (and Classical economists) used exogenously given consumption baskets, Walras was able to make them endogenous by finding a way to model preferences, enabling him to include landowners and their rents very neatly. However, EscudĂ© highlights that the advantages of Walrasâ theory were compensated by some disadvantages since Marx outlined a more general framework for certain fundamental aspects that escape âgeneral equilibriumâ. This appears when he models Marxâs theory of the industrial cycle. There, unemployment (or the âindustrial reserve armyâ) is normally positive and varies inversely with capitalists hoarding, i.e., the portion of the capital they own but do not invest, keeping it as a reserve of value that they move with discretion and are prime movers of the cycle. EscudĂ© suggests that Keynes would have profited by a better understanding of Marxâs theory (and by referring to Capital instead of the theories of Silvio Gesell in his General Theory).
Finally, the two chapters of Part IV of the book address the political praxis of Marx and Engels and contain both an exposition and a critique of their political project. A last chapter is dedicated to some final reflections.
Among the contributions of EscudĂ© is how he deals with the so-called âtransformation problemâ, i.e., how to relate the labor-values of commodities âused throughout Book I of Capital merely as a simplifying assumptionâ to the production prices developed in Book III (which are the equilibrium prices before the introduction of absolute ground rent, which would require a âmodificationâ to such production prices. EscudĂ© shows that Marx did not get to formalize this âmodificationâ although he did point to the need to do so. He also shows that Marxâs approximate formulas for production prices and global profit rate are a first step in an algorithm that quickly converges to the true production prices and global profit rate given by the correctly formulated equation system of prices and incomes.
As previously mentioned, EscudĂ© critically analyzes Marxâs way of addressing the capitalist entrepreneur. He finds a contradiction between the fact that Marx recognizes in his textual analyses the directing and planning work of the entrepreneur, on the one hand, and the absence of this labor in his analytical apparatus, on the other, both in his theory of surplus value (to which EscudĂ© refers to as the âesotericâ portion of Marxâs theory) and in his model of equilibrium prices and wages (the âexotericâ portion of Marxâs theory). Thereby, he discards the theory of surplus value as erroneous in its basic assumptions and shows how the âexotericâ part of the theory can be modified if the work of the entrepreneur (or corporate executives) is included, as well as the retribution he receives on account of not only his (planning, organizing, commanding and controlling) work but also for his bearing non-quantifiable (and hence non-insurable) risk due to the uncertain environment he works in. EscudĂ© shows that this was reflected in the ideas of economists such as Cantillon, Turgot, and Ramsay, of which Marx was well aware of but discarded before they were not compatible with his theory of surplus value. Of course, such modifications lead to conclusions diametrically opposite to those of Marx: âOnce we formally recognize that capitalist entrepreneurs make a (fundamental) contribution to the productive process through their exertion, the idea that they can be dispensed with is destroyed, as well as the conception that the income of entrepreneurs and owners is based on an unpaid portion of the labor of wage workers (p. 445).â
As a complement to this analysis, EscudĂ© dedicates a whole chapter of his book to the analysis of the treatment of entrepreneurial work in the history of economic thought, starting with the previously mentioned authors (Cantillon, Turgot, and Ramsay), as well as Smith and Ricardo, and also Walras, Edgeworth and Cassel, to conclude with Schumpeter, Knight, Berle and Means, Coase, and Scitovsly. This entails a notable and original contribution to the history of economic thought, sinking the scalpel in each of these authorsâ works and extracting his ideas on the economic role of the entrepreneur.
Finally, the author analyzes how âMarxâs millenarian and utopian conceptionâ was applied in the Russian and Chinese revolutions of the 20th centuries. His main conclusion is that âin the exclusively state-run economy there tends to predominate a logic of political bureaucratic competition between cliques that is only held in check by an even tighter hierarchical control that weakens initiative and in the long run is no match for the flexibility attainable by Capitalismâ (p. 573). According to the author this explains the reintroduction of capitalism (i.e., private capital and wage labor in private firms) both in Russia (and other countries that formed the Soviet Union) and in China. This leads him to conclude that âThe desideratum of the 21st century is no longer Capitalism vs. Communism but what kind of Capitalism and what kind of popular participation in the political process (democracy) is to existâ (p. 573).
In summary, we are in the presence of a book that dissects Marxâs theory of Capitalism by combining a masterly handling of analytical economics with a profound knowledge of the contributions of the majority of scholars that have shaped economics, a combination that is rarely seen and that does not fail to impress the reader.
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