We've mostly learned that Marx was wrong. The fact that capitalism was prone to crises, i.e. the business cycle, was a familiar fact by the time Marx wrote Capital. Marx argued that these derived from the fact that in capitalism capital could only come from impoverishing workers, and once capitalism ran out of workers to impoverish, time would run out and the whole system would collapse. Pretty clearly that's not what happened, and whatever the many flaws of capitalism it led to rising living standards. Even now, when inequality has increased in the US, living standards have risen for large sectors of the work force (software developers, for example) while it has stagnated for others. So the central prediction of Marx has failed to come to pass.
We also understand the business cycle in a way that Marx didn't. It's not really his fault -- Capital is 150 years old -- but we have much better explanations of the business cycle, thanks to John Maynard Keynes. We now know that money and banking is central to the cycle, and that the government can act to ameliorate the cycle. The financial crisis of 2008 essentially recreated the starting conditions of the Great Depression, and even though the government response was far from optimal (there was lots of talk of "expansionary austerity"), we had nowhere near the disaster of the Great Depression.
We also understand economic growth better than Marx did. In Marx' day, the idea was that capitalists would steal from the workers to build factories, and then once this process was over the final crisis would hit. He did not know the endless march of technological advance that would follow. (To be fair, how could he? No one can see the future.) We know from Robert Solow's research on growth theory that most of the rise in output is not from building factories, but from technological advance.
Marx also didn't really understand the role of finance in the economy. Since capital can only come from worker exploitation, there's no role for savings or investment. You can see how the communist economies struggled with this. The only idea they had for funding development was expropriation, so they would just have the state do the expropriating. (This is the source of the criticism of the Soviet Union and Maoist China for being "state capitalist"). There's no role for people saving for the future. TIAA/CREF and the Norwegian wealth fund cannot exist. There's no role for investors trying to diversify risk. There's no role for entrepreneurs trying to raise money to fund future technological advance. That is why when China switched to capitalist development, it averaged 6% economic growth for like 50 years. Strikingly, they still teach Marx in schools in China, but they didn't become the world power they are today until they started ignoring him.
> He did not know the endless march of technological advance that would follow.
This is a bizarre claim. He absolutely predicted this, it was a huge focus of most of his work and is central the 'tendency for the rate of profit to fall'. It is also one of the essential parts of how surplus value is extracted. The common notion is simply that factory workers get paid less than the value of their labor but this is only a part of how surplus value is taken. Capitalist also do this by raising the quality of life but at a slightly slower rate the efficiencies that they benefit from in the production process, allowing them the extract surplus value through both consumption and production.
So much of Capital and Grundrisse is about the relationship between technology and capital its hard to imagine that you have even passing understanding of Marx and can make a comment like that.
> Marx also didn't really understand the role of finance in the economy.
Another very strange claim since a good amount of Capital vol. 3 deals with "Fictitious capital" and Marx is quite aware of the increasing role that finance will play in the resolution of periodic crises.
> So the central prediction of Marx has failed to come to pass.
With the increasing instability of our global financial system I think a few years time you'll revisit some of the claims of yours with a bit more skepticism
It's not an argument about Marx until somebody accuses somebody else of not understanding Marx. It's like the national anthem at baseball games.
He didn't predict it. He predicted capital accumulation. The tight relation between technology and capital in Capital is exactly the mistake he's making. You can't explain the increase in output in terms of capital. This is the fundamental insight of Solow's research. With technological advance, the output of the economy becomes larger for the same inputs.
Marx had heard of finance, since it existed by the time he was writing, but he didn't understand it. Otherwise he would have understood that profits do not exist solely because of exploitation. People have time preferences, and risk preferences. People would rather get paid today, and would rather avoid risk. Thus, profits are required to fund projects with long-dated payoffs, or are risky. Take away those profits, and you see those projects go largely unfunded. That's why the China that took Marx' advice was one of the poorest in the world, and the China that ignored his advice makes up 15% of world output.
The instability of the global financial system is overrated. Look how easily the Fed stepped in this summer and stabilized financial markets.
We also understand the business cycle in a way that Marx didn't. It's not really his fault -- Capital is 150 years old -- but we have much better explanations of the business cycle, thanks to John Maynard Keynes. We now know that money and banking is central to the cycle, and that the government can act to ameliorate the cycle. The financial crisis of 2008 essentially recreated the starting conditions of the Great Depression, and even though the government response was far from optimal (there was lots of talk of "expansionary austerity"), we had nowhere near the disaster of the Great Depression.
We also understand economic growth better than Marx did. In Marx' day, the idea was that capitalists would steal from the workers to build factories, and then once this process was over the final crisis would hit. He did not know the endless march of technological advance that would follow. (To be fair, how could he? No one can see the future.) We know from Robert Solow's research on growth theory that most of the rise in output is not from building factories, but from technological advance.
Marx also didn't really understand the role of finance in the economy. Since capital can only come from worker exploitation, there's no role for savings or investment. You can see how the communist economies struggled with this. The only idea they had for funding development was expropriation, so they would just have the state do the expropriating. (This is the source of the criticism of the Soviet Union and Maoist China for being "state capitalist"). There's no role for people saving for the future. TIAA/CREF and the Norwegian wealth fund cannot exist. There's no role for investors trying to diversify risk. There's no role for entrepreneurs trying to raise money to fund future technological advance. That is why when China switched to capitalist development, it averaged 6% economic growth for like 50 years. Strikingly, they still teach Marx in schools in China, but they didn't become the world power they are today until they started ignoring him.