Refuting Dr. Flynn And “Economics For Dummies” On Marx

The other day I was looking through my book shelf and happened to find the first book I ever read on economics: Economics For Dummies. I felt nostalgic for a time before I had a YouTube account and was the target of every right wing nut job on it. I had a flip through for old times sake and thought I’d reread some passages that actually began my journey into the subject. The book was as much as I remembered, most economics explained in plain English. A while into my trip down memory lane I came across the section where author, Sean Masaki Flynn, PhD, began to speak about Karl Marx. It was in this particular passage where he claimed he was going to “explain his ideas before discrediting them”. Well, that’s a hell of a claim.

Being a Marxist-Leninist-Maoist there was no way I was going to give up going over his bragging of being able to discredit the most radical and challenging economist of all time. I was quite enthused to find out what kind of “critique” he was going to make. Dr. Flynn is not a libertarian, so I expected a much better argument from him. (Libertarians have been rather dishonest in the economic debate since the global economic collapse of capitalism in 2008. (Actually they always have.)) I was disappointed to find that his criticisms were really vague and not very well backed up, if at all.

As a result I’m dedicating this post to critiquing the section of “Economics For Dummies” on Karl Marx, refuting Dr. Flynn’s claims. For brevity’s sake I will not be posting his entire section on Marx. I will only be posting the parts where he is explaining why Marx is supposedly wrong.

“In particular, he believed that the only capitalists who would survive and whose businesses would grow were those who paid workers the minimum salaries necessary for the workers to survive. Thus, even as productivity and output rose rapidly, workers would endure permanent, grinding poverty out of which they’d never be able to rise except by means of a violent overthrow of the capitalists – an overthrow in which the workers would gain control over the factories.

Marx argued that this violent overthrow would be facilitated by what he saw as an inevitable tendency toward concentration and monopoly. When only one monopoly firm in each industry existed, the workers would find it much easier to revolt and take over the system.

With a century and a quarter of hindsight, we know that Marx was wrong in his economic thinking. In particular, workers’ wages do rise over time – in fact, they rise on average as fast as technological innovation increases productivity levels. That’s because capitalists compete over the limited supply of workers, and wages get bid up as quickly as productivity improvements allow one capitalist to bid higher wages to steal workers away from other capitalists.

In addition, competition does not lead to each industry being dominated by a single monopoly firm, and even if that were inevitably true, governments would still have a strong interest in preventing that outcome. Instead, competition remains robust in most industries, and consequently delivers all the benefits of Adam Smith’s invisible hand.”

Economics For Dummies, pg. 349

What I think he is referring to here, I’m not sure it’s not specific, is the subject of capitalist concentration of capital. Well that did happen, it’s basically impossible to deny it. Of course not a single capitalist entity controls an entire sector of production but there has been a massive reduction in the availability of firms that actually produce. The entire world economy is now dominated by no more than 200 giant companies, the great majority of which are based in the USA. Right now there is basically a handful of automobile manufacturers in the world. At one time there were almost 200 in France alone. A concentration of competition has definitely happened. In addition, Chinese firms produce most of the cheap commodities that are available in the world. A result of this has been a massive deindustrialization of the West, the United States and Canada particularly. I would also add that the emergence of Wal-Mart is sure proof that monopolies exist, in fact the totality of their control is overwhelming. There are now optometrist offices, grocery stores and even doctor’s offices in them as well. They have put untold millions of small local producers out of business as they have taken over entire markets. This one cannot deny.

“The process of monopolisation has reached unprecedented proportions. In the first quarter of 2006 mergers and acquisitions in the USA amounted to $10 billion dollars a day. This feverish activity does not signify a real development of the productive forces, but the opposite. And the pace of monopolisation does not diminish but increases. On November 19-20, 2006 the value of mergers and acquisitions in the USA amounted to a record of $75 billion – in just 24 hours! Takeovers are a kind of corporate cannibalism that is inevitably followed by asset-stripping, factory closures and sackings – that is, by the wholesale and wanton destruction of means of production and the sacrifice of thousands of jobs on the altar of Profit.”

In defense of Marxism, Why we are Marxists

It is just that we in the First World have not yet reached this point. As we can see the situation is actually getting worse as the entire world is falling into recession. Real wages have diminished since the 1970s and the gap between what workers were producing and what they received increased exponentially. So wages are lowering in terms of what they are producing as opposed to what they receive. Another major contributing factor is the shifting of this burden to the Third World where many commodities the working class uses are produced under greater levels of exploitation. These have made those commodities cheaper for the working class in the First World making their living standards more affordable. What really happened here was that a portion of the poverty was transferred to the Third World as to off-set some of the social instability (violent overthrow of the capitalists) that arises as a result. In truth we can see these violent attempts by the working class to relieve themselves of these conditions (grinding poverty).

It is in these areas affected that the return of Marxist (primarily Maoist) revolutionary movements have returned. Philippines, China, Peru, Colombia and many others. The classes didn’t polarize exactly as Marx had predicted, but they have certainly done so (based on the data Marx had at the time he couldn’t know capital would be shifted to the Third World). One merely has to look at the events of Occupy Wall Street to see what could be the beginnings of such upheaval in the First World. One could merely look at Greece in addition.

Dr. Flynn also completely makes a straw man of Marx’ argument of the lowering of wages. At no point did Marx say that wages would be lowered and then never rise for any reason. Nor did he say they would always stay at the minimum wage. This is completely untrue.

“So, in future, the German Workers’ party has got to believe in Lassalle’s “iron law of wages”! That this may not be lost, the nonsense is perpetrated of speaking of the “abolition of the wage system” (it should read: system of wage labor), “together with the iron law of wages”. If I abolish wage labor, then naturally I abolish its laws also, whether they are of “iron” or sponge. But Lassalle’s attack on wage labor turns almost solely on this so-called law. In order, therefore, to prove that Lassalle’s sect has conquered, the “wage system” must be abolished “together with the iron law of wages” and not without it….

…Since Lassalle’s death, there has asserted itself in our party the scientific understanding that wages are not what they appear to be — namely, the value, or price, of labor—but only a masked form for the value, or price, of labor power. Thereby, the whole bourgeois conception of wages hitherto, as well as all the criticism hitherto directed against this conception, was thrown overboard once and for all. It was made clear that the wage worker has permission to work for his own subsistence—that is, to live, only insofar as he works for a certain time gratis for the capitalist (and hence also for the latter’s co-consumers of surplus value); that the whole capitalist system of production turns on the increase of this gratis labor by extending the working day, or by developing the productivity—that is, increasing the intensity or labor power, etc.; that, consequently, the system of wage labor is a system of slavery, and indeed of a slavery which becomes more severe in proportion as the social productive forces of labor develop, whether the worker receives better or worse payment. And after this understanding has gained more and more ground in our party, some return to Lassalle’s dogma although they must have known that Lassalle did not know what wages were, but, following in the wake of the bourgeois economists, took the appearance for the essence of the matter.”

– Karl Marx, Critique of the Gotha Programme, Chapter 2

Marx said that they would find new measures to increase profits, either by increasing the work day or by investing in new machinery. In reality these both happened as well as the exporting of jobs to the Third World where the rate of exploitation is higher (lower wages). In places like these (Foxconn for example) the work day can be as long as 14 hours a day as Marx predicted.

Flynn is implying Marx used Lassalle’s idea of “The Iron Law of Wages”. Often this is used as a strawman against Marx by Libertarians, even claiming that it is Marx’s own theory.

What Marx really said was that the gap between the wages workers would get paid and what profits would be generated would increase. He is describing a higher rate of exploitation, not a lowering of wages. Lowering of wages can happen, but not necessarily. This was aptly demonstrated in the previous chart showing this increase in inequality.

Engels himself didn’t believe in Lassalle’s concept of the “Iron law of Wages”:

“Thirdly, our people have allowed themselves to be saddled with the Lassallean “iron law of wages” which is based on a completely outmoded economic view, namely that on average the workers receive only the minimum wage because, according to the Malthusian theory of population, there are always too many workers (such was Lassalle’s reasoning). Now in Capital Marx has amply demonstrated that the laws governing wages are very complex, that, according to circumstances, now this law, now that, holds sway, that they are therefore by no means iron but are, on the contrary, exceedingly elastic, and that the subject really cannot be dismissed in a few words, as Lassalle imagined. Malthus’ argument, upon which the law Lassalle derived from him and Ricardo (whom he misinterpreted) is based, as that argument appears, for instance, on p. 5 of the Arbeiterlesebuch, where it is quoted from another pamphlet of Lassalle’s, is exhaustively refuted by Marx in the section on “Accumulation of Capital.” Thus, by adopting the Lassallean “iron law” one commits oneself to a false proposition and false reasoning in support of the same.”

– Engels to August Bebel In Zwickau

What he is really saying is that he rejects Lassalle’s concept of the “Iron Law of Wages”, he is saying that he believes in Ricardo’s concept and that Lassalle didn’t understand it. Engels clearly says this is an incorrect conception of the Iron Law of Wages and must be abolished.

Dr. Flynn claimed that wages rise in accordance with technological innovation. They did not rise (as they decreased slightly (as the graph shows)).

There is no correlation between increased productivity (increased productivity is based on more technological innovation) and an increase in wages. This can be aptly demonstrated with the graphs shown earlier that show a comparison of minimum wage in comparison to an increase in productivity (technological innovation).

In part of claiming that workers wages rise over time, he backs this up with the claim that capitalists compete with each other for the labour of workers because there is a limited supply of it. As a result of the labour market functioning just like any other market, the demand for labour would increase the cost of purchasing it. Except that this is never the case. It implies that the demand for labour exceeds the supply of labour. This has never been the case, there is no time when the general amount of labourers has been less than the demand for it. There are rare cases in which a particular highly skilled labour experiences this shortage phenomenon, but not in the whole of the labour market as Dr. Flynn is claiming. This can easily be demonstrated by the fact that there is never a lack of unemployment. The unemployment rate never reaches zero, not even in socialist countries like the Soviet Union, North Korea and Cuba which have exceedingly small unemployment rates were still not able to achieve it. (The unemployment rate in Cuba in 2011 was 1.4%., see sources.)

This can be demonstrated even further when comparing the number of unemployed people to the number of positions available in the work force. This statement by Dr. Flynn is completely untrue and is far below what can be expected by a person with a PhD.

Finally he concludes with the claim that monopolies cannot happen because the state would intervene and prevent it from happening, because the State has an interest in doing so. In reality we can see that this is not always the case. This doesn’t negate the fact that individual politicians have their own personal interests and also implies that politicians can’t be bought off which is ridiculous considering that the entire political system is funded by the capitalist class, in particular the largest ones (finance capital).

It’s true that the day-to-day functions of the government and the elections are paid for by the public, but the hundreds of millions that are spent by the politicians running for office are funded almost exclusively by the finance capitalist class, then large enterprises, the most elite of the elite. By doing this we can see that they wield great control over the government, as was witnessed by the bank bailouts following the Global Collapse of Capitalism in 2008. This can also be proven by showing who were the greatest contributors to both the Democrat and Republican campaigns. (Center For Responsive Politics) & Federal Election Commission

Along with this it appears that Dr. Flynn was implying that Marx had never taken state intervention into account with his economic theory. I’m not positive that is what he is saying, it’s pretty vague and may not being saying it at all. However, considering the intention of this whole section was to “discredit” Marx, I think it’s safe to assume that he was implying it. This is incorrect however, he did write about it in the third volume of Capital.

“This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-dissolving contradiction, which prima facie represents a mere phase of transition to a new form of production. It manifests itself as such a contradiction in its effects. It establishes a monopoly in certain spheres and thereby requires state interference. It reproduces a new financial aristocracy, a new variety of parasites in the shape of promoters, speculators and simply nominal directors; a whole system of swindling and cheating by means of corporation promotion, stock issuance, and stock speculation. It is private production without the control of private property.”

Capital Vol. III Part V Chapter 27.
The Role of Credit in Capitalist Production

In addition to this he also had planned to do it in one of the other books that would make up his view of economics. There were six books originally planned, but he died before he even finished the first one (On Capital). Here is a portion of his letter to Lassalle where he declares his intent to do so.

“Chronologically, this Introduction was followed by a letter Marx wrote to Lasalle on February 22, 1858, where he writes:

The whole is divided into 6 books: 1. On Capital (contains a few introductory Chapters). 2. On Landed Property. 3. On Wage Labor. 4. On the State. 5. International Trade. 6. World Market generally speaking the critique and history of political economy and socialism would form the subject of another work, and, finally, the short historical outline of the development of economic categories and relations yet a third. (Collected Works, vol. 40)”

– Samezō Kuruma, An Inquiry into Marx’s Theory of Crisis

With this I think I’ve aptly demonstrated two things: Firstly, either Dr. Flynn doesn’t know what he’s talking about when it comes to Marxist economic writings, or he’s a liar when it comes to Marxist economic writings. Although I find it quite plausible that he has just merely lied as a function of his position as a bourgeois economist. Their job is quite literally to assault any challenges to the standing economic order. It’s a pity I never come across a legitimate argument against Marx. I think this demonstrates the inherent intellectual weakness of bourgeois economics, an inability to prove superiority through rational debate. Lies and strawmen must always be used against Marx.

It also proves one more thing: an appeal to authority is a true fallacy. This man has a PhD in economics and still didn’t understand Marxist economics, or even some basic labour supply and demand concepts. Or perhaps it just took a Marxist to take an honest look at Marxism.

Dr. Flynn, I hope for a response.

* * *
Value of mergers and acquisitions in the USA 2006

Karl Marx, Critique of the Gotha Programme, Ch. 2

Engels to August Bebel In Zwickau

Ricardo’s Iron Law of Wages

Cuban Unemployment 2009

Capital Vol. III Part V, Chapter 27. The Role of Credit in Capitalist Production

Samezō Kuruma, An Inquiry into Marx’s Theory of Crisis