Marxism and Marginal Utility Economics

Source: Living Marxism, April 1939;
Transcribed: by Adam Buick;
Proofed: and corrected by Geoff Traugh, August 2005.

Recently the editors of Common Sense ^[1] have once more dealt with the “unscientific character” of Marxism by pointing out that:

“Ricardo’s labor theory of value, taken over by Marx and embellished with the theory of surplus value, was abandoned long ago by all but Marxist economists, and a whole branch of ‘marginal utility’ economics developed, of which Marx could know nothing ... that even in the Soviet Union (so far as Five Year Plans go, if not at the Marx-Engels Institute) marginal utility economics have displaced the useless and misleading Marxian economics.”

However, what is brought forward here as an argument against Marxism is in reality only another confirmation of it. Certainly, the Russian state-capitalism, in which class relations are continued, cannot employ the Marxian science, for this science consists of nothing but the critique of those selfsame capitalistic conditions, which characterize Russia and every other capitalistic country. For the purpose of justifying the exploitation of the workers, the inequalities of income, and the accumulation of capital that exists there, the Marxian economic theories are certainly useless. What Marx had said ^[2] of the science of bourgeois economy — namely, that it reached its limits with Ricardo because,

“He consciously made the antagonism of class interests, of wages and profits, of profits and rents, the starting point of his investigation,”

holds equally true for Russian economic “science.” The continued class society forces Russian economic theory to embrace those ideological weapons of bourgeois society which appears as economic theory, and to attempt to destroy even that kernel of truth contained in Classical economy, which served with Marxists as a basis of attack upon the whole capitalistic society.

The development of marginal utility economics is closely connected with the difficulty of the proponents of the classical theory to confute Marxist theories, as both the Classicists and the Marxists based their argument on the same objective value concept. The marginal utility school arose in defense of capitalism, and its apology consisted in the construction of a value concept which justified the prevailing class and income differentiations. The existing inequalities based on the exploitation of labor were explained as an undefeatable natural law of diminishing utility. This theory, as was so well stated by C. E. Ayres ^[3],

“Only undertakes to demonstrate under any given conditions of income distribution the automatic achievement of the maximum total of human satisfaction: the greatest good of all. Even so, this poor-little-rich-girl notion which proposes to balance the surfeit of the rich against the precarious existence of the poor is so extravagantly complacent that most economists have hesitated to give it clear and unequivocal expression.”

Though single concepts of this theory were adopted by economists of other schools, nevertheless, as a general theory, it was slowly abandoned. The Neo-Classicists, for instance, did not bother themselves any longer with questions as to the desirability or the justification of the prevailing economic system: they simply took for granted that it was the best possible one, and merely tried to find means of making it more efficient, a condition which forced them to restrict themselves, as far as market phenomena were concerned, to mere price considerations. The value concept was displaced by a cost-of-production theory, which the Neo-Classicists thought sufficient to explain the existing division of wealth.

However, the question of utility was raised anew in relation to the problem of the allocation of resources in a socialist economy ^[4] and it was pointed out that even with an acceptance of the labor theory of value, the question of demand must be dealt with. It is clear that no society can prevail which entirely disregards the real needs of its people; that production is impossible unless men are able to eat and work.

“Every child knows, too, that the mass of products corresponding to the different needs require different and quantitatively determined masses of the total labor of society. That this necessity of distributing social labor in definite proportions cannot be done away with by the particular form of social production, but can only change the form it assumes, is self-evident.” ^[5]

However, the question of the allocation of resources to meet demand and in the interest of economy as it is raised in modern economic theory has no connection with the simple and direct statement of Marx just quoted, but is determined by class considerations based on a particular form in which the union of labor and the means of production is accomplished.

In Russia, as elsewhere, the means of production are not controlled by the workers but are the monopoly of a special group in society. In the relations of the workers to the means of production, no difference exists between a private property society and a state-capitalist system. The position of the Russian bureaucracy to its workers is exactly the same as that of the individual entrepreneur to his. The first need of that bureaucracy is to safeguard its own position in order to develop industry and agriculture. Whatever else this bureaucracy may do, it has first of all to “plan” its own security, and then to proceed to “plan” life for the rest of the population. This is recognized not only by the present and supposedly “degenerated” Russian bureaucracy, but was clear also to the “founders” of the Russian state-capitalist system.

“As a general rule,” Trotsky has said ^[6], “man strives to avoid labor. The problem before the social organization is just to bring ‘laziness’ within a definite framework, to discipline it, and to pull mankind together ... The only way to attract the labor power necessary for our economic problems is to introduce compulsory labor service ... We can have no way to Socialism except by the authoritative regulation of the economic forces and resources of the country, and the centralized distribution of labor power in harmony with the general State plan. The Labor State considers itself empowered to send every worker to the place where his work is necessary. And not one serious Socialist will begin to deny to the Labor State the right to lay its hand upon the worker who refuses to execute his labor duty.”

After the question of production is thus settled, the question of distribution is easily solved.

“We still retain, and for a long time will retain, the system of wages,” Trotsky pointed out ^[7]. However, “Wages, in the form both of money and of goods, must be brought into the closest possible touch with the productivity of individual labor ... Those workers who do more for the general interest than others receive the right to a greater quantity of the social product than the lazy, the careless, and the disorganizers. Finally, when it rewards some, the Labor State cannot but punish others — those who are clearly infringing labor solidarity, undermining the common work, and seriously impairing the Socialist renaissance of the country. Repression for the attainment of economic ends is a necessary weapon of the Socialist dictatorship.”

The control of production by a particular group in society carries with it their control of distribution. The division of society into rulers and ruled as deemed necessary by Trotsky and as exists in Russia requires, besides a sufficient number of bayonets, an ideology which convinces those who are ruled that their status is natural, unavoidable, and beneficial. Income differentiations and, with this, the formation of additional group interests, becomes an increasing necessity, and is accentuated still more by the political need to preclude a unity of misery against the privileged in society. Because Marxism could be employed only in opposition to such a state of affairs, it had to be ignored, or emasculated in favor of evaluations supposedly based on scarcity, utility, or demands; for behind such terms, not only real but also assumed utility, scarcity, and demand can be hidden and justified. The “utility” of the one or other social function or labor is first of all the “utility” it has for the safeguarding of existing class relations and its corresponding mode of production. Not social needs will determine “utility,” but groups interests. The class structure of society comes to light precisely in its need for such evaluations. Just as little as the privileges of the capitalists results from their “utility” but from the fact that they control the means of production and are thus able to exploit the workers, so little does “utility” explain the privileges of the Russian bureaucracy. Those privileges are also based on the conditions of the control of the means of production by the bureaucracy. A theory justifying class rule and exploitation is necessary in Russia, and its acceptance of the defense theories of capitalism does not, as the editors of Common Sense believe, indicate the faulty character of Marxism, but its continued usefulness in the class struggle of the Russian workers against their present masters.

1. ‘Marx over Europe’, Common Sense, September 1938, p. 4.

2. K. Marx, Capital. Vol I, p. 18.

3. The Problems of Economic Order, New York, 1938, p. 43.

4. Oscar Lange, On the Economic Theory of Socialism, Minneapolis 1938.

5. The Correspondence of Marx and Engels, New York, 1934, p. 246.

6. L. Trotsky, Dictatorship vs. Democracy, New York, 1922, pp. 133-142.

7. Ibid., p. 149.