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Refreshing Incoherence in Neoclassical Economic Theory Research Community: According to Marxists, capitalism promotes profits without any concern for developing people. If the capital and infrastructure of a community is aging, capital will decide to move away without any concern for the lives of community workers. People are unessential and communities are ignored. Relations destroy but goods are produced and worshipped. It makes sense, therefore, to develop a system that places higher weight on developing people and promoting strong communities. However, the serious problem for Marxists lies in maintaining the social planning along with the individual freedom, the ultimate end to be achieved by Marx: “…in communist society, where nobody has exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have mind, without ever becoming hunter, fisherman, herdsman or critic” [Marx and Engel (1967), p. 54] This passage contains two crucial facts [Carter (1988)]: (i) it is the individual who decides his/her own activity as expressed by ‘just as I have mind’, and (ii) ‘society regulates the general production’. The question is to reconcile the antagonism between (i) and (ii). 6 Capitalist Defense against Marxism Marx was surely a profound thinker who won legions of supporters around the world. But his predictions have not withstood the test of time. Although capitalist markets have changed over the past 150 years, competition has not devolved into monopoly. Real wages have risen and profit rates have not declined. Nor has a reserve army of the unemployed developed. We do have bouts with the business cycle, but more and more economists believe that significant recessions and depressions may be more the unintended result of state intervention (through 6 See Carter (1988) for a discussion on this issue. PAKISTAN BUSINESS REVIEW JULY 2011 216
Research Refreshing Incoherence in Neoclassical Economic Theory monetary policy carried out by central banks and government policies on taxation and spending) and less an inherent feature of markets as such. Socialist revolutions, to be sure, have occurred throughout the world, but never where Marx’s theory predicted— in the most advanced capitalist countries. On the contrary, socialist revolts have occurred in poor, so-called Third World countries. The apparently higher standards of living and technological advancements in capitalist social system are regarded as a prima facie evidence of the supremacy of capitalist reality over Marxism by neoclassical economists [See Friedman (1980) and (1982) for ample examples]. But, when the defenders of capitalism frequently compare the Socialist East with the industrialized West, they choose the richest capitalist countries for comparison. This is analogous to defending feudalism by drawing attention to the happy condition of the nobility, while forgetting that their wealth and leisure are the results of the poverty of their serfs. Similarly West, when viewed as far from self-sufficient and a part of an international economic system, includes the exploitation of the Third-World as a basis for the high standards of living experienced in the developed nations, or at the very least is seen to induce underdevelopment in other parts of the world [Carter (1988)]. When this whole international exploitive capitalist system is compared with socialism, capitalism does not sound so well. Most troubling to present-day Marxism is the ongoing collapse of socialism. Revolutions in socialist countries today are against socialism and for free markets. In practice, socialism has failed to create the non-alienated, self-managed, and fully planned society. Real-world socialism in the twentieth century was unsuccessful in emancipating the masses. In most cases, neoclassical economists believe, it merely led to new forms of statism, domination, and abuse of power. Marx’s theory of value, his philosophy of human nature, and his claims to have uncovered the laws of history fit together to offer a complex, yet grand vision of a new world order. If the first three-quarters of the twentieth century provided a testing ground for that vision, the end of the century demonstrated its somewhat utopian nature and apparent 217 PAKISTAN BUSINESS REVIEW JULY 2011
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