Friday, December 18, 2020

 

Notes from Session 2 discussion on Bastiat and Carey, 17 December 2020

Marx summarised his take on Bastiat and Carey briefly in a section of a letter to Engels of 2 April 1858 where Marx summarised the ideas that would later appear at the end of chapter 6 of Capital volume 1.

If we look at capitalist society just as "the market", without taking into account that some commodities in it (money, labour-power) work differently from others, then we deceive ourselves.

"Simple circulation, considered as such - and it constitutes the surface of bourgeois society in which the underlying operations which give rise to it are obliterated - evinces no distinction [i.e. of status, power, etc.] between the objects of exchange, save formal and evanescent ones.

"Here we have the realm of liberty, equality, and of property based on 'labour'. Accumulation, as it appears here in the form of hoarding, is merely greater thrift, etc.

"On the one hand, then, the fatuity of the economic harmonists, modern free traders (Bastiat, Carey, etc.) [i.e. people who argued that 'pure' market economics would bring equilibrium and general welfare] in upholding this most superficial and most abstract relation of production ['of production'? but that's what Marx writes] as their truth, as against the more advanced relations and their antagonism...

"While everything may be 'lovely' here, it will soon come to a sticky end and this as a result of the law of equivalence". [Marx means, I think, as a result of the basic value relations, not as a result of secondary distortions, etc.]

Both Bastiat and Carey argued that "pure" capitalism was a harmonious and pretty much ideal economic system.

Both of them, however, criticised the actual capitalist society they lived in.

Bastiat argued that the high-tariff protectionist policies of France under the "July monarchy" (1832-1848) warped capitalism there.

Carey argued that capitalism in the USA was warped by having not enough protectionist tariffs in US to escape being warped by the influences of the world market dominated by British capital.

The USA had tariffs, mainly as a convenient way of raising government revenue, from the start; but from 1846, and especially from 1857, they were lowered. They were raised again from 1861 and remained high for a long time.

We talked about the actual level of industrial development in the USA then. The USA was then still predominantly a country of small farmers, much less industrially developed than the UK. In 1820, 70% of the workforce of the USA was in agriculture, as against 37% in the UK; in 1870, 38% USA, 16% UK. Coal did not surpass wood as a source of energy in the USA until the 1880s.

We also talked about whether protectionist policies helped the USA's industrial advance in the later 19th century. It was suggested that we could estimate an answer by comparing the USA to Canada. But Canada (like Australia), although part of the British Empire, in fact developed tariffs against British imports just as the USA did.

Marx had nothing special to say about that. His concern was not to determine what government policies best developed capitalism, but to unpick Bastiat's and Carey's critiques of actual capitalism.

Angus Maddison puts that quite crisply:

"As Marx was not interested in the survival of the capitalist system, he was not really concerned with economic policy, except in so far as the labour movement was involved. There, his argument was concentrated on measures to limit the length of the working day, and to strengthen trade union bargaining power. His analysis was also largely confined to the situation in the leading capitalist country of his day - the UK - and he did not consider the policy problems of other Western countries in catching up with the lead country (as Friedrich List did [a German protectionist economist]). In so far as Marx was concerned with other countries, it was mainly with poor countries which were victims of Western imperialism in the merchant capitalist era."

In that last sentence, Maddison will have had in mind this passage from Marx's Capital:

"The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalised the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation..."

We discussed whether free trade is the "natural" regime of capitalist development. Natural? Maybe not. But standard, or default, maybe.

By the early 19th century tariffs on imports had long been the major and most convenient source of government revenue for many governments. They had also been "ideologically" supported by mercantilist proto-economic theory, which held that a country's wealth was measured by its stocks of precious metals, and therefore the country should restrict spending n imports as much as it could.

David Ricardo, whom Marx praised as giving "the most perfect expression" of "classical economics", argued in contrast that through "comparative advantage" two countries would in general both benefit from freeing trade between them. They would do so even if the two countries were on different levels of development, and all commodities could be produced cheaper in country A than country B. Free trade would lead to country B specialising in the commodities where its disadvantage was least, and country A specialising in those where its advantage was most, and greater overall output for the same effort.

https://en.wikipedia.org/wiki/Comparative_advantage

Volumes upon volumes have been written on the hidden assumptions in Ricardo's argument and where it falls down (which of course in many circumstances it does). Marx was not really concerned with those issues. He did not consider Ricardo to have preached capitalist harmony. On the contrary, he commented: "Mr Ricardo commences his celebrated work on the principles of political economy with the principle that the three fundamental classes of society... viz: the owners of the land, the capitalists, and the wage labourers, are forming a deadly and fatal antagonism" (The Crédit Mobilier, People's Paper, 7 June 1856). As far as I know he never specifically disputed Ricardo on comparative advantage.

Marx accepted in general that free trade would develop capital faster, though also that "nursery tariffs" might work to help a country get industries reach take-off point without being stifled early on by world competition. In general both he and socialists at least through to the time of Lenin, Trotsky, Luxemburg, etc. favoured free trade against protection.

But that was not because free trade was better advice to bourgeois governments. It was because both free trade and protectionism, under capitalism, would turn against the working class and against poorer countries, but free trade would in general allow a freer and fuller development of the contradictions of capitalism, leading to class struggle and towards socialism.

Marx had stated this view in his Speech on the Question of Free Trade" of January 1848. In later years Marx referred to few of his earlier writings. That speech on Free Trade was one of the few he cited as important and valid, alongside The Poverty of Philosophy and the Communist Manifesto.

The Anti-Corn-Law League in Britain, from 1838, had been the first great bourgeois mass-mobilising political movement in history, campaigning for the repeal of the tariffs on corn imports. It ran alongside the working-class Chartist movement, which generally favoured free trade, but intervened in Anti-Corn-Law mass meetings to raise specific working-class demands, setting the model which inspired Marx's attitude.

In 1846 the Corn Laws were repealed, and in 1853 Britain repealed most other tariffs. Britain then for decades until World War 1 had a "one-sided" free trade policy, imposing no tariffs on imports from any country. Britain's bourgeois economists argued that the cheaper imports would benefit British capitalism whatever tariffs other countries might impose on British exports. There was a short period in the 1860s when free trade began to spread widely in Europe, but in the later 19th century countries other than Britain shifted to tariffs, not as "nursery tariffs", but to protect established industries.

Marx lived in Brussels from when he was expelled from Paris in early 1845 to the outbreak of the revolutions in early 1848. Engels was there too most of that time. They were active in the Communist Correspondence Committee, a mostly emigré group which later merged into the Communist League for which Marx wrote the Communist Manifesto.

In September 1847 an international Free Trade congress was held in Brussels. Presumably it was inspired by the British free-traders' victory against the Corn Laws. Bastiat was one of the leading figures from France there. Marx went to intervene. He was unable to get called to speak, though his comrade Georg Weerth was called. Marx then wrote up what he had planned to say and delivered it as a speech to the Democratic Association in Brussels in January 1848.


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