For many the fall of the Berlin Wall consigned Karl Marx (1818-1883) and his writing to history. The Communist states that took Marx as their inspiration had not delivered freedom or prosperity for their workers. The Communist approach to the economy just hadn’t worked and Marx’s reputation as an economist was in shreds.
But in the last few years, something strange has happened. It’s as if the global financial crisis has brought Karl Marx back from the dead. His key insight that capitalism was inherently unstable and would lurch from crisis to crisis as society became increasingly unequal seems more relevant than ever.
In the final part of Masters of Money (previous episode were on Keynes and Hayek) Stephanie Flanders gets to grips with Marx’s extraordinary economic thesis, separating what he actually wrote from what was enacted in his name.
Marx divided the world into bosses and workers. For him, they would always be at odds – and that continual battle is a recipe for repeated, worsening crises. Bosses squeeze what they pay workers in their eternal search for profit. But in the end the crisis comes when those squeezed workers don’t have enough money to buy what bosses are trying to sell them.
Paradoxically, Marx was also a great admirer of capitalism. Among the programme’s many surprising revelations, Stephanie Flanders shows how The Communist Manifesto contains paeans of praise to capitalism and all it has achieved. Marx resisted calls for an immediate armed revolution of the workers. Instead he believed that only when we’d got everything we could out of capitalism could we afford the revolution.
Flanders examines the Marxist explanation for the crisis we’ve just seen. She shows how capitalism is surprisingly adept at "solving" problems but only by shifting them from one place to another. When large sections of the population weren’t being paid enough to support demand, the capitalists invented consumer credit so people could carry on spending even if they did not have the money. Therefore the economy stayed afloat and the capitalists continue making profit.
But capitalism is only ever as strong as its latest temporary fix. Eventually, say the Marxists, the system will run out of road.
Stephanie Flanders explains how Marx’s world view grew out of the 19th century Industrial Revolution that was unfolding around him. It was a time where many workers lived and worked in appalling conditions and she asks if his analysis can still be relevant in the 21st century where the distinction between worker and boss has become blurred. Today we invest in pensions and shares and many of us are self-employed.
Marx was right to see capitalism as inherently unstable – and often unfair. Keynes and Hayek saw that too. But Marx was the first and unlike them – he didn’t think we should find a way to live with it
With contributions from P J O’Rourke, Nigel Lawson, Nobel Laureate Joseph Steiglitz, Sir Mervyn King, Dr Madsen Pirie and Prof David Harvey the programme provides a provocative and intelligent analysis of one of the most controversial but undisputed giants of economic theory.
The programme concludes by observing that capitalism has lifted millions out of poverty in China and the developing world but for many ordinary people in the West, the system has not been working at all well. Stephanie Flanders argues that what is of value in Marxism is its reminder that if capitalism doesn’t work for everyone, it might not work at all.
Masters Of Money: Marx will be shown on BBC Two. We'll bring you transmission details when they are announced.