Friday 18 May 2018

The Preconditions of Socialism: a Critical Review (iii)


After a week’s pause, it’s time to go back to Preconditions. Last time we examined that book’s general content and its Cold War re-discovery.

Suppose the reader, intent on saving him/herself a time-consuming engagement with Bernstein’s “scholastic” (his own term) argument decided instead to jump straight in Chapter 3 of Preconditions (2 of Evolutionary) where he makes his empirical argument.

Although perhaps unfamiliar with details, the reader is, of course, aware of Bernstein’s general intent, and particularly of what his final goal (pun intended) is: he is there to fell Marxism, much like a logger fells an old tree [“In principle, Marxism stands or falls with this theory” (p. 12)]

In section b of that chapter (P3§b E2§b) after presenting his statement of what Marxism explains, Bernstein asked himself the following question: “Now, is all this correct?” (p. 57, "Now, is all that right?" in Evolutionary).

I’ll quote the whole paragraph immediately following that question, where he answers it:
“Yes and no. It is correct, above all, as a tendency. The forces described exist, and they operate in the given direction. And the processes are also taken from reality. The fall in the rate of profit is a fact, the occurrence of overproduction and crises is a fact, periodic destruction of capital is a fact, the concentration and centralisation of industrial capital is a fact, and the increase in the rate of surplus value is a fact. So far, the account remains, in principle, unshaken. If the picture does not agree with reality, then it is not because anything false has been said but because what is said is incomplete. Factors which have a limiting effect on the antagonisms described are either completely ignored in Marx or are, though dealt with here and there, later abandoned when the established facts are summed up and compared, so that the social effect of the antagonisms appears much stronger and direct than it is in reality.”
Setting aside Bernstein’s own astonishing earlier extended admission (P3§a/E3§a) about exploitation in the Marxist sense of the word of surplus labour being “clearly evident” (p. 50) before capitalism and even at the beginning of capitalism (for example, “when the slave had to produce for exchange, he was a simple surplus labour machine” and that “it never occurred to the rich of that epoch to represent their wealth as the fruit of their own labour”), that paragraph seems fairly clear: it would appear that in empirical, factual terms Marxism, in Bernstein’s critical appraisal, does okay, yes?

I am not the first to notice that: Bernstein’s Marxist critics and at least one of his British supporters, Austin Harrison, did: “Bernstein attacked the ‘surplus-value’ theory— though he admitted that its basis was, in the main, correct”, he wrote.

It seems that was the takeaway Thorstein Veblen, one of the great names of American Institutional economics and himself a critic, arguably close to revisionism/reformism, mistakenly found in Voraussetzungen, which he read in German.

Writing in 1906 Veblen opens his famous "The Socialist Economics of Karl Marx and his Followers, part 1" (part 1, part 2), with this paragraph:
The system of doctrines worked out by Marx is characterized by a certain boldness of conception and a great logical consistency. Taken in detail, the constituent elements of the system are neither novel nor iconoclastic, nor does Marx at any point claim to have discovered previously hidden facts or to have invented recondite formulations of facts already known; but the system as a whole has an air of originality and initiative such as is rarely met with among the sciences that deal with any phase of human culture. How much of this distinctive character the Marxian system owes to the personal traits of its creator is not easy to say, but what marks it off from all other systems of economic theory is not a matter of personal idiosyncrasy. It differs characteristically from all systems of theory that had preceded it, both in its premises and in its aims. The (hostile) critics of Marx have not sufficiently appreciated the radical character of his departure in both of these respects, and have, therefore, commonly lost themselves in a tangled scrutiny of supposedly abstruse details; whereas those writers who have been in sympathy with his teachings have too commonly been disciples bent on exegesis and on confirming their fellow-disciples in the faith.” (Incidentally, in the second paragraph Veblen defends Marxism against Eugen von Böhm-Bawerk's criticism!)

I suspect neoclassical economists, constantly (and justly) pilloried for failing to predict the GFC or the effects of globalisation, even in tendential, approximate, general terms, would be happy if their critics expressed similar feelings. (Sorry, professors).

How, then, one fits that with Bernstein’s avowedly anti-Marxist stance? Because, make no mistake, that’s what people like Harrison (“the tendency was unmistakable”; Marxism was “in itself untenable”), Sidney Hook (“history had falsified them”), Noah Smith, and Matt loved about it.

I’ll ask readers to consider that carefully, at their leisure. Check the online version.

To understand that one needs to read the two paragraphs originally included in Preconditions but left out in Evolutionary as I mentioned earlier in this review. When they are ready, please continue reading below.

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Now, I’ll introduce part of the data Bernstein presents a couple of pages later (p. 59), in P3§b (E2§b), to whet readers’ appetite.

This is the first data item, in German marks, apparently for 1899. I say apparently because it's undated in Preconditions; the date, however, was included in Evolutionary, where they appear, not as tabulation, but as a text passage with the average capital figures converted to British pounds:

English Sewing Thread Trust
====================================
                             average
Equity type        Owners    capital
                             (marks)

------------------------------------
Original shares     6,000      1,200
Preference shares   4,500      3,000
Debentures          1,800      6,300


Trust of Fine-Cotton Spinners
====================================
                             average
Equity type        Owners    capital
                             (marks)
------------------------------------
Original shares     2,904      6,000
Preference shares   1,870     10,000
Debentures            680     26,000


Additionally he mentions the Great Manchester Ship Canal plus two other firms, without presenting data. (Bernstein never explained why he converted from pounds to marks, at the rate of 20 marks/£, but one may presume he did that for the benefit of his German readers)

It's evident Bernstein considered that data important for his analysis, as he additionally went to great lengths to introduce it, regretting that similar studies had not been extended to more joint-stock companies.

From that data Bernstein concludes:
[T]he number of shareholders and their average holding of shares have seen a rapid growth. Altogether the number of shareholders in England is estimated at considerably more than a million, and that does not appear extravagant if one considers that in the year 1896 alone the number of joint-stock companies in the United Kingdom ran to over 21,223 with a paid-up capital of 22,290 million marks”. (My emphasis)
That’s all good and well, although a closer examination should reveal some details. Without going now into some well-known peculiarities of statistical wealth distributions (which more technically-minded readers should have little difficulty understanding: average), I'll mention two here.

First detail. A prominent economist has recently claimed that Marxists opposed Bernstein because he “had the temerity to argue that wages were increasing” (I’ll leave the origin of that and another anonymous quote for the next post). That data provide no evidence whatsoever to support conclusions like that. Those are financial asset levels; wages are flows. As a matter of fact, Bernstein just isn’t particularly interested in wages.

By 1899 the total British population, according to the ONS (XLS), was 40,774,300 people. Bernstein was writing about 2.5% of the population (4.9% if his vague “considerably more than a million” means two millions). He was writing about a tiny minority (this is another clue about where his argument leads to). Against another of Bernstein's commentators, it's hard to imagine that data meaning that “The poor were not becoming poorer and the rich, richer”

Which raises the question: why on earth would that falsify Marx's predictions?

With variations, the same applies to all the wealth/income data in Preconditions/Evolutionary.

His readers’ misunderstandings, of course, are no conclusive proof of Bernstein’s errors: maybe they did not read him carefully. But there's another possibility (in fact, a better explanation): as in the previous section, here too Bernstein’s labyrinthine argument (in Harrison's apt description) induces confusion in his readers, particularly if they are not careful enough and accept a priori his conclusions at face value. Text missing in Evolutionary but included in Preconditions can explain that, too.

But there is a second “detail” in that data, which not for obvious is less fundamental: wouldn’t one need at least one previous point of comparison to conclude from those figures that “the number of shareholders and their average holding of shares have seen a rapid growth”?

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Unfortunately, one cannot understand that chapter in isolation, as I hoped.

If one re-reads the comments made on Bernstein’s work, one cannot but notice something missing: with just one exception (Jack Fitzgerald) his commentators, particularly those sympathetic to him, barely mention his data. Beyond something like “the data falsify Marxism” his supporters seldom offer anything. The few who incautiously venture into that, like those two anonymous commentators above, seem to run swiftly into shaky ground. (Yes, last week I intentionally sent my illustrious but sloppy anti-Marxist readers on a wild goose chase).

I believe that can be explained: an assessment of the empirical argument of Preconditions requires assessing previously his “scholastic” argument. One needs to “decipher” step-by-step, so to speak, Bernstein’s twisted, self-contradictory reasoning: there are many leaps of logic in it, many unstated assumptions (or sleights of hand, if you prefer). My initial hopes of avoiding that quagmire were dashed; time-consuming, soul-crushing, and unpleasant as it is, there is no way around it.

Having said that, in the next two posts I'll finally undertake a preliminary assessment of Preconditions, for those less obsessive than me about whys. I can advance that the argument before P3 (E2) was reverse-engineered to disqualify Marxism. Forced to admit Marxism's ability to describe reality, Bernstein disqualifies that ability as merely a tendency. Thanks to Preconditions this can be proven beyond reasonable doubt. The proof, lengthy and laborious, will come after the preliminary assessment.

At any event, today's post shall help readers understand both my journey through Preconditions and my argument in the following posts.

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As a bonus, I'll issue a fun challenge to the readers (advice to illustrious but sloppy anti-Marxist readers: engage your brains as you read, don’t just smile in ovine agreement to every putdown, try to actually understand what the guy is saying). This is your task:
  1. Locate the equivalent of that long Bernstein quote in Evolutionary (E2§b).
  2. Write a list of the things Bernstein admits are facts.
  3. Go back to E2§a.
In the first four paragraphs of E2§a you'll find Bernstein contradicting himself. One of the items in your list which he admits as fact in §b, he claimed in §a a little earlier is mere abstraction, not fact. (The solution in the next post)

Happy hunting!

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