P2P Foundation » Blog Archive » Mises and the Neo-Marxists: Paleotechnic Blood Brothers?


Sean Gabb

Mises and the Neo-Marxists: Paleotechnic Blood Brothers?

photo of Kevin Carson

Kevin Carson

10th October 2009

In an earlier post,  I argued that we’re experiencing an end to economic growth–not because of an end to progress and innovation, but because progress and innovation are making conventional metrics of “growth” obsolete.  GDP and other conventional metrics of economic “growth” measure the value of inputs consumed to produce a given level of output.  The implosion of capital outlay requirements to undertake production mean that the vast majority of investment capital is becoming superfluous, and that enormous amounts of paper GDP disappear from off the econometric radar.

For this reason the Austrian dogma of von Mises, that the only way to raise real wages is to increase the amount of capital invested, is shown to rely on a false assumption:  the assumption that there is some necessary link between productivity and the sheer quantity of capital invested.  George Reisman displays this tendency at its most vulgar:

The truth, which real economists, from Adam Smith to Mises, have elaborated, is that in a market economy, the wealth of the rich—of the capitalists—is overwhelmingly invested in means of production, that is, in factories, machinery and equipment, farms, mines, stores, and the like. This wealth, this capital, produces the goods which the average person buys, and as more of it is accumulated and raises the productivity of labor higher and higher, brings about a progressively larger and ever more improved supply of goods for the average person to buy.

But this view has been at the heart of most twentieth century assumptions about economy of scale, and an unquestioned assumption behind the work of liberal managerialists like Chandler and Galbraith (see Chapter One of my book Organization Theory,  “Chapter One: A Critical Survey of Orthodox Views on Economy of Scale“).

As demonstrated first by the shift of manufacturing from the old mass-production core to the job-shops of Shenzhen and Emilia-Romagna, and now by the rise of networked garage manufacturers like 100kGarages,  initial capital outlay requirements for physical production are imploding in exactly the same way that Rushkoff described for the information industries — which means that venture capital will lose most of its outlets in manufacturing as well.

For the same reason that the Austrian fixation on the quantity of capital investment as a source of productivity is obsolete, Marxist theories of the “Social Structure of Accumulation,” with long-wave investment in some new capital-intensive infrastructure as an engine of growth, are likewise obsolete.  Technical innovation, in such theories, provides the basis for a new long-wave of investment to soak up surplus capital.  The creation of some sort of new infrastructure is both a long-term sink for capital, and the foundation for new levels of productivity.

Gopal Balakrishnan,  in New Left Review, correctly observes capitalism’s inability, this time around, to gain a new lease on life through a new Kondratieff long-wave cycle:  i.e., “a new socio-technical infrastructure, to supersede the existing fixed-capital grid.”  But he mistakenly sees it as the result either of an inability to bear the expense (as if productivity growth required an enormous capital outlay), or of technological stagnation.

Balakrishan’s claim of “technological stagnation,” frankly, is utterly astonishing.  He equates the outsourced production in job-shops, on the flexible manufacturing model that prevails in various forms in Shenzhen, Emilia-Romagna, and assorted corporate supplier networks, with a lower level of technological advancement.  But the shift of production from the old expensive, capital-intensive, product-specific infrastructure of mass-production industry to job-shops is in fact the result of an amazing level of technological advance:  namely, the rise of cheap CNC machine tools scaled to small shops that are more productive than the old mass-production machinery.

By technological stagnation, apparently, Balakrishnan simply means that less money is being invested in new generations of capital; but the crisis of capitalism results precisely from the fact that new forms of technology permit unprecedented levels of productivity with physical capital costs an order of magnitude lower.

Two opposing themes in the Social Structure of Accumulation theory, mentioned by Balakrishnan, are at odds with each other.  The first is the rising set of costs, and the needto reduce them to restore the rate of profit.  But lowering costs and increasing profit directly creates an internal contradiction:   a surplus of investment capital without a productive outlet.

The SSA paradigm, in many ways, is obsolete:  its focus on new engines of accumulation, as sponges for enormous quantities of investment capital, is no longer relevant.

Both the Austrians and the neo-Marxists, in their equation of progress and productivity with the sheer quantitative mass of capital invested, are stuck in the paleotechnic age.

P2P Foundation » Blog Archive » Mises and the Neo-Marxists: Paleotechnic Blood Brothers?

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4 responses to “P2P Foundation » Blog Archive » Mises and the Neo-Marxists: Paleotechnic Blood Brothers?

  1. Too many words.
    Money is stored wealth, effort, production, goods. What’s so complicated?
    Keynes “authenticated” a system whereby you can spend (use) wealth (goods/services) that hasn’t been created. So it falls apart. The eventual day of reckoning is postponed, as always, by stealing from those who have some stored wealth, mainly by inflation.
    GDPs, etc, are not that necessary, are they?

  2. And for your next post, a carefully considered argument about how many angels can dance on a pinhead.

    Sorry, but this sort of debating of unreal matters of doctine purity is a bad habit of libertarians. The vicious factional arguments between monetarists and Miseians and all the rest of the ideological disputes don’t illuminate anything and certainly don’t help advance the cause of individual liberty. (regardless of how interesting a technical discussion on the changing nature of capital investment and its measurement might be)

  3. Thanks for the link, Sean.

    C. Ingoldby, I disagree on the issue of relevance. Mainstream economics has been dominated for the past century by those who assume capital-intensive forms of production are more productive, and that there’s a link between the quantity of capital invested and the level of productivity. And it’s as near as dammit to a dogma among the Misesian segment of the libertarian movement.

    That an assumption shared by managerialist liberals in the Schumpeter-Chandler-Galbraith line, Neo-Marxists, and Austro-Libertarians is so fundamentally false seems noteworthy to me.

  4. Steven Northwood

    I enjoyed it, a good read.