I received plenty of feedback in my last article (See: The Poverty of Ethics: Dissecting the Non-aggression Principle), some positive, some negative. A popular request was to review a few Austrian (I use ‘Austrian’ here as a popular reference to the Austrian School of Economics) works which challenge the Marxist interpretation of classes and exploitation. I accepted the request.
This is a critical response to Hans-Hermann Hoppe’s Marxist and Austrian Class Analysis (all excerpts used are directly quoted from the work).
Time Preference and the Austrian Critique of Marxist Analysis
Hoppe’s intention for his work is demonstrated quite simply in the introduction:
“I want to do the following in this paper: First to present the theses that constitute the hard core of the Marxist theory of history. I claim that all of them are essentially correct. Then I will show how these true theses are derived in Marxism from a false starting point. Finally, I will demonstrate how Austrianism in the Mises-Rothbard tradition can give a correct but categorically different explanation of their validity.”
Hoppe then goes onto make fairly accurate descriptions of core Marxist beliefs surrounding historical materialism, the labor theory of value, and class antagonisms. He then tackles the issue of surplus value and its exploitative properties with a criticism of Marx’s analysis:
“What is wrong with this analysis? The answer becomes obvious once it is asked why the laborer would possibly agree to such an arrangement! He agrees because his wage payment represents present goods while his own labor services represent only future goods-and he values present goods more highly. After all, he could also decide not to sell his labor services to the capitalist and then reap the “full value” of his output himself”
The classical answer to any Marxist conception of surplus value/labor: time preference. Hoppe continues to expand upon his previous criticism:
“…he [Marx] does not understand the phenomenon of time preference as a universal category of human action.’ That the laborer does not receive his “full worth” has nothing to do with exploitation but merely reflects the fact that it is impossible for man to exchange future goods against present ones except at a discount. Unlike the case of slave and slave master, where the latter benefits at the expense of the former,the relationship between the free laborer and the capitalist is a mutually beneficial one. The laborer enters the agreement because…he prefers a smaller amount of present goods over a larger future one.”
Hoppe’s criticism rests firmly on two conjectures. Firstly, time preference as an explanation as to why surplus value exists within the realm of ‘clean capitalism’. Secondly, the relationship between the laborer and capitalist is ‘mutually beneficial’, void of any exploitation.
Let’s start with time preference. First, Hoppe’s commits the fatal error of ignoring context. As I pointed out in my previous article, the greatest failure of any libertarian philosophy surrounding socio-economic action is that it divorces action from the material conditions it exists in. The only way to understand why a person acts is to understand the environment which shapes that action. Thus, time preference can only be seen as a valid explanation if you presume the legitimacy of private ownership.
Marx’s entire premise regarding capitalist property relations is that they exist to reproduce a material condition which legitimize private property. Giving birth to the circular logic of Capital. Time preference can only exist because the laborer exists in a property relation where his only choice is to sell his labor-power. The material conditions of depravity that pressure the laborer to sell his labor-power do not affect the capitalist who owns the means of production (aside from the obvious duty of a capitalist being to produce and sell commodities). The capitalist class is the sole class with any feasible sense of flexibility as they exclusively access the means by which one may subsist. Therefore the statement that “After all, he could also decide not to sell his labor services to the capitalist and then reap the “full value” of his output himself” is utterly nonsensical.In capitalism, time is money and the worker cannot afford to wait. To reproduce his existence, he must sell his labor-power; even if this means being exploited. With this understanding it becomes obvious that there is little ‘decision’ to be made. The choice of Capitalism is illusory. Where before the slave/serf would be bound to a master/lord, the laborer is only bound to material conditions which force him to hunt for a capitalist in which he can sell his labor-power.
Capitalism is based on an inequality of access and economic actions within its realm only serve to reproduce the existing conditions. Therefore, the principle of time preference is an insufficient attempt to legitimize (and trivialize) an inherently unequal and exploitative property relation.
Next, there is the issue of “mutual benefit”. Hoppe draws distinction between capitalist property relations and those that existed in forms of feudalism and chattel slavery. As I stated above, there are clear distinctions. However, to suggest that capitalism somehow uniquely proposes mutual benefit compared to previous property relations, is ridiculous. Capitalist property relations are mutual only insofar as they allow the capitalist to prosper and provide the worker with subsistence, paid piecemeal. This is not wholly different than previous forms of property relations where the slave/serf was (meagerly) fed and subsisted in a life of servitude to the master/lord. Engels points out the differences between the social existence of slaves and workers:
“The individual slave, property of one master, is assured an existence, however miserable it may be, because of the master’s interest. The individual proletarian, property as it were of the entire bourgeois class which buys his labor only when someone has need of it, has no secure existence. This existence is assured only to the class as a whole.” – Friedrich Engels, Principles of Communism
In this sense, the system of capitalism can hardly be considered “mutually beneficial” as Hoppe might intend the phrase. The entire property relation and all action therein (including conceptualizations such as time preference) is based on a system of brutal inequality and deliberate exclusion from the means of production. Therefore, the system of capitalism is still a system of exploitation.
‘Socialized Production’, Ownership, and Capital
“Under a system of socialized production, quite contrary to Marx’s proclamations, the development of productive forces would not reach new heights but would instead sink dramatically…”
A classic Austrian objection to social ownership of the means of production. He continues:
“For obviously, capital accumulation must be brought about by definite individuals at definite points in time and space through homesteading, producing, and/or saving…”
Let’s see how he attaches this to his objection against social ownership:
“In the case of collectively owned factors of production, an actor is no longer granted exclusive control over his accumulated capital…for him of the expected income and hence that of the capital goods is reduced.”
Hoppe presents a rather interesting criticism of social ownership, different from the cliche ‘calculation problem’.
First, let’s unpackage the language of his argument. He starts by identifying the source of wealth, or capital accumulation, as individual action. He does this so he can use ‘libertarian’ philosophy, posited by this interpretation of individual action, as a legitimization of private property. His mistake is in the subtle acceptance of the ideal abstraction of labor that overemphasizes individual production of capital; which can then be interpreted as an individual product. The real nature of capital is described by Marx and Engels:
“..capital is not a thing, but rather a definite social production relation, belonging to a definite historical formation of society,which is manifested in a thing and lends this thing a specific social character.” – Capital Volume III, Chapter 48, The Trinity Formula
Hoppe’s entire objection revolves around the idea that capital accumulation and the value of capital goods can be interpreted solely through an individual’s exclusive ownership, and likewise that this subjective interpretation holds the key to productive forces (which there is no reason or analysis given as to why). The truth is much different. The entire system of capitalism is based on a social context, an interrelated conundrum of values and productive units. In fact, exchange value, the locomotive of market interaction, is dependent on society as it is a social expression. This is because the exchange value of commodities is impossible to determine unless contrasted against other commodities. All production in capitalism is social, and likewise so is all consumption.
Ergo, the entire premise of Mr. Hoppe’s objection falls flat on its face. If we can recognize accumulation as a consequence of social production we can destroy any reasoning behind a “sinking” in productive capacities under social ownership because of a lack of “exclusive control”.
Moreover, Hoppe misinterprets the entire structure of social ownership. Genuine social ownership seeks to empower the worker by including him in a direct control over the product of his labor and the fixed capital he employs. The course of production, consumption, and the fate of his labor will be firmly in the hands of the worker, defeating any logic about there being a lack of “control” (especially when realizing all production as social production, see above).
Austrian Theory of Exploitation
“The starting point for the Austrian exploitation theory is plain and simple…Exploitation occurs whenever a person successfully claims partial or full control over scarce resources he has not homesteaded, saved, or produced, and which he has not acquired contractually from a previous producer-owner.”
It is interesting that Hoppe’s definition of exploitation readily includes so called ‘clean capitalism’ before the insertion of the phrase “acquired contractually from a previous producer-owner”. We know that in capitalism, the worker labors, the capitalist subtracts. If we were to simply remove the phrase in question, a much more agreeable definition of exploitation might be reached. The moral livelihood of capitalism hinges on the the interpretation of words such as “voluntary” and modifiers like “contractually”. So much so that these words and modifiers must first be divorced from a social context as to eliminate any doubts about the honesty of their application. The Austrian theory would like to paint billionaires as victims of exploitation via taxes or sweatshop owners as victims of unions or some other bourgeois interpretation of what it means to ‘aggress’. Which is really the cornerstone of Austrian ‘ethics’, being bourgeois reaction (see: The Poverty of Ethics: Dissecting the Non-aggression Principle). The propertied classes need to redefine the meaning of ‘ethics’, or rather, co-opt its usage to protect private property and the right to it. This pandering is a natural political necessitation coming from a class that exists through and for the leverage of property.
Another interesting point here is the inclusion of the conjunction “and”; as if the property barons of today not only obtained their power through socio-economic coercion (I mean contractual agreement) but also through their own personal saving, producing, or homesteading. Such a nonsensical interpretation of capitalist accumulation really draws Mr. Hoppe’s perspective into question.
Nature and Development of the State
“And in the course of economic development, just as producers and contractors can form firms, enterprises, and corporations, so can exploiters create large-scale exploitation enterprises, governments, and states. The ruling class…is initially composed of the members of such an exploitation firm.”
Hoppe here is referring to the development of a state or a similar tool of suppression. Notice the distance he draws between your everyday, average, ‘nothing-to-see-here’, producers (bourgeoisie) and the ‘ruling class’. Interestingly enough, this is a common theme among Austrians. Precisely so because Austrian theory would have observers believe that capitalist property relations can exist separate of a form of institutionalized violence (e.g. the state). Admitting that the same bourgeois, drawn here as distinguished from the ruling class, are indeed the ruling class, would be catastrophic to Austrian theory. This is, however, the historical truth on the matter. The state is a tool of suppression, having evolved in modern society as a institution the capitalist class utilizes to suppress opposition and enforce their privilege. The bourgeois property rights proposed by Austrians, is the same property rights that necessitated the existence of a state.
“…with a ruling class established over a given territory and engaged in the expropriation of economic resources from a class of exploited producers, the center of all history indeed becomes the struggle between exploiters and the exploited.”
Once again, we see the same attempt at distancing property holders from the ruling class. Now, Hoppe goes as far as to mimic Marx’s famous “history of all hitherto existing societies is the history of class struggle” with his reinvented “center of all history…the struggle between exploiters and exploited”. A bold claim indeed, but does it stand true? In the blunt reading of the phrase, yes. With an actual analysis of what Hoppe means by “exploited” and “exploiters”, using the Austrian theory of exploitation, the answer is no. Hoppe is almost likening himself with modern day GOP pundits by painting the chilvary of private business against the tyranny of the state. The truth is much different. The state serves to protect the interests of the capitalist class, not exploit them. A quick reading of US Presidential history will make that very clear. Even small business interests are not exactly pitted against those of the state. Many small business owners enjoy a predictable rate of profit and market stability. The state through its suppressive functions helps maintain both a constant pool of uneducated and unemployed persons, as well as a stable market environment with minimal competition. All the factors necessary for a moderately successful capitalist enterprise. Austrians will point to the ‘red tape’ and excessive regulation coming from the state as proof of this antagonism, this is no proof at all. Given, some grievances exist about the quality of state administration, no grievances exist about the actual existence of these functions. This is why even the petit bourgeois anarcho-capitalist still supports private institutions of violence such as ‘private defense forces’ against none such institutions at all. This is because they recognize, subconsciously perhaps, the need for a violent and suppressive tool which can essentially mimic most of the functions of the modern state; only then more tailored to their preference. Thus, Austrian theory cannot clean the house, only reorganize the mess.
“While productive enterprises come or go because of voluntary support or its absence, a ruling class never comes to power because there is a demand for it…”
Perhaps this is only my rudimentary understanding of modern economics speaking, but for something to be produced, must not there be a demand for it? The demand is clear and present, and my analysis has shown that this demand comes precisely from the propertied classes.
Now Mr. Hoppe goes onto describe a society free of exploitation:
“Contrary to Marxist claims, this society will not be the result of any historical laws…Nor will it be the result of a tendency for the rate of profit to fall with an increased organic composition of capital…Just as the labor theory of value is false beyond repair, so is the law of the tendency of the profit rate to fall, which is based on it…”
The Labor Theory of Value is such an incredibly spacious concept, as its its conflict with Austrian theory, I will not elaborate too much on this final point.
The disagreement I will draw is with the denial of the tendency for the rate of profit to fall. The tendency for the rate of profit to fall is a critical measure of understanding the internal contradictions within capitalism and attempting to denounce it in a brief conclusion did Hoppe no good. Without anymore analysis, allow me to cite some empirical evidence to the contrary:
Also, an interesting paper on the subject:
Overall, Hans-Hermann Hoppe’s Marxist and Austrian Class Analysis was an entertaining read. Despite all the false interpretations, misperceptions, and the predictable assortment of Austrian theory punch-lines, it was one of the more polished criticisms of Marxist theory I have read. Marxist theory, however, far exceeds Austrian theory in class analysis and I hope every reader may come to understand this.
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