The New York Times has launched a debate about whether Karl Marx was right after all about capitalism (http://www.nytimes.com/roomfordebate/2014/03/30/was-marx-right). As the NYT put it in its introduction to the contributions of some well-known economic commentators and bloggers:“in the golden, post-war years of Western economic growth, the comfortable living standard of the working class and the economy’s overall stability made the best case for the value of capitalism and the fraudulence of Marx’s critical view of it. But in more recent years many of the forces that Marx said would lead to capitalism’s demise – the concentration and globalization of wealth, the permanence of unemployment, the lowering of wages – have become real, and troubling, once again. So is his view of our economic future being validated?”

You can see what’s worrying the NYT. Like many supporters of capitalism as the only and best system of human social organisation, the NYT is worried that capitalism does not (or no longer seems) to deliver ever-increasing living standards for the majority, but instead is producing ever greater inequalities of wealth and incomes, to such a point that it could provoke a backlash against the system itself.

So the NYT offers a debate. And the question of whether Marx was right about capitalism is put to five bloggers. Of course, most of these are very quick to assume that capitalism does work or is, at least, the best system on offer and there is no alternative (TINA), to use Margaret Thatcher’s infamous phrase about the ‘free markets’ and welfare cuts.

Take free marketer, Michael R. Strain, a resident scholar at the neo-liberal American Enterprise Institute. Mr Strain tells us that maybe Marx had a point back in the days of Victorian England and Charles Dickens, when there was poverty everywhere. But now, Strain tells us, things are different. Now only just over 5% of the world’s population is living on less than $1 dollar a day compared to over 26% just 40 years ago. This is the great achievement of ‘free enterprise’.

This statistic hides a story though, because the big reduction in the worst level of poverty (living on $1 (1987 prices) was achieved by China’s dramatic rise in the world economy. I would be surprised if Strain would conclude that China’s economy is an example of ‘free enterprise’. For that matter, the biggest falls in poverty also took place in the Soviet economies until the fall of the Wall.

No matter, after damning Marx with faint praise, Strain brings up a hoary old chestnut used by mainstream economics: the fallacies of Marx’s labour theory of value. You see, it’s obvious false “that the value of an object is determined by the labor required to produce it. I could spend hundreds of hours writing a song; Bruce Springsteen could write one in 15 minutes worth far more than mine. Q.E.D”.

Well, fancy Marx not noticing that the product of some people’s labour is worth more in the market than others even though they take less time. Clearly, Strain has not read Marx’s Capital Volume One, where he deals with this issue and many others in relating the difference between ‘concrete’ labour and ‘abstract’ labour time.

But again, no matter, Strain has to admit that Marx may still have point about capitalist crises: “There is an inherent instability in capitalism — cycles of boom and bust lead to human misery. Capitalism does create income and wealth inequality.” That doesn’t sound good for ‘free enterprise’ but Strain then tells us that, after all, such crises are not ‘inherent’ and all this inequality and boom and bust were just leftovers from the Great Recession and capitalism would be soon all right. Great – panic over!

Strain’s arguments are thin indeed. We get a more serious bashing of Marx from top Keynesian Brad de Long, professor of economics at University of California, Berkeley, and who blogs at Grasping Reality With Both Hands. First, he tries a quick demolition of “Marx’s fixation on the labor theory of value” which according to De Long “made his technical economic analyses of little worth”. You see, Marx’s claim that only labour creates value meant that he could not see rising living standards being achieved if the rate of exploitation of labour rose over time. Marx was “confused between levels and shares” of income. After all, you can have a falling share of value going to labour, but still have rising living standards.

This, of course, is yet another chestnut: that Marx reckoned wages would keep on falling under capitalism until the point that, as De Long puts it, the working class would starve. And how wrong was that. This is a nonsense view of Marx’s immiseration theory. Marx clearly recognised that rising productivity of labour under the dynamic development of the capitalist mode of production could lead to increased wages, except that the workers would have to fight for them. A rising rate of exploitation did not necessarily mean falling wages, although sometimes it could. Again this is all in Marx’s Capital – but our esteemed economist seems ignorant of that.

All these misrepresentations of Marx’s value theory are deliberate. Marx’s theory explains that the world’s wealth does not come from capitalists investing, landlords from owning land or bankers from lending money, or somehow from ‘technology’, but from the effort of human labour. But the product of labour is usurped and appropriated by the owners of capital so there is a direct contradiction between profit and the value created by labour. This is something that cannot be admitted or accepted by the apologists of capital.

De Long tells us that Marx thought that new technology under capitalism would lead inexorably to rising unemployment and Marx was wrong. But what Marx explained was that capital’s drive for higher profits would mean more labour-saving technology. That would mean a rise in the ratio of machinery, plant and technology per employee, what Marx called the organic composition of capital. The evidence for this happening over time in every major capitalist economy is overwhelming. The ratio of the means of production to the employment of labour has risen hugely. And this creates a tension between capital and labour on sharing out the new value created and on the continued employment of labour in outdated industries. A reserve army of labour is permanently available for capital to exploit or not. This seems to describe exactly the nature of technology and labour under capitalism, not De Long’s distortion. Ironically, De Long says at the end of his piece that maybe robot technology will actually displace human labour permanently after all. But that’s another story.

Tyler Cowan is a professor of economics at George Mason University and blogs at Marginal Revolution, which covers economic affairs. Tyler is a firm proponent of modern neoclassical economics that starts from the assumption of free markets and sees economics as the study of the allocation of scarce resources, basing himself of the neoclassical assumptions of marginalism.

For Cowan, Marx has got the wrong end of the stick. Capitalism’s failure to provide things like decent education and health or better living standards, at least right now, is because of ‘vested interests’ blocking the free market from making a proper allocation of resources. ‘Rent seekers’ and monopolies (including trade union interference) are the problem, not capitalism as such. Cowan reckons Marx has little to say on these issues. Again, of course, yet another eminent economist has not read his Marx, who dealt with the issue of monopoly and rent at length.

Like De Long, Cowan confuses productivity with profitability. For him, the low profitability that Marx pointed out “perceptively” is due to the low growth in productivity since the 1970s. Thus Cowan suggests that Marx had a similar theory to the neoclassical marginal productivity theory, something by the way that Thomas Piketty also thinks in his recent opus, Capital in the 21st century.

But turning Marx into a neoclassical economist won’t work. Actually Marx’s theory is the opposite: a higher growth in the productivity of labour will eventually lead to a falling rate of profit, because it can only be achieved by increasing investment in the means of production and reducing relatively the costs of labour. But as profits only come from labour power, there is a tendency for profitability to fall as productivity rises.

Yves Smith writes the blog Naked Capitalism. She is the head of Aurora Advisors, a management consulting firm and generally considered more to the left in the economic spectrum. But she soon dismisses Marx’s analysis, as she sees it, in her contribution. We are told that Marx had an underconsumption theory of crises under capitalism, namely that “Marx believed that overproduction would lead to pressure on wages, which would prove to be ultimately self-defeating, since the drive to lower pay levels to restore and increase profit levels would wreck markets for goods and services. That’s very much in keeping with the dynamic in advanced economies today.”

This is the usual view of Marx by many lefts and the modern version of this is to claim that rising inequality of incomes is the cause of crises, or at least the latest one. I have spent a lot of time on my blog explaining both that this is wrong and it was not Marx’s view either (see my post: https://thenextrecession.wordpress.com/2014/03/11/is-inequality-the-cause-of-capitalist-crises/.)

But no matter, because according to Smith, Marx got it wrong anyway about class struggle under capitalism eventually leading to its overthrow. You see, a ‘middle class’ developed around managers and trade unionists and this has permanently blocked any move to end capitalism. So Marx was wrong in his expectation of change.

There was only one blogger who defended Marx’s ideas out of the five invited to contribute to the NYT debate – I suppose a fair ratio of views among economists. Doug Henwood is editor of Left Business Observer, host of a weekly radio show originating on KPFA, Berkeley, and is author of several books.

Henwood makes it clear where he stands: “I don’t see how you can understand our current unhappy economic state without some sort of Marx-inspired analysis.” Even better, he places the Marxist theory of the cause of crises under capitalism squarely with the movement of profitability. “Corporate profitability — which, as every Marxist schoolchild knows, is the motor of the system — had fallen sharply off its mid-1960s highs.” As Henwood explains, the strategists of capital moved to raise profitability through a reduction in labour rights and by holding down wages. “The “cure” worked for about 30 years. Corporate profits skyrocketed and financial markets thrived. The underlying mechanism, as Marx would explain it, is simple: workers produce more in value than they are paid, and the difference is the root of profit. If worker productivity rises while pay remains stagnant or declines, profits increase. This is precisely what has happened over the last 30 years. According to the Bureau of Labor Statistics, productivity rose 93 percent between 1980 and 2013, while pay rose 38 percent (all inflation-adjusted)”.

However, Henwood reckons the current crisis is the result of inequality and low wages reducing consumption and thus the answer is to raise wages and public spending. The problem with this view of Marx is that it does not match the facts: consumption did not slump at all prior to the Great Recession: it was the collapse of the housing market, profits and then investment, not consumption. Raising wages and reducing inequality will help the majority but lower profitability further and thus reignite the capitalist crisis. It’s not higher shares for labour that is the answer but the replacement of the capitalist mode of production.

But at least Henwood understands better Marx’s views, unlike the other bloggers. That did not stop Philip Pilkington, a heterodox economist, blogging that Henwood was wrong. Pilkington correctly refutes De Long’s distortion that Marx thought wages must keep falling. As he says “I don’t know why this myth continues to bounce around. Everyone and their mother seem to think that Marx was dead sure that real living standards of workers could not rise under capitalism. But this is simply not true…Marx did not argue that real wages could not rise under capitalism. End of story”

Unfortunately, Pilkington relies on the arguments of the post-Keynesian ‘Marxist’ economist of the 1940s, Joan Robinson. As a result, he claims that Henwood is confused to argue that US profitability fell in the 1970s. He says “I don’t know where this stuff comes from. I know that Marxists want to bring every crisis down to some sort of crisis of profitability but really, the data is readily available.”

Yes, it is readily available and unfortunately for Pilkington backs the Marxist case. Pilkington is confused with his data. Not understanding Marx’s law of the tendency of the rate of profit to fall, Pilkington provides us with a graph showing the year on year change in the mass of profit to refute Henwood, not the rate of profit! Oh dear.

Pilkington concludes with a question “is Marx relevant for understanding the world today?” And his answer: “Frankly, I don’t think so.” For him, we are back to rising inequality and banking speculation as the explanations of crises – they remain the most popular and yet the furthest away from Marx’s.

So Marx continues to be blogged to death.