Marxian Class Analysis and Economics

Rick Wolff

This article is from the May/June 2006 issue of Dollars & Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org/archives/2006/0506wolff.html


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This article is from the May/June 2006 issue of Dollars & Sense magazine.

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Class analysis predates economics. Long before modern economics emerged, ancient Greek thinkers, for example, analyzed their society by classifying people into groups by wealth. They viewed understanding the relationships between classes as crucial to improving their society and debated whether wealth should be distributed equally. While class analysis has a long history, no single definition of class has prevailed. Alongside property definitions (rich and poor), social theorists have used definitions based on the power that various groups wielded and have debated whether power is or should be distributed unequally (to elites, to kings, and so on) or equally (in various versions of democracy).

For Adam Smith and David Ricardo, originators of modern economics, class analysis was central. Here is how Ricardo opened his Principles of Political Economy and Taxation (1817): "The produce of the earth ... is divided among three classes of the community ...". He defined these classes as owners of the land, owners of capital (machines, tools, etc.), and owners of labor power who do the work. He continued, "To determine the laws which regulate this distribution is the principal problem in Political Economy." Like many thinkers before and since, Ricardo believed that understanding a society required identifying its main classes and recognizing the nature of their interdependence and conflicts. Class and class differences were the core concerns of economics at the discipline's founding.

Why then do today's dominant economic theories—the neoclassical and Keynesian economics traditions—ignore class analysis? They do that in reaction to what Marx did with class analysis after Ricardo. Building on but also differing from Smith and Ricardo, Marx took class analysis in new directions. He also linked his new class analysis to a fundamental critique of capitalism; Smith and Ricardo had used their class analyses to celebrate capitalism.

Marx was a radical who criticized his society's unequal distributions of property and power. Like other social critics, he favored collective ownership of property, egalitarian income distribution, and democracy as basic component of social justice. Marx inherited the ancient concept of classes based on property. He made use of Smith's and Ricardo's economics because he valued their class analyses. He also appreciated the power definition of class. But Marx believed that the received definitions of class were inadequate. He developed a new class analysis to equip mass movements for social justice with new insights and strategies for constructing just, egalitarian and democratic societies.

In his new class analysis, Marx defined class not in terms of wealth, income, or power, but rather in terms of the surplus. He argued that in all societies, a portion of the people applied brain and muscle to produce a quantity of goods that exceeded what they themselves consumed plus what went to replenish the raw materials and equipment used up in the production process. That excess he called a surplus. Societies differed in how they organized this surplus: who produced it, who got it, and what they did with it.

By focusing on the surplus, Marx had changed the very meaning of class. In his work, it referred less and less to groups of people (the rich, the poor, labor, management, the rulers, the powerless, and so on). Instead, it increasingly referred to the economic processes of producing, appropriating, and distributing the surplus that occur in every society. A "class structure" came to mean a particular set of these processes. Because the dominant class structure in Marx's time was capitalist, it was the particular capitalist processes of surplus production, appropriation, and distribution that he analyzed.

Capitalism is still dominant, and Marx's analysis still applies. Here is a capsule summary. Capitalists promise workers wages in return for producing an output which the capitalists own, immediately and entirely. The capitalists sell the output in markets and pocket the revenues. One portion of capitalists' revenues provides workers their promised wages, which workers then use to buy back from the capitalists a portion of what they had produced for the capitalists. After paying wages and replenishing materials used up in production, the remaining revenues comprise the capitalists' surplus. The workers produce the surplus; the capitalists appropriate it.

As Marx stressed, capitalism resembles feudalism and slavery in this organization of the surplus. Slaves produced more than they got back from their slave masters; feudal serfs kept part of their product for themselves and delivered the rest—the surplus—as rents to feudal lords. Whenever workers produce a surplus that other people get, Marx labeled that "exploitation." Thus, in his scheme, the transitions from slavery and feudalism that established capitalism had not freed workers from exploitation.

Marx's surplus-based concept of class turned out to be a powerful analytical tool that those in the Marxist tradition have used to make sense of a wide range of political and economic questions. One fruitful area of research has focused on how changes in economic, political, and cultural conditions affect the size of the surplus pumped out of the workers, how workers and capitalists struggle over that size, and how the supplies, demands, and prices of goods and services in the market reflect and affect those class struggles. For example, falling food and clothing prices make it easier for capitalists to lower the money wages they pay and thereby extract more surplus from workers. To take another example, if political and cultural developments encourage workers' class consciousness to grow—if they come to understand surplus and exploitation—they may reduce the surplus they deliver to capitalists or even demand the right to appropriate the surplus themselves.

Marxian analysis also follows the surplus after the capitalists appropriate it. Competition among capitalists and their struggles with workers impose demands on the surplus. Thus, for example, capitalists distribute some of the surplus to pay supervisors to squeeze more surplus from workers. Capitalists distribute another portion of the surplus to attorneys to fend off lawsuits, another portion to pay managers who buy new machines to overcome competitors, and so on.

Class-analytical economics distinguishes workers who produce the surplus ("productive workers") from those who provide the conditions that capitalists need to keep appropriating it ("unproductive workers" such as supervisors, lawyers, and managers). Since productive workers create the surplus that capitalists then distribute to unproductive workers, these two groups relate differently to class processes even though members of both are wage-earners. Thus, Marxian economists can ask and answer questions about class differences among different groups of workers that other economists, lacking an analysis of class in surplus terms, cannot ask let alone answer.

Marxian economics also explores interactions among class processes. How surpluses get produced and appropriated shapes how those surpluses are then distributed and vice versa. For example, intensified exploitation (e.g., speed-ups, closer supervision, or cuts in paid time off) produces stress that often requires capitalists to devote more of the surplus for programs like counseling that help workers cope with alcoholism, absenteeism, and so on. Similarly, when capitalists distribute more of the surplus to buy new machines, that usually changes the number of workers hired, the intensity of their labor, and the resulting rate of their exploitation. Class analysis further shows how commodity prices, enterprise profits, and individual incomes depend on and influence class processes. For example, when workers succeed in raising their wages at the expense of capitalists' surpluses, capitalists often respond by automation, outsourcing to cheaper workers abroad, layoffs, or still other strategies that change individual incomes, corporate profits, prices, and government tax revenues both at home and abroad.

Those in the Marxist tradition also study the interactions among politics, culture, and capitalist class processes. For example, capitalists spend part of their surpluses on campaign contributions and lobbyists to shape government policies in the interests of exploiting more surplus from their workers, of beating out their capitalist competitors, and so on. Needless to say, such distributions out of the surplus have a heavy impact on politics in capitalist societies. Another example: When Wal-Mart recently found its surpluses hurt by employees' class action suits over discrimination and unfair labor practices, it decided to distribute more of its huge surpluses to "media expenditures." In plain English, this money aims to influence what TV programs we see, how newspapers shape stories, what messages films emphasize, and so forth. Beyond Wal-Mart's image, these distributions of the surplus help to shape the larger culture and thereby the development of the societies whose media Wal-Mart intends to "engage."

Marxian economists recognize that capitalism often yields rising output and consumption levels. But their analyses typically underscore the contradictions and injustices of capitalism's uneven distributions of its costs and benefits and demonstrate how the economic problems of capitalism, including unemployment, waste of natural and human resources, and cyclical instability, emerge in part from the system's particular class structure.

An analysis of class in terms of surplus has also allowed thinkers in the Marxian tradition to develop an economics of post-capitalism. A post-capitalist economy begins when revolutionary economic change brings about an end to exploitation, not merely changes in its form. Then, the workers who produce the surplus will also be the people who appropriate and distribute that surplus. In a sense, productive workers become their own board of directors; they collectively appropriate their own surpluses within enterprises. Imagine that Monday through Thursday, the workers produce output. Fridays they perform three very different activities collectively: return a portion of their output to themselves as individual wages, replenish the used-up means of production, and devote what remains—the surplus—to maintain this new class structure. Such a nonexploitative class structure is what Marxian class analysis means by communism. Of course, a nonexploitative class structure is no automatic utopia; it will have its distinctive economic, political, and cultural problems, but they will differ from those of capitalism.

Marxian economists argue about how class processes interact with other economic, political, and cultural processes to shape the evolution of capitalist societies. They differ as well in their analyses of nonexploitative class structures—past, present, and future. Generations of these debates have yielded a complex, sophisticated, and diverse Marxian class analytical economics that offers distinctive understandings of capitalism and the communist alternative.

Yet Marxian class analysis is now largely excluded from books, newspapers, classrooms, and most people's consciousness by the neoclassical and Keynesian economics orthodoxies. Instead of welcoming debate among alternative kinds of economics, most orthodox economists endorse the silencing of alternatives generally and Marxian class analysis in particular. Neither neoclassical nor Keynesian economics argues about the production, appropriation, and distribution of surpluses. They simply deny that surpluses or class processes exist. Students mostly study neoclassical or Keynesian models of how economies work. Practical economists apply the models to statistics and statistics to the models. The public hears their conclusions not as results of one kind of (class-blind) economics but rather as the truth of economic science, applicable always and everywhere.

Nonetheless, Marxian class analyses thrive despite their exclusion from the mainstream. Capitalism's problems plus the struggles and oppositions they provoke continue to generate critics. Many find capitalism's inequalities of wealth, income, and power unacceptable. Some find their way to Marxian class analyses focused on the social organization of the surplus as a key to the insights and strategies needed to take societies beyond capitalism.

Richard Wolff is professor of economics at the University of Massachusetts, Amherst. He is co-author of Knowledge and Class: A Critique of Political Economy, Economics: Marxian vs. Neoclassical, Bringing It All Back Home: Class, Gender, and Power in the Modern Household, and Class Theory and History: Capitalism and Communism in the USSR.