Beyond being infuriating and insulting, President Obama’s now
notorious “you didn’t build that” speech probably left many people
puzzled. It is so foreign to how most Americans think they might
have wondered where such thinking comes from.
Whether or not you think it’s accurate to call Obama a Marxist,
his perspective on how the economy works is Marxian through and
through. More specifically, it is a reflection of what’s referred
to as Marx’s “labor theory of value.”
That theory is defined in the Dictionary of Economics
as “[t]he worth of a product or service is in proportion to the
labor employed to generate it.”
Economists not under the spell of Marxism consider the labor
theory of value to be a convoluted mess. Marx himself had great
difficulty papering over the logical gaps and contradictions of the
theory. One obvious problem is that “labor” is not a homogeneous
resource. Furthermore, it is not the only scarce resource necessary
for the production of practically every product or service.
The question of how relative prices are determined is still a
central question in economics. “Price theory” is what comprises
most of microeconomics.
Today the mainstream conclusion about what determines relative
prices is that they result from the interaction of “supply and
demand.” In the context of price theory, supply and demand are like
file drawers where numerous factors can be organized and
analyzed.
The price of any product is affected by the quantity of all the
resources necessary to produce it — labor, energy, land,
information, time, for example. Marx’s position was that only one
of these resources mattered, i.e., labor. Furthermore, he devoted
none of his attention to the demand side of price
determination. It’s as though he tried to design a pair of scissors
using a single blade and, in fact, only a small piece of a single
blade. I don’t think that it’s an exaggeration to say that no
economist, other than true-believer Marxists, thinks that the labor
theory of value makes any economic sense or is useful in
understanding how an economy actually works.
In his classic textbook on the history of economic thought,
William Fellner poses the following question about the labor theory
of value and offers an explanation:
What function does the theory perform in the Marxian system, and
why do contemporary Marxists continue to cling to it? The answer,
we suggest, is that a simple and sweeping doctrine of exploitation
is the essence of Marxism as a creed, and that it is
impossible to obtain a doctrine of exploitation as simple and
sweeping as is the Marxian from premises other than the “worker’s
right to the whole produce.” Marxism as a creed is founded
on the idea that all income going to the owners of wealth results
from exploitation. The Marxian creed requires the
exploitation doctrine as its foundation. (Emphasis in original.)
— William Fellner, Modern Economic
Analysis
A belief in the labor theory of value is what explains the
hostility toward profits that is so prevalent on the left. If labor
is 100 percent responsible for the creation of value, profit is
theft. Profits are only possible if labor is exploited and only if
capitalists get what’s not rightfully theirs. Likewise, property is
theft, as are various forms of capital. Marx is the inventor of the
word “capitalism.” His turgid three volume magnum opus is titled
Das Kapital.
In countless ways Marxism is an intellectual mess. Theoretically
it makes no sense. In practice it has led not to utopia, but to
dystopia. The most horrific and repressive regimes in the world
today — North Korea, Cuba, and Zimbabwe, for example — are
Marxian in theory and practice.
Nevertheless, a Marxian view of the world continues to be
popular on the left. Obama’s speech reflects his deeply held belief
that business owners do not deserve the share of income and wealth
they receive. All value ought to go to the workers. Any other
outcome is the result of “the exploitation of humans by humans.”
According to Marx, that’s what happens under capitalism and will
continue to happen until private property rights are abolished.
Only then can true equality be achieved.
It’s important to remember that even bankrupt ideas can be
popular over long periods of time. Two other leading examples are
Malthusianism and Keynesianism. Their predictions and policy
prescriptions have proven wrong countless times, yet as doctrines
they still hold wide appeal. Malthus’s Essay on the Principle
of Population was published in 1798 and Keynes’
General Theory of Employment, Interest, and Money
was published in 1936. The failure of the Democrats’ massive
stimulus spending ought to be enough to toss Keynesianism into the
dumpster of ideas that sound good but turn out to be disasters when
applied to the real world.
Marx fully expected capitalism to collapse within a few years
after the publication of The Communist Manifesto in 1848.
V. I. Lenin’s Imperialism: The Highest Stage of
Capitalism, published in 1916, was essentially an attempt to
explain why capitalism still existed. By then Marxists fully
expected that capitalism would be long gone.
One thing that J.M. Keynes got right was his understanding of
the power of ideology. In the final paragraph of The General
Theory he wrote, “The ideas of economists and political
philosophers, both when they are right and when they are wrong, are
more powerful than is commonly understood.… Madmen in authority,
who hear voices in the air, are distilling their frenzy from some
academic scribbler of a few years back.”
Whether or not Barack Obama is a Marxist depends on how you
define Marxist. Most everyone who acts like a Marxist reacts
strongly if called a Marxist. There are probably a hundred Marxists
for every one who admits to being one. The birth certificate I
would like to see is one that would show where Obama’s ideology was
born.
