COLUMBUS — One of the themes of Ohio’s U.S. senate campaign is that incumbent Sherrod Brown, a Democrat, is so liberal that he is sometimes ranked to the left of Sen. Bernie Sanders of Vermont, a socialist.
After reading Brown’s 2004 book, “Myths of Free Trade,” I say forget Sanders. You can peg Brown to the left of Leon Trotsky, on one question, at least.
I know. The American Right spent so many years denouncing liberals as “commies” and “Marxists” that the words seem meaningless.
Nevertheless, there’s no mistaking the source of Brown’s politics – it’s Karl Marx.
I surely do not mean that Brown is part of any revolutionary plot. But his view of economics is fundamentally Marxian — not “liberal” — and his ideas about wealth and jobs are noxious to the creation of both.
Until I began reading “Myths of Free Trade” a few days ago, I had Brown figured as just another anti-China demagogue making his living off Rust Belt resentment. Now I’m convinced of his sincerity, but his reason for hating free trade has little to do with economic costs and benefits. He just thinks big business is evil, more so if not restrained by U.S. law.
In a campaign that’s all about jobs, that sort of hostility struck me as a liability, so I read the rest. Now I think that his anti-capitalist hostility goes a lot deeper than campaign trail rabble-rousing: Brown really believes in the worldwide struggle of the proletariat against the bourgeoisie. So says Sanders, at least.
“I’ve known him for many years,” Sanders says. “What’s very clear is that Sherrod Brown knows which side of the struggle he is on.”
Here’s what I learned from Brown’s book:
Brown has no idea how money gets made or how business ever benefits the working man.
Brown sees employment as exploitative. The worker and the boss aren’t just on opposite side of the table; they’re enemies, separate classes struggling with one another. Any good Marxist will tell you that class struggle isn’t just inevitable, but good: it’s the engine of historical progress.
Companies do not share their wealth with valued workers, but governments and unions sometimes succeed in coercing more from them. This is one of two big reasons Brown is so hostile to companies going abroad – they’re out of reach.
The other reason Brown hates imports and trade is that he thinks a nation’s real wealth is in its industrial base. Basic Marxist theory is that the “means of production” form the base of a society; the rest — including law, religion and art — is just “superstructure.” The thousands of maquiladora factories just across the Texas border in Juarez represent the destruction of America’s wealth by the pirates who temporarily own them.
Combine those two notions and you have Brown’s basic view of the economy. It’s never explicitly laid out; the book is more of a long complaint than a policy prescription, but there is a shape to the complaint.
The basic idea is that busy factories make money (off the sweat and ingenuity of workers, of course), but some of that money does get to the middle class through unions and government redistribution; then the middle class can afford to buy the things they make at work. If that system isn’t hermetically sealed from cheap foreign goods and labor, it will all fall apart.
Throughout the book, Brown talks up “good-paying jobs” in manufacturing. He cites a 19th Century advocate of central planning named Friedrich List on its importance:
‘The forces of production are the tree on which wealth grows…. The tree which bears the fruit is of itself of greater value than the fruit itself,’ List wrote in his seminal work, The National System of Political Economy, in 1841. A nation is not measured by its wealth and its purchasing power, but ‘in the proportion in which it has more developed its powers of production.’
Let’s leave aside the irony of Brown citing List (List thought nobody could compete in trade with the dominant power; Brown thinks the dominant power can’t compete with anybody).
There’s a reason List’s idea is collecting dust. In a globalized economy, manufacturing simply isn’t as important as it once was, no matter what Marx wrote.
Take the iPad, which by itself counted for about $4 billion worth of the U.S.-China trade gap in 2011, according to the Economist. Chinese labor costs for assembling the iPad (about $150 million) represent just 2 percent of the product’s retail value. On the other hand, 30 percent of the revenue goes to the shareholders as profits, while American workers in design, development, marketing, distribution, and retail get about 20 percent of the revenues.
The money just isn’t in manufacturing any more. And Apple’s success isn’t dependent on its subcontractors at Foxconn buying iPads.
Yet Brown writes, “As long as wages stay low in developing countries, workers will never be able to buy what they make, and global supply will continue to outrun global demand. As long as workers in developing countries are paid less than the value they add to a product, worldwide demand will continue to stagnate.”
This passage is a dead giveaway. It is pure labor theory of value, which underlies Marxian economics.
According to the theory, which made some sense in a time of handicrafts, it’s the worker who creates value by turning $1 of raw materials into a finished product that can be sold for $2. The capitalist exploits the worker by paying him a dime for labor worth a dollar. That leaves the capitalist a profit of 90 cents – or 90 cents of surplus value, as Marx called it.
Brown’s Marxian idea, that workers must not be “paid less than the value they add to a product,” is an explicit rejection of both corporate business and profit-making. If the retail price is $2, the raw materials cost $1, and it’s wrong to pay the worker anything less than $1, then there’s no profit and no business.
Brown doesn’t have the political power to outlaw profits, but he sure can rage against the companies that make them, can’t he?
As a practical matter, Brown believes government’s role is to redistribute enough of those profits to the middle class that they can afford to buy things. The “challenge (that) faces U.S. policy makers,” Brown writes, is that in “industry after industry there is a surplus of capacity and a lack of demand. The only solution is to create new markets — the crisis of overproduction, what Marx called one of the “internal contradictions” of capitalism.
Marx’s idea was that capitalism produces an ever-expanding supply of goods and services that an impoverished proletariat can’t afford, leading to surplus capacity and the periodic economic crises that we call recessions. It ties back to the labor theory of value – if a worker is paid just a fraction of the final price of the goods he produces, then in the aggregate, workers have just a fraction of the money they would need to buy all of the aggregate goods. Hence, oversupply, a problem that exists only in the minds of Marxists.
These sorts of overproduction crises don’t exist in real life, because businesses just don’t operate that way. Every now and then, they guess wrong and make a bunch of Pontiac Azteks or JarJar Binks merchandise, but a modern corporation gauges the market and controls its inventory. They start with what customers want. Marx hated that approach, heaping scorn on the “brutal, capitalistic form, where the laborer exists for the process of production, and not the process of production for the laborer.”
If you start with the laborer’s needs and build businesses around them, then you might end up with Brown’s “industry after industry” that nobody wants to buy from.
To the degree that this can be called economics, it’s well outside the mainstream, whether Keynesian or free market, to say the least.
In real life, wealth is created by improvements in productivity and efficiency, by moving assets toward more profitable use, and by inventing new uses. For most of us, that means learning a valuable new skill can lead to a raise or a better-paying job. Just getting good at your job means a lot, at least if your company is any good. But the idea has broad application.
Mainstream economists also recognize that a booming economy helps us all, albeit unequally, but you don’t need an economist to tell you what you know from experience. Low unemployment means more competition for labor, which means better pay, even for unskilled workers.
Brown acknowledges this at one point, writing, “Private industry is the dynamic engine of job growth in our society.” That sentence stands out because it’s the only one of its kind in the book. Nowhere else does he credit business for anything; instead, business is always the bad guy in his story, exploiting workers in every place.
In Brown’s view, U.S. history is the triumph of the people over big business. That’s pretty much straight out of Marx and his writing partner Friedrich Engels’ “Communist Manifesto”: To Marx and Engels, “The history of all hitherto existing societies is the history of class struggle.” Socialism was seen as a transitional stage in which a capitalist society moved toward true communism; it was marked by the triumph of the proletariat over the dictatorship of the bourgeoisie. In other words, the people finally overcome the rich businessmen who really run the country.
Here’s Brown’s reading of the last century:
It has been a one-hundred-year battle between the privileged and the rest of us. We took on oil and chemical companies to enact clean air and safe drinking water laws. We overcame industry opposition to pass auto safety rules. We beat back insurance and medical interests to establish Medicare and Medicaid for senior citizens and poor children. We fought off Wall Street bankers to create Social Security. We battled entrenched business interests to enact women’s and civil rights, protections for the disabled, and prohibitions on child labor. We fought for all of it.
Every bit of progress made in the struggle for economic and social justice came over the opposition of society’s most privileged and most powerful. Remarkably, it was ordinary working families who won so many of these battles against the most entrenched, well-heeled interests.
Brown believes that corporations were heartened by the slaughter of protestors at Tiananmen Square: “Since June 4, 1989, when hundreds – perhaps thousands – of Chinese civilians were murdered by the People’s Liberation Army on Tiananmen Square in Beijing, the U.S. government and America’s largest corporations have seen China as an opportunity, an untapped economic resource.”
You see, they really like hiring Chinese people, who are “as obsequious and obedient as cogs in a 3,000-year-old totalitarian machine must surely be.”
Not only do businesses love dictatorships, they actively undermine democracy around the world, Brown writes.
“As developing nations make progress toward democracy, as they increase worker rights and create regulations to protect the environment, the American business community punishes them by pulling its trade and investment in favor of more totalitarian governments.”
Brown should have found one example to support such a vicious accusation.
Lately, of course, Brown has been trying to pass himself off as a friend of a big business called General Motors, but he hadn’t started that charade when he wrote his book. Twice, he accuses GM of exploiting its workers.
“General Motors, Mexico’s largest private employer, pays its workers about fifty dollars a week. Who will buy the cars?” Later, he says GM tries to evade a Mexican profit-sharing law by claiming “it has no profits from any of its Mexico plants, which are operated as ‘cost centers’ and not ‘profit centers.’” He cites a GM employee who “told us how General Motors, the company union, and the government are all arrayed against him.”
To Brown, even extreme communist expropriation is defensible. Here’s his view of the “land reforms” of Jacobo Arbenz of Guatemala (italics mine):
“In the early 1950s, Arbenz took office and pushed through the legislature a bold land reform program that redistributed unused land from large landowners to Indian peasants. Although many of Arbenz’s advisers were communists (none were connected to the Soviet Union, however), his land reform was fundamentally capitalistic. Land was redistributed into small plots for individual families, not into state-owned collectives. Landowners were compensated in government bonds.”
Clearly, he sees the fundamentals of capitalism rather differently than the rest of us.
Brown doesn’t just hate capitalists; he blames them for the Nazis and World War II. In making the point that free markets do not inevitably lead to democracy (which is true enough), he writes: “World history tells us something very different. The rise of twentieth-century Germany and Japan, fueled by industrial capitalism, led to fascism, not democracy.”
Leaving aside the fact that “industrial capitalism” is a Marxist term, this idea isn’t serious. Weimar Germany and Imperial Japan were mercantile states only emerging out of feudalism, seething with resentments, roiled by economic crises and militarism — the opposite of free-market paradises.
A search for “industrial capitalism” and “Hirohito” gets four hits, so I’m not sure where Brown got the idea. I’d guess it’s been rattling around in his head since his days in Russian Studies at Yale. I did find an article published by the Trotskyist International Communist League making a similar argument about Japan.
As for the Nazis, there’s a whole subgenre of Marxist theory making Brown’s argument, much of it drawing from Franz Leopold Neumann’s book, “Behemoth: The Structure and Practice of National Socialism.”
The theorists have filled their volumes with Marxist dialectics because there’s not much factual support for the idea that big business sponsored Hitler’s rise.
There were a couple of industrialists who may have given some money – Fritz Thyssen, Ernst von Borsig, and Emil Kirdorf. And Hitler did speak to the Dusseldorf Industry Club in 1932, which apparently got him a couple bucks at the door. But there’s not much more on which to base the theory.
That’s because the National Socialist German Workers Party was explicitly anti-capitalist, calling for nationalization of industry, profit sharing, and wide-scale land redistribution.
In 1933, Leon Trotsky himself assessed Hitler’s rise, and whether it owed to industrial capitalists or to the middle class:
While the Nazis acted as a party and not as a state power, they did not quite find an approach to the working class. On the other side, the big bourgeoisie, even those who supported Hitler with money, did not consider his party theirs. The national ‘renaissance’ leaned wholly upon the middle classes….
Not even he thought capitalists were to blame for the Nazis. It’s not easy to find yourself left of Leon Trotsky on any issue, but to be more hostile to big business than the greatest communist theorist of the last century? That’s an accomplishment.
Or maybe Trotsky just wasn’t quite so blinded by ideology.