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Saturday, September 7, 2013

Resurrecting Marx ( A Little) - Hunter Lewis

Of Marx the man, the less said the better. He cheated in his scholarly work, borrowing without credit and distorting others's work, and cheated at home with the domestic help when his wife's back was turned. He was always in debt and trying to borrow more.
Of his work, Keynes was right to call his system " complicated hocus pocus," a characterization which fits Keynes's work too. But in fairness to Marx, he was wasn't entirely a charlatan. Some things he got right. He acknowledged for example that a market system produces the lowest prices, something that President Obama has denied repeatedly. He was not right that capitalism exploits the weak, but if we substitute the term crony capitalism for capitalism then he was right. He was also right in criticizing the kind of print, borrow, and spend policies that Keynes brought us and that are so popular today among world governments. Here is what Marx presciently said in Capital about those policies:

"The only part of the so-called national wealth that actu­ally enters into the collective possessions of modern people is—their national debt. Hence, as a necessary consequence, the modern doctrine that a nation becomes the richer the more deeply it is in debt. Public credit becomes thecredo of capital. And with the rise of national debt-making, want of faith in the national debt takes the place of blasphemy against the Holy Ghost, which may not be forgiven.
As with the stroke of an enchanter’s wand ... [the public debt] endows barren money with the power of breeding and thus turns it into capital, without the necessity of its exposing itself to the troubles and risks inseparable from its employment in industry or even in usury. The state creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on function­ing in their hands just as so much hard cash would. . . .
As the national debt finds its support in the public revenue, which must cover the yearly payment for interest, &c., the modern system of taxation was the necessary complement of the system of national loans. The loans enable the govern­ment to meet extraordinary expenses, without the taxpayers feeling it immediately, but they necessitate, as a consequence, increased taxes. On the other hand, the raising of taxation caused by the accumulation of debts contracted one after another, compels the government always to have recourse to new loans for extraordinary expense. Modern fiscality ... thus contains within itself the germ of automatic progres­sion. Overtaxation is not an incident, but rather a principle."

Hunter Lewis is the author of two new books, Free Prices Now! and Crony Capitalism in America 2008-12. He is also the co-founder of global investment firm Cambridge Associates LLC.

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