Neo-Marxism and Post-Keynesian Economics

From Kalecki to Sraffa and Joan Robinson

Ludo Cuyvers

• Publisher: Routledge
• Year: 2022
• Print ISBN: 9781032254821
• eBook ISBN: 9781000600469
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Piero Sraffa and Joan Robinson, both iconic Cambridge economists, were highly influenced by the economic theory of Karl Marx, and integrated important elements of Marx's economic system into their theories. This book argues, based on published and unpublished documents, that the work of Sraffa and Robinson can in fact be considered as essentially post-Keynesian neo-Marxist.

The first part of the book reviews the intellectual development of several key thinkers to this neo-Marxist current in economic thought: Kalecki, Steindl, Baran and Sweezy. Part One and Part Two separately examine Robinson and Sraffa's works and questions how they fit into this specific neo-Marxist current, either building on it (in Robinson's case), or following another direction (in Sraffa's case). Part Three observes Robinson's theory of economic growth and its relationship to the views of Marx and Kalecki. Overall, Cuyvers demonstrates how their thought processes share characteristics with neo-Marxist key ideological ideas, such as stating or implying the labour theory of value as either redundant or wrong, emphasising the role of class struggle in the distribution of income and rejecting Marx's falling rate of profits.

Following on from ideas briefly introduced in Cuyvers's Economic Ideas of Marx's Capital (2017), this book will particularly appeal to readers interested in the history of economic thought, the work of Sraffa, Robinson and Marx, post-Keynesian economics and neo-Marxism.

Part 1 Post-Keynesian neo-Marxism: the trajectory

DOI: 10.4324/9781003283416-1

When Paul Sweezy, the famous éminence grise of the Marxist economists, delivered his Marshall Lecture at Cambridge University in 1971, he reviewed the “alternative approaches” to the “late capitalist reality” and organised them under three headings: the heterodox bourgeois, the traditional Marxist, and the neo-Marxist (Sweezy, 1971: 30). When he then elaborated on the neo-Marxist approach, he stated that he was “not particularly wedded to the label” and explained:

I use it not to designate a group which is in some sense less genuinely Marxist than others – though clearly some may be – but rather a group which is less convinced of the adequacy of Marxist theory as it has been inherited from the past.

(Sweezy, 1971: 39).

Indeed, in the 1950s and 1960s, it seemed as if a distinct, fresh current in economic thought was forming. This new current originated in the application of John Maynard Keynes’s insights on macro-economic mechanisms to the theories of Karl Marx about the working of the capitalist economic system and the appropriate way to analyse that system. The main proponents of this new approach were convinced that capitalism had changed dramatically since Marx’s time. During much of the nineteenth century, capitalism had been based on cut-throat competition between capitalist enterprises. This had changed in the twentieth century; many markets were now dominated by just a few large capitalist players.

Together with the theoretical challenges that the realities of modern capitalism posed, Marxist economic theory was also challenged by the theoretical and methodological problems related to how Marx had “transformed” his values of Volume I of Capital into the prices of production of Volume III.

The changes in capitalism had evidently not gone unnoticed by Marxists. In Das Finanzkapital (1910), Rudolf Hilferding had elaborated on how the rise of corporate capitalism is an inevitable consequence of the competitive advantages of large-scale production, which, in turn, pushes the banks into becoming major shareholders of the joint stock companies. He argued that the “development of capitalist industry produces concentration of banking, and this concentrated banking system is itself an important force in attaining the highest stage of capitalist concentration in cartels and trusts” (Hilferding, 1981: 223). This concentration, in his opinion, changed the nature of economic crises with “the disruption of credit (…) not (…) as complete as in crises of the early period of capitalism” (Hilferding, 1981: 290). He further argued that cartels do not eliminate crises: they divert the main burden of a crisis to the non-cartelised industries. And with the increasing cartelisation, the role of the capitalist state in safeguarding the domestic markets from foreign competition, as well as in promoting the penetration of foreign markets, becomes crucial. This, then, leads to the export of capital and the struggle for foreign markets and economic territory, in other words, to imperialism.

The changes in the nature of capitalism were also analysed by Rosa Luxemburg in her Die Akkumulation des Kapitals (1913). She looked into great detail on the conditions for the expanded reproduction of the capitalist economic system, which she saw as closely linked to the expansion of “effective demand” (Luxemburg, 1913: 131). Her conclusion was that with the accumulation of capital, the demand for consumer goods by the workers will lag the increased output of these goods, that goes with the growth of the means of production that are put in operation. This tendency towards “underconsumption” can be neutralised as long as “external markets” exist. She, therefore, like Hilferding, pointed to the role played by the exports of capital to the non-capitalist part of the world and by the struggles for territory between imperialist powers, but, interestingly, also to the role of armaments spending as a kind of domestic or internal “external market” (Luxemburg, 1913: 458ff.).

Neither Hilferdings’s nor Luxemburg’s analysis investigated the nature itself of the competitive process between large companies, i.e., the “micro-foundations of macroeconomics”. Since much of the dynamics in Marx’s model of capitalism was based on competition, it was natural to conclude that the model needed revision as a result of the emergence of oligopolistic firms. In 1926, in a seminal paper published in the Economic Journal, the otherwise unknown Piero Sraffa wrote that in Marshallian economic theory, the idea of a downward sloping average cost curve due to a “greater internal division of labour, which is rendered possible by an increase in the dimensions of an individual firm, was entirely abandoned, as it was seen to be incompatible with competitive conditions” (Sraffa, 1926: 537–538). The author argued that “external economies but internal to the industry”, i.e., the economies that were supposed to lead to the downward sloping part of the cost curve of the companies under consideration, “constitute precisely the class which is most seldom to be met with” (Sraffa, 1926: 540) and concluded with the necessity “to abandon the path of free competition and turn in the opposite direction, namely, towards monopoly” (Sraffa, 1926: 542). He suggested that the actual conditions in industries

generally do not fit exactly one or other of the categories, but will be found scattered along the intermediate zone, and that the nature of an industry will approximate more closely to the monopolist or the competitive system according to its particular circumstances, such as whether the number of autonomous undertakings in it is larger or smaller, or whether or not they are bound together by partial agreements, etc.

(Sraffa, 1926: 542)

At Cambridge, Sraffa’s paper resulted in new and intense research on “imperfect competition”. Joan Robinson started in 1930 what was to become her The Economics of Imperfect Competition. The book came out in 1933, and in the same year, in the United States, Edward Chamberlin’s The Theory of Monopolistic Competition was published.¹ In the foreword to her book, Robinson stated:

Mr. Sraffa’s article must be regarded as the fount from which my work flows, for the chief aim of this book is to attempt to carry out his pregnant suggestion that the whole theory of value should be treated in terms of monopoly analysis.

(Robinson, 1933: xiii)

The theoretical as well as the more empirical and descriptive work on oligopolies and monopolistic competition, further strengthened the belief among Marxist-oriented economists that capitalism had entered a new phase and that Marx’s theory had to be revised. With the publication of Keynes’s The General Theory of Employment, Interest and Money in 1936 and the spread of its ideas, some of these economists, mainly under the influence of Michał Kalecki’s views, analysed the economics of “monopoly capitalism” and formulated theories that I will henceforth refer to as “post-Keynesian neo-Marxist”. Apart from Kalecki, mention should be made of Josef Steindl, Paul M. Sweezy, and Paul A. Baran.

It is true that today “post-Keynesian neo-Marxism” cannot be considered as a separate school of thought but is part of the post-Keynesian heterodox school. However, as I also showed elsewhere (Cuyvers, 2017), the ideas and hypotheses put forward by its main representatives, particularly in the 1950s and 1960s, were very important in shaping post-Keynesianism. These authors aimed at explaining the stagnation of the mature capitalist economies and the role of imperialism, by integrating Keynesian and Marxian insights (Cogoy, 1987). Since then, neo-Marxist insights have been evolving and authors working along these lines, first and foremost, now consider themselves post Keynesians – the drop of the hyphen between “post” and “Keynesian” marks the difference with the original post Keynesians. One should not forget that we are living in the post-Soviet bloc era and that ideological stances have changed. At present, the vast majority of the post Keynesians who are sympathetic to Marx’s work (many of them are much less sympathetic) will probably agree with Geoff Harcourt who always stressed the line of descent going from Marx to Sraffa and argued that “the Marxian stream is the most appropriate one, both for interpreting Sraffa’s own views and inclinations” (Harcourt, 2018: 89).

What was largely, although not entirely, left untouched by the second-generation Marxists such as Hilferding or Luxemburg,² was Marx’s theory of value and of exploitation. Of course, some well-known critics of Marx’s economic theories had pointed to the “the transformation problem”, i.e., how the values of Volume I of Marx’s Capital are transformed into the prices of production of Volume III. This problem that was considered as a serious theoretical inconsistency, received its importance, because of the 1896 essay by von Böhm-Bawerk, Zum Abschluss des Marxschen Systems (von Böhm-Bawerk, 1896), after he had already stated in his Kapital und Kapitalzins, well before Volume III of Capital was published, that Marx’s transformation problem was insolvable and that Marx knew it could not be solved (von Böhm-Bawerk, 1890: 389–390).In the early years of the twentieth century, a number of economists explored a mathematical treatment of Ricardo’s (and hence Marx’s) theory of value. We find this, fo...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of figures
• Preface
• Part 1 Post-Keynesian neo-Marxism: the trajectory
• Part 2 Piero Sraffa’s neo-Marxist theory of value and distribution
• Part 3 Joan Robinson: Modelling capitalist economic growth with Marxist and neo-Marxist ingredients
• Index