The Great Economists Page 7

  But just a few years later, the government backtracked, deciding that Jewish attorneys would not be allowed to work in private practice. Heinrich decided to change his religion. He was not alone. Most of the leading families of the eighteenth-century German Jewish community had converted to Christianity by the 1830s. Most chose Catholicism, but Marx’s father opted for Protestantism because he was an adherent of the Enlightenment whose library included works such as Thomas Paine’s Rights of Man. He was among the Protestant intellectual middle class who wished to reconcile the rationalism of the Enlightenment with religious tenets.

  Still, the Marx family were held in esteem. Typical of the German middle class, Heinrich Marx established his law practice with the dowry of his bride, Henriette Pressburg, who came from a well-to-do family. Karl Marx’s mother was from the Netherlands and his aunt had married Lion Philips, whose grandsons were the founders of the eponymous Dutch electronics giant. Also, Heinrich Marx received from the Prussian government the title of Justizrat, or judicial councillor, which was a highly desired honorific for an attorney. Their family’s social position led Karl’s sister Louise to reveal later that she was ‘extremely embarrassed’ to have a communist leader for a brother.6

  At a time when few were able to enrol in secondary education, Marx studied at the Trier Gymnasium. This preparatory school was at the pinnacle of the German educational system. He studied French instead of Hebrew for his third language after Latin and Greek, reflecting his father’s wish that he pursue a legal rather than theological career. It led to French culture and history becoming an integral part of his ideas. He received high grades on his German and Latin exams, but, somewhat ironically, he did poorly in mathematics, an important element of modern economics.

  After completing his secondary education, Marx enrolled at the University of Bonn. But, shortly thereafter, in 1836, he left for the University of Berlin and became engaged to Jenny von Westphalen back home in Trier. Her father, Johann Ludwig von Westphalen, was a senior Prussian bureaucrat and aristocrat. Following the suppression of the Revolution of 1848–49 against Prussian rule, her family lived as political refugees in London for a decade while her half-brother Ferdinand was the Prussian Minister of the Interior. But the social differences between the Westphalens and the Marxes were not great. Jenny’s father’s salary was less than that of Heinrich Marx. Thus, Jenny did not have a substantial dowry and Karl Marx was facing a decade without any income. In that light, his engagement could be considered an act of rebellion against nineteenth-century bourgeois society. There would be more to come.

  Marx’s PhD thesis was a comparison of the theories of nature found in the writings of Greek philosophers. It was slow going, and by the time Marx had finished it he had exceeded the statutory maximum of four years and had not applied for an extension. He submitted it instead to the University of Jena, the only German university that required neither a residence period nor a formal defence of the dissertation. It also boasted the lowest fees for granting a doctorate, which Marx received in April 1841.

  Aged twenty-three, Marx returned to his native region to become a freelance writer after he had encountered the ideas of Georg Wilhelm Friedrich Hegel at university and joined a group known as the Young Hegelians. Formed by students after Hegel’s death in 1831, they were a radical group who were disillusioned with the Prussian state and sought to undermine it with revolutionary ideas. Like other Young Hegelians, Marx abandoned any thoughts of an academic career. His father was not upset by his interests, though he believed his son was misguided. But he condemned his son for excessive spending. It led Marx to harbour a sense of grievance that he would not receive financial support during his parents’ lifetimes: ‘I have had … a falling out with my family, and, as long as my mother lives, I have no right to my fortune.’7 He faced the prospect of no inheritance as well as no assets during a time when he also had little income.

  A year later, Karl Marx found his first job. He became the informal editor for six months in 1842–43 of the Rhineland News, which introduced him to communist ideas. Marx enjoyed being a newspaper editor. For much of his life, journalism was the base for not only his livelihood but also his political activism. Marx wrote of the economic conditions: ‘that Germany is poor in people who are economically independent, that 9/10 of educated young men must beg the state for bread for their future, that our rivers are neglected, that shipping is in wretched condition, that our once blossoming commercial cities are no longer flourishing.’8

  In 1844 Marx began his lifelong collaboration with Friedrich Engels. Marx was residing then in Paris. He and his new wife had moved there a year earlier as he had few employment options in Germany and they decided to leave for more tolerant France. Engels and Marx had previously corresponded as they shared similar ideas. So, Engels stopped in Paris en route from England to Germany to meet Marx. What was supposed to be a brief encounter ended up lasting ten days.

  While working diligently for the family firm in Manchester, Engels became increasingly sympathetic to communism. Manchester was the global symbol and centre of Britain’s Industrial Revolution. Engels’s mistress was an Irish immigrant named Mary Burns, who had been both a factory worker and a domestic servant. Through her and his work at his family’s Ermen & Engels cotton plant, Engels observed that industrialization generated not only enormous wealth but also misery. There was a stark contrast between the suburban homes of the capitalists and the factory workers’ slum neighbourhoods. In 1845 he published The Condition of the Working Class in England about his experiences, in which he described the exploitation of the industrial workers employed in factories and mills who produced the capitalists’ wealth. So, Engels led a double life. He was a typical capitalist with a bourgeois family, but at the same time, he was a revolutionary who associated with and financed politically dangerous people, including Marx.

  In January 1845 Karl Marx was expelled from France after the Prussian government protested against some of his commentary. There were standing orders to arrest him should he set foot in Prussian territory. Since he was given just ten days to leave the country, his pregnant wife was left behind to sort out their affairs. The Marx family moved to Belgium, where other German dissidents were residing, and stayed for three years.

  By the middle of 1846 Marx had pawned all of their gold and silver due to his worsening financial situation. Engels was in equally difficult circumstances, having moved to Brussels to organize German workers with Marx, and was dependent on a monthly cheque from his father. Marx had to give up his apartment and move into furnished rooms at a hotel which meant employing fewer servants. Throughout his life, Marx’s economic ‘woes’ were a very benign sort of genteel poverty. An additional expense was due to his being an aspiring political leader. Followers expected financial support and being accommodated as guests. Ironically, Marx’s anti-bourgeois and communist beliefs made him reluctant to continue to depend on wealthier friends and supporters in Cologne who had previously sent him money. Marx tried to support himself as a freelance author, but press censorship in Germany made it almost impossible for him to get published.

  It was at this time that he wrote his best-known work. Asked to do so by the Communist League, Marx penned the Communist Manifesto in collaboration with Engels. The pamphlet was published in February 1848 and it concludes: ‘Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win.’9

  The final sentence proclaimed: ‘Working Men of All Countries, Unite!’10 It is sometimes translated as: ‘Workers of the World, Unite!’ or ‘Workers of All Lands, Unite’. This exhortation is engraved on Marx’s gravestone.

  In the Manifesto, Marx and Engels set out a ten-point guide for a future communist government, including the abolition of inheritance rights and the creation of a state bank with a monopoly on credit. Their version of communism stressed the revolutionary process of creating a new regime, which was radically different from competing
forms of socialism. In fact, they denounced socialism as simply a merely reactionary critique of capitalism.

  Marx expected capitalists to refuse to cooperate with such a communist government. It would result in an economic crisis that would enable the government to undertake more drastic measures. Marx believed that crisis led to revolution, which was what had happened with the overthrow of the monarchy and the proclamation of the First French Republic in 1792. (It was short-lived. In 1804, Napoleon Bonaparte declared himself Emperor of the First Empire of France, which collapsed in 1815.)

  In a historical parallel, after the publication of the Manifesto, the 1848 Revolution which Marx supported led to the establishment of the Second French Republic. It was a new and radical form of government in Europe, which was welcomed by revolutionaries.

  Marx did not have time to celebrate. In March 1848 he was exiled again, this time being given just twenty-four hours to leave Belgium. In fact, the police jailed him and his wife before then. Both were released the next day but had to leave the country immediately with their children, abandoning all their possessions.

  Just a few weeks later, however, Marx and the other leading figures of the Communist League were in Paris at the invitation of the French Republic. Germany and Austria were also drawn into the revolutionary movement. It was then possible for exiled German radicals like Marx to return home, so he moved to Cologne and became the editor of the New Rhineland News. The post gave him a platform for his Manifesto ideas, including a call for a workers’ revolution in Germany. It never happened. Instead, Marx stood trial for his insurgent activities and was expelled from Germany the following year.

  Along with other activists of the 1848 Revolution, he moved in 1849 to London, which had a liberal policy on political refugees. Marx had fallen out with the Communist League by then. He was only thirty-one and intended to return to Germany and continue his revolutionary activities, but instead he remained in England until his death.

  At the time, London had 2.4 million inhabitants, which made it the world’s most populous city. The British capital was the centre of capitalism. Whatever happened at the Bank of England and the London Stock Exchange affected the world economy.

  Marx spent time in the working-class neighbourhoods of London’s East End, which was home to a large number of immigrant Germans. His family lived in Soho, which was then an immigrant, bohemian area of central London. He founded a journal similar to the one that he had edited in Cologne, The New Rhineland News: Review of Political Economy, which he sought to circulate in Germany. Meanwhile, the Marx family became increasingly impoverished, Jenny Marx observing: ‘Conditions here are completely different from Germany. All six of us live in one room, with a little study attached, and pay more each week than for the largest house in Germany [in one month].’11

  Although the Marx family struggled to pay for food, the children had a governess and a maid, which was not atypical for those living in genteel poverty. But they suffered tragedies. Three of the four children born in London died before reaching adulthood, while two of the three born in Brussels survived.

  Professionally, there were also blows. In 1851 Louis-Napoléon Bonaparte came to power in France through a coup d’état. While serving as President of the French Republic, Napoleon Bonaparte’s nephew titled himself Emperor Napoleon III. In reaction, Marx wrote a pamphlet, The Eighteenth Brumaire of Louis Bonaparte, which opens with the phrase that history repeats itself ‘the first time as tragedy, the second time as farce’.12 But it had minimal impact due to Marx’s exile and the imprisonment of his followers in Cologne.

  At least finances soon improved for the Marx family. From 1853 to 1862 Marx was a correspondent for a number of newspapers and was able to move the family to a new home in Kentish Town in north London. His reporting on the Crimean War of 1853–56 and other foreign events raised his profile, as he wrote observations such as: ‘Has [the bourgeoisie] ever affected a progress without dragging individuals and peoples through blood and dirt, through misery and degradation?’13

  The war confirmed his belief that a revolution would be triggered by economic crisis – and the first global crisis finally occurred in 1857. A crash in railroad stocks in the US led to the Panic of 1857, which dragged down investors not only in America but globally. Banks in England, France and elsewhere in Europe were affected since financial markets had become interlinked. Jenny Marx observed how this crisis ended the long period of gloom for Marx that had lasted since the death of his eight-year-old son in 1855. Engels even told Marx he was concentrating on riding and shooting to prepare for a forthcoming revolution. But economic recovery started a year later in 1858 and the economic crisis did not lead to revolution. It did, however, lead Marx to become politically active once again.

  The recession also caused his employer, the New York Tribune, to cut back on its European correspondents. As a sign of desperate times, in 1862 Marx even sought a position in business! After being turned down for a job at a London railway in his first foray into the business world, Marx was helped financially once again, and not for the last time, by Engels.

  A year later, in November 1863, his mother passed away and Marx obtained his inheritance. Unexpectedly, a political ally, Wilhelm Wolff, also passed away in exile in Manchester and bequeathed to Marx the bulk of his assets. The family was able to move to a larger house, despite the fact that Marx still had no steady income. It was fortunate because Marx experienced a sudden deterioration of his health that year. He suffered from carbuncles, boils on the skin which were worsened by stress. It meant that he became an observer and not an active participant in the political upheavals in the next two years, which included the American Civil War and the Polish uprising against Russia.

  Regardless, Marx’s influence spread. He became involved with the International Working Men’s Association (IWMA), known as the First International, formed by an array of European workers’ societies. It was followed by the 1889 Socialist or Second International, and the Third Communist International of 1919. The IWMA drew from Marx’s theories, particularly the two books published in his lifetime: A Contribution to the Critique of Political Economy of 1859 and the first volume of Capital: Critique of Political Economy, published in 1867. Volumes 2 and 3 of Capital were edited by Engels posthumously.

  Ironically, Marx’s daughter Laura became involved with a radical French student living in exile who was a member of the International Working Men’s Association. Marx had some trouble with this since his daughters had been prepared for bourgeois marriages. They eventually married, and Engels ended up supporting their family too.

  Marxism

  It was after the 1857 global crisis that Marx began writing his treatise on political economy, A Contribution to the Critique of Political Economy, which was published two years later. He analysed the ideas of the leading political economists of the day, particularly Adam Smith and his chief disciple, David Ricardo, as well as Thomas Malthus, Jean-Baptiste Say and James and John Stuart Mill, among others.

  Somewhat surprisingly, Marx admired Ricardo, calling him ‘the greatest economist of the nineteenth century’.14 Even though Ricardo was a capitalist, Marx shared his belief in a conflictual course of capitalism. Recall from the previous chapter that Ricardo saw an inevitable conflict between the classes due to international trade. At the heart of Marxism was also a complex class society whose inherent inequalities provided the seeds of its self-destruction. Marx predicted that would lead to the end of capitalism; he believed that Ricardo just hadn’t taken his analysis to its conclusion.

  Marx’s ‘theory of surplus value’ helps explain his involvement with trade unions and how the end of capitalism comes about. He argued that inputs such as machinery, fuel and raw materials made up a growing part of the cost of production relative to the wages paid to workers. Meanwhile, as production became more mechanized, demand for labour would fall, creating unemployment. The unemployed constituted a ‘reserve army’, depressing wages for all workers since the unemplo
yed could be hired to replace any worker who demanded higher pay. More expensive machinery also meant that factories needed to run for longer hours to be profitable. By contrast, unions advocated shorter working hours, which were beneficial for workers but reduced the capitalists’ profit. Marx believed that declining profits and labour unrest would lead to the end of the capitalist system.

  It was the lack of a revolution after the global crisis of 1857 that led Marx to play down the importance of crises in bringing about the end of capitalism. Marx had originally predicted the rise of a capitalist system, characterized by unrest and crisis, which would lead to its destruction. Now he began to stress the importance of inequality, particularly the misery of the working class. Marx documented the many instances of exploitation and poverty that existed in stark contrast to the industrial output fuelling the growing wealth of the upper classes, particularly in Great Britain from the mid-1840s to the mid-1860s. He cited how, in 1863, a woman was reported to have worked herself literally to death cleaning dresses for ladies preparing for a royal ball.15 (Though he omitted to mention his own financial dependence on the capitalist Ermen & Engels textile mill and its workers.)

  Marx and Engels thought that revolution would come from the most advanced economies because that is where the capitalist crisis was most likely to occur. In their view, workers were unlikely to attain power peacefully. A violent revolution would follow. Marx saw a parallel with the Civil War in America, where Southern slaveholders started a war when anti-slavery advocates came to power.