Marx a lesson only in the dangers of human pessimism - The Centre for Independent Studies
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Marx a lesson only in the dangers of human pessimism

Elmer Funke Kupper wrote on these pages on Tuesday that Karl Marx and Friedrich Engels’ Communist Manifesto is essential reading for business executives even today. But the most valuable lesson from the pair’s diatribe is not the danger of capitalism but the danger of human pessimism.

Marx was fundamentally negative about the future – and the consequences of capitalism, free trade and technology for workers. Ultimately, he believed market competition would force employers to continually reduce their workers’ wages or replace them with machines, leading to an eventual collapse in wages and mass unemployment.

We know his dystopian vision proved to be spectacularly wrong.

Marx failed to predict that technology and innovation would lead to unprecedented advances in human productivity – which has spurred the creation of new and better jobs, real wage growth and huge improvements in living standards across the world.

In fact, rather than devaluing labour, market competition encourages businesses to employ more productive, highly skilled workers – who can demand higher wages.

Nevertheless, in some ways, we shouldn’t be surprised that Marx couldn’t foresee any of this.

Writing at a time when farming was done with horse, plough and scythe, he could not predict the invention of the tractors and harvesters that would revolutionise agricultural production. And at a time when mining was done by men down dirty and dangerous shafts, he could not have imagined the robots and autonomous vehicles that have created more technical, specialised jobs in the industry and made it much safer. Nor did Marx anticipate the huge rise in interesting, cognitive-based jobs – such as data scientists, engineers, IT technicians, radiographers and auditors.

Marx was writing at the height of Britain’s industrial revolution, when factory jobs were often tough, dangerous and monotonous – and low-paid.

Yet, he failed to grasp that industrialisation was not a static phenomenon, but a temporary stage of economic development that would lead to a brighter future.

Booming middle class

Between the 1840s (when the Communist Manifesto was published) and 1910, it is estimated that average real wages in Britain more than doubled. Working conditions improved as well. And importantly, capitalism proved to be incredibly adaptable; it didn’t cease to exist when child labour became taboo or when working hours were regulated.

And human progress has accelerated further in more recent times; as developing countries have undertaken the same, messy process of industrialisation that Britain did in the 19th century. Consequently, we have seen more than a billion people lifted out of extreme poverty since 1990, and a booming middle class across much of Asia.

But despite this incredible rate of human advancement, the same old anxieties about free trade and technological unemployment have re-emerged today.

Yet there is no more reason than in Marx’s time to believe that capitalism cannot work for and benefit ordinary people in the future.

The problem is that today’s economists and theorists are unlikely to be any better at predicting the future than Marx was – and are often just as pessimistic. Estimates of future job losses from technology range anywhere from a few million to over 2 billion by 2030. But it is far easier to predict the destruction of old jobs than the creation of new ones.

Even if technology, robots and AI eventually swallow up huge swathes of traditional blue-collar jobs (or even white-collar jobs for that matter), human needs and wants are limitless. There will always be demand for workers with certain skills or attributes. The challenge is how to ensure our workforce has the right skills and capabilities for the future.

And this is one thing that Marx was actually right about: the plight of low-skilled workers, at risk of being displaced by free trade and technology, should not be ignored.

History tells us that most workers will eventually transition to higher-value jobs in other industries; but this transition is not always easy or painless – especially if workers are unable to up-skill, undertake new training or re-locate for work.

And ignoring these transitional problems is a sure path to nurturing distrust in our economic system; clear in the election of Donald Trump on a distinctly anti-free trade platform.

The problem of low-skilled workers deserves attention. But it doesn’t justify the crisis of faith in capitalism or free trade seen today, even in successful, market-based economies like Australia.

Marx’s Communist Manifesto may have been published 170 years ago, but his pessimism about the future of capitalism remains as misguided now as it was then.

Eugenie Joseph is a senior policy analyst at the Centre for Independent Studies.