Varieties of Capitalism from the Perspectives of Veblen and Marx

By Hodgson, Geoffrey M. | Journal of Economic Issues, June 1995 | Go to article overview
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Varieties of Capitalism from the Perspectives of Veblen and Marx


Hodgson, Geoffrey M., Journal of Economic Issues


The Economist proclaimed on December 26, 1992, that "the collapse of communism brought universal agreement that there was no serious alternative to free-market capitalism as the way to organise economic life." What has emerged is the view that we are at "the end of history" [Fukuyama 1992]. The aim of this essay is to challenge this idea and to argue that these pronouncements ignore the tremendous variety of forms of capitalism itself. Through a comparison of the ideas of Karl Marx with those of Thorstein Veblen, it is argued that the institutional approach provides an important counter to the currently fashionable view of universal convergence to a single variety of capitalism.

Karl Marx and the Triumph of Capitalism

In contrast to the classical and neoclassical economists, Marx held that ahistorical categories such as "utility," "choice," and "scarcity" cannot capture the essential features of a specific economic system. Accordingly, Marx [1971; 1973b] argues that core analytical categories should be abstract expressions of real and specific social relations.

Marx contends that several types of economic system have existed including feudalism, capitalism, and socialism. Capital is not about economic systems in general, nor even socialism, but the capitalist mode of production. Marx's economic analysis starts from what he regards as the essential social relations of this system. This is clear from the key words in the titles of the opening chapters of Capital: commodities, exchange, money, capital, and labor power. Capitalism for Marx is an economic system in which most production takes place in capitalist firms, most products are typically exchanged on the market, and "labor generally appears as wage-labor." Essentially, "the relationship of capital to wage-labor determines the whole character of the mode of production" [Marx 1981, 1019]. Marx's aim is not to analyze any specific variety of capitalism but capitalism in general. The dynamism of capitalism is attributed to its general relations and structures rather than to national or cultural specificities. Cultural and structual variation is recognized by Marx, but it does not play a core analytic role in Capital.

However, there are major problems with Marx's approach. At crucial stages in his argument, he has to fall back on transcendental, ahistorical concepts. For instance, the concept of capitalism itself invokes the ahistorical concept of the mode of production. Also Marx affirms the ahistorical concept of labor as the life blood of all economic systems.(1) Contrary to his own arguments, Marx still ends up relying on concepts and theories that are in fact universal. Indeed, such an invocation is unavoidable.(2)

When analyzing the capitalist system, Marx assumes away all the noncapitalist elements in that system. This is not merely an initial, simplifying assumption. They are never reincorporated at a later stage of the analysis. This is because he believes that commodity exchange and the hiring of labor power in a capitalist firm will become increasingly widespread, displacing all other forms of economic coordination and productive organization, as proclaimed in a famous passage in the Communist Manifesto (Marx 1973a, 70]. Faith in the all-consuming power of capitalist markets is Marx's justification for ignoring the recognized impurities within the capitalist system. These are regarded as doomed and extraneous hangovers of the feudal past. Just as capitalism and commodity-exchange are assumed to become all-powerful, the theoretical system is built on these structures and relations alone.

Yet crucial subsystems within capitalism are unlikely ever to become organized on a strictly capitalist basis. Consider the family. Contrary to Marx, there are practical and theoretical limitations to the operation of markets within that sphere. If the rearing of children was carried out on a capitalist basis, then they would be strictly owned as property by the owners of the household "firm" and eventually sold like slaves on a market.

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