Two Takes on Class Conflict

by Chidem Kurdas

A presentation at this week’s NYU Colloquium by Ralph Raico, professor of history at the State University of New York Buffalo, generated a thought-provoking discussion.  His paper traces the early-to-mid 19th century development  of the classical liberal theory of class conflict—which long predated Marx and is different from class conflict in the Marxian sense.

Marx and his followers identified class conflict as something that happens in the market economy, where the owners of capital appropriate value produced by workers. This market-based notion of class still dominates public discussion, with the state regarded either as a capitalist tool or possibly a mediator between capital and labor.

By contrast, from the classical liberal perspective the state and the groups that control it are the central players. Using the power to tax and regulate, the governing class appropriates society’s wealth, spends it ways to benefit itself and doles it out to political supporters. It is this old concept that makes sense of today’s economic conflicts, from riots in Greece to the rise of Tea Partiers in America.

“Class” has so many different – and overlapping –  meanings that some say it is a useless term. “Class warfare” as commonly used today can describe the opposed interests of managers vs. workers, the rich vs. the poor, shareholders vs. employees or cultural distinctions like Joe six-pack vs. cosmopolitan intellectual. At the Colloquium, Israel Kirzner, professor emeritus of economics at New York University, argued that the term adds nothing.

Yet it can be a handy tool, say, to express the conflict of interest between taxpayers and public sector unions. As Adam Martin pointed out, the old notion of political class is well and alive in public choice economics.  This research program explains key features of collective action such as why legislation caters to the interests of small, homogeneous groups with strong common interests at the expense of the population at large.  Public choice  is “politics without romance” according to James Buchanan, a founder.

Early 19th century classical liberals used vivid words like plunderers vs. producers to depict the political extraction of value—as when a lord’s armed posse “taxed” merchants.  Nowadays we use more neutral terms, the system is infinitely more complicated and tax collectors are more genteel—arms come into play only when a taxpayer proves intransigent.  But the central activity is the same: income is appropriated and distributed to the benefit of the politically favored.

Greek government employees recently went on strike and protested the austerity measures meant to alleviate the country’s debt problem.  Whether we call them an interest group, a distributional coalition or a political class, their interests are against taxpayers who have no government sinecure.  That is class conflict in the pre-Marxian sense.

Despite his all-pervasive influence on the way people thought of class in 20th century, Marx himself did not have a coherent theory and on occasion reverted back to the liberal concept. Professor Raico gives a quote that looks like it could have been written by a classical liberal but is from Marx, who described the French government as a parasite living on the rest of society: “with its enormous bureaucracy and military organization, with its ingenious state machinery …”

The old understanding of class has great explanatory power—even Marx could not completely break from it.

23 thoughts on “Two Takes on Class Conflict

  1. The concept of class or something close to it is very old in legal and political theory and practice. The “industrialist” liberals of early 19th century France analysed by Ralph Raico basically took the concept from the law of the Ancien Régime and from the revolutionnary rethoric and practice. Thus of the three orders or états that shared more or less the power before the Revolution since the establishment of feudalism, only one – the third – was considered productive while the first two were considered parasitic and destined to be eliminated. But this didn’t always led to liberal conclusions. Later on Saint-Simon and Auguste Comte also used Charles Dunoyer and Charles Comte’s language, but they thought that the leading group of the industrial class – the big businessmen and the bankers – shoud rationally plan in cooperation with the state the economy. Guizot and Thierry, as historians, interpreted history as a class struggle around different ownership relations, much like the next wave of historians will interpret history in term of fight for nationhood, but in their work and politics held that the bourgeois was the leading class. They were the people who inspired Marx’s theory of classes, which he combined with elements of the thinking behind the functional classes found in the classical economists’ theory of income distribution, giving him an economic theory of history.

  2. In the early 19th century, the classical liberals in France developed a fairly clear conception of “class warfare.”

    For example, in 1816 and 1817 Charles Dunoyer, distinguished between two groups in society. One of them he called the “Nation of Industrious Peoples” composed of:

    “farmers, merchants, manufacturers, and scholars, the industrious people of all classes and nations. In the other, there are the major portions of all the old and new aristocracies of Europe, office holders, and professional soldiers, the ambitious do-nothings of all ranks and nations who demand to be enriched and advanced at the expense of those who labor.

    “The aim of the first is to extirpate from Europe the three scourges of war, despotism, and monopoly, to ensure that men of every nation may freely exercise their labors, and finally, to establish the forms of government most able to guarantee these advantages at the least cost. The unique object of the second it to exercise power, to exercise it with the greatest possible safety and profit, and, thus, to maintain war, despotism, and monopoly.”

    In other words, society is composed of one set of people who work and save and who produce and exchange, and another set of people who wish to acquire and consume what others have saved and produced. The latter group acquires the wealth produced by those others through political means — taxation, regulation, and government-bestowed privileges that interfere with the natural course of free market forces. And this source of injustice is the same in every country.

    As the French economist, Jean Baptiste Say, stated in his “Letters to Mr. Malthus”:

    “I know that certain governments, corrupted and corrupting, stand in need of monopolies, and customs duties, to pay for the votes of the honorable majorities which pretend to represent nations: I am know so unreasonable to expect them to govern so entirely according to the general interest, as to be able to obtain votes without paying for them; but, at the same time, why should I be astonished that such systems have deplorable consequences?”

    Richard Ebeling

  3. Bogdan, Raico’s paper (available on the Consortium link in the posting) describes the changes in the mindset of some of the “industrialist” liberals. I did not go into the details of the writings of various members of the group. If I had to choose one as offering a consistent view, it would probably be Jean Baptiste Say.

  4. Richard, the quote you have from Charles Dunoyer summarizes in a nutshell how this group of early 19th century classical liberals saw class conflict. It is a good quote, as is the one from Jean Baptiste Say’s letter to Malthus.

  5. It might be worth noting that this class analysis is most decidedly not methodological individualism!

  6. Gene,

    This is the problem. Yes, class per se is not compatible with methodological individualism. But individuals acting purposefully in a certain social role (cf. Alfred Schultz) is. I think Joseph Agassi’s article on MI convincingly “elaborates” the meaning of methodological individualism so that it excludes mainly such horrors as standard macroeconomics, rather than all social role analysis.

  7. It’s nice to see someone promoting classical liberal class theory, but I disagree that it’s incompatible with the idea of the state as a capitalist tool.

    Free market thinkers Thomas Hodgskin, Benjamin Tucker and Franz Oppenheimer all shared an identification of exploitation with use of the “political means” to wealth, but they saw capitalists as the leading component of the ruling class that had captured the state and used it to intervene in the market. In this theory, the primary function of the state is to enforce artificial property rights and artificial scarcity, so that owners of capital and land can accrue monoipoly rents. The result is to increase the price of land and capital relative to labor, to make them artificially scarce and expensive for labor, and thereby force labor to sell itself in a buyer’s market.

    You might check out Roderick Long’s article, “Toward a Libertarian Theory of Class” (Social Philosophy & Policy, Summer 1998).

    Click to access libclass-theory-part-1.pdf

    Click to access libclass-theory-part-2.pdf

  8. Gene- That’s a big question. It depends on how a group is understood. The issue is the method you use, not just the fact that you’re talking about an aggregate of individuals.

    In the Marxist sense, a class is understood in terms of its role in production. There is not much about individuals, it is the aggregate that is the actor. Not so in public choice analysis of interest groups. That theory starts with individuals’ incentives and choices.

  9. Kevin — “but I disagree that it’s incompatible with the idea of the state as a capitalist tool.” I’m not claiming it is incompatible but this is an empirical question. Small businesses, for instance, often bear an enormous burden of regulation with only token, if any, benefits from the state. Then you see certain industries where large companies and labor unions in alliance get government intervention in their favor–the car industry, for instance.

    The key point is that the political class itself pursues its own interest. This is often in alliance with capitalists but the alliances can shift, depending where the interests lie at the time.

  10. I like the honesty of “plunderers and produers.” We should bring it back. And, while we’re at it, throw in “partakers” for those who accept anyhting from the plunderers. Sure, it complexifies things a bit, but it does get at the full set of relationships (and it alliterates!).

    Of course, any individual may be acting as any one of these at any given time. They can be thought of as “together” only because of commonality of each one’s individual action. But shorthand terms are hardly a method.

  11. Political alliances can indeed shift. Sometimes larger businesses lobby for legislation that hurts their small competitors, but sometimes the small fry turn the tables. A case of the latter is here in the People’s Republic of New York, where the small (mostly mom and pop) liquor stores are lobbying to defeat a bill in the NY legislature that would allow grocery stores and supermarkets to compete with them by selling wine. Every once in a while, something like this pops up in the press.

  12. Chidem: I agree that small business is heavily burdened by the state. James O’Connor’s distinction (he’s a neo-Marxist associated with the Monthly Review group) between the monopoly capital sector and the competitive sector might be useful here, if adapted to a liberal class theory framework. The monopoly sector is heavily cartelized by state regulations, and has its operating costs subsidized. When you take into account the tax exemptions specifically targeted to capital-intensive forms of production and toward mergers and acquisitions (e.g. depreciation, the R&D credit, exemption of stock transactions involved in mergers from capital gains, the interest deduction), they shift most of the tax burden onto small- and medium-sized firms in labor-intensive industries. And because they’re cartelized, what tax burden they do have can be passed on as a markup.

    I would guess that small business is privileged at a local level, primarily at the expense of even smaller business it shuts out through zoning and licensing and assorted health/safety codes. The main victim at that level is the kind of household microenterprise that could operate on virtually zero overhead, because it uses spare capacity of ordinary household capital goods most people already own: microbakery using ordinary kitchen oven, unlicensed cab using family car, etc.

    I’m not sure how meaningful the distinction is between “political class” (in the narrow sense of politicians/bureaucrats) and the economic classes that are attached to the state. IMO it makes more sense to treat the corporate wing of the Millsian Power Elite, like feudal landlords in the Old Regime, as components of the state. Brad Spangler’s holdup analogy is useful here: If a robber holds you up at gunpoint and his accomplice, an unarmed bagman, collects the loot, both the gunman and the bagman are robbers.

  13. I agree. In crony capitalism, the cronies are little different from the members of government giving them money and supporting them in other ways, such as through beneficial regulations.

  14. I don’t disagree. But it’s still a central issue whether the coalition of class forces controlling the state and exercising the political means is just a fortuitous, ad hoc assortment, or whether it coheres according to some pattern. (A major theme of Roderick Long’s essay which I linked to above, BTW.) Bryan Caplan has argued that the state is controlled by a random assortment of interests, whereas Rothbard argued it was a coherent coalition.

    IMO the establishment labor unions under the Wagner regime are a (shrinking) part of the coalition, but the Wagner regime itself was created as part of a larger strategic picture. The main business support for the New Deal was capital-intensive industry in which labor costs were a relatively modest portion of the total cost package, but long planning horizons required stability. So this segment of big business was quite willing to reach a deal with domesticated unions, which would enforce contracts against wildcat strikes by their own rank and file and officially recognize management’s control of the work process, in return for higher wages.

  15. Kevin, Leaving aside particular historic conditions, Mancur Olson has clarified the basic logic of distributional coalitions. His 1965 book, The Logic of Collective Action, is a classic. He developed and applied his arguments over time, a process unfortunately cut short by his untimely death. Here is a review of Olson’s last (2000) book by Prof. Ebeling:

  16. Thanks, Chidem. I vaguely recall reading it during the research for a past book, but had forgotten it almost entirely. Looks worth a reread, based on that review. The bit on size and coherence of coalitions probably has something to do with why we see so many “complexes” of functionally related institutions from theoretically opposing branches of power, rather than the “countervailing power” that people like Galbraith and the interest group pluralists talk about.

    This was something Paul Goodman wrote about, although for him the affinity between organizations was based more on organizational style: Weberian/Taylorist work rules and “standard practices,” prestige salaries, mission statements, high overhead and cost-plus markup, etc.

  17. I’m convinced that public choice economists could learn a whole lot from neo-marxist and post-marxist theories of the state. I think its a disciplinary/methodological divide more than a political one that keeps them separated.

  18. Josh, there’s an excellent literature review by G. William Domhoff in one of the neo-Marxist journals of all the major recent Marxist analysis of the relationship between big business and the state. He divides them into

    1) the vulgar instrumentalist school, which treats the state as a straightforward instrument of capital (in the most literalistic sense of Marx’s “executive commitee” quip);

    2) the state automonist school, which treats the state apparatus as a locus of power with its own interests, in addition to those of the politically dominant economic classes; and

    3) the structuralist school, which argues that the structural imperatives of maintaining economic stability and full employment (e.g. the threat of capital flight) lead the state to function in the de facto interests of the dominant capitalist centers of power even when it’s controlled by an avowedly anti-capitalist political movement.

    I think there’s also a lot of useful neo-Marxist analysis of late capitalism that can be incorporated into a radical market anarchist framework. The Marxists are wrong on the causes of economic exploitation (i.e., they believe the difference between the price of labor-power and the value of labor’s product is inherent in wage labor, even when there’s no artificial scarcity of land and capital). But once the existence of exploitation for whatever reason is granted, their analysis of its functional effects (overaccumulation, maldistribution of purchasing power, and all the rest of it) are pretty much on the mark. Likewise some intersection between Marxist theories of over-accumulation and Austrian theories of malinvestment.

    The treatment by the Monthly Review folks of the bloated FIRE economy over the past 30 years, and the reasons for it, is IMO spot on.

    One excellent analysis, from an Austrian standpoint, of the intersection of Rothbardian theory with left-wing theories of maldistribution and overproduction, is “State Monopoly Capitalism and Imperialism,” by Joseph Stromberg.

  19. The difference is understanding the market mechanism. As I recall from my wasted youth, the left-wing theory of overproduction sees it as an inherent trend in the market economy. That does not make sense. The market left to itself corrects imbalances, but monetary and other government interventions create them. Thus the housing bubble was fanned by the Federal Reserve’s easy money policies in the early 2000s.

  20. I agree, Chidem: left-wing ideas on overproduction/overinvestment are wrong on the causal mechanism. But once you recognize that the problem exists, in an economy based on 150 years of corporate-state collusion, their structural analysis of its effects is pretty good.

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