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International Socialist Review, July-August 1967


David Horowitz

The Case for a Neo-Marxist Theory


From International Socialist Review, Vol.28 No.4, July-August 1967, pp.26-28.
Mark up: Einde O’Callaghan for ETOL.


David Horowitz is the author of The Free World Colossus and Shakespeare: An Existential View (Hill and Wang, 1965). He is the editor of a forthcoming anthology on Marx and Modern Economics.

Ernest Mandel’s review of Baran and Sweezy’s Monopoly Capitalism is the kind of intelligent and penetrating analysis that one would expect from the author of Marxist Economic Theory. [1] He has skillfully portrayed most of the essential virtues of this important book, and at the same time has not overlooked its significant deficiencies. Yet there is one question, and that perhaps the most central, that Mandel has not confronted directly. As it is a question of the very nature of Marxist theory, and the requirements for its contemporary development, and as few writers can be so eminently qualified to deal with it as Mandel, one can only regret its absence from his review. However, I would like in the following remarks to attempt to describe the challenge to orthodox Marxists which I believe Monopoly Capitalism represents, in the hopes of opening the discussion which Mandel’s review skirted, but which I believe to be desperately needed on the left.

The most striking feature of Monopoly Capitalism from a theoretical point of view, is its employment of the concept of the economic surplus, as the integrating concept of its analysis. As Mandel notes, this concept was first employed by Baran in The Political Economy of Growth, where he showed “the operative usefulness of the notion ... for understanding the economic problems of the underdeveloped countries.” In Monopoly Capitalism, the authors attempt to use this concept as a basis for a Marxian analysis of advanced monopoly capitalism. Whether a Marxian analysis based on this concept is by nature impossible, or whether Baran and Sweezy have merely fallen short of such an analysis in their particular development of the concept is the question that Mandel does not come to grips with and the question that seems to me crucial to answer. [2] For I believe that not only is a Marxian analysis based on the concept of the economic surplus possible, but that such an analysis is the necessary point of departure for a truly adequate Marxist theory of contemporary capitalism.

The concept of the economic surplus is derived from Marx, Veblen and Keynes, and makes possible the integration of various features of the analyses of these three theorists. The basic framework of Baran and Sweezy’s analysis remains Marxian in the sense that the class control of the means of production is seen to provide the determinant matrix for the system. Within this framework the income analysis of Keynes, which includes some of the most potent economic tools developed in the last hundred years, is made available through the concept which Baran called “actual surplus” in the earlier volume, and which is treated as a “first approximation” of the concept of economic surplus in the joint work.

The Keynesian analysis is further employed to reveal the long-run trend of the system. For Baran and Sweezy have not only broken “with the stereotype repetition of the Hilferding-Lenin analysis,” as Mandel notes, but with the competitive model on which Capital is based as well. Recognizing the predominance of oligopolistic forms in the market structures of monopoly capitalism, they have been compelled to abandon the theory of the falling rate of profit (which rests on the assumption of perfect competition). In its place, they have put the law of the tendency of the surplus to rise, which is a developed version of the Keynesian stagnation theory.

From Veblen, Baran and Sweezy have taken the analysis of waste as increasingly the fundamental and characteristic feature of monopolistic capitalism. It is this analysis that is behind their final definition of the economic surplus as the difference between what a society produces and the socially necessary costs of producing it. For by this analysis, they seek to expose the fundamental irrationality of the system, even if, in Galbraith’s phrase, it “delivers the goods.”

Now Mandel finds the concept of economic surplus deficient, because it abstract, according to him, from the difference between surplus capital and surplus goods. Mandel seems to suggest that this is not merely a terminological problem, but one that “strikes at the roots of Marxist economic theory.” But does it really? Baran and Sweezy do in fact speak of the growth of surplus capital, as distinct from the growth of other forms of surplus, in terms of the tendency of aggregate profits to rise both absolutely and as a share of total output. The problem of effective demand (or of realizing surplus value, in Mandel’s terminology) is very much recognized as a fundamental problem of contemporary capitalism in their analysis. Where the authors have opened up possibilities for confusion (for that is as far as I would go in criticism) is in treating the concept of economic surplus as equivalent to aggregate profits, as merely an approximation of the more developed concept of economic surplus as equivalent to the difference between output and socially necessary costs. In fact, they seem to have abandoned in Monopoly Capitalism the useful distinctions between forms of the surplus (e.g., actual and potential surplus) employed by Baran in The Political Economy of Growth, whereas they ought to have added new distinctions and articulated their model even further. They have attempted, in other words, to subsume the whole of their critique under its Veblenesque aspect. I think this was a mistake, but I do not think it was a basic one, since it can be easily overcome by a suitable redefinition of the surplus and an abandonment of the attempt to get all of its features into a linear relationship with one another in a manner of Marx’s use of the labor theory of value.

This brings me to the final point I would like to make. The value of the concept of the economic surplus is that it makes possible an integrated analysis of the most distinctive features of monopoly capitalism, the phenomenon of waste in the allocation of resources, and the problem of effective demand. It does so, moreover, with a conceptual apparatus that is very close to the apparatus employed by orthodox economics (about as close as Marx’s apparatus was to the orthodox economics of his day). The great virtue of this theoretical situation, in addition to making immediately available to Marxists a set of highly sophisticated analytical techniques, is that it focuses attention on the real differences between orthodox and Marxian analysis, rather than on differences in mere terminology, or highly formalistic and basically irrelevant questions such as what constitutes a proper economic theory of value.

On the one hand, the adoption of an economic apparatus dose to the conceptual apparatus of orthodox economic theory, makes it much more difficult for opponents to evade the challenge of the Marxian critique. On the other, it prevents Marxists from hiding behind the ritualistic invocation of their own orthodox terms and theorems as an excuse for not facing up to the real problems involved in developing a viable socialist theory. For all these reasons, it seems to me that the innovations introduced by Baran and Sweezy must be recognized as representing a major step forward in the development of theoretical Marxism, and the necessary point of departure for a really adequate contemporary Marxist analysis.



1. This is the English title of Mandel’s two volume Traité d’Economie Marxiste, which is to be published in 1967 by Merlin (London) and Monthly Review (New York). See Jan-Feb, 1967, ISR for Mandel’s review of Monopoly Capitalism.

2. Elsewhere, I have indicated my own criticisms of the development of the concept by Baran and Sweezy, and my suggestions for a more adequate treatment. Analyzing the Surplus, Monthly Review, January 1967.

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