Marx Masters of Money

Dover.

The most dangerous man in Europe is about to arrive

on Britain's shores.

His preachings are so incendiary,

he's been forced out of his native country.

Only liberal Britain will tolerate his presence on her soil.

He heads to London to live in exile.

The year is 1849.

But today, that man's writings are still dangerous.

They're so radical, so revolutionary,

they continue to divide the world.

It's been more than 150 years

since he started writing about the world.

But you know what?

If you're looking for an explanation of the global economic crisis,

he's a surprisingly good place to start.

With everything going so wrong, you have to wonder,

is Karl Marx turning out to be right?

Most people know Marx as the father of communism.

You might be surprised to hear that most of what he wrote

was about capitalism.

And today his ideas about that are being taken seriously

right at the heart of global business.

His analysis was pretty on the button,

and explains a lot, I think,

about some of the things that we see going on

around in our economy today.

For Marx, the best argument against capitalism was that it was inherently unfair.

His ideas on inequality have more resonance than ever today.

What Marx did do

is to install this sense of urgency.

Things cannot go on for ever the way they are.

In this series, I'll tell you about the lives and revolutionary thinking

of three extraordinary men -

John Maynard Keynes,

Friedrich Hayek,

and Karl Marx.

Their worlds were changing as never before.

They saw that the fate of nations would hang on the power of money

and they had radically different ideas

about how to control it.

Today, the stakes could hardly be higher.

All three of these men were giants whose ideas live on.

But they speak to us right now because they, more than anyone,

recognised the double-edged power of money -

how markets could transform all of our lives,

but also plunge us into chaos.

Keynes and Hayek argued about whether government

should try to tame this force of human nature, capitalism.

Karl Marx had the most radical advice of all - get rid of it.

In 1989, Karl Marx's reputation lay in ruins.

What a mess!

For most of us, the fall of the Berlin Wall

meant the end of Marx.

Millions rejected the horrors

of a violent and repressive police state.

And because the Communist countries claimed Marx as their inspiration,

his ideas were cast aside, as well.

When this wall came down, I was just

studying economics at university.

Back then we knew,

or we thought we knew,

two things about Marxism, Communism.

One was it hadn't delivered freedom for the workers. Quite the opposite.

And the other, just as bad if you're an economist,

was it hadn't delivered prosperity.

The Communist approach to the economy just hadn't worked.

While the free market West took great strides,

the Communist planned economies had been left behind.

Marx's reputation as an economist was in shreds.

In the last few years, something strange has happened.

It's like the global financial crisis

has brought Karl Marx back from the dead.

And we still don't care what he said about Communism,

but people are going back to his damming assessment of capitalism,

all its deep seated flaws, with a nagging doubt.

Is it all now coming true?

When times were good, Marx was nowhere.

But now the western economies are in crisis

he's attracting new interest

right at the heart of the economic establishment.

From a former IMF chief economist...

Marx is right on a number of dimensions.

He certainly is right

that income inequality can be a source of tremendous tension.

..to the man who saw the 2008 crisis coming.

He had understood that there are situations

in which capitalism and globalisation

can lead to economic crisis.

And an economist at one of the world's leading banks.

It's quite hard to convince people who live in Chelsea or Chelmsford

that this is of great relevance to them, but actually,

it's worth a bash.

Anyone in Chelsea or Chelmsford who thinks Marx is only about communism, is in for a shock.

It's what he said about capitalism that rings so true today.

Marx's key insight was that capitalism was inherently unstable.

He said we'd lurch from crisis to crisis

and society would become increasingly unequal.

Marx divided the world into bosses and workers.

For him, they would always be at odds

and that battle was a recipe for crises.

To make profit, bosses squeeze what they pay workers.

The crisis comes when workers then don't have enough money

to buy what bosses are trying to sell them.

And for decades after World War II, that looked completely wrong.

We had years of stable growth,

and the workers were taking a larger and larger share of the pie.

But not anymore.

Marx would explain this crisis in terms of the fact

that ordinary people haven't got enough money to spend.

Why haven't they got enough money to spend?

Because there's been a big redistribution,

over the last few decades,

away from ordinary people towards capital, towards wealth.

And for Marx, there's no turning back.

He thought there were laws of motion running through human history.

Capitalism would produce bigger and bigger crises

and then it would collapse.

And he believed that the force driving us to this final collapse

was the same one that built our world in the first place -

the power of money.

Marx had a very simple formulation about crises,

which is that they are manifestations of the fundamental flaws,

or contradictions, as he called them, of capitalism.

How would Marx have suggested solving the crisis is,

of course, by abolishing capitalism.

Is capitalism living on borrowed time?

Sometimes it doesn't feel that farfetched.

Here's why I've been thinking more about Marx -

it's cos the last few years hasn't felt like an ordinary recession.

It hasn't felt like a crisis for one economy

or for a group of economies in the West.

At times it really has felt like a crisis for the system,

for capitalism as we know it.

You want a bigger explanation.

And no-one's ever had a bigger explanation

for everything that's happened than Karl Marx.

Capitalism's most implacable critic

was born in the picture-postcard town of Trier,

in what is now southwest Germany.

Today, his birthplace makes its own contribution to the local economy -

it's a big draw for tourists.

But do you still have a lot of people coming here, tourists,

from around the world?

Yes, we have more than 40,000 tourists a year

and 25% came from China.

-So, a quarter of them come from China...

-Yes, yeah.

-..to see Marx' birthplace.

-Yeah.

And what do they buy, what do they like?

They like the red chocolate.

The Karl Marx chocolate.

Maybe I should get some of that, as well, actually.

And the wine.

Well, Marx's father, Heinrich Marx, he had a vineyard nearby Trier.

And you don't think that Karl Marx would mind you selling all this stuff?

A bit capitalist, having this shop.

Perhaps he'd enjoy it because he had a good humour too.

The man with the big theory about our world

had big dreams right from the start.

When he was 17,

Marx had to write an essay about picking the right career.

He said the best position in life was to serve all of mankind,

so your deed would live on perpetually at work

and over your ashes would be shed the hot tears of noble people.

I wonder, would that young man, that rather grand young man,

be surprised to hear that his first home had been turned into a museum?

Probably not.

But for all his ambitions, Marx was hardly a model student.

When he was at university in Berlin

he earned a reputation as a radical thinker.

Marx comes across as a young man, as this, sort of,

energetic, fiery, hairy figure.

He was known as the Wild Boar of the Moor,

which, sort of, points to his, sort of, Levantine complex.

He was full of ideas. He was full of debate.

He liked big drinking sessions and then deep philosophical debate

about the nature of Christ and German Romanticism and politics.

By the time he was 24,

Dr Marx was a bit of a renaissance man.

He was an expert in law, philosophy, you name it.

In fact, the only thing he didn't know much about was economics.

That all changed in 1842.

Marx, by now working as a journalist,

heard about a controversy in this wood

that would help shape his understanding

of how the world works.

Peasants taking sticks from the forest floor to use as firewood

were being prosecuted for theft.

Wood had been gathered here for centuries

but now the landowners had declared it belonged to them.

What had been freely shared was now private property.

You could say that thinking about this question

turned Marx into an economist,

but that wouldn't really capture it.

He came to think that economics,

the nature of economic relationships between people,

were at the heart of absolutely everything.

The foundations of Marx's thinking was materialism,

that when you cut away religion, ideology, politics,

at its root were the material relations

between man - the need for food,

the need to have a roof over your head.

This is what ultimately drives so much of human interaction.

What was unique in Marx, he didn't see economy

just as a special sphere.

He saw economy as the structuring principle

of the entire social totality.

For Marx, it all begins with private property,

which divides the world starkly -

there are those that have it,

and those that don't.

Take this wood.

Before it became private property, I could do what I liked with it.

I could heat my house with it, I could make a chair

and exchange it for food.

But if it belongs to someone else, the whole relationship changes.

Now Marx would say I've become a member of the proletariat,

now I have to work for the owner of the wood,

the capitalist, for a wage.

Then he can sell what I've made

for more than he paid me.

Look what's happened,

something that was part of my life is now a financial transaction.

And the capitalists made profit.

He can use that to buy more wood, build factories,

make more profit.

And so it goes on. Profit is now the heart of everything.

So, there you have it - the Marxian view of capitalism,

or the gist of it, anyway.

If you want more, you'll have to wade through

hundreds of pages of Marx, yourself.

The key point for us is that that driving force of capitalism,

the need to earn more and more profit,

well, Marx thought that was also a recipe for constant crises.

So, Marx would say

you could trace the roots of the crisis we're in today

right to the very heart of capitalism,

to its need to generate profit.

What Marx was seeing in Trier was a world in flux.

Feudalism was on the way out -

an entirely new way of doing things had arrived.

Now, we know what capitalism's really made of,

and the power of money today

means a lot more than just throwing a few peasants in jail.

A bunch of guys on a trading floor

can turn the entire economy upside down.

Around the world, all of our lives depend on markets,

on capitalism being able to deliver.

If Marx is right, if it's fundamentally flawed,

well, that's a really big problem.

We might see a complex, modern economy,

which all of us have a stake in.

But Marxists would say the same old rules still apply.

For them, who owns what still means everything.

They see workers still slaving away

and capitalists, or bourgeoisie,

still exploiting them,

always striving to make more profit.

In Marx's world, any capitalist that doesn't seek maximum profit

is soon replaced by one who does.

So, the system follows a completely predictable course,

he would say, to its own destruction.

It's not an idea that many people accept.

He was completely wrong,

including the idea that capitalism was merely a phase,

and contained within it the seeds of its own destruction.

That's not the case.

Well, everything is bound to collapse if you wait long enough.

I mean, the earth's going to, you know,

sucked into the sun, some day.

You'd be forgiven for thinking the total collapse of capitalism

sounds a little implausible.

How could seeking profit be so disastrous,

when it's done such amazing things?

Just look at how we eat under capitalism.

We get fresh fruit flown in from all over the world.

We can choose from 700 types of breakfast cereal.

We have enough of it and it's all safe to eat.

There's incredible plenty

and the technology it depends on didn't come from the state.

It's what happens when you let capitalists compete for profit.

They didn't do it for our benefit.

They did it because it made them rich.

So, at first glance, Marx's idea

that capitalism's search for profit would be its downfall,

sounds absurd.

Profit may often sound venal, it may often sound wrong,

but it is what pushes progress ahead.

Profit is actually what drives the world forward

and that's what Marx could never quite handle.

The profit motive is essential.

I mean, after all, what is the profit motive?

It's just a way of achieving a better society

by people wanting to better their own individual lot.

When you think of how fundamentally the profit motive

has shaped and enriched our world,

it's no wonder Marx fell out of favour.

But you shouldn't dismiss Dr Marx quite yet.

I mean, it's true he talked a lot about class exploitation, misery,

chaos, but he didn't think capitalism was all bad.

Far from it.

This cocktail bar in London's Soho hides a revolutionary past.

It used to be the Red Lion pub,

site of a clandestine meeting of communists in 1847

that would echo down the ages.

It was at that meeting that they commissioned Karl Marx,

and his side kick Friedrich Engels, to write

one of the most incendiary pamphlets of all time,

the Communist Manifesto.

Some of this you probably know.

The famous opening line - "A spectre is haunting Europe."

And of course the end, about the workers having nothing to lose but their chains.

"They have a world to win.

"Working men of all countries UNITE!" in capital letters.

But what you probably don't know, what I find most interesting,

is what's in the middle.

One of the most perceptive,

and admiring, bits of writing about capitalism I've ever read.

In fact, it reads a lot truer now than when it was written.

I think what's surprising about a lot of Marx's writing

is that you find, in amongst the communism,

a lot of good analysis of capitalism and actually you also find within it

quite a lot of praise for capitalism.

Marx's attitude towards capitalism is basically ambiguous.

He's, at the same time, he was honest, here, Marx,

ultra-fascinated. He was fully aware

that this is the most productive, dynamic system

in the history of humanity, and so on.

The truth is, Marx did understand that the drive for profit

would achieve incredible things.

"It has been the first to show what man's activity can bring about.

"It's accomplished wonders far surpassing

"Egyptian pyramids, Roman aqueducts

"and Gothic cathedrals.

"It has conducted expeditions that put in the shade

"all former exoduses of nations and crusades."

He did really get the kind of global aspect.

He got the idea

that people were suddenly being able to get things

from all the way round the world

in a completely new way and the impact of that.

The need of a constantly expanding market for its products

chases the bourgeoisie over the whole surface of the globe.

It must nestle everywhere, settle everywhere,

establish connections everywhere.

It creates a world after its own image.

But you know, there's got to be a downside for the bourgeoisie.

Modern bourgeois society is like the sorcerer

who is no longer able to control the powers of the netherworld

whom he has called up by his spells.

What the bourgeoisie therefore produces above all

is its own gravediggers.

Its fall, and the victory of the proletariat,

are equally inevitable.

It's stirring stuff, but it does raise a bit of a puzzle.

How can Marx think the capitalists, the bourgeoisie,

are so brilliant and yet so doomed?

Well, for him, it all came down to the way they treat their staff.

To understand Marx's analysis of crises

we have to first understand the capitalism that he knew.

19th century capitalists might have built wonders

surpassing Egyptian pyramids,

but they also forced their workers

to endure terrible conditions and pay.

The Industrial Revolution

and all the incredible achievements that followed

were made possible by coal miners.

This is a replica of what it were like in Victorian era underground.

The man you can see at far side he had a pick and shovel,

he would work the coal, fill that corf.

And his wife had to drag the coal behind her to a loading point

which, well, could be up to 30 or 40 metres away.

I didn't realise that they were husband and wives that worked here.

Oh, yeah, it were all families.

They needed a little boy or a little girl

to work this door as well.

But if you took the job you had to provide a small child, so...

Yeah. The only light they had between them were a candle

which their dad kept so he could see where he was in the coal face,

so the little boy or girl

was sat on their own, in the dark, for twelve hours a day.

It is difficult to overstate

the horror of industrialisation in Europe.

In 1829 Liverpool, for example,

the life expectancy at birth was about 28 years.

And that was the lowest age since the Black Death.

So the impact of the Industrial Revolution on life chances

was absolutely terrifying.

By 1849, his revolutionary writings had got Marx

banned from everywhere but Britain.

Here he could observe the power money had to ruin lives,

at a suitably safe distance, of course.

I think in the last few minutes

I've come closer to what it was actually like,

the drudgery of Victorian times, than Karl Marx ever did.

He never went to a mine and as far as we can tell

he only went to a factory once towards the end of his life.

But it didn't stop him writing vividly

about the horrors of Britain's dark, satanic mills.

The horrors of Victorian working conditions

clearly shaped Marx's economics.

In his time, minimum pay for proles meant maximum profits for bosses,

and any bosses who did choose to pay more usually went bust.

He thought there'd always be downward pressure on wages

and that wages would come down to the minimum

that enabled bare survival.

They couldn't go lower than that, otherwise the workers would die.

But he thought they'd be depressed down to that minimum.

The reality, of course, has been the opposite.

It has been a continual advancement in wages, year in year out,

decade in decade in, decade out.

Marx was wrong.

He thought it would all get so bad

the workers would overthrow the system.

Yet even as he was writing,

reformers were beginning to get rid of the worst employment practices.

Capitalism got kinder, not nastier.

But the idea that the competing interests of bosses

and workers would cause crises, well, that does seem relevant today.

That's a very sophisticated argument,

so, I'm going to need children's toys to explain it.

But let me say, right at the start,

none of these toys endorse any kind of violent revolution.

Now here's a mine owner - capitalist.

Miners, with or without hat.

Now, imagine that there aren't very many miners around.

Then the mine owner has to compete with the other capitalists

for workers, probably ends up having to pay them more than he'd like to.

Trouble is, those higher costs

cut into profits.

Now if that's happening across the economy,

you've got a declining rate of profit

and a lot of capitalists going out of business.

You get a crisis.

You get countless workers losing their jobs,

having a terrible time, until finally wages fall far enough,

the capitalists can go back to exploiting them again.

So, high labour costs are bad for business.

But what makes the collapse of capitalism inevitable for Marx

is that the bosses are in trouble even when they have things

their own way.

Now, imagine the opposite situation.

You've got loads of workers, all of this lot competing for a single job.

Then, well, no wonder he's smiling,

the capitalist only has to pay the workers

the bare minimum.

This bucket is what Marx would have called

the industrial reserve army of the unemployed.

As long as that's full, this lot can keep paying

very low wages and keep making profits.

Except, in the end, there's a problem.

Cos badly paid workers don't spend very much,

and not very much spending in an economy is not good for business.

You get another crisis, more capitalists going bust,

and this crisis is going to be harder to fix.

So, you can see why Marx thought the capitalists were in trouble

no matter what they do.

They never want to pay the workers more money.

They always need to make more profit. But in seeking out profit,

they end up eroding the basis on which it's made.

They've forgotten, if you like,

where their money ultimately comes from.

The punch line, as ever with Marx,

is that capitalism is doomed.

So, that's how problems with wages can cause crises,

at least in theory.

But how is any of that relevant to right now?

A Marxist would say that little parable with the toy men

tells you everything you need to know about the financial

crisis we've just seen.

In fact, they'd say

you could explain the last 40 years of world history

entirely in terms of capitalism's desperate need

to have the advantages of a ready supply of cheap labour,

but none of the costs.

And you don't have to take my word for it.

Let's take a look at the last 40 years of history

through the prism of Marxist theories.

To show how they might explain the mess we're in.

An imaginary Marxist Broadcasting Corporation

would see it all as a good-old, 1970s-style class struggle.

As usual, the world's divided between workers and capitalists,

always fighting to get a bigger slice of the pie.

And the crisis happened, Marxists would argue,

because the capitalists have been coming out on top a bit too often.

The fight is over wages.

Capitalists want to pay less - the workers want to get more.

All those in favour, please show.

THEY CHEER

In the '70s, powerful trade unions battled to keep wages high.

Then we come to the '80s. Fight back time for capitalists.

Marx would have seen Margaret Thatcher and Ronald Regan

as acting purely in the interests of the capitalist bosses.

It was their governments that helped business

by getting rid of the obstacles that made it hard to cut wages.

The violence and intimidation

we have seen should never have happened.

It is the work of extremists. It is the enemy within.

If they do not report for work in 48 hours

they have forfeited their jobs and will be terminated.

End of statement.

So, for the Marxist Broadcasting Corporation,

the capitalist won in the 1980s, and they kept on winning.

The guaranteed high wages and job security

that workers had enjoyed until the seventies had gone.

And downward pressure on wages started to lay the seeds

of the crisis we see today.

Well, it's great telly. Is it actually true?

Well, we know the Marxist view of history is right about one thing,

at least in Britain and America.

Earnings at the very top have soared in the last few years

and everyone else has been squeezed.

In Britain, real earnings have been flat or falling

for the best part of ten years, since before the crisis.

And in America, that's been happening since the '70s.

In the United States, a full-time male worker,

median income has stagnated for a third of a century.

No increase.

Household income today is the same as it was fifteen years ago.

All the increase to the income has gone to the top.

The share of income in the United States

that was going to the top 1% of the households

20 years ago, was around 12%.

Today that share is closer to 23%.

Things haven't gone that far in the UK

but inequality is certainly creeping up the agenda.

So, have the greedy capitalists been picking the pockets of the workers?

So, why do I think all that money's been flowing to the top?

Well, I don't think it's a big conspiracy

but there have been social and political changes

that have made a difference.

We used to have really big unions,

we used to have very high tax rates on rich people.

And we had social norms.

It just wasn't done for the people running a bank

to take a huge chunk of the profits for themselves.

Those things helped keep a lid on inequality.

We don't have them anymore.

But really crucial to all of this

has been the changing structure of our economy.

A lot of it's down to new technology.

# We are the robots

# We are the robots

Work previously done by hand is now done by machines.

Fewer workers needed, there are more competing for every job,

meaning bosses can pay them less.

But perhaps the most significant factor is globalisation.

With falling barriers to trade around the world,

global business has gained access to a giant new pool of cheaper labour.

You have brought into the market now

millions and millions of new workers.

In China, in India, in other parts of Asia,

in parts of South America, Brazil, for instance.

So, that process has transformed

the capital labour ratio on a global scale.

For example an analyst can as well be sitting in the Philippines

or in Mumbai to do the job that is done

at a much higher price in New York.

Many workers in the rich countries

are now competing with an industrial reserve army

running into the billions.

I think, in emerging market economies,

there'd be an overwhelming vote in favour of what has happened

because almost everyone is better off than they were,

and would have been.

But that's less evident in the industrialised world

where many lower paid people have become even lower paid

relative to those who have prospered, and that is a concern.

For years after World War II

we could be pretty sure Marx was wrong.

Where you had capitalism, it was working pretty well.

You could talk about a rising tide lifting all boats,

but you look at the global economy today

and I think you see a capitalism that Marx would recognise.

It's lifted hundreds of millions out of poverty in China,

but for most ordinary people in the West,

the system's not working at all.

For them, capitalism's not coming through on its side of the deal.

It's an analysis that rings true

even for the leader of the world's biggest economy.

Long before the recession,

jobs in manufacturing began leaving our shores.

Technology made businesses more efficient

but also made some jobs obsolete.

Folks at the top saw their incomes rise like never before.

But most hardworking Americans struggled

with costs that were growing, pay cheques that weren't

and personal debt that kept piling up.

Marx would say this squeeze on wages was the root cause

of the huge economic crisis that we've been living through.

But you might see a problem with the Marxist explanation.

If it was all down to low wages,

you'd expect the crisis to have started

where people spend their pay, out in the real economy.

One way or another,

that is how most of the recessions since the war have got started.

But this time it wasn't the high street that sank the city -

it was the other way round.

The explosion that rocked the global economy in 2008

was detonated deep inside the banks.

So, how would Marx link low wages to troubled banks?

The answer is - he saw capital as endlessly adaptable.

It could solve one problem - low wages -

but only at the cost of creating another.

Remember, Marx didn't underestimate capitalism.

He thought it was fundamentally flawed.

He didn't think it was stupid.

If large parts of the population weren't being paid enough

to support demand, well, he wouldn't have been at all surprised

to hear that capitalists had come up with a brilliant solution,

the credit card.

Now are you sure you've got everything, Money?

Let me see, wine...

With consumer credit, people can carry on spending,

even if they haven't got the money.

The economy stays afloat, and the capitalists still make their profit.

So, credit provided an answer to all of capitalism's woes.

But only for a while.

Remember, Marx thought the system was fundamentally flawed.

They might be very clever, these capitalists,

but now, more than ever, they were living on borrowed time.

# Baby, your ship has come in.... #

As we know, it went well beyond credit cards.

What ultimately brought the crisis to a head

was the billions borrowed on mortgages.

People thought the value of their house would keep going up for ever.

Housing credit is beautiful

because if your house price is increasing

and you're borrowing against the increase in value of your house,

you don't feel you're borrowing your way into debt.

But, of course, you are.

In America, it happened on a massive scale.

There, as we know, the capitalists were getting richer and richer.

They couldn't spend all of their extra money.

Driven, as ever, by the desire to make more profit,

they lent it out in riskier and riskier ways.

The name given to this lending might well be familiar.

Subprime.

What we did is, as the incomes

of most Americans were stagnating,

or even declining,

we said, "Don't let it bother you.

"Keep spending as if your income was going up."

And they did that very well.

I mean, who would oppose it? The banks who are making money?

The households who are getting their house?

The politicians who have happy constituents?

I mean, there is nobody

who's going to be unhappy in this process until it collapses.

And we all know how it ended.

In retrospect, it seems obvious.

Lending to people who couldn't afford it

wasn't a lasting solution to anything.

It led to a housing bubble which burst,

threatening some of the world's biggest banks,

and thanks to our integrated world,

what started in the United States

spread and infected the entire system,

causing a global recession.

So, here's the Marxist explanation for the crisis we've just seen.

You've got a global economy

with businesses getting better and better

at squeezing wages and pushing up profits.

But there's a problem.

They're producing a lot of stuff

that the workers can no longer afford,

and a lot of profits looking for a new home.

A global property bubble provided an answer to both those problems.

The system was kept afloat on a mountain of debt

but it was only a matter of time before it all came crashing down.

Capitalism's only ever as strong as its latest, temporary fix.

It's an extraordinary tale and a lot of people would say

it's completely wrong.

Marxism doesn't actually work,

but it keeps coming back, cos it makes for a good story.

I don't think low wages played any role at all in causing the crisis.

The crisis was caused by governments and central banks

flooding the market with cheap credit and cheap money

because politicians don't like the downturn in an economy

that throws people out of work.

I think it may have, to some degree,

increased the level of indebtedness

that people went into the crisis with,

which, I think, intensifies how deep the crisis became,

but it wasn't the underlying cause.

It was a contextual factor which made it a bit worse.

But the idea that low wages may have contributed to the crisis

is gaining ground, even if the name Marx is as toxic as ever.

George Magnus is a senior economic adviser

to one of the world's leading banks.

You've been writing quite a lot about Marx since this crisis started.

How did you come to look at him again?

Actually it was on this trading floor.

It was probably the weekend before Lehman's went bust,

and it's normally a little bit noisy,

but at the time it was...

you could hear a pin drop, it was that deathly quiet

and I could almost feel, you know, that the global system was frozen.

And it was quite a scary thought.

It took me back to a lot of the things that I used to read about

and study when I was much younger -

the days when I actually read Marx for fun.

And you wrote about that, and what was the reaction?

I did get a lot of hate mail, I have to say.

There are a lot of people who were quite opposed to the idea

that anything that was socialistic or Marxist,

you know, could be at all considered serious in the mainstream.

A lot of this hate mail, I have to say, came from the United States

and I was accused of being, you know, an Obama clone and...

-President Obama - the well-known Marxist.

-The well-known Marxist(!)

Very mysterious forces.

So, there was a lot of negative reaction from, I think

people that probably predictably, you know,

had already tied their own ideological colours to the mast.

But the people who do find value in Marx

aren't necessarily going to follow him all the way.

I think Marx helps in framing the problem,

but I think the solutions have to be different,

given the different environment we are in.

Except, Marx would insist, the trap is inescapable.

Capitalists must seek profit above all else

or they'll go out of business.

So, why would they ever choose

to give workers a bigger share of the pie?

What Marx would say is that we have to look for ways out of this crisis,

which look beyond the restoration

of capitalist class power.

And, I think, this is a time when we actually need to start thinking

about the revolutionary solution again.

But who, exactly, is revolting against who?

Marx divided the world neatly into workers and capitalists

but today his stark distinction is incredibly blurred.

Bosses work for themselves and workers own shares.

In our modern world, enough of us do have a stake in the system,

whether mobile phones or pension plans,

to stave off talk of armed revolt.

But what about the people capitalism's failing?

What does Marx have to say to them?

It's really amazing how well Marx seems to understand our world,

where we're more interconnected than he could ever have imagined

and where all the faces of capitalism, good and bad,

are now on display in pretty much every corner of the globe.

But he was the one who famously said

it wasn't enough to interpret the world - the point was to change it.

If you ask him what exactly we're supposed to replace capitalism with,

well, he had remarkably little to say about that.

As Marx entered his final years,

he seemed quite content with the way things were.

He'd been poor for a lot of his life,

but by 1856, he had enough money to move to London's suburbs.

The young firebrand now looked like part of the establishment.

He would spend his day walking around Hampstead Heath

and he would worry about personal finances,

he would worry about his daughters

and the expense of their piano lessons.

I mean, he lived a remarkably bourgeois life, in many ways.

In his later years, Marx was the world authority on the revolution,

but he didn't seem to be in a hurry to make it happen.

Young hot-headed socialists from around the world

would come to North London to pay their respects, win his support.

Mr M seemed happy to watch and wait.

Marx only really had contempt for terrorists,

those who were seeking to fast-forward political progress

by having change through arbitrary violence.

You needed the economic fundamentals in place

for a proper revolution to succeed.

To understand why he didn't want to rush revolution

we need to understand - for the last time, I promise -

a bit more Marxist theory.

As usual, he had a grand analysis of the history of the world.

He saw the great sweep of humanity's endeavours,

from the caveman,

to the slave societies of Greece and Rome,

to the feudalism of kings and castles.

All of which was replaced, in turn, by our own capitalist system

of bosses and workers.

Incredibly unfair,

but also incredibly productive.

Marx said only when we'd got everything we could

out of capitalism

could we afford to have a revolution.

In his words, "the knell of capitalist private property sounds,

"the expropriators are expropriated,

"all to be replaced by

"more or less nothing."

Irritatingly there's next to no alternative laid out.

Marx, basically,

was not the one who simply gave us a blueprint, you know,

five stages after capitalism -

communism, here you have the basic guidelines,

what to do, and so on.

No, no, it's up to us.

He just opened up the field.

Is there an alternative to capitalism?

I've no idea.

Well, I suppose there could be all kinds of alternatives.

Dead silence, starvation,

or the end of the world or anything,

but I simply have no idea if there is an alternative.

It doesn't occur to me, it doesn't seem to me to be important.

It's like saying, is there an alternative to weather?

Marx said we couldn't describe what the next stage of human development

would look anymore than a feudal serf

could have described our lives today,

to which you might say, "fair enough."

Except you might also think it was pretty telling.

After all, nobody else has been able to describe

a convincing alternative to capitalism either.

I think he would have written a lot more

had he lived ten years more,

on what a socialist republic would look like,

and who knows, but that might have saved the world a lot of bother.

Without his blueprint, we all know what happened next.

There weren't any revolutions

in the rich, developed countries, as Marx predicted.

Instead it happened in one of the world's poorest nations.

Soviet Russia may have left Marx far behind

but it was an attempt to try something else,

and many have drawn lessons from its failure.

The truth is, at the moment there are different forms of capitalism.

But on the big argument about whether you really want

to have a communist system or a capitalist one,

that is pretty much won everywhere I think.

There are more humane versions of capitalism

or more barbaric forms of capitalism.

But I don't think there's a systemic alternative to capitalism.

Will there ever be? Yes, I would think so.

I mean, you know, nothing is for ever.

Absolutely nothing, and capitalism is not for ever.

But anyone looking for a fairer alternative

knows they can't ever repeat what happened east of the Berlin Wall.

Dictatorship, political oppression and millions of ruined lives.

From 1945 till 1989,

this was the main remand centre for political prisoners

in communist East Germany.

Today it's been turned into a memorial.

There was a special ideology.

Whoever we arrest, he or she is guilty.

It's possible that places like this

explain why even capitalism's toughest critics today

seldom talk seriously about replacing it.

You can see with all these protests in Europe, Greece, and so on.

I was in Spain, in Greece, asking always the same question,

OK, what do you want?

Apart from some purely moralistic answers,

I didn't get any good, complete proposals,

you know, answers like,

"Oh, money should serve people, not people serving money."

My God, Hitler and everyone would have agreed with this, I'm sure.

You would have thought that with this implosion of the banking system

at the heart of capitalism in the United States

as well as the United Kingdom, and so on,

there would be a huge rush

to Marxism and extreme socialism.

That hasn't really happened.

It is quite surprising and I'm very pleased.

But if memories of this place do fade,

could there ever be an alternative to capitalism,

or should what happened here be a lesson for all time?

If someone wants to seek an alternative to capitalism,

and they're saying by seeking that alternative

that capitalism is a system rather than a fact of life,

and they're saying that, for instance,

that human nature can be altered,

fundamentally they're revealing themselves as utopian.

And the problem with utopia

is that it can only ever be approached across a sea of blood

and you never arrive.

This is my big mantra, when we leftists are accused of utopians.

Maybe, but the only real utopia is to think

that with some cosmetic changes

things can go on indefinitely the way they are now.

# Arise ye Stalins from your slumbers

# Arise ye criminals of want

# For reason in revolt now thunders

# And at last ends the age of can't. #

Marx died in 1883.

In a speech at his grave, his long time friend and collaborator,

Freidrich Engels,

declared his name and work will endure through the ages.

For most of the 20th century his name did endure,

though, usually, for all the wrong reasons.

But now it's 21st century,

what can this long-dead Prussian really say to us?

APPLAUSE

Fundamentally, I think Marx reminds us

that if capitalism doesn't work for everyone, it might not work at all.

When you look at what's happening and the pressure on wages,

can you understand why people are sort of looking again

at some of Marx's analysis?

Yes, it... The big picture.

The workers versus the capitalists.

And there is no doubt that there have been significant changes

in inequality and in the distribution of income,

which make you pause about the benefits of the developments

of output and prosperity that we've seen.

And I don't think you can afford

to believe that the benefits of a market economy

in bringing prosperity will be there

unless there is a collective commitment to keep the system going,

and that does require people to believe

that everyone will benefit in the end.

I think some of the ugliness of capitalism

that he saw in the 19th century

seems to be appearing in the 20th and 21st,

and in a way we have to keep our perspective on this.

The health conditions are much better,

living standards are starting from a higher level,

but it is still the case that

things aren't the way they ought to be.

And they're not moving in the way they should be.

But let's face it, Marx wasn't just talking about tweaking the system.

He had a much grander claim than that.

Did Marx change the world? Of course he did.

And after that funeral,

people did weep hot tears at his grave,

just as his 17-year-old self would have wanted.

Probably many more lived to curse his name.

But there's no getting round it, capitalism's still here.

Marx was right to see capitalism as inherently unstable

and often unfair.

Keynes and Hayek saw that too, but Marx was the first

and unlike them, he didn't think we should find a way to live with it.

He said capitalism would bounce back from crises

and reinvent itself,

but in the end a compelling alternative would appear,

and capitalism would collapse.

For all that rings true now in Marx,

on that he seems to have been dead wrong.

Maybe he did underestimate capitalism.

He certainly overestimated the opposition to it.

I think the system needs to reinvent itself now, again.

If it can pull that off,

we'll be talking even less about Marx a century from now.

But the last few years have left capitalism with plenty to prove.

The open University's produced six one minute animations

to explain some of the key economic ideas that affect all of us,

so, if you want to spot an invisible hand,

or other secrets of economics,

go to...

..and follow the link to the Open University.

Subtitles by Red Bee Media Ltd