Consciousness of Sheep
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I recently stumbled upon a right-leaning YouTube channel making the valid point that Karl Marx was a product of his time. The author was entirely wrong though, to claim that the point has never been made before. Indeed, I made it five years ago:
“Marx’s economics is all the more disappointing because he came so close; but still ended up dangerously removed from how an economy really works. What Marx got right is that there must be some input to the productive process which is paid less than the value it generates in order for profit to be extracted. Unfortunately, Marx’s political outlook – together with an unhealthy fixation on a simplistic version of Darwin’s evolution – pushed him into the belief that that input was ‘socially necessary’ labour power; a concept he had refined from David Ricardo.
“Again, this is understandable – in the course of Marx’s lifetime, England transitioned from a largely agrarian to an urbanised industrial economy.”
Toward the end of his life in 1880s England, Marx wrestled with his conscience over the likelihood that all of that steam-powered spinning machinery might be a source of value independent from his precious socially necessary labour (self-professed Marxists today struggle with the same realisation when they view such things as robotic assembly plants or massive AI datacentres). The problem – for Marx – was that if it was true that the machinery of industry generates value, then everything he wrote about the coming proletarian revolution and the proposed communist utopia was invalid.
As I explained elsewhere, Marx was wrong… but not entirely so. Labour power (aka ‘work’) is indeed a source of value… it is just not the only source of value. And it wasn’t those massive – and expensive machines that were the independent source of value, it was the coal (steam power) which drove them… coal which cost mere pennies to dig out of the ground, but which provided the power behind a global industrial revolution.
The point I wish to make here, however, is that while it is correct to view Marx as a creature of his time, economists viewed as more acceptable to the ruling establishment – and, indeed, to right wing vloggers – often get a free pass in this respect. Consider the grandfather of modern economics, Adam Smith. Scribbling away in Kirkcaldy to finish his Wealth of Nations at the same time Abraham Darby III was building the world’s first iron bridge, the British redcoats were losing the American colonies, and just across the road, James Watt was putting the final touches to the condensing steam engine which would pave the way for the railways and steam ships which would shrink the world. As Nobel Prize-winning chemist Frederick Soddy was to say of the relative importance of the latter and former:
“Still one point seemed lacking to account for the phenomenal outburst of activity that followed in the Western world the invention of the steam engine, for it could not be ascribed simply to the substitution of inanimate energy for animal labour. The ancients used the wind in navigation and drew upon water-power in rudimentary ways. The profound change that then occurred seemed to be rather due to the fact that, for the first time in history, men began to tap a large capital store of energy and ceased to be entirely dependent on the revenue of sunshine. All the requirements of pre-scientific men were met out of the solar energy of their own times. The food they ate, the clothes they wore, and the wood they burnt could be envisaged, as regards the energy content which gives them use-value, as stores of sunlight. But in burning coal one releases a store of sunshine that reached the earth millions of years ago. In so far as it can be used for the purposes of life, the scale of living may be, to almost any necessary extent, augmented, devotion to the primitive ideas of the peoples of Kirkcaldy [i.e., Adam Smith and his followers] and Judea notwithstanding.”
Smith, of course, was one of the economists who provided Marx with the idea of socially necessary labour in the first place:
“If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for, or be worth two deer. It is natural that what is usually the produce of two days’ or two hours’ labour, should be worth double of what is usually the produce of one day’s or one hour’s labour.”
And again, this is understandable for a man living in a largely rural country where what little coal power was being harnessed was by Newcomen-style beam engines in a handful of new manufactories. Water power remained the primary inanimate source of value driving both the cotton manufacturing that characterised the early industrial revolution as well as iron foundries such as the one used by Darby to produce the iron at Ironbridge. That is, the economy that Smith was attempting to model was that of the late medieval period rather than of a modern industrial civilisation… and we should treat Smith and his descendants accordingly.
Most importantly, neither Smith nor Marx had reason to consider that planet Earth might have limits… which is a key reason why they – and their followers – overlooked energy. A ton of coal cost a tiny fraction of the total investment in manufacturing and yet, uncalculated by the economists, provided the energy equivalent of eleven years of human labour. Oil would prove an even greater source of value, a single barrel providing roughly four and a half years of human labour. But, crucially to those writing in the late eighteenth and early nineteenth centuries, these fuels, along with all the mineral inputs to production were to all intents and purposes limitless.
Even today, insofar as economists acknowledge that there might be limits, they point solely to climate change. Several contrarians – myself included – have mocked this as ‘carbon tunnel syndrome.’ The fact that the western economies at least are past ‘peak energy’ and that around the world – accelerated by Trump’s war on Iran – our ability to access key mineral resources is in decline:
“We are trying to build a world powered by green energy and AI, but the physical materials needed to support that goal remain unavailable and are, by any reasonable analysis, unobtainable by any means…
“Replacing all fossil fuels requires roughly 4.5 billion tonnes of copper. Known world reserves sit at 880 million tonnes. We currently mine about 25 million tonnes a year. At this pace, it will take 187 years to extract enough copper for the energy transition…
“The material constraint remains buried because modern governance operates on the financial ledger. Economic models assume capital automatically commands matter. When a treasury allocates funding for the energy transition, the bureaucratic assumption asserts the physical resources will materialise simply because the capital exists.”
That is the voices of Adam Smith and Karl Marx echoing down the ages – no need to worry about anything so earthy as mineral resources, just invest more and the goods will surely arrive. But far from arriving, they are slowing down as the result of a phenomenon that few people even see… declining net energy. It is easy enough to imagine that all energy sources of any type are equal. The litre of petrol that you put in a car in England will have the same properties as the litre you put into a car in Germany. But the oil from which that petrol was refined may not be the same. The Russian oil that Europe’s leaders decided we no longer need, is cheaper to obtain and transport than the light American shale oil that Europe’s refineries now depend upon. And so, the net energy derived from the process is much less… it is costing more energy to get the petrol into your tank than it used to. This roughly appears in the rising price (although market manipulation designed to hide the true cost of the wars in the Persian Gulf and Ukraine have obscured this for now).
Even before those wars though, the rising cost of diesel fuel was rendering key South American copper mines unprofitable. And as energy shortages increase, more countries are going to implement export bans to hang onto domestic supplies. This is a particular problem in Europe, where most of the continent’s mineral resources were used up in the nineteenth and early twentieth centuries (Although the USA may well find itself facing critical shortages too). Across Europe – and especially in Germany – the prohibitively high cost of generating electricity has caused widespread deindustrialisation along with accelerated offshoring of industries… again, a process which began before the war in Ukraine.
Here in the UK, as the equinox approaches and the nights draw in, there is growing concern about the lack of stored gas:
“Chris O’Shea, the chief executive of Centrica, said Britain had ‘almost no gas in storage in the UK for the coming winter.’
“Mr O’Shea said low gas reserves in the UK were a ‘huge concern’ and that the country had ‘for too long’ relied on other countries for energy imports while underinvesting in storage and power plants.
“Britain’s gas facilities were around 30pc full this week, down from 46pc at the same time last year. They were more than 90pc full in the two years before that.”
This is why Britain’s electricity grid operator is talking about implementing pre-emptive power cuts rather than waiting for a combination of weather and gas shortages to leave demand far above supply. At best, this means that at some point this winter, regions of the country will receive emergency alerts telling them the power is being switched off. At worst, of course, we could witness a series of cascading outages with contagion across critical infrastructure.
The British establishment are already lining up the scapegoats for a serious outage this winter, since they dare not acknowledge that 30-years of misguided energy policy has left Britain dangerously short of the energy needed to maintain critical infrastructure. But the reality is that this is the shape of things to come. As net energy declines and key resources are less available (and so too expensive to compete for) the financial (claims upon) wealth that most economists assume to be the key to prosperity are going to be rendered worthless. Meanwhile, those few countries still in possession of critical resources and relatively cheap energy will no doubt (World War Three excepted) get to shape the economics and geopolitics of the mid- and late-twenty first century.
As you made it to the end…
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