Francis Fukuyama has graced us all with his latest ruminations on how the

entire globe ought to organise itself. History is not an end it seems, rather we
need to formulate some new set of policies to make sure that it isnt. Or
something like that, its difficult to see exactly what is being argued for other
than the prejudices of the author unadorned by any deep understanding of
the world around him.
Take, for example, this:
Who would try to assert the primacy of democratic politics over physics? Or
chemistry? Quite, wed lock someone up for that, with a nice jacket that
fastens at the back and a coterie of friendly nurses come feeding time. Joe
Stalin did assert the primacy of democratic socialism over biology and that led
to Lysenko and millions starving. Pol Pot asserted the primacy of such
democratic socialism over basic agriculture and again, millions starved.
Swathes of the world have had politics and politicians asserting that they and
their will are more important than economics and while not everyone starved
life was not lived better in those unfortunate places. Hugo Chavez is a more
TECH | 12/25/2011 @ 6:20AM | 723 views
Fukuyama's Latest Nonsense and
Why Karl Marx Was Right

Politically, the new ideology would need to reassert the supremacy of democratic politics
over economics and legitimate anew government as an expression of the public interest.
Tim Worstall, Contributor
I write about business and technology.
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recent example and the idiot nationalisms of the various fascists of the past
century can also be called into evidence.
For the thing to understand about economics is that it is not a prescription of
the way we should live. It is, rather, simply a connecting of cause and effect.
Economics does not say, for example, that it would be immoral if everyone
earnt $20 an hour, therefore we should not have a minimum wage of $20 an
hour. It says, rather, that if you fix the minimumwage at $20 an hour youre
going to have a lot of unemployment. Still your choice as to whether you do it
or not.
Similarly, economics does not say that the correct price of beef is $5 a pound,
only that if the market clearing price of beef is $5 a pound then if you fix the
price at $3 a pound there will be no beef and if you fix it at $8 youll be
swamped in a tsunami of unwanted steaks.
Economics really just is a toolkit, just as physics or chemistry is, a toolkit that
we can use to make sense of the world around us. To assert that politics,
democracy, should have primacy over such a toolkit is to assert that hammers
should do what theyre told by Congress. Or, to take an historical example,
tides what kings say they should.
Unfortunately thats not the only nonsense in the essay. In brief, his argument
is that democracy, liberal democracy, requires a middle class. As the middle
class is shrinking then liberal democracy is at risk. Therefore we need to come
up with a new overarching theory of everything in order to preserve the
middle class and thus liberal democracy.
Which is very odd indeed for we already have a perfectly servicable theory
which explains both what is happening and what is going to happen, that of
Karl Marx. As Fukuyama says:
OK, yes, what would it look like? Well, why not turn to the Bearded One, the
obscure scribbler of his age, Marx himself? No, of course, I do not mean his
prescriptions for the future, for they were well off into loonie land and
deserving of the straitjacket mentioned above. But he was a perceptive analyst
of what was happening, even if his predictions deserve to be in a Warner
Brothers cartoon with Daffy Duck and friends.

Imagine, for a moment, an obscure scribbler today in a garret somewhere trying to outline
an ideology of the future that could provide a realistic path toward a world with healthy
middle-class societies and robust democracies. What would that ideology look like?
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Start quite simply with the twin concepts of the reserve army of the
unemployed and the monopoly or not of capitalist employers.
As Karl pointed out, the two interact in an interesting manner. Imagine that
our capitalists, the greedy dogs that own everything, require more labour. If
everyone who can currently offer that labour is currently employed then they
will need to poach that labour fromsome other capitalist. This would imply
that they will have to offer higher wages to get that labour to move. Another
way of looking at the same thing is that as, say, labour productivity rises,
capitalists are able to make greater profits from the labour employed. Which
means that capitalists will, as those potential profits rise, be in competition
with each other for access to the labour which allows them to make those
increased profits.
So, inexorably, as long as there is competition between employers for access
to labour, as productivity rises then so will wages.
There are two scenarios in which this does not happen. The first is where
there is a monopoly of employers, where there is no competition for the
labour. An example of this would be the Soviet Union where the State itself
was the only employer. Stalin noted quite explicitly that even as productivity
improved wages should not so as to allow greater state profits and thus more
money that could be reinvested. Somewhat amusing (although not for those
that had to suffer it) that Marxs warning against the evils of a monopoly
employer came to pass in a nominally Marxist state.
The second is where there is a reserve army of the unemployed. Where there
is not the requirement to poach labour, but where it is possible to bring new
labour into the production system. Here there will again be no bidding up of
wages.
We most certainly do not have a monopoly of employers at present. But this
globalisation thing, one way of looking at is precisely that weve opened the
door to a reserve army of some couple of billion people who were not
previously, but are now, part of the global labour force.
We dont actually need any new scribbler in a garret to make sense of what
has been happening in recent decades, the stagnation of lower end wages.
Marx explains it all for us quite nicely.
Further, we dont in fact need any obscure scribbler to tell us what to do to get
out of this either: Marx does that again quite nicely. Once the reserve army is
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exhausted and as long as we maintain that competition among capitalists for
access to the labour, the profits that can be made from labour, then inexorably
and without doubt labour incomes will rise in line with productivity again.
That is, were not seeing a change in the basic rules of society. We are, rather,
seeing the transient effects of the opening up of global trade. And as transient
things go, transiently, so will this be transient.
And, in fact, we are already seeing this. Chinese manufacturing wages have
been rising at a 14% a year clip for well over a decade now. Thats a fourfold
(yes, after inflation) increase. Factories are finding that they have labour
shortages in the Pearl River delta, theyre moving further and further inland
trying to chase that pool of cheap labour, that reserve army. Similar things are
happening in India, in Indonesia, yes, theyre even happening in sub-Saharan
Africa.
A few charts from the research of Xavier Sala i Martin:(yes, he will strike
some as a little odd but he is one of the most cited economists of his
generation)
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True, absolute, poverty, real howling destitution, is thankfully becoming rarer
and rarer.
Yes, this is true even in Africa.
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Sen Welfare is the combination of absolute livings standards and inequality,
rising Sen Welfare means that inequality is falling as incomes rise.
Further, if we look at the work of Branko Milanovic we find that global
inequality is falling. Yes, inequality within countries is rising, but the
inequality over the whole global population is falling.
So, as I say, we dont in fact need some new theory, some new turgid tome to
tell us all how to put the world to rights. What is happening is quite easily
explained by extant theories. As is what needs to be done, which is simply to
keep extending that globalisation, that liberal free market capitalism, until the
reserve army of the unemployed has been absorbed into the Borg of the global
economy and were back to that glory of the rising tide lifting all boats.
Quite simply, Marxism, as long as we remain with the analysis not the
predictions, explains the current world quite nicely.
Two further points, one that is really a test of moral stance. It is entirely
possible to say that, well, OK, those Chinese, Indonesians, Indians, theyre
getting richer. But this is at the expense of the working class here at home.
Median wages havent risen for a generation and this is just wrong. As I say, it
is possible to say this and if you want to just go right ahead. Ill disagree
because Im a liberal (classical branch, but a liberal all the same) and the
European and American working classes are living as high on the hog as the
working classes of any society ever have done. It really is only in this past
century that all have been assured of a roof, a change of clothes and three
squares a day. Now that the some billion of us in the Global North have that,
I see no problem in our standing still for a few decades while the truly poor
catch up.
Agreed, this is a moral point and as always with moral points its possible to
disagree. But that I or you dont progress from flank to T-bone for our
breakfast steak and eggs while hundreds of millions of others do progress
from a daily bowl of corn meal to a balanced and fulfilling diet does not strike
me as a great injustice.
The other is a certain mystification about what on Earth Fukuyama thinks he
is talking about? Hes bemoaning the shrinking of the middle class, worrying
that this lack of a middle class is going to unsettle liberal democracy.
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But the most basic fact of global political economy over the past 40 years has
been the move from destitute peasantry into the middle class of a couple of
billion of our fellow human beings. So what shrinking of the middle class?
This article is available online at:
http://www.forbes.com/sites/timworstall/2011/12/25/fukuyamas-latest-
nonsense-and-why-karl-marx-was-right/
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