A few days back, economist Nouriel Roubini made the offhand comment that:
Karl Marx had it right. At some point, capitalism can destroy itself. You cannot keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand.
As has been noted before, nothing Roubini said was at all – ahem – revolutionary. In fact, there’s really no dispute that his analysis was founded on “well-proven conventional modern macroeconomics.” Much of it didn’t even go beyond Economics 101.
In an article on Project Syndicate which describes the difficulties besetting solutions reliant on fiscal policy, monetary policy, and inflationary measures, Roubini further writes:
Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand.
Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China – and soon enough in other advanced economies and emerging markets – are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.
Of course, Roubini is playing fast and loose with the definition of “socialism.” Stalinist Russia – that is to say, the Soviet Union after Lenin’s more or less capitalist New Economic Policy was replaced – (and its numerous imitators) was an experiment in nationalized state capitalism on an underdeveloped, pseudo-feudal society.
Socialism as such was not and has never been tried. You can certainly criticize Marxist ideas (I do), but you can’t say that “socialism failed” if you don’t even pretend to follow the manual.