Wood’s Marxism

Wood’s goal was to “transform the socialist idea from an ahistorical aspiration into a political program grounded in the historical conditions of capitalism.” This led her to produce a critical response to post-Marxist attempts to detach socialist politics from class, The Retreat from Class, which was the 1986 Isaac and Tamara Deutscher Memorial Prize recipient.

Her critical assessment of “analytical” or “rational choice” Marxism also formed part of this project. Wood questioned the ahistorical thinking of this current, showing its profound impact on our understanding of capitalism, socialism, and the struggle leading from one to the other. This article draws upon Wood’s work to critically assess the theory of exploitation and conception of socialism offered by John Roemer, a key figure of analytical Marxism.

Analytical Marxism consolidated as an intellectual current during the 1980s. It is associated with a group of authors including G. A. Cohen, John Roemer, Jon Elster, Adam Przeworski, and Erik Olin Wright. While their interests and theoretical positions vary, the group converges around the denial of a distinct Marxist methodology.

This current is committed to methodological positions borrowed from analytic philosophy and neoclassical economics. These positions include a focus on the intentional action of individuals (methodological individualism) and the mobilization of “game” or “rational choice” theory. The goal is broadly to use the tools of mainstream social sciences to address issues of the Marxist agenda, including class exploitation and the promotion of market socialism.

Mobilizing what he calls “two major contributions of neoclassical economics” — game theory and the concept of general equilibrium — Roemer’s version of socialism stems directly from his revision of the Marxist theory of exploitation. He rejects the labor theory of value as invalid and seeks to detach exploitation from the extraction of surplus value.

Roemer designs a model in which all producers have access to varying degrees of capital to buy means of production and can therefore avoid selling their labor power. Exploitation ensues from unequal individual capital endowments, which results in relatively richer producers working less than their relatively unprivileged counterparts. Roemer concludes from this thought experiment that exploitation occurs even in the absence of a labor market and the compulsory extraction of surplus value at the point of production.

Once we introduce a labor market to the model, class emerges, in addition to exploitation. Agents can now operate their own (unequally distributed) capital, hire others, or sell their capacity to work. Self-interested agents combine these options in a strategically rational way to reach subsistence while minimizing their labor (the model can be further complexified to include profit and accumulation).

By optimizing the use of their individual assets, Roemer writes, “producers choose their own class position.” Since some work more than the social average to secure a normal bundle of commodities, they are exploited.

A Theory of Justice

Roemer then proposes a general criterion of exploitation whereby a group can be seen as exploited “if it has some conditionally feasible alternative under which its members would be better off.” The moral evil of capitalism therefore lies in an unequal and ethically suboptimal distribution of capital assets, leading to unequal incomes. The aim of Roemer’s socialist “blueprint” is precisely to design a feasible, and ethically superior, alternative to capitalism.

Roemer’s socialism is all about distributive justice. He claims that markets are indispensable in any complex society, and that the experience of communist states has discredited centralized planning. The aim of socialism must therefore be to harness the efficiency of markets as a mechanism of economic coordination while transforming property relations through a redistribution of assets.

In this scenario, markets for commodity and capital goods, labor, and stock, will endure. Firms will compete and maximize profits. In order to equalize opportunities, however, vouchers providing a claim on firms and their profits will be equally distributed.

Since capitalism is said to be economically efficient, Roemer’s market socialism “is designed, on purpose, to be as close as possible to a capitalist economy.” The problem is that capitalism does not permit a just distribution of income due to asset inequalities at birth. The redistribution of assets will create equality of opportunities. To avoid market failures and optimize efficiency, however, this redistribution must be tied to a new cooperative ethos.

Agents bestowed with vouchers will withdraw or limit their labor supply and act as “free riders,” so long as they act as “Nash optimizers” (named after the economist John Nash) and stick to a “go-it-alone” individualistic ethos. Roemer’s solution to this “incentive problem” is a “Kantian” cooperative ethos, named after the philosopher Immanuel Kant.

Roemer sees Kantian optimization as implying a “universal,” as opposed to an individualistic, outlook that will lead an individual to ask what labor supply she would like all workers to offer. Trusting that a cooperative ethos will ensure that other workers will play along, the individual will refrain from free riding. The same ethos also leads investors to optimize investments in a cooperative way. It follows that Kantian optimization resolves the opposition between economic efficiency and distributive justice.

Capitalist Compulsions

The smooth resolution of capitalist contradictions by Roemer’s socialist design mirrors the smoothness of class exploitation as he conceives it. For him, the exploitation of one class by another can occur without coercion, or even without any direct relationship between exploiters and exploited. It simply derives from asset differentials causing income inequalities.

This focus on property relations shifts our attention from coercive relations of surplus extraction to distributive patterns that lead to relative (dis)advantage. This becomes the criterion of exploitation. As Wood puts it: “The ‘rational choice’ model of class formation requires that the relevant issues be presented as having to do with ‘optimization’ or relative advantage rather than with compulsion.”

This expulsion of coercion from the theory, and emphasis on choice, radically lowers the stakes of survival in a class society, hiding the deep difference between optimizing decisions and choosing survival strategies. It rapidly becomes clear, however, that Roemer’s class positions are in fact not chosen by agents so much as they are automatically derived from the rational use of their individual assets. Or to put it another way, in Roemer’s static models, class positions are instantaneously assigned — we can determine the class position of agents before they even “choose” them, by deducing the optimal usage of their individual assets.

In Roemer’s theory, according to Wood, sociohistorical structures are “smuggled into the attributes” of individual agents. This approach leaves what she calls the “vast array of social relations and structures that are already secreted within the ‘assets’ and ‘endowments’ with which individuals enter the ‘game’ of class” unexplained.

For Wood, Roemer’s approach dissolves “macro” structures — and the historically specific dynamics that stem from them — into the “micro” individual psyche of agents or into their individual assets. Within the limits of this framework, Roemer has to “take as a given the compulsions of capitalism, and to impute them to the preference and motivations of individual capitalists.” Yet, as Wood insists, the utilitarian rationality of neoclassical economics is not a natural attribute of individual agents — it actually stems from “historically constituted market dependence and competitive pressures.”

Dynamics of Coercion

While academics debate the validity of the labor theory of value, capitalists are bound by competitive imperatives to “optimize” the extraction of surplus value created in production. Likewise, whoever turns out to be right on the concept of “surplus value,” workers are compelled to compete on labor markets to sell their labor power to survive.

Markets do not actually “clear” and instantaneously reach a point of equilibrium as they are said to do in the neoclassical theory of perfect competition used by Roemer. Firms do not know in advance if they will be able to beat competitors and sell their goods and services.

The “law of value” forces firms to systematically invest and maximize labor productivity to reach or improve upon average levels of efficiency. This competitive and unplanned social process of production recurrently leads to disequilibrium and crisis, and pushes employers to “externalize” costs, contributing to ongoing environmental degradation.

Wood reminds us that Marxism ascribes a determinant role to class struggle because it is strategically situated at the heart of the material reproduction of society. Historically specific dynamics of coercion that sustain exploitation matter because they establish conflicting class interests and structure distinct strategies that classes adopt to reproduce themselves.

Facing peasants that have direct access to land and means of subsistence, for instance, feudal lords must accumulate “extra-economic,” coercive means to extract surpluses and to repel competing exploiters. Under capitalism, following a historical process of mass dispossession of direct producers, wage workers must compete on labor markets to sell their labor power to capitalist employers who are compelled to accumulate by market imperatives as a condition of survival.

Once we trivialize class exploitation by reducing it to noncoercive “games” to secure relatively advantageous consumption bundles, and once we reduce social relations between exploiters and exploited to an issue of inequality (instead of viewing inequalities as a consequence of relations of surplus extraction), the distinct dynamics of modes exploitation fall out of view. When our theory of capitalist exploitation loses sight of coercive forces — whether that means the impersonal coercion of markets or the personal power of employers over production — it also loses its explanatory power.

There is no space left in this perspective for capitalism as a compulsive system that sustains historically distinct patterns of accumulation, crisis, and conflict. The result is to sever the ethical arguments put forth by Roemer from a cogent understanding of the political terrain of capitalism.

Separate Spheres

Wood stresses that Marx seeks to understand the world in order to transform it, and that this implies a “particular kind of knowledge,” one that makes it possible to identify the “principles of historical movement” and “the points at which political action could most effectively intervene.” A key aspect of this is to illuminate how the capitalist configuration of social power brings about a differentiation between “economic” and “political” spheres.

Many Marxists, Roemer among them, meet mainstream economics on its own ground, emptying economic relations of their social and political content. Marx, however, is adamant that capital is a social relation — one that has a historical origin and could therefore be surpassed. The aim of his critique of political economy is, as Wood puts it, to show that “the ultimate secret of capitalist production is a political one.”

For Wood, the economic relations of the capitalist mode of production are in essence historically specific social relations that pertain to “the disposition of power that obtains between workers and the capitalist whom they sell their labour power to.” This is a disposition of power that “has as its condition the political configuration of society as a whole.”

However, the emptying of economic relations from their social content is not simply a mistake made by mainstream economists. It reflects the actual process of differentiation of social power into “economic” and “political” spheres that is characteristic of capitalism.

This implies that production and distribution become “disembedded” (as Karl Polanyi explains) from juridical and customary regulations and are organized through the “economic” mechanisms of commodity exchange and market price signals. Markets, previously socially regulated and at the margins of economic activity, take center stage and regulate the capitalist economy. It also means that ownership of means of production becomes “absolute” and is freed from feudal relations of reciprocity and political obligations.

At bottom, the apparent separation of the “economic” and “political” in capitalism is in fact a differentiation of political powers and functions that supports an entirely new form of class exploitation. Some political powers — control over the labor process and investment decisions — are privatized, while public duties are taken over by an “autonomous” state.

Capitalist exploitation thus divides into a moment of appropriation, which is tied to the “economic” power to organize production granted by private property, and which is supported in turn by a coercive moment backed up by the force that the state monopolizes.

Capitalism Against Democracy

In precapitalist societies, surplus appropriators needed to control coercive state power to extract surpluses from direct producers. Under capitalism, on the other hand, exploitation is made possible by the market dependence of both producers and exploiters. Producers are separated from the conditions of labor and compelled by economic need to sell their capacity to work to employers who are themselves constrained by competitive imperatives to maximize the production of surplus value.

The transfer of surplus labor can thus take place without overt, “extra-economic” coercion being exercised by exploiters. This means that the exploiters no longer need to monopolize state power in order to reproduce themselves. The state is “freed up” and can in principle be democratized, although the acquisition of political rights and civic equality has historically necessitated mass and sustained working-class struggles.

The capitalist configuration of social power has notable implications for political struggles. Equal citizenship hides class exploitation from view and stabilizes democratic capitalist governments. Moreover, since surplus extraction takes place in an “economic” sphere and is no longer immediately a political issue, there is a tendency for class struggle to be depoliticized and confined to production units, and for it to focus on the terms and conditions of work.

Meanwhile — and because the state is now apparently autonomous from class power — it is possible to form labor parties and make gains from electoral politics. Yet the democratization of the state remains profoundly limited and distorted in different ways.

Under capitalism, politics is expelled from large numbers of human activities that are commodified, confined to the “economic” sphere, and submitted to imperatives of profitability and accumulation. These activities escape the processes of democratic deliberation, and the public domain is therefore substantially impoverished.

Capitalism, Wood explains, entails a “completely new form of coercion, the market — the market not simply as a sphere of opportunity, freedom and choice, but as a compulsion, a necessity, a social discipline.” The impersonal power of the market not only regulates production and exchange but is also “capable of subjecting all human activities and relationships to its requirements.”

This includes the state, which, though formally autonomous, depends upon sustained capital accumulation to function and maintain legitimacy. To grasp the nature of these distinct forms of power is key to define what socialism should look like, as well as the obstacles to its emergence.

Democracy Against Capitalism

Wood’s analysis of capitalist power allows us to see the flaws of Roemer’s redistributive market socialism. As she explains, capitalist markets are not simply a set of opportunities or neutral mechanisms — they are fundamentally modes of coercion.

Retaining the market and the price mechanism as an economic regulator, whatever redistributive embellishments might be added on, would imply an “irreducible requirement, the commodification of labour and its subjection to the same imperatives of competition” that exists under capitalism.

Exploitation, disequilibrium, and crisis would endure, and democratic deliberation would remain deeply restrained. Market discipline and competition would continue to foster individualistic survival strategies, which are generated by the need of workers to compete for jobs and of capitalists to compete for profits. This would rule out any Kantian cooperative ethos.

Moving beyond issues of redistribution, socialism must imply a deep transformation of social power. By presenting the market as an unsurpassable form of efficient economic coordination, Roemer reproduces in theory the differentiation of the economic and political of capitalist reality.

If, however, we agree with Marx that the economy is fundamentally a set of social and political relations — even when they assume a “fetishized” and apparently asocial form under the impersonal regulation of the capitalist market — we begin to see how we could collectively transform it. Socialism, Wood suggests, would imply reconceiving democracy “not simply as a political category but as an economic one.” She insists that “Marx’s free association of direct producers is a good place to start.”

This requires not only the necessary democratization of workplaces, but also the replacement of the market by “democracy as an economic regulator, the driving mechanism of the economy” as a whole. Against capitalism, socialism would thus imply democracy as “a new rationality, a new economic logic” anchored “in the interest and objectives of the self-active workers.”

Is this too ambitious a vision? It would seem, on the contrary, that it is the market socialism of rational-choice Marxism, with its abstract ethical rhetoric, detached from the agencies, structures, and contradiction of the capitalist context, that verges on utopianism. It might be more promising, as Wood encourages us to do, to go back to “Marx’s transformation of socialism from moral exhortation to economic and political analysis . . . inextricably bound up with the notion of class struggle and the self-emancipation of the working class.”