It’s Time To Mark To Marxist (Again)

By Michael Every of Rabobank

There are only a few good Marxist jokes: that he had a sister called Onya who invented the starting pistol; that he didn’t like Earl Grey because all proper tea is theft; that Liverpool’s defending against Real Madrid had him smiling in his grave because it was so classless; and that Marx jokes are only funny if everyone gets them. (Get it?)

Not so funny is the US culture war over ‘neo-Marxism’ which we will hear more about as the 2024 Republican candidates emerge. This has market implications as big corporations, big tech, big banks, big universities, and Mickey Mouse are all dragged in.

Not funny either is the first day of the new House Select Committee on Strategic Competition between the United States and the Chinese Communist Party. The 7pm D.C. hearing’s witnesses today include former Trump national security adviser H.R. McMaster; former Trump deputy national security adviser Matt Pottinger; the secretary to a prominent Chinese dissident; and the president of the Alliance for American Manufacturing. Expect to hear, “Are you now or have you ever been doing business with China?” The temperature was not helped by the US saying Covid-19 escaped from a lab (remember Covid?) The risk of a ban on TikTok still lingers, as the US government forces its removal from official phones, as does Canada.

That said, Politico is suggesting President Biden will walk back planned aggressive actions on US capital controls vis-à-vis China and technology: instead of a blanket ban, he may force American businesses to register what they are doing. That will infuriate bipartisan Congressional China hawks, who might respond with their own legislation. However, perhaps that executive order isn’t as ineffective as it sounds against a morally outraged D.C. backdrop: as an analogy, if the government made you officially register to use pornography, might its usage decline?

Meanwhile, China’s 14th National People’s Congress kicks off this weekend. It’s flagged to see a new Financial Work Commission to centralise CCP control of banking, securities, and insurance, and a new Internal Affairs Commission to centralise CCP control of public security and counterintelligence. All Wall Street-friendly stuff, apparently, and even if hedge funds are not buying it, Xinhua says, ‘More US, China financial cooperation expected by industry insiders’. Expect them to be hauled before Congress if so. More so, as Ernst and Young in Beijing are told to wear CCP pin.

Globally, there is huge focus on labor vs. capital, the sine qua non of a real Marxist view of the world. Elon Musk, anti-Marxist in the culture war, is now the world’s richest man again, says Bloomberg. However, that reflects the collapse in his rivals’ wealth rather than any new capital accumulation, or rather *fictitious* capital accumulation, on his part. Indeed, markets remain nervous about low unemployment and higher rates making their fictional wealth more science fictional. Yesterday’s Financial Times headline that ‘US companies say it is easier to hire despite low jobless rate’ is the first that suggests we might be able to get rid of both Marx’s ‘reserve army of labor’ and high wage inflation. Crack open the champagne if so, oh bourgeois brothers!

Then again, the 8.1% m-o-m rise in US pending home sales speaks to asset price inflation, and a wealth effect, and more consumer spending on services, and so high inflation for longer, and so higher rates for longer; and it would also have grabbed the eye of Treasury Secretary Yellen too if she wasn’t in Kyiv talking to President Zelenskiy.

Worse, Japanese retail sales were +1.9% m-o-m in January vs. 0.4% expected, and 6.3% y-o-y, well ahead of inflation; and Aussie retail sales were also +1.9% m-o-m vs. 1.5% consensus, with takeaway food/restaurant/café spending +26% y-o-y, department store sales +17%, and clothing and footwear +17.5%. Somebody in central banking needs to crush those proletarians’ spirits pronto!

Given the incredibly important and political-economy nature of labour vs. capital, one has to grant old-school Marxists their ability to think about such issues seriously. Just look at these recent tweets from @NathanTankus: “If you are a Post-Keynesian you should not be reasoning from ex post profits to sales ratios to market power. I don’t care what Kalecki said about the “degree of monopoly”, the profits equation tells us these must vary economy wide independently of pricing decisions. In fact, this is especially frustrating because there’s a very strong argument to be made that Post-Keynesian economics was **founded** on clarifying the logical flaws with such reasoning in Alfred Eichner’s correspondence with Joan Robinson. Eichner clarified that the target profit margin (or “corporate levy”) involved in setting prices is an ex ante propensity to save while Joan Robinson emphasized the Kalecki profits equation determining ex post profit margins. Learn your history people!!” Unlike neo-Marxist babble, and babble about neo-Marxism, there are some important arguments there markets would benefit from grasping.

By contrast, most market commentary on labour vs. capital is so shallow it doesn’t even know it’s making a Marxist argument as the reason why wage growth stalls, inflation falls, long bonds rally, and stock and stonks soar: ‘Things just work out the way that works for markets’. Well, the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party might have something to say about that. So would Marx. So would the Fed, which might get things to where market commentators want – but the very hard way.

It also appears some Marxists do have a sense of humor. I don’t mean Mark Thomas in the UK, or Zero Mostel in the US (go watch the original ‘The Producers’ and the Cohen brothers’ ‘Hail, Caesar!’), but rather ‘A Marxist guide to investing in the American stock market’ by Alex Lo. He shares a few “salient points about American capitalism and its ill-effects on the rest of society, perhaps the world at large. And it’s in those areas of dysfunction, malice, extreme inequality, and violence where profit opportunities exist.” You don’t have to agree, but it’s more intelligent than ‘An American guide to investing in the Marxist Chinese stock market’. Indeed, the joke that a socialist, a nihilist, and Marxist all walk into a bar, and the owner says, “Sorry, you have to be over 21 to be served here,” inverts the core stupidity of the two camps in some key respects.

Meanwhile, we just got an environmental crack-down on output at the Chinese ‘lithium capital’ of Yichun, with the price of that green metal jumping as 8-13% of global supply is halted: remember how supply chains were healing? We also saw Hong Kong’s exports dropped the most in 70 years (-36.7% y-o-y,) with imports -30.2%: remember how China was reopening? CNY is also heading back towards 7: remember when that rally was supposed to have further to run ‘because weak dollar’?

More positively, UK PM Sunak won his own culture war, and the EU has won its war against its lack of common sense, to both be able to strike a compromise deal over Northern Ireland creating a new ‘green lane’ for traders: “The sausages must flow!” – and now can, along with pork pies, Cornish pasties, and medicines, etc. That is genuinely good supply-chain news, even if the reasons for it happening are domestic political-economy (i.e., the weak UK and Tory positions) and international political-economy (i.e., the weak UK and EU positions).

To conclude, on multiple fronts, it’s time to mark to Marxist (again).