Karl Marx was wrong about pretty much everything. I don’t just mean wrong in the broad moral sense — although, with a hundred million deaths carried out in his name, he has a good claim to be reckoned the greatest incitement to violence in human history. No, I mean wrong in the literal sense that every prediction he made failed to come true — except one.
Marx saw himself as a scientist rather than an ideologue. His followers treated his turgid writings not as a series of opinions, but as a catalogue of empirical truths. Yet his record as a forecaster could not have been worse.
Free markets, Marx wrote, would destroy the middle class, concentrating wealth in the hands of a tiny number of oligarchs. In fact, free markets have enlarged the middle class everywhere they have been allowed to exist.
The revolution, he wrote, would occur when the proletariat became sufficiently self-aware, something he expected to happen first in Britain and then in Germany. In fact, as the working classes in those countries became more educated, they shored up the established order; the revolutions happened (disastrously) in Russia, China and Cuba which, according to Marx, were conservative peasant societies.
Capitalism, he believed, was doomed: It would collapse under the weight of its own contradictions. In fact, when he wrote that in 1848, capitalism was already beginning to lift humanity to an unprecedented level of wealth — a process that has been accelerating ever since.
Marx’s disciples are impervious to the failure of their prophet’s doctrines. Like the religious casuists they despise, they fit events to their beliefs rather than the other way around. Those beliefs are surprisingly widespread.
Although you find few self-declared Marxists these days except in universities, many of his precepts have become mainstream. When we talk of “exploitation” or “wage slaves” or, come to that, “capitalism,” we are quoting the old cadger.
How many times have you heard it asserted that “the rich are getting richer and the poor are getting poorer”? That idea, too, derives from Marx, who called his theory “immiseration.” Until now, it has been as false as everything else he wrote: Someone on benefits in a Western country today is better off than someone on average wages in 1930.
Yet, very recently, it has started to come true. When, in response to the credit crunch, central banks printed extra money, they pushed up the price of property. People who owned stocks, shares, houses and other valuable goods saw their wealth rise commensurately. People dependent on their wages fell behind.
After a century and a half of being solidly wrong, Karl Marx is being vindicated — by loose monetary policy. If we measure assets and debts rather than income, the wealth gap has grown considerably. In Britain, the richest fifth of households are 64 percent better off than they were a decade ago, while the poorest fifth are 43 percent worse off. It’s a similar picture in the United States and in most of Europe.
If you want an explanation for the rise of populism, look no further. The Tea Party, the Occupy crowd, France’s National Front, Greece’s Syriza, Spain’s Podemos — they’re all products of the bank bailouts. Voters are reacting to something recent and unexpected: a real decline in wealth.
It is in our nature to be loss-averse. Innumerable studies by behavioral psychologists show the same thing: Given the chance to win a large sum by staking a smaller, we make the irrational decision to hold on to what we’ve got.
Our pain when we drop a $50 bill is far greater than our pleasure when we find one in the street. Behavioral psychologists also tell us that, faced with loss, we become frightened and angry, and vote accordingly.
The worst of it is that central banks show no sign of slowing. Mark Twain once wrote that, if all you have is a hammer, everything starts to look like a nail. In the minds of the Fed, the Bank of England, the European Central Bank and the Bank of Japan, all they have is a printing press. Every new injection of cash lifts the markets, and the rush wears off more quickly each time.
Until now, the idea that the state should lose its monopoly over money has been seen as a fringe position held only by weirdos like Ron Paul and Daniel Hannan. I have a feeling that that is about to change.
Dan Hannan is a British Conservative MEP.
