Marxism vs libertarianism

Marxist Analysis · 2026-05-13

Core Argument

The central thesis is that libertarian economics — specifically the Austrian School tradition of Hayek, Mises, and Böhm-Bawerk — does not constitute a genuine scientific alternative to Marxism but rather a retreat into subjective idealism that functions as an apology for capitalism. Booth argues that the Austrian School's "economic calculation problem" — the claim that socialist planning is impossible in principle — was already answered by Marx and, more concretely, by Trotsky, who demonstrated that the real obstacle to socialist planning is not technical but political: it is a question of class power, not of computational capacity.

The article claims that the Austrian School's marginal utility theory of value is a consciously reactionary weapon deployed against the growing workers' movement in early 20th-century Vienna, designed to undermine the labour theory of value that underpins Marx's analysis of exploitation and crisis. Far from disproving Marxism, the Austrians' subjective idealism — their reduction of economic dynamics to the preferences of isolated individuals — represents a regression from the scientific materialism of classical political economy. The article further contends that the "socialist calculation debate" was resolved not by Hayek's theoretical arguments but by historical experience: the Soviet planned economy demonstrated socialism's practical viability, while capitalism's periodic crises — from the Great Depression to 2008 to the current inflationary conjuncture — prove that it is capitalism, not socialism, that "neither works in theory nor in practice."

Theoretical Grounding

The analysis is firmly rooted in the classical Marxist tradition, drawing on Marx's Capital (particularly the distinction between labour and labour power, value and price, and the theory of surplus value), Engels's Anti-Dühring (the dialectic of freedom and necessity, the antagonism between organised production within the firm and anarchy between firms), and Trotsky's The Revolution Betrayed and The Soviet Economy in Danger (the materialist explanation of bureaucracy, the transitional role of market mechanisms under workers' democracy).

The article situates itself within the Marxist tradition's long-standing critique of vulgar economy, following Marx's own characterisation of post-Ricardian bourgeois economics as a retreat from science into apologetics. It draws on Lenin's Materialism and Empirio-Criticism to establish the philosophical stakes: the Austrian School's subjectivism is a variant of the idealist currents that Lenin polemicised against, and the battle between the labour theory of value and marginal utility theory is ultimately a battle between materialism and idealism.

The argument also engages with the Marxist theory of crisis, specifically the tendency of the rate of profit to fall as expressed through crises of overproduction. The article explains that capitalism's inherent contradiction — workers produce more value than they receive in wages, so they can never buy back what they produce — means that periodic crises are not aberrations but the system's normal mode of operation. This grounds the claim that the Austrian School's idealised model of perfect competition, even if realised, would still produce crises.

Conjunctural Relevance

The article is written in August 2022, against the backdrop of post-pandemic inflation, supply chain disruptions, labour shortages, and the cost-of-living crisis. Booth explicitly connects the theoretical argument to concrete phenomena: 100,000 pigs being slaughtered and discarded in Britain due to a lack of butchers while supermarket shelves are bare; empty homes used as speculation alongside a housing crisis; the climate catastrophe as capitalism's existential failure. These are presented not as policy failures but as the normal operation of a system driven by profit rather than need.

The article notes that the pandemic saw $17 trillion in direct fiscal stimulus and $10 trillion in central bank injections — an implicit admission by the ruling class that the market cannot manage crises without state intervention. This is used to expose the hypocrisy of libertarian ideology: the same figures who preach free market orthodoxy run "cap-in-hand to the government" when their system faces collapse. The conjuncture is thus one in which capitalism's contradictions are particularly visible, making the ideological battle against libertarianism especially urgent.

The article also situates itself within the longer arc of capitalist crisis management: the shift from Keynesianism to neoliberalism and back again, arguing that both are variants of bourgeois economics that accept capitalism as given. The current moment, with its combination of inflation, shortages, and geopolitical instability, is presented as an opportunity to break with both reformist and libertarian frameworks and advance the case for revolutionary socialism.

Where the Argument Continues

The article is itself a contribution to an ongoing polemic within the Marxist tradition. It explicitly references Trotsky's The Revolution Betrayed and The Soviet Economy in Danger as the definitive Marxist responses to the Austrian School's "economic calculation problem." Readers should consult these texts directly for the full development of the argument about planning, workers' democracy, and the transitional economy.

The article also gestures toward broader debates within Marxist economics that it does not fully develop. The relationship between value and price, the transformation problem, and the precise mechanisms of crisis formation are mentioned but not exhaustively treated. These are addressed in Marx's own Capital (particularly Volume III) and in the broader Marxist literature on crisis theory.

Within the In Defence of Marxism corpus, this article connects to other pieces on the labour theory of value, the nature of the Soviet Union, and the critique of reformism. The magazine issue from which it is drawn (issue 36) likely contains related material on the current economic conjuncture. The article's references to Leigh Phillips and Michal Rozworski's People's Republic of Walmart suggest a contemporary Marxist literature that continues the socialist calculation debate on new terrain.

Connections

• Marx, Capital Volume I: The foundational text for the labour theory of value, the distinction between labour and labour power, and the theory of surplus value. The article's core economic arguments derive from this.
• Engels, Anti-Dühring: The source for the dialectic of freedom and necessity, the critique of "eternal" economic laws, and the famous passage on the leap from the kingdom of necessity to the kingdom of freedom.
• Trotsky, The Revolution Betrayed and The Soviet Economy in Danger: The definitive Marxist responses to the Austrian School's "economic calculation problem," arguing that planning requires workers' democracy, not bureaucratic command.
• Lenin, Materialism and Empirio-Criticism: The philosophical framework for understanding the Austrian School's subjectivism as a variant of idealism.
• Leigh Phillips and Michal Rozworski, People's Republic of Walmart: A contemporary Marxist text that updates the socialist calculation debate by examining how large corporations like Walmart already practice extensive internal planning.
• Hayek, The Road to Serfdom: The key libertarian text that the article engages with critically, particularly its claim that planning leads to totalitarianism.

Key Quotes

1. "The law of value, therefore, lies behind all the other dynamics of capitalism: the drive by the bosses to intensify work and squeeze more surplus value out of the working class; the push to raise productivity by investing in technology, in order to out-compete other producers, and thus make super-profits; and the inherent tendency towards accumulation, expansion, and growth."

2. "The real problem, therefore, as Trotsky underlined, is not an 'economic calculation' one, but a political one. It is not a question of calculation, but of class; a question of power — that is, which class owns and runs the means of production? And according to what laws? On what basis — for needs or profits?"

3. "Even when everyone is acting 'rationally', pursuing their own self-interest, as Smith, Hayek, and all the other liberals and libertarians suggest they should, the result is an outcome that is deeply irrational for society as a whole. Even when (or exactly when) capitalism is working just as it should, in other words, this is precisely when it doesn't work at all."

4. "The task facing humanity is not one of calculating how to allocate scarce resources, but of taking the enormous productive forces and superabundance at society's disposal into common ownership and workers' control; and of developing these forces further, so that they can be put to use rationally and democratically, in order to meet our needs, and not the capitalists' profits."

5. "Freedom does not consist in any dreamt-of independence from natural laws, but in the knowledge of these laws, and in the possibility this gives of systematically making them work towards definite ends." (Engels, Anti-Dühring, quoted approvingly)

6. "The struggle between living interests, as the fundamental factor of planning, leads us into the domain of politics, which is concentrated economics." (Trotsky, quoted approvingly)