By Kamran Nayeri, November 5, 2026
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| Photo credit: Jacobin |
After the publication of “Tribute to My Teacher, Anwar Shaikh” (Nayeri, October 7, 2026), I was asked to write a piece about his major contributions to radical political economy.
In this article, I will discuss
some of Shaikh’s contributions I consider important. While the label Marxist
economics (or political economy) has been in use for some time, it has been
identified with Marx’s labor theory of value, surplus value, capital
accumulation, and economic crisis, and Shaikh considered himself a Marxist
economist; I have never quite liked the terminology. Marx himself never claimed
to be an economist. While Engels pointed to the theory of surplus value as one
of Marx's two intellectual contributions, along with historical materialism, he
added that, above all, Marx was a revolutionary socialist. Engels also criticized
young followers of Marx for overemphasizing economics in Marx’s theory and
accepted his own, as well as Marx’s occasional overemphasis, as a possible
reason.
I must also point out that Shaikh never
claimed to be a socialist activist; he devoted his life to developing a
coherent, consistent theory of capitalism aligned with Marx’s labor theory of
value as outlined in his magnum opus, Capital, while incorporating the main
contributions of heterodox economists and empirically validating it. He did so brilliantly in Capitalism: Competition,
Conflict, Crisis (2016, hereafter “Capitalism”).
Intellectual context of Shaikh’s
development as an economist
To understand Shaikh’s development
as a radical economist, we must begin with his graduate studies in economics at
Columbia University after earning a bachelor’s degree in engineering from
Princeton University. Shaikh wanted to study economic development because he
was born in Pakistan and spent his youth in a mix of developed and
still-undeveloped capitalist countries. He believed economics, as a science,
could help overcome economic backwardness. However, Shaikh rebelled against
mainstream neoclassical theory taught at Columbia University even though he had
very influential professors. Among them were William Vickrey and
Gary Becker, who
taught microeconomics; both won the Nobel Prize in Economic Sciences; Arthur
Frank Burns, a macroeconomist who headed the Council of Economic Advisers
under President Dwight D. Eisenhower from 1953 to 1956 and served as the first
Counselor to the President under Richard Nixon from January to November 1969;
and Ronald
Findlay, who specialized in international trade and economic development. Thus, instead of focusing on economic
development, Shaikh began searching for an alternative to neoclassical theory. His
doctoral dissertation was on “Theories of value and theories
of distribution,” supervised by Findlay.
In “Introduction” to Capitalism
(2016), Shaikh explains this and why his research focused on developed
capitalism and his methodology. He argues that developed capitalism is
characterized by “what appears to be one of almost constant progress:
inexorable growth, rising standards of living, rising productivity, and
ever-improving health, well-being, and welfare. Viewed from afar, it is the
system’s order, its internal coherence, which stands out. However, the closer
one looks, the more haphazard it all seems.
“Individuals
wander along entangled paths, propelled by obscure motivations toward some dimly
imagined ends, crisscrossing and colliding as they act out their economic roles
as buyers and sellers, bosses and workers, producers and speculators, employed
and unemployed; information, misinformation, and disinformation hold equal sway.
Ignorance is as purposeful as knowledge. Private and public spheres are
entwined throughout, as are wealth and poverty, development and underdevelopment,
conquest and cooperation. And everywhere there appears a characteristic
unevenness: across localities, regions, and nations; and across time, in the
form of booms and busts, and breakdowns. Seen up close it is the system’s
disorder that is striking.” (Shaikh 2016, p. 3)
He then asks: “How does one address
these two, equally real, aspects?”
Neoclassical theory
Dominant neoclassical economics
seizes on the first aspect and sets aside the second by casting the market's
supreme optimality as the ever-perfect invisible hand. This optimality is then
projected back into microscopic units, so-called representative agents, from
whose superlatively rational choices it is said to derive. In its perfectly
ordered form, then we arrive at the system which equalizes all prices for all
comparable goods, all wage rates for comparable labor, all profit rates for
comparable degrees of risk. Moreover, it fully utilizes all available
resources, including available plants, equipment, and labor. All these without
error, instability, or crisis. But after claiming this, neoclassical theory
gradually allowed imperfect reality into the story.
Thus, the young Shaikh at Columbia
University gravitated toward the Imperfect-Competition critics of neoclassical
theory, like Joan
Robinson and Edward
Chamberlin. However, Imperfect Competition theorists still operated within
the neoclassical theoretical framework.
Thus, Shaikh began to study
classical political economists, especially Adam Smith and David Ricardo.
He also studied Karl Marx, as
reading Capital became the focus of a layer of radicalized young
economists in the 1960s who discovered Marx’s theory of real competition, then
called “free competition” (in Capitalism he uses the term “real
competition” to depict the turbulent system), and began to rebuild what became
known as Marxist economics, the view of capitalism as a chaotic system where
competition is the result of accumulation of capital. Marx criticized classical
political economy for failing to understand capitalism as a passing stage of
economic development in human history. In particular, he saw the failure to
understand the significance of the working class's emergence and its struggle
against capital as underscoring the grave methodological and philosophical
weakness in Ricardo's work (Pilling 1980, Chapter 2).
Critique of theories of monopoly
capital
Shaikh and others of his generation
identified real competition as a manifestation of the process of capital
accumulation, which became the foundation for Shaikh’s reconstruction of
radical political economy. Thus, Shaikh wrote in Capitalism (2016):
“The theory of
real competition … is the theoretical foundation for the analysis in this book.
The profit motive is inherently expansionary: investors try to recoup more
money than they put in, and if successful, can do it again and again on a
larger scale, colliding with others doing the same. Some succeed, some just
survive, and some fail altogether. This is real competition, antagonistic by
nature and turbulent in operation. It is the central regulating mechanism of
capitalism and is as different from so-called perfect competition as war is
from ballet. Competition within an industry compels individual producers to set
prices that keep them in the game, just as it forces them to lower costs so
that they can cut prices to compete effectively. Costs can be lowered by
cutting wages and increasing the length or intensity of the working day, or at
least by reducing wage growth relative to that of productivity. But these must
contend with the reaction of labor, which is why technical change becomes the
central means over the long run. In this context, individual capitals make
their decisions based on judgments about an intrinsically indeterminate future.
Competition pits seller against seller, seller against buyer, buyer against
buyer, capital against capital, capital against labor, and labor against labor.
Bellum omnium contra omnes' (Shaikh, 2016, p. 14).
In turn, this paradigmatic shift
has a radical implication for understanding capitalism and its history.
The replacement of Marx’s real
competition with monopoly in Marxist writings began with Engels's editorial
note in Volume 3 of Capital (Engels, in Marx, 1894, pp. 568-69) and was popularized
by Lenin’s highly influential Imperialism: The Highest Stage of Capitalism
(1916). But Rudolf Hilferding was the intellectual fountainhead of this staging
of the history of capitalism. In his
Finance Capital (1910), Hilferding offers a systematic analysis of the changing
character of nineteenth-century capitalist development, particularly in
Germany. The analysis of competition is the chief aim of Part Three of his book
titled “Finance Capital and Restrictions to Free Competition.”
For Hilferding, capitalist
development undermined competition for two reasons. First, capital
concentration created larger firms. The small number of large firms seemed to
make collusion and cooperation possible.
Second, the centralization of capital through mergers tended to produce
cartels and trusts. Capitalist competition also seemed unstable because
barriers to entry and exit hampered capital mobility across industries.
Concentration and centralization of capital created barriers to equalizing
profit rates. Thus, Hilferding argued differential profit rates implied a
two-sector economy: one competitive and the other monopolistic. He expected the
monopolistic sector to eventually take over the entire economy: “The ultimate
outcome of this process would be the formation of a general cartel.” (Hilferding,
1910, p. 234). Taking his criticism to
its logical conclusion, Hilferding concluded that Marx’s labor theory of value had
ceased to operate:
“Classical
economics conceives price as the expression of the anarchic character of social
production, and the price level as depending upon the social productivity of labor.
But the objective law of price can operate only through competition. If
monopolistic combinations abolish competition, they eliminate at the same time
the only means through which an objective law of price can actually prevail.
Price ceases to be an objectively determined magnitude and becomes an
accounting exercise for those who decide what it shall be by fiat, a
presupposition instead of a result, subjective rather than objective, something
arbitrary and accidental rather than a necessity which is independent of the
will and consciousness of the parties concerned. It seems that the
monopolistic combine, while it confirms Marx's theory of concentration, at the
same time tends to undermine his theory of value. (ibid., p. 228; my
emphasis)”
Thus, the monopoly capital theorists
from Hilferding to Bukharin, Lenin, and finally to Baran and Sweezy (1966) argued
that capitalism had a progressive competitive period by the last decade of the
nineteenth century and a regressive monopoly capitalist period since then, during
which capitalism entered into crisis and decay as signaled by World War I.
Contributions by Shaikh and his
generation of radical political economists (Marxist economists) helped to
theoretically return to Marx’s labor theory of value based on the foundation of
capital accumulation and real competition, as well as empirically showing that
it, and not the monopoly capital theory, explains the history of capitalism
(Nayeri, 2023, pp. 18-28). They also provide empirical evidence to refute
monopoly capital theory (Nayeri, 2023, Appendix 1, 358-364). In Capitalism,
Shaikh provides a theory of advanced capitalism consistent with Marx’s labor
theory of value, together with empirical evidence to support it
Implications for Dependency
Theories
Once the monopoly capital theory is refuted, the
theoretical path to refute Dependency Theories and it political implication,
Third Worldism, opens.
I begin with Shaikh’s contribution to international
trade theory, which attempts to explain why nations trade with one another,
what determines the goods and services they exchange, who benefits from trade,
and how international trade affects economic development and wealth
distribution. A key question throughout the history of debate on international
trade has been whether it benefits all participating countries or reproduces
and deepens inequalities between them. David Ricardo developed what remains one
of international trade theory's foundational propositions. In On the
Principles of Political Economy and Taxation (1817), he introduced
comparative advantage. The central argument is that countries can benefit from
trade even when one country is more productive in every industry. What matters
is not absolute productivity but relative opportunity cost. For example, if
Portugal has a cost advantage in making wine and England has a cost advantage
in producing textiles, it would be mutually beneficial for them to produce and
trade these two commodities accordingly. This led to the theory of free
international trade.
In "Foreign Trade and the Law of Value," Shaikh
(1979) critically examines the relationship between international trade and
value theory, particularly through a Marxian lens. In the first part, Shaikh (1979a)
criticizes the Ricardian theory of value and argues for a Marxian perspective
that extends the law of value to foreign trade (theory of absolute advantage in
international trade). In the second part of the essay, Shaikh (197 9b) derives
Marxian laws of foreign trade and addresses phenomena often misattributed to
international monopoly power. This analysis is significant for understanding
the complexities of global trade dynamics and the underlying value structures
that govern them. I used Shaikh’s theory of absolute advantage in international
trade to critique dependency theories by Raúl Prebisch, Arghiri Emannuel, and
Paul Baran (Nayer, 1991, Chapters 3, 4, and 5, 2023, Chapters 3, 4, and 5).
Capitalist crises
The 1973-75 world economic recession signaled the
end of post-World War II capitalist prosperity. Much of the Western world- the United States,
Canada, Western Europe, Australia, and New Zealand- sank into recession. The
proximate trigger was the October 1973 OPEC oil embargo, which nearly
quadrupled the price of oil by January 1974. But the underlying conditions had
been building for years. The collapse of the Bretton Woods exchange-rate system
in August 1971 had removed a key external discipline on US monetary policy.
Nixon-era wage and price controls had suppressed measured inflation while
distorting relative prices and creating a backlog of pent-up price pressure.
Accommodative monetary policy through the late 1960s and early 1970s embedded
inflation expectations, which the supply shock then amplified into the first
stagflation.
Radical political economists provided a deeper
understanding of the crisis's root causes, including empirical studies. Shaikh provided
theoretical explanations of capitalist crises. In “Introduction to the History
of Crisis Theory” (Shaikh, 1978), he framed the capitalist economy as a
turbulent system driven by real competition, with ongoing capital accumulation
prone to crisis. He identified three approaches to capitalist crises. The most popular explanation of capitalist
crisis is laissez-faire capitalism rooted in Adam Smith theory of the invisible
hand of the market. There are right-Keynesian (Joan Robinson’s term) varieties
of this explanation. Others claim capitalism cannot expand itself. These include
Keynes's demand-gap theory, disproportionality, and underconsumption theories
of non-Marxist and Marxist economists who rely on Volume 2 of Capital,
and the tendency of the average rate of profit to fall in Volume 3 of Capital,
which argues capitalist accumulation creates the conditions for its crisis.
Shaikh also wrote the entry on “economic crisis” in
the Dictionary of Marxist Thought (1983), in which he discusses possibility
theories of crisis, including underconsumptionist/stagnationist theories, wage
squeeze theories, and necessary theories of crisis focusing on Marx's tendency
of the average rate of profit to fall.
Shaikh contributed to Marxist crisis theory by systematically
transforming national income accounts into Marxian categories to improve
empirical studies (see below) and by developing his theory of advanced
capitalism, as presented in Capitalism: Competition, Conflict, Crises. In this
book, he integrates long wave theory with the tendency of the average rate of
profit to fall.
Systematic transformation of National Income Accounts
to Marxian categories
An admirable aspect of Anwar Shaikh’s contribution
to radical political economy is his work to tie labor theory of value to
empirical evidence, showing that it is superior not only to neoclassical theory
but also to monopoly capital theories of capitalism. To that end, Shaikh developed
a methodology for transforming National Income Accounts categories, which are
in prices, into Marxian categories that are in value terms.
E. Ahmed Tonak, a student of Shaikh who enrolled in
the doctoral program in economics at the New School for Social Research in
1975, wrote about this aspect of Shaikh’s contribution as a tribute to him
(Tonak, 2026). Coming from a similar academic background, Tonak quickly became
Shaikh’s research assistant. Shaikh had
just written a manuscript titled "IO [Input/Output] Accounts and Marxian
Categories." In 1978, he also completed the well-known manuscript
"National Income Accounts and Marxian Categories." Tonak considers
this paper an early draft of Measuring the Wealth of Nations, the book Shaikh
and Tonak published in 1994. He writes that Shaikh’s 1978 paper showed how net
tax, through the capitalist state's distributional policies, affected
productive workers and altered the rate of surplus value. In his dissertation, Tonak
extended this empirical work for 1952-1980. “Later, in two papers on the
subject, Anwar and I replaced net tax with the category of net social wage
(expenditures on labor income minus taxes on labor income) and questioned
whether a welfare state could really be said to exist in the United States.”
Shaikh also developed the concept of profit on
alienation (POA) in the context of the transformation problem, which later
appeared in Measuring the Wealth of Nations, and in his 2016 magnum
opus, Capitalism: Competition, Conflict, Crises.
Tonak adds:
“Marxists have generally been
reluctant to embrace this concept. After all, under capitalism, the fundamental
source of profit is surplus value generated in the sphere of production, while
profit on alienation is discussed in the Marxist literature mainly in
connection with precapitalist merchant profit.
“Yet as my former student Alper
Duman and I tried to show in a paper we wrote together, POA also provides a
useful starting point for analyzing phenomena within capitalism itself: both
privatizations, which have been central to neoliberal policies, and the gains
banks extract from workers' incomes. In that paper, we also sought to
operationalize the concept in the Turkish context and estimate it empirically.
In a sense, following in Anwar's footsteps, we gave concrete empirical form to
a concept whose importance he had emphasized primarily at the theoretical level
(Tonak, 2026).”
Concluding remarks
Anwar Shaikh’s journey to develop a coherent,
consistent radical political theory culminated in the publication of
Capitalism: Competition, Conflict, Crises in 2016. In it, Shaikh reaffirms, theoretically and
empirically, Marx’s labor theory of value while integrating theories of finance
and interest rates, exchange rates, money, inflation, long waves, and crises.
It is important to remember that Marx’s three volumes
of Capital are, by Marx’s own initial plan, incomplete (for a discussion
of Marx’s developing plan for his critique of political economy see Musto, 20100).
In his introduction to the first part of A Contribution to the Critique of
Political Economy, in his letters of 1858–1862, and in the 1861–1863
manuscript itself, this plan titled “Plan for the Critique of Political Economy”
can be presented in the following schematic form as projected by Marx in
1858–1862:
·
Capital:
·
Introduction: Commodity and
Money
·
Capital in general:
·
The production process of
capital:
·
Transformation of money
into capital
·
Absolute surplus value
·
Relative surplus value
·
The combination of both
·
Theories of surplus value
·
The circulation process of
capital
·
The unity of the two, or
capital and profit
·
The competition of capitals
·
Credit
·
Share capital
·
Landed property
·
Wage-labor
·
The state
·
Foreign trade
·
The world-market
However, Marx published only the first volume of Capital,
which deals with the process of production, in 1867. Using Marx’s notebooks as
a draft for Capital, Engels edited and published volume two of Capital,
which deals with the process of circulation of capital, published in 1885, and
volume three of Capital, which deals with the process of capitalist production
as a whole, published in 1894. Karl Kautsky edited and published Theories of
Surplus Value between 1905 and 1910.
Moreover, Engels and Kautsky, who edited Marx’s notebooks,
did not necessarily share the same understanding of Marx’s labor theory of
value. As I noted above, while Marx
considered the law of value operating within the sphere of the capitalist mode
of production, Engels believed it operated as far back as 5,000 to 7,000 years
ago (Weeks, 1981, p. 8).
After the publication of Marx-Engels Werke
(MEW) starting in Germany from 1956 onwards, and subsequently the Marx-Engels
Gesamtausgabe, the first volume of which appeared in 1975 but remains
incomplete, we now have Marx’s own notebooks from which Engels edited Volumes
Two and Three of Capital. Sven-Eric Liedman, a biographer of Marx,
writes in A World to Win: The Life and Works of Karl Marx (2018, p. 18),
“Now Marx’s own text exists in a critical edition, and it thereby becomes
possible to make comparisons [with Engels’ edited volumes two and three of Capital].
The differences, as we will see, are significant. He continues, “Capital is the
subject of an enormous amount of literature. Interpretations often stand
against interpretations.”
Shaikh's contributions must be judged on this basis.
References:
Hilferding, Rudolf. Finance Capital. 1910.
Liedman, Sven-Eric. Karl Marx: A World to Win. 2018.
Marx, Karl. Capital: A Critique of Political Economy. Volume 3. 1894/Vintage Books/1981.
Musto, Marcello. “The Formation
of Marx’s Critique of Political Economy: From the Studies o 1843 to the
Grundrisse.” Socialism and Democracy. 2010.
Nayeri, Kamran. The Role of
Competition in Theories of Late Capitalist Development. Ph.D. dissertation,
1991.
______________. Toward A Theory of
Uneven and Combined Late Capitalist Development. 2023.
_____________. “Tribute
to My Teacher Anwar Shaikh.” Our Place in the World: A Journal of
Ecosocialism. October 7, 2026.
Pilling, Geoff. Marx’s Capital: Philosophy
and Political Economy. 1980.
Shaikh, Anwar. “An
Introduction to the History of Crisis Theory.” In U.S. Capitalism in
Crisis, Union for Radical Political Economics. 1978.
____________. “National
Income Accounts and Marxian Categories. “Unpublished manuscript, 1978.
Shaikh, Anwar. “Foreign Trade and the
Law of Value. Part 1.” Science and Society, Vol. 43, No. 4, pp. 233- 251,
1979.
____________. “Foreign Trade and
the Law of Value. Part 2.” Science and Society. Vol. 44, No. 2, pp. 27-57. 1979.
____________. “Economic Crises.” In
Dictionary of Marxist Thought, Tom Bottomore, Laurance Harris, V.G. Kierman,
and Ralph Miliband, editors. 1983.
Tonak, E. Ahmed. “Anwar
Shaikh Changed My Life.” Jacobins. October 18, 2026.
Weeks, John. Capital and
Exploitation. 1981.
