Karl Marx
Capitalist production develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth: the soil and the labourer. ~ Karl Marx
Historically, Karl Marx (1818–1883) was a counterpoint to Adam Smith. Yet both started from the same base, sharing the obvious observation that homo economicus is rapacious by nature. Their conclusions as to what to do about it were diametric: Smith would do nothing, whereas Marx advocated an equitable society.
From each according to his abilities, to each according to his needs. ~ Karl Marx
Marx was by no means the first to suggest communism. Earlier radicals, such as Pierre-Joseph Proudhon and the English Chartist movement, used language that modern-day readers would label Marxist.
Dire dynamics were blossoming when Marx took his survey of conditions in the mid-19th century. There was a vast rural exodus owing to improved agricultural productivity and attendant population growth.
Workers crowded into urban slums to suffer under the aegis of nascent industrialism. Toiling long hours in harsh conditions for low wages, the lifestyle of the industrial proletariat was a considerable ratcheting of misery from a peasant’s life in previous generations, which had never been good.
So familiar now, the economic gyre of machine-age capitalism got underway in earnest in England in the 1840s. Those with capital prospered. Industrial profits grew while labor incomes stagnated. No national statistics existed, but the bare facts were obvious to everyone. Yet the situation was not quite as bad as Marx painted. By the 1850s, living standards in London were clearly improving.
Marx’s legacy is now renowned, yet he was hardly known in his lifetime. Contemporary John Stuart Mill, the most erudite economist in Marx’s time, never heard of Marx.
Capital is dead labor, which, vampire-like, lives only by sucking living labor, and lives the more, the more labor it sucks. ~ Karl Marx
Marx’s insights, such as capitalism necessarily leading to concentrated socioeconomic power, were too easily ignored because of his polemic inclinations, which rendered his work polar. Economists have either identified with Marx’s concerns or condemned them.
Capitalist production develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth: the soil and the labourer. ~ Karl Marx
The conceptual core of Marx’s political-economic tome, Capital (Das Kapital) (1867–1894), was the “labor theory of value.” The nut of this nutty theory was that the economic value of commodities corresponds with the human labor that goes into their production. This was an ironclad codification of Ricardo’s earlier, and woolier, labor value theory.
Marx’s labor theory of value came from his trying to answer why some commodities were more expensive than others that were similar (such as strawberries over apples). His answer ignored the obvious explanation of relative desirability: regardless of the labor involved, people prefer strawberries over apples.
The production of too many useful things results in too many useless people. ~ Karl Marx
The capitalist who makes more from selling a good than he pays workers who produced it defines a relationship of exploitation. Marx’s exploitation is what economists now call positive net investment.
What is free trade? It is freedom of capital. When you have overthrown the few national barriers which still restrict the progress of capital, you will merely have given it complete freedom of action. ~ Karl Marx
Marx’s “law of value” was essentially about resource allocation: using the existing classical concept of labor time as the metric to signify how resources were directed under capitalism. According to the law of value, at the macroeconomic scale, gross misallocations brought on economic downturns. This critique of capitalism – finding the pricing mechanism inherently faulty – was on point, though Marx’s reasoning was flawed.
As Friedrich Engels, Marx’s close collaborator, opined:
“The law of competition is that demand and supply always strive to complement each other, and therefore never do so. Supply always follows close on demand without ever covering it. It is either too big or too small, never corresponding to demand; because in this unconscious condition of mankind no one knows how big supply or demand is.
“If demand is greater than supply, the price rises and, as a result, supply is to a certain degree stimulated. As soon as it comes on to the market, prices fall; and if it becomes greater than demand, then the fall in prices is so significant that demand is once again stimulated. So it goes on unendingly – a permanently unhealthy state of affairs – a constant alternation of overstimulation and collapse which precludes all advance – a state of perpetual fluctuation perpetually unresolved.
“This law with its constant balancing, in which whatever is lost here is gained there, seems to the economist marvelous. It is his chief glory – he cannot see enough of it and considers it in all its possible and impossible applications. Yet it is obvious that this law is a purely natural law, and not a law of the mind. It is a law which produces revolution.”
Engels expected revolution as the eventual result from workers’ bitter reactions to economic depressions, which “reappear as regularly as the comets, and of which we have on the average one every 5 to 7 years.” Marx felt less certain of this destiny.
The fundamental Marxian objection to the fate of the worker under capitalism was not just that the proletariat were being robbed by their bosses; it was also that work would no longer be fulfilling.
The division of labor under capitalism “attacks the individual at the very roots of his life.” The same methods which increase productivity “mutilate the labourer into a fragment of a man, crippled by lifelong repetition of one and the same trivial operation, and thus reduced.” Factory assembly lines were to prove Marx right, as were specialized clerical office duties.
Marx’s observation of workers’ plight under capitalism was never a purely economic objection; it was instead an extension of the moral concern that Adam Smith fretted over.
(Marxian economics has been misunderstood by many economists. Joseph Schumpeter pointed out why: “There is no point whatever in perusing selected bits of Marx’s writing. Any economist who wishes to study Marx at all must resign himself to reading carefully the whole of Marx’s economic works. Further, there is no point whatever in tackling Marx without preparation. Not only is he a difficult author but, owing to the nature of his scientific apparatus, he cannot be understood without a working knowledge of the economics of his epoch, Ricardo in particular, and of economic theory in general. This is all the more important because the necessity for it does not show on the surface.”)
