Marxism has already been featured in this book, in the ‘Socialism’ section in the part on ‘Politics’. However, there is a distinction – admittedly sometimes blurry – between Karl Marx’s economic analysis and his political philosophy, so his economics warrants separate discussion here. After all, while he may have died penniless and largely unsung, his ideas were to have a profound effect on the planet in the century after his death.
As previously discussed, Marx saw human history as defined by a succession of economic systems, each new one replacing an older dominant order. He believed capitalism pitted the bourgeoisie against the proletariat in a conflict that would culminate in a full-blown class war, paving the way for communism. But what were the economic underpinnings of his theories? He explored them in his magnum opus, Capital: A Critique of Political Economy (commonly known by its German title, Das Kapital), which appeared in three volumes, the first in 1867 and the others posthumously in 1885 and 1894.
The labour theory of value
Key for Marx was his idea of the labour theory of value. He was not the first to come up with such a theory (Ricardo, for instance, devised a thesis of his own) but Marx’s was distinctively new. He argued that the bourgeoisie (the capital-owning class) profit by fixing prices to take account of the cost of raw materials plus the cost of wages and then adding a profit margin. It is the worker, he contended, who creates the added value (the profit margin) by turning the raw materials into something else, yet they are deprived of any cut of profit (the gap between the worker’s wage and the value they produce being termed ‘surplus value’). Indeed, Marx argued, capitalism encourages the consumer to think about the abstract commodity they are buying without considering the labour required to produce it – a process he called commodity fetishism. Moreover, the capitalist actively seeks to keep labour costs low (easily achievable where there is an expanding population and, thus, a supply of labour competing for a finite number of jobs). The search for profit also encourages technological innovation and job specialization that traps workers into low-paid and unsatisfying jobs.
Marx is credited as being among the first to recognize that the capitalist system is inherently prone to crisis, which he related to the tendency of the rate of profit to fall (what Marx would call ‘the most important law of political economy’). He was attuned to the cycle of boom and bust that has marked out capitalism while most of his contemporaries had not yet begun to conjure with the notion.
Though Marx’s status as an economist is hotly disputed, his significance is undeniable. Without Marxian economics, there would have been no Lenin and no USSR, no Stalin and his disastrous policy of forced collectivization, no Mao and his equally devastating Great Leap Forward.