Karl Marx (1818-83) was a philosopher, economist, political theorist, sociologist, journalist and revolutionary socialist. He studied political economics and Hegelian philosophy, which was followed by him developing his ideas and theories with German thinker Friedrich Engels in London. His most famous work was The Communist Manifesto and was published in 1848. Marxism, Marx’s theories about economics, politics and society, reflected the idea that human societies develop through class struggle. In the case of capitalism, this is shown in the conflict between the ruling classes which control means of production and the working class who are willing to sell their labour for wages. Marx predicted that capitalism would fall victim of its internal tensions and be toppled and replaced by socialism.
Marx and Mainstream economics
Ideas that have been generated from Marxian economics have contributed to the mainstream understanding of the global economy. Aspects such as capital accumulation and the business cycle have been fitted for use in capitalist systems. Marx backed up Adam Smith’s idea that the most important economic benefit of capitalism was a rapid growth in productivity abilities. He also expressed that laborers could be harmed as capitalism becomes more productive.
Labor theory of Value
The labor theory of value is a major pillar of Marxian economics. The theory’s basic claim is that: the value of a commodity can be objectively measured by the average number of labor hours required to produce that commodity. E.g. If a pair of shoes takes twice as long to make as a pair of trousers, then the pair of shoes will be worth double the pair of trousers, regardless of the value of the physical inputs.
Marx argued that the theory could explain the value of all commodities, including the commodity that workers sell to capitalists for a wage; he called this commodity ‘labor power’. Labor power is the worker’s capacity to produce goods and services. Marx, using principles of classical economics, explained that the value of labor power must depend on the number of labor hours it takes society, on average, to feed, clothes, and shelter a worker so that he or she has the capacity to work.
Marx then asked the question, if all goods and services are sold at a price which reflects their true value, how can it be that capitalists earn a profit, how do they manage to squeeze out a residual between total revenue and total costs? His answer to this was that they must exploit workers and make them work more hours than needed to create the worker’s labor power. Essentially he believed that capitalists extract “surplus value” from the workers and enjoy monetary profits. However this was a major flaw in his thinking. He was right in claiming that classical economists failed to adequately explain capitalist profits; but mainstream economists now believe that don’t earn profits by exploitation, but by forgoing current consumption, by taking risks, and by organizing production.
This was Marx’s theory that bound together his views on economics and philosophy to a construct a grand theory of history and social change. He believed that humans are free, creative beings who have the potential to change the world, but the modern world is beyond our control. Marx condemned the free market, for instance, as being “anarchic,” or ungoverned. He maintained that the way the market economy is coordinated; dictated by the laws of supply and demand—blocks our ability to take control of ourselves. Marx condemned capitalism as a system that alienates the masses. This was backed up by his reasoning that although workers produce things for the market, market forces, not workers, control things. People are required to work for capitalists who have full control over the means of production and maintain power in the workplace.
Karl Marx was a revolutionary thinker and shaped the way that people and governments think about politics and economics as a whole. His original ideas have carried on through history and some are still relevant today, in countries such as Cuba and North Korea. Although his ideas had many flaws and gaps in logic, they still massively impacted the 20th century as seen by the Russian revolution and the rise of the USSR.