Marx at 200: A renewed interest in the critique of capitalism
Editor’s note: Fight Back! will be running a number of articles to coincide with the 200th anniversary of the birth of Karl Marx.
Karl Marx made enduring contributions to the science of economics. He built upon the work of classical English political economics represented by Adam Smith and David Ricardo. The thought of Smith and Ricardo lives on in mainstream economics and government policies of deregulation and free trade pushed by big business. However the economics of Marx has informed the labor movement and the fight to end the exploitation, giant for-profit corporations, and economic crisis that bear down on the vast majority of working people who struggle to make do from paycheck to paycheck. Marx’s economics still provide insight into the workings of our capitalist economy down to today.
First and foremost, Marx built upon the labor theory of value developed by classical political economy. The labor theory of value sees commodities, or goods and services produced for sale on markets, as having value based on the amount of socially necessary labor time needed to produce them. Marx added to this with his theory of surplus value, which explains that what workers sell to their bosses is not their labor, but their labor power, or ability to work. The value of labor power, seen as wages in the labor market, is based on the socially necessary labor time needed to produce and reproduce workers, or the cost of the goods and services that the workers and their families need to survive.
What is unique about labor power is that its use in production creates more value than it costs. The difference between value of the goods and services created by labor, and wages (the value of labor power) is surplus value. This surplus value goes to the employer, and is the source of profits. This is Marx’s theory of exploitation that can explain the economic hardships of millions of workers who are living paycheck to paycheck while a handful of billionaires who own the giant corporations get rich.
For example, Amazon made almost $2 billion in profit just in the last three months of 2017, while the typical Amazon worker only made $28,446 last year, and half of its workers made less than that. Companies that use a lot of part-time workers can pay even less; the median pay for a worker at Yum brands (which includes KFC, Pizza Hut, and Taco Bell) was only $9111. And companies that offshore their work can pay the least, with toy company Mattel paying their typical worker $6271 a year.
According to Marx’s collaborator, Frederick Engels:
“Ever since political economy put forward the proposition that labor is the source of all wealth and of all value, the question has become inevitable: How is this, then, to be reconciled with the fact that the wage-worker does not receive the whole sum of value created by his labor but has to surrender a part of it to the capitalist? Both the bourgeois economists and the socialists exerted themselves to give a scientifically valid answer to this question, but in vain, until at last Marx came forward with the solution. This solution is as follows: The present day capitalist mode of production presupposes the existence of two social classes -on the one hand, that of the capitalists, who are in possession of the means of production and subsistence, and, on the other hand, that of the proletarians, who, being excluded from this possession, have only a single commodity for sale, their labor power, and who therefore have to sell this labor power of theirs in order to obtain possession of means of subsistence. The value of a commodity is, however, determined by the socially necessary quantity of labor embodied in its production, and, therefore, also in its reproduction; the value of the labor power of an average human being during a day, month or year is determined, therefore, by the quantity of labor embodied in the quantity of means of subsistence necessary for the maintenance of this labor power during a day, month or year.”
“Thus the worker in the service of the capitalist not only reproduces the value of his labour power, for which he receives pay, but over and above that he also produces a surplus value which, appropriated in the first place by the capitalist, is in its further course divided according to definite economic laws among the whole capitalist class and forms the basic stock from which arise ground rent, profit, accumulation of capital, in short, all the wealth consumed or accumulated by the non-labouring classes.”
(Quotes from Frederick Engels, On Marx)
Marx also built upon classical political economy’s theories of competition. Adam Smith argued that competition among small businesses would make them provide what consumers wanted at low prices – the so-called “invisible hand.” Since competitive markets would be self-regulating, then there is no need for government regulation, leading to the economic policy of laissez-faire, which is the basis for deregulation of industry and free trade policies today. But the reality is that small businesses have been by and large replaced by giant corporations, which can cut costs, raise prices, and even cheat and manipulate their customers, as seen in the ongoing string of scandalous acts of financial and technology giants such as Wells Fargo bank and Facebook.
Marx recognized that a more fundamental role of competition was to force capitalists who exploit their workers to reinvest their profits into expanding their businesses. This accumulation of capital, as Marx called it, is behind the rapid economic growth under capitalism as comparative to previous economic systems, where hundreds of years could pass with little change in the ways people produce the goods and services they needed to live. But under capitalism the production process is constantly changing.
Hand in hand with the accumulation of capital came the constant development of new technologies: from the water and wind power of medieval times to first steam and then electric power, the development of electronic communications starting with the telegraph, then the telephone and radio, and now of course now the internet. The mechanization of agriculture, the application (and misuse) of science to boost food production – all of these driven by fight for ever larger profits.
The accumulation of capital is also behind the rise of giant corporations. This began in basic industry and transport such as iron and steel, oil, and railroads in the latter 1800s and led to the rise of their robber baron owners like Rockefeller and Carnegie. Today this has grown to include retail, restaurants, and the new information technology corporate giants of the internet. Much of the stock market is driven by the so-called FANG stocks of Facebook, Amazon, Netflix, and Google (now Alphabet) and a new group of today’s robber barons are centered around Silicon Valley.
Last, but not least, Marx was also the first major economist to develop a theory of the business cycle to explain the periodic ups and downs of a capitalist economy. Marx argued that workers are being exploited, that is, they are not paid for the full value that their labor adds to the production of goods and services, which limits their ability to purchase. At the same time, capitalist businesses take the profits from exploitation and reinvest them in expanding production, new techniques that lower the costs of production, and innovating new products, all of which expands their ability to produce. The contradiction, or conflict between restricting consumption while expanding production leads to periodic crisis of overproduction, or what modern economics calls a recession or depression.
This process can be held back by the capitalists lending more and more to their workers, which helps to keep their spending on the rise, but leading to workers going deeper and deeper into debt. At the same time, profits from exploitation can be diverted away from increasing production to lend to workers and to all forms of financial speculation. But this process just shifts the fundamental conflict into the financial realm, ultimately leading to unsustainable build-up in lending and debt and resulting in a financial crisis. We saw this in greatest financial crisis in U.S. history, in September of 2008, and the economic depression that followed.
Lenin summed these processes of accumulation of capital and economic crisis as:
“The doctrine of surplus-value is the corner-stone of Marx's economic theory.
Capital, created by the labour of the worker, crushes the worker, ruining small proprietors and creating an army of unemployed. In industry, the victory of large-scale production is immediately apparent, but the same phenomenon is also to be observed in agriculture, where the superiority of large-scale capitalist agriculture is enhanced, the use of machinery increases and the peasant economy, trapped by money-capital, declines and falls into ruin under the burden of its backward technique. The decline of small-scale production assumes different forms in agriculture, but the decline itself is an indisputable fact.
By destroying small-scale production, capital leads to an increase in productivity of labour and to the creation of a monopoly position for the associations of big capitalists. Production itself becomes more and more social — hundreds of thousands and millions of workers become bound together in a regular economic organism — but the product of this collective labour is appropriated by a handful of capitalists. Anarchy of production, crises, the furious chase after markets and the insecurity of existence of the mass of the population are intensified.” (Lenin, The Three Sources and Three Component Parts of Marxism)
Since the fall of the Soviet Union in 1991, the corporate media has tried to bury Marxism as “dead.” But the economics of Marx (and his other ideas) continues. Marx’s main work on the economy, Capital, published in 1867, continues to be the most highly cited among books published before 1850. The reality of today’s world: the rising gap between the ultra-rich and everyone else, the growing debt and lack of opportunities for more and more young people, the massive financial crisis in 2008, the growing economic influence of socialist China; all point to a renewed interest in Marx’s critique of a capitalist economy.
While much of this is showing up in the rise of social-democracy in the U.S. – such as the Bernie Sanders campaign and the explosion in membership for the Democratic Socialists of America (DSA) – these are by and large non- (or in part anti-) Marxist trends of socialism. Activists for social change (including Sanders supporters and those in and around the DSA) need to, now more than ever, seriously study the work of Karl Marx. These include Marx’s view of the capitalist economy, on historical materialism (a scientific view of history and social change), and his views on the fight by oppressed nations and nationalities for liberation, including the U.S. Civil War.
But the development of Marxism did not end with Karl Marx or his life-long collaborator, Frederich Engels. While they laid down the foundations for both a scientific view of the economy, history and social change, and the role of nations and national minorities, as well as other issues, others have continued to develop their work. In particular the contributions of V.I. Lenin in the field of economics is often ignored. Lenin’s Imperialism, the Highest Stage of Capitalism, analyzes the modern capitalist economy characterized by giant multinational corporations and a huge financial sector.