Karl Marx (1818-1883)
Born in Germany.
Although Marx did not invent socialism, he soon dominated the movement, and his theories came to be known as Marxism. Studied law and earned a doctorate -- basically a journalist
While Marx was supported financially by his close friend and co-author Friedrich Engels, he nevertheless lived in poverty with his wife Jenny von Westphalen, their children and maid, Helene Demuth.
His association with Engels concluded with the three-volume Das Kapital, the last two volumes of which Engels wrote from Marx's rough notes and manuscripts. Other works by Marx were not published until the twentieth century.
Very influential – wrote on history, philosophy, sociology, psychology and political theory – as well as economics. He, in fact, wrote mostly on economics but is not considered an economist by mainstream economics today.
Very prolific:
Economic and Philosophic Manuscripts of 1844
Theses on Feuerbach (1845)
The German Ideology with Engels (1846)
The Poverty of Philosophy (1847)
Wage Labour and Capital (1849)
The Communist Manifesto (1848)
Das Kapital with Engels (1867 --)
Philosophic Background:
Influenced by Georg Hegel and Ludwig Feuerbach:
Hegel: Theory of progress. History is not a sequence of accidental occurrences or a collection of disconnected stories; rather an organic process guided by the human spirit.
It is the outcome of opposing forces. One force is confronted with the opposite – often taught as “thesis” vs. “antithesis” leading to a “synthesis.” In the battle of ideas, neither one remains in tact, but both are synthesized into a third; this is how all general knowledge, as well as history, advances.
Marx adopted Hegel's dialectic.
Feuerbach: He added “materialism” – holds that the only thing that can truly be said to exist is matter; that fundamentally, all things are composed of material and all phenomena are the result of material interactions.
Hence we get from Marx – Dialectical Materialism (putting Hegel and Feuerbach together).
Dialectics: the way to understand the world was not to see it as a collection of things but as an evolving process. Matter is in continuous evolution toward more complexity -- more complex atoms, plants, men, society, etc. Evolution is linear - and each stage is always the most complex - and better than the last. This evolution will take place through struggle -- this is the thesis-antithesis-synthesis paradigm. Conflict, therefore, exemplifies the driving force of evolution which proceeds by leaps -- "dialectic evolution."
The evolution of the economic formation of society – a process of natural history – conflicts or “contradictions” are the sources of “development” – change or transformation.
The prime mover of history – the way in which individuals make a living, that is, the way in which they satisfy their material needs. This is important because unless their material needs are satisfied, human beings would cease to exist.
“Men must be able to live in order to ‘make history,’” therefore, “The first historical act is . . . the production of the means to satisfy these needs, the production of material life itself.” (The German Ideology).
Economics, to Marx, was the science of production. He understood the relationship between economics or production and history.
The methods of production help to shape human nature itself:
“As individuals express their life, so they are. What they are, therefore, coincides with their production, both with what they produce and with how they produce. The nature of individuals thus depends on the material conditions determining their production. (The German Ideology).
In the course of production of their social life, however, humans enter into certain “definite relations that are indispensable and independent of their will, relations of production which correspond to a definite state of development of their material productive forces.”
These “rules of the capitalist game” are essentially static and consist of two types:
Property relations: between people and things.
Human relations: between people.
Every aspect of the socioeconomic structure owes its origin to the relations of production simply because institutions exist in order to make humans conform to the relations of production – ECONOMICS IS EVERYTHING TO MARX.
Marx’s “social pyramid” – the structure of society owes its origin to the basic facts of economic production:
“The mode of production of material life determines the character of the social, political, and spiritual processes of life. It is not the consciousness of men that determines their existence, but on the contrary, their social existence that determines their consciousness.” (Critique of Political Economy).
** The individual cannot be held “responsible for relations (institutions) whose creature he remains.”
The individual is a result of the process – and therefore cannot be held responsible for his actions – or his place within society.
Everything is historically justified – history had to happen the way it did because it’s all part of this natural progression.
So in Marx humanity appears as a collective subject, whose inherent striving towards full realization shapes the course of history.
Critics of the Neo-Classical Rational Choice Model: This is why Marxists do not believe in the modern-day neo-classical (and Classical) concept of rational-choice. The basic model is that we choose from a given set of preferences subject to a budget constraint. The Marxian criticisms are:
1) Constraints may not only shape preferences but also preempt them, if their joint effect is to exclude all alternatives but one. Example: if I am so poor (budget constraint) that all I have is one option - then there is no choice in front of me.
One consumption bundle – then preferences are redundant.
2) Can choose by some other mechanism than rational choice – for example roles, norms or traditions. Example: I choose to buy something because it is "expected" of me. Betty buys an expensive white dress for her wedding, not out of rational choice (choose the dress over something else given her budget constraint) but because she "must" have a white dress for her wedding. There really isn't, again, a "choice" so-to-speak.
However, tradition operates by influencing preferences, not replacing them. If so -- is there still a choice?
3) Bottom line: Preferences are not the rock bottom explanatory level. Rather one has to look at the causal mechanisms by which preferences are shaped and changed.
Capitalism and Man
Capitalism will repress this development.
Communism – “a society in which the full and free development of every individual forms the ruling principle.” “. . . a society that seeks for its members “the completely unrestricted development and exercise of their physical and mental faculties.”
So it was not their material poverty that Marx saw as the basic tragedy of the workers under capitalism, but their stunted development.
*the assembly line man – life long repetition, cannot reach his true potential.
The inner potentialities of man then appear in strange forms –
God (religious self-alienation)
Money
Capital
Social Change - To correct it was not an intellectual problem – create social conditions in which these unfulfilled human desires can be more directly achieved in the real world.
Alienation: So alienation means that the manmade product then becomes dominant over man.
Two main concepts of alienation in Marx:
1) Lack of self-actualization or spiritual alienation.
2) Power that the products of man may acquire over their creators or social alienation.
Spiritual alienation: lack of a sense of meaning, or as a sense of a lack of meaning.
Commentary Question: Is there an objective “good life” for all human beings? Is Marx assuming there is?
Before capitalism, men were not objectively alienated, since even with a reorganization of the production it would not have been possible to satisfy needs much wider than those actually satisfied.
Rather they had “adaptive preferences” – adaptation of wants to what is possible. Capitalism creates wants that are not possible to satisfy -- therefore we are unhappy and alienated from our true spirits.
Social Alienation: under capitalism the products of men gain an independent existence and come into opposition to their makers – religion, the state, money, capital – the main examples of this process.
We focus on the alienation that takes place in the economic sphere.
The alienation from the means of production is the central problem of the economic writings of Marx.
“The social power, i.e. the multiplied productive force, which arises through the cooperation of different individuals as it is caused by the division of labour, appears to these individuals, since their cooperation is not voluntary but has come about naturally, not of their own united power, but as an alien power existing outside them, of the origin and goal of which they are ignorant, which they are no longer able to control, which on the contrary passes through a peculiar series of phases and stages independent of the will and the action of man, nay even being the prime governor of these.” (The German Ideology).
Men are alienated from the aggregate result of their activities when:
a) they do not realize that these aggregates are the result of their own activities and
b) they are unable to control or to change the outcome.
Human beings are shaped – utterly determined – by their environment.
The evils of the world are not due to the nature of man, but were the product of institutions, education was needed to change these institutions.
The Capitalist Economy
Marx’s Analysis of Capitalism as an Economic System
(Exploitation and Class Struggle)
Two Main Points:
1. The labor theory of value.
2. Competition and the theory of the falling rate of profit.
Private property did not define capitalism for Marx. We had it before (what Marx considered) capitalism.
Capitalism Defined: Capital and capitalism were defined by Marx in terms of the relationships they created among people.
"Self-earned private property, that is based, so to say, on the fusing together of the isolated, independent labouring-individual with the conditions of his labour, is supplanted by capitalistic private property, which rests on exploitation of the nominally free labour of others, i.e., on wages-labour." (Das Kapital)
Capitalism emerged when production facilities were widely consolidated into collective means of production, whose surplus was appropriated by private owners who did not work in them.
Socialism was the next logical stage – where ownership would also become collective.
Marx saw capitalism emerge because it offered wider potentialities for mankind!
It emerged by the revolutionary political and economic activities of the capitalist class, conceiving of themselves as acting for the benefit of all mankind (via Adam Smith).
This individual injustice (freeing a privileged few to look beyond the urgent needs of keeping alive) – did serve a useful purpose.
Allowed mankind to advance intellectually, economically, politically.
BUT – the great economic productivity created by capitalism also offered the means of ending this injustice – making leisure general and making human development available to the masses.
BUT THIS SOLUTION CREATED A PROBLEM:
Those wedded to the capitalist “ethos” were certain to resist collectivization of ownership and all the other legal, political and social changes implied by it. The capitalist class had the political power - and didn't want to give it up.
Another revolutionary confrontation, immediately of ideologies but ultimately of classes was thus in the works.
CLASS CONFLICT
Marx thought that capitalism created even more painful social dislocations than earlier social systems –
Especially recurrent economic crises of mass unemployment with production and commerce brought to a standstill.
(Ignored here are all outside forces – government policy, disease, war, droughts, etc.).
Periods of depression, unemployment, or economic “crisis” in Marx’s terminology were seen by some schools of economists as resulting from a lack of proportion between the output of some sectors – not by an excess of total output (or lack of demand)
Sector A needs B as an input – but B is not produced in the amount needed by A. This then disrupts A. If A is needed in C, it also disrupts C, etc. Productivity is stalled.
But moved beyond the Classical economists by arguing that monetary reactions to severe dis-proportionality could in fact temporarily reduce aggregate demand below aggregate supply.
1. Crises are inherent in capitalism – producers cannot accurately predict the demand of the consumers or the supply of other producers.
2. Price changes reflect – and correct – production imbalances, but in a way that often leads to crises, rather than to the smooth adjustments suggested by the Classical economists.
Monetary and credit system was the destabilizing force:
Overproduction ► increased inventories ► decrease in income ► cannot pay debts ► demand money ► sell at whatever price they can (selling for money - this is the problem - not selling to correct a production problem)
3. Successive crises become progressively worse because they are more universal.
4. The growing size of an impoverished proletariat eventually leads to social revolution, in conjunction with the crisis.
The Nature of Capitalism
Marx’s objectives: To show
1. how the commodity form of market exchange leads to class conflict and exploitation of the labor force,
2. how the commodity system will eventually fail to operate because of its own inherent contradictions,
3. why the class conflict under capitalism, unlike class conflicts under earlier economic systems, should ultimately result in rule by the formerly exploited class rather than by a new ruling class.
Marx understood capitalism to be an economic system in which people make a living by buying and selling things (commodities).
Four properties distinguish commodities:
1. useful
2. produced by human labor
3. offered for sale in the market
4. separable from the individual who produced them.
Labor theory of value:
In Das Kapital, Marx set out to analyze the production and distribution of commodities. The explanation had to include a theory of value – here he turned to Smith and Ricardo.
Labor is the essence of all value to Marx. Being a materialist, he didn’t accept utility explanations – material relations alone determine value.
These relations determine value prior to the determination of price, so that price reflects merely a value caused by the purely objective element common to all commodities – labor.
Theory of Wages:
Value represented the units in which social labor was measured.
*Socially necessary = under normal conditions of production, the value necessary for the subsistence of labor.
The value of an object is proportional to the number of simple undifferentiated socially necessary labor hours that went into it.
The value of labor power can be divided into an amount necessary for the subsistence of labor and an amount over and above that.
The socially necessary labor determines the exchange value of labor itself – wage.
Surplus value: attempted to quantify the exploitation of man by man.
It is that proportion of society’s labor that exceeds what is required to produce the livelihood of the workers themselves.
Out of this comes all the income of the non-working classes – the profit, interest, rent, etc.
Exploitation: This surplus value does not arise in exchange, but in production. The aim of the capitalist is to get surplus value out of each worker. This is exploitation, according to Marx. It exists because the extra value contributed by labor is expropriated by the capitalist.
Surplus value arises not because the worker is paid less than he is worth but because he produces more than he is worth!
This may be regarded as the sum of the non-labor shares of income (rent, interest, profit).
Capital and Value: He did not deny that machinery and other invested resources contributed to production.
His analysis was in terms of people, not things.
Machines were contributions of past labor.
The Law of Accumulation and the Falling Rate of Profit:
Two Reasons profit will fall:
1. All business people try to acquire more surplus value in order to increase their profit. Surplus value is, be definition, derived from labor. Thus we might expect capitalists to seek out labor-intensive methods in order to maximize their profits. But instead they strive to substitute capital for labor:
“Like every other increase in the productiveness of labour, machinery is to cheapen commodities, and, by shortening the portion of the working day, in which the labourer works for himself, to lengthen the other portion that he gives, without equivalent, to the capitalist. In short, it is a means for producing surplus value” (Capital).
The first to introduce capital can lower his/her costs, yet still sell for the market price – hence increasing profit and surplus value.
However, once the capital or technology is introduced everywhere, the price falls and so does the surplus value.
Hence we get the first explanation for competition leading to a falling rate of profit.
2. A second reason is that workers might push for higher wages. If wages are increased, this will reduce the surplus value as well.
(Note: Marx did not believe in Malthus – that the increase in wages would increase population and therefore bring them back down. He thought population was determined by cultural and social factors).
So the tendency for the profit rate to fall provides the incentive for exploitation.
THE CONFLICT AND EXPLOITATION
“At a certain stage of their development, the material forces of production in society come in conflict with the existing relations of production, or – what is but a legal expression for the same thing – with the property relations within which they have been at work before. From forms of development of the forces of production these relations turn into their fetters. Then comes the period of social revolution. With the change of the economic foundation the entire immense superstructure is more or less rapidly transformed. . . . The bourgeois relations of production are the last antagonistic form of the social process of production – antagonistic not in the sense of individual antagonism, but of one arising from conditions surrounding the life of individuals in society; at the same time the productive forces developing in the womb of bourgeois society create the material conditions for the solution of that antagonism” (Critique of Political Economy).
Continued a pattern of dialectical thinking.
Competition would decrease the rate of profit. So capitalists would react by lengthening the workday, speed up the work place, etc., which would increase the rate of surplus value . . .
And the rate of exploitation of labor –
Which in turn hastens the revolution.
Concentration and the Centralization of Industry:
The competition would lead to only the most efficient surviving –
This all leads to greater substitution of capital (and technology) for labor and transforms small-scale industry into large-scale enterprises with a more marked division of labor and far greater capacity for output.
Industry would become more and more centralized, and economic power would be increasingly concentrated in the hands of the few.
In Sum:
Labor Theory of Value
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Exploitation
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Competition and Capital for Labor and Increase in Wages
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Falling Rate of Profits
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More Exploitation AND Concentration/Centralization of Industry
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Expanding working class
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Shrinking Capitalist class
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Revolution and History Progresses