Karl Marx, a German, was the first economist to take issue with Ricardo’s view that a laissez-faire economic system was the best hope for the ultimate well-being of the workers. Marx believed that systems in which capitalists owned the means of production could not long endure. His criticisms of capitalism rested on three primary issues: moral, sociological, and economic.
From Marx’s point of view, conflict is fundamental. In fact, Marx sees conflict as the basis of change. Change is the dialectic process through which societies evolve, and, according to Marx, the dialectic process will eventually lead to pure communism (a condition in which the state owns and controls all of the means of production). Marxists see dialectic materialism (based upon German philosopher Hagel’s theory of the dialectic) as an evolutionary process. At the beginning of this process, human beings lived lonely, subsistence lives. Their material well-being began to improve when they formed into bands, and then into tribes, so that they could cooperate in gaining access to food and fiber. Eventually, tribal people improved their living conditions by practicing animal husbandry and agriculture. When they were able to produce at levels beyond their own needs, more complex social systems evolved in which some were freed from the need to hunt, gather, and farm in order to take on more specialized roles including the priesthood, carpentry, masonry, defense, and so on. This led to a system of barter and trade, and, after that, with the invention of sailing ships, and the creation of nation-states, the establishment of mercantilism. Finally, mercantilism evolved into capitalism. From the Marxist point of view, each of these levels along the way is more advanced and more sophisticated than the last. Thus, they believe that, eventually, capitalism, too, will be completely replaced by a more equitable and better system. Marxists believe that communism is the highest level of dialectic materialism possible.
Marx was certain that capitalism would soon generate extreme social and economic conflict and, hence, change; because, in his opinion, it is an exploitive system. From his perspective, the foundation of capitalism is the value of labor. Moreover, because it exploits labor, it must, he argued, end in unemployment, economic uncertainty, class conflict, and, finally, a transition to socialism. He contended that the value of a good is established by the materials and labor it takes to create it. In pre-capitalist societies, the calculation of the cost of a good was relatively easy because all exchanges were of equal value. For example, if it takes ten hours of labor to make a product, and twenty hours of labor to make a different product, then the value of the second product should be double that of the first. In a capitalistic society, however, surplus value is created during the manufacturing process, and exploitation is the difference between the value the labor has produced and the wages paid. Thus, Marx argued, the capitalist class (bourgeoisie) exploits the working class (proletariat) by making a profit from their labor. The capitalists are, he thought, getting something for nothing.
Marx also identified the fact that capitalists often attempt to replace labor with capital (i.e., mechanization). When this happens, many people are unemployed and they form a surplus of labor which tends to drive down wages. Thus, laborers can be further exploited. Additionally, he reasoned that the foundation of the capitalism is capital accumulation. This, he thought, eventually leads to an unbalanced system in which the smaller and less competitive go out of business, thereby leaving only a few to dominate in every field. Over the long term, this brings about monopolies and imperialism.
Marx predicted that, eventually, as monopolies grow, the misery of laborers will intensify and force people to revolt. When they do, capitalism will be eliminated in favor of socialism.
In is interesting to note that Marx did not expect his ideas to be embraced in underdeveloped nations such as Russia. Instead, he believed it was only a matter of time before the workers of the highly industrialized countries of Europe united in order to form a new communist system in which people would receive honest compensation for their labor, and in which no one would be able to exploit the work of others.
During the last years of World War I., the Germans helped Vladimir Lenin (his actual surname was Ulyanov), a proclaimed Russian communist who was in exile in Switzerland, to return to Russian. They did this, hoping that he would foment revolution and thus force Russia out of the War. In other words, the Germans hoped to create chaos in Russia, and in that endeavor, they were successful. The Russian Revolution was not initially controlled by communists. The Germans and their allies had hoped that once the Czar was deposed, the Russians would agree to a cease fire. Instead, the new government, under the leadership of Alexander Kerensky, continued the fight on the eastern front. Thus, the Germans reasoned that the only way to force Russian to lay down arms was to smuggle Lenin into Russia. The German gamble worked. Lenin was able to take over the government and establish a socialist state. He also ended Russia’s participation in World War I.
Soon after taking control of the Russian government, Lenin’s Marxist regime (Bolsheviks) began to nationalize every aspect of the economy. Lenin believed that it was necessary for the state to control all means of production. Eventually, this led to great economic hardships throughout the nation, and those who resisted collectivization were systematically eliminated. Lenin followed the Marxist notion that in the first years after the elimination of capitalism, there must be a dictatorship of the proletariat established to bring order and to set up the infrastructure needed for the transition to pure communism. In the Russian system, everything was to be run by committees (soviets). Soon, however, this turned into a dictatorship in which one person controlled almost everything. The ideal of pure communism never became a reality in the Soviet Union (now once again Russia).
Discredited as it may be, there remain many who believe that a Marxist system can work, and that, over time, it is the only way in which humankind can fairly distribute resources. In the minds of some, the motto of “…each according to his ability and each according to his need,” continues to have considerable appeal. This is particularly true in places where the middle class is small, or for all practical intents and purposes, does not exist.
Check Your Understanding
Describe the theory of dialectic materialism.
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Marx believed that human societies are, and have been, moving through a series of economic systems starting with hunting and gathering in a process that will eventually culminate in pure communism. He argued that at each stage in the evolutionary process, some people fight to protect the status quo. Even so, he postulated that the world would eventually overcome the objections of capitalists and adopt international communism.