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Marxism Revisited

from Asad Zaman and the WEA Pedagogy Blog

Ever since its origins in industrialising England, the capitalist economic system has always been subject to crises. There are countless theories as to the causes, consequences, and possible remedies for these. Karl Marx was among the earliest and most famous critics of capitalism. He argued that the source of the wealth produced by capitalism was the labour of the workers. The capitalists use their power to make profits by exploiting workers, depriving them of their due shares of profits. Capitalismrequires growth to prosper, and this could only come by increasing exploitation. Crises would marxoccur when workers would be oppressed beyond their limits. Eventually, these crises would destroy capitalism as the workers revolted against this unfair system.

Of course, these ideas are anathema to capitalists. During my own studies of economics in universities, a shallow caricature of Marxist economics was presented, only to be ridiculed and dismissed. Much later, I learned to my great surprise, that Marxist ideas are strongly supported by empirical evidence as well as standard capitalist economic theories. Capitalist theory argues that in free markets with perfect competition, both capital and labour earn according to their productivity, so that there is no exploitation. Textbooks pass silently over the fact that huge and increasing concentration of capital in a small number of hands makes free markets and perfect competition impossible. Textbooks also close their eyes to the reality of unemployment rates (currently at an amazingly high 23 per cent in the USA, if we include discouraged workers). Instead, neoclassical theories tell us that all workers will automatically find work in a dynamic free market economy, and blame unemployment on clumsy government interventions.   read more

  1. louisperetzperetz
    September 17, 2015 at 8:41 am

    I do say Marx was wrong to believe only industrial private property should be deleted. What I proof on my book. I say that one part of money sould be deleted, the one which manage the transactions. Of course it will not be possible to do so in its time, but now it is possible with cards. Using the numérical money only to buy, without capitalism possibility to keep it more than one month using one way to use it..

  2. michael burke
    September 17, 2015 at 9:32 am

    Very little of this is an accurate rendition of Marxism. What is offered is a critique of monopoly not of capitalism.

    “He argued that the source of the wealth produced by capitalism was the labour of the workers.” All classic economists argued this, including Smith and Ricardo.

    Capitalism does not require growth to ‘prosper’. It survives repeated crises. Uniquely, capitalism requires profits. However, in all societies where there is a division of labour (which long predates capitalism) the growth in the capital stock exceeds the rate of growth of the economy. (Smith agreed on this point also, as well, less clearly as Ricardo).

    Therefore, the rate of profit has a tendency to decline. This can be off-set by increased exploitation and other factors, but the tendency will resume at a later point. As the growth in productive capacity is determined by the rate of investment, and investment is determined by profits, then there are repeated crises as production declines.

    It was this point, the law of the tendency of the profit rate to fall which was Marx’s most important contribution to economic theory and his most important discovery in that field.

  3. September 17, 2015 at 1:45 pm

    Confounding sociology and economics
    omment on michael burke on ‘Marxism Revisited’

    You say: “It was this point, the law of the tendency of the profit rate to fall which was Marx’s most important contribution to economic theory and his most important discovery in that field.”

    Wrong. The tendency of the profit rate to fall had already been a tenet of the founding fathers of classical Political Economy.

    Marx was a sociologist first and an economist second. His research program was essentially the same as classical Political Economy: “The science which traces the laws of such of the phenomena of society as arise from the combined operations of mankind for the production of wealth, …” (Mill, 1874, V.39)

    The main difference was that Marx put the social antagonisms into the foreground (no harmonizing Invisible Hand here) and derived them from economic laws: “Intrinsically, it is not a question of the higher or lower degree of development of the social antagonisms that result from the natural laws of capitalist production. It is a question of these laws themselves, of these tendencies working with iron necessity towards inevitable results. (Marx, 1906, M.6)

    Marx used the supposed iron law of the falling profit rate to derive his iron law of societal evolution.

    Whether Marx was a good sociologist is not our concern. What is decisive for Heterodoxy is that his profit theory is false (see 2014b). Because of this, the law of the falling profit rate is also false.

    Methodologically valid economic analysis tells us, roughly speaking, that the monetary economy (national or global; capitalist or communist) moves to the brink of breakdown as soon as the growth of overall public/private debt reverses (see 2014a). How this affects the respective societies is an altogether different question to which economists hitherto have not contributed much of scientific value.

    Egmont Kakarot-Handtke

    Kakarot-Handtke, E. (2014a). Mathematical Proof of the Breakdown of Capitalism. SSRN Working Paper Series, 2375578: 1–21. URL
    Kakarot-Handtke, E. (2014b). Profit for Marxists. SSRN Working Paper Series, 2414301: 1–25. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2414301.
    Marx, K. (1906). Capital: A Critique of Political Economy, Vol. I. The Process of Capitalist Production. Library of Economics and Liberty. URL
    Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On the Definition of Political Economy; and on the Method of Investigation Proper To It. Library of Economics and Liberty. URL

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