LESSON NO.
3: THE THEORY OF
MARXIAN ECONOMICS
TOPIC OUTLINE: Friedrich EngelsNov. 28, 1820 - Aug. 5, 1895
1. KARL MARX THE COMMUNIST MANIFESTO
2. ALL ABOUT MARXIAN ECONOMICS? The Communist Manifesto, (“Manifesto of the
3. MARXIAN ECONOMICS VS. CLASSICAL Communist Party”), pamphlet (1848) written by
ECONOMICS Karl Marx and Friedrich Engels to serve as the
platform of the Communist League. It became one
4. UNDERSTANDING MARXISM?
of the principal programmatic statements of the
5. CLASS CONFLICT AND THE DEMISE OF European socialist and communist parties in the 19th
CAPITALISM and early 20th centuries.
6. A POSITIVE LOOK AT MARXISM The Communist Manifesto embodies the authors’
materialistic conception of history (“The history of
WHO IS KARL MARX?
all hitherto existing society is the history of class
Karl Marx (born May 5, 1818, Trier, Rhine struggles”), and it surveys that history from the age
province, Prussia Germany]—died March 14, 1883, of feudalism down to 19th century capitalism, which
London, England) revolutionary, sociologist, was destined, they declared, to be overthrown and
historian, and economist. replaced by a workers’ society. The communists, the
vanguard of the working class, constituted the
He published (with Friedrich Engels) Manifest der
section of society that would accomplish the
Kommunistischen Partei (1848), commonly known
“abolition of private property” and “raise the
as The Communist Manifesto, the most celebrated
proletariat (working class) to the position of ruling
pamphlet in the history of the socialist movement
class.”
(Britannica, 2024).
The Communist Manifesto opens with the dramatic
He also was the author of the movement’s most
words “A spectre is haunting Europe—the spectre of
important book, Das Kapital. These writings and
communism” and ends by stating, “The proletarians
others by Marx and Engels form the basis of the
have nothing to lose but their chains. They have a
body of thought and belief known as Marxism
world to win.
(Britannica, 2024). (See also socialism;
communism.) Workingmen of all countries, unite.”
Karl Heinrich Marx
May 5, 1818- March 14, 1883
A copy Manifest der
FRIEDRICH ENGELS Parte(184; The Communist ),
by Karl Marx and Friedrich
Friedrich Engels (born Nov. 28, 1820, Barmen, DAS KAPITAL
Rhine province, Prussia [Germany]—died Aug. 5, Das Kapital, (German: Capital) one of the major
1895, London, Eng.) German socialist philosopher, works of the 19thcentury economist and philosopher
the closest collaborator of Karl Marx in the Karl Marx (1818–83), in which he expounded his
foundation of modern communism. They coauthored theory of the capitalist system, its dynamism, and its
The Communist Manifesto (1848), and Engels edited tendencies toward self-destruction. He described his
the second and third volumes of Das Kapital after purpose as to lay bare
Marx’s death.
“the economic law of motion of modern society.”
The first volume was published in Berlin in 1867;
the second and third volumes, edited by his
collaborator Friedrich Engels (1820–95), were
published posthumously in 1885 and 1894,
respectively.
Much of Das Kapital spells out Marx’s concept of economist and philosopher Karl Marx. Marxian
the “surplus value” of economics, or Marxist economics, focuses on the
role of labor in the development of an economy and
labour and its consequences for capitalism.
is critical of the classical approach to wages and
According to Marx, it was not the pressure of
productivity developed by Adam Smith.
population that drove wages to the subsistence level
but rather the existence of a large army of Marx argued that the specialization of the labor
unemployed, which he blamed on the capitalists. He force, coupled with a growing population, pushes
maintained that within the capitalist system, labour wages down, adding that the value placed on goods
was a mere commodity that could gain only and services does not accurately account for the true
subsistence wages. cost of labor (Liberto D., 2021).
Capitalists,however, could force workers to spend
more time on the job than was necessary to earn
their subsistence and then appropriate the excess
product, or surplus value, created by the workers.
More than 140 years ago (1990 upon publication of
the reference used in this discussion), Europe was
aflame with revolt. The year 1848 saw uprisings,
sporadic and generally ineffectual, in Austria,
Germany, Hungary, Italy, and elsewhere, but not in
England.
That year was also the date of the publication of The
Communist Manifesto by Karl Marx and Frederick
Engels. The Manifesto, one of the most influential
Because all profit results from an “exploitation of political documents ever written, declared war upon
labour,” the rate of profit—the amount per unit of the emergent bourgeoisie in the name of the
total capital outlay—depends largely on the number industrial proletariat.
of workers employed. Because machines cannot be
“exploited,” they cannot contribute to total profits, Marx believed that the revolutions in Europe were
though they help labour produce more useful the second phase of the revolt of humankind against
products. economic exploitation and tyranny. The first had
been the American and French revolutions of
Only payroll capital—“variable capital”—is 1775 and 1789, both led by the bourgeoisie and
productive of surplus value and consequently of undertaken to establish the political and economic
profit. The introduction of machines is profitable for ascendancy of capitalism.
the individual entrepreneur, to whom they give an
advantage over his competitors. The ”Rights of Man" proclaimed by these uprisings
seemed to Marx to be in truth the rights of property.
However, as outlay for machinery grows concerning But in1848, so Marxist analysis ran, the proletariat
outlay for wages, profit declines concerning total was in revolt against the consequences of the
capital outlay. Thus, for each additional capital industrial revolution, against the slavery of
outlay, the capitalist will receive less and less return capitalism.
and can attempt to postpone his bankruptcy only by
applying pressure on the workers. Ultimately,
according to Das Kapital, the “capitalist class UNDERSTANDING MARXIAN
becomes unfit to rule, because it is incompetent to
assure an existence to its slave within his slavery.”
ECONOMICS
Much of Marxian economics is drawn from Karl
Consequently, the capitalist system collapses, and
Marx's seminal work "Das Kapital," his magnum
the working class inherits economic and political
opusfirstpublished in 1867. In the book, Marx
power
described his theory of the capitalist system, its
dynamism, and its tendencies toward self-
destruction.
A.MARXIAN ECONOMICS
Much of Das Kapital spells out Marx’s concept of
Marxian economics is a school of economic thought the “surplus value” of labor and its consequences
based on the work of 19th-century (1801-1900) for capitalism.
According to Marx, it was not the pressure of labor SPECIAL CONSIDERATION
pools that drove wages to the subsistence level but
rather the existence of a large army of unemployed, Marxian economics is considered separate from
which he blamed on capitalists. He maintained that Marxism, even if the two ideologies are closely
within the capitalist system, labor was a mere related. Where it differs is that it focuses less on
commodity that could gain only subsistence wages. social and political matters. More broadly, Marxian
economic principles clash with the virtues of
Capitalists, however, could force workers to spend capitalist pursuits.
more time on the job than was necessary to earn
their subsistence and then appropriate the excess During the first half of the twentieth century, with
product, or surplus value, created by the workers. In the Bolshevik revolution in Russia and the spread
other words, Marx argued that workers create value of communism throughout Eastern Europe, it
through their labor but are not properly seemed the Marxist dream had finally and firmly
compensated. Their hard work, he said, is exploited taken root.
by the ruling classes, who generate profits not by However, that dream collapsed before the century
selling their products at a higher price but by paying had ended. The people of Poland, Hungary,
staff less than the value of their labor. Czechoslovakia, East Germany, Romania,
Yugoslavia, Bulgaria, Albania, and the USSR (1922-
1991) rejected Marxist ideology and entered a
MARXIAN ECONOMICS VS. remarkable transition toward privateproperty rights
and a market-exchange-based system.
CLASSICAL ECONOMICS B. MARXISM
Marxian economics is a rejection of the classical Marxism is a social, political, and economic
view of economics developed by economists such as philosophy named after the 19th-century German
Adam Smith. Smith and his peers believed that the philosopher and economist Karl Marx.
free market, an economic system powered by supply
and demand with little or no government control, His work examines the historical effects of
and an onus on maximizing profit, automatically capitalism on labor, productivity, and economic
benefits society. development, and argues that a worker revolution is
needed to replace capitalism with a communist
Marx disagreed, arguing that capitalism consistently system.
only benefits a select few. Under this economic
model, he argued that the ruling class becomes Marxism posits (predict) that the struggle between
richer by extracting value out of cheap labor social classes—specifically between the
provided by the working class. bourgeoisie, or capitalists, and the proletariat, or
workers—defines economic relations in a
In contrast to classical approaches to economic
theory, Marx favored government intervention. capitalist economy and will lead inevitably to a
Economic decisions, he said, should not be made by communist revolution.
producers and consumers and instead ought to be
carefully managed by the state to ensure that
everyone benefits.
He predicted that capitalism would eventually
destroy itself as more people get relegated to worker
status, leading to a revolution and production being
turned over to the state.
Like other classical economists, Karl Marx believed
in a labor theory of value (LTV) to explain relative
differences in market prices. This theory states that
UNDERSTANDING MARXISM the value of a product can be measured objectively
by the average number of hours of labor required to
Marxism is both a social and political theory and produce it. In other words, if a table takes twice as
encompasses Marxist class conflict theory and long to make as a chair, then the table should be
Marxian economics. Marxism was first publicly considered twice as valuable. What Marx added to
formulated in 1848 in the pamphlet The Communist this theory was the conclusion that this labor value
Manifesto by Karl Marx and Friedrich Engels, represented the exploitation of workers.
which lays out the theory of class struggle and
revolution. Marx claimed that two major flaws in capitalism
lead to the exploitation of workers by employers: the
Marxian economics focuses on criticism of chaotic nature of free market competition and the
capitalism, detailed by Marx in his book Das extraction of surplus labor.
Kapital, published in1867.
Marx predicted that capitalism would eventually
Generally, Marxism argues that capitalism as a form destroy itself as more people become relegated to
of economic and social reproduction is inherently working class status, inequality rises, and
flawed and will ultimately fail. competition drives corporate profits to zero. This
Capitalism is defined as a mode of production in would lead, he surmised, to a revolution after which
which business owners (the capitalists) own all of production would be turned over to the working
the means of production (the factory, the tools and class as a whole.
machinery, the raw materials, the final product, and
the profits earned from their sale). Workers (labor)
are hired for wages and have no ownership stake and CLASS CONFLICT AND THE DEMISE
no share in the profits. OF CAPITALISM
Moreover, the wages paid to workers are lower than Marx’s class theory portrays capitalism as one step
the economic value that their work creates for the in a historical progression of economic systems that
capitalist. follow one another in a natural sequence. They are
driven, he posited, by vast impersonal forces of
This is the source of capitalists' profits and it is at
history that play out through the behavior and
the root of the inherent class struggle between labor
conflict among social classes. According to Marx,
and capital.
every society is divided into social classes, whose
TIPS: members have more in common with one another
than with members of other social classes
Another theory developed by Marx is historical
materialism. This theory proposes that society at
any given point in time is ordered by the type of
organization and technology used in the processes of
production. In the modern era of industrial
capitalism, capitalists organize labor in factories or
offices where they work for wages using modern
tools and machines.
THE FOLLOWING ARE SOME KEY
ELEMENTS OF MARX’S THEORIES
OF HOW CLASS CONFLICT WOULD
PLAY OUT IN A CAPITALIST
SYSTEM:
1. Capitalist society is made up of two classes: the
bourgeoisie, or business owners, who control the
means of production, and the proletariat, or
workers, whose labor transforms raw commodities
MARXIAN ECONOMICS: LABOR into goods that have market value.
THEORY OF VALUE (LTV) 2. Ordinary laborers, who do not own the means of
production, such as factories, buildings, and
materials, have little power in the capitalist Does Marxian economics still be applicable intimes
economic system. Workers are also readily of technological advancement such asartificial
replaceable in periods of high unemployment, intelligence (AI)? Explain.
further devaluing their perceived worth.
3. To maximize profits, business owners have to get
the most possible work out of their laborers while CRITIQUES OF MARXISM
paying them the lowest possible wages. This creates Marx inspired multitudes of followers, but many
an imbalance between owners and laborers, whose of his predictions have not come to pass. Marx
work is exploited by the owners for their gain. believed that increasing competition would not
4. Since workers have little personal stake in the produce better goods for consumers but would lead
process of production, Marx believed they would to bankruptcies and the rise of monopolies, with
become alienated from their work, and even from control of production in fewer and fewer hands.
their humanity, and turn resentful toward business Bankrupt former capitalists, he thought, would
owners. join the proletariat, eventually creating an army of
5. The bourgeoisie can leverage social institutions, the unemployed. In addition, the market economy,
including government, media, academia, organized which by its nature is unplanned, would experience
religion, and the banking and financial systems, as crippling supply-and-demand problems and cause
tools and weapons against the proletariat to severe economic depression.
maintain their positions of power and privilege. Capitalism has not collapsed, but it has changed
6. Ultimately, the inherent inequalities and since Marx's time. Governments in many capitalist
exploitative economic relations between these two countries, including the U.S., have the power to
classes will lead to a revolution in which the crack down on monopolies and monopolistic
working class rebels against the bourgeoisie, takes business practices. Governments set minimum
control of the means of production, and abolishes wages and regulatory agencies set standards for
capitalism. worker protection.
Economic inequality has increased in many
capitalist societies. There have been recessions
CLASS CONFLICT AND THE DEMISE periodically as well as one Great Depression, but
OF CAPITALISM they are not thought to be an inherent feature of free
markets. Indeed, a society entirely without
Thus, Marx thought that the capitalist system competition, money, or private property has not
contained the seeds of its destruction. The materialized in the modern world, and recent history
alienation and exploitation of the proletariat that are suggests it is unlikely to emerge in the future
fundamental to capitalist relations would inevitably
drive the working class to rebel against the
bourgeoisie and seize control of the means of
A POSITIVE LOOK AT MARXISM
production.
Placing Marxism in its best light, we can say that
This revolution would be led by enlightened
the Marxist System has great faith in human will.
leaders, known as “the vanguard of the
Marx sees life asa dynamic process in continuous
proletariat,” who understood the class structure of
flux. People change and are changed by
society and would unite the working class by raising
circumstances. They are free, but not entirely. Marx
awareness and class consciousness.
is a moral man.
After the revolution, Marx predicted, private
He is concerned with the quality of life. He is
ownership of the means of production would be
appalled by the misery and degradation he sees
replaced by collective ownership, first under
around him and wants to change all that. He believes
socialism and then under communism. In the final
that through a scientific analysis of the way life or
stage of human development, social classes and
history proceeds, people can understand the forces
class struggle would no longer exist.
that mold them.
Armed with that understanding, when the time is
right, they can act. Above all, Marx believes that
humankind can take its fate into its own hands. He
sees all life as interconnected, so by grasping the
essential level of power—the economy—one can
control all else.
He believes one must change society itself rather
than hope (with utopian reformers) to build on the
altruism of its members.
Marx's goals are humane. True morality can be
established by the application of science to human
affairs.
He believes that ending the alienation of humankind
from nature and its essential self is the achievable
end product of the historical process. Finally, he
believes that people can be free, free from what
Marx calls "forced labor," of work necessary to
live, so that work takes its rightful place as the
natural creative dimension of human existence.
