Marx, Karl.

A philosopher, an economist and a sociologist but perhaps most of all

renowned as the founder of the so-called “scientific socialism” and as a prophet of

Marxism, Karl Marx was born in Trier, Germany on May 5, 1818 and died in London on

March 14, 1883, the year when, incidentally, two other great economists who wrote on

the broad subjects of capitalism, Joseph Schumpeter and John Maynard Keynes were

born. Marx’s two greatest contributions to the intellectual life of his time and beyond it

were the Communist Manifesto written together with Friedrich Engels in 1848 and a

three-volume treatise on the political economy of capitalism, Capital (1867-1895).

Life and Work. After school, Marx first entered Bonn University to study law but he

soon transferred to Berlin University where he got interested in philosophy. He received

his doctoral degree from Jena in 1841 in Greek philosophy. By that time, he was already

deeply involved in radical political movement. In 1842 he became editor of a radical

liberal newspaper, The Rhenish Gazette which was banned by the authorities in 1843. In

that year Marx also got married and moved to Paris. It was in Paris that Marx met his

life-time friend and ally Friedrich Engels and became a communist, based on his

experience of mixing with workers’ groups. In 1848 he and Engels wrote the Communist

Manifesto that became the political credo of the communist movement.

Marx settled in London in 1849, where he spent most of the time in the reading

room of the British Museum studying and developing his economic and political theories.

He suffered from extreme poverty and was helped out by Engels and other friends and

supporters who sent him money. He was a very hard worker but toward the end of his life
his health failed him reducing his creativity and forcing him to leave Capital, his lifework

unfinished. He died at the age of 64.

Despite the fact that for most part of his life Marx was an academic scholar, his

motto expressed in his own words was that “all previous philosophers only tried to

explain the world, while the true task is to change it.” He has certainly had a profound

influence on changes in the world after him although we will never know if that was

indeed the kind of changes that he himself would have approved of.

Economic Interpretation of History. Although Marx is most well-known as a prophet of

communism, this aspect of his work is really important only to believers. We will come

to it later on but we will start here with the contributions that go beyond the political

message of communism and that continue to live on in modern-day social sciences.

The biggest such contribution is the economic interpretation of history, which in

the words of Joseph Schumpeter, was doubtless one of the greatest achievements in

sociology of all times. The economic interpretation of history does not mean that people

are motivated only or primarily by economic motives in their behavior. The true meaning

of Marx’s message in this regard was that religions, philosophical concepts, schools of

art, ethical ideas and political movements are shaped by the economic conditions of their

times and that changes in the economic conditions account for their rise and fall. Those

changes (the “development of the productive forces” of a society) can be influenced by

non-economic factors but in the end the needs coming from the economic side will melt

political and other institutions in a way that is required for their continued development.
 Although certainly not in the above crude form, at least part of this early vision by

Marx is still alive today in works by economists and political scientists who have

absolutely no sympathy to the political message of communism (for example, in

economics it is related to theories accounting for the formation of preferences and social

institutions, as in by works of the Nobel Prize winners Gary S. Becker and George

Akerlof).

The Theory of Class Struggle and the Communist Manifesto. The economic

interpretation of history is closely related (although by no means identical) to Marx’s

theory of social classes and his understanding of the historic process as inherently driven

by class struggle. Classes are defined in their relationship to material means of production

(ownership of factors of production, in modern terminology). The development of

productive forces gradually changes the relative importance of factors of production and

that is translated into relative changes in their power. As the ascending class fights

against the declining class, the social order and the whole political and ideological

landscape undergo drastic changes, often by means of a violent revolution. This logic is

applied to the past human history in the Communist Manifesto and it is extended to

predict the future, in which the takeover by the ascending class under the bourgeois

system, the proletariat, will eventually result in a classless society and an unlimited

potential for economic development.

Although the theory of class struggle is not accepted in its Marxist form by

modern social sciences, many of its insights, including the role that competition for

political influence plays in shaping institutions and government policies still live on.
Also, although the prediction of an imminent collapse of the capitalist system and the

proletarian revolution has not materialized, some of the most forceful passages in the

Communist Manifesto actually refer to the greatest achievements of the “bourgeoisie”

class and to complete changes in the ways human history has been made after its

ascendance to power (that is, after the advent of capitalism). Marx can thus be credited to

be one of the first thinkers to recognize the fact (widely accepted today) that the capitalist

(free market) system represented the biggest breakthrough in human history since the

dawn of civilization itself.

The Theory of Surplus Value and Exploitation. This is the least impressive of all

Marx's intellectual achievements and it is certainly not part of any scientific economic

theory of our days. Marx begins the exposition of his labor theory of value (which is

rooted in Ricardo's labor theory of value) in Capital by asking a question, what it is that

makes commodities comparable in terms of values. His answer is that it is the general

fact that they are all products of labor. He does mention that a commodity must have

value in use as a precondition to having any value at all, but he does not seem to be aware

of the implications of this. More precisely, when postulating that the value of

commodities is governed by the number of hours of labor "socially necessary" to produce

them, Marx refers to some standard commonly prevailing production technology,

apparently without noticing that one needs to know values (equilibrium relative prices)

before it can be determined what makes a production technology commonly prevailing in

the first place. Modern theory of value (largely developed after Marx's death) explains

relative prices by the interaction of "social necessity" (human wants) and the quantity of
scarce resources (labor among them) used in their production, so that from a scientific

point of view the labor theory of value (including Marx's version thereof) is dead and

buried.

The theory of surplus value is even less of a scientific construction. Labor theory

of value alone is not enough to purport Marx's political message that the proletariat

(workers) are being exploited by the bourgeoisie (capitalists). Under the labor theory of

value it is still true that all producers get paid according to the number of labor hours

embodied in their product, so there seems to be no room for extra profit ("surplus value")

accruing to capitalists. To get around this difficulty, Marx makes labor a special

commodity. What hired workers (in contrast to self-employed artisans) sell in the market

is "labor force", not the product of their labor. The value of labor force is determined by

whatever labor is "socially necessary" to produce it, that is, the value of food, clothing,

housing and other components of the "reproduction of labor force". This socially

necessary value of reproduction of labor force is always less than the value of the product

of labor (Marx never really explains why), so when capitalists hire labor they derive

value from owning the product of labor which is in excess of what they pay for the labor

force.

Marx uses the theory of surplus value and exploitation to derive various laws

governing the evolution of capitalism and to predict its eventual self-destruction. As the

capitalistic way of production spreads, exploitation of the proletariat becomes a bigger

and bigger fact of social life. At the same time, the accumulation of capital reduces the

rate of surplus value (which is generated only by current labor, not by capital goods). In
the end, private ownership of capital has to be abolished and the proletariat takes over the

production process, abolishing exploitation.

Marx and Marxism. Marx's theory of surplus value was rooted in the empirical facts of

his time when labor was indeed paid meagerly while owners of capital enjoyed very high

profit rates. Inasmuch as Marx’s own theory was true, however, it only meant that a large

part of the labor force was still employed in the pre-modern sector where their income

was confined basically to subsistence level and made possible the divergence between the

“value of labor force” and the “value of its product”. Only in the presence of a vast

"reserve army of labor" could the determination of the wage rate be treated as exogenous

to the capitalist production and its markets.

The very logic of capitalistic development that Marx so well understood (as

shown, in particular, by the Communist Manifesto) was pointing strongly toward changes

making the theory of exploitation irrelevant. The spread of manufacturing and the retreat

of traditional agriculture and artisanship brought the determination of the "value of labor

force" into the realm of supply and demand in the capitalist sector while the accumulation

of capital also led to the development of capital markets and to overcoming institutional

barriers between workers and capitalists. All of Marx's predictions about the historical

trend of capitalist development completely failed.

This did not lead, however, to the demise of Marx’s political message. Although

radical followers of Marx hardly understood the depth of his theory, they were quick to

seize its slogans. Some of the most repressive and intolerant regimes in human history

were created in the 20th century in the name of Marx, although Marx’s original message
itself was neither anti-democratic nor in the denial of individual freedom. The horrors of

Lenin’s and Stalin’s communism in Russia and the extreme political slogans of modern

communists are no more and no less rooted in Marx than the horrors of Medieval

inquisition in Spain and current occult sects are rooted in the teaching of Jesus. It is not

by pure chance, however, that Marx’s message ended up being used by social reaction,

while the locomotive of progress by-passed his vision and led to the development of

productive forces that he thought was only possible with the rise of proletariat and

communism, in a completely different fashion.

Bibliography:

Marx, Karl and Engels, Friedrich. Manifesto of the Communist Party. International

Publishers, New York, 1948.

Marx, Karl. Capital: a critique of political economy. Edited by Frederick Engels (in three

volumes), International Publishers, New York, 1967.

Schumpeter, Joseph A. Capitalism, Socialism, and Democracy. Harper, New York, 1950.

Schumpeter, Joseph A. History of Economic Analysis. Allen & Unwin, London, 1954.

Blaug, Mark. Economic Theory in Retrospect. Fifth Edition, Cambridge University Press,

Cambridge, England, 1996.

Riazanov (Goldendach), David. Karl Marx and Friedrich Engels. International

Publishers, New York, 1927.