MARXIAN ECONOMICS 1

Marxian Economics

Name

Institution
MARXIAN ECONOMICS 2

Introduction

Karl Marx was born in Prussia, modern-day Germany in 1818 to a Jewish family. Marx’s father

was a lawyer by profession. Inspired by his father’s legal career, Marx followed his footsteps and

studied law (Brennan et al., 2017). Marx is one of the few philosophers, historians, and

economists whose ideologies had an everlasting impact on corporate, social, and economic

arenas. Marx’s harsh criticism of the fundamentals of capitalism inspired many politicians of the

20th century. In Russia, for example, Marxist ideologies inspired Russia’s Bolshevik Revolution

(1917) that officially launched communist on the planet (Mukherji, 2019). As such, Russia

became the first communist country on earth after which it spread the ideology through coercion

and intimidation to other parts of the globe. Karl Marx was a renowned but controversial

philosophical and socioeconomic thinker who disapproved capitalism and proposed socialist

communism as an alternative to the latter as well as brought a permanent change to keeps on

evolving.

Evolution Socialism Ideology by Karl Marx

In the 20th century, many political scientists, historians, psychologists, and economists

viewed Marxist ideologies as radical and revolutionist. Marx ideologies created an opportunity

for the study of the social classes and its direct effect on life experiences (Brennan et al., 2017).

Apart from studying law, Marx also explored socialist and economic theories of the time

following his migration in France where he met and befriended Friedrich Engels, a like-minded

socialist. His meeting with Engel was a turning point in the life of Marx (Mukherji, 2019). For

the first time, the influence of his friend Engel made Marx start envisaging things from a realistic

perspective. Marx started to realize the problems and miseries faced by the workers, and the
MARXIAN ECONOMICS 3

masses arose from the production factors owners (Mukherji, 2019). Marx began writing

masterpieces criticizing structures of governments of the time and their oppression on the

masses. Due to his radical and revolutionary ideas that inspired many and started to take shape,

the French Government viewed Marx as a threat to its stability. As such, the Government

expelled him from the country. In his homeland, Marx was forced into exile for the same reasons

he was expelled in France (Brennan et al., 2017). After expulsion from Germany, Marx moved

into Belgium where he lived briefly before migrating into Britain where he spent his life with his

wife until his death in 1883.

Social Class Ideology

Marx was among the first sociologist to focus on the impact of social classes on the

quality of social life and living standards. From his theory, the social class dictated the lives of

diverse people (Brennan et al., 2017). On this theory, people classified as upper social classes

(nobles) lived a life of leisure, extravagance, and abundance while the lower social classes

(workers/peasants) lived in abject poverty, oppression, and hardship. From his viewpoint, the

control of productions factors was the premise that determined the hierarchy of social classes

(Mukherji, 2019). According to this perspective, the owners of the factor inputs controlled the

outputs needed by the rest of the population for their survival. The owners were wealthy

individuals who controlled production factors such as land, factories, machine, and labor

(Mukherji, 2019). Marx found that wealthy individuals were in a superior and dominant position,

and this was the reason that made them control the lives of the rest of the people. Since the

masses were non-owners of the factor inputs, they had to beg the owners to work to make ends

meet (Mukherji, 2019). In return, the owners used such aspect to their advantage by exploiting
MARXIAN ECONOMICS 4

poor workers because they knew that they had no option of quitting the job since they had no

other means of survival.

Capitalism versus Communism

Dissatisfied with the social setting in the society, Karl Marx investigated the cause of the

inequality in the society despite the abundance of the God-given resources. After in-depth

investigation and analysis, Karl Marx found that capitalism was the primary cause of inequality,

poverty, hardship, oppression, and hopeless among the masses (Brennan et al., 2017). Capitalism

is an economic and political model that evolved in the 14th century but popularized by classical

economists such as Adam Smith and John Stuart in the 18th and 19th centuries. In this model,

the fundamental tenet was the free and private ownership of the factor inputs for production and

other economic purposes (Mukherji, 2019). According to Karl Marx and like-minded

individuals, profit maximization was the primary factor that incentivized capitalists to exploit the

masses with a goal of wealth maximization (Arthur & Reuten, 2016). For wealth maximization

by capitalists, they had to maintain the lowest possible production costs, and this was possible

through underpaying the workers despite their overexploitation.

In response to capitalism, Marx proposed a competing socioeconomic and political theory

called communism. According to Marx, communism would solve the social evils perpetrated by

the capitalists as well as instill sanity and equity in society (Mukherji, 2019). Instead of private

property ownership, Marx recommended communal property ownership in which all the people

should share the benefits of the abundance resources. Since capitalism subjected the masses to

abject poverty and hardship, communism ideology was popular but faced resistance from the

rulers and capitalist entrepreneurs, the majority of who were the property owners (Veblen, 2015).
MARXIAN ECONOMICS 5

In response to communism, rulers and nobles used their powerful positions to crush the aspects

they viewed threated their survival.

Alienation

Alienation plays a critical role in the condemnation of capitalism. According to Marx’s

beliefs, people are naturally creative beings with great potential to change the world (Skousen,

2015). However, he noted that the modern and technologically advanced society is out of control

and anarchic. In this context, he condemned open free market dictated by principles of demand

and supply (Arthur & Reuten, 2016). In his view, the concept of a free market system deterred

the ability of individuals to determine and shape their collective destinies.

Based on his condemnation, capitalism is an ideology that neglected and alienated

masses. According to Marx’s reasoning, it was ironical for the market forces to control and

dictate things such as prices yet it was the workers who produced such goods (Skousen, 2015).

Marxist also condemned the notion of owning production factors and controlling the lives of

their workers by few and wealthy capitalists. Due to the capitalists’ control of workers’ lives,

work was degrading, boring, and unsuitable for people but the machines. In a bid to maximize

production and returns, humans lost their dignity by serving as machines. Marx also suggested

that capitalism had no regard for human worth and social needs (Skousen, 2015). Therefore, this

was the reasons capitalists disregarded the dignity of people by treating them like machines.

Based on the weaknesses of capitalism, Marx assumed that people could replace the

modern and advanced free-market system with a centrally-planned and democratic market

system. The proposed ideology argued that the alienation of people resulted from the aggressive

competition in a bid to maximize wealth rather than emphasizing on the improvement of the
MARXIAN ECONOMICS 6

human needs of the masses (Milios & Dimoulis, 2018). On the same note, Marx noted that a

society characterized by a lack of competition for profits and without property ownership would

alleviate alienation, promote happiness, foster equity, and thwart oppression.

While the concept of alienation postulated by Marx was valid and relevant, the major

weakness was that it suggested the creation of a comprehensive, centrally planned society to end

scarcity and uncertainty. In theory, a centrally planned society can solve most of the social evils

experienced in society, but in reality, implementation of this concept is almost impossible

(Milios & Dimoulis, 2018). Therefore, this may explain one of the significant reasons why

socialist communism failed in most countries, such as USSR and entire Eastern Europe.

Materialism

Materialism is another tenet of Marxian sociopolitical economics. Friedrich Hegel, a

German idealist, and philosopher had a profound impact on Karl Marx’s materialism concept.

Hegel developed a philosophical view of human consciousness, claiming that it evolved from

initial efforts to comprehending nature to complex forms of self-awareness (Skousen, 2015).

Inspired by Hegel’s ideologies, Marx developed a similar concept but departed from Hegel

fundamental tenet by adopting a materialist approach to his philosophical doctrine.

Simplistically, Hegel postulated that the ideas defining successive historical eras are the primary

model in which people relate to the world. By contrast, Marx suggested that the organization of

society to satisfy human needs is the fundamental reality of various societies. While Hegel

viewed history as a combination of progressive ideas, Marx saw history as a succession of

production/economic systems organized to satisfy materialistic needs (Skousen, 2015).

MARXIAN ECONOMICS 7

Therefore, the clamor by people to meet materialistic needs was the fundamental premise behind

the emergence of social classes.

Value of labor Theory and Commodification of Labor

The concept of “labor theory of value” is also among the foundation principle of the

Marxian economics founded in Das Kapitol, Marx’s book. According to the principle, the

amount of labor measured by hours spent in the production of a commodity was the fundamental

aspect that measured the value of the merchandise (Veblen, 2015). Therefore, this postulated that

the products that took more hours to produce were more valuable than products that took fewer

hours to produce.

Although, the theory of value of labor faced profound criticism, it prevailed in the onset

of classical economics and the first industrialization. In Das Kapitol, Marx attempted to divert

attention to disapprove capitalism, a model favored by classical economists (Veblen, 2015).

From Marx viewpoint, the theory could exemplify all product values, including the services sold

by the workers to the capitalist owners of production factors. Marx defined labor power as the

ability of workers to make products by rendering their services. In this theory, Marx borrowed

the ideas of Classical economics to explain the value of labor to the people by arguing that the

time takes by workers to produce commodities on average must determine the value of labor

(Veblen, 2015). In short, the wage rate in the long-run should depend on the average amount of

time spent by workers to produce such commodities.

In this theory, Marx challenged the capitalists by questioning how they could enjoy the

profits fairly if the price of commodities reflected the actual value of such products measured by

time used in the production. From this tenet, Marx argued that the powerful, unfair, privileged,
MARXIAN ECONOMICS 8

and dominant position enjoyed by the owners of the factor inputs were aspects that allow profit-

making (Mukherji, 2019). As such, production owners misuse their position to exploit the masses

to enjoy the profits ruthlessly.

Although Marx was right by proving that the capitalists cannot explain how they generate

profits, his theory was quite vague. While to some extent, capitalists enjoy profits via

exploitation of the workers, Marx unintentionally illustrated that the organized production, risk-

taking initiatives by capitalists, and foregoing consumption created surplus value (Mukherji,

2019). From such a perspective, the surplus value created amounted to the profits generated by

the capitalists. As a result, this demystifies the weakness of the theory of the value of labor.

Scientific Socialism

Marx used scientific socialism to criticize capitalism and to distinguish his ideology from

other socialists at the time such as Charles Fourier. Marxian scientific socialism blended the

philosophical value of labor and the realm of alienation to illustrate profound struggle in the

capitalist society (Lichtenstein, 2017). Precisely, Marx postulated that capitalism had crumbled

into a war of two classes: workers (lower social class) and production owners/capitalists (upper

social class). Marx illustrated that the workers were at the mercy of the capitalists and the owners

of the production. From this premise, Marx exposed capitalism paradoxes and the need for the

struggle between classes.

One of the primary contradictions demystified by Marx was that the aggressive

competition among the capitalists would erupt into bankruptcy of most capitalists leading a few

capitalists to control almost the entire production. Marx critiqued the projected evolution of the

monopolies evolving from capitalism by arguing that market monopolization was caused by
MARXIAN ECONOMICS 9

profound exploitation by curtailing quality and charging unaffordable prices to the consumers

(Lichtenstein, 2017). As such, Marx believed that this would contribute to more suffering in the

society. Such a notion was a significant strength and prediction that come to pass in recent times.

Marx also predicted that unplanned and anarchic economy created economic risks and

uncertainties that could result in the swings in business cycles and mismatch of demand and

supply that would culminate into serious economic depressions. Notably, this was another

strength of the Marx theory and prediction that came to pass (Skousen, 2015). In 2008/2009, for

example, the vast deregulation of the real estate and financial markets exploded, creating one of

the most severe economic crises of all times. Therefore, this fulfilled Marx predictions of the

19th century.

According to Marx’s standpoint, society should abolish the capitalist system

characterized by private property ownership, materialism, and profit incentives. In this

standpoint, Marx proposed the replacement of capitalism by a planned and self-managed

socioeconomic system to thwart exploitation and end alienation (Lichtenstein, 2017). As such,

Marx predicted that a social revolution was inevitable. Marx prediction about social revolution

was first fulfilled in 1917 following the ejection of the autocratic monarchy in Russia and the

introduction of communism (Lichtenstein, 2017). Other countries such as China, North Korea,

Eastern Europe countries, Cuba, Vietnam, and others followed suit in the 20th century.

Income Distribution as per Marxian Economics

The income distribution determines how society divides abundance resources and wealth

among the people. According to Marxian economics, human needs are the fundamentals that

determine income and wealth distribution in society (Brennan et al., 2017). In his theory, the
MARXIAN ECONOMICS 10

inequalities and wealth gaps in the society arise from the forces of capitalism in the production

systems. In other words, the competition among capitalists and desire to maximize profit was the

critical force at the work environment in which capitalists strived to create surplus value by labor

exploitation.

Just like classical economists such as Richard Ricardo, Marx believed that the rate of

aggregate wage equaled the minimum subsistence wage rate in the long run. Based on this belief,

the wage rate is consistent with the subsistence wage in the long run (Lichtenstein, 2017).

According to Marx, the excess labor supply was the primary factor that deterred the market wage

rate from increasing over the subsistence rate. As such, Marx hypothesized that the excess labor

supply increases the dominant and power of the production owners beyond the equilibrium

contribution to the escalation of the exploitation (Arthur & Reuten, 2016). Marx also answered

the concept of unemployment characterized by excess labor supply. In Marx’s thinking, the

desire of the capitalists to keep the costs down and maximize profits encouraged the

development of the alternatives as opposed to reliance on human labor leading to the technology

advancement (Mukherji, 2019). Importantly, this rationale postulated by Marx on the why labor

supply is beyond labor demand is valid and one of the major strength of Marxian economics.

Concept of the Surplus Value

Surplus value is one of the critical concepts of Marxian economics. In his book, Das

Kapitol, Marx explained the concept of the surplus value and its connection to the profits

generated by the capitalist production owners and the exploitation of the workers that contribute

to the class struggle (Brennan et al., 2017). The surplus value also relates to the value of labor

power postulated by Marx and earlier economists such as Ricardo and Adam Smith
MARXIAN ECONOMICS 11

(Lichtenstein, 2017). From the Marx perspective, the production factors such as land and capital

apart from labor do not create value but transfer value to the end product.

Marx argued that the labor generated superior value than the power of labor value spent

on the production of commodities. In short, this suggests that labor power creates more value

than its real value (Mukherji, 2019). According to this premise, the cost of labor reproduction

was the factor that determined the value of labor power. In other words, this involves the value

of products required to keep the workers at a minimum sustenance level. The notion postulated

by Marx is the fundamental premise behind the creation of living wages. Living wages are the

remuneration paid to workers for mere survival or to cater to their primary necessities

(Lichtenstein, 2017). Importantly, this concept is necessary to postulate the notion of income

distribution and profits in a capitalist world.

Conclusion

Karl Marx is one of the few economic, political, and social philosophers that shaped the

world economy and politics by introducing an alternative socioeconomic and political theory to

replace capitalism. Marx’s dislike for the exploitative nature of capitalism was the primary

reason why he suggested its replacement with socialist communism to bring equity among the

people. While Marx’s theory was controversial, it brought an everlasting impact that continues to

take shape even today. In particular, Marxian economics is more relevant in the corporate world

on social responsibility. Although modern capitalism emphasizes on the free market economy,

privatization, and capital accumulation, capitalist economies borrow some ideologies of Marxian

economics such as planning the economy and developing economic policies to neutralize

daunting externalities of capitalism such as unfair competition.

MARXIAN ECONOMICS 12

References

Arthur, C. J., & Reuten, G. (Eds.). (2016). The circulation of capital: Essays on volume two of

Marx’s capital. Springer.

Brennan, D. M., Kristjanson-Gural, D., Mulder, C. P., & Olsen, E. K. (Eds.). (2017). Routledge

Handbook of Marxian Economics. Taylor & Francis.

Lichtenstein, P. M. (2017). An introduction to post-Keynesian and Marxian theories of value

and price. Routledge.

Milios, J., & Dimoulis, D. (2018). Karl Marx and the classics: An essay on value, crises and the

capitalist mode of production. Routledge.

Mukherji, A. (2019). Marxian Economics: Notes from a Neo-classical Viewpoint. Arthaniti:

Journal of Economic Theory and Practice, 0976747918814968.

Skousen, M. (2015). The Big Three in Economics: Adam Smith, Karl Marx, and John Maynard

Keynes: Adam Smith, Karl Marx, and John Maynard Keynes. Routledge.

Veblen, T. (2015). The socialist economics of Karl Marx and his followers. Read Books Ltd.