History of Economic Doctrines

Lecture 15

Alternative Economic System LINK (cont.)

Marxism (Revolutionary Socialism)

Marxism is the idea that socialism will replace capitalism only after a violent revolution.

Georg Hegel [1770-1831] Dialectical Analysis Step 1: Thesis → Antithesis Step 2: Thesis + antithesis → Synthesis	Hegel: History is dominated by dialectical changes in ideas. Example: Near (thesis) + Far (antithesis) yields the concept of Distance (synthesis).
Ludwig Feuerbach [1804-1872] Dialectics + Materialism / Determinism Feuerbach insisted that dialectics operate in the material world, which is deterministic, and not merely in the world of ideas per Hegel. Feurbach, an atheist, attributed religion to human desires to be dependent. Marx agreed. Karl Marx [1818-1883] Religion is the opiate of the masses. Karl Marx, Das Kapital	Marx Biography

Dialectical Materialism +Economic Determinism

The history of all society hitherto is the history of class struggles.

Karl Marx and Friedrich Engels

The Communist Manifesto [1848]

History is a dialectical process among material interests. Therefore, class warfare is an inevitable step in the historical process that facilitates economic progress. Influenced by Feurbach’s material determinism, Marx viewed history as following an unabated course of progress that consists of six major –and necessary – stages: (1) prehistory, (2) primitive culture, (3) feudalism, (4) capitalism, (5) revolution and dictatorship of the proletariat, and (6) communism/socialism.

Link to more discussion of Marx on Economic History

Marx’s Views on Government Under Capitalism

Government is used by capitalists to keep the workers down.

Marx’s View on Value

A good’s value is proportional to the labor socially necessary for its production. [Locke]

Only “hands-on” working time counts as labor. (Adam Smith had similar view.)

Only socially desired commodities have value. (Per Smith, services are not valuable.)

Capital used in production is merely embodied labor. (Similar to David Ricardo’s view.)

Marx’s View on Surplus Value and Exploitation

Surplus value = interest plus rent plus profit.

People only need to work a certain number of hours to support themselves. The capitalist bourgeoisie forces workers to work more than is necessary and then keep the surplus that is produced. All payments of interest, rent, and profit are surplus values expropriated from workers.

Subsistence Theory of Wages

A “reserve army of the unemployed” comprises surplus labor. Even at desperately low wages, these idle workers are always eager to take jobs, so wage rates gravitate to a subsistence level which barely covers biological needs, per Ricardo. This exploitation in the form of surplus values expropriated from labor enables capitalists to accumulate capital, facilitating economic growth. Thus, capitalism is a necessary stage of development, but capitalism ultimately will be “swept into the dustbin of history.”

Marx’s View on Business Cycle

Per Ricardo, capital accumulation and concentrated wealth under capitalism lead to declining rates of profit. Marx viewed “underconsumption” as a potential problem triggering a depression. Per Malthus, the bourgeoisie are not that smart, and do not consume enough, resulting in a glut of production. When the economy takes a turn for the worse, small capitalists [the petit bourgeoisie] are bankrupted. Business cycles are dynamically unstable because some capitalists will be wiped out and become proletariat during each depression, thereby resulting in ever-increasing concentrations of economic power, and ever greater numbers of angry and desperate proletariat workers.

Workers of the world, unite! You have nothing to lose but your chains. You have the world to gain! Last line, The Communist Manifesto [Some Revised Versions]

Marx predicted that monopolistic finance capital would be the final stage under capitalism. Workers overthrow their masters in a short bloody revolution, and establish a “dictatorship of the proletariat.” Government during this brief transitional period is viewed as a necessary evil. In the final stage of pure communism, government would be abolished and everyone would live happily ever after.

From each according to his abilities, to each according to his needs.

Louis Blanc [1840]

The Organization of Work

Very Interesting Link: Marx on Globalization

Arguably Correct Marxist Predictions 1. Class interest dominates most people’s senses of equity. 2. Increasing concentration of economic power. [For example, salaries of top executives are rising significantly faster than for workers; firms grow increasingly large, and international mergers of giant firms are increasingly common.] 3. Increasing globalization of economic activity. a. Declines in the importance of nation-states. b. Transnational technology transfers. c.Commodity production will be done where it is least costly.

Clearly Wrong Marxist Predictions Capitalism is dynamically unstable. Labor theory of value. Industrial workers will be increasingly impoverished across time. Communist revolutions will occur spontaneously in advanced capitalistic nations, not in monarchistic or relatively feudal states (as actually occurred in, e.g., Russia, China, and Cuba). After communist revolutions, the dictatorship of the proletariat will quickly evolve into pure communism (similar to utopian socialism), and government will be eliminated. Fact: All communist governments have been nasty dictatorships.

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These web pages are significantly edited and elaborated versions of student notes based on lectures by Ralph Byrns, 2002-2006.