Marxism

Marxism is the political practice and social theory based on the works of Karl Marx, a 19th century German philosopher, economist, journalist, and revolutionary, along with Friedrich Engels. Marx drew on G.W.F. Hegel's philosophy, the political economy of Adam Smith and David Ricardo, and theorists of 19th century French socialism, and was perhaps inspired by the earlier Paris Commune, an organized civil protest in France and brief socialist ruling of Paris, to develop a critique of society which he claimed was both scientific and revolutionary. This critique achieved its most systematic (albeit unfinished) expression in his masterpiece, Capital: A Critique of Political Economy, more commonly known as Das Kapital. Today, outside the officially "communist" nations, membership of Marxist political parties is relatively small, but Marxism continues to enjoy significant intellectual respect in many circles.

The political-economy roots of Marxism

Political economy is essential to this vision, and Marx built on and critiqued the most well-known political economists of his day, the British classical political economists. Political economy predates the 20th century division of the two disciplines, treating social relations and economic relations as interwoven. Marx proposed a systematic correlation between labour-values and money prices. He claimed that the source of profits under capitalism is value added by workers not paid out in wages. This mechanism operated through the distinction between "labour power", which workers freely exchanged for their wages, and "labour", over which asset-holding capitalists thereby gained control. This practical and theoretical distinction was Marx's primary insight, and allowed him to develop the concept of "surplus value", which distinguished his works from that of the classical economists Adam Smith and David Ricardo. Workers create enough value during a short period of the working day to pay their wages for that day (necessary labour); however, they continue to work for several more hours and continue to create value (surplus labour). This value is not returned to them but appropriated by the capitalists. Thus, it is not the capitalist ruling class that creates wealth, but the workers, the capitalists then appropriating this wealth to themselves. (Some of Marx's insights were seen in a rudimentary form by the "Ricardian socialist" school http://cepa.newschool.edu/het/schools/utopia.htm http://cepa.newschool.edu/het/schools/ricardian.htm.) He developed this theory of exploitation in Capital: A Critique of Political Economy, a "dialectical" investigation into the forms value relations take.

Related Topics:
Adam Smith - David Ricardo

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Capital is written over three volumes, of which only the first was complete at the time of Marx's death. The first volume, and especially the first chapter of that volume, contains the core of the analysis. Hegel's legacy is especially overpowering here, and the work is seldom read with the thoroughness Marx urges in his introduction. According to his prescriptions, the method of presentation proceeds from the most abstract concepts, incorporating one new layer of determination at a time and tracing the effects of each such layer, in an effort to arrive eventually at a total account of the concrete relationships of everyday capitalist society. This investigation is commonly taken to commit Marx to a species of labor theory of value as described above. This and other intrinsic theories of economic value are incompatible with modern, predictive economics in which the theory of value is that of marginalism: on one side, technical production coefficients; on the other, subjective preferences. To neoclassical economists, the labor theory is the reason Marxism failed as an economic theory.

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Marx critiqued Smith and Ricardo for not realizing that their economic concepts reflected specifically capitalist institutions, not innate natural properties of human society, and could not be applied unchanged to all societies. Marx's theory of business cycles; of economic growth and development, especially in two sector models; and of the declining rate of profit, or crisis theory, are other important elements of Marxist economics. Marx later made tentative movements towards econometric investigations of his ideas, but the necessary statistical techniques of national accounting only emerged in the following century. In any case, it has proved difficult to adapt Marx's economic concepts, which refer to social relations, to measurable aggregated stocks and flows. In recent decades, however, a loose "quantitative" school of Marxist economists has emerged. While it may be impossible to find exact measures of Marx's variables from price data, approximations of basic trends are possible.

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Marx suggested that capitalist dynamics included the tendential law of a falling rate of profit. The general tendency could be explained by the actions of individual capitalists. Competition forced them to cut costs by boosting labour productivity, yet this technical change through mechanisation caused a corresponding fall in the "productivity of capital" (the output-capital ratio). As such the average rate of profit fell over the economy as a whole. Certain Marxist economists, such as Henryk Grossman and Paul Mattick Sr, have used this theoretical edifice to construct a theory of capitalist "breakdown". Others have explained it as an aspect of capitalist crisis, and prone to counter-tendencies during economic booms.

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Marx argues that capitalism is, in the words of Ernest Mandel, an editor of Marx's "Capital," a "gigantic enterprise of dehumanization." In "The Communist Manifesto," co-written with Engels and published in 1848, Marx and Engels describe the effects capitalism has on the individual and society: Capitalism "drowns the most heavenly ecstasies of religious fervor, of chivalric enthusiasm, of philistine sentimentalism in the icy water of egotistical calculation."

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The liberal challenge

The Austrian School were the first liberal economists to systematically challenge the Marxist school. This was partly a reaction to the Methodenstreit when they attacked the Hegelian doctrines of the Historical School; Marxist authors have decried that the Austrian school as a "bourgeois" reaction to Marx. The Austrian economists were, however, the first to clash directly with Marxism, since both dealt with such subjects as money, capital, business cycles, and economic processes. Eugen von Boehm-Bawerk wrote extensive critiques of Marx in the 1880s and 1890s, and several prominent Marxists—including Rudolf Hilferding—attended his seminar in 1905-06. In the middle of the twentieth century, prominent US economist Paul Samuelson also devoted several journal articles to the alleged inconsistencies of Marxian theory. Later, neo-Ricardian Sraffians launched a significant attack on the labour theory of value...

Related Topics:
Austrian School - Liberal economists - Methodenstreit - Historical School - Eugen von Boehm-Bawerk - Rudolf Hilferding

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