Critique of Capitalism and Marx’s Economic Theories
Marxian Critique of Classical Political Economy
A Critique of Classical Political Economy
Classical political economy, while positive in its study of market function and capital production, lacks a critical perspective on the proletariat’s plight. It overlooks the alienation of labor through mechanization, rural displacement, reduced wages, and worsening working conditions. Furthermore, it treats economic laws as natural laws, viewing the production system as ahistorical, rather than a historically contingent system with an eventual end. This system harbors a fundamental contradiction between productive forces and production relations, ultimately leading to its collapse. We will now examine some basic concepts of Marx’s critique, drawing on Lapidus and Ostrovitianov.
The Value of a Commodity
The economic value of a commodity is determined by the socially necessary labor time used in its production. Labor is the basis of value. Goods are produced not for consumption, but for exchange in the market. Every commodity must have a use value, distinct from its monetary value. Goods are exchanged for money, acquiring a price that fluctuates with demand and production. Commodity exchange inherently involves the exchange of labor. The labor required to produce a commodity constitutes its “value of work,” forming the basis of any commodity’s price.
Abstract labor refers to the human energy expended in producing a good, while concrete labor refers to the specific way that energy is expended. Simple labor requires no special training, unlike complex labor. Socially necessary labor represents the average number of hours required to produce something in a given society.
The Form of Value and Money
The value of a commodity is the amount of socially necessary simple labor required to produce it. Marx distinguishes three forms of value:
- Simple form: A good’s value is measured relative to another good.
- Total or expanded form: A good’s value is measured relative to multiple other goods.
- General form: All goods express their value in a single equivalent (e.g., money).
In capitalism, the general form of value is money. Marx terms the power of commodities over people “commodity fetishism,” with the fetishism of money being its most extreme form. Money is used not to acquire goods that satisfy needs, but to generate more money, transforming a market economy into a capitalist economy.
Surplus Production in Capitalism
For the capitalist, exchange begins with a monetary investment (M) in a commodity (C), which is then sold for a larger sum of money (M’ = M + ΔM), where ΔM represents surplus value. This surplus value arises from the exploitation of labor. Labor is the only commodity that produces new value, thereby increasing economic value.
The rate of surplus value is the ratio of surplus labor to necessary labor. The rate of profit directly depends on the rate of surplus value. Within the capitalist system, the rate of surplus value eventually stagnates, leading to a decline in the rate of profit, overproduction, and systemic collapse. Two types of capital are involved: constant capital (means of production) which does not produce any increase in value, and variable capital (human labor) which produces the initial value and the surplus value.
Alienated Labor and Exploitation
The degree of alienated labor, or worker exploitation, can be measured by the rate of surplus value, expressed as the percentage ratio of surplus value to variable capital. Surplus value can be increased by extending the workday (absolute surplus value) or by intensifying the pace of work (relative surplus value).
The Rate of Profit and Capitalism’s Collapse
The capitalist’s primary focus is the rate of profit (p = ΔM / (C + V)). Capitalists aim to maximize profit by either reducing invested capital or increasing surplus value. Factors influencing the rate of profit include investment in fixed capital and the circulation speed of capital. The rate of profit depends on the rate of surplus value, or exploitation rate. Both rates initially increase with technological development. Marx viewed capitalism’s periodic crises as preludes to its eventual collapse, driven by its inherent laws. These laws include:
- The law of the falling tendency of the rate of profit: Capitalism’s reliance on profit and surplus value eventually leads to a point where further surplus value generation becomes impossible. Competitive markets compel increasing investments, while the rate of exploitation is limited by workers’ physical capacity. When all surplus value must be reinvested, the system collapses.
- The law of increasing impoverishment: Technological progress and mechanization reduce the demand for labor, leading to unemployment and impoverishment.
Marx interpreted capitalist crises as signs of its eventual demise. These crises contribute to the development of proletarian class consciousness and the potential for revolution. He envisioned a transitional period, “the dictatorship of the proletariat,” where the working class seizes the means of production from the capitalists, leading to a communist society. Elster argues that Marx’s assertion of the falling rate of profit as the primary cause of capitalism’s collapse is untenable, as it overlooks capital-saving technological innovations. Furthermore, Marx inconsistently assumed a constant rate of exploitation.