The Fate of Capitalism: Was Marx Right?

by: Kimball Corson

We have a dearth of knowledge in the U.S. regarding Marxist economic and social theory. Marx is not taught in our economics departments. The reason is clear. I was sitting in the office of an MIT economics professor once, in the early to mid 1970’s, and during our conversation, I asked why. He explained that those providing the government and corporate grants to MIT would not tolerate a Marxist on the faculty and the same was true at other top universities. Chicago, were I was taught economics, certainly had no Marxist on its faculty.

Things haven’t changed. I went out of my way once earlier to take a course on Marxist economics from Paul Sweezy, a Harvard Ph.D and an excellent economist. Because he was a Marxist scholar and taught Marxism, he could not find employment at a top university commensurate with his skills and credentials.

The consequence, sadly to say, is most of us don’t have much of a clue about what Marx had to say. In a nutshell and stripped of his own inflammatory terminology and technical economic errors, Marx had this to say in his book, Das Kapital.

Marx argued that at capitalism would succeed in its initial stages quite well in promoting growth by means of capital investment in new technology and improved means of production. Everyone would prosper. As capitalism developed, however, he argued that capitalists would appropriate to themselves more and more of the profits or income from the economy and that laborers would come to have increasingly less.

Over time, in time and such circumstances, Marx claimed that, first, capitalistic economies would undergo ever more vicious cyclical swings from boom to bust. These cycles and the on-going process of capitalism would, second, result in ever richer capitalists and ever poorer working classes, until, finally, at some point, laborers would revolt and take over the means of production, causing Socialism to ensue as a result. Socialism, in turn, was merely a transitional step to Communism.

This is Marx’s macro socio-economic theory stripped to its bare essentials. Are the central themes now clear and do we see them in our own macro situation.

His expanded theory may be found in Das Kapital. It is not a book you likely have in your back bar bookcase or even your home library. Reading it -- to see through to the encapsulated description I provide -- requires several things. First, you must ignore Marx’s inflammatory language such as the bourgeois = capitalists, the proletarians = the laborers, the “surplus value” of labor = profits and the like. Second, Marx also argued that the “surplus value” had its origin in surplus labor, which he took to be the difference between what it costs to keep workers alive and what they can produce. Ignore all that. Marx’s surplus theory of value has been demonstrated to be incorrect, albeit, according to Nobel Laureate George Stigler, not by a great deal.

Focus on the big issues, the maximal, macro socio-economic view, if you will. It is as I have described it above and in a nutshell, and it makes for some uncomfortable reading and thought.

What we observe of the American economy, at its present stage, is exceptionally close to what Marx described, whether we like it or not. Let me describe the ways:

1. Earlier in our history, up until about 30 years ago, capitalism as it was practiced in the United States did do very well and materially aided a good standard of living for most Americans.

2. Since then, real wages have stagnated and income has become seriously concentrated in the upper income households. The top 1/10 of 1%, get 6% of all income. As Harvard Professor Elizabeth Warren explains it, for long stretches of time in recent years, the growth in the nation's GDP has gone almost entirely to the top 1% or less of the population. The top 40% get about 78% of all income. Now couple this with the following fact:

3. Productivity Growth Quarter in 4Q 2009 was 6.2%. For the year, it came to 5.1%. As Brad DeLong describes this current slice of reality, “The flip side of the jobless recovery is a high productivity-growth recovery--and, with stagnant wages, a rise in the profit share (read, capitalist’s take). This is becoming more prevalent.

4. The distribution of income and wealth in the U.S. has progressively become worse over the last several decades as real wages have stagnated or declined a bit.

5. So to have our cyclical booms and busts become more severe over the last decade. We have had the dot com boom and bust and now the housing boom and bust. We are anything but stable, especially now as we are loaded up with debt and deficits.

6. The share of income or profits being generated by small business is falling and the share of total profits being generated by large businesses is increasing.

7. Government has enacted much special interest legislation contrary to the public interest, to aid the concentration of wealth and income in the hands of the wealthiest and feather representatives own beds.

8. Now, what we see with increased productivity and the maldistribution of income and wealth is a growing surplus of labor or the unemployed.

9. We are beginning to see embryonic development of reactionary grass roots political movements, such as the Tea Party crowd. While now small, without good leadership and ill-focused, grass root movements do not have to stay that way. Once started, they can change quickly and gain good focus and leadership.

10. As a matter of public policy, we are adamantly and deliberately ignoring entirely too much that is important here, all to our prospective detriment. In short, we are asking for public upheaval and revolt.

11. The public, both right and left, are truly exasperated with our federal government, frustrated with our economy, mad at Congress and the Administration and ripe for something new that offers us all a better prospect.

Marx is timely here, possibly even prophetic and above all, at this stage in our developing economy and social order, he is quite disturbing.

Disclosure: none relevant

About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here