Contributions to Economics: Karl Marx
March 6th, 2009 at 6:35 pm - by admin
Karl Heinrich Marx (1818-1883) is often misrepresented and misunderstood by social scientists and the political establishment — it’s often seen that Marx headed some large scale socialist revolution, eventually leading to what appears to be the collapse of Communist Russia and the associated states; in reality, Marx was but a famous — and rather extreme — thinker of his time.
This piece will be in no way a complete introduction to Karl Marx, but rather a brief primer of his most important contributions to economic theory; that of surplus value created by the labourer.
Marx’s work aimed to demonstrate that capitalism, which he clearly loathed — but understood as a great driving force towards economic growth — suffered a set of internal contradictions in its very philosophy which would eventually cause a great collapse.
Born in Trier, Germany to a Jewish family, Marx converted to Protestantism early in his life. A student of philosophy, law and history at the universities of Bonn, Berlin, and Jena. After university, the student was not offered university positions due to radicalism, however, ended up editing and writing for the paper Rheinische Zeitung, where some of his publications brought him in a negative light with the government and political establishment. In 1843, Marx’s radicalism led him to being exiled from Germany.
Being exiled, Marx went to Paris, where he studied French socialism and eventually met his long-time friend and collaborator, Friedrich Engels (1820-1895). In 1848, Marx and Engels co-authored the Manifesto of the Communist Party, where their ideas were recognized as “communistic,” and led to his exile from Paris to London; where he did not leave, save for short visits to mainland Europe, for the rest of his life.
While in London, Marx wrote for the New York Tribune to survive while working on his magnum opus, Das Kapital, which was released in 1867 — and finished after Marx’s death, credited to editing by Engels on volumes 2 and 3.
Marx’s contributions to philosophy and economics are broad, though, serving a clear purpose. Marx established historical, economic and social theories which lead to conclusions about capitalism and the reformation in a system of Marxist socialism. A clear evolution of Marx’s though can be seen by following his works throughout history; with Kapital being his primary economic piece, eventually, we see a transformation to one of his arguably most important works, Grundrisse, which David McLellan, described as “the most fundamental Marxist work.”
Historically, Marx saw that every cycle of history — or, more so, every economic establishment — had a number of forces of production and relationships between them. He saw the inputs of production as always changing, totally variable and subject to modifications from the social and economic infrastructure, and, to an extent, saw the relationships as static infrastructure variables, somewhat exogenous and entirely enforced by what he referred to as the superstructure. Marx saw an evolution structured through history, where stages of social evolution and economic evolution were marked at various landmarks, from the origin, where there was no class struggle and no exploitation, then an increase in productivity brought the ability for workers to produce more than their own requirements. At this point, a class of modern day “capitalists” arose, according to Marx, who would exploit labour and create slavery.
This social infrastructure would eventually evolve in to feudalism, where the labour of the serf is clearly socially exploited, though the subsistence is achieved for all. The factors of production finally got stunted by the limits of feudalism, when it got overthrown and replaced with capitalism. The internal contradictions, which Marx fraught to demonstrate, were so severe that eventually, like feudalism and the stages prior to it, capitalism would be replaced with some form of socialism.
Marx’s theory of value, perhaps his most important contribution to the field of economics, albeit, the most rejected — stated that the value of any given commodity is determined by the socially average simple labour time used to create it, giving skilled labour value in multiple units of unskilled labour, suggesting that the market determines all prices based on this mythical underlying labour cost.
This is an important deduction, especially considering it leads the path for Marx’s prime rejection of capitalism — his theory of exploitation. In Das Kapital, it is assumed that all commodities sell at their value — or, eventually, like in modern economics, average out to selling at the “correct” price. Marx’s suggestion, at this point, was that labour power was the single commodity which did not sell at the same definition of value — clearly, because Marx’s definition of value could not be applied to labour, for it depended on it — rather, Marx suggested that labour power sold at a price less than it’s ability to produce.
He introduced two topics, labour power and labour time; the first being the actual ability for people to do work, while the latter was the time/hourly basis for wages. He believed that labour power, would result in the creation of “surplus value” which would allow the exploitation of the proletariat, so long as the productive capacity of society was greater than that of its subsistence. The idea was simply that capitalists were in such a position that they could mandate the number of hours — the amount of labour time — a employee worked, or tell them they could not work at all. The need for food, then forces the workers to work.
This ends up to be a pivotal part of Marxian theory — the simple fact that employers determine the girth of employment, places a limit on the efficiency of the labour market; to a point which he believed would encourage its demise. That is, a laborer may produce enough value to reach subsistence after just one or two hours of work, and would in turn be paid roughly that, but be forced to work for 12-14 hours — at least, in Marx’s day.
Of course, there are solid rejections to his labor theories, which mark the basis for his entire contribution to economics. Historically, wages have increased; and today, wages are much higher than that of subsistence. In fact, the entirety of the 20th and 21st centuries has seen massive increases in living standards across the spectrum, and competition between different types of workers causes competitive wage pricing, especially in conditions of relatively full employment. Labour hours likely, in modern economics, could not reasonably be measured without differentiating between different levels of technology, skill and knowledge — furthermore, the share of profits between labour and capital has been shown numerous times to be relatively constant over time, at least thus far.