Marx's Political Economy

Marx today is remembered not for his political writings but for the keen observations about society, class structure, and the plight of the increasingly alienated individual. It might thus come as a surprise to learn that he considered economics to be the driving force responsible for all these phenomena, a force what's more beyond mankind's control. Or to be exact early nineteenth century economics which did not considered price a function of market supply and demand but rather of the amount of labor expended manufacturing a saleable commodity. Unlike free-market advocates who also subscribed to this idea, Marx thought that it would be abused and undermined by an exploitive capitalist system where the need for ever greater levels of investment would come out of the very pockets of the workers who give everything value.

Keywords Class Struggle; Commodity-Fetishism; Circulating Capital; Dialectic; Division of Labor; Exchange Value; Factors of Production; Fixed Capital; Labor Theory of Value; Means of Production; Rate of Exploitation; Reification; Relations of Production; Surplus Value; Use Value

Marx's Political Economy

Overview

During communism's heyday, nearly half the world knew his name. Philosopher, pamphleteer, social critic, and revolutionary, Karl Marx is remembered today for his writings on alienation and social class rather than his ideology. Certainly the realities of the Soviet Socialist States of the twentieth century turned out differently from what Marx himself envisioned and predicted in The Communist Manifesto: the revolution of the proletariat leading to the "withering away" of the state. In his defense, though, Marx was a man imbued with the ideas and grappling with the social realities of the nineteenth century, not those of the twentieth.

More to the point, perhaps, Marx did not see himself as a political thinker, much less as a sociologist, but rather first and foremost as an economist. Throughout his voluminous writings, he returned again and again to same basic themes: capital, landed property, wage labor, the state, foreign trade, and the world market (Freidheim, 1976). Well versed in the economic theory of his day, Marx's own work incorporated ideas from such leading proponents of free-market capitalism as Adam Smith and David Ricardo. Unlike Marx, though, these theorists studied economic matters in isolation to better understand their inner workings. Marx, on the other hand, saw economics as the well-spring and driving force of all the "social, political, and spiritual processes of life" (Brennan, 1998, p. 263).

Of course the classical economists before Marx did speculate on the effect market forces might have on politics and society and vice versa, but rarely did they assert formal causal relationships as Marx did. To do so would go against the grain of the scientific empiricism that had shaped the very nature of all their intellectual inquiry. All knowledge, they fervently believed, came from observation, and a theory was sound only as long as empirical evidence supported it. Marx, on the other hand, was deeply influenced by the German philosopher Hegel, an idealist who believed in an abstract force he called the Spirit which, by expressing itself via conflict, preordained all of history. Marx was also utterly committed to the nascent European labor movement and the socialist ideals it embraced. So great were these influences that Marx premised all of his analysis on them as articles of faith.

Marx held the modern industrial system accountable for destroying the social relations of production, or the interactions people have with things and each other as they work. Effectively disenfranchised, workers had no other option but to sell their labor as a commodity much like a mop or a shovel, Marx claimed (Bottormore & Outhwaite, 1993). And as mere commodities on the open market, workers neither earned a comfortable living from nor controlled any aspect of the production process. Worse still, so bleak were their prospects, these dispossessed workers eventually came to see themselves as just mere "things."

Marx called this dehumanizing process reification, and attributed it to capitalist economies' overdependence on cash. The precapitalist equation common to all transactions—consumer good exchanged for money which is then exchanged for another consumer good—was turned inside out by capitalism. The new, and in Marx's view the more sinister, formula was money exchanged for consumer goods which are again exchanged for money (Booth, n.d.). In this new formula people acquired things as a means to an end, the accumulation of wealth, not as ends unto themselves. Taken to extremes, Marx warned, humankind would increasingly fixate on objects per se, compulsively buy them, and so fall victim to a kind of commodity-fetishism

Consumption for consumption's sake, though, stimulates demand for wares, which, in turn, necessitates expansion of the means of production: the tools, machines, plants, and transportation infrastructure required to transform raw materials into finished goods. The purchase, upkeep, and profitable use of these means of production also all require investment funds, i.e., accumulated capital. And, since workers made only a subsistence wage at best, the requisite financing could only come from those with wealth in hand, or those who owned private property.

The disparity between the "have's" and "have not's" is as old as civilization. Marx was also not the first to write about class. He himself drew upon the ideas of near contemporaries like Saint-Simon and the British materialists in his own original analysis. However, Marx is unique for tracing the root causes of the class structure back to their economic origins, and showing how central the existence and preservation of private property was to it.

According to Marx, those who owned private property had social rank, a meaningful occupation or life of ease, and excellent prospects for the future. They were well-fed, well-clothed, and well-housed, and could afford luxuries and entertainments. Those who did not own private property went wanting, their number growing ever larger. Marx attributed this stratification to capitalism, which he believed to be inherently exploitive. Furthermore, he believed, with class divisions came class struggle. The middle class would prove no safe haven in this regard, Marx believed, because it too would eventually be pauperized. In true Hegelian fashion, Marx saw only rich and poor, and society itself as a dynamic synthesis of base and superstructure. The division of labor, the means of production, private ownership, and the economy as a whole belonged to the base, which spawns the superstructure comprising the political, legal, and social institutions. As long as the base supplies society with its material needs, Marx believed, the superstructure survives. As soon as it doesn't, the superstructure starts to buckle (Fulcher, 2003). In sum, Marx saw economics ultimately dictating all facets of society, yet he also believed that workers had the power to change the economy and thus the course of history.

Further Insights

It goes almost without saying that society is structured around the efficient allocation of resources to meet human needs. To one degree or another, then, social structure and economics are inextricably bound together. Marx had a very deterministic view of the primacy of economics as the organizing force of society. He was absolutely convinced that the combination of how commodities were innately valued, how the workforce was organized, and how investment capital was raised preordained everything else. Ironically, the basic economic theory he so fervently believed in has since been largely discredited and forgotten. However, other elements of his work have survived the test of time, despite his whole world view being premised on said theory, as can be seen in the following specific instances.

Use, Exchange & Surplus Value

Unless individuals are totally self-sufficient, to meet their needs they must be prepared to meet others' in like measure. This exchange, however, can only proceed once they agree upon the intrinsic worth of the goods or service they offer and require. All economic activity ultimately hinges on this question of valuation. In modern-day free markets, people are said to buy things that are useful or pleasing. These countless individual decisions coalesce into an aggregate demand which profit-seeking suppliers then attempt to satisfy. Theoretically, the price of said goods is the exchange value set when supply exactly equals demand.

Not so in Marx's day: prevailing wisdom then held that only the amount of work that went into a good or service determined its value. No less a luminary than Adam Smith deemed that, alone, an item's perceived usefulness to the buyer is an insufficient criterion for determining its value. A costly diamond, he argued, was hardly ever used, whereas cheap water was constantly used. Mining for a diamond, however, was incredibly labor intensive whereas drawing water was often just a chore. By Marx's time, the labor theory of value had few if any detractors.

Also, by Marx's time, the industrial revolution was well and truly underway. Writing in 1776, Smith had only an inkling of how technology and its necessitated division of labor would transform the workplace. Seventy-five years later, Marx observed first hand the full effect of both, taking particular note of how many factory laborers now performed a limited set of repetitive tasks. There was an economic rationale for these phenomena: the compartmentalization and rationalization of production processes fostered greater efficiency on the factory floor. Compartmentalization and rationalization in turn allowed the same number of workers to manufacture more goods faster, lowering the labor value of each. A lower exchange value, of course, meant more people could now afford the commodity and owners could earn higher profits.

But this state of affairs meant that the owners could literally do nothing, yet still reap sizable financial rewards. Marx questioned whether this contradicted the labor theory of value. Pondering this apparent contradiction led Marx to an even more important insight. Namely, even when the effort others expended elsewhere to make the machinery that sped up production lines was factored in as an additional cost, owners still earned more in sales (exchange value) than they paid workers in wages. Output increased during the standard 10 to 12 hour shift, but the amount of labor-time, the basis of compensation, effectively remained unchanged (King, 2007).

The difference, or surplus value as Marx called it, was a ready means of raising additional capital at little or no cost. Moreover, unskilled factory hands had no real job security, bargaining power, or control over the conditions or the tempo of their work. The prevailing wage, or the monetary equivalent of “labor-time,” was set by the owners whose ideas of adequate compensation extended little beyond providing, to use Marx's term, a subsistence wage. This wage typically came to just enough for a worker to support his family and so ensure an adequate supply of future labor. Anyone agitating for higher wages would lose his or her job, and very few workers could forfeit the use value of even a paltry pay packet. But the outrage workers felt at being so thoroughly exploited eventually would cost owners everything, Marx's believed, for it was grist in the mill of the class struggle that would hasten capitalism's demise.

Rates of Profit & Exploitation

Hasten, that is, but not outright cause. Capitalism's own internal contradictions would see to that. And, ironically, the agent of its destruction would be the very profits it constantly sought. Early nineteenth century economic doctrine held that profits invariably fall as the need for capital grows. Marx identified the constant need for two kinds of capital—fixed and circulating. The labor value of the machinery and other "things" necessary to production make up the former, workers' wages the latter.

Owners can borrow money or sell stock in a company they own to raise money. Debt, though, has to be paid off with interest on a regular schedule out of future profits. Stock certificates, alternatively, ceded partial ownership in a firm and thus rights to future profits. For these reasons, surplus value is the least onerous, most accessible form of capital available to owners. In Marx's way of thinking, then, for every rate of "profit," there is a commensurate rate of exploitation. Unfortunately, though, to remain competitive, firms invariably have to replace workers with machines because the latter produce saleable goods more quickly and thus with greater surplus value.

But as the proportion of fixed to circulating capital rises, the amount of socially necessary labor that goes into production falls and, with it, a commodity's intrinsic worth. For, machines per se do not create value; men using machines do. So, paradoxically, if the labor theory of value holds true, owners invest more and more for a less and less tangible profit. Even worse, perhaps, the fewer the actual man-hours worked, the smaller the pool of untapped surplus value left for owners to appropriate.

More daunting still, nineteenth century economists believed that the economy as a whole was subject to the so-called law of the equalization of the rate of profit. Subscribed to by Smith, Ricardo, and Marx, the law states that the aggregate growth in earnings from loans, property rentals, equipment-leasing, and natural profits, or the "wages of entrepreneurship," at best remains fairly static year in and year out. This is because the overall economy was and still is seen as a collection of separate markets in different stages of growth or decline. The lure of higher profits brings new entrants into one market, putting downward pressure on its prices until profits fall. Meanwhile, prices in other markets with lower rates of profit rise, because there are now fewer producers to meet demand (Murno, n.d.).

What’s more, during the late eighteenth and early nineteenth centuries, profit rates actually fell with such regularity that Smith, Ricardo, and other leading classical theorists expected no better for the future. Marx was even more dour in his appraisal: declining profit rates would hurt workers sooner and more grievously than the owners of capital. Crushing poverty and its accompanying miseries would become so endemic that they would sweep away a dying capitalist system in a paroxysm of social and political upheaval.

Viewpoints

Evaluating Marx

It would be unfair to blame Marx for what were basically the inadequacies of the economic theory of his day. Two of his central tenets—the labor theory of value and the law of the equalization of profits—were widely held to be true. And it must be said that even when mainstream economists began to doubt their validity, Marx's intellectual disciples continued to uphold them. Paradoxically, for all the importance he placed on economic theory and the rigor of his analysis of nineteenth century capitalism, Marx never described in detail how the economy would function under communism, capitalism's replacement. He seemed content to limit himself to broad generalities, almost as if communism didn't really require an economy in the traditional sense.

Of course, as history would prove, it did, and a very authoritarian version at that. The command economies of the twentieth century communist regimes relied on central planning, not markets, to allocate scare resources; believed in collective not private ownership; and sought to build a classless society. Their rejection in recent years by the very people whose lot they were meant to better shows just how wide the gulf was between communist rhetoric and communist realities.

We remember Marx today not for his outdated economic theory, but for his brilliant insights into topics that would become focal points in the emerging field of sociology: alienation, class, materialism, and economic determinism. Perhaps his greatest contributions in this respect were his careful, near encyclopedic observations of these phenomena in Das Capital. His analysis may have relied at times on circular reasoning and a myopic view of history, but his depiction of the social realities of the industrial revolution and of the dislocation, loss of identity, and rigid class distinctions of his epoch resonate still.

Reading even the most obscure passages of his work one cannot help but be impressed by the passion Marx brought to his subject matter. As an intellectual, he cannot be easily pigeonholed. He was clearly an ideologue, convinced as he was at the onset of the rightness of his subsequent analysis, yet he also sought to unearth the general principles buried in the daily minutiae of reality, much like an empiricist would. Ultimately, though, Marx was also a Hegelian who saw the dark side of capitalistic competition. Class struggle was inevitable, he thought, because the class system itself favored the economic interests of the few over the many.

Terms & Concepts

Class Struggle: The ongoing conflict between the workers, or proletariat, and the owners of the means of production, or bourgeoisie, rooted in opposing economic interests. Driven by purely economic forces, Marx believed these irreconcilable differences would eventually lead to the violent overthrow of the ruling class in favor of a truly egalitarian state.

Commodity-Fetishism: A complex concept originating with Marx which describes how cash economies obscure the social relationships underlying the processes of production. Essentially, consumers acquire commodities to hold them as private property because of their exchange value rather than for their use value per se. Commodities' labor value is largely irrelevant. Over time, as a result, consumers become fixated on acquiring objects for their own sake.

Circulating Capital: Workers' wages.

Dialectic: A process through which ostensibly opposite ideas, the thesis and antithesis, are pitted against one another and resolved within the synthesis, which unifies them.

Division of Labor: Specialization of the work force to optimize the production process.

Exchange Value: The amount of labor time it takes to make a commodity one wishes to acquire. For convenience sake, it is expressed in monetary terms.

Factors of Production: In classical economics, land, labor, and physical capital are all considered necessary prerequisites for the manufacture of goods or the provision of services. Contemporary economics considers entrepreneurship and human capital to also be full-fledged factors.

Fixed Capital: The amount of labor-time it takes to make the machines and other materials needed in production.

Labor Theory of Value: Contends that the economic worth of a commodity is solely determined by the amount of physical and mental effort required to manufacture it. Included here is the effort expended to make any machinery used in a commodity's production.

Labor Time: The average amount of socially necessary labor needed to produce a commodity.

Rate of Exploitation: The proportion of daily output a worker is not directly compensated for because he is compensated only for his time, not his productivity.

Reification: A process whereby a human quality or relationship is objectified and devalued as just another thing or commodity.

Relations of Production: The social and political relations that arise from the division of labor on the one hand and, more generally, from the ownership of the means of production on the other. The latter includes the social and political system that buttresses capitalist economies.

Surplus Value: Essentially, the value added to goods when a laborer works his or her usual number of hours but, because of machinery and the division of labor, produces more. Owners selling goods produced in such a manner earn higher profits and keep this additional sales revenue for themselves.

Use Value: The judgment made by the consumer that a particular purchase will be personally helpful or otherwise beneficial.

Bibliography

Brennan, T. (1998). Why the time is out of joint: Marx's political economy without the subject. South Atlantic Quarterly, 97 , 263. Retrieved March 12, 2008 from EBSCO Online Database Academic Search Complete. http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=1055061&site=ehost-live

Booth, W. (1989). Explaining capitalism: The method of Marx's political economy. Political Studies, 37 , 612-625. Retrieved March 12, 2008 from EBSCO Online Database SocINDEX with FullText. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=21381242&site=ehost-live

Bottormore, T. & Outhwaite, W., eds. (1993). Marx's interpretation of the bourgeois-capitalist world in terms of human `self-alienation'. In Max Weber & Karl Marx (pp. 89-118). Abingdon: Taylor & Francis Ltd. Retrieved March 12, 2008 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=17369299&site=ehost-live

Freidheim, E. (1976). Karl Marx. In Sociological Theory and Research Practice (pp. 41-53). Rochester, VT: Schenkman Books, Inc. Retrieved March 12, 2008 from SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=6826829&site=ehost-live

Fuchs, C. (2013). Political Economy and Surveillance Theory. Critical Sociology (Sage Publications, Ltd.), 39, 671-687. Retrieved October 27, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=90016520

Fuchs, C., & Dyer-Witheford, N. (2013). Karl Marx @ Internet Studies. New Media & Society, 15, 782-796. Retrieved October 27, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=89549532

Fulcher, J. (2003). Theories and theorizing: Pioneers of social theory. In Sociology (pp. 22-32). Oxford: Oxford University Press.

Harvey, D. (2012). History versus Theory: A Commentary on Marx's Method in Capital. Historical Materialism, 20, 3-38. Retrieved October 27, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=78720838

King. W. (2007). Marxist economics. In Essential Principles of Economics: A Hypermedia Text. Retrieved March 15, 2007, from http://william-king.www.drexel.edu/top/Prin/txt/marx/ApxToC.html

Munro, J. (n.d.) Some basic principles of Marxian economics. Retrieved March 15, 2007, from http://eh.net/coursesyllabi/syllabi/munro/MARXECON.htm

Suggested Reading

Aron, R. (1950). Social structure and the ruling class. British Journal of Sociology, 1 , 1-16. Retrieved March 12, 2008 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=17393080&site=ehost-live

Fourcade, M., Steiner, P., Streeck, W., & Woll, C. (2013). Moral categories in the financial crisis. Socio-Economic Review, 11, 601-627. Retrieved October 27, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=88429762

Halewood, M. (2012). On natural-social commodities. The form and value of things. British Journal Of Sociology, 63, 430-450. Retrieved October 27, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=79680750

Hayes, P. (1993). Marx's analysis of the French class structure. Theory & Society, 22 , 99-123. Retrieved March 12, 2008 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=10755700&site=ehost-live

Kincaid, J. (2005). A critique of value-form Marxism. Historical Materialism, 13 , 85-119. Retrieved March 12, 2008 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=17266481&site=ehost-live

Pressman, S. (1999). Karl Marx (1818-83). In Fifty Major Economists (pp. 48-52). Abingdon: Taylor & Francis Ltd. Retrieved March 15, 2008 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=17020650&site=ehost-live

Wacquant, L. (1985). Heuristic models in Marxian theory. Social Forces, 64 , 17-45. Retrieved March 12, 2008 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=5287489&site=ehost-live

Worsley, P. (2002). Marxism, sociology and utopia. In Marx and Marxism (pp. 101-110). Abingdon: Routledge. Retrieved March 12, 2008 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=17445520&site=ehost-live