Who was Karl Marx
Karl Marx (1818-1883) was a philosopher, author, social theorist and economist famous for his theories about capitalism and communism. Marx, in conjunction with Friedrich Engels, published The Communist Manifesto in 1848; later in life, he wrote Das Kapital (the first volume was published in Berlin in 1867; the second and third volumes were published posthumously in 1885 and 1894, respectively), which discussed the labor theory of value. Ironically, Marx was eloquent in describing the exploitation of the working class while personally failing to maintain a job for a significant period of time.
Marx was inspired by classical political economists such as Adam Smith and David Ricardo, while his own branch of economics, Marxian economics, is not favored among modern mainstream thought. Nevertheless, Marx's ideas have had a huge impact on societies, most prominently in communist projects such as those in the USSR, China, and Cuba. Among modern thinkers, Marx is still very influential among the fields of sociology, political economy and strands of heterodox economics.
While many equate Karl Marx with socialism, his work on understanding capitalism as a social and economic system remains a valid critique in the modern era. In Das Kapital (or Capital in Eglish), Marx argues that society is composed of two main classes: Capitalists are the business owners who organize the process of production and who own the means of production such as factories, tools and raw material, and who are also entitled to any and all profits. The other, much larger class is composed of labor (which Marx termed the "proletariat"). Laborers do not own or have any claim to the means of production, the finished products they work on, or any of the profits generated from sales of those products. Rather, labor works only in return for a money wage. Marx argued that because of this uneven arrangement, capitalists exploit workers.
Another important theory developed by Marx is known as historical materialism. This theory posits that a society at any given point in time is ordered by the type of technology used in the process of production. Under industrial capitalism, society is ordered with capitalists organizing labor in factories or offices where they work for wages. Prior to capitalism, Marx suggested that feudalism existed as a specific set of social relations between lord and peasant classes related to the hand-powered or animal-powered means of production prevalent at the time.
BREAKING DOWN Karl Marx
Marx's work laid the foundations for future communist leaders such as Vladimir Lenin and Josef Stalin. Operating from the premise that capitalism contained the seeds of its own destruction, his ideas formed the basis of Marxism and served as a theoretical base for communism. Nearly everything Marx wrote was viewed through the lens of the common laborer. From Marx comes the idea that capitalist profits are possible because value is "stolen" from the workers and transferred to the employers. He was, without question, one of the most important and revolutionary thinkers of his time.
Born in Trier, Prussia (now Germany), in 1818, Marx was the son of a successful Jewish lawyer who converted to Lutheranism before Marx’s birth. Marx studied law in Bonn and Berlin, and at Berlin, was introduced to the philosophy of G.W.F. Hegel. He became involved in radicalism at a young age through the Young Hegelians, a group of students who criticized the political and religious establishments of the day. Marx received his doctorate from the University of Jena in 1841. His radical beliefs prevented him from securing a teaching position, so instead he took a job as a journalist and later became the editor of Rheinische Zeitung, a liberal newspaper in Cologne.
After living in Prussia, Marx lived in France for some time, and that is where he met his lifelong friend Friedrich Engels. He was expelled from France, and then lived for a brief period in Belgium before moving to London where he spent the rest of his life with his wife. Marx died of bronchitis and pleurisy in London on March 14, 1883. He was buried at Highgate Cemetery in London. His original grave was nondescript, but in 1956, the Communist Party of Great Britain unveiled a large tombstone, including a bust of Marx and the inscription "Workers of all Lands Unite," an Anglicized interpretation of the famous phrase in The Communist Manifesto: "Proletarians of all countries, unite!"
The Communist Manifesto summarizes Marx and Engels's theories about the nature of society and politics, and is an attempt to explain the goals of Marxism, and, later, socialism. When writing The Communist Manifesto, Marx and Engels explained how they thought capitalism was unsustainable and how the capitalist society that existed at the time of the writing would eventually be replaced by a socialist one.
Das Kapital (full title: Capital: A Critique of Political Economy) was a critique of capitalism. By far the more academic work, it lays forth Marx's theories on commodities, labor markets, the division of labor and a basic understanding of the rate of return to owners of capital. The exact origins of the term "capitalism" in English are unclear, it appears that Karl Marx was not the first to use the word "capitalism" in English, although he certainly contributed to the rise of its use. According to the Oxford English Dictionary, the English word was first used by author William Thackeray in 1854, in his novel The Newcomes, who intended it to mean a sense of concern about personal possessions and money in general. While it's unclear whether either Thackeray or Marx was aware of the other's work, both men meant the word to have a pejorative ring.
Marxist ideas in their pure form have very few direct adherents in contemporary times; indeed, very few Western thinkers embraced Marxism after 1898, when economist Eugen von Böhm-Bawerk's Karl Marx and the Close of His System was first translated into English. In his damning rebuke, Böhm-Bawerk showed that Marx failed to incorporate capital markets or subjective values in his analysis, nullifying most of his more pronounced conclusions. Still, there are some lessons that even modern economic thinkers can learn from Marx.
Though he was the capitalist system's harshest critic, Marx understood that it was far more productive than previous or alternative economic systems. In Das Kapital, he wrote of "capitalist production" that combined "together of various processes into a social whole," which included developing new technologies. He believed all countries should become capitalist and develop that productive capacity, and then workers would naturally revolt into communism. But, like Adam Smith and David Ricardo before him, Marx predicted that because of capitalism's relentless pursuit of profit by way of competition and technological progress to lower the costs of production, that the rate of profit in an economy would always be falling over time.
The Labor Theory of Value
Like the other classical economists, Karl Marx believed in the labor theory of value to explain relative differences in market prices. This theory stated that the value of a produced economic good can be measured objectively by the average number of labor-hours required to produce it. In other words, if a table takes twice as long to make as a chair, then the table should be considered twice as valuable.
Marx understood the labor theory better than his predecessors (even Adam Smith) and contemporaries, and presented a devastating intellectual challenge to laissez-faire economists in Das Kapital: If goods and services tend to be sold at their true objective labor values as measured in labor hours, how do any capitalists enjoy profits? It must mean, Marx concluded, that capitalists were underpaying or overworking, and thereby exploiting, laborers to drive down the cost of production.
While Marx's answer was eventually proved incorrect and later economists adopted the subjective theory of value, his simple assertion was enough to show the weakness of the labor theory's logic and assumptions; Marx unintentionally helped fuel a revolution in economic thinking.
Economic Change Leads to Social Transformation
Dr. James Bradford "Brad" DeLong, professor of economics at UC-Berkeley, wrote in 2011 that Marx's "primary contribution" to economic science actually came in a 10-paragraph stretch of The Communist Manifesto, in which he describes how economic growth causes shifts among social classes, often leading to a struggle for political power.
This underlies an often unappreciated aspect about economics: the emotions and political activity of the actors involved. A corollary of this argument was later made by French economist Thomas Piketty, who proposed that while nothing was wrong with income inequality in an economic sense, it could create blow back against capitalism among the people. Thus, there is a moral and anthropological consideration to any economic system. The idea that societal structure and transformations from one order to the next can be the result of technological change in how things are produced in an economy is known as historical materialism.