Karl Marx: Right ideas, wrong ideas? | Business| Economy and finance news from a German perspective | DW | 03.05.2018
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Karl Marx: Right ideas, wrong ideas?

The economic theories of Karl Marx, born 200 years ago, became unchallengeable doctrine in many countries for much of the 20th century. We take a look at which of his ideas were right — and which were wrong.

When Karl Marx was working out his economic theories during his years in 19th-century Germany, France and Britain, Europe's leading nations were the center of global political and economic power. Their far-flung empires dominated trade and industry; their militaries dominated subject peoples.

Yet that didn't mean Europeans led easy lives. At home, life was very hard for most people, especially for workers in the new factories of the Industrial Revolution. Technology was advancing rapidly, but government social protections were almost non-existent. Workers were often brutally exploited.

Marx lived through an era of radical upheavals

Marx was born to an upper-middle-class German Jewish family on May 5, 1818; he died in London in March 1883, a couple of months shy of his 65th birthday. When he was 30, in the fateful year of 1848, a wave of democratic revolts broke out in much of Europe.

Millions of Europeans were fed up with the continued rule of unelected kings and hereditary aristocrats. They wanted democracy, and they had the examples of the American (1775-1783) and French (1789-1799) revolutions to inspire them. Those revolutions had succeeded, two generations earlier, in toppling monarchical rule.

But the revolution of 1848 failed. It was suppressed by armed force, and monarchical rule continued in Germany and elsewhere until 1918, at the end of the First World War. Yet it was in 1848 that Marx, then a young revolutionary intellectual, co-published a pamphlet with his collaborator Friedrich Engels that was to become world-famous: the Communist Manifesto.

Marx spent the rest of his life working out the political-economic ideas he first gave clear expression to in 1848. His main body of work was published in three thick volumes, under the title "Das Kapital" (Capital), written between 1867 and 1883. 

An economic theory became a sectarian faith

 Marx was a brilliant — albeit flawed — economic thinker. He was also a strong-willed, opinionated egoist who was always sure he was right. At leftist meetings, he had a tendency to bully and humiliate anyone who tried to disagree with his theses. His wealthy friend Engels was an effective promoter and organizer who believed in Marx and his ideas with messianic fervor, and supported him financially.

As fate would have it, this combination of brilliance, controversy and self-promotion meant that Marx's reputation rose far above that of rival leftist political economists. Over the course of the late 19th and early 20th centuries, his ideas came to be accepted as unchallengeable dogmas on the revolutionary political left.

As a result, when the credibility of Europe's royal houses collapsed in the wake of the disastrous First World War that they had misled the Continent into, it was Marx's ideas and doctrines that leftist revolutionaries tried to implement.

Marx's writings became the Bible of the revolutionaries who took power in Russia in 1917, and later in other countries. Even today, after Marxism-inspired state communism has been thoroughly discredited by the dark experiences of history, innumerable leftist groups define themselves as "Marxists" and cling to the bearded economist's ideas with quasi-religious intensity. Many insist that Marx's theories were largely correct — and the disasters of real-world Communism only occurred because his ideas were not implemented correctly.

But what were those ideas?

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The doctrines

Marx's core idea was that the whole of human history could be explained as a materialist struggle between classes, playing out a zero-sum game over control of the means of production and the distribution of what is produced.

He based this idea on his and Engels' observation of the exploitation of the 19th century "proletariat," or factory workers, by factory owners (industrialists), whom Marx termed "capitalists," or owners of capital.

By "capital," Marx meant the physical means of production, rather than money (financial capital), though he recognized that it was necessary to first own financial capital in order to buy physical capital.

Marx gave a fair bit of attention in "Das Kapital" to the question of how businessmen initially obtain enough money to buy factories. He termed this "the problem of primitive accumulation," and showed that it was nearly impossible to acquire an initial fortune by saving up excess money from selling one's labor.

He argued that the original sources of fortunes large enough to launch a person, or a family, into the capitalist class were almost always some form of theft, such as the seizure and privatization of public lands, acquisition of booty through war, colonialism, enslavement of workers, or financial fraud.

On that score, history shows innumerable examples confirming Marx's hypothesis. The acquisition of great fortunes by Russian and Eastern European oligarchs who seized public property in the wake of the collapse of state communism is a recent case in point.

Surplus value

In Volume One of "Das Kapital," Marx said that capitalists made "profits" unfairly, by seizing the "surplus value of labor," which he defined as the difference between the factory owner's costs and the money he was able to obtain by selling goods produced in the factory.

Since the workers produced the goods, Marx argued, it was they, not the capitalist, who had a moral claim on earning all the sales revenues. The capitalist was, in this view, essentially a parasite. This led directly to Marx's fundamental political-economic prescription: The "proletariat" should seize the means of production.

Marx thought this would inevitably occur, in part because the proletariat was much more numerous than the capitalist class, and so would eventually win the "class struggle" — all it needed was sufficient "class consciousness" to recognize the nature of its predicament.

He also argued that in any given domain of industry, competition between capitalists would lead to overproduction, intense downward pressure on prices, and a consequent collapse in net profits.

This presumed tendency for the rate of profit to fall would inevitably lead to crises, because without profits, capitalists would be unable to continue financial accumulation. Capitalism, Marx and Engels thought, was systemically unstable. It would eventually collapse because of its "inherent contradictions," and give way to socialism, in which the means of production would be owned by the producers (the workers).

The end stage of socialism would, in Marx's model, be communism — a system in which private property disappeared altogether, and everything was owned in common. People would freely contribute according to their abilities, and take according to their needs. Marx never explored in detail how that was meant to work — and as it turns out, it didn't.

In Part Two, we'll explore why Marx turned out to be wrong in his core economic idea — the idea that the surplus value of labor is the basis of all profits .

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