If a pair of shoes usually takes twice as long to produce as a pair of pants, for example, then shoes are twice as valuable as pants. In the long run, the competitive price of shoes will be twice the price of pants, regardless of the value of the physical inputs. Although the labor theory of value is demonstrably false, it prevailed among classical economists through the midnineteenth century.
Adam Smith , for instance, flirted with a labor theory of value in his classic defense of capitalism, The Wealth of Nations , and David Ricardo later systematized it in his Principles of Political Economy , a text studied by generations of free-market economists.
So the labor theory of value was not unique to Marxism. Marx did attempt, however, to turn the theory against the champions of capitalism, pushing the theory in a direction that most classical economists hesitated to follow. Marx argued that the theory could explain the value of all commodities, including the commodity that workers sell to capitalists for a wage.
Marx, using principles of classical economics, explained that the value of labor power must depend on the number of labor hours it takes society, on average, to feed, clothe, and shelter a worker so that he or she has the capacity to work. In other words, the long-run wage workers receive will depend on the number of labor hours it takes to produce a person who is fit for work.
Suppose five hours of labor are needed to feed, clothe, and protect a worker each day so that the worker is fit for work the following morning.
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If one labor hour equaled one dollar, the correct wage would be five dollars per day. Marx then asked an apparently devastating question: if all goods and services in a capitalist society tend to be sold at prices and wages that reflect their true value measured by labor hours , how can it be that capitalists enjoy profits —even if only in the short run?
How do capitalists manage to squeeze out a residual between total revenue and total costs? Capitalists, Marx answered, must enjoy a privileged and powerful position as owners of the means of production and are therefore able to ruthlessly exploit workers. Marx was correct when he claimed that classical economists failed to adequately explain capitalist profits. But Marx failed as well. By the late nineteenth century, the economics profession rejected the labor theory of value. Mainstream economists now believe that capitalists do not earn profits by exploiting workers see profits.
Instead, they believe, entrepreneurial capitalists earn profits by forgoing current consumption, by taking risks, and by organizing production. Marx wove economics and philosophy together to construct a grand theory of human history and social change. His concept of alienation, for example, first articulated in his Economic and Philosophic Manuscripts of , plays a key role in his criticism of capitalism.
Marx believed that people, by nature, are free, creative beings who have the potential to totally transform the world.
Socialism | Internet Encyclopedia of Philosophy
But he observed that the modern, technologically developed world is apparently beyond our full control. He maintained that the way the market economy is coordinated—through the spontaneous purchase and sale of private property dictated by the laws of supply and demand —blocks our ability to take control of our individual and collective destinies. Marx condemned capitalism as a system that alienates the masses. His reasoning was as follows: although workers produce things for the market, market forces, not workers, control things.
People are required to work for capitalists who have full control over the means of production and maintain power in the workplace. Work, he said, becomes degrading, monotonous, and suitable for machines rather than for free, creative people. In the end, people themselves become objects—robotlike mechanisms that have lost touch with human nature, that make decisions based on cold profit-and-loss considerations, with little concern for human worth and need.
Marx concluded that capitalism blocks our capacity to create our own humane society. It assumes that people can successfully abolish an advanced, market-based society and replace it with a democratic, comprehensively planned society. Marx claimed that we are alienated not only because many of us toil in tedious, perhaps even degrading, jobs, or because by competing in the marketplace we tend to place profitability above human need. The issue is not about toil versus happiness.
Dreams of National Capital: Market Socialism, Past and Present
We are alienated, he maintained, because we have not yet designed a society that is fully planned and controlled, a society without competition , profits and losses, money, private property, and so on—a society that, Marx predicted, must inevitably appear as the world advances through history. But for Marxists to speak of alienation under capitalism, they must assume that a successfully planned world is possible.
A staunch antiutopian, Marx claimed that his criticism of capitalism was based on the latest developments in science. Marx claimed that he had discovered the laws of history, laws that expose the contradictions of capitalism and the necessity of the class struggle.
Marx predicted that competition among capitalists would grow so fierce that, eventually, most capitalists would go bankrupt, leaving only a handful of monopolists controlling nearly all production. This, to Marx, was one of the contradictions of capitalism: competition, instead of creating better products at lower prices for consumers, in the long run creates monopoly , which exploits workers and consumers alike. What happens to the former capitalists? They fall into the ranks of the proletariat, creating a greater supply of labor, a fall in wages, and what Marx called a growing reserve army of the unemployed.
Also, thought Marx, the anarchic, unplanned nature of a complex market economy is prone to economic crises as supplies and demands become mismatched, causing huge swings in business activity and, ultimately, severe economic depressions.
The more advanced the capitalist economy becomes, Marx argued, the greater these contradictions and conflicts. The more capitalism creates wealth, the more it sows the seeds of its own destruction. Ultimately, the proletariat will realize that it has the collective power to overthrow the few remaining capitalists and, with them, the whole system.
The entire capitalist system—with its private property, money, market exchange, profit-and-loss accounting, labor markets, and so on—must be abolished, thought Marx, and replaced with a fully planned, self-managed economic system that brings a complete and utter end to exploitation and alienation.
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USD Sign in to Purchase Instantly. Overview Everyone knows that in socialism private companies are replaced by state enterprises which employ wage-workers in order to produce profits which accrue to the state. In the nineteenth century, socialists as different as Marx and Kropotkin were agreed that socialism means a marketless, moneyless, wageless, classless, stateless world society. Subsequently this vision of non-market socialism has been developed by currents such as the Anarcho-Communists, Impossibilists, Council Communists, Bordigists and Situationists.