Marxist economics

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Marxist economics

MARXISM IS COMPLICATED by the fact that Marx is by no means the only influence on this critical school; indeed, given the various sorts of political movements that have been inspired by this thinker (socialism, Trotskyism, communism, Leninism, Stalinism, Maoism, radical democracy, etc.), one despairs at trying to provide a fair and lucid introduction. Add to that the fact that Marx himself changed his mind on various issues or sometims expressed opinions that appear mutually exclusive, and one is faced with a rather high hurdle. Nonetheless, there are a number of Marxist thoughts and thinkers that have been especially influential on recent scholarly developments (particularly in literary, cultural, and political studies). In short, the goal of this section of the Guide to Theory, as with any of the sections, is not to give an exhaustive account of this critical school but, rather, to give a sense for the major concepts influencing this approach while attempting to stay conscious of the various ways that individual terms have been contested over the last number of decades. The major distinction in Marxist thought that influences literary and cultural theory is that between traditional Marxists (sometimes, unfairly, called vulgar Marxists) and what are sometimes referred to as post-Marxists or neo-Marxists. The major distinction between these two versions of Marxist thought lies in the concept of ideology: traditional Marxists tend to believe that it is possible to get past ideology in an effort to reach some essential truth (eg. the stages of economic development). Post-Marxists, especially after Louis Althusser, tend to think of ideology in a way more akin to Jacques Lacan, as something that is so much a part of our culture and mental make-up that it actively determines what we commonly refer to as "reality." According to these post-Marxist critics, there may well be some hard kernel behind our obfuscating perceptions of reality but that kernel is by definition resistant to articulation. As soon as one attempts to articulate it, one is at risk of falling back into ideology. This understanding of ideology is what Fredric Jameson famously terms the "prison-house of language." The links on the left will lead you to specific ideas discussed by Marx and those "post-Marxists" who have proven to be most influential on literary and cultural studies; however, you might like to begin with a quick overview:


KARL MARX is, along with Freud, one of a handful of thinkers from the last two centuries who has had a truly transformative effect on society, on culture, and on our very understanding of ourselves. Although there were a few critics claiming an end to Marxist thought (and even an end to ideology) after the fall of the communist system in the former Soviet Union, Marxist thought has continued to have an important influence on critical thought, all the more so recently after the rise of globalization studies. As protests at recent G7 and IMF meetings make clear, the school can also still have important political effects.

LOUIS ALTHUSSER represents an important break in Marxist thought, particularly when it comes to the notion of ideology. His Lacan-inspired version of Marxism significantly changed the way many Marxists approached both capitalism and hegemony after the second world war.

FREDRIC JAMESON is surely the most influential contemporary Marxist thinker in the United States. His own alterations of and dialogue with Althusserian and Lacanian thought have established him as an important influence on the rise of globalization studies, an important critical school of the last few years. In particular, he has attempted to make sense of the continuing staying power of capitalism and the ways that capitalism has transformed since Marx wrote his critiques in the nineteenth century, addressing such issues as multi-national (or "late") capitalism, the power of the media, and the influence of postmodernity on Marxist debate. The lattermost issue is explored in the Jameson modules under Postmodernism.

Marxian economics refers to a body of economic thought stemming from the work of Karl Marx.

Marx and classical economics

Marx built on, and critiqued, the best-known economists of his day, the British classical economists. These were the same "bourgeois economists" that modern pro-capitalist economists credit as the founding fathers of their discipline, such as Adam Smith and David Ricardo. In particular, Marx based much of his work on the labor theory of value, then a bedrock of economic thought, whereas modern pro-capitalist economists theorize that value is generated from other sources than labor.

The labor theory of value holds that the value of an exchangeable good or service lies in the amount of labor required to produce it; the source of profits under capitalism, then, is value added by workers not paid out in wages. He developed this theory of exploitation of the proletariat with an exposition of the labor theory of value in the first volume of Capital, while remaining aware that the labor theory of value was not a valid theory of relative prices. He critiqued Smith and Ricardo, on the other hand, for not realizing their economic concepts reflected capitalist institutions, not innate natural properties of mankind. Thus, such theories did not necessarily apply to societies with different modes of production. Marx's theories of business cycles; of economic growth and development (especially in two sector models) and of the declining rate of profit, are other important elements of Marxian economics.

Marx's economic theories

Marx's master work on political economy was Capital: A Critique of Political Economy  (better known by the German title Das Kapital), a three-volume work, of which only the first volume was published in his lifetime (the others were produced by Engels from Marx's notes). Marx wrote other treatises on economics: Critique of Political Economy, one of his early works, was mostly incorporated intoCapital, especially the beginning of Volume I. Marx's notes made in preparing to write Capital were published years later under the title Grundisse.

Marx begins his analysis of capitalism with an analysis of the commodity, which he says is an object that is unique to capitalism. The first sentence of Capital, Volume I states: "The wealth of those societies in which the capitalist mode of production prevails, presents itself as 'an immense accumulation of commodities,' its unit being a single commodity."

Under the labor theory of value, the direct value of a commodity stems solely from the socially necessary labor time invested in it. But commodities also have a use value (that is, the direct utility gained from an item) and an exchange value (roughly equivalent to its market price, though Marxian economics would measure it in labor time). For example, the use value of a carrot lies in eating it and no longer being hungry, while its exchange value might be found in the quantity of gold (whose true value also lies in the labor which extracted it) which it could be sold for.

However, capitalists do not pay workers the full value of the commodities they produce. The gap between the value a worker produces and his or her wages are a form of unpaid labor, known assurplus value. To Marx, this is wage slavery, a central feature of capitalism as a mode of production.

To understand surplus value, consider a widget that sells for $1,000 that takes a single worker, paid $10 per hour, ten hours to produce. The worker is being paid only $100 to produce the widget, so the remaining $900 is surplus value which is being appropriated by his or her employer. He is thus said to be working for himself for only one of every ten hours.

Moreover, Marx notes that markets tend to obscure the social relationships and processes of production, a phenomenon he termed commodity fetishism. Consumers see a commodity only in market terms. In looking to obtain something as private property, they consider only its exchange value, rather than its true value -- the labor used to produce it.

Liberal Challenge

The Austrian School was the first group of liberal economists to systematically challenge Marxian economics. This was partly a reaction to the Methodenstreit, an attack on the Hegelian doctrines of the Historical School. Though many Marxist authors have attempted to portray the Austrian school as a bourgeois reaction to Marx, such an interpretation is untenable: Carl Menger wrote hisPrinciples of Economics at almost the same time as Marx was completing Das Kapital. The Austrian economists were, however, the first to clash directly with Marxism, since both dealt with such subjects as money, capital, business cycles, and economic processes. Eugen von Boehm-Bawerk wrote extensive critiques of Marx in the 1880s and 1890s, and several prominent Marxists--including Rudolf Hilferding--attended Boehm-Bawerk's seminar in 1905-06.

In contrast, the classical economists had shown little interest in such topics, and many of them did not even gain familiarity with Marx's ideas until well into the twentieth century.

Current theorizing in Marxian economics

Marxian economics has been built upon by many others, beginning almost at the moment of Marx's death. The final three volumes of Das Kapital were written by his close associate Friedrich Engels, based on Marx's notes. More recent economists who have made significant contributions in the Marxist vein include Paul Sweezy, Harry Magdoff, Joan Robinson, Richard Wolff, and Stephen Resnick

Though Marxian economists today are far outnumbered by their neo-classical counterparts, many continue to teach and to publish, particularly in Europe. To some, Marxian economics may be viewed not as an all-encompassing approach, but as one important element in an analytical toolset--perhaps part of a broader category of heterodox economics or radical political economy.

10 These on MARXISM today:

  1. It no longer makes sense to ask to what extent the teaching of Marx and Engels is, today, theoretically acceptable and practically applicable.

2. Today, all attempts to re-establish the Marxist doctrine as a whole in its original function as a theory of the working classes social revolution are reactionary utopias.
3. Though basically ambiguous, there are, however, important aspects of Marxian teaching which in their changing function and applying to different locations have until today retained their effectiveness. Also, the impetus generated by the praxis of the old Marxist labor movement has been presently incorporated into the practical struggles of peoples -and classes.
4. The first step in re-establishing a revolutionary theory and practice consists in breaking with that Marxism which claims to monopolize revolutionary initiative as well as theoretical and practical direction.
5. Marx is today only one among the numerous precursors, founders and developers of the socialist movement of the working class. No less important are the so-called Utopian Socialists from Thomas More to the present. No less important are the great rivals of Marx, such as Blanqui, and his sworn enemies, such as Proudhon and Bakunin. No less important, in the final result, are the more recent developments such as German revisionism, French syndicalism, and Russian Bolshevism.
6. The following points are particularly critical for Marxism: (a) its dependence on the underdeveloped economic and political conditions in Germany and all the other countries of central and eastern Europe where it was to have political relevance; (b) its unconditional adherence to the political forms of the bourgeois revolution; (c) the unconditional acceptance of the advanced economic conditions of England as a model for the future development of all countries and as objective preconditions for the transition to socialism; to which one should add; (d) the consequences of its repeated desperate and contradictory attempts to break out of these conditions.
7. The results of these conditions are: (a) the overestimation of the state as the decisive instrument of social revolution; (b) the mystical identification of the development of the capitalist economy with the social revolution of the working class; (c) the subsequent ambiguous development of this first form of the Marxian theory of revolution by the artificial grafting onto it of a theory of the communist revolution in two phases; this theory, directed on the one hand against Blanqui, and on the other against Bakunin, whisks away from the present movement the real emancipation of the working class and puts it back into the indefinite future.
8. This is the point for insertion of the Leninist or Bolshevik development; and it is in this new form that Marxism has been transferred to Russia and Asia. Thereby Marxism has been changed; from a revolutionary theory it has become an ideology. This ideology could be and has been used for a variety of different goals.
9. It is from this viewpoint that one comes to judge in a critical spirit the two Russian revolutions of 1917 and 1928, and it is from this viewpoint that one must determine the functions fulfilled by Marxism today in Asia and on a world scale.
10. The control of the workers over the production of their own lives will not come from their occupying the positions, on the international and world markets, abandoned by the self-destroying and so-called free competition of the monopolistic owners of the means of production. This control can only result from a planned intervention by all the classes today excluded from it into a production which today is already tending in every way to be regulated in a monopolistic and planned fashion.


Today, under the impact of the capitalist crisis, many workers have developed a thirst for economics. They are attempting to understand the forces which dominate their lives. This brief introduction to Marxist economics attempts to provide the class conscious worker not with a complete account of economics, but a guide to the basic laws of motion of capitalist society dominating his existence.

The shallowness of capitalist economics is demonstrated by their inability to understand the crisis affecting their system. Its role is to cover up the exploitation of the working class and to “prove” the superiority of capitalist society. Their quack “theories” and “solutions” are incapable of patching up the rotten and diseased nature of capitalism. Only the transformation of society on socialist lines and the introduction of a planned economy can end the nightmare of unemployment, slump and chaos.

The right wing labour leaders have rejected their old god Keynes, to be replaced by “orthodox” economic solutions: cuts, wage restraint and deflation. The left reformists still cling to the capitalist policies of yesterday (reflation, import controls, etc.), which have been recognised as totally ineffective under capitalism.

Only with a Marxist understanding of capitalist society can the conscious worker cut through the lies and distortion of the capitalist economists and combat their influence within the Labour Movement.

Conditions for capitalism

Today, modern production is concentrated in the hands of giant companies. Unilever, ICI, Fords, British Petroleum, are some examples of the firms which dominate our lives. Although it is true that small businesses do exist, they really represent the production of the past and not the present. Modern production is essentially a mass, large-scale business.

At present, 200 top companies together with 35 banks and finance houses control the British economy, and account for 85 per cent of output. This development has come about over the past few hundred years through ruthless competition, crisis and war. At the time when the classical economists predicted free trade in the future, Marx explained the development of monopoly from competition as the weaker firms went to the wall. Monopoly capitalism grew out of and abolished free competition.

At first sight, it looks as if goods and things are produced mainly for people's needs. Obviously every society has to do this. But under capitalism, goods are not merely produced to satisfy someone's want or need, but primarily for sale. That is the paramount function of capitalist industry.

In the famous words of the ex-chairman of British Leyland, Lord Stokes, “I'm in business to make money, not cars!” This is a perfect expression of the aspirations of the entire capitalist class.

The capitalist process of production requires the existence of certain conditions. Firstly, the existence of a large class of propertyless workers who are obliged to sell themselves piece-meal in order to live. Thus the Tory conception of a “property owning democracy” is an absurdity under capitalism, because if the mass of the population owned sufficient property to be self-sufficient, the capitalists would not find the workers to produce their profits. Secondly, the means of production must be concentrated in the hands of the capitalists. Over the centuries, the peasants and those who owned their own means of subsistence were ruthlessly crushed and their means of life appropriated by the capitalists and landlords. They in turn hire the workers to work these means of production and produce surplus value.

Value and commodities

How does capitalism work? How are workers exploited? Where does profit come from? How are slumps caused? In order to answer these questions, we first need to learn the key to the mystery: what is value? Having solved this problem, the other answers fall into place. An understanding of value is essential, for an understanding of the economics of capitalist society.

To begin with, all the capitalist firms produce goods or services, or more correctly they produce commodities. That is a good or service produced for sale only. Of course, someone may make something for his or her own personal use. Before capitalism existed, many people had to. But this is not a commodity. Capitalist production is above all the creation and “immense accumulation of commodities”. That is why Marx himself started his investigation of capitalism with an analysis of the character of the commodity itself.

Every commodity has a use-value for people. That means they are useful to someone otherwise they could not be sold. This use-value is limited to the physical properties of the commodity. They also contain a value. What is it and how can it be shown? If we leave the use of money out for the time being, commodities, when they are exchanged, fall into certain proportions.

For example: 1 pair of shoes ) 1 watch ) = 10 yards of cloth 3 bottles of whisky ) 1 car tyre )

Each of the items on the left can be exchanged for 10 yards of cloth. They also, in the same amounts, can be exchanged with one another. This simple example shows that the exchange value of these different commodities expresses something contained in them. But what makes a pair of shoes = 10 yards of cloth? Or 1 watch = 3 bottles of whisky? And so on…

Well, obviously, there must be something common to all. Clearly it is neither weight, colour, nor hardness. Again, it is not because they are useful. Bread after all is worth less than a Roll Royce, yet one is a necessity and the other luxury. So what is the common quality? The only thing in common is they are all products of human labour.The amount of human labour contained in a commodity is expressed in time: weeks, days, hours, minutes.To go back to the example: all these commodities can be expressed in terms of their common factor, labour-time.

5 hours (labour) worth of shoes 5 hours (labour) worth of tyres 5 hours (labour) worth of watches 5 hours (labour) worth of whisky 5 hours (labour) worth of cloth

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