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Marx was born in Germany (then Prussia) in 1818. He studied philosophy at universities in Bonn and Berlin, earning his doctorate in Jena at the age of twenty-three. His early radicalism preempted any career aspirations in academia and forced him to flee to Paris in 1843. It was then that Marx cemented his lifelong friendship with Friedrich Engels. In 1849 Marx moved to London, where he continued to study and write, drawing heavily upon works by David Ricardo and Adam Smith. Marx died in London in 1883 in somewhat impoverished surroundings, never having held a job in England and relying on Engels for financial support. Major Contributions
At the request of the Communist League, Marx and Engels coauthored their most famous work, "The Communist Manifesto," published in 1848. A call to arms for the proletariat —"Workers of the world, unite!"— the manifesto set down the principles on which communism was to evolve. Marx held that history was a series of class struggles between owners of capital (capitalists) and workers (the proletariat). As wealth became more concentrated in the hands of a few capitalists, the ranks of an increasingly dissatisfied proletariat would swell, leading to bloody revolution and eventually a classless society.
The labour theory of value is a major pillar of traditional Marxian economics. Its basic claim is simple: the value of a commodity can be objectively measured by the average amount of labour hours that are required to produce that commodity. 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. The labor theory of value is demonstrably false. But it did prevail among classical economists through the mid-nineteenth century. Adam Smith, for instance, flirted with a labor theory of value in his classic defense of capitalism, The Wealth of Nations (1776), while David Ricardo later systematized it in his Principles of Political Economy (1817), a text studied by generations of free-market economists. So the labour theory of value was not unique to Marxism. Marx did attempt, however, to turn the theory against the champions of capitalism. He pushed the theory in a direction that most classical economists hesitated to follow. Marx argued that the theory is supposed to explain the value of all commodities, including the commodity that workers sell to capitalists for a wage. Marx called this commodity "labour power." Labour power is the worker's capacity to produce goods and services. Marx, using principles of classical economics, explained that the value of labour power must depend upon the number of labour 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 that workers receive will depend upon the number of labour hours it takes to produce a person who is fit for work. Suppose that five hours of labour are needed to feed, clothe, and protect a worker each day so that the worker is fit for work the following morning. If one labour 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 labour hours), how can it be that capitalists enjoy profits? 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. Although the capitalist pays workers the correct wage, somehow—Marx was terribly vague here—the capitalist makes workers work more hours than are needed to create the worker's labour power. If the capitalist pays each worker five dollars per day, he can require workers to work, say, twelve hours per day—not uncommon during Marx's time. Hence, if one labour hour equals one dollar, workers produce twelve dollars' worth of products for the capitalist but are paid only five. The bottom line: capitalists extract "surplus value" from the workers and enjoy monetary profits. Although Marx tried to use the labour theory of value against capitalism by stretching it to its limits, he unintentionally demonstrated the weakness of the theory's logic and underlying assumptions. Marx was correct when he claimed that classical economists failed to adequately explain capitalist profits. But Marx failed as well. Therefore, the economics profession rejected the labor theory of value by the late nineteenth century. Mainstream economists now believe that capitalists do not earn profits by exploiting workers. Instead, they believe, capitalists earn profits by forgoing current consumption, by taking risks, and by organizing production. An Appraisal Marx was surely a profound thinker who won legions of supporters around the world. But his predictions have not withstood the test of time. Although capitalist markets have changed over the past 150 years, competition has not devolved into monopoly. Real wages have risen and profit rates have not declined. Nor has a reserve army of the unemployed developed. We do have bouts with the business cycle, but more and more economists believe that significant recessions and depressions may be more the unintended result of state intervention (through monetary policy carried out by central banks and government policies on taxation and spending) and less an inherent feature of markets as such. Socialist revolutions, to be sure, have occurred throughout the world, but never where Marx's theory predicted—in the most advanced capitalist countries. On the contrary, socialist revolts have occurred in poor, so-called Third World countries. Most troubling to present-day Marxism is the ongoing collapse of socialism. Revolutions in socialist countries today are against socialism and for free markets. In practice, socialism has failed to create the nonalienated, self-managed, and fully planned society. Real-world socialism in the twentieth century failed to emancipate the masses. In most cases it merely led to new forms of statism, domination, and abuse of power. Marx's theory of value, his philosophy of human nature, and his claims to have uncovered the laws of history fit together to offer a complex, yet grand vision of a new world order. If the first three-quarters of the twentieth century provided a testing ground for that vision, the end of the century demonstrates its truly utopian nature and ultimate unworkability.
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A Brief Biography