Karl Marx is perhaps the most famous theorist who ever stood up and opposed the idea and the practice of modern capitalism. Today, capitalism is used by the majority of sovereign states as a means to promote economic growth, which proves fundamental for the states that yearn to strive and prosper within the world’s system. Marx was very skeptical about the whole ideology, urging that a ‘dictatorship over the proletariat’ (or rule by the poor) should replace the capitalist hierarchy. His viewpoints on capitalism, and his postulation of a utopian state known as communism, have influenced some of the most brutal dictators in history, from Joseph Stalin to Pol Pot. But what did Karl Marx believe to be the faults within the capitalist system?
It would be wrong for me to say that Marx did not believe in the workings of capitalism at all; he acknowledges that some aspects within it might cause economic progression, at the same time as protecting the proletariat, or the working class. He uses the “CMC cycle” to display how capitalism can in fact work, as this economic cycle depends on starting with a commodity, selling it for a market price, and then buying another commodity with the money from the previous deal. However, Marx did not refer to this as capitalism; he referred to this as a simple exchange of wants. The seller wants the money, and the buyer wants the good and this way both people are satisfied. Marx stated that capitalism begins when the cycle starts with money, not a commodity. So as we buy a commodity with the money, we can then add to the commodity any value that will increase the price, and then sell it on for a profit. This is known as the “MCM cycle” (money, commodity, money), which ends in profit for the capitalist. We are able to observe this sort of economic activity in today’s society, with touts buying tickets at market pricing, and then selling the ticket or the commodity on for a major profit. The reason this is not the correct procedure for an economy to follow is that it relies on the exploitation of workers, or in this case the touts who are exploiting their producer surplus over the consumer.
But it was not just Marx who had criticised the way in which capitalism functioned; his good friend Friedrich Engels developed similar viewpoints. Engels focused more on the underlying structures within capitalism rather than the visible interpretations of Marx. Engels condemned the way in which the economy was run and managed: firms were free to make their own decisions on what and how they produced their goods and services, which Engels saw as a bad thing. This freedom arguably is and always has been the most significant factor to economic growth, though Engels did not appreciate this. Instead Engels put forward the idea of a ‘planned economy’, one that would be very much dictated by the state itself, as this was thought to create a closer relationship between buyers and sellers in the markets. It was more than just this, however, as Engels examined the fact that within capitalism, there was a sense of anarchy within industries and the production system, which would lead to inevitable booms and busts which would weaken confidence in the economy. Engels was naive in this sense, as his solution was that if the state knew what people wanted, and how many people had to be provided for, the production sector should be manageable. History will show that this was a foolish assumption under the ruling of Joseph Stalin from 1928 to 1953. With a planned economy in the USSR, the central state could not identify what was in demand due to a lack of information and this led to some industries seriously under-producing, whilst others were over-producing and it was almost impossible to find the right mix of output for the people to benefit from.
Clearly, Marx and Engels were not capitalist enthusiasts. Their arguments set out the core principles that should deter most people from praising the capitalist system. Their attacks are in a sense reasonable, but neither of these theorists realised one crucial aspect of human nature, which is that economics is powered by the maximisation of individual welfare. Therefore, given the chance to make money, people are going to exploit resources, their authority and their labourers in order to satisfy themselves. That is the tragic truth of capitalism.
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