Marxian Economic Thought

Karl Marx (1818–1883), a German philosopher and economist, developed the most influential critique of the entire classical/capitalist system in his major work Das Kapital (Volume I published in 1867). Where the classical economists saw a free market as broadly fair and self-correcting, Marx saw capitalism as a historically specific system built on the exploitation of one class (workers) by another (owners of capital) — a system he believed was internally unstable and destined to be replaced.

Marx's method rested on historical materialism — the view that a society's economic system (how it organises production) is the real foundation shaping its politics, laws, religion and ideas, and that history moves through a sequence of economic stages (such as feudalism giving way to capitalism) driven by conflict between the class that owns the means of production and the class that does not. This conflict-driven process he called dialectical materialism, borrowing the idea of thesis-antithesis-synthesis from the philosopher Hegel but applying it to material, economic conditions rather than pure ideas.

Marx's specifically economic contribution was his theory of surplus value. Building on the classical labour theory of value (the idea that a good's value comes from the labour used to produce it — a view Smith and Ricardo also held), Marx argued that a worker is paid a wage only enough to cover subsistence, but is made to work longer hours than that wage actually represents in value; the difference — the extra value the worker creates but is not paid for — is 'surplus value,' which the capitalist keeps as profit. Marx treated this as systematic exploitation built into the very structure of capitalism, not an occasional unfairness. From this he predicted an intensifying class struggle between the bourgeoisie (the capitalist class, who own factories, land and machinery) and the proletariat (the working class, who own only their own labour), which he believed would eventually lead workers to overthrow the capitalist system and replace it with a socialist, and eventually communist, society in which the means of production are collectively owned. …