Marx's critique of market capitalism in political economy

¶ … Market in Marxist Political Economy

Today's individual has an unlimited access to information, which is generally due to the burst of the dot-com era, but also due to several process of social emancipation. We are now only one click away from finding out the types of data we need for barely almost any kind of research. In the field of economics, the specialized literature is extremely vast, detailing the basic principles of the market place, the macro and microeconomic forces, labor force characteristics, the contemporaneous economic crisis and so on. And the wide access the individual has to this information is not only due to the technological appliances and the social developments, but mostly to the economists who played a vital role in setting the basis of the modern economic systems.

Introduction to Economic Thought

The world had functioned on the basis of economic principles ever since its beginnings and references to these exist in antiquity (Greek philosopher Aristotle) or even in the Bible, with the most relevant one being the truck practiced. Chronologically addressing the issue, the first economic thinkers were the mercantilists, who set the basis for a market on which shareholders would be able to collect and invest their money. Jean Baptiste Colbert, France's Minister on Finance throughout the reign of King Louis the XIV, developed the first policies relative to taxation and a state budget. John Locke argued the rights of the population to be the owners of their goods, and in more specific terms, he addressed the issues of private and public goods.

Society can however only discuss modern economics starting with the 18th century, and due to the contributions of British economist Adam Smith. His Wealth of Nations (full title: An Inquiry into the Nature and Causes of the Wealth of Nations) is considered the first book on modern economics and the author is seen as the father of modern economics. In this, Smith argued the theory of the invisible hand, by which he emphasized the need for a reduced governmental intervention within the market, which is able to regulate itself (Groenewegen, 2003).

Numerous other economists followed and made major contributions to the field. David Ricardo is for instance most renowned for his theory of comparative advantages, an issue highly used in today's modern international trade. He said that each country should recognize its limitations and only produce those goods for which they held a comparative advantage (such as natural resources or skilled labor force). They would then exchange them on the market for the items they cannot produce.

Other classic economists include Thomas Mathus, who argued for a minimal governmental interference in economy, or John Stuart Mill, who was the advocate of a balance between supply and demand. This balance and the limited political interference in the economic life are the primary concepts at the basis of the classic economic thought.

Karl Marx is yet another key representative in the history of economic thought, and he is the founder of the Marxists trend. He used political theories to condemn the capitalist models and promote the socialist ones. What is remarkable about the Marxist trend is that its representatives were equally focused on politics and economics. Several of Marx's followers, such as Beatrice Webb or Karl Kautsky managed to influence the political approaches to economics.

The second half of the nineteenth century brought in a revolution of the economic thought - it introduced the notion of marginalism to identify the utility of one item, instead of the whole product line (Seligman, 1990). This was the moment that the door to the contemporaneous economics was opened. The works that followed that time, coming from the neoclassics or the Keynesians, all deal with modern economics issues, such as macroeconomic forces, labor market and employment theories, or financial policies.

Despite the fact that all these individuals and groups make for an interesting topic, the aim of this paper is not to present their contributions, but simply those of Marxists in the field of setting a place for the market. Such an endeavour is only possible however after a background has been set for the Marxists theory.

3. The Marxist Theory

Marxism is the name given to the doctrines of Karl Marx and it has played a crucial role in the establishment of modern economics. Marx is often assimilated with a founder of modern socialism and several contemporaneous models of socialism and communism are based on his ideas. The economic and political philosophy is known as scientific, as opposed to utopian, and it has generated numerous effects in the field of academics and disciplines such as history, literature, economics, philosophy or politics (the Columbia Encyclopedia, 2007).

4. The Market in the Marxist Political Economy

The study of the Marxists ideas relative to the market is based directly on the works of Karl Marx and his followers and the references they make in their books to the market.

In the Communist Manifesto (2002), Karl Marx, Friederich Engels, Samuel Moore and Gareth Stedman Jones recognize the emergence of a world market and the growing importance of international trade. They refer to the market as "a system on unequal change, of the war of all against all or of buying cheap and selling dear." In their vision, the market was based on consumption and demand and the identification of human needs outside this principle was rather challenging.

An important contribution to the market ideology is that the authors recognized the existence of a relationship between employment and the market. This relationship was based on that the employment, the division of labor and the "human material progress had proceed in parallel with the growth of the market." Otherwise put, there existed a direct relationship between the market and the employment, with the market being the feature which set the tone. An increase of the market would generate an increase in employment and vice versa. However, an increase or decrease in employment would not affect the market as the relationship between the two is unilateral.

Engels, Moore and Jones believed that the future successful implementation of the communist policies would see no major use of the market; "in the society of the future, there would be no mediation through the market. Wealth would satisfy needs directly. It would be the restoration of the natural relationship between things and men." The market made it more difficult for the individuals to become detached from the need of wealth simply because it allowed the accumulation of wealth; ergo, to reach socialism and communism, the market had to be eliminated.

The Manifesto also dealt with the industrial revolution and the consequent changes it brought along. Relative to this, the authors stated that mechanized work was coming to replace human labor and in the context of the market, the skills and abilities of the individual workers were being undervalued and improperly measured. Ergo, the working class was once again disconsidered in the face of political and economic forces.

The book presents the idea according to which the market suppresses the actions of purposive individuals. "Freed from the constraints imposed by custom or traditional authority, producers and traders had to calculate for themselves how the market might receive what they had to offer. But the market only corrected imbalances between production and the satisfaction of need retrospectively - or if need did not coincide with what the market recognized as effective demand, not at all."

The negative take on the market was extremely popular in the socialist agenda, but Marx found it rather difficult to subject to it mostly since he saw the market as a vital component in the process of change, towards the achievement of a perfect communist society. "A denunciation of the injustices of the market came easy to socialists, but for Marx, it posed a problem. His communism had supposedly started from the dynamism of the modern exchange economy and its capacity to satisfy the needs of the all-round human personality. To remove the market as the means whereby needs were harmonized with resources was to remove the central dynamic feature of this economy."

The Manifesto is without a doubt different from the previous works and one reason in support of this statement is the way in which the authors address the market. Previous works have barely recognized it. Also, previous economic model were flawed in that they based the resource allocation on other features, rather than the market. The Manifesto, however it reveals several negative ideas on the market, it takes an important step in recognizing its role within the society and for economic wealth.

In Capital, Marx, Ernest Mandel, David Fernbach and Ben Fowkes focus on financial issues and make fewer references to the market. The book is however relevant for the current research as it looks at the market through the lens of financial issues. In this order of ideas, Marx and the co-authors address the matter of price fluctuation within the market and relate it to the fluctuations in terms of production costs and profits. "Fluctuations of market prices [...] may always be the result of a dual movement: the changes in the value of a commodity and the changes in the value of the money-commodity, gold."

Marx's view of the financial theory is rather ambiguous, and just like in the case of the Manifesto, the author shares a sometimes different view from his socialist collaborators. He believes the market to be the basis of an efficient economy and this is generally because the market regulates offer and demand and in turn, sets the prices for the commodities. Otherwise put, Marx's view is that prices should be set by the market, rather than the production costs and the desires for profits. In achieving this, a two stage strategy would have to be employed. First of all, the values should be transformed into prices of production and the prices of production should then be turned into market prices. The method was extremely complex at the time and generated numerous monetary challenges.

Another issues addressed by the authors of Capital is that of profit. In alignment with the socialist and communist views, Marx, Mandel, Fernbach and Fowkes believe in a unification of profits. In other words, they believe that there should be an established profit rate and all entrepreneurs should register similar revenues, within a calculated mathematical limit. They have described this rate as an average of the social capital. Also, they argue that the limit should be based on the competition encountered within the market and the market value of the employed commodities. They have also addressed the matters of demand and supply in terms of market value, and stated that if the retail price is larger than the market value, the demand for that product or commodity will decrease, whereas the supply of the product will be reduced; if on the other hand, the price goes below the market value, the item will register a higher demand, but a lower supply. "Thus, if supply and demand regulate market price, or rather the departures of market price from market value, the market value in turn regulates the relationship between demand and supply, or the center around which fluctuations of demand and supply make the market price oscillate."

Another important work of Karl Marx is the Critique to Hegel's 'Philosophy of Right', written in collaboration with Joseph O'Malley and Annette Jolin. The book however does not address the issues of market, but simply acknowledges the fluctuation which occur within it, as well as fact that market operations are guided by both independent individual needs, as well as governmental interferences.

In Grundrisse, Marx and Martin Nicolaus point out the contradictory and even conflicting ideas of the socialists of the time. Some representatives of the era strongly believe that the market has to be eliminated in order to achieve a perfect model of socialism, and then communism, with all social, political and economic ideas communists promote. Others however argue that the free market is the very core of a successful socialist model and a sustained economic growth. "The contradictions within this mental construct are the contradictions within the ideology of radical bourgeois democracy, as typified to the highest degree and with the most socialist coloration [...] by the Proudhonists. They wish to make bourgeois liberty and bourgeois equality more perfect, to realize them fully and completely, and to that end rail and rant about the tyranny of money and the venality of the market-place, not knowing that this very market-place is the real foundation of the bourgeois liberty and equality they wish to perfect. The opponents of the bourgeois radicals among the bourgeoisie, namely the political economists, have a sounder understanding of this particular question to the extent that they understand what are the real relations between bourgeois freedom and the market-place." Marx belonged to the latter category, that of political economists who understood and militated for the real role of the market.

The book continues by detailing several monetary aspects and, similar to Capital, it looks at the market through the lens of the monetary issues. It also deals with the already familiar issues of market value and states that the market value will adjust to the real value through the means of continuous market oscillations, rather than artificial interventions.

Grundrisse also contains excerpts from a letter sent by Marx to Engels, in which he states his future purposes of further analyzing the international market and writing a book entitled World Market. The author had already begun his analysis of the international market and had found that it is influenced by private and public operations on the money market, by the trade of commodities and by the exchange rates established privately or publicly. He concluded with the existence of a relationship between individual and global market and he believed that the size and importance of such a market would increase along the years to come. "In the case of the world market, the connection of the individual with all, but at the same time also the independence of this connection from the individual, have developed to such a high level that the formation of the world market already at the same time contains the conditions for going beyond it."

The analysis of Marx's theories on market is far from being exhaustive; however the selected works are highly relevant in the context of the current research and succeed in helping the reader form an opinion of the Marxists believes and their approaches of the market.

5. Conclusions

The contemporaneous individual has the ability to make informed decisions due to two reasons: the technological burst which enables access to information and the efforts of the classic and modern thinkers, who ensure the existence of the information. An analysis of the history of economic though reveals the numerous endeavours of various economists in setting the basis of modern economics. However proof of an interest in economics has been revealed ever since antiquity, the basis of modern economics have only been set throughout the 18th century, with the aid of thinkers such as Adam Smith, David Ricardo or John Stuart Mill. The classics strongly emphasized on the need for a reduced governmental intervention within the market place and the existence of a balance between demand and supply. Other notable trends reveal the Marxists, the neoclassic or the Keynesians.

Karl Marx was born into a Jewish family in Germany and he was educated in the liberal spirit, with basis on the classic economists. The creation of his ideology was a complex process, following various stages. Firstly, he started the courses of the law university, where he became accustomed with philosophy. After receiving his doctoral degree, he turned to political journalism, to finally discover economic issues he would later on come to address. His initial views were based on the ideology of Georg Hegel, but they changed with the thorough analysis of the works by Adam Smith, David Ricardo and other classic economists. Marx was unsatisfied with the political and economic principles guiding his era and he saw a need for a violent revolution in order to overthrow the rulers and give the power to the people. The workers in the factories would play the key role in this revolution. As his analysis of economic and political principles evolved, Marx came to realize that the working class was not only a revolutionary force, but that it played a major economic role.

The Marxists theory is extremely complex and addresses several features of life. Some of the most interesting ideas revolve around the interpretation of the social classes, the definition of the state in terms of classes, the role of the revolution and means of overthrowing the ruling class. It all culminates with the statement that proletarians and capitalists would be defeated by socialists, and the political background would peacefully evolve into communism. Communists promoted equality and a classless society, and their slogan was "From each according to his ability, to each according to his needs."

The analysis on how the Marxists viewed the market is based on a thorough reading of Marx's books. In his Communist Manifesto, the co-authors blame the market for standing in the way of social equality and an even distribution of wealth through communism. Marx' ideas on the other hand reveal the belief that the market would support the implementation of a perfect model of communism.

In Capital, Marx and his collaborates are focused on financial aspects of the society, but they also analyze various issues through monetary lens. In terms of the market, they believe it to be the place where the prices are set and they develop on one of the most important theories of political economy: if the price increases, the demand decreases and the supply increases, whereas a decrease in price will generate an increased demand, but a reduced offer.

With Grundrisse, Marx and Nicolaus identify the reasons for the conflicting views on market: the extremist bourgeois desired to preserve and improve their social status through accumulation of wealth in an economy governed by chance and influences, whereas the political economists saw the market as a means of economic growth and equilibrium. The authors address the matter of market through financial and monetary lens and come to the conclusion that the emergence and growth of an international market cannot be delayed.

The feature that best characterizes the time in which Karl Marx lived is dualism. It is obvious at numerous levels, but extremely relevant in terms of the market. While the 'conservatives' of the time desired to preserve a national economy based on nepotism and chance, the 'liberals' supported the creation of a market place, in which price would be established by demand, offer and normal and continuous market fluctuations. Marx belonged to the second group and proof of it stands his various works. His efforts make him a notable economists and one important father of modern economics.