Market in Marxist 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).

Formation of the Marxist Ideology

Karl Marx was born on May 5, 1818 in Trier, Germany, in a Jewish family, with numerous rabbis in its past. In order to avoid exile, the family changed religions and its name from Mordechai, to Markus and then Marx. Karl received a liberal education with basis on the classic theories. During his high school years, he discovered and enjoyed the works of Homer and Shakespeare, on which he would later on base some of his ideas.

Marx attended the Bonn and Berlin Universities to studies law, but he soon turned to philosophy. While at first he despised the ideology of Georg Hegel, he soon became its adept. He received his doctoral degree for the paper Difference between the Democritean and Epicurean Philosophy of Nature, which revealed high Hegelian ideas. In 1841 he returned to Trier and began a career in political journalism, featuring various articles of communist nature. While doing this, Marx became interested in situations arousing economic features, alongside with political ones, leading then to his formation as a socialist. He came to address the role of the working class within the overall economic context and stated that, unlike Hegel's beliefs, the state was not above the classes. Marx revealed ideas of a revolution centred on the population as the main agent, with the aim of social emancipation and the achievement of a full democracy; he engaged in collaborations with French and German communist societies.

Marx's ideas changed after a thorough study of Adam Smith and David Ricardo, due to which he understood the working class in terms of economic role, rather than revolutionary power. In June 1844, the German workers rebelled against their capitalist owners; the revolution was extinguished by the military forces and its effects were reduced, but it opened the most important ideological door for Marx. "He regarded the working class no longer as the passive but as the 'dynamic element' of the German revolution. Marx the revolutionary communist had finally emerged" (Callinicos, 2004).

Marxists Ideas

However the Marxists ideology is extremely complex, its essence can be captured by the following points:

The economic classes are the most important components of the society; the economic class is defined in terms of the relations between members and the means of production

The capitalist ideologies promote the ideas of owners, landowners, workers and peasants, reducing the roles of the working classes

All history is due to the struggles of the classes and the stages of history are: primitive communism, barbarism, the slave society, feudalism, capitalism, socialism and communism

The feudal class is replaced by the capitalist one as it removes the feudal personal relations and introduces the cash nexus

Capitalists exploit the difference between retail price and actual value of the products to get rich; the lack of a balance generates economic recessions

The introduction of mechanized work generates job loses and the minimum wages lead to poverty and even bankruptcy for the small entrepreneurs

Capitalism throws the working classes into proletariat, which wins through a violent revolution

The state represents the formation in which the ruling class controls the other classes; the rules are overthrown through revolutions

Revolutions can be replaced by a revisionistic approach - winning power by elections and without violence

The proletariat will establish a socialist society, which will peacefully evolve into communism

The final result, communism, is a classless society, in which the state fades away in socialism, the means of production are publicly owned

The socialist motto is "From each according to his ability, to each according to his work"; the communist slogan is "From each according to his ability, to each according to his needs" (Formal Reasoning Group, 1995)

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.