Marx’s theory on labour still has capital

By Edmund Conway

Published: 10:42PM BST 06 Sep 2009

A few years ago the British Broadcasting Corporation asked its radio listeners
to vote for their favourite philosopher. As the votes poured in there were
some obvious favourites from the start – Plato, Socrates, Aristotle, Hume
and Nietzsche among them – but as the counting started it soon transpired
that there was a clear winner for the title of Britain’s favourite
philosopher: Karl Marx.

Marx’s key point was that societies are in the midst of a process of evolution
from less sophisticated, less fair economic systems towards an ideal final
destination. Having started off in feudal states and moved on through
mercantilism to the modern system of capitalism, human society would
naturally soon graduate to a fairer, more utopian system. That system, he
argued, was communism.

In a communist society, property and the means of production (factories,
tools, raw materials, etc.) would be owned not by private individuals or
companies, but by everyone. Initially the state would own and control all
companies and institutions, running them from the top down and ensuring
companies did not oppress their workers. Eventually, however, the state
would ‘wither away’.

This, said Marx, represented the final stage of human society, when the class
barriers that had stratified nations for thousands of years would dissolve.

Many forms of Communism had been proposed before Marx and his colleague
Friedrich Engels took it up in The Communist Manifesto in 1848. For example,
in 1516 English writer and politician Thomas More sketched out a society
based on common ownership of property in his book Utopia, and various
communist communities had already cropped up in Europe and the United States
by the early 19th century.

Marx’s point, however, was that communism would be adopted en masse as workers
throughout the world revolted against their governments and overthrew them
to institute a fairer society. His rationale for this was that the existing
system of capitalism was patently unfair, the rich – with more capital
(possessions) – becoming richer at the expense of the average worker. He
claimed that human history was a history of class struggle, with conflict
between the aristocracy and the rising bourgeoisie (the capitalist middle
class, who increasingly owned the means of production) giving way to a new
conflict between the bourgeoisie and the proletariat (the working classes
who labour for them).

At the heart of Marx’s theories was the labour theory of value. This idea,
laid out in Das Kapital (1867), states that a commodity is worth the amount
of time it takes for someone to make it. So, for instance, a jacket that
takes twice as long as a pair of trousers to stitch and sew ought to be
worth twice as much. However, he argued, those who ran companies pocketed
disproportionate amounts of the profits themselves. The reason bosses get
away with this, Marx argued, is that they own the means of production and so
are able to exploit their workers.

There are question marks over how well the labour theory of value holds up.
However, the broad thrust remains undiminished: that there is a major divide
between the wealth and opportunity of those who own land and capital and of
those who do not.

At one stage in the 20th century around half the world’s population lived
under governments that claimed Marx as their guiding political light.
However, by the end of the century only a couple of unreconstructed
dictatorships remained pure communist nations. Why did the theory not stand
the test of time?

In part, because Marx was wrong about the eventual evolution of capitalism. It
has not descended into a monopolistic system – at least not yet – thanks in
part to government regulation and in part to the invisible hand. The world
did not become overrun with the unemployed, and, although booms and busts
have continued, government control is as much to blame for these as
unbridled capitalist forces.

Few if any of the countries that embraced communism following socialist
revolutions could strictly be said to fit Marx’s criteria – they were mostly
agrarian, low-income, undeveloped nations, such as Russia and China.

The 20th-century experiments with Marxism also underlined its inherent flaws.
Most important of all, central control over an economy has proven immensely
difficult to pull off – if not impossible. When the Iron Curtain fell in the
1990s and the former Soviet states were opened up to Western eyes, it became
clear that, for all the bombast of the Cold War years, they were painfully
underdeveloped. While the forces of supply and demand created dynamic
economies that generated wealth at a rapid rate, the staid, centrally
controlled systems in the Soviet Union and China stifled innovation. Without
competition between companies – the fundamental driving force of free
markets – the economy simply trundled along, pushed forward by bureaucrats.
There was only one area where the Soviets truly excelled: military and
aeronautic innovation. Tellingly, this was the only field in which there was
outright competition – in this case with the West in the Cold War.

‘50 Economic Ideas You Really Need To Know’ by Edmund Conway (Quercus)
is available from Telegraph Books at £9.99 plus 99p p&p. Ring 0844 871 1514
or go to books.telegraph.co.uk