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KARL MARX

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KARL MARX Karl Heinrich Marx was born onKarl Heinrich Marx was born on

May 5, 1818 in Trier, which is inMay 5, 1818 in Trier, which is inthe German Rhineland.the German Rhineland.

Studied philosophy andStudied philosophy andeconomics in Berlineconomics in Berlin

Earned his living (badly) as aEarned his living (badly) as ajournalistjournalist

He was a German philosopherHe was a German philosopherwho believed in idea ofwho believed in idea ofCommunism.Communism.

He is well known for writing hisHe is well known for writing his

pamphlet, Manifesto of thepamphlet, Manifesto of theCommunist Party.Communist Party.

He passed away on MarchHe passed away on March14th, 188314th, 1883 having only writtenhaving only written3 of the planned 8 volumes of3 of the planned 8 volumes ofDas Kapital.Das Kapital.

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Marx propounded that a new

form of class inequality, calledcapitalism, characterized thesociety at the time of hiswriting.

All societies are divided intotwo groups Owners are bourgeoisie Workers are proletarians

As capitalism emerges, thereis an accumulation of capital(wealth) by the bourgeoisie

(the capitalists) and thecreation of a free (i.e., notserf) labor force, theproletariat.

It sets up two classes whichmust eventually conflict.

Marxs Theory of Capitalism

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Marxs Theory of

Capitalism His theory implied that there would have to be a revolution that

would destroy capitalism.

Marx was not saying that capitalism would collapse because it

was immoral or because it was inefficient.

He was saying that capitalism would collapse because of theunalterable rules of social change that invariably destroyeconomic systems marked by class inequality.

The eventual replacement would be communism.

Communism would create a classless society and, therefore, itwould be the final and permanent state of society.

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Marx based his view on an applicationof the Labor Theory of Value.

Simply put: Machines without workers are useless. Workers without machines, on the other hand, are not

useless because the workers can make the machinesthat they need to do their work.

Therefore, in the end, all production is done by labor.

Marx argued that the only sourceof a firms profit is the labor itemploys.

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Irrational Capital

Accumulation However, the capitalists who own the firms have an

irrational belief that profits come from the capitalgoods (that is, machines) they employ in their firms.Each firm is in cut-throat competition for each others

business. Driven to gain temporary competitive advantage over

others. The way to do this is to introduce labor saving

innovations.

- that is, replace labor with capitals. As a result, they obsessively strive to accumulatecapital goods.

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This increases theirexpenses but, alas,not their profits,

because only laborcan generate profit

Their rate of

profit

declines

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Crises

But when the overall rate of profit is low,smaller firms are especially vulnerable tobusiness crises.

They get taken over by larger firms. This concentrates power in the hands of

fewer and fewer firms.

Moreover, the middle class capitalists whosell their small firms to the big firms thenbecome new members of the workingclass.

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Exploitation

When big firms

become bigger and

even more powerful,

they try to boost theirprofits by increasing

the pressure on

workers to, for

example, work longerhours, work for lower

wages, etc.

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Revolution

The stage is set for revolutionLabour class swelling and is

increasingly exploited

Capitalist shrinking and becomingincreasingly cut-throat

the labour rises up in revolt, replacing

the capitalists as the dominant classand creating the new socialist order

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At some point, the

growing but increasinglyoppressed working classturns on their capitalistoppressors.

This unleashes arevolution and bringsabout the end ofcapitalism.

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