What Is Marxist Economics?¶
Core Argument¶
The capitalist system's worst crisis has renewed interest in Marxist economics, which offers an objective analysis of how social relations are distorted into cash payments—a phenomenon Marx termed 'commodity fetishism'. Unlike feudalism's transparent social obligations, capitalism reduces all human ties to naked self-interest, emerging through 'primitive accumulation' that dispossessed peasants and monopolised the means of production, creating a new class division between propertyless wage-labourers and capitalists who extract surplus value.
Marx distinguished use-value from exchange-value, establishing labour as the source of all value. Commodities exchange based on the quantity of labour-time they contain, determined by socially necessary labour-time—the average labour under average conditions. Value is a social relationship between persons appearing as a relation between things; prices fluctuate around values like tides around sea level, with the law of value regulating capitalism through price signals that allocate labour and resources across sectors. Value is a historical category that will disappear under socialism, whereas material wealth persists in all societies.
The labour theory of value applies only to reproducible commodities, not unique items like paintings. Marx rejected the Austrian School's marginal utility theory as subjective idealism, insisting value is objective. Under capitalism, exploitation is hidden because necessary and surplus labour are not separated in time and space. The capitalist purchases labour-power, whose value equals the means of subsistence; the worker performs necessary labour-time to cover wages, then surplus labour-time producing surplus value. Total commodity value equals constant capital plus variable capital plus surplus value, with the rate of exploitation expressed as surplus value divided by variable capital.
Money functions as a measure of value, universal means of payment, and store of wealth, with gold historically serving as the universal commodity. Paper currencies are now fiat money backed by state authority. Credit developed to avoid shipping gold, allowing banks to lend more than they hold in deposits; bank profits are a portion of surplus value creamed off from production. The 2007 financial crash revealed banks over-extending, with shadow banking circumventing reserve rules until the state was forced to intervene. Fictitious capital—derivatives and collateralised debt obligations—has no real value but entitles its owner to a share of surplus value.
Competition forces capitalists to accumulate, raising the organic composition of capital and driving concentration and centralisation. However, as variable capital declines relative to constant capital, the rate of profit tends to fall. Counteracting tendencies include intensified exploitation, wages below labour-power, cheapening of constant capital, foreign trade, and stock capital. Labour's share of national income has declined across OECD economies since 1980; in the US, productivity rose 83 per cent between 1973 and 2007 while male median real wages rose only 5 per cent.
Capitalist crises are crises of overproduction. The working class cannot buy back the values it produces, creating a barrier to development. Marx distinguished his analysis from Keynesian under-consumption theory: capitalist production is production for profit, not consumption. Wages tend to rise at the peak of a boom before a slump, so lack of demand cannot be the real cause of crisis. State attempts to create demand through printing money fuel inflation; taxing capitalists reduces investment; taxing workers reduces consumption further. Such solutions intensify capitalism's contradictions.
Pre-capitalist economies were governed by nature, tradition, or direct will, making economic relations transparent. Capitalism destroyed these self-contained bonds, replacing them with a global division of labour that operates without conscious direction. Marx rejected subjective consciousness as the basis for analysing capitalist society's objective recurrences, approaching economics from society's objective standpoint. Classical political economy developed the labour theory of value but treated capitalism as humanity's permanent condition; Marx exposed capitalism as a historical stage destined to collapse. Bourgeois economics abandoned scientific analysis for description and apologetics under pressure from class struggle. Capitalism's triumph is only the prelude to labour's victory, but the system will not fall of its own volition—it must be overthrown by the conscious movement of the working class.