Karl Marx's Critique of Capitalism: An Essay

Capitalism as a self-destructing political, economic and social system is central to the understanding of Marx’s ideologies. By critiquing a structure that shapes the lives of many populations today, his work proves to still be extremely significant in offering an insight into capitalism and its implications. However, this assumption of capitalism inevitably self-destructing is one of which that is debated amongst scholars, usually in the light of how applicable it is in today’s societies. By examining his primary theses, I will argue that Marx’s work on this topic holds immense validity and leaves a legacy in that his work can be used to understand past, present and future crises. The crises Marx speaks of will be explored in sections, with the first being the tendency of the rate of profit to fall, and the second being the crisis of overproduction. It will further focus on the inherently toxic structure of capitalism, followed by its potential to breed a proletariat uprising. The essay will also analyze root causes of crises and its relationship to the capitalist structure, which appear to mirror his ideas showing his arguments hold not only truth, but also immense value.

Capitalism’s thirst for maximizing profit involves the struggle of competition between capitalists, a thirst that cannot be sustained according to Marx. The drive for investing in constant capital and increasing the mass production of cheaper commodities is based around this emphasis on profit maximization. Automated machines (or dead labor as Marx called it) that produce the commodities quicker without having to pay wages was seen as revolutionary, as seen in the Industrial Revolution during the early 19th century. Yet improved productivity in the hands of the capitalists breeds crises, and in this case, it is his theory of the tendency for the rate of profit to fall, which is, according to Marx, an ultimate way in which capitalist defeats itself. The competition between capitalists means they are forced to invest in ever greater percentage of their surplus value in machinery. However, the use of machines makes skilled human labor less necessary, and by replacing living labor with dead labor, it introduces the possibility for the rate of profit to fall. Furthermore, this is because capitalists are tied up in constant investment of machinery maintenance, and in the long run, the rate of profit therefore falls. This substitution of manual work not only leads to the rate of profit to fall, but it increases unemployment as their jobs are replaced with machinery which in turn leads to the fall in demand, which will be looked at in the next section. It is clear to empirically see the rate of profit to fall, for example Italian sociologist Luciano Gallino estimated the gross rate of profit in the period 1960-1980 to have fell by 50% in the major economies of the world, translated from his book ‘The Irresponsible Enterprise’. This can be explained in terms of rising production throughout the 20th century, showing the validity of Marx’s ideas. Marx attempts to show that this tendency for the rate of profit to fall arises through capitalism’s inherent nature in that to stay afloat, capitalists must expand and compete with other capitalists, captured in his infamous ‘Accumulate, accumulate!’. This competitive struggle is also subject to the crisis of underconsumption and overproduction, which is the result of the increased dead labor and unemployment.

One of the most detrimental features of capitalism is the epidemic of over production, accompanied by the under consumption of the proletariat, deriving from the bourgeoise’s tendency to maximize profit in which they are ignorant in realizing their anticipated value of the capital investment in the production process. This value diminishes in the hands of rising productivity and wealth, lowering the rate of profit and thereby exposing a contradiction in the system as discussed previously. Marx relates the falling rate of profit as inseparable with overproduction; they originate from the same conditions, showing the crises are interlinked in that they arise out of competitive struggle. Jeppe Druedahl captures Marx’s claim on the why overproduction is endemic to capitalism through Marx explains that this possibility of overproduction arises because the capitalist economy is not a barter economy, where commodities are exchanged with commodities, showing the inescapability of self-destruction due to the nature of the capitalist system. Although intrinsically convincing, it is useful to apply his theory. It is also clear to see his theory in action after his death. For example, the Great Depression during the 1930 brought scholars to understand the period in a Marxist light, concluding that overproduction was indeed endemic to capitalism. By the bourgeois class focusing heavily on the maximization of profit, they naturally adapt to the levels of demand by producing more commodities, and in this case, it began with food. It led to, particularly farmers, overproducing commodities which drove the price down without increasing demand, leaving many on the brink of poverty and unemployment as they could not afford the basic necessities. Yet this begs the question to why a country like the United States is currently considered a consumer society by many, such as historian Lawrence Glickman. It is possible that Marx did not appreciate the possibility for intervention in providing help for the working class to avoid underconsumption. Financial sectors like banks can remove the possibility of under consumption and thus will balance the supply and demand. To understand what may look like an invalid theory in today’s economy, it is useful to look at how underconsumption may vary under capitalism’s changing dynamics. Although America is one of the largest input countries, it is said that blue collared Americans can only sustain a basic lifestyle under over borrowing. Although there are now short - term solutions such as more achievable loans, capitalism is unable to sustain this without breeding financial crisis. For example, blue collared Americans have an average personal debt of $38,000, with 50% of their wages paying of these debts. The crisis of overproduction therefore exposes the irrationality of the system, and even a century after the Great Depression, it seems capitalism is still vulnerable to crises like the 2008 global financial crisis, thus validating Marx’s theory.

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Marx anticipated the death of capitalism through its inherent unstable nature, particularly in ‘Grundrisse’ and ‘A Contribution to the Critique of Political Economy’. The nature of the capitalist system is self - destructive as it breeds the potential for financial crises, and crises carry the most frightful devastation in their train, like an earthquake. A financial crisis, according to Marx, is the result of the contradictions inherent in the capitalist structure. The structure that leads to its downfall consists of many inconsistencies, including overproduction; underconsumption and the falling rate of profit. Furthermore, through its little government intervention as a means to improve the production of wealth, it allows for companies to express its thirst for profit. This is the laissez faire aspect, one of which is the core of capitalist countries today as seen in a neoliberal economy, which will be discussed later in this section. Furthermore, the crises of overproduction and little intervention breeds a potential crisis, such as the 2008 global financial crisis. Furthermore, the crisis arose from the collapse of the housing market, which was arguably the result of the inherent capitalist goals of profit maximization. As Andrew Kliman states, the home price bubble of this period undoubtedly boosted profitability artificially by stimulating demand in an unsustainable way. This unsustainable way Kliman speaks of refers to the lending out of subprime loans, of which brought up the housing prices with the risk of the buyers ending up in default (not being able to repay). The risk that these investors and banks took lines up perfectly with Marx’s M-C-M formula. The formula demonstrates the incessant self-expansion aspect of capitalism: M - refers to the money, in which buys commodities in the form of means of production and labor power; C - refers the production of commodities for exchange, and thus more money which is reinvested for more profits. This, according to Marx, is the capitalist structure and that of which will be the cause of a crisis. During 2008, it is clear to see the detriments that the result of more money to invest precipitates future crisis that not only affects the economy, but the average population too. In 2009, the number of unemployment persons grown by 3.6 million since 2007 (Bureau of Labor Statistics, 2009), mirroring Marx’s claim that the financial crisis will attack the working class, referring to the unemployed reserve army of workers.

The apparent inevitability of capitalism self-destructing appears to be logically intelligible, as capitalism is deemed an ever-ending line of profit maximization and self-expansion and cannot sustain itself. However, it is unable to avoid in a capitalist structure. Arguably, state planning and strategic intervention may overcome this notion that capitalism will dismantle itself; this has been particularly evident in the emergence of Keynesianism as a response to the overly deregulated market which caused the 2008 crisis. Keynes’ ideas were based on the idea that with some intervention, the market will prosper without the likeliness of a crisis. Through his ideas on fining countries for the purpose of restraining them from running large trade deficits or surpluses; and his ideas on the government adjusting their fiscal policies, injecting demand into the economy in times of recession and [creating] high employment by either increasing public spending or reducing taxation, it would vanquish the ills of capitalism that Marx anticipated. Marx may have responded by claiming that short term solutions or improvements like investing money to level out demand does not remove the possibility of a crisis; it merely delays one. Henry Hazlitt follows this thought, through his dissecting of Keynesian economics in his book ‘The Critics of Keynesian Economics’ claiming that Keynes failed to see that speculative anticipations and risks are necessarily involved in all economic activity, and that somebody must bear these risks, implying that his theory is based on overly optimistic predictions, disregarding the unpredictability of capitalism. It is clear that Marx’s emphasis on capitalism being self-destructing holds critical value, as the more solutions to overcoming what may have been thought of as mere obstacles, is actually the fundamentals of capitalism which cannot be solved without eradicating it altogether. Therefore, the theories that aim to improve capitalism or discredit Marx’s ability to appreciate the flexibility of capitalism tend to fall apart as they still base their ideas on competition and profit, which inevitably will result in its own downfall and the polarization of the classes.

Class struggle and the mode of production are interlinked within the capitalist system. Marxist dialect encapsulates the motion of history and its relationship with the classes, followed by Marx’s most controversial idea of a mass social revolution. His uses the dialect as a way to understand the social processes that follow from previous systems onto the next and aims to show how revolutions serve as the locomotives of history. Furthermore, by analyzing historical shifts, such as the move from feudalism to capitalism, it is clear to see the productive forces that develop alongside it. With the rise of productivity, as discussed previously, comes issues that lead to its own downfall. His analysis of history through the use of dialect is captured in the ‘Critique of Political Economy’: revolution is the midwife of every old society, which is pregnant with a new one. These advancements in society will lead to a social uprising as the class struggle sharpens, and a social class capable of taking the forces of production forward assumes power from its erstwhile masters. Although, the idea of constant progression and the advancements of productive forces is on the one hand questionable. Critics may argue that this seeming linear notion of history is too decisive and does not predetermine a social revolution. However, Marx’s claims on this progression are not as linear and deterministic as some may have thought. As Terry Eagleton points, stages of productive forces do not dance harmoniously hand in hand throughout history, it involves little guarantee on when or if the new developments will come about. It is the expanding of surplus which introduces the possibility of an uprising to happen once the organization of labor is more advanced than the previous. It is the expanding of surplus which comes at the price of the proletariat, because only with capitalism can enough surplus be generated for the abolition of scarcity, generating the potential for an uprising. Furthermore, this removes the idea that Marx did not fully appreciate the flexibility of capitalism. Marx did in fact appreciate the disordered paths of history and the rigged complexities of society; by using historical materialism he understood that the material conditions vary and therefore a revolution is sought to be a singular uprising, however in today’s age the material conditions seem to lead smaller scale, sporadic uprisings. For example, we can explain the protests such as the anti-capitalist demonstration outside the European Union’s summit in Gothenburg to have been deterred from it becoming large scale because of the advanced militant strength of the opposition.

By exploring Marx’s ideas on the tendency for the rate of profit to fall; the crisis of overproduction, the unstable nature of capitalism and his thought on a social uprising, it is clear that Marx’s work is not only convincing on the idea of self-destruction but proves a great deal in understanding how destructive capitalism is to those who exist within it. Unfortunately, to gather the entirety of his work in relation to capitalism’s own downfall would be exceptionally lengthy, but to understand his key thoughts provides a basis to seeing day to day life as something that exists under material conditions. Therefore, to claim capitalism is self-destructing is not only convincing through his social, political and economic theses, but because it is still extremely useful today. The derived points in this essay show the immense value of his work, and how it can be used to understand current crises and the roots it has within the capitalist structure.