Despite its demonstrable failure in the 20th century, Marxism remains one of the most popular political and economic ideologies today. Western democracies have adopted many of the principles and policies recommended by Marx and his followers. Many postcolonial developing countries have modelled their societies in accordance with socialist doctrines. This state of affairs suggests that Karl Marx’s critique of capitalism must be at least somewhat credible. Thus a viable alternative to markets and private property still exists. If so many people worldwide aspire to put these ideas into practice, surely they must have some merit?
In reality, nothing could be further from the truth. The reasons why socialism continues to be so widespread are complex, but they are certainly not economically based. Countries that have adopted Marxist policies remain the poorest, least developed and most likely to suffer from chronic economic crises. The latest example in the long list of failed Marxist experiments is Venezuela. A nation which has been plunged into poverty despite having the world’s largest oil reserves.
The reasons why Karl Marx’s critique of capitalism is not convincing are numerous. In this essay, I will briefly discuss two of them – the concept of “exploitation” and the origin of private property.
Is Capitalism Exploitation?
Let us begin by examining Marx’s claim that the system of capitalism is a system based on exploitation. In the book New ideas from dead economists: An introduction to modern economic thought Todd G. Buchholz accurately sums up the Marxist view of the relationship between owners and workers:
“In feudal times, lords owned a claim on the output of serfs. Under capitalism, owners of factories and land owned a claim on the output of their wage-labourers. The survival of the master class rests on the work of the serving class. Does this put workers in a strong bargaining position? No.”
The comparison between feudal lords and factory and landowners is not applicable. Firstly, feudal lords had a monopoly over the labour of their peasants which was enforceable by coercion through law. In the competitive capitalist system, owners and workers negotiate the terms of voluntary contracts. Workers have a variety of potential buyers for their labour and have the choice to work only for themselves (by starting their own enterprise for example) or they may even choose not to work at all. The underlying freedom of negotiation and association between individuals in a capitalist economy where property rights are enforced means that voluntary contracts cannot be considered exploitative. This monopolistic approach is not characteristic of a competitive capitalist economy. Therefore, equating feudalist exploitation with capitalist production is wrong.
Far from being exploitative, the free market capitalist system is composed of enterprises in which workers, managers and owners have a harmonious relationship. Since Marx was concerned mainly about the wellbeing of the workers, let us examine their situation in a free market capitalist enterprise. The workers are the people that employ their labour in the process of production. This process would not be possible without property and without capital. Let us consider a factory. The input of the workers – manual labour – is a vital part of production. But without available land, the factory wouldn’t have been built and without capital expenditure on machines and tools, the workers wouldn’t be able to produce anything.
For this reason, property and equipment provided by the owners are very valuable to the workers. Thus, they pay for the opportunity to produce with a surplus of their labour. Far from it being theft, the surplus of the worker’s labour is, in fact, a trade. Indeed, the management and the owners of the company enable the workers to produce and therefore earn their money. Free market capitalist enterprises are, in reality, a cooperative endeavour between various individuals and groups aimed at improving the well-being of their customers.
There is another fact about capitalism which Marxists tend to ignore and which serves as an indictment of their economic model. Under capitalism, workers are free to organize and form collectives and cooperative ventures. Ownership and management decisions can be arranged democratically and distributed equally. There are many examples of such cooperative ventures, such as the Mondragon Corporation. However, the fact this type of non-hierarchical organizational structure is not very wide-spread points to its inherent deficiencies, particularly in regards to production. Democratically-run enterprises are simply not as productive and not as successful as those based on hierarchy.
Indeed, it seems that it is in the worker’s best interests to outsource management decisions and risk management associated with the property to others since this enables him to become more specialized and more productive. The low productivity of the cooperatives, notwithstanding the mere fact, that such organizational structures are permitted under a capitalist system means that it cannot be characterized as “oppressive”. Indeed, anyone is free to live and produce in accordance with Marxist principles if they wish. But it seems that an overwhelming majority of people do not believe that that is in their best interests. It seems that when people are free they choose not to follow this path in their life.
Private Property Origins
Another aspect of capitalism which Marx and his followers get wrong is private property. Capitalism is the outcome of proper enforcement of private property rights. Marxists assert that these rights are merely social constructs used as propaganda to legitimize the existing oppressing order. They believe that hierarchies of order are artificial and that the natural state of the political community is material equality between all of its members.
This understanding of the origin of rights and private property is frivolous. Private property originates from nature (or God for those that have a different metaphysical understanding). If we conceptualise property as legitimate control, it follows that the primordial form of private property is, in fact, our own body. Hence, because of this fact, private property precedes all other forms of social organising, regardless of whether they are voluntary ( family, community) or not ( country). But is it possible for private property to be natural, but the right to it – entirely a social convention?
On the contrary, it is not possible. Coming back to our body, we can conclude that it is not possible to assume complete control over another person’s body. Even slaves exercise some element of free will, which makes them follow their ruler’s orders. Their natural rights are almost completely nullified through the social convention of slavery, but the natural state of man allows them to preserve a minimal amount of freedom through the private ownership of their bodies.
A natural extension of the right to private ownership of one’s body is the right to private ownership of the goods created through it. The reason being, that every product ought to be owned by the person that took a risk and has invested time and money in its production. Free trade between people is also a logical consequence of their private property. Once attained legitimate control over that which one had created, he could then save it for himself, give it away or exchange it for something else.
As we can see, the fundamentals of capitalism – private property and free trade – are a natural, default state of humans. Human hierarchies are also natural, and not a product of the social environment, due to the fact that people are not born with equal physical and intellectual characteristics and some do have inherent advantages. Civilised communities cultivate these natural differences and construct hierarchies based on competency, not power or superstition, as the Marxists claim.
These hierarchies are not only just, but they are also effective as they put capable and talented people in positions that best allow them to shine and maximise their prosperity while increasing the wealth of all members of society. Free market capitalism is the best instrument for creating such dynamic competency-based hierarchies. While statism, on the other hand, is an instrument for building static hierarchies based on power and superstition.
This fundamental disregard for human nature, the mechanics of the natural order and natural law are at the root of the failed Marxist experiments of the 20th and 21st centuries. The leftist belief that every man is born as an equal blank slate and that all inequalities are a product of an oppressive order was empirically refuted almost immediately after the first communist regimes were established. Assuming power, Marxists quickly realized that their proposed mode of existence went against the natural instincts of the overwhelming majority of people. They employed enormous force on a massive scale in an attempt to change the very nature of man, committing the worst atrocities in the history of mankind in the process. The Holodomor was an attempt to enforce Marxist principles in food production. It failed and millions starved to death. The Cultural Revolution in China was an attempt to erase the memories of the oppressive imperial governments and rearrange society in accordance with Marxist dogma. Millions died and a significant part of Chinese cultural heritage was destroyed forever. It is not surprising that they failed since no man can stand against nature.
The reasons behind marxism’s failures can be numerous. This article lays out two of the core ones – the lack of understanding of the relationship between the participants in capitalistic production and that of some of the fundamentals of human nature. Often we hear that communism and socialism are “good ideas in theory, but terrible in practice”. Those people that make that claim have either not understood the ideas of Marx, or have the desire to try and apply the theory in the “correct” way. Reality is, however, that Marx has serious flaws on a basic theoretical level. The horrifying and destructive aftermath that follows the application of Marxist principles in practice is precisely because of these fundamental flaws in the theory, and not the incorrect interpretation of the Marxist ideas by communists and socialists.
Marx’s critique of capitalism is unconvincing. Having said that, I recommend everyone to read his work. Their value is in the ability to provoke thought and to serve as an instrument to understand the leftist utopian thinking.
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