Karl Heinrich Marx May 5, 1818 March 14, 1883 Economic Theory

The Works of Marx u He was a prolific writer, despite his personal life tragedies. u Here is a brief list of works by Karl Marx –1844: –A Contribution to the Critique of Hegel's Philosophy of Right. Introduction –Outlines of a Critique of Political Economy –Critical Notes on "The King of Prussia" –Economic and Philosophic Manuscript –1845: Theses on Feuerbach

Additional Works by Marx u He also wrote many articles with F. Engels – Communist League (1847) –The Communist Manifesto (1848) – England's 17th c. Revolution (1850) –The Alleged Splits in the International (1872) –Reformists in Germany's Social-Democratic party (1879)

DAS KAPITAL u The most important work by Karl Marx is clearly Das Kapital which appeared in three volumes. Only volume I appeared while he was alive. Volumes II and III were edited by Engels and appeared after Karl Marx’s death in 1883

Georg Hegel –Hegelian Philosophy Thesis Anti-thesis Synthesis

Ludwig Feuerbach u Doctrine of Materialism –Man is object of “conscious” rather than “unconscious” –For instance, paintings of GOD in the image of Man –Alienation “process and result of converting the product of the individual as a social activity into something that is part of themselves -both independent and dominant”

Dialectic Materialism u Marx agreed with Adam Smith on the importance of the division of labor to economic evolution. u He saw conflict will arise as a result from the division of labor u Recall, Adam Smith had similar concerns in that he saw: – Social disadvantage - workers dehumanized by repetitive, monotonous tasks

Conflicts due to division of Labor u Next, industry from commerce u Then, conflict among the different types of labor u Eventually individual conflicts with society as workers become “enslaved” to their trade u Eventually, human’s labor becomes an alien power, opposed to them and enslaving them. u Resulting into socialism and communism

Dialectic Materialism The Conflicts u For instance, Industry and commerce separate from agriculture with resulting –conflict between city and rural areas u In general, Marx viewed with concern the opposing (conflicting) scenarios brough about by dialectic materialism –Rural vs. Urban –Worker vs. Owner –Innovation vs. Status Quo

Static vs. Dynamic Factors of Production Land, Labor, Capital, and Technology Relations of Production Private Property, Wage System Social Superstructure Religion, Law, Government Dynamic Static

Economic and Philosophic Manuscripts of 1844 (published in 1932) u Appears his thoughts were more consistent between early writings and Das Kapital than at first thought. Among the points: –Criticized political economist for only explaining the workings of the economy rather than the causes –Contradiction in that more wealth the worker produces the poorer they became

5 Laws of Capitalist Motion u LAW I: Law of Accumulation and Failing Rate of Profit –K  L     LAW II: due to   in Law I then u Law of Concentration and Centralization of Industry –  Concentration only way to keep  high

Laws of Accumulation (cont.) u LAW III u Because of the existence of Laws I and II there will result u The Law of a Growing Industrial Reserve Army –UNEMPLOYMENT

Laws of Accumulation (cont.) u As a consequence of increased unemployment then u LAW IV: The Law of Increasing Misery of the Proletariat u LAW V: The Law of Crisis and Depressions

Communist Manifesto u Written in 1848 it was commissioned to Marx and Engels at the second Congress of the League of Communists in London

Communist Manifesto (cont.) u... the first step in the revolution by the working class is to raise the proletariat to the position of ruling class to win the battle of democracy u The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the state,

Communist Manifesto (cont.) u 10 Points which, in general, will be needed for the proletariat to take over: – 1. Abolition of property in land and application of all rents of land to public purposes. – 2. A heavy progressive or graduated income tax. – 3. Abolition of all rights of inheritance.

Communist Manifesto (cont.) – 4. Confiscation of the property of all emigrants and rebels. –5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly – 6. Centralization of the means of communication and transport in the hands of the state.

Communist Manifesto (cont.) –7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan. –8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.

Communist Manifesto (cont.) –9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country. – 10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc.

The Great Contradiction u If the Exchange value of commodities is determined by the labor time they contain, how can these commodities frequently differ from their labor values? u In other words: Competition is supposed to produce equal profits across industries u Yet capital/labor ratios differ between industries

The Great Contradiction (cont.) u Thus, according to Marx since labor is the sole source of surplus it must be that labor intensive industries should have the largest possible profits u In order to argue against the critics, he used the following formulas

The Great Contradiction (cont.) u Definitions –Constant Capital (c)  charges on fixed capital (i.e. depreciation plus the cost of raw materials) –Variable Capital (v)  total wages paid to labor –Outlay (  )  cost of production (excluding profits) or c + v –Surplus Value  Total Revenues - (c+v) or Total Revenues - 

The Great Contradiction (cont.) –Rate of surplus value (s)  s/v –Rate of profit (p)  s/  –Organic composition of capital (O)  ratio of capital to labor u In contemporary terms –GNP = c + v + s =  s –NNP = v + s

The Great Contradiction (cont.) u ASSUMPTIONS: –Different commodities are produced at different organic composition of capital –rate of surplus is taken to be 100% (for simplicity) –Competition will equalize the average profit

Transformation of Values to Prices

Explanation of Table u Column 1: represents five different commodities u Column 2: capital/labor ratios with outlay being a $100 per industry and $500 for entire economy u Column 3: Amount of constant capital (c) used

Transformation of Values to Prices

Explanation of Table (cont.) u Column 4: Cost of product (c+v) u Column 5: Surplus value (since a 100% is assumed that implies that s=v u Column 6: TRUE value of product according to Marx (4)+(5)

Transformation of Values to Prices

Explanation of Table (cont.)  Column 7: Average profits (recall that p= s/  or 110/500=.22) u Column 8: Sale price (4) + (7) u Column 9: Deviation of Price from Value (8)-(6)

Transformation of Values to Prices On average the difference is zero

Those who used Marx u Vladmir Ilyich Lenin u Indicated that the movement towards communism could be shortened in order to be applicable in Russia

Lenin on How to Achieve Communism u... during the transition from capitalism to communism suppression is still necessary, but it is now the suppression of the exploiting minority by the exploited majority...

A special apparatus, a special machine for suppression, the "state", is still necessary, but this is now a transitional state. It is no longer a state in the proper sense of the word; for the suppression of the minority of exploiters by the majority of the wage slaves of yesterday is comparatively so easy, simple and natural a task that it will entail far less bloodshed than the oppression of the rising of slaves, serfs or wage-laborers, and it will cost mankind far less.

Why Russia needs to be ready for War u the victory of socialism in one country does not at one stroke eliminate all wars in general. On the contrary, it presupposes wars. The development of capitalism proceeds extremely unevenly in different countries. It cannot be otherwise under commodity production. From this it follows irrefutably that socialism cannot achieve victory simultaneously in all countries.

It will achieve victory first in one or several countries, while the others will for some time remain bourgeois or pre-bourgeois. This is bound to create not only friction, but a direct attempt on the part of the bourgeoisie of other countries to crush the socialist state's victorious proletariat. In such cases, a war on our part would be a legitimate and just war

Leon Trotsky u Leader of the Russian Revolution. u Architect of the Red Army. Commissar of foreign affairs between u In 1929, deported from the USSR by Stalinists. u In 1940,murdered by assassin.

MAO TSE-TUNG

MAO TSE-TUNG u The transition to communism is based on: u the numerous types of state system in the world can be reduced to three basic kinds according to the class character of their political power: –(1) republics under bourgeois dictatorship; –(2) republics under the dictatorship of the proletariat; and –(3) republics under the joint dictatorship of several revolutionary classes.

MAO TSE-TUNG u The first kind comprises the old democratic states u The second kind exists in the Soviet Union, and the conditions for its birth are ripening in capitalist countries. In the future, it will be the dominant form throughout the world for a certain period.

MAO TSE-TUNG u The third kind is the transitional form of state to be adopted in the revolutions of the colonial and semi-colonial countries. Each of these revolutions will necessarily have specific characteristics of its own, but these will be minor variations on a general theme

On why democracy is not needed to evolve to Communism u The so-called democratic system in modern states is usually monopolized by the bourgeoisie and has become simply an instrument for oppressing the common people. On the other hand, the Kuomintang's Principle of Democracy means a democratic system shared by all the common people and not privately owned by the few.