Marxist economic theory criticisms of capitalism

Marxist economic theory: Picture shows a fat capitalist provided small wages to a work who helped produce enormous profits

Let me open by saying that it is very recently that I’ve learned anything about Marxist economic theory, but what little I’ve learned so far has surprised me.

I’ve always learned that Marxist economic theory and ideas were harmful, evil, and not something to waste time on.

I did learn at a very young age that Karl Marx proposed that the value of something was determined by the amount of labour put into its creation and that idea intuitively seemed wrong when compared to the Adam Smith idea that value is whatever price the market would bear.

However, I recently learned that this idea, which is known as The Labour Theory of Value, does not come from Karl Marx, but rather comes from Adam Smith, and that I was confusing the ideas of “value” and “price” which they both distinguished as being different.

My first exposure to Marxist economic theory came in the book Contending Perspectives in Economics, by the economics professor John T Harvey.

That entire (and fairly short) book opened my eyes to various ideas in economic thought, as well as to the idea that every economic school of thought consists of two very different parts: the descriptions, and the prescriptions.

The descriptions are how the various schools of economic thought considered that economies work, and the prescriptions (now that we know how they work), consist of the set of policy ideas that the proponents think make sense.

The chapter on Marxism in the above book caused me to start to think that his criticisms of capitalism are hard to dismiss, as some things he predicted to be inevitable in a capitalist system have over the decades come to pass.

Things like capitalism: creates a focus on profits to the exclusion of much else, provides enormous material wealth, which spurs technological innovation, over time reduces per-unit profits, over time reduces employment opportunities, over time pushes more firms closer to the “edge” of financial solvency, resulting in economies that are more susceptible to shocks, which combined with more and more firms being closer to the “edge” of solvency results in increasingly consolidated industries, that there would be a separation of business decisions from moral decisions, and that all of the above would over time increase wealth and income inequality.

My other recent exposure to Marxist economic theory is a talk by economist Richard Wolff who presents workers cooperatives as what Marx truly meant by the word “socialism”.

In a workers coop, the workers own the firm, the state does not.

Per Professor Wolff, Marx wrote that one of the problems with capitalism is the main economic decision-making is in the hands of very few people, almost all of whom do not work in the business. That economic decision-making is too highly centralized.

The people who make the main decisions include the shareholders who elect the board of directors and the members of the board of directors.

Per Professor Wolff, Marx wrote that state-owned firms have the same problem, they just put that highly centralized decision making into the hands of a different small group of people, almost all of whom do not work in the business.

This presenter of Marxism contradicts that claim by Professor Wolff.

This post is a summary of another perspective on Marxism, which I found on the YouTube channel of Ryan Chapman.

Who is Ryan Chapman? I have no clue.

But I thought he did a decent job of presenting the main ideas of Marxist economic theory while not speaking in ideological terms, but rather gave a fairly “Just the facts Ma’am” overview of the ideas, which I appreciated.

This post is a summary of his presentation of some of the ideas of Marxist economic theory, not a word-for-word transcript.

As I found the full video interesting, if you think this blog post is, I suggest you watch the full video, as it contains more than my terse summary does. This summary is for the crowd who prefers to read summaries to save time.

Marxist economic theory: Classical vs adapted versions

In his opening comments, he distinguishes between adapted versions of Marxism, which apparently he talks about a lot on his channel, but this video is about classical Marxism, as developed by Karl Marx and his collaborator Frederick Engels.

Marx’s first major piece of writing

Was titled “Economic and Philosophical Manuscripts“, in which is found:

[XXII] We have proceeded from the premises of political economy. We have accepted its language and its laws. We presupposed private property, the separation of labour, capital and land, and of wages, profit of capital and rent of land – likewise division of labour, competition, the concept of exchange value, etc.

Marx, K. (1844). Estranged Labour, Marx, 1844. Marxists Internet Archive.

What Marx meant by “property” was influenced by John Locke

He starts with the claim that what Marx meant by “property” is not used in the sense that we normally think about it today. He claims that Marx uses the word property in a broad sense, in the way that John Locke used the word in the 1600s in two treatises he wrote about government.

Locke spoke about when we put our work into something we transform it, and in that transformation, we’re putting an essence of ourselves into that thing. For example, if you break a branch off a tree, and then you sharpen the end into a spear, you’re transforming that branch through your work, and in doing so, you’re putting an essence of yourself into it, in the form of craftsmanship.

John Locke wrote:

That labour put a distinction between them and common. That added something to them more than Nature.

Locke, J. (1689). Property: John Locke, Second Treatise, Chapter 5.

The way Marx used the word, “property” means the product of our labour. John Locke argued that we naturally feel a sense of ownership over that property because we put work into it and there is an essence of ourselves in it. He claimed it would be wrong for a government to claim that property, and instead the government should do the opposite. The government should protect the rights of its citizens to own private property.

Per this presenter, when John Locke spoke of “rights, liberty, and property”, that’s the property he’s talking about.

… every Man has a Property in his own Person. This no Body has any Right to but himself. The Labour of his Body, and the Work of his Hands, we may say, are properly his. Whatsoever then he removed out of the State that Nature hath provided, and left it in, he hath mixed his Labour with, and joyned to it something that is his own, and thereby makes it his Property.

Locke, J. (1689). Property: John Locke, Second Treatise, Chapter 5.

But Karl Marx and John Locke lived in very different economies

John Locke wrote of these ideas in the late 1600s and Karl Marx was thinking of these things in the mid-1800s in industrialized western Europe.

Liberalism, representative democracy, and private property rights were spreading, which meant that capitalism was spreading.

It also meant the monarchy and feudalism were clearly on the way out.

This time period was dominated by classical liberalism. Which meant the governments at the time were especially non-interventionist, at least compared to modern standards.

While others celebrated, Marx criticized

While many who had a part in bringing this new liberalism to western Europe were celebrating the dawning of the era of capitalism and the leaving of feudalism in the dustbin of history, the capitalism Marx saw and criticized was the capitalism of Charles Dickens.

In which Marx saw some good and a lot of bad.

Marx did not separate philosophy and economics

The division of labour

Marx thought the division of labour, which started the assembly line approach to work, while financially rewarding to the factory owners, was causing a loss of meaning in the lives of industrial workers because they didn’t have agency over their work lives.

Prior to working in factories, work was more artisanal, more craftmanship. Workers had more control over their work lives, in terms of when they worked, and how they prioritized their efforts. The workerss also owned the output of their work, which they then kept, or sold.

Industrial factory work didn’t permit this. Workers’ labour was directed by the factory owner and/or manager, who had to organize large numbers of people into large-scale production processes, which created things the workers did not own.

Which per Marx, leads to “alienated labour”

Of which he said:

What constitutes the alienation of labour? First, that the work is external to the worker, that it is not part of his nature; and that, consequently, he does not fulfill himself in his work but denies himself, has a feeling of misery rather than well-being, does not develop freely his mental and physical energies but is physically exhausted and mentally debased. The worker therefore feels himself at home only during his leisure time, whereas at work he feels homeless. His work is not voluntary but imposed, forced labour.

It is not the satisfaction of a need, but only a means for satisfying other needs. Its alien character is clearly shown by the fact that as soon as there is no physical or other compulsion it is avoided like the plauge. External labour, labour in which man alienates himself, is a labour of self-sacrifice, of mortification. Finally, the external character of work for the worker is shown by the fact that it is not his own work but work for someone else, that in work he does not belong to himself but to another person.

Marx, K. (1844). Estranged Labour, Marx, 1844. Marxist Internet Archive.

Marx saw an exploitative relationship based on private property

And between two distinct classes of people. Marx thought that combining the division of labour with the concept of private property inevitably led to this relationship.

The “bourgeoisie” or business owners

Are the ones who own the output of the labour of the workers they employ. They end up owning a lot of property.

The “proletariat” or industrial workers

Are the ones who did the work in the factories, and did not own the output of their labour. They are almost all propertyless.

Surplus value

The workers earned wages out of the deal, and the owners paid the workers as little as they could get away with, in order to protect/increase their profits.

The profit represents the value created by the workers, that was owned by the owners.

Marx believed this “surplus value” was theft and exploitation.

Child labour

Due to a lack of regulation against it, it was common to find young children working long hours in dangerous conditions.

Workers couldn’t vote themselves better conditions

Voting was restricted to people who had education, and public education was not widespread. As a result, the owners outvoted the workers, who essentially had no say as regards pay, working conditions, etc.

Marx saw workers getting screwed over by almost everything he saw.

Marx saw a dismal future

He saw the interests of the owners cause them to squeeze the workers more and more, which would create more unequal outcomes over time.

The rich would get richer while the poor would get poorer.

Eventually, the system would break and need to be replaced. He thought the breakage would entail a lot of human suffering.

And suggested what to replace the system with

Marx saw the abolition of private property in humanity’s future.

To be clear, this presenter is talking about “bourgeoisie property” which we think of as “the means of production”.

This abolition of private property is a system Marx and Engels called “communism”.

A further discussion about their ideas of communism comes later.

Marx and Engels were not alone in criticizing capitalism and proposing alternatives

It was in fact quite common among intellectuals of their day.

However, other critics took a “moral” perspective, saying stuff like “This, that, and the other aspects of capitalism are morally wrong, and therefore we should replace it something morally better, which is [fill in the preferred solution here].

To Marx and Engels, this way of thinking was naive, or as they called it “utopian”.

Marx was impressed with the way Charles Darwin had grounded his arguments about evolution through natural selection in logic and empirical evidence and he aspired to do something similar for the social sciences.

Having said that, Marx and Engels were not entirely objective and disassociated with the subject being studied. They had an agenda that influenced their methods.

The quote below, spoken by Engels at the funeral of Marx is particularly interesting to me, for two reasons which I’ll mention below.

For Marx was before all else a revolutionist. His real mission in life was to contribute, in one way or another, to the overthrow of capitalist society and the state institutions which it brought into being, to contribute to the liberation of the modern proletariat…

Engels, F. (1883). Engels’ burial speech. Marxist Internet Archive.

The first reason I find this interesting is it documents his underlying agenda which allows us to all “filter” his writings through the idea that his goal was to hasten the demise of capitalism.

The second thing I find interesting is the reference to “the state institutions” and I find this interesting for two reasons: 1) It acknowledges the role of “laws” in shaping an economy, which is something, believe it or not, some people even today fail to fully grasp, and 2) it lines up with something economist Richard Wolff said about Marxism which is that Marx believed highly centralized decision making of capitalism (important decisions for a firm being centralized into the board of directors) and of state-owned firms, such as existed in the USSR (important decisions for a firm being centralized into a committee of stated appointed people) are equally problematic. Per professor Wolff, the problem, per Marx, is not capitalism vs state-owned, by centralized decision making vs distributed decision making.

Having said that, this presenter presents a different perspective on that.

However, their method of analysis seemed more practical

Their method involved two main concepts.


The idea is that no society can be understood without knowing what happened in the past. They viewed society as the history of interconnectedness and changes over time.


The idea is that people are the products of their environments.

A core concept here is the material world, quite literally the world of physical stuff shapes the way we need to provide for ourselves.

This led to his interest in tools and machinery, and how they influenced how we organize into societies and economies.

For example, how the windmill shaped feudalism, but the steam mill shaped industrial capitalism as a result of it requiring a lot of money to set up, and it requiring the division of labour to operate.

Marx believed (and I think this is reasonable) that once we invented the steam mill, industrial capitalism was bound to follow.

So, per Marx, the conditions around us determine what form of the economy makes the most sense, and “naturally” emerges.

Marx further believed that the economic structure of society, which is shaped by the environment around us, which includes the tools and machinery we’ve invented, IS the foundation on which the other aspects of society are built.

And some of the stuff we’ve built on top of that foundation are laws, politics, religion, and philosophy.

In the same way that Charles Darwin figured out that the diversity of species on earth was the result of a constant interplay or “dance” between the environment “shaping” the organisms it sustains while those organisms simultaneously shape the environment sustaining them (or more accurately “us” as all life on earth is biologically related), Marx believed that the development of society was a constant interplay between “materialism” shaping the people and the people shaping materialism.

Which in turn included the role of conflict

Marx felt that the primary way people influenced society was through conflict and that a study of the ways people come into conflict with others can help us understand how people influence society.

He further believed that the dominant influence on society was “class conflict” and he further believed that in class conflict the “ruling class” always had an institutional advantage, as they have MUCH more influence in making up the rules of society.

The ideas of the ruling class are in every epoch the ruling ideas: i.e., the class which is the ruling material force of society, is at the same time its ruling intellectual force. The class which has the means of material production at its disposal, has control at the same time over the means of mental production, so that thereby, generally speaking, the ideas of those who lack the means of mental production are subject to it.

Marx, K. (1845). The German Ideology. Karl Marx 1845. Marxists Internet Archive.

Marx argued that you can not understand a segment of society without understanding who they’re in conflict with. So to understand the “owner class” or the bourgeoisie, you must understand the “working class” or the proletariat, and vice versa.

Enter, stage left: Historical Materialism

Historial material is an attempt to understand how a society came to be the way it is, why it is the way it is, and where it’s heading.

This is done by analyzing societies through the lens of materialism, dialectics, economics and class conflict.

Dialectics and more specifically Hegelian Dialectics (named after the German philosopher Hegel) was a huge influence on Marx and is the process of trying to understand things by examing the contradictory nature of opposing ideas.

And this whole thing was wrapped in logic and verifiable facts. As Marx “showed his work” from a perspective of logic, people could easily follow his train of thought, and they could hone in on precisely where they thought he went wrong.

Some major claims of Marx and Engels

These claims were generated using the framework of historical materialism.

History always moves forward in time and on this timeline, there are periods of history, each of which has its own economic structure and its own class conflicts.

Each period “creates” the next, which leaves its distinct characteristics within the new emerging period.

Feudalism and monarchy gave birth to the industrial capitalism and democracy that Marx and Engels lived in.

The dominant class conflict of industrial capitalism is between the bourgeoisie and the proletariat. The bourgeoisie have an institutional advantage, giving them a monopoly on power, which is derived from the accumulation of private property.

As capitalism develops further, members of the bourgeoisie compete against each other while also oppressing the social classes below them (the middle class and the proletariat), extracting more and more money, and more and more property, making themselves richer and richer as wealth accumulates in fewer and fewer hands.

This has the effect of making the lower classes poorer and poorer, as they become increasingly propertyless.

As this continues, the middle class shrinks to where it eventually disappears and the majority of the population becomes the proletariat.

At some point, this gets so bad, that the proletariat band together, and reclaim society as their own (I believe this is called the “eat the rich” phase) and creates a new society where private property is abolished.

This ushers in the first period of human history free of class conflict, a period he calls “communism”.

Marx wrote the following about the destruction of capitalism:

Along with the constantly diminishing number of the magnates of capital, who usurp and monopolize all advantages of the process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organized by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralization of the means of production and socialization of labour at last reach a point where they become incompatible with their capitalist integument (which means shell). The integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.

Marx, K. (1867). Economic Manuscripts: Capital Vol. I – Chapter Thirty Two. Marxists Internet Archive.

Now, we’ve all heard that “predicting is hard, especially about the future”, but Marx didn’t let that stop him.

He thought that his description of the unfolding of capitalism was “inevitable”.

Now having said that, some of his predictions do seem to be coming true, and others, well, not so much.

Now let’s talk communism

Let’s pretend that the proletariat have taken power and abolished private property. What did Marx say that would look like?

The ideas of the proletariat would define this epoch

Marx believed that every epoch of human history has a ruling class, and so that after the proletariat rose up and took power, they would become the ruling class, and their intellectual ideas would be the ones to shape the laws and other structures of society.

His analysis of the conflict between the bourgeoisie and the proletariat led him to conclude that the ideas of the proletariat would be fundamentally socialist in nature.

Which in his mind meant the proletariat would rule this new epoch with socialist ideas.

Here is something Engels wrote on this topic:

Above all, it will have to take the control of industry and of all branches of production out of the hands of mutually competing individuals, and instead institute a system in which all these branches of production are operated by society as a whole – that is, for the common account, according to a common plan, and with the participation of all members of society.

It will, in other words, abolish competition and replace it with association.

[And on the next page]

Private property must, therefore, be abolished and in its place must come the common utilization of all instruments of production and the distribution of all products according to common agreement – in a word, what is call the communcal ownership of goods.

Engels, F. (1847). The Principles of Communism. Marxists Internet Archive.

So all property that can generate wealth, property that can be sold, rented, etc, would go into the hands of the state, and the state would direct the economy, and to some extent, would direct labour.

However, Marx and Engels thought this would be a gradual process, cumulating in the state taking “ownership” of all capital and all production, and eventually private property would disappear of its own accord.

Engels predicted this would so dramatically expand production that even the need for money would disappear.

Up to now, some of their ideas seemed to be describing things pretty well, but after the state ownership experiments of the USSR and China, we know they got this one wrong.


Publically funded education would be dominant, as private schools create class connotations.


Large public housing projects would be dominant and would be available to people working both in industry and in agriculture.


Would simply be abolished.

Equal obligation to work

Would apply to everyone, regardless of what family you were born into.

Being born of capitalism…

Would necessarily mean that capitalism would shape the early stages of communism.

And weirdly, equal pay for equal work would create inequalities. This is because different people produce different amounts in a given time frame, and different people have different expense levels in life, due to being married with children, or not, etc, etc. And in the first phase of communism, there is no way around this.

But later…

This would be resolved in the “higher phase” of communism, which Marx saw as a period of extreme prosperity and extreme abundance.

At this phase, the communist ideal of “From everyone according to his faculties, to everyone according to his needs” would become a reality.

Now I see a certain irony in contrasting that the other critics of capitalism at this time were considered excessively “idealistic”, with the above statement of idealism.

They wanted communism sooner rather than later

Marx and Engels were morally disgusted by capitalism, which, bear in mind, in their day was the capitalism described in the novels by Charles Dickens. Long hours, low pay, child labour, illiteracy, and extreme poverty.

The Communist Manifesto was a propaganda piece they wrote to inspire communists of their day to help speed up the demise of capitalism and the ushering in of the communist epoch.

They believed that creating a society that constrained freedoms contributing to class oppression was right and proper.

They believed that any society that contained class conflict necessarily featured class oppression, and the only way to rid society of class oppression was to engineer a society that contained no class inequality.

Which they saw as requiring a network of constraints

Such as banning inheritance, private schools, homeschooling, and the owning of private property.

But perhaps the greatest constraint of all is the elimination of political freedom.

Their communist society is a totalitarian society shaped through and through by socialism and communism, which can not allow for pluralism of ideas.

If you’re not a socialist or a communist, your opinions have no bearing on the shaping of this society.

While you can find quotes from Marx and Engels about democracy, and while some use this as evidence they supported democracy, this presenter says that is not the obvious conclusion to gain by studying their work.

Their totalitarian vision for society

When in their time they were urging the proletariat to take power and overthrow capitalism, they were speaking to a minority of people who lived at that time.

They did not caution their readers to wait until they had a majority.

Engels even wrote in a letter:

…it cannot be expected that at the moment of crisis we shall already have the majority of the electorate and therefore of the nation behind us.

Engels, F. (1884). Letters: Marx-Engels Correspondence 1884. Marxists Internet Archive.

They advocated for a minority of socialists and communists to seize power, on behalf of the proletariat, and from there, to impose their politics on everyone else.

If you had a problem with this, you were free to keep it to yourself.

All media would be owned by the state. Everyone would be publically educated by the state. There would be no opposition political party that might pull society away from socialism and communism.

And they wanted this to occur worldwide.

While people do find ways to interpret classical Marxism in ways that define it as not totalitarian, their vision for a communist society very much was.

Some aspects of capitalism moved away from Marx and Engels predictions

Increased workplace regulations have made working a more pleasant experience, and the increase in global extreme poverty did not materialize as predicted.

NOTE: This next bit is an addition to what the presenter says because I personally feel he did leave out some important tidbits.

While global extreme poverty is being alleviated, which is great, it doesn’t alter that global wealth and income inequality has occurred as Marx and Engels predicted, and in developed nations, there has been a decline in living standards that occurred, which is in line with their prediction.

So while capitalism from 1945 to 1975 ish did do all this contrary to their predictions, starting in 1975 ish, capitalism did again start behaving in ways consistent with their predictions, but not nearly as dystopian.

So whether they were right or wrong, depends partially on which data you think is most relevant.

So… What IS Marxism?

Here the presenter makes a VERY interesting statement, which is generic to any school of thought named after an individual.

Marx is the guy.

Marxists are the people who are inspired by him.

Marxism is what comes out of both Marx and Marxists. It refers to both the beliefs and behaviours of both Marx and Marxists.

He uses another such school of thought named after a different person as a comparison: Christianity.

Christ is the guy.

Christians are the people who are inspired by him.

Christianity is the subject that comes out of both Christ, and Christians. So whatever Christians get up to, even after the death of Christ, adds to the subject of Christianity.

This is how we treat any school of thought named after and inspired by a person.

Over time people interpret the teachings differently and adapt the teachings to their times.

Neither Christians nor Marxists are, or need to be, held to strict fundamentalist standards.

So neither Marxists nor Christians need to be 100% aligned with what Marx or Christ advocated. They’re allowed to, and do, adapt it to their times.

This is NOT special treatment. This is how we treat any school of thought.

Another example of this is Hegel, the German philosopher who had such an enormous influence on Marx.

Hegel is the guy.

Hegelians are the people he inspired.

Hegelianism is the subject that comes out of both Hegel and Hegelians.

Karl Marx was a Hegelian. Marx adapted Hegel and still counts as a Hegelian. You can include Marxism in the history of Hegelianism, even though he adapted it.

The common threads it seems all Marxists share is…

A dialectical reading of society, where they see two groups in conflict, which they see as a binary of oppressed and oppressors.

The nature of the oppression is systemic.

And the only way to overcome it is to get power and to change the status quo.

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