There are many misconceptions in the theories of Karl Marx – too many to cover in a single article. I’d like to mention one of them today – the fact that Marx never understood capitalism when he came up with his economic theories.
Marx asserted that the capitalist exploits workers because the worker is never paid the full value of goods produced. Capitalism allows the business-owner to claim a profit on goods sold minus the costs of labor, etc. Marx viewed this as exploitation of the working class (the proletariat) who isn’t paid the full value of labor put forth to produce goods sold on the market.
Marx believed the ruling class, the bourgeoisie, kept the working class perpetually, from generation to generation, from improving their lot in life. The bourgeoisie, on the other hand, is by birthright the landowner and business owner whose status alone keeps the working class from ever entering entrepreneurship.
This is obviously untrue. In fact, it is the state that acts to prevent totally free markets (true capitalism) from taking place. It is the government that seizes property as it sees fit to benefit the governors at the expense of the governed.
What Marx understood to be capitalism was essentially a mercantilist society. In mercantilism society is rigidly structured in a caste system where people have no upward mobility. This is easily observable in colonial Britain where the ruling class slapped oppressive rules on trade that benefitted themselves, but prevented peasants from ever owning land or starting a business for themselves.
The East India Company could serve as a model for Marx’s bourgeoisie ruling class. The East India Company was granted a Royal Charter granting them monopolistic rights to trade cotton, silk, indigo dye, saltpeter, tea, and opium. This offshoot of the British royal family became so powerful that it ruled large swaths of India following the Battle of Plassey in 1757.
No one outside the East India Company could enjoy the enormous trade benefits and resulting riches. One had to be born into a special caste to participate. There was no hope for an Indian peasant to participate fully in the fruits of his labor and the resources of his country.
It was mercantilism that classic liberal Adam Smith rebelled against and what Karl Marx should have decried instead of capitalism. Mercantilist forces forced their will on colonies spread throughout the world, including the American colonies. It was oppressive mercantilist policies that forced revolutionaries in America to revolt against their oppressors.
In a capitalist society there are no rigid classes. In a freely competitive society, with few regulatory controls or government interference, movement between classes is extremely mobile. Poor men become rich men (the great industrialists of the late 19th century are an excellent example) and rich men become poor men (such as those who invested foolishly during the dot.com bust).
Moreover, a worker is free to choose who he works for and understands that he will be paid a wage. The entrepreneur, on the other hand, understands that he will be able to sell his goods on the market after they are produced for a profit. The smart entrepreneur then reinvests his profits in his business so it will grow.
Capitalism has benefitted American society as a whole and has not resulted in the “unavoidable” class wars that Marx assumed were inevitable. In fact it was the mercantilist society that Americans and other oppressed societies around the world rebelled against.
If only Marx could have corrected his error think of the millions of lives and years of turmoil that could have been saved. Of course the resulting work would have been something similar to Adam Smith’s Wealth of Nations.
