Essay on "Marx, Capitalism Is an Economic System Founded"

Essay 4 pages (1501 words) Sources: 0

[EXCERPT] . . . .

Marx, capitalism is an economic system founded upon the exploitation of workers. Using his labor theory of value, demonstrate how he attempted to give validity to his claim.

Karl Marx believed that capitalism, by its very nature, was an exploitative system. It reaffirmed the historically unequal status between proletariat and the bourgeois, every time an employee walked into a factory he or she did not own. The factory owner, Marx pointed out, did not work with his or her hands for a living. The factor owner merely owned the factory, and gained profits from the labor of the workers by virtue of ownership, much like owners of the land gained a profit off of the labor of the serfs tied to the land. The laborer essentially rented his or her body to the factory owner in the form of labor, but did not profit from the fruits of his or her labor, namely the goods (fruits) he or she manufactured. The capitalist sold these goods, and felt that he or she was doing a service to the workers, by offering the workers a salary for working on his or her property.

Modern industrial life thus extracted an unfair cost from the worker. Unlike, for example, a person who labors upon his or her self-sustaining farm, the worker does not produce what he or she needs to survive under capitalism. Instead, the worker merely produces a commodity that will only profit the capitalist. Then, the worker uses his or her wages to buy needed goods -- and give his or her hard-earned profits to more capitalists. In exchange for his or her time, the worker must place excessive wear and tear put upon his or her body. By giving up his or her time, and gaining a wage for essentially leasing his or her body in the service of the capitalist, the worker produces what Marx called the surplus value of labor, namely the cost the laborer incurs by doing more for the capitalist, than the cost the capitalist incurs by hiring or renting the worker's labor-power in the form of the worker's time, body, toil, and expertise. The capitalist calls this surplus value a fair profit, but Marx believes, given the fact that society has rendered the worker dependant upon the exploitative capitalist for his or her livelihood, this profit is not fair at all. The capitalist is gaining more value, simply by virtue of factory ownership, not by toil, from the exploitative relationship.

In theory, the value of a good or service should be equated with the amount of labor that is used to produce it, in other words, the blood, sweat, toil and tears of the labor that goes into the production of the commodity. But the cost or profit of the capitalist is in profit. It is benefit of the worker's labor that the worker does not receive, and merely gets passed onto the owner. Furthermore, in the capitalist market, the value of a good or service is based upon the demand or price that a capitalist can extract from the good or service, not the amount of labor that goes into the work, necessarily. For example, a steelworker may work very hard to produce an engine, but that may command less of a profit, based on demand, of a competing engine that is produced by another manufacturer. The steelworker for the less profitable plant may get a lower salary but do the same work, and although according to Classical theory he or she can 'move' his or her commodity of labor from plant to gain the highest salary -- but regardless, Marx would assert, even the best-paid worker toils more than the poorest-paid owner and the owner gains the real profit from the worker's expertise and pain.

Although in theory the value of labor and value should be conjoined, in the real interaction of a capitalist marketplace, prices vary a great deal based upon the ability of the capitalist to command a price, and the value placed upon labor varies upon the supply and the demand for labor. Most unfairly of all, Marx would argue when labor is cheap and the value of the labor market places a low value upon labor, the capitalist can gain more of a profit from the same goods because he or she is paying a lower wage for same hard work -- more evidence of the exploitative nature of the capitalist system.

Question

While several factors contributed to the decline of Classical orthodoxy, some would argue that the formidable challenge of Marx might have hastened its demise. Critically evaluate and propose alternative explanations for the rise of the Neoclassical paradigm. How relevant is Kuhn's theory to the above paradigmatic shift?

According to Thomas Kuhn, great revolutions in scientific thinking do not occur slowly, but in cataclysmic shifts, when old paradigms are shown to be inadequate explanations of real-life phenomena. This theory of Kuhn's is manifest not just in the natural sciences, but is also seen in the development of the Industrial Revolution and the way that this revolution enabled, through the development of new manufacturing technology, the new capitalist class to manufacture cheaper goods for the majority of the populace in a way that was not simply possible before. As a result of this development of new technology, production rates increased rapidly, and the need for specialized craftsmanship declined. There was a sudden revolution in the way that society produced and distributed goods, and the way that society was organized.

This shift or Kuhn-like revolution highlighted some of the hidden inadequacies of Classical economic theory and demanded new explanations for traditional economic behavior. Marxism was one theoretical response to the excesses of industrialism, but it did not specifically cause the Neoclassical paradigm to shift away from Classical orthodoxy. A paradigm shift of some sort was necessary to deal with the increased complexity of economic life, and Neoclassical economic theory was one explanation amongst many, and all explanations were attempts to come to terms with the theoretical challenges of the new urban industrialism.

The value of the product was supposed to depend upon the costs incurred by producing that product, according to the Classical school. Mass production called into question this equation of costs of production with value. In response to some of the challenges of industrialization, Neoclassical economists introduced the idea of marginal utility, namely that when things are produced on a mass scale, the costs of production will be borne by the producer in a different fashion, and the way the producer responds to demand will also differ. For example, with a machine it is easier and more profitable to produce many items than it is by hand, but if a good is in high demand, even if these goods are very cheap to produce, the manufacturer can still charge more, regardless of the costs of production. But also according to the law of marginal utility, introduced by the Neoclassicists, eventually the producer will use his or her resources to a maximum extent, and gain less and less of a profit from the mass-produced items. Like Classical economists, Neoclassicists believed that the market would eventually find equilibrium, but the nature of mass production created a different and more complex way for that equilibrium to be reached.

Rather than focusing on the ways the economic system enabled the maximizing of profitability for the individual, as did the Classical economists, Neoclassical theorists focused on larger-scale economies of scale. Neoclassicism stresses that there must be equilibrium between production supply and consumer demand, in contrast to Marxism that stresses that the capitalist system was in a state of perpetual inequity. Thus, Neoclassical theory takes into consideration, by virtue of necessity, the historical and technical changes that occurred as a result of… READ MORE

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