Friday, December 3, 2010



Good theory is theory that is proven to be correct in its predictions for future phenomena. Karl Marx’ DAS CAPITAL (1867) discovered the long term laws of motion of the capitalist mode of production. Here is what Karl Marx predicted in the 19th century, which has come true in the 20th and 21st century:

• Stepped up technological progress
• Accelerated increase in the productivity and intensity of labor
• Spread of capitalism through every part of the world
• Growing concentration and centralization of capital
• Transformation of the great majority of economically active people into sellers of labor power
• Declining rate of profit
• Increased rate of surplus value
• Periodically recurrent recessions
• Inevitable class struggle between Capital and Labor
• Increasingly revolutionary attempts to overthrow capitalism

(list taken from Ernest Mandel's Introduction to Capital, Vol 1, London: Penguin Classic, 1990).

While many said that Marxism had died an ignominious death after the fall of the USSR in 1992, in fact, there has been a resurgence of socialist ideals in Latin American governments today. Developing countries in most recent years, are rejecting the ideals of privatization and unfettered capitalism, because of resultant high poverty rates. Instead, countries like India are contemplating the need for more welfare state programs. Russia has returned to many of its socialist programs, after a failed experiment in complete privatization. The world may be turning towards a ‘mixed economy’, in which entrepreneurship and socialist policies share the same stage.


Most mainstream economists focus on the circulation of money. Marx starts by examining ‘the commodity’ as an elementary form of capitalist wealth. For Marx, commodity production is the basic and fundamental feature of capitalism. Everything becomes a commodity. Labor power itself is a commodity under capitalism. Capitalism is the pursuit of capital or wealth, using privately owned means of production.

Marx exposes the dual nature of the commodity, its use-value and exchange-value. He tells us that all forms of production hinge on human energy and material obtained from nature. In pre-capitalist societies, items are produced primarily for their use-value. In capitalism, they are produced primarily for their exchange value and ability to yield a profit. Thus an item must be sold at more than it cost. Marx calls this difference - between the cost and sale price of a commodity - ‘surplus value’. This surplus value is derived from labor power, i.e. the more a worker can produce, the more a capitalist can sell. The capitalist must maximize the amount of surplus value from the labor power of the worker. Volume 1 of Capital centers around this ‘secret’ of surplus value. Labor power produces new exchange value larger than the costs of labor power . This is surplus value. As a result, the capitalist must keep wages at the lowest possible minimum. Today, in the US , if the minimum wage had kept up with inflation, it would be set at $20 per hour, not $7.00 approx.