Marxism is a method of socioeconomic analysis that frames capitalism through a paradigm of

exploitation, analyzes class relations and social conflict using a materialist interpretation of
historical development and takes a dialectical view of social transformation. While it originates
from the works of 19th century German philosophers Karl Marx and Friedrich Engels.

Karl Marx
Born in Trier, Germany, Marx studied law and philosophy at university. He married Jenny von
Westphalen in 1843. Due to his political publications, Marx became stateless and lived in exile
with his wife and children in London for decades, where he continued to develop his thought in
collaboration with German thinker Friedrich Engels and publish his writings, researching in the
reading room of the British Museum. His best-known titles are the 1848 pamphlet, The
Communist Manifesto, and the three-volume Das Kapital. His political and philosophical
thought had enormous influence on subsequent intellectual, economic and political history.
Marx's critical tout on society, economics and politics – collectively understood as Marxism –
hold that human societies develop through class struggle. In capitalism, this manifests itself in
the conflict between the ruling classes (known as the bourgeoisie) that control the means of
production and the working classes (known as the proletariat) that enable these means by selling
their labour power in return for wages. Employing a critical approach known as historical
materialism, Marx predicted that, like previous socio-economic systems, capitalism produced
internal tensions which would lead to its self-destruction and replacement by a new system:
socialism. For Marx, class antagonisms under capitalism, owing in part to its instability and
crisis-prone nature, would eventuate the working class' development of class consciousness,
leading to their conquest of political power and eventually the establishment of a classless,
communist society constituted by a free association of producers. Marx actively pressed for its
implementation, arguing that the working class should carry out organised revolutionary action
to topple capitalism and bring about socio-economic emancipation.
Marx has been described as one of the most influential figures in human history, and his work
has been both lauded and criticised. His work in economics laid the basis for much of the current
understanding of labour and its relation to capital, and subsequent economic thought. Many
intellectuals, labour unions, artists and political parties worldwide have been influenced by

1
Marx's work, with many modifying or adapting his ideas. Marx is typically cited as one of the
principal architects of modern social science.

Friedrich Engels
(28 November 1820 – 5 August 1895) was a German philosopher, communist, social scientist,
journalist and businessman. His father was an owner of large textile factories in Salford, England
and in Barmen, Prussia (what is now in Wuppertal, Germany).Engels developed what is now
known as Marxist theory together with Karl Marx and in 1845 he published The Condition of the
Working Class in England, based on personal observations and research in English cities. In
1848, Engels co-authored The Communist Manifesto with Marx and also authored and co-
authored (primarily with Marx) many other works. Later, Engels supported Marx financially,
allowing him to do research and write Das Kapital. After Marx's death, Engels edited the second
and third volumes of Das Kapital. Additionally, Engels organised Marx's notes on the Theories
of Surplus Value, which he later published as the "fourth volume" of Capital. In 1884, he
published The Origin of the Family, Private Property and the State on the basis of Marx's
ethnographic research.
Engels died in London on 5 August 1895, at the age of 74 of laryngeal cancer and following
cremation his ashes were scattered off Beachy Head, near Eastbourne.
Marxian economics focuses on the role of labor in the development of an economy and is critical
of the classical approach to wages and productivity developed by Adam Smith. Marx argued that
the specialization of the labor force, coupled with a growing population, pushes wages down,
adding that the value placed on goods and services does not accurately account for the true cost
of labor.

CHIEF TENETS OF MARXIAN THOUGHT

The following are the chief tenets of Marxian thought.

Marxian philosophy, method of approach, money, and division of labour. Marx's Materialistic
Interpretation of History Marx was perturbed about the various ill effects of capitalism which
progressed throughout Europe. At the same time he was a philosopher deeply trained in Hegelian

2
philosophy; history moves on the basic of ideas. This combination is in the hands of God, since it
is, He who will let people think along some lines and not the others. Thus history is nothing but
the march of God on earth the unfolding of His will in this world. Marx maintained that
Hegelian interpretation of history was upside down. Ideas did not move on their own, or
according to the predetermined will of God; they were also mould on the basis of some deeper
elements in the economy. Marx, in order to be through in his analysis, starts with what he calls
the mode of production in the economy. Within this productive relationship, there may be a
system of slavery, here may be a system of workers and capitalist, feudal lords and serfs and so
on.Next plank in Marxian interpretaition of history is the concept of surplus value. It is assumed
by marx that whenever labour works it impacts that labour to the raw materials it works upon
and in this manner the produced good acquire value. This necessary labour, or the labour cost of
labour, is less than then the actual amount of labour power which the consumption of these
goods and services can replace. Thus, there is a surplus value over and above the replacement
cost.Throughout history, according to Marx, here has been a flight for the appropriation of this
surplus value which the labour is capable of producing. All other classes are subject to its
exploitation and in this manner the appropriation of the surplus value goes on till this class is
ousted and replaced by another class which in its own turn starts exploiting the workers and
appropriating the surplus values.

CLASS STRUGGLE

“The Communist Manifesto” written by Marx and Engels throws light on class struggle. In this
Marx wrote that, “The history of all existing society is the history of class struggle. “Marx made
the class conflict the dominant feature of social life.In ancient times, there was conflict between
the master and the slaves. Under feudalism, there was the struggle between the lord and the serf.
Now under the modern capitalism, the capitalist (bourgeoisie) and the workers
(proletariat).Capitalist production created a system under which workers are enslaved to
capitalists, to the machines, to the supervisor and to the master. Exploitation of labourers is
inherent in the capitalist system. As exploitation increases, there will be two divisions in the
society the capitalist and the workers.Capitalism itself creates conditions for its destruction.

3
METHOD OF APPROACH

Karl Marx first analysed the four broad divisions of economic activity, namely production,
consumption, exchange and distribution. Marx said that production was subjected to natural laws
and distribution to social laws. Productive consumption and consumptive production – the
former shows the use of the product in a new process of production and the later the reproduction
of human life. In addition, he emphasized that production, supplied the material for Consumption
and consumption supplied wants. Thus production and consumption are complementary.

MONEY

Marx in his theory of money mentioned three important functions of money, namely, measure of
value, standard of price and means of payment. When money functioned as a measure of value, it
was considered as an ideal money. If two commodities gold and silver serve as a measure of
value, then all goods had two prices – gold price and a silver price. If the ratio of exchange
between these two remained the same, there would be no disturbance.Marx believed that the total
quantity of money during a given period was determined by two factors- (a) the sum of prices of
commodities in circulation and (b) the rapidity with which goods changed their forms.Marx
considered gold and siver as universal money. He said that just as a reserve money was needed
for home circulation, a reserve money of gold and silver were required for external circulation in
the international markets.

DIVISIONS OF LABOUR

Marx explained in detail the concept of division of labour in manufacture and pointed out that
how in manufacture, a commodity from being a product of an independent workman became a
social product, which was the result of the co-operation of so many workers. Distinguished
between division of labour in manufacture and the division of labour in society or social division
of labour. Social division of labour was regulated by the law of nature. But in the case of the
division of labour in manufacture, the production was complex and was carried on accordance to
the capitalist mode.

Law of fetishism of commodities

4
Fetishism means the mystical character and contradictory nature possessed by the commodities.
Every commodity has two value for the consumer and exchange value for the owner.
This fetishism of comodities has its origin in the peculiar social character of the labour that
produces them.
Labour theory of value
Marx considered the labour theory of value a necessary step to arrive at the theory of surplus
value which explains the exploitative nature of the capitalist society. The value of every
commodity is simply the amount of crystallised human labour which contains, and commodities
differ in value according to the different quantities of labour which are socially necessary to
produce them. Further, Marx emphasised that the value of a commodity would remain constant,
if the labour time required for its production also remained constant.
The theory of surplus Value
Marx divided the labour into two kinds: Necessary labour and Surplus labour .Surplus labour
creates surplus value; its the difference between the selling price of the commodity and the actual
wages paid to the labourer. Marx classified capital as constant capital and variable capital.
Capital invested in stocks or raw materials or equipment which directly asset the productivity of
labour was called by Marx as variable capital. According to Marx, it was only the variable
capital which was capable of creating surplus value. Marx also distinguishes between absolute
surplus and relative surplus value. Absolute surplus value results from an increase in the number
of working hours and the relative surplus value from reducing the real wages.
Law of capitalist accumulation
It is the surplus value that creates capital accumulation. They reinvest it to acquire a large stock
of capital and thus accumulate capital. Marx commented “accumulate, accumulate it, that is
Moses and the Prophets”.
Marx’s theory of capitalist crisis
Marxian analysis of the law of motion of a capitalist society brings out the conclusion that
capitalism must dig its own grave because of certain inherent tendencies in the order which
makes the occurrence of a crisis inevitable. The first proposition of Marx is the division of
capitalist society into two classes- the capitalist and the workers. The second proposition is the
labour theory of value which underlines the concept of exploitation of the workers. The
conclusion which emerges out of these two propositions is the ever-widening gap between the

5
capitalist and the workers. The capitalists go on accumulating capital and undertake further
investment in the hope of growing richer and richer. The workers get just enough to support
themselves and their families. The subsistence level of wages makes it impossible for the
workers to demand anything beyond barest of their needs. Insufficiency of purchasing power
with the workers leads to the phenomenon of under consumption. Overproduction and under-
consumption are, in fact, the obverse and reverse of the same coin. Attracted by their initial
success in the acquisition of profits, the entrepreneurs go on investing their savings. Little do
they realize that poverty of the masses imposes a great restriction on their capacity to consume.
Such of the rich as do not have the incentive to invest, have a great propensity to hoard their
savings, which, in effect, amount to withdrawal of so much money from circulation and a cut in
demand of more than the same order. A chronic deficiency of demand is the result. Falling rate
of profit is the direct outcome of the falling purchasing power of the masses. A crisis is inherent
in such a situation. To Marx the following three theories of crisis are attributed:

a. Law of falling tendency of rate of profit

b. Crises arising from disproportionality

c. Crises arising from under-consumption

Law of falling tendency of rate of profit
The rate of profit has a tendency to fall, as the accumulation of capital goes on. The
accumulation of capital takes place, constant capital increases in relation to capital or quantity
increases. The barrier of the capitalist mode of production becomes apparent, in the fact that
development of the productive power of labour creates in the falling rat of profit a law which
turns into an antagonism of this mode of production at a certain point for its defeat of periodical
crises. The starting point of the crisis is in both cases a decline in the rate of profit, but what lies
behind the decline in the rate of profit, in one case requires a very different analysis from what
lies behind the decline in the rate of profit in the other.
The Theory of Disproportionality
There can arise disproportionality between various branches of production, as each capitalist
starts production and investment on rough estimates of the market. The capitalist system works
on the basis of anticipated demand and hence it becomes difficult to maintain correct proportions
between different branches of production and therefore, output of one or other industry is solid

6
at prices less or more than its value and this tends to spread to other branches. Hence a general
crisis in the economy emerges. The process of adjustment imposed by the forces of competition
would not be smooth, but cause an all-pervasive disequilibrium.
Under-consumption theory
Increasing production creates a problem within itself of selling all the production at given
values. The prices come down and a general crisis ensues. The last cause of all real crises
always remains the poverty and restricted consumption of the masses as compared to the
tendency of capital production to develop the productive forces in such a way that only the
absolute power of consumption of the entire society would be their limit. Self-preservation forces
the capitalist to expand the scale of output. The market must, therefore, be continually extended.
MARXISM AND CLASSICISM
It has often been-remarked that Marxism is essentially a product of classical influence, especially
the of Ricardo Even Marx himself acknowledged his debt to classicism. In "The Critique of
Political economy, Marx clearly mentioned that he studied the classical political economy, while
he was collecting material for his Da Kapital from the British Museum Library. It is a better
proof to say that his economic theories are based on classical theories, "Marxism" remark Gide
and Rist, is simply ted on the classical trunk. According to Prof. Gide, "Marxian theories are
derived directly from the theories of leading economists of the early 19th century, especially
from Ricardo's. Marxian theory of Value, analysis of conflict between profit and wages, theory
of surplus value are derived from Ricardian theories. Again Marxian concept of natural laws
shows close connection with classicism. Marx's abstract, deductive method is essentially
Ricardian in nature. Marx made use of the same theoretical tools used by Ricardo. Marxian
theory of value is essentially Ricardian in nature. Both Ricardo and Marx accepted that the value
of a commodity is determined by the quantity of labour used for its production. For both, value is
measured by the hours of work put in by a worker. Similarly, the theory of industrial reserve
army is based on the Ricardian concept of technological unemployment. Another similarity is the
universal applicability of Marxian theories. So it is reasonable to conclude that Marxism is a new
interpretation of classical theories. The French Marxist Labriola says, "Das capital, instead of
being the prologue to the communal critique, is simply the epilogue of the bourgeoisie
economics." Sorel also meant the same thing when he observed, "Marxism is really much more
akin to the Manchester Doctrine than to the utopian." In spite of all these similarities, there are

7
certain differences between Marxism and classicism. There is ample difference in the language
used, method of deduction and sociological implication. To a certain extent, Marxian analysis
appeared to be an improvement over Ricardian analysis. While the classical economists studied
economic problems on the assumption that capitalism was fixed and permanent system, Marx
regarded capitalism itself as a variable, subject to change. Marx considered it as a transitional
stage. Again while the dominant note of classical writings is based on class harmony. Marx
regarded class conflict and class struggle as a historical fact.

Weaknesses (criticism)

The following are the weaknesses of Marxian economic thought :

1. Marx's materialistic interpretation of history is inadequate and one-sided. History of man is

moulded by many factors. Economic factors are only one of them.

2. The whole Marxian analysis is built on the theory of surplus value. However in the real world,
we are concerned with tangible prices and not with value.

3 Marx has proved to be a false prophet. There is no increasing misery of labour in advanced
capitalist societies as assumed by Marx. On the contrary, the real wages of workers have
continued to rise.

1. Marx pointed out that the technological progress leads to unemployment and thereby rises
the strength of industrial reserve army. This is an exaggerated view.
2. Marx failed to visualize that technological innovations may lead to capital saving.

6. Marx failed to understand the flexibility in capitalism.

Conclusion

In spite of the above criticisms, we should remember that Marx developed many insights into the
problem of modern industrialization. The gifted and ingenious writer who called his system as
scientific, must be regarded as a religious figure to rank with Christ or Mohammed. His
monumental work—Das Kapital is, in fact, the Dooms day Book of Capitalism. To Loria, this
book is a masterpiece where in all is great, all alike incomparable and wonderful.

8
References

Arrow K. (2000). Economic Transition: Speed and Scope. Journal of Institutional and
Theoretical Economics, vol. 156.
Aslund A., Boone P., Johnson S. (1996). How to stabilize: Lessons from post-communist
countries. Brookings Papers on Economic Activity, 1.
Berg A. , Sachs J.(1992). Structural adjustment and international trade in Eastern Europe: the
case of Poland. Economic Policy ,v. 16.
Bessonova O, Kirdina S, O'Sullivan R (1996). Market Experiment in the Housing Economy of
Russia. NSU, Novosibirsk.
Blanchard O. (1997). The Economics of Post-Communist Transition. Oxford. 1.
Blanchard O., Dornbush R., Krugman P., Layard R., Summers L. (1991) . Reform in Eastern
Europe. Cambridge, Mass.: MIT Press.
Buzgalin A., Kolganov A. (2003). Classical Marxism: What is out of Date, and What Has Stood
the Test of Time (Theses for Discussion).
www.nodo50.org/.../buzgalin_kolganov_24... (15.06.2012)
Chamberlin E.H. (1956). The theory of monopolistic competition. A re-orientation of the theory
of value. Harvard University Press, Cambridge, Massachusetts.
Coricelli F. (1998). Macroeconomic Policies and the Development of Markets in Transition
Economies. CEU Press, Budapest.
Davydova I. (1997). Die Novosibirsker Sociologishe Schule: Aufstieg ind Niedergang eines
regionalen socialiwissenschaftlichen Zentrums // Oswald Ingrid, Possekel Ralf,
Stykow Petra, Wielgolis Jan (Hg.) Socialiwissenschaft in Rusland. Bd 2. Berlin (In German).
Draskovic V., Draskovic M. (2012). Institutional Nihilism as a Basis for Anti-
Development Policy. // Montenegrin Journal of Economics. Vol. 8, № 1.
Duggar W.M., Sherman H.J. (2000). Reclaiming Evolution: A Dialogue Between Marxism and
Institutionalism on Social Change. Routledge, London and New York.
Gavrilenkov E., Kuboniwa M. (1997). Development of Capitalism in Russia. Second challenge.
Tokio.