Summary on Marxism

In Marxist economics, the objective is to explain the existence of profits despite the fact that "labor produces all value," and to use the explanation as a tool to understand, and anticipate, the dynamics of capitalist society. The Marxist labor theory of value holds:

In a capitalist economy, the "natural price" or value of any commodity is its cost of production.
Labor, the common element of all production, is the measure of cost.
In a capitalist economy, labor is a commodity, and so the value (wage) of labor is the cost of production of labor, measured in labor hours.
In a modern economy, thanks to increased productivity, a labor-day can produce more than its cost.
This difference is called "surplus-value" and is the basis of capitalist profits and exploitation.

The aim of capitalists then is to increase the rate of surplus-value, and so increase profits. This creates a tension, as it leads at once to the relative immiserization of labor (wages are a smaller and smaller proportion of total value) and a falling rate of profit. This leads (in the capitalism that Marx knew) to increasing instability of boom and bust and a collapse of the free-market capitalist system. In a modern mixed capitalist system it leads -- perhaps -- also to an unsustainable rise in government deficits and debts and the danger of a collapse of government. While Marxism does not provide a blueprint for an alternative system, it indicates that a successful alternative will have to be free of the exploitation of labor through wages and surplus-value. To the list of chapters