The Economics Book

102

A

lthough much of
economics is concerned
with free market
economies, it should not be
forgotten that for a large part of the
20th century up to a third of the
world was under some form of
communist or socialist rule. These
states had centralized, or planned,
economies. Political philosophers
were looking for an alternative to
capitalism even as the modern free
market economies emerged.
However, a truly economic
argument for communism was
not formulated until the middle

in economic progress, replacing

systems that he considered to

be outmoded: feudalism (where

peasants were legally tied

to their local land-owning lord),

and mercantilism (in which

governments control foreign trade).

He almost admiringly described

how it had driven technological

innovation and industrial efficiency.

But ultimately he believed that

capitalism was only a passing

stage and an imperfect system

whose flaws would inevitably lead

to its downfall and replacement.

At the heart of his analysis is

the division of society into the

“bourgeoisie,” a minority who own

the means of production, and the

“proletariat,” the majority who make

up the workforce. For Marx this

division characterizes capitalism.

Exploiting the workers

With the advent of modern industry

the bourgeoisie had effectively

become the ruling class, because

ownership of the means of

MARXIST ECONOMICS

In June 1848, workers in Paris rose up

against the government and manned

barricades. The uprising was part of

a wave of failed revolutions across

Europe. It was quickly suppressed.

IN CONTEXT

FOCUS

Economic systems

KEY THINKER

Karl Marx (1818–83)

BEFORE

1789 Revolution sweeps away

the old feudal regime and

aristocracy in France.

1816 German thinker Georg

Hegel explains his dialectics

in The Science of Logic.

1848 Revolutions spring up

throughout Europe, led by

disaffected members of the

middle and working classes.

AFTER

1922 The USSR is established

on Marxist principles under

Vladimir Lenin.

1949 Mao Zedong becomes

the founding father of the

People’s Republic of China.

1989 The fall of the Berlin Wall

symbolizes the collapse of

Eastern Bloc communism.

of the 19th century, when Karl

Marx (p.105) wrote his critique

of capitalism.

While Marx’s influence is

popularly seen as political, he was,

perhaps more than anything else,

an economist. He believed that the

economic organization of society

forms the basis for its social and

political organization; economics,

therefore, drives social change.

Marx saw history not in terms of

war or colonialism, but as a

progression of different economic

systems, which gave birth to new

forms of social organization.

With the rise of the market

came merchants, and with the

factory, an industrial proletariat.

Feudalism had been replaced by

capitalism, which in turn would be

supplanted by communism. In his

1848 Communist Manifesto, Marx

said that this would be brought

about by revolution. To explain

what he saw as the inevitability

of this change, he analyzed the

capitalist system and its inherent

weaknesses in the three-volume

Das Kapital (Capital).

However, Marx was not

absolutely critical of capitalism.

He viewed capitalism as a

historically necessary stage