104 MARXIST ECONOMICS
With nothing to lose but his chains,
a worker symbolically breaks free of his
oppressors in a poster commemorating
the 1917 Russian Revolution—an event
directly inspired by Marx’s ideas.
The bourgeoisie...
compels all nations,
on pain of extinction,
to adopt the bourgeois
mode of production.
Karl Marx
Friedrich Engelssatisfaction, alienating them from
the process of production. Marx
argued that this alienation would
inevitably lead to social unrest.
Competition and monopoly
Another essential element of
capitalism is competition between
producers. To compete in a market,
a firm must try not only to reduce
production costs but also to
undercut its competitors’ prices.
In the process some producers fail
and go bankrupt, while others take
over an increasing portion of the
market. The tendency, as Marx saw
it, was toward fewer and fewer
producers controlling the means of
production and a concentration
of wealth in the hands of an ever
smaller bourgeoisie. In the long
term this would create monopolies
that could exploit not only the
workers but also consumers. At
the same time the ranks of the
proletariat would be swelled
by the former bourgeoisie and
the unemployed.
Marx saw competition as the
cause of another failing of the
capitalist system: the desire to
jump into markets where profits are
increasing encourages increased
production, sometimes regardless
of demand. This overproduction
leads not only to waste but also to
stagnation and even decline of the
whole economy. By its nature
capitalism is unplanned and ruled
only by the complexities of the
market—economic crises are an
inevitable result of the mismatch
of supply and demand. Therefore,
growth in a capitalist economy
is not a smooth progression but is
interrupted by periodic crises,
which Marx believed would
become more and more frequent.
The hardship created by these
crises would be especially felt
by the proletariat.
To Marx these apparently
insurmountable weaknesses in the
capitalist economy would lead to
its eventual collapse. To explain
how this would come about, he
used an idea proposed by the
German philosopher Georg Hegel,
which showed how contradictory
notions are resolved in a process of
dialectic: every idea or state of
affairs (the original “thesis”),
contains within it a contradiction
(the “antithesis”), and from this
conflict a new, richer notion (the
“synthesis”) arises.
Marx saw the inherent
contradictions within economies –
personified in the conflicts between
different groups or classes—as
driving historical change. He
analyzed the exploitation and
alienation of the proletariat by the
bourgeoisie under capitalism as an
example of a social contradiction,
where the thesis (capitalism)contains its own antithesis (the
exploited workers). The oppression
and alienation of the workers,
combined with the inherent
instability of a capitalist economy
lurching from crisis to crisis, would
result in massive social unrest.
A proletarian revolution was both
inevitable and necessary to usher
in capitalism’s successor in the
historical progression (the
synthesis)—communism. Marx
encouraged revolution in the
closing words of the Communist
Manifesto: “The proletarians have
nothing to lose but their chains.
They have a world to win. Working
men of all countries, unite!”Revolution
Marx predicted that once the
bourgeoisie had been overthrown,
the means of production would be
taken over by the proletariat. At
first this would amount to what
Marx called a “dictatorship by the
proletariat:” a form of socialism
where economic power was in the
hands of the majority. However, this
would be only a first step toward
the abolition of private property in
favor of common ownership in a
communist state.