Does Marx Still Matter in the 21st Century?

A portrait of Karl Marx.

A portrait of Karl Marx. (Photo credit: Wikipedia)

With the end of the Cold War and the demise of the Soviet Union, the model of state-led socialism and communism became completely discredited. As a result, we were told that capitalism would be the end of history, and dialectically speaking we can not go further than we currently do. That is what Francis Fukuyama (“The End of History”, 1992) said, who had read his Hegel and his Marx. He contradicted Marx in that not socialism is the end of society, but liberal democracy, or neoliberal capitalism, as scholars on the left refer to the current state of affairs. There was a really Hegelian tinge to Fukuyama’s thought, because Hegel, while considering the World Spirit to be continuously progressing from the past to the present (which is hard to deny in hindsight), also thought that the Germany of his time, with a strong Prussian state acting on behalf of the bourgeoisie, would be the end of history.

But from then on it became more complicated. After Hegel’s death, his students, all considering themselves to be Hegelian philosophers, began to quarrel about whether history had actually reached its end. There was a dispute between the so-called Old Hegelians and Young Hegelians. The Old Hegelians were conservatives like Hegel in the sense that they believed that the end of history had been reached, because the current socio-economic and political foundations were proving themselves to be superior to anything that came before, but also anything that shall came after it. The Young Hegelians, like Marx, thought that the World Spirit is not at rest, and that the current structures is not the most superior solution for society. Marx was also significantly more empirical and politically active than Hegel, because Marx had argued that Hegel’s abstract idealism, while proving to be a useful paradigm, had to be viewed in context with the real, material world. The rest of Marx’ life was devoted to the study of capitalism, and proving that the capitalist system contains within itself so many contradictions that it has to ultimately break down and be replaced by socialism and communism. How that goal was to be accomplished, Marx left to his successors.

But back to the present problem: was Fukuyama right in that liberal democratic capitalism proves to be the most superior form of how to run our political economy? Many of my friends would claim, yes, and point to the demise of the Soviet Union as an example for the failure of socialism: the widespread poverty, the corruption of the oligarchic party elite, the economic inefficiency. Doubtless these processes were in place. In the 1990s, the Russians suffered through a period of crony capitalism and the rise of a greedy oligarchy, but under Putin’s regime since 2000 some central state controls have curbed the worst aspects of the oligarchy. Russia is now using its enormous gas reserves to participate in the global economy as a serious political power. Another example is certainly China. Only 40 years ago, there was almost nobody, who was too concerned about China. Kissinger and Nixon had just visited China, and it was before the major reforms by Deng Xiaoping. Communism was on the wane, and after Mao’s death, the imperative for economic reforms became very clear to the communist party leadership. When the communist governments in Eastern Europe fell in the late 1980s, it became clear that China had no choice but to embrace capitalism full-steam ahead. Deng said it was okay for a few businessmen to become rich, and so they did their best in commoditizing production and introducing commerce into the backward communist structures. These two examples, the Soviet Union and China, are clear examples in favor of capitalism. It can not really be denied after all that the standard of living is higher in post-communist Russia and China, and that it was due to the implementation of capitalist practices of economic growth, the commoditization of products and labor, and private property that a higher standard of living could be afforded.

But here I will now caution the believers in capitalism. I think that Fukuyama and the Old Hegelians were too quick in concluding the end of history, especially if taking some abstract philosophical premises or some superficial reading of economic data to make grand conclusions about the prospects for world history. There are two important reasons why we should not rule out Marx and his dialectical reason as is applied to understand contemporary challenges in our global economic system. First, with regard to the aforementioned historical examples, communist China and the Soviet Union, that clearly were a failure, we have to notice that it was not Marx, who bore the responsibility for how that communist system would play out in the real world. One should not confuse the Marxian analysis of the capitalist system with the Marxian belief in a socialist society. Though it would be correct to say that Marx had the analysis as well as that belief, it would be wrong to conclude that his belief about socialism had anything to do with the really existing socialist states. Marx’ intellectual successors had to worry about how to create socialism, and it did devolve into something that is not very reminiscent of an ideal socialist state. The failure of the Soviet Union is a condemnation of Lenin and Stalin, and not of Marx. The second thing that has to be kept in mind is Marx’ analysis of capitalism itself. Is that Marxian analysis of capitalism still valid? If it is, as I would argue that it is, then his ideas have to be taken seriously by contemporaries no matter which ideological spectrum they belong to, and where they eventually want to cast their votes.

Now the question becomes what is meant by the Marxian analysis of capitalism. I do not have the space to treat his whole theory, and would recommend the readers to read the three volumes of ‘Das Kapital’ (1867, 1885, 1894) themselves. But just to pick up on a few ideas: Marx argued that the capitalist system is inherently unstable, and that while it creates enormous economic growth and a potential and real increase in the standard of living, it does so on an uneven basis, and some might become very rich, while many others will be neglected. So we have enormous wealth and income inequality on the one hand, created through the intrinsic logic of the system, and on the other hand, we have an inherently unstable system that produces booms and busts. Now, this still sounds normal, and not really problematic, but that is only because I am treating the theory in the abstract.

Let us apply the theory to the real world. Marx’ instability hypothesis is confirmed by the enormous economic crisis that has started to engulf the world economy in 2008. (Indeed, “Das Kapital” booksales usually increase after economic crises hit.) While capitalism has opened the venues for trade and economic growth, it has also increased the vulnerability of the economy of each country. Generally, the more inter-connected the economies of different countries are (in the form of trade relations, trade treaties, financial trading etc.) the more vulnerable each country will be, when a crisis hits. When the housing bubble blew up in America, taking down the banks that needed to be bailed out by their governments, the European banking system also faltered, because they were similarly levered up as the US banks, buying the US mortgage papers that were not worth much, because so many home borrowers had defaulted. When the banks pulled back loans to individuals and businesses, as they were forced to, the whole economy went down, because businesses suddenly did not have enough liquidity to hire workers. Laid off workers did not have the income to buy as much products in the market. A fall in demand leds to a crisis even in countries that had built up a lot of real rather than the fictitious wealth of the financial sector (especially China, Germany).

Now, here comes the next set of problems. The financial institutions that were considered too big to fail are continuing with the same policies of reckless speculation. Surplus capital that is stored in the banks has to go somewhere, so financial institutions, and quite frankly anybody who is wealthy enough is all too willing to chase the next financial bubble, such as in the housing market in Canada or in China, or in gold, silver, wheat and oil futures market etc. What does the reckless speculation mean? It means that whoever had been a responsible saver will be shafted. There is no Glass-Steagall law in place anymore that will prevent our deposits to be used for gambling purposes. Most pensioners in the US only have meager retirement savings, and the few savings that they have are either used for personal contingencies or are burned up in losses that financial institutions have to write if their speculation continues to be out of control.

What does this have to do with the real economy? Well, the financial sector has become a leech on the productive economy, and that is because the financial sector had been taking out a larger share of the profit, even from industrial corporations. GE used to be a company that was producing mainly electronic products. Today, they are a company that is only partly manufacturing, and mostly doing financial investments, which does not create any real value to the economy. Who can eat, shelter or clothe himself with stock papers and derivatives?

A close reading of Marx, and some careful newspaper reading will explain again the underlying forces behind this process. The productive sector (manufacturing, agriculture and services) is being hollowed out, because we are facing enormous overproduction. Now, this might not appear to be obvious. But two processes should be kept in mind, and they had been in effect for at least the last half century, though that trend had picked up in the 1980s and going forward. First, with the collapse of the Soviet Union, and the modernization of China, India, and arguably the other states in Southeast Asia, Latin America, and now to some extent even Africa, the global labor population that is available in the labor market has essentially doubled. More workers is a boon for the capitalist, because he can now re-distribute the labor from the wealthy countries with high living standard and labor costs, to those countries with lower labor costs and living standards. Ethically, this may be good, but what it also does in the short-run is it will squeeze overall consumption. The workers in the West are expected to see their incomes stagnate, and in some cases even fall, which is generally bad for companies. There are now jobs and wages in the so-called emerging countries, but their consumption is overall still too low, and does not entirely make up for the losses in consumption in the West (which is what most Chinese economic experts are lamenting too about their country). That is one source of overproduction. Also, workers will work very hard, making them enormously productive. There are few or no labor laws in the emerging countries, though that is subject to change. But at least in the initial outsourcing phase, cheap labor really means exploited labor, and more money for the shareholders. What do the shareholders do with the money? Make more plant investments and create more jobs? Sometimes that happens, but it does not have to happen, depending on where they see growth opportunities. Producing 200 million computers, when only 100 million can be sold, is quite foolish. The surplus capital has to go elsewhere now. Shareholders may deploy their excess capital to buy treasury bonds or buy derivatives (Harvey, “Limits of Capital”, 2010). Nothing that produces any value. But back to the overproduction issue: we have a larger labor supply, that generally has a downward driving pressure on wages, and a depressing effect on consumption, and we have an un-unionized workforce in emerging countries that can claim few protections under labor laws, so the workers will be very productive. (There are unions in China, but they are controlled by the communist Party. The current challenge is to expand independent unions.) This promises an increase in inequality, which the world-wide rise in the within-country GINI coefficient really shows. The rich are getting richer, but the poor are barely improving. Marx’ inequality hypothesis was certainly accurate.

The second factor is another intrinsic process in capitalism: the automation of work (Rifkin, “The End of Work”, 1994; Aronowitz and DiFazio, “Jobless Future”, 1995). Automation has been a consistent process in capitalist development. The forces for it are very easily explained. As time goes on, labor becomes more expensive, and with the given level of production, consumption and competition in the market place, the company faces a decline in the rate of profit. In order to counter this downward movement in profits, the company has to invest in technology and innovation with the objective of lowering the cost of production. Over the long term, the machines are cheaper than workers. With lower cost of production the firms that are quickest to innovate make the most profits, and many workers lose their jobs along the way. This has been well theorized by Marx. Now, what is the problem with this situation? Because, as Josef Schumpeter (“Capitalism, Socialism and Democracy”, 1942) reassures us, innovation may destroy jobs, but it will surely create more jobs in the future, and all of us can gain from cheaper products in the consumer market. Here we need to be careful again. Though there had been a shift from agriculture to manufacturing (early 20th century), and a shift from manufacturing to services (since 1970s) in the western capitalist countries, we have also seen increases in precarious employment in the service sector, i.e. more part-time labor, contingent labor, contractors, low-wage workers etc. (EU Commission, “Precarious Employment in Europe” ) New jobs do not have to be better jobs. More importantly, the companies are already looking for ways how to reduce service labor too: automation of call centers reduces the need for people in call centers; ATMs reduce the need for bank tellers; automated check-outs in supermarkets reduce the need for cashiers; massive open online courses are designed to reduce the need for so many teachers; online shopping reduces the need for sales workers; tax software reduces the need for accountants; computers doing legal research reduces the need for lawyers. Many Western countries, especially in Europe, are already complaining about elevated rates of unemployment. In the US similar problems are also coming into play.

How is that related again to overproduction? Twofold. First, increasing labor productivity with labor-saving technology massively increases output for which there is no guarantee of actually selling this increased output. Displacing labor also means displacing the consumers. Second, it is true that a machine will never decide to go on strike, and it will go to its physical maximum to produce output without any complaints. But a machine also has no personal desires besides electricity to function. They also do not draw any income with which to buy things in the market. In the mean time, in the absence of universal welfare policies, the mass of the population will simply not have the income to benefit from all this increased output due to a lack of income. In the mean time, a few very wealthy people, who have absorbed all the extra profits, that introducing these machines have generated, recognize this trend toward stagnation in the real economy, and invest more in stocks and financial capital, which produces no real value in the economy. On the contrary, it will suck the savers and the pensioners dry, while allowing the gamblers to take more from the national income. We have finally arrived at full circle with regard to where the problems in our contemporary economy can be found.

I will add perhaps one more complication in our system. With the enormous bank bailouts and the response to the economic crisis, many developed countries have seen their public debt increase. The political leaders in the West are now trying to decide how they are supposed to repay that debt. They could either punish the creditors by not repaying them, or by raising the rate of inflation (the second is the wiser choice, and it had been practiced to some extent, though the first solution should be considered too), or they could punish the taxpayers with more taxes and the people with more spending cuts. It turns out that the latter two measures are preferred. The taxpayers are primarily working and middle class people, who pay the bulk of the taxes, while the very wealthy generally have favorable tax laws on their behalf, so they can keep the burden low on themselves (or otherwise they would not be as rich as they currently are). Spending cuts largely affect also the working and the middle class people, who have come to rely on government programs. Now the Tea Party and other conservative groups say that the deficit has to be reduced through dramatic austerity measures on the backs of the poor and the middle class, who did nothing to create the debt and the banking crisis. In Europe, even sharper austerity policies had been implanted in the weakest Eurozone countries, who can afford austerity the least. The government had always played a mediating role among conflicting classes and groups of people. One of their central functions has been to guarantee property rights for the wealthy on the one hand, and the social rights of the poor and the middle class, which will supposedly stabilize the society in a social contract. This social contract is now destroyed, because the social rights are thrown overboard. Austerity measures are self-reinforcing, because less government demand means fewer sales and profits, and more cutbacks, which is the current dynamic in Europe and partly in North America (Blyth, “Austerity: The History of a Dangerous Idea”, 2013). Not only poverty is becoming more widespread in the West, but the economic growth crisis is exacerbated by conditions of inequality (Stiglitz, “The Price of Inequality”, 2012).

Fukuyama was wrong to pronounce the end of history. The contradictions in our capitalist economy will continue to play out. With these developments, social tensions and conflicts are likely to increase and exacerbate before they decrease. People have to collectively demand a more humane economic system, no matter what name they want to give to it, so that they can all reap the benefits of an economy that uses machines to produce goods in abundance, which are then shared by all of the people.

Some Marxist Literature

Adorno, Theodor W., and Max Horkheimer. Dialectic of Enlightenment. Stanford, CA: Stanford University Press, 2002 [1944].

Althusser, Louis. For Marx (Pour Marx). London: Verso, 2005 [1965]. Available online:

Baran, Paul A., and Paul M. Sweezy. Monopoly Capital: An Essay on the American Economic and Social Order. New York: Monthly Review Press, 1967.

Bernstein, Eduard. Evolutionary Socialism (Die Voraussetzungen des Sozialismus und die Aufgaben der Sozialdemokratie). 1899. Available online:

Bourdieu, Pierre. Distinction: A Social Critique of the Judgment of Taste (La Distinction). Cambridge, MA: Harvard University Press, 1984 [1979].

Bukharin, Nikolai. Imperialism and World Economy. 1917. Available online:

Engels, Friedrich. Conditions of the Working Class in England, 1845. Available online:

Engels, Friedrich. Origins of the Family, Private Property and the State. 1884. Available online:

Foster, John Bellamy, and Robert W. McChesney. The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China. New York: Monthly Review Press, 2012.

Gramsci, Antonio. Selections from the Prison Notebooks. London: Elec Book. 1999 [1929-35]. Available online:

Hardt, Michael and Antonio Negri. Empire. Cambridge, MA: Harvard University Press, 2000. Available online:

Harvey, David. The Enigma of Capital and the Crises of Capitalism. New York: Oxford University Press, 2010.

Hilferding, Rudolf. Finance Capital (Finanzkapital). 1910. Available online:

Kautsky, Karl. The Road to Power (Der Weg zur Macht). 1909. Available online:

Kalecki, Michal. Collected Works of Michal Kalecki, Volumes 1-7 (Oxford, New York: Clarendon press, 1990-1997).

Lenin, Vladimir I. Imperialism: The Highest Stage of Capitalism (Империализм как высшая стадия капитализма). 1917. Available online:

Lukacs, Györgi. History and Class Consciousness: Studies in Marxist Dialectics (Geschichte und Klassenbewusstsein: Studien über marxistische Dialektik). 1919-23.

Luxemburg, Rosa. The Accumulation of Capital. 1913.

Mandel, Ernest. Marxist Economic Theory (Traité d’économie marxiste). 1968 [1962]. Available online:

Marcuse, Herbert. One-Dimensional Man. 1964. Available online:

Marx, Karl. The German Ideology. 1846. Available online:

Marx, Karl. Manifesto of the Communist Party. 1848. Available online:

Marx, Karl. Class Struggles in France, 1850. Available online:

Marx, Karl. The Eighteenth Brumaire of Louis Bonaparte. 1852. Available online:

Marx, Karl. Capital Vol. 1. 1867. Available online:

Marx, Karl. The Civil War in France. 1871. Available online:

Marx, Karl. Critique of the Gotha Program. 1875. Available online:

Marx, Karl. Capital Vol. 2. 1885. Available online:

Marx, Karl. Capital Vol. 3. 1894. Available online:

Okishio, Nobuo, Michael Krüger, and Peter Flaschel. Nobuo Okoshio- Essays in Political Economy: Collected Papers. (Frankfurt/M., Berlin, Bern, New York, Paris, Wien: Peter Lang, 1993).

Plekhanov, Georgi V. Socialism and the Political Struggle. Available online:

Przeworski, Adam. Capitalism and Social Democracy. New York: Cambridge University Press, 1985.

Resnick, Stephen A., and Richard D. Wolff. Knowledge and Class: A Marxian Critique of Political Economy. Chicago: Chicago University Press, 1987.

Sweezy, Paul M. Theory of Capitalist Development. New York: Monthly Review Press, 1942.

Trotzky, Leon. The Permanent Revolution. 1931. Available online:

Tugan-Baranovsky, Mikhail. Periodic Industrial Crises. Selected Works. Moscow, 1997.

Wallerstein, Immanuel. The Modern World-System. Vol. 1-4 (1974, 1980, 1989, 2011).

Wright, Erik Olin. Class Counts: Comparative Studies in Class Analysis. Cambridge, UK: Cambridge University Press, 1997.

More Online Resources:

Marxist Internet Archive:

Marxist Sociology Section:

Rethinking Marxism (Journal):

Critics of Marx and Marxism:

Bohm von Bawerk, Eugen. Karl Marx and the Close of His System. New York: Orion Editions, 1984 [1896].

Bortkiewicz, Ladislaus von. Value and Price in the Marxian Value System, International Economic Papers, No. 2. Available online:

Dmitriev, V.K. Economic Essays on Value, Competition and Utility. Cambridge, UK: Cambridge University Press, 1974 [1878].

Gordon, David. Resurrecting Marx: The Analytical Marxists on Freedom, Exploitation, and Justice. New Brunswick, NJ: Transaction Publishers, 1991.

Hayek, Friedrich A. The Road to Serfdom. Chicago: Chicago University Press, 1994 [1944]).

Mises, Ludwig von. Theory and History: An Interpretation of Social and Economic Evolution. Auburn AL: Ludwig von Mises Institute, 2007 [1957]. Available online:

Popper, Karl. The Open Society and Its Enemies. London: Routledge, 1945.

Rothbard, Murray. Economic Thought Before Adam Smith: An Austrian Perspective on the History of Economic Thought. Auburn, AL: Ludwig von Mises Institute, 1995. Available online:

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