Marx believed that capitalism was doomed, and he developed an intricate analysis of the "laws of motion" of capitalist society to prove it. At one level the argument has a moral basis: the inherent injustices of capitalism lead ultimately to economic and social conditions that cannot be maintained. At another level the argument is sociological: class conflict—between a decreasing number of increasingly wealthy capitalists and a growing and increasingly miserable working class—will lead ultimately to social revolution. And, finally, the argument is economic: the accumulation of capital in private hands makes possible economic abundance; yet accumulation also leads to depressions, chronic unemployment, and the economic breakdown of capitalism. At each level the idea of conflict is emphasized: conflict between ideal and reality, between capital and labor, and between growth and stagnation. Out of conflict comes change, and for this basic reason, accord
Marx did not give great emphasis to these extraordinary insights into modern society. He developed them in early essays that were not published until after World War II and in two chapters of Capital that deal with them in partial fashion. But even that was enough to profoundly influence many modern psychologists and give us the concept of alienation as a source of psychological disorders.
ing to Marx, capitalism must give way to another form of society in which conflict is replaced by ethical, social, and economic harmony. Change through conflict is the "dialectical process" by which socialism was ultimately to replace capitalism. Marx felt that the process had an economic basis in the division of society into workers and capitalists. Their relationship was exploitive, with the owners of the means of production having the upper hand. Conflict was inherent in this situation, he argued, and it would build up until the whole fabric of society was torn apart.
Exploitation of labor is the starting point. It leads to inadequate purchasing power and, through surplus value and capitalist competition, to accumulation of capital. There is an inconsistency here, however. When the economy is prosperous, business firms earn surplus value for their owners, who reinvest it for expanded output. But purchasing power eventually lags, partly because workers are not paid the full value of their labor and partly because capital investment pushes output capacity upward. Sooner or later a glut of unsold commodities appears on the market. Production is then cut back and prices fall: unemployment increases, profit declines and then disappears, and capital accumulation is halted. The capitalist "crisis" continues until the glut of commodities has been disposed of: prices recover, profits increase, and capital accumulation resumes once more, continuing until the next glut appears. This process, argued Marx, creates the recurring cycles of prosperity and depression that are an inherent failing of capitalism.
Marx also argued that the crises would become more severe—longer and deeper—as capitalism developed. The total capital and productive capacity of the economy increase from crisis to crisis, and the ratio of capital to labor rises. These changes cause the gluts to become larger and larger, to take longer and longer to be disposed of, and necessitate greater and greater cutbacks in production.
But why, one may ask, would the glut appear in the first place? Will not rising prosperity cause increases in employment, wage rates, and purchasing power? Marx answered that even during prosperity the "reserve army" of the unemployed receives recruits—workers whose jobs are taken over by machines. Capital investment leads to substitution of capital for labor. Indeed, this is the only way in which capitalists can increase the rate at which they accumulate surplus value. During prosperity, therefore, capital accumulation creates technological unemployment and pushes wages and purchasing power down, just as commodity gluts do during periods of depression. In either case, the result is the immiseration of the working class.
This is only half the picture, however. Changes also take place within the capitalist class. First, the rate of profit declines as investment in machinery and equipment gradually becomes an increasing proportion of total investment. (Marx was thoroughly convinced of this when he wrote the first volume of Capital , but the notes he left for Volume Three show that he was not quite so sure that profit rates must necessarily decline as capital accumulation proceeds.) Second, the business cycles engendered by capitalism enable the big capitalists to gobble up the little ones. The firms with the largest
financial resources survive, and over the years the ownership of industry gradually becomes centralized in fewer and fewer hands until a few great financiers control all. This remaining capitalist class becomes increasingly wealthy, in contrast to the growing misery of the proletariat, which expands as small businesses fail and the owners join the ranks of the working class. The working class also becomes increasingly degraded as technological change breaks down complex jobs into simple ones, skilled jobs become semiskilled, and semiskilled become unskilled. Ultimately a revolution occurs, a popular uprising of the vast majority against the wealthy few. Led by communists, the working class seizes power and proceeds to build the new society.
Marx was quite aware of the possibility that these economic trends could be modified by political and social changes. Labor unions, originating in the conflict between capital and labor, could reduce exploitation of labor, but Marx feared that opportunistic union leaders might retreat from class conflict in favor of class accommodation. Governments, although dominated by capitalist political interests, could introduce social welfare legislation to strengthen the economic system as a whole. And parliamentary democracy could provide the appearance of popular participation even while the economic basis of political power was becoming more concentrated. Marx, however, was confident that the underlying economic trends and conflicts would predominate and ultimately create a revolutionary situation in which capitalism would be more or less rapidly transformed into socialism.