A critique: Where Marx (1818-1883) was right and why he was wrong on the demise of capitalism

So, knowing Marx’s theories as having failed, it is nevertheless interesting to investigate where he went wrong, and where he was right

Karl Marx
Karl Marx

Sonali Ranade & Shealja Sharma

It is nearly 175 years since Karl Marx [1818-1883] predicted the demise of Capitalism as an “economic arrangement” that thrived on exploitation of labour, and was prone to excessive production of goods and services due to Capitalist greed and fetish for private property.

Marx expected his revolution to overthrow Capitalism within his lifetime, for which he held back publication of a major portion of his works, that were later published posthumously by his friend, Friedrich Engels. The revolution never came, and 175 years later, the prospects of it materializing anytime soon look equally dim.

Nevertheless, Marx proved to be one of the most influential philosophers of the 19th century. His ideas of what propels growth under Capitalism are better grounded in his theory of dialectical materialism than any theory of growth that Capitalism itself has to offer, including that of Adam Smith himself.

As I wish to show in this essay, Marx was right about his idea of labour and accumulated knowledge that propel growth under Capitalism. But an ideologically committed Marx drew the wrong conclusions from his well-grounded theory of productive forces.

Likewise, something of his theory of history is still fascinating and well-grounded compared to what is offered by liberal theories which implicitly assume that the basic nature of Man is unchanging, and never evolves even though the culture around him changes as he evolves and causes change in his social and cultural arrangements. On the face of it, Marx’s theory, that man is product of history, and evolves with it, is far more credible than to assume that the Man is unchanged by history. We will look at in detail the gaping hole that Marx reveals at the heart of the liberal theory of the human nature.

So, knowing Marx’s theories as having failed, it is nevertheless interesting to investigate where he went wrong, and where he was right. In the process we learn a lot about where liberal theory is lacking and needs to address its own metaphysics.

The statues of Karl Marx (foreground) and his collaborator Friedrich Engels in Marx-Engels-Forum in reunited Berlin, Germany
The statues of Karl Marx (foreground) and his collaborator Friedrich Engels in Marx-Engels-Forum in reunited Berlin, Germany
Wikimedia Commons


Marx started out on his philosophical adventure as a young Hegelian, who was sold on Hegel’s idea of History as an explanation for Man’s evolution over time. In Hegel, History had been all but deified, and this had a profound effect on Marx’s thinking.

However, Marx was not so convinced by the Metaphysics that grounded Hegel’s Theory of History. Hegel had proposed that Man’s self-consciousness develops through a series of confrontations between self, and others like self, which are resolved or transcended by resolving the conflict in a higher plane of consciousness. Many Hegelians tried to pull away from Hegel’s Philosophy of Mind, while retaining his Theory of History, and Marx was one among them.

Marx was keen to restore ‘Labour’ to the centre of his philosophical world, and wanted to ground the metaphysics that gives rise to movement or evolution in history, a more concrete or “materialistic” basis than Hegelian consciousness. He thought Man’s labour could be one such materialistic force.

On a broader front, Marx was trying to attempt a grand synthesis of the German philosophy of Human Nature, coming from Kant’s idea of the rational man with free will, through Hegel's idea of a self-conscious being, with the empiricist economics of Adam Smith and David Ricardo, [from whom Marx borrowed the Labour Theory of Value], together with his own theory of history, grounded in a material world.

This early philosophical exploration is available in Marx’s early works, never published in his life-time such as the Manuscripts of 1844, the German Ideology, Preface to a Critique of Political Economy and Grundrisse. It was in the attempt to marry Hegelian metaphysics with the empiricist economic theories of Adam Smith and David Ricardo, in a real-world setting, that began Marx’s journey. His theory of History followed as a consequence; an adaptation from Hegel to his own purpose.

For various reasons, that I have detailed in a separate essay, Marx abandoned his attempt to ground his philosophy in the first person, personal experience of Man, like Kant and Hegel, and ported over most of his theories to a third person, an observer’s point of view. In short, in his later work, Marx proposed his theory of labour, dialectic materialism, and his theory of history, as purely “scientific” theories, that were to be taken as empirical facts that stood on the basis of their own truth; and not as some metaphysical musing about Man’s consciousness, individual or social.

Marx himself recognized the contradictions inherent in them. Here, I shall confine myself to the barest outline of Marx later works, and the contradictions that persist in his theories, and which survived Marx’s efforts to excise the metaphysics that had so frustrated him in his earlier theorizing.

A form of socialist realism at the Museum of Socialist Art, Sofia, Bulgaria
A form of socialist realism at the Museum of Socialist Art, Sofia, Bulgaria
Wikimedia Commons


A critique: Where Marx (1818-1883) was right and why he was wrong on the demise of capitalism

Marx wasn’t all that successful in excising the devil of metaphysics from his later “scientific” work. One such essential metaphysical construct was that of labour.

For Marx, labour is all the ways in which man interacts with his world, comprising nature, and others like self. Any which way Man acts to interact with, or master nature, or deal with others like himself, is labour. Moreover, labour is the only way in which man interacts with his world. Hugging your daughter is labour for Marx. There is no other way.

This is a pretty watertight definition, at the heart of Marx’s philosophical construct. Although Marx was to treat his idea of all-encompassing labour as something “materialistic,” as distinct from the nebulous grounding for consciousness that German philosophy had in his time, we can see there is a very large, visible, metaphysical component to Marx’s conception of labour because it encompasses every possible thing that Man can possibly do in his world.

Moreover, as Marx would say, it is through his labour in the world, that man becomes conscious of himself, and so constitutes himself. [Marx loved circularity by the way, just like our learned Sanghis, and some erudite editors who guard the integrity of our new episteme in the new era after 2014.]

Marx, having thus defined his conception of labour as a metaphysical construct, went on to treat actual labour, and this metaphysical labour, as one and the same.

He never distinguished among labour on the factory floor by a worker, or research by a scientist, or thinking by a philosopher, or a cave painting by an artist, or unpaid work by a mother teaching her child to do maths. They are all the same, paid or not, voluntary or forced, for self or for others; and this gives rise to deep conceptual difficulties in Marx dialectical materialism, as we will see when we talk about Marx concept of “Accumulated Knowledge” of Man.

A critique: Where Marx (1818-1883) was right and why he was wrong on the demise of capitalism


A critique: Where Marx (1818-1883) was right and why he was wrong on the demise of capitalism

In later work, Marx attempted to separate his theory of human nature, from his theory of history, and ground both as materialist propositions that would be proved by empirical observation like any other social science theory, taking them away from any philosophical moorings in a first person, personal experience.

The aim of this move was to give substance to his claim, first made in his book, the German Ideology, that “consciousness does not determine life, but life determines consciousness.”

In doing so Marx made little use of his theory of fetishes so elaborately crafted for his early work, although the concept survives as “commodity fetish” in the Capital to explain Man’s attachment to private property.

Instead, Marx, in his later theory of Human Nature posits that Man is a victim of “false consciousness” where false consciousness is something where Man makes universal errors of judgement rather than any one particular error.

To prove ONE such instance of “false consciousness”, Marx cites exploitation of labour, or that of Man by man, where man uses another’s labour to acquire capital or property. This evidence of exploitation itself constitutes false consciousness because, no rational agent with full agency and free will, would do such a thing. [The Kantian moral imperative.]

Marx moved to this new formulation after he replaced Hegelian theory of History, [that runs in parallel with his three moments of consciousness], and argued that it is material forces, that cause consciousness to develop. Marx then argued that the fundamental things that develop, so as to bring movement of History, are not features of consciousness at all but material forces. The development of consciousness is to be explained by material reality, and does not explain it.

Also, it was “materialistic forces” that would cause Capitalism to collapse through over-production, enabling Man to replace it with a more Humane social and economic arrangement. So, materialism is very important to Marx.

The most important reason for Marx, to separate “base” from “superstructure” of his material forces, is to preserve the productive “base” created by Capitalism, while dismantling the “superstructure”, that contains political and legal institutions, that allow exploitation of labour.

In short, Marx, like Christianity before him, was after dismantling modern day “slavery”, or exploitation of labour, under Capitalism, rather than dismantling society, and its productive base itself. The distinction is very important.

A critique: Where Marx (1818-1883) was right and why he was wrong on the demise of capitalism
Wei Fang


A critique: Where Marx (1818-1883) was right and why he was wrong on the demise of capitalism

Marx proposed that the base of all human institutions is that upon which the forms of consciousness are built, and in terms of which institutions, and the consciousness that derives from them, are to be explained.

“The base, Marx held, consists of two parts: first, a system of economic relations, and secondly, certain active productive forces. The existence of any particular system of economic relations is explained in terms of the level of development of productive forces.

These productive forces in turn consist of labour power and accumulated knowledge. As man’s mastery over nature increases, the productive forces will inevitably develop. At each level of development, a particular economic relation will be more suited to contain and facilitate their operation.”

The stuff in bold is my emphasis on a quote by Roger Scruton that explains why Marxists get Marx so wrong. Roger Scruton doesn’t use my argument though.

“Upon the system of economic relations rises the superstructure of legal and political institutions. These serve to consolidate and protect the economic base, and are therefore explicable in their sustaining and protective function.

Finally, the political institutions generate their own peculiar ideology. This is the system of beliefs, perceptions, values, and prejudices, which together consolidate the entire structure, and serve both to conceal the changeability, and to dignify the actuality, of each particular arrangement.”

So that’s the base and the superstructure of Marx materialistic forces that drive both consciousness and history.

Why the separation into base and superstructure? As Marx explains, it is the superstructure that is overthrown under communism, leaving the base intact to continue with its productive work but under a new superstructure that is more humane. Marx never got around to explaining how the new utopia would actually work. Just that the one under capitalism would go to end exploitation of man by man or of labour.

Marx posits there are roughly five economic arrangements under the superstructure of his materialistic forces. They are primitive communism, slavery, feudalism, capitalism and communism. The last is distinguished by the fact that, under communism, the necessity for a legal, political and ideological superstructure vanishes, together with all its apparatus and the “false consciousness” which surrounds it, because man has transcended the need for private property through a plentitude of goods and services. [Altruism follows plentitude; altruism doesn’t cause plentitude, as Karl Popper would say.]

More important is what causes the superstructure to become unnecessary, and here we have the key to that which Marxists are loathe to admit to.

Consider what is at the heart of Marx’s productive forces. It is firstly labour, and secondly accumulated knowledge, or what we might call technology & knowhow.

Labour available on a per capita basis is fixed. It by itself cannot contribute to growth over a given level of output, never mind Marx’s theory of exploitation. There are only so many hours in a workday. So, what does grow, and grows “inevitably” as Marx himself notes, is accumulated knowledge or man’s mastery over nature. [This is an observed fact. Man’s store of knowledge has grown while working hours per person have fallen.]

So, this implies that the non-linear or exponential growth in output necessary to create the plentitude of goods and services necessary to cause Capitalism to collapse through overproduction can only come from accumulated knowledge, or increasing mastery over nature.

Exploitation of man by man ends, not when communists comrades take charge of the productive forces, and start rationing out goods and services. They only produce misery when they do that. Instead, the exploitative structure becomes redundant because, man’s mastery over nature, through accumulated knowledge, obviates the need for such exploitation. Marxists turned Marx on his head by trying to bring about a communist revolution before we have achieved the required mastery over nature.

Who owns and controls the store of Man’s accumulated knowledge? How does it grow? As I have argued, this is the beast, [& not the Sanghi Bhist that India adores,] that actually drives history and consciousness in Marx’s thought; not so much the “exploitation” that Marx focussed on.

Secondly, and we shall go into Marx’s theory of value created by labour next, do note what Marx attributes to labor. In his arguments, all value is created by labour alone.

In a very fundamental sense, you might say this is true because accumulated knowledge is also created by labour. But in reality this notion is false. The labour that creates the store of knowledge is actually saved labour, set apart from any direct productive processes, by foregoing consumption/wages, and specifically directed at researching new techniques, or making new tools.

Saved labour differs from direct labour in that it is already capital or property, a thing Marx abhors. And it is also the most productive part of materialistic forces responsible for non-linear growth that causes Capitalism to collapse eventually through a surfeit of goods and services.

For Marx then to argue that only labour [or direct labour] creates value is a false notion. Accumulated knowledge creates more value. Marx mentions accumulated knowledge, correctly attributes much value to it in enhancing productive forces, but assumes this happens for free. Worse, he ignores the store of knowledge completely thereafter in his theorizing.

Furthermore, the accumulation of such knowledge goes on all the time over centuries of Man’s history. No existing labour owns this store of knowledge, nor may its value be attributed to the body of men and women who now constitute labour. And there will inevitably be inventors and entrepreneurs who added to this store and demand property rights over them. How should the economic claims of accumulated knowledge to be adjusted against what is currently available as labour? Marx provides no answers. Fact is he didn’t even recognize the contradiction that he himself created for the second time in reformulating his theory of history as a materialistic force.


A critique: Where Marx (1818-1883) was right and why he was wrong on the demise of capitalism

In his early Theory of History, Marx posits there are three “moments” of human consciousness, and corresponding to these, three stages of history, each manifesting itself as a stage of Man’s stance towards the world.

In Marx’s early theory of history, the natural man is the primitive man dominated by nature, living out his existence per nature’s dictates. During the second stage, man learns to acquire some mastery over nature for his use. He thus begins to acquire useful artifacts to ease his life, make tools etc., and the institution of private property develops.

This separates man from nature as nature becomes an object for man. But private property also separates man from man as private property is not communally shared. Private property generates the institutions of exchange, modes of productions, or the economic system we know as Capitalism.

However, as Man’s mastery over nature is complete, and production of artifacts becomes plentiful, the need for private property turns obsolete/redundant. Thus, with plentitude [generated by Capitalism] man no longer needs private property. Man can now transcend private property, stop treating nature as something to be exploited, and end his alienation from others like self. Man thus becomes free from want, and can go back to his species-life and free creativity.

Do note that Capitalism’s demise is brought about only after Man’s mastery over nature is complete, not before. Moreover, the collapse of Capitalism comes about in its superstructure - political institutions, social & legal institutions, and ideology; not because chaos prevails but because the level of property and plenitude that Capitalism creates, makes the institution of private property redundant.

Everything is in such plentitude, that no man is chasing private property any more. The collapse of Capitalism is not brought about by comrades seizing productive forces and rationing out goods and services. It is in fact Capitalism that makes communism possible by developing productive forces in Marx’s world.

My guess is power hungry Marxists pushed this part of Marx’s thought into oblivion in order to seize power through a revolution at the earliest. However, Marx is very clear that Communism is a suitable way to organize Man’s life after want/need has been effectively eliminated by Capitalism.

So why did Marx want to overthrow Capitalism or its superstructure, if not the base, so vehemently? For that we need to understand Marx’s theory of Labour Value.


A critique: Where Marx (1818-1883) was right and why he was wrong on the demise of capitalism

Now let us look at Marx’s labour theory of Value that he borrowed from David Ricardo [1772-1823] and adopted for his own purposes. And how it leads to exploitation of man and hence makes overthrow of the superstructure of Capitalism desirable. [The base is to be carefully preserved in order to keep producing platitude.]

In Marx’s earlier formulation of his theories, then based in metaphysics, Commodities have both a use value and an exchange value. Use value is easily explained in relation to the actual use the commodity is put to. What explains exchange value and how does that make it possible for somebody to accumulate exchange value through the operation of the market?

David Ricardo in his labour theory of value, posits that the exchange value of any commodity is simply the number of socially necessary hours of labour needed to produce it. [Liberal theory thinks use value is already in the exchange value as part of it and hence need not be separately tracked.] The more labour required, the higher the exchange value. Marx latched on to this explanation by Ricardo to reformulate his theory of exploitation of labour under capitalism.

“The accumulation of exchange value as surplus is then explained in terms of extortion of labour from the laborer, by exchanging his means of subsistence for hours of labour in excess of those needed to produce those means.”

Marx thus makes the case that the existence of any & all surplus value must necessarily be explained in terms of labour used but not paid for.

Marx’s assumption is without basis under free market conditions and fully true only under slavery. Hegel would argue even against such an assumption under slavery. But nevertheless, Marx assumes such exploitation of labour as the basis of his new theory of human nature that triggers history to overthrow Capitalism.

Marx’s assumption that only labour produces any value flies in the face of his own assertion that accumulated knowledge is a key part of his productive forces. Nor does Marx give much thought to how to value the store of accumulated knowledge that actually and visibly drives history in our everyday experience.

Stop for a moment to think where this complication or contradiction comes from. As I noted earlier, Marx’s very definition of labour is metaphysical in which any and everything I do is labour, and there is no other way in which I can interact with this world or others like me, save through my labour.

So, if I work for 1 day on the shop floor, I get a wage to fill my belly. But if I decide not to work, go hungry, in order to make a widget that helps me do my job better, I neither get a wage, nor any extra reward for inventing the widget, and have to go hungry. Which fool will argue that, under such conditions, Man’s store of “accumulated knowledge” will grow, and grow “inevitably” [and for free] as Marx assumes?

We see precisely this killing off of innovation at work in modern socialistic societies, where rate of innovation falls off steeply compared to Capitalistic societies. This mixing up of concepts about labour, and what it is utilized for - direct for production, or saved to add to accumulated knowledge, lies at the heart of the flaw in Marx’s thought.

There are other deep philosophical issues that arise with respect to store of accumulated knowledge and Capital itself [assuming Capital itself is nothing but saved labour] when you bring the time dimension into the matrix of productive forces and try to balance inter-generational equity.

This is true not only of Marx’s ideas but also those of the liberal theories. There is this notion of unearned gains when wealth passes from one entrepreneur to his progeny. Or windfall profits to certain types of property holders when technology changes, completely revising the valuation matrix in society.

On the negative side, changes in store of accumulated knowledge render whole industries obsolete making large number of workers redundant, and destroying enormous amounts of accumulated wealth/capital. Material forces not only create value but also destroy value, and if one looks at history, value destroyed as redundant far exceeds the value currently in use. Pause to think. Unlike Marx assumes, Capitalism destroys a considerable amount of wealth and property even as it creates it through changes in accumulated knowledge. Marx gives no thought to this aspect at all.

Nor is liberal theory free from flaw. Under Capitalism, the historical claims of Capital are preserved over future labour of others not yet born. In a sense, there is more notional wealth in this world than the labour required to meet those claims!! If you look at rich nations today, you find enormous amounts wealth, but a declining work force, that cannot meet the claims on its output by accumulated wealth over a life time. Such wealthy nations have to perforce import labour from abroad, either directly or through import of goods and services. What is true of nations today can be true of the world tomorrow because accounting for wealth is deeply flawed.

And yet we see people go hungry and without jobs. To explain this curious phenomenon of “paper or notional wealth” require a book. So, I will leave it here as a contradiction that bedevils both Marxist thought & Capitalism.

So, Marx’s simplistic but critical assumption that all value comes from labour is deeply flawed and misleading. The reality should give more weight to store of accumulated knowledge and once you recognize that, the entire Marxist theory of base + superstructure driving history, and constituting consciousness, becomes inconsistent needing complete revision.


He did a phenomenal job of restoring man to the centre of our philosophical attention through his concept of labour. This place had been lost to machines, technology, and deified history. Marx brought focus back to man, which is why he proved so popular.

Unfortunately, he couldn’t resurrect the individual that Renaissance, and Kant had created; but Hegel had lost in his Theory of History. Marx promised to restore the Kantian man through Communism to his free creativity, but his thoughts about labour were to prove deeply flawed. You cannot sink, reduce, and submerge a creative individual into mere labour, and nothing but labour, and expect to restore him to full free creativity. The two are mutually exclusive. But Marx did not return to the metaphysical problem he had defined away in his conception of labour. He just kept waiting a life time for history to prove him right.

Also, as we saw, production of goods and services in plentitude necessary to transcend capitalism, requires growth in accumulated knowledge that comes from saved labour. A right to private property arises when I forego my meal in order to save my labour in making a widget. It is not a fetish for property that drives me, but the need to creatively address my problem in enhancing my productivity. So Marx rather long a dreary fascination with fetishes and false consciousness was as misplaced as the Buddhist thought that the world is Maya and should be forsaken. Hardly a constructive way to engage with the world although conceptually, it a thought pregnant with meaning.

Lastly, Marxists of all kinds have misrepresented Marx in order to use his philosophy as an intellectual manual to overthrow the existing order. Marx spent most of his life waiting for the revolution. But it never came. 175 years after Marx, we still wait for it.

My guess is we are missing the revolution even as we wait for it because a revolution happens each day I skip my meal and wage in order to make a widget or think of a new way to teach maths to school kids. They are tiny, ubiquitous, and everywhere, if only we know how to look for them. The bigger economic problem is how to recognize and reward them under any economic arrangement. Even Capitalism is yet to find an efficient way of doing so.

Marx’s friend, philosopher, and guide, and later publisher of all of Marx’s unpublished works, warned Marx to rethink his revolution because even in his life time, instead of collapsing through overproduction as Marx kept predicting, Capitalism was thriving as it found new markets vertically in increasing demand, or horizontally through imperialism. With oil, entirely new markets were created in transportation. Friedrich Engel therefore asked Marx to rethink his revolution as Capitalism kept creating it own demand for goods and services, instead of collapsing under the weight of over-production. But Marx I guess was too exhausted to do so.

Every generation logically thinks doom is here. The world ought to have ended soon after Buddha discovered that it was an illusion. It never did. My guess is that even if Communism were ushered in by some magic, as Herman Hesse imagined in his book the Glass Bead Game, Nietzsche’s Will to Power thesis will ensure we will invent a new game of life to transcend even the Communist utopia, if it were at all desirable.

Marx didn’t reckon with what creativity can do when Man mixes it with his labour and nature. John Locke invented labour as one of Man’s rights. Marx tried to sink and submerge Man in the narrow concept of his labour. Not a very wise thing to do even if your intentions are noble as Marx’s undoubtedly were.

Man is much more than his labour.

Much much more.

Man is creative; and much much more than just an artifact of his history.

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