Was Marx right?
The current state of the U.S. economy raises the question: Was Karl Marx right that capitalism would destroy itself?
Marx’s thesis—in The Communist Manifesto (1848), written with Frederich Engels—was that, despite its technological progress, capitalism was basically unstable due to its dehumanizing and exploitative character. He predicted cycles of growth and collapse, during which capitalists would increasingly take advantage of labor surplus (the difference between labor’s subsistence and what it produces, also thought by Marx to equate to corporate profits).
The process enriches the capitalists and impoverishes the workers. Workers grow in number and discontent, finally realize that the system is unjust, and capitalism “self-destructs,” giving way (in Marx’s view) to socialism or communism.
Maoism and Stalinism cast a tyrannical pall over these alternative economic systems, and Marx failed to correctly anticipate the role of labor unions and governmental regulations in sustaining capitalism. Still, was Marx right?
The vitality of the Occupy movement—with its terminology of the “1 percent” and “99 percent”—shows us discontent about poverty and inequality not seen in a century. The top 1 percent held 10 percent of U.S. wealth in 1980; today that number is 25 percent, the highest inequality since 1928. CEO salaries have increased fivefold over the past two decades while average wages have been flat. Government programs try to correct this inequality: Most benefits (60 percent) accrue to middle- and low-income groups, while most taxes (70 percent) are paid by the upper one-fifth of income earners.
But the inequality problem is due largely to a lack of private-sector free-market competition. Efficient market-resource allocation needs many buyers and sellers, near-perfect information, and mobile labor—conditions that simply do not exist.
Finally, greed: Wall Street’s recent behavior shows this human failing. A few banks are still “too big to fail”; in the absence of moderating regulations like the Glass-Steagall Act and the Volker Rule, fail they will. While Marx hasn’t been proven right yet, bankers and tea party Republican ideologues are doing their best to do so. This fall’s elections may finally answer the question.