Critics Of Capitalism While classical and neo-classical economists praised the capitalist system for its ability to generate vast wealth and impressive efficiency, not everyone was pleased. Those objecting to capitalism had two different perspectives. Some, let's call them conservative (or reactionary) thinkers, regarded the capitalist system and it's rationalist underpinnings as destructive of a cultural "fabric" which had developed over centuries. These people felt that the market split people apart from one another, breaking down traditional classes and the obligations mutually owed among the various ranks of society. Gone was the sense of loyalty and the feeling of community that they felt characterized the feudal age. It was to be replaced with the "cash nexus" and labor markets. These commentators saw the new economic system and its accompanying social system as based on the tenets of reason, not faith or custom. They saw the French Revolution and the French Republic as exemplary of what happens when reason tosses aside (at least) a thousand years of cultural and social evolution. The chaos and bloodshed that characterized so much of the revolution was precisely the sort of madness these conservative observers felt was being unleashed upon the world‹and capitalism was the heartless economic engine that went hand in hand. An example of this sort of thinking can be found in the works of Edmond Burke. To read more about Edmund Burke click here

The critics of the right were arguing against a system which was already established. There was no hope that they could prevail.

The other opposition came from the left. It was far more durable and effective. The leftist opposition took two broad forms‹the utopian socialists on the one hand, and the communists on the other. Marx gave them the name "utopian socialists", and it was intended as an insult. By this name, Marx intended to highlight their naiveté in assuming that profound social change only required the expression of an interesting idea to bring the masses flocking in rejection of the lives they'd lived for time immemorial.

The first of these is Robert Owen. Owen was a man who became a textile mill owner at New Lanark in Scotland. Robert Owen's factory provided education for the workers' children, a good wage, and a healthy environment. In addition, workers were encouraged to advise and assist one another in matters of productive efficiency and conduct. The startling aspect of all this, to general society, was its profitability. Owen's mill did well financially. Countless interested citizens, legislators and capitalists visited it. Eventually, others tried to replicate Owen's model. The results were, to say the least, mixed. Owen spent his fortune traveling to sites attempting to emulate his model, and eventually gave up the life of a reforming mill owner. He became, at last, the head of Britain's emerging labor movement and created another significant role for himself in that area. Owen was hardly a revolutionary, and he was not an economic theorist. Still, his success and influence went beyond any of the other "utopian" socialists. In fact, it is somewhat unfair to include him in the utopian socialist group.

The next member of this somewhat unhappy group is Count Henri de Rouvroy de Saint-Simon. Saint-Simon's vision was of a society and economy clogged with the predations of the commercial and business classes whose interests were to impede production and supply in order to drive up prices and profit‹to cheat and rob the customer in order to increase gains. In response, Saint-Simon believed that society and the economy should be organized like a factory, so that product and quality could be maximized. The engineers should, in effect, by put in charge. He attracted a following, many of which were engineers. This following ultimately became something of a religion (which stirred the fears of an early 19th century Catholic France. Soon, rumors of "free love" and such scandalized French society, and the Saint-Simonist "religion" suffered the wrath of government sanctions.

Finally, we come to Charles Fourier. Fourier believed that the problem with economic society was "repression". People were required by economic necessity, to do things that did not match their particular character. Fourier set about describing a community where people would find tasks that would compliment every personality profile. All aspects of life were covered in Fourier's "phalansteres". Everything from work assignments to recreations and games was defined. Fourier waited for subscribers, and there were some. Overall, however, nothing came of his designs.

John Stuart Mill is also counted by Heilbroner as a utopian socialist. This is a bit unfair as Mill only qualifies in this regard because he believed that, ultimately, we couldn't really consume the vast output of the newly capable industry. Because of this, profits for industry would fall as they reached the limits of the peoples' abilities to consume, and at that point people could divert their energies to enriching their true human capabilities. This is hardly a "socialist" position, nor is it "revolutionary" (except in it's implication that we might have to find something other than materialism to amuse ourselves). The serious critic of capitalism is, of course, Karl Marx.

Karl Marx is, first, a philosopher: a student of George Wilhelm Friedrich Hegel, the pre-eminent philosopher of mid-19th century Prussia. Hegel postulated that all reality was the product of "idea", specificically the idea carried in the "universal" mind‹which is perhaps best characterized is the mind of God. This is a manifestation of what is called "idealism" in philosophy: the premise that reality is a product of thought or mind, rather than having an independent, concrete existence which is the more common approach of "British" empiricism. If reality is the ongoing thought process of God, it clearly has a direction and purpose. Hegel would insist that this meaning an purpose is utterly beyond our capability of understanding, though it would doubtless, in the longer run, be a positive direction. Best that we understand our good fortune in realizing that God is the source of our reality and in the glow of being the culture that discovered this fact‹and simply "go along for the ride". His radical students, however, were not impressed.

Marx and his radical student companions decided that Hegel had the process right, but the authorship wrong. It was not God that ran the process of human development, but rather it was man who created his own movement and development‹and everything that went along with it. Engels (Marx's intellectual companion and alter-ego) suggested the "Hegelian" beginning of the process of history as being the state of "primitive communism". This was a vastly pre-historic state wherein humans were nearly "dumb" animals‹without concepts of "property" or human individuality. Still, they were also unencumbered with the exploitation and alienation that property brings. It was a kind of primitive utopia. Inevitably, humans developed the concept of property, and with it the idea of human individuality: the property that is "mine" reflects and objectivizes "me". At this instant, the march of human history begins.

Marx argues that humans differentiate themselves from other animals through the process of labor. Man is the only animal that significantly alters his environments through his own directed efforts. These efforts create a series of "modes of production" which is the structure by which people derive their living. Each mode of production encompasses the techniques used to produce goods, the organization of this production, the property relationships by which the wealth produced is divided up and the ideas (philosophies, religions, politics, art and culture) that serve the needs of that mode of production. The ideas of medieval Europe supported the concept of the lord of the manor, the peasant and his role of providing labor and the church with God at the pinnacle. The residents of medieval Europe would have seen these institutions as ordained by God and immutable, but the march of human labor created new modes of production which tore down these ideas and the economic structures associated with them.

As labor and history march onward, economic society becomes more and more productive, and people become more individualized and sophisticated. With Capitalism, man reaches the highest level of productivity and wealth, and the idea of the individual reaches its pinnacle. Indeed, under capitalism, humans become so individualized that the very fabric of community begins to unravel. People become commodities, and, using tools owned by the capitalists, produce other commodities the pursuit of which comes to define their existence. People become alienated from the "life processes". They no longer feel fulfilled by having produced what the produce. They're simply "in it for the money". The lack of community, lack of connectedness and lack of fulfillment from one's life process is a condition that makes capitalism intolerable. Capitalism, like all other modes of production, must fall. Marx becomes an economist in order to discover the processes by which capitalism must collapse.

According to Marx, all goods sell (in the longer run) for a price equal to the socially necessary labor time contained in them. Socially necessary labor time is rather like the "industry average". The capitalist pays for all inputs to his process of production and amount equal to the socially necessary labor contained within each input. If the product being made is bread, the capitalism may buy flour at 1/2 hour of labor for enough for each loaf. The oven may have cost, say 1000 hours of labor to buy, and if it produces 100,000 loaves of bread over its life, it would impart 1000/100000 or 1/100 of an hour of labor to each loaf. Finally, let's assume 1/2 hour of a baker's labor time is needed per loaf. The load will then sell for 1/2 + 1/2 + 1/100 or 1 1/100 hours of labor per loaf. One wonders where the capitalist get his profit. The answer lies in the baker he hires. To hire labor, the capitalist pays the socially necessary amount of labor needed to produce (or give sustanance to) a worker. Let's say that workers need 5 hours of labor time per day to subsist. They work, however, for 14 hours per day, and produce, thereby, 14 hours of value. The capitalist only pays for 5 hours of the 14, and pockets the remaining 9 hours of labor value as profit. This excess of labor created over labor paid for is something Marx called Surplus Value, and it is the source of profit for the capitalist.

Capitalists are faced with the prospect of competition. This constant pressure causes them to seek no ways to produce. Over time, they will adopt machinery that speeds the process of production and displaces labor. This gives the capitalist a temporary gain. If the new oven, say, reduces the labor actually contained in the loaf from 1 1/100 to 1/2 hour of labor, the capitalist will (in the short run) continue to sell his bread for the industry standard 1 1/100 hours, pocketing an additional 51/100 hours of profit value. Over time, however, other capitalists will adopt this new technology and the price will fall to the new "socially necessary" labor content of 1/2 hour. At this point, the capitalist loses his temporary gain. Now he's being paid only 1/2 hour of labor per load, and he's burdened with having to pay for an expensive new oven, and, equally importantly, he's got rid of some of his employees so that he has less Surplus Value (in absolute terms) to provide his profit. His investment costs, in other words, have grown, and his stock of Surplus Value has shrunk. His rate of return SV/Investment Cost will have fallen.

This tendency to replace labor with machinery causes constant problems for capitalism. As machinery is adopted, workers are displace, forming the "reserve army of the unemployed" which keeps wages a bare subsistence. Despite this, the cost of the machinery and the relative lack of living workers (employees) from whom to extract surplus value means greater and greater pressure on rate of return. Eventually a cycle of business collapse and recovery begins‹with the larger firms gobbling up the small in each cycle. With each passing cycle, the surviving firms become larger and more capitalized, and the pressure on returns ever greater. Workers are worked harder and faster to produce more Surplus Value per day. The depressions become more frequent and more severe. Eventually, the workers can take no more, rise up and toss capitalism aside.

Having overthrown capitalism, the most progressive (most Marxist) of the workers will seize control and establish a socialist state ruled by a dictatorship of the proletariat. This is necessary to allow the creation of Communism. The alienation and commoditization drilled into people under capitalism will need time to be eliminated. Eventually, as "socialist man" emerges, the communist state can begin. Marx is very vague on what, exactly, Communism will look like. Clearly, it is a far less materialistic society than our own. The idea is that we will treat material goods the way we do tap water. We use what we need, but do not covet or pursue tap water. Having freed ourselves from property and from the lusting after commodities, we will be liberated to do what most suits usŠwrite poetry in the morning, herd sheep in the afternoon.


Obviously, capitalism has not collapsed (and, ironically, the "communist" revolutions that have occurred have all taken place in agricultural, developing nations). It seems likely that Marx's focus on long run phenomena blinded him to the fact that we never achieve the long run. We're stuck in the perpetual short run. This is the short run where profits can continue to grow through constant innovation in products and techniques. As long as we develop new "ovens", the rewards to adopting them will continue, and profit will not fall.