This is one of a series of posts that will ask what the most pertinent question raised by a prominent influencer of political economy might have been, and what the relevance of that question might be today. There is a list of all posts in the series at the end of each entry. The origin of this series is noted here.
After the first two posts in this series, the topics have been chosen by me, and this is one of those. This series has been produced using what I describe as directed AI searches to establish positions with which I agree, followed by final editing before publication.
The Karl Marx question
Karl Marx was not the first to critique capitalism, but he remains the most enduring. Writing in the 19th century, he saw in industrialisation both extraordinary productive capacity and extraordinary human cost. His central claim was stark: capitalism contains within it contradictions so deep that it is fated to crisis.
The essence of Marx's analysis was simple. Capitalists make profits by paying workers less than the value they produce. But if wages are held down, workers cannot afford to buy what they produce. Capitalism, therefore, undermines its own market. It grows by exploiting labour, but in doing so, it weakens demand.
This contradiction leads directly to the Marx Question: if capitalism's natural tendency is to concentrate wealth in a few hands, impoverish the many, and generate recurrent crises, why do we still treat it as an inevitable and permanent system?
1. Exploitation as the engine of profit
Marx's labour theory of value argued that all profit ultimately comes from labour. Machines may assist, but it is human labour that creates surplus value. Capitalists appropriate that surplus by paying workers less than the value they add.
This exploitation is not an accident; it is the system. Employers compete by squeezing wages, intensifying work, and cutting costs. The result is a structural bias towards inequality. Capital accumulates, labour is dispossessed.
2. Crisis as a recurring feature
Capitalism is not only unequal; it is unstable. By suppressing wages, it undermines its own demand base. Profits rise in the short term, but long-term markets falter. To bridge the gap, credit expands. Workers borrow to sustain consumption; firms borrow to expand production. Eventually, debt becomes unsustainable, bubbles burst, and crisis ensues.
This cycle — boom, credit expansion, bust — has repeated ever since Marx wrote. From the crash of 1873 to the Great Depression, from 2008's global financial crisis to today's looming debt crises, Marx's diagnosis looks disturbingly accurate.
3. The concentration of capital
Marx also foresaw the centralisation of wealth and power. Competition drives weaker firms out, leaving monopolies and oligopolies. Today, global corporations dominate markets, supply chains, and even governments. Tech giants command more data than states. Finance capital dominates politics. Wealth inequality has returned to levels not seen since the 19th century.
This concentration is not incidental. It is the logical endpoint of unregulated accumulation.
4. The politics of denial
Despite repeated crises and ever-widening inequality, capitalism is still presented as the natural, inevitable order of things. Alternatives are dismissed as utopian or dangerous. “There is no alternative,” Margaret Thatcher declared, and neoliberalism turned it into dogma.
Why this denial? Because capitalism serves the interests of those who benefit from it — the wealthy, the asset-owning, the powerful. They use their influence to control narratives, fund think tanks, capture politics, and shape media. Capitalism is not just an economic system; it is a political and ideological project sustained by those it enriches.
5. Marx's unfinished revolution
Marx believed capitalism would collapse under the weight of its contradictions, giving way to socialism. That has not happened. Capitalism has proved more adaptable than he foresaw. Welfare states, trade unions, and regulation mitigated its worst excesses in the mid-20th century, ensuring its survival at that time, especially when the 1930s had questioned that likelihood. But since the 1980s, those protections have been progressively dismantled. Neoliberalism has restored capitalism in a purer, harsher form — global, financialised, and extractive.
We now face the consequences Marx anticipated: unstable economies, grotesque inequality, and democratic erosion. His revolution never came, but his critique remains potent.
6. What answering the Marx question might mean today
To respond to the Marx Question, we need not replicate his prescriptions, but we cannot ignore his insights. If capitalism naturally concentrates wealth and generates crises, then stability and justice require countervailing power. That means:
- Redistribution. We need progressive taxation of income, wealth, inheritance, and capital gains to rebalance shares between labour and capital.
- Labour empowerment. Strong unions are essential, as is sectoral bargaining (for which I argued in my books The Courageous State and The Joy of Tax), workplace democracy, and minimum standards (including livable wages) that prevent exploitation.
- Public ownership and planning. Key sectors like energy, water, housing, and transport should serve public purpose, not profit.
- Democratic regulation of capital. Finance must be controlled, speculation curtailed, and credit directed into productive, sustainable uses.
- Global cooperation. Tax havens, secrecy jurisdictions, and unregulated global capital flows must be dismantled if nation-states are to reclaim democracy.
Inference
The Marx Question asks whether a system that thrives on exploitation and crisis can ever be sustainable. The evidence of history suggests not. Unless constrained by democratic power, capitalism eats itself: it devours labour, erodes communities, destroys the environment, and destabilises politics. The evidence for that hypothesis is now seen all around us.
Marx's insight was not that collapse was inevitable, but that contradictions are inescapable. Capitalism cannot be left to itself. Either it is rebalanced by deliberate, democratic intervention, or it will implode under its own weight.
The choice is stark: civilise capitalism, or let it destroy the very foundations on which it rests. Marx's question, left unanswered, is not about economics alone. It is about survival.
Previous posts in this series
- The economic questions
- Economic questions: The Henry Ford Question
- Economic questions: The Mark Carney Question
- Economics questions: The Keynes question
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The rise of capitalism gave rise to socialism,communism and anarchism in the 19th Century. True, these movements were either temporarily suppressed or destroyed,they are still there and can be revived explicitly or clandestinely. The people may arise again like the proposed Corbyn/Sultana party, greens or left parties in Europe and around the world.
The huge irony is that in China Marxism has been turned into market capitalism oppression.
https://akjournals.com/view/journals/032/69/4/article-p485.xml
“Unlikely Partners: Chinese Reformers, Western Economists, and the Making of Global China” Julian Gewirtz
“Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace” Matthew C. Klein and Michael Pettis
One of the things government could and should do is to foster competition amongst its suppliers.
Government needs to buy goods and services from suppliers. This allows suppliers to specialise and to be efficient, though efficiency can be taken too far. It doesn’t make sense for government to try to do everything. In other words, we need a mixed economy where government runs natural monopolies but where private companies compete to provide other services.
The problem is that, at the moment, government pushes competition and efficiency too far. Bids are chosen on the basis of lowest cost, which is open to gerrymandering. It also leads to a few, or even one large company, being given enormous contracts. This locks the government in to future contract because there is no one else left to compete for future contracts. In turn this leads to the government being exploited and overcharged for these services.
I see two changes that are needed. First award contracts to the second lowest bid; it’s much more difficult to game this. It’s an approach I use for domestic contracts. Secondly ensure that, for large contracts, at least, say, 4 contractors are used to ensure genuine competition persists.
When reading Shoshana Zuboff’s ‘Surveillance Capitalism’ I came across the notion that capitalism was like a raw sausage – dangerous unless cooked by the heat of regulation. A strange metaphor, but it stuck with me. We also need some other things on the plate, for a a balanced mixed economy.
Though its a hefty tome and not light reading Zuboff’s book is profound, and arguably as insightful about today’s tech based capitalism as Marx was about industrial capitalism.
Also Martin Wolf’s book on how today’s Market Capitalism is undermining Liberal Democracy. As chief economist of the FT, he is not exactly a raging leftie!
He is not – I know!
Jason Hickel argues along very similar lines to Richard’s conclusions here (although I doubt he would think it possible to “civilize capitalism”).
His ideas are well presented in this recent Q&A, if you have time (it’s just over an hour long) and can adjust to his rapid-fire delivery.
https://www.youtube.com/watch?v=MU1QdQsjGpM
Noted
Will watch later
Yes – I think Jason Hickel is one of the most important economists writing today – he’s also, like Piketty, a bit of a star in Europe – for example keynote speaker on the platform with Ursula von der Leyen etc at the EU Beyond Growth conference. Online, I recommend for example his co-authored paper ‘Capitalism and extreme poverty’ – https://www.sciencedirect.com/science/article/pii/S0305750X22002169 – great antidote to those arguing capitalism has improved people’s living standards…
“The rise of capitalism from the long 16th century onward is associated with a decline in wages to below subsistence, a deterioration in human stature, and an upturn in premature mortality… Where progress has occurred, significant improvements in human welfare began only around the 20th century. These gains coincide with the rise of anti-colonial and socialist political movements.”
Thanks
[…] By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future […]
Richard – ‘Civilise capitalism’ is a big ask. Piketty and others have tried to address it. The suggestion is that only cataclysms like wars and plagues can destroy enough capital, to rebalance the system in the workers favour – for a limited time.
We have a spread of authoritarianism in previously democratic countries – and a sort of state capitalism in China – as well as the overwhelming dominances of the techbros in the West.
Danny Dorling and especially David Harvey have much to say
Might not AI and the almost limitless enthusiasm for it amongst the tech community and company bosses provide a means by which capitalism finally eats itself? It seems to me that if the fears about wide scale job losses due to the growth of AI become a reality it will undermine the Henry Ford philosophy. Who will be able to afford to buy the products of AI manufacturing? In my former profession we are seeing the growth of AI in the large multinational law firms rendering many young lawyers effectively redundant? And of those in the ‘elite’ ranks of the profession, how are they going to gain the necessary experience to enable them to acquire the quality of judgment that underpins legal practice? It seems to me that no one cares provided AI results in boosting short term profits.
You identify the conundrum – the wiping out of future skill sets to achieve short term profit by creating long term risk. The wonders of naïve capitalism are all there to be seen.
This for me raises another question – what of our education system? And the training that companies provide?
AI can replace jobs, but do we need to understand what it is doing better and why?
There is an argument that most people don’t understand things like electricity, the internet etc and yet people use them regardless. Should AI be any different?
Shouldn’t firms be providing apprenticeships/training so that their staff understand the fundamentals, so that they can deploy AI and be able to check if/when things go awry? If that is what juniors in companies do, then is there still a place for as much more formal education ahead of entering the workforce?
I don’t know the answer, but has been mused on in the past, the education system doesn’t appear fit for the technological changes society is going through.
In my experiemce most people are clueless in the basics of AI. They think it is a search engine. It most definitely is not.
I fear that capitalism can only be moderated democratically and there is no electable political party or entity that can attain power at present. Labour was the main hope in recent times, but they are now almost pro capitalism rather than socialist. Other fledgling socialist parties are stirring, although a long way from making a significant impression.
I see two major obstacles in their way; the media and the ill-informed public who might vote for them. They are obviously linked; the media being guilty of the misinformation and we know why this is so. The media are controlled by capitalists.
I think Marx concluded that only a worker’s revolution would change the status quo. I can’t see that happening when most people, while not being rich capitalists, are reasonably comfortable. In Marx’s day this wasn’t the case.
I don’t see the outcome Marx did: the world has changed. His assumptions have not held true. But capitalism is still killing itself.
I think Marx was actually right about the collapse of capitalism and the emergence of a new society.
But the sincere, inherent nature of contemporary capitalism is based on theft really.
And what capitalism has managed to do is steal the revolution. They stole it and replaced it with fascism. They headed off a revolution with a sham one that they could control. And it seems to be working.
I should have added that, as in most things, the only answer is in education or learning. Richard is doing his part in this, but we need a lot more educators to get the ill-informed to the state of being well-informed. We have seen in recent years a move in the other direction led by various politicians and think tanks all peddling misinformation.
Thanks
When trying to articulate Marx, it seems I can’t do justice to his argument. I fall into the trap of technical language. I probably don’t understand it well enough to argue that he is wrong. Equally, for the same reason, it is difficult for someone to prove to me beyond doubt that he is right.
Marx believed that labour theory of value did not determine the price of commodities. There is no labour value. Very often neoclassicals and supporters of marginal value theory lump Marx into the same category as labour value theory economists. This is a mistake, and in doing so have lumped him in a universal category of classical economists, instead of approaching his work on its own terms. They have alienated Marx from his work and have transformed his work into something that it is not.
In a capitalist mode of production, labour is paid according to a mathematical formulation to earn a profit for the capital owners. Labour is not paid to produce commodities of value to the customer. These are 2 different things. Two different values. This causes workers to become alienated from working life and feel discontent. Whereas Adam Smith describes the human powered baker receiving the value of his labour. The baker understands his purpose, he feels that his self interest is realised, he receives the value of his labour and is paid by his customers accordingly. Marx does not disagree with Adam Smith, rather Marx sees Adam Smith’s theory as incomplete and a special case. In pointing out this contradiction in labour theory, Marx believes that his methodology of value has changed the world. Ultimately that is what Marx values and what he believes workers want to do; change the world.
That is why Marx was on the cusp – the last classicist and the first Marxist (but by a long way, not the last)
As he got older there were already devoted followers of Marx. Some of them interpreted his works in a way that caused him to say he was not -in their terms- a Marxist. And his ideas had evolved.
So many have acted in his name ( Lenin, Mao ) and so many use his name as an insult, ( e.g. Trump calling people ‘Radical Marxists’ ) it is difficult to get a clear idea of the real content of his work.
Keynes and Christ also had the same difficulty.
This series is going to be very useful if only if they encourage us to re-examine our interpretations.
Thanks
The idea that the capitalists as a class , by seizing a very large chunk of the surplus value created by the labour of the working class as their profit, create a long term crisis of overproduction because workers collectively cannot buy back all of the goods they produce is definitely not the core periodic crisis- producing contradiction in capitalism that Marx theorizes. This “underconsumpionism” theory is actually one promoted by the likes of Robert Tressel in The Ragged Trousered Philanthropist.
Marx in Capital instead identified a more complex underlying inbuilt source of periodic long term capitalist economix crisis, ie, The tendancy of the rate of profit to fall – as the organic composition of capital rises. I will spare readers the detail here , but there is a perfectly good explanation of this absolutely core Marxist theory on Wikipedia . I don’t think it aids your analysis to misrepresent what Marx was saying, which differentiated him radically from essentially reformist underconsumptionist theorists.
Have you noticed that precisely because Marx was so ambiguous that people have been arguing ever since about what he is saying, and that two books of Capital are, anyway, by Engels?
Sorry Richard , but your “reply” simply avoids the fact that In Capital, volume 3, (yes indeed, put together by Engels fron sundry notes by Marx), the core contradiction within capitalism is the tendancy of the rate of profit to decline as the organic composition of capital rises. Marx is definitely not an underconsumptionist . It is true that whether there is an actual tendancy for the rate of profit to decline is still massively controversial amongst economists , and famous Marxist Rosa Luxemburg is often accused of being an underconsumptionist in her economic work on the “transformation problem”. Nevertheless Marx himself battled for years, unsuccessfully, to fully work out and prove his theory satisfactorily even to himself ( regardless of Engels editing of his writings which simply glossed over this ) but was definitely not an underconsumptionist who saw the capitalist crisis as rooted , Robert Tressell – Ragged Trousered Philanthropists style, in an inability of poorly paid workers to buy all of their production. So I’ m afraid your early opening statement, supposedly describing “the essence of his view” is simply incorrect. This isn’t mere nitpicking, because what you have claimed isn’t accurately describing the essence of what Marx saw as the core contradiction of Capitalism.
Politely you are both wasting my time because clearly many do not agree with you – as you note – and you are also revealing classic signs of being a troll. You are entitled to your view. You are not entitled to ask me to agree.
dearie, dearie, me Richard, I am not a troll, but someone who became interested in your recent series of economic topics, and who has actually read (and academically studied for my degrees many decades ago) an awful lot of Marx and more modern Marxist material over many decades, and you have simply wrongly ascribed a key analytical position to Marx which is incorrect. That Marx, and mainstrean Marxist economic analysis hold to the theory of the centrality as a crisis causal agent the theory of the tendancy of the rate of profit to decline , not any alternative, underconsumptionist theory as you claim, is not a matter of debate , just a historical fact. Your blog comments appear to only be open to uncritical fanboys and girls. I will leave you with your vulnerable ego and not waste my time with it again. Please remove my name from your subscribers list.
But you are also saying others are doing as I have.
How do I know you are right?
Sorry – but I really have not got time to argue the finer points of Marxist disagreement – and you are wholly missing my point if you think that is what I was seeking to do.
You will not be missed by the broad minded people who come here – but you have to unsubscribe yourself – I cannot do that. Just click the unsubcribe button on every mail you get.
In one of his most insightful, and funniest aphorisms on marxism, Sartre once said “we cannot go beyond it because we have not gone beyond the circumstances that engendered it”. I think this is why it’s so hard – even for his opponents – to get away from the idea of Marx as prophet, rather than just a guy that had some brilliant insights, but like the rest of us also got some things wrong, sometimes changed his mind, developed his ideas over time, and (like Sartre) wrote a lot that was never really finished for publication.
But if we don’t look for ‘revealed truth’ in Marx – just some good ideas – I think we find there both the shorter-term crises of underconsumption and the longer-term problem of the tendency of the rate of profit to fall – we really shouldn’t miss the latter, because it has great explanatory power at the moment (supported by Piketty’s meticulous historical documentation) of why capital moves from enterprise into assets as the rate of return on assets exceeds enterprise. In Marx’s last writings, incidentally, he also saw the even longer term crisis of ecological unsustainability.
I’m not suggesting that discussion about what makes capitalism prone to crises, makes it unstable and unsustainable, is not important – but it takes place within a context we probably all agree: the empirical fact that crises do keep on occurring – and, I would argue, the now equally obvious inability of capitalism to avoid total climate-ecological breakdown.
Thanks
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