Why Marx was right about capitalism

Karl Marx’s ideas remain crucial to understanding capitalism and the crisis and instability across the world today.

Marx spent decades studying the inner workings of the system, culminating in his masterwork Capital, published in the late 1800s. He argued that capitalism would be plagued by periodic crises, with consequences of poverty and misery for millions of people. Such economic crises riddled the 20th century, in 1929-39, the late 1970s, early 1990s, and the early 2000s.

Since 2007 the world has experienced the worst economic crisis since the Great Depression of the 1930s. It is now seven years since the crisis first hit Wall Street. Yet there is still no relief for the masses of ordinary people who are paying dearly for the crisis.

Approximately five million people have lost their homes in the US and unemployment in the Eurozone is at record highs of 12 per cent.

Unemployment is at Depression levels of nearly 28 per cent in Greece and 26 per cent in Spain. Australia has been far less affected but there are growing fears that the slowing Chinese economy and the slowdown of the mining boom will lead to recession here.

Marx never argued, as it is sometimes claimed, that capitalism would inevitably collapse. Rather he sought to understand what drove the system’s cycle of boom and slump, and to explain how its was based on exploitation. Marx believed that crises would tend to get worse as capitalism aged, due to increasing difficulties sustaining levels of profitability.

This is a feature of the current economic crisis. Not only was the slump the deepest since the Great Depression, it has also seen the weakest recovery from a downturn in economies like the US since the Second World War.

The response of governments and corporations to the economic crisis has starkly exposed how the system is run in the interests of corporations and the rich.

Massive bank bail-outs saw the US Federal Reserve hand an astonishing $16 trillion to banks. Corporations and banks have actually increased their share of profit. Workers on the other hand have suffered job losses and declining real incomes. Wages in US are now just below 2007 levels, and 6.1 per cent below them in the U.K. People are also working harder as a result of sackings and demands for longer hours.

The inter-connected nature of global capitalism meant the European Union and the International Monetary Fund had to pay to bail out smaller European countries like Greece.

The bailout packages mean the Greek government have enforced ruthless austerity programmes cutting public jobs and social services. The bailouts have been used to justify laying off 25,000 people from the public sector while unemployment is at 28 per cent.

The wealthy are a small minority yet they control what Marx termed the “means of production”—the technology, factories and agricultural land needed to run the economy. This economic control means they also control the major decisions in society—think of the massive influence of ruling class figures such as Gina Rinehart or Rupert Murdoch.

The working class have no control of production so to get a living they have to sell their ability to work, what Marx termed labour power, in return for a wage. Marx wrote that, “labour-power is a commodity which its possessor, the wage-worker, sells to the capitalist. Why does he sell it? It is in order to live.”

The ruthless class offensive as the system’s response to the crisis would have come as no surprise to Marx. He explained how class divisions, most importantly the antagonistic relationship between the capitalist ruling class and the working class were at the heart of the system.

The easiest way for capitalists, the shareholders and CEOs, to increase their profits is to increase the level of exploitation of their workers, by demanding longer working hours or cutting pay. Marx showed that labour is the source of all new value. The ruling class derives profit from the exploitation of the working class by paying us less than the value we create. The more the ruling class can squeeze workers, the more profit they get.

Class struggle

But Marx also argued that capitalism continually generates class struggle, as workers are forced to defend their wages and living standards. In the Communist Manifesto, Marx explained how modern society was characterised by “a more or less veiled civil war” between classes that threatened to spill out into mass working class struggles against the system.

He pointed out that capitalism created conditions where: “Large-scale industry concentrates in one place a crowd of people unknown to one another. Competition divides their interests. But the maintenance of wages, their common interest which they have against their boss, unites them in a common thought of resistance…”

The ruthless effort to make the working class pay for the crisis has seen a revival of just such resistance. The Occupy movement, beginning at Wall Street in the United States, sparked global resistance to austerity. It popularised the idea that the system rules for the 1 per cent while the 99 per cent are left to suffer. The Spanish Indignados movement took over city centres in their hundreds of thousands and held mass meetings. On 14 November 2012 millions of workers walked out on an unprecedented international general strike across Southern Europe. The Greek working class have responded to austerity with over 30 general strikes.

We saw the possibility of revolution in the developing world with the Arab Spring. The Egyptian and Tunisian revolutions were also a product of the economic crisis. The first spark of the Arab Spring was the protest of self-immolation by 26-year-old stallvender Mohamed Bouazizi against harassment by local police. This reflected the desperate economic circumstances of many young Arab people.

In periods of powerful mass movements the victories won through struggle can give workers involved a sense of their power to effect change.

One of the most striking consequences of the revolution in Egypt in 2011, where mass demonstrations forced out a dictator, was the confidence gained by ordinary Egyptians that they could win further victories in their workplaces or against subsequent governments. This has led to several years of major demonstrations as well as struggle in the factories as workers win better wages and the right to form new independent unions.


Such periods can open up the possibility of the working class taking control of society and running it in the interests of the majority. Marx argued in 1879, “The emancipation of the working class is conquered by the working classes themselves.”

Marx believed that workers’ control of society could only succeed through a revolution. The capitalist system itself emerged through a series of revolutions that saw the old feudal lords swept away. It was only through completely transforming society that the new capitalist class could dominate.

But unlike the revolution which established capitalism, Marx described a socialist revolution as “a revolution by the majority in the interests of the majority.” It will be a democratic revolution to put the majority in control.

A workers revolution can only emerge from an intense period of workers’ struggle and class conflict, forcing workers to take over in the workplaces where they are most powerful. There have been small recent experiments of workers control. After the Egyptian revolution, threatened with hospital closures, doctors and nurses took over hospitals and ran them in the interests of patients. In Greece workers took over and ran the state broadcaster ERT for five months last year after it was threatened with closure.

The only successful workers’ revolution of the 20th century was the Russian Revolution of 1917. It produced the highest level of democracy and workers’ self-organisation yet seen. The country was run by soviets, mass meetings in workplaces that elected immediately recallable delegates to nation-wide meetings. This was much more democratic than capitalist democracy has ever been.

Workers’ power only survived for a few short years before the revolution was isolated and exhausted, allowing Stalin to rise to power and institute a dictatorship. However, in a short period of time the workers’ government ended Russia’s involvement in the First World War and immediately introduced hugely progressive reforms. These included the right to divorce, ending illegality of homosexuality and recognising the rights of oppressed minorities.

In the years directly after 1917, a wave of revolutions swept Europe. But only in Russia was there a mass revolutionary party of workers, the Bolshevik Party, that sought to convince the working class as a whole to take power, and to organise for a revolution.

Today the need for radical change is more and more obvious. Capitalism has proved incapable of providing a decent living for millions of ordinary people. The barbarism of the wars in the Middle East are still with us and governments have been incapable of dealing with climate change.

The struggles in Australia today may not be as intense as in parts of the world at the sharp end of the global crisis. But it is these campaigns of today, whether opposing Abbott’s rampage against refugees, against the cuts to education and public services, or to defend unions that can lay the basis for radical change.

There is a critical need to rebuild the left and social movements on a class basis to stop Abbott’s attacks. This means building stronger socialist organisation focused on mobilising large numbers to fight through grassroots campaigns, protests and strikes. On campus we can need to build a renewed student left that can take on Abbott.

As Marx said: “The philosophers have only interpreted the world, in various ways; the point is to change it”.


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