Though Karl Marx’s theories were never valid, they changed the world by stoking grievance, focusing it on the status quo, demanding that the status quo be burned to the ground, and promising that a never-fully-defined utopia would spontaneously spring from the ashes.
His claims included the following:
- Value is a function of "socially useful" labor content.
- Capitalist societies are split into two classes: the Bourgeoisie and the Proletariat.
- Voluntary exchange is a zero-sum game; one party to every exchange gains at the expense of the other.
- Capitalists "expropriate" the surplus value of products from the workers who produced those products.
- Workers in capitalist societies will be increasingly "immiserated" to the point of revolution.
- Workers who disagree with Marx suffer from "false consciousness."
But each of these assertions is false:
1. Value is not a function of labor; it's a function of demand. Value doesn’t come from labor, labor is valuable only to the extent that it produces value—that is, that it is used to produce goods and services that people want.
A mud pie may take as much labor to make as an apple pie, but no one wants a mud pie, so it has no value. In addition, value changes as conditions change. Even though their “labor content” hasn’t changed, buggy whips were more valuable before the automobile was invented than they are today.
Marx tried to explain away these facts with the idea of “socially useful” labor, but he was never able to define or quantify it in a way that would allow central planners to compare the values of different goods and services and of the same goods at different times and under different conditions.
2. Capitalist society is not split into two classes. Business owners and workers come from every walk of life and from every economic stratum.
3. Voluntary exchange is not a zero-sum game. All parties to an exchange benefit or they would not agree to the trade. Each person benefits because each places different values on the goods and services exchanged. Value is subjective and is not based on an objective (but immeasurable) quantity such as "socially useful labor content."
4. The "surplus value" of a product (basically, a product's selling price less the cost of materials and overhead), goes to pay the:
- Inventor of the product produced by the factory
- Entrepreneur (often, but not necessarily, the inventor) who identified the market demand for the product and decided to build a factory
- Capitalist (often, but not necessarily, the entrepreneur) who provided some or all the financing
- Financiers who found other investors willing to risk their resources to build and equip the factory
- Managers who coordinated the workers’ efforts
- Marketers who made consumers aware of the product and of its potential benefits
- Workers on the factory floor
Marx largely ignored these inputs as well as the surplus value that customers obtain when they purchase the product made by the factory. If there were no surplus value to be had from buying the product, no one would buy it.
By demanding that the workers on the factory floor (along with whichever office workers Marx considered part of the proletariat rather than of the oppressive, managerial class) receive all the product’s value, Marx was demanding that no one else responsible for the existence of the product would be paid and that consumers would not gain by purchasing it. In effect, his “perfect world” was one in which no one would have an incentive to invent, produce, or purchase anything.
5. Workers in free markets are not "immiserated." Instead, they are far better off materially than in unfree, or less free, societies. By our standards, factory workers in Marx’s time labored under terrible conditions for pitiful wages. However, factory work and pay were often much better (or, at least, less bad) than the alternatives that were available at the time.
Free markets have made people so productive that they need to work far fewer hours to feed themselves and their families. Instead of working six or seven 12-hour days every week, people in free-market countries typically work five 7- or 8-hour days. Moreover, children no longer need to work to survive.
Free markets have also placed women on a more equal footing with men. In a world in which brute strength is the most important factor for survival, women are second-class citizens. But in a free market society, where brains matter far more than brawn, women are more than able to compete with men.
Marx claimed that socialism would put the means of production in the hands of workers, but it was capitalism that fulfilled his promise. Today, the “means of production” increasingly translates into a worker’s knowledge, her laptop and cellphone, and, perhaps, a 3D printer.
Marx envisioned a socialist utopia in which he "could fish in the morning, hunt in the afternoon, rear cattle in the evening and do critical theory at night, just as I have a mind, without ever becoming hunter, fisherman, shepherd or critic." Again, it was capitalism that made Marx's dream a reality by increasing productivity so much that people no longer must spend all their waking hours just trying to scratch out a subsistence living.
6. Workers who disagree with Marx are not suffering from "false consciousness" nor are they stupid. They understand their own interests far better than do either central planners or ivory tower theorists.
Marx did not understand, or refused to understand, the incentives created by a society based on the principle of “from each according to his ability, to each according to his need.” To the extent that this principle is followed, it creates a world in which people demonstrate minimum ability and maximum need.
Marx never defined what a “Marxist system” would be or how it would work. He refused to describe his socialist utopia in more than very general terms because he believed that it must emerge spontaneously and it would, therefore, be foolish to try to predict the final form into which it would evolve.
At the same time, however, he believed that a revolution was necessary to bring socialism about. But revolution implies a sharp break from the status quo. Rather than allowing a new socio-economic order to emerge naturally, then, Marx wanted to forcibly install his new order over the ashes of the old—a new order that he refused to define because it had to emerge naturally.
As a result, “Marxism” was something of an empty bucket into which revolutionaries could pour whatever they wished.
In practice, Marxists have proven much better at destroying societies and cultures than they have at creating successful new ones. Marxism remains relevant only to the extent that it remains a destructive force.