History of Capitalist Theory - Karl Marx

Karl Marx

A critique of the results of capitalism was formulated by Karl Marx. According to Marx, the treatment of labor as a commodity led to people valuing things more in terms of their price rather than their usefulness (see commodity fetishism), and hence to an expansion of the system of commodities. Marx observed that some people bought commodities in order to use them, while others bought them in order to sell them on at a profit. Much of the history of late capitalism involves what David Harvey called the "system of flexible accumulation" in which more and more things become commodities, the value of which is determined through the process of exchange rather than their use. For example, not only pins are commodities; shares in the ownership of a factory that manufactures pins become commodities; then options on the stock issued in the company that operates the factory become commodities; then portions of the interest rate attached to bonds issued by the company become commodities, and so on. The prevalence of commodity speculation in modern capitalism significantly shapes its outcomes.

Marx defines "capital" as money and "capitalist production" as the use of money to denominate wealth; these labels refer to John Stuart Mill's definition of value in a market economy as being the going price for a good or service.

Marx believed that the extension of the Labor Theory of Value (the theory of value used by Thomas Hobbes, John Locke, Adam Smith, David Ricardo, etc.) indicated capitalists (owners of the means of production) would exploit workers by depriving them of value that workers themselves create. According to Marx, surplus value is the difference between the value that the worker has created and the wage that the worker receives from his employer.