In this article, we explore Richard Murphy’s reflections on Karl Marx’s assertions regarding capitalism’s tendency to concentrate wealth and income, along with its crisis-generating potential. Murphy argues that historical evidence supports Marx’s claims and underscores the necessity for robust regulation in business and labor relations. Although crises typically lead to reforms, they often revert to previous deregulations, influenced by corporate interests. Furthermore, movements like those of 1848 are frequently seen as failures, yet they did lead to policies benefitting workers and the disadvantaged. Such patterns were evident during the Great Depression, which galvanized a strong commitment to New Deal reforms.
However, a critical perspective offered by scholars of Karl Polanyi suggests a more somber view. In essence, Polanyi’s work suggests that while capitalist practices incited reform, these changes merely mitigated, rather than halted, capitalism’s relentless impact on labor and communities.
Murphy begins with Marx’s labor theory of value, which has faced significant critique over the years. Yet, detractors often miss the core power dynamics Marx highlighted, where capitalist profits depend on the exploitation of labor. In an era marked by enclosure movements and oppressive working conditions, business owners wielded considerable power over workers, often resulting in inherently exploitative practices.
Moreover, improvements in productivity can enlarge profit margins, enabling business owners to thrive while also sharing gains with employees. Thus, the capitalist system, despite its exploitative tendencies, is not inevitably detrimental.
Social values have a significant impact as well. In Japan, for example, entrepreneurs are celebrated for generating employment rather than merely accumulating wealth. Many of the Japanese billionaires I encountered eschewed ostentation; one notably preferred shopping at discount retailers even while collecting valuable art pieces.
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
Karl Marx may not have been the first critic of capitalism, but he remains its most significant. In the 19th century, he identified both the remarkable productivity of industrialization and the significant human cost that accompanied it. His main thesis was compelling: capitalism is inherently contradictory and destined for crisis.
Marx’s analysis is straightforward. Capitalists generate profit by compensating workers less than the value of their output. When wages are suppressed, however, workers lack the financial means to purchase the goods they produce, thus undermining capitalism’s own marketplace. Therefore, while capitalism exploits labor, it inadvertently reduces consumer demand.
This contradiction prompts the Marx Question: if capitalism is predisposed to funnel wealth to a select few, impoverish the majority, and incite frequent crises, why is it still perceived as an unavoidable system?
1. Exploitation as the engine of profit
According to Marx’s labor theory of value, profit fundamentally stems from labor. While machines play a supportive role, it is human labor that generates surplus value. Capitalists claim this surplus by compensating workers less than the value they provide.
This exploitation is not incidental; it is ingrained in the system. Employers compete by reducing wages, increasing workloads, and minimizing costs, resulting in a systemic bias toward inequality. As capital accumulates, labor becomes marginalized.
2. Crisis as a recurring feature
Capitalism is not only marked by inequality; it is fundamentally unstable. By keeping wages low, it undermines its own consumer base. While profits might soar temporarily, over the long term, markets struggle. To fill the gap, credit expands. Workers borrow to maintain their consumption levels, whereas firms take on debt to increase production. Eventually, unsustainable debt leads to crisis.
This cycle—boom, credit expansion, bust—has recurred since Marx’s time, from the 1873 crash to the Great Depression, and from the 2008 global financial crisis to the current looming debt challenges. Marx’s predictions about capitalism’s instability remain hauntingly accurate.
3. The concentration of capital
Marx also warned of the centralization of wealth and power. Competition ejects weaker firms from the market, ultimately giving rise to monopolies and oligopolies. Today, global corporations dominate markets, supply chains, and even governmental structures. Tech giants have amassed more data than many states, while financial entities exert significant political influence. Wealth inequality is once again at levels reminiscent of the 19th century.
This concentration of power is not incidental but is a logical outcome of unrestricted accumulation.
4. The politics of denial
Despite repeated crises and burgeoning inequality, capitalism is still framed as the natural and inevitable order of society. Alternative systems are dismissed as unrealistic or hazardous. The mantra “There is no alternative,” famously voiced by Margaret Thatcher, has been codified into neoliberal doctrine.
This denial is understandable: capitalism serves the interests of those who gain from it—the affluent, the asset holders, and the powerful. They manipulate narratives, support think tanks, influence politicians, and mold media perceptions. Capitalism transcends economics; it is a political and ideological enterprise bolstered by those it enriches.
5. Marx’s unfinished revolution
Marx predicted that capitalism would collapse under the weight of its contradictions, paving the way for socialism. However, that collapse has not occurred. Capitalism has displayed remarkable adaptability beyond his expectations. During the mid-20th century, welfare states, labor unions, and regulations curbed its most egregious excesses, sustaining its existence especially after the uncertainties of the 1930s. Yet since the 1980s, these protective measures have been systematically dismantled. Neoliberal ideologies have reintroduced a harsher form of capitalism — one that is global, financialized, and extractive.
As a result, we now grapple with the very issues Marx foresaw: unstable economies, severe inequality, and the erosion of democracy. While his revolution has yet to materialize, his critical perspective continues to resonate.
6. What answering the Marx Question might mean today
In addressing the Marx Question, we need not strictly adhere to his solutions; however, his insights should not be disregarded. If capitalism inherently centralizes wealth and creates crises, achieving stability and justice necessitates counterbalancing power. This entails:
- Redistribution. Implementing progressive taxation on income, wealth, inheritance, and capital gains to restore balance between shares that favor labor over capital.
- Labor empowerment. Strengthening labor unions, advocating for sectoral bargaining, promoting workplace democracy, and establishing minimum standards, including livable wages, to prevent exploitation.
- Public ownership and planning. Ensuring key sectors such as energy, water, housing, and transportation prioritize public good over profit.
- Democratic regulation of capital. Controlling financial practices, curbing speculation, and directing credit towards productive and sustainable initiatives.
- Global cooperation. Dismantling tax havens, secrecy jurisdictions, and unregulated international capital flows to restore democratic governance within nation-states.
Inference
The Marx Question prompts us to contemplate whether a system reliant on exploitation and crisis can sustain itself. Historical evidence suggests otherwise. Without democratic oversight, capitalism ultimately consumes itself, exploiting labor, undermining communities, degrading the environment, and destabilizing politics. We now witness the manifestations of this hypothesis all around us.
Marx’s key insight was not necessarily that collapse is predetermined, but rather that contradictions are integral to the system. Capitalism should not operate unregulated. It requires deliberate, democratic interventions to restore balance, or it risks collapsing under its own unsustainable weight.
The implications are stark: we can either moderate capitalism or allow it to undermine the very foundations of society. The unanswered question posed by Marx concerns not only economics but the very essence of survival itself.
