Karl Marx is best known as the author of the Communist Manifesto, published in 1848. In it he argued that capitalism was increasing poverty and suffering and that this was leading to revolutionary upheavals that would overthrow the system and replace it with socialism. His critics have argued that he was wrong on both counts. The massive increase in wealth since 1848 has lifted people out of poverty. Revolutionary attempts to bring about socialism have led to dictators like Stalin and Chairman Mao, who only made things worse, and it is all Marx’s fault.

At the same time they have praised Adam Smith, ‘the father of capitalism’, who wrote The Wealth of Nations. We even have a right-wing think tank, The Adam Smith Institute, named after him. But Marx and Smith both regarded landlords as parasites who produced nothing and lived off the wealth created by others. Both men addressed two questions that dominated the thinking of many political and economic commentators at the time. One was the unprecedented explosion in material wealth under capitalism. Where did the wealth come from? The other was the dramatic increase in poverty. Where did the wealth go? How were these questions connected? Could we organise society to both increase the growth and reduce the level of poverty?

Adam Smith was just as concerned with these questions as Marx and thought that gross inequality was unjust and undermined society. Something his latter-day supporters have conveniently forgotten. But I am a Marxist and not a Smithist for one simple reason. Smith thought the roots of this inequality lay in the past, in the actions of the greedy ancien regime who sucked up the wealth via rent and imposed restrictions on trade to protect their interests.

He believed that untrammelled free enterprise in which the new capitalist entrepreneurs could pursue their own self-interest would produce a fairer society because, if you were going to make a profit from selling all these exciting new goods, people needed to be earning enough to afford them. A free market needed to be a fair market. So the growing power of the capitalists would mean fair government as well.

Fifty years later, Marx argued that it was not the old ruling class who was to blame. Nor was it the new ruling class. It was the nature of capitalism itself, based upon the myth that fair markets worked to everyone’s advantage. This was a dubious proposition to start with. But things really fell apart when you looked at the labour market.

Capitalists built factories and bought machinery and raw materials. The machinery gradually wore out and the materials were all used up in production and then the capitalist invested more money to replace them. But all this investment only paid off because of the skill and effort of the workforce. They were also paid for. But the capitalists did not buy slaves and set them to work. They bought the labour power of the workers, and the cost of replacing that labour power (a living wage if you like) was much less than the value that the workers added to all those goods produced in the factories. This magic quality of labour power was the source of the massive increase in wealth that showed itself in profits and dividends and warehouses bulging with goods.

Marx called plant and raw materials ‘dead labour’. They contained the value created by previous generations of workers. To release their value you needed the ‘living  labour’ of workers whose labour power added more value (surplus value in Marx’s terminology) than they were paid for.

Capitalism could not survive without the working class. We are the source of all its wealth and achievements. But competition between capitalists leads them to attack us­. The great paradox, the contradiction at the heart of capitalism, is that it is driven to destroy the working class, the source of its wealth. In doing so it drives us to resist and the only way we can resolve this dilemma is to overthrow capitalism. The fact is that capitalists needs us. We don’t need them. That simple truth is Marx’s great contribution to the socialist movement and the rallying cry at the end of the Communist Manifesto.

We have nothing to lose but our chains. We have a world to win. Workers of the World Unite!

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