Can Capitalism Fall?

I am reading a book written by Karl Marx called "Das Kapital". In the past century there has been much debate on Marx’s comments and theory about capitalism. Marxism is based on the belief that capitalism will inevitably fail in any society. He believed that capitalists (business owners) exploited there workers by awarding low wages to maintain a high profit. Furthermore, as competition increases, capitalists are forced to invest in expensive machinery to increase productivity. Consequently, they lower their workers’ wages to maintain their profit margin. Marx believed the workers would eventually revolt due to the decrease in wages.
Today we have proven that Marx’s theory is wrong. America’s version of capitalism has not only survived, but is thriving due to certain factors. These include: the ability to buy stock in companies, formation of unions, government regulated minimum wages, and the development of a middle class. How have these factors helped capitalism survive?
A web page about Karl Marx can be found at http://clsuk.tripod.com/daskapital/


Dr. Tufte said...

-1 on Mason - you don't have to just provide a link. Rather, the content there has to be an integral part of the post.

Other than that, I'm not sure what I can add.

isabelle said...

I agree that government intervention has helped capitalism stay on top. I think that minimum wages are good in the sense that they help provide a base amount that employers have to pay. However, the more the minimum wage is increased, the higher prices will rise, and the ycle starts over again.

Dr. Tufte said...

-1 on Isabelle for a spelling error.


I'm treading as carefully as I can here.

Isabelle: do you understand that you didn't support what you wrote with facts? That makes this an opinion.

Opinions are fine in the real world, and on this blog.

Having said that, how do you feel taking a position about our culture, society and government that is subjective rather than objective? Does the "wiggle room" make you nervous?

I ask this because this sort of statement is very common out in the real world, and the wiggle room used and abused by many people makes me nervous.

As an MBA student, how would you feel if your boss said "Government intervention has helped my business a lot, and the price floor they instituted for our product has helped provide a base amount for our customers to pay".

The visceral response to that statement is probably negative, but I'm not too worried about that.

What I'd like to know is if you'd view this boss as a bright person?

isabelle said...

Due to my inexperiance in economics (only micro and macro), I can't say that I have a good response other than I understand your point and can see how my response is erroneous. Next time,I will more fully think out my ideas.

Aaliyah said...

The factors mentioned in your post have helped capitalism to survive, by limiting the power business has to abuse the worker.

The formation of unions have particularly changed the face of capitalism by being the champion for the worker. Workers are no longer exploited by business owners looking only for profit. Unions force employers to treat their employees as assets.

Another factor that has changed the face of capitalism is the idea of The Social Contract and business stakeholders. Businesses are not only responsible to stockholders for profit, they are also responsible to the environments in which they operate. Often times a company's ability to succeed in a capitalist market is dependent upon its commitment to societal values.

However, isn't socialism, as described by Marx, just a step between capitalism and communism? Where capitalism is the selling of privately owned goods in a free market system, and communism is the dissolution of the state (government) and goods are distributed equally. In Marxist theory, socialism still has unequal distribution of goods according to work done- like capitalism - but is lacking privately owned businesses and free market operations. Isn't the "American form of capitalism" gravitating towards a socialistic state with the introduction of ideas for public welfare, i.e. WIC, universal health care, and government regulation of businesses?

Dr. Tufte said...

Sorry if I hit a nerve Isabelle :)

Maybe your comment hit a nerve in me as well - I hear a lot of people passing off opinions as fact.

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Kate said...

Mason said it correctly by stating that the capitalism spoken of is the American version of capitalism (AVC). Looking at the list of factors that have influenced the AVC leads to the question, could these factors also hinder capitalism? If so how can we avert these problems if capitalism is the goal?

Unions are listed as a factor that has ensured the welfare of AVC. Aaliyah comments that a positive result of unions is that it has forced employers to treat employees as assets. Another way to look at it might be the barriers to entry and exit will increase therefore less companies will enter industries that are highly unionized and competition will be decreased. If unions are a bigger hindrance to AVC then they should be addressed for change, which they often are.

All seemingly beneficial factors should be looked at more critically. Otherwise another blogger will be listing them as the AVC’s downfall.

Dr. Tufte said...

All of this is good.

One poorly understood problem with Marx is that his labor theory of value was developed precisely because economists couldn't explain why things had the value they did.

Shortly after Marx, Marshall and others developed the marginal principle. Most economists have concluded that the labor theory of value was incorrect, and that the marginal principle is how the world works. This removes the foundation for listening much to Marx's predictions.

mason said...

Dr. Tufte I was unable to edit this post. The edit label is gone to completely take out the link. I only put it there in case anyone wanted to know who Karl Marx was.