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Refreshing Incoherence in Neoclassical Economic Theory Research after all the productive forces in the old society that can develop, have developed. This conflict in capitalism between private appropriation and social production is revealed in the theory of rate of profit to fall, that gives rise to capital-labor conflict. Marx claimed that labor has the capacity to produce more use value than its exchange value and the difference between the two is called exploitation, but disguised as profit by capitalist [Marx (1898)]. 4 Therefore, the source of profits, according to Marx, under capitalism is value added by workers but not paid out in wages. Once the wage is covered, the capitalist, owners of the means of production, always has an incentive to force workers to work longer and harder than the workers are themselves likely to do. The capitalist is to compete with other businessmen to stay in competition by improving the product and cutting down the cost of production. But this attempt to increase labor productivity and thereby improve profit creates a tendency for the profitability of capital as a whole to fall. This further puts pressure by capitalist on labor force to increase profitability, a move that creates competitive instability and furthers class struggle. 5 Therefore, class struggle for power, the control over the means of production, is fundamental to capitalism and, therefore, capitalism is always in danger of destroying itself which lays the foundation of a new social order. The conflict is rooted in the essential structure of capitalism as a system: “those who own the means of production and those who perform wage labor are bound together but have significantly different needs about the intensity of production and the distribution of its proceeds” [Gordon (1987)]. In Marx’s own language, the conclusion is: “The modern laborer…instead of rising with the progress of industry sinks deeper and deeper below the conditions of existence of his own class. He becomes a pauper, and pauperism develops more rapidly than population and wealth. And here it becomes evident, that the bourgeoisie [capitalist class] is unfit any longer to be the ruling class in society….It is unfit to rule 4 For an exposition of Marxist’s Theory of Value, see Weeks (1981) 5 For a detailed analysis of the rate of profit to fall and abstract labor theory of value, see Cole, Cameron and Edward (1983) PAKISTAN BUSINESS REVIEW JULY 2011 214
Research Refreshing Incoherence in Neoclassical Economic Theory because it is incompetent to assure an existence to its slave within his slavery, because it cannot help letting him sink into such a state, that it has to feed him, instead of being fed by him. Society can no longer live under this bourgeoisie…” [Marx and Engels (1967): p. 93]. Finally, workers are brought together into revolutionary associations which ultimately overthrow the bourgeoisie. If it is the dynamics of capitalist system that creates problems, then according to socialists, we need to think of possibilities moving somewhere else than capitalism. Many Marxist have suggested the following charter for moving beyond capitalism. Fairness: People must be treated fairly, that is they should not be penalized for their families, colors or skin. Capitalism violates social fairness in one fundamental aspect at least, that is a kind of power and control enjoyed by the owners of capital that is denied to the rest. “Nature does not produce on the one side owners of money or commodities, and on the other men possessing nothing but their own labor power…it is clearly the result of a past historical development” [Marx (1970): p. 169). The top 10 percent richest people in any country are many times wealthy as the bottom 10% percent of its people. Did they work so many times as hard as their income levels suggest? Rather, this huge difference is driven due to the concentration of capital goods ownership in a few hands legitimized by the capitalist system. Much economic fairness can be achieved by moving towards a system in which the ownership of capital goods is common. 215 Efficiency: People do not want to work harder than what makes their life comfortable. Heavy investment in social structures and economic systems, on the armies of managerial and supervisory personnel, on resolving continuing labor conflicts and on ever-present over production of dangerous and wasteful products necessitated by inter-firm competition make capitalism a remarkably wasteful kind of economic system. A better efficient system can be constructed if we move towards cooperation and control in the organization of production and greater social participation and control in the planning and allocation of economic resources. PAKISTAN BUSINESS REVIEW JULY 2011
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