History & Perspectives on the Economics of Socialism

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Other essays and articles in the Main Archives related to this topic include : Marx and Locke: Comparison of Views on Government, Property and Labor  •  Summary and Analysis of Das Kapital by Karl Marx  •   Analysis and Summary of Principles of Political Economy by John Stuart Mill  •    Profile of Tokyo in the Context of Globalization  •   North Korea’s Nuclear Path: A Historical Look at U.S. Involvement

The Marxian school of economics is based not only on the works of Karl Marx himself but other economists as well. A primary issue in studies of Marxian economics concerns the labor theory of value, which asserts that the value of a product or service is not associated with its cost but rather the amount of work that went into the production. Furthermore, in a capitalist system any value that becomes added to the product or service is not returned to the worker but instead goes to benefit the capitalist who owns the means of production. To take this one step further, this theory also contends that the labor theory of value is not commiserate with the idea of relative price, thus the capitalist benefits again because these products or services are priced according to supply and demand rather than the amount of work that went into the item or service.

With such a system, the capitalist is constantly benefiting from the labor of the worker and the wages paid to laborers are not equivalent to the good or service itself. Much of this theory is set forth in Marx’s Das Kapital and while it is a seminal work in the canon of Marxian study and literature, there are several other key scholars and ideas behind the movement. Marx states, “As the value of labor is only an irrational expression for the value of labor-power, it follows, of course, that the value of labor must always be less than the value it produces, for the capitalist always makes labor-power work longer than is necessary for the reproduction of its own value (Marx 140). This is the defining idea of the capitalist as set forth in Das Kapital and the same theory drives much of the contemporary debate about Marxian economics, even though some of the ideas about the labor theory of value have become outmoded in this era of shifting modes of production.

 It is also necessary to point out that Marx’s work in Das Kapital, as well as that of those who came after him, integrates the idea of surplus value, which is the difference between the value produced by a laborer and his or her wages. In short, this means that the if worker is producing a good or offering a service that is worth a certain amount on the market, say for example, $10 and the worker is only paid $80 for the work required to produce 50 items that the capitalist owner can sell for $10 per piece, the remaining amount (that left over after the worker and materials are paid) is the surplus value and goes to the capitalist as profit rather than directly to the worker in the form of extra wages. Marx defines this as “wage slavery” and contends that this is a product of a capitalist system.

Another theory of economic socialism is the Fabian school. Although grounded in the same general principles of Marian thought, there are a few noteworthy differences between the two. “Fabian socialism differed from the current Marxian socialism not only in doctrine but still more in spirit and in its conception of the influences making for socialism. At bottom what matters in Marx is not his theory of value but his emphasis on the class struggle as the sole effective instrument of progress. Marx believes that socialism will come not only because it is a better system than capitalism but because there is behind it a rising class led by economic conditions to achieve it. Fabian literature, on the other hand, seems often to be unconscious of the relevance of class distinctions and shows no belief at all in a class struggle as the instrument of change (Cole 187). Interestingly, this movement was formed in England and although it was not a widespread movement by any means, it was backed by a number of well-known and outspoken proponents including the activist and playwright George Bernard Shaw. For the Fabians, true socialist economic reform would come about as a result of legislative action aimed at very gradually taking the means of production out of wealthy capitalists and returning them to the worker. Like Marxian thought, it was also based on an idealistic notion of the perfect state in which the workers labored for the good of society rather than for the benefit of the wealthy.

The initial means of economic reform proposed by those of the Fabian school were dramatically different than those that came before it, most notably the Marxists. While Marxism is a different concept than Marxian thought, it is worth noting how two economic movements differed. “In 1884, the Fabian Society was founded in England with the aim of bringing about a socialist society by means of intellectual debate, the publication of books and pamphlets, and the ‘permeation’ of socialist ideas into the universities, the press, government institutions, and political parties. This was in marked contrast to the other means of bringing about socialism adopted by Marxist parties, namely the use of violence and revolution to overthrow capitalism” (Wilshire 12). It is clear that both Marxian and Fabian variations of economic thought agreed that capitalism was the problem, the question was what the best way to achieve reform was. While Marxian economists tend to focus on the value of labor and other associated issues, the Fabians were concerned with more ethereal ideas about capitalism and socialism. Many of them advocated for reform of rent and other small-scale changes, but few addressed the needs of the labor organizations in Britain, for example. In this sense, one can view Marxian economic ideology as a more coherent set of principles since many of its foremost scholars dealt with issues of wide-ranging interest that far extended those addressed by the Fabian socialists.

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