Shall we never be rid of Karl Marx? It is not fashionable any more to be a full blown Marxist, but writers, politicians, and popularisers find that showing their sympathy or respect for Marx is a way to proclaim that their heart is on the left side. It does not matter if historians have argued that his analysis of capitalism does not fit the facts and that his predictions of the inevitable evolution of society have been falsified. His theories are re-interpreted, reformulated, and transmogrified, until made immune to counterexample and refutation. The first reason for his perennial presence that springs to mind is that he was a powerful thinker and a masterly writer—when he set aside his Hegelian prose. A deeper reason was that he instilled hope in people dismayed by the disorders of the time by casting socialism into the role of a lay religion, complete with dogmas, heresies, and excommunications. A third reason, which is now seducing some French egalitarians, is the quest to discover the mechanism that will make capitalism self-destruct. But even for those who would not call themselves Marxist, he proposed a materialist methodology that many see as an especially fruitful way of studying society.

A prickly fellow

Political philosophy depends much more on the personality and biography of its framers than is usually thought. Plato’s aristocratic origins and his resentment at the execution of his beloved master Socrates can be read in palimpsest in The Republic or The Laws. The gentle character and rational disposition of Thomas Aquinas made for the inclusiveness of the Summas. Machiavelli was a discarded and over-intelligent civil servant of his beloved Florence, yearning for an Italy free of the French and Spanish “barbarians”. Hobbes attributed his timidity and insecurity to his early upbringing and clearly wrote for times of civil discord. And Hegel was very much the professor at a Prussian State University, marked by the unfolding of history in Napoleonic times.

Karl Marx (1818-1883), as many commentators have noticed, showed the traits of an Old Testament prophet, in that he proposed a doctrine of salvation and of the end of history akin to that of the great religions of the Book and fundamentally different from the rationalism of the Enlightenment, especially the Scottish Enlightenment.1 He led the hazardous life of a conspirator. Endlessly persecuted by the Prussian police, he was repeatedly forced to change his abode on the Continent, only to find some peace as a refugee in Victorian London, where he and his fellow revolutionaries were totally ignored in a supremely confident and prosperous society.

Marx had the good luck to be befriended by Friedrich Engels (1820-1895). After they met in Paris in 1844 they welded an association which would last for the rest of their lives and beyond. The development of Marxism, indeed of socialism, would have been very different if these two friends had not worked together untiringly and in full harmony for so many years. Not only did they co-author books and articles; not only did they jointly launch and organise associations to promote the cause of communism; they also conspired and fought against what they saw as their misguided rivals in working class politics. Marx was the more spiteful (remember “The bourgeoisie will pay for my boils”, which he suffered after long sitting hours at the British Museum). Engels, on the other hand, was a sunny character full of curiosity and generosity. He even financed Marx and his family during their spells of poverty and adopted the boy believed to have been fathered by Marx with the family’s housekeeper, Helen Demuth. All in all, he was the more likeable figure. Still, they were both full of scorn for their political rivals and merciless in their battles against them. Their vitriolic attacks on Feuerbach, Proudhon, Bauer, Lasalle, Dühring are extreme examples of the well-known savagery of political battles among exiles. The ultimate explanation for their uncivilized behaviour was their unshakeable belief that they were in full possession of the truth: their hard-headed socialism was “scientific”; their rivals in the workers’ movement, misguided or ill-intentioned; the cruelty of their hoped for revolution, merely “the birth-pangs of history”; all was justified in the march towards a human and happy society.

The Communist Manifesto

The most read of Marx and Engel’s writings is The Communist Manifesto. They were asked to compose it by members of a London secret communist society, “The League of the Just”. Engels had convinced them to merge with the “Communist Corresponding Society” set up by Marx and himself in Germany. The Manifesto was presented to the members in 1847 and published in 1848, just before France erupted in a revolution that toppled the monarchy and turned it into a republic. The flames then spread over whole of Europe and for three years it seemed that a new democratic era was born. Another attempt at socialist revolution, The Paris Commune, followed in 1871. The next revolutions did not come until after the havoc of World War I.

Though the Manifesto was written by Marx, he relied greatly on Engels’ book The Condition of the Working Class in England published in 1845, a scathing denunciation of life in Manchester factories, presented as an anticipation of what the whole capitalist system was to become. Nearer to what was the final text of the Manifesto there are two drafts of Engels’ in 1847 that served as a starting point for Marx’s composition. One was “A Communist Confession of Faith”2 and the second has been called “Principles of Communism”3. The “Principles” text clearly shows how aligned in thought the two friends were. It is right after all to call the Manifesto a joint work.

A comparison with Engels’ sketchy drafts shows Marx’s great rhetorical gifts when he shed his crypto-Hegelian garb. The first phrase of the pamphlet is justly famous:

A spectre haunts Europe—the spectre of Communism. All the powers of old Europe have entered into a holy alliance to exorcise this spectre: Pope and Czar, Metternich and Guizot, French Radicals and German police spies.

The claim was exaggerated but it instilled confidence into the dispersed groups who called themselves communist or socialist in that their aim was the abolition of private property.

The Manifesto was divided into five parts. The first is a short introduction. Then came chapter I, titled “Bourgeois and Proletarians”, a panegyric of the productive powers of the capitalist economy, you will be surprised to hear, but really the eulogy in the funeral service of capitalism. Chapter II was a call for the communist elite to open the eyes of untaught proletarians to the exploitation they suffered under capitalism, and eventually to lead them to join the ranks of the revolutionists. Chapter III damned reactionary and utopian socialism with faint praise, as they would luckily be superseded by their own scientific brand. The last chapter proclaimed the readiness of the communists to back workers’ parties across Europe, as long as they accepted the aim of getting rid of private property “by the forcible overthrow of the whole social order”.

The starting point is proclaimed in chapter I: “The history of all hitherto existing societies is the history of class struggle”. Throughout history, human societies were divided in a variety of social classes but modern bourgeois society “has simplified class antagonisms […]. Society as a whole [is] dividing itself increasingly into two great hostile camps, into two great classes, directly facing each other: the Bourgeoisie and the Proletariat.” The essential engine of transformation is “a series of revolutions in technology and the modes of production and exchange”. Here we are being introduced to a fundamental element of Marxian sociology, ‘historical materialism’, that social change is driven by the modes of economic production embodying new technologies. This idea, especially as developed in Das Kapital4 (1867) has caught the attention of historians ever since. It was a call not to be content with mere political history. This is not to say that there was no economic history before that book—for example, Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations—but nobody up to then had presented the modes of production and exchange as the moving forces of history. In the case of modern capitalism, Marx was saying, the transformation of technical and commercial conditions had led to an unprecedented upheaval in society. The idea of “revolution” has become commonplace to describe profound changes in all spheres of society, when up to the writings of Marx the term had been limited to politics, to the English or French Revolutions of the 17th and 18th centuries. Now Marx applied it to the changes wrought in society by the bourgeois mode of production and attributed the evolution of history to the working out of necessary economic laws—a highly controversial idea.

Then came one of those paradoxical turns of phrase that must have shocked many of his fellow revolutionists.

The bourgeoisie has played in history an eminently revolutionary role. […] The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society.

Thus, the capitalist class, he said, has torn through the fabric of traditional societies and is now in the process of creating a globalised economy of huge productive force.

The bourgeoisie, during its class rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding together. Subjection of Nature’s forces to man, the extensive use of machinery, the application of chemistry to industry and manufacture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalisation of rivers, whole populations conjured out of the ground—what earlier century had even a presentiment that such productive forces slumbered in the womb of social labour?

It’s all there: even the powerful sexual metaphor.

Then came what made the Communist Manifesto such a stirring piece of political propaganda: its description of the moving mechanism of capitalist society and the historical prediction based on this analysis.

For Marx, capitalism unleashed powers that took on an independent life and turned against the very system of private property on which it was based. Over the previous thirty years, the history of industry and commerce had been a succession of crises that “progressively threaten the existence of bourgeois society”. Epidemics of over-production repeatedly struck, when it seemed that “society has too much civilization, too much food, too much industry, too much trade”, so that existing products and resources for future production were destroyed.

The reaction of the bourgeoisie was two-fold: the said temporary destruction of productive forces; and the extension and deepening of the exploitation of their markets. On the one hand the capitalist mode of production was extended to more primitive peoples and societies by the creation of colonies and the extension of trade. On the other hand, capitalism turned workers into proletarians.

Competition and the division of labour destroyed the societies of old. Slowly all workers amalgamated into a single downtrodden class. The condition of small shopkeepers, artisans, farmers, and wage earners slowly deteriorated into proletarian conditions. The very gathering of hands in huge factories was a step in the agglomeration of the subject classes into one body.

Far from prospering with the progress of industry, the modern worker falls ever further down, underneath even of the standard of his own class. The worker becomes a pauper.

When these proletarians unite they will become a force for revolution. They are helped by “the bourgeois ideologues who have raised themselves to the theoretical comprehension of the general movement of history”—a highfalutin’ way of explaining how it happened that a doctor of philosophy and a factory owner presumed to tell the poor downtrodden masses how they should organise their lives and action. Marx ended the chapter as the supremely effective deviser of slogans that he was: “what the bourgeoisie mainly produces is its own gravediggers.”

“Do I exaggerate when I extol Marx’s gift for the telling phrase? ”

As I say, the Manifesto went on to disparage other writings on socialism and to offer full collaboration to already existing workers’ parties in England, the United States, France, Switzerland, and above all Germany, so that they all started to think of the coming downfall of capitalism. Do I exaggerate when I extol Marx’s gift for the telling phrase? He ended with a final call to aim at a communist revolution: “proletarians risk to lose nothing but their chains; they have a world to gain. Proletarians of all lands, unite”.

The hungry forties

Engels’s The Condition of the Working Class in England (1845) and the Communist Manifesto (1848) are very much the books of a particular period, the twenty years from 1835 to 1855, usually known as the ‘hungry forties’. As explained by George R. Boyer (1998), those years were especially hard for textile workers, especially in and around Manchester. Their hardship multiplied during the crises of 1837, 1842 and 1848, and during the ‘cotton famine’ of the American Civil War, when textile labourers bore with fortitude the effects of the Northern blockade on Southern maritime exports. However, the growing prosperity of the English labourers in the 1860s put paid to socialism in the British Isles for years to come, if not for ever.

It is easy to see how Engels and Marx were led astray by the political and social conditions of middle and Northern England during the 1830s and 40s. The reward of labour, the conditions of work in factories, and the exploitation of women and children in the workshops of England shocked not only Engels but also many humane observers of factory work and industrial cities. Indeed, Parliament was led to use the law to forbid the worst abuses, after compiling detailed reports on these ills—the Blue Books that Marx so effectively used in his later writings, especially Das Kapital (1873).5 These cruel conditions led large numbers of working men to stage general strikes, and to take part in the Chartist movement demanding a more democratic Constitution, so that it seemed Revolution was nigh.

Friedrich Hayek edited in 1963 a collection of essays under the title of Capitalism and the Historians which helped overturn the widespread view, taken from Marx and Engels, that the modern productive society was built on the accumulation of capital forcibly extracted from a downtrodden working class by heartless capitalists. Hayek’s collection showed that the evolving conditions of the working classes in England were not based on the worsening of living standards under industry compared with life under subsistence agriculture. During the Victorian era, pace Engels and Dickens, the people’s living standards clearly bettered. Later economic research has shown that the 1830s did see some worsening, especially due to the deplorable hygienic conditions in the great factory towns: the incidence of cholera and tuberculosis made for a shortening of life expectations after the hopeful of the 1820s.6

See also George Boyer: “Politics and Welfare: The Political Economy of the English Poor Laws”, Library of Economics and Liberty, December 2, 2002.

Boyer usefully summarises the data. There seems to be little doubt that in the hungry forties there was a fall in real wages for all workers, and especially so for workers in the cotton industry of South Lancashire. Especially hard hit were manual cotton workers who weaved at home and faced the competition of mechanical production in factories. In Manchester, where Engels was in charge of his family’s factory from 1842 to 1844, cotton workers as a whole suffered a very hard ten years after 1832, when their real wages declined by 15 per cent. To this must be added the effect of high rates of unemployment except for the better years of 1845-46; at the low points of the downturn before and after this peak in prosperity, unemployment among the mill workers was as high as 15-20 percent. (Boyer, pages 165-6) To this was added the discontent caused by the New Poor Law, which forced temporarily destitute families to demand relief at “well-ordered Poor Houses”, where inmates were separated by sex and age.

Historians have spent much effort to pair these undoubtedly patchy economic data with biological indicators of welfare. There is much dispute about life expectancy, which seems to have declined from 40.8 years in 1829-33 to 39.5 in 1849-53. Another measure used is the height of military recruits, which “increased from the mid-18th century until 1840, declined during the 1840s, and then rose again after 1850”. (Boyer, page 167)

But the Victorian boom of the 1850s and 60s showed Marx and Engels’s predictions to have been wrong, concludes Boyer. GDP growth per man hour from 1856 to 1873 grew annually by 1.3 percent. Wages clearly increased; Boyer recalls a study showing that real wages grew by 38 per cent from 1851 to 1881. Neither did cyclical downturns become more severe in the second half of the century. Unions changed their character to trade associations. Legislation increasingly favoured working class interests, starting with the repeal of the Corn Laws and other free-trade measures to make food cheaper.

Alienation and the New Man

The Communist Manifesto is an excellent introduction to Marx’s great work on Capital but three fundamental elements needed deeper development: alienation and the new man; historical materialism; and the economic engine driving the capitalist system.

In 1846, before writing the Manifesto, Marx and Engels finished book that they were never able to publish and which was partly lost: The German Ideology. There they laid down the philosophical foundations of their system, to which, as Leszek Kolakowski (2005, chapter VIII) rightly notes, Marx faithfully stuck during his whole life. Humanity was the sorcerer’s apprentice. Men had created money and commodities, but these took on an independent life and lorded over them. Man became “alienated”, so that his creations made him incapable of the all-round development of his aptitudes and talents. The cause of such alienation was the division of labour driven by technology and competition, portrayed by Charlie Chaplin in his caricature of “Fordism”, Modern Times—as if competition were not a form of social cooperation. The degradation of humanity would proceed relentlessly under capitalism, until the yoke of private property was forcibly lifted and communism emerged. In a communist society nobody would have

[…] one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have in mind, without ever becoming hunter, fisherman, shepherd or critic.

One does not know whether to laugh or cry at such nonsense. This passage is a most telling sign of how Marx and Engels conceived the economy. The power of the productive system was such that, once private property was abolished and the state had disappeared, the machinery of production could be left to work of its own accord, like a sort of perpetuum mobile. There was no need to decide what to produce. Scarcity would have disappeared and at the touch of a button all wanted goods and services would appear. And every man, woman and child would live like rentiers!

The materialist interpretation of history

Marx stood Hegel’s philosophy on its head by making material conditions rather than the Idea the motor of history. “It is not consciousness that determines life but life that determines consciousness.” It is the non-intellectual part of society that governs thought. Whatever Kolakowski may say, history for Marx is governed by laws that link social evolution with modes of production, as he would expound in Das Kapital. This does not leave individual people and their ideas without any role in history. Though most peoples’ ideas are distorted by the interests of the social class to which they belong but, as we saw in the Manifesto, some bourgeois thinkers heave themselves over their circumstances and can help the revolution along.7

As Karl Popper showed in The Poverty of Historicism (1944-5, 1957) philosophies of history that seek laws of historical evolution are untenable. Marx did accept that men’s ideas had a return influence on society.8 There is little doubt, however, that he also believed he could prophesy the unavoidable downfall of capitalism and the inevitable coming of socialism. Such certainties are very consoling but lead to dangerous ethical conclusions, namely to totalitarian excuses for imposing suffering on the present generation in the full expectation of a glorious future for the whole of mankind.9

The true nature of capitalism: appearance and reality

We saw when commenting on the Manifesto that Marx and Engels despised the current forms of socialist thought of their time because they were not “scientific”. The science bit in their social philosophy was a combination of Hegelian determinism and classical political economy. The relentless destruction of capitalism and the march towards communism could be prophesied because of a mechanism in society that could be understood with a modified version of classical economics.

Marx only published the first volume of Das Kapital in his lifetime. Engels put together volumes II and III after his friend’s death. Marx studied David Ricardo and Adam Smith with great care. From Ricardo he took the model of the functioning of a capitalist economy, where prices could be explained by the relative cost of producing the goods and services people exchanged. The profits of entrepreneurs came from the difference between costs of production, mainly wages, and the prices with a margin obtained by entrepreneurs. But this analysis of the economy did not satisfy Marx because it appeared to be just and fair: prices and profits arose from equal exchange. Was it right that the system should treat labour as a mere commodity? If labour created value, as Ricardo appeared to say, why should anybody profit from the effort of labourers? Marx’s solution was a very Hegelian one: beneath the fair appearance of the market there lurked exploitation. Prices and profits were the appearance; value and exploitation the underlying reality. No matter if the rate of profit was one for the whole economy and the rate of exploitation varied among firms depending on the labour intensity of their productive techniques. This would be explained in volume III.10 Neither Ricardo nor Marx analysed demand, the ultimate reason for the productive efforts of humanity.

Capitalism in History

For more information, see the EconTalk podcast episode McCloskey on Capitalism and the the Bourgeois Virtues. EconTalk, March 2008.

From Adam Smith Marx took the secular fall of the rate of profit, which traced the future path of capitalism, as we shall see. Das Kapital volume I is principally a work of history: of how and why humanity has evolved along the times and where this march is leading us all. To start with, the Marxian theory of economic growth does not fit the facts of the industrialisation of the West. For him, the “primitive accumulation of capital” extracted from agricultural serfs and slaving workers was a necessary condition of the industrial revolution. Of course there was a great deal of fixed capital invested in coal mines and canals, but in fact it all started with public finance and applied science, the new modes of mass production being set up away from limiting city guilds. That Marxian misrepresentation had grave real consequences, when in the Soviet Union it was applied by Stalin’s rush for growth on the backs of ordinary people, by positing that industrialisation had to start with heavy industry on the back of forced agricultural labour. The path to development is not forcible expropriation but new ideas freely sought and applied and new institutions to protect the property of the new productive classes.11

For more ideas and information, see Pedro Schwartz, “Piketty Fever”. Library of Economics and Liberty, June 5, 2014. See also the podcast interview Thomas Piketty on Inequality and Capital in the 21st Century. EconTalk, September 2009.

At the heart of Das Kapital is the trend of the evolution of capitalism towards monopoly brought about by cyclical recessions. The tendency of the rate of profits to fall secularly Marx took from Adam Smith. To restore the rate of profits to the accustomed level, capitalists were forced to increase their investments. Since, as investment intensified, wages would tend to increase, there was a need to keep a sizable number in a “reserve army of the unemployed” and substitute even more capital for labour. This made for periodic over-investment and under-consumption, destructive crises, mergers and take-overs. Wages would become more and more depressed and small-firm owners demoted into the working class. Miserable workers became proletarians when they realised the alienation of their nature caused by the division of labour. The proletariat would be forced or led to bring down the capitalist system with a revolution. So strikes “the last hour of capitalist private property. And the expropriators are expropriated.”12

Events have not unfolded the Marxian way.13 Increases in capital will reduce the marginal productivity of machinery and necessarily increase the productivity and the reward of labour. So it has been: the deepening of capital investment has led to a high and secular growth in wages. Also, Marx took no account of human capital, the investment in education and on the work training in capitalist societies, though Adam Smith had broached the question.14 Indeed, when Marxist writers of today discuss the distribution of income between capital and labour they often forget that the most important capital of a nation is not machinery but that embodied in people and institutions.15

Marx Redux: Why?

For more ideas and information, see David L. Prychitko: “The Nature and Significance of Marx’s Capital: A Critique of Political Economy”, Library of Economics and Liberty, September 6, 2004, and the EconTalk podcast episode James Otteson on the End of Socialism.

The histories of both capitalism and socialism have been quite different from what Marx and Engels predicted. The attempt to give birth to the New Man has resulted in unworkable utopias drowned in seas of blood: such is the experience of Stalin’s Soviet Union, of Mao’s China, of Pol Pot’s Cambodia and Castro’s Cuba. While the individualist societies damned by our two socialist dreamers have multiplied the productive capacities of mankind, thanks to the division of labour and competition, an increasing number of people on this earth can enjoy a Standard of living that includes ample time free from the drudgery of work.

Historical materialism still attracts many social scientists. Economic historians see Marx as the founder of their lore, though they forget that Adam Smith and the whole Scottish Enlightenment preceded him. It is true that Marx used statistics and historical evidence as few had done before. But if I ask myself the question whether the economic interpretation of history should be preferred to wider, more encompassing points of view16 my answer would be in the negative. I will leave the analysis of such reductionism for another day, when I will call on the help of Deirdre McCloskey and Niall Ferguson.

The principal reason why people with democratic convictions still pay attention to Marx is that he was that arch-critic of social inequality. Inspired by him, some would impose an equality of results, whereby individuals would not have very different assets and incomes, whatever their ability, hard work, or capacity to answer the demands of the rest of society. Social Democrats would swear by an equality of opportunity fostered by the state, so that we should all compete on a level playing field. Only a small number of thinkers and politicians have the courage to defend free competition and equality before the law, and call Marxism and socialism by their name: the politics of envy.


Boyer, George R. (1998): “The Historical Background to the Communist Manifesto”. Journal of Economic Perspectives, vol. 12, nr. 4, Fall, pgs. 151-174.

Desai, Megnad (1974): Marxian Economic Theory. Gray-Mills Publishng Ltd., London.

Engels, Friedrich (1845): The Condition of the Working Class in England in 1844. Cambridge University Press. 2010.

Kolakowki, Leszek (2005): Currents of Marxism. Book I, The Founders. The three books of the work were published in a single volume by Norton and Cy., New York.

Marx, Karl (1867, 1885, 1894): Das Kapital: Kritik der politischen Oekonomie vol. I: Capital. A Critique of Political Economie (1867). Vol. II: Capital. The process of the Circulation of Capital, edition by F. Engels (1885). Vol. III: Capital: The Progress of Capitalist Production as a whole, edition by F. Engels (1894). MEW, Progress Publishers, Moscow. All three volumes available online at the Library of Economics and Liberty, Capital: A Critique of Political Economy, Vol. I. The Process of Capitalist Production, Vol. II. The Process of Circulation of Capital, and Vol. III. The Process of Capitalist Production as a Whole

Marx, Karl and Engels, Friedrich (1844): Die heilige Familie, gegen den Junghegelianer Bruno Bauer gerichtet [English edition: The Holy Family]


[Marx, Karl and Engels, Friedrich] (1848): Manifest der Kommunistischen Partei. (The Manifesto of the Communist Party). Many editions. See, for example,

McCloskey, Deirdre (2011): Bourgeois Dignity: Why Economics Can’t Explain the Modern World. University of Chicago Press.

Morishima, Michio (1973): Marx’s Economics. Cambridge University Press.

Neal, Larry and Williamson, Jeffrey G. (2014): The Cambridge History of Capitalism. Vol. I: The Rise of Capitalism from Ancient Origins to 1848; vol. II: The Spread of Capitalism from 1848 to the Present. Oxford Universty Press. Paperback 2015.

Piketty, Thomas (2014): Capital in the 21st Century. Harvard University Press

Popper, Karl R. (1957): The Poverty of Historicism. Routledge and Kegan Paul, London.


Popper, Karl R. (1957): The Open Society and its Enemies, vol. II: The High Tide of Prophecy, Hegel & Marx. Routledge and Kegan Paul, London.

Rojo, Luis A. (1984): “El pensamiento económico de Marx, cien años después” in Marx, economía y moral, in Rojo and Pérez Díaz. Alianza Editorial, Madrid.

Schwartz, Pedro (1966): “John Stuart Mill and Laissez Faire: London Water”, Economica, NS, vol. XXXIII, nr. 129, February, pgs. 71-83.

Seligman, Edwin (1901-2): “The Economic Interpretation of History”, Political Science Quarterly, vols. 16 pgs. 612-640, and 17, pgs. 71-98 and 284-312.


Kolakowski (1978) called this the soteriology (the doctrine of salvation) and eschatology (the doctrine of judgment at the end of time) of Marxist theology.

June, 9, 1847. Published in Gründesdokumente des Bundes der Kommunisten. Accessed January 2016 at Engels wrote to Marx: “Think over the Confession of Faith a bit. I believe we had better drop the catechism form and call the thing Communist Manifesto. As more or less history has to be related in it, the form it has been in hitherto quite unsuitable. I am bringing what I have done here with me. It is in simple narrative form but miserably worded, in fearful haste.” As published of all places in the Chinese edition of Marx/Engels Selected Works, Peking, 1977.

October-November 1847. Published in 1914 by Eduard Bernstein. Accessed January 2016 at

Available online at the Library of Economics and Liberty,

See in Capital Section 3, “The Production of Absolute Surplus Value”. (Available online at This section of the first book of Capital must be read to see how hard Marx worked at getting his facts right, how effective his sarcasm was in debate, how genuine his indignation at the uses of manufacturers, and how excessive the hopes he lay on the Chartist movement.

Before Engels published his book, Edwin Chadwick, the great Utilitarian public servant, had written a critical Report on the Sanitary Condition of the Labouring Population of Great Britain (1842). It was that self-same Chadwick who connected the contaminated water supply of London with the prevalence of cholera. The discovery of bacteria by Louis Pasteur was still in the far future, but the causal connection was made by statistical induction. See Schwartz (1966).

Some commentators jokingly call Marx’s philosophy of history an “escalator theory”: the movement of history takes us up effortlessly towards communism but we can always help by climbing steps.

Kolakowski (2005), page 130, says: “Clearly Marx cannot be saddled with the view that all history is the effect of historical laws, that it makes no difference what people think of their lives, and that the creations of thought are merely foam on the surface of history […].”

Popper was especially discerning in his treatment of Marx in The Open Society (1945, 1957).

Das Marx Problem, that value and exploitation do not coincide with price and profit, has exercised many later socialists, such as Professors Desai and Morishima. Values and rates of exploitation cannot be observed. The value method of calculation cannot be used to explain actual prices (or as Desai puts it, page 65, “Marx’s theory is a tool for the critical study of capitalism, not an operational tool for socialist planning”). Desai and Morishima take the escape that in the aggregate total value in a capitalist economy is equal to total prices, and total surplus value is equal to total profits—but not for each and every commodity. As Luis A. Rojo (1984) put it, what Marx wanted to show with the identity of total surplus value and total profits is that “a capitalist economy is like a great corporation set up to exploit wage labour, where each capitalist receives the part of profits corresponding to his share of total capital invested”. Where is competition among capitalists, then? All this is a purely theological excogitation about the original sin of capitalism, of no practical or philosophical interest.

See Deirdre McCloskey’s Bourgeois Virtues, for example, for a very un-Marxian view of capitalism.

Historical necessity of this sort is again seducing today’s critics of capitalism. Thus Piketty, in his revealingly titled Capital in the 21st Century (2015), posits a tendency of the return to capital growing more quickly than the return to labour, until inequality becomes so extreme that the capitalist order will implode, unless private property is taxed out of existence—the same kind of idea as that of Marx.

Anybody wanting to examine Marx’ and Engels’s view of capitalism, its past and its future should not fail to see the two volumes titled The Cambridge History of Capitalism, edited by Larry Neal and Jeffrey G. Williamson (2014, Cambridge University Press.)

In chapter I.x of the An Inquiry into the Nature and Causes of the Wealth of Nations Smith studied the causes of differences in wages among employments he analysed the cases of the disagreeableness of the work, the investment needed to learn it, the trust in those who perform it, the likelihood of unemployment, and the probability of success—what we would call differences in human capital.

In his monumental study of inequality in the return to capital and labour (2014) Piketty only mentioned human capital once in a single footnote, thus forgetting its importance among the assets of the working class.

The classic reference is Edwin Seligman (1901-2): “The existence of man depends upon his ability to sustain himself; the economic life is therefore the fundamental condition of all life. […] What the conditions of maintenance are to the individual, the similar relations of production and consumption are to the community. To economic causes, therefore, must be traced in the last instance those transformations in the structure of society which themselves condition he relations of social classes and the various manifestations of social life.”


*Pedro Schwartz is “Rafael del Pino” Research Professor of economics at Universidad Camilo José in Madrid. A member of the Royal Academy of Moral and Political Sciences in Madrid, he is a frequent contributor to the European media on the current financial and social scene. He currently serves as President of the Mont Pelerin Society.

For more articles by Pedro Schwartz, see the Archive.