Department Of Economics

Patna University, Patna

M.A. Economics, Sem-1st ,
MD-3rd & CC-04
History of Economic Thought

Dr. Ravi Ranjan Kumar Sharma

Assistant Professor
(Guest Faculty)
Karl Marx Economic Thought
Karl Marx was born in Trier city of Germany in 1818. He attained higher education
from Berlin University. During his time capitalism was at its peak and condition of laborers was
pathetic. Karl Marx was critical of capitalist society and exposed working class exploitation.In
1844, he wrote a book, ‘Economic and philosophic manuscripts.’ In this book we are acquainted
with idea of young Marx. In 1848, he wrote ‘The Communist Manifesto’ in which he expressed
his concern about working class exploitation and called for revolution to other throw capitalism.
Marx has called upon the working class of the world to unite. In 1867, he gave his theory ‘Surplus
value’ of labour in his book ‘Das Kapital.’ He criticized revised Marxism in his work ‘Critique of
Gotha programme’ and expressed the need for ‘dictatorship of proletariat.’
According to Marx found socialism in state of chaos and propounded scientific socialism.
 Marx’s methodology is dialectical which he borrowed from Hegel. Dialectical method implies
that matter undergoes evolution through process of thesis and anti-thesis. Marx was
influenced by French Revolution and so he believed that any change can be brought by
revolution. He wrote, ‘The Civil War in France.’ He also inspired by socialism of France.
 Marx's analysis of property is influenced from Proudhon’s book ‘The philosophy of poverty’
in which he said that property theft. Marx wrote Poverty of Philosophy.
 Marx's theory of surplus value is his ‘economic determinism’ which states that value of
anything is determined by value of labour involved in producing it. This theory was influenced
by classical economic thinkers of England.
He modified classical economic thinking by combining his concept of theory of surplus
value with his subsistence theory. He believed that labourers receive wage which is essential
for their livelihood. They never receive value of their working hours. Surplus value is in fact
appropriated by the capitalist class in from of surplus labour. It is for this reason he asked
laborers to overthrow capitalism. He was the first thinker who made economic interpretation
of history, and asked the working class i.e. proletariat to replace existing capitalist system. He
made detailed and critical analysis of capitalism.
Scientific Socialism
Utopian socialist try to obtained economic equality in society but there consideration is moral.
They ruled out the conflict existence society. For them human life should be free from jealousy
in equality and hatred. They thought that capitalist in the industrial society corrupted good
human nature. Therefore, they were against the capitalism.
Marx wrote communist manifesto and said that Robert Owen, St. Simon and Charles Fourier
were utopian socialist. They could not tell about systemic causes of exploitation and abolishing of
disparity. Therefore it was utopia-
 Marx believes in economic interpretation of history.
 Economic interpretation implies mode of production and relation of production. Unlike
Hegel’s idealism, Marx’s approach of analyzing Society on the basis of means of production
can be considered as empirical approach. For e.g. production under feudalism was done with
hands whereas under capitalist system production is done by machines.
 Marks analyzed capitalism of 19th century. He believed that working class is exploited by
capitalist class in the form of surplus labour. According to Marx, the intrinsic flawed in a
capitalist economy is due to concept of ‘private property’, and this gives an opportunity of
communist revolution for establishing classless and stateless society.
 Marx exposed intrinsic flawed in capitalist mode of production. Since workers are denied of
their ‘value’ of work which is appropriated by this capitalist, this creates a situation of
excessive production but no buyers.
 Marx is scientific thinker because he analyzed history through economic interpretation. He
predicted overthrowing of capitalism and establishment of communism after revolution.
According to him, the major reason for class conflict is due to conflict between means of
production and relation of production.
 Marx is a materialist and his concept of dialectical materialism he doesn't believed in any
divine power and considers religion as an opium and obstacle in development of class
consciousness.
Utopian
 Marx determined communism as ultimate goal, which appears romantic then scientific.
 Marx's communism is a romantic idea. Stratification of society is unscientific and over-
simplistic because neither capitalist nor feudal society is confined in two classes.
 His analysis of history into five stages is based on pre-conceived notion and thus unscientific.
Therefore Karl popper finds intrinsic flawed in his analysis.
 There are two dimension of Marxist thought. Scientific as- well- as moralistic. Moralistic
ideas of Marx are more important than his scientific thought. The Central theme of Marx’s
thinking is to create egalitarian society which is free from any exploitation.
Dialectical materialism
Dialectical refers the method of development or progress. Materialism denotes that the
matter is the basic element of universe. Development of Society and History is based on his
dialectical method. Since Marx is materialist therefore, says that religion is an opium. He never
believes in the change through democratic matter. He said that the basic element of universe
is matter but it cannot be understood through physics. Society and history is always in stage of
movement. It is not static hence dialectical method is suitable for study history and society.

Marx’s concept of dialectical materialism represents philosophical basis of Marxism.

Marx is a materialistic thinker. Marx borrowed dialectical method from Hegel but he says that
‘idea’ is a not a substance of development but ‘matter.’ Matter includes forces of production,
‘matter’ undergoes through dialectical process because of inherent contradiction until highest
stage of development comes into existence. Dialectical development believe in contradiction
therefore capitalism is a thesis, dictatorship of proletariat is antithesis and communism is
synthesis. Marxist materialism is different from Hobbes. Hobbes argued that motion comes
from outside in the matter. But Marx said that motion is inherent in the matter. Matter
implies economics factors which pushes the progress of history and society.
Contrary to idealism, which regards the world as embodiment of an absolute idea, Marx
materialism holds that the world is by very nature ‘material.’ The world develops in accordance
to laws of movement of matter. Contrary to ‘idea’ which asserts that only our mind really
exists, the Marxist materialistic philosophy holds that ‘matter’ is an objective reality existing
outside and independent of our mind. For Marx, the key idea is not history of philosophy but
history of economic production.
Features:
 That synthesis as negation of negation.
 According to Marx, the process of dialectical materialism undergoes three of processes of
thesis, anti-thesis and synthesis.
 Synthesis combines better element of both thesis and anti-thesis. Base of development comes
from contradiction. Every object produces opposite thing. It is known as antithesis.
 Dialectical materialism denotes that God or any divine power is not driving the development
of history. Material factors determine the development. Sabine also said that democracy is not
mechanism of development in Marx.
Criticism
Basic assumption of Marx is that motion lies in the matter. Matter moves automatically,
then how matter will not move in the communist society. There is inherent contradiction in
Marx’s thought he says matter is under constant motion which makes society and history
move forward. He believes that communism will be perfect community which means matter
will no longer move forward.
 Marx says that motion lies in matter. History and society develop through the forces of
production which is material. But ironically this method of development it only applied for
European societies. It is not applicable for Asiatic Societies. Marx said Asiatic societies are
static however European societies are moving forward. He said that Colonialism will push
forward Asiatic society towards capitalist societies. Colonialism is external force for bringing
about movement in Asiatic society. Therefore, Marxian analysis of Marxian analysis is
Eurocentric. Dr. Ambedkar, Ram Manohar Lohiya rejected the Marxian analysis of Indian
society. Although Lenin did not accept the idea of Asiatic society of Marx. Lenin said that
colonialism will never

brought about capitalism in Asiatic society. Colonialism is exploitative for the Asiatic society and
it is harming the communist revolution in Europe too.
Criticism of Feurbach
 Marx says that the materialism of Feurbach is contemplative. Feurbach says that idea and
matter are separate. He says that material life determines everything. He speaks life scholar of
physics who believes in the primacy of matter. On the other hand Marx analyse materialism
with the help of historical and social conditions. Marx says that relation between matter and
consciousness is dialectical.
 Consciousness is embodied in human life. Human beings are different from the animals
because the life of human being is given by the consciousness. It is not only sensual activity
like animal. Consciousness and ideas of human being is reflected through human activity. For
Marx values are equal important apart from the material world. Therefore, materialism of Marx
is unique which synthesise consciousness. Human beings are natural and they are dependant
over nature for fulfilment of physical needs. But they are also able to control nature. Because
of their consciousness they created a new artificial world. It is result of human consciousness.
Therefore relation between matter and material life and consciousness is not causal like
Feurbach.
Historical materialism-
Modern liberal thinking neglected the importance of tradition and history, culture
traditions and community. Marx undertook economic interpretation of history. Hegel was
first western scholar who tried to study state and government through history. Marx was the
first scholar who tried to study economic history. It is known as historical materialism. He
analyzed capitalist mode of production exposed its shortcomings.
Marx has applied principle of dialectical materialism to understand historical
materialism. Unlike dialectical materialism, which represents philosophical basis of Marxism,
historical materialism represents its scientific basis.
In order to understand Marx’s concept of historical materialism, we first need to analyze
mode of production. There are two components of production: (a) mode of production (tool,
equipment) (b) relation of production which involves relation between class conflict between
mode of production and relation of production shapes the history. This is why Marx observed “the
History of all existing society is history of class struggle”.
 Marx’s concept historical materialism is progressive in nature where present stage of
history is better than the previous one. For e.g. capitalism is better than feudalism. Although
exploitation continues in every phase of history. Capitalism is the most advanced stage of history
but exploitation becomes institutionalize. Marx’s interpretation of history is evolutionary. Final
phase history is communism. Thus it is deterministic too.
Primitive communism:- The first phase of historical development of society is primitive
communism. At this stage, means of production was at primitive stage. Economic resources was
controlled by community, there was no concept of economic inequality, private property and no
need for state. Marx’s concept of primitive communism was taken by Engels

1. Slavery:- Humans harnessed farming and domesticating techniques this stage, the concept of
‘private property’ emerged slaves became means of production masters. In this phase
prisoners of war were made slaves instead of being killed. This lead to division of society into
master and slave with emergence of class exploitation. State and government were established
/state/government became an instrument of exploitation.
2. Feudalism: - At this stage, there were lord and peasant. Although ‘master’ of slavery system
became ‘Lord’ in feudal system, exploitation continued with change in means of production.
Land was owned by feuds, labouring was done by serfs and surplus was appropriated by the
landlord. Land becomes means of production. The feudal chiefs were appointed by the kings
who fulfilled his economic and security interest. Society became divided between haves (who
owned means of production) and haves not (who do not owned means of production).
3. Capitalism: - Capital becomes new means of production. Capitalism lead to emergence of
new social class i.e. capitalist class (Bourgeois) and (the proletariat) working class. He believed
that this transition was more progressive than the preceding one. Concept of democracy, rights
and liberty emerged at this stage, but the exploitation of the working class continued. New
means of Transportation and communication developed.
Marx believed that concept of liberty and democracy fulfills interest of capitalist class only.
The development in mode of production under capitalist system benefited only capitalist class.
Class consciousness will emerge in the capitalism.
4. Communist society: - Marx, argued communism will emerge after overthrowing capitalism by
working class. Communist society will be stateless, classless, just and equal society.
People in communist society will work according to their capacity and receive according to
need. Class and state automatically withers away. No need of religion and ideology in
community society.
Division of labour comes to an end. A person becomes engineers in morning. Same person
can engage in hunting in evening. Entire community owns means of production. People in
communist society will work according to their capacity and receiving according to need. With
abolishing of private property, class and state automatically wither away. No need of religious
and ideology in communist society. Human being no longer becomes a member of class. Human
being becomes truly social. Thus communist society is democratic fraternity develops due to
economic equality.
Class Struggle (Social Stratification)
Class contraction cannot be solved democratically or peacefully. Marx believes that every
stage of history society is divided into two classes, ‘haves’ and ‘haves not’ for example, master
and slave; patrician and Plebeian, lord and serf. This division of society into classes is known
as principle of social stratification. His stratification of society is not based on any religious,
caste, sex or nation-state considerations. Relation between class is full of conflict.
Under capitalist society, there is Proletariat class (who sell their labour to sustain their lives)
and Bourgeois (owns means of production). According to Marx, any change can be brought
about only through revolution. History moves through class struggle.

Reconciliation or Harmony is not possible between two classes. Relations between two
classes are exploitative. Marx aid not divided society in classes, but explained about class
divided society. His objective is to put an end of class division in society.
Revolution
Society was already divided in class but class consciousness emerges during capitalism.
Class consciousness is essential for revolution. It is generated by materiel conditions of
society. Urban-industrial society created by capitalism promotes class-consciousness. Marx
admitted that seeds of destruction of capitalism lies within itself. Seed of destruction is
proletariat or, working class. While living in urban centers they develop class-consciousness
economic conditions of working class is same. Capitalism promotes more production, but
consumption is less due to less purchasing power of proletariat. Workers are fired from job in
absence of production.
Since most of the industries are set up in cities, there will be increase in consciousness
of people in cities. And will unite them for common cause of over-throwing of capitalism. The
development of new means of communication will generate awareness in other parts of the
world. Because of further decline in demand. Factory are shut down workers come to know
that, they are exploited everywhere. New means of transportation and communication spread
the message among workers. Finally bring about revolution.
This revolution would bring final emancipation to mankind. It will bring proletariat class
to power. All means of production will come under social ownership. This is why Marx urges ‘all
the workers to unite as they have nothing to lose but their chain. (Communist manifesto)
Economic Determinism
Nature of economy (base) determines nature of state, religion and ideology
(superstructure). He never tried to analyze superstructure because it is determined by (base) of
economy. It is comprised of mode of production and relation of production. Marx and
Engels developed materialistic conception of history to explain the law of human development.
Marx believed that capitalist class creates state in order to maintain their hold on means
of production. Under communism, there is common ownership over means of production, with
stateless and classless society. He believed that division of society into two classes is due to
emergence of concept of ‘private property’ under capitalist system. Capitalist class makes
religion which distorts class consciousness. Religion is like an opium. People make an
imagination of haven in order to forget then present misery in the society. Ideology is also
utilized by the capitalist to sustain their exploitation. Marx says that ideology is false
consciousness.
Liberty, rights and democracy is merely an ideology. Marx says that he is scientific and
does not believe in ideology. Ideology is needed in class divided society. Marx rejected
Hegelian idea that Consciousness Determine Social condition. ‘Economic determinism’ of
Marx is known as political economy. He believed that social conditions determines and shapes
consciousness. For Marx social conditions means economic to conditions. He believed that
primary needs to human being are material or economic and they indulge in productive
activities by fulfilling their economic needs.
Critics call Marx’s ‘Economic Determinism Theory’ as ‘Economic Reductionism
Theory.’ Economic reduction means. Economy is the only factor which shapes society and
state.
 Economic determinism implies that, economy is a primary factor. Marx never neglected others
factors. It is unjustified to say Marx as an economic reductionist. He is economic determinist.
Capitalist state is an artificial institution, institution, class machines:- State is neither an
‘natural institution’ or an ‘ethical institution’ or ‘organic’. He believed that state is an artificial
device to fulfill interest of capitalist class at the cost of exploitation of the working class. Marx
argued that in primitive communist stage, state did not exist as there was no concept of ‘private
property.’ Thus, society was not divided into classes. Marx says that state in an executive agency
of Bourgeoisie. For Marx, state is instrument of exploitation of Bourgeoisie class. He called state
as an instrument of oppression and embodiment of injustice. Marx refuted Hegel, who projected
state is the march of God on earth.
Dictatorship of Proletariat
Earlier Marx predicted for arrival of communism after demise of capitalism. But due
to experience of Paris commune. He admitted the importance of a transitional phase of history,
namely dictatorship of proletariat. Dictatorship denotes existence of class in society.
Marx gave the concept of ‘dictatorship of proletariat ‘represent proletariat
rule or rule by working class. By analyzing the French Revolution, Marx came to conclusion
that capitalist class is always antagonistic towards proletariat class. He believes that
establishment of proletariat’s class rule is inevitable. Under ‘dictatorship of proletariat’,
classless and stateless society will be established. People will work according to their capacity
and they receive according to their work. State will perform the following functions for
socializing means of production:-
1. Abolition of property in land and application of all rents of land to public purpose.
2. A heavy progressive or graduated income tax.
3. Abolition of all rights of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralisation of credit in the hands of the state by means of a national bank with State
capital and an exclusive monopoly.
6. Centralisation of the means of transport in the hands of the State.
7. Extension of factories and instruments of production owned by the state; the bringing into
cultivation of waste-lands and the improvement of the soil generally in accordance with a
common plan.
8. Equal liability of all to labour. Establishment of industrial armies, especially for agriculture.
9. Combination of agriculture and industries; gradual abolition of the distinction between town
and country, by a more equitable distribution of the population over the country.
10. Free education for all children in public schools. Abolition of children’s factory labour in
its present form. Combination of education with industrial production.
MARXISM, SOCIALISM AND ANARCHISM
Marx said that Marxism is different from socialism democracy. Because, socialist were
Advocating for democratic transition towards socialism. Marxism is also different from
anarchism. Dictatorship of proletariat is distinguishing feature of Marxism which lacks in
anarchism.
In this book, ‘Critique of Gotha programmes’ Marx has tried to distinguish Marxism
from socialism and anarchism. Socialist advocated about democratic transition towards
capitalism. Marx says that dictatorship is necessary in class divided society. Anarchist claims
that they want to abolish state. Anarchist never accepted state for transitional phase too.
Sabine criticizes Marx. He argued that best part of Marx is visible, while he attacks over
capitalism. He could not provide any positive and solid solution. He mentions only few lines,
while describing dictatorship of proletariat and communism.

Analysis of capitalism
Marx analyzed capitalism is his work ‘Das Kapital’. He attacked over capitalism as it leads to
emergence of commodity Fetishism. Commodity implies exchange values. And Fetishism
refers a sense of accomplishment without use of values. Slaves were considered as commodity.
And labour power becomes commodity in the age of capitalism. Marx makes distinction
between use value and exchange value. Every object has its own use value. Cloth is essential
for its utility of human being. It is known as use value. But value which is determined by
market is considered as exchange value. Capitalism always promote exchange value. It
increases community Fetishism means commodity becomes valuable in itself, without its
utility. Everyone wants get and more commodity. Love and Craze towards commodity
becomes primary. It undermines human values. Machines and labour are two crucial factors
for production. Capitalist gives only subsistence value to laboures than the actual value of
their labours. Surplus value is appropriated by the Bourgeoisie.
According to Marx and Engels, one who owns economic power, holds political power.
He is first thinker who has said that economic factors determine politics. He believes that
knowledge of forces of production is more important than knowledge about state, religion
and ideology. Marx believed that state is monopolized by bourgeoisie class. There is constant
conflict between bourgeoisie class and proletariat class.
Marx believes that destruction of capitalism is inevitable. In capitalist system, there is
competition among capitalist for sake of profit. Monopolization of property in the hands of
few capitalists. And economic conditions of proletariat class become miserable. This leads to
closure of industries and laying of labourers.
Young Marx and old Marx
McClelland said that ideas of young Marx and old Marx are in continuity. Althusser disagreed
with McClelland. Althusser said that real Marx is adult marks who is revolutionary, scientific
materialistic and positivistic there is epistemological break between young Marx and old Marx.
 For young Marx, individual is more important than class and society.
 Freedom and democracy is more important.
 Mark is young Humanistic but old Marx is scientific.
 Young Marx discusses the psychological impact of capitalism.
Alienation
Alienation means losing freedom when human being becomes like object.
Alienation means when individuals or human beings are separated from society,
productive activities and more over from control over himself. Marx said that in
capitalist from of economy, human beings are alienated from the world, which is created
and made by human beings. Idea of young Marx is drawn from philosophic and
Economic manuscript (1844). Popularly known as Paris Manuscripts. He pointed out
about uniqueness of human being. He said that capacity to labour is specific quality of
Human being. They reflect their creativity though labour.
Human being enjoy, while doing labour. Human beings are different from
animals. Animals do something only for fulfilling their physical need. Act of Humans
is conscious. Human being never engaged in a work for fulfilling merely physical need.
In capitalist economy labours are working for taking care of their bodily need. Workers
lost enjoyment in their work. Work becomes compulsion. It creates alienation in human
being.

Stages of Alienation
1. Production: - It is based on division of labour, competition and compulsory
labour. Alienation starts from productive forces itself. Role of individual workers
minimised.
2. Society: - Capitalism creates atomistic society where individuals become self-
centric fraternity lost due cut throat competition.
3. Environment: - Marx speaks like Rousseau and says that ‘Go back to nature’, which
means human beings should live social life with enjoyment and creativity.
4. Alienation from himself:- The extreme form of alienation is alienation from himself.
Where human being become like an object and behave like machine.
In young age, Marx described about alienation but he couldn't tell measures for
ending alienation and these measures were propounded by Marx in his adult age. He
believes that man wants to end his alienation he should get himself liberated not only
from religion and God but also from-entire structure of alienation, i.e. capitalism, which
according to him was real cause of alienation. Capitalism destroys individual’s freedom
and dehumanizes him. Marx defines freedom as end of necessity. Capitalism promotes
compulsion. End of necessity refers, human being will choose the work according to
their wish.