Economic Update: The Contributions of Karl Marx (Part III)

Economic Update: The Contributions of Karl Marx (Part III)

Welcome to part three of this four-part
series on the work and contributions of Karl Marx once again
let me remind you that the point in purpose here is not to have you agree or
disagree with what Marx wrote but to become aware of what the perspective of
the leading critic of capitalism is what insights he may have discovered that we
can make use of now to improve the economy for all of us the point is not
to agree the point is to understand and learn from something we should have been
studying for the last 75 years but were mostly afraid to do where we left off
was on Marx’s basic economic theory the way in which capitalism as a system
reproduces the very dichotomy of a mass of people producing a surplus for a
minority of people gathering it into their hands and deciding what to do with
it and that was true of slavery and that was true of feudalism and it turns out
as marx teaches us that it’s also true in capitalism I want to pick up by
asking and answering the question when a mass of employees produce a surplus that
shows up in the hands and rests in the hands of the employers a very small part
of the population how does it exactly happen and what here’s the big one what
did the employers do with that surplus delivered to that well the surplus takes
many forms but the closest word we have to capture the idea is profit in some
sense every business involves revenues earning money from selling the fruits of
human labor but by having that revenue be larger than the cost of what we paid
the workers and what we spent for the raw materials and the tools and
equipment the revenues in short are greater than the costs in a
profitable business and that profit what’s produced by the workers in that
situation is received by the employers but do the employers do with it and how
does that produce the kind of society that capitalism exhibits I’m gonna give
you a few examples you’ll be able to supply them yourselves once you get the
hang of it let’s start with one I like always to start with
it’s called dividends most business in modern capitalist society is done by an
entity called a corporation the corporation has shareholders people who
have enough money and wealth to buy one or more shares of that company they are
owners thereby of that company and how big is their ownership depends on how
many shares they can afford to buy in many large corporations a part of the
surplus this extra this profit that the mass of workers has produced that flows
into the hands of the employers a portion of that is distributed to the
shareholders now what’s that distribution called it’s a dividend
that’s the name we give to it let’s be real clear what contribution has been
made by the person who owns a share what contribution did that man a woman make
to producing the surplus in that corporation the answer is none they were
there have no idea how any of it works they didn’t spend one minute that year
in that Factory in that office in that store but they got a portion of the
surplus produced by workers who did labour delivered to them four times a
year by means of a check that’s the use of this surplus why is that done well
that’s the for those people buying a share by
buying a share they showed a confidence in the company
they showed that they were wealthy enough to buy a share and the company
rewards them it has the interesting consequence of saying to wealthy people
here’s a way for your wealth to grow but of course to use the word grow implies
that the wealth comes out of itself like a plant as a seed and another plant
comes out of that seed this isn’t that way at all what these wealthy people
have is the means to get a piece of the surplus other people are producing they
get that delivered to them so now at the end of the year they have not only the
shares they bought the wealth in the form of those shares but they have the
addition of the dividends paid to them how nice for them the workers who
produced the surplus they don’t get it the workers who produce the surplus
watch it being distributed by their employer to people they don’t know who
had nothing to do with the production process remarkable here’s another
example the employer can decide to take a big fat portion of that surplus and
give it to top executives of the company the CEO for example and give him a pay
package of 20 40 60 a hundred million dollars not at all uncommon these days
in the United States for sure that’s an interesting way to use this surplus
let’s be real clear the mass of people produce a surplus if that surplus were
distributed to all of them they could rise up out of their working conditions
and their wealth conditions and become wealthier but that’s not what happens
the wealth the surplus they produce doesn’t get distributed back to them it
goes into the hands of the employers and they use it to satisfy themselves to
keep themselves in the of doing what they’re doing and by
giving themselves dividends as shareholders by giving themselves high
pay packages they make sure they’re wealthy enough to keep being in the
position of getting pieces of the surplus in other words in capitalism if
you’re getting a piece of this surplus and accumulating wealth that’s the way
to keep getting surplus and the cumulative wealth or to say the same
thing in the language that masses of people have understood for as long as
capitalism’s been around the rich get richer and the poor don’t that’s how
this system works there should be no surprise no shock and
awe to discover that capitalism is a system that produces in equality the
system is as efficient in producing wealth at one pole as it is efficient in
producing poverty at another every 20 years in every capitalist society along
comes a novelist a sociologist a statistician to remind us that there’s
an awful lot of poor people around the world an awful lot of poor people around
the United States or wherever else that anyone who has an illusion that this
society makes us all equal you know in the idea of liberty equality fraternity
and democracy that we talked about in an earlier segment those ideas are
delusions this is a system that produces inequality because it’s set up to do
that it’s nobody’s mistake it’s nobody’s cruelty it’s the way the system works
and that’s a very fundamental understanding that Marx achieved it led
him to the conclusion that if you want finally to get rid of the gross
inequality that capitalism has always produced
you’ve got the face the difficult the awkward maybe even the scary reality
that to overcome inequality capitalism itself has to go you have to do better
than that as long as you leave the employer-employee division you’re going
to have the same kind of inequality among people that we know characterized
slavery that we know characterized feudalism and is with us today
hint hint but we don’t need to hint because Marx explains to us which is why
it’s interesting that we are stuck in a system that keeps reproducing the very
thing we say so many of us we don’t want Marx is also interested in pointing out
another feature of capitalism and here it goes and it’s a wonderful inside of
his comes in fact out of his teacher the philosopher in Germany named Hegel who
taught that everything is contradictory everything about life that we know is a
bundle of conflicting ideas needs forces pressures on us that to be free of
contradiction is to be free of life itself this is an idea that Marx plays
with and he shows us how capitalism illustrates the contradiction and I’m
gonna give you that as an example Marx explains to us that every capitalist is
trying to get as much surplus out of his workers as possible because the more
surplus he has the more dividends he can pay to keep his shareholders happy the
more high salaries he can give his executives the more he can keep this
system going because he uses this surplus to reinforce his dominance so he
wants always to get more surplus one of the ways you do that is have the workers
not work for as in my example $20 an hour but maybe get them to work for I
don’t know $15 an hour you get the same
output from them but you’d give them less which leaves more for you the
capitalist and you all know how capitalists do that some of them do it
by bringing immigrants into the country whom they can pay less money to others
do it by employing children or women who are not used to the higher salaries that
men have been able to get in these societies and so they’re exploited in
that way others move to a poor country where they can get away with paying
lower wages whatever it is a good capitalist graduated from a Master of
Business Administration program knows that you’re clever and you’re good and
you’re successful as a capitalist if you economize on your labor costs there are
many capitalists who do that by replacing people with machines with
automation a computer a robot something that is cheaper to get the work done
than hiring a worker so capitalists are always looking for implementing
competing over ways to save on labor it’s the way the system works and then
Marx smiles and says here’s the poor capitalists no sooner are they
successful in paying lower wages or no wages at all then they discover oh my
goodness the workers the mass of people don’t have as much money as they used to
precisely because we are lowering the wages or replacing them with machines
and when they have less money here comes the punchline folks they can’t buy the
very stuff we’re producing to sell we will have been clever to reduce our
labor costs only to discover that we’re driving right into the stone wall of
insufficient demand insufficient purchases not enough of a market for
what we sell which can be as destructive of our success as it would have been to
pay higher wages the system is a contradiction the very logic imposed on
the capitalist undermines the success of the capitalist and again Marx’s
punchline you don’t escape from this kind
prediction by a law or a rule or a regulation or a behavior pattern or
anything else this is how this system works and if you don’t want to have
periodic collapses of the economy when capitalists who’ve been so successful in
saving on wages discover they have no market that people can’t afford to buy
it so then they don’t can’t sell and then they lay off workers because you
don’t point in hiring a worker if you can’t sell what the worker helps you
produce and then will you fire those workers and of course then they have no
income and they can buy even less than they could before and you have that
downward spiral we call recession and depression the system is unstable every
four to seven years capitalism wherever it has come in the history of the world
has produced on average an economic downturn workers thrown out of work
business is going out of business real suffering until the system gets back up
again I like to tell the story that if you lived with a person as unstable as
capitalism you would have moved out Omo Marxist point capitalism is a system
that produces and reproduces inequality and capitalism is a system that produces
and in and reproduces instability those two reasons alone Marx suggests to us
are reasons to question to challenge why we should accept a system that works
this way we could have and we should have says Marx gone beyond capitalism
recognized as he has figured them out and found them the contradictions the
inadequate inadequacies and the injustice –is that this system has
bequeathed to us it’s not that the original ideas of liberty equality
fraternity and democracy had anything wrong with them
not at all Marx was entranced by them as a young person and never gave up
on his commitment what’s remarkable about Marx is that he located in
capitalism itself the obstacles to realizing those objectives and therefore
became the critic to show us what those obstacles were so we would understand
what kind of changes need to be undertaken to free us from the
inequality and the instability that this system cannot escape in the fourth and
final segment of this four-part series we will talk about what kinds of changes
Marx’s work points to that might get us out of the failure of capitalism to
deliver on liberty equality fraternity and democracy thank you very much we’ve
come to the end of part three of this four-part series on Marx’s contribution
I hope you have found it of interest and I ask you as I always do please join us
join the patreon community we are building by going to
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21 thoughts on “Economic Update: The Contributions of Karl Marx (Part III)

  1. First
    I like the professor to address what wealthy call 'taking risks'. 'They take risks with their 💰 so dividend is their reward'.

    I have also heard 'capitalism in moderation always beats socialism in abundance'. I don't know how to take that

  2. You are a legend Dr. Wolff. I am from india. I was involved in students politics in my college days. Fought for communist party of india. But never clearly understood the marxist critique of capitalism except greed is bad. That was just common sense.
    Then i found you. And i was like whoaaa. If someone ever taught me like this in my college.

  3. Capitalism is not meant to make everybody equal.. its primary goal is to elevate people to start their own business and be selfless reliance so not everybody's going to be successful to have a business this is why you have people who are poor who don't know how to adapt or apply themselves..

  4. Socialism doesn't work either it makes you more dependent upon the government for everything then leading for government to control the masses.. capitalism does not with capitalism you're basically on your own..

  5. The thing with capitalism though I don't care for it either is that.. people complain about low wages but you have a choice to start your own business which is what I did that's what capitalism does for you inspires you to do.. socialism does not allow you to stay working and complain about the job you're working in Knowing damn well that you didn't know wages and you're unhappy there but yet you stay there.. when you can easily left and start your own business and then you'll be rich like those guys..

  6. Would you say that overpopulation is a great benefit to the flawed system of capitalism? Creating a work-force that is willing to both accept lower wages/benefits as well as a creating a much larger pool of buyers to offset the reduction in the purchasing power of those workers.

  7. The SURPLUS within capitalism is not fixed. There is an UNDETERMINED SOCIAL SURPLUS (people at work/ earning money/ producing goods/ employing workers) and a CAPITALIST SURPLUS. The CAPITALIST SURPLUS, much smaller then the social surplus, can go to the capitalist to motivate them to create more social surplus. IN THIS WAY CAPITALIST SOCIETY IS A RATIONAL AND SOCIAL TOTALITY………. The claim of workers on this surplus is stupid and irrational.

  8. You know it's "bad" when a former hung-go "patriot" (a 35-years-too-early foreshadower of the modern Drumpf-Cult) is actually willing to listen to – and, largely agree with – R. Wolff.

  9. Cheque or chek? Can a machine think the way a human does?
    And thanks Professor for your updates. People never think in these lines as Karl Marx did two centuries ago.
    In these two hundred years how many men lost their jobs, how many businesses closed, what happened to our female workers, how these complex social forces directed morality of women and men could be researchable.

  10. You should ONLY apply tarrif's to good's you produce..carefully..& make sure the product you produce is of HIGH quality & MORE efficient

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