Malthus vs Marxs Views on Capitalism - Essay Example

Malthus vs. Marx’s Views on Capitalism Over the years, there have been countless debates on theeffectiveness of various economic systems, especially capitalism in satisfying human wants and enhancing the prosperity the overall societal. Notable scholars such as Karl Marx, Thomas Malthus, and Adam Smith among others are known mostly for stirring these debates through their perspectives and arguments. This essay will focus on Malthus, Marx, and their perspective on capitalism. For instance, Malthus argues that capitalism can produce general “gluts,” that is, an over production of good. Marx on his part argues that crises can also occur. However, they identify problem originating in different ways. Therefore, the essay will explain how each accounts for downturns in capitalist economies. It will go ahead and argue which explanation is more persuasive. To begin with, it is important to understand capitalism and its working in the society. Capitalism refers to an economic system characterized by corporate or private ownership of capital goods through investments that are determined through private decision, and through production, distribution, and the prices of goods that are determined majorly by competition in a free market (Frank 5). Elements of capitalism include production of goods or services for profit, means of production is owned privately, wage labor, and competitive markets. This system became dominant after feudalism diminished in the Western world. It is worth noting that the designation of this system is applied to different historical cases that vary in geography, culture, time, and politics (Frank 9). Capitalism has many variants that bear the aforementioned characteristics though the degree of application of these characteristics may differ a little bit. The main forms of capitalism include state capitalism, free- market capitalism, mercantilism, corporate capitalism, and social market capitalism. Of particular interest to this essay is the production aspect of capitalism, especially as it has been the focus of Malthus and Marx’s arguments. Thomas Malthus is widely known for his theories on population. However, his contributions to political economy theories were equally significant. Malthus argument focused on production and its ability to meet the economic demand of a society. In developing his theories about political economy, he defended Sismondi’s views on general glut. Malthus argues about general glut, which means overproduction of goods, in his Surplus Theory (Hollander 12). According to him, the general glut question may be general as well as particular, permanent or temporary as well. He argues that the concept of the general glut in a given society has a potential of presenting a problem (Buccholz 60). Malthus glut theory was based on insufficient aggregate demand that was analyzed through the existing patterns of expenditure among the three socio- economic classes. He assumed that capitalists would spend their income on basic needs since they will not have time and capacity to utilize all the goods and services at their disposal thus spending most of their income on the capital accumulation (Hollander 26). The property owners on their part would spend most of their income on personal services and luxury items such as culture and arts. Besides, he assumed that laborers would spend most their incomes if not all on basic needs necessary to maintain their basic subsistence level and would not have remaining money for savings. Malthus argued that the glut problem was because of high rate of savings among the capitalists making the capital accumulation rate to be unsustainable. Therefore, demand for labor would increase in order to keep up with the capital growth. This may result to temporal labor shortage causing rise of wages or some newly invested capital may fail to find matching labor hence becoming idle (Buccholz 62). Eventually, this scenario would lead to an economic crisis. To him, overproduction of goods is capitalism downturn since in most cases there is insufficient effective aggregate demand. However, he failed to discuss whether increasing wages would be an effective way of solving this problem. He also assumes that whereas capital expanded technology remained the same thus resulting to temporal labor shortage. This assumption may prove invalid in some capitalistic societies. Karl Marx is undoubtedly one of the greatest thinkers in economics, philosophy, sociology, and political economy. He played remarkable role in social sciences development especially through his ideologies regarding production, and ownership of means of production. His arguments on capitalism have created numerous debates regarding this economic system over the decades particularly on whether it is good for the entire society or just few people. Regarding overproduction of goods, he argued similarly like Malthus that it could cause crisis in capitalist economy. Marx’s work on overproduction in the capitalistic society is contained mostly in Das Kapital, his seminal work (Wheen 1). Marx’s argument is that under capitalism, technological advancements, and rise in productivity levels results to increase in material wealth in the society while at the same time reducing the wealth’s economic value (Wheen 7). According to Marx, this situation leads to decreased rate of profit which presents a tendency that happens to be a paradox; feature of capitalism crisis. The paradox that arises is that of overproduction in the midst of under consumption, or more specifically, of poverty in the midst of plenty (Alfredo 14). He believes that the working class through their excessive wage demands does not cause the crisis. He argues that under full employment conditions, real wages increase and the surplus- value rate increases too. However, the increase may not be proportional to capital’s organic composition hence resulting to average profit decline leading to crisis. In Marx’s view, overproduction is one of the major capitalism crises. This is because capitalists produce too much in order to sell at a profit (Buccholz 127). The capitalists are driven by the desire for accumulation of capital at all costs. It therefore creates a tendency for them to overproduce without factoring in the level of consumption of these goods (Buccholz 129). Therefore, it is evident that both Malthus and Marx are of the opinion that capitalist economies have downturns. As noted, Malthus argues that under capitalism, capital accumulations among the capitalists are unsustainable while the laborers are unable to save and invest since they spend all their incomes on basic needs. This prevailing scenario, according to him is the downturn of capitalism because there is insufficient aggregate demand due to low purchasing power by the majority laborers, a situation that compares unfavorably to overproduction because of high rate of capital accumulation by the capitalists (Davis 133). He also cites frequent economic crisis in the capitalist society as another downturn of capitalism. He argues that this crisis is caused by labor shortage that fails to match high amount of capital accumulated by the capitalists. On the other hand, Marx explains the major capitalism downturn as overproduction in the midst of under consumption. However, he does attribute labor shortage to this downturn. He notes that the business cycle itself is responsible for capitalist crisis. He says that when wages increase, production also increases but the increase is not proportional to capital’s organic composition that results to decline of average profit (Davis 135). In addition, Marx’s view agrees with Malthus’ that consumption of goods is dependent on the consumers’ ability to buy the goods. Therefore, since under capitalism, laborers disposable income is diminished their ability to meet the supply of the surplus goods is diminished as well (Buccholz 128). Finally, I find Karl Marx’s explanation on downturns in capitalist economy more persuasive than Thomas Malthus’ does. Marx has explained the downturn of capitalist economies more explicitly and holistically than Malthus has. He has taken into account production aspects such as technology, labor, and profitability. In explaining the capitalist economy, Marx argues that increase in labor wages increases productivity leading to increased revenues. In addition, he does not assume that technology will remain the same. In addition, he acknowledges that production should match consumption, a position he argues lacks in capitalist economy thus becoming its downturn. Marx is known for advocating for better terms for laborers of means of production and actually demanding that means of production should be owned collectively. It is against this background that he brings into perspective the poor working conditions and inadequate wages of laborers, which reduces their ability to purchase goods hence causing crisis in the capitalist economy. In as much as Malthus argument is clear and provides important insights into capitalist economies, I still find it less persuasive. Malthus’ arguments regarding capitalist economies are not broad enough and are based on numerous assumptions that may prove untenable in this dynamic world. Malthus argues that crisis in capitalist economies is in great part caused by labor shortage and high capital accumulation. This position by Malthus is based on the assumption that technology remains constant and production relies on human labor only. This assumption is greatly disputable as technology has continued to advance and is playing very critical role in production in capitalist economies. Lastly, Malthus fails to consider other production aspects such as profitability. It is therefore evident that Marx’s explanation is more persuasive than Malthus’ is. Works Cited Alfredo, Saad- Filho. The Value of Marx: Political Economy for Contemporary Capitalism. London: Routledge, 2002. Print. Buchholz, Todd. New Ideas from Dead Economists: An Introduction to Modern Economic Thought. Plume Publishers, 2007.Print. Frank, Stilwell. Political Economy: The Contest of Economic Ideas. Oxford University Press, 2002. Print. Hollander, Samuel. The Economics of Thomas Robert Malthus. Toronto, Canada: University of Toronto Press, 1997. Davis, Timothy. The Historical Context of the General Glut Controversy. In Steven Kates ‘Essays on Economic Theory’s Most Controversial Principle. Edward Elgar Publishing, 2003. Print. Wheen, Francis. Marx’s Das Kapital. Atlantic Books, 2006. Print. Read More