While there have been numerous economists over the decades that have proposed varied overviews of economic explanations, however, the history of economics can be outlined through Classical economics, Keynesian Economics, Monetarist Economics, the Neo-Classical Synthesis and contemporary Economics. 

Classical Economics comprising of economists such as Adam Smith, Thomas Malthus and David Ricardo, originated in the late 18th century from Adam Smith, matured into different versions/corrections till the late 19th century. Classical economics stemmed from Adam Smith’s theory that the manifestation of an individual’s self-interest leads to social benefit. David Ricardo, much like Adam Smith, promoted the benefits of free trade, private ownership and a market-based economy through the theory of comparative advantage. 

While this was applicable in a time when the functioning of an economy was not as complex as it is today and relied majorly on an agrarian outlook, however, it started to be challenged by other economists as the years passed and the outcomes of the Industrial Revolution became more and more pertinent in the society. Disputing the capitalist and market-based structure of an economy, Karl Marx and Friedreich Engels were pioneers in proposing the idea of the communist manifesto which believes that the hierarchy will eventually drive the workers to overthrow their bosses, hence, leading to a classless and stateless system. 

Despite the opposition to a free market-based economy, the world was dominated by the capitalist system with simultaneous communist uprisings. This gained increased traction during the Russian Revolution and formation of the Soviet Union which was built on the very principle of communism. Alongside the establishment of the Soviet Union, the Great Depression affected nations worldwide and neither were classical economists able to curate a solution to this scenario nor were they able to explain how it happened. 

John Maynard Keynes proposed a solution to this issue through his work, known as Keynesian Economics. The main argument in his book was to correct a recession with government intervention in the form of monetary and fiscal policies to increase output and decrease unemployment. Although not entirely in alignment with communism, Keynes’s theory did promote social equality and aimed at reducing the income gap through the kind of measures that were to be taken under government intervention. Therefore, directly challenging the principles of classical economics.  

Due to the large-scale consequences of the Great Depression, many economies started employing socialism in their systems. This meant that even though private ownership will be possible, there will be government regulation of industries, large markets and public services. With the rise in the acceptance of the Keynesian model, the Monetarist school of Economics kept focussing on maintaining price stability and argued that money supply should be increased slowly and predictably to allow for steady growth. This school of thought was more reliant on capitalist ideology as it urged that the economy is far too complex to be manipulated with monetary/fiscal policies and that the Great Depression occurred as a result of botched government policies. 

Economics today is an amalgamation of both the Keynesian and Monetarist views and is called the New Neoclassical Synthesis. Besides this, contemporary economics has seen a surge in the importance granted to the developmental aspect of the subject. This can be seen through the works of economists such as Amartya Sen and Jean Derez who talk about aspects of the economy that do not directly affect economic growth but rather use development as a pathway to reach the ultimate goal of economic growth. For instance, the definition and relativity of poverty according to Amartya Sen’s capability approach and the importance of health equity as outlined by Jean Derez’s work showcases the growing importance of looking at economics as more than just a subject but rather an institution that needs to cater to the masses for it to be effective. 

Looking at the varied theories, schools of thought and progression in Economics it can be inferred that the system is ever-changing as a result of circumstantial findings or realisations, as seen in the case of John Keynes, and the contradictions or attempt at falsification by an opposing school of thought which either leads to a synthesis, as seen in NeoClassical Economics or the complete disposal of a previously accepted notion such as those proposed by Classical Economists. 

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This is a complete peculiarity, as the substantiation of successful ideas is shown through their implementation and not through their theoretical analysis. Every idea seems to be the perfect and unique solution when having been only applied on paper but being introduced in society is a much different thing.

Cooperation or Oppression?

Marx severely criticises the State to, later on, justify the dictatorship of the proletariat, which means building up a new and renovated State, but now in hands of the ones Marx considers should govern. Through this system, the proletariat will end up being the high class of society just by following the State’s structure, as it is a monopoly that benefits consistently those who are in in the Administration.

Marx portrays capitalism as an inhumane ideology that has been promoted by a lack of knowledge. How can an ideology that is based on shared knowledge and distributed information for the correct and efficient function of markets be based on a lack of knowledge?

Capitalism in brief

Capitalism is just the free Exchange of good and services following the wills of households without the State intervention, but with the State protection through the enforcement of the rule of law, which provides security for contracts and allows freedom of transaction and trade to be protected from fraudulent external agents.

One of Marx’s greatest lies is that which says that “merchants and entrepreneurs are expropriating wealth from workers through the concept of capital gain or surpluses”. The reality is that this exploitation really doesn’t exist, as contracts are voluntary and previously negotiated but never enforced. Those poverty conditions and high costs of living which sometimes force workers to accept a salary below their needs are created by the same socialist thinkers and politicians that impose capital gain tax or wage tax of over 40% or 50%. It is true that governments can’t raise wages, but they can increase disposable income and purchasing power, how? By slashing taxes.

Marxists in their capital gain theory don’t take into account investment in real capital, either fixed or circulating, which needs to be done by the entrepreneur and has an implicit risk in it, as any kind of investment. A large part of the revenue generated by a firm is due to capital expenditure and not so much due to workers and their added value. For example, in a denim factory, without a machine to wash, dry and transform fabric, it will be impossible for the workers to produce denim at the volume and speed they actually do.

In this case, the cost of capital (investment) which is confronted by the entrepreneur, will have a risk of not being returned and even generate losses, which is why all revenue and profits generated by capital (capital productivity) is usually reinvested in the firm’s future operations or just enjoyed by the entrepreneur due to the risk implicit in the investment, which is usually called return of investment (ROI), or risky return in high-risk operations.

Marxists in the today’s world employ a concept that never matches with reality. To what Marxists are referring with the term “neoliberalism” is really to mercantilism, which is an ideology that was widely put into practice from the 16th-18th century in Europe, based on interventionist State policies in the economy, which lead to the creation of monopolies and autarchies, through subsidization of unproductive sectors which are considered of “national relevance”, and through tight control of monetary policy and outflow of fiat money, to control inflation. It is necessary to bear in mind, that what Marxists normally criticise as capitalism is really “neomercantilism”.

Price controls are an important Marxist measure. Price controls were one of the main proposals of Marx to “abolish capitalism and lead to the dictatorship of the proletariat” from the State. The argument that Price fixation could work is based on the false Intrinsic theory of value, that sustains that each fair price, independently if it is intrinsic or objective, should be fixed by the State based on the amount of labour that has been put into its production.

To simply argue this theory, it is valid to say how these rules will cause enterprises to look forward to a capital-intensive model, reducing prices and being more competitive in the market, and as communists tend to don’t like this, they will finally end up performing several expropriations of private firms and premises, ending up as Cuba or Venezuela sunken in misery.

The failed Utopia

Marxism has shown in various different ways that it is a utopian ideology which promotes economic inefficiency which leads to poverty and hunger. His theories are based just on subjective forms and never on practical studies which have resulted valid when applied to reality. Marxism has caused hundreds of millions of deaths throughout history. It has been estimated that at least 150 million people may have died (more than that of in WWII) at the hands of Marxist regimes around the world. (source) Every communist regime in the 20th century strived or succeeded in imposing cruel and comprehensive dictatorship over the societies under their power, what they call rights of proletariats. Mind control through agitprop, restraint, and persuasion were rigorously put into effect to inculcate “socialist values” and destroy bourgeois, capitalist thinking.

It is not just that Marx failed as an economist by not being able to create a system of efficient growth and progress, but instead, he depicted a system of starvation, death and misery. As a futurologist, he was even less successful, as he predicted the end of capitalism based on his theory of dialectic materialism, but even nowadays in 2020, capitalism is still alive and stronger than ever. We have had to pass through several hard crises, but capitalism has always survived.

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