Compare and contrast neoclassical and Marxian views about the stability of the capitalist economy
According to Forder in ‘theories of welfare’, a major similarity between the classical theorists and the neoclassical theorists was that they both emphasized on private ownership of the means of production - Compare and contrast neoclassical and Marxian views about the stability of the capitalist economy introduction. ‘(Forder 1984, p 27). Such an economic system was what they defined as capitalist or capitalism. (Callinicos 2003, p 26). To them, the command system where the state took much control of the means of production as well as the distribution had been substituted by capitalism. (Polychroniou and. Targ 1996, p 131). The role of materialistic values is highly emphasized in the capitalist economic system. In the modern world, the capitalistic tendencies are highly experienced. This paper discusses Marxists views as well as those of the neoclassicist economists on the stability of the capitalist economy while highlighting their differences as well as their similarities.
Marx argued that capitalism was an out come of ‘class’ in the society. His theory which was most applicable to explain the happenings of his times argued that there was a general correlation between the social stratification, politics and the economy. (Eyal et al 2000, p 187). He noted that capitalism had two fundamental features which were “the exploitation of wage labor and the competitive accumulation of capital” (Callinicos 2003, p 35). To Marx, the dominant class or the bourgeoisie were the owners of the factors of production and were determined to do all in their power to maintain their status quo. The workers, also the ‘proletariat’ worked for the dominant class. They earned meager wages despite their hard wok which aimed at making the owners of production richer. (Ikerd 2005, p 44).
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Marx argued that in the society individual interests seemed to be in isolation with the rest of the society though this was actually not the case. In other words the pursuit of individual interests was not independent but rather affected the entire society. To him, the capitalist society worked to benefit a certain group in the society (the bourgeoisie) at the expense of the working class. (Forder 1984, p 29-35). The dominant class or the owners of the factors of production aimed at increasing their capital accumulation as well as their appropriation of the surplus value. With time the relationship between the bourgeoisie and the proletariat was enforced. Marx coined the idea of class consciousness which would evolve with time. The workers would become keener of the level of exploitation that they were subjected to and a revolution would see the culmination of the capitalist society. Marx suggests that there is always a class struggle between the owners of production and the workers. (Forder 1984, p 91). To him, there was a direct relationship between the economy and the state. Laws adopted worked to favor the bourgeoisie by ensuring that they retained their status quo at the expense of the workers. The stability of the capitalist society was therefore dependent on the magnitude of the conflict between the two main classes in the society. The economic system would remain stable for as long as the working class did not rebel which depended on the how alienated they were.
The Marxist theory would best suffice to explain exploitation in the contemporary capitalist economy. Some people tend to remain rich due to the fact that they control the factors of production while others continue to languish in poverty for the lack of it. Low income families are likely to transfer it to their children as for instance without the finances they cannot afford proper education for their children which would change this situation. Marxist continued class conflict can best be explained for the constant demonstrations in society as people seek better treatment. Civil societies constantly demand for increment in their wages as a way of rejecting the exploitation by the ‘’bourgeoisie’. The class differences is persistence in the contemporary US society as can be seen in the article ‘social inequalities in US hit new record’ where a small proportion of the population ‘the wealthy’ continue to have higher wages at the expense of the larger society.
On the other hand, the neoclassical theorists focused more on individualism. The argument raised was that people were rational beings who sought to maximize on their benefits or gains rather than their pain. In this case individuals were the best judges of their welfare. According to the neoclassicists, production and distribution of goods in any complex economy such as the capitalism would be through competition in a free market economy where the forces of demand and supply took full charge without any interference. (Forder 1984, p 30-35). Their viewpoint differed from Marx’s in the sense that they did not overemphasize the role of social stratification in the society in relation to the economy. The determination of wages according to them was largely affected by the market forces or the demand and supply forces. Labor in this case was viewed like a commodity in the market. To the neoclassicist “workers were capable of performing at higher or lower levels of productivity and they had a choice or preferences in the market attributed by the market forces”. (Forder 1984, p 34-35). This implies that workers did not necessarily work to benefit the owners of production. Instead the neoclassicists argued that both the workers and the dominant class were rational and aimed at maximizing gains while reducing pain at all costs. The owners of production would choose “the cost minimizing job structures while using the available techniques of production”. (Albelda et al 1987, p 70). This way they would influence the market in the sense that they would create certain jobs to be filled by the working class. The workers on the other hand, would have a variety of jobs to choose from depending on what the owners of the factors of production had chosen. To the neoclassicists the job structures would increase the output as well as the workers satisfaction at an added cost.
Unlike Marx, the neoclassicists detached the economy from power and argued that the job structures would be efficient. (Wolff and Resnick. 1987, p 92). This was different from Marx’s ideology which argued that the dominant class aimed at maintaining their status quo as the owners of factors of production by exploiting the working class which was compelled by their plight to this exploitation. Neoclassicists embraced the role of will and self satisfaction on either sides or classes in the capitalists’ society. Differences in wages in this economy would be a reflection of the desirability of jobs as well as the differences in skills and not as a result of competition among the various owners of the factors of production. This was different from Marx who failed to give a clear stance on the effect of the quality of labor and how it would influence the wages. To him, the class conflict triggered by the struggle over material gains would only be resolved by a revolution to embrace socialism. (Wallerstein 2008, p 59).
He argued that the worker was not an ‘object’ to be viewed as a commodity like any other in the market instead he had the human conscious which was what triggered the class conflict. Marx failed to offer a clear explanation if the production in the society was triggered by the demand for goods and services or was as a result of the need of the owners of the factors of production to accumulate more wealth or profits. (Outhwaite 2003 p 154). He made it clear that any investment by the dominant class was triggered by their selfish or individualistic interests of earning more profits which he termed as ‘the surplus value’. (Callinicos 2003, p 37)
To the neoclassical theorists, differences in wages were attributed to the difference in skills as well as the desirability of jobs. (Albelda et al 1987, p 70). The quality of work produced by the workers in the capitalist society was emphasized by the neoclassicists who argued that workers would gain satisfaction from certain jobs and the wages offered would be of little or no significance in their pursing those jobs. Some would offer their services at a lower wage as the job satisfaction from the jobs were vital.
The neoclassicists saw the capitalist society as one where the need for socialism was unnecessary as “production did not rely on the property relations, the class structure or the social control of the economic life”. (Albelda et al 1987, p 71). They embraced the aspect of meritocracy where and individuals would attain any economic positions in the society based on their achievements rather than on their social classes as depicted by Marx. To them, the society was open and ascribed status had no role in determining the economic position that one attained. They argued that the differences in wealth were due to differences in people’s tastes, their abilities as well as the availability of opportunities in the society. (Marglin 1984, p 146). Production in the capitalist society exhibited a hierarchical division of labor where power was held at the top but trickled down the pyramid.
The neoclassical theory of capitalism can best explain situations where people’ abilities have seen them acquire great positions in the society. A clear example would be when talent in music, athletes or invention of an idea that sees one attains a higher status in the economical ladder. The aspect of meritocracy dominates the world and regardless of the social class that one was born into they can attain higher status through hard work for instance in education.
Marx argued that in a capitalist society the unemployment levels were as a result of technological change. This is to say the job creation was by the owners of production and when they changed the technology some people would be rendered unemployed especially if they lacked the needed skills. (Hodgson G 1995. pp 56-78). The dominant class would make surplus value or profits by overworking the workers or through the surplus labor. The wages paid did not match the time spent working. The workers pay was equitable to their half day labor yet they worked for the whole day. (Howard and King 1988, p 94-7). Marx adopted a monopolistic approach to the means of production where the owners of the factors of production had all the control although there was competition among them. This is in contrast with the neoclassicists who embraced free competition where the demand and supply controlled the market. The market forces were what would ensure the stability of the capitalist market.
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