Understanding Marxist Socialism

Understanding Marxist Socialism

The theory of Communism may be summed up in one sentence: Abolish all private property.

Karl Marx

The Philosophical side of Karl Marx (1818–1883) believed that as humans, our sense of being, and purpose in life comes from relations with other people, not from our own activities. We are like herd animals; it is the herd that is important, not the individual animal. He was therefore a corporatist in the sense that we are all part of a larger body. Separation from others is a tragedy and goes against our human nature.

Practically, speaking, however, Marx was somewhere between an economic philosopher, a political agitator, and an apocalyptic prophet. He professed to see the future of mankind, and in that future workers were to face increasing torment, toil, poverty and oppression at the hands of their bourgeois masters, until one day the workers of the world would unite and overthrow their oppressors. So, Marx tells his followers: look I know things are bad, and they will get worse — unless you follow my plan which is to revolt now!

Marx believed capitalism to be a doomed economic system, because in order to manufacture a product you need land, labor, and technology (tools). As technology improves, the capitalist will invest more in technology and less in labor, and as laborers become poorer they will revolt. He views Adam Smith’s law of supply and demand this way: If the demand for a product goes up without a corresponding rise in supply, then the price increases. (Price = the market value of the per unit output.) Supply is influenced by factors of production, like tools and methodology. Therefore, due to the synergy of the production process the output is greater than the costs related to the sum of inputs. In other words, price less the cost of inputs = profit. Marx argues that labor shouldn’t be included as simply part of the input costs, which to Marx is a small fraction of the total. In primitive societies, the surplus (profit) goes back to the laborers and to Marx that is fair and just. This naturally assumes that bourgeoisie profits were obscenely large, relative to the pittance paid to laborers.

Today, the average corporate profit margin in the United States is about 9%, or nine cents on every dollar. In most cases this nine cents is either reinvested in the company or paid in dividends as a return on the stockholder’s investment. Companies in the growth phase of their life cycle typically reinvest profits back into their companies. The reinvestment of profit for business expansion is critical to the process of new job creation and lower unemployment rates. Mature companies, whose sales have plateaued, typically distribute profits to their stockholders or invest in smaller high-growth businesses. Most dividends distributed by corporations provide a steady flow of supplemental income to retirees.

Marxist Communism

When we think of communism, it is Karl Marx and Friedrich Engels’ (1820–1895) book The Communist Manifesto (1848) that comes to mind. They argue that the history of the world has been one long struggle between the oppressors and the oppressed. In their view, private property was the root of this conflict: property owners were those who owned the businesses that hired the workers; who were then forced through economic necessity to work long, brutal hours for a pittance in wages, never able to earn enough to own land or anything more than the bare necessities of life. The oppressors were those who controlled the means of production, the Bourgeoisie (today we would call them capitalists), and those who were oppressed, the Proletariat (workers). Marx and Engels advocated and predicted the downfall of the rich bourgeoisie, along with the Parliamentarians (government officials) that protected their wealth, and wrote laws that kept the proletariat overworked, impoverished, and dependent upon the bourgeoisie for a meager existence. It is important to note that the book was written in the mid-19th century, at a time when the Industrial Revolution was in its infancy. In fact, wages were low, working conditions harsh and the hours long. In any case, Marx and Engels believed that the oppression of workers to be a necessary step in the progression of history that would lead to the uprising of workers against their oppressors.

To Marx, socialism was a logical step in the march toward what he considered pure communism, similar in theory to the song Imagine by John Lennon. In Marxist Socialism, the government steps in to represent the interests of the workers, as opposed to representing the interests of the bourgeoisie, by gradually enacting policies that restrict and eventually eliminate private property rights, particularly the means of production. In theory, this will be accomplished when the government has complete control over all corporations. This will be accomplished through heavy-handed regulations, and increasingly oppressive taxation on corporations, the wealthy, and inheritance. Eventually all industry and agriculture will be nationalized and everyone will essentially work for the government. There will be no rich or poor, and therefore all class antagonism will disappear. This, however, cannot be accomplished without completely dismantling all existing governmental and commercial structures, and establishing a completely new, (and at the time untested) alternative society. Also, as Marx stated in his book The Communist Manifesto, this was not intended to be a nationalist movement, but eventually a worldwide revolution. Thus, “… the Communists everywhere support every revolutionary movement against the existing social and political order of things.”

When class distinctions have disappeared, public power will lose its political character. This is because political power is nothing more than ‘the organized power of one class for oppressing another.’ When the proletariat eliminate the old conditions for production, they will render class antagonism impossible, and thereby eliminate their own class supremacy. Bourgeois society will be replaced by an ‘association’ in which ‘the free development of each is the condition for the free development of all’. (SparkNotes Editors. SparkNote on The Communist Manifesto. SparkNotes.com. SparkNotes LLC. n.d… Web. 17 Jan. 2013)

Total Power

Let’s pretend that you are a criminal mastermind with an obsession to become the absolute ruler of your country. Unfortunately, you were not born into royalty, great wealth, or a powerful political/military family. However, you learn about Marxist Socialism. The ideology of a worker-dominated government appeals to the masses, and the nationalization of assets appeals to your greed. You see, if you are the head of the government and the government owns and/or controls everything in the country, then you are absolutely powerful, absolutely corrupt, and immensely wealthy. So, all you have to do is get everyone riled-up, foment a revolution, and completely dismantle all existing institutions. An unfortunate byproduct is the killing or squashing of all opposition; and probably even the true believers, those suckers who actually believed in a communist utopia.

Nationalizing private property means that the state would own your house, your employment, your church (there would be no freedom of religion), and your business. In exchange the state would provide you with a job and all your basic needs. Obviously, this would require a massive despotic taking of everything that you and your countrymen own. Of course, Marx put a positive spin on the process. The Communist Manifesto ends with this rallying cry: “Let the ruling classes tremble at a Communist revolution. The proletarians have nothing to lose but their chains. They have a world to win. WORKING MEN OF ALL COUNTRIES, UNITE!”

Marx’s communist utopia has yet to be realized. Even though we refer to them as Communist, countries like North Korea, Cuba, Venezuela, and the former Soviet Union all stalled in an advanced state of socialism. With the rise in Marxist Socialism also came the rise of atheism as an alternative to religion. This brought persecution, death, and confiscation of church property. Limited religious freedom was, however, tolerated; in fact, a Soviet Zion (the Jewish Autonomous Oblast) was established in Eastern Russia for Jews in an effort by Joseph Stalin (1878–1953) to displace them from mainstream Russian life. As throughout history, if you found yourself on the wrong side of the prevailing orthodoxy, you felt the intense pressure to conform, escape or else be constantly looking over your shoulder.

The historical reality is that the working poor have suffered far more under Marxist Socialism than under the bourgeoisie. In less than 100 years over 90 million people have died either directly or indirectly as a result of Marxist Socialism, be it from civil wars, oppression, or famines caused by authoritarian dictators. Most of the dead were peasants, the people most hopeful that the dream of communism would improve their lives. After all, it was in the poorest countries where Marxist Socialism took root. Marx’s followers were not successful in overthrowing the governments of Western Europe or the United States; however, various degrees of Democratic Socialism have become embedded in all modern nations. Most of these socialist programs today fall under what Marx would have called Conservative Socialism. This is a system where the workers are, according to Marx, temporarily placated by government policies that reduce the influence of capitalism through regulations, minimum wage laws, government supported unions, anti-poverty programs, public education, public healthcare, etcetera. In spite of Marx’s criticism of it, some Conservative Socialism has proven to be worthwhile and valuable to society. On the other hand, some can be detrimental to a nation’s prosperity.

Is True Marxist Socialism Realistic?

Ironically, China and Russia, the former cradles of Marxist Socialism, have both abandoned Marxism to pursue more capitalistic policies, while maintaining totalitarian control of their countries. So much for Marx’s ultimate conclusion that communism would result in the abandonment of governments and people would form free communal associations. A flaw in Marxist thinking is that once power in any government is established, those in power will fight to stay in control.

In every major country there is a bureaucracy that numbers in the hundreds of thousands and in the case of the United States, millions. These are all government employees who believe that they are performing vital functions for the betterment of the public, and of course they will jealously guard their livelihoods. Those in leadership have even more to lose if the status quo changes. Therefore, there is a tendency for all governments to pass laws that increase and consolidate their power and wealth, which can effectively decrease individual rights and true national wealth.

A second flaw is the idea that the world would someday become one large classless society. It simply defies human nature. People organize naturally, but there must be meaning, identification, and a sense of belonging for the members or the group collapses. The ideology of a worldwide worker collective holds virtually no meaning or feelings of belonging for anyone. On the other hand, if the whole world was controlled by one universal communist government with one political party, and we all were commanded by law to be one collective, then that would be that. However, aside from the fact that maintaining control of the whole world would be a logistical and police nightmare, collectives by coercion are still contrary to human nature and will ultimately fail.

The third flaw is the historical fact that as an economic system Marxist Socialism has repeatedly failed. In the Soviet Union, North Korea, China, Cuba, Venezuela and elsewhere, economic activity has lagged far behind private capital-based countries. Since the gradual implementation of free market policies, China has soared economically. Cuba, North Korea and Venezuela on the other hand are hold-outs and have suffered greatly from the policies of backward totalitarian regimes. We should remember that mutually beneficial trade is the goose that lays golden eggs and whenever a government kills the goose, then wealth will simply dry up.


In terms of natural resources, one of the richest countries in the world is Venezuela. According to the CIA’s World Factbook, it has the largest proven oil reserves on earth, estimated at 297 billion barrels. However, its economy has been mismanaged for decades under authoritarian socialism. First by the deceased Hugo Chavez (1954–2013), and now by his successor Nicolas Maduro (1962- ). Their oil industry is so corrupt and inefficient that according to an article by the New York Times, they recently have been forced to import oil from the United States.

The Venezuelan economy shrank 18% in 2016, according to CNN Money; and according to the International Monetary Fund (IMF) inflation is running at about 720%. By the end of 2016, the 100 Bolivar Note was worth about 2 cents.

It wasn’t that long ago that Venezuela was a major oil exporter with revenues paying for extensive social programs. The country had officially abandoned capitalism. It was bringing in so much oil money that corruption and the inefficient management of resources was barely noticed. Both, however, were gradually spreading like a virus and pretty soon oil rigs were left abandoned for lack of parts. Thieves were stripping equipment and selling their loot on the black market. Poverty was growing at an alarming rate; and then, with a global drop in the price of oil, the country is now at the brink of disintegration.

Working under Marxist Socialism

There are basically two different forms of government in the world today: those countries where citizens work for the government, and those countries where the government works for its citizens. In the first example, the government owns or controls the means of production, banking and all commerce. Everyone in the country, who is employed, essentially works for the government. The government decides how much you will earn, how much you will be taxed and how much you will get to keep from your paycheck. It controls what products and services are available and how much they will cost; it also determines what products can be imported from abroad. It owns, controls, and profits from all natural-resources and productive activities within its borders. This system requires an incredibly large — and typically inadequate — bureaucracy to manage such a large and complicated enterprise, including the care of all its citizens. These bureaucratic planners can never have enough information to effectively manage the allocation and distribution of resources to broad and diverse populations.

International Trade

Remember that governments have the power of law. The police and military are always in the background to enforce whatever laws the government dictates. Therefore, it can force its citizens to purchase only domestically made products. When the country enters the international marketplace, however, the rules change. If it wishes to export finished goods abroad, then it’s products must be internationally competitive. In other words, the products need to fill a niche in the international market place, be competitively priced, and provide the quality that international consumers demand.

Of course, even if the country does not export finished goods and is blessed with an abundance of natural resources, it can always export raw materials like coal, iron ore, bauxite or oil. Money from the sale of these commodities can be used to pay for the imports of goods needed domestically. Russia is a good example; their economy is dependent on the international demand for its raw materials, particularly oil. Even though Russia can somewhat control supply and demand within its own borders, it has no control over the global price of oil. Because oil is a commodity, Russian oil is worth the same as oil shipped from any other country. They may have a distribution advantage relative to certain markets and a disadvantage to others; but in either case their revenues from exports are dependent on internationally set oil prices. Great when oil prices are high, but economically crushing when they are low.

National Wealth

So, where is the wealth of the country concentrated? Does the government keep its citizens in near poverty while a select few are allowed to earn massive riches? Does the government allow foreign investment? Is it politically stable? Does it allow its citizens to keep enough of their pay to live in a nice home, own an automobile, build a savings account, and invest for the future?

Authoritarian regimes greatly limit the ability of their countries to build national wealth by concentrating power and money in the hands of a small minority of supporters, and by placing restrictions on foreign investment and international trade. They apparently do not realize that as imports and exports in a country grow, so does the wealth that is flowing into the country.

They could increase national income by allowing citizens to own property, invest in businesses, earn wages based on marketable skills, and build individual wealth. The more citizens there are in countries that have purchasing power, the greater will be the national wealth. The greater the national wealth, the more stable the government and the more the government will collect in taxes to fund public services.

Governments as public entities should operate similarly to private sector companies, because they are both in existence to provide services. Private sector firms must provide more value than their price. Therefore, government services should also provide more value to citizens than they cost — as determined by consumers, not bureaucrats. So, if you accept this premise, then there is no limit to the size of government other than its ability to continue providing services that add more value to society than their costs to society.

Purchasing Power

Let’s look at the country of China. It has a population of well over a billion people, but until recent decades most imports were banned by its government. The economy was largely agrarian and the citizens were poor. As a result, China was ignored by the world as a trading partner. There is a difference between a nation’s population and the purchasing power of its citizens.

Today, China is a country that for the past two decades has fueled world economic growth. Domestic and international companies are investing in world class manufacturing facilities, hiring workers and paying ever increasing wages. A growing percentage of the population is achieving middle class. As more of the population achieves wealth, so does the nation.

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