For Discussion: The Clearest Explanation of Marxism and Surplus Value I’ve Come Across

Whenever my adult children and I get together, we end up “discussing” current events such as the coming General Election, U.S. foreign policy, Black Lives Matter, or Cuba. And those discussions always lead to exchanges about alternatives to capitalism — especially socialism inspired by Karl Marx. On such occasions I end up defending those alternatives, and my dialog partners offer powerful counter-arguments.

I always come away from such events wishing I could be clearer in expressing my convictions. I’ve taught Marxism in the past. For a while, in a team-taught interdisciplinary course involving 15 Berea College faculty drawn from various disciplines (History, Philosophy, Physics, Biology, Economics . . .), I was asked to give the Karl Marx lecture to those colleagues and the entire B.C. sophomore class. The context was a course called “Religious and Historical Perspectives,” the best teaching (and learning) experience I’ve ever had.

There I wish I had been able to give something like the lecture I’ve pasted below. It’s given by Richard Wolff and it’s the clearest explanation of Marx’s theory of “surplus value” that I’ve come across.

Richard Wolff is emeritus professor of economics at the University of Massachusetts. He is a Marxist educated at Yale,Stanford and Harvard. He currently teaches at the New School in New York City. I am grateful to my good friend, John Capillo, who called him to my attention.

Please watch the video. If my children do, I know it will spark more enlightened conversation. I’m also hoping it will start discussion here among readers of this blog.

See what you think:

Critical Thinking: Mixed Economies Are All We Have

Mixed Economy

[This is the fourth blog entry in a series on critical thinking which lays out ten guidelines for critical thought. My previous two entries addressed the first rule of critical thought, “Think Systemically.” That rule holds that we can’t really remove our culture’s blinders unless (without prejudice) we’re clear about the meaning of the key systemic terms: capitalism, Marxism, socialism, communism, mixed economy, and fascism. So having already dealt with capitalism, the last installment tried to explain Marxism, socialism and communism in fewer than 1000 words. This week’s episode finishes Rule One by explaining mixed economy and fascism in just three points each. Next time we’ll move on to the second rule of critical thinking, “Expect Challenge.”]


Following the Great Depression of the 1930s, the world as a whole has moved away from attempts to implement either pure capitalism or pure socialism. Instead, the trend virtually everywhere has been towards selecting the best elements from each system in a “mixed economy.” As the phrase implies, this involves (1) some private ownership of the means of production and some public ownership, (2) some free and open markets and some controlled markets, and (3) earnings typically limited by a progressive income tax.

Of course what we have in the United States is a highly mixed economy. The U.S. government is, after all, the largest land owner in the nation. Drug, alcohol, food, and medical care markets (and many others) are highly regulated. Following World War II, Americans earning more than $400,000 were taxed at a rate of 91%. Currently, the top income tax bracket is 34%. None of that would be possible under pure free market capitalism.

Similarly, countries claiming to be “socialist” (like Venezuela) or “communist” (like Cuba) have mixed economies. Private enterprise is a key part of both.

Does this mean that the economic systems of the United States and Cuba for example are the same? Not at all. True, both economies are “mixed.” But they differ in terms of whom they are mixed in favor of. The United States economy is mixed in favor of the wealthy and corporations. This is illustrated by consideration of the recipients of recent government bailouts – basically large corporations and Wall Street firms rather than middle or lower class people. The theory at work here is “trickle down.” That is, it is believed that if the wealthy prosper, they won’t hide their money under their mattresses. Instead they’ll invest. Investment will create jobs. Everyone will benefit. So mixing an economy in favor of the wealthy is not sinister; it’s done for the benefit of all.

Cuba, for instance, has a different approach. Its theoreticians observe that historically the wealth hasn’t trickled down – at least not to people living in the Third World (the former colonies). So, (the theory goes) the economy must be mixed directly in favor of the poor majority. The government must adopt a proactive posture and interfere directly in the market to make sure that everyone has free education (even through the university level), free health care, and retirement pensions. Food is subsidized to ensure that everyone eats. And the government is the employer of last resort to provide dignified employment for everyone, so that Cubans are not simply on the dole.

In summary, then, all we have in the world are “mixed economies.” Today, most of them are mixed in favor of the wealthy (once again, on the “trickle-down” theory). Some, like Cuba’s, prioritize the needs of the poor.


What about fascism then? Today the word is thrown around on all sides, and seems to mean “people I disagree with,” or “mean people,” or “those who force their will on the rest of us.” There’s talk of Islamo-fascists. President George W. Bush was accused of being a fascist. Recently President Obama has been similarly labeled.
None of those really capture the essence of fascism. Benito Mussolini, who claimed fascism as a badge of honor in the 1930s (along with Adolph Hitler in Germany, Antonio Salazar in Portugal, and Francisco Franco in Spain), called fascism “corporatism.” By that he meant an alliance between government and large business concerns or corporations.

In terms of Rule One of Critical Thinking, then, we might understand fascism as “capitalism in crisis” or “police state capitalism.” That is fascism is the form capitalism has historically taken in situations of extreme crisis, as occurred in the 1930s following the Great Stock Market Crash of 1929.

More accurately however (in the light of our previous section on mixed economies), we might call fascism police state economy mixed in favor of the wealthy. Fascists are always anti-socialist and anti-communist.

The three elements of fascism then include: (1) A police state (2) enforcing an economy mixed in favor of large corporations, (3) characterized by extreme anti-socialism and anti-communism, and by scapegoating “socialists,” “communists” and minorities (like Jews, blacks, gypsies, homosexuals . . .) for society’s problems.


Both economies mixed in favor of the rich and those mixed in favor of the poor claim to respect human rights. They also blame their opponents for not following suit. The truth is, however, that both types of economies both respect and disrespect human rights. That is, despite claims to the contrary, no system of political-economy has shown consistent respect for all human rights. Instead all systems prioritize them according to what they consider the most basic. This means that capitalism respects some human rights more than others. So does socialism.

Capitalism puts at the top of its list the rights to private property, the right to enter binding contracts and have them fulfilled, as well as the right to maximize earnings. These rights even belong to corporations which under capitalism are considered persons.

On the other hand, capitalism’s tendency is to deny the legitimacy of specifically human rights as recognized, for example, by the U.N. Declaration of Human Rights. For this reason, the United States has never ratified key protocols implementing the Declaration, or other key documents asserting rights beyond the corporate. Moreover, if capitalism’s prioritized rights are threatened, all others are subject to disregard, including the rights to free elections, speech, press, assembly, religion, and freedom from torture. Historical references in the blog entries which follow this one will support that observation.

Similarly, socialism heads its own list with the rights to food, shelter, clothing, healthcare and education. In the name of those rights, socialism relativizes rights to private ownership and the rights to enter binding contracts, and to maximize earnings. If the rights socialism considers basic are threatened, history has shown that it too, like capitalism, will disregard all others.


What’s the “take-away” from all of this? Simply this: capitalism is both a simple and complicated system; so is socialism. Both can be summarized quite simply, as can mixed economies, Marxism, communism, and fascism. Capitalism respects some human rights, while disregarding others. The same can be said of socialism and systems that call themselves “communist.”

Critical thinkers should remember those simple summaries and truths about human rights. Doing so will help cut through many of the misunderstandings and distortions that characterize discussion of today’s key issues.

Thinking Critically about Marxism, Socialism and Communism (All in fewer than 1000 words!)


[This is the third blog entry in a series on critical thinking which lays out ten guidelines for critical thought. Last week started a sub-series on the first rule of critical thought, “Think Systemically.” That rule holds that we can’t really escape Plato’s Cave unless (without prejudice) we’re clear about the meaning of the key systemic terms: capitalism, Marxism, socialism, communism, mixed economy, and fascism. Last week’s blog entry tried to explain capitalism in three simple phrases: (1) private ownership of the means of production, (2) free and open markets, and (3) unlimited earnings. This week’s episode turns to the main critique of capitalism (Marxism) and to the nature of its alternatives, socialism and communism. Again without judging, it will clearly explain these terms using just three points each and in fewer than 1000 words. I promise.]


Marxism represents the Western tradition’s most trenchant critique of capitalism. Marxism’s three points are as follows: (1) capitalism necessarily exploits workers and the environment, (2) workers will eventually rise up against such exploitation and replace capitalism with socialism, and (3) socialism will eventually evolve into communism. Let’s consider those points one-by-one.

First of all, Marxism’s critique of capitalism holds that the system necessarily exploits workers (and by extension, as we shall see, the environment). The adverb “necessarily” is emphasized here to show that, on Marx’s analysis, the destructive nature of capitalism is not dependent on the personal qualities of individual capitalists. Regardless of their personal virtue or lack thereof, the market mechanism itself forces capitalists to exploit workers (and the environment). This is because, for one thing, workers are forced to enter a labor market whose wage level is set by competition with similar workers seeking the same job. As a result, each prospective employee will bid his competitors down until what economists have called the “natural” wage level is attained. Marx found this “natural” level below what workers and their families need to sustain themselves in ways worthy of human beings.

For Marxists, the capitalist system does not merely exploit workers of necessity. It also necessarily exploits the environment. That is, the market’s supply and demand guidance dynamic punishes the presence of environmental conscience on the part of producers. Thus, for example, a conscientious entrepreneur might be moved to put scrubbers on the smokestacks of his factory and filters to purify liquid effluents from his plant entering a nearby river. In doing so, he will, of course, raise his costs of production. Meanwhile, his competitors who lack environmental conscience will continue spewing unmitigated smoke into the atmosphere and pouring toxins into the river. Their lowered costs will enable them to undersell the conscientious producer, and eventually drive him out of business. In this way, the market rewards absence of environmental conscience.

Marx’s second point is that the exploitation which the capitalist system necessarily fosters will cause rebellion on the part of workers. They will rise up against their employers and overthrow the capitalist system.

Marx’s third point is that the workers will replace capitalism with socialism. Socialism will eventually evolve into communism. So what do those terms mean?


For Marx capitalism’s replacement at the hands of workers is socialism. This economic system is capitalism’s opposite on each of the three points indicated earlier. First of all, whereas capitalism espouses private ownership of the means of production, socialism advocates public ownership. According to this theory, the workers themselves take over the factories and administer them, not for the profit of the few, but for the benefit of workers and their families.

Secondly, whereas capitalism demands free and open markets, socialism mandates controlled markets. Since socialism has the interests of the working majority at center, its pure theory will not allow, for instance, production of luxury crops (such as roses or coffee) if that production deprives workers of the food they need for subsistence.

Thirdly, whereas capitalism idealizes unlimited income, socialism calls for redistribution of income – for instance, through a progressive income tax. For socialism, greed is definitely not good. So it might also limit income by establishing ceilings beyond which personal incomes are not permitted to rise. Taxes and surplus earnings are then used for the common good, for example to fund schools, clinics, food subsidies, affordable housing, rents and health care.


As for Communism, it is a “vision of the future” which some, though not by any means all, socialists entertain as history’s end point. That is, while all communists are socialists, not all socialists are communists. This is because some socialists (along with all capitalists, of course) consider the communist vision of the future as unrealistic and unattainable. That vision, overly idealistic or not, is of a future where there will be (1) abundance for all, (2) no classes, as a result of such plenty, and (3) no need for a state.

To begin with, the vision of virtually unlimited abundance marks communists such as Marx and Engels as convinced industrialists. They were highly impressed by the unprecedented output of the factory system of the late nineteenth and early twentieth centuries. Shirts, for example, that would take a skilled seamstress days to produce, were turned out in minutes, once an assembly line based on “division of labor” was set in motion. Soon, communists theorized, the world would be filled with consumer goods. And in a context of such abundance “yours” and “mine” would cease to have meaning. Neither would it make sense for some to hoard goods to themselves at the expense of others. The result would be the disappearance of classes. There would be no rich and no poor. Everyone would have more than enough of what they need.

With the disappearance of classes would come the gradual “withering away” of the state. This is because “the state,” by communist definition is simply armed administrator of the affairs of society’s dominant class. As Marx and Engels put it in their Manifesto, “Political power, properly so called, is merely the organized power of one class for oppressing another.”

Thus the state’s job is to impose the will of a ruling class on others. Under capitalism, the state’s function is to oblige the working class to accept conditions profitable to the bourgeoisie (wealthy property owners). In other words, under capitalism, the state imposes the “dictatorship of the bourgeoisie.”

Meanwhile, under socialism, the function of the state is to impose the will of the working class on the bourgeoisie. It enforces the “dictatorship of the proletariat.” By way of contrast, under communism, in the absence of classes (eliminated by a condition of abundance) there remains no group whose will needs to be imposed on others. The state’s function thus ceases. It gradually disappears.

[Next week: Conclusion of Critical Thinking’s first rule (Think Systemically): Mixed Economy and Fascism]