Communism and Karl Marx: Study with Video Lessons, Practice Problems & Examples

The Communist Model, developed by Karl Marx, critiques the Free Market System, emphasizing the labor theory of value, which posits that all value derives from labor. Capitalists, who own the means of production, exploit workers by paying them less than the value they create. Marx predicted that this exploitation would lead to a revolution where workers seize control of production, establishing communism. Despite attempts in countries like Russia and China, communism has struggled in practice, often resulting in corruption and inefficiency, with only North Korea and Cuba currently adhering to this model.

Communism and Karl Marx

Throughout this course, we've been focused mostly on the Keynesian model of economics. Let's look at one of the biggest critiques to modern economic theories. It's the Communist Model developed by Karl Marx. So the Communist Model is one of the biggest critiques of the Free Market System. It's basically the extreme opposite of the free market system. It was developed by Karl Marx in the 1860s, and it was notably through his publication of Das Kapital, which was the name of his book where he studied this communist theory. Okay? So he studied mainstream economics, the classical model and he believed he understood what would happen in the long run of the free market system. He developed what he called the labor theory of value. And he thought that all value, all the value of a good or service is attributable to the labor involved in creating it. Okay? So this is the idea of the labor that goes into producing a product, that's where the value lies. So if you think about a T-shirt company, without the labor, they just have cotton. They just have a bunch of raw material with no final product, right? But the labor that goes into creating the product, that is what, that is where all the value is created in the product, right? The T-shirt, if there was no labor involved, would just be cotton. Okay? So he believes that all of the value comes from the labor. He believed that the owners of the business, the capitalists, added nothing of value. Okay? They just owned the machines. Right? All that the capitalists did, the people with the money, was to have the monopoly over the means of production. This is a big thing with the communist model: the means of production. Basically, the factories are owned by the capitalists, and they use this monopoly over the factories, over the places where the products get made, to exploit the workers. So the workers are exploited by the capitalist in this model, and the value added by workers, remember that the labor theory of value believes that all the values are derived from the labor. So the value added by the workers is much higher than their wage. Okay. The value added is much higher than their wage. They're being exploited for these profits by the capitalists. So, he believed that wages would eventually be driven down by the greed of the capitalists that increased profits, and increased profits would be eventually driven down to bear survival levels, okay? So the wages of the workers would just be bare survival where all the value they add would be profits of the capitalists because of their monopoly over the factories and owning the means of production. And over time, the control of production, the monopoly would get worse and worse and be consolidated by a few firms, so that only a few firms had all the power over, the means of production. And these firms would eventually have trouble selling their products to the penniless masses. So this is what he believed would happen in the long run of the capitalist system, right? All the power would be consolidated and then nobody would have any money to buy these products that are being produced, right? So finally, what would happen would be a rebellion where the working class seizes the means of production. And you may have heard of seizing the means of production. This is the final conclusion of the communist revolution here, and that they would establish communism. So the workers would now own the means of production rather than the capitalists themselves owning the means of production. However, so that's the big wrap-up of the communist theory. He believed that this is an inevitable end of the capitalist model is that communism will rise once the workers have their revolution. However, Marx died in 1883 without ever providing how a communist economy would work. Okay? He never said what would happen in a communist economy and how it would operate once the workers had the means of production. However, Communism was still attempted quite a few times in a few different countries. It was attempted by Russia by the Bolshevik party in 1917, and that's when the Soviet Union was formed. The Soviet Union ended up being a cruel dictatorship. It was very corrupt. So it's very corrupt. And it didn't really fit the communist model in the end. Okay? So, communism spread to other countries including China and Eastern Europe, but the Soviet Union collapsed in 1991. So, 1991, that was the end of the Soviet Union and that was pretty much the end of the communist model being used in practice. However, there still are 2 countries that still follow the communist model, mainly North Korea and Cuba are still known to follow this communist model in practice. And they don't tend to have the best reputation for their economies. So Communism has never really seen its true potential. And it's not thought to work practically in theory. Or practically in practice, right? It's always said to be ideal in theory but not in practice, okay? So that's the Communist model developed by Karl Marx and mainly focuses on that labor theory of value and the revolution of the workers to seize the means of production. Okay? So that's about it. Let's go ahead and move on to the next video.

Here’s what students ask on this topic:

What is the labor theory of value according to Karl Marx?

The labor theory of value, as proposed by Karl Marx, posits that the value of a good or service is directly attributable to the labor required to produce it. Marx argued that labor is the source of all value, meaning that without the labor input, raw materials would remain just that—raw and without value. For example, in a t-shirt company, the cotton itself has little value until labor transforms it into a finished product. Marx believed that capitalists, who own the means of production, exploit workers by paying them less than the value they create, thereby generating profit from this discrepancy.

How did Karl Marx critique the Free Market System?

Karl Marx critiqued the Free Market System by arguing that it inherently leads to the exploitation of workers. He believed that capitalists, who own the means of production, exploit laborers by paying them wages that are less than the value of the goods and services they produce. This exploitation results in increased profits for the capitalists while driving down wages to mere survival levels. Marx predicted that this imbalance would eventually lead to a revolution where workers would seize control of the means of production, establishing a communist society.

What did Karl Marx predict would happen in the long run of the capitalist system?

Karl Marx predicted that in the long run, the capitalist system would lead to the consolidation of power among a few firms, creating monopolies over the means of production. This would result in severe exploitation of workers, driving their wages down to survival levels while capitalists reap the profits. Over time, the masses would become impoverished and unable to purchase the goods produced, leading to economic crises. Ultimately, Marx foresaw a proletarian revolution where workers would overthrow the capitalists, seize the means of production, and establish a communist society.

Why did communism struggle in practice despite its theoretical appeal?

Communism struggled in practice for several reasons, despite its theoretical appeal. One major issue was the lack of a clear, practical framework for how a communist economy should operate, as Karl Marx did not provide detailed guidelines. Additionally, attempts to implement communism, such as in the Soviet Union and China, often resulted in authoritarian regimes, corruption, and inefficiency. These regimes failed to achieve the equitable distribution of resources and power that Marx envisioned. The economic inefficiencies and lack of incentives for productivity further hindered the success of communist systems, leading to their eventual collapse or stagnation.

Which countries still follow the communist model today?

As of today, the primary countries that still follow the communist model are North Korea and Cuba. Both nations adhere to the principles of state ownership of the means of production and centralized economic planning. However, these countries have faced significant economic challenges and are often criticized for their lack of political freedoms and human rights issues. The economic performance of these countries has generally been poor, contributing to the perception that communism is ideal in theory but problematic in practice.