It’s Labor Day and my thoughts turn to Karl Marx. My impression is that the general public, to the extent they think about old Karl at all, think of him as some kind of political theorist whose ideas led to the disaster of Communism. There’s some truth to that, but Marx was mostly an economist who had some brilliant insight (as well as a few boneheaded ones). His notion of “historical forces” are pure conjecture and the source of much subsequent anguish. But he did rightly deduce a lot of things about the cost of labor and the cost of capital and how, over time, it was inevitable that labor would become of less and less importance as a factor of production. Some people interpret this to mean a “race to the bottom”, ignoring the fact that as the real cost of labor declines, so does the real cost of capital.
Marx didn’t foresee the enormous improvements in technology ahead, nor the need for complex organizations to cope with those technologies. He didn’t foresee the growth of capitalist participation, where many laborers are also capitalists. He certainly didn’t foresee the growth of the knowledge industries, where the “big earners” are people who possess skills – he didn’t see the arrival or impact of human capital.
I’m not knocking Marx. His contemporaries didn’t foresee these things either.
Marx is worth reading – he was a brilliant thinker. He strikes a chord for some people. But beware: Marx is from a different age and worked with assumptions that aren’t especially germane in today’s world. Marx isn’t the devil, but he’s not the path to salvation either.