Why marxism failed, fails and will always fails

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Álvaro Martín

Estudiante de economía internacional. Defensor del libre mercado desde que tengo uso de razón. Una sola frase para cambiar el mundo: "Laissez faire". Autor de "IN DEFENSE OF FREEDOM", prologado por Daniel Lacalle.

Últimas entradas de Álvaro Martín (ver todo)

• La economía mundial, en desequilibrio - 3 de septiembre de 2019
• Greta Thunberg, la anticapitalista por antonomasia - 28 de junio de 2019
• Oda por una unión liberal - 11 de junio de 2019

Last week, even Juncker celebrated Marx’s 200th birthday. For me it represents an occasion for breaking down Marxism’s main arguments and clichés, that are still repeated nowadays by critics of capitalism, even after having suffered tremendous oppressive regimes based on Marx’s ideology, as Stalin’s USSR or Mao’s China. When well-known left wing economic analysts or political leaders repeat incessantly the typical phrase: “Marx got it right”, I really don’t understand what they are talking about. It is not just that Marx failed as an economist by not being able to design a system of efficient growth and progress, but instead he portrayed a system of starvation, death and misery.

Many of us, when arguing against Marxism are blamed for not knowing how to differentiate between a theory, as it is Marxism and its practical application, as was the USSR or Mao’s Chinese dictatorial regime. We have to assume that a sophisticated person should know how to differentiate between these two branches of Marxism. This is a complete idiosyncrasy, as the demonstration of successful ideas is shown through their implementation and not through their theorical analysis. Every idea seems to be the perfect and unique solution when having been only applied on paper but being introduced in society is a much different thing.

If you read Human Action by Ludwig Von Mises, you’ll be able to depict how human nature and their actions are the result of social evolution that will be later explained and studied by Darwin. In this sense, traditional socialism has always been depicted as “humanitarian” ideologies, and as a transition between capitalism and communism, as Marx explained in The Communist Manifesto. Marx severely criticises the State to later on justify the dictatorship of the proletariat, which means building up a new and renovated State, but now in hands of the ones Marx considers should govern. The problem for Marx is not the size or power of the State, as it is for libertarians, but who rules and has the power, as for Marx, oppression and severe restrictions will be necessary for a communist society to form. Through this system, the proletariat will end up being the high class of society just by following the State’s structure, as it is a monopoly that benefits consistently those who are in in the Administration.

Marx portrays capitalism as an inhumane ideology that has been promoted by a lack of knowledge. How can an ideology that is based on shared knowledge and distributed information for the correct and efficient function of markets be based on an ack of knowledge? Capitalism is just the free Exchange of good and services following the wills of households without the State intervention, but with the State protection through the enforcement of the rule of law, which provides security for contracts and allows freedom of transaction and trade to be protected from fraudulent external agents. One of Marx’s greatest lies is that which says that “merchants and entrepreneurs are expropriating wealth from workers through the concept of capital gain or surpluses”. The reality is that this exploitation really doesn’t exist, as contracts are voluntary and previously negotiated but never enforced. Those poverty conditions and high costs of living which sometimes force workers to accept a salary below their needs are created by the same socialist thinkers and politicians that impose capital gain tax or wage tax of over 40% or 50%. It is true that governments can’t raise wages, but they can increase disposable income and purchasing power, how? By slashing taxes.

Marxists in their capital gain theory don’t take into account investment in real capital, either fixed or circulating, which needs to be done by the entrepreneur and has an implicit risk in it, as any kind of investment. A large part of the revenue generated by a firm is due to capital expenditure and not so much due to workers and their added value. For example, in a t-shirt factory, without a machine to wash, dry and transform cotton, it will be impossible for the workers to produce t-shirts at the volume and speed they actually do. In this case the cost of capital (investment) which is confronted by the entrepreneur, will have a risk of not being returned and even generate losses, which is why all revenue and profits generated by capital (capital productivity) is usually reinvested in the firm’s future operations or just enjoyed by the entrepreneur due to the risk implicit in the investment, which is usually called investment return, or speculative return in high risk operations.

Marxism has shown in various different ways that it is a utopian ideology which promotes economic inefficiency which leads to poverty and hunger.

We should celebrate Marx’s death, and not his birthday.