Contemporary Issues in the Society and Karl Marx
The 2007/08 economic crisis meant massive losses of jobs, home, and savings for millions of people across the globe. This has demonstrated the fallacy that is the monetarism economic doctrine which postulated that economic crisis can be minimized or totally eliminated through the adjustment of the amounts of money that are held in the banking systems together with the interest rate. As a result of this, leading financial systems across the world employed fiscal policies that would see government intervention in the monetary crisis by trying to adjust the prevailing interest rates and increase the amounts loanable to individuals during the economic crisis. The economic stimulus plan suggested by the USA government of using almost $800 billion financed by government borrowing in order to “jump start” the economy followed this reasoning. This runs against Karl Marx boom-and-bust cycle that he used to predict the likelihood of economic crisis in a capitalist economy. While the Economic crisis may have been viewed as a purely financial catastrophe, it had its roots in more factors such as skewed education systems, income inequalities, classism within the capitalist economies, and lack of social mobility. The contemporary issues surrounding this phenomenon will be described with reference to Marxism.
Upper Social Classes
One difference between the modern school and Marxism is the concept of class. According to the modern school, there is no capitalistic class. Instead, non-capitalist entrepreneurs borrow from rentiers using the funds to establish productive enterprises. As a result of this, the only link between the entrepreneurs and the rentiers is the interest rate that the rentiers expect to get. Through this notion, Britain’s economy grew where an increase in entrepreneurs and the sources of funds continued to characterize the economy (Herold, 2002). However, Karl Marx stated that the capitalist class was a definite concrete group that comprised of those who had the monopoly of production mean such as loanable capital. Marx stated that the capitalist class is composed of innumerable familial, personal, and organizational affiliations. As such, the atomised non-capitalist entrepreneur is a fiction. Marx further explained that the ability to borrow is limited by the ability of one to own capital assets that are required to act as security against loans (Marx, 2007). As a result of this, credit in the capitalist system of economy is often rationed on the basis of the specific monopoly complexes that involve financial, commercial, and industrial capitalists. During the economic crisis, the precipitators of the crises were prominent as empires of monopolistic lenders started collapsing (Bresser-Pereira, 2010). In the USA, Fannie Mae and Freddie Mac, two personal monopoly lenders, were rescued by the government. Northern Rock in Britain was also rescued using tax money. All these represent organizations owned by the upper social class (Champion, 2008). As pointed out by Karl Marx, the upper class defends itself and ensures that it remains at this level. Taxes that were contributed by all citizens were used to secure the interests of a few “upper class” family businesses at the expense of the very people who provided taxes.
A major tenet of Karl Marx is that the “working class” can result in sustainable economic prosperity. The cycles of economic crises experienced across the globe have been as a result of ignoring this tenet. In the 1970s, one of the major concerns of employers was the need to stop the continuous increase in real wages for the employees. In the USA, this was accomplished by outsourcing labour, bringing women into the labour force at lower wages, substituting machines for workers, and introducing low-wage immigrants into the labour force (Smith, 2011). The results of this move were predictable. First, there was an increase in the profitability of organizations as workers increased production but were paid low wages. However, after a few years of stagnant employee salaries, the ability of the employees to purchase the commodities produced was greatly reduced. With looming economic crises, the capitalistic system found a way of postponing this. The employers introduced employee loan to enable employees purchase more. Organizations started investing their increased profits in purchasing of new securities that were backed by employees’ auto loan, mortgages, and credit-car loans. Those who owned such securities received a certain proportion of the monthly payments made by the employees (Burton, 2013). The postponement of the economic crises in the 1970s was only paving way for a much bigger economic crisis. According to Karl Marx, it is only through real empowerment of the working class that economic prosperity can be guaranteed as opposed to being an illusion or bubble that breaks with time (Schuman, 2013). According to Karl Marx, the distinctive ownership of the means of production and consumption would only result in the over-exploitation of the working class to an extent where it was no longer in a position to purchase the commodities in the market (Bresser-Pereira, 2010). Karl Marx prediction would start materializing in 2006. By this time, the employees had been stretched to their limits. However, the employers with a need to make profits led to the relaxation of borrowing requirements in order to continue exploiting the working class. However, the working class was eventually stretched to its limits and the spiralling descent of the economy began (North, 2009). As such, the forcing of the working class to spend in a capitalistic economy where the working class does not own the resources of production will always be counterproductive since the owners of the instruments of production do not have the interest of the workers at heart.
Karl Marx postulated that two tenets determined social mobility. These are “education hypothesis” and “income hypothesis”. On the education hypothesis, it is best defined by the class origin and the ability to attain education. If children from all classes are able to access college education, they are in turn able to decrease the class gap. In the USA and England, the increase in access to education has reduced the association of son to their fathers’ careers (Corak, 2013). However, a scrutiny of the education system and social mobility shows the work of a “hidden curriculum” that persists in the enactment of classes instead of the systematic ascent of people from lower classes. However, Marxists support mass education as a viable way of closing the gap between classes and increasing social mobility.
Another factor on social mobility is the income hypothesis. According to the income inequality hypothesis, the privileged class has a lot of resources that it can use to lavish its children. These resources are then used by the children to secure desirable class positions for themselves (Piketty, 1995). The parents increase the human, social, and cultural capital of their children by providing high quality childcare and education (Clark & Cummins, 2013). With the increased access to better school and neighbourhoods and friends who can provide career advantages, this is the beginning of the formation of a human capital. As this trend continues, Karl Marx states that the class conflict is only likely to be accelerated. While all the classes require quality education, the upper income class is the one with the means to provide this high quality education (Brennan, et al., 2014). On the other hand, the lower income class does not have much choice in the education it gives it children. According to a new research, the attempts to increase social mobility in Britain have not resulted in any tangible fruits. According to a study tracking down rare surnames such as Nottidge and Pepys, it was realized that the “iron law” of inheritance has consistently shown better results than the efforts made to improve social mobility (RT, 2015). The report noted that there is a significant correlation between the wealth of families five generations apart. The research showed that the descendants of those who were wealthy in 1858 are wealthier than the average person in 2012 (Doward, 2015). As a result, Marx postulation about the need for income equality is thus observed.
According to Marx, capitalist crises are the result of “overproduction”. There are very many commodities that are produced in order to be sold at a profit and eventually, too much capital is invested in the industry in order to get a part of the profits. Marx believed that the reason for this is that the capitalist system on both the national and international fronts is a system that has separate and independent ownership (Katz, 1993; Wood, 1987). During the prosperous periods, there is an increase in investment in production. In particular, the periodic boom stimulates production of “fixed capital” in the form of buildings and machinery. Resources are strained in order to provide more capital to purchase fixed capital. The mass production triggered by this capital increment results in flooding of commodities which leads to an economic crises. Marx explained that the high levels of investment in fixed capital result in a decline in the level of employment. At the onset of the economic cries, unemployment strengthens the bargaining power of the workers and this forces production levels to slacken. This explains the housing bubble and its eventual burst in the USA and in Europe (Evans, 2013). During the period preceding the economic crises, real estate prices in the United States had been rising for decades with only few instances of slowdown resulting from changes in interest rate during this period. The price continued to increase with home ownership through government sponsored programs increasing. Further, the general sentiment was that owning a home was the ultimate American dream. As Karl Marx showed, this overproduction and overspending on housing was short lived. As a result, the levels of production reached a maximum and there was an eventual drop in this sector of the economy.
Bourgeois including Keynes held that the interest rates in an economy would be used to control the economic cycle. According to this, they believed that the levels of investment would be determined by the difference between the interest rate of borrowed money capital and the rate of profit created by the mean of production. As a result of this, they held that provided the interest rates remain substantially lower than the profit rates entrepreneurs are likely to accrue, the entrepreneurs will continue borrowing and invest until this gap in interest is eliminated (Doepke & Zilibotti, 2008). As a result of this, there is a notion that as long as the interest rates remain sufficiently low, there will be full-employment of capital. However, Karl Marx believed that the level of investment in any economy is as a direct result of the rate of profit accrued from the privately owned means of production. Further, Marx stated that during an economic recess, even with abnormally low interest rates, the loanable capital remains unused. Marx characterised this as a period during the industrial cycle immediately after a crisis that low interest loanable capital remains idle in great masses (Tabb, 2010). The validity of the position taken by Marx was demonstrated by the excesses in bank reserves that were characterised by the USA banks during the period following the economic crises. Despite the fact that interests on bank loans were below the rate of inflation at one point, the USA continued to experience a decline in the amounts of bank loans taken.
Karl Marx was critical of the education system and how it continues to stratify the society into different classes. The main function of education in the capitalist society can be seen as the creation of efficient and obedient workers. This is achieved by transmitting the ideologies of capitalism to the students. The current school system from an early age teaches the students to compete with their colleagues in order to become better than them. The teachers are the authority in the school and they urge the students to become submissive to authority which is a trait that is carried on to the workplace. Ideology in the capitalist society is essential and the best way of transmitting the ideologies of capitalism is through education. In fact, Marxists view education as a state instrument that is used to pass on ruling class ideology to justify the capitalist system (Anyon, 2011). An example of this can be observed in the differences between the private schools system and the public school system. Remarkably, private schools have created a system where the ruling class is educated while in the public schools, the working class is produced. In the current UK government, an example is current Prime Minister David Cameron and MP Boris Johnson. Both attended Eton which is a private school and were later members of the Bullingdon Club which is an exclusive men’s club at Oxford. This shows a deliberate attempt by the system on one hand to produce the owners of the means of production while on the other hand producing the working class. The fact that education is working well for the elite only increases pressure for it to work for the majority. Currently, education is geared towards employability for the majority to an extent of changing the curriculum to fit what the businesses want or need (Anyon, 2011). The current employability notion needs fine tuning to equip the students to compete in a more effective manner. The current education paradigm cannot chance the ratio between the graduates who are seeking for graduate level jobs and the actual jobs available in the market. A retrogressive solution is to cut the number of students accessing universities. A more radical move that Marxists support would require allocation of greater investment into the economy including the social economy. However, this would require confronting capitalism and the system of upper classes hording wealth in financial systems and banks.
Having been a beneficiary of public schooling, I have had the opportunity to observe the skewed manner in which resource allocation and teaching within the school system only works to entrench the beliefs that we are meant to get an education in order to join the growing population of employees. In school, we are pressured to attain the minimum 5 GCSEs in order to amount to anything. In the real sense, the 5 GCSEs are the requirements put forward by the industrial players and they do not signify anything of significance. Instead, we are confined to this way of thinking while a private education system prepares the privileged to take over the instruments of production. Unfortunately, the high costs of these schools mean that the only people who can access them are the children of the privileged within the society. As I have pointed out earlier, Karl Marx shows that the idea of capitalism is pushed forward by the increase in disparities in education and the continued income inequalities. Overall, the paper shows that the capitalistic system has only worked to alienate the classes further with little or no tangible benefits to the working class. The financial crisis and the continued enrichment of the privileged through inheritance in the UK are just an example of the different directions through which the economic classes are growing.
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