Lecture 12: The Marxian Failure and Legacy

What this lecture covers

This lecture closes the course's treatment of Marx by systematically dismantling both his macro theory (why capitalism was destined to collapse) and his micro theory (the labor theory of value), before asking what, if anything, remains worth keeping. It follows directly from the previous two lectures on exploitation and the five sources of capitalist crisis, and extends the critique of superabundance from the start of the week.

By the end, you should be able to explain why Marx's historical predictions failed, why each of his five sources of crisis turns out to be overstated or manageable, why the labor theory of value runs into serious problems once you ask about "dead labor" and unpaid domestic work, and why the lecture argues that Marx's lasting contribution is not a theory of value but an argument about power and freedom.

Key ideas

• Failed historical predictions: Marx expected socialist revolutions in advanced, uncompetitive capitalist economies, but actual communist revolutions occurred in peasant societies like Russia and China, not the sequence he predicted.
• States can manage crises: Marx underestimated the capacity of capitalist governments to address liquidity crises, weak demand, and worker discontent, for example through welfare states and Keynesian stimulus spending.
• The falling rate of profit is not guaranteed: Marx's argument assumes a fixed number of industries and ignores that productivity gains can outpace the effects of increasing capital intensity.
• Monopoly isn't inevitable: industries with "economies of smallness," like the information technology sector, can resist the concentration Marx expected from rising entry costs.
• Relative vs. absolute immiseration: Marx conflated workers becoming worse off relative to capitalists with workers becoming poorer in absolute terms; wages can rise even as, by his own measure, the rate of exploitation increases.
• The labor theory of value ignores other contributors: it does not account for "dead labor" (workers who built the machinery), the capitalist's own entrepreneurial work, or unpaid domestic labor that sustains the worker.
• Sraffa's corn theory of value: an economist's thought experiment showing that any commodity necessary to produce all others (not just labor) generates the same mathematical structure as the labor theory of value, undermining its special status.
• The lasting legacy: the lecture argues what survives from Marx is not the labor theory of value but a critique of markets as amoral distributors of goods and harms, and a power-based argument that being compelled to work for another class is a form of unfreedom.

Walkthrough

The failure of Marx's historical predictions (1:04)

The lecture opens by summarizing why Marx's big historical claims were wrong: the revolutions of 1830 and 1848 he took as harbingers of communism quickly reversed, and the communist revolutions that did occur happened in peasant societies rather than the advanced, monopolistic capitalist economies his theory predicted. It argues history shows no single teleological direction, undermining Marx's larger theory of historical stages.

Revisiting the five sources of crisis (4:09)

Working back through the macro theory from the previous lecture, the lecture shows how governments have repeatedly managed the crises Marx predicted: liquidity crises (citing a US-led rescue package for Mexico), the declining rate of profit (questioned both empirically and because Marx assumed a fixed number of industries), competition eliminating competitors (countered by examples like Apple's entry into a monopolized computer market), and weak demand (addressed through Keynesian government borrowing and spending, as in responses to the Great Recession).

Why worker militancy did not materialize (16:30)

The lecture explains two reasons Marx's predicted working-class consciousness never fully emerged: workers compare themselves to similarly situated peers rather than to capitalists, and Marx conflated relative immiseration (a shrinking share of the surplus) with absolute immiseration (falling actual living standards), when wages can rise even as relative exploitation increases. The welfare state, the lecture notes via economist Ralph Miliband, functions as "capitalism's best friend" by preventing workers from ever reaching the point of having "nothing to lose but their chains."

Problems with the labor theory of value (21:41)

The lecture turns to the micro foundations, arguing the labor theory of value ignores the contribution of "dead workers" who built the machinery in use, the entrepreneurial work of the capitalist, and unpaid domestic labor (illustrated with a 1986 New York divorce case awarding a stay-at-home spouse a share of her husband's medical practice). It introduces economist Piero Sraffa's "corn theory of value" to show that the mathematical structure Marx attributes uniquely to labor applies to any commodity necessary for producing all others, undermining the claim that labor is a uniquely special source of value.

What remains: power and freedom (40:10)

Having dismissed the labor theory of value as an "analytical mess," the lecture identifies two things worth salvaging from Marx: a negative critique of markets, which reflect and lock in existing inequalities without justifying them (echoing the course's earlier discussion of Mill and market bias toward the status quo), and a positive argument about freedom. It reinterprets Marx's definition of the working class, being compelled to sell your labor to survive, as fundamentally about the distribution of power rather than a precise calculus of exploitation, connecting this power-based reading to later neo-Marxist scholarship.

Before you watch

• Watch the two preceding lectures, "Marx's Theory of Capitalism" and "Marxian Exploitation and Distributive Justice," which set up the labor theory of value, the five sources of crisis, and the concept of superabundance that this lecture critiques.
• Recall the course's earlier discussion of Locke's workmanship ideal, since much of the critique here concerns whether "making" something entitles you to it.

Check your understanding

1. Why did Marx's predictions about where and how socialist revolutions would occur fail to match actual twentieth-century history?
2. According to the lecture, how have capitalist states managed the crises (liquidity, profit decline, weak demand) that Marx thought were fatal to capitalism?
3. What is the difference between relative and absolute immiseration, and why does this distinction undermine Marx's theory of working-class militancy?
4. How does Sraffa's "corn theory of value" challenge the special status Marx gives to living human labor as the source of value?
5. What two things does the lecture argue are worth preserving from Marx's theory, despite the failure of the labor theory of value?