Question

Karl Marx arrives at very different conclusions about the long-run viability of the capitalist economy than do many of his contemporaries. Please write an essay on how Marx concludes that the capitalist economy will eventually collapse and give way to a communist economy. Your essay should include a description of Marx's model, so that you can explain why he reaches such a different conclusion compared to Say, Bastiat, Mill, and other contemporaries.

Answer 1

Ans ) Karl Marx uses organic composition of capital to explain the phenomenon of decreasing of profit in long run of the capitalist. He define increase in reserve army of labour i .e the person coming in labour market every year they can come after finishing their education or have left the current job.

Karl Marx explain the organic composition of capital as the ratio of constant capital to the variable cost. Variable cost arises from hiring labour. In starting face of capitalism the capitalist will hire worker and will pay him less then his marginal productivity he will exploit labour for his profit motive or to be in competition he will accumulate his capital. This will increase constant capital as a result variable cost will decrease because of machines or labours will be replaced by machines. The reduction in salaries for further increase in capital or profit will decrease the demand of product they are producing in the market. After removal of labour from machine the labour can be hired more cheaply in home as well as abroad as a result the demand of product will decrease. The profit will decrease in long run. Organic composition of capital , according to Karl Marx, expresses the specific form which the capitalist mode of production gives the relationship between means of production and labour power determining the productivity of labor and creation of surplus product.

In his theory the capitalist will end up things in worse because capitalist himself will decrease the profit by exploiting labor and by decreasing wage or increasing unemployment in the country. This model assumes that there is lassiz fair policy , no intervention by the govt. In providing employment to peoples.