Why the Marxist explanation of the European crisis is wrong

Iakovos Alhadeff

I am not a specialist on Marxism, and I have no intention of becoming one. Time is limited and one has to choose what to learn and what not to learn.  But Karl Marx is always fashionable. In my document “Why Marx was wrong”, I explain why Marxism is based on wrong foundations, as all rational economists recognize today. In this document I would like to examine Marxism in the context of the current financial crisis.

Most people that you hear today talking about Marxism have no idea about what Marxism really is. What they are basically saying is that capitalists exploit workers during the production process, and therefore workers do not receive their true contribution to production, but they only receive a very small part of this contribution. According to Marx most part of this contribution is stolen by capitalists. Marx called this stolen value the “surplus value of labor”. For more information on the concept of the surplus value of labor see wikipedia


The whole concept of the Marxist surplus value is wrong. The thing however is that today’s ignorant European Marxists, use this argument in a simplistic way to explain the crisis. What they say is that capitalists exploit workers more and more, and as a result workers receive a decreasing part of their contribution to production. As a result their purchasing power is falling and they cannot absorb the wealth produced. The wealth produced is accumulated by capitalists and there is an under consumption crisis.

To summarize, their basic argument put into a sentence, is that workers receive an unfair, small, and declining part of their contribution to production, and they therefore cannot absorb this production. And they have to borrow from the capitalists in order to neutralize the fall in their real incomes, and be able to sustain themselves.  And this is the reason they claim that people are so indebted today.

I must say that this kind of reasoning is not put forward by Marxist economists or theorists, but by ignorant people who think they know what they are talking about. But it is this kind of reasoning that you are likely to come across in the social media. And this kind of reasoning is problematic in many respects. But for us, the Europeans and the Americans, it is not only problematic. It is a joke. Most European countries and the U.S.A. were for many years running deficits in our trade relations with the rest of the world. Think of a world that produces only tomatoes. These countries were for instance exporting 100 tomatoes and were importing 150 tomatoes. And they were borrowing from the rest of the world in order to cover for these trade deficits.

But a country that is running a trade deficit it is not exporting “surplus value of labor”. It is importing surplus value of labor. I hope this is clear. If the U.S.A. for instance is importing 200 tomatoes and exporting only 100 tomatoes, its total labor contribution to production is staying within the borders of the country, and the country imports additional labor power from the rest of the world. I believe everybody understands that, and there should not be any disagreements.

One could argue though, that domestic capitalists have at the same time stolen the surplus value of domestic workers, and they have also stolen the surplus value of labor of foreign workers (through imports) and this is the reason the country is indebted. That of course raises the question why the foreign capitalists left domestic capitalists to steal the surplus value of their workers and did not steal it themselves. But let’s forget about that. Let’s make things simpler. It must be kept in mind that for someone to even talk about Marxian theory, he must believe that the real wealth he produced was greater than the real wealth he consumed. And I am not talking in monetary terms but in real terms. For someone to talk about Marxism, he must believe that he produced 10 tomatoes in the last 10 years and he consumed only 6. If he thinks he produced 6 tomatoes and consumed 10, there is no way that someone could have possibly stolen his “surplus value of labor”. Even if he consumed these 10 tomatoes by borrowing it still makes no difference. The fact remains that he consumed more than he produced. I hope this is very clear. If I produce 1 tomato and consume 1.5 tomatoes, I borrowed somebody else’s product of labor.

And therefore one has to be honest when answering whether he produced more goods than he consumed in his life. And in reality we are not talking about tomatoes. We are talking about schooling, medical services, automobiles, trips and holidays, restaurants, houses, clothes, computers, cell phones, studies etc. Did the average European and American produce more than he consumed in order to claim that someone stole his “surplus value of labor”? Or did he “steal-borrow” the “surplus value of labor” of poor people in exporting countries like China and India? Because if the loans that we, the Europeans and the Americans, owe to such exporting countries are not paid back, it is these people that should claim that we have stolen their surplus value of labor.

And therefore socialists should be the first ones to demand that American and European loans are paid back to the exporting countries. At least they should ask so, when it comes to countries like China and India, where the average citizen is much poorer than the average European or the average American. But what do we see? We see that such people are always the first to say that debts should not be paid back. These people are an embarrassment for Marxist theory. And they cannot even be sincere to themselves, and admit that they consumed so much more than they produced.

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