Full Peterhouse Cambridge Essay

Does the Crisis of Capitalism prove Marx was right after all?


Capitalism as an economic system is now used by most of the world; it has suffered crises in the past like the great depression of the early 1930s however the current crisis in capitalism does not prove that Marx was correct as capitalism is still surviving and remains dominant. While Marxism and its socialist/communist offshoots first appeared on the international scene after the Bolshevik revolution of 1917, spread across the world and then met its first crisis in the 1980s and consequently crumbled. Hence it is clear that capitalism is a much more resilient economic ideology. Marxism and its calls for “revolutionary struggle” have led to oppressive dictatorships of the proletariat in which, in addition to the lack of economic freedom, political freedom has vanished. The ineptitude of the Marxist economic ideology and the repression of its political form have resulted in many countries flocking to western capitalism and liberal democracy. Contrary to the beliefs of Marx it seems evident to many political economists like Francis Fukuyama and many others that “the universalization of Western liberal democracy” has come “as the final form of human government”.

Both ideologies have polarised economic ideas, on the one hand there is capitalism advocating private ownership as a means of producing wealth, rather than state or public ownership. This economic idea is driven by profit with workers putting in additional labour time for their services leading to a profit for the capitalist. This system works with many levels of capitalists each making a profit from his subordinates, this profit is distributed as interest, rent, taxes, etc with the balance being net profit to each capitalist. This inadvertently leads to an economic pyramid with many levels of capitalists and workers at the bottom. Also with the capitalist system profits and capital are invested in the production, distribution and trade of goods and services, this leads to a feedback loop and with every successful production cycle there is more capital and profit available which leads to the company expanding. Theoretically there is no limit to the company’s expansion but in the past 150 years monopolism has emerged and there has been an increasing number of large businesses. Capitalism is rather utilitarian as it aims to satisfy human wants (luxuries) as well as needs. Capitalism also proposes that every item has a value and this value is subject to supply and demand in the market for example a large supply and small demand will lead to cheaper prices and vice versa; this idea leads to the free market economy. To protect this free market whereby everyone has a private right to property and other forms of ownership, there is the rule of law. In addition to advocating a less stringent regulatory system and encouraging entrepreneurship, Capitalism follows a laissez faire ideology with great amounts of economic freedom however a totally free market economy has not been in practice and all capitalist states utilise some Keynesian economic ideas; this is the mixed capitalist economy we see today.

These ideas result in some distinct economic benefits; these benefits are what
Endear nations to chose capitalism as their economic and political line of thought. Capitalism offers us a robust system fuelled by profit, which encourages private sector competition, which ensures the most adaptive and innovative companies survive in the market and so only the best businesses provide services. As the best companies exist and are constantly competing the market is strong and resilient. The profit accumulated by these companies often leads to fast economic growth and sometimes even economic booms, such as 1920s America. With periods of good economic growth comes further investment in businesses from the domestic market (and as a result of increasing globalisation and free trade), and from multi-national companies based abroad. This additional investment acts as a catalyst for economic growth. And with a strengthening domestic market come strong companies, which may start becoming multi-national companies and join foreign markets leading to even faster growth. The capitalist system is made even more alluring by the fact that there is economic freedom and whoever wishes to start a business can, and is encouraged to do so. One of the chief benefits of Capitalism lies in the good living standards attainable in such a state; as a result of the capitalist system one can become prosperous and enjoy very good living standards, which are unachievable in a Marxist state. Capitalism is fair as it is very meritocratic with only the hard working and successful making large amounts of money and the unsuccessful and less hard working people earning smaller sums. Capitalism has been a key factor in the incredible pace of research and development in the world. This is because capitalism follows utilitarian thought and tries to meet the “wants” of all the people inevitably resulting in innovation.

With Marxist economics we see a parallel picture with a “proletarian revolution” in which the wealth of the nation is much more fairly divided amongst the people and the economy is stringently regulated by the state. With this ideology people are denied the right of private ownership and instead the state and people work collectively producing goods at a rate to ensure prices are low and almost constant for essential goods in the state, with an emphasis on the peoples needs; hence the market is controlled by the state. With this ideology there is no private ownership at all and every means of production (as well as infrastructure) is in the control of the state or shared amongst the people, this is because Marxists believe the state and the people are the only entities that can administer this monopoly fairly. Marxists believe for the same reasons that all debt should be in the hands of the state via a national bank. Marxist thinkers believe that “value” is too subjective in the free market and value should be dictated by human needs rather than wants. Marxism advocates economic equality among the people and aims to give each and every person living in such a society the inalienable right to receive the necessities one requires like education, healthcare, food, water and more. This is why Marxists want workers to be paid for the labour time necessary for a commodities production; Marxists believe all value is created by labour so the labourer should be entitled to the fruits of his work. These commodities produced are sold at a particular value; Marxists want this market value to be equal to the amount paid to the labourer for his labour time. In capitalist states the workers are exploited via surplus hours, which leads to a useful profit, Marxism sees this as unjust and wants to see the workers paid what they rightfully worked for (i.e. the commodities value), hence with Marxism there is no profit, nor a capitalist but the worker earns more money. This economic idea goes hand in hand with Marxist political thinking, which argues that there should be a classless and egalitarian system of governance.

These ideas mean Marxism provides an economic system, which is bereft of the “busts” that cause so much trauma in the capitalist system, instead there is steady economic growth; as a result of it being a planned economy. The planning involved in the Marxist economic state leads to there being a lack of inflation and inflation remains at 0% indefinitely, conversely inflation and deflation have ravaged capitalist economies during “busts” and led to negative economic growth. This is because with the Marxist system the price of human necessities are planned and maintained at a low cost. There are hardly ever price hikes for these goods and when there are price hikes the government responds with wage increases to rectify the inflation back to 0%. This economic idea is clearly evident during the period of the Soviet Union prior to its collapse and also other Marxist/communist states. Whilst capitalist states particularly in the west suffer from unemployment problems due to many not receiving adequate training to go into work, leading to a group in the population being below the poverty line. In Marxist states it is a different story with there being an almost 100% employment rate meaning that everyone earns a living and few live in squalor. The shared living standard among the people within a Marxist state leads to the people being less materialistic which is again yet another benefit.

When one looks at the exhaustive list of benefits capitalism provides it begs one to wonder why capitalism is in crisis today. One of the key reasons for the credit crunch is our reliance on corporate monopolies such as banks. When these great banks or financial institutions collapse a significant economic vacuum is created and no companies are left to fill it, so it becomes the responsibility of the state. Even before the credit crunch this “bailout culture” existed in the US, with Long Term Capital Management being bailed out to the tune of $5 billion in 1998. To make matters worse with de-regulation these economic heavy weights started taking huge risks and rode on the back of economic growth and the housing bubble as illustrated with the example of northern rock and the Lehman Brothers that took huge risks and eventually paid the price. In turn with de-regulation companies can decide whom they lend to and with low interest rates before the crisis, mortgages and loans were offered to people who were sub-prime. And when the credit crunch took hold this was a factor that augmented it and left banks and financial institutions reeling with defaults and a burst housing bubble leading to huge problems. To make matters worse new financial products like securities were introduced shortly before and had not been tested enough for any likely problems. To compound matters there was little regulation of these securities and soon the mortgages of these sub-prime borrowers were being traded on the floors of Wall Street, which sold this “toxic debt” across the world. So it is clear that capitalism does not lead to an inevitable bust but with huge monopolies, de-regulation, sub-prime borrowing, over-confidence and new financial products being instigated without careful thought of how to measure the strength of the product; has all led to an economic crisis across the world all being caused by western capitalist actions.

It is clear that capitalism is a potent force for good if regulated and controlled properly. It may suffer from inflation at times but inflation has its pros and cons and moderate levels of inflation can make a nations exports look attractive to foreign customers. It’s only in these “bust” cycles when you get inflation high enough to cause significant problems and with good regulation “busts” can be avoided entirely
By regulating the economy and preventing such economic bubbles from forming.
Marxism may lead to slow and steady economic growth but well regulated capitalism leads to steady but faster economic growth without the booms and bust. With the capitalist system unemployment is inevitable but with there being a better regulated one formed by many small businesses everyone will share in the prosperity and there will be no contractions in the employment rate as a result of “busts”.
Capitalism encourages privatisation of companies, over the nationalisation and collectivisation of Marxism. With privatisation come some inherent advantages over nationalisation, we see that private firms perform better economically against their nationalised rivals even though nationalised companies are insulated from loss because of state support. This issue is illustrated by the frequent collapse of nationalised assets after being put into a competitive free market; a good example of this would be the collapse of nationalised Soviet assets in the 1990s, following the collapse of communism. Nationalised units are deficient due to state bureaucracy and some cases when the government tries to meet its own political ends. As history has testified corruption can be ripe in the state sector because of its large size this is very visible in the premiership of Leonoid Breznev. The corruption in this sector has lead to the under-pricing of national assets when they were privatised, even looting prior to privatisation by employees and lastly many workers in a nationalised body in a Marxist state have less incentives to work as they know their job will always be there and few are unemployed to replace them whilst those in the private sector have to work hard or risk being sacked. Many Marxists argue that privatisation is too narrow in its distribution of wealth and often deepens the rich poor divide but it must be remembered that the profits from successful businesses tend to be dispersed across the whole of the nation, for example via the stock exchange and sometimes even to welfare through corporation tax. All of this promotes liquidity, job creation and helps society at large. The notion that capitalism in some way shape or form might increase inequality is entirely bogus because with the welfare state (such as Britain’s after World War II) there is social equality in conjunction with economic freedom. So it is crystal clear that the idea of privatisation offers significant advantages over nationalisation and the basis of this statement is categorically supported by historical evidence.

On the contrary to the question proposed it seems like Marxism is the crumbling ideology of late. The swarms of ex-communist and ex-socialist countries turning to capitalism for economic salvation manifests the superiority of the capitalist state. At the zenith of Marxism in the mid 20th century a third of mankind lived in a socialist or communist state but now this number has fallen to just a few states with most of these subscribing to capitalist economic philosophy, this statistic speaks wonders about the feasibility of a Marxist state. Chile is a prime example of how capitalism can change a state’s economic fortunes from an ailing state with socialism failing to an economic miracle brought about by capitalism and leading to robust economic growth that exists to this day. Prior to the ascension of Pinochet and his military Junta in 1973, a socialist president, Allende, ruled Chile using Marxist economic ideas. The period of Allende’s presidency (1970-73) saw a long and tumultuous recession this was because the Chilean welfare state was becoming more and more untenable, Chile was financially unstable during this period and to worsen matters Chile had suffered an earthquake in 1971 of magnitude 7.1 (on Richter scale). To typify the matter Chile suffered from hyperinflation with a rate of inflation of over 150%, which proved to be cataclysmic economically, this was the result of economic mismanagement mainly stemming from ruthless socialist economics such as the governments attempts to set a fixed price on essential goods and a multiple exchange rate. All of these socialist reactions to economic crisis proved futile, troublesome and the Chilean people were short of food and consumer goods and many were driven into poverty. All of this instability was ripe for a military coup and General Pinochet taken over in a military coup on September 11, 1973. Immediately after the coup Pinochet came across a neo-liberal economic document called the “El Ladrillo” which had been prepared earlier in the year by a group of economists that opposed Allende’s government called “the Chicago boys” who were all under the pupilage of the great economist Milton Friedman. Pinochet was so transfixed on this document he presented it to the army staff and modelled the Chilean economy on its neo-liberal economic ideas. With this document in hand Pinochet set to “make Chile not a nation of proletarians, but a nation of entrepreneurs” he did this through various free market and free trade reforms. The first of which was to privatise every industry in Chile, except the copper mines, as the copper mines were an integral natural resource. Chile revolutionised their economy by introducing private pensions, which proved very successful. He opened Chile to free trade and encouraged foreign direct investment into Chile thereby ensuring a competitive free market. Pinochet de-regulated the economic system bringing with it economic freedom and a stock exchange. Pinochet did not always follow neo-liberal economic theory and Chile’s choice of a fixed exchange rate of 39 pesos’ per dollar in June 1979 (in a bid to quell inflation), over the sliding neo-liberal exchange rate proved to be a significant blunder with severe repercussions. This resulted in balance of trade problems, which created an artificial bubble, which finally burst in 1982 adding to the global financial turmoil of that year and leading to a protracted 2-year recession. This period of the “first miracle” (1973-1982) saw a GDP shrink by 5.6% in 1973 followed by a 1% growth in 1974 and in 1975 GDP shrank by 12.9%. When the new free market established itself after fighting off this recession Chile saw strong macro-economic growth from 1976-81 with a maximum GDP growth of 10%. However 1982 was to be a fateful year for Chile for one its great trade partner, the USA was going through a financial crisis with an inflation of 12% and unemployment reaching a ceiling of 10.8% (as of 1982). Even worse the whole of Latin America was in the midst of a debt crisis in the early 1980s, being unable to pay the interests on their loans; by 1983 debt amounted to 50% of the regions GDP and was increasing quickly as a result of high interest rates. This crisis still leaves countries in this area indebted to this day. Chile’s previous indecisions like the fixed exchange rate came into play and caused even more problems. This set of circumstances led to a fall in GDP of 13.6% in 1975 and fall of 2.8% in 1976. The very problem Marxists point out against the Capitalist ideology, inflation, in fact strengthened the Chilean economy and led to a speedy recovery from 1984 onwards. This was largely because the de-valuation of the Peso increased Chilean exports and led to strong economic growth. After Pinochet consequent governments followed free market ideas and Chile has not seen recession in a quarter century. The “second miracle” (1985-89) (with further growth beyond this period) makes even the first look measly; the average GDP growth from 1985-1996 has been 7% therefore by the rule of 72 the Chilean economy has more than doubled in the period, which is a monumentus feat. The miracle did not only lead to economic progression, the socio-economic position of Chileans improved for example infant mortality stood at 82 per 1000 in 1970 and dropped to 19.5 per 1000 by 1985. It must not be forgotten that the population living below the poverty line in the early 1970s was over 50% now this figure is just 13%. Neo-liberal economics has made Chile the wealthiest state in Latin America and a model for economic growth. In this case the free market has well and truly set the people free as the dictator Pinochet relinquished his powers in 1990. The miracle of Chile has set a precedent for other ex-socialist and communist states to logically turn to capitalism and indeed many have taken Chile as a model; take for example Russia, Latin American neighbours, China and all ex communist states in Eastern Europe, which have all seen similarly terrific economic growth.

Politically speaking capitalism offers a society with a class system and a less wide distribution of wealth. However with the growth of capitalism have come offshoots such as the capitalist welfare state whereby some of these popular characteristics of the capitalist state have been sidelined in favour of other ideas. Capitalism varies tremendously politically, on the one hand there is the welfare state and on the other the “laissez faire” and economically liberal state but the economic principles remain the same.

Marxism, however, has a set of political ideas, which seem to vary little among such states. The common characteristics include the belief of equality, freedom, a classless society and common ownership and cooperation between the people. Marxists believe that Marxisms finest form; communism will allow people to enjoy freedom and condition mankind in such a way they would not wish or need to exploit eachother. They believe such a government will create relations between the people that will act cohesively to hold the nation together without significant state involvement. Marx believed that Marxism would come about through a “revolutionary struggle” by the proletariat against its exploiters; he believed that such revolutions were inevitable and the whole world will become Marxist. Marx and Engel’s thought that Marxism would come in gradually first there would be the capitalist state, then the “revolutionary struggle” leading to the “first phase”; this is socialism. In this phase most will be commonly owned and some class differences would exist. This “first phase” would mature into a “second phase”, communism whereby class differences and private ownership would be eradicated in favour of equality and collectivisation/nationalisation.

With the socialism/communism of history and today we see a lot of the aforementioned political ideas. These ideas despite their innocuousness are a façade and beneath it are sinister misgivings, which have been displayed in history for all to see. Take Marx’s ideas of a “revolutionary struggle” it has not led to equality but instead has incited violence and led to long protracted wars like the Chinese civil war which killed over 3.2 million people and also other Marxist insurgencies all over the world. Most Marxist states have forgotten Marx’s ideas of democracy and have turned into authoritarian dictatorships like North Korea. Perhaps the brutal “revolutionary struggles” before the coming of power have a profound effect on the leadership, turning it to dictatorship with a “might is right” approach. This totalitarianism leads to the total annihilation of all political opposition and perceived threats, with Stalin alone victims of direct repression numbered around 8 million, which includes all of his purges and massacre’s. Economically speaking the policies of Marxism coupled with its radical leaders has led to the oppression of its own people one of the most catastrophic being forced collectivisation. Stalin’s collectivisation led to the deaths of 10 million of his own people with 7 million of these being in 1932-33. In a capitalist state such needless, pointless and ruthless suffering would never have occurred and this is proven by the fact that the worst crop failure in tsarist Russia in 1892 killed 400,000 people despite the use of inferior equipment. In addition the equality of wealth and the state monopoly often results in civil servants looting from the state in a bid to get wealthier.


The crisis of capitalism does not prove that Marx was right; it shows that the Capitalist economic system is being run in a less than optimal fashion with monopolisation and too much de-regulation. With a Marxist state such as North Korea there maybe slow and steady economic growth even through the credit crunch, but at what peril? Oppression, no economic or political freedoms and a severe lack of economic amelioration. Capitalism and its utilitarian standpoint has resulted in the people’s needs being met and hence a great deal of innovation has been made possible which would have been otherwise impossible with Marxism and its idea of meeting essentials. Would the light bulb, which has revolutionised the world, be here if Marxism had existed everywhere? Definitely not. Western capitalism has led to many more technological advances then Marxism; take for example the meagre numbers of communist Nobel laureates compared to the hundreds of capitalist laureates. With Marxism we would be held back technologically. In light of this, the economic advantages of capitalism and the radical and often unfeasible policies of Marxism it is evident that Marxism is a largely untenable political and economic philosophy; this is why so many states flock to capitalism and freedom. It seems like Marx was wrong after all; with the unpopularity and infrequent use of Marxism Marx would be deeply aghast by the abysmal failure of Marxism. The question being posed should be how long Marxism will last amid all of this attenuation?

Actual peterhouse cambridge introductory excerpt

Well the first peterhouse cambridge introductory excerpt was quite dull to say the least, well i couldn't post anything i'd actually put in my introduction because the deadline had not passed and by putting my true introduction up it could be plagiarised. Now the deadlines passed i can give you a taster....

" Capitalism as an economic system is now used by most of the world; it has suffered crises in the past like the great depression of the early 1930s however the current crisis in capitalism does not prove that Marx was correct as capitalism is still surviving and remains dominant. While Marxism and its socialist/communist offshoots first appeared on the international scene after the Bolshevik revolution of 1917, spread across the world and then met its first crisis in the 1980s and consequently crumbled. Hence it is clear that capitalism is a much more resilient economic ideology. Marxism and its calls for “revolutionary struggle” have led to oppressive dictatorships of the proletariat in which, in addition to the lack of economic freedom, political freedom has vanished. The ineptitude of the Marxist economic ideology and the repression of its political form have resulted in many countries flocking to western capitalism and liberal democracy. Contrary to the beliefs of Marx it seems evident to many political economists like Francis Fukuyama and many others that “the universalization of Western liberal democracy” has come “as the final form of human government”. "

Long awaited blogging comeback

Hi everyone

Im making my return to blogging so wish me luck and thanks for your patience.

I thought it would be befitting to restart my blogging with a post sharing the same topic as my first post on this blog, that being economic history.

I will try to make a post at least every month on any issue. The next few posts will be less historical and more in line with current affairs, politics and economics, so i hope you enjoy. If there are any comments or ideas please share them. With feedback i have already collated i have realised that smaller posts are more accessible and intriguing for my readership and i will attempt to make my posts more smaller.

Wish me well.

Kind Regards

Does the crisis of capitalism prove that marx was right after all? first 150 words.

The catastrophic predicament of Capitalism right now does not prove Marx was right. The crisis of Capitalism just shows mankind that the system of capitalism has not yet been perfected. In fact this current financial crisis owes more to “laissez faire” regulation than to an inevitable “bust”. Capitalism may manifest itself in many “booms and busts” but from every “boom” and every “bust” we learn from our economic misdemeanours. Marxist theory may result in slow and steady economic growth without these often-traumatic recessions, but at what expense? Slow economic growth, lack of economic and sometimes political freedom, measly chances for economic self-advancement, mediocre living standards, forced collectivisation and government corruption. This is the ugly truth of Marxism and its various offshoots.

Both ideologies have polarised economic ideas on the one hand there is capitalism advocating private ownership as a means of producing wealth, rather than state or public ownership. In addition to advocating a less stringent regulatory system and encouraging entrepreneurship.