The Marxian Economic System in the context of Development

The Marxian economics system is composed of four components 

a) The capitalist economic system 

b) the labour theory of value

c) the theory of surplus labour 

d) The theory of capital accumulation 

 The Capitalist Economy system - 

According to Karl Marx, the capitalist system of Economy consists of the following elements - 

a. The Capitalist system is divided into two sections - A. The Capitalists B. The Worker 

b. A commodity forms the unit of production in a capitalist society where the commodity is defined as the carrier of use-value (utility) and exchange-value (with other commodities) 

c. The growth of capitalism is based upon the exploitation of labour. 

d. All the commodity is produced with the motive of profit and exchange equation in m-C-M. The capitalist purchases commodity, C, (Labour power) with money, m , with an intention to sell it (after production) for profit, M. 

v) The motive force behind capitalism is profit. the capitalists also reinvest the profit to upgrade technology.

vi) the capitalist also adopts labour-saving technology to keep away manpower from work that creates unemployment.

The Labour Theory of Value 

According to Marx, the value of a commodity is determined by the quantity of labour required to reproduce it. One commodity has both use-value and exchange-value. When commodities represent use values, they are quantitively different due to different forms of useful labour used in them.

Marx was an advocate of the labour theory of value and believe that all production belongs to labour because workers produce all products within the society. Marx had predicted that capitalists will keep the workers in misery because the sole purpose of a capitalist is to generate wealth by gaining maximum profit out of product and that's why they provide subsentential amounts to workers.

The Theory of Surplus value 

The workers have the characteristic of being capable to produce more than the value of the workforce and the surplus amount produced by workers is used by capitalists to profit in return they don't provide anything to workers and in this way they exploit workers.

The Theory of capital accumulation - 

Marx stated that capitalists accumulate the wealth to make a profit for the following two major reasons -

(i) The emergence of surplus value in capitalist production includes the capitalist accumulating and to re-invest.

(ii) The mass effect of this all-around expansion of production is an increase in demand for labour, rise in wage rate and reduction in surplus value because the surplus value is simply the access of total produce over subsistence produce. This provides another reason for an individual capitalist to accumulate. 

The Marxian model of economic development 

Marx has contributed to the theory of economic development in three ways :

1. He formulated the materialistic interpretation of history

2. He specified the motivating force for economic development 

3. he suggested an alternating path for planned economic development 

Symbolically, the Marxian theory of Economic Development can be summarised in these formulas:

1. Q (Total output) = f {(Size of the labour force), K (Capital), R ( Amount of land), T (Technological progress)}

2. Technological progress depends on investment (T=I)

3. Investment depends on the rate of profit 

4. Rate of profit depends on the surplus amount of production 

5. Wage depends on the level of investment and employment 

6. labour employment depends on the amount of investment.

7. Consumption expenditure depends on the wage bill. 

8. Profit is determined by the level of technology and consumption. 

9. Total output = profit + wages

10. The economy has two sectors; consumer goods and producer goods sectors. so, the total output is the sum of consumer goods and producer goods. 

- ShashanK Priyadarshi