This month  marks the 200th anniversary of the birth of Karl Marx, perhaps the most influential political philosopher of our times. At a time when capitalism seems to be losing its way in its European heartland, and perhaps elsewhere too, it is appropriate to see what we can learn from Marx's theory of how capitalism would evolve.

Marx understood the dynamics of capitalism well and recognised its historical role  in the Communist Manifesto.  He wrote about the capitalist's continuous drive for innovation and said “Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones.” He foresaw globalisation, though it took longer than he had anticipated, when he said that capitalism would “nestle everywhere, settle everywhere, establish connexions everywhere”.  He anticipated “industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe.” and that give “a cosmopolitan character to production and consumption in every country.” He recognised the central role of the physical environment when he said in his magnum opus The Capital “Labour is ... not the only source of material wealth, ie of the use-values it produces. As William Petty says, labour is the father of material wealth, the earth is its mother.”

Marx understood the capitalist economic system as well as other contemporary economists. But his interest, unlike theirs, was not to see how it could be better run but how it could be changed. That is what led him to his truly valuable contribution about the dynamics of capitalist evolution summarised in this quotation from his Critique of Political  Economy: “At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.”

Marx's determinism was not mechanistic. Change, he argued would come through the class struggle with the proletariat leading it. He understood well the importance of agency and accepted that the exploited may remain passive, trapped in an “objective illusion” of equality of opportunity and freedom of choice, now compounded by ethnic, religious and caste identities, leading to a “false consciousness”.  How and when this “false consciousness” will give way to a true understanding by the oppressed and exploited of the roots of injustice is still a open question.  But Marx also said that the time for change has to be ripe:”No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of the old society”.

Has capitalism exhausted its potential? This did not happen in the first three industrial revolutions and capitalism survived, thrived and spread throughout the world, including to countries ostensibly dedicated to Marxist ideals. But now a fourth industrial revolution is under way involving, among other things, new synthetic materials, manufacturing methods like 3-D printing, artificial intelligence, automation and robotics. In  Marxian terms it would be a new mode of production that involves a move away from the foundational principle of  private enterprise capitalism and demands a new form of property relations for several reasons.

First, the mutual dependence between capital, which owns the assets used for production and the labouring majority, which secures its living by selling their labour, is broken by the large scale substitution of labour by machines.  This substitution has happened in the past and Marx did say: “Machines were, it may be said, the weapon employed by the capitalist to quell the revolt of specialized labor.” The difference now is of scale of structural  unemployment because of these new modes of production. This  threatens capital with the prospect of demand deficiency and undermines the “objective illusion”  of equal opportunity on which social tranquillity rests in capitalist societies.

Second, the new knowledge economy shifts incomes away from capital and labour to those who create and own the knowledge on which this fourth industrial revolution depends. The capitalist market economy has not yet evolved efficient mechanisms for handling education, research and intellectual property, the last mentioned fast becoming an anti-capitalist restraint on competition

Third, the network effects of digitisation of marketing and payments, and the winner takes all tendency in the rapidly spreading internet economy, leads to immense concentration of  corporate power, which we are already seeing.  The only restraint is the prospect of new entrants. But with the tendency to concentration, only those with very deep pockets can challenge incumbents and that may well shift power from the innovators to the financiers.

Fourth, this new networked economy has a natural tendency to go global, which is quite consistent with Marx’s view of capitalist evolution. However, the types of institutions that exist for managing competition and corporate governance at the national level are missing at the global level. Capitalism without regulation of competition is not sustainable. The globalisation of competition management has to come.

All this raises the possibility of people questioning the logic of the present economic systems  and  looking for alternatives like employee ownership, already presaged in the widespread use of ESOPs in technology and information economy companies.  This, along with the delinking of entitlements from employment through measures like a universal basic income, could bring us closer to the humanist society that Marx prophesied in the Manifesto: “In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all.”