Karl Marx, arguably one of the most influential social and political thinkers of all time, was born 200 years ago. At the height of his influence, people believing in Marxist ideology, in some form or the other, ruled in Russia (the largest landmass in the world), China (the most populous country of the world), most of Eastern Europe, some parts of Asia (the so-called CIS countries which were once parts of USSR; Vietnam, North Korea and three states in India through multi-party democratic elections) and Latin America (Cuba, Venezuela).

No doubt, the popularity of Marxist ideology has gone down even in those countries and states. I will not try to analyse the causes of this decline here.

I would only focus on a single line written by Marx (jointly with Engels) in Communist Manifesto which best summarises the most popular message of Marxism in all parts of the world. The sentence, translated in English goes like this: “Workers of the world unite, for you have nothing to lose but your chains”. This clarion call to the workers of the world to unite against capitalists, the common enemy of the working class, was one of the most appealing political slogans of all time.

At the same time, this is where Marxism made the mistake in understanding the evolving reality. There are some very good reasons why all the workers of the world will not unite, in their self interest, against all the capitalists of the world. There is no such thing as homogeneous labour and capital. So, along with the conflict of interest between the wage-earning workers and the profit-earning capitalists within a firm, there exist many kinds of tensions between different types of labour and capital.

A competitive fight goes on between labour in low wage countries (such as China, India, Mexico) and labour in high wage countries (such as the US, Japan, the EU) through international trade and migration. Some workers in some countries are gaining jobs and incomes at the expense of some others.

In this game, a section of American capitalists aligns with Chinese, Indian or Mexican workers while competing with American capital producing in US with US labour in the same products (like steel, cars, cell phones, software).

So, these Chinese/Indian/Mexican workers would not unite with American workers against all American capitalists. They would welcome foreign capital coming to their countries to create jobs for them, even while bargaining better terms with foreign firms (like Apple, IBM, Microsoft, GM or GE) operating factories in China/India/Mexico. This is in addition to workers of different countries competing for the same jobs through temporary or permanent migration to other countries.

Competing interests

Also, workers are more concerned with what similar workers are earning in other competing firms and supervisors (next level which many of them aspire to rise to) are earning within the same firm than what the capitalists or major shareholders (like Ambanis or Tatas) earn. Workers in GM don’t care about wages in Google or Facebook (since they belong to non-competing groups with totally different skills). But compensation packages of workers in Ford or Toyota do bother them. Managers, though technically wage/salary earners, find their interests more aligned with the owners of firms as their perks, bonuses and value of stock options are linked to profits of the company.

There are also conflicts between organised and unorganised sector workers and between unionised (‘insiders’) and non-unionised workers (‘outsiders). As more benefits are provided to one section of employees either by the private owners of a firm or by state provided social security system, less would be available for other sections, given the budgetary constraints of the firm and the government.

Organised vs unorganised

In countries such as India where many organised sector employees can afford to use low paid domestic help, any mandated improvement in wages and working conditions of such unorganised workers would cut into the living standards of the organised sector workers.

Similarly, a rise in the price of, say, steel (brought about by higher import duty on steel) would benefit domestic steel workers as well as the owners of domestic steel companies but would hurt the workers and the capitalists in, say, the domestic car and appliance industries that use steel as an input. Once again, the interests of all workers (and capitalists) even within a country are not aligned in the same direction.

Even in communist Russia and China which were kept largely insulated from international trade and migration, the tensions between different classes of workers — particularly agricultural and industrial — existed. One of the purposes of collective farms (in USSR) or communes (in China) was to extract maximum surplus from agriculture (by keeping agricultural wages low by the co-called ‘iron bowl’ of community kitchens) to feed industrial labour. In such a situation, one cannot expect agricultural and industrial workers to unite against the capitalists which happened to be the state itself (‘state capitalism’).

More generally, if terms of trade (prices of agricultural goods relative to industrial goods) move against agriculture, the farmers and agricultural workers lose while industrial workers gain.

Joan Robinson, the distinguished British economist with Marxist leanings, once remarked that exploitation of workers is bad but far worse is when a worker is not exploited at all under capitalism. That means he has no job and income. In other words, an already employed worker, even at low wages, has a lot (his livelihood) to lose, not just his chains, notwithstanding the Marxist slogan.

To conclude, Marx should be given the (unintentional) credit that the fear of Marxist uprising (especially after the communist revolutions in Russia and China) has forced the capitalists and the state to improve the working conditions and the social safety net in many countries of the world. So, in a sense, Marxism has become less relevant partly because of (the success of) Marxism itself.

The writer is a former Professor of Economics, IIM, Calcutta.

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