The capitalist, the one who owns the means of production, buys the right to use the labour of a worker for a whole day, by paying them a wage. This work therefore belongs to the capitalist, and not to the person who did the work. For example, someone working as a data analyst does not own any of the data analysis that they do. This person spends their entire day producing things that will not belong to them. In this way, workers are exploited, because they are not able to obtain the value created by the work that they do. Instead, the company sells the data analysis and pockets the profits, for example.

Marx disagrees with Adam Smith, who we read about before. Smith believed that wealth was created through exchange, but Marx believed that it is violence that creates wealth. The domination of one person or resource by another is what leads to this person becoming rich. For example, it was through stealing land, slavery, and the expropriation of villagers that the British Empire was able to amass power and wealth in the 18^th and 19^th centuries.

The global economy is, according to this analysis, not to everyone’s advantage. What ends up happening is that some people control a lot of the machines, land and buildings necessary to produce goods and services, and these people are concentrated in wealthy countries like the United States. Multi-national companies like Apple, Toyota, Nestle, etc. capture most of the value added, and the workers, often in Asia, of these companies, see almost nothing of what the company rakes in when they sell their goods. The market is, for Marx, hierarchical and a place of domination, and not a place of freedom and expression as Smith believed.

For liberal economists, freedom is about being able to possess, to exchange, and to sell things. Democracy is therefore about being free to do these things in the market, without much intervention by a government or external actor. However, in a capitalist regime motivated by profits, socialists argue that there will be too many cars, robots, televisions and soft drinks, and not enough social housing, schools and hospitals. These public goods, such as health and education, need to be provided by the Government, so that all citizens are assured a quality education and healthcare regime, no matter their position or actions within the market.

In the early 21^st century, many previously state-owned services were sold off to private buyers, with the idea that increased competition would improve the quality of services provided. However, this was often to the detriment to the employees of these companies, as well as services often being cut, reduced, or unreliable, such as what happened with the rail network in the United Kingdom. Sometimes, the private market suppliers collude – they make an agreement to keep prices high – and this is in their interests, rather than in the interests of the people consuming the service. This has been shown to be the case with electricity markets in Europe, with petrol markets, and more.

Today however, the market for goods and services is not the largest or most dominant economic market. That would be the financial market. In the 1970’s, the financial markets were opened, and currency exchanges were no longer made at fixed rates. Buying, selling, and lending on the financial markets increased dramatically. Whereas previously, paying people a salary meant that you were guaranteeing that they could buy your goods, now, this is no longer the case. Wages are a cost, rather than a guarantee of consumption, and therefore, they must be reduced as much as possible. The money that is used to buy things and to invest, in large part comes from these financial markets, and not from the sale of goods and services.

In the end, according to Marx, the exploitation of workers is what will cause the demise of capitalism. This is because the only way to make profits is through taking the added value of the work that employees perform. Value is created through labour, and exploiting this labour for the benefit of the few at the expense of the many. At a certain point, however, these workers can no longer buy the goods and services that they are busy producing, because they no longer have enough money for them: most of it is concentrated at the top. Capitalists can do nothing about this: they are forced, by competition, to keep making a profit, by reducing the prices and selling more, or by reducing the costs of production (the price of labour, the wages). This leads to overproduction, and so food and other goods are wasted and destroyed because they are not sold. People go hungry and starve, yet companies are overproducing the things they need to survive.

This situation, to Marx, is completely absurd. He believed, therefore, that capitalism is a very inefficient economic system, and should be replaced by something else, or strongly domesticated. If Smith believed in no intervention in the economy, and Keynes believed in some intervention, Marx believed in a lot of intervention, or just removing the whole system. Smith’s economy based on free association between people is criticised by Marx, instead believing that the economy is based on relationships of domination between people. Both economists believed that economic growth is a good thing, however.

For Polyani, labour, land, and money are not goods that can be commodified and bought and sold in a market. Labour is just the work of human beings, land is that upon which human societies exist, and money is a creation of the central bank. None of these things were created to be sold in a market: they are the very fabric of the economy itself. Whereas Marx believed that the power struggle between the capitalists and the workers was the source of the problem and its solution, Polyani believes that it will be the recognition of the needs of the society and its relationships that will bring an end to the domination by exchange relations.

Exchange relations are not the only way of organising a society, according to Polyani. We also have relations based on reciprocity, and on redistribution. Reciprocity considers the other as equal to oneself, and therefore seeks to give in equal terms for what is taken. Redistribution requires a central authority which will take the resources from some people, and give them to others, so that each person is considered equal. Market-based relations treat human beings as instruments, as a means to obtain what one wants, rather than having a value in themselves. The solution, therefore, is to restrict or reduce the exchange relations that we have in our lives.

The dogma of economic growth is another aspect of economic thinking which Polyani strongly criticises. Whilst strong economic growth led to huge gains in the standard of living for many Western countries, this growth also created major social and environmental problems. These include pollution, reduction in working conditions, people becoming more individualised and an increase in violence, the production of useless and quickly obsolete goods, advertising everywhere, without limits, and more. Economic growth is measured in terms of the increase in GDP, the gross domestic product, which is the sum of the value of all the goods and services produced in a country within a certain time period. However, this measure doesn’t take into account the social and volunteer work that produces value, nor does it account for the environmental impacts of economic activity. GDP also isn’t able to measure inequalities in a society, yet takes into account ‘bad’ activities – GDP increases when more people are buying paracetamol, whether they really need this or not. It is therefore severely limited in what it can measure. Using a very limited measure of value as the single most important determinant of the ‘health’ of the economy, is, therefore, quite restrictive.

Despite this, most economists today, liberal economists, are searching for continuous economic growth, believing that this will lead to better lives for all people. In fact, GDP increases produce greater satisfaction up to a point, at which happiness no longer increases in the same way, despite increasing GDP. The United Nation’s World Happiness Report demonstrates this. You can read more about how happiness is challenging GDP as a measure of health in this article on The Conversation.

Nicolas Georgescu-Roegen, a 20^th century economist and mathematician, believed that economic value was not created through markets or exchange, or even through labour, but through the natural resources which are taken and transformed. The current economic system takes natural resources with value, and spits out waste, with no value. Using the laws of thermodynamics, Georgescu-Rogen explains how humanity, and the economy as the transformation of natural resources, cannot continue to grow infinitely. Endless economic growth is not possible, with the materials and resources we have on earth. He points out that it is as if human beings decided to have a brief but exciting existence on planet Earth: each car we produce means fewer human lives will be possible in the future.

There is another type of economy which environmental economists propose. One part of this involves ‘de-growth,’ which is the idea that we must shrink the economic action occurring in the economy, or at least, no longer care about the idea of growth. Tim Jackson is a British economist who promotes this idea. Another pillar is a kind of “Green New Deal” which proposes government investment in renovating and insulating housing, converting fossil fuel electricity to renewables, developing public transport, sustainable agriculture, and more.

Finally, growing the social economy, or social enterprise, is another part of the solutions these economists propose. This means more people will have jobs that are meaningful, in which the value that they produce goes directly to people who need it, and each person in the value creation chain is valued equally. This social economy is not founded on the principle of competition, rather it is based on cooperation between self-organised individuals.