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Capitalism and Inequality Re-Examined


  • Jon D. Wisman


Ever since capitalism came to be recognized as a new economic system, it has had vociferous critics, of whom none was more wide-ranging than Karl Marx. Marx recognized that behind its ideological patina of freedom, capitalism, like the exploitative systems of slavery and feudalism, was a social system in which a small class extracted from the mass of producers practically all output above that necessary for bare subsistence. An elite's ability to do so was grounded in its monopoly ownership of the means of production. However, Marx, and other critics faulted it for more than its exploitation and extreme inequality. Sharing much with romanticism, they believed that its very institutions of private property and markets corrupt society and its members. Nevertheless, Marx in particular recognized that capitalism, unlike earlier exploitative systems, was radically dynamic, producing unprecedented wealth, while  transforming not only all it inherited from the past, but also its own nature so as to eventually even empower the producers. Yet his anti-private property and anti-market animus led him to believe that empowered producers would abandon these capitalist institutions. He did not imagine that the dynamism, wealth, and potential freedom that capitalism was delivering might have little chance of flourishing in the absence of these institutions. This article claims that Marx and other critics were wrong to fault capitalism's central institutions for the injustices that accompanied them. These institutions are not the problem. Instead it is the inequality that co-evolved with them and enables them to be used for exploitation.

Suggested Citation

  • Jon D. Wisman, 2014. "Capitalism and Inequality Re-Examined," Working Papers 2014-12, American University, Department of Economics.
  • Handle: RePEc:amu:wpaper:2014-12

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    References listed on IDEAS

    1. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, July.
    2. Jon D. Wisman & James F. Smith, 2011. "Legitimating Inequality: Fooling Most of the People All of the Time," American Journal of Economics and Sociology, Wiley Blackwell, vol. 70(4), pages 974-1013, October.
    3. Jon Wisman, 2011. "Inequality, Social Respectability, Political Power, and Environmental Devastation," Journal of Economic Issues, Taylor & Francis Journals, vol. 45(4), pages 877-900.
    4. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    5. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1167-1199.
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    More about this item


    exploitation; Marx; state power; socialism;

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • P11 - Economic Systems - - Capitalist Systems - - - Planning, Coordination, and Reform
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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