Economic History Theories
Marx, Keynes and the neoclassical tradition have had a lot to contribute to the success of the economic growth in the world. They all stood for their specific terms which sometimes seemed to be similar. Firstly, they all believed that there was something wrong with capitalism; this is because capitalism only favoured the private owners rather than the state at large. In such a scenario, there are zero chances for growth of citizens who will be made to continue working for the wealthy. This will mean the rich will continue being productive, and the poor will remain poor hence unequal wealth distribution. Secondly, all of them advocated for socialization of investment. This required for a gradual change between the propensity to consume and inducement to invest. In the end, it will ensure there is an adequate level of demand in the market. This can be made efficient by guaranteeing full employment of citizens so they can have the money to spend.
Moreover, they also agreed on the disappearance of finance capital. In this line, they argued that the disappearance of financial capital was essential for equal distribution of wealth. This also aimed at eliminating the communist rule. It also contributes to a lower factor productivity of growth. Disappearance of finance capital is also aimed at achieving healthier financial structures. Through their ideas, all of them addressed the falling rate of profit theory. They argued that due to technological changes, the profit rate theory was likely to decline to a certain point, until the world adapts to the changes. Adaptation to these changes would eventually lead to a rise in the rate of profit worldwide. It is therefore prudent to say that Marx, Keynes and neoclassical tradition had similarities in their economic arguments.
While there existed similarities in their work, they also recorded some differences in their argument, Keynes rejected the labour theory of value, which was supported by both Marx and neoclassical trading. The labour theory of value argues that the cost of a good or service is determined by the total amount of labour required. Keynes supported the marginalist and utility theory, which recommended that work invested in the production of a particular good does not necessarily transmit to its market value. Keynes argued that there was no theory of exploitation of labour, he stated that profit came from capital invested. Keynes also viewed his arguments to save capitalism from itself; he argued that capitalism if controlled well, could eventually result in economic growth. However, Marx and neoclassical did not agree with this; there was no way advocating for controlled capitalism could have helped in economic growth.
In regards to the rate of profit theory, Keynes ideas were a little bit different from marks. He argued that the fluctuation rate of profit as the main determinants to changes in the industrial cycle. If the profit rate increases, then it would result in economic growth while the drop of profit rate would lead to a decline in economic growth. Moreover, they all had different arguments regarding to socialization of investment. Keynes referred to it as the solution to depression problems in a capitalist society. He argued that if reducing interest rate and providing capital money could not help revive the country economy, then it was better controlled by the government. In contrast to this, mar and neoclassical traditions believed that a country’s economy would rise if interest rates were reduced and investment money was made available to citizens. Concerning the above, it is quite evident that the three had different views regarding economic growth.