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The flaw in the Marxist position

It is necessary only to read or read about Marx to the point that one realises that he fails even to define his terms with adequate precision or to map them to the economic process. Having identified what is wrong with his fundamental assumptions, it really is not worth wading through hundreds of pages of his turgid text.

The very terms “capital” and “profit” are used too loosely to be of any use in establishing a coherent analysis of what is going on. Is “capital” money, or credit, or land, or physical capital, or what? The question needs to be asked from the outset and a distinction made, because each of these is a different entity and behaves differently.

Likewise “profit”, which may be wages, or a return to physical capital, or economic rent of land, or a return to a monopoly condition. Lumping them together is legitimate if the analysis is mere book-keeping, but it misleading conclusions will be drawn if the economic process is considered in this way.

There are three factors of production, not two. These are land, labour and capital.

By “Land” is meant the surface of the earth and products in their natural state eg fish in the sea. Land is not a sub-set of Capital and it leads to misleading conclusions to assume that it is. By “Labour” is meant human effort. By “Capital” is meant products set aside for the creation of products that are consumed. A fishing boat and its tackle, and the artisans tools, are “capital” on this definition.

“Money” cannot be regarded as Capital, since it is merely the the medium of exchange and “Credit” is a temporary claim on production, advanced to, for instance, enable the farmer to buy seeds and live until the crop has been harvested and sold, at which point the credit is extinguished. Share certificates and land titles are merely tokens that enable their holders to make a claim on production.

The return to land is economic rent in accordance with Ricardo’s Law of Rent. The return to Capital can be referred to as “Interest” but it is not the same thing as interest paid to a moneylender. The return for labour is “wages”. “Profit” may consist of any possible rent, interest as defined above, or wages, or any possible combination of these three entities.

Value and labour are related in the sense that the value of something is the labour that someone is willing to give in order to acquire it. (exactly the opposite to what Marx claimed)

All of this is subtly different from Marx’s analysis and leads to entirely different and more radical conclusions. Having got the initial definitions wrong, it is inevitable that any conclusions Marx draws are also wrong. He really needs to be dropped. He is a dead end. Literally.