During the middle of the 19th century, "a spectre [was] haunting Europe." Workers were revolting against their oppression by the ruling class. A series of isolated revolutions broke out across Europe. Unfortunately, these revolutions lacked proper leadership and clear aims. Thus, after achieving a degree of success, the old ruling class quietly slipped back in to regain their old position. However, this didn't bother the working-class leaders who just formed the Communist League. They viewed the uprisings of 1848 as mere dress rehearsals for the inevitable Communist revolution. They knew Communism was destined to become to eventually succeed capitalism.
The goals of Communism were outlined in The Communist Manifesto, co-written by Karl Marx and Friedrich Engels. The two were an ideal working combination. Marx was stocky and well-built. Engels was "tall and fair and rather elegant." Marx was a slow perfectionist, and had difficulty learning languages. Engels was said to have known twenty languages, and was quick thinker. They complemented each others abilities, with Engels supplying the "breadth and dash" and Marx supplying the "depth."
Both Marx and Engels had been enthralled by the radical literature of the day. Engels discovered it on his own, much to the chagrin of his parents. Marx's family encouraged him. During his college days, Marx was involved in the day's great debate, concerning the Hegelian dialectic. Hegel stated that a new idea (a thesis) would produce it's opposite (an antithesis). These two would combine, producing synthesis, which would then become a thesis on its own, continuing the cycle. Thus change would continue endlessly in all human affairs (except those in the Prussian state). Marx accepted the dialectic, and further added to it his own principal of "dialectic materialism." According to Marx, all change was the result of a desire to achieve economic goals. Every change is the result of production and the exchange of products. Thus, any change in society was not caused merely by philosophical ideas, but by changes in economics. Each society will be built up to best achieve its economic goals. Constant change in the economy would result in changes in the social system. The factory and market were incompatible with the feudal system, therefore the feudal system had to fail. Desire to increase economic well-being results in new innovations, new ideas, and entirely new social systems.
The constant social change caused by the unrelenting system of change results in class conflicts. With change, one class must rise in standing, while another must fall. The class in danger of loosing its social standing will fight to keep it. However, the change is inevitable, and eventually the ruling class will fall, no matter what effort they put forth.
Likewise, entire economic systems, too, are destined to fall. Capitalism was based on interdependent, cooperative production processes. However, its superstructure was the individualistic private property system. Thus, while "factories necessitated social planning, the private property abhorred it." Capitalism's base and superstructure clashed, and the system was destined to fail. Furthermore, capitalism would "breed its own successor." The factory system would produce a new socialistic class that would serve as the basis for the new economic system: communism.
Marx and Engels not only praised the proletariat, they also encouraged them to seek to change the course of history. Through his writing Marx encouraged the creation of "an international working-class movement." However, the initial movements failed. More important was the tone that Marx "injected into working class affairs." He was unable to accept disagreement, and often stooped to Anti-Semitism and name calling. Even seemingly close ideological partners were criticized for 'wrong' opinions. With this, he injected a "pessimistic analysis of the outlook for a capitalistic economy," provided by his dialectical materialist theory of history. His economic laws proved not only that workers should seek more power, but that they would naturally obtain it, and the entire capitalist system would fail.
In his prophesy of capitalism's doom, Marx used a 'pure' form of capitalism. For, if perfect capitalism was destined to fail, our imperfect form was certain to fail even sooner. In the pure form, there were no monopolies or unions, and everything was sold for its 'value'. This value was defined as the amount of labor (including labor used to produce each 'part') to produce an item. In 'perfect' capitalism, profits arose from the contract/wage basis of work. A laborer's value was the subsistence wage required for him to live. However, he contracts to work for a period of time longer than his 'subsistence need', but his value remains the same. Thus, while he may work ten hours, he is only 'worth' the five hours required for survival, and the company achieves a profit based on the workers five hours of additional work.
In their quest to seek additional profits, companies will compete for labor. This will in turn drive up wages. To combat the rising wages, the companies will implement labor-saving machinery, thus eliminating some jobs, and keeping wages low. Unfortunately, since excess labor is the one source of profits, the companies are cutting out their own profits. Soon production is no longer profitable, machines replace men faster than they can be reemployed elsewhere, and smaller firms eventually go out of business. The economy reaches a slump, and workers are willing to accept subvalue wages. The small companies, unable to survive under the new conditions are engulfed by the larger companies. Then, the cycle repeats itself, this time with fewer players, and enters a 'depression' even worse than the previous one. Eventually the system breaks down. "Misery, oppression, slavery, degradation, [and] exploitation" abound in the society. Finally, the socialization of industry reaches the point that it is incompatible with capitalistic system, and the entire system collapses, leaving in its place a new, classless, system. The new system would go through transitional periods of "socialism," and "dictatorship of the proletariat" before it would end up in it's final state: pure communism.
Marx's logic not only spurred the birth of communism, but it also created a new "study" - the "critique of economics itself." He noted that all labor was not equal. The labor needed to kill a deer could not be compared to that needed to grow a potato. Instead, an abstract "labor-power" is identified. This abstract labor is the result of a "propertyless class" who are 'forced' by their conditions to sell their labor. He also included "laws of motion" that capitalism would follow over the course of time.
To the embarrassment of many hard-core capitalists, many of Marx's predictions have turned out to be true. Profits do tend to fall, due to the pressures of competition. Businesses struggle to innovate in order to survive. Large firms have come to dominate the business world. Business does go through a series of ups and downs. Marx was the first to see many of the characteristics we believe to be inherent to the business cycle. His 'prophesies' did have one major flaw - he predicted that profits would fall from cycle to cycle. He also failed to see new legislation to combat the drift towards communism. However, as witnessed throughout Europe in the middle 20th century, capitalism did break down. (Unfortunately, the strain of 'communism' put in it's place also broke down.)
European capitalism broke down for many of the reasons Marx predicted. The business cycles steadily worsened. Wars plagued society, and "destroyed the faith of the lower and middle classes in the system." The leadership acted exactly how Marx said they would, and caused their own destruction: trade Unions were stamped out; monopolies were encouraged. The rich ignored the pleas of the poor. Thus, capitalism fell because of the differentiation between the social and business structures.
American capitalism, however, managed to thrive. America wasn't plagued with the European, aristocratic, noble ruling class. The American leadership was willing to change in directions the Europeans wouldn't dare. Furthermore, the plague of war on the American homeland was much less than that on European soil. The credo of "rugged individualism," resulted in a more pragmatic decision making process, and a strong clinging to democracy. America prospered during the European turmoil, and, because of the prosperity, it is now struggling to catch up with a transmogrified Europe.
Karl Marx predicted capitalism would eventually bring about its own decline, and naturally lead to communism. Lenin and other leaders tried to speed up the process, and in doing so, created a strain of communism that was destined to fail. However, the decline of capitalism is still occurring from the inside. Socialistic plans, such as national health care, are being ascribed to. "Soak the rich" policies are coupled with generous welfare plans. The government is gradually taking control of more and more companies. The United States and the rest of the world are gradually slipping towards socialism, but without the drama of a bloody revolution.