One of the Marxist critiques of market society is something called the under-consumption paradox. Importantly, Marx saw that there was a constant conflict between workers and employers in their goals, and that the conflict could never be adequately worked out, leaving society in a perpetual state of flux. The under-consumption paradox can be explained easily.
The goal of an employer is to reduce wages enough that he or she can extract maximum excess value from the employee. Marx saw this as an undeniable truth of capitalism and the market society, that every dollar an employer had to pay an employee over the minimum the employee would have taken is a dollar the employer lost in value. At the same time, the employee had a different goal in mind. The employee wanted to maximize his own value, looking for the highest salary number possible. What this meant, then, was that the employee would be cutting into the profit margins of the employer if the employee was able to achieve his or her goals. Importantly, Marx identified in this a conflict that would not resolve itself because the two sides would always be at conflict over these divergent goals.
Likewise, this criticism identified something more important in the conflict between microeconomics and macroeconomics. That is, it makes good sense for a company to try to pay its employees as little as it can get away with (Cohen). This produces extra value for the company. However, if a company does so, then employees have less money in their pockets to spend at the end of the day. If all companies behave in this manner, then, it becomes true that employees are no longer able to purchase the goods produced by the company at high levels. This means that whatever savings a company might produce from paying less to employees will cost them in the long run because of a lack of consumption when employees are paid less. Likewise, the flip side is also true. If a company wants to pay its employees more money in order to encourage them to spend, the company will be giving up value on the front end by paying more to employees than they had to pay them. This meant that any value gained on the back end would be a wash because the company would just be making up for its front-end loss. This was a conflict Marx saw in market society that would not work itself out because of divergent goals and values.
There are many valid criticisms of the criticism launched by Marx discussed in the previous paragraph. Importantly, Marx’s criticism of market society rests on the idea that every company and every person is looking to maximize its pure economic value. The crux assumption made by Marx is that the system cannot work because every person and company’s goal is always to keep pushing for more and more economic value. In truth, there are varying goals that make compromise possible where win-win situations can exist. If the crux of Marx’s criticism is that equilibrium can never exist in the market society given the competing goals of the different parties, then this criticism depends upon the idea of parties never being able to settle for good enough.
In reality, people in market society are able to seek out goals other than pure economic maximization. There are many companies that are capable of producing profits while also providing a valuable service for society. Some are interested in creating value in ways other than having the maximum profit margins and totals at the end of the year. Likewise, in the modern market society, not all workers are interested in pure maximization of their economic value. All the time, people make choices on their employment based upon something other than pure salary and benefits. They choose to work in places where they are valued, they choose to take jobs where they can have an impact on people, and they choose to stay in places because of commitments that have nothing to do with money. These realities about how market society operates do much to undermine the criticism levied by Marx. If people are not wholly motivated by money, and companies are motivated by something other than pure profit maximization, then it becomes possible for there to be an equilibrium despite what might look like competing goals on either side of the aisle.
Marx might argue that even if there are other goals that can drive behavior for both companies and for individuals, the existence of this conflict between the two sides will always be an issue in a market society. He might argue that even if people say they are driven by things other than money, when it comes down to it, they have to pay bills and put food on the table. There is a very real incentive for people to maximize their value, even in those situations where they nominally mention goals other than just making money. Likewise, Marx might argue that in the corporate world, companies have a fiduciary duty to their shareholders, and thus, they are required by law to seek that action which drives profits higher and higher. Despite the existence of a movement toward corporate social responsibility, companies have every incentive to maximize value, and thus, there will always be some sort of conflict between the two sides that keeps equilibrium from occurring.
- Cohen, Gerald Allan. Why not socialism?. Princeton University Press, 2009.