Marx theory of capitalist development has been accepted by his followers as a Gospel of truth.
It has a special application to a particular society named capitalist society.
Still, it has been severely criticized on the following grounds:
(i) Materialistic Interpretation of History is Partial Truth:
The foremost point of criticism against Marx is that it is a partial concept. Marx has minimized the significance of other non-economic factors in the history. The non-economic factors like ethical, ideological, religious, cultural and the political conditions also greatly influence the history.
Man does not live by bread only, other things are also necessary. Bertrand Russell has rightly remarked in this regard, “Larger events in our political life are determined by the interaction of material conditions and human passions”. Thus, the material and non- material factors play an important part in the development of various economic activities.
(ii) Theory of Surplus Value is Unreal:
The whole Marxian theory is based on the theory of surplus value. In real world, we are not concerned with values but with real tangible prices. Thus, Marx has created an abstract and unreal world which has made it difficult and cumbersome to understand proper working of capitalism.
(iii) Marx-A False Prophet:
According to some other opponents, Prof. Marx has been proved a false prophet. The countries which have toed the Marxian line of thinking have been curiously those in which capitalist development lagged behind. All the communist states had been poor and are even now so, as compared to capitalist countries.
On the contrary, the real wages of workers have continuously increased in their value. The workers tend to become more prosperous with capitalist development and the middle class instead of disappearing, has emerged as dominant class. There have been also no signs of the withering away of the state in these countries.
(iv) Technology does not Create Unemployment:
Marx contended that with the introduction of technology, industrial reserve army expands. But, this is an exaggerated view for the long run effect of technological progress. It creates more employment opportunities by raising aggregate demand and income. The improved techniques of production even if they may be labour saving can show better benefits on the labourers.
(v) Falling Tendency of Profits not Correct:
According to Joan Robinson, “Marx’s explanation of the falling tendency of profits explains nothing at all”. Marx contends that as development proceeds, there is an increase in the organic composition of capital which brings decline in the profit rate. But this is wrong opinion because as development proceeds, capital output ratio falls and so the output increases and profits also increase.
(vi) Capitalist did not meet its Predicted Doomsday:
Marx also could not understand the emergence of political democracy as the protector and preserver of capitalism. The introduction of social security measures, anti trust laws and the mixed economies have given a lie to the Marxian prediction that capitalism contains within itself the seeds of its own destruction.
(vii) Cyclical Theory Wrong:
Marx emphasized that capital accumulation led to reduction in the demand for consumption goods and fall in profits. But he failed to realize that with economic development, the share of wages in aggregate income need not fall, nor the demand for consumer goods.
(viii) Static Analysis:
In the words of Schumpeter “It is unsuited for two main props being:
(a) Labour theory of value and
(b) Modified version of subsistence theory of wages.
Marx was analyzing the problem of growth with the help of tools which were essentially suited to static economic analysis.
(ix) Analysis of Crisis is Out-dated:
Marx considered the business cycle as an integral part of capitalist development but it lacks precision. The analysis of crisis is based on nature of capitalist production rather than on monetary and fiscal factors and the theory which neglects the monetary and fiscal factor is considered to be incomplete and inadequate. Marxian analysis of crisis at the most can be regarded as suggestive rather than analytical and convincing.