During Karl Marx’s lifetime Europe was undergoing one of the biggest social and economic upheavals in centuries, perhaps even in a millennium. It was transitioning from an agrarian economy to an industrialised one, generally resulting in the wealthy landowners controlling industrial businesses and the peasant farmers moving to the cities to undertake low-skilled, monotonous work with few alternative work opportunities. Most of these individuals would have worked to survive, during both the agrarian and industrial ages.
Karl Marx came to the view that these workers were being exploited by the industrialists and envisaged a decentralized, cooperative society where individuals are free from exploitation and doing fulfilling, meaningful and creative work. That’s an admirable objective, but the challenging question is how best to achieve it.
The path to this utopia that Marx set out was progressively more socialism until full central control with no private ownership, followed by the role of government diminishing overtime and ultimately government dissolving. This progressive move to full socialism contemplated more and more privately owned (SME) businesses going broke, leaving a few big businesses (in each industry) controlled by government through legislation and regulation and ultimately expropriated by government, leaving government in full control over industry and the economy.
With the benefit of hindsight and numerous examples over the past century, it is apparent that the path he laid out for achieving his utopian objective was flawed. One of these flaws resulted from misunderstanding human nature. Humans, being self-interested creatures, seek positions of power and when such positions are obtained, they continually seek more power, and become increasingly reluctant to relinquish it. That applies both in government and big-business.
As a country becomes more socialist, the public service increases in size and bureaucrats become more powerful and the common people lose more and more of their rights. Since bureaucrats will never relinquish control voluntarily, communism will never be achieved through socialism.
Another flaw was his assumption that bureaucrats and other public servants would treat fellow citizens as equals, not subjugate them. That’s contrary to natural human behaviour. Socialism in effect replaces a landlord in a feudal system with government control. It does not lead to a decentralized, cooperative society where individuals are free from systemic alienation. That history has shown time and time again.
The third flaw is that an economic system that removes the incentive for people to work harder and smarter to improve their lot in life, to improve their own well-being, which socialism does, leads to the impoverishment of the people.
Marx’s belief that society would benefit from wealth being distributed based on the principle: “From each according to his ability, to each according to his needs.”, is also flawed – because it is contrary to human nature and results in a ‘race to the bottom’, providing a continual disincentive to work harder and smarter, resulting in poverty for all. Some are more capable than others, some willing to work harder than others, some are willing to take more risk than others, some willing to work in tougher environments, and so on – so it is impractical, contrary to nature, for each to receive the same remuneration.
His belief that industry collectively owned and controlled by bureaucrats (the executive arm of government) and the elimination of prices would lead to greater prosperity for all, was also wrong. Prices and profit incentive have been shown over a millennia to be fundamental to human progress and prosperity and fundamental to co-operation and collaboration of people in one’s local community and around the world. The most efficient way to allocate capital, resources and human skill and labour to the most valuable endeavour, is through prices, profit and associated expected return on investment. It is not by a bureaucracy.
So, a lot of what Marx believed was wrong, but we shouldn’t be too harsh on him. He was living in a very different world to that we currently live in. His world even pre-dates the fields of modern psychology and behavioural science. His concern that the private ownership of industry creates an inherent conflict between the “bourgeoisie” (owners/oppressors) and the “proletariat” (workers/oppressed) would have been reasonable in the 19th century. At that time, the factory owners were probably equivalent of the nobles, wealthy folk, and the workers were poor, with low skills doing monotonous, boring, work.
Through capitalism, people have become more skilled and have been doing far more meaningful and creative work. Since Marx’s death it has become apparent that capitalism does not create oppressors and oppressed classes. True capitalism does the opposite. As people become more skilled and have more work and business opportunities they gain more power, and so are not oppressed. Free markets have been shown conclusively to lead to less oppression.
Socialism on the other hand is not that different to feudalism. Under the feudal system, in exchange for land and protection, individuals swore loyalty and provided services (such as military duty and labour) to those higher up in the rigid hierarchy. Under this system power is concentrated at the top. The monarch owned the land, leased large portions to nobles, who in turn allocated smaller plots to knights and the serfs (peasants) worked the land and did the fighting. These serfs were subjugated to the nobles (the lords) who controlled their lives. Socialism is not much different. Under socialism, most of the people are subjugated to government, with the bureaucracy controlling their lives, dictating what they can and cannot do.
Since Marx did not have the knowledge or hindsight we have today, an interesting question to consider is: If he were alive today, knowing what has transpired and been discovered since his death in 1883, what path would he set out for achieving his objective of a decentralized, cooperative society where individuals are free from exploitation and doing fulfilling, meaningful and creative work?
He would recognise that the closest society will ever get to his goal is through free markets, the protection of individual liberties and small government focussed on its core role of protecting its people from attack and protecting their property from theft and damage. He would be an advocate for Classic Liberals because that reflects its DNA.
Many believe that free markets give rise to large monopolistic businesses. They are mistaken in that belief. Big businesses are not in favour of free markets. They want a government that supports them. One that is willing to provide financial support in the form of subsidies, grants, and so on, as well as protection from competition. Big business benefits from government inhibiting the growth of smaller and emerging companies through, amongst others, laws and regulations that necessitate expensive compliance systems, that reduce employment opportunities for their staff, and that in effect deprive smaller companies of the capital needed to fund their growth. Big business also benefits from government implementing a system that removes capital from the hands of the people and allocates it to them. This is done through compulsory superannuation. Smaller companies are effectively locked out of Australia’s $4.5 trillion superannuation pool of money, which is allocated to big-business, government, infrastructure and large commercial properties. Next to nothing of the $4.5 trillion is invested in Australian unlisted companies.
If small businesses can secure capital on a ‘best dressed’ basis, one where those offering the highest expected return for risk secure the capital, big businesses will have to behave. If they price gouge or drop the quality of their products or don’t continually improve product quality and affordability, small businesses will win business from them by offering customers a better option. A free capital market is also likely to see employees investing in the companies employing them and investing more over time. This further aligns the interests of the founder and other employees, and that should be mutually beneficial.
Individuals and their small businesses need free markets to thrive and achieve their potential but those don’t exist anywhere in the world today. Western democracies do not have free market economies. They, including Australia, have mixed economies – private ownership of industry with varying levels of state control. Over the past century these economies have succumbed to more state control. In other words, they have become increasingly socialist. This is somewhat bewildering as history has shown that socialism leads to poverty whereas free markets to prosperity. Wherever socialism has been embraced, the people became poorer and wherever freer markets were allowed, the people became more prosperous.
Any country that wants to maximise the average well-being of its people must protect its people from attack, protect their property from theft and damage, protect their individual liberties, embrace free markets, and treat its people as adults capable of making decisions in their own interests. Any country that does so will get far closer to Karl Marx’s objective than any that don’t.
That’s probably a hard pill to swallow but rather than dismissing it on face value, give it some thought. Consider what individuals need to do to live a more fulfilling and prosperous life. That is very unlikely to be working as an employee in a corporate or government bureaucracy. It is far more likely to be working collaboratively for mutual benefit in a small business that in turn is working collaboratively for mutual benefit with its upstream and downstream businesses.
It is also worth recognising that the behaviour of industrialists, of capitalists, has changed dramatically since the days of Karl Marx, and even over the past couple of decades. One of those changes is that whereas the capitalists of yesteryear fiercely protected their intellectual property – by, for example, securing patent protection – with the rapid development of Ai and robotics more industry titans now prefer open source over protection. This leads to the world collaborating to improve the technologies and their functionality. Socialism does the opposite. The other major change is that the industry titans of today, far prefer flat corporate structures (with no corporate hierarchy) over the ‘master-servant’ corporate structures of yesteryear. As people become more skilled and capable, less management is needed, rather employees are encouraged to contribute and collaborate for mutual benefit. And that mutual benefit includes ownership stakes in the company employing them. At the price of SpaceX shares at its recent IPO, it was reported that some 4,400 employees became US dollar millionaires.
In conclusion: The closest the world will get top the Marxist utopia of a world without government where society collaborates for mutual benefit, is through the core principles and policies adopted by Classic Liberals.
So, Marxists, consider joining us, in our endeavours to create a far more prosperous and just world.
Written by: Mark M.J. Morris (May 2026)