Among the theories and ideas of Karl Marx, we can find many weak points. Most important of these, perhaps, is the labor theory of value, because it is upon this that Marx proves that capitalists exploit the proletariat. This principle of exploitation in and of itself is what justifies the destruction of the capitalist order—without it Marx’s theories are for nought.
The labor theory of value states that two commodities being exchanged must have equal value. Therefore, there must exist a separate factor common to both that makes them equal. Marx said that this factor is the amount of labor that goes into producing each product. Therefore, a hypothetical dress shirt costs twice as much as a hypothetical casual shirt because the labor that went into producing the former is twice that of the labor that went into producing the latter.
Now, all this assumes that a transaction must take place between equal commodities, but what exactly makes them equal? In fact, for a transaction to occur in the first place the commodities must be precisely unequal. If a dress shirt was precisely equal to two casual shirts, who on earth would trade? They should be just as happy with either one. The very fact that one party values the other party’s goods above his own is what allows the transaction to take place. Because party A values party B’s dress shirt more than party A’s casual shirts, and vise versa on the other side, the two parties will be inclined trade. Conversely, if party A held party B’s dress shirt to have the same value as his own shirts, there would be absolutely no reason for them to trade. Arguing also from empirical data, it should follow that labor intensive factories produce far more value than those that have a surplus of capital, but this is not always the case.
Assuming the labor theory of value is true, however, it can be explained why Marx thought the laborers were being exploited by the capitalists. Marx boiled down the capitalist scheme as follows: a capitalist takes his capital, uses it to buy labor, sells the products of this labor, and pockets the surplus. According the idea that all transactions are equal, the only way for the capitalist to receive a net increase is if he has exploited the worker’s labor, paying him less than what his labor is worth. All this relies firmly on the idea that transactions must be equal, but as we have seen, they are necessarily unequal, so this system does not hold. As another empirical example, capitalists that employ machinery instead of manpower should never make much money at all, because it is impossible to cheat machinery out of the value that it produces. However, it is clear to see that entirely mechanized factories still produce major profits.
Upon the labor theory of value rests many of Marx’s most critical ideas. However, when the theory is proved false Marx’s claims become totally absurd. Perhaps the most important of his claims is that capitalists grow wealthy only by cheating their hardworking employees out of their rightful labor value. But as we have seen, this claim cannot hold.