All of Marx’s important prophecies have turned out to be false.

First, he predicted growing class polarization and the disappearance of the middle class in societies based on a market economy. Karl Kautsky rightly stressed that if this prediction were wrong, the entire Marxist theory would be in ruins. It is clear that this prediction has proved to be wrong; rather, the opposite is the case. The middle classes are growing, whereas the working class in the sense Marx meant it has been dwindling in capitalist societies in the midst of technological progress.

Second, he predicted not only the relative but also the absolute impoverishment of the working class. This prediction was already wrong in his lifetime. As a matter of fact, it should be noticed that the author of Capital updated in the second edition various statistics and figures but not those relating to workers’ wages; those figures, if updated, would have contradicted his theory. Not even the most doctrinaire Marxists have tried to cling to this obviously false prediction in recent decades.

Third, and most importantly, Marx’s theory predicted the inevitability of the proletarian revolution. Such a revolution has never occurred anywhere. The Bolshevik Revolution in Russia had nothing to do with Marxian prophesies. Its driving force was not a conflict between the industrial working class and capital, but rather was carried out under slogans that had no socialist, let alone Marxist, content: Peace and land for peasants. There is no need to mention that these slogans were to be subsequently turned into their opposite. What in the twentieth century perhaps comes closest to the working class revolution were the events in Poland of 1980-81: the revolutionary movement of industrial workers (very strongly supported by the intelligentsia) against the exploiters, that is to say, the state. And this solitary example of a working class revolution (if even this may be counted) was directed against a socialist state, and carried out under the sign of the cross, with the blessing of the Pope.

In the fourth place, one must mention Marx’s prediction concerning the inevitable fall of the profit rate, a process that was supposed to lead ultimately to the collapse of the capitalist economy. Not unlike the others, this prediction proved to be simply wrong. Even according to Marx’s theory, this could not be an inevitably operating regularity, because the same technical development that lowers the part of the variable capital in production costs is supposed to lower the value of the constant capitaý. Therefore the profit rate might remain stable or increase even if what Marx called “living labor” declines for a given unit of output. And even if this “law” were true, the mechanism whereby its operation would cause the decline and demise of capitalism is inconceivable, since the collapse of the profit rate can very well occur in conditions in which the absolute amount of profit is growing. This was noticed, for what it’s worth, by Rosa Luxemburg, who invented a theory of her own about the inescapable collapse of capitalism, which proved to be no less wrong.

The fifth tenet of Marxism that has turned out to be erroneous is the prediction that the market will hamper technical progress. The exact opposite has quite obviously proved to be the case. Market economies have been shown to be extremely efficient in stimulating technological progress, whereas “real socialism” turned out to be technologically stagnating. Since it is undeniable that the market has created the greatest abundance ever known in human history, some neo-Marxists have felt compelled to change their approach. At one time, capitalism appeared horrifying because it produced misery; later, it turned out to be horrifying because it produces such abundance that it kills culture.

Neo-Marxists deplore what is called “consumerism,” or “consumerist society.” In our civilization there are indeed many alarming and deplorable phenomena associated with the growth of consumption. The point is, however, that what we know as the alternative to this civilization is incomparably worse. In all Communist societies, economic reforms (to the extent that they yielded any results at all) led invariably in the same direction: the partial restoration of the market, that is to say, of “capitalism.”

As for the so-called materialist interpretation of history, it has provided us with a number of interesting insights and suggestions, but it has no explanatory value. In its strong, rigid version, for which one may find considerable support in many classical texts, it implies that social development depends entirely on the class struggle that ultimately, through the intermediary of changing “modes of production,” is determined by the technological level of the society in question. It implies, moreover, that law, religion, philosophy, and other elements of culture have no history of their own, since their history is the history of the relations of production. This is an absurd claim, completely lacking in historical support.

If, on the other hand, the theory is taken in a weak, limited sense, it merely says that the history of culture has to be investigated in such a way that one should take account of social struggles and conflicting interests, that political institutions depend in part, at least negatively, on technological development and on social conflicts. This, however, is an uncontroversial banality that was known long before Marx. And so, the materialist interpretation of history is either nonsense or a banality.

Another component of Marx’s theory that lacks explanatory power is his labor theory. Marx made two important additions to the theories of Adam Smith and David Ricardo. First, he stated that in relationships between workers and capital, the labor force, rather than labor, is being sold; secondly, he made a distinction between abstract and concrete labor. Neither of these principles has any empirical basis, and neither is needed to explain crises, competition, and conflict of interest. Crises and economic cycles are understandable by analyzing the movement of prices, and the theory of value adds nothing to our understanding of them. It seems that contemporary economics—as distinct from economical ideologies—would not differ much from what it is today if Marx had never been born.

The tenets I have mentioned are not chosen at random: they constitute the skeleton of the Marxian doctrine.

—Leszek Kolakowski, “What Is Left of Socialism?” First Things (2002)

Answer: It depends on wether we’re talking in absolute or marginal terms!

A little economics lesson:

…so bbcity asked me this in regards to Ryan Faulk’s post about Marx’s value theory:

“I actually don’t see the connection between the diamond and the capitalist. Diamonds serve no substantive purpose whatever, apart from sating people’s vain desire for them, and thusly society wouldn’t collapse if they somehow vanished… People would just start valuing something else that’s rare, of course, and the freedom to be vain wouldn’t be confiscated from them—no worries. But the value-rarity trajectory is a manmade idea. A dumb rare thing has no bearing whatever on the way value is allocated—people do. People create these valuations; which are congruently inane. Maybe find a new analogy?”

I’ll explain why we’re using a “diamond vs. water” analogy in the first place. The reason has to do with historical context:

So in the 1600s-1800s, classical economists were trying to build an understanding of causal relationships in the economy…

Part of this required an explanation for why people value different things differently (as expressed via differentiations in market prices i.e. voluntary willingness to pay). Adam Smith and others theorized that a thing’s value was dependent on the amount of labor that went into it. So X is more expensive than Y on a market because X requires more labor than Y. This is the labor theory of value and it is what Marx based his political economy on (unlike Smith or Ricardo). 

However there was a problem with all of these theories of value. They could not explain many empirical facts, like why a diamond attained a price on a market 1000 times more than a container of water, despite the fact that a diamond could require less labor to produce and (unlike water) was not at all physiologically necessary for human life. This was known as the Diamond-Water Paradox.

It was solved by three economists - Jevons, Walras, and Menger (above) - in what is now called the Marginalist Revolution. They pointed out that value is epistemologically subjective and only revealed marginally by human action. When a human reveals their values through action, the revelation is ordinal and relative to everything else they could be doing and have already done. Humans are not expressing absolute value through their choices unless the options are absolute (i.e. one diamond and no water vs. no diamond and some water forever).

So when I buy a diamond for $10,000 instead of another bottle of water for $1, I am expressing my subjective value marginally, meaning the value of one more diamond to me vs. one more bottle of water to me relative to everything else I already have done and could do. Given that I already have water or can get it cheaply (given it is nowhere near as scarce and the supply-demand equilibrium price is thus much lower despite the extremely high absolute value of water) its marginal value under normal circumstances is quite low. 

Understanding value this way (subjective theory of value | revealed marginal utility | market supply-demand) gave rise to modern economic method - marginalism. It’s now the undisputed standard in econ and most relevant social science because it explains the facts.

To your objections, diamonds do serve a ‘substantive purpose’ - they evidently satisfy the voluntarily, marginally revealed values of human beings. You may not like the valuations of these human beings (“they’re just vain!”) or feel that they are ontologically socially generated and affected by environment (what’s not?) or whatever, but that’s all quite beside the point. We are talking about value-neutral social science and marginalism usefully explains the empirical facts, unlike the Marxist or Smithian labor theory of value. And this is also the case for the value of janitor vs. the entrepreneurial “capitalist.” The entrepreneur’s labor is marginally much much more valuable than the janitor’s even though on a desert island the janitor’s labor may have greater absolute value (for similar reasons to why the diamond’s marginal value is much greater than water’s).

I agree with your other objection, however. If all diamonds disappeared, it would likely be much less detrimental to most people’s lives than if all “capitalists” disappeared. Entrepreneurial capitalists are probably more akin to all goods used for indirect communication or something like that. So in that sense the analogy doesn’t express the operational function of capitalists (though I don’t think it’s meant to). We use the Diamond-Water Paradox because that’s historically important and a clear, extreme example to demonstrate the point.

Salvador Allende was elected president of Chile in 1970 with 36% of the popular vote. He was a Marxist-Leninist who explicitly wanted to bring about Marx’s “revolutionary socialist state” in anticipation of the inevitable communism Marx’s theory predicted. Allende took power at the end of 1970, with plans to begin The Chilean Path to Socialism aided by his economic advisor Pedro Vuskovic. This entailed the following policies:

• nationalization of all major industry and commerce
• nationalization of all natural resources
• state land seizure of all significant property holdings
• forced collectivization of agriculture
• extensive, absolute price controls
• total income tax and redistribution
• drastic increases in government spending
• monetary expansion via state central bank to fund spending

This socialist program began to be implemented in 1971 and 1972. The end goal was to put the entire economy of Chile 100% under direct state control (oh and then stateless communist wonderland obviously!!). By 1973, the state directly controlled 80% of the economy. As the laws of economics dictate, these policies meant extreme price inflation (over 140% in 1972, over 500% in 1973), waves of severe food shortages, rationing, the beginnings of mass starvation, a drastic decline in production and investment, the closing of businesses… as well as an unprecedented anti-Allende women’s movement culminating in the March of the Empty Pots to protest food shortages, frequent violent demonstrations across the country, rural unrest, revolt, and emigration.

Things had turned to shit and were getting worse fast. When Allende was asked about the worsening situation, he responded “things are good or bad according to whether they bring us nearer to or further from power, according to whether they assure or not the irreversibility of the revolutionary process.” His government followed this and - violently at times - suppressed resistance, including imprisoning and beating of anti-communist journalists and machine-gunning student demonstrators. Chile under Allende was beginning to look just like China under Mao. 

Chile’s Supreme Court issued endless warnings against Allende’s government, calling for his resignation, calling his actions unconstitutional, calling his rule illegitimate. Allende openly defied the courts. This was a clear violation of his central campaign promise - to follow the rule of law. Later, the parliament called for Allende’s resignation and eventually the Supreme Court openly and explicitly requested that the army depose Allende. Salvador Allende remained.

During this rule, Allende maintained regular, personal contact with the Soviet KGB and received great direct support from the Russian communist state. (as well as some significant support from the American state, coincidentally). Under the supervision of Allende, revolutionary communist militias and paramilitary groups had covertly imported enmormous stocks of weaponry and numerous communist revolutionaries from all Latin American countries. In mid-1973, the Soviet Union and Allende planned to ship large supplies of heavy weapons, heavy artillery, and tanks from Russia to Chile (but they were just a few months too late for Allende). 

In his private correspondence, Allende confirms that he was preparing to initiate violent communist revolution on a mass scale. Lengthy documents have since been discovered detailing Allende’s party’s plans for sabotage of resisting industry, urban warfare, infiltration of the armed forces, the violent seizure of TV and radio stations, and so on. According to their own documents, the point of all this was to “take total power and impose the dictatorship of the proletariat.”

They had in mind the nightmare of full-blown, totalitarian, revolutionary communism.

Allende had infiltrated the armed forces to some degree and so the army did not quickly depose him. Soldiers were openly mocked by common people for their failure to act. Fortunately for Chile, the young general Augusto Pinochet took the initiative and spearheaded a coup against Allende, following the request of the Supreme Court. Upon capture, Allende killed himself with a machine gun given to him by Castro (and Castro had told Allende to do this so he would become a martyr for the Marxist cause).

The remaining revolutionary communist militia and paramilitary armed during Allende’s rule waged war on Pinochet for seven months, eventually losing primarily because they had virtually no public support whatsoever. The people of Chile were unambiguously on the side of Pinochet. The majority of all violent deaths (1,261 out of 2,279) under Pinochet’s entire rule (through 1990) took place during these months and were members of the armed forces and communist paramilitary and militia. The majority of the remainder were communist paramilitary and insurgents during later years.

Pinochet quickly ended some of Allende’s worst socialist policies and the Chilean economy immediately, though slowly, began to recover. With more free market reforms over the years, Chile eventually became the most prosperous and developed country in South America.

It could well have been different. It could well have been another revolutionary Marxist state like Cambodia, a society leaping backward: economic decline, mass poverty, malnutrition, starvation, democide, millions of civilians dead. Instead Pinochet had a death toll in the hundreds. Still terrible, but nothing like the scale or severity or suffering of revolutionary communism.

That is what I mean when I say that Allende’s communist regime would have likely resulted in mass human tragedy if it had not been for Pinochet. That is why I say Pinochet was a significantly lesser evil than Allende.