“Marx contributed to the theory of economic development in three respects, namely, in broad respect of proving an economic interpretation of history, in the narrower respect of specifying the motivating forces of capitalist development, and in the final respect of suggesting an alternative-path of planned economic development.”

Materialistic Interpretation of History: The materialistic interpretation of history attempts to show that all historical events are the result of a continuous economic struggle between different classes and groups in society. The main cause of this struggle is the conflict between ‘the mode of production’ and the ‘relations of production’.

The mode of production refers to a particular arrangement of production in a society that determines the entire social, political and religious way of living.

The relations of production relate to the class structure of a society ‘uniquely characterized’ by the following components: (i) the organization of labour in a scheme of division and co-operation, the skills of labour, and the status of labour in the social context with respect to degrees of freedom or servitude; (ii) the geographical environment and the knowledge of the use of resources and materials; and (iii) technical means and processes and state of science generally.


According the Marx, every society’s class structure consists of the propertied and the non-propertied classes. Since the mode of production is subject to change, a stage comes in the evolution of a society when the forces of production come into clash with the society’s class structure the existing property relations “turn into fetters” on the forces of production then comes the period of ‘social revolution’. This leads to the class struggle-the struggle between the haves and the have-nots-which ultimately overthrows the whole social system.

Surplus Value: Marx uses his theory of surplus value as the economic basis of the ‘class struggle’ under capitalism and it is on the basis of his theory of surplus value that he builds the superstructure of his analysis of economic development. Class struggle is simply the outcome of accumulation of surplus value in the hands of a few capitalists.

Capitalism, according to Marx, is divided into two great protagonists: the workers who sell their ‘labour-power’ and the capitalists who own ‘the means of production’. Labour power is like any other commodity. The laborer sells his labour for what it is worth in the labour market, viz., for its value.

And its value, like the value of any other commodity, is the amount of labour that it takes to produce labour-power. In other words, the value of labour-power is the value of the means of subsistence necessary for maintenance of the laborer, which is determined by the number of hours necessary for its production.


According to Marx, the value of the commodities necessary for the subsistence of the labour is never equal to the value of the produce of that labour. If a laborer works for a ten-hour day, but it takes him six hours’ labour to produce goods to cover his subsistence, he will be paid wages equal to six hours’ labour.

The difference worth 4 hours’ labour goes into the capitalists pocket in the form of net profits, rent and interest. Marx calls this unpaid work “surplus value”. The extra labour that a laborer puts in and for which he receives nothing, Marx calls “surplus labour”

Capital Accumulation: According to Marx, it is surplus labour hat leads to capital accumulation. This supererogatory labour simply augments the capitalist’s profits. The capitalists’ main motive is to increase the surplus value which goes to swell his profits.

He tries to maximize his profits in three ways; (1) by prolonging the working day in order to increase the working hours of surplus labour. If the working hours are extended from ten to twelve, the surplus will automatically increase from four to six; (2) by diminishing the number of hours required to produce the labor’s sustenance. If they were reduced from six to fur, the surplus would again rise from four to six. It also tantamount to a reduction in the subsistence wage; (3) by ‘the speeding up of labour’, i.e., increasing the productivity of labour. This requires a technological change that helps in raising the total output and lowering the cost of production.