While Americans argued over slavery, Europe had begun to divide over what began to be called “wage slavery.” Just as the liberalism of Locke and Mill and capitalism of Smith had become the pillars of the social and economic order, an English economist named David Ricardo observed that the value of traded things — commodities — is determined by the quantity of labor needed to produce them, which industrialization made variable, rather than the material from which it comes, which remained more or less fixed.
This idea caught fire in the mind of Karl Marx, a German intellectual exiled in England who was then observing the new industrial economy. Marx concluded that capitalists — people with money beyond that needed for well-being, also known as capital invested in productive ventures — make profits from the difference between the costs of production (the labor and raw materials they pay for) and the market price they obtain. A key advantage in the process lies in the difference between what it costs for workers to stay alive and the ultimate price of the goods they make, which Marx called “surplus value”; this is what, Marx argued, capitalists take from workers.
Marx did not blame capitalists, whom he saw as trapped within the rules; instead, he viewed the economic system and capital itself as the cause of the surplus value theft. No real change would occur, he proposed, until control of production and markets was in the hands of all society, especially the workers.
The idea first appeared in a document called the Communist Manifesto, which Marx wrote with fellow exile Friedrich Engels in 1848. It was a fast and furious summary of complex ideas, written just as worker revolts broke out in the most widespread revolutionary wave in European history, from France to as far as Hungary. This was the dawn of what would be called the socialist movement, its ideas later developed in detail in many books, especially the three-volume Capital. Their key and simplest concept would prove maddeningly difficult to bring about.
To understand what was to happen in the United States, we need to review the emergence of socialism in Europe, which occurred in four steps: 1) the proto-socialism that built up to Marx and the First International; 2) Anarchism; 3) labor unions and 4) a broad-based debate within socialism between reform and revolution. All of this took place between from about the 1820s to the 1880s and a little beyond.
