I cannot possibly reply adequately to the many lengthy, intelligent, and thoughtful comments that were provoked by my effort to launch a discussion about ideology, but I must at least try, so herewith a series of responses. Forgive me if I fail to answer your questions or speak directly to your concerns.
1. I began with the emergence of capitalism as the dominant form of social and economic organization in Europe in the early nineteenth century for two reasons: First, because I believe it is impossible to think clearly about our situation today without coming to grips with the nature of capitalism; and Second, because I always try to understand a complicated subject by looking at it in its simplest form and then explicating the complications and elaborations of it as responses to or outgrowths of that simpler form. Speaking about philosophy, that is what I did in explaining Kant's CRITIQUE OF PURE REASON and, rather less importantly, Rawls' A THEORY OF JUSTICE, and that is what I did in my book on Marx's economic theories, UNDERSTANDING MARX.
2. The Labor Theory of Value began as an attempt by Adam Smith and David Ricardo to give a theoretical explanation of the determination of price in a capitalist market, and thereby to explain the division of the social product among landed interests, entrepreneurs, and workers. It was taken up by Marx in a brilliant, but ultimately unsuccessful, effort to demonstrate, by means of a distinction between labor and labor power, that profit, and thus capitalism, rests upon the exploitation of the working class. Marx was right about that claim, but his theoretical proof was flawed. Capitalism does rest on exploitation, and Marx is correct when he says that the exploitation is made possible by the fact that the vast majority of people in a capitalist economy have been separated from control over the means of production. I have gone into this in very great detail both in UNDERSTANDING MARX and in a series of articles, the most important of which is "A Critique and Reinterpretation of Marx's Labor Theory of Value," which is online.
3. Capitalism depends for its continued profitability on an endless search for cheap labor, a search that today encompasses the entire world. Everything Marx said about the Reserve Army of the Unemployed in England now applies quite directly to the world reserve army of unemployed, making it possible for capital in the economically advanced countries to find cheap labor abroad. These days, this is called outsourcing.
4. The Economics profession has spent the last century and a half producing ever more sophisticated mathematical justifications for the simple fact of exploitation [such as the theory of marginal product], but the same obscene contrast between wealth and poverty that stared everyone in the face in early nineteenth century England is before us today.
5. Marx's analysis failed in several absolutely central ways to grasp the future development of capitalism. [I have gone into this in some detail in my paper "The Future of Socialism," also online.] The two most important failures are, First, his failure to foresee and to explain the emergence of a stable and seemingly permanent pyramid of wages and salaries, resulting not in every greater solidarity of the working class but in relative exploitation and the fragmentation of the working class, and Second, his failure to foresee the capacity of capital to overcome its competition sufficiently to work together to save capitalism through control of the state and through fiscal and monetary policies [Keynesianism]. Marx also failed to anticipate the inability of capitalism to eliminate or weaken the irrational forces of religious, racial, ethnic, and national sentiment in the world, a fact of which we are all now painfully aware.
6. We live now in a world in which no one seems capable any longer in even conceiving of an alternative to capitalism. Virtually everyone left, right, and center begins by singing paeans of praise to what they call "the free market," and then arguing about what small portion of the surplus social product should be shunted to the workers to keep them quiet and happy. I am not really interested in discussing the comments of academic philosophers like Rawls or Nussbaum or Parfitt et al, because they do not seem to me to be talking about the world we actually live in, the world of rampant global capitalism. We need desperately, and I am not competent to give, an analysis of the emergence of financial capitalism that will complement Marx's analysis of industrial capitalism.
7. Finally, and for me at any rate most distressingly, the many powerful critiques of the present situation share with my own feeble efforts the weakness that they are not grounded in a real world movement among the exploited to mobilize and change the social order. People like me, caustic though we may be in our criticism of capitalism, are in fact comfortably insulated from the evils we decry. This gives to what we say an airy insubstantiality that no amount of theoretical penetration can overcome,.