The First Stage: is usually called primitive communism. It has the following characteristics.
- Shared property: there is no ownership between individual possessions. Instead, all possessions the tribe finds are shared to ensure its survival.
- Hunting and gathering: there is no concept of ownership beyond individual possessions. All is shared by the tribe to ensure its survival.
- Proto-democracy: tribal societies have yet to develop large scale agriculture, and due to this, their survival is a daily struggle.
The Second Stage: may be called slave society, considered to be the beginning of "class society" where private property appears.
- Class: here, the idea of class appears. There is always a slave-owning ruling class and the slaves themselves.
- Statism: the state develops during this stage as a tool for the slave-owners to use and control the slaves.
- Agriculture: people learn to cultivate plants and animals on a large enough scale to support large populations.
- Democracy and authoritarianism: these opposites develop at the same stage. Democracy arises first with the development of the republican city-state, followed by the totalitarian empire.
- Private property: citizens now own more than personal property. Land ownership is especially important during a time of agricultural development.
- Aristocracy: the state is ruled by monarchs who inherit their positions, or at times marry or conquer their ways into leadership.
- Theocracy: this is a time of largely religious rule. When there is only one religion in the land and its organizations affect all parts of daily life.
- Hereditary classes: castes can sometimes form and one's class is determined at birth with no form of advancement. This was the case with India.
- Nation-state: nations are formed from the remnants of the fallen empires. Sometimes, they rebuild themselves into empires once more; this was the case with England's transition from a province to an empire.
Marx pays special attention to this stage in human development. The bulk of his work is devoted to analysing the mechanisms of capitalism, which, in western society, classically arose "red in tooth and claw" from feudal society in a revolutionary movement. In capitalism, the profit motive rules and people, freed from serfdom, work for the capitalists for wages. The capitalist class are free to spread their laissez faire practices around the world. In the capitalist-controlled parliament, laws are made to protect wealth.
Capitalism may be considered the Fourth Stage in the sequence. It appears after the bourgeois revolution when the capitalists (or their merchant predecessors) overthrow the feudal system. Capitalism is categorized by the following:
- Market economy: In capitalism, the entire economy is guided by market forces. Supporters of laissez faire economics argue that there should be little or no intervention from the government under capitalism. Marxists, however, such as Lenin in his Imperialism, the Highest Stage of Capitalism, argue that the capitalist government is a powerful instrument for the furtherance of capitalism and the capitalist nation-state, particularly in the conquest of markets abroad.
- Private property: The means of production are no longer in the hands of the monarchy and its nobles, but rather they are controlled by the capitalists. The capitalists control the means of production through commercial enterprises (such as corporations), which aim to maximise profit.
- Parliamentary democracy: The capitalists tend to govern through an elected centralised parliament or congress, rather than under an autocracy. Capitalist (bourgeois) democracy, although it may be extended to the whole population, does not necessarily lead to universal suffrage. Historically it has excluded (by force, segregation, legislation or other means) sections of the population such as women, slaves, ex-slaves, people of colour or those on low income. The government acts on behalf of, and is controlled by, the capitalists through various methods.
- Wages: In capitalism, workers are rewarded according to their contract with their employer. Power elites propagate the illusion that market forces mean wages converge to an equilibrium at which workers are paid for precisely the value of their services. In reality, workers are paid less than the value of their productivity — the difference forming profit for the employer. In this sense, all paid employment is exploitation and the worker is "alienated" from their work. Insofar as the profit-motive drives the market, it is impossible for workers to be paid for the full value of their labour, as all employers will act in the same manner.
- Imperialism: Wealthy countries seek to dominate poorer countries in order to gain access to raw materials and to provide captive markets for finished products. This is done directly through war, the threat of war, or the export of capital. The capitalist's control over the state can play an essential part in the development of capitalism, to the extent the state directs warfare and other foreign intervention.
- Financial institutions: Banks and capital markets such as stock exchanges direct unused capital to where it is needed. They reduce barriers to entry in all markets, especially to the poor; it is in this way that banks dramatically improve class mobility.
- Monopolistic tendencies: The natural, unrestrained market forces will create monopolies from the most successful commercial entities.
According to Marx, capitalism has critical failings — inner contradictions — which lead to its downfall. The working class, to which the capitalist class gave birth in order to produce commodities and profits, is the "grave digger" of capitalism. The worker is not paid the full value of what he or she produces. The rest is surplus value — the capitalist's profit, which Marx calls the "unpaid labour of the working class." The capitalists are forced by competition to attempt to drive down the wages of the working class to increase their profits, and this creates conflict between the classes, and gives rise to the development of class consciousness in the working class. The working class, through trade union and other struggles, becomes conscious of itself as an exploited class. In the view of classical Marxism, the struggles of the working class against the attacks of the capitalist class will eventually lead the working class to establish its own collective control over production.
After the working class gains class consciousness and mounts a revolution against the capitalists, socialism, which may be considered the Fifth Stage, will be attained, if the workers are successful.
Socialism may be characterised as follows:
- Common property: the means of production are taken from the hands of a few capitalists and put in the hands of the workers. This translates into the democratic communes controlling the means of production.
- Council democracy: Marx, basing himself on a thorough study of Paris Commune, believed that the workers would govern themselves through system of communes. He called this the dictatorship of the proletariat, which, overthrowing the dictatorship (governance) of capital, would democratically plan production and the resources of the world.
Marx explained that, since socialism, the first stage of communism, would be "in every respect, economically, morally, and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges", each worker would naturally expect to be awarded according to the amount of labor he contributes, despite the fact that each worker's ability and family circumstances would differ, so that the results would still be unequal at this stage, although fully supported by social provision.