The phrase 'contradictions of capitalism' is associated with Karl Marx (1818-1883) who claimed that capitalist society suffered from two unresolvable problems that would prevent both social harmony and a stable economic life. First, Marx assumed that the competitive processes of a capitalist market society would lead to a concentration of capital ownership in fewer and fewer hands. Marx built this claim on the assumption, which he holds in common with laissez faire economics, that a competitive economy must lead inevitably to the elimination of some producers by others, there must be winners and losers and the winners would grow increasingly large.
Capitalism, Marx argued, contrary to the general assumption of laissez faire economics, had an inherent tendency towards concentration of capital in oligopolies and monopolies. The concentration of capital involved, first of all, the displacement of the handworker and the craftsworker and increasing domination of factory-based technology. An industrial proletariat of wage workers emerged, and grew larger, as independent producers were eliminated by factory-based competition.
When capitalist corporations grow more concentrated and larger, the number of individuals owning the means of production become fewer. The class structure becomes polarized and the economic and social conditions of the two opposed main classes become more strongly contrasted. This leads to political activation of the working class and prolonged conflict with the dominant bourgeois class through political and industrial organization. It is this social polarization that provides the unsolveable social or relational contradiction of capitalist society.
The social organization of a capitalist society also presented an inherent structural contradiction in the economic dynamics of capitalism. The social effects of such instability in turn must intensify the political struggle of social classes hastening the event of socialist revolution.