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UNIVERSITY OF MAIDUGURI
Maiduguri, Nigeria
CENTRE FOR DISTANCE
LEARNING
MANAGEMENT SCIENCES
ECON 314: POLITICAL ECONOMY
ECON
314:
Unit: 2
POLITICAL ECONOMY
UNIT: 2
ii
CDL, University of Maiduguri, Maiduguri
ECON 314: POLITICAL ECONOMY
Published
Unit: 2
2008©
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Further enquiries should be directed to the:
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University of Maiduguri
P. M. B. 1069
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This text is being published by the authority of the
Senate, University of Maiduguri, Maiduguri – Nigeria.
ISBN:
978-8133-
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CDL, University of Maiduguri, Maiduguri
ECON 314: POLITICAL ECONOMY
Unit: 2
P R E FA C E
This study unit has been prepared for learners so that they
can do most of the study on their own. The structure of the
study unit is different from that of conventional textbook.
The course writers have made efforts to make the study
material rich enough but learners need to do some extra
reading for further enrichment of the knowledge required.
The learners are expected to make best use of library
facilities and where feasible, use the Internet. References are
provided
to
guide
the
selection
of
reading
materials
required.
The University expresses its profound gratitude to our course
writers and editors for making this possible. Their efforts
iv
CDL, University of Maiduguri, Maiduguri
ECON 314: POLITICAL ECONOMY
Unit: 2
will no doubt help in improving access to University
education.
Professor M. M. Daura
Ag. Vice-Chancellor
v
CDL, University of Maiduguri, Maiduguri
ECON 314: POLITICAL ECONOMY
Unit: 2
HOW TO STUDY THE UNIT
You are welcome to this study Unit. The unit is
arranged to simplify your study. In each topic of the unit,
we have introduction, objectives, in-text, summary and selfassessment exercise.
The study unit should be 6-8 hours to complete. Tutors
will be available at designated contact centers for tutorial.
The center expects you to plan your work well. Should you
wish to read further you could supplement the study with
more information from the list of references and suggested
readings available in the study unit.
PRACTICE EXERCISES/TESTS
1. Self-Assessment Exercises (SAES)
This is provided at the end of each topic. The exercise
can help you to assess whether or not you have actually
studied and understood the topic. Solutions to the exercises
are provided at the end of the study unit for you to assess
yourself.
2. Tutor-Marked Assignment (TMA)
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CDL, University of Maiduguri, Maiduguri
ECON 314: POLITICAL ECONOMY
Unit: 2
This is provided at the end of the study Unit. It is a
form of examination type questions for you to answer and
send to the center. You are expected to work on your own in
responding to the assignments. The TMA forms part of your
continuous assessment (C.A.) scores, which will be marked
and returned to you. In addition, you will also write an end
of Semester Examination, which will be added to your TMA
scores.
Finally, the center wishes you success as you go through
the different units of your study.
vii
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ECON 314: POLITICAL ECONOMY
Unit: 2
INTRODUCTION TO THE COURSE
This lecture is concerned with the definition of the subject matter:
Political Economy and the Methods of its analysis. We will discuss various
definitions of the subject matter-political Economy.
Every society has a definite system of production and distribution
relations or the economic basis, the economic system of the society, which
rests on the property relations. Political economy studies the relationship of
production with the productive forces.
The topic essentially deals withy the intervention of the state in the
form of controlling market forces. However, state intervention in controlling
market has been argued to be anti-people policy, which some economist feels
otherwise. For clarity therefore, we look at political economics from basically
three approaches namely liberalism, economic nationalism and Marxism. Each
of these three approaches has a perception perspective of the relationship
between society, state and markets.
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ECON 314: POLITICAL ECONOMY
ECON 314:
Unit: 2
POLITICAL ECONOMY
UNIT: 2
TA B LE
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C O N TE N T S
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PREFACE
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INTRODUCTION TO THE COURSE
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CHARACTERISTICS OF BOURGEOIS ECONOMICS
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DOMINANT BRANDS OF BOURGEOIS ECONOMIC I
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MARXIST THEORY OF CAPITAL ACCUMULATION I
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TOPIC 1:
TABLE OF CONTENTS
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1.0 TOPIC:
THE SUBJECT MATTER OF
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1.5 SELF- ASSESSMENT EXERCISES -
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1.7 SUGGESTED READINGS
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1.0 TOPIC:
Unit: 2
THE SUBJECT MATTER OF POLITICAL
ECONOMY
1.1 INTRODUCTION
Proletarian political economy has an exceptional role in providing the
theoretical grounding for the goals, tasks and methods in the revolutionary
struggle of the masses.
This lecture is concerned with the definition of the subject matter:
Political Economy and the Methods of its analysis. We will discuss various
definitions of the subject matter-political Economy.
Every society has a definite system of production and distribution
relations or the economic basis, the economic system of the society, which
rests on the property relations. Political economy studies the relationship of
production with the productive forces.
The topic essentially deals withy the intervention of the state in the
form of controlling market forces. However, state intervention in controlling
market has been argued to be anti-people policy, which some economist feels
otherwise. For clarity therefore, we look at political economics from basically
three approaches namely liberalism, economic nationalism and Marxism. Each
of these three approaches has a perception perspective of the relationship
between society, state and markets.
1.2 OBJECTIVES
At the end of this lecture, the student should be able to:
i. Explain the subject matter of political economy.
1.3 IN-TEXT
1.3.1
DEFINITION
OF
THE
SUBJECT
MATTER:
POLITICAL ECONOMY
Political economy, as a field of study, is concerned with the relationship
between politics and economics. It should be noted that the term “economy”
relates to the market and the phrase “political” refers to the state.
Political economy is defined by Kutnetsor et al (1988), as “the science of the
conditions and forms under which the various human societies have produced
and exchanged and on this basis has distributed their products”.
Political economy therefore refers to the intervention of the state in the form
of controlling market forces. The study of economic forces (of demand and
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ECON 314: POLITICAL ECONOMY
Unit: 2
supply) and price mechanism in isolation will be pure economics; meaning to
say we will be talking about economics in it’s entirety. Assuming there are no
markets, the state alone will allocate economic resources and this will fall
within the area of political economy, therefore focuses on the market and its
relationship to the state.
Every society has a definite system of production relation, or the economics
basis, the economic system of the society, which rests on the (relation).
Political economy studies the relationship of production with the productive
forces.
In every class-divided society, the economic relatives between human beings
express the substance of the relation between classes, and that is why political
economy examines their interconnection with such a form of class relation as
the state, which is the political superstructure on which the economy rests. In
looking at political economy on the broader sense of the term, the Marxist it
as a science of relations production in all the economic and social formations,
including the communist formation.
The bourgeois economist sees it from a different perspective; they did not
analyse the sphere of production and they ignored the connection between
production, distribution, exchange and consumption, holding that the subject
matter of political economy lay in distribution or exchange only, i.e. in the
turnover of commodities. Marx argued that the bourgeois view was
unfounded; he went on to draw the conclusion that production has a definite
role to play with respect to distribution, exchange and consumption.
In an effort to renovate the methods for their apology of capitalism, many
bourgeois economists tend now to ignore the relations of production and to
lay emphasis only on the technical aspects of production. This is the origin of
theories such as ‘the post-industrial society” “convergence” of the two
economic and social systems, and the “mixed economy”, all of which are
designed to camouflage the exploitation under the capitalist system.
1.3.2
APPROACHES TO THE STUDY OF POLITICAL
ECONOMY
There are basically three approaches to the study of political economy, namely
liberalism, economic nationalism, and Marxism, Each of these approaches has
a perception perspective of the relationship between Society; State and
Market.
LIBERALISM
The liberal approach to the study of political economy is more or less
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superficial. The liberals tend to separate politics from economics: however, it
should be noted that much of the liberal approach does address economic
issues. They have designed different components for politics and economics
in political economy, though emphasis is on the economic component.
Traditionally, political liberalism relates to social inequality and liberties, i.e.
right to life, freedom of association, etc. Economic liberalism, on the other
hand, intends free trade, open market and less trade intervention. In the free
market economy price mechanism determines both the domestic and
international economic relations. To them, free trade and trade liberalization
enhance economic growth and development, ensures maximum economic
efficiency and individual economic welfare.
Adam Smith, David Ricardo and a host of other liberal thinkers have talked of
the invisible hand controlling economic activities and this resolved essentially
around the forces of demand and supply. This means that both the buyers or
consumers and the sellers tend to behave rationally, their actions and reactions
in the market place end to equate to the equilibrium position. The liberals are
of the belief that market originates spontaneously out of man’s needs and
therefore it is unnecessary for the state to organize it. The liberals are of the
view that politics hamper economic growth and therefore should be kept away
from economics.
ECONOMIC NATIONALISM
The nationalists have a different view in the study of political economy. They
see the need to protect the state as the first priority. This is so because they
see the need to protect the state so as to ensure the survival of the state. As
such to them politics should take precedence over economic activities. The
nationalists consider the safeguarding of national economic interest as the
minimum essential to the security and survival of the state. Others subscribe
to the view that economic national in is very necessary to protect the national
economy from hazard and to stem the tide of imperialist expansion as well as
national aggrandisement of the developed capitalist countries.
In conclusion, therefore, economic nationalists share the view that the state
power and wealth should be pursued at the same time; however, they warn
that the pursuit of national wealth should not overshadow the quest for power
and security. They also share the view that industrialization is paramount to
the growth of other sectors. Hence, industrialization is central to their policy
since they believe that industrial development striggers up development in
other sectors. If a country is economically strong it will guaranteed economic
viability and political independence. Above all, they believe that industries
ensure military power and national security.
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MARXISM
Two schools of thought can be identified in the Marxist approach. The first
can be termed evolutionary Marxism rooted in the writings of Eduart
Bernstein and Carl Kentsay. This school has resemblances with social
democracy of liberalism which lays emphasis on equalitarianism, equality, etc.
This school has however, been overshadowed by the second trend of
Marxism, which is rooted in the radical ideas of Karl Marx and Friendrick
Hegels. This brand of Marxism is more scientific in methodology and also
more empirical in approach. The socialist ideology practiced in countries such
as China, the former Soviet Union, former Yugoslavia, and Cuba, are based on
this brand of Marxism. It has five fundamental elements, historical and
dialectical materialism, and the doctrine of class struggle, the theory of surplus
value, the theory of an inevitable revolution and the theory of withearing away
of the state.
1.4 SUMMARY
We have attempted to define the subject matter of political economy.
We stated that political economy is concerned with the relationship between
politics and economics.
We also attempted to introduce the various approaches to the study of the
subject matter of political economy. We identified three main approached to
the study of the subject matter as liberalism, nationalism, and Marxism.
1.5 SELF-ASSESSMENT EXERCISE
1.
2.
3.
Define political economy?
How many approaches do we have in the study of political economy?
Briefly define the term “political” economy and identify this man
approaches in the study of the subject.
1.6 REFERENCES
Ake, C. (1981), A Political Economy of Africa Lagos: Longman Publishers Ltd
Cilpin, Robert, (1987). The Political Economy of
International
Relations.
Princeton,
Princeton
University Press.
1.7 REFERENCES
Ake, C. (1981), A Political Economy of Africa Lagos: Longman Publishers Ltd
Cilpin, Robert, (1987). The Political Economy of
International
Relations.
Princeton,
Princeton
University Press.
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Unit: 2
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TOPIC 2:
TABLE OF CONTENTS
PAGES
2.0
TOPIC:
CHARACTERISTICS OF BOURGEOIS ECONOMICS
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OBJECTIVES
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2.3.3 RELIGIOUS PHILOSOPHY
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2.3.4 UNIT
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REFERENCE
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2.3.1 THE GENERAL CRISIS OF CAPITALISM
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2.0
TOPIC:
CHARACTERISTICS
Unit: 2
OF
BOURGEOIS
ECONOMICS
2.1 INTRODUCTION
In the last lecture we attempted definition of the concept, “Political
Economy”. We also discussed of the different approaches to the study of
political economy. In this lecture we are going to discuss the main
distinguishing features of bourgeois economics.
The fundamental characteristic of bourgeois economics is its belief in
the idea of capitalism. They are of the view that capitalism is capable of
ensuring the stable and prolonged social progress. The bourgeois philosophy
has rejected the idea of social science as a means of objective social prediction
confirming the communist perspectives of social development. The main
features of the bourgeois economics include: The general crises of capitalism,
Contemporary irrationalism and existentialism, Religious philosophy and
Unity.
2.2 OBJECTIVES
At the end of this topic, you should be able to:
i.
discuss the main features of bourgeois economics and
ii.
outline their methods of analysis
2.3 IN-TEXT
2.3.1
THE GENERAL CRISIS OF CAPITALISM
One of the fundamental characteristics of bourgeois economics is its
belief in the idea of capitalism. They are of the view that capitalism is capable
of ensuring the stable and prolonged social progress. They are of the belief
that the crisis in capitalism is the crisis of “modern man” or modern science,
the spiritual crisis of the age or the crisis of technological civilisation. This
view is opposite to the Marxist view that the crisis is linked with social science.
The bourgeois economics tends to ignore the fact specific historical destiny of
capitalism, which is doomed to extinction, is identified with the decline of
world culture. The bourgeois philosophy has rejected the idea of social science
as a means of objective social predition confirming the communist
perspectives of social development. To this end Karl Popper writes….
“We must reject the possibility of theoretical
history, that is to say, of a historical social
science that would correspond to theoretical
physics. There can be no scientific theory of
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ECON 314: POLITICAL ECONOMY
Unit: 2
historical development serving as a basis for
historical prediction.”
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ECON 314: POLITICAL ECONOMY
2.3.2
Unit: 2
CONTEMPORARY IRRATIONALISM AND
EXISTENTIALISM
No other social formation. More than capitalism at its imperialists stage has
deserved the judgement implied in Goethe’s remark, “reason madness has
become, goodness torment”. Not for nothing does irrationalism, a philosophy
proclaiming the unreason, the assurdity of all that exists, figure as one of the
most influential trends in contemporary bourgeois thought.
The horrors and disasters of the First World War had already destroyed the
illusions of the bourgeois liberalism of the last century with regard to a
rational, harmoniously developing process of unending progress in history.
This illusion was replaced by the idea that human existence has no meaning,
that there was no future for the historical process, and that no one could do
anything about it.
However more important than any other trend in a contemporary bourgeois
philosophy existentialism has been able to describe and at the same time
justify this feeling of the “pointlessness of existence”. That is, bourgeois
economics (philosophy) is of the belief that existence has no much meaning,
man sees himself as becoming alienated, estranged from his own essence to
such an extent that he begins to question this essence. For this reason
therefore existentialism has for nearly half a century been the predominant
form of irrationalism.
The fundamental principle of existentialism is the ascertain that the existence
precedes essence or, which is the same thing, that one must begin from
subjectivity. As noted by sartress book “existentialism is humanism” (1976)
this thesis clearly testifies to the subjective idealism of this trend.
Difference is however, also noted there. In the classical subjective idealism of
the past the denial of the objective existence of the external world or, at least
of its know ability was combined with faith in the knowability of the subject,
the situation has now changed. Existentialism asserts that even the subject
itself cannot be known by means of subject rational cognition, it is the origin
from which I think and act, about which I make statements not developing
the course of one thought which is ignorant. Existence cannot to be the object
because it is individual, whereas rational knowledge demands the universal.
As we can see, important questions concerning human life and knowledge are
raised here. But in dealing with them, existentialism rules out from the start
the objective and, above all the social meaning of these questions.
In the place of scientific solution if offers the religious idealist solution.
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Existentialism also finds conformation of the irrationality of human existence
in the fact that the rest depths of existence are only revested to his only special
condition, wish Jaspers calls (“a frontier situation”) such situations are death,
suffering, terror, struggle, guilt, religious ecstasy, mental illness, etc.
2.3.3
RELIGIOUS PHILOSOPHY
Contemporary religious philosophy is cone of the character of bourgeois
economics thoughts. The religious philosophy is divided into various creeds
and types of philosophical thinking and its exponents associated themselves
with various schools of philosophy. Thus we may encounter Christian,
Judanic, Muslim and Budhist. They use religion to protect their property and
use in the defence of private ownership, which is acknowledge as one of the
most assention forms of organisation of society, and in its constant criticism
of materialism and autheism, particularly dialectical and historical materialism.
But both in its defence of capitalism and in its anti-maxims religions
philosophy finds allies and supporters in other trends of 20th century
bourgeois philosophy.
2.3.4
UNITY
Bourgeois ideology assumes a variety of forms and uses the most diverse
methods and means of deceiving the working people. But all the essence is the
defence of capitalist system.
It should be understood that all bourgeois philosophy belong to one camp,
the fact of the idealism of contemporary philosophical thought in capitalist
society. Secondly the various schools operate in framework of this unity as
supplementary conceptions, making up for each others limitations and the
obvious shortcoming the lead to it.
The best evidence of the underlying unity of bourgeois philosophy is to be
found in its relation to religion it is no accident that Lenin defined idealism as
a refined form of fideism, that is to say, a theory that substitutes faith for
knowledge.
2.4 SUMMARY
In this lesson we attempted the discussion of the characteristic of the
Bourgeois contemporary philosophy. They are as follows:
The General crisis of capitalism and, the specific features of
contemporary idealism.
Contemporary irrationalism; existentialism
Religious philosophy and
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Unit: 2
Unity
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2.5 SELF-ASSESSMENT EXERCISE
1.
2.
List the characteristics of Bourgeois Economics
Discuss the General crisis of capitalism
2.6 REFERENCES
Konstantinor, F.V.(ed) (1982): The Fundamentals of Marexist Leninist Philosophy;
Progress Publishers, U.S.S.R.
Suchtingm, W.A. (1983) Marx An Introduction; Harvester Press Publisher; Great
Britain.
2.7 SUGGESTED READING
Konstantinor, F.V.(ed) (1982): The Fundamentals of Marexist Leninist Philosophy;
Progress Publishers, U.S.S.R.
Suchtingm, W.A. (1983) Marx An Introduction; Harvester Press Publisher; Great
Britain.
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TOPIC 3:
TABLE OF CONTENTS
PAGES
3.0
TOPIC: DOMINANT BRANDS OF BOURGEOIS ECONOMIC I -
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ECON 314: POLITICAL ECONOMY
3.0 TOPIC:
DOMINANT
BRANDS
Unit: 2
OF
BOURGEOIS
ECONOMICS I
3.1 INTRODUCTION
In the last lecture we discussed the characteristics of economics. The
arguments tended towards the enhancement of capitalism as the only means
by which to ensure a stable and prolonged social system. In this lecture we are
going to discuss the major schools of thought of bourgeois economics. The
most dominant of all are Keynesian, the neo-classical and the neo-Ricardian.
The dominant brands or schools of bourgeois economics are the neoclassical, the Keynesians and the neo-Ricardian.
3.2
OBJECTIVES
At the end of this topic, you should be able to:
i.
list the dominant brands of bourgeois economics.
3.3
IN-TEXT
3.3.1
DOMINANT
BRANDS
OF
BOURGEOIS
ECONOMICS
The dominant brands or school bourgeois economics are the neo- classical,
the Keynesian and the neo- racardian.
3.3.2
NEO-CLASSICISM
The neo-classical economics was developed initially in Britian in response to
the demand by the new industrial capitalist of the industrial revolution to
narrow the focus of economics. This was necessitated by the two many
questions that the classical economics was alleged to be asking and as a result
of which it was such becoming rather dangerous in its labour theory of value.
The propentents of classical economics were the like of William Jerons, Karl
Menger, Vilfredo Parato Leon Walras, Samuelson Solow, Debrev, etc. The
main features of neo-classicm are its subjective and individualist utility theory
of value, the use of marginalism, involving psychological preferences,
mathematical moddeling and sophistry, partial and general equilibrium
analysis, and its paradigm of gradualism, harmony of interest, each Librium
and preoccupation with scarcity market exchange and efficiency.
However, the major problems of neoclassical economics are both scientific
and ideological. At the scientific level, neoclassical impedes the analysis of
capitalism while many of its substantive theories are defective. On the
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Unit: 2
ideological plane, neoclassical economic is an apologetic ideology and its social
implications are reactionary the technical characters of neoclassical economics
makes it difficult for the scientific study and the understanding of the capitalist
system; or any other system for that matters. Inhibition of scientific
understanding relates to its social and historical character. Thus, the social
system, technology, consumer incomes and psychological preferences, which
are exogenous to the economic system being studied one deliberately made
abstract so that the theory may be independent of any particular results.
Some of the more obvious defective theories of this neoclassical system are
those of distribution, utility, aggregate production function, general
equilibrium, growth and crisis. On income distribution, neoclassicists are of
the view that it is given by marginal contribution of economic agents since its
assumption of perfect competition sets factor rental prices equal to marginal
products. Hence social inequalities are natural and corresponds to differences
in marginal productivity. But Lipsey has admitted that on the question of
income distribution: we must at the moment admit defeat “we must admit that
we cannot at all deal with important class of problems” (Onimode, 1985). On
the issue of circularity of the subjective utility theory of value based on
artificial psychological preferences, Joan, R. Observed that utility is a
metaphysical concept of impreanable circularity; utility is the quality of
commodities that makes individuals want to buy commodities which show
they have utility.
The idea of aggregate production used by neo-classicst in capital theory,
growth models and income distribution has always been torpedoed by the
reswitching debate. Briefly, the issue is that if producers are allowed to switch
from one method of production to another according to wage profit pattern
facing them, then the factor-price frontier will cease to be smooth and
negatively shaped, so that the aggregation of capital for an aggregated
production function becomes impossible. After the fall (collapse) of the
production function, neoclassical economics has been seeking refuge in its
competitive general equilibrium theory. However, the theory has come under
critism. For instance, the neoclassicist’s growth models, with their aggregate
production functions, perfect competition and abstract equilibrium have been
theoretically undermined by challenge to the aggregate production function
and the empirical sterility of growth models generally. Finally, on the basis of
the icy elegance of the neo classical system, economic crises, were deemed to
be impossible. Consequently, when the Great Depression burst during, 1929 –
1933, the science of economics had nothing useful to say about the greatest
convulsion that ever rocked the world economy. Such was the extent to which
neoclassical economics was successful.
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The other major ideological problems with neoclassicism are the social
implications of its analysis. These can be illustrated with respect to social
inequalities, the defects of capitalism, class struggle, and the future of
capitalism. Thus, because income distribution is given by marginal
productivity, social inequalities are rational reflections of productivity
differentials among individuals.
3.3.3
KEYNESIAN
As a result of the Great Depression and the failure of neoclassicism to grapple
with the problems of social control and organisation plaguing capitalist
enterprises and the state, many practical disciplines like the Keynesianism,
scientific management, etc, emerged from the neoclassical school. The essence
of the emergence of the neoclassical revolution is the incorporation of
aggregative behaviour with subjective individualism, the state, expectations
and uncertainty to show the invalidity of classical and neoclassical, automatic
full employment equilibrium and more likely occurrence of unemployment
equilibrium. To Keynes the solution to this problem, which he identified as
the heart of capitalist crises, has two components.
First, the idea of free enterprise. It restored the relevance of economics to
government policy by integrating the new analysis with institutional and
political factors such as trade unions. This gave birth to the mixed-economy
with a private and public sector. Wages were revealed to be steeply
downwards, aggregate effective demand may be deficient for full employment,
while the demand for investible funds and money based on psychological
preferences were discovered to react to volatile expectations. To deal with
these possible sources of disequilibrium, government stabilization policy was
erected on large goals of public spending and a flexible money credit system.
Fiscal and monetary policies became the policies recommended for arriving at
full employment to policy makers and most economist. Keynes’ remarked that
the right solution to trade cycle was not to be found in the abolishment of
booms and thus keeping us permanently in a semi-slumps, but in abolishing
slumps and thus keeping us permanently in a quasi-boom.
Keynes’ seond solution to the crises was the issue of circular flow of income,
which constitutional a new analysis of facts and causes of depressions. The
critical variable is effective demand consisting of aggregate consumption,
investment and government spending. These are components of autonomous
expenditure. This gave rise to the aggregate demand or the income
expenditure model. To maintain high level of effective demand for the
achievement of full employment, his multiplier analysis links changes in any of
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the items of the autonomous expenditure to the corresponding greater
changes in the level of national income.
For some two decades after its adoption around 1950, it seemed as if the
Keynesian strategy had provided a permanent solution to capitalist crises. The
boom in capitalist countries during the period 1950. 1965 was attributed to
Keynesian policies, in spite of the anti Keynesian grumblings of the
monetanists. Regarding Keynesian as a special case of classical theory where
wages are rigid downwards, they in affect advised their fellow economist, “do
not adjust your theories, there is a fault in reality”.
However, at the theoretical level Keynesian economics gave intellectual
stimulus to econometric macro models, business cycles and growth theories,
Philips Curve analysis relating changes in money wages to unemployment, and
to the cost push versus demand pull debate on inflation. Consequently,
therefore the Keynesian economics has placed the responsibility for full
employment at a high level of economic activity on the state. But there is no
theory of the state sector. Bourgeois economics is still addressed only to the
economic aspecst of social behaviour, and the obsession in with market forces
and prices.
The Keynesian economist believe that the capitalist economy is just like the
leaking tube that must be pumped continuously if it is not to go flat and grind
to a halt. However it should be noted that the more it is pumped by fiscalmonetary policies, the more it leaks.
3.4 SUMMARY
In this lecture we discussed the dominant brands of bourgeois economics,
namely the Keynesian and the neo-classicals. The main argument of the
Keynesian was the idea of fiscal and monetary policy that can bring about full
employment (equilibrium) in the economy. They lean more to social behaviour
and market forces. On the other hand, the neoclassicists are more concerned
with the utility theory of value, market exchange interest rate, equilibrium
scarcity, and efficiency. The neoclassical economic analysis is both scientific
and ideological.
3.5 SELF-ASSESSMENT EXERCISE
1.
2.
Discuss some of the defects of the neo-classical economics.
Mention some proponent of neo-classicism
3.6 REFERENCES
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Unit: 2
Onimode, B. (1988), An Introduction to Marxist Political Economy. Zed Books
Limited
Ake, C. (1981), A Political Economy of Africa: London: Longman Groly Ltd.
London.
3.7 SUGGESTED READING
Ake, C. (1981), A Political Economy of Africa: London: Longman Groly Ltd.
London.
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TOPIC 4:
TABLE OF CONTENTS
PAGES
4.0
TOPIC:
DOMINANTS BRANDS OF BOURGEOIS
ECONOMIC II
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4.3.2 NEO-RICARDIAN -
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4.3.3 THE IRRELEVANCE OF BOURGEOIS ECONOMICS
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4.4
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4.5
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4.6
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4.0
TOPIC:
DOMINANT
BRAND
Unit: 2
OF
BOURGEOIS
ECONOMIC II
4.1 INTRODUCTION
In the last lecture we discussed the Keynesian and neo-classical economics as
brands of bourgeois economic. Attempt was made to discuss brand areas such
as views of each employment, economic growth, price, interest, partial and
general equilibrium, etc. A different critique of the views was also attempted
pointing out the limitations of the schools.
In this lecture, we are continuing with the examination of the views of the
dominant brands of bourgeois economics. We shall also attempt to discuss the
relevant of bourgeois economics.
Having appraised difference views as postulated by each brand of
bourgeois economics with regards to full employment, economic growth,
price, interest, partial and general equilibrium etc, the relevance of this
postulation depends on who is posturing the argument or his school of
thought. It is pertinent to note that the emergence of each school is as a result
of problems in the economy.
4.2 OBJECTIVES
At the end of the lecture, you should be able to:
i.
discuss the irrelevance of bourgeois economics.
4.3 IN-TEXT
4.3.1
DOMINANT BRANDS II
1.
2.
4.3.2
Neo-Ricardian
The irrelevance of Bourgeois Economics.
NEO-RICARDIAN
With the persistent problems in the economy, monopolies, trade unionism,
cartels and rivalry, imperialism, loud criticisms of neo-classical economics
have led to the emergence of neo-Ricardians. They include Piero Straffa, Joan
Robinson, E. Nell, A Bhaduri, Garegnani, etc. Their analysis was essentially a
return to the method of David Ricardo, the theoretical father of the classical
school. The neo-Ricardians are opposed to subjective individualism, demand
and supply as the determinants of income distribution, neo-classical capital
theory and incorporate social satisfaction in their analysis. They argue that
marginal productivity theory based on the aggregate production function is
not derivable from neo-classical general equilibrium theory. They also argue
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that it is not possible in capital theory to aggregate capital unless the profit
rate is known, and that ranking production techniques by capital intensity is
dusious because re-switching of techonologies may occur to render the profit
rate and capital intensity positively, rather than negatively. In spite of the
efforts of their main opponents, the neo-classical school of Cambridge
Massachusetts, U.S.A, led by Paul Samuelson and Robert Solomon
demolished the aggregate production function and the marginal productivity
theory. The neo-classicists had to fall back to general equilibrium theory
which is vacuous and largely irrelevant to social life.
However, the claim made by the neo-Ricardians that Staffa’s work
demonstrates that income distribution is independent of neo-classical
demand-supply forces is not correct. Straffa’s system explicitly excluded
variations in production, consumption, and labour supply and it is precisely
only through these variations that supply-demand forces can operate. Even
though the neo-Ricardians incorporate social classes in formal and abstract
terms in their growth theory, they still conceive of these classes as cooperating in harmony denying the class struggle and equating growth with
development. The neo-Ricardians are also pre-occupied with distribution
independent of production with market exchange, tendencies to equilibrium
and the gradualism of the neo-classicists. The basic constituents of the neoRicardians theory are sectors, industries, and processes and any activities
defined in technological terms.
The dependence of the neo-Ricardian theory on marginal productivity theory
is not also correct. This is because of the possibility of generating general
competitive equilibrium without the possibility of assuring capital
independently of the rate of profiting even if capital does not receive its
marginal product. If an equilibrium exists with equality of average profit rates
in each industry, all the neo-Ricardian equations will be satisfied at a point.
4.3.3 THE IRRELEVANCE OF BOURGEOIS ECONOMICS
Adebayo Adedeji as quated by Onimode Bade (1985), once pointed out that
[the African economy today is the most open and the most exposed economy
in the world, overtly dependent on external trade and other stimuli, foreign
technology and foreign expertise. The very strategies of development which
African Governments have been pursuing since independence, have come
from outside as they have been theories of development developed during the
colonial and neo-colonial periods to rationalise the colonial pattern of
production in Africa. Not expectedly, these foreign theories of development
and economic growth reinforce the economic dependence of Africa]
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The unscientific nature and the social irrelevance of bourgeois economic is
noted in two major arguments. First and foremost is with respect to the
advanced capitalist countries of Western Europe, North America and Japan,
where the bulk of current variants of vulgar economics has been unscientific,
this is due to the failure to provide a good reflection of the society of the
capitalist system. Bourgeois economics, just like the neo-classicism, was
designed mainly as part of the ideological premises of the bourgeois. This is
so because it wants to protect and rationalise the capitalist social order, and
also to defend it against attack. It is in this context that the orthodox
economics dons blinkers, diverts attention from crucial issues and exaggerates
trivial problems. This is only the methodology and techniques of the
discipline have been irrelevant, even in the advanced capitalist countries, to
the major problems of crisis, inflation, unemployment, inequality, sustained
growth and so on, confronting those societies.
Virtues are alleged to be rationality, competitiveness, universalism, and social
mobility, and psychological individualism, need achievement motivation and
the like. These often racist virtues are contrastal with the alleged irrationality
collectivity ascribed status, particularism and hierarchical structures of the
backward societies.
Second is the imperialist development theory. This is the end of the theory
dogma, which is out to discredit the non-capitalist development, by either
eliminating the need for choice of development path through systematic
trivalisation of the critical differences between capitalist and socialist
development or by trying to exaggerate trivial similarities between both
Galbatraths’s. The New Industrial state which is neither socialist nor
capitalist, is a good example. Rostow’s crude historgapyhy, which puts all
societies on the same historical track of development stages is another
example. It is possible to identify all societies in their economic dimension as
lying within fore stages the traditional society, the precondition for take-off,
the drive to maturity and the age of high mass consumption.
Secondly, the unscientific character and social irrelevance of bourgeois
economics is one of the issues that confront Third World, countries. The
vulgggar economy distorted the nature of these economics, intensifying of the
major contradictious like the crises of underdevelopment, dependency,
exploitation, inequality, etc. To compound the issue was the uncritical
acceptance and propagation of capitalist and imperialist economics in these
countries by their petty-bourgeois intellectuals. This has inhibited the
scientific understanding of these societies and prevented serious efforts at
efforts at liquidating their syndrome of underdevelopment.
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Besides its eclectic praxiology anchor on the neo-classical sophistry of
mathematical modelling, bourgeois development theory is fundamentally a
rabid ideological mechanism of imperialist domination and exploitation
(Onimode, 1985:19). This can be summarised in four ways.
First is the erection of the features of the capitalist societies as near types,
whose economic virtures are alleged to be rationality. Competitiveness
universalism, and social mobility and psychological individualism need
achievement motivation and the like. These often racist virtues are contrasted
with the alleged irrationality, collectivity ascribed status, particularism and
hierarchical structures of the backward societies.
Third, are the so-called models of dualism with their abstract subsistence
sector, unlimited supply of labour (Rostow) and similar problems. These
bogus theories with their artful historical amnesia then called economists to
find solutions for leading sectors through the monetary and fiscal policies
advocated for raising savings, mild inflation for redistribution of income for
the benefit of the enterprising capitalist saverb, and by designing incentives
for foreign investors on the other hand, social scientist were to cultivate
modernizing elite, acquisitive aggression, individualism and similar capitalist
elements.
Fourth, is the imperialist development theories that recommended the
standard bourgeois strategies of increasing primary product (export) as the
engine of growth for the less developed economies. Example is Albert
Hirschinan’s crude import substitution industrialization and foreign aid. Not
only that, the Prebisch thesis of deteriorating terms of trade, the problems of
unequal exchange, the intensification of dependency and unequal
development, and related contradictions of these uncritical strategies of
underdevelopment are quietly ignored or vigorously rationalised. In the final
analysis the Third World countries are, in the words of Franz Fanon,
Wallowing in their economic crises of underdevelopment with widening
inequality between them and the imperialist countries.
4.4
SUMMARY
In this lecture we analysed the neo-Ricardian school of thought. The neoRicardian included Joan Robinson, E. NELL, A. Bhaduw, etc. Their argument
was focused on demand and supply, marginal productivity theory, and
equilibrium theory.
We also discussed the irrelevance of bourgeois economics. The irrelevance is
based on four characteristics of development theory elaborated by the
imperialist. These included the erection of the features of the capitalist
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societies as the ideal types, their ideology dogma, their so-called model of
dualism lastly, their vague strategies for increase in primary exports as the
engine of growth.
4.5 SELF-ASSESSMENT EXERCISE
1. Explain two areas of irrelevance of bourgeois economics.
2. Name the renowned proponent of the neo-Ricardian theory.
4.6 REFERENCES
Onimode, B. (1985) An Introduction to Marxist Political Economy. London: Zed
Books Ltd.
Afanasyev, V. (1981) Fundamentals of Scientific Commission. Moscow, Progress
Publishers.
4.7 SUGGESTED READING
Ihanvbare, Julius O. and Shaw M. Timothy (1981). Towards a Political Economy of
Nigeria. Gower Publishers, U.S.A
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TOPIC 5:
TABLE OF CONTENTS
PAGES
5.0
TOPIC:
DIALECTICAL AND HISTORICAL MATERIALISM - 24
5.1
INTRODUCTION -
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5.2
OBJECTIVES
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5.3
IN-TEXT
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5.3.1 MARXIST PHILOSOPHY AND DIALECTICAL METHOD -
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5.3.2 DIALECTICAL MATERIALISM -
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5.4
SUMMARY -
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5.5
SELF-ASSESSMENT EXERCISE -
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5.6
REFERENCES
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5.7
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ECON 314: POLITICAL ECONOMY
5.0 TOPIC:
DIALECTICAL
Unit: 2
AND
HISTORICAL
MATERIALISM
5.1 INTRODUCTION
In the last lecture we tried to analyze the neo-Ricardian idea of bourgeois
economics; This school of thought are concerned mainly the distribution of
income independent of population. They are also concerned about industrial
sectors and development.
We also discussed the irrelevance of the bourgeois economics, pointing on the
scientific nature of analysis, and the unproved claims made by bourgeois
economics.
In this lecture we are going to discuss dialectical and historical materialism,
which is the most fundamental philosophy of Maxwell.
The Marxist philosophy is dialectical materialism. This is so because it
is out to solve the fundamental question of philosophy. It acknowledges the
materiality and knowability of the universe and also tries to examine the world
as it is really is. It is so because it examines the world in constant motion,
development and regeneration.
5.2 OBJECTIVES
At the end of this topic, you should be able to:
i.
explain the dialectical method.
5.3 IN-TEXT
5.3.1
MARXIST
PHILOSOPHY
AND
THE
DIALECTICAL METHOD
The most important subject matter of Marxist philosophy is the solution of
the fundamental question of philosophy the relation of consciousness to being
Marxist philosophy is dialectical materialism. This is so because it out to solve
the fundamental question of philosophy. It acknowledges the materiality and
know ability of the universe and also tries to examine the world as it is really
is. Marxist philosophy is dialectical because it examines the world in constant
motion, development and regeneration.
The Marxist dialectics and materialism which form the core of Marxist
philosophy differ sharply from burgeois philosophy. Its material separates it
from the dialectical idealism of Hegelian philosophy with its pre-occupation
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with the mind and introspective speculation. This refers to the study of the
historical development of material reality so as to comprehend human
consciousness and thought processes. Marxist hence exhibit “Diamat” which
is the synthesized experience of nature and society that reveals general laws
common to both. On the one hand, dialectical materialism is concerned
generally with nature and its laws of motion; on the other hand, historical
materialism deals more specifically with the general laws of development of
human society. All aspects of Marxist philosophy are incorporated in the
synthesis of human experiences with return and society that commonly shapes
the general laws of human mind in its physical and social interactions.
Historical development is named in two ways: - the history of nature, and the
history of human society. From both the general laws of historical
development and of thought are formulated from the laws of dialectical.
These laws have been classified into three:
i.
The law of transformation of quantitative into qualitative changes;
ii.
The law of the interpretation of opposites or the unity and conflict of
opposite and
iii.
The law of negation of the negation.
The interconnected laws of nature and society are, therefore, welcome
for the theoretical natural sciences and are applicable to such social
science as political economy.
5.3.2
DIALECTICAL MATERIALISM
Dialectical materialism is concerned primarily with fundamental analysis of the
relationship between matter and consciousness. According to Lenin, matter is
a philosophical category, denoting the objective reality which is given to man
by his sensations and which is copied, photographed and reflected by our
sensations while existing independently of them. Matter is, therefore, a general
property of material objects and phenomenon. It defines their objective reality
and exists outside our consciousness, but is reflected in our consciousness.
Thus, consciousness is the outcome of historical social development in which
labour plays a critical role. Though life is not determined by consciousness,
consciousness is determined by life. People change their thoughts and the
output of their thoughts and the output of their consciousness as they change
their thoughts and the output of their consciousness as they change their real
existence through developing their material production.
Engels noted that motion is the mode of existence of matter. To him there
cannot be matter without motion; social life, or the history of human society
is, therefore, a higher form of motion of matter. The most important
distinguishing characteristic of this social life is the process of material
production, which determines all other aspects of human life. This
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underscores the production process and its use as the starting point of Marxist
political economy.
The distinctive feature of the Marxist theory of knowledge is that it tries to
picture the world as material production activities of people in practice. The
Marxist maintain that sources of knowledge is the objective reality around us
as opposed to the idealists and rationalists who claim that the source of
knowledge is mind itself. This is so because knowledge itself is the active,
purposive reflection of the objective world and its laws in man’s mind. Hence,
the Marxist theory of knowledge is based on our awareness of the objective
world, its realities and phenomena as the sole source of human knowledge.
Knowledge, therefore, develops from the practice of production into
cognition or theoretical activity, through the unity of theory and practice. As
production activities change, so does the development of knowledge became
possible through its movement from direct living sensation and perception to
abstract thought. It is related to definite concrete reality.
There are basically three major canons of the theory of knowledge identified
by the Marxist. First of all is thing, object and phenomena; it exists
independently of our consciousness or perception. Secondly, they believe that
there is no difference in principle between the phenomenon and the thing in
itself. The only difference is what is known and established and what is not
known yet established. Third, is the necessity to think dialectically and not to
regard knowledge as fixed and immutable. Knowledge develops dialectically
through a process of approximations from ignorance to closer and closer
reflection of the concrete world.
It should be noted that these principles or canons of knowledge by the
Marxists emphasis the critical significance of the material basis of knowledge
which, in political economy, makes the production process a primary concern.
These issues are also discussed in the basic elements of Marxist economic
methodology. Marx summarized all these by insisting that to understand
bourgeois society and how it functions; we should start with the real or
economic basis of society. The anatomy of civil society is to be sought on
political economy.
5.4 SUMMARY
The idea of dialectical materialism of Marxism was discussed in this lecture.
The Marxists are of the view that dialectical materialism deals more generally
with nature and its laws of motion. It is concerned with the analysis of the
fundamental relation of matter to consciousness.
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We stated that matter exists outside our consciousness and that matter
determiner consciousness. To the Marxist knowledge develops from the
practice of production. To understand the bourgeois society, therefore, we
should start first from or with the real or economic basis of the society.
5.5 SELF-ASSESSMENT EXERCISE
1.
2.
Discuss the Marxist canons of the theory of knowledge.
Mention three laws of dialectics?
5.6 REFERENCES
Onimode, Bade, (1985), Introduction to Marxist Political Economy: London: Zeal
Publishers Ltd.
5.7 SUGGESTED READING
Konstantiv, F. V. (ed.) (1982), The Fundamentals of Marxists Lenitist Philosophy:
Moscow: Progress Books.
Kntnetsor, G. (ed.) (1985), Political Economy: A study Anl: Moscow: Process
Book.
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TOPIC 6:
TABLE OF CONTENTS
PAGES
6.0
TOPIC : HISTORICAL MATERIALISM -
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INTRODUCTION
6.2
OBJECTIVES
6.3
IN-TEXT
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30
6.3.2 THE SUBJECT MATTER OF HISTORICAL MATERIALISM- 32
6.4
SUMMARY -
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6.5
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6.6
REFERENCES
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SUGGESTED READING -
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6.0 TOPIC:
Unit: 2
HISTORICAL MATERIALISM
6.1 INTRODUCTION
In the last lecture we discussed dialectical materialism. We stated that
dialectical materialism is all about the analysis of the fundamental relation of
matter to consciousness.
In this lecture we will discuss historical materialism. We shall begin with a
short history of the emergence of historical materialism, and thereafter discuss
the subject matter of historical materialism.
The emergence of historical materialism was as a result of the events
that took place at the end of 18th century and in the first half of the 19th
century, which showed that society was by no means a monolith but rather a
living organization subject to change and obeying in the existence and
development of certain objective laws that were independent of the human
will and consciousness. Marx and Engels developed historical materialism by
extending philosophical materialism and materialistically reversing dialects to
the interpretation of the society, by practicalising them in the revolutionary
activity of the working class.
The Marxist theory of capital accumulation could be summarized
under two headings, first is the labour-power, that is people ability to perform
labour, meaning to say the energy used in production. Second is the means of
production, which comprise the objects as used, or supervised by labourpower, these are method used by marx.
6.2 OBJECTIVES
At the end of this topic, you should be able to:
i
explain historical materialism
ii
outline its emergence and the subject matter.
6.3 IN-TEXT
6.3.1 THE EMERGENCE OF HISTORICAL MATERIALISM
Pre-Marxist materialism was inconsistent and limited. It was unable to apply
the principles of philosophical materialism to the study of social life and
history.
The great contribution of Karl Marx and Fredrick Engels to the development
of scientific thought was that they completed the half-built edifice of
materialism, that is, extended it to the study of society, the materialist world
outlook became for the first time comprehensive and fully consistent and
effective.
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Certain social and theoretical pre-conditions were required before historical
materialism could come into being. It was ushered in by the logical
development of progressive social political and philosophical thought. The
social conditions also played their part in revealing the possibility of
discovering the laws of social life.
The acceleration of social development, the Kaleidoscopic change of events
and the radical break-up of social relation beginning from t6he English, and
especially the French (1789-1794) bourgeois revolutions, the extreme
aggravations of class contradictions and collisions, the emergence on the
historical science of working class, such, in general, were the social preconditions that favoured the appearance of historical materialism.
The great events that took place at the end of the 18 th century and in the first
half of the 19th century showed that society was by means a monolith but
rather, a living organization subject to change and obeying in its existence and
development certain objective laws that were independent of the human will
and consciousness.
Marx and Engels developed historical materialism by extending philosophical
materialism and materialistically reversing dialectics to the interpretation of the
society, by practicalising them in the revolutionary activity of the working
class.
According to Lenin, by showing the lack of isolation between historical
materialism and philosophical materialism, Marx deepened and developed
philosophical materialism to the full, and later extended the cognition of
nature to include the cognition of human society. His historical materialism
was a great achievement in scientific thinking.
The most general laws discovered by dialectical materialism operate in society,
but here they take a specific form. It is not enough to know the laws of
development of human society, nor is enough to know the general principles
of philosophical materialism and the laws of dialectics; we must also study the
specific forms in which they take effect in the history of society in social life.
The dialectical method, applied to society, and the method of historical
materialism are, in essence, identical essential concepts. When applied to
society, the dialectical method becomes concrete. Marx and Engels formulated
the basic propositions of historical materialism in the 1840’s in such works as
Economics and Philosophic Manuscripts of 1844, The Holy Family, The
German Ideology, and particularly in more mature form, in the poverty of
philosophy and the manifesto of the communist party.
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The new view of history, of social development, was at first only a hypothesis
and method that for the first time made possible a strictly scientific approach
to history.
6.3.2
SUBJECT-MATTER
OF
HISTORICAL
MATERIALISM
Human society is in essence and structures the most complex form of
existence of matter. It is a distinct, qualitatively unique part of nature, in a
certain sense opposed to the rest of nature. This interpretation of the
relationship between society and nature, fundamental distinguishes historical
materialism both from idealism, which in most cases creates an antithesis
between society and nature and metaphysical materialism, which does not
recognize the qualitative difference between them.
The subject-matter of historical materialism is therefore the study of society
and the laws of its development. These laws are based on Marx’s insight into
the fact that in political economy legal relations as well as forms of state could
neither be understood by themselves, nor explained by the so-called general
progress of the human mind, but are rooted in the material conditions of life.
The production of the material means of existence in society and, therefore,
the level of economic development, determines the extent of development of
the rest of the society, and the course of human society.
Historical materialism, otherwise known as the science of society, is rooted in
the fundamental unity of the material basis, or economic foundation, and the
class struggle. The critical feature of this material basis, which gives rise to
class struggle and related contradictions, are the social relations of production
into which people etc.
In the capitalist system the relations of production are in turn determined by
the central role of capital which defines the production relations between the
bourgeois, as owners of capital and other means of production, and the
proletarian who serve as the direct producers simply because they have been
disposed by capital, and forced to sell their labour power as wage-slaves.
These workers are forced to produce what we call surplus labour over and
above their subsistence wages. This exploitation constitutes a contradiction
and a source of conflict between the two classes.
However, this struggle continues until the further development of labour’s
productive capacity is strangled by the existing promotion relations. Then the
economic foundation, disintegrates and a period of social revolution
transforming the political, legal, intellectual and other ideological forms of civil
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society unfolds. The transition from one mode of production to a higher one
occurs through this conflict of class opposites, through class struggle.
All historical development is spurred by this control role of contradiction
impining on the basic of the society.
6.4 SUMMARY
In this lecture, we discussed the emergence of historical materialism; we noted
that it started since (1789-1794) during the French bourgeois revolutions. It
later manifested itself clearly in the great events of the 18 th and 19th centuries.
The founders were Marx and Engels. We stated that the whole idea of
historical materialism is the study of the society and the laws of its
development.
6.5 SELF-ASSESSMENT EXERCISE
1.
2.
3.
4.
5.
Identify those who developed the thesis of historical materialism.
What is the subject matter of historical materialism?
Discuss the subject-matter of historical materialism
Identify those who developed the thesis of historical materialism.
What is the subject-matter of historical materialism?
6.6 REFERENCES
Konstantinov, F.V, (1982): The Fundamental of Marxist Lininist Philosophy
Moscow Progress Publishers.
Onimode, Bade (1985): An Introduction to Marxist Political Economy London: Zed
Books Ltd.
6.7 SUGGESTED READING
Konstantinov, F. V, (1982): The fundamental of Marxist Lenist philosophy. Moscow
progress publishers
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TOPIC 7:
TABLE OF CONTENTS
PAGES
7.0
TOPIC: MARXIST THEORY OF CAPITAL ACCUMULATION I 34
7.1
INTRODUCTYION
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OBJECTIVES
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7.3
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7.3.1 MARXIST THEORY OF CAPITAL ACCUMULATION
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7.4
SUMMARY -
7.5
SELF-ASSESSMENT EXERCISE
7.6
REFERENCES
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7.7
SUGGESTED READING -
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7.0 TOPIC:
Unit: 2
MARXIST THEORY OF ACCUMULATION I
7.1 INTRODUCTION
In the last lecture, we discussed the historical materialism. In that lecture we
specifically discussed how the idea of historical materialism emerged, tracing it
to the work of Marx and Engels. The subject matter of historical materialism
was also discussed.
In this lecture, we will discuss the Marxist theory of capital accumulation
starting with the discussion of capital.
7.2 OBJECTIVE
At the end of this topic, you should be able to:
i
Explain the term “capital”
ii
Explain capital accumulation.
7.3 IN-TEXT
7.3.1
MARXIST THEORY OF ACCUMULATION I
To start with, we may ask two general questions about capital. First, what is
capital? Secondly, what method did Marx Use? In looking at these questions,
we may first of all start by working at what Marx means by “the capitalist
mode of production”. Unfortunately, he uses the term in somewhat different
ways, though the context generally makes what he means reasonably clear. To
start with we have to make the following distinction.
The first factor to distinguish is what Marx sometimes calls the factor of
production. He summarized it under two headings, first is the labour power,
that is, people’s ability to perform labour, meaning to say the energy used in
production. Second, is means of production which comprised the objects as
used or supervised by labour-power.
Now having considered these factors, in isolation from one another, it should
be stated that they stand in certain relations with agents of production
(institutions, individual human beings, corporations, etc) which control them.
These, when legally legitimated and protected, may be called “property”
relations. Marx referred to these relations as relations of production. However,
to distinguish this sense of relations of production from another important
concept which might be equally so called, let us call them, when it is necessary
to make a finer discrimination, social relations of production.
The necessity to differentiate these related concepts becomes obvious once we
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remember that in isolation from one another, these factors of production will
not be able to produce anything. Bringing together these factors we can make
further distinction between them and what may be called technical relations of
production, which are production, which are the relations in an actual process
of production (for example, the assembly-line type of organization of
production is a good example technical relations of production). If we consider
the factors of production, we have the productive forces.
Marx uses mode of production in, at least, three different ways; first, he uses it
to designate approximately what is known as productive forces. Mode of
production simply means in this sense a way of producing goods considered
simply in its technical aspects. Second, he uses it to include both this and also
the social relations which are the matrix of the productive forces and from
which the proceeding sense is abstracted, Marx sometimes uses the term to
signify yet a wider sense in which what is included in the concept is not merely
the production of goods in the narrower sense (the first sense), and the
relevant social relations of production (the second sense) but also the ways it
actually produces. What then is the character of specifically capitalist mode of
production? To answer this question Marx made a distinction between the
capitalist mode of production and other modes of production, and he
postulates that…
(The fact of being a commodity is the dominant and determining
characteristics of its product. This implies that … the labourer
himself comes forward merely as a seller of commodities, and thus as
a free wage-labourer, so that labour appear in general as wage labour
… the relationship between wage-labour determines the entire
character of the mode of production) (Soliciting, 1983:78).
Marx defines commodity as “use-value” that is, something that is able to satisfy
a human went or need. Use-values are paradigmatically objects of various sorts
in the usual sense, like sealing wax and string; but they may be less palpable
things like songs or services of instructions. Use-values are not inherently such,
they usually come to be so (i.e., tobacco). But things are in general use values
on the basis of some inherent properties of the object. A commodity is, in the
second place use-value that is produced on a more-or-less regular basis for
exchange in the market, directly with other use-values (barter) or in any
developed society, with money. In brief, it has an “exchange value”.
If being a commodity is the general character of use-values in the capitalist
mode of production, then in particular, labour-power will be a commodity, the
exchange value of which is expressed in terms of wages. Therefore, labourpower is a commodity, except that the labourers do not control the means of
production. So a situation in which the commodity is the general form of usevalue presupposes that one group owns the means of production and that by
virtue of this those who work for the means of production have to sell their
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labour-power to those who do own those means. This defines the social
relations of production which characterises the capitalist mode of production.
If the general form of use-value is the commodity, then the point of buying
labour-power and putting it to work on means of production is to produce and
sell commodities. This use if sum of exchange value, typically money is a
special case of the general concept of capital, namely, the concept of money,
which is increased by buying commodity and then selling it again. This,
therefore, gives us the general view of the capitalist mode of production in a
most schematic form.
7.4 SUMMARY
In this lecture, we tried to analyse the concept of capital from the Marxian
perspective. We started the analysis by trying to explain the capitalist mode of
production. In explaining the capitalist mode of production certain
terminologies had to be explained i.e. factors of production, labour-power,
social relations of production, technical relations of production. These
concepts were used to explain how capitalist mode of production operates.
7.5 SELF-ASSESSMENT EXERCISE
1.
2.
How does the capitalist mode of production transform and become
capital (money).
What do you understand by use-value?
7.6 REFERENCES
Suchting, W. A. (1983), Marx; An Introduction: London; Harvesters Press
Publishers.
Kamenka, E. and Weale, R.S. (1975), Federalism, Capitalism and Beyond: London:
Edward Arnord Publishers Ltd.
7.7 SUGGESTED READING
Onimode, Bade (1985) An Introduction to Marxist Political Economy: London:
Zeal Publishers London.
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TOPIC 8:
TABLE OF CONTENTS
PAGES
8.0
TOPIC:
MARXIST THEORY OF CAPITAL ACCUMULATION 38
8.1
INTRODUCTION -
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8.2
OBJECTIVES
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8.3.2 PROBLEMS OF CAPITALIST DEVELOPMENT
8.3.3 THE CHARACTER OF PRE-CAPITALIST
AND CAPITALIST CRISIS
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SUMMARY
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8.0 TOPIC:
MARXIST
THEORY
Unit: 2
OF
CAPITAL
ACCUMULATION
8.1 INTRODUCTION
In lecture seven we explained capital from the Marxian perspective. In this
lecture we are continuing with the Marxist explanation of capital accumulation
in the capitalist world. We will discuss capital accumulation in capitalist
development, problems of capital accumulation in capitalist development,
problems of capital accumulation, and the character of capitalist crises.
8.2 OBJECTIVES
At the end of this topic, you should be able to:
i.
explain the term “capital accumulation.
ii.
discuss the problem of capital accumulation; and
ii.
describe the character of pre-capitalist and capitalist crises.
8.3 IN-TEXT
8.3.1
CAPITAL
ACCUMULATION
IN
CAPITALIST
DEVELOPMENT
The development of the capitalist world i.e., basically the process of capital
accumulation, and the capitalist accumulation, and the capitalist accumulation,
and the capitalist is the decisive social agent. This accumulation of capital as
the driving force of capital development depends on the generation of mass
surplus value that constitutes capital expansion. This means that the theory of
value, which tries to analyse the theory of production is very crucial for the
understanding of capitalist accumulation. The role played by the capitalist is
critical to capitalist development. The crucial element is this mission of the
capitalist in his passion for the continuous accumulation of capital.
David Ricardo is of the view that consumption and accumulation are
universal; however, his followers denied the motive of accumulation under
capitalism and defined interest rate as the reward for “waiting” or
“abstinence” from consumption, not from accumulation; however, even the
universalism of accumulation claimed by David Ricardo is not a matter of
human nature as he supposed, but a capitalist necessity, since the purpose of
production to the capitalist is of creating exchange value or surplus value.
This view shows the differences between the classical economists and Marxist
view on capitalist development. One point on which the Marxists and the
classical economists differ is the role of labour power in capital accumulation.
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The Marxist are of the view that capitalist accumulation is possible as a result
surplus value generated through the competitive drive. The source of capital
accumulation - surplus value - is the difference between the value of the
product produced by labour and the value of labour power. It is the difference
between output actually produced and the price in terms of wages paid by the
capitalist to the labourer. For example, Ahmadu Bulama is an employee of
Dantata and Sawoe. He is a driver and through the value of his labour per day
is N 100.00 he is paid only N 20. 00, the surplus value that is accumulated by
the capitalist here is N 80.00 (eighty naira) labour power is crucial to the
accumulation on process and involves the capitalist demand for labour power.
This is why wages are always below the total value exerted by labour so that
the creation of surplus value and accumulation becomes possible, this in effect
is the crucial feature of capitalist development. This problem usually arises due
to the peculiar nature of labour power as a commodity which is not produced
by a “labour power industry” that can adjust its supply to the demand to
ensure excess supply that keeps wages below value added.
On the other hand, the classicists, championed by David Ricardo are of the
view that the market price and natural price of labour provide the answer to
Marxian analysis. To him market price is given by demand and supply of
labour and the natural price is that which is just sufficient to enable workers to
subsist and perpetuate the rate at a constant level. The force that adjusts the
market price to the natural price of labour is the Malthusian population
theory, according to which if wages rise, population will force wages down
because the supply of labour will rise above the demand for it. So population
changes replace in adjusting supply to demand in the labour market.
Marx vehemently opposed this classical solution and attacked the Malthusian
population theory as a libel and a disgrace on human race. In is place he
postulated what he called the reserved “army” or the relative “surplus
population” as the main reason that keeps wages below. The value of
commodities created by labour.
This industrial reserved army of unemployed people is necessitated by the
capitalist through labour-saving machinery (use of machines that displace
labour). This its done by constant improvement in the method of production
through innovative machines. This mechanization raises the organic
composition of capital and causes relative or absolute decline in the demand
for labour; this depress wages to sustain the creation of surplus value for
accumulation. Capitalist crises and depressors which destroy capital and make
it possible for underutilization of productive forces also causes labour to be
redundant and increases the industrial reserve army whenever it is too low to
ensure satisfaction and smooth accumulation by capitalist.
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8.3.2
Unit: 2
PROBLEM OF CAPITALIST DEVELOPMENT
The problem of capitalist development can be traced to the gloomy
predictions of classical economists which earned economics the appellation of
the “dismal science”. On the issue of the basis of the internal logic of their
theory of capitalist development the classicists ar of the view that the
stationary state is the inevitable end of economic progress. This is basically
rooted in the Malthusian population theory and the classical law of
diminishing returns to agricultural production. These two immutable natural
laws were supposed to cause accumulation to encourage increased population
which forces recourse to the cultivation inferior land with diminishing returns.
The Marxists argued that the resulting relative decrease in agricultural
production, or its rising labour cost of production, is supposed to lead to a
rising share of wages which forces profit to fall relatively and associate to
such a low level that it is unable to cover the risks and efforts of
accumulation. At this juncture, the capitalist have no more incentive to
accumulate and so the rate of growth of the capital stock drops to zero.
Hence J. S. Mills impossibility of ultimately avoiding the stationary stage.
Fortunately, for the human society and unfortunately for the classical
economists, their gloomy prophecy has not come to pass because of the errors
in their predictions. Technical progress has come into check the virulence of
the law of diminishing returns in agriculture, while the industrial revolution
not only nullified the law but generated increasing returns in many Industries.
It should also be noted that since 1870’s in Western Europe the birth rate has
declined more than the death rate so that population growth has been
arrested.
8.3.3
CHARACTER OF PRE-CAPITALISTS CRISES
“The contradictory movements of capitalist society impresses itself upon the
practical bourgeois most strikingly in the changes of the periodic cycle
through which modern industry runs and whose crowning point is the general
crisis. The crisis is once again approaching, although as yet in its preliminary
stage, and by the universality of it’s theatre and the intensity of its action will
drum dialectics even into the heads of the mushroom upstarts of the new,
holy Prusso-German empire”. (Karl Marx - capital Vol. 1 p. 26 quoted in
Onimode, 1985).
It should be noted here that Marx’s analysis of the crisis was purely in the
context of the capitalist system. There had economic crises before capitalism.
However, that of the pre-capitalist and the capitalist crises were quite district
with respect to such features as causation, manifestation, periodicity and
consequences (Onimode, 1985:165).
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Pre-capitalist crises involved the actual material destruction of elements of
reproduction through natural and social catastrophes such as wars, droughts,
earthquakes, floods, poor harvest, plagues, etc. Before and during the 18 th
century these were more serious problems than economic fluctuations. In
particular, since agriculture the main stay of the economy in pre-capitalist
mode of production, the reduction in agricultural production due to
ecological disaster such as bad weather condition, etc. and reduction in labour
due to earth-quakes or physical destruction often led to crisis. However, such
crises are localized and irregular.
There were also pre-capitalist crises of simple commodity production which
could be caused by over-production and hoarding. Given the commodity
circuit of contradictory movement of capitalist (C.M.C) which dominated this
mode of production, the object of the object of production was the creation
of use-values rather than exchange values, as under capitalism. The
differentiation (separation of purchase from sale involved in this commodity
movement (C -M). This possibility was likely to be limited and localized rather
than being general band frequent. Also hoarding of the realized movement
(M), even when it occurred on a large scale and threatened the burning or
stability of simple commodity production could be offset by increased money
supply. Consequently under simple commodity production, though crises of
these types were possible, they were unlikely.
8.4 SUMMARY
In this lecture we discussed capital accumulation in the capitalist development.
We stated that capital accumulation is critical for the capitalist or capitalism. It
is with this capital accumulation that capitalists developed (expanded) by and
by. Capital accumulation is made possible through the surplus value created by
labour-power. It is through the surplus labour that capitalists accumulate
capital.
We also discussed the problems encountered by capitalists through their
prediction. Such problems included the ones indicated by David Ricardo and
Malthusian population theory which were all proved wrong (unrealistic) in the
final analysis. Finally, we discussed the character of pre-capitalist crises. We
stated that the problem of that era was that of natural catastrophes and
hoarding which hindered effective distribution of agricultural goods since
agriculture was the main stay of the pre-capitalist economy.
8.5 SELF - ASSESSMENT EXERCISE
1.
2.
3.
Discuss the pre-capitalist crises.
What do you understand by “reserving army” labour?
Why did the classicists postulated an inevitable end of economic
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4.
Unit: 2
progress?
What was the basic pre-capitalist crisis?
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8.6 REFERENCES
Onimode, Bade (1985) Introduction to Marxist Political Economy: 2nd Publishers.
Kamemka L. and Waela R. S. (ed) (1985) Fedralism, Capitalism and Beyond:
London: Edward Arnold Publishers.
Kutnersor, G. (1988) Political Economy: A Study Aid: London: Progress
Publishers.
8.8 SUGGESTED READING:
Onimode, B. (1985) : Introduction To Marxist Political Economy: 2nd Publishers
London.
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SOLUTIONS TO EXERCISE
TOPIC 1
1.
Political economy refers to the intervention of the state in controlling market
forces. It refers to how government normally interferes in the economic
activities of a nation.
2.
We have basically three approaches to the study of political economy, namely:
Liberalism, Nationalism and Marxism.
TOPIC 2
1. The basic characteristics of bourgeois economics are as follows: capitalism,
existentialism, belief in religious philosophy, and unity.
TOPIC 3
1.
Some of the components of neo-classicism are as follows; Williams
Jerons, Karl Menger, Vilfredo Pareto, Leon, Walras, Samelson Solow,
etc.
2.
The emergence of the Keynesian economics was the result of the great
depression which plunged the capitalist into problem and also the
failure of the neo-classicists to give a concrete solution to the economic
problems of the capitalists.
TOPIC 4
1.
The neo-Ricardians include the following; Piero Straffa, Joan
Robinson, E. NELL, A. Bhadinn, Garegnam etc. Their writings were
the answer to David Ricardo views.
2.
The two areas of irrelevance of bourgeois economics:
i.
Its unscientific nature and the social irrelevance of
bourgeois economics in general.
ii.
The unscientific character and social irrelevance of
bourgeois economics in the context of the Third World
countries.
TOPIC 5
1.
The laws of dialectics are as follows:
i.
The law of transformation of quantitative into qualitative
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ii.
iii.
2.
Unit: 2
changes.
The law of unity and the conflicts of opposites.
The law of negation of the negation.
The three canons of the theory of knowledge identified by the Marxists
are as follows:
i.
The existence of thing, object and phenomenon: it exists
independently of our consciousness or perception.
ii.
The necessity to think dialectically and not to regard knowledge
as fixed and immutable.
TOPIC 6
Karl Marx and Fredricks Engels were the people who developed the idea of
historical materialism.
1. The subject matter of historical materialism, is basically the study of
society and the laws of its development Historical materialism is rooted in
the fundamental unity of the material basis, or economic foundation, and
the class struggle.
TOPIC 7
1.
Use-value from the Marxian perspective means commodity.
TOPIC 8
1.
The reserved army of labour, according to Marx, means the surplus
unemployed labour that can be used any time in the production
process.
2.
The classicist postulated that the inevitable and of economic progress
will be the stationary state that will eventually emerge.
The pre-capitalist crisis involved the actual material destruction of
elements of reproduction through natural and social catastrophes such
as wars, droughts, earthquakes, poor harvest, epidemics, e.t.c.
3.
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SELF-ASSESSMENT EXERCISE
TOPIC 1
The subject matter of political economy is the interference of the state in the
economic activities of the state by controlling the market forces.
We have three main approaches to the study of political economy. First, there
is the liberal approach. This approach tends to separate the study of politics
from economics. Political liberalism entails social inequality, liberties, i.e.
freedom of association, right to life, etc.
On economic liberalism, they are of the view that there should be free trade,
open market and less trade intervention. To them, market mechanism should
determine both the domestic and interntional relations.
Secondly, there is economic naturalism. To this school, the protection of the
state should be the first priority. As such, politics should take precedence over
economic activities. However, proponents of this approach share the view
that state power and wealth should be pursued at the same time.
The last approach is the Marxist approach; it is rooted in the work of Karl
Marx. Marxism is scientific in methodology, also empirical in approach. It has
had fundamental elements, historical and dialectical materialism, the doctrine
of class struggle, theory of surplus value, the theory of inevitable revolution,
and the withering away of the state.
TOPIC 2
One of the features of bourgeois economics is capitalist crisis. They are of the
view that capitalism is capable of ensuring stable and prolonged social
progress. They are of the belief that the crisis in capitalism is a crisis of
modern science, the spiritual crisis of the age of technological civilization. The
Marxists are opposed to this view. They trace the capitalist crisis to the
historical character of capitalism and its destiny.
TOPIC 3
Some of the defects of neo-classical economics are as follows, distribution,
utility theory, aggregate production function, general equilibrium, growth and
crisis of income distribution.
TOPIC 4
First bourgeois economics is irrelevant because it has failed to actually solve
the economic problems of the world. This is because of the unscientific nature
of its analysis.
Second, the unscientific nature of bourgeois economics has compounded the
Third World Countries problems rather than solve them. These problems
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Unit: 2
include underdevelopment, dependency, exploitation, inequality, etc. To
compound the issue is the uncritical acceptance of capitalist and imperialist
economics in these countries.
TOPIC 5
Marxists identified three major canons of the theory of knowledge; first and
foremost is the canon of thing, object and phenomenon. This exists
independently of our consciousness or perceptions. Second, is the lack of
difference in between the phenomenon and the thing in itself. Third, the
necessity to think dialectically and not to regard knowledge as fixed and itself.
Third, the necessity to think dialectically and not to regard knowledge as fixed
and immutable.
TOPIC 6
The subject matter of historical materialism is all about the study of society
and the laws of its development. Historical materialism or the science of
societies is rooted in the fundamental unity of the material basis, economic
foundations and the class struggle. The material bases are the social relations
of production to which people enter in the production of their means of
existence.
TOPIC 7
The capitalist mode of production is done in such a way that there are those
who own the means of production and those own labour power (capitalists
and peasants).
Those who supply the labour for the purpose of production (they do not own
the means of production) they have to sell their labour-power in order to earn
a living. The process of buying and selling of labour-power makes production
possible and the surplus labour expropriated by the capitalist through
production, and the commodities produce are sold out to earn money
(capital).
TOPIC 8
The pre-capitalist economic crisis is basically the economic crisis that engulfed
different nations in the world before capitalism.
In those earlier days, the crisis that plagued the peasants was mostly that of
distribution of agricultural goods since the mainstay of the economy then was
agriculture, Natural disasters and social catastrophes, i.e., wars, droughts,
earth-quakes, plagues, floods, epidemics, poor harvest etc. Before the 18 th
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Unit: 2
century these were the main economic problem. These altered the supply of
labour for agricultural the supply of labour for agricultural purposes.
However, such crises were localized and not frequent.
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Unit: 2
TUTOR-MARKET ASSIGNMENT (TMA)
1. Define political economy and explain in detail the three approaches to the
study of political economy.
2. Compare and contrast the economic nationalism view of political
economics and that of Marxism.
3. Who are the proponents of Neo-classicism?
4. Explain the context of bourgeois economics.
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