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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© All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means without prior permission in writing from the University of Maiduguri. This text forms part of the learning package for the academic programme of the Centre for Distance Learning, University of Maiduguri. Further enquiries should be directed to the: Coordinator Centre for Distance Learning University of Maiduguri P. M. B. 1069 Maiduguri, Nigeria. This text is being published by the authority of the Senate, University of Maiduguri, Maiduguri – Nigeria. ISBN: 978-8133- iii 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) vi 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 CDL, University of Maiduguri, Maiduguri 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. CDL, University of Maiduguri, Maiduguri - Nigeria 1 ECON 314: POLITICAL ECONOMY ECON 314: Unit: 2 POLITICAL ECONOMY UNIT: 2 TA B LE O F C O N TE N T S PAGES PREFACE - - - - - - - - - - - - - - - - - - iii HOW TO STUDY THE UNIT iv INTRODUCTION TO THE COURSE - 1 TOPIC: 1: THE SUBJECT MATTER OF POLITICAL ECONOMY - 3 2: CHARACTERISTICS OF BOURGEOIS ECONOMICS - 8 3: DOMINANT BRANDS OF BOURGEOIS ECONOMIC I - 13 CDL, University of Maiduguri, Maiduguri - Nigeria 2 ECON 314: POLITICAL ECONOMY Unit: 2 4: DOMINANTS BRANDS OF BOURGEOIS ECONOMIC II - 18 5: DIALECTICAL AND HISTORICAL MATERIALISM - - 24 6: HISTORICAL MATERIALISM - 29 7: MARXIST THEORY OF CAPITAL ACCUMULATION I - 34 8: MARXIST THEORY OF CAPITAL ACCUMULATION - 38 - - - - SOLUTIONS TO EXERCISES CDL, University of Maiduguri, Maiduguri - Nigeria 3 ECON 314: POLITICAL ECONOMY Unit: 2 TOPIC 1: TABLE OF CONTENTS PAGES 1.0 TOPIC: THE SUBJECT MATTER OF POLITICAL ECONOMY - - - 3 1.1 INTRODUCTION - - - - - - - 1.2 OBJECTIVES - - - - - - - 4 1.3 IN-TEXT - - - - - - - 4 - - - 4 - - - - 5 - - - - - 4 - 1.3.1 DEFINITION OF THE SUBJECT MATTER: POLITICAL ECONOMY - - 1.3.2 APPROACHES TO THE STUDY OF POLITICAL ECONOMY 1.4 SUMMARY - - - 7 CDL, University of Maiduguri, Maiduguri - Nigeria 4 ECON 314: POLITICAL ECONOMY Unit: 2 1.5 SELF- ASSESSMENT EXERCISES - - - - 7 1.6 REFERENCE - - - - - - - - - - - - - 7 1.7 SUGGESTED READINGS - 7 CDL, University of Maiduguri, Maiduguri - Nigeria 5 ECON 314: POLITICAL ECONOMY 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 CDL, University of Maiduguri, Maiduguri - Nigeria 6 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 CDL, University of Maiduguri, Maiduguri - Nigeria 7 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 8 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 9 ECON 314: POLITICAL ECONOMY CDL, University of Maiduguri, Maiduguri - Nigeria Unit: 2 10 ECON 314: POLITICAL ECONOMY Unit: 2 TOPIC 2: TABLE OF CONTENTS PAGES 2.0 TOPIC: CHARACTERISTICS OF BOURGEOIS ECONOMICS 2.1 INTRODUCTION - - - - - - - - 9 2.2 OBJECTIVES - - - - - - - - 9 2.3 IN-TEXT - - - - - - - - 9 - - - 9 2.3.2 CONTEMPORARY IRRATIONALISM AND - - - 10 2.3.3 RELIGIOUS PHILOSOPHY - - - - - 11 2.3.4 UNIT - - - - - - - - 11 2.4 SUMMARY - - - - - - - - - 11 2.5 SELF-ASSESSMENT EXERCISE - - - - - - 12 2.6 REFERENCE - - - - - - - 12 2.7 SUGGESTED READING - - - - - - - 12 - 2.3.1 THE GENERAL CRISIS OF CAPITALISM - CDL, University of Maiduguri, Maiduguri - Nigeria 8 11 ECON 314: POLITICAL ECONOMY 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 CDL, University of Maiduguri, Maiduguri - Nigeria 12 ECON 314: POLITICAL ECONOMY Unit: 2 historical development serving as a basis for historical prediction.” CDL, University of Maiduguri, Maiduguri - Nigeria 13 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. CDL, University of Maiduguri, Maiduguri - Nigeria 14 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 15 ECON 314: POLITICAL ECONOMY - Unit: 2 Unity CDL, University of Maiduguri, Maiduguri - Nigeria 16 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 17 ECON 314: POLITICAL ECONOMY Unit: 2 TOPIC 3: TABLE OF CONTENTS PAGES 3.0 TOPIC: DOMINANT BRANDS OF BOURGEOIS ECONOMIC I - 13 3.1 INTRODUCTION - - - - - - - - 14 3.2 OBJECTIVES - - - - - - - - 14 3.3 IN-TEXT - - - - - - - - 14 3.3.1 DOMINANT BRANDS OF BOURGEOIS ECONOMIC - 14 3.3.2 NEO-CLASSISM - - - - - - - 14 3.3.3 KEYNESIANISM - - - - - - - 15 3.4 SUMMARY - - - - - - - 16 3.5 SELF-ASSESSMENT EXERCISE - - - - - - 17 3.6 REFERENCE - - - - - - - 17 3.7 SUGGESTED READING - - - - - - - 17 - - - CDL, University of Maiduguri, Maiduguri - Nigeria 18 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 CDL, University of Maiduguri, Maiduguri - Nigeria 19 ECON 314: POLITICAL ECONOMY 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. CDL, University of Maiduguri, Maiduguri - Nigeria 20 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 21 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 22 ECON 314: POLITICAL ECONOMY 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. CDL, University of Maiduguri, Maiduguri - Nigeria 23 ECON 314: POLITICAL ECONOMY Unit: 2 TOPIC 4: TABLE OF CONTENTS PAGES 4.0 TOPIC: DOMINANTS BRANDS OF BOURGEOIS ECONOMIC II - - - - - 18 4.1 INTRODUCTION - - - - - - - - 18 4.2 OBJECTIVES - - - - - - - - 18 4.3 IN-TEXT - - - - - - - - 18 4.3.1 DOMINANT BRANDS II - - - - - - 18 4.3.2 NEO-RICARDIAN - - - - - - 18 4.3.3 THE IRRELEVANCE OF BOURGEOIS ECONOMICS - 20 4.4 SUMMARY - - - - - - - 22 4.5 SELF-ASSESSMENT EXERCISE - - - - - - 22 4.6 REFERENCES - - - - - - - 23 4.7 SUGGESTED READING - - - - - - - 23 - - - - CDL, University of Maiduguri, Maiduguri - Nigeria 24 ECON 314: POLITICAL ECONOMY 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 CDL, University of Maiduguri, Maiduguri - Nigeria 25 ECON 314: POLITICAL ECONOMY Unit: 2 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] CDL, University of Maiduguri, Maiduguri - Nigeria 26 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 27 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 28 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 29 ECON 314: POLITICAL ECONOMY Unit: 2 TOPIC 5: TABLE OF CONTENTS PAGES 5.0 TOPIC: DIALECTICAL AND HISTORICAL MATERIALISM - 24 5.1 INTRODUCTION - - - - - - - - 25 5.2 OBJECTIVES - - - - - - - - 25 5.3 IN-TEXT - - - - - - - - 25 5.3.1 MARXIST PHILOSOPHY AND DIALECTICAL METHOD - 25 5.3.2 DIALECTICAL MATERIALISM - - - - - 26 5.4 SUMMARY - - - - - - - 27 5.5 SELF-ASSESSMENT EXERCISE - - - - - - 27 5.6 REFERENCES - - - - - - - 28 5.7 SUGGESTED READING - - - - - - - 28 - - - - CDL, University of Maiduguri, Maiduguri - Nigeria 30 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 CDL, University of Maiduguri, Maiduguri - Nigeria 31 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 32 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 33 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 34 ECON 314: POLITICAL ECONOMY Unit: 2 TOPIC 6: TABLE OF CONTENTS PAGES 6.0 TOPIC : HISTORICAL MATERIALISM - - - - 29 6.1 INTRODUCTION 6.2 OBJECTIVES 6.3 IN-TEXT - - - - - - - 30 - - - - - - - 30 - - - - - - - 30 6.3.1 THE EMERGENCE OF HISTORICAL MATERIALISM 30 6.3.2 THE SUBJECT MATTER OF HISTORICAL MATERIALISM- 32 6.4 SUMMARY - - - - - - - 33 6.5 SELF-ASSESSMENT EXERCISE - - - - - 33 6.6 REFERENCES - - - - - - 33 6.7 SUGGESTED READING - - - - - - 33 - - CDL, University of Maiduguri, Maiduguri - Nigeria 35 ECON 314: POLITICAL ECONOMY 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. CDL, University of Maiduguri, Maiduguri - Nigeria 36 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 37 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 38 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 39 ECON 314: POLITICAL ECONOMY Unit: 2 TOPIC 7: TABLE OF CONTENTS PAGES 7.0 TOPIC: MARXIST THEORY OF CAPITAL ACCUMULATION I 34 7.1 INTRODUCTYION - - - - - - 35 7.2 OBJECTIVES - - - - - - - 35 7.3 IN-TEXT - - - - - - - 35 7.3.1 MARXIST THEORY OF CAPITAL ACCUMULATION 35 7.4 SUMMARY - 7.5 SELF-ASSESSMENT EXERCISE 7.6 REFERENCES - 7.7 SUGGESTED READING - - - - - - - - - 37 - - - - 37 - - - - - 37 - - - - - 37 CDL, University of Maiduguri, Maiduguri - Nigeria 40 ECON 314: POLITICAL ECONOMY 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 CDL, University of Maiduguri, Maiduguri - Nigeria 41 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 42 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 43 ECON 314: POLITICAL ECONOMY Unit: 2 TOPIC 8: TABLE OF CONTENTS PAGES 8.0 TOPIC: MARXIST THEORY OF CAPITAL ACCUMULATION 38 8.1 INTRODUCTION - - - - - - - 39 8.2 OBJECTIVES - - - - - - - 39 8.3 IN-TEXT - - - - - - - 39 - 39 - 40 - 8.3.1 CAPITAL ACCUMULATION IN CAPITALIST DEVELOPMENT - - - - - 8.3.2 PROBLEMS OF CAPITALIST DEVELOPMENT 8.3.3 THE CHARACTER OF PRE-CAPITALIST AND CAPITALIST CRISIS - - - - 41 8.4 SUMMARY - - - - - 42 8.5 SELF-ASSESSMENT EXERCISE - - - - - 42 8.6 REFERENCES - - - - - - 43 8.7 SUGGESTED READING - - - - - - 43 - - - CDL, University of Maiduguri, Maiduguri - Nigeria 44 ECON 314: POLITICAL ECONOMY 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. CDL, University of Maiduguri, Maiduguri - Nigeria 45 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 46 ECON 314: POLITICAL ECONOMY 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). CDL, University of Maiduguri, Maiduguri - Nigeria 47 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 48 ECON 314: POLITICAL ECONOMY 4. Unit: 2 progress? What was the basic pre-capitalist crisis? CDL, University of Maiduguri, Maiduguri - Nigeria 49 ECON 314: POLITICAL ECONOMY Unit: 2 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. CDL, University of Maiduguri, Maiduguri - Nigeria 50 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 51 ECON 314: POLITICAL ECONOMY 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. CDL, University of Maiduguri, Maiduguri - Nigeria 52 ECON 314: POLITICAL ECONOMY Unit: 2 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 CDL, University of Maiduguri, Maiduguri - Nigeria 53 ECON 314: POLITICAL ECONOMY 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 CDL, University of Maiduguri, Maiduguri - Nigeria 54 ECON 314: POLITICAL ECONOMY 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. CDL, University of Maiduguri, Maiduguri - Nigeria 55 ECON 314: POLITICAL ECONOMY 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. CDL, University of Maiduguri, Maiduguri - Nigeria 56