A Manual of Political Economy 97110334054

Citation preview

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ISBN: 971-10334054 Copyright 1985

Karrel, Inc. 38 Pansy Avenue

Quezon City, Philippines Third Printing, 1988

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CONTENTS I

r

i

I

Pref ace

.

V

"-. '--.

l.

A Review o f

the Development o f P o l i t i c a l

Economy

l

2.

The A n a t o m y o f C i v i l S o c i e t y

19

3.

P r o d u c t i o n , Lab our v a l u e s and Exchange

28

4.

Lab o u r Power

39

5.

Surplus

u

and the Lab oUr P r o c e s s

Value

49 r

61.

Circulation

7•

Expanded R e p r o d u c t i o n

72

8.

Unemployment and Accumul ati°o'r1

80

9.

Economic

C r I s i s : The C r i t i q u e o f s a y ' s Law

10.

Economic

C r i s i s : The " D e C l i n i n g R a t e o f P r o f i t 1 0 7

II.

M o n e y i n the

12.

Th e P r i c e System

138

13.

T r a n s f o r m a t i o n o f value s

148

14.

N o n - C a p i t a l i s t Modes o f p r o d u c t i o n

161

la

Co.raf:.l.Las.i on.

lam.. .

T.

and Exchange

Crisis

59

89

122

J

1-ndex

193

iii

I

PREFACE

I \

I

I n the writing of t h i s book, a number o f i n t e l l e c t u a l d e b t s have a c c u m u l a t e d , a l t h o u g h none a r e r e s p o n s i b l e f o r t h e ' f i n a l p r o d u c t . At C a m b r i d g e , Roy Green, C.A. G r e g o r y , G.C. H a r c o u r t a n d P r u e K e r r made g e n e r a l comments on M a r x i a n v e r s u s n e o - c l a s s i c a l economics which encouraged the thought . t h a t an a c c o u n t o f " b a s i c Marx on economics was s t i l l needed, e s p e c i a l l y at: the t e a c h i n g l e v e l . In Sydney, .th e comprehensive knowledge Of P.D. G r o e n e w e g e n a n d D.L. C l a r k on the h i s t o r y o f economic t h o u g h t w e r e o f g r e a t a s s i s t a n c e to us a n d l e n t u n s t i n t i n g l y . p e t e r L i m q u e c o o f J o u r n a l o f C o n t e m p o r a r y A s i a i n s i s t e d On the r e l e v a n c e o f the M a r x i a n " v i s i o n " o f economic g r o w t h in understanding the current capitalist industrialisation of Asia. However, the main ,

intellectual

influences

have

come

from

the

late

M a u r i c e Dobb and h i s l i t e r a r y e x e c u t o r B r i a n P o l l i t t , whose error i s i n a s s e m b l i n g Dobbs's p o l i t i c a l economy w r i t i n g s i n s p i r e d t h i s l i t t l e m a n u a l along with the f e e l i n g t h a t each d e c a d e r e q u i r e s us to i n c o r p o r a t e new i d e a s of r-

p o l i t i c a l .cconomy.

While i t

is

not l i k e l y

t h a t t o t a l l y new t h i n g s

about marx's ecoNomic theory will abound in an e x p o s i t o r y a c c o u n t o f t h e k i n d which f o l l o w s , t h e p e r s p e c t i v e changes w i t h ea-ch new phase Of c a p i t a l i s t d e v e l o p m e n t a n d i t i s perhaps a u s e f u l g u i d e to the "reader 'to highlight the main . aspects of. our p e r s p e c t i v e below. . . i F i r s t , w h i l e t h e w e r k o f M a u r i c e Dobb and R o n a l d Meek, t h e i n t e r p r e t e r s o f M a r x ' s e c o n o m i c s ' f o r ' the previous generation are acknowledged for their i n s i g h t , o n l y on the t h e o r y o f c r i s i s has t h i s book's i n t e r p r e t a t i o n Corrie c l o s e to t h e i r e x p o s i t i o n . . Second, i t h a s seemed n e c e s s a r y , " h a v i n g g o n e through Marx's Grundrisse systematically, in p r e p a r a t i o n f o r these e s s a y s , to r e - e m p h a s i s e Marx's d e b t to "the methodology o f Hegel. T h i s i s something '

V

'b

vi Preface

I

o n e o f the a u t h o r s ( M c F a r l a n e ) wrote a b o u t - i n 1956 and had c o r r e s p o n d e d w i t h Dobb a b o u t . I t was s o m e t h i n g n o t fully taken up ( o r e v e n r e j e c t e d ) by t h e 1970s i n t e r p r e t a t i o n s of such w r i t e r s as Al+husser` o r H i n d e s s and H i r s t , a l t h o u g h i t was s p o t t e d v e r y w e l l by the v e t e r a n R o s d o l s k y . S i n c e Marx w r o t e t h e r e h a v e been many c h a n g e s i n c a p i t a l i s t s o c i e t y : the. r i s e and d i s i n t e g r a t i o n o f i m p e r i a l i s m ; t h e e m e r g e n c e o f ' s e r v e i c e i n d u s t r i e s to r i v a l m a n u s a c t u r i n g i n s i z e -and employment c r e a t i o n ; growth of a "white c o l l a r " work force; a r a d i c a l i s e d s e c t i o n o f t h e m i d d l e c l a s s Which h a s shown c o n c e r n a b o u t mass unemployment and the d e s t r u c t i o n o f the e n v i r o n m e n t . The q u e s t i o n e m e r g e s , t h e n , w h e t h e r the c o n t e n t s o f a textbook on M a r x i a n p o l i t i c a l economy . s t i l l maintains i t s relevance? . The r e a s o n s f o r a n a f f i r m a t i v e answer to t h i s issue a r e s e t o u t s y s t e m a t i c a l l y i n the Conclusion to t h i s b o o k , They i n c l u d e the a n a l y t i c a l power o f Marx's t h e o r y o f c a p i t a l a c c u m u l a t i o n and c r i s i s i n a p r o f i t based s o c i e t y ; M a r x ' s " v i s i o n " a s to w h e r e such a s o c i e t y was h e a d i n g a n d f r o m whence i t came; t h e l i n k between economics and p o l i t i c s proposed. i n M a r x ' s concept of c l a s s s t r u g g l e ; and the h e u r i s t i c v a l u e of t h e method of h i s t o r i c a l m a t e r i a l i s m . However the need r e m a i n s to a b s o r b a n d u t i l i s e k e y c a t e g o r i e s o f - p o l i t i c a l. economy such a s the s u r p l u s v a l u e ; c e n t r a l i s a t i o n and c o n c e n t r a t i o n o f capital; expanded reproduction etc. Despite the increasing "computerisation" of t-he labour and production processes i n modern c a p i t a l i s t n a t i o n s , t h e m a j o r r e s u l t s o f M a r x ' s p o l i t i c a l economy r e m a i n b a s i c a l l y u n c h a n g e d . The c o m b i n a t i o n of N a t u r e with human lab our

power

is

basic source of

the

I

w e a l t h and

of the economic surplus l societies. Never theless, with t in h u n d r e d y e a r s ,Q a b o u t the way and in v i e w of wham we c a p i t a l i s t e c o n o m i e s have d e v e l o p e d , rrain parts of the t h e o r y o f Marx's story require modification profit f a l l ) I' w i t h o u t t h e t e n d e n c y o f t h e . .,. whole s k e l e t o n a s h e n e c e s i t a t i n g .ae..,..aa,D _

-

_

.

_

I

p o l i t i c a l changes

Europe inside lab o u r .movement a r e , o f c o u r s e , s i g n i f i c a n t new aspects [Qty t h a t p o l i t i c a l economy needs to .. .accoL1nt.- A number o f v e r y good books have gmq been published on t h i s a s p e c t ( l ) which emphasize the growing p o l i t i c a l weight o f

people located

between

in

Western

a l a r g e number o f

the t i n y class o f

employed

proper t y -

o w n e r s , c a p i t a l i s t s , r e n t e r s , e t c . , and the b u l k o f I

manual .

working

class.

.The.se

works.

still.

the

need

Preface- vii

.

s u p p l e m e n t i n g , however, b y a k n o w l e g i g e o f t h e b a a i "Iv1arX"i"an e c o n o M i C ' c l a t e g o r i e s . The need f o r p o l i t i c a l economy to " s k e t c h i n " the a n a t o m y o f c i v i l s o c i e t y

r e m a i n s , even i f some bones on the . Skeleton have altered in importance. . . . . We have s a i d t h a t each d e c a d e looks.. a t Marxian political eConomy w i t h different eyes. I n . t h i s par t i c u l a r a c c o u n t o f Marx's e c o n o m i c s , the whole emphasis 'is on t h e . c r i s i s - r i d d e n . n a t u r e o f the c a p i t a l i s t mode of p r o d u c t i o n and the impor l a n c e o f g e t t i n g the a n a l y s i s of i t . r i g h t . The c h a p t e r s o n l

I

economic c r i s i s a r e , i n t h i s sense, t h e book. They s h o u l d be t a k e n t o g e t h e r w i t h comments-about Marx's method, a sceptical some i n t e r p r e t a t i o n s o f Marx» of- the

maintaining

our

respect

for

hub of t h i s the V a r i o u s a t t i t u d e to past ( w h i l e

w h a t . those

earlier

p o l i t i c a l e c o n o m i s t s d i d manage to a c h i e v e ) and a ' p o s i t i v e a t t i t u d e to . s u c h t h i n k e r s as K a l e c k i a n d S t a f f a , a s i n f o r m i n g o u r whole a p p r o a c h to the t o p i c o f M a r x ' s p o l i t i c a l . economy a s t h e a c c o u n t o f the a n a t o m y o f C i v i l s o c i e t y . I t may be - t h a t t h e e m p h a s i s and tone o f the f o l l o w i n g pages r e f l e c t s t h e f a c t t h a t we h a v e o n l y r e c e n t l y w i t n e s s e d the c r i s e s , b u s i n e s s c y c l e s and w o r l d economic slumps t h a t h a v e t a k e n p l a c e

s i n c e 1971. C e r t a i n l y a n a c c o u n t o f M a r x i a n economics . w r i t t e n i n the l a t e 1950s o r e a r l y 1960 s would h a v e had a v e r y d i f f e r e n t p e r s p e c t i v e . . ,

There a r e two a d d i t i o n a l

reasons

for

having

a

manual of . Marxian~ p o l i t i c a l economy handy when dealing with recent t r e n d s in Third-World countries i n Asia and A f r i c a . ( 1 ) To a v o i d the e r r o r o f s e e i n g the r a p i d g r o w t h o f c a p i t a l i s m as u n p r o b l e m a t i c a l . This r e c e n t b u r s t o f i n d u s t r i a l i s a t i o n needs a n a n a l y s i s w h i c h i n c l u d e s giving "background" to capitalism: its earlier m e r c a n t i l e and f i n a n c i a l f a c e s ; t h e d i f f e r e n t i a t i o n o f the p e a s a n t r y u n d e r c o m m e r c i a l i s a t i o n ; f o r m s o f r e s i s t a n c e f r o m the c l a s s e s o f the p r e - c a p i t a l i s t mode o f p r o d u c t i o n and the way these c o n t r a d i c t i o n s

are ..comments

resolved- i n the new system. To t h i s end, Mar"x's on " m a r g i n a l s o c i e t y " and h i s use o f the

d i s t i n c t i o n s between

simple commodity

p r o d u c t i o n and

complex commodity p r o d u c t i o n and between Departments I, I I . a n d I I I ( s e c t o r s producing c a p i t a l goods, wagegoods and l u x u r y c o n s u m p t i o n g o o d s r e s p e c t i v e l y ) a r e

a l l n e c e s s a r y to assess t h e . c o n t r a d i c t i o n s a s well as

.

the p r o g r e s s of d e v e l o p i n g c a p i t a l i s m i n the T h i r d WOrld. ' ( 2 ) To avoid the e q u a l l y s e r i o u s e r r o r s o f the

"dependency school" the " d e v e l o p m e n t o f .v

-

whether the e a r l i e r v e r s i o n o f u n d e r d e v e l o p m e n t " on the. i m p a c t

.x

vI I I Preface

.

sys1;era".. "world capitalism in denying independent g r o w t h to Third World. coL1ntries,(2) orthe .. sophisticated

n

~ion

about

'

"dependent

i n d u s t r i a l i s a t i o n u o f the Third W o r l d . ( 3 ) manual

M a r x i s t p o l i t i c a l economy

must

and t h i r d " worlds,l about . = links . Dr between um e . I t must, above a l l , b r i n g qnluM ' of motion" social systems based on institutionalized ex - o f labour by c a p i t a l . 1

. i"l

,

:;~»»»~

,,/ 1

ve

tr

. .. . .. . . .

I.

NOTES

_

_

(1) Ralph miliband, c a p i t a l i s t Democracy i n .B r i t a i n , O x f o r d University Press, 1982, and D. C o a t e s , The C o n t e x t o f B r i t i s h p o l i t i c s , , H u t c h i n s o n , London, 1984, a r e good examples. , . ( 2 ) See B. McFax;51ane and. P. Lirnqueco ( e d s . ) , Neo_riarxist T h e o r i e s o f Development, .Croom Helm, London,

1982.

.

in Dudley Seers. (eds, (3) See m. B i e n f i e d Detergency T h e o r y : A * C r i t i c a l Reassessment, F r a n c i s ,_

P i n t e r , London, 1981, a n d A . F o s t e r - C a r t e r , " T h e o r y i n Development: C u r r e n t T r e n d s " , T h i r d World Book Review, V o l . l , no. 1, 1984, pp. 4-9.

I

I

J

I

1

J

I

4,

'

Chap fer I

DEVELOPMENT OF POLITlCA.L ECONOMY, l

n.

l

The a i m o f t h i s c h a p t e r is t;o o u t l i n e the m a i n e l e m e n t s o f t h e c l a s s i c a l . s c h o o l o f p o l i t i c a l economy a n d M a r x ' s c o n t r i b u t i o n to i t s development. Some c o m p a r i s o n s w i l l also be made w i t h . t h e more f o r m a l

a n a l y s i s o f n e o c l a s s i c a l economics which i s ' w i d e l y used i n o r t h o d o x t h i n k i n g and p o l i c y m a k i n g .

.

CLASSICAL POLITICAL ECONOMY

By the "classical school" ' o r "classical p o l i t i c a l economy" we Mean those a u t h o r s , r a n g i n g f r o m Adam S m i t h

to

Ricardo,

who d i s c u s s n a t u r a l

price

(or

"necessary price") a s the k e y to u n d e r s t a n d i n g ' the l o n g e r r u n f o r c e s w h i c h s h a p e t h e v a l u e o f goods. Also c r u c i a l was t h e p r o p o s i t i o n t h a t t o t a l p r o d u c t i o n - m a y be seen as a c i r c u l a r p r o c e s s l i n k i n g p r o d u c t i o n and p r o d u c t i v e c o n s u m p t i o n , w h e r e the i n t e r d e p e n d e n c e o f p r o d u c t i o n , d i s t r i b u t i o n a n d c i r c u l a t i o n e n s u r e s the c o n d i t i o n s f o r reproduction of the social product. Such a model came o r i g i n a l l y from Quesnay and C a n t i l l o n i n F r a n c e , a n d was e x p a n d e d by i n t r o d u c i n g the n o t i o n o f e c o n o m i c s u r p l u s w h i c h e n t a i l s the c o n c e p t o f n e c e s s a r y e x p e n s e s i n p r o d u c t i o n . The b a s i c e q u a t i o n Of c l a s s i c a l e c o N o m i s t s w h i c h s u m m a r i s e s the m a j o r r e l a t i o n s h i p s . o f a n economy as t h e y c o n c e i v e d i t was:

surplus

(net)

output

- wages

T h i s e q u a t i o n , w i t h i m p l i c i t s u g g e s t i o n s o n how to s o l v e i t , was p r e s e n t iii the w o r k s o f p o l i t i c a l economists from W i l l i a m Petty in the eighteenth .century to Marx and even up to S t a f f a ( 1 ) i n 1960. Among t h e q u e s t i o n s posed i n u s i n g t h e c o n c e p t of economic s u r p l u s were~

1

2

(at

A MANU.AL OF POLITICAL ECONOMY

of

what

does

the

consist

surplus

determines .its s i z e ; (b) (c)

where does the surplus o r i g i n a t e ;

(d) (e)

what a r e

(f)

what

and

.

among what: s o c i a l classes. i S

it

distributed;

rules o f d i s t r i b u t i o n involved; what d e t e r m i n e s nae g r o w t h o f surplus o v e r time; happens b e r e l a t i v e shares o f surplus accruing =- . d i f f e r e n t categories of. 1

appropriators

the

surplus

increases

over

The f o c u s which' t h i s e q u a t i o n b r i n g s a l s o h e l p s us to d e f i n e m o r e s c i e n t i f i c a l l y the b e g i n n i n g s o f the d i s c u s s i o n of these issues. M a r x , ( 2 ) d a t e s the o r i g i n bf the c l a s s i c a l school " f r o m W i l l i a m P e t t y i n E n g l a n d a n d B o i s g u i l l e b e r t . i n F r a n c e [ u p to] R i c a r d o i n t h e f o r m e r c o u n t r y and Sismondi i n the l a t t e r " . A p a r t f r o m .the i s s u e o f s u r p l u s we h a v e m e n t i o n e d above, t h i s introduction also mentions, without elaboration, three h a l l m a r k s o f c l a s s i c a l p o l i t i c a l economy i n w h i c h t h e d i s c u s s i o n .of s u r p l u s to f o l l o w s h o u l d be s e t : (an

a theory

between

1

We) I

of

distribution of

'social

classes

the n a t i o n a l income

using

concept

he

of

t economic s u r p l u s ; a d i s c u s s i o n o f the d e t e r m i n a t i o n of the s h a r e o f r e n t s in t h a t surplus so t h a t -what i S l e t t a t the

f i n a l round o f the c i r c u l a t i o n p r o c e s s i s the d i s t r i b u t i o n o f n e t produce minus r e n t between (C)

laboUr and c a p i t a l ; . an account o f economic g r o w t h and o f the . f a c t o r s encouraging or i n h i b i t i n g the g r o w t h o f economic surplus.

These

were . issues

classical

political

and

economy

mechanisms paid

to

which

attention.

The

PHYSIOCRATS in the y e a r s b e f o r e the FreNch R e v o l u t i o n r a i s e d a l l the s i g n i f i c a n t i s s u e s and a r e now seen as thefirst

scientific

school o f

economics

-

the f i r s t

school of thinkers to d i s c u s s . the origin and d i s t r i b u t i o n o f surplus and to l i n k economics and p o l i t i c s in a way that ' f o r e s h a d o w s modern p o l i t i c a l economy. . Whereas s i r James Steuar t had seen surplus a r i s i n g in both a g r i c u l t u r e and industry, Quesnay and Other P h y s i o c r a t s stuck to the idea that the d e g r e e o f p r o d u c t i v i t y which makes surplus possible appe.ars first in agriculture i n . that the two actors responsible f o r surplus a r e n a t u r e . a n d the worker s i n

agriculture farmers.

The

together

with

landlords, by

commercially

contrast,

just

Use

minded their

Development of Political Economy 3

p o s i t i o n tO waylay the s u r p l u s . Surplus was, then, . d e f i n e d in the Tableau Economique - a s the "produit net", being total a g r i c u l t u r a l . o u t p u t m i n u s expenses i n c u r r e d i n the p r o d u c t i o n cycle. I n the c u l t i v a t i o n o f t h e s o i l , the l a b o u r e r s n o t o n l y r e p r o d u c e t h e i r own subsistence and t h e i r seed c o r n etc., wh ich was. necessary to r e p l a c e what had been used up i n the course Of c u l t i v a t i o n , t h e y produced a l s o a s u r p l u s w h i c h , went by custom o r c o n t r a c t to o w n e r s o f l a n d e d p r o p e r t y . Trade and ntahuf a c t u r e on the other hand were " s t e r i l e " , n o t i n the sense t h a t what t h e y produced had no v a l u e , b u t in the sense t h a t what they added to the r a w p r o d u c e d i d no m o r e t h a n r e p l a c e t h e i r m a n u f a c t u r i n g c o s t s and ' t r a d i n g expenses and So c r e a t e d no s u r p l u s . . . . Physiocrats Th e a n a l y t i c a l f r a m e w o r k o f the e n a b l e d them to d i s c u s s i s s u e s now f a m i l i a r to modern e c o n o m i s t s such a s ' the c h o i c e o f technique of p r o d u c t i o n . QUESNAY i n " F e r m i e r s " c o n s i d e r e d the r e l a t i v e m e r i t s o f h o r s e s and oxen i n r e l a t i o n to m a n u r e t h r o u g h p u t and e r r o r t put i n t o p u l l i n g , w h i l e T u r g o t i n h i s S u r La G r a n d e et_ P e t i t e C u l t u r e showed w i t h a f e w d e f t s t r o k e s t h a t t h e choice o f h o r s e s over oxen had to be r e l a t e d to the s o c i a l r e l a t i o n s o f production in p a r t i c u l a r a r e a s : whether a f i x e d money r e n t Was b e i n g p a i d . . t h e l a n d l o r d ( w h e r e working f a r m e r s a r e responsible f o r t h e i r own c o s t s ) o r whether Such expenses were b e i n g met by the l a n d l o r d i n s o m e m e a s u r e , w i t h consequent c l a i m s on the c r o p i t s e l f . Again the key h e r e i s the c a p i t a l i s t f a r m e r whom T u r g o t sees a s the. t r u e c r e a t o r o f s u r p l u s , while o f m a r k e t s , new taxes and changes i n t h e . growth interest rates will affect the investment and p r o d u c t i v i t y o f the

productive class of £armers.(3) 1

MARX'S. CONTRIBUTION _Marx was 'to develop Quesnay's

ideas

further

proceeding to the idea that the production o f under s p e c i f i c c o n d i t i o n s o f

use o f

by

surplus

the labour f o r c e

i s the key to understanding the essence

o f par t i c u l a r

modes Of production. under slavery, the social e x i s t e n c e f o r m o f lab o u r , f o r c e d labour, produced the surplus; under feudalism ground rent measured the

e x p l o i t a t i o n o f the s e r f ; in a ' capitalist system, unpaid l a b o r o f ~free wage w o r k e r s ' formed the i n d u s t r i a l - p r o f i t s or surplus value (on which see Chapter 5 b e l o w ) . , By the time o f Ricardo, English s o c i e t y had advanced and a struggle had begun between the r i s i n g

I

4

I

*.

A MANUAL OF POLITICAL ECONOMY

b o u r g e o i s i e and owners o f l a n d . Because o f the h i g h e r level, o f society, a s compared to t h e 1750s, we f i n d ' in R i c a r d o the i d e a t h a t s u r p l u s c a n o r i g i n a t e i n both i n d u s t r y and a g r i c u l t u r e , a s well as the v i e w t h a t landowners have the power to d e d u c t f r o m s u r p l u s a r i s i n g s h a r e f o r themselves. The two t h i n g s o p e r a t i n g in Ricardo's' time were the landlord dominated P a r l i a m e n t and the existence of the Corn Laws p r e v e n t i n g import of food. What t h i s meant was t h a t as m a r g i n a l land had to be brought .into c u l t i v a t i o n to feed a growing p o p u l a t i o n , the owhers of better land w i t h lower costs g o t a d i i i j e r e n t i a l r e n t , o n e . which would increase over time. Ricardo went on to argue t h a t t h i s r i s i n g r e n t s h a r e would provoke a s t r u g g l e between the i n d u s t r i a l i s t s and landowners. From . t h e f o r e g o i n g comments i t may be i n d i c a t e d even a t t h i s v e r y e a r l y s t a g e O f t h i s book t h a t the c l a s s i c a l economists ( a n d M a r x ) sought to u n d e r s t a n d the i n n e r w o r k i n g s of c i v i l s o c i e t y r a t h e r than j u s t i t s outward forms, a s s h o w n b y the a t t e n t i o n g i v e n to. the d i v i s i o n o f annual p r o d u c t i o n i n t o necessary .expenses and s u r p l u s p r o d u c t and the . emphasis on p r o d u c t i o n r a t h e r than exchange. I t i s possible to see through a stud-y o f i n d i V i d u a l w r i t e r s the e v o l u t i o n o f s p e c i f i c c a t e g o r i e s o f p o l i t i c a l economy: s u r p l u s l a b o u r ; w e a l t h ; wage-labour; , d i v i s i o n of l a b o u r ; money; and the l e a v i n g behind of i d e a s a b o u t w e a l t h as the amount o f t r e a s u r e a s o c i e t y possessed. . The M a r x i a n school, w h i l e ' a g r e e i n g w i t h the r e m a r k s of Quesnay and. Adam Smith on s u r p l u s and the d i v i s i o n of l a b o u r , . c o n s i d e r a b l y Widened the scope f o r u t i l i s i n g these concepts, while moving away f r o m the emphasis of both Quesnay and R i c a r d o on the "corn" economy. to

an e x a m i n a t i o n o f t h e emergence o f s u r p l u s

in manufactures and manufacturing as the maiN focus of a t t e n t i o n . For example, Marx went on to the concept .of " s u r p l u s Value" ( s e e c h a p t e r 5 below) and how t h i s f o r m o f s u r p l u s c i r c u l a t e d between p r o d u c t i v e s e c t o r s o f t h e economy a n d . n o n - p r o d u c t i v e S e c t o r s such a s

f i n a n c e and' commerce sectors which b r i n g a b o u t a r e d i s t r i b u t i o n o f the s u r p l u s . . . I n the next c h a p t e r i t w i l l be shown t h a t M a r x ' s theory of h i s t o r i c a l materialism is rooted i n a philisophical tradition

-

t h a t o f Hegel.

I t ' i s a l s o u s e f u l to note t h a t i n i m p o r t a n t ways Marx. can be seen aS the l a s t -of the n i n e t e e n t h c e n t u r y c l a s s i c a l economists. For Marx stood d i r e c t l y i n the l i n e of

has

R i c a r d o and

been

Marx's

substantially

d i s c o v e r e d by S r a f f a and R i c a r d o ' s Works ( 4 ) .

interpretation ofRicardG*

confirmed embodied .

by in

the

material

h i s e d i t i o n of -

I

Development of Political Economy

5

The r e s e a r c h done . b y S r a f f a (including his d i s c o v e r y i n the 1940.5 of new, h i t h e r to undiscovered p a p e r s b y R i c a r d o . " o n V a l u e a n d d i s s e c t i o n of the m e a n i n g a n d i m p l i c a t i o n s o f the "Essay .on P r o f i t s " ) i n d i c a t e s the l i n k between t h e use o f " s u r p l u s " in explaining

d i s t r i b u t i o n of

society's

income

between

s o c i a l c l a s s e s and a l a b o u r t h e o r y of ValUe. I n a " c o r n " economy ( w i t h c o r k r e p r e s e n t i n g both f i n a l p r o d u c t a n d wages, p r o f i t was expressed i n t e r m s O f c o r n and the g e n e r a l p r o f i t rate depended .on t h e a g r i c u l t u r a l p r o f i t r a t e . T h i s , i n t u r n , .was the p r o f i t o n the l a s t p o r t i o n o f c a p i t a l employed on the l a n d : t h e r a t i o o f c o r n produced a t t h e m a r g i n to co-rn consumed as a productive input ( " f e e d " to l a b o u r e r s ) . As a p r o d u c t - r a t i o i t was i n v a r i a n t . t o . a n y c h a n g e i n the p r i c e o f c o r n o r of a n y t h i n g e l s e . L a t e r , . i n h i s "Principles" Ricardo put the whole t h e o r y ' i n the f r a m e w o r k o f a L a b o L l r ~ T h e o r y o f Values- i t was L a b o u r ra.ther than Corn which became the q u a n t i t y i n w h i c h the key r a t i o was e x p r e s s e d . I f we bear t h i s i n mind i t w i l l be e a s i e r to see the p o i n t , a r g u e d i n C h a p t e r s 3-5, t h a t the concept o f labourplayed a central role .in Marx's..analysis it

-

I

-

4.

WGS a l i n k b e t w e e n h i s p o l i t i c a l a n a l y s i s a n d h i s l v i e w o f h i s t o r y . For l a b o u r was synonymous W i t h the concept o f _ p r o d u c t i v e a c t i v i t y : man's m a s t e r y and w o r k i n g - u p o f n a t u r e being par t of I-listory's u n f o l d i n g . Another aspect h e r e - i s t h e d i r e c t i o n ` i n which s o c i e t y was moving: R i c a r d o expected a t r e n d to a s t a t i o n a r y s t a t e , whereas M a r x saw c a p i t a l i s m as i n t r a n s i t i o n , a passing s t a g e i n the economic h i s t o r y o f o u r epoch,

d e s t i n e d to be replaced by a system based on s o c i a l o w n e r s h i p a n d d i r e c t i o n b y the f o r m e r l y o p p r e s s e d working

class..

.

"\

THE R I S E OF NEO-CLASSICAL ECONOMICS I n h i s i n t r o d u c t i o n to A. M e r g e r ' s book The R i g h t

to the Whole Produce o f Labour i n 1899, P r o f e s s o r Fox w e l l , a c o n t e m p o r a r y o f A l f r e d M a r s h a l l , c o m p l a i n s that Ricardo "did more 'than any intentionally S o c i a l i s t w r i t e r to sap the f o u n d a t i o n o f t h a t f o r m o f s o c i e t y h e was t r y i n g to e x p l a i n . " What Fox well p r o b a b l y had in mind h e r e ' w e r e Ricardo's v i e w s on .the s t a t i o n a r y state and h i s e l a b o r a t i o n of a theory based .on the Labour Theory of v a l u e . However Fox w e l l took c o m f o r t f r o m the g r o w i n g s t r e n g t h o f t h e new t h e o r i e s 'of M a r s h a l l and Jevons., so t h a t w i t h the ' r e v o l u t i o n ' \

that

economic

reaction

teaching .had

undergone, "the

(of socialist writers to doctrine) is correspondingly diminished."

the

force

of

economic

6 . .A MANUAL OF POLITICAL ECONOMY

At a d e e p e r l e v e l what both Fox w e l l and M a r s h a l l f e a r e d was the use to which the idea Of economic s u r p l u s m i g h t be p u t . A l r e a d y R i c a r d o had moved the i s s u e s of v a l u e and d i s t r i b u t i o n to the c e n t r e o f d i s c u s s i o n i n p o l i t i c a l economy. ' . Marshall's \

P r i n c i p l e s o f Economics' played a key taking o.Llt s u r p l u s i n the P h y s i o c r a t i c aNd sense f r o m the m a i n s t r e a m of economic thou®H.... _-._..Q _;._..JO by a t t a c k i n g R i c a r d o ' s use o f the concept o f a f i x e d wa.ge o r s u b s i s t e n c e wage which he r i g h t l y s a w a s t h e f o u n d a t i o n o f the emergence o f s u r p l u s (.s net output subsistence wage). . What Marshall and oth a economists ,,._

.

=

m

d i d was to c o n c e n t r a t e M r e p l a c i n g which ( t h e y i m a g i n e d ) the s u b s i s t e n c e

t h e o r y on assumption depended ... the l a b o u r t h e o r y o..f v a l u e . W w approach to v a l u e and d i s t r i b u t i o n was c o n s t r u c t e d i n w h i c h s u p p l y and demand movements d e t e r m i n e d p r i c e s a n d the wage l e v e l and caused wages to move a b o u t . whereas R i c a r d o r e l e g a t e d " s u p p l y and demand" to a f e w pages i n C h a p t e r 30 of h i s p r i n c i p l e s o f p o l i t i c a l Economy and T a x a t i o n , the new t h e o r i e s s o u g h t n o t h i n g - l e s s than a n e w l o g i c a l f o u n d a t i o n to t h e t o p i c w h i c h R i c a r d o had s a i d h i s b o o k was a l l a b o u t distribution o f income between s o c i a l c l a s s e s . . Neo~classical economists started with a d i f f e r e n t p i c t u r e o f how a n economy s h o u l d be viewed. 1

-

WhereaS t h e C l a s s i c a l p o l i t i c a l e c o n o m i s t s b e g a n w i t h the s o c i a l whole, the neW approach p i c t u r e d a s e r i e s o f h e d o n i s t i c consumers p l a c i n g a p s y c h i c e v a l u a t i o n on g o o d s , a c c o r d i n g to t h e _ _ . i n c r e m e n t s in pleasure

received.. Jevons became so e x c i t e d w i t h t h i s new " v i s i o n " o f the economy t h a t he p r o c l a i m e d '"" be a "wrong-headed genius" shunted p o l i t i c a l economy o n t o t h e w r o n g development

The importance of. the a p p T

of the theory

of pleasures and p a i n s a t the hao f Jevons o n l y t h a t i t d e m o n s t r a t e d JevonS' d e s i r e to c o u n t e r the "wrong-headed g e n i u s " ; R i c a r d o , b u t t h a t i t s e t a t r a d i t i o n o f hedoNism i n Neo-classi c a l t h e o r i e s u s i n g " m a r g i n a l u t i l i t y " to e x p l a i n va1L1e.(5) Jevons w r o t e a b o u t consumers who s o u g h t maximum p l e a s u r e in the m a r k e t - p l a c e ; he d i s c u s s e d w o r k e r s a n d . c a p i t a l i s t s o p e r a t i n g i n ways to m i n i r i s e p a i n s ( o r m a x i r i s e l e i s u r e ) . This. f i r m l y launched the p s y c h o l o g i c a l ool.°, i t was, f o r e x a m p l e , f o u n d a t i o n mn d o ,. e n t h u s i a s m by F.Y. Edgewood t h , a t a k e n up powerful . development o f ' English economics followed Dior and T h o r o l d R o g e r s a s Professor Political onoruy a t O x f o r d and was E d i t o r of p r e s t i g i o u s Economic J o u r n a l (1891's

.

,

Development of Political Economy

7

1 9 2 6 ) . Edgewood t h

c a r r i e d f o r w a r d what h e c a l l e d " t h e c a l c u l u s o f f e e l i n g , o f p l e a s u r e and p a i n " :

i f we c a n n o t count the golden 'sands o f l i f e , we cannot n u m b e r ' t h e i n n u m e r a b l e s m i l e s of s e a s o f l o v e , b u t we seem to be c a p a b l e o f o b s e r v i n g t h a t t h e r e is a g r e a t e r , t h e r e is a less, m u l t i t u d e of p l e a s u r e - u n i t s and m a s s . o f enoLlgh.(6 .)

h a p p i n e s s and t h a t - i s

To the u n d e r l y i n g p r i n c i p l e o f hedonism, J e v o n s added the i d e a t h a t people want to possess g o o d s - w h i c h h

yield u t i l i t y

- and

t h a t the d e t e r m i n i n g

f a c t o r in

the

g o o d s o r exchange of money f o r g o o d s a t the. g o i n g p r i c e would be t h e ' " f i n a l d e g r e e of u t i l i t y " . He put i t t h i s way:

exchange of

U t i l i t y must be c o n s i d e r e d as measured by, o r e v e r a s i d e n t i c a l w i t h , the a d d i t i o n made to a. p e r s o n ' s happiness. I t i s a c o n v e n i e n t name f o r the a g g r e g a t e o f the favorable balance of f e e l i n g produced the sum of the pleasure c r e a t e d and the pain prevented We must now carefully discriminate. between . the "total U t i l i t y " a r i s i n g f r o m a n y commodity and the u t i l i t y a t t a c h i n g to a n y p o r l i o n o f i t . ( ' 7 )

.-

I

I

v a l u e and p r i c e w e r e d e t e r m i n e d i n Jevons' model by a r a t h e r c l u m s y process o f exchange between t r a d e r s a l l f o l l o w i n g t h e i r d e s i r e to e q u a l i s e p r i c e s a n d the f i n a l . degree of u t i l i t y . Other neo-classical w r i t e r s used a d i f f e r e n t m e t h o d . to i l l u s t r a t e t h e d e t e r m i n a t i o n o f p r i c e s . W a l r a s p i c t u r e d p r i c e s being

-

s h o u t e d o u t by `an a u c t i o n e e r a s " t a t o n r i e m e n t s " o r b i d s

w i t h . the c o n s u m e r s r e a c t i n g u n t i l the m a r k e t s a l l cleared. Marshall b u i l t o n some c o n c e p t s o f John S t u a r t m i l l to a n a l y s e the u n d e r l y i n g factors shaping s u p p l y a n d demand and t h e i r i n f l u e n c e . o n ~ p r i c e (and vice~versa). . . Was a l l o f t h i s t o t a l l y new? N o t r e a l l y . The i d e a o f u t i l i t y h a d been o u t l i n e d many y e a r s b e f o r e b y D a v a n z a t i ( 1 5 8 8 ) , Jo hn Law ( 1 7 0 5 ) , G a l i a n i ( l ' 7 5 9 ) , a n d Dupuit (1844). The reason f o r

the stroNg e m e r g e n c e o f m a r g i n a l u t i l i t y t h e o r i e s i n 1870 i s d e b a t a b l e . R a d i c a l a n d M a r x i s t t h e o r e t i c i a n s have tended to see h e r e Some a t t e m p t t o h e a d o f f the k i n d o f s u r p l u s a p p r o a c h t h a t was b e i n g p o p u l a r i s e d by t h e " R i c r a r d i a n o t h e r s n o t e d Jevorzs' e x t r e m e d i s l i k e of

Socialists"-

t h a t wing of by .J.s.mill. I t i s

c l a s s i c a l t h e o r y S t i l l represented a l s o l i k e l y t h a t the n e w t h e o r i e s . o f

I

the

1870's -arose

8

A MANUAL OF POLITICAL ECONOMY

f r o m intellectzuWl i d i s s a t i s f a c t i o n w i t h what; Senior and J.B.Say, the s i g n i f i c a n t ml thodox e c o n o m i s t s u n t o t h a t t i m e , had w r i t t e n on v a l u e . " ,, A major t h a t the earlier theories of value failed "symmetry" t e s t - i n the a r e a o f co p r o d u c t i o n they .had looked a t " r e a l " f a c t o r s ( s u c h a s d i f f i c u l t y in i n c r e a s i n g supply) , w h i l e on the demand s i d e they had b r o u g h t i n p u r e l y s u b j e c t i v e f a c t o r s . So i n the new t h e o r e t i c a l upsurge sponsored by Marshall and Jevons a f t e r 1870, l a b o u r costs were more and more t r e a t e d , n o t as r e a l o u t l a y s o f energy, o r g a n i s a t i o n and the payment of a ,

l 4'

~~.