UNIVERSITY OF MAIDUGURI CENTRE FOR … 1-5/ECO 314.pdf · In the same way you read the in-text question and in-text answer carefully, ... ECON 314: POLITICAL ECONOMY Unit: 2 Page14

ECON 314: POLITICAL ECONOMY Unit: 2

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UNIVERSITY OF MAIDUGURICENTRE FOR DISTANCE LEARNING

ECO 314: Political Economy (2 Units)

Course Facilitator: Dr. M. O. Lawan


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STUDY GUIDE

Course Code/ Title: ECO 314: Political Economy

Credit Units: 2

Timing: 26hrsTotal hours of Study per each course material should be twenty Six

hours (26hrs) at two hours per week within a given semester.

You should plan your time table for study on the basis of two

hours per course throughout the week. This will apply to all course

materials you have. This implies that each course material will be

studied for two hours in a week.

Similarly, each study session should be timed at one hour

including all the activities under it. Do not rush on your time,

utilize them adequately. All activities should be timed from five

minutes (5minutes) to ten minutes (10minutes). Observe the time

you spent for each activity, whether you may need to add or

subtract more minutes for the activity. You should also take note of

your speed of completing an activity for the purpose of adjustment.

Meanwhile, you should observe the one hour allocated to a study

session. Find out whether this time is adequate or not. You may

need to add or subtract some minutes depending on your speed.

You may also need to allocate separate time for your self-

assessment questions out of the remaining minutes from the one

hour or the one hour which was not used out of the two hours that


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can be utilized for your SAQ. You must be careful in utilizing your

time. Your success depends on good utilization of the time given;

because time is money, do not waste it.

Reading:

When you start reading the study session, you must not read it like

a novel. You should start by having a pen and paper for writing the

main points in the study session. You must also have dictionary for

checking terms and concepts that are not properly explained in the

glossary.

Before writing the main points you must use pencil to underline

those main points in the text. Make the underlining neat and clear

so that the book is not spoiled for further usage.

Similarly, you should underline any term that you do not

understand its meaning and check for their meaning in the

glossary. If those meanings in the glossary are not enough for you,

you can use your dictionary for further explanations.

When you reach the box for activity, read the question(s) twice so

that you are sure of what the question ask you to do then you go

back to the in-text to locate the answers to the question. You must

be brief in answering those activities except when the question

requires you to be detailed.

In the same way you read the in-text question and in-text answer

carefully, making sure you understand them and locate them in the


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main text. Furthermore before you attempt answering the (SAQ) be

sure of what the question wants you to do, then locate the answers

in your in-text carefully before you provide the answer.

Generally, the reading required you to be very careful, paying

attention to what you are reading, noting the major points and

terms and concepts. But when you are tired, worried and weak do

not go into reading, wait until you are relaxed and strong enough

before you engage in reading activities.

Bold Terms:

These are terms that are very important towards

comprehending/understanding the in-text read by you. The terms

are bolded or made darker in the sentence for you to identify them.

When you come across such terms check for the meaning at the

back of your book; under the heading glossary. If the meaning is

not clear to you, you can use your dictionary to get more

clarifications about the term/concept. Do not neglect any of the

bold term in your reading because they are essential tools for your

understanding of the in-text.

Practice Exercises

a. Activity: Activity is provided in all the study sessions. Each

activity is to remind you of the immediate facts, points and

major informations you read in the in-text. In every study

session there is one or more activities provided for you to


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answer them. You must be very careful in answering these

activities because they provide you with major facts of the

text. You can have a separate note book for the activities

which can serve as summary of the texts. Do not forget to

timed yourself for each activity you answered.

b. In-text Questions and Answers: In-text questions and

answers are provided for you to remind you of major points

or facts. To every question, there is answer. So please note all

the questions and their answers, they will help you towards

remembering the major points in your reading.

c. Self Assessment Question: This part is one of the most

essential components of your study. It is meant to test your

understanding of what you studied so you must give adequate

attention in answering them. The remaining time from the

two hours allocated for this study session can be used in

answering the self- assessment question.

Before you start writing answers to any questions under

SAQ, you are expected to write down the major points

related to the particular question to be answered. Check those

points you have written in the in-text to ascertain that they

are correct, after that you can start explaining each point as

your answer to the question.


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When you have completed the explanation of each question,

you can now check at the back of your book, compare your

answer to the solutions provided by your course writer. Then

try to grade your effort sincerely and honestly to see your

level of performance. This procedure should be applied to all

SAQ activities. Make sure you are not in a hurry to finish but

careful to do the right thing.

e-Tutors: The eTutors are dedicated online teachers that provide

services to students in all their programme of studies. They are

expected to be twenty- four hours online to receive and attend to

students Academic and Administrative questions which are vital to

student’s processes of their studies. For each programme, there

will be two or more e-tutors for effective attention to student’s

enquiries.

Therefore, you are expected as a student to always contact your e-

tutors through their email addresses or phone numbers which are

there in your student hand book. Do not hesitate or waste time in

contacting your e-tutors when in doubt about your learning.

You must learn how to operate email, because e-mailing will give

you opportunity for getting better explanation at no cost.

In addition to your e-tutors, you can also contact your course

facilitators through their phone numbers and e-mails which are

also in your handbook for use. Your course facilitators can also


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resolve your academic problems. Please utilize them effectively for

your studies.

Continuous assessment

The continuous assessment exercise is limited to 30% of the total

marks. The medium of conducting continuous assessment may be

through online testing, Tutor Marked test or assignment. You may

be required to submit your test or assignment through your email.

The continuous assessment may be conducted more than once.

You must make sure you participate in all C.A processes for

without doing your C.A you may not pass your examination, so

take note and be up to date.

Examination

All examinations shall be conducted at the University of

Maiduguri Centre for Distance Learning. Therefore all students

must come to the Centre for a period of one week for their

examinations. Your preparation for examination may require you

to look for course mates so that you form a group studies. The

grouping or Networking studies will facilitate your better

understanding of what you studied.

Group studies can be formed in villages and township as long as

you have partners offering the same programme. Grouping and

Social Networking are better approaches to effective studies.

Please find your group.


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You must prepare very well before the examination week. You

must engage in comprehensive studies. Revising your previous

studies, making brief summaries of all materials you read or from

your first summary on activities, in-text questions and answers, as

well as on self assessment questions that you provided solutions at

first stage of studies. When the examination week commences you

can also go through your brief summarizes each day for various the

courses to remind you of main points. When coming to

examination hall, there are certain materials that are prohibited for

you to carry (i.e Bags, Cell phone, and any paper etc). You will be

checked before you are allowed to enter the hall. You must also be

well behaved throughout your examination period.


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DEPARTMENT OF ECONOMICS UNIVERSITY OF MAIDUGURI

ECO 314

DR. MUHAMMAD O. LAWAN


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GENERAL INTRODUCTION

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 of

political Economy.

Every society has a definite system of production and distribution relations or the

economic basis or the economic system of the society, which rests on property relations.

Political economy studies the relationship of production with the productive forces.

The topic essentially deals with 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 feel otherwise. For clarity therefore, we look

at political economy from basically three approaches namely liberalism, economic

nationalism and Marxism. Each of these three approaches has a perception on the

perspective of the relationship between society, state and markets.


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OBJECTIVES OF THE STUDY

At the end of the course modules, the students are expected to:

Explain the subject matter of political economy.

Discuss approaches to the study of political economy

Discuss the general crisis of capitalism

Understand contemporary irrationalism and existentialism of bourgeois

philosophy.

Discuss Religious philosophy of the bourgeois

List the dominant brands of bourgeois economics

Explain Neo-Ricardian ???

Discuss the irrelevance of Bourgeois Economics.

Explain the dialectical method.

Explain historical materialism

Outline its emergence and the subject matter.

Explain the term “capital”

Explain capital accumulation.

explain the term “capital accumulation. Are they different?

discuss the problem of capital accumulation; and

describe the character of pre-capitalist and capitalist crises.


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T A B L E O F C O N T E N T S PAGES

THE SUBJECT MATTER OF POLITICAL ECONOMY

CHARACTERISTICS OF BOURGEOIS ECONOMICS

DOMINANT BRANDS OF BOURGEOIS ECONOMICS I

DOMINANTS BRANDS OF BOURGEOIS ECONOMICS II

DIALECTICAL AND HISTORICAL MATERIALISM

HISTORICAL MATERIALISM


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MARXIST THEORY OF CAPITAL ACCUMULATION I

MARXIST THEORY OF CAPITAL ACCUMULATION

SOLUTIONS TO SAQS


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Study Session I : The Subject Matter of Political Economy

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 with 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 economists feel otherwise. For clarity therefore, we look

at political economy from basically three approaches namely liberalism, economic

nationalism and Marxism. Each of these three approaches has a different perspective of

the relationship between society, state and markets.

1.1. Learning Outcomes

At the end of this study session, you should be able to:

1. Explain the subject matter of political economy.

2. Discuss approaches to the study of political economy


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1.2 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 market forces (demand and supply) and price

mechanism in isolation may be termed pure economics. Assuming there are no markets,

the state alone will allocate economic resources and this will fall within the area of

political economy which focuses on the market and its relationship to the state.

Every society has a definite system of production relation, or the economic basis, that is

also referred to as the economic system of the society, which rests on the relations of

production. Political economy therefore studies the relationship which people enter into

in process of production.

In every class-divided society, the economic relations between human beings, expresses

the substance of the relationship between classes, and that is why political economy


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examines their interconnection with such a form of class relation. The state, is the

political superstructure which rests on the economy. In looking at political economy in

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.( Recast?)

The bourgeois economists see 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 tended 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 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 particular

perception about the relationship between Society; State and Market.


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1.3.1 Liberalism

The liberal approach to the study of political economy is more or less superficial. The

liberals tend to separate politics from economics and it is note worthy that much of their

approach addresses 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 interventions. 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; ensure

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 revolved 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 tend 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. They are therefore of the view that politics hamper economic growth and therefore

should be kept away from economics.

1.3.2 ECONOMIC NATIONALISM

The nationalists have a different view of political economy. They see the need to protect


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the state as the first priority. This is so because they see the need to protect the state so as

to ensure its (State’s) survival. As such to them politics should take precedence over

economic activities. The nationalists consider the safeguarding of national economic

interest as the minimum that is essential to the security and survival of the state. Others

subscribe to the view that economic nationalism is very necessary to protect the national

economy from hazard and to stem the tide of imperialist expansion as well as national

aggrandizement 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

triggers development in other sectors. If a country is economically strong it will

guarantee economic viability and political independence. Above all, they believe that

industries ensure military power and national security.

1.4 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

egalitarianism, 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 Fredrick Angels.


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This brand of Marxism claims to be 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 with earing away of the state.???

ITQ

1. Briefly discuss the two schools of Marxian thought

ITA

Two schools of thought can be identified in the Marxist approach. The first which is

termed evolutionary Marxism, is 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

Frederick Angels. This brand of Marxism claims to be 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.

1.5 Activity: Political Economy

Activity Timing

Allow: 5 minutes

Activity Text: Meet a colleague and discuss briefly the liberal approach to the study of


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political economy

1.6 Summary of Study Session 1

In this study session, you have learnt:

1. About the subject matter of political economy.

2. various approaches to the study of political economy

1.7. SAQ

SAQ (LO 1 & 2) Define political economy?

SAQ(LO 2) How many approaches do we have in the study of political economy?

SAQ(LO 3) Briefly define the term “political” economy and identify this man

approaches in the study of the subject.

1.8 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.

1.9. Suggested Reading

Ake, C. (1981), A Political Economy of Africa Lagos: Longman Publishers Ltd

Cilpin, Robert, (1987). The Political Economy of

International Relations. Princeton, Princeton University

Press.


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Study Session II Characteristics of Bourgeois Economics

Introduction

In the last lecture we attempted a definition of the concept, “Political Economy”. We also

discussed 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 a 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. economics include: The general crises of capitalism,

Contemporary The main features of the bourgeois irrationalism and existentialism,

Religious philosophy and Unity.

Study Outcomes II


1. discuss the general crisis of capitalism

2. understand contemporary irrationalism and existentialism of bourgeois

philosophy.

3. discuss Religious philosophy of the bourgeois


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2.1 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 a 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 economists tend to ignore the fact that 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 predation 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

historical development serving as a basis for

historical prediction.”

2.3 Contemporary Irrationalism and Existentialism

No other social formation. More than capitalism at its imperialists stage has deserved the

judgment implied in Goethe’s remark, “reason madness has become, goodness torment”.

Not for nothing does irrationalism, a philosophy proclaiming the unreason, the absurdity


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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, harmonious

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 of

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 assertion that 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.


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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 know ability

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 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 it offers the religious idealist solution.

Existentialism also finds conformation of the irrationality of human existence in the fact

that the rest depths of existence are only reverted to his only special condition, wish

Jaspers calls (“a frontier situation”) such situations are death, suffering, terror, struggle,

guilt, religious ecstasy, mental illness, etc.

2.4 Religious Philosophy

Contemporary religious philosophy is one of the character of bourgeois economic

thought. The religious philosophy is divided into various creeds and types of

philosophical thinking and its exponents associated themselves with various schools of


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philosophy. Thus we may encounter Christian, Judaic, Muslim and Buddhist. They use

religion to protect their property and use in the defense of private ownership, which is

acknowledged as one of the most assertive forms of organization of society, and in its

constant criticism of materialism and au theism, particularly dialectical and historical

materialism. But both in its defense of capitalism and in its anti-maxims religions

philosophy finds allies and supporters in other trends of 20th century bourgeois

philosophy.???

2.4.1 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 defense of capitalist

system.

It should be understood that all bourgeois philosophers belongs to one camp, the idealism

of contemporary philosophical thought in capitalist society. Secondly, the various schools

operate within the framework of this unity, as supplementary conceptions, making up for

each other’s limitations and the obvious shortcoming that 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.


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ITQ

Discuss Lenin’s definition of idealism

ITA

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.


Activity Timing

Allow: 5 minutes

Activity Text: Meet a colleague and discuss briefly capitalism at its imperialist stage

2.5 Summary of Study Session I1


1. about the general crisis of capitalism

2. the philosophy behind contemporary irrationalism and existentialism of the

bourgeoisie.

3. to identify the religious philosophy of the bourgeoisie

2.6. SAQ

SAQ (LO 1) List the characteristics of Bourgeois Economics

SAQ (LO 2) Discuss the General crisis of capitalism


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2.7 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.

2.8 Suggested Readings

Konstantinor, F.V.(ed) (1982): The Fundamentals of Marexist Leninist

Philosophy; Progress Publishers, U.S.S.R.

Suchtingm, W.A. (1983) Marx An Introduction; Harvester Press Publisher; Great

Britain.


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Study Session III: Dominant Brands of Bourgeois Economics I

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 neo-classical, the

Keynesians and the neo-Ricardian.

3.1 Learning Outcomes


1. list the dominant brands of bourgeois economics.

3.2 DOMINANT BRANDS OF BOURGEOIS ECONOMICS

The dominant brands or schools of bourgeois economics are the neoclassical, the

Keynesian and the neo- Ricardian.

3.2.1 Neo-Classicism

The neo-classical economics was developed initially in Britain in response to the demand

by the new industrial capitalist of the industrial revolution to narrow the focus of


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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 becoming rather dangerous to its

labour theory of value. The proponents of classical economics were the like of William

Jerons, Karl Menger, Vilfredo Parato Leon Walras, Samuelson, Solow, Debrev, etc. The

main features of neo-classicism are its subjective and individualist utility theory of value,

the use of marginalism, involving psychological preferences, mathematical modeling 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 ideological plane, neoclassical

economics is an apologetic ideology and its social implications are reactionary. The

technical character of neoclassical economics makes it difficult for a scientific study

and the understanding of the capitalist system; or any other system for that matter.

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


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contribution of economic agents since its assumption of perfect competition sets factor

rental prices equal to marginal products. Hence social inequalities are natural and

correspond 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 them

and which therefore shows they have utility.

The idea of aggregate production used by neo-classist 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 criticism. 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,


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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.

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 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 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


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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’ second solution to the crises was the issue of circular flow of income, which

constituted 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 the items of the autonomous expenditure to the corresponding greater changes in

the level of national income.

For some two decades after its adoption that is to around 1950, it seemed as if the

Keynesian strategy had provided a permanent solution to capitalist crises. The boom

experienced in the capitalist countries during the period 1950 to 1965 was attributed to


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Keynesian policies, in spite of the anti Keynesian grumblings of the monetarists.

Regarding Keynesianism as a special case of classical theory, where wages are rigid

downwards, they, in effect, advised their fellow economist thus: “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 aspect of social behaviour, and the obsession 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 fiscal-monetary policies, the more it leaks.

ITQ

What was Keynes’ second solution to crisis?

ITA

Keynes’ second solution to the crises was the issue of circular flow of income, which

constituted a new analysis of facts and causes of depressions. The critical variable is


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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 the items of the autonomous expenditure to the corresponding greater changes in

the level of national income.


Activity Timing

Allow: 5 minutes

Activity Text: Meet a colleague and discuss Neo- Classical economics

3.5 Summary of Study Session I1I


About the dominant brands of bourgeois economics

3.6. SAQ

SAQ (LO 1) Discuss some of the defects of neo-classical economics.

SAQ (LO 2) Mention some proponents of neo-classicism


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3.7 References

Onimode, B. (1988), An Introduction to Marxist Political Economy. Zed Books

Limited

Ake, C. (1981), A Political Economy of Africa: London: Longman Groly Ltd.

3.8 Suggested Reading

Ake, C. (1981), A Political Economy of Africa: London: Longman Groly Ltd.


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Study Session IV: Dominant Brand of Bourgeois Economics II

INTRODUCTION

In the last lecture we discussed the Keynesian and neo-classical economics as brands of

bourgeois economics. Attempt was made to discuss view on brand areas such as

employment, economic growth, price, interest, partial and general equilibrium, etc.

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 relevance of

bourgeois economics.

Having appraised different 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 postulations 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.


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1. explain Neo-Ricardian

2. discuss the irrelevance of Bourgeois Economics.

4.2 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 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 dubious because re-switching of

technologies 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


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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 co-operating 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 neo-Ricardians theory are sectors, industries, and processes and any

activities defined in technological terms.

The dependence of the neo-Ricardians 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 equilibrium exists with equality of

average profit rates in each industry, all the neo-Ricardians equations will be satisfied at a

point.


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4.3. The Irrelevance of Bourgeois Economics

Adebayo Adedeji as quoted 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]

The unscientific nature and the social irrelevance of bourgeois economics are 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

bourgeoisie. 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 which have been irrelevant,

even in the advanced capitalist countries, to the major crises of inflation, unemployment,

inequality, sustained growth and so on, confronting those societies.


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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 contractual 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 trivialisation 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 four 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 vulgar economy distorted the

nature of these economics, intensifying 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


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understanding of these societies and prevented serious efforts at liquidating their

syndrome of underdevelopment.

Besides its eclectic praxeology anchored on the neo-classical sophistry of mathematical

modeling, 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 rear types, whose

economic virtues are alleged to be rational. 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.

Where is second???

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 savers, 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.


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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.

ITQ

Present two major arguments in support of the unscientific character and social

irrelevance of bourgeois economics

ITA

The unscientific nature and the social irrelevance of bourgeois economics are rooted in

two major arguments. First and foremost, it 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 and 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

bourgeoisie. 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


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is only because the methodology and techniques of the discipline have been irrelevant,

even in the advanced capitalist countries, to the major crises of inflation,

unemployment, inequality, sustained growth and so on, confronting those societies.

Secondly, the unscientific character and social irrelevance of bourgeois economics is one

of the issues that confront the Third World, countries. The vulgar economy distorted the

nature of these economies, intensifying 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 liquidating their

syndrome of underdevelopment.


Activity Timing

Allow: 5 minutes

Activity Text: Meet a colleague and discuss Neo- Classical economics

4.5 Summary of Study Session IV


1. To analyse the neo Ricardian School of thought.

2. To explain the irrelevance of bourgeois economics


Page 44 of 76

4.6. SAQ

SAQ (LO 1) Explain two areas of irrelevance of bourgeois economics.

SAQ (LO 2) Name the renowned proponent of the neo-Ricardian theory.

4.7 References

Onimode, B. (1988). An Introduction to Marxist Political Economy. Zed Books

Afanasyev, V. (1981). Fundamentals of Scientific Commission. Moscow, Progress

Publishers.


Ihanvbare, Julius O. and Shaw M. Timothy (1981). Towards a Political Economy

of Nigeria. Gower Publishers, U.S.A


Page 45 of 76


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Study Session V: Dialectical and Historical Materialism

Introduction

In the last lecture we tried to analyze the neo-Ricardian idea of bourgeois economics; this

school of thought is concerned mainly with the distribution of income, independent of

population. It is also concerned about the industrial sector and development.

We also discussed the irrelevance of the bourgeois economics, pointing out the

unscientific nature of its analysis, and the unproved claims made by bourgeois

economists.

In this lecture we are going to discuss dialectical and historical materialism, which is the

most fundamental philosophy of Maxism.

The Marxist philosophy rests on dialectical materialism. This is so because it is out to

solve the fundamental question of philosophy. It acknowledges the materiality and

known ability of the universe and also tries to examine the world as it really is. It is so

because it examines the world in constant motion; development and regeneration.



1 explain the dialectical method.

5.2 Marxist Philosophy and the Dialectical Method

The most important subject matter of Marxist philosophy is in the search for solution to


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the fundamental question of philosophy. The Marxist philosophy is is predicated on

dialectical materialism. This is so because it is out to solve the fundamental question of

philosophy. It acknowledges the materiality and known ability of the universe and also

tries to examine the world as it 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 bourgeois philosophy. Its materialist perspective separates it from the

dialectical idealism of Hegelian philosophy whose pre-occupation was 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 which in turn produces 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 the laws of dialectics. These laws have been classified into three:

i. The law of transformation of quantitative into qualitative changes;


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ii. The law of the interpretation of opposites or the unity and conflict of the

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 also applicable to such social

science as political economy.

5.2.1 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 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


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life is the process of material production, which determines all other aspects of human

life. This 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 Marxists maintain that

sources of knowledge are 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, becoming 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


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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

emphasize 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.

ITQ

What do you understand with the term Dialectical Materialism?

ITA

Dialectical materialism is concerned primarily with fundamental analysis of the

relationship between matter and consciousness.


Activity Timing

Allow: 5 minutes

Activity Text: Meet a colleague and discuss Lenin’s definition of matter.


Page 51 of 76

5.4 Summary of Study Session V


1. to discuss the idea of dialectical materialism.

2. To explain existence of matter.

5.5. SAQ

SAQ (LO 1) Discuss the Marxist canons of the theory of knowledge..

SAQ (LO 2) Mention three laws of dialectics.

5.6 Reference

Onimode, B. (1985), Introduction to Marxist Political Economy: London: Zeal Publishers

Ltd.

5.7 Suggested Readings

Konstantiv, F. V. (ed.) (1982), The Fundamentals of Marxists Lenitist Philosophy:

Moscow: Progress Books.

Kntnetsor, G. (ed.) (1985), Political Economy: A study An???l: Moscow: Process Book.


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Study Session VI: Historical Materialism

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 monolithic but rather a living organization subject to change and

obeying 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’s ability to perform labour, meaning the energy

used in production; and second, is the means of production, which comprise the objects

as used, or supervised by labour-power. These are the methods used by Marx in the


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formulation of the theory of capital accumulation.



1. explain historical materialism

2. outline its emergence and the subject matter.

6.2 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.

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 the English, and especially the French

(1789-1794) bourgeois revolutions, the extreme aggravations of class contradictions and


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collisions, the emergence of the historical science of the working class, in general, were

the social pre-conditions that favored the appearance of historical materialism.

The great events that took place at the end of the 18th 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 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 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 it 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.


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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.

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 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, fundamentally

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


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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 enter 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 bourgeoisie, as owners

of capital and other means of production, and the proletariat who serve as the direct

producers simply because they have been dispossessed by capital, and forced to sell their

labour power as wage-slaves. These workers are forced to produce what is called 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 production relations. Then the economic foundation,

disintegrates and a period of social revolution transforming the political, legal,

intellectual and other ideological forms of civil society unfolds. The transition from one

mode of production to a higher one occurs through this conflict of class opposites,

through class struggle.


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All historical development is spurred by this central role of contradiction impinging on

the basis of the society.

ITQ

Why was Pre-Marxist materialism inconsistent and limited in its view?

ITA

Pre-Marxist materialism 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.


Activity Timing

Allow: 5 minutes

Activity Text: Meet a colleague and discuss the subject-matter of historical materialism.

6.5 Summary of Study Session V1


1. to discuss the idea of historical materialism.

2. to explain the emergence of historical materialism and its subject matter.


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6.6 SAQ

SAQ (LO 1) What is the subject matter of historical materialism?

SAQ (LO 3) Discuss the subject-matter of historical materialism

6.7 References

Konstantinov, F.V, (1982): The Fundamental of Marxist Leninist Philosophy

Moscow Progress Publishers.

Onimode, Bade (1985): An Introduction to Marxist Political Economy London:

Zed Books Ltd.


Konstantinov, F. V, (1982): The fundamental of Marxist Leninist philosophy.

Moscow progress publishers


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Study Session VII Marxist Theory of Accumulation I

Introduction

In the last lecture, we discussed 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 study session, we will discuss the Marxist theory of capital accumulation starting

with discussion on capital.

7.1 Study Outcomes


i Explain the term “capital”

ii Explain capital accumulation.

7.2 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 looking at what Marx means by “the capitalist mode of production”.

Unfortunately, he used 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.


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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, 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, as different from one another, it should be stated

that they stand in certain relations with agents of production (institutions, individual

human beings, corporations, etc) who control them. These, when legally legitimised 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, let us call them, when it is necessary to make a final distinction,

social relations of production.

The necessity to differentiate these related concepts becomes obvious once we 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

in what may be called technical relations of 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 of technical relations of production). If we consider the

factors of production, we have the productive forces.

Marx used mode of production in, at least, three different ways; first, he used 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.


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Second, he used 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 used 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 specifically is the character of the 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

want 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

institutions. Use-values are not inherently such, they usually come to be so (e.g.,

tobacco). But things are in general having 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”.


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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, labour-power 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 use-value 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 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 is the 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.

ITQ

What was Marx’s definition of commodity?

ITA

Marx defines commodity as “use-value” that is, something that is able to satisfy a human

want 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


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institutions. 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.


Activity Timing

Allow: 5 minutes

Activity Text: Meet a colleague and discuss what Marx means by “the capitalist mode of

production”.

7.4 Summary of Study Session V1I


1. to analyse the concept of capital from the Marxian perspective.to discuss the idea of

dialectical materialism.

7.5 SAQ

SAQ (LO 1) How does the capitalist mode of production transform and become

capital (money).

SAQ (LO 2) What do you understand by use-value?


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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.


Onimode, Bade (1985) An Introduction to Marxist Political Economy: London:

Zeal Publishers London.


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Study Session VIII: Marxist Theory of Capital Accumulation

Introduction

In the last study session, 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.



1. explain the term “capital accumulation.

2. discuss the problem of capital accumulation; and

3. describe the character of pre-capitalist and capitalist crises.

8.2 Capital Accumulation in Capitalist Dev elopment

The development of the capitalist world i.e., basically inthe process of capital

accumulation, and the capitalist accumulation, and the capitalist is the decisive social

agent. This accumulation of capital as the driving force of capitalist 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


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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 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. The Marxist are of the view

that capitalist accumulation is possible as a result of 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 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 and this in effect is the crucial feature of capitalist development. This problem


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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 its 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 is 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 then depresses wages to sustain the creation of


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surplus value for accumulation. Capitalist crises and depressions 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.

8.3 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 are 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 of 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 to such a low level that it is unable to cover the risks and efforts of

accumulation. At this juncture, the capitalist has no more incentive to accumulate and so

the rate of growth of the capital stock drops to zero, hence, 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.


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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.

8.4 Character of Pre-Capitalists Crises

“The contradictory movement 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 been 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).

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 18th century these were more serious


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problems than economic fluctuations. In particular, since agriculture was 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 were

localized and irregular.

There were also pre-capitalist crises of simple commodity production which could have

been 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 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 and 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.

ITQ

What was Marxist view on capital accumulation?

ITA

Marxists are of the view that capitalist accumulation is possible as a result of surplus

value generated through the competitive drive. The source of capital accumulation

- surplus


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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.


Activity Timing

Allow: 10 minutes

Activity Text: Meet a colleague and discuss the process of capitalist development.

8.6 Summary of Study Session V1II


1. to define capital accumulation

2. To discuss the problems of capitalist accumulation

3. How to describe the character of pre-capitalist and capitalist crises.

8.7 SAQ

SAQ (LO 1) Discuss the pre-capitalist crises.

capital (money).

SAQ (LO 2) What do you understand by “reserved army” of labour?

SAQ (LO 3) Why did the classicists postulate an inevitable end of economic

progress?


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SAQ (LO 4) What was the basis of pre-capitalist crisis?

8.8 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.

8.7 Suggested Reading:

Onimode, B. (1985) : Introduction To Marxist Political Economy: 2nd Publishers

London.


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Solutions to SAQs

Study Session I

SAQ (LO 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.

SAQ (LO 2):.

We have basically three approaches to the study of political economy, namely:

Liberalism, Nationalism and Marxism.

Study Session II

SAQ (LO 1):

The basic characteristics of bourgeois economics are as follows: capitalism,

existentialism, belief in religious philosophy, and unity.

Study Session III

SAQ (LO 1):

Some of the proponents of neo-classicism are as follows; Williams Jerons, Karl

Menger, Vilfredo Pareto, Leon, Walras, Samelson Solow, etc.

SAQ (LO 2):

The emergence of the Keynesian economics was the result of the great depression


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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.

Study Session IV

SAQ (LO 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.

SAQ (LO 2):

. The two areas of irrelevance of bourgeois economics:

i. Its unscientific nature and the social irrelevance

in general.

ii. The unscientific character and social irrelevance of

bourgeois economics in the context of the Third World

countries.

Study Session V

SAQ (LO 1):

. The laws of dialectics are as follows:

i. The law of transformation of quantitative into qualitative changes.

ii. The law of unity and the conflicts of opposites.

iii. The law of negation of the negation.


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SAQ (LO 2):

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.

Study Session VI

Karl Marx and Fredricks Engels were the people who developed the idea of

historical materialism.

SAQ (LO 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.

Study Session VII

SAQ (LO 1):

1. Use-value from the Marxian perspective means commodity.

Study Session VIII

SAQ (LO 1):

1. The reserved army of labour, according to Marx, means the surplus


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unemployed labour that can be used any time in the production process.

SAQ (LO 2):

The classicist postulated that the inevitable end of economic progress will

be the stationary state that will eventually emerge.

SAQ (LO 3):

. 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.

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