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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
At the end of this study session, you should be able to:
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.
2.5 Activity: Political Economy
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
In this study session, you have learnt:
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
At the end of this study session, you should be able to:
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 neo- classical, 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.
3.4 Activity: Political Economy
Activity Timing
Allow: 5 minutes
Activity Text: Meet a colleague and discuss Neo- Classical economics
3.5 Summary of Study Session I1I
In this study session, you have learnt:
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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4.1 Learning Outcomes
At the end of this study session, you should be able to:
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.
4.4 Activity: Political Economy
Activity Timing
Allow: 5 minutes
Activity Text: Meet a colleague and discuss Neo- Classical economics
4.5 Summary of Study Session IV
In this study session, you have learnt:
1. To analyse the neo Ricardian School of thought.
2. To explain the irrelevance of bourgeois economics
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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.
4.8 Suggested Reading
Ihanvbare, Julius O. and Shaw M. Timothy (1981). Towards a Political Economy
of Nigeria. Gower Publishers, U.S.A
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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.
5.1 Learning Outcomes
At the end of this study session, you should be able to:
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.
5.3 Activity: Political Economy
Activity Timing
Allow: 5 minutes
Activity Text: Meet a colleague and discuss Lenin’s definition of matter.
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5.4 Summary of Study Session V
In this study session, you have learnt:
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.
6.1 Learning Outcomes
At the end of this study session, you should be able to:
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.
6.4 Activity: Political Economy
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
In this study session, you have learnt:
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.
6.8 Suggested Reading
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
At the end of this study session, you should be able to:
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.
7.3 Activity: Political Economy
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
In this study session, you have learnt:
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.
7.7 Suggested Reading
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.
8.1 Learning Outcomes
At the end of this study session, you should be able to:
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.
8.5 Activity: Political Economy
Activity Timing
Allow: 10 minutes
Activity Text: Meet a colleague and discuss the process of capitalist development.
8.6 Summary of Study Session V1II
In this study session, you have learnt:
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.