Marxian Political Economy

Marxist political economy states that capitalism will eventually fail because factory owners and CEOs exploit labor to generate wealth for themselves. He believed that such exploitation leads to social unrest and class conflict. To ensure social and economic stability, he theorized, laborers should own and control the means of production. It treats class as tool of appropriation. State is seen as an agency or institution that manages and protects and advances the interests of capitalist.

Marxian Political Economy

It contests the idea of classical economists like Adam Smith and Ricardo that market operates according to social division of labour, which shows that individuals within market act independently and according to their desire. Further Smith-Recardo argued that market laws are independent of the will and wish of persons. The market and individual wants directly determine what happens in the market. In the neoclassical theories, individuals have an interest in maximising their well being defined by their preference ordering.

Marxian Political Economy

But Marxian method tries to find answers to the question of how we connect individual interests to social order.

To find answers to above question, we need to look at following proposition.

What is the relationship of individuals material interests to social order (It is here the link between politics and economics is established).

Marxian Political Economy

To understand this link, we have to focus on the three strands or streams of Marxian theory of political economy.
Revolutionary politics (route suggested by Marx himself)
The politics of class compromise social democracy (Karl Kautsky) Marxist State Theory.

Marxian Political Economy

We will discuss these theories latter. Let us discuss first the Class, interests and conflict from Marxian view point. The concept of class interests is central to Marxian theory. In Marxism, Marxian class theory asserts that an individuals position within a class hierarchy is determined by his role in the production process, and argues that political and ideological consciousness is determined by class position.

Marxian Political Economy

Within Marxian class theory, the structure of the production process forms the basis of class construction. First individuals see themselves as isolated agents pursing self interests on their own. But capitalist economy worked in such a way as to establish commonality of interests within classes of persons. The more individuals become aware of their common conditions and purpose, the more they see their material interests in broader light.

Marxian Political Economy

This process marks transition from individual to class interests and ultimately turns material economic interests into political one.

Therefore Marxian interpretation of relationship between economic and politics centres on the idea of economic interests and the part they play in defining political agendas.

Marxian Political Economy

How capitalism affects material conditions of workers.
According to Marx material conditions determine class consciousness.
Marx argues that the process of economic growth takes place through competition and competition operates on the basis of price system. Capitalists expand markets at the expense of competitors by reducing prices Capitalism benefits the workers so long as it maintains high level of investment.

Marxian Political Economy

According to Marx, competition tends to be selftiming when it effect is to drive the weaker producer out of business. As the competition weakens, the process that translates into productivity gains also weakens, which means demand does not expand. Marx attributes this to the failure to stimulate market growth which results from failure to enhance real wages. With stagnant market, no investment comes in.

Marxian Political Economy

The result is economic stagnation. When economy stagnates, the capitalist make little profit and accumulate little capital When wages dont improve, the workers suffer from high level of unemployment. This situation is characterized as economic crisis of the system.

Marxian Political Economy

According to Marx, a capitalist economy appears to be consisting of vast accumulation of commodities and individual tied together through the thread of exchange in the market place According to him market economy is more about appropriation of surplus value than maximisation of private welfare.

Marxian Political Economy

Material interests, class conflict and capitalism. Since material interests holds key to Marxian economy and focus on material interest raises following questions.
1. 2. Are those material best served under capitalism Are the material interests of workers and capitalist in conflict under capitalism or both (workers and capitalist) benefits or lose together.

3.
4.

Do the material interests of individual within the classes of workers and capitalists converge or conflict
Does the conflict that arises over material interests lead to challenge to social order of capitalism, or merely involve a shifting of power and benefit within capitalism.

Marxian Political Economy

In the scheme of Marxian political economy, worker appears to be loser because they are being paid less than their value of labour subsistence . Greater the cost of subsistence, less the surplus or profit for capitalist.

Marx argues that the profit motive drives the capitalist to seek ways of increasing their share of output.

Marxian Political Economy

Capitalist secure those profits either by increasing the value of output or reducing the value of subsistence. Marx argues that capitalist attempt to find ways to make workers work harder, longer and more efficiently without altering subsistence.

As a result profit increases, the real wage (subsistence) remains the same, as such his (worker) share of the product declines.

Marxian Political Economy

Economic interests and class consciousness
In Marxian theory, class refers to group of people who have similar position in the production process. Political agenda come to surface only when capitalist and worker have different economic interests. Class consciousness is behind the political agenda.
According to him in the production process there are two forces working class and Capitalist class.

Marxian Political Economy

Capitalist class drives to amass more wealth which set them (capitalist) into competition with each other, which has destructive implications for social order and individual well being.

For investors/capitalists if profit making is not satisfactory, then they refrain from investing in new business activity. To him, falling wages means falling demand for consumption of good, implying falling aggregate demand.

Marxian Political Economy

Individual capitalist benefits by lowering wages because he considers wage as cost. By working against wage increase, capitalists deprive workers of purchasing power in the capitalists system. According to Marx Capitalist have two interests.
1. Interests in wealth 2. Interest in the security of social system that allows pursuit of accumulation of wealth.

Marxian Political Economy

Revolutionary Politics:
It was set out in communist manifesto (1848).
Marx attempted to explain revolution by reference to the laws of motion of capitalism what he called historical materialism. According to Marx, laws of motions of capitalism work independently of the particular history, class situation and political institutions of different countries. Marx did not believe in the durability of self organising or self-regulating character of capitalism. According to him capitalist markets contained very forces that would eventually bring about their demise.

Marxian Political Economy

According to Marx Capitalist development involves the production of commodities (goods exchanged on market) whose value is enough to reproduce surpluses capital than its cost. The surplus capital is invested in productive capital, and this he called accumulation. Capital remains concentrated in fewer economic units of large size. As it advances, it displaces more and more workers creating industrial reserve army of labour.

Marxian Political Economy

Availability of abundant labour drives down wages of workers and they are willing to work for less wages. As the capital become more concentrated, workers are drawn closer together in large factories and urban areas. They organize themselves politically. According to Marx, the efforts of capitalist to increase his profit has harmful effects on the ability of workers to satisfy their material interests.

Marxian Political Economy

In order to raise profits, capitalists work to raise the productivity of labour. In this regard, they introduce more mechanized methods of production, which replaces workers with machines.

And introduction of machinery affects working conditions of workers and increase unemployment.
This leads Marx to conclude that capitalist development produces immiseration and polarization of material conditions of two classes.

Marxian Political Economy

According to Marx, this law creates an accumulation of misery, corresponding with accumulation of wealth.

Finally he concludes that accumulation of wealth at one pole produces at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation at the opposite pole.

Marxian Political Economy

This situation, according to Marx, finally leads to revolution. In this regard he said : Let the ruling classes tremble at a Communistic revolution.... Workers of the world unite; you have nothing to lose but your chains It was in the context, he had said force is the midwife of the old society pregnant with new one. Marx was the advocate of the use of force.

Historical Materialism

Source : International Political Economy by Raymond C. Miller, P-182

Historical materialism

Source : International Political Economy by Raymond C. Miller, P-183

Marxian Political Economy

Marx and Social Democratic Policies.
There are some Marxists who believe that revolution is not inevitable as a result of the laws of motions of capitalist economy.
This strand or stream of Marxist strategy involves workers participation in interest groups, parties and electoral-legislative process.

Marxian Political Economy

The goal is to alter the position of labour and capital within system by establishing institutions and political democracy ensuring the participation of workers. Social Democracy is different from revolutionary politics. Former attempts to achieve goals by peaceful means within bourgeoisie institutions and politics whereas later uses violent means without (outside bourgeoisie institutions). The main idea of the reformist social democratic approach is to foster the material interests of workers with the frame work of capitalism and liberal democracy.

Marxian Political Economy

It attempts to tame capitalism and make it beneficial for more people, not just narrow capitalist class.

The core belief is that the welfare of citizen (worker and citizen) can be advanced by gradually rationalizing the economy.

Marxian Political Economy

Marxian State Theory.
This theory discuss how state is related to economy under capitalism According to this theory state exists to preserve and advance the order that protects the social order created under capitalism.

Marxian Political Economy

State works to define social order that favours one class, that is , bourgeoisie or capitalist class (Poulantzas) State works as agent to represent political interest of bourgeoisie. According to Marx, state is part of the super structure, the political shell of capitalism that is ultimately responsive to economic forces.

Base-Superstructure Analysis of Marx

Marxian Political Economy

Conclusion