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17

Capitalist Political Economy: Smith to Marx to Keynes and Beyond

6
terms
10
notes
Needs summary

Mann, G. (2013). Capitalist Political Economy: Smith to Marx to Keynes and Beyond. In Mann, G. Disassembly Required: A Field Guide to Actually Existing Capitalism. AK Press, pp. 17-46

(noun) a member of a school of political economists founded in 18th century France and characterized chiefly by a belief that government policy should not interfere with the operation of natural economic laws and that land is the source of all wealth

18

Smith was both extending and breaking with the analysis of the Physiocrats, political economists of eighteenth-century France who believed that the natural productivity of the land, set in motion by agriculture, was the origin of all wealth. For them, surplus value--the "additional" value produced between input and output in a production process--was possible only as a gift from nature. Their policy conclusion was logical if agriculture was the source of the surplus upon which the state and all society depended, then anything that hindered it (taxes, trade restrictions, etc.) was bad.

—p.18 default author
notable
1 year, 4 months ago

Smith was both extending and breaking with the analysis of the Physiocrats, political economists of eighteenth-century France who believed that the natural productivity of the land, set in motion by agriculture, was the origin of all wealth. For them, surplus value--the "additional" value produced between input and output in a production process--was possible only as a gift from nature. Their policy conclusion was logical if agriculture was the source of the surplus upon which the state and all society depended, then anything that hindered it (taxes, trade restrictions, etc.) was bad.

—p.18 default author
notable
1 year, 4 months ago
21

Smith assumes that in this system, money serves almost entirely as a means of payment or unit of account. He doesn't imagine market participants seeing money as a form of wealth they could or should accumulate (as we would today). This leads him to assume that people will not hold money as a store of wealth, but will spend it, keeping the circular flow going.

characterising Smith as the first classical economist (differs from predecessors in that it concerns itself wih the whole nation, not just the monarch's coffers)

also: he implies that price serves as a signal to producers, and that the state doesn't need a big role (other than to protect the nation, enforce the law, and provide some public goods)

—p.21 by Geoff Mann 1 year, 4 months ago

Smith assumes that in this system, money serves almost entirely as a means of payment or unit of account. He doesn't imagine market participants seeing money as a form of wealth they could or should accumulate (as we would today). This leads him to assume that people will not hold money as a store of wealth, but will spend it, keeping the circular flow going.

characterising Smith as the first classical economist (differs from predecessors in that it concerns itself wih the whole nation, not just the monarch's coffers)

also: he implies that price serves as a signal to producers, and that the state doesn't need a big role (other than to protect the nation, enforce the law, and provide some public goods)

—p.21 by Geoff Mann 1 year, 4 months ago

a mainstream approach to economics focusing on the determination of goods, outputs, and income distributions in markets through supply and demand; contrast with heterodox economics

23

The term "neoclassical" with respect to economics was coined in 1900 by the American economist Thorstein Veblen, the same person who first discussed "conspicuous consumption".

—p.23 default author
notable
1 year, 4 months ago

The term "neoclassical" with respect to economics was coined in 1900 by the American economist Thorstein Veblen, the same person who first discussed "conspicuous consumption".

—p.23 default author
notable
1 year, 4 months ago
23

[...] The most important difference between them lies not in their explanation of what drives capitalist production, but in the fact that Smith saw increasing harmony and mutual interdependence where Marx saw conflict, exploitation, and inequality. In his analysis of capitalism--and remember, unlike Smith, he wrote after the rise of the terrible factory system--Marx emphasized the tensions and conflicts endemic to capitalism, both in the relations between capitalists, and between capitalists and workers.

—p.23 by Geoff Mann 1 year, 4 months ago

[...] The most important difference between them lies not in their explanation of what drives capitalist production, but in the fact that Smith saw increasing harmony and mutual interdependence where Marx saw conflict, exploitation, and inequality. In his analysis of capitalism--and remember, unlike Smith, he wrote after the rise of the terrible factory system--Marx emphasized the tensions and conflicts endemic to capitalism, both in the relations between capitalists, and between capitalists and workers.

—p.23 by Geoff Mann 1 year, 4 months ago
26

What needed explaining, according to Marx, was why there were capitalists at all. Why didn't everyone have, or at least have access to those things that enabled you to produce things for use or exchange? How did the capitalists get to be the ones with the tools and resources? In search of an answer, he looked at European and especially English history. In light of those histories, he argued that capitalists and capitalism arose through a series of processes he called "original accumulation" (a phrase often translated less helpfully as "primitive accumulation"). By forcefully asserting a property right over what had been collective resources--enclosing common land, appropriating raw materials from colonized peoples, etc.--the means of production became concentrated in the hands of a few. This left the expropriated many with no means of getting by on their own. To survive, they had no choice but to find a way to get access to the means of production, which are also the means of putting food on the table.

—p.26 by Geoff Mann 1 year, 4 months ago

What needed explaining, according to Marx, was why there were capitalists at all. Why didn't everyone have, or at least have access to those things that enabled you to produce things for use or exchange? How did the capitalists get to be the ones with the tools and resources? In search of an answer, he looked at European and especially English history. In light of those histories, he argued that capitalists and capitalism arose through a series of processes he called "original accumulation" (a phrase often translated less helpfully as "primitive accumulation"). By forcefully asserting a property right over what had been collective resources--enclosing common land, appropriating raw materials from colonized peoples, etc.--the means of production became concentrated in the hands of a few. This left the expropriated many with no means of getting by on their own. To survive, they had no choice but to find a way to get access to the means of production, which are also the means of putting food on the table.

—p.26 by Geoff Mann 1 year, 4 months ago
27

[...] Labour is the specific or "real" act of working. Labour-power is the abstract "capacity to work": skills, knowledge, energy, etc. specific to each of those without access to means of productions except through capitalists. Wage workers do not sell "living labour," they sell the commodity labour-power on the labour market. The capitalist, who thus comes to control one more thing necessary for production (and the most important one at that--human energy and ingenuity) puts that labour-power to work as he or she sees fit, and pays the workers a wage for each unit of time they give up the control of their human energies.

—p.27 by Geoff Mann 1 year, 4 months ago

[...] Labour is the specific or "real" act of working. Labour-power is the abstract "capacity to work": skills, knowledge, energy, etc. specific to each of those without access to means of productions except through capitalists. Wage workers do not sell "living labour," they sell the commodity labour-power on the labour market. The capitalist, who thus comes to control one more thing necessary for production (and the most important one at that--human energy and ingenuity) puts that labour-power to work as he or she sees fit, and pays the workers a wage for each unit of time they give up the control of their human energies.

—p.27 by Geoff Mann 1 year, 4 months ago
29

[...] the "extra" or surplus value created in the producton process comes not from capital's contribution, but from the labour power workers contribute to the whole relationship. In other words, the appropriation of labour's surplus value--you can pay them less than what they produce in words--is the source of wealth in capitalism.

—p.29 by Geoff Mann 1 year, 4 months ago

[...] the "extra" or surplus value created in the producton process comes not from capital's contribution, but from the labour power workers contribute to the whole relationship. In other words, the appropriation of labour's surplus value--you can pay them less than what they produce in words--is the source of wealth in capitalism.

—p.29 by Geoff Mann 1 year, 4 months ago
31

[...] If higher wages were all that is necessary, Marx would have been no more than a wordy and over-philosophical union activist. The problems, however, are much bigger: the wage relation and capitalist social relations themselves. The point is not to redistribute capitalist value, but to overcome it, to destroy it as the relation that rules the world.

The idea that capitalism will persist as long as the rule of value holds is Marx's essential lesson. This is not a majority opinion, and is easily taken as dismissive of "reformist" efforts to improve working conditions and the distribution of income. I don't mean to suggest such efforts are useless because they are not "radical" enough. Clearly, any effort on the part of labourers (and unemployed people) to improve the material conditions of their everyday lives is worthwhile. My point is that the fundamental problem with capitalism as a mode of production is not ultimately addressed by the redistribution of capital.

—p.31 by Geoff Mann 1 year, 4 months ago

[...] If higher wages were all that is necessary, Marx would have been no more than a wordy and over-philosophical union activist. The problems, however, are much bigger: the wage relation and capitalist social relations themselves. The point is not to redistribute capitalist value, but to overcome it, to destroy it as the relation that rules the world.

The idea that capitalism will persist as long as the rule of value holds is Marx's essential lesson. This is not a majority opinion, and is easily taken as dismissive of "reformist" efforts to improve working conditions and the distribution of income. I don't mean to suggest such efforts are useless because they are not "radical" enough. Clearly, any effort on the part of labourers (and unemployed people) to improve the material conditions of their everyday lives is worthwhile. My point is that the fundamental problem with capitalism as a mode of production is not ultimately addressed by the redistribution of capital.

—p.31 by Geoff Mann 1 year, 4 months ago
32

[...] The whole point of paying workers well is to keep the system going--in fact, there is a theory in orthodox economics that says this is exactly what "fair" wages do. So as a social justice strategy, wage demands are key. As a social transformation strategy, they are insufficient.

Yet it must be said that this still does not suggest an obvious reason to reject the idea that if workers were paid "fairly"--presumably at least as much as capitalists--then no one would want to be a capitalist anymore, or would have no self-interested incentive to be one, and the whole mode of production would fall apart. In other words, we might use the wage relation to overcome the wage relation. [...]

—p.32 by Geoff Mann 1 year, 4 months ago

[...] The whole point of paying workers well is to keep the system going--in fact, there is a theory in orthodox economics that says this is exactly what "fair" wages do. So as a social justice strategy, wage demands are key. As a social transformation strategy, they are insufficient.

Yet it must be said that this still does not suggest an obvious reason to reject the idea that if workers were paid "fairly"--presumably at least as much as capitalists--then no one would want to be a capitalist anymore, or would have no self-interested incentive to be one, and the whole mode of production would fall apart. In other words, we might use the wage relation to overcome the wage relation. [...]

—p.32 by Geoff Mann 1 year, 4 months ago

the doctrine in neoclassical economics that markets will function perfectly in the absence of interference

34

In fact, the well-known neoclassical doctrine that "without interference" markets will function perfectly (or "clear") is also known as "demand theory".

—p.34 default author
notable
1 year, 4 months ago

In fact, the well-known neoclassical doctrine that "without interference" markets will function perfectly (or "clear") is also known as "demand theory".

—p.34 default author
notable
1 year, 4 months ago
34

The first twist is in the theory of disribution. [...] In fact, the well-known neoclassical doctrine that "without interference" markets will function perfectly (or "clear") is also known as "demand theory". The second twist is in the theory of value: while the classicals took capitalist value, the relation of general equivalence, to be inherent in some material substance or human action, the neoclassicals understand it as "subjective," determined by individual tastes. [...]

the difference between liberal or neoclassical political economy, and the older work of those like Smith/Ricardo

—p.34 by Geoff Mann 1 year, 4 months ago

The first twist is in the theory of disribution. [...] In fact, the well-known neoclassical doctrine that "without interference" markets will function perfectly (or "clear") is also known as "demand theory". The second twist is in the theory of value: while the classicals took capitalist value, the relation of general equivalence, to be inherent in some material substance or human action, the neoclassicals understand it as "subjective," determined by individual tastes. [...]

the difference between liberal or neoclassical political economy, and the older work of those like Smith/Ricardo

—p.34 by Geoff Mann 1 year, 4 months ago

named after William Stanley Jevons, though referring to a shift in economic thought to which many contributed; switch from a focus to class-based analysis to using individual consumers as the basis

35

The Jevonian revolution definitively ended the hold of "who gets what," class-based analysis in orthodox economics, and instead consecrated the individual "consumer" as the unit of analysis.

—p.35 default author
notable
1 year, 4 months ago

The Jevonian revolution definitively ended the hold of "who gets what," class-based analysis in orthodox economics, and instead consecrated the individual "consumer" as the unit of analysis.

—p.35 default author
notable
1 year, 4 months ago
37

[...] The neoclassical doctrine is basically a bald claim that distribution is somehow not a function of, or really even affected by, social power and property relations. Instead, we are told, who gets what is determined outside those processes, in the neutral, apolitical, and un-manipulatable field of the market. This is a critical step toward the idea that "the market" is "natural" and "disinterested"--the principal, maybe the only, basis upon which the word "market" can be paired with the word "free".

—p.37 by Geoff Mann 1 year, 4 months ago

[...] The neoclassical doctrine is basically a bald claim that distribution is somehow not a function of, or really even affected by, social power and property relations. Instead, we are told, who gets what is determined outside those processes, in the neutral, apolitical, and un-manipulatable field of the market. This is a critical step toward the idea that "the market" is "natural" and "disinterested"--the principal, maybe the only, basis upon which the word "market" can be paired with the word "free".

—p.37 by Geoff Mann 1 year, 4 months ago

referring to the theories of 19th-century Swiss economist Leon Walras (that relative prices can find a system-wide or general equilibrium)

38

The idea that those relative prices can find a system-wide equilibrium is the heart of the neoclassical theory of value, a theory often called "Walrasian"

footnote 14

—p.38 default author
notable
1 year, 4 months ago

The idea that those relative prices can find a system-wide equilibrium is the heart of the neoclassical theory of value, a theory often called "Walrasian"

footnote 14

—p.38 default author
notable
1 year, 4 months ago

propensity to hold assets in liquid form (defined by Keynes in The General Theory of Employment, Interest and Money)

42

Keynes called this propensity to hold assets in money form "liquidity preference," "liquidity" being the ease with which an asset can be readily monetized, i.e., exchanged for money. So if "liquidity preference" is high, it suggests people feel insecure or uncertain

—p.42 default author
notable
1 year, 4 months ago

Keynes called this propensity to hold assets in money form "liquidity preference," "liquidity" being the ease with which an asset can be readily monetized, i.e., exchanged for money. So if "liquidity preference" is high, it suggests people feel insecure or uncertain

—p.42 default author
notable
1 year, 4 months ago
45

According to Keynes, this suboptimal up-and-down, occasionally with really high ups and really low downs, is how capitalism works. Its volatility is not a result of mismanagement or interference or workers' demand for "excessive" wages, but a part of how it functions "naturally". And, if the capitalist state does not manage the ups and downs, people might become so disgruntled that all that communism and socialism stuff whispered about in field and factory starts making sense. In the middle of the Depression and then World War II, with the Russian revolution in the background, that warning made many capitalists sit up and take notice. They may not have been big fans of liberal democracy, but it beat the alternative.

—p.45 by Geoff Mann 1 year, 4 months ago

According to Keynes, this suboptimal up-and-down, occasionally with really high ups and really low downs, is how capitalism works. Its volatility is not a result of mismanagement or interference or workers' demand for "excessive" wages, but a part of how it functions "naturally". And, if the capitalist state does not manage the ups and downs, people might become so disgruntled that all that communism and socialism stuff whispered about in field and factory starts making sense. In the middle of the Depression and then World War II, with the Russian revolution in the background, that warning made many capitalists sit up and take notice. They may not have been big fans of liberal democracy, but it beat the alternative.

—p.45 by Geoff Mann 1 year, 4 months ago