ECOP1001: ECONOMICS
AS A SOCIAL SCIENCE
Week 5: Marxist Political Economy
INTRODUCTION • Question: Where do profits come from?
• Chang’s one sentence summary: “Capitalism is a
powerful vehicle for economic progress, but it will
collapse, as private property ownership becomes an
obstacle to further progress”
• Enduring relevance for:
• Theory: Modern political economy
• Issues: Inequality, crisis
• Politics: Social movements, labour movements
1770s Classical political economy
1840s Marxist economics
1870s Neoclassical economics
1900s Institutional
economics
1930s Keynesian macroeconomics

1950s ‘Neoclassical synthesis’
1970s Monetarism
2000s Modern political economy ‘Economic rationalism’
LECTURE
OUTLINE
• Background
• Approach
• Historical materialism
• Modes of production
• Concepts
• Class
• Exploitation
• Labour theory of value
• Alienation
• Circuit of capital
• Capital accumulation
• Analysis
• Crisis
• The state
• Case study
• Inequality
MARXIST POLITICAL
ECONOMY
Historical context: Industrial revolution, mid-19th century Great
Britain and Europe
Key figures: Karl Marx, Author of Capital (Vol.1 published 1867),
Friedrich Engels
Unit of analysis: Classes
Method: Historical materialism
Core concepts: Surplus value, exploitation, alienation, circuit of
capital, capital accumulation
Primary concerns: Capitalist development and crisis
Role of the state: Create conditions for capitalist reproduction
HISTORICAL
CONTEXT I
The bourgeoisie, during its rule of scarce one
hundred years, has created more massive and more
colossal productive forces than have all preceding
generations together. Subjection of Nature’s forces
to man, machinery, application of chemistry to
industry and agriculture, steam-navigation,
railways, electric telegraphs, clearing of whole
continents for cultivation, canalisation of rivers,
whole populations conjured out of the ground —
what earlier century had even a presentiment that
such productive forces slumbered in the lap of
social labour?” Marx, Communist Manifesto (1848)
HISTORICAL
CONTEXT II
“But far more demoralising than his poverty in its influence
upon the English working-man is the insecurity of his
position, the necessity of living upon wages from hand to
mouth, that in short which makes a proletarian of him….The
proletarian, who has nothing but his two hands, who
consumes today what he earned yesterday, who is subject
to every possible chance, and has not the slightest
guarantee for being able to earn the barest necessities of
life, whom every crisis, every whim of his employer may
deprive of bread, this proletarian is placed in the most
revolting, inhuman position conceivable for a human being.”
Engels, The Condition of the Working Class in England
(1845)
KARL MARX
(1818–1883)
• Born in Prussia
• Law student, Young Hegelian, dissident liberal
• Resident of Paris, Brussels and Cologne
(1843-1849) and London (1850-)
• Critic of capitalism, communist, writer for
New York Daily Tribune
• Collaborator with industrial capitalist
Friedrich Engels
• Author of Capital and Communist Manifesto
OVERVIEW OF MARX’S
CONCEP TION OF
CAPITALISM
• Expansionary
• Competitive
• Conflictual
• Crisis‐prone
• Destructive
HISTORICAL
MATERIALISM
• Materialist conception of history:
• Historical development is conditioned by
the economic relations through which
people reproduce themselves and their
society
• “The history of hitherto existing society is
the history of class struggles” – Marx and
Engels, Communist Manifesto
• Dialectical method:
• Analyse economy looking at internal
relations of capitalism, focusing on how
contradictions shape economic change
MODES OF PRODUCTION
• Economic systems understood as distinct modes of production, combining:
• Forces of production
• Relations of production
• Superstructure (social institutions) supported by economic base (forces and relations of
production)
• “In the social production of their existence, men inevitably enter into definite relations, which
are independent of their will, namely [the] relations of production appropriate to a given stage
in the development of their material forces of production. The totality of these relations of
production constitutes the economic structure of society, the real foundation, on which arises
a legal and political superstructure, and to which correspond definite forms of social
consciousness. The mode of production of material life conditions the general process of
social, political, and intellectual life. It is not the consciousness of men that determines their
existence, but their social existence that determines their consciousness.” Marx, Preface to
A Contribution to the Critique of Political Economy (1859)
CLASS
• Capitalism as a mode of production is distinguished by its peculiar class system
• Class structured by capitalism’s relations of production
• Capitalist class: Own the means of production, in competition with each other to accumulate capital
• Working class: Own their labour power which they sell to capitalists, separated from the means of
subsistence
• The ‘double freedom’ of workers under capitalism
• Capital as a social relation, not a thing
• “Capital presupposes wage labour; wage labour presupposes capital” – Marx, Wage Labour and
Capital
• Conflictual interests result in constant class struggle
EXPLOITATION
• Workers sell labour power (capacity to work) to capitalists for a certain amount
of time for a wage
• During that time, the capitalist controls the labour (work performed) by the
worker
• Exploitation occurs when workers produces more value than they are paid for
• ‘Surplus value’ is appropriated by the capitalist
• Absolute surplus value: Extension of labour time (amount of exploitation)
• Relative surplus value: Increasing the productivity of labour (rate of
exploitation)
• Surplus value source of, but not equal to, profits
LABOUR THEORY OF VALUE
• Developed and refined from Smith and Ricardo through distinction
between concrete labour and abstract labour
• Concrete labour: Particular labour processes that produce specific use
values
• Abstract labour: All labour processes that produce general exchange
values
• Value determined by ‘socially necessary labour time’ embedded in
commodities
• ‘Fetishism’ of the commodity, but value ≠ price
ALIENATION
• Workers are alienated:
• From the products of their
labour
• From control over labour
processes
• From other workers
• From themselves
EXERCISE • Think of one commodity
you have bought in the
last month
• Discuss with the person
next to you:
• What you know, if
anything, about the
conditions in which
it was produced
• What questions a
Marxist political
economist would
ask about that
commodity
CIRCUIT OF
CAPITAL I
• M – C – M’
• M = Money
• C = Commodities
• M’ = Increased quantity of money
CIRCUIT OF CAPITAL II
• M – C (MP + LP)…P…C’ – M’
• Stage 1: M – C
• The purchase of labour power and the means
of production
• Stage 2: P
• The production of commodities
• Stage 3: C' – M'
• The sale of transformed commodities and the
realization of profit
CAPITAL ACCUMULATION
• “Accumulate, accumulate! This is Moses and the Prophets!” – Marx,
Capital
• Process of producing and realising surplus value on an ever expanding
scale
• M-C…P…C'-M'-C'…P…C''-M''-C''…P…C'''-M'''-C'''…P…C''''-M''''-C''''…P…C'''''-M'''''
• Supported by:
• ‘Primitive accumulation’: Appropriation of nature and colonialism
• ‘Reserve army of labour’: Unemployed and underemployed workers
• ‘Concentration and centralisation of capital’: Large corporations
that control markets
CRISIS
• Contradictions of capitalism lead to constant episodes of economic crisis
• Capital has a tendency to over-accumulate resulting in lack of profitable investment
opportunities
• Increasing exploitation for short-term profits for individual capitalists undermines
profits for capitalism in the long term
• Crisis registers surplus capacity, unsold commodities, financial instability, mass
unemployment,
• “Crises are never more than momentary, violent solutions for the existing
contradictions, violent eruptions that re-establish the disturbed balance for the time
being.” Marx, Capital, Vol. III, Ch. 15
THE STATE
• “The executive of the modern state is but a committee for
managing the common affairs of the whole bourgeoisie”,
Marx and Engels, The Communist Manifesto
• Creates conditions for capitalist accumulation:
• Secures raw materials
• Regulates wage labour
• Supports certain industries
• Secures legitimacy / represses dissent
• Manages crises
CASE STUDY: INEQUALITY IN
THE UNITED STATES
NEXT WEEK:
NEOCLASSICAL
ECONOMICS, WITH
GUEST LECTURE
FROM PROF JIM
STANFORD