presentation foundations of political economy presenters: hamda ali abdifatah o. o. miigane admas...

Presentation

FOUNDATIONS OF POLITICAL ECONOMY

Presenters:Hamda AliAbdifatah

O. O. MiiganeADMAS University

College.

Why Political Economy?Understand the meaning and concerns

of Foundations of Political EconomyUnderstand the various concepts

associated with political economyIdentify the contentions and

predominant ideas in development and underdevelopment discourses.

Understand the major historical trends in global capitalism

Understand the Marxian dialectics and various epochs in history.

ADMAS University College. 1

Course Modules:Module OneUnit 1: Understanding the

Subject Matter of

Political Economy

Unit 2: Perspectives on Political Economy

Unit 3: Basic Concepts in Political Economy

Unit 4: Primitive Accumulation

of Capital

Unit 5: Historical Materialism

Module TwoUnit 1: Primitive

Communalism

Unit 2: Slave Owning Mode of Production

Unit 3: Feudalism

Unit 4: Capitalism

Unit 5: Socialist Mode of

Production ADMAS University

College. 2

Course Modules:Module ThreeUnit 1: Understanding the

Concept of DevelopmentUnit 2: Modernization

Perspective on DevelopmentUnit 3: Dependency Perspective

on DevelopmentUnit 4: Paul Baran’s Analysis of

Economic Backwardness and Economic Growth

Unit 5: Andre Gunder Frank’s Analysis of Development of Underdevelopment

Unit 6: Samir Amin and Unequal Development

Module FourUnit 1: Imperialism Unit 2: ColonialismUnit 3: Neo-

ColonialismUnit 4:

GlobalisationUnit 5:

Multinational Corporations

Unit 6: Bretton Woods SystemADMAS University

College. 3

Module 1


Unit 1: Understanding the Subject Matter of Political Economy

Political economy was the original term used for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth.

It was developed in the 18th century as the study of the economies of states, or polities, hence the term political economy.

Political economy studies the basis of the development of societies.

This centers on the production of material wealth and the mode of production, that is, it studies production and the basis of society from the point of view of the economic relations between people in the production process.

In the views of Lenin, political economy deals not just with production, but the social relations of humanbeing in production and the social system of production.ADMAS University

College. 1

Cont…dThe subject-matter of political economy is therefore,

the production (economic) relations between people, the relationship of various social classes to political power and the interplay of politics and economy in the determination of power relations within the comity of nations.

I. The forms of ownership of the means of production;

II. The position of the various classes and social groups in production and their interrelations;

III. The forms and socio-political implication of the distribution of material wealth; and

IV. The interplay of politics and economy in the international division of labour and exchange


Unit 1: SummaryPolitical economy studies human interaction with

specific focus on the social relationships of production.

It divides the society into social classes based on the economic capabilities of social actors and further offers explanations for the discrepancies in the international division of labour and exchange.

REFERENCES/FURTHER READINGo Okereke, C. Nna-Emeka (2004). Citizen and State: An

Introduction to Political Discourse. Lagos: Elim.o Ryndina, M.N.; Chernikov, G.P and Khudohormov, G.N.

(1980). Fundamentals of Political Economy. Moscow: ProgressPublishers.


Unit 2: Perspectives on Political Economy

1. Classical political economy (Adam Smith, David Richardo, and Thomas Malthus)

Concerns mainly with the removal of inhibitions to expansion of capital in the productive process.

Arguments mainly that the market forces of demand and supply should be the major determinants of the production process.

Here, the intervention of the government in economic activities is rejected. Rather, the state should focus on its primary function of maintenance of law and order.

Classical political economy has otherwise been referred to as laissez faire political economy because of its emphasis on free enterprise.

The classical approach to political economy argues against the utility of restriction in international trade.

Advocates for the abolition of trade restriction such as import and export duties embargo. It extols policies initiatives, which favour deregulation, privatisation and commercialisation. The western notion of globalisation, which place emphasis on trade and financial liberalisation, fall within this category. ADMAS University

College. 1

Cont…d

2. Marxian Political Economy (Karl Marx)

Scholars of Marxian orientation conceive the classical orientation to political economy as vulgar: Karl Marx as the main proponent of the approach assumed a radical posture in his interpretation of the economic process.

The Marxian interpretation of history places emphasis on social classes, productive forces and the social relationship of production.

Marxians maintains that the economy is the substructure upon which other substructure and overall super-structural edifice of society revolves.

Marx argued that all commodity value is determined by labour content- both the direct labour and indirect labour embodied in capital equipment.

The Marxian approach is consistent with socialist worldview, which accommodates extensive state intervention and control of the economy of the nation. It is the expectation of scholars of Marxian orientation that state monopoly of the productive process will make for a better redistribution income in the society.


Cont…d3. Neo-Classical Political Economy (John Keynes) Scholars in this school of thought doubt the capability of attaining

optimum resource production and allocation within the classical assumption as well as opposed to the extremism of the Marxian scholars.

For them, there is the need for some limited measure of state intervention in the economic process if there must be full economic production.

It is their position that changes in aggregate demand have a significant and lasting effect on output. Hence if aggregate demand fall because of a monetary tightening or a fall off in consumer spending, Keynesian scholars hold that this will in the short run lead to falling output and employment.

Consequently, they posit that state intervention in the economic process is relevant for the attainment of full employment, control of inflation and general

economic recession.

In summary, they postulate that government intervention was needed to control the flow of money in the economy and further accommodate the preference of government’s fiscal and monetary policies to national economic development.


Unit 2: Summary The role of the government in economic life

of the state cannot be over-emphasised.

Beyond the contentions of the above perspectives lies a central denominator, which is the fact that they all advocate for efficient and effective delivery of public goods in the society.

REFERENCES/FURTHER READINGo Anifowoshe, R. and Enemuo, F. C. (eds.). (1999).

Elements of Politics, Lagos: Malthouse.o Okereke, C. N. (2004). Citizen and State: An

Introduction to Political Discourse, Lagos: Elim.o Samuelson, P. and Nordhaus, D.W. (2002).

Economics. New Delhi:Tata McGraw Hill.ADMAS University College. 1

Unit 3: Basic Concepts in Political Economy

1. Labour A conscious and purposeful activity of people to produce

material wealth. In the labour process, people act on nature in order to adapt it to their own requirements.

Labour is eternal to humankind and can be skilled or unskilled. For Fredrich Engels, labour is an external, natural necessity and the primary condition for human life. Lenin shared this view and add that it was labour that created man himself.

The fundamental difference between man and animals appeared whenman began to make tools, even the primitive ones.

A. Means or Instruments of LabourB. Objects of LabourC. Means of Production


Unit 3: Cont…d2. Relations of Production

The relationship between people in the process of production, exchange, distribution and the consumption of material wealth are called relations of production or economic relation.

3. Mode of ProductionThe productive forces (means of production) and relations of production constitute the mode of production.

4. Basis of SocietyA. SuperstructureB. Socio-Economic Formation Primitive communalism Slave owningo Slave ando Slave Masters Feudalismo Lords ando Serfs Capitalism o Bourgeois (capital) o Proletariat (surplus value) Communism

C. Social Class ADMAS University College. 1

Unit 3: Summary This unit examined the various concepts that

are associated with political economy.

Everyone is expected to get familiar with the concepts at this stage because they will be frequently utilized in subsequent units as well as in your life-span.

REFERENCES/FURTHER READINGo Okereke, C. N. (2004). Citizen and State: An Introduction

to Political Discourse. Lagos: Elim.o Ryndina, M.N.; Chernikov, G.P and Khudokormov, G.N.

(1980). Fundamentals of Political Economy. Moscow: Progress Publisher.

o Schaefer, R. T. (2003). Sociology. New York: McGraw HillsADMAS University College. 1

1. Realism School of Thought The term ‘realism’ is used to describe mercantilism and economic nationalism.

1.1. Historical evolution of realism It emerged during the creation of an international

system of states.

Medieval business practices gave way to the basic

structures of the modern commercial world.

The central concern of realism was the security of the

state.

The creation of a large and well-equipped army and by

the acquisition of wealth is a concern of the security.

Cont’d………..

1.2. Central arguments of Realism.

The most important actor in the international system is the

state.

Human nature is seen as inherently selfish and bad.

International economic relations between states are

competitive.

There is a direct relationship between the pursuit of political

power and economic wealth.

1.3. Mercantilism

The central concern of mercantilism is the security of the state.

Security of the state can be enhanced by creation of large and well equipped army and also by acquisition of wealth.

Internally this can be achieved by maximizing tax. And in international level by exporting more and

importing less. This is to increase it’s holdings of gold and silver thus

gaining advantage over other states in the system. How ever it’s impossible all states in international

economic system to achieve this, as one states surplus is another states deficit( zero-sum game).

This is a system of economic relation that would be likely to lead conflict.

1.4. Economic nationalism After policies of intervention and protection was heavily

criticized by Adam Smith a more robust defense of mercantilist position was developed.

The focus shifted from prioritization of achieving a trade surplus to the need for more direct support of the national economy.

The term economic nationalism is used here to distinguish this from classical mercantilist by the work of Alexander Hamilton and Fried rich list.

Both Hamilton and list proposed to compete with Britain in economic, political and military sense a strong manufacturing sector is important.

This required an interventionist approach. Hamilton argued by becoming self sufficient in

manufacturing goods the united states will increase it’s security. And reliance on imports served to weaken the military strength of the US.

Cont’d…………

The struggle is about economic resources; economic prosperity of the state is not enough in it self. It is the relative economic power of the state in direct comparison with other state.

To reach this goal; building state power should be prioritized over economic activities.

1.5 Criticism of realism

One perceived weakness of the realist perspective is that international economic relations are always viewed as a competitive exercise.What about cooperation?

As with realist theory in IR, there is an assumption, especially within economic nationalism, that it is possible to have a comprehensive and objective national interest. Many critics have highlighted that policies designed to advance the interests of the nation state as a whole can actually represent the particular interests of certain groups that are able to influence policy-makers. A realist approach needs to explain how economic interests are translated into the politics of the state.

Cont’d…….

The active role of the state may not guarantee economic development as some realist thinkers may suggest. Realists also didn’t recognize the role played by non-state actors, such as firms, international organizations and non-governmental organizations. It is suggested that structural changes taking place in the world economy are gradually eroding the importance of the state.

The realist approach is ambivalent about questions of equality and ‘who gets what’. Marxists would argue that the state, rather than reflecting the ‘national interest’, is reflective of the interests of the dominant economic class.

2. Liberalism 2.1 Central arguments It is beneficial in the long-run if markets are allowed to

operate freely States should be able to trade openly to each other. The role of state in economic affairs should be kept

minimum.

2.2. Assumptions of liberalism Politics and economics exist in separate spheres. Human beings posses the ability top asses the potential

costs and benefits of any individual decision or action. The harmony of interest, which exist among states in states

is also available between states. Trade between states is mutually beneficial

exercise( positive sum game) The free trade will expand interdependence of national

economies,.

Cont’d…… The greater the degree of interdependence the less likely

states inter in to military conflict.

2.3 Historical evolution of liberalism David Hume: criticized the permanent balance of payment

surplus and demonstrated that such a policy would be unsustainable as continual inflow of gold would rise domestic prices reversing the flow of gold.

Adam smith: provided critique of mercantilist view; that the pursuit of power and wealth by a nation can only be achieved at the expense of the other state. He sought to demonstrate how free market is the most beneficial way of organizing the economy, and doing so aimed to show how this required a minimum of state involvement.

Smith argued that human nature was what drives social change and coined the term invisible hand to describe how the market converts the individual pursuit of self-interest in to benefits for society as a whole because it’s guided the faculties reason.

Cont’d……….David Ricardo: as a general principle advocated free

trade arguing that countries may not always have absolute advantage over another country they will almost have a comparative advantage in the production in certain goods and services.

Ricardo also provided that free trade could contribute to more peaceful international relations. As trade had a positive benefits for all. While emphasizing the specialization of international division labor. John Maynard Keynes: the existence of produced

groups, labor unions and so on meant that liberal interpretation of markets as self-regulating was not matched by reality.

Although Keynes was still a liberalist, but his experience of the soviet union convinced him of the failings of Marxism, the Marxism and the first world war, the great depression had alerted him to the danger of mercantilist policies.

Cont’d……Keynes forwarded that state intervention is designed to complement the workings of the market, rather than replacing.

In 1944 at Bretton wood conference, there was a liberal consensus among the delegates concerning the causes of the second world war. a. The economic nationalism caused economic decline. b. The rise in popularity of fascism.

Bretton woods system was created in an attempt to prevent states pursuing protectionist measures during times of economic hardship.

A framework of institutions was created:a) International bank for reconstruction and developmentb) International monetary fund.c) The general agreement on tariffs and trade.

In other words it can be described as a system of strong states embedded in a liberal market-based world economy.

Cont’d…...2.4. Criticism of liberalism

Markets are not natural phenomenon.

Liberalism don’t look political and

social context

Liberalism is also charged with being

historical.

Justice and economic equality are

disregarded.

3. Marxism 3.1 Central arguments

Historical change is ultimately a reflection of the economic development of society.

Capitalism is the main driving force of world economic relations.

In a capitalist society there is class conflict between the bourgeoisie and the proletariat.

Cont’d ……..3.2. Historical evolution of Marxism

Karl Marx: in capitalist society there can be no inherent social harmony.

Karl illustrated that this harmony is blocked by three different laws. The law of the falling of profits: because of

competition. The law of disproportionality: denies

tendency towards equilibrium The law of concentration: accumulation of

wealth in the hands of the successful capitalists, at the expense of an increasing number of impoverished masses.

Cont’d…….Karl tarried to explain why capitalists maintained to exist so long for two reason.a) The pursuit of material possessions as a ‘natural’

objective of humans.b) The importance of spiritual belief and religious

observance.Marx also saw the state was wholly reflective of the interests of the bourgeoisie and that it created a political and legal framework to these ends.

Vladimir Lenin: capitalism decayed in the most advanced states , the drive for profits would cause capitalists to export capital abroad. This in turn would result in a rivalry between states. Lenin provided that colonies provided with a market for

unwanted goods and cheap natural resources.

Cont’d……….Raul Prebisch: divided countries in to developed core and global periphery south. Raul argued that the development in the core wasn’t lead to

industrialization on the south and the conditions for socialist revolution.

He noted that the core tended to trade manufactured goods in exchange for primary commodities.

The terms of trade where to work against those economies based primary products.

The demand for primary products tend to remain relatively fixed.

Immanuel Wallenstein( world system theory): every domestic struggle or economic difficulty should be viewed as part of the system as whole. The world system theory introduces that there are a new group

of countries the semi-periphery. they tend to have both industries and more organized administrative structures.

Cont…d

3.3. Criticism of Marxism Marx’s view of history as a dialectical process, whereby

capitalism would eventually be replaced by communism is now generally viewed, with hindsight, as optimistic at best.

Many critics view the explanation of all issues within the framework of class struggle as an oversimplification.

The importance attached to economic factors in explaining relations between states is perceived as a major weakness.

The classical Marxist view of the state as a tool for the promotion of the interests of the bourgeoisie is often criticized as being overly simplistic. Realist scholars, for example, view the state as an independent actor that is able to promote the ‘national interest’ rather than the interests of the capitalist class

Unit 4: Summary This unit embarked on a deliberate

attempt to identify the historical process through which wealth differentials in the society was designed and sustained prior to the emergence of the capitalist mode of production.

This process in the views of Karl is the so-called primitive accumulation of capital.

REFERENCES/FURTHER READINGMarx, K., (1986). Capital: A Critique of Political Economy

Volume 1. Moscow: Progress Publishers.Okereke, C. N. (2004). Citizen and State: An Introduction to

Political Discourse. Lagos: Elim.


Unit 5: Historical Materialism1. The Crux of Historical Materialism

For Marx, the history of all hitherto existing societies is the history of class struggles. He argued that the highest determinant of human history is the sum of the relations involved in economic production.

In other words, it is the economic structure of society that constitutes the real foundation on which rises a legal and political superstructure and to which correspond definite forms of social consciousness.

What Marx is saying is that it is economic production that ultimately directs man’s social advancement in history not other factors.


Unit 5: Historical Materialism1. Marx’s Idea of Historical Materialism

Marx notion of historical materialism presupposes that there exist two levels of relationship in the process of production; the relationship between man and nature on the one hand and relationship between man and man on the other.

The relation between man and nature is determined by available forces of production. However, he observed that men not only act on nature in order to produce but also on one another, cooperating mutually in the exchange of activities, which involves relations of production. Such relations often assume the nature of domination and subordination, exploitation and expropriation, oppression and repression b ADMAS University

College. 1

Unit 5: Summary Several levels and regimes of relationships

are entered in the process of production – complementary and contradictory.

Both complementary and contradictory often result in structural changes in society especially with regard to the social formation.

The Marxian notion of historical materialism explores these trends.

REFERENCES/FURTHER READINGo Marx, K. (1986). Capital: A Critique of Political Economy.

Moscow: Progress Publishers.o Nwoko, M. I. (1988). Basic World Political Theories:

Ancient to Contemporary. Nekede, Owerri: Clarentian Press. ADMAS University

College. 1

Module 2


Unit 1: Primitive Communalism

The first socio-economic formation was the primitive communal system, which lasted for many hundreds of thousands of years.

The development of society began from this stage. At first, people were in a half-savage state, powerless before the forces of nature. They ate a mainly vegetarian diet consisting of things found ready to eat in nature roots, wild fruits, nuts etc. This mode of production emerged about two million years ago and existed as the longest period of human history.

The era ended only about seven to nine thousand years ago (Ryndina et al: 1980).ADMAS University

College. 1

Unit 1: Summary

The primitive communal mode of production was characterised by the existence of collective ownership of the productive forces. There was also division of labour based on sex and age,

The main instruments of production were crude implements such as stone and metal.

This era remains the longest existing mode of production in human history.

REFERENCES/FURTHER READINGo Okereke, C. N. (2004). Citizen and State: An

Introduction to Political Discourses. Lagos: Elim.o Ryndina, M.N. Chernikov, G.P. and Khudokormov, G.N.

(1980). Fundamentals of Political Economy. Moscow: Progress Publisher. ADMAS University

College. 1


1. Features of the Slave-Owning Mode of Production The growing inequality between people led to the formation

of the state as an institution of oppression of the exploited class by the class of exploiters. Thus slavery grew up on the ruins of the primitive communal mode of production.

Slavery was the first, most flagrant and avert form of exploitation. It existed virtually everywhere. The slave owing system reached the peak of its development in the period from 2nd Century BC to the 2nd Century AD.

The development of the productive forces, the further social division of labour and exchange increased property inequality even more. On the one hand, rich people appeared who concentrated the draft cattle, instruments of labour and money in their own hands, on the other, poor people who become poorer and poorer were compelled to turn to the rich for loans. Usury emerged- the debtor and the creditor. ADMAS University

College. 1

Unit 2: Summary

1. Features of the Slave-Owning Mode of Production The growing inequality between people led to the formation

of the state as an institution of oppression of the exploited class by the class of exploiters. Thus slavery grew up on the ruins of the primitive communal mode of production.

Slavery was the first, most flagrant and avert form of exploitation. It existed virtually everywhere. The slave owing system reached the peak of its development in the period from 2nd Century BC to the 2nd Century AD.

The development of the productive forces, the further social division of labour and exchange increased property inequality even more. On the one hand, rich people appeared who concentrated the draft cattle, instruments of labour and money in their own hands, on the other, poor people who become poorer and poorer were compelled to turn to the rich for loans. Usury emerged- the debtor and the creditor. ADMAS University

College. 1


1. Slave Owning Mode of Production

2. Feudalism3. Capitalism4. Socialist Mode of

ProductionADMAS University

College. 1

Module 3


Module 4


Unit 5: Historical Materialism

:Unit 3: Basic Concepts in

Political Economy

Unit 4: Primitive Accumulation

of Capital

Unit 5: Historical MaterialismADMAS University College. 1

presentation foundations of political economy presenters: hamda ali abdifatah o. o. miigane admas...

Documents

mode of production unit

capitalism unit

underdevelopment unit

colonialism unit

globalisation unit

feudalism unit

imperialism unit

term political economy