History of economic thought

1. History of economic thought Presentation 8 Petr Wawrosz

2. Socialistic economic theories

3. Historical backgrounds • The modern workers’ movement began with the great Luddite socialuprisings of 1808–20, involving France and, especially, England, where therevolt was so strong, organized, and overpowering that the government, toput it down, had to use an army of 12,000 men. • It is important to highlight the two extremes between which all theattempts to construct a socialist theoretical system have oscillated: the systems of Saint-Simon and Fourier. Itis possible to go back a few centuries, at least to the final years of theRenaissance, to trace, in humanist utopian thought, the first philosophicalmanifestations of that duality in social design.

4. Utopia-of-order model • Formulated by More and other Catholic philosophers such as Campanella and LudovicoAgostini. • This model inspired the first great experiment in the construction of a real ‘socialist’ society, the Jesuit Republic in Paraguay (1649 – 1767), with over 144,000 inhabitants at its peak, and its almost incredible duration of nearly a century, from the seventeenth to eighteenth centuries. • The Catholic view of society as a ‘mystic body’ prevailed. Individuals exist and also deserve to be happy, but only as parts of a metaphysical entity which, one could say, gives them life as social beings. Individual liberty is not a value in Utopia: children obey their parents, women their husbands, and everybody the patriarchs. The slaves obey the free people in More’s Utopia and the colonies the metropolis. The State dominates all. The slaves do not constitute a moral problem, as they are people who prefer slavery in Utopia to liberty outside. • Neither is imperialism a problem; on the contrary, whoever is outside the ideal order deserves subjection. • Perfectly planned production, completely centralized decisions, and meticulously organized working activity, principle controlling the ownership of the means of production.

5. Utopia-offreedommodel • Dream of individual liberation whose philosophicalbasis, if it has one at all, is clearly anti-Catholic and hedonistic. • Worktends to disappear, and the State with it. The criterion of resourceallocation in a communist society was so defined by Marx: ‘from eachaccording to his ability, to each according to his needs’. • Anton FrancescoDoni anticipated him by more than three centuries: ‘everybodybrought the product of his work, and took what he needed’.

6. Claude-Henry de Saint-Simon • 1760 – 1825 • Saint-Simon’s synthesis tried to link an antiindividualistic view of society with the cult of technological and scientific progress. • The ideal of a cohesive and functional social organization. Constructed a model of a strongly hierarchical and strictly meritocratic society. • His ‘socialism’ aspired towards a society of producers, i.e. workers, technicians, scientists, and entrepreneurs—the ‘industrialists’, as he called them. Saint-Simon maintained that the capitalists should be the managing e´lite, not because of the power derived from their wealth, but rather because of their function as innovators and organizers of the production process. The workers would obtain a gradual improvement in their living conditions, not at the expense of machines and capital, but rather by means of them. • The productive efficiency of the factory should be extended to the whole society, which would become an immense factory, with central planning of production and a distribution system based on the principle that remuneration be linked strictly to productivity.

7. Francois-Marie-CharlesFourier • 1772 - 1837 • Comes from theory of the noble savage (Rousseau). • Men were considered to be naturally good. If they have ‘perversions’, it is only because society is unnatural. If individuals were allowed freely to realize their own natural wishes, they would spontaneously organize themselves in a harmonious way. • The family, the receptacle of hypocrisy and repression, would be abolished, and with it commerce, the cancer of the economy and the cause of waste and parasitism. • Consumption would be spontaneously reduced to essentials, industry reorganized, work co-ordinated in small communities and distributed according to individual abilities and wishes. • Alienation would disappear, together with economic exploitation and political oppression.

8. Theoretical notes • Socialismin the first half of the nineteenth century seemed destined to produceonly dream-worlds. • It was the genius of Marx that brokethe spell and founded modern socialism, in fact producing, not one, but twostrokes of genius. • The first consisted of interpreting the two antitheticalprinciples of social reorganization as laws of different historical phases. The‘first phase’ of communism, in which each person would be remuneratedaccording to his or her own ability, would be only the starting point of anevolution towards a superior social organization: a fully-fledged ‘communist’society, in which each person would only receive according to his needs whilewould give according to his abilities. • The other stroke of genius consisted ofnot saying a great deal more about this. Marx avoided extravagant constructions,leaving history, i.e. mankind itself, the task of realizing humanideals.

9. Karl Marx(1818 – 1883)

10. The Communist Manifesto • Published 1848 • Class society – bourgeoisie and workers • Work of proletarians (workers) lost its individual character. Workers become an appendage of the machine. Alienation. • Productivity forces: relationship a man to the nature, determined by technology and natural resources, affected by human activities (discoveries, inventions, conquest, colonization) • Mode of production (productivity relationships): relationships among people (property rights): how society is organized. • As the productivity forces develop, a tension arises between the productivity forces an the mode of production. Result: revolution, change of the social system – new mode of production. • Matherial base (production) and superstructure. • Suggested: expropriation, strongly progressive tax system, the abolition of the rights of inheritance, the nationalization of credit, transport, manufacturing and agriculture.

11. Capital • Main Marx‘s publication. Three volumes. The first one published 1867, the second 1885, the third 1894 (second and third prepared by Friedrich Engels). • Labor theory of value: labor has its value =the value of the goods workers need for their reproduction. • The value of the goods is given number of hours necessary to its production. • Supervalue: the value of the goods created by workers is higher that sum of values of their labor. • Industrial-reserve army. The wage level tends toward the value of the goods workers need for their reproduction. • Tension between productivity forces and mode of production.

12. The term „capital“ • Capitalis a social relationship: it is notsimply a set of means of production, but rather, the power that their controlgives to the bourgeoisie; the power to use the means of production to produceprofits. Only in a particular social system, which he called ‘the capitalistmode of production’, do the means of production become capital.

13. His attitude to the individual • Marx invariably refused to see the individual as a social atom. • The interests, needs, tastes, endowments and ideas of human beings are formed not by ‘nature’ but by history and the social context in which they live; the economist cannot therefore take them as ‘exogenous data’. Political economy must determine ‘human nature’ endogenously with respect to the economic structure studied. • Economic action is always intentional, even when individual perception of the interests in play is distorted by ideologies. For him, the ideologies themselves are instruments of social action. Theory serves practice, science serves social change: the Communist dream of a society made up of free and equal individuals can only come true if it is realized with the conscious intention and the collective action of the subjects who create it.

14. Theory of exploitation • The worker enters the labour market as a seller of the only productiverequisite he owns: his ‘labourpower. Each worker, in order to producehis working capacity, must consume a certain quantity of wage goods inthe proportions determined by the consumption habits prevailing in a certainepoch. Thus, the ‘value of the labour power’ is equal to the value of themeans of subsistence necessary for the survival and the reproduction ofthe working class. • The capitalist enters the labour market with the goodhe possesses, i.e. capital, a part of which consists of wages. He pays the‘exchange value’ of labour power and acquires its ‘use value’. After theexchange, labour becomes a means of production, and its use, given the rulesestablished in the employment contract and the prevailing norms, is theprerogative of the capitalist. Thus, the product of labour, i.e. the set of goodsproduced with the use of labour, belongs to the capitalist. • In the production process, labour produces goods whose value is superiorto that of the labour power. The difference is the ‘surplus value’.

15. Theory of exploitation • Surplusvalue is the valorization of capital and belongs to the capitalist.Everything has followed market rules. The workers have received a‘just’ price for the good they have sold, and the capitalists have paid for it. • The conditions of exploitation have to do with control of the productionprocess. The sale of labour power to the capitalist boils down to the • Exploitation arises out of thefact that the capitalist exercises command to make the workers produce ahigher value than he pays them as a wage. In formal submission there isno revolutionizing in production techniques. The capitalist limits himselfto making his employees work using the same techniques they would use ifthey were self-employed workers, craftsmen, peasants etc. Even in this wayhe obtains a surplus-value.

16. Marx and classical economists • Started to define Ricardo and others as „classical economists“ • Marx´s definition of ‘classical political economy’ is simple and rigorous, and coincides with that of ‘Ricardian economics’: a theoretical system based on the theory of surplus, the labour theory of value, the methodology of aggregates, and the analysis of the behaviour of the social classes and their relationships.

17. Friedrich Engels (1820 – 1895) • The best Marx‘s friend. He supported Marx. • Published some own works, mechanical point of view (e.g. about development of the man). • Marxism (Marxist theory) comes more from the Engels opinion than Marx ones.