Chapter one: political economy as a science:
The definition of political economy:
It’s the science of laws governing the economic relations which are the social relations which take place between the members of the society through the intermediary of material goods and services.
These relations consistituting the process of production and distribution of goods and services necessary for life of the members of the society.
The definition of production:
It’s the transformation of natural resources in to something capable in satisfying the human needs.
The object of political economy:
The object of political economy is the knowledge relative to the totality of phenomena which constitute the economic activity of the man in the society which is the activity of production and distribution of products and services necessary for the life of the members of the society .this activity presents itself in the form of a double relation:
A relation between man and nature, and a relation between man and man.
1-the process of production as a relation between man and nature:
a-from all species, only man is opposed to nature, the other living beings make part of nature, subjugated to its forces.
b- Man has needs and wants, in order to satisfy these wants man has to exercise an effort,
The effort exercised by man distinguishes itself from the effort of the other species by the fact that it's a conscious effort, because man is a thinking animal and because his opposition to nature, he doesn’t take the forces of nature as they are, but he labours them to make them apt to satisfy his wants.
c-man invents tools, instruments of labour, these instruments are used in production.
By means of these instruments man augments the productivity of his labour, that is his productive faculties, and hence his mastery over the forces of nature.
d-the relation between man and nature is a relation of mutual interaction: which means that man labours his conscious effort over the forces of nature, using his instruments in order to transform these forces into something apt to satisfy his wants.
2-the process of production as a relation between man and man:
Production is not only a relation between man and nature; it's also a relation between man and man, because man doesn’t live his struggle against nature singularly. He does it with the other men socially.
Men complete each other, mutually in the society, and this relation takes the form of the social division of labour, which permits the individuals and the groups to specialize in particular activities. Example: the primitive division of labour between man and woman.
The division of labour depends on the realization of a certain level of development of the productive forces.
We can say that the conditions of production process, which are the basis of all economic activities, can be as follows:
The conditions of production process:
a-the labour force: it’s the ensemble of individuals and groups participating to the economic activity, having a technical knowledge acquired through social experience and accumulated from one generation to the other.
b-the instruments of labour: which augments the capacities of the labour force.
c-the objects of labour: the material to be transformed by labour with the aid of the instruments of labour, example: the thread and the electric energy in the production of textiles.
The last two ones, the instruments of labour and the objects of labour represent the (means of production).
The productive forces:
a- The human resources: it's the labour force with its physical and intellectual capacities.
b- The natural resources: represented by the gifts of nature which the society can use in its economic activity.
c- The material resources: represented by all what man produces to be used again in the process of reproduction as: machines, buildings, raw materials.
All previously are the conditions of production process which aims finally at the satisfaction of the needs of the members of the society.
We can distinguish two types of production known in the history of the economic activity: a- subsistence or natural production
b- Exchange production
a- Subsistence production:
At the first stage in the history of all economic activities, the production aimed at the immediate satisfaction of the needs of the producers.
For example: the agricultural production of a peasant family which produces only for the satisfaction of its proper needs. At this stage, production and the product, labour and its result, were unseparable in both reality and the consciousness of the producers.
b- exchange production:
At a later stage, with the possibility of the production of the economic surplus when the level of development of the productivity of labour permits the producers to produce, during a certain period, a quantity of products exceeding the quantity necessary.
It consists of two stages:
The first stage: when labour spent in the production of commodities to start exchanging products.
The second stage: when the money started to be the medium of exchange.
Commodity production supposes the following:
1- Social division of labour.
2- That production is effectuated by independent producers.
3- That production aims at least partly exchange.
4- That the product which became a commodity, is useful for the members of the society which means that it must has a social use value.
The history of political economy:
The economic thought:
The economic thought at the precapitalist era:
It covers the antiquity and the middle ages of Europe
1-the antiquity: in the ancient Greek society
a- the agricultural activity:
It was effectuated under difficult natural conditions: a poor soil, the land has to be cultivated one year and left to lie fallow the next year.
As for the type of the unit of the agricultural production, we can make distinction between three types:
- the units of big proprietors:
Who own the most fertile Land.
These proprietors who owned the most fertile land didn’t participate to the process of labour; they employed the slaves they owned.
- The small proprietors:
Whose number was very big, they counted for one half or more of the population. The area cultivated by each unit is small and often parcelled.
Production was carried out by the labour of the family members and the slaves the family owned using simple means of production.
- The slaves of the state:
The slaves of the state or the hillos, were owned by the state, so the state was the only one who had the right to liberate its slaves.
The slave had the right to make a family to cultivate the land with him, provided that he cedes to the state a part of his product, he has the right to dispose of what remains for him from the product.
So, we can say finally that the agriculture couldn’t in its totality satisfy the needs of the population, that’s why they had to IMPORT.
b- The foreign trade:
The necessity of the foreign trade was concentrated in the cities and specially the ports. It has flourished in Athens to become a basic activity practiced principally by persons as money lenders.
To import one has to export, export some agricultural commodities, like wine and oil, skins, arms, pieces of metallic money, etc.
Hence, the expansion of the industrial activity and the extraction activity it requires.
c- The industrial activity:
It was carried out by artisan units and small workshops owned privately.
The craftsman carried out labour with members of his family assisted by a number of slaves.
The small workshops produced industrial products. The biggest workshop employed 120 workers as in the fabrication of arms. In the workshop, labour is effectuated by the wage – workers and the slaves.
The extraction activity took place in the mines of the states.
This extraction activity was carried out by slaves either owned by commissionaire or hired by him from their owners.
d- Trade:
Exchange and monetary exchange was rather spread, money which was invented in the beginning to facilitate the act of exchange.
This money is used in this economy for a new purpose which is to buy commodities and resell them with a higher price.
In the society economic ideas are found within philosophical ones.
That’s why we are going to talk about Aristotle who was the most one capable in analyzing the economic phenomena.
Aristotle:
Within the framework of the Greek thought, Aristotle distinguishes himself in analyzing the economic phenomena.
The economic analyse of Aristotle was founded directly on the:
a- Needs and their satisfaction:
These needs are satisfied by the goods. These goods are obtained by a number of activities as: agriculture, breeding, fishing, hunting, and as well as the industrial activity and mining, all these activities represent natural means for the acquisition of goods besides, there is trade which Aristotle doesn’t consider as a natural activity.
Aristotle starts from the self sufficient family units, which are the units which produce for the satisfaction of the needs of the family members.
Family units:
- a relation between master and his slave
- a relation between husband and wife
- a relation between parents and their children
Then he introduces the division of labour as a basis for the exchange in natural terms or barter and for the monetary exchange, that is the exchange of commodities for money.
Division of labour:
- Family labour.
- Wages labour.
- Slaves labour.
It was noticed that these commodities are sold at prices.
b- price:
Sum of money paid for one single unit of the commodity
Then he talked about the value of the commodity.
-The value of the commodity:
It’s a social characteristic which renders the commodity object of exchange.
Then he made the distinction between the use-value and the exchange value.
-The use value:
It’s an objective characteristic of the commodity which renders it capable of satisfying needs.
- The exchange value:
Which is the value expresses itself at the moment of exchange; it’s a ratio between two values.
The exchange of commodities is considered as the exchange between labours: for a relation of exchange takes place between the architect and the shoemaker,
The architect must obtain the labour of the shoemaker in order to give him his labour in exchange.
e- Money:
It's for Aristotle:
- means of exchange:
Which saves us the inconveniences of barter which is the exchange in nature.
To fulfill its function as medium of exchange money should have the characteristic of a merchandise which means that it has to be a product having a use-value.
Aristotle added some commodities like metals which are more qualified than others to fulfill their function as a measure of value.
- measure of value:
This is the exchange value of each commodity that is expressed by certain number of monetary units.
In this way money can express the prices of all commodities.
The third function of money is that it’s a stock of value
- Stock of value:
This means that through which wealth is stored up either temporarily or permanently.
f- Interest:
Aristotle approaches the problem of interest which is what the money lender receives in addition to what he has lent.
But he condemns each loan with interest and considers it as usury.
THE MIDDLE AGES OF EUROPE.
1-Social form: feudal organization.
2-Time: 5 to 15 century.
3-every social formation has a mode of production.
First: the mode of production of agriculture in the country:
A-characteristics:
1-social relations of production which gravitate around the land. It’s a matter of an economy primordially agricultural.
2-those who have effectuated labour in process of agriculture (peasants) don’t have the right to utilize the land. This right belongs to the lords.
3-the fact that this economic basis corresponds to a net of personal relations: a part of the labourer don’t enjoy a total personal liberty, they are not salves but serfs attached to their landlords on the land they cultivated.
B – Historical roots:
Its roots start from the ancient society, when the big landowners started to resist against the authority of Rome by residing on their land properties and enlarging these properties by the empire over small properties.
As for the owners of small properties they were too poor to resist. So the property goes to the big owners but the land continues to be exploited by them and their children + they cede to the lord a part of the product of their labour and stay faithful to them.
In this system we find the roots of the system of serfdom, but this doesn’t means that serfs existed as a result of a partial emancipation of slaves.
C-great transformation of productive forces:
1- Transformation took place under the influence of immigration from the east to the west, influence of Arab invasion of south-western Europe.
2- Within the framework of the techniques of agricultural production, it presents itself in: A- better utilization of the motor force generated by water current.
B- Liberation of domestic labourer.
C- Introduction of new means which allow for a better utilization of animal motor force.
D- Improvement in instruments of labour through the replacement of iron instruments for wooden ones.
E - Utilization of heavy plough with wheels.
F- Introduction of new seeds like oats used as food for man and animal.
G- Replacement of oxen by horses as a tracking force.
H- Bi annual agricultural rotation replaced by tri annual rotation.
3-all these aspects of transformation lead to increase in productivity of agricultural labour and to decrease in the number of laborers, serfs or slaves, needed on the lords land.
Note: the increase of productivity of labour on land cultivated by peasants for them selves + the decrease of hours of statute labour = a population growth.
D: productive units:
In the country side, the manors represented the social economic units.
The fief is founded on natural agriculture production seeking a sort of self – sufficiency.
The fief:
It’s a fortified form which contains the cultivated land, forests and the woods. It's composed of one village, sometimes two.
In the village's cottages the direct producers lived, who are:
-the serfs: representing the majority.
-slaves: whose number diminishes over time.
-free peasants: represents the minority, each owing a small parcel o land.
-craftsmen: iron smith, potter and carpenter …etc.
The cultivated land of the fief is divided in to:
-The land to be directly cultivated for the lord.
-land to be cultivated by peasant families in their own interest.
The peasant family as a unit of production doesn’t own but a little quantity of the simple instruments of labour.
The most important instruments are owned by the land lords
Question:
How could the peasants rent the land from its own owners?
The peasant family had to work during some days of the week on the lord's domain. By this the lord appropriates the rent of the land exploited by the peasant family in the form of labour rent(1).
Question:
What obligations were imposed over the peasant family in order to rent the land?
1- Cede a part of the product of the land.
2- Cede some of the animals he breeds and fish he fishes.
3- Grind his grains in the lord's mill.
4- Bake his bread in the lord's oven.
5- Make his beer in the lord's brewery.
6- Use all these means of production owned by the lords.
The possibility that the lords domain could be cultivated by less labour hours and the increase in the productivity of labour on the peasants parcels made it more advantageous to the landlord to cede the totality of the cultivated area to be divided among peasant families and worked out by them. In return he would receive annually a part of the product of the land bigger in quantity.
Here appear beside the labour rent the rent in kind (2) which will become the dominant form of the land rent.
It’s the legal obligation which conducts him to accomplish this labour to undertake his peasant responsibilities.
Consequently, the lord stops to play the role in process of production and becomes one of the social parasites.
The whole labour time of the family productive unit will be constituted of two parts:
1- A part spent for what is necessary for the life of the family.
2- A part exceeding that necessary for the payment of the rent.
At a stage rather related to the expansion of trade and cities, a forum of financial rent appears besides the rent in kind which is the money rent (3).
Here, the producer cedes to the landlord not a part of his product, but the price of that product.
And to do so, he has to produce a part of the product in the form of commodities which is product for sale for the market.
The peasants started to practice pressures on lords to transform the rent in kind in to money rent.
At this time the church got a power which was concentrated in:
1-ownership of land.
2-spiritual power.
3-administrative power.
Second: the mode of production of industry in cities:
1- cities formation:
- New cities emerged in north of Europe.
- These cities were on the banks of big river, on a main cross of roads and beside a church.
- They were considered as markets whose existence evokes the establishment of contacts between Italian cities and those of the north.
- It didn’t represent more than 10% of the population.
- The life of city was based on trade handicraft and a no of domestic industries.
- The organizational form: the guild system:
Advantages of guild system:
- To have a collective organization to protect inhabitants of the city against the nobility of the country side.
- Edit places for public markets.
- Defend the members of craft against serfs escaping from the country side.
2- transformation of industrial production:
A- Introduction of new production techniques.
B- New instruments of labour.
C- New products.
D- Increase in productivity of labour due to the extension of the market for some industries.
E- Transfer of qualified labourers from the east.
F- New centers of arms industry are built up, which pushed the division of labour within industry.
Within the development of cities, their inhabitants distinguish them from ones of the country side.
They began to have their proper organization. But how?????
1- They got rid of the obligations over the inhabitants of the country side and they acquired the right to organize and administrate their city in a way to facilitate their economic life.
2- They struggle for the liberty of owner ship and the liberty to conclude transactions.
3- They develop administrative, legal and tax systems which correspond to the nature of their activities.
4- They acquired a privileged status compared with that of the people of the country side.
This privileged status is supported by an economic relation which allows the city to exploit the country side.
Here it’s a matter of contradiction between the town and the country side.
3- Social classes in the city:
-Commercial class.
-Small retail traders.
-Craftsmen.
-Working class.
Accordingly the class structure of this society is founded in 2 classes:
-Big merchants and big industrial masters. (Owns and governs).
-Working class. (Neither owns nor governs).
Third: the economic thought of the scholastics in Europe:
-The social though was produced by the church. It was a religious thought and we named it as a theological thought.
-Within this thought we find some economic ideas by the scholastics.
-The scholastic thought presents it self as an attempt to conciliate religion and philosophy, faith and reason.
-The intellectual thought is based on the deductive aspects of Aristotle's logic.
-this thought has allowed the church to continue its pressure on the new thought of the city during these more centuries.
Within the theological thought, a certain economic thought is embodied, up till the 14th century around two principal ideas:
A-Interest.
B-Just price.
A-Interest:
It was the less important from the view point of its theoretical perception.
It was on basis similar to these pronounced by Aristotle.
In the scholastic economic thought the distinction between interest and profit was made.
B-Just price:
For each commodity exists a just price for it exists.
Cost of production + reasonable profit allows to live = Just price.
-Starting form the cost of production to determine the just price reflects that the attention of the scholastic is concentrated on the domain of production. But which production???
-Simple commodity production: where the productive activity is carried out by independent individuals selling a part of their products on the market to obtain other products to be used directly by them.
Question:
What about the merchants and prices at which they sell their commodities?
1With the expansions of trade, the scholastics save the merchant from the moral condemnation if the selling price is higher than the purchasing price in 2 cases:
1-if the merchant uses the monetary gain to attain a necessary or noble objective.
2-if the person who buys at the time of purchase doesn’t have the intension to resell.
Such is the essence of the idea of (just price).
Although it finishes by loosing its power on the spirit of men, it has merit of keeping the orientation of the reflection on value in the domain of production.
And it’s the thing which makes the just price the most influential idea by the scholastics in the domain of economic thought.
THE END OF THE PRECAPITALIST ERA
REVIEW:
To talk about the Middle Ages there are 3 main points in feudal society which are:
1-country side
2-city (industry)
3-the thought (economic ideas) of the scholastics
Interest / rate
The birth of political economy at the capitalist era:
Time: from the 15th till 19th century.
Place: Western Europe, especially: Britain, France, Spain, and Italy.
Two phases:
1- From 1400 – 1650 (15th – middle 17th century)
2- From 1650 – 1850 (middle 17th – middle 19th)
Productive unit:
New production unit called enterprise which is based on:
1- Individual private property
2- Immediate objective is realization of monetary gains (maximization of monetary profit)
3- Employees: wage – labourers (labour power becomes a commodity in the labour market)
4- Produces for market.
5- To build the enterprise, you must have a previous accumulated sum of money called money capital.
6- Looks for international market not only domestic ones.
7- Exists in the different domains of economic activities.
The cycle of capital:
Starting point: An amount of money previously accumulated. (Money capital).
Phase 1:
-Appears on the market of productive forces.
-Spends money capital to buy productive forces.
-Transfers money capital to productive capital.
-Appears as a buyer.
Phase 2:
-Leaves the market.
-In domain of production now.
-Use production forces to create commodities.
-Transform productive capital to commodity capital.
-Surplus is created.
Phase 3:
-Goes back to the market.
-Sells commodities.
- Transforms commodity capital in to money capital.
-If the money resulted is bigger than the money capital he started with in the first phase, then the result of the cycle is positive and a money profit is realized.
-But, if the final money capital is less than the one he started with, the result is negative and loss is realized.
