DIFFERENCE BETWEEN CLASSICAL AND MARXIST POLITICAL ECONOMY

Introduction

Political economy is a science of the study of the interconnectedness between economics and politics in a state which is the basis for the change and development in the society. As a field of study, political economy refers to a branch of the social sciences which deals with the production of material wealth considered as the foundation of all human society. It attempts to study the laws that govern the development of human society based on the economic relations of the people in the process of production, distribution and consumption. There are different approaches the study of political economy, they include: classical, neo-classical and Marxist approaches.

In this work, the main area of concentration is on the classical political economy and the Marxist political economy; we are also going give a clear distinction between the two concepts of classical and Marxist political economy, then we are also going to give the differences between the two concepts.

CLARIFICATION OF TERMS

 CLASSICAL ECONOMICS

BRIEF HISTORY OF CLASSICAL ECONOMICS

Classical economics can trace its roots to Adam Smith in 1776. In The Wealth of Nations Adam Smith presented a comprehensive analysis of economic phenomena based on the notions of free markets and actions guided by individual self interests in a laissez faire environment. This work by Smith was motivated in large part as a critique of the existing mercantilist system.

Under mercantilism the ruling aristocracy directed economic activity with the primary goal of benefiting the ruling aristocracy. The mercantilist view was that the wealth of a nation was based on the wealth of the ruling aristocracy. Smith argued, quite convincingly, that the wealth of a nation was actually based on the productivity of resources, which was best achieved if the Producers, consumers, and resource owners were left to their own "selfish" actions.

An efficient allocation of resources, higher living standards, and economic growth were achieved if producers sought higher profit and consumers sought greater satisfaction. Higher profit motivated producers to offer the most desired goods at the lowest expense. Greater satisfaction motivated to seek the most desired goods at the lost expense. The result is the best, more efficient use of available resources.

The classical framework developed by Adam Smith was enhanced, refined, and improved over the ensuring 150 years by a number of scholars. The basic principles were refined and applied to an assortment of topics and issues, including resource markets, international trade, economic development, and industrial activity--to name just a few. Much of this work remains relevant to the modern study of microeconomics, often termed neoclassical economics.

Economists also applied this classical framework to macroeconomic issues, especially unemployment, economic growth, and business-cycle stability. With this application a comprehensive theory of macroeconomics was developed that offered an explanation for macroeconomic phenomena and provided recommendations for government policies.

THE CONCEPT CLASSICAL ECONOMICS

Classical economics dominated the study of economics for 150 years after it was introduced. This work not only launched the modern study of economics, it continues to provide the foundation for modern microeconomics. Classical economic principles were also adapted to macroeconomic phenomena and provided a guide for macroeconomic policy until the beginning of the Great Depression in 1929. Classical economics fell out of favor in the 1930s largely because it did not adequately explain the occurrence of high rates of unemployment during the Great Depression.

The term "classical economics" was coined in the first half of the 1800s by Karl Marx, who is considered by some as an important contributor to the development of classical economics and by others as a primary critic of this theory. The term gained new life in the early 1900s when John Maynard Keynes developed Keynesian economics as an alternative theory of macroeconomics.

Highlights of classical economics include:

One, classical economics is based on three key assumptions--flexible prices, Say's law, and savings-investment equality.

Two, the theoretical structure of classical economics is based on a view that the macro economy operates in aggregate according to the same basic economic principles that guide markets and other microeconomics phenomena.

Three, the economic principles of classical economics indicate that aggregated markets, especially resource markets, automatically achieve equilibrium, meaning full employment that is, full employment of resources is assured.

Four, classical economics indicates that full employment is achieved and maintained without the need for government intervention and that government intervention is more likely to cause than to correct macroeconomic problems.

SHORTCOMINGS OF CLASSICAL ECONOMICS

(1)   It was superficial and too shallow; it was just concern about product and did not tell us the intricate process that takes place in the concept of production. They is a link between politics and the economy, the economy determines politics

(2)   They also fail to recognize the contradictions in capitalism. They see capitalism as a God ordained system that will one day be over thrown by other political system.

(3)    It does not recognize the importance of labor in the political system; they consider profit as not cheating. Under the Neo-classical economy, the scholars here oppose the idea of laissez faire.

(4)    State intervention is needed in the economy to boost economic growth, that if it continues to depend on demand and supply one day they will be a problem, those in this group are the Keynesians and neo-Keynes.

MARXIST POLITICAL ECONOMY

It is based on the theory of Karl Marx, he came to the scene to explain that there is a process of exploitation taking place during the process of production, because the classical economics did not explain the exploitation of workers for him the economic system determine the politics of any country and the economy also determines other aspect of the society, like religion, morality e.t.c   the economy according to Karl Marx is the engine that drives other aspect of the society. The mode of production here refers to the organic unity of the productive forces and social relation of production. The centre piece of Marx work is an incisive analysis of the strengths and weaknesses of capitalism. Marx argued that all commodity value is determined by labour content- both the direct labour and indirect labour embodied in capital equipment. For example, the value of a shirt comes from the efforts of textile workers put together plus the value of the person who made the looms. By imputing all the values of output to labour, Marx attempted to show that profits- the part of output that is produced by workers but received by capitalists- amount to unearned income. It is the opinion of Marx that the injustice of capitalist receiving unearned income justifies transferring the ownership of factories and other means of production from capitalists to workers.

            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.

DIFFERENCES BETWEEN CLASSICAL ECONOMY AND MARXIST POLITICAL ECONOMY

 After finish discussing about classical economy and Marxist political approach I am going to discuss about the differences between classical and Marxist political approach.

The classical political approach considers the state as a neutral judge, which is it does not allow the interference of the state in the affairs of the economy. Whatever is implemented in the economy and is good for the growth of the economy, the government is not allowed to interfere. The state is used by the ruling class to dominate the workers or the masses. That is the rich or the bourgeoisies oppress the poor masses with their wealth and influence. while the in the Marxist political economy  The fundamental ideology is communism, it holds that all people are entitled to enjoy the fruits of their labour but are prevented from doing so in a capitalist economic system, which divides society into two classes: nonowning workers and nonworking owners. Marx called the resulting situation alienation, and he said that when the workers repossessed the fruits of their labour, alienation would be overcome and class divisions would cease. The Marxist theory of history posits class struggle as history's driving force, and it sees capitalism as the most recent and most critical historical stagemost critical because at this stage the proletariat will at last arise united. The failure of the European Revolutions of 1848 and an increasing need to elaborate on Marxist theory, whose orientation is more analytical than practical, led to adaptations such as Leninism and Maoism.

 The classical economics here gives value to commodities, while in the Marxist political approach value is been given to labor because without labor, the production of goods and services cannot be possible. In classical political economy and especially Karl Marx's critique of political economy, a commodity is any good or service ("products" or "activities") produced by human labour  and offered as a product for general sale on the market. Some other priced goods are also treated as commodities, e.g. human labor-power, works of art and natural resources, even though they may not be produced specifically for the market, or be non-reproducible goods.

 Classical economy sees capitalism as a God ordained system that will last forever. That is they see capitalism as a system which has come to stay permanently and can never be destroyed by any other economic system, while the Marxist political economy see capitalism as something that is not above destruction, for them capitalism will one day be destroyed and over thrown just like other economic system like feudalism which were also overthrown.

 Another significant difference that is inevitable in this discussion is that capitalism considers wages and salaries of labor as the true worth of labor. That is what the laborer gets as a result of work done is what is considered under capitalism, while in Marxist political economy they see salaries and wages as not the real worth of a laborer, for this system they is something else they deserve which is been held by the capitalist.

   Classical political economy considers the market as the basis for wealth creation, that is it is the market that gives wealth which implies that the more buyers are made available for products produced the more profit is made which leads to wealth creation because if there are no buyers for commodities produced it will lead to waste of materials and resources they by leading to loss of in profit which in turns leads to poverty, While the Marxist consider productive forces which has to do with productive forces and means of labor as the basis for creation of wealth. 

  The classical consider political economy as economics which simply consider economics as just production, distribution and exchange, while the Marxist political considers the relationship between the economy and other as of the society.

 The scholars of classical economy advocated or praise capitalism, that it promotes industrialization. Here they include Adam Smith, David Ricardo and Thomas Malthus, while the scholars in the Marxist include Fredrick Enges and Karl Marx, and this Marxist political economy is evil and exploitative.

Smith, in The Wealth of Nations (1776), argued that the most important characteristic of a market economy was that it permitted a rapid growth in productive abilities. Smith claimed that a growing market stimulated a greater "division of labor" (i.e., specialization of businesses and/or workers) and this, in turn, led to greater productivity. Although Smith generally said little about laborers, he did note that an increased division of labor could at some point cause harm to those whose jobs became narrower and narrower as the division of labor expanded. Smith maintained that a laissez-faire economy would naturally correct itself over time.
Marx followed Smith by claiming that the most important beneficial economic consequence of capitalism was a rapid growth in productivity abilities. Marx also expanded greatly on the notion that laborers could come to harm as capitalism became more productive. Additionally, in Theories of Surplus Value, Marx noted, "We see the great advance made by Adam Smith beyond the Physiocrats in the analysis of surplus-value and hence of capital. In their view, it is only one definite kind of concrete labour—agricultural labour —that creates surplus-value....But to Adam Smith, it is general social labour—no matter in what use-values it manifests itself—the mere quantity of necessary labour, which creates value. Surplus-value, whether it takes the form of profit, rent, or the secondary form of interest, is nothing but a part of this labour, appropriated by the owners of the material conditions of labour in the exchange with living labour."

Differences in their mode of production

In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production (in German: Produktionsweise, meaning 'the way of producing') is a specific combination of: Productive forces: these include human labour power and available knowledge given the level of technology in the means of production (e.g. tools, equipment, buildings and technologies, materials, and improved land).Social and technical relations of production: these include the property, power, and control relations governing society's productive assets (often codified in law, cooperative work relations, and forms of association), relations between people and the objects of their work, and the relations between social classes.

While the classical mode of production refers to the system of organizing production and distribution within capitalist societies. The process of capitalism, the dynamic of capital accumulation, preceded the development of the capitalist mode of production, beginning sometime in the 15th century. The capitalist mode of production, involving the dominance of wage-based labour and private ownership of the means of production, began growing rapidly in Western Europe from the 18th century, later extending to most of the world.  The capitalist mode of production is characterized by private ownership of the means of production, extraction of the surplus value created in production by a class of private owners (referred to as exploitation), wage-based labour, and distribution of both capital goods and consumer goods in a mainly market-based economy (referred to as commodity production).

CONCLUSION

The distribution of wealth and power has been a point of debate for every civilization. The economic and governmental framework of a society structures the lives of members of that society. Classical and Marxist political economic are on opposite ends of a spectrum, the one valuing a free market, the other an attempt to redress the unjust gap between the poor and the wealthy. Although the debate between the two can often be reduced to a sort of clash of classes, business versus labor, the distinction between socialism and capitalism is nuanced, and both systems demonstrate strengths and drawbacks.

REFERENCES

Schumpeter, J. (1954) History of Economic Analysis. Oxford University Press, New York. 

Swedberg, R. (1998) Max Weber and the Idea of Economic Sociology. Princeton University Press, Princeton relations of production.