History of political Economy
Francois Quesnay, who founded the physiocratic school in the mid-18th century, was the first to introduce a scientific system into political economy. Prior to this there had been many economic doctrines—by which I mean discussions of the economy of bourgeois society—but no doctrine had broken free of the realm directly pertaining to policy, and even when sharp theoretical analysis was attempted it did extend beyond a partial analysis as in the case of William Petty (whose main writings on policy are: “A Treatise on Taxes and Contributions” (1662), “Political Arithmetik” (1690), and “The Political Anatomy of Ireland”). The history of political economy, in the proper sense of the term, begins with Quesnay, whereas the preceding period can be seen as its prehistory. If we take leave of this prehistory, I believe the history of political economy can be divided into three stages.
The first stage corresponds to the period when the productive power that had gradually developed under the feudal relations of production began to broadly collide with these relations. This was a period when the ideologues representing the emerging capitalist relations of production sought, in the name of the society as a whole, to replace the existing relations of production with new ones. The characteristic of political economy during this period was the notion of a “natural order.” The ideal of a natural order was contrasted to the “artificial order” that actually existed, and the ideal was said to be based on the will of God who wished for the happiness of humankind. The image of the natural order was one of perfect harmony, whereas the various maladies of existing society were seen as the outcome of an artificial system that runs counter to that natural order. The task of statesmen, therefore, was to use the power of reason to “corroborate” the natural order and the laws of nature it is based upon in order to bring the system that exists in reality into line with this ideal. An effort was made to elucidate the principles governing of economic operations within the natural order, and the outcome of this was a system of political economy.
If we examine the content of the doctrines in this first stage, however, it is clear that the “natural” economic order depicted is essentially capitalist relations of production, and the so-called “natural laws” are no more than the laws of capitalist production. The relations and laws of capitalist production were declared to be the order and laws of God or nature, which is to say, absolute and unchangeable principles that have existed since time immemorial. Anyone not under the sway of bourgeois prejudices, however, will recognize that capitalist relations of production, like the preceding feudal relations of production, are historical. These relations of production are generated, develop, and one day will perish, so they could hardly be described as constituting a fully harmonious, ideal order. In the eyes of revolutionary thinkers of the time, however, the emerging capitalist relations of production seemed to be an absolute, unchangeable natural order, whereas the feudal relations of production standing in the way of development appeared to be “artificial.” And in fact the feudal system had become artificial by this time, in the sense that it was already deadlocked. Instead of being a form through which productive power could develop, the feudal relations of production had become a fetter to that development. Instead of having historical necessity, the feudal system had become a historical relic. Ultimately these relations could only be artificially maintained through the traditional power of one class. Thus, it was natural that the capitalist relations of production, which were charged with creating a new history, were reflected in people’s minds as a natural order. More than simply appearing to be natural, these relations were in fact natural in a sense, given the circumstances of the era. This was because they had historical necessity. However, when people spoke of “natural” at the time it was certainly not based on this sort of historical awareness. In their minds, the term “natural” concerned a divine will or absolute truth. Thought at the time was characterized by a lack of awareness, treating historical necessity as a supra-historical must [sollen].
This idealistic mindset, far from being unique to political economy, was a general characteristic of the ideology of the revolutionary bourgeoisie. In terms of this point, the materialist conception of history, which forms the cognitive foundation for present-day revolutionary theory (“scientific socialism”), differs completely in orientation. Today, revolutionary theory does not assert that capitalism is artificial whereas socialism is natural; nor is it claimed that socialism must replace capitalism because it is in line with morality whereas capitalism runs counter to it. Rather, capitalism is grasped—along with feudalism and the other preceding systems—as a necessary stage that society passes through on its journey of normal development, and the historical mission of capitalism is recognized to be unprecedented in many ways. Capitalism, as it develops, puts in place the conditions for its own demise and replacement by a new system, just as the preceding systems had done. Once this development has reached a certain point revolution is unavoidable, and a revolution is then carried out in reality.
It should be clear that this perspective differs greatly from the idea of a natural order, which was the ideology of the revolutionary bourgeoisie. The difference basically comes down to whether or not there is an awareness of historical necessity. It can be said that the materialist conception of history awakens human beings to their own history, so that they become capable of consciously advancing it forward. This is precisely why I criticized the idea of a “natural order” earlier, referring to it as consciousness that lacks an awareness of historical necessity. The representatives of political economy during this first period, outlined above, were the Physiocrats, centered on Francois Quesnay.
The subsequent, second stage in the development of political economy corresponded to the period when the capitalist relations of production had already basically come into existence, but the contradictions proper to them had yet to be exposed. The most striking characteristic of economists at that stage was a faith in the capitalist mode of production and an earnest effort to clarify its laws. It is during this period that political economy reaches the highest point possible from a bourgeois perspective. The capitalist relations of production, which are object of political economy, had fundamentally developed to a point where they constituted an actual fact that did not have to be imagined. No longer the laws of an ideal world, they had become the fundamental laws that govern reality to its core. In other words, they had become the “principles of political economy.” Meanwhile, it had become clear that this was not necessarily a perfectly harmonious order, although fundamental doubts about this mode of production had yet to appear. The defects of the socio-economic system were considered to stem from inadequate development of capitalist production, or to be the outcome of some natural necessity based upon human nature or the quality of land (as represented by Malthus’ theory of population). This meant that economists at this stage could advance their analysis of the economic structure of capitalism without being burdened by doubts. David Ricardo is the typical representative of political economy during the second period. Adam Smith can also basically be included in this period, but he also displays some traits characteristic of the first stage.
The development of capitalist production did not remain long at this second stage, however. Gradually the contradictions particular to this mode of production came to be exposed. This was manifested, in particular, by the periodic appearance of general crises, beginning in 1825, and by the class-consciousness and rebellions of workers and the rise of a socialist movement. Political economy thus fell into a dilemma. Given the clear unfolding of contradictions particular to capitalist production, a conscientious pursuit of the truth regarding capitalism became incompatible with the standpoint of the capitalist class.
Political economy had to choose between two paths. One involved discarding a capitalist standpoint so that political economy could become thoroughly scientific, while the second path was to maintain that class standpoint at the expense of science. The former path was traveled by Marxian political economy, whereas the latter is the path of vulgarization taken by bourgeois economists. If political economy is understood as the study of the capitalist class, the latter path represents the orthodoxy, but if it is understood as a science aiming to thoroughly understand the modern mode of production, Marx is the one who must be seen as the direct descendent of Ricardo.
Thus far we have outlined the shifts in political economy, concentrating on the changes in the subjective conditions of economic understanding that accompanied the development of the capitalist relations of production, and we noted that these relations naturally frame the development of political economy because they constitute its object of study. The capitalist relations of production are historical, unfolding with the passing of time, so they will differ depending on the period in which they appear, and unless the given relations have achieved a certain level of development, it is of course impossible to clearly grasp them and establish them conceptually. For example, “finance capital” first came into view in the latter half of the 19th century, so it naturally could not be discovered as a category within political economy before that time. This example is clear at a glance and requires no further explanation, but there are also cases where the relation between the unfolding of the relations of production and the unfolding of the corresponding economic categories is not so clear. The most obvious case is the category of “labor.” Why was labor only first grasped in its generality by modern political economy, despite having existed from the beginning of human history? This is a crucial question for the person studying the history of political economy. Indeed, the understanding of labor is the theoretical foundation for modern political economy. This is the starting point for the modern political economy that truly has a theoretical foundation (Classical political economy). Marx discusses the category of labor in detail in the following passage from his introduction to Grundrisse:
Labor seems to a quite simple category. The conception of labor in this general form—as labor as such—is also immeasurably old. Nevertheless, when it is economically conceived in this simplicity, “labor” is a modern category as are the relations which create this simple abstraction. The Monetary System, for example, still locates wealth altogether objectively, as an external thing, in money. Compared with this standpoint, the commercial, or manufacture, system took a great step forward by locating the source of wealth not in the object but in a subjective activity—in commercial and manufacturing activity—even though it still always conceives this activity within narrow boundaries, as money-making. In contrast to this system, that of the Physiocrats posits a certain kind of labor—agriculture—as the creator of wealth, and as the product in general, as the general result of labor. This product, as befits the narrowness of the activity, still always remains a naturally determined product—the product of agriculture, the product of the earth par excellence.
It was an immense step for Adam Smith to throw out every limiting specification of wealth-creating society—not only manufacturing, or commercial or agricultural labor, but one as well as the others, labor in general. With the abstract universality of wealth-creating activity, we now have the universality of the object defined as wealth, the product as such or again labor as such, but labor as past, objectified labor. How difficult and great was this transition may be seen from how Adam Smith himself from time to time still falls back into the Physiocratic system. Now, it might seem that all that had been achieved thereby was to discover the abstract expression for the simplest and most ancient relation in which human beings—in whatever form of society—play the role of producers. This is correct in one respect. Not in another. Indifference towards any specific kind of labor presupposes a very developed totality of real kinds of labor, of which no single one is any longer predominant. As a rule, the most general abstractions arise only in the midst of the richest possible concrete development, where one thing appears as common to many, to all. Then it ceases to be thinkable in a particular form alone. On the other side, this abstraction of labor as such is not merely the mental product of a concrete totality of labors. Indifference towards specific labors corresponds to a form of society in which individuals can with ease transfer from one labor to another, and where the specific kind is a matter of chance for them, hence of indifference. Not only the category, labor, but labor in reality has here become the means of creating wealth in general, and has ceased to be organically linked with particular individuals in any specific form. Such a state of affairs is at its most developed in the most modern form of existence of bourgeois society—in the United States. Here, then, for the first time, the point of departure of modern economics, namely the abstraction of the category of “labor,” “labor as such,” labor pure and simple, becomes true in practice. The simplest abstraction, then, which modern economics places at the head of its discussions, and which expresses an immeasurably ancient relation valid in all forms of society, nevertheless achieves practical truth as an abstraction only as a category of the most modern society. (Penguin, 1973 pp. 103-5)
This passage may be somewhat difficult to follow, so I would like to offer some explanation. As human beings, needless to say, we require various things. But most of these things are not found within nature in a form that is immediately useful. We thus need to produce the things we need through our own activity, working upon nature to alter it. This human activity to produce various a desired object is labor in its fundamental sense. Here we have the universal content of labor, regardless of the form of society. Labor, understood as the production of the various objects human beings need (or “use-values”), will differ depending on the type of use-value that is produced. The production of grain requires the labor of cultivation, whereas the production of cloth involves the labor of weaving, and so on. In a separate sense, however, labor regardless of its variety is the expenditure of human labor-power. From this perspective, all types of labor present themselves as indiscriminate, simple labor, abstracting from their various differences as something that produces a use-value (i.e. “useful labor”). However, despite the fact that in any historical period, labor regardless of its type is nothing more than the expenditure of human labor-power, in the history of political economy labor was only finally grasped in its simplicity, to establish the category of simple labor, with the appearance of Adam Smith. Why was this the case?
Marx’s response, I think, can basically be understood as follows. First of all, an abstraction, generally speaking, will only first be established once a given thing has developed and differentiated itself so that it exists as a rich totality with manifold aspects. If a thing only exists in one form, abstraction will obviously not be carried out. But even if a thing has developed and differentiated, manifesting itself in new forms, if the variety of these forms remains limited and none of them are important enough to garner attention, the primary form will still dominate so that abstraction is not carried out. The same reasoning pertains to the case of labor, where the abstraction “simple labor” is only possible once labor has actually developed and differentiated itself so that it exists as a rich totality of diverse types of labor. This sort of differentiation of labor, historically speaking, only became feasible in the form of a social division of labor among commodity producers, and this division of labor itself could only be widely developed under the capitalist mode of production. In this sense, simple labor is an abstraction that naturally can only be carried out once the development of the capitalist mode of production has reached a certain level.
Moreover, simple labor is an abstraction premised on an indifference towards the specific type of labor, which is an attitude that first arises when people are able to freely shift from one type of labor to another. This free movement of labor, likewise, only develops under the capitalist mode of production. For this movement to become possible, it was necessary, first and foremost, to wipe out the feudal system (e.g. the system of serfdom and the guild system) that had prevented it in the past. This system was in fact destroyed, needless to say, through a bourgeois revolution. But the capitalist mode of production did not simply remove the systematic barriers impeding the movement of labor. It also simplified labor to an extreme extent; first through the introduction of a manufacture-based division of labor, and then by means of large-scale machine-based production, which has in turn further facilitated the movement of labor. Not only has labor been simplified, but in response to the need for industries to be flexible—in line with the fluctuating business climate and changes in supply and demand—large numbers of workers are sucked in and out of production, so that the mode of production forces them into continually movement. One clear example of this is the scene at employment centers. Such places reveal that simple labor, or labor in general, is certainly not some arbitrary product of human subjectivity but an objective fact that can be seen anywhere today. We can see the way in which there is “labor in general” by signs at employment centers seeking “general laborers.”
The examples above are of course from the contemporary period, not the age of Adam Smith. So it is truly astounding to consider the fact that Smith managed to establish the category of general labor—albeit with defects, as we shall see later in this book—in the latter half of the 18th century, when capitalism was only finally set to enter the stage of the industrial revolution. This remarkable achievement was the result of the singular greatness of his mind. And yet, despite his genius, Smith would not have been able to accomplish this had he lived in an earlier age. Genius can indeed be described as the ability to grasp something that has not developed to the point where the public is aware of it.