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 Chapter  XI

Political Economy

Contribution of Marx and Engels

Contribution of Lenin

Contribution of Mao 

Economic Laws of Socialism


Absorbing all the rational aspects of the German classical philosophy, English classical political economy and French revolutionary and socialist doctrines Marx discovered the Materialist Conception of History. According to this revolutionary conception of history. The development of civil society is to be explained on the basis of the economic relations and their development. Thus political economy was developed and it became an instrument to reveal the relation between people instead of that between things (i.e. the exchange of one commodity for another) as was explained by the bourgeois economists. Engels clearly explained this : "Economics deals not with things but with relations between persons, and in the last resort between classes."32

Contribution of Marx and Engels

The political economy as developed by Marx repudiating the bourgeois economics was aptly exposed by Lenin. "It is the ultimate aim . . . . . analysis of the commodity."33

"‘It is the ultimate aim of this work, to lay bare the economic law of motion of modern society’ (that is to say, capitalist, bourgeois society), says Marx in the preface to Capital. An investigation of the relations of production in a given, historically defined society, in their genesis, development, and decline – such is the content of Marx’s economic doctrine. In capitalist society it is the production of commodities that dominates, and Marx’s analysis therefore begins with an analysis of the commodity." 32 — Lenin.

"Where the bourgeois economists saw a relation between things (the exchange of one commodity for another) Marx revealed a relation between people. The exchange of commodities expresses the tie between individual producers through the market. Money signifies that this tie is becoming closer and closer, inseparably binding the entire economic life of the individual producers into one whole. Capital signifies a further development of this tie: human labour power becomes a commodity. The wage-worker sells his labour power to the owner of the land, factories and instruments of labour. The worker spends one part of the day covering the cost of maintaining himself and his family (wages), while the other part of the day the worker toils without remuneration, creating for the capitalist surplus value, the source of profit, the source of the wealth of the capitalist class.

"The doctrine of surplus value is the corner-stone of Marx’s economic theory." 33

This discovery of surplus value, which according to Engels, was the second important discovery of Marx, provided the exposition of the nature of exploitation of the working class and laid bare the source of antagonism between the proletariat and the bourgeoisie. It explained this antagonism as the principal manifestation of the fundamental contradiction of capitalist society; the contradiction between the social character of production and the private character of ownership.

Marx explained capitalist crises also as another manifestation of this fundamental contradiction of capitalism. Impelled by the pursuit of profit to throw more and more goods on to the market, the capitalists endeavour to maintain their rate of profit by reducing expenditure on wages, whether by cutting wage rates or employing fewer workers. But by so doing they reduce the purchasing power of those who, together with their families, make up the bulk of the population; and so they restrict the market for their goods. This restriction of the market comes into collision with the extension of production and resolves itself by means of a crisis. "Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsaleable, hard cash disappears, credit vanishes, factories are closed, the mass of workers are in want of the means of subsistence, because they have produced too much of the means of subsistence; bankruptcy follows upon bankruptcy, execution upon execution...

"In these crises, the contradiction between socialised production and capitalist appropriation ends in a violent explosion. The circulation of commodities is, for the time being, stopped. Money, the means of circulation, becomes a hindrance to circulation. All the laws of production and circulation of commodities are turned upside down. The economic collision has reached its apogee. The mode of production is in rebellion against the mode of exchange, the productive forces are in rebellion against the mode of production which they have outgrown." 34

Thus these repeated crises of capitalism can only be solved by resolving the fundamental contradiction of capitalism. The force who can resolve this contradiction–the proletariat–however has been created by capitalism itself. The process through which the proletariat resolves this contradiction is explained by Marx in the following oft-quoted passage from Capital:

"As soon as this process of transformation has sufficiently decomposed the old society from top to bottom, as soon as the labourers are turned into proletarians, their means of labour into capital, as soon as the capitalist mode of production stands on its own feet, then the further socialisation of labour and further transformation of the land and other means of production into socially exploited and, therefore, common means of production, as well as the further expropriation of private proprietors, takes a new form. That which is now to be expropriated is no longer the labourer working for himself, but the capitalist exploiting many labourers. This expropriation is accomplished by the action of the immanent laws of capitalistic production itself, by the centralisation of capital. One capitalist always kills many. Hand in hand with this centralisation, or this expropriation of many capitalists by few, develop, on an ever-extending scale, the co-operative form of the labour-process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable in common, the economising of all means of production by their use as the means of production of combined, socialised labour, the entanglement of all peoples in the net of the world-market, and with this, the international character of the capitalistic regime. Along with the constantly diminishing number of the magnates of capital, who usurp and monopolise all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated." 35

Thus Marx presents the historical tendency of capitalist accumulation–the essence of the law of motion of capitalism.

Contribution of Lenin

After the death of Marx and Engels the political economy was further developed by Lenin. Marx and Engels revealed the various aspects of capitalism when it was at the stage of free-competition. They exposed the fundamental contradiction of capitalism and pointed out its tendencies and future direction. But it was not possible for them to analyse imperialism, the highest stage of capitalism which was yet to be unfolded. Lenin further developed the Marxist political economy and analysed the economic and political essences of imperialism.

"The old phase of capitalism came to a close towards the end of the nineteenth and the beginning of the twentieth century, when Marx and Engels were already dead. It is understandable the Marx and Engels could only guess at the new conditions for the development of capitalism that arose as a result of the new phase of capitalism which succeeded the old phase, as a result of the imperialist, monopoly phase of development, when the smooth evolution of capitalism was succeeded by spasmodic, cataclysmic development of capitalism, when the unevenness of development and the contradictions of capitalism became particularly pronounced, and when the struggle for markets and fields of capital export, in the circumstances of the extreme unevenness of development, made periodical imperialist wars for periodic re-divisions of the world and of spheres of influence inevitable.

"..Lenin..on the basis of the fundamental principles in Capital,.. made a substantiated Marxist analysis of imperialism as the last phase of capitalism, and exposed its ulcers and the conditions of its inevitable doom." 36 — Stalin.

Lenin’s analysis of imperialism in his work ‘Imperialism the Highest Stage of Capitalism’ can be summarised as follows:

"Imperialism is capitalism in that stage of development in which the dominance of monopolies and finance capital has established itself; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun; in which the division of all territories of the globe among the biggest capitalist powers has been completed." 37

"Imperialism emerged as the development and direct continuation of the fundamental characteristics of capitalism in general. But capitalism only became capitalist imperialism at a definite and very high stage of its development, when certain of its fundamental characteristics began to change into their opposites, when the features of the epoch of transition from capitalism to a higher social and economic system had taken shape and revealed themselves all along the line. Economically, the main thing in this process is the displacement of capitalist free competition by capitalist monopoly. Free competition is the fundamental characteristic of capitalism, and of commodity production generally; monopoly is the exact opposite of free competition,...At the same time the monopolies, which have grown out of free competition, do not eliminate the latter, but exist over it and alongside of it, and thereby give rise to a number of very acute, intense antagonisms, frictions and conflicts. Monopoly is the transition from capitalism to a higher system." 38 " follows that we must define it as capitalism in transition, or, more precisely, as moribund capitalism." 39

"Monopolies, oligarchy, the striving for domination instead of striving for liberty, the exploitation of an increasing number of small or weak nations by a handful of the richest or most powerful nations — all these have given birth to those distinctive characteristics of imperialism which compel us to define it as parasitic or decaying capitalism." 40

"..uneven development sums up, as it were, modern monopolist capitalism on a world-wide scale. And proves that imperialist wars are absolutely inevitable under such an economic system,." 41

"Imperialism is the eve of the social revolution of the proletariat." 42

This analysis of imperialism made by Lenin at the time of the World War I and the October Revolution remains completely valid to this day.

Contribution of Mao

In the course of advancement of class struggle in a country like China Mao further developed Marxist political economy. He analysed the law of motion of semi-feudal semi-colonial economy of China, and explained characteristic future of the monopoly capitalism– comprador in nature. This variety of capitalism described by Mao as comprador bureaucrat capitalism, is new contribution to political economy. It is linked with both feudalism and imperialism. Mao expounded this semi-feudal, semi-colonial relation of production in his celebrated article On New Democracy and called upon the people to smash this relation of production to accomplish peoples’ democratic revolution.

In the period following World War II imperialism changed some of its methods of exploitation and control and transferred power to the representatives of monopoly capitalist and feudal classes – comprador in character. This resulted in emergence of comprador bureaucrat capitalism in these countries.. This was analysed by the CPC under Mao’s leadership:

"After World War II the imperialists have certainly not given up colonialism, but have merely adopted a new form, neo-colonialism. An important characteristic of such neo-colonialism is that the imperialists have been forced to change their old style of direct colonial rule in some areas [in almost all areas today] and to adopt a new style of colonial rule and exploitation by relying on the agents they have selected and trained. The imperialists headed by the United States enslave or control the colonial countries and countries which have already declared their independence by organising military blocs, setting up military bases, establishing ‘federations’ or ‘communities’, and fostering puppet regimes. By means of economic ‘aid’ or other forms, they retain these countries as markets for their goods, sources of raw material and outlets for their export of capital, plunder the riches and suck the blood of the people of these countries. Moreover, they use the United Nations as an important tool for interfering in the internal affairs of such countries and for subjecting them to military, economic and cultural aggression. When they are unable to continue their rule over these countries by ‘peaceful’ means, they engineer military coups d’etat, carry out subversion or even resort to direct armed intervention and aggression..

"This neo-colonialism is a more pernicious and sinister form of colonialism." 43

When revisionists captured the CPSU and restored capitalism in the Soviet Union, the CPC under the guidance of Mao, basing itself on the fundamental principles laid down in Lenin’s work, made an analysis of the Soviet economy and society and its ruling class. It identified it as social imperialism-socialism in name, imperialism in essence. It showed that state monopoly capitalism was the economic basis of social imperialism and that its ‘new international relations’ were nothing but another name for neo-colonialism.

Economic Laws of Socialism

Though Marx and Engels, particularly in their works, Critique of the Gotha Programme and Anti-Duhring, gave some views on the nature of the functioning of the socialist economy, they however did not attempt to analyse the economic laws of socialism. As Mao has said, "to know the laws it is necessary to go through a process. The vanguard is no exception." 44

Lenin, in the period after the victory of the October Revolution, formulated some guidelines for socialist construction. However he too did not live long enough to ‘go through a process’, and devote attention to the question of the objective laws of motion of socialism.

It was thus left to Stalin to attempt to discover the economic laws of socialism. In his Economic Problems of Socialism in the USSR he formulated the basic economic law of socialism in the following manner:

"The essential features and requirements of the basic economic law of socialism might be formulated roughly in this way : the securing of the maximum satisfaction of the constantly rising material and cultural requirements of the whole of society through the continuous expansion and perfection of socialist production on the basis of higher techniques."45

Mao pointed out that Stalin’s understanding totally neglected the superstructure. This error was corrected in the formulation of the basic economic law as formulated by Mao given in the Shanghai Textbook drawn up during the Cultural Revolution.

"The objective aim of social production and the means to realise it express the basic direction of development of social production and embody the requirements of the economic laws of society. ..The aim of socialist production is to satisfy the ever-increasing needs of the state and the people. This aim is attained by means of propelling the development of technology and production through revolution. Therefore, to sum up briefly, the major characteristics and requirements of the fundamental economic law of socialism are: to opportunely adjust and transform the relations of production and the superstructure; to steadily raise the level of technology; to develop socialist production with greater, faster, better, and more economical results; to satisfy the ever-increasing needs of the state and the people, and create the material conditions for the ultimate elimination of classes and the realisation of communism."46 Thus through a process of social practice Mao further developed it.

Another objective economic law of socialism is the law of balanced (proportionate) development of the national economy, or the law of planned development. This law demands that the various mutually dependent branches of production and enterprises maintain proper proportions among themselves and supply what they produce to others to satisfy each other’s needs. Otherwise, social production will be obstructed or even disrupted.

Stalin explains its basis and applicability in the following manner:

"The law of balanced development of the national economy arose in contradistinction to the law of competition and anarchy of production under capitalism. It arose from the socialisation of the means of production, after the law of competition and anarchy of production had lost its validity. It became operative because a socialist economy can be conducted only on the basis of the economic law of balanced development of the national economy. That means that the law of balanced development of the national economy makes it possible for our planning bodies to plan social production correctly. But possibility must not be confused with actuality. They are two different things. In order to turn the possibility into actuality, it is necessary to study this economic law, to master it, to learn to apply it with full understanding, and to compile such plans as fully reflect the requirements of this law." 47

The law of value which operates under capitalism also operates to certain extent under socialism. This is because socialist production is, to a certain extent, both direct social production and also commodity production. "Wherever commodities and commodity production exist, there the law of value must also exist." 48

"The substance of the law of value is:

(1) the value of commodities is determined by the socially necessary labour time expended on their production;

(2) commodity exchange must be based on the principle of equivalent values.

"What the law of value embodies is bourgeois right, the basic content of which in socialist society is not that much different from what it was in the old society. But under different social economic systems, the law of value will assume different forms and exert different effects on production. ..."

"As far as the whole of socialist production is concerned, planning is primary and price is secondary. That is to say, in the allocation of social labour among various production sectors, what and how much to produce are regulated by the state plan, which reflects the requirements of the fundamental economic law of socialism and the law of planned development of the national economy. The state plan plays a primary and decisive role. The law of value is still useful, but it plays only a secondary and supportive role." 49

These then are the objective economic laws of socialism and their relation and relative importance in the social processes and operation of socialist society.

Lastly, what is the objective historical tendency of the development of socialist society? "The theory of socialist political economy advanced by Marxism-Leninism-Maoism scientifically analyses the laws of motion of the formation and development of socialist relations of production. It also reveals the historical necessity of socialist society developing into communist society...

"...In socialist society, public ownership of the means of production has been established, the labouring people have become masters of society and enterprises, and Marxism has become the guiding thought of society. In these respects, socialist society possesses elements of communism. However, socialist society is merely the first stage of communist society. ....."

"The historical task of the proletariat in the socialist period is to persevere in exercising all-round dictatorship over the bourgeoisie in all spheres and at all stages of development of the revolution, thoroughly defeat the bourgeoisie, abolish all classes and class distinctions generally, abolish all the relations of production on which they rest, abolish all the social relations that correspond to these relations of production, revolutionise all the ideas that result from these social relations, and propel socialist society toward a higher and more mature communist society. Therefore, socialist society constitutes the necessary preparation for communist society, and communist society is, in turn, an objective trend of development of socialist society." 50



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