The Development and The End of
Classical Political Economy.
The article published by Economic Gazeta #1(170)
I. Achievements of classical school
Since its existence, the essence of capitalism has not changed. Still the main purpose of capitalist production is the production of the profits, still there are market, the price of goods, economic crises, unemployment, commodity and money capital, interest and etc. And this essence of capitalism was disclosed and explained sufficiently by classical school of political economy,which numbered such eminent economists as W. Petty, F. Quesnay, A. Smith, D. Ricardo, K. Marx, R. Hilferding etc. K. Marx in his work "Capital", which is the logical culmination of the classical school of political economy, based on the labor theory of value, has been able logically and, thus, historically, track the development and the emergence of categories of commodity-capitalist production. In other words, he created the system of categories that are logically connected and therefore properly reflects the economic development of the material world.
He began his analysis with the two-fold character of the labour, "useful and abstract", and then he moved to the definition of " use-value " and " value ", then "Exchange-value " of goods from where he derived the nature of money. He then examines the nature of money and commodity capital, and indicates that they are forms of the existence of a "productive capital" that creates "supplus value" in the manufacturing process. To prove this provision he introduced such concepts as "constant and variable capital" through which he explained the origination of surplus value. He then showed circulation of private capital. To understand this process he introduced such categoties as "fixed and circulating capital." Fully disclosing the contents of private capital, he transferred to the problem of realization of all private capitals at the level of the capitalist society.
And here, we are faced with a new concept of "social capital" as the sum total of all private capitals of society. At this level, with renewed vigour sounds notion of "Useful value," because without it, one could not understand the mechanism of realization of all commodity capitals. For that reason, Marx splits entire annual product of society into two major divisions: manufacturing of means of production and articles of consumption.
In third volume of "Capital" Marx developed the above concepts to the type in which they were on the surface, which means - in the everyday consciousness of the agents of production: that is, shows as "constant and variable capital" is turning into production costs, and the "surplus value" - into the profits, which divides itself into interest and profit of enterprise, as commodity-capital and money-capital convert themself into commercial capital and money-dealing capital and so on.
What is a masterpiece of economic thought his study, if leave aside his social conclusions about the future. But since Marx wrote "Capital" quantitative changes occurring in the capitalist process of production do not affect these economic categories described above. Increased concentration of production and productivity - these phenomena caused by the needs of private capitals, as well proved Marx. The development of forms of private capital - monopolistic or share capital - again reflects only the process of concentration of capitals and do not affecting the very essence of capitalist production. In other words, classical school is fully accomplished its mission, having explaned completley the functioning of the capitalist production in the form of private capitals. And it showed that the development of productive forces in a society occur spontaneously, where invisible hand of market (in the words of A. Smith) supported the harmony between all sectors of production, or according to scientific expression of Karl Marx, where a law of value in the form of exchange manages the whole process of production.
Quantitative changes in the capitalist production
and their implications
The question arises: "And what is the further development of economic theory?". It is clear that, to show how economic categories, a mechanism of creation of which the classical school explained, develop themselves and come to their negation. We have in mind: private capital, market, competition, the concentration of capital, commodity and money capital, labour as a commodity, money and all other forms that are based on them. But how logically trace the development of capitalism, which does not yet exist ? How to look to it's future and where is the assurance that we are on the right track in its description of the future ?
But to do that, and there is economic science, which has proved that the pursuit of profit, private capital is on the one hand to increase concentration production, and on the other - to increase productivity. And this is - the facts, undisputed and confirmed by all of the development of capitalism. Then the laws of dialectical logic state that the same reason that leads to one result in further its development leads to the opposite result.
The birth of any natural phenomenon, whether biological or social nature, at the same time is a birth of its death. On the one hand, the phenomenon develop itself and on the other - this development approaches closer and closer to the death of that event. This fact is well known in our daily life and I am using it as example to emphasize the dual nature of each developing phenomenon in the physical world. As a real science, which includes political economy, reflectes in their categories such development, the category also have this dual nature, and therefore a logical development of these categories shows us the future development of the material world.
Therefore, Hegel said that if to analyze from that angle any thing, it tells more about itself than it's interpreters, who one-sided look at the process of its development. Science only reveals the secrets of the physical world and becomes fascinating when its categories or meanings are becoming a live, and beginning to "move" and thus - reflect the actual development of the material world.
What causes lead to the negation of private capital
The concentration of capitalist production
All economic meanings of the capitalist world , such as: "Useful and abstract labour", "use-value" and "value", "exchange value" of goods, money and commodity capital, productive capital ", " surplus value and so on - they are all logically linked between themselves and are meaningful only in the relation to the existence of private capital.
And where is the dual nature of private capital ? In that borders of his domination increase all the time as a result of concentration of production, which leads to its increased productivity and profits. But at the same time, the increase of production of private capital leads to its negation as private capital. Because the growing concentration of capitalist production has its limit which is the production of the whole society or an entire country, where the process is happening.
Once private capital reaches those limits, it ceases to be private capital and turning into its opposite "social capital" because so far he has concentrated in his hands all private capital of society. The very process of this transition has been laid at the very meaning of private capital that has meaning only in relation to social capital. The very private capital, first and foremost, is a capitalist form, in which the private ownership exists.
On the other hand, private capital is the development of forms that reflect the quantitative development of its owners. For example, private capital can exist in the form as an individual, monopolistic or stock capital. All of these forms of capital based on capitalist private ownership, that is, the form of private capital. When private capital will transform itself into its opposite of "social capital", the two changes occur. First, the quantitative development of owners of capital reaches its limit, ie, covers all of the capitalist of the society. And in that sense, private capital in the form of monopolistic or Shareholding capital turns into social capital. Secondly, the "Social capital" the same as "private capital" is based on private ownership, but the latest under further development of the capitalism will exist not in the form of private capital but in the form of "social capital". Private ownership depending upon the development of productive forces of a society, can exist in different forms. Under slave-owning system Private ownership existed in the slave form, under feudalism Private ownership existed in the feudal form.
Competition of capitals
If we analyze the competition of private capitals we will arrive to the same result. And what is the dual nature of competition ? The essence of competition is to beat competitors and exclude them from the game. The smaller competitors the better private capital - the winner. But at the same time reducing the number of competitors lead to the death of the concept. If private capital beat all its competitors, the word "competition" is losing its economic meaning, because one private capital will defeat all private capital of society and unite them under its control, that is turned them into "social capital".
In relation to a familiar phenomenon that we perceive it as a clever logic judgement, but when it is transferred to the logic of economic categories, the people are beginning to resist the various arguments and result in the impermissibility of such an approach. The reason is very simple. For example, Birth and death - phenomena that occur daily, are indisputable fact. Another matter is the economic categories, each saw their existence, but no one saw their death. While In either case the general laws of development are identical.
The process of enlarging the scale of production in the form of private capital at the expense of domestic Extensions or as a result of competition is not only quantitative process. It simultaneously accompanied by qualitative changes in the very process of capitalist production. There has been the negation of an exchange within the boundaries of private capital. For example, vertically integrated monopoly establishes a direct technological links between different branches of production, where the product is in its movement from raw material to final product does not take the form of goods. This means the planning of the capitalist production on the level of monopolies.
Contents of the market has changed too since monopolies are emerged. All major and most of the entire market constitute orders, which consumers (monopoly) give to the producers (monopoly). Thus, under the buy-sale has been concealed not spontaneity but deliberate establishing direct links between the branches of industries. Therefore, when private capital is becoming a coherent social capital, it simultaneously brings with it is a qualitative change, the establishment of direct links between all branches of industries, instead of indirect connections, in the form of exchange, between private capitals.
For this reason, such categories of political economy as a market, commodity and money capital, fixed and circulating capital, crises etc. stop to exist, they become a history. Until this moment we came to the idea of social capital by pure logic, based on the nature of the concept of private capital and competition.
Increased productivity
But all the beauty of science is that if the logical result is correct, then no matter from what end one would start one's analysis, it will lead you to the same logical result. Any qualitative development has a limit, once it reched, the qualitative development transforms to another quality level.
In the capitalist economy, private capital is such a limit. When productivity will increase, say, 50 - 100 times compared with a modern, the private capital as a form of capitalist production will be the limit for further development of productive forces. If we take the statistics for the entire existence of capitalism, it is not difficult to notice that the cycle of an economic crises has tended to decline. At the dawn of capitalism crises come every 12 years, then through 10,8,6 and 5 years - at present. Why cycle of an economic crises has tended to decline ?
Because rising productivity, resulting in a more rapid satisfaction of solvent market. By increasing the productivity of the 50 - 100 times the cycle of economic crises will be reduced to one year or even less. In this case, the production of profit loses its economic sense because under these circumstances the capitalist production will never recover out of its crisis. But in this case, and the concept of private capital, which is producing it (profit), too, loses its economic meaning, and so the private capital will be replaced by "social capital".
Solution of the base contradiction of capitalism
in the form of private capital
When we talk about complete freedom of private capital, whether it is in shareholding, state or individual form, we forget this point to the relativity of freedom, because freedom is determined by the needs of the market. And what is the market ? This combination of public consumption, which is productive and personal, that is, we are talking about the totality of the consumption of private capitals, which is the social capital. Consequently, freedom of private capitals is determined by the needs of social capital, which met in the form of an exchange.
According to K. Marx the main contradiction of capitalism, based on private capital - between the social nature of the production and private form of appropriation - is solved with transition of means of production into social ownership. But here he admits another theoretical mistake of economic character. The fact is that under the form of private capital the social character of production exists in the form of social capital, thus posited contradiction is the contradiction between the social nature of capitalist production in the form of social capital and private capitalist form of appropriation. In other words, the contradiction between the social capital (as a production), and private capital (as a form of appropriation), although the appropriation of the product should belong to those who produced it, that is to social capitalist. This contradiction is solved by negating of private capital and its transition into "social capital".
II. Social capital
Common sense of economic development leads us with necessity to the idea of the existence of social capital. (Detail analysis of the Social Capital is given in my books "Capitalism Today and Capitalism Tomorrow" and "Social Capital and Socialism")
1. What is social capital in terms of private capitalist ownership ?
Under social capital capitalist private ownership is maintained. Before capitalist private ownership existed in the form of private individual capital then in the form of monopolistic capital as dominant form of capitalist production. During the further development of the capitalism, monopolistic capitals will transform themselves into Social capital as dominant form of capitalist production. Under social capital all capitalists cease to be the owner of their stock joint capital and become the co-owner of all private stock capitals, which we call "Social Capital". From this moment on, all stocks in their possession and in the public possession are converted into stocks of the social capital and represent the same value they now have on the Stock Exchange.
Proportionally to their value the board of directors of the social capital will distribute dividend earned by social capital from the sale of articles of consumption, on quaterly bases. (for more detailes, see my book "Capitalism today and Capitalism tomorrow"). Consequently, if earlier the capitalist private ownership existed in the form of private capital(individual or monopolistic capital), but now it will exists in the form of "social capital".
As under private capital and so under social capital individual and state ownership remains. If someone individually owned houses, plots of land or educational institutions , they continue to do so under social capital. The social capital posses only the property that previously belonged to the joint stock companies, for example: manufacture, delivery network and product distributions, land, buildings, etc. But it does not in any way put its hands on the individual or state capitalist property, which it did not inherit from monopoly capitals. Many readers got the impression that the social capital owns the whole property in the State and that it(social capital) controls the entire society. This is not the case. Social capital controls the capitalist society in the same degree as former monopolies controled the capitalist society.
2.What is the social capital from an economic standpoint? Under social capital the existence of market connections between monopoly capitals is replaced by straight technological connections between productive capitals of the whole society. Each plant knows in advance from what manufacturers, in what quantities, and at what time it will get raw material or half-finished product, and to what manufacturers, in what quantities, and at what time it must furnish its final product. This principle lies at the base of the functioning of the social capital. In other words, social capital is socialized production in a capitalist form. Since the goal of any social organism ultimately is to meet the needs of the population, the end product of productive activities of "social capital" is the production of articles of consumption in the form of social surplus value.
Economic categories of social capital
For a complete understanding of the concept of social capital we need, in addition to the above, show: how the reproduction of social capital takes place, how it's annual product breaks down by value, what happens to his constant and variable capital, how social working day breaks down, what is the goal of the capitalist production under social capital and etc.. The answers to these questions lay in the development of the annual commodity product, which is analyzed by Marx in 2 - d volume of "Capital".
If under the form of private capitals yearly social product is represented as
I. 4000C + 1000V + 1000S - means of production
II. 2000C + 500V + 500S - articles of consumptions
Then under social capital the same yearly social product is represented as
I. 6000c - means of production
II. 1500v + 1500s - articles of consumptions
As we have seen, the value of the product has not changed, the only thing that has been changed is our understanding just how these values break down into the categories C - constant capital, V - variable capital or the cost of labor power, S - surplus value . The secret of this metamorphosis is under social capital the existence of market connections between monopoly capitals is replaced by straight technological connections between productive capitals of the whole society. Under simple reproduction society must reproduce every year what it consumes. In the given case, if in the course of the annual social working day constant social capital equal in value 6000 is consumed, then during the same period of time it must be reproduced in its former dimensions both in value and in bodily form.
On the other hand, the whole working class and the whole class of capitaslists must again have as many articles of consumption as they consumed during the preceding year . Thus, the aggregate laborer must receive articles of consumption sufficient for his reproduction as labor power, i.e., 1500v, and the aggregate capitalist must receive directly articles of consumption equal in value to 1500s. This is clearly reflected in in the yearly product of the social capital I.6000c + II.(500v + 500s).
As we see under social capital the further development of concepts take place: "constant capital" becomes "constant social capital", "variable capital" turns into "social variable capital" and "surplus value" - into "social surplus value." The main difference between the component parts of the "social capital" and " private capital" (C, V, M) is that under social capital they are reproduced directly into their kind I. 6000c - in means of production, and II. 1500v + 1500M - in articles of consumption. (For detail analysis, please reffer to my book "Social capital and Socialism").
The goal of the social capitalist is to produce more articles of consumption contained in the social surplus value, only in this case social capitalist becomes richer. And the only way to achieve this - is deliberately raise public productivity.
Under these conditions persisted and the Law of value, only now it is not in the form of exchange, but in the form of a conscious regulation of social capital. But in both case, the Law of value performs function of proportional distribution of social labor in society.
An interesting point in this society is the existence of the prices of commodities, which in the amount II. 1500v purchased by social worker and II.1500M - social capitalist. The price of these commodities is directly determined by the social labor costs on their production. The higher productivity, the lower labor costs and thus lower their prices. Therefore, in the same social surplus value II. 1500M would be more articles of consumption if social capital has a high productivity than - a low. As a result, social capitalists is always interested to increase his real wealth, that is, to get more of articles of consumption in the same social surplus value, by deliberately seeking to increase productivity. Thus the theory of social capital once again confirms the correctness of the Labor Theory of Value, on which the entire school of classical political economy is based on, and deliver a crushing blow to the elusive concept that "supply and demand" creates the price of the goods.
The negation of commodity production within the social capital
The existence of direct links between all technological sectors of production leads to the negation of commodity production within the production of the social capital. Therefore, under social capital occurs negation of such meamings as: fixed and circulating capital, commodity and money capital. In the sphere of distribution of articles of consumption this part of the product II.(500v +500S) is still the commodity, because both social worker and social capitalist have to buy that portion of the product accordingly in order to reproduce themselves as a class. Furthermore a social worker is still a commodity that still has to sell itself, in order to gain their livelihood.
III. The negation of Social Capital,
or the transition to Communism
The only way to increase productivity under the social capital - is deliberately to introduce into the production the latest achievements of science and technology.The question arises: What about the further development of productivity will have an impact on the development of the categories of social capital? The answer to this question lies in the analysis of the concept of real wealth and basic contradictions of capitalist production in the form of social capital. So as social capitalist accumulates in his hands the wealth in the form of articles of consumption (luxury): villas, yachts, airplanes, etc., then at very high productivity , these things that he concentrates in the such quantities , will lose for him their meanings as wealth. On the other hand, high productivity make them accessible to every member of society, which by that time will work for 1 - 2 hours per week. In other words, the richness on such level of development is losing its economic meaning. What a joy to be the rich among the rich. Articls Of consumption become for all members of society as accessible as water, the air.
Solution of the basic contradiction of "social capital" between the social nature of the production and private form of appropriation (social capitalist) is that the social product should belong to those who produce it. In terms of political language, this means classless society, which is fixed by the negation of "social surplus value" by merging it with the public-income workforce. At that point, the working class, as meaning is disappearing and becoming the workers. But in that case the concept of "social constant" and "social variable" capital are negated because they have meaning only in relation to the production of "social surplus value." This process of negation is reflected In the same annual social product of the "social capital" as follows.
before negation
I. 6000c (- means of production) + II.(1500v + 1500S ) (- articles of consumption)
after negation
I. 6000c (- means of production) + II. 3000D (- articles of consumption), where D - Revenue of society as a whole.
The theoretical justification of "Social capital" in my books "Social capital and socialism" and "Capitalism today and Capitalism tomorrow " fully confirms the failure of Marx's theory of the dictatorship of the proletariat and socialism.
First, "Social capital" performs perfectly the economic function that Marx allocated to the role of socialism. It increases the productivity of the past to such an extent that the capitalist production loses its economic meaning. Because under the social capital the labor power is almost replaced by full automation and robotization. A production of goods, as a result of high productivity, loses its value as wealth, For this reason, the disappearance of classes, rich and poor occurs.
Secondly, if there is no socialism, then there is no dictatorship of proletariat, which was to be it's political base.
At this point the political economy completes its existence and turns into the economy, simply because politics is the relation of class interests over the distribution of social wealth. And once material basis ( wealth as a surplus product) for the existence of classes disappears, the classes disappear as well, and with them the politics ceases to exist.
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