As the analysis provided by classical political economy is developed, it is compared with a reality which itself is developing. The analysis is critiqued both in terms of its internal consistency and in terms of its coherence with the real world. Only when the analysis itself is sufficiently developed does a body of criticism of it arise, and it is on the foundations of that that vulgar economy can develop.
“Thus Say separates the vulgar notions occurring in Adam Smith’s work and puts them forward in a distinct crystallised form. Ricardo and the further advance of political economy caused by him provide new nourishment for the vulgar economist (who does not produce anything himself): the more economic theory is perfected, that is, the deeper it penetrates its subject-matter and the more it develops as a contradictory system, the more is it confronted by its own, increasingly independent, vulgar element, enriched with material which it dresses up in its own way until finally it finds its most apt expression in academically syncretic and unprincipled eclectic compilations.” (p 501)
Classical political economy, as its analysis develops, seeks to address its own internal contradictions, as well as those that reflect the actual contradictions in society that it seeks to represent. This is the way that all theoretical analysis develops, until such time as the contradictions reach such a level that a new theoretical framework arises to replace the old. But vulgar economy, instead, seeks to explain away the contradictions, and is, thereby led increasingly into apologism.
“Because he finds the contradictions in Smith relatively undeveloped, Say’s attitude still seems to be critical and impartial compared, for example, with that of Bastiat, the professional conciliator and apologist, who, however, found the contradictions existing in the economic life worked out in Ricardian economics and in the process of being worked out in socialism and in the struggles of the time. Moreover, vulgar economy in its early stages does not find the material fully elaborated and therefore assists to a certain extent in solving economic problems from the standpoint of political economy, as, for example, Say, whereas a Bastiat needs merely to busy himself with plagiarism and attempts to argue away the unpleasant side of classical political economy.” (p 501-2)
But, Bastiat himself does not represent the final form of this vulgar economy. That rests with academic economics, which simply seeks to collate the “best” theories and to present them normatively.
“All systems are thus made insipid, their edge is taken off and they are peacefully gathered together in a miscellany. The heat of apologetics is moderated here by erudition, which looks down benignly on the exaggerations of economic thinkers, and merely allows them to float as oddities in its mediocre pap. Since such works only appear when political economy has reached the end of its scope as a science, they are at the same time the graveyard of this science.” (p 502)
Interest-bearing capital appears to create value without the expenditure of labour. It obtains the fruits of others labour by entering into the labour process. It does not represent congealed labour in the way that productive-capital or commodity-capital does; nor does it perform any labour in the production process. Yet it obtains the product of others labour simply on the basis of being inserted into the labour process. The owner of interest-bearing capital does not just get back the value of the capital they advance, but an additional value – interest.
The interest, along with profit, rent and wages appears as a component part of the value of the commodity. The interest is payable because the value of the commodity is enhanced by the advance of interest-bearing capital by an amount equal to the interest. In other words, the interest-bearing capital is creator of value, and this additional value is then the source of the revenue – interest – paid to the owner of the capital.
“But it can do this only because, in this form, it indeed enters by itself, without labour, into the labour process, as an element which in itself creates value, i.e., is a source of value. While it appropriates part of the value of the product without labour, it has also created it without labour, ex proprio sinu, out of itself.” (p 502)
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