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Marxist Political Economy - P J James

22 April 2015
1. Introduction

The fundamental concepts of Marxist political economy are evolved from Marx's own analysis of the specific historical character of capitalism as a social system that follows feudalism and precedes socialism. To this day nobody, including his vehement opponents, has challenged Marx's stature as the most powerful and yet the most scientific analyst and critic of capitalism. By applying the laws of dialectics and the theory of knowledge including that of historical materialism developed by him to the analysis of political economy, Marx infused the specific social content that was completely drained off from economic theory by bourgeois economists of his time. While the latter always argued in terms of the harmony of interests under capitalism, Marx's conception of the whole economic and social life in terms of a conflict of interests arising from the private ownership of the means of production enabled him to foresee such fundamental and irresolvable issues under capitalism such as unemployment, antagonistic conditions of distribution, under-consumption, periodic crises, etc., much earlier than his contemporaries.

However, political economy (or economics as we know it today) had already become a branch of knowledge in the seventeenth century itself during the bourgeoisie's struggle against feudalism. In the period of mercantile capitalism, the bourgeois economists confined their attention to trade and money circulation. Later, bourgeoisie's struggle with the feudalism for economic and political supremacy convinced them that the decisive sphere of political economy was production. Gradually, bourgeois economists abandoned treating the sphere of circulation and trade as the main source of wealth accumulation and began to see it in production. This immensely contributed to the development of political economy. For instance, the founders of bourgeois political economy, Adam Smith and David Ricardo (classical economists), the direct predecessors of Marx in political economy took the production of material wealth as their subject. As such, they were also compelled to recognize the decisive role of cooperation among people in the creation of wealth, which led them to attach great significance to the division of labour in society. But they were unable to reveal the historical character of production process as they could not penetrate in to the essence of the process of production and considered capitalist production an eternal and natural form of production. They confused social phenomena that reflected the economic relations among people with the relationships between things that enter into production. For instance, by capital they understood not the relation between people in the process of production, but the tool or implements used. This confusion of social relations with things created vagueness in understanding political economy itself.

2. Revolution in Political Economy brought about by Marxism

It was left to Marx, along with Engels, to overcome this bourgeois limitation and evolve a truly scientific approach to political economy. Backed by the philosophy of understanding the historical process, and applying the method of dialectical and historical materialism, Marx penetrated into the subject-matter of political economy and revealed the laws of economic life. He showed that the process of production is a contradictory unity of two aspects: a) the relationship between people and nature; b) the relations that people enter into when they interact with nature. But to reach this conclusion, Marx had to make a detailed analysis of the labour process itself.

In the simplest sense, labour process is the conscious and purposeful activity of people directed to modify and adapt natural object to their needs by employing means of production which includes:

Objects of labour, i.e., natural substances on which people act. A raw material is an object of labour that has already been subjected to labour and is intended for further processing;

Instruments of labour, i.e., the things that people place between themselves and the objects of labour and with the help of which they exert a direct effect on the objects of labour. In a broader sense all material conditions of work including land, machines and infrastructural facilities are also instruments of labour.

The means of production and the labour power of people setting them in motion compose the productive forces, which always exist and function within a definite set of production relations. The main productive force is the labourer whose conscious action is the decisive element. The productive forces reflect the relationship between people and nature.

In the production process, people have to enter into relations with one another or into relations of production. In order to produce, people must have means of production, which may belong to individuals, or to groups of people, or to society as a whole. Those who own or control the means of production also own what is produced. The relations among people in the production process are determined primarily by who owns the means of production. Thus, according to Marx, ownership of the means of production underlies the social relations between people at all stages of social development. In the early stages of the evolution of society, the productive forces were extremely primitive and people could only use the means of production collectively. Later, when it became possible to use means of production on an individual basis by a single person, private property in the means of production emerged. And when the means of production reached such a level of development that the whole production process took on a social character, the need arose to establish social ownership of the means of production.

Marx and Engels were the first in history to demonstrate that there are specific social relations directly connected with the production process. These relations of production which is integrally linked up with the sum total of human relations constitute the essence of Marxist political economy. The historically determined definite economic relations that establish in the process of material production inevitably influence the social, political and cultural processes. At the same time, those relations among people apart from those directly connected with production are taken up by other branches of science such as culture, sociology, anthropology, law, etc. and by other natural and technical sciences; but relations of production in terms of their interconnection with productive forces are exclusively studied by political economy. At the same, it should be reiterated that the production relations are not confined solely to the relationships between people directly engaged in production. While production plays the determining role, it is closely interconnected with distribution, exchange and consumption as a single process of social reproduction and hence the institutions and arrangements connected with them also come under the scope of political economy. However, in the ultimate analysis, distribution, exchange and consumption depends on the mode of production and the corresponding social relations under which production takes place

3. Mode of production

Marxist political economy always analyses production relations in their interconnection with the productive forces and visualizes their most effective use through appropriate transformation in the former. In a nutshell, unity of and struggle between the productive forces and the relations of production defines the mode of production which predetermines the whole structure of society. According to Marx, the contradiction between the productive forces and the production relations sets the stage for a leap of the mode of production to another stage as this contradiction is the motive force of social transformation. In his preface to A Contribution to the Critique of Political Economy, while unraveling the materialistic interpretation of history, Marx vividly explains the crucial significance of the mode of production in social transformation thus:

In the social production which men carry on, they enter into definite relations that are independent of their will; these relations of production correspond to a definite stage of development of their material powers of production. The sum total of these relations of production constitutes the economic structure of society—the real foundation on which rise legal and political superstructures and to which correspond definite forms of social consciousness. The mode of production in material life determines the general character of the social, political, and spiritual processes of life. It is not the consciousness of men that determines their existence, but, on the contrary, their social existence determines their consciousness. At a certain stage of their development, the material forces of production in society come in conflict with the existing relations of production, or—what is but a legal expression for the same thing—with the property relations within which they had been at work before. From forms of development of the forces of production these relations turn into their fetters. There begins the era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the entire immense superstructure. In studying such transformations, it is always necessary to distinguish between the material transformation of the economic conditions of production, which can be determined with the precision of natural science, and the legal, political, religious, artistic or philosophic—in short, ideological forms in which men become conscious of this conflict and fight it out. Just as one does not judge an individual by what he thinks about himself, so one cannot judge such a period of transformation by its consciousness, but, on the contrary, this consciousness must be explained from the contradictions of material life, from the conflict existing between the social forces of production and the relations of production. No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of old society. Mankind thus inevitably sets itself only such tasks as it is able to solve, since closer examination will always show that the problem arises only when the material conditions for its solution are already present or at least in the course of formation. In broad outline, the Asiatic, ancient, feudal and modern bourgeois modes of production may be designated as epochs marking progress in the economic development of society. The bourgeois mode of production is the last antagonistic form of the social process of production—antagonistic not in the sense of individual antagonism but of an antagonism that emanates from the individuals' social conditions of existence—but the productive forces developing within bourgeois society create also the material conditions for a solution of this antagonism. (Moscow edition, 1970, p.21)

Marx's interpretation of the mode of production does neither mean any kind of economic determinism in which the technique of production determines everything else nor that people are exclusively motivated by economic considerations. It only implies the real foundation on which the legal, religious, cultural and political superstructures are built up. For instance, under capitalist mode of production, the labour- capital relation, its most characteristic feature, is expressed in the form of exchange relations which is as important as the technique of production. Including this, when the existing property relations and the legal and political superstructure become fetters of production, they must be changed through a forcible social revolution.

A crucial point to be stressed in this context is that when Marx put forward the materialistic interpretation of history and the mode of production analysis ranging from primitive communism to capitalism, he was very critical of mechanically applying the same to non-European social formations and always upheld the cardinal importance of the objective historical analysis of the concrete situations in each social formation. It was in relation to this understanding that he devised the renowned analytical category, Asiatic mode of production, taking special note, especially, of the role of caste in the social formation of South Asia. In his books, German Ideology, Poverty of Philosophy, A Contribution to the Critique of Political Economy, Capital (mainly in Volume 1) and in his articles in New York Daily Tribune pertaining to India, Marx has taken special attention to mention on the Asiatic mode of production with reference to caste as sufficient proof of his approach of warding off any mechanical approach or the so called euro-centrism while applying Marxist theory.

4. The Capitalist Mode of Production

Countries which had gone through classical capitalist development are those where transition from feudalism to capitalism took place through bourgeois revolutions. Starting from the fourteenth to the seventeenth centuries, the foundations of feudalism were shaken by many violent peasant uprisings in the countries of Western Europe. The bourgeoisie who began to lead the struggle of the peasants and urban poor against feudal oppression since the seventeenth century effectively utilized the results of the revolutionary gains in its own class interests and substituted capitalist exploitation for feudal oppression, though vestiges of serf exploitation of peasants continued in many capitalist countries.

Capitalist relations of production took shape over a long time in the womb of the feudal system. During the later stages of feudalism, along with the techniques of agriculture, craftsmen's tools and methods of processing raw materials improved. The use of iron plough and other metal tools necessitated great changes in the methods of smelting and working iron. The invention of the compass and of geographical maps had produced a real revolution in shipping and navigation. The invention and spread of paper making and printing accelerated the development of culture along with exchange and trade. Further, evolution of the social division of labour and growth of production led to strengthening of economic relationships between various regions of a country and the growth of national markets. And, the development of navigation and foreign trade laid the foundation for the formation of the world market.

With the growth of foreign trade and expansion of world market, craft production was not in a position to satisfy the growing demand for commodities. This greatly accelerated the stratification of petty producers and the transition to large-scale capitalist production based on the exploitation of hired labour. Lenin showed that the transition from domestic and handicrafts industry to capitalist production in the towns mainly took place in two ways: 1. A few so called masters among the craftsmen grew wealthy and became capitalist entrepreneurs, while the bulk of the craftsmen, journeymen and apprentices were deprived of the means of production and became wage workers. 2. Merchant capital after subordinating craft industry and ruining it, transformed into industrial capital. In brief, the process of merchant becoming entrepreneur and craftsmen becoming wage earners transformed mercantile capitalism into industrial capitalism. In agriculture too, a similar process of disintegration led to the development of capitalist relations in countries like Britain. That is, the growth of commodity production and development of money relations speeded up the differentiation of peasantry into several subcategories. While majority became impoverished and ruined, a small emerged as kulaks or rich peasants or usurers who became owners of big farms and big money lenders, paving the way for the emergence of capitalist agriculture in the womb of feudal system.

All these processes that led to the emergence of capitalism were summed up by Marx through what is often called the primitive accumulation of capital. Its essence was the forcible expropriation of peasants' farms by big landlords transforming the former into proletarians or wage workers, wealth accumulation in the hands of a few by depriving the majority of the means of production, plunder of colonies, slave trade and so on, which according to Marx was accompanied by brutal coercion inscribed "in the annals of mankind in letters of blood and fire." (Capital, Vol. I, 1975, p. 669)

5. Basic Outline of Marxist Political Economy

The preliminary Marxist edifice of political economy based on Marx's analysis of the capitalist system may be drawn as follows.

1. The Labour Theory of Value. In simple terms, according to Marx, the labour embodied in a commodity appears as its value. Value is the social content inherent in all commodities that allows us to equate them. Commodities as the products of human labour are produced for the market. When two different commodities are exchanged, the same amount of abstract (general) human labour is exchanged.

2. Socially Necessary Labour. In determining the exchange value of a commodity, only socially necessary labour counts. Labour is socially necessary when it is of average skill and intensity, uses modern instruments of production, and produces a commodity which is in demand. Along with 'present' labour, 'past' labour needed to produce the raw materials and the machines used in commodity production is also socially necessary.

3. Labour and labour power. After making a distinction between labour and labour power, Marx pointed out that often the value created by labour or value of the product of labour is much greater than the value of labour power(wage), the latter being equal to the labour time required for the production of the means of subsistence of the worker including food, clothing, medicine, shelter, etc., which also is socially necessary. The worker's ability to create a value greater than that of his labour power through the labour process is the result of the development of the productive forces of society. Under capitalism, like any other commodity, labour power itself has become a commodity being bought in the market at a price. According to Marx, labour power becomes a commodity under two conditions: 1.The worker must be personally free and have the right to freely dispose his own labour power; 2.The worker must be deprived of the means of production and means of existence and therefore be compelled to sell his labour power. These conditions exist in capitalism.

4. Surplus value. The difference between the value of labour and the value of labour power is defined as the surplus value. For instance, a capitalist who has bought 8 hours (whole day's) labour pays a wage equal to 2 hours labour which is the exchange value of labour power in the market. But the exchange value of commodities produced by the labourer is equal to 8 labour hours. That is, the labourer produces 6 hours worth of commodities over and above the commodities and services needed to cover his means of subsistence. This is the surplus value, the source of profit for capitalists. The capitalists can realize surplus value only by entering into the sphere of commodity circulation or exchange relations in the market, constantly buying means of production and labour power and selling commodities produced. In the preface to the first volume of Capital, Marx wrote that the ultimate aim of his work was to lay bare the economic law of modern society which is the law of surplus value. He said: "Production of surplus value is the absolute law of this mode of production."

5. Constant capital and variable capital. The value of a commodity consists of three parts: constant capital, variable capital and surplus value. Constant capital is the value of whatever part of the machinery that is used up in the production process (depreciation) and of the raw materials. This part of a commodity's value is called constant capital because it remains constant and does not produce surplus value for the capitalist. Variable capital is the value of labour power used; it is called variable capital because it produces surplus value. In other words, that part of the capital which the capitalist advances for the purchase of labour power increases in magnitude in the labour process creating surplus value. In Capital, constant capital is symbolized by c, variable capital by v and surplus value by s. Thus the total value of a commodity equals c+v+s.

6. Rate of surplus value. The rate of surplus value or the rate of exploitation is the ratio of surplus value to variable capital (s÷v). Only a part of the whole labour day (8 hours) is needed to produce the means of subsistence for the labourer. If this part is assumed to be 2 hours, the rate of exploitation s÷v is 6÷2×100=300 percent. According to Marx, to determine the degree of exploitation of labour power, the surplus value must not be related to all the capital (money) advanced by capitalists, but to the variable capital alone as only it produces surplus value. Under capitalist mode of production, the degree of exploitation or rate of surplus value increases in accordance with the development of productive forces and deterioration in the conditions of work.

7. Organic composition of capital. The organic composition of capital is the ratio of constant capital to variable capital (c÷v). Due to technological advancement, the organic composition of capital undergoes a continuous change in favour of constant capital, leading to continuous increase in the degree of exploitation.

8. Profit and rate of profit. The capitalist driven by profit motive spends money (M) on labour, transforms labour into commodities(C), and sells these commodities for a larger amount of money (M'). The difference between M' and M is the surplus value, the result of exploitation. The rate of profit is the ratio of surplus value to total capital [s÷(c+v)]. As the equation implies, the rate of profit is determined by the rate of exploitation (s÷v) and by the organic composition of capital (c÷v). By reducing the labour time required for the production of workers' subsistence, the capitalists can increase the rate of profit. The usual methods for this are lengthening of the working day and introduction of new machinery.

9. Falling rate of profit. Since the organic composition of capital undergoes a continuous change in favour of constant capital (which does not produce surplus value), the rate of profit must have the tendency to fall as only the variable part of total capital produces surplus value. This is an inherent contradiction of capitalism

10. Effect of machinery on the rate of exploitation. The increasing application of machinery and technology increases the rate of exploitation, because it now takes less time to produce labourers' means of subsistence; besides, these means can now be earned by several members of the family as the new technology permits the use of even workers of slight physical strength. Technology also helps the capitalist to lengthen the labour day and to increase the intensity of work.

11. Reserve army of labour. One important effect of technological advancement and the increasing application of machinery to production is the growth in unemployment and underemployment making substantial portion of the labour superfluous. Marx called it the reserve army of labour. It enables the capitalist to exert a continuous downward pressure on wages and to increase the rate of exploitation.

12. Antagonistic conditions of distribution. According to Marx, the social character of production and the private nature of its appropriation inevitably lead to a reduction in the consuming power of the masses to the minimum. That is, the productive power of the economy finds itself at variance with the narrow basis of consumption. In other words, overproduction and underconsumption as dialectical opposites are manifestations of the antagonistic conditions of distribution leading to crises as integral to capitalism.

13. Periodical crises and breakdown. Change in the organic composition of capital in favour of constant capital, growth of the reserve army, underconsumption, etc., leading to contraction of the market will accelerate the tendency of the rate of profit to fall. Smaller capitalists are eliminated and capital is concentrated in fewer hands and increased rate of exploitation raises profits for the surviving capitalists. This follows a period of increased accumulation and increased demand for labour power. But rising wages cut again into the surplus value and the vicious circle of downtrend repeats on a higher and more intensified level. As the proletariat grows, real wages and standard of living fall amidst shrinking of the capitalist class or concentration of wealth in a few hands. The condition is ripe for an overthrow of the existing property relations or the antagonistic conditions of distribution that turn into fetters of production through a social revolution led by the proletariat.

6. Imperialism and Development of Marxist Political Economy by Lenin

Marx's analysis of capitalism had taken place in the era of so called industrial capitalism before it has run its full course. However, while dealing with the capitalist issues such as underconsumption, realization crisis (inability to realize surplus value), etc., Marx was fully aware of the fact that capitalism could not sustain within the boundaries of a nation. For instance, when the Communist Manifesto puts the question, "How does the bourgeoisie get over these crises?", an implicit reference to imperialism is there. For, the answer to that question points to "the quest of new markets" outside the nation. On account of the antagonistic conditions of distribution, since the total social product cannot be disposed of within the country, surplus can be realized only through conquering foreign markets. During the industrial capitalist era itself, the colonial strategy was in conformity with this capitalist necessity. To be precise, capitalism was born and developed as a world system from the very beginning and the whole course of capitalist development is influenced by this inherent tendency. Marx being the first to unravel the laws of motion of capitalism was very emphatic in pinpointing this aspect. He said: "The specific task of bourgeois society is the establishment of a world market, at least in outline, and of production based upon this world market." (Marx and Engels, Correspondence 1846-1895, International Publishers, New York, 1934, p. 117)

However, by the last quarter of the nineteenth century and at the turn of the twentieth century, fundamental changes took place in the political economy of capitalism. The new phenomena in the development of capitalism required an exhaustive analysis from the position of Marxism. It was in the process of this task that Lenin, Continuing the works of Marx and Engels Lenin took up this task and formulated the political economy of imperialism as a guide to the revolutionary struggle of the proletariat. Lenin said: "Imperialism emerged as the development and direct continuation of the fundamental characteristics of capitalism in general. But capitalism became capitalist imperialism only 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 to capitalist monopoly." (Unless otherwise stated, all the quotations in this section are from Lenin's Imperialism, the Highest Stage of Capitalism)The process in the formation of monopolies and transition to imperialism is explained by Lenin thus: "1) 1860-70, the highest stage, the apex of development of free competition; monopoly is in the barely discernible, embryonic stage. 2) After the crisis of 1873, a lengthy period of development of cartels; but they are still the exception. They are not yet durable. They are still a transitory phenomenon. 3) The boom at the end of the nineteenth century and the crisis of 1900-03. Cartels became one of the foundations of the whole economic life. Capitalism has been transformed into imperialism."

Lenin's definition of imperialism incorporating its essential five characteristic features is already well-known: "1) the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; 2) the merging of bank capital with industrial capital and the creation, on the basis of this "finance capital" of a financial oligarchy; 3) the export of capital as distinguished from the export of commodities acquires exceptional importance; 4) the formation of international monopolist capitalist combines which share the world among themselves; and 5) territorial division of the whole world among the biggest capitalist powers is completed. Imperialism is capitalism at that stage of development in which 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." All these features are only different forms of the basic characteristic of imperialism - the domination of monopolies. Therefore, imperialism is monopoly capitalism. This transition from competitive capitalism to monopoly capitalism or imperialism was prepared by the whole course of development of the productive forces and production relations of capitalism.

The major scientific and technical discoveries and inventions that took place by the second half of the nineteenth and early twentieth century significantly speeded up the process of concentration of production in different lines of industry. The discovery and practical applications of new methods of making steel, the invention of new types of metal-working machine tools, hard alloys, new types of prime movers such as steam turbines, internal combustion and diesel engines, motor vehicles and later aero-planes and the industrial application of electricity revolutionized production. These advances in production techniques gave rise to structural changes in industry so that light industries, following organic changes in the composition of capital, gave way to heavy industry. The new productive forces necessitated large-scale production. The introduction of new means of production called for larger amounts of capital than even the biggest capitalists had at their disposal. To be successful, the capitalists had to use other people's capital on credit. This led to the development of joint-stock form of company ownership by which a few capitalists could control and manipulate the hard-earned income and savings of the vast majority of working people in the country. Thus the operation of the law of concentration of production led to a small number of big and very big undertakings coming to occupy dominant position in each line of production in every developed capitalist country.

As enterprises became larger, competition became fiercer and more complex. The enormous costs involved in competition between major capitalists, the loss of profit, the risk of ruin and difficulty in marketing pushed the big capitalists into agreements and alliances. Cartels, syndicates, trusts, and groups became the forms of monopoly associations for buying raw materials and other inputs of production, to set monopoly prices, and extracting monopoly super-profits. Lenin noted that competition now meant unprecedentedly brutal suppression of enterprise, energy, and bold initiative and the substitution of "financial fraud, nepotism, servility on the upper rungs of the social ladder". Secret agreements of a few giants against the rest became the order of the day instead of open competition. Thus imperialism is a dialectical unity of two opposites; monopoly and competition. Monopolies dominate the economy, but far from eliminating competition, they make it fiercer and more complex and alter its form. As Lenin emphasized, monopoly oppression and exploitation of the broad masses of people "becomes a hundred times heavier, more burdensome and intolerable."

Monopolies also develop and spread in other spheres of the operation of capital. Lenin wrote: "We shall only have a very insufficient, incomplete, and poor notion of the real power and the significance of modern monopolies if we do not take into consideration the part played by the banks." Thus concentration of production in industry initiated similar processes in the banking sphere. Large industrial, commercial, railway and other undertakings were unable to invest their free resources in small banks, since the authorized capital of the latter was not sufficient to guarantee the safety of large deposits, and small banks did not have adequate resources to grant credit to large undertakings. The position of the big banks in the economy, therefore, strengthened while that of small banks weakened. Thus the concentration and centralization of banking had led by the end of the nineteenth century to the same result as in industry. Lenin noted: "Among the few banks which remain at the head of all capitalist economy as a result of the process of concentration, there is naturally to be observed an increasingly marked tendency towards monopolistic agreements, towards a bank trust." At the same time, industrial monopolies were not content to remain as passive partners of giant banks. They also became the co-owners of the banks, which was made simpler by the banks becoming joint-stock enterprises. Many major industrial monopolies set up their own banks and established personal links with the monopolist banks in which they were most interested, introducing their own directors on to the supervisory councils and boards of these banks. The result was a close interweaving of bank and industrial capital.

Thus coalescence or interweaving of the capital of major banking monopolies with that of industrial monopolies led to the emergence of what Lenin called "finance capital". Consequently, it is monopoly industrial capital merging with monopoly banking capital. With the formation of finance capital, a financial oligarchy also emerged in imperialist states. Composed of a small group of financial magnates that dominates the economic and political life of imperialist states, this financial oligarchy began to control the home and foreign policy of them. The financial oligarchy grows in strength through their expanding connections with the state apparatus and its numerous organs dealing with home and foreign affairs.

Imperialism is the universal system of the domination of finance capital and the export of capital is one of the ways in which it exercises this domination. Of course, export of capital from one country to another had been there in the pre-monopoly stage of the development of capitalism, but it began to play a role of paramount importance in international economic relations only under imperialism. To quote Lenin: "Typical of the old capitalism when free competition had undivided sway, was the export of goods. Typical of the latest stage of capitalism when monopolies rule, is the export of capital." Lenin viewed the export of capital in relation to the general laws governing the development of capitalism into imperialism. In the monopoly stage advanced capitalist countries experience an enormous "super abundance of capital." This "surplus" of capital was relative as it could have easily been used to develop a number of backward industries and even agriculture which, according to Lenin, "today frightfully lags behind industry everywhere". Lenin writes: "As long as capitalism remains what it is, surplus capital will be utilized not for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits by exporting capital abroad to the backward countries. In these backward countries, profits are usually high, for capital is scarce, the price of land is relatively low, wages are low, raw materials are cheap. The possibility of exporting capital is created by the fact that a number of backward countries have already been drawn into world capitalist intercourse; main railways have either been or are being built, the elementary conditions for industrial development have been created, etc. The necessity of exporting capital arises from the fact that in a few countries capitalism has become "overripe" and (owing to the backward stage of agriculture and the impoverished state of the market) capital cannot find a field for "profitable investment".

Usually, the fields into which capital is exported are rather government-guaranteed loans for various kinds of public works, railroads, public utilities, exploitation of natural resources and trade. The activities and spheres to which capital is exported are such that they do not compete with commodity exports from the capital-exporting imperialist country. Capital export therefore leads to a very one-sided or lop-sided 'development' of the economies of backward countries. Though if at all a native bourgeoisie emerges, being tied in several ways to the imperialist bourgeoisie it is incapable of developing native industries on account of formidable obstacles. At the same time, the destruction of handicraft industry by cheap manufactured imports from imperialist countries drives a larger proportion of native population on to the land. The interests of broad masses of people are sacrificed to the needs of capital in imperialist countries. In brief, under monopoly capitalism the right conditions had been established for export of capital and all-round financial exploitation of the people of the world by a handful of imperialist states and their monopolies.

Another aspect pinpointed by Lenin is the concentration and centralization of production. The concentration of production has reached such a degree that a significant share of total world production in most important lines of industry is concentrated in the hands of the biggest national monopolies. This has become the rule in a number of industries such as steel, oil, railway, automobiles, electricity, metallurgy, etc. Once a few monopolies in different capitalist countries begin to play the decisive role in the production of any particular commodity, competition between them becomes particularly fierce and destructive. At the same time agreements between them became possible and a tendency develops for international monopolies to be formed, which consolidates their dominance of the world capitalist market. As Lenin said, "this is a new stage of world concentration of capital and production, incomparably higher than the preceding stages."

According to Lenin, this trend inevitably moves to the formation of international monopolies or super monopolies. The export of capital and the expansion of the foreign economic links and spheres of colonial influence of the biggest national monopolies, resulting in the internationalization of capital and economic relations, played a vast role in laying the foundations of the development of international monopolies. The first international monopolies had developed in the most highly concentrated branches of production in the 1860s to 1870s, but they became a typical feature of capitalism only at the turn of the century. Based on available figures, Lenin penetratingly analyzed their rise and showed that their formation and economic division of the world, was one of the most important features of imperialism. He noted 40 such international monopolies in 1897 whose number rose to roughly 100 in 1910. The outcome of the domination of these international monopolies is stagnation and decay. Monopolies cut production, limit trade and keep important scientific inventions and discoveries secret. The international unions of monopolists, Lenin said, actively push the governments of imperialist countries into military conflicts. Immediate post-world war I history has proved this evaluation of Lenin as correct when the international alliances of monopolies collaborated in putting Germany's arms industry back on its feet thereby helping the ascendancy of fascism leading to World War

7. Change in the Nature of Crisis and Response to It

According to Marx, economic crises lie in the very essence of the capitalist mode of production and the process of accumulation, i.e., appropriation of surplus value. But the forms in which crises manifest differ according to concrete conditions. The necessary conditions for crises were created in the formative stage of capitalism with the emergence of commodity production as the general form of the production of material wealth where money has been converted into capital. Marx has vividly explained how the contradiction between money and commodity, disruption between the acts of purchase and sale, gap between receipts and payments, etc. culminate in the irresolvable contradiction between production and consumption under capitalism. The development of these contradictions and disproportions inherent in capitalism results in the expansion of production coming to a halt and then leading to a fall, and finally a crisis. Often starting as a marketing crisis, the capitalist crisis hits trade, industry, agriculture, and the monetary and credit system. According to Marx, capitalism can only develop cyclically, i.e., by way of continuous alterations between periods of increasing production and periods of decline and stagnation. Every crisis gives capitalists the opportunity to intensity exploitation of workers by reducing wages and dictating worse conditions of work. At the same time, every crisis prompts capitalists to introduce cost-reducing new technologies, techniques and organization of production and renewed capital investment. However, since such cost-reducing avenues are accessible only to the big capital, successive crises lead to concentration of production and capital in the hands of big capitalists. In sum, a crisis dictates the need for renewed capital investment, which ensures the way out of the crisis and simultaneously creates the material prerequisites for the next crisis. Marx had pointed out how crises form the "material basis" for the starting point of new capital investment and next turnover cycle under industrial capitalism. (Capital, Vol. II, p. 189)

But as Lenin analyzed, the nature of capitalist crisis itself has undergone basic changes under imperialism. Finance capital or imperialism, as Lenin unraveled, was the outcome of an intense process of concentration and centralization of capital following the prolonged economic recession of the last quarter of the nineteenth century. From then on, together with industrial capital accumulation, financiers began to play the dominant role and a larger share of the profits from production started flowing to finance capitalists. The outcome was a relative decline in production and an upward trend in prices and rising levels of speculative profit. On account of this growing trend of financial speculation, and stagnation in production and employment relative to pre-monopoly capitalism, crises under imperialism have assumed fundamentally new features. The deep seated depressive forces that had been implanted with the advent of imperialism though could be camouflaged for a time through World War I, the crisis violently came out in the form of the Depression of the 1930s. Based on his study on imperialism, in a Letter sent to the Executive Committee of the Comintern in 1920, Lenin could predict this chronic and irreversible crisis of imperialism as the "dissolution" and break-up of the whole system of imperialist world economy (Lenin, Collected Works, Vol. 35, p 451).The Great Depression was an altogether different experience in the entire history of capitalism as the process of capital accumulation itself came to a standstill. This world economic crisis that began in 1929 as the worst and most destructive in the history of capitalism for the first time exposed its vulnerability as a socio-economic system. It shook the very foundation of imperialist system itself. No part of the world where imperialist finance capital had penetrated could escape from the Depression. No doubt, the source of this stagnation, idle capacity and unemployment, though inherent in capitalism in all stages of its developments, has become intense in the imperialist stage on account of the enormous power of monopolies to control wages and prices in their favour, totally eroding the consuming power of the masses, ultimately resulting it altogether difficult to realize the surplus value. Apart from the exploitation of working people at the level of production, the social consuming power of the toiling masses is further reduced through monopoly practices in pricing and in the sphere of circulation, leading to greater concentration of income and wealth in the hands of the super-rich. The ultimate cause of the crisis is this rigging of the whole system in favour of the financial oligarchs at the expense of the broad masses.

Until the Depression, contrary to the analysis of Marxist political economy, bourgeois economists had been resolutely clinging to their assertions that unemployment and stagnation were temporary aberrations. But the Depression exposed the vulnerability of imperialist economic foundations laying bare the internal logic of finance capital that unemployment and stagnation are the normal conditions of imperialism. As a response to the ideological bankruptcy of bourgeois ideologues who were upholding the state's role as that of a "night-watchman" (see, Engel's statement in " Ludwig Feuerbach and the End of Classical German Philosophy"), and questioning the orthodoxy of laissez-faire economics that upheld capitalism's ability to adjust itself, Keynesianism evolved as a variant of bourgeois political economy in the imperialist epoch. According to Keynes, the laissez-faire mechanism was incapable to generate adequate "effective demand" and eliminate unemployment by itself. Therefore, he suggested government intervention as one of the decisive means of increasing the general level of employment. Instead of increasing the production of mass consumption goods, Keynes' preference was for investments in heavy industry, especially arms production. In actual practice, what occurred was an attempt to stimulate the imperialist economy through militarization using Keynesian prescriptions. But the expansion of armaments industry advocated by Keynes could have been carried out only at the expense of the working people and curtailment of civilian production leading to a further lowering of consumption, growth of unemployment and deepening of economic crises. More precisely, arms production and militarization withdraw enormous material and labour from social production. From a Marxist perspective, military production and the maintenance of armed forces ultimately represent non-productive waste of part of the social product. In a nutshell, adoption of state intervention led to the strengthening of what Lenin called state monopoly capitalism. According to Lenin, state monopoly capitalism combines the strength of monopolies and that of the imperialist state into a single mechanism whose purpose is to enrich the financial oligarchy, suppress the working class and toiling masses and launch aggressive wars to maintain the capitalist – imperialist system. The first practical application of Keynesianism which called for a redefinition of the role of the capitalist state in the economy was the New Deal in America. In the postwar period it became exemplified in the so called welfare state with its enlarged economic and social functions culminating in the repudiation of laissez-faire capitalism. But Keynesianism succeeded only in keeping the recessionary trend in abeyance for a time and could not alter stagnation and unemployment emanating from the internal logic of finance capital as identified by Lenin. As such, in spite of state programming and regulation of the economy, massive diversion of resources from civilian production to war oriented manufacturing, massive avenues of global plunder through neocolonisation, etc,. all leading to an apparent boom euphemistically called 'golden age' for the capitalist-imperialist system until the early 1970s, the imperialist crisis that appeared in the 1930s in the form of the Depression had started bouncing back with intensified vigour in the 1970s in the form global stagflation. This prompted imperialism to resort to a shift in the capital accumulation process through neoliberalism.

8. Soviet and Chinese Experience

Marx clearly envisaged a period of revolutionary transformation from capitalism to communism. This period referred to as socialism corresponds to a period of political transition in which the state becomes an instrument of the revolutionary dictatorship of the proletariat. In contradistinction to communism, socialism is characterized by the fact that the labourer is still rewarded in proportion to his contribution. She is no longer exploited but instead receives an earning in proportion to the labour rendered. And since different labourers contribute differing quantities of socially necessary labour, incomes will differ under socialism. Marx said: "In a higher phase of communist society, after the tyrannical subordination of individuals in the division of labour and thereby also the distinction between manual and intellectual work, have disappeared,... all the springs of social welfare are flowing more freely, along with the all-round development of the individual, then and then only can the narrow bourgeois horizon of rights be left far behind and society will inscribe on its banner: " From each according to his capacity, to each according to his need." (Critique of the Gotha Program, p. 31) In spite of this prediction, since Marx's major concern was with the political economy of capitalism immediately preceding the revolution, he could not develop the political economy of socialism. Marx envisioned socialism as a society that comes into the world out of the womb of capitalism bearing its birthmarks, and it may even be suggested that major organs of socialist economy such as the "socialization" of production are complete before the act of birth. And the society has to move to a higher phase to overcome the "narrow bourgeois horizon."

However, these conditions envisaged by Marx were seldom met in Russia when Lenin, applying his thesis of "uneven development" and the "theory of weakest link", led the October Revolution in 1917, thereby qualitatively developing Marxism of the imperialist epoch and clearly refuting academic Marxists who saw the first socialist state as a violation of the basic tenets of Marxism. Obviously, Russia was a backward agrarian country and the hopeful conviction at that time was about simultaneous revolutions in other countries breaking the chain of imperialism and ensuring the conditions for the feasibility of Russian revolution. Since the expected revolutions were not forthcoming, more effort was required for establishing socialism in one country, and continuation of this relative emphasis in the long-run led to deviation from the dialectical link between the universal and particular character of proletarian revolution. In the context of mounting external aggression and counter revolutionary moves within, though not an economic success, war communism became indispensable for the survival of the Soviet economy. Though the entire circumstances surrounding the first socialist experiment had been severely unfavourable , it was the painstaking efforts by Russian revolutionaries under the theoretical and practical guidance of Lenin that ensured Soviet Union's continued existence. Individualized character of production in a peasant economy coupled with lack of coordination between agriculture and industry among other things necessitated a partial return to profit motive including the operation of commodity production, law of value, etc. as a temporary expedient leading to NEP which could be evaluated as the only option available then to increase production to the point where central planning could begin after a few years.

As Mao Tsetung, in his A Critique of Soviet Economics (Monthly Review Press, New York, 1977), has pointed out, planning in Soviet Union was a sincere attempt to replace the bourgeois law of value by "the law of planned proportional development and state planned economy." Along with the abolition of law of value, commodity production, etc., Stalin could be seen emphasizing the cardinal need of "abolition of the anti-thesis between town and country, and between mental and physical labour and elimination of distinctions between them", etc., in Economic Problems of Socialism in the USSR (Foreign Language Press, Peking, 1972) which Mao developed through his well-known article On the Ten Major Relationships (Selected Works of Mao Tsetung, Vol. V, pp. 284-307). In Chapter 9 of his above quoted book, Stalin's analysis on the international importance of bringing out a Marxist Textbook on Political Economy taking the experience of Soviet Union into consideration is of particular relevance in this context. Here, while criticizing the mechanical approach of Soviet economists like Yaroshenko who still tries to imitate and transplant Marx's method of analysis developed with reference to capitalist societies and that begins with the unraveling of commodities to Soviet Union, then a socialist country, Stalin refers to the need of developing Marxist political economy according to the concrete conditions of socialism. Upholding Stalin, Mao said: "In capitalism, the social nature of production and the private nature of ownership is a fundamental contradiction. Marx began with commodity and went on to reveal the relations among people hidden behind commodities. But under socialism, on account of the establishment of public ownership of means of production and since labour power is no longer a commodity, the relations among people are no longer hidden behind commodity relations. Hence political economy in a socialist society cannot be studied beginning with commodities"(A Critique of Soviet Economics). But within a span of time, usurpation of Khrushchevian revisionism made all such initiatives mentioned by Stalin totally redundant.

At the same time, even when upholding Stalin's positive interventions to develop Marxism-Leninism including Marxist political economy, Mao minced no words in criticizing him for not keeping "politics in command" while dealing with political-economic questions. An oft-quoted criticism of Stalin by Mao is the overemphasis on the development of productive forces in Soviet Union in disregard of the importance of changes in the superstructure. Regarding socialist industrialization and agricultural collectivization that took place in Soviet Union, Mao had a different perspective. For instance, after October Revolution, the viewpoint among Soviet leaders was thus: "The transition from capitalism to socialism will be more difficult for a country the more backward it is." Mao's response: "Actually the transition is less difficult the more backward an economy is, for the poorer they are the more the people want revolution." And instead of the practice of "material incentives" pursued in Soviet Union, Mao emphasized on "spiritual inspiration from political ideology", and for Mao philosophical knowledge was indispensable for those who deal and write books on political economy.

9. Setbacks in Developing Marxist-Leninist Political Economy

In spite of such positive interventions by Stalin and Mao, we are constrained to note on a relative stagnation in the development of political economy along Marxist lines after Lenin. The drawback pertains to the inability or failure to develop Marxist political economy according to the concrete conditions of socialism, i.e., during the transitional period from class society to classless society on the one hand, and in relation to imperialism's transformation from colonialism to neocolonial phase on the other. The theoretical lacunae connected with the absence of developing Marxist-Leninist political economy during the transition from socialism (where the principle is "from each according to his ability, to each according to his work") to communism (where the principle is " from each according to his ability, to each according to his need") provided fertile ground for the emergence of bureaucratic tendencies which could unfold into full-fledged state capitalism with the ascendancy of Khrushchevian revisionism in the 1950s. This became more apparent in the postwar neocolonial phase of imperialism. To be precise, it was Lenin's analysis of imperialism and the theorization on the evolution of finance capital as the most valid category which has contributed to the development and enrichment of Marxist political economy in the colonial phase of imperialism. Obviously, the strategy of revolution put forward by Lenin in the era of imperialism is also based on his study on the global operations of finance capital (or rather the whole process of capital accumulation) including his thesis on the uneven development of capitalism that the front of capitalism will be pierced where the chain of imperialism is the weakest.

However, the postwar neocolonial phase of imperialism has been a qualitatively different situation. At the political level, though socialist advancement was surging ahead during the immediate postwar period, a Marxist political economy perspective on the epoch-making neocolonial offensive unleashed by US led imperialism was conspicuously absent during this time. In Chapter 5 of the Economic Problems of Socialism in the USSR, though Stalin along with the Cominform documents of the period could be seen taking political positions on US imperialism's new offensives such as the Marshall Plan, serious drawbacks occurred in concretely evaluating the political economy of the new phase of imperialism. It was only in the early 1960s that, as part of the Great Debate, the CPC under the leadership of Mao Tsetung could put forward a Marxist-Leninist perspective on neocolonialism in the well-known document Apologists of Neocolonialism. By that time even a nationalist leader like Nkrumah could bring out more detailed studies on neocolonialism (Kwame Nkrumah, Neocolonialism, the Last Stage of Capitalism, Thomas Nelson& Sons, London, 1965).

Though the political economy perspective on neocolonialism put forward by CPC was inspiring to the revolutionary forces, rather than developing and reinforcing the Marxist theory and practice against US led imperialism, the CPC used it primarily as a polemical weapon against Khrushchevian revisionism. Consequently, there was no effort on the part of CPC to situate neocolonialism as a qualitatively new phase of imperialism and unravel the laws of motion of finance capital or the capital accumulation process under neocolonialism on Marxist-Leninist lines. With the ascendancy of left sectarianism led by Lin Biao and with the erroneous evaluation of "imperialism heading for total collapse and socialism advancing towards world-wide victory," the idea of a weakened imperialism got rooted in CPC leading to the abandonment of any further study on the political economy of neocolonialism by it. Following the death of Mao Tsetung in 1976 and with the open embrace of capitalist path by CPC, all the fundamental questions pertaining to imperialism's neocolonial plunder altogether vanished from its agenda.

Meanwhile, there has been a spurt in academic studies on imperialism's postwar phase by scholars from different persuasions such as "dependency school", "critical theory", "neo-Marxism", "post-colonialism", etc., that attach widely different interpretations on the neocolonial phase of imperialism. The hallmark of such studies, to be precise, is a basic departure from the core of Lenin's theory of imperialism including his analysis of the political economy of finance capital on the one hand, and an antipathy towards the Marxist conception of class, state, exploitation, and so on.

10. Conclusion

Today a basic understanding of the concrete manifestations of neocolonialism, the present phase of imperialism, from the perspective of Marxist-Leninist political economy is indispensable for developing class struggle and move towards people's democratic revolution. From the time of the 1982 First All India Conference of the then CRC-CPI (ML) onwards, the Party has been of the view that among other things, the global setbacks suffered by the ICM are inseparably linked up with the lack of a concrete understanding on neocolonialism and the laws of motion of finance capital in the postwar phase of imperialism. It is to rectify this drawback that the CPI (ML) has initiated a political economy study of neocolonialism along with its Ninth Congress in 2011. Based on this, a paper on Imperialism, Colonialism, Neocolonialism (The Marxist Leninist, Issue-12, July-September, 2012) was presented in the first Party School held in 2012. The present paper on Marxist Political Economy shall be read along with that paper on Imperialism, Colonialism, Neocolonialism for a more comprehensive picture on political economy.

The Communist movement in India has a history of almost a century after the salvos of October Revolution in Russia brought Marxism-Leninism to the people of India who were engaged in the national liberation struggle against the British colonialists. It is a complex and chequered history.