Political Economic Thought - Coursework Example

Political Economic Thought This article aims at examining the differences that exist between two renowned economists, that is, John Stuart Mill and Ludwig Von Mises. Disparities between the two authors are examined on the basis of some of their articles. John Stuart Mill’s article under scrutiny is titled “Of Capital” and it is the fourth chapter in his book, Principles of Political Economy. Ludwig Von Mises article, on the other hand, bears the title “The Ordinary Man’s Social Philosophy.” The comparative study explores these differences from economic, political, and social justice perspectives. Economic Thought Ludwig perhaps best introduces the economic element of the article by denoting that the beginning of economics as a novel knowledge branch was one of the most important milestones in mankind’s history. According to the economist, this conceptualization of economics as a study area paved way for better comprehension of capitalistic enterprises. Ludwig also emphasizes that the extra focus on economics changed the understanding of human affairs within the business and trading environment. The author further stresses that, residents of a country that adopts capitalism benefit immensely from the significant achievements wrought by capitalistic thoughts and acts, throughout their lives. Judging from the introductory part of this article, therefore, it is apparent that Ludwig avidly supported the capitalist system of economy. Mill’s article, on the other hand, delves directly into the definition of capital and identification of misconceptions associated with this production requisite. The author is keen to note that, many people consider capital to be the money raised for production purposes. This misconceived notion overlooks previously accumulated stock, comprising of products manufactured by former labor. It is this accumulated stock of labor products that Mill terms as capital. It is imperative to note that Ludwig also acknowledges capital accumulation, as a requisite for improved production. In addition to debunking the misconception that capital primarily consists of money raised for production purposes, Ludwig and Mill both highlight the need for accumulating capital, as the primary foundation of a capitalist economy. For instance, Ludwig is emphatic that saving or capital accumulation is the key factor that changed, step by step, the simple search for sustenance among traditional communities to the modern industry production approaches. According to Ludwig, the trendsetters of this economic evolution comprised of ideas that established the operation mechanism, within which it became safe to accumulate capital through private ownership of production resources. The scholar evidently accorded much credit of capitalist economic prosperity to saving hence accumulation of capital. This is further proven by his assertion that the most creative technological innovations would essentially be useless, if capital resources required for their use had not been accrued through saving. Mill stresses this vital importance of capital in fuelling a capitalist economy by stating that, capital provides the necessary materials and tools for production, and it maintains laborers involved in the production process by availing shelter, food, and necessary protection. In addition to showing the importance of capital in the production process, these prerequisites serve to emphasize Mill’s assertion that capital is not synonymous with money, a common misconception among many. Another notable economic contribution of Ludwig concerns the credit allotted to parties contributing to development of the market economy. The characteristic feature is that it assigns a greater portion of improvements resulting from the efforts of three progressive classes, including those accumulating capital, those investing capital, and those formulating new investment approaches, to the majority of people in the system that are deemed non-progressive. This means that the progressive classes serve the non-progressive persons, who make up the greatest portion of an economy, through providing ordinary people with the chance to reap benefits where they did not invest any capital. Mill illustrates the latter argument, by providing examples on how ordinary persons benefit from investment by the capital goods provider. The hardware manufacturer illustration points out how the sale of the iron goods in various markets generates revenue that can be utilized to pay laborers, enabling them to feed and sustain themselves and their dependents. Both authors also seem to suggest that when the progressive investors accrue more wealth, they do not do it at the expense of the ordinary persons. Rather, the allotment of resultant revenue to various capital requirements determines the residue amount. It is evident from the two scholars’ assertions that, despite the 100 year difference in their ideas, they had a similar outlook on capital and other economic aspects. Political Thought Ludwig extensively explores the link between politics and economics, as can be discerned from his comparison between socialism and capitalism. The author also demonstrates that capitalism entails economic planning, which is a key political consideration. Ludwig notes that terms which denote free market economies like capital, capitalists, and capitalism were utilized by Marx and Marxist theory supporters in a contemptuous manner. Just as pointed out by Mill, many propagandists perpetuate the notion that capital represents money. It is ideas like these, which fuel the misconception that, capitalist economies are fuelled by the need to make and accrue profits, while aggravating poverty among the common masses. Ludwig notes that these terms prompt the masses to accept Marxian ideology without critically evaluating the benefits shaped by capitalism. This Marxist ideology, as indicates by Ludwig, wrongfully asserts that capitalism constitutes a chaotic system of production, where the rich continually manufacture products for consumption by the masses and they accumulate significant amounts of profit in return. This socialist perspective of market economy attempts to explicate the gap between the rich and poor in society, while positioning socialism as a political economy characterized by rational fiscal planning. Ludwig is keen to note that Marxist doctrines gained approval simply due to the fact that; they adopted an interpretation of economic events highly popular among the greater majority of the underprivileged masses. The simplistic interpretation of capitalism also covered the reality of market conditions with a mock philosophical cover, which made it satisfactory to crude materialism and spiritualism. However, the scholar shows that a capitalist society is not anarchy, as stipulated by Marx, but a well-organized political and economic system, with intensive monetary planning and capital allotment to respective sectors. Such organization is evident from the concerted efforts by investors to accrue capital, the entrepreneurial undertakings of individuals, and technological innovativeness of various partisans. Effective combination of these elements contributes to generation of jobs and prosperity. The latter amalgamation of various elements of a capitalist economy counters socialist beliefs that, such prosperity is spontaneous and that, rise in labor productivity can only be credited to the actual laborers. Mill also supports the idea of an interdependent capitalist political economy, by demonstrating how withdrawal of capital from productive employment by investors or government, may place capital goods in unproductive consumption thus depriving ordinary laborers of their earnings. These examples show that capitalism is a framework that benefits from various stakeholders’ input, and it is not the case, as suggested by socialism that the affluent are the sole beneficiaries. Further, it is apparent that without economic planning that characterizes capitalism, there would be no balance between politics and economy prerequisites. Social Justice Through exploration and affirmation of the significant role played by entrepreneurs or investors in the economy, Ludwig achieves an important milestone in discarding the predominant contradiction between politics and economy. The latter arises from the notion that laborers are responsible for the greatest contribution to a capitalist economy, which overlooks the initial investment made by entrepreneurs in form of allocating economic resources to national and international projects. Ludwig, therefore, manages to reconcile economic analysis of actual market conditions and monetary pricing as well as outcomes, implicated in the process. The scholar also demonstrates that capitalism represents an economic framework that is reasonably planned through the collective, self-interested concerted efforts of every stakeholder that participates in it. He also shows that the failure of Marxism or socialism is as a result of the political system’s lack of economic planning and its further destruction, since fiscal planning can only be supported by pricing and regulatory systems that exist under capitalism. Judging from the analysis, one can argue that Ludwig was not necessarily anti-socialist, but rather pro-capitalist. The economist’s opposition to various forms of government interference, and socialism stem not from his lack of tolerance for socialism, but from his respect for individual freedoms and recognition of the fact that there would be virtually no economic progress under a totalitarian system of governance. Ludwig’s article also explicitly demonstrates that the economic gain of one person under a capitalist system does not amount to the loss of another, but it is actually the other person’s gain. This is because the former invests, while the latter gets access to a job that earns him or her some money hence gaining self-sustenance and means to support one’s dependents. In his article on capital and its significance in production, Mill also demonstrates the importance of a capitalist system, although not as directly as the preceding economist. For instance, the economics scholar takes note of the fact that, if children hence heirs of an investor channel their wealth towards productive ventures, or a person who holds a mortgage is paid off and lends the money to another landlord to improve land, or even when a manufacture expands his business, the resources still serve as capital. As a result, these capital goods remain in productive use, sustaining laborers and their dependents. In case of any loss in resources meant for reinvestment, there would be an impact on all stakeholders participating in the market economy. An investor’s loss would mean that there would be a reduced amount of resources productively employed in perpetually maintaining the initial number of workers. As a result, the number of laborers would be reduced and there is also a possibility that the amount of compensation would decrease, in order to spread out the impact of the loss suffered while attempting to maintain regular production. The primary implication is that the loss of one person is the loss of another under a capitalist system, just as one’s gain benefits another. Overall, there is a wide array of similarities between Ludwig Von Mises and John Mill Stuart in their respective interpretation of economic concepts like capital and capitalism. These prominent economists demonstrate the significance of capital accumulation and saving in propelling production in a market economy. They also show the importance of balance between political and economic aspects in a society, in order to sustain productivity while protecting social interests of a society’s residents. Works Cited Mises, Ludwiq. “The Ordinary Man’s Social Philosophy.” In The Anti-Capitalistic Mentality. Geneva, Switzerland: Ludwig von Mises Institute. 2010. 21-26. Stuart, Mill.   “Of Capital.” In Principals of Political Economy. Amherst, New York : Prometheus Books. 2004. Print. Read More