Comparison between Marxism and Neoliberalism - Essay Example

Comparison between Marxism and Neoliberalism as Theories of Operation in Global Political Economy Political economy Political economy can be defined as a social science that deals with how institutions develop in different social and economic systems such as capitalism, socialism and communism. It is the science of wealth, which deals with efforts made by man to supply wants and satisfy desires 3. This science also analyses how studies how politics influences economic relations within nations and between nations. Different ideologies such as capitalism in the United States and communism in Russia and China will then be used to illustrate how they have shaped the economies of their countries and influenced economic growth or retardation in their states 2. This essay will focus on two key theories put across by various economists and demonstrate how they have been used to explain the impact of political ideologies on economic relations such as buying and selling od goods, flow of investment, wealth or poverty of regions and ways in which economic power influences political relationships among states. The theories used in this analysis will be the Marxist, Neoliberalism and Economic Nationalism (Neomercantilism Theory). Marxist Views on Political Economy Marxism is a system of economic, social, and political philosophy based on ideas that view social change in terms of economic factors. This theory asserts that for human beings to survive they must produce and reproduce the materials necessary for life. As a result, the societies are therefore governed by forces of production 1. Karl Marx then views the society as a divide between those that own the means of production and those that provide labour to those that own the means of production. Therefore, according to Marx, political economy is not about the relationship between commodities, prices, supply and demand. It is about the owners of wealth, and how they use it to exploit others. This classification of society into the exploiters and the exploited is what led to the rejection of capitalism by Karl Marx. Marx believed that although capitalism develops the productive powers of human societies to historically unprecedented heights, it does so in ways, which are also disabling, exploitative, and undemocratic 5. In order to change this unjust order in the society Marx advocated for a revolution which would see the distribution of wealth from the few owners of production to all members of the society. The changing of this order would have to be by force as the owners of production are not willing to give up the means of production and will keep exploiting the working class (proletariat) to maintain their status quo. The problem of political economy of capitalism lay in labour. The capitalist only pays wages equal to the value of goods and services the worker needs to keep on providing labour. This means that the worker will never amass surplus and become an owner of the means of production but will make only enough to be productive as a labour provider. Secondly, the cost of the worker’s reproduction is always less than the value of labour they add to the production. For example, a worker working eight hours per day is paid a wage of work done in four hours. However, in order to get that wage they must work the remaining four hours of the day. They end up producing goods in those four hours of which the labour is unpaid for but the cost of the goods creates a surplus profit for the employer. Therefore, the politics of the capitalistic economy is one that makes the rich richer and the poor remain poor if not poorer 4. Neoliberalism Views on Political Economy “Neo” refers to a new kind of liberalization carved out by an elite group of capitalists from the old liberal school of economics that belonged to famous economists such as Adam Smith. Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade 5. It is a school of economic thought derived from the old liberalism that advocates for the abolition of government intervention in economic affairs. Instead, it calls for the laissez- faire approach towards the economy and the assumption is that the economy regulates itself and hence functions best without external interference from the state. However, after the Great Depression, liberalism came under sharp criticism from economists such s Keynes and Marx and business was seen not to be self-regulating as previously assumed. The solution was then proposed that the government needs to play a role in the economy by creating employment for all and create investments. This would then avail capital to all and everyone would be able to buy and sell. Previously liberalism opposed government intervention but neoliberalism in my opinion is an economic system that has found a way for the government’s intervention to work for its advantages and almost often against the best wishes of the people. The political economy under neoliberalism is as a result of the following key points. First, there is the liberation of any enterprise imposed by the government regardless of the social damage done to the people. For example, private enterprises deny their workers membership to unions, which makes it impossible for them to negotiate for better pay. Secondly, neoliberalism calls for the cutting of public expenditure for social services such as healthcare and education. This removes the safety net of the poor leaving them at the mercy of the private enterprises. Thirdly, there is the reduction of government regulation on anything that may diminish business profits. For example, laxity in the laws handling disposal of waste products ensures that company incur low costs in waste management and maintain high profit margins on finished products. Fourthly, there is the privatization of state owned enterprises under the pretext of improving efficiency. This only serves to concentrate wealth among the few rich and ensure that the people pay more for previously affordable services. Finally, there is the replacement of “public good” with “individual responsibility” where every man is charged with the responsibility of providing their own needs and if they fail, they are to blame for not being as aggressive as the few successful members are. In this type of economy, the rich are rich because they work hard and eliminate competition while the poor are poor due to their laziness and inability to keep up with the competition 10. Economic nationalism (neo-mercantilism) This is a theory that critics the theory of liberalism based on three basic ideas. Adam Smith in defending free trade argued that individuals that are free to trade end up benefiting not only themselves but also the society at large. That if a baker is left free to bake his own bread he will bake enough for his family and even surplus to feed the community contrary to when the number of bread to bake has been dictated to him. The assumptions of a laissez-faire economy are that trade benefits all participating parties across all boundaries 6. Moreover, free trade benefits all social classes and all states regardless of their economic status. However, this is not the case under Economic Nationalism where three main weaknesses of liberalism stand out. The first criticism is the assumptions that since companies compete economically states do the same; they do not. Ford and Honda may be companies competing in a free economy but their nations do not as they will put trade restrictions to ensure they outdo each other in revenue gained from the automobile industry. This then means that free trade cannot exist absolutely where national interests are concerned. Secondly, free trade only benefits the wealthy that have the means to participate in trade. Removal of trade barriers have no impact on the homeless who have nothing to exchange for money. Thirdly, for the less developed nations there needs to be an alternative for them to get rich other than free trade. For example, most developing nations export agro products that fetch lower prices in the international markets while their industrial import goods are very expensive. The removal of trade tariffs through free trade will then serve to increase the foreign earnings of the developed nations that sell industrial products at the expense of the third world nations’ foreign revenue. Under Economic Nationalism, the trading parties must enjoy equal trading backgrounds in order for them to benefit from free trade 7. Marxism versus Neoliberalism Marxism and Neoliberalism both propose different ways of organizing an economy but the one thing they agree on is that at the conception and growth of any economy there must be production of the required capital or raw materials. Marx himself did not love capitalism but he understood it was the most efficient and productive system of creating material base for a communism era. From there onwards, the division of resources would take a detour from the capitalist course and establish a society that was based on the principle “from each according to his ability but to each according to his needs”. In this Marxist, society there would be no dominant society as each will have equal resources regardless of their input. The profits of an individual or group serve the whole community according to Marxism 9. Marxism is a suitable economy in states where there is little economic development and the available resources have to be divided equally among the few. This enables to narrow the gap between the rich and the poor and hence reduce social strife. For example, the provision of basic factors such an s education and health ensures that everyone has equal opportunities to benefit from the economy for example through employment opportunities. On the other hand, while Marxism assumes that abolition of classes will get rid of class struggles, it bestows too much power on the government, which sometimes ends up being authoritarian to the people and an inhibiting factor to economic growth. This is because the authoritarian government does not encourage efficiency through competition but mediocrity through uniformity. For example in china during Mao’s era, his refusal to accept expert opinions on agriculture led to the starvation of millions and while many other were executed for opposing his government 9. Neoliberalism, which advocates for capitalism is a society where there are those who provide labour and those who own the means of production that provide those labour opportunities. In this society, profits are concentrated among the few that own the means of production while the working class live hand to mouth despite the wages earned from provision of their labour. However, in a neoliberal economy the rich use mechanisms to ensure that the poor retain their positions as labourers. This society is often unstable as the poor are always trying to overthrow the owners of production and enjoy the same privileges. The advantage however of the neoliberal economy is that it promotes innovation in its strife to attain high profits. For example in the technology sector companies compete to produce devices that have a competitive edge and at the same time are efficient in their production hence lowering costs and raising profits. This is owed partially to the free trade where the government reduces its involvement in business and encourages investors to invest in research and development of their products. Secondly, a capitalistic economy tends to focus on production of surplus, which is necessary in an economy that is over consuming while dependent on limited resources. A neoliberal economy can therefore be said to be one that is ecologically sustainable as companies strive to produce goods using materials that are easily and cheaply available. For example, the use of recyclable shopping bags to replace the expensive cardboard bags has helped to reduce cutting of trees and also manage the disposal of plastic bags in the environment. Unfortunately, as much as neoliberalism contributes to growth, it tends to contribute to growth of the profitable goods but not the goods that the people actually need. For example, the construction of highways and first world apartments in most third world countries is an indication of misplaced priorities in regions where the majority cannot afford a car or descent housing. Conclusion. Despite the criticisms of Marxism, it still provides a better insight on the operational of the global political economy where the world is still largely divided based on the owners of production and the wage providers. Multi-National Corporations such as the oil producing firms are now the new face of owners of production while the majority ordinary citizens are wage providers at a minimal rate. Free trade is practiced but the line between who profits from capitalism and who doesn’t is still largely determined by who plays what role in the industry; a situation that is not owed to maximization of profit but to distribution of resources and the power bestowed on those who have plenty against those who seek plenty. Bibliography Benno, T. 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