What is Political Economy?

Political Economy most commonly refers to interdisciplinary studies drawing upon
economics, political science, law, history, sociology and other disciplines in explaining the
crucial role of political factors in determining economic outcomes.
It's more than four hundred year old history includes the works of French Physiocrats, Adam
Smith, David Ricardo and Karl Marx, among others. More recent scholars related to the field
of Political Economy include Robert Keohane, Robert Gilpin, Peter J. Katzenstein, and
Stephen Krasner, aside from a more critical school inspired by Karl Polanyi, Susan Strange
and Robert W. Cox in particular.
Historically, there have been many reasons for adopting a distinctively political economy
perspective in one's analysis of local and global change. Political Economy is concerned
with the interplay between politics, society and economics and it has a long and
distinguished history in the social sciences. Thinkers as diverse as Adam Smith, John Stuart
Mill, David Ricardo, Karl Marx, Raya Dunayevskaya, and Charlotte Perkins Gilman have all
grounded their work on the fundamental observation that politics and economics are
inherently linked.
Today, there is growing consensus that the separation between the study of politics and
economics is an artificial one and the pendulum is swinging toward an integrated approach.
Further, political economy is an area of study that permits a variety of ideological
perspectives and theoretical paradigms. The academic return to political economy is
especially encouraged by the growing interest in interdisciplinary studies.
However, it is important to note the distinction between the discipline of Political Economy
as described above and a political economy approach which is applied by a variety of
disciplines from different vantage points. For instance, a political economy approach in
Sociology is applied to study the effects of people's involvement in society as members of
groups, and how that changes their ability to function. While Political Science employs
Political Economy to focus on the interaction between institutions and human behaviour, the
way in which the former shapes choices and how the latter change institutional frameworks.
Similarly, Anthropology, History, Economics, Human Geography, Cultural Studies and a
whole array of disciplines and interdisciplinary fields employ political economy approach in a
variety of ways.
The Political Economy Programme at AU reflects both the rich traditions of the discipline of
Political Economy and introduces students to the diverse applications of the political
economy approaches.

Why study Political Economy?
Although the study of political economy has a long and proud history, its importance has
grown over the past several decades. Recent developments such as the dramatic changes
in the price of oil and other minerals, currency value fluctuations, the impact of regional and
international trade agreements (such as the World Trade Organization (WTO) and the North

American Free Trade Agreement (NAFTA)), as well as the shifting dynamics within major
international groups such as the G-8 and the G-20, have initiated some of the most
profound changes in Canadian political and economic governance since Confederation.

At the global level, the impact of the financial crisis of 2008, growth slow-downs in all major
industrialized countries of the world, the economic rise of China and India, and the
challenges of regulating international flows of people, goods, funds, and technology, have
fuelled an increasing interest in international political economy. The consequences and
challenges posed by the subsequent restructuring will have to be researched and studied
for years to come. The Political Economy degree program offers students these
opportunities by introducing you to this fascinating field.

Additionally, transformations wrought by globalization as well as the new information and
communications technologies (ICTs) make it vitally important that students understand both
local political and economic relations and their connections to global change. Thus, the
Athabasca University degree program in Political Economy is designed to provide students
the knowledge and practical skills necessary to meet the profound challenges of the 21st


Classical liberalism is a political philosophy which holds that the most important value is individual
liberty. Classical liberals believe that the utmost priority would be to maximise individual liberty,
while restricting the use of force and coercion (ie government) in order to achieve this. Classical
liberalism encompasses the social/economic/political)aspects, defining the basis and the role of
government (the legitimacy of a government is with the people, and governments should minimise
intervention and adhere to the rule of law), economics (many classical liberals would defend some
type of free market system as to maximise individual freedom in the economic sphere) and society
(mutual toleration, open discussion, freedom to act as long as nobody else is harmed). Famous
examples of classical liberals include Adam Smith and William Gladstone.

Neoliberalism is more about laissez faire economics, so economically it is very similar to classical
liberalism. Neoliberalism is like a modern take on classical liberalism; but it focuses on the markets.
This means it is about deregulation, ending protectionism, and freeing up the markets. While
classical liberalism is more of a political philosophy, neoliberalism bases its ideas on neoclassical
economics, so it is really a set of ideas for how a free market, as advocated by classical liberalism, can
be achieved and maintained. In addition, neoliberalism is quite a modern phenomenon, being
associated with economic ideas in the 19th/20th century proposing laissez faire economics.

 Miscellaneous



Difference Between Liberalism and Neo- liberalism – Understanding liberalism: You might be more (or less) liberal than you think • Categorized under Ideology | Difference Between Liberalism and Neo-liberalism – Understanding liberalism: You might be more (or less) liberal than you think .

many of these branches of liberalism stand diametrically opposed to one another on many political and economic issues. However. In fact. Liberalism was the product of Enlightenment thinking. About as many self-identify as being liberal in their political views as those who adamantly avoid such a label. Liber alism vs Neo-liberalism The word “liberal” carries strong connotations in modern political discussions. the historical roots of liberalism have produced a rich and diverse system of philosophical branches. based on his prolific writing on the natural rights of individuals. The word “liberal” doesn’t adequately capture the dexterity around this philosophical concept. separation . John Locke is considered the godfather of liberal political thought.

” liberalism sought to defend the “common good” – namely a political and economic system that maximized social progress for the group as a whole. liberalism morphed from an individualistic philosophy to one that is more communal in nature. What made liberalism unique was that it empowered the role of the individual and drastically challenged the absolutist foundation of the monarchies everywhere. and financial institution reforms – with a purpose to mitigate the effects of the rampant individualism that is commonly associated with the 1929 stock market crash and subsequent Great Depression. social welfare safety nets. On issues of . Borrowing from John Stuart Mill’s utilitarian concept of providing “the greatest happiness for the greatest number. However. Today. social contract. Borrowing from the New Deal.of state and religion. in the late 19th and early 20th century. liberal economic thought strongly empowers public institutions as a means to support individuals who are adversely affected by the externalities – such as poverty and pollution – of free market capitalism. the modern interpretation of liberalism is associated with left wing causes. and not benefitting a certain portion of individuals. Roosevelt best embodied this value with the “New Deal” in the 1930s. This body of legislation produced a large scale government infrastructure – characterized by public works projects. Franklin D. and many other philosophical concepts – many of which were incorporated in the democratic revolutions that occurred decades after his death.

Smith described the need for human economic activity to be driven by the “invisible hand” of the marketplace. from the Civil Rights Movement for African-Americans in the 1960s to the current struggle for marriage equality for the LGBT community. every individual necessarily labours to render the annual revenue of the society as great as he can. To quote Smith. Not pleased with modern liberalism’s disempowerment of the individual in favor of the state. and Canadian Liberal Party leader Justin Trudeau. Considered to be the blueprints for free market capitalism. a new form of liberalism – or rather a reinterpretation of the original merits of it – emerged in the form neo- liberalism. endeavours as much as he can both to employ his capital in the support of domestic industry. rather than by any governmental institution. “As every individual. Over the past few decades.political rights.” Allowing free individuals to trade in unfettered markets will produce the greatest amount of wealth and overall conditions for an affluent society in the eyes of neo-liberalism. current President of the United States Barack Obama. Present day advocates of modern liberalism include individuals like consumer rights advocate Ralph Nader. and so to direct that industry that its produce may be of the greatest value. . neo-liberal philosophers returned to the founding principles offered by Adam Smith’s Wealth of Nations. therefore. liberalism strives to secure civil liberties for minority groups.

classical liberals. Ron Paul and Governor Gary Johnson. and freely purchase and produce banned substances like marijuana. The transition of this philosophy from economics to a political movement has gained momentum in recent years with the rise in libertarianism in the United States. The individual is the true arbiter of a free society in both economic and political terms in the eyes of neo-liberals. Neo-liberalism highlighted the importance of deregulating markets and privatizing public institutions. the rights of citizens to marry freely. “What kind of a liberal are talking about?” MERCANTILISM MERCANTILISM is one of the great whipping boys in the history of economics. Although modern libertarians may be equated with what is considered “modern conservativism” (although those ideas are liberal on some economic policies. The next time somebody attempts to use this term in conversation. they strongly disagree with policies that relate the role of the state in the private lives of citizens – more specifically. is now considered no more than a historical artefact—and no self-respecting economist . popularized by individuals like Rep.Neo-liberalism – also referred to as “classical liberalism” since it borrows from 18th century philosophical principles – was primarily an economic school of thought in its original form. be sure to challenge them by asking. The school. not be the subject of government surveillance. the term “liberal” isn’t exactly a cookie cutter label that adequately describes the diverse nature of the philosophical tradition. As one can deduce. which dominated European thought between the 16th and 18th centuries. and libertarians alike.

like John Hales. were enchanted by the idea of an overflowing treasure chest. But Mr Grampp argues that. offers a subtler account of mercantilism. But they did try to make it difficult for their opponent to export goods. Yet its defeat has been less total than an introductory economics course might suggest. As William Petty—arguably the first “proper” economist—argued. was perceived to be the most devastating way to grind down the enemy. Such ideas were attractive to some governments. powerful state. In fact. thereby generating a net inflow of foreign exchange and maximising the country’s gold stocks. And a paper by William Grampp. in a short note to his “General Theory”. which severely restricted the ability of other nations to trade between England and its colonies. they were alarmed by the idea of hoarding gold and silver. Fewer exports would supposedly result in economic chaos as gold supplies dwindled. approvingly quotes mercantilists. But there is an important distinction between mercantilist practice and mercantilist thought. investment would help to improve labour productivity and increase employment. rather than an absence of grub.would describe themselves as mercantilist. The dispatching of mercantilist doctrine is one of the foundation stones of modern economics. noting that an ample supply of . Keynes. The Navigation Acts. Nicholas Barbon—who pioneered the fire insurance industry after the Great Fire of London in 1666—wanted money to be invested. Mr Grampp even suggests that Keynesian economics "has an affinity to mercantilist doctrine”. we should stop confusing mercantilism and bullionism. Mr Grampp concedes that mercantilists were keen on foreign trade. Ensuring an absence of gold. This is because many mercantilist thinkers were most concerned with maximising employment. One often reads in mercantilist tomes that foreign trade would be more beneficial than would domestic trade. Boiled to its essence mercantilism is “bullionism”: the idea that the only true measure of a country’s wealth and success was the amount of gold that it had. not hoarded. published in 1952. This idea had important consequences for economic policy. were one such example. the warring governments made few attempts to prevent their foes from importing food (and thereby starving them). Few mercantilists were slaves to the balance of payments. And there are some amusing (and possibly apocryphal) stories of bullionism in action. The best way of ensuring a country’s prosperity was to make few imports and many exports. At the heart of mercantilism is the view that maximising net exports is the best route to national prosperity. on the whole. And almost all mercantilists considered ways of bringing more people into the labour force. And some of the early mercantilists. During the Napoleonic Wars. Countries such as Britain implemented policies which were designed to protect its traders and maximise income. The opinions of thinkers were often mangled when they were translated into policies. Accumulating gold was thought to be necessary for a strong. If one country had more gold than another. given their shared concern with full employment. it was necessarily better off.

arguing that greedy barons could earn “wages or profit. a French thinker. Smith’s contribution did not represent such a sharp break. but how much. But it does nothing to increase demand. as part of his plan to help America "win the future". He saw the damage that overweening government intervention could do. it is thoroughly Keynesian. Early in the recovery some economists gave a veneer of intellectual credibility to this perspective. But Smith points out circumstances in which government interference is necessary. China and Germany are often envied for their trade surpluses or seen as economic models. his contribution does not represent such a sharp break from mercantilist thought. at a time when many rich economies are suffering from insufficient demand and high rates of joblessness. he outlines other cases where government intervention in trade is useful. and China especially has very deliberately subsidised exports. A simple interpretation of the economic history suggests that Smith’s ruthless advocacy for free markets was squarely opposed to regulation-heavy mercantilist doctrine. Smith made it clear that governments would always play a part in making markets—and could not conceive of a market where the government did not play a crucial role. Smith also grumbled that legislators could use mercantilist logic to justify stifling regulation. He was in favour of the Navigation Acts. . but rather instances where individuals and governments could abuse their position of power for personal gain. Nicholas Phillipson. inadequate consumer demand—as a cause of recessions was presaged by mercantilist contributions. But according to research by Lars Magnusson of Uppsala University. denounced those who opposed the use of expensive silks. Smith argued that the East India Company. argues that the notion of “free markets” was alien to the father of economics. in other words. The question was not whether. And he hated monopolies. was responsible for creating the huge famine in Bengal in 1770. whereas the miser who saved his money “caused them to die in distress”. Paul Krugman. Though most of the world's rich countries remain committed to free trade today. And in this sense. Smith was not opposed to regulation per se. And in Smith’s lesser-known "Lectures on Jurisprudence". He argued that purchasers of luxury goods created a livelihood for the poor. This zero-sum way of looking at the global economy is less rooted in the national greatness side of mercantilism than in the focus on full employment. a quasi-governmental organisation that managed parts of India at the time.precious metals could be key in maintaining control over domestic interest rates. for instance. greatly above their natural rate”. wrote of America's 2010 trade agreement with South Korea: There is a case for freer trade — it may make the world economy more efficient. and therefore to ensuring adequate resource utilisation. of a role the state would play. President Barack Obama has made a doubling of American exports a major policy goal. Mercantilism is thought to have begun its intellectual eclipse with the publication of Adam Smith’s "Wealth of Nations" in 1776. In 1598 Barthélemy de Laffemas. mercantilist themes are often found in economic policy debates. The father of economics was certainly concerned with the effects of some mercantilist policies. In some sense the Keynesian theory of underconsumption—that is. who recently wrote a biography of Smith.

But importantly. the case for bullionism as a demand stimulus evaporated with a role for bullion in monetary policy. If you want a trade policy that helps employment. economics's foundational debate continues to resonate. a deal with South Korea. More than two centuries after Smith's landmark work. Mercantilism theory and examples Tejvan Pettinger March 31. not. Mercantilism is associated with policies which restrict imports and foster domestic industries. that means the same GDP but fewer jobs. 2016 trade Mercantilism is an economic theory and practise where the government seeks to regulate the economy and trade in order to promote domestic industry – often at the expense of other countries. The mercantilist temptation is a strong one. Mercantilism stands in contrast to the theory of free trade – which argues countries economic well-being can be best improved through reduction of tariffs and fair free trade. The introduction of fiat money meant that balance-of-payment goals were unnecessary to maintaining a particular monetary policy stance. it has to be a policy that induces other countries to run bigger deficits or smaller surpluses. while those we lose are lower value-added. if the jobs we gain are higher value-added per worker.And there’s even an argument to the effect that increased trade reduces US employment in the current context. however. since central banks no longer needed an adequate hoard of gold to pump money into the economy. and spending stays the same. A countervailing duty on Chinese exports would be job- creating. . especially when growth in the economic pie slows or stops altogether.

Mercantilism involves  Restrictions on imports – tariff barriers. (known also as bullionism) It was believed in the sixteenth / seventeenth century that the accumulation of gold reserves (at expense of other countries) was the best way to increase the prosperity of a country. quotas or non-tariff barriers.  Subsidies of export industries to give competitive advantage in global markets.  Allowing copyright / intellectual theft from foreign companies. .  Granting of state monopolies to particular firms especially those associated with trade and shipping.  Government investment in research and development to maximise efficiency and capacity of domestic industry.  Accumulation of foreign currency reserves and gold and silver reserves.

led to ‘Salt tax’ revolt led by Gandhi.  All colonial exports to Europe had to pass through English first and be re-exported to Europe.  Undervaluation of currency. tariffs on Chinese imports. e.  Under British Empire.  Surge of protectionist sentiment. mercantilism is sometimes associated with policies. Limiting wages and consumption of the working classes to enable greater profits to stay with the merchant class. Examples of mercantilism  England Navigation Act of 1651 prohibited foreign vessels engaging in coastal trade.  Control of colonies.  In seventeenth Century France. government buying foreign currency assets to keep the exchange rate undervalued and make exports more competitive. the state promoted a controlled economy. leading to over supply of industries such as steel – meaning other countries struggle to compete.g. However. A criticism often levelled at China. such as. with strict regulations about the economy and labour markets  Rise of protectionist policies following the great depression. the extent of mercantilist policies are disputed – See Is China Mercantilist? NBER Modern Mercantilism In the modern world.  Some have accused China of mercantilism due to industrial policies which have led to increase in investment and capacity. Protests against this salt tax. rise in FDI in China – combined with policy of undervaluation of currency. making colonies buy from Empire country and taking control of colonies wealth. . Again China has been accused of offering too much subsidised investment for industry.g.  Government subsidy of industry for unfair advantage. e.g. e. India restricted in buying from domestic industries and were forced to import salt from the UK. With countries seeking to reduce imports and also reduce value of currency by leaving gold standard.

But. In Europe. there are arguments to support the restriction of free trade in certain circumstances. Justification for neo-mercantilism Despite many criticisms of mercantilism. Supporters argue that since China’s steel is effectively subsidised leading to a glut in supply. Trying to impoverish other countries will harm our own growth and prosperity. US tariffs on imports of steel from China 266%.  Tariffs in response to domestic subsidies. tariffs are 13%.  Protection against dumping.  Growth of Globalisation and free trade during post-war period show possibilities from opening markets and respecting other countries as equal players. e.g.  Theory of comparative advantage (David Ricardo)  Mercantilism is a philosophy of a zero sum game – where people benefit at the expense of others.  Mercantilism which stresses government regulation and monopoly tends to lead to inefficiency and corruption. It is not a philosophy for increasing global growth and reducing global problems.  Economies of scale from specialisation possible under free trade. increases markets for our exports. increasing other peoples wealth can lead to selfish benefits. it is necessary and fair to impose tariffs on imports of Chinese steel to protect domestic producers from unfair competition.  Mercantilism justified Empire building and the poverty of colonies to enrich the Empire country. Copyright theft Criticisms of Mercantilism  Adam Smith The Wealth of Nations (1776) – argued for benefits of free trade and criticised the inefficiency of monopoly. If some countries have excess supply of goods. . they can sell at a very low price to get rid of the surplus. growth of other countries. this can make domestic firms unprofitable.  Mercantilism leads to tit for tat policies – high tariffs on imports leads to retaliation. Also.

” What were the Marxist views of religion? Because the worker under the capitalist regimes was miserable and alienated.” Marxism is the antithesis of capitalism which is defined by Encarta as “an economic system based on the private ownership of the means of production and distribution of goods. the feeling of a heartless world. The worker is alienated because he has no control over the labor or product which he produces. and the soul of soulless circumstances. according to Marx. “Religion is the sigh of the oppressed creature. Communism evolves from socialism out of this progression: the socialist slogan is “From each according to his ability. they have the ability only to sell their own labor. to each according to his needs. This provided the need for religion. In Towards a Critique of Hegel’s Philosophy of Right (1844). tariffs may be justified to try and develop new industries. While it would take veritably volumes to explain the full implications and ramifications of the Marxist social and economic ideology. characterized by a free competitive market and motivation by profit. religious beliefs were sustained. A proletariat or socialist revolution must occur. the response to earthly suffering.” own only their capacity to work. and exchange. Religion. 2 MARXIST PHILOSOPHY . Under capitalism. distribution. Under capitalism. Marx continues. MARXISM Marxism is an economic and social system based upon the political and economic theories of Karl Marx and Friedrich Engels. He proclaimed that history is the chronology of class struggles. Examples. in order to support their families are paid a bare minimum wage or salary. Protectionism can be justified to protect against this dumping.  Infant industry argument.” Marx indicated in this writing that the working class. the workers.” Marxism is the system of socialism of which the dominant feature is public ownership of the means of production. wars. the working class or “the people. The capitalists sell the products produced by the workers at a proportional value as related to the labor involved. include EEC dumping excess agricultural production on world agricultural markets and China’s dumping of steel. An increasing immiseration of the proletariat occurs as the result of economic recessions. universal in character and acquainted with universal suffering. When the industries have developed and benefit from economies of scale. the proletariat. where the state (the means by which the ruling class forcibly maintains rule over the other classes) is a dictatorship of the proletariat. According to Marx a class is defined by the relations of its members to the means of production. For countries seeking to diversify their economy. these recessions result because the working class is unable to buy the full product of their labors and the ruling capitalists do not consume all of the surplus value. Surplus value is the difference between what the worker is paid and the price for which the product is sold. according to Marx was the response to the pain of being alive.” The communist slogan varies thusly: “From each according to his ability. to each according to his work. Marx wrote. Marxism is summed up in the Encarta Reference Library as “a theory in which class struggle is a central element in the analysis of social change in Western societies. then the tariffs and protectionism can be dropped. the proletariat was a true revolutionary class. and uprisings.

4)Finally. Marx's study of capitalism was grounded in a philosophy that is both dialectical and materialist. Marx gives us his answer to this question. 3)The worker is alienated from other human beings. With dialectics. or ability to do work. having no control over what is made or what happens to it. in return for a wage. nor are its real past and future possibilities. In this way. the historical context. particularly in production. the system of capitalism. social conditions and behavior are found to have a greater affect on the character and development of people's ideas than these ideas do on social conditions and behavior. but people's lives also involve consciousness. an election or an economic crisis for example. hires and fires him. Marx's dialectic is materialist. i. ever neglected when dealing with how something appears in the present. often not even knowing what happens to it once it has left his hands. changes and interaction are brought into focus and emphasized by being viewed as essential parts of whatever institutions and processes are undergoing change and interaction. factories—which they use in their work. with competition and mutual indifference replacing most forms of cooperation. which operates solely on ideas. raw materials. How do the ways in which people earn their living affect their bodies. Unlike Hegel's dialectic. Marx's materialism puts ideas back into the heads of living people and treats both as parts of a world that is forever being remade through human activities. 2)The worker is alienated from the product of that activity. This applies not only to relations with the capitalists. The actual changes that occur in history are seen here as the outcome of opposing tendencies. or "contradictions". These are owned by the capitalists to whom the workers must sell their "labor power". playing no part in deciding what to do or how to do it. the wider context. minds and daily lives? In the theory of alienation. This system of labor displays four relations that lie at the core of Marx's theory of alienation: 1) The worker is alienated (or cut off) from his or her productive activity. Marx was primarily concerned with capitalism as lived rather than as thought about. Whatever Marx's subject of the moment. Whereas Hegel examined ideas apart from the people who held them. is never lost sight of when studying any event within it. the worker is alienated from the distinctive potential for creativity and community we all share just because we are human beings. Someone else. which evolve in the ordinary functioning of society. In this interaction. but also to relations between individuals inside each class as everyone tries to survive as best he can. also sets the conditions and speed of work and even decides if the worker is to be allowed to work or not. his dialectical approach to it insures that his fuller subject is always capitalist society as it developed and is still developing. Through labor which . who use their control over the worker's activity and product to further their own profit maximizing interests. 3 ALIENATION Marx's specific theories are best understood as answers to his pointed questions about the nature and development of capitalism. the capitalist. Workers in capitalist society do not own the means—machines.e.

The cutting of these relationships in half leaves on one side a seriously diminished individual physically weakened. "interest . the boss's factory. the worker's products pass from one hand to another. mentally confused and mystified. "commodity". the banker's loan. workers gradually lose their ability to develop the finer qualities which belong to them as members of the human species. these same products—though no longer seen as such—reenter the worker's daily life as the landlord's house. the worker has constructed the necessary conditions for reproducing his own alienation. other classes are also alienated to the degree that they share or are directly effected by these relations. The world that the worker has made and lost in alienated labor reappears as someone else's private property which he only has access to by selling his labor power and engaging in more alienated labor. outside the control and lost to the understanding of the worker. Submitted to the mystification of the marketplace. "capital". and that includes the capitalists. rent "wage"—depending chiefly on who has them and how they are used. product and other people. Though Marx's main examples of alienation are drawn from the life of workers. Eventually. and the various laws and customs that prescribe his relations with other people. Unknowingly. isolated and virtually powerless.alienates them from their activity. On the other side of this separation are the products and ties with other people. . the grocer's food. changing form and names along the way—"value".

Marx took this explanation more or less for granted. In slave society. His labor theory of value. Only in capitalism does the distribution of what is produced take place through the medium of markets and prices. the value of any commodity is the result of the amount of labor time that went into its production. the slave owner takes by force what his slaves produce. returning to them only what he wishes. with the serfs .4 THEORY OF VALUE What is the effect of the worker's alienated labor on its products. For them. While in feudalism. both on what they can do and what can be done with them? Smith and Ricardo used the labor theory of value to explain the Cost of commodities. is primarily concerned with the more basic problem of why goods have prices of any kind. however. the lord claims as a feudal right some part of what is produced by his serfs.

products and other people in capitalist society. and puts it to work for eight or more hours a day. and therefore. workers can make in. as any other commodity. In selling their labor power. must sell their labor power.. speed up the pace of work. indeed are produced with this exchange in mind. they give up all claims to the products of their labor. Only then can these products exchange for each other at a ratio which reflects these quantities. the relations between workers has been reduced to the quantity of labor that goes into their respective products. While in use value.—give unmistakable evidence of the isolating and degraded quality of human relations found throughout capitalist society. these products become available for exchange in the market. does not have any price. five hours products which are the equivalent of their wages.consuming the rest of their output directly. Surplus-value. "Value". It is this which explains Smith's and Ricardo's finding that the value of a commodity is equal to the amount of labor time which has gone into its production. say. is the difference between the amount of exchange and use value created by workers and the amount returned to them as wages. who lack all means to produce. In accounting for the extraordinary fact that everything produced in capitalist society has a price. Rather than a particular price. while workers are able to consume only that portion of their products which they can buy back in the market with the wages they are paid for their labor power. the physical characteristics of commodities—planned obsolescence. The capitalists' control over this surplus is the basis of their power over the workers and the rest of society. In both societies. most of what is produced cannot be bought or sold. "Exchange value" reflects a situation where the distinct human quality and variety of work has ceased to count. workers are constantly being replaced by machinery. Because of the competition among capitalists. The capitalist buys the worker's labor power. is the most general effect of the worker's alienated labor on all its products. It is in this sense that Marx calls value a product of capitalism. value stands for the whole set of conditions which are necessary for a commodity to have any price at all. Through alienation. while the workers organize to protect themselves. with the capitalists trying to extend the length of the working day. enabling and . etc. The ideal price ("exchange value") of a commodity and the ways in which it is meant to he used ("use value") likewise exhibit in their different ways the distinctive relationships Marx uncovered between workers and their activities. exchange—which is embodied in the fact that they all have a price—is what these products do and what can be done with them. the third aspect of value. In the remaining three or more hours an amount of wealth is produced which remains in the hands of the capitalist. etc. To survive. Marx emphasizes the separation of the worker from the means of production (whereas slaves and serfs are tied to their means of production) and the sale of his or her labor power that this separation makes necessary. Hence. the workers. However. the manufacture of individual and family as opposed to larger group units. then. Marx's labor theory of value also provides a detailed account of the struggle between capitalists and workers over the size of the surplus value. the attention given to style over durability.

Under pressure from the constant growth of the total product. people. but nowhere is it moreevident than in the Internet and other forms of information technology. in which people are forced to live on too little because they produce too much.Time-space compression is represented in many developments. . the capitalists periodically fail to find new markets to take up the slack. This leads to crises of "overproduction". political. Paradoxically. The time-space compression. ideas. most simply.technological. toproduction. and capital around the world. the workers cannot buy a large portion of the consumables that they produce.requiring capitalists to extract ever greater amounts of surplus value from the workers who remain. Because only part of their product is returned to them as wages. and cultural) process that involves a compression of time and space (Harvey1989). the amount of surplus value is also the source of capitalism's greatest weakness. is a situation in which geographic distancehas become less and less an obstacle to communication and information flows. capitalism's classic contradiction. social. that globalization is a complex and multidimensional (economic. and to the movement of goods.