426 POLmCAL ECONOMY
- 1894 ( 1961): The Development of the Monist View
of History. In Selected Philosophical Works, vol. 1.
- 1898 ( 1940): The Role of the Individual in History.
- 1908 (1969): Fundammtal Problems of Marxism.
In Selected Philosophical Works, vol. 3.
Niall HARUING
political economy A term often used synony-
mously with economics to indicate the area
which studies resource allocation and the deter-
mination of aggregate economic activity. Its
more specific meaning in a Marxist context
relates to the corpus of work of certain writers
who dealt with the distribution and accumula-
tion of economic surplus, and the attendant
problems of determination of prices, wages,
employment, and the efficacy or otherwise of
political arrangements to promote accumula-
tion . This is mainly associated with the works of
Adam Smith and Ricardo, and of such authors
as Malthus, James Mill, J. S. Mill, McCulloch,
Senior. Marx himself drew a sharp distinction
between scientific political economy (Adam
Smith and Ricardo, but mainly the latter; see
RICARDO AND MARX), and vulgar political
economy which developed after 1830 (see VUL-
GAR ECONOMICS). Marx regarded his major
work Capital as a critique of political economy,
but in more recent times academic economists
sympathetic to Marxism have used political eco-
nomy as a label for radical economics to distin-
guish it from bourgeois or neo-classical econo-
mics. Yet another strand in academic econo-
mics, which also calls itself political economy,
studies the interaction of democratic political
processes and market determined economic re-
lations. This body of work sees the political
process, in so far as it is not based on market
(commodity) relationships, as a distortion of the
market economy.
All these strands, though seemingly disparate,
have a common root in the work of Adam
Smith, and the key to this work is the concept of
an autonomous, self-regulating economy descri-
bed as CIVIL SOCIETY. It was Adam Smith's
genius to have seen the probability of the isola-
tion of civil society from the political sphere (the
state), its capacity for self-regulation if leh un-
hindered, its potential for achieving a state of
maximum benefit for all participants left free to
pursue their own interests, and hence the phi/o-
sophical desi~abil_ity of _brin~i~g about such
state of affairs, m which c1v1I society co t
become independent of the state. ud
While Adam Smith defined the ground fr
which subsequent developments and diveorn
ences stemmed, his work should be seen in':&·
. context. Apart from tso
appropriate . Iated earlier
its
e~onomists (~ost notab~y - John Locke and
Richard Cantillon) the origins of political eco-
nomy are to be found in the eighteenth-century
Enlightenment. The erosion of religious author-
ity had posed the need for a new explanation of
social events, and the growth of the natural
sciences, especially in the work of Isaac Newton
during the seventeenth century, indicated the
possibility of arriving at such an explanation
using the methods of science. One strand in the
efforts to construct a science of social events was
Montesquieu's Esprit des lois. His work was
taxonomic and while producing a 'model' to
explain the diversity of human social arrange-
ments did not provide a dynamic explanation. A
group of Scottish philosophers, carrying on a
teacher-student succession through the century,
created a body of work constituting the origins
of social science, which they called political
economy. Francis Hutcheson, Adam Ferguson,
David Hume, Adam Smith, John Millar, Lord
Karnes were the principal members of this
group. They produced collectively and cumula-
tively the idea of human history going through
stages of growth, with the key to each stage, as
well as the transition from one stage to another,
the mode of obtaining subsistence in any society.
Hunting, pastoralism, agriculture and com·
merce were identified as the four principal
modes, and a variety of social circumstances -
the nature of political authority, the growth of
morals, the position of women, the 'clas~ ~true·
ture' - were all explained in terms of the mode of
subsistence. This was not a monocausal expla·
nation, nor a unilineal, unidirectional, or deter·
ministic model of historical progress. It was a
bold speculation, supported by extensive read-
ing on the conditions in different societies as
recorded by travellers, and by historical
accounts of diverse nations from the Greek and
Roman onwards (see STAGES OF DEVELOPMEN°f).
Adam Smith was not the most 'materialist' of
the Scottish philosophers 0ohn Millar was) but
he was certainly the most influential and moSf
famous. In the Wealth of Nations the four stages

does not figure prominently, but the
theor Y
. of that theory Iead s Sm1t . h to associate
. and a civil war among private interests in the
logic .
n,erce with hberry . The growth of com-
comce and the growth of liberty mutually deter-
rner
. e each other. Commerce could be seen as a
· but on Iy its
rnin to prosperity, · un h.indered pur-
key h . .
·t would secure t e maximum prosperity.
SUI
Liberty is thus a key to the growth of commerce.
Commerce, by spreading world-wide and making
accumulation of wealth possible in liquid_(i.e.
transportable) form, renders merchants inde-
pendent of political ryranny and hence increases
the chances of the growth of liberty.
Writing at a very early stage of the Industrial
Revolution Adam Smith saw the crucial import-
ance of industrial production. Division of
labour in industrial production made possible
an unprecedented growth in output and produc-
tivity. If it was possible to sell this enhanced
output over a wide market, then such division
would prove profitable, and the profits could be
ploughed back into further profitable activity.
In locating the growth of wealth in the interac-
tion between division of labour and growth of
markets, Smith liberated economics from an
agrarian bias such as the Physiocrats had im-
parted to it, or the narrow commercial bias that
the Mercantilists had given it. Surplus did not
originate in land alone, nor was the: acquisition
of treasure (precious metals) any longer the sole
or desirable measure of economic prosperity.
Thus wealth could take the form of (reproduc-
ible) vendible commodities. If the wealth
holders then spent it productively in further
investment wealth would grow.
The other aspect of Adam Smith's message
was the need to let individuals pursue their self-
interest unhindered by outside (political) inter-
ference. In arguing that individuals, in pursuing
their self-interest, indirectly and inadvertently
promoted the collective interest, Smith crystal-
lized the concept of ci~il society as a self-
regulating and beneficent arrangement. Indi-
vidual rationality led to collective good; the
seeming anarchy of the individual pursuit of
selfish interest led to an ordered universe, an
order brought about not by deliberate political
~ction but unconsciously by the action of many
individuals. The sphere of private interests thus
became autonomous with respect to the sphere
0
~ public interest, the private individual was
divorced from the citizen. But in contrast with
POLITICAL ECONOMY 427
the previously held fears of a collapse of order,
absence of the state overseeing the economic
domain, Smith provided a picture of harmony,
beneficence and prosperity, due precisely to the
absence of the state from the private sphere.
Thus civil society was shown to be auton-
omous, beneficent and capabl~ of progress.
Since wealth consisted of vendible, reproducible
commodities, labour as the primary agent of
production (and via division of labour the key to
growth in productivity) was the obvious choice
as a measure of value of these commodities. But
labour was not only a measure of value; it was
also conceived as a cause or source of value. If
however labour was the source of all value, how
could one justify the two major categories of
non-labour income - rent and profits?
Subsequent work in political economy - de-
fined broadly enough to include much of social
science - grew out of these strands in Smith's
writings. These are (i) the economic theory of
historical progress; (ii) the theory of accumula-
tion and economic growth through the division
of labour and spread of exchange; (iii) the re-
definition of wealth as comprising commodities,
and not solely treasure, which sparked the criti-
cism of mercantilist policies and the advocacy of
Free Trade; (iv) the theory of individual be-
haviour which reconciled pursuit of self-interest
with the collective good, providing a pro-
gramme for laissez-faire and the minimal state;
and (v) the labour theory of value which argued
for labour as a measure and sometimes as a
source of value.
Ricardo refined and reworked the more nar-
rowly economic strands of Smith's work under
(ii), (iii), and (v) above but ignored the theory of
progress. Hegel derived from Smith the theory
of progress and the notion of civil society which
he used in his theory of the state. Marx came to
the economics. of Smith via his Critique of
Hegel's Philosophy of the State. It was here that
the notion of civil society and its separation
from political society was central. Hegel tried to
rationalize the Prussian hereditary monarchy as
the ideal state by arguing that the separation of
civil society from political society was the cause
of a basic social division and as such a hindrance
to historical progress. This contradiction be-
tween civil society as the sphere of selfish in-
terests and political society as the sphere of
428 POPULATION
public interest could only be reconciled, in
Hegel's view, by political arrangements which
stood above and outside civil society - 'supra-
class' agencies. These were the system of estates,
the bureaucracy, and the hereditary monarchy.
In criticizing Hegel's theory, Marx counter-
posed universal franchise, the proletariat and
democracy as the triad which, unlike Hegel's,
could supersede the contradictions of civil
society by ushering in communism and so further-
ing human self-realization. But Marx took the
autonomy of civil society as a datum. His subse-
quent researches led him away from the theory
of the state to an examination of the theory of
the functioning of civil society, i.e. to a critique
of political economy.
Indeed, the theory of progress became histori-
cal materialism in Marx's hands. His theory of
value sharpened the contradiction implicit in the
dual nature of labour as a measure as well as a
source of value. While accepting the theory of
accumulation, Marx sought to bring into ques-
tion, by the method of an immanent critique, the
beneficent aspects of the functioning of capital-
ism. He used historical materialism to demons-
trate the historicity of capitalism - capitalism as
but a stage of history - and used the contradic-
tion in value theory to fashion a theory of class
struggle which in capitalism takes the form of
the antagonism between labour and capital. He
sought to demonstrate how individual pursuit
of self-interest, far from leading to collective
rationality or the public good, leads to recurring
crises, and how the attempts of the capitalists to
overcome these crises leads to an eventual
breakdown of capitalism, and/or its superses-
sion by socialism achieved through political
struggle.
Thus Marx called his work a critique of politi-
cal economy because he showed that its basic
categories were historical and not universal. The
purely economic became relative to its particu-
lar epoch, and transitory. But subsequent de-
velopments in economics have deliberately or
unconsciously ignored Marx's critique. Neo-
classical economics from the 1870s onwards
ignored strands (i) and (v) in Adam Smith's
work (and especially the latter), but took the
theory of individual behaviour and the advo-
cacy of free trade from him and fashioned it into
a pure economic science. The theory of ACCU·
MULATION was ignored by all except Marxists
until Schumpeter and the post-Keynesian Wri-
ters revived it. English economics under the
influence of Marshall and Pigou pointed out the
many exceptions to the simple equation of indi-
vidual good and public good and fashioned an
argument for state intervention to promote eco.
nomic welfare. The autonomy of civil society,
dressed up as the ability of the economy to
achieve full utilization of resources, once again
became an area of controversy after Keynes's
critique of Say's Law (see UNOF.RCONSUMl'TION).
There has recently been a revival of laissez-faire
ideology. In the hands of the Chicago School it
is a double-pronged attack on the Marshall-
Pigou argument for intervention in particular
economic activities to correct the failure of the
'invisible hand', and on Keynes's arguments
against the self-regulating nature of the eco-
nomy. This new classical school claims the label
of political economy by reverting to Smith's
arguments, while ignoring the historical dimen-
sions of classical political economy. One ten-
dency in this revivalist school sees democracy as
a hindrance to the efficient functioning of the
free market and seeks to subordinate the politi-
cal to the economic, i.e. to fashion the state in
the image of civil society. Hence a definition of
political economy as the theory of civil society is
still broadly valid.
Reading
Desai, M . 1979: Marxian Economics, pp. 199-213.
Meck, R. L. 1967: 'The Scottish Contriburion to MarxiSt
Sociology'. In Economics and Ideology.
O'Malley, J. 1970: Editorial Introduction to Karl
Marx, Critique of Hegel's Philosophy of Right.
Skinner, A. 1982: 'A Sconish Contribution to Marxist
Sociology?' In Bradley and Howard, eds. Classical and
Marxian Political Economy.
Ml:GHNAU Ul:SAI
population In his discussion of method in the
Introduction to the Grundrisse Marx treats
population as an example of a category which
should be conceived as the concrete result of
many determinations, a full understanding of
which depends on the prior elucidation of 'more
simple concepts' or abstractions. If population
is considered in undifferentiated form, without
prior consideration of the classes of which it is
composed, which in turn depend upon the social