Chapter 2: The Origin of Classical Political Economy of the Bourgeoisie
Section 1: Characteristics of Classical Political Economy of the Bourgeoisie
Time: Emerged in the mid-17th century, completed in the early 19th century
Main social contradiction: The contradiction between the bourgeoisie and the feudal landlord class and its residual forces. At this time, the contradiction between labor and capital was still subordinate. Classical political economy played a positive role in the establishment and consolidation of the capitalist mode of production.
Basic viewpoints:
- Believed that capitalism was a system in accordance with “human nature,” opposed feudal aristocratic privileges and outdated mercantilism.
- Advocated that the state should not intervene in economic life, striving to prove that economic activities are governed by natural eternal laws (the so-called invisible hand), and that state intervention would disrupt economic activities.
- The study of capitalist production expanded from circulation to production, partially explaining the internal connections of economic phenomena. Laid the foundation for the labor theory of value (main achievement), studied various forms of surplus value (profit, interest, and rent). Also conducted preliminary analysis and discussion on production and circulation.
- Due to the class limitations of the bourgeoisie, it failed to thoroughly analyze the economic system of capitalism, inevitably containing vulgar elements.
- Classical economics appeared in France and Britain, with greater development in Britain.
Section 2: The Emergence of British Classical Political Economy of the Bourgeoisie — William Petty
Social conditions in 17th-century Britain (supplemented by “History of Economic Thought” and “Concise World History: Modern Part”)
In the early 17th century, Britain was still an agricultural country dominated by feudal economy. Since the Watt-Taylor uprising in 1831, continuous peasant uprisings severely struck feudal serfdom, which had already disappeared by the late 14th century. Most peasants were freeholders.
In the mid-17th century, under mercantilist policies, British industry grew significantly, using rough but cheap wool to defeat the Dutch wool, which was surprising and expensive. Significant progress was made in textiles, mining, and iron smelting industries. Handicraft workshops became the main form of production.
Industrial and commercial development promoted the growth of agricultural capitalism. Middle and small nobles also established factories and engaged in commerce, gradually bourgeoisie. Peasants also began to differentiate, with the upper class approaching the landlord class, and the lower peasants going bankrupt, becoming landless or having very little land, and forming proletarians and semi-proletarians.
At the turn of the 16th and 17th centuries, overseas trade in Britain grew markedly. The king granted many patents, with some patent companies holding capital of 100,000 pounds (in the 1630s, the king earned 100,000 pounds annually from selling patents, equivalent to the annual income of ten thousand unskilled workers), including those involved in the slave trade; especially the East India Company monopolizing trade with India and China, with the strongest capital and longest activity period.
Although capitalism grew significantly in industry, agriculture, and foreign trade during this period, feudal states severely hindered further development. The king, feudal nobles, and the Church of England were the biggest exploiters, extorting peasants through rent, exemption from military service, and tithes to maintain their feudal rule. These parasites lived corruptly, and as they declined, exploitation and oppression worsened. Under these historical conditions, the British bourgeois democratic revolution broke out.
The bourgeois revolution from 1640 to 1648 overthrew feudal monarchy and established a bourgeois republic, but later, with the “Glorious Revolution” (a shameful compromise, fully demonstrating the bourgeoisie’s weakness), the monarchy was restored. Ultimately, the bourgeois parliamentary system triumphed, and the king’s power was limited within the scope permitted by Parliament.
In this historical process, as the class struggle between the bourgeoisie and the landlord class intensified, there were also drastic changes in ideological and cultural spheres. The bourgeois representative Francis Bacon, a mechanical materialist in Britain, opposed religious idealist worldviews and scholastic philosophy. Bacon believed that understanding and utilizing nature were possible. His philosophical views promoted the bourgeois study of the internal connections of social and economic activities. Meanwhile, the bourgeoisie also needed to theoretically explain how wealth grew, study the capitalist mode of production, and prove its superiority over feudalism. Under these conditions, William Petty founded classical political economy of the bourgeoisie.
William Petty is the founder of British bourgeois classical political economy
- Petty was born into a handicraft family and later engaged in many professions. During the Restoration period in Britain, he aligned with King Charles II and was granted the title of baron. In his later years, he became a large landowner with 270,000 acres, ultimately becoming a nouveau riche aristocrat bourgeoisie. He was a reckless adventurer with no moral integrity.
- In his early works, Petty still held mercantilist views, and his errors persisted until his later years. His economic theory was more scientific than mercantilists, breaking through superficial analysis, seeking the underlying basis of economic phenomena. Based on the recognition that economic laws are objective laws, he used statistical data to analyze economic phenomena.
- Although Petty did not develop a complete theoretical system, he first proposed the fundamental proposition of the labor theory of value, laying the foundation for classical political economy of the bourgeoisie, making him the founder of classical economics.
Theory of Value
- At this time, capitalism entered the period of handicraft industry, and industrial capital increasingly dominated. Therefore, industrial capitalists demanded to strengthen labor exploitation, improve labor productivity through division of labor, and increase the exploitation rate. Petty personally participated in industrial capital management, understanding that labor is the basis of all commodities. To increase profits and reduce costs, it was necessary to calculate labor consumption, thus proposing the labor theory of value.
- In “Taxation,” Petty recorded the views of the labor theory of value. The “natural price” is the value, and the “political price” is the market price.
- Petty determined that the value of a commodity is the amount of labor spent in its production, and began to measure commodity value by labor time, which was an important contribution. He realized that the value of a commodity is inversely related to labor productivity and carefully planned division of labor to improve productivity. He also understood that the value of money depends on the labor spent to produce it, thus defining precious metals as money.
- Petty’s labor theory of value was incomplete; he did not distinguish between concrete labor and abstract labor, nor did he understand that general labor creates value, or the social nature of value. Therefore, he did not recognize that the value of a commodity is the necessary labor time in its production. He believed that the labor embodied in silver, which reflects the value of wheat, determined the wheat’s value. In reality, this is exchange value (the ratio of quantities of exchanged commodities, e.g., 2
=1
). Exchange value is a manifestation of value, so it is not that exchange value determines value, but that the values of the two commodities determine the exchange value. He confused value and exchange value. When commodities are exchanged, the amount of money involved is the selling price, which is not directly the value of the commodity (some secondary factors cause prices to fluctuate around value, e.g., supply and demand). Clearly, Petty conflated price, value, and exchange value. - These conceptual confusions reflect Petty’s influence from mercantilism, examining commodity value in circulation. Therefore, Petty believed that the value of a commodity is the average amount of money obtained from exchange, which abandoned the labor theory of value.
- Petty further studied why commodities could exchange for a certain amount of money. He divided labor into two poles: one producing money, the other producing other commodities. Only the labor producing money creates value, and only when commodities and money exchange does exchange value arise. He misunderstood the dual nature of labor in producing commodities (abstract labor creates value, concrete labor creates use value); this misunderstanding stemmed from his bourgeois nature, influenced by mercantilism, and he did not see the monetary form of commodity exchange as a historical condition. He thus limited himself to the division of the commodity world into use value and value, with the first pole being commodity production and the second measuring commodity value.
- Based on these errors, he conflated use value and value (a mistake stemming from misunderstanding the dual nature of labor). He said: “Labor is the father of wealth, land is the mother of wealth,” contradicting his own labor theory of value.
- To address how to compare two incomparable factors—labor and land—and how to equalize them, he used wages to measure commodity value, concluding that the general measure of value is the average of a grown man’s possessions. This was very confusing.
(A diagram in the book illustrates an example of land producing value: assuming 2 acres of land, a cow grazing for a year increases by 100 pounds of meat, enough for 50 days of food for one person, thus not relying on human labor to produce 50 days of food. Another person on the same land produces 60 days of food. Therefore, 50 days of food is land-produced value (rent), and the extra 10 days are labor-produced value, equivalent to that person’s wages. Restoring this to the food analogy shows the equal relationship between land and labor in production.)
Marx pointed out that Petty’s value theory confuses three regulations: a) quantity of labor time determines value, with labor seen as the source of value; b) as the exchange value of social labor, money manifests as the true form of value; c) the abstract labor that is the source of exchange value is confused with the practical labor based on natural substances (land).
Theory of Rent
- Petty used rent to represent surplus value, proposing that wages are the value of necessary means of subsistence for workers, and that excess wages would bring loss to society, providing no income. He said workers need a value of 6 pounds, and each hour creates a value of 1 pound. If workers are paid this hourly value, they work 6 hours a day; if paid 0.5 pounds per hour, they work 12 hours. He believed wages should not be set below the value needed for subsistence. Here, he vaguely touched on the concepts of necessary labor time (the labor time to produce wages, which is the value or price of labor power, including material costs for physical and mental recovery, training, and raising the next generation) and surplus labor time (the labor time beyond necessary labor, which is unremunerated by the bourgeoisie and the source of profit). Petty’s wage theory essentially served the bourgeoisie, and in discussing national wage policies, he regarded capitalists’ interests as those of society.
- Petty saw rent as the balance after subtracting the value of means of production and wages. Since the prices of means of production are fixed, rent depends on wages, implying a quantitative opposition between rent and wages. The rent here is essentially what we call surplus value, but Petty equated surplus value with rent.
- Petty conflated the use value and value of rent, leading him to see rent as a gift of the land, i.e., he regarded surplus value as a natural product.
He also failed to recognize the source of interest, deriving interest from rent profits, calling it “money rent” (which is actually a false appearance, as virtual capital and land are somewhat identical. The money paid to landlords for land use rights, which appears as rent, also has characteristics of virtual capital. Land prices involve a monetary amount that can generate interest similar to rent). He thought interest was the interest gained from purchasing land with equivalent money. In reality, the demand and supply of loan capital determine interest. This view shows Petty’s bourgeois perspective, recognizing that ownership of monetary capital naturally generates interest, not as a form of surplus value. - Petty correctly pointed out the problem of differential rent; the concept of differential rent is his contribution. He proposed that similar plots of land, due to varying abundance, produce differential rent, and market proximity causes further differences. However, lacking understanding of the essence of differential rent, he did not establish a complete theory of rent.
- After discussing rent, he suddenly believed that land prices are the total amount of rent for a certain period, which is unscientific. But he correctly pointed out that land prices are the total of rent over a fixed period.
