Political Economy: Core Concepts

Political Economy Overview

• Political economy covers core concepts such as the labor theory of value, surplus value, competition, and capital accumulation.

Marx's Inheritance and Focus

• Marx's economic theories built upon the works of Adam Smith, William Petty, and David Ricardo.
• Marx shifted the focus from the bourgeoisie to the majority of the working class, fighting for their interests within society.
• Marx examined the relationships between people in the context of the development of productive forces and the superstructure.

Economic Laws vs. Economic Policies

• Economic laws are tied to the natural economy, and economic policies are connected to the economy with state intervention.

Essential Conditions for Commodities

• A product must be created through labor.
• It must satisfy a need or purpose.
• It must be exchanged or sold.
• Production involves creation plus exchange and trade.

Natural Economy vs Commodity Economy

• Natural economy existed before the commodity economy.
• The natural economy focuses on self-sufficiency, whereas the commodity economy targets societal and market needs, understanding consumer desires to generate profit.
• Natural economy production is small-scale and simple, while commodity production involves broader exchange, is modern, and more efficient.
• Natural economy has a narrow scope with commodity economy operating on a wider scale.
• The natural economy is conservative and the commodity economy is more open to change.

Prerequisites for a Commodity Economy

• There must be a social division of labor, with each part specializing in a specific task, leading to high specialization and increased productivity.
• Social division of labor consists of general, specific, and individual divisions; general is from the large economy, specific divides larger industries, and individual divisions are within an organization.
• Separation in ownership and usage rights is essential.
• Without separation, it resembles primitive communes; without common ownership, it resembles a natural economy.

Attributes of Commodities

• Commodities have two attributes: use-value and exchange-value.
• Use-value is the utility of a commodity, is permanent, manifested during usage, and a commodity can have many use-values.
• Exchange-value involves comparing the value of one commodity to another, such as 1kg of rice being exchanged for 2 chickens due to labor input.
• Generalized commodity value is the labor input embodied in goods.
• A commodity's two properties are united by labor but are contradictory because use-value is realized outside the market while exchange-value is realized within it.

Factors Influencing Value Quantity

• The main factors affecting value are social labor productivity and labor intensity.
• Increased productivity raises the number of products while decreasing individual product value, leaving total value unchanged.
• Increased labor intensity raises the number of products without increasing individual product value, thus increasing total value.

Types of Labor

• Labor is categorized into simple and complex labor, with complex labor being a multiple of simple labor.
• Concrete labor relates to utility while abstract labor relates to exchange-value.
• These facets mirror each other, unified by the labor creating the product yet divided by concrete labor's individual nature and abstract labor's social nature.

Forms of Currency

• Currency comes in three main forms: commodity money, specie, and fiduciary media.
• Commodity money involves using a commodity as currency, specie includes metal coins and paper money, and fiduciary media involves bank deposits.
• Currency has four forms: simple, expanded, general, and monetary.
• The essence of money is a special commodity meeting the three requirements of a commodity and also measuring the value of other commodities.

Law of Value

• The law of value dictates that, in production, individual labor hours should be less than or equal to social labor hours, and in circulation, goods are exchanged at equivalent values.
• Capital doesn't exist solely in circulation but simultaneously in both.
• The typical pricing equals the value plus or minus depending on three elements: supply, demand, competition, and purchasing power.
• The effects of the law of value are the regulation of production and circulation, guiding commodities away from low-profit to high-profit areas, and uniform commodity distribution throughout regions.
• Also stimulates increased production.

Surplus Value Creation

• The formula represents commodity-money-commodity and money-commodity-money sequences.
• The difference lies in purpose, position, order, and limits.
• The source of contradiction lies in labor-power, which must meet three conditions: freedom and lack of means of production.
• Labor-power has both use-value and value.
• Capitalists prefer piece-rate wages, and the best standard for wage value is real wage.
• Capital is divided into constant and variable capital.

Methods of Creating Surplus Value

• Surplus value is created through absolute and relative methods.
• Absolute surplus value involves increasing the length of the working day, which exhausts workers.
• Relative surplus value maintains working hours but reduces necessary labor time by boosting productivity through technology.
• Both methods increase surplus value, one through increased labor time and the other through increased productivity.
• There's also extra surplus value—instead of increasing social productivity, individual productivity is increased.

Accumulation, Concentration and Centralization

• Next are accumulation, concentration, and centralization.
• Accumulation is about increasing the scale of individual capital and centralization through mergers.
• Accumulation eventually leads to concentration.
• Competition drives mergers, and surplus value drives accumulation.

Organic Composition of Capital (OCC)

• The technical composition of capital examines the quantity of means of production relative to the amount of labor needed to operate them.
• For example, three machines for two workers means two workers operate three machines; reflects quantity.
• With technological developments, technical composition increases, thus increasing productivity.
• The value composition of capital, calculated by the value of the means of production divided by the value of labor-power, reflects value.
• With technological advances, both the absolute and relative constant capital (c) increase, but the relative variable capital (v) decreases.
• To increase productivity, technology must advance, increasing the quantity and value and using it.
• As machines advance, fewer workers are needed to use these machines.

Unemployment Conditions

• Unemployment occurs when individuals are of working age, capable of working, unemployed, and actively seeking work.
• Without the last condition, unemployment becomes a burden on the state economy, leading to crisis and recession.

Costs

• There are two types of costs: capital costs and actual costs.
• Capital cost is the amount capitalists spend to produce goods is calculated as c+v.
• Actual cost includes surplus value that capitalists receive, allowing for reinvestment.
• Capital cost obscures the distinction between c and v, not reflecting the actual cost.
• Profit is the surplus value.

Competition

• Competition includes intra-branch (within industry) and inter-branch (between industries) competition.
• Intra-branch competition occurs within the same industry selling the same product, requiring strategies to maximize sales in a limited market, leading to cost reduction and increased productivity, and thus reducing commodity value and establishing market value.
• Inter-branch competition occurs among capitalists in different industries seeking profitable investment opportunities, necessitating differing OCCs.
• Second, capital must move freely.
• Commercial profit constitutes a portion of the average profit that industrial capital concedes to commercial capital. Because commercial capital aids the sale of industrial capital, expands market, and fosters reinvestment.
• Lastly, commercial profit also encompasses the difference between the selling and purchasing prices, with interest being the portion of profit when capital is lent and invested.

Socialist-Oriented Market Economy in Vietnam

• Chapters 5 and 6 discuss the socialist-oriented market economy and industrialization and modernization in Vietnam.