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Views of Marx and J.S.Mills on Accumulation and Crises - Essay Example

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Name of student: Topic: Lecturer: Date of Presentation: Views of Marx and J.S Mills on Accumulation and Crises Different economists have different views regarding the workings of the market and the economy. There have been various periods of economic crises such as the great depression, Japan’s lost decade, Asian crisis and the recent financial crisis whose causes and solutions can be interpreted differently by various economists such as Ricardo, Adam Smith, J…
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Views of Marx and J.S.Mills on Accumulation and Crises
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Views of Marx and J.S.Mills on Accumulation and Crises

Download file to see previous pages... Karl Marx In his theory of surplus value, Marx asserts that the working class or the proletariat exchange their labour for wages with the capitalist class or the bourgeoisie. Unlike in slave and feudal societies where goods were produced for consumption, in capitalist economy, commodities are produced for exchange in the market with the value of exchange being money. Since labour is also exchanged for wages, it is also regarded as a commodity and social relations assume mysterious form of relationship between things concealed by a veil of money. The labourers are alienated from the means of production and produce goods for the capitalists which they in turn exchange to get a profit. However, if workers are productive, they produce more than they would have produced in a normal working day but all the profit realised goes to the capitalist as labourers receive only the normal wages. This is what Marx referred as surplus value of labour (Eatwell and Milgate 2011, p. 192). According to Marx, the surplus value in feudal societies is consumed while in capitalist societies, surplus value is reinvested to produce more surplus value. He referred to reinvestment of surplus value as accumulation of capital (Callinicos 2011). However, the motive for accumulation is not greed but a result of social mechanisms which result in competition between many capitals and a capital that does not reinvest itself is pushed out of the market. As observed by Eatwell and Milgate (2011, p. 195) capitalist production involves circuit of capital from money and commodity. The money is used to produce commodity which is then sold for money used to produce more items. However, difficulties may arise when converting commodity to money because money need not be turned immediately to commodity hence sale and purchases are separated. The seller can hoard money if the investment is not yielding enough profits hence breaking the cycle and therefore, the possibility of crisis is inevitable. In the crisis theory, Marx asserted that the origin of crisis is the systemic elements of capitalism as a mode of production and basic social order (Callinicos, 2011). These factors include: full employment profit squeeze, underconsumption, and tendency of the rate of profit to fall. In feudal societies, a crisis occurs due to underconsumption but in capitalist societies, it is based on the law of tendency of the rate of profit to fall. As xxx observes the tendency of the rate of profit to fall is due to increased labour productivity which makes demands on the constant capital such as machinery or raw materials. As a result, amount of constant capital grows relative to variable capital leading to higher composition of organic capital and consequently low profit. The value of constant capital according to Marx does not depend on original cost of labour time but labour time for reproducing it hence it diminishes as labour productivity grows leading to low profit. In his study, Marx asserts that permanent crises does not exist as indicated by Smith and Malthus in their analysis that overproduction leads to permanent reduction in rate of profit. He believes that a crisis is a transitory stage of capital accumulation and therefore short-run effect. In the process of capital accumu ...Download file to see next pagesRead More
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