Economic Systems: Production, Development, and History
Economics as a Science
Objective and Subjective Definitions of the Economy
There are two primary approaches to defining the economy: objective and subjective.
Objective Definition (Marxist)
Friedrich Engels defined political economy as “the science that studies the laws governing the production, distribution, circulation, and consumption of material goods that satisfy human needs.”
Subjective Definition (Marginalist)
Lionel Robbins defined economics as “the science that deals with the study of the satisfaction of human needs, given that resources are scarce and there are alternative uses for them.”
Economics: Objectivity and the Scientific Method
Two prominent features of economics as a science are objectivity and the application of the scientific method. Objectivity means that economists can analyze economic facts and events as they occur in reality.
Economics: A Social and Historical Science
Since society changes over time, and economics is a social science, it is also a historical science.
Subjective Economic Theory
This theory is based on formal logic principles:
- Principle of Identity: Studying facts as they are (A is A).
- Principle of Non-Contradiction: A is either A or not A.
- Principle of the Excluded Middle: A cannot be not A.
The current general subjective theory is based on the subjective theory of value, which has the concept of marginal utility as its foundation.
Objective Economic Theory
Its base is dialectical materialism, which proposes that the economy is constantly changing. Key features include:
- Emphasis on the object, not the subject. The economic system is not fixed but changes as a result of human actions.
- The economic system evolves through human action.
- Economics is historical because human needs and solutions change over time.
Conceptualization of Modes of Production
Modes of production refer to the ways in which humans have historically organized themselves to meet their needs and solve their economic problems. It is the dialectical relationship between productive forces and social relations of production.
Historical Modes of Production
A) Primitive Community
This is the first way humans organized to meet their needs. The economic structure was rudimentary, and people heavily relied on nature. There was collective ownership of the means of production, no private property, and social relations were based on cooperation and mutual aid. There was no exploitation of man by man.
This society saw the emergence of the social division of labor. The first division arose with people engaged in hunting, fishing, and agriculture. The second division led to specialized trades. Property evolved, eventually leading to private ownership of the means of production.
B) Asian Mode of Production
Also called the despotic-tributary regime, it developed in some regions of Asia. It is a pre-capitalist system characterized by common ownership of land and other production tools. There is exploitation of man by man, with a ruling class. There is also exploitation of one community by another.
C) Slavery
This mode occurred in cultures such as Roman, Greek, Babylonian, Egyptian, and Phoenician. Private ownership of production developed, including ownership of the producer (slave), leading to the exploitation of man by man. Two main classes emerged: slaveholders and slaves. Livestock farming and the use of precious stones in tools developed. Trade expanded significantly. Slave labor was not very productive due to low work motivation, as slaves owned nothing. Consequently, many slaves were freed and given land in exchange for tribute.
D) Feudalism
This regime was characteristic of the European Middle Ages. Two fundamental institutions were the manor and serfdom. The manor was a piece of land belonging to a feudal lord with significant economic and political power. Serfdom involved two classes: feudal lords (landowners) and serfs (owners of farming implements) who paid rent to the feudal lord.
Serfdom involved exploitation based on private ownership of the means of production. Land rent was paid in three ways: in kind, in labor, and in money. The development of the feudal system was based on the work of the serfs.
E) Capitalism
Background
Cities (Burgos) expanded. Trade developed significantly, with local and regional markets. Geographical discoveries facilitated the exchange of goods. Bourgeois revolutions ended the power of feudal lords.
Forms of Production
Production has taken three historical forms: simple commodity production, manufacturing, and mechanized production.
Historical Phases
Capitalism has gone through two phases:
- Pre-monopoly or Competitive: Characterized by competition among capitalists.
- Imperialist or Monopolist: From the last third of the 19th century to today. Monopolies dominate economic life, leading to capital concentration.
Characteristics
Private ownership of the means of production exists. There are two main social classes: the bourgeoisie and the proletariat. Exploitation takes the form of surplus value. The goal of capitalism is the production of commodities. Urban and rural development is uneven. The anarchy of production leads to periodic crises.
F) Socialism
This mode of production developed in the 20th century as a result of the breakdown of capitalist social relations. The USSR developed under this mode. Key characteristics include social ownership of the means of production instead of private ownership. Social classes tend to disappear. Social relations are based on mutual aid. Exploitation of man by man disappears. Commodities cease to be produced. Economic crises are absent.
G) Development and Underdevelopment
Development
Developed countries are those that have achieved a high level of industrialization. They are also called industrialized countries. Development represents a better standard of living and involves quantitative and qualitative changes. Main manifestations include a sustained process of industrialization, high per capita income, high consumption of goods and services, and exports of manufactured goods and capital.
Underdevelopment
Manifestations of underdevelopment include:
- Dependence: A relationship where the interests of a formally independent nation are subordinated to another.