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[Pg 4]THIS TRANSLATION FIRST PUBLISHED
IN THE UNITED STATES
BY YALE UNIVERSITY PRESS
NEW HAVEN CONNECTICUT
DESIGNED BY SEÁN JENNETT
AND PRINTED IN GREAT BRITAIN
BY BUTLER AND TANNER LTD
LONDON AND FROME

TRANSLATOR’S NOTE

This is an original translation not only of the main bodyof the work but also of a number of quotations fromforeign authors. Page references thus usually indicate theoriginal foreign sources.

In so far as possible, however, I have availed myself of existingtranslations and have referred to the following standardworks:

Karl Marx:Capital, vol. i (transl. by Moore-Aveling, London,1920); vol. ii (transl. by E. Untermann, Chicago,1907); vol. iii (transl. by E. Untermann, Chicago,1909)

Sismondi’s introduction to the second edition ofNouveauxPrincipes is quoted from M. Mignet’s translation of selected passagesby Sismondi, entitledPolitical Economy and the Philosophyof Government, London, 1847. No English translation exists ofMarx’sTheorien über den Mehrwert.

Unfortunately, not all the West European texts, and none ofthe Russian—except Engels’ correspondence with Nikolayon—wereaccessible to me, and I regret having been unable to tracesome quotations and check up on others. In such cases, the Englishversion follows the German text and will at least bring outthe point the author wanted to make.

To save the reader grappling with unfamiliar concepts, Ihave converted foreign currencies and measures into their Englishequivalents, at the following rates:

20marks—25francs—$5—£1 (gold standard); 1hectare—(roughly)2·5 acres; 1kilometre—⁵⁄₈ mile.

I am glad of this opportunity to express my gratitude to Dr.W. Stark and Mrs. J. Robinson for the helpful criticism andappreciation with which my work has met.

A NOTE ON ROSA LUXEMBURG

Rosa Luxemburg was born on 5 March 1870, atZamosc, a little town of Russian Poland, not far fromthe city of Lublin. She came from a fairly well-to-dofamily of Jewish merchants, and soon showed the two outstandingtraits which were to characterise all her life and work: a highdegree of intelligence, and a burning thirst for social justicewhich led her, while still a schoolgirl, into the revolutionarycamp. Partly to escape the Russian police, partly to completeher education, she went to Zurich and studied there the sciencesof law and economics. Her doctoral dissertation dealt with theindustrial development of Poland and showed up the vital integrationof Polish industry with the wider economic system ofmetropolitan Russia. It was a work not only of considerablepromise, but already of solid and substantial achievement.

Her doctorate won, Rosa Luxemburg looked around for apromising field of work and decided to go to Germany, whoseworking-class movement seemed destined to play a leading partin the future history of international socialism. She settledthere in 1896, and two years later contracted a formal marriagewith a German subject which secured her against thedanger of forcible deportation to Russia. Now, at that momentthe German Social-Democratic Party was in the throes of aserious crisis. In 1899, Eduard Bernstein published his well-knownworkDie Voraussetzungen des Sozialismus und die Aufgabender Sozialdemokratie, which urged the party to drop its revolutionaryjargon and to work henceforth for tangible social reformswithin the given economic set-up, instead of trying tobring about its final and forcible overthrow. This ‘reformism’ or‘revisionism’ seemed to Rosa Luxemburg a base as well as afoolish doctrine, and she published in the same year a pamphletSozialreform oder Revolution? which dealt with Bernstein’s ideas inno uncertain fashion. From this moment onward, she was andremained one of the acknowledged leaders of the left wingwithin the German working-class movement.

The events of the year 1905 gave Rosa Luxemburg a welcome[Pg 10]opportunity to demonstrate that revolution was to her morethan a subject of purely academic interest. As soon as theRussian masses began to move, she hurried to Warsaw andthrew herself into the fray. There followed a short span offeverish activity, half a year’s imprisonment, and, finally, areturn journey to Berlin. The experiences of the Warsaw risingare reflected in a book entitledMassenstreik, Partei und Gewerkschaften,which was published in 1906. It recommends thegeneral strike as the most effective weapon in the struggle of theproletariat against the bourgeoisie.

The International Socialist Congress which met at Stuttgartin 1907 prepared and foreshadowed the sorry history of RosaLuxemburg’s later life. On that occasion she drafted, togetherwith Lenin, a resolution which demanded that the workers ofthe world should make any future war an opportunity for thedestruction of the capitalist system. Unlike so many others,she stuck to her resolution when, seven years later, the time oftesting came. The result was that she had to spend nearly thewhole of the first World War in jail, either under punishmentor in protective custody. But imprisonment did not mean inactivity.In 1916, there appeared in Switzerland her bookDie Krise der Sozialdemokratie, which assailed the leaders of theGerman labour party for their patriotic attitude and calledthe masses to revolutionary action. The foundation of theSpartacus League in 1917, the germ cell out of which the CommunistParty of Germany was soon to develop, was vitally connectedwith the dissemination of Rosa Luxemburg’s aggressivesentiments.

The collapse of theKaiserreich on 11 November 1918, gaveRosa Luxemburg her freedom and an undreamt-of range ofopportunities. The two months that followed must have beenmore crowded and more colourful than all her previous lifetaken together. But the end of her career was imminent. Thefatal Spartacus week, an abortive rising of the Berlin workers,led on 15 January 1919, to her arrest by a government composedof former party comrades. During her removal to prisonshe was attacked and severely beaten by soldiers belonging tothe extreme right, a treatment which she did not survive. Herbody was recovered days later from a canal.

A type not unlike Trotsky, Rosa Luxemburg had her tender[Pg 11]and sentimental side, which comes to the surface in her correspondence,especially in theBriefe aus dem Gefaengnis printed in1922. As a thinker she showed considerable honesty and independenceof mind.The Accumulation of Capital, first published in1913, which is undoubtedly her finest achievement, reveals heras that rarest of all rare phenomena—a Marxist critical of KarlMarx.

INTRODUCTION

Academic economists have recently returned from theelaboration of static equilibrium to the classical searchfor a dynamic model of a developing economy. RosaLuxemburg, neglected by Marxist and academic economistsalike, offers a theory of the dynamic development of capitalismwhich is of the greatest interest. The book is one of considerabledifficulty (apart from the vivid historical chapters), and to thoseaccustomed only to academic analysis the difficulty is renderedwell-nigh insurmountable by the Marxist terminology in whichit is expressed. The purpose of this preface is to provide a glossaryof terms, and to search for the main thread of the argument(leaving the historical illustrations to speak for themselves) andset it out in simpler language.

The result is no doubt too simple. The reader must samplefor himself the rich confusion in which the central core ofanalysis is imbedded, and must judge for himself whether thecore has been mishandled in the process of digging it out.[1]

Our author takes her departure from the numerical examplesfor simple reproduction (production with a constant stock ofcapital) and expanded reproduction (production with capitalaccumulating) set out in volume ii of Marx’sCapital. As shepoints out,[2] Marx completed the model for simple reproduction,but the models for accumulation were left at his death in a chaosof notes, and they are not really fit to bear all the weight sheputs on them (Heaven help us if posterity is to pore over all thebacks of old envelopes on which economists have jotted downnumerical examples in working out a piece of analysis). Tofollow her line of thought, however, it is necessary to examineher version of Marx’s models closely, to see on what assumptionsthey are based (explicitly or unconsciously) and to search theassumptions for clues to the succeeding analysis.

To begin at the beginning—gross national income (for aclosed economy) for, say, a year, is writtenc +v +s; that is, constant[Pg 14]capital, variable capital and surplus. Variable capital,v,is the annual wages bill. Surplus,s, is annual rent, interest, andnet profit, so thatv +s represents net national income. (In this introductionsurplus is used interchangeably with rent, interest andnet profit.) Constant capital,c, represents at the same time thecontribution which materials and capital equipment make toannual output, and the cost of maintaining the stock of physicalcapital in existence at the beginning of the year. When all commoditiesare selling at normal prices, these two quantities areequal (normal prices are tacitly assumed always to rule,[3] anassumption which is useful for long-period problems, thoughtreacherous when we have to deal with slumps and crises). Grossreceipts equal toc +v +s pass through the hands of the capitalistsduring the year, of which they use an amount,c, to replacephysical capital used up during the year, so thatc representscosts of raw materials and wear and tear and amortisation ofplant. An amount,v, is paid to workers and is consumed bythem (saving by workers is regarded as negligible[4] ). The surplus,s, remains to the capitalists for their own consumption andfor net saving. The professional classes (civil servants, priests,prostitutes, etc.) are treated as hangers-on of the capitalists, andtheir incomes do not appear, as they are not regarded as producingvalue.[5] Expenditure upon them tends to lessen the savingof capitalists, and their own expenditure and saving are treatedas expenditure and saving out of surplus.

In the model set out inchapter vi there is no technical progress(this is a drastic simplification made deliberately[6] ) and theratio of capital to labour is constant (as the stock of capitalincreases employment increases in proportion). Thus real outputper worker employed is constant (hours of work per year donot vary) and real wages per man are constant. It follows thatreal surplus per man is also constant. So long as these assumptionsare retained Marxianvalue presents no problem.Value isthe product of labour-time.Value created per man-year is constantbecause hours of work are constant. Real product per manyear being constant, on the above assumptions, thevalue of aunit of product is constant. For convenience we may assumemoney wages per man constant. Then, on these assumptions,[Pg 15]both the money price of a unit of output and thevalue of a unitof money are constant. This of course merely plasters over allthe problems of measurement connected with the use of indexnumbers, but provided that the technique of production isunchanging, and normal prices are ruling, those problemsare not serious, and we can conduct the analysis in termsof money values.[7] (Rosa Luxemburg regards it as a matter ofindifference whether we calculate in money or invalue.[8] )

The assumption of constant real wages presents a difficultywhich we may notice in passing. The operation of the capitalistsystem is presumed to depress the level of wages down to thelimit set by the minimum subsistence of the worker and hisfamily. But how large a family? It would be an extraordinaryfluke if the average size of family supported by the given wageof a worker were such as to provide for a rate of growth ofpopulation exactly adjusted to the rate of accumulation ofcapital, and she certainly does not hold that this is the case.[9]There is a reserve army of labour standing by, ready to takeemployment when the capitalists offer it. While they are unemployedthe workers have no source of income, but are keptalive by sharing in the consumption of the wages of friends andrelations who are in work.[10] When an increase in the stock ofcapital takes place, more workers begin to earn wages, thoseformerly employed are relieved of the burden of supportingsome unemployed relations, and their own consumption rises.Thus either they were living below the subsistence minimumbefore, or they are above it now. We may cut this knot bysimply postulating that real wages per man are constant,[11] withoutasking why. The important point for the analysis which weare examining is that when employment increases the total consumptionof the workers as a whole increases by the amount ofthe wages received by the additional workers.[12]

We may now set out the model for simple reproduction—thatis, annual national income for an economy in which thestock of capital is kept intact but not increased. All output is[Pg 16]divided into two departments: I, producing capital equipmentand raw materials, (producers’ goods), and II, producing consumptiongoods. Then we have

This means that the net output of the producers’ goods departmentis equal to the replacement of capital in the consumers’goods department. The whole surplus, as well as the whole ofwages, is currently consumed.

Before proceeding to the model for accumulation there is adifficulty which must be discussed. In the above model the stockof capital exists, so to speak, off stage. Rosa Luxemburg is perfectlywell aware of the relationship between annual wear andtear of capital, which is part ofc, and the stock of fixed capital,[13]but as soon as she (following Marx) discusses accumulation sheequates the addition to the stock of capital made by saving outof surplus in one year to the wear and tear of capital in the nextyear. To make sense of this we must assume that all capital isconsumed and made good once a year. She seems to slip intothis assumption inadvertently at first, though later it is madeexplicit.[14] She also consciously postulates thatv represents theamount of capital which is paid out in wages in advance ofreceipts from sales of the commodities produced. (This, as shesays, is the natural assumption to make for agricultural production,where workers this year are paid from the proceeds oflast year’s harvest.)[15] Thusv represents at the same time theannual wages bill and the amount of capital locked up in thewages fund, whilec represents both the annual amortisation ofcapital and the total stock of capital (other than the wages fund).This is a simplification which is tiresome rather than helpful (itarises from Marx’s ill-judged habit of writing^s⁄_(c +v) for the rate ofprofit on capital), but it is no more than a simplification anddoes not invalidate the rest of the analysis.

Another awkward assumption, which causes serious trouble[Pg 17]later, is implicit in the argument. Savings out of the surplusaccruing in each department (producers’ and consumers’ goods)are always invested in capital in the same department. There isno reason to imagine that one capitalist is linked to others inhis own department more than to those in the other department,so the conception seems to be that each capitalist investshis savings in his own business. There is no lending by onecapitalist to another and no capitalist ever shifts his sphere ofoperations from one department to another. This is a severeassumption to make even about the era before limited liabilitywas introduced, and becomes absurd afterwards. Moreover itis incompatible with the postulate that the rate of profit oncapital tends to equality throughout the economy,[16] for themechanism which equalises profits is the flow of new investment,and the transfer of capital as amortisation funds are re-invested,into more profitable lines of production and away from lessprofitable lines.[17]

The assumption that there is no lending by one capitalistto another puts limitation upon the model. Not only must thetotal rate of investment be equal to the total of planned saving,but investment in each department must be equal to savingin that department, and not only must the rate of increaseof capital lead to an increase of total output compatiblewith total demand, but the increase in output of each department,dictated by the increase in capital in that department,must be divided between consumers’ and producers’ goods inproportions compatible with the demand for each, dictated bythe consumption and the investment plans in each department.

[Pg18]There is no difficulty, however, in choosing numbers whichsatisfy the requirements of the model. The numerical examplesderived from Marx’s jottings are cumbersome and confusing,but a clear and simple model can be constructed on the basis ofthe assumptions set out in chapter vii. In each department,constant capital is four times variable capital.[18] (Constant capitalis the stock of raw materials which is turned over once a year;variable capital is the wages bill, which is equal to the capitalrepresented by the wages fund.) Surplus is equal to variablecapital (net income is divided equally between wages and surplus)and half of surplus is saved.[19] Savings are allotted betweenconstant and variable capital in such a way as to preserve the4 to 1 ratio. Thus four-fifths of savings represents a demand forproducers’ goods, and is added to constant capital each year,and one-fifth represents a demand for consumers’ goods, andis added to the wages fund (variable capital). These ratios dictatethe relationship between Department I (producers’ goods)and Department II (consumers’ goods).[20] It can easily be seenthat the basic assumptions require that the output of DepartmentI must stand in the ratio of 11 to 4 to the output ofDepartment II.[21] We can now construct a much simpler modelthan those provided in the text.

In Department I, 5·5 units are saved (half ofs) of which 4·4 areinvested in constant capital and 1·1 in variable capital. InDepartment II 2 units are saved, 1·6 being added to constantand 0·4 to variable capital. The 66 units of producers’ goodsprovide 44 + 4·4 constant capital for Department I and 16 + 1·6[Pg 19]constant capital for Department II and the 24 units of consumers’goods provide 11 + 4 wages of labour already employed,5·5 + 2 for consumption out of surplus, and 1·1 + 0·4 addition tovariable capital, which provide for an addition to employment.

After the investment has been made, and the labour forceincreased in proportion to the wages bill, we have

The two departments are now equipped to carry out anotherround of investment at the prescribed rate, and the process ofaccumulation continues. The ratios happen to have been chosenso that the total labour force, and total gross output, increaseby 10 per cent per annum.[22]

But all this, as Rosa Luxemburg remarks, is just arithmetic.[23]The only point of substance which she deduces from Marx’snumerical examples is that it is always Department I whichtakes the initiative. She maintains that the capitalists in DepartmentI decide how much producers’ goods to produce, and thatDepartment II has to arrange its affairs so as to absorb anamount of producers’ goods which will fit in with their plans.[24]On the face of it, this is obviously absurd. The arithmetic isperfectly neutral between the two departments, and, as she herselfshows, will serve equally well for the imagined case of asocialist society where investment is planned with a view toconsumption.[25]

But behind all this rigmarole lies the real problem which sheis trying to formulate. Where does the demand come fromwhich keeps accumulation going?

She is not concerned with the problem, nowadays so familiar,of the balance between saving and investment. Marx himselfwas aware of that problem, as is seen in his analysis of disequilibriumunder conditions of simple reproduction (zero netinvestment).[26] When new fixed capital comes into existence, part[Pg 20]of gross receipts are set aside in amortisation funds without anyactual outlay being made on renewals. Then total demand fallsshort of equilibrium output, and the system runs into a slump.Contrariwise, when a burst of renewals falls due, in excess of thecurrent rate of amortisation, a boom sets in. For equilibrium itis necessary for the age composition of the stock of capital tobe such that current renewals just absorb current amortisationfunds. Similarly, when accumulation is taking place, currentinvestment must absorb current net saving.[27]

It is in connection with the problem of effective demand, inthis sense, that Marx brings gold-mining into the analysis. Whenreal output expands at constant money prices, the increasingtotal of money value of output requires an increase in the stockof money in circulation (unless the velocity of circulation risesappropriately). The capitalists therefore have to devote part oftheir savings to increasing their holdings of cash (for there is noborrowing). This causes a deficiency of effective demand. Butthe increase in the quantity of money in circulation comes fromnewly mined gold, and the expenditure of the gold mining industryupon the other departments just makes up the deficiencyin demand.[28]

Rosa Luxemburg garbles this argument considerably, andbrushes it away as beside the point. And itis beside the pointthat she is concerned with. She does not admit the savings andinvestment problem, for she takes it for granted that eachindividual act of saving out of surplus is accompanied by acorresponding amount of real investment, and that every pieceof investment is financed by saving out of surplus of the samecapitalist who makes it.[29] What she appears to be concerned withis rather the inducement to invest. What motive have thecapitalists for enlarging their stock of real capital?[30] How dothey know that there will be demand for the increased output ofgoods which the new capital will produce, so that they can‘capitalise’ their surplus in a profitable form? (On the purely[Pg 21]analytical plane her affinity seems to be with Hobson ratherthan Keynes.)

Needless to say, our author does not formulate the problemof the inducement to invest in modern terminology, and theambiguities and contradictions in her exposition have left amplescope for her critics to represent her theory as irredeemable nonsense.[31]But the most natural way to read it is also the clearest.Investment can take place in an ever-accumulating stock ofcapital only if the capitalists are assured of an ever-expandingmarket for the goods which the capital will produce. Onthis reading, the statement of the problem leads straightforwardlyto the solution propounded in the third Section of thisbook.

Marx has his own answer to the problem of inducement toinvest, which she refers to in the first chapter.[32] The pressure ofcompetition forces each individual capitalist to increase hiscapital in order to take advantage of economies of large-scaleproduction, for if he does not his rivals will, and he will beundersold. Rosa Luxemburg does not discuss whether thismechanism provides an adequate drive to keep accumulationgoing, but looks for some prospective demand outside the circleof production. Here the numerical examples, as she shows, failto help. And this is in the nature of the case, for (in modernjargon) the examples deal withex post quantities, while she islooking forex ante prospects of increased demand for commodities.If accumulation does take place, demand will absorb output,as the model shows, but what is it that makes accumulationtake place?

In Section II our author sets out to find what answers havebeen given to her problem. The analysis she has in mind is nowbroader than the strict confines of the arithmetical model. Technicalprogress is going on, and the output of an hour’s labourrises as time goes by. (The concept ofvalue now becomestreacherous, for thevalue of commodities is continuously falling.)Real wages tend to be constant in terms of commodities, thusthevalue of labour power is falling, and the share of surplus innet income is rising (^s⁄_v, the rate of exploitation, is rising). Theamount of saving in real terms is therefore rising (she suggests[Pg 22]later that the proportion of surplus saved rises with surplus, inwhich case real savings increase all the more[33] ). The problemis thus more formidable than appears in the model, for theequilibrium rate of accumulation of capital, in real terms, isgreater than in the model, where the rate of exploitation is constant.At the same time the proportion of constant to variablecapital is rising. She regards this not as something which islikely to happen for technical reasons, but as being necessarilybound up with the very nature of technical progress. As productivityincreases, the amount of producers’ goods handled perman-hour of labour increases; therefore, she says, the proportionofc tov must increase.[34] This is an error. It arises from thinkingof constant capital in terms of goods, and contrasting it withvariable capital in terms ofvalue, that is, hours of labour. Sheforgets Marx’s warning that, as progress takes place, thevalue ofthe commodities making up constant capital also falls.[35] It isperfectly possible for productivity to increase without any increasein thevalue of capital per man employed. This wouldoccur if improvements in the productivity of labour in makingproducers’ goods kept pace with the productivity of labourin using producers’ goods to make consumers’ goods (capital-savinginventions balance labour-saving inventions, so thattechnical progress is ‘neutral’). However, we can easily get outof this difficulty by postulating that as a matter of fact technicalprogress is mainly labour-saving, or, a better term,capital-using, so that capital per man employed is risingthrough time.

Rosa Luxemburg treats the authors whom she examines inSection II with a good deal of sarcasm, and dismisses them allas useless. To some of the points raised her answers seem scarcelyadequate. For instance, Rodbertus sees the source of all thetroubles of capitalism in the falling proportion of wages innational income.[36] He can be interpreted to refer to the proportionof wages in gross income. In that case, she is right (on theassumption of capital-using inventions) in arguing that a fall inthe proportion of wages is bound up with technical progress,and that the proportion could be held constant only by stopping[Pg 23]progress. He can also be taken to refer to the share of wages innet output, and this is the more natural reading. On this readingshe argues that the fall in share of wages (or rise in rate ofexploitation) is necessary to prevent a fall in the rate of profiton capital[37] (as capital per man employed rises, profit per manemployed must rise if profit per unit of capital is constant). Butshe does not follow up the argument and inquire what rise inthe rate of exploitation is necessary to keep capitalism going(actually, the statisticians tell us, the share of wages in net incomehas been fairly constant in modern industrial economies[38] ).It is obvious that the less the rate of exploitation rises, thesmaller is the rise in the rate of saving which the system has todigest, while the rise in real consumption by workers, whichtakes place when the rate of exploitation rises more slowly thanproductivity in the consumption good industries, creates an outletfor investment in productive capacity in those industries.The horrors of capitalism, and the difficulties which it createsfor itself, are both exaggerated by the assumption of constantreal-wage rates and, although it would be impossible to defendRodbertus’ position that a constant rate of exploitation is allthat is needed to put everything right, he certainly makes acontribution to the argument which ought to be taken intoaccount.

Tugan-Baranovski also seems to be treated too lightly. Hisconception is that the rising proportion of constant capitalin both departments (machines to make machines as well asmachines to make consumers’ goods) provides an outlet foraccumulation, and that competition is the driving force whichkeeps capitalists accumulating. Rosa Luxemburg is no doubtcorrect in saying that his argument does not carry the analysisbeyond the stage at which Marx left it,[39] but he certainlyelaborates a point which she seems perversely to overlook. Herreal objection to Tugan-Baranovski is that he shows how,in certain conditions, capitalist accumulation might be self-perpetuating,while she wishes to establish that the coming[Pg 24]disintegration of the capitalist system is not merely probableon the evidence, but is a logical necessity.[40]

The authors such as Sismondi, Malthus and Vorontsov, whoare groping after the problem of equilibrium between savingand investment, are treated with even less sympathy (thoughshe has a kindly feeling for Sismondi, to whom she considers thatMarx gave too little recognition[41] ) for she is either oblivious thatthere is such a problem, or regards it as trivial.[42] We leave thediscussion, at the end of Section II, at the same point where weentered it, with the clue to the inducement to invest still to find.

Section III is broader, more vigorous and in general morerewarding than the two preceding parts. It opens with a returnto Marx’s model for a capitalist system with accumulation goingon. Our author then sets out a fresh model allowing for technicalprogress. The rate of exploitation (the ratio of surplus towages) is rising, for real wages remain constant while output perman increases. In the model the proportion of surplus saved isassumed constant for simplicity, though in reality, she holds, itwould tend to rise with the real income of the capitalists.[43] Theratio of constant to variable capital is rising for technicalreasons. (The convention by which the annual wear and tearof capital is identified with the stock of capital now becomes agreat impediment to clear thinking.) The arithmetical modelshows the system running into animpasse because the output ofDepartment I falls short of the requirements of constant capitalin the two departments taken together, while the output ofDepartment II exceeds consumption.[44] The method of argumentis by no means rigorous. Nothing follows from the fact thatone particular numerical example fails to give a solution, andthe example is troublesome to interpret as it is necessary to distinguishbetween discrepancies due to rounding off the figures[Pg 25]from those which are intended to illustrate a point of principle.[45]But there is no need to paddle in the arithmetic to find wherethe difficulty lies. The model is over-determined because of therule that the increment of capital within each department atthe end of a year must equal the saving made within the samedepartment during the year. If capitalists from Department IIwere permitted to lend part of their savings to Department Ito be invested in its capital, a breakdown would no longer beinevitable. Suppose that total real wages are constant and thatreal consumption by capitalists increases slowly, so that the realoutput of Department II rises at a slower rate than productivity,then the amount of labour employed in it is shrinking.The ratio of capital to labour however is rising as a consequenceof capital-using technical progress. The output of Department I,and its productive capacity, is growing through time. Capitalinvested in Department I is accumulating faster than the savingof the capitalists in Department I, and capitalists of DepartmentII, who have no profitable outlet in their own industriesfor their savings, acquire titles to part of the capital in DepartmentI by supplying the difference between investment inDepartment I and its own saving.[46] For any increase in the stockof capital of both departments taken together, required bytechnical progress and demand conditions, there is an appropriateamount of saving, and so long as the total accumulationrequired and total saving fit, there is no breakdown.

But here we find the clue to the real contradiction. Thesequantities might conceivably fit, but there is no guarantee thatthey will. If the ratio of saving which the capitalists (takentogether) choose to make exceeds the rate of accumulation dictatedby technical progress, the excess savings can only be‘capitalised’ if there is an outlet for investment outside thesystem. (The opposite case of deficient savings is also possible.Progress would then be slowed down below the technicallypossible maximum; but this case is not contemplated by ourauthor, and it would be irrelevant to elaborate upon it.)

Once more we can substitute for a supposed logical necessity[Pg 26]a plausible hypothesis about the nature of the real case, and sorescue the succeeding argument. If in reality the distribution ofincome between workers and capitalists, and the propensity tosave of capitalists, are such as to require a rate of accumulationwhich exceeds the rate of increase in the stock of capital appropriateto technical conditions, then there is a chronic excess ofthe potential supply of real capital over the demand for it andthe system must fall into chronic depression. (This is the ‘stagnationthesis’ thrown out by Keynes and elaborated by modernAmerican economists, notably Alvin Hansen). How then is itthat capitalist expansion had not yet (in 1912) shown any signof slackening?

Inchapter xxvi Rosa Luxemburg advances her central thesis—thatit is the invasion of primitive economies by capitalismwhich keeps the system alive. There follows a scorching accountof the manner in which the capitalist system, by trade, conquestand theft, swallowed up the pre-capitalist economies,—somereduced to colonies of capitalist nations, some remaining nominallyindependent—and fed itself upon their ruins. The thread ofanalysis running through the historical illustrations is not easyto pick up, but the main argument seems to be as follows: Assoon as a primitive closed economy has been broken into, byforce or guile, cheap mass-produced consumption goods displacethe old hand production of the family or village communities,so that a market is provided for ever-increasing outputsfrom the industries of Department II in the old centresof capitalism, without the standard of life of the workers whoconsume these commodities being raised.[47] The ever-growingcapacity of the export industries requires the products ofDepartment I, thus maintaining investment at home. At thesame time great capital works, such as railways, are undertakenin the new territories.[48] This investment is matched partly bysavings from surplus extracted on the spot, but mainly by loansfrom the old capitalist countries. There is no difficulty here inaccounting for the inducement to invest, for the new territoriesyield commodities unobtainable at home.[49] We might set out theessence of the argument as follows: Cloth from Lancashire paysfor labour in America, which is used to produce wheat andcotton. These provide wages and raw materials to the Lancashire[Pg 27]mills, while the profits acquired both on the plantationsand in the mills are invested in steel rails and rolling stock,which open up fresh territories, so that the whole process iscontinuously expanding. Moreover, apart from profits earnedon capital actually invested in the new territories, great capitalgains are made simply by acquiring possession of land and othernatural resources.[50] Labour to work the resources may be providedby the local dispossessed peasantry or by immigrationfrom the centres of capitalism.[51] Investment in equipment for itto use is more profitable than in that operated by home labour,partly because the wretched condition of the colonial workersmakes the rate of exploitation higher,[52] but mainly just becausethey are on the spot, and can turn the natural resources seizedby the capitalists into means of production. No amount of investmentin equipment for British labour would produce soilbearing cotton, rubber or copper. Thus investment is deflectedabroad[53] and the promise of profit represented by the naturalresources calls into existence, by fair means or foul, the labourand capital to make it come true. The process of building upthis capital provides an outlet for the old industries and rescuesthem from the contradictions inherent in deficiency of demand.

The analysis of militarism in the last chapter over-reachesitself by trying to prove too much. The argument is that armamentsare built up out of taxes which fall entirely on wages.[54]This can be regarded as a kind of ‘forced saving’ imposed on theworkers. These savings are extra to the saving out of surplus.They are invested in armaments, and that ends the story. Onthis basis the armaments, in themselves, cannot be held to providean outlet for the investment of surplus (though the use ofthe armaments, as in the Opium War,[55] to break up primitiveeconomies is a necessary condition for the colonial investmentalready described) and capital equipment to produce armamentsis merely substituted for capital formerly producing consumers’goods. The analysis which best fits Rosa Luxemburg’sown argument, and the facts, is that armaments provide an outletfor the investment of surplus (over and above any contributionthere may be from forced saving out of wages), which, unlikeother kinds of investment, creates no further problem by[Pg 28]increasing productive capacity (not to mention the huge newinvestment opportunities created by reconstruction after thecapitalist nations have turned their weapons against each other).

All this is perhaps too neat an account of what our author issaying. The argument streams along bearing a welter of historicalexamples in its flood, and ideas emerge and disappearagain bewilderingly. But something like the above seems to beintended. And something like it is now widely accepted as beingtrue. Rosa Luxemburg, as we have seen, neglects the rise in realwages which takes place as capitalism develops, and denies theinternal inducement to invest provided by technical progress,two factors which help to rescue capitalism from the difficultieswhich it creates for itself. She is left with only one influence(economic imperialism) to account for continuous capitalaccumulation, so that her analysis is incomplete. All the same,few would deny that the extension of capitalism into new territorieswas the mainspring of what an academic economist hascalled the ‘vast secular boom’ of the last two hundred years,[56]and many academic economists account for the uneasy conditionof capitalism in the twentieth century largely by the‘closing of the frontier’ all over the world.[57] But the academiceconomists are being wise after the event. For all its confusionsand exaggerations, this book shows more prescience than anyorthodox contemporary could claim.

SECTION ONE

THE PROBLEMOF REPRODUCTION

CHAPTER I

THE OBJECTOF OUR INVESTIGATION

Karl Marx made a contribution of lasting service to thetheory of economics when he drew attention to the problemof the reproduction of the entire social capital. It issignificant that in the history of economics we find only twoattempts at an exact exposition of this problem: one by Quesnay,the father of the Physiocrats, at its very inception; and in itsfinal stage this attempt by Marx. In the interim, the problemwas ever with bourgeois economics. Yet bourgeois economistshave never been fully aware of this problem in its pure aspects,detached from related and intersecting minor problems; theyhave never been able to formulate it precisely, let alone solve it.Seeing that the problem is of paramount importance, theirattempts may all the same help us to some understanding of thetrend of scientific economics.

What is it precisely that constitutes this problem of the reproductionof total capital? The literal meaning of the word ‘reproduction’is repetition, renewal of the process of production. Atfirst sight it may be difficult to see in what respect the idea ofreproduction differs from that of repetition which we can allunderstand—why such a new and unfamiliar term should berequired. But in the sort of repetition which we shall consider,in the continual recurrence of the process of production, thereare certain distinctive features. First, the regular repetition ofreproduction is the generalsine qua non of regular consumptionwhich in its turn has been the precondition of human civilisationin every one of its historical forms. The concept of reproduction,viewed in this way, reflects an aspect of the history ofcivilisation. Production can never be resumed, there can be noreproduction, unless certain prerequisites such as tools, rawmaterials and labour have been established during the precedingperiod of production. However, at the most primitive[Pg 32]level of man’s civilisation, at the initial stage of man’s powerover nature; this possibility to re-engage in production dependedmore or less on chance. So long as hunting and fishing were themain foundations of social existence, frequent periods of generalstarvation interrupted the regular repetition of production.Some primitive peoples recognised at a very early stage that forreproduction as a regularly recurring process certain measureswere essential; these they incorporated into ceremonies of areligious nature; and in this way they accepted such measuresas traditional social commitments. Thus, as the thorough researchesof Spencer and Gillen have taught us, the totem cult ofthe Australian negroes is fundamentally nothing but certainmeasures taken by social groups for the purpose of securing andpreserving their animal and vegetable foodstuffs; these precautionshad been taken year by year since time immemorialand thus they became fossilised into religious ceremonials. Yetthe circle of consumption and production which forms theessence of reproduction became possible only with the inventionof tillage with the hoe, with the taming of domestic animals, andwith cattle-raising for the purpose of consumption. Reproductionis something more than mere repetition in so far as it presupposesa certain level of society’s supremacy over nature, or,in economic terms, a certain standard of labour productivity.

On the other hand, at all stages of social development, theprocess of production is based on the continuation of two different,though closely connected factors, the technical and socialconditions—on the precise relationship between man and natureand that between men and men. Reproduction depends to thesame degree on both these conditions. We have just seen howreproduction is bound up with the conditions of human workingtechniques, how far it is indeed solely the result of a certainlevel of labour productivity; but the social forms of productionprevailing in each case are no less decisive. In a primitive communistagrarian community, reproduction as well as the wholeplan of economic life is determined by the community of allworkers and their democratic organs. The decision to re-engagein labour—the organisation of labour—the provision of rawmaterials, tools, and man-power as the essential preliminariesof labour—the arrangement of reproduction and the determinationof its volume are all results of a planned co-operation[Pg 33]in which everybody within the boundaries of the communitytakes his part. In an economic system based on slave labour orcorvée, reproduction is enforced and regulated in all details bypersonal relations of domination. Here the volume of reproductionis determined by the right of disposal held by the rulingélites over smaller or larger circles of other people’s labour. In asociety producing by capitalist methods, reproduction assumes apeculiar form, as a mere glance at certain striking phenomenawill show us. In every other society known to history, reproductionrecurs in a regular sequence as far as its preconditions, theexisting means of production and labour power, make this possible.As a rule, only external influences such as a devastatingwar or a great pestilence, depopulating vast areas of formercultural life, and consequently destroying masses of labourpower and of accumulated means of production, can result in acomplete interruption of reproduction or in its contraction toany considerable extent for longer or shorter periods. A despoticorganisation of the plan of production may on occasion lead tosimilar phenomena. When in ancient Egypt Pharaoh’s willchained thousands of fellaheen for decades to the building of thepyramids; when in modern Egypt Ismail Pasha ordered 20,000fellaheen to forced labour on the Suez Canal; or when, abouttwo hundred years before Christ, the Emperor Shi Hoang Ti,founder of the Chin dynasty, allowed 400,000 people to perishof hunger and exhaustion and thus sacrificed a whole generationto his purpose of consolidating the Great Wall at China’snorthern frontier, the result was always that vast stretches ofarable land were left fallow and that regular economic life wasinterrupted for long periods. In all these cases the causes ofthese interruptions of reproduction obviously lay in the one-sideddetermination of the plan of reproduction by those inpower.

Societies which produce according to capitalist methods presenta different picture. We observe that in certain periods allthe ingredients of reproduction may be available, both labourand means of production, and yet some vital needs of society forconsumer goods may be left unfulfilled. We find that in spite ofthese resources reproduction may in part be completely suspendedand in part curtailed. Here it is no despotic interferencewith the economic plan that is responsible for the difficulties in[Pg 34]the process of production. Quite apart from all technical conditions,reproduction here depends on purely social considerations:only those goods are produced which can with certaintybe expected to sell, and not merely to sell, but to sell at the customaryprofit. Thus profit becomes an end in itself, the decisivefactor which determines not only production but also reproduction.Not only does it decide in each case what work is to beundertaken, how it is to be carried out, and how the productsare to be distributed; what is more, profit decides, also, at theend of every working period, whether the labour process is tobe resumed, and, if so, to what extent and in what direction itshould be made to operate.[58]

In capitalist society, therefore, the process of reproduction asa whole, constitutes a peculiar and most complicated problem,in consequence of these purely historical and social factors.There is, as we shall see, an external characteristic which showsclearly this specific historical peculiarity of the capitalist processof reproduction. Comprising not only production but alsocirculation (the process of exchange), it unites these two elements.Capitalist production is primarily production by innumerableprivate producers without any planned regulation.The only social link between these producers is the act ofexchange. In taking account of social requirements reproductionhas no clue to go on other than the experiences of thepreceding labour period. These experiences, however, remainthe private experiences of individual producers and are not integratedinto a comprehensive and social form. Moreover, theydo not always refer positively and directly to the needs ofsociety. They are often rather indirect and negative, for it isonly on the basis of price fluctuations that they indicate whetherthe aggregate of produced commodities falls short of the effectivedemand or exceeds it. Yet the individual private producersmake recurrent use of these experiences of the preceding labourperiod when they re-engage in reproduction, so that glut orshortage are bound to occur again in the following period. Individualbranches of production may develop independently, sothat there may be a surplus in one branch and a deficiency inanother. But as nearly all individual branches of production[Pg 35]are interdependent technically, glut or shortage in some of thelarger branches of production lead to the same phenomenon inmost of the others. Thus the general supply of products mayalternate periodically between shortage and surplus relative tothe social demand.

Herein lies the peculiar character of reproduction in a capitalistsociety, which differs from all other known forms of production.In the first place, every branch of production developsindependently within certain limits, in a way that leads toperiodical interruptions of production of shorter or longer duration.Secondly, the individual branches of reproduction showdeviations from social requirements amounting to all-rounddisparity and thus resulting in a general interruption of reproduction.These features of capitalist reproduction are quitecharacteristic. In all other economic systems, reproduction runsits uninterrupted and regular course, apart from externaldisturbance by violence. Capitalist reproduction, however, toquote Sismondi’s well-known dictum, can only be representedas a continuous sequence of individual spirals. Every such spiralstarts with small loops which become increasingly larger andeventually very large indeed. Then they contract, and a newspiral starts again with small loops, repeating the figure up tothe point of interruption. This periodical fluctuation betweenthe largest volume of reproduction and its contraction topartial suspension, this cycle of slump, boom, and crisis, as ithas been called, is the most striking peculiarity of capitalistreproduction.

It is very important, however, to establish quite firmly andfrom the very outset that this cyclical movement of boom,slump, and crisis, does not represent the whole problem ofcapitalist reproduction, although it is an essential element of it.Periodical cycles and crises are specific phases of reproductionin a capitalist system of economy, but not the whole of this process.In order to demonstrate the pure implications of capitalistreproduction we must rather consider it quite apart from theperiodical cycles and crises. Strange as this may appear, themethod is quite rational; it is indeed the only method of inquirythat is scientifically tenable. In order to demonstrate and tosolve the problem of pure value we must leave price fluctuationsout of consideration. The approach of vulgar economics[Pg 36]always attempts to solve the problem of value by reference tofluctuations in demand and supply. Classical economists, fromAdam Smith to Karl Marx, attack the problem in the oppositeway, pointing out that fluctuations in the mutual relationbetween demand and supply can explain only disparities betweenprice and value, not value itself. In order to find thevalue of a commodity, we must start by assuming thatdemand and supply are in a state of equilibrium, that theprice of a commodity and its value closely correspond to oneanother. Thus the scientific problem of value begins at thevery point where the effect of demand and supply ceases tooperate.

In consequence of periodical cycles and crises capitalist reproductionfluctuates as a rule around the level of the effectivetotal demand of society, sometimes rising above and sometimesfalling below this level, contracting occasionally even to thepoint of almost complete interruption of reproduction. However,if we consider a longer period, a whole cycle with its alternatingphases of prosperity and depression, of boom and slump,that is if we consider reproduction at its highest and lowestvolume, including the stage of suspension, we can set off boomagainst slump and work out an average, a mean volume ofreproduction for the whole cycle. This average is not only atheoretical figment of thought, it is also a real objective fact.For in spite of the sharp rises and falls in the course of a cycle,in spite of crises, the needs of society are always satisfied moreor less, reproduction continues on its complicated course, andproductive capacities develop progressively. How can this takeplace, leaving cycles and crises out of consideration? Here thereal question begins. The attempt to solve the problem of reproductionin terms of the periodical character of crises is fundamentallya device of vulgar economics, just like the attempt tosolve the problem of value in terms of fluctuations in demandand supply. Nevertheless, we shall see in the course of ourobservations that as soon as economic theory gets an inkling ofthe problem of reproduction, as soon as it has at least startedguessing at the problem, it reveals a persistent tendency suddenlyto transform the problem of reproduction into the problemof crises, thus barring its own way to the solution of thequestion. When we speak of capitalist reproduction in the following[Pg 37]exposition, we shall always understand by this term amean volume of productivity which is an average taken overthe various phases of a cycle.

Now, the total of capitalist reproduction is created by anunlimited and constantly changing number of private producers.They produce independently of one another; apart fromthe observation of price fluctuations there is no social control—nosocial link exists between the individual producers other thanthe exchange of commodities. The question arises how theseinnumerable disconnected operations can lead to the actualtotal of production. This general aspect of our problem indeedstrikes us immediately as one of prime importance. But if weput it this way, we overlook the fact that such private producersare not simply producers of commodities but are essentiallycapitalist producers, that the total production of society is notsimply production for the sake of satisfying social requirements,and equally not merely production of commodities, but essentiallycapitalist production.

Let us examine our problem anew in the light of this fact.A producer who produces not only commodities but capitalmust above all create surplus value. The capitalist producer’sfinal goal, his main incentive, is the production of surplus value.The proceeds from the commodities he has manufactured mustnot only recompense him for all his outlay, but in additionthey must yield him a value which does not correspond withany expense on his part, and is pure gain. If we consider theprocess of production from the point of view of the creation ofsurplus value, we see that the capital advanced by the capitalistis divided into two parts: the first part represents his expenseson means of production such as premises, raw material, partlyfinished goods and machinery. The second part is spent onwages. This holds good, even if the capitalist producer does notknow it himself, and in spite of the pious stuff about fixed andcirculating capital with which he may delude himself and theworld. Marx called this first part constant capital. Its value isnot changed by its utilisation in the labour process—it is transferredin toto to the finished product. The second part Marxcalls the variable capital. This gives rise to an additional value,which materialises when the results of unpaid labour are appropriated.The various components which make up the value of[Pg 38]every commodity produced by capitalist methods may be expressedby the formula:c +v +s. In this formulac stands for thevalue of the constant capital laid out in inanimate means ofproduction and transferred to the commodity,v stands for thevalue of the variable capital advanced in form of wages, ands stands for the surplus value, the additional value of the unpaidpart of wage labour. Every type of goods shows these threecomponents of value, whether we consider an individual commodityor the aggregate of commodities as a whole, whether weconsider cotton textiles or ballet performances, cast-iron tubesor liberal newspapers. Thus for the capitalist producer themanufacture of commodities is not an end in itself, it is only ameans to the appropriation of surplus value. This surplus value,however, can be of no use to the capitalist so long as it remainshidden in the commodity form of the product. Once the commodityhas been produced, it must be realised, it must be convertedinto a form of pure value; that is, into money. All capitalexpenses incorporated in the commodity must shed their commodity-formand revert to the capitalist as money to make thisconversion possible so that he can appropriate the surplus valuein cash. The purpose of production is fulfilled only when thisconversion has been successful, only when the aggregate ofcommodities has been sold according to its value. The proceedsof this sale of commodities, the money that has been receivedfor them, contains the same components of value as the formeraggregate of commodities and can be expressed by the sameformulac +v +s. Partc recompenses the capitalist for hisadvances on means of production that have been used up, partv recompenses him for his advances on wages, and the last part,s, represents the expected surplus, the capitalist’s clear profit incash.[59]

This conversion of capital from its original form, from thestarting point of all capitalist production, into means of production,dead and living, such as raw materials, instruments,and labour; its further conversion into commodities by a living[Pg 39]labour process; and its final reconversion into money, a greateramount of money indeed than at the initial stage—this transformationof capital is, however, required for more than theproduction and appropriation of surplus value. The aim andincentive of capitalist production is not a surplus value pureand simple, to be appropriated in any desired quantity, but asurplus value ever growing into larger quantities, surplus valuead infinitum. But to achieve this aim, the same magic meansmust be used over and over again, the means of capitalist production—theever repeated appropriation of the proceeds of unpaidwage labour in the process of commodity manufacture, andthe subsequent realisation of the commodities so produced.

Thus quite a new incentive is given to constantly renewedproduction, to the process of reproduction as a regular phenomenonin capitalist society, an incentive unknown to any othersystem of production. In every other economic system known tohistory, reproduction is determined by the unceasing need ofsociety for consumer goods, whether they are the needs of allthe workers determined in a democratic manner as in anagrarian and communist market community, or the despoticallydetermined needs of an antagonistic class society, as in aneconomy of slave labour orcorvée and the like. But in a capitalistsystem of production, it is not consideration of social needswhich actuates the individual private producer who alonematters in this connection. His production is determined entirelyby the effective demand, and even this is to him a mere meansfor the realisation of surplus value which for him is indispensable.Appropriation of surplus value is his real incentive, andproduction of consumer goods for the satisfaction of the effectivedemand is only a detour when we look to the real motive,that of appropriation of surplus value, although for the individualcapitalist it is also a rule of necessity. This motive, toappropriate surplus value, also urges him to re-engage in reproductionover and over again. It is the production of surplusvalue which turns reproduction of social necessities into aperpetuummobile. Reproduction, for its part, can obviously be onlyresumed when the products of the previous period, the commodities,have been realised; that is, converted into money; forcapital in the form of money, in the form of pure value, mustalways be the starting point of reproduction in a capitalist[Pg 40]system. The first condition of reproduction for the capitalistproducer is thus seen to be a successful realisation of the commoditiesproduced during the preceding period of production.

Now we come to a second important point. Under a system ofprivate economy, it is the individual producer who determinesthe volume of reproduction at his discretion. His main incentiveis appropriation of surplus value, indeed an appropriation increasingas rapidly as possible. An accelerated appropriation ofsurplus value, however, necessitates an increased production ofcapital to generate this surplus value. Here a large-scale enterpriseenjoys advantages over a small one in every respect. Infine, the capitalist method of production furnishes not only apermanent incentive to reproduction in general, but also amotive for its expansion, for reproduction on an ever largerscale.

Nor is that all. Capitalist methods of production do morethan awaken in the capitalist this thirst for surplus valuewhereby he is impelled to ceaseless expansion of reproduction.Expansion becomes in truth a coercive law, an economic conditionof existence for the individual capitalist. Under the ruleof competition, cheapness of commodities is the most importantweapon of the individual capitalist in his struggle for a place inthe market. Now all methods of reducing the cost of commodityproduction permanently amount in the end to an expansion ofproduction; excepting those only which aim at a specific increaseof the rate of surplus value by measures such as wage-cuttingor lengthening the hours of work. As for these latterdevices, they are as such likely to encounter many obstacles. Inthis respect, a large enterprise invariably enjoys advantages ofevery kind over a small or medium concern. They may rangefrom a saving in premises or instruments, in the application ofmore efficient means of production, in extensive replacementof manual labour by machinery, down to a speedy exploitation ofa favourable turn of the market so as to acquire raw materialscheaply. Within very wide limits, these advantages increase indirect proportion to the expansion of the enterprise. Thus, assoon as a few capitalist enterprises have been enlarged, competitionitself forces all others to expand likewise. Expansionbecomes a condition of existence. A growing tendency towardsreproduction at a progressively increasing scale thus ensues,[Pg 41]which spreads automatically like a tidal wave over ever largersurfaces of reproduction.

Expanding reproduction is not a new discovery of capital.On the contrary, it had been the rule since time immemorial inevery form of society that displayed economic and cultural progress.It is true, of course, that simple reproduction as a merecontinuous repetition of the process of production on the samescale as before can be observed over long periods of social history.In the ancient agrarian and communist village communities,for instance, increase in population did not lead to agradual expansion of production, but rather to the new generationbeing expelled and the subsequent founding of equallysmall and self-sufficient colonies. The old small handicraft unitsof India and China provide similar instances of a traditionalrepetition of production in the same forms and on the samescale, handed down from generation to generation. But simplereproduction is in all these cases the source and unmistakablesign of a general economic and cultural stagnation. No importantforward step in production, no memorial of civilisation,such as the great waterworks of the East, the pyramids of Egypt,the military roads of Rome, the Arts and Sciences of Greece,or the development of craftsmanship and towns in the MiddleAges would have been possible without expanding reproduction;for the basis and also the social incentive for a decisiveadvancement of civilisation lies solely in the gradual expansionof production beyond immediate requirements, and in a continualgrowth of the population itself as well as of its demands.

Exchange in particular, which brought about a class society,and its historical development into the capitalist form ofeconomy, would have been unthinkable without expandingreproduction. In a capitalist society, moreover, expanding reproductionacquires certain characteristics. As we have alreadymentioned, it becomes right away a coercive law to the individualcapitalist. Capitalist methods of production do not excludesimple or even retrogressive reproduction; indeed, this isresponsible for the periodical phenomenon of crises followingphases, likewise periodical, of overstrained expansion of reproductionin times of boom. But ignoring periodical fluctuations,the general trend of reproduction is ever towards expansion.For the individual capitalist, failure to keep abreast of this[Pg 42]expansion means quitting the competitive struggle, economicdeath.

Moreover, there are certain other aspects to be considered.The concept of expanding reproduction applies only to thequantity of products, to the aggregate of manufactured objects.So long as production rests solely or mainly upon a naturaleconomy, consumption determines the extent and character ofthe individual labour process, as well as that of reproduction ingeneral, as an end in itself: this applies to the agrarian andcommunist village communities of India, to the Romanvillawith its economy of slave labour, and to the medieval feudalfarm based oncorvée. But the picture is different in a capitalisteconomic system. Capitalist production is not production forthe purpose of consumption, it is production for the purpose ofcreating value. The whole process of production as well as ofreproduction is ruled by value relationships. Capitalist productionis not the production of consumer goods, nor is it merelythe production of commodities: it is pre-eminently the productionof surplus value. Expanding reproduction, from a capitalistpoint of view, is expanding production of surplus value, thoughit takes place in the forms of commodity production and is thusin the last instance the production of consumer goods. Changesin the productivity of labour during the course of reproductioncause continual discrepancies between these two aspects. Ifproductivity increases, the same amount of capital and surplusvalue may represent a progressively larger amount of consumergoods. Expanding production, understood as the creation of agreater amount of surplus value, need not therefore necessarilyimply expanding reproduction in the capitalist meaning of theterm. Conversely, capital may, within limits, yield a greatersurplus value in consequence of a higher degree of exploitationsuch as is brought about by wage-cutting and the like, withoutactually producing a greater amount of goods. But in both casesthe surplus value has a twofold aspect: it is a quantity of valueas well as an aggregate of material products, and from a capitalistpoint of view, its elements in both instances are thus thesame.

As a rule, an increased production of surplus value resultsfrom an increase of capital brought about by addition of part ofthe appropriated surplus value to the original capital, no matter[Pg 43]whether this capitalist surplus value is used for the expansion ofan old enterprise or for founding a new one, an independentoffshoot. Capitalist expanding reproduction thus acquires thespecific characteristics of an increase in capital by means of aprogressive capitalisation of surplus value, or, as Marx has putit, by the accumulation of capital.

The general formula for enlarged reproduction under therule of capital thus runs as follows:c +v +^s⁄_x +s´. Here^s⁄_x standsfor the capitalised part of the surplus value appropriated in anearlier period of production;s´ stands for the new surplus valuecreated by the increased capital. Part of this new surplus valueis capitalised again, and expanding reproduction is thus, fromthe capitalist point of view, a constantly flowing process of alternateappropriation and capitalisation of surplus value.

So far, however, we have only arrived at a general andabstract formula for reproduction. Let us now consider moreclosely the concrete conditions which are necessary to applythis formula.

The surplus value which has been appropriated, after it hassuccessfully cast off its commodity-form in the market, appearsas a given amount of money. This money-form is the form ofits absolute value, the beginning of its career as capital. But asit is impossible to create surplus value with money, it cannot,in this form, advance beyond the threshold of its career. Capitalmust assume commodity-form, so that the particular portion ofit which is earmarked for accumulation can be capitalised. Foronly in this form can it become productive capital; that is,capital begetting new surplus value. Therefore, like the originalcapital, it must again be divided into two parts; a constant part,comprising the inanimate means of production, and a variablepart, the wages. Only then will our formulac +v +s apply to itin the same way as it applied to the old capital.

But the good intent of the capitalist to accumulate, his thriftand abstinence which make him use the greater part of hissurplus value for production instead of squandering it on personalluxuries, is not sufficient for this purpose. On the contrary,it is essential that he should find on the commoditymarket the concrete forms which he intends to give his newsurplus value. In the first place, he must secure the material[Pg 44]means of production such as raw materials, machines etc. requiredfor the branch of production he has chosen and planned,so that the particular part of the surplus value which correspondsto his constant capital may assume a productive form.Secondly, the other, variable part of his surplus value must alsobe convertible, and two essentials are necessary for this conversion:of first importance, the labour market must offer asufficient quantity of additional labour, and secondly, as theworkers cannot live on money alone, the commodity market,too, must offer an additional amount of provisions, which theworkers newly to be employed may exchange against the variablepart of the surplus value they will get from the capitalist.

All these prerequisites found, the capitalist can set his capitalisedsurplus value to work and make it, as operating capital,beget new surplus value. But still his task is not completelydone. Both the new capital and the surplus value produced stillexist for the time being in the shape of an additional quantityof some commodity or other. In this form the new capital is butadvanced, and the new surplus value created by it is still in aform in which it is of no use to the capitalist. The new capitalas well as the surplus value which it has created must cast offtheir commodity-form, re-assume the form of pure value, andthus revert to the capitalist as money. Unless this process issuccessfully concluded, the new capital and surplus value willbe wholly or partly lost, the capitalisation of surplus value willhave miscarried, and there will have been no accumulation. Itis absolutely essential to the accumulation of capital that asufficient quantity of commodities created by the new capitalshould win a place for itself on the market and be realised.

Thus we see that expanding reproduction as accumulation ofcapital in a capitalist system is bound up with a whole seriesof special conditions. Let us look at these more closely. The firstcondition is that production should create surplus value, forsurplus value is the elementary form in which alone increasedproduction is possible under capitalist conditions. The entireprocess of production must abide by this condition when determiningthe relations between capitalist and worker in the productionof commodities. Once this first condition is given, thesecond is that surplus value must be realised, converted into theform of money, so that it can be appropriated for the purposes[Pg 45]of expanding reproduction. This second condition thus leads usto the commodity market. Here, the hazards of exchange decidethe further fate of the surplus value, and thus the future of reproduction.The third condition is as follows: provided that partof the realised surplus value has been added to capital for thepurpose of accumulation, this new capital must first assume itsproductive form of labour and inanimate means of production.Moreover, that part of it which had been exchanged for labourmust be converted into provisions for the workers. Thus we areled again to the markets of labour and commodities. If all theserequirements have been met and enlarged reproduction of commoditieshas taken place, a fourth condition must be added: theadditional quantity of commodities representing the new capitalplus surplus value will have to be realised, that is, reconvertedinto money. Only if this conversion has been successful, can itbe said that expanding capitalist reproduction has actuallytaken place. This last condition leads us back to the commoditymarket.

Thus capitalist production and reproduction imply a constantshifting between the place of production and the commoditymarket, a shuttle movement from the private office andthe factory where unauthorised persons are strictly excluded,where the sovereign will of the individual capitalist is the highestlaw, to the commodity market where nobody sets up any lawsand where neither will nor reason assert themselves. But it isthis very licence and anarchy of the commodity market whichbrings home to the individual capitalist that he is dependentupon society, upon the entirety of its producing and consumingmembers. The individual capitalist may need additional meansof production, additional labour and provisions for theseworkers in order to expand reproduction, but whether he canget what he needs depends upon factors and events beyond hiscontrol, materialising, as it were, behind his back. In order torealise his increased aggregate of products, the individual capitalistrequires a larger market for his goods, but he has no controlwhatever over the actual increase of demand in general, or ofthe particular demand for his special kind of good.

The conditions we have enumerated here, which all give expressionto the inherent contradiction between consumptionand private production and their social interconnection, are[Pg 46]nothing new, and it is not only at the stage of reproduction thatthey become apparent. These conditions express the generalcontradiction inherent in capitalist production. They involve,however, particular difficulties as regards the process of reproductionfor the following reasons. With regard to reproduction,especially expanding reproduction, the capitalist method ofproduction not only reveals its general fundamental character,but, what is more, it shows, in the various periods of production,a definite rhythm within a continuous progression—thecharacteristic interplay of individual wills. From this point ofview, we must inquire in a general way how it is possible forevery individual capitalist to find on the market the means ofproduction and the labour he requires for the purpose ofrealising the commodities he has produced, although thereexists no social control whatever, no plan to harmonize productionand demand. This question may be answered by sayingthat the capitalist’s greed for surplus value, enhanced by competition,and the automatic effects of capitalist exploitation,lead to the production of every kind of commodity, includingmeans of production, and also that a growing class of proletarianisedworkers becomes generally available for the purposesof capital. On the other hand, the lack of a plan in thisrespect shows itself in the fact that the balance between demandand supply in all spheres can be achieved only by continuousdeviations, by hourly fluctuations of prices, and by periodicalcrises and changes of the market situation.

From the point of view of reproduction the question is a differentone. How is it possible that the unplanned supply in themarket for labour and means of production, and the unplannedand incalculable changes in demand nevertheless provide adequatequantities and qualities of means of production, labourand opportunities for selling which the individual capitalistneeds in order to make a sale? How can it be assured that everyone of these factors increases in the right proportion? Let us putthe problem more precisely. According to our well-known formula,let the composition of the individual capitalist’s productionbe expressed by the proportion 40c + 10v + 10s. His constantcapital is consequently four times as much as his variablecapital, and the rate of exploitation is 100 per cent. The aggregateof commodities is thus represented by a value of 60. Let us[Pg 47]now assume that the capitalist is in a position to capitalise andto add to the old capital of this given composition half of hissurplus value. In this case, the formula 44c + 11v + 11s = 66would apply to the next period of production.

Let us assume now that the capitalist can continue the annualcapitalisation of half his surplus value for a number of years.For this purpose it is not sufficient that means of production,labour and markets in general should be forthcoming, but hemust find these factors in a proportion that is strictly in keepingwith his progress in accumulation.

CHAPTER II

QUESNAY’S AND ADAM SMITH’SANALYSES OF THE PROCESS OFREPRODUCTION

So far we have taken account only of the individual capitalistin our survey of reproduction; he is its typical representative,its agent, for reproduction is indeed broughtabout entirely by individual capitalist enterprises. This approachhas already shown us that the problem involves difficultiesenough. Yet these difficulties increase to an extraordinary degreeand become even more complicated, when we turn our attentionfrom the individual capitalist to the totality of capitalists.

A superficial glance suffices to show that capitalist reproductionas a social whole must not be regarded simply as amechanical summation of all the separate processes of individualcapitalist reproduction. We have seen, for instance, thatone of the fundamental conditions for enlarged reproduction byan individual capitalist is a corresponding increase of his opportunitiesto sell on the commodity market. But the individualcapitalist may not always expand because of an absoluteincrease in the absorptive capacity of the market, but also as aresult of the competitive struggle, at the cost of other individualcapitalists. Thus one capitalist may win what another or manyothers who have been shouldered from the market must writeoff as a loss. This process will enable one capitalist to increasehis reproduction by the amount that it compels others by lossesto restrict their own. One capitalist will be able to engage inenlarged reproduction because others cannot even achievesimple reproduction. In the same way, one capitalist mayenlarge his reproduction by using labour power and means ofproduction which another’s bankruptcy, that is his partial orcomplete retirement from reproduction, has set free.

These commonplaces prove that reproduction of the social[Pg 49]capital as a whole is not the same as the reproduction of theindividual capitalist raised to thenth degree. They show thatthe reproductive activities of individual capitalists ceaselesslycut across one another and to a greater or smaller degree maycancel each other out.

Therefore we must clarify our concept of reproduction ofcapital as a whole, before we examine the laws and mechanismsof capitalist total reproduction. We must raise the questionwhether it is even possible to deduce anything like total reproductionfrom the disorderly jumble of individual capitals inconstant motion, changing from moment to moment accordingto uncontrollable and incalculable laws, partly running aparallel course, and partly intersecting and cancelling eachother out. Can one actually talk of total social capital of societyas an entity, and if so, what is the real meaning of this concept?That is the first question a scientific examination of the laws ofreproduction has to consider. At the dawn of economic theoryand bourgeois economics, Quesnay, the father of the Physiocrats,approached the problem with classical fearlessness andsimplicity and took it for granted that total capital exists as areal and active entity. In his famousTableau Économique, so intricatethat no one before Marx could understand it, Quesnaydemonstrated the phases of the reproduction of aggregatecapital with a few figures, at the same time taking into accountthat it must also be considered from the aspect of commodityexchange, that is as a process of circulation.[60]

Society as Quesnay sees it consists of three classes: the productiveclass of agriculturists; the sterile class containing allthose who are active outside the sphere of agriculture—industry,commerce, and the liberal professions; and lastly the classof landowners, including the Sovereign and the collectors oftithes. The national aggregate product materialises in the handsof the productive class as an aggregate of provisions and raw[Pg 50]materials to the value of some 5,000 million livres. Of this sum,2,000 millions represent the annual working capital of agriculture,1,000 millions represent the annual wear and tear of fixedcapital, and 2,000 millions are the net revenue accruing to thelandowners. Apart from this total produce, the agriculturists,here conceived quite in capitalist terms as tenant farmers, have2,000 million livres cash in hand. Circulation now takes placein such a way that the tenant class pay the landowners 2,000millions cash as rent (as the cost of the previous period of production).For this money the landowning class buy provisionsfrom the tenants for 1,000 millions and industrial products fromthe sterile class for the remaining 1,000 millions. The tenants intheir turn buy industrial products for the 1,000 millions handedback to them, whereupon the sterile class buy agricultural productsfor the 2,000 millions they have in hand: for 1,000 millionsraw materials etc., to replace their annual working capital, andprovisions for the remaining 1,000 millions. Thus the money hasin the end returned to its starting point, the tenant class; theproduct is distributed among all classes so that consumption isensured for everyone; at the same time the means of productionof the sterile as well as of the productive class have been renewedand the landowning class has received its revenue. Theprerequisites of reproduction are all present, the conditions ofcirculation have all been fulfilled, and reproduction can startagain on its regular course.[61]

We shall see later in the course of our investigation that thisexposition, though showing flashes of genius, remains deficientand primitive. In any case, we must stress here that Quesnay,on the threshold of scientific economics, had not the slightestdoubt as to the possibility of demonstrating total social capitaland its reproduction. Adam Smith, on the other hand, whilegiving a more profound analysis of the relations of capital, laid[Pg 51]out what seems like a maze when compared with the clear andsweeping outlines of the Physiocrat conception. By his wronganalysis of prices, Smith upset the whole foundation of thescientific demonstration of the capitalist process as a whole.This wrong analysis of prices ruled bourgeois economics for along time; it is the theory which maintains that, although thevalue of a commodity represents the amount of labour spent inits production, yet the price consists of three elements only: thewage of labour, the profit of capital, and the rent.

As this obviously must also apply to the aggregate of commodities,the national product, we are faced with the startlingdiscovery that, although the value of the aggregate of commoditiesmanufactured by capitalist methods represents allpaid wages together with the profits of capital and the rents,that is the aggregate surplus value, and consequently can replacethese, there is no component of value which correspondsto the constant capital used in production. According to Smith,v +s is the formula expressing the value of the capitalist productas a whole. Demonstrating his view with the example of corn,Smith says as follows:

‘These three parts (wages, profit, and rent) seem eitherimmediately or ultimately to make up the whole price of corn.A fourth part, it may perhaps be thought, is necessary for replacingthe stock of the farmer, or for compensating the wearand tear of his labouring cattle, and other instruments of husbandry.But it must be considered that the price of any instrumentof husbandry, such as a labouring horse, is itself made upof the same three parts: the rent of the land upon which he isreared, the labour of tending and rearing him, and the profitsof the farmer who advances both the rent of this land and thewages of this labour. Though the price of the corn, therefore,may pay the price as well as the maintenance of the horse, thewhole price still resolves itself either immediately or ultimatelyinto the same three parts of rent, of labour and profit.’[62]

Sending us in this manner ‘from pillar to post’, as Marx hasput it, Smith again and again resolved constant capital intov +s. However, he had occasional doubts and from time to timerelapsed into the contrary opinion. He says in the second book:

[Pg 52]‘It has been shown in the first Book, that the price of thegreater part of commodities resolves itself into three parts, ofwhich one pays the wages of the labour, another the profits ofthe stock, and a third the rent of the land which had beenemployed in producing and bringing them to market.... Sincethis is the case ... with regard to every particular commodity,taken separately; it must be so with regard to all the commoditieswhich compose the whole annual produce of the land andlabour of every country, taken complexly. The whole price orexchangeable value of that annual produce must resolve itselfinto the same three parts, and be parcelled out among thedifferent inhabitants of the country, either as the wages of theirlabour, the profits of their stock, or the rent of their land.’[63]

Here Smith hesitates and immediately below explains: ‘Butthough the whole value of the annual produce of the land andlabour of every country is thus divided among and constitutesa revenue to its different inhabitants, yet as in the rent of aprivate estate we distinguish between the gross rent and the neatrent, so may we likewise in the revenue of all the inhabitants ofa great country.

‘The gross rent of a private estate comprehends whatever ispaid by the farmer; the neat rent, what remains free to thelandlord after deducting the expense of management, of repairs,and all other necessary charges; or what, without hurting hisestate, he can afford to place in his stock reserved for immediateconsumption, or to spend upon his table, equipage, the ornamentsof his house and furniture, his private enjoyments andamusements. His real wealth is in proportion, not to his gross,but to his neat rent.

‘The gross revenue of all the inhabitants of a great countrycomprehends the whole annual produce of their land andlabour; the neat revenue, what remains free to them afterdeducting the expense of maintaining, first, their fixed, andsecondly, their circulating capital, or what, without encroachingupon their capital, they can place in their stock reserved forimmediate consumption, or spend upon their subsistence, conveniences,and amusements. Their real wealth too is in proportion,not to their gross, but to their neat revenue.’[64]

Here Smith introduces a portion of value which corresponds[Pg 53]to constant capital, only to eliminate it the very next momentby resolving it into wages, profits, and rents. And in the end, thematter rests with this explanation:

‘As the machines and instruments of trade, etc. which composethe fixed capital either of an individual or of a society,make no part either of the gross or the neat revenue of either,so money, by means of which the whole revenue of the societyis regularly distributed among all its different members, makesitself no part of that revenue.’[65]

Constant capital, the fixed capital of Adam Smith, is thus puton the same level as money and does not enter into the totalproduce of society, its gross revenue. It does not exist withinthis total product as an element of value.

You cannot get blood out of a stone, and so circulation, themutual exchange of the total product constituted in this manner,can only lead to realisation of the wages (v) and of the surplusvalue (s). However, as it cannot by any means replace the constantcapital, continued reproduction evidently must becomeimpossible. Smith indeed knew quite well, and did not dreamof denying, that every individual capitalist requires constantcapital in addition to his wages fund, his variable capital, inorder to run his enterprise. Yet the above analysis of commodityprices, when it comes to take note of capitalist production as awhole, allows constant capital to disappear without a trace ina puzzling way. Thus the problem of the reproduction of capitalis completely muddled up. It is plain that if the most elementarypremise of the problem, the demonstration of social capital asa whole, were on the rocks, the whole analysis was bound to fail.Ricardo, Say, Sismondi and others took up this erroneoustheory of Adam Smith, and they all stumbled in their observationson the problem of reproduction over this most elementarydifficulty: the demonstration of social capital.

Another difficulty is mixed up with the foregoing from thevery outset of scientific analysis. What is the nature of the totalcapital of a society? As regards the individual producer, theposition is clear: his capital consists of the expenses of his enterprise.Assuming capitalist methods of production, the value ofhis product yields him a surplus over and above his expenses,that surplus value which does not replace his capital but constitutes[Pg 54]his net income, which he can consume completely withoutencroaching upon his capital and which is thus his fund ofconsumption. It is true that the capitalist may save part of thisnet income, not consuming it himself but adding it to hiscapital. But that is another matter, a new step, the formationof a new capital which again must be replaced by subsequentreproduction and must again yield him a surplus. In any case,the capital of an individual always consists of what he requiresfor production, together with his advances on the running of hisenterprise, and his income is what he himself actually consumesor may consume, his fund of consumption. If we ask a capitalist:‘What are the wages you pay your workers?’ his answer will be:‘They are obviously part of my working capital.’ But if we ask:‘What are these wages for the workers who have received them?’—itis impossible that he should describe them as capital, forwages received are not capital for the workers but income, theirfund of consumption.

Let us now take another example. A manufacturer ofmachinery produces machines in his factory. The annual outputis a certain number of machines. In its value, however, thisannual output contains the capital advanced by the manufactureras well as the net income that has been earned. Part of themanufactured machines thus represent income for the manufacturerand are destined to realise this income in the processof circulation and exchange. But the person who buys thesemachines from the manufacturer does not buy them as incomebut in order to use them as a means of production; for him theyare capital.

These examples make it seem plausible that an object which iscapital for one person may be income for another andvice versa.How can it be possible under these circumstances to constructanything in the nature of a total capital of society? Indeedalmost every scientific economist up to the time of Marx concludedthat there is no social capital.[66] Smith was still doubtful,undecided, vacillating about this question; so was Ricardo. Butalready Say declared categorically:

‘It is in this way, that the total value of products is distributedamongst the members of the community; I say, thetotal value,[Pg 55]because such part of the whole value produced, as does not goto one of the consuming producers, is received by the rest. Theclothier buys wool of the farmer, pays his workmen in everydepartment, and sells the cloth, the result of their united exertion,at a price that reimburses all his advances, and affordshimself a profit. He never reckons as profit, or as the revenueof his own industry, anything more than thenet surplus, afterdeducting all charges and outgoings; but those outgoings aremerely an advance of their respective revenues to the previousproducers, which are refunded by thegross value of the cloth.The price paid to the farmer for his wool is the compound ofthe several revenues of the cultivator, the shepherd and thelandlord. Although the farmer reckons asnet produce only thesurplus remaining after payment of his landlord and his servantsin husbandry, yet to them these payments are items ofrevenue—rent to the one and wages to the other—to the one,the revenue of the land, to the other, the revenue of his industry.The aggregate of all these is defrayed out of the value of thecloth, the whole of which forms the revenue of some one orother, and is entirely absorbed in that way.—Whence it appearsthat the termnet produce applies only to the individual revenueof each separate producer or adventurer in industry, but thatthe aggregate of individual revenue, the total revenue of thecommunity, is equal to thegross produce of its land, capital andindustry, which entirely subverts the system of the economistsof the last century, who considered nothing but the net produceof the land as farming revenue, and therefore concluded, thatthis net produce was all that the community had to consume;instead of closing with the obvious inference, that the whole ofwhat had been created, may also be consumed by mankind.’[67]

Say proves his theory in his own peculiar fashion. WhereasAdam Smith tried to give a proof by referring each privatecapital unit to its place of production in order to resolve it intoa mere product of labour, but conceived of every product oflabour in strictly capitalist terms as a sum of paid and unpaidlabour, asv +s, and thus came to resolve the total product ofsociety intov +s; Say, of course, is cocksure enough to ‘correct’these classical errors by inflating them into common vulgarities.[Pg 56]His argument is based upon the fact that the entrepreneur atevery stage of production pays other people, the representativesof previous stages of production, for the means of productionwhich are capital for him, and that these people in their turnput part of this payment into their own pockets as their incomeand partly use it to recoup themselves for expenses advanced inorder to provide yet another set of people with an income. Sayconverts Adam Smith’s endless chain of labour processes into anequally unending chain of mutual advances on income andtheir repayment from the proceeds of sales. The worker appearshere as the absolute equal of the entrepreneur. He has hisincome advanced in the form of wages, paying for it in turn bythe labour he performs. Thus the final value of the aggregatesocial product appears as the sum of a large number of advancedincomes and is spent in the process of exchange on repaymentof all these advances. It is characteristic of Say’s superficialitythat he illustrates the social connections of capitalist reproductionby the example of watch manufacture—a branch of productionwhich at that time and partly even to-day is pure‘manufacture’ where every worker is also an entrepreneur on asmall scale and the process of production of surplus value ismasked by a series of successive acts of exchange typical ofsimple commodity production.

Thus Say gives an extremely crude expression to the confusioninaugurated by Adam Smith. The aggregate of annualsocial produce can be completely resolved as regards its valueinto a sequence of various incomes. Therefore it is completelyconsumed every year. It remains an enigma how production canbe taken up again without capital and means of production,and capitalist reproduction appears to be an insoluble problem.

If we compare the varying approaches to the problem fromthe time of the Physiocrats to that of Adam Smith, we cannotfail to recognise partial progress as well as partial regression.The main characteristic of the economic conception of thePhysiocrats was their assumption that agriculture alone createsa surplus, that is surplus value, and that agricultural labour isthe only kind of labour which is productive in the capitalistsense of the term. Consequently we see in theTableau Économiquethat the unproductive class of industrial workers createsvalue only to the extent of the same 2,000 million livres which[Pg 57]it consumes as raw materials and foodstuffs. Consequently, too,in the process of exchange, the total of manufactured productsis divided into two parts, one of which goes to the tenant classand the other to the landowning class, while the manufacturingclass does not consume its own products. Thus in the value ofits commodities, the manufacturing class reproduces, strictlyspeaking, only that circulating capital which has been consumed,and no income is created for the class of entrepreneurs.The only income of society that comes into circulation in excessof all capital advances, is created in agriculture and is consumedby the landowning class in the form of rents, whileeven the tenant class do no more than replace their capital: towit, 1,000 million livres interest from the fixed capital and2,000 million circulating capital, two-thirds being raw materialsand foodstuffs, and one-third industrial products. Further it isstriking that it is in agriculture alone that Quesnay assumes theexistence of fixed capital which he callsavances primitives as distinctfromavances annuelles. Industry, as he sees it, apparentlyworks without any fixed capital, only with circulating capitalturned over each year, and consequently does not create in itsannual output of commodities any element of value for makinggood the wear and tear of fixed capital (such as premises, tools,and so on).[68]

In contrast with this obvious defect, the English classicalschool shows a decisive advance above all in proclaiming everykind of labour as productive, thus revealing the creation ofsurplus value in manufacture as well as in agriculture. We say:the English classical school, because on this point Adam Smithhimself occasionally relapses quietly into the Physiocrat pointof view. It is only Ricardo who develops the theory of the valueof labour as highly and logically as it could advance within thelimits of the bourgeois approach. The consequence is that wemust assume all capital investment to produce annual surplus[Pg 58]value, in the manufacturing part of social production as awhole no less than in agriculture.[69]

On the other hand, the discovery of the productive, value-creatingproperty of every kind of labour, alike in agricultureand in manufacture, suggested to Smith that agriculturallabour, too, must produce, apart from the rent for the landowningclass, a surplus for the tenant class over and above thetotal of their capital expenses. Thus, in addition to the replacementof capital, an annual income of the tenant class comesinto being.[70]

Lastly, by a systematic elaboration of the concepts ofavancesprimitives andavances annuelles introduced by Quesnay, which hecalls fixed and circulating capital, Smith has made clear, amongother things, that the manufacturing side of social productionrequires a fixed as well as a circulating capital. Thus he waswell on the way to restoring to order the concepts of capital andrevenue of society, and to describing them in precise terms. Thefollowing exposition represents the highest level of clarity whichhe achieved in this respect:

‘Though the whole annual produce of the land and labour ofevery country is, no doubt, ultimately destined for supplying theconsumption of its inhabitants and for procuring a revenue tothem, yet when it first comes either from the ground or from thehands of the productive labourer, it naturally divides itself into[Pg 59]two parts. One of them, and frequently the largest, is, in the firstplace, destined for replacing a capital, or for renewing the provisions,materials, and finished work, which had been withdrawnfrom a capital; the other for constituting a revenueeither to the owner of this capital, as the profit of his stock, orto some other person, as the rent of his land.’[71]

‘The gross revenue of all the inhabitants of a great countrycomprehends the whole annual produce of their land andlabour; the neat revenue, what remains free to them afterdeducting the expense of maintaining, first, their fixed, andsecondly, their circulating capital; or what, without encroachingupon their capital, they can place in their stock reserved forimmediate consumption, or spend upon their subsistence, conveniencies,and amusements. Their real wealth too is in proportion,not to their gross, but to their neat revenue.’[72]

The concepts of total capital and income appear here in amore comprehensive and stricter form than in theTableauÉconomique. The one-sided connection of social income withagriculture is severed and social income becomes a broaderconcept; and a broader concept of capital in its two forms, fixedand circulating capital, is made the basis of social production asa whole. Instead of the misleading differentiation of productioninto two departments, agriculture and industry, other categoriesof real importance are here brought to the fore: the distinctionbetween capital and income and the distinction, further,between fixed and circulating capital.

Now Smith proceeds to a further analysis of the mutual relationsof these categories and of how they change in the courseof the social process, in production and circulation—in the reproductiveprocess of society. He emphasises here a radicaldistinction between fixed and circulating capital from the pointof view of the society:

‘The whole expense of maintaining the fixed capital must[Pg 60]evidently be excluded from the neat revenue of the society.Neither the materials necessary for supporting their usefulmachines and instruments of trade, their profitable buildings,etc., nor the produce of the labour necessary for fashioningthose materials into the proper form, can ever make any part ofit. The price of that labour may indeed make a part of it; asthe workmen so employed may place the whole value of theirwages in their stock reserved for immediate consumption. Butin other sorts of labour, both the price and the produce go tothis stock, the price to that of the workmen, the produce to thatof other people whose subsistence, convenience and amusementsare augmented by the labour of those workmen.’[73]

Here Smith comes up against the important distinction betweenworkers who produce means of production and thosewho produce consumer goods. With regard to the former heremarks that they create the value—destined to replace theirwages and to serve as their income—in the form of means ofproduction such as raw materials and instruments which intheir natural form cannot be consumed. With regard to thelatter category of workers, Smith observes that conversely thetotal product, or better that part of value contained in it whichreplaces the wages, the income of the workers together with itsother remaining value, appears here in the form of consumergoods. (The real meaning latent in this conclusion, thoughSmith does not say so explicitly, is that the part of the productwhich represents the fixed capital employed in its productionappears likewise in this form.) In the further course of ourinvestigation we shall see how close Smith has here come to thevantage point from which Marx tackled the problem. Thegeneral conclusion, however, maintained by Smith without anyfurther examination of the fundamental question, is that, in anycase, whatever is destined for the preservation and renewal ofthe fixed capital of society cannot be added to society’s netincome.

The position is different with regard to circulating capital.‘But though the whole expenses of maintaining the fixed capitalis thus necessarily excluded from the neat revenue of thesociety, it is not the same case with that of maintaining the circulatingcapital. Of the four parts of which this latter capital is[Pg 61]composed, money, provisions, materials and finished work, thethree last, it has already been observed, are regularly withdrawnfrom it and placed either in the fixed capital of the society, orin their stock reserved for immediate consumption. Whateverportion of those consumable goods is not employed in maintainingthe former, goes all to the latter, and makes a part ofthe neat revenue of the society, besides what is necessary formaintaining the fixed capital.’[74]

We see that Smith here simply includes in this category ofcirculating capital everything but the fixed capital alreadyemployed, that is to say, foodstuffs and raw materials and inpart commodities which, according to their natural form, belongto the replacement of fixed capital. Thus he has made theconcept of circulating capital vague and ambiguous. But afurther and most important distinction crops up and cuts rightthrough this conception: ‘The circulating capital of a society isin this respect different from that of an individual. That of anindividual is totally excluded from making any part of his neatrevenue, which must consist altogether in his profits. But thoughthe circulating capital of every individual makes a part of thatof the society to which he belongs, it is not upon that accounttotally excluded from making a part likewise of their neatrevenues.’[75]

In the following illustration Smith expounds what he means:‘Though the whole goods in a merchant’s shop must by nomeans be placed in his own stock reserved for immediate consumption,they may in that of other people, who, from arevenue derived from other funds, may regularly replace theirvalue to him, together with its profits, without occasioning anydiminution either of his capital or theirs.’[76]

Here Smith has established fundamental categories withregard to the reproduction and movement of circulating socialcapital. Fixed and circulating capital, private and social capital,private and social revenue, means of production and consumergoods, are marked out as comprehensive categories, and theirreal, objective interrelation is partly indicated and partlydrowned in the subjective and theoretical contradictions ofSmith’s analysis. The concise, strict, and classically clear scheme[Pg 62]of the Physiocrat theory is dissolved here into a disorderlyjumble of concepts and relations which at first glance appearsan absolute chaos. But we may already perceive new connectionswithin the social process of reproduction, understood bySmith in a deeper, more modern and vital way than was withinQuesnay’s grasp, though, like Michelangelo’s slave in the unhewnblock of marble, they are still inchoate.

This is the only illustration Smith gives of this problem.But at the same time he attacks it from another angle—by ananalysis of value. This very same theory which represents anadvance beyond the Physiocrats—the theory that it is an essentialquality of all labour to create value; the strictly capitalistdistinction between paid labour replacing wages, and unpaidlabour creating surplus value; and, finally, the strict division ofsurplus value into its two main categories, of profit and rent—allthis progress from the analysis of the Physiocrats leads Smithto the strange proposition that the price of every commodityconsists of wages, plus profits, plus rent, or, in Marx’s shorthand,ofv +s. In consequence, the commodities annually producedby society as a whole can be resolved completely, as tovalue, into the two components: wages and surplus value. Herethe category of capital has disappeared all of a sudden; societyproduces nothing but income, nothing but consumer goods,which it also consumes completely. Reproduction withoutcapital becomes a paradox, and the treatment of the problemas a whole has taken an immense backward step against that ofthe Physiocrats.

The followers of Adam Smith have tackled this twofoldtheory from precisely the wrong approach. Before Marx nobodyconcerned himself with the important beginnings of an exactexposition of the problem in Smith’s second book, while mostof his followers jealously preserved Smith’s radically wronganalysis of prices, accepting it, like Ricardo, without question,or else, like Say, elaborating it into a trite doctrine. WhereSmith raised fruitful doubts and stimulating contradictions, Sayflaunted the opinionated presumption of a commonplace mind.Smith’s observation that the capital of one person may be therevenue of another induced Say to proclaim every distinctionbetween capital and income on the social scale to be absurd.The absurdity, however, that income should completely absorb[Pg 63]the total value of annual production which is thus consumedcompletely, assumes in Say’s treatment the character of anabsolutely valid dogma. If society annually consumes its owntotal product completely, social reproduction without anymeans of production whatever must become an annual repetitionof the Miracle of the Creation.

CHAPTER III

A CRITICISM OF SMITH’S ANALYSIS

(1) There is a fixed capital of society, no part of whichenters into its net revenue. This fixed capital consists in ‘thematerials necessary for supporting their useful machines andinstruments of trade’ and ‘the produce of labour necessary forfashioning those materials into the proper form’.[77] By singlingout the production of such fixed capital as of a special kind, andexplicitly contrasting it with the production of consumer goods,Smith in effect transformed fixed capital into what Marx calls‘constant capital’—that part of capital which consists of allmaterial means of production, as opposed to labour power.

(2) There is a circulating capital of society. After eliminatingthe part of fixed, or constant, capital, there remains only thecategory of consumer goods; these are not capital for societybut net revenue, a fund of consumption.

(3) Capital and net revenue of an individual do not strictlycorrespond with capital and net revenue of society. What isnothing but fixed, or constant capital for society as a wholecannot be capital for the individual; it must be revenue, too, afund of consumption, comprising as it does those parts of fixedcapital which represent the workers’ wages and the capitalists’profits. On the other hand, the circulating capital of the individualscannot be capital for society but must be revenue, especiallyin so far as it takes the form of provisions.

(4) As regards the value of the total annual social product, notrace of capital remains. It can be resolved completely into thethree kinds of income: wages, profits of capital, and rents.

If we tried from this haphazard collection of odd ideas tobuild up a picture of the annual reproduction of total social[Pg 65]capital, and of its mechanism, we should soon despair of ourtask. Indeed, all these observations leave us infinitely remotefrom the solution of the problem how social capital is annuallyrenewed, how everybody’s consumption is ensured by hisincome, while the individuals can nevertheless adhere to theirown points of view on capital and income. Yet if we wish toappreciate fully Marx’s contribution to the elucidation of thisproblem, we must be fully aware of all this confusion of ideas,the mass of conflicting points of view.

Let us begin with Adam Smith’s last thesis which alone wouldsuffice to wreck the treatment of the problem of reproduction inclassical economics.

Smith’s basic principle is that the total produce of society,when we consider its value, resolves itself completely into wages,profits and rents: this conception is deeply rooted in his scientifictheory that value is nothing but the product of labour. Alllabour performed, however, is wage labour. This identificationof human labour with capitalist wage labour is indeed theclassical element in Smith’s doctrine. The value of the aggregateproduct of society comprises both the recompense for wagesadvanced and a surplus from unpaid labour appearing as profitfor the capitalist and rent for the landowner. What holds goodfor the individual commodity must hold good equally for theaggregate of commodities. The whole mass of commodities producedby society—taken as a quantity of value—is nothing buta product of labour, of paid as well as unpaid labour, and thusit is also to be completely resolved into wages, profits, and rents.

It is of course true that raw materials, instruments, and thelike, must be taken into consideration in connection with alllabour. Yet is it not true also that these raw materials and instrumentsin their turn are equally products of labour whichagain may have been paid or unpaid? We may go back as far aswe choose, we may twist and turn the problem as much as welike, yet we shall find no element in the value of any commodity—andtherefore none in the price—which cannot be resolvedpurely in terms of human labour. We can distinguish, however,two parts in all labour: one part repays the wages and the otheraccrues to the capitalist and landlord. There seems nothing leftbut wages and profits—and yet, there is capital, individual andsocial capital. How can we overcome this blatant contradiction?[Pg 66]The fact that Marx himself stubbornly pursued this matter fora long time without getting anywhere at first as witness hisTheories of the Surplus Value,[78] proves that this theoretical problemis indeed extremely hard to solve. Yet the solution he eventuallyhit on was strikingly successful, and it is based upon his theoryof value. Adam Smith was perfectly right: nothing but labourconstitutes the value of the individual commodity and of theaggregate of commodities. He was equally right in saying thatfrom a capitalist point of view all labour is either paid labourwhich restores the wages, or unpaid labour which, as surplusvalue, accrues to the various classes owning the means of production.What he forgot, however, or rather overlooked, is thefact that, apart from being able to create new value, labourcan also transfer to the new commodities the old values incorporatedin the means of production employed. A baker’sworking day of ten hours is, from the capitalist point of view,divided into paid and unpaid hours, intov +s. But the commodityproduced in these ten hours will represent a greatervalue than that of ten hours’ labour, for it will also contain thevalue of the flour, of the oven which is used, of the premises, ofthe fuel and so on, in short the value of all the means of productionnecessary for baking. Under one condition alone could thevalue of any one commodity be strictly equal tov +s; if a manwere to work in mid-air, without raw materials, without tools orworkshop. But since all work on materials (material labour)presupposes means of production of some sort which themselvesresult from preceding labour, the value of this past labour is ofnecessity transferred to the new product.

The process in question does not only take place in capitalistproduction; it is the general foundation of human labour, quiteindependent of the historical form of society. The handling ofman-made tools is a fundamental characteristic of humancivilisation. The concept of past labour which precedes all newlabour and prepares its basis, expresses the nexus between manand nature evolved in the history of civilisation. This is theeternal chain of closely interwoven labouring efforts of humansociety, the beginnings of which are lost in the grey dawn ofthe socialisation of mankind, and the termination of whichwould imply the end of the whole of civilised mankind. Therefore[Pg 67]we have to picture all human labour as performed with thehelp of tools which themselves are already products of antecedentlabour. Every new product thus contains not only thenew labour whereby it is given its final form, but also pastlabour which had supplied the materials for it, the instrumentsof labour and so forth. In the production of value, that is commodityproduction into which capitalist production also enters,this phenomenon is not suspended, it only receives a particularexpression. Here the labour which produces commoditiesassumes a twofold characteristic: it is on the one hand usefulconcrete labour of some kind or other, creating the useful object,the value-in-use. On the other hand, it is abstract, general,socially necessary labour and as such creates value. In its firstaspect it does what labour has always done: it transfers to thenew product past labour, incorporated in the means of productionemployed, with this distinction only, that this past labour,too, now appears as value, as old value. In its second aspect,labour creates new value which, in capitalist terms, can bereduced to paid and unpaid labour, tov +s. Thus the value ofevery commodity must contain old value which has been transferredby labourqua useful concrete labour from the means ofproduction to the commodity, as well as the new value, createdby the same labourqua socially necessary labour merely as thislabour is expended hour by hour.

This distinction was beyond Smith: he did not differentiatethe twofold character of value-creating labour. Marx onceclaimed to have discovered the ultimate source of Smith’sstrange dogma—that the aggregate of produced values can becompletely resolved intov +s—in his fundamentally erroneoustheory of value.[79] Failure to differentiate between the two aspectsof commodity-producing labour as concrete and useful labouron the one hand, and abstract and socially necessary labour onthe other, indeed forms one of the most important characteristicsof the theory of value as conceived not only by Smith but by allmembers of the classical school.

Disregarding all social consequences, classical economics recognisedthat human labour alone is the factor which createsvalue, and it worked out this theory to that degree of claritywhich we meet in Ricardo’s formulation. There is a fundamental[Pg 68]distinction, however, between Marx’s theory of valueand Ricardo’s, a distinction which has been misunderstood notonly by bourgeois economists but also in most cases by thepopularisers of Marx’s doctrine: Ricardo, conceiving as he did,of bourgeois economy in terms of natural law, believed also thatthe creation of value, too, is a natural property of human labour,of the specific and concrete labour of the individual humanbeing.

This view is even more blatantly revealed in the writings ofAdam Smith who for instance declares what he calls the ‘propensityto exchange’ to be a quality peculiar to human nature,having looked for it in vain in animals, particularly in dogs.And although he doubted the existence of the propensity toexchange in animals, Smith attributed to animal as well ashuman labour the faculty of creating value, especially when heoccasionally relapses into the Physiocrat doctrine:

‘No equal capital puts into motion a greater quantity of productivelabour than that of the farmer. Not only his labouringservants, but his labouring cattle, are productive labourers....’[80]

‘The labourers and labouring cattle, therefore, employed inagriculture, not only occasion, like the workmen in manufactures,the reproduction of a value equal to their own consumption,or to the capital which employs them, together with itsowner’s profits, but of a much greater value. Over and abovethe capital of the farmer and all its profits, they regularlyoccasion the reproduction of the rent of the landlord.’[81]

Smith’s belief that the creation of value is a direct physiologicalproperty of labour, a manifestation of the animalorganism in man, finds its most vivid expression here. Just as thespider produces its web from its own body, so labouring manproduces value—labouring man pure and simple, every manwho produces useful objects—because labouring man is by birtha producer of commodities; in the same way human societyis founded by nature on the exchange of commodities, and acommodity economy is the normal form of human economy.

It was left to Marx to recognise that a given value coversa definite social relationship which develops under definitehistorical conditions. Thus he came to discriminate between thetwo aspects of commodity-producing labour: concrete individual[Pg 69]labour and socially necessary labour. When this distinctionis made, the solution of the money problem becomes clear also,as though a spotlight had been turned on it.

Marx had to establish a dynamic distinction in the courseof history between the commodity producer and the labouringman, in order to distinguish the twin aspects of labour whichappear static in bourgeois economy. He had to discover that theproduction of commodities is a definite historical form of socialproduction before he could decipher the hieroglyphics of capitalisteconomy. In a word, Marx had to approach the problemwith methods of deduction diametrically opposed to those of theclassical school, he had in his approach to renounce the latter’sfaith in the human and normal element in bourgeois productionand to recognise their historical transience: he had toreverse the metaphysical deductions of the classics into theiropposite, the dialectical.

On this showing Smith could not possibly have arrived at aclear distinction between the two aspects of value-creatinglabour, which on the one hand transfers the old value incorporatedin the means of production to the new product, and onthe other hand creates new value at the same time. Moreover,there seems to be yet another source of his dogma that totalvalue can be completely resolved intov +s. We should be wrongto assume that Smith lost sight of the fact that every commodityproduced contains not only the value created by its production,but also the values incorporated in all the means of productionthat had been spent upon it in the process of manufacturing it.By the very fact that he continually refers us from one stage ofproduction to a former one—sending us, as Marx complains,from pillar to post, in order to show the complete divisibility ofthe aggregate value intov +s—Smith proves himself well awareof the point. What is strange in this connection is that he againand again resolves the old value of the means of production, too,intov +s, so as finally to cover the whole value contained in thecommodity.

‘In the price of corn, for example, one part pays the rent ofthe landlord, another pays the wages of maintenance of thelabourers and labouring cattle employed in producing it, andthe third pays the profit of the farmer. These three parts (wages,profit, and rent) seem either immediately or ultimately to make[Pg 70]up the whole price of corn. A fourth part, it may perhaps bethought, is necessary for replacing the stock of the farmer, or forcompensating the wear and tear of his labouring cattle andother instruments of husbandry. But it must be considered thatthe price of any instrument of husbandry, such as a labouringhorse, is itself made up of the same three parts: the rent of theland upon which he is reared, the labour of tending and rearinghim, and the profits of the farmer who advances both the rentof this land and the wages of this labour. Though the price ofthe corn, therefore, may pay the price as well as the maintenanceof the horse, the whole price still resolves itself eitherimmediately or ultimately into the same three parts of rent, oflabour, and profit.’[82]

Apparently Smith’s confusion arose from the following premises:first, that all labour is performed with the help of meansof production of some kind or other—yet what are these meansof production associated with any given labour (such as rawmaterials and tools) if not the product of previous labour? Flouris a means of production to which the baker adds new labour.Yet flour is the result of the miller’s work, and in his hands itwas not a means of production but the very product, in the sameway as now the bread and pastries are the product of the baker.This product, flour, again presupposes grain as a means of production,and if we go one step further back, this corn is not ameans of production in the hands of the farmer but the product.It is impossible to find any means of production in whichvalue is embodied, without it being itself the product of someprevious labour.

Secondly, speaking in terms of capitalism, it follows furtherthat all capital which has been completely used up in the manufactureof any commodity, can in the end be resolved into acertain quantity of performed labour.

Thirdly, the total value of the commodity, including allcapital advances, can readily be resolved in this manner into acertain quantity of labour. What is true for every commodity,must go also for the aggregate of commodities produced by asociety in the course of a year; its aggregate value can similarlybe resolved into a quantity of performed labour.

Fourthly, all labour performed under capitalist conditions is[Pg 71]divided into two parts: paid labour which restores the wagesadvanced, and unpaid labour which creates profit and rent, orsurplus value. All labour carried out under capitalist conditionsthus corresponds to our formulav +s.[83]

All the arguments outlined above are perfectly correct andunassailable. Smith handled them in a manner which proveshis scientific analysis consistent and undeviating, and his conceptionsof value and surplus value a distinct advance on thePhysiocrat approach. Only occasionally, in his third thesis, hewent astray in his final conclusion, saying that the aggregatevalue of the annually produced aggregate of commodities canbe resolved into the labour of that very year, although he himselfhad been acute enough to admit elsewhere that the value ofthe commodities a nation produces in the course of one yearnecessarily includes the labour of former years as well, that is thelabour embodied in the means of production which have beenhanded down.

But even if the four statements enumerated are perfectlycorrect in themselves, the conclusion Smith draws from them—thatthe total value of every commodity, and equally of theannual aggregate of commodities in a society, can be resolvedentirely intov +s—is absolutely wrong. He has the right ideathat the whole value of a commodity represents nothing butsocial labour, yet identifies it with a false principle, that allvalue is nothing butv +s. The formulav +s expresses the functionof living labour under capitalism, or rather its doublefunction, first to restore the wages, or the variable capital, andsecondly, to create surplus value for the capitalist. Wage labourfulfils this function whilst it is employed by the capitalists, invirtue of the fact that the value of the commodities is realised incash. The capitalist takes back the variable capital he hadadvanced in form of wages, and he pockets the surplus value aswell.v +s therefore expresses the relation between wage labourand capitalist, a relationship that is terminated in every instance[Pg 72]as soon as the process of commodity production is finished. Oncethe commodity is sold, and the relationv +s is realised for thecapitalist in cash, the whole relationship is wiped out and leavesno traces on the commodity. If we examine the commodity andits value, we cannot ascertain whether it has been produced bypaid or by unpaid labour, nor in what proportion these havecontributed. Only one fact is beyond doubt: the commoditycontains a certain quantity of socially necessary labour which isexpressed in its exchange. It is completely immaterial for the actof exchange as well as for the use of the commodity whether thelabour which produced it could be resolved intov +s or not. Inthe act of exchange all that matters is that the commodity representsvalue, and only its concrete qualities, its usefulness, arerelevant to the use we make of it. Thus the formulav +s onlyexpresses, as it were, the intimate relationship between capitaland labour, the social function of wage labour, and in theactual product this is completely wiped out. It is different withthe constant capital which has been advanced and invested inmeans of production, because every activity of labour requirescertain raw materials, tools, and buildings. The capitalist characterof this state of affairs is expressed by the fact that thesemeans of production appear as capital, asc, the property ofa person other than the labourer, divorced from labour, theproperty of those who themselves do not work. Secondly, theconstant capitalc, a mere advance laid out for the purpose ofcreating surplus value, appears here only as the foundation ofv +s. Yet the concept of constant capital involves more thanthis: it expresses the function of the means of production in theprocess of human labour, quite independently of all its historicalor social forms. Everybody must have raw materials and workingtools, the means of production, be it the South Sea Islanderfor making his family canoe, the communist peasant communityin India for the cultivation of their communal land, the Egyptianfellah for tilling his village lands or for building Pharaoh’spyramids, the Greek slave in the small workshops of Athens,the feudal serf, the master craftsman of the medieval guild, orthe modern wage labourer. They all require means of productionwhich, having resulted from human labour, express thelink between human labour and natural matter, and constitutethe eternal and universal prerequisites of the human process of[Pg 73]production.c in the formulac +v +s stands for a certain functionof the means of production which is not wiped out in the successionof the labour process. Whereas it is completely immaterial,for both the exchange and the actual use made of a commodity,whether it has been produced by paid or by unpaid labour, bywage labour, slave labour, forced labour or any other kind oflabour; on the other hand, it is of decisive importance, as forusing it, whether the commodity is itself a means of productionor a consumer good. Whether paid or unpaid labour has beenemployed in the production of a machine, matters to the machinerymanufacturer and to his workers, but only to them; forsociety, when it acquires this machine by an act of exchange,only the quality of this machine as a means of production, onlyits function in the process of production is of importance. Just asevery producing society, since time immemorial, has had to givedue regard to the important function of the means of productionby arranging, in each period of production, for the manufactureof the means of production requisite for the next period, socapitalist society, too, cannot achieve its annual production ofvalue to accord with the formulav +s—which indicates theexploitation of wage labour—unless there exists, as the result ofthe preceding period, the quantity of means of productionnecessary to make up the constant capital. This specific connectionof each past period of production with the period followingforms the universal and eternal foundation of the social processof reproduction and consists in the fact that in every periodparts of the produce are destined to become the means of productionfor the succeeding period: but this relation remainedhidden from Smith’s sight. He was not interested in means ofproduction in respect of their specific function within the processto which they are applied; he was only concerned with themin so far as they are like any other commodity, themselves theproduct of wage labour that has been employed in a capitalistmanner. The specifically capitalist function of wage labour inthe productive process completely obscured for him the eternaland universal function of the means of production within thelabour process. His narrow bourgeois approach overlooked completelythe general relations between man and nature underneaththe specific social relations between capital and wagelabour. Here, it seems, is the real source of Adam Smith’s strange[Pg 74]dogma, that the total value of the annual social product can beresolved intov +s. He overlooked the fact thatc as the first linkin the formulac +v +s is the essential expression of the generalsocial foundation of exploitation of wage labour by capital.

We conclude that the value of every commodity must be expressedby the formulac +v +s. The question now arises howfar this formula applies to the aggregate of commodities withina society. Let us turn to the doubts expressed by Smith on thispoint, the statement that an individual’s fixed and circulatingcapital and his revenue do not strictly correspond to the samecategories from the point of view of society. (Cf. above,p. 64,no. 3.) What is circulating capital for one person is not capitalfor another, but revenue, as for instance capital advances forwages. This statement is based upon an error. If the capitalistpays wages to the workers, he does not abandon his variablecapital and let it stray into the workers’ hands, to become theirincome. He only exchanges the value-form of his variablecapital against its natural form, labour power. The variablecapital remains always in the hand of the capitalist, first asmoney, and then as labour power, to revert to him latertogether with the surplus value as the cash proceeds from thecommodities. The worker, on the other hand, never gainspossession of the variable capital. His labour power is nevercapital to him, but it is his only asset, the power to work is theonly thing he possesses. Again, if he has sold it and taken amoney wage, this wage is for him not capital but the price of hiscommodity which he has sold. Finally, the fact that the workerbuys provisions with the wages he has received, has no moreconnection with the function this money once fulfilled as variablecapital in the hands of the capitalist, than has the privateuse a vendor of a commodity can make of the money he hasobtained by a sale. It is not the capitalist’s variable capitalwhich becomes the workers’ income, but the price of theworker’s commodity ‘labour power’ which he has sold, while thevariable capital, now as ever, remains in the hands of the capitalistand fulfils its specific function. Equally erroneous is theconception that the income of the capitalist (the surplus value)which is hidden in machines—in our example of a machinerymanufacturer—which has not as yet been realised, is fixedcapital for another person, the buyer of the machines. It is not[Pg 75]the machines, or parts of them, which form the income of themachinery manufacturer, but the surplus value that is hiddenin them—the unpaid labour of his wage labourers. After themachine has been sold, this income simply remains as before inthe hand of the machinery manufacturer; it has only changedits outward shape: it has been changed from the ‘machine-form’into the ‘money-form’. Conversely, the buyer of this machinehas not, by its purchase, newly obtained possession of his fixedcapital, for he had this fixed capital in hand even before thepurchase, in the form of a certain amount of cash. By buying thismachine, he has only given to his capital the adequate materialform for it to become productive. The income, or surplusvalue, remains in the hands of the machinery manufacturerbefore and after the sale of the machine, and the fixed capitalremains in the hands of the other person, the capitalist buyerof the machine, just as the variable capital in the first examplealways remained in the hands of the capitalist and the incomein the hands of the worker.

Smith and his followers have caused confusion because, intheir investigation of capitalist exchange, they mixed up the use-formof the commodities with their relations of value. Further,they did not distinguish the individual circulations of capitalsand commodities which are ever interlacing. One and the sameact of exchange can be circulation of capital, when seen fromone aspect, and at the same time simple commodity exchangefor the purpose of consumption. The fallacy that whatever iscapital for one person must be income for another, andviceversa, must be translated thus into the correct statement thatwhat is circulation of capital for one person, may be simplecommodity exchange for another, andvice versa. This onlyexpresses the capacity of capital to undergo transformations ofits character, and the interconnections of various spheres ofinterest in the social process of exchange. The sharply outlinedexistence of capital in contrast with income still stands in bothits clearly defined forms of constant and variable capital. Evenso, Smith comes very close to the truth when he states thatcapital and income of the individual are not strictly identicalwith the same categories from the point of view of the community.Only a few further connecting links are lacking for aclear revelation of the true relationship.

CHAPTER IV

MARX’S SCHEMEOF SIMPLE REPRODUCTION

Let us now consider the formulac +v +s as the expressionof the social product as a whole. Is it only a theoreticalabstraction, or does it convey any real meaning whenapplied to social life—has the formula any objective existence inrelation to society as a whole? It was left to Marx to establish thefundamental importance ofc, the constant capital, in economictheory. Yet Adam Smith before him, working exclusively withthe categories of fixed and circulating capital, in effect transformedthis fixed capital into constant capital, though he wasnot aware of having achieved this result. This constant capitalcomprises not only those means of production which wear outin the course of years, but also those which are completelyabsorbed by production in any one year. His very dogma thatthe total value is resolved intov +s and his arguments on thispoint lead Smith to distinguish between the two categories ofproduction—living labour and inanimate means of production.On the other hand, when he tries to construe the social processof reproduction on the basis of the capitals and incomes ofindividuals, the fixed capital he conceives of as existing apartfrom these, is, in fact, constant capital.

Every individual capitalist uses for the production of his commoditiescertain material means of production such as premises,raw materials and instruments. In order to produce the aggregateof commodities in a given society, an aggregate of allmaterial means of production used by the individual capitalistsis an obvious requisite. The existence of these means of productionwithin the society is a real fact, though they themselvesexist in the form of purely private individual capitals. This is theuniversal absolute condition of social production in all itshistorical forms.[84]

[Pg 77]The specific capitalist form manifests itself in the fact that thematerial means of production function asc, as constant capital,the property of those who do not work; it is the opposite pole toproletarianised labour power, the counterpart of wage labour.The variable capital,v, is the aggregate of wages actually paidin the society in the course of a year’s production. This fact, too,has real objective existence, although it manifests itself in aninnumerable mass of individual wages. In every society theamount of labour power actually engaged in production and theannual maintenance of the workers is a question of decisiveimportance. Where this factor takes the specific capitalist formofv, the variable capital, it follows that the means of subsistencefirst come to the workers in form of a wage which is the price ofthe labour power they have sold to another person, the ownerof the material means of production who does not work himself;under this aspect, it is the latter’s capitalist property. Further,v is an aggregate of money, that is to say it is the means of subsistencefor the workers in a form of pure value. This concept ofv implies that the workers are free in a double sense—free inperson and free of all means of production. It also expresses thefact that in a given society the universal form of production iscommodity production.

Finally,s, the surplus value, stands for the total of all surplusvalues gained by the individual capitalists. Every society performssurplus labour, and even a socialist society will have to dothe same. It must perform surplus labour in a threefold sense:it has to provide a quantity of labour for the maintenance ofnon-workers (those who are unable to work, such as children,old people, invalids, and also civil servants and the so-calledliberal professions who do not take an immediate part in thesatisfaction of material[85] wants), it has to provide a fund of socialinsurance against elementary disasters which may threaten theannual produce, such as bad harvests, forest fires and floods;[Pg 78]and lastly it must provide a fund for the purpose of increasingproduction, either because of an increase in the population, orbecause higher standards of civilisation lead to additional wants.It is in two respects that the capitalist character manifests itself:surplus labour comes into being (1) as surplus value, i.e. incommodity-form, realisable in cash, and (2) as the property ofnon-workers, of those who own the means of production.

Similarly, if we considerv +s, these two amounts takentogether, we see that they represent objective quantities ofuniversal validity: the total of living labour that has been performedwithin a society in the course of one year. Every humansociety, whatever its historical form, must take note of thisdatum, with reference to both the results that have beenachieved, and the existing and available labour power. Thedivision intov +s is a universal phenomenon, independent of thesociety’s particular historical form. In its capitalist form, thisdivision shows itself not only in the qualitative peculiarities ofbothv ands as already outlined, but also in their quantitativerelationship:v tends to become depressed to a minimum level,just sufficient for the physiological and social existence of theworker, ands tends to increase continually at the cost of, andrelative to,v.

The predominant feature of capitalist production is expressedin this last circumstance: it is the fact that the creation andappropriation of surplus value is the real purpose of, and theincentive to, production.

We have examined the relations upon which the capitalistformula of the aggregate product is based, and have found themuniversally valid. In every planned economy they are made theobject of conscious regulation on the part of society; in a communistsociety by the community of workers and their democraticorgans, and in a society based upon class-rule by thenucleus of owners and their despotic power. In a system ofcapitalist production there is no such planned regulation. Theaggregate of the society’s capitals and the aggregate of its commoditiesalike consist in reality of innumerable fragments ofindividual capitals and individual items of merchandise, takentogether.

Thus the question arises whether these sums themselves meananything more in a capitalist society than a mere statistical[Pg 79]enumeration which is, moreover, inexact and fluid. Applyingthe standards of society as a whole, we perceive that thecompletely independent and sovereign individual existence ofprivate enterprises is only the historically conditioned form,whereas it is social interconnections that provide the foundation.Although individual capitals act in complete independenceof one another, and a social regulation is completely lacking, themovement of capitals forms a homogeneous whole. This movement,too, appears in specifically capitalist forms. In everyplanned system of production it is, above all, the relation betweenall labour, past and present, and the means of production(betweenv +s andc, according to our formula), or the relationbetween the aggregate of necessary consumer goods (again, inthe terms of our formula,v +s) andc which are subjected toregulation. Under capitalist conditions, on the other hand, allsocial labour necessary for the maintenance of the inanimatemeans of production and also of living labour power is treatedas one entity, as capital, in contrast with the surplus labour thathas been performed, i.e. with the surplus values. The relationbetween these two quantitiesc and (v +s) is a palpably real,objective relationship of capitalist society: it is the average rateof profit; every capital is in fact treated only as part of a commonwhole, the whole of social capital, and assigned the profit towhich it is entitled, according to its size, out of the surplus valuewrested from society, regardless of the quantity which thisparticular capital has actually created. Thus social capital andits counterpart, the whole of social surplus value, are not merelyreal quantities, having an objective existence, but, what is more,the relation between them, the average profit, guides and directsthe whole process of exchange. This it does in three ways:(1) by the mechanism of the law of value which establishes thequantitative relations of exchange between the individual kindsof commodities independently of their specific value relationship;(2) by the social division of labour, the assignment ofcertain portions of capital and labour to the individual spheresof production; (3) by the development of labour productivitywhich on the one hand stimulates individual capitals to engagein pioneering work for the purpose of securing a higher profitthan the average, and on the other hand extends the progressthat has been achieved by individuals over the whole field of[Pg 80]production. By means of the average rate of profit, in a word,the total capital of society completely governs the seeminglyindependent motions of individual capitals.

The formulac +v +s thus applies to the aggregate of commoditiesproduced in a society under capitalism no less thanto the value composition of every individual commodity. It is,however, only the value-composition for which this holds good—theanalogy cannot be carried further.

The formula is indeed perfectly exact if we regard the totalproduct of a capitalistically producing society as the output ofone year’s labour, and wish to analyse it into its respective components.The quantityc shows how much of the labour of formeryears has been taken over towards the product of the presentyear in the form of means of production. Quantitiesv +s showthe value components of the product created by new labourduring the last year only; the relation betweenv ands finallyshows us how the annual labour programme of society is apportionedto the two tasks of maintaining the workers andmaintaining those who do not work. This analysis remains validand correct also with regard to the reproduction of individualcapital, no matter what may be the material form of the productthis capital has created. All three,c,v, ands, appear alike to acapitalist of the machinery industry in the form of machineryand its parts; to the owner of a music hall they are representedby the charms of the dancers and the skill of the acrobats. Solong as the product is left undifferentiated,c,v, ands differ fromone another only in so far as they arealiquot components ofvalue. This is quite sufficient for the reproduction of individualcapital, as such reproduction begins with the value-form ofcapital, a certain amount of money that has been gained by therealisation of the manufactured product. The formulac +v +sthen is the given basis for the division of this amount of money;one part for the purchase of the material means of production,a second part for the purchase of labour power, and a third part—inthe case of simple reproduction assumed in the first instance—forthe capitalist’s personal consumption. In the case ofexpanding reproduction part three is further subdivided, only afraction of it being devoted to the capitalist’s personal consumption,the remainder to increasing his capital. In order to reproducehis capital actually, the capitalist must, of course, turn[Pg 81]again to the commodity market with the capital he has dividedin this manner, so that he can acquire the material prerequisitesof production such as raw materials, instruments, and so on. Itseems a matter of course to the individual capitalist as well as tohis scientific ideologist, the ‘vulgar economist’, that he should infact find there just those means of production and labour powerhe needs for his business.

The position is different as regards the total production ofa society. From the point of view of society as a whole, theexchange of commodities can only effect a shifting around,whereby the individual parts of the total product change hands.The material composition of the product, however, cannot bechanged by this process. After this change of places, as well asbefore it, there can be reproduction of total capital, if, and onlyif, there is in the total product of the preceding period: first,a sufficient quantity of means of production, secondly, adequateprovisions to maintain the same amount of labour as hitherto,and, last but not least, the goods necessary to maintain thecapitalist class and its hangers-on in a manner suitable to theirstation. This brings us to a new plane: we are now concernedwith material points of view instead of pure relations of value.It is the use-form of the total social product that matters now.What the individual capitalist considers nobody else’s businessbecomes a matter of grave concern for the totality of capitalists.Whereas it does not make the slightest difference to the individualcapitalist whether he produces machinery, sugar, artificialmanure or a progressive newspaper—provided only that he canfind a buyer for his commodity so that he can get back hiscapital plus surplus value—it matters infinitely to the ‘totalcapitalist’ that his total product should have a definite use-form.By that we mean that it must provide three essentials: the meansof production to renew the labour process, simple provisions forthe maintenance of the workers, and provisions of higher qualityand luxury goods for the preservation of the ‘total capitalist’himself. His desire in this respect is not general and vague, butdetermined precisely and quantitatively. If we ask what quantitiesof all three categories are required by the ‘total capitalist’,the value-composition of last year’s total product gives us adefinite estimate, as long, that is, as we confine ourselves tosimple reproduction, which we have taken for our starting[Pg 82]point. Hitherto we have conceived of the formulac +v +s as amerely quantitative division of the total value, applicable aliketo total capital and to individual capital, and representing thequantity of labour contained in the annual product of society.Now we see that the formula is also the basis of the materialcomposition of the product. Obviously the ‘total capitalist’, ifhe is to take up reproduction to the same extent as before, mustfind in his new total product as many means of production ascorrespond to the size ofc, as many simple provisions for theworkers as correspond to the sum of wagesv, and as many provisionsof better quality for himself and his hangers-on as correspondtos. In this way our analysis of the value of the society’saggregate product is translated into a general recipe for thisproduct as follows: the totalc of society must be re-embodiedin an equal quantity of means of production, thev in provisionsfor the workers, and thes in provisions for the capitalists, inorder that simple reproduction may take place.

Here we come up against palpable differences between theindividual capitalist and the total capitalist. The manner inwhich the former always reproduces his constant and variablecapital as well as his surplus value is such that all three partsare contained in the same material form within his homogeneousproduct, that this material form, moreover, is completely irrelevantand may have different qualities in the case of eachindividual capitalist. The ‘total capitalist’, for his part, reproducesevery component of the value of his annual product in adifferent material form,c as means of production,v as provisionsfor the workers, ands as provisions for the capitalists. In thecase of the reproduction of individual capitals, there is no discrepancybetween relations of value and material points of view.Besides, it is quite clear that individual capital may concentrateon aspects of value, accepting material conditions as a law fromheaven, as self-evident phenomena of commodity-exchange,whereas the ‘total capitalist’ has to reckon with material pointsof view. If the totalc of society were not reproduced annuallyin the form of an equal amount of means of production, everyindividual capitalist would be doomed to search the commoditymarket in vain with hisc realised in cash, unable to find therequisite materials for his individual reproduction. From thepoint of view of reproducing the total capital, the formula[Pg 83]c +v +s is inadequate. This again is proof of the fact that theconcept of total capital is something real and does not merelyparaphrase the concept of production. We must, however, makegeneral distinctions in our exposition of total capital: instead ofshowing it as a homogeneous whole, we must demonstrate itsthree main categories; and we shall not vitiate our theory if, forthe sake of simplicity, we consider for the present only twodepartments of total capital: the production of producer goods,and that of consumer goods for workers and capitalists. We haveto examine each department separately, adhering to the fundamentalconditions of capitalist production in each case. At thesame time, we must also emphasise the mutual connections betweenthese two departments from the point of view of reproduction.For only if each is regarded in connection with theother, do they make up the basis of the social capital as a whole.

We made a start by investigating individual capital. But wemust approach the demonstration of total capital and its totalproduct in a somewhat different manner. Quantitatively, as aquantity of value, thec of society consists precisely in the total ofindividual constant capitals, and the same applies to the otheramounts,v ands. But the outward shape of each has changed—thec of constant capitals re-emerges from the process of productionas an element of value with infinitely varied facets,comprising a host of variegated objects for use, but in the totalproduct it appears, as it were, contracted into a certain quantityof means of production. Similarly withv ands, which in the caseof the individual capitalist re-emerge as items in a most colourfuljumble of commodities, being provisions in adequate quantitiesfor the workers and capitalists. Adam Smith came very close torecognising this fact when he observed that the categories offixed and circulating capital and of revenue in relation to theindividual capitalist do not coincide with these categories in thecase of society.

(1) The formulac +v +s serves to express the production ofsociety viewed as a whole, as well as the production of individualcapitalists.

(2) Social production is divided into two departments,engaged in the production of producer and consumer goodsrespectively.

[Pg 84](3) Both departments work according to capitalist methods,that is to say they both aim at the production of surplus value,and thus the formulac +v +s will apply to each of them.

(4) The two departments are interdependent, and are thereforebound to display a certain quantitative relationship, namelythe one department must produce all means of production, theother all provisions for the workers and capitalists of bothdepartments.

Proceeding from this point of view, Marx devised the followingdiagram of capitalist reproduction:

The figures in this diagram express quantities of value,amounts of money which are chosen arbitrarily, but their ratiosare exact. Each department is characterised by the use-form ofthe commodities produced. Their mutual circulation takes placeas follows: Department I supplies the means of production forthe entire productive process, for itself as well as for DepartmentII. From this alone it follows that for the undisturbedcontinuance of reproduction—for we still presume simple reproductionon the old scale—the total produce of Department I(I 6,000) must have the same value as the sum of constantcapitals in both departments: (I 4,000c + II 2,000c). Similarly,Department II supplies provisions for the whole of society, forits own workers and capitalists as well as for the workers andcapitalists of Department I. Hence it follows that for the undisturbedcourse of consumption and production and its renewalon the old scale it is necessary that the total quantity of provisionssupplied by Department II should equal in value allthe incomes of the employed workers and capitalists of society[here II 3,000 = I(1,000v + 1,000s) + II(500v + 500s)].

Here we have indeed expressed relationships of value whichare the foundation not only of capitalist reproduction but ofreproduction in every society. In every producing society, whateverits social form, in the primitive small village community ofthe Bakairi of Brazil, in theoikos of a Timon of Athens with itsslaves, or in the imperialcorvée farm of Charlemagne, the labourpower available for society must be distributed in such a way[Pg 85]that means of production as well as provisions are produced inadequate quantities. The former must suffice for the immediateproduction of provisions as well as for the future renewal of themeans of production themselves, and the provisions in their turnmust suffice for the maintenance of the workers occupied in theproduction alike of these same provisions and of the means ofproduction, and moreover for the maintenance of all those whodo not work.

In its broad outline, Marx’s scheme corresponds with theuniversal and absolute foundation of social reproduction, withonly the following specifications: socially necessary labourappears here as value, the means of production as constantcapital, the labour necessary for the maintenance of the workersas variable capital and that necessary for the maintenance ofthose who do not work as surplus value.

In capitalist society, however, the connections between thesetwo great departments depend upon exchange of commodities,on the exchange of equivalents. The workers and capitalists ofDepartment I can only obtain as many provisions from DepartmentII as they can deliver of their own commodities, themeans of production. The demand of Department II for meansof production, on the other hand, is determined by the size of itsconstant capital. It follows therefore that the sum of the variablecapital and of the surplus value in the production of producergoods [here I(1,000v + 1,000s)] must equal the constant capitalin the production of provisions [here II(2,000c)].

An important proviso remains to be added to the abovescheme. The constant capital which has been spent by the twodepartments is in reality only part of the constant capital usedby society. This constant capital is divided into two parts; thefirst is fixed capital—premises, tools, labouring cattle—whichfunctions in a number of periods of production, in every one ofwhich, however, only part of its value is absorbed by the product,according to the amount of its wear and tear. The secondis circulating capital such as raw materials, auxiliary semi-finishedproducts, fuel and lighting—its whole value is completelyabsorbed by the new product in every period of production.Yet only that part of the means of production is relevantfor reproduction which is actually absorbed by the productionof value; without becoming less correct, an exact exposition of[Pg 86]social circulation may disregard the remaining part of the fixedcapital which has not been absorbed by the product, though itshould not completely forget it. This is easy to prove.

Let us assume that the constant capital, 6,000c, in the twodepartments, which is in fact absorbed by the annual productof these departments, consists of 1,500c fixed and 4,500c circulatingcapital, the 1,500c of fixed capital representing here theannual wear and tear of the premises, machinery and labouringcattle. This annual wear and tear equals, say, 10 per cent ofthe total value of the fixed capital employed. Then the totalsocial capital would really consist of 19,500c + 1,500v, the constantcapital in both departments being 1,500c of fixed and4,500c of circulating capital. Since the term of life of theaggregate fixed capital, with a 10 per cent wear and tear, isten yearsex hypothesi, the fixed capital needs renewal only afterthe lapse of ten years. Meanwhile one-tenth of its value entersinto social production in every year. If all the fixed capital ofa society, with the same rate of wear and tear, were of equaldurability, it would, on our assumption, need complete renewalonce within ten years. This, however, is not the case. Some ofthe various use-forms which are part of the fixed capital maylast longer and others shorter, wear and tear and duration oflife are quite different in the different kinds and individualrepresentations of fixed capital. In consequence, fixed capitalneed not be renewed—reproduced in its concrete use-form—allat once, but parts of it are continually renewed at various stagesof social production, while other parts still function in theirolder form. Our assumption of a fixed capital of 15,000c witha 10 per cent rate of wear and tear does not mean that this mustbe renewed all at once every ten years, but that an annualaverage renewal and replacement must be effected of a partof the total fixed social capital corresponding to one-tenth of itsvalue; that is to say, Department I which has to satisfy the needsof society for means of production must reproduce, year by yearnot only all its raw and partly finished materials, etc., its circulatingcapital to the value of 4,500, but must also reproduce theuse-forms of its fixed capital—premises, machinery, and the like—tothe extent of 1,500, corresponding with the annual wearand tear of fixed capital. If Department I continues in this mannerto renew one-tenth of the fixed capital in its use-form every[Pg 87]year, the result will be that every ten years the total fixed capitalof society will have been replaced throughout by new items;thus it follows that the reproduction of those parts disregardedso far is also completely accounted for in the above scheme.

In practice, the procedure is that every capitalist sets asidefrom his annual production, from the realisation of his commodities,a certain amount for the redemption of his fixedcapital. These individual annual deductions must amount to acertain quantity of capital, therefore the capitalist has in factrenewed his fixed capital, that is, he has replaced it by new andmore efficient items. This alternating procedure of building upannual reserves of money for the renewal of fixed capital andof the periodical employment of the accumulated amounts forthe actual renewal of fixed capital varies with the individualcapitalist, so that some are accumulating reserves, while othershave already started their renewals. Thus every year part of thefixed capital is actually renewed. The monetary procedure hereonly disguises the real process which characterises the reproductionof fixed capital.

On closer observation we see that this is as it should be. Thewhole of the fixed capital takes part in the process of production,for physically the mass of usable objects, premises, machinery,labouring cattle, are completely employed. It is their peculiarityas fixed capital, on the other hand, that only part of the value isabsorbed in the production of value, since in the process ofreproduction (again postulating simple reproduction), all thatmatters is to replace in their natural form the values which havebeen actually used up as means of subsistence and productionduring a year’s production. Therefore, fixed capital need onlybe reproduced to the extent that it has in fact been used up inthe production of commodities. The remaining portion of value,embodied in the total use-form of fixed capital, is of decisiveimportance for production as a labour process, but does notexist for the annual reproduction of society as a process ofvalue-formation.

Besides, this process which is here expressed by relations ofvalue applies equally to every society, even to a communitywhich does not produce commodities. If once upon a time, forinstance, say ten years’ labour of 1,000 fellaheen was requiredfor the construction of the famous Lake Moeris and the related[Pg 88]Nile canals—that miraculous lake, which Herodotus tells us wasmade by hand—and if for the maintenance of this, the mostmagnificent drainage system of the world, the labour of a further100 fellaheen was annually required (the figures, of course, arechosen at random), we might say that after every hundred yearsthe Moeris dam and the canals were reproduced anew, althoughin fact the entire system was not constructed as a whole in everycentury. This is manifestly true. When, amid the stormy incidentsof political history and alien conquests, the usual crudeneglect of old monuments of culture set in—as displayed, e.g. bythe English in India when the reproductional needs of ancientcivilisations were understood no longer—then in the course oftime the whole Lake Moeris, its water, dikes and canals, the twopyramids in its midst, the colossus upon it and other marvellouserections, disappeared without a trace, as though they had neverbeen built. Only ten lines in Herodotus, a dot on Ptolemy’s mapof the world, traces of old cultures, and of villages and citiesbear witness that at one time rich life sprang from this magnificentirrigation system, where to-day there are only stretches ofarid desert in inner Lybia, and desolate swamps along the coast.There is only one point where Marx’s scheme of simple reproductionmay appear unsatisfactory or incomplete in relation toconstant capital, and that is when we go back to that period ofproduction, when the total fixed capital was first created.Indeed, society possesses transformed labour amounting to morethan those parts of fixed capital which are absorbed into thevalue of the annual product and are in turn replaced by it. Inthe figures of our example the total social capital does not consistof 6,000c + 1,500v, as in the diagram, but of 19,500c + 1,500v.Though 1,500 of the fixed capital (which, on our assumption,amounts to 15,000) are annually reproduced in the form ofappropriate means of production, an equal amount is also consumedby the same production each year, though the whole ofthe fixed capital as a use-form, an aggregate of objects, has beenrenewed. After ten years, society possesses in the eleventh, justas in any other year, a fixed capital of 15,000, whereas it hasannually achieved only 1,500c; and its constant capital as awhole is 19,500, whereas it has created only 6,000. Obviously,since it must have created this surplus of 13,500 fixed capital byits labour, it possesses more accumulated past labour than our[Pg 89]scheme of reproduction warrants. Even at this stage, the annuallabour of society must be based on some previous annual labourthat has been hoarded. This question of past labour, however,as the foundation of all present labour, brings us to the very firstbeginning which is as meaningless with regard to the economicdevelopment of mankind as it is for the natural development ofmatter. The scheme of reproduction grasps the social process asperpetually in motion, as a link in the endless chain of events,it neither wants to demonstrate its initial origin, nor should it doso. The social reproductive process is always based on pastlabour, we may trace it back as far as we like. Social labour hasno beginning, just as it has no end. Like the historical origin ofHerodotus’ Lake Moeris, the beginnings of the reproductiveprocess in the history of civilisation are lost in the twilightof legend. With the progress of techniques and with culturaldevelopment, the means of production change their form, crudepaleoliths are replaced by sharpened tools, stone implementsby elegant bronze and iron, the artisan’s tool by steam-drivenmachinery. Yet, though the means of production and the socialorganisation of the productive process continually change theirform, society already possesses for its labour process a certainamount of past labour serving as the basis for annualreproduction.

Under capitalist methods of production past labour of societypreserved in the means of production takes the form of capital,and the question of the origin of this past labour which forms thefoundation of the reproductive process becomes the question ofthe genesis of capital. This is much less legendary, indeed it iswrit in letters of blood in modern history. The very fact, however,that we cannot think of simple reproduction unless weassume a hoard of past labour, surpassing in volume the labourannually performed for the maintenance of society, touches thesore spot of simple reproduction; and it shows that simple reproductionis a fiction not only for capitalist production but also forthe progress of civilisation in general. If we merely wish tounderstand this fiction properly, and to reduce it to a scheme,we must presume, as itssine qua non, results of a past productiveprocess which cannot possibly be restricted to simple reproductionbut inexorably points towards enlarged reproduction. Byway of illustration, we might compare the aggregate fixed[Pg 90]capital of society with a railway. The durability and consequentlythe annual wear and tear of its various parts is verydifferent. Parts such as viaducts and tunnels may last for centuries,steam engines for decades, but other rolling stock will beused up in a short time, in some instances in a few months. Yetit is possible to work out an average rate of wear and tear, saythirty years, so that the value of the whole is annually depreciatedby one thirtieth. This loss of value is now continually madegood by partial reproduction of the railway (which may countas repairs), so that a coach is renewed to-day, part of the engineto-morrow, and a section of sleepers the day after. On ourassumption then, the old railway is replaced by a new one afterthirty years, a similar amount of labour being performed eachyear by the society so that simple reproduction takes place. Butthe railway can only be reproduced in this manner—it cannotbe so produced. In order to make it fit for use and to makegood its gradual wear and tear, the railway must have beencompleted in the first place. Though the railway can be repairedin parts, it cannot be made fit for use piecemeal, an axleto-day and a coach to-morrow. Indeed, the very essence of fixedcapital is always to enter into the productive process in itsentirety, as a material use-value. In order to get this use-formready in the first place, society must apply a more concentratedamount of labour to its manufacture. In terms of our example,the labour of thirty years that is used for repairs, must be compressedinto, say, two or three years. During this period ofmanufacture, society must therefore expend an amount oflabour far greater than the average, that is to say it must haverecourse to expanding reproduction; later, when the railway isfinished, it may return to simple reproduction. Though we neednot visualise the aggregate fixed capital as a single coherent use-objector a conglomeration of objects which must be producedall at once, the manufacture of all the more important means ofproduction, such as buildings, transport facilities, and agriculturalstructures, requires a more concentrated application oflabour, and this is true for the modern railway or steamship asmuch as it was for the rough stone-axe and the handmill. Thereforeit is only in theory that simple reproduction can be conceivedas alternating with enlarged reproduction; the latter isnot only a general condition of a progressive civilisation and an[Pg 91]expanding population, but also thesine qua non for the economicform of fixed capital, or those means of production which inevery society correspond to the fixed capital.

Marx deals with this conflict between the formation of fixedcapital and simple reproduction but indirectly, in connectionwith fluctuations in the wear and tear of the fixed capital, morerapid in some years than in others. Here he emphasises the needfor perpetual ‘over-production’, i.e. enlarged reproduction,since a strict policy of simple reproduction would periodicallylead to reproductive losses. In short, he regards enlarged reproductionunder the aspect of an insurance fund for the fixedcapital of the society, rather than in the light of the actual productiveprocess.[87]

In quite a different context Marx appears to endorse theopinion expressed above. InTheories on the Surplus Value, vol ii,part 2, analysing the conversion of revenue into capital, hespeaks of the peculiar reproduction of the fixed capital, the replacementof which in itself already provides a fund for accumulation.He draws the following conclusion:

‘The point we have in mind is as follows: even if the aggregatecapital employed in machine manufacture were just largeenough to make good the annual wear and tear of the machines,many more machines could be annually produced than are required,since the wear and tear is in parts merelyidealiter andmust be made goodrealiter,in natura, only after a certain numberof years. Capital so employed supplies each year a mass ofmachinery which becomes available for, and anticipates new,capital investments. Let us suppose, for instance, a machinemanufacturer who starts production this year. During this year,he supplies machines for £12,000. If he were merely to reproducethe machines he has manufactured, he would have toproduce, during the subsequent eleven years, machines for£1,000 only, and even then, a year’s production would not beconsumed within the year. Still less could it be consumed, if hewere to employ the whole of his capital. To keep this capitalworking, to keep it reproducing itself every year, a new andcontinuous expansion of the branches of manufacture that requirethese machines, is indispensable. This applies even more,[Pg 92]if the machine manufacturer himself accumulates. In consequence,evenif the capital invested in one particular branch of productionis simply being reproduced,[88] a continuous accumulation inthe other branches of production must go with it.’[89]

We might take the machine manufacturer of Marx’s exampleas illustrating the production of fixed capital. Then the inferenceis that if society maintains simple reproduction in thissphere, employing each year a similar amount of labour for theproduction of fixed capital (a procedure which is, of course,impossible in practical life), then annual production in all otherspheres must expand. But if here, too, simple reproduction is tobe maintained, then, if the fixed capital once created is to bemerely renewed, only a small part of the labour employed in itscreation can be expended. Or, to put it the other way round:if society is to provide for investment in fixed capital on a largescale, it must, even assuming simple reproduction to prevail onthe whole, resort periodically to enlarged reproduction.

With the advance of civilisation, there are changes not only inthe form of the means of production but also in the quantityof value they represent—or better, changes in the social labourstored up in them. Apart from the labour necessary for itsimmediate preservation, society has increasingly more labourtime and labour power to spare, and it makes use of these for themanufacture of means of production on an ever increasing scale.How does this affect the process of reproduction? How, in termsof capitalism, does society create out of its annual labour agreater amount of capital than it formerly possessed? This questiontouches upon enlarged reproduction, and it is not yet timeto deal with it.

CHAPTER V

THE CIRCULATION OF MONEY

In our study of the reproductive process we have not so farconsidered the circulation of money. Here we do not refer tomoney as a measuring rod, an embodiment of value, becauseall relations of social labour have been expressed, assumed andmeasured in terms of money. What we have to do now is to testour diagram of simple reproduction under the aspect of moneyas a means of exchange.

Quesnay already saw that we shall only understand the socialreproductive process if we assume, side by side with the means ofproduction and consumer goods, a certain quantity of money.[90]

Two questions now arise: (1) by whom should the money beowned, and (2) how much of it should there be? The answer tothe first question, no doubt, is that the workers receive theirwages in the form of money with which they buy consumergoods. From the point of view of society, this means merely thatthe workers are allocated a certain share of the fund for consumption:every society, whatever its historical form of production,makes such allocations to its workers. It is, however, anessential characteristic of the capitalist form of production thatthe workers do not obtain their share directly in the form ofgoods but by way of commodity exchange, just as it is an essentialfeature of the capitalist mode of production that their[Pg 94]labour power is not applied directly, as a result of a relation ofpersonal domination, but again by way of commodity exchange:the workers selling their labour power to the owners of themeans of production, and purchasing freely their consumergoods. Variable capital in its money form is the expression andmedium of both these transactions.

Money, then, comes first into circulation by the payment ofwages. The capitalist class must therefore set a certain quantityof money circulating in the first place, and this must be equal tothe amount they pay in wages. The capitalists of Department Ineed 1,000 units of money, and the capitalists of Department IIneed 500 to meet their wages bill. Thus, according to ourdiagram, two quantities of money are circulating: I(1,000v) andII(500v). The workers spend the total of 1,500 on consumergoods, i.e. on the products of Department II. In this way,labour power is maintained, that is to say the variable capitalof society is reproduced in its natural form, as the foundation ofall other reproductions of capital. At the same time, the capitalistsof Department II dispose of their aggregate product(1,500) in the following manner: their own workers receive 500and the workers of Department I receive 1,000. This exchangegives the capitalists of Department II possession of 1,500 moneyunits: 500 are their own variable capital which has returned tothem; these may start circulating again as variable capital butfor the time being they have completed their course. The other1,000 accrue to them year by year out of the realisation of one-thirdof their own products. The capitalists of Department IInow buy means of production from the capitalists of DepartmentI for these 1,000 money units in order to renew the partof their own constant capital that has been used up. By meansof this purchase, Department II renews in its natural form halfof the constant capital IIc it requires. Department I now hasin return 1,000 money units which are nothing more than themoney originally paid to its own workers. Now, after havingchanged hands twice, the money has returned to Department I,to become effective later as variable capital. This completes thecirculation of this quantity of money for the moment, but thecirculation within society has not yet come to an end. Thecapitalists of Department I have not yet realised their surplusvalue to buy consumer goods for themselves; it is still contained[Pg 95]in their product in a form which is of no use to them. Moreover,the capitalists of Department II have not yet renewed thesecond half of their constant capital. These two acts of exchangeare identical both in substance and in value, for the capitalistsof Department I receive their goods from Department II inexchange for the I(1,000c) means of production needed by thecapitalists of Department II. However, a new quantity of moneyis required to effect this exchange. It is true that the samemoney which has already completed its course, might bebrought into circulation again for this purpose—in theory, therecould be no objection to this. In practice, however, this solutionis out of the question, for the needs of the capitalists, as consumers,must be satisfied just as constantly as the needs of theworkers—they run parallel to the process of production andmust be mediated by specific quantities of money. Hence itfollows that the capitalists of both departments—that is to sayall capitalists—must have a further cash reserve in hand, inaddition to the money required as variable capital, in order torealise their own surplus value in the form of consumer goods.On the other hand, before the total product is realised andduring the process of its production, certain parts of the constantcapital must be bought continually. These are the circulatingparts of the constant capital, such as raw and auxiliarymaterials, semi-finished goods, lighting and the like. Therefore,not only must the capitalists of Department I have certainquantities of money in hand to satisfy their needs as consumers,but the capitalists of Department II must also have money tomeet the requirements of their constant capital. The exchangeof 1,000s I (the surplus value of Department I contained in themeans of production) against goods is thus effected by moneywhich is advanced partly by the capitalists of Department I inorder to satisfy their needs as consumers, and partly by thecapitalists of Department II in order to satisfy their needs asproducers.[91] Both lots of capitalists may each advance 500 units[Pg 96]of the money necessary for the exchange, or possibly the twodepartments will contribute in different proportions. At anyrate, two things are certain: (a) the money set aside for the purposeby both departments must suffice to effect the exchangebetween I(1,000s) and II(1,000c); (b) whatever the distributionof this money between the two departments may have been, theexchange transaction completed, each department of capitalistproduction must again possess the same amount of money it hadearlier put into circulation. This latter maxim applies quitegenerally to social circulation as a whole: once the process ofcirculation is concluded, money will always have returned to itspoint of origin. Thus all capitalists, after universal exchange,have achieved a twofold result: first they have exchanged productswhich, in their natural form, were of no use to them,against other products which, in their natural form, the capitalistsrequire either as means of production or for their ownconsumption. Secondly, they have regained possession of themoney which they set in circulation so as to effect these acts ofexchange.

This phenomenon is unintelligible from the point of view ofsimple commodity circulation, where commodity and moneycontinually change places—possession of the commodity excludingthe possession of money, as money constantly usurps theplace which the commodity has given up, andvice versa. Indeed,this is perfectly true with regard to every individual act of commodityexchange which is the form of social circulation. Yetthis social circulation itself is more than mere exchange of commodities:it is the circulation of capital. It is, however, an essentialand characteristic feature of this kind of circulation, that itdoes not only return to the capitalist the value of his originalcapital plus an increase, the surplus value, but that it also assistssocial reproduction by providing the means of production andlabour power in the natural form of productive capital, and byensuring the maintenance of those who do not work. Possessingboth the means of production and the money needed, the capitalistsstart the total social process of circulation; as soon as thesocial capital has completed its circuit, everything is again intheir hands, apportioned to each department according to theinvestments made by it. The workers have only temporarypossession of money during which time they convert the variable[Pg 97]capital from its money form into its natural form. The variablecapital in the capitalists’ hands is nothing but the outwardshape of part of their capital, and for this reason it must alwaysrevert to them.

So far, we have only considered circulation as it takes placebetween the two large departments of production. Yet 4,000units of the first Department’s produce remain there in the formof means of production to renew its constant capital of 4,000c.Moreover 500 of the consumer goods produced in DepartmentII [corresponding to the surplus value II(500s)] also remainin this department in the form of consumer goods for thecapitalist class. Since in both departments the mode of productionis capitalistic, that is unplanned, private production, eachdepartment can distribute its own products—means of productionin Department I and consumer goods in Department II—amongstits own capitalists only by way of commodity exchange,i.e. by a large number of individual sale transactions betweencapitalists of the same department. Therefore the capitalists ofboth departments must have a reserve of money with which toperform these exchange transactions—to renew both the meansof production in Department I and the consumer goods for thecapitalist class in Department II. This part of circulation doesnot present any features of specific interest, as it is merely simplecommodity circulation. Vendor and purchaser alike belong tothe same category of agents of production, and circulation isconcerned only with money and commodity changing handswithin the same class and department. All the same, the moneyneeded for this circulation must from the outset be in the handsof the capitalist class: it is part of their capital.

So far, the circulation of total social capital presents nopeculiarities, even if we consider the circulation of money. Fromthe very outset it is self-evident that society must possess a certainquantity of money to make this circulation possible, andthis for two reasons: first, the general form of capitalist productionis that of commodity production which implies the circulationof money; secondly, the circulation of capital is basedupon the continuous alternation of the three forms of capital:money capital, productive capital, and commodity capital.And as it is this very money, finally, which operates as capital—ourdiagram referring to capitalist production exclusively—the[Pg 98]capitalist class must have possession of this money, as it haspossession of every other form of capital; it throws it into circulationin order to regain possession as soon as the process ofcirculation has been completed.

At first glance, only one detail might strike us: if the capitaliststhemselves have set in motion all the money which circulatesin society, they must also advance the money needed forthe realisation of their own surplus value. Thus it seems that thecapitalists as a class ought to buy their own surplus value withtheir own money. As the capitalist class has possession of thismoney resulting from previous periods of production, even priorto the realisation of the product of each working period, theappropriation of surplus value at first sight does not seem to bebased upon the unpaid labour of the wage labourer—as it infact is—but merely the result of an exchange of commoditiesagainst an equivalent quantity of money both supplied by thecapitalist class itself. A little reflection, however, dispels thisillusion. After the general completion of circulation, the capitalists,now as before, possess their money funds which eitherreverted to them or remained in their hands. Further, theyacquired consumer goods for the same amount which theyhave consumed. (Note that we are still confining ourselves tosimple reproduction as the prime condition of our diagram ofreproduction: the renewal of production on the old scale andthe use of all surplus value produced for the personal consumptionof the capitalist class.)

Moreover, the illusion vanishes completely if we do not confineourselves to one period of production but observe a numberof successive periods in their mutual interconnections. Thevalue the capitalist puts into circulation to-day in the form ofmoney for the purpose of realising his own surplus value, is infact nothing but his surplus value resulting from the precedingperiod of production in form of money. The capitalist mustadvance money out of his own pocket in order to buy his goodsfor consumption. On the one hand, the surplus value which heproduces each year either exists in a natural form which rendersit unfit for consumption, or, if it takes a consumable form, itis temporarily in the hands of another person. On the otherhand, he (the capitalist) has regained possession of the money,and he is now making his advances by realising his surplus[Pg 99]value from the preceding period. As soon as he has realised hisnew surplus value, which is still embodied in the commodity-form,this money will return to him. Consequently, in the courseof several periods of production, the capitalist class draws itsconsumer goods from the pool, as well as the other naturalforms of its capital. The quantity of money originally in itspossession, however, remains unaffected by this process.

Investigation of the circulation of money in society shows thatthe individual capitalist can never invest the whole of his moneycapital in production but must always keep a certain moneyreserve to be employed as variable capital, i.e. as wages.Further, he must keep a capital reserve for the purchase ofmeans of production at any given period, and in addition, hemust have a cash reserve for his personal consumption.

The process of reproducing the total social capital thusentails the necessity of producing and reproducing the substanceof money. Money is also capital, for Marx’s diagramwhich we have discussed before, conceives of no other thancapitalist production. Thus the diagram seems incomplete. Weought to add a further department, that of production of themeans of exchange, to the other two large departments of socialproduction [those of means of production (I) and of consumergoods (II)]. It is, indeed, a characteristic feature of this thirddepartment that it serves neither the purposes of productionnor those of consumption, merely representing social labour inan undifferentiated commodity that cannot be used. Thoughmoney and its production, like the exchange and productionof commodities, are much older than the capitalist mode of production,it was only the latter which made the circulation ofmoney a general form of social circulation, and thus the essentialelement of the social reproductive process. We can onlyobtain a comprehensive diagram of the essential points of capitalistproduction if we demonstrate the original relationshipbetween the production and reproduction of money and thetwo other departments of social production.

Here, however, we deviate from Marx. He included the productionof gold (we have reduced the total production of moneyto the production of gold for the sake of simplicity) in the firstdepartment of social production.

‘The production of gold, like that of metals generally, belongs[Pg 100]to department I, which occupies itself with means of production.’[92]

This is correct only in so far as the production of gold is theproduction of metal for industrial purposes (jewellery, dentalstoppings, etc.). But gold in its capacity as money is not a metalbut rather an embodiment of social labourin abstracto. Thus itis no more a means of production than it is a consumer good.Besides, a mere glance at the diagram of reproduction itselfshows what inconsistencies must result from confusing means ofexchange with means of production. If we add a diagrammaticrepresentation of the annual production of gold as the substanceof money to the two departments of social production, we getthe following three sets of figures:

This quantity of value of 30, chosen by Marx as an example,obviously does not represent the quantity of money which circulatesannually in society; it only stands for that part which isannually reproduced, the annual wear and tear of the moneysubstance which, on the average, remains constant so long associal reproduction remains on the same level. The turnover ofcapital goes on in a regular manner and the realisation of commoditiesproceeds at an equal pace. If we consider the third lineas an integral part of the first one, as Marx wants us to do, thefollowing difficulty arises: the constant capital of the thirddepartment consists of real and concrete means of production,premises, tools, auxiliary materials, vessels, and the like, just asit does in the two other departments. Its product, however, the30g which represent money, cannot operate in its natural formas constant capital in any process of production. If we thereforeinclude this 30g as an essential part of the product of DepartmentI (6,000 means of production) the means of productionwill show a social deficit of this size which will prevent DepartmentsI and II from resuming their reproduction on the oldscale. According to the previous assumption—which forms thefoundation of Marx’s whole diagram—reproduction as a wholestarts from the product of each department in its actual use-form.[Pg 101]The proportions of the diagram are based upon thisassumption; without it, they dissolve in chaos. Thus the firstfundamental relation of value is based upon the equation:I(6,000) equals I(4,000c) + II(2,000c). This cannot apply to theproduct III(30g), since neither department can use gold as ameans of production [say, in the proportion of I(20c) + II(10c)].The second fundamental relation derived from this is basedupon the equation I(1,000v) + I(1,000s) = II(2,000c). This wouldmean, with regard to the production of gold, that as many consumergoods are taken from Department II as there are meansof production supplied to it. But this is equally untrue. Thoughthe production of gold removes concrete means of productionfrom the total social product and uses them as its constantcapital, though it takes concrete consumer goods for the use ofits workers and capitalists, corresponding to its variable capitaland surplus value, the product it supplies yet cannot operate inany branch of production as a means of production, nor is it aconsumer good, fit for human consumption. To include theproduction of money in the activities of Department I, therefore,is to run counter to all the general proportions whichexpress the relations of value in Marx’s diagram, and todiminish the diagram’s validity.

The attempt by Marx to find room for the production of goldwithin Department I (means of production) moreover leads todubious results. The first act of circulation between this newsub-Department (called by Marx Ig) and Department II (consumergoods) consists as usual in the workers’ purchase of consumergoods from Department II with the money obtained aswages from the capitalists. This money is not yet a product ofthe new period of production. It has been reserved by thecapitalists of Department Ig out of the money contained intheir product of an earlier period. This, indeed, is the normalprocedure. But now Marx allows the capitalists of DepartmentII to buy gold from Ig with the money they have reserved,gold as a commodity material to the value of 2. This isa leap from the production of money into the industrial productionof gold which is no more to do with the problem of theproduction of money than with the production of boot-polish.Yet out of the 5 Ig v that have been reserved, 3 still remain, andas the capitalist, unable to use them as constant capital, does not[Pg 102]know what to do with them, Marx arranges for him to addthem on to his own reserve of money. Marx further finds thefollowing way out to avoid a deficit in the constant capital ofII which must be exchanged completely against the means ofproduction (Iv + Is):

‘Therefore, this money must be entirely transferred from IIcto IIs, no matter whether it exists in necessities of life or articlesof luxury, and vice versa, a corresponding value of commoditiesmust be transferred from IIs to IIc. Result: A portion of thesurplus-value is accumulated as a hoard of money.’[93]

A strange result, in all conscience! We have achieved an increasein money, a surplus of the money substance, by simplyconfining ourselves to the annual wear and tear of the moneyfund. This surplus value comes into existence, for some unknownreason, at the expense of the capitalists in the consumergoods department. They practise abstinence, not because theymay want to expand their production of surplus value, let ussay, but in order to secure a sufficient quantity of consumergoods for the workers engaged in the production of gold.

The capitalists of Department II, however, get poor rewardfor this Christian virtue. In spite of their abstinence, they arenot only unable to expand their reproduction, but they are nolonger even in the position to resume their production on itsformer scale. Even if the corresponding ‘commodity value’ istransferred from IIg to IIc, it is not only the value but itsactual and concrete form which matters. As the new part of theproduct of I now consists of money which cannot be used as ameans of production, Department II, in spite of its abstinence,cannot renew its constant material capital on the old scale. Asour diagram presupposes simple reproduction, its condition arethus violated in two directions: surplus value is being hoarded,and the constant capital shows a deficit. Marx’s own results,then, prove that the production of gold cannot possibly find aplace in either of the two departments of his diagram; the wholediagram is upset as soon as the first act of exchange betweenDepartments I and II has been completed. As Engels remarksin his footnote, ‘the analysis of the exchange of newly producedgold within the constant capital of Department I is not containedin the MS.’[94] Besides, the inconsistency would then only[Pg 103]have been greater. The point of view we advocate is confirmedby Marx himself when he gives an exhaustive answer to thequestion, as striking as it is brief: ‘Money in itself is not anelement of actual reproduction.’[95]

There is another important reason why we should put theproduction of money in a third and separate department ofsocial production as a whole: Marx’s diagram of simple reproductionis valid as the starting-point and foundation of thereproductive process not only for capitalism but also,mutatismutandis, for every regulated and planned economic order, forinstance a socialist one. However, the production of money,just like the commodity-form of the products, becomes obsoletewhen private ownership of the means of production is abolished.It constitutes the ‘illegitimate’ liabilities, thefaux frais of theanarchic economy under capitalism, a peculiar burden for asociety based upon private enterprise, which implies the annualexpenditure of a considerable amount of labour on the manufactureof products which are neither means of production noryet consumer goods. This peculiar expenditure of labour by asociety producing under capitalism will vanish in a sociallyplanned economy. It is most adequately demonstrated bymeans of a separate department within the process of reproducingsocial capital. It is quite immaterial in this connectionwhether we picture a country which produces its own gold or acountry which imports gold from abroad. The same expenditureof social labour which in the first case is necessary for thedirect production of gold, is required in the second case to effectthe exchange transactions.

These observations show that the problem of the reproductionof total capital is not so crude as it often appears to thosewho approach it merely from the point of view of crises. Thecentral problem might be formulated as follows: how is itpossible that, in an unplanned economy, the aggregate productionof innumerable individual capitalists can satisfy all theneeds of society? One answer that suggests itself points to thecontinual fluctuations in the level of production in accordancewith the fluctuating demand, i.e. the periodical changes in themarket. This point of view, which regards the aggregate productof society as an undifferentiated mass of commodities, and[Pg 104]treats social demand in an equally absurd way, overlooks themost important element, thedifferentia specifica of the capitalistmode of production. We have seen that the problem of capitalistreproduction contains quite a number of precisely defined relationsreferring to specific capitalist categories and also,mutatismutandis, to the general categories of human labour. The realproblem consists in their inherent tendencies towards both conflictand harmony. Marx’s diagram is the scientific formulationof the problem.

Inquiry must now be made into the implications of thisdiagram analytic of the process of production. Has it any realbearing on the problems of actual life? According to thediagram, circulation absorbs the entire social product; all consumers’needs are satisfied, and reproduction takes place withoutfriction. The circulation of money succeeds the circulationof commodities, completing the cycle of social capital. But whatis the position in real life? The relations outlined in the diagramlay down a precise first principle for the division of social labourin a planned production—always providing a system of simplereproduction, i.e. no changes in the volume of production. Butno such planned organisation of the total process exists in acapitalist economy, and things do not run smoothly, along amathematical formula, as suggested by the diagram. On thecontrary, the course of reproduction shows continual deviationsfrom the proportions of the diagram which become manifest(a) in the fluctuations of prices from day to day; (b) in the continualfluctuations of profits; (c) in the ceaseless flow of capitalfrom one branch of production to another, and finally in theperiodical and cyclical swings of reproduction between over-productionand crisis.

And yet, apart from all these deviations, the diagram presentsa socially necessary average level in which all these movementsmust centre, to which they are always striving to return,once they have left it. That is why the fluctuating movementsof the individual capitalists do not degenerate into chaos butare reduced to a certain order which ensures the prolongedexistence of society in spite of its lack of a plan.

In comparison, the similarities and the profound discrepanciesbetween Marx’s diagram of reproduction and Quesnay’sTableau Économique strike us at once. These two diagrams, the[Pg 105]beginning and end of the period of classical economics, are theonly attempts to describe an apparent chaos in precise terms, achaos created by the interrelated movements of capitalist productionand consumption, and by the disparity of innumerableprivate producers and consumers. Both writers reduce thischaotic jumble of individual capitals to a few broadly conceivedrules which serve, as it were, as moorings for the developmentof capitalist society, in spite of its chaos. They both achieve asynthesis between the two aspects which are the basis of thewhole movement of social capital: that circulation is at one andthe same time a capitalist process of producing and appropriatingsurplus value, and also a social process of producingand consuming material goods necessary to civilised humanexistence. Both show the circulation of commodities to act as amediator for the social process as a whole, and both conceiveof the circulation of money as a subsidiary phenomenon, anexternal and superficial expression of the various stages withinthe circulation of commodities.

It is socially necessary labour which creates value. Thisinspired fundamental law of Marx’s theory of value whichprovided the solution of the money problem, amongst others,further led him first to distinguish and then to integrate thosetwo aspects in the total reproductive process: the aspect ofvalue and that of actual material connections. Secondly, Marx’sdiagram is based upon the precise distinction between constantand variable capital which alone reveals the internalmechanisms of the production of surplus value and brings it, asa value-relationship, into precise relation with the two materialcategories of production: that of producer and consumer goods.

After Quesnay, some classical economists, Adam Smith andRicardo in particular, came fairly close to this point of view.Ricardo’s contribution, his precise elaboration of the theory ofvalue, has even been frequently confused with that of Marx. Onthe basis of his own theory of value, Ricardo saw that Smith’smethod of resolving the price of all commodities intov +s—atheory which wrought so much havoc in the analysis of reproduction—iswrong; but he was not much interested in Smith’smistake, nor indeed very enthusiastic about the problem of reproductionas a whole. His analysis, in fact, represents a certaindecline after that of Adam Smith, just as Smith had partly[Pg 106]retrogressed as against the Physiocrats. If Ricardo expoundedthe fundamental value categories of bourgeois economy—wages,surplus value and capital—much more precisely and consistentlythan his predecessors, he also treated them morerigidly. Adam Smith had shown infinitely more understandingfor the living connections, the broad movements of the whole.In consequence he did not mind giving two, or, as in the case ofthe problem of value, even three or four different answers to thesame question. Though he contradicts himself quite cheerfullyin the various parts of his analysis, these very contradictions areever stimulating him to renewed effort, they make him approachthe problem as a whole from an ever different point of view,and so to grasp its dynamics. Ultimately, it was the limitationof their bourgeois mentalities which doomed both Smith andRicardo to failure. A proper understanding of the fundamentalcategories of capitalist production, of value and surplus value asliving dynamics of the social process demands the understandingof this process in its historical development and of the categoriesthemselves as historically conditioned forms of the generalrelations of labour. This means that only a socialist can reallysolve the problem of the reproduction of capital. Between theTableau Économique and the diagram of reproduction in thesecond volume ofCapital there lies the prosperity and decline ofbourgeois economics, both in time and in substance.

CHAPTER VI

ENLARGED REPRODUCTION

The shortcomings of the diagram of simple reproductionare obvious: it explains the laws of a form of reproductionwhich is possible only as an occasional exception ina capitalist economy. It is not simple but enlarged reproductionwhich is the rule in every capitalist economic system, evenmore so than in any other.[96]

Nevertheless, this diagram is of real scientific importance intwo respects. In practice, even under conditions of enlargedreproduction, the greater part of the social product can belooked on as simple reproduction, which forms the broad basisupon which production in every case expands beyond its formerlimits. In theory, the analysis of simple reproduction also providesthe necessary starting point for all scientific exposition ofenlarged reproduction. The diagram of simple reproductionof the aggregate social capital therefore inevitably introducesthe further problem of the enlarged reproduction of the totalcapital.

We already know the historical peculiarity of enlarged reproductionon a capitalist basis. It must represent itself asaccumulation of capital, which is both its specific form and itsspecific condition. That is to say, social production as a whole—whichon a capitalist basis is the production of surplus value—can[Pg 108]in every case be expanded only in so far as the socialcapital that has been previously active is now augmented bysurplus value of its own creation. This use of part of the surplusvalue (and in particular the use of an increasing part of it) forthe purpose of production instead of personal consumption bythe capitalist class, or else the increase of reserves, is the basis ofenlarged reproduction under capitalist conditions of production.

The characteristic feature of enlarged reproduction of theaggregate social capital—just as in our previous assumption ofsimple reproduction—is the reproduction of individual capitals,since production as a whole, whether regarded as simple or asenlarged production, can in fact only occur in the form ofinnumerable independent movements of reproduction performedby private individual capitals.

The first comprehensive analysis of the accumulation of individualcapitals is given in volume i of Marx’sCapital, section 7,chapters 22, 23. Here Marx treats of (a) the division of thesurplus value into capital and revenue; (b) the circumstanceswhich determine the accumulation of capital apart from thisdivision, such as the degree of exploitation of labour power andlabour productivity; (c) the growth of fixed capital relative tothe circulating capital as a factor of accumulation; and (d) theincreasing development of an industrial reserve army which isat the same time both a consequence and a prerequisite of theprocess of accumulation. In the course of this discussion, Marxdeals with two inspired notions of bourgeois economists withregard to accumulation: the ‘theory of abstinence’ as held bythe more vulgar economists, who proclaim that the division ofsurplus value into capital, and thus accumulation itself, is anethical and heroic act of the capitalists; and the fallacy of theclassical economists, their doctrine that the entire capitalisedpart of the surplus value is used solely for consumption by theproductive workers, that is to say spent altogether on wages forthe workers employed year by year. This erroneous assumption,which completely overlooks the fact that every increase of productionmust manifest itself not only in the increased number ofemployed workers but also in the increase of the material meansof production (premises, tools, and, certainly, raw materials) isobviously rooted in that ‘dogma’ of Adam Smith which wehave already discussed. Moreover, the assumption that the expenditure[Pg 109]of a greater amount of capital on wages is sufficientto expand production, also results from the mistaken idea thatthe prices of all commodities are completely resolved into wagesand surplus value, so that the constant capital is disregardedaltogether. Strangely enough, even Ricardo who was, at anyrate occasionally, aware of this element of error in Smith’sdoctrine, subscribes most emphatically to its ultimate inferences,mistaken though they were:

‘It must be understood, that all the productions of a countryare consumed; but it makes the greatest difference imaginablewhether they are consumed by those who reproduce, or by thosewho do not reproduce another value. When we say that revenueis saved, and added to capital, what we mean is, that the portionof revenue, so said to be added to capital, is consumedby productive, instead of unproductive labourers.’[97]

If all the goods produced are thus swallowed up by humanconsumption, there can clearly be no room to spare in the totalsocial product for such unconsumable means of production astools and machinery, new materials and buildings, and consequentlyenlarged reproduction, too, will have to take a peculiarcourse. What happens—according to this odd conception—issimply that staple foodstuffs for new workers will be producedto the amount of the capitalised part of surplus value instead ofthe choice delicacies previously provided for the capitalist class.The classical theory of enlarged reproduction does not admitof any variations other than those connected with the productionof consumer goods. After our previous observations it is notsurprising that Marx could easily dispose of this elementarymistake of both Ricardo and Smith. Just as simple reproductionrequires a regulated renewal of the constant capital, the materialmeans of production, quite apart from the production of consumergoods in the necessary quantity for labourer and capitalist,equally so in the case of expanding production mustpart of the new additional capital be used to enlarge the constantcapital, that is to add to the material means of production.Another law, Marx discovered, must also be applied here. Theconstant capital, continually overlooked by the classical economists,increases relative to the variable capital that is spent[Pg 110]on wages. This is merely the capitalist expression of the generaleffects of increasing labour productivity. With technical progress,human labour is able to set in motion ever larger massesof means of production and to convert them into goods. Incapitalist terms, this means a progressive decrease in expensesfor living labour, in wages, relative to the expenses for inanimatemeans of production. Contrary to the assumption of AdamSmith and Ricardo, enlarged reproduction must not only startwith the division of the capitalised part of the surplus value intoconstant and variable capital, but, as the technique of productionadvances, it is bound to allocate in this division everincreasing portions to the constant, and ever diminishing portionsto the variable capital. This continuous qualitative changein the composition of capital is the specific manifestation of theaccumulation of capital, that is to say of enlarged reproductionon the basis of capitalism.[98]

[Pg 111]The other side of this picture of continual changes in therelation between the portions of constant and variable capitalis the formation of a relative surplus population, as Marx calledit, that is to say that part of the working population whichexceeds the average needs of capital, and thus becomes redundant.This reserve of unemployable industrial labour (takenhere in a broader sense, and including a proletariat that isdominated by merchant capital) is always present. It forms anecessary prerequisite of the sudden expansion of productionin times of boom, and is another specific condition of capitalistaccumulation.[99]

From the accumulation of individual capitals we can thereforededuce the following four characteristic phenomena ofenlarged reproduction:

(1) The volume of enlarged reproduction is independent,within certain limits, of the growth of capital, and can transcendit. The necessary methods for achieving this are: increased exploitationof labour and natural forces, and increased labourproductivity (including increased efficiency of the fixed capital).

(2) All real accumulation starts with that part of the surplusvalue which is intended for capitalisation being divided intoconstant and variable capital.

(3) Accumulation as a social process is accompanied by continuouschanges in the relation between constant and variablecapital, whereby that portion of capital which is invested ininanimate means of production continually increases as comparedwith that expended on wages.

(4) Concomitant with the accumulative process, and as acondition of the latter, there develops an industrial reservearmy.

These characteristics, derived from the reproductive processas it is performed by the individual capitals, represent an enormous[Pg 112]step forward as compared with the analyses of bourgeoiseconomists. Now, however, our problem is to demonstrate theaccumulation of the aggregate capital which originates fromthese movements of individual capitals, and on the basis of thediagram of simple reproduction to establish the precise relationsbetween the aspects of value prevalent in the production ofsurplus value and the material considerations in the productionof consumer and producer goods, with a view to accumulation.

The essential difference between enlarged reproduction andsimple reproduction consists in the fact that in the latter thecapitalist class and its hangers-on consume the entire surplusvalue, whereas in the former a part of the surplus value is setaside from the personal consumption of its owners, not for thepurpose of hoarding, but in order to increase the active capital,i.e. for capitalisation. To make this possible, the new additionalcapital must also find the material prerequisites for its activityforthcoming. Here the concrete composition of the aggregatesocial product becomes important. Marx says already involume i, when he considers the accumulation of individualcapitals:

‘The annual production must in the first place furnish allthose objects (use-values) from which the material componentsof capital, used up in the course of the year, have to be replaced.Deducting these there remains the net or surplus-product, inwhich the surplus-value lies. And of what does this surplus-productconsist? Only of things destined to satisfy the wants anddesires of the capitalist class, things which, consequently, enterinto the consumption fund of the capitalists? Were that the case,the cup of surplus-value would be drained to the very dregs,and nothing but simple reproduction would ever take place.—Toaccumulate it is necessary to convert a portion of the surplus-productinto capital. But we cannot, except by a miracle, convertinto capital anything but such articles as can be employedin the labour-process (i.e. means of production), and suchfurther articles as are suitable for the sustenance of the labourer,(i.e. means of subsistence). Consequently, a part of the annualsurplus-labour must have been applied to the production ofadditional means of production and subsistence, over and abovethe quantity of these things required to replace the capitaladvanced. In one word, surplus-value is convertible into capital[Pg 113]solely because the surplus-product, whose value it is, alreadycomprises the material elements of new capital.’[100]

Additional means of production, however, and additionalconsumer goods for the workers alone are not sufficient; to getenlarged reproduction really going, additional labour is also required.Marx now finds a specific difficulty in this last condition:

‘For this the mechanism of capitalist production providesbeforehand, by converting the working class into a class dependenton wages, a class whose ordinary wages suffice, not only forits maintenance, but for its increase. It is only necessary forcapital to incorporate this additional labour-power, annuallysupplied by the working class in the shape of labourers of allages, with the surplus means of production comprised in theannual produce, and the conversion of surplus-value into capitalis complete.’[101]

This is the first solution which Marx gave to the problem ofthe accumulation of the aggregate capital. Having dwelt onthis aspect of the question already in volume i ofCapital, Marxreturns to the problem at the end of the second volume of hismain work whose concluding 21st chapter is devoted to accumulationand enlarged reproduction of the aggregate capital.

Let us examine Marx’s diagrammatic exposition of accumulationmore closely. On the model of the diagram of simple reproductionwith which we are already familiar, he devised adiagram for enlarged reproduction, the difference appearingmost clearly if we compare the two.

Assuming that society’s annual aggregate product can berepresented by an amount to the value of 9,000 (denotingmillions of working hours, or, in capitalist monetary terms, anyarbitrary amount of money), the aggregate product is to bedistributed as follows:

Department I represents means of production, Department IIconsumer goods. One glance at the proportion of the figuresshows that in this case simple reproduction alone is possible.The means of production made in Department I equal the total[Pg 114]of the means of production actually used by the two departments.If these are merely renewed, production can be repeatedonly on its previous scale. On the other hand, the aggregateproduct of Department II equals the total of wages and surplusvalue in both departments. This shows that the consumer goodsavailable permit only the employment of just as many workersas were previously employed, and that the entire surplus valueis similarly spent on consumer goods, i.e. the personal consumptionof the capitalist class.

Here a double disproportion confronts us: 6,000 means ofproduction are created—more than those which are actuallyused by the society, i.e. 4,000c + 1,500c, leaving a surplus of 500.Similarly, less consumer goods (3,000) are produced than thesum of what is paid out in wages (i.e. 1,000v + 750v, the requirementof the workers), plus the aggregate of surplus value thathas been produced (1,000s + 750s). This results in a deficit of500. Since our premises do not allow us to decrease the numberof workers employed, the consequence must be that the capitalistclass cannot consume the entire surplus value it haspocketed. This proves fully consistent with the two material preconditionsof enlarged reproduction on a capitalist basis: part ofthe appropriated surplus value is not to be consumed but isused for the purposes of production; and more means of productionmust be produced so as to ensure the use of the capitalisedsurplus value for the actual expansion of reproduction.

In considering the diagram of simple reproduction, we sawthat its fundamental social conditions are contained in the followingequation: the aggregate of means of production (theproduct of Department I) must be equivalent to the constantcapital of both departments, but the aggregate of consumergoods (the product of Department II) must equal the sum ofvariable capitalsand surplus values of the two departments. Asregards enlarged reproduction, we must now infer a preciseinverse double ratio. The general precondition of enlarged reproduction[Pg 115]is that the product of Department I must be greaterin value than the constant capital of both departments takentogether, and that of Department II must be so much less thanthe sum total of both the variable capital and the surplus valuein the two departments.

This, however, by no means completes the analysis of enlargedreproduction; rather has it led us merely to the threshold of thequestion. Having deduced the proportions of the diagram, wemust now pursue their further activities, the flow of circulationand the continuity of reproduction. Just as simple reproductionmay be compared to an unchanging circle, to be repeated timeand again, so enlarged reproduction, to quote Sismondi, is comparableto a spiral with ever expanding loops. Let us begin byexamining the loops of this spiral. The first general questionarising in this connection is how actual accumulation proceedsin the two departments under the conditions now known to us,i.e. how the capitalists may capitalise part of their surplus value,and at the same time acquire the material prerequisites necessaryfor enlarged reproduction.

Let us assume that half the surplus value of Department I isbeing accumulated. The capitalists, then, use 500 for their consumptionbut augment their capital by another 500. In order tobecome active, this additional capital of 500 must be divided, aswe now know, into constant and variable capital. Assuming theratio of 4 to 1 remains what it was for the original capital, thecapitalists of Department I will divide their additional capitalof 500 thus: they will buy new means of production for 400 andnew labour for 100. This does not present any difficulties, sincewe know that Department I has already produced a surplus of500 means of production. Yet the corresponding enlargement ofthe variable capital by 100 units of money is not enough, sincethe new additional labour power must also find adequate consumergoods which can only be supplied by Department II.Now the circulation between the two large departments is shifting.Formerly, under conditions of simple reproduction, DepartmentI acquired 1,000 consumer goods for its own workers, andnow it must find another 100 for its new workers. Department Itherefore engages in enlarged reproduction as follows:

[Pg 116]Department II, in turn, after selling these consumer goods tothe value of 100, is now in a position to acquire additionalmeans of production to the same amount from Department I.And in fact, Department I still has precisely one hundred of itssurplus product left over which now find their way into DepartmentII, enabling the latter to expand its own reproduction aswell. Yet here, too, the additional means of production aloneare not much use; to make them operate, additional labourpower is needed. Assuming again that the previous compositionof capital has been maintained, with a ratio of 2 to 1 as regardsconstant and variable capital, additional labour to the tune of50 is required to work the additional 100 means of production.This additional labour, however, needs additional consumergoods to the amount of its wages, which are in fact supplied byDepartment II itself. This department must therefore produce,in addition to the 100 additional consumer goods for the newworkers of Department I and the goods for the consumption ofits own workers, a further amount of consumer goods to the tuneof 50 as part of its aggregate product. Department II thereforestarts on enlarged reproduction at a rate of 1,600c + 800v.

Now the aggregate product of Department I (6,000) has beenabsorbed completely. 5,500 were necessary for renewing the oldand used-up means of production in both departments, and theremaining 500 for the expansion of production: 400 in DepartmentI and 100 in Department II. As regards the aggregateproduct of Department II (3,000), 1,900 have been used for theincreased labour force in the two departments, and the 1,100consumer goods which remain serve the capitalists for their personalconsumption, the consumption of their surplus value. 500are consumed in Department I, and 600 in Department IIwhere, out of a surplus value of 700, only 150 had been capitalised(100 being expended on means of production and 50 onwages).

Enlarged reproduction can now proceed on its course. If wemaintain our rate of exploitation at 100 per cent, as in the caseof the original capital, the next period will give the followingresults:

[Pg 117]The aggregate product of society has grown from 9,000 to9,800, the surplus value of Department I from 1,000 to 1,100,and of Department II from 750 to 800. The object of thecapitalist expansion of production, the increased production ofsurplus value, has been gained. At the same time, the materialcomposition of the aggregate social product again shows a surplusof 600 as regards the means of production (6,600) over andabove those which are actually needed (4,400 + 1,600), and alsoa deficit in consumer goods as against the sum total made up bythe wages previously paid (1,100v + 800v) and the surplus valuethat has been created (1,100s + 800s). And thus we again havethe material possibility as well as the necessity to use part of thesurplus value, not for consumption by the capitalist class, butfor a new expansion of production.

The second enlargement of production, and increased productionof surplus value, thus follows from the first as a matterof course and with mathematical precision. The accumulationof capital, once it has started, automatically leads farther andfarther beyond itself. The circle has become a spiral whichwinds itself higher and higher as if compelled by a natural lawin the guise of mathematical terms. Assuming that in the followingyears there is always capitalisation of half the surplusvalue, while the composition of the capital and the rate ofexploitation remain unchanged, the reproduction of capitalwill result in the following progression:

[Pg 118]Thus, after five years of accumulation, the aggregate socialproduct is found to have grown from 9,000 to 14,348, the socialaggregate capital from (5,500c + 1,750v = 7,250) to (8,784c +2,782v = 11,566) and the surplus value from (1,000s + 500s = 1,500)to (1,464s + 1,065s = 2,529), whereby the surplus value for personalconsumption, being 1,500 at the beginning of accumulation,has grown to 732 + 958 = 1,690 in the last year.[102] Thecapitalist class, then, has capitalised more, it has practisedgreater abstinence, and yet it has been able to live better.Society, in a material respect, has become richer, richer inmeans of production, richer in consumer goods, and it hasequally become richer in the capitalist sense of the term since itproduces more surplus value. The social product circulatesintoto in society. Partly it serves to enlarge reproduction andpartly it serves consumption. The requirements of capitalistaccumulation correspond to the material composition of theaggregate social product. What Marx said in volume i ofCapital is true: the increased surplus value can be added on tocapital because the social surplus product comes into the worldfrom the very first in the material form of means of production,in a form incapable of utilisation except in the productive process.At the same time reproduction expands in strict conformitywith the laws of circulation: the mutual supply of thetwo departments of production with additional means of productionand consumer goods proceeds as an exchange of equivalents.It is an exchange of commodities in the course of whichthe very accumulation of one department is the condition ofaccumulation in the other and makes this possible. The complicatedproblem of accumulation is thus converted into adiagrammatic progression of surprising simplicity. We maycontinue the above chain of equationsad infinitum so long as weobserve this simple principle: that a certain increase in the constantcapital of Department I always necessitates a certainincrease in its variable capital, which predetermines beforehandthe extent of the increase in Department II, with which againa corresponding increase in the variable capital must be co-ordinated.Finally, it depends on the extent of increase in thevariable capital in both departments, how much of the totalmay remain for personal consumption by the capitalist class.[Pg 119]The extent of this increase will also show that this amount ofconsumer goods which remains for private consumption by thecapitalist is exactly equivalent to that part of the surplus valuewhich has not been capitalised in either department.

There are no limits to the continuation of this diagrammaticdevelopment of accumulation in accordance with the few easyrules we have demonstrated. But now it is time to take care lestwe should only have achieved these surprisingly smooth resultsthrough simply working out certain fool-proof mathematicalexercises in addition and subtraction, and we must furtherinquire whether it is not merely because mathematical equationsare easily put on paper that accumulation will continuead infinitum without any friction.

In other words: the time has come to look for the concretesocial conditions of accumulation.

CHAPTER VII

ANALYSIS OF MARX’S DIAGRAMOF ENLARGED REPRODUCTION

This already clearly expresses the interdependence of thetwo departments—but it is a dependence of a peculiar kind.Accumulation here originates in Department I, and DepartmentII merely follows suit. Thus it is Department I alone thatdetermines the volume of accumulation. Marx effects accumulationhere by allowing Department I to capitalise one-half of itssurplus value; Department II, however, may capitalise only asmuch as is necessary to assure the production and accumulationof Department I. He makes the capitalists of Department IIconsume 600s as against the consumption of only 500s by thecapitalists of Department I who have appropriated twice theamount of value and far more surplus value. In the next year,he assumes the capitalists of Department I again to capitalisehalf their surplus value, this time making the capitalists ofDepartment II capitalise more than in the previous year—summarilyfixing the amount to tally exactly with the needs ofDepartment I. 500s now remain for the consumption of thecapitalists of Department II—less than the year before—surelya rather queer result of accumulation on any showing. Marxnow describes the process as follows:

‘Then let Department I continue accumulation at the sameratio, so that 550s are spent as revenue, and 55s accumulated.In that case, 1,100 Iv are first replaced by 1,100 Ic, and 550 Ismust be realised in an equal amount of commodities of II,[Pg 121]making a total of 1,650 I(v +s). But the constant capital of II,which is to be replaced, amounts only to 1,600, and the remaining50 must be made up out of 800 IIs. Leaving aside the moneyaspect of the matter, we have as a result of this transaction:

‘I. 4,400c + 550s (to be capitalised); furthermore, realised incommodities of II for the fund for consumption of the capitalistsand labourers of I, 1,650 (v +s).

‘In Department I, 550s must be capitalised. If the former proportionis maintained, 440 of this amount form constant capital,and 110 variable capital. These 110 must be eventually takenout of 725 IIs, that is to say, articles of consumption to the valueof 110 are consumed by the labourers of I instead of thecapitalists of II, so that the latter are compelled to capitalisethese 110s which they cannot consume. This leaves 615 IIs ofthe 725 IIs. But if II thus converts these 110 into additionalconstant capital, it requires an additional variable capital of 55.This again must be taken out of its surplus value. Subtractingthis amount from 615 IIs, we find that only 560 IIs remain forthe consumption of the capitalists of II, and we obtain thefollowing values of capital after accomplishing all actual andpotential transfers:

This quotation is given at length since it shows very clearlyhow Marx here effects accumulation in Department I at theexpense of Department II. In the years that follow, the capitalistsof the provisions department get just as rough a deal.Following the same rules, Marx allows them in the third year toaccumulate 264s—a larger amount this time than in the twopreceding years. In the fourth year they are allowed to capitalise290s and to consume 678s, and in the fifth year they accumulate320s and consume 745s. Marx even says: ‘If things are to proceednormally, accumulation in II must take place more rapidlythan in I, because that portion of I(v +s) which must be convertedinto commodities of IIc, would otherwise grow morerapidly than IIc, for which it can alone be exchanged.’[104]

[Pg 122]Yet the figures we have quoted fail to show a quicker accumulationin Department II, and in fact show it to fluctuate. Herethe principle seems to be as follows: Marx enables accumulationto continue by broadening the basis of production in DepartmentI. Accumulation in Department II appears only as a conditionand consequence of accumulation in Department I:absorbing, in the first place, the other’s surplus means of productionand supplying it, secondly, with the necessary surplus ofconsumer goods for its additional labour. Department I retainsthe initiative all the time, Department II being merely a passivefollower. Thus the capitalists of Department II are only allowedto accumulate just as much as, and are made to consume noless than, is needed for the accumulation of Department I.While in Department I half the surplus value is capitalisedevery time, and the other half consumed, so that there is anorderly expansion both of production and of personal consumptionby the capitalists, the twofold process in Department IItakes the following erratic course:

Here there is no rule in evidence for accumulation and consumptionto follow; both are wholly subservient to the requirementsof accumulation in Department I.

Needless to say, the absolute figures of the diagram arearbitrary in every equation, but that does not detract from theirscientific value. It is thequantitative ratios which are relevant,since they are supposed to express strictly determinate relationships.Those precise logical rules that lay down the relations ofaccumulation in Department I, seem to have been gained atthe cost of any kind of principle in construing these relations forDepartment II; and this circumstance calls for a revision of theimmanent connections revealed by the analysis.

It might, however, be permissible to assume the defect to liein a rather unhappy choice of example. Marx himself, dissatisfiedwith the diagram quoted above, proceeded forthwithto give a second example in order to elucidate the movements[Pg 123]of accumulation, where the figures of the equation run in thefollowing order:

In contrast to the previous example, the capital of bothdepartments is here seen to have the same composition, i.e.constant and variable capital are in a ratio of 5 to 1. Thisalready presupposes a considerable development of capitalistproduction, and accordingly of social labour productivity—aconsiderable preliminary expansion of the scale of production,and finally, a development of all the circumstances whichbring about a relatively redundant surplus population in theworking class. We are no longer introduced to enlarged reproduction,as in the first example, at the stage of the originaltransition from simple to enlarged reproduction—the only pointof that is in any case for the sake of abstract theory. This time,we are brought face to face with the process of accumulationas it goes on at a definite and rather advanced stage of development.It is perfectly legitimate to assume these conditions, andthey in no way distort the principles we must employ in order towork out the individual loops of the reproductive spiral. Hereagain Marx takes for a starting point the capitalisation of halfthe surplus value in Department I.

‘Now take it that the capitalist class of I consumes one-half ofthe surplus-value, or 500, and accumulates the other half. Inthat case (1,000v + 500s) I, or 1,500, must be converted into1,500 IIc. Since IIc amounts to only 1,430, it is necessary to take70 from the surplus-value. Subtracting this sum from 285s leaves215 IIs. Then we have:

‘I. 5,000c + 500s (to be capitalised) + 1,500 (v +s) in the fundset aside for consumption by capitalists and labourers.

‘II. 1,430c + 70s (to be capitalised) + 285v + 215s. As 70 IIsare directly annexed by IIc, a variable capital of 70 : 5, or 14,is required to set this additional constant capital in motion.These 14 must come out of the 215s, so that only 201 remain,and we have:

[Pg 124]After these preliminary arrangements, capitalisation can nowproceed. This is done as follows:

In Department I the 500s which have been capitalised aredivided into five-sixths (417c) + one-sixth (83v). These 83vwithdraw a corresponding amount from IIs which serves tobuy units of constant capital and thus accrues to IIc. Anincrease of IIc by 83 involves the necessity of an increase inIIv by 17 (one-fifth of 83). After the completion of this turnoverwe therefore have:

The capital of Department I has grown from 6,000 to 6,500, i.e.by one-twelfth; in Department II it has grown from 1,715 to1,899, i.e. by just over one-ninth.

If the same ratio is maintained in the continuance of accumulation,the result at the end of the second year is as follows:

In the course of three years, the total social capital has increasedfrom I.6,000 + II.1,715 = 7,715 to I.7,629 + II.2,229 =9,858, and the total product from 9,000 to 11,500.

Accumulation in both departments here proceeds uniformly,[Pg 125]in marked difference from the first example. From the secondyear onwards, both departments capitalise half their surplusvalue and consume the other half. A bad choice of figures in thefirst example thus seems to be responsible for its arbitraryappearance. But we must check up to make sure that it is notonly a mathematical manipulation with cleverly chosen figureswhich this time ensures the smooth progress of accumulation.

In the first as well as in the second example, we are continuallystruck by a seemingly general rule of accumulation: to makeany accumulation possible, Department II must always enlargeits constant capital by precisely the amount by which DepartmentI increases (a) the proportion of surplus value for consumptionand (b) its variable capital. If we take the example ofthe first year as an illustration, the constant capital of DepartmentII must be increased by 70. And why? because this capitalwas only 1,430 before.

But if the capitalists of Department I wish to accumulate halftheir surplus value (1,000) and to consume the other half, theyneed consumer goods for themselves and for their workers to thetune of 1,500 units which they can obtain only from DepartmentII in exchange for their own products—means of production.Since Department II has already satisfied its own demandfor producer goods to the extent of its own constant capital(1,430), this exchange is only possible if Department II decidesto enlarge its own constant capital by 70. This means that itmust enlarge its own production—and it can do so only bycapitalising a corresponding part of its surplus value. If thissurplus value amounts to 285 in Department II, 70 of it must beadded to the constant capital. The first step towards expansionof production in Department II is thus demonstrated to be atthe same time the condition for, and the consequence of, increasedconsumption by the capitalists of Department I. But toproceed. Hitherto, the capitalists of Department I could onlyspend one-half of their surplus value (500) on personal consumption.To capitalise the other half, they must redistribute these500s in such a way as to maintain at least the previous ratio ofcomposition, i.e. they must increase the constant capital by 417and the variable capital by 83. The first operation presents nodifficulties: the surplus value of 500 belonging to the capitalistsof Department I is contained in a natural form in their own[Pg 126]product, the means of production, and is fit straightway to enterinto the process of production; Department I can thereforeenlarge its constant capital with the appropriate quantity of itsown product. But the remaining 83 can only be used as variablecapital if there is a corresponding quantity of consumer goodsfor the newly employed workers. Here it becomes evident for thesecond time that accumulation in Department I is dependentupon Department II: Department I must receive for its workers83 more consumer goods than before from Department II. Asthis is again possible only by way of commodity exchange,Department I can satisfy its demands only on condition thatDepartment II is prepared for its part to take up products ofDepartment I, producer goods, to the tune of 83. Since DepartmentII has no use for the means of production except to employthem in the process of production, it becomes not onlypossible but even necessary that Department II should increaseits own constant capital by these very 83 which will now beused for capitalisation and are thus again withdrawn from theconsumable surplus value of this department. The increase inthe variable capital of Department I thus entails the secondstep in the enlargement of production in Department II. Allmaterial prerequisites of accumulation in Department I are nowpresent and enlarged reproduction can proceed. Department II,however, has so far made only two increases in its constantcapital. The result of this enlargement is that if the newlyacquired means of production are indeed to be used, thequantity of labour power must be increased correspondingly.Maintaining the previous ratio, the new constant capital of 153requires a new variable capital of 31. This implies the necessityto capitalise a corresponding further amount of the surplusvalue. Thus the fund for the capitalists’ personal consumption inDepartment II comes to be what remains of the surplus value(285s) after deduction of the amounts used for twice enlargingthe constant capital (70 + 83) and a commensurate increase inthe variable capital (31)—a fund of 101, after deducting a totalof 184. Similar operations in the second year of accumulationresult for Department II in its surplus value being divided into158 for capitalisation and 158 for the consumption of its capitalists,and in the third year, the figures become 172 and 170respectively.

[Pg 127]We have studied this process so closely, tracing it step bystep, because it shows clearly that the accumulation of DepartmentII is completely determined and dominated by theaccumulation of Department I. Though this dependence is nolonger expressed, as in Marx’s first example, by arbitrary changesin the distribution of the surplus value, it does not do awaywith the fact itself, even if now the surplus value is always neatlyhalved by each department, one-half for capitalisation and theother for personal consumption. Though there is nothing tochoose between the capitalists of the two departments as far asthe figures are concerned, it is quite obvious that Department Ihas taken the initiative and actively carries out the wholeprocess of accumulation, while Department II is merely a passiveappendage. This dependence is also expressed in the followingprecise rule: accumulation must proceed simultaneously in bothdepartments, and it can do so only on condition that the provisions-departmentincreases its constant capital by the preciseamount by which the capitalists of the means-of-production-departmentincrease both their variable capital and their fundfor personal consumption. This equation (increase IIc = increaseIv + increase Is.c.)[106] is the mathematical cornerstone of Marx’sdiagram of accumulation, no matter what figures we maychoose for its concrete application. But now we must see whethercapitalist accumulation does in actual fact conform to this hardand fast rule.

Let us first return to simple reproduction. Marx’s diagram, itwill be remembered, was as follows:

Here, too, we established certain equations which form thefoundation of simple reproduction; they were:

(a) The product of Department I equals in value the sum ofthe two constant capitals in Departments I and II.

(b) The constant capital of Department II equals the sum ofvariable capital and surplus value in Department I—a necessaryconsequence of (a).

[Pg 128](c) The product of Department II equals the sum of variablecapital and surplus value in both departments—a necessaryconsequence of (a) and (b).

These equations correspond to the conditions of capitalistcommodity production (at the restricted level of simple reproduction,however). Equation (b), for instance, is a result of theproduction of commodities, entailed by the fact, in other words,that the entrepreneurs of either department can only obtain theproducts of the other by an exchange of equivalents. Variablecapital and surplus value in Department I together representthe demand of this department for consumer goods. The productof Department II must provide for the satisfaction of thisdemand, but consumer goods can only be obtained in exchangefor an equivalent part of the product of Department I, themeans of production. These equivalents, useless to DepartmentII in their natural form if not employed as constantcapital in the process of production, will thus determine howmuch constant capital there is to be in Department II. If thisproportion were not adhered to, if, e.g., the constant capital ofDepartment II (as a quantity of value) were larger than I(v +s),then it could not be completely transformed into means of production,since the demand of Department I for consumer goodswould be too small; if the constant capital (II) were smallerthan I(v +s.c), either the previous quantity of labour powercould not be employed in this department, or the capitalistscould not consume the whole of their surplus value. In all thesecases, the premises of simple reproduction would be violated.

These equations, however, are not just an exercise in mathematics,nor do they merely result from the system of commodityproduction. To convince us of this fact, there is a simplemeans at hand. Let us imagine for a moment that, instead ofa capitalist method of production, we have a socialist, i.e. aplanned society in which the social division of labour has cometo replace exchange. This society also will divide its labourpower into producers of means of production and producers ofmeans of consumption. Let us further imagine the technicaldevelopment of labour to be such that two-thirds of social labourare employed in the manufacture of producer goods and one-thirdin the manufacture of consumer goods. Suppose thatunder these conditions 1,500 units (reckoned on a daily,[Pg 129]monthly, or yearly basis) suffice to maintain the whole workingpopulation of the society, one thousand of these being employed,according to our premise, in Department soc. I (making meansof production), and five hundred in Department soc. II (makingconsumer goods), and that the means of production dating fromprevious labour periods and used up during one year’s labour,represent 3,000 labour units. This labour programme, however,would not be adequate for the society, since considerably morelabour will be needed to maintain all those of its members whodo not work in the material, the productive sense of the term:the child, the old and sick, the civil servant, the artist and thescientist. Moreover, every society needs certain reserves againsta rainy day, as a protection against natural calamities. Takingit that precisely the same quantity of labour and, similarly, ofmeans of production as that required for the workers’ own maintenanceis needed to maintain all the non-workers and to buildup the reserves, then, from the figures previously assumed, weshould get the following diagram for a regulated production:

Herec stands for the material means of production that havebeen used, expressed in terms of social labour time;v stands forthe social labour time necessary to maintain the workers themselvesands for that needed to maintain those who do not workand to build up the reserves.

If we check up on the proportions of this diagram, we obtainthe following result: there is neither commodity production norexchange, but in truth a social division of labour. The productsof Department I are assigned to the workers of Department IIin the requisite quantities, and the products of Department IIare apportioned to everyone, worker or no, in both departments,and also to the reserve-fund; all this being the outcomenot of an exchange of equivalents but of a social organisationthat plans and directs the process as a whole—because existingdemands must be satisfied and production knows no other endbut to satisfy the demands of society.

Yet all that does not detract from the validity of the equations.The product of Department I must equal Ic + IIc: this meanssimply that Department I must annually renew all the means[Pg 130]of production which society has used up during one year’slabour. The product of Department II must equal the sum ofI(v +s) + II(v +s): this means that society must each year produceas many consumer goods as are required by all its members,whether they work or not, plus a quota for the reservefund. The proportions of the diagram are as natural and asinevitable for a planned economy as they are for a capitalisteconomy based upon anarchy and the exchange of commodities.This proves the diagram to have objective social validity,even if, just because it concernssimple reproduction, it hashardly more than theoretical interest for either a capitalist ora planned economy, finding practical application only in therarest of cases.

The same sort of scrutiny must now be turned on the diagramof enlarged reproduction. Taking Marx’s second example as thebasis for our test, let us again imagine a socialist society. Fromthe point of view of a regulated society we shall, of course, haveto start with Department II, not with Department I. Assumingthis society to grow rapidly, the result will be an increasingdemand for provisions by its members, whether they work ornot. This demand is growing so quickly that a constantly increasingquantity of labour—disregarding for the moment theprogress of labour productivity—will be needed for the productionof consumer goods. The quantities required, expressed interms of social labour incorporated in them, increase from yearto year in a progression of, say, 2,000 : 2,215 : 2,399 : 2,600 andso on. Let us further assume that technical conditions demandan increasing amount of means of production for producing thisgrowing quantity of provisions, which, again measured in termsof social labour, mounts from year to year in the following progression:7,000 : 7,583 : 8,215 : 8,900 and so on. To achieve thisenlargement of production, we must further have a growth inthe labour performedper annum according to the following progression:2,570 : 2,798 : 3,030 : 3,284. [The figures correspond tothe respective amounts of I(v +s) + II(v +s).] Finally, the labourperformed annually must be so distributed that one-half isalways used for maintaining the workers themselves, a quarterfor maintaining those who do not work, and the last quarter forthe purpose of enlarging production in the following year. Thuswe obtain the proportions of Marx’s second diagram of enlarged[Pg 131]reproduction for a socialist society. In fact, three conditions areindispensable if production is to be enlarged in any society, evenin a planned economy: (1) the society must have an increasingquantity of labour power at its disposal; (2) in every workingperiod, the immediate needs of society must not claim thewhole of its working time, so that part of the time can be devotedto making provision for the future and its growingdemands; (3) means of production must be turned out yearafter year in sufficiently growing quantities—without whichproduction cannot be enlarged on a rising scale. In respectof all these general points, Marx’s diagram of enlarged reproductionhas objective validity—mutatis mutandis—for a plannedsociety.

It remains to test whether it is also valid for a capitalisteconomy. Here we must ask first of all: what is the starting pointof accumulation? That is the approach on which we have toinvestigate the mutual dependence of the accumulative processin the two departments of production. There can be no doubtthat under capitalist conditions Department II is dependentupon Department I in so far as its accumulation is determinedby the additional means of production available. Conversely,the accumulation in Department I depends upon a correspondingquantity of additional consumer goods being available forits additional labour power. It does not follow, however, thatso long as both these conditions are observed, accumulation inboth departments is bound, as Marx’s diagram makes it appear,to go on automatically year after year. The conditions ofaccumulation we have enumerated are no more than thosewithout which there can be no accumulation. There may evenbe a desire to accumulate in both departments, yet the desire toaccumulate plus the technical prerequisites of accumulation isnot enough in a capitalist economy of commodity production.A further condition is required to ensure that accumulation canin fact proceed and production expand: the effective demandfor commodities must also increase. Where is this continuallyincreasing demand to come from, which in Marx’sdiagram forms the basis of reproduction on an ever risingscale?

It cannot possibly come from the capitalists of DepartmentsI and II themselves—so much is certain right away—it cannot[Pg 132]arise out of their personal consumption. On the contrary, it isthe very essence of accumulation that the capitalists refrain fromconsuming a part of their surplus value which must be everincreasing—at least as far as absolute figures are concerned—thatthey use it instead to make goods for the use of other people.It is true that with accumulation the personal consumption ofthe capitalist class will grow and that there may even be anincrease in the total value consumed; nevertheless it will stillbe no more than a part of the surplus value that is used forthe capitalists’ consumption. That indeed is the foundation ofaccumulation: the capitalists’ abstention from consuming thewhole of their surplus value. But what of the remaining surplusvalue, the part that is accumulated? For whom can it bedestined? According to Marx’s diagram, Department I has theinitiative: the process starts with the production of producergoods. And who requires these additional means of production?The diagram answers that Department II needs them in orderto produce means of consumption in increased quantities. Wellthen, who requires these additional consumer goods? DepartmentI, of course—replies the diagram—because it now employsa greater number of workers. We are plainly running in circles.From the capitalist point of view it is absurd to produce moreconsumer goods merely in order to maintain more workers, andto turn out more means of production merely to keep this surplusof workers occupied. Admittedly, as far as the individualcapitalist is concerned, the worker is just as good a consumer,i.e. purchaser of his commodity, as another capitalist or anyoneelse, provided that he can pay. Every individual capitalistrealises his surplus value in the price of his commodity, whetherhe sells it to the worker or to some other buyer. But this does nothold true from the point of view of the capitalist class as a whole.The working class in general receives from the capitalist class nomore than an assignment to a determinate part of the socialproduct, precisely to the extent of the variable capital. Theworkers buying consumer goods therefore merely refund to thecapitalist class the amount of the wages they have received, theirassignment to the extent of the variable capital. They cannotreturn a groat more than that; and if they are in a position tosave in order to make themselves independent as small entrepreneurs,they may even return less, though this is the exception.

[Pg 133]Part of the surplus value is consumed by the capitalist classitself in form of consumer goods, the money exchanged for thesebeing retained in the capitalists’ pockets. But who can buy theproducts incorporating the other, the capitalised part of thesurplus value? Partly the capitalists themselves—the diagramanswers—who need new means of production for the purposeof expanding production, and partly the new workers who willbe needed to work these new means of production. But thatimplies a previous capitalist incentive to enlarge production; ifnew workers are set to work with new means of production,there must have been a new demand for the products which areto be turned out.

Perhaps the answer is that the natural increase of the populationcreates this growing demand. In fact, the growth of thepopulation and its needs provided the starting point for ourexamination of enlarged reproduction in an hypotheticalsocialist society. There the requirements of society could serveas an adequate basis, since the only purpose of production wasthe satisfaction of wants. In a capitalist society, however, thematter is rather different. What kind of people are we thinkingof when we speak of an increase in the population? There areonly two classes of the population according to Marx’s diagram,the capitalists and the workers. The natural increase of theformer is already catered for by that part of the surplus valuewhich is consumed inasmuch as it increases in absolute quantity.In any case, it cannot be the capitalists who consume the remainder,since capitalist consumption of the entire surplus valuewould mean a reversion to simple reproduction. That leaves theworkers, their class also growing by natural increase. Yet acapitalist economy is not interested in this increase for its ownsake, as a starting point of growing needs.

The production of consumer goods for Iv and IIv is not anend in itself, as it would be in a society where the economicsystem is shaped for the workers and the satisfaction of theirwants. In a capitalist system, Department II does not producemeans of consumption in large quantities simply to keep theworkers of Departments I and II. Quite the contrary: a certainnumber of workers in Departments I and II can support themselvesin every case because their labour power is useful underthe obtaining conditions of supply and demand. This means[Pg 134]that the starting point of capitalist production is not a givennumber of workers and their demands, but that these factorsthemselves are constantly fluctuating, ‘dependent variables’ ofthe capitalist expectations of profit. The question is thereforewhether the natural increase of the working class also entails agrowing effective demand over and above the variable capital.And that is quite impossible. The only source of money for theworking class in our diagram is the variable capital which musttherefore provide in advance for the natural increase of theworkers. One way or the other: either the older generation mustearn enough to keep their offspring—who cannot, then, countas additional consumers; or, failing that, the next generation,the young workers, must turn to work in order to obtain wagesand means of subsistence for themselves—in which case the newworking generation is already included in the number ofworkers employed. On this count, the process of accumulationin Marx’s diagram cannot be explained by the natural increaseof the population.

But wait! Even under the sway of capitalism, society does notconsist exclusively of capitalists and wage labourers. Apart fromthese two classes, there are a host of other people: the landowners,the salaried employees, the liberal professions such asdoctors, lawyers, artists and scientists. Moreover, there is theChurch and its servants, the Clergy, and finally the State with itsofficials and armed forces. All these strata of the population canbe counted, strictly speaking, neither among the capitalist noramong the working class. Yet society has to feed and supportthem. Perhaps it is they, these strata apart from the capitalistsand wage labourers, who call forth enlarged reproduction bytheir demand. But this seeming solution cannot stand up to acloser scrutiny. The landowners must as consumers of rent, i.e.of part of the surplus value, quite obviously be numbered amongthe capitalist class; since we are here concerned with the surplusvalue in its undivided, primary form, their consumption isalready allowed for in the consumption of the capitalist class.The liberal professions in most cases obtain their money, i.e. theassignment to part of the social product, directly or indirectlyfrom the capitalist class who pay them with bits of their ownsurplus value. And the same applies to the Clergy, with thedifference only that its members also obtain their purchasing[Pg 135]power in part from the workers, i.e. from wages. The upkeep ofthe State, lastly, with its officers and armed forces is borne by therates and taxes, which are in their turn levied upon either thesurplus value or the wages. Within the limits of Marx’s diagramthere are in fact only the two sources of income in a society: thelabourers’ wages and the surplus value. All the strata of thepopulation we have mentioned as apart from the capitalists andthe workers, are thus to be taken only for joint consumers ofthese two kinds of income. Marx himself rejects any suggestionthat these ‘third persons’ are more than a subterfuge:

‘All members of society not directly engaged in reproduction,with or without labour, can obtain their share of the annualproduce of commodities—in other words, their articles of consumption... only out of the hands of those classes who are thefirst to handle the product, that is to say, productive labourers,industrial capitalists, and real estate owners. To that extent theirrevenues are substantially derived from wages (of the productivelabourers), profit and ground rent, and appear as indirectderivations when compared to these primary sources of revenue.But, on the other hand, the recipients of these revenues, thusindirectly derived, draw them by grace of their social functions,for instance that of a king, priest, professor, prostitute, soldier,etc., and they may regard these functions as the primary sourcesof their revenue.’[107]

And about the consumers of interest and ground rent asbuyers, Marx says: ‘Now, if that portion of the surplus-value ofcommodities, which the industrial capitalist yields in the formof ground rent or interest to other shareholders in the surplus-value,cannot be in the long run converted into money by thesale of the commodities, then there is an end to the payment ofrent and interest, and the landowners or recipients of interestcan no longer serve in the role of miraculous interlopers, whoconvert aliquot portions of the annual reproduction into moneyby spending their revenue. The same is true of the expenditureof all so-called unproductive labourers, State officials, physicians,lawyers, etc., and others who serve economists as an excusefor explaining inexplicable things, in the role of the ‘generalpublic’.[108]

Seeing that we cannot discover within capitalist society any[Pg 136]buyers whatever for the commodities in which the accumulatedpart of the surplus value is embodied, only one thing is left:foreign trade. But there are a great many objections to a methodthat conceives of foreign trade as a convenient dumping groundfor commodities which cannot be found any proper place in thereproductive process. Recourse to foreign trade really begsthe question: the difficulties implicit in the analysis are simplyshifted—quite unresolved—from one country to another. Yet ifthe analysis of the reproductive process actually intends not anysingle capitalist country but the capitalist world market, therecan be no foreign trade: all countries are ‘home’. This point ismade by Marx already in the first volume ofCapital, in connectionwith accumulation:

‘We here take no account of export trade, by means of whicha nation can change articles of luxury either into means of productionor means of subsistence, andvice versa. In order toexamine the object of our investigation in its integrity, free fromall disturbing subsidiary circumstances, we must treat the wholeworld as one nation and assume that capitalist production iseverywhere established and has possessed itself of every branchof industry.’[109]

The same difficulty presents itself if we consider the matterfrom yet another aspect. In Marx’s diagram of accumulation weassumed that the portion of the social surplus value intendedfor accumulation exists from the first in a natural form whichdemands it to be used for capitalisation.

‘In one word, surplus-value is convertible into capital solelybecause the surplus-product, whose value it is, already comprisesthe material elements of new capital.’[110]

Here, a surplus value of 570s can be capitalised because fromthe very outset it consists in means of production. To thisquantity of producer goods there correspond besides additionalconsumer goods to the amount of 114s so that 684s can becapitalised in all. But the process here assumed of simply transferring[Pg 137]means of production to constant capital on the one hand,consumer goods to variable capital on the other, in commensuratequantities, is in contradiction with the very structure ofcapitalist commodity production. Whatever natural form thesurplus value may have, there can be no immediate transfer tothe place of production for the purpose of accumulation. It mustfirst be realised, it must be turned into hard cash.[111]

Of the surplus value in Department I, 500 are fit to be capitalised,but not until they have first been realised; the surplusvalue has to shed its natural form and assume the form of purevalue before it can be added to productive capital. This is truefor each individual capitalist and also for the ‘aggregate capitalist’of society, it being a prime condition for capitalist productionthat the surplus value must be realised in the form of purevalue. Accordingly, regarding reproduction from the point ofview of society as a whole—

‘We must not follow the manner copied by Proudhon frombourgeois economy, which looks upon this matter as though asociety with a capitalist mode of production would lose itsspecific historical and economic characteristics by being takenas a unit. Not at all. We have, in that case, to deal with theaggregate capitalist.’[112]

The surplus value must therefore shed its form as surplus productbefore it can re-assume it for the purpose of accumulation;by some means or other it must first pass through the moneystage. So the surplus product of Departments I and II must bebought—by whom? On the above showing, there will have tobe an effective demand outside I and II, merely in order torealise the surplus value of the two departments, just so that thesurplus product can be turned to cash. Even then, we shouldonly have got to the stage where the surplus value has becomemoney. If this realised surplus value is further to be employed inthe process of enlarging reproduction, in accumulation, an evenlarger demand must be expected for the future, a demand whichis again to come from outside the two departments. Either the[Pg 138]demand for the surplus product will therefore have to increaseannually in accordance with the rate of increase of the accumulatedsurplus value, or—vice versa—accumulation can only proceedprecisely in so far as the demand outside I and II isrising.

CHAPTER VIII

MARX’S ATTEMPTTO RESOLVE THE DIFFICULTY

Complete abstraction from the circulation of money,though making the process of accumulation so smoothand simple in the diagram of enlarged reproduction, hasgreat disadvantages of its own, we see. There was much to besaid for this method in the analysis of simple reproduction,where consumption is the be-all and end-all of production.Money there had an ephemeral part, mediating the distributionof the social product among the various groups of consumers—theagent for the renewal of capital. In the process of accumulation,however, the money form has an essential function: it nolonger serves as a mere agent in the circulation of commodities—hereit has come to be a feature of capital itself, an element inthe circulation of capital. Even if the transformation of thesurplus value is not essential to real reproduction, it is theeconomicsine qua non of capitalist accumulation. In the transitionfrom production to reproduction, the surplus product is thussubjected to two metamorphoses: first it casts off its use-formand then it assumes a natural form which is fit for the purposeof accumulation. The point here is not that the different cyclesof production are counted off in units of years. It would be justas well to take the month; for that matter, the successive transformationof individual portions of the surplus value in DepartmentsI and II may even intersect in time. Series of years heredo not mean units of time but really intend the sequence ofeconomic transformations. What matters is that this sequencemust be observed if accumulation is to keep its capitalist character,whether it extends over a longer or a shorter period oftime. This brings us back to the old question: How, and bywhom, is the accumulated surplus value to be realised?

Marx was well aware that his seemingly water-tight schemeof accumulation did not cover this point adequately, and he[Pg 140]himself kept reviewing the problem from various angles. Whathe says is this:

‘It has been shown in volume i, how accumulation works inthe case of the individual capitalist. By the conversion of thecommodity-capital into money, the surplus-product, in whichthe surplus-value is incorporated, is also monetised. The capitalistreconverts the surplus-value thus monetised into additionalnatural elements of his productive capital. In the next cycle ofproduction the increased capital furnishes an increased product.But what happens in the case of the individual capital, mustalso show in the annual reproduction of society as a whole, justas we have seen it does in the case of reproduction on a simplescale, where the successive precipitation of the depreciatedelements of fixed capital in the form of money, accumulated asa hoard, also makes itself felt in the annual reproduction ofsociety.’[113]

He examines the mechanism of accumulation further fromthis very point of view, focusing on the fact that surplus valuemust pass through the money stage before it is accumulated.

‘For instance, capitalist A, who sells during one year, orduring a number of successive years, certain quantities of commoditiesproduced by him, thereby converts that portion of thecommodities, which bears surplus-value, the surplus-product,or, in other words, the surplus-value produced by himself,successively into money, accumulates it gradually, and thusmakes for himself a new potential money-capital. It is potentialmoney-capital on account of its capacity and destination ofbeing converted into the elements of productive capital. Butpractically he merely accumulates a simple hoard, which is notan element of actual production. His activity for the time beingconsists only in withdrawing circulating money out of circulation.Of course, it is not impossible that the circulating moneythus laid away by him was itself, before it entered into circulation,a portion of some other hoard.’[114] ‘Money is withdrawnfrom circulation and accumulated as a hoard by the sale of commoditieswithout a subsequent purchase. If this operation isconceived as one taking place universally, then it seems inexplicablewhere the buyers are to come from, since in that caseeverybody would want to sell in order to hoard, and no one[Pg 141]would want to buy. And it must be so conceived, since everyindividual capital may be in process of accumulation.

‘If we were to conceive of the process of circulation as onetaking place in a straight line between the various divisions ofannual reproduction—which would be incorrect as it consistswith a few exceptions of mutually retroactive movements—thenwe should have to start out from the producer of gold (or silver)who buys without selling, and to assume that all others sell tohim. In that case, the entire social surplus-product of thecurrent year would pass into his hands, representing the entiresurplus-value of the year, and all the other capitalists woulddistribute among themselves their relative shares in his surplus-product,which consists naturally of money, gold being thenatural form of his surplus-value. For that portion of the productof the gold producer, which has to make good his active capital,is already tied up and disposed of. The surplus-value of the goldproducer, in the form of gold, would then be the only fund fromwhich all other capitalists would have to derive the material forthe conversion of their annual surplus-product into gold. Themagnitude of its value would then have to be equal to the entireannual surplus-value of society, which must first assume theguise of a hoard. Absurd as this assumption would be, it wouldaccomplish nothing more than to explain the possibility of auniversal formation of a hoard at the same period. It would notfurther reproduction itself, except on the part of the gold producer,by one single step.

The obstacle in the way of realising the surplus value whichMarx here calls a ‘seeming difficulty’ nevertheless is importantenough for the whole further discussion inCapital, volume ii,to be concentrated on overcoming it. As a first attempt, Marxproffers the solution of a hoard which, owing to the separationof the different individual constant capitals in the process ofcirculation, will inevitably be formed in a capitalist system ofproduction. Inasmuch as different capital investments havedifferent spans of life, and there is always an interval before theparts of a plant are due for renewal, at any given moment wemay find that one individual capitalist is already busy renewinghis plant, while another is still building up reserves from the[Pg 142]proceeds yielded by the sale of his commodities against the daywhen he will have enough to renew his fixed capital.

‘For instance, let A sell 600, representing 400c + 100v + 100sto B, who may represent more than one buyer. A sells 600 incommodities for 600 in money, of which 100 are surplus-valuewhich he withdraws from circulation and hoards in the form ofmoney. But these 100 in money are but the money-form of thesurplus-product in which a value of 100 was incorporated.’[116]

In order to comprehend the problem in complete purity,Marx here assumes the whole of the surplus value to be capitalised,for which reason he ignores altogether that part of thesurplus value is used for the capitalists’ personal consumption;in addition, A´, A´´ and A´´´ as well as B´, B´´ and B´´´ herebelong to Department I.

‘The formation of a hoard, then, is not a production, nor is itan increment of production. The action of the capitalist consistsmerely in withdrawing from circulation 100 obtained by thesale of his surplus-product, in holding and hoarding this amount.This operation is carried on, not alone on the part of A, but atnumerous points of the periphery of circulation by other capitalistsnamed A´, A´´, A´´´.... However, A accomplishes theformation of a hoard only to the extent that he acts as a seller,so far as his surplus-product is concerned, not as a buyer. Hissuccessive production of surplus-products, the bearers of hissurplus-value convertible into money, is therefore a premise forthe formation of his hoard. In the present case, where we aredealing only with the circulation within Department I, thenatural form of the surplus-product, and of the total product ofwhich it is a part, is that of an element of constant capital of I,that is to say it belongs to the category of a means of productioncreating means of production. We shall see presently whatbecomes of it, what function it performs, in the hands of thebuyers such as B, B´, B´´, etc.

‘It must particularly be noted at this point that A, whilewithdrawing money from circulation and hoarding it, on theother hand throws commodities into it without withdrawingother commodities in return. The capitalists, B, B´, B´´, etc., arethereby enabled to throw only money into it and withdraw onlycommodities from it. In the present case, these commodities,[Pg 143]according to their natural form and destination, become a fixedor circulating element of the constant capital of B, B´, etc.’[117]

There is nothing new about this whole process. Marx hadalready described it extensively in connection with simple reproduction,since it alone can explain how a society is able torenew constant capital under conditions of capitalist reproduction.How this process can lay the besetting problem of ouranalysis of enlarged reproduction is far from self-evident. Thedifficulty had been that for the purpose of accumulation, partof the surplus value is not consumed by the capitalists but addedto capital in order to expand production, giving rise to thequestion of buyers for this additional product. The capitalists donot want to consume it and the workers are not able to do so,their entire consumption being covered in every case by theavailable variable capital. Whence the demand for the accumulatedsurplus value? or, as Marx would have it: Whence themoney to pay for the accumulated surplus value?

If, by way of answer, we are referred to the process of hoardingattendant upon the gradual renewal of the constant capitalby the individual capitalists at various times, the connectionbetween these two points remains obscure. As long as B, B´ andB´´, etc., buy producer goods from their colleagues A, A´ andA´´ in order to renew their constant capital that has in fact beenused up, the limits of simple reproduction are not transcended,and the whole thing has nothing to do with our problem. Themoment the producer goods purchased by B, B´, B´´, etc., serveto increase their constant capital, however, for purposes ofaccumulation, a number of new questions clamour for attention.First and foremost where do the B’s get the cash to buy anadditional product from the A’s? The only way they could havemade their money is by sale of their own surplus product.Before they can acquire new means of production for expandingtheir enterprises, before they appear as buyers, that is to say, ofthe surplus product that is to be accumulated, they must firsthave disposed of their own surplus product—in a word, B, B´,B´´, etc., must have been vendors themselves. But who couldhave bought their surplus product? It is obvious that the difficultyis simply shifted from the A’s to the B’s without havingbeen mastered.

[Pg 144]At one stage of the analysis it really does seem for a time as ifa solution were found at last. After a short digression, Marxreturns to the main line of his investigation in the followingwords:

‘In the present case, this surplus-product consists at the outsetof means of production used in the creation of means of production.It is not until it reaches the hands of B, B´, B´´, etc.,(I), that this surplus-product serves as an additional constantcapital. But it is virtually that even in the hands of the accumulatorsof hoards, the capitalists A, A´, A´´, (I), before it is sold.If we consider merely the volume of values of the reproductionon the part of I, then we are still moving within the limits ofsimple reproduction, for no additional capital has been set inmotion for the purpose of creating this virtual additionalcapital (the surplus-product), nor has any greater amount ofsurplus-labour been performed than that done on the basis ofsimple reproduction. The difference is here only one of the formof the surplus-labour performed, of the concrete nature of itsparticularly useful service. It is expended in means of productionfor Department Ic instead of IIc, in means of production ofmeans of production instead of means of production of articlesof consumption. In the case of simple reproduction it had beenassumed that the entire surplus-value was spent as revenue inthe commodities of II. Hence it consisted only of such means ofproduction as restore the constant capital of IIc in its naturalform. In order that the transition from simple to expanded reproductionmay take place, the production in Department Imust be enabled to create fewer elements for the constant capitalof II and more for that of I.... Considering the matter merelyfrom the point of view of the volume of values, it follows, then,that the material requirements of expanded reproduction areproduced within simple reproduction. It is simply a question ofthe expenditure of the surplus-labour of the working class of Ifor the production of means of production, the creation ofvirtual additional capital of I. The virtual additional money-capital,created on the part of A, A´, A´´, by the successive saleof their surplus-product, which was formed without any capitalistexpenditure of money, is in this case simply the money-formof the additional means of production made by I.’[118]

[Pg 145]On this interpretation, the difficulty seems to dissolve intothin air at our touch. Accumulation requires no new sources ofmoney at all. Before, when the capitalists themselves consumedtheir surplus value, they had to have a corresponding moneyreserve in hand, the analysis of simple reproduction alreadyhaving proved that the capitalist class must itself put into circulationthe money needed for the realisation of their surplusvalue. Now, instead of consumer goods, the capitalist class, orrather B, B´, and B´´, buy an equivalent amount of means ofproduction in order to expand their production. In this way,money to the same value is accumulated in the hands of theother capitalist group, viz. A, A´, A´´, etc.

‘This hoarding ... does not in any way imply an additionto the wealth in precious metals, but only a change of functionon the part of money previously circulating. A while ago itserved as a medium of circulation, now it serves as a hoard, asa virtual additional money-capital in process of formation.’[119]

And that is that! Yet this way out of the difficulty is open to usonly on one condition, and that is not far to seek: Marx heretakes accumulation in its first rudiments,in statu nascendi, as itbegins to evolve from simple reproduction. In respect of theamount of value, production is not yet enlarged, it has only beenrearranged so that its material elements are grouped in a differentway. That the sources of money also seem adequate istherefore not surprising. This solution, however, is only true forone specific moment, the period of transition from simple reproductionto enlarged reproduction—in short, a moment that hasno reference to reality and can only be conceived speculatively.Once accumulation has been established for some time, whenincreasing amounts of value are thrown upon the market inevery period of production, buyers for these additional valuescannot fail to become a problem. And on this point the profferedsolution breaks down. For that matter, it was never morethan a seeming solution,not a real one. On closer scrutiny, it failsus even at the precise instant it appears to have smoothed theway for us. For if we take accumulation just at the very momentof its emergence from simple reproduction, the prime conditionit demands is a decrease in the consumption of the capitalistclass. No sooner have we discovered a way to expand reproduction[Pg 146]with the means of circulation already at hand, than wefind previous consumers trickling away at the same rate. What,then, is the good of expanding production; who is there able tobuy from B, B´ and B´´ this increased amount of products whichthey could turn out only by denying themselves the money theyneed for buying new means of production from A, A´ and A´´?

That solution, we see, was a mere illusion—the difficulty stillpersists. Marx himself at once re-opens the question where B,B´ and B´´ get the money to buy the surplus product of A, A´and A´´.

‘To the extent that the products created by B, B´, B´´, etc.,(I) re-enter in their natural form into their own process, it goeswithout saying that a corresponding portion of their ownsurplus-product is transferred directly (without any interventionof circulation) to their productive capital and becomes anelement of additional constant capital. To the same extent theydo not help to convert any surplus-product of A, A´, A´´ etc.,(I) into money. Aside from this, where does the money comefrom? We know that they have formed their hoard in the sameway as A, A´, etc., by the sale of their respective surplus-products.Now they have arrived at the point where theiraccumulated hoard of virtual money-capital is to enter effectuallyupon its function as additional money-capital. But this ismerely turning around in a circle. The question still remains:Where does the money come from, which the various B’s (I)withdrew from the circulation and accumulated?’[120]

His prompt reply again seems surprisingly simple: ‘Now weknow from the analysis of simple reproduction, that the capitalistsof I and II must have a certain amount of ready moneyin their hands, in order to be able to dispose of their surplus-products.In that case, the money which served only for thespending of revenue in articles of consumption returned to thecapitalists in the same measure in which they advanced it forthe purpose of disposing of their commodities. Here the samemoney reappears, but in a different function. The A’s and B’ssupply one another alternately with the money for convertingtheir surplus-product into virtual additional capital, and throwthe newly formed money-capital alternately into circulation asa medium of purchase.’[121]

[Pg 147]That is harking back to simple reproduction all over again. Itis quite true, of course, that the capitalists A and the capitalistsB are constantly accumulating a hoard of money bit by bit so asto be able to renew their constant (fixed) capital from time totime, and in this way they really are assisting one another inrealising their products. Yet this accumulating hoard does notdrop from the clouds—it is simply a natural precipitation of thefixed capital that is (in terms of value) continually being transferredin instalments to the products which are then one by onerealised in the process of sale. Owing to its very nature, theaccumulated hoard can only cover the renewal of the oldcapital; there cannot possibly be enough to serve further forpurchasing additional constant capital. That means that we arestill within the limits of simple reproduction. Perhaps, though,that part of the medium of circulation which hitherto servedthe capitalists for their personal consumption, and is now to becapitalised, becomes a new source of additional money? For thatto be true, however, we should have to be back at the uniqueand fleeting moment that has no more than theoretical existence—theperiod of transition from simple to enlarged reproduction.Beyond this gap accumulation cannot proceed—we are in truthgoing round in circles.

So the capitalist hoarding will not do as a way out of ourdifficulties. This conclusion should not come as a surprise, sincethe very exposition of the difficulty was misleading. It is not thesource of money that constitutes the problem of accumulation,but the source of the demand for the additional goods producedby the capitalised surplus value; not a technical hitch in thecirculation of money but an economic problem pertaining tothe reproduction of the total social capital. Quite apart fromthe question which had claimed Marx’s entire attention so far,namely where B, B´, etc., (I), get the money to buy additionalmeans of production from A, A´, etc., (I), successful accumulationwill inevitably have to face a far more serious problem:to whom can B, B´, etc., now sell their increased surplus-product?Marx finally makes them sell their products to oneanother:

‘It may be that the different B, B´, B´´, etc., (I), whose virtualnew capital enters upon its active function, are compelled tobuy from one another their product (portions of their surplus-product)[Pg 148]or to sell it to one another. In that case, the moneyadvanced by them for the circulation of their surplus-productflows back under normal conditions to the different B’s in thesame proportion in which they advanced it for the circulationof their respective commodities.’[122]

‘In that case’—the problem simply has not been solved, forafter all B, B´, and B´´ have not cut down on their consumptionand expanded their production just so as to buy each other’sincreased product, i.e. means of production. Even that, incidentally,would only be possible to a very limited extent. Marxassumes a certain division of labour in Department I itself: theA’s turn out means of production for making producer goodsand the B’s means of production for making consumer goods,which is as much as to say that, though the product of A, A´,etc., need never leave Department I, the product of B, B´, etc.,is by its natural form predestined from the first for DepartmentII. Already the accumulation of B, B´, etc., it follows, mustlead us to circulation between Departments I and II. ThusMarx’s analysis itself confirms that, if Department I is toaccumulate, the department for means of consumption must, inthe last resort, increase its immediate or mediate demand formeans of production, and so it is to Department II and itscapitalists that we must look for buyers for the additional productturned out by Department I.

Sure enough, Marx’s second attack on the problem takes upfrom there: the demand of capitalists in Department II foradditional means of production. Such a demand inevitablyimplies that the constant capital IIc is in process of expanding.This is where the difficulty becomes truly formidable:

‘Take it now that A(I) converts his surplus-product into goldby selling it to a capitalist B in Department II. This can be doneonly by the sale of means of production on the part of A(I) toB(II) without a subsequent purchase of articles of consumption,in other words, only by a one-sided sale on A’s part. Now wehave seen that IIc cannot be converted into the natural form ofproductive constant capital unless not only Iv but also at leasta portion of Is, is exchanged for a portion of IIc, which IIc existsin the form of articles of consumption. But now that A hasconverted his Is into gold by making this exchange impossible[Pg 149]and withdrawing the money obtained from IIc out of circulation,instead of spending it for articles of consumption of IIc,there is indeed on the part of A(I) a formation of additionalvirtual money-capital, but on the other hand there is a correspondingportion of the value of the constant capital B(II) heldin the form of commodity-capital, unable to transform itselfinto natural productive constant capital. In other words, aportion of the commodities of B(II), and at that a portionwhich must be sold if he wishes to reconvert his entire constantcapital into its productive form, has become unsaleable. To thatextent, there is an over-production which clogs reproduction,even on the same scale.’[123]

Department I’s efforts to accumulate by selling its additionalproduct to Department II have met with an unlooked-for result:a deficit for the capitalists of Department II serious enough toprevent even simple reproduction on the old scale.

Having got to this crucial point, Marx seeks to lay bare theroot of the problem by a careful and detailed exposition:

‘Let us now take a closer look at the accumulation in DepartmentII. The first difficulty with reference to IIc, that isto say the conversion of an element of the commodity-capitalof II into the natural form of constant capital of II, concernssimple reproduction. Let us take the formula previously used.(1,000v + 1,000s) I are exchanged for 2,000 IIc. Now, if one halfof the surplus-product of I, or 500s, is reincorporated in DepartmentI as constant capital, then this portion, being detainedin Department I, cannot take the place of any portion of IIc.Instead of being converted into articles of consumption, it ismade to serve as an additional means of production in DepartmentI itself.... It cannot perform this function simultaneouslyin I and II. The capitalist cannot spend the value of his surplus-productfor articles of consumption, and at the same timeconsume the surplus-product itself productively, by incorporatingit in his productive capital. Instead of 2,000 I(v +s), only1,500 are exchangeable for 2,000 IIc, namely 1,000v + 500s of I.But 500 Ic cannot, be reconverted from the form of commoditiesinto productive constant capital of II.’[124]

By now, hardly anybody could fail to be convinced that thedifficulty is real, but we have not taken a single step nearer a[Pg 150]solution. This, incidentally, is where Marx has to do penancefor his ill-advised continual recourse in an earlier over-simplification,to a fictitious moment of transition—in order in elucidatethe problem of accumulation—from simple reproductionto enlarged reproduction, making his major premise accumulationat its very inception, in its feeble infancy instead itsvigorous stride. There was something to be said, at least, for thisfiction, so long as it was just a question of accumulation withinDepartment I. The capitalists of Department I, who deniedthemselves part of what they had been wont to consume, at oncehad a new hoard of money in hand with which they could startcapitalisation. But when it comes to Department II, the samefiction only piles on the difficulties. The ‘abstinence’ of thecapitalists in Department I here finds expression in a painfulloss of consumers for whose expected demand production hadlargely been calculated. Since the capitalists of Department II,on whom we tried the experiment whether they might notpossibly be the long-sought buyers of the additional product ofaccumulation in Department I, are themselves in sore straits—notknowing as yet where to go with their own unsold product—theyare even less likely to be of any help to us. There is noshutting our eyes to the fact that an attempt to make one groupof capitalists accumulate at the expense of the other is bound toget involved in glaring inconsistencies.

Yet another attempt to get round the difficulty is subsequentlymentioned by Marx who at once rejects it as a subterfuge.The unmarketable surplus value in Department II that isthe result of accumulation in Department I might be considereda reserve of commodities the society is going to need in thecourse of the following year. This interpretation Marx counterswith his usual thoroughness:

‘(1) ... the forming of such supplies and the necessity for itapplies to all capitalists, those of I as well as of II. Consideringthem in their capacity as sellers of commodities, they differ onlyby the fact that they sell different kinds of commodities. Asupply of commodities of II implies a previous supply of commoditiesof I. If we neglect this supply on the one side, we mustalso do so on the other. But if we count them in on both sides,the problem is not altered in any way. (2) Just as this year closeson the side of II with a supply of commodities for the next year,[Pg 151]so it was opened by a supply of commodities on the same side,taken over from last year. In the analysis of annual reproduction,reduced to its abstract form, we must therefore strike it outat both ends. By leaving this year in possession of its entireproduction, including the supply held for next year, we takefrom it the supply of commodities transferred from last year, andthus we have actually to deal with the aggregate product of anaverage year as the object of our analysis. (3) The simplecircumstance that the difficulty which must be overcome didnot show itself in the analysis of simple reproduction proves thatit is a specific phenomenon due merely to the different arrangementof the elements of Department I with a view to reproduction,an arrangement without which reproduction on anexpanded scale cannot take place at all.’[125]

The last remark, be it noted, is equally damaging to his ownearlier attempt at resolving the specific difficulties of accumulationby moments pertaining to simple reproduction, viz. theformation of a hoard consequent upon the gradual turnover ofthe fixed capital in the hands of the capitalists which was previouslyadduced as the explanation of accumulation in DepartmentI.

Marx then proceeds to set out enlarged reproduction in theform of diagrams. But no sooner does he begin to analyse hisdiagram, than the same difficulty crops up anew in a slightlydifferent guise. Assuming that the capitalists of Department IImust for their part convert 140s into constant capital so as tomake accumulation possible for the others, he asks:

‘Therefore Department II must buy 140s for cash withoutrecovering this money by a subsequent sale of its commodities toI. And this is a process which is continually repeated in everynew annual production, so far as it is reproduction on anenlarged scale. Where does II get the money for this?’[126]

In the following, Marx tries out various approaches in orderto discover this source. First the expenditure on variable capitalby the capitalists in Department II is closely scrutinised. True,it exists in the form of money; but its proper function is thepurchase of labour power, and it cannot possibly be withdrawnand made to serve, maybe, for purchasing additional means ofproduction.

[Pg 152]‘This continually repeated departure from and return to thestarting point, the pocket of the capitalist, does not add in anyway to the money moving in this cycle. This, then, is not asource of the accumulation of money.’[127]

Marx then considers all conceivable dodges, only to showthem up as evading the issue.

‘But stop!’ he exclaims. ‘Isn’t there a chance to make a littleprofit?’[127]

He considers whether the capitalists could not manage to savea little of the variable capital by depressing the wages of theworkers below the normal average and thus to tap a new sourceof money for accumulation. A mere flick of his fingers, of course,disposes of this notion:

‘But it must not be forgotten that the wages actually paid(which determine the magnitude of the variable capital undernormal conditions) do not depend on the benevolence ofthe capitalists, but must be paid under certain conditions.This does away with this expedient as a source of additionalmoney.’[127]

He even explores what hidden methods there may be of‘saving’ on the variable capital, such as the truck system, frauds,etc., only to comment finally: ‘This is the same operation asunder (1), only disguised and carried out by a detour. Thereforeit must likewise be rejected as an explanation of the presentproblem.’[128]

All efforts to make the variable capital yield a new source ofmoney for the purpose of accumulation are thus unrewarded:‘In short, we cannot accomplish anything with 376 IIv for thesolution of this question.’[128]

Marx next turns to the cash reserves which the capitalists inDepartment II keep for the circulation of their own consumptionand investigates whether none of this money can be divertedto the purposes of capitalisation. Yet this, he allows, is ‘stillmore impossible’.

‘Here the capitalists of the same department are standing faceto face, heavily buying and selling their articles of consumption.The money required for these transactions serves only as amedium of circulation and must flow back to the interestedparties in the normal course of things, to the extent that they[Pg 153]have advanced it to the circulation, in order to pass again andagain over the same course.’[129]

The next attempt to follow belongs, as was to have beenexpected, to the category of those ‘subterfuges’ which Marxruthlessly refutes: the attempt to explain that money-capital canbe formed in the hands of one capitalist group in Department IIby defrauding the other capitalists within the same department—viz.in the process of the mutual selling of consumer goods. Notime need be wasted on this little effort.

Then comes a more sober proposition: ‘Or, a certain portionof IIs, represented by necessities of life, might be directly convertedinto new variable capital of Department II.’[130]

It is not quite clear how this can help us over the hurdle, helpto get accumulation going. For one thing, the formation ofadditional variable capital in Department II is not much useif we have no additional constant capital for this department,being in fact engaged on the task of finding it. For anotherthing, our present concern is to see if we can find in DepartmentII a source of money for the purchase of additional meansof production from I, and Department II’s problem how toplace its own additional product in some way or other in theprocess of production is beside the point. Further, is the implicationthat the respective consumer goods should be used‘direct’, i.e. without the mediation of money, in the productionof Department II, so that the corresponding amount of moneycan be diverted from variable capital to the purpose of accumulation?If so, we could not accept the solution. Under normalconditions of capitalist production, the remuneration of theworkers by consumer goods direct is precluded, one of thecorner-stones of capitalist economy being the money-form of thevariable capital, the independent transaction between theworker as buyer of commodities and producer of consumergoods. Marx himself stresses this point in another context:

‘We know that the actual variable capital consists of labour-power,and therefore the additional must consist of the samething. It is not the capitalist of I who among other things buysfrom II a supply of necessities of life for his labourers, oraccumulates them for this purpose, as the slave holder had to do.It is the labourers themselves who trade with II.’[131]

[Pg 154]And that goes for the capitalists of Department II just asmuch as for those of Department I, thus disposing of Marx’s lasteffort.

Marx ends up by referring us to the last part ofCapital,volume ii, chapter 21, the ‘Concluding Remarkssub iv’, asEngels has called them. Here we find the curt explanation:

‘The original source for the money of II isv +s of the goldproducers in Department I, exchanged for a portion of IIc.Only to the extent that the gold producer accumulates surplus-valueor converts it into means of production of I, in otherwords, to the extent that he expands his production, does hisv +s stay out of Department II. On the other hand, to theextent that the accumulation of gold on the part of the goldproducer himself leads ultimately to an expansion of production,a portion of the surplus-value of gold production not spentas revenue passes into Department II as additional variablecapital of the gold producers, promotes the accumulation ofnew hoards in II and supplies it with means by which to buyfrom I without having to sell to it immediately.’[132]

After the breakdown of all conceivable attempts at explainingaccumulation, therefore, after chasing from pillar to post, fromA I to B I, and from B I to A II, we are made to fall back in theend on the very gold producer, recourse to whom Marx had atthe outset of his analysis branded as ‘absurd’. The analysis ofthe reproductive process, and the second volume ofCapitalfinally comes to a close without having provided the longsought-for solution to our difficulty.

CHAPTER IX

THE DIFFICULTY VIEWED FROM THEANGLE OF THE PROCESS OFCIRCULATION

The flaw in Marx’s analysis is, in our opinion, the misguidedformulation of the problem as a mere question of‘the sources of money’, whereas the real issue is the effectivedemand, the use made of goods, not the source of themoney which is paid for them. As to money as a means of circulation:when considering the reproductive process as a whole,we must assume that capitalist society must always dispose ofmoney, or a substitute, in just that quantity that is needed forits process of circulation. What has to be explained is the greatsocial transaction of exchange, caused by real economic needs.While it is important to remember that capitalist surplus valuemust invariably pass through the money stage before it can beaccumulated, we must nevertheless try to track down the economicdemand for the surplus product, quite apart from thepuzzle where the money comes from. As Marx himself says inanother passage:

‘The money on one side in that case calls forth expanded reproductionon the other, because the possibility for it existswithout the money. For money in itself is not an element ofactual reproduction.’[133]

And in a different context, Marx actually shows the questionabout the ‘sources of money’ to be a completely barren formulationof the problem of accumulation.

In fact, he had come up against this difficulty once beforewhen examining the process of circulation. Still dealing withsimple reproduction, he had asked, in connection with thecirculation of the surplus value:

‘But the commodity capital must be monetised before itsconversion into productive capital, or before the surplus-value[Pg 156]contained in it can be spent. Where does the money for thispurpose come from? This question seems difficult at the firstglance, and neither Tooke nor anyone else has answered it sofar.’[134]

And he was then quite uncompromising about getting tothe root of the matter: ‘The circulating capital of 500 p.st.advanced in the form of money-capital, whatever may be itsperiod of turn-over, may now stand for the total capital ofsociety, that is to say, of the capitalist class. Let the surplus-valuebe 100 p.st. How can the entire capitalist class manage todraw continually 600 p.st. out of the circulation, when theycontinually throw only 500 p.st. into it?’[135]

All that, mind you, refers to simple reproduction, where theentire surplus value is used for the personal consumption of thecapitalist class. The question should therefore from the outsethave been put more precisely in this form: how can the capitalistssecure for themselves consumer goods to the amount of£100 surplus value on top of putting £500 into circulation forconstant and variable capital? It is immediately obvious thatthose £500 which, in form of capital, always serve to buy meansof production and to pay the workers, cannot simultaneouslydefray the expense of the capitalists’ personal consumption.Where, then, does the additional money come from?—the £100the capitalists need to realise their own surplus value? Thus alltheoretical dodges one might devise for this point are summarilydisposed of by Marx right away:

‘For instance: So far as the constant circulating capital isconcerned, it is obvious that not all invest it simultaneously.While the capitalist A sells his commodities so that his advancedcapital assumes the form of money, there is on the other hand,the available money-capital of the buyer B which assumes theform of his means of production which A is just producing. Thesame transaction, which restores that of B to its productiveform, transforms it from money into materials of production andlabour-power; the same amount of money serves in the two-sidedprocess as in every simple purchase C-M. On the otherhand, when A reconverts his money into means of production,[Pg 157]he buys from C, and this man pays B with it, etc., and thus thetransaction would be explained.

‘But none of the laws referring to the quantity of the circulatingmoney, which have been analysed in the circulation ofcommodities (vol. i, chap, iii), are in any way changed by thecapitalist character of the process of production.

‘Hence, when we have said that the circulating capital ofsociety, to be advanced in the form of money, amounts to500 p.st., we have already accounted for the fact that this is onthe one hand the sum simultaneously advanced, and that, onthe other hand, it sets in motion more productive capital than500 p.st., because it serves alternately as the money fund ofdifferent productive capitals. This mode of explanation, then,assumes that money as existing whose existence it is called uponto explain.

‘It may be furthermore said: Capitalist A produces articleswhich capitalist B consumes unproductively, individually. Themoney of B therefore monetises the commodity-capital of A,and thus the same amount serves for the monetisation of thesurplus-value of B and the circulating constant capital of A. Butin that case, the solution of the question to be solved is still moredirectly assumed, the question: Whence does B get the moneyfor the payment of his revenue? How does he himself monetisethis surplus-portion of his product?

‘It might also be answered that that portion of the circulatingvariable capital, which A continually advances to his labourers,flows back to him continually from the circulation, and only analternating part stays continually tied up for the payment ofwages. But a certain time elapses between the expenditure andthe reflux, and meanwhile the money paid out for wages might,among other uses, serve for the monetisation of surplus-value.But we know, in the first place, that, the greater the time, thegreater must be the supply of money which the capitalist Amust keep continually in reserve. In the second place, thelabourer spends the money, buys commodities for it, and thusmonetises to that extent the surplus-value contained in them.Without penetrating any further into the question at this point,it is sufficient to say that the consumption of the entire capitalistclass, and of the unproductive persons dependent upon it, keepsstep with that of the labouring class; so that, simultaneously[Pg 158]with the money thrown into circulation by the labouring class,the capitalists must throw money into it, in order to spend theirsurplus-value as revenue. Hence money must be withdrawnfrom circulation for it. This explanation would merely reducethe quantity of money required, but not do away with it.

‘Finally it might be said: A large amount of money is continuallythrown into circulation when fixed capital is first invested,and it is not recovered from the circulation until after the lapseof years, by him who threw it into circulation. May not this sumsuffice to monetise the surplus-value? The answer to this is thatthe employment as fixed capital, if not by him who threw it intocirculation, then by some one else, is probably implied in thesum of 500 p.st. (which includes the formation of a hoard forneeded reserve funds). Besides, it is already assumed in theamount expended for the purchase of products serving as fixedcapital, that the surplus-value contained in them is also paid,and the question is precisely, where the money for this purposecame from.’[136]

This parting shot, by the way, is particularly noteworthy inthat Marx here expressly repudiates the attempt to explainrealisation of the surplus value, even in the case of simple reproduction,by means of a hoard formed for the periodical renewalof fixed capital. Later on, with a view to realising the surplusvalue under the much more difficult conditions of accumulation,he makes more than one tentative effort to substantiate anexplanation of this type which he himself dismissed as a‘plausible subterfuge’.

Then follows a solution which has a somewhat disconcertingring: ‘The general reply has already been given: When a massof commodities valued atx times 1,000 p.st. has to circulate, itchanges absolutely nothing in the quantity of the money requiredfor this circulation, whether this mass of commoditiescontains any surplus-value or not, and whether this mass ofcommodities has been produced capitalistically or not. In otherwords,the problem itself does not exist. All other conditions beinggiven, such as velocity of circulation of money, etc., a definitesum of money is required in order to circulate the value of commoditiesworthx times 1,000 p.st., quite independently of thefact how much or how little of this value falls to the share of the[Pg 159]direct producers of these commodities. So far as any problemexists here, it coincides with the general problem: Where doesall the money required for the circulation of the commoditiesof a certain country come from?’[137]

The argument is quite sound. The answer to the generalquestion about the origin of the money for putting a certainquantity of commodities into circulation within a country willalso tell us where the money for circulating the surplus valuecomes from. The division of the bulk of value contained in thesecommodities into constant and variable capital, and surplusvalue, does not exist from the angle of the circulation of money—inthis connection, it is quite meaningless. But it is only fromthe angle of the circulation of money, or of a simple commoditycirculation, that the problem has no existence. Under the aspectof social reproduction as a whole, it is very real indeed; but itshould not, of course, be put in that misleading form that bringsus back to simple commodity circulation, where it has no meaning.We should not ask, accordingly: Where does the moneyrequired for realising the surplus value come from? but: Whereare the consumers for this surplus value? It is they, for sure, whomust have this money in hand in order to throw it into circulation.Thus, Marx himself, although he just now denied theproblem to exist, keeps coming back to it time and again:

‘Now, there are only two points of departure: The capitalistand the labourer. All third classes of persons must either receivemoney for their services from these two classes, or, to the extentthat they receive it without any equivalent services, they arejoint owners of the surplus-value in the form of rent, interest,etc. The fact that the surplus-value does not all stay in the pocketof the industrial capitalist, but must be shared by him withother persons, has nothing to do with the present question. Thequestion is: How does he maintain his surplus-value, not, howdoes he divide the money later after he has secured it? For thepresent case, the capitalist may as well be regarded as the soleowner of his surplus-value. As for the labourer it has alreadybeen said that he is but the secondary point of departure, whilethe capitalist is the primary starting point of the money thrownby the labourer into circulation. The money first advanced asvariable capital is going through its second circulation, when[Pg 160]the labourer spends it for the payment of means of subsistence.

‘The capitalist class, then, remains the sole point of departureof the circulation of money. If they need 400 p.st. for the paymentof means of production, and 100 p.st. for the payment oflabour-power, they throw 500 p.st. into circulation. But thesurplus-value incorporated in the product, with a rate of surplus-valueof 100 per cent, is equal to the value of 100 p.st. How canthey continually draw 600 p.st. out of circulation, when theycontinually throw only 500 p.st. into it? From nothing comesnothing. The capitalist class as a whole cannot draw out ofcirculation what was not previously in it.’[138]

Marx further explodes another device which might conceivablybe thought adequate to the problem, i.e. a more rapidturnover of money enabling a larger amount of value to circulateby means of a smaller amount of money. The dodge will notwork, of course, since the velocity of money in circulation isalready taken into account by equating the aggregate bulk ofcommodities with a certain number of pounds sterling. But thenat last we seem in sight of a proper solution:

‘Indeed, paradoxical as it may appear at first sight, it is thecapitalist class itself that throws the money into circulationwhich serves for the realisation of the surplus-value incorporatedin the commodities. But, mark well, it is not thrown into circulationas advanced money, not as capital. The capitalist classspends it for their individual consumption. The money is notadvanced by them, although they are the point of departure ofits circulation.’[139]

This lucid and comprehensive account is the best evidencethat the problem is not just imaginary but very real. It providesa solution, not by disclosing a new ‘source of money’ for therealisation of the surplus value, but by pointing out at last theconsumers of this surplus value. We are still, on Marx’s assumption,within the bounds of simple reproduction; the capitalistclass, that is to say, use the whole of their surplus value forpersonal consumption. Since the capitalists are the consumers ofsurplus value, it is not so much a paradox as a truism that theymust, in the nature of things, possess the money for appropriatingthe objects of consumption, the natural form of this surplus[Pg 161]value. The circulatory transaction of exchange is the necessaryconsequence of the fact that the individual capitalist cannotimmediately consume his individual surplus value, and accordinglythe individual surplus product, as could, for instance, theemployer of slave labour. As a rule the natural material form ofthe surplus product tends to preclude such use. The aggregatesurplus value of the capitalists in general is, however, containedin the total social product—as long as there is simple reproduction—asexpressed by a corresponding quantity of consumergoods for the capitalist class, just as the sum total of variablecapital has its corresponding equivalent in the quantity of consumergoods for the working class, and as the constant capitalof all individual capitalists taken together is represented bymaterial means of production in an equivalent quantity. Inorder to exchange the unconsumable individual surplus valuesfor a corresponding amount of consumer goods, a double transactionof commodity exchange is needed: first, the sale of one’sown surplus product and then the purchase of consumer goodsout of the surplus product of society. These two transactions canonly take place among members of the capitalist class, amongindividual capitalists, which means that their agent, the money,thereby merely changes hands as between one capitalist andanother without ever being alienated from the capitalist class ingeneral. Since simple reproduction inevitably implies the exchangeof equivalents, one and the same amount of money canserve year by year for the circulation of the surplus value, andonly an excess of zeal will inspire the further query: where doesthe money which mediates the capitalists’ own consumptioncome from in the first place? This, question, however, reduces toa more general one: how did money capital initially come intothe hands of the capitalists, that money capital of which theyalways retain a certain part for their personal consumption,apart from what they use for productive investment? Put in thisway, however, the question belongs in the chapter of so-called‘primitive accumulation’, i.e. the historical genesis of capital,going beyond the framework of an analysis of the process ofcirculation as well as of reproduction.

Thus the fact is clear and unequivocal—so long as we remainwithin the bounds of simple reproduction. Here the problem issolved by the premises themselves; in fact, the solution is already[Pg 162]anticipated by the very concept of simple reproduction whichindeed is based on the entire surplus value being consumed bythe capitalist class. This implies that it must also be the latterwho buy it, that is to say, individual capitalists must buy it fromeach other.

‘In the present case’, Marx says himself, ‘we had assumed,that the sum of money which the capitalist throws into circulationuntil the first surplus-value flows back to him, is exactlyequal to the surplus-value which he is going to produce andmonetise. This is obviously an arbitrary assumption, so far as,the individual capitalist is concerned. But it must be correctwhen applied to the entire capitalist class, when simple reproductionis assumed. It expresses the same thing that this assumptiondoes, namely, that the entire surplus-value is consumedunproductively, but it only, not any portion of the originalcapital stock.’[140]

But simple reproduction on a capitalist basis is after all animaginary quantity in economic theory: no more and no lesslegitimate, and quite as unavoidable as √−1 in mathematics.What is worse, it cannot offer any help at all with the problemof realising the surplus value in real life, i.e. with regard toenlarged reproduction or accumulation. Marx himself says sofor a second time in the further development of his analysis.

Where does the money for realising the surplus value comefrom if there is accumulation, i.e. not consumption but capitalisationof part of the surplus value? Marx’s first answer is as follows:

‘In the first place, the additional money-capital required forthe function of the increasing productive capital is supplied bythat portion of the realised surplus-value which is thrown intocirculation by the capitalists as money-capital, not as the moneyform of their revenue. The money is already present in thehands of the capitalists. Only its employment is different.’[141]

Our investigation of the reproductive process has alreadymade us familiar with this explanation, and we are equallyfamiliar with its defects; for one thing, the answer rests on themoment of the first transition from simple reproduction toaccumulation. The capitalists only yesterday consumed theirentire surplus value, and thus had in hand an appropriateamount of money for their circulation. To-day they decide to[Pg 163]‘save’ part of the surplus value and to invest it productivelyinstead of squandering it. Provided that material means ofproduction were manufactured instead of luxury goods, theyneed only put part of their personal money fund to a differentuse. But the transition from simple reproduction to expandedreproduction is no less a theoretical fiction than simple reproductionof capital itself, for which reason Marx immediatelygoes on to say:

‘Now, by means of the additional productive capital, its product,an additional quantity of commodities, is thrown intocirculation. Together with this additional quantity of commodities,a portion of the additional money required for itscirculation is thrown into circulation, so far as the value of thismass of commodities is equal to that of the productive capitalconsumed in their production. This additional quantity ofmoney has precisely been advanced as an additional money-capital,and therefore it flows back to the capitalist through theturn-over of his capital. Here the same question reappears,which we met previously. Where does the additional moneycome from, by which the additional surplus-value now containedin the form of commodities is to be realised?’[142]

The problem could not be put more precisely. But instead ofa solution, there follows the surprising conclusion:

‘The general reply is again the same. The sum total of theprices of the commodities has been increased, not because theprices of a given quantity of commodities have risen, but becausethe mass of the commodities now circulating is greater than thatof the previously circulating commodities, and because thisincrease has not been offset by a fall in prices. The additionalmoney required for the circulation of this greater quantity ofcommodities of greater value must be secured, either by greatereconomy in the circulating quantity of money—whether bymeans of balancing payments, etc., or by some measure whichaccelerates the circulation of the same coins,—or by the transformationof money from the form of a hoard into that of acirculating medium.’[143]

All this amounts to an exposition along these lines: underconditions of developing and growing accumulation, capitalistreproduction dumps ever larger masses of commodity values on[Pg 164]the market. To put this commodity mass of a continuallyincreasing value into circulation requires an ever larger amountof money. This increasing amount of money must be foundsomehow or other. All this is, no doubt, plausible and correctas far as it goes, but our problem is not solved, it is merelywished away.

One thing or the other! Either we regard the aggregate socialproduct in a capitalist economy simply as a mass, a conglomerationof commodities of a certain value, seeing underconditions of accumulation, a mere increase in this undifferentiatedmass of commodities and in the bulk of its value. Then allwe need say is that a corresponding quantity of money is requiredfor circulating this bulk of value, that with an increasing bulkof value the quantity of money must also increase, unless thisgrowth of value is offset by acceleration of, and economy in,the traffic. And the final question, where does all money originallycome from, could then be answered on Marx’s recipe: fromthe gold mines. This, of course, is one way of looking at things,that of simple commodity circulation. But in that case there isno need to drag in concepts such as constant and variablecapital, or surplus value, which have no place in simple commoditycirculation, belonging essentially to the circulation ofcapitals and to social reproduction; nor is there need to inquirefor sources of money for the realisation of the social surplusvalue under conditions of first simple, and then enlarged, reproduction.Under the aspect of simple commodity circulationpuzzles of this kind are without meaning or content. But oncethese questions have been raised, once the course has been setfor an investigation into the circulation of capitals and socialreproduction, there can be no appealing to the sphere of simplecommodity circulation, where there is no such problem at all,and consequently no solution to it. There can be no looking forthe answer there, and then saying triumphantly that the problemhas long been solved and in fact never really existed.

All this time, it appears, Marx has been tackling the problemfrom a wrong approach. No intelligent purpose can be served byasking for the source of the money needed to realise the surplusvalue. The question is rather where the demand can arise—tofind an effective demand for the surplus value. If the problemhad been put in this way at the start, no such long-winded[Pg 165]detours would have been needed to show whether it can besolved or not. On the basis of simple reproduction, the matteris easy enough: since all surplus value is consumed by the capitalists,they themselves are the buyers and provide the fulldemand for the social surplus value, and by the same token theymust also have the requisite cash in hand for circulation of thesurplus value. But in this showing it is quite evident that underconditions of accumulation, i.e. of capitalisation of part of thesurplus value, it cannot,ex hypothesi, be the capitalists themselveswho buy the entire surplus value, that they cannotpossibly realise it. True, if the capitalised surplus value is to berealised at all, money must be forthcoming in adequate quantitiesfor its realisation. But it is quite impossible that this moneyshould come from the purse of the capitalist class itself. Justbecause accumulation is postulated, the capitalists cannot buytheir surplus value themselves, even though they might,inabstracto, have the money to do so. But who else could providethe demand for the commodities incorporating the capitalisedsurplus value?

‘Apart from this class (the capitalists), there is, according toour assumption—the general and exclusive domination of capitalistproduction—no other class but the working class. All thatthe working class buys is equal to the sum total of its wages,equal to the sum total of the variable capital advanced by theentire capitalist class.’[144]

The workers, then, are even less able than the capitalist classto realise the capitalised surplus value. Somebody must buy it,if the capitalists are still to be able to recover the capital theyhave accumulated and advanced; and yet—we cannot think ofany buyers other than capitalists and workers. ‘How can theentire capitalist class accumulate money under such circumstances?’[144]

Realisation of the surplus value outside the only two existingclasses of society appears as indispensable as it looks impossible.The accumulation of capital has been caught in a vicious circle.At any rate, the second volume ofCapital offers no way out.

If we should now ask why Marx’sCapital affords no solutionto this important problem of the accumulation of capital, wemust bear in mind above all that this second volume is not a[Pg 166]finished whole but a manuscript that stops short half waythrough.

The external form of its last chapters in particular provesthem to be in the nature of notes, intended to clear the author’sown mind, rather than final conclusions ready for the reader’senlightenment. This fact is amply authenticated by the manbest in the position to know: Friedrich Engels, who edited thesecond volume. In his introduction to the second volume hereports in detail on the conditions of the preliminary studies andthe manuscripts Marx had left, which were to form the basis ofthis volume:

‘The mere enumeration of the manuscripts left by Marx asa basis for Volume II proves the unparalleled conscientiousnessand strict self-criticism which he practised in his endeavour tofully elaborate his great economic discoveries before he publishedthem. This self-criticism rarely permitted him to adapt hispresentation of the subject, in content as well as in form, to hisever widening horizon, which he enlarged by incessant study.

‘The material ... consists of the following parts: First, amanuscript entitled “A contribution to the Critique of PoliticalEconomy”, containing 1,472 quarto pages in 23 divisions,written in the time from August, 1861, to June, 1863. It is acontinuation of the work of the same title, the first volume ofwhich appeared in Berlin, in 1859.... This manuscript, valuablethough it is, could not be used in the present edition ofVolume II.

‘The period after the publication of Volume I, which is nextin order, is represented by a collection of four manuscripts forVolume II, marked I-IV by Marx himself. Manuscript I (150pages) presumably written in 1865 or 1867, is the first independent,but more or less fragmentary, elaboration of thequestions now contained in Volume II. This manuscript is likewiseunsuited for this edition. Manuscript III is partly a compilationof quotations and references to the manuscripts containingMarx’s extracts and comments, most of them relating to thefirst section of Volume II, partly an elaboration of special points,particularly a critique of Adam Smith’s statements as to fixedand circulating capital and the source of profits; furthermore,[Pg 167]a discussion of the relations of the rate of surplus-value to therate of profit, which belongs in Volume III. The referencesfurnished little that was new, while the elaborations for VolumesII and III were rendered valueless through subsequent revisionsand had to be ruled out for the greater part. Manuscript IV isan elaboration, ready for printing, of the first section and thefirst chapters of the second section of Volume II, and has beenused in its proper place. Although it was found that this manuscripthad been written earlier than Manuscript II, yet it wasfar more finished in form and could be used with advantage forthe corresponding part of this volume. I had to add only a fewsupplementary parts of Manuscript II. This last manuscript isthe only fairly completed elaboration of Volume II and datesfrom the year 1870. The notes for the final revision, which Ishall mention immediately, say explicitly: “The second elaborationmust be used as a basis.”

‘There is another interruption after 1870, due mainly to illhealth. Marx employed this time in his customary way, that isto say he studied agronomics, agricultural conditions in Americaand especially Russia, the money market and banking institutions,and finally natural sciences, such as geology and physiology.Independent mathematical studies also form a large partof the numerous manuscripts of this period. In the beginningof 1877, Marx had recovered sufficiently to resume once morehis chosen life’s work. The beginning of 1877 is marked byreferences and notes from the above named four manuscriptsintended for a new elaboration of Volume II, the beginning ofwhich is represented by Manuscript V (56 pages in folio). Itcomprises the first four chapters and is not very fully workedout. Essential points are treated in footnotes. The material israther collected than sifted, but it is the last complete presentationof this most important first section. A preliminary attemptto prepare this part for the printer was made in Manuscript VI(after October, 1877, and before July, 1878), embracing 17quarto pages, the greater part of the first chapter. A second andlast attempt was made in Manuscript VII, dated July 2, 1878,and consisting of 7 pages in folio.

‘About this time Marx seems to have realised that he wouldnever be able to complete the second and third volume in amanner satisfactory to himself, unless a complete revolution in[Pg 168]his health took place. Manuscripts V-VIII show traces of hardstruggles against depressing physical conditions far too frequentlyto be ignored. The most difficult part of the first sectionhad been worked over in Manuscript V. The remainder of thefirst, and the entire second section, with the exception ofChapter 17, presented no great theoretical difficulties. But thethird section, dealing with the reproduction and circulation ofsocial capital, seemed to be very much in need of revision.Manuscript II, it must be pointed out, had first treated of thisreproduction without regard to the circulation which is instrumentalin effecting it, and then taken up the same question withregard to circulation. It was the intention of Marx to eliminatethis section and to reconstruct it in such a way that it wouldconform to his wider grasp of the subject. This gave rise toManuscript VIII, containing only 70 pages in quarto. A comparisonwith Section III, as printed after deducting the paragraphsinserted out of Manuscript II, shows the amount ofmatter compressed by Marx into this space.

‘Manuscript VIII is likewise merely a preliminary presentationof the subject, and its main object was to ascertain anddevelop the new points of view not set forth in Manuscript II,while those points were ignored about which there was nothingnew to say. An essential part of Chapter 17, Section II, which ismore or less relevant to Section III, was at the same time drawninto this discussion and expanded. The logical sequence wasfrequently interrupted, the treatment of the subject was incompletein various places, and especially the conclusion was veryfragmentary. But Marx expressed as nearly as possible what heintended to say on the subject.

‘This is the material for Volume II, out of which I wassupposed “to make something”, as Marx said to his daughterEleanor shortly before his death.’[145]

We cannot but admire this ‘something’ which Engels managedto ‘make’ from material of such a kind. As far as our presentproblem is concerned, however, this detailed report makesit clear that no more than the first two of the three sections thatmake up volume ii were anything like ready for print in themanuscripts Marx left: the section ‘On the Circulation of[Pg 169]Money and Commodity Capital’ and on ‘The Causes of Circulationand the Turnover of Capital’. The third section whichtreats of the reproduction of total capital is merely a collectionof fragments which Marx himself considered to be ‘very muchin need of revision.’ Yet it is the last part of this section, i.e.chapter 21, ‘On Accumulation and Enlarged Reproduction’,which is of primary importance in the present context, and ofthe whole book this is the most incomplete. It comprises thirty-fivepages of print in all and breaks off right in the middle ofthe analysis.

Besides this extraneous circumstance, we would suggestanother point of great influence. Marx’s investigation of thesocial reproductive process starts off, as we have seen, from theanalysis of Adam Smith which came to grief, among otherreasons, because of the erroneous doctrine that the price of allcommodities is composed ofv +s. Polemics against this dogmadominated Marx’s entire analysis of the reproductive process.He devoted all his attention to proving that the total capital ofsociety must serve, not only for consumption to the full amountof the various sources of revenue, but also for renewal of theconstant capital. And inasmuch as the purest theoretical formfor this line of reasoning is given, not by enlarged reproduction,but by simple reproduction, Marx tends to consider reproductionmainly from a point of view that is the very opposite ofaccumulation, from the assumption that the entire surplus valueis consumed by the capitalists. How greatly these polemics influencedhis analysis is proved by his returning time and againin the course of his work to the attack on Adam Smith from themost various angles. So already in volume i, the following pagesare devoted to it: vol. i, sect. 7, chap. 24, (2), pp. 588-602, andin vol. ii, pp. 417-56, p. 473, pp. 504-8, and pp. 554 f.

Marx again takes up the question of total reproduction involume iii but from the start becomes once more involved withthe problem set by Smith to which he devotes the whole of his49th chapter and most of chapter 50 (pp. 968-92 and 992-1022).Finally, inTheorien ueber den Mehrwert, we again finddetailed polemics against Smith’s dogma: pp. 164-253 in vol. i,and pp. 92, 95, 126, 233, and 262 in vol. ii, part 2. Marxrepeatedly stressed and emphasised the fact that he consideredreplacement of the constant capital from the aggregate social[Pg 170]product the most difficult and important problem of reproduction.[146]The other problem, that of accumulation, i.e. realisationof the surplus value for the purpose of capitalisation, was thuspushed into the background, so that in the end Marx hardlytouched upon it.

This problem being of such paramount importance for capitalisteconomy, it is not surprising that bourgeois economistshave dealt with it again and again. Attempts to grapple withthis vital question for capitalist economy, with the questionwhether capital accumulation is possible in practice, come uptime and again in the history of economic theory. To thesehistorical attempts, before and after Marx, at solving this problemwe shall now turn.

SECTION TWO

HISTORICAL EXPOSITIONOF THE PROBLEM

CHAPTER X

SISMONDI’S THEORYOF REPRODUCTION

The first grave doubts as to the divine character of thecapitalist order came to bourgeois economists under theimmediate impact of the first crises of 1815 and 1818-19in England. Even then it had still been external circumstanceswhich led up to these crises, and they appeared to be ephemeral.Napoleon’s blockade of the Continent which for a time had cutoff England from her European markets and had favoured aconsiderable development of home industries in some of thecontinental countries, was partly responsible; for the rest thematerial exhaustion of the Continent, owing to the long periodof war, made for a smaller demand for English products thanhad been expected when the blockade was lifted. Still, theseearly crises were enough to reveal to the contemporary worldthe sinister aspects of this best of all social orders. Gluttedmarkets, shops filled with goods nobody could buy, frequentbankruptcies—and on the other hand the glaring poverty ofthe toiling masses—for the first time all this starkly met the eyesof theorists who had preached the gospel of the beautifulharmonies of bourgeoislaissez-faire and had sung its praisesin all keys. All contemporary trade reports, periodicals andtravellers’ notes told of the losses sustained by English merchants.In Italy, Germany, Russia, and Brazil, the English disposedof their commodity stocks at a loss of anything between25 per cent and33¹⁄₃ per cent. People at the Cape of Good Hopein 1818 complained that all the shops were flooded withEuropean goods offered at lower prices than in Europe and stillunmarketable. From Calcutta there came similar complaints.From New Holland whole cargoes returned to England. In theUnited States, a contemporary traveller reports, ‘there was notown nor hamlet from one end to the other of this immenseand prosperous continent where the amount of commodities[Pg 174]displayed for sale did not considerably exceed the means of thepurchasers, although the vendors tried to attract custom bylong-term credits, all sorts of facilities for payment, payment byinstalments and acceptance of payment in kind’.

At the same time, England was hearing the desperate outcryof her workers. TheEdinburgh Review of 1820[147] quotes an addressby the Nottingham frame-work knitters which contained thefollowing statements:

‘After working from 14 to 16 hours a day, we only earn from4s. to 7s. a week, to maintain our wives and families upon; andwe farther state, that although we have substituted bread andwater, or potatoes and salt, for that more wholesome food anEnglishman’s table used to abound with, we have repeatedlyretired, after a heavy day’s labour, and have been under thenecessity of putting our children supperless to bed, to stifle thecries of hunger. We can most solemnly declare, that for the lasteighteen months we have scarcely known what it was to be freefrom the pangs of hunger.’[148]

Then Owen in England, and Sismondi in France, almostsimultaneously raised their voices in a weighty indictment ofcapitalist society. Owen, as a hard-headed Englishman andcitizen of the leading industrial state, constituted himself spokesmanfor a generous social reform, whereas the petty-bourgeois[Pg 175]Swiss rather lost himself in sweeping denunciations of the imperfectionsof the existing social order and of classical economics.And yet, by so doing, Sismondi gave bourgeois economics amuch harder nut to crack than Owen, whose fertile practicalactivities were directly applied to the proletariat.

Sismondi explained in some detail that the impetus for hissocial criticism came from England, and especially her firstcrisis. In the second edition of hisNouveaux Principes d’ÉconomiePolitique Ou De La Richesse Dans Ses Rapports Avec La Population,[149]eight years after the publication of the first edition in 1819, hewrites as follows:

‘It was in England that I performed the task of preparing thenew edition. England has given birth to the most celebratedPolitical Economists: the science is cultivated even at this timewith increased ardour.... Universal competition or the effortalways to produce more and always cheaper, has long beenthe system in England, a system which I have attacked asdangerous. This system has used production by manufacture toadvance with gigantic steps, but it has from time to time precipitatedthe manufacturers into frightful distress. It was in presenceof these convulsions of wealth that I thought I ought toplace myself, to review my reasonings and compare them withfacts.—The study of England has confirmed me in my “NewPrinciples”. In this astonishing country, which seems to besubject to a great experiment for the instruction of the rest of theworld, I have seen production increasing, whilst enjoymentswere diminishing. The mass of the nation here, no less thanphilosophers, seems to forget that the increase of wealth is notthe end in political economy, but its instrument in procuringthe happiness of all. I sought for this happiness in every class,and I could nowhere find it. The high English aristocracy hasindeed arrived to a degree of wealth and luxury which surpassesall that can be seen in other nations; nevertheless it does notitself enjoy the opulence which it seems to have acquired at theexpense of the other classes; security is wanting and in everyfamily most of the individuals experience privation rather thanabundance.... Below this titled and not titled aristocracy, Isee commerce occupy a distinguished rank; its enterprises embracethe whole world, its agents brave the ices of the poles,[Pg 176]and the heats of the equator, whilst every one of its leading men,meeting on Exchange, can dispose of thousands. At the sametime, in the streets of London, and in those of the other greattowns of England, the shops display goods sufficient for the consumptionof the world.—But have riches secured to the Englishmerchant the kind of happiness which they ought to securehim? No: in no country are failures so frequent, nowhere arethose colossal fortunes, sufficient in themselves to supply a publicloan to uphold an Empire, or a republic, overthrown with asmuch rapidity. All complain that business is scarce, difficult,not remunerative. Twice, within an interval of a few years, aterrible crisis has ruined part of the bankers, and spread desolationamong all the English manufacturers. At the same timeanother crisis has ruined the farmers, and been felt in its reboundby retail dealers. On the other hand, commerce, in spiteof its immense extent, has ceased to call for young men who havetheir fortunes to make; every place is occupied, in the superiorranks of society no less than in the inferior; the greater numberoffer their labour in vain, without being able to obtain remuneration.—Has,then, this national opulence, whose materialprogress strikes every eye, nevertheless tended to the advantageof the poor? Not so. The people of England are destitute ofcomfort now, and of security for the future. There are no longeryeomen, they have been obliged to become day labourers. Inthe towns there are scarcely any longer artisans, or independentheads of a small business, but only manufacturers. The operative,to employ a word which the system has created, does notknow what it is to have a station; he only gains wages, and asthese wages cannot suffice for all seasons, he is almost every yearreduced to ask alms from the poor-rates.—This opulent nationhas found it more economical to sell all the gold and silverwhich she possessed, to do without coin, and to depend entirelyon a paper circulation; she has thus voluntarily deprived herselfof the most valuable of all the advantages of coin: stability ofvalue. The holders of the notes of the provincial banks run therisk every day of being ruined by frequent and, as it were,epidemic failures of the bankers; and the whole state is exposedto a convulsion in the fortune of every individual, if an invasionor a revolution should shake the credit of the national bank.The English nation has found it more economical to give up[Pg 177]those modes of cultivation which require much hand-labour,and she has dismissed half the cultivators who lived in thefields. She has found it more economical to supersede workmenby steam-engines; she has dismissed ... the operatives in towns,and weavers giving place to power-looms, are now sinkingunder famine; she has found it more economical to reduce allworking people to the lowest possible wages on which they cansubsist, and these working people being no longer anything buta rabble, have not feared plunging into still deeper misery bythe addition of an increasing family. She has found it moreeconomical to feed the Irish with potatoes, and clothe them inrags; and now every packet brings legions of Irish, who, workingfor less than the English, drive them from every employment.What is the fruit of this immense accumulation of wealth? Havethey had any other effect than to make every class partake ofcare, privation and the danger of complete ruin? Has not England,by forgetting men for things, sacrificed the end to themeans?’[150]

This mirror, held up to capitalist society almost a centurybefore the time of writing, is clear and comprehensive enough inall conscience. Sismondi put his finger on every one of the sorespots of bourgeois economics: the ruin of small enterprise; thedrift from the country; the proletarisation of the middle classes;the impoverishment of the workers; the displacement of theworker by the machine; unemployment; the dangers of thecredit system; social antagonisms; the insecurity of existence;crises and anarchy. His harsh, emphatic scepticism struck aspecially shrill discord with the complacent optimism, the idleworship of harmony as preached by vulgar economics which, inthe person of MacCulloch in England and of Say in France, wasbecoming the fashion in both countries. It is easy to imaginewhat a deep and painful impression remarks like the followingwere bound to make:

‘There can only be luxury if it is bought with another’slabour; only those will work hard and untiringly who have todo so in order to get not the frills but the very necessities of life.’[151]

‘Although the invention of the machine which increases man’s[Pg 178]capacity, is a blessing for mankind, it is made into a scourge forthe poor by the unjust distribution we make of its benefits.’[152]

‘The gain of an employer of labour is sometimes nothing if notdespoiling the worker he employs; he does not benefit becausehis enterprise produces much more than it costs, but because hedoes not pay all the costs, because he does not accord thelabourer a remuneration equal to his work. Such an industry isa social evil, for it reduces those who perform the work to utmostpoverty, assuring to those who direct it but the ordinary profitson capital.’[153]

‘Amongst those who share in the national income, one groupacquires new rights each year by new labours, the other havepreviously acquired permanent rights by reason of a primaryeffort which makes a year’s labour more advantageous.’[154]

‘Nothing can prevent that every new discovery in appliedmechanics should diminish the working population by thatmuch. To this danger it is constantly exposed, and society providesno remedy for it.’[155]

‘A time will come, no doubt, when our descendants will condemnus as barbarians because we have left the working classeswithout security, just as we already condemn, as they also will,as barbarian the nations who reduced those same classes toslavery.’[156]

Sismondi’s criticism thus goes right to the root of the matter;for him there can be no compromise or evasion which might tryto gloss over the dark aspects of capitalist enrichment he exposed,as merely temporary shortcomings of a transition period.He concludes his investigation with the following rejoinder toSay:

‘For seven years I have indicated this malady of the socialorganism, and for seven years it has continuously increased. Icannot regard such prolonged suffering as the mere frictionswhich always accompany a change. Going back to the origin ofincome, I believe to have shown the ills we experience to be theconsequence of a flaw in our organisation, to have shown thatthey are not likely to come to an end.’[157]

The disproportion between capitalist production and the distribution[Pg 179]of incomes determined by the former appears to himthe source of all evil. This is the point from which he comes tothe problem of accumulation with which we are now concerned.

The main thread of his criticism against classical economics isthis: capitalist production is encouraged to expand indefinitelywithout any regard to consumption; consumption, however, isdetermined by income.

‘All the modern economists, in fact, have allowed that thefortune of the public, being only the aggregation of privatefortunes, has its origin, is augmented, distributed and destroyedby the same means as the fortune of each individual. They allknow perfectly well, that in a private fortune, the most importantfact to consider is the income, and that by the income mustbe regulated consumption or expenditure, or the capital will bedestroyed. But as, in the fortune of the public, the capital of onebecomes the income of another, they have been perplexed todecide what was capital, and what income, and they havetherefore found it more simple to leave the latter entirely out oftheir calculations. By neglecting a quality so essential to bedetermined, Say and Ricardo have arrived at the conclusion,that consumption is an unlimited power, or at least having nolimits but those of production, whilst it is in fact limited byincome.... They announced that whatever abundance mightbe produced, it would always find consumers, and they haveencouraged the producers to cause that glut in the markets,which at this time occasions the distress of the civilised world;whereas they should have forewarned the producers that theycould only reckon on those consumers who possessed income.’[158]

Sismondi thus grounds his views in a theory of income. Whatis income, and what is capital? He pays the greatest attention tothis distinction which he calls ‘the most abstract and difficultquestion of political economics’. The fourth chapter of hissecond book is devoted to this problem. As usual, Sismondistarts his investigation with Robinson Crusoe. For such a one,the distinction between capital and income was still ‘confused’;it becomes ‘essential’ only in society. Yet in society, too, thisdistinction is very difficult, largely on account of the alreadyfamiliar myth of bourgeois economics, according to which ‘thecapital of one becomes the income of another’, andvice versa.[Pg 180]Adam Smith was responsible for this confusion which was thenelevated to an axiom by Say in justification of mental inertiaand superficiality. It was loyally accepted by Sismondi.

‘The nature of capital and of income are always confused bythe mind; we see that what is income for one becomes capitalfor another, and the same object, in passing from hand to hand,successively acquires different denominations; the value whichbecomes detached from an object that has been consumed,appears as a metaphysical quantity which one expends and theother exchanges, which for one perishes together with the objectitself and which for the other renews itself and lasts for the timeof circulation.’[159]

After this promising introduction, Sismondi dives right intothe difficult problem and declares: all wealth is a product oflabour; income is part of wealth, and must therefore have thesame origin. However, it is ‘customary’ to recognise three kindsof income, called rent, profit and wage respectively, whichspring from the three sources of ‘land, accumulated capital andlabour’. As to the first thesis, he is obviously on the wrong tack.As the wealth of a society, i.e. as the aggregate of useful objects,of use-values, wealth is not merely a product of labour but alsoof nature who both supplies raw materials and provides themeans to support human labour. Income, on the other hand, isa concept of value. It indicates the amount to which an individualor individuals can dispose over part of the wealth of societyor of the aggregate social product. In view of Sismondi’s insistencethat social income is part of social wealth, we mightassume him to understand by social income the actual annualfund for consumption. The remaining part of wealth that hasnot been consumed, then, is the capital of society. Thus weobtain at least a vague outline of the required distinction betweencapital and income on a social basis. At the very nextmoment, however, Sismondi accepts the ‘customary’ distinctionbetween three kinds of income, only one of which derivesexclusively from ‘accumulated capital’ while in the other two‘land’ or ‘labour’ are conjoined with capital. The concept ofcapital thus at once becomes hazy again. However, let us seewhat Sismondi has to say about the origin of these three kindsof income which betray a rift in the foundations of society. He[Pg 181]is right to take a certain development of labour productivityas his point of departure.

‘By reason of the advances both in industry and science, bywhich man has subjugated the forces of nature, every workercan produce more, far more, in a day than he needs toconsume.’[160]

Sismondi thus rightly stresses the fact that the productivityof labour is an indispensable condition for the historical foundationof exploitation. Yet he goes on to explain the actual originof exploitation in a way typical of bourgeois economics: ‘Buteven though his labour produces wealth, this wealth, if he iscalled upon to enjoy it, will make him less and less fit for work.Besides, wealth hardly ever remains in the possession of the manwho must live by the work of his hands.’[160]

Thus he makes exploitation and class antagonism the necessaryspur to production, quite in accord with the followers ofRicardo and Malthus. But now he comes to the real causeof exploitation, the divorce of labour power from the means ofproduction.

‘The worker cannot, as a rule, keep the land as his own; land,however, has a productive capacity which human labour butdirects to the uses of man. The master of the land on whichlabour is performed, reserves a share in the fruits of labour towhich his land has contributed, as his remuneration for thebenefits afforded by this productive capacity.’[161]

This is called rent. And further: ‘In our state of civilisation,the worker can no longer call his own an adequate fund ofobjects for his consumption, enough to live while he performsthe labours he has undertaken—until he has found a buyer.He no longer owns the raw materials, often coming from faraway, on which he must exercise his industry. Even less does hepossess that complicated and costly machinery which facilitateshis work and makes it infinitely more productive. The rich manwho possesses his consumption goods, his raw materials and hismachines, need not work himself, for by supplying the workerwith all these, he becomes in a sense the master of his work. Asreward for the advantages he has put at the worker’s disposal,he takes outright the greater part of the fruits of his labour.’[162]

This is called capital profits. What remains of wealth, after[Pg 182]the cream has been taken off twice, by landlord and capitalist,is the wage of labour, the income of the worker. And Sismondiadds: ‘He can consume it without reproduction.’[163]

Thus, Sismondi makes the fact of non-reproduction thecriterion of income as distinct from capital for wages as well asfor rent. In this, however, he is only right with regard to rentand the consumed part of capital profits; as for the part of thesocial product which is consumed in form of wages, it certainlydoes reproduce itself; it becomes the labour power of the wagelabourer, for him a commodity by whose sale he lives, which hecan bring to market again and again; for society it becomes thematerial form of variable capital which must reappear time andagain in the aggregate reproduction of a year, if there is to beno loss.

So far so good. Hitherto we have only learned two facts: theproductivity of labour permits of the exploitation of the workersby those who do not work themselves, and exploitation becomesthe actual foundation of the distribution of income owing to thedivorce of the worker from his means of production. But westill do not know what is capital and what income, and Sismondiproceeds to clarify this point, starting as usual withRobinson Crusoe:

‘In the eyes of the individual all wealth was nothing but aprovision prepared beforehand for the time of need. Even so,he already distinguished two elements in this provision ... onepart which he budgets to have at hand for immediate or almostimmediate use, and the other which he will not need until it isto afford him new production. Thus one part of his corn mustfeed him until the next harvest, another part, reserved for sowing,is to bear fruit the following year. The formation of societyand the introduction of exchange, permit to increase this seed,this fertile part of accumulated wealth, almost indefinitely, andthis is what is called capital.’[164]

Balderdash would be a better name for all this. In using theanalogy of seed, Sismondi here identifies means of productionand capital, and this is wrong for two reasons. First, means ofproduction are capital not intrinsically, but only under quitedefinite historical conditions; secondly, the concept of capitalcovers more than just the means of production. In capitalist[Pg 183]society—with all the conditions Sismondi ignores—the means ofproduction are only a part of capital, i.e. they are constantcapital.

Sismondi here lost his thread plainly because he tried toestablish a connection between the capital concept and thematerial aspects of social reproduction. Earlier, so long as hewas concerned with the individual capitalist, he listed means ofsubsistence for the workers together with means of productionas component parts of capital—again a mistake in view of thematerial aspects of the reproduction of individual capitals. Yetas soon as he tries to focus the material foundations of socialreproduction and sets out to make the correct distinction betweenconsumer goods and means of production, the concept ofcapital dissolves in his hands.

However, Sismondi well knows that the means of productionare not the sole requisites for production and exploitation;indeed, he has the proper instinct that the core of the relation ofexploitation is the very fact of exchange with living labour.Having just reduced capital to constant capital, he now immediatelyreduces it exclusively to variable capital:

‘When the farmer has put in reserve all the corn he expectsto need till the next harvest, he will find a good use for thesurplus corn: he will feed what he has left over to other peoplewho are going to work for him, till his land, spin and weavehis hemp and wool, etc.... By this procedure, the farmer convertsa part of his income into capital, and in fact, this is theway in which new capital is always formed.... The corn hehas reaped over and above what he must eat while he is working,and over and above what he will have to sow in order tomaintain the same level of exploitation, is wealth which he cangive away, squander and consume in idleness without becomingany poorer; it was income, but as soon as he uses it to feedproducers, as soon as he exchanges it for labour, or for the fruitsto come from the work of his labourers, his weavers, his miners,it is a permanent value that multiplies and will no longerperish; it is capital.’[165]

Here there is some grain mixed up with quite a lot of chaff.Constant capital seems still required to maintain production onthe old scale, although it is strangely reduced to circulating[Pg 184]capital, and although the reproduction of fixed capital is completelyignored. Circulating capital apparently is also superfluousfor the expansion of reproduction, for accumulation: thewhole capitalised part of the surplus value is converted intowages for new workers who evidently labour in mid-air, withoutmaterial means of production. The same view is expressed evenmore clearly elsewhere:

‘When the rich man cuts down his income in order to add tohis capital, he is thus conferring a benefit on the poor, becausehe himself shares out the annual product; and whatever he callsincome, he will keep for his own consumption; whatever he callscapital, he gives to the poor man to constitute an income forhim.’[166]

Yet at the same time Sismondi gives due weight to the ‘secretof profit-making’ and the origin of capital. Surplus value arisesfrom the exchange of capital for labour, from variable capital,and capital arises from the accumulation of surplus value.

With all this, however, we have not made much progresstowards a distinction between capital and income. Sismondinow attempts to represent the various elements of productionand income in terms of the appropriate parts of the aggregatesocial product.

‘The employer of labour, as also the labourer, does not useall his productive wealth for the sowing; he devotes part of it tobuildings, mills and tools which render the work easier andmore productive, just as a share of the labourer’s wealth hadbeen devoted to the permanent work of making the soil morefertile. Thus we see how the different kinds of wealth successivelycome into being and become distinct. One part of thewealth accumulated by society is devoted by every one whopossesses it to render labour more profitable by slow consumption,and make the blind forces of nature execute the workof man; this part is calledfixed capital and comprises reclaiming,irrigation, factories, the tools of trade, and mechanical contrivancesof every description. A second part of wealth is destinedfor immediate consumption, to reproduce itself in the work itgets done, to change its form, though not its value, withoutcease. This part is calledcirculating capital and it comprises seed,raw materials for manufacture, and wages. Finally, a third part[Pg 185]of wealth becomes distinguishable from the second: it is thevalue by which the finished job exceeds the advances which hadto be made: this part is calledincome on capitals and is destinedto be consumed without reproduction.’[167]

After this laborious attempt to achieve a division of the aggregatesocial production according to incommensurable categories,fixed capital, circulating capital, and surplus value,Sismondi soon shows unmistakable signs that he means constantcapital when he speaks of fixed capital, and variable capitalwhen he speaks of circulating capital. For ‘all that is created’, isdestined for human consumption, though fixed capital is consumed‘mediately’ while the circulating capital ‘passes into theconsumption fund of the worker whose wage it forms’.[168] Thuswe are a little nearer to the division of the social product intoconstant capital (means of production), variable capital (provisionsfor the workers) and surplus value (provisions for thecapitalists). But so far Sismondi’s explanations are not particularlyilluminating on the subject which he himself describes as‘fundamental’. In this welter of confusion, at any rate, wecannot see any progress beyond Adam Smith’s ‘massivethought’.

Sismondi feels this himself and would clarify the problem ‘bythe simplest of all methods’, sighing that ‘this movement ofwealth is so abstract and requires such great power of concentrationto grasp it properly’.[168] Thus again we put on blinkers witha focus on Robinson [Crusoe], who in the meantime haschanged to the extent that he has produced a family and is nowa pioneer of colonial policy:

‘A solitary farmer in a distant colony on the border of thedesert has reaped 100 sacks of corn this year; there is no marketwhere to bring them; this corn, in any case, must be consumedwithin the year, else it will be of no value to the farmer; yet thefarmer and his family eat only 30 sacks of it; this will be hisexpenditure, constituting the exchange of his income; it is notreproduced for anybody whatever. Then he will call for workers,he will make them clear woods, and drain swamps in his neighbourhoodand put part of the desert under the plough. Theseworkers will eat another 30 sacks of corn: this will be theirexpenditure; they will be in a position to afford this expenditure[Pg 186]at the price of their revenue, that is to say their labour; for thefarmer it will be an exchange: he will have converted his 30sacks into fixed capital. In the end, he is left with 40 sacks. Hewill sow them that year, instead of the 20 he had sown the previousyear; this constitutes his circulating capital which he willhave doubled. Thus the 100 sacks will have been consumed, butof these 100 sacks 70 are a real investment for him, which willreappear with great increase, some of them at the very nextharvest, and the others in all subsequent harvests.—The veryisolation of the farmer we have just assumed gives us a betterfeeling for the limitations of such an operation. If he has onlyfound consumers for 60 of the 100 sacks harvested in that year,who is going to eat the 200 sacks produced the following yearby the increase in his sowing? His family, you might say, whichwill increase. No doubt; but human generations do not multiplyas quickly as subsistence. If our farmer had hands available torepeat this assumed process each year, his corn harvest will bedoubled every year, and his family could at the most be doubledonce in 25 years.’[169]

Though the example is naïve, the vital question stands outclearly in the end: where are the buyers for the surplus valuethat has been capitalised? The accumulation of capital can indefinitelyincrease the production of the society. But what aboutthe consumption of society? This is determined by the variouskinds of income. Sismondi explains this important subject inchapter v of book ii, ‘The Distribution of the National IncomeAmong the Various Classes of Citizens’, in a resumed effort todescribe the components of the social product.

‘Under this aspect, the national income is composed of twoparts and no more; the one consists in annual production ...the profit arising from wealth. The second is the capacity forwork which springs from life. This time we understand bywealth both territorial possessions and capital, and by profit thenet income accruing to the owners as well as the profit of thecapitalist.’[170]

Thus all the means of production are separated from thenational income as ‘wealth’, and this income is divided intosurplus value and labour power, or better, its equivalent, thevariable capital. This, then, though still far too vague, is our[Pg 187]division into constant capital, variable capital and surplusvalue. But ‘national income’, it soon transpires, means forSismondi the annual aggregate product of society:

‘Similarly, annual production, or the result of all the nation’swork in the course of a year, is composed of two parts: one wehave just discussed—the profit resulting from wealth; the otheris the capacity for work, which is assumed to equal the part ofwealth for which it is exchanged, or the subsistence of theworkers.’[171]

The aggregate social product is thus resolved, in terms ofvalue, into two parts: variable capital and surplus value—constantcapital has disappeared. We have arrived at Smith’sdogma that the commodity price is resolved intov +s (or iscomposed ofv +s)—in other words, the aggregate productconsists solely of consumer goods for workers and capitalists.

Sismondi then goes on to the problem of realising the aggregateproduct. On the one hand, the sum total of incomes in asociety consists of wages, capital profits and rents, and is thusrepresented byv +s; on the other hand, the aggregate socialproduct, in terms of value, is equally resolved intov +s ‘so thatnational income and annual production balance each other(and appear as equal quantities)’, i.e. so that they must beequal in value.

‘Annual production is consumed altogether during the year,but in part by the workers who, by exchanging their labour forit, convert it into capital and reproduce it; in part by thecapitalists who, exchanging their income for it, annihilate it.The whole of the annual income is destined to be exchanged forthe whole of annual production.’[172]

This is the basis on which, in the sixth chapter of book ii,‘On Reciprocal Determination of Production and Consumption’,Sismondi finally sets up the following precise law of reproduction:‘It is the income of the past year which must pay forthe production of the present year.’[173]

If this is true, how can there be any accumulation of capital?If the aggregate product must be completely consumed by theworkers and capitalists, we obviously remain within the boundsof simple reproduction, and there can be no solution to theproblem of accumulation. Sismondi’s theory in fact amounts to[Pg 188]a denial of the possibility of accumulation. The aggregate socialdemand being the bulk of wages given to the workers and theprevious consumption of the capitalists, who will be left to buythe surplus product if reproduction expands? On this count,Sismondi argues that accumulation is objectively impossible, asfollows:

‘What happens after all is always that we exchange the wholeof production for the whole production of the previous year.Besides, if production gradually increases, the exchange, at thesame time as it improves future conditions, must entail a smallloss every year.’[174]

In other words, when the aggregate product is realised,accumulation is bound each year to create a surplus that cannotbe sold. Sismondi, however, is afraid of drawing this final conclusion,and prefers a ‘middle course’, necessitating a somewhatobscure subterfuge: ‘If this loss is not heavy, and evenly distributed,everyone will bear with it without complaining abouthis income. This is what constitutes the national economy, andthe series of such small sacrifices increases capital and commonwealth.’[174]

If, on the other hand, there is ruthless accumulation, thissurplus residue becomes a public calamity, and the result is acrisis. Thus a petty-bourgeois subterfuge becomes the solution ofSismondi: putting the dampers on accumulation. He constantlypolemises against the classical school which advocates unrestricteddevelopment of the productive forces and expansionof production; and his whole work is a warning againstthe fatal consequences of giving full rein to the desire toaccumulate.

Sismondi’s exposition proves that he was unable to grasp thereproductive process as a whole. Quite apart from his unsuccessfulattempt to distinguish between the categories of capital andincome from the point of view of society, his theory of reproductionsuffers from the fundamental error he took over from AdamSmith: the idea that personal consumption absorbs the entireannual product, without leaving any part of the value for therenewal of society’s constant capital, and also, that accumulationconsists merely of the transformation of capitalised surplusvalue into variable capital. Yet, if later critics of Sismondi, e.g.[Pg 189]the Russian Marxist Ilyin,[175] think that pointing out this fundamentalerror in the analysis of the aggregate product can justifya cavalier dismissal of Sismondi’s entire theory of accumulationas inadequate, as ‘nonsense’, they merely demonstrate their ownobtuseness in respect of Sismondi’s real concern, his ultimateproblem. The analysis of Marx at a later date, showing up thecrude mistakes of Adam Smith for the first time, is the bestproof that the problem of accumulation is far from solved justby attending to the equivalent of the constant capital in theaggregate product. This is proved even more strikingly in theactual development of Sismondi’s theory: his views involvedhim in bitter controversy with the exponents and popularisers ofthe classical school, with Ricardo, Say and MacCulloch. Thetwo parties to the conflict represent diametrically opposedpoints of view: Sismondi stands for the sheer impossibility, theothers for the unrestricted possibility, of accumulation. Sismondiand his opponents alike disregard constant capital in their expositionof reproduction, and it was Say in particular whopresumed to perpetuate Adam Smith’s confused concept of theaggregate product asv +s as an unassailable dogma.

The knowledge we owe to Marx that the aggregate productmust, apart from consumer goods for the workers and capitalists(v +s), also contain means of production to renew what hasbeen used, that accumulation accordingly consists not merelyin the enlargement of variable but also of constant capital, isnot enough, as amply demonstrated by this entertaining turnof events, to solve the problem of accumulation. Later we shallsee how this stress on the share of constant capital in the reproductiveprocess gave rise to new fallacies in the theory ofaccumulation. At present it will suffice to put on record that thedeference to Smith’s error about the reproduction of aggregatecapital is not a weakness unique to Sismondi’s position but israther the common ground on which the first controversy aboutthe problem of accumulation was fought out. Scientific research,not only in this sphere, proceeds in devious ways; it often tacklesthe upper storeys of the edifice, as it were, without making sureof the foundations; and so this conflict only resulted in thatbourgeois economics took on the further complicated problemof accumulation without even having assimilated the elementary[Pg 190]problem of simple reproduction. At all events, Sismondi, in hiscritique of accumulation, had indubitably given bourgeoiseconomics a hard nut to crack—seeing that in spite of his transparentlyfeeble and awkward deductions, Sismondi’s opponentswere still unable to get the better of him.

CHAPTER XI

MacCULLOCHv. SISMONDI

Sismondi’s emphatic warnings against the ruthless ascendancyof capital in Europe called forth severe opposition onthree sides: in England the school of Ricardo, in FranceJ. B. Say, the commonplace vulgariser of Adam Smith, and theSt. Simonians. While Owen in England, profoundly aware ofthe dark aspects of the industrial system and of the crises inparticular, saw eye to eye with Sismondi in many respects, theschool of that other great European, St. Simon, who hadstressed the world-embracing conception of large industrialexpansion, the unlimited unfolding of the productive forces ofhuman labour, felt perturbed by Sismondi’s alarms. Here, however,we are interested in the controversy between Sismondi andthe Ricardians which proved the most fruitful from the theoreticalpoint of view. In the name of Ricardo, and, it seemed, withRicardo’s personal approval, MacCulloch anonymously publisheda polemical article[176] against Sismondi in theEdinburgh Review[Pg 192]in October 1819, i.e. immediately after the publicationof theNouveaux Principes.

In 1820, Sismondi replied in Rossi’sAnnales de Jurisprudencewith an essay entitled: ‘Does the Power of Consuming NecessarilyIncrease with the Power to Produce? An Enquiry.’[177]

In his reply Sismondi[178] himself states that his polemics wereconceived under the impact of the commercial crisis: ‘Thistruth we are both looking for, is of utmost importance underpresent conditions. It may be considered as fundamental foreconomics. Universal distress is in evidence in the trade, inindustry and, in many countries certainly, even in agriculture.Such prolonged and extraordinary suffering has brought misfortuneto countless families and insecurity and despondency toall, until it threatens the very bases of the social order. Twocontrasting explanations have been advanced for the distressthat has caused such a stir. Some say: we have produced toomuch, and others: we have not produced enough. “There willbe no equilibrium,” say the former, “no peace and no prosperityuntil we consume the entire commodity surplus whichremains unsold on the market, until we organise production forthe future in accordance with the buyers’ demand.”—“Therewill be a new equilibrium,” say the latter, “if only we doubleour efforts to accumulate as well as to produce. It is a mistaketo believe that there is a glut on the market; no more than halfour warehouses are full; let us fill the other half, too, and themutual exchange of these new riches will revive our trade.”’[179]

[Pg 193]In this supremely lucid way, Sismondi sets out and underlinesthe real crux of the dispute. MacCulloch’s whole position intruth stands or falls with the statement that exchange is actuallyan interchange of commodities; every commodity accordinglyrepresents not only supply but demand. The dialogue thencontinues as follows:

‘Demand and supply are truly correlative and convertibleterms. The supply of one set of commodities constitutes thedemand for another. Thus, there is a demand for a givenquantity of agricultural produce, when a quantity of wroughtgoods equal thereto in productive cost is offered in exchange forit; and conversely, there is an effectual demand for this quantityof wrought goods, when the supply of agricultural producewhich it required the same expense to raise, is presented as itsequivalent.’[180]

The Ricardian’s dodge is obvious: he has chosen to ignore thecirculation of money and to pretend that commodities are immediatelybought and paid for by commodities.

From the conditions of highly developed capitalist production,we are thus suddenly taken to a stage of primitive bartersuch as we might find still flourishing at present in CentralAfrica. There is a distant element of truth in this trick sincemoney, in a simple circulation of commodities, plays merely thepart of an agent. But of course, it is just the intervention of anagent which separates the two transactions of circulation, saleand purchase, and makes them independent of one another inrespect of both time and place. That is why a further purchaseneed not follow hard upon a sale for one thing; and secondly,sale and purchase are by no means bound up with the samepeople: in fact, they will involve the same performers only inrare and exceptional cases. MacCulloch, however, makes justthis baseless assumption by confronting, as buyer and seller,industry on the one hand and agriculture on the other. Theuniversality of these categories,qua total categories of exchange,obscures the actual splitting up of this social division of labourwhich results in innumerable private exchange transactionswhere the sale and purchase of two commodities rarely come tothe same thing. MacCulloch’s simplified conception of commodityexchange in general which immediately turns the[Pg 194]commodity into money and pretends that it can be directlyexchanged, makes it impossible to understand the economicsignificance of money, its historical appearance.

Sismondi’s answer to this is regrettably clumsy. In order toshow that MacCulloch’s explanation of commodity exchangehas no application for capitalist production, he takes recourseto the Leipsic Book Fair.[181]

‘At the Book Fair of Leipsic, booksellers from all over Germanyarrive, each with four or five publications of his own insome 40 or 50 dozen copies; these are exchanged for others andevery seller takes home 200 dozen books, just as he has brought200 dozen, with the sole difference, that he brought four differentworks and takes home 200. This is the demand and theproduction which, according to M. Ricardo’s disciple, are correlativeand convertible; one buys the other, one pays for theother, one is the consequence of the other. But as far as weare concerned, for the bookseller and for the general public,demand and consumption have not even begun. For all that ithas changed hands at Leipsic, a bad book will still be just asunsold (a bad mistake of Sismondi’s, this!), it will still clutterup the merchants’ shops, either because nobody wants it, orbecause everyone has a copy already. The books exchanged atLeipsic will only sell if the booksellers can find individuals whonot only want them but are also prepared to make sacrifices inorder to withdraw them from circulation. They alone constitutean effective demand.’[182]

Although this example is rather crude, it shows clearly thatSismondi was not side-tracked by his opponent’s trick, that heknows after all what he is talking about.

MacCulloch then attempts to turn the examination fromabstract commodity exchange to concrete social conditions:‘Supposing, for the sake of illustration, that a cultivator[Pg 195]advanced food and clothing for 100 labourers, who raised forhimfood for 200; while a master-manufacturer also advancedfood and clothing for 100, who fabricated for himclothing for200. Then the farmer, besides replacing the food of his ownlabourers, would have food for 100 to dispose of; while themanufacturer, after replacing the clothing of his own labourers,would have clothing for 100 to bring to market. In this case, thetwo articles would be exchanged against each other, the supplyof food constituting the demand for the clothing, and that of theclothing the demand for the food.’[183]

What are we to admire more in this hypothesis: the absurdityof the set-up which reverses all actual relations, or the effronterywhich simply takes for granted in the premises all that is laterclaimed proved? In order to prove that it is always possible tocreate an unlimited demand for all kinds of goods, MacCullochchooses for his example two commodities which pertain to themost urgent and elementary wants of every human being: foodand clothing. In order to prove that commodities may beexchanged at any time, and without regard to the needs ofsociety, he chooses for his example two products in quantitieswhich are right from the start in strict conformity with theseneeds, and which therefore contain no surplus as far as societyis concerned. And yet he calls this quantity needed by societya surplus—viz. as measured against the producer’s personalrequirements for his own product, and is consequently able todemonstrate brilliantly that any amount of commodity ‘surplus’can be exchanged for a corresponding ‘surplus’ of othercommodities. Finally, in order to prove that different privatelyproduced commodities can yet be exchanged, although theirquantity, production costs and social importance must of coursebe different, he chooses for his example commodities whosequantity, production cost and general social necessity are preciselythe same right from the start. In short, MacCulloch positsa planned, strictly regulated production without any over-productionin order to prove that no crisis is possible in anunplanned private economy.

The principal joke of canny Mac, however, lies elsewhere.What is at issue is the problem of accumulation. Sismondi wasworried by, and worried Ricardo and his followers with, the[Pg 196]following question: if part of the surplus value is capitalised, i.e.used to expand production over and above the income ofsociety, instead of being privately consumed by the capitalists,where are we to find buyers for the commodity surplus? Whatwill become of the capitalised surplus value? Who will buythe commodities in which it is hidden? Thus Sismondi. Andthe flower of Ricardo’s school, its official representative on theChair of London University, the authority for the then EnglishMinisters of the Liberal Party and for the City of London, thegreat Mr. MacCulloch replies—by constructing an example inwhich no surplus value whatever is produced. His ‘capitalists’slave away in agriculture and industry in the name of charity,and all the time the entire social product, including the ‘surplus’,is only enough for the needs of the workers, for the wages,while the ‘farmer’ and ‘manufacturer’ see to production andexchange without food and clothing.

Sismondi, justly impatient, now exclaims: ‘The moment wewant to find out what is to constitute the surplus of productionover consumption of the workers, it will not do to abstractfrom that surplus which forms the due profit of labour and thedue share of the master.’[184]

MacCulloch’s only reaction is to multiply his silly argumentby a thousand. He asks the reader to assume ‘1,000 farmers’, and‘also 1,000 master-manufacturers’ all acting as ingenuously asthe individuals. The exchange, then, proceeds as smoothly ascan be desired. Finally, he exactly doubles labour productivity‘in consequence of more skilful application of labour and of theintroduction of machinery—thus that every one of the 1,000farmers, by advancing food and clothing for 100 labourers,obtains a return consisting of ordinary food for 200 togetherwith sugar, grapes and tobacco equal in production cost to thatfood’, while every manufacturer obtains, by an analogous procedure,in addition to the previous quantity of clothing for allworkers, ‘ribbands, cambrics and lace, equal in productive cost,and therefore in exchangeable value, to that clothing’.[185] Aftersuch complete reversal of the chronological order, the assumption,that is, of first the existence of private property with wagelabour, and then, at a later stage, such level of labour productivityas makes exploitation possible at all, he now assumes[Pg 197]labour productivity to progress with equal speed in all spheres,the surplus product to contain precisely the same amount ofvalue in all branches of industry, and to be divided amongprecisely the same number of people. When these various surplusproducts are then exchanged against one another, is it anywonder that the exchange proceeds smoothly and completely toeverybody’s satisfaction? It is only another of his many absurditiesthat MacCulloch makes the capitalists who had hithertolived on air and exercised their profession in their birthday suits,now live exclusively on sugar, tobacco and wine, and arraythemselves only in ribbons, cambrics and lace.

The most ridiculous performance, however, is thevolte-face bywhich he evades the real problem. The question had been whathappens to the capitalist surplus, that surplus which is used notfor the capitalist’s own consumption but for the expansion ofproduction. MacCulloch solves it on the one hand by ignoringthe production of surplus value altogether, and on the other, byusing all surplus value in the production of luxury goods. Whatbuyers, then, does he advance for this new luxury production?The capitalists, evidently; the farmers and manufacturers, since,apart from these, there are only workers in MacCulloch’smodel. Thus the entire surplus value is consumed for thepersonal satisfaction of the capitalists, that is to say, simple reproductiontakes place. The answer to the problem of thecapitalisation of surplus value is, according to MacCulloch,either to ignore surplus value altogether, or to assume simplereproduction instead of accumulation as soon as surplus valuecomes into being. He stillpretends to speak of expanding reproduction,but again, as before when he pretended to deal withthe ‘surplus’, he uses a trick,viz. first setting out an impossiblespecies of capitalist production without any surplus value, andthen persuading the reader that the subsequentdébut of thesurplus value constitutes an expansion of production.

Sismondi is not quite up to these Scottish acrobatics. He hadup to now succeeded in pinning his Mac down, proving him tobe ‘obviously absurd’. But now he himself becomes confusedwith regard to the crucial point at issue. On the above rantingsof his opponent, he should have declared coldly: Sir, with allrespect for the flexibility of your mind, you are dodging theissue. I keep on asking, who will buy the surplus product, if the[Pg 198]capitalists use it for the purpose of accumulation, i.e. to expandproduction, instead of squandering it altogether? And youreply: Oh well, they will expand their production of luxurygoods, which they will, of course, eat up themselves. But this isa conjuring trick, seeing that the capitalists consume the surplusvalue in so far as they spend it on their luxuries—they do notaccumulate at all. My question is about the possibility ofaccumulation, not whether the personal luxuries of the capitalistsare possible. Answer this clearly, if you can, or else goplay with your wine and tobacco, or go to blazes for allI care.

But Sismondi, instead of putting the screws on the vulgariser,suddenly begins to moralise with pathos and social conscience.He exclaims: ‘Whose demand? Whose satisfaction? The mastersor the workers in town or country? On this new conception [ofMac’s] there is a surplus of products, an advantage from labour—towhom will it accrue?’[186] and gives his own answer in thefollowing impassioned words: ‘But we know full well, and thehistory of the commercial world teaches us all too thoroughly,that it is not the worker who profits from the increase in productsand labour; his pay is not in the least swelled by it. M.Ricardo himself said formerly that it ought not to be, unless youwant the social wealth to stop growing. On the contrary, sorryexperience teaches us that wages nearly always contract by veryreason of this increase. Where, then, does the accumulation ofwealth make itself felt as a public benefit? Our author assumes1,000 farmers who profit, while 100,000 workers toil; 1,000entrepreneurs who wax rich, while 100,000 artisans are keptunder their orders. Whatever good may result from the accumulationof the frivolous enjoyment of luxuries is only felt by a100th part of the nation. And will this 100th part, called uponto consume the entire surplus product of the whole workingclass, be adequate to a production that may grow without let orhindrance, owing to progress of machinery and capitals? In theassumption made by the author, every time the national productis doubled, the master of the farm or of the factory mustincrease his consumption a hundredfold; if the national wealthto-day, thanks to the invention of so many machines, is ahundred times what it was when it only covered the cost of production,[Pg 199]every employer would to-day have to consume enoughproducts to support 10,000 workers.’[187]

At this point Sismondi again believes himself to have a firmgrasp on how crises begin to arise: ‘We might imagine, if put toit, that a rich man can consume the goods manufactured by10,000 workers, this being the fate of the ribbons, lace andcambrics whose origin the author has shown us. But a singleindividual would not know how to consume agricultural productto the same tune, the wines, sugar and spices whichM. Ricardo [whom Sismondi evidently suspected of havingwritten the article since he only got to know ‘Anonymous’ of theEdinburgh Review at a later date] conjures up in exchange, aretoo much for the table of one man. They will not sell, or else thestrict proportion between agricultural and industrial products,apparently the basis of his whole system, cannot be maintained.’[188]

Sismondi, we see, has thus fallen into MacCulloch’s trap.Instead of waiving an answer to the problem of accumulationwhich refers to the production of luxuries, he pursues his opponentinto this field without noticing that the ground under hisfeet has shifted. Here he finds two causes for complaint. For onething, he has moral objections to MacCulloch’s allowing thecapitalists instead of the workers to benefit by the surplus value,and is side-tracked into polemising against distribution undercapitalism. From this digression, he unexpectedly reverts to theoriginal problem which he now formulates as follows: the capitalists,then, consume the entire surplus value in luxuries. Let itbe so. But could anyone increase his consumption as rapidlyand indefinitely as the progress of labour productivity makes thesurplus value increase? And in this second instance, Sismondihimself abandons his own problem. Instead of perceiving that itis the lack of consumers other than workers and capitalistswhich accounts for the difficulty in capitalist accumulation, hediscovers a snag in simple reproduction because the capitalists’capacity to consume has physical limits. Since the absorptivecapacity of the capitalists for luxuries cannot keep up withlabour productivity, that is to say with the increase in surplusvalue, there must be crises and over-production. We haveencountered this line of thought once before in theNouveauxPrincipes—so Sismondi himself was manifestly not quite clear[Pg 200]about the problem at all times. And that is hardly surprising,since one can really come to grips with the whole problem ofaccumulation only when one has fully grasped the problem ofsimple reproduction, and we have seen how much Sismondi wasat fault in this respect.

Yet in spite of all this, the first time that Sismondi crossedswords with the heirs of the classical school, he proved himselfby no means the weaker party. On the contrary, in the end herouted his opponent. If Sismondi misunderstood the mostelementary principles of social reproduction and ignored constantcapital, quite in keeping with Adam Smith’s dogma, hewas in this respect no worse at any rate than his opponent. Constantcapital does not exist for MacCulloch either, his farmersand manufacturers ‘advance’ merely food and clothing to theirworkers, and food and clothing between them make up theaggregate product of society. If there is, then, nothing to choosebetween the two as far as this elementary blunder is concerned,Sismondi towers heads above Mac because of his intuitiveunderstanding of the contradictions in the capitalist mode ofproduction. In the end, the Ricardian was at a loss to answerSismondi’s scepticism concerning the possibility of realising thesurplus value. Sismondi also shows himself more penetrating inthat he throws the Nottingham proletarians’ cry of distress inthe teeth of the apostles and apologists of harmony with theirsmug complacency, of those who deny ‘any surplus of productionover demand, any congestion of the market, any suffering’,when he proves that the introduction of the machine must ofnecessity create a ‘superabundant population’, and particularlyin the end, when he underlines the tendency of the capitalistworld market in general with its inherent contradictions. MacCullochdenies outright that general over-production is possible.He has a specific for every partial over-production up his sleeve:

‘It may be objected, perhaps, that on the principle that thedemand for commodities increases in the same ratio as theirsupply, there is no accounting for the gluts and stagnation producedby overtrading. We answer very easily—A glut is anincrease in the supply of a particular class of commodities, unaccompaniedby a corresponding increase in the supply of thoseother commodities which should serve as their equivalents.While our 1,000 farmers and 1,000 master-manufacturers are[Pg 201]exchanging their respective surplus products, and reciprocallyaffording a market to each other, if 1,000 new capitalists wereto join their society, employing each 100 labourers in tillage,there would be an immediate glut in agricultural produce ...because in this case there would be no contemporaneous increasein the supply of the manufactured articles which shouldpurchase it. But let one half of the new capitalists becomemanufacturers, and equivalents in the form of wrought goodswill be created for the new produce raised by the other half:the equilibrium will be restored, and the 1,500 farmers and1,500 master-manufacturers will exchange their respectivesurplus products with exactly the same facility with which the1,000 farmers and 1,000 manufacturers formerly exchangedtheirs.’[189]

Sismondi answers this buffoonery which ‘very easily’ pokesabout in a fog, by pointing to the real changes and revolutionswhich take place before his own eyes. ‘It was possible to putbarbarous countries under the plough, and political revolutions,changes in the financial system, and peace, at once broughtcargoes to the ports of the old agricultural countries whichalmost equalled their entire harvest. The recent Russian conquestof the vast provinces on the Black Sea, the change in thesystem of government in Egypt, and the outlawing of piracyin High Barbary, have suddenly poured the granaries of Odessa,Alexandria and Tunis into the Italian ports and have put suchan abundance of corn on the markets that all along the coaststhe farmer’s trade is fighting a losing battle. Nor is the remainderof Europe safe from a similar revolution, caused by thesimultaneous ploughing under of immense expanses of new landon the banks of the Mississippi, which export all their agriculturalproduce. Even the influence of New Holland may oneday be the ruin of English industry, if not in the price of foodstuffs,which are too expensive to transport, at least in respect ofwool and other agricultural products which are easier totransport.’[190]

What would MacCulloch have to advise in view of such anagrarian crisis in Southern Europe? That half the new farmersshould turn manufacturer. Whereupon Sismondi counters:[Pg 202]‘Such counsel cannot seriously apply to the Tartars of theCrimea or to the fellaheen of Egypt.’ And he adds: ‘The timeis not yet ripe to set up new industries in the regions oversea orin New Holland.’[191]

Sismondi’s acuity recognised that industrialisation of thelands overseas was only a matter of time. He was equally awareof the fact that the expansion of the world market would notbring with it the solution to the difficulty but would only reproduceit in a higher degree, in yet more potent crises. His predictionfor the expansive tendency of capitalism is that it willreveal an aspect of fiercer and fiercer competition, of mountinganarchy within production itself. Indeed, he puts his finger onthe fundamental causes of crises in a passage where he states thetrend of capitalist production precisely as surpassing all limits ofthe market. At the end of his reply to MacCulloch he says:‘Time and again it has been proclaimed that the equilibriumwill re-establish itself, that work will start again, but a singledemand each time provides an impetus in excess of the realneeds of trade, and this new activity must soon be followed by ayet more painful glut.’[192]

To such a profound grasp of the real contradictions in themovements of capital, thevulgarus on the Chair of LondonUniversity with his harmony cant and his country-dance of1,000 beribboned farmers and 1,000 bibulous manufacturerscould find no effective answer.

CHAPTER XII

RICARDOv. SISMONDI

MacCulloch’s reply to Sismondi’s theoretical objectionsevidently did not settle the matter to Ricardo’sown satisfaction. Unlike that shrewd ‘Scottish arch-humbug’,as Marx calls him, Ricardo really wanted to discoverthe truth and throughout retained the genuine modesty of agreat mind.[193] That Sismondi’s polemics against him and hispupil had made a deep impression is proved by Ricardo’s revisedapproach to the question of the effects of the machine,that being the point on which Sismondi, to his eternal credit,had confronted the classical school of harmony with the sinisteraspects of capitalism. Ricardo’s followers had enlarged upon thedoctrine that the machine can always create as many or evenmore opportunities for the wage labourers as it takes away bydisplacing living labour. This so-called theory of compensationwas subjected to a stern attack by Sismondi in the chapter ‘Onthe Division of Labour and Machinery’[194] and in another chaptersignificantly entitled: ‘Machinery Creates a Surplus Population’,[195]both published in theNouveaux Principes of 1819, twoyears later than Ricardo’s main work. In 1821, after the MacCulloch-Sismondicontroversy, Ricardo inserted a new chapterin the third edition of hisPrinciples, where he frankly confessesto his error and says in the strain of Sismondi: ‘That the opinionentertained by the labouring classes, that the employment of[Pg 204]machinery is frequently detrimental to their interests, is notfounded on prejudice and error, but is conformable to thecorrect principles of political economy.’[196]

He, like Sismondi, had to defend himself against the suspicionthat he is opposing technical progress, but, less ruthless, he compromiseswith the evasion that the evil emerges only gradually.‘To elucidate the principle, I have been supposing, that improvedmachinery issuddenly discovered, and extensively used;but the truth is, that these discoveries are gradual, and ratheroperate in determining the employment of the capital which issaved and accumulated, than in diverting capital from its actualemployment.’[197]

Yet the problem of crises and accumulation continued toworry Ricardo also. In 1823, the last year of his life, he spentsome days in Geneva in order to talk the problem over face toface with Sismondi. The result of these talks is Sismondi’s essay‘On the Balance Between Consumption and Production’, publishedin theRevue Encyclopédique of May 1824.[198]

In hisPrinciples, Ricardo had at the crucial points completelyaccepted Say’s trite doctrine of harmony in the relations betweenproduction and consumption. In chapter xxi he haddeclared: ‘M. Say has, however, most satisfactorily shown, thatthere is no amount of capital which may not be employed in acountry, because demand is only limited by production. Noman produces, but with a view to consume or sell, and he neversells, but with an intention to purchase some other commodity,which may be immediately useful to him, or which may contributeto future production. By producing, then, he necessarily[Pg 205]becomes either the consumer of his own goods, or the purchaserand consumer of the goods of some other person.’[199]

To this conception of Ricardo’s, Sismondi’sNouveaux Principeswere a powerful challenge, and the dispute as a whole turnedalso on this point. Ricardo could not deny the fact of criseswhich had but recently passed over England and other countries.What was at issue was the explanation for them. Right atthe outset of their debate, Sismondi and Ricardo had agreed ona remarkably lucid and precise formulation of the problem,excluding the question of foreign commerce altogether. Sismondigrasped the significance and necessity of foreign trade forcapitalist production, its need for expansion, well enough; inthis line he was quite in step with Ricardo’s Free Traders,whom he considerably excelled in his dialectical conception ofthe expansionist needs of capital. He fully admitted that industry‘is increasingly led to look for its vents on foreign marketswhere it is threatened by greater revolutions’.[200] He forecast, aswe have seen, the rise of a dangerous competition for Europeanindustry in the overseas countries. This was after all a creditableachievement in the year 1820, and one which reveals Sismondi’sdeep insight into the relations of capitalist world economy. Buteven so, Sismondi was in fact far from conceiving the problemof realising the surplus value, the problem of accumulation, todepend on foreign commerce as its only means of salvation, aview attributed to him by later critics. On the contrary, Sismondiwas quite explicit in the sixth chapter of volume i:[201] ‘Inorder to make these calculations with greater certainty and tosimplify these questions, we have hitherto made completeabstraction from foreign trade and supposed an isolated nation;this isolated nation is human society itself, and what is true for anation without foreign commerce, is equally true for mankind.’

In other words: in considering the entire world market as onesociety producing exclusively by capitalist methods, Sismondigrounds his problem in the same premises as Marx was to doafter him. That was also the basis on which he came to termswith Ricardo. ‘From the question that troubled us, we had eachof us dismissed the instance of a nation that sold more abroad[Pg 206]than it needed to buy there, that could command a growingexternal market for its growing internal production. In any case,it is not for us to decide whether fortunes of war or politicscould perhaps bring forth new consumers for a nation—what isneeded is proof that a nation can create these for itself simply byincreasing its production.’[202]

This is how Sismondi formulated the problem of realising thesurplus value in all precision, just as it confronts us throughoutthe ensuing era in economics, in contrast with Ricardo whoactually maintains along with Say, as we are already aware andshall show in further detail, that production creates its owndemand.

Ricardo’s thesis in the controversy with Sismondi takes thefollowing form: ‘Supposing that 100 workers produce 1,000sacks of corn, and 100 weavers 1,000 yards woollen fabric. Letus disregard all other products useful to man and all intermediariesbetween them, and consider them alone in the world.They exchange their 1,000 yards against the 1,000 sacks. Supposingthat the productive power of labour has increased by atenth owing to a successive progress of industry, the same peoplewill exchange 1,100 yards against 1,100 sacks, and each willbe better clothed and fed; new progress will make them exchange1,200 yards for 1,200 sacks, and so on. The increase inproducts always only increases the enjoyment of those whoproduce.’[203]

The great Ricardo’s standards of reasoning, it must regretfullybe stated, are if anything even lower than those of theScottish arch-humbug, MacCulloch. Once again we are invitedto witness a harmonious and graceful country-dance of sacksand yards—the very proportion which is to be proved, is againtaken for granted. What is more, all relevant premises for theproblem are simply left out. The real problem—you will recollect—theobject of the controversy had been the question:who are the buyers and consumers of the surplus product thatcomes into being if the capitalists produce more goods than areneeded for their own and their workers’ consumption; if, thatis to say, they capitalise part of their surplus value and use itto expand production, to increase their capital? Ricardo answersit by completely ignoring the capital increase. The picture he[Pg 207]paints of the various stages of production is merely that of agradually increasing productivity of labour. According to hisassumptions, the same amount of labour first produces 1,000sacks and 1,000 yards textiles, then 1,100 sacks and 1,100 yards,further 1,200 sacks and 1,200 yards, and so on, in a gracefullyascending curve. Not only that the image of a marshalleduniform progression on both sides, of conformity even in thenumber of objects brought to exchange, is wearisome, theexpansion of capital is nowhere as much as mentioned in themodel. Here we have no enlarged but simple reproduction witha greater bulk of use-values indeed, but without any increasein the value of the aggregate social product. Since only theamount of value, not the number of use-values is relevant tothe exchange transaction, and this amount remains constant inthe example, Ricardo makes no real advances, even though heseems to analyse the progressive expansion of production.Finally, he is quite oblivious of the relevant categories of reproduction.MacCulloch had begun by making the capitalists producewithout any surplus value and live on air, but at least herecognised the existence of the workers, making provision fortheir consumption. Ricardo, however, does not even mentionthe workers; for him the distinction between variable capitaland surplus value does not exist at all. Besides this majoromission, it is of small account that he, just like his disciple,takes no notice of constant capital. He wants to solve the problemof realising the surplus value and expanding capital withoutpositing more than the existence of a certain quantity ofcommodities which are mutually exchanged.

Sismondi was blind to the fact that the venue has beenchanged altogether. Yet he tried faithfully to bring the fantasiesof his famous guest and opponent down to earth and to analysetheir invisible contradictions, plaintively saying that theseassumptions, ‘just like German metaphysics, abstract from timeand space’.[204] He grafts Ricardo’s hypothesis on to ‘society in itsreal organisation, with unpropertied workers whose wage isfixed by competition and who can be dismissed the momenttheir master has no further need of their work ... for’—remarksSismondi, as acute as he is modest—‘it is just this social organisationto which our objection refers’.[205]

[Pg 208]He lays bare the many difficulties and conflicts bound upwith the progress of labour productivity under capitalism, andshows that Ricardo’s postulated changes in the technique oflabour, from the point of view of society, lead to the followingalternative: Either a number of workers corresponding to theincrease in labour productivity will have to be dismissed outright—thenthere will be a surplus of products on the one hand,and on the other unemployment and misery—a faithful pictureof present-day society. Or the surplus product will be used forthe maintenance of the workers in a new field of production,the production of luxury goods. Here Sismondi undoubtedlyproves himself superior: he suddenly remembers the existenceof the constant capital, and now it is he who subjects theEnglish classic to a frontal attack:

‘For setting up a new industry for manufacturing luxuries,new capital is also needed; machines will have to be built, rawmaterials procured, and distant commerce brought into activity;for the wealthy are rarely content with enjoying what is immediatelyin front of them. Where, then, could we find this newcapital which may perhaps be much more considerable thanthat required by agriculture?... Our luxury workers are still along way from eating our labourers’ grain, from wearing theclothes from our common factories; they are not yet made intoworkers, they may not even have been born yet, their trade doesnot exist, the materials on which they are to work have notarrived from India. All those among whom the former shoulddistribute their bread, wait for it in vain.’[206]

Sismondi now takes constant capital into account, not onlyin the production of luxuries, but also in agriculture, andfurther raises the following objection against Ricardo: ‘We mustabstract from time, if we make the assumption that the cultivator,whom a mechanical discovery or an invention of ruralindustry enables to treble the productive power of his workers,will also find sufficient capital to treble his exploitation, hisagricultural implements, his equipment, his livestock, his granaries:to treble the circulating capital which must serve himwhile waiting for his harvest.’[207]

In this way Sismondi breaks with the superstition of theclassical school that with capital expanding all additional[Pg 209]capital would be exclusively spent on wages, on the variablecapital. He clearly dissents from Ricardo’s doctrine—which didnot, however, prevent his allowing all the errors arising out ofthis doctrine three years later again to creep into the secondedition of hisNouveaux Principes. In opposition to Ricardo’s faciledoctrine of harmony, Sismondi underlines two decisive points:on the one hand, the objective difficulties of the process ofenlarged reproduction which works by no means so smoothly incapitalist reality as it does in Ricardo’s absurd hypothesis; onthe other hand, the fact that all technical progress in sociallabour productivity is always achieved under capitalism at theexpense of the working class, bought with their suffering. Sismondishows himself superior to Ricardo in yet a third point:he represents the broad horizon of the dialectical approach asagainst Ricardo’s blunt narrow-mindedness with its incapacityto conceive of any forms of society other than those of bourgeoiseconomics:

‘Our eyes,’ he exclaims, ‘are so accustomed to this neworganisation of society, this universal competition, degeneratinginto hostility between the rich and the working class, that we nolonger conceive of any mode of existence other than that whoseruins surround us on all sides. They believe to prove me absurdby confronting me with the vices of preceding systems. Indeed,as regards the organisation of the lower classes, two or threesystems have succeeded one another; yet, since they are not tobe regretted, since, after first doing some good, they then imposedterrible disasters on mankind, may we conclude from thisthat we have now entered the true one? May we conclude thatwe shall not discover the besetting vice of the system of wagelabour as we have discovered that of slavery, of vassalage, andof the guilds? A time will come, no doubt, when our descendantswill condemn us as barbarians because we have left theworking classes without security, just as we already condemn,as they also will, as barbarian the nations who have reducedthose same classes to slavery.’[208]

Sismondi’s statement, putting in a nutshell the vital differencesbetween the parts played by the proletariat in a modernsociety and in the society of ancient Rome, shows his profoundinsight into historical connections. He shows no less discernment,[Pg 210]in his polemics against Ricardo, when analysing thespecific economic character of the slave-system and of feudaleconomy as well as their relative historical significance, andfinally when emphasising, as the dominant universal tendencyof bourgeois economy, ‘that it severs completely all kind ofproperty from every kind of labour’.

The second round, no more than the first, between Sismondiand the classical school, brought little glory for Sismondi’sopponents.[209]

CHAPTER XIII

SAYv. SISMONDI

Sismondi’s essay against Ricardo in theRevue Encyclopédiqueof May 1824, was the final challenge for J. B. Say, at thattime the acknowledged ‘prince of economic science’ (princede la science économique), the so-called representative, heir andpopulariser of the school of Adam Smith on the Continent. Say,who had already advanced some arguments against Sismondi inhis letters to Malthus, countered the following July with anessay on ‘The Balance Between Consumption and Production’in theRevue Encyclopédique, to which Sismondi in turn publisheda short reply. The chronology of Sismondi’s polemical engagementswas thus inverse to the sequence of the opposing theories,for it had been Say who first communicated his doctrine of adivinely established balance between production and consumptionto Ricardo who had in turn handed it down to MacCulloch.In fact, as early as 1803, Say, in hisTraité d’ÉconomiePolitique, book i, chapter xii, had coined the following peremptorystatement: ‘Products are paid for with other products.It follows that if a nation has too many goods of one kind, themeans of selling them would be to create goods of a differentkind.’[210]

Here we meet again the all too familiar conjuring recipewhich was accepted alike by Ricardo’s school and by the ‘vulgareconomists’ as the corner-stone of the doctrine of harmony.[211]

[Pg 212]Essentially, Sismondi’s principal work constitutes a sustainedpolemic against this thesis. At this stage Say charges to theattack in theRevue Encyclopédique with a completevolte-face, asfollows:

‘Objection may be made that, because of man’s intelligence,because of the advantage he can draw from the means providedby nature and artifice, every human society can produceall thethings fit to satisfy its needs and increase its enjoyment in farlarger quantities than it can itself consume. But there I wouldask how it is possible that we know of no nation that is suppliedwith everything. Even in what rank as prospering nations seven-eighthsof the population are lacking in a multitude of thingsconsidered necessities in ... I will not say a wealthy family, but ina modest establishment. The village I live in at present lies inone of the richest parts of France; yet in 19 out of 20 houses Ienter here, I see but the coarsest fare and nothing that makesfor the well-being of the people, none of the things the Englishcall comforts.’[212]

There is something to admire about the effrontery of theexcellent Say. It was he who had maintained that in a capitalisteconomy there could be no difficulties, no surplus, no crises andno misery; since goods can be bought one for the other, we needonly go on producing more and more and everything in thegarden will be lovely. It was in Say’s hands that this postulatehad become a tenet of the doctrine of harmony, that doctrineso typical of vulgar economics, which had evoked a sharp protestfrom Sismondi who proved this view untenable. The latterhad shown that goods cannot be sold in any quantity you like,but that a limit is set to the realisation of goods by the income of[Pg 213]society in each case, byv +s; inasmuch as the wages of theworkers are depressed to a mere subsistence level, and inasmuchas there is also a natural limit to the consumptive capacity of thecapitalist class, an expansion of production, Sismondi says, mustinevitably lead to slumps, crises and ever greater misery for thegreat masses. Say’s come-back to this is masterly in its ingenuity:If you will insist that over-production is possible, how can ithappen that there are so many people in our society who arenaked, hungry and in want? Pray, explain this contradiction ifyou can. Say, whose own position excels by contriving blithelyto shrug off the circulation of money altogether by operatingwith a system of barter, now censures his critic for speaking ofan over-abundance of products in relation not only to purchasingpower but to the real needs of society, and that althoughSismondi had left no doubt at all about this very salient pointof his deductions. ‘Even if there is a very great number of badlyfed, badly clothed and badly housed people in a society, thesociety can only sell what it buys, and, as we have seen, it canonly buy with its income.’[213]

A little further on, Say concedes this point but alleges that hisopponent has made a new mistake: ‘It is not consumers, then,in which the nation is lacking,’ he says, ‘but purchasing power.Sismondi believes that this will be more extensive, when theproducts are rare, when consequently they are dearer and theirproduction procures ampler pay for the workers.’[214]

That is how Say attempts to degrade, in his own trite methodof thought, or better, method of canting, Sismondi’s theorywhich attacked the very foundations of capitalist organisationand its mode of distribution. He burlesques theNouveaux Principes,turning them into a plea for ‘rare’ goods and high prices,and holds up to them the mirror of an artfully flattered capitalistaccumulation at its peak. If production becomes more vigorous,he argues, labour grows in numbers and the volume of productionexpands, the nations will be better and more universallyprovided for, and he extols the conditions in countries whereindustrial development is at its highest, as against the misery ofthe Middle Ages. Sismondi’s maxims he declares subversive tocapitalist society: ‘Why does he call for an inquiry into the lawswhich might oblige the entrepreneur to guarantee a living for[Pg 214]the worker he employs? Such an inquiry would paralyse thespirit of enterprise. Merely the fear that the authorities mightinterfere with private contracts is a scourge and harmful to thewealth of a nation.’[215]

Not to be diverted from his purpose by this indiscriminateapologia of Say’s, Sismondi once more turns the discussion onthe fundamental issue:

‘Surely I have never denied that since the time of Louis XIVFrance has been able to double her population and to quadrupleher consumption, as he contends. I have only claimed that theincrease of products is a good if it is desired, paid for and consumed;that, on the other hand, it is an evil if, there being nodemand, the only hope of the producer is to entice the consumersof a rival industry’s products. I have tried to show thatthe natural course of the nations is progressive increase of theirproperty, an increase consequent upon their demand for newproducts and their means to pay for them, but that in consequenceof our institutions, of our legislation having robbed theworking class of all property and every security, they have alsobeen spurred to a disorderly labour quite out of touch with thedemand and with purchasing power, which accordingly onlyaggravates poverty.’[216]

And he winds up the debate by inviting the preacher of harmonyto reflect upon the circumstance that, though a nationmay be rich, public misery no less than material wealth is constantlyon the increase, the class which produces everythingbeing daily brought nearer to a position where it may consumenothing. On this shrill discordant note of capitalist contradictionscloses the first clash about the problem of accumulation.

Summing up the general direction of this first battle of wits,we must note two points:

[Pg 215](1) In spite of all the confusion in Sismondi’s analysis, hissuperiority to both Ricardo and his followers and to the self-styledheir to the mantle of Adam Smith is quite unmistakable.Sismondi, in taking things from the angle of reproduction, looksfor concepts of value (capital and income) and for factualelements (producer and consumer goods) as best he can, inorder to grasp how they are interrelated within the total socialprocess. In this he is nearest to Adam Smith, with the differenceonly that the contradictions there appearing as merelysubjective and speculative, are deliberately stressed as thekeynote of Sismondi’s analysis where the problem of capitalaccumulation is treated as the crucial point and principaldifficulty.

Sismondi has therefore made obvious advances on AdamSmith, while Ricardo and his followers as well as Say throughoutthe debate think solely in terms of simple commodity production.They only see the formula C—M—C, even reducing everythingto barter, and believe that such barren wisdom can coverall the problems specific to the process of reproduction andaccumulation. This is a regress even on Smith, and over suchmyopic vision, Sismondi scores most decisively. He, the socialcritic, evinces much more understanding for the categories ofbourgeois economics than their staunchest champions—just as,at a later date, the socialist Marx was to grasp infinitely morekeenly than all bourgeois economists together thedifferentiaspecifica of the mechanism of capitalist economy. If Sismondiexclaims in the face of Ricardo’s doctrine: ‘What, is wealth tobe all, and man a mere nothing?’[217] it is indicative not only of thevulnerable moral strain in his petty-bourgeois approach comparedto the stern, classical impartiality of Ricardo, but also ofa critical perception, sharpened by social sensibilities for theliving social connections of economy; an eye, that is, for intrinsiccontradictions and difficulties as against the rigid, hideboundand abstract views of Ricardo and his school. The controversyhad only shown up the fact that Ricardo, just like the followersof Adam Smith, was not even able to grasp, let alone solve thepuzzle of accumulation put by Sismondi.

(2) The clue to the problem, however, was already impossibleof discovery, because the whole argument had been side-tracked[Pg 216]and concentrated upon the problem of crises. It is only naturalthat the outbreak of the first crisis should dominate the discussion,but no less natural that this effectively prevented eitherside from recognising that crises are far from constitutingtheproblem of accumulation, being no more than its characteristicphenomenon: one element in the cyclical form of capitalist reproduction.Consequently, the debate could only result in atwofoldquid pro quo: one party deducing from crises that accumulationis impossible, and the other from barter that crises areimpossible. Subsequent developments of capitalism were to givethe lie to both conclusions alike.

And yet, Sismondi’s criticism sounds the first alarm of economictheory at the domination of capital, and for this reasonits historical importance is both great and lasting. It paves theway for the disintegration of a classical economics unable to copewith the problem of its own making. But for all Sismondi’s terrorof the consequences attendant upon capitalism triumphant, hewas certainly no reactionary in the sense of yearning for pre-capitalisticconditions, even if on occasion he delights in extollingthe patriarchal forms of production in agriculture andhandicrafts in comparison with the domination of capital. Herepeatedly and most vigorously protests against such an interpretationas e.g. in his polemic against Ricardo in theRevueEncyclopédique:

‘I can already hear the outcry that I jib at improvements inagriculture and craftsmanship and at every progress man couldmake; that I doubtless prefer a state of barbarism to a state ofcivilisation, since the plough is a tool, the spade an even olderone, and that, according to my system, man ought no doubt towork the soil with his bare hands.

‘I never said anything of the kind, and I crave indulgence toprotest once for all against all conclusions imputed to my systemsuch as I myself have never drawn. Neither those who attackme nor those who defend me have really understood me, andmore than once I have been put to shame by my allies as muchas by my opponents.’—‘I beg you to realise that it is not themachine, new discoveries and inventions, not civilisation towhich I object, but the modern organisation of society, anorganisation which despoils the man who works of all propertyother than his arms, and denies him the least security in a reckless[Pg 217]over-bidding that makes for his harm and to which he isbound to fall a prey.’[218]

There can be no question that the interests of the proletariatwere at the core of Sismondi’s criticism, and he is making nofalse claims when he formulates his main tendency as follows:

‘I am only working for means to secure the fruits of labourto those who do the work, to make the machine benefit the manwho puts it in motion.’[219]

When pressed for a closer definition of the social organisationtowards which he aspires, it is true he hedges and confesses himselfunable to do so:

‘But what remains to be done is of infinite difficulty, and Icertainly do not intend to deal with it to-day. I should like toconvince the economists as completely as I am convinced myselfthat their science is going off on a wrong tack. But I cannot trustmyself to be able to show them the true course; it is a supremeeffort—the most my mind will run to—to form a conceptioneven of the actual organisation of society. Yet who would havethe power to conceive of an organisation that does not even existso far, to see the future, since we are already hard put to it tosee the present?’[220]

Surely it was no disgrace to admit oneself frankly powerless toenvisage a future beyond capitalism in the year 1820—at a timewhen capitalism had only just begun to establish its dominationover the big industries, and when the idea of socialism was onlypossible in a most Utopian form. But, as Sismondi could neitheradvance beyond capitalism nor go back to a previous stage, theonly course open to his criticism was a petty-bourgeois compromise.Sceptical of the possibility of developing fully bothcapitalism and the productive forces, he found himself undernecessity to clamour for some moderation of accumulation, forsome slowing down of the triumphant march of capitalism.That is the reactionary aspect of his criticism.[221]

CHAPTER XIV

MALTHUS

At the same time as Sismondi, Malthus also waged waragainst some of the teachings of Ricardo. Sismondi, inthe second edition of his work as well as in his polemics,repeatedly referred to Malthus as an authority on his side. Thushe formulated the common aims of his campaign againstRicardo in theRevue Encyclopédique:

‘Mr. Malthus, on the other hand, has maintained in England,as I have tried to do on the Continent, that consumptionis not the necessary consequence of production, that the needsand desires of man, though they are truly without limits, areonly satisfied by consumption in so far as means of exchangego with them. We have affirmed that it is not enough to createthese means of exchange, to make them circulate among thosewho have these desires and wants; that it can even happen frequentlythat the means of exchange increase in society togetherwith a decrease in the demand for labour, or wages, so that thedesires and wants of one part of the population cannot be satisfiedand consumption also decreases. Finally, we have claimedthat the unmistakable sign of prosperity in a society is not anincreasing production of wealth, but an increasing demand forlabour, or the offer of more and more wages in compensationfor this labour. Messrs. Ricardo and Say, though not denyingthat an increasing demand for labour is a symptom of prosperity,maintained that it inevitably results from an increase ofproduction. As for Mr. Malthus and myself, we regard thesetwo increases as resulting from independent causes which mayat times even be in opposition. According to our view, if thedemand for labour has not preceded and determined production,the market will be flooded, and then new productionbecomes a cause of ruin, not of enjoyment.’[222]

These remarks suggest far-reaching agreement, a brotherhood[Pg 220]in arms of Sismondi and Malthus, at least in their oppositionagainst Ricardo and his school. Marx considers thePrinciples ofPolitical Economy, which Malthus published in 1820, an outrightplagiarism of theNouveaux Principes which had been publishedthe year before. Yet Sismondi and Malthus are frequently atodds regarding the problem with which we are here concerned.

Sismondi is critical of capitalist production, he attacks itsharply, even denounces it, while Malthus stands for the defence.This does not mean that he denies its inherent contradictions,as Say or MacCulloch had done. On the contrary he raisesthem quite unmercifully to the status of a natural law andasserts their absolute sanctity. Sismondi’s guiding principle isthe interests of the workers. He aspires, though rather generallyand vaguely, towards a thoroughgoing reform of distribution infavour of the proletariat. Malthus provides the ideology forthose strata who are the parasites of capitalist exploitation, wholive on ground rent and draw upon the common wealth, andadvocates the allocation of the greatest possible portion of thesurplus value to these ‘unproductive consumers’. Sismondi’sgeneral approach is predominantly ethical, it is the approach ofthe social reformer. Improving upon the classics, he stresses, inopposition to them, that ‘consumption is the only end ofaccumulation’, and pleads for restricted accumulation. Malthus,on the contrary, bluntly declares that production has no otherpurpose than accumulation and advocates unlimited accumulationby the capitalists, to be supplemented and assured by theunlimited consumption of their parasites. Finally, Sismondistarts off with a critical analysis of the reproductive process, ofthe relation between capital and income from the point of view ofsociety; while Malthus, opposing Ricardo, begins with an absurdtheory of value from which he derives an equally absurd theoryof surplus value, attempting to explain capitalist profits as anaddition to the price over and above the value of commodities.[223]

Malthus opposes the postulate that supply and demand areidentical with a detailed critique in chapter vi of hisDefinitionsin Political Economy.[224] In hisElements of Political Economy, JamesMill had declared:

[Pg 221]‘What is it that is necessarily meant, when we say that thesupply and the demand are accommodated to one another?It is this: that goods which have been produced by a certainquantity of labour, exchange for goods which have been producedby an equal quantity of labour. Let this proposition beduly attended to, and all the rest is clear.—Thus, if a pair ofshoes is produced with an equal quantity of labour as a hat, solong as a hat exchanges for a pair of shoes, so long the supplyand demand are accommodated to one another. If it should sohappen, that shoes fell in value, as compared with hats, whichis the same thing as hats rising in value compared with shoes,this would simply imply that more shoes had been brought tomarket, as compared with hats. Shoes would then be in morethan the due abundance. Why? Because in them the produceof a certain quantity of labour would not exchange for the produceof an equal quantity. But for the very same reason hatswould be in less than the due abundance, because the produceof a certain quantity of labour in them would exchange for theproduce of more than an equal quantity in shoes.’[225]

Against such trite tautologies, Malthus marshals a twofoldargument. He first draws Mill’s attention to the fact that he isbuilding without solid foundations. In fact, he argues, evenwithout an alteration in the ratio of exchange between hats andshoes, there may yet be too great a quantity ofboth in relationto the demand. This will result in both being sold at less thanthe cost of production plus an appropriate profit.

‘But can it be said on this account’, he asks, ‘that the supply ofhats is suited to the demand for hats, or the supply of shoessuited to the demand for shoes, when they are both so abundantthat neither of them will exchange for what will fulfil theconditions of their continued supply?’[226]

In other words, Malthus confronts Mill with the possibility ofgeneral over-production: ‘... when they are compared with thecosts of production ... it is evident that ... they may all fallor rise at the same time’.[227]

Secondly, he protests against the way in which Mill, Ricardo[Pg 222]and company are wont to model their postulates on a system ofbarter: ‘The hop planter who takes a hundred bags of hops toWeyhill fair, thinks little more about the supply of hats andshoes than he does about the spots in the sun. What does hethink about, then? and what does he want to exchange his hopsfor? Mr. Mill seems to be of opinion that it would show greatignorance of political economy, to say that what he wants ismoney; yet, notwithstanding the probable imputation of thisgreat ignorance, I have no hesitation in distinctly asserting, thatit really is money which he wants....’[228]

For the rest, Malthus is content to describe the machineryby which an excessive supply can depress prices below the costof production and so automatically bring about a restriction ofproduction, andvice versa.

‘But this tendency, in the natural course of things, to cure a glutor a scarcity, is no ... proof that such evils have never existed.’[229]

It is clear that in spite of his contrary views on the question ofcrises, Malthus thinks along the same lines as Ricardo, Mill,Say, and MacCulloch. For him, too, everything can be reducedto barter. The social reproductive process with its large categoriesand interrelations which claimed the whole of Sismondi’sattention, is here completely ignored.

In view of so many contradictions within the fundamentalapproach, the criticism of Sismondi and Malthus have only afew points in common: (1) Contrary to Say and the followers ofRicardo, they both deny the hypothesis of a pre-establishedbalance of consumption and production. (2) They both maintainthat not only partial but also universal crises are possible.

But here their agreement ends. If Sismondi seeks the cause ofcrises in the low level of wages and the capitalists’ limitedcapacity for consumption, Malthus, on the other hand, transformsthe fact of low wages into a natural law of populationmovements; for the capitalists’ limited capacity for consumption,however, he finds a substitute in the consumption of theparasites on surplus value such as the landed gentry and theclergy with their unlimited capacity for wealth and luxury.‘The church with a capacious maw is blest.’

Both Malthus and Sismondi look for a category of consumers[Pg 223]who buy without selling, in order to redeem capitalist accumulationand save it from a precarious position. But Sismondineeds them to get rid of the surplus product of society over andabove the consumption of the workers and capitalists, that is tosay, to get rid of the capitalised part of the surplus value.Malthus wants them as ‘producers’ of profit in general. It remainsentirely his secret, of course, how therentiers and theincumbents of the state can assist the capitalists in appropriatingtheir profits by buying commodities at an increased price, sincethey themselves obtain their purchasing power mainly fromthese capitalists. In view of these profound contrasts, the alliancebetween Malthus and Sismondi does not go very deep.And if Malthus, as Marx has it, distorts Sismondi’sNouveauxPrincipes into a Malthusian caricature, Sismondi in turn stressesonly what is common to them both and quotes Malthus insupport, giving the latter’s critique of Ricardo a somewhat Sismondiancast. On occasion, no doubt, Sismondi actually succumbsto the influence of Malthus; for instance, he takes overthe latter’s theory of reckless state expenditure as an emergencymeasure in aid of accumulation and so becomes involved incontradictions with his own initial assumptions.

On the whole, Malthus neither rendered an original contributionto the problem of reproduction, nor even grasped itfully. In his controversy with the followers of Ricardo, he operatedwith the concepts of simple commodity circulation, just asthey did in their controversy with Sismondi. His quarrel withthat school turns on the ‘unproductive consumption’ by theparasites of the surplus value; it is not a quarrel about the socialfoundations of capitalist reproduction. Malthus’ edifice tumblesto the ground as soon as the absurd mistakes in his theory ofprofits are uncovered. Sismondi’s criticism remains valid, andhis problems remain unsolved even if we accept Ricardo’stheory of value with all its consequences.

SECTION TWO

HISTORICAL EXPOSITIONOF THE PROBLEM

CHAPTER XV

v. KIRCHMANN’S THEORY OFREPRODUCTION

The second theoretical polemics about the problem ofaccumulation was also started by current events. If thefirst English crisis and its attendant misery of the workingclass had stimulated Sismondi’s opposition against the classicalschool, it was the revolutionary working-class movementarisen since which, almost twenty-five years later, provided theincentive for Rodbertus’ critique of capitalist production. Therisings of the Lyons silk weavers and the Chartist movement inEngland were vastly different from the shadowy spectres raisedby the first crisis, and the ears of the bourgeoisie were made toring with their criticism of the most wonderful of all forms ofsociety. The first socio-economic work of Rodbertus, probablywritten for theAugsburger Allgemeine Zeitung in the late thirtiesbut not published by that paper, bears the significant title,TheDemands of the Working Classes,[230] and begins as follows:

‘What do the working classes want? Will the others be able tokeep it from them? Will what they want be the grave of moderncivilisation? Thoughtful people have long realised that a timemust come when history would put this question with greaturgency. Now, the man in the street has learned it too, from theChartist meetings and the Birmingham scenes.’

During the forties, the leaven of revolutionary ideas was mostvigorously at work in France in the formation of the varioussecret societies and socialist schools of the followers of Proudhon,Blanqui, Cabet, Louis Blanc, etc. The February revolution andthe June proclamation of the ‘right to work’ led to a first head-onclash between the two worlds of capitalist society—an epoch-makingeruption of the contradictions latent in capitalism. Asregards the other, visible form of those contradictions—the[Pg 228]crises—the available data for observation at the time of thesecond controversy were far more comprehensive than in theearly twenties of the century. The dispute between Rodbertusand v. Kirchmann took place under the immediate impact ofthe crises in 1837, 1839, 1847, and even of the first world crisisin 1857—Rodbertus writing his interesting pamphletOn CommercialCrises and the Mortgage Problem of the Landowners[231] in 1858.Thus the inherent contradictions of capitalist society meetinghis eyes were in strident discord with the doctrine of harmonyheld by the English classics and their vulgarisers both in Englandand on the Continent, quite unlike any critique in thetimes when Sismondi had raised his voice in warning.

Incidentally, a quotation from Sismondi in Rodbertus’ firstwriting proves that the former’s strictures immediately influencedRodbertus. He was thus familiar with contemporaryFrench writings against the classical school, though perhapsless so with the far more numerous English literature. There isno more than this flimsy support for the myth of the Germanprofessors about the so-called ‘priority’ of Rodbertus over Marxin the ‘foundation of socialism’. Accordingly, Professor Diehlwrites in his article on Rodbertus inHandwörterbuch der Staatswissenschaften:‘Rodbertus must be considered the real founderof scientific socialism in Germany, since in his writings between1839 and 1842, even before Marx and Lassalle, he provided acomprehensive socialist system, a critique of Adam Smith’sdoctrine, new theoretical foundations and proposals for socialreform.’

This piece of god-fearing, pious righteousness comes from thesecond edition of 1901, after all that had been written byEngels, Kautsky and Mehring to destroy this learned legend,and in spite of it. Quite inevitably, of course, and proof againstany evidence to the contrary, however weighty, it was onlyright in the eyes of all the learned German economists that thepalm of ‘priority’ should be wrested from Marx, the revolutionaryanarchist, by Rodbertus, the ‘socialist’ with monarchist,Prussian and nationalist leanings, the man who believed incommunism five hundred years from now, but for the presentsupported a steady exploitation rate of 200 per cent. However,we are interested in another aspect of Rodbertus’ analysis. The[Pg 229]same Professor Diehl continues his eulogy as follows: ‘Rodbertuswas not only a pioneer of socialism; political economy as awhole owes much stimulation and furtherance to him; economictheory in particular is indebted to him for the critique ofclassical economics, for the new theory of the distribution ofincome, for the distinction between the logical and historicalcategories of capital, and so on.’

Here we shall deal with these latter achievements of Rodbertus,especially with the ‘and so on’.

Rodbertus’ decisive treatise,Towards the Understanding of OurPolitico-Economic Conditions[232] of 1842, set the ball rolling. v. Kirchmannreplied inDemokratische Blätter with two essays—On theSocial Aspects of Ground Rent[233] andThe Society of Barter[234] —andRodbertus parried in 1850 with hisLetters on Social Problems.[235]Thus the discussion entered the same theoretical arena whereMalthus-Sismondi and Say-Ricardo-MacCulloch had foughtout their differences thirty years earlier. In his earliest writings,Rodbertus had already expressed the thought that the wages oflabour present an ever diminishing part of the national productin modern society where the productivity of labour is increasing.He claimed this to be an original idea, and from thatmoment until his death thirty years later he did nothing butreiterate it and formulate it in various ways. This ‘decliningwage rate’ is for him the root of all evils to be found in modernsociety, in particular of pauperism and the crises, whose combinationhe calls ‘the social problem of our times’.

v. Kirchmann does not agree with this explanation. He tracespauperism back to the effects of a rising ground rent; crises, onthe other hand, to a lack of markets. About the latter especiallyhe says: ‘The greatest part of social ills is caused not by defectsof production but by a lack of markets for the products ... themore a country can produce, the more means it has for satisfyingevery need, the more it is exposed to the danger of miseryand want.’—The labour-problem is here included as well, for‘the notorious right to work ultimately reduces to the questionof markets’. ‘We see’, he concludes, ‘that the social problemis almost identical with the problem of markets. Even the ills[Pg 230]of much-abused competition will vanish, once markets aresecure; its advantages alone will remain. There will remain aspirit of rivalry to supply good and cheap commodities, but thelife-and-death struggle will disappear which is caused only byinsufficient markets.’[236]

The difference between the points of view of Rodbertus andv. Kirchmann is evident. Rodbertus sees the root of the evil ina faulty distribution of the national product, and v. Kirchmannin the limitations of the markets for capitalist production. Notwithstandingall the confusion in his expositions, especially inhis idealist vision of a capitalist competition content with alaudable rivalry for better and cheaper commodities, and alsoin his conception of the ‘notorious right to work’ as a problemof markets, v. Kirchmann up to a point still shows more understandingfor the sore spot of capitalist production, i.e. thelimitations of its market, than Rodbertus who clings to distribution.Thus it is v. Kirchmann who now takes up the problemwhich Sismondi had originally put on the agenda. Nevertheless,he by no means agrees with Sismondi’s elucidation andsolution of the problem, siding rather with the opponents ofthe latter. Not only does he accept Ricardo’s theory of groundrent, and Adam Smith’s dogma that ‘the price of the commodityis composed of two parts only, of the interests on capital andthe wages of labour’ (v. Kirchmann transforms the surplusvalue into ‘interest on capital’); he also subscribes to the thesisof Say and Ricardo that products are only bought with otherproducts and that production creates its own demand, so that ifone side appears to have produced too much, it only meansthere was not enough production on the other. v. Kirchmann,we see, faithfully follows the classics, if in a somewhat ‘Germanedition’. He begins by arguing, e.g., that Say’s law of a naturalbalance between production and demand ‘still does not give acomprehensive picture of reality’, and adds:

‘Commerce involves yet further hidden laws which preventthis postulated order from obtaining in complete purity. Theymust be discovered if we are to explain the present flooding ofthe market, and their discovery might perhaps also show us the[Pg 231]way to avoid this great evil. We believe that there are threerelations in the modern system of society which cause theseconflicts between Say’s indubitable law and reality.’

These relations are (1) ‘too inequitable a distribution of theproducts’—here, as we see, v. Kirchmann somewhat approximatesto Sismondi’s point of view; (2) the difficulties whichnature puts in the way of human labour engaged in production;and (3) finally, the defects of commerce as a mediator betweenproduction and consumption. Disregarding the last twoobstacles to Say’s law, we shall now consider v. Kirchmann’sreasoning of his first point.

‘The first relation’, he explains, ‘can be put more briefly astoo low a wage of labour, which is thus the cause of a slump.Those who know that the price of commodities is composed oftwo parts only, of the interest on capital and the wage of labour,might consider this a startling statement; if the wage of labouris low, prices are low as well, and if one is high, so is the other.’

(We see v. Kirchmann accepts Smith’s dogma even in itsmost misleading form: the price is notresolved into wage oflabour and surplus value, but iscomposed of them as a mere sum—aview in which Adam Smith strayed furthest from his owntheory of the value of labour.)

‘Wage and price thus are directly related, they balance eachother. England only abolished her corn laws, her tariffs onmeat and other victuals, in order to cause wages to fall and thusto enable her manufacturers to oust all other competitors fromthe world markets by means of still cheaper commodities. This,however, only holds good up to a point and does not affect theratio in which the product is distributed among the workersand the capitalists. Too inequitable a distribution among thesetwo is the primary and most important cause why Say’s law isnot fulfilled in real life, why the markets are flooded althoughthere is production in all branches.’

v. Kirchmann gives a detailed illustration of this statement.Using the classical method, he takes us, of course, to animaginary isolated society which makes an unresisting, if thankless,object for the experiments of political economy. v. Kirchmannsuggests we should imagine a place (Ort) which comprises903 inhabitants, no more, no less,viz. three entrepreneurs with300 workers each.Ort is to be able to satisfy all needs by its own[Pg 232]production—in three establishments, that is to say, one forclothing, a second for food, lighting, fuel and raw materials, anda third for housing, furniture and tools. In each of these threedepartments, the ‘capital together with the raw materials’ is tobe provided by the entrepreneur, and the remuneration of theworkers is to be so arranged that the workers obtain as theirwage one half of the annual produce, the entrepreneur retainingthe other half ‘as interest on capital and profits of the enterprise’.Every business is to produce just enough to satisfy all theneeds of the 903 inhabitants.Ort accordingly has ‘all the conditionsnecessary for general well-being’, and everybody cantherefore tackle his work with courage and vigour. After a fewdays, however, joy and delight turn into a universal misery andgnashing of teeth: something has happened on v. Kirchmann’sIsland of the Blessed which was no more to be expected thanfor the skies to fall: an industrial and commercial crisis accordingto all modern specifications has broken out! Only the mostessential clothing, food and housing for the 900 workers hasbeen produced, yet the warehouses of the three entrepreneursare full of clothes and raw materials, and their houses standempty: they complain of a lack of demand, while the workersin turn complain that their wants are not fully satisfied. Whathas gone wrong? Could it be that there is too much of one kindof produce and too little of another, as Say and Ricardo wouldhave it? Not at all, answers v. Kirchmann. Everything availableinOrt in well-balanced quantities, just enough to satisfyall the wants of the community. What, then, has thrown aspanner into the works, why the crisis? The obstruction causedby distribution alone—but this must be savoured in v. Kirchmann’sown words:

‘The obstacle, why nevertheless no smooth exchange takesplace, lies solely and exclusively in the distribution of theseproducts. They are not distributed equitably among all, but theentrepreneurs retain half of them for themselves as interest andprofit, and only give half to the workers. It is clear that theworker in the clothing department can exchange, against halfof his product, only half of the food, lodging, etc., that has beenproduced, and it is clear that the entrepreneur cannot get ridof the other half since no worker has any more products to givein exchange. The entrepreneurs do not know what to do with[Pg 233]their stocks, the workers do not know what to do for hungerand nakedness.’

Nor does the reader, we might add, know what to do withv. Kirchmann’s constructions. His model is so childish thatevery advance leads deeper into the maze.

First of all, there seems to be no reason whatever why, andto what purpose, v. Kirchmann should devise this splitting-upof production into three parts. If analogous examples byRicardo and MacCulloch usually confront tenant farmers andmanufacturers, that is presumably only inspired by the antiquatedPhysiocrat conception of social reproduction whichRicardo had adopted, although his own theory of value asagainst the Physiocrats deprived it of all meaning, and althoughAdam Smith had already made a good start in considering thereal material foundations of the social reproductive process.Still, we have seen that the tradition of distinguishing betweenagriculture and industry as the foundation of reproduction waskept up in economic theory until Marx introduced his epoch-makingdistinction of the two productive departments in societyfor producer and consumer goods. v. Kirchmann’s three departments,however, have no real significance at all. Obviously, nomaterial consideration of reproduction can have been responsiblefor this supremely arbitrary division which jumbles uptools and furniture, raw materials and food, but makes clothinga department in its own right. One might as well postulate onedepartment for food, clothing and housing, another for medicinesand a third for tooth brushes. v. Kirchmann’s primaryconcern, no doubt, is with the social division of labour; hencethe assumption of as nearly equal quantities of products aspossible in the transactions of exchange. Yet this exchange, onwhich the argument turns, plays no part at all in v. Kirchmann’sexample since it is not the value which is distributedbut the quantities of products, the bulk of use-values as such.In this intriguingOrt of v. Kirchmann’s imagining, again, theproducts are distributed first, and only afterwards, when thedistribution is accomplished, is there to be universal exchange,whereas on the solid ground of capitalist production it is, as weknow, the exchange which inaugurates the distribution of theproduct and serves as its agent. Besides, the queerest thingshappen in v. Kirchmann’s distributive system: ‘As we all know’,[Pg 234]the prices of the products, i.e. the price of the aggregate productof society, consist ofv +s, of wage and capital interest alone—sothat the aggregate product must be distributed entirelyamong workers and entrepreneurs; but then unhappily v. Kirchmanndimly remembers the fact that production needs thingslike raw materials and tools. SoOrt is provided with rawmaterials furtively introduced among the food, and with toolsamong the furniture. But now the question arises: who is to getthese indigestible items in the course of general distribution?the workers as wages, or the capitalists as profits of enterprise?They could hardly expect a warm welcome from either. And onsuch feeble premises the star turn of the performance is to takeplace: the exchange between workers and entrepreneurs. Thefundamental transaction of exchange in capitalist production,the exchange between workers and capitalists, is transformed byv. Kirchmann from an exchange between living labour andcapital into an exchange of products. Not the first act, that ofexchanging labour power for variable capital, but the second,the realisation of the wage received from the variable capital isput at the centre of the whole machinery, the entire commodityexchange of capitalist society being in turn reduced to thisrealisation of the labour-wage. And the crowning glory is thatthis exchange between workers and entrepreneurs, the king-pinof all economic life, dissolves into nothing on a closer scrutiny—itdoes not take place at all. For as soon as all workers havereceived their natural wages in the form of half their product,an exchange will be possible only among the workers themselves;every worker will only keep one-third of his wage consistingexclusively of either clothing, food or furniture, as thecase may be, and realise the remainder to equal parts in thetwo other product-groups. The entrepreneurs no longer comeinto this at all; the three of them are left high and dry with theirsurplus value: half the clothing, furniture and food that has beenproduced by the society; and they have no idea what to do withthe stuff. In this calamity of v. Kirchmann’s creation, even themost generous distribution of the product would be of no use.On the contrary, if larger quantities of the social product wereallotted to the workers, they would have even less to do withthe entrepreneurs in this transaction: all that would happen isthat the exchange of the workers among themselves would increase[Pg 235]in volume. The surplus product which the entrepreneurshave on their hands would then contract, it is true, though notindeed because the exchange of the surplus product would befacilitated, but merely because there would be less surplus valuealtogether. Now as before, an exchange of the social productbetween workers and entrepreneurs is out of the question. Onemust confess that the puerile and absurd economics herecrammed into comparatively little space exceed the boundseven of what might be put up with from a Prussian PublicProsecutor—such having been v. Kirchmann’s profession,though he must be credited with having incurred disciplinarycensure on two occasions. Nevertheless, after these unpromisingpreliminaries, v. Kirchmann goes right to the root of the matter.He admits that his assuming the surplus product in a concreteuse-form is the reason why the surplus value cannot be usefullyemployed. As a remedy he now allows the entrepreneurs todevote half of the social labour appropriated as surplus value tothe production not of common goods but of luxuries. The‘essence of luxury-goods being that they enable the consumer touse up more capital and labour power than in the case ofordinary goods’, the three entrepreneurs manage to consume bythemselves in the form of laces, fashionable carriages and thelike, their entire half-share in all the labour performed by thesociety. Now nothing unsaleable is left, and the crisis is happilyavoided; over-production is made impossible once and for all,capitalists and workers alike are safe; the name of v. Kirchmann’smagic cure which has brought all these benefits to pass,and which re-establishes the balance between production andconsumption, being: luxury. In other words, the capitalists whodo not know what to do with their surplus value which theycannot realise, are advised by the dear fellow—to eat it up! Asit happens, luxury is in fact an old familiar invention of capitalistsociety, and still there are recurrent crises. Why is this?v. Kirchmann enlightens us: ‘The answer can only be that inreal life sluggish markets are entirely due to the fact that thereare stillnot enough luxuries, or, in other words, that the capitalists,i.e. those who can afford to consume, still consume toolittle.’

This misguided abstinence of the capitalists, however, resultsfrom a bad habit which political economists have been ill-advised[Pg 236]to encourage: the desire to save for purposes of ‘productiveconsumption’. In other words: crises are caused byaccumulation. This is v. Kirchmann’s principal thesis. Heproves it again by means of a touchingly simple example: ‘Letus assume conditions which economists praise as more favourable,’he says, ‘where the entrepreneurs say: we do not want tospend our income to the last penny in splendour and luxury,but will re-invest it productively. What does this mean? Nothingbut the setting-up of all sorts of productive enterprises fordelivering new goods of such a kind that their sale can yieldinterest (v. Kirchmann means profits) on a capital saved andinvested by the three entrepreneurs from their unconsumedrevenues. Accordingly, the three entrepreneurs decide to consumeonly the produce of a hundred workers, that is to say torestrict their luxury considerably, and to employ the labourpower of the remaining 350 workers together with the capitalthey use for setting up new productive enterprises. The questionnow arises in what kind of productive enterprises these fundsare to be used.’

Since, according to v. Kirchmann’s assumption, constantcapital is not reproduced, and the entire social product consistsentirely of consumer goods, ‘the three entrepreneurs can onlychoose again between enterprises for the manufacture of ordinarygoods or for that of luxuries’.

In this way, however, the three entrepreneurs will be facedwith the already familiar dilemma: if they turn out ‘commongoods’, there will be a crisis, since the workers lack means topurchase these additional provisions, having been bought offwith half the value of their produce. If they go in for luxuries,they will have to consume them alone. There is no other possibility.The dilemma is not even affected by foreign trade whichwould ‘only increase the range of commodities on the homemarket’ or increase productivity.

‘These foreign commodities are therefore either commongoods—then the capitalist will not, and the worker, lacking themeans, cannot buy them, or they are luxuries, in which case theworker, of course, is even less able to buy them, and the capitalistwill not want them either because of his efforts to save.’

This argument, however primitive, yet shows quite nicely andclearly the fundamental conception of v. Kirchmann and the[Pg 237]nightmare of all economic theory: in a society consisting exclusivelyof workers and capitalists, accumulation will be impossible.v. Kirchmann is therefore frankly hostile to accumulation,‘saving’, ‘productive consumption’ of the surplus value, andstrongly attacks these errors advocated by classical economics.His gospel is increasing luxury together with the productivity oflabour as the specific against crises. We see that v. Kirchmann,if he grotesquely aped Ricardo and Say in his theoreticalassumptions, is a caricature of Sismondi in his final conclusions.Yet it is imperative to get v. Kirchmann’s approach to theproblem perfectly clear, if we are to understand the import ofRodbertus’ criticism and the outcome of the whole controversy.

CHAPTER XVI

RODBERTUS’ CRITICISMOF THE CLASSICAL SCHOOL

Rodbertus digs deeper than v. Kirchmann. He looks forthe roots of evil in the very foundations of social organisationand declares bitter war on the predominant FreeTrade school—not against a system of unrestricted commoditycirculation or the freedom of trade which he fully accepts, butagainst the Manchester doctrine oflaissez-faire within the internalsocial relations of economy. At that time, after the periodof storm and stress of classical economics, a system of unscrupulousapologetics was already in full sway which found its mostperfect expression in the ‘doctrine of harmony’ of M. FrédéricBastiat, the famous vulgarian and idol of all Philistines, andquite soon the various Schultzes were to flourish as commonplace,German imitations of the French prophet of harmony.Rodbertus’ strictures are aimed at these unscrupulous ‘peddlersof free trade’. In his firstLetter on Social Problems[237] he exclaims:

‘Because of their paltry incomes, five-sixths of the populationare not only deprived of most of the benefits of civilisation, butare in constant danger of the most terrible outbreaks of real distressto which they sometimes succumb. Yet they are thecreators of all the wealth of the society. Their labours begin atdawn and end at dusk, continuing even after night has fallen—butno exertion can change this fate; they cannot raise theirincome, and only lose that little leisure which ought to remainnowadays for the improvement of their minds. Hitherto it mighthave seemed as if all this suffering were necessary to the progressof civilisation, but now that a series of the most wonderful discoveriesand inventions have increased human labour powermore than a hundredfold, new prospects of changing these grimconditions are suddenly revealed. As a result, the wealth andassets of a nation increase at a growing rate as compared with[Pg 239]the population. Could anything be more natural, I ask, or morejustly demanded, than that this increase should also somehowbenefit the creators of this old and new wealth? that theirincomes should be raised or their working-hours shortened, orthat they might join in increasing numbers the ranks of thelucky ones, privileged to reap the fruits of labour? Yet stateeconomy, or better, national economy has only achieved theopposite result. Increasing poverty of these classes goes togetherwith increasing wealth of the nation, there is even need ofspecial legislation, lest the working day become longer, andfinally, the working classes swell in number out of proportionwith the others. Even that is not enough! The hundredfoldincrease of labour efficiency which was powerless to relieve five-sixthsof the population, even threatens periodically the remainingsixth of the nation and thus society as a whole.’

‘What contradictions in the economic sphere in particular!And what contradictions in the social sphere in general! Thewealth of society is growing, and this growth is accompaniedby a growth of poverty.—The creative efficiency of the meansof production is increasing, and the consequence is that they arescrapped. Social conditions demand that the material positionof the working classes should be raised to the level of theirpolitical status, and economic conditions, by way of answer,depress them further. Society needs the unrestricted growth ofwealth, and contemporary leaders of production must createrestrictions, in order to discourage poverty. In a single respectalone is there harmony: just as wrong as the conditions is theauthoritative section of the society with its inclination to lookfor the root of the evil everywhere except in the right place.This egotism, which only too often dons the scholar’s gown, alsoaccuses the vices of the workers of being the cause of poverty.The responsibility for the crimes committed against them byall-powerful facts is ascribed to their alleged discontent andshiftlessness, and where even such egotism cannot close its eyesto their innocence, it makes an elaborate dogma of the “necessityof poverty”. Unremittingly, it exhorts the workers only towork and to pray, impresses upon them the duty of abstinenceand economy, and at best infringes upon their rights by theinstitution of compulsory saving, adding to the misery of theworkers. It does not see that a blind force of commerce has[Pg 240]transformed the prayer for work into the curse of enforcedunemployment, that ... abstinence is impossible or cruel, andthat, lastly, morals always remain ineffective if commended bythose of whom the poet says that they drink wine in secret butpreach water in public.’[238]

Thirty years after Sismondi and Owen, twenty years afterthe indictment made by the English socialists, the followersof Ricardo, and last but not least, after the publication of theCommunist Manifesto, such bold words alone cannot claimto break new ground. What matters above all now is thetheoretical foundation of this indictment. Rodbertus here proposeda complete system which can be reduced to the followingsimple statements.

Owing to the laws of an economy left to its own devices, thehigh level of labour productivity achieved by history, togetherwith the institutions of positive law, that is to say the right ofprivate ownership, a whole series of wrong and unethicalphenomena had emerged:

(1) In the place of ‘normal’, ‘constituted’ value we haveexchange value, and accordingly coined money instead of aproper ‘paper’ or ‘labour’ currency which would genuinelycorrespond to the concept of money. The first principle is thatall economic goods are products of labour, or, as we might putit, that labour alone is creative. This statement, however, doesnot imply that the value of the product must always equal thecost of labour, or that, in other words, value is even nowmeasured in terms of labour. The truth is rather ‘that this stillhas not become afact, but is only anidea of political economy’.[239]

‘If the value could be constituted in accordance with thelabour expended on the product, we might imagine a kind ofmoney which would be, as it were, a leaf torn from the publicaccount-book, a receipt written on the most rubbishy material,on rags, which everyone would receive for the value he hasproduced, and which he would realise as a voucher for anequivalent part of the national product subsequently underdistribution.... If, however, for some reason or another, it isimpossible ornot yet possible to establish this value, money as suchmust still retain the value it is designed to liquidate; made of[Pg 241]an intrinsically valuable commodity like gold or silver, it hasto represent a pledge or pawn of the same value.’[240] ‘As soon ascapitalist commodity production has come into existence, everythingis turned upside down: there can no longer be a constitutedvalue, since it can only be exchange value’,[241] and, ‘sincethe value cannot be constituted, money cannot bepurely money,it cannot fully conform to its concept’.[242] In an equitable exchange,the exchange value of the products would have to equalthe quantity of labour needed for producing them, and anexchange of products would always mean an exchange of equalquantities of labour. Even assuming, however, that everybodyproduced just those use-values which another person requires,yet, ‘since we are here concerned with human discernment andhuman volition, there must always be for a start a correctcalculation, adjustment and allocation of the labour quantitiescontained in the products for exchange, there must be alawto which the facts will conform’.[243]

It is well-known that Rodbertus, in his discovery of ‘constitutedvalue’, laid great stress on his priority to Proudhonwhich we shall gladly concede him. Marx, in hisPoverty ofPhilosophy, and Engels in his preface to it, have comprehensivelyshown that this ‘concept’ is a mere phantom, still used in theorybut in practice buried already in England well before Rodbertus’time, that it is but a Utopian distortion of Ricardo’s doctrine ofvalue. We therefore need not deal further with this ‘music ofthe future, performed on a toy trumpet’.

(2) The ‘economy of exchange’ resulted in the ‘degradation’of labour to a commodity, the labour wage being determinedas an item of expenditure (Eichmann’s der Arbeit) instead of representinga fixed rate of the national product. By a daring jump inhistory, Rodbertus derives his wages law indirectly from slaveryand regards the specific traits which a capitalist production ofcommodities imposes on exploitation as no more than a lyingdeception against which he fulminates from a moral point ofview.

‘So long as the producers themselves remained the propertyof those who were not producing, so long as slavery was inexistence, it was the advantage of the “masters” alone which[Pg 242]unilaterally determined the volume of this share (of the workers).With the producers attaining full liberty of person, if nothingmore as yet, both parties agree on the wage in advance. Thewage, in modern terminology, is the object of a “free contract”,that is to say, an object of competition. Labour is therefore as amatter of course subjected to the same laws of exchange as itsproducts: labour itself acquires exchange value; the size of thewage depends on the effects of supply and demand.’

Rodbertus, after having thus turned everything upside down,after deriving the exchange value of labour from competition,now immediately derives its value from its exchange value.

‘Under the laws of exchange value, labour, like producedgoods, comes to have a kind of “cost value” which exercisessome magnetic effects upon its exchange value, the amount ofthe labour wage. It is that particular amount of payment whichis necessary for the “maintenance” of labour, in other words,which enables labour to continue, if only in the persons of itsprogeny—it is the so-called “minimum of subsistence”.’

For Rodbertus, however, this is not a statement of objectiveeconomic laws, but merely an object for moral indignation.He calls the thesis of the classical school, that labour is worthno more than the wages it can command, a ‘cynical’ statement,and he is determined to expose the ‘string of lies’ leading to this‘crude and unethical’ conclusion.[244]

‘It was a degrading view to estimate the wages of labour inaccordance with the “necessary subsistence”, like so manymachines to be kept in repair. Now that labour, the fountainheadof all commodities, has itself become a commodity ofexchange, it is no less degrading to speak of its “natural price”,of its “costs“, just as we speak of the natural price and costs ofits product, and to include this natural price, these costs, in theamount of goods that is necessary to call forth a continuous flowof labour on the market.’

This commodity character of labour power, however, and thecorresponding determination of its value, are nothing but amalicious misrepresentation of the Free Trade school. Like thegood Prussian he was, Rodbertus put capitalist commodity productionas a whole in the dock, as offending against the obtainingconstitutional law, instead of pointing out its inherent contradiction,[Pg 243]the conflict between determining the value of labourand determining the valuecreated by labour, as the Englishdisciples of Ricardo had done.

‘Stupid beyond words’, he exclaims, ‘is the dualist conceptionof those economists who would have the workers, as faras their legal status is concerned, join in deciding the fate ofsociety, and would for all that, have these same workers from aneconomic point of view, always treated as mere commodities!’[245]

Now it only remains to find out why the workers put up withsuch stupid and blatant injustice—an objection which Hermannfor instance raised against Ricardo’s theory of value. Rodbertusis ready with this answer:

‘What were the workers to do after their emancipation otherthan to agree to these regulations? Imagine their position: whenthe workers were freed, they were naked or in rags, they hadnothing but their labour power. The abolition of slavery orserfdom, moreover, rescinded the master’s legal or moral obligationto feed them and care for their needs. Yet these needsremained, they still had to live. How, then, could their labourpower provide them with a living? Were they simply to grabsome of the capital existing in the society for their maintenance?The capital of society was already in the hands of other people,and the organs of the “law” would not have tolerated such astep. What, then, could the workers have done? Only thesealternatives were before them: either to overthrow the law ofsociety or to return, under roughly the same conditions asbefore, to their former masters, the owners of the land and ofcapital, and to receive as wages what was formerly doled out tothem to keep them fed.’[246]

It was fortunate for mankind and the Prussian state that theworkers were ‘wise’ enough not to overthrow civilisation andpreferred to submit to the ‘base demands’ of their ‘formermasters’. This, then, is the origin of the capitalist wage system,of the wages law as ‘a kind of slavery’ resulting from an abuseof power on the part of the capitalists, and from the precariousposition and the meek acquiescence on the part of the proletariat—ifwe are to believe the highly original explanations ofthat very Rodbertus whose theories Marx is reputed to have‘plagiarised’. Let Rodbertus claim ‘priority’ in this particular[Pg 244]theory of value without challenge, seeing that English socialistsand other social critics had already given far less crude andprimitive analyses of the wage-system. The singular point aboutit all is that Rodbertus’ display of moral indignation about theorigin and the economic laws of the wages system does not leadup to the demand for doing away with this abominable injustice,the ‘dualism stupid beyond words’. Far from it! He frequentlyreassures his fellow-men that he does not really meananything very serious by roaring—he is no lion fell, only oneSnug the joiner. Indeed, an ethical theory of the wages law isnecessary only to achieve a further conclusion:

(3) Since the ‘laws of exchange value’ determine the wage, anadvance in labour productivity must bring about an ever decliningshare in the product for the workers. Here we have arrivedat the Archimedean fulcrum of Rodbertus’ system. This ‘decliningwage rate’ is his most important ‘original’ discovery onwhich he harps from his first writings on social problems (probablyin 1839) until his death, and which he ‘claims’ as his veryown. This conception, for all that, was but a simple corollary ofRicardo’s theory of value and is contained implicit in the wagesfund theory which dominated bourgeois economics up to thepublication of Marx’sCapital. Rodbertus nevertheless believedthat this ‘discovery’ made him a kind of Galileo in economics,and he refers to his ‘declining wage rate’ as explaining everyevil and contradiction in capitalist economy. Above all, hederives from the declining wage rate the phenomenon ofpauperism which, together with the crises, in his opinion constitutesthe social question. It would be as well to draw theattention of contemporaries, ‘out for Marx’s blood’, to the factthat it was not Marx but Rodbertus, a man much nearer theirown heart, who set up a whole theory of progressive poverty ina very crude form, and that he, unlike Marx, made it the verypivot, not just a symptom, of the entire social problem. Comparefor instance his argument in his firstLetter on Social Problemsto v. Kirchmann on the absolute impoverishment of theworking class. The ‘declining wage rate’ must serve in additionto explain the other fundamental phenomena of the socialproblem—the crises. In this connection Rodbertus tackles theproblem of balancing consumption with production, touchingupon the whole lot of cognate controversial issues which had[Pg 245]already been fought out between the schools of Sismondi andRicardo.

Rodbertus’ knowledge of crises was of course based upon farmore material evidence than that of Sismondi. In his firstLetteron Social Problems he already gives a detailed description of thefour crises in 1818-19, 1825, 1837-9 and 1847. Since his observationscovered a much longer period, Rodbertus could by andlarge gain a much deeper insight into the essential character ofcrises than his predecessors. As early as 1850 he formulatedthe periodical character of the crises which recur at evershorter intervals and at the same time with ever increasingseverity:

‘Time after time, these crises have become more terrible inproportion with the increase in wealth, engulfing an ever greaternumber of victims. The crisis of 1818-19, although even thiscaused panic in commerce and inspired misgivings in economics,was of small importance compared to that of 1825-6. The firstcrisis had made such inroads on the capital assets of Englandthat the most famous economists doubted whether completerecovery could ever be made. Yet it was eclipsed by the crisis of1836-7. The crises of 1839-40 and 1846-7 wrought even greaterhavoc than previous ones.’—‘According to recent experiences,however, the crises recur at ever shorter intervals. There was alapse of 18 years between the first and the third crisis, of14 years between the second and the fourth, and of only12 years between the third and the fifth. Already the signs aremultiplying that a new disaster is imminent, though no doubtthe events of 1848 put off the catastrophe.’[247]

Rodbertus remarks that an extraordinary boom in productionand great progress in industrial technique always are theheralds of a crisis. ‘Every one of them [of the crises] followedupon a period of outstanding industrial prosperity.’[248]

From the crises in history he demonstrates that ‘they occuronly after a considerable increase of productivity’.[249] Rodbertusopposes what he terms the vulgar view which conceives of crisesas mere disturbances in the monetary and credit system, andhe criticises the whole of Peel’s currency legislation as an errorof judgment, arguing the point in detail in his essayOn[Pg 246]Commercial Crises and the Mortgage Problem. There he makes thefollowing comment among others: ‘We would therefore deceiveourselves if we were to regard commercial crises merely as crisesof the monetary, banking, or credit system. This is only theirouter semblance when they first emerge.’[250]

Rodbertus also shows a remarkably acute grasp of the partplayed by foreign trade in the problem of crises. Just likeSismondi, he states the necessity of expansion for capitalist production,but he simultaneously emphasises the fact that theperiodical crises are bound to grow in volume.

‘Foreign trade’, he says, ‘is related to slumps only as charity isrelated to poverty. They ultimately only enhance one another.’[251]And further: ‘The only possible means of warding off furtheroutbreaks of crises is the application of the two-edged knife ofexpanding foreign markets. The violent urge towards such expansionis largely no more but a morbid irritation caused by asickly organ. Since one factor on the home market, productivity,is ever increasing, and the other factor, purchasing power,remains constant for the overwhelming majority of the population,commerce must endeavour to conjure up a similarlyunlimited amount of purchasing power on the foreign market.’[252]In this way, the irritation may be soothed to some extent sothat at least there will not be a new outbreak of the calamityright away. Every foreign market opened defers the social problemin a like manner. Colonisation of primitive countries wouldhave similar effects: Europe rears a market for herself in placeswhere none had been before. Yet such a medicine would essentiallydo no more than appease the ill. As soon as the newmarkets are supplied, the problem will revert to its former state—aconflict between the two factors: limited purchasing powerversus unlimited productivity. The new attack would be wardedoff the small market only to re-appear, in even wider dimensionsand with even more violent incidents, on a larger one. Andsince the earth is finite and the acquisition of new markets mustsome time come to an end, the time will come when the question[Pg 247]can no longer be simply adjourned. Sooner or later, adefinite solution will have to be found.’[253]

[Pg 248]Rodbertus also recognises the anarchical character of capitalistprivate enterprise to be conducive to crises, but only as onefactor among many, seeing it as the source of a particular typeof crises, not as the real cause of crises in general. About thecrises at v. Kirchmann’sOrt, e.g., he says: ‘I maintain that aslump of this kind does not occur in real life. The market ofto-day is large, there are countless wants and many branches ofproduction, productivity is considerable and the data of commerceare obscure and misleading. The individual entrepreneurdoes not know how much others are producing, and so it mayeasily happen that he over-estimates the demand for a certaincommodity with which he will then overstock the market.’

Rodbertus says outright that the only remedy for these crisesis the ‘complete reversal’ of contemporary property-relations ora planned economy, concentrating all means of production ‘inthe hands of a single social authority’. To set troubled minds atrest, however, he is quick to add that he reserves judgment asto whether there can actually be such a state of affairs—‘yetthis would be the only possible way to prevent slumps of thiskind’. Thus he expressly regards anarchy in the modern modeof production as responsible for only a specific and partialmanifestation of crises.

Rodbertus scornfully rejects Say-Ricardo’s axiom of a naturalequilibrium between consumption and production; just likeSismondi, he emphasises that everything turns on the purchasingpower of society, and also takes it to be dependent uponthe distribution of income. All the same, he does not endorse[Pg 249]Sismondi’s theory of crises and disagrees sharply with the conclusionsdrawn from it. If Sismondi saw the source of all evil inthe unlimited expansion of production without regard to thelimitations of incomes, and advocated a restriction of production,Rodbertus, quite on the contrary, champions the mostpowerful and unrestricted expansion of production, of wealthand of the productive forces, believing this to be a social necessity.Whoever rejects the wealth of society, rejects at the sametime its power, its progress, and, with its progress, its virtues.Whoever stands in the way of growing wealth, stands in theway of all social progress whatever. Every increase in knowledge,resolve and capacity is conceived as bound up with anincrease in wealth.[254] From this point of view, Rodbertus isstrongly in favour of issuing houses which he regards as theindispensable foundations for a rapid and unrestricted expansionof company promoting. Both his essay of 1859 on themortgage problem and the treatise on theFinancial Crisis inPrussia[255] are devoted to this plea. He even polemises outrightagainst the Sismondian type ofcaveat, as usual broaching thematter first from his peculiar Utopian ethics.

‘The entrepreneurs’, he holds forth, ‘are essentially civil servantsof economy. By the institution of property, they are onceand for all entrusted with the nation’s means of production. Ifthey set them to work and strain all their energies in the process,they do but their duty, since capital—let me repeat—existsentirely for the sake of production.’ And a further, factualargument: ‘Or would you have them (the entrepreneurs) turnacute attacks of suffering into a chronic state by working persistentlyand from the first with fewer forces than are given bythe means of production; are they to pay for a less severe formof the evil with its permanent duration? Even if we were sillyenough to give them this advice, they would not be able tofollow it. How could the entrepreneurs of the world recognisethe limits beyond which the market would cease to be healthy?They engage in production without knowing the one of theother, they are producing in the most distant corners of theearth for a market hundreds of miles away, they produce withsuch vast forces that a month’s production may already overstepthe limit. How could production—so divided and yet so[Pg 250]powerful—conceivably estimate in good time what will beenough? Where, for instance, are the organisations, the up-to-datestatistical bureaux and the like to help them in this task?What is worse, the price alone, its rise and fall, indicates theposition of the market, and this is not like a barometer whichpredicts the temperature of the market, but more like a thermometerwhich only registers it. If the price falls, the limit hasbeen passed already, and the evil is with us.’[256]

These thrusts, obviously aimed at Sismondi, exhibit quitefundamental differences between the two opponents. If Engelsthen says in hisAnti-Duehring that Sismondi first explained thecrises as resulting from under-consumption, and that Rodbertusborrowed this view from him, he is not strictly accurate. Allthat Rodbertus and Sismondi have in common is their oppositionagainst the classical school and the general explanation ofcrises as the result of the distribution of incomes. Even in thisconnection Rodbertus mounts his own particular hobby horse:over-production is not caused by the low level of working classincomes, nor yet, as Sismondi maintains, by the capitalists’limited capacity for consumption, but solely by the fact thatwith a growing productivity of labour, the workers’ income, interms of value, represents an ever smaller share of the product.Rodbertus takes pains to convince the opposition that it is notthe small volume of the workers’ share which causes the crises.

‘Just imagine’, he goes on to lecture v. Kirchmann, ‘theseshares to be so small as to ensure only a bare subsistence forthose who are entitled to them. As long as you establish them asrepresenting a proportion of the national product, you will havea constant “vessel for value” which can absorb ever increasingcontents, and an ever increasing prosperity of the workingclasses as well.... And now imagine on the contrary as large ashare for the working classes as you please, and let it become anever smaller fraction of the national product that grows withincreasing productivity. Then, provided it is not reduced to thepresent pittance, this share will still protect the workers fromundue privations since the amount of products it represents willstill be considerably greater than it is to-day. Once this sharebegins to decline, however, there will be spreading discontent,culminating in a commercial crisis for which the capitalists are[Pg 251]not to blame inasmuch as they did no more than their dutyin laying down the volume of production according to the givenmagnitude of these shares.’

That is why the ‘declining wage rate’ is the real cause ofcrises. It can only be counteracted by legal measures to ensurethat the workers’ share represents a stable and unchanging rateof the national product. This grotesque notion takes some understandingif we are to do justice to its economic implications.

CHAPTER XVII

RODBERTUS’ ANALYSIS OFREPRODUCTION

To begin with, what does it mean that a decrease in theworkers’ share is bound immediately to engender over-productionand commercial crises? Such a view can onlymake sense provided Rodbertus takes the ‘national product’ toconsist of two parts,vide the shares of the workers and of thecapitalists, in short ofv +s, one share being exchangeable for theother. And that is more or less what he actually seems to say onoccasions, e.g. in his firstLetter on Social Problems:

‘The poverty of the working classes precludes their incomefrom giving scope to increasing production. The additionalamount of products from the entrepreneurs’ point of view lowersthe value of the aggregate product so far as to bar productionon the former scale, leaving the workers at best to their accustomedstraits, though, if it could be made available to theworkers, it would not only improve their lot but would furtheract as a counterweight by increasing the value of what is retainedby the capitalists (and so enable the latter to keep theirenterprises at the same level).’[257]

The ‘counterweight’ which in the hand of the workers increasesthe ‘value’ of ‘what is retained’ by the entrepreneurs,can in this context only be the demand. Once again, we havelanded happily at the familiarOrt of v. Kirchmann’s whereworkers and capitalists exchange their incomes for the surplusproduct, and where the crises arise because variable capital issmall and the surplus value large. This peculiar notion hasalready been dealt with above. There are other occasions, however,when Rodbertus advances a somewhat different conception.The interpretation of his theory in the fourthLetter onSocial Problems is that the continual shifts in the relations ofdemand, evident in the share of the working class and caused[Pg 253]by the share of the capitalist class, must result in a chronic disproportionbetween production and consumption.

‘What if the entrepreneurs endeavour to keep always withinthe limits of those shares, yet the shares themselves are all thetime on the decline for the great majority of the society, theworkers, decreasing gradually, unnoticeably, but with relentlessforce?—What if the share of these classes is continually decreasingto the same extent as their productivity is increasing?’—‘Is itnot really the fact that the capitalists of necessity organise productionin accordance with the present volume of shares inorder to make wealth universal, and that yet they always produceover and above this volume (of previous shares), therebyperpetuating dissatisfaction which culminates in this stagnationof trade?’[258]

On this showing, the explanation of crises should be asfollows: the national product consists of a number of ‘commongoods’, as v. Kirchmann puts it, for the workers, and of superiorgoods for the capitalists. The wages represent the quantity ofthe former, and aggregate surplus value that of the latter. If thecapitalists organise their production on this footing, and if at thesame time there is progressive productivity, a lack of proportionwill immediately ensue. For the share of the workers to-day isno longer that of yesterday, but less. If the demand for ‘commongoods’ had involved, say, six-sevenths of the national productyesterday, then to-day it involves only five-sevenths, and theentrepreneurs, having provided for six-sevenths of ‘commongoods’, will find to their painful surprise that they over-producedby one-seventh. Now, wiser by this experience, theytry to organise to-morrow’s output of ‘common goods’ to a merefive-sevenths of the total value of the national product, but theyhave a new disappointment coming to them, since the share ofthe national product falling to wages to-morrow is bound to beonly four-sevenths, and so on.

In this ingenious theory there are quite a few points to makeus wonder. If our commercial crises are entirely due to the factthat the workers’ ‘wage rate’, the variable capital, represents aconstantly diminishing portion of the total value of the nationalproduct, then this unfortunate law brings with it the cure for theevil it has caused, since it must be an ever smaller part of the[Pg 254]aggregate product for which there is over-production. AlthoughRodbertus delights in such terms as ‘an overwhelming majority’,‘the large popular masses’ of consumers, it is not the number ofheads that make up the demand, but the value they representwhich is relevant. This value, if Rodbertus is to be believed,forms a more and more trifling part of the aggregate product.Crises are thus made to rest on an ever narrowing economicbasis, and all that remains to discover is how in spite of it all itcan still happen that the crises are universal and increasinglysevere besides, as Rodbertus is fully aware. The purchasingpower lost by the working classes should be gained by thecapitalist class; ifv decreases,s must grow larger to make up forit. On this crude scheme, the purchasing power of society as awhole cannot change, as Rodbertus says in so many words: ‘Iknow very well that what is taken from the workers’ share goesultimately to swell that of the “rentiers” (rent and surplus valueare used as synonyms,R.L.), and that purchasing power remainsconstant on the whole and in the long run. But as far asthe product on the market is concerned, the crisis always sets inbefore this increase can make itself felt.’[259]

In short, the most it can amount to is that there is ‘too much’of ‘common goods’ and ‘too little’ of superior goods for thecapitalists. Quite unawares, and by devious ways, Rodbertushere falls in with the Say-Ricardian theory he so ardently contested,the theory that over-production on one side alwayscorresponds to under-production on the other. Seeing that theratio of the two shares is persistently shifting to the advantage ofthe capitalists, our commercial crises might be expected on thewhole to take on increasingly the character of periodical under-instead of over-production! Enough of this exercise in logic.The upshot of it all is that Rodbertus conceives the nationalproduct in respect of its value as made up of two parts only, ofs andv, thus wholly subscribing to the views and traditions of theclassical school he is fighting tooth and nail, and even addinghis own flourish that the capitalists consume the entire surplusvalue. That is why he repeatedly says without mincing hiswords, as in the fourthLetter on Social Problems:

‘Accordingly, we must abstract from the reasons which causethe division of rent in general into rent proper and capital rent,[Pg 255]to find the basic principle underlying the division of rent (surplusvalue) in general, the principle underlyingthe division of thelabour product into wage and rent.’[260] And, in the thirdLetter:‘Ground rent, capital profit and the wage of labour are, let merepeat, revenue. By this means landlords, capitalists and workersmust live, must satisfy, that is to say, their immediate humannecessities. They must therefore draw their income in the formof goods suitable for this purpose.’[261]

The misrepresentation of capitalist economy has never beenformulated more crudely, and there is no doubt that Rodbertusclaims the palm of ‘priority’—not so much over Marx as overall popular economists—with full justification. To leave thereader in no doubt about the utter muddle he has made, hegoes on, in the same letter, to rank capitalist surplus value as aneconomic category on the same level as the revenue of theancient slave-owner:

‘The first state (that of slavery) goes with the most primitivenatural economy: that portion of the labour product which iswithheld from the income of workers or slaves and forms themaster’s or owner’s property, will undividedly accrue to the oneman who owns the land, the capital, the worker and the labourproduct; there is not even a distinction of thought between rentand capital profits.—The second state entails the most complicatedmoney economy: that portion of the labour product,withheld from the income of the now emancipated workers, andaccruing to the respective owners of land, and capital, will befurther divided among the owners of the raw material and themanufactured product respectively; the one rent of the formerstate will be split up into ground rent and capital profits, andwill have to be differentiated accordingly.’[262]

Rodbertus regards the splitting-up of the surplus value ‘withheld’from the workers’ ‘income’ as the most striking differencebetween exploitation by slavery and modern capitalist exploitation.It is not the specific historical form of sharing out newlycreated value among labour and capital, but the distribution ofthe surplus value among the various people it benefits, which,irrelevant to the productive process, is yet the decisive fact in thecapitalist mode of production. In all other respects, capitalist[Pg 256]surplus value remains just the same as the old ‘single rent’of the slave-owner: a private fund for the exploiter’s own consumption!

Yet Rodbertus again contradicts himself in other places, rememberingall of a sudden the constant capital and the necessityfor its renewal in the reproductive process. Thus, instead ofbisecting the aggregate product intov ands, he posits a tripledivision:c,v, ands. In his thirdLetter on Social Problems he argueson the forms of reproduction in a slave-economy:

‘Since the master will see to it that part of the slave labour isemployed in maintaining or even improving the fields, herds,agricultural and manufacturing tools, there will be “capitalreplacement”, to use a modern term, in which part of thenational economic product is immediately used for the upkeepof the estate, without any mediation by exchange or even byexchange value.’[263] And, passing on to capitalist reproduction,he continues: ‘Now, in terms of value, one portion of the labourproduct, is used or set aside for the maintenance of the estate,for “capital replacement”, another, for the workers’ subsistenceas their money wage; and the owners of the land, of capital,and of the labour product retain the last as their revenueor rent.’[264]

This, then, is an explicit expression of the triple division intoconstant capital, variable capital, and surplus value. Again, inthis thirdLetter, he formulates the peculiarity of his ‘new’ theorywith equal precision: ‘On this theory, then, and under conditionsof adequate labour productivity, the portion of the productwhich remains for wages after the replacement of capital,will be distributed among workers and owners as wages andrent, on the basis of the ownership in land and capital.’[265]

It does seem now as if Rodbertus’ analysis of the value of theaggregate product represents a distinct advance over the classicalschool. Even Adam Smith’s ‘dogma’ is openly criticised a littlefurther on, and it is really surprising that Rodbertus’ learnedadmirers, Messrs. Wagner, Dietzel, Diehl & Co. failed to claimtheir white-headed boy’s ‘priority’ over Marx on such an importantpoint of economic theory. As a matter of fact, in thisrespect no less than in the general theory of value, Rodbertus’priority is of a somewhat dubious character. If he seems on[Pg 257]occasion to gain true insight, it immediately turns out to be amisunderstanding, or at best a wrong approach. His criticism ofAdam Smith’s dogma affords a supreme example of his failureto cope with the triple division of the national product towardswhich he had groped his way. He says literally:

‘You know that all economists since Adam Smith alreadydivided the value of the product into wage of labour, rent, andcapital profit, that it is therefore not a new idea to ground theincomes of the various classes, and especially the various itemsof the rent, in a division of the product. But the economists atonce go off the track. All of them, not even excepting Ricardo’sschool, make the mistake, first, not to recognise that the aggregateproduct, the finished good, the national product as a whole,is an entity in which workers, landowners, and capitalists allshare, but conceiving the division of the unfinished product tobe of one kind shared among three partners, and that of themanufactured product as of another kind again, shared betweenonly two partners. For these theories both the unfinished productand the manufactured product constitute as such separateitems of revenue. Secondly,—though both Sismondi and Ricardoare free from this particular error—they regard the natural factthat labour cannot produce goods without material help, i.e.without the land, as an economic fact, and take the social factfor a primary datum that capital as understood to-day is requiredby the division of labour. Thus they set up the fiction ofa fundamental economic relationship on which they base alsofor the shares of the various owners, ground rent springing fromthe contribution of the land lent by the owner to production,capital profits from the contribution of capital employed by thecapitalist to this end, and the wages finally from labour’s contribution,seeing that there are separate owners of land, capital,and labour in the society. Say’s school, elaborating on thismistake with much ingenuity, even invented the concept of productiveservice of land, capital, and labour in conformity withthe shares in the product of their respective owners, so as toexplain these shares as the result of productive service.—Thirdly,they are caught up in the ultimate folly of deriving the wage oflabour and the items of rent from the value of the product, thevalue of the product in turn being derived from the wage oflabour and the items of rent, so that the one is made to depend[Pg 258]on the other andvice versa. This absurdity is quite unmistakablewhen some of these authors attempt to expound “TheInfluence of Rent Upon Production Prices” and “The Influenceof Production Prices Upon Rent” in two consecutive chapters.’[266]

Yet for all these excellent critical comments—the last, particularlyacute, actually does to some extent anticipate Marx’scriticism of this point inCapital, volume ii—Rodbertus calmlyfalls in with the fundamental blunder of the classical school andits vulgar followers: to ignore altogether that part of the valueof the aggregate product which is needed to replace the constantcapital of the society. This way it was easier for him to keep upthe singular fight against the ‘declining wage rate’.

Under capitalist forms of production, the value of the aggregatesocial product is divided into three parts: one correspondingto the value of the constant capital, the second to the wage total,i.e. the variable capital, and the third to the aggregate surplusvalue of the capitalist class. In this composition, the portioncorresponding to the variable capital is relatively on the decline,and this for two reasons. To begin with, the relation ofc to(v +s) withinc +v +s changes all the time in the direction of arelative increase ofc and a relative decrease ofv+s. This is thesimple law for a progressive efficiency of human labour, validfor all societies of economic progress, independently of theirhistorical forms, a formula which only states that living labour isincreasingly able to convert more means of production intoobjects for use in an ever shorter time. And if (v +s) decreases asa whole, so mustv, as its part, decrease in relation to the totalvalue of the product. To kick against this, to try and stop thedecrease, would be tantamount to contending against thegeneral effects of a growing labour productivity. Further, thereis within (v +s) as well a change in the direction of a relativedecrease inv and a relative increase ins, that is to say, an eversmaller part of the newly created value is spent on wages and anever greater part is appropriated as surplus value. This is thespecifically capitalist formula of progressive labour productivitywhich, under capitalist conditions of production, is no less validthan the general law. To use the power of the state to prevent adecrease ofv as againsts would mean that the fundamentalcommodity of labour power is debarred from this progress which[Pg 259]decreases production costs for all commodities; it would meanthe exemption of this one commodity from the economic effectsof technical progress. More than that: the ‘declining wage rate’is only another expression of the rising rate of surplus valuewhich forms the most powerful and effective means of checkinga decline of the profit rate, and which therefore represents theprime incentive for capitalist production in general, and fortechnical progress within this system of production in particular.Doing away with the ‘declining wage rate’ by way of legislationwould be as much as to do away with theraison d’être of capitalistsociety, to deal a crippling blow to its entire system. Let us facethe facts: the individual capitalist, just like capitalist society asa whole, has no glimmering that the value of the product ismade up from the sum total of labour necessary in the society,and this is actually beyond his grasp. Value, as the capitalistunderstands it, is the derivative form, reversed by competitionas production costs. While in truth the value of the productis broken down into the values of its component fragmentsc,vands, the capitalist mind conceives of it as the summation ofc,v ands. These, in addition, also appear to him from a distortedperspective and in a secondary form, as (1) the wear andtear of his fixed capital, (2) his advances on circulating capital,including workers’ wages, and (3) the current profits, i.e. theaverage rate of profit on his entire capital. How, then, is thecapitalist to be compelled by a law, say of the kind envisagedby Rodbertus, to maintain a ‘fixed wage rate’ in the face of theaggregate value of the product? It would be quite as brilliant tostipulate by law for exactly one-third, no more, no less, of thetotal price of the product to be payable for the raw materialsemployed in the manufacture of any commodity. Obviously,Rodbertus’ supreme notion, of which he was so proud, on whichhe built as if it were a new Archimedean discovery, which wasto be the specific for all the ills of capitalist production, is arrantnonsense from all aspects of the capitalist mode of production.It could only result from the muddle in the theory of valuewhich is brought to a head in Rodbertus’ inimitable phrase:that ‘now, in a capitalist society, the product must have value-in-exchangejust as it had to have value-in-use in ancienteconomy’.[267] People in ancient society had to eat bread and meat[Pg 260]in order to live, but we of to-day are already satisfied with knowingthe price of bread and of meat. The most obvious inferencefrom Rodbertus’ monomania about a ‘fixed wage rate’ is that heis quite incapable of understanding capitalist accumulation.

Previous quotations have already shown that Rodbertusthinks solely of simple commodity production, quite in keepingwith his mistaken doctrine that the purpose of capitalist productionis the manufacture of consumer goods for the satisfaction of‘human wants’. For he always talks of ‘capital replacements’, ofthe need to enable the capitalists to ‘continue their enterprise onthe previous scale’. His principal argument, however, is directlyopposed to the accumulation of capital. To fix the rate of thesurplus value, to prevent its growth, is tantamount to paralysingthe accumulation of capital. Both Sismondi and v. Kirchmannhad recognised the problem of balancing production and consumptionto be indeed a problem of accumulation, that is tosay of enlarged capitalist reproduction. Both traced the disturbancesin the equilibrium of reproduction to accumulativetendencies denying the possibility of accumulation, with theonly difference that the one recommended a damper on the productiveforces as a remedy, while the other favoured their increasingemployment to produce luxuries, the entire surplusvalue to be consumed. In this field, too, Rodbertus follows hisown solitary path. The others might try with more or lesssuccess to comprehend thefact of capitalist accumulation, butRodbertus prefers to fight the very concept. ‘Economists sinceAdam Smith have one after the other echoed the principle,setting it up as a universal and absolute truth, that capital couldonly come about by saving and accumulating.’[268]

Rodbertus is up in arms against this ‘deluded judgment’.Over sixty pages of print he sets out in detail that (a) it is notsaving which is the source of capital but labour, that (b) theeconomists’ ‘delusion’ about ‘saving’ hails from the extravagantview that capital is itself productive, and that (c) this delusion isultimately due to another: the error that capital is—capital.

v. Kirchmann for his part understood quite well what is at thebottom of capitalist ‘savings’. He had the pretty argument:‘Everyone knows that the accumulation of capital is not a merehoarding of reserves, an amassing of metal and monies to remain[Pg 261]idle in the owners’ vaults. Those who want to save do it for thesake of re-employing their savings either personally or throughthe agency of others as capital, in order to yield them revenue.That is only possible if these capitals are used in new enterpriseswhich can produce so as to provide the required interest. Onemay build a ship, another a barn, a third may reclaim a desolateswamp, a fourth may order a new spinning frame, while a fifth,in order to enlarge his shoe-making business, would buy moreleather and employ more hands—and so on. Only if the capitalthat has been saved is employed in this way, can it yield interest(meaning profit), and the latter is the ultimate object of allsaving.’[269]

That is how v. Kirchmann described somewhat clumsily,but on the whole correctly, what is in fact the capitalisationof surplus value, the process of capitalist accumulation, whichconstitutes the whole significance of saving, advocated byclassical economists ‘since Adam Smith’ with unerring instinct.Declaring war on saving and accumulation was quite in keepingwith v. Kirchmann’s premises, considering that he, likeSismondi, saw the immediate cause of the crises in accumulation.Here, too, Rodbertus is more ‘thorough’. Having learnedfrom Ricardo’s theory of value that labour is the source of allvalue, and consequently of capital, too, he is completely blindedby this elementary piece of knowledge to the entire complexityof capitalist production and capital movements. Since capital isgenerated by labour, both the accumulation of capital, i.e. ‘saving’,and the capitalisation of the surplus value are nothing buteyewash.

In order to untangle this intricate network of errors by‘economists since Adam Smith’, he takes, as we might expect,the example of the ‘isolated husbandman’ and proves all that heneeds by a long-drawn vivisection of the unhappy creature.Here already he discovers ‘capital’, that is to say, of course, thatfamous ‘original stick’ with which ‘economists since AdamSmith’ have hooked the fruits of a theory of capital from the treeof knowledge. ‘Would saving be able to produce this stick?’ ishis query. And since every normal person will understand that‘saving’ cannot produce any stick, that Robinson [Crusoe] musthave made it of wood, we have already proved that the ‘savings’[Pg 262]theory is quite mistaken. Presently, the ‘isolated husbandman’hooks a fruit from the tree with the stick, and this fruit is his‘income’.

‘If capital were the source of income, already this mostelementary and primitive event would have to give evidence ofthis relation. Would it be true to say, then, without doingviolence to facts and concepts, that the stick is asource of incomeor of part of the income consisting in the fruit brought down? canwe trace income, wholly or in part, back to the stick as itscause,may we consider it, wholly or in parts, as aproduct of the stick?’[270]

Surely not. And since the fruit is the product, not of the stickwhich brought it down, but of the tree which grew it, Rodbertushas already proved that all ‘economists since Adam Smith’ aregrossly mistaken if they maintain that income derives fromcapital. After a clear exposition of all fundamental concepts ofeconomics on the example of Robinson [Crusoe]’s ‘economy’,Rodbertus transfers the knowledge thus acquired first to afictitious society ‘without ownership in capital or land’, that isto say to a society with a communist mode of possession, andthen to a society ‘with ownership in capital and land’, that is tosay contemporary society, and, lo and behold—all the laws ofRobinson [Crusoe]’s economy apply point for point to these twoforms of society as well. Rodbertus contrives here a theory ofcapital and income which is the very crown of his Utopianimagination. Since he has discovered that Robinson [Crusoe]’s‘capital’ is the means of production pure and simple, he identifiescapital with the means of production in capitalist economy aswell. Thus reducing capital, with a wave of his hand, to constantcapital, he protests in the name of justice and morality againstthe fact that the wages, the workers’ means of subsistence, arealso considered capital. He contends furiously against theconceptof variable capital, seeing in it the cause of every disaster.‘If only’, he grieves, ‘economists would pay attention to what Isay, if only they would examine without prejudice whether theyare right or I. This is the focal point of all errors about capitalin the ruling system, this is the ultimate source of injusticeagainst the working classes, in theory and practice alike.’[271]

[Pg 263]For ‘justice’ demands that the goods constituting the ‘realwages’ of the workers be counted, not as part of capital, but asbelonging to the category of income. Though Rodbertus knowsvery well that the capitalist must regard the wages he has‘advanced’ as part of his capital, just like the other part laidout on immediate means of production, yet in his opinion thisapplies only to individual capitals. As soon as it is a question ofthe social aggregate product, of reproduction as a whole, hedeclares the capitalist categories of production an illusion, amalicious lie and a ‘wrong’. ‘Capitalper se (properly so-called),the items which make up capital, capital from the nation’s pointof view, is something quite different from private capital, capitalassets, capitalproperty, all that “capital” in the modern use of theterm usually stands for.’[272]

An individual capitalist produces by capitalist methods, butsociety as a whole must produce like Robinson [Crusoe], as acollective owner employing communist methods.

‘It makes no difference from this general and national pointof view that greater or smaller parts of the aggregate nationalproduct are now owned in all the various phases of productionby private persons who must not be numbered among the producersproper, and that the latter always manufacture thisnational aggregate product as servants—without sharing in theownership of their own product—of these few owners.’

[Pg 264]Certain peculiarities of the relations within the society as awhole no doubt result from this, namely (1) the institution of‘exchange’ as an intermediary, and (2) the inequality in thedistribution of the product.

‘Yet all these consequences do not affect the movements ofnational production and the shaping of the national productwhich are always the same, now as ever (under the rule of communism),no more than they alter in any respect, as far as thenational point of view is concerned, the contrast between capitaland income so far established.’

Sismondi had laboured in the sweat of his brow, as had Smithand many others, to disentangle the concepts of capital andincome from the contradictions of capitalist production. Rodbertushas a simpler method and abstracts from the specificforms determined by capitalist production for society as a whole;he simply calls the means of production ‘capital’ and the articleof consumption ‘revenue’ and leaves it at that.

‘The essential influence of ownership in land and capitalapplies only to individuals having traffic with one another. Ifthe nation is taken as a unit, the effects of such ownership uponthe individuals completely disappear.’[273]

We see that as soon as Rodbertus comes up against the realproblem, the capitalist aggregate product and its movements,he exhibits the Utopian’s characteristic obtuseness in respect ofthe historical peculiarities of production. Marx’s comment onProudhon, that ‘speaking of society as a whole, he pretends thatthis society is no longer capitalist’ therefore fits him like a glove.The case of Rodbertus again exemplifies how every economistbefore Marx had been at a loss when it came to harmonising theconcrete aspects of the labour process with the perspective ofcapitalist production which regards everything in terms of value,to mediating between the forms of movement performed by individualcapitals and the movement of social capital. Suchefforts as a rule vacillate from one extreme to another: theshallow approach of Say and MacCulloch, recognising only theconceptions of individual capital, and the Utopian approach ofProudhon and Rodbertus who recognise only those of the processof labour. That is the context in which Marx’s penetrationappears in its true light. His diagram of simple reproduction[Pg 265]illuminates the entire problem by gathering up all these perspectivesin their harmony and their contradictions, and so resolvesthe hopeless obscurities of innumerable tomes into tworows of figures of striking simplicity.

On the strength of such views on capital and income as these,capitalist appropriation is clearly quite impossible to understand.Indeed, Rodbertus simply brands it as ‘robbery’ andindicts it before the forum of the rights of property it so blatantlyviolates.

‘This personal freedom of the workers which ought legally toinvolve ownership in the value of the labour product, leads inpractice to their renunciation of the proprietary claims extortedunder pressure of ownership in land and capital; but the ownersdo not admit to this great and universal wrong, almost asthough they were instinctively afraid that history might followits own stern and inexorable logic.’[274]

Rodbertus’ ‘theory in all its details is therefore conclusiveproof that those who praise present-day relations of ownershipwithout being able at the same time to ground ownership inanything but labour, completely contradict their own principle.It proves that the property relations of to-day are in fact foundedon a universal violation of this principle, that the great individualfortunes being amassed in society nowadays are the resultof cumulative robbery mounting up in society with every new-bornworker since time immemorial.’[275]

Since surplus value is thus branded as ‘robbery’, an increasingrate of surplus value must appear ‘as a strange error of present-dayeconomic organisation’. Brissot’s crude paradox with itsrevolutionary ring—‘property is theft’—had been the startingpoint for Proudhon’s first pamphlet, but Rodbertus’ thesis isquite another matter, arguing that capital is theft perpetratedon property. It need only be set side by side with Marx’s chapteron the transformation of the laws of ownership into the laws ofcapitalist appropriation—this triumph of historical dialectics invol. i of Marx’sCapital—in order to show up Rodbertus’‘priority’. By ranting against capitalist appropriation under theaspect of the ‘right of property’, Rodbertus closed his mind tocapital as the source of surplus value just as effectively as he hadpreviously been prevented by his tirades against ‘saving’ from[Pg 266]seeing the surplus value as a source of capital. He is thus in aneven worse position than v. Kirchmann, lacking all qualificationsfor understanding capitalist accumulation.

What it amounts to is that Rodbertus wants unrestrictedexpansion of production without saving, that is to say withoutcapitalist accumulation! He wants an unlimited growth ofthe productive forces, and at the same time a rate of surplusvalue stabilised by an act of law. In short, he shows himselfquite unable to grasp the real foundations of capitalist productionhe wishes to reform, and to understand the most importantresults of the classical economics he criticises so adversely.

It is no more than to be expected, therefore, that Prof. Diehlshould declare Rodbertus a pioneer of economic theory on thestrength of his ‘new theory of income’ and of the distinctionbetween the logical and the historical categories of capital(capital properly so-called in contrast to individual capital),that Prof. Adolf Wagner should call him the ‘Ricardo ofeconomic socialism’, proving himself ignorant at once ofRicardo, Rodbertus and socialism alike. Lexis even judges thatRodbertus is at least the equal of ‘his British rival’ in powerof abstract thinking, and by far his superior in ‘virtuosity tolay bare the phenomena in their ultimate connections’, in‘imaginative vitality’, and above all in his ‘ethical approach toeconomic life’. Rodbertus’ real achievements in economic theoryhowever, other than his critique of Ricardo’s ground rent, hisat times quite clear-cut distinction between surplus value andprofit, his treatment of the surplus value as a whole in deliberatecontrast with its partial manifestations, his critique of Smith’sdogma concerning the analysis of commodities in terms of value,his precise formulation of the periodical character of the crisesand his analysis of their manifestations—all these attempts tocarry the investigation beyond Smith, Ricardo and Say, promisingas such, though doomed to failure because of the confusedbasic concepts, are rather above the heads of Rodbertus’ officialadmirers. As Franz Mehring already pointed out, it wasRodbertus’ strange fortune to be lauded to heaven for hisalleged prowess in economics by the same people who calledhim to task for his real merits in politics. This contrast betweeneconomic and political achievements, however, does not concernus here: in the realm of economic theory, his admirers built[Pg 267]him a grand memorial on the barren field he had dug with thehopeless zeal of the visionary, while the modest beds where hehad sown a few fertile seeds, were allowed to be smothered withweeds and forgotten.[276]

It cannot be said that the problem of accumulation had onthe whole been much advanced beyond the first controversy[Pg 268]by this Prusso-Pomeranian treatment. If in the interim theeconomic theory of harmony had dropped from the level ofRicardo to that of a Bastiat-Schultze, social criticism had correspondinglydeclined from Sismondi to Rodbertus. Sismondi’scritique of 1819 had been an historical event, but Rodbertus’ideas of reform, even on their first appearance, were a miserableregression—still more so on their subsequent reiteration.

In the controversy between Sismondi on the one hand andSay and Ricardo on the other, one party proved that accumulationwas impossible because of the crises, and therefore warnedagainst full development of the productive forces. The otherparty proved that crises were impossible and advocated an unlimiteddevelopment of accumulation. Though all argued fromwrong premises, each was logically consistent.

v. Kirchmann and Rodbertus both started, were bound tostart, from the fact of crises. Here the problem of enlarged reproductionof aggregate capital, the problem of accumulation, wascompletely identified with the problem of crises and side-trackedin an attempt to find a remedy for the crises, although thehistorical experience of fifty years had shown all too clearly thatcrises, as witnessed by their periodical recurrence, are a necessaryphase in capitalist reproduction. One side now sees theremedy in the complete consumption of the surplus value by thecapitalist, that is to say in refraining from accumulation, theother in stabilisation of the rate of surplus value by legislativemeasures which comes to the same thing, i.e. renouncingaccumulation altogether. This special fad of Rodbertus’ sprangfrom his fervent and explicit belief in an unlimited capitalistexpansion of the productive forces and of wealth, withoutaccumulation of capital. At a time when capitalist productionwas developed to a degree which was soon to enable Marx tomake his fundamental analysis, the last attempt of bourgeoiseconomics to cope with the problem of reproduction degeneratedinto absurd and puerile Utopianism.

SECTION TWO

HISTORICAL EXPOSITIONOF THE PROBLEM

CHAPTER XVIII

A NEW VERSION OF THE PROBLEM

The third controversy about capitalist accumulation takesplace in an historical setting quite different from that ofthe two earlier ones. The time now is the period from thebeginning of the eighties to the middle of the nineties, the sceneRussia. In Western Europe, capitalism had already attainedmaturity. The rose-coloured classical view of Smith and Ricardoin a budding bourgeois economy had long since vanished ...the self-interested optimism of the vulgarian Manchester doctrineof harmony had been silenced by the devastating impactof the world collapse in the seventies, and under the heavyblows of a violent class struggle that blazed up in all capitalistcountries after the sixties. Even that harmony patched up withsocial reformism which had its hey-day after the early eighties,especially in Germany, soon ended in a hangover. The trial oftwelve years’ special legislation against the Social DemocraticParty had brought about bitter disillusionment, and ultimatelydestroyed all the veils of harmony, revealing the cruel capitalistcontradictions in their naked reality. Since then, optimism hadonly been possible in the camp of the rising working class and itstheorists. This was admittedly not optimism about a natural, orartificially established equilibrium of capitalist economy, orabout the eternal duration of capitalism, but rather the convictionthat capitalism, by mightily furthering the development ofthe productive forces, and in virtue of its inherent contradictions,would provide an excellent soil for the historical progress ofsociety towards new economic and social forms. The negative,depressing tendency of the first stage of capitalism, at one timerealised by Sismondi alone and still observed by Rodbertus aslate as the forties and fifties, is compensated by a tendencytowards elation: the hopeful and victorious striving of theworkers for ascendancy in their trade-union movement and bypolitical action.

[Pg 272]Such was the setting in Western Europe. In the Russia of thattime, however, the picture was different indeed. Here, theseventies and eighties represent in every respect a period oftransition, a period of internal crises with all its agonies. Bigindustry only now staged its real entry, fostered by the period ofhigh protective tariffs. In particular, the introduction of a tariffon gold at the Western frontier in 1877 was a special landmarkin the absolutist government’s new policy of forcing the growthof capitalism. ‘Primitive accumulation’ of capital flourishedsplendidly in Russia, encouraged by all kinds of state subsidies,guarantees, premiums and government orders. It earned profitswhich would already seem legendary to the West. Yet thepicture of internal conditions in contemporary Russia was anythingbut attractive and auspicious. On the plains, the declineand disintegration of rural economy under the pressure ofexploitation by the Exchequer and the monetary system causedterrible conditions, periodical famines and peasant risings. Inthe towns, again, the factory proletariat had not yet been consolidated,either socially or mentally, into a modern workingclass. For the greater part, it was still closely connected withagriculture, and remained semi-rural, particularly in the largeindustrial parts of Moscow-Vladimir, the most important centreof the Russian textile industry. Accordingly, primitive forms ofexploitation were countered by primitive measures of defence.Not until the early eighties did the spontaneous factory revoltsin the Moscow district with their smashing up of machines providethe impetus for the first rudiments of factory legislation inthe Czarist Empire.

If the economic aspect of Russian public life showed at everystep the harsh discords of a period of transition, there was acorresponding crisis in intellectual life. ‘Populism’, the indigenousbrand of Russian socialism, theoretically grounded inthe peculiarities of the Russian agrarian constitution, was politicallyfinished with the failure of the terrorist party of ‘NarodnayaVolya’, its extreme revolutionary exponent. The firstwritings of George Plekhanov, on the other hand, which were topave the way in Russia for Marxist trains of thought, had onlybeen published in 1883 and 1885, and for about a decade theyseemed to have little influence. During the eighties and up to thenineties the mental life of the Russian, and in particular of the[Pg 273]socialist intelligentsia with their tendency towards opposition,was dominated by a peculiar mixture of ‘indigenous’ ‘populist’remnants and random elements of theoretical Marxism. Themost remarkable feature of this mixture was scepticism as to thepossibility of capitalist development in Russia.

At an early date, the Russian intelligentsia had been preoccupiedwith the question whether Russia should follow theexample of Western Europe and embark on capitalist development.At first, they noticed only the bleak aspects of capitalismin the West, its disintegrating effects upon the traditional patriarchalforms of production and upon the prosperity and assuredlivelihood for the broad masses of the population. As againstthat, the Russian rural communal ownership in land, the famousobshchina, seemed to offer a short-cut to the blessed land ofsocialism, a lead direct to a higher social development of Russia,without the capitalist phase and its attendant misery as experiencedin Western Europe. Would it be right to fling away thisfortunate and exceptional position, this unique historical opportunity,and forcibly transplant capitalist production to Russiawith the help of the state? Would it be right to destroy the systemof rural holdings and production, and open the doors wide toproletarisation, to misery and insecurity of existence for thetoiling masses?

The Russian intelligentsia was preoccupied with this fundamentalproblem ever since the Agrarian Reform, and evenearlier, since Hertzen, and especially since Chernishevski. Thiswas the wholly unique world view of ‘populism’ in a nutshell.An enormous literature was created in Russia by this intellectualtendency ranging from the avowedly reactionary doctrinesof the Slavophiles to the revolutionary theory of theterrorist party. On the one hand, it encouraged the collection ofvast material by separate inquiries into the economic forms ofRussian life, into ‘national production’ and its singular aspects,into agriculture as practised by the peasant communes, into thedomestic industries of the peasants, theartel, and also into themental life of the peasants, the sects and similar phenomena.On the other hand, a peculiar type ofbelles lettres sprang up asthe artistic reflection of the contradictory social conditions, thestruggle between old and new ways which beset the mind atevery step with difficult problems. Finally, in the seventies and[Pg 274]eighties, a peculiarly stuffy philosophy of history sprang upfrom the same root and found its champions in Peter Lavrov,Nicolai Mikhailovski, Professor Kareyev and V. Vorontsov. Itwas the ‘subjective method in sociology’ which declared ‘criticalthought’ to be the decisive factor in social development, orwhich, more precisely, sought to make a down-at-heel intelligentsiathe agent of historical progress.

Here we are interested only in one aspect of this wide fieldwith its many ramifications,viz: the struggle of opinions regardingthe chances of capitalist development, and even then only inso far as these were based upon general reflections on the socialconditions of the capitalist mode of production, since these latterwere also to play a big part in the Russian controversial literatureof the eighties and nineties.

The point at issue was to begin with Russian capitalism andits prospects, but this, of course, led further afield to the wholeproblem of capitalist development. The example and the experiencesof the West were adduced as vital evidence in this debate.

One fact was of decisive importance for the theoretical contentof the discussion that followed: not only was Marx’s analysisof capitalist production as laid down in the first volume ofCapital already common property of educated Russia, but thesecond volume, too, with its analysis of the reproduction ofcapital as a whole had already been published in 1885. Thisgave a fundamentally new twist to the discussion. No more didthe problem of crises obscure the real crux of the problem: forthe first time, the argument centred purely in the reproductionof capital as a whole, in accumulation. Nor was the analysisbogged any longer by an aimless fumbling for the concepts ofincome and of individual and aggregate capital. Marx’s diagramof social reproduction had provided a firm foothold. Finally, theissue was no longer betweenlaissez-faire and social reform, butbetween two varieties of socialism. The petty-bourgeois andsomewhat muddled ‘populist’ brand of Russian socialists stoodfor scepticism regarding the possibility of capitalist development,much in the spirit of Sismondi and, in part, of Rodbertus,though they themselves frequently cited Marx as their authority.Optimism, on the other hand, was represented by theMarxist school in Russia. Thus the setting of the stage had beenshifted completely.

[Pg 275]One of the two champions of the ‘populist’ movement,Vorontsov, known in Russia mainly under thenom de plume V. V.,(his initials), was an odd customer. His economics were completelymuddled, and as an expert on theory he cannot be takenseriously at all. The other, Nikolayon (Danielson), however,was a man of wide education, and thoroughly conversant withMarxism. He had edited the Russian translation of the firstvolume ofCapital and was a personal friend of Marx andEngels, with both of whom he kept up a lively correspondence(published in the Russian language in 1908). Nevertheless it wasVorontsov who influenced public opinion among the Russianintelligentsia in the eighties, and Marxists in Russia had to fighthim above all. As for our problem: the general prospects ofcapitalist development, a new generation of Russian Marxists,who had learned from the historical experience and knowledgeof Western Europe, joined forces with George Plekhanov inopposition to the above-mentioned two representatives ofscepticism in the nineties. They were amongst others ProfessorKablukov, Professor Manuilov, Professor Issayev, ProfessorSkvortsov, Vladimir Ilyin, Peter v. Struve, Bulgakov, and ProfessorTugan Baranovski. In the further course of our investigationwe shall, however, confine ourselves to the last three ofthese, since every one of them furnished a more or less finishedcritique of this theory on the point with which we are hereconcerned. This battle of wits, brilliant in parts, which kept thesocialist intelligentsia spellbound in the nineties and was onlybrought to an end by the walkover of the Marxist school,officially inaugurated the infiltration into Russian thought ofMarxism as an economico-historical theory. ‘Legalist’ Marxismat that time publicly took possession of the Universities, theReviews and the economic book market in Russia—with allthe disadvantages of such a position. Ten years later, whenthe revolutionary risings of the proletariat demonstrated in thestreets the darker side of this optimism about capitalist development,none of this Pleïad of Marxist optimists, with but a singleexception, was to be found in the camp of the proletariat.

CHAPTER XIX

VORONTSOV AND HIS ‘SURPLUS’

The representatives of Russian ‘populism’ were convincedthat capitalism had no future in Russia, and this convictionbrought them to the problem of capitalist reproduction.V. V. laid down his theories on this point in a series ofarticles in the reviewPatriotic Memoirs and in other periodicalswhich were collected and published in 1882 under the titleThe Destiny of Capitalism in Russia. He further dealt with theproblem in ‘The Commodity Surplus in the Supply of theMarket’,[277] ’Militarism and Capitalism’,[278]Our Trends,[279] and finallyinOutlines of Economic Theory.[280] It is not easy to determineVorontsov’s attitude towards capitalist development in Russia.He sided neither with the purely slavophil theory whichdeduced the perversity and perniciousness of capitalism forRussia from the ‘peculiarities’ of the Russian economic structureand a specifically Russian ‘national character’, nor with theMarxists who saw in capitalist development an unavoidablehistorical stage which is needed to clear the way towards socialprogress for Russian society, too. Vorontsov for his part simplyasserts that denunciation and acclamation of capitalism areequally futile because, having no roots in Russia, capitalismis just impossible there and can have no future. The essentialconditions of capitalist development are lacking in Russia, andlove’s labour’s lost if the state tries to promote it artificially—onemight as well spare these efforts together with the heavysacrifices they entail. But if we look into the matter more closely,Vorontsov’s thesis is not nearly so uncompromising. For if wepay attention to the fact that capitalism does not mean only theaccumulation of capital wealth but also that the small produceris reduced to the proletarian level, that the labourer’s livelihood[Pg 277]is not assured and that there are periodical crises, then Vorontsovwould by no means deny that all these phenomena exist inRussia. On the contrary, he explicitly says in his preface toThe Destiny of Capitalism in Russia: ‘Whilst I dispute the possibilityof capitalism as a form of production in Russia, I do notintend to commit myself in any way as to its future as a form ordegree of exploiting the national resources.’

Vorontsov consequently is of the opinion that capitalism inRussia merely cannot attain the same degree of maturity as inthe West, whereas the severance of the immediate producerfrom the means of production might well be expected underRussian conditions. Vorontsov goes even further: he does notdispute at all that a development of the capitalist mode of productionis quite possible in various branches of production, andeven allows for capitalist exports from Russia to foreign markets.Indeed he says in his essay on ‘The Commodity Surplus in theSupply of the Market’ that ‘in several branches of industry,capitalist production develops very quickly’[281] [in the Russianmeaning of the term, of course—R. L.].

‘It is most probable that Russia, just like any other country,enjoys certain natural advantages which enable her to act as asupplier of certain kinds of commodities on foreign markets. It isextremely possible that capital can profit by this fact and layhands upon the branches of production concerned—that is tosay the (inter)national division of labour will make it easy forour capitalists to gain a foothold in certain branches. This,however, is not the point. We do not speak of a merely incidentalparticipation of capital in the industrial organisation of thecountry, but ask whether it is likely that the entire productionof Russia can be put on a capitalist basis.’[282]

Put in this form, Vorontsov’s scepticism looks quite differentfrom what might have been expected at first. He doubts whetherthe capitalist mode of production could ever gain possession ofthe entire production in Russia; but then, capitalism has not sofar accomplished this feat in any country of the world, not evenin England. Such a brand of scepticism as to the future ofcapitalism appears at a glance quite international in outlook.And indeed, Vorontsov’s theory here amounts to a quite[Pg 278]general reflection on the nature and the essential conditions ofcapitalism; it is based upon a general theoretical approach tothe reproductive process of social capital as a whole. Vorontsovgives the following very clear formulation of the specific relationsbetween the capitalist mode of production and the problem ofmarkets:

‘The (inter)national division of labour, the distribution of allbranches of industry among the countries taking part in internationalcommerce, is quite independent of capitalism.

‘The market which thus comes into being, the demand for theproducts of different countries resulting from such a division oflabour among the nations, has intrinsically nothing in commonwith the market required by the capitalist mode of production....The products of capitalist industry come on the market foranother purpose; the question whether all the needs of thecountry are satisfied is irrelevant to them, and the entrepreneurdoes not necessarily receive in their stead another material productwhich may be consumed. Their main purpose is to realisethe surplus value they contain. What, then, is this surplus valuethat it should interest the capitalist for its own sake? From ourpoint of view, it is the surplus of production over consumptioninside the country. Every worker produces more than he himselfcan consume, and all these surplus items accumulate in a fewhands; their owners themselves consume them, exchangingthem for the purpose against the most variegated kinds ofnecessities and luxuries. Yet eat, drink and dance as much asthey like—they will not be able to squander the whole of thesurplus value: a considerable remnant will be left over, of whichthey have to dispose somehow even though they cannot exchangeit for other products. They must convert it into money,since it would otherwise just go bad. Since there is no one insidethe country on whom the capitalists could foist this remnant, itmust be exported abroad, and that is why foreign markets areindispensable to countries embarking on the capitalist venture.’[283]

The above is a literal translation, showing all the peculiaritiesof Vorontsov’s diction, so that the reader may have a taste ofthis brilliant Russian theorist with whom one can spend momentsof sheer delight.

Later, in 1895, Vorontsov summarised the same views in his[Pg 279]bookOutlines of Economic Theory now claiming our attention.Here he takes a stand against the views of Say and Ricardo, andin particular also against John Stuart Mill who denied the possibilityof general over-production. In the course of his argumenthe discovers something no one had known before: he has laidbare the source of all errors the classical school made about theproblem of crises. This mistake lies in a fallacious theory of thecosts of production to which bourgeois economists are addicted.No doubt, from the aspect of the costs of production (whichaccording to Vorontsov’s equally unheard-of assumption do notcomprise profits), both profit and crises are unthinkable andinexplicable. But we can only appreciate this original thoughtto the full in the author’s own words:

‘According to the doctrine of bourgeois economists, the valueof a product is determined by the labour employed in its manufacture.Yet bourgeois economists, once they have given thisdetermination of value, immediately forget it and base theirsubsequent explanation of the exchange phenomena upon adifferent theory which substitutes “costs of production” forlabour. Thus two products are mutually exchanged in suchquantities that the costs of production are equal on both sides.Such a view of the process of exchange indeed leaves no roomfor a commodity surplus inside the country. Any product of aworker’s annual labour must, from this point of view, representa certain quantity of material of which it is made, of tools whichhave been used in its manufacture, and of the products whichserved to maintain the workers during the period of production.It [presumably the product—R. L.] appears on the market inorder to change its use-form, to reconvert itself into objects, intoproducts for the workers and the value necessary for renewingthe tools. As soon as it is split up into its component parts, theprocess of reassembling, the productive process, will begin, inthe course of which all the values listed above will be consumed.In their stead, a new product will come into being which is theconnecting link between past and future consumption.’

From this perfectly unique attempt to demonstrate social reproductionas a continuous process in the light of the costs ofproduction, the following conclusion is promptly drawn: Consideringthus the aggregate bulk of a country’s products, weshall find no commodity surplus at all over and above the[Pg 280]demand of society; an unmarketable surplus is therefore impossiblefrom the point of view of a bourgeois economic theoryof value.’

Yet, after having eliminated capitalist profit from the costs ofproduction by an extremely autocratic manhandling of thebourgeois theory of value, Vorontsov immediately presents thisdeficiency as a great discovery: ‘The above analysis, however,reveals yet another feature in the theory of value prevalent oflate: it becomes evident that this theory leaves no room forcapitalist profits.’

The argument that follows is striking in its brevity andsimplicity: ‘Indeed, if I exchange my own product, representinga cost of production of 5 roubles, for another product ofequal value, I receive only so much as will be sufficient to covermy expense, but for my abstinence [literally so—R. L.] I shallget nothing.’

‘Thus it is proved on a strictly logical development of theideas held by bourgeois economists that the destiny of the commoditysurplus on the market and that of capitalist profit isidentical. This circumstance justifies the conclusion that bothphenomena are interdependent, that the existence of one is acondition of the other, and indeed, so long as there is no profit,there is no commodity surplus.... It is different if the profitcomes into being inside the country. Such profit is not originallyrelated to production; it is a phenomenon which is connectedwith the latter not by technical and natural conditions but byan extraneous social form. Production requires for its continuation... only material, tools, and means of subsistence for theworkers, therefore as such it consumes only the correspondingpart of the products: other consumers must be found for thesurplus which makes up the profit, and for which there is noroom in the permanent structure of industrial life, in production—consumers,namely, who are not organically connected withproduction, who are fortuitous to a certain extent. The necessarynumber of such consumers may or may not be forthcoming,and in the latter case there will be a commodity surplus on themarket.’[284]

[Pg 281]Well content with the ‘simple’ enlightenment, by which hehas turned the surplus product into an invention of capital andthe capitalist into a ‘fortuitous’ consumer who is ‘not organicallyconnected with capitalist production’, Vorontsov now turns tothe crises. On the basis of Marx’s ‘logical’ theory of the value oflabour which he claims to ‘employ’ in his later works, heexpounds them as an immediate result of the surplus value, asfollows:

‘If the working part of the population consumes what entersinto the costs of production in form of the wages for labour, thecapitalists themselves must destroy [literally so—R. L.] thesurplus value, excepting that part of it which the marketrequires for expansion. If the capitalists are in a position to doso and act accordingly, there can be no commodity surplus; ifnot, over-production, industrial crises, displacement of theworkers from the factories and other evils will result.’

According to Vorontsov, however, it is ‘the inadequate elasticityof the human organism which cannot enlarge its capacity to consumeas rapidly as the surplus value is increasing’, which is inthe end responsible for these evils. He repeatedly expresses thisingenious thought as follows: ‘The Achilles heel of capitalistindustrial organisation thus lies in the incapacity of the entrepreneursto consume the whole of their income.’

Having thus ‘employed’ Marx’s ‘logical’ version of Ricardo’stheory of value, Vorontsov arrives at Sismondi’s theory of criseswhich he adopts in as crude and simplified a form as possible.He believes, of course, that he is adopting the views of Rodbertusin reproducing those of Sismondi. ‘The inductive methodof research’, he declares triumphantly, ‘has resulted in the verysame theory of crises and of pauperism which had been objectivelystated by Rodbertus.’[285]

It is not quite clear what Vorontsov means by an ‘inductivemethod of research’ which he contrasts with the objectivemethod—since all things are possible to Vorontsov, he may conceivablymean Marx’s theory. Yet Rodbertus, too, was not toemerge unimproved from the hands of the original Russianthinker. Vorontsov corrects Rodbertus’ theory merely in so faras he eliminates the stabilisation of the wage rate in accordancewith the value of the aggregate product which, to Rodbertus,[Pg 282]had been the pivot of his whole system. According to Vorontsov,this measure against crises is a mere palliative, since ‘the immediatecause of the above phenomena (over-production, unemployment,etc.) is not that the working classes receive toosmall a share of the national income, but that the capitalist classcannot possibly consume all the products which every year fallto their share.’[286]

Yet, as soon as he has refuted Rodbertus’ reform of the distributionof incomes, Vorontsov, with that ‘strictly logical’consistency so peculiar to him, ultimately arrives at the followingforecast for the future destiny of capitalism: ‘If industrialorganisation which prevails in W. Europe is to prosper andflourish further still, it can only do so provided that some meanswill be found to destroy [verbatim—R. L.] that portion of thenational income which falls to the capitalists’ share over andabove their capacity to consume. The simplest solution of thisproblem will be an appropriate change in the distribution of theaggregate income among those who take part in production. Ifthe entrepreneurs would retain for themselves only so much ofall increase of the national income as they need to satisfy alltheir whims and fancies, leaving the remainder to the workingclass, the mass of the people, then the régime of capitalism wouldbe assured for a long time to come.’[287]

The hash of Ricardo, Marx, Sismondi and Rodbertus thus istopped with the discovery that capitalist production could beradically cured of over-production, that it could ‘prosper andflourish’ in all eternity, if the capitalists would refrain fromcapitalising their surplus value and would make a free gift tothe working class of the corresponding part of the surplus value.Meanwhile the capitalists, until they have become sensibleenough to accept Vorontsov’s good advice, employ other meansfor the annual destruction of a part of their surplus value.Modern militarism, amongst others, is one of these appropriatemeasures—and this precisely to the extent to which the bills ofmilitarism are footed by the capitalists’ income—for Vorontsovcan be counted upon to turn things upside down—and not bythe working masses. A primary remedy for capitalism, however,is foreign trade which again is a sore spot in Russian capitalism.[Pg 283]As the last to arrive at the table of the world market, Russiancapitalism fares worst in the competition with older capitalistcountries and thus lacks both prospects as to foreign marketsand the most vital conditions of existence. Russia remains the‘country of peasants’, a country of ‘populist’ production.

‘If all this is correct,’ Vorontsov concludes his essay on ‘TheCommodity Surplus in the Supply of the Market’, ‘then capitalismcan play only a limited part in Russia. It must resign fromthe direction of agriculture, and its development in the industrialsphere must not inflict too many injuries upon the domesticindustries which under our economic conditions are indispensableto the welfare of the majority of the population. If thereader would comment that capitalism might not accept sucha compromise, our answer will be: so much the worse forcapitalism.’

Thus Vorontsov ultimately washes his hands of the wholething, declining for his part all responsibility for the furtherfortunes of economic development in Russia.

CHAPTER XX

NIKOLAYON

The second theorist of populist criticism, Nikolayon,brings quite a different economic training and knowledgeto his work. One of the best-informed experts onRussian economic relations, he had already in 1880 attractedattention by his treatise on the capitalisation of agricultural incomes,which was published in the reviewSlovo. Thirteen yearslater, spurred on by the great Russian famine of 1891, hepursued his inquiries further in a book entitledOutlines of OurSocial Economy Since the Reform. Here he gives a detailed exposition,fully documented by facts and figures, of how capitalismdeveloped in Russia, and on this evidence proceeds to show thatthis development is the source of all evil, and so of the famine,also, so far as the Russian people are concerned. His views aboutthe destiny of capitalism in Russia are grounded in a definitetheory about the conditions of the development of capitalist productionin general, and it is this with which we must now deal.

Since the market is of decisive importance for the capitalistmode of economy, every capitalist nation tries to make sure of aslarge a market as possible. In the first place, of course, it relieson its home market. But at a certain level of development, thehome market is no longer sufficient for a capitalist nation, andthis for the following reasons: all that social labour newly producesin one year can be divided into two parts—the sharereceived by the workers in the form of wages, and that which isappropriated by the capitalists. Of the first part, only so manymeans of subsistence as correspond, in value, to the sum total ofthe wages paid within the country can be withdrawn from circulation.Yet capitalist economy decidedly tends to depress thispart more and more. Its methods are a longer working day,stepping up the intensity of labour, and increasing output bytechnical improvements which enable the substitution of femaleand juvenile for male labour and in some cases displace adult[Pg 285]labour altogether. Even if the wages of the workers still employedare rising, such increase can never equal the savings of thecapitalists resulting from these changes. The result of all this isthat the working class must play an ever smaller part as buyerson the home market. At the same time, there is a further change:capitalist production gradually takes over even the trades whichprovided additional employment to an agricultural people;thus it deprives the peasants of their resources by degrees, sothat the rural population can afford to buy fewer and fewerindustrial products. This is a further reason for the continualcontraction of the home market. As for the capitalist class, wesee that this latter is also unable to realise the entire newlycreated product, though for the opposite reason. However largethe requirements of this class, the capitalists will not be able toconsume the entire surplus product in person. First, becausepart of it is needed to enlarge production, for technical improvementswhich, to the individual entrepreneur, will be a necessarycondition of existence in a competitive society. Secondly,because an expanding capitalist production implies an expansionin those branches of industry which produce means ofproduction (e.g. the mining industry, the machine industry andso forth) and whose products from the very beginning take ause-form that is incapable of personal consumption and canonly function as capital. Thirdly and lastly, the higher labourproductivity and capital savings that can be achieved by massproduction of cheap commodities increasingly impel societytowards mass production of commodities which cannot all beconsumed by a mere handful of capitalists.

Although one capitalist can realise his surplus value in thesurplus product of another capitalist andvice versa, this is onlytrue for products of a certain branch, for consumer goods. However,the incentive of capitalist production is not the satisfactionof personal wants, and this is further shown by the progressivedecline in the production of consumer as compared to that ofproducer goods.

‘Thus we see that the aggregate product of a capitalist nationmust greatly exceed the requirements of the whole industrialpopulation employed, in the same way as each individual factoryproduces vastly in excess of the requirements of both itsworkers and the entrepreneur, and this is entirely due to the[Pg 286]fact that the nation is a capitalist nation, because the distributionof resources within the society does not aim to satisfy thereal wants of the population but only the effective demand. Justas an individual factory-owner could not maintain himself as acapitalist even for a day if his market were confined to therequirements of his workers and his own, so the home market ofa developed capitalist nation must also be insufficient.’

At a certain level, capitalist development thus has the tendencyto impede its own progress. These obstacles are ultimatelydue to the fact that progressive labour productivity, involvingthe severance of the immediate producer from the means ofproduction, does not benefit society as a whole, but only theindividual entrepreneur; and the mass of labour power and men-hourswhich has been ‘set free’ by this process becomes redundantand thus is not only lost to society but will become aburden to it. The real wants of the masses can only be satisfiedmore fully in so far as there can be an ascendancy of a ‘populist’mode of production based upon the union between the producerand his means of production. It is the aim of capitalism, however,to gain possession of just these spheres of production, andto destroy in the process the main factor which makes for itsown prosperity. The periodical famines in India, for instance,recurring at intervals of ten or eleven years, were thus amongthe causes of periodical industrial crises in England. Any nationthat sets out on capitalist development will sooner or later comeup against these contradictions inherent in this mode of production.And the later a nation embarks on the capitalist venture,the more strongly will these contradictions make themselvesfelt, since, once the home market has been saturated, no substitutecan be found, the outside market having already beenconquered by the older competing countries.

The upshot of it all is that the limits of capitalism are set bythe increasing poverty born of its own development, by the increasingnumber of redundant workers deficient in all purchasingpower. Increasing labour productivity which can rapidlysatisfy every effective demand of society corresponds to the increasingincapacity of ever broader masses of the population tosatisfy their most vital needs; on the one hand, a glut of goodsthat cannot be sold—and on the other, large masses who lackthe bare necessities.

[Pg 287]These are Nikolayon’s general views.[288] He knows his Marx, wesee, and has turned the two first volumes ofCapital to excellentuse. And still, the whole trend of his argument is genuinely Sismondian.It is capitalism itself which brings about a shrinkinghome market since it impoverishes the masses; every calamity ofmodern society is due to the destruction of the ‘populist’ modeof production, that is to say the destruction of small-scale enterprise.That is his main theme. More openly even than Sismondi,Nikolayon sets the tenor of his critique by an apotheosis ofsmall-scale enterprise, this sole approach to grace.[289] The aggregatecapitalist product cannot, in the end, be realised withinthe society, this can only be done with recourse to outsidemarkets. Nikolayon here comes to the same conclusion asVorontsov, in spite of a quite different theoretical point ofdeparture. Applied to Russia, it is the economic scientificground for a sceptical attitude towards capitalism. Capitalistdevelopment in Russia has been without access to foreignmarkets from the first, it could only show its worst aspects—ithas impoverished the masses of the people. In consequence, itwas a ‘fatal mistake’ to promote capitalism in Russia.

On this point, Nikolayon fulminates like a prophet of the OldTestament: ‘Instead of keeping to the tradition of centuries,instead of developing our old inherited principle of a close connectionbetween the immediate producer and his means ofproduction, instead of usefully applying the scientific achievementsof W. Europe to their forms of production based on thepeasants’ ownership of their means of production, instead of increasingtheir productivity by concentrating the means of productionin their hands, instead of benefiting, not by the formsof production in W. Europe, but by its organisation, its powerfulco-operation, its division of labour, its machinery, etc., etc.—insteadof developing the fundamental principle of a landowningpeasantry and applying it to the cultivation of the land bythe peasants, instead of making science and its applicationwidely accessible to the peasants—instead of all this, we havetaken the opposite turning. We have failed to prevent the[Pg 288]development of capitalist forms of production, although theyare based on the expropriation of the peasants; on the contrary,we have promoted with all our might the upsetting of ourentire economic life which resulted in the famine of 1891.’

Though the evil is much advanced, it is not too late even nowto retrace our steps. On the contrary, a complete reform ofeconomic policy is just as urgently needed for Russia in view ofthe threatening proletarisation and collapse, as Alexander’sreforms after the Crimean war were necessary in their time.

Now a social reform as advocated by Nikolayon is completelyUtopian. His attitude exhibits an even more blatantpetty-bourgeois and reactionary bias than Sismondi’s ever did,considering that the Russian ‘populist’ writes after a lapse ofseventy years. For in his opinion, the oldobshchina, the ruralcommunity founded on the communal ownership of the soil, isthe raft to deliver Russia from the flood of capitalism. On it,the discoveries of modern big industry and scientific techniqueare to be grafted by measures which remain his own secret—sothat it can serve as the basis of a ‘socialised’ higher form of production.Russia can choose no other alternative: either she turnsher back upon capitalist development, or she must resign herselfto death and decay.[290]

[Pg 289]After a crushing criticism of capitalism Nikolayon thus endsup with the same old ‘populist’ panacea which had as early asthe fifties, though at that time with greater justification, beenhailed as the ‘peculiarly Russian’ guarantee of a higher socialdevelopment, although its reactionary character as a lifelessrelic of ancient institutions had been exposed in Engels’FluechtlingsliteraturinVolksstaat (1875). Engels wrote at the time:

‘A further development of Russia on bourgeois lines wouldgradually destroy communal property there too, quite apartfrom any interference of the Russian government “with theknout and with bayonets” (as the revolutionary populistsimagined). Under the pressure of taxes and usury, communallandownership is no longer a privilege, it becomes an irksomechain. The peasants frequently run away from it, either with orwithout their families, to seek their living as itinerant labourers,and leave the land behind. We see that communal ownership inRussia has long since passed its flower and there is every indicationthat its decay is approaching.’

[Pg 290]With these words, Engels hits right on the target of theobshchina problem—eighteen years before the publication ofNikolayon’s principal work. If Nikolayon subsequently with renewedcourage again conjured up the ghost of theobshchina, itwas a bad historical anachronism inasmuch as about a decadelater theobshchina was given an official burial by the state. Theabsolutist government which had for financial reasons triedduring half a century artificially to keep the machinery of therural community going was compelled to give up this thanklesstask on its own accord. The agrarian problem soon made itclear how far the old ‘populist’ delusion was lagging behind theactual course of economic events, and conversely, how powerfullycapitalist development in Russia, mourned and cursed asstill-born, could demonstrate with lightning and thunder itscapacity to live and to multiply. Once again, and for the lasttime, this turn of events demonstrates in quite a different historicalsetting how a social critique of capitalism, which begins[Pg 291]by doubting its capacity for development, must by a deadlylogic lead to a reactionary Utopianism—both in the France of1819 and in the Russia of 1893.[291]

CHAPTER XXI

STRUVE’S ‘THIRD PERSONS’AND ‘THREE WORLD EMPIRES’

We now turn to the criticism of the above opinions asgiven by the Russian Marxists.

In 1894, Peter v. Struve who had already given adetailed appraisal of Nikolayon’s book in an essay ‘On CapitalistDevelopment in Russia’,[292] published a book in Russian,[293] criticisingthe theories of ‘populism’ from various aspects. In respectof our present problem, however, he mainly confines himself toproving, against both Vorontsov and Nikolayon, that capitalismdoes not cause a contraction of the home market but, on thecontrary, an expansion. There can be no doubt that Nikolayonhas made a blunder—the same that Sismondi had made. Theyeach describe only a single aspect of the destructive process, performedby capitalism on the traditional forms of production bysmall enterprise. They saw only the resulting depression ofgeneral welfare, the impoverishment of broad strata of the population,and failed to notice that economic aspect of the processwhich entails the abolition of natural economy and the substitutionof a commodity economy in rural districts. And this isas much as to say that, by absorbing further and further sectionsof formerly independent and self-sufficient producers into itsown sphere, capitalism continuously transforms into commoditybuyers ever new strata of people who had not before bought itscommodities. In fact, the course of capitalist development isjust the opposite of that pictured by the ‘populists’ on the modelof Sismondi. Capitalism, far from ruining the home market,really sets about creating it, precisely by means of a spreadingmoney economy.

Struve in particular refutes the theory that the surplus valuecannot possibly be realised on the home market. He argues as[Pg 293]follows: The conviction that a mature capitalist society consistsexclusively of entrepreneurs and workers forms the basis ofVorontsov’s theory, and Nikolayon himself operates with thisconcept throughout. From this point of view, of course, therealisation of the capitalist aggregate product seems incomprehensible.And Vorontsov’s theory is correct in so far as it statesthe fact that neither the capitalists’ nor the workers’ consumptioncan realise the surplus value, so that the existence of ‘thirdpersons’ must be presumed.[294] But then, is it not beyond anydoubt that some such ‘third persons’ exist in every capitalistsociety? The idea of Vorontsov and Nikolayon is pure fiction‘which cannot advance our understanding of any historical processwhatever by a hair’s breadth’.[295] There is no actual capitalistsociety, however highly developed, composed exclusively ofcapitalists and workers.

‘Even in England and Wales, out of a thousand self-supportinginhabitants, 543 are engaged in industry, 172 in commerce,140 in agriculture, 81 in casual wage labour, and 62 in the CivilService, the liberal professions and the like.’

Even in England, then, there are large numbers of ‘thirdpersons’, and it is they who, by their consumption, help torealise the surplus value in so far as it is not consumed by thecapitalists. Struve leaves it open whether these ‘third persons’consume enough to realise all surplus value—however that maybe, ‘the contrary would have to be proved’.[296] This cannot bedone, he claims, for Russia, that vast country with an immensepopulation. She, in fact, is in the fortunate position to be ableto dispense with foreign markets. In this—and here Struve dipsinto the intellectual treasures of Professors Wagner, Schaeffle,and Schmoller—she enjoys the same privileges as the UnitedStates of America. ‘If the example of the N. American Unionstands for anything, it is proof of the fact that under certain circumstancescapitalist industry can attain a very high level ofdevelopment almost entirely on the basis of the home market.’[297]

[Pg 294]The negligible amount of industrial exports from the U.S.A.in 1882 is mentioned in support of this statement which Struveformulates as a general doctrine: ‘The vaster the territory, andthe larger the population of a country, the less does that countryrequire foreign markets for its capitalist development.’ He infersfrom this, in direct opposition to the ‘populists’, ‘a more brilliantfuture (for Russia) than for the other countries’.

On the basis of commodity production, the progressivedevelopment of agriculture is bound to create a market wideenough to support the development of Russian industrial capitalism.This market would be capable of unlimited expansion, instep with the economic and cultural progress of the country, andtogether with the substitution of a monetary for a naturaleconomy. ‘In this respect, capitalism enjoys more favourableconditions in Russia than in other countries.’[298]

Struve paints a detailed and highly coloured picture of thenew markets which, thanks to the Trans-Siberian Railway, areopening up in Siberia, Central Asia, Asia Minor, Persia and theBalkans. But his prophetic zeal blinds him to the fact that heis no longer talking about the ‘indefinitely expanding’ homemarket but about specific foreign markets. In later years, hewas to throw in his lot, in politics too, with this optimisticRussian capitalism and its liberal programme of imperialistexpansion, for which he had laid the theoretical foundationswhen still a ‘Marxist’.

Indeed, the tenor of Struve’s argument is a fervent belief inthe unlimited capacity for expansion of capitalist production,but the economic foundation of this optimism is rather weak.He is somewhat reticent as to what he means by the ‘thirdpersons’ whom he considers the mainstay of accumulation, but[Pg 295]his references to English occupational statistics indicate that hehas in mind the various private and public servants, the liberalprofessions, in short the notoriousgrand public so dear to bourgeoiseconomists when they are completely at a loss. It is this‘great public’ of which Marx said that it serves as the explanationfor things which the economist cannot explain. It is obviousthat, if we categorically refer to consumption by the capitalistsand the workers, we do not speak of the entrepreneur as anindividual, but of the capitalist class as a whole, including theirhangers-on—employees, Civil Servants, liberal professions, andthe like. All such ‘third persons’ who are certainly not lacking inany capitalist society are, as far as economics is concerned, jointconsumers of the surplus value for the greater part, in so far,namely, as they are not also joint consumers of the wages oflabour. These groups can only derive their purchasing powereither from the wage of the proletariat or from the surplusvalue, if not from both; but on the whole, they are to be regardedas joint consumers of the surplus value. It follows thattheir consumption is already included in the consumption ofthe capitalist class, and if Struve tries to reintroduce them to thecapitalists by sleight-of-hand as ‘third persons’ to save the situationand help to realise the surplus value, the shrewd profiteerwill not be taken in. He will see at once that this great public isnothing but his old familiar retinue of parasites who buy hiscommodities with money of his own providing. No, no, indeed!Struve’s ‘third persons’ will not do at all.

Struve’s theory of foreign markets and their significance forcapitalist production is equally untenable. In this, he defers tothe mechanist approach of the ‘populists’ who, along with theprofessors’ textbooks, hold that a capitalist (European) countrywill first exploit the home market to the limit, and will onlylook to foreign markets when this is almost or completely exhausted.Then, following in the footsteps of Wagner, Schaeffleand Schmoller, Struve arrives at the absurd conclusion that acountry with vast territories and a large population can makeits capitalist production a ‘self-contained whole’ and rely indefinitelyon the home market alone.[299] In actual fact, capitalist[Pg 296]production is by nature production on a universal scale. Quitecontrary to the bookish decrees issued by German scholars, itis producing for a world market already from the wordgo. Thevarious pioneering branches of capitalist production in England,such as the textile, iron and coal industries, cast about formarkets in all countries and continents, long before the processof destroying peasants’ property, the decline of handicraft andof the old domestic industries within the country had come toan end. And again, is it likely that the German chemical orelectrotechnical industries would be grateful for the soberadvice not to work for five continents, as they have done fromthe beginning, but to confine themselves to the German homemarket which, being largely supplied from abroad, is evidentlyfar from exhausted in respect of a whole lot of other Germanindustries? Or that one should explain to the German machineindustry, it should not venture yet upon foreign markets, sinceGerman import statistics are visible proof that a good deal of[Pg 297]the demand in Germany for products of this branch is satisfiedby foreign supplies? No, this schematic conception of ‘foreigntrade’ does not help us at all to grasp the complexity of theworld market with its uncounted ramifications and differentshades in the division of labour. The industrial development ofthe U.S.A. who have already at the time of writing become adangerous rival to Britain both on the world market and evenin England herself, just as they have beaten German competition,e.g. in the sphere of electrotechnics, both in the worldmarket and in Germany herself, has given the lie to Struve’sinferences, already out-of-date when they were put on paper.

Struve also shares the crude view of the Russian ‘populists’who saw hardly more than a merchant’s sordid concern for hismarket in the international connections of capitalist economy,and its historical tendency to create a homogeneous livingorganism based on social division of labour as well as the countlessvariety of natural wealth and productive conditions of theglobe. Moreover he accepts the Three Empire fiction of Wagnerand Schmoller (the self-contained Empires of Great Britain,Russia and the U.S.A.) which completely ignores or artificiallyminimises the vital part played by an unlimited supply of meansof subsistence, of raw and auxiliary materials and of labourpower which is just as necessary for a capitalist industry computedin terms of a world market as the demand for finished products.Alone the history of the English cotton industry, a reflectionin miniature of the history of capitalism in general, spreadingover five continents throughout the nineteenth century,makes a mockery of the professors’ childish pretensions whichhave only one real significance: to provide the theoreticaljustification for the system of protective tariffs.

CHAPTER XXII

BULGAKOV AND HIS COMPLETIONOF MARX’S ANALYSIS

The second critic of ‘populist’ scepticism, S. Bulgakov, isno respecter of Struve’s ‘third persons’ and at oncedenies that they form the sheet-anchor for capitalistaccumulation.

‘The majority of economists before Marx’, he declares, ‘solvedthe problem by saying that some sort of “third person” isneeded, as adeus ex machina, to cut the Gordian knot, i.e. toconsume the surplus value. This part is played by luxury-lovinglandowners (as with Malthus), or by indulgent capitalists, oryet by militarism and the like. There can be no demand for thesurplus value without some such extraordinary mediators; adeadlock will be reached on the markets and the result will beover-production and crises.’[300]

‘Struve thus assumes that capitalist production in its development,too, may find its ultimate mainstay in the consumption ofsome fantastic sort of “third person”. But if this great public isessentially characterised as consuming the surplus value, whencedoes it obtain the means to buy?’[301]

For his part, Bulgakov centres the whole problem from thefirst in the analysis of the social aggregate product and its reproductionas given by Marx in the second volume ofCapital.He has a thorough grasp of the fact that he must start withsimple reproduction and must fully understand its working inorder to solve the question of accumulation. In this context, hesays, it is of particular importance to obtain a clear picture ofthe consumption of surplus value and wages in such branchesof production as do not turn out goods for consumption, andfurther, to understand fully the circulation of that portion of thesocial aggregate product which represents used-up constant[Pg 299]capital. This, he argues, is a completely new problem of whicheconomists had not even been aware before Marx brought itup. ‘In order to solve this problem, Marx divides all capitalisticallyproduced commodities into two great and fundamentallydifferent categories: the production of producer and consumergoods. There is more theoretical importance in this divisionthan in all previous squabbles on the theory of markets.’[302]

Bulgakov, we see, is an outspoken and enthusiastic supporterof Marx’s theory. The object of his study, as he puts it, is thusa critique of the doctrine that capitalism cannot exist withoutexternal markets. ‘For this purpose, the author has made use ofthe most valuable analysis of social reproduction given by Marxin volume ii ofCapital which for reasons unknown has scarcelybeen utilised in economic theory. Though this analysis cannotbe taken as fully completed, we are yet of opinion that even inits present fragmentary shape it offers an adequate foundationfor a solution of the market problem that differs from thatadopted by Messrs. Nikolayon, V. V. and others, and whichthey claim to have found in Marx.’[303]

Bulgakov gives the following formulation of his solutionwhich he has deduced from Marx himself: ‘In certain conditions,capitalism may exist solely by virtue of an internal market.It is not an inherent necessity peculiar to the capitalist mode ofproduction that the outside market be able to absorb the surplusof capitalist production. The author has arrived at this conclusionin consequence of his study of the above-mentionedanalysis of social reproduction.’

And now we are eager to hear the arguments Bulgakov hasbased on the above thesis.

At first sight, they prove surprisingly simple: Bulgakov faithfullyreproduces Marx’s well-known diagram of simple reproduction,adding comments which do credit to his insight. Hefurther cites Marx’s equally familiar diagram of enlarged reproduction—andthis indeed is the proof we have been so anxiousto find.

‘Consequent upon what we have said, it will not be difficultnow to determine the very essence of accumulation. The means-of-productiondepartment I must produce additional meansof production necessary for enlarging both its own production[Pg 300]and that of Department II. II, in its turn, will have to supplyadditional consumption goods to enlarge the variable capital inboth departments. Disregarding the circulation of money, theexpansion of production is reduced to an exchange of additionalproducts of I needed by II against additional products of IIneeded by I.’

Loyally following Marx’s deductions, Bulgakov does notnotice that so far his entire thesis is nothing but words. Hebelieves that these mathematicalformulæ solve the problem ofaccumulation. No doubt we can easily imagine proportions suchas those he has copied from Marx, andif there is expanding production,theseformulæ will apply. Yet Bulgakov overlooks theprincipal problem: who exactly is to profit by an expansion suchas that whose mechanism he examines? Is it explained just becausewe can put the mathematical proportions of accumulationon paper? Hardly, because just as soon as Bulgakov has declaredthe matter settled and goes on to introduce the circulation ofmoney into the analysis, he right away comes up against thequestion: where are I and II to get the money for the purchaseof additional products? When we dealt with Marx, time andagain the weak point in his analysis, the question really of consumersin enlarged reproduction, cropped up in a pervertedform as the question of additional money sources. Here Bulgakovquite slavishly follows Marx’s approach, accepting his misleadingformulation of the problem without noticing that it is notstraightforward, although he knows perfectly well that ‘Marxhimself did not answer this question in the drafts which wereused to compile the second volume ofCapital’. It should be allthe more interesting to see what answer Marx’s Russian pupilattempted to work out on his own.

‘The following solution’, Bulgakov says, ‘seems to us to correspondbest to Marx’s doctrine as a whole: The new variablecapital in money-form supplied by II for both departments hasits commodity equivalent in surplus value II. With reference tosimple reproduction, we have already seen that the capitaliststhemselves must throw money into circulation to realise theirsurplus value, money which ultimately reverts to the pocket ofthe very capitalist it came from. The quantity of money requiredfor the circulation of the surplus value is determined inaccordance with the general law of commodity circulation by[Pg 301]the value of the commodities that contained it, divided by theaverage amount of money turnover. This same law must applyhere; the capitalists of Department II must dispose of a certainamount of money for the circulation of their surplus value, andmust consequently possess certain money reserves. These reservesmust be ample enough for the circulation both of thatportion of the surplus value which represents the consumptionfund and of that which is to be accumulated as capital.’

Bulgakov further argues that it is immaterial to the questionhow much money is required to circulate a certain amount ofcommodities inside a country, whether or not some of thesecommodities contain any surplus value. ‘In answer to the generalquestion as to money sources inside the country, however,our solution is that the money is supplied by the producer ofgold.’[304]

If a country requires more money consequent upon an ‘expansionof production’, the production of gold will have to beincreased accordingly. So here we are again: the producer ofgold is again thedeus ex machina, just as he had been for Marx.In fact, Bulgakov has sadly disappointed us in the high hopeswe had of his new solution. His ‘solution’ of the problem doesnot go a step beyond Marx’s own analysis. It can be reduced tothree extremely simple statements as follows: (1) Question: Howmuch money do we need for the realisation of capitalised surplusvalue? Answer: Just as much as is required in accordancewith the general law of commodity circulation. (2) Q.: Wheredo the capitalists get the money for the realisation of capitalisedsurplus value? A.: They are supposed to have it. (3) Q.: Howdid the money come into the country in the first place? A.: It isprovided by the producer of gold. The extreme simplicity ofthis method of explanation is suspicious rather than attractive.

We need not trouble, however, to refute this theory whichmakes the gold producer thedeus ex machina of capitalist accumulation.Bulgakov has done it himself quite adequately. Eightypages on, he returns to the gold producer in quite a differentcontext, in the course of a lengthy argument against thetheory of the wages fund in which he got involved for somemysterious reason. Here he suddenly displays a keen grasp ofthe problem:

[Pg 302]‘We know already that there is a gold producer amongstother producers. Even under conditions of simple reproduction,he increases, on the one hand, the absolute quantity of moneycirculating inside the country, and on the other, he buys producerand consumer goods without, in his turn, selling commodities,paying with his own product, i.e. with the generalexchange equivalent, for the goods he buys. The gold producernow might perhaps render the service of buying the wholeaccumulated surplus value from II and pay for it in gold whichII can then use to buy means of production from I and toincrease its variable capital needed to pay for additional labourpower so that the gold producer now appears as the realexternal market.

‘This assumption, however, is quite absurd. To accept itwould mean to make the expansion of social production dependentupon the expansion of gold production. (Hear, hear!) Thisin turn presupposes an increase in gold production which isquite unreal. If the gold producer were obliged to buy all theaccumulated surplus value from II for his own workers, his ownvariable capital would have to grow by the day and indeed bythe hour. Yet his constant capital as well as his surplus valueshould also grow in proportion, and gold production as a wholewould consequently have to take on immense dimensions.(Hear, hear!) Instead of submitting this sophistical presumptionto statistical tests—which in any case would hardly be possible—asingle fact can be adduced which would alone refute thispresupposition: it is the development of the institution of creditwhich accompanies the development of capitalist economy.(Hear, hear!) Credit has the tendency to diminish the amountof money in circulation (this decrease being, of course, onlyrelative, not absolute); it is the necessary complement of adeveloping economy of exchange which would otherwise soonfind itself hampered by a lack of coined money. I think we neednot give figures in this context to prove that the rôle of moneyin exchange-transactions is now very small. The hypothesis isthus proved in immediate and evident disagreement with thefacts and must be confuted.’[305]

Bravo! Bravissimo! This is really excellent! Bulgakov, however,thus ‘confutes’ also his former explanation of the question,[Pg 303]in what way and by whom capitalised surplus value is realised.Moreover, in refuting his own statements, Bulgakov has onlyexplained in somewhat greater detail what Marx expressed in asingle word when he called the hypothesis of a gold producerswallowing up the entire surplus value of society—‘absurd’.

Admittedly, Bulgakov’s real solution and that of RussianMarxists in general who deal extensively with the problemmust be sought elsewhere. Just like Tugan Baranovski andIlyin [Lenin], Bulgakov underlines the fact that the opposingsceptics made a capital error with respect to the possibility ofaccumulation in analysing the value of the aggregate product.They, especially Vorontsov, assumed that the aggregate socialproduct consists in consumer goods, and they all started fromthe false premise that consumption is indeed the object of capitalistproduction. This, as the Marxists now explain, is the sourceof the entire misunderstanding—of all the imaginary difficultiesconnected with the realisation of the surplus value, with whichthe sceptics racked their brains.

‘This school created non-existent difficulties because of thismistaken conception. Since the normal conditions of capitalistproduction presuppose that the capitalists’ consumption fundis only a part of the surplus value, and the smaller part at that,the larger being set aside for the expansion of production, it isobvious that the difficulties imagined by this (thepopulist)school do not really exist.’[306]

The unconcern with which Bulgakov here ignores the realproblem is striking. Apparently it has not dawned on him thatthe question as to the ultimate beneficiaries, quite irrelevant solong as personal consumption of the entire surplus value isassumed, only becomes acute on the assumption of enlargedreproduction.

All these ‘imaginary difficulties’ vanish, thanks to two discoveriesof Marx’s which his Russian pupils untiringly quoteagainst their opponents. The first is the fact that, in terms ofvalue, the social product is composed, not ofv +s, but ofc +v +s.Secondly, the ratio ofc tov in this sum continually increaseswith the progress of capitalist production, and at the same time,the capitalised part of the surplus value as against that part ofit that is consumed, is ever growing. On this basis, Bulgakov[Pg 304]establishes a complete theory of the relations between productionand consumption in a capitalist society. As this theory playssuch an important part for the Russian Marxists in general,and Bulgakov in particular, it will be necessary to get betteracquainted with it.

‘Consumption,’ Bulgakov says, ‘the satisfaction of socialneeds, is but an incidental moment in the circulation of capital.The volume of production is determined by the volume ofcapital, and not by the amount of social requirements. Notalone that the development of production is unaccompaniedby a growth in consumption—the two are mutually antagonistic.Capitalist production knows no other than effective consumption,but only such persons who draw either surplus valueor labour wages can be effective consumers, and their purchasingpower strictly corresponds to the amount of thoserevenues. Yet we have seen that the fundamental evolutionarylaws of capitalist production tend, despite the absolute increase,to diminish the relative size of variable capital as well as of thecapitalists’ consumption fund. We can say, then,that the developmentof production diminishes consumption.[307] The conditions of productionand of consumption are thus in conflict. Productioncannot and does not expand to further consumption. Expansion,however, is an inherent fundamental law of capitalist productionand confronts every individual capitalist in the form of astern command to compete. This contradiction is negligible inview of the fact that expanding production as such represents amarket for additional products. “Inherent contradictions areresolved by an extension of the outlying fields of production.”’[308](Bulgakov here quotes a saying of Marx which he has thoroughlymisunderstood; we shall later have occasion to deal with it oncemore.) ‘It has just been shown how this is possible.’ (A referenceto the analysis of the diagram of enlarged reproduction.) ‘Evidently,the greater share of the expansion is apportioned toDepartment I, to the production, that is to say, of constantcapital, and only a (relatively) smaller part to Department IIwhich produces commodities for immediate consumption. Thischange in the relations of the two departments shows wellenough what part is played by consumption in a capitalistsociety, and it indicates where we should expect to find the most[Pg 305]important demand for capitalist commodities.’[309] ‘Even withinthe narrow limits of the profit motive and the crises, even onthis strait and narrow path, capitalist production is capableof unlimited expansion, irrespective of, and even despite, adecrease in consumption. The Russian literature frequentlypoints out that in view of diminishing consumption a considerableincrease of capitalist production is impossible without externalmarkets, but this is due to a wrong evaluation of the partplayed by consumption in a capitalist society, the failure toappreciate that consumption is not the ultimate end of capitalistproduction. Capitalist production does not exist by the grace ofan increase in consumption but because of an extension of theoutlying fields of production which in fact constitute the marketfor capitalist products. A whole progression of Malthusian investigators,discontented with the superficial harmony doctrineof the school of Say and Ricardo, have slaved away at a solutionof the hopeless undertaking: to find means of increasingconsumption which the capitalist mode of production is boundto decrease. Marx was the only one to analyse the real connections:he has shown that the growth of consumption is fatallylagging behind that of production, and must do so whatever“third persons” one might invent. Consumption and its volumethen should by no means be considered as establishing theimmediate limits to the expansion of production. Capitalist productionatones by the crises for deviating from the true purposeof production, but it is independent of consumption. The expansionof production is alone limited by, and dependent upon, thevolume of capital.’[310]

The theory of Bulgakov and Tugan Baranovski is here directlyattributed to Marx. In the eyes of the Russian Marxists, it is onthe whole the direct consequence of Marx’s doctrine, of whichit forms an organic part. On another occasion Bulgakov sayseven more clearly that it is a faithful interpretation of Marx’sdiagram of enlarged reproduction. Once a country has embracedcapitalist production, its internal movement develops along thefollowing lines:

‘The production of constant capital makes up the DepartmentI of social reproduction, thereby instituting an independentdemand for consumption goods to the extent of both its[Pg 306]own variable capital and the consumption fund of its capitalists.Department II in its turn starts the demand for the products ofDepartment I.Thus a closed circle is already formed at the initialstage of capitalist production, in which it depends on no external marketbut is self-sufficient and can grow, of itself, as it were, by means ofaccumulation.’[311]

In the hands of the Russian Marxists this theory becomes thefavourite stick with which to beat their opponents, the ‘populist’sceptics, in the question of markets. We can only appreciateits daring to the full when we look at its amazing discrepancywith everyday practice, with all the known facts of capitalisteconomy. A thesis pronounced so triumphantly as the purestMarxist gospel is even more deserving of our admiration whenwe consider that it is grounded in an extremely simple confusion.We shall have further occasion to deal with this confusionwhen we come to the doctrine of Tugan Baranovski.

Bulgakov further develops a completely erroneous theoryof foreign commerce, based upon his misapprehension of therelations between consumption and production in capitalisteconomy. A picture of reproduction like the above in fact hasno room for foreign commerce. If capitalism forms a ‘closedcircle’ in every country from the very beginning, if, chasing itstail like a puppy and in complete ‘self-sufficiency’, it is able ofitself to create an unlimited market for its products and canspur itself on to ever greater expansion, then every capitalistcountry as such must also be a closed and self-sufficient economicwhole. In but a single respect would foreign commerceappear reasonable: to compensate, by imports from abroad, forcertain deficiencies due to the soil and the climate, i.e. theimport of raw materials or foodstuffs from sheer necessity. Completelyupsetting the thesis of the ‘populists’, Bulgakov in factadvances a theory of international commerce among capitaliststates which gives pride of place to the import of agriculturalproducts, with industrial exports merely providing the requisitefunds.

International traffic in commodities does not here seem toflow from the character of the mode of production but from thenatural conditions of the countries concerned. This theory atany rate has not been borrowed from Marx but from the[Pg 307]economic experts of the German bourgeoisie. Just as Struvetook over from Wagner and Schaeffle his Three Empire Theory,so Bulgakov adopts from the late List (R.I.P.) the division ofstates on the basis of ‘agriculture’ and ‘mixed agriculture andmanufacture’, or rather adapts it, in deference to the times, tothe categories of ‘manufacture’ and ‘mixed manufacture andagriculture’. Nature has afflicted the first category with adeficiency in raw materials and foodstuffs, making it thus dependentupon foreign commerce. The second category has beenliberally endowed with all it needs; here foreign trade is of noaccount. The prototype of the first category is England, of thesecond—the U.S.A. The stoppage of foreign commerce wouldmean the economic death-blow to England, but only a temporarycrisis in the U.S.A. with a guarantee of full recovery.

‘Production there is capable of unlimited expansion on thebasis of the internal market.’[312]

This theory, a hoary relic of German economics even now,has obviously not the least grasp of the interrelations obtainingin an international capitalist economy. It conceives of moderninternational trade in terms that may have been appropriateto the times of the Phoenicians. Just listen to the lecture ofProfessor Buecher:

‘Although the liberalist era has greatly facilitated internationaltraffic, it would be a mistake to infer from this that theperiod of a national economy is nearing its end, to be replacedby a period of international economy.... Granted that we seein Europe to-day a number of small countries that are not independentnations in respect of their commodity supply, beingcompelled to import substantial amounts of their foodstuffs andluxuries, while their industrial productivity is in excess of thenational needs and creates a permanent surplus for whichemployment must be found in alien spheres of consumption.Yet although countries of industrial production and those producingraw materials exist side by side and depend upon oneanother, such “international division of labour” should notbe regarded as a sign that mankind is about to attain to ahigher stage of development which it would be proper to contrast,under the label of world economy, with the ... previousstages. No stage of economic development has ever permanently[Pg 308]guaranteed full autonomy in the satisfaction of wants. Everyone of them has left certain gaps which had to be filled in bysome means or other. So-called “international economy”, onthe other hand, has not, at any rate so far, engendered anyphenomena which are essentially different from those of nationaleconomy, and we very much doubt that such phenomena willappear in the near future.’[313]

As far as Bulgakov is concerned, this conception at any rateresults in an unexpected conclusion: his theory of the unlimitedcapacity for development of capitalism is confined tocertain countries with favourable natural conditions. Capitalismin England is foredoomed because the world market will beexhausted before long. In the U.S.A., India and Russia it can[Pg 309]look forward to an unlimited development because these countriesare ‘self-sufficient’.

Apart from these obvious peculiarities, Bulgakov’s argumentsabout foreign commerce again imply a fundamental misconception.Against the sceptics, from Sismondi to Nikolayon, whobelieved that they had to take recourse to outside markets forthe realisation of capitalist surplus value, he chiefly argues asfollows:

‘These experts obviously consider external commerce as a“bottomless pit” to swallow up in all eternity the surplus valuewhich cannot be got rid of inside the country.’

Bulgakov for his part triumphantly points out that foreigncommerce is indeed not a pit and certainly not a bottomless one,but rather appears as a double-edged sword, that exports alwaysbelong with imports, and that the two usually counterbalanceone another. Thus, whatever is pushed out over one border, willbe brought back, in a changed use-form, over another. ‘Wemust find room for the commodities that have been importedas an equivalent of those exported, within the bounds of thegiven market, and as this is impossible,ex hypothesi, it wouldonly generate new difficulties to have recourse to an externaldemand.’[314]

On another occasion he says that the way to realise thesurplus value found by the Russian ‘populists’, viz. externalmarkets, ‘is much less favourable than that discovered byMalthus, v. Kirchmann and Vorontsov himself when he wrotethe essayOn Militarism and Capitalism’.[315]

Although Bulgakov fervently copies Marx’s diagram of reproduction,he here exhibits no grasp whatever of the real problemtowards which the sceptics from Sismondi to Nikolayonwere groping their way. He denies that foreign commerce solves[Pg 310]the difficulty as pretended, since it again brings the surplusvalue that has been disposed of into the country, although in a‘changed form’. In conformity with the crude picture ofv. Kirchmann and Vorontsov, he thus believes the problem tobe that of destroying a certain quantity of the surplus value, ofwiping it from the face of the earth. It simply does not occur tohim that the real problem is the realisation of the surplus value,the metamorphosis of commodities, in fact the ‘changed form’of the surplus value.

Bulgakov thus finally arrives at the same goal as Struve,though by a different route. He preaches the self-sufficiency ofcapitalist accumulation which swallows up its own product asKronos swallows up his children, and breeds ever more vigorouslywithout help from outside. Now only one further step isneeded for Marxism to revert to bourgeois economics, and this,as luck would have it, was taken by Tugan Baranovski.

CHAPTER XXIII

TUGAN BARANOVSKIAND HIS ‘LACK OF PROPORTION’

We have left this theorist to the end, although healready developed his views in Russian in 1894, i.e.before Struve and Bulgakov, partly because he onlygave his theories their mature form in German at a laterdate,[316] and also because the conclusions he draws from thepremises of the Marxist critics are the most far-reaching in theirimplications.

Like Bulgakov, Tugan Baranovski starts from Marx’s analysisof social reproduction which gave him the clue to this bewilderingmaze of problems. But while Bulgakov, the enthusiastic discipleof Marx, only sought to follow him faithfully and simplyattributed his own conclusions to the master, Tugan Baranovski,on the other hand, lays down the law to Marx who, in hisopinion, did not know how to turn his brilliant exposition of thereproductive process to good account. Tugan Baranovski’s mostimportant general conclusion from Marx’s principles, the pivotof his whole theory, is that, contrary to the assumptions of thesceptics, capitalist accumulation is not only possible under thecapitalist forms of revenue and consumption, but is, in fact,completely independent of both. It is not consumption, he says,but production itself which makes for the best market. Productionand the market are therefore the same, and since theexpansion of production is unlimited in itself, the market, thecapacity to absorb its products, has no limits either.

‘The diagram quoted’, he says, ‘was to prove conclusively apostulate which, though simple enough, might easily give riseto objections, unless the process be adequately understood—thepostulate, namely, that capitalist production creates a marketfor itself. So long as it is possible to expand social production, if[Pg 312]the productive forces are adequate for this purpose, the proportionatedivision of social production must also bring about acorresponding expansion of the demand inasmuch as undersuch conditions all newly produced goods represent a newlycreated purchasing power for the acquisition of other goods.Comparing simple reproduction of the social capital with itsreproduction on a rising scale, we arrive at the most importantconclusion that in capitalist economy the demand for commoditiesis in a sense independent of the total volume of socialconsumption. Absurd as it may seem to “common-sense”, it isyet possible that the volume of social consumption as a wholegoes down while at the same time the aggregate social demandfor commodities grows.’[317]

And again further on: ‘Arising from the abstract analysis ofthe reproductive process of social capital we have formed theconclusion that nothing will be left over of the social product inview of the proportionate division of the social capital.’[318]

Accordingly Tugan Baranovski subjects Marx’s theory ofcrises to a revision which he claims to have developed fromSismondi’s ‘over-consumption’. ‘Marx is in substantial agreementwith the general view that the poverty of the workers, i.e.of the great majority of the population, makes it impossible torealise the products of an ever expanding capitalist production,since it causes a decline in demand. This opinion is definitelymistaken. We have seen that capitalist production creates itsown market—consumption being only one of the moments ofcapitalist production. In a planned social production if theleaders of production were equipped with allinformation aboutthe demand and with thepower to transfer labour and capitalfreely from one branch of production to another, then, howeverlow the level of social consumption, the supply of commoditieswould not exceed the demand.’[319]

The only circumstance which periodically causes the marketto be flooded is a lack of proportion in the enlargement of production.On this assumption, therefore, Tugan Baranovskidescribes the course of capitalist accumulation as follows: ‘Whatwould the workers ... produce if production were organised onproportionate lines? Obviously their own means of subsistence[Pg 313]and production. With what object? To expand production inthe second year. The production of what products? Again ofmeans of production and subsistence for the workers—and so onad infinitum.’[320]

This game of question and answer, mind you, is not a formof self-mockery, it is meant in all seriousness. ‘If the expansionof production has no practical limits, then we must assume thatthe expansion of markets is equally unlimited, forif social productionis proportionately organised, there is no limit to the expansion ofthe market other than the productive forces available.’[321]

Since production thus creates its own demand, foreign commerceof capitalist states is also assigned that peculiar mechanisticfunction we have already met in Bulgakov. A foreignmarket, for instance, is an absolute necessity for England. ‘Doesnot this prove that capitalist production creates a surplus productfor which there is no room on the internal market? Why,come to that, does England require an external market? Theanswer is not difficult: because a considerable part of England’spurchasing power is expended on obtaining foreign commodities.The import of foreign commodities for the English homemarket also makes it essential to export English commoditiesabroad. Since England cannot manage without importing fromabroad, exports are a vital condition for that country, sincewithout them she would not be able to pay for her imports.’[322]

Here again agricultural imports are described as a stimulatingand decisive factor, quite in accordance with the schemeof the German professors.

What, then, is the general line of reasoning on which TuganBaranovski supports his daring solution of the problem ofaccumulation, the new revelation on the problem of crises anda whole lot of others? Hard to believe, but quite incontrovertiblefor all that, Tugan Baranovski’s proof consists exclusively andentirely—in Marx’s diagram of enlarged reproduction, no moreno less. Although he repeatedly refers rather pompously to his‘abstract analysis of the reproductive process of social capital’,to the ‘conclusive logic’ of his analysis, this entire analysis isnothing but a copy of Marx’s diagram of enlarged reproduction,with a different set of figures. Nowhere in the entire works of[Pg 314]Tugan Baranovski shall we find a trace of any other argument.In Marx’s diagram, admittedly, accumulation, production,realisation and exchange run smoothly with clockwork precision,and no doubt this kind of ‘accumulation’ can continuead infinitum, just as long, that is to say, as ink and paper do notrun out. And it is this harmless written exercise with mathematicalequations which Tugan Baranovski quite seriously considersademonstration of such a course in real events.

On another occasion he counters Hobson, who is convincedthat accumulation is impossible, with the following words:‘Diagram No. 2 of the reproduction of social capital on a risingscale corresponds to the case of capital accumulation Hobsonhas in mind. But does this diagram show a surplus product tocome into being? Far from it.’[323]

Hobson is refuted and the matter settled because ‘in thediagram’ no surplus product comes into being.

Admittedly, Tugan Baranovski knows quite well that in hardfact things do not work out so smoothly. There are continualfluctuations in the exchange relations and periodical crises. Butthese crises happen only because in the expansion of productionthe proper proportions are not maintained, because, that is tosay, the proportions of ‘diagram No. 2’ are not observed in thefirst place. If they were, there would be no crisis, and capitalistproduction could get along as nicely as it does on paper, inevery detail. Tugan Baranovski is committed to the view thatwe can ignore the crises if we consider the reproductive processas a continuous process. Although the ‘proportion’ may be upsetat any moment, yet on average it will always be re-establishedby different deviations, by price-fluctuations from day to day,and in the long run by periodical crises. That on the whole this‘proportion’ is more or less maintained is proved by the fact thatcapitalist economy is still going strong—otherwise it would longago have ended in chaos and collapse. In the long run, then,Tugan Baranovski’s ‘proportion’ is observed by and large, andwe must conclude that reality obeys ‘diagram No. 2’. And sincethis diagram can be indefinitely extended, it follows that capitalistaccumulation can also proceedad infinitum.

[Pg 315]What is striking in all this is not Tugan Baranovski’s conclusionthat the diagram corresponds to the actual course ofevents—as we have seen, Bulgakov also shared this belief; thereally startling fact is that Tugan Baranovski sees no necessityfor as much asinquiring whether the diagram is correct,that, instead of proving the diagram, he considers this, thearithmetical exercise on paper, as proof of the actual state ofaffairs. Bulgakov honestly tried to project Marx’s diagram onthe real concrete relations of capitalist economy and of capitalistexchange; he endeavoured to overcome the difficulties resultingfrom it, though without success, it is true, remaining to the lastinvolved with Marx’s analysis, which he himself recognised tobe incomplete and fragmentary. But Tugan Baranovski does notneed any proof, he does not greatly exercise his brains: since thearithmetical sums come out satisfactorily, and may be continuedad lib., this is to him proof that capitalist accumulationcan also proceed without let or hindrance—provided the said‘proportion’ obtains, which it will have to do by hook or bycrook, as he himself would not dream of denying.

Tugan Baranovski, however, has one indirect proof that thediagram with its strange results corresponds to, and truly reflects,reality. This is the fact that capitalist production, quite inaccordance with Marx’s diagram, puts human consumptionsecond to production, that it conceives of the former as ameans and of the latter as an end in itself, just as it puts humanlabour, the ‘worker’, on a par with the machine.

‘Technical progress is expressed by the fact that the means oflabour, the machine, increases more and more in importance ascompared to living labour, to the worker himself. Means of productionplay an ever growing part in the productive process andon the commodity market. Compared to the machine, theworker recedes further into the background and the demand resultingfrom the consumption of the workers is also put into theshade by that which results from productive consumption by themeans of production. The entire workings of capitalist economytake on the character of a mechanism existing on its own, as itwere, in which human consumption appears as a simple momentof the reproductive process and the circulation of capitals.’[324]

Tugan Baranovski considers this discovery as a fundamental[Pg 316]law of the capitalist mode of production, which is confirmed bya quite tangible phenomenon: with the progress of capitalistdevelopment Department I goes on growing relatively to, andat the expense of, Department II. It was Marx himself who, aswe all know, set up this law in which he grounded the schematicexposition of reproduction, though in the further developmentof his diagram he ignored subsequent alterations for simplicity’ssake. This, the automatic growth of the producer goods as comparedwith the consumer goods department affords TuganBaranovski the only objective proof of his theory: that in capitalistsociety human consumption becomes increasingly unimportant,and production more and more an end in itself. Thisthesis forms the corner-stone of his entire theoretical edifice.

‘In all the industrial countries’, he proclaims, ‘we are confrontedwith the same type of development—the developmentof national economy everywhere follows the same fundamentallaw. The mining industry which creates the means of productionfor modern industry comes more and more to the fore.The relative decrease in the export of immediately consumablemanufactured goods from Britain is thus also an expression ofthe fundamental law governing capitalist development. Thefurther technical progress advances, the more do consumergoods recede as compared with producer goods. Human consumptionplays an ever decreasing part as against the productiveconsumption of the means of production.’[325]

Although this ‘fundamental law’ like all his other ‘fundamental’laws, in so far as they mean anything at all, is borrowedready-made from Marx, Baranovski does not rest content withthis and immediately proceeds to preach the Marxist gospel toMarx himself. Scrabbling about like a blind hen, Marx hasturned up another pearl—Tugan will give him that—only hedoes not know what to do with it. It needed a Tugan Baranovskito know how to make it useful to science, and in his hand thenewly discovered law suddenly throws a new light on the wholeworkings of capitalist economy. This law of the expansion inthe department of producer goods at the cost of that of consumergoods reveals clearly, concisely, exactly, and in measurableterms, that capitalist society attaches progressively lessimportance to human consumption, putting man on the same[Pg 317]level as the means of production, and that Marx was thereforecompletely wrong both in assuming that man alone, not themachine, too, can be the creator of surplus value, and in saying,further, that human consumption represents a limit for capitalistproduction which is bound to cause periodical crises in thepresent, and the collapse and terrible end of capitalist economyin the near future. In short, the ‘fundamental law’ governingthe increase of producer as compared to consumer goods reflectsthe singular nature of capitalist society as a whole which Marxhad not understood and which to interpret happily fell to thelot of Tugan Baranovski.

We have seen above the decisive part played by the ‘fundamentallaw’ of capital in the controversy between the RussianMarxists and the sceptics. Bulgakov’s remarks we already know;another Marxist already referred to, Vladimir Ilyin, expresseshimself in similar terms in his polemics against the ‘populists’:

‘It is well known that the law of capitalist production consistsin the fact that the constant capital grows more rapidly thanthe variable capital, that is to say an ever increasing part of thenewly formed capital falls to the department of social productionwhich creates producer goods. In consequence, this departmentis absolutely bound to grow more rapidly than thedepartment creating consumer goods, that is to say, the verything happens which Sismondi declared to be “impossible”,“dangerous”, etc. In consequence, consumer goods make up asmaller and smaller share of the total bulk of capitalist production,and this is entirely in accordance with the historical“mission” of capitalism and its specific social structure: theformer in fact consists in the development of the productiveforces of society (production as an end in itself), and the latterprevents that the mass of the population should turn them touse.’[326]

In this respect, of course, Tugan Baranovski goes evenfarther. With his love of paradox he actually permits himself[Pg 318]the joke of submitting a mathematical proof that accumulationof capital and expansion of production are possible even if theabsolute volume of production decreases. In this connection,Karl Kautsky has pointed out, he had recourse to a somewhatdubious scientific subterfuge, namely that he shaped his daringdeductions exclusively for a specific moment: the transitionfrom simple to enlarged reproduction—a moment which isexceptional even in theory, but certainly of no practical significancewhatever.[327]

[Pg 319]As to Tugan Baranovski’s ‘fundamental law’, Kautskydeclares it to be a mere illusion due to the fact that TuganBaranovski considered the organisation of production only inthe old countries of capitalist big industry.

‘It is correct’, Kautsky says, ‘that with a progressive divisionof labour, there will be comparatively fewer and fewer factoriesetc. for the production of goods direct for personal consumption,together with a relative increase in the number ofthose which supply both the former and one another with tools,machines, raw materials, transport facilities and so on. While inoriginal peasant economy an enterprise that cultivated the flaxalso made the linen with its own tools and got it ready forhuman consumption, nowadays hundreds of enterprises mayshare in the manufacture of a single shirt, by producing rawcotton, iron rails, steam engines and railway trucks that bring itto port, and so on. With international division of labour it willhappen that some countries—the old industrial countries—canonly slowly expand their production for personal consumption,while making large strides in their production of producer[Pg 320]goods which is much more decisive for the heartbeat of economiclife than the production of consumer goods. From thepoint of view of the nation concerned, we might easily form theopinion that producer goods can be turned out on a constantlyrising scale with a more rapid rate of increase than in the productionof consumer goods, and that their production is notbound up with that of the latter.’

The opinion, that producer goods can be produced independentof consumption, is of course a mirage of Tugan Baranovski’s,typical of vulgar economics. Not so the fact cited in supportof this fallacy: the quicker growth of Department I as comparedwith Department II is beyond dispute, not only in oldindustrial countries but wherever technical progress plays adecisive part in production. It is the foundation also of Marx’sfundamental law that the rate of profit tends to fall. Yet in spiteof it all, or rather precisely for this reason, it is a howler ifBulgakov, Ilyin and Tugan Baranovski imagine to have discoveredin this law the essential nature of capitalist economy asan economic system in which production is an end in itself andhuman consumption merely incidental.

[Pg 321]The growth of the constant at the expense of the variablecapital is only the capitalist expression of the general effects ofincreasing labour productivity. The formulac greater thanv(c >v), translated from the language of capitalism into that ofthe social labour process, means only that the higher the productivityof human labour, the shorter the time needed tochange a given quantity of means of production into finishedproducts.[328]

[Pg 322]This is a universal law of human labour. It has been validin all pre-capitalist forms of production and will also be valid inthe future in a socialist order of society. In terms of the materialuse-form of society’s aggregate product, this law must manifestitself by more and more social labour time being employed inthe manufacture of producer than of consumer goods. In aplanned and controlled social economy, organised on socialistlines, this transformation would in fact be more rapid eventhan it is in contemporary capitalist economy. In the firstplace, rational scientific techniques can only be applied on thelargest scale when the barriers of private ownership in land areabolished. This will result in an immense revolution in vastprovinces of production which will ultimately amount to a replacementof living labour by machine labour, and which willenable us to tackle technical jobs on a scale quite impossibleunder present day conditions. Secondly, the general use ofmachinery in the productive process will be put on a neweconomic basis. At present the machine does not compete withliving labour but only with that part of it that is paid. The costof the labour power which is replaced by the machine representsthe lowest limit of the applicability of the machine. Whichmeans that the capitalist becomes interested in a machine onlywhen the costs of its production—assuming the same level ofperformance—amount to less than the wages of the workers itreplaces. From the point of view of the social labour processwhich is the only one to matter in a socialist society, the machinecompetes not with the labour that is necessary to maintain theworker but with the labour he actually performs. In otherwords, in a society that is not governed by the profit motive butaims at saving human labour, the use of machinery is economicallyindicated just as soon as it can save more human labourthan is necessary for making it, not to mention the many caseswhere the use of machinery is desirable even if it does notanswer this economic minimum—for reasons of health andsimilar considerations, in the interest of the workers themselves.However that may be, the tension between the respectiveeconomic usefulness of the machine in (a) a capitalist, and (b) a[Pg 323]socialist society is at least equal to the difference between labourand that part of it that is paid; it is, in other words, the preciseequivalent of the whole capitalist surplus value. Consequently,if the capitalist profit motive is abolished and a social organisationof labour introduced, the marginal use of the machine willsuddenly be increased by the whole extent of the capitalist surplusvalue, so that an enormous field, not to be gauged as yet,will be open to the triumphal march of the machine. This wouldbe tangible proof that the capitalist mode of production, allegedto spur on to the optimum technical development, in fact setslarge social limits to technical progress, in form of the profitmotive on which it is based. It would show that as soon as theselimits are abolished, technical progress will develop such apowerful drive that the technical marvels of capitalist productionwill be child’s play in comparison.

In terms of the composition of the social product, this technicaltransformation can only mean that, compared to the productionof consumer goods, the production of producer goods—measuredin units of labour time—must increase more rapidlyin a socialist society than it does even to-day. Thus the relationbetween the two departments of social production which theRussian Marxists took to reveal typical capitalist baseness, theneglect of man’s need to consume, rather proves to be the precisemanifestation of the progressive subjection of nature tosocial labour, which will become even more striking when productionis organised solely with a view to human needs. Theonly objective proof for Tugan Baranovski’s ‘fundamental law’thus collapses as a ‘fundamental’ confusion. His whole construction,including his ‘new theory of crises’, together with the ‘lackof proportion’, is reduced to its foundations on paper: a slavishcopy of Marx’s diagram of enlarged reproduction.

CHAPTER XXIV

THE END OF RUSSIAN ‘LEGALIST’MARXISM

The Russian ‘legalist’ Marxists, and Tugan Baranovskiabove all, can claim the credit, in their struggleagainst the doubters of capitalist accumulation, ofhaving enriched economic theory by an application of Marx’sanalysis of the social reproductive process and its schematicrepresentation in the second volume ofCapital. But in view ofthe fact that this same Tugan Baranovski quite wrongly regardedsaid diagram as the solution to the problem insteadof its formulation, his conclusions were bound to reverse thebasic order of Marx’s doctrine.

Tugan Baranovski’s approach, according to which capitalistproduction can create unlimited markets and is independent ofconsumption, leads him straight on to the thesis of Say-Ricardo,i.e. a natural balance between production and consumption,between supply and demand. The difference is simply that thosetwo only thought in terms of simple commodity circulation,whilst Tugan Baranovski applies the same doctrine to the circulationof capital. His theory of crises being caused by a ‘lack ofproportion’ is in effect just a paraphrase of Say’s old triteabsurdity: the over-production of any one commodity only goesto show under-production of another; and Tugan Baranovskisimply translates this nonsense into the terminology used inMarx’s analysis of the reproductive process. Even though hedeclares that, Say notwithstanding, general over-production isquite possible in the light of the circulation of money which theformer had entirely neglected, yet it is in fact this very sameneglect, the besetting sin of Say and Ricardo in their dealingswith the problem of crises which is the condition for his delightfulmanipulations with Marx’s diagram. As soon as it is appliedto the circulation of money, ‘diagram No. 2’ begins to bristlewith spikes and barbs. Bulgakov was caught in these spikes whenhe attempted to follow up Marx’s interrupted analysis to a[Pg 325]logical conclusion. This compound of forms of thought borrowedfrom Marx with contents derived from Say and Ricardois what Tugan Baranovski modestly calls his ‘attempt at a synthesisbetween Marx’s theory and classical economics’.

After almost a century, the theory of optimism which holds,in the face of petty-bourgeois doubts, that capitalist productionis capable of development, returns, by way of Marx’s doctrineand its ‘legalist’ champions, to its point of departure, to Say andRicardo. The three ‘Marxists’ join forces with the bourgeois‘harmonists’ of the Golden Age shortly before the Fall whenbourgeois economics was expelled from the Garden of Innocence—thecircle is closed.

There can be no doubt that the ‘legalist’ Russian Marxistsachieved a victory over their opponents, the ‘populists’, but thatvictory was rather too thorough. In the heat of battle, all three—Struve,Bulgakov and Tugan Baranovski—overstated theircase. The question was whether capitalism in general, andRussian capitalism in particular, is capable of development;these Marxists, however, proved this capacity to the extent ofeven offering theoretical proof that capitalism can go on forever. Assuming the accumulation of capital to be without limits,one has obviously proved the unlimited capacity of capitalismto survive! Accumulation is the specifically capitalist method ofexpanding production, of furthering labour productivity, ofdeveloping the productive forces, of economic progress. If thecapitalist mode of production can ensure boundless expansionof the productive forces, of economic progress, it is invincibleindeed. The most important objective argument in support ofsocialist theory breaks down; socialist political action and theideological import of the proletarian class struggle cease toreflect economic events, and socialism no longer appears anhistorical necessity. Setting out to show that capitalism ispossible, this trend of reasoning ends up by showing thatsocialism is impossible.

The three Russian Marxists were fully aware that in thecourse of the dispute they had made an about-turn, thoughStruve, in his enthusiasm for the cultural mission of capitalism,does not worry about giving up a useful warrant.[329] Bulgakov[Pg 326]tried to stop the gaps now made in socialist theory with anotherfragment of the same theory as best he could: he hoped thatcapitalist society might yet perish, in spite of the immanentbalance between production and consumption, because of thedeclining profit rate. But it was he himself who finally cut awaythe ground from under this somewhat precarious comfort. Forgettingthe straw he had offered for the salvation of socialism,he turned on Tugan Baranovski with the teaching that, in thecase of large capitals, the relative decline in the profit rate iscompensated by the absolute growth of capital.[330] More consistentthan the others, Tugan Baranovski finally with the crude joyof a barbarian destroys all objective economic arguments insupport of socialism, thus building in his own spirit ‘a morebeautiful world’ on an ethical foundation. ‘The individual protestsagainst an economic order which transforms the end (man)into a means (production) and the means (production) into anend.’[331]

Our three Marxists demonstrated in person that the newfoundations of socialism had been frail and jerry-built. Theyhad hardly laid down the new basis for socialism before theyturned their backs on it. When the masses of Russia were stakingtheir lives in the fight for the ideals of a social order to come,which would put the end (man) before the means (production),the ‘individual’ went into retreat, to find philosophical andethical solace with Kant. In actual fact, the ‘legalist’ bourgeoisMarxists ended up just where we should expect them to fromtheir theoretical position—in the camp of bourgeois harmonies.

SECTION THREE

THE HISTORICALCONDITIONS OFACCUMULATION

CHAPTER XXV

CONTRADICTIONS WITHIN THEDIAGRAM OF ENLARGEDREPRODUCTION

In the first section, we ascertained that Marx’s diagram ofaccumulation does not solve the question of who is to benefitin the end by enlarged reproduction. If we take the diagramliterally as it is set out at the end of volume ii, it appears thatcapitalist production would itself realise its entire surplus value,and that it would use the capitalised surplus value exclusivelyfor its own needs. This impression is confirmed by Marx’sanalysis of the diagram where he attempts to reduce the circulationwithin the diagram altogether to terms of money, that isto say to the effective demand of capitalists and workers—anattempt which in the end leads him to introduce the ‘producerof money’ as adeus ex machina. In addition, there is that mostimportant passage inCapital, volume i, which must be interpretedto mean the same.

‘To accumulate it is necessary to convert a portion of thesurplus-product into capital. But we cannot, except by a miracle,convert into capital anything but such articles as can be employedin the labour-process (i.e. means of production), andsuch further articles as are suitable for the sustenance of the[Pg 330]labourer (i.e. means of subsistence). Consequently, a part of theannual surplus-labour must have been applied to the productionof additional means of production and subsistence, over andabove the quantity of these things required to replace the capitaladvanced. In one word, surplus-value is convertible into capitalsolely because the surplus-product, whose value it is, alreadycomprises the material elements of new capital.’[332]

The following conditions of accumulation are here laid down:(1) The surplus value to be capitalised first comes into being inthe natural form of capital (as additional means of productionand additional means of subsistence for the workers). (2) Theexpansion of capitalist production is achieved exclusively bymeans of capitalist products, i.e. its own means of productionand subsistence. (3) The limits of this expansion are each timedetermined in advance by the amount of surplus value which isto be capitalised in any given case; they cannot be extended,since they depend on the amount of the means of productionand subsistence which make up the surplus product; neither canthey be reduced, since a part of the surplus value could not thenbe employed in its natural form. Deviations in either direction(above and below) may give rise to periodical fluctuations andcrises—in this context, however, these may be ignored, becausein general the surplus product to be capitalised must be equalto actual accumulation. (4) Since capitalist production buys upits entire surplus product, there is no limit to the accumulationof capital.

Marx’s diagram of enlarged reproduction adheres to theseconditions. Accumulation here takes its course, but it is not inthe least indicated who is to benefit by it, who are the newconsumers for whose sake production is ever more enlarged.The diagram assumes, say, the following course of events: thecoal industry is expanded in order to expand the iron industryin order to expand the machine industry in order to expand theproduction of consumer goods. This last, in turn, is expandedto maintain both its own workers and the growing army of coal,iron and machine operatives. And so onad infinitum. We arerunning in circles, quite in accordance with the theory of TuganBaranovski. Considered in isolation, Marx’s diagram does indeedpermit of such an interpretation since he himself explicitly[Pg 331]states time and again that he aims at presenting the process ofaccumulation of the aggregate capital in a society consistingsolely of capitalists and workers. Passages to this effect can befound in every volume ofCapital.

In volume i, in the very chapter on ‘The Conversion ofSurplus-Value into Capital’, he says:

‘In order to examine the object of our investigation in itsintegrity, free from all disturbing subsidiary circumstances, wemust treat the whole world as one nation, and assume thatcapitalist production is everywhere established and has possesseditself of every branch of industry.’[333]

In volume ii, the assumption repeatedly returns; thus inchapter 17 on ‘The Circulation of Surplus-Value’: ‘Now, thereare only two points of departure: The capitalist and thelabourer. All third classes of persons must either receive moneyfor their services from these two classes, or, to the extent thatthey receive it without any equivalent services, they are jointowners of the surplus-value in the form of rent, interest, etc....The capitalist class, then, remains the sole point of departureof the circulation of money.’[334]

Further, in the same chapter ‘On the Circulation of Moneyin Particular under Assumption of Accumulation’: ‘But thedifficulty arises when we assume, not a partial, but a generalaccumulation of money-capital on the part of the capitalistclass. Apart from this class, there is, according to our assumption—thegeneral and exclusive domination of capitalist production—noother class but the working class.’[335]

And again in chapter 20: ‘... there are only two classes inthis case, the working class disposing of their labour-power, andthe capitalist class owning the social means of production andthe money.’[336]

In volume iii, Marx says quite explicitly, when demonstratingthe process of capitalist production as a whole: ‘Let us supposethat the whole society is composed only of industrial capitalistsand wage workers. Let us furthermore make exceptions offluctuations of prices which prevent large portions of the totalcapital from reproducing themselves under average conditionsand which, owing to the general interrelations of the entire[Pg 332]process of reproduction, such as are developed particularly bycredit, must always call forth general stoppages of a transientnature. Let us also make abstraction of the bogus transactionsand speculations, which the credit system favours. In that case,a crisis could be explained only by a disproportion of productionin various branches, and by a disproportion of the consumptionof the capitalists and the accumulation of their capitals. But asmatters stand, the reproduction of the capitals invested in productiondepends largely upon the consuming power of the non-producingclasses; while the consuming power of the labourersis handicapped partly by the laws of wages, partly by the factthat it can be exerted only so long as the labourers can beemployed at a profit for the capitalist class.’[337]

This last quotation refers to the question of crises with whichwe are not here concerned. It can leave no doubt, however,that the movement of the total capital, ‘as matters stand’,depends in Marx’s view on three categories of consumers only:the capitalists, the workers and the ‘non-productive classes’, i.e.the hangers-on of the capitalist class (king, parson, professor,prostitute, mercenary), of whom he quite rightly disposes involume ii as the mere representatives of a derivative purchasingpower, and thus the parasitic joint consumers of the surplusvalue or of the wage of labour.

Finally, inTheories of Surplus Value,[338] Marx formulates hisgeneral presuppositions with regard to accumulation as follows:‘Here we have only to consider the forms through which capitalpasses during the various stages of its development. Thus we donot set out the actual conditions of the real process of production,but always assume that the commodity is sold for what it isworth. We ignore the competition of capitalists and the creditsystem; we also leave out of account the actual constitution ofsociety which never consists exclusively of the classes of workersand industrial capitalists, and where there is accordingly nostrict division between producers and consumers. The first category(of consumers, whose revenues are partly of a secondary,not a primitive nature, derived from profits and the wage oflabour) is much wider than the second category (of producers).[Pg 333]Therefore the manner in which it spends its income, and theextent of such income, effects very large modifications in theeconomic household, and especially so in the process of circulationand reproduction of capital.’

Speaking of the ‘actual constitution of society’, Marx herealso considers merely the parasitic joint consumers of surplusvalue and of the wage of labour, i.e. only the hangers-on of theprincipal categories of capitalist production.

There can be no doubt, therefore, that Marx wanted todemonstrate the process of accumulation in a society consistingexclusively of workers and capitalists, under the universal andexclusive domination of the capitalist mode of production. Onthis assumption, however, his diagram does not permit of anyother interpretation than that of production for production’ssake.

Here accumulation continues year after year without interruption,the capitalists in each case consuming half of the[Pg 334]surplus value they have gained and capitalising the other half.In the process of capitalisation, the same technical foundation,that is to say the same organic composition or division into constantand variable capital and also the same rate of exploitation(always amounting to 100 per cent) is consecutively maintainedfor the additional capital as it was for the original capital. Inaccordance with Marx’s assumption in volume i ofCapital, thecapitalised part of the surplus value first comes into being asadditional means of production and as means of subsistence forthe workers, both serving the purpose of an ever expandingproduction in the two departments. It cannot be discoveredfrom the assumptions of Marx’s diagram for whose sake productionis progressively expanded. Admittedly, production and consumptionincrease simultaneously in a society. The consumptionof the capitalists increases (in terms of value, in the first year itamounts to 500 + 142, in the second year to 542 + 158, in thethird year to 586 + 171, and in the fourth year to 635 + 185);the consumption of the workers increases as well; the variablecapital increasing year after year in both departments preciselyindicates this growth in terms of value. And yet, the growingconsumption of the capitalists can certainly not be regarded asthe ultimate purpose of accumulation; on the contrary, thereis no accumulation inasmuch as this consumption takes placeand increases; personal consumption of the capitalists must beregarded as simple reproduction. Rather, the question is: if,and in so far as, the capitalists do not themselves consume theirproducts but ‘practise abstinence’, i.e. accumulate, for whosesake do they produce? Even less can the maintenance of an everlarger army of workers be the ultimate purpose of continuousaccumulation of capital. From the capitalist’s point of view, theconsumption of the workers is a consequence of accumulation,it is never its object or its condition, unless the principles(foundations) of capitalist production are to be turned upsidedown. And in any case, the workers can only consume that partof the product which corresponds to the variable capital, not ajot more. Who, then, realises the permanently increasing surplusvalue? The diagram answers: the capitalists themselves and theyalone.—And what do they do with this increasing surplus value?—Thediagram replies: They use it for an ever greater expansionof their production. These capitalists are thus fanatical[Pg 335]supporters of an expansion of production for production’s sake.They see to it that ever more machines are built for the sake ofbuilding—with their help—ever more new machines. Yet theupshot of all this is not accumulation of capital but an increasingproduction of producer goods to no purpose whatever. Indeed,one must be as reckless as Tugan Baranovski, and rejoice asmuch in paradoxical statements, to assume that this untiringmerry-go-round in thin air could be a faithful reflection intheory of capitalist reality, a true deduction from Marx’sdoctrine.[339]

Besides the analysis of enlarged reproduction roughed out inCapital, volume ii, the whole of Marx’s work, volume ii in particular,contains a most elaborate and lucid exposition of hisgeneral views regarding the typical course of capitalist accumulation.If we once fully understand this interpretation, thedeficiencies of the diagram at the end of volume ii are immediatelyevident.

If we examine critically the diagram of enlarged reproductionin the light of Marx’s theory, we find various contradictionsbetween the two.

To begin with, the diagram completely disregards the increasingproductivity of labour. For it assumes that the compositionof capital is the same in every year, that is to say, thetechnical basis of the productive process is not affected byaccumulation. This procedure would be quite permissible initself in order to simplify the analysis, but when we come toexamine the concrete conditions for the realisation of the aggregateproduct, and for reproduction, then at least we must takeinto account, and make allowance for, changes in techniquewhich are bound up with the process of capital accumulation.Yet if we allow for improved productivity of labour, the materialaggregate of the social product—both producer and consumergoods—will in consequence show a much more rapid increasein volume than is set forth in the diagram. This increase in theaggregate of use-values, moreover, indicates also a change inthe value relationships. As Marx argues so convincingly, basinghis whole theory on this axiom, the progressive development of[Pg 336]labour productivity reacts on both the composition of accumulatingcapital and the rate of surplus value so that they cannotremain constant under conditions of increasing accumulationof capital, as was assumed by the diagram. Rather, if accumulationcontinues,c, the constant capital of both departments,must increase not only absolutely but also relatively tov +c orthe total new value (the social aspect of labour productivity);at the same time, constant capital and similarly the surplusvalue must increase relatively to the variable capital—in short,the rate of surplus value, i.e. the ratio between surplus valueand variable capital, must similarly increase (the capitalistaspect of labour productivity). These changes need not, ofcourse, occur annually, just as the terms of first, second and thirdyear in Marx’s diagram do not necessarily refer to calendaryears but may stand for any given period. Finally, we maychoose to assume that these alterations, both in the compositionof capital and in the rate of surplus value, take place either inthe first, third, fifth, seventh year, etc., or in the second, sixthand ninth year, etc. The important thing is only that they areallowed for somewhere and taken into account as periodicalphenomena. If the diagram is amended accordingly, the resultof this method of accumulation will be an increasing annualsurplus in the consumer at the expense of producer goods. It istrue that Tugan Baranovski conquers all difficulties on paper:he simply constructs a diagram with different proportions whereyear by year the variable capital decreases by 25 per cent. Andsince this arithmetical exercise is successful enough on paper,Tugan triumphantly claims to have ‘proved’ that accumulationruns smoothly like clockwork, even if the absolute volume ofconsumption decreases. Even he must admit in the end, however,that his assumption of such an absolute decrease of thevariable capital is in striking contrast to reality. Variable capitalis in point of fact a growing quantity in all capitalist countries;only in relation to the even more rapid growth of constantcapital can it be said to decrease. On the basis of what is actuallyhappening, namely a greater yearly increase of constant capitalas against that of variable capital, as well as a growing rate ofsurplus value, discrepancies must arise between the materialcomposition of the social product and the composition of capitalin terms of value. If, instead of the unchanging proportion of[Pg 337]5 to 1 between constant and variable capital, proposed byMarx’s diagram, we assume for instance that this increase ofcapital is accompanied by a progressive readjustment of its composition,the proportion between constant and variable in thesecond year being 6 to 1, in the third year 7 to 1, and in thefourth year 8 to 1—if we further assume that the rate of surplusvalue also increases progressively in accordance with the higherproductivity of labour so that, in each case, we have the sameamounts as those of the diagram, although, because of the relativelydecreasing variable capital, the rate of surplus value doesnot remain constant at the original 100 per cent—and if finallywe assume that one-half of the appropriated surplus value iscapitalised in each case (excepting Department II where capitalisationexceeds 50 per cent, 184 out of 285 being capitalisedduring the first year), the result will be as follows:

If this were a true picture of the accumulative process, themeans of production (constant capital) would show a deficit of16 in the second year, of 45 in the third year and of 88 in thefourth year; similarly, the means of subsistence would show asurplus of 16 in the second year, of 45 in the third year and of88 in the fourth year.

This negative balance for the means of production may beonly imaginary in part. The increasing productivity of labourensures that the means of production grow faster in bulk thanin value, in other words: means of production become cheaper.As it is use value, i.e. the material elements of capital, which isrelevant for technical improvements of production, we may[Pg 338]assume that the quantity of means of production, in spite oftheir lower value, will suffice for progressive accumulation upto a certain point. This phenomenon amongst others also checksthe actual decline of the rate of profit and modifies it to a meretendency, though our example shows that the decline of theprofit rate would not only be retarded but rather completelyarrested. On the other hand, the same fact indicates a muchlarger surplus of unsaleable means of subsistence than is suggestedby the amount of this surplus in terms of value. In thatcase, we should have to compel the capitalists of Department IIto consume this surplus themselves, which Marx makes themdo on other occasions; in which case, and in so far as thosecapitalists are concerned, there would again be no accumulationbut rather simple reproduction. Alternatively, we should haveto pronounce this whole surplus unsaleable.

Yet would it not be very easy to make good this loss in meansof production which results from our example? We need onlyassume that the capitalists of Department I capitalise theirsurplus value to a greater extent. Indeed, there is no validreason to suppose, as Marx did, that the capitalists in each caseadd only half their surplus value to their capital. Advances inlabour productivity may well lead to progressively increasingcapitalisation of surplus value. This assumption is the more permissiblein that the cheapening of consumer goods for the capitalistclass, too, is one of the consequences of technologicalprogress. The relative decrease in the value of consumableincome (as compared with the capitalised part) may then permitof the same or even a higher standard of living for this class.We might for instance make good the deficit in producer goodsby transferring a corresponding part of surplus value I to theconstant capital of this department, a part which would otherwisebe consumed, since this surplus value, like all other productsof the department, originally takes the form of producergoods;11⁴⁄₇ would then be transferred in the second year, 34 inthe third year and 66 in the fourth year.[340] The solution of onedifficulty, however, only adds to another. It goes without sayingthat if the capitalists of Department I relatively restrict their[Pg 339]consumption for purposes of accumulation, there will be a proportionatelygreater unsaleable residue of consumer goods inDepartment II; and thus it becomes more and more impossibleto enlarge the constant capital even on its previous technologicalbasis. If the capitalists in Department I relatively restrict theirconsumption, the capitalists of Department II must relativelyexpand their personal consumption in proportion. The assumptionof accelerated accumulation in Department I would thenhave to be supplemented by that of retarded accumulation inDepartment II, technical progress in one department by regressionin the other.

These results are not due to mere chance. The adjustments wehave tried out on Marx’s diagram are merely meant to illustratethat technical progress, as he himself admits, must be accompaniedby a relative growth of constant as against variablecapital. Hence the necessity for a continuous revision of the ratioin which capitalised surplus value should be allotted toc andvrespectively. In Marx’s diagram, however, the capitalists are inno position to make these allocations at will, since the materialform of their surplus value predetermines the forms of capitalisation.Since, according to Marx’s assumption, all expansion ofproduction proceeds exclusively by means of its own, capitalisticallyproduced means of production and subsistence,—sincethere are here no other places and forms of production andequally no other consumers than the two departments withtheir capitalists and workers,—and since, on the other hand, thesmooth working of the accumulative process depends on thatcirculation should wholly absorb the aggregate product of bothdepartments, the technological shape of enlarged reproductionis in consequence strictly prescribed by the material form of thesurplus product. In other words: according to Marx’s diagram,the technical organisation of expanded production can and mustbe such as to make use of the aggregate surplus value producedin Departments I and II. In this connection we must bear inmind also that both departments can obtain their respectiveelements of production only by means of mutual exchange.Thus the allocation to constant or variable capital of the surplusvalue earmarked for capitalisation, as well as the allotment ofthe additional means of production and subsistence (for theworkers) to Departments I and II is given in advance and[Pg 340]determined by the relations between the two departments ofthe diagram—both in material and in terms of value. Theserelations themselves, however, reflect a quite determinatetechnical organisation of production. This implies that, on theassumptions of Marx’s diagram, the techniques of productiongiven in each case predetermine the techniques of the subsequentperiods of enlarged reproduction, if accumulation continues.Assuming, that is to say, in accordance with Marx’sdiagram, that the expansion of capitalist production is alwaysperformed by means of the surplus value originally producedin form of capital, and further—or rather, conversely—thataccumulation in one department is strictly dependent on accumulationin the other, then no change in the technical organisationof production can be possible in so far as the relation ofc tov is concerned.

We may put our point in yet another way: it is clear that aquicker growth of constant as compared with variable capital,i.e. the progressive metamorphosis of the organic composition ofcapital, must take the material form of faster expansion of productionin Department I as against production in DepartmentII. Yet Marx’s diagram, where strict conformity of thetwo departments is axiomatic, precludes any such fluctuationsin the rate of accumulation in either department. It is quitelegitimate to suppose that under the technical conditions ofprogressive accumulation, society would invest ever increasingportions of the surplus value earmarked for accumulation inDepartment I rather than in Department II. Both departmentsbeing only branches of the same social production—supplementaryenterprises, if you like, of the ‘aggregate capitalist’,—sucha progressive transfer, for technical reasons, from onedepartment to the other of a part of the accumulated surplusvalue would be wholly feasible, especially as it corresponds tothe actual practice of capital. Yet this assumption is possibleonly so long as we envisage the surplus value earmarked forcapitalisation purely in terms of value. The diagram, however,implies that this part of the surplus value appears in adefinite material form which prescribes its capitalisation. Thusthe surplus value of Department II exists as means of subsistence,and since it is as such to be only realised by Department I,this intended transfer of part of the capitalised surplus value[Pg 341]from Department II to Department I is ruled out, first becausethe material form of this surplus value is obviously useless toDepartment I, and secondly because of the relations of exchangebetween the two departments which would in turn necessitatean equivalent transfer of the products of Department I intoDepartment II. It is therefore downright impossible to achievea faster expansion of Department I as against Department IIwithin the limits of Marx’s diagram.

However we may regard the technological alterations of themode of production in the course of accumulation, they cannotbe accomplished without upsetting the fundamental relations ofMarx’s diagram.

And further: according to Marx’s diagram, the capitalisedsurplus value is in each case immediately and completelyabsorbed by the productive process of the following period, for,apart from the portion earmarked for consumption, it has anatural form which allows of only one particular kind of employment.The diagram precludes the cashing and hoarding ofsurplus value in monetary form, as capital waiting to be invested.The free monetary forms of private capital, in Marx’sview, are first the money deposited gradually against the wearand tear of the fixed capital, for its eventual renewal; andsecondly those amounts of money which represent realisedsurplus value but are still too small for investment. From thepoint of view of the aggregate capital, both these sources of freemoney capital are negligible. For if we assume that even aportion of the social surplus value is realised in monetary formfor purposes of future investment, then at once the questionarises: who has bought the material items of this surplus value,and who has provided the money? If the answer is: other capitalists,of course,—then, seeing that the capitalist class is representedin the diagram by the two departments, this portion ofthe surplus value must also be regarded as investedde facto, asemployed in the productive process. And so we are back atimmediate and complete investment of the surplus value.

Or does the freezing of one part of the surplus value in monetaryform in the hands of certain capitalists mean that othercapitalists will be left with a corresponding part of that surplusproduct in its material form? does the hoarding of realisedsurplus value by some imply that others are no longer able to[Pg 342]realise their surplus value, since the capitalists are the onlybuyers of surplus value? This would mean, however, that thesmooth course of reproduction and similarly of accumulationas described in the diagram would be interrupted. The resultwould be a crisis, due not to over-production but to amere intention to accumulate, the kind of crisis envisaged bySismondi.

In one passage of hisTheories,[341] Marx explains in so manywords that he ‘is not at all concerned in this connection with anaccumulation of capital greater than can be used in the productiveprocess and might lie idle in the banks in monetary form,with the consequence of lending abroad’. Marx refers thesephenomena to the section on competition. Yet it is important toestablish that his diagram veritably precludes the formation ofsuch additional capital. Competition, however wide we maymake the concept, obviously cannot create values, nor can itcreate capitals which are not themselves the result of the reproductiveprocess.

The diagram thus precludes the expansion of production byleaps and bounds. It only allows of a gradual expansion whichkeeps strictly in step with the formation of the surplus value andis based upon the identity between realisation and capitalisationof the surplus value.

For the same reason, the diagram presumes an accumulationwhich affects both departments equally and therefore allbranches of capitalist production. It precludes expansion of thedemand by leaps and bounds just as much as it prevents a one-sidedor precocious development of individual branches ofcapitalist production.

Thus the diagram assumes a movement of the aggregatecapital which flies in the face of the actual course of capitalistdevelopment. At first sight, two facts are typical for the historyof the capitalist mode of production: on the one hand theperiodical expansion of the whole field of production by leapsand bounds, and on the other an extremely unequal developmentof the different branches of production. The history of theEnglish cotton industry from the first quarter of the eighteenthto the seventies of the nineteenth century, the most characteristicchapter in the history of the capitalist mode of production,[Pg 343]appears quite inexplicable from the point of view of Marx’sdiagram.

Finally, the diagram contradicts the conception of the capitalisttotal process and its course as laid down by Marx inCapital, volume iii. This conception is based on the inherentcontradiction between the unlimited expansive capacity of theproductive forces and the limited expansive capacity of socialconsumption under conditions of capitalist distribution. Let ussee how Marx describes this contradiction in detail in chapter 15on ‘Unravelling the Internal Contradictions of the Law’ (of thedeclining profit rate):

‘The creation of surplus-value, assuming the necessary meansof production, or sufficient accumulation of capital, to be existing,finds no other limit but the labouring population, when therate of surplus-value, that is, the intensity of exploitation, isgiven; and no other limit but the intensity of exploitation, whenthe labouring population is given. And the capitalist process ofproduction consists essentially of the production of surplus-value,materialised in the surplus-product, which is that aliquot portionof the produced commodities, in which unpaid labour is materialised.It must never be forgotten, that the production of thissurplus-value—and the re-conversion of a portion of it intocapital, or accumulation, forms an indispensable part of thisproduction of surplus-value—is the immediate purpose and thecompelling motive of capitalist production. It will not do torepresent capitalist production as something which it is not, thatis to say, as a production having for its immediate purpose theconsumption of goods, or the production of means of enjoymentfor the capitalists. (And, of course, even less for the worker.R. L.) This would be overlooking the specific character ofcapitalist production, which reveals itself in its innermostessence. The creation of this surplus-value is the object of thedirect process of production, and this process has no other limitsthan those mentioned above. As soon as the available quantityof surplus-value has been materialised in commodities, surplus-valuehas been produced. But this production of surplus-valueis but the first act of the capitalist process of production, itmerely terminates the act of direct production. Capital hasabsorbed so much unpaid labour. With the development of theprocess, which expresses itself through a falling tendency of the[Pg 344]rate of profit, the mass of surplus-value thus produced is swelledto immense dimensions. Now comes the second act of theprocess. The entire mass of commodities, the total product,which contains a portion which is to reproduce the constant andvariable capital as well as a portion representing surplus-value,must be sold. If this is not done, or only partly accomplished, oronly at prices which are below the prices of production, thelabourer has been none the less exploited, but his exploitationdoes not realise as much for the capitalist. It may yield nosurplus-value at all for him, or only realise a portion of the producedsurplus-value, or it may even mean a partial or completeloss of his capital. The conditions of direct exploitation andthose of the realisation of surplus-value are not identical. Theyare separated logically as well as by time and space. The firstare only limited by the productive power of society, the last bythe proportional relations of the various lines of production andby the consuming power of society. This last-named power is notdetermined either by the absolute productive power or by theabsolute consuming power, but by the consuming power basedon antagonistic conditions of distribution, which reduces theconsumption of the great mass of the population to a variableminimum within more or less narrow limits. The consumingpower is furthermore restricted by the tendency to accumulate,the greed for an expansion of capital and a production of surplus-valueon an enlarged scale. This is a law of capitalist productionimposed by incessant revolutions in the methods of productionthemselves, the resulting depreciation of existing capital, thegeneral competitive struggle and the necessity of improving theproduct and expanding the scale of production, for the sake ofself-preservation and on penalty of failure. The market must,therefore, be continually extended, so that its interrelations andthe conditions regulating them assume more and more the formof a natural law independent of the producers and become evermore uncontrollable. This eternal contradiction seeks to balanceitself by an expansion of the outlying fields of production. Butto the extent that the productive power develops, it finds itselfat variance with the narrow basis on which the conditions ofconsumption rest. On this self-contradictory basis it is no contradictionat all that there should be an excess of capital simultaneouslywith an excess of population. For while a combination of[Pg 345]these two would indeed increase the mass of the producedsurplus-value, it would at the same time intensify the contradictionbetween the conditions under which this surplus-value isproduced and those under which it is realised.’[342]

If we compare this description with the diagram of enlargedreproduction, the two are by no means in conformity. Accordingto the diagram, there is no inherent contradiction betweenthe production of the surplus value and its realisation, rather,the two are identical. The surplus value here from the verybeginning comes into being in a natural form exclusivelydesigned for the requirements of accumulation. In fact it leavesthe place of production in the very form of additional capital,that is to say it is capable of realisation in the capitalist processof accumulation. The capitalists, as a class, see to it in advancethat the surplus value they appropriate is produced entirely inthat material form which will permit and ensure its employmentfor purposes of further accumulation. Realisation and accumulationof the surplus value here are both aspects of the sameprocess, they are logically identical. Therefore according to thepresentation of the reproductive process in the diagram, society’scapacity to consume does not put a limit to production. Hereproduction automatically expands year by year, although thecapacity of society for consumption has not gone beyond its‘antagonistic conditions of distribution’. This automatic continuationof expansion, of accumulation, truly is the ‘law ofcapitalist production ... on penalty of failure’. Yet accordingto the analysis in volume iii, ‘the market must, therefore, becontinually extended’, ‘the market’ obviously transcending theconsumption of capitalists and workers. And if Tugan Baranovskiinterprets the following passage ‘this eternal contradictionseeks to balance itself by an expansion of the outlying fields ofproduction’ as if Marx had meant production itself by ‘outlyingfields of production’, he violates not only the spirit of thelanguage but also Marx’s clear train of thought. The ‘outlyingfields of production’ are clearly and unequivocally not productionitself but consumption which ‘must be continually extended’.The following passage inTheorien über den Mehrwert,amongst others, sufficiently shows that Marx had this in mindand nothing else: ‘Ricardo therefore consistently denies the[Pg 346]necessity for anexpansion of the market to accompany the expansionof production and the growth of capital. The entire capitalexisting within a country can also be profitably used in thatcountry. He therefore argues against Adam Smith who had setup his (Ricardo’s) opinion on the one hand but also contradictedit with his usual sure instinct.’[343]

In yet another passage, Marx clearly shows that TuganBaranovski’s notion of production for production’s sake is whollyalien to him: ‘Besides, we have seen in volume ii part iii thata continuous circulation takes place between constant capitaland constant capital (even without considering any acceleratedaccumulation), which is in so far independent of individualconsumption, as it never enters into such consumption, butwhich is nevertheless definitely limited by it, because the productionof constant capital never takes place for its own sake,but solely because more of this capital is needed in thosespheres of production whose products pass into individualconsumption.’[344]

Admittedly, in the diagram in volume ii, Tugan Baranovski’ssole support, market and production coincide—they are oneand the same. Expansion of the market here means extendedproduction, since production is said to be its own exclusivemarket—the consumption of the workers being an element ofproduction, i.e. the reproduction of variable capital. Thereforethe limit for both the expansion of production and the extensionof the market is one and the same: it is given by the volume ofthe social capital, or the stage of accumulation already attained.The greater the quantity of surplus value that has been extractedin the natural form of capital, the more can be accumulated;and the greater the volume of accumulation, the moresurplus value can be invested in its material form of capital, i.e.the more can be realised. Thus the diagram does not admit thecontradiction outlined in the analysis of volume iii. In theprocess described by the diagram there is no need for a continualextension of the market beyond the consumption of capitalistsand workers, nor is the limited social capacity for consumptionan obstacle to the smooth course of production and its unlimitedcapacity for expansion. The diagram does indeed permit ofcrises but only because of a lack of proportion within production,[Pg 347]because of a defective social control over the productiveprocess. It precludes, however, the deep and fundamentalantagonism between the capacity to consume and the capacity toproduce in a capitalist society, a conflict resulting from the veryaccumulation of capital which periodically bursts out in crisesand spurs capital on to a continual extension of the market.

CHAPTER XXVI

THE REPRODUCTION OF CAPITALAND ITS SOCIAL SETTING

Marx’s diagram of enlarged reproduction cannot explainthe actual and historical process of accumulation.And why? Because of the very premises of the diagram.The diagram sets out to describe the accumulative process onthe assumption that the capitalists and workers are the soleagents of capitalist consumption. We have seen that Marx consistentlyand deliberately assumes the universal and exclusivedomination of the capitalist mode of production as a theoreticalpremise of his analysis in all three volumes ofCapital. Underthese conditions, there can admittedly be no other classes ofsociety than capitalists and workers; as the diagram has it, all‘third persons’ of capitalist society—civil servants, the liberalprofessions, the clergy, etc.—must, as consumers, be counted inwith these two classes, and preferably with the capitalist class.This axiom, however, is a theoretical contrivance—real life hasnever known a self-sufficient capitalist society under the exclusivedomination of the capitalist mode of production. Thistheoretical device is perfectly admissible so long as it merelyhelps to demonstrate the problem in its integrity and does notinterfere with its very conditions. A case in point is the analysisof simple reproduction of the aggregate social capital, where theproblem itself rests upon a fiction: in a society producing bycapitalist methods, i.e. a society which creates surplus value, thewhole of the latter is taken to be consumed by the capitalistswho appropriate it. The object is to present the forms of socialproduction and reproduction under these given conditions. Herethe very formulation of the problem implies that productionknows no other consumers than capitalists and workers and thusstrictly conforms to Marx’s premise: universal and exclusivedomination of the capitalist mode of production. The implicationsof both fictions are the same. Similarly, it is quite legitimate[Pg 349]to postulate absolute dominance of capital in an analysis of theaccumulation of individual capitals, such as is given inCapital,volume i. The reproduction of individual capitals is an elementin total social reproduction but one which follows an independentcourse, contrary to the movements of the other elements.In consequence it will not do simply to take together the individualmovements of the respective capitals in order to arrive atthe total movement of social capital, since the latter is essentiallydifferent. The natural conditions of reproducing individualcapitals therefore neither conform with one another, nor do theyconform to the relations of the total capital. Under normalconditions of circulation, every individual capital engages inthe process of circulation and of accumulation entirely on itsown account, depending upon others only in so far, of course,as it is compelled to find a market for its product and mustfind available the means of production it requires for its specificactivities. Whether the strata who afford this market and providethe necessary means of production are themselves capitalistproducers or not is completely immaterial for the individualcapital, although, in theory, the most favourable premise foranalysing the accumulation of individual capital is the assumptionthat capitalist production has attained universal and exclusivedomination and is the sole setting of this process.[345]

Now, however, the question arises whether the assumptionswhich were decisive in the case of individual capital, are alsolegitimate for the consideration of aggregate capital.

‘We must now put the problem in this form:given universalaccumulation, that is to say provided that in all branches of productionthere is greater or less accumulation of capital—whichin fact is a condition of capitalist production, and which is justas natural to the capitalistqua capitalist as it is natural to themiser to amass money (but which is also necessary for the perpetuationof capitalist production)—what are theconditions ofthis universal accumulation, to what elements can it be reduced?’

[Pg 350]And the answer: ‘The conditions for the accumulation of capital areprecisely those which rule its original production and reproduction ingeneral: these conditions being that one part of the money buyslabour and the other commodities (raw materials, machinery,etc.) ... Accumulation of new capital can only proceed thereforeunder the same conditions under which already existingcapital is reproduced.’[346]

In real life the actual conditions for the accumulation of theaggregate capital are quite different from those prevailing forindividual capitals and for simple reproduction. The problemamounts to this: If an increasing part of the surplus value is notconsumed by the capitalists but employed in the expansion ofproduction, what, then, are the forms of social reproduction?What is left of the social product after deductions for the replacementof the constant capital cannot,ex hypothesi, be absorbedby the consumption of the workers and capitalists—this beingthe main aspect of the problem—nor can the workers andcapitalists themselves realise the aggregate product. They canalways only realise the variable capital, that part of the constantcapital which will be used up, and the part of the surplus valuewhich will be consumed, but in this way they merely ensure thatproduction can be renewed on its previous scale. The workersand capitalists themselves cannot possibly realise that part ofthe surplus value which is to be capitalised. Therefore, therealisation of the surplus value for the purposes of accumulationis an impossible task for a society which consists solely of workersand capitalists. Strangely enough, all theorists who analysedthe problem of accumulation, from Ricardo and Sismondi toMarx, started with the very assumption which makes theirproblem insoluble. A sure instinct that realisation of the surplusvalue requires ‘third persons’, that is to say consumers otherthan the immediate agents of capitalist production (i.e. workersand capitalists) led to all kinds of subterfuges: ‘unproductiveconsumption’ as presented by Malthus in the person of thefeudal landowner, by Vorontsov in militarism, by Struve in the‘liberal professions’ and other hangers-on of the capitalist class;or else foreign trade is brought into play which proved a usefulsafety valve to all those who regarded accumulation with[Pg 351]scepticism, from Sismondi to Nicolayon. Because of these insolubledifficulties, others like v. Kirchmann and Rodbertustried to do without accumulation altogether, or, like Sismondiand his Russian ‘populist’ followers, stressed the need forat least putting the dampers on accumulation as much aspossible.

The salient feature of the problem of accumulation, and thevulnerable point of earlier attempts to solve it, has only beenshown up by Marx’s more profound analysis, his precise diagrammaticdemonstration of the total reproductive process, andespecially his inspired exposition of the problem of simple reproduction.Yet he could not supply immediately a finished solutioneither, partly because he broke off his analysis almost as soon ashe had begun it, and partly because he was then preoccupied,as we have shown, with denouncing the analysis of Adam Smithand thus rather lost sight of the main problem. In fact, he madethe solution even more difficult by assuming the capitalist modeof production to prevail universally. Nevertheless, a solution ofthe problem of accumulation, in harmony both with other partsof Marx’s doctrine and with the historical experience and dailypractice of capitalism, is implied in Marx’s complete analysis ofsimple reproduction and his characterisation of the capitalistprocess as a whole which shows up its immanent contradictionsand their development (inCapital, vol. iii). In the light of this,the deficiencies of the diagram can be corrected. All the relationsbeing, as it were, incomplete, a closer study of thediagram of enlarged reproduction will reveal that it points tosome sort of organisation more advanced than purely capitalistproduction and accumulation.

Up to now we have only considered one aspect of enlargedreproduction, the problem of realising the surplus value, whosedifficulties hitherto had claimed the sceptics’ whole attention.Realisation of the surplus value is doubtless a vital question ofcapitalist accumulation. It requires as its prime condition—ignoring,for simplicity’s sake, the capitalists’ fund of consumptionaltogether—that there should be strata of buyers outsidecapitalist society. Buyers, it should be noted, not consumers,since the material form of the surplus value is quite irrelevant toits realisation. The decisive fact is that the surplus value cannotbe realised by sale either to workers or to capitalists, but only[Pg 352]if it is sold to such social organisations or strata whose ownmode of production is not capitalistic. Here we can conceiveof two different cases:

(1) Capitalist production supplies consumer goods over andabove its own requirements, the demand of its workers andcapitalists, which are bought by non-capitalist strata andcountries. The English cotton industry, for instance, during thefirst two-thirds of the nineteenth century, and to some extenteven now, has been supplying cotton textiles to the peasantsand petty-bourgeois townspeople of the European continent,and to the peasants of India, America, Africa and so on. Theenormous expansion of the English cotton industry was thusfounded on consumption by non-capitalist strata and countries.[347]In England herself, this flourishing cotton industry called forthlarge-scale development in the production of industrial machinery(bobbins and weaving-looms), and further in the metaland coal industries and so on. In this instance, Department IIrealised its products to an increasing extent by sale to non-capitalistsocial strata, and by its own accumulation it createdon its part an increasing demand for the home produce ofDepartment I, thus helping the latter to realise its surplus valueand to increase its own accumulation.

(2) Conversely, capitalist production supplies means of productionin excess of its own demand and finds buyers in non-capitalistcountries. English industry, for instance, in the firsthalf of the nineteenth century supplied materials for the construction[Pg 353]of railroads in the American and Australian states.(The building of railways cannot in itself be taken as evidencefor the domination of capitalist production in a country. As amatter of fact, the railways in this case provided only one of thefirst conditions for the inauguration of capitalist production.)Another example would be the German chemical industrywhich supplies means of production such as dyes in greatquantities to Asiatic, African and other countries whose ownproduction is not capitalistic.[348] Here Department I realises itsproducts in extra-capitalist circles. The resulting progressiveexpansion of Department I gives rise to a corresponding expansionof Department II in the same (capitalistically producing)country in order to supply the means of subsistence for thegrowing army of workers in Department I.

Each of these cases differs from Marx’s diagram. In one case,the product of Department II exceeds the needs of both departments,measured by the variable capital and the consumed partof the surplus value. In the second case, the product of DepartmentI exceeds the volume of constant capital in both departments,enlarged though it is for the purpose of expandingproduction. In both cases, the surplus value does not come intobeing in that natural form which would make its capitalisationin either department possible and necessary. These two prototypescontinually overlap in real life, supplement each other andmerge.

In this contest, one point seems still obscure. The surplusof consumer goods, say cotton fabrics, which is sold to non-capitalistcountries, does not exclusively represent surplus value,but, as a capitalist commodity, it embodies also constant andvariable capital. It seems quite arbitrary to assume that justthose commodities which are sold outside the capitalist strataof society should represent nothing but surplus value. On theother hand, Department I clearly can in this case not onlyrealise its surplus value but also accumulate, and that withoutrequiring another market for its product than the two departmentsof capitalist production. Yet both these objections areonly apparent. All we need remember is that each component[Pg 354]of the aggregate product represents a proportion of the totalvalue, that under conditions of capitalist production not only theaggregate product but every single commodity contains surplusvalue; which consideration does not prevent the individualcapitalist, however, from computing that the sale of his specificcommodities must first reimburse him for his outlay on constantcapital and secondly replace his variable capital (or, ratherloosely, but in accordance with actual practice: it must firstreplace his fixed, and then his circulating capital); what thenremains will go down as profit. Similarly, we can divide theaggregate social product into three proportionate parts which,in terms of value, correspond to (1) the constant capital that hasbeen used up in society, (2) the variable capital, and (3) theextracted surplus value. In the case of simple reproduction theseproportions are also reflected in the material shape of theaggregate product: the constant capital materialises as meansof production, the variable capital as means of subsistence forthe workers, and the surplus value as means of subsistence forthe capitalist. Yet as we know, the concept of simple reproductionwith consumption of the entire surplus value by thecapitalists is a mere fiction. As for enlarged reproduction oraccumulation, in Marx’s diagram the composition of the socialproduct in terms of value is also strictly in proportion to itsmaterial form: the surplus value, or rather that part of it whichis earmarked for capitalisation, has from the very beginning theform of material means of production and means of subsistencefor the workers in a ratio appropriate to the expansion of productionon a given technical basis. As we have seen, this conception,which is based upon the self-sufficiency and isolation ofcapitalist production, falls down as soon as we consider therealisation of the surplus value. If we assume, however, that thesurplus value is realised outside the sphere of capitalist production,then its material form is independent of the requirementsof capitalist production itself. Its material form conformsto the requirements of those non-capitalist circles who help torealise it, that is to say, capitalist surplus value can take theform of consumer goods, e.g. cotton fabrics, or of means ofproduction, e.g. materials for railway construction, as the casemay be. If one department realises its surplus value by exportingits products, and with the ensuing expansion of production[Pg 355]helps the other department to realise its surplus value on thehome market, then the fact still remains that thesocial surplusvalue must yet be taken as realised outside the two departments,either mediately or immediately. Similar considerations enablethe individual capitalist to realise his surplus value, even if thewhole of his commodities can only replace either the variable orthe constant capital of another capitalist.

Nor is the realisation of the surplus value the only vital aspectof reproduction. Given that Department I has disposed of itssurplus value outside, thereby starting the process of accumulation,and further, that it can expect a new increase in thedemand in non-capitalist circles, these two conditions add up toonly half of what is required for accumulation. There is manya slip ’twixt the cup and the lip. The second requirement ofaccumulation is access to material elements necessary for expandingreproduction. Seeing that we have just turned thesurplus product of Department I into money by getting rid ofthe surplus means of production to non-capitalist circles, fromwhere are these material elements then to come? The transactionwhich is the portal for realising the surplus value is also,as it were, a backdoor out of which flies all possibility of convertingthis realised surplus value into productive capital—oneleads to the nether regions and the other to the deep sea. Let ustake a closer look.

Here we usec in both Departments I and II as if it were theentire constant capital in production. Yet this we know iswrong. Only for the sake of simplifying the diagram have wedisregarded that thec which figures in Departments I and IIof the diagram is only part of the aggregate constant capital ofsociety, that is to say that part which, circulating during oneyear, is used up and embodied in the products of one period ofproduction. Yet it would be perfectly absurd if capitalist production—orany other—would use up its entire constant capitaland create it anew in every period of production. On the contrary,we assume that the whole mass of means of production,for the periodical total renewal of which the diagram providesin annual instalments—renewal of the used-up part—lies atthe back of production as presented in the diagram. With progressinglabour productivity and an expanding volume ofproduction, this mass increases not only absolutely but also[Pg 356]relatively to the part which is consumed in production in everycase, together with a corresponding increase in the efficiencyof the constant capital. It is the more intensive exploitation ofthis part of the constant capital, irrespective of its increase invalue, which is of paramount importance for the expansion ofproduction.

‘In the extractive industries, mines, etc., the raw materialsform no part of the capital advanced. The subject of labour isin this case not a product of previous labour, but is furnishedby Nature gratis, as in the case of metals, minerals, coal, stone,etc. In these cases the constant capital consists almost exclusivelyof instruments of labour, which can very well absorb anincreased quantity of labour (day and night shifts of labourers,e.g.). All other things being equal, the mass and value of theproduct will rise in direct proportion to the labour expended.As on the first day of production, the original produce-formers,now turned into the creators of the material elements of capital—manand Nature—still work together. Thanks to the elasticityof labour-power, the domain of accumulation has extendedwithout any previous enlargement of constant capital.—Inagriculture the land under cultivation cannot be increasedwithout the advance of more seed and manure. But this advanceonce made, the purely mechanical working of the soil itselfproduces a marvellous effect on the amount of the product. Agreater quantity of labour, done by the same number oflabourers as before, thus increases the fertility, without requiringany new advance in the instruments of labour. It is once againthe direct action of man on Nature which becomes an immediatesource of greater accumulation, without the interventionof any new capital. Finally, in what is called manufacturingindustry, every additional expenditure of labour presupposes acorresponding additional expenditure of raw materials, but notnecessarily of instruments of labour. And as extractive industryand agriculture supply manufacturing industry with its rawmaterials and those of its instruments of labour, the additionalproduct the former have created without additional advance ofcapital, tells also in favour of the latter.—General result: byincorporating with itself the two primary creators of wealth,labour-power and the land, capital acquires a power of expansionthat permits it to augment the elements of its accumulation[Pg 357]beyond the limits apparently fixed by its own magnitude, orby the value and the mass of the means of production, alreadyproduced, in which it has its being.’[349]

In addition, there is no obvious reason why means of productionand consumer goods should be produced by capitalistmethods alone. This assumption, for all Marx used it as thecorner-stone of his thesis, is in conformity neither with the dailypractice, and the history, of capital, nor with the specific characterof this mode of production. In the first half of the nineteenthcentury, a great part of the surplus value in England wasproduced in form of cotton fabrics. Yet the material elementsfor the capitalisation of this surplus value, although they certainlyrepresented a surplus product, still were by no means allcapitalist surplus value, to mention only raw cotton from theslave states of the American Union, or grain (a means of subsistencefor the English workers) from the fields of serf-owningRussia. How much capitalist accumulation depends upon meansof production which are not produced by capitalist methods isshown for example by the cotton crisis in England during theAmerican War of Secession, when the cultivation of the plantationscame to a standstill, or by the crisis of European linen-weavingduring the war in the East, when flax could not beimported from serf-owning Russia. We need only recall thatimports of corn raised by peasants—i.e. not produced by capitalistmethods—played a vital part in the feeding of industriallabour, as an element, that is to say, of variable capital, for afurther illustration of the close ties between non-capitalist strataand the material elements necessary to the accumulation ofcapital.

Moreover, capitalist production, by its very nature, cannotbe restricted to such means of production as are producedby capitalist methods. Cheap elements of constant capital areessential to the individual capitalist who strives to increase hisrate of profit. In addition, the very condition of continuous improvementsin labour productivity as the most importantmethod of increasing the rate of surplus value, is unrestrictedutilisation of all substances and facilities afforded by nature andsoil. To tolerate any restriction in this respect would be contraryto the very essence of capital, its whole mode of existence. After[Pg 358]many centuries of development, the capitalist mode of productionstill constitutes only a fragment of total world production.Even in the small Continent of Europe, where it now chieflyprevails, it has not yet succeeded in dominating entire branchesof production, such as peasant agriculture and the independenthandicrafts; the same holds true, further, for large parts ofNorth America and for a number of regions in the other continents.In general, capitalist production has hitherto been confinedmainly to the countries in the temperate zone, whilst itmade comparatively little progress in the East, for instance, andthe South. Thus, if it were dependent exclusively on elementsof production obtainable within such narrow limits, its presentlevel and indeed its development in general would have beenimpossible. From the very beginning, the forms and laws ofcapitalist production aim to comprise the entire globe as a storeof productive forces. Capital, impelled to appropriate productiveforces for purposes of exploitation, ransacks the wholeworld, it procures its means of production from all corners ofthe earth, seizing them, if necessary by force, from all levels ofcivilisation and from all forms of society. The problem of thematerial elements of capitalist accumulation, far from beingsolved by the material form of the surplus value that has beenproduced, takes on quite a different aspect. It becomes necessaryfor capital progressively to dispose ever more fully of thewhole globe, to acquire an unlimited choice of means of production,with regard to both quality and quantity, so as to findproductive employment for the surplus value it has realised.

The process of accumulation, elastic and spasmodic as it is,requires inevitably free access to ever new areas of raw materialsin case of need, both when imports from old sources fail or whensocial demand suddenly increases. When the War of Secessioninterfered with the import of American cotton, causing thenotorious ‘cotton famine’ in the Lancashire district, new andimmense cotton plantations sprang up in Egypt almost at once,as if by magic. Here it was Oriental despotism, combined withan ancient system of bondage, which had created a sphere ofactivity for European capital. Only capital with its technicalresources can effect such a miraculous change in so short a time—butonly on the pre-capitalist soil of more primitive socialconditions can it develop the ascendancy necessary to achieve[Pg 359]such miracles. Another example of the same kind is the enormousincrease in the world consumption of rubber which at present(1912) necessitates a supply of latex to the value of £50,000,000per annum. The economic basis for the production of rawmaterials is a primitive system of exploitation practised byEuropean capital in the African colonies and in America, wherethe institutions of slavery and bondage are combined in variousforms.[350]

Between the production of surplus value, then, and the subsequentperiod of accumulation, two separate transactions takeplace—that of realising the surplus value, i.e. of converting itinto pure value, and that of transforming this pure value intoproductive capital. They are both dealings between capitalistproduction and the surrounding non-capitalist world. From theaspect both of realising the surplus value and of procuring thematerial elements of constant capital, international trade is aprime necessity for the historical existence of capitalism—aninternational trade which under actual conditions is essentiallyan exchange between capitalistic and non-capitalistic modes ofproduction.

Hitherto we have considered accumulation solely with regardto surplus value and constant capital. The third element ofaccumulation is variable capital which increases with progressiveaccumulation. In Marx’s diagram, the social product containsever more means of subsistence for the workers as thematerial form proper to this variable capital. The variablecapital, however, is not really the means of subsistence for theworkers but is in fact living labour for whose reproduction thesemeans of subsistence are necessary. One of the fundamentalconditions of accumulation is therefore a supply of living labourwhich can be mobilised by capital to meet its demands. Thissupply can be increased under favourable conditions—but only[Pg 360]up to a certain point—by longer hours and more intensivework. Both these methods of increasing the supply, however, donot enlarge the variable capital, or do so only to a small extent(e.g. payment for overtime). Moreover, they are confined todefinite and rather narrow limits which they cannot exceedowing to both natural and social causes. The increasing growthof variable capital which accompanies accumulation musttherefore become manifest in ever greater numbers of employedlabour. Where can this additional labour be found?

In his analysis of the accumulation of individual capital,Marx gives the following answer: ‘Now in order to allow ofthese elements actually functioning as capital, the capitalistclass requires additional labour. If the exploitation of thelabourers already employed does not increase, either extensivelyor intensively, then additional labour-power must be found. Forthis the mechanism of capitalist production provides beforehand,by converting the working class into a class dependent onwages, a class whose ordinary wages suffice, not only for itsmaintenance, but for its increase. It is only necessary for capitalto incorporate this additional labour-power, annually suppliedby the working class in the shape of labourers of all ages, withthe surplus means of production comprised in the annualproduce, and the conversion of surplus-value into capital iscomplete.’[351]

[Pg 361]Thus the increase in the variable capital is directly andexclusively attributed to the natural physical increase of a workingclass already dominated by capital. This is in strict conformitywith the diagram of enlarged reproduction which recognisesonly the social classes of capitalists and workers, andregards the capitalist mode of production as exclusive andabsolute. On these assumptions, the natural increase of theworking class is the only source of extending the labour supplycommanded by capital. This view, however, is contrary to thelaws governing the process of accumulation. The natural propagationof the workers and the requirements of accumulatingcapital are not correlative in respect of time or quantity. Marxhimself has most brilliantly shown that natural propagationcannot keep up with the sudden expansive needs of capital. Ifnatural propagation were the only foundation for the developmentof capital, accumulation, in its periodical swings fromoverstrain to exhaustion, could not continue, nor could the productivesphere expand by leaps and bounds, and accumulationitself would become impossible. The latter requires an unlimitedfreedom of movement in respect of the growth of variablecapital equal to that which it enjoys with regard to the elementsof constant capital—that is to say it must needs dispose over thesupply of labour power without restriction. Marx considers thatthis can be achieved by an ‘industrial reserve army of workers’.His diagram of simple reproduction admittedly does not recognisesuch an army, nor could it have room for it, since thenatural propagation of the capitalist wage proletariat cannotprovide an industrial reserve army. Labour for this army isrecruited from social reservoirs outside the dominion of capital—itis drawn into the wage proletariat only if need arises. Onlythe existence of non-capitalist groups and countries can guaranteesuch a supply of additional labour power for capitalistproduction. Yet in his analysis of the industrial reserve army[352]Marx only allows for (a) the displacement of older workers bymachinery, (b) an influx of rural workers into the towns inconsequence of the ascendancy of capitalist production in agriculture,(c) occasional labour that has dropped out of industry,and (d) finally the lowest residue of relative over-population,the paupers. All these categories are cast off by the capitalist[Pg 362]system of production in some form or other, they constitute awage proletariat that is worn out and made redundant one wayor another. Marx, obviously influenced by English conditionsinvolving a high level of capitalist development, held that therural workers who continually migrate to the towns belong tothe wage proletariat, since they were formerly dominated byagricultural capital and now become subject to industrialcapital. He ignores, however, the problem which is of paramountimportance for conditions on the continent of Europe,namely the sources from which this urban and rural proletariatis recruited: the continual process by which the rural and urbanmiddle strata become proletarian with the decay of peasanteconomy and of small artisan enterprises, the very process, thatis to say, of incessant transition from non-capitalist to capitalistconditions of a labour power that is cast off by pre-capitalist,not capitalist, modes of production in their progressive breakdownand disintegration. Besides the decay of European peasantsand artisans we must here also mention the disintegration ofthe most varied primitive forms of production and of socialorganisation in non-European countries.

Since capitalist production can develop fully only with completeaccess to all territories and climes, it can no more confineitself to the natural resources and productive forces of thetemperate zone than it can manage with white labour alone.Capital needs other races to exploit territories where the whiteman cannot work. It must be able to mobilise world labourpower without restriction in order to utilise all productive forcesof the globe—up to the limits imposed by a system of producingsurplus value. This labour power, however, is in most casesrigidly bound by the traditional pre-capitalist organisation ofproduction. It must first be ‘set free’ in order to be enrolled inthe active army of capital. The emancipation of labour powerfrom primitive social conditions and its absorption by the capitalistwage system is one of the indispensable historical bases ofcapitalism. For the first genuinely capitalist branch of production,the English cotton industry, not only the cotton of theSouthern states of the American Union was essential, but alsothe millions of African Negroes who were shipped to America toprovide the labour power for the plantations, and who later,as a free proletariat, were incorporated in the class of wage[Pg 363]labourers in a capitalist system.[353] Obtaining the necessary labourpower from non-capitalist societies, the so-called ‘labour-problem’,is ever more important for capital in the colonies. Allpossible methods of ‘gentle compulsion’ are applied to solvingthis problem, to transfer labour from former social systems to thecommand of capital. This endeavour leads to the most peculiarcombinations between the modern wage system and primitiveauthority in the colonial countries.[354] This is a concrete example[Pg 364]of the fact that capitalist production cannot manage withoutlabour power from other social organisations.

Admittedly, Marx dealt in detail with the process ofappropriating non-capitalist means of production as well aswith the transformation of the peasants into a capitalist proletariat.Chapter xxiv ofCapital, vol. i, is devoted to describingthe origin of the English proletariat, of the capitalistic agriculturaltenant class and of industrial capital, with particularemphasis on the looting of colonial countries by Europeancapital. Yet we must bear in mind that all this is treated solelywith a view to so-called primitive accumulation. For Marx,these processes are incidental, illustrating merely the genesis ofcapital, its first appearance in the world; they are, as it were,travails by which the capitalist mode of production emerges[Pg 365]from a feudal society. As soon as he comes to analyse the capitalistprocess of production and circulation, he reaffirms theuniversal and exclusive domination of capitalist production.

Yet, as we have seen, capitalism in its full maturity alsodepends in all respects on non-capitalist strata and social organisationsexisting side by side with it. It is not merely a question ofa market for the additional product, as Sismondi and the latercritics and doubters of capitalist accumulation would have it.The interrelations of accumulating capital and non-capitalistforms of production extend over values as well as over materialconditions, for constant capital, variable capital and surplusvalue alike. The non-capitalist mode of production is the givenhistorical setting for this process. Since the accumulation ofcapital becomes impossible in all points without non-capitalistsurroundings, we cannot gain a true picture of it by assumingthe exclusive and absolute domination of the capitalist mode ofproduction. Sismondi and his school, when they attributed theirdifficulties entirely to the problem of realising the surplus value,indeed revealed a proper sense for the conditions vital toaccumulation. Yet the conditions for augmenting the materialelements of constant and variable capital are quite a differentmatter from those which govern the realisation of surplus value.Capital needs the means of production and the labour powerof the whole globe for untrammelled accumulation; it cannotmanage without the natural resources and the labour power ofall territories. Seeing that the overwhelming majority of resourcesand labour power is in fact still in the orbit of pre-capitalistproduction—this being the historicalmilieu of accumulation—capitalmust go all out to obtain ascendancy over theseterritories and social organisations. There is noa priori reasonwhy rubber plantations, say, run on capitalist lines, such ashave been laid out in India, might not serve the ends of capitalistproduction just as well. Yet if the countries of thosebranches of production are predominantly non-capitalist, capitalwill endeavour to establish domination over these countries andsocieties. And in fact, primitive conditions allow of a greaterdrive and of far more ruthless measures than could be toleratedunder purely capitalist social conditions.

It is quite different with the realisation of the surplus value.Here outside consumersqua other-than-capitalist are really[Pg 366]essential. Thus the immediate and vital conditions for capitaland its accumulation is the existence of non-capitalist buyers ofthe surplus value, which is decisive to this extent for the problemof capitalist accumulation.

Whatever the theoretical aspects, the accumulation of capital,as an historical process, depends in every respect upon non-capitalistsocial strata and forms of social organisation.

The solution to this problem which for almost a century hasbeen the bone of contention in economic theory thus lies betweenthe two extremes of the petty-bourgeois scepticismpreached by Sismondi, v. Kirchmann, Vorontsov and Nicolayon,who flatly denied accumulation, and the crudeoptimism advocated by Ricardo, Say and Tugan Baranovskiwho believed in capital’s unlimited capacity for parthenogenesis,with the logical corollary of capitalism-in-perpetuity.The solution envisaged by Marx lies in the dialectical conflictthat capitalism needs non-capitalist social organisations as thesetting for its development, that it proceeds by assimilating thevery conditions which alone can ensure its own existence.

At this point we should revise the conceptions of internal andexternal markets which were so important in the controversyabout accumulation. They are both vital to capitalist developmentand yet fundamentally different, though they must beconceived in terms of social economy rather than of politicalgeography. In this light, the internal market is the capitalistmarket, production itself buying its own products and supplyingits own elements of production. The external market is thenon-capitalist social environment which absorbs the products ofcapitalism and supplies producer goods and labour power forcapitalist production. Thus, from the point of view of economics,Germany and England traffic in commodities chiefly on aninternal, capitalist market, whilst the give and take betweenGerman industry and German peasants is transacted on anexternal market as far as German capital is concerned. Theseconcepts are strict and precise, as can be seen from the diagramof reproduction. Internal capitalist trade can at best realise onlycertain quantities of value contained in the social product: theconstant capital that has been used up, the variable capital, andthe consumed part of the surplus value. That part of the surplusvalue, however, which is earmarked for capitalisation, must be[Pg 367]realised elsewhere. If capitalisation of surplus value is the realmotive force and aim of production, it must yet proceed withinthe limits given by the renewal of constant and variable capital(and also of the consumed part of the surplus value). Further,with the international development of capitalism the capitalisationof surplus value becomes ever more urgent and precarious,and the substratum of constant and variable capital becomesan ever-growing mass—both absolutely and in relation to thesurplus value. Hence the contradictory phenomena that the oldcapitalist countries provide ever larger markets for, and becomeincreasingly dependent upon, one another, yet on the otherhand compete ever more ruthlessly for trade relations with non-capitalistcountries.[355] The conditions for the capitalisation ofsurplus value clash increasingly with the conditions for therenewal of the aggregate capital—a conflict which, incidentally,is merely a counterpart of the contradictions implied in the lawof a declining profit rate.

CHAPTER XXVII

THE STRUGGLE AGAINST NATURALECONOMY

Capitalism arises and develops historically amidst a non-capitalistsociety. In Western Europe it is found at firstin a feudal environment from which it in fact sprang—thesystem of bondage in rural areas and the guild system in thetowns—and later, after having swallowed up the feudal system,it exists mainly in an environment of peasants and artisans, thatis to say in a system of simple commodity production bothin agriculture and trade. European capitalism is further surroundedby vast territories of non-European civilisation rangingover all levels of development, from the primitive communisthordes of nomad herdsmen, hunters and gatherers to commodityproduction by peasants and artisans. This is the settingfor the accumulation of capital.

We must distinguish three phases: the struggle of capitalagainst natural economy, the struggle against commodity economy,and the competitive struggle of capital on the internationalstage for the remaining conditions of accumulation.

The existence and development of capitalism requires anenvironment of non-capitalist forms of production, but notevery one of these forms will serve its ends. Capitalism needsnon-capitalist social strata as a market for its surplus value, as asource of supply for its means of production and as a reservoirof labour power for its wage system. For all these purposes,forms of production based upon a natural economy are of nouse to capital. In all social organisations where natural economyprevails, where there are primitive peasant communities withcommon ownership of the land, a feudal system of bondage oranything of this nature, economic organisation is essentially inresponse to the internal demand; and therefore there is nodemand, or very little, for foreign goods, and also, as a rule, nosurplus production, or at least no urgent need to dispose of[Pg 369]surplus products. What is most important, however, is that, inany natural economy, production only goes on because bothmeans of production and labour power are bound in one formor another. The communist peasant community no less than thefeudalcorvée farm and similar institutions maintain their economicorganisation by subjecting the labour power, and themost important means of production, the land, to the rule oflaw and custom. A natural economy thus confronts the requirementsof capitalism at every turn with rigid barriers. Capitalismmust therefore always and everywhere fight a battle of annihilationagainst every historical form of natural economy that itencounters, whether this is slave economy, feudalism, primitivecommunism, or patriarchal peasant economy. The principalmethods in this struggle are political force (revolution, war),oppressive taxation by the state, and cheap goods; they arepartly applied simultaneously, and partly they succeed andcomplement one another. In Europe, force assumed revolutionaryforms in the fight against feudalism (this is the ultimateexplanation of the bourgeois revolutions in the seventeenth,eighteenth and nineteenth centuries); in the non-Europeancountries, where it fights more primitive social organisations, itassumes the forms of colonial policy. These methods, togetherwith the systems of taxation applied in such cases, and commercialrelations also, particularly with primitive communities,form an alliance in which political power and economic factorsgo hand in hand.

In detail, capital in its struggle against societies with a naturaleconomy pursues the following ends:

(1) To gain immediate possession of important sources of productiveforces such as land, game in primeval forests, minerals,precious stones and ores, products of exotic flora such as rubber,etc.

At the time of primitive accumulation, i.e. at the end of theMiddle Ages, when the history of capitalism in Europe began,and right into the nineteenth century, dispossessing the peasantsin England and on the Continent was the most striking weaponin the large-scale transformation of means of production and[Pg 370]labour power into capital. Yet capital in power performs thesame task even to-day, and on an even more important scale—bymodern colonial policy. It is an illusion to hope that capitalismwill ever be content with the means of production whichit can acquire by way of commodity exchange. In this respectalready, capital is faced with difficulties because vast tracts ofthe globe’s surface are in the possession of social organisationsthat have no desire for commodity exchange or cannot, becauseof the entire social structure and the forms of ownership, offerfor sale the productive forces in which capital is primarily interested.The most important of these productive forces is ofcourse the land, its hidden mineral treasure, and its meadows,woods and water, and further the flocks of the primitive shepherdtribes. If capital were here to rely on the process of slowinternal disintegration, it might take centuries. To wait patientlyuntil the most important means of production could be alienatedby trading in consequence of this process were tantamountto renouncing the productive forces of those territories altogether.Hence derives the vital necessity for capitalism in itsrelations with colonial countries to appropriate the most importantmeans of production. Since the primitive associations of thenatives are the strongest protection for their social organisationsand for their material bases of existence, capital must begin byplanning for the systematic destruction and annihilation of allthe non-capitalist social units which obstruct its development.With that we have passed beyond the stage of primitive accumulation;this process is still going on. Each new colonial expansionis accompanied, as a matter of course, by a relentless battle ofcapital against the social and economic ties of the natives, whoare also forcibly robbed of their means of production and labourpower. Any hope to restrict the accumulation of capital exclusivelyto ‘peaceful competition’, i.e. to regular commodityexchange such as takes place between capitalist producer-countries,rests on the pious belief that capital can accumulate withoutmediation of the productive forces and without the demandof more primitive organisations, and that it can rely upon theslow internal process of a disintegrating natural economy.Accumulation, with its spasmodic expansion, can no more waitfor, and be content with, a natural internal disintegration ofnon-capitalist formations and their transition to commodity[Pg 371]economy, than it can wait for, and be content with, the naturalincrease of the working population. Force is the only solutionopen to capital; the accumulation of capital, seen as an historicalprocess, employs force as a permanent weapon, not onlyat its genesis, but further on down to the present day. From thepoint of view of the primitive societies involved, it is a matter oflife or death; for them there can be no other attitude thanopposition and fight to the finish—complete exhaustion and extinction.Hence permanent occupation of the colonies by themilitary, native risings and punitive expeditions are the order ofthe day for any colonial regime. The method of violence, then,is the immediate consequence of the clash between capitalismand the organisations of a natural economy which would restrictaccumulation. Their means of production and their labourpower no less than their demand for surplus products is necessaryto capitalism. Yet the latter is fully determined to underminetheir independence as social units, in order to gain possessionof their means of production and labour power and toconvert them into commodity buyers. This method is the mostprofitable and gets the quickest results, and so it is also the mostexpedient for capital. In fact, it is invariably accompanied bya growing militarism whose importance for accumulation willbe demonstrated below in another connection. British policy inIndia and French policy in Algeria are the classical examples ofthe application of these methods by capitalism.

The ancient economic organisations of the Indians—the communistvillage community—had been preserved in their variousforms throughout thousands of years, in spite of all the politicaldisturbances during their long history. In the sixth centuryb.c. the Persians invaded the Indus basin and subjected part ofthe country. Two centuries later the Greeks entered and leftbehind them colonies, founded by Alexander on the patternof a completely alien civilisation. Then the savage Scythiansinvaded the country, and for centuries India remained underArab rule. Later, the Afghans swooped down from the Iranmountains, until they, too, were expelled by the ruthless onslaughtof Tartar hordes. The Mongols’ path was marked byterror and destruction, by the massacre of entire villages—thepeaceful countryside with the tender shoots of rice made crimsonwith blood. And still the Indian village community survived.[Pg 372]For none of the successive Mahometan conquerors hadultimately violated the internal social life of the peasant massesand its traditional structure. They only set up their own governorsin the provinces to supervise military organisation and tocollect taxes from the population. All conquerors pursued theaim of dominating and exploiting the country, but none was interestedin robbing the people of their productive forces and indestroying their social organisation. In the Moghul Empire, thepeasant had to pay his annual tribute in kind to the foreignruler, but he could live undisturbed in his village and couldcultivate his rice on hissholgura as his father had done beforehim. Then came the British—and the blight of capitalist civilisationsucceeded in disrupting the entire social organisation of thepeople; it achieved in a short time what thousands of years,what the sword of the Nogaians, had failed to accomplish. Theultimate purpose of British capital was to possess itself of thevery basis of existence of the Indian community: the land.

This end was served above all by the fiction, always popularwith European colonisers, that all the land of a colony belongsto the political ruler. In retrospect, the British endowed theMoghul and his governors with private ownership of the wholeof India, in order to ‘legalise’ their succession. Economic expertsof the highest repute, such as James Mill, duly supported thisfiction with ‘scientific’ arguments, so in particular with thefamous conclusion given below.[356]

[Pg 373]As early as 1793, the British in Bengal gave landed propertyto all thezemindars (Mahometan tax collectors) or hereditarymarket superintendents they had found in their district so as towin native support for the campaign against the peasant masses.Later they adopted the same policy for their new conquests inthe Agram province, in Oudh, and in the Central Provinces.Turbulent peasant risings followed in their wake, in the courseof which tax collectors were frequently driven out. In the resultingconfusion and anarchy British capitalists successfully appropriateda considerable portion of the land.

The burden of taxation, moreover, was so ruthlessly increasedthat it swallowed up nearly all the fruits of the people’slabour. This went to such an extreme in the Delhi and Allahabaddistricts that, according to the official evidence of theBritish tax authorities in 1854, the peasants found it convenientto lease or pledge their shares in land for the bare amount ofthe tax levied. Under the auspices of this taxation, usury cameto the Indian village, to stay and eat up the social organisation[Pg 374]from within like a canker.[357] In order to accelerate this process,the British passed a law that flew in the face of every traditionand justice known to the village community: compulsory alienationof village land for tax arrears. In vain did the old familyassociations try to protect themselves by options on their hereditaryland and that of their kindred. There was no stopping therot. Every day another plot of land fell under the hammer;individual members withdrew from the family unit, and thepeasants got into debt and lost their land.

The British, with their wonted colonial stratagems, tried tomake it appear as if their power policy, which had in factundermined the traditional forms of landownership and broughtabout the collapse of the Hindu peasant economy, had beendictated by the need to protect the peasants against nativeoppression and exploitation and served to safeguard their owninterests.[358] Britain artificially created a landed aristocracy at theexpense of the ancient property-rights of the peasant communities,and then proceeded to ‘protect’ the peasants against these[Pg 375]alleged oppressors, and to bring this illegally usurped land intothe possession of British capitalists.

Thus large estates developed in India in a short time, whileover large areas the peasants in their masses were turned intoimpoverished small tenants with a short-term lease.

Lastly, one more striking fact shows the typically capitalistmethod of colonisation. The British were the first conquerors ofIndia who showed gross indifference to public utilities. Arabs,Afghans and Mongols had organised and maintained magnificentworks of canalisation in India, they had given the countrya network of roads, spanned the rivers with bridges and seen tothe sinking of wells. Timur or Tamerlane, the founder of theMongol dynasty in India, had a care for the cultivation of thesoil, for irrigation, for the safety of the roads and the provisionof food for travellers.[359] The primitive Indian Rajahs, the Afghanor Mongol conquerors, at any rate, in spite of occasional crueltyagainst individuals, made their mark with the marvellous constructionswe can find to-day at every step and which seem tobe the work of a giant race. ‘The (East India) Company whichruled India until 1858 did not make one spring accessible, didnot sink a single well, nor build a bridge for the benefit of theIndians.’[360]

[Pg 376]Another witness, the Englishman James Wilson, says: ‘In theMadras Province, no-one can help being impressed by the magnificentancient irrigation systems, traces of which have beenpreserved until our time. Locks and weirs dam the rivers intogreat lakes, from which canals distribute the water for an areaof 60 or 70 miles around. On the large rivers, there are 30 to40 of such weirs.... The rain water from the mountains wascollected in artificial ponds, many of which still remain andboast circumferences of between 15 and 25 miles. Nearly allthese gigantic constructions were completed before the year1750. During the war between the Company and the Mongolrulers—and, be it said,during the entire period of our rule in India—theyhave sadly decayed.’[361]

No wonder! British capital had no object in giving the Indiancommunities economic support or helping them to survive.Quite the reverse, it aimed to destroy them and to deprive themof their productive forces. The unbridled greed, the acquisitiveinstinct of accumulation must by its very nature take everyadvantage of the ‘conditions of the market’ and can have nothought for the morrow. It is incapable of seeing far enoughto recognise the value of the economic monuments of an oldercivilisation. (Recently British engineers in Egypt feverishly triedto discover traces of an ancient irrigation system rather like theone a stupid lack of vision had allowed to decay in India, whenthey were charged with damming the Nile on a grand scale infurtherance of capitalist enterprise.) Not until 1867 was Englandable to appreciate the results of her noble efforts in thisrespect. In the terrible famine of that year a million people werekilled in the Orissa district alone; and Parliament was shockedinto investigating the causes of the emergency. The Britishgovernment has now introduced administrative measures in anattempt to save the peasant from usury. The Punjab AlienationAct of 1900 made it illegal to sell or mortgage peasant landsto persons other than of the peasant caste, though exceptionscan be made in individual cases, subject to the tax collector’s[Pg 377]approval.[362] Having deliberately disrupted the protecting ties ofthe ancient Hindu social associations, after having nurtured asystem of usury where nothing is thought of a 15 per cent chargeof interest, the British now entrust the ruined Indian peasantto the tender care of the Exchequer and its officials, under the‘protection’, that is to say, of those draining him of his livelihood.

Next to tormented British India, Algeria under French ruleclaims pride of place in the annals of capitalist colonisation.When the French conquered Algeria, ancient social and economicinstitutions prevailed among the Arab-Kabyle population.These had been preserved until the nineteenth century,and in spite of the long and turbulent history of the countrythey survive in part even to the present day.

Private property may have existed no doubt in the towns,among the Moors and Jews, among merchants, artisans andusurers. Large rural areas may have been seized by the Stateunder Turkish suzerainty—yet nearly half of the productiveland is jointly held by Arab and Kabyle tribes who still keep upthe ancient patriarchal customs. Many Arab families led thesame kind of nomad life in the nineteenth century as they haddone since time immemorial, an existence that appears restlessand irregular only to the superficial observer, but one that is infact strictly regulated and extremely monotonous. In summerthey were wont, man, woman and child, to take their herds andtents and migrate to the sea-swept shores of the Tell district;and in the winter they would move back again to the protectivewarmth of the desert. They travelled along definite routes, andthe summer and winter stations were fixed for every tribe andfamily. The fields of those Arabs who had settled on the landwere in most cases the joint property of the clans, and the greatKabyle family associations also lived according to old traditionalrules under the patriarchal guidance of their electedheads.

The women would take turns for household duties; a matriarch,again elected by the family, being in complete charge of theclan’s domestic affairs, or else the women taking turns of duty.This organisation of the Kabyle clans on the fringe of theAfrican desert bears a startling resemblance to that of the[Pg 378]famous Southern SlavonicZadruga—not only the fields but allthe tools, weapons and monies, all that the members acquire orneed for their work, are communal property of the clan. Personalproperty is confined to one suit of clothing, and in the caseof a woman to the dresses and ornaments of her dowry. Morevaluable attire and jewels, however, are considered commonproperty, and individuals were allowed to use them only if thewhole family approved. If the clan was not too numerous, mealswere taken at a common table; the women took it in turns tocook, but the eldest were entrusted with the dishing out. If afamily circle was too large, the head of the family would eachmonth ration out strictly proportionate quantities of uncookedfood to the individual families who then prepared them. Thesecommunities were bound together by close ties of kinship,mutual assistance and equality, and a patriarch would implorehis sons on his deathbed to remain faithful to the family.[363]

These social relations were already seriously impaired by therule of the Turks, established in Algeria in the sixteenth century.Yet the Turkish exchequer had by no means confiscatedall the land. That is a legend invented by the French at a muchlater date. Indeed, only a European mind is capable of such aflight of fancy which is contrary to the entire economic foundationof Islam both in theory and practice. In truth, the factswere quite different. The Turks did not touch the communalfields of the village communities. They merely confiscated agreat part of uncultivated land from the clans and converted itinto crownland under Turkish local administrators (Beyliks).The state worked these lands in part with native labour, andin part they were leased out on rent or against payment inkind. Further the Turks took advantage of every revolt of thesubjected families and of every disturbance in the country to[Pg 379]add to their possessions by large-scale confiscation of land, eitherfor military establishments or for public auction, when most ofit went to Turkish or other usurers. To escape from the burdenof taxation and confiscation, many peasants placed themselvesunder the protection of the Church, just as they had done inmedieval Germany. Hence considerable areas became Church-property.All these changes finally resulted in the following distributionof Algerian land at the time of the French conquest:crownlands occupied nearly 3,750,000 acres, and a further7,500,000 acres of uncultivated land as common property ofAll the Faithful (Bled-el-Islam). 7,500,000 acres had beenprivately owned by the Berbers since Roman times, and underTurkish rule a further 3,750,000 acres had come into privateownership, a mere 12,500,000 acres remaining communal propertyof individual Arab clans. In the Sahara, some of the7,500,000 acres fertile land near the Sahara Oases was communallyowned by the clans and some belonged to privateowners. The remaining 57,000,000 acres were mainly wasteland.

With their conquest of Algeria, the French made a great adoabout their work of civilisation, since the country, havingshaken off the Turkish yoke at the beginning of the eighteenthcentury, was harbouring the pirates who infested the Mediterraneanand trafficked in Christian slaves. Spain and theNorth American Union in particular, themselves at that timeslave traders on no mean scale, declared relentless war on thisMoslem iniquity. France, in the very throes of the Great Revolution,proclaimed a crusade against Algerian anarchy. Hersubjection of that country was carried through under the slogansof ‘combating slavery’ and ‘instituting orderly and civilised conditions’.Yet practice was soon to show what was at the bottomof it all. It is common knowledge that in the forty years followingthe subjection of Algeria, no European state suffered somany changes in its political system as France: the restorationof the monarchy was followed by the July Revolution and thereign of the ‘Citizen King’, and this was succeeded by theFebruary Revolution, the Second Republic, the Second Empire,and finally, after the disaster of 1870, by the Third Republic.In turn, the aristocracy, high finance, petty bourgeoisie and thelarge middle classes in general gained political ascendancy.[Pg 380]Yet French policy in Algeria remained undeflected by this successionof events; it pursued a single aim from beginning to end;at the fringe of the African desert, it demonstrated plainly thatall the political revolutions in nineteenth-century France centredin a single basic interest: the rule of a capitalist bourgeoisieand its institutions of ownership.

‘The bill submitted for your consideration’, said DeputyHumbert on June 30, 1873, in the Session of the FrenchNational Assembly as spokesman for the Commission for RegulatingAgrarian Conditions in Algeria, ‘is but the crowningtouch to an edifice well-founded on a whole series of ordinances,edicts, laws and decrees of the Senate which together andseverally have as the same object: the establishment of privateproperty among the Arabs.’

In spite of the ups and downs of internal French politicsFrench colonial policy persevered for fifty years in its systematicand deliberate efforts to destroy and disrupt communal property.It served two distinct purposes: The break-up of communalproperty was primarily intended to smash the socialpower of the Arab family associations and to quell their stubbornresistance against the French yoke, in the course of whichthere were innumerable risings so that, in spite of France’smilitary superiority, the country was in a continual state ofwar.[364] Secondly, communal property had to be disrupted inorder to gain the economic assets of the conquered country; theArabs, that is to say, had to be deprived of the land they hadowned for a thousand years, so that French capitalists could getit. Once again the fiction we know so well, that under Moslemlaw all land belongs to the ruler, was brought into play. Justas the English had done in British India, so Louis Philippe’sgovernors in Algeria declared the existence of communal propertyowned by the clan to be ‘impossible’. This fiction servedas an excuse to claim for the state most of the uncultivated areas,and especially the commons, woods and meadows, and to usethem for purposes of colonisation. A complete system of settlementdeveloped, the so-calledcantonments which settled Frenchcolonists on the clan land and herded the tribes into a small[Pg 381]area. Under the decrees of 1830, 1831, 1840, 1844, 1845 and1846 these thefts of Arab family land were legalised. Yet thissystem of settlement did not actually further colonisation; itonly bred wild speculation and usury. In most instances theArabs managed to buy back the land that had been taken fromthem, although they were thus incurring heavy debts. Frenchmethods of oppressive taxation had the same tendency, in particularthe law of June 16, 1851, proclaiming all forests to be stateproperty, which robbed the natives of 6,000,000 acres of pastureand brushwood, and took away the prime essential foranimal husbandry. This spate of laws, ordinances and regulationswrought havoc with the ownership of land in the country.Under the prevailing condition of feverish speculation in land,many natives sold their estates to the French in the hope of ultimatelyrecovering them. Quite often they sold the same plot totwo or three buyers at a time, and what is more, it was quiteoften inalienable family land and did not even belong to them.A company of speculators from Rouen, e.g., believed that theyhad bought 50,000 acres, but in fact they had only acquired adisputed title to 3,425 acres. There followed an infinite numberof lawsuits in which the French courts supported on principleall partitions and claims of the buyers. In these uncertain conditions,speculation, usury and anarchy were rife. But althoughthe introduction of French colonists in large numbers amongthe Arab population had aimed at securing support for theFrench government, this scheme failed miserably. Thus, underthe Second Empire, French policy tried another tack. Thegovernment, with its European lack of vision, had stubbornlydenied the existence of communal property for thirty years, butit had learned better at last. By a single stroke of the pen, jointfamily property was officially recognised and condemned to bebroken up. This is the double significance of the decree of theSenate dated April 22, 1864. General Allard declared in theSenate:

‘The government does not lose sight of the fact that thegeneral aim of its policy is to weaken the influence of the tribalchieftains and to dissolve the family associations. By this means,it will sweep away the last remnants of feudalism [sic!] defendedby the opponents of the government bill.... The surest methodof accelerating the process of dissolving the family associations[Pg 382]will be to institute private property and to settle Europeancolonists among the Arab families.’[365]

The law of 1863 created special Commissions for cuttingup the landed estates, consisting of the Chairman, either aBrigadier-General or Colonel, onesous-préfet, one representativeof the Arab military authorities and an official bailiff. Thesenatural experts on African economics and social conditions werefaced with the threefold task, first of determining the preciseboundaries of the great family estates, secondly to distribute theestates of each clan among its various branches, and finally tobreak up this family land into separate private allotments. Thisexpedition of the Brigadiers into the interior of Africa duly tookplace. The Commissions proceeded to their destinations. Theywere to combine the office of judge in all land disputes withthat of surveyor and land distributor, the final decision restingwith the Governor-General of Algeria. Ten years’ valiantefforts by the Commissions yielded the following result: between1863 and 1873, of 700 hereditary estates, 400 were shared outamong the branches of each clan, and the foundations for futureinequalities between great landed estates and small allotmentswere thus laid. One family, in fact, might receive between 2·5and 10 acres, while another might get as much as 250 or even450 acres, depending on the size of the estate and the numberof collaterals within the clan. Partition, however, stopped atthat point. Arab customs presented unsurmountable difficultiesto a further division of family land. In spite of Colonels andBrigadiers, French policy had again failed in its object to createprivate property for transfer to the French.

But the Third Republic, an undisguised regime of the bourgeoisie,had the courage and the cynicism to go straight for itsgoal and to attack the problem from the other end, disdainingthe preliminaries of the Second Empire. In 1873, the NationalAssembly worked out a law with the avowed intention immediatelyto split up the entire estates of all the 700 Arab clans,and forcibly to institute private property in the shortest possibletime. Desperate conditions in the colony were the pretext forthis measure. It had taken the great Indian famine of 1866 to[Pg 383]awaken the British public to the marvellous exploits of Britishcolonial policy and to call for a parliamentary investigation;and similarly, Europe was alarmed at the end of the sixties bythe crying needs of Algeria where more than forty years ofFrench rule culminated in wide-spread famine and a disastrousmortality rate among the Arabs. A commission of inquiry wasset up to recommend new legislation with which to bless theArabs: it was unanimously resolved that there was only one life-buoyfor them—the institution of private property; that alonecould save the Arab from destitution, since he would thenalways be able to sell or mortgage his land. It was decided therefore,that the only means of alleviating the distress of the Arabs,deeply involved in debts as they were because of the Frenchland robberies and oppressive taxation, was to deliver themcompletely into the hands of the usurers. This farce was expoundedin all seriousness before the National Assembly andwas accepted with equal gravity by that worthy body. The‘victors’ of the Paris Commune flaunted their brazenness.

In the National Assembly, two arguments in particular servedto support the new law: those in favour of the bill emphasisedover and over again that the Arabs themselves urgently desiredthe introduction of private property. And so they did, or ratherthe Algerian land speculators and usurers did, since they werevitally interested in ‘liberating’ their victims from the protectionof the family ties. As long as Moslem law prevailed in Algeria,hereditary clan and family lands were inalienable, which laidinsuperable difficulties in the way of anyone who wished tomortgage his land. The law of 1863 had merely made a breachin these obstacles, and the issue now at stake was their completeabolition so as to give a free hand to the usurers. The secondargument was ‘scientific’, part of the same intellectual equipmentfrom which that worthy, James Mill, had drawn for hisabstruse conclusions regarding Indian relations of ownership:English classical economics. Thoroughly versed in their masters’teachings, the disciples of Smith and Ricardo impressivelydeclaimed that private property is indispensable for the preventionof famines in Algeria, for more intensive and better cultivationof the land, since obviously no one would be prepared toinvest capital or intensive labour in a piece of land which doesnot belong to him and whose produce is not his own to enjoy.[Pg 384]But the facts spoke a different language. They proved that theFrench speculators employed the private property they hadcreated in Algeria for anything but the more intensive andimproved cultivation of the soil. In 1873, 1,000,000 acres wereFrench property. But the capitalist companies, the Algerian andSetif Company which owned 300,000 acres, did not cultivatethe land at all but leased it to the natives who tilled it in thetraditional manner, nor were 25 per cent of the other Frenchowners engaged in agriculture. It was simply impossible to conjureup capitalist investments and intensive agriculture overnight,just as capitalist conditions in general could not becreated out of nothing. They existed only in the imagination ofprofit-seeking French speculators, and in the benighted doctrinairevisions of their scientific economists. The essential point,shorn of all pretexts and flourishes which seem to justify the lawof 1873, was simply the desire to deprive the Arabs of theirland, their livelihood. And although these arguments had wornthreadbare and were evidently insincere, this law which was toput paid to the Algerian population and their material prosperity,was passed unanimously on July 26, 1873.

But even this master-stroke soon proved a failure. The policyof the Third Republic miscarried because of the difficulties insubstituting at one stroke bourgeois private property for theancient clan communism, just as the policy of the Second Empirehad come to grief over the same issue. In 1890, when the lawof July 26, 1873, supplemented by a second law on April 28,1887, had been in force for seventeen years, 14,000,000 francshad been spent on dealing with 40,000,000 acres. It was estimatedthat the process would not be completed before 1950 andwould require a further 60,000,000 francs. And still abolition ofclan communism, the ultimate purpose, had not been accomplished.What had really been attained was all too evident:reckless speculation in land, thriving usury and the economicruin of the natives.

Since it had been impossible to institute private property byforce, a new experiment was undertaken. The laws of 1873 and1887 had been condemned by a commission appointed for theirrevision by the Algerian government in 1890. It was anotherseven years before the legislators on the Seine made the effortto consider reforms for the ruined country. The new decree of[Pg 385]the Senate refrained in principle from instituting private propertyby compulsion or administrative measures. The laws ofFebruary 2, 1897, and the edict of the Governor-General ofAlgeria (March 3, 1898) both provided chiefly for the introductionof private property following a voluntary application bythe prospective purchaser or owner.[366] But there were clauses topermit a single owner, without the consent of the others, toclaim private property; further, such a ‘voluntary’ applicationcan be extorted at any convenient moment if the owner is indebt and the usurer exerts pressure. And so the new law left thedoors wide open for French and native capitalists further todisrupt and exploit the hereditary and clan lands.

Of recent years, this mutilation of Algeria which had beengoing on for eight decades meets with even less opposition,since the Arabs, surrounded as they are by French capital followingthe subjection of Tunisia (1881) and the recent conquestof Morocco, have been rendered more and more helpless. Thelatest result of the French regime in Algeria is an Arab exodusinto Turkey.[367]

CHAPTER XXVIII

THE INTRODUCTION OF COMMODITYECONOMY

The second condition of importance for acquiring meansof production and realising the surplus value is that commodityexchange and commodity economy should beintroduced in societies based on natural economy as soon astheir independence has been abrogated, or rather in the courseof this disruptive process. Capital requires to buy the productsof, and sell its commodities to, all non-capitalist strata andsocieties. Here at last we seem to find the beginnings of that‘peace’ and ‘equality’, thedo ut des, mutual interest, ‘peacefulcompetition’ and the ‘influences of civilisation’. For capital canindeed deprive alien social associations of their means of productionby force, it can compel the workers to submit to capitalistexploitation, but it cannot force them to buy its commodities orto realise its surplus value. In districts where natural economyformerly prevailed, the introduction of means of transport—railways,navigation, canals—is vital for the spreading of commodityeconomy, a further hopeful sign. The triumphant march ofcommodity economy thus begins in most cases with magnificentconstructions of modern transport, such as railway lines whichcross primeval forests and tunnel through the mountains, telegraphwires which bridge the deserts, and ocean liners which callat the most outlying ports. But it is a mere illusion that theseare peaceful changes. Under the standard of commerce, therelations between the East India Company and the spice-producingcountries were quite as piratical, extortionate and blatantlyfraudulent as present-day relations between Americancapitalists and the Red Indians of Canada whose furs they buy,or between German merchants and the Negroes of Africa.Modern China presents a classical example of the ‘gentle’,‘peace-loving’ practices of commodity exchange with backwardcountries. Throughout the nineteenth century, beginning with[Pg 387]the early forties, her history has been punctuated by wars withthe object of opening her up to trade by brute force. Missionariesprovoked persecutions of Christians, Europeans instigatedrisings, and in periodical massacres a completely helpless andpeaceful agrarian population was forced to match arms with themost modern capitalist military technique of all the GreatPowers of Europe. Heavy war contributions necessitated apublic debt, China taking up European loans, resulting inEuropean control over her finances and occupation of her fortifications;the opening of free ports was enforced, railway concessionsto European capitalists extorted. By all these measurescommodity exchange was fostered in China, from the earlythirties of the last century until the beginning of the Chineserevolution.

European civilisation, that is to say commodity exchangewith European capital, made its first impact on China with theOpium Wars when she was compelled to buy the drug fromIndian plantations in order to make money for British capitalists.In the seventeenth century, the East India Company hadintroduced the cultivation of poppies in Bengal; the use of thedrug was disseminated in China by its Canton branch. At thebeginning of the nineteenth century, opium fell so considerablyin price that it rapidly became the ‘luxury of the people’. In1821, 4,628 chests of opium were imported to China at anaverage price of £265; then the price fell by 50 per cent, andChinese imports rose to 9,621 chests in 1825, and to 26,670chests in 1830.[368] The deadly effects of the drug, especially of thecheaper kinds used by the poorer population, became a publiccalamity and made it necessary for China to lay an embargoon imports, as an emergency measure. Already in 1828, theviceroy of Canton had prohibited imports of opium, only todeflect the trade to other ports. One of the Peking censors commandedto investigate the question gave the following report:

‘I have learnt that people who smoke opium have developed[Pg 388]such a craving for this noxious drug that they make every effortto obtain this gratification. If they do not get their opium atthe usual hour, their limbs begin to tremble, they break out insweat, and they cannot perform the slightest tasks. But as soonas they are given the pipe, they inhale a few puffs and are curedimmediately.

‘Opium has therefore become a necessity for all who smoke it,and it is not surprising that under cross-examination by thelocal authorities they will submit to every punishment ratherthan reveal the names of their suppliers. Local authorities arealso in some cases given presents to tolerate the evil or to delayany investigation already under way. Most merchants whobring goods for sale into Canton also deal in smuggled opium.

‘I am of the opinion that opium is by far a greater evil thangambling, and that opium smokers should therefore be punishedno less than gamblers.’

The censor suggested that every convicted opium smokershould be sentenced to eighty strokes of the bamboo, and anybodyrefusing to give the name of his supplier to a hundredstrokes and three years of exile. The pigtailed Cato of Pekingconcludes his report with a frankness staggering to any Europeanofficial: ‘Apparently opium is mostly introduced fromabroad by dishonest officials in connivance with profit-seekingmerchants who transport it into the interior of the country.Then the first to indulge are people of good family, wealthyprivate persons and merchants, but ultimately the drug habitspreads among the common people. I have learnt that in allprovinces opium is smoked not only in the civil service but alsoin the army. The officials of the various districts indeed enjointhe legal prohibition of sale by special edicts. But at the sametime, their parents, families, dependants and servants simply goon smoking opium, and the merchants profit from the ban byincreased prices. Even the police have been won over; they buythe stuff instead of helping to suppress it, and this is an additionalreason for the disregard in which all prohibitions andordinances are held.’[369]

Consequently, a stricter law was passed in 1833 which madeevery opium smoker liable to a hundred strokes and two monthsin the stocks, and provincial governors were ordered to report[Pg 389]annually on their progress in the battle against opium. But therewere two sequels to this campaign: on the one hand large-scalepoppy plantations sprang up in the interior, particularly in theHonan, Setchuan, and Kueitchan provinces, and on the other,England declared war on China to get her to lift the embargo.These were the splendid beginnings of ‘opening China’ toEuropean civilisation—by the opium pipe.

Canton was the first objective. The fortifications of the townat the main arm of the Perl estuary could not have been moreprimitive. Every day at sunset a barrier of iron chains wasattached to wooden rafts anchored at various distances, andthis was the main defence. Moreover, the Chinese guns couldonly fire at a certain angle and were therefore completely ineffectual.With such primitive defences, just adequate to preventa few merchant ships from landing, did the Chinese meetthe British attack. A couple of British cruisers, then, sufficed toeffect an entry on September 7, 1839. The sixteen battle-junksand thirteen fire-ships which the Chinese put up for resistancewere shot up or dispersed in a matter of forty-five minutes. Afterthis initial victory, the British renewed the attack in the beginningof 1841 with a considerably reinforced fleet. This time thefleet, consisting in a number of battle-junks, and the forts wereattacked simultaneously. The first incendiary rocket that wasfired penetrated through the armour casing of a junk into thepowder chamber and blew the ship with the entire crew sky-high.In a short time eleven junks, including the flag-ship, weredestroyed, and the remainder precipitately made for safety.The action on land took a little longer. Since the Chinese gunswere quite useless, the British walked right through the fortifications,climbed to a strategic position—which was not evenguarded—and proceeded to slaughter the helpless Chinese fromabove. The casualty list of the battle was: for the Chinese600 dead, and for the British, 1 dead and 30 wounded, morethan half of the latter having been injured by the accidentalexplosion of a powder magazine. A few weeks later, therefollowed another British exploit. The forts of Anung-Hoy andNorth Wantong were to be taken. No less than twelve fullyequipped cruisers were available for this task. What is more,the Chinese, once again forgetful of the most important thing,had omitted to fortify the island of South Wantong. Thus the[Pg 390]British calmly landed a battery of howitzers to bombard thefort from one side, the cruisers shelling it from the other. Afterthat, the Chinese were driven from the forts in a matter ofminutes, and the landing met with no resistance. The ensuingdisplay of inhumanity—an English report says—will be for everdeeply deplored by the British staff. The Chinese, trying toescape from the barricades, had fallen into a moat which wassoon literally filled to the brim with helpless soldiers begging formercy. Into this mass of prostrate human bodies, the sepoys—actingagainst orders, it is claimed—fired again and again. Thisis the way in which Canton was made receptive to commodityexchange.

Nor did the other ports fare better. On July 4, 1841, threeBritish cruisers with 120 cannon appeared off the islands in theentrance to the town of Ningpo. More cruisers arrived the followingday. In the evening the British admiral sent a messageto the Chinese governor, demanding the capitulation of theisland. The governor explained that he had no power to resistbut could not surrender without orders from Peking. He thereforeasked for a delay. This was refused, and at half-past two inthe morning the British stormed the defenceless island. Withineight minutes, the fort and the houses on the shore were reducedto smouldering rubble. Having landed on the deserted coastlittered with broken spears, sabres, shields, rifles and a few deadbodies, the troops advanced on the walls of the island town ofTinghai. With daybreak, reinforced by the crews of other shipswhich had meanwhile arrived, they proceeded to put scaling-laddersto the scarcely defended ramparts. A few more minutesgave them mastery of the town. This splendid victory wasannounced with becoming modesty in an Order of the Day: ‘Fatehas decreed that the morning of July 5, 1841, should be the historicdate on which Her Majesty’s flag was first raised over themost beautiful island of the Celestial Empire, the first Europeanflag to fly triumphantly above this lovely countryside.’[370]

On August 25, 1841, the British approached the town ofAmoy, whose forts were armed with a hundred of the heaviestChinese guns. These guns being almost useless, and the commanderslacking in resource, the capture of the harbour waschild’s play. Under cover of a heavy barrage, British ships drew[Pg 391]near the walls of Kulangau, landed their marines, and after ashort stand the Chinese troops were driven out. The twenty-sixbattle-junks with 128 guns in the harbour were also captured,their crews having fled. One battery, manned by Tartars, heroicallyheld out against the combined fire of three British ships, buta British landing was effected in their rear and the post wipedout.

This was the finale of the notorious Opium War. By the peacetreaty of August 27, 1842, the island of Hongkong was ceded toBritain. In addition, the towns of Canton, Amoy, Futchou,Ningpo and Shanghai were to open their ports to foreign commerce.But within fifteen years, there was a further war againstChina. This time, Britain had joined forces with the French.In 1857, the allied navies captured Canton with a heroism equalto that of the first war. By the peace of Tientsin (1858), theopium traffic, European commerce and Christian missions wereadmitted into the interior. Already in 1859, however, theBritish resumed hostilities and attempted to destroy the Chinesefortifications on the Peiho river, but were driven off after a fiercebattle in which 464 people were wounded or killed.[371]

[Pg 392]After that, Britain and France again joined forces. At the endof August 1860, 12,600 English and 7,500 French troops underGeneral Cousin-Montauban first captured the Taku forts withouta single shot having been fired. Then they proceeded towardsTientsin and on towards Peking. A bloody battle wasjoined at Palikao, and Peking fell to the European Powers.Entering the almost depopulated and completely undefendedcity, the victors began by pillaging the Imperial Palace, manfullyhelped by General Cousin himself, who was later to becomefield marshal and Count of Palikao. Then the Palace went upin flames, fired on Lord Elgin’s order as an imposed penance.[372]

The European Powers now obtained concessions to set upembassies in Peking, and to start trading with Tientsin andother towns. The Tchi-fu Convention of 1876 guaranteed fullfacilities for importing opium into China—at a time when theAnti-Opium League in England agitated against the spreadingof the drug habit in London, Manchester and other industrialdistricts, when a parliamentary commission declared the consumption[Pg 393]of opium to be harmful in the extreme. By all treatiesmade at that time between China and the Great Powers anyEuropean, whether merchant or missionary, was guaranteed theright to acquire land, to which end the legitimate argumentswere ably supported by deliberate fraud.

First and foremost the ambiguity of the treaty texts made aconvenient excuse for European capital to encroach beyondthe Treaty Ports. It used every loophole in the wording of thetreaties to begin with, and subsequently blackmailed the Chinesegovernment into permitting the missions to acquire land notalone in the Treaty Ports but in all the provinces of the realm.Their claim was based upon the notorious bare-faced distortionof the Chinese original in Abbé Delamarre’s official translationof the supplementary convention with France. French diplomacy,and the Protestant missions in particular, unanimouslycondemned the crafty swindle of the Catholic padre, but neverthelessthey were firm that the rights of French missions obtainedby this fraud should be explicitly extended to the Protestantmissions as well.[373]

China’s entry into commodity exchange, having begun withthe Opium Wars, was finally accomplished with a series of‘leases’ and the China campaign of 1900, when the commercialinterests of European capital sank to a brazen internationaldogfight over Chinese land. The description of the DowagerEmpress, who wrote to Queen Victoria after the capture of theTaku forts, subtly underlines this contrast between the initialtheory and the ultimate practice of the ‘agents of Europeancivilisation’:

‘To your Majesty, greeting!—In all the dealings of Englandwith the Empire of China, since first relations were establishedbetween us, there has never been any idea of territorial aggrandisementon the part of Great Britain, but only a keen desire topromote the interests of her trade. Reflecting upon the fact thatour country is now plunged into a dreadful condition of warfare,we bear in mind that a large proportion of China’s trade,seventy or eighty per cent, is done with England; moreover,your Customs duties are the lightest in the world, and few restrictionsare made at your sea-ports in the matter of foreign[Pg 394]importations; for these reasons our amiable relations withBritish merchants at our Treaty Ports have continued unbrokenfor the last half century, to our mutual benefit.—But a suddenchange has now occurred and general suspicion has beencreated against us. We would therefore ask you now to considerthat if, by any conceivable combination of circumstances,the independence of our Empire should be lost, and the Powersunite to carry out their long-plotted schemes to possess themselvesof our territory’—(in a simultaneous message to theEmperor of Japan, the impulsive Tzu Hsi openly refers to ‘Theearth-hungry Powers of the West, whose tigerish eyes of greedare fixed in our direction’[374] )—‘the results to your country’sinterests would be disastrous and fatal to your trade. At thismoment our Empire is striving to the utmost to raise an armyand funds sufficient for its protection; in the meanwhile we relyon your good services to act as mediator, and now anxiouslyawait your decision.’[375]

Both during the wars and in the interim periods, Europeancivilisation was busy looting and thieving on a grand scale inthe Chinese Imperial Palaces, in the public buildings and inthe monuments of ancient civilisation, not only in 1860, whenthe French pillaged the Emperor’s Palace with its legendarytreasures, or in 1900, ‘when all the nations vied with each otherto steal public and private property’. Every European advancewas marked not only with the progress of commodity exchange,but by the smouldering ruins of the largest and most venerabletowns, by the decay of agriculture over large rural areas, andby intolerably oppressive taxation for war contributions. Thereare more than 40 Chinese Treaty Ports—and every one of themhas been paid for with streams of blood, with massacre andruin.

CHAPTER XXIX

THE STRUGGLE AGAINST PEASANTECONOMY

An important final phase in the campaign against naturaleconomy is to separate industry from agriculture,to eradicate rural industries altogether from peasanteconomy. Handicraft in its historical beginnings was a subsidiaryoccupation, a mere appendage to agriculture in civilisedand settled societies. In medieval Europe it became graduallyindependent of thecorvée farm and agriculture, it developedinto specialised occupations, i.e. production of commodities byurban guilds. In industrial districts, production had progressedfrom home craft by way of primitive manufacture to the capitalistfactory of the staple industries, but in the rural areas, underpeasant economy, home crafts persisted as an intrinsic part ofagriculture. Every hour that could be spared from cultivatingthe soil was devoted to handicrafts which, as an auxiliarydomestic industry, played an important part in providing forpersonal needs.[376]

It is a recurrent phenomenon in the development of capitalistproduction that one branch of industry after the other is singledout, isolated from agriculture and concentrated in factories formass production. The textile industry provides the textbookexample, but the same thing has happened, though lessobviously, in the case of other rural industries. Capital must getthe peasants to buy its commodities and will therefore begin byrestricting peasant economy to a single sphere—that of agriculture—which[Pg 396]will not immediately and, under European conditionsof ownership, only with great difficulty submit to capitalistdomination.[377] To all outward appearance, this process isquite peaceful. It is scarcely noticeable and seemingly causedby purely economic factors. There can be no doubt that massproduction in the factories is technically superior to primitivepeasant industry, owing to a higher degree of specialisation,scientific analysis and management of the productive process,improved machinery and access to international resources ofraw materials. In reality, however, the process of separatingagriculture and industry is determined by factors such asoppressive taxation, war, or squandering and monopolisation ofthe nation’s land, and thus belongs to the spheres of politicalpower and criminal law no less than with economics.

Nowhere has this process been brought to such perfection asin the United States. In the wake of the railways, financed byEuropean and in particular British capital, the American farmercrossed the Union from East to West and in his progress overvast areas killed off the Red Indians with fire-arms and blood-hounds,liquor and venereal disease, pushing the survivors tothe West, in order to appropriate the land they had ‘vacated’,to clear it and bring it under the plough. The American farmer,the ‘backwoodsman’ of the good old times before the War ofSecession, was very different indeed from his modern counterpart.There was hardly anything he could not do, and he leda practically self-sufficient life on his isolated farm.

In the beginning of the nineties, one of the leaders of theFarmers’ Alliance, Senator Peffer, wrote as follows: ‘The Americanfarmer of to-day is altogether a different sort of man fromhis ancestor of fifty or a hundred years ago. A great many menand women now living remember when farmers were largelymanufacturers; that is to say, they made a great many implementsfor their own use. Every farmer had an assortment oftools with which he made wooden implements, as forks and[Pg 397]rakes, handles for his hoes and ploughs, spokes for his wagon,and various other implements made wholly out of wood. Thenthe farmer produced flax and hemp and wool and cotton. Thesefibres were prepared upon the farm; they were spun into yarn,woven into cloth, made into garments, and worn at home.Every farm had upon it a little shop for wood and iron work,and in the dwelling were cards and looms; carpets were woven,bed-clothing of different sorts was prepared; upon every farmgeese were kept, their feathers used for supplying the homedemand with beds and pillows, the surplus being disposed of atthe nearest market town. During the winter season wheat andflour and corn meal were carried in large wagons drawn byteams of six to eight horses a hundred or two hundred miles tomarket, and traded for farm supplies for the next year—groceriesand dry goods. Besides this, mechanics were scatteredamong the farmers. The farm wagon was in process of buildinga year or two; the material was found near the shop; the characterof the timber to be used was stated in the contract; it hadto be procured in a certain season and kept in the drying processa length of time specified, so that when the material was broughttogether in proper form and the wagon made, both parties tothe contract knew where every stick of it came from, and howlong it had been in seasoning. During winter time the neighbourhoodcarpenter prepared sashes and blinds and doors andmoulding and cornices for the next season’s building. When thefrosts of autumn came the shoemaker repaired to the dwellingsof the farmers and there, in a corner set apart to him, he madeup shoes for the family during the winter. All these things weredone among the farmers, and a large part of the expense waspaid with products of the farm. When winter approached, thebutchering season was at hand; meat for family use during thenext year was prepared and preserved in the smoke house. Theorchards supplied fruit for cider, for apple butter, and for preservesof different kinds, amply sufficient to supply the wants ofthe family during the year, with some to spare. Wheat wasthreshed, a little at a time, just enough to supply the needs of thefamily for ready money, and not enough to make it necessaryto waste one stalk of straw. Everything was saved and put to use.One of the results of that sort of economy was that comparativelya very small amount of money was required to conduct[Pg 398]the business of farming. A hundred dollars average probablywas as much as the largest farmers of that day needed in theway of cash to meet the demands of their farm work, paying forhired help, repairs of tools, and all other incidental expenses.’[378]

This Arcadian life was to come to a sudden end after theWar of Secession. The war had burdened the Union with anenormous National Debt, amounting to £1,200,000, and inconsequence the taxes were considerably increased. On theother hand, a feverish development of modern traffic and industry,machine-building in particular, was encouraged by theimposition of higher protective tariffs. The railway companieswere endowed with public lands on an imposing scale, in orderto promote railroad construction and farm-settlements: in 1867alone, they were given more than 192,500,000 acres, and so thepermanent way grew at an unprecedented rate. In 1860 itamounted to less than 31,000 miles, in 1870 it had grown tomore than 53,000 miles and in 1880 to more than 93,000 miles.(During the same period—1870-1880—the permanent way inEurope had grown from 80,000 miles to 100,000 miles.) The railwaysand speculations in land made for mass emigration fromEurope to the United States, and more than4¹⁄₂ million peopleimmigrated in the twenty-three years from 1869 to 1892. In thisway, the Union gradually became emancipated from European,and in particular from British, industry; factories were set upin the States and home industries developed for the productionof textiles, iron, steel and machinery. The process of revolutionarytransformation was most rapid in agriculture. Theemancipation of the slaves had compelled the Southern plantersto introduce the steam plough shortly after the Civil War, andnew farms had sprung up in the West in the wake of the railways,which from the very beginning employed the mostmodern machinery and technique.

‘The improvements are rapidly revolutionising the agricultureof the West, and reducing to the lowest minimum everattained, the proportion of manual labour employed in itsoperations.... Coincident with this application of mechanics[Pg 399]to agriculture, systematic and enlarged business aptitudes havealso sought alliance with this noble art. Farms of thousands ofacres have been managed with greater skill, a more economicaladaptation of means to ends, and with a larger margin of realprofit than many others of 80 acres.’[379]

During this time, direct and indirect taxation had increasedenormously. On June 30, 1864, during the Civil War, a newfinance bill was passed which is the basis of the present systemof taxation, and which raised taxes on consumption and incometo a staggering degree. This heavy war levy served as a pretextfor a real orgy of protective tariffs in order to offset the tax onhome production by customs duties.[380] Messrs. Morrill, Stevensand the other gentlemen who advanced the war as a lever forenforcing their protectionist programme, initiated the practiceof wielding the implement of a customs policy quite openly andcynically to further private profiteering interests of all descriptions.Any home producer who appeared before the legislativeassembly with a request for any kind of special tariff to fill hisown pocket saw his demands readily granted, and the tariffrates were made as high as any interested party might wish.

‘The war’, writes the American Taussig, ‘had in many ways abracing and ennobling influence on our national life; but itsimmediate effect on business affairs, and on all legislationaffecting moneyed interests, was demoralising. The line betweenpublic duty and private interests was often lost sight of bylegislators. Great fortunes were made by changes in legislationurged and brought about by those who were benefited bythem, and the country has seen with sorrow that the honour andhonesty of public men did not remain undefiled.’[381]

[Pg 400]This customs bill which completely revolutionised the country’seconomic life, and remained in force unchanged for twentyyears, was literally pushed through Congress in three days, andthrough the Senate in two, without criticism, without debate,without any opposition whatever.[382] Down to the present day itforms the basis of U.S. customs legislation.

This shift in U.S. fiscal policy ushered in an era of the mostbrazen parliamentary log-rolling and of undisguised and unrestrainedcorruption of elections, of the legislature and thepress to satisfy the greed of Big Business. ‘Enrichissez-vous’ becamethe catchword of public life after the ‘noble war’ to liberatemankind from the ‘blot of slavery’. On the stock exchange, theYankee negro-liberator sought his fortunes in orgies of speculation;in Congress, he endowed himself with public lands,enriched himself by customs and taxes, by monopolies, fraudulentshares and theft of public funds. Industry prospered. Gonewere the times when the small or medium farmer requiredhardly any money, when he could thresh and turn into cash hiswheat reserves as the need arose. Now he was chronically in needof money, a lot of money, to pay his taxes. Soon he was forced tosell all his produce and to buy his requirements from the manufacturersin the form of ready-made goods. As Peffer puts it:

‘Coming from that time to the present, we find that everythingnearly has been changed. All over the West particularlythe farmer threshes his wheat all at one time, he disposes ofit all at one time, and in a great many instances the straw iswasted. He sells his hogs, and buys bacon and pork; he sellshis cattle, and buys fresh beef and canned beef or corned beef,as the case may be; he sells his fruit, and buys it back in cans.If he raises flax at all, instead of putting it into yarn and makinggowns for his children, as he did fifty years or more ago, hethreshes his flax, sells the seed, and burns the straw. Not morethan one farmer in fifty now keeps sheep at all; he relies uponthe large sheep farmer for the wool, which is put into cloth orclothing ready for his use. Instead of having clothing made upon the farm in his own house or by a neighbour woman orcountry tailor a mile away, he either purchases his clothing[Pg 401]ready made at the nearest town, or he buys the cloth and has acity tailor make it up for him. Instead of making implementswhich he uses about the farm—forks, rakes, etc.—he goes totown to purchase even a handle for his axe or his mallet; hepurchases twine and rope and all sorts of needed material madeof fibres; he buys his cloth and his clothing; he buys his cannedfruit and preserved fruit; he buys hams and shoulders and messpork and mess beef; indeed, he buys nearly everything now thathe produced at one time himself, and these things all costmoney. Besides all this, and what seems stranger than anythingelse, whereas in the earlier time the American home was a freehome, unencumbered, not one case in a thousand where ahome was mortgaged to secure the payment of borrowed money,and whereas but a small amount of money was then needed foractual use in conducting the business of farming, there wasalways enough of it among the farmers to supply the demand.Now, when at least ten times as much is needed, there is little ornone to be obtained, nearly half the farms are mortgaged for asmuch as they are worth, and interest rates are exorbitant. As tothe cause of such wonderful changes ... the manufacturer camewith his woollen mill, his carding mill, his broom factory, hisrope factory, his wooden-ware factory, his cotton factory, hispork-packing establishment, his canning factory and fruit preservinghouses; the little shop on the farm has given place to thelarge shop in town; the wagon-maker’s shop in the neighbourhoodhas given way to the large establishment in the city where... a hundred or two hundred wagons are made in a week;the shoemaker’s shop has given way to large establishments inthe cities where most of the work is done by machines.’[383]

Finally, the agricultural labour of the farmer himself hasbecome machine work: ‘He ploughs and sows and reaps withmachines. A machine cuts his wheat and puts it in a sheaf, andsteam drives his threshers. He may read the morning paperwhile he ploughs and sit under an awning while he reaps.’[384]

Sering estimated in the middle eighties that the necessarycash ‘for a very modest beginning’ of the smallest farm in theNorth West is £240 to £280.[385]

[Pg 402]This revolution of American agriculture after the ‘Great War’was not the end. It was only the beginning of the whirlpool inwhich the farmer was caught. His history brings us automaticallyto the second phase of the development of capitalistaccumulation of which it is an excellent illustration.—Naturaleconomy, the production for personal needs and the closeconnection between industry and agriculture must be oustedand a simple commodity economy substituted for them. Capitalismneeds the medium of commodity production for itsdevelopment, as a market for its surplus value. But as soon assimple commodity production has superseded natural economy,capital must turn against it. No sooner has capital called itto life, than the two must compete for means of production,labour power, and markets. The first aim of capitalism is toisolate the producer, to sever the community ties which protecthim, and the next task is to take the means of production awayfrom the small manufacturer.

In the American Union, as we have seen, the ‘Great War’inaugurated an era of large-scale seizure of public lands bymonopolist capitalist companies and individual speculators.Feverish railroad building and ever more speculation in railwayshares led to a mad gamble in land, where individual soldiersof fortune and companies netted immense fortunes and evenentire counties. In addition a veritable swarm of agents luredthe vast flow of emigrants from Europe to the U.S.A. by blatantand unscrupulous advertising, deceptions and pretences ofevery description. These immigrants first settled in the EasternStates along the Atlantic seaboard, and, with the growth ofindustry in these states, agriculture was driven westward. The‘wheat centre’ which had been near Columbus, Ohio, in 1850,in the course of the subsequent fifty years shifted to a position99 miles further North and 680 miles further West. Whereas in1850 51·4 per cent of the total wheat crop had been suppliedby the Eastern States, in 1880 they produced only 13·6 per cent,71·7 per cent being supplied by the Northern Central and 9 percent by the Western States.

In 1825, the Congress of the Union under Monroe haddecided to transplant the Red Indians from the East to the Westof the Mississippi. The redskins put up a desperate resistance;but all who survived the slaughter of forty Red Indian campaigns[Pg 403]were swept away like so much rubbish and driven likecattle to the West to be folded in reservations like so many sheep.The Red Indian had been forced to make room for the farmer—andnow the farmer in his turn was driven beyond theMississippi to make way for capital.

Following the railway tracks, the American farmer movedWest and North-West into the land of promise which the greatland speculators’ agents had painted for him in glowing colours.Yet the most fertile and most favourably situated lands wereretained by the companies who farmed them extensively oncompletely capitalistic lines. All around the farmer who hadbeen exiled into the wilderness, a dangerous competitor anddeadly enemy sprang up—the ‘bonanza farms’, the great capitalistagricultural concerns which neither the Old World nor theNew had known before. Here surplus value was produced withthe application of all the resources known to modern scienceand technology.

‘As the foremost representative of financial agriculture wemay consider Oliver Dalrymple, whose name is to-day knownon both sides of the Atlantic. Since 1874 he has simultaneouslymanaged a line of steamers on the Red River and six farmsowned by a company of financiers and comprising some 75,000acres. Each one is divided into departments of 2,000 acres,and every department is again subdivided into three sectionsof 667 acres which are run by foremen and gangleaders.Barracks to shelter 50 men and stable as many horses and mules,are built on each section, and similarly kitchens, machine shedsand workshops for blacksmiths and locksmiths. Each section iscompletely equipped with 20 pairs of horses, 8 double ploughs,12 horse-drawn drill-ploughs, 12 steel-toothed harrows, 12cutters and binders, 2 threshers and 16 wagons. Everything isdone to ensure that the machines and the living labour (men,horses and mules) are in good condition and able to do thegreatest possible amount of work. There is a telephone lineconnecting all sections and the central management.

‘The six farms of 75,000 acres are cultivated by an army of600 workers, organised on military lines. During the harvest, themanagement hires another 500 to 600 auxiliary workers, assigningthem to the various sections. After the work is completed inthe fall, the workers are dismissed with the exception of the[Pg 404]foreman and 10 men per section. In some farms in Dakota andMinnesota, horses and mules do not spend the winter at theplace of work. As soon as the stubble has been ploughed in, theyare driven in teams of a hundred or two hundred pairs 900miles to the South, to return only the following spring.

‘Mechanics on horseback follow the ploughing, sowing andharvesting machines when they are at work. If anything goeswrong, they gallop to the machine in question, repair it and getit moving again without delay. The harvested corn is carriedto the threshing machines which work day and night withoutinterruption. They are stoked with bundles of straw fed into thestokehold through pipes of sheet-iron. The corn is threshed,winnowed, weighed and filled into sacks by machinery, then itis put into railway trucks which run alongside the farm, and goesto Duluth or Buffalo. Every year, Dalrymple increases his landunder seed by 5,800 acres. In 1880 it amounted to 25,000 acres.[386]

In the late seventies, there were already individual capitalistsand companies who owned 35,000-45,000 acres of wheat land.Since the time of Lafargue’s writing, extensive capitalist agriculturein America has made great strides in technique and theemployment of machinery.[387]

[Pg 405]The American farmer could not successfully compete withsuch capitalist enterprises. At a time when the general revolutionin the conditions of finance, production and transport compelledhim to give up production for personal needs and toproduce exclusively for the market, the great spreading ofagriculture caused a heavy fall in the prices of agriculturalproducts. And at the precise moment when farming becamedependent on the market, the agricultural market of the Unionwas suddenly turned from a local one into a world market, andbecame a prey to the wild speculations of a few capitalistmammoth concerns.

In 1879, a notable year for the history of agricultural conditionsin Europe as well as in America, there began the massexport of wheat from the U.S.A. to Europe.[388]

Big Business was of course the only one to profit from thisexpanding market. The small farmer was crushed by the competitionof an increasing number of extensive farms and becamethe prey of speculators who bought up his corn to exert pressure[Pg 406]on the world market. Helpless in the face of the immense capitalistpowers, the farmer got into debt—a phenomenon typicalfor a declining peasant economy. In 1890, Secretary Rusk ofthe U.S. Department of Agriculture sent out a circular letterwith reference to the desperate position of the farmers, saying:

‘The burden of mortgages upon farms, homes, and land, isunquestionably discouraging in the extreme, and while in somecases no doubt this load may have been too readily assumed,still in the majority of cases the mortgage has been the resultof necessity.... These mortgages ... drawing high rates ofinterest ... have to-day, in the face of continued depression ofthe prices of staple products, become very irksome, and in manycases threaten the farmer with loss of home and land. It is aquestion of grave difficulty to all those who seek to remedy theills from which our farmers are suffering. At present prices thefarmer finds that it takes more of his products to get a dollarwherewith to buy back the dollar which he borrowed than itdid when he borrowed it. The interest accumulates, while thepayment of the principal seems utterly hopeless, and the verydepression which we are discussing makes the renewal of themortgage most difficult.’[389]

According to the census of May 29, 1891, 2·5 million farmswere deep in debt; two-thirds of them were managed by theowners whose obligations amounted to nearly £440,000.

‘The situation is this: farmers are passing through the “valleyand shadow of death”; farming as a business is profitless; valuesof farm products have fallen 50 per cent since the great war, andfarm values have depreciated 25 to 50 per cent during the lastten years; farmers are overwhelmed with debts secured by mortgageson their homes, unable in many instances to pay even theinterest as it falls due, and unable to renew the loans becausesecurities are weakening by reason of the general depression;many farmers are losing their homes under this dreadful blight,and the mortgage mill still grinds. We are in the hands of amerciless power; the people’s homes are at stake.’[390]

Encumbered with debts and close to ruin, the farmer had nooption but to supplement his earnings by working for a wage, orelse to abandon his farm altogether. Provided it had not yet[Pg 407]fallen into the clutches of his creditors like so many thousands offarms, he could shake from off his feet the dust of the ‘land ofpromise’ that had become an inferno for him. In the middleeighties, abandoned and decaying farms could be seen everywhere.In 1887, Sering wrote:

‘If the farmer cannot pay his debts to date, the interest he hasto pay is increased to 12, 15 or even 20 per cent. He is pressedby the banker, the machine salesman and the grocer who robhim of the fruits of his hard work.... He can either remain onthe farm as a tenant or move further West, to try his fortuneselsewhere. Nowhere in North America have I found so manyindebted, disappointed and depressed farmers as in the wheatregions of the North Western prairies. I have not spoken to asingle farmer in Dakota who would not have been prepared tosell his farm.[391]

‘The Commissioner of Agriculture of Vermont in 1889 reporteda wide-spread desertion of farm-lands of that state. Hewrote: “... there appears to be no doubt about there being inthis state large tracts of tillable unoccupied lands, which can bebought at a price approximating the price of Western lands,situated near school and church, and not far from railroadfacilities. The Commissioner has not visited all of the countiesin the State where these lands are reported, but he has visitedenough to satisfy him that, while much of the unoccupied andformerly cultivated land is now practically worthless for cultivation,yet very much of it can be made to yield a liberal rewardto intelligent labour.”’[392]

The Commissioner of the State of New Hampshire issued apamphlet in 1890, devoting 67 pages to the description of farmsfor sale at the lowest figures. He describes 1442 farms withtenantable buildings, abandoned only recently. The same hashappened in other districts. Thousands of acres once raisingcorn and wheat are left untilled and run to brush and wood.

In order to resettle the deserted land, speculators engaged inadvertising campaigns and attracted crowds of new immigrants—newvictims who were to suffer their predecessors’ fate evenmore speedily.

A private letter says: ‘In the neighbourhood of railroads andmarkets, there remains no common land. It is all in the hands[Pg 408]of the speculators. A settler takes over vacant land and countsfor a farmer; but the management of his farm hardly assureshis livelihood, and he cannot possibly compete with the bigfarmer. He tills as much of his land as the law compels him todo, but to make a comfortable living, he must look for additionalsources of income outside agriculture. In Oregon, for instance,I have met a settler who owned 160 acres for five years, butevery summer, until the end of July, he worked twelve hours aday for a dollar a day at road-making. This man, of course, alsocounts as one of the five million farmers in the 1890 census.Again, in the County of Eldorado, I saw many farmers whocultivated their land only to feed their cattle and themselves.There would have been no profit in producing for the market,and their chief income derives from gold-digging, the felling andselling of timber, etc. These people are prosperous, but it is notagriculture which makes them so. Two years ago, we workedin Long Cañon, Eldorado County, living in a cabin on an allotment.The owner of this allotment came home only once a yearfor a couple of days, and worked the rest of the time on therailway in Sacramento. Some years ago, a small part of theallotment was cultivated, to comply with the law, but now it isleft completely untilled. A few acres are fenced off with wire,and there is a log cabin and a shed. But during the last yearsall this stands empty; a neighbour has the key and he made usfree of the hut. In the course of our journey, we saw manydeserted allotments, where attempts at farming had been made.Three years ago I was offered a farm with dwelling house fora hundred dollars, but in a short time the unoccupied housecollapsed under the snow. In Oregon, we saw many derelictfarms with small dwelling houses and vegetable gardens. Onewe visited was beautifully made: a sturdy block house, fashionedby a master-builder, and some equipment; but the farmerhad abandoned it all. You were welcome to take it all withoutcharge.’[393]

Where could the ruined American farmer turn? He set outon a pilgrimage to follow the wheat centre and the railways.The former had shifted in the main to Canada, the Saskatchewanand the Mackenzie River where wheat can still thriveon the 62nd parallel. A number of American farmers followed—and[Pg 409]after some time in Canada, they suffered the old fate.[394]During recent years, Canada has entered the world market asa wheat-exporting country, but her agriculture is dominated toan even greater extent by big capital than elsewhere.[395]

In Canada, public lands were lavished upon private capitalistcompanies on an even more monstrous scale than in theUnited States. Under the Charter of the Canadian Pacific RailwayCompany with its grant of land, private capital perpetratedan unprecedented act of robbing the public. Not only that thecompany was guaranteed a twenty years’ monopoly of railway-building,not only that it got a building site of about 713 milesfree of charge, not only that it got a 100 years’ state guaranteeof the 3 per cent interest on the share capital of £m. 20—tocrown it all, the company was given the choice of 25 millionacres out of the most fertile and favourably situated lands, notnecessarily in the immediate vicinity of the permanent way, asa free gift. All future settlers on this vast area were thus at themercy of railway capital from the very outset. The railwaycompany, in its turn, immediately proceeded to sell off 5 millionacres for ready cash to the North-West Land Company, an[Pg 410]association of British capitalists under the chairmanship of theDuke of Manchester. The second group of capitalists which wasliberally endowed with public lands was the Hudson Bay Company,which was given a title to no less than one-twentieth ofall the lands between Lake Winnipeg, the U.S. border, theRocky Mountains, and Northern Saskatchewan, for renouncingtheir privileges in the North-West. Between them, these twocapitalist groups had gained possession of five-ninths of all theland that could be settled. A considerable part of the other landswas assigned by the State to 26 capitalist ‘colonising companies’.[396]Thus the Canadian farmer was practically everywhere ensnaredby capital and capitalist speculation. And still mass immigrationcontinued—not only from Europe, but also from the UnitedStates!

These are the characteristics of capitalist domination on aninternational scale. Having evicted the peasant from his soil, itdrives him from England to the East of the United States, andfrom there to the West, and on the ruins of the Red Indians’economy it transforms him back into a small commodity producer.Then, when he is ruined once more, he is driven from theWest to the North. With the railways in the van, and ruin in therear—capital leads the way, its passage is marked with universaldestruction. The great fall of prices in the nineties is againsucceeded by higher prices for agricultural products, but thisis of no more avail to the small American farmer than to theEuropean peasant.

Yet the numbers of farmers are constantly swelling. In thelast decade of the nineteenth century they had grown from4,600,000 to 5,700,000, and the following ten years still saw anabsolute increase. The aggregate value of farms had during thesame period risen from £150,240,000 to £330,360,000.[397] Wemight have expected the general increase in the price of farmproduce to have helped the farmer to come into his own. Butthat is not so; we see that the growing numbers of tenant farmersoutstrip the increase in the farming population as a whole. In1880, the proportion of tenant farmers amounted to 25·5 percent of the total number of farmers in the Union, in 1890 it was[Pg 411]28·4 per cent, in 1900 35·3 per cent, and in 1910 37·2 percent.

Though prices for farm produce were rising, the tenant farmerwas more and more rapidly stepping into the shoes of the independentfarmer. And although much more than one-third ofall farmers in the Union are now tenant farmers, their socialstatus in the United States is that of the agricultural labourer inEurope. Constantly fluctuating, they are indeed wage-slaves ofcapital; they work very hard to create wealth for capital, gettingnothing in return but a miserable and precarious existence.

In quite a different historical setting, in South Africa, thesame process shows up even more clearly the ‘peaceful methods’by which capital competes with the small commodity producer.

In the Cape Colony and the Boer Republics, pure peasanteconomy prevailed until the sixties of the last century. For along time the Boers had led the life of animal-tending nomads;they had killed off or driven out the Hottentots and Kaffirs witha will in order to deprive them of their most valuable pastures.In the eighteenth century they were given invaluable assistanceby the plague, imported by ships of the East India Company,which frequently did away with entire Hottentot tribes whoselands then fell to the Dutch immigrants. When the Boers spreadfurther East, they came in conflict with the Bantu tribes andinitiated the long period of the terrible Kaffir wars. These god-fearingDutchmen regarded themselves as the Chosen Peopleand took no small pride in their old-fashioned Puritan moralsand their intimate knowledge of the Old Testament; yet, notcontent with robbing the natives of their land, they built theirpeasant economy like parasites on the backs of the Negroes,compelling them to do slave-labour for them and corruptingand enervating them deliberately and systematically. Liquorplayed such an important part in this process, that the prohibitionof spirits in the Cape Colony could not be carriedthrough by the English government because of Puritan opposition.There were no railways until 1859, and Boer economy ingeneral and on the whole remained patriarchal and based onnatural economy until the sixties. But their patriarchal attitudedid not deter the Boers from extreme brutality and harshness.It is well known that Livingstone complained much more aboutthe Boers than about the Kaffirs. The Boers considered the[Pg 412]Negroes an object, destined by God and Nature to slavefor them, and as such an indispensable foundation of theirpeasant economy. So much so that their answer to the abolitionof slavery in the English colonies in 1836 was the ‘GreatTrek’, although there the owners had been compensated with£3,000,000. By way of the Orange River and Vaal, the Boersemigrated from the Cape Colony, and in the process they drovethe Matabele to the North, across the Limpopo, setting themagainst the Makalakas. Just as the American farmer had driventhe Red Indian West before him under the impact of capitalisteconomy, so the Boer drove the Negro to the North. The ‘FreeRepublics’ between the Orange River and the Limpopo thuswere created as a protest against the designs of the Englishbourgeoisie on the sacred right of slavery. The tiny peasantrepublics were in constant guerilla warfare against the BantuNegroes. And it was on the backs of the Negroes that the battlebetween the Boers and the English government, which went onfor decades, was fought. The Negro question, i.e. the emancipationof the Negroes, ostensibly aimed at by the English bourgeoisie,served as a pretext for the conflict between England andthe republics. In fact, peasant economy and great capitalistcolonial policy were here competing for the Hottentots andKaffirs, that is to say for their land and their labour power.Both competitors had precisely the same aim: to subject, expelor destroy the coloured peoples, to appropriate their land andpress them into service by the abolition of their social organisations.Only their methods of exploitation were fundamentallydifferent. While the Boers stood for out-dated slavery on a pettyscale, on which their patriarchal peasant economy was founded,the British bourgeoisie represented modern large-scale capitalistexploitation of the land and the natives. The Constitution of theTransvaal (South African) Republic declared with crude prejudice:‘The People shall not permit any equality of colouredpersons with white inhabitants, neither in the Church nor in theState.’[398]

In the Orange Free State and in the Transvaal no Negro wasallowed to own land, to travel without papers or to walk abroadafter sunset. Bryce tells us of a case where a farmer, an Englishmanas it happened, in the Eastern Cape Colony had flogged[Pg 413]his Kaffir slave to death. When he was acquitted in open court,his neighbours escorted him home to the strains of music. Thewhite man frequently maltreated his free native labourers afterthey had done their work—to such an extent that they wouldtake to flight, thus saving the master their wages.

The British government employed precisely the oppositetactics. For a long time it appeared as protector of the natives;flattering the chieftains in particular, it supported their authorityand tried to make them claim a right of disposal over theirland. Wherever it was possible, it gave them ownership of triballand, according to well-tried methods, although this flew in theface of tradition and of the actual social organisation of theNegroes. All tribes in fact held their land communally, and eventhe most cruel and despotic rulers such as the Matabele ChieftainLobengula merely had the right as well as the duty to allotevery family a piece of land which they could only retain solong as they cultivated it. The ultimate purpose of the Britishgovernment was clear: long in advance it was preparing forland robbery on a grand scale, using the native chieftains themselvesas tools. But in the beginning it was content with the‘pacification’ of the Negroes by extensive military actions. Upto 1879 were fought 9 bloody Kaffir wars to break the resistanceof the Bantus.

British capital revealed its real intentions only after two importantevents had taken place: the discovery of the Kimberleydiamond fields in 1869-70, and the discovery of the gold minesin the Transvaal in 1882-5, which initiated a new epoch in thehistory of South Africa. Then the British South Africa Company,that is to say Cecil Rhodes, went into action. Public opinion inEngland rapidly swung over, and the greed for the treasuresof South Africa urged the British government on to drasticmeasures. South Africa was suddenly flooded with immigrantswho had hitherto only appeared in small numbers—immigrationhaving been deflected to the United States. But with thediscovery of the diamond and gold fields, the numbers of whitepeople in the South African colonies grew by leaps and bounds:between 1885 and 1895, 100,000 British had immigrated intoWitwatersrand alone. The modest peasant economy was forthwithpushed into the background—the mines, and thus themining capital, coming to the fore. The policy of the British[Pg 414]government veered round abruptly. Great Britain had recognisedthe Boer Republics by the Sand River Agreement and theTreaty of Bloemfontein in the fifties. Now her political mightadvanced upon the tiny republics from every side, occupyingall neighbouring districts and cutting off all possibility of expansion.At the same time the Negroes, no longer protectedfavourites, were sacrificed. British capital was steadily forgingahead. In 1868, Britain took over the rule of Basutoland—only,of course, because the natives had ‘repeatedly implored’ her todo so.[399] In 1871, the Witwatersrand diamond fields, or WestGriqualand, were seized from the Orange Free State and turnedinto a Crown Colony. In 1879, Zululand was subjected, later tobecome part of the Natal Colony; in 1885 followed the subjectionof Bechuanaland, to be joined to the Cape Colony. In 1888Britain took over Matabele and Mashonaland, and in 1889the British South Africa Company was given a Charter for boththese districts, again, of course, only to oblige the natives andat their request.[400] Between 1884 and 1887, Britain annexed St.Lucia Bay and the entire East Coast as far as the Portuguesepossessions. In 1894, she subjected Tongaland. With their laststrength, the Matabele and Mashona fought one more desperatebattle, but the Company, with Rhodes at the head, first liquidatedthe rising in blood and at once proceeded to the well-triedmeasure for civilising and pacifying the natives: two largerailways were built in the rebellious district.

The Boer Republics were feeling increasingly uncomfortablein this sudden stranglehold, and their internal affairs as wellwere becoming completely disorganised. The overwhelminginflux of immigrants and the rising tides of the frenzied new[Pg 415]capitalist economy now threatened to burst the barriers of thesmall peasant states. There was indeed a blatant conflict betweenagricultural and political peasant economy on the onehand, and the demands and requirements of the accumulationof capital on the other. In all respects, the republics were quiteunable to cope with these new problems. The constant dangerfrom the Kaffirs, no doubt regarded favourably by the British,the unwieldy, primitive administration, the gradual corruptionof thevolksraad in which the great capitalists got their way bybribery, lack of a police force to keep the undisciplined crowdsof adventurers in some semblance of order, the absence of labourlegislation for regulating and securing the exploitation of theNegroes in the mines, lack of water supplies and transport toprovide for the colony of 100,000 immigrants that had suddenlysprung up, high protective tariffs which increased the cost oflabour for the capitalists, and high freights for coal—all thesefactors combined towards the sudden and stunning bankruptcyof the peasant republics.

They tried, obstinately and unimaginatively, to defend themselvesagainst the sudden eruption of capitalism which engulfedthem, with an incredibly crude measure, such as only a stubbornand hide-bound peasant brain could have devised: they deniedall civic rights to theuitlanders who outnumbered them by farand who stood for capital, power, and the trend of the time.In those critical times it was an ill-omened trick. The mismanagementof the peasant republics caused a considerablereduction of dividends, on no account to be put up with. Miningcapital had come to the end of its tether. The British SouthAfrica Company built railroads, put down the Kaffirs,organised revolts of theuitlanders and finally provoked the BoerWar. The bell had tolled for peasant economy. In the UnitedStates, the economic revolution had begun with a war, in SouthAfrica war put the period to this chapter. Yet in both instances,the outcome was the same: capital triumphed over the smallpeasant economy which had in its turn come into being on theruins of natural economy, represented by the natives’ primitiveorganisations. The domination of capital was a foregone conclusion,and it was just as hopeless for the Boer Republics toresist as it had been for the American farmer. Capital officiallytook over the reins in the new South African Union which[Pg 416]replaced the small peasant republics by a great modern state,as envisaged by Cecil Rhodes’ imperialist programme. The newconflict between capital and labour had superseded the old onebetween British and Dutch. One million white exploiters ofboth nations sealed their touching fraternal alliance within theUnion with the civil and political disfranchisement of fivemillion coloured workers. Not only the Negroes of the BoerRepublics came away empty-handed, but the natives of theCape Colony, whom the British government had at one timegranted political equality, were also deprived of some of theirrights. And this noble work, culminating under the imperialistpolicy of the Conservatives in open oppression, was actually tobe finished by the Liberal Party itself, amid frenzied applausefrom the ‘liberal cretins of Europe’ who with sentimental pridetook as proof of the still continuing creative vigour and greatnessof English liberalism the fact that Britain had granted completeself-government and freedom to a handful of whites in SouthAfrica.

The ruin of independent craftsmanship by capitalist competition,no less painful for being soft-pedalled, deserves byrights a chapter to itself. The most sinister part of such achapter would be out-work under capitalism;—but we need notdwell on these phenomena here.

The general result of the struggle between capitalism andsimple commodity production is this: after substituting commodityeconomy for natural economy, capital takes the place ofsimple commodity economy. Non-capitalist organisations providea fertile soil for capitalism; more strictly: capital feeds onthe ruins of such organisations, and although this non-capitalistmilieu is indispensable for accumulation, the latter proceeds atthe cost of this medium nevertheless, by eating it up. Historically,the accumulation of capital is a kind of metabolismbetween capitalist economy and those pre-capitalist methods ofproduction without which it cannot go on and which, in thislight, it corrodes and assimilates. Thus capital cannot accumulatewithout the aid of non-capitalist organisations, nor, on theother hand, can it tolerate their continued existence side by sidewith itself. Only the continuous and progressive disintegrationof non-capitalist organisations makes accumulation of capitalpossible.

[Pg 417]The premises which are postulated in Marx’s diagram ofaccumulation accordingly represent no more than the historicaltendency of the movement of accumulation and its logical conclusion.The accumulative process endeavours everywhere tosubstitute simple commodity economy for natural economy.Its ultimate aim, that is to say, is to establish the exclusive anduniversal domination of capitalist production in all countriesand for all branches of industry.

Yet this argument does not lead anywhere. As soon as thisfinal result is achieved—in theory, of course, because it cannever actually happen—accumulation must come to a stop.The realisation and capitalisation of surplus value become impossibleto accomplish. Just as soon as reality begins to correspondto Marx’s diagram of enlarged reproduction, the end ofaccumulation is in sight, it has reached its limits, and capitalistproduction isin extremis. For capital, the standstill of accumulationmeans that the development of the productive forces isarrested, and the collapse of capitalism follows inevitably, asan objective historical necessity. This is the reason for the contradictorybehaviour of capitalism in the final stage of itshistorical career: imperialism.

Marx’s diagram of enlarged reproduction thus does not conformto the conditions of an accumulation in actual progress.Progressive accumulation cannot be reduced to static interrelationsand interdependence between the two great departmentsof social production (the departments of producer andconsumer goods), as the diagram would have it. Accumulationis more than an internal relationship between the branches ofcapitalist economy; it is primarily a relationship between capitaland a non-capitalist environment, where the two great departmentsof production sometimes perform the accumulative processon their own, independently of each other, but even thenat every step the movements overlap and intersect. From thiswe get most complicated relations, divergencies in the speed anddirection of accumulation for the two departments, differentrelations with non-capitalist modes of production as regardsboth material elements and elements of value, which we cannotpossibly lay down in rigid formulæ. Marx’s diagram of accumulationis only the theoretical reflection of the precise momentwhen the domination of capital has reached its limits, and thus[Pg 418]it is no less a fiction than his diagram of simple reproduction,which gives the theoretical formulation for the point of departureof capitalist accumulation. The precise definition of capitalistaccumulation and its laws lies somewhere in between thesetwo fictions.

CHAPTER XXX

INTERNATIONAL LOANS

The imperialist phase of capitalist accumulation whichimplies universal competition comprises the industrialisationand capitalist emancipation of thehinterland wherecapital formerly realised its surplus value. Characteristic of thisphase are: lending abroad, railroad constructions, revolutions,and wars. The last decade, from 1900 to 1910, shows in particularthe world-wide movement of capital, especially in Asiaand neighbouring Europe: in Russia, Turkey, Persia, India,Japan, China, and also in North Africa. Just as the substitutionof commodity economy for a natural economy and that ofcapitalist production for a simple commodity production wasachieved by wars, social crises and the destruction of entire socialsystems, so at present the achievement of capitalist autonomyin thehinterland and backward colonies is attained amidst warsand revolutions. Revolution is an essential for the process ofcapitalist emancipation. The backward communities must shedtheir obsolete political organisations, relics of natural and simplecommodity economy, and create a modern state machineryadapted to the purposes of capitalist production. The revolutionsin Turkey, Russia, and China fall under this heading. Thelast two, in particular, do not exclusively serve the immediatepolitical requirements of capitalism; to some extent they carryover outmoded pre-capitalist claims while on the other handthey already embody new conflicts which run counter to thedomination of capital. These factors account for their immensedrive, but at the same time impede and delay the ultimatevictory of the revolutionary forces. A young state will usuallysever the leading strings of older capitalist states by wars, whichtemper and test the modern state’s capitalist independence ina baptism by fire. That is why military together with financialreforms invariably herald the bid for economic independence.

The forward-thrusts of capital are approximately reflected inthe development of the railway network. The permanent way[Pg 420]grew most quickly in Europe during the forties, in America inthe fifties, in Asia in the sixties, in Australia during the seventiesand eighties, and during the nineties in Africa.[401]

Public loans for railroad building and armaments accompanyall stages of the accumulation of capital: the introduction ofcommodity economy, industrialisation of countries, capitalistrevolutionisation of agriculture as well as the emancipation ofyoung capitalist states. For the accumulation of capital, the loanhas various functions: (a) it serves to convert the money of non-capitalistgroups into capital, i.e. money both as a commodityequivalent (lower middle-class savings) and as fund of consumptionfor the hangers-on of the capitalist class; (b) it servesto transform money capital into productive capital by meansof state enterprise—railroad building and military supplies; (c)it serves to divert accumulated capital from the old capitalistcountries to young ones. In the sixteenth and seventeenth centuries,the loan transferred capital from the Italian cities toEngland, in the eighteenth century from Holland to England,in the nineteenth century from England to the AmericanRepublics and Australia, from France, Germany and Belgiumto Russia, and at the present time [1912] from Germany to[Pg 421]Turkey, from England, Germany and France to China, and,via Russia, to Persia.

In the Imperialist Era, the foreign loan played an outstandingpart as a means for young capitalist states to acquire independence.The contradictions inherent in the modern system offoreign loans are the concrete expression of those which characterisethe imperialist phase. Though foreign loans are indispensablefor the emancipation of the rising capitalist states,they are yet the surest ties by which the old capitalist statesmaintain their influence, exercise financial control and exertpressure on the customs, foreign and commercial policy of theyoung capitalist states. Pre-eminently channels for the investmentin new spheres of capital accumulated in the old countries,such loans widen the scope for the accumulation of capital; butat the same time they restrict it by creating new competition forthe investing countries.

These inherent conflicts of the international loan system area classic example of spatio-temporal divergencies between theconditions for the realisation of surplus value and the capitalisationthereof. While realisation of the surplus value requires onlythe general spreading of commodity production, its capitalisationdemands the progressive supercession of simple commodityproduction by capitalist economy, with the corollary that thelimits to both the realisation and the capitalisation of surplusvalue keep contracting ever more. Employment of internationalcapital in the construction of the international railway networkreflects this disparity. Between the thirties and the sixties of thenineteenth century, railway building and the loans necessary forit mainly served to oust natural economy, and to spread commodityeconomy—as in the case of the Russian railway loans inthe sixties, or in that of the American railways which were builtwith European capital. Railway construction in Africa andAsia during the last twenty years, on the other hand, almostexclusively served the purposes of an imperialist policy, ofeconomic monopolisation and economic subjugation of the backwardcommunities. As regards Russia’s railroad construction inEastern Asia, for instance, it is common knowledge that Russiahad paved the way for the military occupation of Manchuriaby sending troops to protect her engineers working on the Manchurianrailway. With the same object in view, Russia obtained[Pg 422]railway concessions in Persia, Germany in Asia Minor andMesopotamia, and Britain and Germany in Africa.

In this connection, we must deal with a misunderstandingconcerning the capital investments in foreign countries and thedemand of these countries for capital imports. Already in theearly twenties of the last century, the export of British capital toAmerica played an important part, being largely responsible forthe first genuine industrial and commercial crises in England in1825. Since 1824, the London stock exchange had been floodedwith South American stocks and shares. During the followingyear, the newly created states of South and Central Americaraised loans in London alone for more than £20,000,000, and inaddition, enormous quantities of South American industrialshares and similar bonds were sold. This sudden prosperity andthe opening up of the South American markets in their turncalled forth greatly increased exports of British commoditiesto the Latin Americas. British commodity exports to thesecountries amounted to £2,900,000 in 1821 which had risen to£6,400,000 by 1825.

Cotton textiles formed the most important item of theseexports; this powerful demand was the impetus for a rapidexpansion of British cotton production, and many new factorieswere opened. In 1821, raw cotton to the value of £m. 129 wasmade up in England, and in 1826 the amount had risen to£m. 167.

The situation was thus fraught with the elements of a crisis.Tugan Baranovski raises the question: ‘But from where did theSouth American countries take the means to buy twice as manycommodities in 1825 as in 1821? The British themselves suppliedthese means. The loans floated on the London stock exchangeserved as payment for imported goods. Deceived by the demandthey had themselves created, the British factory-owners weresoon brought to realise by their own experience that their highexpectations had been unfounded.’[402]

He thus characterises as ‘deceptive’, as an unhealthy, abnormaleconomic phenomenon the fact that the South American demandfor English goods had been brought about by British capital.Thus uncritically he took over the doctrine of an expert with[Pg 423]whose other theories he wished to have nothing in common. Theopinion had been advanced already during the English crisisof 1825 that it could be explained by the ‘singular’ developmentof the relations between British capital and South Americandemand. None other than Sismondi had raised the same questionas Tugan Baranovski and given a most accurate descriptionof events in the second edition of hisNouveaux Principes:

‘The opening up of the immense market afforded by SpanishAmerica to industrial producers seemed to offer a good opportunityto relieve British manufacture. The British governmentwere of that opinion, and in the seven years following the crisisof 1818, displayed unheard-of activity to carry English commerceto penetrate the remotest districts of Mexico, Columbia,Brazil, Rio de la Plata, Chile and Peru. Before the governmentdecided to recognise these new states, it had to protect Englishcommerce by frequent calls of battleships whose captains had adiplomatic rather than a military mission. In consequence, ithad defied the clamours of the Holy Alliance and recognised thenew republics at a moment when the whole of Europe, on thecontrary, was plotting their ruin. But however big the demandafforded by free America, yet it would not have been enoughto absorb all the goods England had produced over and abovethe needs of consumption, had not their means for buying Englishmerchandise been suddenly increased beyond all bounds bythe loans to the new republics. Every American state borrowedfrom England an amount sufficient to consolidate its government.Although they were capital loans, they were immediatelyspent in the course of the year like income, that is to say theywere used up entirely to buy English goods on behalf of thetreasury, or to pay for those which had been dispatched onprivate orders. At the same time, numerous companies withimmense capitals were formed to exploit all the American mines,but all the money they spent found its way back to England,either to pay for the machinery which they immediately used,or else for the goods sent to the localities where they were towork. As long as this singular commerce lasted, in which theEnglish only asked the Americans to be kind enough to buyEnglish merchandise with English capital, and to consume themfor their sake, the prosperity of English manufacture appeareddazzling. It was no more income but rather English capital[Pg 424]which was used to push on consumption: the English themselvesbought and paid for their own goods which they sent toAmerica, and thereby merely forwent the pleasure of usingthese goods.’[403]

From this Sismondi drew the characteristic conclusion thatthe real limits to the capitalist market are set by income, i.e. bypersonal consumption alone, and he used this example as onemore warning against accumulation.

Down to the present day, the events which preceded the crisisof 1825 have remained typical for a period of boom and expansionof capital, and such ‘singular commerce’ is in fact one ofthe most important foundations of the accumulation of capital.Particularly in the history of British capital, it occurs regularlybefore every crisis, as Tugan Baranovski himself showed by thefollowing facts and figures: the immediate cause of the 1836crisis was the flooding of the American market with Britishgoods, again financed by British money. In 1834, U.S. commodityimports exceeded exports by £m. 1·2 but at the sametime their imports of precious metal exceeded exports bynearly £m. 3·2. Even in 1836, the year of the crisis itself, theirsurplus of imported commodities amounted to £m. 10·4, andstill the excess of bullion imported was £m. 1. This influx ofmoney, no less than the stream of goods, came chiefly fromEngland, where U.S. railway shares were bought in bulk.1835/6 saw the opening in the United States of sixty-one newbanks with a capital of £m. 10·4, predominantly British. Again,the English paid for their exports themselves. The unprecedentedindustrial boom in the Northern States of the Union, eventuallyleading to the Civil War, was likewise financed by Britishcapital, which again created an expanding market for Britishindustry in the United States.

And not only British capital—other European capitals alsomade every possible effort to take part in this ‘singular commerce’.To quote Schaeffle, in the five years between 1849 and1854, at least £m. 100 were invested in American shares on thevarious stock exchanges of Europe. The simultaneous revival ofworld industry attained such dimensions that it culminated inthe world crash of 1857.—In the sixties, British capital lost no[Pg 425]time in creating similar conditions in Asia as well as the UnitedStates. An unending stream was diverted to Asia Minor andEast India, where it financed the most magnificent railroad projects.The permanent way of British India amounted in 1860to 844 miles, in 1870 to 4,802 miles, in 1880 to 9,361 miles andin 1890 to 16,875 miles. This at once increased the demand forBritish commodities. No sooner had the War of Secession cometo a close, than British capital again flowed into the UnitedStates. It again paid for the greater part of the enormous railroadconstructions in the Union during the sixties and seventies,the permanent way amounting in 1850 to 8,844 miles, in 1860to 30,807 miles, in 1870 to 53,212 miles, in 1880 to 94,198 miles,and in 1890 to 179,005 miles. Materials for these railways werealso being supplied by England—one of the main causes for therapid development of the British coal and iron industries andthe reasons why these industries were so seriously affected bythe American crises of 1866, 1873 and 1884. What Sismondiconsidered sheer lunacy was in this instance literally true: theBritish with their own materials, their own iron etc., had builtrailroads in the United States, they had paid for the railwayswith their own capital and only forwent their ‘use’. In spite ofall periodical crises, however, European capital had acquiredsuch a taste for this madness, that the London stock exchangewas seized by a veritable epidemic of foreign loans in the middleof the seventies. Between 1870 and 1875, loans of this kind,amounting to £m. 260, were raised in London. The immediateconsequence was a rapid increase in the overseas export ofBritish merchandise. Although the foreign countries concernedwent periodically bankrupt, masses of capital continued to flowin. Turkey, Egypt, Greece, Bolivia, Costa Rica, Ecuador, Honduras,Mexico, Paraguay, Peru, St. Domingo, Uruguay, andVenezuela completely or partially suspended their payments ofinterest in the late seventies. Yet undeterred by this, the feverfor exotic state loans burst out again at the end of the eighties—theSouth American states and South African colonies werelent immense quantities of European capital. In 1874, for instance,the Argentine Republic borrowed as much as £m. 10and the loan had risen to £m. 59 by 1890.

England built railways with her own iron and coal in all thesecountries as well, paying for them with her own capital. In 1885,[Pg 426]the Argentine permanent way had been 1,952 miles, in 1893 itwas 8,557 miles.

British total exports (mainly to the Argentine) amounted to£m. 4·7 in 1885 and to £m. 10·7 a mere four years later.

At the same time, British capital flowed into Australia inthe form of state loans. At the end of the eighties the loansto the three colonies Victoria, New South Wales and Tasmaniaamounted to £m. 112, £m. 81 of which were invested in railwayconstruction. The permanent way of Australia extendedover 4,900 miles in 1880, and over 15,600 miles in 1895.

Britain, supplying capital and materials for these railways,was also embroiled in the crises of 1890 in the Argentine, Transvaal,Mexico, Uruguay, and in that of 1893 in Australia.

The following two decades made a difference only in so faras German, French and Belgian capital largely participatedwith British capital in foreign investments, while railway constructionin Asia Minor had been financed entirely by Britishcapital from the fifties to the late eighties. From then on, Germancapital took over and put into execution the tremendousproject of the Anatolian railway. German capital investments inTurkey gave rise to an increased export of German goods to thatcountry.

In 1896, German exports to Turkey amounted to £m. 1·4,in 1911 to £m. 5·65. To Asiatic Turkey, in particular, goodswere exported in 1901 to the value of £m. 0·6 and in 1911 to thevalue of £m. 1·85. In this case, German capital was used to aconsiderable extent to pay for German goods, the Germansforgoing, to use Sismondi’s term, only the pleasure of usingtheir own products.

Realised surplus value, which cannot be capitalised and lies[Pg 427]idle in England or Germany, is invested in railway construction,water works, etc. in the Argentine, Australia, the Cape Colonyor Mesopotamia. Machinery, materials and the like are suppliedby the country where the capital has originated, and the samecapital pays for them. Actually, this process characterises capitalistconditions everywhere, even at home. Capital must purchasethe elements of production and thus become productivecapital before it can operate. Admittedly, the products are thenused within the country, while in the former case they are usedby foreigners. But then capitalist production does not aim atits products being enjoyed, but at the accumulation of surplusvalue. There had been no demand for the surplus productwithin the country, so capital had lain idle without the possibilityof accumulating. But abroad, where capitalist productionhas not yet developed, there has come about, voluntarily or byforce, a new demand of the non-capitalist strata. The consumptionof the capitalist and working classes at home is irrelevant forthe purposes of accumulation, and what matters to capital isthe very fact that its products are ‘used’ byothers. The new consumersmust indeed realise the products, pay for their use, andfor this they need money. They can obtain some of it by theexchange of commodities which begins at this point, a brisktraffic in goods following hard on the heels of railway constructionand mining (gold mines, etc.). Thus the capital advancedfor railroad building and mining, together with an additionalsurplus value, is gradually realised. It is immaterial to the situationas a whole whether this exported capital becomes sharecapital in new independent enterprises, or whether, as a governmentloan, it uses the mediation of a foreign state to find newscope for operation in industry and traffic, nor does it matter ifin the first case some of the companies are fraudulent and failin due course, or if in the second case the borrowing state finallygoes bankrupt, i.e. if the owners sometimes lose part of theircapital in one way or another. Even the country of origin is notimmune, and individual capitals frequently get lost in crises.The important point is that capital accumulated in the oldcountry should find elsewhere new opportunities to beget andrealise surplus value, so that accumulation can proceed. In thenew countries, large regions of natural economy are open toconversion into commodity economy, or existing commodity[Pg 428]economy can be ousted by capital. Railroad construction andmining, gold mining in particular, are typical for the investmentof capitals from old capitalist countries in new ones. Theyare pre-eminently qualified to stimulate a brisk traffic in goodsunder conditions hitherto determined by natural economy andboth are significant in economic history as mile-stones alongthe route of rapid dissolution of old economic organisations, ofsocial crises and of the development of modern conditions, thatis to say of the development of commodity economy to beginwith, and further of the production of capital.

For this reason, the part played by lending abroad as wellas by capital investments in foreign railway and mining sharesis a fine sample of the deficiencies in Marx’s diagram of accumulation.In these instances, enlarged reproduction of capitalcapitalises a surplus value that has already been realised (in sofar as the loans or foreign investments are not financed by thesavings of the petty bourgeoisie or the semi-proletariat). It isquite irrelevant to the present field of accumulation, when,where and how the capital of the old countries has been realisedso that it may flow into the new country. British capital whichfinds an outlet in Argentine railway construction might well inthe past have been realised in China in the form of Indian opium.Further, the British capital which builds railways in the Argentine,is of English origin not only in its pure value-form, asmoney capital, but also in its material form, as iron, coal andmachinery; the use-form of the surplus value, that is to say,has also come into being from the very beginning in the use-formsuitable for the purposes of accumulation. The actualuse-form of the variable capital, however, labour power, ismainly foreign: it is the native labour of the new countrieswhich is made a new object of exploitation by the capital of theold countries. If we want to keep our investigation all on oneplane, we may even assume that the labour power, too, has thesame country of origin as the capital. In point of fact new discoveries,of gold mines for instance, tend to call forth massemigration from the old countries, especially in the first stages,and are largely worked by labour from those countries. It mightwell be, then, that in a new country capital, labour power andmeans of production all come from the same capitalist country,say England. So it is really in England that all the material[Pg 429]conditions for accumulation exist—a realised surplus value asmoney capital, a surplus product in productive form, and lastlylabour reserves. Yet accumulation cannot proceed here: Englandand her old buyers require neither railways nor an expandedindustry. Enlarged reproduction, i.e. accumulation, ispossible only if new districts with a non-capitalist civilisation,extending over large areas, appear on the scene and augmentthe number of consumers.

But then, who are these new consumers actually; who is itthat realises the surplus value of capitalist enterprises which arestarted with foreign loans; and who, in the final analysis, paysfor these loans? The international loans in Egypt provide aclassical answer.

The internal history of Egypt in the second half of the nineteenthcentury is characterised by the interplay of three phenomena:large-scale capitalist enterprise, a rapidly growing publicdebt, and the collapse of peasant economy. Until quite recently,corvée prevailed in Egypt, and the Wali and later the Khedivefreely pursued their own power policy with regard to the conditionof landownership. These primitive conditions preciselyoffered an incomparably fertile soil for the operations of Europeancapital. Economically speaking, the conditions for a monetaryeconomy had to be established to begin with, and the statecreated them by direct compulsion. Until the thirties, MehemetAli, the founder of Modern Egypt, here applied a method ofpatriarchal simplicity: every year, he ‘bought up’ the fellaheen’sentire harvest for the public exchequer, and allowed them tobuy back, at a higher price, a minimum for subsistence and seed.In addition he imported cotton from East India, sugar canefrom America, indigo and pepper, and issued the fellaheen withofficial directions what to plant and how much of it. Thegovernment again claimed the monopoly for cotton and indigo,reserving to itself the exclusive right of buying and selling thesegoods. By such methods was commodity exchange introduced inEgypt. Admittedly, Mehemet Ali also did something towardsraising labour productivity. He arranged for dredging of theancient canalisation, and above all he started the work of thegreat Kaliub Nile dams which initiated the series of great capitalistenterprises in Egypt. These were to comprise four greatfields: (1) irrigation systems, in which the Kaliub works built[Pg 430]between 1845 and 1853 take first place—quite apart fromunpaid forced labour, they swallowed up £m. 2·5 and incidentallyproved quite useless at first; (2) routes for traffic—the mostimportant construction which proved ultimately detrimentalto Egypt being the Suez Canal; (3) the cultivation of cotton,and (4) the production of sugar cane. With the building of theSuez Canal, Egypt became caught up in the web of Europeancapitalism, never again to get free of it. French capital led theway with British capital hard on its heels. In the twenty yearsthat followed, the internal disturbances in Egypt were colouredby the competitive struggle between these two capitals. Frenchcapital was perhaps the most peculiar exponent of the Europeanmethods of capital accumulation at the expense of primitiveconditions. Its operations were responsible for the useless Niledams as well as for the Suez Canal. Egypt first contracted tosupply the labour of 20,000 serfs free of charge for a number ofyears, and secondly to take up shares in the Suez Company tothe tune of £m. 3·5, i.e. 40 per cent of the company’s totalcapital. All this for the sake of breaking through a canal whichwould deflect the entire trade between Europe and Asia fromEgypt and would painfully affect her part in this trade. These£m. 3·5 formed the nucleus for Egypt’s immense national debtwhich was to bring about her military occupation by Britaintwenty years later. In the irrigation system, sudden transformationswere initiated: the ancientsakias, i.e. bullock-drivenwater-wheels, of which 50,000 had been busy for 7 months inthe year in the Nile delta alone, were partially replaced bysteam pumps. Modern steamers now plied on the Nile betweenCairo and Assuan. But the most profound change in theeconomic conditions of Egypt was brought about by the cultivationof cotton. This became almost epidemic in Egypt when,owing to the American War of Secession and the English cottonfamine, the price per short ton rose from something between£30 and £40 to £200-£250. Everybody was planting cotton,and foremost among all, the Viceroy and his family. His estatesgrew fat, what with large-scale land robbery, confiscations,forced ‘sale’ or plain theft. He suddenly appropriated villagesby the score though without any legal excuse. Within an incrediblyshort time, this vast demesne was brought undercotton, with the result that the entire technique of Egyptian[Pg 431]traditional agriculture was revolutionised. Dams were thrownup everywhere to protect the cotton fields from the seasonalflooding of the Nile, and a comprehensive system of artificialirrigation was introduced. These waterworks together with continuousdeep ploughing—a novel departure for the fellah whohad until then merely scratched his soil with a plough datingback to the Pharaohs—and finally the intensive labours of theharvest made between them enormous demands on Egypt’slabour power. This was throughout the same forced peasantlabour over which the state claimed to have an unrestrictedright of disposal; and thousands had already been employed onthe Kaliub dams and the Suez Canal and now the irrigation andplantation work to be done on the viceregal estates clamouredfor this forced labour. The 20,000 serfs who had been put at thedisposal of the Suez Canal Company were now required by theKhedive himself, and this brought about the first clash withFrench capital. The company was adjudged a compensation of£m. 3·35 by the arbitration of Napoleon III, a settlement towhich the Khedive could all the more readily agree, since thevery fellaheen whose labour power was the bone of contentionwere ultimately to be mulcted of this sum. The work of irrigationwas immediately put in hand. Centrifugal machines, steamand traction engines were therefore ordered from England andFrance. In their hundreds, they were carried by steamers fromEngland to Alexandria and then further. Steam ploughs wereneeded for cultivating the soil, especially since the rinderpestof 1864 had killed off all the cattle, England again being thechief supplier of these machines. The Fowler works were expandedenormously of a sudden to meet the requirements of theViceroy for which Egypt had to pay.[404]

[Pg 432]But now Egypt required yet a third type of machine, cottongins and presses for packing. Dozens of these gins were set up inthe Delta towns. Like English industrial towns, Sagasis, Tanta,Samanud and other towns were covered by palls of smokeand great fortunes circulated in the banks of Alexandria andCairo.

But already in the year that followed, this cotton speculationcollapsed with the cotton prices which fell in a couple of daysfrom 27d. per pound to 15d., 12d., and finally 6d. after the cessationof hostilities in the American Union. The following year, IsmailPasha ventured on a new speculation, the production of canesugar. The forced labour of the fellaheen was to compete withthe Southern States of the Union where slavery had beenabolished. For the second time, Egyptian agriculture was turnedupside down. French and British capitalists found a new fieldfor rapid accumulation. 18 giant sugar factories were put onorder in 1868-9 with an estimated daily output of 200 shorttons of sugar, that is to say four times as much as that of thegreatest then existing plant. Six of them were ordered fromEngland, and twelve from France, but England eventuallydelivered the lion’s share, because of the Franco-German war.These factories were to be built along the Nile at intervals of6·2 miles (10km.), as centres of cane plantations of an area comprising[Pg 433]10 sq.km. Working to full capacity, each factory requireda daily supply of 2,000 tons of sugar cane. Fellaheen were drivento forced labour on the sugar plantations in their thousands,while further thousands of their number built the IbrahimyaCanal. The stick andkourbash were unstintingly applied.Transport soon became a problem. A railway network had tobe built round every factory to haul the masses of cane inside,rolling stock, funiculars, etc., had to be obtained as quickly aspossible. Again these enormous orders were placed with Englishcapital. The first giant factory was opened in 1872, 4,000 camelsproviding makeshift transport. But it proved to be simply impossibleto supply cane in the quantities required by the undertaking.The working staff was completely inadequate, since thefellah, accustomed to forced labour on the land, could not betransformed overnight into a modern industrial worker by thelash of the whip. The venture collapsed, even before many ofthe imported machines had been installed. This sugar speculationconcluded the period of gigantic capitalist enterprise inEgypt in 1873.

What had provided the capital for these enterprises? Internationalloans. One year before his death in 1863, Said Pashahad raised the first loan at a nominal value of £m. 3·3 whichcame to £m. 2·5 in cash after deduction of commissions, discounts,etc. He left to Ismail Pasha the legacy of this debt andthe contract with the Suez Canal Company, which was toburden Egypt with a debt of £m. 17. Ismail Pasha in turnraised his first loan in 1864 with a nominal value of £m. 5·7at 7 per cent and a cash value of £m. 4·85 at8¹⁄₄ per cent. Whatremained of it, after £m. 3·35 had been paid to the Suez CanalCompany as compensation, was spent within the year, swallowedup for the greater part by the cotton gamble. In 1865,the first so-called Daira-loan was floated by the Anglo-EgyptianBank, on the security of the Khedive’s private estates. Thenominal value of this loan was £m. 3·4 at 9 per cent, and itsreal value £m. 2·5 at 12 per cent. In 1866,Fruehling & Goschenfloated a new loan at a nominal value of £m. 3 and a cashvalue of £m. 2. The Ottoman Bank floated another in 1867 ofnominally £m. 2, really £m. 1·7. The floating debt at that timeamounted to £m. 30. The Banking HouseOppenheim & Neffenfloated a great loan in 1868 to consolidate part of this debt. Its[Pg 434]nominal value was £m. 11·9 at 7 per cent, though Ismail couldactually lay hands only on £m. 7·1 at13¹⁄₂ per cent. This moneymade it possible, however, to pay for the pompous celebrationson the opening of the Suez Canal, in presence of the leadingfigures in the Courts of Europe, in finance and in thedemi-monde,for a madly lavish display, and further, to grease the palm ofthe Turkish Overlord, the Sultan, with a new baksheesh of£m. 1. The sugar gamble necessitated another loan in 1870.Floated by the firm ofBischoffsheim & Goldschmidt, it had anominal value of £m. 7·1 at 7 per cent, and its cash value was£m. 5. In 1872/3Oppenheim’s floated two further loans, a modestone amounting to £m. 4 at 14 per cent and a large one of£m. 32 at 8 per cent which reduced the floating debt by one-half,but which actually came only to £m. 11 in cash, since theEuropean banking houses paid it in part by bills of exchangethey had discounted.

In 1874, a further attempt was made to raise a national loanof £m. 50 at an annual charge of 9 per cent, but it yieldedno more than £m. 3·4. Egyptian securities were quoted at54 per cent of their face value. Within the thirteen yearsafter Said Pasha’s death, Egypt’s total public debt hadgrown from £m. 3·293 to £m. 94·110,[405] and collapse wasimminent.

These operations of capital, at first sight, seem to reach theheight of madness. One loan followed hard on the other, theinterest on old loans was defrayed by new loans, and capitalborrowed from the British and French paid for the large ordersplaced with British and French industrial capital.

While the whole of Europe sighed and shrugged its shouldersat Ismail’s crazy economy, European capital was in fact doingbusiness in Egypt on a unique and fantastic scale—an incrediblemodern version of the biblical legend about the fat kine whichremains unparalleled in capitalist history.

In the first place, there was an element of usury in everyloan, anything between one-fifth and one-third of the moneyostensibly lent sticking to the fingers of the European bankers.Ultimately, the exorbitant interest had to be paid somehow, buthow—where were the means to come from? Egypt herself was[Pg 435]to supply them; their source was the Egyptian fellah—peasanteconomy providing in the final analysis all the most importantelements for large-scale capitalist enterprise. He provided theland since the so-called private estates of the Khedive werequickly growing to vast dimensions by robbery and blackmailof innumerable villages; and these estates were the foundationsof the irrigation projects and the speculation in cotton and sugarcane. As forced labour, the fellah also provided the labourpower and, what is more, he was exploited without payment andeven had to provide his own means of subsistence while he wasat work. The marvels of technique which European engineersand European machines performed in the sphere of Egyptianirrigation, transport, agriculture and industry were due tothis peasant economy with its fellaheen serfs. On the KaliubNile dams and on the Suez Canal, in the cotton plantations andin the sugar plants, untold masses of peasants were put to work;they were switched over from one job to the next as the needarose, and they were exploited to the limit of endurance andbeyond. Although it became evident at every step that therewere technical limits to the employment of forced labour forthe purposes of modern capital, yet this was amply compensatedby capital’s unrestricted power of command over the pool oflabour power, how long and under what conditions men wereto work, live and be exploited.

But not alone that it supplied land and labour power, peasanteconomy also provided the money. Under the influence ofcapitalist economy, the screws were put on the fellaheen bytaxation. The tax on peasant holdings was persistently increased.In the late sixties, it amounted to £2 5s. perhectare, but not afarthing was levied on the enormous private estates of the royalfamily. In addition, ever more special rates were devised.Contributions of 2s. 6d. perhectare had to be paid for themaintenance of the irrigation system which almost exclusivelybenefited the royal estates, and the fellah had to pay 1s. 4d. forevery date tree felled, 9d. for every clay hovel in which he lived.In addition, every male over 10 years of age was liable to a headtax of 6s. 6d. The total paid by the fellaheen was £m. 2·5 underMehemet Ali, £m. 5 under Said Pasha, and £m. 8·15 underIsmail Pasha.

The greater the debt to European capital became, the more[Pg 436]had to be extorted from the peasants.[406] In 1869 all taxes wereput up by 10 per cent and the taxes for the coming year collectedin advance. In 1870, a supplementary land tax of 8s. perhectare was levied. All over Upper Egypt people were leavingthe villages, demolished their dwellings and no longer tilledtheir land—only to avoid payment of taxes. In 1876, the taxon date palms was increased by 6d. Whole villages went out tofell their date palms and had to be prevented by rifle volleys.North of Siut, 10,000 fellaheen are said to have starved in 1879because they could no longer raise the irrigation tax for theirfields and had killed their cattle to avoid paying tax on it.[407]

Now the fellah had been drained of his last drop of blood.Used as a leech by European capital, the Egyptian state hadaccomplished its function and was no longer needed. Ismail, theKhedive, was given hiscongé; capital could begin winding upoperations.

Egypt had still to pay 394,000 Egyptian pounds as interest onthe Suez Canal shares for £m. 4 which England had bought in1875. Now British commissions to ‘regulate’ the finances ofEgypt went into action. Strangely enough, European capitalwas not at all deterred by the desperate state of the insolventcountry and offered again and again to grant immense loansfor the salvation of Egypt. Cowe and Stokes proposed a loanof £m. 76 at 9 per cent for the conversion of the total debt,Rivers Wilson thought no less than £m. 103 would be necessary.TheCrédit Foncier bought up floating bills of exchange by themillion, attempting, though without success, to consolidate thetotal debt by a loan of £m. 91. With the financial position growinghopelessly desperate, the time drew near when the country[Pg 437]and all her productive forces was to become the prey of Europeancapital. October 1878 saw the representatives of theEuropean creditors landing in Alexandria. British and Frenchcapital established dual control of finances and devised newtaxes; the peasants were beaten and oppressed, so that paymentof interest, temporarily suspended in 1876, could be resumedin 1877.[408]

Now the claims of European capital became the pivot ofeconomic life and the sole consideration of the financial system.In 1878, a new commission and ministry were set up, both witha staff in which Europeans made up one half. In 1879, thefinances of Egypt were brought under permanent control ofEuropean capital, exercised by theCommission de la Dette PubliqueÉgyptienne in Cairo. In 1878, the Tshifliks, estates of theviceregal family, which comprised 431,100 acres, were convertedinto crown land and pledged to the European capitalistsas collateral for the public debt, and the same happened to theDaira lands, the private estates of the Khedive, comprising485,131 acres, mainly in Upper Egypt; this was, at a later date,sold to a syndicate. The other estates for the greatest part fell tocapitalist companies, the Suez Canal Company in particular.To cover the cost of occupation, England requisitioned ecclesiasticallands of the mosques and schools. An opportune pretextfor the final blow was provided by a mutiny in the Egyptianarmy, starved under European financial control while Europeanofficials were drawing excellent salaries, and by a revolt engineeredamong the Alexandrian masses who had been bled white.The British military occupied Egypt in 1882, as a result oftwenty years’ operations of Big Business, never to leave again.This was the ultimate and final step in the process of liquidatingpeasant economy in Egypt by and for European capital.[409]

[Pg 438]It should now be clear that the transactions between Europeanloan capital and European industrial capital are basedupon relations which are extremely rational and ‘sound’ for theaccumulation of capital, although they appear absurd to thecasual observer because this loan capital pays for the ordersfrom Egypt and the interest on one loan is paid out of a newloan. Stripped of all obscuring connecting links, these relationsconsist in the simple fact that European capital has largelyswallowed up the Egyptian peasant economy. Enormous tractsof land, labour, and labour products without number, accruingto the state as taxes, have ultimately been converted into Europeancapital and have been accumulated. Evidently, only byuse of thekourbash could the historical development which wouldnormally take centuries be compressed into two or three decades,and it was just the primitive nature of Egyptian conditionswhich proved such fertile soil for the accumulation of capital.

As against the fantastic increase of capital on the one hand,the other economic result is the ruin of peasant economy togetherwith the growth of commodity exchange which is rootedin the supreme exertion of the country’s productive forces.Under Ismail’s rule, the arable and reclaimed land of Egyptgrew from 5 to 6·75 million acres, the canal system from 45,625to 54,375 miles and the permanent way from 256·25 to 1,638miles. Docks were built in Siut and Alexandria, magnificentdockyards in Alexandria, a steamer-service for pilgrims toMecca was introduced on the Red Sea and along the coast ofSyria and Asia Minor. Egypt’s exports which in 1861 hadamounted to £4,450,000 rose to £m. 14·4 in 1864; her importswhich under Said Pasha amounted to £m 1·2 rose under Ismailto between £m. 5 and £m. 5·5. Trade which recovered only inthe eighties from the opening up of the Suez Canal amountedto £m. 8·15 worth of imports and £m. 12·45 worth of exports[Pg 439]in 1890, but in 1900 the figures were £m. 144 for imports and£m. 12·25 for exports, and in 1911—£m. 27·85 for imports and£m. 26·85 for exports. Thanks to this development of commodityeconomy which expanded by leaps and bounds with theassistance of European capital, Egypt herself had fallen a preyto the latter. The case of Egypt, just as that of China and, morerecently, Morocco, shows militarism as the executor of theaccumulation of capital, lurking behind international loans,railroad building, irrigation systems, and similar works ofcivilisation. The Oriental states cannot develop from natural tocommodity economy and further to capitalist economy fastenough and are swallowed up by international capital, sincethey cannot perform these transformations without selling theirsouls to capital. Their feverish metamorphoses are tantamountto their absorption by international capital.

Another good recent example is the deal made by Germancapital in Asiatic Turkey. European capital, British capital inparticular, had already at an early date attempted to gainpossession of this area which marches with the ancient traderoute between Europe and Asia.[410]

In the fifties and sixties, British capital built the railwaylines Smyrna-Aydin-Diner and Smyrna-Kassaba-Alasehir,obtained the concession to extend the line to Afyon Karahisarand also leased the first tract for the Anatolian railway Ada-Bazar-Izmid.French capital gradually came to acquire influenceover part of the railway building during this time. In1888, German capital appeared on the scene. It took up 60 per[Pg 440]cent of the shares in the new merger of international interests,negotiated principally with the French capitalist group representedby theBanque Ottomane. International capital took upthe remaining 40 per cent.[411] The Anatolian Railway Company,a Turkish company, was founded on the 14th Redsheb of theyear 1306 (March 4, 1889) with theDeutsche Bank for principalbacker, to take over the railway lines between Ada-Bazar andIzmid, running since the early seventies, as also the concessionfor the Izmid-Eskisehir-Angora line (525 miles). It was furtherentitled to complete the Ada-Bazar-Scutari line and branchlines to Brussa, in addition to building the supplementary networkEskisehir-Konya (278 miles) on the basis of the 1893 concession,and finally to run a service from Angora to Kaisari(264 miles). The Turkish government gave the company a stateguarantee of annual gross earnings amounting to £412 per km.on the Ada-Bazar line and of £600 per km. on the Izmid-Angoralines. For this purpose it wrote over to theAdministrationde la Dette Publique Ottomane the revenue from tithes in thesandshaksof Izmid, Ertoghrul, Kutalia and Angora, with which tomake up the gross earnings guaranteed by the government. Forthe Angora-Kaisari line the government guaranteed annualgross earnings of 775 Turkish pounds, i.e. £712 per km., and604 Turkish pounds, i.e. approximately £550, provided, in thelatter case, that the supplementary grant per km. did not exceed219 Turkish pounds (£200 a year). The government was toreceive a quarter of the eventual surplus of gross earnings overthe guaranteed amount. TheAdministration de la Dette PubliqueOttomane as executor of the government guarantee collected thetithes of thesandshaks Trebizonde and Gumuchhane direct andpaid the railway company out of a common fund which wasformed of all the tithes set aside for this purpose. In 1898, theEskisehir-Konya maximum grant was raised from 218 to 296Turkish pounds.

In 1899, the company obtained concessions to build and runa dockyard at Ada-Bazar, to issue writs, to build corn-elevatorsand storerooms for goods of every description, further the rightto employ its own staff for loading and unloading and, finally,in the sphere of customs policy, the creation of a kind of freeport.

[Pg 441]In 1901, the company acquired a concession for the Baghdadrailway Konya-Baghdad-Bazra-Gulf of Persia (1,500 miles)which connects with the Anatolian line by the Konya-Aregli-Bulgurluline. For taking up this concession, a new limited companywas founded which placed the order of constructing theline, at first to Bulgurlu, with a Building Company registered inFrankfort-on-the-Main.

Between 1893 and 1910, the Turkish government gave additionalgrants—£1,948,000 for the Ada-Bazar-Angora line and1,800,000 Turkish pounds for the Eskisehir-Konya line—a totalof £3,632,000.[412] Finally, by the concession of 1907, the companywas empowered to drain the Karavirar Lake and to irrigate theKonya plain, these works to be executed within six years atgovernment expense. In this instance, the company advancedthe government the necessary capital up to £780,000 at 5 percent interest, repayable within thirty-six years. In return theTurkish government pledged as securities: (1) an annual sumof 25,000 Turkish pounds, payable from the surplus of the tithes’fund assigned to theAdministration de la Dette Publique Ottomaneto cover the railway grants and other obligations; (2) theresidual tithes over the last 5 years in the newly irrigatedregions; (3) the net proceeds from the working of the irrigationsystems, and (4) the price of all reclaimed or irrigated land thatwas sold. For the execution of this work, the Frankfort companyhad formed a subsidiary company ‘for the irrigation of theKonya plain’ with a capital of £m. 5·4 to take this work in hand.

In 1908 the company obtained the concession for extendingthe Konya railway as far as Baghdad and the Gulf of Persia,again with inclusion of a guaranteed revenue.

To pay for this railway grant, a German Baghdad railwayloan was taken up in three instalments of £m. 2·16, £m. 4·32and £m. 4·76 respectively, on the security of the aggregatetithes for thevilayets Aydin, Baghdad, Mossul, Diarbekir, Ursaand Aleppo, and the sheep-tax in thevilayets Konya, Adana,Aleppo, etc.[413]

The foundation of accumulation here becomes quite clear.[Pg 442]German capital builds railways, ports and irrigation works inAsiatic Turkey; in all these enterprises it extorts new surplusvalue from the Asiatics whom it employs as labour power. Butthis surplus value must be realised together with the means ofproduction from Germany (railway materials, machinery, etc.).How is it done? In part by commodity exchange which isbrought about by the railways, the dockyards, etc., and nurtured[Pg 443]in Asia Minor under conditions of natural economy. In part,i.e. in so far as commodity exchange does not grow quicklyenough for the needs of capital, by using force, the machineryof the state, to convert the national real income into commodities;these are turned into cash in order to realise capital plussurplus value. That is the true object of the revenue grants forindependent enterprises run by foreign capital, and of the collateralin the case of loans. In both instances so-called tithes(ueshur), pledged in different ways, are paid in kind by theTurkish peasant and these were gradually increased from about12 to12¹⁄₂ per cent. The peasant in the Asiaticvilayet must payup or else his tithe would simply be confiscated by the police andthe central and local authorities. These tithes, themselves amanifestation of ancient Asiatic despotism based on naturaleconomy, are not collected by the Turkish government direct,but by tax-farmers not unlike the tax-collectors of theancienrégime; that is to say the expected returns from the levy in eachvilayet are separately auctioned by the state to tax-farmers. Theyare bought by individual speculators or syndicates who sell thetithes of eachsandshak (district) to other speculators and theseresell their shares to a whole number of smaller agents. All thesemiddlemen want to cover their expenses and make the greatestpossible profit, and thus, by the time they are actually collected,the peasants’ contributions have swollen to enormous dimensions.The tax-farmer will try to recoup himself for any mistakein his calculations at the expense of the peasant, and the latter,nearly always in debt, is impatient for the moment when he cansell his harvest. But often, after cutting his corn, he cannot startthreshing for weeks, until indeed the tax-farmer deigns to takehis due. His entire harvest is about to rot in the fields, and thetax-farmer, usually a grain merchant himself, takes advantageof this fact and compels him to sell at a low price. These tax-collectorsknow how to enlist the support of the officials, especiallythe Muktars, the local headmen, against complainingmalcontents.[414]

Along with the taxes on salt, tobacco, spirits, the excise onsilk, the fishing dues, etc., the tithes are pledged with theConseilde l’Administration de la Dette Publique Ottomane to serve as securityfor the railway grant and the loans. In every case theConseil[Pg 444]reserves to itself the right to vet the tax-farmers’ contracts andstipulates for the proceeds of the tithe to be paid directly intothe coffers of its regional offices. If no tax-farmer can be found,the tithes are stored in kind by the Turkish government; thewarehouse keys are deposited with theConseil which then cansell the tithes on its own account.

Thus the economic metabolism between the peasants of AsiaMinor, Syria and Mesopotamia on the one hand and Germancapital on the other proceeds in the following way: in thevilayets Konya, Baghdad, Bazra, etc., the grain comes into beingas a simple use-product of primitive peasant economy. It immediatelyfalls to the tithe-farmer as a state levy. Only then, inthe hands of this latter, does it become a commodity, and, assuch, money which falls to the state. This money is nothing butconverted peasant grain; it was not even produced as a commodity.But now, as a state guarantee, it serves towards payingfor the construction and operation of railways, i.e. to realiseboth the value of the means of production and the surplus valueextorted from the Asiatic peasants and proletariat in the buildingand running of the railway. In this process further means ofproduction of German origin are used, and so the peasant grainof Asia, converted into money, also serves to turn into cash thesurplus value that has been extorted from the German workers.In the performance of these functions, the money rolls from thehands of the Turkish government into the coffers of theDeutscheBank, and here it accumulates, as capitalist surplus value, inthe form of promoters’ profits, royalties, dividends and interestsin the accounts of Messrs. Gwinner, Siemens, Stinnes and theirfellow directors, of the shareholders and clients of theDeutscheBank and the whole intricate system of its subsidiary companies.If there is no tax-farmer, as provided in the concessions, thenthe complicated metamorphoses are reduced to their mostsimple and obvious terms: the peasant grain passes immediatelyto theAdministration de la Dette Publique Ottomane, i.e. to therepresentatives of European capital, and becomes already in itsnatural form a revenue for German and other foreign capital:it realises capitalist surplus value even before it has shed its use-formfor the Asiatic peasant, even before it has become a commodityand its own value has been realised. This is a coarse andstraightforward metabolism between European capital and[Pg 445]Asiatic peasant economy, with the Turkish state reduced to itsreal rôle, that of a political machinery for exploiting peasanteconomy for capitalist purposes,—the real function, this, of allOriental states in the period of capitalist imperialism. This businessof paying for German goods with German capital in Asiais not the absurd circle it seems at first, with the kind Germansallowing the shrewd Turks merely the ‘use’ of their great worksof civilisation—it is at bottom an exchange between Germancapital and Asiatic peasant economy, an exchange performedunder state compulsion. On the one hand it makes for progressiveaccumulation and expanding ‘spheres of interest’ as a pretextfor further political and economic expansion of Germancapital in Turkey. Railroad building and commodity exchange,on the other hand, are fostered by the state on the basis of arapid disintegration, ruin and exploitation of Asiatic peasanteconomy in the course of which the Turkish state becomes moreand more dependent on European capital, politically as well asfinancially.[415]

CHAPTER XXXI

PROTECTIVE TARIFFS ANDACCUMULATION

Imperialism is the political expression of the accumulationof capital in its competitive struggle for what remains stillopen of the non-capitalist environment. Still the largest partof the world in terms of geography, this remaining field for theexpansion of capital is yet insignificant as against the high levelof development already attained by the productive forces ofcapital; witness the immense masses of capital accumulated inthe old countries which seek an outlet for their surplus productand strive to capitalise their surplus value, and the rapidchange-over to capitalism of the pre-capitalist civilisations. Onthe international stage, then, capital must take appropriatemeasures. With the high development of the capitalist countriesand their increasingly severe competition in acquiring non-capitalistareas, imperialism grows in lawlessness and violence,both in aggression against the non-capitalist world and in evermore serious conflicts among the competing capitalist countries.But the more violently, ruthlessly and thoroughly imperialismbrings about the decline of non-capitalist civilisations, the morerapidly it cuts the very ground from under the feet of capitalistaccumulation. Though imperialism is the historical method forprolonging the career of capitalism, it is also a sure means ofbringing it to a swift conclusion. This is not to say that capitalistdevelopment must be actually driven to this extreme: the meretendency towards imperialism of itself takes forms which makethe final phase of capitalism a period of catastrophe.

Classical economics, in its period of storm and stress, had hadhigh hopes of a peaceful development of the accumulation ofcapital and of a trade and industry which can only prosper intimes of peace, evolving the orthodox Manchester ideology ofthe harmony of interests among the world’s commercial nationson the one hand, and between capital and labour on the other.These hopes were apparently justified in Europe by the short[Pg 447]period of Free Trade in the sixties and seventies, which was basedupon the mistaken doctrine of the English Free Traders that theonly theoretical and practical condition for the accumulation ofcapital is commodity exchange, that the two are identical. Aswe have seen, Ricardo and his whole school identified accumulationand its reproductive conditions with simple commodityproduction and the conditions of simple commodity circulation.This was soon to become even more obvious in the practices ofthe common Free Trader. The special interests of the exportingLancashire cotton manufacturers in Manchester determined theentire line of argument of the Cobden League. Their principalobject was to get markets, and it became an article of faith:‘Buy from foreign countries and thus in turn sell our industrialproduct, our cotton goods, on the new markets.’ Cobden andBright demanded Free Trade and cheaper foodstuffs in particularin the interest of consumption; but the consumer was not theworker who eats the bread, but the capitalist who consumeslabour power.

This teaching never expressed the interests of capitalistaccumulation as a whole. In England herself it was given thelie already in the forties, when the harmony of interests of thecommercial nations in the East were proclaimed to the sound ofgunfire in the Opium Wars which ultimately, by the annexationof Hongkong, brought about the very opposite of such harmony,a system of ‘spheres of interest’.[416] On the European Continent,[Pg 448]Free Trade in the sixties did not represent the interests of industrialcapital, because the foremost Free Trade countries of theContinent were still predominantly agrarian with a comparativelyfeeble development of industry. Rather, the policy of FreeTrade was implemented as a means for the political reconstructionof the Central European states. In Germany, under Bismarckand Manteuffel, it was a peculiarly Prussian lever forousting Austria from theBund and theZollverein and to set up thenew German Empire under Prussian leadership. Economicallyspeaking, the mainstays of Free Trade were in this case theinterests both of commercial capital, especially in the Hansatowns to whom international trade was vital, and of agrarianconsumers; among industry proper, it was otherwise. The ironindustry was won over only with difficulty and in exchange forthe abolition of the Rhine tolls. But the cotton industry inSouthern Germany remained irreconcilable and clung to protectivetariffs. In France, ‘most favoured nations’ clause’ agreements,the basis of the Free Trade system all over Europe, wereconcluded by Napoleon III without the consent, and evenagainst the will, of parliament, industrialists and agrarians, whoconstituted an absolute majority, being in favour of protectivetariffs. The government of the Second Empire only took thecourse of commercial treaties as an emergency measure—Britainaccepted it as such—in order to get round political opposition inFrance and to establish Free Trade behind the back of the legislatureby international action. The first principal treaty betweenEngland and France simply rode rough-shod over public opinionin France.[417] Two imperial decrees abolished the old system ofFrench protective tariffs which had been in force from 1853 to[Pg 449]1862. With scant observance of the formalities they were ‘ratified’in 1863. In Italy, Free Trade was a prop of Cavour’s policy,depending as it did on French support. Under pressure ofpublic opinion, an inquiry was made in 1870 which revealedthat those most intimately concerned were hostile to the policy ofFree Trade. In Russia, finally, the tendency towards Free Tradein the sixties was but the first step towards creating a broadbasis for commodity economy and industry on a large scale,coming at the same time as the abolition of serfdom and theconstruction of a railway network.[418]

Thus the very inception of an international system of FreeTrade shows it to be just a passing phase in the history ofcapitalist accumulation, and it shows up the fallacy of attributingthe general reversion to protective tariffs after the seventiessimply to a defensive reaction against English Free Trade.[419]

[Pg 450]Such an explanation is vitiated by the fact that both inGermany and France the leaders in the reversion to protectivetariffs were the agrarian interests, that the measures weredirected not against British but against American competition,and that not England but Germany constituted the chiefdanger to the rising home industry in Russia, and France tothat in Italy. Nor was Britain’s monopoly the cause for theworld-wide depression which prevailed since the seventies andinduced the desire for protective tariffs. We must look deeperfor the reasons responsible for the change of front on the questionof protective tariffs. The doctrine of Free Trade with itsdelusion about the harmony of interests on the world marketcorresponded with an outlook which conceived of everythingin terms of commodity exchange. It was abandoned just as soonas big industrial capital had become sufficiently established inthe principal countries of the European Continent to look tothe conditions for its accumulation. As against the mutualinterests of capitalist countries, these latter bring to the forethe antagonism engendered by the competitive struggle for thenon-capitalist environment.

When the Free Trade era opened, Eastern Asia was only justbeing made accessible by the Chinese wars, and Europeancapital had but begun to make headway in Egypt. In theeighties the policy of expansion became ever stronger, togetherwith a policy of protective tariffs. There was an uninterruptedsuccession of events during the eighties: the British occupation[Pg 451]of Egypt, Germany’s colonial conquests in Africa, the Frenchoccupation of Tunisia together with the Tonkin expedition,Italy’s advances in Assab and Massawa, the Abyssinian warand the creation of a separate Eritrea, and the English conquestsin South Africa. The clash between Italy and Franceover the Tunisian sphere of interest was the characteristic preludeto the Franco-Italian tariff war seven years later, by whichdrastic epilogue an end was made to the Free Trade harmony ofinterests on the European Continent. To monopolise the non-capitalistareas at home and abroad became the war-cry ofcapital, while the free-trade policy of the ‘open door’ specificallyrepresented the peculiar helplessness of non-capitalist countriesin the face of international capital and the natural equilibriumwhich was aimed at by its competition in the preliminary stageof the partial or total occupation of these areas as colonies orspheres of interest. As the oldest capitalist Empire, Englandalone could so far remain loyal to Free Trade, primarily becauseshe had long had immense possessions of non-capitalist areasas a basis for operations which afforded her almost unlimitedopportunities for capitalist accumulation. Until recently, shehad thus in fact been beyond the competition of other capitalistcountries. These, in turn, universally strove to become self-sufficientbehind a barrier of protective tariffs; yet they buy oneanother’s commodities and come to depend ever more one uponanother for replenishing their material conditions of reproduction.Indeed, protective tariffs have by now completely lost theiruse for technical development of the productive forces, all toooften being the instrument for the artificial conservation ofobsolete productive methods. The inherent contradictions of aninternational policy of protective tariffs, exactly like the dualcharacter of the international loan system, are just a reflectionof the historical antagonism which has developed between thedual interests of accumulation: expansion, the realisation andcapitalisation of surplus value on the one hand, and, on theother, an outlook which conceives of everything purely in termsof commodity exchange.

This fact is evidenced particularly in that the modern systemof high protective tariffs, required by colonial expansion andthe increasing inner tension of the capitalist medium, was alsoinstituted with a view to increasing armaments. The reversion[Pg 452]to protective tariffs was carried through in Germany as well asin France, Italy, and Russia, together with, and in the interestsof, an expansion of the armed services, as the basis for theEuropean competition in armaments which was developing atthat time, first on land, and then also at sea. European FreeTrade, with its attendant continental system of infantry, hadbeen superseded by protective tariffs as the foundation andsupplement of an imperialist system with a strong bias towardsnaval power.

Thus capitalist accumulation as a whole, as an actual historicalprocess, has two different aspects. One concerns thecommodity market and the place where surplus value is produced—thefactory, the mine, the agricultural estate. Regardedin this light, accumulation is a purely economic process, with itsmost important phase a transaction between the capitalist andwage labourer. In both its phases, however, it is confined tothe exchange of equivalents and remains within the limits ofcommodity exchange. Here, in form at any rate, peace, propertyand equality prevail, and the keen dialectics of scientific analysiswere required to reveal how the right of ownership changes inthe course of accumulation into appropriation of other people’sproperty, how commodity exchange turns into exploitation andequality becomes class-rule.

The other aspect of the accumulation of capital concerns therelations between capitalism and the non-capitalist modes ofproduction which start making their appearance on the internationalstage. Its predominant methods are colonial policy,an international loan system—a policy of spheres of interest—andwar. Force, fraud, oppression, looting are openly displayedwithout any attempt at concealment, and it requires an effortto discover within this tangle of political violence and contestsof power the stern laws of the economic process.

Bourgeois liberal theory takes into account only the formeraspect: the realm of ‘peaceful competition’, the marvels oftechnology and pure commodity exchange; it separates itstrictly from the other aspect: the realm of capital’s blusteringviolence which is regarded as more or less incidental to foreignpolicy and quite independent of the economic sphere of capital.

In reality, political power is nothing but a vehicle for theeconomic process. The conditions for the reproduction of capital[Pg 453]provide the organic link between these two aspects of theaccumulation of capital. The historical career of capitalism canonly be appreciated by taking them together. ‘Sweating bloodand filth with every pore from head to toe’ characterises notonly the birth of capital but also its progress in the world atevery step, and thus capitalism prepares its own downfall underever more violent contortions and convulsions.

CHAPTER XXXII

MILITARISM AS A PROVINCEOF ACCUMULATION

Militarism fulfils a quite definite function in the historyof capital, accompanying as it does every historicalphase of accumulation. It plays a decisive part in thefirst stages of European capitalism, in the period of the so-called‘primitive accumulation’, as a means of conquering the NewWorld and the spice-producing countries of India. Later, it isemployed to subject the modern colonies, to destroy the socialorganisations of primitive societies so that their means of productionmay be appropriated, forcibly to introduce commoditytrade in countries where the social structure had been unfavourableto it, and to turn the natives into a proletariat by compellingthem to work for wages in the colonies. It is responsible forthe creation and expansion of spheres of interest for Europeancapital in non-European regions, for extorting railway concessionsin backward countries, and for enforcing the claims ofEuropean capital as international lender. Finally, militarism isa weapon in the competitive struggle between capitalist countriesfor areas of non-capitalist civilisation.

In addition, militarism has yet another important function.From the purely economic point of view, it is a pre-eminentmeans for the realisation of surplus value; it is in itself a provinceof accumulation. In examining the question who shouldcount as a buyer for the mass of products containing the capitalisedsurplus value, we have again and again refused to considerthe state and its organs as consumers. Since their incomeis derivative, they were all taken to belong to the special categoryof those who live on the surplus value (or partly on thewage of labour), together with the liberal professions and thevarious parasites of present-day society (‘king, professor, prostitute,mercenary’). But this interpretation will only do on twoassumptions: first, if we take it, in accordance with Marx’s[Pg 455]diagram, that the state has no other sources of taxation thancapitalist surplus value and wages,[420] and secondly, if we regardthe state and its organs as consumers pure and simple. If theissue turns on the personal consumption of the state organs (asalso of the ‘mercenary’) the point is that consumption is partlytransferred from the working class to the hangers-on of thecapitalist class, in so far as the workers foot the bill.

Let us assume for a moment that the indirect taxes extortedfrom the workers, which mean a curtailment of their consumption,are used entirely to pay the salaries of the state officials andto provision the regular army. There will then be no change inthe reproduction of social capital as a whole. Both DepartmentsII and I remain constant because society as a whole stilldemands the same kind of products and in the same quantities.Onlyv as the commodity of ‘labour power’ has changed in valuein relation to the products of Department II, i.e. in relation tothe means of subsistence. Thisv, the same amount of moneyrepresenting labour power, is now exchanged for a smalleramount of means of subsistence. What happens to the productsof Department II which are then left over? Instead of theworkers, the state officials and the regular army now receivethem. The organs of the capitalist state take over the workers’consumption on the same scale exactly. Although the conditionsof reproduction have remained stable, there has been aredistribution of the total product. Part of the products ofDepartment II, originally intended entirely for the consumptionof the workers as equivalent forv, is now allocated to the[Pg 456]hangers-on of the capitalist class for consumption. From thepoint of view of social reproduction, it is as if the relative surplusvalue had in the first place been larger by a certain amountwhich is added on to the consumption of the capitalist class andits hangers-on.

So far the crude exploitation, by the mechanism of indirecttaxation, of the working class for the support of the capitaliststate’s officials amounts merely to an increase of the surplusvalue, of that part of it, that is to say, which is consumed. Thedifference is that this further splitting off of surplus value fromvariable capital only comes later, after the exchange betweencapital and labour has been accomplished. But the consumptionby the organs of the capitalist state has no bearing on therealisation ofcapitalised surplus value, because the additionalsurplus value for this consumption—even though it comes aboutat the workers’ expense—is created afterwards. On the otherhand, if the workers did not pay for the greater part of the stateofficials’ upkeep, the capitalists themselves would have to bearthe entire cost of it. A corresponding portion of their surplusvalue would have to be assigned directly to keeping the organsof their class-rule, either at the expense of production whichwould have to be curtailed accordingly, or, which is more probable,it would come from the surplus value intended for theirconsumption. The capitalists would have to capitalise on asmaller scale because of having to contribute more towards theimmediate preservation of their own class. In so far as they shiftonto the working class (and also the representatives of simplecommodity production, such as peasants and artisans) the principalcharge of their hangers-on, the capitalists have a largerportion of surplus value available for capitalisation. But as yetno opportunities for such capitalisation have come into being, no newmarket, that is to say, for the surplus value that has becomeavailable, in which it could produce and realise new commodities.But when the monies concentrated in the exchequer bytaxation are used for the production of armaments, the pictureis changed.

With indirect taxation and high protective tariffs, the billof militarism is footed mainly by the working class and thepeasants. The two kinds of taxation must be considered separately.From an economic point of view, it amounts to the following,[Pg 457]as far as the working class is concerned: provided thatwages are not raised to make up for the higher price of foodstuffs—whichis at present the fate of the greatest part of the workingclass, including even the minority that is organised in tradeunions, owing to the pressure of cartels and employers’ organisations[421] —indirecttaxation means that part of the purchasingpower of the working class is transferred to the state. Now asbefore the variable capital, as a fixed amount of money, will putin motion an appropriate quantity of living labour, that is tosay it serves to employ the appropriate quantity of constantcapital in production and to produce the corresponding amountof surplus value. As soon as capital has completed this cycle, itis divided between the working class and the state: the workerssurrender the state part of the money they received as wages.Capital has wholly appropriated the former variable capital inits material form, as labour power, but the working class retainsonly part of the variable capital in the form of money, the stateclaiming the rest. And this invariably happens after capital hasrun its cycle between capitalist and worker; it takes place, as itwere, behind the back of capital, at no point impinging directon the vital stages of the circulation of capital and the productionof surplus value, so that it is no immediate concern of thelatter. But all the same it does affect the conditions for the reproductionof capital as a whole. The transfer of some of the purchasingpower from the working class to the state entails aproportionate decrease in the consumption of means of subsistenceby the working class. For capital as a whole, it meansproducing a smaller quantity of consumer goods for the workingclass, provided that both variable capital (in the form of moneyand as labour power) and the mass of appropriated surplusvalue remain constant, so that the workers get a smaller shareof the aggregate product. In the process of reproduction of theentire capital, then, means of subsistence will be produced inamounts smaller than the value of the variable capital, becauseof the shift in the ratio between the value of the variable capital[Pg 458]and the quantity of means of subsistence in which it is realised,with the money wages of labour remaining constant, accordingto our premise, or at any rate not rising sufficiently to offset theincrease in the price of foodstuffs. This increase represents thelevel of indirect taxation.

How will the material relations of reproduction be adjusted?When fewer means of subsistence are needed for the renewal oflabour power, a corresponding amount of constant capital andliving labour becomes available which can now be used for producingother commodities in response to a new effective demandarising within society. It arises from the side of the state whichhas appropriated, by way of tax legislation, the part wanting ofthe workers’ purchasing power. This time, however, the statedoes not demand means of subsistence (after all that has alreadybeen said under the heading of ‘third persons’, we shall hereignore the demand for means of subsistence for state officialswhich is also satisfied out of taxes) but it requires a special kindof product, namely the militarist weapons of war on land andat sea.

Again we take Marx’s second diagram of accumulationas the basis for investigating the ensuing changes in socialreproduction:

Now let us suppose that, owing to indirect taxation and theconsequent increase in the price of means of subsistence, theworking class as a whole reduces consumption by, say, a 100value units of the real wages. As before, the workers receive1,000v + 285v = 1,285v in money, but for this money they only getmeans of subsistence to the value of 1185. The 100 units whichrepresent the tax increase in the price of foodstuffs go to thestate which receives in addition military taxes from the peasants,etc., to the value of 150 units, bringing the total up to 250. Thistotal constitutes a new demand—the demand for armaments.At present, however, we are only interested in the 100 unitstaken from the workers’ wages. This demand for armaments tothe value of 100 must be satisfied by the creation of an appropriatebranch of production which requires a constant capital of71·5 and a variable capital of 14·25, assuming the average[Pg 459]organic composition outlined in Marx’s diagram.

This new branch of production further requires that 71·5means of production be produced and about 13 means of subsistence,because, of course, the real wages of the workers arealso less by about one-thirteenth.

You could counter by saying that the profit accruing tocapital from this new expansion of demand is merely on paper,because the cut in the actual consumption of the working classwill inevitably result in a corresponding curtailment of themeans of subsistence produced. It will take the following formfor Department II:

In addition, Department I will also have to contract accordingly,so that, owing to the decreasing consumption of the workingclass, the equations for both departments will be:

If, by the mediation of the state, the same 100 units now callforth armament production of an equal volume with a correspondingfillip to the production of producer goods, this is atfirst sight only an extraneous change in the material forms ofsocial production: instead of a quantity of means of subsistence aquantity of armaments is now being produced. Capital has wonwith the left hand only what it has lost with the right. Or wemight say that the large number of capitalists producing meansof subsistence have lost the effective demand in favour of a smallgroup of big armament manufacturers.

But this picture is only valid for individual capital. Here itmakes no difference indeed whether production engages in onesphere of activity or another. As far as the individual capitalistis concerned, there are no departments of total production suchas the diagram distinguishes. There are only commodities andbuyers, and it is completely immaterial to him whether he producesinstruments of life or instruments of death, corned beef orarmour plating.

Opponents of militarism frequently appeal to this point of[Pg 460]view to show that military supplies as an economic investmentfor capital merely put profit taken from one capitalist into thepocket of another.[422] On the other hand, capital and its advocatestry to overpersuade the working class to this point of viewby talking them into the belief that indirect taxes and thedemand of the state would only bring about a change in thematerial form of reproduction; instead of other commoditiescruisers and guns would be produced which would give theworkers as good a living, if not a better one.

One glance at the diagram shows how little truth there is inthis argument as far as the workers are concerned. To makecomparison easier, we will suppose the armament factories toemploy just as many workers as were employed before in theproduction of means of subsistence for the working class. 1,285units will then be paid out as wages, but now they will onlybuy 1,185’s worth of means of subsistence.

All this looks different from the perspective of capital as awhole. For this the 100 at the disposal of the state, which representthe demand for armaments, constitute a new market.Originally this money was variable capital and as such it hasdone its job, it has been exchanged for living labour which producedthe surplus value. But then the circulation of the variablecapital was stopped short, this money was split off, and it nowappears as a new purchasing power in the possession of thestate. It has been created by sleight of hand, as it were, but stillit has the same effects as a newly opened market. Of course for[Pg 461]the time being capital is debarred from selling 100 units of consumergoods for the working class, and the individual capitalistconsiders the worker just as good a consumer and buyer of commoditiesas anyone else, another capitalist, the state, the peasant,foreign countries, etc. But let us not forget that for capital as awhole the upkeep of the working class is only a necessary evil,only a means towards the real end of production: the creationand realisation of surplus value. If it were possible to extortsurplus value without giving labour an equal measure of meansof subsistence, it would be all the better for business. To beginwith indirect taxation has the same effects as if—the price offoodstuffs remaining constant—the capitalists had succeeded indepressing wages by a hundred units without detracting fromthe work performed, seeing that a lower output of consumergoods is equally the inevitable result of continuous wage cuts. Ifwages are cut heavily, capital does not worry about having toproduce fewer means of subsistence for the workers, in fact itdelights in this practice at every opportunity; similarly, capitalas a whole does not mind if the effective demand of the workingclass for means of subsistence is curtailed because of indirecttaxation which is not compensated by a rise in wages. This mayseem strange because in the latter case the balance of the variablecapital goes to the exchequer, while with a direct wage cutit remains in the capitalists’ pockets and—commodity pricesremaining equal—increases the relative surplus value. But acontinuous and universal reduction of money wages can onlybe carried through on rare occasions, especially if trade unionorganisation is highly developed. There are strong social andpolitical barriers to this fond aspiration of capital. Depression ofthe real wage by means of indirect taxation, on the other hand,can be carried through promptly, smoothly and universally, andit usually takes time for protests to be heard; and besides, theopposition is confined to the political field and has no immediateeconomic repercussions. The subsequent restriction in theproduction of means of subsistence does not represent a loss ofmarkets for capital as a whole but rather a saving in the costsof producing surplus value. Surplus value is never realised byproducing means of subsistence for the workers—however necessarythis may be, as the reproduction of living labour, for theproduction of surplus value.

At first it looks as if Department II were also creating andrealising surplus value in the process of producing means of subsistencefor the workers, and Department I by producing therequisite means of production. But if we take the social productas a whole, the illusion disappears. The equation is in that case:

Now, if the means of subsistence for the workers are cut by100 units, the corresponding contraction of both departmentswill give us the following equations:

This looks like a general decrease in both the total volume ofproduction and in the production of surplus value—but only ifwe contemplate just the abstract quantities of value in the compositionof the total product; it does not hold good for thematerial composition thereof. Looking closer, we find that nothingbut the upkeep of labour is in effect decreased. Fewer meansof subsistence and production are now being made, no doubt,but then, they had had no other function save to maintainworkers. The social product is smaller and less capital is nowemployed—but then, the object of capitalist production is notsimply to employ as much capital as possible, but to produce asmuch surplus value as possible. Capital has only decreasedbecause a smaller amount is sufficient for maintaining theworkers. If the total cost of maintaining the workers employedin the society came to 1,285 units in the first instance, thepresent decrease of the social product by 171·5—the difference of(9,000-8,828·5)—comes off this maintenance charge, and thereis a consequent change in the composition of the social product:

[Pg 463]Constant capital and surplus value remain unchanged, andonly the variable capital, paid labour, has diminished. Or—incase there are doubts about constant capital being unaffected—wemay further allow for the event that, as would happen inactual practice, concomitant with the decrease in means of subsistencefor the workers there will be a corresponding cut inthe constant capital. The equation for the social product as awhole would then be:

In spite of the smaller social product, there is no change inthe surplus value in either case, and it is only the cost of maintainingthe workers that has fallen.

Put it this way: the value of the aggregate social product maybe defined as consisting of three parts, the total constant capitalof the society, its total variable capital, and its total surplusvalue, of which the first set of products contains no additionallabour, and the second and third no means of production. Asregards their material form, all these products come into beingin the given period of production—though in point of value theconstant capital had been produced in a previous period and ismerely being transferred to new products. On this basis, we canalso divide all the workers employed into three mutually exclusivecategories: those who produce the aggregate constantcapital of the society, those who provide the upkeep for all theworkers, and finally those who create the entire surplus value forthe capitalist class.

If, then, the workers’ consumption is curtailed, only workersin the second category will lose their jobs.Ex hypothesi, theseworkers had never created surplus value for capital, and in consequencetheir dismissal is therefore no loss from the capitalist’spoint of view but a gain, since it decreases the cost of producingsurplus value.

The demand of the state which arises at the same time has thelure of a new and attractive sphere for realising the surplusvalue. Some of the money circulating as variable capital breaksfree of this cycle and in the state treasury it represents a newdemand. For the technique of taxation, of course, the order ofevents is rather different, since the amount of the indirect taxesis actually advanced to the state by capital and is merely being[Pg 464]refunded to the capitalists by the sale of their commodities, aspart of their price. But economically speaking, it makes no difference.The crucial point is that the quantity of money with thefunction of variable capital should first mediate the exchangebetween capital and labour power. Later, when there is an exchangebetween workers and capitalists as buyers and sellers ofcommodities respectively, this money will change hands andaccrue to the state as taxes. This money, which capital has setcirculating, first fulfils its primary function in the exchange withlabour power, but subsequently, by mediation of the state, itbegins an entirely new career. As a new purchasing power, belongingwith neither labour nor capital, it becomes interested innew products, in a special branch of production which does notcater for either the capitalists or the working class, and thus itoffers capital new opportunities for creating and realising surplusvalue. When we were formerly taking it for granted thatthe indirect taxes extorted from the workers are used for payingthe officials and for provisioning the army, we found the ‘saving’in the consumption of the working class to mean that theworkers rather than the capitalists were made to pay for thepersonal consumption of the hangers-on of the capitalist classand the tools of their class-rule. This charge devolved from thesurplus value to the variable capital, and a correspondingamount of the surplus value became available for purposes ofcapitalisation. Now we see how the taxes extorted from theworkers afford capital a new opportunity for accumulationwhen they are used for armament manufacture.

On the basis of indirect taxation, militarism in practice worksboth ways. By lowering the normal standard of living for theworking class, it ensures both that capital should be able tomaintain a regular army, the organ of capitalist rule, and thatit may tap an impressive field for further accumulation.[423]

We have still to examine the second source of the state’s purchasingpower referred to in our example, the 150 units out of[Pg 465]the total 250 invested in armaments. They differ essentiallyfrom the hundred units considered above in that they are notsupplied by the workers but by the petty bourgeoisie, i.e. theartisans and peasants. (In this connection, we can ignore thecomparatively small tax-contribution of the capitalist classitself.)

The money accruing to the state as taxes from the peasantmasses—as our generic term for all non-proletarian consumers—wasnot originally advanced by capital and has not split offfrom capital in circulation. In the hand of the peasant it is theequivalent of goods that have been realised, the exchange valueof simple commodity production. The state now gets part of thepurchasing power of the non-capitalist consumers, purchasingpower, that is to say, which is already free to realise the surplusvalue for capitalist accumulation. Now the question arises,whether economic changes will result for capital, and if so, ofwhat nature, from diverting the purchasing power of such stratato the state for militarist purposes. It almost looks as if we hadcome up against yet another shift in the material form of reproduction.Capital will now produce an equivalent of war materialsfor the state instead of producing large quantities of means ofproduction and subsistence for peasant consumers. But in factthe changes go deeper. First and foremost, the state can use themechanism of taxation to mobilise much larger amounts of purchasingpower from the non-capitalist consumers than theywould ordinarily spend on their own consumption.

Indeed the modern system of taxation itself is largely responsiblefor forcing commodity economy on the peasants. Underpressure of taxes, the peasant must turn more and more ofhis produce into commodities, and at the same time he mustbuy more and more. Taxation presses the produce of peasanteconomy into circulation and compels the peasants to becomebuyers of capitalist products. Finally, on a basis of commodityproduction in the peasant style, the system of taxation luresmore purchasing power from peasant economy than wouldotherwise become active.

What would normally have been hoarded by the peasantsand the lower middle classes until it has grown big enough toinvest in savings banks and other banks is now set free to constitutean effective demand and an opportunity for investment.[Pg 466]Further the multitude of individual and insignificant demandsfor a whole range of commodities, which will become effectiveat different times and which might often be met just as well bysimple commodity production, is now replaced by a comprehensiveand homogeneous demand of the state. And the satisfactionof this demand presupposes a big industry of the highestorder. It requires the most favourable conditions for the productionof surplus value and for accumulation. In the form ofgovernment contracts for army supplies the scattered purchasingpower of the consumers is concentrated in large quantitiesand, free of the vagaries and subjective fluctuations ofpersonal consumption, it achieves an almost automatic regularityand rhythmic growth. Capital itself ultimately controlsthis automatic and rhythmic movement of militarist productionthrough the legislature and a press whose function is to mouldso-called ‘public opinion’. That is why this particular provinceof capitalist accumulation at first seems capable of infinite expansion.All other attempts to expand markets and set up operationalbases for capital largely depend on historical, social andpolitical factors beyond the control of capital, whereas productionfor militarism represents a province whose regular and progressiveexpansion seems primarily determined by capital itself.

In this way capital turns historical necessity into a virtue: theever fiercer competition in the capitalist world itself provides afield for accumulation of the first magnitude. Capital increasinglyemploys militarism for implementing a foreign andcolonial policy to get hold of the means of production andlabour power of non-capitalist countries and societies. This samemilitarism works in a like manner in the capitalist countries todivert purchasing power away from the non-capitalist strata.The representatives of simple commodity production and theworking class are affected alike in this way. At their expense,the accumulation of capital is raised to the highest power, byrobbing the one of their productive forces and by depressing theother’s standard of living. Needless to say, after a certain stagethe conditions for the accumulation of capital both at home andabroad turn into their very opposite—they become conditionsfor the decline of capitalism.

The more ruthlessly capital sets about the destruction of non-capitaliststrata at home and in the outside world, the more it[Pg 467]lowers the standard of living for the workers as a whole, thegreater also is the change in the day-to-day history of capital.It becomes a string of political and social disasters and convulsions,and under these conditions, punctuated by periodicaleconomic catastrophes or crises, accumulation can go on nolonger.

But even before this natural economic impasse of capital’sown creating is properly reached it becomes a necessity for theinternational working class to revolt against the rule of capital.

Capitalism is the first mode of economy with the weapon ofpropaganda, a mode which tends to engulf the entire globe andto stamp out all other economies, tolerating no rival at its side.Yet at the same time it is also the first mode of economy whichis unable to exist by itself, which needs other economic systemsas a medium and soil. Although it strives to become universal,and, indeed, on account of this its tendency, it must break down—becauseit is immanently incapable of becoming a universalform of production. In its living history it is a contradiction initself, and its movement of accumulation provides a solution tothe conflict and aggravates it at the same time. At a certainstage of development there will be no other way out than theapplication of socialist principles. The aim of socialism is notaccumulation but the satisfaction of toiling humanity’s wants bydeveloping the productive forces of the entire globe. And so wefind that socialism is by its very nature an harmonious anduniversal system of economy.

FOOTNOTES:

[1]For a totally different interpretation see Sweezy;The Theory of CapitalistDevelopment, chap. xi, Section 9.

[2]Seep. 166.

[3]Cf. the quotation fromCapital, vol. iii, p. 331.

[4]Seep. 132.

[5]Seep. 135.

[6]Seep. 130.

[7]Exchanges between industries, however, must take place at ‘prices ofproduction’ not atvalues. See below,p. 15, note.

[8]Seep. 113.

[9]Seep. 361.

[10]Seep. 134.

[11]Later it is assumed that real wages can be depressed by taxation(p. 455).

[12]Seep. 116.

[13]Seep. 85.

[14]Seep. 355.

[15]Seep. 76, note 355.

[16]Seep. 79.

[17]In the numerical example quoted in chap. vi. (p. 117.) the rate of profitis much higher in Department II than in I. Marx has made the rate ofexploitation equal in the two departments, and the ratio of constant tovariable capital higher in Department I. This is evidently an oversight.The two departments must trade with each other at market prices, not interms ofvalue. Therefores₁ must represent the profits accruing to DepartmentI, not a proportion (half in the example) of thevalue generated inDepartment I.^s₁/_v₁ should exceed^s₂⁄_v₂ to an extent corresponding to the higherorganic composition of capital in Department I. The point is interesting, asit shows that when off guard Marx forgot that he could make prices proportionaltovalues only when the organic composition of capital is the same inall industries.

[18]Seep. 129.

[19]Seep. 130.

[20]Since, in this model, the organic composition of capital is the same inthe two departments, prices correspond tovalues.

[21]Of total gross output,²⁄₃ is replacement of constant capital; surplus is¹⁄₆ of gross output, and of surplus half is saved; thus savings are¹⁄₁₂ of grossoutput; of saving⁴⁄₅ is added to constant capital; thus¹⁄₁₅ of gross output isadded to constant capital. The output of Department I is therefore²⁄₃ +¹⁄₁₅ or¹¹⁄₁₅ of total gross output. Similarly, the output of Department II is⁴⁄₁₅ oftotal gross output.

[22]This model bears a strong family resemblance to Mr. Harrod’s ‘Warrantedrate of growth’.Towards a Dynamic Economics, lecture III.

[23]Seep. 119.

[24]Seep. 125.

[25]Seep. 128.

[26]Seep. 91.

[27]Seep. 115.

[28]Seep. 102. The phrase ‘zahlungsfähige nachfrage’, translated ‘effectivedemand’, is not the effective demand of Keynes (roughly, current expenditure)but appears often to mean demand for new capital, or, perhaps, prospectivefuture demand for goods to be produced by new capital.

[29]This assumption is made explicit later (p. 342).

[30]See pp.131 et seq.

[31]See Sweezy, loc. cit.

[32]Seep. 40.

[33]Seep. 303.

[34]Seep. 258.

[35]This point is, however, later admitted (p. 337).

[36]Seep. 252.

[37]Seep. 259. Marx himself failed to get this point clear. Cf. myEssay onMarxian Economics, chap. v.

[38]Cf. Kalecki,Essays in the Theory of Economic Fluctuations, pp. 14 etseq.

[39]Seep. 323.

[40]Seep. 314. Marx did not find himself in this dilemma because heheld that there is a fundamental ‘contradiction’ in capitalism which showsitself in a strong tendency for the rate of profit on capital to fall as technicalprogress takes place. But Rosa Luxemburg sees that the tendency to a fallingrate of profit is automatically checked and may even be reversed if real-wagerates are constant (p. 338).

[41]Seep. 217, note.

[42]One passage suggests that she sees the problem, but thinks it irrelevantto the real issue (p. 342).

[43]Seep. 338.

[44]Seep. 337.

[45]In this model the rate of exploitation is different in the two departments.This means that the numbers represent money value, notvalue.

[46]Rosa Luxemburg seems to regard this process as impossible, but forwhat reason is by no means clear (p. 341).

[47]Seep. 352.

[48]Seep. 352.

[49]Seep. 358.

[50]Seep. 370.

[51]Seep. 428.

[52]Seep. 435.

[53]Seep. 421.

[54]Seep. 455.

[55]Seep. 387.

[56]Hicks,Value and Capital, p. 302, note. Mr. Hicks himself, however,regards the increase in population as the mainspring.

[57]Cf.A Survey of Contemporary Economics (ed. Ellis), p. 63.

[58]‘If production be capitalistic in form, so, too, will be reproduction’(Capital, vol. i, p. 578).

[59]Surplus value in our exposition is identical with profit. This is true forproduction as a whole, which alone is of account in our further observations.For the time being, we shall not deal with the further division of surplusvalue into its component parts: profit of enterprise, interest, and rent, as thissubdivision is immaterial to the problem of reproduction.

[60]‘Quesnay’sTableau Économique shows ... how the result of national productionin a certain year, amounting to some definite value, is distributed bymeans of the circulation in such a way, that ... reproduction can takeplace.... The innumerable individual acts of circulation are at onceviewed in their characteristic social mass movement—the circulationbetween great social classes distinguished by their economic function’(Capital, vol. ii, p. 414).

[61]Cf.Analyse du Tableau Économique, inJournal de l’Agriculture, du Commerceet des Finances, by Dupont (1766), pp. 305 ff. in Oncken’s edition ofŒuvresde F. Quesnay. Quesnay remarks explicitly that circulation as he describes itis based upon two conditions: unhampered trade, and a system of taxationapplying only to rent: ‘Yet these facts have indispensable conditions; thatthe freedom of commerce sustains the sale of products at a good price, ...and moreover, that the farmer need not pay any other direct or indirectcharges but this income, part of which, say two sevenths, must form therevenue of the Sovereign’ (op. cit., p. 311).

[62]Adam Smith,An Enquiry into the Nature and Causes of the Wealth of Nations(ed. MacCulloch, Edinburgh London, 1828), vol. i, pp. 86-8.

[63]Op. cit., vol. ii, pp. 17-18.

[64]Ibid., pp. 18-19.

[65]Ibid., p. 23.

[66]As to the concept of ‘national capital’ specific to Rodbertus, see below,Section II.

[67]J. B. Say,A Treatise on Political Economy (transl. by C. R. Prinsep, vol. ii,London, 1821); pp. 75-7.

[68]Attention must be drawn to the fact that Mirabeau in hisExplicationson theTableau Économique explicitly mentions the fixed capital of the unproductiveclass: ‘The primary advances of this class, for the establishmentof manufactures, for instruments, machines, mills, smithies (ironworks) andother factories ... (amount to) 2,000 million livres’ (Tableau Économiqueavec ses Explications, 1760, p. 82). In his confusing sketch of theTableauitself, Mirabeau, too, fails to take this fixed capital of the sterile class intoaccount.

[69]Smith accordingly arrives at this general formulation: ‘The value whichthe workmen add to the materials, therefore, resolves itself in this case intotwo parts, of which the one pays their wages, the other the profits of theiremployer upon the whole stock of materials and wages which he advanced’(op. cit., vol. i, p. 83). Further, in Book II, chap. 8, on industrial labour inparticular: ‘The labour of a manufacturer adds generally to the value of thematerials which he works upon, that of his own maintenance and of hismaster’s profit. The labour of a menial servant, on the contrary, adds to thevalue of nothing. Though the manufacturer has his wages advanced to himby his master, he in reality costs him no expense, the value of those wagesbeing generally restored, together with a profit, in the improved value of thesubject upon which his labour is bestowed’ (op. cit., vol. ii, pp. 93-4).

[70]‘The labourers ... therefore, employed in agriculture, not onlyoccasion, like the workmen in manufactures, the reproduction of a valueequal to their own consumption, or to the capital which employs them,together with its owner’s profit, but of a much greater value. Over andabove the capital of the farmer and all its profits, they regularly occasionthe reproduction of the rent of the landlord’ (ibid., p. 149).

[71]Ibid., pp. 97-8. Yet already in the following sentence Smith convertscapital completely into wages, that is variable capital: ‘That part of theannual produce of the land and labour of any country which replaces acapital, never is immediately employed to maintain any but productivehands. It pays the wages of productive labour only. That which is immediatelydestined for constituting a revenue, either as profit or as rent,may maintain indifferently either productive or unproductive hands’ (ibid.,p. 98).

[72]Ibid., p. 19.

[73]Smith, op. cit., vol. ii, pp. 19-20.

[74]Ibid., vol. i, pp. 21-2.

[75]Ibid., p. 22.

[76]Ibid.

[77]An Enquiry into the Nature and Causes of the Wealth of Nations, vol. i,p. 19.

[78]Theorien über den Mehrwert (Stuttgart, 1905), vol. i, pp. 179-252.

[79]Capital, vol. ii, p. 435.

[80]Smith, op. cit., vol. ii, p. 148.

[81]Ibid., p. 149.

[82]Op. cit., vol. i, pp. 86-7.

[83]In this connection, we have disregarded the contrary conception whichalso runs through the work of Smith. According to that, theprice of the commoditycannot be resolved intov +s, though thevalue of commodities consistsinv +s. This distinction, however, is more important with regard toSmith’s theory of value than in the present context where we are mainlyinterested in his formulav +s.

[84]For the sake of simplicity, we shall follow general usage and speak hereand in the following of annual production, though this term, strictly speaking,applies in general to agriculture only. The periods of industrial production,or of the turnover of capitals, need not coincide with calendar years.

[85]The distinction between intellectual and material labour need notinvolve special categories of the population in a planned society, based oncommon ownership of the means of production. It will always find expressionin the existence of a certain number of spiritual leaders who must bematerially maintained. The same individuals may exercise these variousfunctions at different times.

[86]Capital, vol. ii, p. 459.

[87]Capital, vol. ii, pp. 544-7. Cf. also p. 202 on the necessity of enlargedreproduction under the aspect of a reserve fund.

[88]Marx’s italics.

[89]Theorien über den Mehrwert, vol. ii, part 2, p. 248.

[90]In his seventh note to theTableau Économique, following up his argumentsagainst the mercantilist theory of money as identical with wealth,Quesnay says: ‘The bulk of money in a nation cannot increase unless thisreproduction itself increases; otherwise, an increase in the bulk of moneywould inevitably be prejudicial to the annual production of wealth....Therefore we must not judge the opulence of states on the basis of a greateror smaller quantity of money: thus a stock of money, equal to the incomeof the landowners, is deemed much more than enough for an agriculturalnation where the circulation proceeds in a regular manner, and wherecommerce takes place in confidence and full liberty’ (Analyse du TableauÉconomique, ed. Oncken, pp. 324-5).

[91]Marx (Capital, vol. ii, p. 482) takes the money spent directly by thecapitalists of Department II as the starting point of this act of exchange.As Engels rightly says in his footnote, this does not affect the final result ofcirculation, but the assumption is not the correct condition of circulationwithin society. Marx himself has given a better exposition inCapital, vol. ii,pp. 461-2.

[92]Capital, vol. ii, p. 548.

[93]Capital, vol. ii, p. 550.

[94]Ibid., p. 551.

[95]Ibid., p. 572.

[96]‘The premise of simple reproduction, that I(v +s) is equal to IIc, isirreconcilable with capitalist production, although this does not exclude thepossibility that a certain year in an industrial cycle of ten or eleven yearsmay not show a smaller total production than the preceding year, so thatthere would not have been even a simple reproduction, compared to thepreceding year. Indeed, considering the natural growth of population peryear, simple reproduction could take place only in so far as a correspondinglylarger number of unproductive servants would partake of the 1,500representing the aggregate surplus-product. But accumulation of capital,actual capitalist production, would be impossible under such circumstances’(Capital, vol. ii, p. 608).

[97]Ricardo,Principles, chap. viii, ‘On Taxes’. MacCulloch’s edition ofRicardo’s Works, p. 87, note. (Reference not given in original.)

[98]‘The specifically capitalist mode of production, the development of theproductive power of labour corresponding to it, and the change thenceresulting in the organic composition of capital, do not merely keep pacewith the advance of accumulation, or with the growth of social wealth.They develop at a much quicker rate, because mere accumulation, theabsolute increase of the total social capital, is accompanied by the centralisationof the individual capitals of which that total is made up; and becausethe change in the technological composition of the additional capital goeshand in hand with a similar change in the technological composition of theoriginal capital. With the advance of accumulation, therefore, the proportionof constant to variable capital changes. If it was originally say 1 : 1, itnow becomes successively 2 : 1, 3 : 1, 4 : 1, 5 : 1, 7 : 1, etc., so that, as the capitalincreases, instead of¹⁄₂ of its total value, only¹⁄₃,¹⁄₄,¹⁄₅,¹⁄₆,¹⁄₈, etc., is transformedinto labour-power, and, on the other hand,²⁄₃,³⁄₄,⁴⁄₅,⁵⁄₆,⁷⁄₈ into means ofproduction. Since the demand for labour is determined not by the amountof capital as a whole, but by its variable constituent alone, that demandfalls progressively with the increase of the total capital, instead of, aspreviously assumed, rising in proportion to it. It falls relatively to themagnitude of the total capital, and at an accelerated rate, as this magnitudeincreases. With the growth of the total capital, its variable constituent or thelabour incorporated in it, also does increase, but in a constantly diminishingproportion. The intermediate pauses are shortened, in which accumulationworks as simple extension of production, on a given technical basis. It is notmerely that an accelerated accumulation of total capital, accelerated in aconstantly growing progression, is needed to absorb an additional numberof labourers, or even, on account of the constant metamorphosis of oldcapital, to keep employed those already functioning. In its turn, this increasingaccumulation and centralisation becomes a source of new changes in thecomposition of capital, of a more accelerated diminution of its variable, ascompared with its constant constituent’ (Capital, vol. i, pp. 642-3).

[99]‘The course characteristic of modern industry, viz., a decennial cycle(interrupted by smaller oscillations), of periods of average activity, productionat high pressure, crisis and stagnation, depends on the constant formation,the greater or less absorption, and the re-formation of the industrialreserve army or surplus population. In their turn, the varying phases of theindustrial cycle recruit the surplus population, and become one of the mostenergetic agents of its reproduction’ (ibid., pp. 646-7).

[100]Capital, vol. i. pp. 593-4.

[101]Ibid., p. 594.

[102]Op. cit., vol. ii, pp. 596-601.

[103]Capital, vol. ii, pp. 598-9.

[104]Ibid., p. 599.

[105]Capital, vol. ii, pp. 600-1.

[106]Surplus consumption.

[107]Capital, vol. ii, p. 429.

[108]Ibid., pp. 531-2.

[109]Op. cit., vol. i, p. 594, note 1.

[110]Ibid., p. 594.

[111]Here we can leave out of account instances of products capable in partof entering the process of production without any exchange, such as coal inthe mines. Within capitalist production as a whole such cases are rare(cf. Marx,Theorien ..., vol. ii, part 2, pp. 255 ff.).

[112]Capital, vol. ii, p. 503.

[113]Capital, vol. ii, p. 571.

[114]Ibid., p. 572.

[115]Ibid., pp. 573-4.

[116]Capital, vol. ii, p. 375.

[117]Ibid., pp. 575-6.

[118]Capital, vol. ii, pp. 579-81.

[119]Ibid., p. 581.

[120]Capital, vol. ii, pp. 583-4.

[121]Ibid., p. 584.

[122]Capital, vol. ii, p. 585.

[123]Ibid., pp. 586-7.

[124]Ibid., pp. 588-9.

[125]Capital, vol. ii, pp. 590-1.

[126]Ibid., p. 593.

[127]Capital, vol. ii, p. 594.

[128]Ibid., p. 595.

[129]Ibid., p. 595.

[130]Ibid., p. 596.

[131]Ibid., p. 601.

[132]Capital, vol. ii, p. 610.

[133]Capital, vol. ii, p. 572.

[134]Capital, vol. ii, pp. 380-1.

[135]Ibid., p. 381.

[136]Capital, vol. ii, pp. 381-3.

[137]Ibid., p. 383.

[138]Capital, vol. ii, pp. 384-5.

[139]Ibid., p. 385.

[140]Capital, vol. ii, p. 387.

[141]Ibid., p. 397.

[142]Ibid., p. 397.

[143]Ibid., pp. 397-8.

[144]Capital, vol. ii, p. 401.

[145]Capital, vol. ii, pp. 8 ff.

[146]Cf. e.g.Capital, vol. ii, pp. 430, 522, and 529.

[147]In the review of an essay onObservations on the injurious Consequences of theRestrictions upon Foreign Commerce, by a Member of the late Parliament, London,1820 (Edinburgh Review, vol. lxvi, pp. 331 ff.). This interesting document,from which the following extracts are taken, an essay with a Free Tradebias, paints the general position of the workers in England in the mostdismal colours. It gives the facts as follows: ‘The manufacturing classes inGreat Britain ... have been suddenly reduced from affluence and prosperityto the extreme of poverty and misery. In one of the debates in the lateSession of Parliament, it was stated that the wages of weavers of Glasgowand its vicinity which, when highest, had averaged about 25s. or 27s. aweek, had been reduced in 1816 to 10s.; and in 1819 to the wretchedpittance of 5-6s. or 6s. They have not since been materially augmented.’In Lancashire, according to the same evidence, the direct weekly wage ofthe weavers was from 6s. to 12s. a week for 15 hours’ labour a day, whilsthalf-starved children worked 12 to 16 hours a day for 2s. or 3s. a week.Distress in Yorkshire was, if possible, even greater. As to the address by theframe-work knitters of Nottingham, the author says that he himself investigatedconditions and had come to the conclusion that the declarations ofthe workers ‘were not in the slightest degree exaggerated’.

[148]Ibid., p. 334.

[149]Paris, 1827.

[150]Preface to the second edition. Translation by M. Mignet, inPoliticalEconomy and the Philosophy of Government (London, 1847), pp. 114 ff.

[151]Nouveaux Principes ... (2nd ed.), vol. i, p. 79.

[152]Nouveaux Principes ... (2nd ed.), vol. i, p. xv.

[153]Ibid., p. 92.

[154]Ibid., pp. 111-12.

[155]Ibid., p. 335.

[156]Op. cit., vol. ii, p. 435.

[157]Ibid., p. 463.

[158]Op. cit., vol. i, p. xiii (pp. 120-1 of Mignet’s translation).

[159]Nouveaux Principes ... (2nd ed.), vol. i, p. 84.

[160]Ibid., p. 85.

[161]Ibid., p. 86.

[162]Ibid., pp. 86-7.

[163]Nouveaux Principes ..., vol. i, p. 87.

[164]Ibid., pp. 87-8.

[165]Ibid., pp. 88-9.

[166]Nouveaux Principes ..., vol. i, pp. 108-9.

[167]Ibid., pp. 93-4.

[168]Ibid., p. 95.

[169]Nouveaux Principes ..., vol. i, pp. 95-6.

[170]Ibid., pp. 104-5.

[171]Ibid., p. 105.

[172]Ibid., pp. 105-6.

[173]Ibid., pp. 113, 120.

[174]Nouveaux Principes ..., vol. i, p. 121.

[175]Vladimir Ilyich [Lenin],Economic Studies and Essays,St. Petersburg, 1899.

[176]The article in theEdinburgh Review was really directed against Owen,sharply attacking on 24 pages of print the latter’s four treatises: (1) ‘A NewView of Society, or Essays on the formation of Human Character’, (2)‘Observations on the Effects of the Manufacturing System’, (3) ‘TwoMemorials on Behalf of the Working Classes, Presented to the Governmentsof America and Europe’, and finally (4) ‘Three Tracts’ and ‘An Account ofPublic Proceedings relative to the Employment of the Poor’. ‘Anonymous’here attempts a detailed proof that Owen’s reformist ideas by no means getdown to the real causes of the misery of the English proletariat, these causesbeing: the transition to the cultivation of barren land (Ricardo’s theory ofground rent!), the corn laws and high taxation pressing upon farmer andmanufacturer alike. Free trade andlaissez-faire thus is his alpha and omega.Given unrestricted accumulation, all increase in production will create foritself an increase in demand. Owen is accused of ‘profound ignorance’ asregards Say and James Mill.—‘In his reasonings, as well as in his plans, Mr.Owen shows himself profoundly ignorant of all the laws which regulate theproduction and distribution of wealth.’—From Owen, the author proceedsto Sismondi and formulates the point of contention as follows: ‘He [Owen]conceives that when competition is unchecked by any artificial regulations,and industry permitted to flow in its natural channels, the use of machinerymay increase the supply of the several articles of wealth beyond the demandfor them, and by creating an excess of all commodities, throw the workingclasses out of employment. This is the position which we hold to be fundamentallyerroneous; and as it is strongly insisted on by the celebrated M. deSismondi in hisNouveaux Principes d’Économie Politique, we must entreat theindulgence of our readers while we endeavour to point out its fallacy, and todemonstrate, that the power of consuming necessarily increases with everyincrease in the power of producing’ (Edinburgh Review, Oct. 1819, p. 470).

[177]The original title is:Examen de cette question: Le pouvoir de consommers’accroît-il toujours dans la société avec le pouvoir de produire? We have not beenable to obtain a copy of Rossi’sAnnales, but the essay as a whole was incorporatedby Sismondi in the second edition of hisNouveaux Principes.

[178]At the time of writing, Sismondi was still in the dark as to the identityof ‘Anonymous’ in theEdinburgh Review.

[179]Sismondi, op. cit., vol. ii, pp. 376-8.

[180]MacCulloch, loc. cit., p. 470.

[181]Incidentally, Sismondi’s Leipsic Book Fair, as a microcosm of thecapitalist world, has staged a come-back after 55 years—in Eugen Duehring’s‘system’. Engels, in his devastating criticism of that unfortunate‘universal genius’ adduces this idea as proof that Duehring, by attemptingto elucidate a real industrial crisis by means of an imaginary one on theLeipsic Book Fair, a storm at sea by a storm in a teacup, has shown himself a‘real Germanliteratus’. But, as in many other instances exposed by Engels, thegreat thinker has simply borrowed here from someone else on the sly.

[182]Sismondi, op. cit., vol. ii, pp. 381-2.

[183]MacCulloch, loc. cit., p. 470.

[184]Sismondi, op. cit, vol. ii, p. 384.

[185]MacCulloch, loc. cit., p. 471.

[186]Sismondi, op. cit., vol. ii, pp. 394-5.

[187]Ibid., pp. 396-7.

[188]Ibid., pp. 397-8.

[189]MacCulloch, loc. cit., pp. 471-2.

[190]Sismondi, op. cit., vol. ii, pp. 400-1.

[191]Sismondi, op. cit., vol. ii, p. 401.

[192]Ibid., pp. 405-6.

[193]It is typical that on his election to Parliament in 1819, when he alreadyenjoyed the highest reputation on account of his economic writings, Ricardowrote to a friend: ‘You will have seen that I have taken my seat in theHouse of Commons. I fear I shall be of little use there. I have twiceattempted to speak but I proceeded in the most embarrassed manner, and Ihave no hope of conquering the alarm with which I am assailed the momentI hear the sound of my own voice’ (Letters of D. Ricardo to J. R. MacCulloch,N.Y., 1895, pp. 23-4). Such diffidence was quite unknown to the gasbagMacCulloch.

[194]Nouveaux Principes ..., book iv, chap. vii.

[195]Ibid., book vii, chap. vii.

[196]D. Ricardo,On the Principles of Political Economy and Taxation (3rdedition, London, 1821), p. 474.

[197]Ibid., p. 478.

[198]This essay,Sur la Balance des Consommations avec les Productions, is reprintedin the second edition ofNouveaux Principes, vol. ii, pp. 408 ff.Sismondi tells us about this discussion: ‘M. Ricardo, whose recent deathhas been a profound bereavement not only to his friends and family butto all those whom he enlightened by his brilliance, all those whom heinspired by his lofty sentiments, stayed for some days in Geneva in the lastyear of his life. We discussed in two or three sessions this fundamentalquestion on which we disagreed. To this enquiry he brought the urbanity,the good faith, the love of truth which distinguished him, and a claritywhich his disciples themselves had not heard, accustomed as they were to theefforts of abstract thought he demanded in the lecture room.’

[199]Ricardo. op. cit., p. 339.

[200]Sismondi, op. cit., vol. ii, p. 361.

[201]Nouveaux Principes ..., book iv, chap, iv: ‘Comment la Richesse commercialesuit l’Accroissement du Revenu’ (vol. i, p. 115).

[202]Sismondi, op. cit., vol. ii, p. 412.

[203]Ibid., p. 416.

[204]Ibid., p. 424.

[205]Ibid., p. 417.

[206]Sismondi, op. cit., vol. ii, pp. 425-6.

[207]Ibid., p. 429.

[208]Ibid., pp. 434-5.

[209]Thus, if Tugan Baranovski, championing Say-Ricardo’s views, tells usabout the controversy between Sismondi and Ricardo (Studies on the Theoryand History of Commercial Crises in England, p. 176), that Sismondi was compelled‘to acknowledge as correct the doctrine he had attacked and toconcede his opponent all that is necessary’; that Sismondi himself ‘hadabandoned his own theory which still finds so many adherents’, and that‘the victory in this controversy lies with Ricardo’, this shows a lack of discrimination—toput it mildly—such as is practically unheard-of in a workof serious scientific pretensions.

[210]‘L’argent ne remplit qu’un office passager dans ce double échange. Leséchanges terminés, il se trouve qu’on a payé des produits avec des produits.En conséquence, quand une nation a trop de produits dans un genre, lemoyen de les écouler est d’en créer d’un autre genre’ (J. B. Say,Traitéd’Économie Politique, Paris, 1803, vol. i, p. 154).

[211]In fact, here again, Say’s only achievement lies in having given apompous and dogmatic form to an idea that others had expressed beforehim. As Bergmann points out, in hisTheory of Crises (Stuttgart, 1895), thework of Josiah Tucker (1752), Turgot’s annotations to the French pamphlets,the writings of Quesnay, Dupont de Nemours, and of others containquite similar observations on a natural balance, or even identity, betweendemand and supply. Yet the miserable Say, as Marx once called him, claimscredit as the evangelist of harmony for the great discovery of the ‘théorie desdébouchés’, modestly comparing his own work to the discovery of the principlesof thermo-dynamics, of the lever, and of the inclined plane. In the prefaceand table of contents, e.g. to the 6th edition of hisTraité (1841, pp. 51, 616)he says: ‘The theory of exchange and of vents, such as it is developed in thiswork, will transform world politics.’ The same point of view is also expoundedby James Mill in his ‘Commerce Defended’ of 1808, and it is he whom Marxcalls the real father of the doctrine of a natural equilibrium between productionand demand.

[212]Say inRevue Encyclopédique, vol. 23, July 1824, pp. 20 f.

[213]Nouveaux Principes ..., vol. i, p. 117.

[214]Say, loc. cit., p. 21.

[215]Say, loc. cit., p. 29. Say indicts Sismondi as the arch-enemy of bourgeoissociety in the following ranting peroration: ‘It is against the modern organisationof society, an organisation which, by despoiling the working man ofall property save his hands, gives him no security in the face of a competitiondirected towards his detriment. What! Society despoils the working manbecause it ensures to every kind of entrepreneur free disposition over hiscapital, that is to say his property! I repeat: there is nothing more dangerousthan views conducive to a regulation of the employment of property’ for‘hands and faculties ... are also property’ (ibid., p. 30).

[216]Sismondi, op. cit., pp. 462-3.

[217]Ibid., p. 331.

[218]Sismondi, op. cit., p. 432-3.

[219]Ibid., p. 449.

[220]Ibid., p. 448.

[221]Marx, in his history of the opposition to Ricardo’s school and its dissolution,makes only brief mention of Sismondi, explaining: ‘I leaveSismondi out of this historical account, because the criticism of his viewsbelongs to a part with which I can deal only after this treatise, the actualmovement of capital (competition and credit)’ (Theorien über den Mehrwert,vol. iii, p. 52). Later on, however, in connection with Malthus, he also dealswith Sismondi in a passage that, on the whole, is comprehensive: ‘Sismondiis profoundly aware of the self-contradiction of capitalist production; hefeels that its forms, its productive conditions, spur on an untrammelleddevelopment of the productive forces and of wealth on the one hand, yetthat these conditions, on the other, are only relative; that their contradictionsof value-in-use and value-in-exchange, of commodity and money, ofsale and purchase, of production and consumption, of capital and wage-labour,and so on, take on ever larger dimensions, along with the forwardstrides of the productive forces. In particular, he feels the fundamental conflict:here the untrammelled development of productive power and of awealth which, at the same time, consists in commodities, must be monetised;and there the basis—restriction of the mass of producers to thenecessary means of subsistence. He therefore does not, like Ricardo, conceiveof the crises as merely incidental, but as essential, as eruptions of theimmanent conflicts on ever grander scale and at determinate periods. Whichfaces him with the dilemma: is the state to put restrictions on theproductiveforces to adapt them to the productive conditions, or upon theproductiveconditions to adapt them to theproductive forces? Frequently he has recourseto the past, becomeslaudator temporis acti, and seeks to master the contradictionsby a different regulation of income relative to capital, or of distributionrelative to production, quite failing to grasp that the relations of distributionare nothing but the relations of productionsub alia specie. He has a perfectpicture of the contradictions immanent in bourgeois production, yet he doesnot understand them, and therefore fails also to understand the process oftheir disintegration. (And indeed, how could he, seeing this production wasstill in the making?—R.L.) And yet, his view is in fact grounded in thepremonition thatnew forms of appropriating wealth must answer to theproductive forces, developed in the womb of capitalist production, to thematerial and social conditions of creating this wealth; that the bourgeoisforms of appropriation are but transitory and contradictory, wealth existingalways with contrary aspects and presenting itself at once as its opposite.Wealth is ever based on the premises of poverty, and can develop only bydeveloping poverty’ (ibid., p. 55).

InThe Poverty of Philosophy, Marx opposes Sismondi to Proudhon in sundrypassages, yet about the man himself he only remarks tersely: ‘Those, who,like Sismondi, wish to return to the true proportions of production, whilepreserving the present basis of society, are reactionary, since, to be consistent,they must also wish to bring back all the other conditions of industryof former times’ (The Poverty of Philosophy, London, 1936, p. 57). Two shortreferences to Sismondi are inOn the Critique of Political Economy: once he isranked, as the last classic of bourgeois economics in France, with Ricard inEngland; in another passage emphasis is laid on the fact that Sismondi, contraryto Ricardo, underlined the specifically social character of labour thatcreates value.—In theCommunist Manifesto, finally, Sismondi is mentioned asthe head of the petty-bourgeois school.

[222]Nouveaux Principes ..., vol. ii, p. 409.

[223]Cf. Marx,Theorien über den Mehrwert, vol. iii, pp. 1-29, which gives adetailed analysis of Malthus’ theory of value and profits.

[224]Dedicated to James Mill and published in 1827.

[225]James Mill,Elements of Political Economy (3rd edition, London, 1826),pp. 239-40.

[226]Malthus.Definitions in Political Economy (London, 1827), p. 51.

[227]Ibid., p. 64.

[228]Malthus,Definitions in Political Economy (London, 1827), pp. 53-4.

[229]Ibid., pp. 62-3.

[230]Die Forderungen der arbeitenden Klassen.

[231]Die Handelskrisen und die Hypothekennot der Grundbesitzer.

[232]Zur Erkenntnis unserer staatswirtschaftlichen Zustände.

[233]Über die Grundrente in sozialer Beziehung.

[234]Die Tauschgesellschaft.

[235]Soziale Briefe.

[236]Rodbertus quotes v. Kirchmann’s arguments explicitly and in greatdetail. But according to his editors, no complete copy ofDemokratischeBlätter with the original essay is obtainable.

[237]To v. Kirchmann, in 1880.

[238]Dr. Carl Rodbertus-Jagetzow,Schriften (Berlin, 1899), vol. iii, pp. 172-4,184.

[239]Op. cit., vol. ii, pp. 104 f.

[240]Op. cit., vol. i, p. 99.

[241]Ibid., p. 173.

[242]Ibid., p. 176.

[243]Op. cit., vol. ii, p. 65.

[244]Schriften, vol. i, pp. 182-4.

[245]Ibid., pp. 182-4.

[246]Ibid., p. 72.

[247]Schriften, vol. iii, pp. 110-11.

[248]Ibid., p. 108.

[249]Op. cit., vol. i, p. 62.

[250]Schriften, vol. iv, p. 226.

[251]InTowards the Understanding of Our Politico-Economic Conditions, part ii,n. 1.

[252]InOn Commercial Crises and the Mortgage Problem of the Landowners, quotedabove (op. cit., vol. iii, p. 186).

[253]Op. cit., vol. iv, p. 233. It is interesting to note in this connection howRodbertus appears in practice as an extremely sober and realistically-mindedprophet of capitalist colonial policy, in the manner of the present-day‘Pan-Germans’, his moral ranting about the unhappy fate of the workingclasses notwithstanding. In a footnote to the above quotation, he writes:‘We can go on to glance briefly at the importance of the opening up of Asia,in particular of China and Japan, the richest markets in the world, and alsoof the maintenance of English rule in India. It is to defer the solution of thesocial problem.’ (The eloquent avenger of the exploited ingenuously disclosesthe means by which the profiteering exploiters can continue ‘theirstupid and criminal error’, their ‘flagrant injustice’ for as long as possible.)‘For the solution of this problem, the present lacks in unselfishness andmoral resolution no less than in intelligence.’ (Rodbertus’ philosophicalresignation is unparalleled!) ‘Economic advantage cannot, admittedly, constitutea legal title to intervention by force, but on the other hand, a strictapplication of modern natural and international law to all the nations of theworld, whatever their state of civilisation, is quite impracticable.’ (A comparisonwith Dorine’s words in Molière’sTartuffe is irresistible: ‘Le cieldéfend, de vraie, certains contentements, mais il y a avec lui des accommodements.’)—‘Ourinternational law has grown from a civilisation ofChristianethics, and since all law is based upon reciprocity, it can only provide thestandard for relations between nations of the same civilisation. If it is appliedbeyond these limits, it is sentiment rather than natural and internationallaw and the Indian atrocities should have cured us of it. Christian Europeshould rather partake of the spirit which made the Greeks and the Romansregard all the other peoples of the world as barbarians. The younger Europeannations might then regain the drive for making world history whichimpelled the Ancients to spread their native civilisation over the countries ofthe globe. They would reconquer Asia for world history byjoint action. Suchcommon purpose and action would in turn stimulate the greatest socialprogress, a firm foundation of peace in Europe, a reduction of armies, acolonisation of Asia in the ancient Roman style—in other words, a genuinesolidarity of interests in all walks of social life.’ The vision of capitalistcolonial expansion inspires the prophet of the exploited and oppressed toalmost poetical flights, all the more remarkable for coming at a time whena civilisation of Christian ethics accomplished such glorious exploits as theOpium Wars against China and the Indian atrocities—that is to say, theatrocities committed by the British in their bloody suppression of the IndianMutiny.—In his secondLetter on Social Problems, in 1850, Rodbertus hadexpressed the conviction that if society lacks the ‘moral resolution’ necessaryto solve the social question, in other words, to change the distribution ofwealth, history would be forced to ‘use the whip of revolution against it’(op. cit., vol. ii, p. 83). Eight years later, however, the stalwart Prussianprefers to crack the whip of a colonial policy of Christian ethics over thenatives of the colonial countries. It is, of course, what one might expect ofthe ‘original founder of scientific socialism in Germany’ that he should alsobe a warm supporter of militarism, and his phrase about the ‘reduction ofarmies’ is but poetic licence in his verbal fireworks. In his essayOn theUnderstanding of the Social Question he explains that the ‘entire national taxburden is perpetually gravitating towards the bottom, sometimes in formof higher prices for wage goods, and sometimes in form of lower moneywages’. In this connection, he considers conscription ‘under the aspect ofa charge on the state’, explaining that ‘as far as the working classes areconcerned, it is nothing like a tax but rather a confiscation of their entireincome for many years’. He adds immediately: ‘To avoid misunderstandingI would point out that I am a staunch supporter of our present militaryconstitution (i.e. the military constitution of counter-revolutionary Prussia)—althoughit may be oppressive to the working classes and demand greatfinancial sacrifices from the propertied classes’ (op. cit., vol. iii, p. 34). Thatdoes not even sound like a lion’s roar!

[254]Schriften, vol. iii, p. 182.

[255]Published already in 1845.

[256]Schriften, vol. iv, p. 231.

[257]Schriften, vol. iii, p. 176.

[258]Op. cit., vol. i, pp. 53, 57.

[259]Schriften, vol. i, p. 206.

[260]Ibid., vol. i, p. 19.

[261]Op. cit., vol. ii, p. 110.

[262]Ibid., p. 144.

[263]Schriften, vol. ii, p. 146.

[264]Ibid., p. 155.

[265]Ibid., p. 223.

[266]Schriften, vol. ii, p. 226.

[267]Ibid., p. 156.

[268]Schriften, vol. i, p. 40.

[269]Op. cit., vol. ii, p. 25.

[270]Schriften, vol. i, p. 250.

[271]Ibid., p. 295. Rodbertus reiterates during a lifetime the ideas hehad evolved as early as 1842 in hisTowards the Understanding of OurPolitico-Economic Conditions. ‘Under present conditions, we have, however,gone so far as to consider not only the wage of labour part of the costs of thegoods, but also rents and capital profits. We must therefore refute thisopinion in detail. It has a twofold foundation: (a) a wrong conception ofcapital which counts the wage of labour as part of the capital just likematerials and tools, while it is on the same level as rent and profit; (b) aconfusion of the costs of the commodity and the advances of the entrepreneuror the costs of the enterprise’ (Towards the Understanding of Our Politico-EconomicConditions, Neubrandenburg & Friedland, G. Barnovitz, 1842, p. 14).

[272]Schriften, vol. i, p. 304. Just so already inTowards the Understanding of OurPolitico-Economic Conditions, ‘We must distinguish between capital in itsnarrow or proper sense, and the fund of enterprise, or capital in a widersense. The former comprises the actual reserves in tools and materials, thelatter the fund necessary for running an enterprise under present conditionsof division of labour. The former is capital absolutely necessary to production,and the latter achieves such relative necessity only by force of presentconditions. Hence only the former is capital in the strict and proper meaningof the term; this alone is completely congruent with the concept of nationalcapital’ (ibid., pp. 23-4).

[273]Schriften, vol. i, p. 292.

[274]Op. cit., vol. ii, p. 136.

[275]Ibid., p. 225.

[276]A memorial of the worst kind, by the way, was that of the editors whopublished his works after his death. These learned gentlemen, Messrs.Wagner, Kozak, Moritz Wuertz & Co., quarrelled in the prefaces to hisposthumous writings like a rough crowd of ill-mannered servants in anantechamber, fighting out publicly their petty personal feuds and jealousies,and slanging one another. They did not even bother in common decencyto establish the dates for the individual manuscripts they had found. To takean instance, it needed Mehring to observe that the oldest manuscript ofRodbertus that had been found was not published in 1837, as laid downautocratically by Prof. Wagner, but in 1839 at the earliest, since it refersin its opening paragraphs to historical events connected with the Chartistmovement belonging, as a professor of economics really ought to know, inthe year 1839. In Professor Wagner’s introduction to Rodbertus we areconstantly bored by his pomposity, his harping on the ‘excessive demandson his time’; in any case Wagner addresses himself solely to his learnedcolleagues and talks above the heads of the common crowd; he passes overin silence, as befits a great man, Mehring’s elegant correction before theassembled experts. Just as silently, Professor Diehl altered the date of 1837to 1839 in theHandwörterbuch der Staatswissenschaften, without a word to saywhen and by whom he had been thus enlightened.

But the final touch is provided by the ‘popular’, ‘new and inexpensive’edition of Puttkamer and Muehlbrecht (1899). Some of the quarrellingeditors collaborated on it but still continue their disputes in the introductions.Wagner’s former vol. ii has become vol. i in this edition, yet Wagnerstill refers to vol. ii in the introduction to vol. i. The firstLetter on SocialProblems is placed in vol. iii, the second and third in vol. ii and the fourth invol. i. The order of theLetters on Social Problems, of theControversies, of theparts ofTowards the Understanding ..., chronological and logical sequence,the dates of publication and of writing are hopelessly mixed up, making achaos more impenetrable than the stratification of the soil after repeatedvolcanic eruptions. 1837 is maintained as the date of Rodbertus’ earliestMS., probably out of respect to Professor Wagner—and this in 1899,although Mehring’s rectification had been made in 1894. If we compare thiswith Marx’s literary heritage in Mehring’s and Kautsky’s edition, publishedby Dietz, we see how such apparently superficial matters but reflect deeperconnections: one kind of care for the scientific heritage of the authority of theclass-conscious proletariat, and quite another in which the official experts ofthe bourgeoisie squander the heritage of a man who, in their own self-interestedlegends, had been a first-rate genius.Suum cuique—had this notbeen the motto of Rodbertus?

[277]An essay inPatriotic Memoirs, May 1883.

[278]An essay in the reviewRussian Thought, September 1889.

[279]A book published in 1893.

[280]A book published in 1895.

[281]Patriotic Memoirs, vol. v: ‘A Contemporary Survey’, p. 4.

[282]Ibid., p. 10.

[283]Patriotic Memoirs, vol. v: ‘A Contemporary Survey’, p. 14.

[284]Outlines of Economic Theory (St. Petersburg, 1895), pp. 157 ff.

[285]‘Militarism and Capitalism’ inRussian Thought (1889), vol. ix, p. 78.

[286]‘Militarism and Capitalism’ inRussian Thought (1889), vol. ix, p. 80.

[287]Ibid., p. 83. Cf.Outlines, p. 196.

[288]Cf.Outlines of Our Social Economy, in particular pp. 202-5, 338-41.

[289]Vladimir Ilyich [Lenin] has given detailed proof of the strikingsimilarity between the position of the Russian ‘populists’ and the views ofSismondi in his essayOn the Characteristics of Economic Romanticism (1897).

[290]Outlines of Our Social Economy, p. 322. Friedrich Engels appraises theRussian situation differently. He repeatedly tries to convince Nikolayon thatRussia cannot avoid a high industrial development, and that her sufferingsare nothing but the typical capitalist contradictions. Thus he writes onSeptember 22, 1892: ‘I therefore hold that at present industrial productionnecessarily implies big industry, making use of steam power, electricity,mechanical looms and frames, and lastly the manufacture of the machinesthemselves by mechanical means. From the moment that railways are introducedin Russia, recourse to all these extremely modern means of productionbecomes inevitable. It is necessary that you should be able to mend andrepair your engines, coaches, railways and the like, but to do this cheaply,you must also be in a position to make at home the things needing repair.As soon as the technique of war has become a branch of industry (armour-platedcruisers, modern artillery, machine guns, steel bullets, smokeless gunpowder, etc.) a big industry that is indispensable for the production of suchitems has become a political necessity for you as well. All these items cannotbe made without a highly developed metal industry which on its part cannotdevelop unless there is a corresponding development of all other branches ofproduction, textiles in particular’ (Marx-Engels to Nikolayon, St. Petersburg,1908, p. 75). And further in the same letter: ‘So long as Russianindustry depends on the home market alone, it can only satisfy the internaldemand. The latter, however, can grow but slowly, and it seems to me thatunder present conditions of life in Russia it is even bound to decrease, sinceit is one of the unavoidable consequences of high industrial development thatit destroys its own home market by the same process which served to createit: by destroying the bases of the peasants’ domestic industry. Yet peasantscannot live without such a domestic industry. They are ruined as peasants,their purchasing power is reduced to a minimum, and unless they grownew roots in new conditions of life, unless they become proletarians, theywill only represent a very small market for the newly arising plants andfactories.

‘Capitalist production is a phase of economic transition, full of inherentcontradictions which only develop and become visible to the extent thatcapitalist production develops. The tendency of simultaneously creating anddestroying a market is just one of these contradictions. Another is the hopelesssituation that will ensue, all the sooner in a country like Russia whichlacks external markets than in countries more or less fit to compete in theopen world market. These latter can find some means of relief in this seeminglyhopeless situation by heroic measures of commercial policy, that is tosay by forcibly opening up new markets. China is the most recent market tobe opened up for English commerce, and it proved adequate for a temporaryrevival of prosperity. That is why English capital is so insistent on railroadbuilding in China. Yet railways in China mean the destruction of the entirefoundation of China’s small rural enterprises and her domestic industry. Inthis case, there is not even a native big industry developed to compensatefor this evil to some extent, and hundreds of millions will consequently findit impossible to make a living at all. The result will be mass emigration,such as the world has never yet seen, and America, Asia and Europe will beflooded with the detested Chinese. This new competitor on the labourmarket will compete with American, Australian and European labour at thelevel of what the Chinese consider a satisfactory standard of living, which iswell known to be the lowest in the whole world. Well then, if the wholesystem of production in Europe has not been revolutionised by then, thatwill be the time to start this revolution’ (ibid., p. 79).

Engels, though he followed Russian developments with attention andkeen interest, persistently refused to take an active part in the Russian dispute.In his letter of November 24, 1894, i.e. shortly before his death, heexpressed himself as follows: ‘My Russian friends almost daily and weeklybombard me with requests to come forward with my objections to Russianbooks and reviews which not only misinterpret but even misquote the sayingsof our author (Marx). My friends assure me that my interventionwould suffice to put matters right. Yet I invariably and firmly refuse allsuch proposals because I cannot afford to become involved with a disputeheld in a foreign country, in a tongue which I, at least, cannot read as easilyand freely as the more familiar W. European languages, and in a literaturewhich is at best accessible to me only in fortuitous glimpses of some fragments,and which I cannot pursue anything like systematically enough inall its stages and details without neglecting my real and serious work. Thereare people everywhere who, once they have taken up a certain stand, are notashamed to have recourse to misinterpreting the thoughts of others and to allkinds of dishonest manipulations for their own ends, and if that is what hashappened to our author, I am afraid they will not deal more kindly withme, so that in the end I shall be compelled to interfere in the dispute, firstto defend others, and then in my own defence’ (ibid., p. 90).

[291]We might mention that the surviving champions of ‘populist’ pessimism,and Vorontsov in particular, to the last remained loyal to their views,in spite of all that happened in Russia—a fact that does more credit to theircharacter than to their intelligence. Referring to the 1900 and 1902 crises,Vorontsov wrote in 1902: ‘The doctrinaire dogma of the Neo-Marxistsrapidly loses its power over people’s minds. That the newest successes of theindividualists are ephemeral has obviously dawned even on their officialadvocates.... In the first decade of the twentieth century, we come backto the same views about economic development in Russia that had been thelegacy of the 1870’s’ (Cf. the reviewPolitical Economics, October 1902,quoted by A. Finn Yenotayevski inThe Contemporary Economy of Russia1890-1910, St. Petersburg, 1911, p. 2.) Even to-day, then, this last of the‘populist’ Mohicans deduces the ‘ephemeral character’, not of his owntheory, but of economic reality. What of the saying of Barrère: ‘Il n’y a queles morts qui ne reviennent pas’.

[292]Published inSozialdemokratisches Zentralblatt, vol. iii, No. 1.

[293]Critical Comments on the Problem of Economic Development in Russia.

[294]Op. cit., p. 251.

[295]Ibid., p. 255.

[296]Ibid., p. 252.

[297]Ibid., p. 260. ‘There can be no doubt that Struve’s attempt to refutewhat he calls the pessimist outlook on the analogy of the U.S.A. is fallacious.He says that Russia can overcome the evil consequences of the most recentcapitalism just as easily as the U.S.A. But what he forgets is that the U.S.A.from the first represent a new bourgeois state, that they were founded by apetty bourgeoisie and by peasants who had fled from European feudalismto set up a purely bourgeois society. In Russia, on the other hand, we havea primitive communist foundation, a society ofgentes, as it were, in the pre-civilisedstage which, though it is already disintegrating, still serves as amaterial basis upon which the capitalist revolution (for it is in fact a socialrevolution) can take place and become effective. In America, a monetaryeconomy had been stabilised more than a century ago, whereas a naturaleconomy had until recently prevailed in Russia. It should be obvious thereforethat this revolution in Russia is bound to be much more ruthless andviolent, and accompanied by immensely more suffering than in America’(Engels to Nikolayon, October 17, 1893,Letters ..., p. 85).

[298]Critical Comments ..., p. 284.

[299]Professor Schmoller, amongst others, clearly reveals the reactionaryaspect of the ‘Three Empire Theory’ (viz. Great Britain, Russia and theU.S.A.) evolved by the German professors. In his handbook of commercialpolicy (Handelspolitische Säkularbetrachtung), the venerable scholar dolefullyfrowns upon ‘neo-mercantilism’, that is to say upon the imperialist designsof the three arch-villains. ‘In the interests of a higher intellectual, moral andaesthetic civilisation and social progress’ he demands a strong German navyand a European Customs Union. ‘Out of the economic tension of the worldthere arises the prime duty for Germany to create for herself a strong navy,so as to be prepared for battle in the case of need, and to be desirable as anally to the World Powers’—which latter, however, Professor Schmoller sayselsewhere, he does not wish to blame for again taking the path of large-scalecolonial expansion. ‘She neither can nor ought to pursue a policy of conquestlike the Three World Powers, but she must be able, if necessary, to breaka foreign blockade of the North Sea in order to protect her own colonies andher vast commerce, and she must be able to offer the same security to thestates with whom she forms an alliance. It is the task of the Three-PartiteUnion (Germany, Austro-Hungary, and Italy) to co-operate with Francetowards imposing some restraint, desirable for the preservation of all otherstates, on the over-aggressive policy of the Three World Powers which constitutesa threat to all smaller states, and to ensure moderation in conquests,in colonial acquisitions, in the immoderate and unilateral policy of protectivetariffs, in the exploitation and maltreatment of all weaker elements.The objectives of all higher intellectual, moral and aesthetic civilisation andof social progress depend on the fact that the globe should not be dividedup among Three World Empires in the twentieth century, that these ThreeEmpires should not establish a brutal neo-mercantilism’ (Die Wandlungen derEuropäischen Handelspolitik des 19. Jahrhunderts, ‘Changes in the EuropeanCommercial Policy During the 19th Century’, inJahrb. für Gesetzgebung,Verwaltung und Volkswirtschaft, vol. xxiv, p. 381).

[300]S. Bulgakov,On the Markets of Capitalist Production. A Study in Theory(Moscow, 1897), p. 15.

[301]Ibid., p. 32, footnote.

[302]Ibid., p. 27.

[303]Ibid., pp. 2-3.

[304]On the Markets of Capitalist Production, pp. 50, 55.

[305]On the Markets of Capitalist Production, p. 132 ff.

[306]Ibid., p. 20.

[307]Bulgakov’s italics.

[308]Capital, vol. iii, p. 387.

[309]Bulgakov, op. cit., p. 161.

[310]Ibid., p. 167.

[311]Bulgakov, op. cit., p. 210 (our italics).

[312]Ibid., p. 199.

[313]K. Buecher; The Rise of National Economy (Die Entstehung der Volkswirtschaft),5th edition, p. 147. Professor Sombart’s theory is the most recentcontribution in this field. He argues that we are not moving towards aninternational economy but rather farther and farther away from it. ‘I maintain,on the contrary, that commercial relations to-day do not form astronger but rather a weaker link between the civilised nations, in relationto their economy as a whole. Individual economy takes not more but ratherless account of the world market than it did a hundred or fifty years ago.At least ... it would be wrong to assume that the relative importance ofinternational relations with regard to modern political economy is increasing.The opposite is the case.’ Sombart scornfully rejects the assumption ofa progressive international division of labour, of a growing need for outsidemarkets owing to an inelastic home demand. He in his turn is convincedthat ‘the individual national economies will develop into ever more perfectmicrocosms and that the importance of the home market will increasinglysurpass that of the world market for all branches of industry’ (Die DeutscheVolkswirtschaft im 19. Jahrhundert, 2nd edition, 1909, pp. 399-420). Thisdevastating discovery admittedly hinges on a full acceptance of the Professor’speculiar conception which, for some reasons, only considers those as‘exporting countries’ who pay for their imports with a surplus of agriculturalproducts over and above their own needs, who pay ‘with the soil’. In thisscheme Russia, Rumania, the U.S.A. and the Argentine are, but Germany,England and Belgium are not, ‘exporting countries’. Since capitalistdevelopment will sooner or later also claim the surplus of agricultural productsfor the home demand in Russia and the U.S.A., it is evident that therewill be fewer and fewer ‘exporting countries’ in the world—internationaleconomy will vanish.—Another of Sombart’s discoveries is that greatcapitalist ‘non-exporting’ countries increasingly obtain ‘free’ imports inform of interest on exported capital—but the capital exports as well asexports of industrial commodities are of absolutely no account to ProfessorSombart. ‘In the course of time we shall probably get to a point where weimport without exporting’ (p. 422). Modern, sensational, and precious!

[314]Bulgakov, op. cit., p. 132.

[315]Ibid., p. 236. A quite uncompromising version of the same view isgiven by V. Ilyin [Lenin]: ‘The romanticists (as he calls the sceptics) argueas follows: the capitalists cannot consume the surplus value; therefore theymust dispose of it abroad. I ask: Do the capitalists perhaps give away theirproducts to foreigners for nothing, throw it into the sea, maybe? If they sellit, it means that they obtain an equivalent. If they export certain goods, itmeans that they import others’ (Economic Studies and Essays, p. 2). As amatter of fact, his explanation of the part played by external commercein capitalist production is far more correct than that of Struve and Bulgakov.

[316]Studies on the Theory and History of Commercial Crises in England (Jena,1901) andTheoretical Foundations of Marxism (1905).

[317]Studies on the Theory and History ..., p. 23.

[318]Ibid., p. 34.

[319]Ibid., p. 333.

[320]Ibid., p. 191.

[321]Ibid., p. 231, italics in the original.

[322]Ibid., p. 305.

[323]Studies on the Theory and History ..., p. 191

[324]Ibid., p. 27.

[325]Studies on the Theory and History ..., p. 58.

[326]V. Ilyin [Lenin] ‘Studies and Essays in Economics’ (OekonomischeStudien und Artikel. Zur Charakterisierung des ökonomischen Romantizismus, St.Petersburg, 1899), p. 20.—Incidentally, the same author is responsible forthe statement that enlarged reproduction begins only with capitalism. Itquite escapes him that under conditions of simple reproduction, which hetakes to be the rule for all pre-capitalist modes of production, we shouldprobably never have advanced beyond the stage of the paleolithic scraper.

[327]Die Neue Zeit, vol. xx, part 2,Krisentheorien, p. 116. Kautsky’s mathematicaldemonstration to Tugan Baranovski that consumption is bound togrow, and ‘in the precise ratio as the bulk of producer goods in terms ofvalue’, calls for two comments: first, like Marx, Kautsky paid no attentionto the progress in the productivity of labour so that consumption appears tohave a relatively larger volume than it would in fact have. Secondly, theincrease in consumption to which Kautsky here refers is only a consequence,a result of enlarged reproduction, it is neither its basis nor its aim;it is mainly due to the growth of the variable capital, the continual employmentof additional workers. The upkeep of these workers, however, neither isnor ought to be the object of the expansion of reproduction—no more, forthat matter, than the increasing personal consumption of the capitalist class.Kautsky’s argument no doubt refutes Tugan Baranovski’s pet notion: thewhimsy to construe enlarged reproduction with an absolute decrease inconsumption. But for all that, he does not get anywhere near the fundamentalproblem, the relations between production and consumption underthe aspect of the reproductive process, though we are told in another passageof the same work: ‘With the capitalists growing richer, and the workers theyexploit increasing in numbers, they constitute between them a market forthe consumer goods produced by capitalist big industry which expands continually,yet it does not grow as rapidly as the accumulation of capital andthe productivity of labour, and must therefore remain inadequate.’ Anadditional market is required for these consumer goods, a market outsidetheir own province, among those occupational groups and nations whosemode of production is not yet capitalistic. This market is found and alsowidens increasingly, but the expansion is again too slow, since the additionalmarket is not nearly so elastic and capable of expansion as the capitalistproductive process. As soon as capitalist production has developed to the bigindustry stage, as in England already in the first quarter of the nineteenthcentury, it is capable of expanding by leaps and bounds so as soon to out-distanceall expansions of the market. Every period of prosperity subsequentto a considerable extension of the market is thus from the outset doomed toan early end—the inevitable crisis. This, in brief, is the theory of crisesestablished by Marx, and, as far as we can see, generally accepted by the“orthodox” Marxists’ (ibid., p. 80). Kautsky, however, is not interested inharmonising this conception of the realisation of the aggregate product withMarx’s diagram of enlarged reproduction, perhaps because, as our quotationalso shows, he deals with the problem solely from the aspect of crises, regarding,in other words, the social product as a more or less homogeneous bulkof goods and ignoring the fact that it is differentiated in the reproductiveprocess.

L. Bouding seems to come closer to the crucial point. In his brilliantreview on Tugan Baranovski he gives the following formulation: ‘With asingle exception to be considered below, the existence of a surplus productin capitalist countries does not put a spoke in the wheel of production, notbecause production will be distributed more efficiently among the variousspheres, or because the manufacture of machinery will replace that of cottongoods. The reason is rather that, capitalist development having begunsooner in some countries than in others, and because even to-day there arestill some countries that have no developed capitalism, the capitalist countriesin truth have at their disposal an outside market in which they can getrid of their products which they cannot consume themselves, no matterwhether these are cotton or iron goods. We would by no means deny that itis significant if iron goods replace cotton goods as the main products of theprincipal capitalist countries. On the contrary, this change is of paramountimportance, but its implications are rather different from those ascribed toit by Tugan Baranovski. It indicates the beginning of the end of capitalism.So long as the capitalist countries exported commodities for the purpose ofconsumption, there was still a hope for capitalism in these countries, and thequestion did not arise how much and how long the non-capitalist outsideworld would be able to absorb capitalist commodities. The growing share ofmachinery at the cost of consumer goods in what is exported from the maincapitalist countries shows that areas which were formerly free of capitalism,and therefore served as a dumping-ground for its surplus products, are nowdrawn into the whirlpool of capitalism. It shows that, since they are developinga capitalism of their own, they can by themselves produce the consumergoods they need. At present they still require machinery produced bycapitalist methods since they are only in the initial stages of capitalistdevelopment. But all too soon they will need them no longer. Just as theynow make their own cotton and other consumer goods, they will in futureproduce their own iron ware. Then they will not only cease to absorb thesurplus produce of the essentially capitalist countries, but they will themselvesproduce surplus products which they can place only with difficulty’(Die Neue Zeit, vol. xxv, part 1,Mathematische Formeln gegen Karl Marx,p. 604). Bouding here broaches an important aspect of the general relationspertaining to the development of international capitalism. Further, as alogical consequence, he comes to the question of imperialism but unfortunatelyhe finally puts the wrong kind of edge on his acute analysis by consideringthe whole of militarist production together with the system of exportinginternational capital to non-capitalist countries under the heading of ‘recklessexpenditure’.—We must say in parenthesis that Bouding, just likeKautsky, holds that the law of a quicker growth in the means-of-productiondepartment relative to the means-of-subsistence department is a delusion ofTugan Baranovski’s.

[328]‘Apart from natural conditions, such as fertility of the soil, etc., andfrom the skill of independent and isolated producers (shown rather qualitativelyin the genus than quantitatively in the mass of their products), thedegree of productivity of labour, in a capitalist society, is expressed in therelative extent of the means of production that one labourer, during a giventime, with the same tension of labour-power, turns into products. The massof means of production which he thus transforms, increases with the productivenessof his labour. But those means of production play a double part.The increase of some is a consequence, that of the others a condition of theincreasing productivity of labour. E.g., with the division of labour in manufacture,and with the use of machinery, more raw material is worked up inthe same time and, therefore, a greater mass of raw material and auxiliarysubstances enter into the labour-process. That is the consequence of theincreasing productivity of labour. On the other hand, the mass of machinery,beasts of burden, mineral manures, drainpipes, etc., is a condition of theincreasing productivity of labour. So also is it with the means of productionconcentrated in buildings, furnaces, means of transport, etc. But whethercondition or consequence, the growing extent of the means of production, ascompared with the labour-power incorporated with them, is an expressionof the growing productiveness of labour. The increase of the latter appears,therefore, in the diminution of the mass of labour in proportion to the massof means of production moved by it, or in the diminution of the subjectivefactor of the labour-process as compared with the objective factor’ (Capital,vol. i, pp. 635-6). And yet another passage: ‘We have seen previously, thatwith the development of the productivity of labour, and therefore with thedevelopment of the capitalist mode of production, which develops thesocially productive power of labour more than all previous modes of production,there is a steady increase of the mass of means of production, which arepermanently embodied in the productive process as instruments of labourand perform their function in it for a longer or shorter time at repeatedintervals (buildings, machinery, etc.); also, that this increase is at the sametime the premise and result of the development of the productivity of sociallabour. It is especially capitalist production, which is characterised byrelative as well as absolute growth of this sort of wealth’ (Capital, vol. i,chap. xxiii, 2). ‘The material forms of existence of constant capital, themeans of production, do not consist merely of such instruments of labour,but also of raw material in various stages of finished and of auxiliary substances.With the enlargement of the scale of production and the increase inthe productivity of labour by co-operation, division of labour, machinery,etc., the mass of raw materials and auxiliary substances used in the dailyprocess of reproduction, grows likewise’ (Capital, vol. ii, p. 160).

[329]Struve says in the preface to the collection of his Russian essays (publishedin 1901): ‘In 1894, when the author published his “Critical Commentson the Problem of Economic Development in Russia”, he inclined in philosophytowards positivism, in sociology and economics towards outspoken,though by no means orthodox, Marxism. Since then, the author no longersees the whole truth in positivism and Marxism which is grounded in it (!),they no longer fully determine his view of the world. Malignant dogmatismwhich not only browbeats those who think differently, but spies upon theirmorals and psychology, regards such work as a mere “Epicurean instabilityof mind”. It cannot understand that criticism in its own right is to the livingand thinking individual one of the most valuable rights. The author does notintend to renounce this right, though he might constantly be in danger ofbeing indicted for “instability”’ (Miscellany, St. Petersburg, 1901).

[330]Bulgakov, op. cit., p. 252.

[331]Tugan Baranovski,Studies on the Theory and History ..., p. 229.

[332]Capital, vol. i, pp. 593-4.

[333]Ibid., p. 594, note 1.

[334]Op. cit., vol. ii, p. 384.

[335]Ibid., pp. 400-1.

[336]Ibid., p. 488.

[337]Capital, vol. iii, p. 568.

[338]Theorien ..., vol. ii, part 2, ‘The Accumulation of Capital and Crises’,p. 263.

[339]‘It is never the original thinkers who draw the absurd conclusions.They leave that to the Says and MacCullochs’ (Capital, vol. ii, p. 451).—And—wemight add—to the Tugan Baranovskis.

[340]The figures result from the difference between the amounts of constantcapital in Department I under conditions of technical progress, and underMarx’s stable conditions.

[341]Theorien über den Mehrwert, vol. ii, part 2, p. 252.

[342]Capital, vol. iii, p. 285 ff.

[343]Theorien ..., vol. ii, part 2, p. 305.

[344]Capital, vol. iii, p. 359.

[345]‘If capital and the productivity of labour advance and the standard ofcapitalist production in general is on a higher level of development, thenthere is a correspondingly greater mass of commodities passing through themarket from production to individual and industrial consumption, greatercertainty that each particular capital will find the conditions for its reproductionavailable in the market’ (Theorien ..., vol. ii, part 2, p. 251).

[346]Theorien ..., vol. ii, part 2, p. 250:Akkumulation von Kapital und Krisen.(The Accumulation of Capital and the Crises.) Marx’s italics.

[347]The following figures plainly show the importance of the cotton industryfor English exports:

In 1893, cotton exports to the amount of £64,000,000 made up 23 percent, and iron and other metal exports not quite 17 per cent, of the totalexport of manufactured goods, amounting to £277,000,000 in all.

In 1898, cotton exports to the amount of £65,000,000 made up 28 percent, and metal exports 22 per cent, of the total export of manufacturedgoods, amounting to £233,400,000 in all.

In comparison, the figures for the German Empire show the followingresult: In 1898, cotton exports to the amount of £11,595,000 made up5·75 per cent of the total exports, amounting to £200,500,000. 5,250,000,000yards of cotton bales were exported in 1898, 2,250,000,000 of them to India(E. Jaffé:Die englische Baumwollindustrie und die Organisation des Exporthandels.Schmoller’s Jahrbücher, vol. xxiv, p. 1033).

In 1908, British exports of cotton yarn alone amounted to £13,100,000(Statist. Jahrb. für das Deutsche Reich, 1910).

[348]One-fifth of German aniline dyes, and one-half of her indigo, goes tocountries such as China, Japan, British India, Egypt, Asiatic Turkey, Brazil,and Mexico.

[349]Capital, vol. i, pp. 615-16.

[350]The English Blue Book on the practices of the Peruvian Amazon Company,Ltd., in Putumayo, has recently revealed that in the free republic ofPeru and without the political form of colonial supremacy, internationalcapital can, to all intents and purposes, enslave the natives, so that it mayappropriate the means of production of the primitive countries by exploitationon the greatest scale. Since 1900, this company, financed by Englishand foreign capitalists, has thrown upon the London market approximately4,000 tons of Putumayo rubber. During this time, 30,000 natives were killedand most of the 10,000 survivors were crippled by beatings.

[351]Capital, vol. i, p. 594. Similarly in another passage: ‘One part of thesurplus value, of the surplus means of subsistence produced, must then beconverted into variable capital for the purpose of purchasing new labour.This can only be done if the number of workers grows or if their workingtime is prolonged.... This, however, cannot be considered a ready measurefor accumulation. The working population can increase if formerly unproductiveworkers are transformed into productive ones, or if parts of thepopulation who previously performed no work, such as women, childrenand paupers, are drawn into the process of production. Here, however, weshall ignore this aspect. Lastly, the working population can increase throughan absolute increase in population. If accumulation is to proceed steadilyand continuously, it must be grounded in an absolute growth of the population,though this may decline in comparison with the capital employed. Anexpanding population appears as the basis of accumulation conceived as asteady process. An indispensable condition for this is an average wage whichis adequate not only to the reproduction of the working population butpermits its continual increase’ (Theorien über den Mehrwert, vol. ii, part 2, inthe chapter on ‘Transformation of Revenue Into Capital’ (Verwandlung vonRevenue in Kapital), p. 243).

[352]Capital, vol. i, pp. 642 ff.

[353]A table published in the United States shortly before the War ofSecession contained the following data about the value of the annual productionof the Slave States and the number of slaves employed—for the greatestpart on cotton plantations:

Year	Cotton: Dollars	Slaves
1800	5,200,000	893,041
1810	15,000,000	1,191,364
1820	26,300,000	1,543,688
1830	34,100,000	2,009,053
1840	74,600,000	2,487,255
1850	101,800,000	3,197,509
1851	137,300,000	3,200,000

(Simons, ‘Class Struggles in American History’. Supplement toNeue Zeit(Klassenkämpfe in der Geschichte Amerikas.Ergänzungsheft der ‘Neuen Zeit’),Nr. 7, p. 39.)

[354]Bryce, a former English Minister, describes a model pattern of suchhybrid forms in the South African diamond mines: ‘The most striking sightat Kimberley, and one unique in the world, is furnished by the two so-called“compounds” in which the natives who work in the mines are housed andconfined. They are huge inclosures, unroofed, but covered with a wirenetting to prevent anything from being thrown out of them over the walls,and with a subterranean entrance to the adjoining mine. The mine isworked on the system of three eight-hour shifts, so that the workman is nevermore than eight hours together underground. Round the interior of the wallare built sheds or huts in which the natives live and sleep when not working.A hospital is also provided within the inclosure, as well as a school wherethe work-people can spend their leisure in learning to read and write. Nospirits are sold.... Every entrance is strictly guarded, and no visitors, whiteor native, are permitted, all supplies being obtained from the store within,kept by the company. The De Beers mine compound contained at the timeof my visit 2,600 natives, belonging to a great variety of tribes, so that hereone could see specimens of the different native types from Natal and Pondoland,in the south, to the shores of Lake Tanganyika in the far north. Theycome from every quarter, attracted by the high wages, usually eighteen tothirty shillings a week, and remain for three months or more, and occasionallyeven for longer periods.... In the vast oblong compound one sees Zulusfrom Natal, Fingos, Pondos, Tembus, Basutos, Bechuanas, Gungunhana’ssubjects from the Portuguese territories, some few Matabili and Makalaka;and plenty of Zambesi boys from the tribes on both sides of that great river,a living ethnological collection such as can be examined nowhere else inSouth Africa. Even Bushmen, or at least natives with some Bushman bloodin them, are not wanting. They live peaceably together, and amuse themselvesin their several ways during their leisure hours. Besides games ofchance, we saw a game resembling “fox and geese” played with pebbles on aboard; and music was being discoursed on two rude native instruments, theso-called “Kaffir piano” made of pieces of iron of unequal length fastenedside by side in a frame, and a still ruder contrivance of hard bits of wood,also of unequal size, which when struck by a stick emit different notes, thefirst beginning of a tune. A very few were reading or writing letters, the restbusy with their cooking or talking to one another. Some tribes are incessanttalkers, and in this strange mixing-pot of black men one may hear a dozenlanguages spoken as one passes from group to group’ (James Bryce,Impressionsof South Africa, London, 1897, pp. 242 ff.).

After several months of work, the negro as a rule leaves the mine with thewages he has saved up. He returns to his tribe, buying a wife with his money,and lives again his traditional life. Cf. also in the same book the most livelydescription of the methods used in South Africa to solve the ‘labour-problem’.Here we are told that the negroes are compelled to work in themines and plantations of Kimberley, Witwatersrand, Natal, Matabeleland,by stripping them of all land and cattle, i.e. depriving them of their means ofexistence, by making them into proletarians and also demoralising themwith alcohol. (Later, when they are already within the ‘enclosure’ of capital,spirits, to which they have just been accustomed, are strictly prohibited—theobject of exploitation must be kept fit for use.) Finally, they are simplypressed into the wage system of capital by force, by imprisonment, andflogging.

[355]The relations between Germany and England provide a typicalexample.

[356]Mill, in hisHistory of British India, substantiates the thesis that underprimitive conditions the land belongs always and everywhere to the sovereign,on evidence collected at random and quite indiscriminately from themost varied sources (Mungo Park, Herodotus, Volney, Acosta, Garcilassode la Vega, Abbé Grosier, Barrow, Diodorus, Strabo and others). Applyingthis thesis to India, he goes on to say: ‘From these facts only one conclusioncan be drawn, that the property of the soil resided in the sovereign; for if itdid not reside in him, it will be impossible to show to whom it belonged’(James Mill,History of British India (4th edition, 1840), vol. i, p. 311). Mill’seditor, H. H. Wilson who, as Professor of Sanskrit at Oxford University,was thoroughly versed in the legal relations of Ancient India, gives aninteresting commentary to this classical deduction. Already in his preface hecharacterises the author as a partisan who has juggled with the whole historyof British India in order to justify the theories of Mr. Bentham and who,with this end, has used the most dubious means for his portrait of the Hinduswhich in no way resembles the original and almost outrages humanity. Heappends the following footnote to our quotation: ‘The greater part of thetext and of the notes here is wholly irrelevant. The illustrations drawn fromthe Mahometan practice, supposing them to be correct, have nothing to dowith the laws and rights of the Hindus. They are not, however, even accurateand Mr. Mill’s guides have misled him.’ Wilson then contests outright thetheory of the sovereign’s right of ownership in land, especially with referenceto India. (Ibid., p. 305, footnote.) Henry Maine, too, is of the opinion thatthe British attempted to derive their claim to Indian land from the Mahometansin the first place, and he recognises this claim to be completely unjustified.‘The assumption which the English first made was one which theyinherited from their Mahometan predecessors. It was that all the soilbelonged in absolute property to the sovereign,—and that all private propertyin land existed by his sufferance. The Mahometan theory and thecorresponding Mahometan practice had put out of sight the ancient viewof the sovereign’s rights which, though it assigned to him a far larger shareof the produce of the land than any Western ruler has ever claimed, yet innowise denied the existence of private property in land’ (Village Communitiesin the East and West (5th edition, vol. 2, 1890), p. 104). Maxim Kovalevski,on the other hand, has proved thoroughly that this alleged ‘Mahometantheory and practice’ is an exclusively British legend. (Cf. his excellent study,written in Russian,On the Causes, the Development and the Consequences of theDisintegration of Communal Ownership of Land (Moscow, 1879), part i.) Incidentally,British experts and their French colleagues at the time of writingmaintain an analogous legend about China, for example, asserting that allthe land there had been the Emperor’s property. (Cf. the refutation of thislegend by Dr. O. Franke,Die Rechtsverhältnisse am Grundeigentum in China,1903.)

[357]‘The partitions of inheritances and execution for debt levied on land aredestroying the communities—this is the formula heard nowadays everywherein India’ (Henry Maine, op. cit., p. 113).

[358]This view of British colonial policy, expounded e.g. by Lord Roberts ofKandahar (for many years a representative of British power in India) istypical. He can give no other explanation for the Sepoy Mutiny than mere‘misunderstandings’ of the paternal intentions of the British rulers. ‘... thealleged unfairness of what was known in India as the land settlement, underwhich system the right and title of each landholder to his property wasexamined, and the amount of revenue to be paid by him to the paramountPower, as owner of the soil, was regulated ... as peace and order wereestablished, the system of land revenue, which had been enforced in anextremely oppressive and corrupt manner under successive Native Rulersand dynasties, had to be investigated and revised. With this object in view,surveys were made, and inquiries instituted into the rights of ownership andoccupancy, the result being that in many cases it was found that familiesof position and influence had either appropriated the property of theirhumbler neighbours, or evaded an assessment proportionate to the value oftheir estates. Although these inquiries were carried out with the best intentions,they were extremely distasteful to the higher classes, while they failedto conciliate the masses. The ruling families deeply resented our endeavoursto introduce an equitable determination of rights and assessment of landrevenue.... On the other hand, although the agricultural populationgreatly benefited by our rule, they could not realise the benevolent intentionsof a Government which tried to elevate their position and improve theirprospects’ (Forty One Years in India, London, 1901, p. 233).

[359]In hisMaxims on Government (translated from the Persian into English in1783), Timur says: ‘And I commanded that they should build places ofworship, and monasteries in every city; and that they should erect structuresfor the reception of travellers on the high roads, and that they should makebridges across the rivers.

‘And I commanded that the ruined bridges should be repaired; and thatbridges should be constructed over the rivulets, and over the rivers; and thaton the roads, at the distance of one stage from each other, Kauruwansaraishould be erected; and that guards and watchmen should be stationed on theroad, and that in every Kauruwansarai people should be appointed toreside....

‘And I ordained, whoever undertook the cultivation of waste lands, orbuilt an aqueduct, or made a canal, or planted a grove, or restored toculture a deserted district, that in the first year nothing should be taken fromhim, and that in the second year, whatever the subject voluntarily offeredshould be received, and that in the third year, duties should be collectedaccording to the regulation’ (James Mill, op. cit., vol. ii, pp. 493,498).

[360]Count Warren,De l’État moral de la population indigène. Quoted by Kovalevski,op. cit., p. 164.

[361]Historical and Descriptive Account of British India from the most remoteperiod to the conclusion of the Afghan war by Hugh Murray, James Wilson,Greville, Professor Jameson, William Wallace and Captain Dalrymple(Edinburgh, 4th edition, 1843), vol. ii, p. 427. Quoted by Kovalevski,op. cit.

[362]Victor v. Leyden,Agrarverfassung und Grundsteuer in Britisch Ostindien.Jahrb. f. Ges., Verw. u. Volksw., vol. xxxvi, no. 4, p. 1855.

[363]‘When dying, the father of the family nearly always advises his childrento live in unity, according to the example of their elders. This is his lastexhortation, his dearest wish’ (A. Hanotaux et A. Letournaux,La Kabylieet les Coûtumes Kabyles, vol. ii, 1873, ‘Droit Civil’, pp. 468-73). The authors,by the way, appraised this impressive description of communism in the clanwith this peculiar sentence: ‘Within the industrious fold of the familyassociation, all are united in a common purpose, all work for the generalinterest—but no one gives up his freedom or renounces his hereditary rights.In no other nation does the organisation approach so closely to equality,being yet so far removed from communism.’

[364]‘We must lose no time in dissolving the family associations, since they arethe lever of all opposition against our rule’ (Deputy Didier in the NationalAssembly of 1851).

[365]Quoted by Kovalevski, op. cit., p. 217. Since the Great Revolution, ofcourse, it had become the fashion in France to dub all opposition to thegovernment an open or covert defence of feudalism.

[366]G. Anton,Neuere Agrarpolitik in Algerien und Tunesien. Jahrb. f. Gesetzgebung,Verwaltung und Volkswirtschaft (1900), pp. 1341 ff.

[367]On June 20, 1912, M. Albin Rozet, on behalf of the Commission for theReform of the ‘Indigenat’ (Administrative Justice) in Algeria, stated in hisspeech to the French Chamber of Deputies that thousands of Algerians weremigrating from the Setif district, and that 1,200 natives had emigrated fromTlemcen during the last year, their destination being Syria. One immigrantwrote from his new home: ‘I have now settled in Damascus and am perfectlyhappy. There are many Algerians here in Syria who, like me, haveemigrated. The government has given us land and facilities to cultivate it.’The Algerian government combats this exodus—by denying passports toprospective emigrants. (Cf.Journal Officiel, June 21, 1912, pp. 1594 ff.)

[368]77,379 chests were imported in 1854. Later, the imports somewhatdeclined, owing to increased home production. Nevertheless, China remainedthe chief buyer. India produced just under 6,400,000 tons of opiumin 1873/4, of which 6,100,000 tons were sold to the Chinese. To-day [1912]India still exports 4,800,000 tons, value £7,500,000,000, almost exclusivelyto China and the Malay Archipelago.

[369]Quoted by J. Scheibert,Der Krieg in China (1903), vol. 2, p. 179.

[370]Scheibert, op. cit., p. 207.

[371]An Imperial Edict issued on the third day of the eighth moon in thetenth year of Hsien-Feng (6/9/1860) said amongst other things: ‘We havenever forbidden England and France to trade with China, and for longyears there has been peace between them and us. But three years ago theEnglish, for no good cause, invaded our city of Canton, and carried off ourofficials into captivity. We refrained at that time from taking any retaliatorymeasures, because we were compelled to recognise that the obstinacy of theViceroy Yeh had been in some measure a cause of the hostilities. Two yearsago, the barbarian Commander Elgin came north and we then commandedthe Viceroy of Chihli, T’an Ting-hsiang, to look into matters preparatoryto negotiations. But the barbarian took advantage of our unreadiness,attacking the Taku forts and pressing on to Tientsin. Being anxious to spareour people the horrors of war, we again refrained from retaliation andordered Kuei Liang to discuss terms of peace. Notwithstanding the outrageousnature of the barbarians’ demands we subsequently ordered KueiLiang to proceed to Shanghai in connection with the proposed Treaty ofCommerce and even permitted its ratification as earnest of our good faith.

‘In spite of all this, the barbarian leader Bruce again displayed intractabilityof the most unreasonable kind, and once more appeared off Takuwith a squadron of warships in the eighth Moon. Seng Ko Lin Ch’in thereuponattacked him fiercely and compelled him to make a rapid retreat.From all these facts it is clear that China has committed no breach of faithand that the barbarians have been in the wrong. During the present yearthe barbarian leaders Elgin and Gros have again appeared off our coasts,but China, unwilling to resort to extreme measures, agreed to their landingand permitted them to come to Peking for the ratification of the Treaty.

‘Who could have believed that all this time the barbarians have beendarkly plotting, and that they had brought with them an army of soldiersand artillery with which they attacked the Taku forts from the rear, and,having driven out our forces, advanced upon Tientsin!’ (I. O. Bland andE. T. Blackhouse,China under the Empress Dowager (London, 1910), pp. 24-5.Cf. also in this work the entire chapter, ‘The Flight to Yehol’.)

[372]These European exploits to make China receptive to commodity exchange,provide the setting for a charming episode of China’s internalhistory: Straight from looting the Manchu Emperor’s Summer Palace, the‘Gordon of China’ went on a campaign against the rebels of Taiping. In1863 he even took over command of the Imperial fighting forces. In fact,the suppression of the revolt was the work of the British army. But while aconsiderable number of Europeans, among them a French admiral, gavetheir lives to preserve China for the Manchu dynasty, the representatives ofEuropean commerce were eagerly grasping this opportunity to make capitalout of these fights, supplying arms both to their own champions and to therebels who went to war against them. ‘Moreover, the worthy merchant wastempted, by the opportunity for making some money, to supply both armieswith arms and munitions, and since the rebels had greater difficulties inobtaining supplies than the Emperor’s men and were therefore compelledand prepared to pay higher prices, they were given priority and could thusresist not only the troops of their own government, but also those of Englandand France’ (M. v. Brandt,33 Jahre in Ostasien, 1911, vol. iii, China, p. 11).

[373]Dr. O. Franke,Die Rechtsverhältnisse am Grundeigentum in China (Leipzig,1903), p. 82.

[374]Bland and Blackhouse, op. cit., p. 338.

[375]Ibid., p. 337.

[376]Until recently, in China the domestic industries were widely practisedeven by the bourgeoisie and in such large and ancient towns as Ningpo withits 300,000 inhabitants. ‘Only a generation ago, the family’s shoes, hats,shirts, etc., were made by the women themselves. At that time, it was practicallyunheard-of for a young woman to buy from a merchant what she couldhave made with the labour of her own hands’ (Dr. Nyok-Ching Tsur, ‘Formsof Industry in the Town of Ningpo’ (Die gewerblichen Betriebsformen der StadtNingpo), Tuebingen, 1909, p. 51).

[377]Admittedly, this relation is reversed in the last stages of the history ofpeasant economy when capitalist production has made its full impact. Oncethe small peasants are ruined, the entire work of farming frequently devolveson the women, old people and children, while the men are made to work fortheir living for capitalist entrepreneurs in the domestic industries or aswage-slaves in the factories. A typical instance is the small peasant inWuerttemberg.

[378]W. A. Peffer,The Farmer’s Side. His Troubles and Their Remedy (NewYork, 1891), Part ii, ‘How We Got Here’, chap. i, ‘Changed Conditions ofthe Farmer’, pp. 56-7. Cf. also A. M. Simmons,The American Farmer (2ndedition, Chicago, 1906), pp. 74 ff.

[379]Report of the U.S.A. Commissioner of Agriculture for the year 1867(Washington, 1868). Quoted by Lafargue:Getreidebau und Getreidehandel inden Vereinigten Staaten inDie Neue Zeit (1885), p. 344. This essay on graincultivation and the grain trade in the U.S.A. was first published in aRussian periodical in 1883.

[380]‘The three Revenue Acts of June 30, 1864, practically formed onemeasure, and that probably the greatest measure of taxation which theworld has seen.... The Internal Revenue Act was arranged, as Mr.David A. Wells has said, on the principle of the Irishman at DonnybrookFair: “whenever you see a head, hit it, whenever you see a commodity, taxit”’ (F. W. Taussig,The Tariff History of the United States (New York-London,1888), pp. 163-4).

[381]Ibid., pp. 166-7.

[382]‘The necessity of the situation, the critical state of the country, theurgent need of revenue, may have justified this haste, which, it is safe to say,is unexampled in the history of civilised countries’ (Taussig, op. cit., p. 168).

[383]Peffer, op. cit., pp. 58 ff.

[384]Ibid., p. 6.

[385]‘Agricultural Competition in North America’ (Die landwirtschaftlicheKonkurrenz Nordamerikas) Leipzig, 1887, p. 431.

[386]Lafargue, op. cit., p. 345.

[387]The Thirteenth Annual Report of the Commissioner of Labour (Washington,1899) tables the advantages of machinery methods over handmethods so far achieved as follows:

Type of work	Labour time per unit
	Machine		Hand
	hrs.	min.	hrs.	min.
Planting small corn	—	32·7	10	55
Harvesting and threshing small corn	1	—	46	40
Planting corn	—	37·5	6	15
Cutting corn	3	4·5	5	—
Shelling corn	—	3·6	66	40
Planting cotton	1	3	8	48
Cultivating cotton	12	5	60	—
Mowing grass (scythev. mower)	1	0·6	7	20
Harvesting and baling hay	11	3·4	35	30
Planting potatoes	1	2·5	15	—
Planting tomatoes	1	4	10	—
Cultivating and harvesting tomatoes	134	5·2	324	20

[388]Wheat exports from the Union to Europe:

Year	Million bushels	Year	Million bushels
1868-9	17·9	1885-6	57·7
1874-5	71·8	1890-1	55·1
1879-80	153·2	1899-1900	101·9

(Juraschek’sUebersichten der Weltwirtschaft, vol. vii, part i, p. 32).

Simultaneously, the price per bushel wheatloco farm (in cents) declined asfollows:

1870-9	105	1896	73
1880-9	83	1897	81
1895	51	1898	58

Since 1899, when it had reached the low level of 58 cents per bushel, theprice is moving up again:

1900	62	1903	78
1901	62	1904	92
1902	63

(Ibid., p. 18).

According to the ‘Monthly Returns on External Trade’ (Monatliche Nachweiseüber den Auswärtigen Handel), the price (in marks) per 1,000kg., was inJune 1912:

Berlin	227·82	London	170·96
New York	178·08	Odessa	173·94
Mannheim	247·93	Paris	243·69

[389]Peffer, op. cit., part i, ‘Where We Are’, chap, ii, ‘Progress of Agriculture’,pp. 30-1.

[390]Ibid., p. 4.

[391]Sering, op. cit., p. 433.

[392]Peffer, op. cit., pp. 34 f.

[393]Quoted by Nikolayon, op. cit., p. 224.

[394]49,199 people immigrated to Canada in 1902. In 1912, the number ofimmigrants was more than 400,000—138,000 of them British, and 134,000American. According to a report from Montreal, the influx of Americanfarmers continued into the spring of the present year [1912].

[395]‘Travelling in the West of Canada, I have visited only one farm of lessthan a thousand acres. According to the census of the Dominion of Canada,in 1881, when the census was taken, no more than 9,077 farmers occupied2,384,337 acres of land between them; accordingly, the share of an individual(farmer) amounted to no less than 2,047 acres—in no state of theUnion is the average anywhere near that’ (Sering, op. cit., p. 376). Inthe early eighties, farming on a large scale was admittedly not verywidely spread in Canada. But already in 1887, Sering describes the ‘BellFarm’, owned by a limited company, which comprised no fewer than56,700 acres, and was obviously modelled on the pattern of the Dalrymplefarm. In the eighties, Sering, who regarded the prospects of Canadian competitionwith some scepticism, put the ‘fertile belt’ of Western Canada atthree-fifths of the entire acreage of Germany, and estimated that actuallyonly 38,400,000 acres of this were arable land, and no more than 15,000,000acres at best were prospective wheat land (Sering, op. cit., pp. 337-8). TheManitoba Free Press in June 1912, worked out that in summer, 1912,11,200,000 acres were sown with spring wheat in Canada, as against19,200,000 acres under spring wheat in the United States. (Cf.Berliner Tageblatt,Handelszeitung, No. 305, June 18, 1912.)

[396]Sering, op. cit., pp. 361 ff.

[397]Ernst Schultze, ‘Das Wirtschaftsleben der Vereinigten Staaten’,Jahrb. f.Gesetzg., Verw. u. Volkswirtschaft 1912, no. 17, p. 1724.

[398]Article 9.

[399]‘Moshesh, the great Basuto leader, to whose courage and statesmanshipthe Basutos owed their very existence as a people, was still alive at the time,but constant war with the Boers of the Orange Free State had brought himand his followers to the last stage of distress. Two thousand Basuto warriorshad been killed, cattle had been carried off, native homes had been brokenup and crops destroyed. The tribe was reduced to the position of starvingrefugees, and nothing could save them but the protection of the Britishgovernment which they had repeatedly implored’ (C. P. Lucas,A HistoricalGeography of the British Colonies, part ii, vol. iv (Geography of South and EastAfrica), Oxford, 1904, p. 39).

[400]‘The Eastern section of the territory is Mashonaland where, with thepermission of King Lobengula, who claimed it, the British South AfricaCompany first established themselves’ (ibid., p. 72).

[401]The Permanent Way (in kilometres).

Year	Europe	America	Asia	Africa	Australia
1840	2,925	4,754	—	—	—
1850	23,405	16,064	—	—	—
1860	51,862	53,955	1,393	455	376
1870	104,914	93,193	8,185	1,786	1,765
1880	168,983	174,666	16,287	4,646	7,847
1890	223,869	331,417	33,724	9,386	18,889
1900	283,878	402,171	60,301	20,114	24,014
1910	333,848	526,382	101,916	36,854	31,014

Accordingly, the increase was as follows:

	%	%	%	%	%
1840/50	710	215	—	—	—
1860/70	102	73	486	350	350
1870/80	61	88	99	156	333
1880/90	32	89	107	104	142
1890/1900	27	21	79	114	27

[402]Tugan Baranovski,Studies on the Theory and History of Commercial Crisesin England, p. 74.

[403]Sismondi,Nouveaux Principes ..., vol. i, book iv, chap. iv: ‘CommercialWealth Follows the Growth of Income’, pp. 368-70.

[404]Engineer Eyth, a representative of Fowler’s, tells us: ‘Now there wasa feverish exchange of telegrams between Cairo, London and Leeds.—“Whencan Fowler’s deliver 150 steam ploughs?”—Answer: “Working tocapacity, within one year.”—“Not good enough. Expect unloading Alexandriaby spring 150 steam ploughs.”—A.: “Impossible.”—The works atthat time were barely big enough to turn out 3 steam ploughs per week.N.B. a machine of this type costs £2,500 so that the order involved £m. 3·75.Ismail Pasha’s next wire: “Quote cost immediate factory expansion. Viceroywilling foot bill."”—You can imagine that Leeds made hay while the sunshone. And in addition, other factories in England and France as well weremade to supply steam ploughs. The Alexandria warehouses, where goodsdestined for the vice-regal estates were unloaded, were crammed to the roofwith boilers, wheels, drums, wire-rope and all sorts of chests and boxes. Thesecond-rate hostelries of Cairo swarmed with newly qualified steam ploughmen,promoted in a hurry from anvil or share-plough, young hopefuls, fit foranything and nothing, since every steam plough must be manned by at leastone expert pioneer of civilisation. Wagonloads of this assorted cargo weresent into the interior, just so that the next ship could unload. You cannotimagine in what condition they arrived at their destination, or rather anywherebut their destination. Ten boilers were lying on the banks of the Nile,and the machine to which they belonged was ten miles further. Here was alittle heap of wire-rope, but you had to travel another 20 hours to find theappropriate pulleys. In one place an Englishman who was to set up themachines squatted desolate and hungry on a pile of French crates, and inanother place his mate had taken to native liquor in his despair. Effendis andKatibs, invoking the help of Allah, rushed to and fro between Siut andAlexandria and compiled endless lists of items the names of which they didnot even know. And yet, in the end, some of this apparatus was set inmotion. In Upper Egypt, the ploughs belched steam—civilisation and progresshad made another step forward’ (Lebendige Kräfte, 7 Vorträge aus demGebiete der Technik, Berlin, 1908, p. 21).

[405]Cf. Evelyn Baring, Earl of Cromer,Egypt Today (London, 1908), vol. i,p. 11.

[406]Incidentally, the money wrested from the Egyptian fellah further fell,by way of Turkey, to European capital. The Turkish loans of 1854, 1855,1871, 1877 and 1886 were based on the contributions from Egypt whichwere increased several times and paid direct into the Bank of England.

[407]‘It is stated by residents in the Delta’, reportsThe Times of March 31,1879, ‘that the third quarter of the year’s taxation is now collected, and theold methods of collection applied. This sounds strangely by the side of thenews that people are starving by the roadside, that great tracts of countryare uncultivated, because of the physical burdens, and that the farmers havesold their cattle, the women their finery, and that the usurers are fillingthe mortgage offices with their bonds, and the courts with their suits offoreclosure’ (quoted by Th. Rothstein,Egypt’s Ruin, 1910, pp. 69-70).

[408]‘This produce’, wrote the correspondent ofThe Times from Alexandria,‘consists wholly of taxes paid by the peasants in kind, and when one thinks ofthe poverty-stricken, overdriven, under-paid fellaheen in their miserablehovels, working late and early to fill the pockets of the creditors, the punctualpayment of the coupon ceases to be wholly a subject of gratification’ (quotedby Rothstein, op. cit., p. 49).

[409]Eyth, an outstanding exponent of capitalist civilisation in the primitivecountries, characteristically concludes his masterly sketch on Egypt, fromwhich we have taken the main data, with the following imperialist articles offaith: ‘What we have learnt from the past also holds true for the future.Europe must and will lay firm hands upon those countries which can nolonger keep up with modern conditions on their own, though this will notbe possible without all kinds of struggle, when the difference between rightand wrong will become blurred, when political and historical justice willoften enough mean disaster for millions and their salvation depend uponwhat is politically wrong. All the world over, the strongest hand will makean end to confusion, and so it will even on the banks of the Nile’ (op. cit.,p. 247). Rothstein has made it clear enough what kind of ‘order’ the Britishcreated ‘on the banks of the Nile’.

[410]Already in the early twenties of the last century, the Anglo-Indiangovernment commissioned Colonel Chesney to investigate the navigabilityof the River Euphrates in order to establish the shortest possible connectionbetween the Mediterranean and the Persian Gulf, resp. India. After detailedpreparations and a preliminary reconnaissance in winter 1831, the expeditionproper set out in 1835/7. In due course, British staff and officials investigatedand surveyed a wider area in Eastern Mesopotamia. These effortsdragged on until 1866 without any useful results for the British government.But at a later date Great Britain returned to the plan of connecting theMediterranean with India by way of the Gulf of Persia, though in a differentform, i.e. the Tigris railway project. In 1879, Cameron travelled throughMesopotamia for the British government to study the lie of the land for theprojected railway (Max Freiherr v. Oppenheim,Vom Mittelmeer zum PersischenGolf durch den Hauran, die Syrische Wüste und Mesopotamien, vol. ii,pp. 5 and 36).

[411]S. Schneider,Die Deutsche Bagdadbahn (1900), p. 3.

[412]Saling,Börsenjahrbuch 1911/12, p. 2211.

[413]Saling, op. cit., pp. 360-1. Engineer Pressel of Wuerttemberg, who asassistant to Baron v. Hirsch was actively engaged in these transactions inEuropean Turkey, neatly accounts for the total grants towards railway-buildingin Turkey which European capital wrested from the Turkishgovernment:

	Length in km.	Paid guarantee in francs
3 lines in European Turkey	1888·8	33,099,352
Turkish permanent way in Asia completed before 1900	2313·2	53,811,538
Commissions and other costs connected with the guaranteed railway grants paid to the A.D.P.O.		9,351,209
Total		96,262,099

All this refers only to the period before 1899; not until that date were therevenue grants paid in part. The tithes of no less than 28 out of the 74sandshaksin Asiatic Turkey had been pledged for the revenue grants, and withthese grants, between 1856 and 1900, a grand total of 1,576 miles of railshad been laid down in Asiatic Turkey. Pressel, the expert, by the way givesan instance of the underhand methods employed by the railway companyat Turkish expense; he states that under the 1893 agreement the Anatoliancompany promised to run the railway to Baghdad via Angora, but laterdecided that this plan of theirs would not work and, having qualified for theguarantee, left the line to its fate and got busy with another route viaKonya. ‘No sooner have the companies succeeded in acquiring the Smyrna-Aydin-Dinerline, than they will demand the extension of this line toKonya, and the moment these branch lines are completed, the companieswill move heaven and earth to force the goods traffic to use these new routesfor which there are no guarantees, and which, more important still, neednever share their takings, whereas the other lines must pay part of theirsurplus to the government, once their gross revenue exceeds a certainamount. In consequence, the government will gain nothing by the Aydinline, and the companies will make millions. The government will foot thebill for practically the entire revenue guarantee for the Kassaba-Angoraline, and can never hope to profit by its contracted 25 per cent share in thesurplus above £600 gross takings’ (W. V. Pressel,Les Chemins de Fer enTurquie d’Asie (Zurich, 1900), p. 7).

[414]Charles Moravitz,Die Türkei im Spiegel ihrer Finanzen (1903), p. 84.

[415]‘Incidentally, in this country everything is difficult and complicated. Ifthe government wishes to create a monopoly in cigarette paper or playingcards, France and Austro-Hungary immediately are on the spot to veto theproject in the interest of their trade. If the issue is oil, Russia will raiseobjections, and even the Powers who are least concerned will make theiragreement dependent on some other agreement. Turkey’s fate is that ofSancho Panza and his dinner: as soon as the minister of finance wishes to doanything, some diplomat gets up, interrupts him and throws a veto in histeeth’ (Moravitz, op. cit., p. 70).

[416]And not only in England. ‘Even in 1859, a pamphlet, ascribed to Diergardtof Viersen, a factory owner, was disseminated all over Germany,urging that country to make sure of the East-Asiatic markets in good time.It advocated the display of military force as the only means for gettingcommercial advantages from the Japanese and the Eastern Asiatic nationsin general. A German fleet, built with the people’s small savings, had beena youthful dream, long since brought under the hammer by HannibalFischer. Though Prussia had a few ships, her naval power was not impressive.But in order to enter into commercial negotiations with Eastern Asia, it wasdecided to equip a ship. Graf zu Eulenburg, one of the ablest and mostprudent Prussian statesmen, was appointed chief of this mission which alsohad scientific objects. Under most difficult conditions he carried out his commissionwith great skill, and though the plan for simultaneous negotiationswith the Hawaiian islands had to be given up, the mission was otherwisesuccessful. Though the Berlin press of that time knew better, declaringwhenever a new difficulty was reported, that it was only to be expected,and denouncing all expenditure on naval demonstrations as a waste of thetaxpayers’ money, the ministry of the new era remained steadfast, and theharvest of success was reaped by the ministry that followed’ (W. Lotz,Die Ideen der deutschen Handelspolitik, p. 80).

[417]Following on the preliminary discussion between Michel Chevalier andRichard Cobden on behalf of the French and English governments, ‘officialnegotiations were shortly entered upon and were conducted with the greatestsecrecy. On January 1, 1860, Napoleon III announced his intentions in amemorandum addressed to M. Fould, the Minister of State. This declarationcame like a bolt from the blue. After the events of the past year, the generalbelief was that no attempt would be made to modify the tariff systembefore 1861. Feelings ran high, but all the same the treaty was signed onJanuary 23’ (Auguste Devers,La politique commerciale de la France depuis 1860.Schriften des Vereins für Sozialpolitik, vol. 51, p. 136).

[418]Between 1857 and 1868, the revision along liberal lines of the Russiantariffs and the ultimate writing-off of the insane system ofkantrin with regardto protective tariffs were a manifestation and corollary of the progressivereforms which the disastrous Crimean wars had made inevitable. But thereduction of customs duties reflected the concern of the landowning gentrywho, both as consumers of foreign goods and as producers of grain for export,were interested in unrestricted commerce between Russia and WesternEurope. The champion of agrarian interests, the ‘Free Economic Association’stated: ‘During the last sixty years, between 1822 and 1882, agriculture,Russia’s largest producer, was brought to a precarious position owing to fourgreat setbacks. These could in every case be directly attributed to excessivetariffs. On the other hand, the thirty-two years between 1845 and 1877when tariffs were moderate went by without any such emergency, in spiteof three foreign wars and one civil war [meaning the Polish insurrection of1863—R. L.], every one of which proved a greater or less strain on thefinancial resources of the state’ (Memorandum of the Imperial Free EconomicAssociation on Revising Russian Tariffs (St. Petersburg, 1890), p. 148). As lateas the nineties, then, the scientific spokesman of the Free Trade Movement,the said ‘Free Economic Association’, had to agitate against protectivetariffs as a ‘contrivance to transplant’ capitalist industry to Russia. In areactionary ‘populist’ spirit, it denounced capitalism as a breeding groundfor the modern proletariat, ‘those masses of shiftless people without home orproperty who have nothing to lose and have long been in ill repute’ (p. 191).This is proof enough that until most recent times the Russian champions ofFree Trade, or at least of moderate tariffs, did not to any appreciable extentrepresent the interests of industrial capital. Cf. also K. Lodyshenski:TheHistory of the Russian Tariffs (St. Petersburg, 1886), pp. 239-58.

[419]This is also the opinion of F. Engels. In one of his letters to Nikolayon,on June 18, 1892, he writes: ‘English authors, blinded by their patrioticinterests, completely fail to grasp why the whole world so stubbornly rejectsEngland’s example of free trade and adopts in its place the principle ofprotective tariffs. Of course, they simply dare not admit even to themselvesthat the system of protective tariffs, by now almost universal, is merely adefensive measure against English free trade which was instrumental in perfectingEngland’s industrial monopoly. Such a defence policy may be moreor less reasonable—in some cases it is downright stupid, as for instance inGermany who under the system of free trade had become a great industrialpower and now imposes protective tariffs on agricultural products and rawmaterials, thus increasing the cost of her industrial production. In my viewthis universal reversion to protective tariffs is not a mere accident but thereaction against England’s intolerable industrial monopoly. The form whichthis reaction takes, as I said before, may be wrong, inadequate and evenworse, but its historical necessity seems to me quite clear and obvious’(Letters of Karl Marx and Frederick Engels to Nikolayon (St. Petersburg,1908), p. 71).

[420]Dr. Renner indeed makes this assumption the basis of his treatise ontaxation. ‘Every particle of value created in the course of one year is madeup of these four parts: profit, interest, rent, and wages; and annual taxation,then, can only be levied upon these’ (Das arbeitende Volk und die Steuern,Vienna, 1909). Though Renner immediately goes on to mention peasants,he cursorily dismisses them in a single sentence: ‘A peasant e.g. is simultaneouslyentrepreneur, worker, and landowner, his agricultural proceeds yieldhim wage, profit, and rent,all in one.’ Obviously, it is an empty abstractionto apply simultaneously all the categories of capitalist production to thepeasantry, to conceive of the peasant as entrepreneur, wage labourer andlandlord all in one person. If, like Renner, we want to put the peasant into asingle category, his peculiarity for economics lies in the very fact that hebelongs neither to the class of capitalist entrepreneurs nor to that of the wageproletariat, that he is not a representative of capitalism at all but of simplecommodity production.

[421]It would go beyond the scope of the present treatise to deal with cartelsand trusts as specific phenomena of the imperialist phase. They are due tothe internal competitive struggle between individual capitalist groups for amonopoly of the existing spheres for accumulation and for the distribution ofprofits.

[422]In a reply to Vorontsov, Professor Manuilov, for example, wrote whatwas then greatly praised by the Russian Marxists: ‘In this context, we mustdistinguish strictly between a group of entrepreneurs producing weapons ofwar and the capitalist class as a whole. For the manufacturers of guns, riflesand other war materials, the existence of militarism is no doubt profitableand indispensable. It is indeed quite possible that the abolition of the systemof armed peace would spell ruin for Krupp. The point at issue, however,is not a special group of entrepreneurs but the capitalists as a class, capitalistproduction as a whole.’ In this connection, however, it should be noted that‘if the burden of taxation falls chiefly on the working population, everyincrease of this burden diminishes the purchasing power of the populationand hence the demand for commodities’. This fact is taken as proof thatmilitarism, under the aspect of armament production, does indeed ‘enrichone group of capitalists, but at the same time it injures all others, spellinggain on the one hand but loss on the other’ (Vesnik Prava, Journal of theLaw Society (St. Petersburg, 1890), no. 1, ‘Militarism and Capitalism’).

[423]Ultimately, the deterioration of the normal conditions under whichlabour power is renewed will bring about a deterioration of labour itself, itwill diminish the average efficiency and productivity of labour, and thusjeopardise the conditions for the production of surplus value. But capitalwill not feel these results for a long time, and so they do not immediatelyenter into its economic calculations, except in so far as they bring about moredrastic defensive measures of the wage labourers in general.

INDEX

Labour, abstract and concrete,67ff.,72,105
— intellectual and material,77
— paid and unpaid,37ff.,55,62,65ff.,71,73,75,98,322f.,343
— past and present,66f.,70,75,80,88f.
— problem,363f.
[Pg 472]Labour, progressive productivity of, its capitalist and general social expression,258,321f.,335f.,349,357
Lafargue,399,404
Laissez-faire,173,238,274
Lassalle, F.,228
Lavrov, P.,274
Lenin, Vladimir Ilyich,see Ilyin
Letournaux, A.,378
Lexis,266
Leyden, V. v.,377
List, F.,307
Livingstone, Dr.,411
Loans, international,387,419-45,451f.
Lodyshenski, K.,449
Lotz, W.,448
Lucas, C. P.,414
Luxury goods,81,102,163,197ff.,208,235ff.,260,277

TRANSLATOR’S NOTE	page	7
A NOTE ON ROSA LUXEMBURG		9
INTRODUCTION		13
SECTION ONE
THE PROBLEM OF REPRODUCTION
I. THE OBJECT OF OUR INVESTIGATION	page	31
II. QUESNAY’S AND ADAM SMITH’S ANALYSES OF THE PROCESS OF REPRODUCTION		48
III. A CRITICISM OF SMITH’S ANALYSIS		64
IV. MARX’S SCHEME OF SIMPLE REPRODUCTION		76
V. THE CIRCULATION OF MONEY		93
VI. ENLARGED REPRODUCTION		107
VII. ANALYSIS OF MARX’S DIAGRAM OF ENLARGED REPRODUCTION		120
VIII. MARX’S ATTEMPT TO RESOLVE THE DIFFICULTY		139
IX. THE DIFFICULTY VIEWED FROM THE ANGLE OF THE PROCESS OF CIRCULATION		155
SECTION TWO
HISTORICAL EXPOSITION OF THE PROBLEM
FIRST ROUND
Sismondi-Malthusv. Say-Ricardo, MacCulloch
X. SISMONDI’S THEORY OF REPRODUCTION	page	173
XI. MACCULLOCHv. SISMONDI		191
XII. RICARDOv. SISMONDI		203
XIII. SAYv. SISMONDI		211
XIV. MALTHUS		219
SECOND ROUND
The Controversy between Rodbertus and von Kirchmann
XV. V. KIRCHMANN’S THEORY OF REPRODUCTION	page	227
[Pg 6]XVI. RODBERTUS’ CRITICISM OF THE CLASSICAL SCHOOL		238
XVII. RODBERTUS’ ANALYSIS OF REPRODUCTION		252
THIRD ROUND
Struve—Bulgakov—Tugan Baranovski v. Vorontsov—Nikolayon
XVIII. A NEW VERSION OF THE PROBLEM	page	271
XIX. VORONTSOV AND HIS ‘SURPLUS’		276
XX. NIKOLAYON		284
XXI. STRUVE’S ‘THIRD PERSONS’ AND ‘THREE WORLD EMPIRES’		292
XXII. BULGAKOV AND HIS COMPLETION OF MARX’S ANALYSIS		298
XXIII. TUGAN BARANOVSKI AND HIS ‘LACK OF PROPORTION’		311
XXIV. THE END OF RUSSIAN ‘LEGALIST’ MARXISM		324
SECTION THREE
THE HISTORICAL CONDITIONS OF ACCUMULATION
XXV. CONTRADICTIONS WITHIN THE DIAGRAM OF ENLARGED REPRODUCTION	page	329
XXVI. THE REPRODUCTION OF CAPITAL AND ITS SOCIAL SETTING		348
XXVII. THE STRUGGLE AGAINST NATURAL ECONOMY		368
XXVIII. THE INTRODUCTION OF COMMODITY ECONOMY		386
XXIX. THE STRUGGLE AGAINST PEASANT ECONOMY		395
XXX. INTERNATIONAL LOANS		419
XXXI. PROTECTIVE TARIFFS AND ACCUMULATION		446
XXXII. MILITARISM AS A PROVINCE OF ACCUMULATION		454
INDEX		469

	c	v	s	Gross Output
Department I	48·4	12·1	12·1	72·6
Department II	17·6	4·4	4·4	26·4
Total				99

2nd year:	I.	4,840c	+	1,210v	+	1,210s	=	7,260
	II.	1,760c	+	880v	+	880s	=	3,520
Total:								10,780

3rd year:	I.	5,324c	+	1,331v	+	1,331s	=	7,986
	II.	1,936c	+	968v	+	968s	=	3,872
Total:								11,858

4th year:	I.	5,856c	+	1,464v	+	1,464s	=	8,784
	II.	2,129c	+	1,065v	+	1,065s	=	4,259
Total:								13,043

5th year:	I.	6,442c	+	1,610v	+	1,610s	=	9,662
	II.	2,342c	+	1,172v	+	1,172s	=	4,686
Total:								14,348

I.	(4,400c + 440c) + (1,100v + 110v)	=	4,840c	+	1,210v	=	6,050
II.	(1,600c + 50c + 110c) + (800v + 25v + 55v)	=	1,760c	+	88v	=	2,640
Total:							8,690’[103]

I.	5,417c	+	1,083v	+	1,083s	=	7,583
II.	1,583c	+	316v	+	316s	=	2,215
Total:							9,798

I.	4,000c	+	1,000v	+	1,000s	=	6,000	means of production
II.	2,000c	+	500v	+	500s	=	3,000	articles of consumption.[86]

I.	4,400c	+	1,100v	+	1,100s	=	6,600
II.	1,600c	+	800v	+	800s	=	3,200
Total:							9,800

1st year:	150	are capitalised,	600	consumed
2nd	240		660
3rd	254		626
4th	290		678
5th	320		745

I.	5,000c	+	1,000v	+	1,000s	=	7,000
II.	1,430c	+	285v	+	285s	=	2,000
Total:							9,000

I.	5,869c	+	1,173v	+	1,173s	=	8,215
II.	1,715c	+	342v	+	342s	=	2,399
Total:							10,614

I.	6,358c	+	1,271v	+	1,271s	=	8,900
II.	1,858c	+	371v	+	371s	=	2,600
Total:							11,500

I.	4,949c	+	989·75v	+	989·75s	=	6,928·5
II.	1,358·5c	+	270·75v	+	270·75s	=	1,900

	1886	1890
	£m.	£m.
Iron	21·8	31·6
Machinery	10	16·4
Coal	9	19

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The Project Gutenberg eBook ofThe Accumulation of Capital

RARE MASTERPIECESOF PHILOSOPHY AND SCIENCE

EDITED BY DR. W. STARK

THE ACCUMULATIONOF CAPITAL

THEACCUMULATIONOF CAPITAL

byROSA LUXEMBURG

translated from the GermanbyAGNES SCHWARZSCHILD(doctor iuris)

With an IntroductionbyJOAN ROBINSON

CONTENTS

TRANSLATOR’S NOTE

A NOTE ON ROSA LUXEMBURG

INTRODUCTION

SECTION ONE

THE PROBLEMOF REPRODUCTION

CHAPTER I

THE OBJECTOF OUR INVESTIGATION

CHAPTER II

QUESNAY’S AND ADAM SMITH’SANALYSES OF THE PROCESS OFREPRODUCTION

CHAPTER III

A CRITICISM OF SMITH’S ANALYSIS

CHAPTER IV

MARX’S SCHEMEOF SIMPLE REPRODUCTION

CHAPTER V

THE CIRCULATION OF MONEY

CHAPTER VI

ENLARGED REPRODUCTION

CHAPTER VII

ANALYSIS OF MARX’S DIAGRAMOF ENLARGED REPRODUCTION

CHAPTER VIII

MARX’S ATTEMPTTO RESOLVE THE DIFFICULTY

CHAPTER IX

THE DIFFICULTY VIEWED FROM THEANGLE OF THE PROCESS OFCIRCULATION

SECTION TWO

HISTORICAL EXPOSITIONOF THE PROBLEM

CHAPTER X

SISMONDI’S THEORYOF REPRODUCTION

CHAPTER XI

MacCULLOCHv. SISMONDI

CHAPTER XII

RICARDOv. SISMONDI

CHAPTER XIII

SAYv. SISMONDI

CHAPTER XIV

MALTHUS

SECTION TWO

HISTORICAL EXPOSITIONOF THE PROBLEM

CHAPTER XV

v. KIRCHMANN’S THEORY OFREPRODUCTION

CHAPTER XVI

RODBERTUS’ CRITICISMOF THE CLASSICAL SCHOOL

CHAPTER XVII

RODBERTUS’ ANALYSIS OFREPRODUCTION

SECTION TWO

HISTORICAL EXPOSITIONOF THE PROBLEM

CHAPTER XVIII

A NEW VERSION OF THE PROBLEM

CHAPTER XIX

VORONTSOV AND HIS ‘SURPLUS’

CHAPTER XX

NIKOLAYON

CHAPTER XXI

STRUVE’S ‘THIRD PERSONS’AND ‘THREE WORLD EMPIRES’

CHAPTER XXII

BULGAKOV AND HIS COMPLETIONOF MARX’S ANALYSIS

CHAPTER XXIII

TUGAN BARANOVSKIAND HIS ‘LACK OF PROPORTION’

CHAPTER XXIV

THE END OF RUSSIAN ‘LEGALIST’MARXISM

SECTION THREE

THE HISTORICALCONDITIONS OFACCUMULATION

CHAPTER XXV

CONTRADICTIONS WITHIN THEDIAGRAM OF ENLARGEDREPRODUCTION

CHAPTER XXVI

THE REPRODUCTION OF CAPITALAND ITS SOCIAL SETTING

CHAPTER XXVII

THE STRUGGLE AGAINST NATURALECONOMY

CHAPTER XXVIII

THE INTRODUCTION OF COMMODITYECONOMY

CHAPTER XXIX

by
ROSA LUXEMBURG

translated from the German
by
AGNES SCHWARZSCHILD
(doctor iuris)

With an Introduction
by
JOAN ROBINSON