Produced by Fritz Ohrenschall, Judith Picken and the Online
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  [Transcriber's notes:
  Inconsistent hyphenation and use of umlauts retained.
  Equations are surrounded by _ indicating that the variables are all
  italicised. If there are non-italicised alphabetic characters in
  the equation the variables are surrounded by _ separately.
  [sqrt] has been used to represent square root (radical) sign.
  A full list of errors that have been changed can be found at the end.]




  RARE MASTERPIECES
  OF PHILOSOPHY AND SCIENCE

  EDITED BY DR. W. STARK


  THE ACCUMULATION
     OF CAPITAL

  PUBLISHED ON THE LOUIS STERN MEMORIAL FUND




      THE
  ACCUMULATION
   OF CAPITAL

  by
  ROSA LUXEMBURG

  _translated from the German
  by
  AGNES SCHWARZSCHILD
  (doctor iuris)_

  _With an Introduction
  by
  JOAN ROBINSON_

  NEW HAVEN
  YALE UNIVERSITY PRESS
  1951




  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




CONTENTS


  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-Malthus _v._ Say-Ricardo, MacCulloch

  X. SISMONDI'S THEORY OF REPRODUCTION                    _page_    173

  XI. MACCULLOCH _v._ SISMONDI                                      191

  XII. RICARDO _v._ SISMONDI                                        203

  XIII. SAY _v._ SISMONDI                                           211

  XIV. MALTHUS                                                      219

  SECOND ROUND

  The Controversy between Rodbertus and von Kirchmann

  XV. V. KIRCHMANN'S THEORY OF REPRODUCTION               _page_    227

  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




TRANSLATOR'S NOTE


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

In so far as possible, however, I have availed myself of existing
translations and have referred to the following standard works:

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)

  _The Poverty of Philosophy_ (translator's name not given, London,
     1936).

Sismondi's introduction to the second edition of _Nouveaux Principes_ is
quoted from M. Mignet's translation of selected passages by Sismondi,
entitled _Political Economy and the Philosophy of Government_, London,
1847. No English translation exists of Marx's _Theorien über den
Mehrwert_.

Unfortunately, not all the West European texts, and none of the
Russian--except Engels' correspondence with Nikolayon--were accessible
to me, and I regret having been unable to trace some quotations and
check up on others. In such cases, the English version follows the
German text and will at least bring out the point the author wanted to
make.

To save the reader grappling with unfamiliar concepts, I have converted
foreign currencies and measures into their English equivalents, at the
following rates:

20 _marks_--25 _francs_--$5--£1 (gold standard); 1 _hectare_--(roughly)
2·5 acres; 1 _kilometre_--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 and appreciation with
which my work has met.

  AGNES SCHWARZSCHILD




A NOTE ON ROSA LUXEMBURG


Rosa Luxemburg was born on 5 March 1870, at Zamosc, a little town of
Russian Poland, not far from the city of Lublin. She came from a fairly
well-to-do family of Jewish merchants, and soon showed the two
outstanding traits which were to characterise all her life and work: a
high degree of intelligence, and a burning thirst for social justice
which led her, while still a schoolgirl, into the revolutionary camp.
Partly to escape the Russian police, partly to complete her education,
she went to Zurich and studied there the sciences of law and economics.
Her doctoral dissertation dealt with the industrial development of
Poland and showed up the vital integration of Polish industry with the
wider economic system of metropolitan Russia. It was a work not only of
considerable promise, but already of solid and substantial achievement.

Her doctorate won, Rosa Luxemburg looked around for a promising field of
work and decided to go to Germany, whose working-class movement seemed
destined to play a leading part in the future history of international
socialism. She settled there in 1896, and two years later contracted a
formal marriage with a German subject which secured her against the
danger of forcible deportation to Russia. Now, at that moment the German
Social-Democratic Party was in the throes of a serious crisis. In 1899,
Eduard Bernstein published his well-known work _Die Voraussetzungen des
Sozialismus und die Aufgaben der Sozialdemokratie_, which urged the
party to drop its revolutionary jargon and to work henceforth for
tangible social reforms within the given economic set-up, instead of
trying to bring about its final and forcible overthrow. This 'reformism'
or 'revisionism' seemed to Rosa Luxemburg a base as well as a foolish
doctrine, and she published in the same year a pamphlet _Sozialreform
oder Revolution?_ which dealt with Bernstein's ideas in no uncertain
fashion. From this moment onward, she was and remained one of the
acknowledged leaders of the left wing within the German working-class
movement.

The events of the year 1905 gave Rosa Luxemburg a welcome opportunity
to demonstrate that revolution was to her more than a subject of purely
academic interest. As soon as the Russian masses began to move, she
hurried to Warsaw and threw herself into the fray. There followed a
short span of feverish activity, half a year's imprisonment, and,
finally, a return journey to Berlin. The experiences of the Warsaw
rising are reflected in a book entitled _Massenstreik, Partei und
Gewerkschaften_, which was published in 1906. It recommends the general
strike as the most effective weapon in the struggle of the proletariat
against the bourgeoisie.

The International Socialist Congress which met at Stuttgart in 1907
prepared and foreshadowed the sorry history of Rosa Luxemburg's later
life. On that occasion she drafted, together with Lenin, a resolution
which demanded that the workers of the world should make any future war
an opportunity for the destruction of the capitalist system. Unlike so
many others, she stuck to her resolution when, seven years later, the
time of testing came. The result was that she had to spend nearly the
whole of the first World War in jail, either under punishment or in
protective custody. But imprisonment did not mean inactivity. In 1916,
there appeared in Switzerland her book _Die Krise der Sozialdemokratie_,
which assailed the leaders of the German labour party for their
patriotic attitude and called the masses to revolutionary action. The
foundation of the Spartacus League in 1917, the germ cell out of which
the Communist Party of Germany was soon to develop, was vitally
connected with the dissemination of Rosa Luxemburg's aggressive
sentiments.

The collapse of the _Kaiserreich_ on 11 November 1918, gave Rosa
Luxemburg her freedom and an undreamt-of range of opportunities. The two
months that followed must have been more crowded and more colourful than
all her previous life taken together. But the end of her career was
imminent. The fatal Spartacus week, an abortive rising of the Berlin
workers, led on 15 January 1919, to her arrest by a government composed
of former party comrades. During her removal to prison she was attacked
and severely beaten by soldiers belonging to the extreme right, a
treatment which she did not survive. Her body was recovered days later
from a canal.

A type not unlike Trotsky, Rosa Luxemburg had her tender and
sentimental side, which comes to the surface in her correspondence,
especially in the _Briefe aus dem Gefaengnis_ printed in 1922. As a
thinker she showed considerable honesty and independence of mind. _The
Accumulation of Capital_, first published in 1913, which is undoubtedly
her finest achievement, reveals her as that rarest of all rare
phenomena--a Marxist critical of Karl Marx.

  W. STARK




INTRODUCTION


Academic economists have recently returned from the elaboration of
static equilibrium to the classical search for a dynamic model of a
developing economy. Rosa Luxemburg, neglected by Marxist and academic
economists alike, offers a theory of the dynamic development of
capitalism which is of the greatest interest. The book is one of
considerable difficulty (apart from the vivid historical chapters), and
to those accustomed only to academic analysis the difficulty is rendered
well-nigh insurmountable by the Marxist terminology in which it is
expressed. The purpose of this preface is to provide a glossary of
terms, and to search for the main thread of the argument (leaving the
historical illustrations to speak for themselves) and set it out in
simpler language.

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

Our author takes her departure from the numerical examples for simple
reproduction (production with a constant stock of capital) and expanded
reproduction (production with capital accumulating) set out in volume ii
of Marx's _Capital_. As she points out,[2] Marx completed the model for
simple reproduction, but the models for accumulation were left at his
death in a chaos of notes, and they are not really fit to bear all the
weight she puts on them (Heaven help us if posterity is to pore over all
the backs of old envelopes on which economists have jotted down
numerical examples in working out a piece of analysis). To follow her
line of thought, however, it is necessary to examine her version of
Marx's models closely, to see on what assumptions they are based
(explicitly or unconsciously) and to search the assumptions for clues to
the succeeding analysis.

To begin at the beginning--gross national income (for a closed economy)
for, say, a year, is written _c + v + s_; that is, constant capital,
variable capital and surplus. Variable capital, _v_, is the annual wages
bill. Surplus, _s_, is annual rent, interest, and net profit, so that
_v + s_ represents net national income. (In this introduction surplus is
used interchangeably with rent, interest and net profit.) Constant
capital, _c_, represents at the same time the contribution which
materials and capital equipment make to annual output, and the cost of
maintaining the stock of physical capital in existence at the beginning
of the year. When all commodities are selling at normal prices, these
two quantities are equal (normal prices are tacitly assumed always to
rule,[3] an assumption which is useful for long-period problems, though
treacherous when we have to deal with slumps and crises). Gross receipts
equal to _c + v + s_ pass through the hands of the capitalists during
the year, of which they use an amount, _c_, to replace physical capital
used up during the year, so that _c_ represents costs of raw materials
and wear and tear and amortisation of plant. An amount, _v_, is paid to
workers and is consumed by them (saving by workers is regarded as
negligible[4]). The surplus, _s_, remains to the capitalists for their
own consumption and for net saving. The professional classes (civil
servants, priests, prostitutes, etc.) are treated as hangers-on of the
capitalists, and their incomes do not appear, as they are not regarded
as producing _value_.[5] Expenditure upon them tends to lessen the
saving of capitalists, and their own expenditure and saving are treated
as expenditure and saving out of surplus.

In the model set out in chapter vi there is no technical progress (this
is a drastic simplification made deliberately[6]) and the ratio of
capital to labour is constant (as the stock of capital increases
employment increases in proportion). Thus real output per worker
employed is constant (hours of work per year do not vary) and real wages
per man are constant. It follows that real surplus per man is also
constant. So long as these assumptions are retained Marxian _value_
presents no problem. _Value_ is the product of labour-time. _Value_
created per man-year is constant because hours of work are constant.
Real product per man year being constant, on the above assumptions, the
_value_ of a unit of product is constant. For convenience we may assume
money wages per man constant. Then, on these assumptions, both the
money price of a unit of output and the _value_ of a unit of money are
constant. This of course merely plasters over all the problems of
measurement connected with the use of index numbers, but provided that
the technique of production is unchanging, and normal prices are ruling,
those problems are not serious, and we can conduct the analysis in terms
of money values.[7] (Rosa Luxemburg regards it as a matter of
indifference whether we calculate in money or in _value_.[8])

The assumption of constant real wages presents a difficulty which we may
notice in passing. The operation of the capitalist system is presumed to
depress the level of wages down to the limit set by the minimum
subsistence of the worker and his family. But how large a family? It
would be an extraordinary fluke if the average size of family supported
by the given wage of a worker were such as to provide for a rate of
growth of population exactly adjusted to the rate of accumulation of
capital, and she certainly does not hold that this is the case.[9] There
is a reserve army of labour standing by, ready to take employment when
the capitalists offer it. While they are unemployed the workers have no
source of income, but are kept alive by sharing in the consumption of
the wages of friends and relations who are in work.[10] When an increase
in the stock of capital takes place, more workers begin to earn wages,
those formerly employed are relieved of the burden of supporting some
unemployed relations, and their own consumption rises. Thus either they
were living below the subsistence minimum before, or they are above it
now. We may cut this knot by simply postulating that real wages per man
are constant,[11] without asking why. The important point for the
analysis which we are examining is that when employment increases the
total consumption of the workers as a whole increases by the amount of
the wages received by the additional workers.[12]

We may now set out the model for simple reproduction--that is, annual
national income for an economy in which the stock of capital is kept
intact but not increased. All output is divided into two departments:
I, producing capital equipment and raw materials, (producers' goods),
and II, producing consumption goods. Then we have

   I: _c_{1} + v_{1} + s_{1} = c_{1} + c_{2}_

  II: _c_{2} + v_{2} + s_{2} = v_{1} + v_{2} + s_{1} + s_{2}_

Thus

  _c_{2} = v_{1} + s_{1}_

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

Before proceeding to the model for accumulation there is a difficulty
which must be discussed. In the above model the stock of capital exists,
so to speak, off stage. Rosa Luxemburg is perfectly well aware of the
relationship between annual wear and tear of capital, which is part of
_c_, and the stock of fixed capital,[13] but as soon as she (following
Marx) discusses accumulation she equates the addition to the stock of
capital made by saving out of surplus in one year to the wear and tear
of capital in the next year. To make sense of this we must assume that
all capital is consumed and made good once a year. She seems to slip
into this assumption inadvertently at first, though later it is made
explicit.[14] She also consciously postulates that _v_ represents the
amount of capital which is paid out in wages in advance of receipts from
sales of the commodities produced. (This, as she says, is the natural
assumption to make for agricultural production, where workers this year
are paid from the proceeds of last year's harvest.)[15] Thus _v_
represents at the same time the annual wages bill and the amount of
capital locked up in the wages fund, while _c_ represents both the
annual amortisation of capital and the total stock of capital (other
than the wages fund). This is a simplification which is tiresome rather
than helpful (it arises from Marx's ill-judged habit of writing _s/(c +
v)_ for the rate of profit on capital), but it is no more than a
simplification and does not invalidate the rest of the analysis.

Another awkward assumption, which causes serious trouble later, is
implicit in the argument. Savings out of the surplus accruing in each
department (producers' and consumers' goods) are always invested in
capital in the same department. There is no reason to imagine that one
capitalist is linked to others in his own department more than to those
in the other department, so the conception seems to be that each
capitalist invests his savings in his own business. There is no lending
by one capitalist to another and no capitalist ever shifts his sphere of
operations from one department to another. This is a severe assumption
to make even about the era before limited liability was introduced, and
becomes absurd afterwards. Moreover it is incompatible with the
postulate that the rate of profit on capital tends to equality
throughout the economy,[16] for the mechanism 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 less profitable lines.[17]

The assumption that there is no lending by one capitalist to another
puts limitation upon the model. Not only must the total rate of
investment be equal to the total of planned saving, but investment in
each department must be equal to saving in that department, and not only
must the rate of increase of capital lead to an increase of total output
compatible with 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 in proportions
compatible with the demand for each, dictated by the consumption and the
investment plans in each department.

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

                 _c_   _v_   _s_  _Gross Output_
  Department I    44    11    11        66
  Department II   16     4     4        24
                                        --
                            Total       90

In Department I, 5·5 units are saved (half of _s_) of which 4·4 are
invested in constant capital and 1·1 in variable capital. In Department
II 2 units are saved, 1·6 being added to constant and 0·4 to variable
capital. The 66 units of producers' goods provide 44 + 4·4 constant
capital for Department I and 16 + 1·6 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 to variable capital, which provide for an addition to
employment.

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

                  _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

The two departments are now equipped to carry out another round of
investment at the prescribed rate, and the process of accumulation
continues. The ratios happen to have been chosen so that the total
labour force, and total gross output, increase by 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's numerical examples
is that it is always Department I which takes the initiative. She
maintains that the capitalists in Department I decide how much
producers' goods to produce, and that Department II has to arrange its
affairs so as to absorb an amount of producers' goods which will fit in
with their plans.[24] On the face of it, this is obviously absurd. The
arithmetic is perfectly neutral between the two departments, and, as she
herself shows, will serve equally well for the imagined case of a
socialist society where investment is planned with a view to
consumption.[25]

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

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

It is in connection with the problem of effective demand, in this sense,
that Marx brings gold-mining into the analysis. When real output expands
at constant money prices, the increasing total of money value of output
requires an increase in the stock of money in circulation (unless the
velocity of circulation rises appropriately). The capitalists therefore
have to devote part of their savings to increasing their holdings of
cash (for there is no borrowing). This causes a deficiency of effective
demand. But the increase in the quantity of money in circulation comes
from newly mined gold, and the expenditure of the gold mining industry
upon the other departments just makes up the deficiency in demand.[28]

Rosa Luxemburg garbles this argument considerably, and brushes it away
as beside the point. And it _is_ beside the point that she is concerned
with. She does not admit the savings and investment problem, for she
takes it for granted that each individual act of saving out of surplus
is accompanied by a corresponding amount of real investment, and that
every piece of investment is financed by saving out of surplus of the
same capitalist who makes it.[29] What she appears to be concerned with
is rather the inducement to invest. What motive have the capitalists for
enlarging their stock of real capital?[30] How do they know that there
will be demand for the increased output of goods which the new capital
will produce, so that they can 'capitalise' their surplus in a
profitable form? (On the purely analytical plane her affinity seems to
be with Hobson rather than Keynes.)

Needless to say, our author does not formulate the problem of the
inducement to invest in modern terminology, and the ambiguities and
contradictions in her exposition have left ample scope 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 of capital only if the capitalists are
assured of an ever-expanding market for the goods which the capital will
produce. On this reading, the statement of the problem leads
straightforwardly to the solution propounded in the third Section of
this book.

Marx has his own answer to the problem of inducement to invest, which
she refers to in the first chapter.[32] The pressure of competition
forces each individual capitalist to increase his capital in order to
take advantage of economies of large-scale production, for if he does
not his rivals will, and he will be undersold. Rosa Luxemburg does not
discuss whether this mechanism provides an adequate drive to keep
accumulation going, but looks for some prospective demand outside the
circle of production. Here the numerical examples, as she shows, fail to
help. And this is in the nature of the case, for (in modern jargon) the
examples deal with _ex post_ quantities, while she is looking for _ex
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 accumulation take place?

In Section II our author sets out to find what answers have been given
to her problem. The analysis she has in mind is now broader than the
strict confines of the arithmetical model. Technical progress is going
on, and the output of an hour's labour rises as time goes by. (The
concept of _value_ now becomes treacherous, for the _value_ of
commodities is continuously falling.) Real wages tend to be constant in
terms of commodities, thus the _value_ of labour power is falling, and
the share of surplus in net income is rising (_s/v_, the rate of
exploitation, is rising). The amount of saving in real terms is
therefore rising (she suggests later that the proportion of surplus
saved rises with surplus, in which case real savings increase all the
more[33]). The problem is thus more formidable than appears in the
model, for the equilibrium rate of accumulation of capital, in real
terms, is greater than in the model, where the rate of exploitation is
constant. At the same time the proportion of constant to variable
capital is rising. She regards this not as something which is likely to
happen for technical reasons, but as being necessarily bound up with the
very nature of technical progress. As productivity increases, the amount
of producers' goods handled per man-hour of labour increases; therefore,
she says, the proportion of _c_ to _v_ must increase.[34] This is an
error. It arises from thinking of constant capital in terms of goods,
and contrasting it with variable capital in terms of _value_, that is,
hours of labour. She forgets Marx's warning that, as progress takes
place, the _value_ of the commodities making up constant capital also
falls.[35] It is perfectly possible for productivity to increase without
any increase in the _value_ of capital per man employed. This would
occur if improvements in the productivity of labour in making producers'
goods kept pace with the productivity of labour in using producers'
goods to make consumers' goods (capital-saving inventions balance
labour-saving inventions, so that technical progress is 'neutral').
However, we can easily get out of this difficulty by postulating that as
a matter of fact technical progress is mainly labour-saving, or, a
better term, capital-using, so that capital per man employed is rising
through time.

Rosa Luxemburg treats the authors whom she examines in Section II with a
good deal of sarcasm, and dismisses them all as useless. To some of the
points raised her answers seem scarcely adequate. For instance,
Rodbertus sees the source of all the troubles of capitalism in the
falling proportion of wages in national income.[36] He can be
interpreted to refer to the proportion of wages in gross income. In that
case, she is right (on the assumption of capital-using inventions) in
arguing that a fall in the proportion of wages is bound up with
technical progress, and that the proportion could be held constant only
by stopping progress. He can also be taken to refer to the share of
wages in net output, and this is the more natural reading. On this
reading she argues that the fall in share of wages (or rise in rate of
exploitation) is necessary to prevent a fall in the rate of profit on
capital[37] (as capital per man employed rises, profit per man employed
must rise if profit per unit of capital is constant). But she does not
follow up the argument and inquire what rise in the rate of exploitation
is necessary to keep capitalism going (actually, the statisticians tell
us, the share of wages in net income has been fairly constant in modern
industrial economies[38]). It is obvious that the less the rate of
exploitation rises, the smaller is the rise in the rate of saving which
the system has to digest, while the rise in real consumption by workers,
which takes place when the rate of exploitation rises more slowly than
productivity in the consumption good industries, creates an outlet for
investment in productive capacity in those industries. The horrors of
capitalism, and the difficulties which it creates for itself, are both
exaggerated by the assumption of constant real-wage rates and, although
it would be impossible to defend Rodbertus' position that a constant
rate of exploitation is all that is needed to put everything right, he
certainly makes a contribution to the argument which ought to be taken
into account.

Tugan-Baranovski also seems to be treated too lightly. His conception is
that the rising proportion of constant capital in both departments
(machines to make machines as well as machines to make consumers' goods)
provides an outlet for accumulation, and that competition is the driving
force which keeps capitalists accumulating. Rosa Luxemburg is no doubt
correct in saying that his argument does not carry the analysis beyond
the stage at which Marx left it,[39] but he certainly elaborates a point
which she seems perversely to overlook. Her real 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 disintegration of the capitalist system is not merely
probable on the evidence, but is a logical necessity.[40]

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

Section III is broader, more vigorous and in general more rewarding than
the two preceding parts. It opens with a return to Marx's model for a
capitalist system with accumulation going on. Our author then sets out a
fresh model allowing for technical progress. The rate of exploitation
(the ratio of surplus to wages) is rising, for real wages remain
constant while output per man increases. In the model the proportion of
surplus saved is assumed constant for simplicity, though in reality, she
holds, it would tend to rise with the real income of the
capitalists.[43] The ratio of constant to variable capital is rising for
technical reasons. (The convention by which the annual wear and tear of
capital is identified with the stock of capital now becomes a great
impediment to clear thinking.) The arithmetical model shows the system
running into an _impasse_ because the output of Department I falls short
of the requirements of constant capital in the two departments taken
together, while the output of Department II exceeds consumption.[44] The
method of argument is by no means rigorous. Nothing follows from the
fact that one particular numerical example fails to give a solution, and
the example is troublesome to interpret as it is necessary to
distinguish between discrepancies due to rounding off the figures from
those which are intended to illustrate a point of principle.[45] But
there is no need to paddle in the arithmetic to find where the
difficulty lies. The model is over-determined because of the rule that
the increment of capital within each department at the end of a year
must equal the saving made within the same department during the year.
If capitalists from Department II were permitted to lend part of their
savings to Department I to be invested in its capital, a breakdown would
no longer be inevitable. Suppose that total real wages are constant and
that real consumption by capitalists increases slowly, so that the real
output 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 consequence of capital-using technical
progress. The output of Department I, and its productive capacity, is
growing through time. Capital invested in Department I is accumulating
faster than the saving of the capitalists in Department I, and
capitalists of Department II, who have no profitable outlet in their own
industries for their savings, acquire titles to part of the capital in
Department I by supplying the difference between investment in
Department I and its own saving.[46] For any increase in the stock of
capital of both departments taken together, required by technical
progress and demand conditions, there is an appropriate amount of
saving, and so long as the total accumulation required and total saving
fit, there is no breakdown.

But here we find the clue to the real contradiction. These quantities
might conceivably fit, but there is no guarantee that they will. If the
ratio of saving which the capitalists (taken together) choose to make
exceeds the rate of accumulation dictated by technical progress, the
excess savings can only be 'capitalised' if there is an outlet for
investment outside the system. (The opposite case of deficient savings
is also possible. Progress would then be slowed down below the
technically possible maximum; but this case is not contemplated by our
author, and it would be irrelevant to elaborate upon it.)

Once more we can substitute for a supposed logical necessity a
plausible hypothesis about the nature of the real case, and so rescue
the succeeding argument. If in reality the distribution of income
between workers and capitalists, and the propensity to save of
capitalists, are such as to require a rate of accumulation which exceeds
the rate of increase in the stock of capital appropriate to technical
conditions, then there is a chronic excess of the potential supply of
real capital over the demand for it and the system must fall into
chronic depression. (This is the 'stagnation thesis' thrown out by
Keynes and elaborated by modern American economists, notably Alvin
Hansen). How then is it that capitalist expansion had not yet (in 1912)
shown any sign of slackening?

In chapter xxvi Rosa Luxemburg advances her central thesis--that it is
the invasion of primitive economies by capitalism which keeps the system
alive. There follows a scorching account of the manner in which the
capitalist system, by trade, conquest and theft, swallowed up the
pre-capitalist economies,--some reduced to colonies of capitalist
nations, some remaining nominally independent--and fed itself upon their
ruins. The thread of analysis running through the historical
illustrations is not easy to pick up, but the main argument seems to be
as follows: As soon as a primitive closed economy has been broken into,
by force or guile, cheap mass-produced consumption goods displace the
old hand production of the family or village communities, so that a
market is provided for ever-increasing outputs from the industries of
Department II in the old centres of capitalism, without the standard of
life of the workers who consume these commodities being raised.[47] The
ever-growing capacity of the export industries requires the products of
Department I, thus maintaining investment at home. At the same time
great capital works, such as railways, are undertaken in the new
territories.[48] This investment is matched partly by savings from
surplus extracted on the spot, but mainly by loans from the old
capitalist countries. There is no difficulty here in accounting for the
inducement to invest, for the new territories yield commodities
unobtainable at home.[49] We might set out the essence of the argument
as follows: Cloth from Lancashire pays for labour in America, which is
used to produce wheat and cotton. These provide wages and raw materials
to the Lancashire mills, while the profits acquired both on the
plantations and in the mills are invested in steel rails and rolling
stock, which open up fresh territories, so that the whole process is
continuously expanding. Moreover, apart from profits earned on capital
actually invested in the new territories, great capital gains are made
simply by acquiring possession of land and other natural resources.[50]
Labour to work the resources may be provided by the local dispossessed
peasantry or by immigration from the centres of capitalism.[51]
Investment in equipment for it to use is more profitable than in that
operated by home labour, partly because the wretched condition of the
colonial workers makes the rate of exploitation higher,[52] but mainly
just because they are on the spot, and can turn the natural resources
seized by the capitalists into means of production. No amount of
investment in equipment for British labour would produce soil bearing
cotton, rubber or copper. Thus investment is deflected abroad[53] and
the promise of profit represented by the natural resources calls into
existence, by fair means or foul, the labour and capital to make it come
true. The process of building up this capital provides an outlet for the
old industries and rescues them from the contradictions inherent in
deficiency of demand.

The analysis of militarism in the last chapter over-reaches itself by
trying to prove too much. The argument is that armaments are built up
out of taxes which fall entirely on wages.[54] This can be regarded as a
kind of 'forced saving' imposed on the workers. These savings are extra
to the saving out of surplus. They are invested in armaments, and that
ends the story. On this basis the armaments, in themselves, cannot be
held to provide an outlet for the investment of surplus (though the use
of the armaments, as in the Opium War,[55] to break up primitive
economies is a necessary condition for the colonial investment already
described) and capital equipment to produce armaments is merely
substituted for capital formerly producing consumers' goods. The
analysis which best fits Rosa Luxemburg's own argument, and the facts,
is that armaments provide an outlet for the investment of surplus (over
and above any contribution there may be from forced saving out of
wages), which, unlike other kinds of investment, creates no further
problem by increasing productive capacity (not to mention the huge new
investment opportunities created by reconstruction after the capitalist
nations have turned their weapons against each other).

All this is perhaps too neat an account of what our author is saying.
The argument streams along bearing a welter of historical examples in
its flood, and ideas emerge and disappear again bewilderingly. But
something like the above seems to be intended. And something like it is
now widely accepted as being true. Rosa Luxemburg, as we have seen,
neglects the rise in real wages which takes place as capitalism
develops, and denies the internal inducement to invest provided by
technical progress, two factors which help to rescue capitalism from the
difficulties which it creates for itself. She is left with only one
influence (economic imperialism) to account for continuous capital
accumulation, so that her analysis is incomplete. All the same, few
would deny that the extension of capitalism into new territories was the
mainspring of what an academic economist has called the 'vast secular
boom' of the last two hundred years,[56] and many academic economists
account for the uneasy condition of capitalism in the twentieth century
largely by the 'closing of the frontier' all over the world.[57] But the
academic economists are being wise after the event. For all its
confusions and exaggerations, this book shows more prescience than any
orthodox contemporary could claim.

  JOAN ROBINSON
  _Cambridge._

FOOTNOTES:

[1] For a totally different interpretation see Sweezy; _The Theory of
Capitalist Development_, chap. xi, Section 9.

[2] See p. 166.

[3] Cf. the quotation from _Capital_, vol. iii, p. 331.

[4] See p. 132.

[5] See p. 135.

[6] See p. 130.

[7] Exchanges between industries, however, must take place at 'prices of
production' not at _values_. See below, p. 15, note.

[8] See p. 113.

[9] See p. 361.

[10] See p. 134.

[11] Later it is assumed that real wages can be depressed by taxation
(p. 455).

[12] See p. 116.

[13] See p. 85.

[14] See p. 355.

[15] See p. 76, note 355.

[16] See p. 79.

[17] In the numerical example quoted in chap. vi. (p. 117) the rate of
profit is much higher in Department II than in I. Marx has made the rate
of exploitation equal in the two departments, and the ratio of constant
to variable capital higher in Department I. This is evidently an
oversight. The two departments must trade with each other at market
prices, not in terms of _value_. Therefore _s_{1}_ must represent the
profits accruing to Department I, not a proportion (half in the example)
of the _value_ generated in Department I. _s_{1}/v_{1}_ should exceed
_s_{2}/v_{2}_ to an extent corresponding to the higher organic
composition of capital in Department I. The point is interesting, as it
shows that when off guard Marx forgot that he could make prices
proportional to _values_ only when the organic composition of capital is
the same in all industries.

[18] See p. 129.

[19] See p. 130.

[20] Since, in this model, the organic composition of capital is the
same in the two departments, prices correspond to _values_.

[21] Of total gross output, 2/3 is replacement of constant capital;
surplus is 1/6 of gross output, and of surplus half is saved; thus
savings are 1/12 of gross output; of saving 4/5 is added to constant
capital; thus 1/15 of gross output is added to constant capital. The
output of Department I is therefore 2/3 + 1/15 or 11/15 of total gross
output. Similarly, the output of Department II is 4/15 of total gross
output.

[22] This model bears a strong family resemblance to Mr. Harrod's
'Warranted rate of growth'. _Towards a Dynamic Economics_, lecture III.

[23] See p. 119.

[24] See p. 125.

[25] See p. 128.

[26] See p. 91.

[27] See p. 115.

[28] See p. 102. The phrase '_zahlungsfähige nachfrage_', translated
'effective demand', is not the effective demand of Keynes (roughly,
current expenditure) but appears often to mean demand for new capital,
or, perhaps, prospective future 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] See p. 40.

[33] See p. 303.

[34] See p. 258.

[35] This point is, however, later admitted (p. 337).

[36] See p. 252.

[37] See p. 259. Marx himself failed to get this point clear. Cf. my
_Essay on Marxian Economics_, chap. v.

[38] Cf. Kalecki, _Essays in the Theory of Economic Fluctuations_, pp.
14 et seq.

[39] See p. 323.

[40] See p. 314. Marx did not find himself in this dilemma because he
held that there is a fundamental 'contradiction' in capitalism which
shows itself in a strong tendency for the rate of profit on capital to
fall as technical progress takes place. But Rosa Luxemburg sees that the
tendency to a falling rate of profit is automatically checked and may
even be reversed if real-wage rates are constant (p. 338).

[41] See p. 217, note.

[42] One passage suggests that she sees the problem, but thinks it
irrelevant to the real issue (p. 342).

[43] See p. 338.

[44] See p. 337.

[45] In this model the rate of exploitation is different in the two
departments. This means that the numbers represent money value, not
_value_.

[46] Rosa Luxemburg seems to regard this process as impossible, but for
what reason is by no means clear (p. 341).

[47] See p. 352.

[48] See p. 352.

[49] See p. 358.

[50] See p. 370.

[51] See p. 428.

[52] See p. 435.

[53] See p. 421.

[54] See p. 455.

[55] See p. 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.




  _SECTION ONE_


  THE PROBLEM
  OF REPRODUCTION




_CHAPTER I_

THE OBJECT OF OUR INVESTIGATION


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

What is it precisely that constitutes this problem of the reproduction
of total capital? The literal meaning of the word 'reproduction' is
repetition, renewal of the process of production. At first sight it may
be difficult to see in what respect the idea of reproduction differs
from that of repetition which we can all understand--why such a new and
unfamiliar term should be required. But in the sort of repetition which
we shall consider, in the continual recurrence of the process of
production, there are certain distinctive features. First, the regular
repetition of reproduction is the general _sine qua non_ of regular
consumption which in its turn has been the precondition of human
civilisation in every one of its historical forms. The concept of
reproduction, viewed in this way, reflects an aspect of the history of
civilisation. Production can never be resumed, there can be no
reproduction, unless certain prerequisites such as tools, raw materials
and labour have been established during the preceding period of
production. However, at the most primitive level of man's civilisation,
at the initial stage of man's power over nature; this possibility to
re-engage in production depended more or less on chance. So long as
hunting and fishing were the main foundations of social existence,
frequent periods of general starvation interrupted the regular
repetition of production. Some primitive peoples recognised at a very
early stage that for reproduction as a regularly recurring process
certain measures were essential; these they incorporated into ceremonies
of a religious nature; and in this way they accepted such measures as
traditional social commitments. Thus, as the thorough researches of
Spencer and Gillen have taught us, the totem cult of the Australian
negroes is fundamentally nothing but certain measures taken by social
groups for the purpose of securing and preserving their animal and
vegetable foodstuffs; these precautions had been taken year by year
since time immemorial and thus they became fossilised into religious
ceremonials. Yet the circle of consumption and production which forms
the essence of reproduction became possible only with the invention of
tillage with the hoe, with the taming of domestic animals, and with
cattle-raising for the purpose of consumption. Reproduction is something
more than mere repetition in so far as it presupposes a 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, the process of
production is based on the continuation of two different, though closely
connected factors, the technical and social conditions--on the precise
relationship between man and nature and that between men and men.
Reproduction depends to the same degree on both these conditions. We
have just seen how reproduction is bound up with the conditions of human
working techniques, how far it is indeed solely the result of a certain
level of labour productivity; but the social forms of production
prevailing in each case are no less decisive. In a primitive communist
agrarian community, reproduction as well as the whole plan of economic
life is determined by the community of all workers and their democratic
organs. The decision to re-engage in labour--the organisation of
labour--the provision of raw materials, tools, and man-power as the
essential preliminaries of labour--the arrangement of reproduction and
the determination of its volume are all results of a planned
co-operation in which everybody within the boundaries of the community
takes his part. In an economic system based on slave labour or _corvée_,
reproduction is enforced and regulated in all details by personal
relations of domination. Here the volume of reproduction is determined
by the right of disposal held by the ruling _élites_ over smaller or
larger circles of other people's labour. In a society producing by
capitalist methods, reproduction assumes a peculiar form, as a mere
glance at certain striking phenomena will show us. In every other
society known to history, reproduction recurs in a regular sequence as
far as its preconditions, the existing means of production and labour
power, make this possible. As a rule, only external influences such as a
devastating war or a great pestilence, depopulating vast areas of former
cultural life, and consequently destroying masses of labour power and of
accumulated means of production, can result in a complete interruption
of reproduction or in its contraction to any considerable extent for
longer or shorter periods. A despotic organisation of the plan of
production may on occasion lead to similar phenomena. When in ancient
Egypt Pharaoh's will chained thousands of fellaheen for decades to the
building of the pyramids; when in modern Egypt Ismail Pasha ordered
20,000 fellaheen to forced labour on the Suez Canal; or when, about two
hundred years before Christ, the Emperor Shi Hoang Ti, founder of the
Chin dynasty, allowed 400,000 people to perish of hunger and exhaustion
and thus sacrificed a whole generation to his purpose of consolidating
the Great Wall at China's northern frontier, the result was always that
vast stretches of arable land were left fallow and that regular economic
life was interrupted for long periods. In all these cases the causes of
these interruptions of reproduction obviously lay in the one-sided
determination of the plan of reproduction by those in power.

Societies which produce according to capitalist methods present a
different picture. We observe that in certain periods all the
ingredients of reproduction may be available, both labour and means of
production, and yet some vital needs of society for consumer goods may
be left unfulfilled. We find that in spite of these resources
reproduction may in part be completely suspended and in part curtailed.
Here it is no despotic interference with the economic plan that is
responsible for the difficulties in 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
certainty be expected to sell, and not merely to sell, but to sell at
the customary profit. Thus profit becomes an end in itself, the decisive
factor which determines not only production but also reproduction. Not
only does it decide in each case what work is to be undertaken, how it
is to be carried out, and how the products are to be distributed; what
is more, profit decides, also, at the end of every working period,
whether the labour process is to be resumed, and, if so, to what extent
and in what direction it should be made to operate.[58]

In capitalist society, therefore, the process of reproduction as a
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 shows clearly this
specific historical peculiarity of the capitalist process of
reproduction. Comprising not only production but also circulation (the
process of exchange), it unites these two elements. Capitalist
production is primarily production by innumerable private producers
without any planned regulation. The only social link between these
producers is the act of exchange. In taking account of social
requirements reproduction has no clue to go on other than the
experiences of the preceding labour period. These experiences, however,
remain the private experiences of individual producers and are not
integrated into a comprehensive and social form. Moreover, they do not
always refer positively and directly to the needs of society. They are
often rather indirect and negative, for it is only on the basis of price
fluctuations that they indicate whether the aggregate of produced
commodities falls short of the effective demand or exceeds it. Yet the
individual private producers make recurrent use of these experiences of
the preceding labour period when they re-engage in reproduction, so that
glut or shortage are bound to occur again in the following period.
Individual branches of production may develop independently, so that
there may be a surplus in one branch and a deficiency in another. But as
nearly all individual branches of production are interdependent
technically, glut or shortage in some of the larger branches of
production lead to the same phenomenon in most of the others. Thus the
general supply of products may alternate periodically between shortage
and surplus relative to the social demand.

Herein lies the peculiar character of reproduction in a capitalist
society, which differs from all other known forms of production. In the
first place, every branch of production develops independently within
certain limits, in a way that leads to periodical interruptions of
production of shorter or longer duration. Secondly, the individual
branches of reproduction show deviations from social requirements
amounting to all-round disparity and thus resulting in a general
interruption of reproduction. These features of capitalist reproduction
are quite characteristic. In all other economic systems, reproduction
runs its uninterrupted and regular course, apart from external
disturbance by violence. Capitalist reproduction, however, to quote
Sismondi's well-known dictum, can only be represented as a continuous
sequence of individual spirals. Every such spiral starts with small
loops which become increasingly larger and eventually very large indeed.
Then they contract, and a new spiral starts again with small loops,
repeating the figure up to the point of interruption. This periodical
fluctuation between the largest volume of reproduction and its
contraction to partial suspension, this cycle of slump, boom, and
crisis, as it has been called, is the most striking peculiarity of
capitalist reproduction.

It is very important, however, to establish quite firmly and from the
very outset that this cyclical movement of boom, slump, and crisis, does
not represent the whole problem of capitalist reproduction, although it
is an essential element of it. Periodical cycles and crises are specific
phases of reproduction in a capitalist system of economy, but not the
whole of this process. In order to demonstrate the pure implications of
capitalist reproduction we must rather consider it quite apart from the
periodical cycles and crises. Strange as this may appear, the method is
quite rational; it is indeed the only method of inquiry that is
scientifically tenable. In order to demonstrate and to solve the problem
of pure value we must leave price fluctuations out of consideration. The
approach of vulgar economics always attempts to solve the problem of
value by reference to fluctuations in demand and supply. Classical
economists, from Adam Smith to Karl Marx, attack the problem in the
opposite way, pointing out that fluctuations in the mutual relation
between demand and supply can explain only disparities between price and
value, not value itself. In order to find the value of a commodity, we
must start by assuming that demand and supply are in a state of
equilibrium, that the price of a commodity and its value closely
correspond to one another. Thus the scientific problem of value begins
at the very point where the effect of demand and supply ceases to
operate.

In consequence of periodical cycles and crises capitalist reproduction
fluctuates as a rule around the level of the effective total demand of
society, sometimes rising above and sometimes falling below this level,
contracting occasionally even to the point of almost complete
interruption of reproduction. However, if we consider a longer period, a
whole cycle with its alternating phases of prosperity and depression, of
boom and slump, that is if we consider reproduction at its highest and
lowest volume, including the stage of suspension, we can set off boom
against slump and work out an average, a mean volume of reproduction for
the whole cycle. This average is not only a theoretical 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 more or less, reproduction continues on
its complicated course, and productive capacities develop progressively.
How can this take place, leaving cycles and crises out of consideration?
Here the real question begins. The attempt to solve the problem of
reproduction in terms of the periodical character of crises is
fundamentally a device of vulgar economics, just like the attempt to
solve the problem of value in terms of fluctuations in demand and
supply. Nevertheless, we shall see in the course of our observations
that as soon as economic theory gets an inkling of the problem of
reproduction, as soon as it has at least started guessing at the
problem, it reveals a persistent tendency suddenly to transform the
problem of reproduction into the problem of crises, thus barring its own
way to the solution of the question. When we speak of capitalist
reproduction in the following exposition, we shall always understand by
this term a mean volume of productivity which is an average taken over
the various phases of a cycle.

Now, the total of capitalist reproduction is created by an unlimited and
constantly changing number of private producers. They produce
independently of one another; apart from the observation of price
fluctuations there is no social control--no social link exists between
the individual producers other than the exchange of commodities. The
question arises how these innumerable disconnected operations can lead
to the actual total of production. This general aspect of our problem
indeed strikes us immediately as one of prime importance. But if we put
it this way, we overlook the fact that such private producers are not
simply producers of commodities but are essentially capitalist
producers, that the total production of society is not simply production
for the sake of satisfying social requirements, and equally not merely
production of commodities, but essentially capitalist production.

Let us examine our problem anew in the light of this fact. A producer
who produces not only commodities but capital must above all create
surplus value. The capitalist producer's final goal, his main incentive,
is the production of surplus value. The proceeds from the commodities he
has manufactured must not only recompense him for all his outlay, but in
addition they must yield him a value which does not correspond with any
expense on his part, and is pure gain. If we consider the process of
production from the point of view of the creation of surplus value, we
see that the capital advanced by the capitalist is divided into two
parts: the first part represents his expenses on means of production
such as premises, raw material, partly finished goods and machinery. The
second part is spent on wages. This holds good, even if the capitalist
producer does not know it himself, and in spite of the pious stuff about
fixed and circulating capital with which he may delude himself and the
world. Marx called this first part constant capital. Its value is not
changed by its utilisation in the labour process--it is transferred _in
toto_ to the finished product. The second part Marx calls 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 every commodity produced by capitalist
methods may be expressed by the formula: _c + v + s_. In this formula
_c_ stands for the value of the constant capital laid out in inanimate
means of production and transferred to the commodity, _v_ stands for the
value of the variable capital advanced in form of wages, and _s_ stands
for the surplus value, the additional value of the unpaid part of wage
labour. Every type of goods shows these three components of value,
whether we consider an individual commodity or the aggregate of
commodities as a whole, whether we consider cotton textiles or ballet
performances, cast-iron tubes or liberal newspapers. Thus for the
capitalist producer the manufacture of commodities is not an end in
itself, it is only a means to the appropriation of surplus value. This
surplus value, however, can be of no use to the capitalist so long as it
remains hidden in the commodity form of the product. Once the commodity
has been produced, it must be realised, it must be converted into a form
of pure value; that is, into money. All capital expenses incorporated in
the commodity must shed their commodity-form and revert to the
capitalist as money to make this conversion possible so that he can
appropriate the surplus value in cash. The purpose of production is
fulfilled only when this conversion has been successful, only when the
aggregate of commodities has been sold according to its value. The
proceeds of this sale of commodities, the money that has been received
for them, contains the same components of value as the former aggregate
of commodities and can be expressed by the same formula _c + v + s_.
Part _c_ recompenses the capitalist for his advances on means of
production that have been used up, part _v_ recompenses him for his
advances on wages, and the last part, _s_, represents the expected
surplus, the capitalist's clear profit in cash.[59]

This conversion of capital from its original form, from the starting
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 labour process; and its final
reconversion into money, a greater amount of money indeed than at the
initial stage--this transformation of capital is, however, required for
more than the production and appropriation of surplus value. The aim and
incentive of capitalist production is not a surplus value pure and
simple, to be appropriated in any desired quantity, but a surplus value
ever growing into larger quantities, surplus value _ad infinitum_. But
to achieve this aim, the same magic means must be used over and over
again, the means of capitalist production--the ever repeated
appropriation of the proceeds of unpaid wage labour in the process of
commodity manufacture, and the subsequent realisation of the commodities
so produced.

Thus quite a new incentive is given to constantly renewed production, to
the process of reproduction as a regular phenomenon in capitalist
society, an incentive unknown to any other system of production. In
every other economic system known to history, reproduction is determined
by the unceasing need of society for consumer goods, whether they are
the needs of all the workers determined in a democratic manner as in an
agrarian and communist market community, or the despotically determined
needs of an antagonistic class society, as in an economy of slave labour
or _corvée_ and the like. But in a capitalist system of production, it
is not consideration of social needs which actuates the individual
private producer who alone matters in this connection. His production is
determined entirely by the effective demand, and even this is to him a
mere means for the realisation of surplus value which for him is
indispensable. Appropriation of surplus value is his real incentive, and
production of consumer goods for the satisfaction of the effective
demand is only a detour when we look to the real motive, that of
appropriation of surplus value, although for the individual capitalist
it is also a rule of necessity. This motive, to appropriate surplus
value, also urges him to re-engage in reproduction over and over again.
It is the production of surplus value which turns reproduction of social
necessities into a _perpetuum mobile_. Reproduction, for its part, can
obviously be only resumed when the products of the previous period, the
commodities, have been realised; that is, converted into money; for
capital in the form of money, in the form of pure value, must always be
the starting point of reproduction in a capitalist system. The first
condition of reproduction for the capitalist producer is thus seen to be
a successful realisation of the commodities produced during the
preceding period of production.

Now we come to a second important point. Under a system of private
economy, it is the individual producer who determines the volume of
reproduction at his discretion. His main incentive is appropriation of
surplus value, indeed an appropriation increasing as rapidly as
possible. An accelerated appropriation of surplus value, however,
necessitates an increased production of capital to generate this surplus
value. Here a large-scale enterprise enjoys advantages over a small one
in every respect. In fine, the capitalist method of production furnishes
not only a permanent incentive to reproduction in general, but also a
motive for its expansion, for reproduction on an ever larger scale.

Nor is that all. Capitalist methods of production do more than awaken in
the capitalist this thirst for surplus value whereby he is impelled to
ceaseless expansion of reproduction. Expansion becomes in truth a
coercive law, an economic condition of existence for the individual
capitalist. Under the rule of competition, cheapness of commodities is
the most important weapon of the individual capitalist in his struggle
for a place in the market. Now all methods of reducing the cost of
commodity production permanently amount in the end to an expansion of
production; excepting those only which aim at a specific increase of the
rate of surplus value by measures such as wage-cutting or lengthening
the hours of work. As for these latter devices, they are as such likely
to encounter many obstacles. In this respect, a large enterprise
invariably enjoys advantages of every kind over a small or medium
concern. They may range from a saving in premises or instruments, in the
application of more efficient means of production, in extensive
replacement of manual labour by machinery, down to a speedy exploitation
of a favourable turn of the market so as to acquire raw materials
cheaply. Within very wide limits, these advantages increase in direct
proportion to the expansion of the enterprise. Thus, as soon as a few
capitalist enterprises have been enlarged, competition itself forces all
others to expand likewise. Expansion becomes a condition of existence. A
growing tendency towards reproduction at a progressively increasing
scale thus ensues, which spreads automatically like a tidal wave over
ever larger surfaces of reproduction.

Expanding reproduction is not a new discovery of capital. On the
contrary, it had been the rule since time immemorial in every form of
society that displayed economic and cultural progress. It is true, of
course, that simple reproduction as a mere continuous repetition of the
process of production on the same scale 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 a gradual expansion of production, but rather to the new generation
being expelled and the subsequent founding of equally small and
self-sufficient colonies. The old small handicraft units of India and
China provide similar instances of a traditional repetition of
production in the same forms and on the same scale, handed down from
generation to generation. But simple reproduction is in all these cases
the source and unmistakable sign of a general economic and cultural
stagnation. No important forward 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 Middle Ages would have
been possible without expanding reproduction; for the basis and also the
social incentive for a decisive advancement of civilisation lies solely
in the gradual expansion of production beyond immediate requirements,
and in a continual growth 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 of economy, would have
been unthinkable without expanding reproduction. In a capitalist
society, moreover, expanding reproduction acquires certain
characteristics. As we have already mentioned, it becomes right away a
coercive law to the individual capitalist. Capitalist methods of
production do not exclude simple or even retrogressive reproduction;
indeed, this is responsible for the periodical phenomenon of crises
following phases, likewise periodical, of overstrained expansion of
reproduction in 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 expansion means
quitting the competitive struggle, economic death.

Moreover, there are certain other aspects to be considered. The concept
of expanding reproduction applies only to the quantity of products, to
the aggregate of manufactured objects. So long as production rests
solely or mainly upon a natural economy, consumption determines the
extent and character of the individual labour process, as well as that
of reproduction in general, as an end in itself: this applies to the
agrarian and communist village communities of India, to the Roman
_villa_ with its economy of slave labour, and to the medieval feudal
farm based on _corvée_. But the picture is different in a capitalist
economic system. Capitalist production is not production for the purpose
of consumption, it is production for the purpose of creating value. The
whole process of production as well as of reproduction is ruled by value
relationships. Capitalist production is not the production of consumer
goods, nor is it merely the production of commodities: it is
pre-eminently the production of surplus value. Expanding reproduction,
from a capitalist point of view, is expanding production of surplus
value, though it takes place in the forms of commodity production and is
thus in the last instance the production of consumer goods. Changes in
the productivity of labour during the course of reproduction cause
continual discrepancies between these two aspects. If productivity
increases, the same amount of capital and surplus value may represent a
progressively larger amount of consumer goods. Expanding production,
understood as the creation of a greater amount of surplus value, need
not therefore necessarily imply expanding reproduction in the capitalist
meaning of the term. Conversely, capital may, within limits, yield a
greater surplus value in consequence of a higher degree of exploitation
such as is brought about by wage-cutting and the like, without actually
producing a greater amount of goods. But in both cases the surplus value
has a twofold aspect: it is a quantity of value as well as an aggregate
of material products, and from a capitalist point of view, its elements
in both instances are thus the same.

As a rule, an increased production of surplus value results from an
increase of capital brought about by addition of part of the
appropriated surplus value to the original capital, no matter whether
this capitalist surplus value is used for the expansion of an old
enterprise or for founding a new one, an independent offshoot.
Capitalist expanding reproduction thus acquires the specific
characteristics of an increase in capital by means of a progressive
capitalisation of surplus value, or, as Marx has put it, by the
accumulation of capital.

The general formula for enlarged reproduction under the rule of capital
thus runs as follows: _c + v + s/x + s´_. Here _s/x_ stands for the
capitalised part of the surplus value appropriated in an earlier period
of production; _s´_ stands for the new surplus value created by the
increased capital. Part of this new surplus value is capitalised again,
and expanding reproduction is thus, from the capitalist point of view, a
constantly flowing process of alternate appropriation and capitalisation
of surplus value.

So far, however, we have only arrived at a general and abstract formula
for reproduction. Let us now consider more closely the concrete
conditions which are necessary to apply this formula.

The surplus value which has been appropriated, after it has successfully
cast off its commodity-form in the market, appears as a given amount of
money. This money-form is the form of its absolute value, the beginning
of its career as capital. But as it is impossible to create surplus
value with money, it cannot, in this form, advance beyond the threshold
of its career. Capital must assume commodity-form, so that the
particular portion of it which is earmarked for accumulation can be
capitalised. For only in this form can it become productive capital;
that is, capital begetting new surplus value. Therefore, like the
original capital, it must again be divided into two parts; a constant
part, comprising the inanimate means of production, and a variable part,
the wages. Only then will our formula _c + v + s_ apply to it in the
same way as it applied to the old capital.

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

All these prerequisites found, the capitalist can set his capitalised
surplus value to work and make it, as operating capital, beget new
surplus value. But still his task is not completely done. Both the new
capital and the surplus value produced still exist for the time being in
the shape of an additional quantity of some commodity or other. In this
form the new capital is but advanced, and the new surplus value created
by it is still in a form in which it is of no use to the capitalist. The
new capital as well as the surplus value which it has created must cast
off their commodity-form, re-assume the form of pure value, and thus
revert to the capitalist as money. Unless this process is successfully
concluded, the new capital and surplus value will be wholly or partly
lost, the capitalisation of surplus value will have miscarried, and
there will have been no accumulation. It is absolutely essential to the
accumulation of capital that a sufficient quantity of commodities
created by the new capital should win a place for itself on the market
and be realised.

Thus we see that expanding reproduction as accumulation of capital in a
capitalist system is bound up with a whole series of special conditions.
Let us look at these more closely. The first condition is that
production should create surplus value, for surplus value is the
elementary form in which alone increased production is possible under
capitalist conditions. The entire process of production must abide by
this condition when determining the relations between capitalist and
worker in the production of commodities. Once this first condition is
given, the second is that surplus value must be realised, converted into
the form of money, so that it can be appropriated for the purposes of
expanding reproduction. This second condition thus leads us to the
commodity market. Here, the hazards of exchange decide the further fate
of the surplus value, and thus the future of reproduction. The third
condition is as follows: provided that part of the realised surplus
value has been added to capital for the purpose of accumulation, this
new capital must first assume its productive form of labour and
inanimate means of production. Moreover, that part of it which had been
exchanged for labour must be converted into provisions for the workers.
Thus we are led again to the markets of labour and commodities. If all
these requirements have been met and enlarged reproduction of
commodities has taken place, a fourth condition must be added: the
additional quantity of commodities representing the new capital plus
surplus value will have to be realised, that is, reconverted into money.
Only if this conversion has been successful, can it be said that
expanding capitalist reproduction has actually taken place. This last
condition leads us back to the commodity market.

Thus capitalist production and reproduction imply a constant shifting
between the place of production and the commodity market, a shuttle
movement from the private office and the factory where unauthorised
persons are strictly excluded, where the sovereign will of the
individual capitalist is the highest law, to the commodity market where
nobody sets up any laws and where neither will nor reason assert
themselves. But it is this very licence and anarchy of the commodity
market which brings home to the individual capitalist that he is
dependent upon society, upon the entirety of its producing and consuming
members. The individual capitalist may need additional means of
production, additional labour and provisions for these workers in order
to expand reproduction, but whether he can get what he needs depends
upon factors and events beyond his control, materialising, as it were,
behind his back. In order to realise his increased aggregate of
products, the individual capitalist requires a larger market for his
goods, but he has no control whatever over the actual increase of demand
in general, or of the particular demand for his special kind of good.

The conditions we have enumerated here, which all give expression to the
inherent contradiction between consumption and private production and
their social interconnection, are nothing new, and it is not only at
the stage of reproduction that they become apparent. These conditions
express the general contradiction inherent in capitalist production.
They involve, however, particular difficulties as regards the process of
reproduction for the following reasons. With regard to reproduction,
especially expanding reproduction, the capitalist method of production
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--the characteristic interplay of individual
wills. From this point of view, we must inquire in a general way how it
is possible for every individual capitalist to find on the market the
means of production and the labour he requires for the purpose of
realising the commodities he has produced, although there exists no
social control whatever, no plan to harmonize production and demand.
This question may be answered by saying that 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, including means of production, and also that a growing class
of proletarianised workers becomes generally available for the purposes
of capital. On the other hand, the lack of a plan in this respect shows
itself in the fact that the balance between demand and supply in all
spheres can be achieved only by continuous deviations, by hourly
fluctuations of prices, and by periodical crises and changes of the
market situation.

From the point of view of reproduction the question is a different one.
How is it possible that the unplanned supply in the market for labour
and means of production, and the unplanned and incalculable changes in
demand nevertheless provide adequate quantities and qualities of means
of production, labour and opportunities for selling which the individual
capitalist needs in order to make a sale? How can it be assured that
every one of these factors increases in the right proportion? Let us put
the problem more precisely. According to our well-known formula, let the
composition of the individual capitalist's production be expressed by
the proportion _40c + 10v + 10s_. His constant capital is consequently
four times as much as his variable capital, and the rate of exploitation
is 100 per cent. The aggregate of commodities is thus represented by a
value of 60. Let us now assume that the capitalist is in a position to
capitalise and to add to the old capital of this given composition half
of his surplus value. In this case, the formula _44c + 11v + 11s = 66_
would apply to the next period of production.

Let us assume now that the capitalist can continue the annual
capitalisation 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 he must find these factors
in a proportion that is strictly in keeping with his progress in
accumulation.

FOOTNOTES:

[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 for production 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 surplus value into its component parts: profit of
enterprise, interest, and rent, as this subdivision is immaterial to the
problem of reproduction.




_CHAPTER II_

QUESNAY'S AND ADAM SMITH'S ANALYSES OF THE PROCESS OF REPRODUCTION


So far we have taken account only of the individual capitalist in our
survey of reproduction; he is its typical representative, its agent, for
reproduction is indeed brought about entirely by individual capitalist
enterprises. This approach has already shown us that the problem
involves difficulties enough. Yet these difficulties increase to an
extraordinary degree and become even more complicated, when we turn our
attention from the individual capitalist to the totality of capitalists.

A superficial glance suffices to show that capitalist reproduction as a
social whole must not be regarded simply as a mechanical summation of
all the separate processes of individual capitalist reproduction. We
have seen, for instance, that one of the fundamental conditions for
enlarged reproduction by an individual capitalist is a corresponding
increase of his opportunities to sell on the commodity market. But the
individual capitalist may not always expand because of an absolute
increase in the absorptive capacity of the market, but also as a result
of the competitive struggle, at the cost of other individual
capitalists. Thus one capitalist may win what another or many others who
have been shouldered from the market must write off as a loss. This
process will enable one capitalist to increase his reproduction by the
amount that it compels others by losses to restrict their own. One
capitalist will be able to engage in enlarged reproduction because
others cannot even achieve simple reproduction. In the same way, one
capitalist may enlarge his reproduction by using labour power and means
of production which another's bankruptcy, that is his partial or
complete retirement from reproduction, has set free.

These commonplaces prove that reproduction of the social capital as a
whole is not the same as the reproduction of the individual capitalist
raised to the _n_th degree. They show that the reproductive activities
of individual capitalists ceaselessly cut across one another and to a
greater or smaller degree may cancel each other out.

Therefore we must clarify our concept of reproduction of capital as a
whole, before we examine the laws and mechanisms of capitalist total
reproduction. We must raise the question whether it is even possible to
deduce anything like total reproduction from the disorderly jumble of
individual capitals in constant motion, changing from moment to moment
according to uncontrollable and incalculable laws, partly running a
parallel course, and partly intersecting and cancelling each other out.
Can one actually talk of total social capital of society as an entity,
and if so, what is the real meaning of this concept? That is the first
question a scientific examination of the laws of reproduction has to
consider. At the dawn of economic theory and bourgeois economics,
Quesnay, the father of the Physiocrats, approached the problem with
classical fearlessness and simplicity and took it for granted that total
capital exists as a real and active entity. In his famous _Tableau
Économique_, so intricate that no one before Marx could understand it,
Quesnay demonstrated the phases of the reproduction of aggregate capital
with a few figures, at the same time taking into account that it must
also be considered from the aspect of commodity exchange, that is as a
process of circulation.[60]

Society as Quesnay sees it consists of three classes: the productive
class of agriculturists; the sterile class containing all those who are
active outside the sphere of agriculture--industry, commerce, and the
liberal professions; and lastly the class of landowners, including the
Sovereign and the collectors of tithes. The national aggregate product
materialises in the hands of the productive class as an aggregate of
provisions and raw 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 fixed
capital, and 2,000 millions are the net revenue accruing to the
landowners. Apart from this total produce, the agriculturists, here
conceived quite in capitalist terms as tenant farmers, have 2,000
million livres cash in hand. Circulation now takes place in such a way
that the tenant class pay the landowners 2,000 millions cash as rent (as
the cost of the previous period of production). For this money the
landowning class buy provisions from the tenants for 1,000 millions and
industrial products from the sterile class for the remaining 1,000
millions. The tenants in their turn buy industrial products for the
1,000 millions handed back to them, whereupon the sterile class buy
agricultural products for the 2,000 millions they have in hand: for
1,000 millions raw materials etc., to replace their annual working
capital, and provisions for the remaining 1,000 millions. Thus the money
has in the end returned to its starting point, the tenant class; the
product is distributed among all classes so that consumption is ensured
for everyone; at the same time the means of production of the sterile as
well as of the productive class have been renewed and the landowning
class has received its revenue. The prerequisites of reproduction are
all present, the conditions of circulation have all been fulfilled, and
reproduction can start again on its regular course.[61]

We shall see later in the course of our investigation that this
exposition, though showing flashes of genius, remains deficient and
primitive. In any case, we must stress here that Quesnay, on the
threshold of scientific economics, had not the slightest doubt as to the
possibility of demonstrating total social capital and its reproduction.
Adam Smith, on the other hand, while giving a more profound analysis of
the relations of capital, laid out what seems like a maze when compared
with the clear and sweeping outlines of the Physiocrat conception. By
his wrong analysis of prices, Smith upset the whole foundation of the
scientific demonstration of the capitalist process as a whole. This
wrong analysis of prices ruled bourgeois economics for a long time; it
is the theory which maintains that, although the value of a commodity
represents the amount of labour spent in its production, yet the price
consists of three elements only: the wage 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 startling discovery that,
although the value of the aggregate of commodities manufactured by
capitalist methods represents all paid wages together with the profits
of capital and the rents, that is the aggregate surplus value, and
consequently can replace these, there is no component of value which
corresponds to the constant capital used in production. According to
Smith, _v + s_ is the formula expressing the value of the capitalist
product as a whole. Demonstrating his view with the example of corn,
Smith says as follows:

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

Sending us in this manner 'from pillar to post', as Marx has put it,
Smith again and again resolved constant capital into _v + s_. However,
he had occasional doubts and from time to time relapsed into the
contrary opinion. He says in the second book:

'It has been shown in the first Book, that the price of the greater part
of commodities resolves itself into three parts, of which one pays the
wages of the labour, another the profits of the stock, and a third the
rent of the land which had been employed in producing and bringing them
to market.... Since this is the case ... with regard to every particular
commodity, taken separately; it must be so with regard to all the
commodities which compose the whole annual produce of the land and
labour of every country, taken complexly. The whole price or
exchangeable value of that annual produce must resolve itself into the
same three parts, and be parcelled out among the different inhabitants
of the country, either as the wages of their labour, the profits of
their stock, or the rent of their land.'[63]

Here Smith hesitates and immediately below explains: 'But though the
whole value of the annual produce of the land and labour of every
country is thus divided among and constitutes a revenue to its different
inhabitants, yet as in the rent of a private estate we distinguish
between the gross rent and the neat rent, so may we likewise in the
revenue of all the inhabitants of a great country.

'The gross rent of a private estate comprehends whatever is paid by the
farmer; the neat rent, what remains free to the landlord after deducting
the expense of management, of repairs, and all other necessary charges;
or what, without hurting his estate, he can afford to place in his stock
reserved for immediate consumption, or to spend upon his table,
equipage, the ornaments of his house and furniture, his private
enjoyments and amusements. 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 country comprehends
the whole annual produce of their land and labour; the neat revenue,
what remains free to them after deducting the expense of maintaining,
first, their fixed, and secondly, their circulating capital, or what,
without encroaching upon their capital, they can place in their stock
reserved for immediate 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 to constant
capital, only to eliminate it the very next moment by resolving it into
wages, profits, and rents. And in the end, the matter rests with this
explanation:

'As the machines and instruments of trade, etc. which compose the 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 society is regularly distributed among all its
different members, makes itself no part of that revenue.'[65]

Constant capital, the fixed capital of Adam Smith, is thus put on the
same level as money and does not enter into the total produce of
society, its gross revenue. It does not exist within this total product
as an element of value.

You cannot get blood out of a stone, and so circulation, the mutual
exchange of the total product constituted in this manner, can only lead
to realisation of the wages (_v_) and of the surplus value (_s_).
However, as it cannot by any means replace the constant capital,
continued reproduction evidently must become impossible. Smith indeed
knew quite well, and did not dream of denying, that every individual
capitalist requires constant capital in addition to his wages fund, his
variable capital, in order to run his enterprise. Yet the above analysis
of commodity prices, when it comes to take note of capitalist production
as a whole, allows constant capital to disappear without a trace in a
puzzling way. Thus the problem of the reproduction of capital is
completely muddled up. It is plain that if the most elementary premise
of the problem, the demonstration of social capital as a whole, were on
the rocks, the whole analysis was bound to fail. Ricardo, Say, Sismondi
and others took up this erroneous theory of Adam Smith, and they all
stumbled in their observations on the problem of reproduction over this
most elementary difficulty: the demonstration of social capital.

Another difficulty is mixed up with the foregoing from the very outset
of scientific analysis. What is the nature of the total capital of a
society? As regards the individual producer, the position is clear: his
capital consists of the expenses of his enterprise. Assuming capitalist
methods of production, the value of his product yields him a surplus
over and above his expenses, that surplus value which does not replace
his capital but constitutes his net income, which he can consume
completely without encroaching upon his capital and which is thus his
fund of consumption. It is true that the capitalist may save part of
this net income, not consuming it himself but adding it to his capital.
But that is another matter, a new step, the formation of a new capital
which again must be replaced by subsequent reproduction and must again
yield him a surplus. In any case, the capital of an individual always
consists of what he requires for production, together with his advances
on the running of his enterprise, and his income is what he himself
actually consumes or 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?'--it is
impossible that he should describe them as capital, for wages received
are not capital for the workers but income, their fund of consumption.

Let us now take another example. A manufacturer of machinery produces
machines in his factory. The annual output is a certain number of
machines. In its value, however, this annual output contains the capital
advanced by the manufacturer as well as the net income that has been
earned. Part of the manufactured machines thus represent income for the
manufacturer and are destined to realise this income in the process of
circulation and exchange. But the person who buys these machines from
the manufacturer does not buy them as income but in order to use them as
a means of production; for him they are capital.

These examples make it seem plausible that an object which is capital
for one person may be income for another and _vice versa_. How can it be
possible under these circumstances to construct anything in the nature
of a total capital of society? Indeed almost every scientific economist
up to the time of Marx concluded that there is no social capital.[66]
Smith was still doubtful, undecided, vacillating about this question; so
was Ricardo. But already Say declared categorically:

'It is in this way, that the total value of products is distributed
amongst the members of the community; I say, the _total_ value, because
such part of the whole value produced, as does not go to one of the
consuming producers, is received by the rest. The clothier buys wool of
the farmer, pays his workmen in every department, and sells the cloth,
the result of their united exertion, at a price that reimburses all his
advances, and affords himself a profit. He never reckons as profit, or
as the revenue of his own industry, anything more than the _net_
surplus, after deducting all charges and outgoings; but those outgoings
are merely an advance of their respective revenues to the previous
producers, which are refunded by the _gross_ value of the cloth. The
price paid to the farmer for his wool is the compound of the several
revenues of the cultivator, the shepherd and the landlord. Although the
farmer reckons as _net_ produce only the surplus remaining after payment
of his landlord and his servants in husbandry, yet to them these
payments are items of revenue--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
the cloth, the whole of which forms the revenue of some one or other,
and is entirely absorbed in that way.--Whence it appears that the term
_net_ produce applies only to the individual revenue of each separate
producer or adventurer in industry, but that the aggregate of individual
revenue, the total revenue of the community, is equal to the _gross_
produce of its land, capital and industry, which entirely subverts the
system of the economists of the last century, who considered nothing but
the net produce of the land as farming revenue, and therefore concluded,
that this net produce was all that the community had to consume; instead
of closing with the obvious inference, that the whole of what had been
created, may also be consumed by mankind.'[67]

Say proves his theory in his own peculiar fashion. Whereas Adam Smith
tried to give a proof by referring each private capital unit to its
place of production in order to resolve it into a mere product of
labour, but conceived of every product of labour in strictly capitalist
terms as a sum of paid and unpaid labour, as _v + s_, and thus came to
resolve the total product of society into _v + s_; Say, of course, is
cocksure enough to 'correct' these classical errors by inflating them
into common vulgarities. His argument is based upon the fact that the
entrepreneur at every stage of production pays other people, the
representatives of previous stages of production, for the means of
production which are capital for him, and that these people in their
turn put part of this payment into their own pockets as their income and
partly use it to recoup themselves for expenses advanced in order to
provide yet another set of people with an income. Say converts Adam
Smith's endless chain of labour processes into an equally unending chain
of mutual advances on income and their repayment from the proceeds of
sales. The worker appears here as the absolute equal of the
entrepreneur. He has his income advanced in the form of wages, paying
for it in turn by the labour he performs. Thus the final value of the
aggregate social product appears as the sum of a large number of
advanced incomes and is spent in the process of exchange on repayment of
all these advances. It is characteristic of Say's superficiality that he
illustrates the social connections of capitalist reproduction by the
example of watch manufacture--a branch of production which at that time
and partly even to-day is pure 'manufacture' where every worker is also
an entrepreneur on a small scale and the process of production of
surplus value is masked by a series of successive acts of exchange
typical of simple commodity production.

Thus Say gives an extremely crude expression to the confusion
inaugurated by Adam Smith. The aggregate of annual social produce can be
completely resolved as regards its value into a sequence of various
incomes. Therefore it is completely consumed every year. It remains an
enigma how production can be 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 from the time of the
Physiocrats to that of Adam Smith, we cannot fail to recognise partial
progress as well as partial regression. The main characteristic of the
economic conception of the Physiocrats was their assumption that
agriculture alone creates a surplus, that is surplus value, and that
agricultural labour is the only kind of labour which is productive in
the capitalist sense of the term. Consequently we see in the _Tableau
Économique_ that the unproductive class of industrial workers creates
value only to the extent of the same 2,000 million livres which it
consumes as raw materials and foodstuffs. Consequently, too, in the
process of exchange, the total of manufactured products is divided into
two parts, one of which goes to the tenant class and the other to the
landowning class, while the manufacturing class does not consume its own
products. Thus in the value of its commodities, the manufacturing class
reproduces, strictly speaking, 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 excess of all
capital advances, is created in agriculture and is consumed by the
landowning class in the form of rents, while even the tenant class do no
more than replace their capital: to wit, 1,000 million livres interest
from the fixed capital and 2,000 million circulating capital, two-thirds
being raw materials and foodstuffs, and one-third industrial products.
Further it is striking that it is in agriculture alone that Quesnay
assumes the existence of fixed capital which he calls _avances
primitives_ as distinct from _avances annuelles_. Industry, as he sees
it, apparently works without any fixed capital, only with circulating
capital turned over each year, and consequently does not create in its
annual output of commodities any element of value for making good the
wear and tear of fixed capital (such as premises, tools, and so on).[68]

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

On the other hand, the discovery of the productive, value-creating
property of every kind of labour, alike in agriculture and in
manufacture, suggested to Smith that agricultural labour, too, must
produce, apart from the rent for the landowning class, a surplus for the
tenant class over and above the total of their capital expenses. Thus,
in addition to the replacement of capital, an annual income of the
tenant class comes into being.[70]

Lastly, by a systematic elaboration of the concepts of _avances
primitives_ and _avances annuelles_ introduced by Quesnay, which he
calls fixed and circulating capital, Smith has made clear, among other
things, that the manufacturing side of social production requires a
fixed as well as a circulating capital. Thus he was well on the way to
restoring to order the concepts of capital and revenue of society, and
to describing them in precise terms. The following exposition represents
the highest level of clarity which he achieved in this respect:

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

'The gross revenue of all the inhabitants of a great country comprehends
the whole annual produce of their land and labour; the neat revenue,
what remains free to them after deducting the expense of maintaining,
first, their fixed, and secondly, their circulating capital; or what,
without encroaching upon their capital, they can place in their stock
reserved for immediate 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 a more
comprehensive and stricter form than in the _Tableau Économique_. The
one-sided connection of social income with agriculture is severed and
social income becomes a broader concept; and a broader concept of
capital in its two forms, fixed and circulating capital, is made the
basis of social production as a whole. Instead of the misleading
differentiation of production into two departments, agriculture and
industry, other categories of real importance are here brought to the
fore: the distinction between capital and income and the distinction,
further, between fixed and circulating capital.

Now Smith proceeds to a further analysis of the mutual relations of
these categories and of how they change in the course of the social
process, in production and circulation--in the reproductive process of
society. He emphasises here a radical distinction between fixed and
circulating capital from the point of view of the society:

'The whole expense of maintaining the fixed capital must evidently be
excluded from the neat revenue of the society. Neither the materials
necessary for supporting their useful machines and instruments of trade,
their profitable buildings, etc., nor the produce of the labour
necessary for fashioning those materials into the proper form, can ever
make any part of it. The price of that labour may indeed make a part of
it; as the workmen so employed may place the whole value of their wages
in their stock reserved for immediate consumption. But in other sorts of
labour, both the price and the produce go to this stock, the price to
that of the workmen, the produce to that of other people whose
subsistence, convenience and amusements are augmented by the labour of
those workmen.'[73]

Here Smith comes up against the important distinction between workers
who produce means of production and those who produce consumer goods.
With regard to the former he remarks that they create the
value--destined to replace their wages and to serve as their income--in
the form of means of production such as raw materials and instruments
which in their natural form cannot be consumed. With regard to the
latter category of workers, Smith observes that conversely the total
product, or better that part of value contained in it which replaces the
wages, the income of the workers together with its other remaining
value, appears here in the form of consumer goods. (The real meaning
latent in this conclusion, though Smith does not say so explicitly, is
that the part of the product which represents the fixed capital employed
in its production appears likewise in this form.) In the further course
of our investigation we shall see how close Smith has here come to the
vantage point from which Marx tackled the problem. The general
conclusion, however, maintained by Smith without any further examination
of the fundamental question, is that, in any case, whatever is destined
for the preservation and renewal of the fixed capital of society cannot
be added to society's net income.

The position is different with regard to circulating capital. 'But
though the whole expenses of maintaining the fixed capital is thus
necessarily excluded from the neat revenue of the society, it is not the
same case with that of maintaining the circulating capital. Of the four
parts of which this latter capital is composed, money, provisions,
materials and finished work, the three last, it has already been
observed, are regularly withdrawn from it and placed either in the fixed
capital of the society, or in their stock reserved for immediate
consumption. Whatever portion of those consumable goods is not employed
in maintaining the former, goes all to the latter, and makes a part of
the neat revenue of the society, besides what is necessary for
maintaining the fixed capital.'[74]

We see that Smith here simply includes in this category of circulating
capital everything but the fixed capital already employed, that is to
say, foodstuffs and raw materials and in part commodities which,
according to their natural form, belong to the replacement of fixed
capital. Thus he has made the concept of circulating capital vague and
ambiguous. But a further and most important distinction crops up and
cuts right through this conception: 'The circulating capital of a
society is in this respect different from that of an individual. That of
an individual is totally excluded from making any part of his neat
revenue, which must consist altogether in his profits. But though the
circulating capital of every individual makes a part of that of the
society to which he belongs, it is not upon that account totally
excluded from making a part likewise of their neat revenues.'[75]

In the following illustration Smith expounds what he means: 'Though the
whole goods in a merchant's shop must by no means be placed in his own
stock reserved for immediate consumption, they may in that of other
people, who, from a revenue derived from other funds, may regularly
replace their value to him, together with its profits, without
occasioning any diminution either of his capital or theirs.'[76]

Here Smith has established fundamental categories with regard to the
reproduction and movement of circulating social capital. Fixed and
circulating capital, private and social capital, private and social
revenue, means of production and consumer goods, are marked out as
comprehensive categories, and their real, objective interrelation is
partly indicated and partly drowned in the subjective and theoretical
contradictions of Smith's analysis. The concise, strict, and classically
clear scheme of the Physiocrat theory is dissolved here into a
disorderly jumble of concepts and relations which at first glance
appears an absolute chaos. But we may already perceive new connections
within the social process of reproduction, understood by Smith in a
deeper, more modern and vital way than was within Quesnay's grasp,
though, like Michelangelo's slave in the unhewn block 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 an analysis of value.
This very same theory which represents an advance beyond the
Physiocrats--the theory that it is an essential quality of all labour to
create value; the strictly capitalist distinction between paid labour
replacing wages, and unpaid labour creating surplus value; and, finally,
the strict division of surplus value into its two main categories, of
profit and rent--all this progress from the analysis of the Physiocrats
leads Smith to the strange proposition that the price of every commodity
consists of wages, plus profits, plus rent, or, in Marx's shorthand, of
_v + s_. In consequence, the commodities annually produced by society as
a whole can be resolved completely, as to value, into the two
components: wages and surplus value. Here the category of capital has
disappeared all of a sudden; society produces nothing but income,
nothing but consumer goods, which it also consumes completely.
Reproduction without capital becomes a paradox, and the treatment of the
problem as a whole has taken an immense backward step against that of
the Physiocrats.

The followers of Adam Smith have tackled this twofold theory from
precisely the wrong approach. Before Marx nobody concerned himself with
the important beginnings of an exact exposition of the problem in
Smith's second book, while most of his followers jealously preserved
Smith's radically wrong analysis of prices, accepting it, like Ricardo,
without question, or else, like Say, elaborating it into a trite
doctrine. Where Smith raised fruitful doubts and stimulating
contradictions, Say flaunted the opinionated presumption of a
commonplace mind. Smith's observation that the capital of one person may
be the revenue of another induced Say to proclaim every distinction
between capital and income on the social scale to be absurd. The
absurdity, however, that income should completely absorb the total
value of annual production which is thus consumed completely, assumes in
Say's treatment the character of an absolutely valid dogma. If society
annually consumes its own total product completely, social reproduction
without any means of production whatever must become an annual
repetition of the Miracle of the Creation.

In this state the problem of reproduction remained up to the time of
Karl Marx.

FOOTNOTES:

[60] 'Quesnay's _Tableau Économique_ shows ... how the result of
national production in a certain year, amounting to some definite value,
is distributed by means of the circulation in such a way, that ...
reproduction can take place.... The innumerable individual acts of
circulation are at once viewed in their characteristic social mass
movement--the circulation between great social classes distinguished by
their economic function' (_Capital_, vol. ii, p. 414).

[61] Cf. _Analyse du Tableau Économique_, in _Journal de l'Agriculture,
du Commerce et des Finances_, by Dupont (1766), pp. 305 ff. in Oncken's
edition of _OEuvres de F. Quesnay_. Quesnay remarks explicitly that
circulation as he describes it is based upon two conditions: unhampered
trade, and a system of taxation applying only to rent: 'Yet these facts
have indispensable conditions; that the freedom of commerce sustains the
sale of products at a good price, ... and moreover, that the farmer need
not pay any other direct or indirect charges but this income, part of
which, say two sevenths, must form the revenue 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 his
_Explications_ on the _Tableau Économique_ explicitly mentions the fixed
capital of the unproductive class: 'The primary advances of this class,
for the establishment of manufactures, for instruments, machines, mills,
smithies (ironworks) and other factories ... (amount to) 2,000 million
livres' (_Tableau Économique avec ses Explications_, 1760, p. 82). In
his confusing sketch of the _Tableau_ itself, Mirabeau, too, fails to
take this fixed capital of the sterile class into account.

[69] Smith accordingly arrives at this general formulation: 'The value
which the workmen add to the materials, therefore, resolves itself in
this case into two parts, of which the one pays their wages, the other
the profits of their employer 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 in particular: 'The labour of a
manufacturer adds generally to the value of the materials which he works
upon, that of his own maintenance and of his master's profit. The labour
of a menial servant, on the contrary, adds to the value of nothing.
Though the manufacturer has his wages advanced to him by his master, he
in reality costs him no expense, the value of those wages being
generally restored, together with a profit, in the improved value of the
subject upon which his labour is bestowed' (op. cit., vol. ii, pp.
93-4).

[70] 'The labourers ... therefore, employed in agriculture, 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 its owner's profit, but of a much greater value. Over and
above the capital of the farmer and all its profits, they regularly
occasion the reproduction of the rent of the landlord' (ibid., p. 149).

[71] Ibid., pp. 97-8. Yet already in the following sentence Smith
converts capital completely into wages, that is variable capital: 'That
part of the annual produce of the land and labour of any country which
replaces a capital, never is immediately employed to maintain any but
productive hands. It pays the wages of productive labour only. That
which is immediately destined 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.




_CHAPTER III_

A CRITICISM OF SMITH'S ANALYSIS


Let us recapitulate the conclusions to which Smith's analysis has
brought us:

(1) There is a fixed capital of society, no part of which enters into
its net revenue. This fixed capital consists in 'the materials necessary
for supporting their useful machines and instruments of trade' and 'the
produce of labour necessary for fashioning those materials into the
proper form'.[77] By singling out the production of such fixed capital
as of a special kind, and explicitly 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
all material means of production, as opposed to labour power.

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

(3) Capital and net revenue of an individual do not strictly correspond
with capital and net revenue of society. What is nothing but fixed, or
constant capital for society as a whole cannot be capital for the
individual; it must be revenue, too, a fund of consumption, comprising
as it does those parts of fixed capital which represent the workers'
wages and the capitalists' profits. On the other hand, the circulating
capital of the individuals cannot be capital for society but must be
revenue, especially in so far as it takes the form of provisions.

(4) As regards the value of the total annual social product, no trace of
capital remains. It can be resolved completely into the three kinds of
income: wages, profits of capital, and rents.

If we tried from this haphazard collection of odd ideas to build up a
picture of the annual reproduction of total social capital, and of its
mechanism, we should soon despair of our task. Indeed, all these
observations leave us infinitely remote from the solution of the problem
how social capital is annually renewed, how everybody's consumption is
ensured by his income, while the individuals can nevertheless adhere to
their own points of view on capital and income. Yet if we wish to
appreciate fully Marx's contribution to the elucidation of this problem,
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 would suffice to
wreck the treatment of the problem of reproduction in classical
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 scientific theory that
value is nothing but the product of labour. All labour performed,
however, is wage labour. This identification of human labour with
capitalist wage labour is indeed the classical element in Smith's
doctrine. The value of the aggregate product of society comprises both
the recompense for wages advanced and a surplus from unpaid labour
appearing as profit for the capitalist and rent for the landowner. What
holds good for the individual commodity must hold good equally for the
aggregate of commodities. The whole mass of commodities produced by
society--taken as a quantity of value--is nothing but a product of
labour, of paid as well as unpaid labour, and thus it is also to be
completely resolved into wages, profits, and rents.

It is of course true that raw materials, instruments, and the like, must
be taken into consideration in connection with all labour. Yet is it not
true also that these raw materials and instruments in their turn are
equally products of labour which again may have been paid or unpaid? We
may go back as far as we choose, we may twist and turn the problem as
much as we like, yet we shall find no element in the value of any
commodity--and therefore none in the price--which cannot be resolved
purely in terms of human labour. We can distinguish, however, two parts
in all labour: one part repays the wages and the other accrues to the
capitalist and landlord. There seems nothing left but wages and
profits--and yet, there is capital, individual and social capital. How
can we overcome this blatant contradiction? The fact that Marx himself
stubbornly pursued this matter for a long time without getting anywhere
at first as witness his _Theories of the Surplus Value_,[78] proves that
this theoretical problem is indeed extremely hard to solve. Yet the
solution he eventually hit on was strikingly successful, and it is based
upon his theory of value. Adam Smith was perfectly right: nothing but
labour constitutes the value of the individual commodity and of the
aggregate of commodities. He was equally right in saying that from a
capitalist point of view all labour is either paid labour which restores
the wages, or unpaid labour which, as surplus value, accrues to the
various classes owning the means of production. What he forgot, however,
or rather overlooked, is the fact that, apart from being able to create
new value, labour can also transfer to the new commodities the old
values incorporated in the means of production employed. A baker's
working day of ten hours is, from the capitalist point of view, divided
into paid and unpaid hours, into _v + s_. But the commodity produced in
these ten hours will represent a greater value than that of ten hours'
labour, for it will also contain the value of the flour, of the oven
which is used, of the premises, of the fuel and so on, in short the
value of all the means of production necessary for baking. Under one
condition alone could the value of any one commodity be strictly equal
to _v + s_; if a man were to work in mid-air, without raw materials,
without tools or workshop. But since all work on materials (material
labour) presupposes means of production of some sort which themselves
result from preceding labour, the value of this past labour is of
necessity transferred to the new product.

The process in question does not only take place in capitalist
production; it is the general foundation of human labour, quite
independent of the historical form of society. The handling of man-made
tools is a fundamental characteristic of human civilisation. The concept
of past labour which precedes all new labour and prepares its basis,
expresses the nexus between man and nature evolved in the history of
civilisation. This is the eternal chain of closely interwoven labouring
efforts of human society, the beginnings of which are lost in the grey
dawn of the socialisation of mankind, and the termination of which would
imply the end of the whole of civilised mankind. Therefore we have to
picture all human labour as performed with the help of tools which
themselves are already products of antecedent labour. Every new product
thus contains not only the new labour whereby it is given its final
form, but also past labour which had supplied the materials for it, the
instruments of labour and so forth. In the production of value, that is
commodity production into which capitalist production also enters, this
phenomenon is not suspended, it only receives a particular expression.
Here the labour which produces commodities assumes a twofold
characteristic: it is on the one hand useful concrete 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 first aspect it does what labour has always
done: it transfers to the new product past labour, incorporated in the
means of production employed, 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 be reduced to
paid and unpaid labour, to _v + s_. Thus the value of every commodity
must contain old value which has been transferred by labour _qua_ useful
concrete labour from the means of production to the commodity, as well
as the new value, created by the same labour _qua_ socially necessary
labour merely as this labour is expended hour by hour.

This distinction was beyond Smith: he did not differentiate the twofold
character of value-creating labour. Marx once claimed to have discovered
the ultimate source of Smith's strange dogma--that the aggregate of
produced values can be completely resolved into _v + s_--in his
fundamentally erroneous theory of value.[79] Failure to differentiate
between the two aspects of commodity-producing labour as concrete and
useful labour on the one hand, and abstract and socially necessary
labour on the other, indeed forms one of the most important
characteristics of the theory of value as conceived not only by Smith
but by all members of the classical school.

Disregarding all social consequences, classical economics recognised
that human labour alone is the factor which creates value, and it worked
out this theory to that degree of clarity which we meet in Ricardo's
formulation. There is a fundamental distinction, however, between
Marx's theory of value and Ricardo's, a distinction which has been
misunderstood not only by bourgeois economists but also in most cases by
the popularisers of Marx's doctrine: Ricardo, conceiving as he did, of
bourgeois economy in terms of natural law, believed also that the
creation of value, too, is a natural property of human labour, of the
specific and concrete labour of the individual human being.

This view is even more blatantly revealed in the writings of Adam Smith
who for instance declares what he calls the 'propensity to 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 to exchange in animals, Smith attributed to animal as
well as human labour the faculty of creating value, especially when he
occasionally relapses into the Physiocrat doctrine:

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

'The labourers and labouring cattle, therefore, employed in agriculture,
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 its owner's profits, but of a much greater value.
Over and above the capital of the farmer and all its profits, they
regularly occasion the reproduction of the rent of the landlord.'[81]

Smith's belief that the creation of value is a direct physiological
property of labour, a manifestation of the animal organism in man, finds
its most vivid expression here. Just as the spider produces its web from
its own body, so labouring man produces value--labouring man pure and
simple, every man who produces useful objects--because labouring man is
by birth a producer of commodities; in the same way human society is
founded by nature on the exchange of commodities, and a commodity
economy is the normal form of human economy.

It was left to Marx to recognise that a given value covers a definite
social relationship which develops under definite historical conditions.
Thus he came to discriminate between the two aspects of
commodity-producing labour: concrete individual labour and socially
necessary labour. When this distinction is 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 course of history
between the commodity producer and the labouring man, in order to
distinguish the twin aspects of labour which appear static in bourgeois
economy. He had to discover that the production of commodities is a
definite historical form of social production before he could decipher
the hieroglyphics of capitalist economy. In a word, Marx had to approach
the problem with methods of deduction diametrically opposed to those of
the classical school, he had in his approach to renounce the latter's
faith in the human and normal element in bourgeois production and to
recognise their historical transience: he had to reverse the
metaphysical deductions of the classics into their opposite, the
dialectical.

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

'In the price of corn, for example, one part pays the rent of the
landlord, another pays the wages of maintenance of the labourers and
labouring cattle employed in producing it, and the third pays the profit
of the farmer. These three parts (wages, profit, and rent) seem either
immediately or ultimately to make up the whole price of corn. A fourth
part, it may perhaps be thought, is necessary for replacing the stock of
the farmer, or for compensating the wear and tear of his labouring
cattle and other instruments of husbandry. But it must be considered
that the price of any instrument of husbandry, such as a labouring
horse, is itself made up of the same three parts: the rent of the land
upon which he is reared, the labour of tending and rearing him, and the
profits of the farmer who advances both the rent of this land and the
wages of this labour. Though the price of the corn, therefore, may pay
the price as well as the maintenance of the horse, the whole price still
resolves itself either immediately or ultimately into the same three
parts of rent, of labour, and profit.'[82]

Apparently Smith's confusion arose from the following premises: first,
that all labour is performed with the help of means of production of
some kind or other--yet what are these means of production associated
with any given labour (such as raw materials and tools) if not the
product of previous labour? Flour is 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 it was not a means of production but the very product, in
the same way 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 a means of
production in the hands of the farmer but the product. It is impossible
to find any means of production in which value is embodied, without it
being itself the product of some previous labour.

Secondly, speaking in terms of capitalism, it follows further that all
capital which has been completely used up in the manufacture of any
commodity, can in the end be resolved into a certain quantity of
performed labour.

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

Fourthly, all labour performed under capitalist conditions is divided
into two parts: paid labour which restores the wages advanced, and
unpaid labour which creates profit and rent, or surplus value. All
labour carried out under capitalist conditions thus corresponds to our
formula _v + s_.[83]

All the arguments outlined above are perfectly correct and unassailable.
Smith handled them in a manner which proves his scientific analysis
consistent and undeviating, and his conceptions of value and surplus
value a distinct advance on the Physiocrat approach. Only occasionally,
in his third thesis, he went astray in his final conclusion, saying that
the aggregate value of the annually produced aggregate of commodities
can be resolved into the labour of that very year, although he himself
had been acute enough to admit elsewhere that the value of the
commodities a nation produces in the course of one year necessarily
includes the labour of former years as well, that is the labour embodied
in the means of production which have been handed down.

But even if the four statements enumerated are perfectly correct in
themselves, the conclusion Smith draws from them--that the total value
of every commodity, and equally of the annual aggregate of commodities
in a society, can be resolved entirely into _v + s_--is absolutely
wrong. He has the right idea that the whole value of a commodity
represents nothing but social labour, yet identifies it with a false
principle, that all value is nothing but _v + s_. The formula _v + s_
expresses the function of living labour under capitalism, or rather its
double function, first to restore the wages, or the variable capital,
and secondly, to create surplus value for the capitalist. Wage labour
fulfils this function whilst it is employed by the capitalists, in
virtue of the fact that the value of the commodities is realised in
cash. The capitalist takes back the variable capital he had advanced in
form of wages, and he pockets the surplus value as well. _v + s_
therefore expresses the relation between wage labour and capitalist, a
relationship that is terminated in every instance as soon as the
process of commodity production is finished. Once the commodity is sold,
and the relation _v + s_ is realised for the capitalist in cash, the
whole relationship is wiped out and leaves no traces on the commodity.
If we examine the commodity and its value, we cannot ascertain whether
it has been produced by paid or by unpaid labour, nor in what proportion
these have contributed. Only one fact is beyond doubt: the commodity
contains a certain quantity of socially necessary labour which is
expressed in its exchange. It is completely immaterial for the act of
exchange as well as for the use of the commodity whether the labour
which produced it could be resolved into _v + s_ or not. In the act of
exchange all that matters is that the commodity represents value, and
only its concrete qualities, its usefulness, are relevant to the use we
make of it. Thus the formula _v + s_ only expresses, as it were, the
intimate relationship between capital and labour, the social function of
wage labour, and in the actual product this is completely wiped out. It
is different with the constant capital which has been advanced and
invested in means of production, because every activity of labour
requires certain raw materials, tools, and buildings. The capitalist
character of this state of affairs is expressed by the fact that these
means of production appear as capital, as _c_, the property of a person
other than the labourer, divorced from labour, the property of those who
themselves do not work. Secondly, the constant capital _c_, a mere
advance laid out for the purpose of creating surplus value, appears here
only as the foundation of _v + s_. Yet the concept of constant capital
involves more than this: it expresses the function of the means of
production in the process of human labour, quite independently of all
its historical or social forms. Everybody must have raw materials and
working tools, the means of production, be it the South Sea Islander for
making his family canoe, the communist peasant community in India for
the cultivation of their communal land, the Egyptian fellah for tilling
his village lands or for building Pharaoh's pyramids, the Greek slave in
the small workshops of Athens, the feudal serf, the master craftsman of
the medieval guild, or the modern wage labourer. They all require means
of production which, having resulted from human labour, express the link
between human labour and natural matter, and constitute the eternal and
universal prerequisites of the human process of production. _c_ in the
formula _c + v + s_ stands for a certain function of the means of
production which is not wiped out in the succession of 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, by wage labour, slave labour, forced labour or any
other kind of labour; on the other hand, it is of decisive importance,
as for using it, whether the commodity is itself a means of production
or a consumer good. Whether paid or unpaid labour has been employed in
the production of a machine, matters to the machinery manufacturer and
to his workers, but only to them; for society, when it acquires this
machine by an act of exchange, only the quality of this machine as a
means of production, only its function in the process of production is
of importance. Just as every producing society, since time immemorial,
has had to give due regard to the important function of the means of
production by arranging, in each period of production, for the
manufacture of the means of production requisite for the next period, so
capitalist society, too, cannot achieve its annual production of value
to accord with the formula _v + s_--which indicates the exploitation of
wage labour--unless there exists, as the result of the preceding period,
the quantity of means of production necessary to make up the constant
capital. This specific connection of each past period of production with
the period following forms the universal and eternal foundation of the
social process of reproduction and consists in the fact that in every
period parts of the produce are destined to become the means of
production for the succeeding period: but this relation remained hidden
from Smith's sight. He was not interested in means of production in
respect of their specific function within the process to which they are
applied; he was only concerned with them in so far as they are like any
other commodity, themselves the product of wage labour that has been
employed in a capitalist manner. The specifically capitalist function of
wage labour in the productive process completely obscured for him the
eternal and universal function of the means of production within the
labour process. His narrow bourgeois approach overlooked completely the
general relations between man and nature underneath the specific social
relations between capital and wage labour. Here, it seems, is the real
source of Adam Smith's strange dogma, that the total value of the
annual social product can be resolved into _v + s_. He overlooked the
fact that _c_ as the first link in the formula _c + v + s_ is the
essential expression of the general social foundation of exploitation of
wage labour by capital.

We conclude that the value of every commodity must be expressed by the
formula _c + v + s_. The question now arises how far this formula
applies to the aggregate of commodities within a society. Let us turn to
the doubts expressed by Smith on this point, the statement that an
individual's fixed and circulating capital and his revenue do not
strictly correspond to the same categories from the point of view of
society. (Cf. above, p. 64, no. 3.) What is circulating capital for one
person is not capital for another, but revenue, as for instance capital
advances for wages. This statement is based upon an error. If the
capitalist pays wages to the workers, he does not abandon his variable
capital and let it stray into the workers' hands, to become their
income. He only exchanges the value-form of his variable capital against
its natural form, labour power. The variable capital remains always in
the hand of the capitalist, first as money, and then as labour power, to
revert to him later together with the surplus value as the cash proceeds
from the commodities. The worker, on the other hand, never gains
possession of the variable capital. His labour power is never capital to
him, but it is his only asset, the power to work is the only thing he
possesses. Again, if he has sold it and taken a money wage, this wage is
for him not capital but the price of his commodity which he has sold.
Finally, the fact that the worker buys provisions with the wages he has
received, has no more connection with the function this money once
fulfilled as variable capital in the hands of the capitalist, than has
the private use a vendor of a commodity can make of the money he has
obtained by a sale. It is not the capitalist's variable capital which
becomes the workers' income, but the price of the worker's commodity
'labour power' which he has sold, while the variable capital, now as
ever, remains in the hands of the capitalist and fulfils its specific
function. Equally erroneous is the conception that the income of the
capitalist (the surplus value) which is hidden in machines--in our
example of a machinery manufacturer--which has not as yet been realised,
is fixed capital for another person, the buyer of the machines. It is
not the machines, or parts of them, which form the income of the
machinery manufacturer, but the surplus value that is hidden in
them--the unpaid labour of his wage labourers. After the machine has
been sold, this income simply remains as before in the hand of the
machinery manufacturer; it has only changed its outward shape: it has
been changed from the 'machine-form' into the 'money-form'. Conversely,
the buyer of this machine has not, by its purchase, newly obtained
possession of his fixed capital, for he had this fixed capital in hand
even before the purchase, in the form of a certain amount of cash. By
buying this machine, he has only given to his capital the adequate
material form for it to become productive. The income, or surplus value,
remains in the hands of the machinery manufacturer before and after the
sale of the machine, and the fixed capital remains in the hands of the
other person, the capitalist buyer of the machine, just as the variable
capital in the first example always remained in the hands of the
capitalist and the income in the hands of the worker.

Smith and his followers have caused confusion because, in their
investigation of capitalist exchange, they mixed up the use-form of the
commodities with their relations of value. Further, they did not
distinguish the individual circulations of capitals and commodities
which are ever interlacing. One and the same act of exchange can be
circulation of capital, when seen from one aspect, and at the same time
simple commodity exchange for the purpose of consumption. The fallacy
that whatever is capital for one person must be income for another, and
_vice versa_, must be translated thus into the correct statement that
what is circulation of capital for one person, may be simple commodity
exchange for another, and _vice versa_. This only expresses the capacity
of capital to undergo transformations of its character, and the
interconnections of various spheres of interest in the social process of
exchange. The sharply outlined existence of capital in contrast with
income still stands in both its clearly defined forms of constant and
variable capital. Even so, Smith comes very close to the truth when he
states that capital and income of the individual are not strictly
identical with the same categories from the point of view of the
community. Only a few further connecting links are lacking for a clear
revelation of the true relationship.

FOOTNOTES:

[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
which also runs through the work of Smith. According to that, the
_price_ of the commodity cannot be resolved into _v + s_, though the
_value_ of commodities consists in _v + s_. This distinction, however,
is more important with regard to Smith's theory of value than in the
present context where we are mainly interested in his formula _v + s_.




_CHAPTER IV_

MARX'S SCHEME OF SIMPLE REPRODUCTION


Let us now consider the formula _c + v + s_ as the expression of the
social product as a whole. Is it only a theoretical abstraction, or does
it convey any real meaning when applied to social life--has the formula
any objective existence in relation to society as a whole? It was left
to Marx to establish the fundamental importance of _c_, the constant
capital, in economic theory. Yet Adam Smith before him, working
exclusively with the categories of fixed and circulating capital, in
effect transformed this fixed capital into constant capital, though he
was not aware of having achieved this result. This constant capital
comprises not only those means of production which wear out in the
course of years, but also those which are completely absorbed by
production in any one year. His very dogma that the total value is
resolved into _v + s_ and his arguments on this point lead Smith to
distinguish between the two categories of production--living labour and
inanimate means of production. On the other hand, when he tries to
construe the social process of reproduction on the basis of the capitals
and incomes of individuals, the fixed capital he conceives of as
existing apart from these, is, in fact, constant capital.

Every individual capitalist uses for the production of his commodities
certain material means of production such as premises, raw materials and
instruments. In order to produce the aggregate of commodities in a given
society, an aggregate of all material means of production used by the
individual capitalists is an obvious requisite. The existence of these
means of production within the society is a real fact, though they
themselves exist in the form of purely private individual capitals. This
is the universal absolute condition of social production in all its
historical forms.[84]

The specific capitalist form manifests itself in the fact that the
material means of production function as _c_, as constant capital, the
property of those who do not work; it is the opposite pole to
proletarianised labour power, the counterpart of wage labour. The
variable capital, _v_, is the aggregate of wages actually paid in the
society in the course of a year's production. This fact, too, has real
objective existence, although it manifests itself in an innumerable mass
of individual wages. In every society the amount of labour power
actually engaged in production and the annual maintenance of the workers
is a question of decisive importance. Where this factor takes the
specific capitalist form of _v_, the variable capital, it follows that
the means of subsistence first come to the workers in form of a wage
which is the price of the labour power they have sold to another person,
the owner of 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 subsistence
for the workers in a form of pure value. This concept of _v_ implies
that the workers are free in a double sense--free in person and free of
all means of production. It also expresses the fact that in a given
society the universal form of production is commodity production.

Finally, _s_, the surplus value, stands for the total of all surplus
values gained by the individual capitalists. Every society performs
surplus labour, and even a socialist society will have to do the same.
It must perform surplus labour in a threefold sense: it has to provide a
quantity of labour for the maintenance of non-workers (those who are
unable to work, such as children, old people, invalids, and also civil
servants and the so-called liberal professions who do not take an
immediate part in the satisfaction of material[85] wants), it has to
provide a fund of social insurance against elementary disasters which
may threaten the annual produce, such as bad harvests, forest fires and
floods; and lastly it must provide a fund for the purpose of increasing
production, either because of an increase in the population, or because
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. in commodity-form,
realisable in cash, and (2) as the property of non-workers, of those who
own the means of production.

Similarly, if we consider _v + s_, these two amounts taken together, we
see that they represent objective quantities of universal validity: the
total of living labour that has been performed within a society in the
course of one year. Every human society, whatever its historical form,
must take note of this datum, with reference to both the results that
have been achieved, and the existing and available labour power. The
division into _v + s_ is a universal phenomenon, independent of the
society's particular historical form. In its capitalist form, this
division shows itself not only in the qualitative peculiarities of both
_v_ and _s_ as already outlined, but also in their quantitative
relationship: _v_ tends to become depressed to a minimum level, just
sufficient for the physiological and social existence of the worker, and
_s_ tends to increase continually at the cost of, and relative to, _v_.

The predominant feature of capitalist production is expressed in this
last circumstance: it is the fact that the creation and appropriation of
surplus value is the real purpose of, and the incentive to, production.

We have examined the relations upon which the capitalist formula of the
aggregate product is based, and have found them universally valid. In
every planned economy they are made the object of conscious regulation
on the part of society; in a communist society by the community of
workers and their democratic organs, and in a society based upon
class-rule by the nucleus of owners and their despotic power. In a
system of capitalist production there is no such planned regulation. The
aggregate of the society's capitals and the aggregate of its commodities
alike consist in reality of innumerable fragments of individual capitals
and individual items of merchandise, taken together.

Thus the question arises whether these sums themselves mean anything
more in a capitalist society than a mere statistical enumeration which
is, moreover, inexact and fluid. Applying the standards of society as a
whole, we perceive that the completely independent and sovereign
individual existence of private enterprises is only the historically
conditioned form, whereas it is social interconnections that provide the
foundation. Although individual capitals act in complete independence of
one another, and a social regulation is completely lacking, the movement
of capitals forms a homogeneous whole. This movement, too, appears in
specifically capitalist forms. In every planned system of production it
is, above all, the relation between all labour, past and present, and
the means of production (between _v + s_ and _c_, according to our
formula), or the relation between the aggregate of necessary consumer
goods (again, in the terms of our formula, _v + s_) and _c_ which are
subjected to regulation. Under capitalist conditions, on the other hand,
all social labour necessary for the maintenance of the inanimate means
of production and also of living labour power is treated as one entity,
as capital, in contrast with the surplus labour that has been performed,
i.e. with the surplus value _s_. The relation between these two
quantities _c_ and (_v + s_) is a palpably real, objective relationship
of capitalist society: it is the average rate of profit; every capital
is in fact treated only as part of a common whole, the whole of social
capital, and assigned the profit to which it is entitled, according to
its size, out of the surplus value wrested from society, regardless of
the quantity which this particular capital has actually created. Thus
social capital and its counterpart, the whole of social surplus value,
are not merely real quantities, having an objective existence, but, what
is more, the relation between them, the average profit, guides and
directs the whole process of exchange. This it does in three ways: (1)
by the mechanism of the law of value which establishes the quantitative
relations of exchange between the individual kinds of commodities
independently of their specific value relationship; (2) by the social
division of labour, the assignment of certain portions of capital and
labour to the individual spheres of production; (3) by the development
of labour productivity which on the one hand stimulates individual
capitals to engage in pioneering work for the purpose of securing a
higher profit than the average, and on the other hand extends the
progress that has been achieved by individuals over the whole field of
production. By means of the average rate of profit, in a word, the total
capital of society completely governs the seemingly independent motions
of individual capitals.

The formula _c + v + s_ thus applies to the aggregate of commodities
produced in a society under capitalism no less than to the value
composition of every individual commodity. It is, however, only the
value-composition for which this holds good--the analogy cannot be
carried further.

The formula is indeed perfectly exact if we regard the total product of
a capitalistically producing society as the output of one year's labour,
and wish to analyse it into its respective components. The quantity _c_
shows how much of the labour of former years has been taken over towards
the product of the present year in the form of means of production.
Quantities _v + s_ show the value components of the product created by
new labour during the last year only; the relation between _v_ and _s_
finally shows us how the annual labour programme of society is
apportioned to the two tasks of maintaining the workers and maintaining
those who do not work. This analysis remains valid and correct also with
regard to the reproduction of individual capital, no matter what may be
the material form of the product this capital has created. All three,
_c_, _v_, and _s_, appear alike to a capitalist of the machinery
industry in the form of machinery and its parts; to the owner of a music
hall they are represented by the charms of the dancers and the skill of
the acrobats. So long as the product is left undifferentiated, _c_, _v_,
and _s_ differ from one another only in so far as they are _aliquot_
components of value. This is quite sufficient for the reproduction of
individual capital, as such reproduction begins with the value-form of
capital, a certain amount of money that has been gained by the
realisation of the manufactured product. The formula _c + v + s_ then 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--in the case of simple
reproduction assumed in the first instance--for the capitalist's
personal consumption. In the case of expanding reproduction part three
is further subdivided, only a fraction of it being devoted to the
capitalist's personal consumption, the remainder to increasing his
capital. In order to reproduce his capital actually, the capitalist
must, of course, turn again to the commodity market with the capital he
has divided in this manner, so that he can acquire the material
prerequisites of production such as raw materials, instruments, and so
on. It seems a matter of course to the individual capitalist as well as
to his scientific ideologist, the 'vulgar economist', that he should in
fact find there just those means of production and labour power he needs
for his business.

The position is different as regards the total production of a society.
From the point of view of society as a whole, the exchange 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 be changed by this process. After this change
of places, as well as before it, there can be reproduction of total
capital, if, and only if, there is in the total product of the preceding
period: first, a sufficient quantity of means of production, secondly,
adequate provisions to maintain the same amount of labour as hitherto,
and, last but not least, the goods necessary to maintain the capitalist
class and its hangers-on in a manner suitable to their station. This
brings us to a new plane: we are now concerned with 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 business becomes a matter of grave concern for
the totality of capitalists. Whereas it does not make the slightest
difference to the individual capitalist whether he produces machinery,
sugar, artificial manure or a progressive newspaper--provided only that
he can find a buyer for his commodity so that he can get back his
capital plus surplus value--it matters infinitely to the 'total
capitalist' that his total product should have a definite use-form. By
that we mean that it must provide three essentials: the means of
production to renew the labour process, simple provisions for the
maintenance of the workers, and provisions of higher quality and luxury
goods for the preservation of the 'total capitalist' himself. His desire
in this respect is not general and vague, but determined precisely and
quantitatively. If we ask what quantities of all three categories are
required by the 'total capitalist', the value-composition of last year's
total product gives us a definite estimate, as long, that is, as we
confine ourselves to simple reproduction, which we have taken for our
starting point. Hitherto we have conceived of the formula _c + v + s_
as a merely quantitative division of the total value, applicable alike
to total capital and to individual capital, and representing the
quantity of labour contained in the annual product of society. Now we
see that the formula is also the basis of the material composition of
the product. Obviously the 'total capitalist', if he is to take up
reproduction to the same extent as before, must find in his new total
product as many means of production as correspond to the size of _c_, as
many simple provisions for the workers as correspond to the sum of wages
_v_, and as many provisions of better quality for himself and his
hangers-on as correspond to _s_. In this way our analysis of the value
of the society's aggregate product is translated into a general recipe
for this product as follows: the total _c_ of society must be
re-embodied in an equal quantity of means of production, the _v_ in
provisions for the workers, and the _s_ in provisions for the
capitalists, in order that simple reproduction may take place.

Here we come up against palpable differences between the individual
capitalist and the total capitalist. The manner in which the former
always reproduces his constant and variable capital as well as his
surplus value is such that all three parts are contained in the same
material form within his homogeneous product, that this material form,
moreover, is completely irrelevant and may have different qualities in
the case of each individual capitalist. The 'total capitalist', for his
part, reproduces every component of the value of his annual product in a
different material form, _c_ as means of production, _v_ as provisions
for the workers, and _s_ as provisions for the capitalists. In the case
of the reproduction of individual capitals, there is no discrepancy
between relations of value and material points of view. Besides, it is
quite clear that individual capital may concentrate on aspects of value,
accepting material conditions as a law from heaven, as self-evident
phenomena of commodity-exchange, whereas the 'total capitalist' has to
reckon with material points of view. If the total _c_ of society were
not reproduced annually in the form of an equal amount of means of
production, every individual capitalist would be doomed to search the
commodity market in vain with his _c_ realised in cash, unable to find
the requisite materials for his individual reproduction. From the point
of view of reproducing the total capital, the formula _c + v + s_ is
inadequate. This again is proof of the fact that the concept of total
capital is something real and does not merely paraphrase the concept of
production. We must, however, make general distinctions in our
exposition of total capital: instead of showing it as a homogeneous
whole, we must demonstrate its three main categories; and we shall not
vitiate our theory if, for the sake of simplicity, we consider for the
present only two departments of total capital: the production of
producer goods, and that of consumer goods for workers and capitalists.
We have to examine each department separately, adhering to the
fundamental conditions of capitalist production in each case. At the
same time, we must also emphasise the mutual connections between these
two departments from the point of view of reproduction. For only if each
is regarded in connection with the other, do they make up the basis of
the social capital as a whole.

We made a start by investigating individual capital. But we must
approach the demonstration of total capital and its total product in a
somewhat different manner. Quantitatively, as a quantity of value, the
_c_ of society consists precisely in the total of individual constant
capitals, and the same applies to the other amounts, _v_ and _s_. But
the outward shape of each has changed--the _c_ of constant capitals
re-emerges from the process of production as an element of value with
infinitely varied facets, comprising a host of variegated objects for
use, but in the total product it appears, as it were, contracted into a
certain quantity of means of production. Similarly with _v_ and _s_,
which in the case of the individual capitalist re-emerge as items in a
most colourful jumble of commodities, being provisions in adequate
quantities for the workers and capitalists. Adam Smith came very close
to recognising this fact when he observed that the categories of fixed
and circulating capital and of revenue in relation to the individual
capitalist do not coincide with these categories in the case of society.

We have come to the following conclusions:

(1) The formula _c + v + s_ serves to express the production of society
viewed as a whole, as well as the production of individual capitalists.

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

(3) Both departments work according to capitalist methods, that is to
say they both aim at the production of surplus value, and thus the
formula _c + v + s_ will apply to each of them.

(4) The two departments are interdependent, and are therefore bound to
display a certain quantitative relationship, namely the one department
must produce all means of production, the other all provisions for the
workers and capitalists of both departments.

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

   I. _4,000c + 1,000v + 1,000s = 6,000_ means of production
  II. _2,000c +   500v +   500s = 3,000_ articles of consumption.[86]

The figures in this diagram express quantities of value, amounts of
money which are chosen arbitrarily, but their ratios are exact. Each
department is characterised by the use-form of the commodities produced.
Their mutual circulation takes place as follows: Department I supplies
the means of production for the entire productive process, for itself as
well as for Department II. From this alone it follows that for the
undisturbed continuance of reproduction--for we still presume simple
reproduction on the old scale--the total produce of Department I (I
6,000) must have the same value as the sum of constant capitals in both
departments: (I 4,000_c_ + II 2,000_c_). Similarly, Department II
supplies provisions for the whole of society, for its own workers and
capitalists as well as for the workers and capitalists of Department I.
Hence it follows that for the undisturbed course of consumption and
production and its renewal on the old scale it is necessary that the
total quantity of provisions supplied by Department II should equal in
value all the 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 which are the
foundation not only of capitalist reproduction but of reproduction in
every society. In every producing society, whatever its social form, in
the primitive small village community of the Bakairi of Brazil, in the
_oikos_ of a Timon of Athens with its slaves, or in the imperial
_corvée_ farm of Charlemagne, the labour power available for society
must be distributed in such a way that means of production as well as
provisions are produced in adequate quantities. The former must suffice
for the immediate production of provisions as well as for the future
renewal of the means of production themselves, and the provisions in
their turn must suffice for the maintenance of the workers occupied in
the production alike of these same provisions and of the means of
production, and moreover for the maintenance of all those who do not
work.

In its broad outline, Marx's scheme corresponds with the universal and
absolute foundation of social reproduction, with only the following
specifications: socially necessary labour appears here as value, the
means of production as constant capital, the labour necessary for the
maintenance of the workers as variable capital and that necessary for
the maintenance of those who do not work as surplus value.

In capitalist society, however, the connections between these two great
departments depend upon exchange of commodities, on the exchange of
equivalents. The workers and capitalists of Department I can only obtain
as many provisions from Department II as they can deliver of their own
commodities, the means of production. The demand of Department II for
means of production, on the other hand, is determined by the size of its
constant capital. It follows therefore that the sum of the variable
capital and of the surplus value in the production of producer goods
[here I(_1,000v + 1,000s_)] must equal the constant capital in the
production of provisions [here II(2,000_c_)].

An important proviso remains to be added to the above scheme. The
constant capital which has been spent by the two departments is in
reality only part of the constant capital used by society. This constant
capital is divided into two parts; the first is fixed capital--premises,
tools, labouring cattle--which functions in a number of periods of
production, in every one of which, however, only part of its value is
absorbed by the product, according to the amount of its wear and tear.
The second is circulating capital such as raw materials, auxiliary
semi-finished products, fuel and lighting--its whole value is completely
absorbed by the new product in every period of production. Yet only that
part of the means of production is relevant for reproduction which is
actually absorbed by the production of value; without becoming less
correct, an exact exposition of social circulation may disregard the
remaining part of the fixed capital which has not been absorbed by the
product, though it should not completely forget it. This is easy to
prove.

Let us assume that the constant capital, 6,000_c_, in the two
departments, which is in fact absorbed by the annual product of these
departments, consists of 1,500_c_ fixed and 4,500_c_ circulating
capital, the 1,500_c_ of fixed capital representing here the annual wear
and tear of the premises, machinery and labouring cattle. This annual
wear and tear equals, say, 10 per cent of the total value of the fixed
capital employed. Then the total social capital would really consist of
_19,500c + 1,500v_, the constant capital in both departments being
1,500_c_ of fixed and 4,500_c_ of circulating capital. Since the term of
life of the aggregate fixed capital, with a 10 per cent wear and tear,
is ten years _ex hypothesi_, the fixed capital needs renewal only after
the lapse of ten years. Meanwhile one-tenth of its value enters into
social production in every year. If all the fixed capital of a society,
with the same rate of wear and tear, were of equal durability, it would,
on our assumption, need complete renewal once within ten years. This,
however, is not the case. Some of the various use-forms which are part
of the fixed capital may last longer and others shorter, wear and tear
and duration of life are quite different in the different kinds and
individual representations of fixed capital. In consequence, fixed
capital need not be renewed--reproduced in its concrete use-form--all at
once, but parts of it are continually renewed at various stages of
social production, while other parts still function in their older form.
Our assumption of a fixed capital of 15,000_c_ with a 10 per cent rate
of wear and tear does not mean that this must be renewed all at once
every ten years, but that an annual average renewal and replacement must
be effected of a part of the total fixed social capital corresponding to
one-tenth of its value; that is to say, Department I which has to
satisfy the needs of society for means of production must reproduce,
year by year not only all its raw and partly finished materials, etc.,
its circulating capital to the value of 4,500, but must also reproduce
the use-forms of its fixed capital--premises, machinery, and the
like--to the extent of 1,500, corresponding with the annual wear and
tear of fixed capital. If Department I continues in this manner to renew
one-tenth of the fixed capital in its use-form every year, the result
will be that every ten years the total fixed capital of society will
have been replaced throughout by new items; thus it follows that the
reproduction of those parts disregarded so far is also completely
accounted for in the above scheme.

In practice, the procedure is that every capitalist sets aside from his
annual production, from the realisation of his commodities, a certain
amount for the redemption of his fixed capital. These individual annual
deductions must amount to a certain quantity of capital, therefore the
capitalist has in fact renewed his fixed capital, that is, he has
replaced it by new and more efficient items. This alternating procedure
of building up annual reserves of money for the renewal of fixed capital
and of the periodical employment of the accumulated amounts for the
actual renewal of fixed capital varies with the individual capitalist,
so that some are accumulating reserves, while others have already
started their renewals. Thus every year part of the fixed capital is
actually renewed. The monetary procedure here only disguises the real
process which characterises the reproduction of fixed capital.

On closer observation we see that this is as it should be. The whole 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 peculiarity as fixed
capital, on the other hand, that only part of the value is absorbed in
the production of value, since in the process of reproduction (again
postulating simple reproduction), all that matters is to replace in
their natural form the values which have been actually used up as means
of subsistence and production during a year's production. Therefore,
fixed capital need only be reproduced to the extent that it has in fact
been used up in the production of commodities. The remaining portion of
value, embodied in the total use-form of fixed capital, is of decisive
importance for production as a labour process, but does not exist for
the annual reproduction of society as a process of value-formation.

Besides, this process which is here expressed by relations of value
applies equally to every society, even to a community which does not
produce commodities. If once upon a time, for instance, say ten years'
labour of 1,000 fellaheen was required for the construction of the
famous Lake Moeris and the related Nile canals--that miraculous lake,
which Herodotus tells us was made by hand--and if for the maintenance of
this, the most magnificent drainage system of the world, the labour of a
further 100 fellaheen was annually required (the figures, of course, are
chosen at random), we might say that after every hundred years the
Moeris dam and the canals were reproduced anew, although in fact the
entire system was not constructed as a whole in every century. This is
manifestly true. When, amid the stormy incidents of political history
and alien conquests, the usual crude neglect of old monuments of culture
set in--as displayed, e.g. by the English in India when the
reproductional needs of ancient civilisations were understood no
longer--then in the course of time the whole Lake Moeris, its water,
dikes and canals, the two pyramids in its midst, the colossus upon it
and other marvellous erections, disappeared without a trace, as though
they had never been built. Only ten lines in Herodotus, a dot on
Ptolemy's map of the world, traces of old cultures, and of villages and
cities bear witness that at one time rich life sprang from this
magnificent irrigation system, where to-day there are only stretches of
arid desert in inner Lybia, and desolate swamps along the coast. There
is only one point where Marx's scheme of simple reproduction may appear
unsatisfactory or incomplete in relation to constant capital, and that
is when we go back to that period of production, when the total fixed
capital was first created. Indeed, society possesses transformed labour
amounting to more than those parts of fixed capital which are absorbed
into the value of the annual product and are in turn replaced by it. In
the figures of our example the total social capital does not consist of
_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 of appropriate means of production,
an equal amount is also consumed by the same production each year,
though the whole of the fixed capital as a use-form, an aggregate of
objects, has been renewed. After ten years, society possesses in the
eleventh, just as in any other year, a fixed capital of 15,000, whereas
it has annually achieved only 1,500_c_; and its constant capital as a
whole is 19,500, whereas it has created only 6,000. Obviously, since it
must have created this surplus of 13,500 fixed capital by its labour, it
possesses more accumulated past labour than our scheme of reproduction
warrants. Even at this stage, the annual labour of society must be based
on some previous annual labour that has been hoarded. This question of
past labour, however, as the foundation of all present labour, brings us
to the very first beginning which is as meaningless with regard to the
economic development of mankind as it is for the natural development of
matter. The scheme of reproduction grasps the social process as
perpetually in motion, as a link in the endless chain of events, it
neither wants to demonstrate its initial origin, nor should it do so.
The social reproductive process is always based on past labour, we may
trace it back as far as we like. Social labour has no beginning, just as
it has no end. Like the historical origin of Herodotus' Lake Moeris, the
beginnings of the reproductive process in the history of civilisation
are lost in the twilight of legend. With the progress of techniques and
with cultural development, the means of production change their form,
crude paleoliths are replaced by sharpened tools, stone implements by
elegant bronze and iron, the artisan's tool by steam-driven machinery.
Yet, though the means of production and the social organisation of the
productive process continually change their form, society already
possesses for its labour process a certain amount of past labour serving
as the basis for annual reproduction.

Under capitalist methods of production past labour of society preserved
in the means of production takes the form of capital, and the question
of the origin of this past labour which forms the foundation of the
reproductive process becomes the question of the genesis of capital.
This is much less legendary, indeed it is writ in letters of blood in
modern history. The very fact, however, that we cannot think of simple
reproduction unless we assume a hoard of past labour, surpassing in
volume the labour annually performed for the maintenance of society,
touches the sore spot of simple reproduction; and it shows that simple
reproduction is a fiction not only for capitalist production but also
for the progress of civilisation in general. If we merely wish to
understand this fiction properly, and to reduce it to a scheme, we must
presume, as its _sine qua non_, results of a past productive process
which cannot possibly be restricted to simple reproduction but
inexorably points towards enlarged reproduction. By way of illustration,
we might compare the aggregate fixed capital of society with a railway.
The durability and consequently the annual wear and tear of its various
parts is very different. Parts such as viaducts and tunnels may last for
centuries, steam engines for decades, but other rolling stock will be
used up in a short time, in some instances in a few months. Yet it is
possible to work out an average rate of wear and tear, say thirty years,
so that the value of the whole is annually depreciated by one thirtieth.
This loss of value is now continually made good by partial reproduction
of the railway (which may count as repairs), so that a coach is renewed
to-day, part of the engine to-morrow, and a section of sleepers the day
after. On our assumption then, the old railway is replaced by a new one
after thirty years, a similar amount of labour being performed each year
by the society so that simple reproduction takes place. But the railway
can only be reproduced in this manner--it cannot be so produced. In
order to make it fit for use and to make good its gradual wear and tear,
the railway must have been completed in the first place. Though the
railway can be repaired in parts, it cannot be made fit for use
piecemeal, an axle to-day and a coach to-morrow. Indeed, the very
essence of fixed capital is always to enter into the productive process
in its entirety, as a material use-value. In order to get this use-form
ready in the first place, society must apply a more concentrated amount
of labour to its manufacture. In terms of our example, the labour of
thirty years that is used for repairs, must be compressed into, say, two
or three years. During this period of manufacture, society must
therefore expend an amount of labour far greater than the average, that
is to say it must have recourse to expanding reproduction; later, when
the railway is finished, it may return to simple reproduction. Though we
need not visualise the aggregate fixed capital as a single coherent
use-object or a conglomeration of objects which must be produced all at
once, the manufacture of all the more important means of production,
such as buildings, transport facilities, and agricultural structures,
requires a more concentrated application of labour, and this is true for
the modern railway or steamship as much as it was for the rough
stone-axe and the handmill. Therefore it is only in theory that simple
reproduction can be conceived as alternating with enlarged reproduction;
the latter is not only a general condition of a progressive civilisation
and an expanding population, but also the _sine qua non_ for the
economic form of fixed capital, or those means of production which in
every society correspond to the fixed capital.

Marx deals with this conflict between the formation of fixed capital and
simple reproduction but indirectly, in connection with fluctuations in
the wear and tear of the fixed capital, more rapid in some years than in
others. Here he emphasises the need for perpetual 'over-production',
i.e. enlarged reproduction, since a strict policy of simple reproduction
would periodically lead to reproductive losses. In short, he regards
enlarged reproduction under the aspect of an insurance fund for the
fixed capital of the society, rather than in the light of the actual
productive process.[87]

In quite a different context Marx appears to endorse the opinion
expressed above. In _Theories on the Surplus Value_, vol ii, part 2,
analysing the conversion of revenue into capital, he speaks of the
peculiar reproduction of the fixed capital, the replacement of 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 aggregate capital
employed in machine manufacture were just large enough 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
merely _idealiter_ and must be made good _realiter_, _in natura_, only
after a certain number of years. Capital so employed supplies each year
a mass of machinery which becomes available for, and anticipates new,
capital investments. Let us suppose, for instance, a machine
manufacturer who starts production this year. During this year, he
supplies machines for £12,000. If he were merely to reproduce the
machines he has manufactured, he would have to produce, during the
subsequent eleven years, machines for £1,000 only, and even then, a
year's production would not be consumed within the year. Still less
could it be consumed, if he were to employ the whole of his capital. To
keep this capital working, to keep it reproducing itself every year, a
new and continuous expansion of the branches of manufacture that require
these machines, is indispensable. This applies even more, if the
machine manufacturer himself accumulates. In consequence, even _if the
capital invested in one particular branch of production is simply being
reproduced_,[88] a continuous accumulation in the other branches of
production must go with it.'[89]

We might take the machine manufacturer of Marx's example as illustrating
the production of fixed capital. Then the inference is that if society
maintains simple reproduction in this sphere, employing each year a
similar amount of labour for the production of fixed capital (a
procedure which is, of course, impossible in practical life), then
annual production in all other spheres must expand. But if here, too,
simple reproduction is to be maintained, then, if the fixed capital once
created is to be merely renewed, only a small part of the labour
employed in its creation can be expended. Or, to put it the other way
round: if society is to provide for investment in fixed capital on a
large scale, it must, even assuming simple reproduction to prevail on
the whole, resort periodically to enlarged reproduction.

With the advance of civilisation, there are changes not only in the form
of the means of production but also in the quantity of value they
represent--or better, changes in the social labour stored up in them.
Apart from the labour necessary for its immediate preservation, society
has increasingly more labour time and labour power to spare, and it
makes use of these for the manufacture of means of production on an ever
increasing scale. How does this affect the process of reproduction? How,
in terms of capitalism, does society create out of its annual labour a
_greater_ amount of capital than it formerly possessed? This question
touches upon enlarged reproduction, and it is not yet time to deal with
it.

FOOTNOTES:

[84] For the sake of simplicity, we shall follow general usage and speak
here and 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 not
involve special categories of the population in a planned society, based
on common ownership of the means of production. It will always find
expression in the existence of a certain number of spiritual leaders who
must be materially maintained. The same individuals may exercise these
various functions at different times.

[86] _Capital_, vol. ii, p. 459.

[87] _Capital_, vol. ii, pp. 544-7. Cf. also p. 202 on the necessity of
enlarged reproduction under the aspect of a reserve fund.

[88] Marx's italics.

[89] _Theorien über den Mehrwert_, vol. ii, part 2, p. 248.




_CHAPTER V_

THE CIRCULATION OF MONEY


In our study of the reproductive process we have not so far considered
the circulation of money. Here we do not refer to money as a measuring
rod, an embodiment of value, because all relations of social labour have
been expressed, assumed and measured in terms of money. What we have to
do now is to test our diagram of simple reproduction under the aspect of
money as a means of exchange.

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

Two questions now arise: (1) by whom should the money be owned, and (2)
how much of it should there be? The answer to the first question, no
doubt, is that the workers receive their wages in the form of money with
which they buy consumer goods. From the point of view of society, this
means merely that the 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, an
essential characteristic of the capitalist form of production that the
workers do not obtain their share directly in the form of goods but by
way of commodity exchange, just as it is an essential feature of the
capitalist mode of production that their labour power is not applied
directly, as a result of a relation of personal domination, but again by
way of commodity exchange: the workers selling their labour power to the
owners of the means of production, and purchasing freely their consumer
goods. Variable capital in its money form is the expression and medium
of both these transactions.

Money, then, comes first into circulation by the payment of wages. The
capitalist class must therefore set a certain quantity of money
circulating in the first place, and this must be equal to the amount
they pay in wages. The capitalists of Department I need 1,000 units of
money, and the capitalists of Department II need 500 to meet their wages
bill. Thus, according to our diagram, two quantities of money are
circulating: I(1,000_v_) and II(500_v_). The workers spend the total of
1,500 on consumer goods, i.e. on the products of Department II. In this
way, labour power is maintained, that is to say the variable capital of
society is reproduced in its natural form, as the foundation of all
other reproductions of capital. At the same time, the capitalists of
Department II dispose of their aggregate product (1,500) in the
following manner: their own workers receive 500 and the workers of
Department I receive 1,000. This exchange gives the capitalists of
Department II possession of 1,500 money units: 500 are their own
variable capital which has returned to them; these may start circulating
again as variable capital but for the time being they have completed
their course. The other 1,000 accrue to them year by year out of the
realisation of one-third of their own products. The capitalists of
Department II now buy means of production from the capitalists of
Department I for these 1,000 money units in order to renew the part of
their own constant capital that has been used up. By means of this
purchase, Department II renews in its natural form half of the constant
capital II_c_ it requires. Department I now has in return 1,000 money
units which are nothing more than the money originally paid to its own
workers. Now, after having changed hands twice, the money has returned
to Department I, to become effective later as variable capital. This
completes the circulation of this quantity of money for the moment, but
the circulation within society has not yet come to an end. The
capitalists of Department I have not yet realised their surplus value to
buy consumer goods for themselves; it is still contained in their
product in a form which is of no use to them. Moreover, the capitalists
of Department II have not yet renewed the second half of their constant
capital. These two acts of exchange are identical both in substance and
in value, for the capitalists of Department I receive their goods from
Department II in exchange for the I(1,000_c_) means of production needed
by the capitalists of Department II. However, a new quantity of money is
required to effect this exchange. It is true that the same money which
has already completed its course, might be brought into circulation
again for this purpose--in theory, there could be no objection to this.
In practice, however, this solution is out of the question, for the
needs of the capitalists, as consumers, must be satisfied just as
constantly as the needs of the workers--they run parallel to the process
of production and must be mediated by specific quantities of money.
Hence it follows that the capitalists of both departments--that is to
say all capitalists--must have a further cash reserve in hand, in
addition to the money required as variable capital, in order to realise
their own surplus value in the form of consumer goods. On the other
hand, before the total product is realised and during the process of its
production, certain parts of the constant capital must be bought
continually. These are the circulating parts of the constant capital,
such as raw and auxiliary materials, semi-finished goods, lighting and
the like. Therefore, not only must the capitalists of Department I have
certain quantities of money in hand to satisfy their needs as consumers,
but the capitalists of Department II must also have money to meet the
requirements of their constant capital. The exchange of 1,000s I (the
surplus value of Department I contained in the means of production)
against goods is thus effected by money which is advanced partly by the
capitalists of Department I in order to satisfy their needs as
consumers, and partly by the capitalists of Department II in order to
satisfy their needs as producers.[91] Both lots of capitalists may each
advance 500 units of the money necessary for the exchange, or possibly
the two departments will contribute in different proportions. At any
rate, two things are certain: (_a_) the money set aside for the purpose
by both departments must suffice to effect the exchange between
I(1,000_s_) and II(1,000_c_); (_b_) whatever the distribution of this
money between the two departments may have been, the exchange
transaction completed, each department of capitalist production must
again possess the same amount of money it had earlier put into
circulation. This latter maxim applies quite generally to social
circulation as a whole: once the process of circulation is concluded,
money will always have returned to its point of origin. Thus all
capitalists, after universal exchange, have achieved a twofold result:
first they have exchanged products which, in their natural form, were of
no use to them, against other products which, in their natural form, the
capitalists require either as means of production or for their own
consumption. Secondly, they have regained possession of the money which
they set in circulation so as to effect these acts of exchange.

This phenomenon is unintelligible from the point of view of simple
commodity circulation, where commodity and money continually change
places--possession of the commodity excluding the possession of money,
as money constantly usurps the place which the commodity has given up,
and _vice versa_. Indeed, this is perfectly true with regard to every
individual act of commodity exchange which is the form of social
circulation. Yet this social circulation itself is more than mere
exchange of commodities: it is the circulation of capital. It is,
however, an essential and characteristic feature of this kind of
circulation, that it does not only return to the capitalist the value of
his original capital plus an increase, the surplus value, but that it
also assists social reproduction by providing the means of production
and labour power in the natural form of productive capital, and by
ensuring the maintenance of those who do not work. Possessing both the
means of production and the money needed, the capitalists start the
total social process of circulation; as soon as the social capital has
completed its circuit, everything is again in their hands, apportioned
to each department according to the investments made by it. The workers
have only temporary possession of money during which time they convert
the variable capital from its money form into its natural form. The
variable capital in the capitalists' hands is nothing but the outward
shape of part of their capital, and for this reason it must always
revert to them.

So far, we have only considered circulation as it takes place between
the two large departments of production. Yet 4,000 units of the first
Department's produce remain there in the form of means of production to
renew its constant capital of 4,000_c_. Moreover 500 of the consumer
goods produced in Department II [corresponding to the surplus value
II(500_s_)] also remain in this department in the form of consumer goods
for the capitalist class. Since in both departments the mode of
production is capitalistic, that is unplanned, private production, each
department can distribute its own products--means of production in
Department I and consumer goods in Department II--amongst its own
capitalists only by way of commodity exchange, i.e. by a large number of
individual sale transactions between capitalists of the same department.
Therefore the capitalists of both departments must have a reserve of
money with which to perform these exchange transactions--to renew both
the means of production in Department I and the consumer goods for the
capitalist class in Department II. This part of circulation does not
present any features of specific interest, as it is merely simple
commodity circulation. Vendor and purchaser alike belong to the same
category of agents of production, and circulation is concerned only with
money and commodity changing hands within the same class and department.
All the same, the money needed for this circulation must from the outset
be in the hands of the capitalist class: it is part of their capital.

So far, the circulation of total social capital presents no
peculiarities, even if we consider the circulation of money. From the
very outset it is self-evident that society must possess a certain
quantity of money to make this circulation possible, and this for two
reasons: first, the general form of capitalist production is that of
commodity production which implies the circulation of money; secondly,
the circulation of capital is based upon 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--our diagram referring to capitalist production
exclusively--the capitalist class must have possession of this money,
as it has possession of every other form of capital; it throws it into
circulation in order to regain possession as soon as the process of
circulation has been completed.

At first glance, only one detail might strike us: if the capitalists
themselves have set in motion all the money which circulates in society,
they must also advance the money needed for the realisation of their own
surplus value. Thus it seems that the capitalists as a class ought to
buy their own surplus value with their own money. As the capitalist
class has possession of this money resulting from previous periods of
production, even prior to the realisation of the product of each working
period, the appropriation of surplus value at first sight does not seem
to be based upon the unpaid labour of the wage labourer--as it in fact
is--but merely the result of an exchange of commodities against an
equivalent quantity of money both supplied by the capitalist class
itself. A little reflection, however, dispels this illusion. After the
general completion of circulation, the capitalists, now as before,
possess their money funds which either reverted to them or remained in
their hands. Further, they acquired consumer goods for the same amount
which they have consumed. (Note that we are still confining ourselves to
simple reproduction as the prime condition of our diagram of
reproduction: the renewal of production on the old scale and the use of
all surplus value produced for the personal consumption of the
capitalist class.)

Moreover, the illusion vanishes completely if we do not confine
ourselves to one period of production but observe a number of successive
periods in their mutual interconnections. The value the capitalist puts
into circulation to-day in the form of money for the purpose of
realising his own surplus value, is in fact nothing but his surplus
value resulting from the preceding period of production in form of
money. The capitalist must advance money out of his own pocket in order
to buy his goods for consumption. On the one hand, the surplus value
which he produces each year either exists in a natural form which
renders it unfit for consumption, or, if it takes a consumable form, it
is temporarily in the hands of another person. On the other hand, he
(the capitalist) has regained possession of the money, and he is now
making his advances by realising his surplus value from the preceding
period. As soon as he has realised his new surplus value, which is still
embodied in the commodity-form, this money will return to him.
Consequently, in the course of several periods of production, the
capitalist class draws its consumer goods from the pool, as well as the
other natural forms of its capital. The quantity of money originally in
its possession, however, remains unaffected by this process.

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

The process of reproducing the total social capital thus entails the
necessity of producing and reproducing the substance of money. Money is
also capital, for Marx's diagram which we have discussed before,
conceives of no other than capitalist production. Thus the diagram seems
incomplete. We ought to add a further department, that of production of
the means of exchange, to the other two large departments of social
production [those of means of production (I) and of consumer goods
(II)]. It is, indeed, a characteristic feature of this third department
that it serves neither the purposes of production nor those of
consumption, merely representing social labour in an undifferentiated
commodity that cannot be used. Though money and its production, like the
exchange and production of commodities, are much older than the
capitalist mode of production, it was only the latter which made the
circulation of money a general form of social circulation, and thus the
essential element of the social reproductive process. We can only obtain
a comprehensive diagram of the essential points of capitalist production
if we demonstrate the original relationship between the production and
reproduction of money and the two other departments of social
production.

Here, however, we deviate from Marx. He included the production of gold
(we have reduced the total production of money to the production of gold
for the sake of simplicity) in the first department of social
production.

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

This is correct only in so far as the production of gold is the
production of metal for industrial purposes (jewellery, dental
stoppings, etc.). But gold in its capacity as money is not a metal but
rather an embodiment of social labour _in abstracto_. Thus it is no more
a means of production than it is a consumer good. Besides, a mere glance
at the diagram of reproduction itself shows what inconsistencies must
result from confusing means of exchange with means of production. If we
add a diagrammatic representation of the annual production of gold as
the substance of money to the two departments of social production, we
get the following three sets of figures:

    I. _4,000c + 1,000v + 1,000s = 6,000_ means of production
   II. _2,000c +   500v +   500s = 3,000_ means of subsistence
  III.    _20c +     5v +     5s =    30_ means of exchange

This quantity of value of 30, chosen by Marx as an example, obviously
does not represent the quantity of money which circulates annually in
society; it only stands for that part which is annually reproduced, the
annual wear and tear of the money substance which, on the average,
remains constant so long as social reproduction remains on the same
level. The turnover of capital goes on in a regular manner and the
realisation of commodities proceeds at an equal pace. If we consider the
third line as an integral part of the first one, as Marx wants us to do,
the following difficulty arises: the constant capital of the third
department consists of real and concrete means of production, premises,
tools, auxiliary materials, vessels, and the like, just as it does in
the two other departments. Its product, however, the 30_g_ which
represent money, cannot operate in its natural form as constant
capital in any process of production. If we therefore include this
30_g_ as an essential part of the product of Department I (6,000
means of production) the means of production will show a social
deficit of this size which will prevent Departments I and II from
resuming their reproduction on the old scale. According to the
previous assumption--which forms the foundation of Marx's whole
diagram--reproduction as a whole starts from the product of each
department in its actual use-form. The proportions of the diagram are
based upon this assumption; without it, they dissolve in chaos. Thus the
first fundamental relation of value is based upon the equation: I(6,000)
equals I(4,000_c_) + II(2,000_c_). This cannot apply to the product
III(30_g_), since neither department can use gold as a means of
production [say, in the proportion of I(20_c_) + II(10_c_)]. The second
fundamental relation derived from this is based upon the equation
I(1,000_v_) + I(1,000_s_) = II(2,000_c_). This would mean, with regard
to the production of gold, that as many consumer goods are taken from
Department II as there are means of production supplied to it. But this
is equally untrue. Though the production of gold removes concrete means
of production from the total social product and uses them as its
constant capital, though it takes concrete consumer goods for the use of
its workers and capitalists, corresponding to its variable capital and
surplus value, the product it supplies yet cannot operate in any branch
of production as a means of production, nor is it a consumer good, fit
for human consumption. To include the production of money in the
activities of Department I, therefore, is to run counter to all the
general proportions which express the relations of value in Marx's
diagram, and to diminish the diagram's validity.

The attempt by Marx to find room for the production of gold within
Department I (means of production) moreover leads to dubious results.
The first act of circulation between this new sub-Department (called by
Marx I_g_) and Department II (consumer goods) consists as usual in the
workers' purchase of consumer goods from Department II with the money
obtained as wages from the capitalists. This money is not yet a product
of the new period of production. It has been reserved by the capitalists
of Department I_g_ out of the money contained in their product of an
earlier period. This, indeed, is the normal procedure. But now Marx
allows the capitalists of Department II to buy gold from I_g_ with the
money they have reserved, gold as a commodity material to the value of
2. This is a leap from the production of money into the industrial
production of gold which is no more to do with the problem of the
production of money than with the production of boot-polish. Yet out of
the 5 I_g v_ that have been reserved, 3 still remain, and as the
capitalist, unable to use them as constant capital, does not know what
to do with them, Marx arranges for him to add them on to his own reserve
of money. Marx further finds the following way out to avoid a deficit in
the constant capital of II which must be exchanged completely against
the means of production (I_v_ + I_s_):

'Therefore, this money must be entirely transferred from II_c_ to II_s_,
no matter whether it exists in necessities of life or articles of
luxury, and vice versa, a corresponding value of commodities must be
transferred from II_s_ to II_c_. Result: A portion of the surplus-value
is accumulated as a hoard of money.'[93]

A strange result, in all conscience! We have achieved an increase in
money, a surplus of the money substance, by simply confining ourselves
to the annual wear and tear of the money fund. This surplus value comes
into existence, for some unknown reason, at the expense of the
capitalists in the consumer goods department. They practise abstinence,
not because they may want to expand their production of surplus value,
let us say, but in order to secure a sufficient quantity of consumer
goods for the workers engaged in the production of gold.

The capitalists of Department II, however, get poor reward for this
Christian virtue. In spite of their abstinence, they are not only unable
to expand their reproduction, but they are no longer even in the
position to resume their production on its former scale. Even if the
corresponding 'commodity value' is transferred from II_g_ to II_c_, it
is not only the value but its actual and concrete form which matters. As
the new part of the product of I now consists of money which cannot be
used as a means of production, Department II, in spite of its
abstinence, cannot renew its constant material capital on the old scale.
As our diagram presupposes simple reproduction, its condition are thus
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 a place in either of the two
departments of his diagram; the whole diagram is upset as soon as the
first act of exchange between Departments I and II has been completed.
As Engels remarks in his footnote, 'the analysis of the exchange of
newly produced gold within the constant capital of Department I is not
contained in the MS.'[94] Besides, the inconsistency would then only
have been greater. The point of view we advocate is confirmed by Marx
himself when he gives an exhaustive answer to the question, as striking
as it is brief: 'Money in itself is not an element of actual
reproduction.'[95]

There is another important reason why we should put the production of
money in a third and separate department of social production as a
whole: Marx's diagram of simple reproduction is valid as the
starting-point and foundation of the reproductive process not only for
capitalism but also, _mutatis mutandis_, for every regulated and planned
economic order, for instance a socialist one. However, the production of
money, just like the commodity-form of the products, becomes obsolete
when private ownership of the means of production is abolished. It
constitutes the 'illegitimate' liabilities, the _faux frais_ of the
anarchic economy under capitalism, a peculiar burden for a society based
upon private enterprise, which implies the annual expenditure of a
considerable amount of labour on the manufacture of products which are
neither means of production nor yet consumer goods. This peculiar
expenditure of labour by a society producing under capitalism will
vanish in a socially planned economy. It is most adequately demonstrated
by means of a separate department within the process of reproducing
social capital. It is quite immaterial in this connection whether we
picture a country which produces its own gold or a country which imports
gold from abroad. The same expenditure of social labour which in the
first case is necessary for the direct production of gold, is required
in the second case to effect the exchange transactions.

These observations show that the problem of the reproduction of total
capital is not so crude as it often appears to those who approach it
merely from the point of view of crises. The central problem might be
formulated as follows: how is it possible that, in an unplanned economy,
the aggregate production of innumerable individual capitalists can
satisfy all the needs of society? One answer that suggests itself points
to the continual fluctuations in the level of production in accordance
with the fluctuating demand, i.e. the periodical changes in the market.
This point of view, which regards the aggregate product of society as an
undifferentiated mass of commodities, and treats social demand in an
equally absurd way, overlooks the most important element, the
_differentia specifica_ of the capitalist mode of production. We have
seen that the problem of capitalist reproduction contains quite a number
of precisely defined relations referring to specific capitalist
categories and also, _mutatis mutandis_, to the general categories of
human labour. The real problem consists in their inherent tendencies
towards both conflict and harmony. Marx's diagram is the scientific
formulation of the problem.

Inquiry must now be made into the implications of this diagram analytic
of the process of production. Has it any real bearing on the problems of
actual life? According to the diagram, circulation absorbs the entire
social product; all consumers' needs are satisfied, and reproduction
takes place without friction. The circulation of money succeeds the
circulation of commodities, completing the cycle of social capital. But
what is the position in real life? The relations outlined in the diagram
lay down a precise first principle for the division of social labour in
a planned production--always providing a system of simple reproduction,
i.e. no changes in the volume of production. But no such planned
organisation of the total process exists in a capitalist economy, and
things do not run smoothly, along a mathematical formula, as suggested
by the diagram. On the contrary, the course of reproduction shows
continual deviations from the proportions of the diagram which become
manifest (_a_) in the fluctuations of prices from day to day; (_b_) in
the continual fluctuations of profits; (_c_) in the ceaseless flow of
capital from one branch of production to another, and finally in the
periodical and cyclical swings of reproduction between over-production
and crisis.

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

In comparison, the similarities and the profound discrepancies between
Marx's diagram of reproduction and Quesnay's _Tableau Économique_ strike
us at once. These two diagrams, the beginning and end of the period of
classical economics, are the only attempts to describe an apparent chaos
in precise terms, a chaos created by the interrelated movements of
capitalist production and consumption, and by the disparity of
innumerable private producers and consumers. Both writers reduce this
chaotic jumble of individual capitals to a few broadly conceived rules
which serve, as it were, as moorings for the development of capitalist
society, in spite of its chaos. They both achieve a synthesis between
the two aspects which are the basis of the whole movement of social
capital: that circulation is at one and the same time a capitalist
process of producing and appropriating surplus value, and also a social
process of producing and consuming material goods necessary to civilised
human existence. Both show the circulation of commodities to act as a
mediator for the social process as a whole, and both conceive of the
circulation of money as a subsidiary phenomenon, an external and
superficial expression of the various stages within the circulation of
commodities.

It is socially necessary labour which creates value. This inspired
fundamental law of Marx's theory of value which provided the solution of
the money problem, amongst others, further led him first to distinguish
and then to integrate those two aspects in the total reproductive
process: the aspect of value and that of actual material connections.
Secondly, Marx's diagram is based upon the precise distinction between
constant and variable capital which alone reveals the internal
mechanisms of the production of surplus value and brings it, as a
value-relationship, into precise relation with the two material
categories of production: that of producer and consumer goods.

After Quesnay, some classical economists, Adam Smith and Ricardo in
particular, came fairly close to this point of view. Ricardo's
contribution, his precise elaboration of the theory of value, has even
been frequently confused with that of Marx. On the basis of his own
theory of value, Ricardo saw that Smith's method of resolving the price
of all commodities into _v + s_--a theory which wrought so much havoc in
the analysis of reproduction--is wrong; but he was not much interested
in Smith's mistake, nor indeed very enthusiastic about the problem of
reproduction as a whole. His analysis, in fact, represents a certain
decline after that of Adam Smith, just as Smith had partly retrogressed
as against the Physiocrats. If Ricardo expounded the fundamental value
categories of bourgeois economy--wages, surplus value and capital--much
more precisely and consistently than his predecessors, he also treated
them more rigidly. Adam Smith had shown infinitely more understanding
for the living connections, the broad movements of the whole. In
consequence he did not mind giving two, or, as in the case of the
problem of value, even three or four different answers to the same
question. Though he contradicts himself quite cheerfully in the various
parts of his analysis, these very contradictions are ever stimulating
him to renewed effort, they make him approach the problem as a whole
from an ever different point of view, and so to grasp its dynamics.
Ultimately, it was the limitation of their bourgeois mentalities which
doomed both Smith and Ricardo to failure. A proper understanding of the
fundamental categories of capitalist production, of value and surplus
value as living dynamics of the social process demands the understanding
of this process in its historical development and of the categories
themselves as historically conditioned forms of the general relations of
labour. This means that only a socialist can really solve the problem of
the reproduction of capital. Between the _Tableau Économique_ and the
diagram of reproduction in the second volume of _Capital_ there lies the
prosperity and decline of bourgeois economics, both in time and in
substance.

FOOTNOTES:

[90] In his seventh note to the _Tableau Économique_, following up his
arguments against the mercantilist theory of money as identical with
wealth, Quesnay says: 'The bulk of money in a nation cannot increase
unless this reproduction itself increases; otherwise, an increase in the
bulk of money would inevitably be prejudicial to the annual production
of wealth.... Therefore we must not judge the opulence of states on the
basis of a greater or smaller quantity of money: thus a stock of money,
equal to the income of the landowners, is deemed much more than enough
for an agricultural nation where the circulation proceeds in a regular
manner, and where commerce takes place in confidence and full liberty'
(_Analyse du Tableau Économique_, ed. Oncken, pp. 324-5).

[91] Marx (_Capital_, vol. ii, p. 482) takes the money spent directly by
the capitalists 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 of circulation, but the assumption is not the correct
condition of circulation within society. Marx himself has given a better
exposition in _Capital_, 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.




_CHAPTER VI_

ENLARGED REPRODUCTION


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

Nevertheless, this diagram is of real scientific importance in two
respects. In practice, even under conditions of enlarged reproduction,
the greater part of the social product can be looked on as simple
reproduction, which forms the broad basis upon which production in every
case expands beyond its former limits. In theory, the analysis of simple
reproduction also provides the necessary starting point for all
scientific exposition of enlarged reproduction. The diagram of simple
reproduction of the aggregate social capital therefore inevitably
introduces the further problem of the enlarged reproduction of the total
capital.

We already know the historical peculiarity of enlarged reproduction on a
capitalist basis. It must represent itself as accumulation of capital,
which is both its specific form and its specific condition. That is to
say, social production as a whole--which on a capitalist basis is the
production of surplus value--can in every case be expanded only in so
far as the social capital that has been previously active is now
augmented by surplus value of its own creation. This use of part of the
surplus value (and in particular the use of an increasing part of it)
for the purpose of production instead of personal consumption by the
capitalist class, or else the increase of reserves, is the basis of
enlarged reproduction under capitalist conditions of production.

The characteristic feature of enlarged reproduction of the aggregate
social capital--just as in our previous assumption of simple
reproduction--is the reproduction of individual capitals, since
production as a whole, whether regarded as simple or as enlarged
production, can in fact only occur in the form of innumerable
independent movements of reproduction performed by private individual
capitals.

The first comprehensive analysis of the accumulation of individual
capitals is given in volume i of Marx's _Capital_, section 7, chapters
22, 23. Here Marx treats of (_a_) the division of the surplus value into
capital and revenue; (_b_) the circumstances which determine the
accumulation of capital apart from this division, such as the degree of
exploitation of labour power and labour productivity; (_c_) the growth
of fixed capital relative to the circulating capital as a factor of
accumulation; and (_d_) the increasing development of an industrial
reserve army which is at the same time both a consequence and a
prerequisite of the process of accumulation. In the course of this
discussion, Marx deals with two inspired notions of bourgeois economists
with regard to accumulation: the 'theory of abstinence' as held by the
more vulgar economists, who proclaim that the division of surplus value
into capital, and thus accumulation itself, is an ethical and heroic act
of the capitalists; and the fallacy of the classical economists, their
doctrine that the entire capitalised part of the surplus value is used
solely for consumption by the productive workers, that is to say spent
altogether on wages for the workers employed year by year. This
erroneous assumption, which completely overlooks the fact that every
increase of production must manifest itself not only in the increased
number of employed workers but also in the increase of the material
means of production (premises, tools, and, certainly, raw materials) is
obviously rooted in that 'dogma' of Adam Smith which we have already
discussed. Moreover, the assumption that the expenditure of a greater
amount of capital on wages is sufficient to expand production, also
results from the mistaken idea that the prices of all commodities are
completely resolved into wages and surplus value, so that the constant
capital is disregarded altogether. Strangely enough, even Ricardo who
was, at any rate occasionally, aware of this element of error in Smith's
doctrine, subscribes most emphatically to its ultimate inferences,
mistaken though they were:

'It must be understood, that all the productions of a country are
consumed; but it makes the greatest difference imaginable whether they
are consumed by those who reproduce, or by those who do not reproduce
another value. When we say that revenue is saved, and added to capital,
what we mean is, that the portion of revenue, so said to be added to
capital, is consumed by productive, instead of unproductive
labourers.'[97]

If all the goods produced are thus swallowed up by human consumption,
there can clearly be no room to spare in the total social product for
such unconsumable means of production as tools and machinery, new
materials and buildings, and consequently enlarged reproduction, too,
will have to take a peculiar course. What happens--according to this odd
conception--is simply that staple foodstuffs for new workers will be
produced to the amount of the capitalised part of surplus value instead
of the choice delicacies previously provided for the capitalist class.
The classical theory of enlarged reproduction does not admit of any
variations other than those connected with the production of consumer
goods. After our previous observations it is not surprising that Marx
could easily dispose of this elementary mistake of both Ricardo and
Smith. Just as simple reproduction requires a regulated renewal of the
constant capital, the material means of production, quite apart from the
production of consumer goods in the necessary quantity for labourer and
capitalist, equally so in the case of expanding production must part of
the new additional capital be used to enlarge the constant capital, that
is to add to the material means of production. Another law, Marx
discovered, must also be applied here. The constant capital, continually
overlooked by the classical economists, increases relative to the
variable capital that is spent on wages. This is merely the capitalist
expression of the general effects of increasing labour productivity.
With technical progress, human labour is able to set in motion ever
larger masses of means of production and to convert them into goods. In
capitalist terms, this means a progressive decrease in expenses for
living labour, in wages, relative to the expenses for inanimate means of
production. Contrary to the assumption of Adam Smith and Ricardo,
enlarged reproduction must not only start with the division of the
capitalised part of the surplus value into constant and variable
capital, but, as the technique of production advances, it is bound to
allocate in this division ever increasing portions to the constant, and
ever diminishing portions to the variable capital. This continuous
qualitative change in the composition of capital is the specific
manifestation of the accumulation of capital, that is to say of enlarged
reproduction on the basis of capitalism.[98]

The other side of this picture of continual changes in the relation
between the portions of constant and variable capital is the formation
of a relative surplus population, as Marx called it, that is to say that
part of the working population which exceeds the average needs of
capital, and thus becomes redundant. This reserve of unemployable
industrial labour (taken here in a broader sense, and including a
proletariat that is dominated by merchant capital) is always present. It
forms a necessary prerequisite of the sudden expansion of production in
times of boom, and is another specific condition of capitalist
accumulation.[99]

From the accumulation of individual capitals we can therefore deduce the
following four characteristic phenomena of enlarged reproduction:

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

(2) All real accumulation starts with that part of the surplus value
which is intended for capitalisation being divided into constant and
variable capital.

(3) Accumulation as a social process is accompanied by continuous
changes in the relation between constant and variable capital, whereby
that portion of capital which is invested in inanimate means of
production continually increases as compared with that expended on
wages.

(4) Concomitant with the accumulative process, and as a condition of the
latter, there develops an industrial reserve army.

These characteristics, derived from the reproductive process as it is
performed by the individual capitals, represent an enormous step
forward as compared with the analyses of bourgeois economists. Now,
however, our problem is to demonstrate the accumulation of the aggregate
capital which originates from these movements of individual capitals,
and on the basis of the diagram of simple reproduction to establish the
precise relations between the aspects of value prevalent in the
production of surplus value and the material considerations in the
production of consumer and producer goods, with a view to accumulation.

The essential difference between enlarged reproduction and simple
reproduction consists in the fact that in the latter the capitalist
class and its hangers-on consume the entire surplus value, whereas in
the former a part of the surplus value is set aside from the personal
consumption of its owners, not for the purpose of hoarding, but in order
to increase the active capital, i.e. for capitalisation. To make this
possible, the new additional capital must also find the material
prerequisites for its activity forthcoming. Here the concrete
composition of the aggregate social product becomes important. Marx says
already in volume i, when he considers the accumulation of individual
capitals:

'The annual production must in the first place furnish all those objects
(use-values) from which the material components of capital, used up in
the course of the year, have to be replaced. Deducting these there
remains the net or surplus-product, in which the surplus-value lies. And
of what does this surplus-product consist? Only of things destined to
satisfy the wants and desires of the capitalist class, things which,
consequently, enter into 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.--To
accumulate it is necessary to convert a portion of the surplus-product
into capital. But we cannot, except by a miracle, convert into capital
anything but such articles as can be employed in the labour-process
(i.e. means of production), and such further articles as are suitable
for the sustenance of the labourer, (i.e. means of subsistence).
Consequently, a part of the annual surplus-labour must have been applied
to the production of additional means of production and subsistence,
over and above the quantity of these things required to replace the
capital advanced. In one word, surplus-value is convertible into
capital solely because the surplus-product, whose value it is, already
comprises the material elements of new capital.'[100]

Additional means of production, however, and additional consumer goods
for the workers alone are not sufficient; to get enlarged 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 provides beforehand, by
converting the working class into a class dependent on wages, a class
whose ordinary wages suffice, not only for its maintenance, but for its
increase. It is only necessary for capital to incorporate this
additional labour-power, annually supplied by the working class in the
shape of labourers of all ages, with the surplus means of production
comprised in the annual produce, and the conversion of surplus-value
into capital is complete.'[101]

This is the first solution which Marx gave to the problem of the
accumulation of the aggregate capital. Having dwelt on this aspect of
the question already in volume i of _Capital_, Marx returns to the
problem at the end of the second volume of his main work whose
concluding 21st chapter is devoted to accumulation and enlarged
reproduction of the aggregate capital.

Let us examine Marx's diagrammatic exposition of accumulation more
closely. On the model of the diagram of simple reproduction with which
we are already familiar, he devised a diagram for enlarged reproduction,
the difference appearing most clearly if we compare the two.

Assuming that society's annual aggregate product can be represented by
an amount to the value of 9,000 (denoting millions of working hours, or,
in capitalist monetary terms, any arbitrary amount of money), the
aggregate product is to be distributed as follows:

   I.  _4,000c + 1,000v + 1,000s = 6,000_
  II.  _2,000c +   500v +   500s = 3,000_
                                   -----
                            Total: 9,000

Department I represents means of production, Department II consumer
goods. One glance at the proportion of the figures shows that in this
case simple reproduction alone is possible. The means of production made
in Department I equal the total of the means of production actually
used by the two departments. If these are merely renewed, production can
be repeated only on its previous scale. On the other hand, the aggregate
product of Department II equals the total of wages and surplus value in
both departments. This shows that the consumer goods available permit
only the employment of just as many workers as were previously employed,
and that the entire surplus value is similarly spent on consumer goods,
i.e. the personal consumption of the capitalist class.

Now let us take the same aggregate product of 9,000 in the following
equation:

   I.  _4,000c + 1,000v + 1,000s = 6,000_
  II.  _1,500c +   750v +   750s = 3,000_
                                   -----
                            Total: 9,000

Here a double disproportion confronts us: 6,000 means of production are
created--more than those which are actually used by the society, i.e.
_4,000c + 1,500c_, leaving a surplus of 500. Similarly, less consumer
goods (3,000) are produced than the sum of what is paid out in wages
(i.e. _1,000v + 750v_, the requirement of the workers), plus the
aggregate of surplus value that has been produced (_1,000s + 750s_).
This results in a deficit of 500. Since our premises do not allow us to
decrease the number of workers employed, the consequence must be that
the capitalist class cannot consume the entire surplus value it has
pocketed. This proves fully consistent with the two material
preconditions of enlarged reproduction on a capitalist basis: part of
the appropriated surplus value is not to be consumed but is used for the
purposes of production; and more means of production must be produced so
as to ensure the use of the capitalised surplus value for the actual
expansion of reproduction.

In considering the diagram of simple reproduction, we saw that its
fundamental social conditions are contained in the following equation:
the aggregate of means of production (the product of Department I) must
be equivalent to the constant capital of both departments, but the
aggregate of consumer goods (the product of Department II) must equal
the sum of variable capitals _and_ surplus values of the two
departments. As regards enlarged reproduction, we must now infer a
precise inverse double ratio. The general precondition of enlarged
reproduction is that the product of Department I must be greater in
value than the constant capital of both departments taken together, and
that of Department II must be so much less than the sum total of both
the variable capital and the surplus value in the two departments.

This, however, by no means completes the analysis of enlarged
reproduction; rather has it led us merely to the threshold of the
question. Having deduced the proportions of the diagram, we must now
pursue their further activities, the flow of circulation and the
continuity of reproduction. Just as simple reproduction may be compared
to an unchanging circle, to be repeated time and again, so enlarged
reproduction, to quote Sismondi, is comparable to a spiral with ever
expanding loops. Let us begin by examining the loops of this spiral. The
first general question arising in this connection is how actual
accumulation proceeds in 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
necessary for enlarged reproduction.

Marx expounds the question in the following way:

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

  _4,400c + 1,100v_.

Department II, in turn, after selling these consumer goods to the value
of 100, is now in a position to acquire additional means of production
to the same amount from Department I. And in fact, Department I still
has precisely one hundred of its surplus product left over which now
find their way into Department II, enabling the latter to expand its own
reproduction as well. Yet here, too, the additional means of production
alone are not much use; to make them operate, additional labour power is
needed. Assuming again that the previous composition of capital has been
maintained, with a ratio of 2 to 1 as regards constant and variable
capital, additional labour to the tune of 50 is required to work the
additional 100 means of production. This additional labour, however,
needs additional consumer goods to the amount of its wages, which are in
fact supplied by Department II itself. This department must therefore
produce, in addition to the 100 additional consumer goods for the new
workers of Department I and the goods for the consumption of its own
workers, a further amount of consumer goods to the tune of 50 as part of
its aggregate product. Department II therefore starts on enlarged
reproduction at a rate of _1,600c + 800v_.

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

Enlarged reproduction can now proceed on its course. If we maintain our
rate of exploitation at 100 per cent, as in the case of the original
capital, the next period will give the following results:

   I.  _4,400c + 1,100v + 1,100s = 6,600_

  II.  _1,600c +   800v +   800s = 3,200_
                                   -----
                            Total: 9,800

The aggregate product of society has grown from 9,000 to 9,800, the
surplus value of Department I from 1,000 to 1,100, and of Department II
from 750 to 800. The object of the capitalist expansion of production,
the increased production of surplus value, has been gained. At the same
time, the material composition of the aggregate social product again
shows a surplus of 600 as regards the means of production (6,600) over
and above those which are actually needed (4,400 + 1,600), and also a
deficit in consumer goods as against the sum total made up by the wages
previously paid (_1,100v + 800v_) and the surplus value that has been
created (_1,100s + 800s_). And thus we again have the material
possibility as well as the necessity to use part of the surplus value,
not for consumption by the capitalist class, but for a new expansion of
production.

The second enlargement of production, and increased production of
surplus value, thus follows from the first as a matter of course and
with mathematical precision. The accumulation of capital, once it has
started, automatically leads farther and farther beyond itself. The
circle has become a spiral which winds itself higher and higher as if
compelled by a natural law in the guise of mathematical terms. Assuming
that in the following years there is always capitalisation of half the
surplus value, while the composition of the capital and the rate of
exploitation remain unchanged, the reproduction of capital will result
in the following progression:

  _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

Thus, after five years of accumulation, the aggregate social product is
found to have grown from 9,000 to 14,348, the social aggregate 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 personal consumption, being 1,500
at the beginning of accumulation, has grown to 732 + 958 = 1,690 in the
last year.[102] The capitalist class, then, has capitalised more, it has
practised greater abstinence, and yet it has been able to live better.
Society, in a material respect, has become richer, richer in means of
production, richer in consumer goods, and it has equally become richer
in the capitalist sense of the term since it produces more surplus
value. The social product circulates _in toto_ in society. Partly it
serves to enlarge reproduction and partly it serves consumption. The
requirements of capitalist accumulation correspond to the material
composition of the aggregate social product. What Marx said in volume i
of _Capital_ is true: the increased surplus value can be added on to
capital because the social surplus product comes into the world from 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 conformity with the laws of
circulation: the mutual supply of the two departments of production with
additional means of production and consumer goods proceeds as an
exchange of equivalents. It is an exchange of commodities in the course
of which the very accumulation of one department is the condition of
accumulation in the other and makes this possible. The complicated
problem of accumulation is thus converted into a diagrammatic
progression of surprising simplicity. We may continue the above chain of
equations _ad infinitum_ so long as we observe this simple principle:
that a certain increase in the constant capital of Department I always
necessitates a certain increase in its variable capital, which
predetermines beforehand the extent of the increase in Department II,
with which again a corresponding increase in the variable capital must
be co-ordinated. Finally, it depends on the extent of increase in the
variable capital in both departments, how much of the total may remain
for personal consumption by the capitalist class. The extent of this
increase will also show that this amount of consumer goods which remains
for private consumption by the capitalist is exactly equivalent to that
part of the surplus value which has not been capitalised in either
department.

There are no limits to the continuation of this diagrammatic development
of accumulation in accordance with the few easy rules we have
demonstrated. But now it is time to take care lest we should only have
achieved these surprisingly smooth results through simply working out
certain fool-proof mathematical exercises in addition and subtraction,
and we must further inquire whether it is not merely because
mathematical equations are easily put on paper that accumulation will
continue _ad infinitum_ without any friction.

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

FOOTNOTES:

[96] 'The premise of simple reproduction, that I(_v + s_) is equal to
II_c_, is irreconcilable with capitalist production, although this does
not exclude the possibility that a certain year in an industrial cycle
of ten or eleven years may not show a smaller total production than the
preceding year, so that there would not have been even a simple
reproduction, compared to the preceding year. Indeed, considering the
natural growth of population per year, simple reproduction could take
place only in so far as a correspondingly larger number of unproductive
servants would partake of the 1,500 representing 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
of Ricardo's Works, p. 87, note. (Reference not given in original.)

[98] 'The specifically capitalist mode of production, the development of
the productive power of labour corresponding to it, and the change
thence resulting in the organic composition of capital, do not merely
keep pace with the advance of accumulation, or with the growth of social
wealth. They develop at a much quicker rate, because mere accumulation,
the absolute increase of the total social capital, is accompanied by the
centralisation of the individual capitals of which that total is made
up; and because the change in the technological composition of the
additional capital goes hand in hand with a similar change in the
technological composition of the original capital. With the advance of
accumulation, therefore, the proportion of constant to variable capital
changes. If it was originally say 1 : 1, it now becomes successively 2 :
1, 3 : 1, 4 : 1, 5 : 1, 7 : 1, etc., so that, as the capital increases,
instead of 1/2 of its total value, only 1/3, 1/4, 1/5, 1/6, 1/8, etc.,
is transformed into labour-power, and, on the other hand, 2/3, 3/4, 4/5,
5/6, 7/8 into means of production. Since the demand for labour is
determined not by the amount of capital as a whole, but by its variable
constituent alone, that demand falls progressively with the increase of
the total capital, instead of, as previously assumed, rising in
proportion to it. It falls relatively to the magnitude of the total
capital, and at an accelerated rate, as this magnitude increases. With
the growth of the total capital, its variable constituent or the labour
incorporated in it, also does increase, but in a constantly diminishing
proportion. The intermediate pauses are shortened, in which accumulation
works as simple extension of production, on a given technical basis. It
is not merely that an accelerated accumulation of total capital,
accelerated in a constantly growing progression, is needed to absorb an
additional number of labourers, or even, on account of the constant
metamorphosis of old capital, to keep employed those already
functioning. In its turn, this increasing accumulation and
centralisation becomes a source of new changes in the composition of
capital, of a more accelerated diminution of its variable, as compared
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, production at high pressure, crisis and stagnation, depends on
the constant formation, the greater or less absorption, and the
re-formation of the industrial reserve army or surplus population. In
their turn, the varying phases of the industrial cycle recruit the
surplus population, and become one of the most energetic 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.




_CHAPTER VII_

ANALYSIS OF MARX'S DIAGRAM OF ENLARGED REPRODUCTION


The first enlargement of reproduction gave the following picture:

   I.  _4,400c + 1,100v + 1,100s = 6,600_
  II.  _1,600c +   800v +   800s = 3,200_
                                   -----
                            Total: 9,800

This already clearly expresses the interdependence of the two
departments--but it is a dependence of a peculiar kind. Accumulation
here originates in Department I, and Department II merely follows suit.
Thus it is Department I alone that determines the volume of
accumulation. Marx effects accumulation here by allowing Department I to
capitalise one-half of its surplus value; Department II, however, may
capitalise only as much as is necessary to assure the production and
accumulation of Department I. He makes the capitalists of Department II
consume 600_s_ as against the consumption of only 500_s_ by the
capitalists of Department I who have appropriated twice the amount of
value and far more surplus value. In the next year, he assumes the
capitalists of Department I again to capitalise half their surplus
value, this time making the capitalists of Department II capitalise more
than in the previous year--summarily fixing the amount to tally exactly
with the needs of Department I. 500_s_ now remain for the consumption of
the capitalists of Department II--less than the year before--surely a
rather queer result of accumulation on any showing. Marx now describes
the process as follows:

'Then let Department I continue accumulation at the same ratio, so that
550_s_ are spent as revenue, and 55_s_ accumulated. In that case, 1,100
I_v_ are first replaced by 1,100 I_c_, and 550 I_s_ must be realised in
an equal amount of commodities of II, 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 remaining 50 must be made up out of 800 II_s_.
Leaving aside the money aspect of the matter, we have as a result of
this transaction:

'I. _4,400c + 550s_ (to be capitalised); furthermore, realised in
commodities of II for the fund for consumption of the capitalists and
labourers of I, 1,650 (_v + s_).

'II. _1,650c + 825v + 725s_.

'In Department I, 550_s_ must be capitalised. If the former proportion
is maintained, 440 of this amount form constant capital, and 110
variable capital. These 110 must be eventually taken out of 725 II_s_,
that is to say, articles of consumption to the value of 110 are consumed
by the labourers of I instead of the capitalists of II, so that the
latter are compelled to capitalise these 110_s_ which they cannot
consume. This leaves 615 II_s_ of the 725 II_s_. But if II thus converts
these 110 into additional constant capital, it requires an additional
variable capital of 55. This again must be taken out of its surplus
value. Subtracting this amount from 615 II_s_, we find that only 560
II_s_ remain for the consumption of the capitalists of II, and we obtain
the following values of capital after accomplishing all actual and
potential transfers:

   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]

This quotation is given at length since it shows very clearly how Marx
here effects accumulation in Department I at the expense of Department
II. In the years that follow, the capitalists of the provisions
department get just as rough a deal. Following the same rules, Marx
allows them in the third year to accumulate 264_s_--a larger amount this
time than in the two preceding years. In the fourth year they are
allowed to capitalise 290_s_ and to consume 678_s_, and in the fifth
year they accumulate 320_s_ and consume 745_s_. Marx even says: 'If
things are to proceed normally, accumulation in II must take place more
rapidly than in I, because that portion of I(_v + s_) which must be
converted into commodities of II_c_, would otherwise grow more rapidly
than II_c_, for which it can alone be exchanged.'[104]

Yet the figures we have quoted fail to show a quicker accumulation in
Department II, and in fact show it to fluctuate. Here the principle
seems to be as follows: Marx enables accumulation to continue by
broadening the basis of production in Department I. Accumulation in
Department II appears only as a condition and consequence of
accumulation in Department I: absorbing, in the first place, the other's
surplus means of production and supplying it, secondly, with the
necessary surplus of consumer goods for its additional labour.
Department I retains the initiative all the time, Department II being
merely a passive follower. Thus the capitalists of Department II are
only allowed to accumulate just as much as, and are made to consume no
less than, is needed for the accumulation of Department I. While in
Department I half the surplus value is capitalised every time, and the
other half consumed, so that there is an orderly expansion both of
production and of personal consumption by the capitalists, the twofold
process in Department II takes the following erratic course:

  1st year: 150 are capitalised, 600 consumed
  2nd       240                  660
  3rd       254                  626
  4th       290                  678
  5th       320                  745

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

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

It might, however, be permissible to assume the defect to lie in a
rather unhappy choice of example. Marx himself, dissatisfied with the
diagram quoted above, proceeded forthwith to give a second example in
order to elucidate the movements of accumulation, where the figures of
the equation run in the following order:

   I.  _5,000c + 1,000v + 1,000s = 7,000_
  II.  _1,430c +   285v +   285s = 2,000_
                                   -----
                            Total: 9,000

In contrast to the previous example, the capital of both departments is
here seen to have the same composition, i.e. constant and variable
capital are in a ratio of 5 to 1. This already presupposes a
considerable development of capitalist production, and accordingly of
social labour productivity--a considerable preliminary expansion of the
scale of production, and finally, a development of all the circumstances
which bring about a relatively redundant surplus population in the
working class. We are no longer introduced to enlarged reproduction, as
in the first example, at the stage of the original transition from
simple to enlarged reproduction--the only point of that is in any case
for the sake of abstract theory. This time, we are brought face to face
with the process of accumulation as it goes on at a definite and rather
advanced stage of development. It is perfectly legitimate to assume
these conditions, and they in no way distort the principles we must
employ in order to work out the individual loops of the reproductive
spiral. Here again Marx takes for a starting point the capitalisation of
half the surplus value in Department I.

'Now take it that the capitalist class of I consumes one-half of the
surplus-value, or 500, and accumulates the other half. In that case
(_1,000v + 500s_) I, or 1,500, must be converted into 1,500 II_c_. Since
II_c_ amounts to only 1,430, it is necessary to take 70 from the
surplus-value. Subtracting this sum from 285_s_ leaves 215 II_s_. Then
we have:

'I. _5,000c + 500s_ (to be capitalised) + 1,500(_v + s_) in the fund
set aside for consumption by capitalists and labourers.

'II. _1,430c + 70s_ (to be capitalised) + _285v + 215s_. As 70 II_s_ are
directly annexed by II_c_, 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 215_s_, so that only 201 remain, and we have:

  'II _(1,430) + 70c + (285v + 14v) + 201s_.'[105]

After these preliminary arrangements, capitalisation can now proceed.
This is done as follows:

In Department I the 500_s_ which have been capitalised are divided into
five-sixths (417_c_) + one-sixth (83_v_). These 83_v_ withdraw a
corresponding amount from II_s_ which serves to buy units of constant
capital and thus accrues to II_c_. An increase of II_c_ by 83 involves
the necessity of an increase in II_v_ by 17 (one-fifth of 83). After the
completion of this turnover we therefore have:

   I. _(5,000c + 417s) + (1,000v + 83s)v = 5,417c + 1,083v = 6,500_
  II. _(1,500c +  83s) +   (299v + 17s)  = 1,538c +   316v = 1,899_
                                                             -----
                                                      Total: 8,399

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 to 1,899, i.e. by
just over one-ninth.

At the end of the next year, the results of reproduction on this basis
are:

   I. _5,417c + 1,083v + 1,083s = 7,583_
  II. _1,583c +   316v +   316s = 2,215_
                                  -----
                           Total: 9,798

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

   I. _5,869c + 1,173v + 1,173s = 8,215_
  II. _1,715c +   342v +   342s = 2,399_
                                 ------
                          Total: 10,614

And at the end of the third year:

   I. _6,358c + 1,271v + 1,271s = 8,900_
  II. _1,858c +   371v +   371s = 2,600_
                                 ------
                          Total: 11,500

In the course of three years, the total social capital has increased
from 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, in marked
difference from the first example. From the second year onwards, both
departments capitalise half their surplus value and consume the other
half. A bad choice of figures in the first example thus seems to be
responsible for its arbitrary appearance. But we must check up to make
sure that it is not only a mathematical manipulation with cleverly
chosen figures which this time ensures the smooth progress of
accumulation.

In the first as well as in the second example, we are continually struck
by a seemingly general rule of accumulation: to make any accumulation
possible, Department II must always enlarge its constant capital by
precisely the amount by which Department I increases (_a_) the
proportion of surplus value for consumption and (_b_) its variable
capital. If we take the example of the first year as an illustration,
the constant capital of Department II must be increased by 70. And why?
because this capital was only 1,430 before.

But if the capitalists of Department I wish to accumulate half their
surplus value (1,000) and to consume the other half, they need consumer
goods for themselves and for their workers to the tune of 1,500 units
which they can obtain only from Department II in exchange for their own
products--means of production. Since Department II has already satisfied
its own demand for producer goods to the extent of its own constant
capital (1,430), this exchange is only possible if Department II decides
to enlarge its own constant capital by 70. This means that it must
enlarge its own production--and it can do so only by capitalising a
corresponding part of its surplus value. If this surplus value amounts
to 285 in Department II, 70 of it must be added to the constant capital.
The first step towards expansion of production in Department II is thus
demonstrated to be at the same time the condition for, and the
consequence of, increased consumption by the capitalists of Department
I. But to proceed. Hitherto, the capitalists of Department I could only
spend one-half of their surplus value (500) on personal consumption. To
capitalise the other half, they must redistribute these 500_s_ in such a
way as to maintain at least the previous ratio of composition, i.e. they
must increase the constant capital by 417 and the variable capital by
83. The first operation presents no difficulties: the surplus value of
500 belonging to the capitalists of Department I is contained in a
natural form in their own product, the means of production, and is fit
straightway to enter into the process of production; Department I can
therefore enlarge its constant capital with the appropriate quantity of
its own product. But the remaining 83 can only be used as variable
capital if there is a corresponding quantity of consumer goods for the
newly employed workers. Here it becomes evident for the second time that
accumulation in Department I is dependent upon Department II: Department
I must receive for its workers 83 more consumer goods than before from
Department II. As this is again possible only by way of commodity
exchange, Department I can satisfy its demands only on condition that
Department II is prepared for its part to take up products of Department
I, producer goods, to the tune of 83. Since Department II has no use for
the means of production except to employ them in the process of
production, it becomes not only possible but even necessary that
Department II should increase its own constant capital by these very 83
which will now be used for capitalisation and are thus again withdrawn
from the consumable surplus value of this department. The increase in
the variable capital of Department I thus entails the second step in the
enlargement of production in Department II. All material prerequisites
of accumulation in Department I are now present and enlarged
reproduction can proceed. Department II, however, has so far made only
two increases in its constant capital. The result of this enlargement is
that if the newly acquired means of production are indeed to be used,
the quantity of labour power must be increased correspondingly.
Maintaining the previous ratio, the new constant capital of 153 requires
a new variable capital of 31. This implies the necessity to capitalise a
corresponding further amount of the surplus value. Thus the fund for the
capitalists' personal consumption in Department II comes to be what
remains of the surplus value (285_s_) after deduction of the amounts
used for twice enlarging the constant capital (70 + 83) and a
commensurate increase in the variable capital (31)--a fund of 101, after
deducting a total of 184. Similar operations in the second year of
accumulation result for Department II in its surplus value being divided
into 158 for capitalisation and 158 for the consumption of its
capitalists, and in the third year, the figures become 172 and 170
respectively.

We have studied this process so closely, tracing it step by step,
because it shows clearly that the accumulation of Department II is
completely determined and dominated by the accumulation of Department I.
Though this dependence is no longer expressed, as in Marx's first
example, by arbitrary changes in the distribution of the surplus value,
it does not do away with the fact itself, even if now the surplus value
is always neatly halved by each department, one-half for capitalisation
and the other for personal consumption. Though there is nothing to
choose between the capitalists of the two departments as far as the
figures are concerned, it is quite obvious that Department I has taken
the initiative and actively carries out the whole process of
accumulation, while Department II is merely a passive appendage. This
dependence is also expressed in the following precise rule: accumulation
must proceed simultaneously in both departments, and it can do so only
on condition that the provisions-department increases its constant
capital by the precise amount by which the capitalists of the
means-of-production-department increase both their variable capital and
their fund for personal consumption. This equation (increase II_c_ =
increase I_v_ + increase I_s.c_.)[106] is the mathematical cornerstone
of Marx's diagram of accumulation, no matter what figures we may choose
for its concrete application. But now we must see whether capitalist
accumulation does in actual fact conform to this hard and fast rule.

Let us first return to simple reproduction. Marx's diagram, it will be
remembered, was as follows:

   I. _4,000c + 1,000v + 1,000s = 6,000_ means of production
  II. _2,000c +   500v +   500s = 3,000_ means of consumption
                                  -----
                                  9,000 total production

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

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

(_b_) The constant capital of Department II equals the sum of variable
capital and surplus value in Department I--a necessary consequence of
(_a_).

(_c_) The product of Department II equals the sum of variable capital
and surplus value in both departments--a necessary consequence of (_a_)
and (_b_).

These equations correspond to the conditions of capitalist commodity
production (at the restricted level of simple reproduction, however).
Equation (_b_), for instance, is a result of the production of
commodities, entailed by the fact, in other words, that the
entrepreneurs of either department can only obtain the products of the
other by an exchange of equivalents. Variable capital and surplus value
in Department I together represent the demand of this department for
consumer goods. The product of Department II must provide for the
satisfaction of this demand, but consumer goods can only be obtained in
exchange for an equivalent part of the product of Department I, the
means of production. These equivalents, useless to Department II in
their natural form if not employed as constant capital in the process of
production, will thus determine how much constant capital there is to be
in Department II. If this proportion were not adhered to, if, e.g., the
constant capital of Department 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 goods would
be too small; if the constant capital (II) were smaller than I(_v +
s.c_), either the previous quantity of labour power could not be
employed in this department, or the capitalists could not consume the
whole of their surplus value. In all these cases, 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 commodity production. To
convince us of this fact, there is a simple means at hand. Let us
imagine for a moment that, instead of a capitalist method of production,
we have a socialist, i.e. a planned society in which the social division
of labour has come to replace exchange. This society also will divide
its labour power into producers of means of production and producers of
means of consumption. Let us further imagine the technical development
of labour to be such that two-thirds of social labour are employed in
the manufacture of producer goods and one-third in the manufacture of
consumer goods. Suppose that under these conditions 1,500 units
(reckoned on a daily, monthly, or yearly basis) suffice to maintain the
whole working population of the society, one thousand of these being
employed, according to our premise, in Department soc. I (making means
of production), and five hundred in Department soc. II (making consumer
goods), and that the means of production dating from previous 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 more labour will be needed to maintain all
those of its members who do not work in the material, the productive
sense of the term: the child, the old and sick, the civil servant, the
artist and the scientist. Moreover, every society needs certain reserves
against a rainy day, as a protection against natural calamities. Taking
it that precisely the same quantity of labour and, similarly, of means
of production as that required for the workers' own maintenance is
needed to maintain all the non-workers and to build up the reserves,
then, from the figures previously assumed, we should get the following
diagram for a regulated production:

   I. _4,000c + 1,000v + 1,000s = 6,000_ means of production
  II. _2,000c +   500v +   500s = 3,000_ means of consumption

Here _c_ stands for the material means of production that have been
used, expressed in terms of social labour time; _v_ stands for the
social labour time necessary to maintain the workers themselves and _s_
for that needed to maintain those who do not work and to build up the
reserves.

If we check up on the proportions of this diagram, we obtain the
following result: there is neither commodity production nor exchange,
but in truth a social division of labour. The products of Department I
are assigned to the workers of Department II in the requisite
quantities, and the products of Department II are apportioned to
everyone, worker or no, in both departments, and also to the
reserve-fund; all this being the outcome not of an exchange of
equivalents but of a social organisation that plans and directs the
process as a whole--because existing demands must be satisfied and
production knows no other end but 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 I_c_ + II_c_: this means simply that
Department I must annually renew all the means of production which
society has used up during one year's labour. The product of Department
II must equal the sum of I(_v + s_) + II(_v + s_): this means that
society must each year produce as many consumer goods as are required by
all its members, whether they work or not, plus a quota for the reserve
fund. The proportions of the diagram are as natural and as inevitable
for a planned economy as they are for a capitalist economy based upon
anarchy and the exchange of commodities. This proves the diagram to have
objective social validity, even if, just because it concerns _simple_
reproduction, it has hardly more than theoretical interest for either a
capitalist or a planned economy, finding practical application only in
the rarest of cases.

The same sort of scrutiny must now be turned on the diagram of enlarged
reproduction. Taking Marx's second example as the basis for our test,
let us again imagine a socialist society. From the point of view of a
regulated society we shall, of course, have to start with Department II,
not with Department I. Assuming this society to grow rapidly, the result
will be an increasing demand for provisions by its members, whether they
work or not. This demand is growing so quickly that a constantly
increasing quantity of labour--disregarding for the moment the progress
of labour productivity--will be needed for the production of consumer
goods. The quantities required, expressed in terms of social labour
incorporated in them, increase from year to year in a progression of,
say, 2,000 : 2,215 : 2,399 : 2,600 and so on. Let us further assume that
technical conditions demand an increasing amount of means of production
for producing this growing quantity of provisions, which, again measured
in terms of social labour, mounts from year to year in the following
progression: 7,000 : 7,583 : 8,215 : 8,900 and so on. To achieve this
enlargement of production, we must further have a growth in the labour
performed _per annum_ according to the following progression: 2,570 :
2,798 : 3,030 : 3,284. [The figures correspond to the respective amounts
of I(_v + s_) + II(_v + s_).] Finally, the labour performed annually
must be so distributed that one-half is always used for maintaining the
workers themselves, a quarter for maintaining those who do not work, and
the last quarter for the purpose of enlarging production in the
following year. Thus we obtain the proportions of Marx's second diagram
of enlarged reproduction for a socialist society. In fact, three
conditions are indispensable if production is to be enlarged in any
society, even in a planned economy: (1) the society must have an
increasing quantity of labour power at its disposal; (2) in every
working period, the immediate needs of society must not claim the whole
of its working time, so that part of the time can be devoted to making
provision for the future and its growing demands; (3) means of
production must be turned out year after year in sufficiently growing
quantities--without which production cannot be enlarged on a rising
scale. In respect of all these general points, Marx's diagram of
enlarged reproduction has objective validity--_mutatis mutandis_--for a
planned society.

It remains to test whether it is also valid for a capitalist economy.
Here we must ask first of all: what is the starting point of
accumulation? That is the approach on which we have to investigate the
mutual dependence of the accumulative process in the two departments of
production. There can be no doubt that under capitalist conditions
Department II is dependent upon Department I in so far as its
accumulation is determined by the additional means of production
available. Conversely, the accumulation in Department I depends upon a
corresponding quantity of additional consumer goods being available for
its additional labour power. It does not follow, however, that so long
as both these conditions are observed, accumulation in both departments
is bound, as Marx's diagram makes it appear, to go on automatically year
after year. The conditions of accumulation we have enumerated are no
more than those without which there can be no accumulation. There may
even be a desire to accumulate in both departments, yet the desire to
accumulate plus the technical prerequisites of accumulation is not
enough in a capitalist economy of commodity production. A further
condition is required to ensure that accumulation can in fact proceed
and production expand: the effective demand for commodities must also
increase. Where is this continually increasing demand to come from,
which in Marx's diagram forms the basis of reproduction on an ever
rising scale?

It cannot possibly come from the capitalists of Departments I and II
themselves--so much is certain right away--it cannot arise out of their
personal consumption. On the contrary, it is the very essence of
accumulation that the capitalists refrain from consuming a part of their
surplus value which must be ever increasing--at least as far as absolute
figures are concerned--that they use it instead to make goods for the
use of other people. It is true that with accumulation the personal
consumption of the capitalist class will grow and that there may even be
an increase in the total value consumed; nevertheless it will still be
no more than a part of the surplus value that is used for the
capitalists' consumption. That indeed is the foundation of accumulation:
the capitalists' abstention from consuming the whole of their surplus
value. But what of the remaining surplus value, the part that is
accumulated? For whom can it be destined? According to Marx's diagram,
Department I has the initiative: the process starts with the production
of producer goods. And who requires these additional means of
production? The diagram answers that Department II needs them in order
to produce means of consumption in increased quantities. Well then, who
requires these additional consumer goods? Department I, of
course--replies the diagram--because it now employs a greater number of
workers. We are plainly running in circles. From the capitalist point of
view it is absurd to produce more consumer goods merely in order to
maintain more workers, and to turn out more means of production merely
to keep this surplus of workers occupied. Admittedly, as far as the
individual capitalist is concerned, the worker is just as good a
consumer, i.e. purchaser of his commodity, as another capitalist or
anyone else, provided that he can pay. Every individual capitalist
realises his surplus value in the price of his commodity, whether he
sells it to the worker or to some other buyer. But this does not hold
true from the point of view of the capitalist class as a whole. The
working class in general receives from the capitalist class no more than
an assignment to a determinate part of the social product, precisely to
the extent of the variable capital. The workers buying consumer goods
therefore merely refund to the capitalist class the amount of the wages
they have received, their assignment to the extent of the variable
capital. They cannot return a groat more than that; and if they are in a
position to save in order to make themselves independent as small
entrepreneurs, they may even return less, though this is the exception.

Part of the surplus value is consumed by the capitalist class itself in
form of consumer goods, the money exchanged for these being retained in
the capitalists' pockets. But who can buy the products incorporating the
other, the capitalised part of the surplus value? Partly the capitalists
themselves--the diagram answers--who need new means of production for
the purpose of expanding production, and partly the new workers who will
be needed to work these new means of production. But that implies a
previous capitalist incentive to enlarge production; if new workers are
set to work with new means of production, there must have been a new
demand for the products which are to be turned out.

Perhaps the answer is that the natural increase of the population
creates this growing demand. In fact, the growth of the population and
its needs provided the starting point for our examination of enlarged
reproduction in an hypothetical socialist society. There the
requirements of society could serve as an adequate basis, since the only
purpose of production was the satisfaction of wants. In a capitalist
society, however, the matter is rather different. What kind of people
are we thinking of when we speak of an increase in the population? There
are only two classes of the population according to Marx's diagram, the
capitalists and the workers. The natural increase of the former is
already catered for by that part of the surplus value which 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 value would mean a reversion to simple
reproduction. That leaves the workers, their class also growing by
natural increase. Yet a capitalist economy is not interested in this
increase for its own sake, as a starting point of growing needs.

The production of consumer goods for I_v_ and II_v_ is not an end in
itself, as it would be in a society where the economic system is shaped
for the workers and the satisfaction of their wants. In a capitalist
system, Department II does not produce means of consumption in large
quantities simply to keep the workers of Departments I and II. Quite the
contrary: a certain number of workers in Departments I and II can
support themselves in every case because their labour power is useful
under the obtaining conditions of supply and demand. This means that
the starting point of capitalist production is not a given number of
workers and their demands, but that these factors themselves are
constantly fluctuating, 'dependent variables' of the capitalist
expectations of profit. The question is therefore whether the natural
increase of the working class also entails a growing effective demand
over and above the variable capital. And that is quite impossible. The
only source of money for the working class in our diagram is the
variable capital which must therefore provide in advance for the natural
increase of the workers. One way or the other: either the older
generation must earn enough to keep their offspring--who cannot, then,
count as additional consumers; or, failing that, the next generation,
the young workers, must turn to work in order to obtain wages and means
of subsistence for themselves--in which case the new working generation
is already included in the number of workers employed. On this count,
the process of accumulation in Marx's diagram cannot be explained by the
natural increase of the population.

But wait! Even under the sway of capitalism, society does not consist
exclusively of capitalists and wage labourers. Apart from these two
classes, there are a host of other people: the landowners, the salaried
employees, the liberal professions such as doctors, lawyers, artists and
scientists. Moreover, there is the Church and its servants, the Clergy,
and finally the State with its officials and armed forces. All these
strata of the population can be counted, strictly speaking, neither
among the capitalist nor among the working class. Yet society has to
feed and support them. Perhaps it is they, these strata apart from the
capitalists and wage labourers, who call forth enlarged reproduction by
their demand. But this seeming solution cannot stand up to a closer
scrutiny. The landowners must as consumers of rent, i.e. of part of the
surplus value, quite obviously be numbered among the capitalist class;
since we are here concerned with the surplus value in its undivided,
primary form, their consumption is already allowed for in the
consumption of the capitalist class. The liberal professions in most
cases obtain their money, i.e. the assignment to part of the social
product, directly or indirectly from the capitalist class who pay them
with bits of their own surplus value. And the same applies to the
Clergy, with the difference only that its members also obtain their
purchasing power in part from the workers, i.e. from wages. The upkeep
of the State, lastly, with its officers and armed forces is borne by the
rates and taxes, which are in their turn levied upon either the surplus
value or the wages. Within the limits of Marx's diagram there are in
fact only the two sources of income in a society: the labourers' wages
and the surplus value. All the strata of the population we have
mentioned as apart from the capitalists and the workers, are thus to be
taken only for joint consumers of these two kinds of income. Marx
himself rejects any suggestion that 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 annual produce of
commodities--in other words, their articles of consumption ... only out
of the hands of those classes who are the first to handle the product,
that is to say, productive labourers, industrial capitalists, and real
estate owners. To that extent their revenues are substantially derived
from wages (of the productive labourers), profit and ground rent, and
appear as indirect derivations when compared to these primary sources of
revenue. But, on the other hand, the recipients of these revenues, thus
indirectly 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 sources of their
revenue.'[107]

And about the consumers of interest and ground rent as buyers, Marx
says: 'Now, if that portion of the surplus-value of commodities, which
the industrial capitalist yields in the form of ground rent or interest
to other shareholders in the surplus-value, cannot be in the long run
converted into money by the sale of the commodities, then there is an
end to the payment of rent and interest, and the landowners or
recipients of interest can no longer serve in the role of miraculous
interlopers, who convert aliquot portions of the annual reproduction
into money by spending their revenue. The same is true of the
expenditure of all so-called unproductive labourers, State officials,
physicians, lawyers, etc., and others who serve economists as an excuse
for explaining inexplicable things, in the role of the 'general
public'.[108]

Seeing that we cannot discover within capitalist society any buyers
whatever for the commodities in which the accumulated part of the
surplus value is embodied, only one thing is left: foreign trade. But
there are a great many objections to a method that conceives of foreign
trade as a convenient dumping ground for commodities which cannot be
found any proper place in the reproductive process. Recourse to foreign
trade really begs the question: the difficulties implicit in the
analysis are simply shifted--quite unresolved--from one country to
another. Yet if the analysis of the reproductive process actually
intends not any single capitalist country but the capitalist world
market, there can be no foreign trade: all countries are 'home'. This
point is made by Marx already in the first volume of _Capital_, in
connection with accumulation:

'We here take no account of export trade, by means of which a nation can
change articles of luxury either into means of production or means of
subsistence, and _vice versa_. In order to examine the object of our
investigation in its integrity, free from all disturbing subsidiary
circumstances, we must treat the whole world as one nation and assume
that capitalist production is everywhere established and has possessed
itself of every branch of industry.'[109]

The same difficulty presents itself if we consider the matter from yet
another aspect. In Marx's diagram of accumulation we assumed that the
portion of the social surplus value intended for accumulation exists
from the first in a natural form which demands it to be used for
capitalisation.

'In one word, surplus-value is convertible into capital solely because
the surplus-product, whose value it is, already comprises the material
elements of new capital.'[110]

In the figures of our diagram:

   I. _5,000c + 1,000v + 1,000s = 7,000_ means of production
  II. _1,430c +   285v +   285s = 2,000_ means of consumption

Here, a surplus value of 570_s_ can be capitalised because from the very
outset it consists in means of production. To this quantity of producer
goods there correspond besides additional consumer goods to the amount
of 114_s_ so that 684_s_ can be capitalised in all. But the process here
assumed of simply transferring means of production to constant capital
on the one hand, consumer goods to variable capital on the other, in
commensurate quantities, is in contradiction with the very structure of
capitalist commodity production. Whatever natural form the surplus value
may have, there can be no immediate transfer to the place of production
for the purpose of accumulation. It must first 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 surplus value has to shed
its natural form and assume the form of pure value before it can be
added to productive capital. This is true for each individual capitalist
and also for the 'aggregate capitalist' of society, it being a prime
condition for capitalist production that the surplus value must be
realised in the form of pure value. Accordingly, regarding reproduction
from the point of view of society as a whole--

'We must not follow the manner copied by Proudhon from bourgeois
economy, which looks upon this matter as though a society with a
capitalist mode of production would lose its specific historical and
economic characteristics by being taken as a unit. Not at all. We have,
in that case, to deal with the aggregate capitalist.'[112]

The surplus value must therefore shed its form as surplus product before
it can re-assume it for the purpose of accumulation; by some means or
other it must first pass through the money stage. So the surplus product
of Departments I and II must be bought--by whom? On the above showing,
there will have to be an effective demand outside I and II, merely in
order to realise the surplus value of the two departments, just so that
the surplus product can be turned to cash. Even then, we should only
have got to the stage where the surplus value has become money. If this
realised surplus value is further to be employed in the process of
enlarging reproduction, in accumulation, an even larger demand must be
expected for the future, a demand which is again to come from
outside the two departments. Either the demand for the surplus
product will therefore have to increase annually in accordance
with the rate of increase of the accumulated surplus value, or--_vice
versa_--accumulation can only proceed precisely in so far as the demand
outside I and II is rising.

FOOTNOTES:

[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
part of entering the process of production without any exchange, such as
coal in the 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.




_CHAPTER VIII_

MARX'S ATTEMPT TO RESOLVE THE DIFFICULTY


Complete abstraction from the circulation of money, though making the
process of accumulation so smooth and simple in the diagram of enlarged
reproduction, has great disadvantages of its own, we see. There was much
to be said 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 distribution of the social product among
the various groups of consumers--the agent for the renewal of capital.
In the process of accumulation, however, the money form has an essential
function: it no longer serves as a mere agent in the circulation of
commodities--here it has come to be a feature of capital itself, an
element in the circulation of capital. Even if the transformation of the
surplus value is not essential to real reproduction, it is the economic
_sine qua non_ of capitalist accumulation. In the transition from
production to reproduction, the surplus product is thus subjected to two
metamorphoses: first it casts off its use-form and then it assumes a
natural form which is fit for the purpose of accumulation. The point
here is not that the different cycles of production are counted off in
units of years. It would be just as well to take the month; for that
matter, the successive transformation of individual portions of the
surplus value in Departments I and II may even intersect in time. Series
of years here do not mean units of time but really intend the sequence
of economic transformations. What matters is that this sequence must be
observed if accumulation is to keep its capitalist character, whether it
extends over a longer or a shorter period of time. This brings us back
to the old question: How, and by whom, is the accumulated surplus value
to be realised?

Marx was well aware that his seemingly water-tight scheme of
accumulation did not cover this point adequately, and he himself kept
reviewing the problem from various angles. What he says is this:

'It has been shown in volume i, how accumulation works in the case of
the individual capitalist. By the conversion of the commodity-capital
into money, the surplus-product, in which the surplus-value is
incorporated, is also monetised. The capitalist reconverts the
surplus-value thus monetised into additional natural elements of his
productive capital. In the next cycle of production the increased
capital furnishes an increased product. But what happens in the case of
the individual capital, must also show in the annual reproduction of
society as a whole, just as we have seen it does in the case of
reproduction on a simple scale, where the successive precipitation of
the depreciated elements of fixed capital in the form of money,
accumulated as a hoard, also makes itself felt in the annual
reproduction of society.'[113]

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

'For instance, capitalist A, who sells during one year, or during a
number of successive years, certain quantities of commodities produced
by him, thereby converts that portion of the commodities, which bears
surplus-value, the surplus-product, or, in other words, the
surplus-value produced by himself, successively into money, accumulates
it gradually, and thus makes for himself a new potential money-capital.
It is potential money-capital on account of its capacity and destination
of being converted into the elements of productive capital. But
practically he merely accumulates a simple hoard, which is not an
element of actual production. His activity for the time being consists
only in withdrawing circulating money out of circulation. Of course, it
is not impossible that the circulating money thus laid away by him was
itself, before it entered into circulation, a portion of some other
hoard.'[114] 'Money is withdrawn from circulation and accumulated as a
hoard by the sale of commodities without a subsequent purchase. If this
operation is conceived as one taking place universally, then it seems
inexplicable where the buyers are to come from, since in that case
everybody would want to sell in order to hoard, and no one would want
to buy. And it must be so conceived, since every individual capital may
be in process of accumulation.

'If we were to conceive of the process of circulation as one taking
place in a straight line between the various divisions of annual
reproduction--which would be incorrect as it consists with a few
exceptions of mutually retroactive movements--then we should have to
start out from the producer of gold (or silver) who buys without
selling, and to assume that all others sell to him. In that case, the
entire social surplus-product of the current year would pass into his
hands, representing the entire surplus-value of the year, and all the
other capitalists would distribute among themselves their relative
shares in his surplus-product, which consists naturally of money, gold
being the natural form of his surplus-value. For that portion of the
product of the gold producer, which has to make good his active capital,
is already tied up and disposed of. The surplus-value of the gold
producer, in the form of gold, would then be the only fund from which
all other capitalists would have to derive the material for the
conversion of their annual surplus-product into gold. The magnitude of
its value would then have to be equal to the entire annual surplus-value
of society, which must first assume the guise of a hoard. Absurd as this
assumption would be, it would accomplish nothing more than to explain
the possibility of a universal formation of a hoard at the same period.
It would not further reproduction itself, except on the part of the gold
producer, by one single step.

'Before we solve this _seeming difficulty_, we must
distinguish....'[115]

The obstacle in the way of realising the surplus value which Marx here
calls a 'seeming difficulty' nevertheless is important enough for the
whole further discussion in _Capital_, volume ii, to be concentrated on
overcoming it. As a first attempt, Marx proffers the solution of a hoard
which, owing to the separation of the different individual constant
capitals in the process of circulation, will inevitably be formed in a
capitalist system of production. Inasmuch as different capital
investments have different spans of life, and there is always an
interval before the parts of a plant are due for renewal, at any given
moment we may find that one individual capitalist is already busy
renewing his plant, while another is still building up reserves from
the proceeds yielded by the sale of his commodities against the day
when he will have enough to renew his fixed capital.

'For instance, let A sell 600, representing _400c + 100v + 100s_ to B,
who may represent more than one buyer. A sells 600 in commodities for
600 in money, of which 100 are surplus-value which he withdraws from
circulation and hoards in the form of money. But these 100 in money are
but the money-form of the surplus-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 the surplus value is used for the
capitalists' personal consumption; in addition, A´, A´´ and A´´´ as well
as B´, B´´ and B´´´ here belong to Department I.

'The formation of a hoard, then, is not a production, nor is it an
increment of production. The action of the capitalist consists merely in
withdrawing from circulation 100 obtained by the sale of his
surplus-product, in holding and hoarding this amount. This operation is
carried on, not alone on the part of A, but at numerous points of the
periphery of circulation by other capitalists named A´, A´´, A´´´....
However, A accomplishes the formation 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. His successive production of surplus-products, the bearers of
his surplus-value convertible into money, is therefore a premise for the
formation of his hoard. In the present case, where we are dealing only
with the circulation within Department I, the natural form of the
surplus-product, and of the total product of which 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 production creating means of production. We shall
see presently what becomes of it, what function it performs, in the
hands of the buyers such as B, B´, B´´, etc.

'It must particularly be noted at this point that A, while withdrawing
money from circulation and hoarding it, on the other hand throws
commodities into it without withdrawing other commodities in return. The
capitalists, B, B´, B´´, etc., are thereby enabled to throw only money
into it and withdraw only commodities from it. In the present case,
these commodities, according to their natural form and destination,
become a fixed or circulating element of the constant capital of B, B´,
etc.'[117]

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

If, by way of answer, we are referred to the process of hoarding
attendant upon the gradual renewal of the constant capital by the
individual capitalists at various times, the connection between these
two points remains obscure. As long as B, B´ and B´´, etc., buy producer
goods from their colleagues A, A´ and A´´ in order to renew their
constant capital that has in fact been used up, the limits of simple
reproduction are not transcended, and the whole thing has nothing to do
with our problem. The moment the producer goods purchased by B, B´, B´´,
etc., serve to increase their constant capital, however, for purposes of
accumulation, a number of new questions clamour for attention. First and
foremost where do the B's get the cash to buy an additional product from
the A's? The only way they could have made their money is by sale of
their own surplus product. Before they can acquire new means of
production for expanding their enterprises, before they appear as
buyers, that is to say, of the surplus product that is to be
accumulated, they must first have disposed of their own surplus
product--in a word, B, B´, B´´, etc., must have been vendors themselves.
But who could have bought their surplus product? It is obvious that the
difficulty is simply shifted from the A's to the B's without having been
mastered.

At one stage of the analysis it really does seem for a time as if a
solution were found at last. After a short digression, Marx returns to
the main line of his investigation in the following words:

'In the present case, this surplus-product consists at the outset of
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 constant capital. But it is
virtually that even in the hands of the accumulators of hoards, the
capitalists A, A´, A´´, (I), before it is sold. If we consider merely
the volume of values of the reproduction on the part of I, then we are
still moving within the limits of simple reproduction, for no additional
capital has been set in motion for the purpose of creating this virtual
additional capital (the surplus-product), nor has any greater amount of
surplus-labour been performed than that done on the basis of simple
reproduction. The difference is here only one of the form of the
surplus-labour performed, of the concrete nature of its particularly
useful service. It is expended in means of production for Department
I_c_ instead of II_c_, in means of production of means of production
instead of means of production of articles of consumption. In the case
of simple reproduction it had been assumed that the entire surplus-value
was spent as revenue in the commodities of II. Hence it consisted only
of such means of production as restore the constant capital of II_c_ in
its natural form. In order that the transition from simple to expanded
reproduction may take place, the production in Department I must be
enabled to create fewer elements for the constant capital of II and more
for that of I.... Considering the matter merely from the point of view
of the volume of values, it follows, then, that the material
requirements of expanded reproduction are produced within simple
reproduction. It is simply a question of the expenditure of the
surplus-labour of the working class of I for the production of means of
production, the creation of virtual additional capital of I. The virtual
additional money-capital, created on the part of A, A´, A´´, by the
successive sale of their surplus-product, which was formed without any
capitalist expenditure of money, is in this case simply the money-form
of the additional means of production made by I.'[118]

On this interpretation, the difficulty seems to dissolve into thin air
at our touch. Accumulation requires no new sources of money at all.
Before, when the capitalists themselves consumed their surplus value,
they had to have a corresponding money reserve in hand, the analysis of
simple reproduction already having proved that the capitalist class must
itself put into circulation the money needed for the realisation of
their surplus value. Now, instead of consumer goods, the capitalist
class, or rather B, B´, and B´´, buy an equivalent amount of means of
production in order to expand their production. In this way, money to
the same value is accumulated in the hands of the other capitalist
group, viz. A, A´, A´´, etc.

'This hoarding ... does not in any way imply an addition to the wealth
in precious metals, but only a change of function on the part of money
previously circulating. A while ago it served as a medium of
circulation, now it serves as a hoard, as a virtual additional
money-capital in process of formation.'[119]

And that is that! Yet this way out of the difficulty is open to us only
on one condition, and that is not far to seek: Marx here takes
accumulation in its first rudiments, _in statu nascendi_, as it begins
to evolve from simple reproduction. In respect of the amount of value,
production is not yet enlarged, it has only been rearranged so that its
material elements are grouped in a different way. That the sources of
money also seem adequate is therefore not surprising. This solution,
however, is only true for one specific moment, the period of transition
from simple reproduction to enlarged reproduction--in short, a moment
that has no reference to reality and can only be conceived
speculatively. Once accumulation has been established for some time,
when increasing amounts of value are thrown upon the market in every
period of production, buyers for these additional values cannot fail to
become a problem. And on this point the proffered solution breaks down.
For that matter, it was never more than a seeming solution, _not a real
one_. On closer scrutiny, it fails us even at the precise instant it
appears to have smoothed the way for us. For if we take accumulation
just at the very moment of its emergence from simple reproduction, the
prime condition it demands is a decrease in the consumption of the
capitalist class. No sooner have we discovered a way to expand
reproduction with the means of circulation already at hand, than we
find previous consumers trickling away at the same rate. What, then, is
the good of expanding production; who is there able to buy from B, B´
and B´´ this increased amount of products which they could turn out only
by denying themselves the money they need for buying new means of
production from A, A´ and A´´?

That solution, we see, was a mere illusion--the difficulty still
persists. 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 goes without
saying that a corresponding portion of their own surplus-product is
transferred directly (without any intervention of circulation) to their
productive capital and becomes an element of additional constant
capital. To the same extent they do not help to convert any
surplus-product of A, A´, A´´ etc., (I) into money. Aside from this,
where does the money come from? We know that they have formed their
hoard in the same way as A, A´, etc., by the sale of their respective
surplus-products. Now they have arrived at the point where their
accumulated hoard of virtual money-capital is to enter effectually upon
its function as additional money-capital. But this is merely 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 we know from the
analysis of simple reproduction, that the capitalists of I and II must
have a certain amount of ready money in their hands, in order to be able
to dispose of their surplus-products. In that case, the money which
served only for the spending of revenue in articles of consumption
returned to the capitalists in the same measure in which they advanced
it for the purpose of disposing of their commodities. Here the same
money reappears, but in a different function. The A's and B's supply one
another alternately with the money for converting their surplus-product
into virtual additional capital, and throw the newly formed
money-capital alternately into circulation as a medium of
purchase.'[121]

That is harking back to simple reproduction all over again. It is quite
true, of course, that the capitalists A and the capitalists B are
constantly accumulating a hoard of money bit by bit so as to be able to
renew their constant (fixed) capital from time to time, and in this way
they really are assisting one another in realising their products. Yet
this accumulating hoard does not drop from the clouds--it is simply a
natural precipitation of the fixed capital that is (in terms of value)
continually being transferred in instalments to the products which are
then one by one realised in the process of sale. Owing to its very
nature, the accumulated hoard can only cover the renewal of the old
capital; there cannot possibly be enough to serve further for purchasing
additional constant capital. That means that we are still within the
limits of simple reproduction. Perhaps, though, that part of the medium
of circulation which hitherto served the capitalists for their personal
consumption, and is now to be capitalised, becomes a new source of
additional money? For that to be true, however, we should have to be
back at the unique and fleeting moment that has no more than theoretical
existence--the period of transition from simple to enlarged
reproduction. Beyond this gap accumulation cannot proceed--we are in
truth going round in circles.

So the capitalist hoarding will not do as a way out of our difficulties.
This conclusion should not come as a surprise, since the very exposition
of the difficulty was misleading. It is not the source of money that
constitutes the problem of accumulation, but the source of the demand
for the additional goods produced by the capitalised surplus value; not
a technical hitch in the circulation of money but an economic problem
pertaining to the reproduction of the total social capital. Quite apart
from the question which had claimed Marx's entire attention so far,
namely where B, B´, etc., (I), get the money to buy additional means of
production from A, A´, etc., (I), successful accumulation will
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 one another:

'It may be that the different B, B´, B´´, etc., (I), whose virtual new
capital enters upon its active function, are compelled to buy from one
another their product (portions of their surplus-product) or to sell it
to one another. In that case, the money advanced by them for the
circulation of their surplus-product flows back under normal conditions
to the different B's in the same proportion in which they advanced it
for the circulation of their respective commodities.'[122]

'In that case'--the problem simply has not been solved, for after all B,
B´, and B´´ have not cut down on their consumption and expanded their
production just so as to buy each other's increased product, i.e. means
of production. Even that, incidentally, would only be possible to a very
limited extent. Marx assumes a certain division of labour in Department
I itself: the A's turn out means of production for making producer goods
and 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 Department II. Already the accumulation
of B, B´, etc., it follows, must lead us to circulation between
Departments I and II. Thus Marx's analysis itself confirms that, if
Department I is to accumulate, the department for means of consumption
must, in the last resort, increase its immediate or mediate demand for
means of production, and so it is to Department II and its capitalists
that we must look for buyers for the additional product turned out by
Department I.

Sure enough, Marx's second attack on the problem takes up from there:
the demand of capitalists in Department II for additional means of
production. Such a demand inevitably implies that the constant capital
II_c_ is in process of expanding. This is where the difficulty becomes
truly formidable:

'Take it now that A(I) converts his surplus-product into gold by selling
it to a capitalist B in Department II. This can be done only by the sale
of means of production on the part of A(I) to B(II) without a subsequent
purchase of articles of consumption, in other words, only by a one-sided
sale on A's part. Now we have seen that II_c_ cannot be converted into
the natural form of productive constant capital unless not only I_v_ but
also at least a portion of I_s_, is exchanged for a portion of II_c_,
which II_c_ exists in the form of articles of consumption. But now that
A has converted his I_s_ into gold by making this exchange impossible
and withdrawing the money obtained from II_c_ out of circulation,
instead of spending it for articles of consumption of II_c_, there is
indeed on the part of A(I) a formation of additional virtual
money-capital, but on the other hand there is a corresponding portion of
the value of the constant capital B(II) held in the form of
commodity-capital, unable to transform itself into natural productive
constant capital. In other words, a portion of the commodities of B(II),
and at that a portion which must be sold if he wishes to reconvert his
entire constant capital into its productive form, has become unsaleable.
To that extent, there is an over-production which clogs reproduction,
even on the same scale.'[123]

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

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

'Let us now take a closer look at the accumulation in Department II. The
first difficulty with reference to II_c_, that is to say the conversion
of an element of the commodity-capital of II into the natural form of
constant capital of II, concerns simple reproduction. Let us take the
formula previously used. (_1,000v + 1,000s_) I are exchanged for 2,000
II_c_. Now, if one half of the surplus-product of I, or 500_s_, is
reincorporated in Department I as constant capital, then this portion,
being detained in Department I, cannot take the place of any portion of
II_c_. Instead of being converted into articles of consumption, it is
made to serve as an additional means of production in Department I
itself.... It cannot perform this function simultaneously in I and II.
The capitalist cannot spend the value of his surplus-product for
articles of consumption, and at the same time consume the
surplus-product itself productively, by incorporating it in his
productive capital. Instead of 2,000 I(_v + s_), only 1,500 are
exchangeable for 2,000 II_c_, namely _1,000v + 500s_ of I. But 500 I_c_
cannot, be reconverted from the form of commodities into productive
constant capital of II.'[124]

By now, hardly anybody could fail to be convinced that the difficulty is
real, but we have not taken a single step nearer a solution. This,
incidentally, is where Marx has to do penance for his ill-advised
continual recourse in an earlier over-simplification, to a fictitious
moment of transition--in order in elucidate the problem of
accumulation--from simple reproduction to enlarged reproduction, making
his major premise accumulation at its very inception, in its feeble
infancy instead its vigorous stride. There was something to be said, at
least, for this fiction, so long as it was just a question of
accumulation within Department I. The capitalists of Department I, who
denied themselves part of what they had been wont to consume, at once
had a new hoard of money in hand with which they could start
capitalisation. But when it comes to Department II, the same fiction
only piles on the difficulties. The 'abstinence' of the capitalists in
Department I here finds expression in a painful loss of consumers for
whose expected demand production had largely been calculated. Since the
capitalists of Department II, on whom we tried the experiment whether
they might not possibly be the long-sought buyers of the additional
product of accumulation in Department I, are themselves in sore
straits--not knowing as yet where to go with their own unsold
product--they are even less likely to be of any help to us. There is no
shutting our eyes to the fact that an attempt to make one group of
capitalists accumulate at the expense of the other is bound to get
involved in glaring inconsistencies.

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

'(1) ... the forming of such supplies and the necessity for it applies
to all capitalists, those of I as well as of II. Considering them in
their capacity as sellers of commodities, they differ only by the fact
that they sell different kinds of commodities. A supply of commodities
of II implies a previous supply of commodities of I. If we neglect this
supply on the one side, we must also 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 closes on the side of II with a supply of commodities for
the next year, 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 out at both
ends. By leaving this year in possession of its entire production,
including the supply held for next year, we take from it the supply of
commodities transferred from last year, and thus we have actually to
deal with the aggregate product of an average year as the object of our
analysis. (3) The simple circumstance that the difficulty which must be
overcome did not show itself in the analysis of simple reproduction
proves that it is a specific phenomenon due merely to the different
arrangement of the elements of Department I with a view to reproduction,
an arrangement without which reproduction on an expanded scale cannot
take place at all.'[125]

The last remark, be it noted, is equally damaging to his own earlier
attempt at resolving the specific difficulties of accumulation by
moments pertaining to simple reproduction, viz. the formation of a hoard
consequent upon the gradual turnover of the fixed capital in the hands
of the capitalists which was previously adduced as the explanation of
accumulation in Department I.

Marx then proceeds to set out enlarged reproduction in the form of
diagrams. But no sooner does he begin to analyse his diagram, than the
same difficulty crops up anew in a slightly different guise. Assuming
that the capitalists of Department II must for their part convert 140_s_
into constant capital so as to make accumulation possible for the
others, he asks:

'Therefore Department II must buy 140_s_ for cash without recovering
this money by a subsequent sale of its commodities to I. And this is a
process which is continually repeated in every new annual production, so
far as it is reproduction on an enlarged scale. Where does II get the
money for this?'[126]

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

'This continually repeated departure from and return to the starting
point, the pocket of the capitalist, does not add in any way to the
money moving in this cycle. This, then, is not a source of the
accumulation of money.'[127]

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

'But stop!' he exclaims. 'Isn't there a chance to make a little
profit?'[127]

He considers whether the capitalists could not manage to save a little
of the variable capital by depressing the wages of the workers below the
normal average and thus to tap a new source of 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 under normal conditions)
do not depend on the benevolence of the capitalists, but must be paid
under certain conditions. This does away with this expedient as a source
of additional money.'[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 as under (1), only
disguised and carried out by a detour. Therefore it must likewise be
rejected as an explanation of the present problem.'[128]

All efforts to make the variable capital yield a new source of money for
the purpose of accumulation are thus unrewarded: 'In short, we cannot
accomplish anything with 376 II_v_ for the solution of this
question.'[128]

Marx next turns to the cash reserves which the capitalists in Department
II keep for the circulation of their own consumption and investigates
whether none of this money can be diverted to the purposes of
capitalisation. Yet this, he allows, is 'still more impossible'.

'Here the capitalists of the same department are standing face to face,
heavily buying and selling their articles of consumption. The money
required for these transactions serves only as a medium of circulation
and must flow back to the interested parties in the normal course of
things, to the extent that they have advanced it to the circulation, in
order to pass again and again over the same course.'[129]

The next attempt to follow belongs, as was to have been expected, to the
category of those 'subterfuges' which Marx ruthlessly refutes: the
attempt to explain that money-capital can be formed in the hands of one
capitalist group in Department II by defrauding the other capitalists
within the same department--viz. in the process of the mutual selling of
consumer goods. No time need be wasted on this little effort.

Then comes a more sober proposition: 'Or, a certain portion of II_s_,
represented by necessities of life, might be directly converted into new
variable capital of Department II.'[130]

It is not quite clear how this can help us over the hurdle, help to get
accumulation going. For one thing, the formation of additional variable
capital in Department II is not much use if we have no additional
constant capital for this department, being in fact engaged on the task
of finding it. For another thing, our present concern is to see if we
can find in Department II a source of money for the purchase of
additional means of production from I, and Department II's problem how
to place its own additional product in some way or other in the process
of production is beside the point. Further, is the implication that the
respective consumer goods should be used 'direct', i.e. without the
mediation of money, in the production of Department II, so that the
corresponding amount of money can be diverted from variable capital to
the purpose of accumulation? If so, we could not accept the solution.
Under normal conditions of capitalist production, the remuneration of
the workers by consumer goods direct is precluded, one of the
corner-stones of capitalist economy being the money-form of the variable
capital, the independent transaction between the worker as buyer of
commodities and producer of consumer goods. 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 same thing. It is not the
capitalist of I who among other things buys from II a supply of
necessities of life for his labourers, or accumulates them for this
purpose, as the slave holder had to do. It is the labourers themselves
who trade with II.'[131]

And that goes for the capitalists of Department II just as much as for
those of Department I, thus disposing of Marx's last effort.

Marx ends up by referring us to the last part of _Capital_, volume ii,
chapter 21, the 'Concluding Remarks _sub iv_', as Engels has called
them. Here we find the curt explanation:

'The original source for the money of II is _v + s_ of the gold
producers in Department I, exchanged for a portion of II_c_. Only to the
extent that the gold producer accumulates surplus-value or converts it
into means of production of I, in other words, to the extent that he
expands his production, does his _v + s_ stay out of Department II. On
the other hand, to the extent that the accumulation of gold on the part
of the gold producer himself leads ultimately to an expansion of
production, a portion of the surplus-value of gold production not spent
as revenue passes into Department II as additional variable capital of
the gold producers, promotes the accumulation of new hoards in II and
supplies it with means by which to buy from I without having to sell to
it immediately.'[132]

After the breakdown of all conceivable attempts at explaining
accumulation, therefore, after chasing from pillar to post, from A I to
B I, and from B I to A II, we are made to fall back in the end on the
very gold producer, recourse to whom Marx had at the outset of his
analysis branded as 'absurd'. The analysis of the reproductive process,
and the second volume of _Capital_ finally comes to a close without
having provided the long sought-for solution to our difficulty.

FOOTNOTES:

[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.




_CHAPTER IX_

THE DIFFICULTY VIEWED FROM THE ANGLE OF THE PROCESS OF CIRCULATION


The flaw in Marx's analysis is, in our opinion, the misguided
formulation of the problem as a mere question of 'the sources of money',
whereas the real issue is the effective demand, the use made of goods,
not the source of the money 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 of
money, or a substitute, in just that quantity that is needed for its
process of circulation. What has to be explained is the great social
transaction of exchange, caused by real economic needs. While it is
important to remember that capitalist surplus value must invariably pass
through the money stage before it can be accumulated, we must
nevertheless try to track down the economic demand for the surplus
product, quite apart from the puzzle where the money comes from. As Marx
himself says in another passage:

'The money on one side in that case calls forth expanded reproduction on
the other, because the possibility for it exists without the money. For
money in itself is not an element of actual reproduction.'[133]

And in a different context, Marx actually shows the question about the
'sources of money' to be a completely barren formulation of the problem
of accumulation.

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

'But the commodity capital must be monetised before its conversion into
productive capital, or before the surplus-value contained in it can be
spent. Where does the money for this purpose come from? This question
seems difficult at the first glance, and neither Tooke nor anyone else
has answered it so far.'[134]

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

All that, mind you, refers to simple reproduction, where the entire
surplus value is used for the personal consumption of the capitalist
class. The question should therefore from the outset have been put more
precisely in this form: how can the capitalists secure for themselves
consumer goods to the amount of £100 surplus value on top of putting
£500 into circulation for constant and variable capital? It is
immediately obvious that those £500 which, in form of capital, always
serve to buy means of production and to pay the workers, cannot
simultaneously defray the expense of the capitalists' personal
consumption. Where, then, does the additional money come from?--the £100
the capitalists need to realise their own surplus value? Thus all
theoretical dodges one might devise for this point are summarily
disposed of by Marx right away:

'It should not be attempted to avoid this difficulty by plausible
subterfuges.

'For instance: So far as the constant circulating capital is concerned,
it is obvious that not all invest it simultaneously. While the
capitalist A sells his commodities so that his advanced capital assumes
the form of money, there is on the other hand, the available
money-capital of the buyer B which assumes the form of his means of
production which A is just producing. The same transaction, which
restores that of B to its productive form, transforms it from money into
materials of production and labour-power; the same amount of money
serves in the two-sided process as in every simple purchase C-M. On the
other hand, when A reconverts his money into means of production, he
buys from C, and this man pays B with it, etc., and thus the transaction
would be explained.

'But none of the laws referring to the quantity of the circulating
money, which have been analysed in the circulation of commodities (vol.
i, chap, iii), are in any way changed by the capitalist character of the
process of production.

'Hence, when we have said that the circulating capital of society, to be
advanced in the form of money, amounts to 500 p.st., we have already
accounted for the fact that this is on the one hand the sum
simultaneously advanced, and that, on the other hand, it sets in motion
more productive capital than 500 p.st., because it serves alternately as
the money fund of different productive capitals. This mode of
explanation, then, assumes that money as existing whose existence it is
called upon to explain.

'It may be furthermore said: Capitalist A produces articles which
capitalist B consumes unproductively, individually. The money of B
therefore monetises the commodity-capital of A, and thus the same amount
serves for the monetisation of the surplus-value of B and the
circulating constant capital of A. But in that case, the solution of the
question to be solved is still more directly assumed, the question:
Whence does B get the money for the payment of his revenue? How does he
himself monetise this surplus-portion of his product?

'It might also be answered that that portion of the circulating variable
capital, which A continually advances to his labourers, flows back to
him continually from the circulation, and only an alternating part stays
continually tied up for the payment of wages. But a certain time elapses
between the expenditure and the 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, the greater must be the supply of money which the capitalist A
must keep continually in reserve. In the second place, the labourer
spends the money, buys commodities for it, and thus monetises 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 capitalist class, and of the unproductive
persons dependent upon it, keeps step with that of the labouring class;
so that, simultaneously with the money thrown into circulation by the
labouring class, the capitalists must throw money into it, in order to
spend their surplus-value as revenue. Hence money must be withdrawn from
circulation for it. This explanation would merely reduce the quantity of
money required, but not do away with it.

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

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

Then follows a solution which has a somewhat disconcerting ring: 'The
general reply has already been given: When a mass of commodities valued
at _x_ times 1,000 p.st. has to circulate, it changes absolutely nothing
in the quantity of the money required for this circulation, whether this
mass of commodities contains any surplus-value or not, and whether this
mass of commodities has been produced capitalistically or not. In other
words, _the problem itself does not exist_. All other conditions being
given, such as velocity of circulation of money, etc., a definite sum of
money is required in order to circulate the value of commodities worth
_x_ times 1,000 p.st., quite independently of the fact how much or how
little of this value falls to the share of the direct producers of
these commodities. So far as any problem exists here, it coincides with
the general problem: Where does all the money required for the
circulation of the commodities of a certain country come from?'[137]

The argument is quite sound. The answer to the general question about
the origin of the money for putting a certain quantity of commodities
into circulation within a country will also tell us where the money for
circulating the surplus value comes from. The division of the bulk of
value contained in these commodities into constant and variable capital,
and surplus value, does not exist from the angle of the circulation of
money--in this connection, it is quite meaningless. But it is only from
the angle of the circulation of money, or of a simple commodity
circulation, that the problem has no existence. Under the aspect of
social reproduction as a whole, it is very real indeed; but it should
not, of course, be put in that misleading form that brings us back to
simple commodity circulation, where it has no meaning. We should not
ask, accordingly: Where does the money required for realising the
surplus value come from? but: Where are the consumers for this surplus
value? It is they, for sure, who must have this money in hand in order
to throw it into circulation. Thus, Marx himself, although he just now
denied the problem to exist, keeps coming back to it time and again:

'Now, there are only two points of departure: The capitalist and the
labourer. All third classes of persons must either receive money for
their services from these two classes, or, to the extent that they
receive it without any equivalent services, they are joint owners of the
surplus-value in the form of rent, interest, etc. The fact that the
surplus-value does not all stay in the pocket of the industrial
capitalist, but must be shared by him with other persons, has nothing to
do with the present question. The question is: How does he maintain his
surplus-value, not, how does he divide the money later after he has
secured it? For the present case, the capitalist may as well be regarded
as the sole owner of his surplus-value. As for the labourer it has
already been said that he is but the secondary point of departure, while
the capitalist is the primary starting point of the money thrown by the
labourer into circulation. The money first advanced as variable capital
is going through its second circulation, when the labourer spends it
for the payment of means of subsistence.

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

Marx further explodes another device which might conceivably be thought
adequate to the problem, i.e. a more rapid turnover of money enabling a
larger amount of value to circulate by means of a smaller amount of
money. The dodge will not work, of course, since the velocity of money
in circulation is already taken into account by equating the aggregate
bulk of commodities with a certain number of pounds sterling. But then
at last we seem in sight of a proper solution:

'Indeed, paradoxical as it may appear at first sight, it is the
capitalist class itself that throws the money into circulation which
serves for the realisation of the surplus-value incorporated in the
commodities. But, mark well, it is not thrown into circulation as
advanced money, not as capital. The capitalist class spends it for their
individual consumption. The money is not advanced by them, although they
are the point of departure of its circulation.'[139]

This lucid and comprehensive account is the best evidence that the
problem is not just imaginary but very real. It provides a solution, not
by disclosing a new 'source of money' for the realisation of the surplus
value, but by pointing out at last the consumers of this surplus value.
We are still, on Marx's assumption, within the bounds of simple
reproduction; the capitalist class, that is to say, use the whole of
their surplus value for personal consumption. Since the capitalists are
the consumers of surplus value, it is not so much a paradox as a truism
that they must, in the nature of things, possess the money for
appropriating the objects of consumption, the natural form of this
surplus value. The circulatory transaction of exchange is the necessary
consequence of the fact that the individual capitalist cannot
immediately consume his individual surplus value, and accordingly the
individual surplus product, as could, for instance, the employer of
slave labour. As a rule the natural material form of the surplus product
tends to preclude such use. The aggregate surplus value of the
capitalists in general is, however, contained in the total social
product--as long as there is simple reproduction--as expressed by a
corresponding quantity of consumer goods for the capitalist class, just
as the sum total of variable capital has its corresponding equivalent in
the quantity of consumer goods for the working class, and as the
constant capital of all individual capitalists taken together is
represented by material means of production in an equivalent quantity.
In order to exchange the unconsumable individual surplus values for a
corresponding amount of consumer goods, a double transaction of
commodity exchange is needed: first, the sale of one's own surplus
product and then the purchase of consumer goods out of the surplus
product of society. These two transactions can only take place among
members of the capitalist class, among individual capitalists, which
means that their agent, the money, thereby merely changes hands as
between one capitalist and another without ever being alienated from the
capitalist class in general. Since simple reproduction inevitably
implies the exchange of equivalents, one and the same amount of money
can serve year by year for the circulation of the surplus value, and
only an excess of zeal will inspire the further query: where does the
money which mediates the capitalists' own consumption come from in the
first place? This, question, however, reduces to a more general one: how
did money capital initially come into the hands of the capitalists, that
money capital of which they always retain a certain part for their
personal consumption, apart from what they use for productive
investment? Put in this way, 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 of circulation as well as of reproduction.

Thus the fact is clear and unequivocal--so long as we remain within the
bounds of simple reproduction. Here the problem is solved by the
premises themselves; in fact, the solution is already anticipated by
the very concept of simple reproduction which indeed is based on the
entire surplus value being consumed by the capitalist class. This
implies that it must also be the latter who buy it, that is to say,
individual capitalists must buy it from each other.

'In the present case', Marx says himself, 'we had assumed, that the sum
of money which the capitalist throws into circulation until the first
surplus-value flows back to him, is exactly equal to the surplus-value
which he is going to produce and monetise. This is obviously an
arbitrary assumption, so far as, the individual capitalist is concerned.
But it must be correct when applied to the entire capitalist class, when
simple reproduction is assumed. It expresses the same thing that this
assumption does, namely, that the entire surplus-value is consumed
unproductively, but it only, not any portion of the original capital
stock.'[140]

But simple reproduction on a capitalist basis is after all an imaginary
quantity in economic theory: no more and no less legitimate, and quite
as unavoidable as [sqrt](-1) in mathematics. What is worse, it cannot
offer any help at all with the problem of realising the surplus value in
real life, i.e. with regard to enlarged reproduction or accumulation.
Marx himself says so for a second time in the further development of his
analysis.

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

'In the first place, the additional money-capital required for the
function of the increasing productive capital is supplied by that
portion of the realised surplus-value which is thrown into circulation
by the capitalists as money-capital, not as the money form of their
revenue. The money is already present in the hands of the capitalists.
Only its employment is different.'[141]

Our investigation of the reproductive process has already made us
familiar with this explanation, and we are equally familiar with its
defects; for one thing, the answer rests on the moment of the first
transition from simple reproduction to accumulation. The capitalists
only yesterday consumed their entire surplus value, and thus had in hand
an appropriate amount of money for their circulation. To-day they decide
to 'save' part of the surplus value and to invest it productively
instead of squandering it. Provided that material means of production
were manufactured instead of luxury goods, they need only put part of
their personal money fund to a different use. But the transition from
simple reproduction to expanded reproduction is no less a theoretical
fiction than simple reproduction of capital itself, for which reason
Marx immediately goes on to say:

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

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

'The general reply is again the same. The sum total of the prices of the
commodities has been increased, not because the prices of a given
quantity of commodities have risen, but because the mass of the
commodities now circulating is greater than that of the previously
circulating commodities, and because this increase has not been offset
by a fall in prices. The additional money required for the circulation
of this greater quantity of commodities of greater value must be
secured, either by greater economy in the circulating quantity of
money--whether by means of balancing payments, etc., or by some measure
which accelerates the circulation of the same coins,--or by the
transformation of money from the form of a hoard into that of a
circulating medium.'[143]

All this amounts to an exposition along these lines: under conditions of
developing and growing accumulation, capitalist reproduction dumps ever
larger masses of commodity values on the market. To put this commodity
mass of a continually increasing value into circulation requires an ever
larger amount of money. This increasing amount of money must be found
somehow or other. All this is, no doubt, plausible and correct as far as
it goes, but our problem is not solved, it is merely wished away.

One thing or the other! Either we regard the aggregate social product in
a capitalist economy simply as a mass, a conglomeration of commodities
of a certain value, seeing under conditions of accumulation, a mere
increase in this undifferentiated mass of commodities and in the bulk of
its value. Then all we need say is that a corresponding quantity of
money is required for circulating this bulk of value, that with an
increasing bulk of value the quantity of money must also increase,
unless this growth of value is offset by acceleration of, and economy
in, the traffic. And the final question, where does all money originally
come from, could then be answered on Marx's recipe: from the gold mines.
This, of course, is one way of looking at things, that of simple
commodity circulation. But in that case there is no need to drag in
concepts such as constant and variable capital, or surplus value, which
have no place in simple commodity circulation, belonging essentially to
the circulation of capitals and to social reproduction; nor is there
need to inquire for sources of money for the realisation of the social
surplus value under conditions of first simple, and then enlarged,
reproduction. Under the aspect of simple commodity circulation puzzles
of this kind are without meaning or content. But once these questions
have been raised, once the course has been set for an investigation into
the circulation of capitals and social reproduction, there can be no
appealing to the sphere of simple commodity circulation, where there is
no such problem at all, and consequently no solution to it. There can be
no looking for the answer there, and then saying triumphantly that the
problem has long been solved and in fact never really existed.

All this time, it appears, Marx has been tackling the problem from a
wrong approach. No intelligent purpose can be served by asking for the
source of the money needed to realise the surplus value. The question is
rather where the demand can arise--to find an effective demand for the
surplus value. If the problem had been put in this way at the start, no
such long-winded detours would have been needed to show whether it can
be solved or not. On the basis of simple reproduction, the matter is
easy enough: since all surplus value is consumed by the capitalists,
they themselves are the buyers and provide the full demand for the
social surplus value, and by the same token they must also have the
requisite cash in hand for circulation of the surplus value. But in this
showing it is quite evident that under conditions of accumulation, i.e.
of capitalisation of part of the surplus value, it cannot, _ex
hypothesi_, be the capitalists themselves who buy the entire surplus
value, that they cannot possibly realise it. True, if the capitalised
surplus value is to be realised at all, money must be forthcoming in
adequate quantities for its realisation. But it is quite impossible that
this money should come from the purse of the capitalist class itself.
Just because accumulation is postulated, the capitalists cannot buy
their surplus value themselves, even though they might, _in abstracto_,
have the money to do so. But who else could provide the demand for the
commodities incorporating the capitalised surplus value?

'Apart from this class (the capitalists), there is, according to our
assumption--the general and exclusive domination of capitalist
production--no other class but the working class. All that the working
class buys is equal to the sum total of its wages, equal to the sum
total of the variable capital advanced by the entire capitalist
class.'[144]

The workers, then, are even less able than the capitalist class to
realise the capitalised surplus value. Somebody must buy it, if the
capitalists are still to be able to recover the capital they have
accumulated and advanced; and yet--we cannot think of any buyers other
than capitalists and workers. 'How can the entire capitalist class
accumulate money under such circumstances?'[144]

Realisation of the surplus value outside the only two existing classes
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 of _Capital_ offers no way out.

If we should now ask why Marx's _Capital_ affords no solution to this
important problem of the accumulation of capital, we must bear in mind
above all that this second volume is not a finished whole but a
manuscript that stops short half way through.

The external form of its last chapters in particular proves them to be
in the nature of notes, intended to clear the author's own mind, rather
than final conclusions ready for the reader's enlightenment. This fact
is amply authenticated by the man best in the position to know:
Friedrich Engels, who edited the second volume. In his introduction to
the second volume he reports in detail on the conditions of the
preliminary studies and the manuscripts Marx had left, which were to
form the basis of this volume:

'The mere enumeration of the manuscripts left by Marx as a basis for
Volume II proves the unparalleled conscientiousness and strict
self-criticism which he practised in his endeavour to fully elaborate
his great economic discoveries before he published them. This
self-criticism rarely permitted him to adapt his presentation of the
subject, in content as well as in form, to his ever widening horizon,
which he enlarged by incessant study.

'The material ... consists of the following parts: First, a manuscript
entitled "A contribution to the Critique of Political Economy",
containing 1,472 quarto pages in 23 divisions, written in the time from
August, 1861, to June, 1863. It is a continuation of the work of the
same title, the first volume of which appeared in Berlin, in 1859....
This manuscript, valuable though it is, could not be used in the present
edition of Volume II.

'The manuscript next following in the order of time is that of Volume
III....

'The period after the publication of Volume I, which is next in order,
is represented by a collection of four manuscripts for Volume II, marked
I-IV by Marx himself. Manuscript I (150 pages) presumably written in
1865 or 1867, is the first independent, but more or less fragmentary,
elaboration of the questions now contained in Volume II. This manuscript
is likewise unsuited for this edition. Manuscript III is partly a
compilation of quotations and references to the manuscripts containing
Marx's extracts and comments, most of them relating to the first section
of Volume II, partly an elaboration of special points, particularly a
critique of Adam Smith's statements as to fixed and circulating capital
and the source of profits; furthermore, a discussion of the relations
of the rate of surplus-value to the rate of profit, which belongs in
Volume III. The references furnished little that was new, while the
elaborations for Volumes II and III were rendered valueless through
subsequent revisions and had to be ruled out for the greater part.
Manuscript IV is an elaboration, ready for printing, of the first
section and the first chapters of the second section of Volume II, and
has been used in its proper place. Although it was found that this
manuscript had been written earlier than Manuscript II, yet it was far
more finished in form and could be used with advantage for the
corresponding part of this volume. I had to add only a few supplementary
parts of Manuscript II. This last manuscript is the only fairly
completed elaboration of Volume II and dates from the year 1870. The
notes for the final revision, which I shall mention immediately, say
explicitly: "The second elaboration must be used as a basis."

'There is another interruption after 1870, due mainly to ill health.
Marx employed this time in his customary way, that is to say he studied
agronomics, agricultural conditions in America and especially Russia,
the money market and banking institutions, and finally natural sciences,
such as geology and physiology. Independent mathematical studies also
form a large part of the numerous manuscripts of this period. In the
beginning of 1877, Marx had recovered sufficiently to resume once more
his chosen life's work. The beginning of 1877 is marked by references
and notes from the above named four manuscripts intended for a new
elaboration of Volume II, the beginning of which is represented by
Manuscript V (56 pages in folio). It comprises the first four chapters
and is not very fully worked out. Essential points are treated in
footnotes. The material is rather collected than sifted, but it is the
last complete presentation of this most important first section. A
preliminary attempt to prepare this part for the printer was made in
Manuscript VI (after October, 1877, and before July, 1878), embracing 17
quarto pages, the greater part of the first chapter. A second and last
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 would never be able
to complete the second and third volume in a manner satisfactory to
himself, unless a complete revolution in his health took place.
Manuscripts V-VIII show traces of hard struggles against depressing
physical conditions far too frequently to be ignored. The most difficult
part of the first section had been worked over in Manuscript V. The
remainder of the first, and the entire second section, with the
exception of Chapter 17, presented no great theoretical difficulties.
But the third section, dealing with the reproduction and circulation of
social capital, seemed to be very much in need of revision. Manuscript
II, it must be pointed out, had first treated of this reproduction
without regard to the circulation which is instrumental in effecting it,
and then taken up the same question with regard to circulation. It was
the intention of Marx to eliminate this section and to reconstruct it in
such a way that it would conform to his wider grasp of the subject. This
gave rise to Manuscript VIII, containing only 70 pages in quarto. A
comparison with Section III, as printed after deducting the paragraphs
inserted out of Manuscript II, shows the amount of matter compressed by
Marx into this space.

'Manuscript VIII is likewise merely a preliminary presentation of the
subject, and its main object was to ascertain and develop the new points
of view not set forth in Manuscript II, while those points were ignored
about which there was nothing new to say. An essential part of Chapter
17, Section II, which is more or less relevant to Section III, was at
the same time drawn into this discussion and expanded. The logical
sequence was frequently interrupted, the treatment of the subject was
incomplete in various places, and especially the conclusion was very
fragmentary. But Marx expressed as nearly as possible what he intended
to say on the subject.

'This is the material for Volume II, out of which I was supposed "to
make something", as Marx said to his daughter Eleanor shortly before his
death.'[145]

We cannot but admire this 'something' which Engels managed to 'make'
from material of such a kind. As far as our present problem is
concerned, however, this detailed report makes it clear that no more
than the first two of the three sections that make up volume ii were
anything like ready for print in the manuscripts Marx left: the section
'On the Circulation of Money and Commodity Capital' and on 'The Causes
of Circulation and the Turnover of Capital'. The third section which
treats of the reproduction of total capital is merely a collection of
fragments which Marx himself considered to be 'very much in 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 of the whole book this is the most
incomplete. It comprises thirty-five pages of print in all and breaks
off right in the middle of the analysis.

Besides this extraneous circumstance, we would suggest another point of
great influence. Marx's investigation of the social reproductive process
starts off, as we have seen, from the analysis of Adam Smith which came
to grief, among other reasons, because of the erroneous doctrine that
the price of all commodities is composed of _v + s_. Polemics against
this dogma dominated Marx's entire analysis of the reproductive process.
He devoted all his attention to proving that the total capital of
society must serve, not only for consumption to the full amount of the
various sources of revenue, but also for renewal of the constant
capital. And inasmuch as the purest theoretical form for this line of
reasoning is given, not by enlarged reproduction, but by simple
reproduction, Marx tends to consider reproduction mainly from a point of
view that is the very opposite of accumulation, from the assumption that
the entire surplus value is consumed by the capitalists. How greatly
these polemics influenced his analysis is proved by his returning time
and again in the course of his work to the attack on Adam Smith from the
most various angles. So already in volume i, the following pages are
devoted to it: vol. i, sect. 7, chap. 24, (2), pp. 588-602, and in vol.
ii, pp. 417-56, p. 473, pp. 504-8, and pp. 554 f.

Marx again takes up the question of total reproduction in volume iii but
from the start becomes once more involved with the problem set by Smith
to which he devotes the whole of his 49th chapter and most of chapter 50
(pp. 968-92 and 992-1022). Finally, in _Theorien ueber den Mehrwert_, we
again find detailed polemics against Smith's dogma: pp. 164-253 in vol.
i, and pp. 92, 95, 126, 233, and 262 in vol. ii, part 2. Marx repeatedly
stressed and emphasised the fact that he considered replacement of the
constant capital from the aggregate social product the most difficult
and important problem of reproduction.[146] The other problem, that of
accumulation, i.e. realisation of the surplus value for the purpose of
capitalisation, was thus pushed into the background, so that in the end
Marx hardly touched upon it.

This problem being of such paramount importance for capitalist economy,
it is not surprising that bourgeois economists have dealt with it again
and again. Attempts to grapple with this vital question for capitalist
economy, with the question whether capital accumulation is possible in
practice, come up time and again in the history of economic theory. To
these historical attempts, before and after Marx, at solving this
problem we shall now turn.

FOOTNOTES:

[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.




  _SECTION TWO_


  HISTORICAL EXPOSITION
  OF THE PROBLEM

  FIRST ROUND


  SISMONDI-MALTHUS _v._

  SAY-RICARDO--MACCULLOCH




_CHAPTER_ X

SISMONDI'S THEORY OF REPRODUCTION


The first grave doubts as to the divine character of the capitalist
order came to bourgeois economists under the immediate impact of the
first crises of 1815 and 1818-19 in England. Even then it had still been
external circumstances which led up to these crises, and they appeared
to be ephemeral. Napoleon's blockade of the Continent which for a time
had cut off England from her European markets and had favoured a
considerable development of home industries in some of the continental
countries, was partly responsible; for the rest the material exhaustion
of the Continent, owing to the long period of war, made for a smaller
demand for English products than had been expected when the blockade was
lifted. Still, these early crises were enough to reveal to the
contemporary world the sinister aspects of this best of all social
orders. Glutted markets, shops filled with goods nobody could buy,
frequent bankruptcies--and on the other hand the glaring poverty of the
toiling masses--for the first time all this starkly met the eyes of
theorists who had preached the gospel of the beautiful harmonies of
bourgeois _laissez-faire_ and had sung its praises in all keys. All
contemporary trade reports, periodicals and travellers' notes told of
the losses sustained by English merchants. In Italy, Germany, Russia,
and Brazil, the English disposed of their commodity stocks at a loss of
anything between 25 per cent and 33 1/3 per cent. People at the Cape of
Good Hope in 1818 complained that all the shops were flooded with
European goods offered at lower prices than in Europe and still
unmarketable. From Calcutta there came similar complaints. From New
Holland whole cargoes returned to England. In the United States, a
contemporary traveller reports, 'there was no town nor hamlet from one
end to the other of this immense and prosperous continent where the
amount of commodities displayed for sale did not considerably exceed
the means of the purchasers, although the vendors tried to attract
custom by long-term credits, all sorts of facilities for payment,
payment by instalments and acceptance of payment in kind'.

At the same time, England was hearing the desperate outcry of her
workers. The _Edinburgh Review_ of 1820[147] quotes an address by the
Nottingham frame-work knitters which contained the following statements:

'After working from 14 to 16 hours a day, we only earn from 4_s._ to
7_s._ a week, to maintain our wives and families upon; and we farther
state, that although we have substituted bread and water, or potatoes
and salt, for that more wholesome food an Englishman's table used to
abound with, we have repeatedly retired, after a heavy day's labour, and
have been under the necessity of putting our children supperless to bed,
to stifle the cries of hunger. We can most solemnly declare, that for
the last eighteen months we have scarcely known what it was to be free
from the pangs of hunger.'[148]

Then Owen in England, and Sismondi in France, almost simultaneously
raised their voices in a weighty indictment of capitalist society. Owen,
as a hard-headed Englishman and citizen of the leading industrial state,
constituted himself spokesman for a generous social reform, whereas the
petty-bourgeois Swiss rather lost himself in sweeping denunciations of
the imperfections of the existing social order and of classical
economics. And yet, by so doing, Sismondi gave bourgeois economics a
much harder nut to crack than Owen, whose fertile practical activities
were directly applied to the proletariat.

Sismondi explained in some detail that the impetus for his social
criticism came from England, and especially her first crisis. In the
second edition of his _Nouveaux Principes d'Économie Politique Ou De La
Richesse Dans Ses Rapports Avec La Population_,[149] eight years after
the publication of the first edition in 1819, he writes as follows:

'It was in England that I performed the task of preparing the new
edition. England has given birth to the most celebrated Political
Economists: the science is cultivated even at this time with increased
ardour.... Universal competition or the effort always to produce more
and always cheaper, has long been the system in England, a system which
I have attacked as dangerous. This system has used production by
manufacture to advance with gigantic steps, but it has from time to time
precipitated the manufacturers into frightful distress. It was in
presence of these convulsions of wealth that I thought I ought to place
myself, to review my reasonings and compare them with facts.--The study
of England has confirmed me in my "New Principles". In this astonishing
country, which seems to be subject to a great experiment for the
instruction of the rest of the world, I have seen production increasing,
whilst enjoyments were diminishing. The mass of the nation here, no less
than philosophers, seems to forget that the increase of wealth is not
the end in political economy, but its instrument in procuring the
happiness of all. I sought for this happiness in every class, and I
could nowhere find it. The high English aristocracy has indeed arrived
to a degree of wealth and luxury which surpasses all that can be seen in
other nations; nevertheless it does not itself enjoy the opulence which
it seems to have acquired at the expense of the other classes; security
is wanting and in every family most of the individuals experience
privation rather than abundance.... Below this titled and not titled
aristocracy, I see commerce occupy a distinguished rank; its enterprises
embrace the whole world, its agents brave the ices of the poles, and
the heats of the equator, whilst every one of its leading men, meeting
on Exchange, can dispose of thousands. At the same time, in the streets
of London, and in those of the other great towns of England, the shops
display goods sufficient for the consumption of the world.--But have
riches secured to the English merchant the kind of happiness which they
ought to secure him? No: in no country are failures so frequent, nowhere
are those colossal fortunes, sufficient in themselves to supply a public
loan to uphold an Empire, or a republic, overthrown with as much
rapidity. All complain that business is scarce, difficult, not
remunerative. Twice, within an interval of a few years, a terrible
crisis has ruined part of the bankers, and spread desolation among all
the English manufacturers. At the same time another crisis has ruined
the farmers, and been felt in its rebound by retail dealers. On the
other hand, commerce, in spite of its immense extent, has ceased to call
for young men who have their fortunes to make; every place is occupied,
in the superior ranks of society no less than in the inferior; the
greater number offer their labour in vain, without being able to obtain
remuneration.--Has, then, this national opulence, whose material
progress strikes every eye, nevertheless tended to the advantage of the
poor? Not so. The people of England are destitute of comfort now, and of
security for the future. There are no longer yeomen, they have been
obliged to become day labourers. In the towns there are scarcely any
longer artisans, or independent heads of a small business, but only
manufacturers. The operative, to employ a word which the system has
created, does not know what it is to have a station; he only gains
wages, and as these wages cannot suffice for all seasons, he is almost
every year reduced to ask alms from the poor-rates.--This opulent nation
has found it more economical to sell all the gold and silver which she
possessed, to do without coin, and to depend entirely on a paper
circulation; she has thus voluntarily deprived herself of the most
valuable of all the advantages of coin: stability of value. The holders
of the notes of the provincial banks run the risk every day of being
ruined by frequent and, as it were, epidemic failures of the bankers;
and the whole state is exposed to a convulsion in the fortune of every
individual, if an invasion or a revolution should shake the credit of
the national bank. The English nation has found it more economical to
give up those modes of cultivation which require much hand-labour, and
she has dismissed half the cultivators who lived in the fields. She has
found it more economical to supersede workmen by steam-engines; she has
dismissed ... the operatives in towns, and weavers giving place to
power-looms, are now sinking under famine; she has found it more
economical to reduce all working people to the lowest possible wages on
which they can subsist, and these working people being no longer
anything but a rabble, have not feared plunging into still deeper misery
by the addition of an increasing family. She has found it more
economical to feed the Irish with potatoes, and clothe them in rags; and
now every packet brings legions of Irish, who, working for less than the
English, drive them from every employment. What is the fruit of this
immense accumulation of wealth? Have they had any other effect than to
make every class partake of care, privation and the danger of complete
ruin? Has not England, by forgetting men for things, sacrificed the end
to the means?'[150]

This mirror, held up to capitalist society almost a century before the
time of writing, is clear and comprehensive enough in all conscience.
Sismondi put his finger on every one of the sore spots of bourgeois
economics: the ruin of small enterprise; the drift from the country; the
proletarisation of the middle classes; the impoverishment of the
workers; the displacement of the worker by the machine; unemployment;
the dangers of the credit system; social antagonisms; the insecurity of
existence; crises and anarchy. His harsh, emphatic scepticism struck a
specially shrill discord with the complacent optimism, the idle worship
of harmony as preached by vulgar economics which, in the person of
MacCulloch in England and of Say in France, was becoming the fashion in
both countries. It is easy to imagine what a deep and painful impression
remarks like the following were bound to make:

'There can only be luxury if it is bought with another's labour; only
those will work hard and untiringly who have to do 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 capacity,
is a blessing for mankind, it is made into a scourge for the poor by the
unjust distribution we make of its benefits.'[152]

'The gain of an employer of labour is sometimes nothing if not
despoiling the worker he employs; he does not benefit because his
enterprise produces much more than it costs, but because he does not pay
all the costs, because he does not accord the labourer a remuneration
equal to his work. Such an industry is a social evil, for it reduces
those who perform the work to utmost poverty, assuring to those who
direct it but the ordinary profits on capital.'[153]

'Amongst those who share in the national income, one group acquires new
rights each year by new labours, the other have previously acquired
permanent rights by reason of a primary effort which makes a year's
labour more advantageous.'[154]

'Nothing can prevent that every new discovery in applied mechanics
should diminish the working population by that much. To this danger it
is constantly exposed, and society provides no remedy for it.'[155]

'A time will come, no doubt, when our descendants will condemn us as
barbarians because we have left the working classes without security,
just as we already condemn, as they also will, as barbarian the nations
who reduced those same classes to slavery.'[156]

Sismondi's criticism thus goes right to the root of the matter; for him
there can be no compromise or evasion which might try to 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 to Say:

'For seven years I have indicated this malady of the social organism,
and for seven years it has continuously increased. I cannot regard such
prolonged suffering as the mere frictions which always accompany a
change. Going back to the origin of income, I believe to have shown the
ills we experience to be the consequence of a flaw in our organisation,
to have shown that they are not likely to come to an end.'[157]

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

The main thread of his criticism against classical economics is this:
capitalist production is encouraged to expand indefinitely without any
regard to consumption; consumption, however, is determined by income.

'All the modern economists, in fact, have allowed that the fortune of
the public, being only the aggregation of private fortunes, has its
origin, is augmented, distributed and destroyed by the same means as the
fortune of each individual. They all know perfectly well, that in a
private fortune, the most important fact to consider is the income, and
that by the income must be regulated consumption or expenditure, or the
capital will be destroyed. But as, in the fortune of the public, the
capital of one becomes the income of another, they have been perplexed
to decide what was capital, and what income, and they have therefore
found it more simple to leave the latter entirely out of their
calculations. By neglecting a quality so essential to be determined, Say
and Ricardo have arrived at the conclusion, that consumption is an
unlimited power, or at least having no limits but those of production,
whilst it is in fact limited by income.... They announced that whatever
abundance might be produced, it would always find consumers, and they
have encouraged 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 they could only reckon on
those consumers who possessed income.'[158]

Sismondi thus grounds his views in a theory of income. What is income,
and what is capital? He pays the greatest attention to this distinction
which he calls 'the most abstract and difficult question of political
economics'. The fourth chapter of his second book is devoted to this
problem. As usual, Sismondi starts 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, this distinction is very difficult, largely on account of
the already familiar myth of bourgeois economics, according to which
'the capital of one becomes the income of another', and _vice versa_.
Adam Smith was responsible for this confusion which was then elevated to
an axiom by Say in justification of mental inertia and superficiality.
It was loyally accepted by Sismondi.

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

After this promising introduction, Sismondi dives right into the
difficult problem and declares: all wealth is a product of labour;
income is part of wealth, and must therefore have the same origin.
However, it is 'customary' to recognise three kinds of income, called
rent, profit and wage respectively, which spring from the three sources
of 'land, accumulated capital and labour'. 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 also of nature who both supplies raw materials and
provides the means to support human labour. Income, on the other hand,
is a concept of value. It indicates the amount to which an individual or
individuals can dispose over part of the wealth of society or of the
aggregate social product. In view of Sismondi's insistence that social
income is part of social wealth, we might assume him to understand by
social income the actual annual fund for consumption. The remaining part
of wealth that has not been consumed, then, is the capital of society.
Thus we obtain at least a vague outline of the required distinction
between capital and income on a social basis. At the very next moment,
however, Sismondi accepts the 'customary' distinction between three
kinds of income, only one of which derives exclusively from 'accumulated
capital' while in the other two 'land' or 'labour' are conjoined with
capital. The concept of capital thus at once becomes hazy again.
However, let us see what Sismondi has to say about the origin of these
three kinds of income which betray a rift in the foundations of society.
He is right to take a certain development of labour productivity as his
point of departure.

'By reason of the advances both in industry and science, by which man
has subjugated the forces of nature, every worker can produce more, far
more, in a day than he needs to consume.'[160]

Sismondi thus rightly stresses the fact that the productivity of labour
is an indispensable condition for the historical foundation of
exploitation. Yet he goes on to explain the actual origin of
exploitation in a way typical of bourgeois economics: 'But even though
his labour produces wealth, this wealth, if he is called upon to enjoy
it, will make him less and less fit for work. Besides, wealth hardly
ever remains in the possession of the man who must live by the work of
his hands.'[160]

Thus he makes exploitation and class antagonism the necessary spur to
production, quite in accord with the followers of Ricardo and Malthus.
But now he comes to the real cause of exploitation, the divorce of
labour power from the means of production.

'The worker cannot, as a rule, keep the land as his own; land, however,
has a productive capacity which human labour but directs to the uses of
man. The master of the land on which labour is performed, reserves a
share in the fruits of labour to which his land has contributed, as his
remuneration for the benefits 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 of objects for his
consumption, enough to live while he performs the labours he has
undertaken--until he has found a buyer. He no longer owns the raw
materials, often coming from far away, on which he must exercise his
industry. Even less does he possess that complicated and costly
machinery which facilitates his work and makes it infinitely more
productive. The rich man who possesses his consumption goods, his raw
materials and his machines, need not work himself, for by supplying the
worker with all these, he becomes in a sense the master of his work. As
reward 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 the cream
has been taken off twice, by landlord and capitalist, is the wage of
labour, the income of the worker. And Sismondi adds: 'He can consume it
without reproduction.'[163]

Thus, Sismondi makes the fact of non-reproduction the criterion of
income as distinct from capital for wages as well as for rent. In this,
however, he is only right with regard to rent and the consumed part of
capital profits; as for the part of the social product which is consumed
in form of wages, it certainly does reproduce itself; it becomes the
labour power of the wage labourer, for him a commodity by whose sale he
lives, which he can bring to market again and again; for society it
becomes the material form of variable capital which must reappear time
and again in the aggregate reproduction of a year, if there is to be no
loss.

So far so good. Hitherto we have only learned two facts: the
productivity of labour permits of the exploitation of the workers by
those who do not work themselves, and exploitation becomes the actual
foundation of the distribution of income owing to the divorce of the
worker from his means of production. But we still do not know what is
capital and what income, and Sismondi proceeds to clarify this point,
starting as usual with Robinson Crusoe:

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

Balderdash would be a better name for all this. In using the analogy of
seed, Sismondi here identifies means of production and capital, and this
is wrong for two reasons. First, means of production are capital not
intrinsically, but only under quite definite historical conditions;
secondly, the concept of capital covers more than just the means of
production. In capitalist society--with all the conditions Sismondi
ignores--the means of production are only a part of capital, i.e. they
are constant capital.

Sismondi here lost his thread plainly because he tried to establish a
connection between the capital concept and the material aspects of
social reproduction. Earlier, so long as he was concerned with the
individual capitalist, he listed means of subsistence for the workers
together with means of production as component parts of capital--again a
mistake in view of the material aspects of the reproduction of
individual capitals. Yet as soon as he tries to focus the material
foundations of social reproduction and sets out to make the correct
distinction between consumer goods and means of production, the concept
of capital dissolves in his hands.

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

'When the farmer has put in reserve all the corn he expects to need till
the next harvest, he will find a good use for the surplus corn: he will
feed what he has left over to other people who are going to work for
him, till his land, spin and weave his hemp and wool, etc.... By this
procedure, the farmer converts a part of his income into capital, and in
fact, this is the way in which new capital is always formed.... The corn
he has reaped over and above what he must eat while he is working, and
over and above what he will have to sow in order to maintain the same
level of exploitation, is wealth which he can give away, squander and
consume in idleness without becoming any poorer; it was income, but as
soon as he uses it to feed producers, as soon as he exchanges it for
labour, or for the fruits to come from the work of his labourers, his
weavers, his miners, it is a permanent value that multiplies and will no
longer perish; 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 on the old scale,
although it is strangely reduced to circulating capital, and although
the reproduction of fixed capital is completely ignored. Circulating
capital apparently is also superfluous for the expansion of
reproduction, for accumulation: the whole capitalised part of the
surplus value is converted into wages for new workers who evidently
labour in mid-air, without material means of production. The same view
is expressed even more clearly elsewhere:

'When the rich man cuts down his income in order to add to his capital,
he is thus conferring a benefit on the poor, because he himself shares
out the annual product; and whatever he calls income, he will keep for
his own consumption; whatever he calls capital, he gives to the poor man
to constitute an income for him.'[166]

Yet at the same time Sismondi gives due weight to the 'secret of
profit-making' and the origin of capital. Surplus value arises from 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 progress towards a
distinction between capital and income. Sismondi now attempts to
represent the various elements of production and income in terms of the
appropriate parts of the aggregate social product.

'The employer of labour, as also the labourer, does not use all his
productive wealth for the sowing; he devotes part of it to buildings,
mills and tools which render the work easier and more productive, just
as a share of the labourer's wealth had been devoted to the permanent
work of making the soil more fertile. Thus we see how the different
kinds of wealth successively come into being and become distinct. One
part of the wealth accumulated by society is devoted by every one who
possesses it to render labour more profitable by slow consumption, and
make the blind forces of nature execute the work of man; this part is
called _fixed capital_ and comprises reclaiming, irrigation, factories,
the tools of trade, and mechanical contrivances of every description. A
second part of wealth is destined for immediate consumption, to
reproduce itself in the work it gets done, to change its form, though
not its value, without cease. This part is called _circulating capital_
and it comprises seed, raw materials for manufacture, and wages.
Finally, a third part of wealth becomes distinguishable from the
second: it is the value by which the finished job exceeds the advances
which had to be made: this part is called _income_ on capitals and is
destined to be consumed without reproduction.'[167]

After this laborious attempt to achieve a division of the aggregate
social production according to incommensurable categories, fixed
capital, circulating capital, and surplus value, Sismondi soon shows
unmistakable signs that he means constant capital when he speaks of
fixed capital, and variable capital when he speaks of circulating
capital. For 'all that is created', is destined for human consumption,
though fixed capital is consumed 'mediately' while the circulating
capital 'passes into the consumption fund of the worker whose wage it
forms'.[168] Thus we are a little nearer to the division of the social
product into constant capital (means of production), variable capital
(provisions for the workers) and surplus value (provisions for the
capitalists). But so far Sismondi's explanations are not particularly
illuminating on the subject which he himself describes as 'fundamental'.
In this welter of confusion, at any rate, we cannot see any progress
beyond Adam Smith's 'massive thought'.

Sismondi feels this himself and would clarify the problem 'by the
simplest of all methods', sighing that 'this movement of wealth is so
abstract and requires such great power of concentration to grasp it
properly'.[168] Thus again we put on blinkers with a focus on Robinson
[Crusoe], who in the meantime has changed to the extent that he has
produced a family and is now a pioneer of colonial policy:

'A solitary farmer in a distant colony on the border of the desert has
reaped 100 sacks of corn this year; there is no market where to bring
them; this corn, in any case, must be consumed within the year, else it
will be of no value to the farmer; yet the farmer and his family eat
only 30 sacks of it; this will be his expenditure, constituting the
exchange of his income; it is not reproduced for anybody whatever. Then
he will call for workers, he will make them clear woods, and drain
swamps in his neighbourhood and put part of the desert under the plough.
These workers will eat another 30 sacks of corn: this will be their
expenditure; they will be in a position to afford this expenditure at
the price of their revenue, that is to say their labour; for the farmer
it will be an exchange: he will have converted his 30 sacks into fixed
capital. In the end, he is left with 40 sacks. He will sow them that
year, instead of the 20 he had sown the previous year; this constitutes
his circulating capital which he will have doubled. Thus the 100 sacks
will have been consumed, but of these 100 sacks 70 are a real investment
for him, which will reappear with great increase, some of them at the
very next harvest, and the others in all subsequent harvests.--The very
isolation of the farmer we have just assumed gives us a better feeling
for the limitations of such an operation. If he has only found consumers
for 60 of the 100 sacks harvested in that year, who is going to eat the
200 sacks produced the following year by the increase in his sowing? His
family, you might say, which will increase. No doubt; but human
generations do not multiply as quickly as subsistence. If our farmer had
hands available to repeat this assumed process each year, his corn
harvest will be doubled every year, and his family could at the most be
doubled once in 25 years.'[169]

Though the example is naïve, the vital question stands out clearly in
the end: where are the buyers for the surplus value that has been
capitalised? The accumulation of capital can indefinitely increase the
production of the society. But what about the consumption of society?
This is determined by the various kinds of income. Sismondi explains
this important subject in chapter v of book ii, 'The Distribution of the
National Income Among the Various Classes of Citizens', in a resumed
effort to describe the components of the social product.

'Under this aspect, the national income is composed of two parts and no
more; the one consists in annual production ... the profit arising from
wealth. The second is the capacity for work which springs from life.
This time we understand by wealth both territorial possessions and
capital, and by profit the net income accruing to the owners as well as
the profit of the capitalist.'[170]

Thus all the means of production are separated from the national income
as 'wealth', and this income is divided into surplus value and labour
power, or better, its equivalent, the variable capital. This, then,
though still far too vague, is our division into constant capital,
variable capital and surplus value. But 'national income', it soon
transpires, means for Sismondi the annual aggregate product of society:

'Similarly, annual production, or the result of all the nation's work in
the course of a year, is composed of two parts: one we have just
discussed--the profit resulting from wealth; the other is the capacity
for work, which is assumed to equal the part of wealth for which it is
exchanged, or the subsistence of the workers.'[171]

The aggregate social product is thus resolved, in terms of value, into
two parts: variable capital and surplus value--constant capital has
disappeared. We have arrived at Smith's dogma that the commodity price
is resolved into _v + s_ (or is composed of _v + s_)--in other words,
the aggregate product consists solely of consumer goods for workers and
capitalists.

Sismondi then goes on to the problem of realising the aggregate product.
On the one hand, the sum total of incomes in a society consists of
wages, capital profits and rents, and is thus represented by _v + s_; on
the other hand, the aggregate social product, in terms of value, is
equally resolved into _v + s_ 'so that national income and annual
production balance each other (and appear as equal quantities)', i.e. so
that they must be equal in value.

'Annual production is consumed altogether during the year, but in part
by the workers who, by exchanging their labour for it, convert it into
capital and reproduce it; in part by the capitalists who, exchanging
their income for it, annihilate it. The whole of the annual income is
destined to be exchanged for the 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 for the 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 the workers and
capitalists, we obviously remain within the bounds of simple
reproduction, and there can be no solution to the problem of
accumulation. Sismondi's theory in fact amounts to a denial of the
possibility of accumulation. The aggregate social demand being the bulk
of wages given to the workers and the previous consumption of the
capitalists, who will be left to buy the surplus product if reproduction
expands? On this count, Sismondi argues that accumulation is objectively
impossible, as follows:

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

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

If, on the other hand, there is ruthless accumulation, this surplus
residue becomes a public calamity, and the result is a crisis. Thus a
petty-bourgeois subterfuge becomes the solution of Sismondi: putting the
dampers on accumulation. He constantly polemises against the classical
school which advocates unrestricted development of the productive forces
and expansion of production; and his whole work is a warning against the
fatal consequences of giving full rein to the desire to accumulate.

Sismondi's exposition proves that he was unable to grasp the
reproductive process as a whole. Quite apart from his unsuccessful
attempt to distinguish between the categories of capital and income from
the point of view of society, his theory of reproduction suffers from
the fundamental error he took over from Adam Smith: the idea that
personal consumption absorbs the entire annual product, without leaving
any part of the value for the renewal of society's constant capital, and
also, that accumulation consists merely of the transformation of
capitalised surplus value into variable capital. Yet, if later critics
of Sismondi, e.g. the Russian Marxist Ilyin,[175] think that pointing
out this fundamental error in the analysis of the aggregate product can
justify a cavalier dismissal of Sismondi's entire theory of accumulation
as inadequate, as 'nonsense', they merely demonstrate their own
obtuseness in respect of Sismondi's real concern, his ultimate problem.
The analysis of Marx at a later date, showing up the crude mistakes of
Adam Smith for the first time, is the best proof that the problem of
accumulation is far from solved just by attending to the equivalent of
the constant capital in the aggregate product. This is proved even more
strikingly in the actual development of Sismondi's theory: his views
involved him in bitter controversy with the exponents and popularisers
of the classical school, with Ricardo, Say and MacCulloch. The two
parties to the conflict represent diametrically opposed points of view:
Sismondi stands for the sheer impossibility, the others for the
unrestricted possibility, of accumulation. Sismondi and his opponents
alike disregard constant capital in their exposition of reproduction,
and it was Say in particular who presumed to perpetuate Adam Smith's
confused concept of the aggregate product as _v + s_ as an unassailable
dogma.

The knowledge we owe to Marx that the aggregate product must, apart from
consumer goods for the workers and capitalists (_v + s_), also contain
means of production to renew what has been used, that accumulation
accordingly consists not merely in the enlargement of variable but also
of constant capital, is not enough, as amply demonstrated by this
entertaining turn of events, to solve the problem of accumulation. Later
we shall see how this stress on the share of constant capital in the
reproductive process gave rise to new fallacies in the theory of
accumulation. At present it will suffice to put on record that the
deference to Smith's error about the reproduction of aggregate capital
is not a weakness unique to Sismondi's position but is rather the common
ground on which the first controversy about the problem of accumulation
was fought out. Scientific research, not only in this sphere, proceeds
in devious ways; it often tackles the upper storeys of the edifice, as
it were, without making sure of the foundations; and so this conflict
only resulted in that bourgeois economics took on the further
complicated problem of accumulation without even having assimilated the
elementary problem of simple reproduction. At all events, Sismondi, in
his critique of accumulation, had indubitably given bourgeois economics
a hard nut to crack--seeing that in spite of his transparently feeble
and awkward deductions, Sismondi's opponents were still unable to get
the better of him.

FOOTNOTES:

[147] In the review of an essay on _Observations on the injurious
Consequences of the Restrictions 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 Trade bias, paints the general position
of the workers in England in the most dismal colours. It gives the facts
as follows: 'The manufacturing classes in Great Britain ... have been
suddenly reduced from affluence and prosperity to the extreme of poverty
and misery. In one of the debates in the late Session of Parliament, it
was stated that the wages of weavers of Glasgow and its vicinity which,
when highest, had averaged about 25_s._ or 27_s._ a week, had been
reduced in 1816 to 10_s._; and in 1819 to the wretched pittance of
5-6_s._ or 6_s._ They have not since been materially augmented.' In
Lancashire, according to the same evidence, the direct weekly wage of
the weavers was from 6_s._ to 12_s._ a week for 15 hours' labour a day,
whilst half-starved children worked 12 to 16 hours a day for 2_s._ or
3_s._ a week. Distress in Yorkshire was, if possible, even greater. As
to the address by the frame-work knitters of Nottingham, the author says
that he himself investigated conditions and had come to the conclusion
that the declarations of the 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, in
_Political Economy 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.




_CHAPTER XI_

MACCULLOCH _v._ SISMONDI


Sismondi's emphatic warnings against the ruthless ascendancy of capital
in Europe called forth severe opposition on three sides: in England the
school of Ricardo, in France J. B. Say, the commonplace vulgariser of
Adam Smith, and the St. Simonians. While Owen in England, profoundly
aware of the dark aspects of the industrial system and of the crises in
particular, saw eye to eye with Sismondi in many respects, the school of
that other great European, St. Simon, who had stressed the
world-embracing conception of large industrial expansion, the unlimited
unfolding of the productive forces of human labour, felt perturbed by
Sismondi's alarms. Here, however, we are interested in the controversy
between Sismondi and the Ricardians which proved the most fruitful from
the theoretical point of view. In the name of Ricardo, and, it seemed,
with Ricardo's personal approval, MacCulloch anonymously published a
polemical article[176] against Sismondi in the _Edinburgh Review_ in
October 1819, i.e. immediately after the publication of the _Nouveaux
Principes_.

In 1820, Sismondi replied in Rossi's _Annales de Jurisprudence_ with an
essay entitled: 'Does the Power of Consuming Necessarily Increase with
the Power to Produce? An Enquiry.'[177]

In his reply Sismondi[178] himself states that his polemics were
conceived under the impact of the commercial crisis: 'This truth we are
both looking for, is of utmost importance under present conditions. It
may be considered as fundamental for economics. Universal distress is in
evidence in the trade, in industry and, in many countries certainly,
even in agriculture. Such prolonged and extraordinary suffering has
brought misfortune to countless families and insecurity and despondency
to all, until it threatens the very bases of the social order. Two
contrasting explanations have been advanced for the distress that has
caused such a stir. Some say: we have produced too much, and others: we
have not produced enough. "There will be no equilibrium," say the
former, "no peace and no prosperity until we consume the entire
commodity surplus which remains unsold on the market, until we organise
production for the future in accordance with the buyers'
demand."--"There will be a new equilibrium," say the latter, "if only we
double our efforts to accumulate as well as to produce. It is a mistake
to believe that there is a glut on the market; no more than half our
warehouses are full; let us fill the other half, too, and the mutual
exchange of these new riches will revive our trade."'[179]

In this supremely lucid way, Sismondi sets out and underlines the real
crux of the dispute. MacCulloch's whole position in truth stands or
falls with the statement that exchange is actually an interchange of
commodities; every commodity accordingly represents not only supply but
demand. The dialogue then continues as follows:

'Demand and supply are truly correlative and convertible terms. The
supply of one set of commodities constitutes the demand for another.
Thus, there is a demand for a given quantity of agricultural produce,
when a quantity of wrought goods equal thereto in productive cost is
offered in exchange for it; and conversely, there is an effectual demand
for this quantity of wrought goods, when the supply of agricultural
produce which it required the same expense to raise, is presented as its
equivalent.'[180]

The Ricardian's dodge is obvious: he has chosen to ignore the
circulation of money and to pretend that commodities are immediately
bought and paid for by commodities.

From the conditions of highly developed capitalist production, we are
thus suddenly taken to a stage of primitive barter such as we might find
still flourishing at present in Central Africa. There is a distant
element of truth in this trick since money, in a simple circulation of
commodities, plays merely the part of an agent. But of course, it is
just the intervention of an agent which separates the two transactions
of circulation, sale and purchase, and makes them independent of one
another in respect of both time and place. That is why a further
purchase need not follow hard upon a sale for one thing; and secondly,
sale and purchase are by no means bound up with the same people: in
fact, they will involve the same performers only in rare and exceptional
cases. MacCulloch, however, makes just this baseless assumption by
confronting, as buyer and seller, industry on the one hand and
agriculture on the other. The universality of these categories, _qua_
total categories of exchange, obscures the actual splitting up of this
social division of labour which results in innumerable private exchange
transactions where the sale and purchase of two commodities rarely come
to the same thing. MacCulloch's simplified conception of commodity
exchange in general which immediately turns the commodity into money
and pretends that it can be directly exchanged, makes it impossible to
understand the economic significance of money, its historical
appearance.

Sismondi's answer to this is regrettably clumsy. In order to show that
MacCulloch's explanation of commodity exchange has no application for
capitalist production, he takes recourse to the Leipsic Book Fair.[181]

'At the Book Fair of Leipsic, booksellers from all over Germany arrive,
each with four or five publications of his own in some 40 or 50 dozen
copies; these are exchanged for others and every seller takes home 200
dozen books, just as he has brought 200 dozen, with the sole difference,
that he brought four different works and takes home 200. This is the
demand and the production which, according to M. Ricardo's disciple, are
correlative and convertible; one buys the other, one pays for the other,
one is the consequence of the other. But as far as we are concerned, for
the bookseller and for the general public, demand and consumption have
not even begun. For all that it has changed hands at Leipsic, a bad book
will still be just as unsold (a bad mistake of Sismondi's, this!), it
will still clutter up the merchants' shops, either because nobody wants
it, or because everyone has a copy already. The books exchanged at
Leipsic will only sell if the booksellers can find individuals who not
only want them but are also prepared to make sacrifices in order to
withdraw them from circulation. They alone constitute an effective
demand.'[182]

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

MacCulloch then attempts to turn the examination from abstract commodity
exchange to concrete social conditions: 'Supposing, for the sake
of illustration, that a cultivator advanced food and clothing
for 100 labourers, who raised for him _food_ for 200; while a
master-manufacturer also advanced food and clothing for 100, who
fabricated for him _clothing_ for 200. Then the farmer, besides
replacing the food of his own labourers, would have food for 100 to
dispose of; while the manufacturer, after replacing the clothing of his
own labourers, would have clothing for 100 to bring to market. In this
case, the two articles would be exchanged against each other, the supply
of food constituting the demand for the clothing, and that of the
clothing the demand for the food.'[183]

What are we to admire more in this hypothesis: the absurdity of the
set-up which reverses all actual relations, or the effrontery which
simply takes for granted in the premises all that is later claimed
proved? In order to prove that it is always possible to create an
unlimited demand for all kinds of goods, MacCulloch chooses for his
example two commodities which pertain to the most urgent and elementary
wants of every human being: food and clothing. In order to prove that
commodities may be exchanged at any time, and without regard to the
needs of society, he chooses for his example two products in quantities
which are right from the start in strict conformity with these needs,
and which therefore contain no surplus as far as society is concerned.
And yet he calls this quantity needed by society a surplus--_viz._ as
measured against the producer's personal requirements for his own
product, and is consequently able to demonstrate brilliantly that any
amount of commodity 'surplus' can be exchanged for a corresponding
'surplus' of other commodities. Finally, in order to prove that
different privately produced commodities can yet be exchanged, although
their quantity, production costs and social importance must of course be
different, he chooses for his example commodities whose quantity,
production cost and general social necessity are precisely the same
right from the start. In short, MacCulloch posits a planned, strictly
regulated production without any over-production in order to prove that
no crisis is possible in an unplanned private economy.

The principal joke of canny Mac, however, lies elsewhere. What is at
issue is the problem of accumulation. Sismondi was worried by, and
worried Ricardo and his followers with, the following question: if part
of the surplus value is capitalised, i.e. used to expand production over
and above the income of society, instead of being privately consumed by
the capitalists, where are we to find buyers for the commodity surplus?
What will become of the capitalised surplus value? Who will buy the
commodities in which it is hidden? Thus Sismondi. And the flower of
Ricardo's school, its official representative on the Chair of London
University, the authority for the then English Ministers of the Liberal
Party and for the City of London, the great Mr. MacCulloch replies--by
constructing an example in which 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 and exchange
without food and clothing.

Sismondi, justly impatient, now exclaims: 'The moment we want to find
out what is to constitute the surplus of production over consumption of
the workers, it will not do to abstract from that surplus which forms
the due profit of labour and the due share of the master.'[184]

MacCulloch's only reaction is to multiply his silly argument by a
thousand. He asks the reader to assume '1,000 farmers', and 'also 1,000
master-manufacturers' all acting as ingenuously as the individuals. The
exchange, then, proceeds as smoothly as can be desired. Finally, he
exactly doubles labour productivity 'in consequence of more skilful
application of labour and of the introduction of machinery--thus that
every one of the 1,000 farmers, by advancing food and clothing for 100
labourers, obtains a return consisting of ordinary food for 200 together
with sugar, grapes and tobacco equal in production cost to that food',
while every manufacturer obtains, by an analogous procedure, in addition
to the previous quantity of clothing for all workers, 'ribbands,
cambrics and lace, equal in productive cost, and therefore in
exchangeable value, to that clothing'.[185] After such complete reversal
of the chronological order, the assumption, that is, of first the
existence of private property with wage labour, and then, at a later
stage, such level of labour productivity as makes exploitation possible
at all, he now assumes labour productivity to progress with equal speed
in all spheres, the surplus product to contain precisely the same amount
of value in all branches of industry, and to be divided among precisely
the same number of people. When these various surplus products are then
exchanged against one another, is it any wonder that the exchange
proceeds smoothly and completely to everybody's satisfaction? It is only
another of his many absurdities that MacCulloch makes the capitalists
who had hitherto lived on air and exercised their profession in their
birthday suits, now live exclusively on sugar, tobacco and wine, and
array themselves only in ribbons, cambrics and lace.

The most ridiculous performance, however, is the _volte-face_ by which
he evades the real problem. The question had been what happens to the
capitalist surplus, that surplus which is used not for the capitalist's
own consumption but for the expansion of production. MacCulloch solves
it on the one hand by ignoring the production of surplus value
altogether, and on the other, by using all surplus value in the
production of luxury goods. What buyers, 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's model. Thus the entire surplus value is consumed for the
personal satisfaction of the capitalists, that is to say, simple
reproduction takes place. The answer to the problem of the
capitalisation of surplus value is, according to MacCulloch, either to
ignore surplus value altogether, or to assume simple reproduction
instead of accumulation as soon as surplus value comes into being. He
still _pretends_ to speak of expanding reproduction, but again, as
before when he pretended to deal with the 'surplus', he uses a trick,
_viz._ first setting out an impossible species of capitalist production
without any surplus value, and then persuading the reader that the
subsequent _début_ of the surplus value constitutes an expansion of
production.

Sismondi is not quite up to these Scottish acrobatics. He had up to now
succeeded in pinning his Mac down, proving him to be 'obviously absurd'.
But now he himself becomes confused with regard to the crucial point at
issue. On the above rantings of his opponent, he should have declared
coldly: Sir, with all respect for the flexibility of your mind, you are
dodging the issue. I keep on asking, who will buy the surplus product,
if the capitalists use it for the purpose of accumulation, i.e. to
expand production, instead of squandering it altogether? And you reply:
Oh well, they will expand their production of luxury goods, which they
will, of course, eat up themselves. But this is a conjuring trick,
seeing that the capitalists consume the surplus value in so far as they
spend it on their luxuries--they do not accumulate at all. My question
is about the possibility of accumulation, not whether the personal
luxuries of the capitalists are possible. Answer this clearly, if you
can, or else go play with your wine and tobacco, or go to blazes for all
I 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 masters or the workers in town or
country? On this new conception [of Mac's] there is a surplus of
products, an advantage from labour--to whom will it accrue?'[186] and
gives his own answer in the following impassioned words: 'But we know
full well, and the history of the commercial world teaches us all too
thoroughly, that it is not the worker who profits from the increase in
products and labour; his pay is not in the least swelled by it. M.
Ricardo himself said formerly that it ought not to be, unless you want
the social wealth to stop growing. On the contrary, sorry experience
teaches us that wages nearly always contract by very reason of this
increase. Where, then, does the accumulation of wealth make itself felt
as a public benefit? Our author assumes 1,000 farmers who profit, while
100,000 workers toil; 1,000 entrepreneurs who wax rich, while 100,000
artisans are kept under their orders. Whatever good may result from the
accumulation of the frivolous enjoyment of luxuries is only felt by a
100th part of the nation. And will this 100th part, called upon to
consume the entire surplus product of the whole working class, be
adequate to a production that may grow without let or hindrance, owing
to progress of machinery and capitals? In the assumption made by the
author, every time the national product is doubled, the master of the
farm or of the factory must increase his consumption a hundredfold; if
the national wealth to-day, thanks to the invention of so many machines,
is a hundred times what it was when it only covered the cost of
production, every employer would to-day have to consume enough products
to support 10,000 workers.'[187]

At this point Sismondi again believes himself to have a firm grasp on
how crises begin to arise: 'We might imagine, if put to it, that a rich
man can consume the goods manufactured by 10,000 workers, this being the
fate of the ribbons, lace and cambrics whose origin the author has shown
us. But a single individual would not know how to consume agricultural
product to the same tune, the wines, sugar and spices which M. Ricardo
[whom Sismondi evidently suspected of having written the article since
he only got to know 'Anonymous' of the _Edinburgh Review_ at a later
date] conjures up in exchange, are too much for the table of one man.
They will not sell, or else the strict 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 accumulation which refers to the
production of luxuries, he pursues his opponent into this field without
noticing that the ground under his feet has shifted. Here he finds two
causes for complaint. For one thing, he has moral objections to
MacCulloch's allowing the capitalists instead of the workers to benefit
by the surplus value, and is side-tracked into polemising against
distribution under capitalism. From this digression, he unexpectedly
reverts to the original problem which he now formulates as follows: the
capitalists, then, consume the entire surplus value in luxuries. Let it
be so. But could anyone increase his consumption as rapidly and
indefinitely as the progress of labour productivity makes the surplus
value increase? And in this second instance, Sismondi himself abandons
his own problem. Instead of perceiving that it is the lack of consumers
other than workers and capitalists which accounts for the difficulty in
capitalist accumulation, he discovers a snag in simple reproduction
because the capitalists' capacity to consume has physical limits. Since
the absorptive capacity of the capitalists for luxuries cannot keep up
with labour productivity, that is to say with the increase in surplus
value, there must be crises and over-production. We have encountered
this line of thought once before in the _Nouveaux Principes_--so
Sismondi himself was manifestly not quite clear about the problem at
all times. And that is hardly surprising, since one can really come to
grips with the whole problem of accumulation only when one has fully
grasped the problem of simple reproduction, and we have seen how much
Sismondi was at fault in this respect.

Yet in spite of all this, the first time that Sismondi crossed swords
with the heirs of the classical school, he proved himself by no means
the weaker party. On the contrary, in the end he routed his opponent. If
Sismondi misunderstood the most elementary principles of social
reproduction and ignored constant capital, quite in keeping with Adam
Smith's dogma, he was in this respect no worse at any rate than his
opponent. Constant capital does not exist for MacCulloch either, his
farmers and manufacturers 'advance' merely food and clothing to their
workers, and food and clothing between them make up the aggregate
product of society. If there is, then, nothing to choose between the two
as far as this elementary blunder is concerned, Sismondi towers heads
above Mac because of his intuitive understanding of the contradictions
in the capitalist mode of production. In the end, the Ricardian was at a
loss to answer Sismondi's scepticism concerning the possibility of
realising the surplus value. Sismondi also shows himself more
penetrating in that he throws the Nottingham proletarians' cry of
distress in the teeth of the apostles and apologists of harmony with
their smug complacency, of those who deny 'any surplus of production
over demand, any congestion of the market, any suffering', when he
proves that the introduction of the machine must of necessity create a
'superabundant population', and particularly in the end, when he
underlines the tendency of the capitalist world market in general with
its inherent contradictions. MacCulloch denies 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 the demand for
commodities increases in the same ratio as their supply, there is no
accounting for the gluts and stagnation produced by overtrading. We
answer very easily--A glut is an increase in the supply of a particular
class of commodities, unaccompanied by a corresponding increase in the
supply of those other commodities which should serve as their
equivalents. While our 1,000 farmers and 1,000 master-manufacturers are
exchanging their respective surplus products, and reciprocally affording
a market to each other, if 1,000 new capitalists were to 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 increase in the supply of the manufactured
articles which should purchase it. But let one half of the new
capitalists become manufacturers, and equivalents in the form of wrought
goods will be created for the new produce raised by the other half: the
equilibrium will be restored, and the 1,500 farmers and 1,500
master-manufacturers will exchange their respective surplus products
with exactly the same facility with which the 1,000 farmers and 1,000
manufacturers formerly exchanged theirs.'[189]

Sismondi answers this buffoonery which 'very easily' pokes about in a
fog, by pointing to the real changes and revolutions which take place
before his own eyes. 'It was possible to put barbarous countries under
the plough, and political revolutions, changes in the financial system,
and peace, at once brought cargoes to the ports of the old agricultural
countries which almost equalled their entire harvest. The recent Russian
conquest of the vast provinces on the Black Sea, the change in the
system of government in Egypt, and the outlawing of piracy in High
Barbary, have suddenly poured the granaries of Odessa, Alexandria and
Tunis into the Italian ports and have put such an abundance of corn on
the markets that all along the coasts the farmer's trade is fighting a
losing battle. Nor is the remainder of Europe safe from a similar
revolution, caused by the simultaneous ploughing under of immense
expanses of new land on the banks of the Mississippi, which export all
their agricultural produce. Even the influence of New Holland may one
day be the ruin of English industry, if not in the price of foodstuffs,
which are too expensive to transport, at least in respect of wool and
other agricultural products which are easier to transport.'[190]

What would MacCulloch have to advise in view of such an agrarian crisis
in Southern Europe? That half the new farmers should turn manufacturer.
Whereupon Sismondi counters: 'Such counsel cannot seriously apply to
the Tartars of the Crimea or to the fellaheen of Egypt.' And he adds:
'The time is not yet ripe to set up new industries in the regions
oversea or in New Holland.'[191]

Sismondi's acuity recognised that industrialisation of the lands
overseas was only a matter of time. He was equally aware of the fact
that the expansion of the world market would not bring with it the
solution to the difficulty but would only reproduce it in a higher
degree, in yet more potent crises. His prediction for the expansive
tendency of capitalism is that it will reveal an aspect of fiercer and
fiercer competition, of mounting anarchy within production itself.
Indeed, he puts his finger on the fundamental causes of crises in a
passage where he states the trend of capitalist production precisely as
surpassing all limits of the market. At the end of his reply to
MacCulloch he says: 'Time and again it has been proclaimed that the
equilibrium will re-establish itself, that work will start again, but a
single demand each time provides an impetus in excess of the real needs
of trade, and this new activity must soon be followed by a yet more
painful glut.'[192]

To such a profound grasp of the real contradictions in the movements of
capital, the _vulgarus_ on the Chair of London University with his
harmony cant and his country-dance of 1,000 beribboned farmers and 1,000
bibulous manufacturers could find no effective answer.

FOOTNOTES:

[176] The article in the _Edinburgh Review_ was really directed against
Owen, sharply attacking on 24 pages of print the latter's four
treatises: (1) 'A New View of Society, or Essays on the formation of
Human Character', (2) 'Observations on the Effects of the Manufacturing
System', (3) 'Two Memorials on Behalf of the Working Classes, Presented
to the Governments of America and Europe', and finally (4) 'Three
Tracts' and 'An Account of Public Proceedings relative to the Employment
of the Poor'. 'Anonymous' here attempts a detailed proof that Owen's
reformist ideas by no means get down to the real causes of the misery of
the English proletariat, these causes being: the transition to the
cultivation of barren land (Ricardo's theory of ground rent!), the corn
laws and high taxation pressing upon farmer and manufacturer alike. Free
trade and _laissez-faire_ thus is his alpha and omega. Given
unrestricted accumulation, all increase in production will create for
itself an increase in demand. Owen is accused of 'profound ignorance' as
regards 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 the production and distribution of wealth.'--From Owen, the
author proceeds to 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 machinery may increase the supply of the several
articles of wealth beyond the demand for them, and by creating an excess
of all commodities, throw the working classes out of employment. This is
the position which we hold to be fundamentally erroneous; and as it is
strongly insisted on by the celebrated M. de Sismondi in his _Nouveaux
Principes d'Économie Politique_, we must entreat the indulgence of our
readers while we endeavour to point out its fallacy, and to demonstrate,
that the power of consuming necessarily increases with every increase in
the power of producing' (_Edinburgh Review_, Oct. 1819, p. 470).

[177] The original title is: _Examen de cette question: Le pouvoir de
consommer s'accroît-il toujours dans la société avec le pouvoir de
produire?_ We have not been able to obtain a copy of Rossi's _Annales_,
but the essay as a whole was incorporated by Sismondi in the second
edition of his _Nouveaux Principes_.

[178] At the time of writing, Sismondi was still in the dark as to the
identity of 'Anonymous' in the _Edinburgh 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 the
capitalist 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 attempting to elucidate a real industrial crisis by means of an
imaginary one on the Leipsic Book Fair, a storm at sea by a storm in a
teacup, has shown himself a 'real German _literatus_'. But, as in many
other instances exposed by Engels, the great 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.




_CHAPTER XII_

RICARDO _v._ SISMONDI


MacCulloch's reply to Sismondi's theoretical objections evidently did
not settle the matter to Ricardo's own satisfaction. Unlike that shrewd
'Scottish arch-humbug', as Marx calls him, Ricardo really wanted to
discover the truth and throughout retained the genuine modesty of a
great mind.[193] That Sismondi's polemics against him and his pupil had
made a deep impression is proved by Ricardo's revised approach 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 sinister aspects of capitalism. Ricardo's followers had
enlarged upon the doctrine that the machine can always create as many or
even more opportunities for the wage labourers as it takes away by
displacing living labour. This so-called theory of compensation was
subjected to a stern attack by Sismondi in the chapter 'On the Division
of Labour and Machinery'[194] and in another chapter significantly
entitled: 'Machinery Creates a Surplus Population',[195] both published
in the _Nouveaux Principes_ of 1819, two years later than Ricardo's main
work. In 1821, after the MacCulloch-Sismondi controversy, Ricardo
inserted a new chapter in the third edition of his _Principles_, where
he frankly confesses to his error and says in the strain of Sismondi:
'That the opinion entertained by the labouring classes, that the
employment of machinery is frequently detrimental to their interests,
is not founded on prejudice and error, but is conformable to the correct
principles of political economy.'[196]

He, like Sismondi, had to defend himself against the suspicion that he
is opposing technical progress, but, less ruthless, he compromises with
the evasion that the evil emerges only gradually. 'To elucidate the
principle, I have been supposing, that improved machinery is _suddenly_
discovered, and extensively used; but the truth is, that these
discoveries are gradual, and rather operate in determining the
employment of the capital which is saved and accumulated, than in
diverting capital from its actual employment.'[197]

Yet the problem of crises and accumulation continued to worry Ricardo
also. In 1823, the last year of his life, he spent some days in Geneva
in order to talk the problem over face to face with Sismondi. The result
of these talks is Sismondi's essay 'On the Balance Between Consumption
and Production', published in the _Revue Encyclopédique_ of May
1824.[198]

In his _Principles_, Ricardo had at the crucial points completely
accepted Say's trite doctrine of harmony in the relations between
production and consumption. In chapter xxi he had declared: 'M. Say has,
however, most satisfactorily shown, that there is no amount of capital
which may not be employed in a country, because demand is only limited
by production. No man produces, but with a view to consume or sell, and
he never sells, but with an intention to purchase some other commodity,
which may be immediately useful to him, or which may contribute to
future production. By producing, then, he necessarily becomes either
the consumer of his own goods, or the purchaser and consumer of the
goods of some other person.'[199]

To this conception of Ricardo's, Sismondi's _Nouveaux Principes_ were a
powerful challenge, and the dispute as a whole turned also on this
point. Ricardo could not deny the fact of crises which had but recently
passed over England and other countries. What was at issue was the
explanation for them. Right at the outset of their debate, Sismondi and
Ricardo had agreed on a remarkably lucid and precise formulation of the
problem, excluding the question of foreign commerce altogether. Sismondi
grasped the significance and necessity of foreign trade for capitalist
production, its need for expansion, well enough; in this line he was
quite in step with Ricardo's Free Traders, whom he considerably excelled
in his dialectical conception of the expansionist needs of capital. He
fully admitted that industry 'is increasingly led to look for its vents
on foreign markets where it is threatened by greater revolutions'.[200]
He forecast, as we have seen, the rise of a dangerous competition for
European industry in the overseas countries. This was after all a
creditable achievement in the year 1820, and one which reveals
Sismondi's deep insight into the relations of capitalist world economy.
But even so, Sismondi was in fact far from conceiving the problem of
realising the surplus value, the problem of accumulation, to depend on
foreign commerce as its only means of salvation, a view attributed to
him by later critics. On the contrary, Sismondi was quite explicit in
the sixth chapter of volume i:[201] 'In order to make these calculations
with greater certainty and to simplify these questions, we have hitherto
made complete abstraction from foreign trade and supposed an isolated
nation; this isolated nation is human society itself, and what is true
for a nation without foreign commerce, is equally true for mankind.'

In other words: in considering the entire world market as one society
producing exclusively by capitalist methods, Sismondi grounds his
problem in the same premises as Marx was to do after him. That was also
the basis on which he came to terms with Ricardo. 'From the question
that troubled us, we had each of us dismissed the instance of a nation
that sold more abroad than it needed to buy there, that could command a
growing external market for its growing internal production. In any
case, it is not for us to decide whether fortunes of war or politics
could perhaps bring forth new consumers for a nation--what is needed is
proof that a nation can create these for itself simply by increasing its
production.'[202]

This is how Sismondi formulated the problem of realising the surplus
value in all precision, just as it confronts us throughout the ensuing
era in economics, in contrast with Ricardo who actually maintains along
with Say, as we are already aware and shall show in further detail, that
production creates its own demand.

Ricardo's thesis in the controversy with Sismondi takes the following
form: 'Supposing that 100 workers produce 1,000 sacks of corn, and 100
weavers 1,000 yards woollen fabric. Let us disregard all other products
useful to man and all intermediaries between them, and consider them
alone in the world. They exchange their 1,000 yards against the 1,000
sacks. Supposing that the productive power of labour has increased by a
tenth owing to a successive progress of industry, the same people will
exchange 1,100 yards against 1,100 sacks, and each will be better
clothed and fed; new progress will make them exchange 1,200 yards for
1,200 sacks, and so on. The increase in products always only increases
the enjoyment of those who produce.'[203]

The great Ricardo's standards of reasoning, it must regretfully be
stated, are if anything even lower than those of the Scottish
arch-humbug, MacCulloch. Once again we are invited to witness a
harmonious and graceful country-dance of sacks and yards--the very
proportion which is to be proved, is again taken for granted. What is
more, all relevant premises for the problem are simply left out. The
real problem--you will recollect--the object of the controversy had been
the question: who are the buyers and consumers of the surplus product
that comes into being if the capitalists produce more goods than are
needed for their own and their workers' consumption; if, that is to say,
they capitalise part of their surplus value and use it to expand
production, to increase their capital? Ricardo answers it by completely
ignoring the capital increase. The picture he paints of the various
stages of production is merely that of a gradually increasing
productivity of labour. According to his assumptions, the same amount of
labour first produces 1,000 sacks 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 gracefully ascending curve. Not only that the image of a marshalled
uniform progression on both sides, of conformity even in the number of
objects brought to exchange, is wearisome, the expansion of capital is
nowhere as much as mentioned in the model. Here we have no enlarged but
simple reproduction with a greater bulk of use-values indeed, but
without any increase in the value of the aggregate social product. Since
only the amount of value, not the number of use-values is relevant to
the exchange transaction, and this amount remains constant in the
example, Ricardo makes no real advances, even though he seems 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 produce without any surplus value and live on
air, but at least he recognised the existence of the workers, making
provision for their consumption. Ricardo, however, does not even mention
the workers; for him the distinction between variable capital and
surplus value does not exist at all. Besides this major omission, it is
of small account that he, just like his disciple, takes no notice of
constant capital. He wants to solve the problem of realising the surplus
value and expanding capital without positing more than the existence of
a certain quantity of commodities which are mutually exchanged.

Sismondi was blind to the fact that the venue has been changed
altogether. Yet he tried faithfully to bring the fantasies of his famous
guest and opponent down to earth and to analyse their invisible
contradictions, plaintively saying that these assumptions, 'just like
German metaphysics, abstract from time and space'.[204] He grafts
Ricardo's hypothesis on to 'society in its real organisation, with
unpropertied workers whose wage is fixed by competition and who can be
dismissed the moment their master has no further need of their work ...
for'--remarks Sismondi, as acute as he is modest--'it is just this
social organisation to which our objection refers'.[205]

He lays bare the many difficulties and conflicts bound up with the
progress of labour productivity under capitalism, and shows that
Ricardo's postulated changes in the technique of labour, from the point
of view of society, lead to the following alternative: Either a number
of workers corresponding to the increase in labour productivity will
have to be dismissed outright--then there will be a surplus of products
on the one hand, and on the other unemployment and misery--a faithful
picture of present-day society. Or the surplus product will be used for
the maintenance of the workers in a new field of production, the
production of luxury goods. Here Sismondi undoubtedly proves himself
superior: he suddenly remembers the existence of the constant capital,
and now it is he who subjects the English 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, raw materials procured,
and distant commerce brought into activity; for the wealthy are rarely
content with enjoying what is immediately in front of them. Where, then,
could we find this new capital which may perhaps be much more
considerable than that required by agriculture?... Our luxury workers
are still a long way from eating our labourers' grain, from wearing the
clothes from our common factories; they are not yet made into workers,
they may not even have been born yet, their trade does not exist, the
materials on which they are to work have not arrived from India. All
those among whom the former should distribute their bread, wait for it
in vain.'[206]

Sismondi now takes constant capital into account, not only in the
production of luxuries, but also in agriculture, and further raises the
following objection against Ricardo: 'We must abstract from time, if we
make the assumption that the cultivator, whom a mechanical discovery or
an invention of rural industry enables to treble the productive power of
his workers, will also find sufficient capital to treble his
exploitation, his agricultural implements, his equipment, his livestock,
his granaries: to treble the circulating capital which must serve him
while waiting for his harvest.'[207]

In this way Sismondi breaks with the superstition of the classical
school that with capital expanding all additional capital would be
exclusively spent on wages, on the variable capital. He clearly dissents
from Ricardo's doctrine--which did not, however, prevent his allowing
all the errors arising out of this doctrine three years later again to
creep into the second edition of his _Nouveaux Principes_. In opposition
to Ricardo's facile doctrine of harmony, Sismondi underlines two
decisive points: on the one hand, the objective difficulties of the
process of enlarged reproduction which works by no means so smoothly in
capitalist reality as it does in Ricardo's absurd hypothesis; on the
other hand, the fact that all technical progress in social labour
productivity is always achieved under capitalism at the expense of the
working class, bought with their suffering. Sismondi shows himself
superior to Ricardo in yet a third point: he represents the broad
horizon of the dialectical approach as against Ricardo's blunt
narrow-mindedness with its incapacity to conceive of any forms of
society other than those of bourgeois economics:

'Our eyes,' he exclaims, 'are so accustomed to this new organisation of
society, this universal competition, degenerating into hostility between
the rich and the working class, that we no longer conceive of any mode
of existence other than that whose ruins surround us on all sides. They
believe to prove me absurd by confronting me with the vices of preceding
systems. Indeed, as regards the organisation of the lower classes, two
or three systems have succeeded one another; yet, since they are not to
be regretted, since, after first doing some good, they then imposed
terrible disasters on mankind, may we conclude from this that we have
now entered the true one? May we conclude that we shall not discover the
besetting vice of the system of wage labour as we have discovered that
of slavery, of vassalage, and of the guilds? A time will come, no doubt,
when our descendants will condemn us as barbarians because we have left
the working classes without security, just as we already condemn, as
they also will, as barbarian the nations who have reduced those same
classes to slavery.'[208]

Sismondi's statement, putting in a nutshell the vital differences
between the parts played by the proletariat in a modern society and in
the society of ancient Rome, shows his profound insight into historical
connections. He shows no less discernment, in his polemics against
Ricardo, when analysing the specific economic character of the
slave-system and of feudal economy as well as their relative historical
significance, and finally when emphasising, as the dominant universal
tendency of bourgeois economy, 'that it severs completely all kind of
property from every kind of labour'.

The second round, no more than the first, between Sismondi and the
classical school, brought little glory for Sismondi's opponents.[209]

FOOTNOTES:

[193] It is typical that on his election to Parliament in 1819, when he
already enjoyed the highest reputation on account of his economic
writings, Ricardo wrote to a friend: 'You will have seen that I have
taken my seat in the House of Commons. I fear I shall be of little use
there. I have twice attempted to speak but I proceeded in the most
embarrassed manner, and I have no hope of conquering the alarm with
which I am assailed the moment I 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 gasbag MacCulloch.

[194] _Nouveaux Principes_ ..., book iv, chap. vii.

[195] Ibid., book vii, chap. vii.

[196] D. Ricardo, _On the Principles of Political Economy and Taxation_
(3rd edition, London, 1821), p. 474.

[197] Ibid., p. 478.

[198] This essay, _Sur la Balance des Consommations avec les
Productions_, is reprinted in the second edition of _Nouveaux
Principes_, vol. ii, pp. 408 ff. Sismondi tells us about this
discussion: 'M. Ricardo, whose recent death has been a profound
bereavement not only to his friends and family but to all those whom he
enlightened by his brilliance, all those whom he inspired by his lofty
sentiments, stayed for some days in Geneva in the last year of his life.
We discussed in two or three sessions this fundamental question on which
we disagreed. To this enquiry he brought the urbanity, the good faith,
the love of truth which distinguished him, and a clarity which his
disciples themselves had not heard, accustomed as they were to the
efforts 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
commerciale suit 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
us about the controversy between Sismondi and Ricardo (_Studies on the
Theory and History of Commercial Crises in England_, p. 176), that
Sismondi was compelled 'to acknowledge as correct the doctrine he had
attacked and to concede his opponent all that is necessary'; that
Sismondi himself 'had abandoned 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--to put it mildly--such as
is practically unheard-of in a work of serious scientific pretensions.




_CHAPTER XIII_

SAY _v_. SISMONDI


Sismondi's essay against Ricardo in the _Revue Encyclopédique_ of May
1824, was the final challenge for J. B. Say, at that time the
acknowledged 'prince of economic science' (_prince de la science
économique_), the so-called representative, heir and populariser of the
school of Adam Smith on the Continent. Say, who had already advanced
some arguments against Sismondi in his letters to Malthus, countered the
following July with an essay on 'The Balance Between Consumption and
Production' in the _Revue Encyclopédique_, to which Sismondi in turn
published a short reply. The chronology of Sismondi's polemical
engagements was thus inverse to the sequence of the opposing theories,
for it had been Say who first communicated his doctrine of a divinely
established balance between production and consumption to Ricardo who
had in turn handed it down to MacCulloch. In fact, as early as 1803,
Say, in his _Traité d'Économie Politique_, book i, chapter xii, had
coined the following peremptory statement: 'Products are paid for with
other products. It follows that if a nation has too many goods of one
kind, the means of selling them would be to create goods of a different
kind.'[210]

Here we meet again the all too familiar conjuring recipe which was
accepted alike by Ricardo's school and by the 'vulgar economists' as the
corner-stone of the doctrine of harmony.[211]

Essentially, Sismondi's principal work constitutes a sustained polemic
against this thesis. At this stage Say charges to the attack in the
_Revue Encyclopédique_ with a complete _volte-face_, as follows:

'Objection may be made that, because of man's intelligence, because of
the advantage he can draw from the means provided by nature and
artifice, every human society can produce _all_ the things fit to
satisfy its needs and increase its enjoyment in far larger quantities
than it can itself consume. But there I would ask how it is possible
that we know of no nation that is supplied with everything. Even in what
rank as prospering nations seven-eighths of the population are lacking
in a multitude of things considered necessities in ... I will not say a
wealthy family, but in a modest establishment. The village I live in at
present lies in one of the richest parts of France; yet in 19 out of 20
houses I enter here, I see but the coarsest fare and nothing that makes
for the well-being of the people, none of the things the English call
comforts.'[212]

There is something to admire about the effrontery of the excellent Say.
It was he who had maintained that in a capitalist economy there could be
no difficulties, no surplus, no crises and no misery; since goods can be
bought one for the other, we need only go on producing more and more and
everything in the garden will be lovely. It was in Say's hands that this
postulate had become a tenet of the doctrine of harmony, that doctrine
so typical of vulgar economics, which had evoked a sharp protest from
Sismondi who proved this view untenable. The latter had 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 society in each case, by _v + s_;
inasmuch as the wages of the workers are depressed to a mere subsistence
level, and inasmuch as there is also a natural limit to the consumptive
capacity of the capitalist class, an expansion of production, Sismondi
says, must inevitably lead to slumps, crises and ever greater misery for
the great masses. Say's come-back to this is masterly in its ingenuity:
If you will insist that over-production is possible, how can it happen
that there are so many people in our society who are naked, hungry and
in want? Pray, explain this contradiction if you can. Say, whose own
position excels by contriving blithely to shrug off the circulation of
money altogether by operating with a system of barter, now censures his
critic for speaking of an over-abundance of products in relation not
only to purchasing power but to the real needs of society, and that
although Sismondi had left no doubt at all about this very salient point
of his deductions. 'Even if there is a very great number of badly fed,
badly clothed and badly housed people in a society, the society can only
sell what it buys, and, as we have seen, it can only buy with its
income.'[213]

A little further on, Say concedes this point but alleges that his
opponent 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 the products are rare,
when consequently they are dearer and their production procures ampler
pay for the workers.'[214]

That is how Say attempts to degrade, in his own trite method of thought,
or better, method of canting, Sismondi's theory which attacked the very
foundations of capitalist organisation and its mode of distribution. He
burlesques the _Nouveaux Principes_, turning them into a plea for 'rare'
goods and high prices, and holds up to them the mirror of an artfully
flattered capitalist accumulation at its peak. If production becomes
more vigorous, he argues, labour grows in numbers and the volume of
production expands, the nations will be better and more universally
provided for, and he extols the conditions in countries where industrial
development is at its highest, as against the misery of the Middle Ages.
Sismondi's maxims he declares subversive to capitalist society: 'Why
does he call for an inquiry into the laws which might oblige the
entrepreneur to guarantee a living for the worker he employs? Such an
inquiry would paralyse the spirit of enterprise. Merely the fear that
the authorities might interfere with private contracts is a scourge and
harmful to the wealth of a nation.'[215]

Not to be diverted from his purpose by this indiscriminate apologia of
Say's, Sismondi once more turns the discussion on the fundamental issue:

'Surely I have never denied that since the time of Louis XIV France has
been able to double her population and to quadruple her consumption, as
he contends. I have only claimed that the increase 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 no demand, the only hope of the producer is to
entice the consumers of a rival industry's products. I have tried to
show that the natural course of the nations is progressive increase of
their property, an increase consequent upon their demand for new
products and their means to pay for them, but that in consequence of our
institutions, of our legislation having robbed the working class of all
property and every security, they have also been spurred to a disorderly
labour quite out of touch with the demand and with purchasing power,
which accordingly only aggravates poverty.'[216]

And he winds up the debate by inviting the preacher of harmony to
reflect upon the circumstance that, though a nation may be rich, public
misery no less than material wealth is constantly on the increase, the
class which produces everything being daily brought nearer to a position
where it may consume nothing. On this shrill discordant note of
capitalist contradictions closes the first clash about the problem of
accumulation.

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

(1) In spite of all the confusion in Sismondi's analysis, his
superiority to both Ricardo and his followers and to the self-styled
heir to the mantle of Adam Smith is quite unmistakable. Sismondi, in
taking things from the angle of reproduction, looks for concepts of
value (capital and income) and for factual elements (producer and
consumer goods) as best he can, in order to grasp how they are
interrelated within the total social process. In this he is nearest to
Adam Smith, with the difference only that the contradictions there
appearing as merely subjective and speculative, are deliberately
stressed as the keynote of Sismondi's analysis where the problem of
capital accumulation is treated as the crucial point and principal
difficulty.

Sismondi has therefore made obvious advances on Adam Smith, while
Ricardo and his followers as well as Say throughout the debate think
solely in terms of simple commodity production. They only see the
formula C--M--C, even reducing everything to barter, and believe that
such barren wisdom can cover all the problems specific to the process of
reproduction and accumulation. This is a regress even on Smith, and over
such myopic vision, Sismondi scores most decisively. He, the social
critic, evinces much more understanding for the categories of bourgeois
economics than their staunchest champions--just as, at a later date, the
socialist Marx was to grasp infinitely more keenly than all bourgeois
economists together the _differentia specifica_ of the mechanism of
capitalist economy. If Sismondi exclaims in the face of Ricardo's
doctrine: 'What, is wealth to be all, and man a mere nothing?'[217] it
is indicative not only of the vulnerable moral strain in his
petty-bourgeois approach compared to the stern, classical impartiality
of Ricardo, but also of a critical perception, sharpened by social
sensibilities for the living social connections of economy; an eye, that
is, for intrinsic contradictions and difficulties as against the rigid,
hidebound and abstract views of Ricardo and his school. The controversy
had only shown up the fact that Ricardo, just like the followers of Adam
Smith, was not even able to grasp, let alone solve the puzzle of
accumulation put by Sismondi.

(2) The clue to the problem, however, was already impossible of
discovery, because the whole argument had been side-tracked and
concentrated upon the problem of crises. It is only natural that the
outbreak of the first crisis should dominate the discussion, but no less
natural that this effectively prevented either side from recognising
that crises are far from constituting _the_ problem of accumulation,
being no more than its characteristic phenomenon: one element in the
cyclical form of capitalist reproduction. Consequently, the debate could
only result in a twofold _quid pro quo_: one party deducing from crises
that accumulation is impossible, and the other from barter that crises
are impossible. Subsequent developments of capitalism were to give the
lie to both conclusions alike.

And yet, Sismondi's criticism sounds the first alarm of economic theory
at the domination of capital, and for this reason its historical
importance is both great and lasting. It paves the way for the
disintegration of a classical economics unable to cope with the problem
of its own making. But for all Sismondi's terror of the consequences
attendant upon capitalism triumphant, he was certainly no reactionary in
the sense of yearning for pre-capitalistic conditions, even if on
occasion he delights in extolling the patriarchal forms of production in
agriculture and handicrafts in comparison with the domination of
capital. He repeatedly and most vigorously protests against such an
interpretation as e.g. in his polemic against Ricardo in the _Revue
Encyclopédique_:

'I can already hear the outcry that I jib at improvements in agriculture
and craftsmanship and at every progress man could make; that I doubtless
prefer a state of barbarism to a state of civilisation, since the plough
is a tool, the spade an even older one, and that, according to my
system, man ought no doubt to work the soil with his bare hands.

'I never said anything of the kind, and I crave indulgence to protest
once for all against all conclusions imputed to my system such as I
myself have never drawn. Neither those who attack me nor those who
defend me have really understood me, and more than once I have been put
to shame by my allies as much as by my opponents.'--'I beg you to
realise that it is not the machine, new discoveries and inventions, not
civilisation to which I object, but the modern organisation of society,
an organisation which despoils the man who works of all property other
than his arms, and denies him the least security in a reckless
over-bidding that makes for his harm and to which he is bound to fall a
prey.'[218]

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

'I am only working for means to secure the fruits of labour to those who
do the work, to make the machine benefit the man who puts it in
motion.'[219]

When pressed for a closer definition of the social organisation towards
which he aspires, it is true he hedges and confesses himself unable to
do so:

'But what remains to be done is of infinite difficulty, and I certainly
do not intend to deal with it to-day. I should like to convince the
economists as completely as I am convinced myself that their science is
going off on a wrong tack. But I cannot trust myself to be able to show
them the true course; it is a supreme effort--the most my mind will run
to--to form a conception even of the actual organisation of society. Yet
who would have the power to conceive of an organisation that does not
even exist so far, to see the future, since we are already hard put to
it to see the present?'[220]

Surely it was no disgrace to admit oneself frankly powerless to envisage
a future beyond capitalism in the year 1820--at a time when capitalism
had only just begun to establish its domination over the big industries,
and when the idea of socialism was only possible in a most Utopian form.
But, as Sismondi could neither advance beyond capitalism nor go back to
a previous stage, the only course open to his criticism was a
petty-bourgeois compromise. Sceptical of the possibility of developing
fully both capitalism and the productive forces, he found himself under
necessity to clamour for some moderation of accumulation, for some
slowing down of the triumphant march of capitalism. That is the
reactionary aspect of his criticism.[221]

FOOTNOTES:

[210] 'L'argent ne remplit qu'un office passager dans ce double échange.
Les échanges 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, le moyen de les écouler est d'en créer d'un autre genre' (J. B.
Say, _Traité d'Économie Politique_, Paris, 1803, vol. i, p. 154).

[211] In fact, here again, Say's only achievement lies in having given a
pompous and dogmatic form to an idea that others had expressed before
him. As Bergmann points out, in his _Theory of Crises_ (Stuttgart,
1895), the work of Josiah Tucker (1752), Turgot's annotations to the
French pamphlets, the writings of Quesnay, Dupont de Nemours, and of
others contain quite similar observations on a natural balance, or even
identity, between demand and supply. Yet the miserable Say, as Marx once
called him, claims credit as the evangelist of harmony for the great
discovery of the '_théorie des débouchés_', modestly comparing his own
work to the discovery of the principles of thermo-dynamics, of the
lever, and of the inclined plane. In the preface and table of contents,
e.g. to the 6th edition of his _Traité_ (1841, pp. 51, 616) he says:
'The theory of exchange and of vents, such as it is developed in this
work, will transform world politics.' The same point of view is also
expounded by James Mill in his 'Commerce Defended' of 1808, and it is he
whom Marx calls the real father of the doctrine of a natural equilibrium
between production and demand.

[212] Say in _Revue 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
bourgeois society in the following ranting peroration: 'It is against
the modern organisation of society, an organisation which, by despoiling
the working man of all property save his hands, gives him no security in
the face of a competition directed towards his detriment. What! Society
despoils the working man because it ensures to every kind of
entrepreneur free disposition over his capital, that is to say his
property! I repeat: there is nothing more dangerous than 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 leave
Sismondi out of this historical account, because the criticism of his
views belongs to a part with which I can deal only after this treatise,
the actual movement of capital (competition and credit)' (_Theorien über
den Mehrwert_, vol. iii, p. 52). Later on, however, in connection with
Malthus, he also deals with Sismondi in a passage that, on the whole, is
comprehensive: 'Sismondi is profoundly aware of the self-contradiction
of capitalist production; he feels that its forms, its productive
conditions, spur on an untrammelled development of the productive forces
and of wealth on the one hand, yet that these conditions, on the other,
are only relative; that their contradictions of value-in-use and
value-in-exchange, of commodity and money, of sale and purchase, of
production and consumption, of capital and wage-labour, and so on, take
on ever larger dimensions, along with the forward strides of the
productive forces. In particular, he feels the fundamental conflict:
here the untrammelled development of productive power and of a wealth
which, at the same time, consists in commodities, must be monetised; and
there the basis--restriction of the mass of producers to the necessary
means of subsistence. He therefore does not, like Ricardo, conceive of
the crises as merely incidental, but as essential, as eruptions of the
immanent conflicts on ever grander scale and at determinate periods.
Which faces him with the dilemma: is the state to put restrictions on
the _productive forces_ to adapt them to the productive conditions, or
upon the _productive conditions_ to adapt them to the _productive
forces_? Frequently he has recourse to the past, becomes _laudator
temporis acti_, and seeks to master the contradictions by a different
regulation of income relative to capital, or of distribution relative to
production, quite failing to grasp that the relations of distribution
are nothing but the relations of production _sub alia specie_. He has a
perfect picture of the contradictions immanent in bourgeois production,
yet he does not understand them, and therefore fails also to understand
the process of their disintegration. (And indeed, how could he, seeing
this production was still in the making?--R.L.) And yet, his view is in
fact grounded in the premonition that _new_ forms of appropriating
wealth must answer to the productive forces, developed in the womb of
capitalist production, to the material and social conditions of creating
this wealth; that the bourgeois forms of appropriation are but
transitory and contradictory, wealth existing always with contrary
aspects and presenting itself at once as its opposite. Wealth is ever
based on the premises of poverty, and can develop only by developing
poverty' (ibid., p. 55).

In _The Poverty of Philosophy_, Marx opposes Sismondi to Proudhon in
sundry passages, yet about the man himself he only remarks tersely:
'Those, who, like Sismondi, wish to return to the true proportions of
production, while preserving the present basis of society, are
reactionary, since, to be consistent, they must also wish to bring back
all the other conditions of industry of former times' (_The Poverty of
Philosophy_, London, 1936, p. 57). Two short references to Sismondi are
in _On the Critique of Political Economy_: once he is ranked, as the
last classic of bourgeois economics in France, with Ricard in England;
in another passage emphasis is laid on the fact that Sismondi, contrary
to Ricardo, underlined the specifically social character of labour that
creates value.--In the _Communist Manifesto_, finally, Sismondi is
mentioned as the head of the petty-bourgeois school.




_CHAPTER XIV_

MALTHUS


At the same time as Sismondi, Malthus also waged war against some of the
teachings of Ricardo. Sismondi, in the second edition of his work as
well as in his polemics, repeatedly referred to Malthus as an authority
on his side. Thus he formulated the common aims of his campaign against
Ricardo in the _Revue Encyclopédique_:

'Mr. Malthus, on the other hand, has maintained in England, as I have
tried to do on the Continent, that consumption is not the necessary
consequence of production, that the needs and desires of man, though
they are truly without limits, are only satisfied by consumption in so
far as means of exchange go with them. We have affirmed that it is not
enough to create these means of exchange, to make them circulate among
those who have these desires and wants; that it can even happen
frequently that the means of exchange increase in society together with
a decrease in the demand for labour, or wages, so that the desires and
wants of one part of the population cannot be satisfied and consumption
also decreases. Finally, we have claimed that the unmistakable sign of
prosperity in a society is not an increasing production of wealth, but
an increasing demand for labour, or the offer of more and more wages in
compensation for this labour. Messrs. Ricardo and Say, though not
denying that an increasing demand for labour is a symptom of prosperity,
maintained that it inevitably results from an increase of production. As
for Mr. Malthus and myself, we regard these two increases as resulting
from independent causes which may at times even be in opposition.
According to our view, if the demand for labour has not preceded and
determined production, the market will be flooded, and then new
production becomes a cause of ruin, not of enjoyment.'[222]

These remarks suggest far-reaching agreement, a brotherhood in arms of
Sismondi and Malthus, at least in their opposition against Ricardo and
his school. Marx considers the _Principles of Political Economy_, which
Malthus published in 1820, an outright plagiarism of the _Nouveaux
Principes_ which had been published the year before. Yet Sismondi and
Malthus are frequently at odds regarding the problem with which we are
here concerned.

Sismondi is critical of capitalist production, he attacks it sharply,
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 raises them quite unmercifully to the
status of a natural law and asserts their absolute sanctity. Sismondi's
guiding principle is the interests of the workers. He aspires, though
rather generally and vaguely, towards a thoroughgoing reform of
distribution in favour of the proletariat. Malthus provides the ideology
for those strata who are the parasites of capitalist exploitation, who
live on ground rent and draw upon the common wealth, and advocates the
allocation of the greatest possible portion of the surplus value to
these 'unproductive consumers'. Sismondi's general approach is
predominantly ethical, it is the approach of the social reformer.
Improving upon the classics, he stresses, in opposition to them, that
'consumption is the only end of accumulation', and pleads for restricted
accumulation. Malthus, on the contrary, bluntly declares that production
has no other purpose than accumulation and advocates unlimited
accumulation by the capitalists, to be supplemented and assured by the
unlimited consumption of their parasites. Finally, Sismondi starts off
with a critical analysis of the reproductive process, of the relation
between capital and income from the point of view of society; while
Malthus, opposing Ricardo, begins with an absurd theory of value from
which he derives an equally absurd theory of surplus value, attempting
to explain capitalist profits as an addition to the price over and above
the value of commodities.[223]

Malthus opposes the postulate that supply and demand are identical with
a detailed critique in chapter vi of his _Definitions in Political
Economy_.[224] In his _Elements of Political Economy_, James Mill had
declared:

'What is it that is necessarily meant, when we say that the supply and
the demand are accommodated to one another? It is this: that goods which
have been produced by a certain quantity of labour, exchange for goods
which have been produced by an equal quantity of labour. Let this
proposition be duly attended to, and all the rest is clear.--Thus, if a
pair of shoes is produced with an equal quantity of labour as a hat, so
long as a hat exchanges for a pair of shoes, so long the supply and
demand are accommodated to one another. If it should so happen, that
shoes fell in value, as compared with hats, which is the same thing as
hats rising in value compared with shoes, this would simply imply that
more shoes had been brought to market, as compared with hats. Shoes
would then be in more than the due abundance. Why? Because in them the
produce of a certain quantity of labour would not exchange for the
produce of an equal quantity. But for the very same reason hats would be
in less than the due abundance, because the produce of a certain
quantity of labour in them would exchange for the produce of more than
an equal quantity in shoes.'[225]

Against such trite tautologies, Malthus marshals a twofold argument. He
first draws Mill's attention to the fact that he is building without
solid foundations. In fact, he argues, even without an alteration in the
ratio of exchange between hats and shoes, there may yet be too great a
quantity of _both_ in relation to the demand. This will result in both
being sold at less than the cost of production plus an appropriate
profit.

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

In other words, Malthus confronts Mill with the possibility of general
over-production: '... when they are compared with the costs of
production ... it is evident that ... they may all fall or rise at the
same time'.[227]

Secondly, he protests against the way in which Mill, Ricardo and
company are wont to model their postulates on a system of barter: 'The
hop planter who takes a hundred bags of hops to Weyhill fair, thinks
little more about the supply of hats and shoes than he does about the
spots in the sun. What does he think about, then? and what does he want
to exchange his hops for? Mr. Mill seems to be of opinion that it would
show great ignorance of political economy, to say that what he wants is
money; yet, notwithstanding the probable imputation of this great
ignorance, I have no hesitation in distinctly asserting, that it really
is money which he wants....'[228]

For the rest, Malthus is content to describe the machinery by which an
excessive supply can depress prices below the cost of production and so
automatically bring about a restriction of production, and _vice versa_.

'But this tendency, in the natural course of things, to cure a glut or 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 of
crises, Malthus thinks along the same lines as Ricardo, Mill, Say, and
MacCulloch. For him, too, everything can be reduced to barter. The
social reproductive process with its large categories and interrelations
which claimed the whole of Sismondi's attention, is here completely
ignored.

In view of so many contradictions within the fundamental approach, the
criticism of Sismondi and Malthus have only a few points in common:
(1) Contrary to Say and the followers of Ricardo, they both deny the
hypothesis of a pre-established balance of consumption and production.
(2) They both maintain that not only partial but also universal crises
are possible.

But here their agreement ends. If Sismondi seeks the cause of crises in
the low level of wages and the capitalists' limited capacity for
consumption, Malthus, on the other hand, transforms the fact of low
wages into a natural law of population movements; for the capitalists'
limited capacity for consumption, however, he finds a substitute in the
consumption of the parasites on surplus value such as the landed gentry
and the clergy 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 who buy
without selling, in order to redeem capitalist accumulation and save it
from a precarious position. But Sismondi needs them to get rid of the
surplus product of society over and above the consumption of the workers
and capitalists, that is to say, to get rid of the capitalised part of
the surplus value. Malthus wants them as 'producers' of profit in
general. It remains entirely his secret, of course, how the _rentiers_
and the incumbents of the state can assist the capitalists in
appropriating their profits by buying commodities at an increased price,
since they themselves obtain their purchasing power mainly from these
capitalists. In view of these profound contrasts, the alliance between
Malthus and Sismondi does not go very deep. And if Malthus, as Marx has
it, distorts Sismondi's _Nouveaux Principes_ into a Malthusian
caricature, Sismondi in turn stresses only what is common to them both
and quotes Malthus in support, giving the latter's critique of Ricardo a
somewhat Sismondian cast. On occasion, no doubt, Sismondi actually
succumbs to the influence of Malthus; for instance, he takes over the
latter's theory of reckless state expenditure as an emergency measure in
aid of accumulation and so becomes involved in contradictions with his
own initial assumptions.

On the whole, Malthus neither rendered an original contribution to the
problem of reproduction, nor even grasped it fully. In his controversy
with the followers of Ricardo, he operated with the concepts of simple
commodity circulation, just as they did in their controversy with
Sismondi. His quarrel with that school turns on the 'unproductive
consumption' by the parasites of the surplus value; it is not a quarrel
about the social foundations of capitalist reproduction. Malthus'
edifice tumbles to the ground as soon as the absurd mistakes in his
theory of profits are uncovered. Sismondi's criticism remains valid, and
his problems remain unsolved even if we accept Ricardo's theory of value
with all its consequences.

FOOTNOTES:

[222] _Nouveaux Principes_ ..., vol. ii, p. 409.

[223] Cf. Marx, _Theorien über den Mehrwert_, vol. iii, pp. 1-29, which
gives a detailed 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.




  _SECTION TWO_


  HISTORICAL EXPOSITION
  OF THE PROBLEM


  SECOND ROUND

  THE CONTROVERSY BETWEEN RODBERTUS
  AND VON KIRCHMANN




_CHAPTER XV_

v. KIRCHMANN'S THEORY OF REPRODUCTION


The second theoretical polemics about the problem of accumulation was
also started by current events. If the first English crisis and its
attendant misery of the working class had stimulated Sismondi's
opposition against the classical school, it was the revolutionary
working-class movement arisen since which, almost twenty-five years
later, provided the incentive for Rodbertus' critique of capitalist
production. The risings of the Lyons silk weavers and the Chartist
movement in England were vastly different from the shadowy spectres
raised by the first crisis, and the ears of the bourgeoisie were made to
ring with their criticism of the most wonderful of all forms of society.
The first socio-economic work of Rodbertus, probably written for the
_Augsburger Allgemeine Zeitung_ in the late thirties but not published
by that paper, bears the significant title, _The Demands of the Working
Classes_,[230] and begins as follows:

'What do the working classes want? Will the others be able to keep it
from them? Will what they want be the grave of modern civilisation?
Thoughtful people have long realised that a time must come when history
would put this question with great urgency. Now, the man in the street
has learned it too, from the Chartist meetings and the Birmingham
scenes.'

During the forties, the leaven of revolutionary ideas was most
vigorously at work in France in the formation of the various secret
societies and socialist schools of the followers of Proudhon, Blanqui,
Cabet, Louis Blanc, etc. The February revolution and the June
proclamation of the 'right to work' led to a first head-on clash between
the two worlds of capitalist society--an epoch-making eruption of the
contradictions latent in capitalism. As regards the other, visible form
of those contradictions--the crises--the available data for observation
at the time of the second controversy were far more comprehensive than
in the early twenties of the century. The dispute between Rodbertus and
v. Kirchmann took place under the immediate impact of the crises in
1837, 1839, 1847, and even of the first world crisis in 1857--Rodbertus
writing his interesting pamphlet _On Commercial Crises and the Mortgage
Problem of the Landowners_[231] in 1858. Thus the inherent
contradictions of capitalist society meeting his eyes were in strident
discord with the doctrine of harmony held by the English classics and
their vulgarisers both in England and on the Continent, quite unlike any
critique in the times when Sismondi had raised his voice in warning.

Incidentally, a quotation from Sismondi in Rodbertus' first writing
proves that the former's strictures immediately influenced Rodbertus. He
was thus familiar with contemporary French writings against the
classical school, though perhaps less so with the far more numerous
English literature. There is no more than this flimsy support for the
myth of the German professors about the so-called 'priority' of
Rodbertus over Marx in the 'foundation of socialism'. Accordingly,
Professor Diehl writes in his article on Rodbertus in _Handwörterbuch
der Staatswissenschaften_: 'Rodbertus must be considered the real
founder of scientific socialism in Germany, since in his writings
between 1839 and 1842, even before Marx and Lassalle, he provided a
comprehensive socialist system, a critique of Adam Smith's doctrine, new
theoretical foundations and proposals for social reform.'

This piece of god-fearing, pious righteousness comes from the second
edition of 1901, after all that had been written by Engels, Kautsky and
Mehring to destroy this learned legend, and in spite of it. Quite
inevitably, of course, and proof against any evidence to the contrary,
however weighty, it was only right in the eyes of all the learned German
economists that the palm of 'priority' should be wrested from Marx, the
revolutionary anarchist, by Rodbertus, the 'socialist' with monarchist,
Prussian and nationalist leanings, the man who believed in communism
five hundred years from now, but for the present supported a steady
exploitation rate of 200 per cent. However, we are interested in another
aspect of Rodbertus' analysis. The same Professor Diehl continues his
eulogy as follows: 'Rodbertus was not only a pioneer of socialism;
political economy as a whole owes much stimulation and furtherance to
him; economic theory in particular is indebted to him for the critique
of classical economics, for the new theory of the distribution of
income, for the distinction between the logical and historical
categories 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 Our
Politico-Economic Conditions_[232] of 1842, set the ball rolling.
v. Kirchmann replied in _Demokratische Blätter_ with two essays--_On
the Social Aspects of Ground Rent_[233] and _The Society of
Barter_[234]--and Rodbertus parried in 1850 with his _Letters on Social
Problems_.[235] Thus the discussion entered the same theoretical arena
where Malthus-Sismondi and Say-Ricardo-MacCulloch had fought out their
differences thirty years earlier. In his earliest writings, Rodbertus
had already expressed the thought that the wages of labour present an
ever diminishing part of the national product in modern society where
the productivity of labour is increasing. He claimed this to be an
original idea, and from that moment until his death thirty years later
he did nothing but reiterate it and formulate it in various ways. This
'declining wage rate' is for him the root of all evils to be found in
modern society, in particular of pauperism and the crises, whose
combination he calls 'the social problem of our times'.

v. Kirchmann does not agree with this explanation. He traces pauperism
back to the effects of a rising ground rent; crises, on the other hand,
to a lack of markets. About the latter especially he says: 'The greatest
part of social ills is caused not by defects of production but by a lack
of markets for the products ... the more a country can produce, the more
means it has for satisfying every need, the more it is exposed to the
danger of misery and want.'--The labour-problem is here included as
well, for 'the notorious right to work ultimately reduces to the
question of markets'. 'We see', he concludes, 'that the social problem
is almost identical with the problem of markets. Even the ills of
much-abused competition will vanish, once markets are secure; its
advantages alone will remain. There will remain a spirit of rivalry to
supply good and cheap commodities, but the life-and-death struggle will
disappear which is caused only by insufficient markets.'[236]

The difference between the points of view of Rodbertus and v. Kirchmann
is evident. Rodbertus sees the root of the evil in a faulty distribution
of the national product, and v. Kirchmann in the limitations of the
markets for capitalist production. Notwithstanding all the confusion in
his expositions, especially in his idealist vision of a capitalist
competition content with a laudable rivalry for better and cheaper
commodities, and also in his conception of the 'notorious right to work'
as a problem of markets, v. Kirchmann up to a point still shows more
understanding for the sore spot of capitalist production, i.e. the
limitations of its market, than Rodbertus who clings to distribution.
Thus it is v. Kirchmann who now takes up the problem which Sismondi had
originally put on the agenda. Nevertheless, he by no means agrees with
Sismondi's elucidation and solution of the problem, siding rather with
the opponents of the latter. Not only does he accept Ricardo's theory of
ground rent, and Adam Smith's dogma that 'the price of the commodity is
composed of two parts only, of the interests on capital and the wages of
labour' (v. Kirchmann transforms the surplus value into 'interest on
capital'); he also subscribes to the thesis of Say and Ricardo that
products are only bought with other products and that production creates
its own demand, so that if one side appears to have produced too much,
it only means there was not enough production on the other. v.
Kirchmann, we see, faithfully follows the classics, if in a somewhat
'German edition'. He begins by arguing, e.g., that Say's law of a
natural balance between production and demand 'still does not give a
comprehensive picture of reality', and adds:

'Commerce involves yet further hidden laws which prevent this postulated
order from obtaining in complete purity. They must be discovered if we
are to explain the present flooding of the market, and their discovery
might perhaps also show us the way to avoid this great evil. We believe
that there are three relations in the modern system of society which
cause these conflicts between Say's indubitable law and reality.'

These relations are (1) 'too inequitable a distribution of the
products'--here, as we see, v. Kirchmann somewhat approximates to
Sismondi's point of view; (2) the difficulties which nature puts in the
way of human labour engaged in production; and (3) finally, the defects
of commerce as a mediator between production and consumption.
Disregarding the last two obstacles to Say's law, we shall now consider
v. Kirchmann's reasoning of his first point.

'The first relation', he explains, 'can be put more briefly as too low a
wage of labour, which is thus the cause of a slump. Those who know that
the price of commodities is composed of two parts only, of the interest
on capital and the wage of labour, might consider this a startling
statement; if the wage of labour is 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 its most misleading
form: the price is not _resolved_ into wage of labour and surplus value,
but is _composed_ of them as a mere sum--a view in which Adam Smith
strayed furthest from his own theory of the value of labour.)

'Wage and price thus are directly related, they balance each other.
England only abolished her corn laws, her tariffs on meat and other
victuals, in order to cause wages to fall and thus to enable her
manufacturers to oust all other competitors from the world markets by
means of still cheaper commodities. This, however, only holds good up to
a point and does not affect the ratio in which the product is
distributed among the workers and the capitalists. Too inequitable a
distribution among these two is the primary and most important cause why
Say's law is not fulfilled in real life, why the markets are flooded
although there is production in all branches.'

v. Kirchmann gives a detailed illustration of this statement. Using the
classical method, he takes us, of course, to an imaginary isolated
society which makes an unresisting, if thankless, object for the
experiments of political economy. v. Kirchmann suggests we should
imagine a place (_Ort_) which comprises 903 inhabitants, no more, no
less, _viz._ three entrepreneurs with 300 workers each. _Ort_ is to be
able to satisfy all needs by its own production--in three
establishments, that is to say, one for clothing, a second for food,
lighting, fuel and raw materials, and a third for housing, furniture and
tools. In each of these three departments, the 'capital together with
the raw materials' is to be provided by the entrepreneur, and the
remuneration of the workers is to be so arranged that the workers obtain
as their wage one half of the annual produce, the entrepreneur retaining
the other half 'as interest on capital and profits of the enterprise'.
Every business is to produce just enough to satisfy all the needs of the
903 inhabitants. _Ort_ accordingly has 'all the conditions necessary for
general well-being', and everybody can therefore tackle his work with
courage and vigour. After a few days, however, joy and delight turn into
a universal misery and gnashing of teeth: something has happened on v.
Kirchmann's Island of the Blessed which was no more to be expected than
for the skies to fall: an industrial and commercial crisis according to
all modern specifications has broken out! Only the most essential
clothing, food and housing for the 900 workers has been produced, yet
the warehouses of the three entrepreneurs are full of clothes and raw
materials, and their houses stand empty: they complain of a lack of
demand, while the workers in turn complain that their wants are not
fully satisfied. What has gone wrong? Could it be that there is too much
of one kind of produce and too little of another, as Say and Ricardo
would have it? Not at all, answers v. Kirchmann. Everything available in
_Ort_ in well-balanced quantities, just enough to satisfy all the wants
of the community. What, then, has thrown a spanner into the works, why
the crisis? The obstruction caused by distribution alone--but this must
be savoured in v. Kirchmann's own words:

'The obstacle, why nevertheless no smooth exchange takes place, lies
solely and exclusively in the distribution of these products. They are
not distributed equitably among all, but the entrepreneurs retain half
of them for themselves as interest and profit, and only give half to the
workers. It is clear that the worker in the clothing department can
exchange, against half of his product, only half of the food, lodging,
etc., that has been produced, and it is clear that the entrepreneur
cannot get rid of the other half since no worker has any more products
to give in exchange. The entrepreneurs do not know what to do with
their stocks, the workers do not know what to do for hunger and
nakedness.'

Nor does the reader, we might add, know what to do with v. Kirchmann's
constructions. His model is so childish that every advance leads deeper
into the maze.

First of all, there seems to be no reason whatever why, and to what
purpose, v. Kirchmann should devise this splitting-up of production into
three parts. If analogous examples by Ricardo and MacCulloch usually
confront tenant farmers and manufacturers, that is presumably only
inspired by the antiquated Physiocrat conception of social reproduction
which Ricardo had adopted, although his own theory of value as against
the Physiocrats deprived it of all meaning, and although Adam Smith had
already made a good start in considering the real material foundations
of the social reproductive process. Still, we have seen that the
tradition of distinguishing between agriculture and industry as the
foundation of reproduction was kept up in economic theory until Marx
introduced his epoch-making distinction of the two productive
departments in society for producer and consumer goods. v. Kirchmann's
three departments, however, have no real significance at all. Obviously,
no material consideration of reproduction can have been responsible for
this supremely arbitrary division which jumbles up tools and furniture,
raw materials and food, but makes clothing a department in its own
right. One might as well postulate one department for food, clothing and
housing, another for medicines and a third for tooth brushes. v.
Kirchmann's primary concern, no doubt, is with the social division of
labour; hence the assumption of as nearly equal quantities of products
as possible in the transactions of exchange. Yet this exchange, on which
the argument turns, plays no part at all in v. Kirchmann's example since
it is not the value which is distributed but the quantities of products,
the bulk of use-values as such. In this intriguing _Ort_ of v.
Kirchmann's imagining, again, the products are distributed first, and
only afterwards, when the distribution is accomplished, is there to be
universal exchange, whereas on the solid ground of capitalist production
it is, as we know, the exchange which inaugurates the distribution of
the product and serves as its agent. Besides, the queerest things happen
in v. Kirchmann's distributive system: 'As we all know', the prices of
the products, i.e. the price of the aggregate product of society,
consist of _v + s_, of wage and capital interest alone--so that the
aggregate product must be distributed entirely among workers and
entrepreneurs; but then unhappily v. Kirchmann dimly remembers the fact
that production needs things like raw materials and tools. So _Ort_ is
provided with raw materials furtively introduced among the food, and
with tools among the furniture. But now the question arises: who is to
get these 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 on such feeble
premises the star turn of the performance is to take place: the exchange
between workers and entrepreneurs. The fundamental transaction of
exchange in capitalist production, the exchange between workers and
capitalists, is transformed by v. Kirchmann from an exchange between
living labour and capital into an exchange of products. Not the first
act, that of exchanging labour power for variable capital, but the
second, the realisation of the wage received from the variable capital
is put at the centre of the whole machinery, the entire commodity
exchange of capitalist society being in turn reduced to this realisation
of the labour-wage. And the crowning glory is that this exchange between
workers and entrepreneurs, the king-pin of all economic life, dissolves
into nothing on a closer scrutiny--it does not take place at all. For as
soon as all workers have received 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 consisting
exclusively of either clothing, food or furniture, as the case may be,
and realise the remainder to equal parts in the two other
product-groups. The entrepreneurs no longer come into this at all; the
three of them are left high and dry with their surplus value: half the
clothing, furniture and food that has been produced by the society; and
they have no idea what to do with the stuff. In this calamity of v.
Kirchmann's creation, even the most generous distribution of the product
would be of no use. On the contrary, if larger quantities of the social
product were allotted to the workers, they would have even less to do
with the entrepreneurs in this transaction: all that would happen is
that the exchange of the workers among themselves would increase in
volume. The surplus product which the entrepreneurs have on their hands
would then contract, it is true, though not indeed because the exchange
of the surplus product would be facilitated, but merely because there
would be less surplus value altogether. Now as before, an exchange of
the social product between workers and entrepreneurs is out of the
question. One must confess that the puerile and absurd economics here
crammed into comparatively little space exceed the bounds even of what
might be put up with from a Prussian Public Prosecutor--such having been
v. Kirchmann's profession, though he must be credited with having
incurred disciplinary censure on two occasions. Nevertheless, after
these unpromising preliminaries, v. Kirchmann goes right to the root of
the matter. He admits that his assuming the surplus product in a
concrete use-form is the reason why the surplus value cannot be usefully
employed. As a remedy he now allows the entrepreneurs to devote half of
the social labour appropriated as surplus value to the production not of
common goods but of luxuries. The 'essence of luxury-goods being that
they enable the consumer to use up more capital and labour power than in
the case of ordinary goods', the three entrepreneurs manage to consume
by themselves in the form of laces, fashionable carriages and the like,
their entire half-share in all the labour performed by the society. Now
nothing unsaleable is left, and the crisis is happily avoided;
over-production is made impossible once and for all, capitalists and
workers alike are safe; the name of v. Kirchmann's magic cure which has
brought all these benefits to pass, and which re-establishes the balance
between production and consumption, being: luxury. In other words, the
capitalists who do not know what to do with their surplus value which
they cannot realise, are advised by the dear fellow--to eat it up! As it
happens, luxury is in fact an old familiar invention of capitalist
society, and still there are recurrent crises. Why is this? v. Kirchmann
enlightens us: 'The answer can only be that in real life sluggish
markets are entirely due to the fact that there are still _not enough_
luxuries, or, in other words, that the capitalists, i.e. those who can
afford to consume, still consume too little.'

This misguided abstinence of the capitalists, however, results from a
bad habit which political economists have been ill-advised to
encourage: the desire to save for purposes of 'productive consumption'.
In other words: crises are caused by accumulation. This is v.
Kirchmann's principal thesis. He proves it again by means of a
touchingly simple example: 'Let us assume conditions which economists
praise as more favourable,' he says, 'where the entrepreneurs say: we do
not want to spend our income to the last penny in splendour and luxury,
but will re-invest it productively. What does this mean? Nothing but the
setting-up of all sorts of productive enterprises for delivering new
goods of such a kind that their sale can yield interest (v. Kirchmann
means profits) on a capital saved and invested by the three
entrepreneurs from their unconsumed revenues. Accordingly, the three
entrepreneurs decide to consume only the produce of a hundred workers,
that is to say to restrict their luxury considerably, and to employ the
labour power of the remaining 350 workers together with the capital they
use for setting up new productive enterprises. The question now arises
in what kind of productive enterprises these funds are to be used.'

Since, according to v. Kirchmann's assumption, constant capital is not
reproduced, and the entire social product consists entirely of consumer
goods, 'the three entrepreneurs can only choose again between
enterprises for the manufacture of ordinary goods or for that of
luxuries'.

In this way, however, the three entrepreneurs will be faced with the
already familiar dilemma: if they turn out 'common goods', there will be
a crisis, since the workers lack means to purchase these additional
provisions, having been bought off with 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 which would 'only increase the range of commodities on the home
market' or increase productivity.

'These foreign commodities are therefore either common goods--then the
capitalist will not, and the worker, lacking the means, cannot buy them,
or they are luxuries, in which case the worker, of course, is even less
able to buy them, and the capitalist will not want them either because
of his efforts to save.'

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

FOOTNOTES:

[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 great
detail. But according to his editors, no complete copy of _Demokratische
Blätter_ with the original essay is obtainable.




_CHAPTER XVI_

RODBERTUS' CRITICISM OF THE CLASSICAL SCHOOL


Rodbertus digs deeper than v. Kirchmann. He looks for the roots of evil
in the very foundations of social organisation and declares bitter war
on the predominant Free Trade school--not against a system of
unrestricted commodity circulation or the freedom of trade which he
fully accepts, but against the Manchester doctrine of _laissez-faire_
within the internal social relations of economy. At that time, after the
period of storm and stress of classical economics, a system of
unscrupulous apologetics was already in full sway which found its most
perfect expression in the 'doctrine of harmony' of M. Frédéric Bastiat,
the famous vulgarian and idol of all Philistines, and quite soon the
various Schultzes were to flourish as commonplace, German imitations of
the French prophet of harmony. Rodbertus' strictures are aimed at these
unscrupulous 'peddlers of free trade'. In his first _Letter on Social
Problems_[237] he exclaims:

'Because of their paltry incomes, five-sixths of the population are not
only deprived of most of the benefits of civilisation, but are in
constant danger of the most terrible outbreaks of real distress to which
they sometimes succumb. Yet they are the creators of all the wealth of
the society. Their labours begin at dawn and end at dusk, continuing
even after night has fallen--but no exertion can change this fate; they
cannot raise their income, and only lose that little leisure which ought
to remain nowadays for the improvement of their minds. Hitherto it might
have seemed as if all this suffering were necessary to the progress of
civilisation, but now that a series of the most wonderful discoveries
and inventions have increased human labour power more than a
hundredfold, new prospects of changing these grim conditions are
suddenly revealed. As a result, the wealth and assets of a nation
increase at a growing rate as compared with the population. Could
anything be more natural, I ask, or more justly demanded, than that this
increase should also somehow benefit the creators of this old and new
wealth? that their incomes should be raised or their working-hours
shortened, or that they might join in increasing numbers the ranks of
the lucky ones, privileged to reap the fruits of labour? Yet state
economy, or better, national economy has only achieved the opposite
result. Increasing poverty of these classes goes together with
increasing wealth of the nation, there is even need of special
legislation, lest the working day become longer, and finally, the
working classes swell in number out of proportion with the others. Even
that is not enough! The hundredfold increase of labour efficiency which
was powerless to relieve five-sixths of the population, even threatens
periodically the remaining sixth 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! The wealth of society is
growing, and this growth is accompanied by a growth of poverty.--The
creative efficiency of the means of production is increasing, and the
consequence is that they are scrapped. Social conditions demand that the
material position of the working classes should be raised to the level
of their political status, and economic conditions, by way of answer,
depress them further. Society needs the unrestricted growth of wealth,
and contemporary leaders of production must create restrictions, in
order to discourage poverty. In a single respect alone is there harmony:
just as wrong as the conditions is the authoritative section of the
society with its inclination to look for the root of the evil everywhere
except in the right place. This egotism, which only too often dons the
scholar's gown, also accuses the vices of the workers of being the cause
of poverty. The responsibility for the crimes committed against them by
all-powerful facts is ascribed to their alleged discontent and
shiftlessness, and where even such egotism cannot close its eyes to
their innocence, it makes an elaborate dogma of the "necessity of
poverty". Unremittingly, it exhorts the workers only to work and to
pray, impresses upon them the duty of abstinence and economy, and at
best infringes upon their rights by the institution of compulsory
saving, adding to the misery of the workers. It does not see that a
blind force of commerce has transformed the prayer for work into the
curse of enforced unemployment, that ... abstinence is impossible or
cruel, and that, lastly, morals always remain ineffective if commended
by those of whom the poet says that they drink wine in secret but preach
water in public.'[238]

Thirty years after Sismondi and Owen, twenty years after the indictment
made by the English socialists, the followers of Ricardo, and last but
not least, after the publication of the Communist Manifesto, such bold
words alone cannot claim to break new ground. What matters above all now
is the theoretical foundation of this indictment. Rodbertus here
proposed a complete system which can be reduced to the following simple
statements.

Owing to the laws of an economy left to its own devices, the high level
of labour productivity achieved by history, together with the
institutions of positive law, that is to say the right of private
ownership, a whole series of wrong and unethical phenomena had emerged:

(1) In the place of 'normal', 'constituted' value we have exchange
value, and accordingly coined money instead of a proper 'paper' or
'labour' currency which would genuinely correspond to the concept of
money. The first principle is that all economic goods are products of
labour, or, as we might put it, that labour alone is creative. This
statement, however, does not imply that the value of the product must
always equal the cost of labour, or that, in other words, value is even
now measured in terms of labour. The truth is rather 'that this still
has not become a _fact_, but is only an _idea_ of political
economy'.[239]

'If the value could be constituted in accordance with the labour
expended on the product, we might imagine a kind of money which would
be, as it were, a leaf torn from the public account-book, a receipt
written on the most rubbishy material, on rags, which everyone would
receive for the value he has produced, and which he would realise as a
voucher for an equivalent part of the national product subsequently
under distribution.... If, however, for some reason or another, it is
_impossible_ or _not yet possible_ to establish this value, money as
such must still retain the value it is designed to liquidate; made of
an intrinsically valuable commodity like gold or silver, it has to
represent a pledge or pawn of the same value.'[240] 'As soon as
capitalist commodity production has come into existence, everything is
turned upside down: there can no longer be a constituted value, since it
can only be exchange value',[241] and, 'since the value cannot be
constituted, money cannot be _purely_ money, it cannot fully conform to
its concept'.[242] In an equitable exchange, the exchange value of the
products would have to equal the quantity of labour needed for producing
them, and an exchange of products would always mean an exchange of equal
quantities of labour. Even assuming, however, that everybody produced
just those use-values which another person requires, yet, 'since we are
here concerned with human discernment and human volition, there must
always be for a start a correct calculation, adjustment and allocation
of the labour quantities contained in the products for exchange, there
must be a _law_ to which the facts will conform'.[243]

It is well-known that Rodbertus, in his discovery of 'constituted
value', laid great stress on his priority to Proudhon which we shall
gladly concede him. Marx, in his _Poverty of Philosophy_, and Engels in
his preface to it, have comprehensively shown that this 'concept' is a
mere phantom, still used in theory but in practice buried already in
England well before Rodbertus' time, that it is but a Utopian distortion
of Ricardo's doctrine of value. We therefore need not deal further with
this 'music of the future, performed on a toy trumpet'.

(2) The 'economy of exchange' resulted in the 'degradation' of labour to
a commodity, the labour wage being determined as an item of expenditure
(_Eichmann's der Arbeit_) instead of representing a fixed rate of the
national product. By a daring jump in history, Rodbertus derives his
wages law indirectly from slavery and regards the specific traits which
a capitalist production of commodities imposes on exploitation as no
more than a lying deception against which he fulminates from a moral
point of view.

'So long as the producers themselves remained the property of those who
were not producing, so long as slavery was in existence, it was the
advantage of the "masters" alone which unilaterally determined the
volume of this share (of the workers). With the producers attaining full
liberty of person, if nothing more as yet, both parties agree on the
wage in advance. The wage, in modern terminology, is the object of a
"free contract", that is to say, an object of competition. Labour is
therefore as a matter of course subjected to the same laws of exchange
as its products: labour itself acquires exchange value; the size of the
wage 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 produced goods, comes to
have a kind of "cost value" which exercises some magnetic effects upon
its exchange value, the amount of the labour wage. It is that particular
amount of payment which is necessary for the "maintenance" of labour, in
other words, which enables labour to continue, if only in the persons of
its progeny--it is the so-called "minimum of subsistence".'

For Rodbertus, however, this is not a statement of objective economic
laws, but merely an object for moral indignation. He calls the thesis of
the classical school, that labour is worth no 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 in accordance
with the "necessary subsistence", like so many machines to be kept in
repair. Now that labour, the fountainhead of all commodities, has itself
become a commodity of exchange, it is no less degrading to speak of its
"natural price", of its "costs", just as we speak of the natural price
and costs of its product, and to include this natural price, these
costs, in the amount of goods that is necessary to call forth a
continuous flow of labour on the market.'

This commodity character of labour power, however, and the corresponding
determination of its value, are nothing but a malicious
misrepresentation of the Free Trade school. Like the good Prussian he
was, Rodbertus put capitalist commodity production as a whole in the
dock, as offending against the obtaining constitutional law, instead of
pointing out its inherent contradiction, the conflict between
determining the value of labour and determining the value _created by_
labour, as the English disciples of Ricardo had done.

'Stupid beyond words', he exclaims, 'is the dualist conception of those
economists who would have the workers, as far as their legal status is
concerned, join in deciding the fate of society, and would for all that,
have these same workers from an economic point of view, always treated
as mere commodities!'[245]

Now it only remains to find out why the workers put up with such stupid
and blatant injustice--an objection which Hermann for instance raised
against Ricardo's theory of value. Rodbertus is ready with this answer:

'What were the workers to do after their emancipation other than to
agree to these regulations? Imagine their position: when the workers
were freed, they were naked or in rags, they had nothing but their
labour power. The abolition of slavery or serfdom, moreover, rescinded
the master's legal or moral obligation to feed them and care for their
needs. Yet these needs remained, they still had to live. How, then,
could their labour power provide them with a living? Were they simply to
grab some 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 a step. What, then,
could the workers have done? Only these alternatives were before them:
either to overthrow the law of society or to return, under roughly the
same conditions as before, to their former masters, the owners of the
land and of capital, and to receive as wages what was formerly doled out
to them to keep them fed.'[246]

It was fortunate for mankind and the Prussian state that the workers
were 'wise' enough not to overthrow civilisation and preferred to submit
to the 'base demands' of their 'former masters'. This, then, is the
origin of the capitalist wage system, of the wages law as 'a kind of
slavery' resulting from an abuse of power on the part of the
capitalists, and from the precarious position and the meek acquiescence
on the part of the proletariat--if we are to believe the highly original
explanations of that very Rodbertus whose theories Marx is reputed to
have 'plagiarised'. Let Rodbertus claim 'priority' in this particular
theory of value without challenge, seeing that English socialists and
other social critics had already given far less crude and primitive
analyses of the wage-system. The singular point about it all is that
Rodbertus' display of moral indignation about the origin and the
economic laws of the wages system does not lead up to the demand for
doing away with this abominable injustice, the 'dualism stupid beyond
words'. Far from it! He frequently reassures his fellow-men that he does
not really mean anything very serious by roaring--he is no lion fell,
only one Snug the joiner. Indeed, an ethical theory of the wages law is
necessary only to achieve a further conclusion:

(3) Since the 'laws of exchange value' determine the wage, an advance in
labour productivity must bring about an ever declining share in the
product for the workers. Here we have arrived at the Archimedean fulcrum
of Rodbertus' system. This 'declining wage rate' is his most important
'original' discovery on which he harps from his first writings on social
problems (probably in 1839) until his death, and which he 'claims' as
his very own. This conception, for all that, was but a simple corollary
of Ricardo's theory of value and is contained implicit in the wages fund
theory which dominated bourgeois economics up to the publication of
Marx's _Capital_. Rodbertus nevertheless believed that this 'discovery'
made him a kind of Galileo in economics, and he refers to his 'declining
wage rate' as explaining every evil and contradiction in capitalist
economy. Above all, he derives from the declining wage rate the
phenomenon of pauperism which, together with the crises, in his opinion
constitutes the social question. It would be as well to draw the
attention of contemporaries, 'out for Marx's blood', to the fact that it
was not Marx but Rodbertus, a man much nearer their own heart, who set
up a whole theory of progressive poverty in a very crude form, and that
he, unlike Marx, made it the very pivot, not just a symptom, of the
entire social problem. Compare for instance his argument in his first
_Letter on Social Problems_ to v. Kirchmann on the absolute
impoverishment of the working class. The 'declining wage rate' must
serve in addition to explain the other fundamental phenomena of the
social problem--the crises. In this connection Rodbertus tackles the
problem of balancing consumption with production, touching upon the
whole lot of cognate controversial issues which had already been fought
out between the schools of Sismondi and Ricardo.

Rodbertus' knowledge of crises was of course based upon far more
material evidence than that of Sismondi. In his first _Letter on Social
Problems_ he already gives a detailed description of the four crises in
1818-19, 1825, 1837-9 and 1847. Since his observations covered a much
longer period, Rodbertus could by and large gain a much deeper insight
into the essential character of crises than his predecessors. As early
as 1850 he formulated the periodical character of the crises which recur
at ever shorter intervals and at the same time with ever increasing
severity:

'Time after time, these crises have become more terrible in proportion
with the increase in wealth, engulfing an ever greater number of
victims. The crisis of 1818-19, although even this caused panic in
commerce and inspired misgivings in economics, was of small importance
compared to that of 1825-6. The first crisis had made such inroads on
the capital assets of England that the most famous economists doubted
whether complete recovery could ever be made. Yet it was eclipsed by the
crisis of 1836-7. The crises of 1839-40 and 1846-7 wrought even greater
havoc than previous ones.'--'According to recent experiences, however,
the crises recur at ever shorter intervals. There was a lapse of 18
years between the first and the third crisis, of 14 years between the
second and the fourth, and of only 12 years between the third and the
fifth. Already the signs are multiplying that a new disaster is
imminent, though no doubt the events of 1848 put off the
catastrophe.'[247]

Rodbertus remarks that an extraordinary boom in production and great
progress in industrial technique always are the heralds of a crisis.
'Every one of them [of the crises] followed upon a period of outstanding
industrial prosperity.'[248]

From the crises in history he demonstrates that 'they occur only after a
considerable increase of productivity'.[249] Rodbertus opposes what he
terms the vulgar view which conceives of crises as mere disturbances in
the monetary and credit system, and he criticises the whole of Peel's
currency legislation as an error of judgment, arguing the point in
detail in his essay _On Commercial Crises and the Mortgage Problem_.
There he makes the following comment among others: 'We would therefore
deceive ourselves if we were to regard commercial crises merely as
crises of the monetary, banking, or credit system. This is only their
outer semblance when they first emerge.'[250]

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

'Foreign trade', he says, 'is related to slumps only as charity is
related to poverty. They ultimately only enhance one another.'[251] And
further: 'The only possible means of warding off further outbreaks of
crises is the application of the two-edged knife of expanding foreign
markets. The violent urge towards such expansion is largely no more but
a morbid irritation caused by a sickly 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 similarly unlimited
amount of purchasing power on the foreign market.'[252] In this way, the
irritation may be soothed to some extent so that at least there will not
be a new outbreak of the calamity right away. Every foreign market
opened defers the social problem in a like manner. Colonisation of
primitive countries would have similar effects: Europe rears a market
for herself in places where none had been before. Yet such a medicine
would essentially do no more than appease the ill. As soon as the new
markets are supplied, the problem will revert to its former state--a
conflict between the two factors: limited purchasing power versus
unlimited productivity. The new attack would be warded off the small
market only to re-appear, in even wider dimensions and with even more
violent incidents, on a larger one. And since the earth is finite and
the acquisition of new markets must some time come to an end, the time
will come when the question can no longer be simply adjourned. Sooner
or later, a definite solution will have to be found.'[253]

Rodbertus also recognises the anarchical character of capitalist
private enterprise to be conducive to crises, but only as one factor
among many, seeing it as the source of a particular type of crises, not
as the real cause of crises in general. About the crises at v.
Kirchmann's _Ort_, e.g., he says: 'I maintain that a slump of this kind
does not occur in real life. The market of to-day is large, there are
countless wants and many branches of production, productivity is
considerable and the data of commerce are obscure and misleading. The
individual entrepreneur does not know how much others are producing, and
so it may easily happen that he over-estimates the demand for a certain
commodity with which he will then overstock the market.'

Rodbertus says outright that the only remedy for these crises is the
'complete reversal' of contemporary property-relations or a planned
economy, concentrating all means of production 'in the hands of a single
social authority'. To set troubled minds at rest, however, he is quick
to add that he reserves judgment as to whether there can actually be
such a state of affairs--'yet this would be the only possible way to
prevent slumps of this kind'. Thus he expressly regards anarchy in the
modern mode of production as responsible for only a specific and partial
manifestation of crises.

Rodbertus scornfully rejects Say-Ricardo's axiom of a natural
equilibrium between consumption and production; just like Sismondi, he
emphasises that everything turns on the purchasing power of society, and
also takes it to be dependent upon the distribution of income. All the
same, he does not endorse Sismondi's theory of crises and disagrees
sharply with the conclusions drawn from it. If Sismondi saw the source
of all evil in the unlimited expansion of production without regard to
the limitations of incomes, and advocated a restriction of production,
Rodbertus, quite on the contrary, champions the most powerful and
unrestricted expansion of production, of wealth and of the productive
forces, believing this to be a social necessity. Whoever rejects the
wealth of society, rejects at the same time its power, its progress,
and, with its progress, its virtues. Whoever stands in the way of
growing wealth, stands in the way of all social progress whatever. Every
increase in knowledge, resolve and capacity is conceived as bound up
with an increase in wealth.[254] From this point of view, Rodbertus is
strongly in favour of issuing houses which he regards as the
indispensable foundations for a rapid and unrestricted expansion of
company promoting. Both his essay of 1859 on the mortgage problem and
the treatise on the _Financial Crisis in Prussia_[255] are devoted to
this plea. He even polemises outright against the Sismondian type of
_caveat_, as usual broaching the matter first from his peculiar Utopian
ethics.

'The entrepreneurs', he holds forth, 'are essentially civil servants of
economy. By the institution of property, they are once and for all
entrusted with the nation's means of production. If they set them to
work and strain all their energies in the process, they do but their
duty, since capital--let me repeat--exists entirely for the sake of
production.' And a further, factual argument: 'Or would you have them
(the entrepreneurs) turn acute attacks of suffering into a chronic state
by working persistently and from the first with fewer forces than are
given by the means of production; are they to pay for a less severe form
of the evil with its permanent duration? Even if we were silly enough to
give them this advice, they would not be able to follow it. How could
the entrepreneurs of the world recognise the limits beyond which the
market would cease to be healthy? They engage in production without
knowing the one of the other, they are producing in the most distant
corners of the earth for a market hundreds of miles away, they
produce with such vast forces that a month's production may already
overstep the limit. How could production--so divided and yet so
powerful--conceivably estimate in good time what will be enough? Where,
for instance, are the organisations, the up-to-date statistical bureaux
and the like to help them in this task? What is worse, the price alone,
its rise and fall, indicates the position of the market, and this is not
like a barometer which predicts the temperature of the market, but more
like a thermometer which only registers it. If the price falls, the
limit has been passed already, and the evil is with us.'[256]

These thrusts, obviously aimed at Sismondi, exhibit quite fundamental
differences between the two opponents. If Engels then says in his
_Anti-Duehring_ that Sismondi first explained the crises as resulting
from under-consumption, and that Rodbertus borrowed this view from him,
he is not strictly accurate. All that Rodbertus and Sismondi have in
common is their opposition against the classical school and the general
explanation of crises as the result of the distribution of incomes. Even
in this connection Rodbertus mounts his own particular hobby horse:
over-production is not caused by the low level of working class incomes,
nor yet, as Sismondi maintains, by the capitalists' limited capacity for
consumption, but solely by the fact that with a growing productivity of
labour, the workers' income, in terms of value, represents an ever
smaller share of the product. Rodbertus takes pains to convince the
opposition that it is not the small volume of the workers' share which
causes the crises.

'Just imagine', he goes on to lecture v. Kirchmann, 'these shares to be
so small as to ensure only a bare subsistence for those who are entitled
to them. As long as you establish them as representing a proportion of
the national product, you will have a constant "vessel for value" which
can absorb ever increasing contents, and an ever increasing prosperity
of the working classes as well.... And now imagine on the contrary as
large a share for the working classes as you please, and let it become
an ever smaller fraction of the national product that grows with
increasing productivity. Then, provided it is not reduced to the present
pittance, this share will still protect the workers from undue
privations since the amount of products it represents will still be
considerably greater than it is to-day. Once this share begins to
decline, however, there will be spreading discontent, culminating in a
commercial crisis for which the capitalists are not to blame inasmuch
as they did no more than their duty in laying down the volume of
production according to the given magnitude of these shares.'

That is why the 'declining wage rate' is the real cause of crises. It
can only be counteracted by legal measures to ensure that the workers'
share represents a stable and unchanging rate of the national product.
This grotesque notion takes some understanding if we are to do justice
to its economic implications.

FOOTNOTES:

[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] In _Towards the Understanding of Our Politico-Economic
Conditions_, part ii, n. 1.

[252] In _On Commercial Crises and the Mortgage Problem of the
Landowners_, quoted above (op. cit., vol. iii, p. 186).

[253] Op. cit., vol. iv, p. 233. It is interesting to note in this
connection how Rodbertus appears in practice as an extremely sober and
realistically-minded prophet of capitalist colonial policy, in the
manner of the present-day 'Pan-Germans', his moral ranting about the
unhappy fate of the working classes 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 also of the maintenance of English
rule in India. It is to defer the solution of the social problem.' (The
eloquent avenger of the exploited ingenuously discloses the means by
which the profiteering exploiters can continue 'their stupid and
criminal error', their 'flagrant injustice' for as long as possible.)
'For the solution of this problem, the present lacks in unselfishness
and moral resolution no less than in intelligence.' (Rodbertus'
philosophical resignation is unparalleled!) 'Economic advantage cannot,
admittedly, constitute a legal title to intervention by force, but on
the other hand, a strict application of modern natural and international
law to all the nations of the world, whatever their state of
civilisation, is quite impracticable.' (A comparison with Dorine's words
in Molière's _Tartuffe_ is irresistible: 'Le ciel défend, de vraie,
certains contentements, mais il y a avec lui des accommodements.')--'Our
international law has grown from a civilisation of _Christian_ ethics,
and since all law is based upon reciprocity, it can only provide the
standard for relations between nations of the same civilisation. If it
is applied beyond these limits, it is sentiment rather than natural and
international law and the Indian atrocities should have cured us of it.
Christian Europe should rather partake of the spirit which made the
Greeks and the Romans regard all the other peoples of the world as
barbarians. The younger European nations might then regain the drive for
making world history which impelled the Ancients to spread their native
civilisation over the countries of the globe. They would reconquer Asia
for world history by _joint action_. Such common purpose and action
would in turn stimulate the greatest social progress, a firm foundation
of peace in Europe, a reduction of armies, a colonisation of Asia in the
ancient Roman style--in other words, a genuine solidarity of interests
in all walks of social life.' The vision of capitalist colonial
expansion inspires the prophet of the exploited and oppressed to almost
poetical flights, all the more remarkable for coming at a time when a
civilisation of Christian ethics accomplished such glorious exploits as
the Opium Wars against China and the Indian atrocities--that is to say,
the atrocities committed by the British in their bloody suppression of
the Indian Mutiny.--In his second _Letter on Social Problems_, in 1850,
Rodbertus had expressed the conviction that if society lacks the 'moral
resolution' necessary to solve the social question, in other words, to
change the distribution of wealth, history would be forced to 'use the
whip of revolution against it' (op. cit., vol. ii, p. 83). Eight years
later, however, the stalwart Prussian prefers to crack the whip of a
colonial policy of Christian ethics over the natives of the colonial
countries. It is, of course, what one might expect of the 'original
founder of scientific socialism in Germany' that he should also be a
warm supporter of militarism, and his phrase about the 'reduction of
armies' is but poetic licence in his verbal fireworks. In his essay _On
the Understanding of the Social Question_ he explains that the 'entire
national tax burden is perpetually gravitating towards the bottom,
sometimes in form of higher prices for wage goods, and sometimes in form
of lower money wages'. In this connection, he considers conscription
'under the aspect of a charge on the state', explaining that 'as far as
the working classes are concerned, it is nothing like a tax but rather a
confiscation of their entire income for many years'. He adds
immediately: 'To avoid misunderstanding I would point out that I am a
staunch supporter of our present military constitution (i.e. the
military constitution of counter-revolutionary Prussia)--although it may
be oppressive to the working classes and demand great financial
sacrifices from the propertied classes' (op. cit., vol. iii, p. 34).
That does 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.




_CHAPTER XVII_

RODBERTUS' ANALYSIS OF REPRODUCTION


To begin with, what does it mean that a decrease in the workers' share
is bound immediately to engender over-production and commercial crises?
Such a view can only make sense provided Rodbertus takes the 'national
product' to consist of two parts, _vide_ the shares of the workers and
of the capitalists, in short of _v + s_, one share being exchangeable
for the other. And that is more or less what he actually seems to say on
occasions, e.g. in his first _Letter on Social Problems_:

'The poverty of the working classes precludes their income from giving
scope to increasing production. The additional amount of products from
the entrepreneurs' point of view lowers the value of the aggregate
product so far as to bar production on the former scale, leaving the
workers at best to their accustomed straits, though, if it could be made
available to the workers, it would not only improve their lot but would
further act as a counterweight by increasing the value of what is
retained by the capitalists (and so enable the latter to keep their
enterprises at the same level).'[257]

The 'counterweight' which in the hand of the workers increases the
'value' of 'what is retained' by the entrepreneurs, can in this context
only be the demand. Once again, we have landed happily at the familiar
_Ort_ of v. Kirchmann's where workers and capitalists exchange their
incomes for the surplus product, and where the crises arise because
variable capital is small and the surplus value large. This peculiar
notion has already been dealt with above. There are other occasions,
however, when Rodbertus advances a somewhat different conception. The
interpretation of his theory in the fourth _Letter on Social Problems_
is that the continual shifts in the relations of demand, evident in the
share of the working class and caused by the share of the capitalist
class, must result in a chronic disproportion between production and
consumption.

'What if the entrepreneurs endeavour to keep always within the limits of
those shares, yet the shares themselves are all the time on the decline
for the great majority of the society, the workers, decreasing
gradually, unnoticeably, but with relentless force?--What if the share
of these classes is continually decreasing to the same extent as their
productivity is increasing?'--'Is it not really the fact that the
capitalists of necessity organise production in accordance with the
present volume of shares in order to make wealth universal, and that yet
they always produce over and above this volume (of previous shares),
thereby perpetuating dissatisfaction which culminates in this stagnation
of trade?'[258]

On this showing, the explanation of crises should be as follows: the
national product consists of a number of 'common goods', as v. Kirchmann
puts it, for the workers, and of superior goods for the capitalists. The
wages represent the quantity of the former, and aggregate surplus value
that of the latter. If the capitalists organise their production on this
footing, and if at the same time there is progressive productivity, a
lack of proportion will immediately ensue. For the share of the workers
to-day is no longer that of yesterday, but less. If the demand for
'common goods' had involved, say, six-sevenths of the national product
yesterday, then to-day it involves only five-sevenths, and the
entrepreneurs, having provided for six-sevenths of 'common goods', will
find to their painful surprise that they over-produced by one-seventh.
Now, wiser by this experience, they try to organise to-morrow's output
of 'common goods' to a mere five-sevenths of the total value of the
national product, but they have a new disappointment coming to them,
since the share of the national product falling to wages to-morrow is
bound to be only four-sevenths, and so on.

In this ingenious theory there are quite a few points to make us wonder.
If our commercial crises are entirely due to the fact that the workers'
'wage rate', the variable capital, represents a constantly diminishing
portion of the total value of the national product, then this
unfortunate law brings with it the cure for the evil it has caused,
since it must be an ever smaller part of the aggregate product for
which there is over-production. Although Rodbertus delights in such
terms as 'an overwhelming majority', 'the large popular masses' of
consumers, it is not the number of heads that make up the demand, but
the value they represent which 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 economic
basis, and all that remains to discover is how in spite of it all it can
still happen that the crises are universal and increasingly severe
besides, as Rodbertus is fully aware. The purchasing power lost by the
working classes should be gained by the capitalist class; if _v_
decreases, _s_ must grow larger to make up for it. On this crude scheme,
the purchasing power of society as a whole cannot change, as Rodbertus
says in so many words: 'I know very well that what is taken from the
workers' share goes ultimately to swell that of the "rentiers" (rent and
surplus value are used as synonyms, _R.L._), and that purchasing power
remains constant on the whole and in the long run. But as far as the
product on the market is concerned, the crisis always sets in before
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 the capitalists.
Quite unawares, and by devious ways, Rodbertus here falls in with the
Say-Ricardian theory he so ardently contested, the theory that
over-production on one side always corresponds to under-production on
the other. Seeing that the ratio of the two shares is persistently
shifting to the advantage of the capitalists, our commercial crises
might be expected on the whole 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 national
product in respect of its value as made up of two parts only, of _s_ and
_v_, thus wholly subscribing to the views and traditions of the
classical school he is fighting tooth and nail, and even adding his own
flourish that the capitalists consume the entire surplus value. That is
why he repeatedly says without mincing his words, as in the fourth
_Letter on Social Problems_:

'Accordingly, we must abstract from the reasons which cause the division
of rent in general into rent proper and capital rent, to find the basic
principle underlying the division of rent (surplus value) in general,
the principle underlying _the division of the labour product into wage
and rent_.'[260] And, in the third _Letter_: 'Ground rent, capital
profit and the wage of labour are, let me repeat, revenue. By this means
landlords, capitalists and workers must live, must satisfy, that is to
say, their immediate human necessities. They must therefore draw their
income in the form of goods suitable for this purpose.'[261]

The misrepresentation of capitalist economy has never been formulated
more crudely, and there is no doubt that Rodbertus claims the palm of
'priority'--not so much over Marx as over all popular economists--with
full justification. To leave the reader in no doubt about the utter
muddle he has made, he goes on, in the same letter, to rank capitalist
surplus value as an economic category on the same level as the revenue
of the ancient slave-owner:

'The first state (that of slavery) goes with the most primitive natural
economy: that portion of the labour product which is withheld from the
income of workers or slaves and forms the master's or owner's property,
will undividedly accrue to the one man who owns the land, the capital,
the worker and the labour product; there is not even a distinction of
thought between rent and capital profits.--The second state entails the
most complicated money economy: that portion of the labour product,
withheld from the income of the now emancipated workers, and accruing to
the respective owners of land, and capital, will be further divided
among the owners of the raw material and the manufactured product
respectively; the one rent of the former state will be split up into
ground rent and capital profits, and will have to be differentiated
accordingly.'[262]

Rodbertus regards the splitting-up of the surplus value 'withheld' from
the workers' 'income' as the most striking difference between
exploitation by slavery and modern capitalist exploitation. It is not
the specific historical form of sharing out newly created value among
labour and capital, but the distribution of the surplus value among the
various people it benefits, which, irrelevant to the productive process,
is yet the decisive fact in the capitalist mode of production. In all
other respects, capitalist 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, remembering all
of a sudden the constant capital and the necessity for its renewal in
the reproductive process. Thus, instead of bisecting the aggregate
product into _v_ and _s_, he posits a triple division: _c_, _v_, and
_s_. In his third _Letter on Social Problems_ he argues on the forms of
reproduction in a slave-economy:

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

This, then, is an explicit expression of the triple division into
constant capital, variable capital, and surplus value. Again, in this
third _Letter_, he formulates the peculiarity of his 'new' theory with
equal precision: 'On this theory, then, and under conditions of adequate
labour productivity, the portion of the product which remains for wages
after the replacement of capital, will be distributed among workers and
owners as wages and rent, on the basis of the ownership in land and
capital.'[265]

It does seem now as if Rodbertus' analysis of the value of the aggregate
product represents a distinct advance over the classical school. Even
Adam Smith's 'dogma' is openly criticised a little further on, and it is
really surprising that Rodbertus' learned admirers, Messrs. Wagner,
Dietzel, Diehl & Co. failed to claim their white-headed boy's 'priority'
over Marx on such an important point of economic theory. As a matter of
fact, in this respect no less than in the general theory of value,
Rodbertus' priority is of a somewhat dubious character. If he seems on
occasion to gain true insight, it immediately turns out to be a
misunderstanding, or at best a wrong approach. His criticism of Adam
Smith's dogma affords a supreme example of his failure to cope with the
triple division of the national product towards which he had groped his
way. He says literally:

'You know that all economists since Adam Smith already divided the value
of the product into wage of labour, rent, and capital profit, that it is
therefore not a new idea to ground the incomes of the various classes,
and especially the various items of the rent, in a division of the
product. But the economists at once go off the track. All of them, not
even excepting Ricardo's school, make the mistake, first, not to
recognise that the aggregate product, the finished good, the national
product as a whole, is an entity in which workers, landowners, and
capitalists all share, but conceiving the division of the unfinished
product to be of one kind shared among three partners, and that of the
manufactured product as of another kind again, shared between only two
partners. For these theories both the unfinished product and the
manufactured product constitute as such separate items of revenue.
Secondly,--though both Sismondi and Ricardo are free from this
particular error--they regard the natural fact that labour cannot
produce goods without material help, i.e. without the land, as an
economic fact, and take the social fact for a primary datum that capital
as understood to-day is required by the division of labour. Thus they
set up the fiction of a fundamental economic relationship on which they
base also for the shares of the various owners, ground rent springing
from the contribution of the land lent by the owner to production,
capital profits from the contribution of capital employed by the
capitalist 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 this mistake
with much ingenuity, even invented the concept of productive service of
land, capital, and labour in conformity with the shares in the product
of their respective owners, so as to explain these shares as the result
of productive service.--Thirdly, they are caught up in the ultimate
folly of deriving the wage of labour and the items of rent from the
value of the product, the value of the product in turn being derived
from the wage of labour and the items of rent, so that the one is made
to depend on the other and _vice versa_. This absurdity is quite
unmistakable when some of these authors attempt to expound "The
Influence of Rent Upon Production Prices" and "The Influence of
Production Prices Upon Rent" in two consecutive chapters.'[266]

Yet for all these excellent critical comments--the last, particularly
acute, actually does to some extent anticipate Marx's criticism of this
point in _Capital_, volume ii--Rodbertus calmly falls in with the
fundamental blunder of the classical school and its vulgar followers: to
ignore altogether that part of the value of the aggregate product which
is needed to replace the constant capital of the society. This way it
was easier for him to keep up the singular fight against the 'declining
wage rate'.

Under capitalist forms of production, the value of the aggregate social
product is divided into three parts: one corresponding to the value of
the constant capital, the second to the wage total, i.e. the variable
capital, and the third to the aggregate surplus value of the capitalist
class. In this composition, the portion corresponding to the variable
capital is relatively on the decline, and this for two reasons. To begin
with, the relation of _c_ to (_v + s_) within _c + v + s_ changes all
the time in the direction of a relative increase of _c_ and a relative
decrease of _v + s_. This is the simple law for a progressive efficiency
of human labour, valid for all societies of economic progress,
independently of their historical forms, a formula which only states
that living labour is increasingly able to convert more means of
production into objects for use in an ever shorter time. And if (_v +
s_) decreases as a whole, so must _v_, as its part, decrease in relation
to the total value of the product. To kick against this, to try and stop
the decrease, would be tantamount to contending against the general
effects of a growing labour productivity. Further, there is within (_v +
s_) as well a change in the direction of a relative decrease in _v_ and
a relative increase in _s_, that is to say, an ever smaller part of the
newly created value is spent on wages and an ever greater part is
appropriated as surplus value. This is the specifically capitalist
formula of progressive labour productivity which, under capitalist
conditions of production, is no less valid than the general law. To use
the power of the state to prevent a decrease of _v_ as against _s_ would
mean that the fundamental commodity of labour power is debarred from
this progress which decreases production costs for all commodities; it
would mean the exemption of this one commodity from the economic effects
of technical progress. More than that: the 'declining wage rate' is only
another expression of the rising rate of surplus value which forms the
most powerful and effective means of checking a decline of the profit
rate, and which therefore represents the prime incentive for capitalist
production in general, and for technical progress within this system of
production in particular. Doing away with the 'declining wage rate' by
way of legislation would be as much as to do away with the _raison
d'être_ of capitalist society, to deal a crippling blow to its entire
system. Let us face the facts: the individual capitalist, just like
capitalist society as a whole, has no glimmering that the value of the
product is made up from the sum total of labour necessary in the
society, and this is actually beyond his grasp. Value, as the capitalist
understands it, is the derivative form, reversed by competition as
production costs. While in truth the value of the product is broken down
into the values of its component fragments _c_, _v_ and _s_, the
capitalist mind conceives of it as the summation of _c_, _v_ and _s_.
These, in addition, also appear to him from a distorted perspective and
in a secondary form, as (1) the wear and tear of his fixed capital, (2)
his advances on circulating capital, including workers' wages, and (3)
the current profits, i.e. the average rate of profit on his entire
capital. How, then, is the capitalist to be compelled by a law, say of
the kind envisaged by Rodbertus, to maintain a 'fixed wage rate' in the
face of the aggregate value of the product? It would be quite as
brilliant to stipulate by law for exactly one-third, no more, no less,
of the total price of the product to be payable for the raw materials
employed in the manufacture of any commodity. Obviously, Rodbertus'
supreme notion, of which he was so proud, on which he built as if it
were a new Archimedean discovery, which was to be the specific for all
the ills of capitalist production, is arrant nonsense from all aspects
of the capitalist mode of production. It could only result from the
muddle in the theory of value which is brought to a head in Rodbertus'
inimitable phrase: that 'now, in a capitalist society, the product must
have value-in-exchange just as it had to have value-in-use in ancient
economy'.[267] People in ancient society had to eat bread and meat in
order to live, but we of to-day are already satisfied with knowing the
price of bread and of meat. The most obvious inference from Rodbertus'
monomania about a 'fixed wage rate' is that he is quite incapable of
understanding capitalist accumulation.

Previous quotations have already shown that Rodbertus thinks solely of
simple commodity production, quite in keeping with his mistaken doctrine
that the purpose of capitalist production is the manufacture of consumer
goods for the satisfaction of 'human wants'. For he always talks of
'capital replacements', of the need to enable the capitalists to
'continue their enterprise on the previous scale'. His principal
argument, however, is directly opposed to the accumulation of capital.
To fix the rate of the surplus value, to prevent its growth, is
tantamount to paralysing the accumulation of capital. Both Sismondi and
v. Kirchmann had recognised the problem of balancing production and
consumption to be indeed a problem of accumulation, that is to say of
enlarged capitalist reproduction. Both traced the disturbances in the
equilibrium of reproduction to accumulative tendencies denying the
possibility of accumulation, with the only difference that the one
recommended a damper on the productive forces as a remedy, while the
other favoured their increasing employment to produce luxuries, the
entire surplus value to be consumed. In this field, too, Rodbertus
follows his own solitary path. The others might try with more or less
success to comprehend the _fact_ of capitalist accumulation, but
Rodbertus prefers to fight the very concept. 'Economists since Adam
Smith have one after the other echoed the principle, setting it up as a
universal and absolute truth, that capital could only 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 not saving which
is the source of capital but labour, that (_b_) the economists'
'delusion' about 'saving' hails from the extravagant view that capital
is itself productive, and that (_c_) this delusion is ultimately due to
another: the error that capital is--capital.

v. Kirchmann for his part understood quite well what is at the bottom of
capitalist 'savings'. He had the pretty argument: 'Everyone knows that
the accumulation of capital is not a mere hoarding of reserves, an
amassing of metal and monies to remain idle in the owners' vaults.
Those who want to save do it for the sake of re-employing their savings
either personally or through the agency of others as capital, in order
to yield them revenue. That is only possible if these capitals are used
in new enterprises which can produce so as to provide the required
interest. One may build a ship, another a barn, a third may reclaim a
desolate swamp, a fourth may order a new spinning frame, while a fifth,
in order to enlarge his shoe-making business, would buy more leather and
employ more hands--and so on. Only if the capital that has been saved is
employed in this way, can it yield interest (meaning profit), and the
latter is the ultimate object of all saving.'[269]

That is how v. Kirchmann described somewhat clumsily, but on the whole
correctly, what is in fact the capitalisation of surplus value, the
process of capitalist accumulation, which constitutes the whole
significance of saving, advocated by classical economists 'since Adam
Smith' with unerring instinct. Declaring war on saving and accumulation
was quite in keeping with v. Kirchmann's premises, considering that he,
like Sismondi, saw the immediate cause of the crises in accumulation.
Here, too, Rodbertus is more 'thorough'. Having learned from Ricardo's
theory of value that labour is the source of all value, and consequently
of capital, too, he is completely blinded by this elementary piece of
knowledge to the entire complexity of capitalist production and capital
movements. Since capital is generated by labour, both the accumulation
of capital, i.e. 'saving', and the capitalisation of the surplus value
are nothing but eyewash.

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 he needs by a long-drawn
vivisection of the unhappy creature. Here already he discovers
'capital', that is to say, of course, that famous 'original stick' with
which 'economists since Adam Smith' have hooked the fruits of a theory
of capital from the tree of knowledge. 'Would saving be able to produce
this stick?' is his query. And since every normal person will understand
that 'saving' cannot produce any stick, that Robinson [Crusoe] must have
made it of wood, we have already proved that the 'savings' 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 most elementary and
primitive event would have to give evidence of this relation. Would it
be true to say, then, without doing violence to facts and concepts, that
the stick is a _source_ of income or of part of the income consisting in
the fruit brought down? can we trace income, wholly or in part, back to
the stick as its _cause_, may we consider it, wholly or in parts, as a
_product_ of the stick?'[270]

Surely not. And since the fruit is the product, not of the stick which
brought it down, but of the tree which grew it, Rodbertus has already
proved that all 'economists since Adam Smith' are grossly mistaken if
they maintain that income derives from capital. After a clear exposition
of all fundamental concepts of economics on the example of Robinson
[Crusoe]'s 'economy', Rodbertus transfers the knowledge thus acquired
first to a fictitious society 'without ownership in capital or land',
that is to say to a society with a communist mode of possession, and
then to a society 'with ownership in capital and land', that is to say
contemporary society, and, lo and behold--all the laws of Robinson
[Crusoe]'s economy apply point for point to these two forms of society
as well. Rodbertus contrives here a theory of capital and income which
is the very crown of his Utopian imagination. Since he has discovered
that Robinson [Crusoe]'s 'capital' is the means of production pure and
simple, he identifies capital with the means of production in capitalist
economy as well. Thus reducing capital, with a wave of his hand, to
constant capital, he protests in the name of justice and morality
against the fact that the wages, the workers' means of subsistence, are
also considered capital. He contends furiously against the _concept_ of
variable capital, seeing in it the cause of every disaster. 'If only',
he grieves, 'economists would pay attention to what I say, if only they
would examine without prejudice whether they are right or I. This is the
focal point of all errors about capital in the ruling system, this is
the ultimate source of injustice against the working classes, in theory
and practice alike.'[271]

For 'justice' demands that the goods constituting the 'real wages' of
the workers be counted, not as part of capital, but as belonging to the
category of income. Though Rodbertus knows very well that the capitalist
must regard the wages he has 'advanced' as part of his capital, just
like the other part laid out on immediate means of production, yet in
his opinion this applies only to individual capitals. As soon as it is a
question of the social aggregate product, of reproduction as a whole, he
declares the capitalist categories of production an illusion, a
malicious lie and a 'wrong'. 'Capital _per se_ (properly so-called), the
items which make up capital, capital from the nation's point of view, is
something quite different from private capital, capital _assets_,
capital _property_, all that "capital" in the modern use of the term
usually stands for.'[272]

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

'It makes no difference from this general and national point of view
that greater or smaller parts of the aggregate national product are now
owned in all the various phases of production by private persons who
must not be numbered among the producers proper, and that the latter
always manufacture this national aggregate product as servants--without
sharing in the ownership of their own product--of these few owners.'

Certain peculiarities of the relations within the society as a whole no
doubt result from this, namely (1) the institution of 'exchange' as an
intermediary, and (2) the inequality in the distribution of the product.

'Yet all these consequences do not affect the movements of national
production and the shaping of the national product which are always the
same, now as ever (under the rule of communism), no more than they alter
in any respect, as far as the _national point of view_ is concerned, the
contrast between capital and income so far established.'

Sismondi had laboured in the sweat of his brow, as had Smith and many
others, to disentangle the concepts of capital and income from the
contradictions of capitalist production. Rodbertus has a simpler method
and abstracts from the specific forms determined by capitalist
production for society as a whole; he simply calls the means of
production 'capital' and the article of consumption 'revenue' and leaves
it at that.

'The essential influence of ownership in land and capital applies only
to individuals having traffic with one another. If the nation is taken
as a unit, the effects of such ownership upon the individuals completely
disappear.'[273]

We see that as soon as Rodbertus comes up against the real problem, the
capitalist aggregate product and its movements, he exhibits the
Utopian's characteristic obtuseness in respect of the historical
peculiarities of production. Marx's comment on Proudhon, that 'speaking
of society as a whole, he pretends that this society is no longer
capitalist' therefore fits him like a glove. The case of Rodbertus again
exemplifies how every economist before Marx had been at a loss when it
came to harmonising the concrete aspects of the labour process with the
perspective of capitalist production which regards everything in terms
of value, to mediating between the forms of movement performed by
individual capitals and the movement of social capital. Such efforts as
a rule vacillate from one extreme to another: the shallow approach of
Say and MacCulloch, recognising only the conceptions of individual
capital, and the Utopian approach of Proudhon and Rodbertus who
recognise only those of the process of labour. That is the context in
which Marx's penetration appears in its true light. His diagram of
simple reproduction illuminates the entire problem by gathering up all
these perspectives in their harmony and their contradictions, and so
resolves the hopeless obscurities of innumerable tomes into two rows 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' and indicts it before the forum
of the rights of property it so blatantly violates.

'This personal freedom of the workers which ought legally to involve
ownership in the value of the labour product, leads in practice to their
renunciation of the proprietary claims extorted under pressure of
ownership in land and capital; but the owners do not admit to this great
and universal wrong, almost as though they were instinctively afraid
that history might follow its own stern and inexorable logic.'[274]

Rodbertus' 'theory in all its details is therefore conclusive proof that
those who praise present-day relations of ownership without being able
at the same time to ground ownership in anything but labour, completely
contradict their own principle. It proves that the property relations of
to-day are in fact founded on a universal violation of this principle,
that the great individual fortunes being amassed in society nowadays are
the result of cumulative robbery mounting up in society with every
new-born worker since time immemorial.'[275]

Since surplus value is thus branded as 'robbery', an increasing rate of
surplus value must appear 'as a strange error of present-day economic
organisation'. Brissot's crude paradox with its revolutionary
ring--'property is theft'--had been the starting point for Proudhon's
first pamphlet, but Rodbertus' thesis is quite another matter, arguing
that capital is theft perpetrated on property. It need only be set side
by side with Marx's chapter on the transformation of the laws of
ownership into the laws of capitalist appropriation--this triumph of
historical dialectics in vol. i of Marx's _Capital_--in order to show up
Rodbertus' 'priority'. By ranting against capitalist appropriation under
the aspect of the 'right of property', Rodbertus closed his mind to
capital as the source of surplus value just as effectively as he had
previously been prevented by his tirades against 'saving' from seeing
the surplus value as a source of capital. He is thus in an even worse
position than v. Kirchmann, lacking all qualifications for understanding
capitalist accumulation.

What it amounts to is that Rodbertus wants unrestricted expansion of
production without saving, that is to say without capitalist
accumulation! He wants an unlimited growth of the productive forces, and
at the same time a rate of surplus value stabilised by an act of law. In
short, he shows himself quite unable to grasp the real foundations of
capitalist production he wishes to reform, and to understand the most
important results of the classical economics he criticises so adversely.

It is no more than to be expected, therefore, that Prof. Diehl should
declare Rodbertus a pioneer of economic theory on the strength of his
'new theory of income' and of the distinction between 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 of economic socialism', proving himself ignorant at once of
Ricardo, Rodbertus and socialism alike. Lexis even judges that Rodbertus
is at least the equal of 'his British rival' in power of abstract
thinking, and by far his superior in 'virtuosity to lay bare the
phenomena in their ultimate connections', in 'imaginative vitality', and
above all in his 'ethical approach to economic life'. Rodbertus' real
achievements in economic theory however, other than his critique of
Ricardo's ground rent, his at times quite clear-cut distinction between
surplus value and profit, his treatment of the surplus value as a whole
in deliberate contrast with its partial manifestations, his critique of
Smith's dogma concerning the analysis of commodities in terms of value,
his precise formulation of the periodical character of the crises and
his analysis of their manifestations--all these attempts to carry the
investigation beyond Smith, Ricardo and Say, promising as such, though
doomed to failure because of the confused basic concepts, are rather
above the heads of Rodbertus' official admirers. As Franz Mehring
already pointed out, it was Rodbertus' strange fortune to be lauded to
heaven for his alleged prowess in economics by the same people who
called him to task for his real merits in politics. This contrast
between economic and political achievements, however, does not concern
us here: in the realm of economic theory, his admirers built him a
grand memorial on the barren field he had dug with the hopeless zeal of
the visionary, while the modest beds where he had sown a few fertile
seeds, were allowed to be smothered with weeds and forgotten.[276]

It cannot be said that the problem of accumulation had on the whole been
much advanced beyond the first controversy by this Prusso-Pomeranian
treatment. If in the interim the economic theory of harmony had dropped
from the level of Ricardo to that of a Bastiat-Schultze, social
criticism had correspondingly declined from Sismondi to Rodbertus.
Sismondi's critique of 1819 had been an historical event, but Rodbertus'
ideas of reform, even on their first appearance, were a miserable
regression--still more so on their subsequent reiteration.

In the controversy between Sismondi on the one hand and Say and Ricardo
on the other, one party proved that accumulation was impossible because
of the crises, and therefore warned against full development of the
productive forces. The other party proved that crises were impossible
and advocated an unlimited development of accumulation. Though all
argued from wrong premises, each was logically consistent.

v. Kirchmann and Rodbertus both started, were bound to start, from the
fact of crises. Here the problem of enlarged reproduction of aggregate
capital, the problem of accumulation, was completely identified with the
problem of crises and side-tracked in an attempt to find a remedy for
the crises, although the historical experience of fifty years had shown
all too clearly that crises, as witnessed by their periodical
recurrence, are a necessary phase in capitalist reproduction. One side
now sees the remedy in the complete consumption of the surplus value by
the capitalist, that is to say in refraining from accumulation, the
other in stabilisation of the rate of surplus value by legislative
measures which comes to the same thing, i.e. renouncing accumulation
altogether. This special fad of Rodbertus' sprang from his fervent and
explicit belief in an unlimited capitalist expansion of the productive
forces and of wealth, without accumulation of capital. At a time when
capitalist production was developed to a degree which was soon to enable
Marx to make his fundamental analysis, the last attempt of bourgeois
economics to cope with the problem of reproduction degenerated into
absurd and puerile Utopianism.

FOOTNOTES:

[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 he
had evolved as early as 1842 in his _Towards the Understanding of Our
Politico-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 the goods, but also rents and capital profits. We must
therefore refute this opinion in detail. It has a twofold foundation:
(_a_) a wrong conception of capital which counts the wage of labour as
part of the capital just like materials and tools, while it is on the
same level as rent and profit; (_b_) a confusion of the costs of the
commodity and the advances of the entrepreneur or the costs of the
enterprise' (_Towards the Understanding of Our Politico-Economic
Conditions_, Neubrandenburg & Friedland, G. Barnovitz, 1842, p. 14).

[272] _Schriften_, vol. i, p. 304. Just so already in _Towards the
Understanding of Our Politico-Economic Conditions_, 'We must distinguish
between capital in its narrow or proper sense, and the fund of
enterprise, or capital in a wider sense. The former comprises the actual
reserves in tools and materials, the latter the fund necessary for
running an enterprise under present conditions of division of labour.
The former is capital absolutely necessary to production, and the latter
achieves such relative necessity only by force of present conditions.
Hence only the former is capital in the strict and proper meaning of the
term; this alone is completely congruent with the concept of national
capital' (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
who published his works after his death. These learned gentlemen,
Messrs. Wagner, Kozak, Moritz Wuertz & Co., quarrelled in the prefaces
to his posthumous writings like a rough crowd of ill-mannered servants
in an antechamber, fighting out publicly their petty personal feuds and
jealousies, and slanging one another. They did not even bother in common
decency to establish the dates for the individual manuscripts they had
found. To take an instance, it needed Mehring to observe that the oldest
manuscript of Rodbertus that had been found was not published in 1837,
as laid down autocratically by Prof. Wagner, but in 1839 at the
earliest, since it refers in its opening paragraphs to historical events
connected with the Chartist movement belonging, as a professor of
economics really ought to know, in the year 1839. In Professor Wagner's
introduction to Rodbertus we are constantly bored by his pomposity, his
harping on the 'excessive demands on his time'; in any case Wagner
addresses himself solely to his learned colleagues and talks above the
heads of the common crowd; he passes over in silence, as befits a great
man, Mehring's elegant correction before the assembled experts. Just as
silently, Professor Diehl altered the date of 1837 to 1839 in the
_Handwörterbuch der Staatswissenschaften_, without a word to say when
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 quarrelling
editors collaborated on it but still continue their disputes in the
introductions. Wagner's former vol. ii has become vol. i in this
edition, yet Wagner still refers to vol. ii in the introduction to vol.
i. The first _Letter on Social Problems_ is placed in vol. iii, the
second and third in vol. ii and the fourth in vol. i. The order of the
_Letters on Social Problems_, of the _Controversies_, of the parts of
_Towards the Understanding_ ..., chronological and logical sequence, the
dates of publication and of writing are hopelessly mixed up, making a
chaos more impenetrable than the stratification of the soil after
repeated volcanic eruptions. 1837 is maintained as the date of
Rodbertus' earliest MS., probably out of respect to Professor
Wagner--and this in 1899, although Mehring's rectification had been made
in 1894. If we compare this with Marx's literary heritage in Mehring's
and Kautsky's edition, published by Dietz, we see how such apparently
superficial matters but reflect deeper connections: one kind of care for
the scientific heritage of the authority of the class-conscious
proletariat, and quite another in which the official experts of the
bourgeoisie squander the heritage of a man who, in their own
self-interested legends, had been a first-rate genius. _Suum
cuique_--had this not been the motto of Rodbertus?




  _SECTION TWO_


  HISTORICAL EXPOSITION
  OF THE PROBLEM


  THIRD ROUND

  STRUVE-BULGAKOV-TUGAN BARANOVSKI
  _v._ VORONTSOV-NIKOLAYON




_CHAPTER XVIII_

A NEW VERSION OF THE PROBLEM


The third controversy about capitalist accumulation takes place in an
historical setting quite different from that of the two earlier ones.
The time now is the period from the beginning of the eighties to the
middle of the nineties, the scene Russia. In Western Europe, capitalism
had already attained maturity. The rose-coloured classical view of Smith
and Ricardo in a budding bourgeois economy had long since vanished ...
the self-interested optimism of the vulgarian Manchester doctrine of
harmony had been silenced by the devastating impact of the world
collapse in the seventies, and under the heavy blows of a violent class
struggle that blazed up in all capitalist countries after the sixties.
Even that harmony patched up with social reformism which had its hey-day
after the early eighties, especially in Germany, soon ended in a
hangover. The trial of twelve years' special legislation against the
Social Democratic Party had brought about bitter disillusionment, and
ultimately destroyed all the veils of harmony, revealing the cruel
capitalist contradictions in their naked reality. Since then, optimism
had only been possible in the camp of the rising working class and its
theorists. This was admittedly not optimism about a natural, or
artificially established equilibrium of capitalist economy, or about the
eternal duration of capitalism, but rather the conviction that
capitalism, by mightily furthering the development of the productive
forces, and in virtue of its inherent contradictions, would provide an
excellent soil for the historical progress of society towards new
economic and social forms. The negative, depressing tendency of the
first stage of capitalism, at one time realised by Sismondi alone and
still observed by Rodbertus as late as the forties and fifties, is
compensated by a tendency towards elation: the hopeful and victorious
striving of the workers for ascendancy in their trade-union movement and
by political action.

Such was the setting in Western Europe. In the Russia of that time,
however, the picture was different indeed. Here, the seventies and
eighties represent in every respect a period of transition, a period of
internal crises with all its agonies. Big industry only now staged its
real entry, fostered by the period of high protective tariffs. In
particular, the introduction of a tariff on gold at the Western frontier
in 1877 was a special landmark in the absolutist government's new policy
of forcing the growth of capitalism. 'Primitive accumulation' of capital
flourished splendidly in Russia, encouraged by all kinds of state
subsidies, guarantees, premiums and government orders. It earned profits
which would already seem legendary to the West. Yet the picture of
internal conditions in contemporary Russia was anything but attractive
and auspicious. On the plains, the decline and disintegration of rural
economy under the pressure of exploitation by the Exchequer and the
monetary system caused terrible conditions, periodical famines and
peasant risings. In the towns, again, the factory proletariat had not
yet been consolidated, either socially or mentally, into a modern
working class. For the greater part, it was still closely connected with
agriculture, and remained semi-rural, particularly in the large
industrial parts of Moscow-Vladimir, the most important centre of the
Russian textile industry. Accordingly, primitive forms of exploitation
were countered by primitive measures of defence. Not until the early
eighties did the spontaneous factory revolts in the Moscow district with
their smashing up of machines provide the impetus for the first
rudiments of factory legislation in the Czarist Empire.

If the economic aspect of Russian public life showed at every step the
harsh discords of a period of transition, there was a corresponding
crisis in intellectual life. 'Populism', the indigenous brand of Russian
socialism, theoretically grounded in the peculiarities of the Russian
agrarian constitution, was politically finished with the failure of the
terrorist party of 'Narodnaya Volya', its extreme revolutionary
exponent. The first writings of George Plekhanov, on the other hand,
which were to pave the way in Russia for Marxist trains of thought, had
only been published in 1883 and 1885, and for about a decade they seemed
to have little influence. During the eighties and up to the nineties the
mental life of the Russian, and in particular of the socialist
intelligentsia with their tendency towards opposition, was dominated by
a peculiar mixture of 'indigenous' 'populist' remnants and random
elements of theoretical Marxism. The most remarkable feature of this
mixture was scepticism as to the possibility of capitalist development
in Russia.

At an early date, the Russian intelligentsia had been preoccupied with
the question whether Russia should follow the example of Western Europe
and embark on capitalist development. At first, they noticed only the
bleak aspects of capitalism in the West, its disintegrating effects upon
the traditional patriarchal forms of production and upon the prosperity
and assured livelihood for the broad masses of the population. As
against that, the Russian rural communal ownership in land, the famous
_obshchina_, seemed to offer a short-cut to the blessed land of
socialism, a lead direct to a higher social development of Russia,
without the capitalist phase and its attendant misery as experienced in
Western Europe. Would it be right to fling away this fortunate and
exceptional position, this unique historical opportunity, and forcibly
transplant capitalist production to Russia with the help of the state?
Would it be right to destroy the system of rural holdings and
production, and open the doors wide to proletarisation, to misery and
insecurity of existence for the toiling masses?

The Russian intelligentsia was preoccupied with this fundamental problem
ever since the Agrarian Reform, and even earlier, since Hertzen, and
especially since Chernishevski. This was the wholly unique world view of
'populism' in a nutshell. An enormous literature was created in Russia
by this intellectual tendency ranging from the avowedly reactionary
doctrines of the Slavophiles to the revolutionary theory of the
terrorist party. On the one hand, it encouraged the collection of vast
material by separate inquiries into the economic forms of Russian life,
into 'national production' and its singular aspects, into agriculture as
practised by the peasant communes, into the domestic industries of the
peasants, the _artel_, and also into the mental life of the peasants,
the sects and similar phenomena. On the other hand, a peculiar type of
_belles lettres_ sprang up as the artistic reflection of the
contradictory social conditions, the struggle between old and new ways
which beset the mind at every step with difficult problems. Finally, in
the seventies and eighties, a peculiarly stuffy philosophy of history
sprang up from the same root and found its champions in Peter Lavrov,
Nicolai Mikhailovski, Professor Kareyev and V. Vorontsov. It was the
'subjective method in sociology' which declared 'critical thought' to be
the decisive factor in social development, or which, more precisely,
sought to make a down-at-heel intelligentsia the agent of historical
progress.

Here we are interested only in one aspect of this wide field with its
many ramifications, _viz_: the struggle of opinions regarding the
chances of capitalist development, and even then only in so far as these
were based upon general reflections on the social conditions of the
capitalist mode of production, since these latter were also to play a
big part in the Russian controversial literature of the eighties and
nineties.

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

One fact was of decisive importance for the theoretical content of the
discussion that followed: not only was Marx's analysis of capitalist
production as laid down in the first volume of _Capital_ already common
property of educated Russia, but the second volume, too, with its
analysis of the reproduction of capital as a whole had already been
published in 1885. This gave a fundamentally new twist to the
discussion. No more did the problem of crises obscure the real crux of
the problem: for the first time, the argument centred purely in the
reproduction of capital as a whole, in accumulation. Nor was the
analysis bogged any longer by an aimless fumbling for the concepts of
income and of individual and aggregate capital. Marx's diagram of social
reproduction had provided a firm foothold. Finally, the issue was no
longer between _laissez-faire_ and social reform, but between two
varieties of socialism. The petty-bourgeois and somewhat muddled
'populist' brand of Russian socialists stood for 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 the Marxist school in Russia. Thus the setting of the
stage had been shifted completely.

One of the two champions of the 'populist' movement, Vorontsov, known in
Russia mainly under the _nom de plume_ V. V., (his initials), was an odd
customer. His economics were completely muddled, and as an expert on
theory he cannot be taken seriously at all. The other, Nikolayon
(Danielson), however, was a man of wide education, and thoroughly
conversant with Marxism. He had edited the Russian translation of the
first volume of _Capital_ and was a personal friend of Marx and Engels,
with both of whom he kept up a lively correspondence (published in the
Russian language in 1908). Nevertheless it was Vorontsov who influenced
public opinion among the Russian intelligentsia in the eighties, and
Marxists in Russia had to fight him above all. As for our problem: the
general prospects of capitalist development, a new generation of Russian
Marxists, who had learned from the historical experience and knowledge
of Western Europe, joined forces with George Plekhanov in opposition to
the above-mentioned two representatives of scepticism in the nineties.
They were amongst others Professor Kablukov, Professor Manuilov,
Professor Issayev, Professor Skvortsov, Vladimir Ilyin, Peter v. Struve,
Bulgakov, and Professor Tugan Baranovski. In the further course of our
investigation we shall, however, confine ourselves to the last three of
these, since every one of them furnished a more or less finished
critique of this theory on the point with which we are here concerned.
This battle of wits, brilliant in parts, which kept the socialist
intelligentsia spellbound in the nineties and was only brought to an end
by the walkover of the Marxist school, officially inaugurated the
infiltration into Russian thought of Marxism as an economico-historical
theory. 'Legalist' Marxism at that time publicly took possession of the
Universities, the Reviews and the economic book market in Russia--with
all the disadvantages of such a position. Ten years later, when the
revolutionary risings of the proletariat demonstrated in the streets the
darker side of this optimism about capitalist development, none of this
Pleïad of Marxist optimists, with but a single exception, was to be
found in the camp of the proletariat.




_CHAPTER XIX_

VORONTSOV AND HIS 'SURPLUS'


The representatives of Russian 'populism' were convinced that capitalism
had no future in Russia, and this conviction brought them to the problem
of capitalist reproduction. V. V. laid down his theories on this point
in a series of articles in the review _Patriotic Memoirs_ and in other
periodicals which were collected and published in 1882 under the title
_The Destiny of Capitalism in Russia_. He further dealt with the problem
in 'The Commodity Surplus in the Supply of the Market',[277] 'Militarism
and Capitalism',[278] _Our Trends_,[279] and finally in _Outlines of
Economic Theory_.[280] It is not easy to determine Vorontsov's attitude
towards capitalist development in Russia. He sided neither with the
purely slavophil theory which deduced the perversity and perniciousness
of capitalism for Russia from the 'peculiarities' of the Russian
economic structure and a specifically Russian 'national character', nor
with the Marxists who saw in capitalist development an unavoidable
historical stage which is needed to clear the way towards social
progress for Russian society, too. Vorontsov for his part simply asserts
that denunciation and acclamation of capitalism are equally futile
because, having no roots in Russia, capitalism is just impossible there
and can have no future. The essential conditions of capitalist
development are lacking in Russia, and love's labour's lost if the state
tries to promote it artificially--one might as well spare these efforts
together with the heavy sacrifices they entail. But if we look into the
matter more closely, Vorontsov's thesis is not nearly so uncompromising.
For if we pay attention to the fact that capitalism does not mean only
the accumulation of capital wealth but also that the small producer is
reduced to the proletarian level, that the labourer's livelihood is not
assured and that there are periodical crises, then Vorontsov would by no
means deny that all these phenomena exist in Russia. On the contrary, he
explicitly says in his preface to _The Destiny of Capitalism in Russia_:
'Whilst I dispute the possibility of capitalism as a form of production
in Russia, I do not intend to commit myself in any way as to its future
as a form or degree of exploiting the national resources.'

Vorontsov consequently is of the opinion that capitalism in Russia
merely cannot attain the same degree of maturity as in the West, whereas
the severance of the immediate producer from the means of production
might well be expected under Russian conditions. Vorontsov goes even
further: he does not dispute at all that a development of the capitalist
mode of production is quite possible in various branches of production,
and even allows for capitalist exports from Russia to foreign markets.
Indeed he says in his essay on 'The Commodity Surplus in the Supply of
the Market' that 'in several branches of industry, capitalist production
develops very quickly'[281] [in the Russian meaning 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 a supplier of
certain kinds of commodities on foreign markets. It is extremely
possible that capital can profit by this fact and lay hands upon the
branches of production concerned--that is to say the (inter)national
division of labour will make it easy for our capitalists to gain a
foothold in certain branches. This, however, is not the point. We do not
speak of a merely incidental participation of capital in the industrial
organisation of the country, but ask whether it is likely that the
entire production of Russia can be put on a capitalist basis.'[282]

Put in this form, Vorontsov's scepticism looks quite different from what
might have been expected at first. He doubts whether the capitalist mode
of production could ever gain possession of the entire production in
Russia; but then, capitalism has not so far accomplished this feat in
any country of the world, not even in England. Such a brand of
scepticism as to the future of capitalism appears at a glance quite
international in outlook. And indeed, Vorontsov's theory here amounts to
a quite general reflection on the nature and the essential conditions
of capitalism; it is based upon a general theoretical approach to the
reproductive process of social capital as a whole. Vorontsov gives the
following very clear formulation of the specific relations between the
capitalist mode of production and the problem of markets:

'The (inter)national division of labour, the distribution of all
branches of industry among the countries taking part in international
commerce, is quite independent of capitalism.

'The market which thus comes into being, the demand for the products of
different countries resulting from such a division of labour among the
nations, has intrinsically nothing in common with the market required by
the capitalist mode of production.... The products of capitalist
industry come on the market for another purpose; the question whether
all the needs of the country are satisfied is irrelevant to them, and
the entrepreneur does not necessarily receive in their stead another
material product which may be consumed. Their main purpose is to realise
the surplus value they contain. What, then, is this surplus value that
it should interest the capitalist for its own sake? From our point of
view, it is the surplus of production over consumption inside the
country. Every worker produces more than he himself can consume, and all
these surplus items accumulate in a few hands; their owners themselves
consume them, exchanging them for the purpose against the most
variegated kinds of necessities and luxuries. Yet eat, drink and dance
as much as they like--they will not be able to squander the whole of the
surplus value: a considerable remnant will be left over, of which they
have to dispose somehow even though they cannot exchange it for other
products. They must convert it into money, since it would otherwise just
go bad. Since there is no one inside the country on whom the capitalists
could foist this remnant, it must be exported abroad, and that is why
foreign markets are indispensable to countries embarking on the
capitalist venture.'[283]

The above is a literal translation, showing all the peculiarities of
Vorontsov's diction, so that the reader may have a taste of this
brilliant Russian theorist with whom one can spend moments of sheer
delight.

Later, in 1895, Vorontsov summarised the same views in his book
_Outlines of Economic Theory_ now claiming our attention. Here he takes
a stand against the views of Say and Ricardo, and in particular also
against John Stuart Mill who denied the possibility of general
over-production. In the course of his argument he discovers something no
one had known before: he has laid bare the source of all errors the
classical school made about the problem of crises. This mistake lies in
a fallacious theory of the costs of production to which bourgeois
economists are addicted. No doubt, from the aspect of the costs of
production (which according to Vorontsov's equally unheard-of assumption
do not comprise profits), both profit and crises are unthinkable and
inexplicable. But we can only appreciate this original thought to the
full in the author's own words:

'According to the doctrine of bourgeois economists, the value of a
product is determined by the labour employed in its manufacture. Yet
bourgeois economists, once they have given this determination of value,
immediately forget it and base their subsequent explanation of the
exchange phenomena upon a different theory which substitutes "costs of
production" for labour. Thus two products are mutually exchanged in such
quantities that the costs of production are equal on both sides. Such a
view of the process of exchange indeed leaves no room for a commodity
surplus inside the country. Any product of a worker's annual labour
must, from this point of view, represent a certain quantity of material
of which it is made, of tools which have been used in its manufacture,
and of the products which served to maintain the workers during the
period of production. It [presumably the product--R. L.] appears on the
market in order to change its use-form, to reconvert itself into
objects, into products for the workers and the value necessary for
renewing the tools. As soon as it is split up into its component parts,
the process of reassembling, the productive process, will begin, in the
course of which all the values listed above will be consumed. In their
stead, a new product will come into being which is the connecting link
between past and future consumption.'

From this perfectly unique attempt to demonstrate social reproduction as
a continuous process in the light of the costs of production, the
following conclusion is promptly drawn: Considering thus the aggregate
bulk of a country's products, we shall find no commodity surplus at all
over and above the demand of society; an unmarketable surplus is
therefore impossible from the point of view of a bourgeois economic
theory of value.'

Yet, after having eliminated capitalist profit from the costs of
production by an extremely autocratic manhandling of the bourgeois
theory of value, Vorontsov immediately presents this deficiency as a
great discovery: 'The above analysis, however, reveals yet another
feature in the theory of value prevalent of late: it becomes evident
that this theory leaves no room for capitalist profits.'

The argument that follows is striking in its brevity and simplicity:
'Indeed, if I exchange my own product, representing a cost of production
of 5 roubles, for another product of equal value, I receive only so much
as will be sufficient to cover my expense, but for my abstinence
[literally so--R. L.] I shall get nothing.'

And now Vorontsov really comes to grips with the root of the problem:

'Thus it is proved on a strictly logical development of the ideas held
by bourgeois economists that the destiny of the commodity surplus on the
market and that of capitalist profit is identical. This circumstance
justifies the conclusion that both phenomena are interdependent, that
the existence of one is a condition of the other, and indeed, so long as
there is no profit, there is no commodity surplus.... It is different if
the profit comes into being inside the country. Such profit is not
originally related to production; it is a phenomenon which is connected
with the latter not by technical and natural conditions but by an
extraneous social form. Production requires for its continuation ...
only material, tools, and means of subsistence for the workers,
therefore as such it consumes only the corresponding part of the
products: other consumers must be found for the surplus which makes up
the profit, and for which there is no room in the permanent structure of
industrial life, in production--consumers, namely, who are not
organically connected with production, who are fortuitous to a certain
extent. The necessary number of such consumers may or may not be
forthcoming, and in the latter case there will be a commodity surplus on
the market.'[284]

Well content with the 'simple' enlightenment, by which he has turned the
surplus product into an invention of capital and the capitalist into a
'fortuitous' consumer who is 'not organically connected with capitalist
production', Vorontsov now turns to the crises. On the basis of Marx's
'logical' theory of the value of labour which he claims to 'employ' in
his later works, he expounds them as an immediate result of the surplus
value, as follows:

'If the working part of the population consumes what enters into the
costs of production in form of the wages for labour, the capitalists
themselves must destroy [literally so--R. L.] the surplus value,
excepting that part of it which the market requires for expansion. If
the capitalists are in a position to do so and act accordingly, there
can be no commodity surplus; if not, over-production, industrial crises,
displacement of the workers from the factories and other evils will
result.'

According to Vorontsov, however, it is '_the inadequate elasticity of
the human organism_ which cannot enlarge its capacity to consume as
rapidly as the surplus value is increasing', which is in the end
responsible for these evils. He repeatedly expresses this ingenious
thought as follows: 'The Achilles heel of capitalist industrial
organisation thus lies in the incapacity of the entrepreneurs to consume
the whole of their income.'

Having thus 'employed' Marx's 'logical' version of Ricardo's theory of
value, Vorontsov arrives at Sismondi's theory of crises which he adopts
in as crude and simplified a form as possible. He believes, of course,
that he is adopting the views of Rodbertus in reproducing those of
Sismondi. 'The inductive method of research', he declares triumphantly,
'has resulted in the very same theory of crises and of pauperism which
had been objectively stated by Rodbertus.'[285]

It is not quite clear what Vorontsov means by an 'inductive method of
research' which he contrasts with the objective method--since all things
are possible to Vorontsov, he may conceivably mean Marx's theory. Yet
Rodbertus, too, was not to emerge unimproved from the hands of the
original Russian thinker. Vorontsov corrects Rodbertus' theory merely in
so far as he eliminates the stabilisation of the wage rate in accordance
with the value of the aggregate product which, to Rodbertus, had been
the pivot of his whole system. According to Vorontsov, this measure
against crises is a mere palliative, since 'the immediate cause of the
above phenomena (over-production, unemployment, etc.) is not that the
working classes receive too small a share of the national income, but
that the capitalist class cannot possibly consume all the products which
every year fall to their share.'[286]

Yet, as soon as he has refuted Rodbertus' reform of the distribution of
incomes, Vorontsov, with that 'strictly logical' consistency so peculiar
to him, ultimately arrives at the following forecast for the future
destiny of capitalism: 'If industrial organisation which prevails in W.
Europe is to prosper and flourish further still, it can only do so
provided that some means will be found to destroy [_verbatim_--R. L.]
that portion of the national income which falls to the capitalists'
share over and above their capacity to consume. The simplest solution of
this problem will be an appropriate change in the distribution of the
aggregate income among those who take part in production. If the
entrepreneurs would retain for themselves only so much of all increase
of the national income as they need to satisfy all their whims and
fancies, leaving the remainder to the working class, the mass of the
people, then the régime of capitalism would be assured for a long time
to come.'[287]

The hash of Ricardo, Marx, Sismondi and Rodbertus thus is topped with
the discovery that capitalist production could be radically cured of
over-production, that it could 'prosper and flourish' in all eternity,
if the capitalists would refrain from capitalising their surplus value
and would make a free gift to the working class of the corresponding
part of the surplus value. Meanwhile the capitalists, until they have
become sensible enough to accept Vorontsov's good advice, employ other
means for the annual destruction of a part of their surplus value.
Modern militarism, amongst others, is one of these appropriate
measures--and this precisely to the extent to which the bills of
militarism are footed by the capitalists' income--for Vorontsov can be
counted upon to turn things upside down--and not by the working masses.
A primary remedy for capitalism, however, is foreign trade which again
is a sore spot in Russian capitalism. As the last to arrive at the
table of the world market, Russian capitalism fares worst in the
competition with older capitalist countries and thus lacks both
prospects as to foreign markets and 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 'The
Commodity Surplus in the Supply of the Market', 'then capitalism can
play only a limited part in Russia. It must resign from the direction of
agriculture, and its development in the industrial sphere must not
inflict too many injuries upon the domestic industries which under our
economic conditions are indispensable to the welfare of the majority of
the population. If the reader would comment that capitalism might not
accept such a compromise, our answer will be: so much the worse for
capitalism.'

Thus Vorontsov ultimately washes his hands of the whole thing, declining
for his part all responsibility for the further fortunes of economic
development in Russia.

FOOTNOTES:

[277] An essay in _Patriotic Memoirs_, May 1883.

[278] An essay in the review _Russian 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' in _Russian Thought_ (1889), vol. ix,
p. 78.

[286] 'Militarism and Capitalism' in _Russian Thought_ (1889), vol. ix,
p. 80.

[287] Ibid., p. 83. Cf. _Outlines_, p. 196.




_CHAPTER XX_

NIKOLAYON


The second theorist of populist criticism, Nikolayon, brings quite a
different economic training and knowledge to his work. One of the
best-informed experts on Russian economic relations, he had already in
1880 attracted attention by his treatise on the capitalisation of
agricultural incomes, which was published in the review _Slovo_.
Thirteen years later, spurred on by the great Russian famine of 1891, he
pursued his inquiries further in a book entitled _Outlines of Our Social
Economy Since the Reform_. Here he gives a detailed exposition, fully
documented by facts and figures, of how capitalism developed in Russia,
and on this evidence proceeds to show that this development is the
source of all evil, and so of the famine, also, so far as the Russian
people are concerned. His views about the destiny of capitalism in
Russia are grounded in a definite theory about the conditions of the
development of capitalist production in general, and it is this with
which we must now deal.

Since the market is of decisive importance for the capitalist mode of
economy, every capitalist nation tries to make sure of as large a market
as possible. In the first place, of course, it relies on its home
market. But at a certain level of development, the home market is no
longer sufficient for a capitalist nation, and this for the following
reasons: all that social labour newly produces in one year can be
divided into two parts--the share received by the workers in the form of
wages, and that which is appropriated by the capitalists. Of the first
part, only so many means of subsistence as correspond, in value, to the
sum total of the wages paid within the country can be withdrawn from
circulation. Yet capitalist economy decidedly tends to depress this part
more and more. Its methods are a longer working day, stepping up the
intensity of labour, and increasing output by technical improvements
which enable the substitution of female and juvenile for male labour and
in some cases displace adult labour altogether. Even if the wages of
the workers still employed are rising, such increase can never equal the
savings of the capitalists resulting from these changes. The result of
all this is that the working class must play an ever smaller part as
buyers on the home market. At the same time, there is a further change:
capitalist production gradually takes over even the trades which
provided additional employment to an agricultural people; thus it
deprives the peasants of their resources by degrees, so that the rural
population can afford to buy fewer and fewer industrial products. This
is a further reason for the continual contraction of the home market. As
for the capitalist class, we see that this latter is also unable to
realise the entire newly created product, though for the opposite
reason. However large the requirements of this class, the capitalists
will not be able to consume the entire surplus product in person. First,
because part of it is needed to enlarge production, for technical
improvements which, to the individual entrepreneur, will be a necessary
condition of existence in a competitive society. Secondly, because an
expanding capitalist production implies an expansion in those branches
of industry which produce means of production (e.g. the mining industry,
the machine industry and so forth) and whose products from the very
beginning take a use-form that is incapable of personal consumption and
can only function as capital. Thirdly and lastly, the higher labour
productivity and capital savings that can be achieved by mass production
of cheap commodities increasingly impel society towards mass production
of commodities which cannot all be consumed by a mere handful of
capitalists.

Although one capitalist can realise his surplus value in the surplus
product of another capitalist and _vice versa_, this is only true for
products of a certain branch, for consumer goods. However, the incentive
of capitalist production is not the satisfaction of personal wants, and
this is further shown by the progressive decline in the production of
consumer as compared to that of producer goods.

'Thus we see that the aggregate product of a capitalist nation must
greatly exceed the requirements of the whole industrial population
employed, in the same way as each individual factory produces vastly in
excess of the requirements of both its workers and the entrepreneur, and
this is entirely due to the fact that the nation is a capitalist
nation, because the distribution of resources within the society does
not aim to satisfy the real wants of the population but only the
effective demand. Just as an individual factory-owner could not maintain
himself as a capitalist even for a day if his market were confined to
the requirements of his workers and his own, so the home market of a
developed capitalist nation must also be insufficient.'

At a certain level, capitalist development thus has the tendency to
impede its own progress. These obstacles are ultimately due to the fact
that progressive labour productivity, involving the severance of the
immediate producer from the means of production, does not benefit
society as a whole, but only the individual entrepreneur; and the mass
of labour power and men-hours which has been 'set free' by this process
becomes redundant and thus is not only lost to society but will become a
burden to it. The real wants of the masses can only be satisfied more
fully in so far as there can be an ascendancy of a 'populist' mode of
production based upon the union between the producer and his means of
production. It is the aim of capitalism, however, to gain possession of
just these spheres of production, and to destroy in the process the main
factor which makes for its own prosperity. The periodical famines in
India, for instance, recurring at intervals of ten or eleven years, were
thus among the causes of periodical industrial crises in England. Any
nation that sets out on capitalist development will sooner or later come
up 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 themselves felt, since, once the home
market has been saturated, no substitute can be found, the outside
market having already been conquered by the older competing countries.

The upshot of it all is that the limits of capitalism are set by the
increasing poverty born of its own development, by the increasing number
of redundant workers deficient in all purchasing power. Increasing
labour productivity which can rapidly satisfy every effective demand of
society corresponds to the increasing incapacity of ever broader masses
of the population to satisfy their most vital needs; on the one hand, a
glut of goods that cannot be sold--and on the other, large masses who
lack the bare necessities.

These are Nikolayon's general views.[288] He knows his Marx, we see, and
has turned the two first volumes of _Capital_ to excellent use. And
still, the whole trend of his argument is genuinely Sismondian. It is
capitalism itself which brings about a shrinking home market since it
impoverishes the masses; every calamity of modern society is due to the
destruction of the 'populist' mode of 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 of small-scale enterprise, this sole approach to
grace.[289] The aggregate capitalist product cannot, in the end, be
realised within the society, this can only be done with recourse to
outside markets. Nikolayon here comes to the same conclusion as
Vorontsov, in spite of a quite different theoretical point of departure.
Applied to Russia, it is the economic scientific ground for a sceptical
attitude towards capitalism. Capitalist development in Russia has been
without access to foreign markets from the first, it could only show its
worst aspects--it has impoverished the masses of the people. In
consequence, it was a 'fatal mistake' to promote capitalism in Russia.

On this point, Nikolayon fulminates like a prophet of the Old Testament:
'Instead of keeping to the tradition of centuries, instead of developing
our old inherited principle of a close connection between the immediate
producer and his means of production, instead of usefully applying the
scientific achievements of W. Europe to their forms of production based
on the peasants' ownership of their means of production, instead of
increasing their productivity by concentrating the means of production
in their hands, instead of benefiting, not by the forms of production in
W. Europe, but by its organisation, its powerful co-operation, its
division of labour, its machinery, etc., etc.--instead of developing the
fundamental principle of a landowning peasantry and applying it to the
cultivation of the land by the peasants, instead of making science and
its application widely accessible to the peasants--instead of all this,
we have taken the opposite turning. We have failed to prevent the
development of capitalist forms of production, although they are based
on the expropriation of the peasants; on the contrary, we have promoted
with all our might the upsetting of our entire economic life which
resulted in the famine of 1891.'

Though the evil is much advanced, it is not too late even now to retrace
our steps. On the contrary, a complete reform of economic policy is just
as urgently needed for Russia in view of the threatening proletarisation
and collapse, as Alexander's reforms after the Crimean war were
necessary in their time.

Now a social reform as advocated by Nikolayon is completely Utopian. His
attitude exhibits an even more blatant petty-bourgeois and reactionary
bias than Sismondi's ever did, considering that the Russian 'populist'
writes after a lapse of seventy years. For in his opinion, the old
_obshchina_, the rural community founded on the communal ownership of
the soil, is the raft to deliver Russia from the flood of capitalism. On
it, the discoveries of modern big industry and scientific technique are
to be grafted by measures which remain his own secret--so that it can
serve as the basis of a 'socialised' higher form of production. Russia
can choose no other alternative: either she turns her back upon
capitalist development, or she must resign herself to death and
decay.[290]

After a crushing criticism of capitalism Nikolayon thus ends up with the
same old 'populist' panacea which had as early as the fifties, though at
that time with greater justification, been hailed as the 'peculiarly
Russian' guarantee of a higher social development, although its
reactionary character as a lifeless relic of ancient institutions had
been exposed in Engels' _Fluechtlingsliteratur_ in _Volksstaat_ (1875).
Engels wrote at the time:

'A further development of Russia on bourgeois lines would gradually
destroy communal property there too, quite apart from any interference
of the Russian government "with the knout and with bayonets" (as the
revolutionary populists imagined). Under the pressure of taxes and
usury, communal landownership is no longer a privilege, it becomes an
irksome chain. The peasants frequently run away from it, either with or
without their families, to seek their living as itinerant labourers, and
leave the land behind. We see that communal ownership in Russia has long
since passed its flower and there is every indication that its decay is
approaching.'

With these words, Engels hits right on the target of the _obshchina_
problem--eighteen years before the publication of Nikolayon's principal
work. If Nikolayon subsequently with renewed courage again conjured up
the ghost of the _obshchina_, it was a bad historical anachronism
inasmuch as about a decade later the _obshchina_ was given an official
burial by the state. The absolutist government which had for financial
reasons tried during half a century artificially to keep the machinery
of the rural community going was compelled to give up this thankless
task on its own accord. The agrarian problem soon made it clear how far
the old 'populist' delusion was lagging behind the actual course of
economic events, and conversely, how powerfully capitalist development
in Russia, mourned and cursed as still-born, could demonstrate with
lightning and thunder its capacity to live and to multiply. Once again,
and for the last time, this turn of events demonstrates in quite a
different historical setting how a social critique of capitalism, which
begins by doubting its capacity for development, must by a deadly logic
lead to a reactionary Utopianism--both in the France of 1819 and in the
Russia of 1893.[291]

FOOTNOTES:

[288] Cf. _Outlines of Our Social Economy_, in particular pp. 202-5,
338-41.

[289] Vladimir Ilyich [Lenin] has given detailed proof of the striking
similarity between the position of the Russian 'populists' and the views
of Sismondi in his essay _On the Characteristics of Economic
Romanticism_ (1897).

[290] _Outlines of Our Social Economy_, p. 322. Friedrich Engels
appraises the Russian situation differently. He repeatedly tries to
convince Nikolayon that Russia cannot avoid a high industrial
development, and that her sufferings are nothing but the typical
capitalist contradictions. Thus he writes on September 22, 1892: 'I
therefore hold that at present industrial production necessarily implies
big industry, making use of steam power, electricity, mechanical looms
and frames, and lastly the manufacture of the machines themselves by
mechanical means. From the moment that railways are introduced in
Russia, recourse to all these extremely modern means of production
becomes inevitable. It is necessary that you should be able to mend and
repair 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-plated cruisers, modern artillery, machine guns, steel
bullets, smokeless gun powder, etc.) a big industry that is
indispensable for the production of such items has become a political
necessity for you as well. All these items cannot be made without a
highly developed metal industry which on its part cannot develop unless
there is a corresponding development of all other branches of
production, textiles in particular' (Marx-Engels to Nikolayon, St.
Petersburg, 1908, p. 75). And further in the same letter: 'So long as
Russian industry depends on the home market alone, it can only satisfy
the internal demand. The latter, however, can grow but slowly, and it
seems to me that under present conditions of life in Russia it is even
bound to decrease, since it is one of the unavoidable consequences of
high industrial development that it destroys its own home market by the
same process which served to create it: by destroying the bases of the
peasants' domestic industry. Yet peasants cannot live without such a
domestic industry. They are ruined as peasants, their purchasing power
is reduced to a minimum, and unless they grow new roots in new
conditions of life, unless they become proletarians, they will only
represent a very small market for the newly arising plants and
factories.

'Capitalist production is a phase of economic transition, full of
inherent contradictions which only develop and become visible to the
extent that capitalist production develops. The tendency of
simultaneously creating and destroying a market is just one of these
contradictions. Another is the hopeless situation that will ensue, all
the sooner in a country like Russia which lacks external markets than in
countries more or less fit to compete in the open world market. These
latter can find some means of relief in this seemingly hopeless
situation by heroic measures of commercial policy, that is to say by
forcibly opening up new markets. China is the most recent market to be
opened up for English commerce, and it proved adequate for a temporary
revival of prosperity. That is why English capital is so insistent on
railroad building in China. Yet railways in China mean the destruction
of the entire foundation of China's small rural enterprises and her
domestic industry. In this case, there is not even a native big industry
developed to compensate for this evil to some extent, and hundreds of
millions will consequently find it 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 be flooded with the detested
Chinese. This new competitor on the labour market will compete with
American, Australian and European labour at the level of what the
Chinese consider a satisfactory standard of living, which is well known
to be the lowest in the whole world. Well then, if the whole system of
production in Europe has not been revolutionised by then, that will be
the time to start this revolution' (ibid., p. 79).

Engels, though he followed Russian developments with attention and keen
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, he expressed himself as follows: 'My Russian friends almost daily
and weekly bombard me with requests to come forward with my objections
to Russian books and reviews which not only misinterpret but even
misquote the sayings of our author (Marx). My friends assure me that my
intervention would suffice to put matters right. Yet I invariably and
firmly refuse all such proposals because I cannot afford to become
involved with a dispute held in a foreign country, in a tongue which I,
at least, cannot read as easily and freely as the more familiar W.
European languages, and in a literature which is at best accessible to
me only in fortuitous glimpses of some fragments, and which I cannot
pursue anything like systematically enough in all its stages and details
without neglecting my real and serious work. There are people everywhere
who, once they have taken up a certain stand, are not ashamed to have
recourse to misinterpreting the thoughts of others and to all kinds of
dishonest manipulations for their own ends, and if that is what has
happened to our author, I am afraid they will not deal more kindly with
me, so that in the end I shall be compelled to interfere in the dispute,
first to 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 their character than to their intelligence. Referring to
the 1900 and 1902 crises, Vorontsov wrote in 1902: 'The doctrinaire
dogma of the Neo-Marxists rapidly loses its power over people's minds.
That the newest successes of the individualists are ephemeral has
obviously dawned even on their official advocates.... In the first
decade of the twentieth century, we come back to the same views about
economic development in Russia that had been the legacy of the 1870's'
(Cf. the review _Political Economics_, October 1902, quoted by A. Finn
Yenotayevski in _The Contemporary Economy of Russia 1890-1910_, St.
Petersburg, 1911, p. 2.) Even to-day, then, this last of the 'populist'
Mohicans deduces the 'ephemeral character', not of his own theory, but
of economic reality. What of the saying of Barrère: 'Il n'y a que les
morts qui ne reviennent pas'.




_CHAPTER XXI_

STRUVE'S 'THIRD PERSONS' AND 'THREE WORLD EMPIRES'


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

In 1894, Peter v. Struve who had already given a detailed appraisal of
Nikolayon's book in an essay 'On Capitalist Development in Russia',[292]
published a book in Russian,[293] criticising the theories of 'populism'
from various aspects. In respect of our present problem, however, he
mainly confines himself to proving, against both Vorontsov and
Nikolayon, that capitalism does not cause a contraction of the home
market but, on the contrary, an expansion. There can be no doubt that
Nikolayon has made a blunder--the same that Sismondi had made. They each
describe only a single aspect of the destructive process, performed by
capitalism on the traditional forms of production by small enterprise.
They saw only the resulting depression of general welfare, the
impoverishment of broad strata of the population, and failed to notice
that economic aspect of the process which entails the abolition of
natural economy and the substitution of a commodity economy in rural
districts. And this is as much as to say that, by absorbing further and
further sections of formerly independent and self-sufficient producers
into its own sphere, capitalism continuously transforms into commodity
buyers ever new strata of people who had not before bought its
commodities. In fact, the course of capitalist development is just the
opposite of that pictured by the 'populists' on the model of Sismondi.
Capitalism, far from ruining the home market, really sets about creating
it, precisely by means of a spreading money economy.

Struve in particular refutes the theory that the surplus value cannot
possibly be realised on the home market. He argues as follows: The
conviction that a mature capitalist society consists exclusively of
entrepreneurs and workers forms the basis of Vorontsov's theory, and
Nikolayon himself operates with this concept throughout. From this point
of view, of course, the realisation of the capitalist aggregate product
seems incomprehensible. And Vorontsov's theory is correct in so far as
it states the fact that neither the capitalists' nor the workers'
consumption can realise the surplus value, so that the existence of
'third persons' must be presumed.[294] But then, is it not beyond any
doubt that some such 'third persons' exist in every capitalist society?
The idea of Vorontsov and Nikolayon is pure fiction 'which cannot
advance our understanding of any historical process whatever by a hair's
breadth'.[295] There is no actual capitalist society, however highly
developed, composed exclusively of capitalists and workers.

'Even in England and Wales, out of a thousand self-supporting
inhabitants, 543 are engaged in industry, 172 in commerce, 140 in
agriculture, 81 in casual wage labour, and 62 in the Civil Service, the
liberal professions and the like.'

Even in England, then, there are large numbers of 'third persons', and
it is they who, by their consumption, help to realise the surplus value
in so far as it is not consumed by the capitalists. Struve leaves it
open whether these 'third persons' consume enough to realise all surplus
value--however that may be, 'the contrary would have to be proved'.[296]
This cannot be done, he claims, for Russia, that vast country with an
immense population. She, in fact, is in the fortunate position to be
able to dispense with foreign markets. In this--and here Struve dips
into the intellectual treasures of Professors Wagner, Schaeffle, and
Schmoller--she enjoys the same privileges as the United States of
America. 'If the example of the N. American Union stands for anything,
it is proof of the fact that under certain circumstances capitalist
industry can attain a very high level of development almost entirely on
the basis of the home market.'[297]

The negligible amount of industrial exports from the U.S.A. in 1882 is
mentioned in support of this statement which Struve formulates as a
general doctrine: 'The vaster the territory, and the larger the
population of a country, the less does that country require foreign
markets for its capitalist development.' He infers from this, in direct
opposition to the 'populists', 'a more brilliant future (for Russia)
than for the other countries'.

On the basis of commodity production, the progressive development of
agriculture is bound to create a market wide enough to support the
development of Russian industrial capitalism. This market would be
capable of unlimited expansion, in step with the economic and cultural
progress of the country, and together with the substitution of a
monetary for a natural economy. 'In this respect, capitalism enjoys more
favourable conditions in Russia than in other countries.'[298]

Struve paints a detailed and highly coloured picture of the new markets
which, thanks to the Trans-Siberian Railway, are opening up in Siberia,
Central Asia, Asia Minor, Persia and the Balkans. But his prophetic zeal
blinds him to the fact that he is no longer talking about the
'indefinitely expanding' home market but about specific foreign markets.
In later years, he was to throw in his lot, in politics too, with this
optimistic Russian capitalism and its liberal programme of imperialist
expansion, for which he had laid the theoretical foundations when still
a 'Marxist'.

Indeed, the tenor of Struve's argument is a fervent belief in the
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 'third persons' whom he considers
the mainstay of accumulation, but his references to English
occupational statistics indicate that he has in mind the various private
and public servants, the liberal professions, in short the notorious
_grand public_ so dear to bourgeois economists when they are completely
at a loss. It is this 'great public' of which Marx said that it serves
as the explanation for things which the economist cannot explain. It is
obvious that, if we categorically refer to consumption by the
capitalists and the workers, we do not speak of the entrepreneur as an
individual, but of the capitalist class as a whole, including their
hangers-on--employees, Civil Servants, liberal professions, and the
like. All such 'third persons' who are certainly not lacking in any
capitalist society are, as far as economics is concerned, joint
consumers of the surplus value for the greater part, in so far, namely,
as they are not also joint consumers of the wages of labour. These
groups can only derive their purchasing power either from the wage of
the proletariat or from the surplus value, if not from both; but on the
whole, they are to be regarded as joint consumers of the surplus value.
It follows that their consumption is already included in the consumption
of the capitalist class, and if Struve tries to reintroduce them to the
capitalists by sleight-of-hand as 'third persons' to save the situation
and help to realise the surplus value, the shrewd profiteer will not be
taken in. He will see at once that this great public is nothing but his
old familiar retinue of parasites who buy his commodities 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 for capitalist
production is equally untenable. In this, he defers to the mechanist
approach of the 'populists' who, along with the professors' textbooks,
hold that a capitalist (European) country will first exploit the home
market to the limit, and will only look to foreign markets when this is
almost or completely exhausted. Then, following in the footsteps of
Wagner, Schaeffle and Schmoller, Struve arrives at the absurd conclusion
that a country with vast territories and a large population can make its
capitalist production a 'self-contained whole' and rely indefinitely on
the home market alone.[299] In actual fact, capitalist production is by
nature production on a universal scale. Quite contrary to the bookish
decrees issued by German scholars, it is producing for a world market
already from the word _go_. The various pioneering branches of
capitalist production in England, such as the textile, iron and coal
industries, cast about for markets in all countries and continents, long
before the process of destroying peasants' property, the decline of
handicraft and of the old domestic industries within the country had
come to an end. And again, is it likely that the German chemical or
electrotechnical industries would be grateful for the sober advice not
to work for five continents, as they have done from the beginning, but
to confine themselves to the German home market which, being largely
supplied from abroad, is evidently far from exhausted in respect of a
whole lot of other German industries? Or that one should explain to the
German machine industry, it should not venture yet upon foreign markets,
since German import statistics are visible proof that a good deal of
the demand in Germany for products of this branch is satisfied by
foreign supplies? No, this schematic conception of 'foreign trade' does
not help us at all to grasp the complexity of the world market with its
uncounted ramifications and different shades in the division of labour.
The industrial development of the U.S.A. who have already at the time of
writing become a dangerous rival to Britain both on the world market and
even in England herself, just as they have beaten German competition,
e.g. in the sphere of electrotechnics, both in the world market and in
Germany herself, has given the lie to Struve's inferences, 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 his market in the
international connections of capitalist economy, and its historical
tendency to create a homogeneous living organism based on social
division of labour as well as the countless variety of natural wealth
and productive conditions of the globe. Moreover he accepts the Three
Empire fiction of Wagner and Schmoller (the self-contained Empires of
Great Britain, Russia and the U.S.A.) which completely ignores or
artificially minimises the vital part played by an unlimited supply of
means of subsistence, of raw and auxiliary materials and of labour power
which is just as necessary for a capitalist industry computed in terms
of a world market as the demand for finished products. Alone the history
of the English cotton industry, a reflection in miniature of the history
of capitalism in general, spreading over five continents throughout the
nineteenth century, makes a mockery of the professors' childish
pretensions which have only one real significance: to provide the
theoretical justification for the system of protective tariffs.

FOOTNOTES:

[292] Published in _Sozialdemokratisches 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
refute what 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 recent capitalism 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 a petty bourgeoisie and by peasants who
had fled from European feudalism to set up a purely bourgeois society.
In Russia, on the other hand, we have a primitive communist foundation,
a society of _gentes_, as it were, in the pre-civilised stage which,
though it is already disintegrating, still serves as a material basis
upon which the capitalist revolution (for it is in fact a social
revolution) can take place and become effective. In America, a monetary
economy had been stabilised more than a century ago, whereas a natural
economy had until recently prevailed in Russia. It should be obvious
therefore that this revolution in Russia is bound to be much more
ruthless and violent, 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
reactionary aspect of the 'Three Empire Theory' (viz. Great Britain,
Russia and the U.S.A.) evolved by the German professors. In his handbook
of commercial policy (_Handelspolitische Säkularbetrachtung_), the
venerable scholar dolefully frowns upon 'neo-mercantilism', that is to
say upon the imperialist designs of the three arch-villains. 'In the
interests of a higher intellectual, moral and aesthetic civilisation and
social progress' he demands a strong German navy and a European Customs
Union. 'Out of the economic tension of the world there 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 an ally
to the World Powers'--which latter, however, Professor Schmoller says
elsewhere, he does not wish to blame for again taking the path of
large-scale colonial expansion. 'She neither can nor ought to pursue a
policy of conquest like the Three World Powers, but she must be able, if
necessary, to break a foreign blockade of the North Sea in order to
protect her own colonies and her vast commerce, and she must be able to
offer the same security to the states with whom she forms an alliance.
It is the task of the Three-Partite Union (Germany, Austro-Hungary, and
Italy) to co-operate with France towards imposing some restraint,
desirable for the preservation of all other states, on the
over-aggressive policy of the Three World Powers which constitutes a
threat to all smaller states, and to ensure moderation in conquests, in
colonial acquisitions, in the immoderate and unilateral policy of
protective tariffs, in the exploitation and maltreatment of all weaker
elements. The objectives of all higher intellectual, moral and aesthetic
civilisation and of social progress depend on the fact that the globe
should not be divided up among Three World Empires in the twentieth
century, that these Three Empires should not establish a brutal
neo-mercantilism' (_Die Wandlungen der Europäischen Handelspolitik des
19. Jahrhunderts_, 'Changes in the European Commercial Policy During the
19th Century', in _Jahrb. für Gesetzgebung, Verwaltung und
Volkswirtschaft_, vol. xxiv, p. 381).




_CHAPTER XXII_

BULGAKOV AND HIS COMPLETION OF MARX'S ANALYSIS


The second critic of 'populist' scepticism, S. Bulgakov, is no respecter
of Struve's 'third persons' and at once denies that they form the
sheet-anchor for capitalist accumulation.

'The majority of economists before Marx', he declares, 'solved the
problem by saying that some sort of "third person" is needed, as a _deus
ex machina_, to cut the Gordian knot, i.e. to consume the surplus value.
This part is played by luxury-loving landowners (as with Malthus), or by
indulgent capitalists, or yet by militarism and the like. There can be
no demand for the surplus value without some such extraordinary
mediators; a deadlock will be reached on the markets and the result will
be over-production and crises.'[300]

'Struve thus assumes that capitalist production in its development, too,
may find its ultimate mainstay in the consumption of some fantastic sort
of "third person". But if this great public is essentially characterised
as consuming the surplus value, whence does it obtain the means to
buy?'[301]

For his part, Bulgakov centres the whole problem from the first in the
analysis of the social aggregate product and its reproduction as given
by Marx in the second volume of _Capital_. He has a thorough grasp of
the fact that he must start with simple reproduction and must fully
understand its working in order to solve the question of accumulation.
In this context, he says, it is of particular importance to obtain a
clear picture of the consumption of surplus value and wages in such
branches of production as do not turn out goods for consumption, and
further, to understand fully the circulation of that portion of the
social aggregate product which represents used-up constant capital.
This, he argues, is a completely new problem of which economists had not
even been aware before Marx brought it up. 'In order to solve this
problem, Marx divides all capitalistically produced commodities into two
great and fundamentally different categories: the production of producer
and consumer goods. There is more theoretical importance in this
division than in all previous squabbles on the theory of markets.'[302]

Bulgakov, we see, is an outspoken and enthusiastic supporter of Marx's
theory. The object of his study, as he puts it, is thus a critique of
the doctrine that capitalism cannot exist without external markets. 'For
this purpose, the author has made use of the most valuable analysis of
social reproduction given by Marx in volume ii of _Capital_ which for
reasons unknown has scarcely been utilised in economic theory. Though
this analysis cannot be taken as fully completed, we are yet of opinion
that even in its present fragmentary shape it offers an adequate
foundation for a solution of the market problem that differs from that
adopted by Messrs. Nikolayon, V. V. and others, and which they claim to
have found in Marx.'[303]

Bulgakov gives the following formulation of his solution which 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 of production that the outside market be
able to absorb the surplus of capitalist production. The author has
arrived at this conclusion in consequence of his study of the
above-mentioned analysis of social reproduction.'

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

At first sight, they prove surprisingly simple: Bulgakov faithfully
reproduces Marx's well-known diagram of simple reproduction, adding
comments which do credit to his insight. He further cites Marx's equally
familiar diagram of enlarged reproduction--and this indeed is the proof
we have been so anxious to find.

'Consequent upon what we have said, it will not be difficult now to
determine the very essence of accumulation. The means-of-production
department I must produce additional means of production necessary for
enlarging both its own production and that of Department II. II, in its
turn, will have to supply additional consumption goods to enlarge the
variable capital in both departments. Disregarding the circulation of
money, the expansion of production is reduced to an exchange of
additional products of I needed by II against additional products of II
needed by I.'

Loyally following Marx's deductions, Bulgakov does not notice that so
far his entire thesis is nothing but words. He believes that these
mathematical _formulæ_ solve the problem of accumulation. No doubt we
can easily imagine proportions such as those he has copied from Marx,
and _if there is expanding production_, these _formulæ_ will apply. Yet
Bulgakov overlooks the principal problem: who exactly is to profit by an
expansion such as that whose mechanism he examines? Is it explained just
because we can put the mathematical proportions of accumulation on
paper? Hardly, because just as soon as Bulgakov has declared the matter
settled and goes on to introduce the circulation of money into the
analysis, he right away comes up against the question: where are I and
II to get the money for the purchase of additional products? When we
dealt with Marx, time and again the weak point in his analysis, the
question really of consumers in enlarged reproduction, cropped up in a
perverted form as the question of additional money sources. Here
Bulgakov quite slavishly follows Marx's approach, accepting his
misleading formulation of the problem without noticing that it is not
straightforward, although he knows perfectly well that 'Marx himself did
not answer this question in the drafts which were used to compile the
second volume of _Capital_'. It should be all the more interesting to
see what answer Marx's Russian pupil attempted to work out on his own.

'The following solution', Bulgakov says, 'seems to us to correspond best
to Marx's doctrine as a whole: The new variable capital in money-form
supplied by II for both departments has its commodity equivalent in
surplus value II. With reference to simple reproduction, we have already
seen that the capitalists themselves must throw money into circulation
to realise their surplus value, money which ultimately reverts to the
pocket of the very capitalist it came from. The quantity of money
required for the circulation of the surplus value is determined in
accordance with the general law of commodity circulation by the value
of the commodities that contained it, divided by the average amount of
money turnover. This same law must apply here; the capitalists of
Department II must dispose of a certain amount of money for the
circulation of their surplus value, and must consequently possess
certain money reserves. These reserves must be ample enough for the
circulation both of that portion of the surplus value which represents
the consumption fund and of that which is to be accumulated as capital.'

Bulgakov further argues that it is immaterial to the question how much
money is required to circulate a certain amount of commodities inside a
country, whether or not some of these commodities contain any surplus
value. 'In answer to the general question as to money sources inside the
country, however, our solution is that the money is supplied by the
producer of gold.'[304]

If a country requires more money consequent upon an 'expansion of
production', the production of gold will have to be increased
accordingly. So here we are again: the producer of gold is again the
_deus ex machina_, just as he had been for Marx. In fact, Bulgakov has
sadly disappointed us in the high hopes we had of his new solution. His
'solution' of the problem does not go a step beyond Marx's own analysis.
It can be reduced to three extremely simple statements as follows: (1)
Question: How much money do we need for the realisation of capitalised
surplus value? Answer: Just as much as is required in accordance with
the general law of commodity circulation. (2) Q.: Where do the
capitalists get the money for the realisation of capitalised surplus
value? A.: They are supposed to have it. (3) Q.: How did the money come
into the country in the first place? A.: It is provided by the producer
of gold. The extreme simplicity of this method of explanation is
suspicious rather than attractive.

We need not trouble, however, to refute this theory which makes the gold
producer the _deus ex machina_ of capitalist accumulation. Bulgakov has
done it himself quite adequately. Eighty pages on, he returns to the
gold producer in quite a different context, in the course of a lengthy
argument against the theory of the wages fund in which he got involved
for some mysterious reason. Here he suddenly displays a keen grasp of
the problem:

'We know already that there is a gold producer amongst other producers.
Even under conditions of simple reproduction, he increases, on the one
hand, the absolute quantity of money circulating inside the country, and
on the other, he buys producer and consumer goods without, in his turn,
selling commodities, paying with his own product, i.e. with the general
exchange equivalent, for the goods he buys. The gold producer now might
perhaps render the service of buying the whole accumulated surplus value
from II and pay for it in gold which II can then use to buy means of
production from I and to increase its variable capital needed to pay for
additional labour power so that the gold producer now appears as the
real external market.

'This assumption, however, is quite absurd. To accept it would mean to
make the expansion of social production dependent upon the expansion of
gold production. (Hear, hear!) This in turn presupposes an increase in
gold production which is quite unreal. If the gold producer were obliged
to buy all the accumulated surplus value from II for his own workers,
his own variable capital would have to grow by the day and indeed by the
hour. Yet his constant capital as well as his surplus value should also
grow in proportion, and gold production as a whole would consequently
have to take on immense dimensions. (Hear, hear!) Instead of submitting
this sophistical presumption to statistical tests--which in any case
would hardly be possible--a single fact can be adduced which would alone
refute this presupposition: it is the development of the institution of
credit which accompanies the development of capitalist economy. (Hear,
hear!) Credit has the tendency to diminish the amount of money in
circulation (this decrease being, of course, only relative, not
absolute); it is the necessary complement of a developing economy of
exchange which would otherwise soon find itself hampered by a lack of
coined money. I think we need not give figures in this context to prove
that the rôle of money in exchange-transactions is now very small. The
hypothesis is thus proved in immediate and evident disagreement with the
facts and must be confuted.'[305]

Bravo! Bravissimo! This is really excellent! Bulgakov, however, thus
'confutes' also his former explanation of the question, in what way and
by whom capitalised surplus value is realised. Moreover, in refuting his
own statements, Bulgakov has only explained in somewhat greater detail
what Marx expressed in a single word when he called the hypothesis of a
gold producer swallowing up the entire surplus value of
society--'absurd'.

Admittedly, Bulgakov's real solution and that of Russian Marxists in
general who deal extensively with the problem must be sought elsewhere.
Just like Tugan Baranovski and Ilyin [Lenin], Bulgakov underlines the
fact that the opposing sceptics made a capital error with respect to the
possibility of accumulation in analysing the value of the aggregate
product. They, especially Vorontsov, assumed that the aggregate social
product consists in consumer goods, and they all started from the false
premise that consumption is indeed the object of capitalist production.
This, as the Marxists now explain, is the source of the entire
misunderstanding--of all the imaginary difficulties connected with the
realisation of the surplus value, with which the sceptics racked their
brains.

'This school created non-existent difficulties because of this mistaken
conception. Since the normal conditions of capitalist production
presuppose that the capitalists' consumption fund is only a part of the
surplus value, and the smaller part at that, the larger being set aside
for the expansion of production, it is obvious that the difficulties
imagined by this (the _populist_) school do not really exist.'[306]

The unconcern with which Bulgakov here ignores the real problem is
striking. Apparently it has not dawned on him that the question as to
the ultimate beneficiaries, quite irrelevant so long as personal
consumption of the entire surplus value is assumed, only becomes acute
on the assumption of enlarged reproduction.

All these 'imaginary difficulties' vanish, thanks to two discoveries of
Marx's which his Russian pupils untiringly quote against their
opponents. The first is the fact that, in terms of value, the social
product is composed, not of _v + s_, but of _c + v + s_. Secondly, the
ratio of _c_ to _v_ in this sum continually increases with the progress
of capitalist production, and at the same time, the capitalised part of
the surplus value as against that part of it that is consumed, is ever
growing. On this basis, Bulgakov establishes a complete theory of the
relations between production and consumption in a capitalist society. As
this theory plays such an important part for the Russian Marxists in
general, and Bulgakov in particular, it will be necessary to get better
acquainted with it.

'Consumption,' Bulgakov says, 'the satisfaction of social needs, is but
an incidental moment in the circulation of capital. The volume of
production is determined by the volume of capital, and not by the amount
of social requirements. Not alone that the development of production is
unaccompanied by 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 value or
labour wages can be effective consumers, and their purchasing power
strictly corresponds to the amount of those revenues. Yet we have seen
that the fundamental evolutionary laws of capitalist production tend,
despite the absolute increase, to diminish the relative size of variable
capital as well as of the capitalists' consumption fund. We can say,
then, _that the development of production diminishes consumption_.[307]
The conditions of production and of consumption are thus in conflict.
Production cannot and does not expand to further consumption. Expansion,
however, is an inherent fundamental law of capitalist production and
confronts every individual capitalist in the form of a stern command to
compete. This contradiction is negligible in view of the fact that
expanding production as such represents a market for additional
products. "Inherent contradictions are resolved by an extension of the
outlying fields of production."'[308] (Bulgakov here quotes a saying of
Marx which he has thoroughly misunderstood; we shall later have occasion
to deal with it once more.) 'It has just been shown how this is
possible.' (A reference to the analysis of the diagram of enlarged
reproduction.) 'Evidently, the greater share of the expansion is
apportioned to Department I, to the production, that is to say, of
constant capital, and only a (relatively) smaller part to Department II
which produces commodities for immediate consumption. This change in the
relations of the two departments shows well enough what part is played
by consumption in a capitalist society, and it indicates where we should
expect to find the most important demand for capitalist
commodities.'[309] 'Even within the narrow limits of the profit motive
and the crises, even on this strait and narrow path, capitalist
production is capable of unlimited expansion, irrespective of, and even
despite, a decrease in consumption. The Russian literature frequently
points out that in view of diminishing consumption a considerable
increase of capitalist production is impossible without external
markets, but this is due to a wrong evaluation of the part played by
consumption in a capitalist society, the failure to appreciate that
consumption is not the ultimate end of capitalist production. Capitalist
production does not exist by the grace of an increase in consumption but
because of an extension of the outlying fields of production which in
fact constitute the market for capitalist products. A whole progression
of Malthusian investigators, discontented with the superficial harmony
doctrine of the school of Say and Ricardo, have slaved away at a
solution of the hopeless undertaking: to find means of increasing
consumption which the capitalist mode of production is bound to
decrease. Marx was the only one to analyse the real connections: he has
shown that the growth of consumption is fatally lagging behind that of
production, and must do so whatever "third persons" one might invent.
Consumption and its volume then should by no means be considered as
establishing the immediate limits to the expansion of production.
Capitalist production atones by the crises for deviating from the true
purpose of production, but it is independent of consumption. The
expansion of production is alone limited by, and dependent upon, the
volume of capital.'[310]

The theory of Bulgakov and Tugan Baranovski is here directly attributed
to Marx. In the eyes of the Russian Marxists, it is on the whole the
direct consequence of Marx's doctrine, of which it forms an organic
part. On another occasion Bulgakov says even more clearly that it is a
faithful interpretation of Marx's diagram of enlarged reproduction. Once
a country has embraced capitalist production, its internal movement
develops along the following lines:

'The production of constant capital makes up the Department I of social
reproduction, thereby instituting an independent demand for consumption
goods to the extent of both its own variable capital and the
consumption fund of its capitalists. Department II in its turn starts
the demand for the products of Department I. _Thus a closed circle is
already formed at the initial stage of capitalist production, in which
it depends on no external market but is self-sufficient and can grow, of
itself, as it were, by means of accumulation._'[311]

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

Bulgakov further develops a completely erroneous theory of foreign
commerce, based upon his misapprehension of the relations between
consumption and production in capitalist economy. A picture of
reproduction like the above in fact has no room for foreign commerce. If
capitalism forms a 'closed circle' in every country from the very
beginning, if, chasing its tail like a puppy and in complete
'self-sufficiency', it is able of itself to create an unlimited market
for its products and can spur itself on to ever greater expansion, then
every capitalist country as such must also be a closed and
self-sufficient economic whole. In but a single respect would foreign
commerce appear reasonable: to compensate, by imports from abroad, for
certain deficiencies due to the soil and the climate, i.e. the import of
raw materials or foodstuffs from sheer necessity. Completely upsetting
the thesis of the 'populists', Bulgakov in fact advances a theory of
international commerce among capitalist states which gives pride of
place to the import of agricultural products, with industrial exports
merely providing the requisite funds.

International traffic in commodities does not here seem to flow from the
character of the mode of production but from the natural conditions of
the countries concerned. This theory at any rate has not been borrowed
from Marx but from the economic experts of the German bourgeoisie. Just
as Struve took over from Wagner and Schaeffle his Three Empire Theory,
so Bulgakov adopts from the late List (_R.I.P._) the division of states
on the basis of 'agriculture' and 'mixed agriculture and manufacture',
or rather adapts it, in deference to the times, to the categories of
'manufacture' and 'mixed manufacture and agriculture'. Nature has
afflicted the first category with a deficiency in raw materials and
foodstuffs, making it thus dependent upon foreign commerce. The second
category has been liberally endowed with all it needs; here foreign
trade is of no account. The prototype of the first category is England,
of the second--the U.S.A. The stoppage of foreign commerce would mean
the economic death-blow to England, but only a temporary crisis in the
U.S.A. with a guarantee of full recovery.

'Production there is capable of unlimited expansion on the basis of the
internal market.'[312]

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

'Although the liberalist era has greatly facilitated international
traffic, it would be a mistake to infer from this that the period of a
national economy is nearing its end, to be replaced by a period of
international economy.... Granted that we see in Europe to-day a number
of small countries that are not independent nations in respect of their
commodity supply, being compelled to import substantial amounts of their
foodstuffs and luxuries, while their industrial productivity is in
excess of the national needs and creates a permanent surplus for which
employment must be found in alien spheres of consumption. Yet although
countries of industrial production and those producing raw materials
exist side by side and depend upon one another, such "international
division of labour" should not be regarded as a sign that mankind is
about to attain to a higher stage of development which it would be
proper to contrast, under the label of world economy, with the ...
previous stages. No stage of economic development has ever permanently
guaranteed full autonomy in the satisfaction of wants. Every one of them
has left certain gaps which had to be filled in by some means or other.
So-called "international economy", on the other hand, has not, at any
rate so far, engendered any phenomena which are essentially different
from those of national economy, and we very much doubt that such
phenomena will appear in the near future.'[313]

As far as Bulgakov is concerned, this conception at any rate results in
an unexpected conclusion: his theory of the unlimited capacity for
development of capitalism is confined to certain countries with
favourable natural conditions. Capitalism in England is foredoomed
because the world market will be exhausted before long. In the U.S.A.,
India and Russia it can look forward to an unlimited development
because these countries are 'self-sufficient'.

Apart from these obvious peculiarities, Bulgakov's arguments about
foreign commerce again imply a fundamental misconception. Against the
sceptics, from Sismondi to Nikolayon, who believed that they had to take
recourse to outside markets for the realisation of capitalist surplus
value, he chiefly argues as follows:

'These experts obviously consider external commerce as a "bottomless
pit" to swallow up in all eternity the surplus value which cannot be got
rid of inside the country.'

Bulgakov for his part triumphantly points out that foreign commerce is
indeed not a pit and certainly not a bottomless one, but rather appears
as a double-edged sword, that exports always belong with imports, and
that the two usually counterbalance one another. Thus, whatever is
pushed out over one border, will be brought back, in a changed use-form,
over another. 'We must find room for the commodities that have been
imported as an equivalent of those exported, within the bounds of the
given market, and as this is impossible, _ex hypothesi_, it would only
generate new difficulties to have recourse to an external demand.'[314]

On another occasion he says that the way to realise the surplus value
found by the Russian 'populists', viz. external markets, 'is much less
favourable than that discovered by Malthus, v. Kirchmann and Vorontsov
himself when he wrote the essay _On Militarism and Capitalism_'.[315]

Although Bulgakov fervently copies Marx's diagram of reproduction, he
here exhibits no grasp whatever of the real problem towards which the
sceptics from Sismondi to Nikolayon were groping their way. He denies
that foreign commerce solves the difficulty as pretended, since it
again brings the surplus value that has been disposed of into the
country, although in a 'changed form'. In conformity with the crude
picture of v. Kirchmann and Vorontsov, he thus believes the problem to
be that of destroying a certain quantity of the surplus value, of wiping
it from the face of the earth. It simply does not occur to him 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 of capitalist
accumulation which swallows up its own product as Kronos swallows up his
children, and breeds ever more vigorously without help from outside. Now
only one further step is needed for Marxism to revert to bourgeois
economics, and this, as luck would have it, was taken by Tugan
Baranovski.

FOOTNOTES:

[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 recent contribution in this field. He argues that we are not
moving towards an international economy but rather farther and farther
away from it. 'I maintain, on the contrary, that commercial relations
to-day do not form a stronger but rather a weaker link between the
civilised nations, in relation to their economy as a whole. Individual
economy takes not more but rather less 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 of international relations with
regard to modern political economy is increasing. The opposite is the
case.' Sombart scornfully rejects the assumption of a progressive
international division of labour, of a growing need for outside markets
owing to an inelastic home demand. He in his turn is convinced that 'the
individual national economies will develop into ever more perfect
microcosms and that the importance of the home market will increasingly
surpass that of the world market for all branches of industry' (_Die
Deutsche Volkswirtschaft im 19. Jahrhundert_, 2nd edition, 1909, pp.
399-420). This devastating discovery admittedly hinges on a full
acceptance of the Professor's peculiar conception which, for some
reasons, only considers those as 'exporting countries' who pay for their
imports with a surplus of agricultural products over and above their own
needs, who pay 'with the soil'. In this scheme Russia, Rumania, the
U.S.A. and the Argentine are, but Germany, England and Belgium are not,
'exporting countries'. Since capitalist development will sooner or later
also claim the surplus of agricultural products for the home demand in
Russia and the U.S.A., it is evident that there will be fewer and fewer
'exporting countries' in the world--international economy will
vanish.--Another of Sombart's discoveries is that great capitalist
'non-exporting' countries increasingly obtain 'free' imports in form of
interest on exported capital--but the capital exports as well as exports
of industrial commodities are of absolutely no account to Professor
Sombart. 'In the course of time we shall probably get to a point where
we import 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 is
given by V. Ilyin [Lenin]: 'The romanticists (as he calls the sceptics)
argue as follows: the capitalists cannot consume the surplus value;
therefore they must dispose of it abroad. I ask: Do the capitalists
perhaps give away their products to foreigners for nothing, throw it
into the sea, maybe? If they sell it, it means that they obtain an
equivalent. If they export certain goods, it means that they import
others' (_Economic Studies and Essays_, p. 2). As a matter of fact, his
explanation of the part played by external commerce in capitalist
production is far more correct than that of Struve and Bulgakov.




_CHAPTER XXIII_

TUGAN BARANOVSKI AND HIS 'LACK OF PROPORTION'


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

Like Bulgakov, Tugan Baranovski starts from Marx's analysis of social
reproduction which gave him the clue to this bewildering maze of
problems. But while Bulgakov, the enthusiastic disciple of Marx, only
sought to follow him faithfully and simply attributed his own
conclusions to the master, Tugan Baranovski, on the other hand, lays
down the law to Marx who, in his opinion, did not know how to turn his
brilliant exposition of the reproductive process to good account. Tugan
Baranovski's most important general conclusion from Marx's principles,
the pivot of his whole theory, is that, contrary to the assumptions of
the sceptics, capitalist accumulation is not only possible under the
capitalist 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. Production and the market are
therefore the same, and since the expansion of production is unlimited
in itself, the market, the capacity to absorb its products, has no
limits either.

'The diagram quoted', he says, 'was to prove conclusively a postulate
which, though simple enough, might easily give rise to objections,
unless the process be adequately understood--the postulate, namely, that
capitalist production creates a market for itself. So long as it is
possible to expand social production, if the productive forces are
adequate for this purpose, the proportionate division of social
production must also bring about a corresponding expansion of the demand
inasmuch as under such conditions all newly produced goods represent a
newly created purchasing power for the acquisition of other goods.
Comparing simple reproduction of the social capital with its
reproduction on a rising scale, we arrive at the most important
conclusion that in capitalist economy the demand for commodities is in a
sense independent of the total volume of social consumption. Absurd as
it may seem to "common-sense", it is yet possible that the volume of
social consumption as a whole goes down while at the same time the
aggregate social demand for commodities grows.'[317]

And again further on: 'Arising from the abstract analysis of the
reproductive process of social capital we have formed the conclusion
that nothing will be left over of the social product in view of the
proportionate division of the social capital.'[318]

Accordingly Tugan Baranovski subjects Marx's theory of crises to a
revision which he claims to have developed from Sismondi's
'over-consumption'. 'Marx is in substantial agreement with the general
view that the poverty of the workers, i.e. of the great majority of the
population, makes it impossible to realise the products of an ever
expanding capitalist production, since it causes a decline in demand.
This opinion is definitely mistaken. We have seen that capitalist
production creates its own market--consumption being only one of the
moments of capitalist production. In a planned social production if the
leaders of production were equipped with all _information_ about the
demand and with the _power_ to transfer labour and capital freely from
one branch of production to another, then, however low the level of
social consumption, the supply of commodities would not exceed the
demand.'[319]

The only circumstance which periodically causes the market to be flooded
is a lack of proportion in the enlargement of production. On this
assumption, therefore, Tugan Baranovski describes the course of
capitalist accumulation as follows: 'What would the workers ... produce
if production were organised on proportionate lines? Obviously their own
means of subsistence and production. With what object? To expand
production in the second year. The production of what products? Again of
means of production and subsistence for the workers--and so on _ad
infinitum_.'[320]

This game of question and answer, mind you, is not a form of
self-mockery, it is meant in all seriousness. 'If the expansion of
production has no practical limits, then we must assume that the
expansion of markets is equally unlimited, for _if social production is
proportionately organised, there is no limit to the expansion of the
market other than the productive forces available_.'[321]

Since production thus creates its own demand, foreign commerce of
capitalist states is also assigned that peculiar mechanistic function we
have already met in Bulgakov. A foreign market, for instance, is an
absolute necessity for England. 'Does not this prove that capitalist
production creates a surplus product for which there is no room on the
internal market? Why, come to that, does England require an external
market? The answer is not difficult: because a considerable part of
England's purchasing power is expended on obtaining foreign commodities.
The import of foreign commodities for the English home market also makes
it essential to export English commodities abroad. Since England cannot
manage without importing from abroad, exports are a vital condition for
that country, since without them she would not be able to pay for her
imports.'[322]

Here again agricultural imports are described as a stimulating and
decisive factor, quite in accordance with the scheme of the German
professors.

What, then, is the general line of reasoning on which Tugan Baranovski
supports his daring solution of the problem of accumulation, the new
revelation on the problem of crises and a whole lot of others? Hard to
believe, but quite incontrovertible for all that, Tugan Baranovski's
proof consists exclusively and entirely--in Marx's diagram of enlarged
reproduction, no more no 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 is nothing but a copy of Marx's diagram of enlarged
reproduction, with a different set of figures. Nowhere in the entire
works of 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 continue _ad infinitum_, just as long, that is to
say, as ink and paper do not run out. And it is this harmless written
exercise with mathematical equations which Tugan Baranovski quite
seriously considers a _demonstration_ of such a course in real events.

'The diagrams we have adduced are bound to prove conclusively that....'

On another occasion he counters Hobson, who is convinced that
accumulation is impossible, with the following words: 'Diagram No. 2 of
the reproduction of social capital on a rising scale corresponds to the
case of capital accumulation Hobson has in mind. But does this diagram
show a surplus product to come into being? Far from it.'[323]

Hobson is refuted and the matter settled because 'in the diagram' no
surplus product comes into being.

Admittedly, Tugan Baranovski knows quite well that in hard fact things
do not work out so smoothly. There are continual fluctuations in the
exchange relations and periodical crises. But these crises happen only
because in the expansion of production the proper proportions are not
maintained, because, that is to say, the proportions of 'diagram No. 2'
are not observed in the first place. If they were, there would be no
crisis, and capitalist production could get along as nicely as it does
on paper, in every detail. Tugan Baranovski is committed to the view
that we can ignore the crises if we consider the reproductive process as
a continuous process. Although the 'proportion' may be upset at any
moment, yet on average it will always be re-established by 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 that capitalist economy is still
going strong--otherwise it would long ago have ended in chaos and
collapse. In the long run, then, Tugan Baranovski's 'proportion' is
observed by and large, and we must conclude that reality obeys 'diagram
No. 2'. And since this diagram can be indefinitely extended, it follows
that capitalist accumulation can also proceed _ad infinitum_.

What is striking in all this is not Tugan Baranovski's conclusion that
the diagram corresponds to the actual course of events--as we have seen,
Bulgakov also shared this belief; the really startling fact is that
Tugan Baranovski sees no necessity for as much as _inquiring_ whether
the diagram is correct, that, instead of proving the diagram, he
considers this, the arithmetical exercise on paper, as proof of the
actual state of affairs. Bulgakov honestly tried to project Marx's
diagram on the real concrete relations of capitalist economy and of
capitalist exchange; he endeavoured to overcome the difficulties
resulting from it, though without success, it is true, remaining to the
last involved with Marx's analysis, which he himself recognised to be
incomplete and fragmentary. But Tugan Baranovski does not need any
proof, he does not greatly exercise his brains: since the arithmetical
sums come out satisfactorily, and may be continued _ad lib._, this is to
him proof that capitalist accumulation can also proceed without let or
hindrance--provided the said 'proportion' obtains, which it will have to
do by hook or by crook, as he himself would not dream of denying.

Tugan Baranovski, however, has one indirect proof that the diagram with
its strange results corresponds to, and truly reflects, reality. This is
the fact that capitalist production, quite in accordance with Marx's
diagram, puts human consumption second to production, that it conceives
of the former as a means and of the latter as an end in itself, just as
it puts human labour, the 'worker', on a par with the machine.

'Technical progress is expressed by the fact that the means of labour,
the machine, increases more and more in importance as compared to living
labour, to the worker himself. Means of production play an ever growing
part in the productive process and on the commodity market. Compared to
the machine, the worker recedes further into the background and the
demand resulting from the consumption of the workers is also put into
the shade by that which results from productive consumption by the means
of production. The entire workings of capitalist economy take on the
character of a mechanism existing on its own, as it were, in which human
consumption appears as a simple moment of the reproductive process and
the circulation of capitals.'[324]

Tugan Baranovski considers this discovery as a fundamental law of the
capitalist mode of production, which is confirmed by a quite tangible
phenomenon: with the progress of capitalist development Department I
goes on growing relatively to, and at the expense of, Department II. It
was Marx himself who, as we all know, set up this law in which he
grounded the schematic exposition of reproduction, though in the further
development of his diagram he ignored subsequent alterations for
simplicity's sake. This, the automatic growth of the producer goods as
compared with the consumer goods department affords Tugan Baranovski the
only objective proof of his theory: that in capitalist society human
consumption becomes increasingly unimportant, and production more and
more an end in itself. This thesis forms the corner-stone of his entire
theoretical edifice.

'In all the industrial countries', he proclaims, 'we are confronted with
the same type of development--the development of national economy
everywhere follows the same fundamental law. The mining industry which
creates the means of production for modern industry comes more and more
to the fore. The relative decrease in the export of immediately
consumable manufactured goods from Britain is thus also an expression of
the fundamental law governing capitalist development. The further
technical progress advances, the more do consumer goods recede as
compared with producer goods. Human consumption plays an ever decreasing
part as against the productive consumption 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 borrowed ready-made from
Marx, Baranovski does not rest content with this and immediately
proceeds to preach the Marxist gospel to Marx himself. Scrabbling about
like a blind hen, Marx has turned up another pearl--Tugan will give him
that--only he does not know what to do with it. It needed a Tugan
Baranovski to know how to make it useful to science, and in his hand the
newly discovered law suddenly throws a new light on the whole workings
of capitalist economy. This law of the expansion in the department of
producer goods at the cost of that of consumer goods reveals clearly,
concisely, exactly, and in measurable terms, that capitalist society
attaches progressively less importance to human consumption, putting man
on the same level as the means of production, and that Marx was
therefore completely wrong both in assuming that man alone, not the
machine, too, can be the creator of surplus value, and in saying,
further, that human consumption represents a limit for capitalist
production which is bound to cause periodical crises in the present, and
the collapse and terrible end of capitalist economy in the near future.
In short, the 'fundamental law' governing the increase of producer as
compared to consumer goods reflects the singular nature of capitalist
society as a whole which Marx had not understood and which to interpret
happily fell to the lot of Tugan Baranovski.

We have seen above the decisive part played by the 'fundamental law' of
capital in the controversy between the Russian Marxists and the
sceptics. Bulgakov's remarks we already know; another Marxist already
referred to, Vladimir Ilyin, expresses himself in similar terms in his
polemics against the 'populists':

'It is well known that the law of capitalist production consists in the
fact that the constant capital grows more rapidly than the variable
capital, that is to say an ever increasing part of the newly formed
capital falls to the department of social production which creates
producer goods. In consequence, this department is absolutely bound to
grow more rapidly than the department creating consumer goods, that is
to say, the very thing happens which Sismondi declared to be
"impossible", "dangerous", etc. In consequence, consumer goods make up a
smaller 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: the former in fact
consists in the development of the productive forces of society
(production as an end in itself), and the latter prevents that the mass
of the population should turn them to use.'[326]

In this respect, of course, Tugan Baranovski goes even farther. With his
love of paradox he actually permits himself the joke of submitting a
mathematical proof that accumulation of capital and expansion of
production are possible even if the absolute volume of production
decreases. In this connection, Karl Kautsky has pointed out, he had
recourse to a somewhat dubious scientific subterfuge, namely that he
shaped his daring deductions exclusively for a specific moment: the
transition from simple to enlarged reproduction--a moment which is
exceptional even in theory, but certainly of no practical significance
whatever.[327]

As to Tugan Baranovski's 'fundamental law', Kautsky declares it to be a
mere illusion due to the fact that Tugan Baranovski considered the
organisation of production only in the old countries of capitalist big
industry.

'It is correct', Kautsky says, 'that with a progressive division of
labour, there will be comparatively fewer and fewer factories etc. for
the production of goods direct for personal consumption, together with a
relative increase in the number of those which supply both the former
and one another with tools, machines, raw materials, transport
facilities and so on. While in original peasant economy an enterprise
that cultivated the flax also made the linen with its own tools and got
it ready for human consumption, nowadays hundreds of enterprises may
share in the manufacture of a single shirt, by producing raw cotton,
iron rails, steam engines and railway trucks that bring it to port, and
so on. With international division of labour it will happen that some
countries--the old industrial countries--can only slowly expand their
production for personal consumption, while making large strides in their
production of producer goods which is much more decisive for the
heartbeat of economic life than the production of consumer goods. From
the point of view of the nation concerned, we might easily form the
opinion that producer goods can be turned out on a constantly rising
scale with a more rapid rate of increase than in the production of
consumer goods, and that their production is not bound up with that of
the latter.'

The opinion, that producer goods can be produced independent of
consumption, is of course a mirage of Tugan Baranovski's, typical of
vulgar economics. Not so the fact cited in support of this fallacy: the
quicker growth of Department I as compared with Department II is beyond
dispute, not only in old industrial countries but wherever technical
progress plays a decisive part in production. It is the foundation also
of Marx's fundamental law that the rate of profit tends to fall. Yet in
spite of it all, or rather precisely for this reason, it is a howler if
Bulgakov, Ilyin and Tugan Baranovski imagine to have discovered in this
law the essential nature of capitalist economy as an economic system in
which production is an end in itself and human consumption merely
incidental.

The growth of the constant at the expense of the variable capital is
only the capitalist expression of the general effects of increasing
labour productivity. The formula _c_ greater than _v_ (_c > v_),
translated from the language of capitalism into that of the social
labour process, means only that the higher the productivity of human
labour, the shorter the time needed to change a given quantity of means
of production into finished products.[328]

This is a universal law of human labour. It has been valid in all
pre-capitalist forms of production and will also be valid in the future
in a socialist order of society. In terms of the material use-form of
society's aggregate product, this law must manifest itself by more and
more social labour time being employed in the manufacture of producer
than of consumer goods. In a planned and controlled social economy,
organised on socialist lines, this transformation would in fact be more
rapid even than it is in contemporary capitalist economy. In the first
place, rational scientific techniques can only be applied on the largest
scale when the barriers of private ownership in land are abolished. This
will result in an immense revolution in vast provinces of production
which will ultimately amount to a replacement of living labour by
machine labour, and which will enable us to tackle technical jobs on a
scale quite impossible under present day conditions. Secondly, the
general use of machinery in the productive process will be put on a new
economic basis. At present the machine does not compete with living
labour but only with that part of it that is paid. The cost of the
labour power which is replaced by the machine represents the lowest
limit of the applicability of the machine. Which means that the
capitalist becomes interested in a machine only when the costs of its
production--assuming the same level of performance--amount to less than
the wages of the workers it replaces. From the point of view of the
social labour process which is the only one to matter in a socialist
society, the machine competes not with the labour that is necessary to
maintain the worker but with the labour he actually performs. In other
words, in a society that is not governed by the profit motive but aims
at saving human labour, the use of machinery is economically indicated
just as soon as it can save more human labour than is necessary for
making it, not to mention the many cases where the use of machinery is
desirable even if it does not answer this economic minimum--for reasons
of health and similar considerations, in the interest of the workers
themselves. However that may be, the tension between the respective
economic usefulness of the machine in (_a_) a capitalist, and (_b_) a
socialist society is at least equal to the difference between labour and
that part of it that is paid; it is, in other words, the precise
equivalent of the whole capitalist surplus value. Consequently, if the
capitalist profit motive is abolished and a social organisation of
labour introduced, the marginal use of the machine will suddenly be
increased by the whole extent of the capitalist surplus value, so that
an enormous field, not to be gauged as yet, will be open to the
triumphal march of the machine. This would be tangible proof that the
capitalist mode of production, alleged to spur on to the optimum
technical development, in fact sets large social limits to technical
progress, in form of the profit motive on which it is based. It would
show that as soon as these limits are abolished, technical progress will
develop such a powerful drive that the technical marvels of capitalist
production will be child's play in comparison.

In terms of the composition of the social product, this technical
transformation can only mean that, compared to the production of
consumer goods, the production of producer goods--measured in units of
labour time--must increase more rapidly in a socialist society than it
does even to-day. Thus the relation between the two departments of
social production which the Russian Marxists took to reveal typical
capitalist baseness, the neglect of man's need to consume, rather proves
to be the precise manifestation of the progressive subjection of nature
to social labour, which will become even more striking when production
is organised solely with a view to human needs. The only 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 'lack of proportion', is reduced to
its foundations on paper: a slavish copy of Marx's diagram of enlarged
reproduction.

FOOTNOTES:

[316] _Studies on the Theory and History of Commercial Crises in
England_ (Jena, 1901) and _Theoretical 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' (_Oekonomische
Studien und Artikel. Zur Charakterisierung des ökonomischen
Romantizismus_, St. Petersburg, 1899), p. 20.--Incidentally, the same
author is responsible for the statement that enlarged reproduction
begins only with capitalism. It quite escapes him that under conditions
of simple reproduction, which he takes to be the rule for all
pre-capitalist modes of production, we should probably never have
advanced beyond the stage of the paleolithic scraper.

[327] _Die Neue Zeit_, vol. xx, part 2, _Krisentheorien_, p. 116.
Kautsky's mathematical demonstration to Tugan Baranovski that
consumption is bound to grow, and 'in the precise ratio as the bulk of
producer goods in terms of value', calls for two comments: first, like
Marx, Kautsky paid no attention to the progress in the productivity of
labour so that consumption appears to have a relatively larger volume
than it would in fact have. Secondly, the increase 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 employment of
additional workers. The upkeep of these workers, however, neither is nor
ought to be the object of the expansion of reproduction--no more, for
that matter, than the increasing personal consumption of the capitalist
class. Kautsky's argument no doubt refutes Tugan Baranovski's pet
notion: the whimsy to construe enlarged reproduction with an absolute
decrease in consumption. But for all that, he does not get anywhere near
the fundamental problem, the relations between production and
consumption under the aspect of the reproductive process, though we are
told in another passage of the same work: 'With the capitalists growing
richer, and the workers they exploit increasing in numbers, they
constitute between them a market for the consumer goods produced by
capitalist big industry which expands continually, yet it does not grow
as rapidly as the accumulation of capital and the productivity of
labour, and must therefore remain inadequate.' An additional market is
required for these consumer goods, a market outside their own province,
among those occupational groups and nations whose mode of production is
not yet capitalistic. This market is found and also widens increasingly,
but the expansion is again too slow, since the additional market is not
nearly so elastic and capable of expansion as the capitalist productive
process. As soon as capitalist production has developed to the big
industry stage, as in England already in the first quarter of the
nineteenth century, it is capable of expanding by leaps and bounds so as
soon to out-distance all expansions of the market. Every period of
prosperity subsequent to a considerable extension of the market is thus
from the outset doomed to an early end--the inevitable crisis. This, in
brief, is the theory of crises established by Marx, and, as far as we
can see, generally accepted by the "orthodox" Marxists' (ibid., p. 80).
Kautsky, however, is not interested in harmonising this conception of
the realisation of the aggregate product with Marx's diagram of enlarged
reproduction, perhaps because, as our quotation also 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 bulk of goods
and ignoring the fact that it is differentiated in the reproductive
process.

L. Bouding seems to come closer to the crucial point. In his brilliant
review on Tugan Baranovski he gives the following formulation: 'With a
single exception to be considered below, the existence of a surplus
product in capitalist countries does not put a spoke in the wheel of
production, not because production will be distributed more efficiently
among the various spheres, or because the manufacture of machinery will
replace that of cotton goods. The reason is rather that, capitalist
development having begun sooner in some countries than in others, and
because even to-day there are still some countries that have no
developed capitalism, the capitalist countries in truth have at their
disposal an outside market in which they can get rid of their products
which they cannot consume themselves, no matter whether these are cotton
or iron goods. We would by no means deny that it is significant if iron
goods replace cotton goods as the main products of the principal
capitalist countries. On the contrary, this change is of paramount
importance, but its implications are rather different from those
ascribed to it by Tugan Baranovski. It indicates the beginning of the
end of capitalism. So long as the capitalist countries exported
commodities for the purpose of consumption, there was still a hope for
capitalism in these countries, and the question did not arise how much
and how long the non-capitalist outside world would be able to absorb
capitalist commodities. The growing share of machinery at the cost of
consumer goods in what is exported from the main capitalist countries
shows that areas which were formerly free of capitalism, and therefore
served as a dumping-ground for its surplus products, are now drawn into
the whirlpool of capitalism. It shows that, since they are developing a
capitalism of their own, they can by themselves produce the consumer
goods they need. At present they still require machinery produced by
capitalist methods since they are only in the initial stages of
capitalist development. But all too soon they will need them no longer.
Just as they now make their own cotton and other consumer goods, they
will in future produce their own iron ware. Then they will not only
cease to absorb the surplus produce of the essentially capitalist
countries, but they will themselves produce 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 relations pertaining to the
development of international capitalism. Further, as a logical
consequence, he comes to the question of imperialism but unfortunately
he finally puts the wrong kind of edge on his acute analysis by
considering the whole of militarist production together with the system
of exporting international capital to non-capitalist countries under the
heading of 'reckless expenditure'.--We must say in parenthesis that
Bouding, just like Kautsky, holds that the law of a quicker growth in
the means-of-production department relative to the means-of-subsistence
department is a delusion of Tugan Baranovski's.

[328] 'Apart from natural conditions, such as fertility of the soil,
etc., and from the skill of independent and isolated producers (shown
rather qualitatively in the genus than quantitatively in the mass of
their products), the degree of productivity of labour, in a capitalist
society, is expressed in the relative extent of the means of production
that one labourer, during a given time, with the same tension of
labour-power, turns into products. The mass of means of production which
he thus transforms, increases with the productiveness of 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 the increasing
productivity of labour. E.g., with the division of labour in
manufacture, and with the use of machinery, more raw material is worked
up in the same time and, therefore, a greater mass of raw material and
auxiliary substances enter into the labour-process. That is the
consequence of the increasing productivity of labour. On the other hand,
the mass of machinery, beasts of burden, mineral manures, drainpipes,
etc., is a condition of the increasing productivity of labour. So also
is it with the means of production concentrated in buildings, furnaces,
means of transport, etc. But whether condition or consequence, the
growing extent of the means of production, as compared with the
labour-power incorporated with them, is an expression of the growing
productiveness of labour. The increase of the latter appears, therefore,
in the diminution of the mass of labour in proportion to the mass of
means of production moved by it, or in the diminution of the subjective
factor of the labour-process as compared with the objective factor'
(_Capital_, vol. i, pp. 635-6). And yet another passage: 'We have seen
previously, that with the development of the productivity of labour, and
therefore with the development of the capitalist mode of production,
which develops the socially productive power of labour more than all
previous modes of production, there is a steady increase of the mass of
means of production, which are permanently embodied in the productive
process as instruments of labour and perform their function in it for a
longer or shorter time at repeated intervals (buildings, machinery,
etc.); also, that this increase is at the same time the premise and
result of the development of the productivity of social labour. It is
especially capitalist production, which is characterised by relative as
well as absolute growth of this sort of wealth' (_Capital_, vol. i,
chap. xxiii, 2). 'The material forms of existence of constant capital,
the means 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 in the productivity of labour by co-operation, division
of labour, machinery, etc., the mass of raw materials and auxiliary
substances used in the daily process of reproduction, grows likewise'
(_Capital_, vol. ii, p. 160).




_CHAPTER XXIV_

THE END OF RUSSIAN 'LEGALIST' MARXISM


The Russian 'legalist' Marxists, and Tugan Baranovski above all, can
claim the credit, in their struggle against the doubters of capitalist
accumulation, of having enriched economic theory by an application of
Marx's analysis of the social reproductive process and its schematic
representation in the second volume of _Capital_. But in view of the
fact that this same Tugan Baranovski quite wrongly regarded said diagram
as the solution to the problem instead of its formulation, his
conclusions were bound to reverse the basic order of Marx's doctrine.

Tugan Baranovski's approach, according to which capitalist production
can create unlimited markets and is independent of consumption, 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 those two only thought in terms of simple
commodity circulation, whilst Tugan Baranovski applies the same doctrine
to the circulation of capital. His theory of crises being caused by a
'lack of proportion' is in effect just a paraphrase of Say's old trite
absurdity: the over-production of any one commodity only goes to show
under-production of another; and Tugan Baranovski simply translates this
nonsense into the terminology used in Marx's analysis of the
reproductive process. Even though he declares that, Say notwithstanding,
general over-production is quite possible in the light of the
circulation of money which the former had entirely neglected, yet it is
in fact this very same neglect, the besetting sin of Say and Ricardo in
their dealings with the problem of crises which is the condition for his
delightful manipulations with Marx's diagram. As soon as it is applied
to the circulation of money, 'diagram No. 2' begins to bristle with
spikes and barbs. Bulgakov was caught in these spikes when he attempted
to follow up Marx's interrupted analysis to a logical conclusion. This
compound of forms of thought borrowed from Marx with contents derived
from Say and Ricardo is what Tugan Baranovski modestly calls his
'attempt at a synthesis between 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 production is capable of
development, returns, by way of Marx's doctrine and its 'legalist'
champions, to its point of departure, to Say and Ricardo. The three
'Marxists' join forces with the bourgeois 'harmonists' of the Golden Age
shortly before the Fall when bourgeois economics was expelled from the
Garden of Innocence--the circle is closed.

There can be no doubt that the 'legalist' Russian Marxists achieved a
victory over their opponents, the 'populists', but that victory was
rather too thorough. In the heat of battle, all three--Struve, Bulgakov
and Tugan Baranovski--overstated their case. The question was whether
capitalism in general, and Russian capitalism in particular, is capable
of development; these Marxists, however, proved this capacity to the
extent of even offering theoretical proof that capitalism can go on for
ever. Assuming the accumulation of capital to be without limits, one has
obviously proved the unlimited capacity of capitalism to survive!
Accumulation is the specifically capitalist method of expanding
production, of furthering labour productivity, of developing the
productive forces, of economic progress. If the capitalist mode of
production can ensure boundless expansion of the productive forces, of
economic progress, it is invincible indeed. The most important objective
argument in support of socialist theory breaks down; socialist political
action and the ideological import of the proletarian class struggle
cease to reflect economic events, and socialism no longer appears an
historical necessity. Setting out to show that capitalism is possible,
this trend of reasoning ends up by showing that socialism is impossible.

The three Russian Marxists were fully aware that in the course of the
dispute they had made an about-turn, though Struve, in his enthusiasm
for the cultural mission of capitalism, does not worry about giving up a
useful warrant.[329] Bulgakov tried to stop the gaps now made in
socialist theory with another fragment of the same theory as best he
could: he hoped that capitalist society might yet perish, in spite of
the immanent balance between production and consumption, because of the
declining profit rate. But it was he himself who finally cut away the
ground from under this somewhat precarious comfort. Forgetting the straw
he had offered for the salvation of socialism, he turned on Tugan
Baranovski with the teaching that, in the case of large capitals, the
relative decline in the profit rate is compensated by the absolute
growth of capital.[330] More consistent than the others, Tugan
Baranovski finally with the crude joy of a barbarian destroys all
objective economic arguments in support of socialism, thus building in
his own spirit 'a more beautiful world' on an ethical foundation. 'The
individual protests against an economic order which transforms the end
(man) into a means (production) and the means (production) into an
end.'[331]

Our three Marxists demonstrated in person that the new foundations of
socialism had been frail and jerry-built. They had hardly laid down the
new basis for socialism before they turned their backs on it. When the
masses of Russia were staking their 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
and ethical solace with Kant. In actual fact, the 'legalist' bourgeois
Marxists ended up just where we should expect them to from their
theoretical position--in the camp of bourgeois harmonies.

FOOTNOTES:

[329] Struve says in the preface to the collection of his Russian essays
(published in 1901): 'In 1894, when the author published his "Critical
Comments on the Problem of Economic Development in Russia", he inclined
in philosophy towards positivism, in sociology and economics towards
outspoken, though by no means orthodox, Marxism. Since then, the author
no longer sees the whole truth in positivism and Marxism which is
grounded in it (!), they no longer fully determine his view of the
world. Malignant dogmatism which not only browbeats those who think
differently, but spies upon their morals and psychology, regards such
work as a mere "Epicurean instability of mind". It cannot understand
that criticism in its own right is to the living and thinking individual
one of the most valuable rights. The author does not intend to renounce
this right, though he might constantly be in danger of being indicted
for "instability"' (_Miscellany_, St. Petersburg, 1901).

[330] Bulgakov, op. cit., p. 252.

[331] Tugan Baranovski, _Studies on the Theory and History_ ..., p. 229.




  _SECTION THREE_


  THE HISTORICAL
  CONDITIONS OF
  ACCUMULATION




_CHAPTER XXV_

CONTRADICTIONS WITHIN THE DIAGRAM OF ENLARGED REPRODUCTION


In the first section, we ascertained that Marx's diagram of accumulation
does not solve the question of who is to benefit in the end by enlarged
reproduction. If we take the diagram literally as it is set out at the
end of volume ii, it appears that capitalist production would itself
realise its entire surplus value, and that it would use the capitalised
surplus value exclusively for its own needs. This impression is
confirmed by Marx's analysis of the diagram where he attempts to reduce
the circulation within the diagram altogether to terms of money, that is
to say to the effective demand of capitalists and workers--an attempt
which in the end leads him to introduce the 'producer of money' as a
_deus ex machina_. In addition, there is that most important passage in
_Capital_, volume i, which must be interpreted to mean the same.

'The annual production must in the first place furnish all those objects
(use-values) from which the material components of capital, used up in
the course of the year, have to be replaced. Deducting these there
remains the net or surplus-product, in which the surplus-value lies. And
of what does this surplus-value consist? Only of things destined to
satisfy the wants and desires of the capitalist class, things which,
consequently, enter into 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.

'To accumulate it is necessary to convert a portion of the
surplus-product into capital. But we cannot, except by a miracle,
convert into capital anything but such articles as can be employed in
the labour-process (i.e. means of production), and such further articles
as are suitable for the sustenance of the labourer (i.e. means of
subsistence). Consequently, a part of the annual surplus-labour must
have been applied to the production of additional means of production
and subsistence, over and above the quantity of these things required to
replace the capital advanced. In one word, surplus-value is convertible
into capital solely because the surplus-product, whose value it is,
already comprises 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 in the natural
form of capital (as additional means of production and additional means
of subsistence for the workers). (2) The expansion of capitalist
production is achieved exclusively by means of capitalist products, i.e.
its own means of production and subsistence. (3) The limits of this
expansion are each time determined in advance by the amount of surplus
value which is to be capitalised in any given case; they cannot be
extended, since they depend on the amount of the means of production and
subsistence which make up the surplus product; neither can they be
reduced, since a part of the surplus value could not then be employed in
its natural form. Deviations in either direction (above and below) may
give rise to periodical fluctuations and crises--in this context,
however, these may be ignored, because in general the surplus product to
be capitalised must be equal to actual accumulation. (4) Since
capitalist production buys up its entire surplus product, there is no
limit to the accumulation of capital.

Marx's diagram of enlarged reproduction adheres to these conditions.
Accumulation here takes its course, but it is not in the least indicated
who is to benefit by it, who are the new consumers for whose sake
production is ever more enlarged. The diagram assumes, say, the
following course of events: the coal industry is expanded in order to
expand the iron industry in order to expand the machine industry in
order to expand the production of consumer goods. This last, in turn, is
expanded to maintain both its own workers and the growing army of coal,
iron and machine operatives. And so on _ad infinitum_. We are running in
circles, quite in accordance with the theory of Tugan Baranovski.
Considered in isolation, Marx's diagram does indeed permit of such an
interpretation since he himself explicitly states time and again that
he aims at presenting the process of accumulation of the aggregate
capital in a society consisting solely of capitalists and workers.
Passages to this effect can be found in every volume of _Capital_.

In volume i, in the very chapter on 'The Conversion of Surplus-Value
into Capital', he says:

'In order to examine the object of our investigation in its integrity,
free from all disturbing subsidiary circumstances, we must treat the
whole world as one nation, and assume that capitalist production is
everywhere established and has possessed itself of every branch of
industry.'[333]

In volume ii, the assumption repeatedly returns; thus in chapter 17 on
'The Circulation of Surplus-Value': 'Now, there are only two points of
departure: The capitalist and the labourer. All third classes of persons
must either receive money for their services from these two classes, or,
to the extent that they receive it without any equivalent services, they
are joint owners of the surplus-value in the form of rent, interest,
etc.... The capitalist class, then, remains the sole point of departure
of the circulation of money.'[334]

Further, in the same chapter 'On the Circulation of Money in Particular
under Assumption of Accumulation': 'But the difficulty arises when we
assume, not a partial, but a general accumulation of money-capital on
the part of the capitalist class. Apart from this class, there is,
according to our assumption--the general and exclusive domination of
capitalist production--no other class but the working class.'[335]

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

In volume iii, Marx says quite explicitly, when demonstrating the
process of capitalist production as a whole: 'Let us suppose that the
whole society is composed only of industrial capitalists and wage
workers. Let us furthermore make exceptions of fluctuations of prices
which prevent large portions of the total capital from reproducing
themselves under average conditions and which, owing to the general
interrelations of the entire process of reproduction, such as are
developed particularly by credit, must always call forth general
stoppages of a transient nature. Let us also make abstraction of the
bogus transactions and speculations, which the credit system favours. In
that case, a crisis could be explained only by a disproportion of
production in various branches, and by a disproportion of the
consumption of the capitalists and the accumulation of their capitals.
But as matters stand, the reproduction of the capitals invested in
production depends largely upon the consuming power of the non-producing
classes; while the consuming power of the labourers is handicapped
partly by the laws of wages, partly by the fact that it can be exerted
only so long as the labourers can be employed at a profit for the
capitalist class.'[337]

This last quotation refers to the question of crises with which we 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 in volume ii as the mere representatives of a
derivative purchasing power, and thus the parasitic joint consumers of
the surplus value or of the wage of labour.

Finally, in _Theories of Surplus Value_,[338] Marx formulates his
general presuppositions with regard to accumulation as follows: 'Here we
have only to consider the forms through which capital passes during the
various stages of its development. Thus we do not set out the actual
conditions of the real process of production, but always assume that the
commodity is sold for what it is worth. We ignore the competition of
capitalists and the credit system; we also leave out of account the
actual constitution of society which never consists exclusively of the
classes of workers and industrial capitalists, and where there is
accordingly no strict 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 of labour) is
much wider than the second category (of producers). Therefore the
manner in which it spends its income, and the extent of such income,
effects very large modifications in the economic household, and
especially so in the process of circulation and reproduction of
capital.'

Speaking of the 'actual constitution of society', Marx here also
considers merely the parasitic joint consumers of surplus value and of
the wage of labour, i.e. only the hangers-on of the principal categories
of capitalist production.

There can be no doubt, therefore, that Marx wanted to demonstrate the
process of accumulation in a society consisting exclusively of workers
and capitalists, under the universal and exclusive domination of the
capitalist mode of production. On this assumption, however, his diagram
does not permit of any other interpretation than that of production for
production's sake.

Let us recall the second example of Marx's diagram of enlarged
reproduction:

  1st year:
   I. _5,000c + 1,000v + 1,000s = 7,000_ means of production
  II. _1,430c +   285v +   285s = 2,000_ means of subsistence
                                  -----
                                  9,000

  2nd year:
   I. _5,417c + 1,083v + 1,083s = 7,583_ means of production
  II. _1,583c +   316v +   316s = 2,215_ means of subsistence
                                  -----
                                  9,798

  3rd year:
   I. _5,869c + 1,173v + 1,173s = 8,215_ means of production
  II. _1,715c +   342v +   342s = 2,399_ means of subsistence
                                 ------
                                 10,614

  4th year:
   I. _6,358c + 1,271v + 1,271s = 8,900_ means of production
  II. _1,858c +   371v +   371s = 2,600_ means of subsistence
                                 ------
                                 11,500

Here accumulation continues year after year without interruption, the
capitalists in each case consuming half of the 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 constant and variable capital and
also the same rate of exploitation (always amounting to 100 per cent) is
consecutively maintained for the additional capital as it was for the
original capital. In accordance with Marx's assumption in volume i of
_Capital_, the capitalised part of the surplus value first comes into
being as additional means of production and as means of subsistence for
the workers, both serving the purpose of an ever expanding production in
the two departments. It cannot be discovered from the assumptions of
Marx's diagram for whose sake production is progressively expanded.
Admittedly, production and consumption increase simultaneously in a
society. The consumption of the capitalists increases (in terms of
value, in the first year it amounts to 500 + 142, in the second year to
542 + 158, in the third year to 586 + 171, and in the fourth year to
635 + 185); the consumption of the workers increases as well; the
variable capital increasing year after year in both departments
precisely indicates this growth in terms of value. And yet, the growing
consumption of the capitalists can certainly not be regarded as the
ultimate purpose of accumulation; on the contrary, there is no
accumulation inasmuch as this consumption takes place and increases;
personal consumption of the capitalists must be regarded as simple
reproduction. Rather, the question is: if, and in so far as, the
capitalists do not themselves consume their products but 'practise
abstinence', i.e. accumulate, for whose sake do they produce? Even less
can the maintenance of an ever larger army of workers be the ultimate
purpose of continuous accumulation of capital. From the capitalist's
point of view, the consumption 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
upside down. And in any case, the workers can only consume that part of
the product which corresponds to the variable capital, not a jot more.
Who, then, realises the permanently increasing surplus value? The
diagram answers: the capitalists themselves and they alone.--And what do
they do with this increasing surplus value?--The diagram replies: They
use it for an ever greater expansion of their production. These
capitalists are thus fanatical supporters of an expansion of production
for production's sake. They see to it that ever more machines are built
for the sake of building--with their help--ever more new machines. Yet
the upshot of all this is not accumulation of capital but an increasing
production of producer goods to no purpose whatever. Indeed, one must be
as reckless as Tugan Baranovski, and rejoice as much in paradoxical
statements, to assume that this untiring merry-go-round in thin air
could be a faithful reflection in theory of capitalist reality, a true
deduction from Marx's doctrine.[339]

Besides the analysis of enlarged reproduction roughed out in _Capital_,
volume ii, the whole of Marx's work, volume ii in particular, contains a
most elaborate and lucid exposition of his general views regarding the
typical course of capitalist accumulation. If we once fully understand
this interpretation, the deficiencies of the diagram at the end of
volume ii are immediately evident.

If we examine critically the diagram of enlarged reproduction in the
light of Marx's theory, we find various contradictions between the two.

To begin with, the diagram completely disregards the increasing
productivity of labour. For it assumes that the composition of capital
is the same in every year, that is to say, the technical basis of the
productive process is not affected by accumulation. This procedure would
be quite permissible in itself in order to simplify the analysis, but
when we come to examine the concrete conditions for the realisation of
the aggregate product, and for reproduction, then at least we must take
into account, and make allowance for, changes in technique which are
bound up with the process of capital accumulation. Yet if we allow for
improved productivity of labour, the material aggregate of the social
product--both producer and consumer goods--will in consequence show a
much more rapid increase in volume than is set forth in the diagram.
This increase in the aggregate of use-values, moreover, indicates also a
change in the value relationships. As Marx argues so convincingly,
basing his whole theory on this axiom, the progressive development of
labour productivity reacts on both the composition of accumulating
capital and the rate of surplus value so that they cannot remain
constant under conditions of increasing accumulation of capital, as was
assumed by the diagram. Rather, if accumulation continues, _c_, the
constant capital of both departments, must increase not only absolutely
but also relatively to _v + c_ or the total new value (the social aspect
of labour productivity); at the same time, constant capital and
similarly the surplus value must increase relatively to the variable
capital--in short, the rate of surplus value, i.e. the ratio between
surplus value and variable capital, must similarly increase (the
capitalist aspect of labour productivity). These changes need not, of
course, occur annually, just as the terms of first, second and third
year in Marx's diagram do not necessarily refer to calendar years but
may stand for any given period. Finally, we may choose to assume that
these alterations, both in the composition of capital and in the rate of
surplus value, take place either in the first, third, fifth, seventh
year, etc., or in the second, sixth and ninth year, etc. The important
thing is only that they are allowed for somewhere and taken into account
as periodical phenomena. If the diagram is amended accordingly, the
result of this method of accumulation will be an increasing annual
surplus in the consumer at the expense of producer goods. It is true
that Tugan Baranovski conquers all difficulties on paper: he simply
constructs a diagram with different proportions where year by year the
variable capital decreases by 25 per cent. And since this arithmetical
exercise is successful enough on paper, Tugan triumphantly claims to
have 'proved' that accumulation runs smoothly like clockwork, even if
the absolute volume of consumption decreases. Even he must admit in the
end, however, that his assumption of such an absolute decrease of the
variable capital is in striking contrast to reality. Variable capital is
in point of fact a growing quantity in all capitalist countries; only in
relation to the even more rapid growth of constant capital can it be
said to decrease. On the basis of what is actually happening, namely a
greater yearly increase of constant capital as against that of variable
capital, as well as a growing rate of surplus value, discrepancies must
arise between the material composition of the social product and the
composition of capital in terms of value. If, instead of the unchanging
proportion of 5 to 1 between constant and variable capital, proposed by
Marx's diagram, we assume for instance that this increase of capital is
accompanied by a progressive readjustment of its composition, the
proportion between constant and variable in the second year being 6 to
1, in the third year 7 to 1, and in the fourth year 8 to 1--if we
further assume that the rate of surplus value also increases
progressively in accordance with the higher productivity of labour so
that, in each case, we have the same amounts as those of the diagram,
although, because of the relatively decreasing variable capital, the
rate of surplus value does not remain constant at the original 100 per
cent--and if finally we assume that one-half of the appropriated surplus
value is capitalised in each case (excepting Department II where
capitalisation exceeds 50 per cent, 184 out of 285 being capitalised
during the first year), the result will be as follows:

  1st year:
   I. _5,000c + 1,000v + 1,000s = 7,000_ means of production
  II. _1,430c +   285v +   285s = 2,000_ means of subsistence

  2nd year:
   I. _(5,428 4/7)c + (1,071 3/7)v + 1,083s = 7,583_ means of production
  II. _(1,587 5/7)c +   (311 2/7)v +   316s = 2,215_ means of subsistence

  3rd year:
   I. _5,903c + 1,139v + 1,173s = 8,215_ means of production
  II. _1,726c +   331v +   342s = 2,399_ means of subsistence

  4th year:
   I. _6,424c + 1,205v + 1,271s = 8,900_ means of production
  II. _1,879c +   350v +   371s = 2,600_ means of subsistence

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

This negative balance for the means of production may be only imaginary
in part. The increasing productivity of labour ensures that the means of
production grow faster in bulk than in value, in other words: means of
production become cheaper. As it is use value, i.e. the material
elements of capital, which is relevant for technical improvements of
production, we may assume that the quantity of means of production, in
spite of their lower value, will suffice for progressive accumulation up
to a certain point. This phenomenon amongst others also checks the
actual decline of the rate of profit and modifies it to a mere tendency,
though our example shows that the decline of the profit rate would not
only be retarded but rather completely arrested. On the other hand, the
same fact indicates a much larger surplus of unsaleable means of
subsistence than is suggested by the amount of this surplus in terms of
value. In that case, we should have to compel the capitalists of
Department II to consume this surplus themselves, which Marx makes them
do on other occasions; in which case, and in so far as those capitalists
are concerned, there would again be no accumulation but rather simple
reproduction. Alternatively, we should have to pronounce this whole
surplus unsaleable.

Yet would it not be very easy to make good this loss in means of
production which results from our example? We need only assume that the
capitalists of Department I capitalise their surplus value to a greater
extent. Indeed, there is no valid reason to suppose, as Marx did, that
the capitalists in each case add only half their surplus value to their
capital. Advances in labour productivity may well lead to progressively
increasing capitalisation of surplus value. This assumption is the more
permissible in that the cheapening of consumer goods for the capitalist
class, too, is one of the consequences of technological progress. The
relative decrease in the value of consumable income (as compared with
the capitalised part) may then permit of the same or even a higher
standard of living for this class. We might for instance make good the
deficit in producer goods by transferring a corresponding part of
surplus value I to the constant capital of this department, a part which
would otherwise be consumed, since this surplus value, like all other
products of the department, originally takes the form of producer goods;
11 4/7 would then be transferred in the second year, 34 in the third
year and 66 in the fourth year.[340] The solution of one difficulty,
however, only adds to another. It goes without saying that if the
capitalists of Department I relatively restrict their consumption for
purposes of accumulation, there will be a proportionately greater
unsaleable residue of consumer goods in Department II; and thus it
becomes more and more impossible to enlarge the constant capital even on
its previous technological basis. If the capitalists in Department I
relatively restrict their consumption, the capitalists of Department II
must relatively expand their personal consumption in proportion. The
assumption of accelerated accumulation in Department I would then have
to be supplemented by that of retarded accumulation in Department II,
technical progress in one department by regression in the other.

These results are not due to mere chance. The adjustments we have tried
out on Marx's diagram are merely meant to illustrate that technical
progress, as he himself admits, must be accompanied by a relative growth
of constant as against variable capital. Hence the necessity for a
continuous revision of the ratio in which capitalised surplus value
should be allotted to _c_ and _v_ respectively. In Marx's diagram,
however, the capitalists are in no position to make these allocations at
will, since the material form of their surplus value predetermines the
forms of capitalisation. Since, according to Marx's assumption, all
expansion of production proceeds exclusively by means of its own,
capitalistically produced means of production and subsistence,--since
there are here no other places and forms of production and equally no
other consumers than the two departments with their capitalists and
workers,--and since, on the other hand, the smooth working of the
accumulative process depends on that circulation should wholly absorb
the aggregate product of both departments, the technological shape of
enlarged reproduction is in consequence strictly prescribed by the
material form of the surplus product. In other words: according to
Marx's diagram, the technical organisation of expanded production can
and must be such as to make use of the aggregate surplus value produced
in Departments I and II. In this connection we must bear in mind also
that both departments can obtain their respective elements of production
only by means of mutual exchange. Thus the allocation to constant or
variable capital of the surplus value earmarked for capitalisation, as
well as the allotment of the additional means of production and
subsistence (for the workers) to Departments I and II is given in
advance and determined by the relations between the two departments of
the diagram--both in material and in terms of value. These relations
themselves, however, reflect a quite determinate technical organisation
of production. This implies that, on the assumptions of Marx's diagram,
the techniques of production given in each case predetermine the
techniques of the subsequent periods of enlarged reproduction, if
accumulation continues. Assuming, that is to say, in accordance with
Marx's diagram, that the expansion of capitalist production is always
performed by means of the surplus value originally produced in form of
capital, and further--or rather, conversely--that accumulation in one
department is strictly dependent on accumulation in the other, then no
change in the technical organisation of production can be possible in so
far as the relation of _c_ to _v_ is concerned.

We may put our point in yet another way: it is clear that a quicker
growth of constant as compared with variable capital, i.e. the
progressive metamorphosis of the organic composition of capital, must
take the material form of faster expansion of production in Department I
as against production in Department II. Yet Marx's diagram, where strict
conformity of the two departments is axiomatic, precludes any such
fluctuations in the rate of accumulation in either department. It is
quite legitimate to suppose that under the technical conditions of
progressive accumulation, society would invest ever increasing portions
of the surplus value earmarked for accumulation in Department I rather
than in Department II. Both departments being only branches of the same
social production--supplementary enterprises, if you like, of the
'aggregate capitalist',--such a progressive transfer, for technical
reasons, from one department to the other of a part of the accumulated
surplus value would be wholly feasible, especially as it corresponds to
the actual practice of capital. Yet this assumption is possible only so
long as we envisage the surplus value earmarked for capitalisation
purely in terms of value. The diagram, however, implies that this part
of the surplus value appears in a definite material form which
prescribes its capitalisation. Thus the 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 from Department II to Department I is ruled
out, first because the material form of this surplus value is obviously
useless to Department I, and secondly because of the relations of
exchange between the two departments which would in turn necessitate an
equivalent transfer of the products of Department I into Department II.
It is therefore downright impossible to achieve a faster expansion of
Department I as against Department II within the limits of Marx's
diagram.

However we may regard the technological alterations of the mode of
production in the course of accumulation, they cannot be accomplished
without upsetting the fundamental relations of Marx's diagram.

And further: according to Marx's diagram, the capitalised surplus value
is in each case immediately and completely absorbed by the productive
process of the following period, for, apart from the portion earmarked
for consumption, it has a natural form which allows of only one
particular kind of employment. The diagram precludes the cashing and
hoarding of surplus value in monetary form, as capital waiting to be
invested. The free monetary forms of private capital, in Marx's view,
are first the money deposited gradually against the wear and tear of the
fixed capital, for its eventual renewal; and secondly those amounts of
money which represent realised surplus value but are still too small for
investment. From the point of view of the aggregate capital, both these
sources of free money capital are negligible. For if we assume that even
a portion of the social surplus value is realised in monetary form for
purposes of future investment, then at once the question arises: 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 represented in the diagram by the two
departments, this portion of the surplus value must also be regarded as
invested _de facto_, as employed in the productive process. And so we
are back at immediate and complete investment of the surplus value.

Or does the freezing of one part of the surplus value in monetary form
in the hands of certain capitalists mean that other capitalists will be
left with a corresponding part of that surplus product in its material
form? does the hoarding of realised surplus value by some imply that
others are no longer able to realise their surplus value, since the
capitalists are the only buyers of surplus value? This would mean,
however, that the smooth course of reproduction and similarly of
accumulation as described in the diagram would be interrupted. The
result would be a crisis, due not to over-production but to a mere
intention to accumulate, the kind of crisis envisaged by Sismondi.

In one passage of his _Theories_,[341] Marx explains in so many words
that he 'is not at all concerned in this connection with an accumulation
of capital greater than can be used in the productive process and might
lie idle in the banks in monetary form, with the consequence of lending
abroad'. Marx refers these phenomena to the section on competition. Yet
it is important to establish that his diagram veritably precludes the
formation of such additional capital. Competition, however wide we may
make the concept, obviously cannot create values, nor can it create
capitals which are not themselves the result of the reproductive
process.

The diagram thus precludes the expansion of production by leaps and
bounds. It only allows of a gradual expansion which keeps strictly in
step with the formation of the surplus value and is based upon the
identity between realisation and capitalisation of the surplus value.

For the same reason, the diagram presumes an accumulation which affects
both departments equally and therefore all branches of capitalist
production. It precludes expansion of the demand by leaps and bounds
just as much as it prevents a one-sided or precocious development of
individual branches of capitalist production.

Thus the diagram assumes a movement of the aggregate capital which flies
in the face of the actual course of capitalist development. At first
sight, two facts are typical for the history of the capitalist mode of
production: on the one hand the periodical expansion of the whole field
of production by leaps and bounds, and on the other an extremely unequal
development of the different branches of production. The history of the
English cotton industry from the first quarter of the eighteenth to the
seventies of the nineteenth century, the most characteristic chapter in
the history of the capitalist mode of production, appears quite
inexplicable from the point of view of Marx's diagram.

Finally, the diagram contradicts the conception of the capitalist total
process and its course as laid down by Marx in _Capital_, volume iii.
This conception is based on the inherent contradiction between the
unlimited expansive capacity of the productive forces and the limited
expansive capacity of social consumption under conditions of capitalist
distribution. Let us see how Marx describes this contradiction in detail
in chapter 15 on 'Unravelling the Internal Contradictions of the Law'
(of the declining profit rate):

'The creation of surplus-value, assuming the necessary means of
production, or sufficient accumulation of capital, to be existing, finds
no other limit but the labouring population, when the rate of
surplus-value, that is, the intensity of exploitation, is given; and no
other limit but the intensity of exploitation, when the labouring
population is given. And the capitalist process of production consists
essentially of the production of surplus-value, materialised in the
surplus-product, which is that aliquot portion of the produced
commodities, in which unpaid labour is materialised. It must never be
forgotten, that the production of this surplus-value--and the
re-conversion of a portion of it into capital, or accumulation, forms an
indispensable part of this production of surplus-value--is the immediate
purpose and the compelling motive of capitalist production. It will not
do to represent capitalist production as something which it is not, that
is to say, as a production having for its immediate purpose the
consumption of goods, or the production of means of enjoyment for the
capitalists. (And, of course, even less for the worker. R. L.) This
would be overlooking the specific character of capitalist production,
which reveals itself in its innermost essence. The creation of this
surplus-value is the object of the direct process of production, and
this process has no other limits than those mentioned above. As soon as
the available quantity of surplus-value has been materialised in
commodities, surplus-value has been produced. But this production of
surplus-value is but the first act of the capitalist process of
production, it merely terminates the act of direct production. Capital
has absorbed so much unpaid labour. With the development of the process,
which expresses itself through a falling tendency of the rate of
profit, the mass of surplus-value thus produced is swelled to immense
dimensions. Now comes the second act of the process. The entire mass of
commodities, the total product, which contains a portion which is to
reproduce the constant and variable capital as well as a portion
representing surplus-value, must be sold. If this is not done, or only
partly accomplished, or only at prices which are below the prices of
production, the labourer has been none the less exploited, but his
exploitation does not realise as much for the capitalist. It may yield
no surplus-value at all for him, or only realise a portion of the
produced surplus-value, or it may even mean a partial or complete loss
of his capital. The conditions of direct exploitation and those of the
realisation of surplus-value are not identical. They are separated
logically as well as by time and space. The first are only limited by
the productive power of society, the last by the proportional relations
of the various lines of production and by the consuming power of
society. This last-named power is not determined either by the absolute
productive power or by the absolute consuming power, but by the
consuming power based on antagonistic conditions of distribution, which
reduces the consumption of the great mass of the population to a
variable minimum within more or less narrow limits. The consuming power
is furthermore restricted by the tendency to accumulate, the greed for
an expansion of capital and a production of surplus-value on an enlarged
scale. This is a law of capitalist production imposed by incessant
revolutions in the methods of production themselves, the resulting
depreciation of existing capital, the general competitive struggle and
the necessity of improving the product and expanding the scale of
production, for the sake of self-preservation and on penalty of failure.
The market must, therefore, be continually extended, so that its
interrelations and the conditions regulating them assume more and more
the form of a natural law independent of the producers and become ever
more uncontrollable. This eternal contradiction seeks to balance itself
by an expansion of the outlying fields of production. But to the extent
that the productive power develops, it finds itself at variance with the
narrow basis on which the conditions of consumption rest. On this
self-contradictory basis it is no contradiction at all that there should
be an excess of capital simultaneously with an excess of population. For
while a combination of these two would indeed increase the mass of the
produced surplus-value, it would at the same time intensify the
contradiction between the conditions under which this surplus-value is
produced and those under which it is realised.'[342]

If we compare this description with the diagram of enlarged
reproduction, the two are by no means in conformity. According to the
diagram, there is no inherent contradiction between the production of
the surplus value and its realisation, rather, the two are identical.
The surplus value here from the very beginning comes into being in a
natural form exclusively designed for the requirements of accumulation.
In fact it leaves the place of production in the very form of additional
capital, that is to say it is capable of realisation in the capitalist
process of accumulation. The capitalists, as a class, see to it in
advance that the surplus value they appropriate is produced entirely in
that material form which will permit and ensure its employment for
purposes of further accumulation. Realisation and accumulation of the
surplus value here are both aspects of the same process, they are
logically identical. Therefore according to the presentation of the
reproductive process in the diagram, society's capacity to consume does
not put a limit to production. Here production automatically expands
year by year, although the capacity of society for consumption has not
gone beyond its 'antagonistic conditions of distribution'. This
automatic continuation of expansion, of accumulation, truly is the 'law
of capitalist production ... on penalty of failure'. Yet according to
the analysis in volume iii, 'the market must, therefore, be continually
extended', 'the market' obviously transcending the consumption of
capitalists and workers. And if Tugan Baranovski interprets the
following passage 'this eternal contradiction seeks to balance itself by
an expansion of the outlying fields of production' as if Marx had meant
production itself by 'outlying fields of production', he violates not
only the spirit of the language but also Marx's clear train of thought.
The 'outlying fields of production' are clearly and unequivocally not
production itself but consumption which 'must be continually extended'.
The following passage in _Theorien über den Mehrwert_, amongst others,
sufficiently shows that Marx had this in mind and nothing else: 'Ricardo
therefore consistently denies the necessity for an _expansion of the
market_ to accompany the expansion of production and the growth of
capital. The entire capital existing within a country can also be
profitably used in that country. He therefore argues against Adam Smith
who had set up his (Ricardo's) opinion on the one hand but also
contradicted it with his usual sure instinct.'[343]

In yet another passage, Marx clearly shows that Tugan Baranovski's
notion of production for production's sake is wholly alien to him:
'Besides, we have seen in volume ii part iii that a continuous
circulation takes place between constant capital and constant capital
(even without considering any accelerated accumulation), which is in so
far independent of individual consumption, as it never enters into such
consumption, but which is nevertheless definitely limited by it, because
the production of constant capital never takes place for its own sake,
but solely because more of this capital is needed in those spheres of
production whose products pass into individual consumption.'[344]

Admittedly, in the diagram in volume ii, Tugan Baranovski's sole
support, market and production coincide--they are one and the same.
Expansion of the market here means extended production, since production
is said to be its own exclusive market--the consumption of the workers
being an element of production, i.e. the reproduction of variable
capital. Therefore the limit for both the expansion of production and
the extension of the market is one and the same: it is given by the
volume of the social capital, or the stage of accumulation already
attained. The greater the quantity of surplus value that has been
extracted in the natural form of capital, the more can be accumulated;
and the greater the volume of accumulation, the more surplus value can
be invested in its material form of capital, i.e. the more can be
realised. Thus the diagram does not admit the contradiction outlined in
the analysis of volume iii. In the process described by the diagram
there is no need for a continual extension of the market beyond the
consumption of capitalists and workers, nor is the limited social
capacity for consumption an obstacle to the smooth course of production
and its unlimited capacity for expansion. The diagram does indeed permit
of crises but only because of a lack of proportion within production,
because of a defective social control over the productive process. It
precludes, however, the deep and fundamental antagonism between the
capacity to consume and the capacity to produce in a capitalist society,
a conflict resulting from the very accumulation of capital which
periodically bursts out in crises and spurs capital on to a continual
extension of the market.

FOOTNOTES:

[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--we might add--to the Tugan Baranovskis.

[340] The figures result from the difference between the amounts of
constant capital in Department I under conditions of technical progress,
and under Marx'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.




_CHAPTER XXVI_

THE REPRODUCTION OF CAPITAL AND ITS SOCIAL SETTING


Marx's diagram of enlarged reproduction cannot explain the 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 on the assumption that the capitalists and workers
are the sole agents of capitalist consumption. We have seen that Marx
consistently and deliberately assumes the universal and exclusive
domination of the capitalist mode of production as a theoretical premise
of his analysis in all three volumes of _Capital_. Under these
conditions, there can admittedly be no other classes of society than
capitalists and workers; as the diagram has it, all 'third persons' of
capitalist society--civil servants, the liberal professions, the clergy,
etc.--must, as consumers, be counted in with these two classes, and
preferably with the capitalist class. This axiom, however, is a
theoretical contrivance--real life has never known a self-sufficient
capitalist society under the exclusive domination of the capitalist mode
of production. This theoretical device is perfectly admissible so long
as it merely helps to demonstrate the problem in its integrity and does
not interfere with its very conditions. A case in point is the analysis
of simple reproduction of the aggregate social capital, where the
problem itself rests upon a fiction: in a society producing by
capitalist methods, i.e. a society which creates surplus value, the
whole of the latter is taken to be consumed by the capitalists who
appropriate it. The object is to present the forms of social production
and reproduction under these given conditions. Here the very formulation
of the problem implies that production knows no other consumers than
capitalists and workers and thus strictly conforms to Marx's premise:
universal and exclusive domination of the capitalist mode of production.
The implications of both fictions are the same. Similarly, it is quite
legitimate to postulate absolute dominance of capital in an analysis of
the accumulation of individual capitals, such as is given in _Capital_,
volume i. The reproduction of individual capitals is an element in total
social reproduction but one which follows an independent course,
contrary to the movements of the other elements. In consequence it will
not do simply to take together the individual movements of the
respective capitals in order to arrive at the total movement of social
capital, since the latter is essentially different. The natural
conditions of reproducing individual capitals therefore neither conform
with one another, nor do they conform to the relations of the total
capital. Under normal conditions of circulation, every individual
capital engages in the process of circulation and of accumulation
entirely on its own account, depending upon others only in so far, of
course, as it is compelled to find a market for its product and must
find available the means of production it requires for its specific
activities. Whether the strata who afford this market and provide the
necessary means of production are themselves capitalist producers or not
is completely immaterial for the individual capital, although, in
theory, the most favourable premise for analysing the accumulation of
individual capital is the assumption that capitalist production has
attained universal and exclusive domination and is the sole setting of
this process.[345]

Now, however, the question arises whether the assumptions which were
decisive in the case of individual capital, are also legitimate for the
consideration of aggregate capital.

'We must now put the problem in this form: _given universal
accumulation_, that is to say provided that in all branches of
production there is greater or less accumulation of capital--which in
fact is a condition of capitalist production, and which is just as
natural to the capitalist _qua_ capitalist as it is natural to the miser
to amass money (but which is also necessary for the perpetuation of
capitalist production)--what are the _conditions_ of this universal
accumulation, to what elements can it be reduced?'

And the answer: '_The conditions for the accumulation of capital are
precisely those which rule its original production and reproduction in
general_: these conditions being that one part of the money buys labour
and the other commodities (raw materials, machinery, etc.) ...
Accumulation of new capital can only proceed therefore under the same
conditions under which already existing capital is reproduced.'[346]

In real life the actual conditions for the accumulation of the aggregate
capital are quite different from those prevailing for individual
capitals and for simple reproduction. The problem amounts to this: If an
increasing part of the surplus value is not consumed by the capitalists
but employed in the expansion of production, what, then, are the forms
of social reproduction? What is left of the social product after
deductions for the replacement of the constant capital cannot, _ex
hypothesi_, be absorbed by the consumption of the workers and
capitalists--this being the main aspect of the problem--nor can the
workers and capitalists themselves realise the aggregate product. They
can always only realise the variable capital, that part of the constant
capital which will be used up, and the part of the surplus value which
will be consumed, but in this way they merely ensure that production can
be renewed on its previous scale. The workers and capitalists themselves
cannot possibly realise that part of the surplus value which is to be
capitalised. Therefore, the realisation of the surplus value for the
purposes of accumulation is an impossible task for a society which
consists solely of workers and capitalists. Strangely enough, all
theorists who analysed the problem of accumulation, from Ricardo and
Sismondi to Marx, started with the very assumption which makes their
problem insoluble. A sure instinct that realisation of the surplus value
requires 'third persons', that is to say consumers other than the
immediate agents of capitalist production (i.e. workers and capitalists)
led to all kinds of subterfuges: 'unproductive consumption' as presented
by Malthus in the person of the feudal 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 useful safety valve to all those who regarded
accumulation with scepticism, from Sismondi to Nicolayon. Because of
these insoluble difficulties, others like v. Kirchmann and Rodbertus
tried to do without accumulation altogether, or, like Sismondi and his
Russian 'populist' followers, stressed the need for at least putting the
dampers on accumulation as much as possible.

The salient feature of the problem of accumulation, and the vulnerable
point of earlier attempts to solve it, has only been shown up by Marx's
more profound analysis, his precise diagrammatic demonstration of the
total reproductive process, and especially his inspired exposition of
the problem of simple reproduction. Yet he could not supply immediately
a finished solution either, partly because he broke off his analysis
almost as soon as he had begun it, and partly because he was then
preoccupied, as we have shown, with denouncing the analysis of Adam
Smith and thus rather lost sight of the main problem. In fact, he made
the solution even more difficult by assuming the capitalist mode of
production to prevail universally. Nevertheless, a solution of the
problem of accumulation, in harmony both with other parts of Marx's
doctrine and with the historical experience and daily practice of
capitalism, is implied in Marx's complete analysis of simple
reproduction and his characterisation of the capitalist process as a
whole which shows up its immanent contradictions and their development
(in _Capital_, vol. iii). In the light of this, the deficiencies of the
diagram can be corrected. All the relations being, as it were,
incomplete, a closer study of the diagram of enlarged reproduction will
reveal that it points to some sort of organisation more advanced than
purely capitalist production and accumulation.

Up to now we have only considered one aspect of enlarged reproduction,
the problem of realising the surplus value, whose difficulties hitherto
had claimed the sceptics' whole attention. Realisation of the surplus
value is doubtless a vital question of capitalist accumulation. It
requires as its prime condition--ignoring, for simplicity's sake, the
capitalists' fund of consumption altogether--that there should be strata
of buyers outside capitalist society. Buyers, it should be noted, not
consumers, since the material form of the surplus value is quite
irrelevant to its realisation. The decisive fact is that the surplus
value cannot be realised by sale either to workers or to capitalists,
but only if it is sold to such social organisations or strata whose own
mode of production is not capitalistic. Here we can conceive of two
different cases:

(1) Capitalist production supplies consumer goods over and above its own
requirements, the demand of its workers and capitalists, which are
bought by non-capitalist strata and countries. The English cotton
industry, for instance, during the first two-thirds of the nineteenth
century, and to some extent even now, has been supplying cotton textiles
to the peasants and petty-bourgeois townspeople of the European
continent, and to the peasants of India, America, Africa and so on. The
enormous expansion of the English cotton industry was thus founded on
consumption by non-capitalist strata and countries.[347] In England
herself, this flourishing cotton industry called forth large-scale
development in the production of industrial machinery (bobbins and
weaving-looms), and further in the metal and coal industries and so on.
In this instance, Department II realised its products to an increasing
extent by sale to non-capitalist social strata, and by its own
accumulation it created on its part an increasing demand for the home
produce of Department I, thus helping the latter to realise its surplus
value and to increase its own accumulation.

(2) Conversely, capitalist production supplies means of production in
excess of its own demand and finds buyers in non-capitalist countries.
English industry, for instance, in the first half of the nineteenth
century supplied materials for the construction of railroads in the
American and Australian states. (The building of railways cannot in
itself be taken as evidence for the domination of capitalist production
in a country. As a matter of fact, the railways in this case provided
only one of the first conditions for the inauguration of capitalist
production.) Another example would be the German chemical industry which
supplies means of production such as dyes in great quantities to
Asiatic, African and other countries whose own production is not
capitalistic.[348] Here Department I realises its products in
extra-capitalist circles. The resulting progressive expansion of
Department I gives rise to a corresponding expansion of Department II in
the same (capitalistically producing) country in order to supply the
means of subsistence for the growing 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 part of the surplus value. In
the second case, the product of Department I exceeds the volume of
constant capital in both departments, enlarged though it is for the
purpose of expanding production. In both cases, the surplus value does
not come into being in that natural form which would make its
capitalisation in either department possible and necessary. These two
prototypes continually overlap in real life, supplement each other and
merge.

In this contest, one point seems still obscure. The surplus of consumer
goods, say cotton fabrics, which is sold to non-capitalist countries,
does not exclusively represent surplus value, but, as a capitalist
commodity, it embodies also constant and variable capital. It seems
quite arbitrary to assume that just those commodities which are sold
outside the capitalist strata of society should represent nothing but
surplus value. On the other hand, Department I clearly can in this case
not only realise its surplus value but also accumulate, and that without
requiring another market for its product than the two departments of
capitalist production. Yet both these objections are only apparent. All
we need remember is that each component of the aggregate product
represents a proportion of the total value, that under conditions of
capitalist production not only the aggregate product but every single
commodity contains surplus value; which consideration does not prevent
the individual capitalist, however, from computing that the sale of his
specific commodities must first reimburse him for his outlay on constant
capital and secondly replace his variable capital (or, rather loosely,
but in accordance with actual practice: it must first replace his fixed,
and then his circulating capital); what then remains will go down as
profit. Similarly, we can divide the aggregate social product into three
proportionate parts which, in terms of value, correspond to (1) the
constant capital that has been used up in society, (2) the variable
capital, and (3) the extracted surplus value. In the case of simple
reproduction these proportions are also reflected in the material shape
of the aggregate product: the constant capital materialises as means of
production, the variable capital as means of subsistence for the
workers, and the surplus value as means of subsistence for the
capitalist. Yet as we know, the concept of simple reproduction with
consumption of the entire surplus value by the capitalists is a mere
fiction. As for enlarged reproduction or accumulation, in Marx's diagram
the composition of the social product in terms of value is also strictly
in proportion to its material form: the surplus value, or rather that
part of it which is earmarked for capitalisation, has from the very
beginning the form of material means of production and means of
subsistence for the workers in a ratio appropriate to the expansion of
production on a given technical basis. As we have seen, this conception,
which is based upon the self-sufficiency and isolation of capitalist
production, falls down as soon as we consider the realisation of the
surplus value. If we assume, however, that the surplus value is realised
outside the sphere of capitalist production, then its material form is
independent of the requirements of capitalist production itself. Its
material form conforms to the requirements of those non-capitalist
circles who help to realise it, that is to say, capitalist surplus value
can take the form of consumer goods, e.g. cotton fabrics, or of means of
production, e.g. materials for railway construction, as the case may be.
If one department realises its surplus value by exporting its products,
and with the ensuing expansion of production helps the other department
to realise its surplus value on the home market, then the fact still
remains that the _social_ surplus value must yet be taken as realised
outside the two departments, either mediately or immediately. Similar
considerations enable the individual capitalist to realise his surplus
value, even if the whole of his commodities can only replace either the
variable or the constant capital of another capitalist.

Nor is the realisation of the surplus value the only vital aspect of
reproduction. Given that Department I has disposed of its surplus value
outside, thereby starting the process of accumulation, and further, that
it can expect a new increase in the demand in non-capitalist circles,
these two conditions add up to only half of what is required for
accumulation. There is many a slip 'twixt the cup and the lip. The
second requirement of accumulation is access to material elements
necessary for expanding reproduction. Seeing that we have just turned
the surplus product of Department I into money by getting rid of the
surplus means of production to non-capitalist circles, from where are
these material elements then to come? The transaction which is the
portal for realising the surplus value is also, as it were, a backdoor
out of which flies all possibility of converting this realised surplus
value into productive capital--one leads to the nether regions and the
other to the deep sea. Let us take a closer look.

Here we use _c_ in both Departments I and II as if it were the entire
constant capital in production. Yet this we know is wrong. Only for the
sake of simplifying the diagram have we disregarded that the _c_ which
figures in Departments I and II of the diagram is only part of the
aggregate constant capital of society, that is to say that part which,
circulating during one year, is used up and embodied in the products of
one period of production. Yet it would be perfectly absurd if capitalist
production--or any other--would use up its entire constant capital and
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 provides in annual instalments--renewal of
the used-up part--lies at the back of production as presented in the
diagram. With progressing labour productivity and an expanding volume of
production, this mass increases not only absolutely but also relatively
to the part which is consumed in production in every case, together with
a corresponding increase in the efficiency of the constant capital. It
is the more intensive exploitation of this part of the constant capital,
irrespective of its increase in value, which is of paramount importance
for the expansion of production.

'In the extractive industries, mines, etc., the raw materials form no
part of the capital advanced. The subject of labour is in this case not
a product of previous labour, but is furnished by Nature gratis, as in
the case of metals, minerals, coal, stone, etc. In these cases the
constant capital consists almost exclusively of instruments of labour,
which can very well absorb an increased quantity of labour (day and
night shifts of labourers, e.g.). All other things being equal, the mass
and value of the product 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--man and Nature--still work together. Thanks to the
elasticity of labour-power, the domain of accumulation has extended
without any previous enlargement of constant capital.--In agriculture
the land under cultivation cannot be increased without the advance of
more seed and manure. But this advance once made, the purely mechanical
working of the soil itself produces a marvellous effect on the amount of
the product. A greater quantity of labour, done by the same number of
labourers as before, thus increases the fertility, without requiring any
new advance in the instruments of labour. It is once again the direct
action of man on Nature which becomes an immediate source of greater
accumulation, without the intervention of any new capital. Finally, in
what is called manufacturing industry, every additional expenditure of
labour presupposes a corresponding additional expenditure of raw
materials, but not necessarily of instruments of labour. And as
extractive industry and agriculture supply manufacturing industry with
its raw materials and those of its instruments of labour, the additional
product the former have created without additional advance of capital,
tells also in favour of the latter.--General result: by incorporating
with itself the two primary creators of wealth, labour-power and the
land, capital acquires a power of expansion that permits it to augment
the elements of its accumulation beyond the limits apparently fixed by
its own magnitude, or by the value and the mass of the means of
production, already produced, in which it has its being.'[349]

In addition, there is no obvious reason why means of production and
consumer goods should be produced by capitalist methods alone. This
assumption, for all Marx used it as the corner-stone of his thesis, is
in conformity neither with the daily practice, and the history, of
capital, nor with the specific character of this mode of production. In
the first half of the nineteenth century, a great part of the surplus
value in England was produced in form of cotton fabrics. Yet the
material elements for the capitalisation of this surplus value, although
they certainly represented a surplus product, still were by no means all
capitalist surplus value, to mention only raw cotton from the slave
states of the American Union, or grain (a means of subsistence for the
English workers) from the fields of serf-owning Russia. How much
capitalist accumulation depends upon means of production which are not
produced by capitalist methods is shown for example by the cotton crisis
in England during the American War of Secession, when the cultivation of
the plantations came to a standstill, or by the crisis of European
linen-weaving during the war in the East, when flax could not be
imported from serf-owning Russia. We need only recall that imports of
corn raised by peasants--i.e. not produced by capitalist methods--played
a vital part in the feeding of industrial labour, as an element, that is
to say, of variable capital, for a further illustration of the close
ties between non-capitalist strata and the material elements necessary
to the accumulation of capital.

Moreover, capitalist production, by its very nature, cannot be
restricted to such means of production as are produced by capitalist
methods. Cheap elements of constant capital are essential to the
individual capitalist who strives to increase his rate of profit. In
addition, the very condition of continuous improvements in labour
productivity as the most important method of increasing the rate of
surplus value, is unrestricted utilisation of all substances and
facilities afforded by nature and soil. To tolerate any restriction in
this respect would be contrary to the very essence of capital, its whole
mode of existence. After many centuries of development, the capitalist
mode of production still constitutes only a fragment of total world
production. Even in the small Continent of Europe, where it now chiefly
prevails, it has not yet succeeded in dominating entire branches of
production, such as peasant agriculture and the independent handicrafts;
the same holds true, further, for large parts of North America and for a
number of regions in the other continents. In general, capitalist
production has hitherto been confined mainly to the countries in the
temperate zone, whilst it made comparatively little progress in the
East, for instance, and the South. Thus, if it were dependent
exclusively on elements of production obtainable within such narrow
limits, its present level and indeed its development in general would
have been impossible. From the very beginning, the forms and laws of
capitalist production aim to comprise the entire globe as a store of
productive forces. Capital, impelled to appropriate productive forces
for purposes of exploitation, ransacks the whole world, it procures its
means of production from all corners of the earth, seizing them, if
necessary by force, from all levels of civilisation and from all forms
of society. The problem of the material elements of capitalist
accumulation, far from being solved by the material form of the surplus
value that has been produced, takes on quite a different aspect. It
becomes necessary for capital progressively to dispose ever more fully
of the whole globe, to acquire an unlimited choice of means of
production, with regard to both quality and quantity, so as to find
productive 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 materials in case of
need, both when imports from old sources fail or when social demand
suddenly increases. When the War of Secession interfered with the import
of American cotton, causing the notorious 'cotton famine' in the
Lancashire district, new and immense cotton plantations sprang up in
Egypt almost at once, as if by magic. Here it was Oriental despotism,
combined with an ancient system of bondage, which had created a sphere
of activity for European capital. Only capital with its technical
resources can effect such a miraculous change in so short a time--but
only on the pre-capitalist soil of more primitive social conditions can
it develop the ascendancy necessary to achieve such miracles. Another
example of the same kind is the enormous increase in the world
consumption of rubber which at present (1912) necessitates a supply of
latex to the value of £50,000,000 _per annum_. The economic basis for
the production of raw materials is a primitive system of exploitation
practised by European capital in the African colonies and in America,
where the institutions of slavery and bondage are combined in various
forms.[350]

Between the production of surplus value, then, and the subsequent period
of accumulation, two separate transactions take place--that of realising
the surplus value, i.e. of converting it into pure value, and that of
transforming this pure value into productive capital. They are both
dealings between capitalist production and the surrounding
non-capitalist world. From the aspect both of realising the surplus
value and of procuring the material elements of constant capital,
international trade is a prime necessity for the historical existence of
capitalism--an international trade which under actual conditions is
essentially an exchange between capitalistic and non-capitalistic modes
of production.

Hitherto we have considered accumulation solely with regard to surplus
value and constant capital. The third element of accumulation is
variable capital which increases with progressive accumulation. In
Marx's diagram, the social product contains ever more means of
subsistence for the workers as the material form proper to this variable
capital. The variable capital, however, is not really the means of
subsistence for the workers but is in fact living labour for whose
reproduction these means of subsistence are necessary. One of the
fundamental conditions of accumulation is therefore a supply of living
labour which can be mobilised by capital to meet its demands. This
supply can be increased under favourable conditions--but only up to a
certain point--by longer hours and more intensive work. Both these
methods of increasing the supply, however, do not enlarge the variable
capital, or do so only to a small extent (e.g. payment for overtime).
Moreover, they are confined to definite and rather narrow limits which
they cannot exceed owing to both natural and social causes. The
increasing growth of variable capital which accompanies accumulation
must therefore become manifest in ever greater numbers of employed
labour. 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 of these elements actually
functioning as capital, the capitalist class requires additional labour.
If the exploitation of the labourers already employed does not increase,
either extensively or intensively, then additional labour-power must be
found. For this the mechanism of capitalist production provides
beforehand, by converting the working class into a class dependent on
wages, a class whose ordinary wages suffice, not only for its
maintenance, but for its increase. It is only necessary for capital to
incorporate this additional labour-power, annually supplied by the
working class in the shape of labourers of all ages, with the surplus
means of production comprised in the annual produce, and the conversion
of surplus-value into capital is complete.'[351]

Thus the increase in the variable capital is directly and exclusively
attributed to the natural physical increase of a working class already
dominated by capital. This is in strict conformity with the diagram of
enlarged reproduction which recognises only the social classes of
capitalists and workers, and regards the capitalist mode of production
as exclusive and absolute. On these assumptions, the natural increase of
the working class is the only source of extending the labour supply
commanded by capital. This view, however, is contrary to the laws
governing the process of accumulation. The natural propagation of the
workers and the requirements of accumulating capital are not correlative
in respect of time or quantity. Marx himself has most brilliantly shown
that natural propagation cannot keep up with the sudden expansive needs
of capital. If natural propagation were the only foundation for the
development of capital, accumulation, in its periodical swings from
overstrain to exhaustion, could not continue, nor could the productive
sphere expand by leaps and bounds, and accumulation itself would become
impossible. The latter requires an unlimited freedom of movement in
respect of the growth of variable capital equal to that which it enjoys
with regard to the elements of constant capital--that is to say it must
needs dispose over the supply of labour power without restriction. Marx
considers that this can be achieved by an 'industrial reserve army of
workers'. His diagram of simple reproduction admittedly does not
recognise such an army, nor could it have room for it, since the natural
propagation of the capitalist wage proletariat cannot provide an
industrial reserve army. Labour for this army is recruited from social
reservoirs outside the dominion of capital--it is drawn into the wage
proletariat only if need arises. Only the existence of non-capitalist
groups and countries can guarantee such a supply of additional labour
power for capitalist production. Yet in his analysis of the industrial
reserve army[352] Marx only allows for (_a_) the displacement of older
workers by machinery, (_b_) an influx of rural workers into the towns in
consequence 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 system of production in
some form or other, they constitute a wage proletariat that is worn out
and made redundant one way or another. Marx, obviously influenced by
English conditions involving a high level of capitalist development,
held that the rural workers who continually migrate to the towns belong
to the wage proletariat, since they were formerly dominated by
agricultural capital and now become subject to industrial capital. He
ignores, however, the problem which is of paramount importance for
conditions on the continent of Europe, namely the sources from which
this urban and rural proletariat is recruited: the continual process by
which the rural and urban middle strata become proletarian with the
decay of peasant economy and of small artisan enterprises, the very
process, that is to say, of incessant transition from non-capitalist to
capitalist conditions of a labour power that is cast off by
pre-capitalist, not capitalist, modes of production in their progressive
breakdown and disintegration. Besides the decay of European peasants and
artisans we must here also mention the disintegration of the most varied
primitive forms of production and of social organisation in non-European
countries.

Since capitalist production can develop fully only with complete access
to all territories and climes, it can no more confine itself to the
natural resources and productive forces of the temperate zone than it
can manage with white labour alone. Capital needs other races to exploit
territories where the white man cannot work. It must be able to mobilise
world labour power without restriction in order to utilise all
productive forces of the globe--up to the limits imposed by a system of
producing surplus value. This labour power, however, is in most cases
rigidly bound by the traditional pre-capitalist organisation of
production. It must first be 'set free' in order to be enrolled in the
active army of capital. The emancipation of labour power from primitive
social conditions and its absorption by the capitalist wage system is
one of the indispensable historical bases of capitalism. For the first
genuinely capitalist branch of production, the English cotton industry,
not only the cotton of the Southern states of the American Union was
essential, but also the millions of African Negroes who were shipped to
America to provide the labour power for the plantations, and who later,
as a free proletariat, were incorporated in the class of wage labourers
in a capitalist system.[353] Obtaining the necessary labour power from
non-capitalist societies, the so-called 'labour-problem', is ever more
important for capital in the colonies. All possible methods of 'gentle
compulsion' are applied to solving this problem, to transfer labour from
former social systems to the command of capital. This endeavour leads to
the most peculiar combinations between the modern wage system and
primitive authority in the colonial countries.[354] This is a concrete
example of the fact that capitalist production cannot manage without
labour power from other social organisations.

Admittedly, Marx dealt in detail with the process of appropriating
non-capitalist means of production as well as with the transformation of
the peasants into a capitalist proletariat. Chapter xxiv of _Capital_,
vol. i, is devoted to describing the origin of the English proletariat,
of the capitalistic agricultural tenant class and of industrial capital,
with particular emphasis on the looting of colonial countries by
European capital. Yet we must bear in mind that all this is treated
solely with a view to so-called primitive accumulation. For Marx, these
processes are incidental, illustrating merely the genesis of capital,
its first appearance in the world; they are, as it were, travails by
which the capitalist mode of production emerges from a feudal society.
As soon as he comes to analyse the capitalist process of production and
circulation, he reaffirms the universal and exclusive domination of
capitalist production.

Yet, as we have seen, capitalism in its full maturity also depends in
all respects on non-capitalist strata and social organisations existing
side by side with it. It is not merely a question of a market for the
additional product, as Sismondi and the later critics and doubters of
capitalist accumulation would have it. The interrelations of
accumulating capital and non-capitalist forms of production extend over
values as well as over material conditions, for constant capital,
variable capital and surplus value alike. The non-capitalist mode of
production is the given historical setting for this process. Since the
accumulation of capital becomes impossible in all points without
non-capitalist surroundings, we cannot gain a true picture of it by
assuming the exclusive and absolute domination of the capitalist mode of
production. Sismondi and his school, when they attributed their
difficulties entirely to the problem of realising the surplus value,
indeed revealed a proper sense for the conditions vital to accumulation.
Yet the conditions for augmenting the material elements of constant and
variable capital are quite a different matter from those which govern
the realisation of surplus value. Capital needs the means of production
and the labour power of the whole globe for untrammelled accumulation;
it cannot manage without the natural resources and the labour power of
all territories. Seeing that the overwhelming majority of resources and
labour power is in fact still in the orbit of pre-capitalist
production--this being the historical _milieu_ of accumulation--capital
must go all out to obtain ascendancy over these territories and social
organisations. There is no _a priori_ reason why rubber plantations,
say, run on capitalist lines, such as have been laid out in India, might
not serve the ends of capitalist production just as well. Yet if the
countries of those branches of production are predominantly
non-capitalist, capital will endeavour to establish domination over
these countries and societies. And in fact, primitive conditions allow
of a greater drive and of far more ruthless measures than could be
tolerated under purely capitalist social conditions.

It is quite different with the realisation of the surplus value. Here
outside consumers _qua_ other-than-capitalist are really essential.
Thus the immediate and vital conditions for capital and its accumulation
is the existence of non-capitalist buyers of the surplus value, which is
decisive to this extent for the problem of capitalist accumulation.

Whatever the theoretical aspects, the accumulation of capital, as an
historical process, depends in every respect upon non-capitalist social
strata and forms of social organisation.

The solution to this problem which for almost a century has been the
bone of contention in economic theory thus lies between the two extremes
of the petty-bourgeois scepticism preached by Sismondi, v. Kirchmann,
Vorontsov and Nicolayon, who flatly denied accumulation, and the crude
optimism advocated by Ricardo, Say and Tugan Baranovski who 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 conflict that capitalism needs non-capitalist
social organisations as the setting for its development, that it
proceeds by assimilating the very conditions which alone can ensure its
own existence.

At this point we should revise the conceptions of internal and external
markets which were so important in the controversy about accumulation.
They are both vital to capitalist development and yet fundamentally
different, though they must be conceived in terms of social economy
rather than of political geography. In this light, the internal market
is the capitalist market, production itself buying its own products and
supplying its own elements of production. The external market is the
non-capitalist social environment which absorbs the products of
capitalism and supplies producer goods and labour power for capitalist
production. Thus, from the point of view of economics, Germany and
England traffic in commodities chiefly on an internal, capitalist
market, whilst the give and take between German industry and German
peasants is transacted on an external market as far as German capital is
concerned. These concepts are strict and precise, as can be seen from
the diagram of reproduction. Internal capitalist trade can at best
realise only certain quantities of value contained in the social
product: the constant capital that has been used up, the variable
capital, and the consumed part of the surplus value. That part of the
surplus value, however, which is earmarked for capitalisation, must be
realised elsewhere. If capitalisation of surplus value is the real
motive force and aim of production, it must yet proceed within the
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 capitalisation of surplus
value becomes ever more urgent and precarious, and the substratum of
constant and variable capital becomes an ever-growing mass--both
absolutely and in relation to the surplus value. Hence the contradictory
phenomena that the old capitalist countries provide ever larger markets
for, and become increasingly dependent upon, one another, yet on the
other hand compete ever more ruthlessly for trade relations with
non-capitalist countries.[355] The conditions for the capitalisation of
surplus value clash increasingly with the conditions for the renewal of
the aggregate capital--a conflict which, incidentally, is merely a
counterpart of the contradictions implied in the law of a declining
profit rate.

FOOTNOTES:

[345] 'If capital and the productivity of labour advance and the
standard of capitalist production in general is on a higher level of
development, then there is a correspondingly greater mass of commodities
passing through the market from production to individual and industrial
consumption, greater certainty that each particular capital will find
the conditions for its reproduction available 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
industry for English exports:

In 1893, cotton exports to the amount of £64,000,000 made up 23 per
cent, and iron and other metal exports not quite 17 per cent, of the
total export of manufactured goods, amounting to £277,000,000 in all.

In 1898, cotton exports to the amount of £65,000,000 made up 28 per
cent, and metal exports 22 per cent, of the total export of manufactured
goods, amounting to £233,400,000 in all.

In comparison, the figures for the German Empire show the following
result: In 1898, cotton exports to the amount of £11,595,000 made up
5·75 per cent of the total exports, amounting to £200,500,000.
5,250,000,000 yards 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
to countries 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 of Peru and without the political form of colonial supremacy,
international capital can, to all intents and purposes, enslave the
natives, so that it may appropriate the means of production of the
primitive countries by exploitation on the greatest scale. Since 1900,
this company, financed by English and foreign capitalists, has thrown
upon the London market approximately 4,000 tons of Putumayo rubber.
During this time, 30,000 natives were killed and most of the 10,000
survivors were crippled by beatings.

[351] _Capital_, vol. i, p. 594. Similarly in another passage: 'One part
of the surplus value, of the surplus means of subsistence produced, must
then be converted into variable capital for the purpose of purchasing
new labour. This can only be done if the number of workers grows or if
their working time is prolonged.... This, however, cannot be considered
a ready measure for accumulation. The working population can increase if
formerly unproductive workers are transformed into productive ones, or
if parts of the population who previously performed no work, such as
women, children and paupers, are drawn into the process of production.
Here, however, we shall ignore this aspect. Lastly, the working
population can increase through an absolute increase in population. If
accumulation is to proceed steadily and continuously, it must be
grounded in an absolute growth of the population, though this may
decline in comparison with the capital employed. An expanding population
appears as the basis of accumulation conceived as a steady process. An
indispensable condition for this is an average wage which is adequate
not only to the reproduction of the working population but permits its
continual increase' (_Theorien über den Mehrwert_, vol. ii, part 2, in
the chapter on 'Transformation of Revenue Into Capital' (_Verwandlung
von Revenue in Kapital_), p. 243).

[352] _Capital_, vol. i, pp. 642 ff.

[353] A table published in the United States shortly before the War of
Secession contained the following data about the value of the annual
production of the Slave States and the number of slaves employed--for
the greatest part on cotton plantations:

  _Year_    _Cotton:     _Slaves_
            Dollars_

   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 to _Neue
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
such hybrid forms in the South African diamond mines: 'The most striking
sight at 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 and confined. They are huge inclosures, unroofed, but covered
with a wire netting to prevent anything from being thrown out of them
over the walls, and with a subterranean entrance to the adjoining mine.
The mine is worked on the system of three eight-hour shifts, so that the
workman is never more than eight hours together underground. Round the
interior of the wall are 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 where the work-people can spend their
leisure in learning to read and write. No spirits are sold.... Every
entrance is strictly guarded, and no visitors, white or native, are
permitted, all supplies being obtained from the store within, kept by
the company. The De Beers mine compound contained at the time of my
visit 2,600 natives, belonging to a great variety of tribes, so that
here one 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. They come from every quarter, attracted by the high wages,
usually eighteen to thirty shillings a week, and remain for three months
or more, and occasionally even for longer periods.... In the vast oblong
compound one sees Zulus from Natal, Fingos, Pondos, Tembus, Basutos,
Bechuanas, Gungunhana's subjects 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 in South Africa. Even Bushmen, or at least
natives with some Bushman blood in them, are not wanting. They live
peaceably together, and amuse themselves in their several ways during
their leisure hours. Besides games of chance, we saw a game resembling
"fox and geese" played with pebbles on a board; and music was being
discoursed on two rude native instruments, the so-called "Kaffir piano"
made of pieces of iron of unequal length fastened side 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, the
first beginning of a tune. A very few were reading or writing letters,
the rest busy with their cooking or talking to one another. Some tribes
are incessant talkers, and in this strange mixing-pot of black men one
may hear a dozen languages spoken as one passes from group to group'
(James Bryce, _Impressions of South Africa_, London, 1897, pp. 242 ff.).

After several months of work, the negro as a rule leaves the mine with
the wages 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 lively description of the methods used in South Africa to
solve the 'labour-problem'. Here we are told that the negroes are
compelled to work in the mines and plantations of Kimberley,
Witwatersrand, Natal, Matabeleland, by stripping them of all land and
cattle, i.e. depriving them of their means of existence, by making them
into proletarians and also demoralising them with alcohol. (Later, when
they are already within the 'enclosure' of capital, spirits, to which
they have just been accustomed, are strictly prohibited--the object of
exploitation must be kept fit for use.) Finally, they are simply pressed
into the wage system of capital by force, by imprisonment, and flogging.

[355] The relations between Germany and England provide a typical
example.




_CHAPTER XXVII_

THE STRUGGLE AGAINST NATURAL ECONOMY


Capitalism arises and develops historically amidst a non-capitalist
society. In Western Europe it is found at first in a feudal environment
from which it in fact sprang--the system of bondage in rural areas and
the guild system in the towns--and later, after having swallowed up the
feudal system, it exists mainly in an environment of peasants and
artisans, that is to say in a system of simple commodity production both
in agriculture and trade. European capitalism is further surrounded by
vast territories of non-European civilisation ranging over all levels of
development, from the primitive communist hordes of nomad herdsmen,
hunters and gatherers to commodity production by peasants and artisans.
This is the setting for the accumulation of capital.

We must distinguish three phases: the struggle of capital against
natural economy, the struggle against commodity economy, and the
competitive struggle of capital on the international stage for the
remaining conditions of accumulation.

The existence and development of capitalism requires an environment of
non-capitalist forms of production, but not every one of these forms
will serve its ends. Capitalism needs non-capitalist social strata as a
market for its surplus value, as a source of supply for its means of
production and as a reservoir of labour power for its wage system. For
all these purposes, forms of production based upon a natural economy are
of no use to capital. In all social organisations where natural economy
prevails, where there are primitive peasant communities with common
ownership of the land, a feudal system of bondage or anything of this
nature, economic organisation is essentially in response to the internal
demand; and therefore there is no demand, or very little, for foreign
goods, and also, as a rule, no surplus production, or at least no urgent
need to dispose of surplus products. What is most important, however,
is that, in any natural economy, production only goes on because both
means of production and labour power are bound in one form or another.
The communist peasant community no less than the feudal _corvée_ farm
and similar institutions maintain their economic organisation by
subjecting the labour power, and the most important means of production,
the land, to the rule of law and custom. A natural economy thus
confronts the requirements of capitalism at every turn with rigid
barriers. Capitalism must therefore always and everywhere fight a battle
of annihilation against every historical form of natural economy that it
encounters, whether this is slave economy, feudalism, primitive
communism, or patriarchal peasant economy. The principal methods in this
struggle are political force (revolution, war), oppressive taxation by
the state, and cheap goods; they are partly applied simultaneously, and
partly they succeed and complement one another. In Europe, force assumed
revolutionary forms in the fight against feudalism (this is the ultimate
explanation of the bourgeois revolutions in the seventeenth, eighteenth
and nineteenth centuries); in the non-European countries, where it
fights more primitive social organisations, it assumes the forms of
colonial policy. These methods, together with the systems of taxation
applied in such cases, and commercial relations also, particularly with
primitive communities, form an alliance in which political power and
economic factors go hand in hand.

In detail, capital in its struggle against societies with a natural
economy pursues the following ends:

(1) To gain immediate possession of important sources of productive
forces such as land, game in primeval forests, minerals, precious stones
and ores, products of exotic flora such as rubber, etc.

(2) To 'liberate' labour power and to coerce it into service.

(3) To introduce a commodity economy.

(4) To separate trade and agriculture.

At the time of primitive accumulation, i.e. at the end of the Middle
Ages, when the history of capitalism in Europe began, and right into the
nineteenth century, dispossessing the peasants in England and on the
Continent was the most striking weapon in the large-scale transformation
of means of production and labour power into capital. Yet capital in
power performs the same task even to-day, and on an even more important
scale--by modern colonial policy. It is an illusion to hope that
capitalism will ever be content with the means of production which it
can acquire by way of commodity exchange. In this respect already,
capital is faced with difficulties because vast tracts of the globe's
surface are in the possession of social organisations that have no
desire for commodity exchange or cannot, because of the entire social
structure and the forms of ownership, offer for sale the productive
forces in which capital is primarily interested. The most important of
these productive forces is of course the land, its hidden mineral
treasure, and its meadows, woods and water, and further the flocks of
the primitive shepherd tribes. If capital were here to rely on the
process of slow internal disintegration, it might take centuries. To
wait patiently until the most important means of production could be
alienated by trading in consequence of this process were tantamount to
renouncing the productive forces of those territories altogether. Hence
derives the vital necessity for capitalism in its relations with
colonial countries to appropriate the most important means of
production. Since the primitive associations of the natives are the
strongest protection for their social organisations and for their
material bases of existence, capital must begin by planning for the
systematic destruction and annihilation of all the 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 expansion is accompanied, as a matter of course, by a
relentless battle of capital against the social and economic ties of the
natives, who are also forcibly robbed of their means of production and
labour power. Any hope to restrict the accumulation of capital
exclusively to 'peaceful competition', i.e. to regular commodity
exchange such as takes place between capitalist producer-countries,
rests on the pious belief that capital can accumulate without mediation
of the productive forces and without the demand of more primitive
organisations, and that it can rely upon the slow internal process of a
disintegrating natural economy. Accumulation, with its spasmodic
expansion, can no more wait for, and be content with, a natural internal
disintegration of non-capitalist formations and their transition to
commodity economy, than it can wait for, and be content with, the
natural increase of the working population. Force is the only solution
open to capital; the accumulation of capital, seen as an historical
process, employs force as a permanent weapon, not only at its genesis,
but further on down to the present day. From the point of view of the
primitive societies involved, it is a matter of life or death; for them
there can be no other attitude than opposition and fight to the
finish--complete exhaustion and extinction. Hence permanent occupation
of the colonies by the military, native risings and punitive expeditions
are the order of the day for any colonial regime. The method of
violence, then, is the immediate consequence of the clash between
capitalism and the organisations of a natural economy which would
restrict accumulation. Their means of production and their labour power
no less than their demand for surplus products is necessary to
capitalism. Yet the latter is fully determined to undermine their
independence as social units, in order to gain possession of their means
of production and labour power and to convert them into commodity
buyers. This method is the most profitable and gets the quickest
results, and so it is also the most expedient for capital. In fact, it
is invariably accompanied by a growing militarism whose importance for
accumulation will be demonstrated below in another connection. British
policy in India and French policy in Algeria are the classical examples
of the application of these methods by capitalism.

The ancient economic organisations of the Indians--the communist village
community--had been preserved in their various forms throughout
thousands of years, in spite of all the political disturbances during
their long history. In the sixth century B.C. the Persians invaded the
Indus basin and subjected part of the country. Two centuries later the
Greeks entered and left behind them colonies, founded by Alexander on
the pattern of a completely alien civilisation. Then the savage
Scythians invaded the country, and for centuries India remained under
Arab rule. Later, the Afghans swooped down from the Iran mountains,
until they, too, were expelled by the ruthless onslaught of Tartar
hordes. The Mongols' path was marked by terror and destruction, by the
massacre of entire villages--the peaceful countryside with the tender
shoots of rice made crimson with blood. And still the Indian village
community survived. For none of the successive Mahometan conquerors had
ultimately violated the internal social life of the peasant masses and
its traditional structure. They only set up their own governors in the
provinces to supervise military organisation and to collect taxes from
the population. All conquerors pursued the aim of dominating and
exploiting the country, but none was interested in robbing the people of
their productive forces and in destroying their social organisation. In
the Moghul Empire, the peasant had to pay his annual tribute in kind to
the foreign ruler, but he could live undisturbed in his village and
could cultivate his rice on his _sholgura_ as his father had done before
him. Then came the British--and the blight of capitalist civilisation
succeeded in disrupting the entire social organisation of the people; it
achieved in a short time what thousands of years, what the sword of the
Nogaians, had failed to accomplish. The ultimate purpose of British
capital was to possess itself of the very basis of existence of the
Indian community: the land.

This end was served above all by the fiction, always popular with
European colonisers, that all the land of a colony belongs to the
political ruler. In retrospect, the British endowed the Moghul and his
governors with private ownership of the whole of India, in order to
'legalise' their succession. Economic experts of the highest repute,
such as James Mill, duly supported this fiction with 'scientific'
arguments, so in particular with the famous conclusion given below.[356]

As early as 1793, the British in Bengal gave landed property to all the
_zemindars_ (Mahometan tax collectors) or hereditary market
superintendents they had found in their district so as to win native
support for the campaign against the peasant masses. Later they adopted
the same policy for their new conquests in the Agram province, in Oudh,
and in the Central Provinces. Turbulent peasant risings followed in
their wake, in the course of which tax collectors were frequently driven
out. In the resulting confusion and anarchy British capitalists
successfully appropriated a considerable portion of the land.

The burden of taxation, moreover, was so ruthlessly increased that it
swallowed up nearly all the fruits of the people's labour. This went to
such an extreme in the Delhi and Allahabad districts that, according to
the official evidence of the British tax authorities in 1854, the
peasants found it convenient to lease or pledge their shares in land for
the bare amount of the tax levied. Under the auspices of this taxation,
usury came to the Indian village, to stay and eat up the social
organisation from within like a canker.[357] In order to accelerate
this process, the British passed a law that flew in the face of every
tradition and justice known to the village community: compulsory
alienation of village land for tax arrears. In vain did the old family
associations try to protect themselves by options on their hereditary
land and that of their kindred. There was no stopping the rot. Every day
another plot of land fell under the hammer; individual members withdrew
from the family unit, and the peasants got into debt and lost their
land.

The British, with their wonted colonial stratagems, tried to make it
appear as if their power policy, which had in fact undermined the
traditional forms of landownership and brought about the collapse of the
Hindu peasant economy, had been dictated by the need to protect the
peasants against native oppression and exploitation and served to
safeguard their own interests.[358] Britain artificially created a
landed aristocracy at the expense of the ancient property-rights of the
peasant communities, and then proceeded to 'protect' the peasants
against these alleged oppressors, and to bring this illegally usurped
land into the possession of British capitalists.

Thus large estates developed in India in a short time, while over large
areas the peasants in their masses were turned into impoverished small
tenants with a short-term lease.

Lastly, one more striking fact shows the typically capitalist method of
colonisation. The British were the first conquerors of India who showed
gross indifference to public utilities. Arabs, Afghans and Mongols had
organised and maintained magnificent works of canalisation in India,
they had given the country a network of roads, spanned the rivers with
bridges and seen to the sinking of wells. Timur or Tamerlane, the
founder of the Mongol dynasty in India, had a care for the cultivation
of the soil, for irrigation, for the safety of the roads and the
provision of food for travellers.[359] The primitive Indian Rajahs, the
Afghan or Mongol conquerors, at any rate, in spite of occasional cruelty
against individuals, made their mark with the marvellous constructions
we can find to-day at every step and which seem to be the work of a
giant race. 'The (East India) Company which ruled India until 1858 did
not make one spring accessible, did not sink a single well, nor build a
bridge for the benefit of the Indians.'[360]

Another witness, the Englishman James Wilson, says: 'In the Madras
Province, no-one can help being impressed by the magnificent ancient
irrigation systems, traces of which have been preserved until our time.
Locks and weirs dam the rivers into great lakes, from which canals
distribute the water for an area of 60 or 70 miles around. On the large
rivers, there are 30 to 40 of such weirs.... The rain water from the
mountains was collected in artificial ponds, many of which still remain
and boast circumferences of between 15 and 25 miles. Nearly all these
gigantic constructions were completed before the year 1750. During the
war between the Company and the Mongol rulers--and, be it said, _during
the entire period of our rule in India_--they have sadly decayed.'[361]

No wonder! British capital had no object in giving the Indian
communities economic support or helping them to survive. Quite the
reverse, it aimed to destroy them and to deprive them of their
productive forces. The unbridled greed, the acquisitive instinct of
accumulation must by its very nature take every advantage of the
'conditions of the market' and can have no thought for the morrow. It is
incapable of seeing far enough to recognise the value of the economic
monuments of an older civilisation. (Recently British engineers in Egypt
feverishly tried to discover traces of an ancient irrigation system
rather like the one a stupid lack of vision had allowed to decay in
India, when they were charged with damming the Nile on a grand scale in
furtherance of capitalist enterprise.) Not until 1867 was England able
to appreciate the results of her noble efforts in this respect. In the
terrible famine of that year a million people were killed in the Orissa
district alone; and Parliament was shocked into investigating the causes
of the emergency. The British government has now introduced
administrative measures in an attempt to save the peasant from usury.
The Punjab Alienation Act of 1900 made it illegal to sell or mortgage
peasant lands to persons other than of the peasant caste, though
exceptions can be made in individual cases, subject to the tax
collector's approval.[362] Having deliberately disrupted the protecting
ties of the ancient Hindu social associations, after having nurtured a
system of usury where nothing is thought of a 15 per cent charge of
interest, the British now entrust the ruined Indian peasant to 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 rule claims pride
of place in the annals of capitalist colonisation. When the French
conquered Algeria, ancient social and economic institutions 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 country they 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 and usurers. Large rural areas may
have been seized by the State under Turkish suzerainty--yet nearly half
of the productive land is jointly held by Arab and Kabyle tribes who
still keep up the ancient patriarchal customs. Many Arab families led
the same kind of nomad life in the nineteenth century as they had done
since time immemorial, an existence that appears restless and irregular
only to the superficial observer, but one that is in fact strictly
regulated and extremely monotonous. In summer they were wont, man, woman
and child, to take their herds and tents and migrate to the sea-swept
shores of the Tell district; and in the winter they would move back
again to the protective warmth of the desert. They travelled along
definite routes, and the summer and winter stations were fixed for every
tribe and family. The fields of those Arabs who had settled on the land
were in most cases the joint property of the clans, and the great Kabyle
family associations also lived according to old traditional rules under
the patriarchal guidance of their elected heads.

The women would take turns for household duties; a matriarch, again
elected by the family, being in complete charge of the clan's domestic
affairs, or else the women taking turns of duty. This organisation of
the Kabyle clans on the fringe of the African desert bears a startling
resemblance to that of the famous Southern Slavonic _Zadruga_--not only
the fields but all the tools, weapons and monies, all that the members
acquire or need for their work, are communal property of the clan.
Personal property is confined to one suit of clothing, and in the case
of a woman to the dresses and ornaments of her dowry. More valuable
attire and jewels, however, are considered common property, and
individuals were allowed to use them only if the whole family approved.
If the clan was not too numerous, meals were taken at a common table;
the women took it in turns to cook, but the eldest were entrusted with
the dishing out. If a family circle was too large, the head of the
family would each month ration out strictly proportionate quantities of
uncooked food to the individual families who then prepared them. These
communities were bound together by close ties of kinship, mutual
assistance and equality, and a patriarch would implore his sons on his
deathbed to remain faithful to the family.[363]

These social relations were already seriously impaired by the rule of
the Turks, established in Algeria in the sixteenth century. Yet the
Turkish exchequer had by no means confiscated all the land. That is a
legend invented by the French at a much later date. Indeed, only a
European mind is capable of such a flight of fancy which is contrary to
the entire economic foundation of Islam both in theory and practice. In
truth, the facts were quite different. The Turks did not touch the
communal fields of the village communities. They merely confiscated a
great part of uncultivated land from the clans and converted it into
crownland under Turkish local administrators (_Beyliks_). The state
worked these lands in part with native labour, and in part they were
leased out on rent or against payment in kind. Further the Turks took
advantage of every revolt of the subjected families and of every
disturbance in the country to add to their possessions by large-scale
confiscation of land, either for military establishments or for public
auction, when most of it went to Turkish or other usurers. To escape
from the burden of taxation and confiscation, many peasants placed
themselves under the protection of the Church, just as they had done in
medieval Germany. Hence considerable areas became Church-property. All
these changes finally resulted in the following distribution of Algerian
land at the time of the French conquest: crownlands occupied nearly
3,750,000 acres, and a further 7,500,000 acres of uncultivated land as
common property of All the Faithful (_Bled-el-Islam_). 7,500,000 acres
had been privately owned by the Berbers since Roman times, and under
Turkish rule a further 3,750,000 acres had come into private ownership,
a mere 12,500,000 acres remaining communal property of individual Arab
clans. In the Sahara, some of the 7,500,000 acres fertile land near the
Sahara Oases was communally owned by the clans and some belonged to
private owners. The remaining 57,000,000 acres were mainly waste land.

With their conquest of Algeria, the French made a great ado about their
work of civilisation, since the country, having shaken off the Turkish
yoke at the beginning of the eighteenth century, was harbouring the
pirates who infested the Mediterranean and trafficked in Christian
slaves. Spain and the North American Union in particular, themselves at
that time slave traders on no mean scale, declared relentless war on
this Moslem iniquity. France, in the very throes of the Great
Revolution, proclaimed a crusade against Algerian anarchy. Her
subjection of that country was carried through under the slogans of
'combating slavery' and 'instituting orderly and civilised conditions'.
Yet practice was soon to show what was at the bottom of it all. It is
common knowledge that in the forty years following the subjection of
Algeria, no European state suffered so many changes in its political
system as France: the restoration of the monarchy was followed by the
July Revolution and the reign of the 'Citizen King', and this was
succeeded by the February 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 the large
middle classes in general gained political ascendancy. Yet French
policy in Algeria remained undeflected by this succession of events; it
pursued a single aim from beginning to end; at the fringe of the African
desert, it demonstrated plainly that all the political revolutions in
nineteenth-century France centred in a single basic interest: the rule
of a capitalist bourgeoisie and its institutions of ownership.

'The bill submitted for your consideration', said Deputy Humbert on June
30, 1873, in the Session of the French National Assembly as spokesman
for the Commission for Regulating Agrarian Conditions in Algeria, 'is
but the crowning touch to an edifice well-founded on a whole series of
ordinances, edicts, laws and decrees of the Senate which together and
severally have as the same object: the establishment of private property
among the Arabs.'

In spite of the ups and downs of internal French politics French
colonial policy persevered for fifty years in its systematic and
deliberate efforts to destroy and disrupt communal property. It served
two distinct purposes: The break-up of communal property was primarily
intended to smash the social power of the Arab family associations and
to quell their stubborn resistance against the French yoke, in the
course of which there were innumerable risings so that, in spite of
France's military superiority, the country was in a continual state of
war.[364] Secondly, communal property had to be disrupted in order to
gain the economic assets of the conquered country; the Arabs, that is to
say, had to be deprived of the land they had owned for a thousand years,
so that French capitalists could get it. Once again the fiction we know
so well, that under Moslem law all land belongs to the ruler, was
brought into play. Just as the English had done in British India, so
Louis Philippe's governors in Algeria declared the existence of communal
property owned by the clan to be 'impossible'. This fiction served as an
excuse to claim for the state most of the uncultivated areas, and
especially the commons, woods and meadows, and to use them for purposes
of colonisation. A complete system of settlement developed, the
so-called _cantonments_ which settled French colonists on the clan land
and herded the tribes into a small area. Under the decrees of 1830,
1831, 1840, 1844, 1845 and 1846 these thefts of Arab family land were
legalised. Yet this system of settlement did not actually further
colonisation; it only bred wild speculation and usury. In most instances
the Arabs managed to buy back the land that had been taken from them,
although they were thus incurring heavy debts. French methods of
oppressive taxation had the same tendency, in particular the law of June
16, 1851, proclaiming all forests to be state property, which robbed the
natives of 6,000,000 acres of pasture and brushwood, and took away the
prime essential for animal husbandry. This spate of laws, ordinances and
regulations wrought 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 ultimately
recovering them. Quite often they sold the same plot to two or three
buyers at a time, and what is more, it was quite often inalienable
family land and did not even belong to them. A company of speculators
from Rouen, e.g., believed that they had bought 50,000 acres, but in
fact they had only acquired a disputed title to 3,425 acres. There
followed an infinite number of lawsuits in which the French courts
supported on principle all partitions and claims of the buyers. In these
uncertain conditions, speculation, usury and anarchy were rife. But
although the introduction of French colonists in large numbers among the
Arab population had aimed at securing support for the French government,
this scheme failed miserably. Thus, under the Second Empire, French
policy tried another tack. The government, with its European lack of
vision, had stubbornly denied the existence of communal property for
thirty years, but it had learned better at last. By a single stroke of
the pen, joint family property was officially recognised and condemned
to be broken up. This is the double significance of the decree of the
Senate dated April 22, 1864. General Allard declared in the Senate:

'The government does not lose sight of the fact that the general aim of
its policy is to weaken the influence of the tribal chieftains and to
dissolve the family associations. By this means, it will sweep away the
last remnants of feudalism [_sic!_] defended by the opponents of the
government bill.... The surest method of accelerating the process of
dissolving the family associations will be to institute private
property and to settle European colonists among the Arab families.'[365]

The law of 1863 created special Commissions for cutting up the landed
estates, consisting of the Chairman, either a Brigadier-General or
Colonel, one _sous-préfet_, one representative of the Arab military
authorities and an official bailiff. These natural experts on African
economics and social conditions were faced with the threefold task,
first of determining the precise boundaries of the great family estates,
secondly to distribute the estates of each clan among its various
branches, and finally to break up this family land into separate private
allotments. This expedition of the Brigadiers into the interior of
Africa duly took place. The Commissions proceeded to their destinations.
They were to combine the office of judge in all land disputes with that
of surveyor and land distributor, the final decision resting with the
Governor-General of Algeria. Ten years' valiant efforts by the
Commissions yielded the following result: between 1863 and 1873, of 700
hereditary estates, 400 were shared out among the branches of each clan,
and the foundations for future inequalities between great landed estates
and small allotments were thus laid. One family, in fact, might receive
between 2·5 and 10 acres, while another might get as much as 250 or even
450 acres, depending on the size of the estate and the number of
collaterals within the clan. Partition, however, stopped at that point.
Arab customs presented unsurmountable difficulties to a further division
of family land. In spite of Colonels and Brigadiers, French policy had
again failed in its object to create private 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 its goal and to attack
the problem from the other end, disdaining the preliminaries of the
Second Empire. In 1873, the National Assembly worked out a law with the
avowed intention immediately to split up the entire estates of all the
700 Arab clans, and forcibly to institute private property in the
shortest possible time. Desperate conditions in the colony were the
pretext for this measure. It had taken the great Indian famine of 1866
to awaken the British public to the marvellous exploits of British
colonial policy and to call for a parliamentary investigation; and
similarly, Europe was alarmed at the end of the sixties by the crying
needs of Algeria where more than forty years of French rule culminated
in wide-spread famine and a disastrous mortality rate among the Arabs. A
commission of inquiry was set up to recommend new legislation with which
to bless the Arabs: it was unanimously resolved that there was only one
life-buoy for them--the institution of private property; that alone
could save the Arab from destitution, since he would then always 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 French land robberies and oppressive
taxation, was to deliver them completely into the hands of the usurers.
This farce was expounded in all seriousness before the National Assembly
and was 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 served to support
the new law: those in favour of the bill emphasised over and over again
that the Arabs themselves urgently desired the introduction of private
property. And so they did, or rather the Algerian land speculators and
usurers did, since they were vitally interested in 'liberating' their
victims from the protection of the family ties. As long as Moslem law
prevailed in Algeria, hereditary clan and family lands were inalienable,
which laid insuperable difficulties in the way of anyone who wished to
mortgage his land. The law of 1863 had merely made a breach in these
obstacles, and the issue now at stake was their complete abolition so as
to give a free hand to the usurers. The second argument was
'scientific', part of the same intellectual equipment from which that
worthy, James Mill, had drawn for his abstruse conclusions regarding
Indian relations of ownership: English classical economics. Thoroughly
versed in their masters' teachings, the disciples of Smith and Ricardo
impressively declaimed that private property is indispensable for the
prevention of famines in Algeria, for more intensive and better
cultivation of the land, since obviously no one would be prepared to
invest capital or intensive labour in a piece of land which does not
belong to him and whose produce is not his own to enjoy. But the facts
spoke a different language. They proved that the French speculators
employed the private property they had created in Algeria for anything
but the more intensive and improved cultivation of the soil. In 1873,
1,000,000 acres were French property. But the capitalist companies, the
Algerian and Setif Company which owned 300,000 acres, did not cultivate
the land at all but leased it to the natives who tilled it in the
traditional manner, nor were 25 per cent of the other French owners
engaged in agriculture. It was simply impossible to conjure up
capitalist investments and intensive agriculture overnight, just as
capitalist conditions in general could not be created out of nothing.
They existed only in the imagination of profit-seeking French
speculators, and in the benighted doctrinaire visions of their
scientific economists. The essential point, shorn of all pretexts and
flourishes which seem to justify the law of 1873, was simply the desire
to deprive the Arabs of their land, their livelihood. And although these
arguments had worn threadbare and were evidently insincere, this law
which was to put 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 policy of the
Third Republic miscarried because of the difficulties in substituting at
one stroke bourgeois private property for the ancient clan communism,
just as the policy of the Second Empire had come to grief over the same
issue. In 1890, when the law of July 26, 1873, supplemented by a second
law on April 28, 1887, had been in force for seventeen years, 14,000,000
francs had been spent on dealing with 40,000,000 acres. It was estimated
that the process would not be completed before 1950 and would require a
further 60,000,000 francs. And still abolition of clan 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 economic ruin of the natives.

Since it had been impossible to institute private property by force, a
new experiment was undertaken. The laws of 1873 and 1887 had been
condemned by a commission appointed for their revision by the Algerian
government in 1890. It was another seven years before the legislators on
the Seine made the effort to consider reforms for the ruined country.
The new decree of the Senate refrained in principle from instituting
private property by compulsion or administrative measures. The laws of
February 2, 1897, and the edict of the Governor-General of Algeria
(March 3, 1898) both provided chiefly for the introduction of private
property following a voluntary application by the prospective purchaser
or owner.[366] But there were clauses to permit a single owner, without
the consent of the others, to claim private property; further, such a
'voluntary' application can be extorted at any convenient moment if the
owner is in debt and the usurer exerts pressure. And so the new law left
the doors wide open for French and native capitalists further to disrupt
and exploit the hereditary and clan lands.

Of recent years, this mutilation of Algeria which had been going on for
eight decades meets with even less opposition, since the Arabs,
surrounded as they are by French capital following the subjection of
Tunisia (1881) and the recent conquest of Morocco, have been rendered
more and more helpless. The latest result of the French regime in
Algeria is an Arab exodus into Turkey.[367]

FOOTNOTES:

[356] Mill, in his _History of British India_, substantiates the thesis
that under primitive conditions the land belongs always and everywhere
to the sovereign, on evidence collected at random and quite
indiscriminately from the most varied sources (Mungo Park, Herodotus,
Volney, Acosta, Garcilasso de la Vega, Abbé Grosier, Barrow, Diodorus,
Strabo and others). Applying this thesis to India, he goes on to say:
'From these facts only one conclusion can be drawn, that the property of
the soil resided in the sovereign; for if it did 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's editor, H.
H. Wilson who, as Professor of Sanskrit at Oxford University, was
thoroughly versed in the legal relations of Ancient India, gives an
interesting commentary to this classical deduction. Already in his
preface he characterises the author as a partisan who has juggled with
the whole history of 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 Hindus which in no way resembles the original and
almost outrages humanity. He appends the following footnote to our
quotation: 'The greater part of the text and of the notes here is wholly
irrelevant. The illustrations drawn from the Mahometan practice,
supposing them to be correct, have nothing to do with the laws and
rights of the Hindus. They are not, however, even accurate and Mr.
Mill's guides have misled him.' Wilson then contests outright the theory
of the sovereign's right of ownership in land, especially with reference
to India. (Ibid., p. 305, footnote.) Henry Maine, too, is of the opinion
that the British attempted to derive their claim to Indian land from the
Mahometans in the first place, and he recognises this claim to be
completely unjustified. 'The assumption which the English first made was
one which they inherited from their Mahometan predecessors. It was that
all the soil belonged in absolute property to the sovereign,--and that
all private property in land existed by his sufferance. The Mahometan
theory and the corresponding Mahometan practice had put out of sight the
ancient view of the sovereign's rights which, though it assigned to him
a far larger share of the produce of the land than any Western ruler has
ever claimed, yet in nowise denied the existence of private property in
land' (_Village Communities in the East and West_ (5th edition, vol. 2,
1890), p. 104). Maxim Kovalevski, on the other hand, has proved
thoroughly that this alleged 'Mahometan theory and practice' is an
exclusively British legend. (Cf. his excellent study, written in
Russian, _On the Causes, the Development and the Consequences of the
Disintegration of Communal Ownership of Land_ (Moscow, 1879), part i.)
Incidentally, British experts and their French colleagues at the time of
writing maintain an analogous legend about China, for example, asserting
that all the land there had been the Emperor's property. (Cf. the
refutation of this legend by Dr. O. Franke, _Die Rechtsverhältnisse am
Grundeigentum in China_, 1903.)

[357] 'The partitions of inheritances and execution for debt levied on
land are destroying the communities--this is the formula heard nowadays
everywhere in India' (Henry Maine, op. cit., p. 113).

[358] This view of British colonial policy, expounded e.g. by Lord
Roberts of Kandahar (for many years a representative of British power in
India) is typical. He can give no other explanation for the Sepoy Mutiny
than mere 'misunderstandings' of the paternal intentions of the British
rulers. '... the alleged unfairness of what was known in India as the
land settlement, under which system the right and title of each
landholder to his property was examined, and the amount of revenue to be
paid by him to the paramount Power, as owner of the soil, was regulated
... as peace and order were established, the system of land revenue,
which had been enforced in an extremely oppressive and corrupt manner
under successive Native Rulers and dynasties, had to be investigated and
revised. With this object in view, surveys were made, and inquiries
instituted into the rights of ownership and occupancy, the result being
that in many cases it was found that families of position and influence
had either appropriated the property of their humbler neighbours, or
evaded an assessment proportionate to the value of their estates.
Although these inquiries were carried out with the best intentions, they
were extremely distasteful to the higher classes, while they failed to
conciliate the masses. The ruling families deeply resented our
endeavours to introduce an equitable determination of rights and
assessment of land revenue.... On the other hand, although the
agricultural population greatly benefited by our rule, they could not
realise the benevolent intentions of a Government which tried to elevate
their position and improve their prospects' (_Forty One Years in India_,
London, 1901, p. 233).

[359] In his _Maxims on Government_ (translated from the Persian into
English in 1783), Timur says: 'And I commanded that they should build
places of worship, and monasteries in every city; and that they should
erect structures for the reception of travellers on the high roads, and
that they should make bridges across the rivers.

'And I commanded that the ruined bridges should be repaired; and that
bridges should be constructed over the rivulets, and over the rivers;
and that on the roads, at the distance of one stage from each other,
Kauruwansarai should be erected; and that guards and watchmen should be
stationed on the road, and that in every Kauruwansarai people should be
appointed to reside....

'And I ordained, whoever undertook the cultivation of waste lands, or
built an aqueduct, or made a canal, or planted a grove, or restored to
culture a deserted district, that in the first year nothing should be
taken from him, and that in the second year, whatever the subject
voluntarily offered should be received, and that in the third year,
duties should be collected according 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 remote period 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
children to live in unity, according to the example of their elders.
This is his last exhortation, his dearest wish' (A. Hanotaux et A.
Letournaux, _La Kabylie et les Coûtumes Kabyles_, vol. ii, 1873, 'Droit
Civil', pp. 468-73). The authors, by the way, appraised this impressive
description of communism in the clan with this peculiar sentence:
'Within the industrious fold of the family association, all are united
in a common purpose, all work for the general interest--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 are the lever of all opposition against our rule' (Deputy Didier in
the National Assembly of 1851).

[365] Quoted by Kovalevski, op. cit., p. 217. Since the Great
Revolution, of course, it had become the fashion in France to dub all
opposition to the government 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
the Reform of the 'Indigenat' (Administrative Justice) in Algeria,
stated in his speech to the French Chamber of Deputies that thousands of
Algerians were migrating from the Setif district, and that 1,200 natives
had emigrated from Tlemcen during the last year, their destination being
Syria. One immigrant wrote from his new home: 'I have now settled in
Damascus and am perfectly happy. There are many Algerians here in Syria
who, like me, have emigrated. The government has given us land and
facilities to cultivate it.' The Algerian government combats this
exodus--by denying passports to prospective emigrants. (Cf. _Journal
Officiel_, June 21, 1912, pp. 1594 ff.)




_CHAPTER XXVIII_

THE INTRODUCTION OF COMMODITY ECONOMY


The second condition of importance for acquiring means of production and
realising the surplus value is that commodity exchange and commodity
economy should be introduced in societies based on natural economy as
soon as their independence has been abrogated, or rather in the course
of this disruptive process. Capital requires to buy the products of, and
sell its commodities to, all non-capitalist strata and societies. Here
at last we seem to find the beginnings of that 'peace' and 'equality',
the _do ut des_, mutual interest, 'peaceful competition' and the
'influences of civilisation'. For capital can indeed deprive alien
social associations of their means of production by force, it can compel
the workers to submit to capitalist exploitation, but it cannot force
them to buy its commodities or to realise its surplus value. In
districts where natural economy formerly prevailed, the introduction of
means of transport--railways, navigation, canals--is vital for the
spreading of commodity economy, a further hopeful sign. The triumphant
march of commodity economy thus begins in most cases with magnificent
constructions of modern transport, such as railway lines which cross
primeval forests and tunnel through the mountains, telegraph wires which
bridge the deserts, and ocean liners which call at the most outlying
ports. But it is a mere illusion that these are peaceful changes. Under
the standard of commerce, the relations between the East India Company
and the spice-producing countries were quite as piratical, extortionate
and blatantly fraudulent as present-day relations between American
capitalists 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 backward countries. Throughout the nineteenth
century, beginning with the early forties, her history has been
punctuated by wars with the object of opening her up to trade by brute
force. Missionaries provoked persecutions of Christians, Europeans
instigated risings, and in periodical massacres a completely helpless
and peaceful agrarian population was forced to match arms with the most
modern capitalist military technique of all the Great Powers of Europe.
Heavy war contributions necessitated a public debt, China taking up
European loans, resulting in European control over her finances and
occupation of her fortifications; the opening of free ports was
enforced, railway concessions to European capitalists extorted. By all
these measures commodity exchange was fostered in China, from the early
thirties of the last century until the beginning of the Chinese
revolution.

European civilisation, that is to say commodity exchange with European
capital, made its first impact on China with the Opium Wars when she was
compelled to buy the drug from Indian plantations in order to make money
for British capitalists. In the seventeenth century, the East India
Company had introduced the cultivation of poppies in Bengal; the use of
the drug was disseminated in China by its Canton branch. At the
beginning of the nineteenth century, opium fell so considerably in price
that it rapidly became the 'luxury of the people'. In 1821, 4,628 chests
of opium were imported to China at an average price of £265; then the
price fell by 50 per cent, and Chinese imports rose to 9,621 chests in
1825, and to 26,670 chests in 1830.[368] The deadly effects of the drug,
especially of the cheaper kinds used by the poorer population, became a
public calamity and made it necessary for China to lay an embargo on
imports, as an emergency measure. Already in 1828, the viceroy of Canton
had prohibited imports of opium, only to deflect the trade to other
ports. One of the Peking censors commanded to investigate the question
gave the following report:

'I have learnt that people who smoke opium have developed such a
craving for this noxious drug that they make every effort to obtain this
gratification. If they do not get their opium at the usual hour, their
limbs begin to tremble, they break out in sweat, and they cannot perform
the slightest tasks. But as soon as they are given the pipe, they inhale
a few puffs and are cured immediately.

'Opium has therefore become a necessity for all who smoke it, and it is
not surprising that under cross-examination by the local authorities
they will submit to every punishment rather than reveal the names of
their suppliers. Local authorities are also in some cases given presents
to tolerate the evil or to delay any investigation already under way.
Most merchants who bring goods for sale into Canton also deal in
smuggled opium.

'I am of the opinion that opium is by far a greater evil than gambling,
and that opium smokers should therefore be punished no less than
gamblers.'

The censor suggested that every convicted opium smoker should be
sentenced to eighty strokes of the bamboo, and anybody refusing to give
the name of his supplier to a hundred strokes and three years of exile.
The pigtailed Cato of Peking concludes his report with a frankness
staggering to any European official: 'Apparently opium is mostly
introduced from abroad by dishonest officials in connivance with
profit-seeking merchants who transport it into the interior of the
country. Then the first to indulge are people of good family, wealthy
private persons and merchants, but ultimately the drug habit spreads
among the common people. I have learnt that in all provinces opium is
smoked not only in the civil service but also in the army. The officials
of the various districts indeed enjoin the legal prohibition of sale by
special edicts. But at the same time, their parents, families,
dependants and servants simply go on smoking opium, and the merchants
profit from the ban by increased prices. Even the police have been won
over; they buy the stuff instead of helping to suppress it, and this is
an additional reason for the disregard in which all prohibitions and
ordinances are held.'[369]

Consequently, a stricter law was passed in 1833 which made every opium
smoker liable to a hundred strokes and two months in the stocks, and
provincial governors were ordered to report annually on their progress
in the battle against opium. But there were two sequels to this
campaign: on the one hand large-scale poppy plantations sprang up in the
interior, particularly in the Honan, 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' to
European civilisation--by the opium pipe.

Canton was the first objective. The fortifications of the town at the
main arm of the Perl estuary could not have been more primitive. Every
day at sunset a barrier of iron chains was attached to wooden rafts
anchored at various distances, and this was the main defence. Moreover,
the Chinese guns could only fire at a certain angle and were therefore
completely ineffectual. With such primitive defences, just adequate to
prevent a few merchant ships from landing, did the Chinese meet the
British attack. A couple of British cruisers, then, sufficed to effect
an entry on September 7, 1839. The sixteen battle-junks and thirteen
fire-ships which the Chinese put up for resistance were shot up or
dispersed in a matter of forty-five minutes. After this initial victory,
the British renewed the attack in the beginning of 1841 with a
considerably reinforced fleet. This time the fleet, consisting in a
number of battle-junks, and the forts were attacked simultaneously. The
first incendiary rocket that was fired penetrated through the armour
casing of a junk into the powder chamber and blew the ship with the
entire crew sky-high. In a short time eleven junks, including the
flag-ship, were destroyed, and the remainder precipitately made for
safety. The action on land took a little longer. Since the Chinese guns
were quite useless, the British walked right through the fortifications,
climbed to a strategic position--which was not even guarded--and
proceeded to slaughter the helpless Chinese from above. The casualty
list of the battle was: for the Chinese 600 dead, and for the British, 1
dead and 30 wounded, more than half of the latter having been injured by
the accidental explosion of a powder magazine. A few weeks later, there
followed another British exploit. The forts of Anung-Hoy and North
Wantong were to be taken. No less than twelve fully equipped 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 British calmly landed a battery of howitzers
to bombard the fort from one side, the cruisers shelling it from the
other. After that, the Chinese were driven from the forts in a matter of
minutes, and the landing met with no resistance. The ensuing display of
inhumanity--an English report says--will be for ever deeply deplored by
the British staff. The Chinese, trying to escape from the barricades,
had fallen into a moat which was soon literally filled to the brim with
helpless soldiers begging for mercy. Into this mass of prostrate human
bodies, the sepoys--acting against orders, it is claimed--fired again
and again. This is the way in which Canton was made receptive to
commodity exchange.

Nor did the other ports fare better. On July 4, 1841, three British
cruisers with 120 cannon appeared off the islands in the entrance to the
town of Ningpo. More cruisers arrived the following day. In the evening
the British admiral sent a message to the Chinese governor, demanding
the capitulation of the island. The governor explained that he had no
power to resist but could not surrender without orders from Peking. He
therefore asked for a delay. This was refused, and at half-past two in
the morning the British stormed the defenceless island. Within eight
minutes, the fort and the houses on the shore were reduced to
smouldering rubble. Having landed on the deserted coast littered with
broken spears, sabres, shields, rifles and a few dead bodies, the troops
advanced on the walls of the island town of Tinghai. With daybreak,
reinforced by the crews of other ships which had meanwhile arrived, they
proceeded to put scaling-ladders to the scarcely defended ramparts. A
few more minutes gave them mastery of the town. This splendid victory
was announced with becoming modesty in an Order of the Day: 'Fate has
decreed that the morning of July 5, 1841, should be the historic date on
which Her Majesty's flag was first raised over the most beautiful island
of the Celestial Empire, the first European flag to fly triumphantly
above this lovely countryside.'[370]

On August 25, 1841, the British approached the town of Amoy, whose forts
were armed with a hundred of the heaviest Chinese guns. These guns being
almost useless, and the commanders lacking in resource, the capture of
the harbour was child's play. Under cover of a heavy barrage, British
ships drew near the walls of Kulangau, landed their marines, and after
a short stand the Chinese troops were driven out. The twenty-six
battle-junks with 128 guns in the harbour were also captured, their
crews having fled. One battery, manned by Tartars, heroically held out
against the combined fire of three British ships, but a British landing
was effected in their rear and the post wiped out.

This was the finale of the notorious Opium War. By the peace treaty of
August 27, 1842, the island of Hongkong was ceded to Britain. 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 against China. This time, Britain had joined forces
with the French. In 1857, the allied navies captured Canton with a
heroism equal to that of the first war. By the peace of Tientsin (1858),
the opium traffic, European commerce and Christian missions were
admitted into the interior. Already in 1859, however, the British
resumed hostilities and attempted to destroy the Chinese fortifications
on the Peiho river, but were driven off after a fierce battle in which
464 people were wounded or killed.[371]

After that, Britain and France again joined forces. At the end of August
1860, 12,600 English and 7,500 French troops under General
Cousin-Montauban first captured the Taku forts without a single shot
having been fired. Then they proceeded towards Tientsin and on towards
Peking. A bloody battle was joined at Palikao, and Peking fell to the
European Powers. Entering the almost depopulated and completely
undefended city, the victors began by pillaging the Imperial Palace,
manfully helped by General Cousin himself, who was later to become field
marshal and Count of Palikao. Then the Palace went up in flames, fired
on Lord Elgin's order as an imposed penance.[372]

The European Powers now obtained concessions to set up embassies in
Peking, and to start trading with Tientsin and other towns. The Tchi-fu
Convention of 1876 guaranteed full facilities for importing opium into
China--at a time when the Anti-Opium League in England agitated against
the spreading of the drug habit in London, Manchester and other
industrial districts, when a parliamentary commission declared the
consumption of opium to be harmful in the extreme. By all treaties made
at that time between China and the Great Powers any European, whether
merchant or missionary, was guaranteed the right to acquire land, to
which end the legitimate arguments were ably supported by deliberate
fraud.

First and foremost the ambiguity of the treaty texts made a convenient
excuse for European capital to encroach beyond the Treaty Ports. It used
every loophole in the wording of the treaties to begin with, and
subsequently blackmailed the Chinese government into permitting the
missions to acquire land not alone in the Treaty Ports but in all the
provinces of the realm. Their claim was based upon the notorious
bare-faced distortion of the Chinese original in Abbé Delamarre's
official translation of the supplementary convention with France. French
diplomacy, and the Protestant missions in particular, unanimously
condemned the crafty swindle of the Catholic padre, but nevertheless
they were firm that the rights of French missions obtained by this fraud
should be explicitly extended to the Protestant missions as well.[373]

China's entry into commodity exchange, having begun with the Opium Wars,
was finally accomplished with a series of 'leases' and the China
campaign of 1900, when the commercial interests of European capital sank
to a brazen international dogfight over Chinese land. The description of
the Dowager Empress, who wrote to Queen Victoria after the capture of
the Taku forts, subtly underlines this contrast between the initial
theory and the ultimate practice of the 'agents of European
civilisation':

'To your Majesty, greeting!--In all the dealings of England with the
Empire of China, since first relations were established between us,
there has never been any idea of territorial aggrandisement on the part
of Great Britain, but only a keen desire to promote the interests of her
trade. Reflecting upon the fact that our 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
restrictions are made at your sea-ports in the matter of foreign
importations; for these reasons our amiable relations with British
merchants at our Treaty Ports have continued unbroken for the last half
century, to our mutual benefit.--But a sudden change has now occurred
and general suspicion has been created against us. We would therefore
ask you now to consider that if, by any conceivable combination of
circumstances, the independence of our Empire should be lost, and the
Powers unite to carry out their long-plotted schemes to possess
themselves of our territory'--(in a simultaneous message to the Emperor
of Japan, the impulsive Tzu Hsi openly refers to 'The earth-hungry
Powers of the West, whose tigerish eyes of greed are fixed in our
direction'[374])--'the results to your country's interests would be
disastrous and fatal to your trade. At this moment our Empire is
striving to the utmost to raise an army and funds sufficient for its
protection; in the meanwhile we rely on your good services to act as
mediator, and now anxiously await your decision.'[375]

Both during the wars and in the interim periods, European civilisation
was busy looting and thieving on a grand scale in the Chinese Imperial
Palaces, in the public buildings and in the monuments of ancient
civilisation, not only in 1860, when the French pillaged the Emperor's
Palace with its legendary treasures, or in 1900, 'when all the nations
vied with each other to steal public and private property'. Every
European advance was marked not only with the progress of commodity
exchange, but by the smouldering ruins of the largest and most venerable
towns, by the decay of agriculture over large rural areas, and by
intolerably oppressive taxation for war contributions. There are more
than 40 Chinese Treaty Ports--and every one of them has been paid for
with streams of blood, with massacre and ruin.

FOOTNOTES:

[368] 77,379 chests were imported in 1854. Later, the imports somewhat
declined, owing to increased home production. Nevertheless, China
remained the chief buyer. India produced just under 6,400,000 tons of
opium in 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 exclusively to 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
the tenth year of Hsien-Feng (6/9/1860) said amongst other things: 'We
have never forbidden England and France to trade with China, and for
long years there has been peace between them and us. But three years ago
the English, for no good cause, invaded our city of Canton, and carried
off our officials into captivity. We refrained at that time from taking
any retaliatory measures, because we were compelled to recognise that
the obstinacy of the Viceroy Yeh had been in some measure a cause of the
hostilities. Two years ago, the barbarian Commander Elgin came north and
we then commanded the Viceroy of Chihli, T'an Ting-hsiang, to look into
matters preparatory to negotiations. But the barbarian took advantage of
our unreadiness, attacking the Taku forts and pressing on to Tientsin.
Being anxious to spare our people the horrors of war, we again refrained
from retaliation and ordered Kuei Liang to discuss terms of peace.
Notwithstanding the outrageous nature of the barbarians' demands we
subsequently ordered Kuei Liang to proceed to Shanghai in connection
with the proposed Treaty of Commerce and even permitted its ratification
as earnest of our good faith.

'In spite of all this, the barbarian leader Bruce again displayed
intractability of the most unreasonable kind, and once more appeared off
Taku with a squadron of warships in the eighth Moon. Seng Ko Lin Ch'in
thereupon attacked him fiercely and compelled him to make a rapid
retreat. From all these facts it is clear that China has committed no
breach of faith and that the barbarians have been in the wrong. During
the present year the barbarian leaders Elgin and Gros have again
appeared off our coasts, but China, unwilling to resort to extreme
measures, agreed to their landing and permitted them to come to Peking
for the ratification of the Treaty.

'Who could have believed that all this time the barbarians have been
darkly plotting, and that they had brought with them an army of soldiers
and artillery with which they attacked the Taku forts from the rear,
and, having driven out our forces, advanced upon Tientsin!' (I. O. Bland
and E. 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 internal
history: Straight from looting the Manchu Emperor's Summer Palace, the
'Gordon of China' went on a campaign against the rebels of Taiping. In
1863 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 a considerable number of Europeans, among them a French admiral,
gave their lives to preserve China for the Manchu dynasty, the
representatives of European commerce were eagerly grasping this
opportunity to make capital out of these fights, supplying arms both to
their own champions and to the rebels who went to war against them.
'Moreover, the worthy merchant was tempted, by the opportunity for
making some money, to supply both armies with arms and munitions, and
since the rebels had greater difficulties in obtaining supplies than the
Emperor's men and were therefore compelled and prepared to pay higher
prices, they were given priority and could thus resist not only the
troops of their own government, but also those of England and 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.




_CHAPTER XXIX_

THE STRUGGLE AGAINST PEASANT ECONOMY


An important final phase in the campaign against natural economy is to
separate industry from agriculture, to eradicate rural industries
altogether from peasant economy. Handicraft in its historical beginnings
was a subsidiary occupation, a mere appendage to agriculture in
civilised and settled societies. In medieval Europe it became gradually
independent of the _corvée_ farm and agriculture, it developed into
specialised occupations, i.e. production of commodities by urban guilds.
In industrial districts, production had progressed from home craft by
way of primitive manufacture to the capitalist factory of the staple
industries, but in the rural areas, under peasant economy, home crafts
persisted as an intrinsic part of agriculture. Every hour that could be
spared from cultivating the soil was devoted to handicrafts which, as an
auxiliary domestic industry, played an important part in providing for
personal needs.[376]

It is a recurrent phenomenon in the development of capitalist production
that one branch of industry after the other is singled out, isolated
from agriculture and concentrated in factories for mass production. The
textile industry provides the textbook example, but the same thing has
happened, though less obviously, in the case of other rural industries.
Capital must get the peasants to buy its commodities and will therefore
begin by restricting peasant economy to a single sphere--that of
agriculture--which will not immediately and, under European conditions
of ownership, only with great difficulty submit to capitalist
domination.[377] To all outward appearance, this process is quite
peaceful. It is scarcely noticeable and seemingly caused by purely
economic factors. There can be no doubt that mass production in the
factories is technically superior to primitive peasant industry, owing
to a higher degree of specialisation, scientific analysis and management
of the productive process, improved machinery and access to
international resources of raw materials. In reality, however, the
process of separating agriculture and industry is determined by factors
such as oppressive taxation, war, or squandering and monopolisation of
the nation's land, and thus belongs to the spheres of political power
and criminal law no less than with economics.

Nowhere has this process been brought to such perfection as in the
United States. In the wake of the railways, financed by European and in
particular British capital, the American farmer crossed the Union from
East to West and in his progress over vast areas killed off the Red
Indians with fire-arms and blood-hounds, liquor and venereal disease,
pushing the survivors to the 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 of
Secession, was very different indeed from his modern counterpart. There
was hardly anything he could not do, and he led a practically
self-sufficient life on his isolated farm.

In the beginning of the nineties, one of the leaders of the Farmers'
Alliance, Senator Peffer, wrote as follows: 'The American farmer of
to-day is altogether a different sort of man from his ancestor of fifty
or a hundred years ago. A great many men and women now living remember
when farmers were largely manufacturers; that is to say, they made a
great many implements for their own use. Every farmer had an assortment
of tools with which he made wooden implements, as forks and rakes,
handles for his hoes and ploughs, spokes for his wagon, and various
other implements made wholly out of wood. Then the farmer produced flax
and hemp and wool and cotton. These fibres 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 farm geese were
kept, their feathers used for supplying the home demand with beds and
pillows, the surplus being disposed of at the nearest market town.
During the winter season wheat and flour and corn meal were carried in
large wagons drawn by teams of six to eight horses a hundred or two
hundred miles to market, and traded for farm supplies for the next
year--groceries and dry goods. Besides this, mechanics were scattered
among the farmers. The farm wagon was in process of building a year or
two; the material was found near the shop; the character of the timber
to be used was stated in the contract; it had to be procured in a
certain season and kept in the drying process a length of time
specified, so that when the material was brought together in proper form
and the wagon made, both parties to the contract knew where every stick
of it came from, and how long it had been in seasoning. During winter
time the neighbourhood carpenter prepared sashes and blinds and doors
and moulding and cornices for the next season's building. When the
frosts of autumn came the shoemaker repaired to the dwellings of the
farmers and there, in a corner set apart to him, he made up shoes for
the family during the winter. All these things were done among the
farmers, and a large part of the expense was paid with products of the
farm. When winter approached, the butchering season was at hand; meat
for family use during the next year was prepared and preserved in the
smoke house. The orchards supplied fruit for cider, for apple butter,
and for preserves of different kinds, amply sufficient to supply the
wants of the family during the year, with some to spare. Wheat was
threshed, a little at a time, just enough to supply the needs of the
family for ready money, and not enough to make it necessary to waste one
stalk of straw. Everything was saved and put to use. One of the results
of that sort of economy was that comparatively a very small amount of
money was required to conduct the business of farming. A hundred
dollars average probably was as much as the largest farmers of that day
needed in the way of cash to meet the demands of their farm work, paying
for hired help, repairs of tools, and all other incidental
expenses.'[378]

This Arcadian life was to come to a sudden end after the War of
Secession. The war had burdened the Union with an enormous National
Debt, amounting to £1,200,000, and in consequence the taxes were
considerably increased. On the other hand, a feverish development of
modern traffic and industry, machine-building in particular, was
encouraged by the imposition of higher protective tariffs. The railway
companies were endowed with public lands on an imposing scale, in order
to promote railroad construction and farm-settlements: in 1867 alone,
they were given more than 192,500,000 acres, and so the permanent way
grew at an unprecedented rate. In 1860 it amounted to less than 31,000
miles, in 1870 it had grown to more than 53,000 miles and in 1880 to
more than 93,000 miles. (During the same period--1870-1880--the
permanent way in Europe had grown from 80,000 miles to 100,000 miles.)
The railways and speculations in land made for mass emigration from
Europe to the United States, and more than 4 1/2 million people
immigrated in the twenty-three years from 1869 to 1892. In this way, the
Union gradually became emancipated from European, and in particular from
British, industry; factories were set up in the States and home
industries developed for the production of textiles, iron, steel and
machinery. The process of revolutionary transformation was most rapid in
agriculture. The emancipation of the slaves had compelled the Southern
planters to introduce the steam plough shortly after the Civil War, and
new farms had sprung up in the West in the wake of the railways, which
from the very beginning employed the most modern machinery and
technique.

'The improvements are rapidly revolutionising the agriculture of the
West, and reducing to the lowest minimum ever attained, the proportion
of manual labour employed in its operations.... Coincident with this
application of mechanics to agriculture, systematic and enlarged
business aptitudes have also sought alliance with this noble art. Farms
of thousands of acres have been managed with greater skill, a more
economical adaptation of means to ends, and with a larger margin of real
profit than many others of 80 acres.'[379]

During this time, direct and indirect taxation had increased enormously.
On June 30, 1864, during the Civil War, a new finance bill was passed
which is the basis of the present system of taxation, and which raised
taxes on consumption and income to a staggering degree. This heavy war
levy served as a pretext for a real orgy of protective tariffs in order
to offset the tax on home production by customs duties.[380] Messrs.
Morrill, Stevens and the other gentlemen who advanced the war as a lever
for enforcing their protectionist programme, initiated the practice of
wielding the implement of a customs policy quite openly and cynically to
further private profiteering interests of all descriptions. Any home
producer who appeared before the legislative assembly with a request for
any kind of special tariff to fill his own pocket saw his demands
readily granted, and the tariff rates were made as high as any
interested party might wish.

'The war', writes the American Taussig, 'had in many ways a bracing and
ennobling influence on our national life; but its immediate effect on
business affairs, and on all legislation affecting moneyed interests,
was demoralising. The line between public duty and private interests was
often lost sight of by legislators. Great fortunes were made by changes
in legislation urged and brought about by those who were benefited by
them, and the country has seen with sorrow that the honour and honesty
of public men did not remain undefiled.'[381]

This customs bill which completely revolutionised the country's economic
life, and remained in force unchanged for twenty years, was literally
pushed through Congress in three days, and through the Senate in two,
without criticism, without debate, without any opposition whatever.[382]
Down to the present day it forms the basis of U.S. customs legislation.

This shift in U.S. fiscal policy ushered in an era of the most brazen
parliamentary log-rolling and of undisguised and unrestrained corruption
of elections, of the legislature and the press to satisfy the greed of
Big Business. '_Enrichissez-vous_' became the catchword of public life
after the 'noble war' to liberate mankind from the 'blot of slavery'. On
the stock exchange, the Yankee 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, fraudulent
shares and theft of public funds. Industry prospered. Gone were the
times when the small or medium farmer required hardly any money, when he
could thresh and turn into cash his wheat reserves as the need arose.
Now he was chronically in need of money, a lot of money, to pay his
taxes. Soon he was forced to sell all his produce and to buy his
requirements from the manufacturers in the form of ready-made goods. As
Peffer puts it:

'Coming from that time to the present, we find that everything nearly
has been changed. All over the West particularly the farmer threshes his
wheat all at one time, he disposes of it all at one time, and in a great
many instances the straw is wasted. He sells his hogs, and buys bacon
and pork; he sells his 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
making gowns for his children, as he did fifty years or more ago, he
threshes his flax, sells the seed, and burns the straw. Not more than
one farmer in fifty now keeps sheep at all; he relies upon the large
sheep farmer for the wool, which is put into cloth or clothing ready for
his use. Instead of having clothing made up on the farm in his own house
or by a neighbour woman or country tailor a mile away, he either
purchases his clothing ready made at the nearest town, or he buys the
cloth and has a city tailor make it up for him. Instead of making
implements which he uses about the farm--forks, rakes, etc.--he goes to
town to purchase even a handle for his axe or his mallet; he purchases
twine and rope and all sorts of needed material made of fibres; he buys
his cloth and his clothing; he buys his canned fruit and preserved
fruit; he buys hams and shoulders and mess pork and mess beef; indeed,
he buys nearly everything now that he produced at one time himself, and
these things all cost money. Besides all this, and what seems stranger
than anything else, whereas in the earlier time the American home was a
free home, unencumbered, not one case in a thousand where a home was
mortgaged to secure the payment of borrowed money, and whereas but a
small amount of money was then needed for actual use in conducting the
business of farming, there was always enough of it among the farmers to
supply the demand. Now, when at least ten times as much is needed, there
is little or none to be obtained, nearly half the farms are mortgaged
for as much as they are worth, and interest rates are exorbitant. As to
the cause of such wonderful changes ... the manufacturer came with his
woollen mill, his carding mill, his broom factory, his rope factory, his
wooden-ware factory, his cotton factory, his pork-packing establishment,
his canning factory and fruit preserving houses; the little shop on the
farm has given place to the large shop in town; the wagon-maker's shop
in the neighbourhood has 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 in the cities
where most of the work is done by machines.'[383]

Finally, the agricultural labour of the farmer himself has become
machine work: 'He ploughs and sows and reaps with machines. A machine
cuts his wheat and puts it in a sheaf, and steam drives his threshers.
He may read the morning paper while he ploughs and sit under an awning
while he reaps.'[384]

Sering estimated in the middle eighties that the necessary cash 'for a
very modest beginning' of the smallest farm in the North West is £240 to
£280.[385]

This revolution of American agriculture after the 'Great War' was not
the end. It was only the beginning of the whirlpool in which the farmer
was caught. His history brings us automatically to the second phase of
the development of capitalist accumulation of which it is an excellent
illustration.--Natural economy, the production for personal needs and
the close connection between industry and agriculture must be ousted and
a simple commodity economy substituted for them. Capitalism needs the
medium of commodity production for its development, as a market for its
surplus value. But as soon as simple commodity production has superseded
natural economy, capital must turn against it. No sooner has capital
called it to life, than the two must compete for means of production,
labour power, and markets. The first aim of capitalism is to isolate the
producer, to sever the community ties which protect him, and the next
task is to take the means of production away from the small
manufacturer.

In the American Union, as we have seen, the 'Great War' inaugurated an
era of large-scale seizure of public lands by monopolist capitalist
companies and individual speculators. Feverish railroad building and
ever more speculation in railway shares led to a mad gamble in land,
where individual soldiers of fortune and companies netted immense
fortunes and even entire counties. In addition a veritable swarm of
agents lured the vast flow of emigrants from Europe to the U.S.A. by
blatant and unscrupulous advertising, deceptions and pretences of every
description. These immigrants first settled in the Eastern States along
the Atlantic seaboard, and, with the growth of industry 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 position 99 miles further North and 680 miles further West.
Whereas in 1850 51·4 per cent of the total wheat crop had been supplied
by the Eastern States, in 1880 they produced only 13·6 per cent, 71·7
per cent being supplied by the Northern Central and 9 per cent by the
Western States.

In 1825, the Congress of the Union under Monroe had decided to
transplant the Red Indians from the East to the West of the Mississippi.
The redskins put up a desperate resistance; but all who survived the
slaughter of forty Red Indian campaigns were swept away like so much
rubbish and driven like cattle to the West to be folded in reservations
like so many sheep. The Red Indian had been forced to make room for the
farmer--and now the farmer in his turn was driven beyond the Mississippi
to make way for capital.

Following the railway tracks, the American farmer moved West and
North-West into the land of promise which the great land speculators'
agents had painted for him in glowing colours. Yet the most fertile and
most favourably situated lands were retained by the companies who farmed
them extensively on completely capitalistic lines. All around the farmer
who had been exiled into the wilderness, a dangerous competitor and
deadly enemy sprang up--the 'bonanza farms', the great capitalist
agricultural concerns which neither the Old World nor the New had known
before. Here surplus value was produced with the application of all the
resources known to modern science and technology.

'As the foremost representative of financial agriculture we may consider
Oliver Dalrymple, whose name is to-day known on both sides of the
Atlantic. Since 1874 he has simultaneously managed a line of steamers on
the Red River and six farms owned by a company of financiers and
comprising some 75,000 acres. Each one is divided into departments of
2,000 acres, and every department is again subdivided into three
sections of 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 sheds and workshops for
blacksmiths and locksmiths. Each section is completely equipped with 20
pairs of horses, 8 double ploughs, 12 horse-drawn drill-ploughs, 12
steel-toothed harrows, 12 cutters and binders, 2 threshers and 16
wagons. Everything is done to ensure that the machines and the living
labour (men, horses and mules) are in good condition and able to do the
greatest possible amount of work. There is a telephone line connecting
all sections and the central management.

'The six farms of 75,000 acres are cultivated by an army of 600 workers,
organised on military lines. During the harvest, the management hires
another 500 to 600 auxiliary workers, assigning them to the various
sections. After the work is completed in the fall, the workers are
dismissed with the exception of the foreman and 10 men per section. In
some farms in Dakota and Minnesota, horses and mules do not spend the
winter at the place of work. As soon as the stubble has been ploughed
in, they are driven in teams of a hundred or two hundred pairs 900 miles
to the South, to return only the following spring.

'Mechanics on horseback follow the ploughing, sowing and harvesting
machines when they are at work. If anything goes wrong, they gallop to
the machine in question, repair it and get it moving again without
delay. The harvested corn is carried to the threshing machines which
work day and night without interruption. They are stoked with bundles of
straw fed into the stokehold through pipes of sheet-iron. The corn is
threshed, winnowed, weighed and filled into sacks by machinery, then it
is put into railway trucks which run alongside the farm, and goes to
Duluth or Buffalo. Every year, Dalrymple increases his land under seed
by 5,800 acres. In 1880 it amounted to 25,000 acres.[386]

In the late seventies, there were already individual capitalists and
companies who owned 35,000-45,000 acres of wheat land. Since the time of
Lafargue's writing, extensive capitalist agriculture in America has made
great strides in technique and the employment of machinery.[387]

The American farmer could not successfully compete with such capitalist
enterprises. At a time when the general revolution in the conditions of
finance, production and transport compelled him to give up production
for personal needs and to produce exclusively for the market, the great
spreading of agriculture caused a heavy fall in the prices of
agricultural products. And at the precise moment when farming became
dependent on the market, the agricultural market of the Union was
suddenly turned from a local one into a world market, and became a prey
to the wild speculations of a few capitalist mammoth concerns.

In 1879, a notable year for the history of agricultural conditions in
Europe as well as in America, there began the mass export of wheat from
the U.S.A. to Europe.[388]

Big Business was of course the only one to profit from this expanding
market. The small farmer was crushed by the competition of an increasing
number of extensive farms and became the prey of speculators who bought
up his corn to exert pressure on the world market. Helpless in the face
of the immense capitalist powers, the farmer got into debt--a phenomenon
typical for a declining peasant economy. In 1890, Secretary Rusk of the
U.S. Department of Agriculture sent out a circular letter with reference
to the desperate position of the farmers, saying:

'The burden of mortgages upon farms, homes, and land, is unquestionably
discouraging in the extreme, and while in some cases no doubt this load
may have been too readily assumed, still in the majority of cases the
mortgage has been the result of necessity.... These mortgages ...
drawing high rates of interest ... have to-day, in the face of continued
depression of the prices of staple products, become very irksome, and in
many cases threaten the farmer with loss of home and land. It is a
question of grave difficulty to all those who seek to remedy the ills
from which our farmers are suffering. At present prices the farmer finds
that it takes more of his products to get a dollar wherewith to buy back
the dollar which he borrowed than it did when he borrowed it. The
interest accumulates, while the payment of the principal seems utterly
hopeless, and the very depression which we are discussing makes the
renewal of the mortgage most difficult.'[389]

According to the census of May 29, 1891, 2·5 million farms were deep in
debt; two-thirds of them were managed by the owners whose obligations
amounted to nearly £440,000.

'The situation is this: farmers are passing through the "valley and
shadow of death"; farming as a business is profitless; values of farm
products have fallen 50 per cent since the great war, and farm values
have depreciated 25 to 50 per cent during the last ten years; farmers
are overwhelmed with debts secured by mortgages on their homes, unable
in many instances to pay even the interest as it falls due, and unable
to renew the loans because securities 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 a merciless power; the people's homes are at stake.'[390]

Encumbered with debts and close to ruin, the farmer had no option but to
supplement his earnings by working for a wage, or else to abandon his
farm altogether. Provided it had not yet fallen into the clutches of
his creditors like so many thousands of farms, he could shake from off
his feet the dust of the 'land of promise' that had become an inferno
for him. In the middle eighties, abandoned and decaying farms could be
seen everywhere. In 1887, Sering wrote:

'If the farmer cannot pay his debts to date, the interest he has to pay
is increased to 12, 15 or even 20 per cent. He is pressed by the banker,
the machine salesman and the grocer who rob him of the fruits of his
hard work.... He can either remain on the farm as a tenant or move
further West, to try his fortunes elsewhere. Nowhere in North America
have I found so many indebted, disappointed and depressed farmers as in
the wheat regions of the North Western prairies. I have not spoken to a
single farmer in Dakota who would not have been prepared to sell his
farm.[391]

'The Commissioner of Agriculture of Vermont in 1889 reported a
wide-spread desertion of farm-lands of that state. He wrote: "... there
appears to be no doubt about there being in this state large tracts of
tillable unoccupied lands, which can be bought at a price approximating
the price of Western lands, situated near school and church, and not far
from railroad facilities. The Commissioner has not visited all of the
counties in the State where these lands are reported, but he has visited
enough to satisfy him that, while much of the unoccupied and formerly
cultivated land is now practically worthless for cultivation, yet very
much of it can be made to yield a liberal reward to intelligent
labour."'[392]

The Commissioner of the State of New Hampshire issued a pamphlet in
1890, devoting 67 pages to the description of farms for sale at the
lowest figures. He describes 1442 farms with tenantable buildings,
abandoned only recently. The same has happened in other districts.
Thousands of acres once raising corn and wheat are left untilled and run
to brush and wood.

In order to resettle the deserted land, speculators engaged in
advertising campaigns and attracted crowds of new immigrants--new
victims who were to suffer their predecessors' fate even more speedily.

A private letter says: 'In the neighbourhood of railroads and markets,
there remains no common land. It is all in the hands of the
speculators. A settler takes over vacant land and counts for a farmer;
but the management of his farm hardly assures his livelihood, and he
cannot possibly compete with the big farmer. He tills as much of his
land as the law compels him to do, but to make a comfortable living, he
must look for additional sources of income outside agriculture. In
Oregon, for instance, I have met a settler who owned 160 acres for five
years, but every summer, until the end of July, he worked twelve hours a
day for a dollar a day at road-making. This man, of course, also counts
as one of the five million farmers in the 1890 census. Again, in the
County of Eldorado, I saw many farmers who cultivated 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 and selling of timber, etc. These people are
prosperous, but it is not agriculture which makes them so. Two years
ago, we worked in Long Cañon, Eldorado County, living in a cabin on an
allotment. The owner of this allotment came home only once a year for a
couple of days, and worked the rest of the time on the railway in
Sacramento. Some years ago, a small part of the allotment was
cultivated, to comply with the law, but now it is left completely
untilled. A few acres are fenced off with wire, and there is a log cabin
and a shed. But during the last years all this stands empty; a neighbour
has the key and he made us free of the hut. In the course of our
journey, we saw many deserted allotments, where attempts at farming had
been made. Three years ago I was offered a farm with dwelling house for
a hundred dollars, but in a short time the unoccupied house collapsed
under the snow. In Oregon, we saw many derelict farms with small
dwelling houses and vegetable gardens. One we visited was beautifully
made: a sturdy block house, fashioned by a master-builder, and some
equipment; but the farmer had abandoned it all. You were welcome to take
it all without charge.'[393]

Where could the ruined American farmer turn? He set out on a pilgrimage
to follow the wheat centre and the railways. The former had shifted in
the main to Canada, the Saskatchewan and the Mackenzie River where wheat
can still thrive on the 62nd parallel. A number of American farmers
followed--and after some time in Canada, they suffered the old
fate.[394] During recent years, Canada has entered the world market as a
wheat-exporting country, but her agriculture is dominated to an even
greater extent by big capital than elsewhere.[395]

In Canada, public lands were lavished upon private capitalist companies
on an even more monstrous scale than in the United States. Under the
Charter of the Canadian Pacific Railway Company with its grant of land,
private capital perpetrated an unprecedented act of robbing the public.
Not only that the company was guaranteed a twenty years' monopoly of
railway-building, not only that it got a building site of about 713
miles free of charge, not only that it got a 100 years' state guarantee
of the 3 per cent interest on the share capital of £m. 20--to crown it
all, the company was given the choice of 25 million acres out of the
most fertile and favourably situated lands, not necessarily in the
immediate vicinity of the permanent way, as a free gift. All future
settlers on this vast area were thus at the mercy of railway capital
from the very outset. The railway company, in its turn, immediately
proceeded to sell off 5 million acres for ready cash to the North-West
Land Company, an association of British capitalists under the
chairmanship of the Duke of Manchester. The second group of capitalists
which was liberally endowed with public lands was the Hudson Bay
Company, which was given a title to no less than one-twentieth of all
the lands between Lake Winnipeg, the U.S. border, the Rocky Mountains,
and Northern Saskatchewan, for renouncing their privileges in the
North-West. Between them, these two capitalist groups had gained
possession of five-ninths of all the land that could be settled. A
considerable part of the other lands was assigned by the State to 26
capitalist 'colonising companies'.[396] Thus the Canadian farmer was
practically everywhere ensnared by capital and capitalist speculation.
And still mass immigration continued--not only from Europe, but also
from the United States!

These are the characteristics of capitalist domination on an
international scale. Having evicted the peasant from his soil, it drives
him from England to the East of the United States, and from 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 the West to the North. With the railways in the van,
and ruin in the rear--capital leads the way, its passage is marked with
universal destruction. The great fall of prices in the nineties is again
succeeded by higher prices for agricultural products, but this is of no
more avail to the small American farmer than to the European peasant.

Yet the numbers of farmers are constantly swelling. In the last decade
of the nineteenth century they had grown from 4,600,000 to 5,700,000,
and the following ten years still saw an absolute increase. The
aggregate value of farms had during the same period risen from
£150,240,000 to £330,360,000.[397] We might have expected the general
increase in the price of farm produce to have helped the farmer to come
into his own. But that is not so; we see that the growing numbers of
tenant farmers outstrip the increase in the farming population as a
whole. In 1880, the proportion of tenant farmers amounted to 25·5 per
cent of the total number of farmers in the Union, in 1890 it was 28·4
per cent, in 1900 35·3 per cent, and in 1910 37·2 per cent.

Though prices for farm produce were rising, the tenant farmer was more
and more rapidly stepping into the shoes of the independent farmer. And
although much more than one-third of all farmers in the Union are now
tenant farmers, their social status in the United States is that of the
agricultural labourer in Europe. Constantly fluctuating, they are indeed
wage-slaves of capital; they work very hard to create wealth for
capital, getting nothing in return but a miserable and precarious
existence.

In quite a different historical setting, in South Africa, the same
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 peasant economy
prevailed until the sixties of the last century. For a long time the
Boers had led the life of animal-tending nomads; they had killed off or
driven out the Hottentots and Kaffirs with a will in order to deprive
them of their most valuable pastures. In the eighteenth century they
were given invaluable assistance by the plague, imported by ships of the
East India Company, which frequently did away with entire Hottentot
tribes whose lands then fell to the Dutch immigrants. When the Boers
spread further East, they came in conflict with the Bantu tribes and
initiated the long period of the terrible Kaffir wars. These god-fearing
Dutchmen regarded themselves as the Chosen People and took no small
pride in their old-fashioned Puritan morals and their intimate knowledge
of the Old Testament; yet, not content with robbing the natives of their
land, they built their peasant economy like parasites on the backs of
the Negroes, compelling them to do slave-labour for them and corrupting
and enervating them deliberately and systematically. Liquor played such
an important part in this process, that the prohibition of spirits in
the Cape Colony could not be carried through by the English government
because of Puritan opposition. There were no railways until 1859, and
Boer economy in general and on the whole remained patriarchal and based
on natural economy until the sixties. But their patriarchal attitude did
not deter the Boers from extreme brutality and harshness. It is well
known that Livingstone complained much more about the Boers than about
the Kaffirs. The Boers considered the Negroes an object, destined by
God and Nature to slave for them, and as such an indispensable
foundation of their peasant economy. So much so that their answer to the
abolition of slavery in the English colonies in 1836 was the 'Great
Trek', although there the owners had been compensated with £3,000,000.
By way of the Orange River and Vaal, the Boers emigrated from the Cape
Colony, and in the process they drove the Matabele to the North, across
the Limpopo, setting them against the Makalakas. Just as the American
farmer had driven the Red Indian West before him under the impact of
capitalist economy, so the Boer drove the Negro to the North. The 'Free
Republics' between the Orange River and the Limpopo thus were created as
a protest against the designs of the English bourgeoisie on the sacred
right of slavery. The tiny peasant republics were in constant guerilla
warfare against the Bantu Negroes. And it was on the backs of the
Negroes that the battle between the Boers and the English government,
which went on for decades, was fought. The Negro question, i.e. the
emancipation of the Negroes, ostensibly aimed at by the English
bourgeoisie, served as a pretext for the conflict between England and
the republics. In fact, peasant economy and great capitalist colonial
policy were here competing for the Hottentots and Kaffirs, that is to
say for their land and their labour power. Both competitors had
precisely the same aim: to subject, expel or destroy the coloured
peoples, to appropriate their land and press them into service by the
abolition of their social organisations. Only their methods of
exploitation were fundamentally different. While the Boers stood for
out-dated slavery on a petty scale, on which their patriarchal peasant
economy was founded, the British bourgeoisie represented modern
large-scale capitalist exploitation of the land and the natives. The
Constitution of the Transvaal (South African) Republic declared with
crude prejudice: 'The People shall not permit any equality of coloured
persons with white inhabitants, neither in the Church nor in the
State.'[398]

In the Orange Free State and in the Transvaal no Negro was allowed to
own land, to travel without papers or to walk abroad after sunset. Bryce
tells us of a case where a farmer, an Englishman as it happened, in the
Eastern Cape Colony had flogged his Kaffir slave to death. When he was
acquitted in open court, his neighbours escorted him home to the strains
of music. The white man frequently maltreated his free native labourers
after they had done their work--to such an extent that they would take
to flight, thus saving the master their wages.

The British government employed precisely the opposite tactics. For a
long time it appeared as protector of the natives; flattering the
chieftains in particular, it supported their authority and tried to make
them claim a right of disposal over their land. Wherever it was
possible, it gave them ownership of tribal land, according to well-tried
methods, although this flew in the face of tradition and of the actual
social organisation of the Negroes. All tribes in fact held their land
communally, and even the most cruel and despotic rulers such as the
Matabele Chieftain Lobengula merely had the right as well as the duty to
allot every family a piece of land which they could only retain so long
as they cultivated it. The ultimate purpose of the British government
was clear: long in advance it was preparing for land robbery on a grand
scale, using the native chieftains themselves as tools. But in the
beginning it was content with the 'pacification' of the Negroes by
extensive military actions. Up to 1879 were fought 9 bloody Kaffir wars
to break the resistance of the Bantus.

British capital revealed its real intentions only after two important
events had taken place: the discovery of the Kimberley diamond fields in
1869-70, and the discovery of the gold mines in the Transvaal in 1882-5,
which initiated a new epoch in the history of South Africa. Then the
British South Africa Company, that is to say Cecil Rhodes, went into
action. Public opinion in England rapidly swung over, and the greed for
the treasures of South Africa urged the British government on to drastic
measures. South Africa was suddenly flooded with immigrants who had
hitherto only appeared in small numbers--immigration having been
deflected to the United States. But with the discovery of the diamond
and gold fields, the numbers of white people in the South African
colonies grew by leaps and bounds: between 1885 and 1895, 100,000
British had immigrated into Witwatersrand alone. The modest peasant
economy was forthwith pushed into the background--the mines, and thus
the mining capital, coming to the fore. The policy of the British
government veered round abruptly. Great Britain had recognised the Boer
Republics by the Sand River Agreement and the Treaty of Bloemfontein in
the fifties. Now her political might advanced upon the tiny republics
from every side, occupying all neighbouring districts and cutting off
all possibility of expansion. At the same time the Negroes, no longer
protected favourites, were sacrificed. British capital was steadily
forging ahead. In 1868, Britain took over the rule of Basutoland--only,
of course, because the natives had 'repeatedly implored' her to do
so.[399] In 1871, the Witwatersrand diamond fields, or West Griqualand,
were seized from the Orange Free State and turned into a Crown Colony.
In 1879, Zululand was subjected, later to become part of the Natal
Colony; in 1885 followed the subjection of Bechuanaland, to be joined to
the Cape Colony. In 1888 Britain took over Matabele and Mashonaland, and
in 1889 the British South Africa Company was given a Charter for both
these districts, again, of course, only to oblige the natives and at
their request.[400] Between 1884 and 1887, Britain annexed St. Lucia Bay
and the entire East Coast as far as the Portuguese possessions. In 1894,
she subjected Tongaland. With their last strength, the Matabele and
Mashona fought one more desperate battle, but the Company, with Rhodes
at the head, first liquidated the rising in blood and at once proceeded
to the well-tried measure for civilising and pacifying the natives: two
large railways were built in the rebellious district.

The Boer Republics were feeling increasingly uncomfortable in this
sudden stranglehold, and their internal affairs as well were becoming
completely disorganised. The overwhelming influx of immigrants and the
rising tides of the frenzied new capitalist economy now threatened to
burst the barriers of the small peasant states. There was indeed a
blatant conflict between agricultural and political peasant economy on
the one hand, and the demands and requirements of the accumulation of
capital on the other. In all respects, the republics were quite unable
to cope with these new problems. The constant danger from the Kaffirs,
no doubt regarded favourably by the British, the unwieldy, primitive
administration, the gradual corruption of the _volksraad_ in which the
great capitalists got their way by bribery, lack of a police force to
keep the undisciplined crowds of adventurers in some semblance of order,
the absence of labour legislation for regulating and securing the
exploitation of the Negroes in the mines, lack of water supplies and
transport to provide for the colony of 100,000 immigrants that had
suddenly sprung up, high protective tariffs which increased the cost of
labour for the capitalists, and high freights for coal--all these
factors combined towards the sudden and stunning bankruptcy of the
peasant republics.

They tried, obstinately and unimaginatively, to defend themselves
against the sudden eruption of capitalism which engulfed them, with an
incredibly crude measure, such as only a stubborn and hide-bound peasant
brain could have devised: they denied all civic rights to the
_uitlanders_ who outnumbered them by far and who stood for capital,
power, and the trend of the time. In those critical times it was an
ill-omened trick. The mismanagement of the peasant republics caused a
considerable reduction of dividends, on no account to be put up with.
Mining capital had come to the end of its tether. The British South
Africa Company built railroads, put down the Kaffirs, organised revolts
of the _uitlanders_ and finally provoked the Boer War. The bell had
tolled for peasant economy. In the United States, the economic
revolution had begun with a war, in South Africa war put the period to
this chapter. Yet in both instances, the outcome was the same: capital
triumphed over the small peasant economy which had in its turn come into
being on the ruins of natural economy, represented by the natives'
primitive organisations. The domination of capital was a foregone
conclusion, and it was just as hopeless for the Boer Republics to resist
as it had been for the American farmer. Capital officially took over the
reins in the new South African Union which replaced the small peasant
republics by a great modern state, as envisaged by Cecil Rhodes'
imperialist programme. The new conflict between capital and labour had
superseded the old one between British and Dutch. One million white
exploiters of both nations sealed their touching fraternal alliance
within the Union with the civil and political disfranchisement of five
million coloured workers. Not only the Negroes of the Boer Republics
came away empty-handed, but the natives of the Cape Colony, whom the
British government had at one time granted political equality, were also
deprived of some of their rights. And this noble work, culminating under
the imperialist policy of the Conservatives in open oppression, was
actually to be finished by the Liberal Party itself, amid frenzied
applause from the 'liberal cretins of Europe' who with sentimental pride
took as proof of the still continuing creative vigour and greatness of
English liberalism the fact that Britain had granted complete
self-government and freedom to a handful of whites in South Africa.

The ruin of independent craftsmanship by capitalist competition, no less
painful for being soft-pedalled, deserves by rights a chapter to itself.
The most sinister part of such a chapter would be out-work under
capitalism;--but we need not dwell on these phenomena here.

The general result of the struggle between capitalism and simple
commodity production is this: after substituting commodity economy for
natural economy, capital takes the place of simple commodity economy.
Non-capitalist organisations provide a fertile soil for capitalism; more
strictly: capital feeds on the ruins of such organisations, and although
this non-capitalist _milieu_ is indispensable for accumulation, the
latter proceeds at the cost of this medium nevertheless, by eating it
up. Historically, the accumulation of capital is a kind of metabolism
between capitalist economy and those pre-capitalist methods of
production without which it cannot go on and which, in this light, it
corrodes and assimilates. Thus capital cannot accumulate without the aid
of non-capitalist organisations, nor, on the other hand, can it tolerate
their continued existence side by side with itself. Only the continuous
and progressive disintegration of non-capitalist organisations makes
accumulation of capital possible.

The premises which are postulated in Marx's diagram of accumulation
accordingly represent no more than the historical tendency of the
movement of accumulation and its logical conclusion. The accumulative
process endeavours everywhere to substitute simple commodity economy for
natural economy. Its ultimate aim, that is to say, is to establish the
exclusive and universal domination of capitalist production in all
countries and for all branches of industry.

Yet this argument does not lead anywhere. As soon as this final result
is achieved--in theory, of course, because it can never actually
happen--accumulation must come to a stop. The realisation and
capitalisation of surplus value become impossible to accomplish. Just as
soon as reality begins to correspond to Marx's diagram of enlarged
reproduction, the end of accumulation is in sight, it has reached its
limits, and capitalist production is _in extremis_. For capital, the
standstill of accumulation means that the development of the productive
forces is arrested, and the collapse of capitalism follows inevitably,
as an objective historical necessity. This is the reason for the
contradictory behaviour of capitalism in the final stage of its
historical career: imperialism.

Marx's diagram of enlarged reproduction thus does not conform to the
conditions of an accumulation in actual progress. Progressive
accumulation cannot be reduced to static interrelations and
interdependence between the two great departments of social production
(the departments of producer and consumer goods), as the diagram would
have it. Accumulation is more than an internal relationship between the
branches of capitalist economy; it is primarily a relationship between
capital and a non-capitalist environment, where the two great
departments of production sometimes perform the accumulative process on
their own, independently of each other, but even then at every step the
movements overlap and intersect. From this we get most complicated
relations, divergencies in the speed and direction of accumulation for
the two departments, different relations with non-capitalist modes of
production as regards both material elements and elements of value,
which we cannot possibly lay down in rigid formulæ. Marx's diagram of
accumulation is only the theoretical reflection of the precise moment
when the domination of capital has reached its limits, and thus it is
no less a fiction than his diagram of simple reproduction, which gives
the theoretical formulation for the point of departure of capitalist
accumulation. The precise definition of capitalist accumulation and its
laws lies somewhere in between these two fictions.

FOOTNOTES:

[376] Until recently, in China the domestic industries were widely
practised even by the bourgeoisie and in such large and ancient towns as
Ningpo with its 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 practically unheard-of for a young woman to buy
from a merchant what she could have made with the labour of her own
hands' (Dr. Nyok-Ching Tsur, 'Forms of Industry in the Town of Ningpo'
(_Die gewerblichen Betriebsformen der Stadt Ningpo_), Tuebingen, 1909,
p. 51).

[377] Admittedly, this relation is reversed in the last stages of the
history of peasant economy when capitalist production has made its full
impact. Once the small peasants are ruined, the entire work of farming
frequently devolves on the women, old people and children, while the men
are made to work for their living for capitalist entrepreneurs in the
domestic industries or as wage-slaves in the factories. A typical
instance is the small peasant in Wuerttemberg.

[378] W. A. Peffer, _The Farmer's Side. His Troubles and Their Remedy_
(New York, 1891), Part ii, 'How We Got Here', chap. i, 'Changed
Conditions of the Farmer', pp. 56-7. Cf. also A. M. Simmons, _The
American Farmer_ (2nd edition, 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
in den Vereinigten Staaten_ in _Die Neue Zeit_ (1885), p. 344. This
essay on grain cultivation and the grain trade in the U.S.A. was first
published in a Russian periodical in 1883.

[380] 'The three Revenue Acts of June 30, 1864, practically formed one
measure, and that probably the greatest measure of taxation which the
world has seen.... The Internal Revenue Act was arranged, as Mr. David
A. Wells has said, on the principle of the Irishman at Donnybrook Fair:
"whenever you see a head, hit it, whenever you see a commodity, tax it"'
(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, the urgent 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
landwirtschaftliche Konkurrenz 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 hand
methods so far achieved as follows:

  ----------------------------------------------------------------
                                      |   _Labour time per unit_
                                      |---------------------------
             _Type of work_           |  _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 (scythe _v._ mower)    |   1  |  0·6 |   7  |  20
  Harvesting and baling hay           |  11  |  3·4 |  35  |  30
  anting potatoes                     |   1  |  2·5 |  15  |  --
  anting 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's _Uebersichten der Weltwirtschaft_, vol. vii, part i, p.
32).

Simultaneously, the price per bushel wheat _loco_ farm (in cents)
declined as follows:

  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,
the price 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
Nachweise über den Auswärtigen Handel_), the price (in marks) per 1,000
_kg._, was in June 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 of
immigrants was more than 400,000--138,000 of them British, and 134,000
American. According to a report from Montreal, the influx of American
farmers continued into the spring of the present year [1912].

[395] 'Travelling in the West of Canada, I have visited only one farm of
less than 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
occupied 2,384,337 acres of land between them; accordingly, the share of
an individual (farmer) amounted to no less than 2,047 acres--in no state
of the Union is the average anywhere near that' (Sering, op. cit., p.
376). In the early eighties, farming on a large scale was admittedly not
very widely spread in Canada. But already in 1887, Sering describes the
'Bell Farm', owned by a limited company, which comprised no fewer than
56,700 acres, and was obviously modelled on the pattern of the Dalrymple
farm. In the eighties, Sering, who regarded the prospects of Canadian
competition with some scepticism, put the 'fertile belt' of Western
Canada at three-fifths of the entire acreage of Germany, and estimated
that actually only 38,400,000 acres of this were arable land, and no
more than 15,000,000 acres at best were prospective wheat land (Sering,
op. cit., pp. 337-8). The _Manitoba Free Press_ in June 1912, worked out
that in summer, 1912, 11,200,000 acres were sown with spring wheat in
Canada, as against 19,200,000 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
statesmanship the 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 him and his followers to the last stage of
distress. Two thousand Basuto warriors had been killed, cattle had been
carried off, native homes had been broken up and crops destroyed. The
tribe was reduced to the position of starving refugees, and nothing
could save them but the protection of the British government which they
had repeatedly implored' (C. P. Lucas, _A Historical Geography of the
British Colonies_, part ii, vol. iv (Geography of South and East
Africa), Oxford, 1904, p. 39).

[400] 'The Eastern section of the territory is Mashonaland where, with
the permission of King Lobengula, who claimed it, the British South
Africa Company first established themselves' (ibid., p. 72).




_CHAPTER XXX_

INTERNATIONAL LOANS


The imperialist phase of capitalist accumulation which implies universal
competition comprises the industrialisation and capitalist emancipation
of the _hinterland_ where capital formerly realised its surplus value.
Characteristic of this phase are: lending abroad, railroad
constructions, revolutions, and wars. The last decade, from 1900 to
1910, shows in particular the world-wide movement of capital, especially
in Asia and neighbouring Europe: in Russia, Turkey, Persia, India,
Japan, China, and also in North Africa. Just as the substitution of
commodity economy for a natural economy and that of capitalist
production for a simple commodity production was achieved by wars,
social crises and the destruction of entire social systems, so at
present the achievement of capitalist autonomy in the _hinterland_ and
backward colonies is attained amidst wars and revolutions. Revolution is
an essential for the process of capitalist emancipation. The backward
communities must shed their obsolete political organisations, relics of
natural and simple commodity economy, and create a modern state
machinery adapted to the purposes of capitalist production. The
revolutions in Turkey, Russia, and China fall under this heading. The
last two, in particular, do not exclusively serve the immediate
political requirements of capitalism; to some extent they carry over
outmoded pre-capitalist claims while on the other hand they already
embody new conflicts which run counter to the domination of capital.
These factors account for their immense drive, but at the same time
impede and delay the ultimate victory of the revolutionary forces. A
young state will usually sever the leading strings of older capitalist
states by wars, which temper and test the modern state's capitalist
independence in a baptism by fire. That is why military together with
financial reforms invariably herald the bid for economic independence.

The forward-thrusts of capital are approximately reflected in the
development of the railway network. The permanent way grew most quickly
in Europe during the forties, in America in the fifties, in Asia in the
sixties, in Australia during the seventies and eighties, and during the
nineties in Africa.[401]

Public loans for railroad building and armaments accompany all stages of
the accumulation of capital: the introduction of commodity economy,
industrialisation of countries, capitalist revolutionisation of
agriculture as well as the emancipation of young capitalist states. For
the accumulation of capital, the loan has various functions: (_a_) it
serves to convert the money of non-capitalist groups into capital, i.e.
money both as a commodity equivalent (lower middle-class savings) and as
fund of consumption for the hangers-on of the capitalist class; (_b_) it
serves to transform money capital into productive capital by means of
state enterprise--railroad building and military supplies; (_c_) it
serves to divert accumulated capital from the old capitalist countries
to young ones. In the sixteenth and seventeenth centuries, the loan
transferred capital from the Italian cities to England, in the
eighteenth century from Holland to England, in the nineteenth century
from England to the American Republics and Australia, from France,
Germany and Belgium to Russia, and at the present time [1912] from
Germany to Turkey, from England, Germany and France to China, and, via
Russia, to Persia.

In the Imperialist Era, the foreign loan played an outstanding part as a
means for young capitalist states to acquire independence. The
contradictions inherent in the modern system of foreign loans are the
concrete expression of those which characterise the imperialist phase.
Though foreign loans are indispensable for the emancipation of the
rising capitalist states, they are yet the surest ties by which the old
capitalist states maintain their influence, exercise financial control
and exert pressure on the customs, foreign and commercial policy of the
young capitalist states. Pre-eminently channels for the investment in
new spheres of capital accumulated in the old countries, such loans
widen the scope for the accumulation of capital; but at the same time
they restrict it by creating new competition for the investing
countries.

These inherent conflicts of the international loan system are a classic
example of spatio-temporal divergencies between the conditions for the
realisation of surplus value and the capitalisation thereof. While
realisation of the surplus value requires only the general spreading of
commodity production, its capitalisation demands the progressive
supercession of simple commodity production by capitalist economy, with
the corollary that the limits to both the realisation and the
capitalisation of surplus value keep contracting ever more. Employment
of international capital in the construction of the international
railway network reflects this disparity. Between the thirties and the
sixties of the nineteenth century, railway building and the loans
necessary for it mainly served to oust natural economy, and to spread
commodity economy--as in the case of the Russian railway loans in the
sixties, or in that of the American railways which were built with
European capital. Railway construction in Africa and Asia during the
last twenty years, on the other hand, almost exclusively served the
purposes of an imperialist policy, of economic monopolisation and
economic subjugation of the backward communities. As regards Russia's
railroad construction in Eastern Asia, for instance, it is common
knowledge that Russia had paved the way for the military occupation of
Manchuria by sending troops to protect her engineers working on the
Manchurian railway. With the same object in view, Russia obtained
railway concessions in Persia, Germany in Asia Minor and Mesopotamia,
and Britain and Germany in Africa.

In this connection, we must deal with a misunderstanding concerning the
capital investments in foreign countries and the demand of these
countries for capital imports. Already in the early twenties of the last
century, the export of British capital to America played an important
part, being largely responsible for the first genuine industrial and
commercial crises in England in 1825. Since 1824, the London stock
exchange had been flooded with South American stocks and shares. During
the following year, the newly created states of South and Central
America raised loans in London alone for more than £20,000,000, and in
addition, enormous quantities of South American industrial shares and
similar bonds were sold. This sudden prosperity and the opening up of
the South American markets in their turn called forth greatly increased
exports of British commodities to the Latin Americas. British commodity
exports to these countries amounted to £2,900,000 in 1821 which had
risen to £6,400,000 by 1825.

Cotton textiles formed the most important item of these exports; this
powerful demand was the impetus for a rapid expansion of British cotton
production, and many new factories were opened. In 1821, raw cotton to
the value of £m. 129 was made 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 the South American
countries take the means to buy twice as many commodities in 1825 as in
1821? The British themselves supplied these means. The loans floated on
the London stock exchange served as payment for imported goods. Deceived
by the demand they had themselves created, the British factory-owners
were soon brought to realise by their own experience that their high
expectations had been unfounded.'[402]

He thus characterises as 'deceptive', as an unhealthy, abnormal economic
phenomenon the fact that the South American demand for English goods had
been brought about by British capital. Thus uncritically he took over
the doctrine of an expert with whose other theories he wished to have
nothing in common. The opinion had been advanced already during the
English crisis of 1825 that it could be explained by the 'singular'
development of the relations between British capital and South American
demand. None other than Sismondi had raised the same question as Tugan
Baranovski and given a most accurate description of events in the second
edition of his _Nouveaux Principes_:

'The opening up of the immense market afforded by Spanish America to
industrial producers seemed to offer a good opportunity to relieve
British manufacture. The British government were of that opinion, and in
the seven years following the crisis of 1818, displayed unheard-of
activity to carry English commerce to penetrate the remotest districts
of Mexico, Columbia, Brazil, Rio de la Plata, Chile and Peru. Before the
government decided to recognise these new states, it had to protect
English commerce by frequent calls of battleships whose captains had a
diplomatic rather than a military mission. In consequence, it had defied
the clamours of the Holy Alliance and recognised the new republics at a
moment when the whole of Europe, on the contrary, was plotting their
ruin. But however big the demand afforded by free America, yet it would
not have been enough to absorb all the goods England had produced over
and above the needs of consumption, had not their means for buying
English merchandise been suddenly increased beyond all bounds by the
loans to the new republics. Every American state borrowed from England
an amount sufficient to consolidate its government. Although they were
capital loans, they were immediately spent in the course of the year
like income, that is to say they were used up entirely to buy English
goods on behalf of the treasury, or to pay for those which had been
dispatched on private orders. At the same time, numerous companies with
immense 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 to work. As long as this singular
commerce lasted, in which the English only asked the Americans to be
kind enough to buy English merchandise with English capital, and to
consume them for their sake, the prosperity of English manufacture
appeared dazzling. It was no more income but rather English capital
which was used to push on consumption: the English themselves bought and
paid for their own goods which they sent to America, and thereby merely
forwent the pleasure of using these goods.'[403]

From this Sismondi drew the characteristic conclusion that the real
limits to the capitalist market are set by income, i.e. by personal
consumption alone, and he used this example as one more warning against
accumulation.

Down to the present day, the events which preceded the crisis of 1825
have remained typical for a period of boom and expansion of capital, and
such 'singular commerce' is in fact one of the most important
foundations of the accumulation of capital. Particularly in the history
of British capital, it occurs regularly before every crisis, as Tugan
Baranovski himself showed by the following facts and figures: the
immediate cause of the 1836 crisis was the flooding of the American
market with British goods, again financed by British money. In 1834,
U.S. commodity imports exceeded exports by £m. 1·2 but at the same time
their imports of precious metal exceeded exports by nearly £m. 3·2. Even
in 1836, the year of the crisis itself, their surplus of imported
commodities amounted to £m. 10·4, and still the excess of bullion
imported was £m. 1. This influx of money, no less than the stream of
goods, came chiefly from England, where U.S. railway shares were bought
in bulk. 1835/6 saw the opening in the United States of sixty-one new
banks with a capital of £m. 10·4, predominantly British. Again, the
English paid for their exports themselves. The unprecedented industrial
boom in the Northern States of the Union, eventually leading to the
Civil War, was likewise financed by British capital, which again created
an expanding market for British industry in the United States.

And not only British capital--other European capitals also made every
possible effort to take part in this 'singular commerce'. To quote
Schaeffle, in the five years between 1849 and 1854, at least £m. 100
were invested in American shares on the various stock exchanges of
Europe. The simultaneous revival of world industry attained such
dimensions that it culminated in the world crash of 1857.--In the
sixties, British capital lost no time in creating similar conditions in
Asia as well as the United States. An unending stream was diverted to
Asia Minor and East India, where it financed the most magnificent
railroad projects. The permanent way of British India amounted in 1860
to 844 miles, in 1870 to 4,802 miles, in 1880 to 9,361 miles and in 1890
to 16,875 miles. This at once increased the demand for British
commodities. No sooner had the War of Secession come to a close, than
British capital again flowed into the United States. It again paid for
the greater part of the enormous railroad constructions in the Union
during the sixties and seventies, the permanent way amounting in 1850 to
8,844 miles, in 1860 to 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 were also being supplied by England--one of the main causes for
the rapid development of the British coal and iron industries and the
reasons why these industries were so seriously affected by the American
crises of 1866, 1873 and 1884. What Sismondi considered sheer lunacy was
in this instance literally true: the British with their own materials,
their own iron etc., had built railroads in the United States, they had
paid for the railways with their own capital and only forwent their
'use'. In spite of all periodical crises, however, European capital had
acquired such a taste for this madness, that the London stock exchange
was seized by a veritable epidemic of foreign loans in the middle of the
seventies. Between 1870 and 1875, loans of this kind, amounting to £m.
260, were raised in London. The immediate consequence was a rapid
increase in the overseas export of British merchandise. Although the
foreign countries concerned went periodically bankrupt, masses of
capital continued to flow in. Turkey, Egypt, Greece, Bolivia, Costa
Rica, Ecuador, Honduras, Mexico, Paraguay, Peru, St. Domingo, Uruguay,
and Venezuela completely or partially suspended their payments of
interest in the late seventies. Yet undeterred by this, the fever for
exotic state loans burst out again at the end of the eighties--the South
American states and South African colonies were lent immense quantities
of European capital. In 1874, for instance, the Argentine Republic
borrowed as much as £m. 10 and the loan had risen to £m. 59 by 1890.

England built railways with her own iron and coal in all these countries
as well, paying for them with her own capital. In 1885, the Argentine
permanent way had been 1,952 miles, in 1893 it was 8,557 miles.

Exports from England were rising accordingly:

  ----------------------------
            |  1886  |  1890
  ----------+--------+--------
            |  £m.   |  £m.
  Iron      |  21·8  |  31·6
  Machinery |  10    |  16·4
  Coal      |   9    |  19
  ----------------------------

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 in the form of
state loans. At the end of the eighties the loans to the three colonies
Victoria, New South Wales and Tasmania amounted to £m. 112, £m. 81 of
which were invested in railway construction. The permanent way of
Australia extended over 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 far as German,
French and Belgian capital largely participated with British capital in
foreign investments, while railway construction in Asia Minor had been
financed entirely by British capital from the fifties to the late
eighties. From then on, German capital took over and put into execution
the tremendous project of the Anatolian railway. German capital
investments in Turkey gave rise to an increased export of German goods
to that country.

In 1896, German exports to Turkey amounted to £m. 1·4, in 1911 to £m.
5·65. To Asiatic Turkey, in particular, goods were exported in 1901 to
the value of £m. 0·6 and in 1911 to the value of £m. 1·85. In this case,
German capital was used to a considerable extent to pay for German
goods, the Germans forgoing, to use Sismondi's term, only the pleasure
of using their own products.

Let us examine the position more closely:

Realised surplus value, which cannot be capitalised and lies idle in
England or Germany, is invested in railway construction, water works,
etc. in the Argentine, Australia, the Cape Colony or Mesopotamia.
Machinery, materials and the like are supplied by the country where the
capital has originated, and the same capital pays for them. Actually,
this process characterises capitalist conditions everywhere, even at
home. Capital must purchase the elements of production and thus become
productive capital before it can operate. Admittedly, the products are
then used within the country, while in the former case they are used by
foreigners. But then capitalist production does not aim at its products
being enjoyed, but at the accumulation of surplus value. There had been
no demand for the surplus product within the country, so capital had
lain idle without the possibility of accumulating. But abroad, where
capitalist production has not yet developed, there has come about,
voluntarily or by force, a new demand of the non-capitalist strata. The
consumption of the capitalist and working classes at home is irrelevant
for the purposes of accumulation, and what matters to capital is the
very fact that its products are 'used' by _others_. The new consumers
must indeed realise the products, pay for their use, and for this they
need money. They can obtain some of it by the exchange of commodities
which begins at this point, a brisk traffic in goods following hard on
the heels of railway construction and mining (gold mines, etc.). Thus
the capital advanced for railroad building and mining, together with an
additional surplus value, is gradually realised. It is immaterial to the
situation as a whole whether this exported capital becomes share capital
in new independent enterprises, or whether, as a government loan, it
uses the mediation of a foreign state to find new scope for operation in
industry and traffic, nor does it matter if in the first case some of
the companies are fraudulent and fail in due course, or if in the second
case the borrowing state finally goes bankrupt, i.e. if the owners
sometimes lose part of their capital in one way or another. Even the
country of origin is not immune, and individual capitals frequently get
lost in crises. The important point is that capital accumulated in the
old country should find elsewhere new opportunities to beget and realise
surplus value, so that accumulation can proceed. In the new countries,
large regions of natural economy are open to conversion into commodity
economy, or existing commodity economy can be ousted by capital.
Railroad construction and mining, gold mining in particular, are typical
for the investment of capitals from old capitalist countries in new
ones. They are pre-eminently qualified to stimulate a brisk traffic in
goods under conditions hitherto determined by natural economy and both
are significant in economic history as mile-stones along the route of
rapid dissolution of old economic organisations, of social crises and of
the development of modern conditions, that is to say of the development
of commodity economy to begin with, and further of the production of
capital.

For this reason, the part played by lending abroad as well as by capital
investments in foreign railway and mining shares is a fine sample of the
deficiencies in Marx's diagram of accumulation. In these instances,
enlarged reproduction of capital capitalises a surplus value that has
already been realised (in so far as the loans or foreign investments are
not financed by the savings of the petty bourgeoisie or the
semi-proletariat). It is quite irrelevant to the present field of
accumulation, when, where and how the capital of the old countries has
been realised so that it may flow into the new country. British capital
which finds an outlet in Argentine railway construction might well in
the 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, as money capital, but
also in its material form, as iron, coal and machinery; the use-form of
the surplus value, that is to say, has also come into being from the
very beginning in the use-form suitable for the purposes of
accumulation. The actual use-form of the variable capital, however,
labour power, is mainly foreign: it is the native labour of the new
countries which is made a new object of exploitation by the capital of
the old countries. If we want to keep our investigation all on one
plane, we may even assume that the labour power, too, has the same
country of origin as the capital. In point of fact new discoveries, of
gold mines for instance, tend to call forth mass emigration from the old
countries, especially in the first stages, and are largely worked by
labour from those countries. It might well be, then, that in a new
country capital, labour power and means of production all come from the
same capitalist country, say England. So it is really in England that
all the material conditions for accumulation exist--a realised surplus
value as money capital, a surplus product in productive form, and lastly
labour reserves. Yet accumulation cannot proceed here: England and her
old buyers require neither railways nor an expanded industry. Enlarged
reproduction, i.e. accumulation, is possible only if new districts with
a non-capitalist civilisation, extending over large areas, appear on the
scene and augment the number of consumers.

But then, who are these new consumers actually; who is it that realises
the surplus value of capitalist enterprises which are started with
foreign loans; and who, in the final analysis, pays for these loans? The
international loans in Egypt provide a classical answer.

The internal history of Egypt in the second half of the nineteenth
century is characterised by the interplay of three phenomena:
large-scale capitalist enterprise, a rapidly growing public debt, and
the collapse of peasant economy. Until quite recently, _corvée_
prevailed in Egypt, and the Wali and later the Khedive freely pursued
their own power policy with regard to the condition of landownership.
These primitive conditions precisely offered an incomparably fertile
soil for the operations of European capital. Economically speaking, the
conditions for a monetary economy had to be established to begin with,
and the state created them by direct compulsion. Until the thirties,
Mehemet Ali, the founder of Modern Egypt, here applied a method of
patriarchal simplicity: every year, he 'bought up' the fellaheen's
entire harvest for the public exchequer, and allowed them to buy back,
at a higher price, a minimum for subsistence and seed. In addition he
imported cotton from East India, sugar cane from America, indigo and
pepper, and issued the fellaheen with official directions what to plant
and how much of it. The government again claimed the monopoly for cotton
and indigo, reserving to itself the exclusive right of buying and
selling these goods. By such methods was commodity exchange introduced
in Egypt. Admittedly, Mehemet Ali also did something towards raising
labour productivity. He arranged for dredging of the ancient
canalisation, and above all he started the work of the great Kaliub Nile
dams which initiated the series of great capitalist enterprises in
Egypt. These were to comprise four great fields: (1) irrigation systems,
in which the Kaliub works built between 1845 and 1853 take first
place--quite apart from unpaid forced labour, they swallowed up £m. 2·5
and incidentally proved quite useless at first; (2) routes for
traffic--the most important construction which proved ultimately
detrimental to Egypt being the Suez Canal; (3) the cultivation of
cotton, and (4) the production of sugar cane. With the building of the
Suez Canal, Egypt became caught up in the web of European capitalism,
never again to get free of it. French capital led the way with British
capital hard on its heels. In the twenty years that followed, the
internal disturbances in Egypt were coloured by the competitive struggle
between these two capitals. French capital was perhaps the most peculiar
exponent of the European methods of capital accumulation at the expense
of primitive conditions. Its operations were responsible for the useless
Nile dams as well as for the Suez Canal. Egypt first contracted to
supply the labour of 20,000 serfs free of charge for a number of years,
and secondly to take up shares in the Suez Company to the tune of £m.
3·5, i.e. 40 per cent of the company's total capital. All this for the
sake of breaking through a canal which would deflect the entire trade
between Europe and Asia from Egypt and would painfully affect her part
in this trade. These £m. 3·5 formed the nucleus for Egypt's immense
national debt which was to bring about her military occupation by
Britain twenty years later. In the irrigation system, sudden
transformations were initiated: the ancient _sakias_, i.e.
bullock-driven water-wheels, of which 50,000 had been busy for 7 months
in the year in the Nile delta alone, were partially replaced by steam
pumps. Modern steamers now plied on the Nile between Cairo and Assuan.
But the most profound change in the economic conditions of Egypt was
brought about by the cultivation of cotton. This became almost epidemic
in Egypt when, owing to the American War of Secession and the English
cotton famine, 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 estates grew fat, what with
large-scale land robbery, confiscations, forced 'sale' or plain theft.
He suddenly appropriated villages by the score though without any legal
excuse. Within an incredibly short time, this vast demesne was brought
under cotton, with the result that the entire technique of Egyptian
traditional agriculture was revolutionised. Dams were thrown up
everywhere to protect the cotton fields from the seasonal flooding of
the Nile, and a comprehensive system of artificial irrigation was
introduced. These waterworks together with continuous deep ploughing--a
novel departure for the fellah who had until then merely scratched his
soil with a plough dating back to the Pharaohs--and finally the
intensive labours of the harvest made between them enormous demands on
Egypt's labour power. This was throughout the same forced peasant labour
over which the state claimed to have an unrestricted right of disposal;
and thousands had already been employed on the Kaliub dams and the Suez
Canal and now the irrigation and plantation work to be done on the
viceregal estates clamoured for this forced labour. The 20,000 serfs who
had been put at the disposal of the Suez Canal Company were now required
by the Khedive himself, and this brought about the first clash with
French capital. The company was adjudged a compensation of £m. 3·35 by
the arbitration of Napoleon III, a settlement to which the Khedive could
all the more readily agree, since the very fellaheen whose labour power
was the bone of contention were ultimately to be mulcted of this sum.
The work of irrigation was immediately put in hand. Centrifugal
machines, steam and traction engines were therefore ordered from England
and France. In their hundreds, they were carried by steamers from
England to Alexandria and then further. Steam ploughs were needed for
cultivating the soil, especially since the rinderpest of 1864 had killed
off all the cattle, England again being the chief supplier of these
machines. The Fowler works were expanded enormously of a sudden to meet
the requirements of the Viceroy for which Egypt had to pay.[404]

But now Egypt required yet a third type of machine, cotton gins and
presses for packing. Dozens of these gins were set up in the Delta
towns. Like English industrial towns, Sagasis, Tanta, Samanud and other
towns were covered by palls of smoke and great fortunes circulated in
the banks of Alexandria and Cairo.

But already in the year that followed, this cotton speculation collapsed
with the cotton prices which fell in a couple of days from 27_d._ per
pound to 15_d._, 12_d._, and finally 6_d._ after the cessation of
hostilities in the American Union. The following year, Ismail Pasha
ventured on a new speculation, the production of cane sugar. The forced
labour of the fellaheen was to compete with the Southern States of the
Union where slavery had been abolished. For the second time, Egyptian
agriculture was turned upside down. French and British capitalists found
a new field for rapid accumulation. 18 giant sugar factories were put on
order in 1868-9 with an estimated daily output of 200 short tons of
sugar, that is to say four times as much as that of the greatest then
existing plant. Six of them were ordered from England, and twelve from
France, but England eventually delivered the lion's share, because of
the Franco-German war. These factories were to be built along the Nile
at intervals of 6·2 miles (10 _km._), as centres of cane plantations of
an area comprising 10 sq. _km._ Working to full capacity, each factory
required a daily supply of 2,000 tons of sugar cane. Fellaheen were
driven to forced labour on the sugar plantations in their thousands,
while further thousands of their number built the Ibrahimya Canal. The
stick and _kourbash_ were unstintingly applied. Transport soon became a
problem. A railway network had to be built round every factory to haul
the masses of cane inside, rolling stock, funiculars, etc., had to be
obtained as quickly as possible. Again these enormous orders were placed
with English capital. The first giant factory was opened in 1872, 4,000
camels providing makeshift transport. But it proved to be simply
impossible to supply cane in the quantities required by the undertaking.
The working staff was completely inadequate, since the fellah,
accustomed to forced labour on the land, could not be transformed
overnight into a modern industrial worker by the lash of the whip. The
venture collapsed, even before many of the imported machines had been
installed. This sugar speculation concluded the period of gigantic
capitalist enterprise in Egypt in 1873.

What had provided the capital for these enterprises? International
loans. One year before his death in 1863, Said Pasha had raised the
first loan at a nominal value of £m. 3·3 which came to £m. 2·5 in cash
after deduction of commissions, discounts, etc. He left to Ismail Pasha
the legacy of this debt and the contract with the Suez Canal Company,
which was to burden Egypt with a debt of £m. 17. Ismail Pasha in turn
raised his first loan in 1864 with a nominal value of £m. 5·7 at 7 per
cent and a cash value of £m. 4·85 at 8 1/4 per cent. What remained of
it, after £m. 3·35 had been paid to the Suez Canal Company as
compensation, was spent within the year, swallowed up for the greater
part by the cotton gamble. In 1865, the first so-called Daira-loan was
floated by the Anglo-Egyptian Bank, on the security of the Khedive's
private estates. The nominal value of this loan was £m. 3·4 at 9 per
cent, and its real value £m. 2·5 at 12 per cent. In 1866, _Fruehling &
Goschen_ floated a new loan at a nominal value of £m. 3 and a cash value
of £m. 2. The Ottoman Bank floated another in 1867 of nominally £m. 2,
really £m. 1·7. The floating debt at that time amounted to £m. 30. The
Banking House _Oppenheim & Neffen_ floated a great loan in 1868 to
consolidate part of this debt. Its nominal value was £m. 11·9 at 7 per
cent, though Ismail could actually lay hands only on £m. 7·1 at 13 1/2
per cent. This money made it possible, however, to pay for the pompous
celebrations on the opening of the Suez Canal, in presence of the
leading figures in the Courts of Europe, in finance and in the
_demi-monde_, for a madly lavish display, and further, to grease the
palm of the Turkish Overlord, the Sultan, with a new baksheesh of £m. 1.
The sugar gamble necessitated another loan in 1870. Floated by the firm
of _Bischoffsheim & Goldschmidt_, it had a nominal value of £m. 7·1 at 7
per cent, and its cash value was £m. 5. In 1872/3 _Oppenheim's_ floated
two further loans, a modest one 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 the
European banking houses paid it in part by bills of exchange they had
discounted.

In 1874, a further attempt was made to raise a national loan of £m. 50
at an annual charge of 9 per cent, but it yielded no more than £m. 3·4.
Egyptian securities were quoted at 54 per cent of their face value.
Within the thirteen years after Said Pasha's death, Egypt's total public
debt had grown from £m. 3·293 to £m. 94·110,[405] and collapse was
imminent.

These operations of capital, at first sight, seem to reach the height of
madness. One loan followed hard on the other, the interest on old loans
was defrayed by new loans, and capital borrowed from the British and
French paid for the large orders placed with British and French
industrial capital.

While the whole of Europe sighed and shrugged its shoulders at Ismail's
crazy economy, European capital was in fact doing business in Egypt on a
unique and fantastic scale--an incredible modern version of the biblical
legend about the fat kine which remains unparalleled in capitalist
history.

In the first place, there was an element of usury in every loan,
anything between one-fifth and one-third of the money ostensibly lent
sticking to the fingers of the European bankers. Ultimately, the
exorbitant interest had to be paid somehow, but how--where were the
means to come from? Egypt herself was to supply them; their source was
the Egyptian fellah--peasant economy providing in the final analysis all
the most important elements for large-scale capitalist enterprise. He
provided the land since the so-called private estates of the Khedive
were quickly growing to vast dimensions by robbery and blackmail of
innumerable villages; and these estates were the foundations of the
irrigation projects and the speculation in cotton and sugar cane. As
forced labour, the fellah also provided the labour power and, what is
more, he was exploited without payment and even had to provide his own
means of subsistence while he was at work. The marvels of technique
which European engineers and European machines performed in the sphere
of Egyptian irrigation, transport, agriculture and industry were due to
this peasant economy with its fellaheen serfs. On the Kaliub Nile dams
and on the Suez Canal, in the cotton plantations and in the sugar
plants, untold masses of peasants were put to work; they were switched
over from one job to the next as the need arose, and they were exploited
to the limit of endurance and beyond. Although it became evident at
every step that there were technical limits to the employment of forced
labour for the purposes of modern capital, yet this was amply
compensated by capital's unrestricted power of command over the pool of
labour power, how long and under what conditions men were to work, live
and be exploited.

But not alone that it supplied land and labour power, peasant economy
also provided the money. Under the influence of capitalist economy, the
screws were put on the fellaheen by taxation. The tax on peasant
holdings was persistently increased. In the late sixties, it amounted to
£2 5_s._ per _hectare_, but not a farthing was levied on the enormous
private estates of the royal family. In addition, ever more special
rates were devised. Contributions of 2_s._ 6_d._ per _hectare_ had to be
paid for the maintenance of the irrigation system which almost
exclusively benefited the royal estates, and the fellah had to pay 1_s._
4_d._ for every date tree felled, 9_d._ for every clay hovel in which he
lived. In addition, every male over 10 years of age was liable to a head
tax of 6_s._ 6_d._ The total paid by the fellaheen was £m. 2·5 under
Mehemet Ali, £m. 5 under Said Pasha, and £m. 8·15 under Ismail Pasha.

The greater the debt to European capital became, the more had to be
extorted from the peasants.[406] In 1869 all taxes were put up by 10 per
cent and the taxes for the coming year collected in advance. In 1870, a
supplementary land tax of 8_s._ per _hectare_ was levied. All over Upper
Egypt people were leaving the villages, demolished their dwellings and
no longer tilled their land--only to avoid payment of taxes. In 1876,
the tax on date palms was increased by 6_d._ Whole villages went out to
fell their date palms and had to be prevented by rifle volleys. North of
Siut, 10,000 fellaheen are said to have starved in 1879 because they
could no longer raise the irrigation tax for their fields 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 had accomplished its
function and was no longer needed. Ismail, the Khedive, was given his
_congé_; capital could begin winding up operations.

Egypt had still to pay 394,000 Egyptian pounds as interest on the Suez
Canal shares for £m. 4 which England had bought in 1875. Now British
commissions to 'regulate' the finances of Egypt went into action.
Strangely enough, European capital was not at all deterred by the
desperate state of the insolvent country and offered again and again to
grant immense loans for the salvation of Egypt. Cowe and Stokes proposed
a loan of £m. 76 at 9 per cent for the conversion of the total debt,
Rivers Wilson thought no less than £m. 103 would be necessary. The
_Crédit Foncier_ bought up floating bills of exchange by the million,
attempting, though without success, to consolidate the total debt by a
loan of £m. 91. With the financial position growing hopelessly
desperate, the time drew near when the country and all her productive
forces was to become the prey of European capital. October 1878 saw the
representatives of the European creditors landing in Alexandria. British
and French capital established dual control of finances and devised new
taxes; the peasants were beaten and oppressed, so that payment of
interest, temporarily suspended in 1876, could be resumed in 1877.[408]

Now the claims of European capital became the pivot of economic life and
the sole consideration of the financial system. In 1878, a new
commission and ministry were set up, both with a staff in which
Europeans made up one half. In 1879, the finances of Egypt were brought
under permanent control of European capital, exercised by the
_Commission de la Dette Publique Égyptienne_ in Cairo. In 1878, the
Tshifliks, estates of the viceregal family, which comprised 431,100
acres, were converted into crown land and pledged to the European
capitalists as collateral for the public debt, and the same happened to
the Daira lands, the private estates of the Khedive, comprising 485,131
acres, mainly in Upper Egypt; this was, at a later date, sold to a
syndicate. The other estates for the greatest part fell to capitalist
companies, the Suez Canal Company in particular. To cover the cost of
occupation, England requisitioned ecclesiastical lands of the mosques
and schools. An opportune pretext for the final blow was provided by a
mutiny in the Egyptian army, starved under European financial control
while European officials were drawing excellent salaries, and by a
revolt engineered among the Alexandrian masses who had been bled white.
The British military occupied Egypt in 1882, as a result of twenty
years' operations of Big Business, never to leave again. This was the
ultimate and final step in the process of liquidating peasant economy in
Egypt by and for European capital.[409]

It should now be clear that the transactions between European loan
capital and European industrial capital are based upon relations which
are extremely rational and 'sound' for the accumulation of capital,
although they appear absurd to the casual observer because this loan
capital pays for the orders from Egypt and the interest on one loan is
paid out of a new loan. Stripped of all obscuring connecting links,
these relations consist in the simple fact that European capital has
largely swallowed up the Egyptian peasant economy. Enormous tracts of
land, labour, and labour products without number, accruing to the state
as taxes, have ultimately been converted into European capital and have
been accumulated. Evidently, only by use of the _kourbash_ could the
historical development which would normally take centuries be compressed
into two or three decades, and it was just the primitive nature of
Egyptian conditions which 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 together with the growth
of commodity exchange which is rooted in the supreme exertion of the
country's productive forces. Under Ismail's rule, the arable and
reclaimed land of Egypt grew from 5 to 6·75 million acres, the canal
system from 45,625 to 54,375 miles and the permanent way from 256·25 to
1,638 miles. Docks were built in Siut and Alexandria, magnificent
dockyards in Alexandria, a steamer-service for pilgrims to Mecca was
introduced on the Red Sea and along the coast of Syria and Asia Minor.
Egypt's exports which in 1861 had amounted to £4,450,000 rose to £m.
14·4 in 1864; her imports which under Said Pasha amounted to £m 1·2 rose
under Ismail to between £m. 5 and £m. 5·5. Trade which recovered only in
the eighties from the opening up of the Suez Canal amounted to £m. 8·15
worth of imports and £m. 12·45 worth of exports 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 commodity economy which expanded by leaps and bounds with
the assistance of European capital, Egypt herself had fallen a prey to
the latter. The case of Egypt, just as that of China and, more recently,
Morocco, shows militarism as the executor of the accumulation of
capital, lurking behind international loans, railroad building,
irrigation systems, and similar works of civilisation. The Oriental
states cannot develop from natural to commodity economy and further to
capitalist economy fast enough and are swallowed up by international
capital, since they cannot perform these transformations without selling
their souls to capital. Their feverish metamorphoses are tantamount to
their absorption by international capital.

Another good recent example is the deal made by German capital in
Asiatic Turkey. European capital, British capital in particular, had
already at an early date attempted to gain possession of this area which
marches with the ancient trade route between Europe and Asia.[410]

In the fifties and sixties, British capital built the railway lines
Smyrna-Aydin-Diner and Smyrna-Kassaba-Alasehir, obtained the concession
to extend the line to Afyon Karahisar and also leased the first tract
for the Anatolian railway Ada-Bazar-Izmid. French capital gradually came
to acquire influence over part of the railway building during this time.
In 1888, German capital appeared on the scene. It took up 60 per cent
of the shares in the new merger of international interests, negotiated
principally with the French capitalist group represented by the _Banque
Ottomane_. International capital took up the remaining 40 per cent.[411]
The Anatolian Railway Company, a Turkish company, was founded on the
14th Redsheb of the year 1306 (March 4, 1889) with the _Deutsche Bank_
for principal backer, to take over the railway lines between Ada-Bazar
and Izmid, running since the early seventies, as also the concession for
the Izmid-Eskisehir-Angora line (525 miles). It was further entitled to
complete the Ada-Bazar-Scutari line and branch lines to Brussa, in
addition to building the supplementary network Eskisehir-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 state guarantee of annual gross earnings amounting to £412 per
km. on the Ada-Bazar line and of £600 per km. on the Izmid-Angora lines.
For this purpose it wrote over to the _Administration de la Dette
Publique Ottomane_ the revenue from tithes in the _sandshaks_ of Izmid,
Ertoghrul, Kutalia and Angora, with which to make up the gross earnings
guaranteed by the government. For the Angora-Kaisari line the government
guaranteed annual gross earnings of 775 Turkish pounds, i.e. £712 per
km., and 604 Turkish pounds, i.e. approximately £550, provided, in the
latter case, that the supplementary grant per km. did not exceed 219
Turkish pounds (£200 a year). The government was to receive a quarter of
the eventual surplus of gross earnings over the guaranteed amount. The
_Administration de la Dette Publique Ottomane_ as executor of the
government guarantee collected the tithes of the _sandshaks_ Trebizonde
and Gumuchhane direct and paid the railway company out of a common fund
which was formed of all the tithes set aside for this purpose. In 1898,
the Eskisehir-Konya maximum grant was raised from 218 to 296 Turkish
pounds.

In 1899, the company obtained concessions to build and run a dockyard at
Ada-Bazar, to issue writs, to build corn-elevators and storerooms for
goods of every description, further the right to employ its own staff
for loading and unloading and, finally, in the sphere of customs policy,
the creation of a kind of free port.

In 1901, the company acquired a concession for the Baghdad railway
Konya-Baghdad-Bazra-Gulf of Persia (1,500 miles) which connects with the
Anatolian line by the Konya-Aregli-Bulgurlu line. For taking up this
concession, a new limited company was founded which placed the order of
constructing the line, at first to Bulgurlu, with a Building Company
registered in Frankfort-on-the-Main.

Between 1893 and 1910, the Turkish government gave additional
grants--£1,948,000 for the Ada-Bazar-Angora line and 1,800,000 Turkish
pounds for the Eskisehir-Konya line--a total of £3,632,000.[412]
Finally, by the concession of 1907, the company was empowered to drain
the Karavirar Lake and to irrigate the Konya plain, these works to be
executed within six years at government expense. In this instance, the
company advanced the government the necessary capital up to £780,000 at
5 per cent interest, repayable within thirty-six years. In return the
Turkish government pledged as securities: (1) an annual sum of 25,000
Turkish pounds, payable from the surplus of the tithes' fund assigned to
the _Administration de la Dette Publique Ottomane_ to cover the railway
grants and other obligations; (2) the residual tithes over the last 5
years in the newly irrigated regions; (3) the net proceeds from the
working of the irrigation systems, and (4) the price of all reclaimed or
irrigated land that was sold. For the execution of this work, the
Frankfort company had formed a subsidiary company 'for the irrigation of
the Konya plain' with a capital of £m. 5·4 to take this work in hand.

In 1908 the company obtained the concession for extending the 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 railway loan was taken
up in three instalments of £m. 2·16, £m. 4·32 and £m. 4·76 respectively,
on the security of the aggregate tithes for the _vilayets_ Aydin,
Baghdad, Mossul, Diarbekir, Ursa and Aleppo, and the sheep-tax in the
_vilayets_ Konya, Adana, Aleppo, etc.[413]

The foundation of accumulation here becomes quite clear. German capital
builds railways, ports and irrigation works in Asiatic Turkey; in all
these enterprises it extorts new surplus value from the Asiatics whom it
employs as labour power. But this surplus value must be realised
together with the means of production from Germany (railway materials,
machinery, etc.). How is it done? In part by commodity exchange which is
brought about by the railways, the dockyards, etc., and nurtured in
Asia Minor under conditions of natural economy. In part, i.e. in so far
as commodity exchange does not grow quickly enough for the needs of
capital, by using force, the machinery of the state, to convert the
national real income into commodities; these are turned into cash in
order to realise capital plus surplus value. That is the true object of
the revenue grants for independent enterprises run by foreign capital,
and of the collateral in the case of loans. In both instances so-called
tithes (_ueshur_), pledged in different ways, are paid in kind by the
Turkish peasant and these were gradually increased from about 12 to
12 1/2 per cent. The peasant in the Asiatic _vilayet_ must pay up or
else his tithe would simply be confiscated by the police and the central
and local authorities. These tithes, themselves a manifestation of
ancient Asiatic despotism based on natural economy, are not collected by
the Turkish government direct, but by tax-farmers not unlike the
tax-collectors of the _ancien régime_; that is to say the expected
returns from the levy in each _vilayet_ are separately auctioned by the
state to tax-farmers. They are bought by individual speculators or
syndicates who sell the tithes of each _sandshak_ (district) to other
speculators and these resell their shares to a whole number of smaller
agents. All these middlemen want to cover their expenses and make the
greatest possible 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 mistake in
his calculations at the expense of the peasant, and the latter, nearly
always in debt, is impatient for the moment when he can sell his
harvest. But often, after cutting his corn, he cannot start threshing
for weeks, until indeed the tax-farmer deigns to take his due. His
entire harvest is about to rot in the fields, and the tax-farmer,
usually a grain merchant himself, takes advantage of this fact and
compels him to sell at a low price. These tax-collectors know how to
enlist the support of the officials, especially the Muktars, the local
headmen, against complaining malcontents.[414]

Along with the taxes on salt, tobacco, spirits, the excise on silk, the
fishing dues, etc., the tithes are pledged with the _Conseil de
l'Administration de la Dette Publique Ottomane_ to serve as security for
the railway grant and the loans. In every case the _Conseil_ reserves
to itself the right to vet the tax-farmers' contracts and stipulates for
the proceeds of the tithe to be paid directly into the coffers of its
regional offices. If no tax-farmer can be found, the tithes are stored
in kind by the Turkish government; the warehouse keys are deposited with
the _Conseil_ which then can sell the tithes on its own account.

Thus the economic metabolism between the peasants of Asia Minor, Syria
and Mesopotamia on the one hand and German capital on the other proceeds
in the following way: in the _vilayets_ Konya, Baghdad, Bazra, etc., the
grain comes into being as a simple use-product of primitive peasant
economy. It immediately falls to the tithe-farmer as a state levy. Only
then, in the hands of this latter, does it become a commodity, and, as
such, money which falls to the state. This money is nothing but
converted peasant grain; it was not even produced as a commodity. But
now, as a state guarantee, it serves towards paying for the construction
and operation of railways, i.e. to realise both the value of the means
of production and the surplus value extorted from the Asiatic peasants
and proletariat in the building and running of the railway. In this
process further means of production of German origin are used, and so
the peasant grain of Asia, converted into money, also serves to turn
into cash the surplus value that has been extorted from the German
workers. In the performance of these functions, the money rolls from the
hands of the Turkish government into the coffers of the _Deutsche Bank_,
and here it accumulates, as capitalist surplus value, in the form of
promoters' profits, royalties, dividends and interests in the accounts
of Messrs. Gwinner, Siemens, Stinnes and their fellow directors, of the
shareholders and clients of the _Deutsche Bank_ and the whole intricate
system of its subsidiary companies. If there is no tax-farmer, as
provided in the concessions, then the complicated metamorphoses are
reduced to their most simple and obvious terms: the peasant grain passes
immediately to the _Administration de la Dette Publique Ottomane_, i.e.
to the representatives of European capital, and becomes already in its
natural form a revenue for German and other foreign capital: it realises
capitalist surplus value even before it has shed its use-form for the
Asiatic peasant, even before it has become a commodity and its own value
has been realised. This is a coarse and straightforward metabolism
between European capital and Asiatic peasant economy, with the Turkish
state reduced to its real rôle, that of a political machinery for
exploiting peasant economy for capitalist purposes,--the real function,
this, of all Oriental states in the period of capitalist imperialism.
This business of paying for German goods with German capital in Asia is
not the absurd circle it seems at first, with the kind Germans allowing
the shrewd Turks merely the 'use' of their great works of
civilisation--it is at bottom an exchange between German capital and
Asiatic peasant economy, an exchange performed under state compulsion.
On the one hand it makes for progressive accumulation and expanding
'spheres of interest' as a pretext for further political and economic
expansion of German capital in Turkey. Railroad building and commodity
exchange, on the other hand, are fostered by the state on the basis of a
rapid disintegration, ruin and exploitation of Asiatic peasant economy
in the course of which the Turkish state becomes more and more dependent
on European capital, politically as well as financially.[415]

FOOTNOTES:

[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
Crises in England_, p. 74.

[403] Sismondi, _Nouveaux Principes_ ..., vol. i, book iv, chap. iv:
'Commercial Wealth Follows the Growth of Income', pp. 368-70.

[404] Engineer Eyth, a representative of Fowler's, tells us: 'Now there
was a feverish exchange of telegrams between Cairo, London and
Leeds.--"When can Fowler's deliver 150 steam ploughs?"--Answer: "Working
to capacity, within one year."--"Not good enough. Expect unloading
Alexandria by spring 150 steam ploughs."--A.: "Impossible."--The works
at that 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. Viceroy willing foot bill."--You can imagine that
Leeds made hay while the sun shone. And in addition, other factories in
England and France as well were made to supply steam ploughs. The
Alexandria warehouses, where goods destined for the vice-regal estates
were unloaded, were crammed to the roof with boilers, wheels, drums,
wire-rope and all sorts of chests and boxes. The second-rate hostelries
of Cairo swarmed with newly qualified steam ploughmen, promoted in a
hurry from anvil or share-plough, young hopefuls, fit for anything and
nothing, since every steam plough must be manned by at least one expert
pioneer of civilisation. Wagonloads of this assorted cargo were sent
into the interior, just so that the next ship could unload. You cannot
imagine in what condition they arrived at their destination, or rather
anywhere but 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 a little heap of wire-rope, but you had to travel another 20
hours to find the appropriate pulleys. In one place an Englishman who
was to set up the machines squatted desolate and hungry on a pile of
French crates, and in another place his mate had taken to native liquor
in his despair. Effendis and Katibs, invoking the help of Allah, rushed
to and fro between Siut and Alexandria and compiled endless lists of
items the names of which they did not even know. And yet, in the end,
some of this apparatus was set in motion. In Upper Egypt, the ploughs
belched steam--civilisation and progress had made another step forward'
(_Lebendige Kräfte, 7 Vorträge aus dem Gebiete 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
which were increased several times and paid direct into the Bank of
England.

[407] 'It is stated by residents in the Delta', reports _The Times_ of
March 31, 1879, 'that the third quarter of the year's taxation is now
collected, and the old methods of collection applied. This sounds
strangely by the side of the news that people are starving by the
roadside, that great tracts of country are uncultivated, because of the
physical burdens, and that the farmers have sold their cattle, the women
their finery, and that the usurers are filling the mortgage offices with
their bonds, and the courts with their suits of foreclosure' (quoted by
Th. Rothstein, _Egypt's Ruin_, 1910, pp. 69-70).

[408] 'This produce', wrote the correspondent of _The Times_ from
Alexandria, 'consists wholly of taxes paid by the peasants in kind, and
when one thinks of the poverty-stricken, overdriven, under-paid
fellaheen in their miserable hovels, working late and early to fill the
pockets of the creditors, the punctual payment of the coupon ceases to
be wholly a subject of gratification' (quoted by Rothstein, op. cit., p.
49).

[409] Eyth, an outstanding exponent of capitalist civilisation in the
primitive countries, characteristically concludes his masterly sketch on
Egypt, from which we have taken the main data, with the following
imperialist articles of faith: '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 no longer keep up with modern conditions on
their own, though this will not be possible without all kinds of
struggle, when the difference between right and wrong will become
blurred, when political and historical justice will often enough mean
disaster for millions and their salvation depend upon what is
politically wrong. All the world over, the strongest hand will make an
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 British created 'on the banks of the Nile'.

[410] Already in the early twenties of the last century, the
Anglo-Indian government commissioned Colonel Chesney to investigate the
navigability of the River Euphrates in order to establish the shortest
possible connection between the Mediterranean and the Persian Gulf,
resp. India. After detailed preparations and a preliminary
reconnaissance in winter 1831, the expedition proper set out in 1835/7.
In due course, British staff and officials investigated and surveyed a
wider area in Eastern Mesopotamia. These efforts dragged on until 1866
without any useful results for the British government. But at a later
date Great Britain returned to the plan of connecting the Mediterranean
with India by way of the Gulf of Persia, though in a different form,
i.e. the Tigris railway project. In 1879, Cameron travelled through
Mesopotamia for the British government to study the lie of the land for
the projected railway (Max Freiherr v. Oppenheim, _Vom Mittelmeer zum
Persischen Golf 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
as assistant to Baron v. Hirsch was actively engaged in these
transactions in European Turkey, neatly accounts for the total grants
towards railway-building in Turkey which European capital wrested from
the Turkish government:

  ----------------------------------------------------------------------
                                             | _Length | _Paid guarantee
                                             | in km._ |    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
the revenue grants paid in part. The tithes of no less than 28 out of
the 74 _sandshaks_ in Asiatic Turkey had been pledged for the revenue
grants, and with these grants, between 1856 and 1900, a grand total of
1,576 miles of rails had been laid down in Asiatic Turkey. Pressel, the
expert, by the way gives an instance of the underhand methods employed
by the railway company at Turkish expense; he states that under the 1893
agreement the Anatolian company promised to run the railway to Baghdad
via Angora, but later decided that this plan of theirs would not work
and, having qualified for the guarantee, left the line to its fate and
got busy with another route via Konya. 'No sooner have the companies
succeeded in acquiring the Smyrna-Aydin-Diner line, than they will
demand the extension of this line to Konya, and the moment these branch
lines are completed, the companies will move heaven and earth to force
the goods traffic to use these new routes for which there are no
guarantees, and which, more important still, need never share their
takings, whereas the other lines must pay part of their surplus to the
government, once their gross revenue exceeds a certain amount. In
consequence, the government will gain nothing by the Aydin line, and the
companies will make millions. The government will foot the bill for
practically the entire revenue guarantee for the Kassaba-Angora line,
and can never hope to profit by its contracted 25 per cent share in the
surplus above £600 gross takings' (W. V. Pressel, _Les Chemins de Fer en
Turquie 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. If the government wishes to create a monopoly in cigarette
paper or playing cards, France and Austro-Hungary immediately are on the
spot to veto the project in the interest of their trade. If the issue is
oil, Russia will raise objections, and even the Powers who are least
concerned will make their agreement dependent on some other agreement.
Turkey's fate is that of Sancho Panza and his dinner: as soon as the
minister of finance wishes to do anything, some diplomat gets up,
interrupts him and throws a veto in his teeth' (Moravitz, op. cit., p.
70).




_CHAPTER XXXI_

PROTECTIVE TARIFFS AND ACCUMULATION


Imperialism is the political expression of the accumulation of capital
in its competitive struggle for what remains still open of the
non-capitalist environment. Still the largest part of the world in terms
of geography, this remaining field for the expansion of capital is yet
insignificant as against the high level of development already attained
by the productive forces of capital; witness the immense masses of
capital accumulated in the old countries which seek an outlet for their
surplus product and strive to capitalise their surplus value, and the
rapid change-over to capitalism of the pre-capitalist civilisations. On
the international stage, then, capital must take appropriate measures.
With the high development of the capitalist countries and their
increasingly severe competition in acquiring non-capitalist areas,
imperialism grows in lawlessness and violence, both in aggression
against the non-capitalist world and in ever more serious conflicts
among the competing capitalist countries. But the more violently,
ruthlessly and thoroughly imperialism brings about the decline of
non-capitalist civilisations, the more rapidly it cuts the very ground
from under the feet of capitalist accumulation. Though imperialism is
the historical method for prolonging the career of capitalism, it is
also a sure means of bringing it to a swift conclusion. This is not to
say that capitalist development must be actually driven to this extreme:
the mere tendency towards imperialism of itself takes forms which make
the final phase of capitalism a period of catastrophe.

Classical economics, in its period of storm and stress, had had high
hopes of a peaceful development of the accumulation of capital and of a
trade and industry which can only prosper in times of peace, evolving
the orthodox Manchester ideology of the harmony of interests among the
world's commercial nations on the one hand, and between capital and
labour on the other. These hopes were apparently justified in Europe by
the short period of Free Trade in the sixties and seventies, which was
based upon the mistaken doctrine of the English Free Traders that the
only theoretical and practical condition for the accumulation of capital
is commodity exchange, that the two are identical. As we have seen,
Ricardo and his whole school identified accumulation and its
reproductive conditions with simple commodity production and the
conditions of simple commodity circulation. This was soon to become even
more obvious in the practices of the common Free Trader. The special
interests of the exporting Lancashire cotton manufacturers in Manchester
determined the entire line of argument of the Cobden League. Their
principal object was to get markets, and it became an article of faith:
'Buy from foreign countries and thus in turn sell our industrial
product, our cotton goods, on the new markets.' Cobden and Bright
demanded Free Trade and cheaper foodstuffs in particular in the interest
of consumption; but the consumer was not the worker who eats the bread,
but the capitalist who consumes labour power.

This teaching never expressed the interests of capitalist accumulation
as a whole. In England herself it was given the lie already in the
forties, when the harmony of interests of the commercial nations in the
East were proclaimed to the sound of gunfire in the Opium Wars which
ultimately, by the annexation of Hongkong, brought about the very
opposite of such harmony, a system of 'spheres of interest'.[416] On the
European Continent, Free Trade in the sixties did not represent the
interests of industrial capital, because the foremost Free Trade
countries of the Continent were still predominantly agrarian with a
comparatively feeble development of industry. Rather, the policy of Free
Trade was implemented as a means for the political reconstruction of the
Central European states. In Germany, under Bismarck and Manteuffel, it
was a peculiarly Prussian lever for ousting Austria from the _Bund_ and
the _Zollverein_ and to set up the new German Empire under Prussian
leadership. Economically speaking, the mainstays of Free Trade were in
this case the interests both of commercial capital, especially in the
Hansa towns to whom international trade was vital, and of agrarian
consumers; among industry proper, it was otherwise. The iron industry
was won over only with difficulty and in exchange for the abolition of
the Rhine tolls. But the cotton industry in Southern Germany remained
irreconcilable and clung to protective tariffs. In France, 'most
favoured nations' clause' agreements, the basis of the Free Trade system
all over Europe, were concluded by Napoleon III without the consent, and
even against the will, of parliament, industrialists and agrarians, who
constituted an absolute majority, being in favour of protective tariffs.
The government of the Second Empire only took the course of commercial
treaties as an emergency measure--Britain accepted it as such--in order
to get round political opposition in France and to establish Free Trade
behind the back of the legislature by international action. The first
principal treaty between England and France simply rode rough-shod over
public opinion in France.[417] Two imperial decrees abolished the old
system of French protective tariffs which had been in force from 1853
to 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 of public opinion, an
inquiry was made in 1870 which revealed that those most intimately
concerned were hostile to the policy of Free Trade. In Russia, finally,
the tendency towards Free Trade in the sixties was but the first step
towards creating a broad basis for commodity economy and industry on a
large scale, coming at the same time as the abolition of serfdom and the
construction of a railway network.[418]

Thus the very inception of an international system of Free Trade shows
it to be just a passing phase in the history of capitalist accumulation,
and it shows up the fallacy of attributing the general reversion to
protective tariffs after the seventies simply to a defensive reaction
against English Free Trade.[419]

Such an explanation is vitiated by the fact that both in Germany and
France the leaders in the reversion to protective tariffs were the
agrarian interests, that the measures were directed not against British
but against American competition, and that not England but Germany
constituted the chief danger to the rising home industry in Russia, and
France to that in Italy. Nor was Britain's monopoly the cause for the
world-wide depression which prevailed since the seventies and induced
the desire for protective tariffs. We must look deeper for the reasons
responsible for the change of front on the question of protective
tariffs. The doctrine of Free Trade with its delusion about the harmony
of interests on the world market corresponded with an outlook which
conceived of everything in terms of commodity exchange. It was abandoned
just as soon as big industrial capital had become sufficiently
established in the principal countries of the European Continent to look
to the conditions for its accumulation. As against the mutual interests
of capitalist countries, these latter bring to the fore the antagonism
engendered by the competitive struggle for the non-capitalist
environment.

When the Free Trade era opened, Eastern Asia was only just being made
accessible by the Chinese wars, and European capital had but begun to
make headway in Egypt. In the eighties the policy of expansion became
ever stronger, together with a policy of protective tariffs. There was
an uninterrupted succession of events during the eighties: the British
occupation of Egypt, Germany's colonial conquests in Africa, the French
occupation of Tunisia together with the Tonkin expedition, Italy's
advances in Assab and Massawa, the Abyssinian war and the creation of a
separate Eritrea, and the English conquests in South Africa. The clash
between Italy and France over the Tunisian sphere of interest was the
characteristic prelude to the Franco-Italian tariff war seven years
later, by which drastic epilogue an end was made to the Free Trade
harmony of interests on the European Continent. To monopolise the
non-capitalist areas at home and abroad became the war-cry of capital,
while the free-trade policy of the 'open door' specifically represented
the peculiar helplessness of non-capitalist countries in the face of
international capital and the natural equilibrium which was aimed at by
its competition in the preliminary stage of the partial or total
occupation of these areas as colonies or spheres of interest. As the
oldest capitalist Empire, England alone could so far remain loyal to
Free Trade, primarily because she had long had immense possessions of
non-capitalist areas as a basis for operations which afforded her almost
unlimited opportunities for capitalist accumulation. Until recently, she
had thus in fact been beyond the competition of other capitalist
countries. These, in turn, universally strove to become self-sufficient
behind a barrier of protective tariffs; yet they buy one another's
commodities and come to depend ever more one upon another for
replenishing their material conditions of reproduction. Indeed,
protective tariffs have by now completely lost their use for technical
development of the productive forces, all too often being the instrument
for the artificial conservation of obsolete productive methods. The
inherent contradictions of an international policy of protective
tariffs, exactly like the dual character of the international loan
system, are just a reflection of the historical antagonism which has
developed between the dual interests of accumulation: expansion, the
realisation and capitalisation of surplus value on the one hand, and, on
the other, an outlook which conceives of everything purely in terms of
commodity exchange.

This fact is evidenced particularly in that the modern system of high
protective tariffs, required by colonial expansion and the increasing
inner tension of the capitalist medium, was also instituted with a view
to increasing armaments. The reversion to protective tariffs was
carried through in Germany as well as in France, Italy, and Russia,
together with, and in the interests of, an expansion of the armed
services, as the basis for the European competition in armaments which
was developing at that time, first on land, and then also at sea.
European Free Trade, with its attendant continental system of infantry,
had been superseded by protective tariffs as the foundation and
supplement of an imperialist system with a strong bias towards naval
power.

Thus capitalist accumulation as a whole, as an actual historical
process, has two different aspects. One concerns the commodity market
and the place where surplus value is produced--the factory, the mine,
the agricultural estate. Regarded in this light, accumulation is a
purely economic process, with its most important phase a transaction
between the capitalist and wage labourer. In both its phases, however,
it is confined to the exchange of equivalents and remains within the
limits of commodity exchange. Here, in form at any rate, peace, property
and equality prevail, and the keen dialectics of scientific analysis
were required to reveal how the right of ownership changes in the course
of accumulation into appropriation of other people's property, how
commodity exchange turns into exploitation and equality becomes
class-rule.

The other aspect of the accumulation of capital concerns the relations
between capitalism and the non-capitalist modes of production which
start making their appearance on the international stage. Its
predominant methods are colonial policy, an international loan system--a
policy of spheres of interest--and war. Force, fraud, oppression,
looting are openly displayed without any attempt at concealment, and it
requires an effort to discover within this tangle of political violence
and contests of power the stern laws of the economic process.

Bourgeois liberal theory takes into account only the former aspect: the
realm of 'peaceful competition', the marvels of technology and pure
commodity exchange; it separates it strictly from the other aspect: the
realm of capital's blustering violence which is regarded as more or less
incidental to foreign policy and quite independent of the economic
sphere of capital.

In reality, political power is nothing but a vehicle for the economic
process. The conditions for the reproduction of capital provide the
organic link between these two aspects of the accumulation of capital.
The historical career of capitalism can only be appreciated by taking
them together. 'Sweating blood and filth with every pore from head to
toe' characterises not only the birth of capital but also its progress
in the world at every step, and thus capitalism prepares its own
downfall under ever more violent contortions and convulsions.

FOOTNOTES:

[416] And not only in England. 'Even in 1859, a pamphlet, ascribed to
Diergardt of 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 getting commercial advantages from the Japanese and the Eastern
Asiatic nations in general. A German fleet, built with the people's
small savings, had been a youthful dream, long since brought under the
hammer by Hannibal Fischer. Though Prussia had a few ships, her naval
power was not impressive. But in order to enter into commercial
negotiations with Eastern Asia, it was decided to equip a ship. Graf zu
Eulenburg, one of the ablest and most prudent Prussian statesmen, was
appointed chief of this mission which also had scientific objects. Under
most difficult conditions he carried out his commission with great
skill, and though the plan for simultaneous negotiations with the
Hawaiian islands had to be given up, the mission was otherwise
successful. Though the Berlin press of that time knew better, declaring
whenever a new difficulty was reported, that it was only to be expected,
and denouncing all expenditure on naval demonstrations as a waste of the
taxpayers' money, the ministry of the new era remained steadfast, and
the harvest 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
and Richard Cobden on behalf of the French and English governments,
'official negotiations were shortly entered upon and were conducted with
the greatest secrecy. On January 1, 1860, Napoleon III announced his
intentions in a memorandum addressed to M. Fould, the Minister of State.
This declaration came like a bolt from the blue. After the events of the
past year, the general belief was that no attempt would be made to
modify the tariff system before 1861. Feelings ran high, but all the
same the treaty was signed on January 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
Russian tariffs and the ultimate writing-off of the insane system of
_kantrin_ with regard to protective tariffs were a manifestation and
corollary of the progressive reforms which the disastrous Crimean wars
had made inevitable. But the reduction of customs duties reflected the
concern of the landowning gentry who, both as consumers of foreign goods
and as producers of grain for export, were interested in unrestricted
commerce between Russia and Western Europe. 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 four great
setbacks. These could in every case be directly attributed to excessive
tariffs. On the other hand, the thirty-two years between 1845 and 1877
when tariffs were moderate went by without any such emergency, in spite
of three foreign wars and one civil war [meaning the Polish insurrection
of 1863--_R. L._], every one of which proved a greater or less strain on
the financial resources of the state' (_Memorandum of the Imperial Free
Economic Association on Revising Russian Tariffs_ (St. Petersburg,
1890), p. 148). As late as the nineties, then, the scientific spokesman
of the Free Trade Movement, the said 'Free Economic Association', had to
agitate against protective tariffs as a 'contrivance to transplant'
capitalist industry to Russia. In a reactionary 'populist' spirit, it
denounced capitalism as a breeding ground for the modern proletariat,
'those masses of shiftless people without home or property 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 of Free
Trade, or at least of moderate tariffs, did not to any appreciable
extent represent the interests of industrial capital. Cf. also K.
Lodyshenski: _The History 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 patriotic interests, completely fail to grasp why the whole world
so stubbornly rejects England's example of free trade and adopts in its
place the principle of protective tariffs. Of course, they simply dare
not admit even to themselves that the system of protective tariffs, by
now almost universal, is merely a defensive measure against English free
trade which was instrumental in perfecting England's industrial
monopoly. Such a defence policy may be more or less reasonable--in some
cases it is downright stupid, as for instance in Germany who under the
system of free trade had become a great industrial power and now imposes
protective tariffs on agricultural products and raw materials, thus
increasing the cost of her industrial production. In my view this
universal reversion to protective tariffs is not a mere accident but the
reaction against England's intolerable industrial monopoly. The form
which this reaction takes, as I said before, may be wrong, inadequate
and even worse, 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).




_CHAPTER XXXII_

MILITARISM AS A PROVINCE OF ACCUMULATION


Militarism fulfils a quite definite function in the history of capital,
accompanying as it does every historical phase of accumulation. It plays
a decisive part in the first stages of European capitalism, in the
period of the so-called 'primitive accumulation', as a means of
conquering the New World and the spice-producing countries of India.
Later, it is employed to subject the modern colonies, to destroy the
social organisations of primitive societies so that their means of
production may be appropriated, forcibly to introduce commodity trade in
countries where the social structure had been unfavourable to it, and to
turn the natives into a proletariat by compelling them to work for wages
in the colonies. It is responsible for the creation and expansion of
spheres of interest for European capital in non-European regions, for
extorting railway concessions in backward countries, and for enforcing
the claims of European capital as international lender. Finally,
militarism is a weapon in the competitive struggle between capitalist
countries for areas of non-capitalist civilisation.

In addition, militarism has yet another important function. From the
purely economic point of view, it is a pre-eminent means for the
realisation of surplus value; it is in itself a province of
accumulation. In examining the question who should count as a buyer for
the mass of products containing the capitalised surplus value, we have
again and again refused to consider the state and its organs as
consumers. Since their income is derivative, they were all taken to
belong to the special category of those who live on the surplus value
(or partly on the wage of labour), together with the liberal professions
and the various parasites of present-day society ('king, professor,
prostitute, mercenary'). But this interpretation will only do on two
assumptions: first, if we take it, in accordance with Marx's diagram,
that the state has no other sources of taxation than capitalist surplus
value and wages,[420] and secondly, if we regard the state and its
organs as consumers pure and simple. If the issue turns on the personal
consumption of the state organs (as also of the 'mercenary') the point
is that consumption is partly transferred from the working class to the
hangers-on of the capitalist class, in so far as the workers foot the
bill.

Let us assume for a moment that the indirect taxes extorted from the
workers, which mean a curtailment of their consumption, are used
entirely to pay the salaries of the state officials and to provision the
regular army. There will then be no change in the reproduction of social
capital as a whole. Both Departments II and I remain constant because
society as a whole still demands the same kind of products and in the
same quantities. Only _v_ as the commodity of 'labour power' has changed
in value in relation to the products of Department II, i.e. in relation
to the means of subsistence. This _v_, the same amount of money
representing labour power, is now exchanged for a smaller amount of
means of subsistence. What happens to the products of Department II
which are then left over? Instead of the workers, the state officials
and the regular army now receive them. The organs of the capitalist
state take over the workers' consumption on the same scale exactly.
Although the conditions of reproduction have remained stable, there has
been a redistribution of the total product. Part of the products of
Department II, originally intended entirely for the consumption of the
workers as equivalent for _v_, is now allocated to the hangers-on of
the capitalist class for consumption. From the point of view of social
reproduction, it is as if the relative surplus value had in the first
place been larger by a certain amount which is added on to the
consumption of the capitalist class and its hangers-on.

So far the crude exploitation, by the mechanism of indirect taxation, of
the working class for the support of the capitalist state's officials
amounts merely to an increase of the surplus value, of that part of it,
that is to say, which is consumed. The difference is that this further
splitting off of surplus value from variable capital only comes later,
after the exchange between capital and labour has been accomplished. But
the consumption by the organs of the capitalist state has no bearing on
the realisation of _capitalised_ surplus value, because the additional
surplus value for this consumption--even though it comes about at the
workers' expense--is created afterwards. On the other hand, if the
workers did not pay for the greater part of the state officials' upkeep,
the capitalists themselves would have to bear the entire cost of it. A
corresponding portion of their surplus value would have to be assigned
directly to keeping the organs of their class-rule, either at the
expense of production which would have to be curtailed accordingly, or,
which is more probable, it would come from the surplus value intended
for their consumption. The capitalists would have to capitalise on a
smaller scale because of having to contribute more towards the immediate
preservation of their own class. In so far as they shift onto the
working class (and also the representatives of simple commodity
production, such as peasants and artisans) the principal charge of their
hangers-on, the capitalists have a larger portion of surplus value
available for capitalisation. But as yet _no opportunities for such
capitalisation_ have come into being, no new market, that is to say, for
the surplus value that has become available, in which it could produce
and realise new commodities. But when the monies concentrated in the
exchequer by taxation are used for the production of armaments, the
picture is changed.

With indirect taxation and high protective tariffs, the bill of
militarism is footed mainly by the working class and the peasants. The
two kinds of taxation must be considered separately. From an economic
point of view, it amounts to the following, as far as the working class
is concerned: provided that wages are not raised to make up for the
higher price of foodstuffs--which is at present the fate of the greatest
part of the working class, including even the minority that is organised
in trade unions, owing to the pressure of cartels and employers'
organisations[421]--indirect taxation means that part of the purchasing
power of the working class is transferred to the state. Now as before
the variable capital, as a fixed amount of money, will put in motion an
appropriate quantity of living labour, that is to say it serves to
employ the appropriate quantity of constant capital in production and to
produce the corresponding amount of surplus value. As soon as capital
has completed this cycle, it is divided between the working class and
the state: the workers surrender the state part of the money they
received as wages. Capital has wholly appropriated the former variable
capital in its material form, as labour power, but the working class
retains only part of the variable capital in the form of money, the
state claiming the rest. And this invariably happens after capital has
run its cycle between capitalist and worker; it takes place, as it were,
behind the back of capital, at no point impinging direct on the vital
stages of the circulation of capital and the production of surplus
value, so that it is no immediate concern of the latter. But all the
same it does affect the conditions for the reproduction of capital as a
whole. The transfer of some of the purchasing power from the working
class to the state entails a proportionate decrease in the consumption
of means of subsistence by the working class. For capital as a whole, it
means producing a smaller quantity of consumer goods for the working
class, provided that both variable capital (in the form of money and as
labour power) and the mass of appropriated surplus value remain
constant, so that the workers get a smaller share of the aggregate
product. In the process of reproduction of the entire capital, then,
means of subsistence will be produced in amounts smaller than the value
of the variable capital, because of the shift in the ratio between the
value of the variable capital and the quantity of means of subsistence
in which it is realised, with the money wages of labour remaining
constant, according to our premise, or at any rate not rising
sufficiently to offset the increase in the price of foodstuffs. This
increase represents the level of indirect taxation.

How will the material relations of reproduction be adjusted? When fewer
means of subsistence are needed for the renewal of labour power, a
corresponding amount of constant capital and living labour becomes
available which can now be used for producing other commodities in
response to a new effective demand arising within society. It arises
from the side of the state which has appropriated, by way of tax
legislation, the part wanting of the workers' purchasing power. This
time, however, the state does not demand means of subsistence (after all
that has already been said under the heading of 'third persons', we
shall here ignore the demand for means of subsistence for state
officials which is also satisfied out of taxes) but it requires a
special kind of product, namely the militarist weapons of war on land
and at sea.

Again we take Marx's second diagram of accumulation as the basis for
investigating the ensuing changes in social reproduction:

   I. _5,000c + 1,000v + 1,000s = 7,000_ means of production
  II. _1,430c +   285v +   285s = 2,000_ means of subsistence

Now let us suppose that, owing to indirect taxation and the consequent
increase in the price of means of subsistence, the working class as a
whole reduces consumption by, say, a 100 value units of the real wages.
As before, the workers receive _1,000v + 285v = 1,285v_ in money, but
for this money they only get means of subsistence to the value of 1185.
The 100 units which represent the tax increase in the price of
foodstuffs go to the state which receives in addition military taxes
from the peasants, etc., to the value of 150 units, bringing the total
up to 250. This total constitutes a new demand--the demand for
armaments. At present, however, we are only interested in the 100 units
taken from the workers' wages. This demand for armaments to the value of
100 must be satisfied by the creation of an appropriate branch of
production which requires a constant capital of 71·5 and a variable
capital of 14·25, assuming the average organic composition outlined in
Marx's diagram.

  _71·5c + 14·25v + 14·25s = 100_ weapons of war

This new branch of production further requires that 71·5 means of
production be produced and about 13 means of subsistence, because, of
course, the real wages of the workers are also less by about
one-thirteenth.

You could counter by saying that the profit accruing to capital from
this new expansion of demand is merely on paper, because the cut in the
actual consumption of the working class will inevitably result in a
corresponding curtailment of the means of subsistence produced. It will
take the following form for Department II:

  _71·5c + 14·25v + 14·25s = 100_

In addition, Department I will also have to contract accordingly, so
that, owing to the decreasing consumption of the working class, the
equations for both departments will be:

   I. _4,949c   + 989·75v + 989·75s = 6,928·5_
  II. _1,358·5c + 270·75v + 270·75s = 1,900_

If, by the mediation of the state, the same 100 units now call forth
armament production of an equal volume with a corresponding fillip to
the production of producer goods, this is at first sight only an
extraneous change in the material forms of social production: instead of
a quantity of means of subsistence a quantity of armaments is now being
produced. Capital has won with the left hand only what it has lost with
the right. Or we might say that the large number of capitalists
producing means of subsistence have lost the effective demand in favour
of a small group of big armament manufacturers.

But this picture is only valid for individual capital. Here it makes no
difference indeed whether production engages in one sphere of activity
or another. As far as the individual capitalist is concerned, there are
no departments of total production such as the diagram distinguishes.
There are only commodities and buyers, and it is completely immaterial
to him whether he produces instruments of life or instruments of death,
corned beef or armour plating.

Opponents of militarism frequently appeal to this point of view to show
that military supplies as an economic investment for capital merely put
profit taken from one capitalist into the pocket of another.[422] On the
other hand, capital and its advocates try to overpersuade the working
class to this point of view by talking them into the belief that
indirect taxes and the demand of the state would only bring about a
change in the material form of reproduction; instead of other
commodities cruisers and guns would be produced which would give the
workers as good a living, if not a better one.

One glance at the diagram shows how little truth there is in this
argument as far as the workers are concerned. To make comparison easier,
we will suppose the armament factories to employ just as many workers as
were employed before in the production of means of subsistence for the
working class. 1,285 units will then be paid out as wages, but now they
will only buy 1,185's worth of means of subsistence.

All this looks different from the perspective of capital as a whole. For
this the 100 at the disposal of the state, which represent the demand
for armaments, constitute a new market. Originally this money was
variable capital and as such it has done its job, it has been exchanged
for living labour which produced the surplus value. But then the
circulation of the variable capital was stopped short, this money was
split off, and it now appears as a new purchasing power in the
possession of the state. It has been created by sleight of hand, as it
were, but still it has the same effects as a newly opened market. Of
course for the time being capital is debarred from selling 100 units of
consumer goods for the working class, and the individual capitalist
considers the worker just as good a consumer and buyer of commodities as
anyone else, another capitalist, the state, the peasant, foreign
countries, etc. But let us not forget that for capital as a whole the
upkeep of the working class is only a necessary evil, only a means
towards the real end of production: the creation and realisation of
surplus value. If it were possible to extort surplus value without
giving labour an equal measure of means of subsistence, it would be all
the better for business. To begin with indirect taxation has the same
effects as if--the price of foodstuffs remaining constant--the
capitalists had succeeded in depressing wages by a hundred units without
detracting from the work performed, seeing that a lower output of
consumer goods is equally the inevitable result of continuous wage cuts.
If wages are cut heavily, capital does not worry about having to produce
fewer means of subsistence for the workers, in fact it delights in this
practice at every opportunity; similarly, capital as a whole does not
mind if the effective demand of the working class for means of
subsistence is curtailed because of indirect taxation which is not
compensated by a rise in wages. This may seem strange because in the
latter case the balance of the variable capital goes to the exchequer,
while with a direct wage cut it remains in the capitalists' pockets
and--commodity prices remaining equal--increases the relative surplus
value. But a continuous and universal reduction of money wages can only
be carried through on rare occasions, especially if trade union
organisation is highly developed. There are strong social and political
barriers to this fond aspiration of capital. Depression of the real wage
by means of indirect taxation, on the other hand, can be carried through
promptly, smoothly and universally, and it usually takes time for
protests to be heard; and besides, the opposition is confined to the
political field and has no immediate economic repercussions. The
subsequent restriction in the production of means of subsistence does
not represent a loss of markets for capital as a whole but rather a
saving in the costs of producing surplus value. Surplus value is never
realised by producing means of subsistence for the workers--however
necessary this may be, as the reproduction of living labour, for the
production of surplus value.

But to come back to our example:

   I. _5,000c + 1,000v + 1,000s = 7,000_ means of production
  II. _1,430c +   285v +   285s = 2,000_ means of subsistence

At first it looks as if Department II were also creating and realising
surplus value in the process of producing means of subsistence for the
workers, and Department I by producing the requisite means of
production. But if we take the social product as a whole, the illusion
disappears. The equation is in that case:

  _6,430c + 1,285v + 1,285s = 9,000_

Now, if the means of subsistence for the workers are cut by 100 units,
the corresponding contraction of both departments will give us the
following equations:

   I. _4,949c   + 989·75v + 989·75s = 6,928·5_
  II. _1,358·5c + 270·75v + 270·75s = 1,900_

and for the social product as a whole:

  _6,307·5c + 1,260·5v + 1,260·5s = 8,828·5_

This looks like a general decrease in both the total volume of
production and in the production of surplus value--but only if we
contemplate just the abstract quantities of value in the composition of
the total product; it does not hold good for the material composition
thereof. Looking closer, we find that nothing but the upkeep of labour
is in effect decreased. Fewer means of subsistence and production are
now being made, no doubt, but then, they had had no other function save
to maintain workers. The social product is smaller and less capital is
now employed--but then, the object of capitalist production is not
simply to employ as much capital as possible, but to produce as much
surplus value as possible. Capital has only decreased because a smaller
amount is sufficient for maintaining the workers. If the total cost of
maintaining the workers employed in the society came to 1,285 units in
the first instance, the present decrease of the social product by
171·5--the difference of (9,000-8,828·5)--comes off this maintenance
charge, and there is a consequent change in the composition of the
social product:

  _6,430c + 1,113·5v + 1,285s = 8,828·5_

Constant capital and surplus value remain unchanged, and only the
variable capital, paid labour, has diminished. Or--in case there are
doubts about constant capital being unaffected--we may further allow for
the event that, as would happen in actual practice, concomitant with the
decrease in means of subsistence for the workers there will be a
corresponding cut in the constant capital. The equation for the social
product as a whole would then be:

  _6,307·5c + 1,236v + 1,285s = 8,828·5_

In spite of the smaller social product, there is no change in the
surplus value in either case, and it is only the cost of maintaining the
workers that has fallen.

Put it this way: the value of the aggregate social product may be
defined as consisting of three parts, the total constant capital of the
society, its total variable capital, and its total surplus value, of
which the first set of products contains no additional labour, and the
second and third no means of production. As regards their material form,
all these products come into being in the given period of
production--though in point of value the constant capital had been
produced in a previous period and is merely being transferred to new
products. On this basis, we can also divide all the workers employed
into three mutually exclusive categories: those who produce the
aggregate constant capital of the society, those who provide the upkeep
for all the workers, and finally those who create the entire surplus
value for the capitalist class.

If, then, the workers' consumption is curtailed, only workers in the
second category will lose their jobs. _Ex hypothesi_, these workers had
never created surplus value for capital, and in consequence their
dismissal is therefore no loss from the capitalist's point of view but a
gain, since it decreases the cost of producing surplus value.

The demand of the state which arises at the same time has the lure of a
new and attractive sphere for realising the surplus value. Some of the
money circulating as variable capital breaks free of this cycle and in
the state treasury it represents a new demand. For the technique of
taxation, of course, the order of events is rather different, since the
amount of the indirect taxes is actually advanced to the state by
capital and is merely being refunded to the capitalists by the sale of
their commodities, as part of their price. But economically speaking, it
makes no difference. The crucial point is that the quantity of money
with the function of variable capital should first mediate the exchange
between capital and labour power. Later, when there is an exchange
between workers and capitalists as buyers and sellers of commodities
respectively, this money will change hands and accrue to the state as
taxes. This money, which capital has set circulating, first fulfils its
primary function in the exchange with labour power, but subsequently, by
mediation of the state, it begins an entirely new career. As a new
purchasing power, belonging with neither labour nor capital, it becomes
interested in new products, in a special branch of production which does
not cater for either the capitalists or the working class, and thus it
offers capital new opportunities for creating and realising surplus
value. When we were formerly taking it for granted that the indirect
taxes extorted from the workers are used for paying the officials and
for provisioning the army, we found the 'saving' in the consumption of
the working class to mean that the workers rather than the capitalists
were made to pay for the personal consumption of the hangers-on of the
capitalist class and the tools of their class-rule. This charge devolved
from the surplus value to the variable capital, and a corresponding
amount of the surplus value became available for purposes of
capitalisation. Now we see how the taxes extorted from the workers
afford capital a new opportunity for accumulation when they are used for
armament manufacture.

On the basis of indirect taxation, militarism in practice works both
ways. By lowering the normal standard of living for the working class,
it ensures both that capital should be able to maintain a regular army,
the organ of capitalist rule, and that it may tap an impressive field
for further accumulation.[423]

We have still to examine the second source of the state's purchasing
power referred to in our example, the 150 units out of the total 250
invested in armaments. They differ essentially from the hundred units
considered above in that they are not supplied by the workers but by the
petty bourgeoisie, i.e. the artisans and peasants. (In this connection,
we can ignore the comparatively small tax-contribution of the capitalist
class itself.)

The money accruing to the state as taxes from the peasant masses--as our
generic term for all non-proletarian consumers--was not originally
advanced by capital and has not split off from capital in circulation.
In the hand of the peasant it is the equivalent of goods that have been
realised, the exchange value of simple commodity production. The state
now gets part of the purchasing power of the non-capitalist consumers,
purchasing power, that is to say, which is already free to realise the
surplus value for capitalist accumulation. Now the question arises,
whether economic changes will result for capital, and if so, of what
nature, from diverting the purchasing power of such strata to the state
for militarist purposes. It almost looks as if we had come up against
yet another shift in the material form of reproduction. Capital will now
produce an equivalent of war materials for the state instead of
producing large quantities of means of production and subsistence for
peasant consumers. But in fact the changes go deeper. First and
foremost, the state can use the mechanism of taxation to mobilise much
larger amounts of purchasing power from the non-capitalist consumers
than they would ordinarily spend on their own consumption.

Indeed the modern system of taxation itself is largely responsible for
forcing commodity economy on the peasants. Under pressure of taxes, the
peasant must turn more and more of his produce into commodities, and at
the same time he must buy more and more. Taxation presses the produce of
peasant economy into circulation and compels the peasants to become
buyers of capitalist products. Finally, on a basis of commodity
production in the peasant style, the system of taxation lures more
purchasing power from peasant economy than would otherwise become
active.

What would normally have been hoarded by the peasants and the lower
middle classes until it has grown big enough to invest in savings banks
and other banks is now set free to constitute an effective demand and an
opportunity for investment. Further the multitude of individual and
insignificant demands for a whole range of commodities, which will
become effective at different times and which might often be met just as
well by simple commodity production, is now replaced by a comprehensive
and homogeneous demand of the state. And the satisfaction of this demand
presupposes a big industry of the highest order. It requires the most
favourable conditions for the production of surplus value and for
accumulation. In the form of government contracts for army supplies the
scattered purchasing power of the consumers is concentrated in large
quantities and, free of the vagaries and subjective fluctuations of
personal consumption, it achieves an almost automatic regularity and
rhythmic growth. Capital itself ultimately controls this automatic and
rhythmic movement of militarist production through the legislature and a
press whose function is to mould so-called 'public opinion'. That is why
this particular province of capitalist accumulation at first seems
capable of infinite expansion. All other attempts to expand markets and
set up operational bases for capital largely depend on historical,
social and political factors beyond the control of capital, whereas
production for militarism represents a province whose regular and
progressive expansion seems primarily determined by capital itself.

In this way capital turns historical necessity into a virtue: the ever
fiercer competition in the capitalist world itself provides a field for
accumulation of the first magnitude. Capital increasingly employs
militarism for implementing a foreign and colonial policy to get hold of
the means of production and labour power of non-capitalist countries and
societies. This same militarism works in a like manner in the capitalist
countries to divert purchasing power away from the non-capitalist
strata. The representatives of simple commodity production and the
working class are affected alike in this way. At their expense, the
accumulation of capital is raised to the highest power, by robbing the
one of their productive forces and by depressing the other's standard of
living. Needless to say, after a certain stage the conditions for the
accumulation of capital both at home and abroad turn into their very
opposite--they become conditions for the decline of capitalism.

The more ruthlessly capital sets about the destruction of non-capitalist
strata at home and in the outside world, the more it lowers the
standard of living for the workers as a whole, the greater 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 periodical economic catastrophes or crises,
accumulation can go on no longer.

But even before this natural economic impasse of capital's own creating
is properly reached it becomes a necessity for the international working
class to revolt against the rule of capital.

Capitalism is the first mode of economy with the weapon of propaganda, a
mode which tends to engulf the entire globe and to stamp out all other
economies, tolerating no rival at its side. Yet at the same time it is
also the first mode of economy which is unable to exist by itself, which
needs other economic systems as a medium and soil. Although it strives
to become universal, and, indeed, on account of this its tendency, it
must break down--because it is immanently incapable of becoming a
universal form of production. In its living history it is a
contradiction in itself, and its movement of accumulation provides a
solution to the conflict and aggravates it at the same time. At a
certain stage of development there will be no other way out than the
application of socialist principles. The aim of socialism is not
accumulation but the satisfaction of toiling humanity's wants by
developing the productive forces of the entire globe. And so we find
that socialism is by its very nature an harmonious and universal system
of economy.

FOOTNOTES:

[420] Dr. Renner indeed makes this assumption the basis of his treatise
on taxation. 'Every particle of value created in the course of one year
is made up 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 simultaneously entrepreneur, worker, and landowner,
his agricultural proceeds yield him wage, profit, and rent, _all in
one_.' Obviously, it is an empty abstraction to apply simultaneously all
the categories of capitalist production to the peasantry, to conceive of
the peasant as entrepreneur, wage labourer and landlord all in one
person. If, like Renner, we want to put the peasant into a single
category, his peculiarity for economics lies in the very fact that he
belongs neither to the class of capitalist entrepreneurs nor to that of
the wage proletariat, that he is not a representative of capitalism at
all but of simple commodity production.

[421] It would go beyond the scope of the present treatise to deal with
cartels and trusts as specific phenomena of the imperialist phase. They
are due to the internal competitive struggle between individual
capitalist groups for a monopoly of the existing spheres for
accumulation and for the distribution of profits.

[422] In a reply to Vorontsov, Professor Manuilov, for example, wrote
what was then greatly praised by the Russian Marxists: 'In this context,
we must distinguish strictly between a group of entrepreneurs producing
weapons of war and the capitalist class as a whole. For the
manufacturers of guns, rifles and other war materials, the existence of
militarism is no doubt profitable and indispensable. It is indeed quite
possible that the abolition of the system of 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, capitalist production as a
whole.' In this connection, however, it should be noted that 'if the
burden of taxation falls chiefly on the working population, every
increase of this burden diminishes the purchasing power of the
population and hence the demand for commodities'. This fact is taken as
proof that militarism, under the aspect of armament production, does
indeed 'enrich one group of capitalists, but at the same time it injures
all others, spelling gain on the one hand but loss on the other'
(_Vesnik Prava_, Journal of the Law Society (St. Petersburg, 1890), no.
1, 'Militarism and Capitalism').

[423] Ultimately, the deterioration of the normal conditions under which
labour power is renewed will bring about a deterioration of labour
itself, it will diminish the average efficiency and productivity of
labour, and thus jeopardise the conditions for the production of surplus
value. But capital will not feel these results for a long time, and so
they do not immediately enter into its economic calculations, except in
so far as they bring about more drastic defensive measures of the wage
labourers in general.




INDEX


  Abstinence, 43, 102, 108, 118, 150, 235, 240, 280, 334
  Accumulation, its impossibility respective unrestricted possibility
      _23_, 188f., 198ff., 216, 237, 268, 303, 311, 325
  -- primitive, 161, 272, 364, 369f., 454
  Africa, 352, 363f., 382, 386;
    South, 411ff., 420, 451
  Algeria, under French rule, 371, 377ff.;
    under Turkish rule, 378
  Allard, General, 381
  America, 290, 352, 420, 422, 428;
    United States of, 173, 293ff., 297, 307f., 357f., 362f., 379, 396,
      398, 402, 404f., 409ff., 424ff., 432;
    States of South, 420, 422ff.
  American Civil War (War of Secession), 357f., 363, 396, 398f., 402,
      424f., 430
  Anton, G., 385
  Arabs, 377, 380, 382ff.
  Asia, 247, 290, 420ff., 443ff., 450
  Australia, 420, 426f.

  Baring, E., Earl of Cromer, 434
  Barter, 213, 215f., 222, 229
  Bastiat-Schultze, F., 238, 268
  Bentham, J., 372
  Bergmann, 211
  Bismarck, 448
  Blackhouse, E. T., 392, 394
  Blanc, L., 227
  Bland, L. O., 392, 394
  Blanqui, 227
  Boer Republics, 411, 414ff.
  -- War, 415
  Bouding, 319f.
  Brandt, M. V., 392
  Bright, 447
  Brissot, 265
  Bruce, General, 391
  Bryce, J., 363, 412
  Buecher, Prof., 307f.
  Bulgakov, 275, 298-310, 311, 313, 315, 317, 320, 324ff.

  Cabet, 227
  Cameron, 439
  Canada, 408f.
  Capital and income (Marx), 108;
    (Rodbertus), 262ff.;
    (Say), 56;
    (Sismondi), 179ff., 215, 423;
    (Adam Smith), 53f., 58ff., 74ff., 83
  -- circulating, 37, 57ff., 64, 74ff., 83, 85f., 156f., 166, 183ff.,
      259, 354
  -- constant, _13_f., _18_f., _22_f., 38, 44, 51, 53, 64, 72f., 83,
      85f., 88, 94f., 97, 100ff., 109ff., 123ff., 137, 141, 143, 147,
      149, 153, 156ff., 187ff., 200, 208, 236, 256, 258, 298f., 302,
      304f., 336f., 339, 344, 354ff., 359, 361, 365f., 458, 463
  -- -- definition of, 37, 72, 76f.
  -- fixed, _19_, 50, 53, 57ff., 74ff., 83, 85ff., 111, 140, 147, 158,
      166, 184ff., 259, 341, 354
  -- national (_per se_), 54, 263
  -- productive, 43f., 97, 140, 148f., 157, 163, 420
  -- total social, 31, 49f., 53f., 59, 65, 79, 83, 86, 88, 96f., 101,
      103, 107f., 110, 118, 147, 156, 169, 180, 341, 349f.
  -- variable, _14_, _18_f., _22_, 38, 44, 74f., 85, 94ff., 99, 101,
      105, 109ff., 114ff., 123, 125ff., 134, 137, 151ff., 156, 159, 161,
      182f., 185ff., 207, 209, 234, 253, 256, 258, 302, 306, 334, 336,
      344, 346, 350, 354f., 357, 359ff., 365f., 428, 457f., 460, 463f.;
    definition, 37, 77;
    in relation to surplus value, 252, 258, 337;
    in relation to constant capital, 111, 303, 317, 321, 337, 339f.
  Cavour, 449
  Chartist movement, 227, 267
  Chernishevski, 273
  Chesney, Colonel, 439
  Chevalier, M., 448
  China, 41, 247, 289, 353, 373, 386ff., 419, 428;
    Dowager Empress of, 392ff.
  Class antagonism, 181
  -- rule, 78, 452, 456, 464
  -- society, 41
  Cobden, R., 447f.
  Colonial policy, 185, 247, 363f., 369ff., 419, 425, 451f., 454, 466
  -- -- English in India, 88, 247, 371, 374f., 383
  -- -- French in North Africa, 371, 380, 382
  Commodity economy, _see_ Economy
  -- Exchange, 81f., 85, 93f., 97ff., 118, 129f., 193f., 233, 270, 386,
      428, 438, 443, 452, 454
  -- surplus, 195ff., 276-83
  Communism, 263, 369, 378, 384
  Compensation, theory of, 203
  Competition, _21_, _23_, 40, 46, 48, 191, 202, 205, 207, 209, 230,
      242, 259, 283, 297, 332, 342, 344, 368, 416, 419, 446, 450, 457,
      466;
    'peaceful --', 386, 452
  Contradictions latent in capitalism, 202, 218, 227f., 239, 271, 286ff.
  Corn Laws, 231
  _Corvée_, 33, 39, 42, 84, 369, 395
  Crises, _14_, 35f., 41, 46, 103f., 173, 176f., 191, 194, 199, 201ff.,
      211, 213, 216, 218, 222, 227f., 232, 235ff., 244ff., 261, 268,
      272, 274, 281f., 286, 298, 305, 312ff., 318f., 323f., 332, 342,
      346f., 419, 422, 424, 426, 428, 467
  Crusoe, Robinson, 179, 182, 185, 261ff.

  Dalrymple, Oliver, 403f., 409
  Declining wage rate, _20_f., 229, 241, 244, 250f., 253, 258f.
  Delamarre, Abbé, 393
  Demand and supply (production), 36, 46, 133, 192f., 195, 200, 206,
      212, 220ff., 230f., 242, 248, 324
  -- effective, _20_, 34, 39, 131, 134, 155, 164f., 193f., 286, 329,
      458, 461, 465f.
  Devers, A., 448
  Dialectical approach, 69, 205, 209, 265, 366
  Diehl, Prof., 228f., 256, 266f.
  Division of Labour, 79, 104, 128f., 148, 193, 233, 278, 297, 307f.,
      319, 321f.
  Duehring, 194

  East India Company, 375f., 386f., 411
  Economics, bourgeois, 31, 49, 51, 68f., 106, 108, 112, 137, 170,
      173f., 177, 179, 181, 189f., 209, 215, 218, 244, 268, 271, 279f.,
      295, 310, 325f.;
    classical, 35, 57, 65, 67ff., 105, 108f., 179, 188f., 200, 203, 208,
      210, 216, 227ff., 237, 238-252, 254, 256, 258, 266, 279, 325, 383,
      446;
    vulgar, 35f., 81, 108, 177, 211f., 320
  Economy, commodity, 368ff., 386-394, 402, 417, 419f., 427f., 449, 465
  -- natural, 42, 255, 293, 368-385, 386, 402, 415, 417, 419, 427, 443
  -- peasant, handicrafts and domestic industries, 41, 289, 296, 358,
      369, 374, 395-418, 435, 438, 444f., 465
  -- rural, 272
  Egypt, 41, 201f., 353, 358, 425, 429ff., 450f.
  Elgin, Lord, 391f.
  Engels, Friedrich, 95, 102, 154, 166, 168, 194, 228, 241, 250, 275,
      288ff., 294, 449f.
  England, 173ff., 191, 218f., 227ff., 241, 245, 277, 286, 293, 297,
      307f., 313, 316, 318, 352, 357, 366f., 391, 393, 410, 412, 420ff.,
      447ff.
  English cotton industry, 297, 342, 352, 357f., 362, 422
  Exploitation, _17_, _21_ff., 46, 73f., 108, 116, 181ff., 196, 220,
      228, 241, 247, 255, 334, 343f., 358ff., 364, 374, 386, 428, 445,
      451, 456
  Eyth, Engineer, 431, 437

  Family Associations, 374, 377, 380f.
  Feudal system, 210, 293, 365, 368f., 381f.
  Foreign trade, 136, 205f., 236, 246, 282, 297, 306, 309, 313, 350;
    _see also_ market
  Fowler's Works, 431
  France, 174, 177, 191, 214, 218, 227, 291, 296, 379, 391, 393, 420f.,
      431f., 445, 448ff.
  Franke, O., 373, 393
  Free Trade, 205, 238, 242, 447ff.

  General public (_grand public_), 135, 295, 298
  Germany, 173, 271, 296f., 308, 366f., 420ff., 427, 442, 448ff.
  Gold, production of, 99ff., 141, 154, 301f.
  Great Britain, _see_ England
  Gros, 392

  Hangers-on of the capitalist class, cf. also Third persons, _14_,
      81f., 112, 134f., 222f., 295, 332f., 350, 420, 454ff., 464
  Hanotaux, A., 378
  Hansen, _26_
  Harmony, doctrine of, 173, 177, 200, 203f., 211ff., 228f., 238, 271,
      305, 325f., 446f.
  Harrod, _19_
  Hermann, 243
  Herodotus, 88f., 372
  Hertzen, 273
  Hicks, _28_
  Hobson, _21_, 314

  Ilyin, V., 189, 275, 287, 303, 309, 317, 320
  Imperialism, _28_, 320, 368, 416ff., 421, 445f., 452
  India, 41f., 72, 88, 247, 286, 308, 352f., 365, 371ff., 380, 387, 425,
      428, 454
  Indian famine, 376, 382
  -- mutiny, 247, 374
  Industrial reserve army, _15_, 108, 111, 361
  Intelligentsia, 273ff.
  Ismail Pasha, 33, 431ff., 438
  Issayev, Prof., 275
  Italy, 173, 449ff.

  Japan, 247, 353

  Kablukov, Prof., 275
  Kaffir, 411ff.
  -- Wars, 411, 413
  Kalecki, _23_
  Kant, I., 326
  Kareyev, 274
  Kautsky, K., 228, 267, 318ff.
  Keynes, Lord, _20_f., _26_
  Kirchmann, v., 227-37, 238, 244, 248, 250, 252f., 260f., 266, 268,
      309f., 351, 366
  Kovalevski, M., 373, 375f., 384

  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.
  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

  MacCulloch, J. R., 177, 189, 191-202, 203, 206f., 211, 220, 222, 229,
      233, 264, 335
  Maine, Sir Henry, 373f.
  Malthus, _24_, 181, 211, 217, 219-23, 229, 298, 305, 309, 350
  Manuilov, Prof., 275, 460
  Market, internal and external, 236, 246, 277f., 283ff., 292, 294f.,
      299, 306ff., 316
  -- concept revised, 366
  -- problem of, 229f., 235, 277, 284, 289, 312ff., 345ff.
  Marx, K., _13_f., _16_ff., 31, 36f., 43, 49, 51, 54, 60, 62ff., 76-92,
      95, 99ff., 120-38, 139-54, 155ff., 189, 203, 205, 212, 215, 217f.,
      220, 223, 228, 233, 241, 243f., 255f., 258, 264, 268, 274f.,
      281f., 287, 295, 298-310, 311f., 316ff., 320, 324f., 329ff., 348,
      350f., 357, 359ff., 417;
    his diagram of capitalist reproduction, 84, 97, 99ff., 104, 113,
      118f., 127, 274, 298-310, 311, 417, 428, 455;
    his diagram of enlarged reproduction, 120-138, 304f., 313ff., 318,
      323f., 329-47, 348, 353f., 359, 361, 417, 458ff.;
    his diagram of simple reproduction, 76, 92, 103, 107, 112, 114, 173,
      264, 299, 351, 361, 418
  Marxism, 272ff., 310, 326;
    'legalist', 275, 292, 294, 303, 305f., 317, 323, 324-6, 460;
    'orthodox', 318
  Mehemet Ali, 429, 435
  Mehring, F., 228, 266f.
  Mikhailovski, Prof., 274
  Militarism, _27_, 248, 276, 282, 298, 309, 350, 371, 439, 454-67
  Mill, James, 191, 212, 220ff., 372f., 375, 383
  Mill, John Stuart, 279
  Money, as form of pure value, 38f., 43f., 76, 140
  -- circulation, _20_, 50, 93-106, 139ff., 148, 193, 213, 300ff., 324
  -- sources, 144ff., 151ff., 156, 158ff., 300ff.
  Monroe, President, 402
  Moravitz, C., 443, 445
  Most Favoured Nations Clause, 448

  Napoleon Bonaparte, 173
  Napoleon III, 431, 448
  Negroes, 362ff., 411ff.
  Neo-Marxists, 291
  Neo-Mercantilism, 296
  Nikolayon, 275, 284-91, 292f., 299, 309, 351, 366, 408
  Non-capitalist strata necessary for accumulation, 319f., 351ff., 357,
      359, 361ff., 368, 386, 416, 427, 429, 446, 450, 452, 466
  Nyok Ching Tsur, Dr., 395

  _Obshchina_, 273, 288, 290
  Opium Wars, _27_, 247, 387, 391, 393, 447
  Oppenheim, M. v., 439
  _Ort_, 231f., 248, 252
  Over-production, 91, 104, 149, 195, 199f., 213, 221, 235, 250, 252,
      254, 279, 281f., 298, 324, 342
  Owen, Robert, 174f., 191, 240

  Palikao, Count, 392
  Pan-Germans, 247
  Peasantry, _27_;
    their expropriation, 288, 296, 362, 364, 369, 374f.
  Peel, Sir Robert, 245
  Peffer, Senator, 396, 398, 400f., 406f.
  Physiocrats, 31, 49, 51, 56f., 62, 68, 71, 106, 233
  Planned economy, 78f., 103f., 128ff., 195, 248, 312, 323
  Plekhanov, Prof., 272, 275
  Population increase, _15_, 41, 78, 91, 107, 133f., 239, 360f., 371
  Populism, 272ff., 283, 286ff., 303, 306, 309, 317, 325, 351
  Positivism, 326
  Pressel, Engineer, 441f.
  Primitive social organisations, 32, 39, 41f., 72, 362, 368ff., 377,
      415, 428, 454
  Private enterprise, 79, 103, 248
  Production, and consumption, 45f., 204, 211, 218, 244, 253, 260,
      304f., 324, 326, 343, 349
  -- for social requirements, 37, 42, 129, 133, 139, 220, 260, 285,
      304f., 316
  -- its two departments, _16_, _18_f., _23_, _25_, 83ff., 95ff., 99,
      102, 114ff., 123ff., 127ff., 137, 233, 299, 323, 334, 336, 339ff.,
      353, 355, 417, 434
  -- capitalist, as creation of surplus value, 37ff., 42, 78, 84, 107,
      343, 367, 427
  -- -- as end in itself, 311, 316f., 320, 333, 346
  -- -- its universal domination, 216f., 331, 333, 348, 351, 353, 361,
      365, 410, 417, 467
  Productive consumption, 236f., 316
  Profit, of enterprise, 38, 232, 234
  -- motive, 34, 305, 322f.
  Profit, rate, _17_, _23_f., 79f., 167;
    (declining) 259, 320, 326, 338, 343f., 367
  Progress, _28_, 79, 89, 130f., 204, 216, 245, 249, 258f., 274, 296,
      320, 323, 339
  Property, ownership, 214, 248f., 265, 380f., 413
  -- communal, 77, 248, 289, 379, 381
  -- in land, 256, 262, 264f., 370
  -- -- vested in Sovereign, 372f., 380f.
  -- private, 196, 240, 322, 378, 380, 382ff.
  Proudhon, 137, 227, 241, 264f.
  Punjab Alienation Act, 376

  Quesnay, 31, 48ff., 57, 62, 104f., 211

  Railway construction, 289, 353, 398, 402, 409, 419ff., 425ff., 439,
      445
  Renner, K., 455
  Rent, 38, 50ff., 57ff., 64, 68, 135, 181, 254f., 257, 266
  _Rentier_, 223, 254
  Reproduction, enlarged, _13_, 40ff., 80, 89ff., 102, 107-19, 151, 155,
      169, 184, 197, 209, 268, 300, 303, 312, 317f., 329, 335, 339f.,
      351, 353, 355, 429
  -- simple, _13_, _15_, _19_, 41, 48, 98, 102, 104, 107f., 112f., 115,
      127f., 130, 139, 143ff., 155f., 160ff., 165, 169, 187, 190, 197,
      199f., 298, 300, 302, 312, 317, 329, 334, 338, 348, 351, 354
  -- transition from simple to enlarged, 123, 144f., 147, 150, 162f.,
      318;
    _see also_ Marx
  Rhodes, Cecil, 413f., 416
  Ricardo, D., 53f., 57, 62, 67f., 105f., 109f., 179, 181, 189, 191,
      194ff., 203-10, 211, 215ff., 229f., 232f., 237, 240f., 243ff.,
      248, 254, 257, 261, 266, 268, 271, 279ff., 305, 324f., 345f.,
      350, 366, 383, 447
  'Right to Work', 227, 229f.
  Roberts of Kandahar, Lord, 374
  Rodbertus, _22_f., 54, 227ff., 237, 238-51, 252-68, 271, 274, 281f.,
      351
  Rothstein, Th., 436ff.
  Rozet, A., 385
  Rusk, Secretary, 406
  Russia, 167, 173, 271f., 275ff., 283f., 287ff., 297, 308, 326, 357,
      419ff., 445, 449f., 452

  St. Simon, 191
  Said Pasha, 433ff.
  Saling, 441
  Saving, _17_f., _20_ff., _22_f., _27_, 163, 236f., 239, 260f., 265f.
  Say, J. B., 53ff., 62f., 177ff., 189, 191, 204, 206, 210, 211-18,
      219f., 222, 229ff., 237, 248, 254, 257, 264, 266, 268, 279, 305,
      324f., 335, 366
  Schaeffle, Prof., 293, 295, 307, 424
  Scheibert, J., 388, 390
  Schmoller, Prof., 293, 295ff.
  Schneider, S., 440
  Schultze, E., 410
  Sering, 401, 407, 409f.
  Severance of labour power from the means of production, 181, 210, 402
  -- of agriculture and trade (industry), 369, 395f.
  Simmons, A. M., 398
  Simons, 363
  Sismondi, _24_, 35, 53, 115, 173-90, 191-202, 203-10, 211-18, 219f.,
      222f., 227ff., 237, 240, 245, 248ff., 256, 260, 264, 268, 271,
      274, 281f., 287f., 292, 309, 312, 317, 342, 350ff., 365f., 423ff.
  Skvortsov, Prof., 275
  Slavery, 33, 39, 72f., 84, 161, 209f., 241, 243, 255f., 359, 363, 369,
      379, 400, 412, 432
  Slavophiles, 273, 276
  Smith, Adam, 36, 48, 50ff., 83, 105f., 108ff., 166, 169, 180, 185,
      187ff., 191, 210f., 215, 228, 230f., 233, 256f., 260ff., 264, 266,
      271, 346, 351, 383
  Socialism, 228f., 266, 274, 325f., 467;
    English, 244;
    Utopian, 217;
    and Marx's analysis, 131
  Sombart, Prof., 308
  Spheres of interest, 445, 447, 452
  State as consumer, 223, 454ff., 458, 460, 463, 466
  Struve, Peter v., 275, 292-97, 298, 307, 309ff., 325f., 350
  Suez Canal, 33, 430f., 433, 435ff.
  Surplus value, _14_, _18_f., 38, 62, 78, 109ff., 128, 135, 139, 141,
      185ff., 199, 207, 220, 234f., 253, 255ff., 265ff., 298, 301f.,
      310, 317, 332ff., 342f., 350, 353f., 357f., 365ff., 454, 456, 463,
      466;
    its capitalisation, 108, 112ff., 132, 136, 140, 142, 146f., 151f.,
      163, 165, 170, 184, 188, 196, 198, 237, 330f., 338, 340f., 345,
      355, 357, 359f., 367, 417, 421, 428, 446, 451, 456, 464;
    its consumption, 159ff., 169, 197, 254, 298, 303, 348, 354;
    'destruction', 281f., 310, 344;
    definition, 37f., 77;
    realisation, 98ff., 132, 139, 142, 155ff., 165, 170, 200, 205ff.,
      278, 292f., 300, 303, 309f., 329, 341f., 346, 351, 355, 359, 365,
      386, 417, 419, 421, 426, 428f., 442, 444, 451, 454, 461f.;
    contradiction between its production and realisation, 345, 365
  Sweezy, _13_, 21

  Tariffs, protective, 231, 297, 399, 446-53, 456
  Taussig, 399f.
  Taxation, 369, 373f., 379, 381, 383, 394, 396, 399, 435ff., 443, 455,
      458, 464f.;
    indirect, 455ff., 460f., 463f.
  Tax collector, 372f., 443f.
  'Third Persons', 135, 159, 292-7, 298, 305, 348, 350, 458
  'Three World Empires', 292-7
  Timur (Tamerlane), 375
  Tooke, 156
  Trade Unions, 271, 461
  Tucker, Josiah, 211
  Tugan Baranovski, Prof., _23_, 210, 275, 303, 305f., 310, 311-23,
      324ff., 330, 335f., 346, 366, 422ff.
  Turkey, 353, 385, 419, 425f., 436, 439, 442, 445

  Unemployment, 177, 208, 240, 282
  Usury, 373, 377, 381, 383f.
  Utopianism, 249, 262, 264, 268, 288, 291

  Value, problem of pure, 35f.
  -- Marx's theory of, 66, 68, 105, 281
  -- Ricardo's theory of, 68, 105
  -- Rodbertus' theory of, 240ff., 256, 259
  Value, Adam Smith's theory of, 62, 64ff., 105f.
  -- relationships and material points of view, 81f., 105, 112, 264,
      336, 354, 417
  Victoria, Queen, 393
  Violence, 371, 446, 452
  Vorontsov, V., _24_, 274f., 276-83, 287, 291ff., 299, 303, 309f., 350,
      366, 460

  Wagner, Prof., 256, 266f., 293, 295, 297, 307
  Warren, Count, 375
  Wilson, H. H., 372f.
  Wilson, James, 376
  World (international) Commerce, 205, 307f., 359
  World Market, 200, 202, 205, 296f., 308

  _Zadruga_, 378

  [Transcriber's notes:
  List of errors:
  Page 20 "stook" changed to "stock" ("requires an increase in the
    stock")
  Page 31 "Quesney" changed to "Quesnay" ("of this problem: one by
    Quesney,")
  Page 121 missing "(" added ("(_800v + 25v + 55v_)")
  Pages 175 and 192 "E" replaced with "É" ("_Nouveaux Principes
    d'Économie Politique_")
  Page 220 Footnote reference to 224 altered from original 9, assumed to
    be 2
  Page 227 "simulated" changed to "stimulated" ("the working class had
    stimulated Sismondi's opposition")
  Page 255 "irelevant" changed to "irrelevant" ("irrelevant to the
    productive process,")
  Page 275 "." changed to "," ("One of the two champions of the
    'populist' movement,")
  Page 275 second "." added as in "V. V." ("Vorontsov, known in Russia
    mainly under the _nom de plume_ V. V.,")
  Page 293 "'" added ("open whether these 'third persons'")
  Page 293 """ changed to "'" ("entirely on the basis of the home
    market.'")
  Page 300 Two instances of "formulae" changed to "formulæ"
  Page 340 space added to betweenthe ("determined by the relations
    between the two departments")
  Page 354 "producduction" changed to "production" ("the sphere of
    capitalist production,")
  page 379 "57,500,000,000 acres" changed to "57,000,000 acres" [based
    on the German text "23.000.000 Hektar" converted to acres and
    rounded]
  Page 381 "assocations" changed to "associations" ("of accelerating the
    process of dissolving the family associations")
  Page 434 "." removed after "per cent" ("an annual charge of 9 per
    cent")
  Page 441 "Alleppo" changed to "Aleppo" ("_vilayets_ Aydin, Baghdad,
    Mossul, Diarbekir, Ursa and Aleppo")
  Page 474 "," changed to ";" ("443, 455, 458, 464f.;")
  Footnote 180 missing "." added to "470." ("MacCulloch, loc. cit., p.
    470.")
  Footnote 213 "Noveaux" changed to "Nouveaux" ("_Nouveaux Principes_
    ..., vol. i, p. 117.")
  Footnote 233 "socialer" changed to "sozialer" ("_Über die Grundrente
    in sozialer Beziehung._")
  Footnote 239 "f," changed to "f." ("Op. cit., vol. ii, pp. 104 f.")
  Footnote 260 missing "." added to "Ibid.," ("Ibid., vol. i, p. 19.")]





End of Project Gutenberg's The Accumulation of Capital, by Rosa Luxemburg