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_,