William J. Blake: An American Looks at Karl Marx
Critique of the Exploitation Theory
Apart from Böhm-Bawerk’s analysis of profit as derived from an agio on future goods, the main criticism of Marx’s exploitation theory has come from the land-values taxers, the chief theorists of whom are Oppenheimer of Berlin and Max Hirsch of Melbourne.1 Both are disciples of Henry George, the American advocate of the “single tax,” and they fit his deductions to the analysis of Marxism (though Oppenheimer has his own variations).
Oppenheimer points out that Marx does not say that the tendential fall of the rate of profit may not be so great as to reduce profit merely to an infinitesimal amount, and barely permit the capitalist to accumulate, that is, just make enough to cover simple reproduction, his own consumption and a mere trifle besides. Boudin has answered Oppenheimer, but has not answered what is at the back of Oppenheimer’s thinking. Oppenheimer really means to say that if rent were to be socialized then capital, faced with labor that could demand the wages it could earn on the best free land (which would then mean any land) would reduce exploitation nearly to zero.
But Oppenheimer has forgotten the thesis of Marx that it requires a gigantic accumulation and a high organic composition of capital to bring about a tremendous fall in the rate of profit, and that the rate of profit is not an index of exploitation, for it may be low as a percentage of total capital, but the rate of exploitation is thereby made terrific by the rate of surplus-value to variable capital.
He puts aside the Marxist explanation of exploitation for his own. He should have said that with the single tax, exploitation would cease. That is the thesis of Henry George. But that challenges not the implication of Marxism, but Marxism itself.
Max Hirsch a Fundamental Critic of Marxism
Hirsch, a sharp and original (and unreasonably neglected) thinker, argues that once rent is abolished socialism becomes a mere tyranny, since the reason for its existence, exploitation, is thus abolished. This is the single-tax classic thesis. It holds that Marx was a most superficial thinker. He confused the oppression of capital with the oppression capital is able to exercise only when it is bound up with what the single-taxers term privilege. As this is the most challenging bourgeois criticism of socialism and Marxian economic thought, it requires a close study.
It begins with a formulation that the socialists agree with, that private property in land must be abolished. But they point out that there is no need to socialize the production of land to achieve this.
By the State’s taking over the entire rent of land each year, it extinguishes the basis of capitalization, that is, it abolishes the basis of the price of land. Land is free. Its owners pay its full annual value, the differential rent (single-taxers do not accept the Marxian definition of absolute rent; they are Ricardians). Their land ceases to have value, but then they can acquire any other for the same price, to wit, nothing.
Nothing is disturbed. The State acquires no new powers; land titles are nominally intact. But since wages (here is where they differ from Marx) are really reduced by the monopoly of land, once rent is socialized, labor can get “its full value” and still capital can be compensated.
In addition to land values, the capitalists enjoy privileges, tariffs, franchises, and subsidies, all of which the single-taxers would sweep away to restore the purity of competition—by free land, taxation of full annual value of franchises (or their socialization by government ownership of rails and utilities), free trade, that is, absolutely no privileges.
Here, they say, is a capitalism which annuls all of Marx’s pontifical analysis. The thirty-third chapter of the first volume of Capital proves it. A Mr. Peel took $250,000 and 3,000 members of the working class from England to Australia. When they got there (to the Swan River) all his machinery, capital, money, were no good to him. Land was free and the workers told him to go somewhere else. He was through. Marx comments: “Unhappy Mr. Peel, who provided for everything except the export of English modes of production to Swan River.”
So that exploitation is not inherent in capitalism but, as Marx says, the foundation of the capitalist mode of production is the expropriation of the mass of the people from the soil.
Here, say the single-taxers, is the Achilles heel of the Marxian theory. For you do not need to go back to barbarism or the colonies to get free land. Taxation can do it in New York. Once the rent of land is socialized, J. P. Morgan joins unhappy Mr. Peel and cannot exploit, on Marx’s own thesis.
Labor and Capital Could Harmonize
What society needs is not a confused analysis of class struggle but the real analysis; that is, that the pure capitalist (apart from his intertwining with privilege and land ownership) is opposed, as a category, to the landowner and his interests are really on the same side as labor. If labor can earn its full contribution to production, capital is compensated for its savings and risks and so it is possible to enjoy a free market, without governmental or socialist direction; the automatic processes of society are relied on instead of ukases, and still the exploitation of labor ceases, on Marx’s own admissions.
Society creates land values by its social activities: this is a reflection of social activity and need. Rent secretes the natural revenue of government as the breasts secrete the natural nourishment of an infant. The individual by his labor creates objects; these are made by his labor. So under a real society, society takes what is its, i.e., rent, and leaves to labor and capital what is theirs, wages and interest. The single-taxers reject the notion of profits as a confused mass of other categories. To them it is like classifying males, females, and children. Here, too, Marx was naïve.
Single-taxers Are Wholly without an Accumulation Theory
Neither Henry George nor his disciples are too clear as to how they distinguish the yield of capital from that of labor without exploitation. The “fructification” theory of interest of George does not impress even most of his own following.
The reading of Marx, too, is contested by the socialists. That a condition precedes the capitalist mode of production is one thing; that given that mode, a change in land taxation would abolish the mode, is another. The law of value explains the principle of surplus-value and without it the Marxian sees no explanation of profit. If the single-tax hypothesis were correct and the exploitation of labor were impossible were land to be nationalized, then socialism would have to come in at once as there could be no accumulation of capital.
The Marxian believes, though, that the effect of the abolition of absolute rent would merely be to increase the profitability of farming capital.
That the single-tax absorption of rent by the State is a good thing is admitted, but the Marxian feels that it will not raise the wages of labor, except for a spurt. The theory that men would earn in New York or London what they earn on the best free land would be true only in a society in which gigantic social means of production were not required to compete. As soon as the progress of capitalism has made hundreds of millions of dollars necessary for some industries, the notion that because land is open to capital, it is therefore open to labor (so as to break monopoly) has leaped two abysses with one argument.
Accumulation is exploitation. That is the Marxist rock, and until the single-taxers will face accumulation concretely and not assume that it will take place harmoniously because of the Ricardian law of rent, their criticism cannot be deemed decisive, although is refreshing and at least is not mere apologia.
The Accumulation Debate
The Leninist thesis on Imperialism has divided the Marxist successors more than any other single subject since the death of Marx. To insure the defeat of the revisionists all ranks were closed. For the answer to Böhm-Bawerk and other bourgeois critics, there were few dissenters.
But the political division of the socialist parties during and after the War led to a complete divergence of speculations on the present tendencies of capitalism. The non-Leninist theories of the accumulation of capital in its ultimate phase follow:
Kautsky on Imperialism As a Mere Projection of Capitalism
KAUTSKY: Kautsky considers imperialism as the effort of overindustrialized nations to subjugate or to annex a large agricultural country. His reasoning is: industrialism comes to a limit in the home market; other industrial areas involving the same contradictions are of little or no use to it in getting beyond these consumption limits, hence imperialism is nothing more nor less than a continuance of the permanent tendency of capitalism without any new features. It is not necessary to a capitalist state, although profitable to certain sections of it. Since the different rates of growth between industry and agriculture will always compel industrialists to go beyond their own agricultural areas for raw materials and markets alike, this recurrent phase of policy need not be overrated. More than that, by international cartels for raw materials and for delimiting market spheres, etc., there is a likelihood that imperialist solutions will be lessened rather than made more acute.
This theory gets down to the idea of “organized capitalism.” That the Marxian concentration theory is so correct that it may end in a universal trust, an international super-corporation, a universal holding company of plutocrats, who can divide the world without conflicts, is a favorite hypothesis of Kautsky.
The rejoinder of Lenin was that while there is no technical barrier to such a consummation, technical development can take only a form consistent with certain social settings. The needs of capitalism cause it not only to concentrate increasingly, but also to sharpen conflicts increasingly between those gigantic concentrations.
The very contradictions of capitalism that have led to this concentration must constantly increase with the concentration to which they give rise. Hence the end of this development must be an epoch of imperialism and war, in which finance-capital and industrial capital (intertwined as a state oligarchy) give battle to their rivals, not merely for a division of the world, but for the actual annihilation of their opponents, so that their larger share will preserve their own situation without their having to involve themselves in hopeless contradictions because of help to their rivals by way of a cartel.
HILFERDING: The theory of Rudolf Hilferding in his Finance Capital has the merit of appearing far and away the most comprehensive and detailed Marxian book on the financial aspects of capitalism. He is the theoretician of organized capitalism, but, he asserts, on a Marxian basis. That is not to say that he abandons socialism, but he believes it will be ushered in as an economic evolution of capitalism, and not by catastrophes, super-crises, wars, etc.
He begins with the change in emphasis from industrial capital to finance capital. The sphere of circulation for him has become the dominant economic expression, whatever its economic derivation from the process of production.
The cartelization (or as Americans would say, trustification) of society results in a possibility of price agreements among the large capitalists. Price, instead of being a competitive basis of distribution and a regulator of production, changes its nature when it is agreed upon by the large concerns. It no longer expresses anything but an arithmetical record of allotment. Money is of no use, except as a convenience. It has lost its value as an expression of price.
Distribution is mechanical. Each company, allotted a certain area, takes care of that market and so avoids competitive costs, and eliminates disturbance. Part of the new products is given the workers, part reallotted to production. It is a society that is regulated consciously. True, it is on the basis of class antagonisms, but it handles them in an organized manner.
Hilferding points out that the centralization of banking coincides with this cartelization and enables it to carry out its purposes smoothly.
Hilferding agrees that the contradictions of capitalism are so fundamental that even if there are only a few trusts and a few banks left everything will basically remain as it was in the age of competition. But once there are a universal trust and bank controlling everything, then they can regulate the consumption of the workers to suit their production and class contradictions are ended, perhaps not to the advantage of the worker, but ended for the capitalist overlords.
But owing to the facts that it can live only by an exploitation of the proletariat (and thus class antagonism remains fundamental) and that its structure is so simple to seize, this very cartel is the last act of capitalism. Its suppression leads to automatic socialism, for it has created objectively the organization of production and distribution which can be taken over integrally by a society without classes.
But it is not necessary for the workers to seize the industrial structure by a revolution. If they only seize the banks that control the industrial capital (on his theory that finance capital now is paramount), they can easily institute socialism.
This theory is that of all economists who are convinced that the issue of production is settled in the sphere of circulation, or finance. While Lenin holds that finance capital is integrated with industrial monopoly, he also holds that it functions subject only to the contradictions of the process of production, which is fundamental, etc. There is little need to rehearse the differences; they are implicit in the argument.
ROSA LUXEMBURG: The celebrated socialist theoretician and martyr was a vigorous and original economist, certainly the woman who has won the most distinction in that science. Her classic book on Capitalist Accumulation (1913) is an attempt to detail those mechanisms of accumulation not completely given in the original exposition of Karl Marx. She bases her study on the circulation process of capital as a whole, given in the second volume of Capital.2
Marx stated that in circulation capitalists acquire commodities from each other with which to extend production and so they use the surplus-value created by one industry in accumulating capital in another. Rosa Luxemburg held that capital could less and less use this primitive expedient and so it found it necessary to deal with noncapitalistic societies, by the exploitation of which it realized accumulation.
This is a very serious alteration in Marxian theory; for it holds that capitalism all along or at least for many decades since it has been highly developed, has not found its increase from within the sphere of circulation as the means of realizing surplus-value produced in the sphere of production, but that it has constantly gone outside of that closed setting in order to replenish itself.
By this means—that is, capital conquering primitive noncapitalist sources of raw materials, of development, and of markets—capitalism lives. Take that away and it withers and dies.
Her elaboration of this theory is carried out with a wealth of citations and instances, but here we confine ourselves to the theory.
From this theory it follows that it is not of necessity the proletariat that will overthrow capitalism at home, but rather capitalism will meet disaster or move outside the closed circle of workers and capitalists. It can no longer accumulate. But she brings back her beloved proletarian revolution which she, splendid rebel, could no more abjure than her own parents. Long before the capitalists lose this last resource of accumulation the class and national antagonisms, the economic and political anarchy that reflect this desperate drive for primitive areas in which to accumulate, will lead to such disasters as to invite the social revolution.
It does not seem too clear how she reconciles the two points of view. For surely, if capitalism fails to accumulate new capital, and cannot escape by any maneuvers at home, within the circle of capital and labor, then really she believes in an automatic collapse. This is a pure economic theory and she is too keen a historian to admit the unlimited consequences of a pure economic theory. Hence her compromise.
Her theory is based on an oversimplification. Since she assumes that the accumulation of capital could take place only by primitive accumulation—in effect, that is, by first plundering small producers and feudal survivals, then the colonies (because accumulation within the labor-capital relation was impossible)—she is bound to assume that one state of society is pretty much ended before the other begins. For if capitalists must renew their capital outside of the capital-labor relations, then so long as there are noncapitalistic elements in a country capitalists can still accumulate at their expense. This highly stratified idea is the very opposite of the living science of Marxism.
The difficulty here lies in the question of how the accumulation of capital takes place. Marx has shown that the accumulation is a transfer of surplus-value into fresh capital. In extended reproduction, the capital is not merely reproduced but increased. But what has haunted a great many Marxists has been the exact machinery by which this is brought about. They do not merely want to know that X products of labor are incorporated into new capital. They want to have made clear the whole process by which an ever increasing mass of products finds buyers, so that the proceeds can be extended perpetually into new, augmented capital. When it is answered that crises break up this continuity, Rosa Luxemburg would agree but would still maintain that the occasional crisis does not exhaust the limits of capital accumulation; something must explain the continuous ability of capital to find clients for its products, since it cannot sell them all to labor, which steadily has not enough with which to buy back these goods. In other words, she thinks the contradiction to be a constant feature of capital renewal, and the contradiction in capitalism to be even more deadly than as given in the Marxian schemata.
Attempts to Find the Exact Mechanisms of Accumulation
The replies to this problem have been numerous and nearly all ingenious. The first theory is simple: exports. The inability of the consumer to catch up with the mass of products is relieved by selling abroad. The second holds that apart from capitalists and laborers there are others—professional people, government employees, teachers, priests, independent shopkeepers without employees—and that these take up the slack until even they can no longer do so and the crisis is generated (theory of Struve3). And as accumulation, by its very increase of capital in proportion to labor, creates more and more superfluous classes (more people not engaged in production) the growth of this “third group” that takes up the unsalable products is itself increased at the same rate as the accumulation itself, whose contradiction with its labor requires it to find just these consumers.
NOTE: To illustrate: Capital produces 2,000 units and has a surplus-value of 1,000. It uses a capital of 5,000 to produce the 2,000. It pays labor 1,000. Labor can buy only 1,000. Capital then sells this extra 1,000 to the “third group.” It realizes its surplus-value and now has a capital of 6,000. That capital is more efficient and requires less labor. Now the capital produces 2,500, which is a better percentage than 2,000 on the first 5,000. Labor gets only 900, since fewer are employed. The surplus-value this time is 1,600, not 1,000. Labor can take only 900. How can they sell the 1,600? Because they have replaced, says Struve, the labor in the factories by employment of servants, funkeys, salesmen, or intellectuals. These parasitic or subsidiary groups grow with the discharge of labor and the employment of persons out of the surplus. The enlarged class of nonproducers takes up the enlarged slack. When this process fails to work out then the circulation is over; there is a crisis.
This pretty and strange theory is followed by one still cleverer. That is a contribution of the eccentric Russian economist Bulgakov. According to him the means of subsistence and the means of production are both sources of supply for each other. The excess of means of production is sold to capitalists who require means of subsistence (variable capital) for their workers, and the surplus of means of subsistence is sold to those who can use it to assist the production of means of production. The circle is closed as long as both spheres can supply each other in proportion. For Bulgakov it is disproportion rather than surplus-value that interrupts circulation. It was rejected as mechanical by that sturdy, if divergent, Marxian, Rosa Luxemburg. For it is antisocialist.4
The Biological Theory of Accumulation
The last theory states that capitalism has been sustained until now by the nursery. The increase of population has been so great that it has exceeded that surplus-value which incapacitates the laborer from buying back his own product. The more variable capital increases, the more wages (as an absolute amount) are available with which men can found families.
The increase of constant capital gives these workers new jobs, since they are needed to preserve its augmenting value. According to this theory the American worker produced the greatest amount of surplus-value known, but capital was accumulated, despite the discrepancy, because population gained at the rate of some 20 per cent per decade.
Otto Bauer, otherwise not given to many theoretical fancies, rather respected this hypothesis. The collapse of the birth rate recently would, according to this theory, leave no “out” for capitalism and would be the inner secret of the General Crisis.
It is delayed in its application only because the children of yesterday are still numerous and now, middle-aged, form a “bulge” of demand, soon to be flattened out. People to whom population theories are dear would say there is no Marxian contradiction here. The capitalist process produces its clients; finally the rate of surplus-value takes too much out of the workers; they have fewer children because of increased exploitation, and so capitalism cuts its sales throat by shaving the birth rate.
Rosa Luxemburg’s Analysis
Rosa Luxemburg maintained that though Marx gave us the correct reason for accumulation and described its effects perfectly (as also the effect on labor), he is out of touch with reality when it comes to stating how the production of surplus goods is realized in circulation.
Not having the theoretical scope of Marx, she declared that the problem can never be solved by reasoning or by a priori methods, but only by historical observation. Marx gave the theory; we must fit it to the facts. Hence she would have been horrified at the idea that she rejected Marx: she adapted his ideas to the flow of circumstance.
From this point of departure she came to the previously recorded theory that capitalism can save itself only by imperialism. At first the capitalists try to realize surplus-value by the non-laborers’ purchases at home; when that ends, by exports (but these are limited by imports which pay for them); and so they are driven to wasteful purchases in half-developed lands, where capitalism has not yet produced its contradictions and where capitalism of the twentieth century finds a situation of the eighteenth century in which it can accumulate without bothering its head as to who will buy or can buy.
In the home market the means-of-subsistence surplus is disposed of; in the imperialist market principally the excess of constant capital. It largely goes to create capitalist production in the undeveloped lands, thus deferring the contradiction only for a short time, since capitalist production, according to Marx, must reproduce capitalist relations and an exploited working class.
Unlike Marx, who held that capital sought its reproduction in the class relations within its system, Rosa Luxemburg held that capitalism can live only on noncapitalism.
That is why Rosa Luxemburg rejects economic theory as any guide to the problem. Since the dependence of capitalism is on noncapitalism, it cannot exchange value for value, which Marx insists on as a theoretical base. It restores primitive accumulation, noneconomic activities, plunder, slavery (however disguised) of the natives, theft of natural resources. Her theory, then, is that capitalism sunk in contradictions at home, leaves the economic sphere altogether for the criminal. No economic system, she holds, can thrive on economic contradictions.
Hence the more the system robs the colonial countries the sooner it cuts the ground from under its feet.
Rosa Luxemburg asks if Marx’s theory of accumulation is correct, how it can be rendered possible, since it is an accumulation of contradictions even more than of capital. His theory never could have been fulfilled! Capitalism can never sustain itself inwardly.
The Importance of the Accumulation Debate
The reason why the theory of Rosa Luxemburg and of those whose ideas resemble hers have been given at length is that nearly every tendency away from strict Marxist doctrine is implicit in her theories. In intelligence it goes far beyond the vaunted “revisionists.” Yet its defects seem suicidal. It is worth pursuing, for it makes Marxian theory complete for the present highly evolved capitalism.
Now Marx was the founder of the idea of noncapitalist primitive accumulation. His most eloquent chapters are those that chronicle, with the eloquence of a Father of the Church, the lust and blood and plunder that built up the original wealth of capitalist Europe. But for him that was a point of departure, for soon the plunderers discovered a thousand more treasures hidden in the heart of the machine than in all the jewels of India. The hours of their workers, given them for nothing, were the very El Dorado for which a multitude of cavaliers had given their lives.
Now Rosa Luxemburg and all the others that have sought to solve the riddle of accumulation have failed to note Marx’s very serious distinction. That is: there is a “primitive” accumulation and there is an internal accumulation, which latter requires free labor producing for an employer and being paid value for value.
The Part Played by Contemporary Primitive Accumulation
Rosa Luxemburg is right in her descriptions, but her absence of theory leads to what must be termed a complete mistake, and a dangerous one, if Marxian theory is to have pragmatic value.5 Of course, from the beginning of its evolution capitalism has had vital relations with noncapitalistic society. Raw materials have been sweated out of the colonies and backward lands from 1500 to 1939 A.D.
Labor has been handled mercilessly by way of peonage, slavery, and murderous exploitation in the cotton states of America, India, Africa, in the “Red Rubber” country of Manaos in Brazil, and in Mexico, etc.
It is folly for anyone to deny the part that the sheer plunder of India has played for two centuries in British capitalist prosperity. The Lancashire cotton industry was based on slave plantations in the American South, and undoubtedly it was British capitalist needs that fortified an institution which Southerners were already questioning.
That capitalism has been an interplay of capitalism at home and noncapitalistic elements abroad is perfectly true and apt. Rosa Luxemburg is also right in appraising the need for long-term wasteful investments in primitive lands, for new markets, and so on.
But where she makes her mistake is in the assumption that this participation alone keeps the capitalist accumulation going, and that were it to cease, capitalist accumulation within the system, which for her is not primary, would cease also.
Capitalist accumulation within capitalism has been central for the system; it is the other relation that has been important but subsidiary. It is true that imperialism today forces a greater pace in the struggle for foreign markets, in the division of the world. But that is due to the increasing weaknesses of the primary internal accumulation of capital within capitalist relations.
Nor is imperialism so necessary to capitalism that without it it would die. There are certain requirements on the side of labor for that. A breakdown in internal accumulation might bring wanton misery, but not an automatic change in class power.
In other words, the capitalist sells abroad not to insure accumulation but to add to it. The tendential fall in the rate of profit, the tendency to an average rate of profit, chokes his possibilities in the close home market. He goes where he can breathe.
At the same time, as this becomes important, the noncapitalistic character of that outside market is disturbed and it enters the capitalist market eventually.
If anything, by its increasing profits above normal, an exchange of commodities with primitive lands quickens the pace of accumulation at home and so hastens contradictions. By compulsory sales rather than competitive selling, by cheap raw materials, by income from investments, the noncapitalist world becomes simply a mode of assisting capitalization at home.
The Mistake in the Theory of Third Parties
On the other hand, the theories that the non-labor elements, third groups, and what not, explain the domestic sales, are nonsensical, because these third groups are sharers in surplus-value themselves. One cannot look to them to bridge the space between surplus-value and wages.
If primitive accumulation gradually becomes transformed into capitalist accumulation, we are at the starting point. And if there is one point on which Marx is dogmatic, it is that every increase of exploitation abroad leads to a sharpened concentration at home, to a fiercer development of the competitive strife for accumulation, to a pushing of the smaller capitalists to the wall, both in ordinary times and, drastically, by way of crises.
So that Marxist imperialism is more what Lenin thought than Rosa Luxemburg. It is not the dependence of accumulation at home on primitive accumulation abroad, but the conversion of primitive noncapitalistic economies abroad into capitalistic forms of accumulation that are thus universalized. It is this conversion of civilizations outside capitalism (into their taking on more the character of sections of world capitalism) that is the secret of imperialism.
The Role of Price in Accumulation
To understand accumulation thoroughly, and answer its paradoxes (which are as real for bourgeois economics as for Marxian), we must resume the meaning of prices for which goods are sold. Price is determined by labor-time socially necessary in every commodity, regulated by the average rate of profit, and oscillating about that level by supply and demand.
The capitalist can make the spread between cost of production and price of production by two methods: he can exploit his workers more, or he can get a price above the market. We speak of the individual capitalist, not of the whole class.
As a rule prices can be put up only by conspiracy or fraud or monopoly. That means, in plain language, the ruin of weaker competitors. The strong kill the weak. This increases the possibility of “corners” in commodities, of regulated, dictated prices. The profit of the whole class of capitalists is shared by fewer of them.
By increasing concentration and centralization, workers are more exploited and, through their power in dictating to those who provide them raw materials, the strong capitalists can squeeze their weak suppliers as to price. It is notorious that most of the poor manufacturers who supply chain variety stores are simply in a painful interlude between bankruptcies, because of the prices at which they must deliver their merchandise. Thus the large firms reduce at every point the losses due to competition, by reducing the bargaining power of everyone against them, their supplier, their worker, their customer.
The difficulty with those who see a paradox in the mode of internal accumulation is that they assume that all goods must be sold by capital to labor, then and there, or the panic will ensue every Saturday night, when the payrolls fail to come up to scratch in the market. The goods must be sold, certainly; that is why they are produced. But capitalists have reserves. The smaller ones have less, the larger ones more.6 Inventories can reach certain levels before there is trouble. Apart from the incidental relief common to all, such as exports or primitive accumulation (these are smaller than one would imagine, and some are not really a net disposal of goods), the fact is that the rich companies sustain large inventories, the poor companies cannot.
The constant bankruptcies, foreclosures, assignments, suspensions of business that go on are a continuous crisis for smaller business. The crisis in capitalism occurs when goods, failing to move in a certain volume, by that very quantity interrupt the flow of orders back to such an extent that stoppage of production becomes extremely large.
Crisis Is Not an Absolute Category
But there are not two phases, like the two bottles in Alice in Wonderland, labeled “This is Prosperity” and “This is Crisis.” Bourgeois economists like to give that impression, but what they really should say is something like this:
All the time there continues a “cold” or “slow” panic for the weakest sections of the capitalists. It is true that if goods are offered and the laborers cannot buy them back there is a stocking of them, an inventory, sheer loss, failure to turn surplus-value into money, and hence for the capitalist the need to stop accumulation.
But goods do not reach the consumer direct. They are sold and bought, often a dozenfold, in the sphere of circulation. Surplus-value is not realized at once in the market. There are merchants who divide it, landlords who seize it, etc., and even criminals and parasites who are in its service. Goods can keep on in the sphere of circulation a fair time before the ultimate showdown continues.
Since the great mass of goods are means of production (nine-tenths of the profits of American industry are in means of production, that is, the decisive profit factor), the interruption of consumer demand may take time to register its effects, so long as goods are being forced below their value into the hands of powerful capitalists by the continuous failures and losses of the smaller ones.
When Marx describes the contradictions of capitalism, they are given as analyzed beneath their appearance in the historic world, but still as realized in the historic world. What Rosa Luxemburg and the so-called “revolutionaries” forget is that Marx’s schemata of accumulation, whether true or false, is integrated with reality and is not deductive. In other words, accumulation is a joint process of realizing surplus-value, by sales and by concentration at the same time.
How the Small Business Accumulates for the Big
Marx made these two processes two faces of the same coin, and not for any academic reason. One involves the other. Not only are the smaller capitalists always failing and weakening, but that merely registers their finish. All along their goods are being acquired at prices that are advantageous to the large capitalists.7
In the circuit of sales they are, like their workers, making gifts to the capitalists, not of hours but of goods. That is, they get four hours out of their workers but the larger fish take three hours away from them.
Thus the constant acquisition of goods and equipment by the rich is a mode of accumulation that defers the evil day when the fundamental relations of classes rip up the whole internal structure of the exploiters and finally reveal its want of basis. Even so it does not always mechanically manifest itself by a fall in the sales of consumer’s goods preceding the discharge of workers making means of production.
That is the limiting factor which, as it begins to slow up trade, causes the capitalist to look for “outs,” and when these fail, to discharge workmen making the means of production.
As the overwhelming mass of the proletariat are engaged in making these means of production, their discharge causes the already slowing consumers-goods market to take on a terrible appearance and causes a multitude of failures, and the panic is then realized.
Thus the limiting factor of consumption is a precipitant, the discharge of workers in the means of production is a manifestation, the transferred crack in consumers’ purchases the “cause” of a panic, while all along the crisis is implicit, overcome by accumulation by the stronger, who transfer goods in the sphere of circulation to themselves steadily at less than the average rate of profit, and so sell for more than the average; who, as the market resistance becomes greater, push their weakened competitors to the wall, and thus defer the collapse, until the fundamental contradiction of the process of production overcomes that internal class transfer in the sphere of circulation.
The crisis then becomes a violent method of still further continuing concentration, and is the high point of the continuous effort to remedy the capitalists’ situation, not by augmenting prices but by reducing them.
This is the process of accumulation, beyond its fundamentals, as it is seen in the dynamic movement of industry. Rosa Luxemburg and her school confuse the ultimate class contradiction with the constant process, which involves the complex of capitalist society, intra- and extra-class both.
Capitalist Accumulation Is Conditioned by Class Awareness
Nor does Marx confine himself to an economic system in his schemata. The point must come when the action and reaction of this economic conflict is transferred into an arena of social class conflict which (and not in the economic sphere) decides which class shall determine production.
In other words, no economic system ever comes to an end by its economic mechanisms. These mechanisms create social by-products, but until these transcend the economic system it can creak on with the most astounding economic contradictions. The automatic collapse theory considers economics fundamental; it is a theory of economic determinism. Marx considers political economy as what it is, an economic system related only to political structure and social movement and conditioned by them, and therefore never autonomous; this is historical materialism. This fundamental philosophy emerges more sharply in the accumulation discussion than in any other.
A further note: Primitive accumulation extends in space; internal accumulation in concentrating, shrinks the capitalist area. Monopoly at home will reduce the economic circuit; abroad (at first) widen it. That leads to a very interesting and beautiful series of spiral reactions which, alas, must be shelved for post-graduate studies. It is not necessary to know them, but they are full of lessons for those who love economic involutions.
NOTES: The accumulation debate, which involves crisis and imperialism as necessary corollaries, was not closed with the Luxemburg discussion. Several brilliant attempts have been made to go beyond Marx. The super-imperialist hypothesis of Bukharin transfers Kautsky’s unification of the capitalists to their unification in each state; war being conducted then by the states for the single capitalism that will ultimately run every important country. This theory is a form of economic determinism, and takes the evolution of capitalism in every country as though economic technical possibilities move in a vacuum and are always bound to be fully realized.
This scholastic obsession is interesting. It is clear that just as there are still nobles in Europe whose old chateaux face factories, there will be small capitalists in every country, even if a social revolution is in progress. A stage of development is a historic, approximate description, never a rigid category.
TROTSKY: An interesting eddy in the whirlpool of accumulation theories is that of the leader of the “communist opposition,” Leon Trotsky. We pass his political analysis by to center on his theory of a stagnation of economic growth as capitalism matures and develops international monopolies. This is contrary to the thesis of Lenin that such a growth may continue, despite the increase of difficulties.
Trotsky’s hypothesis has with it the fact that there is a progressive slowing up of the rate of gain in production, the last quarter of a century being fairly unimpressive.
It may be true that the total rate of gain is lessened but its distribution may vary greatly. Its composition, too, is of importance: in the United States the gains in production have been impressive since 1900, not because of the technical advances, which have been quite disappointing, but because of the conveyor belt, Fordism, organizational speed-up, etc. It is true that capitalism sabotages invention in order to protect its investment in present equipment, and the more capitalism is monopolized the more this is a factor. But it has compensated itself, for example in Germany, by increased exploitation, to create both relative surplus-value and absolute, by extending hours.
Again, it is not only a question of varying rates of gain and stagnation in differing capitalisms, so much as it is a question of why they manufacture, with the finest equipment, such nonproductive and nonconsumptive goods as armaments.
The gravamen of capitalism, in its latest phase, is not so much technical stagnation as technical attempts to integrate societies for a conflict in which the winner can renew the process of accumulation, as he hopes, in its classic manner.
Here an indubitable fact, the lessening of investment in capital goods and of international investment and the slowing up of production rates of gain, are given a formal interpretation which is little more than tautology.
STERNBERG: In Germany, that forest of theories (before its present leaders discovered the futility of the intellect, probably from surfeit), two more rangers have thriven. These are Fritz Sternberg and Henryk Grossmann.
Sternberg is the master of a style that is rather American, that mixture of miles of statistics, rehearsings of categories in percentages, sesquipedalian footnotes, mountains of citations, and a general literary preoccupation with the range of culture, à la Stuart Chase and the New Republic way of thinking.
This economic journalist (though technically well equipped) questions Marx’s general law of accumulation. His substitute is that the means of production constantly find a market, but that the underpayment of the workers leads to the accumulation of consumers’ remainders which mount steadily and choke the system. It is in the relation of these two constituents, as quantities, that the problem of interrupted accumulation lies.
Like Luxemburg he holds that this calamity is shelved by colonial investment, plunder, etc. He holds, too, that the day must come when this avenue of escape is closed, or nearly closed, and the necessity to accumulate incredible quantities of consumers’ goods will choke the capitalist system to death.
For every capitalist, spurred on by the need to make money, must keep on producing or die, and when the internal market is his only resource, and he must pay his laborers for only half the time they give him (this is inexact, but we are citing), the system must throw up so many unsold goods that it can no longer produce, function, do anything but die, obligingly for Herr Sternberg. This is the crassest vulgarization of Marxism with which I am acquainted and deserves the least respect of all. It is exactly how Marxism is presented on a thousand soapboxes: “the workers can’t buy back and so the unsold goods stop production.” True enough, but that is where the analysis begins.8
Grossmann is a true scholar and economist and a deep student of Marx.9 Grossmann underrates the theory of surplus-value which, like Sombart with the theory of value itself, he holds is of books and not of life.
He looks to the tendential fall of the rate of profit to annihilate capitalism. He rejects the external hypothesis of Luxemburg and Sternberg, by pointing out that even in a country dependent on exports, like England, 85 per cent of profits are due to internal business and two-thirds of the remainder to trade with other highly developed capitalist countries. He therefore reduces the problem to that of internal accumulation.
Grossmann asks, on the Marxian hypothesis, what is to stop the falling rate of profit? True, it cannot sink to zero, but as the mountain of constant capital gets larger, the variable capital relatively less, the time must come when the average rate of profit on that monstrous investment will not allow of extended reproduction, but perhaps only of simple reproduction. The system will contradict itself: no one will be able to make money, and thus socialism becomes a necessary alternative.
All theories of this type converge on the assumption that surplus-value will some day be unrealizable. The tendential fall in the rate of profit, which for Marx is a tendency that sets up counter-factors in the movement of the working-class, is for these critics a formal process. For Marx it is the beginning of a dialectical process, and unless the other equation is developing, the system will come to no “logical” end.
1. Hirsch, Democracy vs. Socialism (London, 1901); Oppenheimer, Grundgesetz der Marxs’chen Gesellschaftslehre (Berlin, 1903).
2. Summarized in Chapter 29 of this book.
3. Available only in Russian. I quote from German summaries. [Author.]
4. It follows Marx’s scheme, but not Marx’s explanation of why that scheme is never realized; it is that very discrepancy that opens the debate!
5. I assume the Marxian case to be true in order to advance the analysis. [Author.]
6. We are now going outside the sale of means of production to producers of means of consumption and dealing with reserves after this interchange of two sections of production is done with. The problem begins when they do not jibe.
7. As Lenin says, monopolies have profits permanently above the average rate.
8. Fritz Sternberg, Imperialism (Berlin, 1925).
9. Henryk Grossmann. See Bibliography for his several contributions.