The Accumulation of Capital
Chapter 12 Ricardo v. Sismondi
MACCULLOCH’s reply to Sismondi’s theoretical objections evidently did not settle the matter to Ricardo’s own satisfaction. Unlike that shrewd ‘Scottish arch-humbug’, as Marx calls him, Ricardo really wanted to discover the truth and throughout retained the genuine modesty of a great mind.(1) That Sismondi’s polemics against him and his pupil had made a deep impression is proved by Ricardo’s revised approach to the question of the effects of the machine, that being the point on which Sismondi, to his eternal credit, had confronted the classical school of harmony with the sinister aspects of capitalism. Ricardo’s followers had enlarged upon the doctrine that the machine can always create as many or even more opportunities for the wage labourers as it takes away by displacing living labour. This so-called theory of compensation was subjected to a stern attack by Sismondi in the chapter On the Division of Labour and Machinery(2) and in another chapter significantly entitled: Machinery Creates a Surplus Population,(3) both published in the Nouveaux Principes of 1819, two years later than Ricardo’s main work. In 1821, after the MacCulloch-Sismondi controversy, Ricardo inserted a new chapter in the third edition of his Principles, where he frankly confesses to his error and says in the strain of Sismondi: ‘That the opinion entertained by the labouring classes, that the employment of machinery is frequently detrimental to their interests, is not founded on prejudice and error, but is conformable to the correct principles of political economy.’(4)
He, like Sismondi, had to defend himself against the suspicion that he is opposing technical progress, but, less ruthless, he compromises with the evasion that the evil emerges only gradually. ‘To elucidate the principle, I have been supposing, that improved machinery is suddenly discovered; and extensively used; but – the truth is that these discoveries are gradual, and rather operate in determining the employment of the capital which is saved and accumulated, than in diverting capital from its actual employment.’(5)
Yet the problem of crises and accumulation continued to worry Ricardo also. In 1823, the last year of his life, he spent some days in Geneva in order to talk the problem over face to face with Sismondi. The result of these talks is Sismondi’s essay On the Balance Between Consumption and Production, published in the Revue Encyclopédique of May 1824.(6)
In his Principles, Ricardo had at the crucial points completely accepted Say’s trite doctrine of harmony in the relations between production and consumption. In chapter xxi he had declared:
‘M. Say has, however, most satisfactorily shown, that there is no amount of capital which may not be employed in a country, because demand is only limited by production. No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person.’(7)
To this conception of Ricardo’s, Sismondi’s Nouveaux Principes were a powerful challenge, and the dispute as a whole turned also on this point. Ricardo could not deny the fact of crises which had but recently passed over England and other countries. What was at issue was the explanation for them. Right at the outset of their debate, Sismondi and Ricardo had agreed on a remarkably lucid and precise formulation of the problem, excluding the question of foreign commerce altogether. Sismondi grasped the significance and necessity of foreign trade for capitalist production, its need for expansion, well enough; in this line he was quite in step with Ricardo’s Free Traders, whom he considerably excelled in his dialectical conception of the expansionist needs of capital. He fully admitted that industry is increasingly led to look for its vents on foreign markets where it is threatened by greater revolutions.(8) He forecast, as we have seen, the rise of a dangerous competition for European industry in the overseas countries. This was after all a creditable achievement in the year 1820, and one which reveals Sismondi’s deep insight into the relations of capitalist world economy. But even so, Sismondi was in fact far from conceiving the problem of realising the surplus value, the problem of accumulation, to depend on foreign commerce as its only means of salvation, a view attributed to him by later critics. On the contrary, Sismondi was quite explicit in the sixth chapter of volume i:(9)
‘In order to make these calculations with greater certainty and to simplify these questions, we have hitherto made complete abstraction from foreign trade and supposed an isolated nation; this isolated nation is human society itself, and what is true for a nation without foreign commerce, is equally true for mankind.’
In other words: in considering the entire world market as one society producing exclusively by capitalist methods, Sismondi grounds his problem in the same premises as Marx was to do after him. That was also the basis on which he came to terms with Ricardo.
‘From the question that troubled us, we had each of us dismissed the instance of a nation that sold more abroad than it needed to buy there, that could command a growing external market for its growing internal production. In any case, it is not for us to decide whether fortunes of war or politics could perhaps bring forth new consumers for a nation – what is needed is proof that a nation can create these for itself simply by increasing its production.’(10)
This is how Sismondi formulated the problem of realising the surplus value in all precision, just as it confronts us throughout the ensuing era in economics, in contrast with Ricardo who actually maintains along with Say, as we are already aware and shall show in further detail, that production creates its own demand.
Ricardo’s thesis in the controversy with Sismondi takes the following form:
‘Supposing that 100 workers produce 1,000 sacks of corn, and 100 weavers 1,000 yards woollen fabric. Let us disregard all other products useful to man and all intermediaries between them, and consider them alone in the world. They exchange their 1,000 yards against the 1,000 sacks. Supposing that the productive power of labour has increased by a tenth owing to a successive progress of industry, the same people will exchange 1,100 yards against 1,100 sacks, and each will be better clothed and fed; new progress will make them exchange 1,200 yards for 1,200 sacks, and so on. The increase in products always only increases the enjoyment of those who produce.’(11)
The great Ricardo’ standards of reasoning, it must regretfully be stated, are if anything even lower than those of the Scottish arch-humbug, MacCulloch. Once again we are invited to witness a harmonious and graceful country-dance of sacks and yards – the very proportion which is to be proved, is again, taken for granted. What is more, all relevant premises for the problem are simply left out. The real problem – you will recollect – the object of the controversy had been the question: who are the buyers and consumers of the surplus product that comes into being if the capitalists produce more goods than are needed for their own and their workers’ consumption; if, that is to say, they capitalise part of their surplus value and use it to expand production, to increase their capital? Ricardo answers it by completely ignoring the capital increase. The picture he paints of the various stages of production is merely that of a gradually increasing productivity of labour. According to his assumptions, the same amount of labour first produces 1,000 sacks and 1,000 yards textiles, then 1,100 sacks and 1,100 yards, further 1,200 sacks and 1,200 yards, and so on, in a gracefully ascending curve. Not only that the image of a marshalled uniform progression on both sides, of conformity even in the number of objects brought to exchange, is wearisome, the expansion of capital is nowhere as much as mentioned in the model. Here we have no enlarged but simple reproduction with a greater bulk of use-values indeed, but without any increase in the value of the aggregate social product. Since only the amount of value, not the number of use-values is relevant to the exchange transaction, and this amount remains constant in the example, Ricardo makes no real advances, even though he seems to analyse the progressive expansion of production. Finally, he is quite oblivious of the relevant categories of reproduction. MacCulloch had, begun by making the capitalists produce without any surplus value and live on air, but at least he recognised the existence of the workers, making provision for their consumption. Ricardo, however, does not even mention the workers; for him the distinction between variable capital and surplus value does not exist at all. Besides this major omission, it is of small account that he, just like his disciple, takes no notice of constant capital. He wants to solve the problem of realising the surplus value and expanding capital without positing more than the existence of a certain quantity of commodities which are mutually exchanged.
Sismondi was blind to the fact that the venue has been changed altogether. Yet he tried faithfully to bring the fantasies of his famous guest and opponent down to earth and to analyse their invisible contradictions, plaintively saying that these assumptions, ‘just like German metaphysics, abstract from time and space’.(12) He grafts Ricardo’s hypothesis on to ‘society in its real organisation, with unpropertied workers whose wage is fixed by competition and who can be dismissed the moment their master has no further need of their work ... for’ – remarks Sismondi, as acute as he is modest – ‘it is just this social organisation to which our objection refers’.(13)
He lays bare the many difficulties and conflicts bound up with the progress of labour productivity under capitalism, and shows that Ricardo’s postulated changes in the technique of labour, from the point of view of society, lead to the following alternative: Either a number of workers corresponding to the increase in labour productivity will have to he dismissed outright – then there will be a surplus of products on the one hand, and on the other unemployment and misery – a faithful picture of present-day society. Or the surplus product will be used for the maintenance of the workers in a new field of production, the production of luxury goods. Here Sismondi undoubtedly proves himself superior: he suddenly remembers the existence of the constant capital, and now it is he who subjects the English classic to a frontal attack:
‘For setting up a new industry for manufacturing luxuries, new capital is also needed; machines will have to be built, raw materials procured, and distant commerce brought into activity; for the wealthy are rarely content, with enjoying what is immediately in front of them. Where, then, could we find this new capital which may perhaps be much more considerable than that required by agriculture? ... Our luxury workers are still a long way from eating our labourers’ grain, from wearing the clothes from our common factories; they are not yet made into workers, they may not even have been born yet, their trade does not exist, the materials on which they are to work have not arrived from India. All those among whom the former should distribute their bread, wait for it in vain.’(14)
Sismondi now takes constant capital into account, not only in the production of luxuries, but also in agriculture, and further raises the following objection against Ricardo:
‘We must abstract from time, if we make the assumption that the cultivator, whom a mechanical discovery or an invention of rural industry enables to treble the productive power of his workers, will also find sufficient capital to treble his exploitation, his agricultural implements, his equipment, his livestock, his granaries: to treble the circulating capital which must serve him while waiting for his harvest.’(15)
In this way Sismondi breaks with the superstition of the classical school that with capital expanding all additional capital would be exclusively spent on wages, on the variable capital. He clearly dissents from Ricardo’s doctrine – which did not, however, prevent his allowing all the errors arising out of this doctrine three years later again to creep into the second edition of his Nouveaux Principes. In opposition to Ricardo’s facile doctrine of harmony, Sismondi underlines two decisive points: on the one hand, the objective difficulties of the process of enlarged reproduction which works by no means so smoothly in capitalist reality as it does in Ricardo’s absurd hypothesis; on the other hand, the fact that all technical progress in social labour productivity is always achieved under capitalism at the expense of the working class, bought with their suffering. Sismondi shows himself superior to Ricardo in yet a third point: he represents the broad horizon of the dialectical approach as against Ricardo’s blunt narrow-mindedness with its incapacity to conceive of any forms of society other than those of bourgeois economics:
‘Our eyes,’ he exclaims, ‘are so accustomed to this new organisation of society, this universal competition, degenerating into hostility between the rich and the working class, that we no longer conceive of any mode of existence other than that whose ruins surround us on all sides. They believe to prove me absurd by confronting me with the vices of preceding systems. Indeed, as regards the organisation of the lower classes, two or three systems have succeeded one another; yet, since they are not to be regretted, since, after first doing some good, they then imposed terrible disasters on mankind, may we conclude from this that we have now entered the true one? May we conclude that we shall not discover the besetting vice of the system of wage labour as we have discovered that of slavery, of vassalage, and of the guilds? A time will come, no doubt, when our descendants will condemn us as barbarians because we have left the working classes without security, just as we already condemn, as they also will, as barbarian the nations who have reduced those same classes to slavery.’(16)
Sismondi’s statement, putting in a nutshell the vital differences between the parts played by the proletariat in a modern society and in the society of ancient Rome, shows his profound insight into historical connections. He shows no less discern then in his polemics against Ricardo, when analysing the specific economic character of the slave-system and of feudal economy as well as their relative historical significance, and finally then emphasising, as the dominant universal tendency of bourgeois economy, ‘that it severs completely all kind of property from every kind of labour’.
The second round, no more than the first, between Sismondi and the classical school, brought little glory for Sismondi’s opponents.(17)
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‘M. Ricardo, whose recent death has been a profound bereavement not only to his friends and family but to all those whom he enlightened by his brilliance, all those whom he inspired by his lofty sentiments, stayed for some days in Geneva in the last year of his life. We discussed in two or three sessions this fundamental question on which we disagreed. To this enquiry he brought the urbanity, the good faith, the love of truth which distinguished him, and a clarity which his disciples themselves had not heard, accustomed as they were to the efforts of abstract thought he demanded in the lecture room.’
Chapter 13: Say vs. Sismondi
Rosa Luxemburg The Accumulation of Capital
Section Two Historical Exposition of the Problem * First Round Sismondi-Malthus v. Say-Ricardo-MacCulloch
Chapter 13 Say v. Sismondi
SISMONDI’S essay against Ricardo in the Revue Encyclopédique of May 1824, was the final challenge for J.B. Say, at that time the acknowledged ‘prince of economic science’ (prince de la science économique), the so-called representative, heir and populariser of the school of Adam Smith on the Continent. Say, who had already advanced some arguments against Sismondi in his letters to Malthus, countered the following July with an essay on The Balance Between Consumption and Production in the Revue Encyclopédique, to which Sismondi in turn published a short reply. The chronology of Sismondi’s polemical engagements was thus inverse to the sequence of the opposing theories, for it had been Say who first communicated his doctrine of a divinely established balance between production and consumption to Ricardo who had in turn handed it down to MacCulloch. In fact, as early as 1803, Say, in his Traité d'Économie Politique, book i, chapter xii, had coined the following peremptory statement: ‘Products are paid for with other products. It follows that if a nation has too many goods of one kind, the means of selling them would be to create goods of a different kind.’(1)
Here we meet again the all too familiar conjuring recipe which was accepted alike by Ricardo’s school and by the ‘vulgar economists’ as the corner-stone of the doctrine of harmony.(2)
Essentially, Sismondi’s principal work constitutes a sustained polemic against this thesis. At this stage Say charges to the attack in the Revue Encyclopédique with a complete volte-face, as follows:
‘Objection may be made that, because of man’s intelligence, because of the advantage he can draw from the means provided by nature and artifice, every human society can produce all the things fit to satisfy its needs and increase its enjoyment in far larger quantities than it can itself consume. But there I would ask how it is possible that we know of no nation that is supplied with everything. Even in what rank as prospering nations seven eighths of the population, are lacking in a multitude of things considered necessities in ... I will not say wealthy family, but in a modest establishment. The village I live in at present lies in one of the richest parts of France; yet in 19 out of 20 houses I enter here, I see but the coarsest fare and nothing that makes for the well-being of the people, none of the things the English call comforts.’(3)
There is something to admire about the effrontery of the excellent Say. It was he who had maintained that in a capitalist economy there could be no difficulties, no surplus, no crises and no misery; since goods can be bought one for the other, we need only go on producing more and more and everything in the garden will be lovely. It was in Say’s hands that this postulate had become a tenet of the doctrine of harmony, that doctrine so typical of vulgar economics, which had evoked a sharp protest from Sismondi who proved this view untenable. The latter had shown that goods cannot be sold in any quantity you like, but that a limit is set to the realisation of goods by the income of society in each case, by v + s; inasmuch as the wages of the workers are depressed to a mere subsistence level, and inasmuch as there is also a natural limit to the consumptive capacity of the capitalist class, an expansion of production, Sismondi says, must inevitably lead to slumps, crises and ever greater misery for the great masses. Say’s come-back to this is masterly in its ingenuity. If you will insist that over-production is possible, how can it happen that there are so many people in our society who are naked, hungry and in want? Pray, explain this contradiction if you can. Say, whose own position excels by contriving blithely to shrug off the circulation of money altogether by operating with a system of barter, now censures his critic for speaking of an over-abundance of products in relation not only to purchasing power but to the real needs of society, and that although Sismondi had left no doubt at all about this very salient point of his deductions. ‘Even if there is a very great number of badly fed, badly clothed and badly housed people in a society, the society can only sell what it buys, and, as we have seen, it can only buy with its income.’(4)
A little further on, Say concedes this point but alleges that his opponent has made a new mistake: ‘It is not consumers, then, in which the nation is lacking,’ he says, ‘but-purchasing power. Sismondi believes that this will be more extensive, when the products are rare, when consequently they are dearer and their production procures ampler pay for the workers.’(5)
That is how Say attempts to degrade, in his own trite method of thought, or better, method of canting, Sismondi’s theory which attacked the very foundations of capitalist organisation and its mode of distribution. He burlesques the Nouveaux Principes, turning them into a plea for ‘rare’ goods and high prices, and holds up to them the mirror of an artfully flattered capitalist accumulation at its peak. If production becomes more vigorous, he argues, labour grows in numbers and the volume of production expands, the nations will be better and more universally provided for, and he extols the conditions in countries where industrial development is at its highest, as against the misery of the Middle Ages. Sismondi’s maxims he declares subversive to capitalist society: ‘Why does he call for an inquiry into the laws which might oblige the entrepreneur to guarantee a living for the worker he employs? Such an inquiry would paralyse the spirit of enterprise. Merely the feat that the authorities might interfere with private contracts is a scourge and harmful to the wealth of a nation.’(6)
Not to be diverted from his purpose by this indiscriminate apologia of Say’s, Sismondi once more turns the discussion on the fundamental issue.
‘Surely I have never denied that since the time: of Louis XIV France has been able to double her population and to quadruple her consumption, as he contends. I have only claimed that the increase of products is a good if it is desired, paid for and consumed; that, on the other hand, it is an evil if, there being no demand, the only hope of the producer is to entice the consumers of a rival industry's products. I have tried to show that the natural course of the nations is progressive increase of their property, an increase consequent upon theft demand for new products and their means to pay for them, but that in consequence of our institutions, of our legislation having robbed the working class of all property and every security, they have also been spurred to a disorderly labour quite out of touch with the demand and with purchasing power, which accordingly only aggravates poverty.’(7)
And he winds up the debate by inviting the preacher of harmony to reflect upon the circumstance that, though a nation may be rich, public misery no less than material wealth is constantly on the increase, the class which produces everything being daily brought nearer to a position where it may consume nothing. On this shrill discordant note of capitalist contradictions closes the first clash about the problem of accumulation.
Summing up the general direction of this first battle of wits, we must note two points:
(1) In spite of all the confusion in Sismondi’s analysis, his superiority to both Ricardo and his followers and to the self styled heir to the mantle of Adam Smith is quite unmistakable. Sismondi, in taking things from the angle of reproduction, looks for concepts of value (capital and income) and for factual elements (producer and consumer goods) as best he can, in order to grasp how they are interrelated within the total social process. In this he is nearest to Adam Smith, with the difference only that the contradictions there appearing as merely subjective and speculative, are deliberately stressed as the keynote of Sismondi’s analysis where the problem of capital accumulation is treated as the crucial point and principal difficulty.
Sismondi has therefore made obvious advances on Adam Smith, while Ricardo and his followers as well as Say throughout the debate think solely in terms of simple commodity production. They only see the formula C–M–C, even reducing everything to barter, and believe that such barren wisdom can cover all the problems specific to the process of reproduction and accumulation. This is a regress even on Smith, and over such myopic vision, Sismondi scores most decisively. He, the social critic, evinces much more understanding for the categories of bourgeois economics than their staunchest champions – just as, at a later date, the socialist Marx was to grasp infinitely more keenly than all bourgeois economists together the differentia specifica of the mechanism of capitalist economy. If Sismondi exclaims in the face of Ricardo’s doctrine: ‘What, is wealth to be all, and man a mere nothing?’(8) it is indicative not only of the vulnerable moral strain in his petty-bourgeois approach compared to the stern, classical impartiality of Ricardo, but also of a critical perception, sharpened by social sensibilities for the living social connections of economy; an eye, that is, for intrinsic contradictions and difficulties as against the rigid, hidebound and abstract views of Ricardo and his school. The controversy had only shown up the fact that Ricardo, just like the followers of Adam Smith, was not even able to grasp, let alone solve the puzzle of accumulation put by Sismondi.
(2) The clue to the problem, however, was already impossible of discovery, because the whole argument had been side-tracked and concentrated upon the problem of crises. It is only natural that the outbreak of the first crisis should dominate the discussion, but no less natural that this effectively prevented either side from recognising that crises are far from constituting the problem of accumulation, being no more than its characteristic phenomenon: one element in the cyclical form of capitalist reproduction. Consequently, the debate could only result in a twofold quid pro quo: one party deducing from crises that accumulation is impossible, and the other from barter that crises are impossible. Subsequent developments of capitalism were to give the lie to both conclusions alike.
And yet, Sismondi’s criticism sounds the first alarm of economic theory at the domination of capital, and for this reason its historical importance is both great and lasting. It paves the way for the disintegration of a classical economics unable to cope with the problem of its own making. But for all Sismondi’s terror of the consequences attendant upon capitalism triumphant, he was certainly no reactionary in the sense of yearning for pre-capitalistic conditions, even if on occasion he delights in extolling the patriarchal forms of production in agriculture and handicrafts in comparison with the domination of capital. He repeatedly and most vigorously protests against such an interpretation as e.g., in his polemic against Ricardo in the Revue Encyclopédique:
‘I can already hear the outcry that I jib at improvements in agriculture and craftsmanship and at every progress man could make; that I doubtless prefer a state of barbarism to a state of civilisation, since the plough is a tool, the spade an even older one, and that, according to my system, man ought no doubt to work the soil with his bare hands.
‘I never said anything of the kind, and I crave indulgence to protest once for all against all conclusions imputed to my system such as I myself have never drawn. Neither those who attack me nor those who defend me have really understood me, and more than once I have been put to shame by my allies as much as by my opponents.’ – ‘I beg you to realise that it is not the machine, new discoveries and inventions, not civilisation to which I object, but the modern organisation of society, an organisation which despoils the man who works of all property other than his arms, and denies him the least security in a reckless over-bidding that makes for his harm and to which he is bound to fall a prey.’(9)
There can be no question that the interests of the proletariat were at the core of Sismondi’s criticism, and he is making no false claims when he formulates his main tendency as follows:
‘I am only working for means to secure the fruits of labour to those who do the work, to make the machine benefit the man, who puts it in motion.’(10)
When pressed for a closer definition of the social organisation towards which he aspires, it is true he hedges and confesses himself unable to do so:
‘But what remains to be done is of infinite difficulty, and I certainly do not intend to deal with it to-day. I should like to convince the economists as completely as I am convinced myself that their science is going off on a wrong tack. But I cannot trust myself to be able to show them the true course; it is a supreme effort – the most my mind will run to – to form a conception even of the actual organisation of society. Yet who would have the power to conceive of an organisation that does not even exist so far, to see the future, since we are already hard put to it to see the present?’(11)
Surely it was no disgrace to admit oneself frankly powerless to envisage a future beyond capitalism in the year 1820 – at a time when capitalism had only just begun to establish its domination over the big industries, and when the idea of socialism was only possible in a most Utopian form. But as Sismondi could neither advance beyond capitalism nor go back to a previous stage, the only course open to his criticism was a petty-bourgeois compromise. Sceptical of the possibility of developing fully both capitalism and the productive forces, he found himself under necessity to clamour for some moderation of accumulation, for some slowing down of the triumphant march of capitalism. That is the reactionary aspect of his criticism.(12)
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‘It is against the modern organisation of society, an organisation which, by despoiling the working man of all property save his hands, gives him no security in the face of a competition directed towards his detriment. What! Society despoils the working man because it ensures to every kind of entrepreneur free disposition over his capital, that is to say his property! I repeat: there is nothing more dangerous than views conducive to a regulation of the employment of property’ for ‘hands and faculties ... are also property’ (ibid., p.30).
‘Sismondi is profoundly aware of the self-contradiction of capitalist production; he feels that its forms, its productive conditions, spur on an untrammelled development of the productive forces and of wealth on the one hand, yet that these conditions, on the other, are only relative; that their contradictions of value-in-use and value-in-exchange, of commodity and money, of sale and purchase, of production and consumption, of capital and wage labour, and so on, take on ever larger dimensions, along with the forward strides of the productive forces. In particular, he feels the fundamental conflict: here the untrammelled development of productive power and of a wealth which, at the same time, consists in commodities, must be monetised; and there the basis – restriction of the mass of producers to the necessary means of subsistence. He therefore does not, like Ricardo, conceive of the crises as merely incidental, but as essential, as eruptions of the immanent conflicts on ever grander scale and at determinate periods. Which faces him with the dilemma: is the state to put restrictions on the productive forces to adapt them to the productive conditions, or upon the productive conditions to adapt them to the productive forces? Frequently he has recourse to the past, becomes loudator temporis acti, and seeks to master the contradictions by a different regulation of income relative to capital, or of distribution relative to production, quite failing to grasp that the relation of distribution are nothing but the relations of production sub alia specie. He has a perfect picture of the contradictions immanent in bourgeois production, yet he does not understand them, and therefore fails also to understand the process of their disintegration. (And indeed, how could he, seeing this production was still in the making? – R.L.) And yet, his view is in fact grounded in the premonition that new forms of appropriating wealth must answer to the productive forces, developed in the womb of capitalist production, to the material and social conditions of creating this wealth; that the bourgeois forms of appropriation are but transitory and contradictory, wealth existing always with contrary aspects and presenting itself at once as its opposite. Wealth is ever based on the premises of poverty, and can develop only by developing poverty’ (ibid., p.55).
‘Those, who, like Sismondi, wish to return to the true proportions of production, while preserving the present basis of society, are reactionary, since, to be consistent, they must also wish to bring all the other conditions of industry of former times’ (The Poverty of Philosophy, London 1936, p.57).
Chapter 14: Malthus
Rosa Luxemburg The Accumulation of Capital
Section Two Historical Exposition of the Problem * First Round Sismondi-Malthus v. Say-Ricardo-MacCulloch
Chapter 14 Malthus
At the same time as Sismondi, Malthus also waged war against some of the teachings of Ricardo. Sismondi, in the second edition of his work as well as in his polemics, repeatedly referred to Malthus as an authority on his side. Thus he formulated the common aims of his campaign against Ricardo in the Revue Encyclopédique:
‘Mr. Malthus, on the other hand, has maintained in England, as I have tried to do on the Continent, that consumption is not the necessary consequence of production, that the needs and desires of man, though they are truly without limits, are only satisfied by consumption in so far as means of exchange go with them. We have affirmed that it is not enough to create these means of exchange, to make them circulate among those who have these desires and wants; that it can even happen frequently that the means of exchange increase in society together with a decrease in the demand for labour, or wages, so that the desires and wants of one part of the population cannot be satisfied and consumption also decreases. Finally, we have claimed that the unmistakable sign of prosperity in a society is not an increasing production of wealth, but an increasing demand for labour, or the offer of more and more wages in compensation for this labour. Messrs. Ricardo and Say, though not denying that an increasing demand for labour is a symptom of prosperity, maintained that it inevitably results from an increase of production. As for Mr. Malthus and myself, we regard these two increases as resulting from independent causes which may at times even be in opposition. According to our view, if the demand for labour has not preceded and determined production, the market will be flooded, and then new production becomes a cause of ruin, not of enjoyment.’(1)
These remarks suggest far-reaching agreement, a brotherhood in arms of Sismondi and Malthus, at least in their opposition against Ricardo and his school. Marx considers the Principles of Political Economy, which Malthus published in 1820, an outright plagiarism of the Nouveaux Principes which had been published the year before. Yet Sismondi and Malthus are frequently at odds regarding the problem with which we are here concerned.
Sismondi is critical of capitalist production, he attacks it sharply, even denounces it, while Malthus stands for the defence. This does not mean that he denies its inherent contradictions, as Say or MacCulloch had done. On the contrary he raises them quite unmercifully to the status of a natural law and asserts their absolute sanctity. Sismondi’s guiding principle is the interests of the workers. He aspires, though rather generally and vaguely, towards a thoroughgoing reform of distribution in favour of the proletariat. Malthus provides the ideology for those strata who are the parasites of capitalist exploitation, who live on ground rent and draw upon the common wealth; and advocates the allocation of the greatest possible portion of the surplus value to these ‘unproductive consumers’. Sismondi’s general approach is predominantly ethical, it is the approach of the social reformer. Improving upon the classics, he stresses, in opposition to them, that ‘consumption is the only end of accumulation’, and pleads for restricted accumulation. Malthus, on the contrary, bluntly declares that production has no other purpose than accumulation and advocates unlimited accumulation by the capitalists, to be supplemented and assured by the unlimited consumption of their parasites. Finally, Sismondi starts off with a critical analysis of the reproductive process, of the relation between capital and income from the point of view of society; while Malthus, opposing Ricardo, begins with an absurd theory of value from which he derives an equally absurd theory of surplus value, attempting to explain capitalist profits as an addition to the price over and above the value of commodities.(2)
Malthus opposes the postulate that supply and demand are identical with a detailed critique in chapter vi of his Definitions in Political Economy.(3) In his Elements of Political Economy, James Mill had declared:
‘What is it that is necessarily meant, when we say that the supply and the demand are accommodated to one another? It is this: that goods which have been produced by a certain quantity of labour, exchange for goods which have been produced by an equal quantity of labour. Let this proposition be duly attended to, and all the rest is clear. – Thus, if a pair of shoes is produced with an equal quantity of labour as a hat, so long as a hat exchanges for a pair of shoes, so long the supply and demand are accommodated to one another. If it should so happen, that shoes fell in value, as compared with hats, which is the same thing as hats rising in value compared with shoes, this would simply imply that more shoes had been brought to market, as compared with hats. Shoes would then be in more than the due abundance. Why? Because in them the produce of a certain quantity of labour would not exchange for the produce of an equal quantity. But for the very same reason hats would be in less than the due abundance, because the produce of a certain quantity of labour in them would exchange for the produce of more than an equal quantity in shoes.’(4)
Against such trite tautologies, Malthus marshals a twofold argument. He first draws Mill’s attention to the fact that he is building without solid foundations. In fact, he argues, even without an alteration in the ratio of exchange between hats and shoes, there may yet be too great a quantity of both in relation to the demand. This will result in both being sold at less than the cost of production plus an appropriate profit.
‘But can it be said on this account’, he asks, ‘that the supply of hats is suited to the demand for hats, or the supply of shoes suited to the demand for shoes, when they are both so abundant that neither of them will exchange for what will fulfil the conditions of their continued supply?’(5)
In other words, Malthus confronts Mill with the possibility of general over-production: ‘... when they are compared with the costs of production ... it is evident that ... they may all fall or rise at the same time’.(6)
Secondly, he protests against the way in which Mill, Ricardo and company are wont to model their postulates on a system of barter:
‘The hop planter who takes a hundred bags of hops to Weyhill fair, thinks little more about the supply of hats and shoes than he does about the spots in the sun. What does he think about, then? and what does he want to exchange his hops for? Mr. Mill seems to be of opinion that it would show great ignorance of political economy, to say that what he wants is money; yet, notwithstanding the probable imputation of this great ignorance, I have no hesitation in distinctly asserting, that it really is money which he wants ...’(7)
For the rest, Malthus is content to describe the machinery by which an excessive supply can depress prices below the cost of production and so automatically bring about a restriction of production, and vice versa.
‘But this tendency, in the natural course of things, to cure a glut or a scarcity, is no ... proof that such evils have never existed.’(8)
It is clear that in spite of his contrary views on the question of crises, Malthus thinks along the same lines as Ricardo, Mill, Say, and MacCulloch. For him, too, everything can be reduced to barter. The social reproductive process with its large categories and interrelations which claimed the whole of Sismondi’s attention, is here completely ignored.
In view of so many contradictions within the fundamental approach, the criticism of Sismondi and Malthus have only a few points in common:
Contrary to Say and the followers of Ricardo, they both deny the hypothesis of a pre-established balance of consumption and production. They both maintain that not only partial but also universal crises are possible.
But here their agreement ends. If Sismondi seeks the cause of crises in the low level of wages and the capitalists’ limited capacity for consumption, Malthus, on the other hand, transforms the fact of low wages into a natural law of population movements; for the capitalists’ limited capacity for consumption, however, he finds a substitute in the consumption of the parasites on surplus value such as the landed gentry and the clergy with their unlimited capacity for wealth and luxury. ‘The church with a capacious maw is blest.’
Both Malthus and Sismondi look for a category of consumers who buy without selling, in order to redeem capitalist accumulation and save it from a precarious position. But Sismondi needs them to get rid of the surplus product of society over and above the consumption of the workers and capitalists, that is to say, to get rid of the capitalised part of the surplus value. Malthus wants them as ‘producers’ of profit in general. It remains entirely his secret, of course, how the rentiers and the incumbents of the state can assist the capitalists in appropriating their profits by buying commodities at an increased price, since they themselves obtain their purchasing power mainly from these capitalists. In view of these profound contrasts, the alliance between Malthus and Sismondi does not go very deep. And if Malthus, as Marx has it, distorts Sismondi’s Nouveaux Principes into a Malthusian caricature, Sismondi in turn stresses only what is common to them both and quotes Malthus in support, giving the latter’s critique of Ricardo a somewhat Sismondian cast. On occasion, no doubt, Sismondi actually succumbs to the influence of Malthus; for instance, he takes over the latter’s theory of reckless state expenditure as an emergency measure in aid of accumulation and so becomes involved in contradictions with his own initial assumptions.
On the whole, Malthus neither rendered an original contribution to the problem of reproduction, nor even grasped it fully. In his controversy with the followers of Ricardo, he operated with the concepts of simple commodity circulation, just as they did in their controversy with Sismondi. His quarrel with that school turns on the ‘unproductive consumption’ by the parasites of the surplus value; it is not a quarrel about the social foundations of capitalist reproduction. Malthus’ edifice tumbles to the ground as soon as the absurd mistakes in his theory of profits are uncovered. Sismondi’s criticism remains valid, and his problems remain unsolved even if we accept Ricardo’s theory of value with all its consequences.
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Chapter 15 vs. Kirchmann’s theory of Reproduction
Rosa Luxemburg The Accumulation of Capital
Section Two Historical Exposition of the Problem * Second Round The Controversy Between Rodbertus and von Kirchmann
Chapter 15 v. Kirchmann’s Theory of Reproduction
THE second theoretical polemics about the problem of accumulation was also started by current events. If the first English crisis and its attendant misery of the working class had stimulated Sismondi’s opposition against the classical school, it was the revolutionary working-class movement arisen since which, almost twenty-five years later, provided the incentive for Rodbertus’ critique of capitalist production. The risings of the Lyons silk weavers and the Chartist movement in England were vastly different from the shadowy spectres raised by the first crisis, and the ears of the bourgeoisie were made to ring with their criticism of the most wonderful of all forms of society. The first socio-economic work of Rodbertus, probably written for the Augsburger Allgemeine Zeitung in the late thirties but not published by that paper, bears the significant title, The Demands of the Working Classes,(1) and begins as follows:
‘What do the working classes want? Will the others be able to keep it from them? Will what they want be the grave of modern civilisation? Thoughtful people have long realised that a time must come when history would put this question with great urgency. Now, the man in the street has learned it too, from the Chartist meetings and the Birmingham scenes.’
During the forties, the leaven of revolutionary ideas was most vigorously at work in France in the formation of the various secret societies and socialist schools of the followers of Proudhon, Blanqui, Cabet, Louis Blanc, etc. The February revolution and the June proclamation of the ‘right to work’ led to a first head on clash between the two worlds of capitalist society – an epoch making eruption of the contradictions latent in capitalism. As regards the other, visible form of those contradictions – the crises – the available data for observation at the time of the second controversy were far more comprehensive than in the early twenties of the century. The dispute between Rodbertus and v. Kirchmann took place under the immediate impact of the crises in 1837, 1839, 1847, and even of the first world crisis in 1857 – Rodbertus writing his interesting pamphlet On Commercial Crises and the Mortgage Problem of the Landowners(2) in 1858. Thus the inherent contradictions of capitalist society meeting his eyes were in strident discord with the doctrine of harmony held by the English classics and their vulgarisers both in England and on the Continent, quite unlike any critique in he times when Sismondi had raised his voice in warning.
Incidentally, a quotation from Sismondi in Rodbertus’ first writing proves that the former’s strictures immediately influenced Rodbertus. He was thus familiar with contemporary French writings against the classical school, though perhaps less so with the far more numerous English literature. There is no more than this flimsy support for the myth of the German professors about the so-called ‘priority’ of Rodbertus over Marx in the ‘foundation of socialism’. Accordingly, Professor Diehl writes in his article on Rodbertus in Handwörterbuch der Staatswissenschaften:
‘Rodbertus must be considered the real founder of scientific socialism in Germany, since in his writings between 1839 and 1842, even before Marx and Lassalle, he provided a comprehensive socialist system, a critique of Adam Smith’s doctrine, new theoretical foundations and proposals for social reform.’
This piece of god-fearing, pious righteousness comes from the second edition of 1901, after all that had been written by Engels, Kautsky and Mehring to destroy this learned legend, and in spite of it. Quite inevitably, of course, and proof against any evidence to the contrary, however weighty, it was only right in the eyes of all the learned German economists that the palm of ‘priority’ should be wrested from Marx, the revolutionary anarchist, by Rodbertus, the ‘socialist’ with monarchist, Prussian and nationalist leanings, the man who believed in communism five hundred years from now, but for the present supported a steady exploitation rate of 200 per cent. However, we are interested in another aspect of Rodbertus’ analysis. The same Professor Diehl continues his eulogy as follows: ‘Rodbertus was not only a pioneer of socialism; political economy as a whole owes much stimulation and furtherance to him; economic theory in particular is indebted to him for the critique of classical economics, for the new theory of the distribution of income, for the distinction between the logical and historical categories of capital, and so on.’
Here we shall deal with these latter achievements of Rodbertus, especially with the ‘and so on’.
Rodbertus’ decisive treatise, Towards the Understanding of Our Politico-Economic Conditions(3) of 1842, set the ball rolling. v. Kirchmann replied in Demokratische Blätter with two essays – On the Social Aspects of Ground Rent(4) and The Society of Barter(5) – and Rodbertus parried in 1850 with his Letters on Social Problems.(6) Thus the discussion entered the same theoretical arena where Malthus-Sismondi and Say-Ricardo-MacCulloch had fought out their differences thirty years earlier. In his earliest writings, Rodbertus had already expressed the thought that the wages of labour present an ever diminishing part of the national product in modern society where the productivity of labour is increasing. He claimed this to be an original idea, and from that moment until his death thirty years later he did nothing but reiterate it and formulate it in various ways. This ‘declining wage rate’ is for him the root of all evils to be found in modern society, in particular of pauperism and the crises, whose combination he calls ‘the social problem of our times’.
v. Kirchmann does not agree with this explanation. He traces pauperism back to the effects of a rising ground rent; crises, on the other hand, to a lack of markets. About the latter especially he says: ‘The greatest part of social ills is caused not by defects of production but by a lack of markets for the products ... the more a country can produce, the more means it has for satisfying every need, the more it is exposed to the danger of misery and want.’ – The labour-problem is here included as well, for ‘the notorious right to work ultimately reduces to the question of markets’. ‘We see’, he concludes, ‘that the social problem is almost identical with the problem of markets. Even the ills of much-abused competition will vanish, once markets are secure; its advantages alone will remain. There will remain a spirit of rivalry to supply good and cheap commodities, but the life-and-death struggle will disappear which is caused only by insufficient markets.’(7)
The difference between the points of view of Rodbertus and v. Kirchmann is evident. Rodbertus sees the root of the evil in a faulty distribution of the national product, and v. Kirchmann in the limitations of the markets for capitalist production. Notwithstanding all the confusion in his expositions, especially in his idealist vision of a capitalist competition content with a laudable rivalry for better and cheaper commodities, and also in his conception of the ‘notorious right to work’ as a problem of markets, v. Kirchmann up to a point still shows more understanding for the sore spot of capitalist production, i.e. the limitations of its market, than Rodbertus who clings to distribution. Thus it is v. Kirchmann who now takes up the problem which Sismondi had originally put on the agenda. Nevertheless, he by no means agrees with Sismondi’s elucidation and solution of the problem, siding rather with the opponents of the latter. Not only does he accept Ricardo’s theory of ground rent, and Adam Smith’s dogma that ‘the price of the commodity is composed of two parts only, of the interests on capital and the wages of labour’. (v. Kirchmann transforms the surplus value into ‘interest on capital’); he also subscribes to the thesis of Say and Ricardo that products are only bought with other products and that production creates its own demand, so that if one side appears to have produced too much, it only means there was not enough production on the other v. Kirchmann, we see, faithfully follows the classics, if in a somewhat ‘German edition’. He begins by arguing, e.g., that Say’s law of a natural balance between production and demand ‘still does not give a comprehensive picture of reality’, and adds:
‘Commerce involves yet further hidden laws which prevent this postulated order from obtaining in complete purity. They must be discovered if we are to explain the present flooding of the market, and their discovery might perhaps also show us the way to avoid this great evil. We believe that there are three relations in the modern system, of society which cause these conflicts between Say’s indubitable law and reality.’
These relations are (1) ‘too inequitable a distribution of the products’ – here, as we see, v. Kirchmann somewhat approximates to Sismondi’s point of view; (2) the difficulties which nature puts in the way of human labour engaged in production; and (3) finally, the defects of commerce as a mediator between production and consumption. Disregarding the last two obstacles to Say’s law, we shall now consider v. Kirchmann’s reasoning of his first point.
‘The first relation’, he explains, ‘can be put more briefly as too low a wage of labour, which is thus the cause of a slump. Those who know that the price of commodities is composed of two parts only, of the interest on capital and the wage of labour, might consider this a startling statement; if the wage of labour is low, prices are low as well, and if one is high, so is the other.’
(We see v. Kirchmann accepts Smith’s dogma even in its most misleading form: the price is not resolved into wage of labour and surplus value, but is composed of them as a mere sum – a view in which Adam Smith strayed furthest from his own theory of the value of labour.)
‘Wage and price thus are directly related, they balance each other. England only abolished her corn laws, her tariffs on meat and other victuals, in order to cause wages to fall and thus to enable her manufacturers to oust all other competitors from the world markets by means of still cheaper commodities. This, however, only holds good up to a point and does not affect the ratio in which the product is distributed among the workers and the capitalists. Too inequitable a distribution among these two is the primary and most important cause why Say’s law is not fulfilled in real life, why the markets are flooded although there is production in all branches.’
v. Kirchmann gives a detailed illustration of this statement. Using the classical method, he takes us, of course, to an imaginary isolated society which makes an unresisting, if thankless, object for the experiments of political economy. v. Kirchmann suggests we should imagine a place (Ort) which comprises 903 inhabitants, no more, no less, viz. three entrepreneurs with 300 workers each. Ort is to be able to satisfy all needs by its own production – in three establishments, that is to say, one for clothing, a second for food, lighting, fuel and raw materials, and a third for housing, furniture and tools. In each of these three departments, the ‘capital together with the raw materials’ is to be provided by the entrepreneur, and the remuneration of the workers is to be so arranged that the workers obtain as their wage one half of the annual produce, the entrepreneurs retaining the other half ‘as interest on capital and profits of the enterprise’. Every business is to produce just enough to satisfy all the needs of the 903 inhabitants. Ort accordingly has ‘all the conditions necessary for general well-being’, and, everybody can therefore tackle his work with courage and vigour. After a few days, however, joy and delight turn into a universal misery and gnashing of teeth: something has happened on v. Kirchmann’s Island of the Blessed which was no more to be expected than for the skies to fall: an industrial and commercial crisis according to all modern specifications has broken out! Only the most essential clothing, food and hoping for the 900 workers has been produced, yet, the warehouses of the three entrepreneurs are full of clothes and raw materials, and their houses stand empty: they complain of a lack of demand, while the workers in turn complain that their wants are not fully satisfied. What has gone wrong? Could it be that there is too much of one kind of produce and too little of another, as Say and Ricardo would have it? Not at all, answers v. Kirchmann. Everything is available in Ort in well-balanced quantities, just enough to satisfy all the wants of the community. What, then, has thrown a spanner into the works, why the crisis? The obstruction is caused by distribution alone – but this must be savoured in v. Kirchmann’s own words
‘The obstacle, why nevertheless no smooth exchange takes place, lies solely and exclusively in the distribution of these products. They are not distributed equitably among all, but the entrepreneurs retain half of them for themselves as interest and profit, and only give half to the workers. It is clear that the worker in the clothing department can exchange, against half of his product, only half of the food, lodging, etc., that has been produced, and it is clear that the entrepreneur, cannot get rid of the other half since no worker has any more products to give in exchange. The entrepreneurs do not know what to do with their stocks, the workers do not know what to do for hunger and nakedness.”
Nor does the reader, we might add, know what to do with v. Kirchmann’s constructions. His model is so childish that every advance leads deeper into the maze.
First of all, there seems to be no reason whatever why, and to what purpose, v. Kirchmann should devise this splitting-up of production into three parts. If analogous examples by Ricardo and MacCulloch usually confront tenant farmers and manufacturers, that is presumably only inspired by the antiquated Physiocrat conception of social reproduction which Ricardo had adopted, although his own theory of value as against the Physiocrats deprived it of all meaning, and although Adam Smith had already made a good start in considering the real material foundations of the social reproductive process. Still, we have seen that the tradition of distinguishing between agriculture and industry as the foundation of reproduction was kept up in economic theory until Marx introduced his epoch making distinction of the two productive departments in society for producer and consumer goods. v. Kirchmann’s three departments, however, have no real significance at all. Obviously, no material consideration of reproduction can have been responsible for this supremely arbitrary division which jumbles up tools and furniture, raw materials and food, but makes clothing a department in its own right. One might as well postulate one department for food, clothing and housing, another for medicines and a third for tooth brushes. v. Kirchmann’s primary concern, no doubt, is with the social division of labour; hence the assumption of as nearly equal quantities of products as possible in the transactions of exchange. Yet this exchange, on which the argument turns, plays no part at all in v. Kirchmann’s example since it is not the value which is distributed but the quantities of products, the bulk of use-values as such. In this intriguing Ort of v. Kirchmann’s imagining, again, the products are distributed first, and only afterwards, when the distribution is accomplished, is there to be universal exchange, whereas on the solid ground of capitalist production it is, as we know, the exchange which inaugurates the distribution of the product and serves as its agent. Besides, the queerest things happen in v. Kirchmann’s distributive system: ‘As we all know’, the prices of the products, i.e. the price of the aggregate product of society, consist of v + s, of wage and capital interest alone so that the aggregate product must be distributed entirely among workers and entrepreneurs; but then unhappily v. Kirchmann dimly remembers the fact that production needs things like raw materials and tools. So Ort is provided with raw materials furtively introduced among the food, and with tools among the furniture. But now the question arises: who is to get these indigestible items in the course of general distribution? the workers as wages, or the capitalists as profits of enterprise? They could hardly expect a warm welcome from either. And on such feeble premises the star turn of the performance is to take place: the exchange between workers and entrepreneurs. The fundamental transaction of exchange in capitalist production, the exchange between workers and capitalists, is transformed by v. Kirchmann from an exchange between living labour and capital into an exchange of products. Not the first act, that of exchanging labour power for variable capital, but the second, the realisation of the wage received from the variable capital is put at the centre of the whole, machinery, the entire commodity exchange of capitalist society being in turn, reduced to this realisation of the labour-wage. And the crowning glory is that this exchange between workers and entrepreneurs, the king-pin of all economic life dissolves into nothing on a closer scrutiny – it does not take place at all. For as soon as all workers have received their natural wages in the form of half their product, an exchange will be possible only among the workers themselves; every worker will only keep one-third of his wage consisting exclusively of either clothing, food or furniture, as the case may be, and realise the remainder to equal parts in the two other product groups. The entrepreneurs no longer come into this at all; the three of them are left high and dry with their surplus value: half the clothing, furniture and food that has been produced by the society; and they have no idea what to do with the stuff. In this calamity of v. Kirchmann’s creation, even the most generous distribution of the product would he of no used. On the contrary, if larger quantities of the social product were allotted to the workers, they would have even less to do with the entrepreneurs in this transaction: all that would happen is that the exchange of the workers among themselves would increase in volume. The surplus product which the entrepreneurs have on their hands would then contract, it is true, though not indeed because the exchange of the surplus product would be facilitated, but merely because there would be less surplus value altogether. Now as before, an exchange of the social product between workers and entrepreneurs is out of the question. One must confess that the puerile and absurd economics here crammed into comparatively little space exceed the bounds even of what might be put up with from a Prussian Public Prosecutor – such having been v. Kirchmann’s profession, though he must be credited with having incurred disciplinary censure on two occasions. Nevertheless, after these unpromising preliminaries, v. Kirchmann goes right to the root of the matter. He admits that his assuming the surplus product in a concrete use-form is the reason why the surplus value cannot be usefully employed. As a remedy he now allows the entrepreneurs to devote half of the social labour appropriated as surplus value to the production not of common goods but of luxuries. The ‘essence of luxury-goods being that they enable the consumer to use up more capital and labour power than in the case of ordinary goods’, the three entrepreneurs manage to consume by themselves in the form of laces, fashionable carriages and the like, their entire half-share in all the labour performed by the society. Now nothing unsaleable is left, and the crisis is happily avoided; over-production is made impossible once and for all, capitalists and workers alike are safe; the name of v. Kirchmann’s magic cure which has brought all these benefits to pass and which re-establishes the balance between production and consumption, being: luxury. In other words, the capitalists who do not know what to do with their surplus value which they cannot realise, are advised by the dear fellow – to eat it up. As it happens, luxury is in fact an old familiar invention of capitalist society, and still there are recurrent crises. Why is this? v. Kirchmann enlightens us: ‘The answer can only be that in real life sluggish markets are entirely due to the fact that there are still not enough luxuries, or, in other words, that the capitalists, i.e. those who can afford to consume, still consume too little.’
This misguided abstinence of the capitalists, however, results from a bad habit which political economists have been ill advised to encourage: the desire to save for purposes of ‘productive consumption’. In other words: crises are caused by accumulation. This is v. Kirchmann’s principal thesis. He proves it again by means of a touchingly simple example:
‘Let us assume conditions which economists praise as more favourable,’ he says, ‘where the entrepreneurs say: we do not want to spend our income to the last penny in splendour and luxury, but will re-invest it productively. What does this mean? Nothing but the setting-up of all sorts of productive enterprises for delivering new goods of such a kind that their sale can yield interest (v. Kirchmann means profits) on a capital saved and invested by the three entrepreneurs from their unconsumed revenues. Accordingly, the three entrepreneurs decide to consume only the produce of a hundred workers, that is to say to restrict their luxury considerably, and to employ the labour power of the remaining 350 workers together with the capital they use for setting up new productive enterprises. The question now arises in what kind of productive enterprises these funds are to be used.’
Since, according to v. Kirchmann’s assumption, constant capital is not reproduced, and the entire social product consists entirely of consumer goods, ‘the three entrepreneurs can only choose again between enterprises for the manufacture of ordinary goods or for that of luxuries’.
In this way, however, the three entrepreneurs will be faced with the already familiar dilemma: if they turn out ‘common. goods’, there will be a crisis, since the workers lack means to purchase these additional provisions, having been bought off with half the value of their produce. If they go in for luxuries, they will have to consume them alone. There is no other possibility. The dilemma is not even affected by foreign trade which would ‘only increase the range of commodities on the home market’ or increase productivity.
‘These foreign commodities are therefore either common goods – then the capitalist will not, and the worker, lacking the means, cannot buy them, or they are luxuries, in which case the worker, of course, is even less able to buy them, and the capitalist will not want them either because of his efforts to save.’
This argument, however primitive, yet shows quite nicely and clearly the fundamental conception of v. Kirchmann and the nightmare of all economic theory: in a society consisting exclusively of workers and capitalists, accumulation will be impossible v. Kirchmann is therefore frankly hostile to accumulation, ‘saving’, ‘productive consumption’ of the surplus value, and strongly attacks these errors advocated by classical economics. His gospel is increasing luxury together with the productivity of labour as the specific against crises. We see that v. Kirchmann, if he grotesquely aped Ricardo and Say in his theoretical assumptions, is a caricature of Sismondi in his final conclusions. Yet it is imperative to get v. Kirchmann’s approach to the problem perfectly clear, if we are to understand the import of Rodbertus’ criticism and the outcome of the whole controversy.