The Accumulation of Capital
Chapter 22 Bulgakov and His Completion of Marx’s Analysis
The second critic of ‘populist’ scepticism, S. Bulgakov, is no respecter of Struve’s ‘third persons’ and at once denies that they form the sheet-anchor for capitalist accumulation.
‘The majority of economists before Marx’ he declares, ‘solved the problem by saying that some sort of ‘third person’ is needed, as a deus ex machina, to cut the Gordian knot, i.e. to consume the surplus value. This part is played by luxury-loving landowners (as with Malthus), or by indulgent capitalists, or yet by-militarism and the like. There can be no demand for the surplus value without some such extraordinary mediators; a deadlock will be reached on the markets and the result will be over-production and crises.’(1)
‘Struve thus assumes that capitalist production in its development, too, may find its ultimate mainstay in the consumption of some fantastic sort of ‘third person’. But if this great public is essentially characterised as consuming the surplus value, whence does it obtain the means to buy?’(2)
For his part, Bulgakov centres the whole problem from the first in the analysis of the social aggregate product and its reproduction as given by Marx in the second volume of Capital. He has a thorough grasp of the fact that he must start with simple reproduction and must fully understand its working in order to solve the question of accumulation. In this context, he says, it is of particular importance to obtain a clear picture of the consumption of surplus value and wages in such branches of production as do not turn out goods for consumption, and further, to understand fully the circulation of that portion of the social aggregate product which represents used-up constant capital. This, he argues, is a completely new problem of which economists had not even been aware before Marx brought it up.
‘In order to solve this problem, Marx divides all capitalistically produced commodities into two great and fundamentally different categories: the production of producer and consumer goods. There is more theoretical importance in this division than in all previous squabbles on the theory of markets.’(3)
Bulgakov, we see, is an outspoken and enthusiastic supporter of Marx’s theory. The object of his study, as he puts it, is thus a critique of the doctrine that capitalism cannot exist without, external markets.
‘For this purpose, the author has made use of the most valuable analysis of social reproduction given by Marx in volume ii of Capital which for reasons unknown has scarcely been utilised in economic theory. Though this analysis cannot be taken as fully completed, we are yet of opinion that even in its present fragmentary shape it offers an adequate foundation for a solution of the market problem that differs from that adopted by Messrs. Nikolayon, V.V. and others, and which they claim to have found in Marx.’(4)
Bulgakov gives the following formulation of his solution which he has deduced from Marx himself:
‘In certain conditions, capitalism may exist solely by virtue of an internal market. It is not an inherent necessity peculiar to the capitalist mode of production that the outside market be able to absorb the surplus of capitalist production. The author has arrived at this conclusion in consequence of his study of the above-mentioned analysis of social reproduction.’
And now we are eager to hear the arguments Bulgakov has based on the above thesis.
At first sight, they prove surprisingly simple: Bulgakov faithfully reproduces Marx’s well-known diagram of simple reproduction, adding comments which do credit to his insight. He further cites Marx’s equally familiar diagram of enlarged reproduction – and this indeed is the proof we have been so anxious to find.
‘Consequent upon what we have said, it will not be difficult now to determine the very essence of accumulation. The means-of-production department I must produce additional means of production necessary for enlarging both its own production and that of Department II. II, in its turn, will have to supply additional consumption goods to enlarge the variable capital in both departments. Disregarding the circulation of money, the expansion of production is reduced to an exchange of additional products of I needed by II against additional products of II needed by I.’
Loyally following Marx’s deductions, Bulgakov does not notice that so far his entire thesis is nothing but words. He believes that these mathematical formulae solve the problem of accumulation. No doubt we can easily imagine proportions such as those he has copied from Marx, and if there is expanding production, these formulae will apply. Yet Bulgakov overlooks the principal problem: who exactly is to profit by an expansion such as that whose mechanism he examines? Is it explained just because we can put the mathematical proportions of accumulation on paper? Hardly, because just as soon as Bulgakov has declared the matter settled and goes on to introduce the circulation of money into the analysis, he right away comes up against the question: where are I and II to get the money for the purchase of additional products? When we dealt with Marx, time and again the weak point in his analysis, the question really of consumers in enlarged reproduction, cropped up in a perverted form as the question of additional money sources. Here Bulgakov quite slavishly follows Marx’s approach, accepting his misleading formulation of the problem without noticing that it is not straightforward, although he knows perfectly well that ‘Marx himself did not answer this question in the drafts which were used to compile the second volume of Capital’. It should be all the more interesting to see what answer Marx’s Russian pupil attempted to work out on his own.
‘The following solution’, Bulgakov says, ‘seems to us to correspond best to Marx’s doctrine as a whole: The new variable capital in money-form supplied by II for both departments has its commodity equivalent in surplus value II. With reference to simple reproduction, we have already seen that the capitalists themselves must throw money into circulation to realise their surplus value, money which ultimately reverts to the pocket of the very capitalist it came from. The quantity of money required for the circulation of the surplus value is determined in accordance with the general law of commodity circulation by the value of the commodities that contained if divided by the average amount of money turnover. This same law must apply here; the capitalists of Department II must dispose of a certain amount of money for the circulation of their surplus value, and must consequently possess certain money reserves. These reserves must be ample enough for the circulation both of that portion of the surplus value which represents the consumption fund and of that which is to be accumulated as capital.’
Bulgakov further argues that it is immaterial to the question how much money is required to circulate a certain amount of commodities inside a country, whether or not some of these commodities contain any surplus value. ‘In answer to the general question as to money sources inside the country, however, our solution is that the money is supplied by the producer of gold.’(5)
If a country requires more money consequent upon an expansion of production, the production of gold will have to be increased accordingly. So here we are again: the producer of gold is again the deus ex machina, just as he had been for Marx. In fact, Bulgakov has sadly disappointed us in the high hopes we had of his new solution. His ‘solution’ of the problem does not go a step beyond Marx’s own analysis. It can be reduced to three extremely simple statements as follows:
Question: How much money do we need for the realisation of capitalised surplus value? Answer: Just as much as is required in accordance with the general law of commodity circulation. Q.: Where do the capitalists get the money for the realisation of capitalised surplus value? A.: They are supposed to have it. Q.: How did the money come into the country in the first place? A.: It is provided by the producer of gold.
The extreme simplicity of this method of explanation is suspicious rather than attractive.
We need not trouble, however, to refute this theory which makes the gold producer the deus ex machina of capitalist accumulation. Bulgakov has done it himself quite adequately. Eighty pages on, he returns to the gold producer in quite a different context, in the course of a lengthy argument against the theory of the wages fund in which he got involved for some mysterious reason. Here he suddenly displays a keen grasp of the problem:
‘We know already that there is gold producer amongst other producers. Even under conditions of simple reproduction, he increases, on the one hand, the absolute quantity of money circulating inside the country, and on the other, he buys producer and consumer goods without, in his turn, selling commodities, paying with his own product, i.e. with the general exchange equivalent, for the goods he buys. The gold producer now might perhaps render the service of buying the whole accumulated surplus value from II and pay for it in gold which II can then use to buy means of production from I and to increase its variable capital needed to pay for additional labour power so that the gold producer now appears as the real external market.
‘This assumption, however, is quite absurd. To accept it would mean to make the expansion of social production dependent upon the expansion of gold production. (Hear, hear!) This in turn presupposes an increase in gold production which is quite unreal. If the gold producer were obliged to buy all the accumulated surplus value from II for his own workers, his own variable capital would have to grow by the day and indeed by the hour. Yet his constant capital as well as his surplus value should also grow in proportion, and gold production as a whole would consequently have to take on immense dimensions. (Hear, hear!) Instead of submitting this sophistical presumption to statistical tests – which in any case would hardly be possible – a single fact can be adduced which would alone refute this presupposition: it is the development of the institution of credit which accompanies the development of capitalist economy. (Hear, hear!) Credit has the tendency to diminish the amount of money in circulation (this decrease being, of course, only relative, not absolute); it is the necessary complement of a developing economy of exchange which would otherwise soon find itself hampered by a lack of coined money. I think we need not give figures in this context to prove that the role of money in exchange-transactions is now very small. The hypothesis is thus proved in immediate and evident disagreement with the facts arid must be confuted.’(6)
Bravo! Bravissimo! This is really excellent! Bulgakov, however, thus ‘confutes’ also his former explanation of the question in what way and by whom capitalised surplus value is realised. Moreover, in refuting his own statements, Bulgakov has only explained in somewhat greater detail what Marx expressed in a single word when he called the hypothesis of a gold producer swallowing up the entire surplus value of society – ‘absurd’.
Admittedly, Bulgakov’s real solution and that of Russian Marxists in general who deal extensively with the problem must be sought elsewhere. Just like Tugan-Baranovski and Ilyin [Lenin], Bulgakov underlines the fact that the opposing sceptics made a capital error with respect to the possibility of accumulation in analysing the value of the aggregate product. They, especially Vorontsov, assumed that the aggregate social product consists in consumer goods, and they all started from the false premise that consumption is indeed the object of capitalist production. This, as the Marxists now explain, is the source of the entire misunderstanding – of all the imaginary difficulties connected with the realisation of the surplus value, with which the sceptics racked their brains.
‘This school created non-existent difficulties because of this mistaken conception. Since the normal conditions of capitalist production presuppose that the capitalists’ consumption fund is only a part of the surplus value, and the smaller part at that, the larger being set aside for the expansion of production, it is obvious that the difficulties imagined by this (the populist) school do not really exist.’(7)
The unconcern with which Bulgakov here ignores the real problem is striking. Apparently it has not dawned on him that the question as to the ultimate beneficiaries, quite irrelevant so long as personal consumption of the entire surplus value is assumed, only becomes acute on the assumption of enlarged reproduction.
All these ‘imaginary difficulties’ vanish, thanks to two discoveries of Marx’s which his Russian pupils untiringly quote against their opponents. The first is the fact that, in terms of value, the social product is composed, not of v + s, but of c + v + s. Secondly, the ratio of c to v in this sum continually increases with the progress of capitalist production, and at the same time, the capitalised part of the surplus value as against that part of it that is consumed, is ever growing. On this basis, Bulgakov establishes a complete theory of the relations between production and consumption in a capitalist society. As this theory plays such an important part for the Russian Marxists in general, and Bulgakov in particular, it will be necessary to get better acquainted with it.
‘Consumption,’ Bulgakov says, ‘the satisfaction of social needs, is but an incidental moment in the circulation of capital. The volume of production is determined by the volume of capital, and not by the amount of social requirements. Not alone that the development of, production is unaccompanied by a growth in consumption – the two are mutually antagonistic. Capitalist production knows no other than effective consumption, but only such persons who draw either surplus value or labour wages can be effective consumers and their purchasing power strictly corresponds to the amount of those revenues. Yet we have seen that the fundamental evolutionary laws of capitalist production tend, despite the absolute increase, to diminish the relative size of variable capital as well as of the capitalists’ consumption fund. We can say, then, that the development of production diminishes consumption.(8) The conditions of production and of consumption are thus in conflict. Production cannot and does not expand to further consumption. Expansion, however, is an inherent fundamental law of capitalist production and confronts every individual capitalist in the form of a stern command to compete. This contradiction is negligible in view of the fact that expanding production as such represents a market for additional products. “Inherent contradictions are resolved by an extension of the outlying fields of production.”’(9) (Bulgakov here quotes a saying of Marx which he has thoroughly misunderstood; we shall later have occasion to deal with it once more.) ‘It has just been shown how this is possible.’ (A reference to the analysis of the diagram of enlarged reproduction.) ‘Evidently, the greater share of the expansion is apportioned to Department I, to the production, that is to say, of constant capital, and only a (relatively) smaller part to Department II which produces commodities for immediate consumption. This change in the relations of the two departments shows well enough what part is played by consumption in a capitalist society, and it indicates where we should expect to find the most important demand for capitalist commodities.’(10)
‘Even within the narrow limits of the profit motive and the crises, even on this strait and narrow path, capitalist production is capable of unlimited expansion, irrespective of, and even despite, a decrease in consumption. The Russian literature frequently points out that in view of diminishing consumption a considerable increase of capitalist production is impossible without external markets, but this is due to a wrong evaluation of the part played by consumption in a capitalist society, the failure to appreciate that consumption is not the ultimate end of capitalist production. Capitalist production does not exist by the grace of an increase in consumption but because of an extension of the outlying fields of production which in fact constitute the market for capitalist products. A whole progression of Malthusian investigators, discontented with the superficial harmony doctrine of the school of Say and Ricardo, have slaved away at a solution of the hopeless undertaking: to find means of increasing consumption which the capitalist mode of production is bound to decrease. Marx was the only one to analyse the real connections: he has shown that the growth of consumption is fatally lagging behind that of production, and must do so whatever ‘third persons’ one might invent. Consumption and its volume then should by no means be considered as establishing the immediate limits to the expansion of production. Capitalist production atones by the crises for deviating from the true purpose of production, but it is independent of consumption. The expansion of production is alone limited by, and dependent upon, the volume of capital.’(11)
The theory of Bulgakov and Tugan-Baranovski is here directly attributed to Marx. In the eyes of the Russian Marxists, it is on the whole the direct consequence of Marx’s doctrine, of which it forms an organic part. On another occasion Bulgakov says even more clearly that it is a faithful interpretation of Marx’s diagram of enlarged reproduction. Once a country has embraced capitalist production, its internal movement develops along the following lines:
‘The production of constant capital makes up the Department I of social reproduction, thereby instituting an independent demand for consumption goods to the extent of both its own variable capital and the consumption fund of its capitalists. Department II in its turn starts the demand for the products of Department I. Thus, a closed circle is already formed at the initial stage of capitalist production,, in which it depends on no external market but is self-sufficient and can grow, of itself, as it were, by means of accumulation.’(12)
In the hands of the Russian Marxists this theory becomes the favourite stick with which to beat their opponents, the ‘populist’ sceptics, in the question of markets. We can only appreciate its daring to the full when we look at its amazing discrepancy with everyday practice, with all the known facts of capitalist economy. A thesis pronounced so triumphantly as the purest Marxist gospel is even more deserving of our admiration when we consider that it is grounded in an extremely simple confusion. We shall have further occasion to deal with this confusion when we come to the doctrine of Tugan-Baranovski.
Bulgakov further develops a completely erroneous theory of foreign commerce, based upon his misapprehension of the relations between consumption and production in capitalist economy. A picture of reproduction like the above in fact has no room for foreign commerce. If capitalism forms a ‘closed circle’ in every country from the very beginning, if, chasing its tail like a puppy and in complete ‘self-sufficiency’, it is able of itself to create an unlimited market for its products and can spur itself on to ever greater expansion, then every capitalist country as such must also be a closed and self-sufficient economic whole. In but a single respect would foreign commerce appear reasonable: to compensate, by imports from abroad, for certain deficiencies due to the soil and the climate, i.e. the import of raw materials or foodstuffs from sheer necessity. Completely upsetting the thesis of the ‘populists’, Bulgakov in fact advances a theory of international commerce among capitalist states which gives, pride of place to ‘the import of agricultural products, with industrial exports merely providing the requisite funds.
International traffic in commodities does not here seem to flow from the character of the mode of production but from the natural conditions of the countries concerned. This theory at any rate has not been borrowed from Marx but from: the economic experts of the German bourgeoisie. Just as Struve took over from Wagner and Schaeffle his Three Empire Theory, so Bulgakov adopts from the late List (R.I.P.) the division of states on the basis of ‘agriculture’ and ‘mixed agriculture and manufacture’, or rather adapts it, in deference to the times, to the categories of ‘manufacture’ and ‘mixed manufacture and agriculture’. Nature has afflicted the first category with a deficiency in raw materials and foodstuffs, making it thus dependent upon foreign commerce. The second category has been liberally endowed with all it needs; here foreign trade is of no account. The prototype of the first category is England, of the second – the USA. The stoppage of foreign commerce would mean the economic death-blow to England, but only a temporary crisis in the USA with a guarantee of full recovery.
‘Production there is capable of unlimited expansion on the basis of the internal market.’(13)
This theory, a hoary relic of German economics even now, has obviously not the least grasp of the interrelations obtaining in an international capitalist economy. It conceives of modern international trade in terms that may have been appropriate to the times of the Phoenicians. Just listen to the lecture of Professor Buecher:
‘Although the liberalist era has greatly facilitated international traffic, it would be a mistake to infer from this that the period of a national economy is nearing its end, to be replaced by a period of international economy ... Granted that we see in Europe to-day a number of small countries that are not independent nations in respect of their commodity supply, being compelled to import substantial amounts of their foodstuffs and luxuries, while their industrial productivity is in excess of the national needs and creates a permanent surplus for which employment must be found in alien spheres of consumption. Yet although countries of industrial production and those producing raw materials exist side by side and depend upon one another, such “international division of labour” should not be regarded as a sign that mankind is about to attain to a higher stage of development which it would be proper to contrast, under the label of world economy, with the ... previous stages. No stage of economic development has ever permanently guaranteed full autonomy in the satisfaction of wants. Every one of them has left certain gaps which had to be filled in by some means or, other. So-called “international economy”, on the other hard, has not, at any rate so far, engendered any phenomena which are essentially different from those of national economy, and we very much doubt that such phenomena will appear in the near future.’(14)
As far as Bulgakov is concerned, his conception at any rate results in an unexpected conclusion: his theory of the unlimited capacity for development of capitalism is confined to certain countries with favourable natural conditions. Capitalism in England is foredoomed because the world market will be exhausted before long. In the USA, India and Russia it can look forward to an unlimited development because these countries are ‘self-sufficient’.
Apart from these obvious peculiarities, Bulgakov’s arguments about foreign commerce again imply a fundamental misconception. Against the sceptics, from Sismondi to Nikolayon, who believed that they had to take recourse to outside markets for the realisation of capitalist surplus value, he chiefly argues as follows:
‘These experts obviously consider external commerce as a “bottomless pit” to swallow up in all eternity the surplus value which cannot be got rid of inside the country.’
Bulgakov for his part triumphantly points out that foreign commerce is indeed not a pit and certainly not a bottomless one, but rather appears as a double-edged sword, that exports always belong with imports, and that the two usually counterbalance one another. Thus, whatever is pushed out over one border, will be brought back, in a changed use-form, over another.
‘We must find room for the commodities that have been imported as an equivalent of those exported, within the bounds of the given market, and as this is impossible, ex hypothesi, it would only generate new difficulties to have recourse to an external demand.’(15)
On another occasion he says that the way to realise the surplus value found by the Russian ‘populists’, viz. external markets, is much less favourable than that discovered by Malthus, v. Kirchmann and Vorontsov himself when he wrote the essay On Militarism and Capitalism’.(16)
Although Bulgakov fervently copies Marx’s diagram of reproduction, he here exhibits no grasp whatever of the real problem towards which the sceptics from Sismondi to Nikolayon were groping their way. He denies that foreign commerce solves the difficulty as pretended, since it again brings the surplus value that has been disposed of into the country, although in a ‘changed form’. In conformity with the crude picture of v. Kirchmann and Vorontsov, he thus believes the problem to be that of destroying a certain quantity of the surplus value, of wiping it from the face of the earth. It simply does not occur to him that the real problem is the realisation of the surplus value, the metamorphosis of commodities, in fact the ‘changed form’ of the surplus value.
Bulgakov thus finally arrives at the same goal as Struve, though by a different route. He preaches the self-sufficiency of capitalist accumulation which swallows up its own product as Kronos swallows up his children, and breeds ever more vigorously without help from outside. Now only one further step is needed for Marxism to revert to bourgeois economics, and this, as luck would have it, was taken by Tugan-Baranovski.
<< Last Chapter | Next Chapter >>
Chapter 23: Tugan Baranovski and His ‘Lack of Proportion’
Rosa Luxemburg The Accumulation of Capital
Section Two Historical Exposition of the Problem * Third Round Struve-Bulgakov-Tugan Baranovski v. Vorontsov-Nikolayon
Chapter 23 Tugan Baranovski and His ‘Lack of Proportion’
We have left this theorist to the end, although he already developed his views in Russian in 1894, i.e. before Struve and Bulgakov, partly because he only gave his theories their mature form in German at a later date,(1) and also because the conclusions he draws from the premises of the Marxist critics are the most far-reaching in their implications.
Like Bulgakov, Tugan Baranovski starts from Marx’s analysis of social reproduction which gave him the clue to this bewildering maze of problems. But while Bulgakov, the enthusiastic disciple of Marx, only sought to follow him faithfully and simply attributed his own conclusions to the master, Tugan Baranovski, on the other hand, lays down the law to Marx who, in his opinion, did not know how to turn his brilliant exposition of the reproductive process to good account. Tugan Baranovski’s most important general conclusion from Marx’s principles, the pivot of his whole theory, is that, contrary to the assumptions of the sceptics, capitalist accumulation is not only possible under the capitalist forms of revenue and consumption, but is, in fact, completely independent of both. It is not consumption, he says, but production itself which makes for the best market. Production and the market are therefore the same, and since the expansion of production is unlimited in itself, the market, the capacity to absorb its products, has no limits either.
‘The diagram quoted’, he says, ‘was to prove conclusively a postulate which, though simple enough, might easily give rise to objections, unless the process be adequately understood – the postulate, namely, that capitalist production creates a market for itself. So long as it is possible to expand social production, if the productive forces are adequate for this purpose, the proportionate division of social production must also bring about a corresponding expansion of the demand inasmuch as under such conditions all newly produced goods represent a newly created purchasing power for the acquisition of other goods. Comparing simple reproduction of the social capital with its reproduction on a rising scale, we arrive at the most important conclusion that in capitalist economy the demand for commodities is in a sense independent of the total volume of social consumption. Absurd as it may seem to “common-sense”, it is yet possible that the volume of social consumption as a whole goes down while at the same time the aggregate social demand for commodities grows.’(2)
And again further on:
‘Arising from abstract analysis of the reproductive process of social capital we have formed the conclusion that nothing will be left over of the social product in view of the proportionate division of the social capital.’(3)
Accordingly Tugan Baranovski subjects Marx’s theory of crises to a revision which he claims to have developed from Sismondi’s ‘over-consumption’.
‘Marx is in substantial agreement with the general view that the poverty of the workers, i.e. of the great majority of the population, makes it impossible to realise the products of an ever expanding capitalist production, since it causes a decline in demand. This opinion is definitely mistaken. We have seen that capitalist production creates its own market – consumption being only one of the moments of capitalist production. In a planned social production if the leaders of production were equipped with all information about the demand and with the power to transfer labour and capital freely from one branch of production to another, then, however low the level of social consumption, the supply of commodities would not exceed the demand.’(4)
The only circumstance which periodically causes the market to be flooded is a lack of proportion in the enlargement of production. On this assumption, therefore, Tugan Baranovski describes the course of capitalist accumulation as follows:
‘What would the workers ... produce if production were organised on proportionate lines? Obviously their own means of subsistence and production. With what object? To expand production in the second year. The production of what products? Again of means of production and subsistence for the workers – and so on ad infinitum.’(5)
This game of question and answer, mind you, is not a form of self-mockery, it is meant in all seriousness.
‘If the expansion of production has no practical limits, then we must assume that the expansion of markets is equally unlimited, for if social production is proportionately organised, there is no limit to the expansion of the market other than the productive forces available.’(8)
Since production thus creates its own demand, foreign commerce of capitalist states is also assigned that peculiar mechanistic function we have already met in Bulgakov. A foreign market, for instance, is an absolute necessity for England.
‘Does not this prove that capitalist production creates a surplus product for which there is no room on the internal market? Why, come to that, does England require an external market? The answer is not difficult: because a considerable part of England’s purchasing power is expended on obtaining foreign commodities. The import of foreign commodities for the English home market also makes it essential to export English commodities abroad. Since England cannot manage without importing from abroad, exports are a vital condition for that country, since without them she would not be able to pay for her imports.’(7)
Here again agricultural imports are described as a stimulating and decisive factor, quite in accordance with the scheme of the German professors.
What, then, is the general line of reasoning on which Tugan Baranovski supports his daring solution of the problem of accumulation, the new revelation on the problem of crises and a whole lot of others? Hard to believe, but quite incontrovertible for all that, Tugan Baranovski’s proof consists exclusively and entirely – in Marx’s diagram of enlarged reproduction, no more no less. Although he repeatedly refers rather pompously to his ‘abstract analysis of the reproductive process of social capital’, to the ‘conclusive logic’ of his analysis, this entire analysis is nothing but a copy of Marx’s diagram of enlarged reproduction, with a different set of figures. Nowhere in the entire works of Tugan Baranovski shall we find a trace of any other argument. In Marx’s diagram, admittedly, accumulation, production, realisation and exchange run smoothly with clockwork precision, and no doubt this kind of ‘accumulation’ can continue ad infinitum, just as long, that is to say, as ink and paper do not run out. And it is this harmless written exercise with mathematical equations which Tugan Baranovski quite seriously considers a demonstration of such a course in real events.
‘The diagrams we have adduced are bound to prove conclusively that ...’
On another occasion he counters Hobson, who is convinced that accumulation is impossible, with the following words:
‘Diagram No.2 of the reproduction of social capital on a rising scale corresponds to the case of capital accumulation Hobson has in mind. But does this diagram show a surplus product to come into being? Far from it.’(8)
Hobson is refuted and the matter settled because ‘in the Diagram’ no surplus product comes into being.
Admittedly, Tugan Baranovski knows quite well that in hard fact things do not work out so smoothly. There are continual fluctuations in the exchange relations and periodical crises. But these crises happen only because in the expansion of production the proper proportions are not maintained, because, that is to say, the proportions, of ‘diagram No.2’ are not observed in the first place. If they were, there would be no crisis, and capitalist production could get along as nicely as it does on paper, in every detail. Tugan Baranovski is committed to the view that we can ignore the crises if we consider the reproductive process as a continuous process. Although the ‘proportion’ may be upset at any moment, yet on average it will always be re-established by different deviations, by price-fluctuations from day to day, and in the long run by periodical crises. That on the whole this ‘proportion’ is more or less maintained is proved by the fact that capitalist economy is still going strong – otherwise it would long ago have ended in chaos and collapse. In the long run, then, Tugan Baranovski’s ‘proportion’ is observed by and large, and we must conclude that reality obeys ‘diagram No.2’. And since this diagram can be indefinitely extended, it follows that capitalist accumulation can also proceed ad infinitum.
What is striking in all this is not Tugan Baranovski’s conclusion that the diagram corresponds to the actual course of events – as we have seen, Bulgakov also shared this belief; the really startling fact is that Tugan Baranovski sees no necessity for as much as inquiring whether the diagram is correct, that, instead of proving the diagram, he considers this, the arithmetical exercise on paper, as proof of the actual state of affairs. Bulgakov honestly tried to project Marx’s diagram on the real concrete relations of capitalist economy and of capitalist exchange; he endeavoured to overcome the difficulties resulting from it, though without success, it is true, remaining to the last involved with Marx’s analysis, which he himself recognised to be incomplete and fragmentary. But Tugan Baranovski does not need any proof, he does not greatly exercise his brains: since the arithmetical sums come out satisfactorily, and may be continued ad lib., this is to him proof that capitalist accumulation can also proceed without let or hindrance – provided the said ‘proportion’ obtains, which it will have to do by hook or by crook, as he himself would not dream of denying.
Tugan Baranovski, however, has one indirect proof that the diagram with its strange results corresponds to, and truly reflects, reality. This is the fact that capitalist production, quite in accordance with Marx’s diagram, puts human consumption second to production, that it conceives of the former as a means and of the latter as an end in itself; just as it puts human labour, the ‘worker’, on a par with the machine.
‘Technical progress is expressed by the fact that the means of labour, the machine, increases more and more in importance as compared to living labour, to the worker himself. Means of production play an ever growing part in the productive process and on the commodity market. Compared to the machine, the worker recedes further into the background and the demand resulting from the consumption of the workers is also put into the shade by that which results from productive consumption by the means of production. The entire workings of capitalist economy take on the character of a mechanism existing on its own, as it were, in which human consumption appears as a simple moment of the reproductive process and the circulation of capitals.’(9)
Tugan Baranovski considers this discovery as a fundamental law of the capitalist mode of production, which is confirmed by a quite tangible phenomenon: with the progress of capitalist development Department I goes on growing relatively to, and at the expense of, Department II. It was Marx himself who, as we all know, set up this law in which he grounded the schematic exposition of reproduction, though in the further development of his diagram he ignored subsequent alterations for simplicity’s sake. This, the automatic growth of the producer goods as compared with the consumer goods department affords Tugan Baranovski the only objective proof of his theory: that in capitalist society human consumption becomes increasingly unimportant; and production more and more an end in itself. This thesis forms the corner-stone of his entire theoretical edifice.
‘In all the industrial countries’, he proclaims, ‘we are confronted with the same type of development – the development of national economy everywhere follows the same fundamental law. The mining industry which creates the means of production for modern industry comes more and more to the fore. The relative decrease in the export of immediately consumable manufactured goods from Britain is thus also an expression of the fundamental law governing capitalist development. The further technical progress advances, the more do consumer goods recede as compared with producer goods. Human consumption plays an ever decreasing part as against the productive consumption of the means of production.’(10)
Although this ‘fundamental law’ like all his other ‘fundamental’ laws, in so far as they mean anything at all, is borrowed ready-made from Marx, Baranovski does not rest content with this and immediately proceeds to preach the Marxist gospel to Marx himself. Scrabbling about like a blind hen, Marx has turned up another pearl – Tugan will give him that – only he does not know what to do with it. It needed a Tugan Baranovski to know how to make it useful to science, and in his hand the newly discovered law suddenly throws a new light on the whole workings of capitalist economy. This law of the expansion in the department of producer goods at the cost of that of consumer goods reveals clearly, concisely, exactly, and in measurable terms, that capitalist society attaches progressively less importance to human consumption, putting man on the same level as the means of production, and that Marx was therefore completely wrong both in assuming that man alone, not the machine, too, can be the creator of surplus value, and in saying, further, that human consumption represents a limit for capitalist production which is bound to cause periodical crises in the present, and the collapse and terrible end of capitalist economy in the near future. In short, the ‘fundamental law’ governing the increase of producer as compared to consumer goods reflects the singular nature of capitalist society as a whole which Marx had not understood and which to interpret happily fell to the lot of Tugan Baranovski.
We have seen above the decisive part played by the fundamental law of capital in the controversy between the Russian Marxists and the sceptics. Bulgakov’s remarks we already know; another Marxist already referred to, Vladimir Ilyin, expresses himself in similar terms in his polemics against the populists:
‘It is well known that the law of capitalist production consists in the fact that the constant capital grows more rapidly than the variable capital, that is to say an ever increasing part of the newly formed capital falls to the department of social production which creates producer goods. In consequence, this department is absolutely bound to grow more rapidly than the department creating consumer goods, that is to say, the very thing happens which Sismondi declared to be “impossible”, “dangerous”, etc. In consequence, consumer goods make up a smaller and smaller share of the total bulk of capitalist production, and this is entirely in accordance with the historical “mission” of capitalism and its specific social structure: the former in fact consists in the development of the productive forces of society (production as an end in itself), and the latter prevents that the mass of the population should turn them to use.’ (11)
In this respect, of course, Tugan Baranovski goes even farther. With his love of paradox he actually permits himself the joke of submitting a mathematical proof that accumulation of capital and expansion of production are possible even if the absolute volume of production decreases. In this connection, Karl Kautsky has pointed out, he had recourse to a somewhat dubious scientific subterfuge, namely that he shaped his daring deductions exclusively for a specific moment: the transition from simple to enlarged reproduction – a moment which is exceptional even in theory, but certainly of no practical significance whatever.(12)
As to Tugan Baranovski’s ‘fundamental law’, Kautsky declares it to be a mere illusion due to the fact that Tugan Baranovski considered the organisation of production only in the old countries of capitalist big industry.
‘It is correct’, Kautsky says, ‘that with a progressive division of labour, there will be comparatively fewer and fewer factories etc. for the production of goods direct for personal consumption, together with a relative increase in the number of those which supply both the former and one another with tools, machines, raw materials, transport facilities and so on. While in original peasant economy an enterprise that cultivated the flax also made the linen with its own tools and got it ready for human consumption, nowadays hundreds of enterprises may share in the manufacture of a single shirt, by producing raw cotton, iron rails, steam engines and railway trucks that bring it to port, and so on. With international division of labour it will happen that some countries – the old industrial countries – can only slowly expand their production for personal consumption; while making large strides in their production of producer goods which is much more decisive for the heartbeat of economic life than the production of consumer goods. From the point of view of the nation concerned, we might easily form the opinion that producer goods can be turned out on a constantly rising scale with a more rapid rate of increase than in the production of consumer goods, and that their production is not bound up with that of the latter.’
The opinion, that producer goods can be produced independent of consumption, is of course a mirage of Tugan Baranovski’s, typical of vulgar economics. Not so the fact cited in support of this fallacy: the quicker growth of Department I as compared with Department II is beyond dispute, not only in old industrial countries but wherever technical progress plays a decisive part in production. It is the foundation also of Marx’s fundamental law that the rate of profit tends to fall. Yet in spite of it all, or rather precisely for this reason, it is a howler if Bulgakov, Ilyin and Tugan Baranovski imagine to have discovered in this law the essential nature of capitalist economy as an economic system in which production is an end in itself and human consumption merely incidental.
The growth of the constant at the expense of the variable capital is only the capitalist expression of the general effects of increasing labour productivity. The formula c greater than v (c > v), translated from the language of capitalism into that of the social labour process, means only that the higher the productivity of human labour, the shorter the time needed to change a given quantity of means of production into finished products.(13)
This is a universal law of human labour. It has been valid in all pre-capitalist forms of production and will also be valid in the future in a socialist order of society. In terms of the material use-form of society’s aggregate product, this law must manifest itself by more and more social labour time being employed in the manufacture of producer than of consumer goods. In a planned and controlled social economy, organised on socialist lines, this transformation would in fact be more rapid even than it is in contemporary capitalist economy. In the first place, rational scientific techniques can only be applied on the largest scale when the barriers of private ownership in land are abolished. This will result in an immense revolution in vast provinces of production which will ultimately amount to a replacement of living labour by machine labour, and which will enable us to tackle technical jobs on a scale quite impossible under present day conditions. Secondly, the general use of machinery in the productive process will be put on a new economic basis. At present the machine does not compete with living labour but only with that part of it that is paid. The cost of the labour power which is replaced by the machine represents the lowest limit of the applicability of the machine. Which means that the capitalist becomes interested in a machine only when the costs of its production – assuming the same level of performance – amount to less than the wages of the workers it replaces. From the point of view of the social labour process which is the only one to matter in a socialist society, the machine competes not with the labour that is necessary to maintain the worker but with the labour he actually performs. In other words, in a society that is not governed by the profit motive but aims at saving human labour, the use of machinery is economic-aims indicated just as soon as it can save more human labour than is necessary for making it, not to mention the many cases where the use of machinery is desirable even if it does not answer this economic minimum – for reasons of health and similar considerations, in the interest of the workers themselves. However that may be, the tension between the respective economic usefulness of the machine in (a) a capitalist, and (b) a socialist society is at least equal to the difference between labour and that part of it that is paid; it is, in other words, the precise equivalent of the whole capitalist surplus value. Consequently, if the capitalist profit motive is abolished and a social organisation of labour introduced, the marginal use of the machine will suddenly be increased by the whole extent of the capitalist surplus value, so that an enormous field, not to be gauged as yet, will be open to the triumphal march of the machine. This would be tangible proof that the capitalist mode of production, alleged to spur on to the optimum technical development, in fact sets large social limits to technical progress, in form of the profit motive on which it is based. It would show that as soon as these limits are abolished, technical progress will develop such a powerful drive that the technical marvels of capitalist production will be child’s play in comparison.
In terms of the composition of the social product, this technical transformation can only mean that, compared to the production of consumer goods, the production of producer goods – measured in units of labour time – must increase more rapidly in a socialist society than it does even to-day. Thus the relation between the two departments of social production which the Russian Marxists took to reveal typical capitalist baseness, the neglect of man’s need to consume, rather proves to be the precise manifestation of the progressive subjection of nature to social labour, which will become even more striking when production is organised solely with a view to human needs. The only objective proof for Tugan Baranovski’s ‘fundamental law’ thus collapses as a ‘fundamental’ confusion. His whole construction, including his ‘new theory of crises’, together with the ‘lack of proportion’, is reduced to its foundations on paper: a slavish copy of Marx’s diagram of enlarged reproduction.
<< Last Chapter | Next Chapter >>
‘With the capitalists growing richer, and the workers they exploit increasing in numbers, they constitute between them a market for the consumer goods produced by capitalist big industry which expands continually, yet it does not grow as rapidly as the accumulation of capital and the productivity of labour, and must therefore remain inadequate. An additional market is required for these consumer goods, a market outside their own province, among those occupational groups and nations whose mode of production is not yet capitalistic. This market is found and also widens increasingly, but the expansion is again too slow, since the additional market is not nearly so elastic and capable of expansion as the capitalist productive process. As soon as capitalist production has developed to the big industry stage, as in England already in the first quarter of the nineteenth century, it is capable of expanding by leaps and bounds so as soon to out-distance all expansions of the market. Every period of prosperity subsequent to a considerable extension of the market is thus from the outset doomed to an early end – the inevitable crisis. This, in brief, is the theory of crises established by Marx, and, as far as we can see, generally accepted by the “orthodox” Marxists.’ (ibid., p.80).
‘With a single exception to be considered below, the existence of surplus product in capitalist countries does not put a spoke in the wheel of production, not because production will be distributed more efficiently among the various spheres, or because the manufacture of machinery will replace that of cotton goods. The reason is rather that, capitalist development having begun sooner in some countries than in others, and because even to-day there are still some countries that have no developed capitalism, the capitalist countries in truth have at their disposal an outside market in which they can get rid of their products which they cannot consume themselves, no matter whether these are cotton or iron goods. We would by no means deny that it is significant if iron goods replace cotton goods as the main products of the principal capitalist countries. On the contrary, this change is of paramount importance, but its implications are rather different from those ascribed to it by Tugan Baranovski. It indicates the beginning of the end of capitalism. So long as the capitalist countries exported commodities for the purpose of consumption, there was still a hope for capitalism in these countries, and the question did not arise how much and how long the non-capitalist outside world would be able to absorb capitalist commodities. The growing share of machinery at the cost of consumer goods in what is exported from the main capitalist countries shows that areas which were formerly free of capitalism, and therefore served as a dumping-ground for its surplus products, are now drawn into the whirlpool of capitalism. It shows that, since they are developing a capitalism of their own, they can by themselves produce the consumer goods they need. At present they still require machinery produced by capitalist methods since they are only in the initial stages of capitalist development. But all too soon they will need them no longer. Just as they now make their own cotton and other consumer goods they will in future produce their own iron ware. Then they will not only cease to absorb the surplus produce of the essentially capitalist countries, but they will themselves produce surplus products which they can place only with difficulty’ (Die Neue Zeit, vol.xxv, part 1, Mathematische Formeln gegen Karl Marx, p.604).
Chapter 24: The End of Russian ‘Legalist’ Marxism
Rosa Luxemburg The Accumulation of Capital
Section Two Historical Exposition of the Problem * Third Round Struve-Bulgakov-Tugan Baranovski v. Vorontsov-Nikolayon
Chapter 24 The End of Russian ‘Legalist’ Marxism
THE Russian ‘legalist’ Marxists, and Tugan Baranovski above all, can claim the credit, in their struggle against the doubters of capitalist accumulation, of having enriched economic theory by an application of Marx’s analysis of the social reproductive process and it schematic representation in the second volume of Capital. But in view of the fact that this same Tugan Baranovski quite wrongly regarded said diagram as the solution to the problem instead of its formulation, his conclusions were bound to reverse the basic order of Marx’s doctrine.
Tugan Baranovski’s approach, according to which capitalist production can create unlimited markets and is independent of consumption, leads him straight on to the thesis of Say-Ricardo, i.e. a natural balance between production and consumption, between supply and demand. The difference is simply that those two only thought in terms of simple commodity circulation, whilst Tugan Baranovski applies the same doctrine to the circulation of capital. His theory of crises being caused by a ‘lack of proportion’ is in effect just a paraphrase of Say’s old trite absurdity: the over-production of any one commodity only goes to show under-production of another; and Tugan Baranovski simply translates this nonsense into the terminology used in Marx’s analysis of the reproductive process. Even though he declares that, Say notwithstanding, general over-production is quite possible in the light of the circulation of money which the former had entirely neglected, yet it is in fact this very same neglect, the besetting sin of Say and Ricardo in their dealings with the problem of crises which is the condition for his delightful manipulations with Marx’s diagram. As soon as it is applied to the circulation of money, ‘diagram No.2’ begins to bristle with spikes and barbs. Bulgakov was caught in these spikes when he attempted to follow up Marx’s interrupted analysis to a logical conclusion. This compound of forms of thought borrowed from Marx with contents derived from Say and Ricardo is what Tugan Baranovski modestly calls his ‘attempt at a synthesis between Marx’s theory and classical economics’.
After almost a century, the theory of optimism which holds, in the face of petty-bourgeois doubts, that capitalist production is capable of development, returns, by way of Marx’s doctrine and its ‘legalist’ champions, to its point of departure, to Say and Ricardo. The three ‘Marxists’ join forces with the bourgeois ‘harmonists’ of the Golden Age shortly before the Fall when bourgeois economics was expelled from the Garden of Innocence – the circle is closed.
There can be no doubt that the ‘legalist’ Russian Marxists achieved a victory over their opponents, the ‘populists’, but that victory was rather too thorough. In the heat of battle, all three – Struve, Bulgakov and Tugan Baranovski – overstated their case. The question was whether capitalism in general, and Russian capitalism in particular, is capable of development; these Marxists, however, proved this capacity to the extent of even offering theoretical proof that capitalism can go on for ever. Assuming the accumulation of capital to be without limits, one has obviously proved the unlimited capacity of capitalism to survive! Accumulation is the specifically capitalist method of expanding production, of furthering labour productivity, of developing the productive forces, of economic progress. If the capitalist mode of production can ensure boundless expansion of the productive forces, of economic progress, it is invincible indeed. The most important objective argument in support of socialist theory breaks down; socialist political action and the ideological import of the proletarian class struggle cease to reflect economic events, and socialism no longer appears an historical necessity. Setting out to show that capitalism is possible, this trend of reasoning ends up by showing that socialism is impossible.
The three Russian Marxists were fully aware that in the course of the dispute they had made an about-turn, though Struve, in his enthusiasm for the cultural mission of capitalism, does not worry about giving up a useful warrant.(1) Bulgakov tried to stop the gaps now made in socialist theory with another fragment of the same theory as best he could: he hoped that capitalist society might yet perish, in spite of the immanent balance between production and consumption, because of the declining profit rate. But it was he himself who finally cut away the ground from under this somewhat precarious comfort. Forgetting the straw he had offered for the salvation of socialism, he turned on Tugan Baranovski with the teaching that, in the case of large capitals, the relative decline in the profit rate is compensated by the absolute growth of capital.(2) More consistent than the others, Tugan Baranovski finally with the crude joy of a barbarian destroys all objective economic arguments in support of socialism, thus building in his own spirit ‘a more beautiful world’ on an ethical foundation. ‘The individual protests against an economic order which transforms the end (man) into a means (production) and the means (production) into an end.’(3)
Our three Marxists demonstrated in person that the new foundations of socialism had been frail and jerry-built. They had hardly laid down the new basis for socialism before they turned their backs on it. When the masses of Russia were staking their lives in the fight for the ideals of a social order to come, which would put the end (man) before the means (production), the ‘individual’ went into retreat, to find philosophical and ethical solace with Kant. In actual fact, the ‘legalist’ bourgeois Marxists ended up just where we should expect them to from their theoretical position – in the camp of bourgeois harmonies.