A Contribution to the Critique of Political Economy

A Contribution to the Critique of Political Economy

His first proposition was as follows: the volume of metallic currency is normal when it is determined by the total value of the commodities in circulation estimated in its bullion value. Expressed so as to apply to international conditions, it reads thus: in a normal state of circulation every country possesses a quantity of money “according to the state of its commerce and wealth.” Money circulates at a value corresponding to its real value or to its cost of production, i. e. it has the same value _in all countries_.[139] That being the case, “there could be no temptation offered to either for their importation or exportation.”[140] There would thus be established a balance of currencies between the different countries. The normal level of a national currency is now expressed in terms of an international balance of currencies, which practically amounts to the statement that nationality does not change anything in a universal economic law. We have reached again the same fatal point as before. How is the normal level disturbed? Or, speaking in terms of the new terminology, how is the international balance of currencies disturbed? Or, how does money cease to have the same value in all countries? Or, finally, how does it cease to pass at its own value in every country? We have seen that the normal level was disturbed by an increase or decrease of the volume of money in circulation while the total value of commodities remained the same; or, because the quantity of money in circulation remained the same while the exchange values of commodities rose or fell. In the same manner, the international level, determined by the value of the metal itself, is disturbed by an increase in the quantity of gold in a country brought about by the discovery of new gold mines,[141] or by an increase or decrease of the total exchange-value of the circulating commodities in any particular country. Just as in the former case the output of the precious metals decreased or increased according as to whether it was necessary to contract or expand the currency and thereby to lower or raise prices, so are the same effects produced now by export and import from one country to another. In the country in which prices would rise or the value of gold would fall below the bullion value in consequence of a redundant currency, gold would be depreciated, and the prices of commodities would rise as compared with other countries. Gold would, therefore, be exported, while commodities would be imported, and vice versa. Just as in the former case the output of gold, so now the import or export of gold and, with it, the rise or fall of prices of commodities would continue until, as we would have said before, the right value relation would be restored between the metal and commodities, or as we shall say now, the international balance of currencies would be restored. Just as in the former case the production of gold increased or decreased because gold stood above or below its value, so now the international migration of gold would take place for the same reason. Just as in the former case, every change in the production of the circulating metal affected its quantity and, thereby, prices, so would the same effect be produced now by international import and export. As soon as the relative values of gold and commodities or the normal quantity of currency would be restored, no further production would take place in the former case, and no further export or import in the latter, except in so far as would be necessary to replace outworn coin and to meet the demand of manufacturers of articles of luxury. It follows “that the temptation to export money in exchange for goods, or what is termed an unfavorable balance of trade, never arises but from a redundant currency.”[142] “The exportation of the coin is caused by its cheapness, and is not the effect, but the cause of an unfavourable balance.”[143] Since the increase or decrease in the production of gold in the former case and the importation or exportation of gold in the latter, take place only whenever its volume rises above or sinks below its normal level, i. e. whenever gold appreciates or depreciates in comparison with its bullion value, or whenever prices of commodities are too high or too low; it follows that every such movement works as a corrective,[144] since, through the resultant expansion or contraction of the currency, prices are restored to their true level: in the former case this level represents the balance between the respective values of gold and of commodities; in the latter, the international balance of currencies. To put it in other words: money circulates in different countries only in so far as it circulates as coin in every country. Money is but coin and all the gold existing in a country must therefore enter circulation, i. e. it can rise above or fall below its value as a token of value. Thus we safely land again, by the round-about way of this international complication, at the simple dogma which constituted our starting point.

With what violence to actual facts Ricardo has to explain them in the sense of his abstract theory, a few illustrations will suffice to show. He maintains, e. g. that in years of poor crops, which happened frequently in England during 1800-1820, gold is exported not because corn is needed and gold as money is at all times an effectual means of purchase in the world market, but because gold is in such cases depreciated in its value as compared with other commodities and, therefore, the currency of the country in which there has been a failure of crops is depreciated with respect to other national currencies. “In consequence of a bad harvest, a country having been deprived of a part of its commodities ... the currency which was before at its just level ... become(s) redundant,” and prices of all commodities rise in consequence.[145] Contrary to this paradoxical interpretation it has been proven statistically that from 1793 to the present time, whenever England had a bad harvest the available supply of currency not only did not become superabundant, but became inadequate and that, therefore, more money circulated and had to circulate on such occasions.[146]

In the same manner, Ricardo maintained, with reference to Napoleon’s Continental System and the English Blockade Decree, that the English exported gold instead of commodities to the Continent, because their money was depreciated with respect to the money on the Continent, that their commodities were, therefore, more high priced, which made it a more profitable commercial speculation to export gold than goods. According to him England was a market in which commodities were dear and money was cheap, while on the Continent commodities were cheap and money was dear. The trouble, according to an English writer, was “the ruinously low prices of our manufactures and of our colonial productions under the operation ... of the ‘Continental System’ during the last six years of the war.... The prices of sugar and coffee, for instance, on the Continent, computed in gold, were four or five times higher than their prices in England, computed in bank-notes. I am speaking ... of the times in which the French chemists discovered sugar in beet-root, and a substitute for coffee in chicory; and when the English grazier tried experiments upon fattening oxen with treacle and molasses―of the times when we took possession of the island of Heligoland, in order to form there a depot of goods to facilitate, if possible, the smuggling of them into the north of Europe; and when the lighter descriptions of British manufactures found their way into Germany through Turkey.... Almost all the merchandise of the world accumulated in our warehouses, where they became impounded, except when some small quantity was released by a French License, for which the merchants at Hamburgh and Amsterdam had, perhaps, given Napoleon such a sum as forty or fifty thousand pounds. They must have been strange merchants ... to have paid so large a sum for liberty to carry a cargo of goods from a dear market to a cheap one. What was the ostensible alternative the merchant had?... Either to buy coffee at 6d. a pound in bank-notes, and send it to a place where it would instantly sell at 3s. or 4s. a pound in gold, or to buy gold with bank-notes at £5 an ounce, and send it to a place where it would be received at £3 17s. 10-1/2d. an ounce.... It is too absurd, of course, to say ... that the gold was remitted instead of the coffee, as a preferable mercantile operation.... There was not a country in the world in which so large a quantity of desirable goods could be obtained, in return for an ounce of gold, as in England.... Bonaparte ... was constantly examining the English Price Current.... So long as he saw that gold was dear and coffee was cheap in England, he was satisfied that his ‘Continental System’ worked well.”[147]

At the very time when Ricardo first formulated his theory of money, and the Bullion Committee embodied it in its parliamentary report, namely in 1810, a ruinous fall of prices of all English commodities as compared with those of 1808 and 1809 took place, while gold rose in value accordingly. Only agricultural products formed an exception, because their importation from abroad met with obstacles and their domestic supply was decimated by unfavorable crop conditions.[148] Ricardo so utterly failed to comprehend the rôle of precious metals as an international means of payment, that in his testimony before the Committee of the House of Lords in 1819 he could say “that drains for exportation would cease altogether so soon as cash payments should be resumed, and the currency be restored to its metallic level.” He died just in time, on the very eve of the crisis of 1825, which belied his prophesies.

The time when Ricardo wrote was generally little adapted for the observation of the function of precious metals as world money. Before the introduction of the Continental System, the balance of trade had almost always been in favor of England, and while that system lasted, the commercial intercourse with the European continent was too insignificant to affect the English rate of exchange. The money transmissions were mostly of a political nature and Ricardo seems to have utterly failed to grasp the part which subsidy payments played at that time in English gold exports.[149]

Among the contemporaries of Ricardo who formed the school which adopted his economic principles, JAMES MILL was the most important one. He attempted to work out Ricardo’s theory of money on the basis of simple metallic circulation, without the irrelevant international complications which served Ricardo to hide the inadequacy of his theory, and without any controversial regard for the operations of the Bank of England. His main arguments are as follows:

“By value of money, is here to be understood the proportion in which it exchanges for other commodities, or the quantity of it which exchanges for a certain quantity of other things.... It is the total quantity of the money in any country, which determines what portion of that quantity shall exchange for a certain portion of the goods or commodities of that country. If we suppose that all the goods of the country are on one side, all the money on the other, and that they are exchanged at once against one another, it is evident ... that the value of money would depend wholly upon the quantity of it. It will appear that the case is precisely the same in the actual state of the facts. The whole of the goods of a country are not exchanged at once against the whole of the money; the goods are exchanged in portions, often in very small portions, and at different times, during the course of the whole year. The same piece of money which is paid in one exchange to-day, may be paid in another exchange tomorrow. Some of the pieces will be employed in a great many exchanges, some in very few, and some, which happen to be hoarded, in none at all. There will, amid all these varieties, be a certain average number of exchanges, the same which, if all the pieces had performed an equal number, would have been performed by each; that average we may suppose to be any number we please; say, for example, ten. If each of the pieces of the money in the country perform ten purchases, that is exactly the same thing as if all the pieces were multiplied by ten, and performed only one purchase each. The value of all the goods in the country is equal to ten times the value of all the money.... If the quantity of money instead of performing ten exchanges in the year, were ten times as great, and performed only one exchange in the year, it is evident that whatever addition were made to the whole quantity, would produce a proportional diminution of value, in each of the minor quantities taken separately. As the quantity of goods, against which the money is all exchanged at once, is supposed to be the same, the value of all the money is no more, after the quantity is augmented, than before it was augmented. If it is supposed to be augmented one-tenth, the value of every part, that of an ounce for example, must be diminished one-tenth.... In whatever degree, therefore, the quantity of money is increased or diminished, other things remaining the same, in that same proportion, the value of the whole, and of every part, is reciprocally diminished or increased. This, it is evident, is a proposition universally true. Whenever the value of money has either risen or fallen (the quantity of goods against which it is exchanged and the rapidity of circulation remaining the same), the change must be owing to a corresponding diminution or increase of the quantity; and can be owing to nothing else. If the quantity of goods diminish, while the quantity of money remains the same, it is the same thing as if the quantity of money had been increased;” and vice versa.... “Similar changes are produced by any alteration in the rapidity of circulation.... An increase in the number of these purchases has the same effect as an increase in the quantity of money; a diminution the reverse.... If there is any portion of the annual produce which is not exchanged at all, as what is consumed by the producer; or which is not exchanged for money; that is not taken into the account, because what is not exchanged for money is in the same state with respect to the money, as if it did not exist.... Whenever the coining of money ... is free, its quantity is regulated by the value of the metal.... Gold and silver are in reality commodities.... It is cost of production ... which determines the value of these, as of other ordinary productions.”[150]

The whole wisdom of Mill resolves itself into a series of arbitrary and absurd assumptions. He wishes to prove that the price of commodities or the value of money is determined by “the total quantity of the money in any country.” _Assuming_ that the quantity and the exchange value of the commodities in circulation remain unchanged and that the same be true of the rapidity of circulation and of the value of precious metals as determined by the cost of production, and _assuming_ at the same time that the quantity of the metallic currency increases or decreases in proportion to the quantity of money _existing_ in a country, it becomes really “evident” that what was to have been proven has been assumed. Mill falls, moreover, into the same error as Hume by assuming that use-values and not commodities with a given exchange value are in circulation, and that vitiates his statement, even if we grant all of his “assumptions.” The rapidity of circulation may remain the same; this may also be true of the value of the precious metals and of the _quantity_ of commodities in circulation; and yet a change in the exchange value of the latter may require now a larger and now a smaller quantity of money for their circulation. Mill sees that a part of the money in a country is in circulation, while another is idle. With the aid of a most absurd average calculation he _assumes_ that, although it really appears to be different, yet all the gold in a country does circulate. Assuming that ten million silver thalers circulate in a country twice a year, there could be twenty million such coins in circulation, if each circulated but once. And if the entire quantity of silver to be found in a country in any form amounts to one hundred million thalers, it may be supposed that the entire one hundred million can enter circulation, if each piece of money should circulate once in five years. One could as well assume that all the money of the world circulate in Hempstead, but that each piece of money instead of being employed three times a year, is employed once in 3,000,000 years. The one assumption is as relevant as the other for the purpose of determining the relation between the sum total of prices of commodities and the volume of currency. Mill feels that it is a matter of decisive importance to him to bring the commodities in direct contact not with the money in circulation, but with the entire supply of money existing in a country. He admits that “the whole of the goods of a country are not exchanged at once against the whole of the money,” but that the goods are exchanged in different portions and at different times of the year for different portions of money. To do away with this difficulty he _assumes_ that it does not exist. Moreover, this entire idea of direct contact of commodities and money and direct exchange is a mere abstraction from the movement of simple purchase and sale or the function of money as a means of purchase. Already in the movement of money as a means of payment, commodity and money cease to appear simultaneously.

The commercial crises of the nineteenth century, namely, the great crises of 1825 and 1836, did not result in any new developments in the Ricardian theory of money, but they did furnish new applications for it. They were no longer isolated economic phenomena, such as the depreciation of the precious metals in the sixteenth and seventeenth centuries which interested Hume, or the depreciation of paper money in the eighteenth and early nineteenth centuries which confronted Ricardo; they were the great storms of the world market in which the conflict of all the elements of the capitalist process of production discharge themselves, and whose origin and remedy were sought in the most superficial and abstract sphere of this process, the sphere of money circulation. The theoretical assumption from which the school of economic weather prophets proceeds, comes down in the end to the illusion that Ricardo discovered the laws governing the circulation of purely metallic currency. The only thing that remained for them to do was to subject to the same laws the circulation of credit and bank-note currency.

The most general and most palpable phenomenon in commercial crises is the sudden, general decline of prices following a prolonged general rise. The general decline of prices of commodities may be expressed as a rise in the relative value of money with respect to all commodities, and the general rise of prices as a decline of the relative value of money. In either expression the phenomenon is described but not explained. Whether I put the question thus: explain the general periodic rise of prices followed by a general decline of the same, or formulate the same problem by saying: explain the periodic decline and rise of the relative value of money with respect to commodities; the different wording leaves the problem as little changed as would its translation from German into English. Ricardo’s theory of money was exceedingly convenient, because it lends a tautology the semblance of a statement of causal connection. Whence comes the periodic general fall of prices? From the periodic rise of the relative value of money. Whence the general periodic rise of prices? From the periodic decline of the relative value of money. It might have been stated with equal truth that the periodic rise and fall of prices is due to their periodic rise and fall. The problem itself is stated under the assumption that the intrinsic value of money, i. e., its value as determined by the cost of production of precious metals remains _unchanged_. If it is more than a tautology then it is based on a misconception of the most elementary principles. If the exchange value of A measured in terms of B, declines, we know that this may be caused by a decline of the value of A as much as by a rise of the value of B; the same being true of the case of a rise of the exchange value of A measured in terms of B. The tautology once admitted as a statement of cause, the rest follows easily. A rise of prices of commodities is caused by a decline of the value of money and a decline of the value of money is caused, as we know from Ricardo, by a redundant currency, i. e., by a rise of the volume of currency over the level determined by its own intrinsic value and the intrinsic value of the commodities. In the same manner, the general decline of prices of commodities is explained by the rise of the value of money above its intrinsic value in consequence of an inadequate currency. Thus, prices rise and fall periodically, because there is periodically too much or too little money in circulation. Should a rise of prices happen to coincide with a contracted currency, and a fall of prices with an expanded one, it may be asserted in spite of those facts that in consequence of a contraction or expansion of the volume of commodities in the market, which can not be proven statistically, the quantity of money in circulation has, although not absolutely, yet relatively increased or declined. We have seen that according to Ricardo these universal fluctuations must take place even with a purely metallic currency, but that they balance each other through their alternations; thus, e. g., an inadequate currency causes a fall of prices, the fall of prices leads to the export of commodities abroad, this export causes again an import of gold from abroad, which, in its turn, brings about a rise of prices; the opposite movement taking place in case of a redundant currency, when commodities are imported and money is exported. But, since in spite of these universal fluctuations of prices which are in perfect accord with Ricardo’s theory of metallic currency, their acute and violent form, their crisis-form, belongs to the period of advanced credit, it is perfectly clear that the issue of bank-notes is not exactly regulated by the laws of metallic currency. Metallic currency has its remedy in the import and export of precious metals which immediately enter circulation and thus, by their influx or efflux, cause the prices of commodities to fall or rise. The same effect on prices must now be exerted by banks by the artificial imitation of the laws of metallic currency. If gold is coming in from abroad it proves that the currency is inadequate, that the value of money is too high and the prices of commodities too low, and, consequently, that bank notes must be put in circulation in proportion to the newly imported gold. On the contrary, notes have to be withdrawn from circulation in proportion to the export of gold from the country. That is to say, the issue of bank notes must be regulated by the import and export of the precious metals or by the rate of exchange. Ricardo’s false assumption that gold is only coin, and that therefore all imported gold swells the currency, causing prices to rise, while all exported gold reduces the currency leading to a fall of prices, this theoretical assumption is turned into a practical experiment of putting in every case an amount of currency in circulation equal to the amount of gold in existence. Lord Overstone (the banker Jones Loyd), Colonel Torrens, Norman, Clay, Arbuthnot and a host of other writers, known in England as the adherents of the “currency principle,” not only preached this doctrine, but with the aid of Sir Robert Peel succeeded in 1844 and 1845 in making it the basis of the present English and Scotch bank legislation. Its ignominous failure, theoretical as well as practical, following upon experiments on the largest national scale, can be treated only after we take up the theory of credit.[151] So much can be seen, however, that the theory of Ricardo which isolates money in its fluent form of currency, ends by ascribing to the ebbs and tides in the supply of precious metals an influence on bourgeois economy such as the believers in the superstitions of the monetary system had never dreamt of. Thus did Ricardo, who proclaimed paper currency as the most perfect form of money, become the prophet of the bullionists.

After Hume’s theory or the abstract opposition to the monetary system was thus developed to its ultimate conclusions, Steuart’s concrete conception of money was finally restored to its rights by THOMAS TOOKE.[152] Tooke arrives at his principles not from any theory, but by a conscientious analysis of the history of prices of commodities from 1793 to 1856. In the first edition of his History of Prices which appeared in 1823, Tooke is still under the complete influence of the Ricardian theory, and vainly tries to reconcile it with actual facts. His pamphlet “On the Currency,” which appeared after the crisis of 1825 might even be considered as the first consistent presentation of the views which were later given the force of law by Overstone. Continued studies in the history of prices forced him, however, to the conclusion that the direct connection between prices and the volume of currency, as it is pictured by the theory, is a mere illusion; that the expansion and contraction of currency which takes place while the value of the precious metals remains unchanged, is always the effect but never the cause of price fluctuations; that the circulation of money is in any event but a secondary movement; and that money assumes quite different forms in the actual process of production in addition to that of a circulating medium. His detailed investigations belong to a sphere outside of that of simple metallic circulation and can be discussed here as little as the investigations of WILSON and FULLARTON which belong to the same class.[153] None of these writers takes a one-sided view of money, but treat it in its various aspects; the treatment, however, is mechanical, without an attempt to establish an organic connection either between these various aspects themselves, or between them and the combined system of economic categories. They fall, therefore, into the error of confusing _money_ as distinguished from _medium of circulation_ with _capital_ or even with commodity, although they are forced elsewhere to differentiate it from both.[154] When gold, e. g., is shipped abroad, it practically means that capital is sent abroad, but the same thing takes place when iron, cotton, grain, or any other commodity is exported. Both are capital and are distinguished not as capital, but as money and commodity. The function of gold as the international medium of exchange springs, therefore, not from its being capital, but from its specific character of money. Similarly, when gold, or bank notes in its place, circulate in the home trade as means of payment, they constitute capital at the same time. But they could not be replaced by capital in the form of commodities, as has been demonstrated very palpably by crises, for instance. That is to say, it is the fact that gold is distinguished from commodities in its capacity of money and not in that of capital, that makes it the means of payment. Even when capital is exported directly as capital, as, e. g., when it is done for the purpose of lending abroad a certain amount on interest, it depends on circumstances, whether it will be exported in the form of commodities or in that of gold, and if in the latter form, it is due to the specific destination of the precious metals as distinguished from commodities to serve as money. In general, these writers do not consider money in its abstract form, as it is developed within the sphere of simple circulation of commodities, and as it spontaneously grows out of the relation of the circulating commodities. As a result, they constantly vacillate between the abstract forms of money which distinguish it from commodity and those forms of it beneath which are concealed concrete relations, such as capital, revenue, etc.[155]

Introduction

to the

Critique of Political Economy.[156]

1. PRODUCTION IN GENERAL.

The subject of our discussion is first of all _material_ production by individuals as determined by society, naturally constitutes the starting point. The individual and isolated hunter or fisher who forms the starting point with Smith and Ricardo, belongs to the insipid illusions of the eighteenth century. They are Robinsonades which do not by any means represent, as students of the history of civilization imagine, a reaction against over-refinement and a return to a misunderstood natural life. They are no more based on such a naturalism than is Rosseau’s “contrat social,” which makes naturally independent individuals come in contact and have mutual intercourse by contract. They are the fiction and only the aesthetic fiction of the small and great Robinsonades. They are, moreover, the anticipation of “bourgeois society,” which had been in course of development since the sixteenth century and made gigantic strides towards maturity in the eighteenth. In this society of free competition the individual appears free from the bonds of nature, etc., which in former epochs of history made him a part of a definite, limited human conglomeration. To the prophets of the eighteenth century, on whose shoulders Smith and Ricardo are still standing, this eighteenth century individual, constituting the joint product of the dissolution of the feudal form of society and of the new forces of production which had developed since the sixteenth century, appears as an ideal whose existence belongs to the past; not as a result of history, but as its starting point.

Since that individual appeared to be in conformity with nature and [corresponded] to their conception of human nature, [he was regarded] not as a product of history, but of nature. This illusion has been characteristic of every new epoch in the past. Steuart, who, as an aristocrat, stood more firmly on historical ground, contrary to the spirit of the eighteenth century, escaped this simplicity of view. The further back we go into history, the more the individual and, therefore, the producing individual seems to depend on and constitute a part of a larger whole: at first it is, quite naturally, the family and the clan, which is but an enlarged family; later on, it is the community growing up in its different forms out of the clash and the amalgamation of clans. It is but in the eighteenth century, in “bourgeois society,” that the different forms of social union confront the individual as a mere means to his private ends, as an outward necessity. But the period in which this view of the isolated individual becomes prevalent, is the very one in which the interrelations of society (general from this point of view) have reached the highest state of development. Man is in the most literal sense of the word a _zoon politikon_, not only a social animal, but an animal which can develop into an individual only in society. Production by isolated individuals outside of society―something which might happen as an exception to a civilized man who by accident got into the wilderness and already dynamically possessed within himself the forces of society―is as great an absurdity as the idea of the development of language without individuals living together and talking to one another. We need not dwell on this any longer. It would not be necessary to touch upon this point at all, were not the vagary which had its justification and sense with the people of the eighteenth century transplanted in all earnest into the field of political economy by Bastiat, Carey, Proudhon and others. Proudhon and others naturally find it very pleasant, when they do not know the historical origin of a certain economic phenomenon, to give it a quasi historico-philosopohical explanation by going into mythology. Adam or Prometheus hit upon the scheme cut and dried, whereupon it was adopted, etc. Nothing is more tediously dry than the dreaming _locus communis_.

Whenever we speak, therefore, of production, we always have in mind production at a certain stage of social development, or production by social individuals. Hence, it might seem that in order to speak of production at all, we must either trace the historical process of development through its various phases, or declare at the outset that we are dealing with a certain historical period, as, e. g., with modern capitalistic production which, as a matter of fact, constitutes the subject proper of this work. But all stages of production have certain landmarks in common, common purposes. _Production in general_ is an abstraction, but it is a rational abstraction, in so far as it singles out and fixes the common features, thereby saving us repetition. Yet these general or common features discovered by comparison constitute something very complex, whose constituent elements have different destinations. Some of these elements belong to all epochs, others are common to a few. Some of them are common to the most modern as well as to the most ancient epochs. No production is conceivable without them; but while even the most completely developed languages have laws and conditions in common with the least developed ones, what is characteristic of their development are the points of departure from the general and common. The conditions which generally govern production must be differentiated in order that the essential points of difference be not lost sight of in view of the general uniformity which is due to the fact that the subject, mankind, and the object, nature, remain the same. The failure to remember this one fact is the source of all the wisdom of modern economists who are trying to prove the eternal nature and harmony of existing social conditions. Thus they say, e. g., that no production is possible without some instrument of production, let that instrument be only the hand; that none is possible without past accumulated labor, even if that labor consist of mere skill which has been accumulated and concentrated in the hand of the savage by repeated exercise. Capital is, among other things, also an instrument of production, also past impersonal labor. Hence capital is a universal, eternal natural phenomenon; which is true if we disregard the specific properties which turn an “instrument of production” and “stored up labor” into capital. The entire history of production appears to a man like Carey, e. g., as a malicious perversion on the part of governments.

If there is no production in general, there is also no general production. Production is always some special branch of production or an aggregate, as, e. g., agriculture, stock raising, manufactures, etc. But political economy is not technology. The connection between the general destinations of production at a given stage of social development and the particular forms of production, is to be developed elsewhere (later on).

Finally, production is not only of a special kind. It is always a certain body politic, a social personality that is engaged on a larger or smaller aggregate of branches of production. The connection between the real process and its scientific presentation also falls outside of the scope of this treatise. [We must thus distinguish between] production in general, special branches of production and production as a whole.

It is the fashion with economists to open their works with a general introduction, which is entitled “production” (see, e. g., John Stuart Mill) and deals with the general “requisites of production.”

This general introductory part treats or is supposed to treat:

1. Of the conditions without which production is impossible, i. e., of the most essential conditions of production. As a matter of fact, however, it dwindles down, as we shall see, to a few very simple definitions, which flatten out into shallow tautologies;

2. Of conditions which further production more or less, as, e. g., Adam Smith’s [discussion of] a progressive and stagnant state of society.

In order to give scientific value to what serves with him as a mere summary, it would be necessary to study the _degree of productivity_ by periods in the development of individual nations; such a study falls outside of the scope of the present subject, and in so far as it does belong here is to be brought out in connection with the discussion of competition, accumulation, etc. The commonly accepted view of the matter gives a general answer to the effect that an industrial nation is at the height of its production at the moment when it reaches its historical climax in all respects. Or, that certain races, climates, natural conditions, such as distance from the sea, fertility of the soil, etc., are more favorable to production than others. That again comes down to the tautology that the facility of creating wealth depends on the extent to which its elements are present both subjectively and objectively. As a matter of fact a nation is at its industrial height so long as its main object is not gain, but the process of gaining. In that respect the Yankees stand above the English.

But all that is not what the economists are really after in the general introductory part. Their object is rather to represent production in contradistinction to distribution―see Mill, e. g.―as subject to eternal laws independent of history, and then to substitute bourgeois relations, in an underhand way, as immutable natural laws of society _in abstracto_. This is the more or less conscious aim of the entire proceeding. On the contrary, when it comes to distribution, mankind is supposed to have indulged in all sorts of arbitrary action. Quite apart from the fact that they violently break the ties which bind production and distribution together, so much must be clear from the outset: that, no matter how greatly the systems of distribution may vary at different stages of society, it should be possible here, as in the case of production, to discover the common features and to confound and eliminate all historical differences in formulating _general human_ laws. E. g., the slave, the serf, the wage-worker―all receive a quantity of food, which enables them to exist as slave, serf, and wage-worker. The conqueror, the official, the landlord, the monk, or the levite, who respectively live on tribute, taxes, rent, alms, and the tithe,―all receive [a part] of the social product which is determined by laws different from those which determine the part received by the slave, etc. The two main points which all economists place under this head, are: first, property; second, the protection of the latter by the administration of justice, police, etc. The objections to these two points can be stated very briefly.

1. All production is appropriation of nature by the individual within and through a definite form of society. In that sense it is a tautology to say that property (appropriation) is a condition of production. But it becomes ridiculous, when from that one jumps at once to a definite form of property, e. g. private property (which implies, besides, as a prerequisite the existence of an opposite form, viz. absence of property). History points rather to common property (e. g. among the Hindoos, Slavs, ancient Celts, etc.) as the primitive form, which still plays an important part at a much later period as communal property. The question as to whether wealth grows more rapidly under this or that form of property, is not even raised here as yet. But that there can be no such a thing as production, nor, consequently, society, where property does not exist in any form, is a tautology. Appropriation which does not appropriate is a _contradictio in subjecto_.

2. Protection of property, etc. Reduced to their real meaning, these commonplaces express more than what their preachers know, namely, that every form of production creates its own legal relations, forms of government, etc. The crudity and the shortcomings of the conception lie in the tendency to see but an accidental reflective connection in what constitutes an organic union. The bourgeois economists have a vague notion that it is better to carry on production under the modern police, than it was, e. g. under club-law. They forget that club law is also law, and that the right of the stronger continues to exist in other forms even under their “government of law.”

When the social conditions corresponding to a certain stage of production are in a state of formation or disappearance, disturbances of production naturally arise, although differing in extent and effect.

To sum up: all the stages of production have certain destinations in common, which we generalize in thought; but the so-called general conditions of all production are nothing but abstract conceptions which do not go to make up any real stage in the history of production.

2. THE GENERAL RELATION OF PRODUCTION TO DISTRIBUTION, EXCHANGE, AND CONSUMPTION.

Before going into a further analysis of production, it is necessary to look at the various divisions which economists put side by side with it. The most shallow conception is as follows: By production, the members of society appropriate (produce and shape) the products of nature to human wants; distribution determines the proportion in which the individual participates in this production; exchange brings him the particular products into which he wishes to turn the quantity secured by him through distribution; finally, through consumption the products become objects of use and enjoyment, of individual appropriation. Production yields goods adopted to our needs; distribution distributes them according to social laws; exchange distributes further what has already been distributed, according to individual wants; finally, in consumption the product drops out of the social movement, becoming the direct object of the individual want which it serves and satisfies in use. Production thus appears as the starting point; consumption as the final end; and distribution and exchange as the middle; the latter has a double aspect, distribution being defined as a process carried on by society, while exchange, as one proceeding from the individual. In production the person is embodied in things, in [consumption[157]] things are embodied in persons; in distribution, society assumes the part of go-between of production and consumption in the form of generally prevailing rules; in exchange this is accomplished by the accidental make-up of the individual.

Distribution determines what proportion (quantity) of the products the individual is to receive; exchange determines the products in which the individual desires to receive his share allotted to him by distribution.

Production, distribution, exchange, and consumption thus form a perfect connection, production standing for the general, distribution and exchange for the special, and consumption for the individual, in which all are joined together. To be sure this is a connection, but it does not go very deep. Production is determined [according to the economists] by universal natural laws, while distribution depends on social chance: distribution can, therefore, have a more or less stimulating effect on production: exchange lies between the two as a formal (?) social movement, and the final act of consumption which is considered not only as a final purpose, but also as a final aim, falls, properly, outside of the scope of economics, except in so far as it reacts on the starting point and causes the entire process to begin all over again.

The opponents of the economists―whether economists themselves or not―who reproach them with tearing apart, like barbarians, what is an organic whole, either stand on common ground with them or are _below_ them. Nothing is more common than the charge that the economists have been considering production as an end in itself, too much to the exclusion of everything else. The same has been said with regard to distribution. This accusation is itself based on the economic conception that distribution exists side by side with production as a self-contained, independent sphere. Or [they are accused] that the various factors are not treated by them in their connection as a whole. As though it were the text books that impress this separation upon life and not life upon the text books; and the subject at issue were a dialectic balancing of conceptions and not an analysis of real conditions.

_a. Production is at the same time also consumption._ Twofold consumption, subjective and objective. The individual who develops his faculties in production, is also expending them, consuming them in the act of production, just as procreation is in its way a consumption of vital powers. In the second place, production is consumption of means of production which are used and used up and partly (as e. g. in burning) reduced to their natural elements. The same is true of the consumption of raw materials which do not remain in their natural form and state, being greatly absorbed in the process. The act of production is, therefore, in all its aspects an act of consumption as well. But this is admitted by economists. Production as directly identical with consumption, consumption as directly coincident with production, they call productive consumption. This identity of production and consumption finds its expression in Spinoza’s proposition, _Determinatio est negatio_. But this definition of productive consumption is resorted to just for the purpose of distinguishing between consumption as identical with production and consumption proper, which is defined as its destructive counterpart. Let us then consider consumption proper.

Consumption is directly also production, just as in nature the consumption of the elements and of chemical matter constitutes production of plants. It is clear, that in nutrition, e. g., which is but one form of consumption, man produces his own body; but it is equally true of every kind of consumption, which goes to produce the human being in one way or another. [It is] consumptive production. But, say the economists, this production which is identical with consumption, is a second production resulting from the destruction of the product of the first. In the first, the producer transforms himself into things; in the second, things are transformed into human beings. Consequently, this consumptive production―although constituting a direct unity of production and consumption―differs essentially from production proper. The direct unity in which production coincides with consumption and consumption with production, does not interfere with their direct duality.

Production is thus at the same time consumption, and consumption is at the same time production. Each is directly its own counterpart. But at the same time an intermediary movement goes on between the two. Production furthers consumption by creating material for the latter which otherwise would lack its object. But consumption in its turn furthers production, by providing for the products the individual for whom they are products. The product receives its last finishing touches in consumption. A railroad on which no one rides, which is, consequently not used up, not consumed, is but a potential railroad, and not a real one. Without production, no consumption; but, on the other hand, without consumption, no production; since production would then be without a purpose. Consumption produces production in two ways.

In the first place, in that the product first becomes a real product in consumption; e. g., a garment becomes a real garment only through the act of being worn; a dwelling which is not inhabited, is really no dwelling; consequently, a product as distinguished from a mere natural object, proves to be such, first _becomes_ a product in consumption. Consumption gives the product the finishing touch by annihilating it, since a product is the [result] of production not only as the material embodiment of activity, but also as a mere object for the active subject.

In the second place, consumption produces production by creating the necessity for new production, i. e. by providing the ideal, inward, impelling cause which constitutes the prerequisite of production. Consumption furnishes the impulse for production as well as its object, which plays in production the part of its guiding aim. It is clear that while production furnishes the material object of consumption, consumption provides the ideal object of production, as its image, its want, its impulse and its purpose. It furnishes the object of production in its subjective form. No wants, no production. But consumption reproduces the want.

In its turn, production:

First, furnishes consumption[158] with its material, its object. Consumption without an object is no consumption, hence production works in this direction by producing consumption.

Second. But it is not only the object that production provides for consumption. It gives consumption its definite outline, its character, its finish. Just as consumption gives the product its finishing touch as a product, production puts the finishing touch on consumption. For the object is not simply an object in general, but a definite object, which is consumed in a certain definite manner prescribed in its turn by production. Hunger is hunger; but the hunger that is satisfied with cooked meat eaten with fork and knife is a different kind of hunger from the one that devours raw meat with the aid of hands, nails, and teeth. Not only the object of consumption, but also the manner of consumption is produced by production; that is to say, consumption is created by production not only objectively, but also subjectively. Production thus creates the consumers.

Third. Production not only supplies the want with material, but supplies the material with a want. When consumption emerges from its first stage of natural crudeness and directness―and its continuation in that state would in itself be the result of a production still remaining in a state of natural crudeness―it is itself furthered by its object as a moving spring. The want of it which consumption experiences is created by its appreciation of the product. The object of art, as well as any other product, creates an artistic and beauty-enjoying public. Production thus produces not only an object for the individual, but also an individual for the object.

Production thus produces consumption: first, by furnishing the latter with material; second, by determining the manner of consumption; third, by creating in consumers a want for its products as objects of consumption. It thus produces the object, the manner, and the moving spring of consumption. In the same manner, consumption [creates] the _disposition_ of the producer by setting (?) him up as an aim and by stimulating wants. The identity of consumption and production thus appears to be a three fold one.

First, direct identity: production is consumption; consumption is production. Consumptive production. Productive consumption. Economists call both productive consumption, but make one distinction by calling the former reproduction, and the latter productive consumption. All inquiries into the former deal with productive and unproductive labor; those into the latter treat of productive and unproductive consumption.

Second. Each appears as the means of the other and as being brought about by the other, which is expressed as their mutual interdependence; a relation, by virtue of which they appear as mutually connected and indispensable, yet remaining outside of each other.

Production creates the material as the outward object of consumption; consumption creates the want as the inward object, the purpose of production. Without production, no consumption; without consumption, no production; this maxim figures (?) in political economy in many forms.

Third. Production is not only directly consumption and consumption directly production; nor is production merely a means of consumption and consumption the purpose of production. In other words, not only does each furnish the other with its object; production, the material object of consumption; consumption, the ideal object of production. On the contrary, either one is not only directly the other, not (?) only a means of furthering the other, but while it is taking place, creates the other as such for itself (?). Consumption completes the act of production by giving the finishing touch to the product as such, by destroying the latter, by breaking up its independent material form; by bringing to a state of readiness, through the necessity of repetition, the disposition to produce developed in the first act of production; that is to say, it is not only the concluding act through which the product becomes a product, but also [the one] through which the producer becomes a producer. On the other hand, production produces consumption, by determining the manner of consumption, and further, by creating the incentive for consumption, the very ability to consume, in the form of want. This latter identity mentioned under point 3, is much discussed in political economy in connection with the treatment of the relations of demand and supply, of objects and wants, of natural wants and those created by society.

Hence, it is the simplest matter with a Hegelian to treat production and consumption as identical. And this has been done not only by socialist writers of fiction but even by economists, e. g. Say; the latter maintained that if we consider a nation as a whole, or mankind _in abstracto_―her production is at the same time her consumption. Storch pointed out Say’s error by calling attention to the fact that a nation does not entirely consume her product, but also creates means of production, fixed capital, etc. To consider society as a single individual is moreover a false mode of speculative reasoning. With an individual, production and consumption appear as different aspects of one act. The important point to be emphasized here is that if production and consumption be considered as activities of one individual or of separate individuals, they appear at any rate as aspects of one process in which production forms the actual starting point and is, therefore, the predominating factor. Consumption, as a natural necessity, as a want, constitutes an internal factor of productive activity, but the latter is the starting point of realization and, therefore, its predominating factor, the act into which the entire process resolves itself in the end. The individual produces a certain article and turns again into himself by consuming it; but he returns as a productive and a self-reproducing individual. Consumption thus appears as a factor of production.

In society, however, the relation of the producer to his product, as soon as it is completed, is an outward one, and the return of the product to the individual depends on his relations to other individuals. He does not take immediate possession of it. Nor does the direct appropriation of the product constitute his purpose, when he produces in society. Between the producer and the product distribution steps in, which determines by social laws his share in the world of products; that is to say, distribution steps in between production and consumption.

Does distribution form an independent sphere standing side by side with and outside of production?

_b. Production and Distribution._ In perusing the common treatises on economics one can not help being struck with the fact that everything is treated there twice; e. g., under distribution, there figure rent, wages, interest, and profit; while under production we find land, labor, and capital as agents of production. As regards capital, it is at once clear that it is counted twice: first, as an agent of production; second, as a source of income; as determining factors and definite forms of distribution, interest and profit figure as such also in production, since they are forms, in which capital increases and grows, and are consequently factors of its own production. Interest and profit, as forms of distribution, imply the existence of capital as an agent of production. They are forms of distribution which have for their prerequisite capital as an agent of production. They are also forms of reproduction of capital.

In the same manner, wages is wage-labor when considered under another head; the definite character which labor has in one case as an agent of production, appears in the other as a form of distribution. If labor were not fixed as wage-labor, its manner of participation in distribution[159] would not appear as wages, as is the case e. g. under slavery. Finally, rent―to take at once the most developed form of distribution―by means of which landed property receives its share of the products, implies the existence of large landed property (properly speaking, agriculture on a large scale) as an agent of production, and not simply land, no more than wages represents simply labor. The relations and methods of distribution appear, therefore, merely as the reverse sides of the agents of production. An individual who participates in production as a wage laborer, receives his share of the products, i. e. of the results of production, in the form of wages. The subdivisions and organization of distribution are determined by the subdivisions and organization of production. Distribution is itself a product of production, not only in so far as the material goods are concerned, since only the results of production can be distributed; but also as regards its form, since the definite manner of participation in production determines the particular form of distribution, the form under which participation in distribution takes place. It is quite an illusion to place land under production, rent under distribution, etc.

Economists, like Ricardo, who are accused above all of having paid exclusive attention to production, define distribution, therefore, as the exclusive subject of political economy, because they instinctively[160] regard the forms of distribution as the clearest forms in which the agents of production find expression in a given society.

To the single individual distribution naturally appears as a law established by society determining his position in the sphere of production, within which he produces, and thus antedating production. At the outset the individual has no capital, no landed property. From his birth he is assigned to wage-labor by the social process of distribution. But this very condition of being assigned to wage-labor is the result of the existence of capital and landed property as independent agents of production.

From the point of view of society as a whole, distribution seems to antedate and to determine production in another way as well, as a pre-economic fact, so to say. A conquering people divides the land among the conquerors establishing thereby a certain division and form of landed property and determining the character of production; or, it turns the conquered people into slaves and thus makes slave labor the basis of production. Or, a nation, by revolution, breaks up large estates into small parcels of land and by this new distribution imparts to production a new character. Or, legislation perpetuates land ownership in large families or distributes labor as an hereditary privilege and thus fixes it in castes.

In all of these cases, and they are all historic, it is not distribution that seems to be organized and determined by production, but on the contrary, production by distribution.

In the most shallow conception of distribution, the latter appears as a distribution of products and to that extent as further removed from and quasi-independent of production. But before distribution means distribution of products, it is first, a distribution of the means of production, and second, what is practically another wording of the same fact, it is a distribution of the members of society among the various kinds of production (the subjection of individuals to certain conditions of production). The distribution of products is manifestly a result of this distribution, which is bound up with the process of production and determines the very organization of the latter. To treat of production apart from the distribution which is comprised in it, is plainly an idle abstraction. Conversely, we know the character of the distribution of products the moment we are given the nature of that other distribution which forms originally a factor of production. Ricardo, who was concerned with the analysis of production as it is organized in modern society and who was the economist of production _par excellence_, for that very reason declares _not_ production but distribution as the subject proper of modern economics. We have here another evidence of the insipidity of the economists who treat production as an eternal truth, and banish history to the domain of distribution.

What relation to production this distribution, which has a determining influence on production itself, assumes, is plainly a question which falls within the province of production. Should it be maintained that at least to the extent that production depends on a certain distribution of the instruments of production, distribution in that sense precedes production and constitutes its prerequisite; it may be replied that production has in fact its prerequisite conditions, which form factors of it. These may appear at first to have a natural origin. By the very process of production they are changed from natural to historical, and if they appear during one period as a natural prerequisite of production, they formed at other periods its historical result. Within the sphere of production itself they are undergoing a constant change. E. g., the application of machinery produces a change in the distribution of the instruments of production as well as in that of products, and modern land ownership on a large scale is as much the result of modern trade and modern industry, as that of the application of the latter to agriculture.

All of these questions resolve themselves in the last instance to this: How do general historical conditions affect production and what part does it play at all in the course of history? It is evident that this question can be taken up only in connection with the discussion and analysis of production.

Yet in the trivial form in which these questions are raised above, they can be answered just as briefly. In the case of all conquests three ways lie open. The conquering people may impose its own methods of production upon the conquered (e. g. the English in Ireland in the nineteenth century, partly also in India); or, it may allow everything to remain as it was contenting itself with tribute (e. g. the Turks and the Romans); or, the two systems by mutually modifying each other may result in something new, a synthesis (which partly resulted from the Germanic conquests). In all of these conquests the method of production, be it of the conquerors, the conquered, or the one resulting from a combination of both, determines the nature of the new distribution which comes into play. Although the latter appears now as the prerequisite condition of the new period of production, it is in itself but a product of production, not of production belonging to history in general, but of production relating to a definite historical period. The Mongols with their devastations in Russia e. g. acted in accordance with their system of production, for which sufficient pastures on large uninhabited stretches of country are the main prerequisite. The Germanic barbarians, with whom agriculture carried on with the aid of serfs was the traditional system of production and who were accustomed to lonely life in the country, could introduce the same conditions in the Roman provinces so much easier since the concentration of landed property which had taken place there, died away completely with the older systems of agriculture. There is a prevalent tradition that in certain periods robbery constituted the only source of living. But in order to be able to plunder, there must be something to plunder, i. e. there must be production.[161] And even the method of plunder is determined by the method of production. A stockjobbing nation[162] e. g. can not be robbed in the same manner as a nation of shepherds.