IV The Marxian System
I. The Materialist Conception of History
As a guide to his studies from 1843-4 onwards, Marx used the conception of history, or method of investigation, which—in contradistinction to the idealist conception of history of Hegel—was named materialistic. As its nature is dialectic—as it seeks to conceive in thought the evolving antagonisms of the social process—it is, like Hegel’s dialectic, a conception of history and a method of investigation at the same time. Nowhere did Marx work out his method of investigation in a special and comprehensive form; the elements of it are scattered throughout his writings, particularly in the Communist Manifesto and in the “Poverty of Philosophy,” and serve the purpose of polemics or demonstration. Only in the preface to his book, “On the Critique of Political Economy” (1859) did he devote two pages to a sketch of his conception of history, but in phraseology which is not always clear, sequential, or free from objection. It was the intention of Marx to write a work on Logic, where he would certainly have formulated clearly his materialistic dialectic. As, however, his fundamental ideas on this subject are available, we are able to extract the essentials of his position.
A glance over human history suffices to teach us that from age to age man has held to be true or false various opinions on rights, customs, religion, the State, philosophy, land-holding, trade, industry, etc., that he has had various economic arrangements, and forms of the State and of society, and that he has gone through an endless series of struggles and wars and migrations. How has this complicated variety of human thought and action come about? Marx raises that question, which, so far as he is concerned, does not aim in the first place at the discovery of the origin of thought, of rights, of religion, of society, of trade, etc.; these he takes to be historically given. He is rather concerned to find out the causes, the impulses, or the springs which produce the changes and revolutions of the essentials and forms of the mental and social phenomena, or which create the tendencies thereto. In a sentence: What interested Marx here was not the origin, but the development and change of things—he is searching for the dynamic law of history.
Marx answered: The prime motive power of human society, which is responsible for the changes of human consciousness and thought, or which causes the various social institutions and conflicts to arise, does not originate, in the first place, from thought, from the Idea, from the world-reason or the world-spirit, but from the material conditions of life. The basis of human history is therefore material. The material conditions of life—that is, the manner in which men as social beings, with the aid of environing nature, and of their own in-dwelling physical and intellectual qualities, shape their material life, provide for their sustenance, and produce, distribute and exchange the necessary goods for the satisfaction of their needs.
Of all categories of material conditions of existence, the most important is production of the necessary means of life. And this is determined by the nature of the productive forces. These are of two kinds: inanimate and personal. The inanimate productive forces are: soil, water, climate, raw materials, tools and machines. The personal productive forces are: the labourers, the inventors, discoverers, engineers, and finally, the qualities of the race—the inherited capacities of specific groups of men, which facilitate work.
The foremost place among the productive forces belongs to the manual and mental labourers; they are the real creators of exchange-value in capitalist society. The next place of importance is taken by modern technology, which is an eminently revolutionising force in society.—(“Capital” (German), Vol. I., Chapters 1, 12, 13 and 14, “Poverty of Philosophy” (German edition, 1885, pp. 100-101.))
So much for the conception “Productive Forces,” which plays an important part with Marx. We come now to the other equally important notion, “Conditions of production.” By this phrase Marx understands the legal and State forms, ordinances and laws, as well as the grouping of social classes and sections: thus, the social conditions which regulate property and determine the reciprocal human relations in which production is carried on. The conditions of production are the work of men in society. Just as men produce various material goods out of the materials and forces made available to them by Nature, so they create out of the reactions of the productive forces upon the mind definite social, political, and legal institutions, as well as systems of religion, morals, and philosophy.
“Men make their own history, but do not so spontaneously in conditions chosen by them, but on the contrary, in conditions which they have found ready to hand transmitted and given.”—(Marx, “The Eighteenth Brumaire,” I.)
That is to say, under the influence of productive work and its needs, men build their form of society, their State, their religion, their philosophy and science. The material production is the substructure or the groundwork, while the corresponding political, religious, and philosophical systems are the superstructure. And in such a manner that the superstructure corresponds to the foundation, lends it strength, and promotes its development.
The foundation is material, and the superstructure is the psychical reflex and effect.
In broad outlines this conception may be illustrated somewhat as follows:
Primitive human groups lived under Communism and were organised according to blood relationship. Their deities have the characteristics of their natural environment, and reflect the physical effects of this environment upon the primitive mental life of the “savage”; their religion, their morality, and their laws promote the communal life and the tribal discipline. Feudal society is based on the possession of land by the nobles and on the industrial labour of the corporations of the towns. The inherited religious ideas are soon transformed in accordance with the dominant interests of these historical periods (primitive Christianity became a State religion); all religious, ethical, and philosophical ideas antagonistic to these interests were fought and persecuted. The middle-class society, which is based on personal property, is endeavouring to sweep away all vestiges of communal and corporation rights, to set free the individual, to mobilise labour and property, to abolish Feudalism and the old Church and monasterial institutions, and to put in their place the individual relation between man and God, or the personal conscience (the Reformation), introducing individual rights as well; it struggles against the independent sovereignty of the feudal domains, and labours for a united national territory, which will afford greater scope to trade and commerce; it supports Absolutism, so long as the latter is in conflict with the feudal lords; and when, afterwards, Absolutism is a hindrance to the development of middle-class society, this also is fought and a constitutional monarchy or a republic demanded. And all this takes place not because certain human intelligences, by reason of more intense thought, or enlightenment, or the call of a supernatural power, are primarily at work, but as a consequence of the influence of the material basis, of the economic foundation of society, upon the mind, which translates and transforms these external realities into religious, juridical, and philosophic conceptions:
“It is not the consciousness of men which determines their existence, but, on the contrary, their social existence determines their consciousness.”—(Marx, Preface to “Critique of Political Economy.”)
Man, even the most heroic, is not the sovereign maker and law-giver of social life, but its executive; he only follows out the tendencies and currents set up by the material foundation of society. Nevertheless, a great deal depends upon the executive officials. If they possess comprehensive knowledge, energetic natures, and outstanding capacities, they are able, within the boundaries drawn for them, to accomplish great things, and to accelerate the development.
“Up to the present the philosophers have but interpreted the world; it is, however, necessary to change it.”—(Marx, “Theses to Feuerbach.”)
We have referred in various places to interests. We are not to understand by this personal, but general social or class interests. Marx is not of the opinion that everybody acts in accordance with his personal welfare. This is not Marxian doctrine, but that of the middle-class moral philosophers, like Helvetius (1715-1771) and Jeremy Bentham (1748-1832), who regarded pleasure and pain of the individual as the measure and motive of his actions and conduct. Marx is rather of the opinion that men often, in the most important events of their lives, act contrary to their personal interests, as in their feelings and thoughts they identify themselves with that which they hold to be the interests of the community or of their class. According to Marx, individual interest generally plays a slight part in history. He is preoccupied with the collective interest of social production. Only the latter does he hold to be determining in the formation of the intellectual superstructure.
Up till now we have only spoken of various forms of production and society, and their corresponding mental systems. But we do not yet know why and how one form of production and society becomes obsolete and gives place to another, that is, how and why revolutionary changes are brought about. Or in other words: we have hitherto considered the statics of society; we will now look at its dynamics.
The revolutionary changes in society depend on two groups of phenomena, which, although casually connected with each other, yet work differently. One of these groups of phenomena is technical, and consists in changes in the productive forces. The other group, which is the effect of the first, is of a personal nature, and consists in struggles between the social classes. Let us consider the first group of causes.
As the productive forces expand, through greater skill on the part of the worker, through discoveries of new raw material and markets, through the invention of new labour processes, tools and machines, and through the better organisation of trade and exchange, so that the material basis or the economic foundation of society is altered, then the old conditions of production cease to promote the interests of production. For the conditions of production: the former social classes, the former laws, State institutions, and intellectual systems were adapted to a state of the productive forces which is either in process of disappearing, or no longer exists. The social and intellectual superstructure no longer corresponds to the economic foundation. The productive forces and the conditions of production come into conflict with each other.
This conflict between the new realty and the old form, this conflict between new causes and the obsolete effects of bygone causes, begins gradually to influence the thoughts of men. Men commence to feel that they are confronted with a new external world, and that a new era has been opened.
Social divisions acquire a new significance: classes and sections which were formerly despised gain in social and economic power; classes which were formerly honoured decline. While this transformation of the social foundation is proceeding, the old religious, legal, philosophical, and political systems cling to their inherited positions, and insist on remaining, although they are obsolete and can no longer satisfy mental needs. For human thought is conservative: it follows external events slowly, just as our eye perceives the sun at a point which the sun has in reality already passed, as the rays require several minutes of time in order to strike our optic nerves. We may recall Hegel’s fine metaphor: “The Owl of Minerva begins its flight only when twilight gathers.” However late, it does begin. Great thinkers gradually arise, who explain the new situation, and create new ideas and trains of thought which correspond to the new situation. The human consciousness gives birth to anxious doubts and questionings, and then new truths; leading to differences of opinion, disputes, strifes, schisms, class struggles, and revolutions.
In the next chapter we will consider more closely the class struggle between Labour and Capital. Meanwhile, we will look at the class struggle generally.
In primitive societies, where private property is yet unknown, or still undeveloped, there are no class distinctions, no class domination, and no class antagonisms. The chief, the medicine man, and the judge regulate or supervise the observance of the customary usages, religious ceremonies, and social arrangements. But as soon as the old order is dissolved, and private property develops, in consequence of trade with other peoples or through wars, there arise classes of those who possess and those who do not. The possessing class carries on the Government, makes laws, and creates institutions, which chiefly serve the end of protecting the interests of the possessing and ruling classes. The intellectual structure of the class society likewise corresponds to the interests of those who possess and rule. So long as these interests promote the common good in some measure, so long as the old forms of production and the old conditions of production are largely in harmony with each other, a certain truce prevails between the classes. But should there set in the above-mentioned opposition between the productive forces and the conditions of production, the latter will cease to satisfy the oppressed classes, and class conflicts will arise, which will either result in legal compromises (reforms) or will end in the overthrow of the society concerned, or will lead to a new set of conditions. Ancient history (Hebrew, Greek, Roman) is full of these social struggles; all the great reform laws of these peoples were attempts to establish social peace, but the rich and the poor, the Patricians and the Plebeians, the Slaves and Freemen, continued their struggles until the downfall of the old world, which has bequeathed to us great intellectual treasures as the fruit of these struggles. In the Middle Ages social struggles between the feudal lords and the traders, between nobles and peasants, were kindled. In more recent times the middle classes fought Autocracy and Squirearchy, and at length the proletariat was pitted against the bourgeoisie—class struggles which led to rebellions and revolutions, and powerfully influenced the intellectual life.
From these historical antagonisms and struggles arose the intellectual and political antagonisms, personified by the leaders of the social groups and classes, of which world-history relates: opposing religious and philosophical systems: Brahma and Buddha, Baal and Jahveh, National God and Universal God, Heathendom and Christendom, Catholicism and Protestantism, Materialism and Idealism, Realism and Nominalism. However abstract or metaphysical, however remote from actual life and material production they may appear to be, nevertheless, in the last resort they are to be traced back through many intermediate stages to changes in the economic foundation of the society in question, to the contradiction between this foundation and the conditions of production, as well as to the great struggles between conflicting interests which spring therefrom. The ethical, political, and politico-economic systems which strive with each other for mastery, as well as national and world wars, are separated from the real basis of society by a progressively smaller number of intermediate stages: the questions of idealist or utilitarian ethics, monarchy or republic, oligarchy or democracy, protection or free trade, State regulation or free scope for the economic forces, Socialism or private enterprise, etc., however lofty and humanitarian may be the arguments and ideal motives which their champions may adduce, are connected with the material foundation and the conditions of production which have come into conflict with it.
Marx and Engels have set forth this conception in the Communist Manifesto, in popular form, as follows:
“Does it require deep intuition to comprehend that man’s ideas, views, and conceptions, in one word, man’s consciousness, changes with every change in the conditions of his material existence, in his social relations and in his social life?
“What else does the history of ideas prove than that intellectual production changes in character in proportion as material production is changed. The ruling ideas of each age have ever been the ideas of its ruling class.
“When people speak of ideas that revolutionise society they do but express the fact that within the old society the elements of a new one have been created, and that the dissolution of the old ideas keeps even pace with the dissolution of the old conditions of existence.
“When the ancient world was in its last throes the ancient religions were overcome by Christianity. When Christian ideas succumbed in the eighteenth century to rationalist ideas, feudal society fought its death-battle with the then revolutionary bourgeoisie. The ideas of religious liberty and freedom of conscience merely gave expression to the sway of free competition within the domain of knowledge.”
Now one step farther. When the conditions of production, the social divisions into classes, and the laws of property become fetters to the productive forces, when the conflict of interests condense themselves into class struggles, then comes a period of social revolution.
“With the change of the economic foundation the entire immense superstructure is more or less rapidly transformed. In considering such transformations the distinction should always be made between the material transformation of the economic conditions of production which can be determined with the precision of natural science, and the legal, political, religious, æsthetic, or philosophic—in short, ideological forms in which men become conscious of this conflict and fight it out. Just as our opinion of an individual is not based on what he thinks of himself, so we are not able to judge of such a period of transformation by its own consciousness; on the contrary, this consciousness must rather be explained from the contradictions of material life, from the existing conflict between the social forces of production and the conditions of production.”—(Preface to “Critique of Political Economy.”)
The revolutionary period only closes when the social order that had become full of contradictions liberates the productive forces and strikes off their fetters, and creates new conditions of production which correspond to them. The old society, which is doomed to disappear, evolves the new conditions of existence before it sinks into oblivion. The men who assist the progress of the new society accordingly occupy themselves with problems which they are able to solve, as the means thereto are given in the material development. Such problems are set before them because, regarded from the theoretical standpoint, they are the mental reflex of the contradictions and revolutionary tendencies within society.
Accordingly, the essence of the historical development of human society has been so far the progressive dialectical unfolding and perfection of the productive forces.
“In broad outlines,” says Marx, “we can designate the Asiatic, the ancient, the feudal, and the modern bourgeois methods of production, as so many epochs in the progress of the economic formation of society. The bourgeois relations of production are the last antagonistic form of the social process of production—antagonistic not in the sense of individual antagonism, but of one arising from conditions surrounding the life of individuals in society; at the same time the productive forces developing in the womb of bourgeois society create the material conditions for the solution of that antagonism. This social formation constitutes, therefore, the closing chapter of the prehistoric stage of human society.”
Prehistoric stage of human society! What significant words! The capitalist economic order is the last phase of this stage, which is written in streams of blood and tears of the dispossessed and exploited, and to which is given the task of developing the productive forces and liberating men from the material fetters, so that they may enter into a life of mental culture. The materialist conception of history, unethical and unidealist like all natural science, opens up wide and elevating prospects. During thousands of years man struggled on the physical plane to obtain release from the animal kingdom, and was subjected to the discipline of unfeeling nature. After he had emerged from the animal kingdom, man laboured for thousands of years to lay the foundation of human society, a process which was performed under the hunger whip of stern taskmasters, and which powerfully stimulated the intellectual capacities of men, but only disclosed the ideal of justice and humanity as a remote and inaccessible star.
The materialist conception of history has shown itself to be a fruitful method of historical investigation. Some aspects of this idea were uttered both before and during Marx’s lifetime. The revolution in the positions of classes and the struggles which followed hard on the English industrial revolution (1760-1825), and everywhere attended the transition from an agrarian to an industrial State, were too palpable to be overlooked. It was Marx who fused these ideas, with the aid of the Hegelian dialectics made of them a method of investigation, and pressed them into the service of Socialism and historical research.
II. Classes, Class Struggles, and Class-Consciousness
One of the most important contributions of Marx to the understanding of historical processes is his conception of social classes and of class struggles. Although, prior to Marx, there were historians and politicians who pointed out the part played by social classes in politics and in social convulsions, it was Marx who first grasped this conception in its entire scope and significance, giving it precise form, and making it an essential part of political and social thought. He refers to the subject in the Communist Manifesto in the following terms:
“The Socialist and Communist systems properly so called, those of St. Simon, Fourier, Owen, and others, spring into existence in the early undeveloped period of the struggle between proletariat and bourgeoisie. The founders of these systems see, indeed, the class antagonisms, as well as the action of the decomposing elements in the prevailing form of society. But the proletariat, as yet in its infancy, offers to them the spectacle of a class without any historical initiative or any independent political movement.”
The classification of the various groups of society, or the division of human society into classes, is as logical a process, that is, a result attained by the operations of reason, as the division of animals, plants, and minerals into various classes. A specific group of social beings, which bear the stamp of common characteristics, is put in a certain class by social science. This classification cannot be made by purely empirical methods of immediate sensuous perceptions. It cannot be determined from the appearance of modern men, whether they are capitalists or workers. We must look for certain scientifically established features which determine the social classification of men. As we have just seen, Marx held economic facts to be fundamental, and he contended that the economic characteristics were valid for purposes of classification. In his view, the manner in which a specific human group obtained its sustenance was the chief characteristic. Men whose chief means of life are wages form the working class. Men whose most important source of livelihood is the ownership of capital (land, buildings, workshops, and raw material) form the capitalist class. It is of little moment that a worker owns a savings-bankbook, and draws interest or dividends from a co-operative society, or that a capitalist personally supervises his undertaking, or organises his business, so that his profits partly consist in wages of superintendence or salary. The outstanding feature is that the chief interest of the worker is concentrated on wages, whilst that of the capitalist is directed on property. It goes without saying that the social classes are not completely homogeneous. Like botanical and zoological classes, they may be divided into kinds and species; the working classes include well-paid hand and brain workers, as well as sweated sections; but all the subdivisions of the social classes possess the common outstanding quality of the same source of livelihood, which is either personal labour or the possession of capital. One class disposes only of labour-power, while the other class owns the means of production.
Between these two classes, says Marx, there are deep-seated, unbridgeable antagonisms, which lead to a class struggle. The antagonisms are primarily of an economic nature. The wage-earners, as the owners of labour power, are constrained to sell this as dear as possible, i.e., to obtain the highest possible wages, whereas the owners of capital endeavour to buy such labour-power as cheap as possible, i.e., to pay the least possible wages. This antagonism is indeed fundamental, but, at first sight, does not touch the intellectual sphere very deeply. On the surface, this antagonism is only one as between buyer and seller, but in reality the distinction is very great, as the seller of labour-power will quickly starve if he does not market his commodity. The owner of the means of production is therefore in a position to cause the seller of labour-power to starve, if the latter does not accept the conditions which the capitalist imposes. Ownership of capital reveals itself as a power that can oppress the owner of labour-power.
This antagonism leads to the formation of Trade Unions. It is also the prime cause of the class struggle, but mere trade unionism is but its incipient stage. It develops into a class struggle when the workers recognise that their condition of subjection is not a temporary state, but the result of the economic system of private capitalism, that the subjection will last so long as this economic system exists, and that the latter could be replaced by an economic order in which the means of production belong to all the members of society. The wage-workers only participate in the class struggle when they learn to think in a Socialist sense, when hostility to the existing social order develops out of the sporadic and unrelated wage struggle and actions of Trade Unions, and when the proletariat, as an organised class, turns from the preoccupations of the present to the tasks of the future, and strives to change the basis of society from private property to common property. The workers then become aware that there can be neither freedom nor equality for them in the existing society, and that their emancipation can only be attained through Socialism. The class struggle may, however, stop short at the recognition of these facts. The dialectical movement will be incomplete if the working class does not take its fate into its own hands, and is not convinced that it has the power to achieve its own emancipation, and therefore contents itself with small social reforms, or relies on noble-minded and benevolent men and heroic redeemers. This was actually the case in the beginnings of the Socialist movement, when the workers saw in Socialism the only way out, but were still too weak to take their fate into their own hands. This was the period which Marx called Utopian, when outstanding personalities spread Socialist ideas, and made Socialist plans and experiments to free the labouring masses. As these personalities knew the impotence of the masses, they turned to philanthropists and humane rulers, and sought to convince them that reason, justice, and the general welfare demanded that Socialism should be introduced, and poverty, misery, and their consequences abolished. This period of Utopian Socialism gave way before the further development of industry, the progress of machine technique, the centralisation and concentration of the means of production and exchange, which brought with it an increase in the number, strength, organisation, and class-consciousness of the working classes. It is the centralisation of the means of production and exchange, in particular, which renders it possible for the working class, by paralysing industry and power stations, to cause the whole of society to feel that living labour-power forms the soul of the economic life.
At the same time Socialist investigators appear, who not only show the reasonableness and justice of Socialism, but exhibit the proof that the new economic order of Socialism is being prepared in the womb of Capitalism, and that therefore the aspirations of the worker are in harmony with the course of social development.
In this wise, a science and an aspiring Socialist movement founded upon reality develops from Utopian Socialism, and, conscious of class, of power, and of aim, enters upon the decisive struggle with the capitalist economic order. The class struggle acts as a lever of social revolution.
The original antagonism of the worker and capitalist over wages and hours of labour becomes am impassionate struggle of two classes over the question of the maintenance or transformation of the social and economic system—one of which classes fights for the existing order of private property and the other for the coming Socialistic system. Great social class struggles inevitably become political struggles. The immediate object of the struggle is the possession of the power of the State, with the aid of which the capitalist class endeavours to maintain its position, whilst the working class aims at the conquest of the power of the State in order to accomplish its larger objects.
The following chapter will show the direction taken by the Labour movement. Here we will but briefly refer to the profound influence of Marx’s doctrine of the class struggle as exercised in political thought. Prior to Marx, political thought and the struggles of political parties seemed to revolve around ideas and great personalities. Idealogy and hero-worship were prevalent. Now, political thought, consciously or unconsciously, proceeds along class and economic lines. This is equally true of historical investigations. These new political and historical orientations are largely the result of Marx’s life-work.
Rigidly conceived and applied, the Marxian doctrine of the class-struggle may lead to ultra-revolutionary tactics of the Socialist and Labour movement, to the system of Workers’ Councils, and Proletarian Dictatorship. If the emerging class and its struggle constitutes the lever of social revolution and the impulse of the dialectical social process, the Dictatorship of the Proletariat is justified, and in any case, democracy, which includes both the capitalist and working class, cannot be the State form during the transition period from private property to Socialism. Considered from the economic standpoint, political democracy is generally impossible, or only sham democracy so long as economic inequality exists. The Communist Manifesto does not contain a single political democratic reform. The conclusion can be drawn from Marx’s idea, as a whole, that in his estimation, the class stood higher than so-called democracy. This is one of the sources of Bolshevism.
III. The Role of the Labour Movement and the Proletarian Dictatorship
The Labour Party is the political expression of the whole Trade Union movement so far as the latter formulates national demands, directed towards the State and society generally. The Labour Party will function the more effectively, and be able to accomplish its allotted task, as its foundation—the Trade Union movement—becomes established and strengthened, and the more comprehensive will be its effects. The Trade Unions are not merely to be satisfied with the work of the present, but are to become the focus and centre of gravity of the proletarian aspirations which arise out of the social transformation process, and are to work for the abolition of Capitalism. The most effective lever for the achievement of this object is the conquest of political power. With its aid the proletariat can consciously carry out the transformation of a Capitalist into a Communist society. To this transformation, there also corresponds a political transition period, the state of which can be nothing else than a revolutionary Dictatorship of the Proletariat.—(Marx, Letter to the German Social Democracy, 1875, on their Gotha Programme.)
Marx considered himself to be the real author of the idea of the Dictatorship of the Proletariat. In a letter written by him, in 1852, to his American friend, Weydemeyer, he declares:
“As far as I am concerned, I can’t claim to have discovered the existence of classes in modern society or their strife against one another. Middle-class historians long ago described the evolution of the class struggles, and political economists showed the economic physiology of the classes. I have added as a new contribution the following propositions: (1) that the existence of classes is bound up with certain phases of material production; (2) that the class struggle leads necessarily to the Dictatorship of the Proletariat; (3) that this dictatorship is but the transition to the abolition of all classes and to the creation of a society of free and equal.”—(“Neue Zeit,” Vol. XXV., second part, p. 164.)
With the exception of the year 1870, Marx remained true to his doctrine of Proletarian Dictatorship: he thought in 1875 as he did in 1847, when he sketched the groundwork of the Proletarian Dictatorship in the Communist Manifesto:
“The first step in the revolution by the working class is to raise the proletariat to the position of ruling class, to win the battle of democracy.
“The proletariat will use its political supremacy to wrest, by degrees, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total of productive forces as rapidly as possible.
“Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionising the mode of production.”
But suppose that it is not the revolutionary working class which first attains to power in the revolution, but the democracy of the lower middle class and the social reformists. In this case, Marx gives the following advice: “Separate from it, and fight it.” In the address to the League of Communists in 1850 he said:
“It may be taken for granted that in the bloody conflicts that are coming, as in the case of previous ones, the courage, resolution, and sacrifice of the workers will be the chief factor in the attainment of victory. As hitherto, so in this struggle, the mass of the lower middle class will maintain an attitude of delay, irresolution, and inactivity as long as possible, in order that, as soon as victory is assured, to arrogate it to themselves and call on the workers to remain quiet, return to work, avoid so-called excesses, and to exclude the proletariat from the fruits of victory. It is not in the power of the workers to hinder the lower middle classes from doing this, but it is within their power to render their success over the armed proletariat very difficult, to dictate to them such conditions that from the beginning the rule of the middle-class democrats is doomed to failure, and its later substitution by the rule of the proletariat is considerably facilitated.
“The workers must, during the conflict and immediately afterwards, as much as ever possible, oppose the compromises of the middle class, and compel the democrats to execute their present terrorist threats. They must aim at preventing the subsiding of the revolutionary excitement immediately after the victory. On the contrary, they must endeavour to maintain it as long as possible.
“Far from opposing so-called excesses, and making examples of hated individuals or public buildings to which hateful remembrances are attached, by sacrificing them to the popular rage, such examples must not only be tolerated, but their direction must even be taken in hand. During the struggle and after the struggle, the workers must seize every opportunity to present their own demands side by side with those of the middle-class democrats. The workers must demand guarantees as soon as the middle-class democrats propose to take the government in hand. If necessary, these guarantees must be exacted, and the new rulers must be compelled to make every possible promise and concession, which is the surest way to compromise them. The workers must size up the conditions in a cool and dispassionate fashion, and manifest open distrust of the new Government, in order to quench, as much as possible, the ardour for the new order of things and the elation which follows every successful street fight. Against the new official Government, they must set up a revolutionary workers’ government, either in the form of local committees, communal councils, or workers’ clubs or workers’ committees, so that the democratic middle-class government not only immediately loses its support amongst the working classes, but from the commencement finds itself supervised and threatened by a jurisdiction, behind which stands the entire mass of the working class. In a word: from the first moment of victory the workers must no longer level their distrust against the defeated reactionary party, but direct it against their former allies, who would seek to exploit the common victory for their own ends. The workers must be armed and organised to enable them to threaten energetic opposition to this party, whose treason to the workers will commence in the first hour of victory. The arming of the whole proletariat with rifles and ammunition must be carried out at once, and steps taken to prevent the reviving of the old militia, which would be directed against the workers. But should this not be successful, the workers must endeavour to organise themselves as an independent guard, choosing their own chief and general staff, with orders to support not the State power, but the councils formed by the workers. Where workers are employed in State service, they must arm and organise in a special corps, with a chief chosen by themselves, or form a part of the Proletarian Guard. Under no pretext must they give up their arms and equipment, and any attempt at disarmament must be forcibly resisted. Destruction of the influence of the middle-class democrats over the workers, immediate independent and armed organisation of the workers, and the imposition of the most irksome and compromising conditions possible upon the rule of the bourgeois democracy, which is for the time unavoidable.... We have noted that the Democrats come to power in the next phase of the movement, and how they will be obliged to impose measures of a more or less Socialistic nature. It will be asked what contrary measures should be proposed by the workers. Naturally, in the beginning of the movement the workers cannot propose actual Communist measures, but they can (1) compel the Democrats to attack the old social order from as many sides as possible, disturb its regular course, and compromise themselves, and concentrate in the hands of the State as much as possible of the productive forces, means of transport, factories, railways, etc. (2) When the Democrats propose measures which are not revolutionary, but merely reformist, the workers must press them to the point of turning such measures into direct attacks on private property; thus, for example, if the small middle class propose to purchase the railways and factories the workers must demand that such railways and factories, being the property of the reactionaries, shall be simply confiscated by the State, without compensation. If the Democrats propose a proportional tax, the workers must demand a progressive tax; if the Democrats themselves declare for a moderate progressive tax, the workers must insist on a tax so steeply graduated as to cause the collapse of large fortunes; if the Democrats demand the regulation of the State debt, the workers must demand State bankruptcy. Thus the demands of the workers must everywhere be directed against the concessions and measures of the Democrats.... Further, the Democrats will either work directly for a Federal Republic, or, at least, if they cannot avoid the Republic one and indivisible, will seek to paralyse it by granting the greatest possible independence to the municipalities and provinces. The workers must set themselves against this plan, not only to secure the one and indivisible German Republic, but to concentrate as much power as possible in the hands of the State. They need not be misled by democratic platitudes about the freedom of the Communes, self-determination, etc. Their battle-cry must be ‘the revolution in permanence.’”
This Address of Marx, written in 1850, appears to be the guide of the Bolsheviks and Spartacists.
The working classes may, however, not expect their immediate emancipation from their political victory.
“In order to work out their own emancipation, and with it that higher form of life which present-day society inevitably opposes, the protracted struggle must pass through a whole series of historical processes, in the course of which men and circumstances alike will be changed. They have no ideal to realise; they have only to set free the elements of the new society, which have already developed in the womb of the collapsing bourgeois society.”—(Marx, “Civil War in France.”)
The means of production will gradually be socialised, production will be placed on a co-operative basis, education will be combined with productive work, in order to transform the members of society into producers. So long as the transition period lasts the Communist maxim, “From each according to his capacity, to each according to his needs,” cannot become operative. For this period is in every respect—economic, social, and intellectual—still tainted with the marks of the old society, and “rights cannot transcend the economic structure of society, and the cultural development which it determines.”—(Criticism of Gotha Program.) To each will be given according to his deeds.
“Accordingly the individual producer will receive back what he gives to society, after deductions for government, education, and other social charges. He will give society his individual quota of labour. For example: the social working day consists in the sum total of individual working days; the individual labour time of the individual producer is the part of the social working day which he contributes; his share thereof. He will receive from society a certificate that he has performed so much work (after deducting his work for social funds), and with this certificate he will draw from the social provision of articles of consumption as much as a similar quantity of labour costs. The same quantity of labour as he will give to society in one form he will receive back in another.... The right of producers will be proportionate to the work they will perform: the equality will consist in the application of the same measure: labour.”
Because performances will vary in accordance with unequal gifts and degrees of diligence, an unequal distribution will actually take place during the transition period. Only in a fully developed Communistic society, after the distinction between intellectual and physical labour has disappeared, when productive activity has become a first need of life, when the all-round development of the individual and the productive forces has been achieved, and all the springs of co-operative riches flow abundantly; only then can the narrow middle-class idea of rights be improved on, and the Communist principle of equality be put into operation.
Marx, who reasoned on strictly economic lines, and placed the emancipation of the working class as the highest goal, to which all other political and economic movements are subordinated, did not mistake the economic, political, and historical rôle of the nation: this is shown by the Communist Manifesto, where the creation of the national State by the bourgeoisie is indicated. He mocked at the young enthusiasts who thought they could brush aside the nation as an obsolete prejudice, but, in spite of this, he considerably under-estimated the unifying force of national feeling, considered from a biological and cultural point of view. He divided civilised mankind into antagonistic classes, and assumed that the economic dividing lines would prove to be more effective than national and political boundary lines. He was, therefore, through and through international. Marx demanded that the national Labour Parties should act internationally as soon as there was a possibility of the collapse of the capitalist domination. He reproached the original Gotha program with the fact that “it borrowed from middle-class Leagues of Peace and Freedom the phrase of the international brotherhood of peoples, whereas it was necessary to promote the international combination of the working classes in a common struggle against the ruling classes and their Governments.” Marx had no confidence in the pacifism of the bourgeoisie.
IV. Outlines of the Economic Doctrines
1. Capital.
As we already know, Marx became a Socialist in the year 1843. As a believer in dialectics, he knew that Socialism can only be understood by a knowledge of the movement operating in middle-class society and its developing forces. His investigations in 1843-4 led to the result that political economy forms the basis of bourgeois society. Henceforth political economy became the chief department of his studies. His comprehensive studies of French and English economists, especially Sismondi and Ricardo, and the anti-capitalist literature of England of the years 1820-40, which were connected with the Ricardian theory of value, furnished him with a wealth of suggestions and materials for the criticism of political economy, for the source and origin and development and decline of capitalism, written from the standpoint of the working class and the coming Socialistic society. Such a work is “Capital.” It consists of three volumes. Only the first volume (1867) was carried through the press by Marx himself. The other two volumes he only sketched, and they were completed and published by Engels after Marx’s death.
The first volume deals with the origin and tendencies of large industrial capital, with the immediate and simple process of commodity production, so far as it concerns the relations between employer and worker, the exploitation of the proletariat, wages and labour time, and the influence of modern technique on the condition of the worker. We see in the first volume the effect of the factory system in creating capital. Its chief figure is the producing, suffering, rebellious working class. In the second volume, the employer appears on the market, sells his commodities, and sets the wheels of production again in motion, so that commodities will continue to be produced. In the third volume, the realisation process of the undertakings of the capitalist class, or the movement of capital as a whole is exhibited: cost of production, cost price, total gains and their division into profit, interest and ground rent. The first volume presents the greatest difficulties. The tremendous efforts of the author to produce a masterpiece unnecessarily refined and sublimated and overloaded with learning the doctrines of value and surplus value until they attained the level of a philosophy, an example of Hegelian logic. He played with his subject like an intellectual athlete. That Marx could handle complicated economic questions in a clear, vigorous manner is shown by the third volume, which is written just as it came out of the author’s head, and without the apparatus of learning subsequently erected, without the crutches of notes and polemico-philosophical excursions.
To understand “Capital” it is necessary to bear in mind that (1) Marx regarded the scientifically discovered principles as the real inner being of things, practice he regarded as the superficial appearance of things, capable of being apprehended empirically; for example, Value is the theoretical expression, Price the empirical; Surplus Value is the theoretical, and Profit the empirical expression; the appearances apprehended by experience (Price and Profit) deviate indeed from theory, but without the theory they cannot be understood; (2) he looked at the capitalist economic system as being essentially free from external hindrances and disturbances, free from invasions both by the State and the proletariat: the Labour struggles of factory protection laws of which Marx speaks in “Capital” serve rather to perfect the productive forces than to restrict the exploiting proclivities of sovereign capital.
2. Value.
The life and motion of capitalistic society appears as an infinite net of exchange operations, formed out of numerous entwined meshes.
Through the medium of money, men continually exchange the most varied commodities and services. A ceaseless buying and selling, an uninterrupted series of exchanges of things, and labour power—this constitutes the essential part of human relations in capitalistic society. An economic map of these relations, graphically displayed, would not be less confusing than an astronomical map which exhibited the manifold and intersected orbits of the heavenly bodies. And yet there must be some rule or law which operates in this seeming medley of movements; for men do not work or exchange their goods by hazard, like savages who give their entire lumps of gold or rough diamonds for a necklace of glass pearls. The English and French economists in the seventeenth, eighteenth, and nineteenth centuries, amongst whom Petty (1623-87), Quesnay (1694-1759), Adam Smith (1723-96), and Ricardo (1772-1823) were the most original, sought for the laws which regulated exchange operations, and their theories were designated by Marx as classical bourgeois economy. Following up their investigations, Marx declared: Every commodity, that is, every thing or good produced under Capitalism and brought to the market possesses a use value and an exchange value.
The use value is the utility of the commodity to satisfy a physical or mental need of its user: a commodity without use value is not exchangeable or saleable. As use values, commodities are materially different from each other; nobody will exchange a ton of wheat for a ton of wheat of the same kind, but he will for clothes.
In what measure will commodities exchange with one another? The measure is the exchange value, and this consists in the trouble and quantity of labour which the production of a commodity costs. Equal quantities of labour are exchanged with each other on the market. As exchange values, as the embodiment of human labour, commodities are essentially equal to each other, only quantitatively are they different, as different categories of commodities embody different quantities of labour. It is obvious that the quantities of labour will not be calculated according to the working methods of the individual producers, but according to the prevailing social working methods.
If, for example, hand-weaver A requires twenty hours for the production of a piece of cloth, which in a modern factory will be produced in five hours, the cloth of the hand-weaver does not therefore possess four-fold exchange value. If hand-weaver A demands of consumer B an equivalent of twenty working hours, B answers that a similar piece of cloth can be produced in five hours, and therefore it only represents an exchange value of five working hours. Thus, according to Marx, the exchange value of a commodity consists in the quantity of socially necessary labour power which its reproduction would require.
This quantity of labour is no constant factor. New inventions, improvements in labour processes, increase in the productivity of labour, etc., cause a diminution in the quantity of labour necessary for the reproduction of a commodity; its exchange value, or expressed in terms of money, its price, will therefore sink, provided that other things (demand, medium of exchange) remain equal.
Consequently, labour is the source of exchange value, and the latter is the principle which regulates exchange operations. Exchange value even measures the extent of the commodity wealth of society. Wealth may increase in volume, but decrease in value, in so far as a less quantity of socially necessary labour becomes necessary for its reproduction.
The more progressive a country is industrially and the higher the level of its civilisation, the greater is its wealth, and the smaller is the quantity of labour which must be expended on the creation of wealth. In the practical Labour politics of our times, this is expressed in higher wages and shorter working hours.
It was said above that use value is a basic condition for the exchange of the individual commodity. This does not exhaust the rôle of use value. The quantity of use value of which society has need determines the quantity of the exchange values to be created. If more commodities are required than society requires, the superfluous commodities have no exchange value, in spite of the labour that is expended on them.—(“Capital” (German), Vol. III., 1, pp. 175-176.)
The complete realisation of exchange values or the social labour that is performed depends, as is seen, on the adaptation of supply to demand, and is a matter of organisation, of social direction.
We have noticed that the Marxian theory of value is related to that of the classical economists, but they are by no means the same thing. Apart from some improvements and definitions which Marx made, they are distinguished by the following conceptions: In the classical theory of value, the capitalist who directs production and provides with his capital the tools and raw materials of labour, markets the finished commodity, and keeps going the processes of reproduction, appears as the only creator of value: the wage worker is only one of his means of production. In the Marxian theory of value, on the other hand, the wage worker who transforms the raw materials into commodities, or removes the raw materials to the place of production, appears as the sole creator of value. Value is only created by the worker in production, and in distribution connected therewith.
3. Wages and Labour.
The worker appears to receive wages for his work. In reality he receives wages as the equivalent for the labour power expended by him, quite in accordance with the law of value, inasmuch as he receives by way of exchange as much means of sustenance as is usual and customary to replace the labour power he has expended, just as the working horse receives as much oats and hay as are necessary to maintain it capable of work.
The capitalist and the worker exchange certain quantities of commodities in proportions determined by economic laws (means of subsistence against a quantity of the commodity, labour power, of equal value, commodity for commodity, exchange value for exchange value).
As, therefore, the wages of labour signify a certain quantity of the means of subsistence, so they increase even if their money form remains unaltered with a fall in the price of the means of life, for the worker is then in the position, with his unaltered wage, to buy a greater quantity of the means of life. In the reverse case, if the prices of the means of life rise, the wages of labour fall, even if their money form remains the same as previously. This law of wages, formulated by Ricardo, was accepted by Marx, but he did not content himself with this acceptance. Ricardo regarded the capitalist world as the only possible and reasonable one, at least at the time when he wrote his “Principles,” while Marx from the year 1843 adopted a critical attitude towards it, and sought to negate it. Consequently, he investigated further, and expressed himself somewhat as follows:
The capitalist theoricians believed that the wages question was disposed of when it was settled by the law of value. We know, however, that every commodity possesses not only an exchange value, but also a use value, and is bought for the sake of the latter. The use value of the commodity labour power is distinguished in a very remarkable way from the use value of all other commodities.
The use or the employment of labour power creates exchange value, and can create much more exchange value than itself possesses.
The employer can make use of labour power so long that it not only creates its own exchange value (the value of the means of subsistence), but double this. To create the value of wages, the worker needs five or six hours daily, but he is obliged to produce for the capitalist during ten or twelve hours. If the worker were independent he would only produce during one half of the working day in order to receive his means of subsistence. This period of producing Marx called “necessary labour.” As he is dependent on the capitalist, the worker must not only perform “necessary labour” but also surplus labour: the worker can generally only find employment under the conditions that, besides the time needed for himself, he also works a definite number of hours for the capitalist without payment. Or, as Marx says: “The fact that half a day’s labour is necessary to keep the labourer alive during the 24 hours, does not in any way prevent him from working the whole day. Therefore, the value of labour power and the value which labour creates in the labour process are two entirely different magnitudes. And this difference in the two values was what the capitalist had in view when he was purchasing labour power. The circumstance that on the one hand the daily sustenance of labour power costs only half a day’s labour, while on the other hand the very same labour power can work during a whole day; that consequently the value which its use during one day creates is double what he pays for that use, this circumstance is, without doubt, a piece of good luck for the buyer, but by no means an injury to the seller.”
“No injury to the seller,” which is quite correct from the standpoint of Ricardo, but not from that of Marx. He often calls surplus value “unpaid labour,” and says, for example, “the capitalist appropriates one half of every day’s labour without payment.” In other words, he takes away something without return. This is a very distinct ethical judgment.
On the other hand, it is very important that in our consideration of the wages question we have come up against the Marxian doctrine of surplus value. For this doctrine is the cornerstone of the whole economic system of Marx.
4. Surplus Value.
We have already noted that Marx followed the classical economics in his treatment of the theory of value, but improved the definition of it, and brought it to bear on wages. In doing this he laid stress on the conflict between Capital and Labour.
The beginning of this dialectical process, so far as England was concerned, was the work of the anti-capitalistic critics, who uttered their protest about 1820, or three years after the appearance of Ricardo’s work. They declared, according to Ricardo, labour is the source and the measure of value. And yet according to his opinion labour is nothing and capital everything.
This should be reversed: labour must be all, and capital nothing. This literature was contemporaneous with the emergence of the English revolutionary Labour movement, from which Chartism arose at a later date. Piercy Ravenstone (1821) called capital a metaphysical (airy, impalpable) entity. Hodgskin (1827) called it a fetish, whereas they described labour as the economic reality. The expressions surplus-product and surplus-value were already known to this anti-capitalist school, with which Marx also connected himself when he set to work to elaborate his criticism of political economy.7 But this literature supplied him with much less material for the construction of the theory of surplus value than the formulation of the theory of value of the classical economy. Besides, while the English anti-capitalist critics, like Ravenstone, Gray, Hodgskin, and J.F. Bray merely condemned surplus value as immoral and as the source of all social wrongs, Marx used the theory of surplus value as the key to unlock the mechanism of the capitalist system and to reveal its workings, its tendencies, and its final destiny. This appears to be the real difference between the English anti-capitalist critics and Marx. In this matter he was obliged to perform most of the work himself. The question he put was no longer “What is the substance of wealth and how is it measured?” but “How is its growth and continual accretions to be explained?” Capital is that portion of wealth which is employed for the purpose of gain, of increase. Whence comes this gain, this increase? The answer is as follows:
All capital that is embarked on a productive undertaking consists of two parts: one part is expended on the technical means of production—on buildings, machines, tools, and raw materials, the other on wages. The first part Marx calls Constant Capital (c), the other part Variable Capital (v). The first is called constant, because it only adds to the commodities just as much value as it loses in the course of the productive process; it creates no fresh value: Marx also calls it the passive portion. The outlay on wages is called variable capital because it undergoes an alteration in the process of production: it creates new additional value: Marx also called variable capital the active portion, for it creates surplus value (s).
This composition of capital of constant and variable parts Marx calls its organic composition. He calls it average or normal composition when the capital of a business is 80 per cent. constant and 20 per cent. variable. If the constant part is higher, and the variable part lower, he calls it capital of a high composition.
Capital of under 80 per cent. constant portion and over 20 per cent. variable portion he calls capital of a lower composition. And rightly, because the higher the ladder of capitalist production is, the more costly and extensive are the machinery and factory buildings and the greater is the outlay on raw materials, whereas primitive businesses employ less machinery, cheaper workshops, but a relatively greater number of workers. The relation between (c) and (v) reveals at the same time the stage to which production has developed.
Thus, according to Marx, it is solely the variable capital which creates surplus value, or, as it is commonly expressed, profit. We have seen above, in the explanation of the nature of wages, why variable capital creates more value than it is paid for by the capitalist; the worker does indeed receive the exchange value of his labour power, but the use value of the labour power functions, we have assumed, twice as many hours as are necessary for its reproduction. This surplus labour is embodied in surplus value. While the worker receives, let us say, a daily wage of three shillings, for the reproduction of which five hours of work suffice, his labour power will be used for ten hours. These five hours of surplus labour appear in the exchange value of the commodity, so that the value of the commodity is composed of the transferred portion of the constant capital, the outlay on wages, and the added surplus value. Immediately before the production process only constant and variable capital existed, or, in brief (c) and (v); after the completion of the production process, the commodity embodies constant and variable capital and also surplus value, or (c) and (v) and (s). This is the actual value of the commodity, (c) or, shortly expressed, c + v + s.
The relation between wages and surplus value, or between paid and unpaid labour, or, shortly, s/v, Marx calls the rate of surplus value: it expresses the degree of the exploitation of labour.
If wages amount to three shillings, which can be produced in five working hours, and if the worker works in the factory ten hours for these wages, so that he creates exchange value to the amount of six shillings, then the rate of surplus value is 100 per cent. The whole of the surplus value which arises in this manner in the process of production is called the mass of the surplus value, or shortly, m.s., that is to say, the individual rate of surplus value multiplied by the total number of workers engaged in an undertaking, or the total amount of wages.
5. Profit.
The mass of surplus value appears to the capitalist in the shape of profit. Surplus value is a Marxian scientific term which exactly expresses the principle of profit. Profit is a commercial expression which describes surplus value as it appears in practical life as a subject of experience, i.e., empirically.
The distinction between the Marxian theoretical and the commercial empirical conception is, however, not so simple: it arises from the different conceptions of the influence of capital and labour in the economic process. Let us explain it more distinctly.
As is known, Marx divided the capital embarked in industrial enterprise into two parts: into constant (technical means of production) and variable (living labour power, wages). He assumed that only the living labour power (wage labour) creates surplus value, whilst the constant capital only adds its own value to the new products.
The capitalist divides his capital outlay otherwise: into fixed (buildings and machines) and circulating (raw materials and wages) capital. The fixed capital is only used up slowly and only passes entirely into production during a series of years—let us say 15 years: thus of a fixed capital of £75,000, £5,000 would each year be consumed in the production of commodities, and written off in the balance sheet. On the other hand, the circulating capital (raw materials and wages) are wholly consumed in every period of production, and must be renewed at the beginning of a new period of production.
Suppose an industrial undertaking about to be started requires a capital expenditure of £105,000: £75,000 fixed capital (for buildings and machinery), £20,000 for raw materials, £10,000 for wages. For convenience sake, we will suppose that the period of production lasts a year, and that the rate of surplus value amounts to 100 per cent., that is, the labour power receives a payment of £10,000, and produces a value of £20,000. At the end of the year, the capitalist reckons an expenditure of £5,000 on account of fixed capital, and £30,000 of circulating capital: the commodities produced cost, therefore, a net outlay of £35,000. This is the cost price, without adding profit. According to Marx, cost price signifies (c) and (v), therefore without (s), (surplus value).
But the capitalist knows that the manufactured commodities represent a greater value than the cost price. According to Marx, the surplus value amounts to £10,000 (as the variable capital of £10,000 creates surplus value at the rate of 100 per cent.); but the capitalist adds to the cost price a profit which includes the gains of the enterprise and interest on the capital outlay. If the capitalist were alone in the market, his profit might suck up the whole of the surplus value of £10,000; but he has to reckon with competition and the state of the market. The cost price, plus profit, is the production price as established by the capitalist. But according to Marx, that is, in pure theory, the production price is equal to the cost price, plus surplus value. There is thus a quantitative distinction—a difference in the amount of money—between the theoretical and practical production price, as well as a qualitative distinction between the notions of the capitalist and Marx respecting the source of profit. The capitalist believes that profit is the result of the portion of capital which he has put into the process of production, combined with his own commercial ability. On the other hand, Marx asserts that the capitalist can only extract a profit because the wage workers (the living labour power) create a surplus value in the process of production for which they receive no payment.
We assumed that the surplus value amounted to 100 per cent. measured with variable capital, and that £10,000 expended on wages produced £20,000. The annual balance sheet, however, would show the percentage of profit to the total outlay. Consequently, we must spread the £10,000 surplus value over the £35,000 which have been expended. The surplus value of an undertaking spread over the total capital (c) Marx calls the rate of profit, or shortly, s/c = 10000/35000 = 28.58 per cent.
As a rule, the capitalist cannot sell under cost price without becoming bankrupt, but he can quite easily sell under the production price, and mostly does so. In the example already given, his rate of profit amounts to over 28 per cent. According to the degree of competition, or by reason of other circumstances which we will examine in the next chapter, he can content himself with a rate of profit of 10, 15, or 20 per cent., which will serve him partly as an income and partly be expended in the development of his enterprise. The 28 per cent. profit generally forms a circle within which he fixes his manufactured price. Under favourable circumstances he can add the whole 28 per cent, to the price; under less favourable, only 20, 15, or 10 per cent. Accordingly, several portions of surplus value remain in the commodities which are not yet realised. What happens to them? The remaining portions of profit or of surplus value fall to the large or small traders who are interposed between producer and consumer, or go in the form of interest to the banking institutions, in the event of the capitalist operating with borrowed money. As the profit is only realised in the process of circulation (in commerce and exchange) and there divided amongst the various economic classes and sections, most people believe that profit arises in commercial transactions. They do not know that the price of a commodity can only be increased in trade because its manufactured price was fixed below its price of production or its value, that is, because the commodities contain surplus value which is only gradually realised in the process of circulation.
The social significance of this doctrine is far-reaching. If it is correct, then all the social sections which are not engaged as manual and brain workers in the process of production, or in the transport of raw material, lead a parasitical life and consume the surplus value which is squeezed by the capitalist class out of the proletariat and appropriated without payment.
Quite otherwise are capitalist ideas. According to them, profit is the result both of the spirit of the enterprise and the ability of the capitalist, added to that portion of the capital which is put into the process of production: the machines and buildings and raw materials which are used up, and the labour power, all of which are bought at their proper exchange value. It is only fit and proper that the trader and moneylender should receive a portion of the profit so created, for they assist in realising the exchange value by bringing the commodities to the consumer, and thus rendering possible the process of production.
Surplus value or profit? Labour or Capital? Behind this question lurks the great class struggle of the modern social order. No wonder the Marxian doctrine of value and surplus value was the occasion for an extensive controversy, in which the famous problem of the average rate of profit played a great part.
6. The Average Rate of Profit.
According to Marx’s doctrine of value and surplus value only variable capital creates fresh value and surplus value. An industrial undertaking of a lower organic composition, which thus employs much variable capital and little constant capital, must consequently create a greater surplus value or more profit than an industrial undertaking of higher composition which may employ the same total capital, but composed of greater constant and smaller variable portions than the former. Let us take two industrial capitals of £35,000 each. One expends £15,000 on the constant elements (machinery, raw materials) and £20,000 on the variable element (wages of labour). The other shows £20,000 constant part and £15,000 variable part. With an equal rate of surplus value—100 per cent.—the first capital would produce £20,000 surplus value (profit) and the other only £15,000 profit. Experience shows, however, that equal amounts of capital—in spite of temporary differences in profits—tend to produce equal profits. From this, it would appear that it is actually the capital expended and not the labour employed which determines the magnitude of the surplus value (profit), that the concrete results of the capitalist process of production do not confirm the Marxian theory of value, that the facts directly contradict the theory. It was Marx himself who drew attention to this problem. After he had constructed his theory of surplus value in the form of a scientific law, he continued: “This law clearly contradicts all experience based on appearance. Everyone knows that a cotton spinner, who, reckoning the percentage on the whole of his applied capital, employs much constant capital and little variable capital, does not, on account of this, pocket less profit or surplus value than a baker, who relatively sets in motion much variable and little constant capital.”
How, then, can the equal rate of profit in the case of capitals of different organic composition be harmonised with the theory of surplus value?
Marx concedes that equal capital sums whose organic parts are unequally employed give an equal rate of profit, although the volumes of surplus value created are different. Two capital sums of £50,000 each, one of which, for example, represents £40,000 constant and £10,000 variable capital, and with a rate of surplus value of 100 per cent. gives £10,000 surplus value, while the other is composed of £10,000 constant and £40,000 variable capital, and with an equal rate of surplus value gives an amount of £40,000 surplus value, will nevertheless yield an equal rate of profit, although theoretically they would be unequal if the rate of surplus value directly determined the rate of profit. In the first case, the rate of profit would amount to 20 per cent. and in the second to 80 per cent. In reality both undertakings yield an equal rate of profit.
How is this explained, according to Marx? By means of competition, the different rates of profit are levelled to a general rate of profit, which is the average of all the various rates of profit. Thus the capitalists do not realise the surplus value as it is created in any particular factory, but in the form of average rate of profit as it is produced by the operations of the total capital of society. The average rate of profit may be lower or higher than the individual rate of profit, for the “various capitalists,” as Marx explains, “so far as profits are concerned, are so many stockholders in a stock company in which the shares of profits are uniformly divided for every 100 shares of capital, so that profits differ in the case of the individual capitalists only according to the amount of capital invested by each of them in the social enterprise, according to his investment in social production as a whole, according to his shares.”
While thus the individual rates of profit do not proportionately coincide with the rates of surplus value, i.e., while the degree of exploitation of the worker in the individual factory, and the volume of surplus value thus individually created, do not directly determine the individual rate of profit, it is the total mass of social surplus value which is the source of the average rate of profit. If the mass of the surplus value be large, the average rate of profit will also be great. Marx says: “It is here just the same as with average rate of interest which a usurer makes who lends out various portions of his capital at different rates of interest. The level of his average rate depends entirely on how much of his capital he has lent at each of the different rates of interest.” The higher the various individual rates of interest, the higher will be the average rate of interest at which his capital has been put out.
The individual price of production signifies, therefore, cost price plus the average rate of profit, and not plus surplus value: it does not necessarily correspond with the total amount of the constant and variable portions of capital employed in an individual enterprise, plus the mass of the surplus value: the prices and magnitudes of value of commodities are not manifestly equal, as Marx has often pointed out. Of course, the total profits of the capitalist class coincide with the total surplus value extracted from the working class, provided, of course, that the supply of commodities corresponds with the social needs.
Thus the law of surplus value, in spite of all deviations and refractions, holds good in the last resort. “In theory,” observes Marx, “it is assumed that the laws of the capitalist mode of production develop freely. In reality, there is always only an approximation.”
And the more capitalist production develops, the greater will be the degree of approximation in particular cases, for the progress of Capitalism signifies a continuous increase of constant capital, a more mechanical character being given to industrial processes, and a reduction of variable capital to the necessary minimum, so that the differences in the organic composition of capitalist undertakings become less, thus bringing the average rate of profit and the rate of surplus value nearer to each other.
This indirect and difficult method of realising profits involves the fact that the capitalist does not distinctly observe the exploitation of wage labour practised by him, but he believes that the profit is owing to his own commercial ability.
This difficult section of the outlines of the economic doctrines of Marx can be most fitly concluded by quoting the comprehensive observations of Marx himself upon this subject, which he gives at the end of his book.—(“Capital” (German), Vol. III., 2, pp. 355-6.)
“In a capitalist society, this surplus value or this surplus product (leaving aside accidental fluctuations in its distribution and considering only the regulating law of these fluctuations) is divided among the capitalists as a dividend in proportion to the percentage of the total social capital held by each. In this shape the surplus value appears as the average profit, which in its turn is separated into profits of enterprise and interest, and which in this way may fall into the hands of different kinds of capitalists. Just as the active capitalist squeezes surplus labour, and with it surplus value in the form of profit out of the worker, so the landlord in his turn squeezes a portion of this surplus value from the capitalist in the shape of rent. Hence when speaking of profit as that portion of surplus value which falls to the share of capital, we mean average profit.... Profits of capital (profits of enterprise plus interest) and ground rent are merely particular constituents of surplus value.... If added together, these parts form the sum of the social surplus value. A large part of profits is immediately transformed into capital.” In this way, capital grows, or, as Marx says, accumulates.
7. Surplus Value as Social Driving Force.
It has been said already that capital is that portion of wealth which is devoted to the object of increasing wealth, of gain, the extraction of profit or surplus value. This object dominates the capitalist class; the desire for surplus value is the leading impulse and principle motive of their activity. Goaded by this desire and exclusively occupied with their special interests, this class unconsciously and unintentionally develops the entire capitalist system and leads it to ever higher and more comprehensive stages.
Surplus value is thus the driving force of the history of modern capitalist society. This principle is rigidly followed out by Marx in his theoretical system, which aims at showing the rise and growth of Capitalism.
The capitalist is no scientific investigator: he is not clear himself whether profit is created by a portion of the capital, or is the result of personal productive forces, but he knows one thing—without living labour power, without the wage worker, his whole capital remains dead and does not increase; all the fixed capital and raw materials are of no use to him so long as they are not set in motion by living labour power and transformed into commodities. His efforts are, therefore, primarily directed to making proper use of the living labour power. Historically considered, little constant and relatively much variable capital was employed in the primitive stage of the large scale industry: there was as yet little machinery, and the chief thing was the living labour power. The workers were not yet factory proletarians in the modern sense, but artisans who had lost their independent existence.
The capitalist harnessed them and utilised their labour power and special ability. Consequently, he strives to lengthen the working day, in order that as many commodities and as much profit as possible may be produced.
If previously the wage worker had laboured ten hours, of which five were devoted to the production of the value of his wages and five to surplus value, he is now obliged to work for twelve hours, which increases the period for surplus labour to seven hours. The surplus value which is extracted through the lengthening of the working day is called by Marx “absolute surplus value.”
Meanwhile, the capitalist learns by experience that if the workers are so organised as to co-operate with one another, the productivity of labour increases. From this arises the mode of labour which Marx calls Co-operation, or a reorganisation of the workplace, which raises the entire production of commodities to a higher level. The co-operation of the workers in the process of production soon leads to the discovery that, if the worker does not himself create the whole product, but only a part thereof, he loses less time and becomes quicker and more skilful in his work and produces more than previously. This discovery leads to the “division of labour,” which indeed reduces the worker to the position of an automaton, or a living machine, but considerably augments commodity wealth. Division of labour again demands finer tools; mechanical problems arise to be solved by mechanicians and engineers. This favours the progress of mechanics. The growing commodity wealth, and the pressure to realise it profitably, renders necessary more extensive markets; the need for extension comes up against transport difficulties; transport problems arise, to be solved by road and canal engineers. The increasing variety of the labour process and the categories of commodities which are produced results in new metallurgical, physical, and chemical problems. Natural science flourishes.
Meanwhile, things are not so peaceful in the places of manufacture. The lengthening of labour the closer strain on their nerves and muscles, as well as the arrangement of the work, cause the workers to combine and struggle for improved conditions of labour. This struggle, together with the progress of natural science, of technology, and the expansion of markets, result in the discovery of machine technology, of steam and electricity, the foundation of large-scale industry.
The capitalist is impelled, on the one hand, to make himself as independent as possible of living labour-power; on the other hand, to increase the volume of his profits. The means thereto are offered him by the new technical discoveries. Those workers who still possessed some pride in handicraft, or as expropriated small peasants were not able to submit to factory discipline, and showed themselves rebellious, were partly replaced by the labour of women and children, and partly curbed and made pliable. The labour time is repeatedly lengthened, and the exploitation of the labour of women and children assumes terrible proportions. The wage worker, who entered into the manufacturing premises of the employer full of the pride of his calling and often with his own tools, became then a small cog in a gigantic, relentless piece of working machinery.
In this extensive and hitherto unprecedented social transformation the old forms of handicraft disappear: whole sections of society, which are the representatives of the disappearing forms of handicraft, sink into poverty, and augment the class of proletarians. The progress of the industrial revolution extends also to agriculture: the greed for surplus value (ground rent) leads to enclosure of common lands by the great landlords, the independent yeomanry is decimated, the small proprietor and small tenant are made proletarians. A transmutation of social classes takes place; the urban population grows rapidly, the country districts are depopulated: out of the revolutionary process the outlines of two classes become more and more distinct: Capitalist and Proletarian.
Both the factory proletariat and the other social sections which adopt a hostile attitude towards Capitalism react against the health-destroying exploitation, and struggle for a normal working day.
The working time is curtailed and bounds are set to the efforts of the capitalist to lengthen the working day and obtain surplus value, but soon the progress of machine technique compels the worker to labour more intensely in the shorter working time: the accelerated movement of the machine determines the pace and necessitates a sharper straining of the nerves. Henceforth, the worker must compress into a working hour as much effort as was previously expended in an hour and a half. The surplus value which is extracted in this way Marx calls “relative surplus value.” The struggle of the workers to secure a shorter working day is a powerful incentive to the manufacturers to perfect their machinery, in order to increase the amount of relative surplus value. The intensification of work or the creation of relative surplus value is one of the most immediate effects and one of the most striking features of advanced Capitalism. The understanding of this new phase is a preliminary condition to the comprehension of the Marxian system. In this matter, Marx goes considerably beyond the anti-capitalist theoreticians who followed upon Ricardo.
What happens when the capitalist observes that the extraction of absolute surplus value comes up against an insurmountable obstacle? He sets himself to fit up his enterprise with the newest and most costly machinery, in order to supplant living labour-power and to work more intensively the living labour-power which he employs.
As, however, less living labour-power brings forth less exchange value and less surplus value, he is obliged to multiply production, in order to cover the fall in surplus value by a larger mass of commodities: if the single commodity brings him less profit, he produces it in such large quantities that the profit thereon is the same, or even greater, than formerly. The more complicated machinery, the greater quantities of raw materials consumed, and the relatively smaller amount of labour-power signify obviously an alteration in the organic composition of capital: the constant portion (machinery, raw materials) preponderates more and more over the variable portion. If, previously, the composition was 50 per cent. constant and 50 per cent. variable, it becomes now something like 80 per cent.: 20 per cent. At the same time, the initial capital is also increased greatly, as machines and large quantities of raw and auxiliary materials demand such increase of capital. If, for example, the initial capital previously amounted to £100,000, divided into £50,000 constant and £50,000 variable capital, it would now amount to £500,000, comprising £400,000 constant and £100,000 variable. This organic composition signifies: that relatively smaller masses of labour set in motion large masses of technical means of production; labour is more productive because more intense; the sum total of commodities is increased; the profit on single articles is smaller, but the total profit is greater; the reconversion of profits into capital proceeds rapidly.
The scale of production is more and more extended, and the amount of initial outlay becomes ever greater, because only large capitals are capable of creating relative surplus value in sufficient sums to assure a profit on the enterprise and payment of interest, and thus assist the accumulation of capital.
The more extended scale of production is not possible to the less powerful capitalist undertakings. They partly disappear and partly combine in joint stock companies. The first alternative gives rise to the concentration of the means of production in fewer hands, and the second to the centralisation of the means of production. This is the effect of the new organic composition of capital on the capitalist class.
The effect on the working class is not less profound. As long as the hand-worker still played an important part in the works premises, as long as the variable part was superior or equal to the constant part in the organic composition of capital, as was the case prior to and at the beginning of large-scale industry, the accumulation of capital meant an increased demand for wage-labour. The position was changed as Capitalism developed, in the manner just described. Although the mass of capital grows, there is a relative decrease in the demand for workers. For this growth of capital refers chiefly to the constant part (machinery and raw materials), while there is a relative shrinkage in the variable part; that means the worker is obliged to consume a much greater quantity of raw material than formerly.
And whereas the prices of commodities fall during the phase of the high organic composition of capital, the period of necessary labour (the hours needed for the reproduction of wages) becomes shorter, while the period of surplus labour becomes longer. The great industrial development therefore signifies for the worker: intensive exploitation and relative over-population, a reserve army of labour-power, which is absorbed by industry in times of prosperous trade, and is speedily demobilised when the slump comes. In times of good business the reserve army serves to check the wage demands of the workers regularly employed, and in times of bad trade it serves to depress wages. The outcome for the workers is as follows:
“Within the capitalist system all methods for raising the social productiveness of labour are brought about at the cost of the individual labourer; all means for the development of production transform themselves into means of domination over, and exploitation of, the producers; they mutilate the labourer into a fragment of a man, degrade him to the level of an appendage to a machine, destroy every remnant of charm in his work, and turn it into a hated toil; they estrange from him the intellectual potentialities of the labour-process in the same proportion as science is incorporated in it as an independent power; they distort the conditions under which he works, subject him during the labour-process to a despotism the more hateful for its meanness; they transform his life-time into working-time, and drag his wife and child beneath the wheels of the Juggernaut of Capital. But all methods for the production of surplus value are at the same time methods of accumulation; and every extension of accumulation becomes again a means for the development of those methods. It follows, therefore, that in proportion as capital accumulates, the lot of the labourer, be his payment high or low, must grow worse. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation at the opposite pole, i.e., on the side of the class that produces its own product in the form of capital.”—(“Capital” (German), Vol. I., pp. 660-1.)
The result of the capitalist social order is the unfolding of the productive forces, the efflorescence of science, the expansion of material civilisation, the dividing of society into antagonistic classes, the conferring of economic power on the few, and the enslavement and degradation of the many.
8. Economic Contradictions. Decay of Society and its Reconstruction.
As the ripening of the capitalist social order to its highest point proceeds, its innate contradictions develop, and announce distinctly the fact that Capitalism has outlived its usefulness, while new life, a higher form of society, is emerging from its womb. The most important contradictions are:
The driving force of the capitalist is to obtain the largest measure of surplus value or profit. The latest stage of Capitalism is, however, marked by the fact of the high organic composition of capital, which means that living labour-power, the source of surplus value, has relatively decreased. The decrease of variable capital signifies manifestly a lower rate of profit. Capitalism in normal times exhibits a tendency towards a lowering of the rate of profit. Therefore it gives rise to a phenomenon which contradicts the aim of the endeavours of the capitalists. The capitalist strives to accumulate capital, but as variable capital and the rate of profit relatively decrease, a tendency towards the depreciation of capital is revealed. The capitalist endeavours to counteract this tendency, and to achieve his object by extending the scale of production, so that the mass of commodities will compensate him for what he loses on them singly. But while he furthers this object by resorting to a higher organic composition of capital, he squeezes out the middleman, reduces the numbers of workers in employment, and creates a relative over-population, a reserve of those who are only employed intermittently; there is a substantial shrinkage in the demand for commodities, as the impoverished masses of the people have obviously less purchasing power. The capitalist extends production, and at the same time contracts the market. The upshot is over-production, under-consumption—crisis: wasting of capital, restriction of production, paralysis of the productive forces. And if Marx lived to-day he would add: the developed economy of large-scale capitalism, that is, the high organic composition of industrial capital, requires enormous quantities of raw materials, which, in part, are only to be had from tropical and sub-tropical countries, and also from eastern Asia; the struggle for these sources of raw materials, and for access to them, leads to wars in which capital sums of unprecedented amount are destroyed. Since 1894 these wars over raw materials and trade routes have broken out every few years. Economic crises and imperialist wars; immeasurable destruction of capital and productive forces. This is a consequence which stands in sharp contradiction to the historical task of the economic order of Capitalism, and to the immediate aims of the individual capitalists.
Further, the capitalist tries from the beginning to create docile and unresisting masses of workers, and yet unites and combines them by the creation of large centres of production; the factories become centres for the organisation of the workers, and for the welding of the individual wills of the proletarians into a class will; they abolish the scattered and antagonistic interests of single sections of the workers, and consolidate them into a unified class interest. Finally, the whole economic process, which began by resting on individualist principles, has assumed a common character; thousands upon thousands of hand and brain workers engage in production in economic undertakings upon a single and uniform plan, with the aid of productive implements which can only be used in common.
The significance and tendency of these contradictions are sketched by Marx in the great finale, which properly belongs to the concluding chapter of the third volume:
“As soon as this process of transformation has sufficiently decomposed the old society from top to bottom, as soon as the labourers are turned into proletarians, their means of labour into capital, as soon as the capitalist means of production stands on its own feet, then the further socialisation of labour and further transformation of the land and other means of production into socially exploited, and therefore common means of production, as well as the further expropriation of private proprietors, takes a new form. That which is now to be expropriated is no longer the labourer working for himself, but the capitalist employing many labourers. This expropriation is accomplished by the action of the immanent laws of capitalist production itself, by the centralisation of capital. One capitalist always kills many. Hand in hand with this centralisation, or this expropriation of many capitalists by a few, develop on an ever-extending scale the co-operative form of the labour process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable in common, the economising of all means of production by their use as the means of production of combined, socialised labour, the entanglement of all peoples in the net of the world market, and with this, the international character of the capitalist regime. Along with the constantly diminishing number of the magnates of capital, who usurp and monopolise all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this, too, grows the revolt of the working class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter on the mode of production, which has sprung up and flourished along with it, and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.”—(“Capital,” Vol. I. English edition, chap. 84.)
Footnotes
7 Compare M. Beer, “History of British Socialism,” Vol, I., pp. 245-270.