the development reaches a point where the monopoly of capital becomes a fetter to the method of production that has thriven on it, when the centralisation of the means of produc- tion and the socialisation of labour become incompatible with their capitalist garment.
24 This is then rent. The expropriators and usurpers are expropriated by the mass of the nation. Capitalist private property is done away with.
This is the historical tendency of the manner of production and appropriation, according to Marx. The class which is called upon to carry out the expropriation of the capitalist class and the transformation of capitalist into public property, is the class of the wage earners, the proletariat. For this purpose must the class be organised as a political party. This party at a given moment seizes the power of the State and " changes the means of production first of all into State property. But therewith the proletariat negatives itself as a proletariat, therewith it puts an end to all differences of class and antagonisms of class, and conse- quently also puts an end to the State as a State. " The struggle for individual existence with its conflicts and excesses is over, the State has nothing more to oppress "and dies off. M* So far, in the most concise compression possible, I have endeavoured to set forth the most important propositions of that part of the Marxist theory which we have to consider as essential to his socialism. Just as little as — or, rather, still less than — the materialist theory of history has this part of the theory sprung from the beginning in a perfected form from the head of its authors. Even more than in the former * Engels, Socialism, Utopian and Scientific.
25 case can a development of the theory be shown which, whilst firmly maintaining the chief points of view, consists of limiting the pro- positions at first represented as absolute. In the preface to Capital (1867), in the preface to the new edition of the Communist Manifesto (1872), in the preface and a note to the new edition of the Poverty of Philosophy (1884), and in the preface to the Class Struggles in the French Revolution (1895), some of the changes are shown which in the course of time have been brought to pass with regard to various corresponding matters in the views of Marx and Engels. But not all the changes to be cited here and elsewhere with reference to single portions or hypotheses of the theory have found full consideration in its final elaboration. Marx and Engels confined themselves sometimes merely to hinting at, sometimes only to stating in regard to single points, the changes recog- nised by them in facts, and in the better analyses of these facts, which influenced the form and application of their theory. And even» in the last respect contradictions are not wanting in their writings. They have left to their successors the duty of bringing unity again into their theory and of co-ordinating theory and practice.
But this duty can only be accomplished if one gives an account unreservedly of the gaps and contradictions in the theory. In other words, the further development and elaboration of the Marxist doctrine must begin with criticism of it. To-day, the position is that one can prove 26 everything out of Marx and Engels. This is very comfortable for the apologists and the literary pettifogger. But he who has kept only a moderate sense for theory, for whom the scientific character of socialism is not il only a show-piece which on festive occasions is taken out of a plate cupboard but otherwise is not taken into consideration,' ' he, as soon as he is conscious of these contradictions, feels also the need of removing them. The duty of the disciples consists in doing this and not in everlastingly repeating the words of their masters.
In this sense has been undertaken the follow- ing criticism of some elements of the Marxist doctrine. The wish to keep within moderate bounds a volume intended in the first instance for the use of working men, and the necessity of finishing it within a few weeks explain why an exhaustive treatment of the subject has not even been attempted. At the same time, let it be understood once for all that no pretensions are raised as to originality in the criticism. Most, if not all, of what follows has in substance been worked out — or at least indicated — by others already. The justification for this essay is not that it discloses something not known before but that it acknowledges what has been dis- closed already.
But this is also a necessary work. The mistakes of a theory can only be considered as overcome when they are recognised as such by the advocates of that theory. Such recognition does not necessarily signify the destruction of 27 the theory. It may rather appear after sub- traction of what is acknowledged to be mistaken — if I may be allowed to use an image of Lassalle — that it is Marx finally who carries the point against Marx.
Chapter II.
THE ECONOMIC DEVELOPMENT OF MODERN SOCIETY.
(a) On the Meaning of the Marxist Theory of Value.
11 From which incidentally the practical application follows that there are sometimes difficulties with the popular claim of the worker to the " full proceeds of his labour. M — Engels, Herr Eugen Dühring's Unwäl- zung.
According to the Marxist theory surplus value is, as we have seen, the pivot of the economy of a capitalist society. But in order to understand surplus value one must first know what value is. The Marxist representation of history and of the course of development of capitalist society begins therefore with the analysis of value.
In modern society, according to Marx, the value of commodities consists in the socially necessary labour spent on them measured according to time. But with the analysis of this measure of value quite a series of abstrac- tions and reductions is necessary. First, the pure exchange value must be found; that is, we must leave aside the special use values of the particular commodities. Then — in forming the concept of general or abstract human labour — we must allow for the peculiarities of 29 particular kinds of labour (reducing higher or complex labour to simple or abstract labour). Then, in order to attain to the socially necessary time of work as a measure of the value of labour, we must allow for the differences in diligence, activity, equipment of the individual workers; and, further (as soon as we are con- cerned with the transformation of value into market value, or price), for the socially neces- sary labour time required for the particular commodities separately. But the value of labour thus gained demands a new reduction. In a capitalistic developed society commodities, as has already been mentioned, are sold not according to their individual value but accord- ing to their price of production — that is, the actual cost price plus an average proportional rate of profit whose degree is determined by the ratio of the total value of the whole social production to the total wage of human labour power expended in producing, exchanging, etc. At the same time the ground rent must be deducted from the total value, and the division of the capital into industrial, commercial, and bank capital must be taken into the calculation. In this way, as far as single commodities or a category of commodities comes into con- sideration, value loses every concrete quality and becomes a pure abstract concept. But what becomes of the surplus value under these circumstances? This consists, according to the Marxist theory, of the difference between the labour value of the products and the payment for the labour force spent in their production by 30 the workers. It is therefore evident that at the moment when labour value can claim ac- ceptance only as a speculative formula or scientific hypothesis, surplus value would all the more become a pure formula — a formula which rests on an hypothesis.
As is known, Friedrich Engels in an essay left behind him which was published in the Neue Zeit of the year 1895-96, pointed out a solution of the problem through the historical consideration of the process. Accordingly the law of value was of a directly determining power, it directly governed the exchange of commodities in the period of exchange and barter of commodities preceding the capitalist order of society.
Engels seeks to prove this in connection with a passage in the third volume of Capital by a short description of the historic evolution of economics. But although he presents the rise and development of the rate of profit so brilliantly, the essay fails in convincing strength of proof just where it deals with the question of value. According to Engels' representation the Marxist law of value ruled generally as an economic law from five to seven thousand years, from the beginning of exchanging products as commodities (in Babylon, Egypt, etc.) up to the beginning of the era of capitalist production. Parvus, in a number of Neue Zeit of the same year, made good some conclusive objections to this view by pointing to a series of facts (feudal relations, undifferentiated agriculture, mon- opolies of guilds, etc.) which hindered the 3* 3* conception of a general exchange value founded on the labour time of the producers. It is quite clear that exchange on the basis of labour value cannot be a general rule so long as pro- duction for exchange is only an auxiliary branch of the industrial units, viz., the utilisation of surplus labour, etc., and as long as the con- ditions under which the exchanging producers take part in the act of exchange are fundamen- tally different. The problem of Labour form- ing exchange value and the connected problems of value and surplus value is no clearer at that stage of industry than it is to-day.
But what was at those times clearer than to-day is the fact of surplus labour. When surplus labour was performed in ancient time — and in the middle ages no kind of deception prevailed about it — it was not hidden by any conception of value. When the slave had to produce for exchange he was a simple surplus labour machine. The serf and the bondsman performed surplus labour in the open form of compulsory service (duties in kind, tithes, etc.). The journeyman employed by the guildmaster could easily see what his work cost his master, and at how much he reckoned it to his customer.* * Where pre-capitalist methods of industry have been handed down to present times, surplus labour is shown to-day even unconcealed. The man employed by the small builder who performs a piece of work for one of his customers knows quite well that his hour's wage is so much less than the price which the master puts in his account for the hour's work. The same with the customers of tailors, gardeners, etc.
3* 3* This clearness of the relations between wages of labour and price of commodities prevails even on the threshold of the capitalist period. From it are explained many passages that surprise us to-day in the economic writings of that time about surplus labour and labour as the sole producer of weath. What appears to us the result of a deeper observation of things was at the time almost a commonplace. It did not at all occur to the rich of that epoch to represent their riches as the fruit of their own work. The theory arising at the beginning of the manu- facturing period of labour as the measure of exchange value (the latter conception then first becoming general) certainly starts from the conception of labour as the only parent of wealth, and interprets value still quite con- cretely (viz., as the cost price of a commodity), but forthwith contributes more towards con- fusing the conceptions of surplus labour than of clearing them. We can learn from Marx himself how Adam Smith, on the basis of these conceptions, represented profits and ground rent as deductions from the labour value; how Ricardo worked out this thought more fully, and how socialists turned it against the bour- geois economy.
But with Adam Smith labour value is already conceived as an abstraction from the prevailing reality. His full reality is in " the early and crude state of society " which precedes the accumulation of capital and the appropriation of land, and in backward industries. In the capitalist world, on the other hand, profit and 33 rent are for Smith constituent elements of value beside labour or wages; and labour value serves Smith only asa <( concept ' ' to disclose the division of the products of labour — that is the fact of surplus labour.
In the Marxist system it is not otherwise in principle. Marx certainly sticks to the idea of labour value more firmly than Smith, and has conceived it in a more strict but at the same time also more abstract form. But whilst the Marxist school — and the present author amongst them — believed that a point of funda- mental importance for the system was the passionately discussed question as to whether the attribute of " socially necessary labour time M in labour value related only to the manner of the production of the respective commodities or included also the relation of the amount produced of these commodities to effective demand, a solution lay already in the desk of Marx which gave quite a dif- ferent complexion to this and other questions, forced it into another region, on to another plane. The value of individual commodities or kinds of commodities becomes something quite secondary, since they are sold at the price of their production — cost of production plus profit rate. What takes the first place is the value of the total production of society, and the excess of this value over the total amount of the wages of the working classes — that is, not the indi- vidual, but the total social surplus value. That which the whole of the workers produce in a given moment over the portion falling to their 34 share, forms the social surplus value, the surplus value of the social production which the indi- vidual capitalists share in approximately equal proportion according to the amount of capital applied by them for business purposes. But the amount of this surplus value is only realised in proportion to the relation between the total production and the total demand — i.e., the buying capacity of the market. From this point of view — that is, taking production as a whole — the value of every single kind of commodity is determined by the labour time which was neces- sary to produce it under normal conditions of production to that amount which the market — that is the community as purchasers — can take in each case. Now just for the commodities under consideration there is in reality no exact measure of the need of the community at a given moment; and thus value conceived as above is a purely abstract entity, not otherwise than the value of the final utility of the school of Gossen, Jevons, and Böhm-Bawerk. Actual relations lie at the foundation of both; but both are built up on abstractions.
Such abstractions naturally cannot be avoided in the observation of complex phenomena. How far they are admissible depends entirely on the substance and the purpose of the investigation. At the outset, Marx takes so much away from the characteristics of commo- dities that they finally remain only embodiments of a quantity of simple human labour; as to the Böhm-Jevons school, it takes away all characteristics except utility. But the one 35 and the other kind of abstractions are only admissible for definite purposes of demonstra- tion, and the propositions found by virtue of them have only worth and validity within defined limits.
If there exist no exact measure for the total demand at one time of a certain class of com- modities, practical experience shows that within certain intervals of time the demand and supply of all commodities approximately equalise themselves. Practice shows, further, that in the production and distribution of com- modities only a part of the community takes an active share, whilst another part consists of persons who either enjoy an income for services which have no direct relation to the production or have an income without working at all. An essentially greater number of men thus live on the labour of all those employed in production than are engaged actively in it, and income statistics show us that the classes not actively engaged in production appropriate, moreover, a much greater share of the total produced than the relation of their number to that of the actively producing class. The surplus labour of the latter is an empiric fact, demonstrable by experience, which needs no deductive proof. Whether the Marxist theory of value is correct or not is quite immaterial to the proof of surplus labour. It is in this respect no demonstration but only a means of analysis and illustration.
If, then, Marx presumes, in the analysis of the production of commodities, that single commodities are sold at their value, he illustrates 36 on a single object the transaction which, according to his conception, the total production actually presents. The labour time spent on the whole of the commodities is in the sense before indicated, their social value.* And even if this social value is not fully realised — because a depreciation of commodi- ties is always occurring through partial over- production— yet this has in principle no bearing on the fact of the social surplus value or surplus product. The growth of its amount will be occasionally hindered or made slower, but there is no question of it standing still, much less of a retrogression in its amount in any modern state.
The surplus product is everywhere increasing, but the ratio of its increase to the increase of wages-capital is declining to-day in the more advanced countries.
By the simple fact that Marx applies the formula for the value of the whole of the com- modities, to single commodities, it is already indicated that he makes the formation of surplus value fall exclusively in the sphere of production, where it is the industrial wage earner who produces it. All other active * It is, in fact, the law of value...that not only on every single commodity is just the necessary labour time spent, but that no more than the necessary proportional amount of the social total labour time is spent in the different groups. " For use value is the condition...the social need — that is, the use value on a social basis appears here as the determining factor for the shares of the total social labour time which fall to the lot of the different particular spheres of production " (Capital, III., 2, pp. 176, 177). This sentence alone makes it impossible to make light of the Gossen-Böhm theory with a few superior phrases.
37 37 elements in modern economic life are auxiliary agents to production and indirectly help to raise the surplus value when they, for example, as merchants, bankers, etc., or their staff, undertake services for industry which would otherwise fall upon it, and so they lessen its cost. The wholesale dealers, etc., with their employees, are only transformed and differ- entiated clerks, etc., of the industrial entre- preneurs, and their profits are the transformed and concentrated charges of the latter. The employees for wages of these merchants cer- tainly create surplus value for them, but no social surplus value. For the profit of their employers, together with their own wages, form a portion of the surplus value which is produced in the industry. Only, this share is then proportionately less than it was before the differentiation of the functions here under con- sideration or than it would be without it. This differentiation only renders possible the great development of production on a large scale and the acceleration of the turnover of industrial capital. Like division of labour generally, it raises the productivity of industrial capital, relatively to the labour directly employed in industry.
We limit ourselves to this short recapitu- lation of the exposition of mercantile capital (from which, again, banking capital represents a differentiation) and of mercantile profit set forth in the third volume of Capital.
It is clear from this within what narrow limits the labour that creates supply value is 3« conceived in the Marxist system. The func- tions developed, as also others not discussed here, are from their nature indispensable to the social life of modern times. Their forms can, and undoubtedly will, be altered; but they themselves will in substance remain, as long as mankind does not dissolve into small social self-contained communities, when they then might be partly annulled and partly reduced to a minimum. In the theory of value which holds good for the society of to-day the whole expenditure for these functions is represented plainly as a deduction from surplus value, partly as " charges/ ' partly as a component part of the rate of exploitation.
There is here a certain arbitrary dealing in the valuing of functions in which the actual community is no longer under consideration, but a supposititious, socially-managed com- munity. This is the key to all obscurities in the theory of value. It is only to be understood with the help of this model. We have seen that surplus value can only be grasped as a concrete fact by thinking of the whole economy of society. Marx did not succeed in finishing the chapter on the classes that is so important for his theory. In it would have been shown most clearly that labour value is nothing more than a key, an abstract image, like the philo- sophical atom endowed with a soul — a key which, employed by the master hand of Marx, has led to the exposure and presentation of the mechanism of capitalist economy as this had not been hitherto treated, not so forcibly, 39 logically, and clearly. But this key refuses service over and above a certain point, and therefore it has become disastrous to nearly every disciple of Marx.
The theory of labour value is above all mis- leading in this that it always appears again and again as the measure of the actual exploita- tion of the worker by the capitalist, and among other things, the characterisation of the rate of surplus value as the rate of exploitation reduces us to this conclusion. It is evident from the fore- going that it is false as such a measure, even when one starts from society as a whole and places the total amount of workers' wages against the total amount of other incomes. The theory of value gives a norm for the justice or injustice of the partition of the product of labour just as little as does the atomic theory for the beauty or ugliness of a piece of sculpture. We meet, indeed, to-day the best placed workers, members of the " aristocracy of labour," just in those trades with a very high rate of surplus value, the most infamously ground-down workers in others with a very low rate.
A scientific basis for socialism or commun- ism cannot be supported on the fact only that the wage worker does not receive the full value of the product of his work. " Marx," says Engels, in the preface to the Poverty of Philo- sophy, "has never based his communistic demands on this, but on the necessary collapse of the capitalist mode of production which is being daily more nearly brought to pass before our eyes."
40 Let us see how in this respect the matter stands.
(b) The Distribution of Wealth in the Modern Community.
If on the one side accumulation appears as growing concentration...on the other side it appears as the repulsion of individual capitalists from one another. M — Marx, The capitalist, according to the theory of Marx, must produce surplus value in order to obtain a profit, but he can only draw surplus value from living labour. In order to secure the market against his competitors he must strive after a cheapening of production and this he attains, where the lowering of wages is resisted, only by means of an increase of the productivity of labour; that is by the perfecting of machinery and the economising of human labour. But in reducing human labour he places so much labour producing surplus value out of its function, and so kills the goose that lays the golden egg. The consequence is a gradually accomplished lowering of the profit rate, which through counteracting circum- stances, is certainly temporarily hindered, but is always starting again. This produces another intrinsic contradiction in the capitalist mode of production. Profit rate is the inducement to the productive application of capital; if it falls below a certain point, the motive for productive 4* 4* undertakings is weakened — especially as far as concerns the new amounts of capital which enter the market as off-shoots of the accumu- lated masses of capital. Capital shows itself as a barrier to capitalist production. The continued development of production is inter- rupted. Whilst on the one hand every active particle of capital tries to secure and increase its rate of profit by means of a feverish strain of production, congestion in the expansion of production already sets in on the other. This is only the counterpart of the transactions lead- ing to relative over-production, which produces a crisis in the market of use values. Over- production of commodities is at the same time manifesting itself as over-production of capital. Here as there, crises bring about a temporary arrangement. Enormous depreciation and destruction of capital take place, and under the influence of stagnation a portion of the working class must submit to a reduction of wages below the average, as an increased reserve army of superabundant hands stands at the disposal of capital in the labour market.
Thus after a time the conditions of a profit- able investment of capital are re-established and the dance can go on anew but with the intrinsic contradiction already mentioned on an increased scale. Greater centralisation of capital, greater concentration of enterprises, increased rate of exploitation.
Now, is all that right?
Yes and no. It is true above all as a ten- dency. The forces painted are there and work in the given direction. And the proceedings are also taken from reality. The fall of the profit rate is a fact, the advent of over-production and crises is a fact, periodic diminution of capital is a fact, the concentration and centralisation of industrial capital is a fact, the increase of the rate of surplus value is a fact. So far we are, in principle, agreed in the statement. When the statement does not agree with reality it is not because something false is said, but because what is said is incomplete. Factors which influence the contradictions described by limiting them, are in Marx either quite ignored, or are, although discussed at some place, abandoned later on when the established facts are summed up and confronted, so that the social result of the conflicts appears much stronger and more abrupt than it is in reality.