Chapter XVI: Section III: is broader, more vigorous and in general more rewarding than (12)

After a crushing criticism of capitalism Nikolayon thus ends up with the same old 'populist' panacea which had as early as the fifties, though at that time with greater justification, been hailed as the 'peculiarly Russian' guarantee of a higher social development, although its reactionary character as a lifeless relic of ancient institutions had been exposed in Engels' _Fluechtlingsliteratur_ in _Volksstaat_ (1875). Engels wrote at the time:

'A further development of Russia on bourgeois lines would gradually destroy communal property there too, quite apart from any interference of the Russian government "with the knout and with bayonets" (as the revolutionary populists imagined). Under the pressure of taxes and usury, communal landownership is no longer a privilege, it becomes an irksome chain. The peasants frequently run away from it, either with or without their families, to seek their living as itinerant labourers, and leave the land behind. We see that communal ownership in Russia has long since passed its flower and there is every indication that its decay is approaching.'

With these words, Engels hits right on the target of the _obshchina_ problem--eighteen years before the publication of Nikolayon's principal work. If Nikolayon subsequently with renewed courage again conjured up the ghost of the _obshchina_, it was a bad historical anachronism inasmuch as about a decade later the _obshchina_ was given an official burial by the state. The absolutist government which had for financial reasons tried during half a century artificially to keep the machinery of the rural community going was compelled to give up this thankless task on its own accord. The agrarian problem soon made it clear how far the old 'populist' delusion was lagging behind the actual course of economic events, and conversely, how powerfully capitalist development in Russia, mourned and cursed as still-born, could demonstrate with lightning and thunder its capacity to live and to multiply. Once again, and for the last time, this turn of events demonstrates in quite a different historical setting how a social critique of capitalism, which begins by doubting its capacity for development, must by a deadly logic lead to a reactionary Utopianism--both in the France of 1819 and in the Russia of 1893.[291]

FOOTNOTES:

[288] Cf. _Outlines of Our Social Economy_, in particular pp. 202-5, 338-41.

[289] Vladimir Ilyich [Lenin] has given detailed proof of the striking similarity between the position of the Russian 'populists' and the views of Sismondi in his essay _On the Characteristics of Economic Romanticism_ (1897).

[290] _Outlines of Our Social Economy_, p. 322. Friedrich Engels appraises the Russian situation differently. He repeatedly tries to convince Nikolayon that Russia cannot avoid a high industrial development, and that her sufferings are nothing but the typical capitalist contradictions. Thus he writes on September 22, 1892: 'I therefore hold that at present industrial production necessarily implies big industry, making use of steam power, electricity, mechanical looms and frames, and lastly the manufacture of the machines themselves by mechanical means. From the moment that railways are introduced in Russia, recourse to all these extremely modern means of production becomes inevitable. It is necessary that you should be able to mend and repair your engines, coaches, railways and the like, but to do this cheaply, you must also be in a position to make at home the things needing repair. As soon as the technique of war has become a branch of industry (armour-plated cruisers, modern artillery, machine guns, steel bullets, smokeless gun powder, etc.) a big industry that is indispensable for the production of such items has become a political necessity for you as well. All these items cannot be made without a highly developed metal industry which on its part cannot develop unless there is a corresponding development of all other branches of production, textiles in particular' (Marx-Engels to Nikolayon, St. Petersburg, 1908, p. 75). And further in the same letter: 'So long as Russian industry depends on the home market alone, it can only satisfy the internal demand. The latter, however, can grow but slowly, and it seems to me that under present conditions of life in Russia it is even bound to decrease, since it is one of the unavoidable consequences of high industrial development that it destroys its own home market by the same process which served to create it: by destroying the bases of the peasants' domestic industry. Yet peasants cannot live without such a domestic industry. They are ruined as peasants, their purchasing power is reduced to a minimum, and unless they grow new roots in new conditions of life, unless they become proletarians, they will only represent a very small market for the newly arising plants and factories.

'Capitalist production is a phase of economic transition, full of inherent contradictions which only develop and become visible to the extent that capitalist production develops. The tendency of simultaneously creating and destroying a market is just one of these contradictions. Another is the hopeless situation that will ensue, all the sooner in a country like Russia which lacks external markets than in countries more or less fit to compete in the open world market. These latter can find some means of relief in this seemingly hopeless situation by heroic measures of commercial policy, that is to say by forcibly opening up new markets. China is the most recent market to be opened up for English commerce, and it proved adequate for a temporary revival of prosperity. That is why English capital is so insistent on railroad building in China. Yet railways in China mean the destruction of the entire foundation of China's small rural enterprises and her domestic industry. In this case, there is not even a native big industry developed to compensate for this evil to some extent, and hundreds of millions will consequently find it impossible to make a living at all. The result will be mass emigration, such as the world has never yet seen, and America, Asia and Europe will be flooded with the detested Chinese. This new competitor on the labour market will compete with American, Australian and European labour at the level of what the Chinese consider a satisfactory standard of living, which is well known to be the lowest in the whole world. Well then, if the whole system of production in Europe has not been revolutionised by then, that will be the time to start this revolution' (ibid., p. 79).

Engels, though he followed Russian developments with attention and keen interest, persistently refused to take an active part in the Russian dispute. In his letter of November 24, 1894, i.e. shortly before his death, he expressed himself as follows: 'My Russian friends almost daily and weekly bombard me with requests to come forward with my objections to Russian books and reviews which not only misinterpret but even misquote the sayings of our author (Marx). My friends assure me that my intervention would suffice to put matters right. Yet I invariably and firmly refuse all such proposals because I cannot afford to become involved with a dispute held in a foreign country, in a tongue which I, at least, cannot read as easily and freely as the more familiar W. European languages, and in a literature which is at best accessible to me only in fortuitous glimpses of some fragments, and which I cannot pursue anything like systematically enough in all its stages and details without neglecting my real and serious work. There are people everywhere who, once they have taken up a certain stand, are not ashamed to have recourse to misinterpreting the thoughts of others and to all kinds of dishonest manipulations for their own ends, and if that is what has happened to our author, I am afraid they will not deal more kindly with me, so that in the end I shall be compelled to interfere in the dispute, first to defend others, and then in my own defence' (ibid., p. 90).

[291] We might mention that the surviving champions of 'populist' pessimism, and Vorontsov in particular, to the last remained loyal to their views, in spite of all that happened in Russia--a fact that does more credit to their character than to their intelligence. Referring to the 1900 and 1902 crises, Vorontsov wrote in 1902: 'The doctrinaire dogma of the Neo-Marxists rapidly loses its power over people's minds. That the newest successes of the individualists are ephemeral has obviously dawned even on their official advocates.... In the first decade of the twentieth century, we come back to the same views about economic development in Russia that had been the legacy of the 1870's' (Cf. the review _Political Economics_, October 1902, quoted by A. Finn Yenotayevski in _The Contemporary Economy of Russia 1890-1910_, St. Petersburg, 1911, p. 2.) Even to-day, then, this last of the 'populist' Mohicans deduces the 'ephemeral character', not of his own theory, but of economic reality. What of the saying of Barrère: 'Il n'y a que les morts qui ne reviennent pas'.

_CHAPTER XXI_

STRUVE'S 'THIRD PERSONS' AND 'THREE WORLD EMPIRES'

We now turn to the criticism of the above opinions as given by the Russian Marxists.

In 1894, Peter v. Struve who had already given a detailed appraisal of Nikolayon's book in an essay 'On Capitalist Development in Russia',[292] published a book in Russian,[293] criticising the theories of 'populism' from various aspects. In respect of our present problem, however, he mainly confines himself to proving, against both Vorontsov and Nikolayon, that capitalism does not cause a contraction of the home market but, on the contrary, an expansion. There can be no doubt that Nikolayon has made a blunder--the same that Sismondi had made. They each describe only a single aspect of the destructive process, performed by capitalism on the traditional forms of production by small enterprise. They saw only the resulting depression of general welfare, the impoverishment of broad strata of the population, and failed to notice that economic aspect of the process which entails the abolition of natural economy and the substitution of a commodity economy in rural districts. And this is as much as to say that, by absorbing further and further sections of formerly independent and self-sufficient producers into its own sphere, capitalism continuously transforms into commodity buyers ever new strata of people who had not before bought its commodities. In fact, the course of capitalist development is just the opposite of that pictured by the 'populists' on the model of Sismondi. Capitalism, far from ruining the home market, really sets about creating it, precisely by means of a spreading money economy.

Struve in particular refutes the theory that the surplus value cannot possibly be realised on the home market. He argues as follows: The conviction that a mature capitalist society consists exclusively of entrepreneurs and workers forms the basis of Vorontsov's theory, and Nikolayon himself operates with this concept throughout. From this point of view, of course, the realisation of the capitalist aggregate product seems incomprehensible. And Vorontsov's theory is correct in so far as it states the fact that neither the capitalists' nor the workers' consumption can realise the surplus value, so that the existence of 'third persons' must be presumed.[294] But then, is it not beyond any doubt that some such 'third persons' exist in every capitalist society? The idea of Vorontsov and Nikolayon is pure fiction 'which cannot advance our understanding of any historical process whatever by a hair's breadth'.[295] There is no actual capitalist society, however highly developed, composed exclusively of capitalists and workers.

'Even in England and Wales, out of a thousand self-supporting inhabitants, 543 are engaged in industry, 172 in commerce, 140 in agriculture, 81 in casual wage labour, and 62 in the Civil Service, the liberal professions and the like.'

Even in England, then, there are large numbers of 'third persons', and it is they who, by their consumption, help to realise the surplus value in so far as it is not consumed by the capitalists. Struve leaves it open whether these 'third persons' consume enough to realise all surplus value--however that may be, 'the contrary would have to be proved'.[296] This cannot be done, he claims, for Russia, that vast country with an immense population. She, in fact, is in the fortunate position to be able to dispense with foreign markets. In this--and here Struve dips into the intellectual treasures of Professors Wagner, Schaeffle, and Schmoller--she enjoys the same privileges as the United States of America. 'If the example of the N. American Union stands for anything, it is proof of the fact that under certain circumstances capitalist industry can attain a very high level of development almost entirely on the basis of the home market.'[297]

The negligible amount of industrial exports from the U.S.A. in 1882 is mentioned in support of this statement which Struve formulates as a general doctrine: 'The vaster the territory, and the larger the population of a country, the less does that country require foreign markets for its capitalist development.' He infers from this, in direct opposition to the 'populists', 'a more brilliant future (for Russia) than for the other countries'.

On the basis of commodity production, the progressive development of agriculture is bound to create a market wide enough to support the development of Russian industrial capitalism. This market would be capable of unlimited expansion, in step with the economic and cultural progress of the country, and together with the substitution of a monetary for a natural economy. 'In this respect, capitalism enjoys more favourable conditions in Russia than in other countries.'[298]

Struve paints a detailed and highly coloured picture of the new markets which, thanks to the Trans-Siberian Railway, are opening up in Siberia, Central Asia, Asia Minor, Persia and the Balkans. But his prophetic zeal blinds him to the fact that he is no longer talking about the 'indefinitely expanding' home market but about specific foreign markets. In later years, he was to throw in his lot, in politics too, with this optimistic Russian capitalism and its liberal programme of imperialist expansion, for which he had laid the theoretical foundations when still a 'Marxist'.

Indeed, the tenor of Struve's argument is a fervent belief in the unlimited capacity for expansion of capitalist production, but the economic foundation of this optimism is rather weak. He is somewhat reticent as to what he means by the 'third persons' whom he considers the mainstay of accumulation, but his references to English occupational statistics indicate that he has in mind the various private and public servants, the liberal professions, in short the notorious _grand public_ so dear to bourgeois economists when they are completely at a loss. It is this 'great public' of which Marx said that it serves as the explanation for things which the economist cannot explain. It is obvious that, if we categorically refer to consumption by the capitalists and the workers, we do not speak of the entrepreneur as an individual, but of the capitalist class as a whole, including their hangers-on--employees, Civil Servants, liberal professions, and the like. All such 'third persons' who are certainly not lacking in any capitalist society are, as far as economics is concerned, joint consumers of the surplus value for the greater part, in so far, namely, as they are not also joint consumers of the wages of labour. These groups can only derive their purchasing power either from the wage of the proletariat or from the surplus value, if not from both; but on the whole, they are to be regarded as joint consumers of the surplus value. It follows that their consumption is already included in the consumption of the capitalist class, and if Struve tries to reintroduce them to the capitalists by sleight-of-hand as 'third persons' to save the situation and help to realise the surplus value, the shrewd profiteer will not be taken in. He will see at once that this great public is nothing but his old familiar retinue of parasites who buy his commodities with money of his own providing. No, no, indeed! Struve's 'third persons' will not do at all.

Struve's theory of foreign markets and their significance for capitalist production is equally untenable. In this, he defers to the mechanist approach of the 'populists' who, along with the professors' textbooks, hold that a capitalist (European) country will first exploit the home market to the limit, and will only look to foreign markets when this is almost or completely exhausted. Then, following in the footsteps of Wagner, Schaeffle and Schmoller, Struve arrives at the absurd conclusion that a country with vast territories and a large population can make its capitalist production a 'self-contained whole' and rely indefinitely on the home market alone.[299] In actual fact, capitalist production is by nature production on a universal scale. Quite contrary to the bookish decrees issued by German scholars, it is producing for a world market already from the word _go_. The various pioneering branches of capitalist production in England, such as the textile, iron and coal industries, cast about for markets in all countries and continents, long before the process of destroying peasants' property, the decline of handicraft and of the old domestic industries within the country had come to an end. And again, is it likely that the German chemical or electrotechnical industries would be grateful for the sober advice not to work for five continents, as they have done from the beginning, but to confine themselves to the German home market which, being largely supplied from abroad, is evidently far from exhausted in respect of a whole lot of other German industries? Or that one should explain to the German machine industry, it should not venture yet upon foreign markets, since German import statistics are visible proof that a good deal of the demand in Germany for products of this branch is satisfied by foreign supplies? No, this schematic conception of 'foreign trade' does not help us at all to grasp the complexity of the world market with its uncounted ramifications and different shades in the division of labour. The industrial development of the U.S.A. who have already at the time of writing become a dangerous rival to Britain both on the world market and even in England herself, just as they have beaten German competition, e.g. in the sphere of electrotechnics, both in the world market and in Germany herself, has given the lie to Struve's inferences, already out-of-date when they were put on paper.

Struve also shares the crude view of the Russian 'populists' who saw hardly more than a merchant's sordid concern for his market in the international connections of capitalist economy, and its historical tendency to create a homogeneous living organism based on social division of labour as well as the countless variety of natural wealth and productive conditions of the globe. Moreover he accepts the Three Empire fiction of Wagner and Schmoller (the self-contained Empires of Great Britain, Russia and the U.S.A.) which completely ignores or artificially minimises the vital part played by an unlimited supply of means of subsistence, of raw and auxiliary materials and of labour power which is just as necessary for a capitalist industry computed in terms of a world market as the demand for finished products. Alone the history of the English cotton industry, a reflection in miniature of the history of capitalism in general, spreading over five continents throughout the nineteenth century, makes a mockery of the professors' childish pretensions which have only one real significance: to provide the theoretical justification for the system of protective tariffs.

FOOTNOTES:

[292] Published in _Sozialdemokratisches Zentralblatt_, vol. iii, No. 1.

[293] _Critical Comments on the Problem of Economic Development in Russia._

[294] Op. cit., p. 251.

[295] Ibid., p. 255.

[296] Ibid., p. 252.

[297] Ibid., p. 260. 'There can be no doubt that Struve's attempt to refute what he calls the pessimist outlook on the analogy of the U.S.A. is fallacious. He says that Russia can overcome the evil consequences of the most recent capitalism just as easily as the U.S.A. But what he forgets is that the U.S.A. from the first represent a new bourgeois state, that they were founded by a petty bourgeoisie and by peasants who had fled from European feudalism to set up a purely bourgeois society. In Russia, on the other hand, we have a primitive communist foundation, a society of _gentes_, as it were, in the pre-civilised stage which, though it is already disintegrating, still serves as a material basis upon which the capitalist revolution (for it is in fact a social revolution) can take place and become effective. In America, a monetary economy had been stabilised more than a century ago, whereas a natural economy had until recently prevailed in Russia. It should be obvious therefore that this revolution in Russia is bound to be much more ruthless and violent, and accompanied by immensely more suffering than in America' (Engels to Nikolayon, October 17, 1893, _Letters_ ..., p. 85).

[298] _Critical Comments_ ..., p. 284.

[299] Professor Schmoller, amongst others, clearly reveals the reactionary aspect of the 'Three Empire Theory' (viz. Great Britain, Russia and the U.S.A.) evolved by the German professors. In his handbook of commercial policy (_Handelspolitische Säkularbetrachtung_), the venerable scholar dolefully frowns upon 'neo-mercantilism', that is to say upon the imperialist designs of the three arch-villains. 'In the interests of a higher intellectual, moral and aesthetic civilisation and social progress' he demands a strong German navy and a European Customs Union. 'Out of the economic tension of the world there arises the prime duty for Germany to create for herself a strong navy, so as to be prepared for battle in the case of need, and to be desirable as an ally to the World Powers'--which latter, however, Professor Schmoller says elsewhere, he does not wish to blame for again taking the path of large-scale colonial expansion. 'She neither can nor ought to pursue a policy of conquest like the Three World Powers, but she must be able, if necessary, to break a foreign blockade of the North Sea in order to protect her own colonies and her vast commerce, and she must be able to offer the same security to the states with whom she forms an alliance. It is the task of the Three-Partite Union (Germany, Austro-Hungary, and Italy) to co-operate with France towards imposing some restraint, desirable for the preservation of all other states, on the over-aggressive policy of the Three World Powers which constitutes a threat to all smaller states, and to ensure moderation in conquests, in colonial acquisitions, in the immoderate and unilateral policy of protective tariffs, in the exploitation and maltreatment of all weaker elements. The objectives of all higher intellectual, moral and aesthetic civilisation and of social progress depend on the fact that the globe should not be divided up among Three World Empires in the twentieth century, that these Three Empires should not establish a brutal neo-mercantilism' (_Die Wandlungen der Europäischen Handelspolitik des 19. Jahrhunderts_, 'Changes in the European Commercial Policy During the 19th Century', in _Jahrb. für Gesetzgebung, Verwaltung und Volkswirtschaft_, vol. xxiv, p. 381).

_CHAPTER XXII_

BULGAKOV AND HIS COMPLETION OF MARX'S ANALYSIS

The second critic of 'populist' scepticism, S. Bulgakov, is no respecter of Struve's 'third persons' and at once denies that they form the sheet-anchor for capitalist accumulation.

'The majority of economists before Marx', he declares, 'solved the problem by saying that some sort of "third person" is needed, as a _deus ex machina_, to cut the Gordian knot, i.e. to consume the surplus value. This part is played by luxury-loving landowners (as with Malthus), or by indulgent capitalists, or yet by militarism and the like. There can be no demand for the surplus value without some such extraordinary mediators; a deadlock will be reached on the markets and the result will be over-production and crises.'[300]

'Struve thus assumes that capitalist production in its development, too, may find its ultimate mainstay in the consumption of some fantastic sort of "third person". But if this great public is essentially characterised as consuming the surplus value, whence does it obtain the means to buy?'[301]

For his part, Bulgakov centres the whole problem from the first in the analysis of the social aggregate product and its reproduction as given by Marx in the second volume of _Capital_. He has a thorough grasp of the fact that he must start with simple reproduction and must fully understand its working in order to solve the question of accumulation. In this context, he says, it is of particular importance to obtain a clear picture of the consumption of surplus value and wages in such branches of production as do not turn out goods for consumption, and further, to understand fully the circulation of that portion of the social aggregate product which represents used-up constant capital. This, he argues, is a completely new problem of which economists had not even been aware before Marx brought it up. 'In order to solve this problem, Marx divides all capitalistically produced commodities into two great and fundamentally different categories: the production of producer and consumer goods. There is more theoretical importance in this division than in all previous squabbles on the theory of markets.'[302]

Bulgakov, we see, is an outspoken and enthusiastic supporter of Marx's theory. The object of his study, as he puts it, is thus a critique of the doctrine that capitalism cannot exist without external markets. 'For this purpose, the author has made use of the most valuable analysis of social reproduction given by Marx in volume ii of _Capital_ which for reasons unknown has scarcely been utilised in economic theory. Though this analysis cannot be taken as fully completed, we are yet of opinion that even in its present fragmentary shape it offers an adequate foundation for a solution of the market problem that differs from that adopted by Messrs. Nikolayon, V. V. and others, and which they claim to have found in Marx.'[303]

Bulgakov gives the following formulation of his solution which he has deduced from Marx himself: 'In certain conditions, capitalism may exist solely by virtue of an internal market. It is not an inherent necessity peculiar to the capitalist mode of production that the outside market be able to absorb the surplus of capitalist production. The author has arrived at this conclusion in consequence of his study of the above-mentioned analysis of social reproduction.'

And now we are eager to hear the arguments Bulgakov has based on the above thesis.

At first sight, they prove surprisingly simple: Bulgakov faithfully reproduces Marx's well-known diagram of simple reproduction, adding comments which do credit to his insight. He further cites Marx's equally familiar diagram of enlarged reproduction--and this indeed is the proof we have been so anxious to find.

'Consequent upon what we have said, it will not be difficult now to determine the very essence of accumulation. The means-of-production department I must produce additional means of production necessary for enlarging both its own production and that of Department II. II, in its turn, will have to supply additional consumption goods to enlarge the variable capital in both departments. Disregarding the circulation of money, the expansion of production is reduced to an exchange of additional products of I needed by II against additional products of II needed by I.'

Loyally following Marx's deductions, Bulgakov does not notice that so far his entire thesis is nothing but words. He believes that these mathematical _formulæ_ solve the problem of accumulation. No doubt we can easily imagine proportions such as those he has copied from Marx, and _if there is expanding production_, these _formulæ_ will apply. Yet Bulgakov overlooks the principal problem: who exactly is to profit by an expansion such as that whose mechanism he examines? Is it explained just because we can put the mathematical proportions of accumulation on paper? Hardly, because just as soon as Bulgakov has declared the matter settled and goes on to introduce the circulation of money into the analysis, he right away comes up against the question: where are I and II to get the money for the purchase of additional products? When we dealt with Marx, time and again the weak point in his analysis, the question really of consumers in enlarged reproduction, cropped up in a perverted form as the question of additional money sources. Here Bulgakov quite slavishly follows Marx's approach, accepting his misleading formulation of the problem without noticing that it is not straightforward, although he knows perfectly well that 'Marx himself did not answer this question in the drafts which were used to compile the second volume of _Capital_'. It should be all the more interesting to see what answer Marx's Russian pupil attempted to work out on his own.

'The following solution', Bulgakov says, 'seems to us to correspond best to Marx's doctrine as a whole: The new variable capital in money-form supplied by II for both departments has its commodity equivalent in surplus value II. With reference to simple reproduction, we have already seen that the capitalists themselves must throw money into circulation to realise their surplus value, money which ultimately reverts to the pocket of the very capitalist it came from. The quantity of money required for the circulation of the surplus value is determined in accordance with the general law of commodity circulation by the value of the commodities that contained it, divided by the average amount of money turnover. This same law must apply here; the capitalists of Department II must dispose of a certain amount of money for the circulation of their surplus value, and must consequently possess certain money reserves. These reserves must be ample enough for the circulation both of that portion of the surplus value which represents the consumption fund and of that which is to be accumulated as capital.'

Bulgakov further argues that it is immaterial to the question how much money is required to circulate a certain amount of commodities inside a country, whether or not some of these commodities contain any surplus value. 'In answer to the general question as to money sources inside the country, however, our solution is that the money is supplied by the producer of gold.'[304]

If a country requires more money consequent upon an 'expansion of production', the production of gold will have to be increased accordingly. So here we are again: the producer of gold is again the _deus ex machina_, just as he had been for Marx. In fact, Bulgakov has sadly disappointed us in the high hopes we had of his new solution. His 'solution' of the problem does not go a step beyond Marx's own analysis. It can be reduced to three extremely simple statements as follows: (1) Question: How much money do we need for the realisation of capitalised surplus value? Answer: Just as much as is required in accordance with the general law of commodity circulation. (2) Q.: Where do the capitalists get the money for the realisation of capitalised surplus value? A.: They are supposed to have it. (3) Q.: How did the money come into the country in the first place? A.: It is provided by the producer of gold. The extreme simplicity of this method of explanation is suspicious rather than attractive.

We need not trouble, however, to refute this theory which makes the gold producer the _deus ex machina_ of capitalist accumulation. Bulgakov has done it himself quite adequately. Eighty pages on, he returns to the gold producer in quite a different context, in the course of a lengthy argument against the theory of the wages fund in which he got involved for some mysterious reason. Here he suddenly displays a keen grasp of the problem:

'We know already that there is a gold producer amongst other producers. Even under conditions of simple reproduction, he increases, on the one hand, the absolute quantity of money circulating inside the country, and on the other, he buys producer and consumer goods without, in his turn, selling commodities, paying with his own product, i.e. with the general exchange equivalent, for the goods he buys. The gold producer now might perhaps render the service of buying the whole accumulated surplus value from II and pay for it in gold which II can then use to buy means of production from I and to increase its variable capital needed to pay for additional labour power so that the gold producer now appears as the real external market.

'This assumption, however, is quite absurd. To accept it would mean to make the expansion of social production dependent upon the expansion of gold production. (Hear, hear!) This in turn presupposes an increase in gold production which is quite unreal. If the gold producer were obliged to buy all the accumulated surplus value from II for his own workers, his own variable capital would have to grow by the day and indeed by the hour. Yet his constant capital as well as his surplus value should also grow in proportion, and gold production as a whole would consequently have to take on immense dimensions. (Hear, hear!) Instead of submitting this sophistical presumption to statistical tests--which in any case would hardly be possible--a single fact can be adduced which would alone refute this presupposition: it is the development of the institution of credit which accompanies the development of capitalist economy. (Hear, hear!) Credit has the tendency to diminish the amount of money in circulation (this decrease being, of course, only relative, not absolute); it is the necessary complement of a developing economy of exchange which would otherwise soon find itself hampered by a lack of coined money. I think we need not give figures in this context to prove that the rôle of money in exchange-transactions is now very small. The hypothesis is thus proved in immediate and evident disagreement with the facts and must be confuted.'[305]

Bravo! Bravissimo! This is really excellent! Bulgakov, however, thus 'confutes' also his former explanation of the question, in what way and by whom capitalised surplus value is realised. Moreover, in refuting his own statements, Bulgakov has only explained in somewhat greater detail what Marx expressed in a single word when he called the hypothesis of a gold producer swallowing up the entire surplus value of society--'absurd'.

Admittedly, Bulgakov's real solution and that of Russian Marxists in general who deal extensively with the problem must be sought elsewhere. Just like Tugan Baranovski and Ilyin [Lenin], Bulgakov underlines the fact that the opposing sceptics made a capital error with respect to the possibility of accumulation in analysing the value of the aggregate product. They, especially Vorontsov, assumed that the aggregate social product consists in consumer goods, and they all started from the false premise that consumption is indeed the object of capitalist production. This, as the Marxists now explain, is the source of the entire misunderstanding--of all the imaginary difficulties connected with the realisation of the surplus value, with which the sceptics racked their brains.

'This school created non-existent difficulties because of this mistaken conception. Since the normal conditions of capitalist production presuppose that the capitalists' consumption fund is only a part of the surplus value, and the smaller part at that, the larger being set aside for the expansion of production, it is obvious that the difficulties imagined by this (the _populist_) school do not really exist.'[306]

The unconcern with which Bulgakov here ignores the real problem is striking. Apparently it has not dawned on him that the question as to the ultimate beneficiaries, quite irrelevant so long as personal consumption of the entire surplus value is assumed, only becomes acute on the assumption of enlarged reproduction.

All these 'imaginary difficulties' vanish, thanks to two discoveries of Marx's which his Russian pupils untiringly quote against their opponents. The first is the fact that, in terms of value, the social product is composed, not of _v + s_, but of _c + v + s_. Secondly, the ratio of _c_ to _v_ in this sum continually increases with the progress of capitalist production, and at the same time, the capitalised part of the surplus value as against that part of it that is consumed, is ever growing. On this basis, Bulgakov establishes a complete theory of the relations between production and consumption in a capitalist society. As this theory plays such an important part for the Russian Marxists in general, and Bulgakov in particular, it will be necessary to get better acquainted with it.

'Consumption,' Bulgakov says, 'the satisfaction of social needs, is but an incidental moment in the circulation of capital. The volume of production is determined by the volume of capital, and not by the amount of social requirements. Not alone that the development of production is unaccompanied by a growth in consumption--the two are mutually antagonistic. Capitalist production knows no other than effective consumption, but only such persons who draw either surplus value or labour wages can be effective consumers, and their purchasing power strictly corresponds to the amount of those revenues. Yet we have seen that the fundamental evolutionary laws of capitalist production tend, despite the absolute increase, to diminish the relative size of variable capital as well as of the capitalists' consumption fund. We can say, then, _that the development of production diminishes consumption_.[307] The conditions of production and of consumption are thus in conflict. Production cannot and does not expand to further consumption. Expansion, however, is an inherent fundamental law of capitalist production and confronts every individual capitalist in the form of a stern command to compete. This contradiction is negligible in view of the fact that expanding production as such represents a market for additional products. "Inherent contradictions are resolved by an extension of the outlying fields of production."'[308] (Bulgakov here quotes a saying of Marx which he has thoroughly misunderstood; we shall later have occasion to deal with it once more.) 'It has just been shown how this is possible.' (A reference to the analysis of the diagram of enlarged reproduction.) 'Evidently, the greater share of the expansion is apportioned to Department I, to the production, that is to say, of constant capital, and only a (relatively) smaller part to Department II which produces commodities for immediate consumption. This change in the relations of the two departments shows well enough what part is played by consumption in a capitalist society, and it indicates where we should expect to find the most important demand for capitalist commodities.'[309] 'Even within the narrow limits of the profit motive and the crises, even on this strait and narrow path, capitalist production is capable of unlimited expansion, irrespective of, and even despite, a decrease in consumption. The Russian literature frequently points out that in view of diminishing consumption a considerable increase of capitalist production is impossible without external markets, but this is due to a wrong evaluation of the part played by consumption in a capitalist society, the failure to appreciate that consumption is not the ultimate end of capitalist production. Capitalist production does not exist by the grace of an increase in consumption but because of an extension of the outlying fields of production which in fact constitute the market for capitalist products. A whole progression of Malthusian investigators, discontented with the superficial harmony doctrine of the school of Say and Ricardo, have slaved away at a solution of the hopeless undertaking: to find means of increasing consumption which the capitalist mode of production is bound to decrease. Marx was the only one to analyse the real connections: he has shown that the growth of consumption is fatally lagging behind that of production, and must do so whatever "third persons" one might invent. Consumption and its volume then should by no means be considered as establishing the immediate limits to the expansion of production. Capitalist production atones by the crises for deviating from the true purpose of production, but it is independent of consumption. The expansion of production is alone limited by, and dependent upon, the volume of capital.'[310]

The theory of Bulgakov and Tugan Baranovski is here directly attributed to Marx. In the eyes of the Russian Marxists, it is on the whole the direct consequence of Marx's doctrine, of which it forms an organic part. On another occasion Bulgakov says even more clearly that it is a faithful interpretation of Marx's diagram of enlarged reproduction. Once a country has embraced capitalist production, its internal movement develops along the following lines:

'The production of constant capital makes up the Department I of social reproduction, thereby instituting an independent demand for consumption goods to the extent of both its own variable capital and the consumption fund of its capitalists. Department II in its turn starts the demand for the products of Department I. _Thus a closed circle is already formed at the initial stage of capitalist production, in which it depends on no external market but is self-sufficient and can grow, of itself, as it were, by means of accumulation._'[311]

In the hands of the Russian Marxists this theory becomes the favourite stick with which to beat their opponents, the 'populist' sceptics, in the question of markets. We can only appreciate its daring to the full when we look at its amazing discrepancy with everyday practice, with all the known facts of capitalist economy. A thesis pronounced so triumphantly as the purest Marxist gospel is even more deserving of our admiration when we consider that it is grounded in an extremely simple confusion. We shall have further occasion to deal with this confusion when we come to the doctrine of Tugan Baranovski.

Bulgakov further develops a completely erroneous theory of foreign commerce, based upon his misapprehension of the relations between consumption and production in capitalist economy. A picture of reproduction like the above in fact has no room for foreign commerce. If capitalism forms a 'closed circle' in every country from the very beginning, if, chasing its tail like a puppy and in complete 'self-sufficiency', it is able of itself to create an unlimited market for its products and can spur itself on to ever greater expansion, then every capitalist country as such must also be a closed and self-sufficient economic whole. In but a single respect would foreign commerce appear reasonable: to compensate, by imports from abroad, for certain deficiencies due to the soil and the climate, i.e. the import of raw materials or foodstuffs from sheer necessity. Completely upsetting the thesis of the 'populists', Bulgakov in fact advances a theory of international commerce among capitalist states which gives pride of place to the import of agricultural products, with industrial exports merely providing the requisite funds.

International traffic in commodities does not here seem to flow from the character of the mode of production but from the natural conditions of the countries concerned. This theory at any rate has not been borrowed from Marx but from the economic experts of the German bourgeoisie. Just as Struve took over from Wagner and Schaeffle his Three Empire Theory, so Bulgakov adopts from the late List (_R.I.P._) the division of states on the basis of 'agriculture' and 'mixed agriculture and manufacture', or rather adapts it, in deference to the times, to the categories of 'manufacture' and 'mixed manufacture and agriculture'. Nature has afflicted the first category with a deficiency in raw materials and foodstuffs, making it thus dependent upon foreign commerce. The second category has been liberally endowed with all it needs; here foreign trade is of no account. The prototype of the first category is England, of the second--the U.S.A. The stoppage of foreign commerce would mean the economic death-blow to England, but only a temporary crisis in the U.S.A. with a guarantee of full recovery.

'Production there is capable of unlimited expansion on the basis of the internal market.'[312]

This theory, a hoary relic of German economics even now, has obviously not the least grasp of the interrelations obtaining in an international capitalist economy. It conceives of modern international trade in terms that may have been appropriate to the times of the Phoenicians. Just listen to the lecture of Professor Buecher:

'Although the liberalist era has greatly facilitated international traffic, it would be a mistake to infer from this that the period of a national economy is nearing its end, to be replaced by a period of international economy.... Granted that we see in Europe to-day a number of small countries that are not independent nations in respect of their commodity supply, being compelled to import substantial amounts of their foodstuffs and luxuries, while their industrial productivity is in excess of the national needs and creates a permanent surplus for which employment must be found in alien spheres of consumption. Yet although countries of industrial production and those producing raw materials exist side by side and depend upon one another, such "international division of labour" should not be regarded as a sign that mankind is about to attain to a higher stage of development which it would be proper to contrast, under the label of world economy, with the ... previous stages. No stage of economic development has ever permanently guaranteed full autonomy in the satisfaction of wants. Every one of them has left certain gaps which had to be filled in by some means or other. So-called "international economy", on the other hand, has not, at any rate so far, engendered any phenomena which are essentially different from those of national economy, and we very much doubt that such phenomena will appear in the near future.'[313]

As far as Bulgakov is concerned, this conception at any rate results in an unexpected conclusion: his theory of the unlimited capacity for development of capitalism is confined to certain countries with favourable natural conditions. Capitalism in England is foredoomed because the world market will be exhausted before long. In the U.S.A., India and Russia it can look forward to an unlimited development because these countries are 'self-sufficient'.

Apart from these obvious peculiarities, Bulgakov's arguments about foreign commerce again imply a fundamental misconception. Against the sceptics, from Sismondi to Nikolayon, who believed that they had to take recourse to outside markets for the realisation of capitalist surplus value, he chiefly argues as follows:

'These experts obviously consider external commerce as a "bottomless pit" to swallow up in all eternity the surplus value which cannot be got rid of inside the country.'

Bulgakov for his part triumphantly points out that foreign commerce is indeed not a pit and certainly not a bottomless one, but rather appears as a double-edged sword, that exports always belong with imports, and that the two usually counterbalance one another. Thus, whatever is pushed out over one border, will be brought back, in a changed use-form, over another. 'We must find room for the commodities that have been imported as an equivalent of those exported, within the bounds of the given market, and as this is impossible, _ex hypothesi_, it would only generate new difficulties to have recourse to an external demand.'[314]

On another occasion he says that the way to realise the surplus value found by the Russian 'populists', viz. external markets, 'is much less favourable than that discovered by Malthus, v. Kirchmann and Vorontsov himself when he wrote the essay _On Militarism and Capitalism_'.[315]

Although Bulgakov fervently copies Marx's diagram of reproduction, he here exhibits no grasp whatever of the real problem towards which the sceptics from Sismondi to Nikolayon were groping their way. He denies that foreign commerce solves the difficulty as pretended, since it again brings the surplus value that has been disposed of into the country, although in a 'changed form'. In conformity with the crude picture of v. Kirchmann and Vorontsov, he thus believes the problem to be that of destroying a certain quantity of the surplus value, of wiping it from the face of the earth. It simply does not occur to him that the real problem is the realisation of the surplus value, the metamorphosis of commodities, in fact the 'changed form' of the surplus value.

Bulgakov thus finally arrives at the same goal as Struve, though by a different route. He preaches the self-sufficiency of capitalist accumulation which swallows up its own product as Kronos swallows up his children, and breeds ever more vigorously without help from outside. Now only one further step is needed for Marxism to revert to bourgeois economics, and this, as luck would have it, was taken by Tugan Baranovski.

FOOTNOTES:

[300] S. Bulgakov, _On the Markets of Capitalist Production. A Study in Theory_ (Moscow, 1897), p. 15.

[301] Ibid., p. 32, footnote.

[302] Ibid., p. 27.

[303] Ibid., pp. 2-3.

[304] _On the Markets of Capitalist Production_, pp. 50, 55.

[305] _On the Markets of Capitalist Production_, p. 132 ff.

[306] Ibid., p. 20.

[307] Bulgakov's italics.

[308] _Capital_, vol. iii, p. 387.

[309] Bulgakov, op. cit., p. 161.

[310] Ibid., p. 167.

[311] Bulgakov, op. cit., p. 210 (our italics).

[312] Ibid., p. 199.

[313] K. Buecher; The Rise of National Economy (_Die Entstehung der Volkswirtschaft_), 5th edition, p. 147. Professor Sombart's theory is the most recent contribution in this field. He argues that we are not moving towards an international economy but rather farther and farther away from it. 'I maintain, on the contrary, that commercial relations to-day do not form a stronger but rather a weaker link between the civilised nations, in relation to their economy as a whole. Individual economy takes not more but rather less account of the world market than it did a hundred or fifty years ago. At least ... it would be wrong to assume that the relative importance of international relations with regard to modern political economy is increasing. The opposite is the case.' Sombart scornfully rejects the assumption of a progressive international division of labour, of a growing need for outside markets owing to an inelastic home demand. He in his turn is convinced that 'the individual national economies will develop into ever more perfect microcosms and that the importance of the home market will increasingly surpass that of the world market for all branches of industry' (_Die Deutsche Volkswirtschaft im 19. Jahrhundert_, 2nd edition, 1909, pp. 399-420). This devastating discovery admittedly hinges on a full acceptance of the Professor's peculiar conception which, for some reasons, only considers those as 'exporting countries' who pay for their imports with a surplus of agricultural products over and above their own needs, who pay 'with the soil'. In this scheme Russia, Rumania, the U.S.A. and the Argentine are, but Germany, England and Belgium are not, 'exporting countries'. Since capitalist development will sooner or later also claim the surplus of agricultural products for the home demand in Russia and the U.S.A., it is evident that there will be fewer and fewer 'exporting countries' in the world--international economy will vanish.--Another of Sombart's discoveries is that great capitalist 'non-exporting' countries increasingly obtain 'free' imports in form of interest on exported capital--but the capital exports as well as exports of industrial commodities are of absolutely no account to Professor Sombart. 'In the course of time we shall probably get to a point where we import without exporting' (p. 422). Modern, sensational, and precious!

[314] Bulgakov, op. cit., p. 132.

[315] Ibid., p. 236. A quite uncompromising version of the same view is given by V. Ilyin [Lenin]: 'The romanticists (as he calls the sceptics) argue as follows: the capitalists cannot consume the surplus value; therefore they must dispose of it abroad. I ask: Do the capitalists perhaps give away their products to foreigners for nothing, throw it into the sea, maybe? If they sell it, it means that they obtain an equivalent. If they export certain goods, it means that they import others' (_Economic Studies and Essays_, p. 2). As a matter of fact, his explanation of the part played by external commerce in capitalist production is far more correct than that of Struve and Bulgakov.

_CHAPTER XXIII_

TUGAN BARANOVSKI AND HIS 'LACK OF PROPORTION'

We have left this theorist to the end, although he already developed his views in Russian in 1894, i.e. before Struve and Bulgakov, partly because he only gave his theories their mature form in German at a later date,[316] and also because the conclusions he draws from the premises of the Marxist critics are the most far-reaching in their implications.

Like Bulgakov, Tugan Baranovski starts from Marx's analysis of social reproduction which gave him the clue to this bewildering maze of problems. But while Bulgakov, the enthusiastic disciple of Marx, only sought to follow him faithfully and simply attributed his own conclusions to the master, Tugan Baranovski, on the other hand, lays down the law to Marx who, in his opinion, did not know how to turn his brilliant exposition of the reproductive process to good account. Tugan Baranovski's most important general conclusion from Marx's principles, the pivot of his whole theory, is that, contrary to the assumptions of the sceptics, capitalist accumulation is not only possible under the capitalist forms of revenue and consumption, but is, in fact, completely independent of both. It is not consumption, he says, but production itself which makes for the best market. Production and the market are therefore the same, and since the expansion of production is unlimited in itself, the market, the capacity to absorb its products, has no limits either.