Imperialism and the Accumulation of Capital, Bukharin 1925


The General Theory of the Market and Crises!

Before we turn to the analysis of the contradictions of capitalism, we must briefly deal with the conclusion of our analysis of Rosa Luxemburg's position from the standpoint of the theory of the market. We have investigated the process of extended reproduction and of realization of surplus value as an unavoidable factor in this reproduction, and all in all we have reached a conclusion, formulated by Marx with classic clarity as follows: 'These limits of consumption are extended by the exertions of the reproduction process itself. On the one hand this increases the consumption of revenue on the part of labourers and capitalists, on the other hand, it is identical with an exertion of productive consumption.'[1]

One must be aware of the whole difference in the way that Marx and Rosa Luxemburg posed the question. According to Marx, accumulation is possible, realization is possible, expanded production is possible. However, these processes do not run smoothly, but complete themselves in contradictions, both those which reveal themselves in the permanent variations of the capitalist system, and the others which express themselves in violent convulsions. In the last analysis, the process of capitalist reproduction itself represents an expanded reproduction of capitalist contradictions. According to Rosa Luxemburg, the matter is quite different. According to her, both a realization of the surplus value and an accumulation and expanded reproduction are absolutely impossible, in so far as one is dealing with a purely capitalist society – to a certain extent, they are impossible from the very beginning, a priori. What, according to Marx, appears in the form of ‘leaps' and spasms of the capitalist system, in the form of explosions of contradictions (crises of over-production), is held by Rosa, according to the nature of the matter, to be a permanent manifestation at any given moment in the industrial cycle.

This viewpoint was refuted by Marx a long time ago

A distinction must be made here (writes Marx). When Adam Smith explains the fall in the rate of profit from an over-abundance of capital, an accumulation of capital, he is speaking of a permanent effect and this is wrong. As against this, the transitory over-abundance of capital, over-production and crises are something different. Permanent crises do not exist. [2]

Let us also mention in passing the interesting fact that Comrade Lenin had already represented a completely identical standpoint several years before the publication of Marx's Theories of Surplus Value: 'I did not say anywhere that this contradiction (i.e. the contradiction between production and consumption, N. B.) should regularly produce a surplus-product.' In a footnote to this he says more precisely:

I stress regularly because the irregular production of a surplus-product (crises) is inevitable in capitalist society as a result of the disturbance in proportion between the various branches of industry. But a certain state of consumption is one of the elements of proportion. [3]

Consequently, it is quite permissible methodologically to examine the problem at first with the exclusion of crises, whereupon these too must be analysed.

Thus, we have seen that the limits of consumption' are expanded by production itself, which increases (1) the income of the capitalists, (2) the income of the working class (additional workers) and (3) the constant capital of society (means of production functioning as capital). We have already had the opportunity to convince ourselves that Rosa Luxemburg rejects this solution to the question as corresponding to the standpoint of Tugan-Baranovsky. Now, in itself, this argument is not exactly convincing. After all, Marx did say of the bourgeois economists that it could happen from time to time that 'a blind pig can find an acorn'. Since, however, Rosa Luxemburg's views on this point are shared by a fair number of people and since, moreover, we have not yet had a clear criticism of Tugan-Baranovsky's market theory, this seems to be the place for us to examine the theory of this economist. It seems to us to be all the more necessary to 'distance ourselves from him, since Comrade Luxemburg's errors will also come to light that much more clearly in the process of such a ‘distancing'; above all, however, our own position will be defined with more precision.

The main reason why Marx was able to clarify the question of the reproduction of the social capital was that he completely destroyed and tore to pieces the dogma that the [exchange] value of the product resolves itself into income, and only into income [i.e. wages, profits and rent], which had been dominant since the times of Adam Smith. Together, the reproduction of the constant capital and the production of additional constant capital form the most important part of the process of expanded reproduction. Moreover, this point is directly related to the theory of the market, for there appeared, alongside the consumers' market and to an increasing extent, the market of means of production, which corresponds to productive consumption, not to personal consumption. Similarly, this situation is also of decisive importance for the theory of the accumulation of capital, since the accumulation of capital presupposes an increase in the constant capital, in a progressive relation compared to the variable capital. And so on and so forth. This is why Marx, with justification, returned again and again to this theme, which Comrade Rosa Luxemburg completely fails to understand.

Herr Tugan-Baranovsky takes this completely correct thesis as his point of departure and begins to make it more 'profound'.

It follows unavoidably from the diagrammatic investigation of the capitalist economy as a social unit (he writes) that the extent of the market in the capitalist economy is in no way determined by the extent of social consumption. If the worker is replaced by the machine, there is, naturally, a regression in the social demand for means of consumption. This, however, is compensated for by a growth in the demand for means of production. Similarly, the conversion of the capitalist's income from a fund of personal consumption into capital leads to a decrease in the demand for means of consumption, whilst this is compensated for by an increase in the demand for means of production. Generally speaking, a proportioned distribution of the social production cannot initiate any sort of regression of consumer demand to the extent that the general supply of products on the market exceeds the demand for them. [4] (Tugan-Baranovsky's emphasis, N. B.)

This passage alone already contains implicitly all the logical contradictions of Tugan-Baranovsky's ' theory ', its whole ‘originality' and 'paradoxicality ', the essence of which consists in the assertion that no necessary connexion is given between the consumers' market and social production.

The passage cited, however, passes over what is at first sight an irrelevant ' triviality ', but one which is, nonetheless, crucial for the matter. Mr Tugan-Baranovsky makes the following series of assertions: the machine replaces the worker, the machine's consumption takes the place of human consumption – and the matter is settled. One compensates for the other, the balance is erected, and the emancipation of the fourth estate is replaced by an emancipation of the production of means of production, which has detached itself once and for all from the production of means of consumption. Even if it will not exactly contribute to raising the reputation of the deceased apologist of the bourgeoisie, it must nonetheless be established that Mr Tugan-Baranovsky has simply allowed himself a criminal liberty, for he has avoided the most important question of all. If a machine is employed, the - result is an expansion of the production of products which are produced with the help of this machine. What happens to these products? What is the relation of the value of the machine employed to the value of these products? In other words, and looked at from the standpoint of the market: what is the relation between the market of means of production and the consumer market? Tugan gives us no answer to the first two questions. He simply suppresses the fundamental question; as a result, it is not surprising that he reaches the 'paradoxical conclusion', about which, nota bene, he is inordinately proud: [5] since there is a market of means of production, production is independent from the consumer market.

Let us try to get to the heart of the matter. The structure of the market can be investigated from two completely different directions.

Firstly. Let us take the social capital in its commodity-form, the ‘commodity-mash' of Comrade Rosa Luxemburg. Objectively, this commodity-mash splits up into two large departments, means of production on the one hand, and means of consumption on the other.

Thus, we are dealing here with a co-existence of various commodities and their respective branches of production. When considered like this, the necessary technical-economic connexion between the various branches of production appears as hidden, veiled and invisible. The reason for this is immediately obvious. For the means of production here are not those means of production with the aid of which the co-existing means of consumption are produced. Our means of production will only be used for the production of means of consumption at the next capital turnover. The same is true of the means of consumption, for their corresponding means of production have already been used and are therefore not present on the market; their value (in this connexion it is irrelevant whether it is their full value, or only part of it) has gone over to the means of consumption and been incorporated in them. Thus, our commodity-mash and the market seen from this side can not only not illuminate the question of the necessary connexion between the various branches of production, they can only obscure it.

Secondly. The second point of view proceeds from the investigation of the mutual connexion of the various branches of production. From this point of view, we are dealing with a relationship in which there exists a series of mutually related branches of production. Each branch provides raw material for the other, until, by way of a series of stages, we reach the finished product which is destined for immediate consumption.

Here, the entire productive apparatus of society is – completely consistent with reality – basically nothing other than an apparatus for the production of human means of consumption. However large they may be in themselves, the branches producing means of production appear as preliminary stages of the production of means of consumption. Developed production, including capitalist production, obscures this fact since, as Marx has already established accurately, the temporal succession of the individual branches (as stages of a process of the production of means of consumption which is essentially unified) is replaced by their spatial arrangement. The product is present simultaneously in various stages of its manufacture. Thus, we are not dealing with a development which can be traced from its origins, not with an ab ovo, as Marx puts it. The process is not such that first, for example, only ore, coal or cotton is obtained, then only machines, then only yarn, and lastly only cloth, etc., is manufactured. No, all these branches function simultaneously. Nevertheless, this situation in no way negates the existence of a quite specific dependency relationship between them, i.e. of the mutual dependence of the various branches which produce means of production and those which produce means of consumption.

Consequently, it is absolutely inadmissible in the question of the market to be content with the first point of view, i.e. to investigate the market independently of the mutual connexions of the various branches of production. Mr Tugan-Baranovsky, on the other hand, has basically formulated the question precisely in the first way, despite all his ‘models'. We shall attempt to demonstrate this in more detail, although Mr Tugan-Baranovsky has made such an idiotic mess that it would need a special treatise to „refute it systematically.

Let us take a closer look at the problem. At any time, certain quantities of means of production and consumption are present on the market. With respect to their values, there is a relative increase in the share of means of production, and a relative decrease in the share of means of consumption. There is no doubt about this. Similarly, there is no doubt that an ever greater share of the total social labour devolves upon the production of means of production. Mr Tugan-Baranovsky is only plagiarizing Marx when he pompously spins these truths out. His deepening' of Marx's thoughts, on the other hand, is quite another matter, and it is this which represents the side of Tugan-Baranovsky's opinions.

Thus, in respect to its value the share of means of production manifests a relative increase. What does that mean? It means that – expressed in products – there is a huge increase in means of consumption. The higher the organic composition of capital and the productivity of social labour, the greater is the amount of consumption products which are placed upon the market. Moreover, the value of the individual unit of the product falls. Let us turn to the above-cited passage from Tugan (to the example of the employment of machines); in this case we are not only dealing with the fact that the meat-eating worker has disappeared and has been replaced by the coal-consuming machine, but also with the fact (which is not only no less important, it is even more important) that large commodity-amounts of those products which are produced with the help of the new machine are placed upon the market. At all events, that already leads us beyond the frame of reference of the question as first posed. Tugan does not understand this. He writes:

Nevertheless, there is no surplus product, since in this case the demand for means of production completely replaces the demand for means of consumption. It is a fact that this machine needs a certain economic expenditure in order to be able to work, just like the worker. For example, if the worker is supplanted by the machine in the production of a certain product, there is a decrease in the social demand for means of consumption for the working class; on the other hand, there is an increase in the demand for machines themselves and for everything necessary for their work (such as heating material, lubrication, etc.). As a total result, there is no contraction of the commodity market. All that is changed is the type of commodities demanded by the market. In this way, it is possible for the social wealth (which is expressed in the amount of products at the disposal of society) to increase when the social income falls. [6] (Tugan-Baranovsky's emphasis, N. B.)

We have already mentioned that the introduction of a machine into the production of a certain product' must be followed by a growth in the quantity of this 'certain product'; Mr Tugan-Baranovsky, however, does not want to know anything about this. There is, however, one more point which must be mentioned. Our Marx-critic admits that the demand for fuel, lubricating oil, etc., increases. But we ask Mr Tugan-Baranovsky: Where does this increased amount of fuel, lubricating oil, etc., come from? This blessing has not descended from heaven! And if not, he is clearly assuming an expansion of production in this branch of production (and, in connexion with this, in others too), thus additional workers, i.e. additional demand for means of consumption, including a 'certain product', in so far as there was something hidden behind this 'certain product' which belonged to the means of consumption of the working class.

What is our result? A quite different one from that of Mr Tugan-Baranovsky. A careful analysis has shown that (1) the increase in means of production calls forth a growth in the amount of means of consumption; (2) simultaneously, this increase creates a new demand for these means of consumption and that, as a result (3) a specific level of the production of means of production corresponds to a quite specific level of the production of means of consumption; in other words, the market of means of production is connected with the market of means of consumption. Thus, in the last analysis, we arrive at the opposite of that which Mr Tugan claims with such aplomb to be the most amazing discovery of the latest' political economy. From the standpoint of the question as first formulated, what happens in various branches of industry in the following capital turnovers is irrelevant in the analysis of the market. At best, only those capital turnovers directly related to the given one will be investigated – and then very one-sidedly, so that one is depriving oneself of the possibility of comprehending the 'objective meaning' of the process of production.

In fact, if one looks at the problem from this point of view, and only from this point of view, one can only arrive at a conclusion a là Tugan-Baranovsky anyway. Let us assume that we had built a magnificent machine shop in the iron foundry industry. There is a huge increase in the consumption of coal and iron. Is this the end of the affair? Not in the least. As long as we are moving in the direction of an analysis of only this preliminary stage of the process, we can in fact fall prey to the illusion that the machine industry consumes coal and iron, whilst the mining industry consumes machines, so that the whole work' is carried on in an autarchic, closed circle. Things look different as soon as we become conscious of the productive relation of the individual branches of production. The machine industry manufactures an increasing amount of machines. What does that mean? It means that, for example, in the textile industry, even with a smaller number of workers, a much 'greater' amount of cotton and other raw materials is processed and thus a significantly greater amount of the finished product, i.e. linen, an object of direct consumption, is produced. This extraordinary increase in the amount of commodities is accompanied by an increase (although by no means a proportional one) of their value, since the value of the finished means of consumption represents not only the labour expended in these branches of industry which produce means of consumption, but also the value of the raw materials, machines, etc., which is automatically transferred to them.

Mr Tugan-Baranovsky's belief that one can cram any amount of labour and means into the production of means of production, as if it were a bottomless vat, and that everything then develops smoothly, since there is no dependency relationship between the consumer market and the process of social reproduction under the capitalist regime, is therefore quite absurd. ('No regression of consumer demand, whatever form it may take, is capable of causing a surplus of general supply.')

Tugan's absurd belief reaches its culminating point in a mad utopia which he dishes up to his honoured readership quite brazenly; indeed, he is obviously proud of it. Here is the notorious passage:

But will not this relative replacement of human consumption by productive consumption of means of production result in the creation of a surplus product for which there is no room on the market? Of course not. It is a simple matter to construct a new model ... and to show clearly that even the most comprehensive replacement of workers by machines could not in itself make any machine superfluous or valueless. Even if every worker except one had been replaced by machines, then one single worker would keep the entire colossus of machines in motion and with their help produce new machines and means of consumption for the capitalist class. The working class will disappear. But that will not in the least hinder a realization of the products of capitalist industry. The capitalists will have at their disposal a large amount of means of consumption, while the entire social product of one year will be swallowed up in the following year by production and the capitalists' consumption. If the capitalists, however, wish to restrict their own consumption in their urge for accumulation, there is nothing to stop this. In this case, the production of means of consumption for the capitalists will be restricted so that a still greater share of the social product will consist of means of production destined for the further extension of production. For instance, coal and iron will be produced and used for the further extension of the production of coal and iron. The expanded production of coal and iron will in each following year consume the amounts of coal and iron produced in the preceding year and so on ad infinitum until the natural resources of the respective minerals are finally exhausted. [7]

Tugan-Baranovsky, sage and superman, decorates this charming fantasy with the following invigorating tirade: 'All this may sound strange, indeed, it may even appear to be utter nonsense. That may well be so. Truth is not always easy to grasp. But truth is still truth.'[8]

Let us take a closer look at this ‘truth' of Tugan-Baranovsky, together with its paralogical reasoning.

In the case used by Tugan we are dealing with an immeasurably high organic composition of capital which is inconceivable in real life. But let us accept Tugan's assumption for the time being. What does it mean? It means a still more measureless production of means of consumption (in products), which is so measureless that the ‘capitalists' are naturally quite unable to consume this Mont Blanc of means of consumption.

It is precisely this which Tugan, in his naiveté, overlooks, because he does not see the technical-economic logic of the production process as a whole. According to him, the production of means of production appears as an autarchic, sovereign and independent sphere, with no connecting bridge whatsoever to the production of means of consumption. In fact, one of the two: either coal and iron are only produced for the production of coal and iron, or coal and iron are also produced for the manufacture of machines, maintenance of the railways, textile factories, breweries, power stations, etc.

In the first case, we are dealing with a part of the social production which by its very nature has no connexion whatsoever with social consumption. There is not the least difference between this example and, shall we say, the case in which, according to Bulgakov's work The Philosophy of Economy (‘ The World as Economy'), the mad Simeon Stolpnik believes himself to be a capitalist who owns the world, since it belongs to his economy. The cosmic ‘metabolism' would then be simultaneous production, the idiot Simeon would exercise restraint on a global scale for the purposes of automatic ‘accumulation' and the whole process would stand in the same relation to human consumption as the ‘process of production' of coal and iron in Tugan-Baranovsky's example. It makes absolutely no difference to the matter that Tugan still keeps ‘one worker' to accomplish this humbug, for if this ‘one worker' were ordered by his clever bosses to produce coal and iron for coal and iron, this would have the same economic importance as if he were forced to spit at the ceiling all day long, or if neither he nor the products produced by him existed at all.

Things look different, however, if coal and iron are produced not only for the sake of expanding the production of coal and iron, but also to supply raw materials and fuel to the machine industry, to the branches of industry for semi-finished and finished commodities which flow out onto the consumer market. In this case, sooner or later the huge expansion of means of production would unavoidably lead to a huge increase in the means of consumption placed on the market. And if there were no demand for these means of consumption, there would take place an unavoidable and devastating collapse, in which precisely that connexion between production and consumption whose existence is denied by our 'paradoxical' Tugan would come into force with primitive violence.

Tugan builds up an entire system of further arguments around this cardinal point of confusion, which only increases the mess.

Let us examine, for example, one of his most important theses: 'Generally speaking, a proportioned distribution of the social production cannot initiate any sort of regression of consumer demand to the extent that the general supply of products on the market exceeds the demand for them.' Let us consider the matter. What does 'proportioned distribution of the social production' mean? Does it include a mutual relation between the production of means of production and the production of means of consumption, or not?

If the required proportionality is likewise a proportionality between the production of means of production and the production of means of consumption, if this proportionality is included, this means the existence of a connexion with the consumer market. But it is then absurd to maintain that no 'regression of consumer demand' can initiate an over-production and the creation of a surplus product, for the regression of consumer demand, its decrease relative to the supply of means of consumption, means nothing other than the violation of the proportionality. (We recall Lenin's words: 'But a certain state of consumption is one of the elements of proportion.') If this proportionality, however, is not included, the entire course of social reproduction as a whole remains a puzzle. For the production of means of production, which is relatively independent under the domination of capitalism because of the anarchical character of its market and production, is by its very nature connected to the production of means of consumption by a whole series of links in production; and so it must be.

‘The proportioned division of the social production' therefore, means something quite different from that which can be read in Tugan-Baranovsky. He says that coal and iron are produced for the further production of coal and iron. What do the machine factories live on? Where do they get coal and iron from? Naturally, they receive coal and iron from the sources of the tatter's production. Thus, there is a connexion between the production of coal and iron and the production of machines. Exactly the same connexion also exists between the production of machines and textiles, chemical products, etc. For abstract machines are not produced, not machines 'in themselves', not platonic ‘ideas' of machines, but extremely concrete machines, which must serve quite concrete productive ends. In other words, the value-relations here are connected in a specific form, as Marx puts it. Or else, the proportionality of the social production represents a mutual relation between the parts of capitalist production such that, along the entire front of the whole process of production, one branch of industry delivers an adequate amount of products to the other. From this point of view, it is obvious that a violation of proportionality can originate from the production of raw materials as well as the production of machines, from the production of half-finished goods as well as from the production of means of consumption.

Tugan-Baranovsky writes:

With a proportional division of the social production, no sort of regression of social consumption can initiate the creation of a surplus product. I consider the consistent regression in the share of popular consumption of the social product to be a basic tendency of capitalist development; nevertheless, in contradiction to Marx, this in no way hinders the process of the realization of the products of capitalist production. [9]

It can easily be seen that two completely different things are mixed in this tirade: the increase of the share (in values) of means of production and the disproportionality between production and consumption.

We shall analyse this really childish confusion immediately. But first, a further passage, which throws an unexpected light on Tugan's whole theoretical conception, will be quoted:

In capitalist economy (explains the super-clever Tugan, that connoisseur of commodity economy) about whose nature Marx was not completely clear, the capitalist class converts a considerably larger (our emphasis, N. B.) share of the social product into means of production than would be possible in a harmonious economy. With the existence of an association of producers, the goal of production would be the most complete satisfaction of social needs possible, which would completely exclude a state of affairs in which an expansion of production was not also accompanied by an expansion of social consumption. In capitalist society, however, it is the tendency of technological progress to replace human consumption (with the consumption?) of means of production to the disadvantage of social consumption. [10]

All that is utter nonsense. It is not true that the-share of means of production grows faster in a capitalist economy than in an association of producers'. The exact opposite is true. Capitalism sets objective limits to the growth of this 'share', because when labour-power is cheap the capitalists do not have a sufficient incentive to introduce new machines. That is part of the ABC of the science of economics. Compared with all earlier social formations, capitalism provides, of course, an incomparable stimulus to technological progress and the increase of the share of means of production. Compared with the 'association of producers', however, capitalism is an economically reactionary system precisely because it sets limits to the development of the productive forces.

The increase of the ‘share' (in values) is nothing other than the expression of the rise of the productivity of social labour. Thus, the said ' share ' (converted into labour) will grow even faster under socialism and for this very reason will guarantee the gigantic growth and diversity of use values.

If accumulation were to take place more slowly, the development of consumption would also be impossible. Capitalism is not ‘blamed' for developing the productive forces too quickly and replacing human labour with that of machines, but for the following (naturally, we are dealing here only with those questions which directly relate to our theme):

1. Capitalism develops the productive forces insufficiently and, as a result, also increases the share of means of production insufficiently.

2. Capitalism distributes these productive forces 'incorrectly' (unproductive consumption).

3. Capitalism has a double budget system of consumption (luxury production, capitalists' wastefulness, etc.).

Thus Tugan's assertion that the ‘sin' of capitalism consists in the fact that human consumption is replaced by the consumption of machines, is absurd. The essence of the question is something quite different.

Let us now return to Tugan-Baranovsky's basic arguments.

After the comments we have already made, it cannot be difficult to expose Mr Tugan's naive confusion. The fall of the share of social consumption in comparison to the share of means of production is a fact. But capitalism's 'difficulty' does not lie in this fact (which will be even more 'characteristic' for socialism). This difficulty lies in the fact that the anarchical structure of capitalism, in which production is not controlled, i.e. the lack of a social proportionality as a whole, and in which the incentives to promote accumulation stimulate an ever increasing extension of the scale of production, is unavoidably heading towards situations in which production, driven beyond the limits of the required proportion, comes into conflict with social consumption. However, the diminution of this consumption below a certain level does represent a violation of the proportionality, however much social consumption declines.

Here we come across the theory of crises. But before we turn to this, we shall first attempt to summarize what we have said about Tugan; this will take place in the form of theoretical characterization. This is all the more necessary since Mr Tugan still has a certain renommée, although it would indeed be difficult to find a writer who – sit venia verbo – was as completely devoid of theoretical honour as this same gentleman, who began his career by flirting with the proletariat and ended it by worshipping the boots of the generals.

The ‘maximes générales' of Mr Tugan's theoretical aspirations consist in the crudest apology for the capitalist regime and the struggle against revolutionary Marxism. Everything else is subordinated to these maximes. Hence the absolutely unbearable eclecticism with which all the ‘works' of the honourable professor abound.

In fact, in his fight with Marx's labour theory of value, he immediately adopts the standpoint of its 'reconciliation' with Bohm-Bawerk's marginal utility theory, [11] e.g. 'The greatest service of the new theory consists in the fact that it promises to put an end, once and for all, to the conflict over value by proceeding from one basic principle and giving a complete and exhaustive explanation of all manifestations of process of valuation.'[12]

As is well known, according to the teachings of the Austrian School the value of the means of production is determined by the value of the means of consumption, and these by their marginal utility. [13] Tugan knows that too. In his Basic Features he writes:

The value of the means of production is determined by the marginal utility of this means of production below all objects produced with the help of the given means of production which manifest the least marginal utility. [14]

But now Herr Tugan receives a new apologetic ‘commission'. He has to prove that there is no contradiction at all between production and consumption, and that no diminution of consumption whatsoever can disorganize capitalist production. ‘Coal and iron are produced for – coal and iron.'

But excuse me: what happens in that case to the theory of value? The entire theory of value is built on the utility of the use-objects! According to Bohm-Bawerk, coal and iron are to a certain extent as yet immature linen, boots and grain! This is at the bottom of the theory which 'promises to put an end, once and for all, to the conflict over value’! Just try to explain the value of coal and iron which do not mature into any kind of articles of use! A child in swaddling-clothes can see that Tugan is developing two ‘systems' of views which directly contradict each other. In as much as one can still talk of some kind of logic here, it would only be the logic of a theoretical swindle which welcomes all means once it comes to justifying His Majesty's capital.

To proceed. Mr Tugan needs to 'guarantee' the course of the social reproduction under capita/ism, and he is ready, not only to recognize Marx's thesis about the diminution of the share of social consumption, but also simultaneously to make Marx more ‘profound' and falsify him, by introducing the argument about the independence of the production of means of production from social consumption. He writes:

And the view that the extent of the market in capitalist economy is determined by the extent of social consumption could only take root in science because the economists never use the method of an investigation of capitalist economy as a whole. [15]

Now, however, Mr Tugan suddenly receives another 'commission'. He is to prove that the matter is by no means so sad from the standpoint of the class struggle as the nasty 'Marxists' claim. And in the twinkling of an eye Mr Tugan manufactures an opposite theory, which is:

The increase in the productivity of social labour leads to a growth in the total sum of the social product (in terms of labour values, N. B.). This surplus product increases relative to the total sum of the social income. Hence, all social incomes can increase simultaneously at the cost of the diminution of the share of means of production. [16]

Thus, the share of means of production falls while the share of income rises. This truth is not understood because

the simultaneous increase of the shares of capitalists and workers in the social product (but not at the cost of diminution of the shares of any other social classes in the social product) must appear completely impossible to modern political economy, which has not progressed beyond Ricardo in this connexion. However, the only reason for this apparent impossibility is that modern science views the total product as consisting solely of means of consumption. [17]

In reality, however, Tugan holds that incomes (in labour units) grow at will thanks to the productivity of labour (!), at the cost of the share of means of production! So a ready-made explanation is always immediately available. Everything is delivered at will. At one time, the share of means of production increases because this is an expression of the productivity of labour. At another, the ‘share' decreases for the very same reason... .

Of course, this clumsy apologetic dance of Tugan's has nothing in common with Marxism. It is unfortunate that Comrade Rosa Luxemburg confuses the conception of orthodox Marxism, the conception of Marx himself (in the second and third volumes of Capital as well as in Theories of Surplus Value) with Mr Tugan-Baranovsky's apologetic position. Mr Tugan-Baranovsky was wrong about Marx's correct views in his criticism (and in his quite monstrous falsification); however, it does not in the least follow that Rosa Luxemburg's viewpoint is free from sin. Tugan is wrong, not because he considers realization to be possible, but because he tears away the necessary connexion between production and consumption. On the other hand, Rosa Luxemburg is wrong, not because she insists on this connexion, but because she considers realization to be impossible within the framework of capitalist society.

We must now turn to a general treatment of the problem of crises.

We have seen that Tugan's theory of the market and realization and Marx's theory are as different as day and night. Comrade Rosa Luxemburg, however, continually accuses the models of the second volume of Capital of leading to Tugan-Baranovsky's theory and contradicting the fundamental principles of the third volume of Capital. As when she writes:

... Lastly, the model contradicts the conception of the capitalist process as a whole and its course as laid down by Marx in the third volume of Capital. The basic idea behind this conception is the immanent contradiction between the limitless expansive capability of the productive force and the limited expansive capability of social consumption under capitalist distribution relations. [18]

And at another place: ' Neither does the consumptive power of society pose any limit to production ... for the process of reproduction as portrayed in the model.'[19]

And finally, a third passage:

The model certainly admits crises, but due exclusively to lack of proportionality in production, i.e. to lack of social control over the process of production. On the other hand (our emphasis, N. B.) it excludes the deep and fundamental contradiction between the ability of capitalist society to produce and its ability to consume, which stems from capital-accumulation, airs itself periodically in crises, and drives capital on to the continual expansion of its market. [20]

As we have already mentioned, we come here upon the problem of crises. We shall allow ourselves to make a few general preliminary theoretical observations by way of introduction which will set the question within its proper framework.

As is well known, the crises we are talking about here are crises of over-production.

Now, the following questions, which Marxism answers quite specifically, arise in this connexion:


The question is whether a general over-production of commodities is possible, or only a partial one. The school of Ricardo and Say, proceeding from the premise of a simple exchange of commodity against commodity, denies the possibility of a general overproduction. Marx demonstrates convincingly (in the second volume of Capital and in Theories of Surplus Value) the possibility of a general over-production. If we have, for example, an overproduction of the most important means of consumption, it follows that there is also an over-production of means of production:

For ... over-production of iron, etc., involves an exactly similar overproduction of coal, as, say, the over-production of woven cloth does of yarn... . There cannot, therefore, be any question of the under-production of those articles whose over-production is implied because they enter as an element, raw material, auxiliary material or means of production into those articles ... whose positive over-production is precisely the fact to be explained. [21]

Thus, one cannot (in the case before us) speak of an overproduction of coal in relation to iron, etc., i.e. of relative overproduction in one branch of production which, as Marx puts it, represents the ‘preliminary stage' of a further branch of production where there is over-production. Still less can one speak of an under-production of coal in relation to iron, i.e. assert that too much iron has been produced because too little coal was produced, for an over-production of iron is impossible without a corresponding over-production of coal.

The further analysis of the problem leads us right up to those questions which we have already elucidated in connexion with the criticism of Tugan-Baranovsky's theory.

In fact, if we were dealing with a market that had emancipated itself from consumption and with a closed circle of the production of means of production in which the one branch of production serves the other and vice versa, in other words, if we were faced with a strange system of production such as that depicted in Tugan's fiery fantasy, then a general over-production would be impossible. We would simply have a swing before us: overproduction of iron would mean under-production of coal; conversely, a general over-production, i.e. a simultaneous overproduction of both coal and iron, would be as impossible as it would be for both ends of a swing to rise at the same time. We reach entirely different conclusions if we abide by Marx's theory, the correct theory, instead of Tugan-Baranovsky's theory. We then receive a chain of related branches of production, which mutually offer each other markets, and which obey a certain order determined by the technical-economic continuity of the process of production as a whole. This chain, however, ends with the production of means of consumption which no longer enter in material form, i.e. as use values, directly into any process of production but into the process of personal consumption. (For the moment, we shall ignore the fact that, with the working class, the process of consumption is a process of the production of labour-power; this will be discussed later. In the case before us we are interested solely in the two departments of the process of production which are dealt with in Marx's models.) As a result, one can indeed envisage a situation in which we have before us an over-production in all links of the chain which expresses itself in an over-production of means of consumption, i.e. in an overproduction in relation to the consumer market, which can be precisely the expression of a general over-production.

Criticizing Say, who explains that demand is limited only by production, Marx comments:

This is very wise. It is certainly limited (by production). There can be no demand for something which cannot be produced on request or which demand does not find ready on the market. But because demand is limited by production, it does not follow in the least that production is or was limited by demand and that it can never exceed demand, especially demand at the market-price.[22]


Furthermore, one must be aware of the fact that one can only be dealing with a relative over-production, i.e. with an over-production in relation to ‘effective' demand, demand backed by ability to pay, but not in relation to the absolute social need. This is left completely unanalysed in the complex of questions now before us.

What after all has over-production to do with absolute needs? It is only concerned with demand that is backed by ability to pay. It is not a question of absolute over-production — over-production as such in relation to the absolute need or the desire to possess commodities. In this sense there is neither partial nor general over-production; and the one is not opposed to the other. [23]

At another place Marx expresses the same thoughts, in a different though no less precise form: 'The excess of commodities is always relative; in other words it is an excess at particular prices. The prices at which the commodities are then absorbed are ruinous for the producer or merchant.’ [24]


Ricardo's adherents, unlike Ricardo himself, certainly recognized an over-production of capital, but firmly denied an over-production of commodities. It is, however, obvious that there can be no over-production of capital if there can be no over-production of commodities. For what does production of capital mean? The process of the production of capital is clearly nothing other than the process of capitalist production; in other words, of the production of commodities under conditions of capitalist production, not under conditions of simple commodity production. The production of capital is, therefore, a production of capitalistically produced commodities. Hence, an over-production of capital is also an over-production of commodities. To admit an overproduction of capital and to deny an over-production of commodities is to show that 'thoughtlessness, which admits the existence and necessity of a particular phenomenon when it is called A, but denies it as soon as it is called B'. [25]


From the standpoint of our entire criticism of Luxemburg's position and that of the Narodniks, Sismondists and other con-fusionists, this point represents a cardinal problem. In this question, too, Marx's position is quite unequivocal. We have already spoken of this at the beginning of the chapter (and also of Lenin's position on this point). We will therefore be content with a final quote. In his discussion of the problem of general over-production, Marx says that the standpoint of an only partial over-production is merely 'a poor way out. In the first place, if we consider only the nature of the commodity, there is nothing to prevent all commodities from being superabundant on the market... . We are here only concerned with the factor of crisis.'[26]

In other words: a conflict between production and consumption, or, which amounts to the same thing, a general over-production, is nothing other than a crisis. This position is basically different from that held by Rosa Luxemburg, according to which overproduction must manifest itself at all times in a purely capitalist society, since an expanded reproduction is absolutely impossible.

Thus, one can only speak of a relative over-production. However, from the standpoint of the absolute satisfaction of needs under capitalism, we are always dealing with an under-production. Not only a partial, but also a general over-production is possible; precisely this contains the conflict between production and consumption. This over-production is an over-production of capital, hence also an over-production of commodities. But this overproduction is not a permanent phenomenon which can always be observed; rather it is the expression of crises. 'There are no permanent crises' (Marx).

If we separate off the most important points which concern us, we receive the following theoretical configuration:

I. The apostles of harmony (Say and Co.) and the apologists: There is never a general over-production.

II. The Sismondists, Narodniks, Rosa Luxemburg: A general over-production must always be present.

III. The orthodox Marxists: A general over-production is sometimes unavoidable (periodic crises).

Or, in a different connexion:

I. Tugan-Baranovsky, Hilferding et al.: Crises stem from the disproportion between the individual branches of production. The, factor of consumption plays no role in this. [27]

II Marx, Lenin and the orthodox Marxists: Crises stem from the disproportion of social production. The factor of consumption, however, forms a component part of this disproportionality.

We must now analyse these basic concepts in more detail.

We have already cited one of Rosa Luxemburg's arguments against Marx's models, the argument concerning the connexion between production and consumption. Rosa Luxemburg is of the opinion that Marx's model 'certainly admits crises (!), but does so exclusively to a lack of proportionality in production, i.e. (my emphasis, N. B.) to lack of social control over the process of production'. She immediately continues: ‘On the other hand (my emphasis, N. B.), it excludes the deep and fundamental contradiction between the ability of capitalist society to produce and its ability to consume ...' (see above). It is easily apparent that Comrade Rosa Luxemburg is opposing control over production to the relation of production to consumption, hence also disproportionality of production to disproportionality between production and consumption. This conception leads her to countless mistakes and incredible confusion.

Let us imagine three socio-economic formations: the collective-capitalist social order (state capitalism), in which the capitalist class is united in a unified trust and we are dealing with an organized, though at the same time, from the standpoint of the classes, antagonistic economy; then, the 'classical' capitalist society, which Marx analyses; and finally socialist society. Let us follow (I) the manner of the course of expanded reproduction; thus, the factors which make an accumulation' possible (we give the word ‘accumulation' quotation marks, because the designation ‘accumulation' by its very nature presupposes only capitalist relations); (2) how, where and when crises can arise.

1. State capitalism. Is an accumulation possible here? Of course. The constant capital grows, because the capitalists' consumption grows. New branches of production, corresponding to new needs, are continually arising. Even though there are certain limits to it, the workers' consumption increases. Notwithstanding this under-consumption' of the masses, no crisis can arise, since mutual demand of all branches of production, and likewise consumer demand, that of the capitalists as well as of the workers, are given from the start. Instead of an ‘anarchy of production' - a plan that is rational from the standpoint of Capital. If there is a ‘miscalculation' in means of production, the surplus is stored, and a corresponding correction will be made in the following period of production. If, on the other hand, there has been a miscalculation' in means of consumption for the workers, this excess is used as 'fodder' by distributing it amongst the workers, or the respective portion of the product will be destroyed. Even in the case of a miscalculation in the production of luxury articles, the 'way out' is clear. Thus, no crisis of over-production can occur here. The capitalist's consumption constitutes the incentive for production and the plan of production. Hence, there is no particularly fast development of production (small number of capitalists).

2. 'Classical' capitalism. We have already seen in the previous chapters how accumulation is possible. In contrast to the case we have just dealt with, here there is an anarchy of production', a money connexion through the market, the form of the wage, etc. If we take an 'ideal average', the solution of the task takes place in the same way as in the first case. (Growth of the constant capital, growth - in values - of the consumption of workers and capitalists.) As opposed to the first case, the 'ideal average' is merely a certain tendency here, which manifests itself in the contradictory and blind course of economic processes. On the other hand, the form of the purchase or sale and the separation of sale from purchase (in contrast to exchange of product against product) is itself a condition of the disturbance of social reproduction. This has the following results:

Firstly, a proportionality between the branches of production cannot exist empirically. It takes effect merely as a tendency; in other words, by way of continual disturbances in the proportionality.

Secondly, these disturbances unavoidably bring about difficulties in the process of social reproduction, because the connexion between the branches of production is effected through money and market.

Thirdly, a disproportionality between production as a whole and social consumption can exist, as a result of the disproportionality between the production of means of consumption and the effective demand for means of consumption. (Demand here is not given a priori as a planned demand; the whole relation only results post factum.)

Fourthly, this disproportionality unavoidably brings about a disturbance in the process of social reproduction, as a result of the money and market connexion. (The surplus cannot be expended as 'fodder' for the workers here, as in the first case.)

Fifthly, this capitalism is continually promoting the tendency to develop production quickly on the one hand (existence of competition, which is lacking in the first case), and to depress the wage on the other (pressure of the reserve army). In other words: it is the tendency of capitalism to push production beyond the limits of consumption. For this kind of disproportionality only appears if an over-production of means of production has taken place and manifested itself externally as an over-production of means of consumption. Everything can proceed relatively smoothly until this phenomenon occurs, since the 'surplus' wave of expansion bypasses those intermediary links in production, in which no conflict can as yet take place with personal consumption. On the other hand, this does not mean that an accumulation is impossible. For the point here is not merely that more is produced, but that more is not produced in the relevant proportion. In contrast to Rosa Luxemburg's assertion, it is not impossible to realize the surplus value. Under certain conditions, however, it does become impossible; we are then dealing with a crisis. ‘... that is, reproduction on too large a scale, which is the same as over-production pure and simple.'[28]

This is the situation in 'classical' capitalist society. We now turn to socialist society.

3. Socialist society. If we take the ‘pure type' of socialist society, there are no crises; the share of means of production, however, will increase even faster than under capitalist rule, since the machine is introduced here under relations in which it would be meaningless in capitalism.

Precisely for that reason, however, the needs of the broad masses of the entire society are satisfied much better than in the cases of the previously mentioned socio-economic formations.

On this basis, it is now easy to estimate how far Comrade Rosa Luxemburg is from the truth. In dealing with an anti-Malthusian pamphlet, Marx writes:

The following is implied here: (1) capitalist production, in which the production of each individual sphere of production and its increase is not directly controlled and determined by the needs of society, but by the productive forces available to each individual capitalist independent of the needs of society. (2) It is implied that, nonetheless, production takes place in such proportions, as if capital were applied directly by society into the various spheres of production, according to its needs.

Under this implication (contradictio in adjecto), over-production could not in fact take place if capitalist production were absolutely socialist production. [29]

In other words: if there were a planned economy, there could be no crisis of over-production. Marx's thoughts are quite clear here: the overcoming of anarchy, i.e. planning, is not opposed to the liquidation of the contradiction between production and consumption as a particular factor; it is portrayed as containing this liquidation. In Rosa Luxemburg, however, we find – as can be seen from the passage cited above dealing with the models in the second volume of Capital – a 'lack of proportionality in production, i.e. of social control over the process of production' on the one hand, and the deep and fundamental contradiction between the ability of capitalist society to produce and its ability to consume' on the other. And Rosa Luxemburg claims that the models in the second volume admitted crises but due exclusively to lack of proportionality in production, i.e. to lack of social control over the process of production. Rosa Luxemburg directly opposes another factor to this one. As we have seen, her thoughts are formulated precisely. Following the sentence cited, she writes: ‘On the other hand, it (the model in the second volume, N. B.) excludes thee deep and fundamental contradiction ...' etc. There can be no more exact formulation, no clearer expression, of a blatantly incorrect position.

It follows from Rosa Luxemburg's viewpoint that crises will also occur in a planned economy, given the existence of ‘under-consumption of the masses'. In other words, according to Rosa Luxemburg, crises are obligatory for our hypothetical state-capitalist society. We, on the other hand, have demonstrated that there can be no crises.[30] But that is not so difficult to understand. In fact, where is the planlessness of the economy, its anarchy, expressed? In the fact that there is no proportionality between the individual branches of production and the scale of production and the scale of personal consumption. This is precisely why Marx speaks about the proportioned application of capital (1) 'in the various spheres of production', and (2) 'according to its [society's, Trans.] needs'. Both factors belong to the concept of the proportionality of social production. Or, to express it in more popular terms: let us assume that we had a complete proportionality in every branch of production, in the sense of their unilateral connexion in one direction: from means of production to means of consumption. Let the entire social production be represented by the series: coal, iron, machines, cloth, so that the production of coal would correspond exactly to the amount which could be consumed by the production of iron, as much iron as would be needed by the production of machines, and so on through the entire chain of branches of production. Would we then have a guarantee against the occurrence of a crisis? No. For it can happen that more cloth is produced than is used and, as a result, also more machines, iron and coal than is necessary. In other words: the disproportionality of the entire social production consists, not only in the disproportionality between the branches of production, but also in the disproportionality between production and personal consumption. Or, to use Lenin's words:

The consumer power of society' and the 'proportional relation of the various branches of production' - these are not conditions that are isolated, independent of, and unconnected with, each other. On the contrary, a definite condition of consumption is one of the elements of proportionality. In actual fact, the analysis of realization showed that the formation of a home market for capitalism owes less to articles of consumption than to means of production. From this it follows that Dept I of social production (the production of means of production) can and must develop more rapidly than Dept II (the production of articles of consumption). Obviously, it does not follow from this that the production of means of production can develop in complete independence of the production of articles of consumption and outside of all connexion with it. [31]

Let us look at the same question from a somewhat different angle. We assumed a proportionality among the various branches of production, in one direction, from coal to cloth, as we expressed it. However, the opposite direction, from cloth to coal, is of equal importance for the course of social reproduction. Even cloth wants to be sold, so that it can be replaced by a machine, etc. Let us once again present the formula for social reproduction: when the entire social production is divided into two, i.e. divided into the production of means of production and the production of means of consumption, the concrete-material parts of the product must mutually exchange places in a specific relationship. But the proceedings are not limited to the mere migration of products from the upper floor (production of means of production) to the lower (production of means of consumption). Rather, there must also be a migration from the lower floor to the upper one, and moreover, in a specific and strictly defined relationship.

Here, we must mention our formulae once again:


From this, as we know, follows the basic condition of the process of reproduction, which is expressed in the equation:

c2 + β2c = v1 + α1 + β1v

or, which amounts to the same thing:

v1 + β1v = c2 + β2c - α1  

Thus, if c2 + β2c - α1v1 + β1v, in other words, will be greater than the future variable capital in the production of means of production, we are dealing with an over-production of means of consumption. However, the entire mechanism of reproduction also has another side to it, which is much more directly related to the problem before us. It is this: we have seen from the analysis of social reproduction that the replacement of the concrete-material elements takes place in various ways. Means of production take their places by means of acts of exchange between the capitalists. Means of consumption, on the other hand, in as much as they represent an element of the variable capital, are directed to their places through acts of the purchase of labour-power by the capitalists and the purchase of means of consumption by the workers. Reproduction is impossible without this. Reproduction is inconceivable in the absence of those acts in which the worker sells his labour-power and buys means of consumption. The models in the second volume of Capital do not exclude these acts of purchase (as may seem to be the case if one pays attention to Rosa Luxemburg's explanations); on the contrary, they explicitly presuppose them.


Firstly, a correct proportion between the workers' means of consumption and the other parts of the total social product is an essential requirement for the smooth running of social reproduction.

Secondly, the amount of the value of the entire labour power, or the sum of the wages paid to all workers, including the additional workers of the new productive cycle, must be equal to the value of the workers' means of consumption. Let us give this amount the symbol V; we then receive:

V = (v1 + β1v) + (v2 + β2v)

This equality, however, is not a reflection of a pre-established harmony. This harmony does not exist in reality, due to the contradictory tendencies of capitalism (the tendency to increase production, but decrease wages), which arise spontaneously. Thus, the dynamic of capitalism leads to:

V < (v1 + β1v) + (v2 + β2v)

in other words, to a disproportionality between production and consumption. It is obvious that, in the production of means of production, for instance, the level of the wage is not determined by a calculation of the values which will be produced in the production of means of consumption for the workers. Similarly, the extent of this production is determined by the level of demand, which simply cannot be calculated. Consequently, one should not differentiate between the disproportionality of the masses' production and consumption, and the general disproportionality of the process of production.

It must be noted here that this conclusion becomes much more important if one visualizes the entire mechanism of the process of reproduction in its totality.

Apologetic economists denied crises, amongst other things, on account of a 'metaphysical equilibrium between buyers and sellers', consumers and producers. Marx comments:

Thus nothing is more absurd as a means of denying crises than the assertion that the consumers (buyers) and producers (sellers) are identical in capitalist production. They are entirely different categories. In so far as the reproduction process takes place, this identity can be asserted only for one out of 3,000 producers, namely the capitalist. On the other hand, it is equally wrong to say that the consumers are producers. The landlord does not produce (rent), and yet he consumes. The same applies to all monied interests. [32]

In other words, Marx is indicating the special role of the worker in the circulation process. The workers do not buy means of production, although they consume them productively, for they do not consume them for themselves. The workers sell a commodity, but not the one which they produce in the factories. What has all this to do with reproduction?

Firstly, we must be aware that capitalist circulation differs from simple commodity circulation in that, amongst other things, labour-power, containing use value and exchange value, figures in the commodities circulating on the market. But that means that, seen socially, i.e. from the point of view of social reproduction as a whole, labour-power is produced as a commodity in capitalist society.

On the other hand, we know that the 'real' form of capital, its productive form, seen from the concrete-material point of view, not from that of its value, represents a relation of means of production with living labour-power, not, however, with means of consumption. In this respect, means of consumption appear, to a certain extent, as a mediating link. In their natural state they cannot form a component part of functioning productive capital; their value must inevitably be converted into the value of labour-power, whose natural form corresponds to the natural form of means of production. Thus, means of production and labour-power are the forms of productive capital. At the same time, this corresponds, in the circulation process, to the movement of labour-power on the commodity market. But what does it correspond to in the sphere of production of the given commodity? We have seen that the production of means of consumption for the workers is the indirect production of labour-power or, to be more exact, the precondition of this production. It is, however, the process of personal consumption which constitutes the direct process of the production of labour-power. Seen from the social point of view, the process of the working class's consumption is the process of the production of labour-power. It follows without further ado that the disproportionality between production and consumption also represents a disproportionality of production in a more direct and exact form, namely, in the form of a disproportionality between the production of means of consumption and the production of labour-power.

When analysing crises, one does not normally take the time to examine the fact that labour-power is also a commodity. And this despite the fact that, as we have already explained, we are dealing with a specific characteristic of capitalist exchange and the capitalist mode of production. Once labour-power has entered into commodity circulation, the contradictions inherent in commodity production must also appear here in a complicated form. The contradiction between the use value of the commodity and its exchange value appears here in the shape of the contradiction between the production of surplus value, which strives for boundless expansion, and the limited purchasing power of the masses, who are realizing the value of their labour-power. This contradiction finds its solution in crises.

Let us now return to the main thread of the argument. At the end of the theoretical part of his treatise on crises, Mr Tugan-Baranovsky writes:

If production were organized according to a plan, the market would possess a complete knowledge of demand, and the power to make a proportioned division of production, to transfer labour and capital freely from one branch of industry to another, and thus the supply of commodities could never exceed demand, however much consumption might fall. [33]

This statement is absolutely correct, although one must criticize the terminology (‘ market ', ‘commodity', etc., in organized production). It is unfortunate for Tugan-Baranovsky that this correct statement stands in complete contradiction to his entire theory. It would appear to be useful to analyse him critically, since such an analysis will allow a still more specific conception of the solution to the problem.

According to Tugan-Baranovsky, knowledge of demand belongs to the concept of planned production. What does this mean?

Demand is by no means a simple concept. It covers demand for coal, demand for machines, demand for iron, etc., in a word, demand for means of production. It also includes demand for bread, demand for textiles, demand for means of consumption. To the extent that we are dealing with an antagonistic (class) social order, 'knowledge of demand' presupposes not only knowledge of the demand for means of production, but also knowledge of consumer demand from workers and capitalists. There will be no crisis. Amongst other reasons, it will not take place because the mutual dependence of production and consumption is known and given; thus, there takes place precisely what Tugan-Baranovsky denies theoretically, once this learned man constructs a market theory with the aid of ill-digested fragments of Marx's analysis. Tugan's error, however, illuminates the statement that the 'level of consumption' is an element in the proportionality of products even more brilliantly. In fact, let us take a somewhat closer look at the structure of the mutual relation of the various branches of production.

Below a series of branches of production, the production of ‘provisions, clothing and housing' stands closest to consumption. Each of these sub-divisions falls into a huge number of further independent branches of production. Related to this series of branches of production, there is a series of means of production industries, which fall, horizontally and vertically, into countless branches of production, according both to their relation in the manufacture of their products to various means of consumption, and also to the mutual connexions of the means of production. Tugan-Baranovsky reaches the paradoxical conclusion that ‘production is independent of consumption', but only because he analyses the connexion in only one sphere: in the sphere of the mutual connexions of the various industries in the area of the production of means of production. Firstly, he overlooks the proportions between the production of means of production and the production of means of consumption (we have already dealt with that); secondly, he completely avoids the question of the proportions between the various branches of production in the production of means of consumption, which -seems particularly strange from an adherent of the marginal utility theory. When all these connexions are taken into consideration, the following result seems entirely plausible:

A change in consumer demand will inevitably change (1) the proportions between the individual branches of production in the production of means of consumption, and (2) as a result of the connexion between the two fundamental branches of social production, the proportions between the various branches of production in the production of means of production. In other words, a change in the consumer budget of society inevitably leads to a restructuring among the different spheres of social labour. The fact that this change is caused by a change in production does not alter the matter itself.

That proves that the ‘element of consumption' is not an independent factor (an error committed by Tugan and Rosa Luxemburg, even though they both arrive at diametrically opposite conclusions), but one element of the total proportionality or disproportionality of social production.

After what we have already said, it is no longer difficult to expose the methodological roots of Rosa Luxemburg's error. The organism of capitalist production is a unity of contradictions'. The apologists only see the unity. ' Thus the apologists', wrote Marx, 'consist in the falsification of the simplest economic relations, and particularly in clinging to the concept of unity in the face of contradiction.'[34]

In another place Marx gives a splendid summary of these apologetic exercises, again in connexion with the theory of crises. He writes:

Sale and purchase are separate (in reality, N. B.), commodity from money, use value from exchange value. But it is assumed (by bourgeois scholars, N. B.) that this division does not take place but exchange trade. Consumption and production are separate; there are producers who do not consume as much as they produce, and there are consumers who do not produce. But it is assumed that production and consumption are identical. The capitalist produces directly to increase his profit for the sake of the exchange value, not for consumption. It is assumed that he produces directly and exclusively for pleasure. Assuming that the existing contradictions of bourgeois production — which indeed balance out, a process of adjustment which appears at the same time as crisis, forced composition of the factors, divided, indifferent towards each other, yet belonging together — so these contradictions cannot be exploited. In every branch of industry every individual capitalist produces in relation to his capital, regardless of the needs of society. ... It is assumed that he produces as if he produced by order of society. [35]

Comrade Rosa Luxemburg very clearly sees this mistake of the apologists. But there are other mistakes. Not only the contradictions, but also the unity, has to be seen. This unity is fully manifested during the crises, while according to Rosa Luxemburg this unity is altogether impossible. In other words: Rosa Luxemburg seeks for superficial, formally logical contradictions in capitalism, which are not dynamic, do not adjust to each other, are not elements of a contradictory unity, but patently deny this unity. But in reality we find dialectic contradictions of a whole, periodically adjusting to each other, constantly reproducing, to blow up the entire capitalist system at a certain stage of development, i.e. destroying the previous unity with the system itself.


[1] Capital, Vol. III, p. 471. The reader should note that this quotation is from the third volume of Capital which, according to Rosa Luxemburg, Tugan-Baranovsky and many others, is supposed to contain elements opposing the formulae in Vol. II.

[2] Theories of Surplus Value, Vol. II, p. 497. (My emphasis in last sentence, N. B.)

[3] Vladimir Ilyin, reply to Mr P. Nezhdanov, Lenin, Collected Works, Vol. IV, p. 161.

[4] M. J. Tugan-Baranovsky, Periodic Industrial Crises, 4th edn. (published by the Literary Cooperative Society of the Smolensk Government-Committee, Smolensk, 1923), p. 205 (in Russian). Moreover, this edition is provided with a preface by Comrade W. Smuschkov which demonstrates a universal ignorance and according to which Marxists reject the thesis that capitalist production 'creates its own market', that Marx had given 'no legal (?!) and detailed (?!) thorough doctrine of crises' and so on. It seems that we are witnessing the beginning of a spread of amateur theoreticians who think that their achievements need only be guided by the conviction that boldness alone can move mountains.

[[5] In German the phrase is 'nicht weniger stolz als der Neger auf sein Nasenring', Trans.]

[[6] op. cit., p. 205.1

[[7] op. cit., p. 212.]

[8] loc. cit.

[9] op. cit., p. 213.

[10] ibid., p. 212.

[11] Eugen von Bohm-Bawerk (1851-1914). Austrian. Leader of the Austrian School at the latter end of the nineteenth century. Three times Finance Minister of the Austro-Hungarian Empire. Later held chair of Political Economy at Vienna University. Two major works are Capital and Interest and The Positive Theory of Capital. Wrote a rebuttal of Marxist economics in Karl Marx and the Close of His System.]

[12] Tugan-Baranovsky, Basic Features of Political Economy, 2nd edn. (Petersburg, 1911), p. 40.

[[13] Austrian School. Developed the marginal utility theory of value. Weiser and Menger, the two leading exponents. Bukharin wrote an analysis of this school in his Economic Theory of the Leisure Class.]

[14] op. cit., p. 45.

[15] Periodic Industrial Crises, p. 205. ' I consider the steady decrease of the share of popular consumption to be a basic tendency of capitalist development' p. 213.

[16] Basic Features of Political Economy, p. 441. The context and the graphic additions show that we are dealing with labour values here. The reader will find more detailed material on this subject in our study devoted to the theory of distribution, 'An Economy Without Value', Neue Zeit, 1913-14, Vol. I.

[17] Basic Features of Political Economy, pp. 440-41.

[18] Luxemburg, The Accumulation of Capital, p. 266. [See p. 343, London edn.]

[19] ibid., p. 268. [p. 345, London edn.]

[20] ibid., p. 270. [pp. 346-7, London edn.)

[21] Theories of Surplus Value, Vol. II, p. 530.

[22] op. cit., Vol. III [Kautsky edn.] (Solution of Ricardo's School. b.). Once again the author of the 'Inquiry', p. 139, footnote.

[23] op cit., Vol. II, p. 506.

[24] ibid., p. 505.

[25] op cit., p. 499.

[26] ibid., p. 504. (My emphasis on the last words, N. B.)

[27] 'These models (Marx's models, N. B.), however, also demonstrate that in capitalist production reproduction can proceed without hindrance both on a simple and an expanded level, provided that these proportions are maintained. On the other hand, crisis can also occur in simple reproduction when the proportion is violated. ... Hence, it does not follow that crisis must stem from the immanent under-consumption of the masses in capitalist production... . Similarly, the possibility of a general over-production of commodities does not follow from the models in themselves; rather, every extension of production which can in any way follow from the available productive forces is shown to be possible.' (Rudolf Hilferding, Das Finanzkapital, 2nd edn. (Vienna, 1920), p. 339. {English edition, p256. Cf. ‘Anti-Critique, p84.} Our emphasis, N. B.) To be fair, we must note that even Mr Tugan admits a general over-production, although only as a peculiar expression of partial over-production, of unproportional distribution of social labour under relations of the money-economy' (Periodic Industrial Crises, p. 265).

[28] Marx, Theories of Surplus Value, Vol. II, p. 533.

[29] op. cit., Vol. III, p. 137 [Kautsky edn.].

[30] The intelligent reader will not, of course, have forgotten that we are dealing with abstract 'ideal types' of social formations, and not with empirically given social orders.

[31] V. I. Lenin, 'A Note on the Question of the Market Theory', Collected Works (Foreign Language Printing House, Moscow), Vol. 4, pp. 58-9 (emphasis in original).

[32] Theories of Surplus Value, Vol. II, p. 519.

[33] Periodic Industrial Crisis, pp. 281-2.

[34] Theories of Surplus Value, Vol. II, p. 500.

[35] op. cit., Vol. III, p. 140, footnote.