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,(1) 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.
‘The diagram quoted’, he says, ‘was to prove conclusively a postulate which, though simple enough, might easily give rise to objections, unless the process be adequately understood – the postulate, namely, that capitalist production creates a market for itself. So long as it is possible to expand social production, if the productive forces are adequate for this purpose, the proportionate division of social production must also bring about a corresponding expansion of the demand inasmuch as under such conditions all newly produced goods represent a newly created purchasing power for the acquisition of other goods. Comparing simple reproduction of the social capital with its reproduction on a rising scale, we arrive at the most important conclusion that in capitalist economy the demand for commodities is in a sense independent of the total volume of social consumption. Absurd as it may seem to “common-sense”, it is yet possible that the volume of social consumption as a whole goes down while at the same time the aggregate social demand for commodities grows.’(2)
And again further on:
‘Arising from abstract analysis of the reproductive process of social capital we have formed the conclusion that nothing will be left over of the social product in view of the proportionate division of the social capital.’(3)
Accordingly Tugan Baranovski subjects Marx’s theory of crises to a revision which he claims to have developed from Sismondi’s ‘over-consumption’.
‘Marx is in substantial agreement with the general view that the poverty of the workers, i.e. of the great majority of the population, makes it impossible to realise the products of an ever expanding capitalist production, since it causes a decline in demand. This opinion is definitely mistaken. We have seen that capitalist production creates its own market – consumption being only one of the moments of capitalist production. In a planned social production if the leaders of production were equipped with all information about the demand and with the power to transfer labour and capital freely from one branch of production to another, then, however low the level of social consumption, the supply of commodities would not exceed the demand.’(4)
The only circumstance which periodically causes the market to be flooded is a lack of proportion in the enlargement of production. On this assumption, therefore, Tugan Baranovski describes the course of capitalist accumulation as follows:
‘What would the workers ... produce if production were organised on proportionate lines? Obviously their own means of subsistence and production. With what object? To expand production in the second year. The production of what products? Again of means of production and subsistence for the workers – and so on ad infinitum.’(5)
This game of question and answer, mind you, is not a form of self-mockery, it is meant in all seriousness.
‘If the expansion of production has no practical limits, then we must assume that the expansion of markets is equally unlimited, for if social production is proportionately organised, there is no limit to the expansion of the market other than the productive forces available.’(8)
Since production thus creates its own demand, foreign commerce of capitalist states is also assigned that peculiar mechanistic function we have already met in Bulgakov. A foreign market, for instance, is an absolute necessity for England.
‘Does not this prove that capitalist production creates a surplus product for which there is no room on the internal market? Why, come to that, does England require an external market? The answer is not difficult: because a considerable part of England’s purchasing power is expended on obtaining foreign commodities. The import of foreign commodities for the English home market also makes it essential to export English commodities abroad. Since England cannot manage without importing from abroad, exports are a vital condition for that country, since without them she would not be able to pay for her imports.’(7)
Here again agricultural imports are described as a stimulating and decisive factor, quite in accordance with the scheme of the German professors.
What, then, is the general line of reasoning on which Tugan Baranovski supports his daring solution of the problem of accumulation, the new revelation on the problem of crises and a whole lot of others? Hard to believe, but quite incontrovertible for all that, Tugan Baranovski’s proof consists exclusively and entirely – in Marx’s diagram of enlarged reproduction, no more no less. Although he repeatedly refers rather pompously to his ‘abstract analysis of the reproductive process of social capital’, to the ‘conclusive logic’ of his analysis, this entire analysis is nothing but a copy of Marx’s diagram of enlarged reproduction, with a different set of figures. Nowhere in the entire works of Tugan Baranovski shall we find a trace of any other argument. In Marx’s diagram, admittedly, accumulation, production, realisation and exchange run smoothly with clockwork precision, and no doubt this kind of ‘accumulation’ can continue ad infinitum, just as long, that is to say, as ink and paper do not run out. And it is this harmless written exercise with mathematical equations which Tugan Baranovski quite seriously considers a demonstration of such a course in real events.
‘The diagrams we have adduced are bound to prove conclusively that ...’
On another occasion he counters Hobson, who is convinced that accumulation is impossible, with the following words:
‘Diagram No.2 of the reproduction of social capital on a rising scale corresponds to the case of capital accumulation Hobson has in mind. But does this diagram show a surplus product to come into being? Far from it.’(8)
Hobson is refuted and the matter settled because ‘in the Diagram’ no surplus product comes into being.
Admittedly, Tugan Baranovski knows quite well that in hard fact things do not work out so smoothly. There are continual fluctuations in the exchange relations and periodical crises. But these crises happen only because in the expansion of production the proper proportions are not maintained, because, that is to say, the proportions, of ‘diagram No.2’ are not observed in the first place. If they were, there would be no crisis, and capitalist production could get along as nicely as it does on paper, in every detail. Tugan Baranovski is committed to the view that we can ignore the crises if we consider the reproductive process as a continuous process. Although the ‘proportion’ may be upset at any moment, yet on average it will always be re-established by different deviations, by price-fluctuations from day to day, and in the long run by periodical crises. That on the whole this ‘proportion’ is more or less maintained is proved by the fact that capitalist economy is still going strong – otherwise it would long ago have ended in chaos and collapse. In the long run, then, Tugan Baranovski’s ‘proportion’ is observed by and large, and we must conclude that reality obeys ‘diagram No.2’. And since this diagram can be indefinitely extended, it follows that capitalist accumulation can also proceed ad infinitum.
What is striking in all this is not Tugan Baranovski’s conclusion that the diagram corresponds to the actual course of events – as we have seen, Bulgakov also shared this belief; the really startling fact is that Tugan Baranovski sees no necessity for as much as inquiring whether the diagram is correct, that, instead of proving the diagram, he considers this, the arithmetical exercise on paper, as proof of the actual state of affairs. Bulgakov honestly tried to project Marx’s diagram on the real concrete relations of capitalist economy and of capitalist exchange; he endeavoured to overcome the difficulties resulting from it, though without success, it is true, remaining to the last involved with Marx’s analysis, which he himself recognised to be incomplete and fragmentary. But Tugan Baranovski does not need any proof, he does not greatly exercise his brains: since the arithmetical sums come out satisfactorily, and may be continued ad lib., this is to him proof that capitalist accumulation can also proceed without let or hindrance – provided the said ‘proportion’ obtains, which it will have to do by hook or by crook, as he himself would not dream of denying.
Tugan Baranovski, however, has one indirect proof that the diagram with its strange results corresponds to, and truly reflects, reality. This is the fact that capitalist production, quite in accordance with Marx’s diagram, puts human consumption second to production, that it conceives of the former as a means and of the latter as an end in itself; just as it puts human labour, the ‘worker’, on a par with the machine.
‘Technical progress is expressed by the fact that the means of labour, the machine, increases more and more in importance as compared to living labour, to the worker himself. Means of production play an ever growing part in the productive process and on the commodity market. Compared to the machine, the worker recedes further into the background and the demand resulting from the consumption of the workers is also put into the shade by that which results from productive consumption by the means of production. The entire workings of capitalist economy take on the character of a mechanism existing on its own, as it were, in which human consumption appears as a simple moment of the reproductive process and the circulation of capitals.’(9)
Tugan Baranovski considers this discovery as a fundamental law of the capitalist mode of production, which is confirmed by a quite tangible phenomenon: with the progress of capitalist development Department I goes on growing relatively to, and at the expense of, Department II. It was Marx himself who, as we all know, set up this law in which he grounded the schematic exposition of reproduction, though in the further development of his diagram he ignored subsequent alterations for simplicity’s sake. This, the automatic growth of the producer goods as compared with the consumer goods department affords Tugan Baranovski the only objective proof of his theory: that in capitalist society human consumption becomes increasingly unimportant; and production more and more an end in itself. This thesis forms the corner-stone of his entire theoretical edifice.
‘In all the industrial countries’, he proclaims, ‘we are confronted with the same type of development – the development of national economy everywhere follows the same fundamental law. The mining industry which creates the means of production for modern industry comes more and more to the fore. The relative decrease in the export of immediately consumable manufactured goods from Britain is thus also an expression of the fundamental law governing capitalist development. The further technical progress advances, the more do consumer goods recede as compared with producer goods. Human consumption plays an ever decreasing part as against the productive consumption of the means of production.’(10)
Although this ‘fundamental law’ like all his other ‘fundamental’ laws, in so far as they mean anything at all, is borrowed ready-made from Marx, Baranovski does not rest content with this and immediately proceeds to preach the Marxist gospel to Marx himself. Scrabbling about like a blind hen, Marx has turned up another pearl – Tugan will give him that – only he does not know what to do with it. It needed a Tugan Baranovski to know how to make it useful to science, and in his hand the newly discovered law suddenly throws a new light on the whole workings of capitalist economy. This law of the expansion in the department of producer goods at the cost of that of consumer goods reveals clearly, concisely, exactly, and in measurable terms, that capitalist society attaches progressively less importance to human consumption, putting man on the same level as the means of production, and that Marx was therefore completely wrong both in assuming that man alone, not the machine, too, can be the creator of surplus value, and in saying, further, that human consumption represents a limit for capitalist production which is bound to cause periodical crises in the present, and the collapse and terrible end of capitalist economy in the near future. In short, the ‘fundamental law’ governing the increase of producer as compared to consumer goods reflects the singular nature of capitalist society as a whole which Marx had not understood and which to interpret happily fell to the lot of Tugan Baranovski.
We have seen above the decisive part played by the fundamental law of capital in the controversy between the Russian Marxists and the sceptics. Bulgakov’s remarks we already know; another Marxist already referred to, Vladimir Ilyin, expresses himself in similar terms in his polemics against the populists:
‘It is well known that the law of capitalist production consists in the fact that the constant capital grows more rapidly than the variable capital, that is to say an ever increasing part of the newly formed capital falls to the department of social production which creates producer goods. In consequence, this department is absolutely bound to grow more rapidly than the department creating consumer goods, that is to say, the very thing happens which Sismondi declared to be “impossible”, “dangerous”, etc. In consequence, consumer goods make up a smaller and smaller share of the total bulk of capitalist production, and this is entirely in accordance with the historical “mission” of capitalism and its specific social structure: the former in fact consists in the development of the productive forces of society (production as an end in itself), and the latter prevents that the mass of the population should turn them to use.’ (11)
In this respect, of course, Tugan Baranovski goes even farther. With his love of paradox he actually permits himself the joke of submitting a mathematical proof that accumulation of capital and expansion of production are possible even if the absolute volume of production decreases. In this connection, Karl Kautsky has pointed out, he had recourse to a somewhat dubious scientific subterfuge, namely that he shaped his daring deductions exclusively for a specific moment: the transition from simple to enlarged reproduction – a moment which is exceptional even in theory, but certainly of no practical significance whatever.(12)
As to Tugan Baranovski’s ‘fundamental law’, Kautsky declares it to be a mere illusion due to the fact that Tugan Baranovski considered the organisation of production only in the old countries of capitalist big industry.
‘It is correct’, Kautsky says, ‘that with a progressive division of labour, there will be comparatively fewer and fewer factories etc. for the production of goods direct for personal consumption, together with a relative increase in the number of those which supply both the former and one another with tools, machines, raw materials, transport facilities and so on. While in original peasant economy an enterprise that cultivated the flax also made the linen with its own tools and got it ready for human consumption, nowadays hundreds of enterprises may share in the manufacture of a single shirt, by producing raw cotton, iron rails, steam engines and railway trucks that bring it to port, and so on. With international division of labour it will happen that some countries – the old industrial countries – can only slowly expand their production for personal consumption; while making large strides in their production of producer goods which is much more decisive for the heartbeat of economic life than the production of consumer goods. From the point of view of the nation concerned, we might easily form the opinion that producer goods can be turned out on a constantly rising scale with a more rapid rate of increase than in the production of consumer goods, and that their production is not bound up with that of the latter.’
The opinion, that producer goods can be produced independent of consumption, is of course a mirage of Tugan Baranovski’s, typical of vulgar economics. Not so the fact cited in support of this fallacy: the quicker growth of Department I as compared with Department II is beyond dispute, not only in old industrial countries but wherever technical progress plays a decisive part in production. It is the foundation also of Marx’s fundamental law that the rate of profit tends to fall. Yet in spite of it all, or rather precisely for this reason, it is a howler if Bulgakov, Ilyin and Tugan Baranovski imagine to have discovered in this law the essential nature of capitalist economy as an economic system in which production is an end in itself and human consumption merely incidental.
The growth of the constant at the expense of the variable capital is only the capitalist expression of the general effects of increasing labour productivity. The formula c greater than v (c > v), translated from the language of capitalism into that of the social labour process, means only that the higher the productivity of human labour, the shorter the time needed to change a given quantity of means of production into finished products.(13)
This is a universal law of human labour. It has been valid in all pre-capitalist forms of production and will also be valid in the future in a socialist order of society. In terms of the material use-form of society’s aggregate product, this law must manifest itself by more and more social labour time being employed in the manufacture of producer than of consumer goods. In a planned and controlled social economy, organised on socialist lines, this transformation would in fact be more rapid even than it is in contemporary capitalist economy. In the first place, rational scientific techniques can only be applied on the largest scale when the barriers of private ownership in land are abolished. This will result in an immense revolution in vast provinces of production which will ultimately amount to a replacement of living labour by machine labour, and which will enable us to tackle technical jobs on a scale quite impossible under present day conditions. Secondly, the general use of machinery in the productive process will be put on a new economic basis. At present the machine does not compete with living labour but only with that part of it that is paid. The cost of the labour power which is replaced by the machine represents the lowest limit of the applicability of the machine. Which means that the capitalist becomes interested in a machine only when the costs of its production – assuming the same level of performance – amount to less than the wages of the workers it replaces. From the point of view of the social labour process which is the only one to matter in a socialist society, the machine competes not with the labour that is necessary to maintain the worker but with the labour he actually performs. In other words, in a society that is not governed by the profit motive but aims at saving human labour, the use of machinery is economic-aims indicated just as soon as it can save more human labour than is necessary for making it, not to mention the many cases where the use of machinery is desirable even if it does not answer this economic minimum – for reasons of health and similar considerations, in the interest of the workers themselves. However that may be, the tension between the respective economic usefulness of the machine in (a) a capitalist, and (b) a socialist society is at least equal to the difference between labour and that part of it that is paid; it is, in other words, the precise equivalent of the whole capitalist surplus value. Consequently, if the capitalist profit motive is abolished and a social organisation of labour introduced, the marginal use of the machine will suddenly be increased by the whole extent of the capitalist surplus value, so that an enormous field, not to be gauged as yet, will be open to the triumphal march of the machine. This would be tangible proof that the capitalist mode of production, alleged to spur on to the optimum technical development, in fact sets large social limits to technical progress, in form of the profit motive on which it is based. It would show that as soon as these limits are abolished, technical progress will develop such a powerful drive that the technical marvels of capitalist production will be child’s play in comparison.
In terms of the composition of the social product, this technical transformation can only mean that, compared to the production of consumer goods, the production of producer goods – measured in units of labour time – must increase more rapidly in a socialist society than it does even to-day. Thus the relation between the two departments of social production which the Russian Marxists took to reveal typical capitalist baseness, the neglect of man’s need to consume, rather proves to be the precise manifestation of the progressive subjection of nature to social labour, which will become even more striking when production is organised solely with a view to human needs. The only objective proof for Tugan Baranovski’s ‘fundamental law’ thus collapses as a ‘fundamental’ confusion. His whole construction, including his ‘new theory of crises’, together with the ‘lack of proportion’, is reduced to its foundations on paper: a slavish copy of Marx’s diagram of enlarged reproduction.
(1) Studies on the Theory and History of Commercial Crises in England (Jena 1901) and Theoretical Foundations of Marxism (1905).
(2) Studies on the Theory and History ..., p.23.
(3) Ibid., p.34.
(4) Ibid., p.333.
(5) Ibid., p.191.
(6) Ibid., p.231, italics in original.
(7) Ibid., p.305.
(8) Ibid., p.191.
(9) Ibid., p.27.
(10) Ibid., p.58.
(11) V. Ilyin [Lenin], Studies and Essays in Economics (Ökonomische Studien und Artikel. Zur Charakterisierung des ökonomischen Romantizismus, St. Petersburg 1899), p.20. – Incidentally, the same author is responsible for the statement that enlarged reproduction begins only with capitalism. It quite escapes him that under conditions of simple reproduction, which he takes to be the rule for all pre-capitalist modes of production, we should probably never have advanced beyond the stage of the paleolithic scraper. [The tool that some humans used, perhaps to skin a deer or a wild horse, around 250,000 years ago – B.B.]
(12) Die Neue Zeit, vol.xx, part 2, Krisentheorien, p.116. Kautsky’s mathematical demonstration to Tugan Baranovski that consumption is bound to grow, and ‘in the precise ratio as the bulk of producer goods in terms of value’, calls for two comments: first, like Marx, Kautsky paid no attention to the progress in the productivity of labour so that consumption appears to have a relatively larger volume than it would in fact have. Secondly, the increase in consumption to which Kautsky here refers, is only a consequence, a result of enlarged reproduction, it is neither its basis nor its aim; it is mainly due to the growth of the variable capital, the continual employment of additional workers. The upkeep of these workers, however, neither is nor ought to be the object of the expansion of reproduction – no more, for that matter, than the increasing personal consumption of the capitalist class. Kautsky’s argument no doubt refutes Tugan Baranovski’s pet notion: the whimsy to construe enlarged reproduction with an absolute decrease in consumption. But for all that, he does not get anywhere near the fundamental problem, the relations between production and consumption under the aspect of the reproductive process; though we are told in another passage of the same work:
‘With the capitalists growing richer, and the workers they exploit increasing in numbers, they constitute between them a market for the consumer goods produced by capitalist big industry which expands continually, yet it does not grow as rapidly as the accumulation of capital and the productivity of labour, and must therefore remain inadequate. An additional market is required for these consumer goods, a market outside their own province, among those occupational groups and nations whose mode of production is not yet capitalistic. This market is found and also widens increasingly, but the expansion is again too slow, since the additional market is not nearly so elastic and capable of expansion as the capitalist productive process. As soon as capitalist production has developed to the big industry stage, as in England already in the first quarter of the nineteenth century, it is capable of expanding by leaps and bounds so as soon to out-distance all expansions of the market. Every period of prosperity subsequent to a considerable extension of the market is thus from the outset doomed to an early end – the inevitable crisis. This, in brief, is the theory of crises established by Marx, and, as far as we can see, generally accepted by the “orthodox” Marxists.’ (ibid., p.80).
Kautsky, however, is not interested in harmonising this conception of the realisation of the aggregate product with Marx’s diagram of enlarged reproduction, perhaps because, as our quotation also shows, he deals with the problem solely from the aspect of crises, regarding, in other words, the social product as a more or less homogeneous bulk of goods and ignoring the fact that it is differentiated in the reproductive process.
L. Boudin seems to come closer to the crucial point. In his brilliant review on Tugan Baranovski he gives the following formulation:
‘With a single exception to be considered below, the existence of surplus product in capitalist countries does not put a spoke in the wheel of production, not because production will be distributed more efficiently among the various spheres, or because the manufacture of machinery will replace that of cotton goods. The reason is rather that, capitalist development having begun sooner in some countries than in others, and because even to-day there are still some countries that have no developed capitalism, the capitalist countries in truth have at their disposal an outside market in which they can get rid of their products which they cannot consume themselves, no matter whether these are cotton or iron goods. We would by no means deny that it is significant if iron goods replace cotton goods as the main products of the principal capitalist countries. On the contrary, this change is of paramount importance, but its implications are rather different from those ascribed to it by Tugan Baranovski. It indicates the beginning of the end of capitalism. So long as the capitalist countries exported commodities for the purpose of consumption, there was still a hope for capitalism in these countries, and the question did not arise how much and how long the non-capitalist outside world would be able to absorb capitalist commodities. The growing share of machinery at the cost of consumer goods in what is exported from the main capitalist countries shows that areas which were formerly free of capitalism, and therefore served as a dumping-ground for its surplus products, are now drawn into the whirlpool of capitalism. It shows that, since they are developing a capitalism of their own, they can by themselves produce the consumer goods they need. At present they still require machinery produced by capitalist methods since they are only in the initial stages of capitalist development. But all too soon they will need them no longer. Just as they now make their own cotton and other consumer goods they will in future produce their own iron ware. Then they will not only cease to absorb the surplus produce of the essentially capitalist countries, but they will themselves produce surplus products which they can place only with difficulty’ (Die Neue Zeit, vol.xxv, part 1, Mathematische Formeln gegen Karl Marx, p.604).
Boudin here broaches an important aspect of the general relations pertaining to the development of international capitalism. Further, as a logical consequence, he comes to the question of imperialism but unfortunately he finally puts the wrong kind of edge on his acute analysis by considering the whole of militarist production together with the system of exporting international capital to non-capitalist countries under the heading of ‘reckless expenditure’ – We must say in parenthesis that Bouding, just like Kautsky, holds that the law of a quicker growth in the means-of-production department relative to the means-of-subsistence department is a delusion of Tugan Baranovski’s.
(13) ‘Apart from natural conditions, such as fertility of the soil, etc., and from the skill of independent and isolated producers (shown rather qualitatively in the genus than quantitatively in the mass of their products), the degree of productivity of labour, in a capitalist society, is expressed in the relative extent of the means of production that one labourer, during a given time, with the same tension of labour-power, turns into products. The mass of means of production which he thus transforms, increases with the productiveness of his labour. But those means of production play a double part. The increase of some is a consequence, that of the others a condition of the increasing productivity of labour. E.g., with the division of labour in manufacture, and with the use of machinery, more raw material is worked up in the same time and, therefore, a greater mass of raw material and auxiliary substances enter into the labour-process. That is the consequence of the increasing productivity of labour. On the other hand, the mass of machinery, beasts of burden, mineral manures, drainpipes, etc., is a condition of the increasing productivity of labour. So also is it with the means of production concentrated in buildings, furnaces, means of transport, etc. But whether condition or consequence, the growing extent of the means of production, as compared with the labour-power incorporated with them, is an expression of the growing productiveness of labour. The increase of the latter appears, therefore, in the diminution of the mass of labour in proportion to the mass of means of production moved by it, or in the diminution of the subjective factor of the labour-process as compared with the objective factor’ (Capital, vol.i, pp.635-6). And yet another passage: ‘We have seen previously, that with the development of the productivity of labour and therefore with the development of the capitalist mode of production, which develops the socially productive power of labour more than all previous modes of production, there is a steady increase of the mass of means of production, which are permanently embodied in the productive process as instruments of labour and perform their function in it for a longer or shorter time at repeated intervals (buildings, machinery, etc.); also, that this increase is at the same time the premise and result of the development of the productivity of social labour. It is especially capitalist production, which is characterised by relative as well as absolute growth of this sort of wealth’ (Capital, vol.i, chap.xxiii, 2). ‘The material forms of existence of constant capital, the means of production, do not consist merely of such instruments of labour, but also of raw material in various stages of finished and of auxiliary substances. With the enlargement of the scale of production and the increase in the productivity of labour by co-operation, division of labour, machinery, etc., the mass of raw materials and auxiliary substances used in the daily process of reproduction, grows likewise’ (Capital, vol.ii, p.160).
Last updated on: 12.12.2008