From New International, Vol.8 No.3, April 1942, pp.77-80.
Transcribed by The C.L.R James Institute & marked up by Damon Maxwell for the Encyclopaedia of Trotskyism On-Line (ETOL).
Johnson’s views on Russian economy as a capitalist system are well known to readers of THE NEW lNTERNATIONAL. He has presented them at length in these columns. Now he seeks to buttress them with the aid of statements made by Leon Trotsky in an article written over a decade ago, and reprinted in the “Archives” section. However, the greater part of his letter is a criticism of another statement made by Trotsky in the course of the same article. I propose to show that Johnson understands neither Trotsky’s article nor the meaning of the Marxian concepts involved. In the course of this criticism I hope to throw some light on a few essential aspects of Marxian economic theory.
I. Johnson begins his letter by taking issue with Trotsky’s contention that the Marxian formulae of extended reproduction “are in no way limited by national boundaries” and are “not adapted to national capitalism.” Johnson insists, on the contrary, that “the formula is carefully adapted by Marx to precisely a national capitalism.” (We will consider later the strange substitution of “formula” for “formulae.”)
The point in dispute seems clear: Trotsky wrote that the condition premised by Marx was an abstract capitalism in which there are no national boundaries, that is, a pure world capitalism; whereas Johnson holds that Marx specifically assumed “a national capitalism.” Clear enough, that is, until we read further in Johnson’s letter (cf. his Point I c) that the Marxian theory “is strictly adapted to a national capitalism, excluding all foreign commerce.” (My emphasis – J. C.)
But with this qualification, how would Johnson’s “national capitalism” differ from a hypothetical pure world capitalism? If it is taken in complete isolation, does this not mean that it is studied as though it were a pure world capitalism? In which case, Johnson appears to be merely repeating Trotsky’s contention against which he previously polemized! But why then should he insist on counterposing “a national capitalism” to world capitalism? This would make sense if his “national capitalism” has specific national, that is, political features – though it would then be in conflict with Marx’s premise of a pure capitalism, one free of non-economic factors. However, I do not think that this is Johnson’s meaning. Rather, his criticism of Trotsky flows from his hazy grasp of Marxian economic theory and his misunderstanding of what Trotsky wrote. (On the latter point, cf. “II” below.) It would not be surprising that, when Johnson wrote that Marx “strictly adapted” the formulae to “a national capitalism,” he had in mind a passage in the first volume of Capital which declares the exact opposite!
We here take no account of export trade [Marx stated] by means of which a nation can change articles of consumption into means of production or means of subsistence, and vice versa. In order to examine the object of our investigation in its integrity we must treat the whole world as one nation, and assume that capitalist production is everywhere established and has possessed itself of every branch of industry. (Capital, Vol. 1. page 636. Charles Kerr edition.)
As we shall also see later, Johnson has a strange knack of apparently paraphrasing Marx and in reality saying the exact opposite! It is obvious here that when Marx excluded foreign trade and treated the whole world as one nation he thereby identified the world with the nation, that is, assumed that it was the only economy on the planet, to wit, world economy. Elementary enough, yet Johnson presents us with “a national capitalism” in opposition to world capitalism! Whatever the source of Johnson’s mistake, his first criticism of Trotsky is invalid; he contradicts his own criticism and reveals confusion on an elementary aspect of Marx’s methodology.
II. His confusion is further expressed in his statement that it follows from Trotsky’s contention (discussed above) that “the workers cannot buy back the product and therefore the capitalist is compelled to seek markets abroad.” (cf. his point I b.)  How and why does this follow? It is true that for Johnson’s “national capitalism” which excludes all foreign commerce, there is no problem of “markets abroad” because there are no “markets abroad.” But how can such foreign markets exist on the premise of a pure world capitalism? Are these markets on the planet Mars or the planet Jupiter! If not, then what does Johnson mean? I can arrive at only one conclusion: that he interprets Trotsky’s statement to mean that Marx’s premise was a real world capitalism consisting of national economics connected by foreign trade. In a word, the reverse of what Trotsky did write! For, when following his exposition of the Marxian concept of a pure capitalism, Trotsky declared that the formulae “are in no way limited by national boundaries” and “are not adapted to national capitalism” he was thereby stating that national divisions, and thus, foreign trade and markets abroad, are assumed to be non-existent! And Johnson’s misinterpretation of Trotsky’s thought also partially explains his confused criticism discussed in point I above.
III. However, Johnson’s confusion goes much deeper than a mere misinterpretation of this or that passage from Trotsky or Marx. It extends to the very formulae with which his letter is concerned. What are these formulae, according to Johnson? He tells us: “The only formula in the chapter on “Reproduction on an Enlarged Scale” is the formula I (v + s) must be greater than II c, if accumulation is to take place.” Simple enough – a single formula. Yet, is it not strange that Trotsky constantly referred to many formulas? Is it not even stranger that despite the numerous controversies among Marxists in regard to these formulae, not a single disputant denied the validity of the formula cited by Johnson?  A single formula? Yet even a cursory glance at the aforementioned last chapter of the second volume of Capital – not to speak of a study of the chapter or a knowledge of Marx’s theory! – reveals a whole series of formulae without which Marx’s theory would be meaningless!
However, let us examine the formula which Johnson tells us is the differentia specifica of extended reproduction and accumulation under capitalism.
Marx divided total social production into two great departments. The industries manufacturing producer goods (or means of production), he called I; and the industries producing consumer goods (or means of consumption), represented by II. The products of each department (as the products of each industry) are the sum of constant capital (the employed means of production), symbolized by c; variable capital (the value of the labor power paid the workers in wages), or v; and surplus values (the new value produced by the worker but owned by the capitalists), or s. Thus:
I c + v + s Total Producer Goods
I I c + v + s Total Consumer Goods
However, the products of these departments are not only values, embodiments of socially necessary labor, but also particular use values – machines, buildings, raw materials; food, shoes, clothing, etc. If, then, in a given economic cycle, let us say one year, the total producer goods manufactured only equal, both in value and in material form, the means of production used up in that period, the production during the next year can only be on the same scale as in the previous year. This would mean that the capitalists would directly consume the surplus value produced. Marx called this simple reproduction. If, however, there is to be an expansion of the scale of production, new producer goods must be manufactured in excess of the means of production required for mere replacement. This is what Marx called extended reproduction. And the conversion of part of the surplus value into new capital for expansion – possible only on the above condition – he called accumulation.
Expressed in Marx’s algebraic formula we get:
I c + v + s (or total producer goods manufactured) must be greater than I c + II c (or total producer goods used up), if accumulation is to take place. Or more simply: I (v + s) must be greater than II c.
Here, then, is the formula which Johnson informs us is valid for capitalism alone. And apparently this is the great contribution of Marx. But what does the algebraic formula tell us? Merely this: that if there is to be accumulation and productive expansion, more producer goods must be manuactured than have been used up. An important but quite axiomatic proposition!
It goes without saying [Marx wrote] that as soon as we assume a process of accumulation, I (v + s) must be greater than II c, not equal to II c, as it is in the case of simple reproduction. (Capital, Vol. II, page 601. My emphasis – J. C.)
Johnson’s “only” formula – that which is supposed to distinguish capitalism from all other economies – “goes without saying,” according to Marx. This should not be surprising since, despite Johnson’s view, the formula can be an algebraic expression of a necessary premise of accumulation. in any economic system taken as a whole. In every economy, extended reproduction and accumulation are possible only if more producer goods are made in a given economic cycle than are used up. The products of every economy are a sum of the means of production used, living labor, and an excess produce above these material and human resources (no matter how measured). If then, we abstract the specific class meanings of the terms of Marx’s formula (c. v. and s) so that the terms symbolize the most general form of the three elements of the total products, we can state that I (v + s) must be greater than II c if accumulation is to take place.
Thus the algebraic formula cited by Johnson taken abstractly does not in itself describe the specific social character of the accumulation; nor does it tell us anything about the mechanism regulating the process of accumulation; how and why more producer goods are put out than consumed. Nor, whether extended reproduction and accumulation are a result of class exploitation. More precisely: the formula describes a necessary condition for capitalist accumulation only if the terms are actual capitalist categories – constant capital, variable capital, surplus value. Therefore one cannot prove that, e.g., Russian economy is a capitalist system – as Johnson seeks to do – by showing that the formula describes a necessary aspect of its process of accumulation. On the contrary, one must prove that the terms of the formula, the social relations of production, are in fact capitalist.
In economic forms of society of the most different kinds [Marx wrote] there occurs, not only simple reproduction, but, in varying degrees, reproduction on a progressively increasing scale. By degrees more is produced and more consumed, and consequently more products have to be converted into means of production. This process, however, does not present itself as accumulation of capital, nor as the function of a capitalist, so long as the laborer’s means of production, and with them, his product and means of subsistence, do not confront him in the shape of capital. (Capital, Vol. 1, page 655.)
And if Johnson had read Trotsky’s article with care he would have noted that his alleged specific capitalist formula is nothing but an algebraic expression of Stalin’s formulation of the Marxian theory of accumulation against which Trotsky’s article is directed! Stalin had declared: “The Marxist theory of reproduction teaches that contemporary society cannot develop without annual accumulations, and it is impossible to accumulate without extended reproduction year in and year out. This is clear and evident.” And Trotsky commented: “It cannot be clearer. But this is not taught by Marxist theory, for it is the general property of bourgeois political economy, its quintessence.. . . ‘The Marxist theory of reproduction’ refers to the capitalist mode of production.” (THE NEW INTERNATIONAL, November, 1941, page 281.)
Of course, Trotsky is not denying that for accumulation there must be extended reproduction. He is emphasizing that it is not the contribution of Marxism, i.e., that there is nothing specifically “Marxist” in this conception. Johnson did not know he was repeating Stalin because he does not understand the meaning of the Marxian theory of accumulation and the algebraic formulae.
IV. It is not necessary or possible for me at this time to treat in any detail the highly complex question of the function of Marx’s algebraic formulae of capitalist extended reproduction. However, some additional remarks are relevant to the present dispute.
(a) Marx sought, with the aid of these formulae, to determine the mechanism whereby in an unregulated, anarchical system in which the individual capitalists are interested solely in profits (and not in the particular use values which the [sic] produce) they can nonetheless find the necessary material goods for progressive expansion. For, unless the required producer and consumer goods are manufactured in proper proportions, progressive accumulation becomes difficult; and if the disproportions are very great, impossible. Of course, such balance is never attained under capitalism (except by accident), and dislocations, overproduction and crises occur. However, to discover the inherent tendencies of the, system, Marx assumed a pure capitalism in perfect equilibrium – that is, constructed what the scientists call “an ideally isolated system.” On the one hand, he assumed that there were only workers and capitalists (and their retainers); that there were neither non-capitalist elements nor non-economic capitalist factors involved; that the workers received the full value of their labor power; that commodities exchanged at their value, etc., etc. On the other hand, he assumed that the development of production from one cycle to another took place at a constant rate of increase, e.g., the capitalists in each period converted only one-half of the surplus value into money capital; which in turn they transformed into (invested in a fixedproportion of constant capital (means of production) and variable capital (labor power).
Then he showed how, in such a system in equilibrium, the circulation of capital and commodities could take place so that there could be extended reproduction and accumulation. This requires not only that the production of producer goods in excess of the means of production used up in both departments of production (the formula cited by Johnson); but that these new producer goods (both as to their value and their use value) are manufactured in a proper relation to the output of consumer goods, and in accordance with the requirements of the economy for means of production for expansion. For example: if the producer goods put out exceed the needs of the economy for expansion (that is, cannot be converted into capital which would yield a profit to the capitalists!) then there is an overproduction of producer goods; and if this excess piles up, there follows a temporary breakdown of the system, crises. Or, if more consumer goods art: put out than can be bought, accumulation can cease as a result of this overproduction even though I (c + v) is greater than II c. And so on.
Johnson does not understand the abstract-hypothetical premises of Marx’s formulae and, therefore, cannot comprehend that the formulae are not supposed to “apply” to a concrete, real capitalism or to “a national capitalism” – let alone Russian economy.
(b) The regulating principle of capitalist accumulation, according to Marx, is the insatiable drive of the capitalists for profits. This is the unique driving force of capitalist extended reproduction flowing from the capital-labor relations of production, and without which the contradictions and antagonisms of capitalism cannot be explained. In fact the social difficulties of accumulation arise precisely because capitalism is a profit-economy. Strange to say, for Johnson profits are not an essential feature of capitalism!
For example, in this article, “Russia and Marxism,” (THE NEW INTERNATIONAL, September, 1941) he defines capitalism without a single reference to profits. He tells us that capitalism “is organized and must be organized for the production of surplus value (production for the sake of production).” And further, that its “main aim ... is nothing but the expansion of this accumulated labor.” So that, he adds, in Russia also (1) “the main aim of production (is) the production of surplus value for the specific purpose of increasing production” (page 215). Then why do the capitalists ever cease producing? Because they cannot produce “surplus value” or because they cannot “realize” surplus value? But why should they be interested in these obstacles if their “specific purpose” is “increasing production”?
Johnson here shows that he has read Marx . . . but without much success. Again, he tries to paraphrase a major thought of the Marxian theory of capitalist accumulation but forgets the essential element, i.e., the driving force of this accumulation! It is precisely the drive for profits which compels the capitalists constantly to produce, expand and accumulate in order that they can realize greater profits – or perish as capitalists in the competitive struggle! However, Johnson’s failure to mention profits in his definition of capitalism was not an oversight – he simply does not comprehend what they are.
Profit is only a “peculiar form” of surplus value [he once wrote]. Surplus value can take the form of capitalist wages “for quantity and quality of work performed” (in Russian today its distribution takes very unusual forms). But it can be produced in only one way. (THE NEW INTERNATIONAL, April, 1941, page 57.)
In other words, in Russia there is “surplus value” but not "profit." Profit is only a “peculiar form” of surplus value? Quite right; this is what Marx stated. But Marx referred to profits as the peculiar capitalist form of surplus value or surplus labor!
And now let us take profit [Marx wrote]. This definite form of surplus value is a prerequisite for the new creation of means of production by means of capitalist production. It is a relation which dominates reproduction... Furthermore, the entire process of capitalist production is regulated by the prices of production. But the regulating of the prices of production are in turn regulated by the equalization of the rate of profit and by the distribution of capital among the various spheres of production in correspondence with this equalization. Profit, then, appears here as the main factor, not of the distribution of products, but of their production itself, as a part in the distribution of capital and labor among the various spheres of production. (Capital, Vol. III, pages 1028-29. My emphases. – J. C.)
Let us grant, then, that in Russia there is “surplus value” but no “profits.” But then it is not profits (in the capitalist sense) which regulate the distribution of the material and human resources to the various spheres of production, which determine the prices of production, and the process of reproduction. Of course, there is class exploitation and surplus labor. The ruling class, the bureaucracy, is interested in the production of more and more surplus labor as the source of its increased revenues (higher living standards) and its accumulation-fund for expansion – essential for its class security and development. The peculiar character of Russian economy, however, which determines its specific process of reproduction and accumulation flows from the fact that the bureaucracy owns the means of production and exchange through its control of the state, and the enslaved character of the working class. The process of accumulation is then consciously directed through the state, and the state alone. It is this “special manner” in which the factors of production are united, this specific way in which surplus labor is extracted from the working class, that differentiates bureaucratic collectivism from capitalism.
Of course, since Russian economy is a system of class exploitation (and based on modern machine technology) and since it operates in a world dominated by capitalism, it necessarily has many features in common with capitalism. However, the basic class relations and therefore the specific character of the economy and its process of accumulation are qualitatively different. (Cf., my article, “Bureaucratic Collectivism,” THE NEW INTERNATIONAL, September, 1941.)
V. Now let us return to Trotsky’s article. Johnson calls to our attention Trotsky’s statement that the Marxist formuae of extended reproduction are valid for capitalism alone He therefore asks: Do the formulae “apply” to present-day Russian economy?
I have already showed that:
(a) Trotsky correctly wrote that the Marxian formulae taken as a whole assume a pure world capitalism – and “apply” to neither “a national capitalism,” nor Russian economy of 1930. Not even Johnson will contend that present-day Soviet economy is “pure” or a “world capitalism.”
(b) The specific formula cited by Johnson taken in its most abstract form is merely an algebraic expression of Stalin’s statement (of the “Marxian theory of extended reproduction”) against which Trotsky’s article is directed.
(c) In its abstract form this formula does describe a premise or necessary condition for accumulation in any economy and therefore in Russia; but then this formula, divorced of its specific capitalist terms, cannot indicate that Russia is a capitalist economy. (How else, by the way, would Johnson formulate in algebraic terms the elementary premise of exended reproduction under a workers’ state or even socialism?)
In addition, it should be added that, despite some ambiguity, Trotsky used interchangeably the Marxian theory of exended reproduction and the formulae of the second volume of Capital; that is, he did not deal with the algebraic formulae in their most abstract form (as explained above) but only in their general capitalist form. Thus, he wrote that the formulae of capitalist extended reproduction have as their “central point ... the pursuit of profits.”
In fact, in Stalin’s speech there is no direct reference to the formulae, but only to the Marxian theory of extended reproduction. – (Cf. International Press Correspondence, Vol. 10, No. 2, January 9, 1930, page 18.)
In any case, it should be clear from a reading of Trotsky’s article that his thesis is that the Marxian theory of accumulation was not valid for Russia of 1930, or for socialism; and that it is valid for capitalism alone. In this I, of course, agree completely with Trotsky. And this is the real issue which Johnson raises by his letter as he makes clear when he writes that the matter in dispute is “Marx’s theory of reproduction and extension of the total social capital.” (Cf. his point I c.) And as previously stated, this theory, whose central point is the pursuit of profits, does not explain the process of accumulation in present-day Russia.
1. I do not propose to discuss the validity of the quoted statement taken by Itself. This would take us too far afield, to a consideration of the theory of “underconsumption,” held by bourgeois economists, and the Marxian theory of crises.
2. Johnson writes that “some of the greatest controversies in Marxism have hinged upon” the question of whether the premise of Marx’s formulae is “a national capitalism.” Apparently he is here referring to the famous dispute around Rosa Luxemburg’s work on the accumulation of capital, and/or the earlier dispute in the Russian movement between Lenin and the Narodniki. In either case he is gravely mistaken as to the nature of these disputes. None of the disputants denied that Marx postulated a pure world capitalism. The differences, in the main, revolved around the question of whether on the basis of this abstract hypothesis there could be any accumulation at all under capitalism; that is, whether the capitalists could convert the surplus value into capital on the basis of a pure capitalism; or whether, even in theory, a non-capitalist market was indispensable for this accumulation. Rosa Luxemburg held the latter view; and from it she developed her theory of modern imperialism and her theory of capitalist collapse. Lenin, Hollering, Bauer, Bukharin, etc., held the former position. But whatever the merit of either view, both sides accepted the fact that Marx assumed a pure world capitalism as the premise of his formulae.
This is the concrete way in which we raise the demand of a people’s militia at the present time.
Last updated: 7 September 2008 by ETOL