Eduard Bernstein

Evolutionary Socialism


Chapter II
The Economic Development if Modern Society

 

(c) The Classes of Establishments in the Production and Distribution of Social Wealth

General statistics are wanting of the classes of enterprises in industry as regards England which is considered the most advanced of the European countries in capitalist production. They exist only for certain branches of production placed under the Factory Laws and for individual localities.

In the factories and workshops coming under the Factory Laws there were engaged, according to the Factory Inspector’s report for 1896, altogether 4,398,983 Persons. [16] That is not quite half the number given as actively engaged in industry according to the census of 1891. The number in the census, omitting the transport trade, is 9,025,902. Of the 4,626,919 remaining persons, we can reckon a fourth to a third as tradesmen in the branches of production referred to, and in some medium-sized and large businesses which do not come under the Factory Laws.

There remain in round numbers 3,000,000 employees and small masters in minute businesses. The 4,000,000 workers under the Factory Laws were distributed among 160,948 factories and workshops which yields an average of twenty-seven to twenty-eight workers per establishment. [17]

If we deal with factories and workshops separately we get 76,297 factories with 3,743,418 employees and 81,669 workshops with 655,565 employees, on the average forty-nine workers to a factory and eight to a registered workshop.

The average number of forty-nine workers to a factory already shows what the closer examination of the tables of the report confirms, that at least two-thirds of the businesses registered as factories belong to the category of medium-sized businesses with six to fifty workers so that at the most 20,000 to 25,000 businesses of fifty workers and more remain which may represent, on the whole, about 3,000,000 workers. Of the 1,171,990 persons engaged in the transport trade only three-quarters can be considered at the most as belonging to large enterprises. If we add these to the foregoing categories we get a total for the workers and the auxiliaries of the large industries of between 31 and 4 millions, and against these stand 51 millions of persons engaged in medium and small businesses. The “workshop of the world” is, accordingly, far from being, as is thought, in the stage of containing only large industries. Enterprises show the greatest diversity in size also in the British Empire, and no class of any size disappears from the scale. [18]

If we compare with the above figures those of the German industrial census of 1895, we find that the latter, on the whole, shows the same picture as the English. The great industries occupied nearly the same position in relation to production in Germany in 1895 as in England in 1891. In Prussia in 1895, 38 per cent. of the industrial workers belonged to the large industries. The development of large undertakings has been accomplished there and in the rest of Germany with extraordinary speed. If certain branches of industry (among them the textile) are in this respect still behind England, others (machines and implements) have reached the English position on the average, and some (the chemical and glass industries and certain branches of the printing trades, and probably also electric engineering) have overtaken it. Still the great mass of persons engaged in industry belong also in Germany to small and medium undertakings. Of the 10¼ million persons engaged in industry in 1895 something over 3 millions were found in large undertakings, 2½ millions in medium-sized undertakings (6 to 50 persons), and 41 millions in small ones. Master artisans still numbered 1¼ millions. In five trades their number, as against that of 1882, had increased absolutely and relatively (to the increase of population), in nine only absolutely, and in eleven it had declined absolutely and relatively. [19]

In France industry still keeps behind agriculture in numbers of workpeople employed. According to the census of April 17th, 1894, it represented only 25.9 per cent, of the population, and agriculture nearly twice as much – namely, 47.3 per cent. Austria shows a similar ratio, where agriculture takes 55.9 per cent. of the population and industry 25.9 per cent. In France there were one million persons working for themselves to 3.3 million employees, and in Austria 600,000 of the former to 2¼ million workmen and day labourers. Here the ratio is also very much the same. Both lands show a series of highly-developed industries (textile, mining, building, etc.), which, with respect to the size of the industry, compete with the most advanced countries, but which are only a portion of the industrial life-work of the nation.

Switzerland has, with 127,000 persons working for themselves, 400,000 employees. The United States of America, which the contributor to the New York Volkszeitung above referred to says is the most developed capitalist country in the world, certainly had, according to the census of 1890, a comparatively high average of workers per establishment-namely, 3½ million workers to 355,415 industrial establishments, i.e., 10 to 1. But the home and small industries are wanting here, just as in England. If one takes the figures of the Prussian industrial statistics from the top downwards, one gets almost exactly the same average as that of the American census. And if one studies more closely the Statistical Abstract of the United States, one comes upon a great number of manufacturing concerns with, on an average, five or fewer workers to the establishment. On the very first page we have 910 manufactories of agricultural implements with 30,723 workers, 35 ammunition factories with 1,993 workers, 251 manufactories of artificial feathers and flowers with 3,638, 59 manufactories of artificial limbs with 154, and 581 sail-cloth and awning factories with 2,873 workers.

If the continual improvement of technical methods and centralisation of businesses in an increasing number of branches of industry is a fact whose significance scarcely any crazy reactionaries can hide from themselves, it is a no less well-established fact that in a whole series of branches of industry small and medium-sized undertakings appear quite capable of existing beside the large industries. In industry there is no development according to a pattern that applies equally to one and all branches. Businesses carried on throughout according to routine, continue as small and medium-sized undertakings, whilst branches of technical trades which were thought to be secured for small businesses are absorbed for ever one fine day by a large organisation.

A whole series of circumstances allows the continuance and renewal of small and medium enterprises. They can be divided into three groups.

First, a great number of trades or branches of trades are nearly equally adapted for small and medium undertakings as for large enterprises, and the advantages which the latter have over the former are not so important that they can outweigh the peculiar advantages of the smaller home industries. This is, as everyone knows, the case, amongst others, with different branches of wood, leather, and metal work. Or, a division of labour is found where the large industry carries out one-half and three-quarters of the manufacture and when the finishing processes are done by smaller enterprises.

Secondly, when the product must be made accessible to the consumer, small establishments are, in many cases, favourable to its manufacture, as is shown most clearly in bakeries. If only the technical side was concerned, baking would long ago have been absorbed by the large industries, for the many bread factories yielding a good profit show that they can be carried on with good results. But in spite of, or beside, them and the cake factories which are gradually winning a market, the small and medium-sized bakeries hold their ground owing to the advantage they offer for trade with consumers in their vicinity. The master bakers are sure of their lives for some time to come as far as they have to reckon only with capitalist undertakings. Their increase since 1882 has certainly not kept step with the increase of population, but is still worth mentioning (77,609 as against 74,283). [20]

But baking is only an extreme example. For a whole series of trades – namely, where production and service performing labour are mixed – the same thing holds good. We will mention here the farrier and wheelwright trades. The American census shows 28,000 farrier and wheelwright businesses with a total of 50,867 persons, of which just one-half are masters. The German trade statistics show 62,722 blacksmiths and farriers; and it will certainly be a good while before the automatic vehicle driven by steam power, etc., will extinguish their spark of life in order to breathe life into new small workshops, as everyone knows bicycles have done. Similarly with the trades of tailors, shoemakers, saddlers, carpenters, carpetmakers, watchmakers, etc., where work for customers, and, in varying degree, repairing or shopkeeping, will keep alive independent existences of which certainly many, but not all, by any means, represent only proletarian incomes.

Last, but not least, the large industry itself gives life to smaller and medium trades partly by production on a large scale producing a corresponding cheapening of materials of work (auxiliary materials, half-manufactured goods), partly by the liberating of capital, on the one hand, and the “setting free” of workers on the other. In great and small amounts new capital is always entering the market seeking utilisation, and the demand on the market for new goods increases steadily with the wealth of the community. Here the shareholders mentioned earlier play no small part. The market could not, in fact, live on the handful of millionaires even if the “hand” counted some thousand fingers. But the hundreds of thousands of rich and well-to-do have something to say to it. Nearly all the articles of luxury for these classes are, in the beginning – and very many also later on – manufactured in small and medium businesses, which, however, can also be capitalistic businesses, according as they work upon dear materials and use costly machines (manufacture of jewellery, work in fine metals, art embroidery). It is only later that the large industry (when it does not itself take over the articles referred to), by cheapening the materials of work, “democratises” the one or the other new luxury.

In spite of the continued changes in the grouping of industries and the internal organisation of the establishments, we have this picture on the whole to-day : that the large industry does not continuously absorb the smaller and medium industries, but that it is growing up beside them. Only the very small enterprises decline relatively and absolutely. [21] But as regards the small and medium industries they do increase, as is shown for Germany by the following figures for employees in trades:

1882

1895

Increase per cent

Small businesses (1-5 persons)

2,457,950

3,056,318

24.3

Small medium businesses (6-10 persons)

   500,097

   833,409

66.6

Greater medium businesses (11-50 persons)

   891,623

1,620,848

81.8

The population increased in the same period by 13.5 per cent only.

Although in the interval treated the large industries increased their armies at a still greater rate – by 88.7 per cent – that has only meant in isolated cases the total absorption of the small businesses. In fact, in many cases no – or no more – competition takes place between large and small enterprises (think of the great works for making machinery and bridges). The example of the textile industry, which is commonly brought into our literature, is in many respects misleading. The increase of productivity which the mechanical mule represents over the old spindle has only recurred now and again. Very many large undertakings are superior to small or medium businesses, not on account of the higher productivity of the labour employed, but simply from the size of the undertaking (building of ships), and they leave the spheres of business of the small industries quite, or, to a great extent, untouched. He who hears that Prussia in the year 1895 saw nearly double as many workers occupied in large industries as in 1895 ; that these in 1882 were only 28.4 per cent., but in 1895 were 38 per cent. of the total number employed in all trades, might easily fancy that small industries would soon be a thing of the past, and that they had played their part in the social economy. The figures quoted show that the rapid extension and expansion of large industries represent only one side of social development.

As in industry so in commerce. In spite of the shooting up of the large warehouses the medium and small commercial businesses maintain their footing. We are, of course, not concerned here with denying the parasitic element in commerce, particularly as regards the so-called small retail business. Nevertheless, it must be observed that also with regard to that, much exaggeration has crept in. Wholesale production and the steadily increasing intercourse all over the world are always throwing greater quantities of commodities on the market which in some way or other must be brought to the consumer. Who would deny that this could take place with less expenditure of labour and cost than by the present retail trade? But as long as it does not take place this kind of trade will persist. And just as it is an illusion to expect from the large industries that they will absorb in a short time the small and medium industries, so is it also Utopian to expect from the capitalistic warehouses an absorption to a considerable extent of medium-sized and small shops. They injure individual businesses and here and there temporarily bring the whole of the small trades into confusion. But after a time the latter find a way of competing with the large shops and of making use of all the advantages which local associations offer them. Fresh specialising and fresh combining of businesses are begun, new forms and methods of carrying on business are started. The capitalistic warehouse is far oftener a product of the great increase of the abundance of goods than an implement of the annihilation of a parasitic small trade. It has had more effect in rousing the latter from its routine and breaking it of certain monopolist customs than in exterminating it.

The number of shop businesses increases steadily; it rose in England between 1875 and 1886 from 295,000 to 366,000. The number of persons employed in commerce rose still more. As the English statistics under this heading were taken on a different basis from those of 1881 [22], we will take the figures from the Prussian statistics.

There were in Prussia in shops and carrying trades (excluding railways and post office business):

1885

1895

Increase Per cent

In businesses with 2 and fewer assistants

411,509

467,656

  13.6

In businesses with 3-5 assistants

776,867

342,112

  91.4

In businesses with 6-50 assistants

157,328

303,078

  92.6

In businesses with 51 assistants and more

  25,619

  62,056

142.2

The increase is proportionately the greatest in the large businesses, but these do not represent much more than 5 per cent. of the whole. It is not the large businesses that offer the most deadly competition to the small ones; the latter provide it among themselves. But in proportion there are not very many corpses. And the scale of businesses remains unhurt in its composition. The small medium-sized shops show the greatest increase.

Finally, when we come to agriculture, as far as concerns the size of separate undertakings, we meet, in our times, with a movement all over Europe, and partially in America, which apparently contradicts everything that the socialistic theory has hitherto advanced. Industry and commerce showed only a slower movement upwards in large undertakings than was assumed, but agriculture shows a standing-still or a direct retrogression in regard to the size of holdings.

As regards Germany, the census of occupations taken in 1895, as against 1882, shows the relatively greatest increase in the group of peasant medium-sized holdings (5 to 10 hectares)-namely, 8 per cent. – and still greater is the increase in the area covered by the whole of them – namely, 8 per cent. The peasants’ small holdings following next below them (2 to 5 hectares) show the next greatest increase: 3.5 per cent. increase in the number of holdings and 8 per cent. increase in extent of land held. The very small holdings (allotments) (under 2 hectares) have an increase of 5.8 per cent. in number and 12 per cent. in land occupied, yet the portion of this land used for agricultural purposes shows a diminution of 1 per cent. The holdings already partially capitalistic (10 to 100 hectares) show an increase of not quite 1 per cent., which falls to the land cultivated as forest, and an increase of not quite 2 per cent. is shown by the large holdings (more than 100 hectares).

Here are the figures referred to for 1885:

Kind of Holding

No. of
Holdings

No. of hectares
used for
agricultural purposes

Total extent
in hectares

Very small (2 hectares and under)

3,236,367

1,808,444

  2,415,414

Small peasants’ holdings (2-5 hectares)

1,016,318

3,285,984

  4,142,071

Medium(5-20 hectares)

   998,804

9,721,875

12,537,660

Large (20-100 hectares)

   281,767

9,869,837

13,157,201

Large holdings (100 hectares & upwards)

     25,061

7,831,801

11,031,896

Over two-thirds of the total area fall under the three categories of peasant farms, about one-third under large holdings. In Prussia the proportion of peasant holdings is even more favourable; they occupy nearly three-fourths of the agricultural area – 22,875,000 out of 32,591,000 hectares.

If we turn from Prussia to its neighbour, Holland, we find:

Holdings

Area of Holding

1884

1893

Increase or decrease

Per cent

1-5 hectares

66,842

777,767

+ 10,925

+16.2

5-10

31,552

  34,199

+   2,647

+  8.4

10-50

48,278

  51,940

+   3,661

+  7.6

Over 50 hectares

  3,554

    3,510

-        44

-  1.2

Here the large holdings have actually decreased and the small medium peasants’ holdings have considerably increased. [23]

In Belgium, according to Vandervelde [24], the ownership of the land as well as the occupation of the soil has yielded to a continued decentralisation. The last general statistics show an increase of owners of land from 201,226 in the year 1846 to 293,524 in the year 1880; an increase also of tenants of land from 371,320 to 626,872. The total cultivated agricultural area of Belgium consisted in 1880 of not quite 2,000,000 hectares, of which over one-third were cultivated by their owners. The division of agricultural allotments reminds one of the Chinese agrarian conditions.

France in the year 1882 had the following agricultural holdings:

Holdings

Extent of Holding

Under 1 hectare

2,167,767

  1,083,833 hectares

1-10 hectares

2,635,030

11,366,274 hectares

10-40 hectares

   727,088

14,845,650 hectares

40-100 hectares

   113,285

22,266,104 hectares

100-200 hectares

     20,644

200-500 hectares

       7,942

Over 500 hectares

          217

Of the holdings between 40 and 100 hectares there are in round numbers 14 million hectares, and of those over 200 hectares 8,000,000, so that, on the whole, the large holdings represent between a fifth and a sixth of the agriculturally cultivated area. The smaller, medium, and large peasants’ holdings cover nearly three-quarters of French soil. From 1862 to 1882 the holdings of 5 to 10 hectares had increased by 24 per cent; those between 10 and 40 acres by 14.28 per cent. The agricultural statistics of 1892 show an increase of the total number of holdings of 30,000, but a decrease in the last-named category of 33,000, which shows a further sub-division of holdings of land.

But how does it stand in England, the classic land of large ownerships of land and of capitalistic farming of the soil? We know the lists of mammoth landlords which from time to time appear in the press as an illustration of the concentration in the ownership of land in England, and we know the passage in Capital where Marx says that the assertion of John Bright that 150 landlords own the half of British land and 12 the half of Scottish, has not been denied. [25] Now, though the land of England is centralised by monopolists, it is not so to the extent that John Bright pronounced. According to Brodrick’s English Land and English Landlords there were out of the 33 millions of acres of land in England and Wales entered in Domesday Book, 14 millions, in round numbers, the property of 1,704 landlords with 3,000 acres each or more. The remaining 19 million acres were divided among 150,000 owners of one acre and more, and a large number of owners of small plots of land. Mulhall gave, in 1892, for the whole of the United Kingdom, 176,520 as the number of owners of more than 10 acres of land (altogether ten-elevenths of the area). How is this soil cultivated? Here are the figures of 1885 and 1895 for Great Britain (England, with Wales and Scotland, but without Ireland), changed into hectares for the sake of more convenient comparison. [26]

These were enumerated:

Holdings

1885

1895

Increase or decrease

2-20 hectares

232,955

235,481

+ 2,526

20-40

  64,715

  66,625

+ 1,910

40-120

  79,573

  81,245

+ 1,672

120-200

  13,875

  13,568

+    307

Over 200

    5,489

     5,219

-    270

Here, too, is a decrease of the large and the very large holdings and an increase of the small and medium-sized ones.

The figures, nevertheless, tell us nothing of the cultivated area. Let us complete them by the figures of the different areas coming under the various classes of holdings. They make a positively bewildering picture. There were in Great Britain in 1895:

Acres

Percentage of
Total area

Holdings under 2 hectares

     366,792

  1.13

Holdings of 2-5

  1,667,647

  5.12

5-20

  2,864,976

  8.74

20-40

  4,885,203

15.0  

40-120

13,875,914

42.59

120-200

  5,113,945

15.7  

200-400

  3,001,184

  9.42

over 400

     801,852

  2.46

According to this 27 to 28 per cent. of the agricultural land of Great Britain is in large holdings, and only 2.46 per cent. is in very large holdings. On the other hand, over 66 per cent. is in medium and large peasants’ holdings. [27] The proportion of the peasant holdings (where, nevertheless, capitalistic large peasant holdings predominate) is greater in England than in the average in Germany. Even in England proper the holdings between 5 and 120 hectares comprise 64 per cent. of the cultivated area, and nearly 13 per cent. of the area only is in holdings of over 200 hectares. [28] In Wales, quite apart from small allotments, 92 per cent., in Scotland 72 per cent, of the holdings are peasant holdings of between 2 and 200 hectares.

Of the cultivated area, 61,014 holdings with 4.6 millions of acres of land were the property of their cultivators, 19,607 holdings were partly the property and partly leased, and 439,405 holdings only were on leased land. It is well known that in Ireland the small peasant class or small tenant class predominates. The same holds good for Italy.

There can, then, be no doubt that in the whole of Western Europe, as also in the Eastern States of the United States, the small and medium agricultural holding is increasing everywhere, and the large and very large holding decreasing. There is no doubt that the medium holdings are often of a pronounced capitalistic type. The concentration of the enterprises is not accomplished here in the form of annexing an ever greater portion of land to the farm, as Marx saw in his time [29], but actually in the form of intensification of the cultivation, changes in cultivation that need more labour for a given area, or in the rearing, etc.) of superior cattle. It is well known that this is to a large extent (not altogether) the result of the competition between the agricultural states or agricultural territories of Eastern Europe and those over the seas. Also these latter will be in a position for a good while yet to produce corn and a number of other products of the soil at such cheap prices that a substantial disarrangement of the factors of development is not to be expected from a change in this respect.

Although the tables of statistics of income in the most advanced industrial countries may partly register the mobility, and with it the transitoriness and insecurity, of capital in modern economy, and although the incomes or fortunes registered may be to an increasing extent paper possessions which a vigorous puff of wind could indeed easily blow away; yet these rows of incomes stand in no fundamental opposition to the gradation of economic unities in industry, commerce, and agriculture. The scale of incomes and the scale of establishments show a fairly well-marked parallelism in their divisions, especially where the middle divisions are concerned. We see these decreasing nowhere, but, on the contrary, considerably increasing everywhere. What is taken away from them from above in one place they supplement from below in another, and they receive compensation from above in one place for that which falls from their ranks below. If the collapse of modern society depends on the disappearance of the middle ranks between the apex and the base of the social pyramid, if it is dependent upon the absorption of these middle classes by the extremes above and below them, then its realisation is no nearer in England, France, and Germany to-day than at any earlier time in the nineteenth century.

But a building can appear outwardly unchanged and substantial and yet be decayed if the stones themselves or important layers of stones have become rotten. The soundness of a business house stands the test of critical periods; it remains, therefore, for us to investigate what is the course of the economic crises which are peculiar to the modern order of production, and what consequences and reactions are to be expected in the near future from them.

 

 

(d) The Crises and Possibilities of Adjustment in Modern Economy.

“The contradictions inherent in the movement of capitalist society impress themselves upon the practical bourgeoisie most strikingly in the changes of the periodic cycle through which modern industry runs, and whose crowning point is the universal crisis.” MARX, Preface to the second edition of Capital.

In Socialist circles the most popular explanation of economic crises is their derivation from under-consumption. Friedrich Engels, however, has on several occasions combated this idea sharply – most sharply, probably, in the third part of the third chapter of the polemical treatise against Dühring, where Engels says that under-consumption by the masses may well be “also a condition of crises,” but that it explains their presence to-day just as little as their former absence. Engels illustrates this by the conditions of the English cotton industry in the year 1877, and declares it to be a strong measure in the face of those conditions “ to explain the present total stagnation in the sale of cotton yarns and textile fabrics by the underconsumption of the English masses and not by the over-production of the English cotton manufacturers.” [30]

But Marx himself has also occasionally pronounced very sharply against the derivation of crises from under-consumption. “It is pure tautology,” he writes in the second volume of Capital, “to say that crises rise from a want of consumers able to pay.” If one wished to give this tautology an appearance of greater reality by saying that the working classes receive too small a portion of what they produce, and that the grievance would therefore be redressed if they had a larger share, it can only be observed that “the crises are each time preceded by a period in which the workers’ wages rise and the working classes actually receive a relatively greater share than usual of the yearly produce destined for consumption.” It thus would appear that capitalist production “includes conditions independent of good or evil intentions – conditions which only permit of temporarily relative prosperity for the working classes and then always as a stormy bird of a crisis.” [31] To which Engels adds in a footnote: “Ad notam for the adherents of Rodbertus’ theory of crises.”

A passage in the second part of the third volume of Capital stands in apparent contradiction to all these statements. There Marx says about crises: “The last reason for all social crises always is the poverty and limitation of consumption of the masses as opposed to the impulse of capitalist production to develop the productive forces, as though only the absolute capacity for consumption of the community formed their limit.” [32] That is not very different from the Rodbertus’ theory of crises, for with him also crises are not occasioned simply by under-consumption by the masses, but, just as explained here, by it in conjunction with the increasing productivity of labour. In the passage quoted by Marx, under-consumption of the masses is emphasised even in contradistinction to the anarchy of production – disparity of production in the various branches and changes of prices which produce temporarily general depressions – as the last reason of all true crises.

As for any real difference of conception appearing here from that expressed in the quotation given above from the second volume, an explanation must be sought in the very different times in which the two sentences were written. There is an interval of between thirteen to fourteen years between them, and the passage from the third volume of Capital is the earlier one. It was written by 1864 or 1865, whilst the one out of the second volume must have been written about 1878. [33] In another passage of this second volume, which had been written by 1870, the periodic character of crises -which is approximately a ten-year cycle of production-is brought into conjunction with the length of the turnover of fixed (laid out in machinery, etc.) capital. The development of capitalistic production has a tendency on the one hand to extend the bulk of value and the length of life of fixed capital, and on the other to diminish this life by a constant revolution of the means of production. Hence the “moral wearing out” of this portion of fixed capital before it is “physically spent.” Through this cycle of connected turnovers comprehending a series of years in which capital is confined through its fixed portion, arises a material cause for periodic crises in which the business passes through periods following one another of exhaustion, medium activity, precipitancy, crisis. [34] The periods for which capital is invested are certainly very diverse and do not coincide, but the crisis always forms the starting point of a great fresh investment and therewith – from the standpoint of the whole community-a more or less new material foundation for the next cycle. [35] This thought is taken up again in the same volume in the chapters on the reproduction of capital, and it is there shown how even with reproduction on the same scale and with unchanged productivity of labour, differences in the length of life of the fixed capital which appear temporarily (if, for example, in one year more constituent portions of fixed capital decay than in the previous year) must have as a consequence crises of production. Foreign trade can indeed help out, but so far as it does not remove these differences it only transfers “the conflicts to a wider sphere and opens to them a greater scope. “ A communistic society could prevent such disturbances by continued relative over-production which in its case would be “only the control of the community over its own means of production”; but in a capitalistic society this over-production is an anarchical element. This example of disturbances merely through the differences of length of life of fixed capital is striking. Want of proportion in the production of fixed and circulating capital is one of the favourite arguments of the economists for explaining crises. It is something quite new to them to hear that such a want of proportion can and must arise from the simple maintenance of fixed capital; that it can and must arise with the assumption of an ideal normal production and the simple reproduction of the social capital already in use. [36] In the chapter on “Accumulation and Reproduction on a larger scale,” over-production and crises are only mentioned cursorily as self-evident results of possibilities of combination which follow from the process depicted. Yet here again the idea of “over-production” is very vigorously maintained. “If,” we find on page 499 “Fullarton, the second – namely: (1) whether the enormous extension of the world market, in conjunction with the extraordinary shortening of time necessary for the transmission of news and for the transport trade, has so increased the possibilities of adjustment of disturbances; and (2) whether the enormously increased wealth of the European states, in conjunction with the elasticity of the modern credit system and the rise of industrial Kartels, has so limited the reacting force of local or individual disturbances that, at least for some time, general commercial crises similar to the earlier ones are to be regarded as improbable.

This question, raised by me in an essay on the “Socialist Theory of a Catastrophic Development of Society,” has experienced all kinds of opposition. [37] Among others it has caused Rosa Luxemburg to lecture me in a series of articles published in the Leipzig Volkszeitung of September, 1898, on the nature of credit and the possibilities of capitalism in regard to adaptation. As these articles, which have also passed into other socialist papers, are true examples of false dialectics, but handled at the same time with great skill, it appears to me to be opportune to examine them here.

Rosa Luxemburg maintains that the credit system, far from working against crises, is the means of pushing them to an extremity. It first made possible the unmeasured extension of capitalistic production, the acceleration of the exchange of goods and of the cyclic course of the process of production, and in this way it is the means of bringing into active conflict as often as possible the differences between production and consumption. It puts into the hand of the capitalist the disposal of the capital of others, and with it the means of foolhardy speculation, and if depression sets in it intensifies the crisis. Its function is to banish the residue of stability from all capitalist conditions, to make all capitalist forces in the highest degree elastic, relative, and sensitive.

Now all that is not exactly new to anyone who knows a little of the literature of socialism in general and of Marxist socialism in particular. The only question is whether it rightly represents the real facts of the case to-day, or whether the picture has not another side. According to the laws of dialectic evolution to which Rosa Luxemburg so much likes to give play, it ought certainly to be the case; but even without falling back upon these, one should realise that a thing like credit, capable of so many forms, must under different conditions work in different ways. Marx treats credit by no means from the point of view that it is only a destructive agent in the capitalist system. He assigns to it, amongst other things [38], the function of “creating the form of transition to a new modus of production,” and with regard to it he expressly brings into prominence “the double-sided characteristics of the credit system.” Frau Luxemburg knows the passage referred to very well; she even reprints the sentence from it where Marx speaks of the mixed character, “half swindler, half prophet”, of the chief promulgators of credit (John Law, Isaac Pereire, etc.). But she refers exclusively to the destructive side of the credit system, and mentions not a word of its capacity for establishing and creating, which Marx expressly includes. Why this amputation, why this noteworthy silence with respect to the “double-sided characteristics”? The brilliant dialectical fireworks by means of which the power of the credit system is represented as a means of adaptation in the light of a “one-day fly”, end in smoke and mist as soon as one looks more closely at this other side which Frau Luxemburg passes by so shyly.

That the credit system makes speculation easier is an experience centuries old; and very old, too, is the experience that speculation does not stop production when industrial circumstances are far enough developed to suit it. Meanwhile, speculation is conditioned by the relation of the knowable to the unknown circumstances. The more the latter predominate the more will speculation flourish; the more it is restrained by the former, the more the ground is cut from under its feet. Therefore the maddest outbursts of commercial speculation come to pass at the dawn of the capitalistic era, and speculation celebrates its wildest orgies usually in the countries where the capitalistic development is youngest. In the domain of industry speculation flourished most luxuriantly in new branches of production. The older a branch of production is under modern forms – with the exception of the manufacture of mere articles of fashion – the more does the speculative momentum cease to play a decisive part in it. The conditions and movements of the market are then more exactly foreseen and are taken into consideration with greater certainty.

Nevertheless, this certainty is only relative, because competition and technical development exclude an absolute control of the market. Over-production is to a certain extent unavoidable. But over-production in single industries does not mean general crises. If it leads to one, either the industries concerned must be of such importance as consumers of the manufactures of other industries, as that their stagnation also stops these industries, or indeed they must take from them, through the medium of the money market – that is, through the paralysis of general credit – the means of carrying on production. But it is evident that there is always a lessening probability of this latter result. The richer a country is, the more developed its credit organisation – which is not to be confused with a more widely spread habit to produce with borrowed capital. For here the possibilities of adjustment multiply in an increasing measure. In some passage, which I cannot find at the moment, Marx said once – and the correctness of the sentence can be proved by the most abundant evidence – that the contractions in the centre of the money market are much more quickly overcome than in the different points of the circumference. But the change of the means of communication brought about in the meantime has more than neutralised the consequences of great distances in this respect. [39]

If the crises of the money market are not quite banished from the world yet, as far as concerns us here, the tightenings of that market by vast commercial undertakings controlled with difficulty are very much reduced.

The relations of financial crises to trade and business crises are not yet so fully explained that one can say with any certainty when both happen together that it was the trade crisis – i.e., over-production – which directly caused the money crisis. In most cases it was quite clear that it was not actual over-production, but overspeculation, which paralysed the money market, and by this depressed the whole business. That is proved from the isolated facts which Marx mentions in the third volume of Capital, taken from the official inquiries into the crises of 1847 and 1857, as well as from the facts which Professor Herkner adduces on these and other crises in his sketch of the history of trade crises in his Handwörterbuch der Staatswissenschaften. Frau Luxemburg deduces on the basis of the facts adduced by Herkner that the crises hitherto have not at all been the right crises, but that they were only infantile illnesses of the capitalistic economy, the accompanying phenomena not of narrowing but of widening the domain of the capitalistic economy-that we “have not yet entered upon that phase of perfect capitalistic maturity which is presumed in the Marxist scheme of the periodicity of crises.” According to her we find ourselves “in a phase where crises no longer accompany the rise of capital nor yet its decline.” This time will only come when the world market is fully developed and can be enlarged by no sudden extensions. Then the struggle between the productive powers and the limits of exchange will become continually sharper and more stormy.

To that one must observe that the formula of the crises in and for Marx was no picture of the future, but a picture of the present day which it was expected would recur in the future in always sharper forms and in greater acuteness. As soon as Frau Luxemburg denies to it the significance which Marx imputed to it for the whole epoch lying behind us, and sets it up as a deduction which did not yet correspond with reality, but was only a logical forecast based on the existence of certain elements in an embryonic state, she immediately questions the whole Marxist prediction of the coming social evolution, so far as this is based on the theory of crises. For if this was not based on experience at the time when it was set up, and has not become manifest in the interval between then and now, in what more distant future can one place its formula as coming true? Its relegation to the time when the world market has been fully developed is a flight into the next world.

No one knows when the world market will be fully developed. Frau Luxemburg is not ignorant of the fact that there is an intensive as well as an extensive broadening of the world market, and that the former is to-day of much greater importance than the latter.

In the trade statistics of the great industrial countries exports play by far the greatest part in regard to the countries longest occupied. England exports to the whole of Australasia (all the Australian colonies, New Zealand, etc.) values less in amount than to a single country, France; to the whole of British North America (Canada, British Columbia, etc.) not so much as to Russia only; to both colonial territories together, which are indeed of a respectable age, not so much as to Germany. Its trade with all its colonies, including the whole of the immense Indian Empire, is not a third of its trade with the rest of the world; and as regards the colonial acquisitions of the last twenty years, the exports thither have been ridiculously small. The extensive widenings of the world market are accomplished much too slowly to allow sufficient outlet for the actual increase of production, if the countries already drawn into it did not offer it an increasing market. A limit to this increasing and intensive amplifying of the world market, along with the extension of its area, cannot be set up a priori. If the universal crisis is the inherent law of capitalistic production, it must prove its reality now or in the near future. Otherwise the proof of its inevitableness hovers in the air of abstract speculation.

We have seen that the credit system to-day undergoes less, not more, contractions leading to the general paralysis of production, and so far, therefore, takes a minor place as a factor in forming crises. But so far as it is a means of a hothouse forcing of over-production, the associations of manufacturers meet this inflation of production in separate countries, and even internationally here and there, ever more frequently, by trying to regulate production as a Kartel, a syndicate, or a trust. Without embarking in prophecies as to its final power of life and work, I have recognised its capacity to influence the relation of productive activity to the condition of the market so far as to diminish the danger of crises. Frau Luxemburg refutes this also.

First she denies that the association of manufacturers can be general. She says the final aim and effect of such associations are, by excluding competition within a branch, to increase their share of the total amount of profit gained in the market of commodities. But, she adds, one branch of industry could only attain this at the cost of another, and the organisation could not possibly, therefore, be general. “Extended into all branches of production it would itself put an end to its effect.”

This proof does not differ by a hair’s-breadth from the proof, long ago abandoned, of the uselessness of trades unions. Its support is even immeasurably more fragile than the wages fund theory of blessed memory. It is the presumption unproven, unprovable, or, rather, proved to be false, that in the commodity market only a fixed amount of profit is to be divided. It presumes, amongst other things, a fixing of prices independently of the movements in the cost of production. But even given a fixed price, and, moreover, a fixed technological basis of production, the amount of profit in a branch of industry can be raised without thereby lessening the profits of another – namely, by the lessening of unproductive expenses, the ceasing of cutting competition, better organisation of production, and the like. That the association of manufacturers is an effective means towards this is self-evident. The problem of the division of profits is the last obstacle of all which stands in the way of a general union of associations of employers.

It stands somewhat better with the last objection of Frau Luxemburg. According to it the Kartels are unsuitable for preventing the anarchy of production because the Kartels of manufacturers as a rule obtain their higher profit rate on the home market, because they use the portion of capital that cannot be applied to this for manufacturing products for foreign countries at a much less profit rate. The consequence is, increased anarchy on the world market – the opposite to the object aimed at.

“As a rule” this manoeuvre can only be upheld where a protective duty affords the Kartel protection, so as to make it impossible for the foreign country to repay it in like coin. Meanwhile we are concerned here neither with denying the harmful effects of the present simple and high protectionist system, nor with an apology for the syndicates of manufacturers. It has not occurred to me to maintain that Kartels, etc., are the last word of economic development, and are suited to remove for ever the contradictions of modern industrial life. I am, on the contrary, convinced that where in modern industrial countries Kartels and trusts are supported and strengthened by protective duties, they must, in fact, become factors of the crises in the industry concerned – also, if not at first, in any case finally, for the “protected” land itself. The question only arises how long the people concerned will be content with this arrangement. Protective tariffs are in themselves no product of economy, but an encroachment on economy by the political power seeking to secure economic results. It is otherwise with the industrial Kartel. It has – although favoured by protective tariffs-grown out of the economic soil, and is a national means of adapting production to the movements of the market. That it is, or can be, at the same time the means of monopolist exploitation is another matter. But it is just as much beside the question that in the former capacity it means an increase of all earlier remedial measures for overproduction. With much less risk than the individual undertaking, it can, in times of a glut on the market, temporarily limit production. Better than this, it is also in a position to meet foreign cutting competition abroad. To deny this is to deny the superiority of organisation over anarchic competition. But we do so, if we deny on principle that Kartels can work as a modifying influence on the nature and frequency of crises. How far they can do so is for the present a matter for conjecture, for we have not sufficient experience to allow of a conclusive judgment in this respect. But still fewer conclusive facts can be given under these circumstances for anticipating future general crises as they hovered before Marx and Engels, repetitions on a larger scale of the crises of 1825, 1836, 1847, 1857, 1873. The mere fact that whilst for a long time socialists generally believed in an increasing contraction of the industrial cycle as the natural consequence of the increasing concentration of capital – a development in the form of a spiral – Friedrich Engels in 1894 found himself driven to question whether a new enlarging of the cycle was not in front of us, and thus to suggest the exact contrary of the former assumption, and he warned us against the abstract deduction that these crises must repeat themselves in the old form. [40]

The history of individual industries shows that their crises by no means always coincide with the so-called general crises. Marx, as we have seen, believed he could establish on the need of an accelerated renewal of fixed capital (implements of production, etc.) a material foundation for periodic crises [41], and it is undoubtedly true that an important reason for crises is to be found here. But it is not accurate, or not more accurate, that these periods of renewal coincide as to time in the various industries. And therewith a further factor of the great general crisis is done away with.

There remains then only so much, that the capacity for production in modern society is much greater than the actual demand for products determined by the buying capacity; that millions live insufficiently housed, insufficiently clad, and insufficiently nourished, in spite of abundant means at hand for sufficient housing, nourishment, and clothing; that out of this incongruity, over-production appears again and again in different branches of production, so that either actually certain articles are produced in greater amounts than can be used – for example, more yarn than the present weaving mills can work – or that certain articles are produced not indeed in a greater quantity than can be used, but in a greater quantity than can be bought; that in consequence of this, great irregularity occurs in the employment of the workers, which makes their situation extremely insecure, weighs them down in unworthy dependence, brings forth over-work here and want of work there; and that of the means employed to-day to counteract the most visible part of this evil, the Kartels represent monopolist unions on the one side against the workers, and on the other against the great public – which have a tendency to carry on warfare over the heads of these and at their cost with the same kind of monopolist unions in other industries or other lands, or, by international or inter-industrial agreements, arbitrarily to adapt production and prices to their need of profit. The capitalistic means of defence against crises virtually bear within themselves the possibilities of a new and more hopeless serfdom for the working classes, as well as of privileges of production which revive in acute form the old guild privileges. It appears to me to be much more important at present, from the standpoint of the workers, to keep before our eyes the possibilities of Kartels and trusts than to prophesy their “impotence.” It is for the working class a subordinate question whether these combinations will be able, in the course of time, to attain their first-mentioned object – the warding off of crises. But it becomes a question full of importance as soon as expectations of any kind as regards the movement for the emancipation of the working classes are made dependent upon the question of the general crisis. For then the belief that Kartels are of no effect against crises may be the cause of very disastrous neglect.

The short sketch which we gave in the introduction to this chapter of the Marx-Engels explanations of economic crises will suffice, in conjunction with the corresponding facts adduced, to show that the problem of crises cannot be solved by a few well-preserved catch-words. We can only investigate what elements of modern economy work in favour of crises and what work against them. It is impossible to pre-judge a priori the ultimate relation of these forces to one another, or their development. Unless unforeseen external events bring about a general crisis – and as we have said that can happen any day – there is no urgent reason for concluding that such a crisis will come to pass for purely economic reasons. Local and partial depressions are unavoidable; general stagnation is not unavoidable with the present organisation and extension of the world market, and particularly with the great extension of the production of articles of food. The latter phenomenon is of peculiar importance for our problem. Perhaps nothing has contributed so much to the mitigation of commercial crises or to the stopping of their increase as the fall of rent and of the price of food. [42]

 

 

Notes

16. It would serve no good purpose to give more recent statistics, and it is impossible in some of the cases given to follow exactly Mr. Bernstein’s figures and so make accurate comparisons. Moreover, our Home Office does not now publish statistics compiled in the same way as in 1896. – ED.

17. The particulars of 1,931 registered factories and 5,624 workshops had not come in when the report was drawn up. They would have somewhat diminished the ratio of workers to a business.

18. German workmen who have emigrated to England have repeatedly expressed their astonishment to me at the dispersion of enterprises which they met in the wood, metal and manufacturing industries of this country. The present figures in the cotton industry show only a moderate increase in the concentration of establishments since the time when Karl Marx wrote.

19. See R. Calwer, The Development of Handicraft, Neue Zeit XV., 2, p.597.

The figures of the imperial census of 1907 are not yet known so far as the development in regard to size is concerned. But the figures for Prussia are known, and they can be taken as a fair average for the whole Empire. They show for trade respectively, industry and commerce together (without railways, post and telegraphs) the following figures:

Numbers

Persons Employed

Establishments

1895

1907

1895

1907

V. Small (1 person only)

1,029,954

   955,707

1,029,954

   955,707

Small (2-5 persons)

   593,884

   767,200

1,638,205

2,038.236

Medium (6-50 persons)

   108,800

   154,330

1,390,745

2,038,236

Great (51-500 persons)

     10,127

     17,287

1,217,085

2,095,065

Very great (501-1,000 persons)

          380

          602

   261,507

   424,587

Giant (1,001 persons and over)

          191

          371

   338,585

   710,253

1,743,336

1,895,497

5,876,083

8,332,912

A remarkable movement towards the great establishments, and often two or more of the establishments enumerated are only departments of one and the same enterprise. The process of industrial and commercial concentration is most obvious. But that it does not mean the disappearance of the small enterprise is no less obvious. It is only the quite small enterprise – the garret workers, etc. – that as a group shows a decrease.

20. In Prussia the increase from 1895 to 1907 was from 52,045 to 62,985, over 20 per cent; whilst the population increased only by 19 per cent.

21. This is confirmed by the new Prussian statistics quoted in a former note.

22. As far as appears from them, they show an increase of over 50 per cent. in the last decade.

23. See W.H. Vliejen : Das Agrarprogramm der niederländischen Sozialdemokratie, Neue Zeit xvii., i, p.75.

24. Der Agrarsozialismus in Belgien, Neue Zeit XV. 1, p.752.

25. Capital, I, 4th ed., p.615.

26. According to the ratio of 1 acre = 0.4 hectares which is not quite exact, but which appears a admissible for the purpose of comparison. The numbers are taken from the Blue Book on Agricultural Holdings.

27. Of which 579,133 plots come under 1 acre.

28. In 1907, 21.78 of all holdings in England were between 1 and 5 acres, and only 3.95 holdings were over 300 acres. The same figures for Wales were 16.91 and 0.66; for Scotland 22.40 and 3.66. – ED.

29. See Capital, I., 4th ed., p. 643, note.

30. Third edition, pp.308, 309. [In a footnote to this Engels remarks : “The explanation of crises by underconsumption originated with Sismondi, and had with him a certain justification.” “Rodbertus,” he says, “borrowed it from Sismondi and Dühring copied it from him.” In the preface to the Poverty of Philosophy Engels also argues in similar fashion against the theory of crises put forth by Rodbertus.]

31. Ibid., pp.406, 407.

32. Ibid., p.21.

33. Compare for this the statement of Engels in the preface to the second volume of Capital. Generally speaking the second volume contains the latest and ripest results of Marx’s work of research.

34. Vol. II, p.164.

35. p.165.

36. Ibid., p. 468.

37. The essay criticised the opinion laid down in a resolution of the International Socialist Congress of 1896 that we were on the eve of a great catastrophic crisis that would produce a total revolution of social conditions. The said resolution ran thus: “The economic and industrial development is going on with such rapidity that a crisis may occur within a comparatively short time. The Congress, therefore, impresses upon the proletariat of all countries the imperative necessity of learning, as class-conscious citizens, how to administer the business of their respective countries for the common good.” I gladly recognised the usefulness of the final recommendation, but I boldly disputed the truth of the premise. This occasioned some violent attacks, to which I replied in the letter reprinted in the preface of this book.

38. Vol. III., i., p.429.

39. Engels calculates that America and India have been brought nearer to the industrial countries of Europe, by means of the Suez Canal, steamer transport, etc., by 70 to 90 per cent., and adds “that owing to this the two great incubators of crises from 1825 to 1857 lost a great part of their destructive power” (Capital, Vol. III., Part I, p.45) On p.395 of the same volume, Engels maintains that certain speculative business formed on risky schemes of credit, which Marx pictures as factors of crises in the money market, have been brought to an end through the oceanic cable. The correcting parenthesis of Engels on p.56 of the second part of Vol. III. is also worthy of notice for its criticism on the development of the credit system.

40. We are, of course, only speaking here of the purely economic foundation of crises. Crises as results of political events (wars and serious threatenings of war) or of very widespread failures of crops – local failures no longer exercise any effect in this respect – are of course always possible.

41. The use of the word “material” in the passage mentioned (Vol. II, p.164) is not without interest in judging how Marx understood this word. According to the present usual definition of the word the explanation of crises from under-consumption would be quite as materialistic as founding it on changes in the process of production, or in implements.

42. Note to the English edition. – This was written in the winter 1898-1899 before the South African War had produced new conditions on the money market and a great increase in armaments. In spite of these facts the crisis that broke out in 1901 was of shorter life than a good many of the earlier crises, and was followed by a longer period of prosperity.

 


Last updated on 16.3.2003