Karl Kautsky

The Class Struggle


1. Commerce and Credit

In countries where the capitalist system of production prevails the masses of the people are forced down to the condition of proletarians; that is to say, of workers who are divorced from their instruments of production so that they can produce nothing by their own efforts, and, therefore, are compelled to sell the only commodity they possess – their labor-power. To this class, also, belong the majority of the farmers, small producers and traders; the little property they still possess today is but a thin veil, calculated rather to conceal than to prevent their dependence and exploitation.

Over against this class we find a small group of property holders – capitalists and landlords – who alone possess the most important means of production and the most important sources of livelihood, the exclusive ownership of which invests them with the power to subjugate the class of propertyless and to exploit them.

While the majority of the people sink ever deeper in want and misery, this small group of capitalists and landlords, together with their parasites, appropriate all the tremendous advantages that have been wrung from nature, especially through the progress made by the natural sciences and their practical application.

There are three sorts of capital: merchant’s capital, interest-bearing capital and industrial capital. The last of these is the youngest; perhaps it is not as many hundred years old as the other two are thousands. But the youngest of these brothers has grown faster, much faster, than either of his seniors; he has become a giant who has enslaved and forced them into his service.

In its classic form small production was not dependent on commerce. The farmer and the mechanic could acquire the means of production, in so far as they needed any, direct from the producer; furthermore, they could sell their product directly to the consumer. Commerce, at that stage of economic development, catered chiefly to luxury; it was not then a matter of necessity. either for the promotion of production or for the support of society.

Capitalist production, however, is from the very start dependent upon commerce; and vice versa, from a certain stage on, commerce needs capitalist production for its further development. The further the capitalist system of production extends, and the more dominant it becomes, the more requisite is the development of commerce to the whole industrial life. Commerce today no longer caters simply to superfluity and luxury. The whole system of production, yes, even the sustenance of the people, in a capitalist country depends now upon the free and unrestricted action of commerce. This is one of the reasons why war is more devastating than ever; it interrupts commerce, and that has become equivalent to a stoppage of production, to a suspension of economic life, and to an industrial ruin that spreads beyond the field of battle and is not less mischievous than the devastation that takes place there.

As important as the development of commerce is that of interest to the capitalist system of production. In the days of the small producer the money-lender was simply a parasite, who profited by the distress or improvidence of others. The money which he lent to others was, as a rule, put to unproductive uses. If, for instance, a nobleman borrowed money, he did so to spend it in pleasure; if a farmer or mechanic borrowed money, it was mainly to pay his taxes or the cost of lawsuits. In those days lending at interest was considered immoral and was everywhere condemned.

Under the capitalist system of production this has all changed. Money is now a means whereby to establish a capitalist industry, to buy and to exploit labor-power. When today a capitalist raises money in order to establish a factory, or to enlarge one already in existence it does not follow – provided, of course, that his undertaking prosper – that his previous income will be reduced by the interest on the loan. The loan, on the contrary, helps him to exploit labor-power, consequently, to increase his income by an amount larger than the interest he will have to pay. Therefore, under the capitalist system of production, lending has lost its original character. Its role as a means for the exploitation of distress or improvidence is pushed to the rear by a new one, that of “fructifying” the capitalist system of production, that is to say, of enabling it to develop faster than it otherwise would by the mere hoarding of capital in the vaults of industrial capitalists. The horror once entertained for a lender has come to an end; he now becomes a spotless character and receives a new and euphonious name, creditor.

Simultaneously with this metamorphosis, the principal current of interest-bearing capital underwent a change. The money which the lenders heaped up in their vaults flowed formerly out of those reservoirs, through a thousand channels, into the hands of the non-capitalists. Today, on the contrary, the vaults of the lenders, the institutions of credit, have become the reservoirs into which there flow, through a thousand channels, money from non-capitalists, and out of which this money is then conveyed to the capitalist. Credit is today, just as it was formerly, a means whereby to render non-capitalists – whether property holders or propertyless – subject to the payment of interest; today, however, it has, further, become a powerful instrument wherewith to convert into capital the property in the hands of the various classes of non-capitalists, from the large estates of endowed institutions and aristocrats down to the pennies saved by servant girls and day laborers. In other words, it has become an instrument for the displacing of the old propertied classes and the intensified exploitation of the wage-earners. People praise the present institutions of credit, savings banks, etc., thinking that they turn the small savings of working-men, servant girls and farmers into capital and these unfortunates themselves into “capitalists.” Nevertheless, the only object in collecting the money of non-capitalists is to place at the disposal of capitalists an increased quantity of capital and thus to accelerate the development of the capitalist system of production. What this means to wage-earners, small farmers and mechanics we have already seen.

At the same time that the present institutions of credit are converting the whole property of non-capitalists into capital and placing it at the disposal of the capitalist class, they see to it that the capital of the capitalist class itself is better utilized than before. They become the reservoirs of all the money which the individual capitalist may, from time to time, have no occasion to use, and they make these sums, which otherwise would have lain “dead,” accessible to such other capitalists as may stand in need of them. Furthermore, they make it possible to convert merchandise into money before it is sold, and thereby diminish the quantity of capital formerly needed in a given business undertaking.

Through all these means the quantity and power of the capital at the disposal of the capitalist class is enormously increased. Hence it is that credit has now become one of the most powerful levers of the capitalist system of production. Next to the great development of machinery and the creation of the reserve army of unemployed labor, credit is the principal cause of the rapid development of the present system.

Credit is, however, much more sensitive than commerce to any disturbance. Every shock it receives is felt throughout the economic organization.

Many political economists have looked upon credit as a means whereby people without any, or with little, property could be turned into capitalists. But, as its name indicates, credit rests upon the confidence of him who gives, in him who takes, credit. The more the latter possesses, the grater is the security that he offers, and the greater is the security that he enjoys. Consequently, credit is only a means whereby more money may be furnished to the capitalists than they possess, thereby to increase their preponderance and to draw sharper the social antagonisms, instead of to weaken or remove them.

To sum up, credit is not only a means whereby to develop the capitalist system of production more rapidly, and to enable it to turn to use every favorable opportunity; it is also a means whereby to promote the downfall of small production; and, lastly, it is a means to render modern industry more and more complicated and liable to disturbance, to carry the feeling of uncertainty into the ranks of the capitalists themselves and to make the ground upon which they move ever more uncertain.

2. Division of Labor and Competition

While, on the one hand, the industrial development draws commerce and credit in ever close, relation with industry, it brings about, on the other hand, an increased division of labor; the various functions which the capitalist has to fulfill in the industrial life, divide more and more and fall to the part of separate undertakings ana institutions. Formerly, it was the merchant’s function not only to buy and sell goods, but to store them, and often to carry them to far distant markets. He had to assort his goods, display them, and render them accessible to the individual purchaser. Today there is a division of labor not between wholesale and retail trade only; we find also large undertakings for the transportation and the storing of goods. In those large central markets called exchanges, buying and selling have to such an extent become separate pursuits and freed themselves from the other functions commonly pertaining to the merchant, that not only are goods located in distant regions, or even not yet produced, bought and sold there, but that goods are bought without the purchaser intending to take possession of them, and others are sold without the seller ever having had them in his possession.

In former days a capitalist could not be conceived without the thought of a large safe into which money was collected and out of which he took the funds which he needed to make payments. Today the treasury of the capitalist has become the subject of a separate occupation in all industrially advanced countries, especially England and America. The bank has sprung up. Payments are no longer made to a capitalist, but to his bank, and from his bank, not from him, are his debts collected. And so it happens that a few central concerns perform today the functions of treasury for the whole capitalist class of the country.

But although the several functions of the capitalist thus become the functions of separate undertakings, they do not become independent of each other except in appearance and legal form; economically, they remain as closely bound to and dependent upon each other as ever. The functions of any of these undertakings could not continue if those of any of the others with which they are connected were to be interrupted.

The more commerce, credit and industry become interdependent and the more the separate functions of the capitalist class are assumed by separate undertakings, the greater is the dependence of one capitalist upon another. Capitalist production becomes, accordingly, more and more a gigantic body, whose various limbs are in the closest relation to each other. Thus, while the masses of the people become ever more dependent upon the capitalists, the capitalists themselves become ever more dependent upon one another.

The economic machinery of the modern system of production constitutes a more and more delicate and complicated mechanism; its uninterrupted operation depends constantly more upon whether each of its wheels fits in with the others and does the work expected of it. Never yet did any system of production stand in such need of careful direction as does the present one. But the institution of private property makes it impossible to introduce plan and order into this system.

While the several industries become, in point of fact, more and more dependent upon one another, in point of law, they remain wholly independent. The means of production in every single industry are private property; their owner can do with them as he pleases.

The farther large production develops, the larger every single industry becomes, the better is the order to which the economic activity of each is reduced, and the more accurate and well considered is the plan upon which each is carried on, down to the smallest details. The joint operation of the various industries is, however, left to the blind force of free competition. It is at the expense of a prodigious waste of power and of materials and under stress of constantly increasing economic crises that free competition keeps the industrial mechanism in motion. The process goes on, not by putting every one in his place, but by crushing everyone who stands in the way. This is what is called “the survival of the fittest in the struggle for existence.” The fact is, however, that competition crushes, not so much the truly unfit, as those who happen to stand in the wrong place, and who lack either the special qualifications or, what is more important, the capital to survive. But competition is no longer satisfied with crushing those who are unequal to the “struggle for existence.” The destruction of every one of these draws in its wake the ruin of numberless others who were economically connected with the bankrupt concern – wage-earners, creditors, etc.

“Every man is the architect of his own fortune.” So runs a favorite proverb. This proverb is an heirloom from the days of small production, when the fate of every single bread-winner, at most that of his family also, depended upon his own personal qualities. Today the fate of every member of a capitalist community depends less and less upon his own individuality, and more and more upon a thousand circumstances that are wholly beyond his control. Competition no longer brings about the survival of the fittest.

3. Profit

Whence does the capitalist class derive its income? The gains of merchant’s and lender’s capital consisted originally of the portions which they withheld from the property of those dependent on them, who might represent any of the various classes. It is otherwise with industrial capital. It so happens that in proportion as the capitalist system of production develops, the industrial form of capital overshadows all others and forces them into its service. Furthermore, it can do this only in so far as it returns to them a part of the surplus value which it has drawn from the workers. As a result of this development the surplus produced by the proletarians becomes more and more the only source from which the whole capitalist class draws its income.

As the small industrialist and the small farmer are disappearing and their influence upon modern society is felt ever less, so also are disappearing the old forms of merchant’s and interest-bearing capital, both of which made their gains by exploiting the non-capitalist classes. Already there are nations without independent artisans and small farmers. England is an instance in point. But no one can conceive of a single modern state without large production. Whoever desires to understand the modern forms of capital must proceed from the industrial form that capital has assumed. The real and increasingly important source from which flow capitalist gains is to be found in the surplus value produced by capital industry.

We have in the preceding chapter become acquainted with the surplus value which the industrial proletarian produces and the industrial capital appropriates. We have also seen how the amount of the surplus value produced by the individual laborer increases at a more rapid rate than does his wage; this is brought about by the increase in the amount of labor, introducing labor-saving machinery and cheaper forms of labor. At the same time there is an increase in the number of proletarians. So the amount of the surplus accruing to the capitalist class swells constantly more and more.

Unfortunately, however, “life’s unalloyed enjoyment is not the lot of mortal man.” However distasteful it may be to him, the capitalist is compelled to “divide” with the landowner and the state. And the share claimed by each of these increases from year to year.

4. Rent

When one speaks of the classes which are steadily becoming the sole property holders and exploiters, the monopolists of the instruments of production, distinction must be made between the capitalists and landlords.

The land is a peculiar means of production. It is the most necessary of all; without it no human activity is possible; even the sailor and the aeronaut need a point of departure and a landing place. Furthermore, it is a means of production that cannot be increased at pleasure. For all this it must be noted that as yet it has but rarely happened that every inch of ground in any state was actually occupied or used productively by its inhabitants; even in China there are still wide stretches of unproductive land.

In medieval Europe each farmer possessed his buildings and parcel of land. Water, forest and pasture were municipal property, and there was enough land so that each might be given possession of any which he reduced to cultivation. Then came the development of commodity-production. The products of the land now had ah exchange value. As a result the land also became, as it were, a product; it had a value. As soon as this occurred the communities began to limit their numbers and take measures to insure the perpetual possession of lands; they became close corporations.

But another class, the feudal lords, were also yearning for the communal property. And in regions where farming on a large scale had developed they succeeded in driving the small farmers from the soil. In the course of events practically all land became the private property of a few.

Thus a monopoly has come into existence, and a monopoly of an altogether extraordinary sort. The earth’s surface is held by a few, not only against the propertyless proletarian class, but against part of the capitalist class itself. A part of the industrial capitalist class may for a time monopolize a branch of industry, but its monopoly is never absolute or permanent. In these respects the land monopolists have the advantage, their monopoly may be both absolute and lasting.

This form of capitalism is most highly developed in England, where a small number of families have possession of all the land. Whoever needs land obtains the use of it only by paying rent. As a rule the capitalist cannot buy land for a factory or dwelling. Thus a part of his profit always goes to the landlord.

In most parts of the world, however, the line is not so sharply drawn. On the continent of Europe, for example, the capitalist manufacturer, mine operator, etc., usually owns the land necessary to his operations. The great landowners, on their part, usually carry on their farming operations themselves.

On the other hand, as capitalism develops, proletarians are more and more herded in cities. This leads to an unprecedented heightening of land values and a reinforcement of the position of the land-owning class. Workers must pay higher and higher rent, and this, in turn, necessitates an increase in their wages. Thus once more the industrial capitalist is forced to share his spoils with the land-owner.


5. Taxes

If the landlord appropriates a constantly increasing proportion of the capitalist’s surplus value, the state is not less active in the same direction. The modern state grew with and through the capitalist class, just as, in turn, it has become the most powerful support of this class. Each has promoted the interests of the other. The capitalist class cannot forego the assistance of the state. It needs the powerful hand of government to protect it against foes within and without.

The further the capitalist system of production develops, the sharper become the contrasts and contradictions which it brings forth, the more complex becomes its operation, the greater the dependence of individuals upon each other, and consequently the more imperative the need of an authority which will see to it that each fulfills his economic functions. A process so sensitive as modern production can endure less easily than any previous one the strain attendant on the settling of differences by individual trials of strength. In place of self-dependence appears now a legal system fostered by the state.

The capitalist system is by no means the product of political rights or laws. It is, on the contrary, the needs of the system that have brought forth the laws that are now in force. These laws do not create the exploitation of the proletariat; they only provide for the smooth running of the system of exploitation, together with all the other processes pertaining to the existing social order. Competition being styled the mainspring of production, law may be designated as a lubricating oil, the object of which is to diminish as much as possible the friction produced by the present social mechanism.

As the conditions which produce this friction grow gradually worse, the greater becomes the need of a strong state power to enforce the law. For example, the constantly increasing opposition between exploiters and exploited, propertied and propertyless, steadily augments the slum element in our population and thus increases the necessity for a large police force. On the other hand, as each capitalist becomes more and more dependent on the co-operation of others of his class, the more he becomes dependent on the decrees of the courts.

But the capitalist is concerned not only with peaceful manufacture and trade within his own country. Foreign trade has from the beginning played an important part in our industrial system, and the greater the extent to which it becomes the controlling interest, the more does the securing and developing of foreign markets become one of the chief concerns of the entire nation. But in the world-market the capitalists of one nation meet those of another as competitors. In order to oppose these competitors, they call upon their government to maintain their rights, or, better yet, to drive out their foreign competitors altogether. Thus as states and monarchs become more and more dependent on the capitalist class armies and navies become more exclusively the tools of this class. Wars are no more dynastic, but commercial, and finally national; they result from economic competition between the capitalists of different nations.

Thus the capitalist system needs, not only an army of officials to operate courts and police departments, but also an army of soldiers. Both armies tend to grow rapidly, but during recent years the latter has oustripped the former. Furthermore, the application of modern science to warfare has enormously increased its cost. As a result, the military expenditures of the great world-states have increased incredibly.

The state is becoming constantly more expensive, its burdens ever heavier. Capitalists and landowners try everywhere to foist these burdens upon the other classes. But the poorer classes grow constantly less able to pay, and so despite their cunning, the exploiters are obliged to increase the share of profits which they turn over to the state.

6. The Falling Off in the Rate of Profit.

Simultaneously with this development, the quantity of the capital which the capitalist class applies productively shows a tendency to increase more rapidly than the exploitation of the working-class, that is to say, more rapidly than the mass of surplus which the latter creates.

To illustrate: Compare a spinner of a hundred years ago with a machine-weaver of today. How enormous is the capital required to enable the latter to work! On the other hand, the capital which the capitalist invested in hand-weaving was trifling in comparison. The exploited hand-spinner may have worked at home. In that case the capitalist paid him his wages and gave him the cotton or flax which he needed. In point of wages there has not been much change, but a machine-weaver consumes today in production a hundred times more raw material than the former hand-weaver; over and above that, how tremendous are today the buildings, power engines, looms, etc., necessary to carry on the industry.

There is still another thing to be considered. The only outlays of the capitalist who a hundred years ago employed a spinner were for wages and raw material, there was not then any fixed capital, for the cost of the spinning-wheel was too trifling to consider. He turned his capital over quickly, say every three months; as a result of this, he needed, to start with, only one-quarter of the capital which he used during the whole year. Today the capital invested in a spinning-mill for machinery and buildings is enormous. Even though the time within which the capitalist could get back the sum he pays out in wages and for raw materials were now the same as it was a hundred years ago, the time which it now takes him to get back the rest of his capital, which a hundred years ago he hardly needed, has become a very long one.

A number of circumstances work in the opposite direction. Among these the most important are the recently developed system of credit and the decline in the value of products, the latter of which is the inevitable result of the increase in the productivity of labor. But neither of these causes is sufficient to counteract the effect of the others. In all branches of production, in some slowly, in others rapidly, the quantity of capital necessary for production grows perceptibly from year to year.

Let it be assumed that the capital necessary for a certain industry a hundred years ago was $100, and that today the amount necessary is $1,000, and, furthermore, that the amount exploited from labor is now five times as large as then, i.e., that whereas the surplus which labor formerly produced was $50, today it is $250. In this case the quantity of the surplus has increased absolutely; nevertheless, in proportion to the quantity of capital invested, the surplus value has decreased. A hundred years ago this proportion was 50 per cent, today it is only 25 per cent. This instance is simply an illustration meant to point out a tendency.

The total amount of surplus yearly produced in this, as a capitalist country, increases rapidly; but still more rapidly grows the total amount of capital invested by the capital class in their establishments. If now it be considered that taxation and rent carry off yearly an ever larger portion of the capitalists’ surplus, the phenomenon may be explained that the quantity of surplus that will accrue to a certain amount of capital tends steadily to diminish, notwithstanding that the amount of exploitation of labor tends steadily to increase.

Accordingly, profit, that is to say, the portion of the surplus produced by labor which a capitalist retains, shows a tendency to decline in proportion to the quantity of capital he invests. Or, to put it another way, in the course of the development of the capitalist system of production, the profit which a given quantity of capital yields tends to go down. This, of course, holds good only on the average and during long periods of time. An evidence of this downward tendency of profit is the steady decline of interest.

It happens, therefore, that while the exploitation of the working-man tends to rise, the rate of capitalist profit has a tendency to sink. This fact is one of the most remarkable contradictions of the capitalist system of production – a system that bristles with contradictions.

Some there are who have concluded from this sinking of profits that the capitalist system of exploitation will put an end to itself, that capital will eventually yield so little profit that starvation will force the capitalists to look for work. This conclusion would be correct, if, as the rate of profits sank, the quantity of invested capital remained the same. This, however, is by no means the case. The total quantity of capital in all capitalist nations grows at a more rapid pace than the rate of profit declines. The increase of capital is a prerequisite to the sinking of profit, and if a capitalist’s investment has increased from one million to two, and from two million to four, his income is not reduced when the rate of profit sinks from 5 per cent to 4, and from 4 to 3.

The decline of the rate of profit, and likewise of interest, in no way implies a reduction of the income of the capitalist class, for the mass of surplus that flows into its hands grows constantly larger; the decline diminishes solely the income of those capitalists who are not able correspondingly to increase their capital. In the course of industrial development, it takes a constantly increasing amount of capital to support its owner with the “dignity of his class.” The quantity of capital requisite to free its owner from labor, and to enable him to live on the labor of others, becomes constantly larger. The sum which fifty years ago was a considerable fortune is today an insignificant pittance.

The decline of profit and interest does not bring on the downfall, but the narrowing of the capitalist class. Every year small capitalists are expelled from it and consigned to the same death struggle in which the small dealer, the small producer, the small farmer, the small concerns generally, are engaged – a death-struggle that may be more or less protracted, but which will finally end for them, or for their children, with downfall into the proletariat. Their efforts to escape their fate only hasten their ruin.

One often wonders at the large number of simpletons whom any knave can allure to intrust him with their money upon the promise of high interest. Those people are, as a rule, not the fools they seem; fraudulent undertakings are the last straws at which sinking capitalists grasp, in the desperate hope of making their small capital remunerative. It is not so much greed as the fear of poverty that blinds them.

7. The Growth of Large Production. Syndicates and Trusts.

Side by side with the competitive struggle between individual and capitalist production rages the competitive struggle between large and small capitalists. Every day brings forth a new invention or a new discovery which increases the productivity of labor. Each of these renders useless, to a smaller or greater extent, former machines, and compels the introduction of new ones, often also the enlargement of establishments. The capitalist, who, at such a pinch, has not the requisite capital at his command, becomes, sooner or later, unable to hold his own in the competitive struggle and goes down, or is forced, at considerable loss, to invest his capital in some smaller industry not yet seized upon by more powerful capitalists than himself. In this way competition in large industry causes over-stocking of capital in small industry, and thereby renders the competition between the small capitalists all the more fierce and their ruin all the more rapid.

The industries conducted on a large scale constantly expand. Establishments that once counted their workmen by hundreds become giant concerns that employ thousands of hands. Day by day the small business establishments disappear; the industrial development instead of increasing, steadily decreases the number of individual enterprises.

Nor is this all. The industrial development leads steadily to the concentration of more and more capitalist undertakings into a single hand, be that the hand of a single capitalist, or of a combination of capitalists who legally constitute one person – the syndicate, the trust.

The paths that lead to this are manifold.

One of them is opened by the anxiety of the capitalist to exclude competition. Competition has been shown to be the mainspring of the modern system of production; indeed, it is the mainspring of all production of merchandise, i.e., production for sale. Nevertheless, however necessary competition is for the production of merchandise in general, there is no capitalist but is anxious to see his own goods free from competition in the market. If he is the sole possessor of goods for which there is a demand, if he has a monopoly of them, he can send their prices far above their actual value; then those who need his goods will be wholly dependent upon him. Where several sellers of the same goods appear in the market, they can establish a monopoly only by combining in such a way that they virtually become one seller. Such combines – rings, syndicates, trusts – are the sooner and more easily brought about the smaller the number of competitors whose conflicting interests are to be harmonized.

In so far as the capitalist system expands the market and increases the number of competitors in it, it makes difficult the formation of monopolies in production and commerce. But in every branch of capitalist industry the moment arrives, sooner or later, when its further development implies the lessening of the number of establishments engaged in it. From that moment on the march is rapid toward the syndicate and the trust. The time when, in a given country, the syndicate can ripen into a trust may be hastened through the protection of its domestic market against foreign competitors by a high tariff. In such a case the number of competitors is diminished and the domestic producers can more easily come together, establish a monopoly, and, thanks to “Protection of home industry,” fleece the national consumer to their hearts’ content.

During the last twenty years the number of trusts, through which the price and production of certain wares is “regulated,” has increased greatly, especially in “protected” countries, such as the United States, France and Germany. The trust, once formed, the several concerns that have combined constitute virtually only one concern. under the guidance of a single head.

The articles most necessary for the development of production, such as coal and iron, are the ones that become the first subjects of syndicates and trusts. Combinations usually extend their influence far beyond the monopolized industries themselves; they render the whole machinery of production dependent upon a few monopolists.

Simultaneously with the effort to bring together the several establishments of one industry into a single hand, there also develops the effort of the several establishments engaged in different branches of industry, but one of which furnishes either the raw material or the machinery needed by the others, to unite under one management. It is a common thing to see railroad lines owning their own coal mines and locomotive works; sugar manufacturers raise a par; of their own cane or beets; the producer of potatoes establish his own whisky distillery, etc.

There is still a third way, and that the simplest, by which several establishments are merged into one.

We have seen how important are the functions of the capitalist under the present system of production; under the system of private property in the means of production, large production is possible only as capitalist production. Under this system it is necessary, in order that production may be carried on smoothly, that the capitalist take the field with his capital and apply it effectively.

At the same time, the larger a capitalist undertaking becomes, the more necessary it is for the capitalist to relieve himself of a part of his increasing duties, either by passing them over to other capitalist concerns, or to some employee whom he engages to attend to his business. Of course, it makes no difference in the industrial process whether these functions are performed by an employee or by the capitalist himself; these functions produce no value when performed by the capitalist and they produce no value when performed by the employee. The capitalist, consequently, must now pay for them out of his surplus. This is another means by which the surplus of the capitalist, and accordingly his profits, are lowered.

While the growth of an enterprise forces the capitalist to relieve himself by the employment of lieutenants, it, at the same time, through the increasing surplus it yields, reduces the expense of the change. The larger the surplus, the more functions can the capitalist transfer to his employees, until finally he relieves himself of all his functions; so that there remains to him only the care as to how to invest profitably that portion of his profits that he does not need for personal consumption.

The number of concerns in which this final stage has been reached grows from year to year.

This is shown clearly by the increase of stock companies, in which even the dullest intellect can see that the person of the capitalist cuts no figure, and the only thing of importance is his capital.

Some have imagined that they saw in the rise of stock companies a means whereby to render accessible to the small holders the benefits of large production. But the stock company, like credit, of which it is only a special form, is rather a means to place at the disposal of the large capitalist the property of the small holders.

Just as soon as a branch of industry can dispense with the person of the capitalist, everyone can engage in it, whether or not he knows anything of the business, provided only he possesses the necessary funds to buy stock. Owing to this fact a capitalist is able to unite in his own hands industries that are wholly disconnected. Stock companies are easily acquired by a large capitalist; all he needs to do is to secure possession of the majority of the stock, and the concern becomes dependent upon him and subject to his interests.

Finally, it must be observed that large masses of capital grow faster than the small ones, for the larger the capital, the larger, also, other things being equal, will be the profits, the smaller proportionately will be the quantity which the capitalist will consume personally, and the larger the portion which he can add to his previous investments as fresh capital. The capitalist whose business yields him a yearly income of $10,000 will be able to live but modestly according to capitalist ideas. On the other hand, the capitalist whose business is large enough to yield him $100,000 annually, may, even though he were to spend upon himself five times as much as the previous one, add annually $60,000, i.e., three-fifths of his profits, to his previous capital. While the small capitalists are compelled to struggle harder and harder for their existence, the large accumulations in the hands of the large capitalists swell faster and faster and within a short time reach immense proportions.

To summarize: The growth of large establishments, the rapid increase of large fortunes, the steady decrease in the number of establishments, the steady concentration of different concerns in one hand, – all these make it evident that the tendency of the capitalist system of production is to concentrate in the hands of an ever smaller number the instruments of production, which have become the monopoly of the capitalist class. The final result must be the concentration of all the instruments of production in the hands of one person or one stock company, to be used as private property and be disposed of at will; the whole machinery of production will be turned into a gigantic concern subject to a single master. The private ownership of the means of production leads, under the capitalist system, to its own destruction! Its development takes the ground from under itself. The moment the wage-workers constitute the bulk of the consumers, the products in which the surplus lies locked up become unsalable, that is, valueless.

In point of fact, a state of things such as here outlined would be as preposterous as it would be impossible. It will not, and cannot, come to that. The mere approach to such conditions would increase to such an extent the sufferings, antagonisms and contradictions in society, that they would become unbearable and society would fall to pieces, even ii a different turn were not previously given to the development. But although such a condition of things will never be completely reached, we are rapidly steering in that direction. At the same time that, on the one hand, the concentration of separate capitalist undertakings in few hands is progressing rapidly, on the other hand, the interdependence of seemingly independent concerns increases as the inevitable result of the division of labor. This mutual dependence becomes, however, constantly more one-sided, for the small capitalists grow ever more dependent on the big ones. Just as most of those workers who are now engaged in home industries and who seem to be independent are in fact wage-workers under some capitalist, so also is many a small capitalist who apparently enjoys independence tributary to other capitalists, and many a seemingly independent capitalist concern is, in fact, but an appendage of some gigantic capitalist establishment.

At the same time that the economic dependence of the bulk of our population upon the capitalist class is on the increase, there is also an increasing dependence within the capitalist class itself of a majority of its members upon a small set whose numbers become smaller, but whose power, because of their wealth, becomes greater.

But dependence brings no more security to the capitalist than to the proletarians, the small traders and producers. On the contrary, it means to him what it does to all the others; with his dependence increases also the uncertainty of his situation. The smaller capitalists, of course, suffer most, but even the largest accumulations of capital afford no absolute certainty.

Some of the causes of the increasing insecurity of capitalist undertakings we have already touched upon. One of these, the sensitiveness of the whole system to outward influences, is on the increase. In proportion as it draws sharper the antagonism between the classes; in proportion as it swells more and more the masses it arraigns against each other; in proportion as it places in the hands of each increasingly powerful weapons; the capitalist system of production multiplies the occasions for disturbances and increases the damages which these disturbances bring about. Furthermore, it is not only the surplus withheld by the capitalist that the growing productivity of labor increases; it increases also the quantity of goods that are thrown upon the market. Along with the exploitation of labor grows the competition among capitalists, which becomes a bitter contest of each against all. Together with this goes a steady revolution in the technical methods of production. New inventions and discoveries are incessantly made which render valueless existing machinery and make superfluous, not only individual workers, not only individual machines, but often whole establishments or even whole branches of industry.

No capitalist can depend on the future; none can say with certainty whether he will be able to keep what he has and to leave it to his children.

The capitalist class itself is splitting up into two sets. The one, which increases steadily, is superfluous to industrial life; it has nothing to do but squander the growing quantity of surplus which flows into its hands. The other set, which consists of those who have not yet become superfluous in their establishments, decreases steadily, but in proportion to this decrease the cares and burdens of their situation grow heavier upon them. While the former set is degenerating in wasteful idleness, the latter is wearing itself out in the competitive struggle.

To both the specter of uncertainty is a growing menace. The modern system of production does not allow even the exploiters, even those who monopolize all its tremendous advantages, to enjoy their booty to the full.

8. Industrial Crises.

Great as is the uncertainty for all classes under our usual conditions, it is further increased by the crises which are periodically brought on, with the certainty of natural law, the moment production reaches a certain stage.

The importance which these crises have assumed during the last decades and the general confusion of thought that prevails concerning them justifies special attention.

The great modern crises which convulse the world’s markets arise from overproduction, which, in its turn, arises from the planlessness that inevitably characterizes our system of commodity production. Overproduction, in the sense of more being produced than is actually needed, may occur under any system. But it could, as a matter of course, cause no injury so long as the producers produce for the satisfaction of their own wants. If, for instance, in the generation gone by, a farmer’s crop of grain happened to be larger than he needed, he stored up the grain against poorer years, and when his barn was full, he would feed his cattle with the residue, or, at worst, let it lie and spoil.

It is otherwise with the modern system of commodity production. In the first place, when the system is once well-developed, no one produces for himself, but for someone else; everyone must buy what he needs. Moreover, the total production of society is not carried on in a systematic way; on the contrary, it is left to each producer to estimate for himself the demand there may be for the goods which he produces. In the second place, just as soon as the modern system of production has outgrown its first stage, no one except the producer of coinable metals can buy before he has sold. These are the two roots out of which grows the crisis.

For the illustration of this fact let the simplest example serve. At a market-place let there come together an owner of money, say a gold-digger with twenty dollars in gold, a wine-merchant with a cask of wine, a weaver with a bale of cloth, and a miller with a sack of flour. To simplify the case, let the value of each of these goods be equal to twenty dollars, and let it be assumed that each has correctly estimated the needs of the other. The wine-merchant sells his wine to the gold-digger, and with the twenty dollars he receives for it purchases the cloth in the hands of the weaver; and, lastly, the weaver invests the proceeds of his cloth in the purchase of the sack of meal. Each will go home satisfied.

Next year these four meet again, each calculating upon the same demand for his goods as before. Let it be assumed that the gold-digger does not despise the merchant’s wine, but that the wine-merchant either has no need of the cloth, or requires the money to pay a debt, and prefers wearing a torn shirt to purchasing new material. In that case the wine-merchant keeps in his pocket the twenty dollars and goes home. In vain does the weaver wait for a customer, and for the same reason that he waits, the miller is also disappointed. The weaver’s family may be hungry, he may crave the flour in the miller’s hands, but he has produced cloth for which there is no demand, and for the same reason that the cloth has become superfluous, the flour also is rendered “superfluous.” Neither the weaver nor the miller has any money, neither can purchase what he wants; what they have produced now appears as excessive production. Furthermore, the same is the case with all other goods which have been produced for their use and which they stand in need of; to carry the illustration a little further, the table produced by the joiner and needed by the miller is “overproduced.”

The essential features of an industrial crisis are all present in this illustration. Of course, in reality, the crisis does not manifest itself at such a primitive stage of production. At the first stage of production of merchandise, production for sale, every producer produces more or less for self-consumption; production for sale constitutes in each family but a part of its total industry. The weaver and the miller of the illustration given above are each possessed of a patch of land and some cattle, and they can wait patiently until a purchaser for their commodities turns up. If the worst came to the worst, they could even manage to live without him.

Furthermore, in the first stages of production for sale the market is still small, it can easily be estimated; year in and year out, production and consumption, the whole social life of a community, keep on the even tenor of their way. In the small settlements of the past everyone knew everybody and was well-informed as to his wants and his purchasing capacity. The industrial activity of such places remained substantially the same from year to year; the number of producers, the productivity of labor, the quantity of products, the number of consumers, their wants, the money at their disposal – all of these changed but slowly, and each change was promptly observed and taken into consideration.

All this takes on a different aspect with the appearance of commerce. Under its influence production for self-consumption is crowded ever more to the rear; the individual producers of the goods for sale, and to a greater extent the dealers, are more and more thrown for their support upon the sale of their goods, and, what is more important, upon their prompt sale. The prevention of the sale of a commodity, or even a delay in the sale, becomes ever more disastrous to the owner; it may even cause his ruin.

Through commerce the most various and widely separated markets are brought together; the general market is greatly extended, but it becomes correspondingly more difficult to control. This inconvenience is further increased by the appearance of one or more middlemen who squeeze themselves between the producers and consumers. Simultaneously with the development of trade and the means of communication the transportation of products has been facilitated; the slightest cause is sufficient to bring them together in great quantities at any point. All these causes combined render more and more uncertain the work of estimating the demand for, and supply of, commodities. The development of statistics does not remove this uncertainty. The whole economic life of society becomes constantly more dependent upon mercantile speculation, and the latter becomes ever more risky.

The merchant is a speculator from the start. Speculation was not invented at the exchange; it is a necessary function of the capitalist. By speculating, that is, by estimating in advance the demand for a commodity; by buying his goods where he can get them cheap, that is, where their supply is excessive; by selling them where they are dear, that is, where they are scarce, the merchant helps to bring some order into the chaos of the planless system of production that is carried on by individually independent concerns. But he is liable to err in his calculations, and all the more as he is not allowed much time to consider his ventures. He is not the only merchant in the world; hundreds and thousands of competitors lie in wait to profit by every favorable opportunity; whoever first espies it carries off the prize. Under such circumstances quickness is a necessity; it will not do to reflect long, to inquire much; the capitalist must venture. Yet he may lose. So soon as there is a great demand for a commodity in any market, it flows thither in large quantities until it exceeds the digestive powers of the market. Then prices tumble; the merchant must sell cheap, often at a loss, or seek another market with his goods. His losses in this operation may be large enough to ruin him.

Wherever the modern system of production for sale is well developed, any given market is either excessively or inadequately supplied. This may lead to the result that in response to some extraordinary cause, the overstocking; of the market becomes so excessive that the losses of the merchants may be unusually heavy and a large number of them become unable to meet their liabilities; that is, they fail. Under such circumstances we have a first-class commercial crisis.

So long as small production was the leading form of industry, the extent and intensity of commercial crises could not but be limited. Whatever the call, it was not then possible to increase rapidly the total amount of commodities at any one place. Under the regime of hand-work or small industry, production is not capable of any considerable extension. It cannot be extended by the employment of a larger number of workmen, for, under ordinary circumstances, it employs all the members of a community that are at its disposal. It can be extended only by making heavier the burden of toil borne by the worker – lengthening his hours of work, depriving him of holidays, etc.; but in the good old days the independent mechanic and farmer, who were not yet crowded by the competition of large production, had no inclination for this. Finally, even if they submitted to such imposition, it made little difference to production, for the productivity of labor was comparatively small.

This changes with the rise of capitalist large production. This system not only develops all the means that enable commerce to swamp any market with goods to a degree never dreamt of before, it not only expands the separate markets into a world-market that embraces the whole globe, it not only multiplies the number of the middlemen between the producer and the consumer, it also enables production to respond to every call of trade and to extend by leaps and bounds.

At present, the very fact that the workmen are wholly subject to the capitalist – that he can, virtually at will, lengthen their hours of work, suspend their Sundays, limit their night rest – enables him to increase production at a more rapid pace than was formerly possible. Furthermore, today one single hour of overwork means, with the present productivity of labor, an increase of production immensely larger than in the days of handicraft. Thanks to credit, capital has become a very elastic quantity. A brisk trade increases confidence, draws money out upon the street, shortens the time requisite for the turning over of capital and, accordingly, increases its effectiveness. But most important of all, capital has permanently at its disposal a large reserve army of workmen – the unemployed. The capitalist is thus able at any time to expand his establishment, to employ additional workmen, to increase his production rapidly and to profit to the utmost by every favorable opportunity.

It has been shown that under the rule of large production industrial capital steps ever more to the front and takes control of the whole capitalist mechanism. But within the circle of capitalist production itself special branches of industry take the lead, as for instance, the iron and spinning industries. The moment any of these receives a special impetus – be it through the opening of new markets in China, or the undertaking of extensive railroad lines – not only does it expand rapidly, but it imparts the impetus it has received to the whole industrial organism. Capitalists enlarge their establishments, start new ones, increase the consumption of raw and auxiliary materials and employ new hands; simultaneously with an this, rent, profit and wages go up. The demand for goods increases, all industries begin to feel the industrial prosperity. At such times it looks as if every undertaking must prosper; confidence becomes blind, credit: grows boundless. Whoever has money seeks to turn it into capital to make it profitable. Industrial giddiness takes possession of all.

In the meantime, production has greatly increased and the originally increased demand upon the market has been satisfied. Nevertheless, production does not stop. One producer does not know what the other is about, and even if, in a lucid interval, misgivings may arise in the mind of some capitalist, they are soon smothered by the necessity of profiting by the opportunity in order not to be left behind in the competitive race. “The devil takes the hindmost.” In the meantime, the disposal of the increased quantity of goods becomes ever more difficult, the warehouses fill up. Yet the hurly-burly goes on. Then comes the moment when one of the mercantile establishments must pay for the goods received from the manufacturer months before. The goods are yet unsold; the debtor has the goods, but no money; he cannot meet his obligations and fails. Next comes the turn of the manufacturer. He also has contracted debts that fall due; as his debtor cannot pay him, he, too, is ruined. Thus one bankruptcy follows another until a general collapse ensues. The recent blind confidence turns into an equally blind fear, the panic grows general, and the crash comes.

At such times the whole industrial mechanism is shaken to its very center; every establishment that is not planted upon the firmest ground goes to pieces. Misfortune overtakes not the fraudulent concerns alone, but all those which in ordinary times just managed to keep their heads above water. At such times the expropriation of the small farmers, small producers, small dealers and small capitalists goes on rapidly. As a matter of course, those among the large capitalists who survive get a rich booty. For during a crisis two important things take place: first, the expropriation of the “small fry”; second, the concentration of production into fewer hands, and thereby the accumulation of large fortunes.

Few, if any, can tell whether they will survive the crisis. All the horrors of the modern system of production, the uncertainty of a livelihood, want, prostitution and crime, reach at such times alarming proportions. Thousands perish from cold and hunger because they have produced too much clothing, too much food, and too marry houses! It is at such seasons that the fact becomes most glaring that the modern productive powers are becoming more and more irreconcilable with the system of production for sale, and that private ownership in the means of production is growing into a greater and greater curse – first, for the class of the propertyless, and then for that of the property holders themselves.

Some political economists have declared that the trust would do away with the crisis. This is false.

The regulation of production by large syndicates or trusts presupposes above all things their control of all branches of industry and the organization of these upon an international basis in all countries over which the capitalist system of production extends. But international trusts are difficult to organize and more difficult to hold together; so it is seldom that a trust becomes powerful enough to regulate international trade and avert a crisis. With regard to overproduction, the principal mission of the trust is not to check it, but to shift its evil consequences from the shoulders of capitalists upon those of workmen and consumers.

But let it be assumed that eventually the leading industries have been successfully organized into well-disciplined, international trusts. What would be the result? Competition among capitalists would be removed in one direction only. The more completely competition disappears among the producers in one branch of industry, the greater becomes the antagonism between them and the producers of other commodities, who, as consumers, need the products of the trust, in short, complete international trustification would cause the capitalist class to be divided no longer into competing individuals, but into hostile groups, who would wage war to the knife against one another.

Only when all trusts are joined into one and the whole machinery of production of all capitalist nations is concentrated in a few hands, that is, when private property in the means of production has virtually come to an end, can the trust abolish the crisis. On the contrary, from a certain stage on in industrial development, the crisis is inevitable so long as private property in the means of production continues.

9. Chronic Overproduction.

Along with the periodical crises and their permanent manifestations, along with the recurring periods of overproduction and their accompaniments of loss of wealth and waste of force, there develops chronic overproduction and waste of energy.

The revolution in the machinery of production goes on uninterrupted; the fields that it invades are ever more numerous. Year after year new branches of industry are captured by capitalist large production, and, consequently, the productivity of labor grows incessantly, and at an ever increasing rate. Simultaneously with this the accumulation of new capital proceeds without interruption. The intenser the exploitation of the single laborer and the larger the number of the exploited laborers, the larger also grows the quantity of the surplus and the mass of wealth that the capitalist class can lay by and apply as capital. The capitalist system, therefore, cannot remain stationary; its constant expansion and the constant expansion of its market are a vital necessity to it; to stand still is death. While formerly, in the days of handicraft and small farming, the country produced year in and year out a quantity of wealth, which, as a rule, increased only with the increase of the population, the capitalist system, on the contrary, is from the start dependent on an incessant increase of production; every stoppage indicates a social malady which grows more painful the longer it lasts. Thus, together with the periodical incentives to increase of production brought on by the periodical extensions of the market, there is a permanent pressure in this direction inherent in the capitalist system of production itself. This pressure, instead of being brought on by the extension of the market, compels the latter to be pushed constantly further.

But there is a limit to the extension of the markets; there have been periods during the last thirty years when it has not gone on. True enough, the field over which capitalist production can extend itself is immense; it leaps over all local and national boundaries, it has the whole globe for its market. But capitalism has virtually reduced the size of the globe. Only a hundred years ago the market for capitalist industry was limited to the western part of Europe and certain coastlands and islands almost exclusively dominated by England. But such was the vigor and greed of the capitalists and so gigantic were the means at their disposal, that since then almost all countries on earth have been forced open, not to the products of England alone, but to those of all capitalist nations. Today there are hardly any other markets to be opened, except those from which little is to be fetched besides fever and blows.

The wonderful development of transportation renders from year to year a completer exploitation of the market possible; but this tendency is counteracted by the circumstance that the market steadily undergoes a change in those very countries whose population has reached a certain degree of civilization. Everywhere the introduction of the goods of capitalist large production extinguishes the domestic system of small production and transforms the industrial and agricultural laborers into proletarians. This produces two important results in all the markets that are counted upon to absorb the surplus products of capitalist industry: first, it lowers the purchasing power of the population and thereby counteracts the effect of the extension of the market; and, second, and more important, it lays there the foundation for the capitalist system of production by calling into existence a proletarian class. Thus capitalist large production digs its own grave. From a certain point onward in its development every new extension of the market means the rising of a new competitor. At present, capitalist large production in the United States, which is not quite a generation old, is engaged not only in the work of freeing itself from its European competitor, but in an endeavor to seize upon the market of the whole American continent. The still more youthful capitalist industry of Russia has started in to be the sole purveyor of the whole extensive territory owned by Russian in Europe and Asia. The East Indies, China, Japan, Australia are developing into industrial states that sooner or later will be able to supply their own wants. In short, the moment is drawing near when the markets of the industrial countries can no longer be extended and will begin to contract. But this would mean the bankruptcy of the whole capitalist system.

For some time past the extension of the market has not kept pace with the requirements of capitalist production. The latter is, consequently, more and more hampered and finds it increasingly difficult to develop fully the productive powers that it possesses. The intervals of prosperity become ever shorter; the length of the crises ever longer.

Hence the quantity of the means of production that either cannot be turned to sufficient use or is forced to remain wholly unused, is on the increase; the quantity of wealth that goes to waste is greater and greater; the quantity of labor power compelled to lie idle is ever more appalling. Under this last head belong not only the swarms of unemployed who are rapidly growing into a threatening social danger; under it must also be numbered, first, that ever-increasing crew of social parasites who, finding all avenues of productive work closed to them, try to eke out a miserable existence through a variety of occupations, most of which are wholly superfluous and not a few injurious to society – such as middlemen, saloonkeepers, agents, drummers, etc.; second, that stupendous mass of humanity of all degrees that may be designated as “the slums,” such as the cheats and swindlers of high and low grade, the criminals and prostitutes, together with their innumerable dependents; third, the swarms of those who fasten upon the possessing classes in the capacity of personal servants; finally, there is the great body of soldiers, for the steady increase of armies during the last twenty years would not have been possible without the overproduction which has set free so large a part of the world’s labor-power.

The capitalist system begins to suffocate in its own surplus; it becomes constantly less able to endure the full unfolding of the productive powers which it has created. Constantly more creative forces must be idle, ever greater quantities of products be wasted, if it is not to go to pieces altogether.

The introduction of the capitalist system, that is, the replacing of small production, under which the instruments of labor were the property of the individual workers, with capitalist large production, under which the implements of labor became the private property of a few individuals and workmen were turned into propertyless proletarians, was the means whereby the productive powers of labor were immensely increased. To do this was the historic mission of the capitalist class The sufferings inflicted upon the masses of human beings expropriated and exploited were terrible, but it fulfilled its mission. It was as much a historic necessity as the two cornerstones upon which it rose; first, the production of merchandise, that is, production for sale; next, the private ownership of the implements of labor.

But however necessary were the capitalist system and the conditions which produced it, they are no longer so. The functions of the capitalist class devolve ever more upon paid employees. The large majority of the capitalists have now nothing to do but consume what others produce. The capitalist today is as superfluous a human being as the feudal lord had become a hundred years ago.

Nay, more. Like the feudal lord of the eighteenth century, the capitalist class has today become a hindrance to further development. Private ownership in the implements of labor has long ceased to secure to each producer the product of his labor and to guarantee him freedom. Today, on the contrary, society is rapidly drifting to the point where the whole population of capitalist nations will be deprived of both property and freedom. What was once a foundation stone of society has become a means of tearing up all foundations: instead of a means of spurring society on to the highest development of its productive powers, it has become a means of compelling society more and more to waste its powers of production. So private property in the means of production has changed from what it originally was into its opposite, not only for the small producer, but for society as a whole. From a motive power of progress it has become a cause of social degradation and bankruptcy.

Today there is no longer any question as to whether the system of private ownership in the means of production shall be maintained. Its downfall is certain. The only question to be answered is: Shall the system of private ownership in the means of production be allowed to pull society with itself down into the abyss; or shall society shake off that burden and then, free and strong, resume the path of progress which the evolutionary law prescribes to it?


Last updated on 23.11.2003