Vladimir Ilyich Lenin


Chapter I. The Theoretical Mistakes of the Narodnik Economists

VI. Marx’s Theory of Realisation

It follows automatically from what has been said that the fundamental premises on which Marx’s theory is based are the following two propositions. The first is that the total product of a capitalist country, like the individual product, consists of the following three parts: 1) constant capital, 2) variable capital, and 3) surplus-value. To those who are familiar with the analysis of the process of production of capital given in Vol. I of Marx’s Capital this proposition is self-evident. The second proposition is that two major departments of capitalist production must be distinguished, namely (Department I), the production of means of production—of articles which serve for productive consumption, i.e., are to be put back into production, articles which are consumed, not by people, but by capital; and (Department II) the production of articles of consumption, i.e., of articles used for personal consumption. “There is more theoretical meaning in this division alone than in all the preceding controversies over the theory of markets” (Bulgakov, loc. cit., p. 27). The question arises as to why such a division of products according to their natural form is now necessary to analyse the reproduction of social capital, when the analysis of the production and reproduction of individual capital dispensed with such a division and left the question of the natural form of the product entirely on one side. On what grounds can we introduce the question of the natural form of the product into a theoretical investigation of capitalist economy, which is based entirely on the exchange-value of the product? The fact is that when the production of individual capital was analysed, the question of where and how the product would be sold, and of where and how articles of consumption would be bought by the workers and means of production by the capitalists, was set aside as making no contribution to this analysis and as having no relation to it. All that had to be examined then was the problem of the value of the separate elements of production and of the results of production. Now, however, the question is: where will the workers and the capitalists obtain their articles of consumption, where will the capitalists obtain their means of production, how will the finished product meet all these demands and enable production to expand? Here, consequently, we have not only “a replacement of value, but also a replacement in material” (Stoffersatz.—Das Kapital, II, 389),[5] and hence it is absolutely essential to distinguish between products that play entirely different parts in the process of social economy.

Once these basic propositions are taken into account, the problem of the realisation of the social product in capitalist society no longer presents any difficulty. Let us first assume simple reproduction, i.e., the repetition of the process of production on its previous scale, the absence of accumulation. Obviously, the variable capital and the surplus-value in Department II (which exist in the form of articles of consumption) are realised by the personal consumption of the workers and capitalists of this department (for simple reproduction presumes that the whole of the surplus-value is consumed, and that no portion of it is converted into capital). Further, the variable capital and the surplus-value which exist in the form of means of production (Department I) must, in order to be realised, be exchanged for articles of consumption for the capitalists and workers engaged in the making of means of production. On the other hand, neither can the constant capital existing in the form of articles of consumption (Department II) be realised except by an exchange for means of production, in order to be put back again into production the following year. Thus we get variable capital and surplus-value in means of production exchanged for constant capital in articles of consumption: the workers and the capitalists (in the means of production department) in this way obtain means of subsistence, while the capitalists (in the articles of consumption department) dispose of their product and obtain constant capital for further production. Under simple reproduction, the parts exchanged must be equal: the sum of variable capital and surplus-value in means of production must be equal to the constant capital in articles of consumption. On the other hand, if we assume reproduction on a progressively increasing scale, i.e., accumulation, the first magnitude must be greater than the second, because there must be available a surplus of means of production with which to begin further production. Let us revert, however, to simple reproduction. There has been left unrealised one more part of the social product, namely, constant capital in means of production. This is realised partly by exchange among the capitalists of this same department (coal, for example, is exchanged for iron, because each of these products serves as a necessary material or instrument in the production of the other), and partly by being put directly into production (for example, coal extracted in order to be used in the same enterprise again for the extraction of coal; grain in agriculture, etc.). As for accumulation, its starting-point, as we have seen, is a surplus of means of production (taken from the surplus-value of the capitalists in this department), a surplus that also calls for the conversion into capital of part of the surplus-value in articles of consumption. A detailed examination of how this additional production will be combined with simple reproduction we consider to be superfluous. It is no part of our task to undertake a special examination of the theory of realisation, and the foregoing is enough to elucidate the error of the Narodnik economists and to enable us to draw certain theoretical conclusions regarding the home market.[1]

On the problem of interest to us, that of the home market, the main conclusion from Marx’s theory of realisation is the following: capitalist production, and, consequently, the home market, grow not so much on account of articles of consumption as on account of means of production. In other words, the increase in means of production outstrips the increase in articles of consumption. Indeed, we have seen that constant capital in articles of consumption (Department II) is exchanged for variable capital + surplus-value in means of production (Department I). According, however, to the general law of capitalist production, constant capital grows faster than variable capital. Hence, constant capital in articles of consumption has to increase faster than variable capital and surplus-value in articles of consumption, while constant capital in means of production has to increase fastest of all, outstripping both the increase of variable capital ( + surplus-value) in means of production and the increase of constant capital in articles of consumption. The department of social production which produces means of production has, consequently, to grow faster than that producing articles of consumption. For capitalism, therefore, the growth of the home market is to a certain extent “independent” of the growth of personal consumption, and takes place mostly on account of productive consumption. But it would be a mistake to understand this “independence” as meaning that productive consumption is entirely divorced from personal consumption: the former can and must increase faster than the latter (and there its “independence” ends), but it goes without saying that, in the last analysis, productive consumption is always bound up with personal consumption. Marx says in this connection: “...We have seen (Book II, Part III) that continuous circulation takes place between constant capital and constant capital...” (Marx has in mind constant capital in means of production, which is realised by exchange among capitalists in the same department). “It is at first independent of individual consumption because it never enters the latter. But this consumption definitely limits it nevertheless, since constant capital is never produced for its own sake but solely because more of it is needed in spheres of production whose products go into individual consumption” (Das Kapital, III, 1, 289. Russ. trans., p. 242). [6]

This larger consumption of constant capital is nothing but a higher level of the development of the productive forces, one expressed in terms of exchange-value, because the rapidly developing “means of production” consist, in the main, of materials, machines, instruments, buildings and all sorts of other accessories for large-scale, especially machine, production. It is quite natural, therefore, that capitalist production, which develops the productive forces of society and creates large-scale production and machine industry, is also distinguished by a particular expansion of that department of social wealth which consists of means of production....“In this case” (namely, the production of means of production), “what distinguishes capitalist society from the savage is not, as Senior thinks, the privilege and peculiarity of the savage to expend his labour at times in a way that does not procure him any products resolvable (exchangeable) into revenue, i.e., into articles of consumption. No, the distinction consists in the following:

“a) Capitalist society employs more of its available annual labour in the production of means of production (ergo, of constant capital) which are not resolvable into revenue in the form of wages or surplus-value, but can function only as capital.

“b) When a savage makes bows, arrows, stone hammers, axes, baskets, etc., he knows very well that he did not spend the time so employed in the production of articles of consumption, but that he has thus stocked up the means of production he needs, and nothing else” (Das Kapital, II, 436. Russ. trans., 333).[7] This “very good knowledge” of one’s relation to production has disappeared in capitalist society owing to the latter’s inherent fetishism, which presents the social relations of men as relations of products—owing to the conversion of every product into a commodity produced for an unknown consumer and to be realised in an unknown market. And as it is a matter of the utmost indifference to the individual entrepreneur what kind of article he produces—every product yields a “revenue,”—this same superficial, individual point of view was adopted by the economist-theoreticians in relation to the whole of society and prevented the process of the reproduction of the total social product in capitalist economy from being understood.

The development of production (and, consequently, of the home market) chiefly on account of means of production seems paradoxical and undoubtedly constitutes a contradiction. It is real “production as an end in itself”—the expansion of production without a corresponding expansion of consumption. But it is a contradiction not of doctrine, but of actual life; it is the sort of contradiction that corresponds to the very nature of capitalism and to the other contradictions of this system of social economy. It is this expansion of production without a corresponding expansion of consumption that corresponds to the historical mission of capitalism and to its specific social structure: the former consists in the development of the productive forces of society; the latter rules out the utilisation of these technical achievements by the mass of the population. There is an undoubted contradiction between the drive towards the unlimited extension of production inherent in capitalism, and the limited consumption of the masses of the people (limited because of their proletarian status). It is this contradiction that Marx records in the propositions so readily quoted by the Narodniks and which are supposed to corroborate their views on the shrinkage of the home market, the non-progressive character of capitalism, etc., etc. Here are some of these propositions: “Contradiction in the capitalist mode of production: the labourers as buyers of commodities are important for the market. But as sellers of their own commodity—labour-power—capitalist society tends to keep them down to the minimum price” (Das Kapital, II, 303).[8]

“...The conditions of realisation are limited by the proportional relation of the various branches of production and the consumer power of society....But the more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest” (ibid., III, 1, 225-226).[9] “The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move—these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour....The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world market, and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production.” (III, 1, 232. Russ. trans., p. 194).[10] “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their outer limit”[2] (III, 2, 21. Russ. trans., p. 395).[11] These propositions all speak of the contradiction we have mentioned, namely, the contradiction between the unrestricted drive to expand production and limited consumption—and of nothing else.[3] Nothing could be more senseless than to conclude from these passages in Capital that Marx did not admit the possibility of surplus-value being realised in capitalist society, that he attributed crises to under-consumption, and so forth. Marx’s analysis of realisation showed that the circulation between constant capital and constant capital is definitely limited by personal consumption; but this same analysis showed the true character of this “limitedness,”[12] it showed that, compared with means of production, articles of consumption play a minor role in the formation of the home market. And, furthermore, there is nothing more absurd than to conclude from the contradictions of capitalism that the latter is impossible, non-progressive, and so on—to do that is to take refuge from unpleasant, but undoubted realities in the transcendental heights of romantic dreams. The contradiction between the drive towards the unlimited expansion of production and limited consumption is not the only contradiction of capitalism, which cannot exist and develop at all without contradictions. The contradictions of capitalism testify to its historically transient character, and make clear the conditions and causes of its collapse and transformation into a higher form; but they by no means rule out either the possibility of capitalism, or its progressive character as compared with preceding systems of social economy.[4]


[1] See Das Kapital, II. Band, III. Abschn.,[13] where a detailed investigation is made of accumulation, the division of articles of consumption into necessities and luxuries, the circulation of money, the wear and tear of fixed capital, etc. Readers who are unable to familiarise themselves with Volume II of Capital are recommended to read the exposition of Marx’s theory of realisation contained in Mr. S Bulgakov’s book quoted above. Mr. Bulgakov’s exposition is more satisfactory than that of Mr. M. Tugan-Baranovsky (Industrial Crises, pp. 407-438), who in building up his schemes has made some very ill-judged departures from Marx and has inadequately explained Marx’s theory; it is also more satisfactory than the exposition given by Mr. A. Skvortsov (Fundamentals of Political Economy, St. Petersburg, 1898, pp 281-295), who holds wrong views on the very important questions of profit and rent.—Lenin

[2] It is this passage that the famous Ed. Bernstein (famous after the fashion of Herostratos) quoted in his Premises of Socialism (Die Voraussetzungen, etc., Stuttgart, 1899, S. 67).[14] Our opportunist, of course, turning away from Marxism towards the old bourgeois economics, hastened to announce that this is a contradiction in Marx’s theory of crises, that Marx’s view “does not differ very much from Rodbertus’s theory of crises.” Actually, however, the only “contradiction” here is between Bernstein’s pretentious claims, on the one hand, and his senseless eclecticism and refusal to delve into the meaning of Marx’s theory, on the other. How far Bernstein failed to understand the theory of realisation is evident from his truly strange argument that the enormous increase in the aggregate surplus product must necessarily imply an increase in the number of affluent people (or an improvement in the living standard of the workers), for the capitalists themselves, if you please, and their “servants” (sic! Seite 51-52) cannot “consume” the entire surplus product!! (Note to 2nd edition.)—Lenin

[3] Mr. Tugan-Baranovsky is mistaken in thinking that in advancing this proposition Marx contradicts his own analysis of realisation (see article “Capitalism and the Market” in Mir Bozhy [God’s Earth ] 1898, No. 6, p. 123). Marx does not contradict himself at all, for the connection between productive consumption and personal consumption is also indicated in the analysis of realization.—Lenin

[4] Cf. “A Characterisation of Economic Romanticism. Sismondi and Our Native Sismondists.”—Lenin

[5] Karl Marx, Capital, Vol. II, Moscow, 1957, p. 394.

[13] Karl Marx, Capital, Vol. II, Moscow, 1957, pp. 351-523.

[6] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 299-300.

[7] Karl Marx, Capital, Vol. II, Moscow, 1957, pp. 438-39.

[8] Karl Marx, Capital, Vol. II, Moscow, 1957, p. 316.

[9] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 239-40.

[10] Karl Marx, Capital, Vol. III, Moscow, 1959, p. 245.

[14] E. Bernstein’s Die Voraussetzungen des Sozialismus und die Aufgaben der Sozialdemokratie (The Premises of Socialism and the Tasks of Social-Democracy), which revised the principles of revolutionary Marxism in the spirit of bourgeois reformism, appeared in 1899. Lenin received a copy of it when the first edition of his The Development of Capitalism in Russia had appeared, so that it was only in the second edition that he was able to include his remarks on Bernstein’s opportunist views.

Lenin calls Bernstein “famous after the fashion of Herostratos.” Tradition has it that Herostratos, a Greek who lived in the 4th century B.C., set fire to the noted temple of Artemis in his native town of Ephesus for the sole purpose of becoming known to posterity. The name of Herostratos has become an epithet applied to individuals who are ready to commit crime for the same of winning fame.

[11] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 472-73.

[12] Karl Marx, Capital, Vol. III, Moscow, 1959, p. 299.

  V. The Views of Adam Smith on the Production and Circulation of the Aggregate Social Product in Capitalist Society and Marx’s Criticism of These Views | VII. The Theory of the National Income  

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