Vladimir Ilyich Lenin


Chapter I. The Theoretical Mistakes of the Narodnik Economists

VII. The Theory of the National Income

Having outlined the main propositions of Marx’s theory of realisation, we still have briefly to point to its enormous importance in the theory of national “consumption,” “distribution,” and “income”. All these problems, particularly the last, have hitherto been a veritable stumbling-block for economists. The more they have spoken and written about it, the greater has been the confusion caused by Adam Smith’s fundamental error. We shall cite here some examples of this confusion.

It is interesting to note, for example, that Proudhon repeated essentially the same error, except that he formulated the old theory somewhat differently. He said:

“A (which stands for all property owners, entrepreneurs and capitalists) starts an enterprise with 10,000 francs, and with them makes advance payment to the workers, who must produce goods in return; after A has thus converted his money into commodities he must, at the end of the production process, at the end, say, of a year, convert the commodities again into money. To whom does he sell his commodities? To the workers, of course, for there are only two classes in society—the entrepreneurs on the one hand, and the workers on the other. These workers, having for the product of their labour received 10,000 francs as pay, which covers their essential requirements of life, must now, how ever, pay more than 10,000 francs, that is, they must pay for the addition that A receives in the shape of the interest and other profits he counted on at the beginning of the year. The worker can cover these 10,000 francs only by borrowing, and, as a consequence, he sinks deeper and deeper into debt and poverty. One of two things must necessarily take place: either the worker may consume 9, although he produced 10, or he pays the entrepreneur only the amount of his wages, in which case the entrepreneur himself suffers bankruptcy and disaster, for he does not receive interest on capital, which he on his part, however, must pay.” (Diehl, Proudhon, II, 200, quoted from the compilation “Industry.” Articles from Handwörterbuch der Staatswissenschaften,[1] Moscow, 1896, p. 101.)

As the reader sees, this is the same difficulty—how surplus-value is to be realised—that Messrs. V. V. and N.–on are fussing over. Proudhon only expressed it in a somewhat specific form. And this specific character of his formulation brings our Narodniks still closer to him: they too, like Proudhon, consider the “difficulty” to lie in the realisation of surplus-value (interest or profit, in Proudhon’s terminology) and do not understand that the confusion they have acquired from the old economists prevents them from explaining the realisation not only of surplus-value, but also of constant capital, i.e., that their “difficulty” is in their not understanding the whole process of the realisation of the product in capitalist society.

Regarding this “theory” of Proudhon’s, Marx sarcastically observes:

“Proudhon exposes his inability to grasp this” (namely, the realisation of the product in capitalist society) “in the ignorant formulation: l’ouvrier ne peut pas racheter son propre produit (the labourer cannot buy back his own product), because the interest which is added to the prix derevient (cost-price) is contained in the product” (Das Kapital, III, 2, 379. Russ. trans., 698, in which there are mistakes).[7]

And Marx quotes the remark directed against Proudhon by a certain vulgar economist named Forcade, who “quite correctly generalises the difficulty put forward in so narrow a form by Proudhon.” Forcade said that the price of commodities contains not only something over and above the wages—the profit—but also the part that replaces constant capital. Hence, concludes Forcade in opposition to Proudhon, the capitalist is also unable to buy back commodities with his profit (not only did Forcade not solve the problem, he did not even understand it).

Neither did Rodbertus make any contribution to the solution of the problem. While laying particular stress on the thesis that “ground-rent, profit on capital and wages are income,”[2] he proved quite unable to arrive at a clear understanding of the concept “income.” Stating his view as to what the tasks of political economy would have been had it pursued “a correct method” (loc. cit., S. 26), he also speaks about the distribution of the national product. “It” (i.e., the true “science of the national economy”—Rodbertus’s italics) “should have shown how out of the total national product one part always goes to replace the capital consumed in production or worn out, while the other, as national income, goes to satisfy the direct requirements of society and of its members” (ibid., S. 27). But although true science should have shown this, Rodbertus’s “science” did nothing of the kind. The reader will see that he merely repeated Adam Smith word for word, evidently not even seeing that this is only the beginning of the problem. Which workers “replace” the national capital? How is their product realised? Not a word did ho say about this. Summing up his theory (diese neue Theorie, die ich der bisherigen gegenüberstelle,[3] S. 32) in the shape of separate theses, Rodbertus first speaks of the distribution of the national product as follows: “Rent” (by this, as we know, Rodbertus meant what is usually termed surplus-value) “and wages are, consequently, the parts into which the product resolves itself, in so far as it is income” (S. 33). This extremely important reservation should have suggested a very vital question to him: he had only just said that by income he meant articles which serve “to satisfy direct requirements”; hence, there are products that do not serve for personal consumption. How are they realised? But Rodbertus sees no unclarity here and soon forgets this reservation, speaking outright of the “division of the product into three parts ” (wages, profit and rent) (S. 49-50 and others). Thus Rodbertus virtually repeated Adam Smith’s theory together with his fundamental mistake and explained nothing at all regarding the question of income. The promise of a new, full and better theory of the distribution of the national product[4] proved to be just empty talk. As a matter of fact, Rodbertus did not advance the theory of this subject a single step. How confused were his conceptions of “income” is shown by his lengthy speculations in his Fourth Social Letter to von Kirchmann (Das Kapital, Berlin, 1884) about whether money should be included in the national income, and whether wages are taken from capital or from income—speculations of which Engels said that they “belong to the domain of scholasticism” (Vorwort to Vol. II, Capital, S. XXI).[5] [8]

Utter confusion on the problem of the national income reigns supreme among economists to this day. For example, in his article on “Crises” in Handwörterbuch der Staatswissenschaften (the afore-mentioned compilation, p. 81), Herkner, speaking of the realisation of the product in capitalist society (§ 5, “distribution”), expresses the opinion that the speculations of K. H. Rau are “sound,” although he merely repeats Adam Smith’s mistake by dividing the whole product of society into incomes. R. Meyer, in his article on “income” (ibid., p. 283 and foll.), quotes the confused definitions of A. Wagner (who also repeats Adam Smith’s error) and frankly admits that “it is difficult to distinguish income from capital,” and that “the most difficult thing is to distinguish between returns (Ertrag) and income (Einkommen).”

We thus see that the economists who have discoursed at length on the inadequate attention paid by the classical economists (and Marx) to “distribution” and “consumption” have not been able to give the slightest explanation of the most fundamental problems of “distribution” and “consumption.” That is understandable, for one cannot even discuss “consumption” unless one understands the process of the reproduction of the total social capital and of the replacement of the various component parts of the social product. This example once again proved how absurd it is to single out “distribution” and “consumption” as though they were independent branches of science corresponding to certain independent processes and phenomena of economic life. It is not with “production” that political economy deals, but with the social relations of men in production, with the social system of production. Once these social relations have been ascertained and thoroughly analysed, the place in production of every class, and, consequently, the share they get of the national consumption, are thereby defined. And the solution of the problem which brought classical political economy to a halt, and which has not been advanced a hair’s breadth by all sorts of experts on “distribution” and “consumption,” is provided by the theory which comes directly after those of the classical economists and which completes the analysis of the production of capital, individual and social.

The problem of “national income” and of “national consumption,” which is absolutely insoluble when examined independently, and has engendered nothing but scholastic speculations, definitions and classifications, proves to be solved in its entirety when the process of the production of the total social capital has been analysed. Furthermore, it ceases to exist as a separate problem when the relation of national consumption to the national product and the realisation of each separate part of this product have been ascertained. All that remains is to give names to these separate parts.

“In order to avoid unnecessary difficulty, one should distinguish gross output (Rohertrag) and net output from gross income and net income.

“The gross output, or gross product, is the total reproduced product....

“The gross income is that portion of value and that portion of the gross product” (Bruttoprodukts oder Rohprodukts) measured by it which remains after deducting that portion of value and that portion of the product of total production measured by it which replaces the constant capital advanced and consumed in production. The gross income, then, is equal to wages (or the portion of the product destined to again become the income of the labourer) + profit + rent. The net income, on the other hand, is the surplus-value, and thus the surplus-product, which remains after deducting wages, and which, in fact, thus represents the surplus-value realised by capital and to be divided with the landlord, and the surplus-product measured by it.

“...Viewing the income of the whole society, national income consists of wages plus profit plus rent, thus, of the gross income. But even this is an abstraction to the extent that the entire society, on the basis of capitalist production, bases itself on the capitalist standpoint and thereby considers only the income resolved into profit and rent as net income” (III, 2, 375-376. Russ. trans., pp. 695-696).[9]

Thus, the explanation of the process of realisation also made clear the question of income and removed the main difficulty that had prevented the achievement of clarity on this question, namely: how does “income for one become capital for another”, how can the product which consists of articles of personal consumption and resolves itself totally into wages, profit and rent, also include the constant part of capital, which can never be income? The analysis of realisation given in Capital, Volume II, Part III, gave a full answer to these questions, and in the concluding part of Volume III of Capital, which deals with “revenues,” Marx had only to give names to the separate parts of the social product and refer the reader to the analysis given in Volume II.[6]


[1] Dictionary of Political Sciences.—Lenin

[2] Dr. Rodbertus-Jagetzow, Zur Beleuchtung der sozialen Frage, Berlin, 1875, S. 72 u. ff. (On the Elucidation of the Social Problem, Berlin, p. 72 and foll. –Ed.)—Lenin

[3] –this new theory, which I set against those that have existed hitherto.—Lenin

[4] Ibid., S. 32: “...bin ich genötigt, der vorstehenden Skizze einer besseren Methode auch noch eine vollständige, solcher besseren Methode entsprechende Theorie, wenigstens der Verteilung des Nationalprodukts, hinzuzufügen.” (Ibid., p. 32: “...I am obliged to add to the present outline of a better method, a full theory, corresponding to this better method, of at least the distribution of the national product.”–Ed.)—Lenin

[5] That is why K. Diehl is absolutely wrong when he says that Rodbertus presented “a new theory of the distribution of income.” (Handwörterbuch der Staatswissenschaften, Art. “Rodbertus,” B. V., S. 448.)—Lenin

[6] See Das Kapital, III, 2, VII. Abschnitt: “Die Revenuen,” Chapter 49- “Zur Analyse des Produktionsprozesses” (Russ. trans., pp. 688-706). Here Marx also points to the circumstances that prevented the earlier economists from understanding this process (pp. 379-382. Russ. trans., 698-700).[10]Lenin

[7] Karl Marx, Capital, Vol. III, Moscow, 1959, p. 822. Lenin’s remark on errors in the translation of Capital refers to the translation by N.–on (Danielson), 1896.

[8] Karl Marx, Capital, Vol. II, Moscow, 1957, Preface by Frederick Engels, p. 17.

[9] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 818-819. p. 64

[10] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 821-824.

  VI. Marx’s Theory of Realisation | VIII. Why Does the Capitalist Nation Need a Foreign Market?  

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