Rosa Luxemburg
The Accumulation of Capital

Section Two
Historical Exposition of the Problem
First Round
Sismondi-Malthus v. Say-Ricardo-MacCulloch

Chapter 11
MacCulloch v. Sismondi

SISMONDI’S emphatic warnings against the ruthless ascendancy of capital in Europe called forth severe opposition on three sides: in England the school of Ricardo, in France J.B. Say, the commonplace vulgariser of Adam Smith, and the St. Simonians. While Owen in England, profoundly aware of the dark aspects of the industrial system and of the crises in particular, saw eye to eye with Sismondi in many respects, the school of that other great European, St. Simon, who had stressed the world-embracing conception of large industrial expansion, the unlimited unfolding of the productive forces of human labour, felt perturbed by Sismondi’s alarms. Here, however, we are interested in the controversy between Sismondi and the Ricardians which proved the most fruitful from the theoretical point of view. In the name of Ricardo, and, it seemed, with Ricardo’s personal approval, MacCulloch anonymously published a polemical article(1) against Sismondi in the Edinburgh Review in October 1819, i.e. immediately after the publication of the Nouveaux Princip es.

In 1820, Sismondi replied in Rossi’s Annales de Jurisprudence with an essay entitled: Does the Power of Consuming Necessarily Increase with the Power to Produce? An Enquiry.(2)

In his reply Sismondi(3) himself states that his polemics were conceived under the impact of the commercial crisis:

‘This truth we are both looking for, is of utmost importance under present conditions. It may be considered as fundamental for economics Universal distress is in evidence in the trade, in industry and, in many countries certainly, even in agriculture. Such prolonged and extraordinary suffering has brought misfortune to countless families and insecurity and despondency to all, until it threatens the very bases of the social order. Two contrasting explanations have been advanced for the distress that has caused such a stir. Some say: we have produced too much, and others: we have not produced enough. “There will be no equilibrium,” say the former, “no peace and no prosperity until we consume the entire commodity surplus which remains unsold on the market, until we organise production for the future in accordance with the buyers’ demand.” – “There will be a new equilibrium,” say the latter, “if only we double our efforts to accumulate as well as to produce Ins a mistake to believe that there is a glut on the market; no more than half our warehouses are full; let us fill the other half, too, and the mutual exchange of these new riches will revive our trade.”’(4)

In this supremely lucid way, Sismondi sets out and underlines the real crux of the dispute. MacCulloch’s whole position in truth stands or falls with the statement that exchange is actually an interchange of commodities; every commodity accordingly represents not only supply but demand. The dialogue then continues as follows:

‘Demand and supply are truly correlative and convertible terms. The supply of one set of commodities constitutes the demand for another. Thus, there is a demand for a given quantity of agricultural produce, when a quantity of wrought goods equal thereto in productive cost is offered in exchange for it; and conversely, there is an effectual demand for this quantity of wrought goods, when the supply of agricultural produce which it required the same expense to raise, is presented as its equivalent.’(5)

The Ricardian’s dodge is obvious: he has chosen to ignore the circulation of money and to pretend that commodities are immediately bought and paid for by commodities.

From the conditions of highly developed capitalist production, we are thus suddenly taken to a stage of primitive barter such as we might find still flourishing at present in Central Africa. There is a distant element of truth in this trick since money, in a simple circulation of commodities, plays merely the part of an agent. But of course, it is just the intervention of an agent which separates the two transactions of circulation, sale and purchase, and makes them independent of one another in respect of both time and place. That is why a further purchase need not follow hard upon a sale for one thing; and secondly, sale and purchase are by no means bound up with the same people: in fact, they will involve the same performers only in rare and exceptional cases. MacCulloch, however, makes just this baseless assumption by confronting, as buyer and seller, industry on the one hand and agriculture on the other. The universality of these categories, qua total categories of exchange, obscures the actual splitting up of this social division of labour which results in innumerable private exchange transactions where the sale and purchase of two commodities rarely come to the same thing. MacCulloch’s simplified conception of commodity exchange in general which immediately turns the commodity, into money and pretends that it can be directly exchanged, makes it impossible to understand the economic significance of money, its historical appearance.

Sismondi’s answer to this is regrettably clumsy. In order to show that MacCulloch’s explanation of commodity exchange has no application for capitalist production, he takes recourse to the Leipsic Book Fair.(6)

‘At the Book Fair of Leipsic, booksellers from all over Germany arrive, each with four or five publications of his own in some 40 or 50 dozen copies; these are exchanged for others and every seller takes home 200 dozen books, just as he has brought 200 dozen, with the sole difference, that he brought four different works and takes home 200. This is the demand and the production which, according to M. Ricardo’s disciple, are correlative and convertible; one buys the other, one pays for the other, one is the consequence of the other. But as far as we are concerned, for the bookseller and for the general public, demand and consumption have not even begun. For all that it has changed hands at Leipsic, a bad book will still be just as unsold (a bad mistake of Sismondi’s, this!), it will still clutter up the merchants’ shops, either because nobody wants it, or because everyone has a copy already. The books exchanged at Leipsic will only sell if the booksellers can find individuals who not only want them but are also prepared to make sacrifices in order to withdraw them from circulation. They alone constitute an effective demand.’(7)

Although this example is rather crude, it shows clearly that Sismondi was not side-tracked by his opponent’s trick, that he knows after all what he is talking about.

MacCulloch then attempts to turn the examination from abstract commodity exchange to concrete social conditions:

‘Supposing, for the sake of illustration, that a cultivator advanced food and clothing for 100 labourers, who raised for him food for 200; while a master-manufacturer also advanced food and clothing for 100, who fabricated for him clothing for 200. Then the farmer, besides replacing the food of his own labourers, would have food for 100 to dispose of, while the manufacturer, after replacing the clothing of his own labourers, would have clothing for 100 to bring to market. In this case, the two articles would be exchanged against each other, the supply of food constituting the demand for the clothing, and that of the clothing the demand for the food.’(8)

What are we to admire more in this hypothesis: the absurdity of the set-up which reverses all actual relations, or the effrontery which simply takes for granted in the premises all that is later claimed proven? In order to prove that it is always possible to create an unlimited demand for all kinds of goods, MacCulloch chooses for his example two commodities which pertain to the most urgent and elementary wants of every human being: food and clothing. In order to prove that commodities may be exchanged at any time, and without regard to the needs of society, he chooses for his example two products in quantities which are right from the start in strict conformity with these needs, and which therefore contain no surplus as far as society is concerned. And yet he calls this quantity needed by society a surplus – viz. as measured against the producer’s personal requirements for his own product, and is consequently able to demonstrate brilliantly that any amount of commodity ‘surplus’ can be exchanged for a corresponding ‘surplus’ of other commodities. Finally, in order to prove that different privately produced commodities can yet be exchanged, although their quantity, production costs and social importance must of course be different, he chooses for his example commodities whose quantity, production cost and general social necessity are precisely the same right from the start. In short, MacCulloch posits a planned, strictly regulated production without any overproduction in order to prove that no crisis is possible in an unplanned private economy.

The principal joke of canny Mac, however, lies elsewhere. What is at issue is the problem of accumulation. Sismondi was worried by, and worried Ricardo and his followers with, the following question: if part of the surplus value is capitalised, i.e. used to expand production over and above the income of society, instead of being privately consumed by the capitalists, where are we to find buyers for the commodity surplus? What will become of the capitalised surplus value? Who will buy the commodities in which it is hidden? Thus Sismondi and the flower of Ricardo’s school, its official representative on the Chair of London University, the authority for the then English Ministers of the Liberal Party and for the City of London, the great Mr. MacCulloch replies – by constructing an example in which no surplus value whatever is produced. His ‘capitalists’ slave away in agriculture and industry in the name of charity, and all the time the entire social product, including the ‘surplus’ is only enough for the needs of the workers, for the wages, while the ‘farmer’ and ‘manufacture’ see to production and exchange without food and clothing.

Sismondi, justly impatient, now exclaims: ‘The moment we want to find out what is to constitute the surplus of production over consumption of the workers, it will not do to abstract from that surplus which forms the due profit of labour and the due share of the master.’(9)

MacCulloch’s only reaction is to multiply his silly argument by a thousand. He asks the reader to assume ‘1,000 farmers’, and ‘also 1,000 master-manufacturers’ all acting as ingenuously as the individuals. The exchange, then, proceeds as smoothly as can be desired. Finally, he exactly doubles labour productivity ‘in consequence of more skilful application of labour and of the introduction of machinery – thus that every one of the 1,000 farmers, by advancing food and clothing for 100 labourers, obtains a return consisting of ordinary food for 200 together with sugar, grapes and tobacco equal in production cost to that food’, while every manufacturer obtains, by an analogous procedure, in addition to the previous quantity of clothing for all workers, ‘ribbands, cambrics and lace, equal in productive cost, and therefore in exchangeable value, to that clothing’.(10) After such complete reversal of the chronological order, the assumption, that is, of first the existence of private property with wage labour, and then, at a later stage, such level of labour productivity as makes exploitation possible at all, he now assumes labour productivity to progress with equal speed in all spheres, the surplus product to contain precisely the same amount of value in all branches of industry, and to be divided among precisely the same number of people. When these various surplus products are then exchanged against one another, is it any wonder that the exchange proceeds smoothly and completely to everybody’s satisfaction? It is only another of his many absurdities that MacCulloch makes the capitalists who had hitherto lived on air and exercised their profession in their birthday suits, now live exclusively on sugar, tobacco and wine, and array themselves only in ribbons, cambrics and lace.

The most ridiculous performance, however, is the volte-face by which he evades the real problem. The question had been what happens to the capitalist surplus, that surplus which is used not for the capitalist’s own consumption but for the expansion of production. MacCulloch solves it on the one hand by ignoring the production of surplus value altogether, and on the other, by using all surplus value in the production of luxury goods. What buyers, then, does he advance for this new luxury production? The capitalists, evidently; the farmers and manufacturers, since, apart from these, there are only workers in MacCulloch’s model. Thus the entire surplus value is consumed for the personal satisfaction of the capitalists, that is to say, simple reproduction takes place. The answer to the problem of the capitalisation of surplus value is, according to MacCulloch, either to ignore surplus value altogether, or to assume simple reproduction instead of accumulation as soon as surplus value comes into being. He still pretends to speak of expanding reproduction, but again, as before when he pretended to deal with the ‘surplus’, he uses a trick, viz. first setting out an impossible species of capitalist production without any surplus value, and then persuading the reader that the subsequent début of the surplus value constitutes an expansion of production.

Sismondi is not quite up to these Scottish acrobatics. He had up to now succeeded in pinning his Mac down, proving him to be ‘obviously absurd’. But now he himself becomes confused with regard to the crucial point at issue. On the above rantings of his opponent, he should have declared coldly: Sir, with all respect for the flexibility of your mind, you are dodging the issue. I keep on asking, who will buy the surplus product, if the capitalists use it for the purpose of accumulation, i.e. to expand production, instead of squandering it altogether? And you reply: Oh well, they will expand their production of luxury goods, which they will, of course, eat up themselves. But this is a conjuring trick, seeing that the capitalists consume the surplus value in so far as they spend it on their luxuries – they do not accumulate at all. My question is about the possibility of accumulation, not whether the personal luxuries of the capitalists are possible. Answer this clearly, if you can, or else go play with your wine and tobacco, or go to blazes for all I care.

But Sismondi, instead of putting the screws on the vulgariser, suddenly begins to moralise with pathos and social conscience. He exclaims: ‘Whose demand? Whose satisfaction? The masters or the workers in town or country? On this new conception [of Mac’s] there is a surplus of products, an advantage from labour – to whom will it accrue?’(11) and gives his own answer in the following impassioned words:

‘But we know full well, and the history of the commercial world teaches us all too thoroughly, that it is not the worker who profits from the increase in products and labour; his pay is not in the least swelled by it. M. Ricardo himself said formerly that it ought not to be, unless you want the social wealth to stop growing. On the contrary, sorry experience teaches us that wages nearly always contract by very reason of this increase. Where, then, does the accumulation of wealth make itself felt as a public benefit? Our author assumes 1,000 farmers who profit, while 100,000 workers toil; 1,000 entrepreneurs who wax rich, while 100,000 artisans are kept under their others. Whatever good may result from the accumulation of the frivolous enjoyment of luxuries is only felt by a 100th part of the nation. And will this 100th part, called upon to consume the entire surplus product of the whole working class, be adequate to a production that may grow without let or hindrance, owing to progress of machinery and capitals? In the assumption made by the author, every time the national product is doubled, the master of the farm or of the factory must increase his consumption a hundredfold; if the national wealth to-day, thanks to the invention of so many machines, is a hundred times what it was when it only covered the cost of production, every employer would to-day have to consume enough products to support 10,000 workers.’(12)

At this point Sismondi again believes himself to have a firm grasp on how crises begin to arise:

‘We might imagine, if put to it, that a rich man can consume the goods manufactured by 10,000 workers, this being the fate of the ribbons, lace and cambrics whose origin the author has shown us. But a single individual would not know how to consume agricultural products to the same tune, the wines, sugar and spices which M. Ricardo [whom Sismondi evidently suspected of having written the article since he only got to know ‘Anonymous’ of the Edinburgh Review at a later date] conjures up in exchange, are too much for the table of one man. They will not sell, or else the strict proportion between agricultural and industrial products, apparently the basis of his whole system, cannot be maintained.’(13)

Sismondi, we see, has thus fallen into MacCulloch’s trap. Instead of waiving an answer to the problem of accumulation which refers to the production of luxuries, he pursues his opponent into this field without noticing that the ground under his feet has shifted. Here he finds two causes for complaint. For one thing, he has moral objections to MacCulloch’s allowing the capitalists instead of the workers to benefit by the surplus value, and is side-tracked into polemising against distribution under capitalism. From this digression, he unexpectedly reverts to the original problem which he now formulates as follows: the capitalists, then, consume the entire surplus value in luxuries. Let it be so. But could anyone increase his consumption as rapidly and indefinitely as the progress of labour productivity makes the surplus value increase? And in this second instance, Sismondi himself abandons his own problem. Instead of perceiving that it is the lack of consumers other than workers and capitalists which accounts for the difficulty in capitalist accumulation, he discovers a snag in simple reproduction because the capitalists’ capacity to consume has physical limits. Since the absorptive capacity of the capitalists for luxuries cannot keep up with labour productivity, that is to say with the increase in surplus value, there must be crises and over-production. We have encountered this line of thought once before in the Nouveaux Principes – so Sismondi himself was manifestly not quite clear about the problem at all times. And that is hardly surprising, since one can really come to grips with the whole problem of accumulation only when one has fully grasped the problem of simple reproduction, and we have seen how much Sismondi was at fault in this respect.

Yet in spite of all this, the first time that Sismondi crossed swords with the heirs of the classical school, he proved himself by no means the weaker party. On the contrary, in the end he routed his opponent. If Sismondi misunderstood the most elementary principles of social reproduction and ignored constant capital, quite in keeping with Adam Smith’s dogma, he was in this respect no worse at any rate than his opponent. Constant capital does not exist for MacCulloch either, his farmers and manufacturers ‘advance’ merely food and clothing to their workers, and food and clothing between them make up the aggregate product of society. If there is, then, nothing to choose between the two as far as this elementary blunder is concerned, Sismondi towers heads above Mac because of his intuitive understanding of the contradictions in the capitalist mode of production. In the end, the Ricardian was at a loss to answer Sismondi’s scepticism concerning the possibility of realising the surplus value. Sismondi also shows himself more penetrating in that he throws the Nottingham proletarians’ cry of distress in the teeth of the apostles and apologists of harmony with their smug complacency, of those who deny ‘any surplus of production over demand, any congestion of the market, any suffering’, when he proves that the introduction of the machine must of necessity create a ‘superabundant population’, and particularly in the end, when he underlines the tendency of the capitalist world market in general with its inherent contradictions. MacCulloch denies outright that general over-production is possible. He has a specific for every partial over-production up his sleeve:

‘It may be objected, perhaps, that on the principle that the demand for commodities increases in the same ratio as their supply, there is no accounting for the gluts and stagnation produced by overtrading. We answer very easily – A glut is an increase in the supply of a particular class of commodities, unaccompanied by a corresponding increase in the supply of those other commodities which should serve as their equivalents. While our 1,000 farmers and 1,000 master-manufacturers are exchanging their respective surplus products, and reciprocally affording a market to each other, if 1,000 new capitalists were to join their society, employing each 100 labourers in tillage, there would be an immediate glut in agricultural produce because in this case there would be no contemporaneous increase in the supply of the manufactured articles which should purchase it. But let one half of the new capitalists become manufacturers, and equivalents in the form of wrought goods will be created for the new produce raised by the other half: the equilibrium will be restored, and the 1,500 farmers and 1,500 master-manufacturers will exchange their respective surplus products with exactly the same facility with which the 1,000 farmers and 1,000 manufacturers formerly exchanged theirs.’(14)

Sismondi answers this buffoonery which ‘very easily’ pokes about in a fog, by pointing to the real changes and revolutions which take place before his own eyes.

‘It was possible to put barbarous countries under the plough, and political revolutions, changes in the financial system, and peace, at once brought cargoes to the ports of the old agricultural countries which almost equalled their entire harvest. The recent Russian conquest of the vast provinces on the Black Sea, the change in the system of government in Egypt, and the outlawing of piracy in High Barbary, have suddenly poured the granaries of Odessa, Alexandria and Tunis into the Italian ports and have put such an abundance of corn on the markets that all along the coasts the farmer’s trade is fighting a losing battle. Nor is the remainder of Europe safe from a similar revolution, caused by the simultaneous ploughing under of immense expanses of new land on the banks of the Mississippi, which export all their agricultural produce. Even the influence of New Holland may one day be the ruin of English industry, if not in the price of foodstuffs, which are too expensive to transport, at least in respect of wool and other agricultural products which are easier to transport.’(15)

What would MacCulloch have to advise in view of such an agrarian crisis in Southern Europe? That half the new farmers should turn manufacturer. Whereupon Sismondi counters:

‘Such counsel cannot seriously apply to the Tartars of the Crimea or to the fellaheen of Egypt.’

And he adds

‘The time is not yet ripe to set up new industries in the regions overseas or in New Holland.’(16)

Sismondi’s acuity recognised that industrialisation of the lands overseas was only a matter of time. He was equally aware of the fact that the expansion of the world market would not bring with it the solution to the difficulty but would only reproduce it in a higher degree, in yet more potent crises. His prediction for the expansive tendency of capitalism is that it will reveal an aspect of fiercer and fiercer competition, of mounting anarchy within production itself. Indeed, he puts his finger on the fundamental causes of crises in a passage where he states the trend of capitalist production precisely as surpassing all limits of the market. At the end of his reply to MacCulloch he says:

‘Time and again it has been proclaimed that the equilibrium will re-establish itself, that work will start again, but a single demand each time provides an impetus in excess of the real needs of trade, and this new activity, must soon be followed by a yet more painful glut.’(17)

To such a profound grasp of the real contradictions in the movements of capital, the vulgarus on the Chair of London University with his harmony, cant and his country-dance of 1,000 beribboned farmers and 1,000 bibulous manufacturers could find no effective answer.

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(1) The article in the Edinburgh Review was really directed against Owen, sharply attacking on 24 pages of print the latter’s four treatises: (1) A New View of Society, or Essays on the formation of Human Character, (2) Observations on the Effects of the Manufacturing System, (3) Two Memorials on Behalf of the Working Classes, Presented to the Governments of America and Europe, and finally (4) Three Tracts and An Account of Public Proceedings relative to the Employment of the Poor. ‘Anonymous’ here attempts a detailed proof that Owen’s reformist ideas by no means get down to the real causes of the misery of the English proletariat, these causes being: the transition to the cultivation of barren land (Ricardo’s theory of ground rent!), the corn laws and high taxation pressing upon farmer and manufacturer alike. Free trade and laissez-faire thus is his alpha and omega. Given unrestricted accumulation, all increase in production will create for itself an increase in demand. Owen is accused of ‘profound ignorance’ as regards Say and James Mill. – ‘In his reasonings, as well as in his plans, Mr. Owen shows himself profoundly ignorant of all the laws which regulate the production and distribution of wealth.’ – From Owen, the author proceeds to Sismondi and formulates the point of contention as follows: ‘He [Owen] conceives that when competition is unchecked by any artificial regulations, and industry permitted to flow in its natural channels, the use of machinery may increase the supply of the several articles of wealth beyond the demand for them, and by creating an excess of all commodities, throw the working classes out of employment. This is the position Which we hold to be fundamentally erroneous; and as it is strongly insisted on by the' celebrated M. de Sismondi in his Nouveaux Principes d’Économie Politique, we must entreat the indulgence of our readers while we endeavour to point out its fallacy, and to demonstrate, that the power of consuming necessarily increases with every increase in the power of producing’ (Edinburgh Review, Oct. 1819, p.470).

(2) The original title is: Examen de cette question: Le pouvoir de consommer s’accroît-il toujours dans la société avec le pouvoir de produire? We have not been able to obtain a copy of Rossi’s Annales, but the essay as a whole was incorporated by Sismondi in the second edition of his Nouveaux Principes.

(3) At the time of writing, Sismondi was still in the dark as to the identity of ‘Anonymous’ in the Edinburgh Review.

4) Sismondi, op. cit., Vol.ii, pp.376-8.

(5) MacCulloch, loc. cit., p.470.

(6) Incidently, Sismondi’s Leipsic Book Fair, as a microcosm of the capitalist world, has staged a come-back after 55 years – in Eugen Dühring’s ‘system’. Engels, in his devastating criticism of that unfortunate ‘universal genius’ adduces this idea as proof that Dühring, by attempting to elucidate a real industrial crisis by means of an imaginary one on the Leipsic Book Fair, a storm at sea by a storm in a teacup, has shown himself a ‘real German literatus’. But, as in many other instances exposed by Engels, the great thinker has simply borrowed here from someone else on the sly.

(7) Sismondi, op. cit., vol.ii, pp.381-2.

(8) MacCulloch, loc. cit., p.470.

(9) Sismondi, op. cit., vol.ii, p.384.

(10) MacCulloch, loc. cit., p.471.

(11) Sismondi, op. cit., vol.ii, pp.394-5.

(11) Ibid., pp.396-7.

(13) Ibid., pp.397-8.

(14) MacCulloch, loc. cit., pp.471-2.

(15) Sismondi, op. cit., vol.ii, pp.400-1.

(16) Sismondi, op. cit., vol.ii, p.401.

(17) Ibid., pp.405-6.

Last updated on: 11.12.2008