Rosa Luxemburg
The Accumulation of Capital

Section Two
Historical Exposition of the Problem
Second Round
The Controversy Between Rodbertus and von Kirchmann

Chapter 15
v. Kirchmann’s Theory of Reproduction

THE second theoretical polemics about the problem of accumulation was also started by current events. If the first English crisis and its attendant misery of the working class had stimulated Sismondi’s opposition against the classical school, it was the revolutionary working-class movement arisen since which, almost twenty-five years later, provided the incentive for Rodbertus’ critique of capitalist production. The risings of the Lyons silk weavers and the Chartist movement in England were vastly different from the shadowy spectres raised by the first crisis, and the ears of the bourgeoisie were made to ring with their criticism of the most wonderful of all forms of society. The first socio-economic work of Rodbertus, probably written for the Augsburger Allgemeine Zeitung in the late thirties but not published by that paper, bears the significant title, The Demands of the Working Classes,(1) and begins as follows:

‘What do the working classes want? Will the others be able to keep it from them? Will what they want be the grave of modern civilisation? Thoughtful people have long realised that a time must come when history would put this question with great urgency. Now, the man in the street has learned it too, from the Chartist meetings and the Birmingham scenes.’

During the forties, the leaven of revolutionary ideas was most vigorously at work in France in the formation of the various secret societies and socialist schools of the followers of Proudhon, Blanqui, Cabet, Louis Blanc, etc. The February revolution and the June proclamation of the ‘right to work’ led to a first head on clash between the two worlds of capitalist society – an epoch making eruption of the contradictions latent in capitalism. As regards the other, visible form of those contradictions – the crises – the available data for observation at the time of the second controversy were far more comprehensive than in the early twenties of the century. The dispute between Rodbertus and v. Kirchmann took place under the immediate impact of the crises in 1837, 1839, 1847, and even of the first world crisis in 1857 – Rodbertus writing his interesting pamphlet On Commercial Crises and the Mortgage Problem of the Landowners(2) in 1858. Thus the inherent contradictions of capitalist society meeting his eyes were in strident discord with the doctrine of harmony held by the English classics and their vulgarisers both in England and on the Continent, quite unlike any critique in he times when Sismondi had raised his voice in warning.

Incidentally, a quotation from Sismondi in Rodbertus’ first writing proves that the former’s strictures immediately influenced Rodbertus. He was thus familiar with contemporary French writings against the classical school, though perhaps less so with the far more numerous English literature. There is no more than this flimsy support for the myth of the German professors about the so-called ‘priority’ of Rodbertus over Marx in the ‘foundation of socialism’. Accordingly, Professor Diehl writes in his article on Rodbertus in Handwörterbuch der Staatswissenschaften:

‘Rodbertus must be considered the real founder of scientific socialism in Germany, since in his writings between 1839 and 1842, even before Marx and Lassalle, he provided a comprehensive socialist system, a critique of Adam Smith’s doctrine, new theoretical foundations and proposals for social reform.’

This piece of god-fearing, pious righteousness comes from the second edition of 1901, after all that had been written by Engels, Kautsky and Mehring to destroy this learned legend, and in spite of it. Quite inevitably, of course, and proof against any evidence to the contrary, however weighty, it was only right in the eyes of all the learned German economists that the palm of ‘priority’ should be wrested from Marx, the revolutionary anarchist, by Rodbertus, the ‘socialist’ with monarchist, Prussian and nationalist leanings, the man who believed in communism five hundred years from now, but for the present supported a steady exploitation rate of 200 per cent. However, we are interested in another aspect of Rodbertus’ analysis. The same Professor Diehl continues his eulogy as follows: ‘Rodbertus was not only a pioneer of socialism; political economy as a whole owes much stimulation and furtherance to him; economic theory in particular is indebted to him for the critique of classical economics, for the new theory of the distribution of income, for the distinction between the logical and historical categories of capital, and so on.’

Here we shall deal with these latter achievements of Rodbertus, especially with the ‘and so on’.

Rodbertus’ decisive treatise, Towards the Understanding of Our Politico-Economic Conditions(3) of 1842, set the ball rolling. v. Kirchmann replied in Demokratische Blätter with two essays – On the Social Aspects of Ground Rent(4) and The Society of Barter(5) – and Rodbertus parried in 1850 with his Letters on Social Problems.(6) Thus the discussion entered the same theoretical arena where Malthus-Sismondi and Say-Ricardo-MacCulloch had fought out their differences thirty years earlier. In his earliest writings, Rodbertus had already expressed the thought that the wages of labour present an ever diminishing part of the national product in modern society where the productivity of labour is increasing. He claimed this to be an original idea, and from that moment until his death thirty years later he did nothing but reiterate it and formulate it in various ways. This ‘declining wage rate’ is for him the root of all evils to be found in modern society, in particular of pauperism and the crises, whose combination he calls ‘the social problem of our times’.

v. Kirchmann does not agree with this explanation. He traces pauperism back to the effects of a rising ground rent; crises, on the other hand, to a lack of markets. About the latter especially he says: ‘The greatest part of social ills is caused not by defects of production but by a lack of markets for the products ... the more a country can produce, the more means it has for satisfying every need, the more it is exposed to the danger of misery and want.’ – The labour-problem is here included as well, for ‘the notorious right to work ultimately reduces to the question of markets’. ‘We see’, he concludes, ‘that the social problem is almost identical with the problem of markets. Even the ills of much-abused competition will vanish, once markets are secure; its advantages alone will remain. There will remain a spirit of rivalry to supply good and cheap commodities, but the life-and-death struggle will disappear which is caused only by insufficient markets.’(7)

The difference between the points of view of Rodbertus and v. Kirchmann is evident. Rodbertus sees the root of the evil in a faulty distribution of the national product, and v. Kirchmann in the limitations of the markets for capitalist production. Notwithstanding all the confusion in his expositions, especially in his idealist vision of a capitalist competition content with a laudable rivalry for better and cheaper commodities, and also in his conception of the ‘notorious right to work’ as a problem of markets, v. Kirchmann up to a point still shows more understanding for the sore spot of capitalist production, i.e. the limitations of its market, than Rodbertus who clings to distribution. Thus it is v. Kirchmann who now takes up the problem which Sismondi had originally put on the agenda. Nevertheless, he by no means agrees with Sismondi’s elucidation and solution of the problem, siding rather with the opponents of the latter. Not only does he accept Ricardo’s theory of ground rent, and Adam Smith’s dogma that ‘the price of the commodity is composed of two parts only, of the interests on capital and the wages of labour’. (v. Kirchmann transforms the surplus value into ‘interest on capital’); he also subscribes to the thesis of Say and Ricardo that products are only bought with other products and that production creates its own demand, so that if one side appears to have produced too much, it only means there was not enough production on the other v. Kirchmann, we see, faithfully follows the classics, if in a somewhat ‘German edition’. He begins by arguing, e.g., that Say’s law of a natural balance between production and demand ‘still does not give a comprehensive picture of reality’, and adds:

‘Commerce involves yet further hidden laws which prevent this postulated order from obtaining in complete purity. They must be discovered if we are to explain the present flooding of the market, and their discovery might perhaps also show us the way to avoid this great evil. We believe that there are three relations in the modern system, of society which cause these conflicts between Say’s indubitable law and reality.’

These relations are (1) ‘too inequitable a distribution of the products’ – here, as we see, v. Kirchmann somewhat approximates to Sismondi’s point of view; (2) the difficulties which nature puts in the way of human labour engaged in production; and (3) finally, the defects of commerce as a mediator between production and consumption. Disregarding the last two obstacles to Say’s law, we shall now consider v. Kirchmann’s reasoning of his first point.

‘The first relation’, he explains, ‘can be put more briefly as too low a wage of labour, which is thus the cause of a slump. Those who know that the price of commodities is composed of two parts only, of the interest on capital and the wage of labour, might consider this a startling statement; if the wage of labour is low, prices are low as well, and if one is high, so is the other.’

(We see v. Kirchmann accepts Smith’s dogma even in its most misleading form: the price is not resolved into wage of labour and surplus value, but is composed of them as a mere sum – a view in which Adam Smith strayed furthest from his own theory of the value of labour.)

‘Wage and price thus are directly related, they balance each other. England only abolished her corn laws, her tariffs on meat and other victuals, in order to cause wages to fall and thus to enable her manufacturers to oust all other competitors from the world markets by means of still cheaper commodities. This, however, only holds good up to a point and does not affect the ratio in which the product is distributed among the workers and the capitalists. Too inequitable a distribution among these two is the primary and most important cause why Say’s law is not fulfilled in real life, why the markets are flooded although there is production in all branches.’

v. Kirchmann gives a detailed illustration of this statement. Using the classical method, he takes us, of course, to an imaginary isolated society which makes an unresisting, if thankless, object for the experiments of political economy. v. Kirchmann suggests we should imagine a place (Ort) which comprises 903 inhabitants, no more, no less, viz. three entrepreneurs with 300 workers each. Ort is to be able to satisfy all needs by its own production – in three establishments, that is to say, one for clothing, a second for food, lighting, fuel and raw materials, and a third for housing, furniture and tools. In each of these three departments, the ‘capital together with the raw materials’ is to be provided by the entrepreneur, and the remuneration of the workers is to be so arranged that the workers obtain as their wage one half of the annual produce, the entrepreneurs retaining the other half ‘as interest on capital and profits of the enterprise’. Every business is to produce just enough to satisfy all the needs of the 903 inhabitants. Ort accordingly has ‘all the conditions necessary for general well-being’, and, everybody can therefore tackle his work with courage and vigour. After a few days, however, joy and delight turn into a universal misery and gnashing of teeth: something has happened on v. Kirchmann’s Island of the Blessed which was no more to be expected than for the skies to fall: an industrial and commercial crisis according to all modern specifications has broken out! Only the most essential clothing, food and hoping for the 900 workers has been produced, yet, the warehouses of the three entrepreneurs are full of clothes and raw materials, and their houses stand empty: they complain of a lack of demand, while the workers in turn complain that their wants are not fully satisfied. What has gone wrong? Could it be that there is too much of one kind of produce and too little of another, as Say and Ricardo would have it? Not at all, answers v. Kirchmann. Everything is available in Ort in well-balanced quantities, just enough to satisfy all the wants of the community. What, then, has thrown a spanner into the works, why the crisis? The obstruction is caused by distribution alone – but this must be savoured in v. Kirchmann’s own words

‘The obstacle, why nevertheless no smooth exchange takes place, lies solely and exclusively in the distribution of these products. They are not distributed equitably among all, but the entrepreneurs retain half of them for themselves as interest and profit, and only give half to the workers. It is clear that the worker in the clothing department can exchange, against half of his product, only half of the food, lodging, etc., that has been produced, and it is clear that the entrepreneur, cannot get rid of the other half since no worker has any more products to give in exchange. The entrepreneurs do not know what to do with their stocks, the workers do not know what to do for hunger and nakedness.”

Nor does the reader, we might add, know what to do with v. Kirchmann’s constructions. His model is so childish that every advance leads deeper into the maze.

First of all, there seems to be no reason whatever why, and to what purpose, v. Kirchmann should devise this splitting-up of production into three parts. If analogous examples by Ricardo and MacCulloch usually confront tenant farmers and manufacturers, that is presumably only inspired by the antiquated Physiocrat conception of social reproduction which Ricardo had adopted, although his own theory of value as against the Physiocrats deprived it of all meaning, and although Adam Smith had already made a good start in considering the real material foundations of the social reproductive process. Still, we have seen that the tradition of distinguishing between agriculture and industry as the foundation of reproduction was kept up in economic theory until Marx introduced his epoch making distinction of the two productive departments in society for producer and consumer goods. v. Kirchmann’s three departments, however, have no real significance at all. Obviously, no material consideration of reproduction can have been responsible for this supremely arbitrary division which jumbles up tools and furniture, raw materials and food, but makes clothing a department in its own right. One might as well postulate one department for food, clothing and housing, another for medicines and a third for tooth brushes. v. Kirchmann’s primary concern, no doubt, is with the social division of labour; hence the assumption of as nearly equal quantities of products as possible in the transactions of exchange. Yet this exchange, on which the argument turns, plays no part at all in v. Kirchmann’s example since it is not the value which is distributed but the quantities of products, the bulk of use-values as such. In this intriguing Ort of v. Kirchmann’s imagining, again, the products are distributed first, and only afterwards, when the distribution is accomplished, is there to be universal exchange, whereas on the solid ground of capitalist production it is, as we know, the exchange which inaugurates the distribution of the product and serves as its agent. Besides, the queerest things happen in v. Kirchmann’s distributive system: ‘As we all know’, the prices of the products, i.e. the price of the aggregate product of society, consist of v + s, of wage and capital interest alone so that the aggregate product must be distributed entirely among workers and entrepreneurs; but then unhappily v. Kirchmann dimly remembers the fact that production needs things like raw materials and tools. So Ort is provided with raw materials furtively introduced among the food, and with tools among the furniture. But now the question arises: who is to get these indigestible items in the course of general distribution? the workers as wages, or the capitalists as profits of enterprise? They could hardly expect a warm welcome from either. And on such feeble premises the star turn of the performance is to take place: the exchange between workers and entrepreneurs. The fundamental transaction of exchange in capitalist production, the exchange between workers and capitalists, is transformed by v. Kirchmann from an exchange between living labour and capital into an exchange of products. Not the first act, that of exchanging labour power for variable capital, but the second, the realisation of the wage received from the variable capital is put at the centre of the whole, machinery, the entire commodity exchange of capitalist society being in turn, reduced to this realisation of the labour-wage. And the crowning glory is that this exchange between workers and entrepreneurs, the king-pin of all economic life dissolves into nothing on a closer scrutiny – it does not take place at all. For as soon as all workers have received their natural wages in the form of half their product, an exchange will be possible only among the workers themselves; every worker will only keep one-third of his wage consisting exclusively of either clothing, food or furniture, as the case may be, and realise the remainder to equal parts in the two other product groups. The entrepreneurs no longer come into this at all; the three of them are left high and dry with their surplus value: half the clothing, furniture and food that has been produced by the society; and they have no idea what to do with the stuff. In this calamity of v. Kirchmann’s creation, even the most generous distribution of the product would he of no used. On the contrary, if larger quantities of the social product were allotted to the workers, they would have even less to do with the entrepreneurs in this transaction: all that would happen is that the exchange of the workers among themselves would increase in volume. The surplus product which the entrepreneurs have on their hands would then contract, it is true, though not indeed because the exchange of the surplus product would be facilitated, but merely because there would be less surplus value altogether. Now as before, an exchange of the social product between workers and entrepreneurs is out of the question. One must confess that the puerile and absurd economics here crammed into comparatively little space exceed the bounds even of what might be put up with from a Prussian Public Prosecutor – such having been v. Kirchmann’s profession, though he must be credited with having incurred disciplinary censure on two occasions. Nevertheless, after these unpromising preliminaries, v. Kirchmann goes right to the root of the matter. He admits that his assuming the surplus product in a concrete use-form is the reason why the surplus value cannot be usefully employed. As a remedy he now allows the entrepreneurs to devote half of the social labour appropriated as surplus value to the production not of common goods but of luxuries. The ‘essence of luxury-goods being that they enable the consumer to use up more capital and labour power than in the case of ordinary goods’, the three entrepreneurs manage to consume by themselves in the form of laces, fashionable carriages and the like, their entire half-share in all the labour performed by the society. Now nothing unsaleable is left, and the crisis is happily avoided; over-production is made impossible once and for all, capitalists and workers alike are safe; the name of v. Kirchmann’s magic cure which has brought all these benefits to pass and which re-establishes the balance between production and consumption, being: luxury. In other words, the capitalists who do not know what to do with their surplus value which they cannot realise, are advised by the dear fellow – to eat it up. As it happens, luxury is in fact an old familiar invention of capitalist society, and still there are recurrent crises. Why is this? v. Kirchmann enlightens us: ‘The answer can only be that in real life sluggish markets are entirely due to the fact that there are still not enough luxuries, or, in other words, that the capitalists, i.e. those who can afford to consume, still consume too little.’

This misguided abstinence of the capitalists, however, results from a bad habit which political economists have been ill advised to encourage: the desire to save for purposes of ‘productive consumption’. In other words: crises are caused by accumulation. This is v. Kirchmann’s principal thesis. He proves it again by means of a touchingly simple example:

‘Let us assume conditions which economists praise as more favourable,’ he says, ‘where the entrepreneurs say: we do not want to spend our income to the last penny in splendour and luxury, but will re-invest it productively. What does this mean? Nothing but the setting-up of all sorts of productive enterprises for delivering new goods of such a kind that their sale can yield interest (v. Kirchmann means profits) on a capital saved and invested by the three entrepreneurs from their unconsumed revenues. Accordingly, the three entrepreneurs decide to consume only the produce of a hundred workers, that is to say to restrict their luxury considerably, and to employ the labour power of the remaining 350 workers together with the capital they use for setting up new productive enterprises. The question now arises in what kind of productive enterprises these funds are to be used.’

Since, according to v. Kirchmann’s assumption, constant capital is not reproduced, and the entire social product consists entirely of consumer goods, ‘the three entrepreneurs can only choose again between enterprises for the manufacture of ordinary goods or for that of luxuries’.

In this way, however, the three entrepreneurs will be faced with the already familiar dilemma: if they turn out ‘common. goods’, there will be a crisis, since the workers lack means to purchase these additional provisions, having been bought off with half the value of their produce. If they go in for luxuries, they will have to consume them alone. There is no other possibility. The dilemma is not even affected by foreign trade which would ‘only increase the range of commodities on the home market’ or increase productivity.

‘These foreign commodities are therefore either common goods – then the capitalist will not, and the worker, lacking the means, cannot buy them, or they are luxuries, in which case the worker, of course, is even less able to buy them, and the capitalist will not want them either because of his efforts to save.’

This argument, however primitive, yet shows quite nicely and clearly the fundamental conception of v. Kirchmann and the nightmare of all economic theory: in a society consisting exclusively of workers and capitalists, accumulation will be impossible v. Kirchmann is therefore frankly hostile to accumulation, ‘saving’, ‘productive consumption’ of the surplus value, and strongly attacks these errors advocated by classical economics. His gospel is increasing luxury together with the productivity of labour as the specific against crises. We see that v. Kirchmann, if he grotesquely aped Ricardo and Say in his theoretical assumptions, is a caricature of Sismondi in his final conclusions. Yet it is imperative to get v. Kirchmann’s approach to the problem perfectly clear, if we are to understand the import of Rodbertus’ criticism and the outcome of the whole controversy.

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(1) Die Forderungen der arbeitenden Klassen.

(2) Die Handelskrisen und die Hypothekennot der Grundbesitzer.

(3) Zur Erkenntnis unserer staatswirtschaftlichen Zustände.

(4) Über die Grundrente in socialer Beziehung.

(5) Die Tauschgesellschaft.

(6) Soziale Briefe.

(7) Rodbertus quotes v. Kirchmann’s arguments explicitly and in great detail. But according to his editors, no complete copy of Demokratische Blätter with the original essay is obtainable.

Last updated on: 11.12.2008