Rosa Luxemburg
The Accumulation of Capital

Section Three
The Historical Conditions of Accumulation

Chapter 25
Contradictions Within the Diagram of Enlarged Reproduction

In the first section, we ascertained that Marx’s diagram of accumulation does not solve the question of who is to benefit in the end by enlarged reproduction. If we take the diagram literally as it is set out at the end of volume ii, it appears that capitalist production would itself realise its entire surplus value, and that it would use the capitalised surplus value exclusively for its own needs. This impression is confirmed by Marx’s analysis of the diagram where he attempts to reduce the circulation within the diagram altogether to terms of money, that is to say to the effective demand of capitalists and workers – an attempt which in the end leads him to introduce the ‘producer of money’ as a deus ex machina. In addition, there is that most important passage in Capital, volume i, which must be interpreted to mean the same.

‘The annual production must in the first place furnish all those objects (use-values) from which the material components of capital, used up in the course of the year, have to be replaced. Deducting these there remains the net or surplus-product, in which the surplus-value lies. And of what does this surplus value consist? Only of things destined to satisfy the wants and desires of the capitalist class, things which, consequently, enter into the consumption fund of the capitalists? Were that the case, the cup of surplus-value would be drained to the very dregs, and nothing but simple reproduction would ever take place.

‘To accumulate it is necessary to convert a portion of the surplus-product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour-process (i.e. means of production), and such further articles as are suitable for the sustenance of the labourer (i.e. means of subsistence). Consequently, a part of the annual surplus-labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.’(1)

The following conditions of accumulation are here laid down:

  1. The surplus value to be capitalised first comes into being in the natural form of capital (as additional means of production and additional means of subsistence for the workers).
  2. The expansion of capitalist production is achieved exclusively by means of capitalist products, i.e. its own means of production and subsistence.
  3. The limits of this expansion are each time determined in advance by the amount of surplus value which is to be capitalised in any given case; they cannot be extended, since they depend on the amount of the means of production and subsistence which make up the surplus product; neither can they be reduced, since a part of the surplus value could not then be employed in its natural form. Deviations in either direction (above and below) may give rise to periodical fluctuations and crises – in this context, however, these may be ignored, because in general the surplus product to be capitalised must be equal to actual accumulation;
  4. Since capitalist production buys up its entire surplus product, there is no limit to the accumulation of capital.

Marx’s diagram of enlarged reproduction adheres to these conditions. Accumulation here takes its course, but it is not in the least indicated who is to benefit by it, who are the new consumers for whose sake production is ever more enlarged. The diagram assumes, say, the following course of events: the coal industry is expanded in order to expand the iron industry in order to expand the machine industry in order to expand the production of consumer goods. This last, in turn, is expanded to maintain both its own workers and the growing army of coal, iron and machine operatives. And so on ad infinitum. We are running in circles, quite in accordance with the theory of Tugan Baranovski. Considered in isolation, Marx’s diagram does indeed permit of such an interpretation since he himself explicitly states time and again that he aims at presenting the process of accumulation of the aggregate capital in a society consisting solely of capitalists and workers. Passages to this effect can be found in every volume of Capital.

In volume i, in the very chapter on The Conversion of Surplus-Value into Capital, he says:

‘In order to examine the object of our investigation in its integrity, free from all disturbing subsidiary circumstances, we must treat the whole world as one nation, and assume that capitalist production is everywhere established and has possessed itself of every branch of industry.’(2)

In volume ii, the assumption repeatedly returns; thus in chapter 17 on The Circulation of Surplus-Value:

‘Now, there are only two points of departure: The capitalist and the labourer. All third classes of persons must either receive money for their services from these two classes, or, to the extent that they receive it without any equivalent services, they are joint owners of the surplus-value in the form of rent, interest, etc. ... The capitalist class, then, remains the sole point of departure of the circulation of money.’(3)

Further, in the same chapter On the Circulation of Money in Particular under Assumption of Accumulation:

‘But the difficulty arises when we assume, not a partial, but a general accumulation of money-capital on the part of the capitalist class. Apart from this class, there is, according to our assumption – the general and exclusive domination of capitalist production – no other class but the working class.’(4)

And again in chapter 20:

‘... there are only two classes in this case, the working class disposing of their labour-power, and the capitalist class owning the social means of production and the money.’(5)

In volume iii, Marx says quite explicitly, when demonstrating the process of capitalist production as a whole:

‘Let us suppose that the whole society is composed only of industrial capitalists and wage workers. Let us furthermore make exceptions of fluctuations of prices which prevent large portions of the total capital from reproducing themselves under average conditions and which, owing to the general interrelations of the entire process of reproduction, such as are developed particularly by credit, must always call forth general stoppages of a transient nature. Let us also make abstraction of the bogus transactions and speculations, which the credit system favours. In that case, a crisis could be explained only by a disproportion of production in various branches, and by a disproportion of the consumption of the capitalists and the accumulation of their capitals. But as matters stand, the reproduction of the capitals invested in production depends largely upon the consuming power of the non-producing classes; while the consuming power of the labourers is handicapped partly by the laws of wages, partly by the fact that it can be exerted only so long as the labourers can be employed at a profit for the capitalist class.’(6)

This last quotation refers to the question of crises with which we are not here concerned. It can leave no doubt, however, that the movement of the total capital, ‘as matters stand’, depends in Marx’s view on three categories of consumers only the capitalists, the workers and the ‘non-productive classes’, i.e. the hangers-on of the capitalist class (king, parson, professor, prostitute, mercenary), of whom he quite rightly disposes in volume ii as the mere representatives of a derivative purchasing power, and thus the parasitic joint consumers of the surplus value or of the wage of labour.

Finally, in Theories of Surplus Value,(7) Marx formulates his general presuppositions with regard to accumulation as follows:

‘Here we have only to consider the forms through which capital passes during the various stages of its development. Thus we do not set out the actual conditions of the real process of production, but always assume that the commodity is sold for what it is worth. We ignore the competition of capitalists and the credit system; we also leave out of account the actual constitution of society which never consists exclusively of the classes of workers and industrial capitalists, and where there is accordingly no strict division between producers and consumers. The first category (of consumers, whose revenues are partly of a secondary, not a primitive nature, derived from profits and the wage of labour) is much wider than the second category (of producers). Therefore the manner in which it spends its income, and the extent of such income, effects very large modifications in the economic household, and especially so in the process of circulation and reproduction of capital.’

Speaking of the ‘actual constitution of society’, Marx here also considers merely the parasitic joint consumers of surplus value and of the wage of labour, i.e. only the hangers-on of the principal categories of capitalist production.

There can be no doubt, therefore, that Marx wanted to demonstrate the process of accumulation in a society consisting exclusively of workers and capitalists, under the universal and exclusive domination of the capitalist mode of production. On this assumption, however, his diagram does not permit of any other interpretation than that of production for production’s sake.

Let us recall the second example of Marx’s diagram of enlarged reproduction:

table data

Here accumulation continues year after year without interruption, the capitalists in each case consuming half of the surplus value they have gained and capitalising the other half. In the process of capitalisation, the same technical foundation, that is to say the same organic composition or division into constant and variable capital and also the same rate of exploitation (always amounting to 100 per cent) is consecutively maintained for the additional capital as it was for the original capital. In accordance with Marx’s assumption in volume i of Capital, the capitalised part of the surplus value first comes into being as additional means of production and as means of subsistence for the workers, both serving the purpose of an ever expanding production in the two departments. It cannot be discovered from the assumptions of Marx’s diagram for whose sake production is progressively expanded. Admittedly, production and consumption increase simultaneously in a society. The consumption of the capitalists increases (in terms of value, in the first year it amounts to 500 + 112, in the second year to 542 + 158, in the third year to 586 + 171, and in the fourth year to 635 + 185); the consumption of the workers increases as well; the variable capital increasing year after year in both departments precisely indicates this growth in terms of value. And yet, the growing consumption of the capitalists can certainly not be regarded as the ultimate purpose of accumulation; on the contrary, there is no accumulation inasmuch as this consumption takes place and increases; personal consumption of the capitalists must be regarded as simple reproduction. Rather, the question is: if, and in so far as, the capitalists do not themselves consume their products but ‘practise abstinence’, i.e. accumulate, for whose sake do they produce? Even less can the maintenance of an ever larger army of workers be the ultimate purpose of continuous accumulation of capital. From the capitalist’s point of view, the consumption of the workers is a consequence of accumulation, it is never its object or its condition, unless the principles (foundations) of capitalist production are to be turned upside down. And in any case, the workers can only consume that part of the product which corresponds to the variable capital, not a jot more. Who, then, realises the permanently increasing surplus value? The diagram answers: the capitalists themselves and they alone. – And what do they do with this increasing surplus value? – The diagram replies: They use it for an ever greater expansion of their production. These capitalists are thus fanatical supporters of an expansion of production for production’s sake. They see to it that ever more machines are built for the sake of building – with their help – ever more new machines. Yet the upshot of all this is not accumulation of capital but an increasing production of producer goods to no purpose whatever. Indeed, one must be as reckless as Tugan Baranovski, and rejoice as much in paradoxical statements, to assume that this untiring merry-go-round in thin air could be a faithful reflection in theory of capitalist reality, a true deduction from Marx’s doctrine.(8)

Besides the analysis of enlarged reproduction roughed out in Capital, volume ii, the whole of Marx’s work, volume ii in particular, contains a most elaborate and lucid exposition of his general views regarding the typical course of capitalist accumulation. If we once fully understand this interpretation, the deficiencies of the diagram at the end of volume ii are immediately evident.

If we examine critically the diagram of enlarged reproduction in the light of Marx’s theory, we find various contradictions between the two.

To begin with, the diagram completely disregards the increasing productivity of labour. For it assumes that the composition of capital is the same in every year, that is to say, the technical basis of the productive process is not affected by accumulation. This procedure would be quite permissible in itself in order to simplify the analysis, but when we come to examine the concrete conditions for the realisation of the aggregate product, and for reproduction, then at least we must take into account, and make allowance for, changes in technique which are bound up with the process of capital accumulation. Yet if we allow for improved productivity of labour, the material aggregate of the social product – both producer and consumer goods – will in consequence show a much more rapid increase in volume than is set forth in the diagram. This increase in the aggregate of use-values, moreover, indicates also a change in the value relationships. As Marx argues so convincingly, basing his whole theory on this axiom, the progressive development of labour productivity reacts on both the composition of accumulating capital and the rate of surplus value so that they cannot remain constant under conditions of increasing accumulation of capital, as was assumed by the diagram. Rather, if accumulation continues, c, the constant capital of both departments, must increase not only absolutely but also relatively to v+c or the total new value (the social aspect of labour productivity); at the same times constant capital and similarly the surplus value must increase relatively to the variable capital – in short, the rate of surplus value, i.e. the ratio between surplus value and variable capital, must similarly increase (the capitalist aspect of labour productivity). These changes need not, of course, occur annually, just as the terms of first, second and third year in Marx’s diagram do not necessarily refer to calendar years but may stand for any given period. Finally, we may choose to assume that these alterations, both in the composition of capital and in the rate of surplus value, take place either in the first, third, fifth, seventh year, etc., or in the second, sixth and ninth year, etc. The important thing is only that they are allowed for somewhere and taken into account as periodical phenomena. If the diagram is amended accordingly, the result of this method of accumulation will be an increasing annual surplus in the consumer at the expense of producer goods. It is true that Tugan Baranovski conquers all difficulties on paper: he simply constructs a diagram with different proportions where year by year the variable capital decreases by 25 per cent. And since this arithmetical exercise is successful enough on paper, Tugan triumphantly claims to have ‘proved’ that accumulation runs smoothly like clockwork, even if the absolute volume of consumption decreases. Even he must admit in the end, however, that his assumption of such an absolute decrease of the variable capital is in striking contrast to reality. Variable capital is in point of fact a growing quantity in all capitalist countries; only in relation to the even more rapid growth of constant capital can it be said to decrease. On the basis of what is actually happening, namely a greater yearly increase of constant capital as against that of variable capital, as well as a growing rate of surplus value, discrepancies must arise between the material composition of the social product and the composition of capital in terms of value. If, instead of the unchanging proportion of 5 to 1 between constant and variable capital, proposed by Marx’s diagram, we assume for instance that this increase of capital is accompanied by a progressive readjustment of its composition, the proportion between constant and variable in the second year being 6 to 1, in the third year 7 to 1, and in the fourth year 8 to 1 – if we further assume that the rate of surplus value also increases progressively in accordance with the higher productivity of labour so that, in each case, we have the same amounts as those of the diagram, although, because of the relatively decreasing variable capital, the rate of surplus value does not remain constant at the original 100 per cent – and if finally we assume that one-half of the appropriated surplus value is capitalised in each case (excepting Department II where capitalisation exceeds 50 per cent, 184 out of 285 being capitalised during the first year), the result will be as follows:

table data

If this were a true picture of the accumulative process, the means of production (constant capital) would show a deficit of 16 in the second year, of 45 in the third year and of 88 in the fourth year; similarly, the means of subsistence would show a surplus of 16 in the second year, of 45 in the third year and of 88 in the fourth year.

This negative balance for the means of production may be only imaginary in part. The increasing productivity of labour ensures that the means of production grow faster in bulk than in value, in other words: means of production become cheaper. As it is use value, i.e. the material elements of capital, which is relevant for technical improvements of production, we may assume that the quantity of means of production, in spite of their lower value, will suffice for progressive accumulation up to a certain point. This phenomenon amongst others also checks the actual decline of the rate of profit and modifies it to a mere tendency, though our example shows that the decline of the profit rate would not only be retarded but rather completely arrested. On the other hand, the same fact indicates a much larger surplus of unsaleable means of subsistence than is suggested by the amount of this surplus in terms of value. In that case, we should have to compel the capitalists of Department II to consume this surplus themselves, which Marx makes them do on other occasions; in which case, and in so far as those capitalists are concerned, there would again be no accumulation but rather simple reproduction. Alternatively, we should have to pronounce this whole surplus unsaleable.

Yet would it not be very easy to make good this loss in means of production which results from our example? We need only assume that the capitalists of Department I capitalise their surplus value to a greater extent. Indeed, there is no valid reason to suppose, as Marx did, that the capitalists in each case add only half their surplus value to their capital. Advances in labour productivity may well lead to progressively increasing capitalisation of surplus value. This assumption is the more permissible in that the cheapening of consumer goods for the capitalist class, too, is one of the consequences of technological progress. The relative decrease in the value of consumable income (as compared with the capitalised part) may then permit of the same or even a higher standard of living for this class. We might for instance make goad the deficit in producer goods by transferring a corresponding part of surplus value I to the constant capital of this department, a part which would otherwise be consumed, since this surplus value, like all other products of the department, originally takes the form of producer goods; 114/7 would then be transferred in the second year, 34 in the third year and 66 in the fourth year.(9) The solution of one difficulty, however, only adds to another. It goes without saying that if the capitalists of Department I relatively restrict their consumption for purposes of accumulation, there will be a proportionately greater unsaleable residue of consumer goods in Department II; and thus it becomes more and more impossible to enlarge the constant capital even on its previous technological basis. If the capitalists in Department I relatively restrict their consumption, the capitalists of Department II must relatively expand their personal consumption in proportion. The assumption of accelerated accumulation in Department I would then have to be supplemented by that of retarded accumulation in Department II, technical progress in one department by regression in the other.

These results are not due to mere chance. The adjustments we have tried out on Marx’s diagram are merely meant to illustrate that technical progress, as he himself admits, must be accompanied by a relative growth of constant as against variable capital. Hence the necessity for a continuous revision of the ratio in which capitalised surplus value should be allotted to c and v respectively. In Marx’s diagram, however, the capitalists are in no position to make these allocations at will, since the material form of their surplus value predetermines the forms of capitalisation. Since, according to Marx’s assumption, all expansion of production proceeds exclusively by means of its own, capitalistically produced means of production and subsistence, – since there are here no other places and forms of production and equally no other consumers than the two departments with their capitalists and workers, – and since, on the other hand, the smooth working of the accumulative process depends on that circulation should wholly absorb the aggregate product of both departments, the technological shape of enlarged reproduction is in consequence strictly prescribed by the material form of the surplus product. In other words: according to Marx’s diagram, the technical organisation of expanded production can and must be such as to make use of the aggregate surplus value produced in Departments I and II. In this connection we must bear in mind also that both departments can obtain their respective elements of production only by means of mutual exchange. Thus the allocation to constant or variable capital of the surplus value earmarked for capitalisation, as well as the allotment of the additional means of production and subsistence (for the workers) to Departments I and II is given in advance and determined by the relations between the two departments of the diagram – both in material and in terms of value. These relations themselves, however, reflect a quite determinate technical organisation of production. This implies that, on the assumptions of Marx’s diagram, the techniques of production given in each case predetermine the techniques of the subsequent periods of enlarged reproduction, if accumulation continues. Assuming, that is to say, in accordance with Marx’s diagram, that the expansion of capitalist production is always performed by means of the surplus value originally produced in form of capital, and further – or rather, conversely – that accumulation in one department is strictly dependent on accumulation in the other, then no change in the technical organisation of production can be possible in so far as the relation of c to v is concerned.

We may put our point in yet another way: it is clear that a quicker growth of constant as compared with variable capital, i.e. the progressive metamorphosis of the organic composition of capital, must take the material form of faster expansion of production in Department I as against production in Department II. Yet Marx’s diagram, where strict conformity of the two departments is axiomatic, precludes any such fluctuations in the rate of accumulation in either department. It is quite legitimate to suppose that under the technical conditions of progressive accumulation, society would invest ever increasing portions of the surplus value earmarked for accumulation in Department I rather than in Department II. Both departments being only branches of the same social production – supplementary enterprises, if you like, of the ‘aggregate capitalist’ – such a progressive transfer, for technical reasons, from one department to the other of a part of the accumulated surplus value would be wholly feasible, especially as it corresponds to the actual practice of capital. Yet this assumption is possible only so long as we envisage the surplus value earmarked for capitalisation purely in terms of value. The diagram, however, implies that this part of the surplus value appears in a definite material form which prescribes its capitalisation. Thus the surplus value of Department II exists as means of subsistence, and since it is as such to be only realised by Department I, this intended, transfer of part of the capitalised surplus value from Department II to Department I is ruled out, first because the material form of this surplus value is obviously useless to Department I, and secondly because of the relations of exchange between the two departments which would in turn necessitate an equivalent transfer of the products of Department I into Department II. It is therefore downright impossible to achieve a faster expansion of Department I as against Department II within the limits of Marx’s diagram.

However we may regard the technological alterations of the mode of production in the course of accumulation, they cannot be accomplished without upsetting the fundamental relations of Marx’s diagram.

And further: according to Marx’s diagram, the capitalised surplus value is in each case immediately and completely absorbed by the productive process of the following period, for, apart from the portion earmarked for consumption, it has a natural form which allows of only one particular kind of employment. The diagram precludes the cashing and hoarding of surplus value in monetary form, as capital waiting to be invested. The free monetary forms of private capital, in Marx’s view, are first the money deposited gradually against the wear and tear of the fixed capital, for its eventual renewal; and secondly those amounts of money which represent realised surplus value but are still too small for investment. From the point of view of the aggregate capital, both these sources of free money capital are negligible. For if we assume that even a portion of the social surplus value is realised in monetary form for purposes of future investment, then at once the question arises: who has bought the material items of this surplus value, and who has provided the money? If the answer is: other capitalists, of course, – then, seeing that the capitalist class is represented in the diagram by the two departments, this portion of the surplus value must also be regarded as invested de facto, as employed in the productive process. And so we are back at immediate and complete investment of the surplus value.

Or does the freezing of one part of the surplus value in monetary form in the hands of certain capitalists mean that other capitalists will be left with a corresponding part of that surplus product in its material form? does the hoarding of realised surplus value by some imply that others are no longer able to realise their surplus value, since the capitalists are the only buyers of surplus value? This would mean, however, that the smooth course of reproduction and similarly of accumulation as described in the diagram would be interrupted. The result would be a crisis, due not to over-production but to a mere intention to accumulate, the kind of crisis envisaged by Sismondi.

In one passage of his Theories,(10) Marx explains in so many words that he ‘is not at all concerned in this connection with an accumulation of capital greater than can be used in the productive process and might lie idle in the banks in monetary form, with the consequence of lending abroad’. Marx refers these phenomena to the section on competition. Yet it is important to establish that his diagram veritably precludes the formation of such additional capital. Competition, however wide we may make the concept, obviously cannot create values, nor can it create capitals which are not themselves the result of the reproductive process.

The diagram thus precludes the expansion of production by leaps and bounds. It only allows of a gradual expansion which keeps strictly in step with the formation of the surplus value and is based upon the identity between realisation and capitalisation of the surplus value.

For the same reason, the diagram presumes an accumulation which affects both departments equally and therefore all branches of capitalist production. It precludes expansion of the demand by leaps and bounds just as much as it prevents a one sided or precocious development of individual branches of capitalist production.

Thus the diagram assumes a movement of the aggregate capital which flies in the face of the actual course of capitalist development. At first sight, two facts are typical for the history of the capitalist mode of production: on the one hand the periodical expansion of the whole field of production by leaps and bounds, and on the other an extremely unequal development of the different branches of production. The history of the English cotton industry from the first quarter of the eighteenth to the seventies of the nineteenth century, the most characteristic chapter in the history of the capitalist mode of production appears quite inexplicable from the point of view of Marx’s diagram.

Finally, the diagram contradicts the conception of the capitalist total process and its course as laid down by Marx in Capital, volume iii. This conception is based on the inherent contradiction between the unlimited expansive capacity of the productive forces and the limited expansive capacity of social consumption under conditions of capitalist distribution. Let us see how Marx describes this contradiction in detail in chapter 15 on Unravelling the Internal Contradictions of the Law (of the declining profit rate):

‘The creation of surplus-value, assuming the necessary means of production, or sufficient accumulation of capital, to be existing, finds no other limit but the labouring population, when the rate of surplus-value, that is, the intensity of exploitation, is given; and no other limit but the intensity of exploitation, when the labouring population is given. And the capitalist process of production consists essentially of the production of surplus-value, materialised in the surplus-product, which is that aliquot portion of the produced commodities, in which unpaid labour is materialised. It must never be forgotten, that the production of this surplus-value – and the re-conversion of a portion of it into capital, or accumulation, forms an indispensable part of this production of surplus-value – is the immediate purpose and the compelling motive of capitalist production. It will not do to represent capitalist production as something which it is not, that is to say, as a production having for its immediate purpose the consumption of goods, or the production of means of enjoyment for the capitalists. (And, of course, even less for the worker. – R.L.) This would be overlooking the specific character of capitalist production, which reveals itself in its innermost essence. The creation of this surplus-value is the object of the direct process of production, and this process has no other limits than those mentioned above. As soon as the available quantity of surplus-value has been materialised in commodities, surplus value has been produced. But this production of surplus-value is but the first act of the capitalist process of production, it merely terminates the act of direct production. Capital has absorbed so much unpaid labour. With the development of the process, which expresses itself through a falling tendency of the rate of profit, the mass of surplus-value thus produced is swelled to immense dimensions. Now comes the second act of the process. The entire mass of commodities, the total product, which contains a portion which is to reproduce the constant and variable capital as well as a portion representing surplus-value, must be sold. If this is not done, or only partly accomplished, or only at prices which are below the prices of production, the labourer has been none the less exploited, but his exploitation does not realise as much for the capitalist. It may yield no surplus-value at all for him, or only realise a portion of the produced surplus-value, or it may even mean a partial or complete loss of his capital. The conditions of direct exploitation and those of the realisation of surplus-value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relations of the various lines of production and by the consuming power of society. This last-named power is not determined either by the absolute productive power or by the absolute consuming power, but by the consuming power based on antagonistic conditions of distribution, which reduces the consumption of the great mass of the population to a variable minimum within more or less narrow limits. The consuming power is furthermore restricted by the tendency to accumulate, the greed for an expansion of capital and a production of surplus value on an enlarged scale. This is a law of capitalist production imposed by incessant revolutions in the methods of production themselves, the resulting depreciation of existing capital, the general competitive struggle and the necessity of improving the product and expanding the scale of production, for the sake of self-preservation and on penalty of failure. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law independent of the producers and become ever more uncontrollable. This eternal contradiction seeks to balance itself by an expansion of the outlying fields of production. But to the extent that the productive power develops, it finds itself at variance with the narrow basis on which the conditions of consumption rest. On this self-contradictory basis it is no contradiction at all that there should be an excess of capital simultaneously with an excess of population. For while a combination of these two would indeed increase the mass of the produced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplus-value is produced and those under which it is realised.’(11)

If we compare this description with the diagram of enlarged reproduction, the two are by no means in conformity. According to the diagram, there is no inherent contradiction between the production of the surplus value and its realisation, rather, the two are identical. The surplus value here from the very beginning comes into being in a natural form exclusively designed for the requirements of accumulation. In fact it leaves the place of production in the very form of additional capital, that is to say it is capable of realisation in the capitalist process of accumulation. The capitalists, as a class, see to it in advance that the surplus value they appropriate is produced entirely in that material form which will permit and ensure its employment for purposes of further accumulation. Realisation and accumulation of the surplus value here are both aspects of the same process, they are logically identical. Therefore according to the presentation of the reproductive process in the diagram, society’s capacity to consume does not put a limit to production. Here production automatically expands year by year, although the capacity of society for consumption has not gone beyond its ‘antagonistic conditions of distribution’. This automatic continuation of expansion, of accumulation, truly is the ‘law of capitalist production ... on penalty of failure’. Yet according to the analysis in volume iii, ‘the market must, therefore, be continually extended’, ‘the market’ obviously transcending the consumption of capitalists and workers. And if Tugan Baranovski interprets the following passage ‘this eternal contradiction seeks to balance itself by an expansion of the outlying fields of production’ as if Marx had meant production itself by ‘outlying fields of production’, he violates not only the spirit of the language but also Marx’s clear train of thought. The ‘outlying fields of production’ are clearly and unequivocally not production itself but consumption which ‘must be continually extended’. The following passage in Theorien über den Mehrwert, amongst others, sufficiently shows that Marx had this in mind and nothing else:

‘Ricardo therefore consistently denies the necessity for an expansion of the market to accompany the expansion of production and the growth of capital. The entire capital existing within a country can also be profitably used in that country. He therefore argues against Adam Smith who had set up his (Ricardo’s) opinion on the one hand but also contradicted it with his usual sure instinct.’(12)

In yet another passage, Marx clearly shows that Tugan Baranovski’s notion of production for production’s sake is wholly alien to him:

‘Besides, we have seen in volume ii part iii that a continuous circulation takes place between constant capital and constant capital (even without considering any accelerated accumulation), which is in so far independent of individual consumption, as it never enters into such consumption, but which is nevertheless definitely limited by it because the production of constant capital never takes place for its own sake, but solely because more of this capital is needed in those spheres of production whose products pass into individual consumption.’(13)

Admittedly, in the diagram in volume ii, Tugan Baranovski’s sole support, market and production coincide – they are one and the same. Expansion of the market here means extended production, since production is said to be its own exclusive market – the consumption of the workers being an element of production, i.e. the reproduction of variable capital. Therefore the limit for both the expansion of production and the extension of the market is one and the same: it is given by the volume of the social capital, or the stage of accumulation already attained. The greater the quantity of surplus value that has been extracted in the natural form of capital, the more can be accumulated; and the greater the volume of accumulation, the more surplus value can be invested in its material form of capital, i.e. the more can be realised. Thus the diagram does not admit the contradiction outlined in the analysis of volume iii. In the process described by the diagram there is no need for a continual extension of the market beyond the consumption of capitalists and workers, nor is the limited social capacity for consumption an obstacle to the smooth course of production and its unlimited capacity for expansion. The diagram does indeed permit of crises but only because of a lack of proportion within production, because of a defective social control over the productive process. It precludes, however, the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market.

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(1) Capital, vol.i, pp.593-4.

(2) Ibid., p.594, note 1.

(3) Op. cit., vol.ii, p.384.

(4) Ibid., pp.400-1.

(5) Ibid., p.488.

(6) Op. cit., vol.iii, p.568.

(7) Theorien ..., vol.ii, part 2, The Accumulation of Capital and Crises, p.263.

(8) ‘It is never the original thinkers who draw the absurd conclusions. They leave that to the Says and MacCullochs’ (Capital, vol.ii, p.451). – And – we might add – to the Tugan Baranovskis.

(9) The figures result from the difference between the amounts of constant capital in Department I under conditions of technical progress, and under Marx’s stable conditions.

(10) Theorien über den Mehrwert, vol.ii, part 2, p.252.

(11) Capital, vol.iii, pp.285ff.

(12) Theorien ..., vol.ii, part 2, p.305.

(13) Capital, vol.iii, p.395.

Last updated on: 11.12.2008