Reform or Revolution, 1. Paul Mattick

Capitalism and Socialism

Whereas Marx’s analysis of the social contradictions inherent in capitalism refers to the general trend of capitalistic development, the actual class struggle is a day-to-day affair and necessarily adjusts itself to changing social conditions. These adjustments are bound to find a reflection in Marxian theory. The history of capitalism is thus also the history of Marxism. Although interrupted by periods of crisis and depression, capitalism was able to maintain itself until now by the continuous expansion of capital and its extension into space through an accelerating increase of the productivity of labor. It proved possible not only to regain a temporarily lost profitability but to increase it sufficiently to continue the accumulation process as well as to improve the living standards of the great bulk of the laboring population. The economic class struggle within rising capitalism, far from endangering the latter, provided an additional capitalist incentive for hastening the expansion of capital through the application of technological innovations and the increase of labor efficiency by organizational means. While the organized labor movement grew and the conditions of the working class improved, this fact itself strengthened the capitalist adversary and weakened the oppositional inclinations of the proletariat. But without revolutionary working class actions, Marxism remains just the theoretical comprehension of capitalism. It is thus not the theory of an actual social practice, able to change the world, but functions as an ideology in anticipation of such a practice. Its interpretation of reality, however correct, does not affect this reality to any important extent. It merely describes the conditions in which the proletariat finds itself, leaving their change to the indeterminate future. The very conditions in which the proletariat finds itself in an ascending capitalism subject it to the rule of capital and to an impotent, merely ideological opposition at best.

The successful expansion of capital and the amelioration of the conditions of the workers led to a spreading doubt regarding the validity of Marx’s abstract theory of capital development. Apart from recurring crisis situations, empirical reality seemed in fact to contradict Marx’s expectations. Even where his theory was upheld, it was no longer associated with a practice ideologically aimed at the overthrow of capitalism. Marxism turned into an evolutionary theory, expressing the wish to transcend the capitalist system by way of constant reforms favoring the working class. Marxian revisionism, in both covert and overt form, led to a kind of synthesis of Marxism and bourgeois ideology, as the theoretical corollary to the increasing practical integration of the labor movement into capitalist society.

As an organized mass movement within ascending capitalism, socialism could be “successful” only as a reformist movement. By adapting itself politically to the framework of bourgeois democracy and economically to that of the labor market, the socialist movement challenged neither the basic social production relations nor the political structures evolved by these relations. As regards its significance, furthermore, Marxism has been more of a regional than an international movement, as may be surmised from its precarious hold in the Anglo-Saxon countries. It was above all a movement of a continental Europe, even though it developed its theory by reflection on capitalistically more advanced England. While in the latter country capitalism was already the dominant mode of production, the bourgeoisie of continental Europe was still struggling to free itself from the remaining shackles of the feudal regime and to create national entities within which capitalist production could progress. The economic and political turmoil accompanying the formation of the various European national states involved the proletariat along with the bourgeoisie and created a political consciousness oriented toward social change. While opposing the entrenched reactionary forces of the past, the rising bourgeoisie also confronted the working class insofar as this class tried to reduce the degree of its exploitation. Despite this early confrontation, the working class was forced to support the aspirations of the bourgeoisie, if only to create the conditions for its own emancipation. From the very beginning of the working-class movement in continental Europe, therefore, there existed simultaneously the need to fight against capitalist exploitation and need to support the development of capitalism as well as the political institutions it created for itself. The common interest of the emerging classes – the bourgeoisie and the proletariat – in overcoming the vested interests of the past was already a form of integration that found its reflection in the strategy and tactics of the labor movement, that is, in its striving for political power within bourgeois democracy and the alleviation of economic conditions of the working class within the confines of political economy. As a political movement, however, Marxism could not dispense with its socialist goal, even though practically it could gain no more for the working class than any of the apolitical movements that arose in the established capitalist nations, such as England and the United States, which restricted themselves to the fight for higher wages and better working conditions without challenging the existing social relations of production.

It was thus historical peculiarities that determined the character of the socialist movements in continental Europe – that is, the partial identity of proletarian and bourgeois political aspirations within the rising capitalism. Marxian theory implied preparation for a socialist revolution within a general revolutionary process that could as yet only issue into the triumph of the bourgeoisie, the destruction of the semifeudal state, and the dominance of capital production. After these accomplishments, the road would be open for a struggle restricted to the labor-capital antagonism, which would first pose the question of a proletarian revolution.

The way to foster this general development was by partaking in the as yet incomplete bourgeois transformation and by pushing forward the capitalist forces of production, through economic demands that could be met only by an accelerated increase of the productivity of labor and the rapid accumulation of capital. In the Anglo-Saxon countries, however, the special issues that agitated the European labor movement no longer existed, or did not arise at all, as the capitalist mode of production and bourgeois rule constituted the uncontested social reality. Here the conditions that were goals for the European labor movement were already an established fact and reduced the struggle between labor and capital to the economic sphere. Class consciousness found its expression in pure trade unionism; the ongoing monopolization of capital was echoed by the attempted “monopolization” of labor, as one of the developed forms of general competition in expanding capitalism. This situation foreshadowed the continental labor movement’s further development and with it that of its Marxist, or socialist, wing. The more capitalism came into its own, the more the idea of revolutionary change fell by the wayside. The growing trade unions severed their early close relationship with the socialist parties, and the latter themselves concentrated their efforts on purely parliamentary activities to press for social legislation favorable to the working class, through the extension, not the abolition, of bourgeois democracy. For the time being, and the foreseeable future, as Eduard Bernstein, one of the leading “revisionists” of the German Social Democracy and the Second International, put it, “the movement was everything and the goal nothing."

However, organized ideologies do not abdicate easily, and this the less so as their proponents defend not only their convictions but also their positions within the organizations that are supposed to realize the ideological goals. The rather quick rise of the socialist movement allowed for an organizational structure increasingly attractive to intellectuals and capable of supporting a bureaucracy whose existence was bound up with the steady growth and permanence of the organization. The hierarchical structure of capitalist society repeated itself in that of the socialist organizations and trade unions as the differentiation between the commanding leadership and the obeying rank and file. And just as the workers accommodated themselves to the general conditions of capitalism, so they accepted the similar structure of the socialist movement as an unavoidable requirement for effective organizational activity.

Although in an entirely different sense from the way the phrase is usually understood, this found a rather apt expression in the interpretation of Social Democracy as “a state within the state.” As in the capitalist world at large, in the Social Democratic movement too there was a right wing, a center, and a left wing, although the struggle between these tendencies remained purely ideological. The actual practice of the movement was reformist, untouched by left-wing rhetoric and indirectly aided by it, as it provided a socialist label for opportunistic activities aimed no longer at the overthrow of capitalism but at organizational growth within the system. Supposedly, bourgeois democracy and capitalism itself would through their own dynamics prepare the social conditions for a qualitative change corresponding to a state of socialism. This comfortable idea was held by all the tendencies within the socialist movement, whether they still believed in revolutionary action to accomplish the transformation of capitalism into socialism, or assumed the possibility of a peaceful nationalization of the means of production through the winning, with a socialist majority, of control of the state.

In any case, the social transformation was cast into the far-away future and played no part in the everyday activity of the labor movement. Capitalism would have to run its course, not only in the already highly developed capitalist nations but even in those just in the process of evolving the capitalist relations of production. It remained true, of course, that devastating crises interrupted the steady capitalization of the world economy, but like the social miseries accompanying the early stages of capitalist production, its susceptibility to crises and depressions was now also adjudged a mark of its infancy, which would be lost as it matured. With the concentration and centralization of capital by way of competition, competition itself would be progressively eliminated and with it the anarchy of the capitalist market. Centralized control of the economy on a national and eventually an international scale would allow for conscious social regulation of both production and distribution and create the objective conditions for a planned economy no longer subject to regulation by the law of value.

This idea was forcefully expressed by Rudolf Hilferding, whose economic writings were widely regarded as a continuation of Marx’s Capital.(1) Leaning heavily on the work of Michael Tugan-Baranowsky, who deduced from the “equilibrium conditions” of Marx’s reproduction schemata (in the second volume of Capital) the theoretical feasibility of a limitless expansion of capital, (2) Hilferding saw this possibility still very much impaired by difficulties in the capitalist circulation process which hindered the full realization of surplus value. He perceived the capital concentration process in the course of accumulation as a merging of banking capital with industrial capital to create a form of capital best described as “financial capital.” It implied the progressive cartelization of capital, tending toward a single General Cartel that would gain complete control over the state and the economy. As the progressive elimination of competition meant an increasing disturbance of the objective price relations, this would mean, of course, that the price mechanism of classical theory would cease to be operative and that the law of value would therefore be unable to serve as the regulator of the capitalist economy.

We are here not interested in Hilferding’s rather confused theory of crisis as a problem of the realization of surplus value, due to disproportionalities between the different spheres of production and between production and consumption, because in his view these difficulties do not arrest the trend towards the complete cartelization of the capitalist economy (3) With the coming to pass of the General Cartel, prices would be consciously determined so as to assure the system’s viability. They would no longer express value relations but the consciously organized distribution of the social product in terms of products. Under such conditions, money as the universal and most general form of value could be eliminated. The continuing social antagonisms would no longer arise from the system of production, which would be completely socialized, but exclusively from that of distribution, which would retain its class character. In this fashion capitalism would be overcome through its own development; the anarchy of production and that type of capitalism analyzed by Marx in Capital would be ended. The expropriation of capital or, what is the same, the socialization of production, will thus be capitalism’s own accomplishment.

Of course, like Marx’s “logical” end result of the capitalist accumulation process, the concept of the General Cartel merely serves to illustrate the trend of concrete capitalistic development. But while in Marx’s model capitalism finds an inevitable end in decreasing profitability, Hilferding’s General Cartel points to an “economically conceivable” capitalist system able to maintain itself indefinitely through the control of the whole of social production. If capitalism tends toward collapse, this is not for economic reasons but must be seen as a political process, as dependent on the conscious resolve to extend the capitalistically achieved socialization of production into the sphere of distribution. Such a transformation is possible only through a sudden political change that transfers control of production from the hands of the cartelized private capital into those of the state. This transformation thus requires the socialist capture of political power within otherwise unchanged production relations

Such a development seems conceivable given the constant growth of socialist organization, striving for political power within bourgeois democracy and able to win the allegiance of always larger masses of the electorate, and finally leading to a socialist parlimentary majority and to the control of government. The socialist state would then institute socialism by decree, through the nationalization, or – what is thought to be the same – the socialization of the decisive branches of industry. This would suffice to extend the socialist type of production and distribution gradually to the whole society. Due to capitalism’s specific form as financial capital, Hilferding suggested that it would be enough to nationalize the larger banks to initiate the socialist transformation. With this, the economic dictatorship of capital would be turned into what Hilferding – in deference to Marx and Engels – called the “dictatorship of the proletariat.”

All this would of course depend on the persistence of the political institutions of bourgeois democracy and the labor movement’s fidelity to its socialist ideology. Would the bourgeoisie honor the parliamentary game if it found itself on the losing side? Would the character of the socialist movement remain the same despite its increasing influence and organizational power within the capitalist regime? Even apart from such unasked questions, it is unclear why, if there is no “economically conceivable” end to capitalism, there should arise a political opportunity for its abolition. An economically secure capitalism would guarantee its political security. Moreover, if capitalism socializes the production process on its own, this “socialization” includes the maintenance of the social production relations as class relations, to be carried over into the nationalized form of social production. Indeed, in Hilferding’s exposition, the change from private to governmental control does not affect the relation between wage labor and capital, except insofar as economic control is transferred from the bourgeoisie to the state apparatus. Thus socialism, in his view, means the completion of the centralization process inherent in competitive capital expansion, the transformation of private into “social” capital and its control by the state, and therewith the possibility for centrally planned production, which would be distinguished from organized capitalism mainly by allowing for a more equitable distribution.

The theoretical progress made in the socialist movement since its beginnings within the incomplete bourgeois revolution thus consisted in the assertion that, just as the socialist movement fostered capitalist development, fully developed capitalism and bourgeois democracy were now opening the way to socialism. If the workers, for historical reasons, and however reluctantly, aided the rise of democratic capitalism, this very same capitalism was now preparing with equal reluctance, but unavoidably, the conditions for a socialist transformation. The development of wage labor and capital was thus a reciprocative evolution, in which both workers and capitalists functioned as precursors of socialism through the accumulation of capital. All that was necessary in order to play an active part in this historical process was to increase general awareness of its happening so as to hasten its completion.

For Hilferding capitalism had already reached its highest stage of development. Notwithstanding the imperialist war and the revolutions in its wake, the prevailing “late capitalism” was for him an organized capitalism, no longer determined by “economic laws” but by political considerations. The capitalist principle of competition was making room for the socialist planning principle through state interventions in the economy. The class struggles over wages and working conditions changed into political struggles and the wage itself into a “political wage,” by way of the parliamentary accomplishments of the socialist parties in the field of social legislation, such as arbitration laws, collective bargaining, unemployment insurance, and so forth, which augmented the “economic wage” and freed it from its value determination. According to Hilferding, the state was not simply, as Marx had called it, the “executive committee of the ruling class,” but reflected, through the medium of political parties, the changing power relations between different classes – all of them sharing in state power. The workers’ class struggle turns into a fight for the determination of social policy and finally for the control of “bourgeois democracy,” or “formal democracy,” because democracy belongs to none but the working class, which first had made it a reality through its struggle against the bourgeoisie. Through democracy the workers will gain the government, the army, the police, and the judiciary, and thus realize their longing for a socialist society. (4)

In view of the actual course of events, Hilferding’s rationalization of the precapitalistic policies of the socialist parties seems to be of no interest at all. The “democratic road to socialism” led direct to the fascist dictatorships and to Hilferding’s own miserable end. However, his concept of socialism as a planned economy under governmental control, one that assumes the functions previously exercised by the centralized but private capital, characterizes almost all of the existing images of a socialist society.

As Marx stopped his analysis short of the expected overthrow the capitalist system and, aside from occasional very general remarks about the basic character of the new society, left the construction of socialism to the future, so Hilferding stopped short at capitalism’s “last stage,” without entering into a more detailed investigation of the problems of the transformation of “organized capitalism” into the socialist organization of society. His party colleague Karl Kautsky, however, as the most eminent of Marxists after Marx and Engels, felt obliged to offer some speculations about the possible postrevolutionary situation. (5) He too saw the “expropriation of the expropriators” in the completion of society’s democratization, to be accomplished by the working class. The immediate measures to be taken were for him those democratic goals the bourgeoisie itself had failed to bring about – that is, the unrestricted vote, a free press, separation of church and state, disarmament, the replacement of the army by a militia, and progressive taxation. Because class relations had existed for thousands of years and were still deeply ingrained in human consciousness, Kautsky felt that they would not be overcome all at once. Only equality in education would gradually do away with class prejudices. Most of all, however, unemployment would have to be abolished through a system of unemployment insurance that would raise the market value of labor power. Wages would rise and profits diminish or disappear altogether. There would be no need to chase the capitalists away from their leading position in industry, because under the changed conditions the bourgeoisie would most likely prefer to sell their property rights, recognizing that political power in the hands of the working class is incompatible with a capitalist mode of production.

A jest on the part of Marx – to the effect that perhaps the cheapest way to socialism would be the buying-out of the capitalists-Kautsky elevated into a political program. But who would buy the capitalist property? Part of it, Kautsky related, could be bought by the workers themselves, other parts by cooperatives, and the rest by governmental agencies on the local and national level. The big monopolies, however, could be expropriated outright as detrimental to all social classes, including the smaller capitalists. And because the monopolies constitute such a large part of the economy, their expropriation would enhance the otherwise more gradual transformation of private into public property. It would also allow for a conscious regulation of production and thus end its determination by value relations. Although labor-time calculation would continue to aid the formation of prices, it would no longer rule production and distribution. Money too would lose its commodity and capital character by being reduced to a mere means of circulation. The continued utilization of prices and money would imply, of course, the continuation of the wage system, even though wages would no longer reflect supply and demand in the labor market. There would also be wage differentials, in order to facilitate the allocation of the social labor, which would not, however, prevent a general rise of all wages. Of course, capital would have to be accumulated and compensation would have to be paid for the loss of the property rights of the capitalists. Taxes would have to be raised, for the various and enlarged state functions. For all these reasons, productivity would have to be increased beyond the level achieved in the old capitalism, so as to make a higher living standard possible.

Although preferring compensation for the loss of the capitalists’ property, Kautsky is not sure that this will actually be done, but leaves this issue for the future to decide. He realizes that with compensation, surplus value, once directly extracted by the capitalists, would still fall to them in terms of claims on the government. However, this extra expense would disappear with the accumulation of additional capital, thus ending the continued exploitation. Besides, Kautsky remarks slyly, if capitalist property were to exist only in the form of claims on the new public owners, this unearned income could easily be taxed away. Compensation would after all amount to confiscation, albeit in a less brutal form.

The watchword of socialism is, then: more work and higher productivity. In this respect, according to Kautsky, socialists could learn a lot from the production methods of the large U.S. corporations. What is more, these methods, as yet limited to the gigantic trusts, could be even more effective when extended to the whole of society. The socialist organization of production is thus well prepared by capitalism and need not be newly invented. The only requirement is to change the accidental and anarchic character of production into a consciously regulated production concerned with social needs.

Kautsky’s exceedingly tame vision of the state of the future, its relation to the socialist economy was still considered by right-wing socialists as unwarranted and even dangerous, a threat to the steady progress of the Social Democratic movement envisioned this progress in terms of a pure trade unionism of British and American type, and a pure parliamentarism, which would enable the party to enter into coalitions with bourgeois parties and, sooner or later, perhaps, into government positions. To that end, the Marxist ideology would have to be sacrificed in favor such evolutionary principles as those propounded by Eduard Bernstein. But Kautsky was the leading Marxist authority and quite unwilling to denounce the Marxist heritage. He was also impressed by the 1905 revolutionary upheavals in Russia and by the mass strikes that occurred around the same time in a number of European countries. A socialist revolution appeared to him, while not an immediate, nevertheless a future possibility. In this spirit, he wrote his most radical work, The Road to Power, against the pure reformism that actuated the socialist parties.(6)

Socialism and its presupposition, political power in the hands of the proletarian state, Kautsky wrote in this work, could not be reached by an imperceptible, gradual, and peaceful transformation of capitalism through social reforms, but only in the manner foreseen by Marx. State power must be conquered. On this point there existed an affinity between the ideas of Marx and Engels and those of Blanqui, with the sole difference that while the latter relied on the coup d’etat, executed by a minority, Marx and Engels looked to revolutionary actions by the broad masses of the working class – the only revolutionary force in modern capitalism – to lead to a proletarian state, that is, to the dictatorship of the proletariat.

Kautsky’s insistence upon the revolutionary content of the labor movement led to a division of the socialist party, in a general way, into an “orthodox” and a “revisionist” wing, whereby the first seemingly dominated ideologically while the other determined the actual practice. Of course, this division was not peculiar to German Social Democracy but, via the Second International, played a part in all socialist organizations. In addition, there were other movements opposing Marxist theory and practice, such as the anarcho-communists, the syndicalists, and the apolitical labor movements in the Anglo-Saxon countries. But it was the Marxist movement which the bourgeoisie recognized as the most important threat to its rule, for it had developed an effective counter-ideology able to subvert the capitalist system. In any case, the success of the apparently “Marxist” revolution in Russia in 1917, its repercussions in the Central European nations, and finally, the subsequent division of the world into capitalist and “socialist” countries, led to a situation wherein any kind of social upheaval in any part of the world received and still receives the label “Marxism."

At this point, however, we are still dealing with the prerevolutionary socialist movement, which found in Hilferding and Kautsky its most exemplary spokesmen. It was their interpretation of Marxism, in the light of changed social conditions, that dominated the socialist ideology. For both, socialism implied the capture of political power through the conquest of the state, either by an evolutionary or a revolutionary process. For both of them, too, capitalism had already prepared the ground for a socialist system of production. All that remained was to remove the value determination of capitalist production, its subjugation to the commodity fetishism of the competitive market, and to organize production and distribution in accordance with the ascertainable needs of society.

It is of course true that Marx and Engels acknowledged the obvious, namely, that the overthrow of capitalism demands the overthrow of its state. For them, the political aspect of the proletarian revolution exhausts itself in overwhelming the capitalist state apparatus with all the means required to this end. The victorious working class would neither institute a new state nor seize control of the existing state, but exercise its dictatorship so as to be able to realize its real goal, the appropriation of the means of production and their irrevocable transformation into social means of production in the most literal sense, that is, as under the control of the association of free and equal producers. Although assuming functions previously associated with those of the state, this dictatorship is not to become a new state, but a means to the elimination of all suppressive measures through the ending of class relations. There is no room for a “socialist state” in socialism, even though there is the need for a central direction of the socialized economy, which, however, is itself a part of the organization of associated producers and not an independent entity set against them.

Of course, for reasons not as yet discernible, this might be utopian, as thus would be a socialist society in the Marxian sense. It has to be tried in a revolutionary situation if a serious effort is to be made to reach the classless society. It may be forced the workers by objective conditions, quite aside from whether not they understand all its implications. But it may also fail, if proletariat abdicates its own dictatorship to a separately or new state machine that usurps control over society. It is not possible to foresee under what particular concrete social conditions the revolutionary process might unfold, and whether or the mere extension and intensification of dictatorial rule will degenerate into a new state assuming independent powers. Whatever the case may be, it is not through the state that socialism can realized, as this would exclude the self-determination of the class, which is the essence of socialism. State rule perpetuates the divorce of the workers from the means of production, on which their dependence and exploitation rests, and thus also perpetuates social class relations.

However, it was precisely the attempt to overcome the apparently utopian elements of Marxian doctrine which induced the theoreticians of the Second International to insist upon the state as the instrument for the realization of socialism. Although they were divided on the question of how to achieve control of the state, they were united in their conviction that the organization of the new society is the state’s responsibility. It was their sense of reality that made them question Marx’s abstract concepts of the revolution and the construction of socialism, bringing these ideas down to earth and in closer relation to the concretely given possibilities.

Indeed, the construction of a socialist system is no doubt a most formidable undertaking. Even to think about it is already of a bewildering complexity defying easy or convincing solutions. It certainly seems to be out of reach for the relatively uneducated working class. It would require the greatest expertise in the under standing and management of social phenomena and the most careful approach to all reorganizational problems, if it is not to end in dismal failure. It demands an overall view of social needs, as well as special qualifications for those attending to them, and thus institutions designed to assure the social reproduction process. Such institutions must have enough authority to withstand all irrational objections and thus must have the support of government which, by sanctioning these decisions, makes them its own. Most of all, the even flow of production must not be interfered with and all unnecessary experimentation must be avoided, so that it would be best to continue with proven methods of production and the production relations on which they were based.

In Marxian theory, a period of social revolution ensues when the existing social relations of production become a hindrance to the utilization and further development of the social forces of production. It is by a change of the social relations of production that the hampered social powers of production find their release. Their further expansion might, but need not, require a quantitative increase in the social powers of production. By ending the drive to “accumulate for the sake of accumulation” and with it the various restrictions due to this type of abstract wealth production, the available productive power of social labor is set free in a qualitatively different system of production geared to the rationally considered needs of society.

In capitalism the productive forces of social labor, which appear as the productive power of capital, limit their own expansion through the decrease of surplus value in the course of capital accumulation. The applications of science and technology merely hasten this process and become themselves barriers to the formation of capital. But without this formation, production must decline even with respect to the capitalistically determined social needs, first with respect to the enlarged reproduction of capital, and then also with regard to simple reproduction, which would mean the end of the capitalist system. Concretely, this process takes the form not only of recurrent periods of depressions and along-term trend of economic decline, but also of capitalism’s inability to avail itself even of the productive forces developed during its relentless drive for surplus value. Part of the existing productive forces are such only potentially, as they fail to increase the profitability of capital in sufficient measure, or at all, and for that reason are not employed. In economic terms, constant and variable capital remain idle because, if not used capitalistically, they cannot be used at all. Their full utilization would require a change in the relations of production which would disencumber social production of its dependence on the creation of surplus value.

Because the capitalistic increase of the social powers of production has the form of the accumulation of capital, science and serve this particular brand of social development and the latter as such. And because science and technology are limitless in every direction, they can change their direction through a change of the social structure, away from its need to accumulate capital, to the real production and consumption requirements of a society not only “socialized” in the limited sense that its development is determined by the interdependence of the separated commodity producers, but in a truly social sense, implying the prevention of special private or class interests from interfering in the consciously recognized needs of society as a whole. Science and technology would move in different directions than those required by society.

Moreover, although an expression of the rapid accumulation capital, its increasing monopolization implies the monopolization of science and technology and their subordination to the specific interests of the centralized capitals. This hinders the increase of productivity in the remaining competitive sectors of the economy and prevents the growth of the social forces of production in capitalistically underdeveloped nations, except insofar as this may suit the special interests of the centralized capitals in the dominating capitalist countries. Finally, the monopolization of the world market plays the bulk of the produced surplus value world-wide into the hands of a diminishing number of internationally operating capitals, at the price of the increasing pauperization of the world’s population. At the same time, the national form of capital production prevents its internationalization for an all-round expansion of the social forces of production, which would require consideration of the real needs of the world population within the framework of a socialized world economy. Unable to proceed in this direction, the increasing productive power of capital turns into a destructive power, which today threatens not only the setbacks of new and worldwide wars, but the destruction of the world itself. Under these conditions the capitalist system has ceased to be a vehicle for the growth of the social forces of production. It merely provides the stage for the change of social relations that is the precondition for the resumption of the civilizing process of social labor.

For the theoreticians of the Second International as well, socialism meant a change of the social relations of production, but they saw this change not in the abolition of wage labor but in the sudden or gradual transformation of private into social capital under the auspices of the state. It is true that they also spoke of the end of wage labor, but this implied no more than the negative act of the state’s expropriation of capital, which would, presumably, automatically change the social status of the laboring class. It did not enter their minds that the workers themselves would have to take possession of the means of production and that they themselves would have to determine the conditions of production, the allocation of social labor, the priorities of production, and the distribution of the social product, through the creation of organizational forms that could assure that decision-making powers would remain in the hands of the actual producers. In the statist conceptions of socialism it is not the working class itself that rearranges society. This is done for it, through substitution for it of a special social group, organized as the state, which imagines that by this token it removes the stigma of exploitation from wage labor.

On the whole, it is of course true that the socialist workers themselves shared this concept with their leaders and assumed that the act of socialization would be a function of government. This turned out to be an illusion, but an illusion that had been systematically indoctrinated into the working class. The indoctrination was successful because the procedure it predicted appeared logical in view of the centralizing tendencies of capitalist production and the democratic form of bourgeois politics. The great difference between capitalism and socialism was thus perceived as the mere elimination of the private property character of capital, or as the complete monopolization of capital under centralized government control, which would serve no longer the specific interests of the capitalist class but the whole of society. But to that end, the state would have to regulate production and thus the labor process, which, under these conditions, seemed feasible only through the maintenance of wage labor.

However, wage labor is only the other side of the capital-labor relation that characterizes capitalist society and determines its productive powers. The complete monopolization of capital does do away, at least ideally, with competitive market relations and does allow for a measure of conscious control of the economy, and thus impairs or ends the value-determination of social production. This may or may not increase the powers of social labor, but it leaves the capitalist relations of production intact. The socialization of production remains incomplete, as it does not affect the social relations of production. The removal of the fetishism of commodity production through its conscious control also removes the fetishistic character of wage labor but not wage labor itself. It continues to express the lack of social power on the part of the working class and its centralization into the hand of the controlling state. The capital-labor relation has been modified but not abolished; there has been a social revolution but not a working-class revolution.


1. Das Finanzkapital (1909); English translation, Finance Capital (London: Routledge and Kegan Paul, 1981).

2. Studien zur Theorie und Geschichte der Handelskrisen (1901); Theoretische Grundlagen des Marxismus (1905).

3. Actually, Hilferding has no crisis theory; he merely describes the differences in market conditions that distinguish periods of prosperity from those of depression. Insofar as he attempts an explanation, it is clearly self-contradictory. On the one hand, he maintains with Marx that the cause of crisis must be looked for in the sphere of production, in the recurring difficulty of producing the surplus value necessary for a further profitable expansion of capital; on the other hand, he speaks of a lack of coordination between the expanding capital and the growing consumption, which disturbs the supply and demand relations in terms of prices, thereby impairing the realization of the produced surplus value. Besides this particular disproportionality, Hilferding mentions a number of others, such as may arise between fixed and circulating capital; between technical and value relations of production; between the functions of money as a hoard and as medium of exchange; between unequal changes in the turnover of the different capital entities, and so forth

Although Hilferding refers to the law of the falling rate of profit in the course of the rising organic composition of capital and for that reason rejects the popular underconsumption theories, he asserts nevertheless that the differences in the organic composition of the diverse capitals display themselves in discrepancies arising between production and consumption in terms of price relations. He forgets that it is the general, or average, rate of profit that regulates the prices of production, regardless of differences in the organic compositions of the individual capitals, and that it is the accumulation process itself that allocates social labor in favor of a more rapid growth of the constant capital. However, searching for the cause of crisis in the circulation process, Hilferding speaks of a difference between market prices and the prices of production. He says, in other words, that some capitalists realize profits beyond that contained in the price of production, while others realize correspondingly less than the profit implied in the price of production, as determined by the organic composition of the total social capital This implies, of course, an impairment of the function of the average rate of profit as a result of the increasing monopolization of capital, which, however, does not alter the size of the total social profit, or surplus value, with respect to the accumulation requirements of the total social capital on which Marx’s crisis theory is based. Whereas in Marx’s theory the value relations regulate the price relations, in Hilferding’s interpretation the actual price relations disrupt the regulatory force of the value relations, because prices do not register the value requirements for the equilibrium conditions of the expanded reproduction of capital.

4. In a speech delivered at the Social-Democratic Party Congress in Kiel, 1927. Cf. Protokoll der Verhandlungen des sozialdemokratischen Parteitages 1927 in Kiel (Berlin: 1927), pp. 165-224.

5. Karl Kautsky, Am Tage nach der sozialen Revolution. (Die soziale Revolution, part II) (Berlin, 1902); English translation, “The Day after the Social Revolution,” in The Social Revolution (Chicago: Kerr, 1902).

6. Karl Kautsky, Der Weg zur Macht (1909): English translation, The Road to Power (Chicago: S. A. Bloch, 1909).