Rise of the working class

6. Reform or revolution

Ted Tripp


Source: Labor College lecture
First published: Labor College Review, November 1986
Transcription, mark-up: Steve Painter


After the Paris Commune of 1871 capitalism entered a flourishing period, reaching the height of prosperity in the 1890s. The capitalist states of Europe received new vigour through expansion to non-capitalist countries throughout the world. Huge industrial combines and bank concentrations ushered in this new imperialist age of capitalism.

For the Marxists, this prosperity was viewed as a temporary phase. The rivalry between the great powers in the struggle for markets and redivision of the world would inevitably lead to clashes between the combines and eventually to war that would be worldwide.

However, the situation was materially ripe for the strengthening of the beliefs in reforms. The easy manner in which the capitalists conceded to demands put forward by the workers rather than restrict their profits through industrial strife and the fact that no crisis or war occurred for more than twenty years gave rise to the view that capitalism had changed and that it would no long suffer crisis as predicted by Marx. As a consequence, the opinion spread that all necessary concessions could be obtained by means of parliamentary action instead of resort to revolution.

A second international was formed in 1889, different to the first, in that its sections remained autonomous and … its ideology, in keeping with the times, was reformist. It remained for Eduard Bernstein in his Problems of Socialism, written in 1898, to supply a theoretical basis to reformism, and the two schools of thought in the labour movement became established and remain to this day.

In his work, Bernstein attacked Marxism as a whole. He claimed that the idea of inevitable collapse of capitalism had been refuted by experience. Capitalism had proved that it could adapt itself to any situation. The anarchic nature of production was being overcome by the credit system, industrial cartels and trusts. Further, the trade union organisations were subjecting the system more and more to its demands. By their action in forcing up wages, unions were lowering the rate of profit, which would eventually mean that no surplus value would remain.

Within the Marxist school, Rosa Luxemburg, one of the most brilliant exponents of Marxism, realised that the existence of Marxist thought necessitated a reply to Berstein’s criticism, for, she maintained if the inherent contradictions of capitalism were not intensifying and capitalism was, according to Bernstein “progressively adapting itself to its own conditions of existence”, socialism ceased to be necessary. Further, it could no longer be supported by scientific argument and must resort to what it was before Marx developed his ideas: utopian.

Reform or revolution

Rosa Luxemburg’s reply, Reform or Revolution, was published in 1899. In it, Luxemburg gave full recognition to the workers’ fight for reforms but insisted that this could not result in the end of capitalism and the final victory for the workers.

Turning to the question of credit, raised by Bernstein as a means of capitalist adaptation, she conceded that, viewed in the light of Bernstein, credit might assist the individual capitalist but the general effect of the credit system for capitalism as a whole was different. Capitalist economic crisis developed from the contradictions between production’s permanent tendency to grow and the limited consumption capacity of the capitalist market.

However, at the first sign of crisis, credit immediately took fright and proved itself ineffective and useless when it was most needed, as credit had the effect of still further extending production, and was therefore a factor ceaselessly urging production beyond the limits of the capitalist market.

Credit, therefore, helped on the crisis and proved itself ineffective and useless when it was most needed. In times of difficulty, it called in its commitments, and thus intensified the crisis.

Far from assisting in the adaptation of capitalism, it intensified the system’ internal contradiction by increasing the concentration of capital in the form of joint stock companies and commercial credit, weakening the vitality of the smaller undertakings in the competitive struggle, thus helping to destroy them and merely stressing still further the contradiction between the social character of production and the capitalist nature of private property.

“The first step of capitalism to adapt itself to its conditions of existence ought to be the abolition of credit, therefore. As credit exists today in the capitalist system it is not a means of adaptation, but a means of destruction, and its effect is highly revolutionary.”

Cartels and trusts

Rosa Luxemburg admitted that cartels and trusts had been insufficiently examined, as it was only towards the end of the 19th century that they began to make their triumphant way in industry. However, one thing was already quite clear — namely that if they were to bring about any diminution of capitalist anarchy they would have to become the general capitalist productive form.

As it was, their function consisted in forcing up the rate of profit in one branch of industry at the expense of others by limiting competition, and even in this they were successful only on the domestic market, whereas on the world market competition and anarchy was intensifying.

In addition, cartels and trusts brought about an increase in the rate of their profits only by a desperate expedient: letting a part of the accumulated capital lie fallow, a phenomenon usually restricted to times of economic crisis. “Such a cure closely resembles the disease,” says Rosa Luxemburg. In a later work: Accumulation of Capital, Luxemburg returns to this theme, stating:

If the capitalist market begins to shrink as the result of the utmost development and exhaustion of the world market by the competing capitalist countries (and it obviously cannot be denied that such a situation must arise sooner or later), then the artificial and partial withdrawal of capital from use must naturally take on such an extent that the cure develops into the disease itself, and the capital already highly socialised in this fashion reverts to a private capitalist character. The cartels and trusts intensify the contradiction between the international character of the capitalist economic system and the national character of the capitalist state because they are accompanied by general tariff wars, which necessarily intensifies the antagonisms existing between individual capitalist states.

Answering Bernstein’s refutation of the Marxism theory of crisis Rosa maintained that the economic crisis up to 1873 were the effects of sudden extensions of production and of the world market and were not the type of economic crisis Marx had in mind in his work Capital. Of such importance is this subject that it is necessary to quote extensively from her work, Reform or Revolution.

As a whole, this formula fits rather to a fully developed capitalist economic system in which the world market is presupposed as something already existing. Only under such circumstances can crisis develop recurrently as a result of the inner movement of the process of production and distribution in the mechanical fashion laid down by Marx, and without the necessity of any outward cause such as a sudden upheaval in productive and market relations. When we examine the economic situation as it exists today, we are compelled to admit that we are not yet in that phase of full capitalist maturity which is postulated in the Marxist theory of periodically recurring crisis. The world market is still being developed … although, therefore we have on the one hand the sudden and rapid opening up of new areas to the capitalist economic system, such as took place periodically up to the seventies and resulted in the previously experienced crisis (crisis of growth, so to speak), we have not yet reached that stage of development and exhaustion of the world market which would automatically produce periodical and inevitable collisions between the productive forces and the limits of the capitalist market ie crisis no longer of growth but of decline.

However, it follows logically from the same conditions which caused a temporary absence (1873-1900) of the crisis that we are now steadily and inevitably approaching the beginning of the end for capitalism, the beginning of the period of capitalism’s final crisis. When once the world market is more or less fully developed and can no longer be suddenly extended and enlarged, and assuming that the productivity of labour power continues to increase, then sooner or later the periodic collisions between productive forces and market barriers must set in, and they will then become more and more violent by virtue of their ceaseless repetition. Now if there is one factor above all others which is calculated to bring us into this phase more rapidly, to develop the world market more quickly, and to exhaust it equally quickly, then it is precisely the phenomenon to which Bernstein looks to bring about an “adaption” of capitalism — namely the credit system and the cartels and trusts.

These words were written in 1899. A year later, a crisis broke out whose effects were particularly severe in precisely those industries in which the credit system and the cartels were most highly developed. But it was thirty years before the first of those terrible “crises of decline” occurred, leading to the break-up of the world market, national tariff warfare and efforts toward economic self-sufficiency and the feverish armament race for a further redistribution of world markets. Certainly, a brilliant prophecy by Rosa Luxemburg had been justified by events.

The trade unions

Finally, on the trade unions, which Berstein considered would be the force to end capitalism, Rosa Luxemburg pointed out that the trade unions were essentially defensive organisations of the working class against capitalist exploitation, and not weapons of attack. They were instruments for giving free vent to the capitalist law of wages — that is the sale of labour power at its prevailing market price ” rather than instruments for doing away with that law. She warned that the workers should not be deceived by the temporary successes of 1899:

If long stretches of social development are reviewed, it becomes impossible to close our eyes to the fact that on the whole we are approaching times of increasing difficulty for the trade union movement rather than times of triumph. When the development of industry has reached its culminating point the period of decline will set in, and then the trade union struggle will become doubly difficult: first of all, the objective market conditions for the sale of labour power will deteriorate as a result of the fact that demand will slow down whilst supply will increase more rapidly than is the case at the moment, and secondly, in an effort to recoup itself in part at least for its losses on the world market, capital will encroach more and more ruthlessly on that part of the product which should fall to the share of labour power, because, after all, the reduction of wages is one of the most important ways of retarding a fall in the rate of profit.

Rosa Luxemburg had brilliantly upheld the Marxist school against that of the reformist Bernstein. Undoubtedly, events had proceeded as predicted in her Marxists analysis. In 1914 a further justification of Marxist reasoning was upheld in the commencement of World War I. But, as already stated, reformism was here to stay, and develop powerful organisations as a result.

The 1914 event brought a crisis in the ranks of European socialists. A few days before hostilities began, the French and German socialists (as in the days prior to the Franco-Prussian war of 1870) pledged each other to avert war by displaying solidarity against their respective governments, but no sooner was war declared than the socialists of both countries voted to support the war credits. And, more surprising, those considered leading Marxists, Georgi Plekhanov in Russia and Jules Guesde in France supported the war. Socialist organisations that condemned the war as an imperialist conflict met in Switzerland at Zimmerwald in 1915 and Keinthal in 1916. These conferences were attended by Lenin and members of the Bolshevik party of Russia.