Main NI Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

The New International, December 1943

V.I. Lenin

Origin of Capitalism in Russia – III

An Old Essay by Lenin



From The New International, Vol. IX No. 11, December 1943, pp. 347–350.
Translated by F. Forest.
Transcribed & marked up by Einde O’Callaghan for ETOL.


[Continued from last issue]

VII. Theories of National Income

Having stated the fundamental postulates of the Marxist theory of realization, we must yet point briefly to its tremendous significance in the theory of “consumption,” “distribution,” and “income” of a nation. All these questions, especially the last, were until now the real stumbling block for economists. The more they wrote and spoke of it, the greater was the confusion emanating from the fundamental mistake of A. Smith. We will indicate several examples of this confusion here.

It is interesting to note, for example, that Proudhon essentially repeated this mistake, simply giving the old theory a somewhat different formulation. He stated:

A (under this are presumed all owners, employers and capitalists) begins an enterprise with 10,000 francs, paying the workers in advance, for which they must produce products. After A has thus transformed his money into commodities, he must, when he has completed production, for example, at the end of a year, again convert the commodities into money. To whom will he sell his commodities? Naturally, to the workers, since there are only two classes in society – on the one hand, the employers, on the other, the workers. These workers, having received 10,000 francs for their labor in the form of wages, which are sufficient to cover the necessities of their life, must now, however, pay more than 20,000 francs, that is, they must pay the percentage of return on capital investment and other profits which he anticipated making at the beginning of the year. This excess above 10,000 francs the worker can cover only by a loan and, as a consequence of this, he falls into greater debt and poverty. One of two things must happen: either the worker can subsist on nine units out of ten he has produced, or he must pay the employer only his wages and no more. In that case, however, the employer himself becomes bankrupt since he borrowed his capital at a rate of interest which he must pay back. (Diehl, Proudhon, II, 200, quoted in the Sbornik, Industry, Articles from Handwörterbuch der Staatswissenschaften, M. 1896, page 101)

As the reader sees, this is the same difficulty – how to realize surplus value – which bothers Messrs V.V. and N—on. Proudhon merely expressed this in a somewhat peculiar form. And the peculiarity of his formulation brings him even closer to our Narodniki. They, exactly like Proudhon, discern the “difficulty” in the realization of surplus value (interest or profit in the terminology of Proudhon), but fail to recognize that the confusing theory, borrowed by them from the old economists, hinders the explanation of realization not only of surplus value but also of constant capital. That is, their “difficulty” results in a failure to understand the whole process of realization of products in capitalist society. Concerning this “theory” of Proudhon, Marx remarked sarcastically:

Proudhon, incapable of grasping this, exposes his incapableness in the ridiculous formula: The laborer cannot buy back his own product, because the interest is contained in it, which is added to the purchase price. (Das Kapital, III, 2, 379. Russ. tr., page 698, with errors.) [20]

Marx quotes a remark against Proudhon by a vulgar economist, a certain Forcade, who “quite correctly generalizes the difficulty, which Proudhon expressed only under a more narrow point of view” [21], that is, Forcade stated that the price of commodities includes not only a surplus over wages and profit, but also a part which replaces constant capital. That means, concludes Forcade – in opposition to Proudhon – that the capitalist too cannot, with his profit, buy back his commodities. (Forcade himself not only failed to solve this problem but did not even understand it.)

In exactly the same manner, Rodbertus failed to contribute anything to the solution of this question. Asserting with particular emphasis that “ground rent, profit on capital, and wages comprise income” [1*], Rodbertus, however, did not in any way clarify for himself the concept of “income.” Describing what would be the problem of political economy if it followed the “correct method” (l.c., page 26), he thus deals with the distribution of the national product: “It (i.e., the genuine “science of national income” – emphasis by Rodbertus) “should have shown how, out of the whole national production, one part is always designated in advance as replacement for what was used in production or by capital, and the other part as national income – for the satisfaction of the direct needs of society and its members” (Ibid., page 27). But although a genuine science should have demonstrated this – nevertheless the “science” of Rodbertus did not make this demonstration at all.

The reader will see that Rodbertus merely repeats Adam Smith word for word, not even noticing, evidently, that the problem first arises here. Which workers “replace” the national capital? Which realize their product? Of this he had not a word to say. Summing up his theory (diese neue Theorie, die ich der bisheringen gegenüberstelle, S. 32) in the form of separate postulates, Rodbertus speaks from the very outset about the distribution of national income, thus: “Rent” (it is clear that under this term Rodbertus meant that which is called surplus value) and wages are therefore in essence shares which pertain to the product to the extent that it is income” (page 33). This very important slip of the tongue should have led him to the most essential question. Since he had previously stated that under income are understood objects serving “the satisfaction of direct needs,” it follows that there are products that are not used for personal consumption. How are they realized? But Rodbertus does not notice this lack of clarity; he quickly ignores this slip and passes on to a discussion of the “division of the product into three shares” (wages, profit and rent, pages 49–50ff.). Thus Rodbertus essentially repeated the dogma of A. Smith and together with it his basic error and hence explained nothing at all regarding income.

The promise of a new and better theory as to the division of the national product turned out to be an empty promise. In actuality, Rodbertus did not advance the theory on this question by a single degree. To what degree his concepts of “income” were confused are revealed in his further discussion in the Fourth Social Letter to F. Kirchman (Das Kapital, Berlin 1884) on the following: It is necessary to consider money as national revenue; are wages derived from capital or from income? – speculations which Engels said belong “to the domain of scholasticism”. (Vorwort to Vol. II of Capital, S. XXI) [22]

The reign of complete confusion regarding concepts of national income is absolute with economists even today. For example, Herkner, in his article on Crises in Handwörterbuch der Staatswissenschaften (the Sbornik mentioned previously, page 81), discussing realization of the product in capitalist society (in paragraph 5 – Distribution) finds the statement of K.G. Rau, who merely repeats the mistake of A. Smith by dividing the whole product of society into shares of income, a “felicitous” one. R. Meyer, in his article on Income (same pl., pages 283ff.), quotes the confused definitions of A. Wagner (who likewise repeats the mistake of A. Smith) and frankly admits that “it is difficult to distinguish income from capital” and “the most difficult thing is the distinction between profit (Ertrag) and income (Einkommen).”

We thus see that the economists, having criticized and being still in the process of criticizing the insufficient attention that the classicists (and Marx) paid to “distribution” and “consumption,” could not elucidate even an iota of the fundamental questions of “distribution” and “consumption.” as if they were independent branches of science corresponding to some independent process and phenomena of economic life. Political economy does not concern itself with “production” at all, but with social relations of people in production, with the social organization of production. Once these social relations are explained and analyzed in full, by that token there are defined the place of each class in production and, consequently, their share in national consumption. And the solution to this problem – before which classical political economy stopped and which has not by a hair been advanced by all sorts of specialists in the field of “distribution” and “consumption” – is given by a theory directly related to that of the classicists, which consummates the analysis of production of capital, individual and social.

The questions about “national income” and about “national consumption” are absolutely insoluble if posed as independent questions. But, although they are thus fruitful only of scholastic discussions, definitions and classification, they prove to be completely soluble when the process of production of the whole social capital is analyzed. More than that: it ceases to exist as a separate question when the relation of national consumption to the social product and the realization of each individual part of the product are explained.

There remains only the need to name these individual parts:

In order to avoid useless difficulties, it is necessary to distinguish the gross output and the net output from the gross income and the net income.

The gross output, or the gross product, is the total reproduced product ...

The gross income is that portion of value and that portion of the gross product measured by it which remains after deducting that portion of value and that portion of the total product measured by it, which replaces the constant capital advanced and consumed in production. The gross income, then, is equal to the wages (or to that portion of the product which is to become once more the income of the laborer) plus the profit, plus the rent. On the other hand, the net income is the surplus value, and thus the surplus product, which remains after the deduction of the wages, and which, in fact, represents the surplus value realized by capital and to be divided with the landlords, and the surplus product measured by it.

... Viewing the income of the whole society, the national income consists of wages plus profit plus rent, that is, of the gross income. But even this is an abstraction to the extent that the entire society, on the basis of capitalist production, places itself upon the capitalist standpoint and considers only the income divided into profit and rent as the net income. (III, 2, 375–6. Russ. tr., pages 695–6.) [23]

Thus the explanation of the process of realization brought clarity also to the question of income, solving the basic difficulty which hindered an understanding of this question: How “income for one is capital for another”? How does production which consists of objects of personal consumption and falls entirely into wages, profit and rent include also the constant part of capital which can never be income? The analysis of realization in Part III of Volume II of Capital fully solves these problems, making it necessary only that these parts of the social product be designated, which Marx does in the concluding part of Vol. III of Capital devoted to the question of “income,” and to refer to the analysis in Vol. II. [2*]

VIII. Why a Foreign Market Is Necessary to a Capitalist Nation

In regard to the analyzed theory of realization of the product in capitalist society, the question may arise: Does not this contradict the fact that a capitalist nation cannot dispense with foreign markets?

It is necessary to remember that the analysis of realization of the product in capitalist society proceeded upon the assumption of an absence of foreign trade: this postulate has been stated and its necessity in such an analysis was demonstrated. Obviously, the importation and exportation of products would only confuse the question, and in no way aid in solving the problem. The mistake of Messrs. V.V. and N—on consists in this: that they bring in the foreign market in order the explain the realization of surplus value. Since it explains exactly nothing, this introduction of the foreign market only hides their theoretic mistakes, on the one hand, and, on the other hand, it permits them to avoid, by means of these erroneous “theories,” the necessity of explaining the fact of the development of the home market for Russian capitalism. [3*] The “foreign market” for them is merely a subterfuge which glosses over the development of capitalism (and consequently of the market) within the country by a subterfuge all the more convenient because it frees them also from the necessity of analyzing the facts which testify to the conquest of foreign markets by Russian capitalism. [4*]

The necessity of a foreign market for a capitalist country is not at all determined by the laws of realization of the social product (and of surplus value in particular), but primarily by the fact that capitalism is only the result of a widespread system of commodity exchange which transcends the limits of state boundaries. Therefore it is not possible to conceive of a capitalist nation without foreign trade, and indeed there is no such nation.

As the reader knows, this result is a historic phenomenon from which the Narodniki cannot take cover in the vapor of hackneyed phrases about the “impossibility for capitalists to consume surplus value.” Here it would be necessary to examine – if they actually wished to pose the question of the foreign market – the history of the development of foreign trade and the history of the development of commodity exchange. Had they analyzed this history, they would, of course, find it impossible to explain capitalism as an accidental deviation from the path.

Secondly, the proportions between the component parts of social production (both in value and in natural form), which it is necessary to presume in demonstrating the theory of reproduction of social capital but which is merely an average derived from a series of constant vacillations – these proportions are constantly upset in capitalist society because of the fact that the individual producers work for an unknown market. The separate parts of industry which serve as a “market” for each other develop unevenly; some outdistance others, and the more developed industry seeks a foreign market. This does not at all signify “the impossibility for a capitalist nation to realize surplus value,” as the Narodnik is ready wistfully to conclude. It shows merely the disproportionality in the development of separate industries. Under a different distribution of the national capital the same quantity of products could be realized within the country. However, in order that capital may leave one sphere of industry and emigrate to another, a crisis is necessary in the former sphere. What reasons then can restrain capitalists who are threatened with this crisis from a search for foreign markets and, in order to facilitate exports, from a demand for subsidies and relief from export restrictions?

Thirdly, the law of pre-capitalist methods of production is the repetition of the process of production in the pre-existing quantity, on the former basis. Such is the corvée economy of the landlords, the natural economy of the peasants, the handicraft production of the industrialists. Contrariwise, the law of capitalist production is that of constant revolution in the methods of production. Under old methods of production, the economic units could exist for centuries, changing neither in character, nor in magnitude, never departing from the limits of the landlord’s domain, the peasant village or the small surrounding market for village artisans and petty industrialists (so-called home workers). Contrariwise, the capitalist enterprise inevitably outgrows the limits of the community, local market, the district and, subsequently, the state. Since the isolation and insulation of the state are already destroyed by commodity exchange, then the natural striving of each capitalist branch of industry leads necessarily to the search for a foreign market.

Thus the necessity to search for a foreign market does not at all prove the insolvency of capitalism, as the Narodnik economists like to present the matter. Completely the opposite – this necessity graphically shows the progressive historical work of capitalism which destroys the ancient isolation and confinement of the earlier systems of economy (and consequently the narrowness of their intellectual and political life) and which links all countries of the world in a single economic unit.

We see from this that the last two reasons for the necessity of a foreign market are, again, reasons of a historical nature. In order to analyze them, it is necessary to examine each separate branch of industry, its development within the country, its transformation into capitalist industry, in a word, it is necessary to study the facts about the development of capitalism in a country. There is nothing surprising in the fact that the Narodniki utilize an incident to evade these facts under cover of hollow and worthless phrases about the “impossibility” of both home and foreign markets.

IX. Conclusions from Chapter I

Let us summarize now the theoretic postulates, analyzed above, which are directly related to the question of the home market.

  1. The basic process of the creation of a home market (i.e., the development of commodity production and capitalism) is the social division of labor. It consists in this, that the various aspects of processing raw materials (and various operations in this process) are separated, one after another, from agriculture and became independent branches of industry, exchanging their products (now already commodities) for products of agriculture. Thus agriculture itself becomes an industry (i.e., producing commodities and the same process of specialization takes place in it.
  2. The direct deduction from the preceding postulate is the law of every developing commodity economy and, particularly, of capitalist economy, that the industrial (i.e., non-agricultural) population grows faster than the agricultural population; an increasing part of the population is withdrawn from agriculture into manufacturing industry.
  3. The separation of the direct producer from the means of production, i.e., his expropriation, which marks the transition from simple commodity production to capitalist production and which is the necessary condition of this transition) creates the home market. This process of the creation of the home market proceeds in two directions. On the one hand, the means of production, from which the small producer is “freed,” are converted into capital in the hands of the new owner, serve in the production of commodities and, consequently, are themselves transformed into commodities. Thus even the simple reproduction of these means of production requires that they be purchased (formerly these means of production were reproduced, in the majority of cases, in the natural form and sometimes they were made at home), i.e., create a market for means of production and later also for the products now produced with the help of these means of production which are likewise converted into commodities. On the other hand, the means of existence of this small producer become a material element of variable capital, i.e., of the sum of money spent by the employer in hiring workers (it does not matter whether he is a landlord, a contractor, a lumber merchant, a factory owner, etc.). In this manner these means of existence have now also been converted into commodities, i.e., create a home market for articles of consumption.
  4. The realization of the product in capitalist society (and consequently the realization of surplus value) cannot be explained unless we understand that: (1) the value of the social product, like that of the individual product, is divided into three parts, and not into two (into constant capital plus variable capital plus surplus value, and not only into variable capital plus surplus value, as Adam Smith and all subsequent political economists up to Marx had taught); and (2) that in its natural form it must be divided into two main departments: means of production (consumed productively) and means of consumption (consumed personally). Having established these basic theoretic postulates, Marx fully explained the process of realization of production in general, and of surplus value in particular, in capitalist production and revealed that it was entirely incorrect to drag the foreign market into the question of realization.
  5. Marx’s theory of realization also shed light on the question of national consumption and income.

From the above, it becomes obvious that the question of the home market as a separate, independent question, independent of the question of the degree of development of capitalism, does not exist at all. Therefore, Marxist theory nowhere and at no time raises this question independently. The home market appears when commodity production appears; it is created by this commodity production, and the degree to which the social division of labor has taken place determines the degree of its development. It spreads with the transference of commodity production from the product to labor power, and only to the extent of the transformation of the latter into a commodity does capitalism cover the entire production of the country, developing chiefly in regard to the means of production which, in capitalist society, occupy an increasingly important place. The “home market” for capitalism is created by developing capitalism itself, which increases the social division of labor and which divides those concerned directly with production into capitalists and workers. The degree of development of the home market is the degree of development of capitalism in the country. To pose the question about the limits of the home market separately from the degree of the development of capitalism (as the Narodnik economists do) is incorrect.

That is why the question as to how the home market for Russian capitalism is being formed is reduced to the following question: in what manner and in what direction do the separate aspects of Russian national economy develop? What are the connection and interdependence between these various aspects?

The succeeding chapters will be devoted to an examination of the data which contain the answers to these questions.


20. Capital, III, page 982, footnote; the word “ridiculous” is left out of the translation, though it appears in the original German. – Tr.

21. Ibid., page 983, footnote.

1*. Zur Beleuchtung der socialen Frage, Dr. Rodbertus-Jagetzow, Berlin 1875, page 72 u. ff.

22. Preface to Vol. II of Capital, page 26. – Tr.

23. Capital, III, pages 978–9. – Tr.

2*. Cf. Das Kapital, III, 8, VII, Abschnitt. Die Revenue, ch. 49: Zur Analyse deg Produktionsprocesses (Russ. tr., pages 588–706). Here Marx also lists the circumstances which hindered the former economists from understanding this process (pages 379–882, Russ. tr., pages 698–700). (Capital, III, Part VII, The Revenues and Their Sources, Ch. 49, A Contribution to the Analysis of the Process of Production, pages 908–992. – Tr.)

3*. G.S. Bulgakov very correctly mentions, in the above quoted book: “Until now the cotton industry destined for the peasant market has grown continuously. Consequently, this absolute narrowing of national consumption” (about which Mr. N—on speaks) “... is conceivable only theoretically.” (pages 214–215)

4*. Volgin, The Basis of Narodnism, in the works of Mr. Vorontsev, St. Pt. 1896, pages 71–76.

Top of page

Main NI Index | Main Newspaper Index

Encyclopedia of Trotskyism | Marxists’ Internet Archive

Last updated on 11 July 2015