But because men pay ever greater attention to economic factors it easily appears as though these played a greater part to-day than formerly. That, however, is not the case. The deception is only caused because in many cases the economic motive appears freely to-day where formerly it was concealed by conditions of government and symbols of all kinds. Modern society is much richer than earlier societies in ideologies which are not determined by economics and by nature working as an economic force. Sciences, arts, a whole series of social relations are to-day much less dependent on economics than formerly, or, in order to give no room for misconception, the point of economic development attained to-day leaves the ideological, and especially the ethical, factors greater space for independent activity than was formerly the case. In consequence of this the interdependency of cause and effect between technical, economic evolution, and the evolution i6 of other social tendencies is becoming always more indirect, and from that the necessities of the first are losing much of their power of dictating the form of the latter.
14 The Iron Necessity of History M receives in this way a limitation, which, let me say at once, signifies in regard to the practice of social democracy, no lessening but an increasing and qualifying of its social political tasks.
Thus we see the materialist conception of history to-day in another form than it was presented at first by its founders. It has gone through a development already, it has suffered limitations in absolutist interpretation. That is, as has been shown, the history of every theory. It would be the greatest retrogression to go back from the ripe form which Engels has given it in the letters to Conrad Schmidt to the first definitions and to give it a " monistic M interpretation based on these.
The first definitions are rather to be supplemented by those letters. The fundamental idea of the theory does not thereby lose in uniformity, but the theory itself gains in scientific character. Only with these supplements does it become truly a theory of the scientific treatment of history. In its first form it could become in the hand of a Marx a lever of mighty historical discoveries, but even his genius was led by it to all kinds of false conclusions.* * *' It is much easier,' ' says Marx in a much-quoted passage in Capital, " to find by analyses the earthly kernel of religious, hazy imaginations than by the reverse process to evolve from the actual conditions of life their i7 Finally, the question arises, up to what point the materialist conception of history has a claim to its name, if we continue to widen it in the above-mentioned manner through the inclusion of other forces. In fact, according to Engels' explanations, it is not purely materialist, much less purely economic. I do not deny that the name does not completely fit the thing. But I seek progress not in making ideas confused, but in making them precise; and because it is of primary importance in the characterisation of a theory of history to acknowledge in what it differs from others, I would, far from taking offence at the title "Economic Interpretation of History/ ' keep it, in spite of all that can be said against it, as the most appropriate description of the Marxist theory of history.
Its significance rests on the weight it lays on economics; out of the recognition and valuation of economic facts arise its just services to the science of history, and the enrichment which this branch of human knowledge owes to it. An economic interpretation of history does not necessarily mean that only economic forces, only economic motives, are recognised; but only that economics forms an ever recurring decisive force, the cardinal point of the great movements in history. To the words "materialist conception heavenly form. The latter is the only materialistic and therefore scientific method " (Capital, I., 2nd ed., p. 386). In this contrast there is great exaggeration. Unless one already knew the heavenly forms, the method of deduction described would lead to all kinds of arbitrary constructions, and if one knew them the deduction described is a means of scientific analysis, but not a scientific antithesis to analytic interpretation.
i8 of history ' ' still adhere all the misunderstandings which are closely joined with the conception of materialism. Philosophic materialism, or the materialism of natural science, is in a mechanical sense deterministic. The Marxist conception of history is not. It allots to the economic foundation of the life of nations no unconditioned determining influence on the forms this life takes.
(c) The Marxist Doctrine of Class War and of the Evolution of Capital.
The doctrine of the class wars rests on the foundation of the materialist conception of history. " It was found," writes Engels in Anti-Dühring, " that all history* hitherto was the history of class wars, that the classes fighting each other are, each time, the outcome of the conditions of production and commerce — in one word, of the economic conditions of their epoch " (3rd edition, page 12). In modern society it is the class war between the capitalist owners of the means of production and the producers without capital, the wage workers, which imprints its mark on history in this respect. For the former class Marx took from France the term Bourgeoisie, and for the latter the term Proletariat. This class struggle between bourgeoisie and proletariat is accordingly the antagonism, transferred to men, which is in the conditions of production to-day, that * In the fourth edition of the work Socialism, Utopian and Scientific, follow here the limiting words "with the exception of primitive societies."
is, in the private character of the method of appropriation and the social character of the method of production. The means of production are the property of individual capitalists who appropriate to themselves the results of the production, but the production itself has become a social process; that means, a production of commodities for use made by many workers on a basis of systematic division and organisation of labour. And this antagonism conceals in itself, or has, a second conflict, as a supplement: the systematic division and organisation of work within the establishments for production (workshop, factory, combination of factories, etc.) is opposed by the unsystematic disposal of the produce on the market.
The starting point of the class struggle between capitalists and workers is the antagonism of interests which follows from the nature of the utilisation of the labour of the latter by the former for profit. The examination of this process of utilisation leads to the doctrine of value and of the production and appropriation of surplus value.
It is significant for capitalist production and the order of society founded thereon, that men in their economic relations stand opposed to one another throughout as buyers and sellers. It recognises in social life no general legal relations of dependence but only actual ones following from purely economic relations (differences of economic means, relation of hirer and hired, etc.). The worker sells to the capitalist his power to work for a definite time, under definite conditions, and for a definite price — wages. The capitalist sells the products (manufactured with the help of the worker — that is, by the whole of the workers employed by him) in the goods market at a price which, as a rule and as a condition of the continuance of his undertaking, yields a surplus above the amount which the manufacture costs. What is, then, this surplus? According to Marx it is the surplus value of the labour accomplished by the worker. The goods are exchanged on the market at a value which is fixed by the labour embodied in them, measured according to time. What the capitalist has put in in past — we would even say dead — labour in the form of raw material, auxiliary material, wear and tear of machinery, rent, and other costs of production, appears again unchanged in the value of the product. It is otherwise with the living work expended on it. This costs the capitalist wages; it brings him an amount beyond these, the equivalent of the value of labour. The labour value is the value of the quantity of labour worked into the product; the worker's wages is the selling price of the labour power used up in production.
Prices, or the value of labour power, are determined by the cost of maintenance of the worker as it corresponds with his historically developed habits of life. The difference between the equivalent (erlös) of the labour-value and the labour-wage is the surplus value which it is the natural endeavour of the capitalist to raise as high as possible and in any case not to allow to sink.
But competition on the market of commodities presses constantly on the price of commodities, and an increase of sales is again only obtained by a cheapening of production. The capitalist can attain this cheapening in three kinds of ways: lowering of wages, lengthening of the hours of work, an increase in the productivity of labour. As at a given time there are always definite limits to the first two, his energy is always being turned to the last one. Better organisation of work, inter-unification of work and perfecting of machinery are, in the more developed capitalist societies, the predominating means of cheapening production. In all these cases the consequence is that the organic composition of capital, as Marx calls it, is changing. The relation of the portion of capital laid out in raw materials, tools for work, etc., increases; the portion of capital laid out in labour wages decreases; the same amount of commodities is produced by fewer workers, an increased amount by the old or even by a less number of workers. The ratio of the surplus value to the portion of capital laid out in wages Marx calls the rate of surplus value or of exploitation, the ratio of the surplus value to the whole capital invested in producing he calls the rate of profit. From the foregoing it is self-evident that the rate of surplus can rise at the same time as the rate of profit falls.
According to the nature of the branch of production we find a very different organic combination of capital. There are undertakings where a disproportionately large portion of the capital is spent on instruments of work, raw material, etc., and only a relatively small amount on wages; and others where the wages form the most important part of the expenditure of capital. The first represent higher, the second lower, organic combinations of capital. If an equal proportionate rate ruled throughout between the surplus value attained and the labour wage, in these latter branches of production the profit rates would in many cases exceed those in the first by multiples. But that is not the case. In a developed capitalist society goods are sold not at their labour values but at their prices of production, which consist of the cost of production (workers' wages plus dead work used up) and of an additional expense which corresponds with the average profit of the whole social production, or the profit rate of that branch of production in which the organic combination of capital shows an average ratio of wages-capital to capital employed for the other purposes. The prices of commodities in the different branches of production, therefore, show by no means the same relation to their value. In some cases they are constantly far below the value, and in others constantly above it, and only in those branches of production with an average composition of capital do they approach the value. The law of value disappears altogether from the consciousness of the producers; it works only behind their backs, whilst the level of the average profit rate is regulated by it at longer intervals only.
The coercive laws of competition and the growing wealth of capital in society tend to lower constantly the profit rate, whilst this is delayed by forces working in opposite directions but is not permanently stopped. Overproduction of capital goes hand in hand with forces creating a superabundance of workers. Greater centralisation is always spreading in manufactures, commerce, and agriculture, and an expropriation of the smaller capitalists by the greater grows. Periodic crises brought about by the anarchy in production in conjunction with the under-consumption of the masses are always reappearing in a more violent and more destructive character; and they hasten the process of centralisation and expropriation by the ruin of innumerable small capitalists. On the one side is generalised the collective — cooperative— form of the process of work on an always growing scale, in an ascending degree; on the other side increases "with the constantly diminishing number of capitalist magnates who usurp and monopolise all the advantages of this process of transformation, the mass of misery, oppression, servitude, deterioration, exploitation, but also with it the revolt of the working class constantly increasing and taught, united and organised by the mechanism of the capitalist process of production itself. M Thus the development reaches a point where the monopoly of capital becomes a fetter to the method of production that has thriven on it, when the centralisation of the means of production and the socialisation of labour become incompatible with their capitalist garment.
This is then rent. The expropriators and usurpers are expropriated by the mass of the nation. Capitalist private property is done away with.
This is the historical tendency of the manner of production and appropriation, according to Marx. The class which is called upon to carry out the expropriation of the capitalist class and the transformation of capitalist into public property, is the class of the wage earners, the proletariat. For this purpose must the class be organised as a political party. This party at a given moment seizes the power of the State and " changes the means of production first of all into State property. But therewith the proletariat negatives itself as a proletariat, therewith it puts an end to all differences of class and antagonisms of class, and consequently also puts an end to the State as a State. " The struggle for individual existence with its conflicts and excesses is over, the State has nothing more to oppress "and dies off. M* So far, in the most concise compression possible, I have endeavoured to set forth the most important propositions of that part of the Marxist theory which we have to consider as essential to his socialism. Just as little as — or, rather, still less than — the materialist theory of history has this part of the theory sprung from the beginning in a perfected form from the head of its authors. Even more than in the former * Engels, Socialism, Utopian and Scientific.
case can a development of the theory be shown which, whilst firmly maintaining the chief points of view, consists of limiting the propositions at first represented as absolute. In the preface to Capital (1867), in the preface to the new edition of the Communist Manifesto (1872), in the preface and a note to the new edition of the Poverty of Philosophy (1884), and in the preface to the Class Struggles in the French Revolution (1895), some of the changes are shown which in the course of time have been brought to pass with regard to various corresponding matters in the views of Marx and Engels. But not all the changes to be cited here and elsewhere with reference to single portions or hypotheses of the theory have found full consideration in its final elaboration. Marx and Engels confined themselves sometimes merely to hinting at, sometimes only to stating in regard to single points, the changes recognised by them in facts, and in the better analyses of these facts, which influenced the form and application of their theory. And even» in the last respect contradictions are not wanting in their writings. They have left to their successors the duty of bringing unity again into their theory and of co-ordinating theory and practice.
But this duty can only be accomplished if one gives an account unreservedly of the gaps and contradictions in the theory. In other words, the further development and elaboration of the Marxist doctrine must begin with criticism of it. To-day, the position is that one can prove everything out of Marx and Engels. This is very comfortable for the apologists and the literary pettifogger. But he who has kept only a moderate sense for theory, for whom the scientific character of socialism is not il only a show-piece which on festive occasions is taken out of a plate cupboard but otherwise is not taken into consideration,' ' he, as soon as he is conscious of these contradictions, feels also the need of removing them. The duty of the disciples consists in doing this and not in everlastingly repeating the words of their masters.
In this sense has been undertaken the following criticism of some elements of the Marxist doctrine. The wish to keep within moderate bounds a volume intended in the first instance for the use of working men, and the necessity of finishing it within a few weeks explain why an exhaustive treatment of the subject has not even been attempted. At the same time, let it be understood once for all that no pretensions are raised as to originality in the criticism. Most, if not all, of what follows has in substance been worked out — or at least indicated — by others already. The justification for this essay is not that it discloses something not known before but that it acknowledges what has been disclosed already.
But this is also a necessary work. The mistakes of a theory can only be considered as overcome when they are recognised as such by the advocates of that theory. Such recognition does not necessarily signify the destruction of the theory. It may rather appear after subtraction of what is acknowledged to be mistaken — if I may be allowed to use an image of Lassalle — that it is Marx finally who carries the point against Marx.
Chapter II.
THE ECONOMIC DEVELOPMENT OF MODERN SOCIETY.
(a) On the Meaning of the Marxist Theory of Value.
11 From which incidentally the practical application follows that there are sometimes difficulties with the popular claim of the worker to the " full proceeds of his labour. M — Engels, Herr Eugen Dühring's Unwälzung.
According to the Marxist theory surplus value is, as we have seen, the pivot of the economy of a capitalist society. But in order to understand surplus value one must first know what value is. The Marxist representation of history and of the course of development of capitalist society begins therefore with the analysis of value.
In modern society, according to Marx, the value of commodities consists in the socially necessary labour spent on them measured according to time. But with the analysis of this measure of value quite a series of abstractions and reductions is necessary. First, the pure exchange value must be found; that is, we must leave aside the special use values of the particular commodities. Then — in forming the concept of general or abstract human labour — we must allow for the peculiarities of particular kinds of labour (reducing higher or complex labour to simple or abstract labour). Then, in order to attain to the socially necessary time of work as a measure of the value of labour, we must allow for the differences in diligence, activity, equipment of the individual workers; and, further (as soon as we are concerned with the transformation of value into market value, or price), for the socially necessary labour time required for the particular commodities separately. But the value of labour thus gained demands a new reduction. In a capitalistic developed society commodities, as has already been mentioned, are sold not according to their individual value but according to their price of production — that is, the actual cost price plus an average proportional rate of profit whose degree is determined by the ratio of the total value of the whole social production to the total wage of human labour power expended in producing, exchanging, etc. At the same time the ground rent must be deducted from the total value, and the division of the capital into industrial, commercial, and bank capital must be taken into the calculation. In this way, as far as single commodities or a category of commodities comes into consideration, value loses every concrete quality and becomes a pure abstract concept. But what becomes of the surplus value under these circumstances? This consists, according to the Marxist theory, of the difference between the labour value of the products and the payment for the labour force spent in their production by the workers. It is therefore evident that at the moment when labour value can claim acceptance only as a speculative formula or scientific hypothesis, surplus value would all the more become a pure formula — a formula which rests on an hypothesis.
As is known, Friedrich Engels in an essay left behind him which was published in the Neue Zeit of the year 1895-96, pointed out a solution of the problem through the historical consideration of the process. Accordingly the law of value was of a directly determining power, it directly governed the exchange of commodities in the period of exchange and barter of commodities preceding the capitalist order of society.
Engels seeks to prove this in connection with a passage in the third volume of Capital by a short description of the historic evolution of economics. But although he presents the rise and development of the rate of profit so brilliantly, the essay fails in convincing strength of proof just where it deals with the question of value. According to Engels' representation the Marxist law of value ruled generally as an economic law from five to seven thousand years, from the beginning of exchanging products as commodities (in Babylon, Egypt, etc.) up to the beginning of the era of capitalist production. Parvus, in a number of Neue Zeit of the same year, made good some conclusive objections to this view by pointing to a series of facts (feudal relations, undifferentiated agriculture, monopolies of guilds, etc.) which hindered the 3* conception of a general exchange value founded on the labour time of the producers. It is quite clear that exchange on the basis of labour value cannot be a general rule so long as production for exchange is only an auxiliary branch of the industrial units, viz., the utilisation of surplus labour, etc., and as long as the conditions under which the exchanging producers take part in the act of exchange are fundamentally different. The problem of Labour forming exchange value and the connected problems of value and surplus value is no clearer at that stage of industry than it is to-day.
But what was at those times clearer than to-day is the fact of surplus labour. When surplus labour was performed in ancient time — and in the middle ages no kind of deception prevailed about it — it was not hidden by any conception of value. When the slave had to produce for exchange he was a simple surplus labour machine. The serf and the bondsman performed surplus labour in the open form of compulsory service (duties in kind, tithes, etc.). The journeyman employed by the guildmaster could easily see what his work cost his master, and at how much he reckoned it to his customer.* * Where pre-capitalist methods of industry have been handed down to present times, surplus labour is shown to-day even unconcealed. The man employed by the small builder who performs a piece of work for one of his customers knows quite well that his hour's wage is so much less than the price which the master puts in his account for the hour's work. The same with the customers of tailors, gardeners, etc.
3* 3* This clearness of the relations between wages of labour and price of commodities prevails even on the threshold of the capitalist period. From it are explained many passages that surprise us to-day in the economic writings of that time about surplus labour and labour as the sole producer of weath. What appears to us the result of a deeper observation of things was at the time almost a commonplace. It did not at all occur to the rich of that epoch to represent their riches as the fruit of their own work. The theory arising at the beginning of the manufacturing period of labour as the measure of exchange value (the latter conception then first becoming general) certainly starts from the conception of labour as the only parent of wealth, and interprets value still quite concretely (viz., as the cost price of a commodity), but forthwith contributes more towards confusing the conceptions of surplus labour than of clearing them. We can learn from Marx himself how Adam Smith, on the basis of these conceptions, represented profits and ground rent as deductions from the labour value; how Ricardo worked out this thought more fully, and how socialists turned it against the bourgeois economy.
But with Adam Smith labour value is already conceived as an abstraction from the prevailing reality. His full reality is in " the early and crude state of society " which precedes the accumulation of capital and the appropriation of land, and in backward industries. In the capitalist world, on the other hand, profit and rent are for Smith constituent elements of value beside labour or wages; and labour value serves Smith only asa <( concept ' ' to disclose the division of the products of labour — that is the fact of surplus labour.
In the Marxist system it is not otherwise in principle. Marx certainly sticks to the idea of labour value more firmly than Smith, and has conceived it in a more strict but at the same time also more abstract form. But whilst the Marxist school — and the present author amongst them — believed that a point of fundamental importance for the system was the passionately discussed question as to whether the attribute of " socially necessary labour time M in labour value related only to the manner of the production of the respective commodities or included also the relation of the amount produced of these commodities to effective demand, a solution lay already in the desk of Marx which gave quite a different complexion to this and other questions, forced it into another region, on to another plane. The value of individual commodities or kinds of commodities becomes something quite secondary, since they are sold at the price of their production — cost of production plus profit rate. What takes the first place is the value of the total production of society, and the excess of this value over the total amount of the wages of the working classes — that is, not the individual, but the total social surplus value. That which the whole of the workers produce in a given moment over the portion falling to their share, forms the social surplus value, the surplus value of the social production which the individual capitalists share in approximately equal proportion according to the amount of capital applied by them for business purposes. But the amount of this surplus value is only realised in proportion to the relation between the total production and the total demand — i.e., the buying capacity of the market. From this point of view — that is, taking production as a whole — the value of every single kind of commodity is determined by the labour time which was necessary to produce it under normal conditions of production to that amount which the market — that is the community as purchasers — can take in each case. Now just for the commodities under consideration there is in reality no exact measure of the need of the community at a given moment; and thus value conceived as above is a purely abstract entity, not otherwise than the value of the final utility of the school of Gossen, Jevons, and Böhm-Bawerk. Actual relations lie at the foundation of both; but both are built up on abstractions.