Such abstractions naturally cannot be avoided in the observation of complex phenomena. How far they are admissible depends entirely on the substance and the purpose of the investigation. At the outset, Marx takes so much away from the characteristics of commodities that they finally remain only embodiments of a quantity of simple human labour; as to the Böhm-Jevons school, it takes away all characteristics except utility. But the one and the other kind of abstractions are only admissible for definite purposes of demonstration, and the propositions found by virtue of them have only worth and validity within defined limits.
If there exist no exact measure for the total demand at one time of a certain class of commodities, practical experience shows that within certain intervals of time the demand and supply of all commodities approximately equalise themselves. Practice shows, further, that in the production and distribution of commodities only a part of the community takes an active share, whilst another part consists of persons who either enjoy an income for services which have no direct relation to the production or have an income without working at all. An essentially greater number of men thus live on the labour of all those employed in production than are engaged actively in it, and income statistics show us that the classes not actively engaged in production appropriate, moreover, a much greater share of the total produced than the relation of their number to that of the actively producing class. The surplus labour of the latter is an empiric fact, demonstrable by experience, which needs no deductive proof. Whether the Marxist theory of value is correct or not is quite immaterial to the proof of surplus labour. It is in this respect no demonstration but only a means of analysis and illustration.
If, then, Marx presumes, in the analysis of the production of commodities, that single commodities are sold at their value, he illustrates on a single object the transaction which, according to his conception, the total production actually presents. The labour time spent on the whole of the commodities is in the sense before indicated, their social value.* And even if this social value is not fully realised — because a depreciation of commodities is always occurring through partial overproduction— yet this has in principle no bearing on the fact of the social surplus value or surplus product. The growth of its amount will be occasionally hindered or made slower, but there is no question of it standing still, much less of a retrogression in its amount in any modern state.
The surplus product is everywhere increasing, but the ratio of its increase to the increase of wages-capital is declining to-day in the more advanced countries.
By the simple fact that Marx applies the formula for the value of the whole of the commodities, to single commodities, it is already indicated that he makes the formation of surplus value fall exclusively in the sphere of production, where it is the industrial wage earner who produces it. All other active * It is, in fact, the law of value...that not only on every single commodity is just the necessary labour time spent, but that no more than the necessary proportional amount of the social total labour time is spent in the different groups. " For use value is the condition...the social need — that is, the use value on a social basis appears here as the determining factor for the shares of the total social labour time which fall to the lot of the different particular spheres of production " (Capital, III., 2, pp. 176, 177). This sentence alone makes it impossible to make light of the Gossen-Böhm theory with a few superior phrases.
elements in modern economic life are auxiliary agents to production and indirectly help to raise the surplus value when they, for example, as merchants, bankers, etc., or their staff, undertake services for industry which would otherwise fall upon it, and so they lessen its cost. The wholesale dealers, etc., with their employees, are only transformed and differentiated clerks, etc., of the industrial entrepreneurs, and their profits are the transformed and concentrated charges of the latter. The employees for wages of these merchants certainly create surplus value for them, but no social surplus value. For the profit of their employers, together with their own wages, form a portion of the surplus value which is produced in the industry. Only, this share is then proportionately less than it was before the differentiation of the functions here under consideration or than it would be without it. This differentiation only renders possible the great development of production on a large scale and the acceleration of the turnover of industrial capital. Like division of labour generally, it raises the productivity of industrial capital, relatively to the labour directly employed in industry.
We limit ourselves to this short recapitulation of the exposition of mercantile capital (from which, again, banking capital represents a differentiation) and of mercantile profit set forth in the third volume of Capital.
It is clear from this within what narrow limits the labour that creates supply value is 3« conceived in the Marxist system. The functions developed, as also others not discussed here, are from their nature indispensable to the social life of modern times. Their forms can, and undoubtedly will, be altered; but they themselves will in substance remain, as long as mankind does not dissolve into small social self-contained communities, when they then might be partly annulled and partly reduced to a minimum. In the theory of value which holds good for the society of to-day the whole expenditure for these functions is represented plainly as a deduction from surplus value, partly as " charges/ ' partly as a component part of the rate of exploitation.
There is here a certain arbitrary dealing in the valuing of functions in which the actual community is no longer under consideration, but a supposititious, socially-managed community. This is the key to all obscurities in the theory of value. It is only to be understood with the help of this model. We have seen that surplus value can only be grasped as a concrete fact by thinking of the whole economy of society. Marx did not succeed in finishing the chapter on the classes that is so important for his theory. In it would have been shown most clearly that labour value is nothing more than a key, an abstract image, like the philosophical atom endowed with a soul — a key which, employed by the master hand of Marx, has led to the exposure and presentation of the mechanism of capitalist economy as this had not been hitherto treated, not so forcibly, logically, and clearly. But this key refuses service over and above a certain point, and therefore it has become disastrous to nearly every disciple of Marx.
The theory of labour value is above all misleading in this that it always appears again and again as the measure of the actual exploitation of the worker by the capitalist, and among other things, the characterisation of the rate of surplus value as the rate of exploitation reduces us to this conclusion. It is evident from the foregoing that it is false as such a measure, even when one starts from society as a whole and places the total amount of workers' wages against the total amount of other incomes. The theory of value gives a norm for the justice or injustice of the partition of the product of labour just as little as does the atomic theory for the beauty or ugliness of a piece of sculpture. We meet, indeed, to-day the best placed workers, members of the " aristocracy of labour," just in those trades with a very high rate of surplus value, the most infamously ground-down workers in others with a very low rate.
A scientific basis for socialism or communism cannot be supported on the fact only that the wage worker does not receive the full value of the product of his work. " Marx," says Engels, in the preface to the Poverty of Philosophy, "has never based his communistic demands on this, but on the necessary collapse of the capitalist mode of production which is being daily more nearly brought to pass before our eyes."
Let us see how in this respect the matter stands.
(b) The Distribution of Wealth in the Modern Community.
If on the one side accumulation appears as growing concentration...on the other side it appears as the repulsion of individual capitalists from one another. M — Marx, The capitalist, according to the theory of Marx, must produce surplus value in order to obtain a profit, but he can only draw surplus value from living labour. In order to secure the market against his competitors he must strive after a cheapening of production and this he attains, where the lowering of wages is resisted, only by means of an increase of the productivity of labour; that is by the perfecting of machinery and the economising of human labour. But in reducing human labour he places so much labour producing surplus value out of its function, and so kills the goose that lays the golden egg. The consequence is a gradually accomplished lowering of the profit rate, which through counteracting circumstances, is certainly temporarily hindered, but is always starting again. This produces another intrinsic contradiction in the capitalist mode of production. Profit rate is the inducement to the productive application of capital; if it falls below a certain point, the motive for productive 4* 4* undertakings is weakened — especially as far as concerns the new amounts of capital which enter the market as off-shoots of the accumulated masses of capital. Capital shows itself as a barrier to capitalist production. The continued development of production is interrupted. Whilst on the one hand every active particle of capital tries to secure and increase its rate of profit by means of a feverish strain of production, congestion in the expansion of production already sets in on the other. This is only the counterpart of the transactions leading to relative over-production, which produces a crisis in the market of use values. Overproduction of commodities is at the same time manifesting itself as over-production of capital. Here as there, crises bring about a temporary arrangement. Enormous depreciation and destruction of capital take place, and under the influence of stagnation a portion of the working class must submit to a reduction of wages below the average, as an increased reserve army of superabundant hands stands at the disposal of capital in the labour market.
Thus after a time the conditions of a profitable investment of capital are re-established and the dance can go on anew but with the intrinsic contradiction already mentioned on an increased scale. Greater centralisation of capital, greater concentration of enterprises, increased rate of exploitation.
Now, is all that right?
Yes and no. It is true above all as a tendency. The forces painted are there and work in the given direction. And the proceedings are also taken from reality. The fall of the profit rate is a fact, the advent of over-production and crises is a fact, periodic diminution of capital is a fact, the concentration and centralisation of industrial capital is a fact, the increase of the rate of surplus value is a fact. So far we are, in principle, agreed in the statement. When the statement does not agree with reality it is not because something false is said, but because what is said is incomplete. Factors which influence the contradictions described by limiting them, are in Marx either quite ignored, or are, although discussed at some place, abandoned later on when the established facts are summed up and confronted, so that the social result of the conflicts appears much stronger and more abrupt than it is in reality.
Unfortunately there is a lack everywhere of exhaustive statistics to show the actual division of the shares, the preference shares, etc., of the limited companies which to-day form so large a portion of the social capital, as in most countries they are anonymous (that is like other paper money, they can change owners without formalities); whilst in England, where the shares registered in names predominate and the list of shareholders thus determined can be inspected by anyone in the State Registry Office, the compilation of more exact statistics of the owners of shares is a gigantic labour on which no one has yet ventured. One can only approximately estimate their number by reference to certain information collected about individual companies. Still, in order to show how very deceptive are the ideas which are formed in this direction and how the most modern and crass form of capitalist centralisation— the u Trust M — has in fact quite a different effect on the distribution of wealth from what it seems to outsiders to possess, the following figures which can be easily verified are given: — The English Sewing Thread Trust, formed about a year ago,* counts no less than 12,300 shareholders. Of these there are 6,000 holders of original shares with ^60 average capital, 4,500 holders of preference shares with ^150 average capital, 1,800 holders of debentures with ^315 average capital. Also the Trust of the spinners of fine cotton had a respectable number of shareholders, namely 5,454. Of these, there were 2,904 holders of original shares with ^300 average capital, 1,870 holders of preference shares with ^500 average capital, 680 holders of debentures with ^130 average capital.
With the Cotton Trust of J. and P. Coates it is similar, f The shareholders in the great Manchester Canal amount in round numbers to 40,000, those in the large provision company of T. Lipton to 74,262. A stores business in London, Spiers and Pond, instanced as a recent example * Written 1899.
t In all these Trusts the original owners or shareholders of the combined factories had to take up themselves a portion of the shares. These are not included in the tables given.
of the centralisation of capital, has, with a total capital of ^1,300,000, 4,650 shareholders, of which only 550 possess a holding above These are some examples of the splitting up of shares of property in centralised undertakings. Now, obviously, not all shareholders deserve the name of capitalists, and often one and the same great capitalist appears in all possible companies as a moderate shareholder. But with all this the number of shareholders and the average amount of their holding of shares has been of rapid growth. Altogether the number of shareholders in England is estimated at much more than a million, and that does not appear extravagant if one considers * Rowntree and Sherwell, in The Temperance Problem and Social Reform, give the following list of the shareholders of five well-known British breweries: — Shareholders of Breweries. Ordinary Shares. Prcf. Shares.
Arthur Guinness, Son and Co...5450 3768 Bass, RatclirT and Gretton Threlfalls Combe and Co.
Samuel Alsopp and Co...
Together, 16,604 shareholders of the whole ^9,710,000 ordinary and preference stocks. Besides, the said companies had issued debentures to the amount oi£6y 110,000. If we assume a similar distribution of these, we would arrive at about 27,000 persons as co-proprietors of the five breweries. Now in 1898 the London Stock Exchange list enumerated more than 119 breweries and distilleries whose capital in circulated shares alone amounted to more than ^70, 000,000, apart from the fact that of sixtyseven of these companies the ordinary shares were as vendors' shares in private hands. All this points to whole armies of capitalists of every description in the brewing and distilling trades.
that in the year 1896 alone the number of limited companies in the United Kingdom ran to over 21,223, with a paid-up capital of ;£i, 145,000,000,* in which, moreover, the foreign undertakings not negotiated in England itself, the Government Stocks, etc., are not included.!
This division of national wealth, for which word in the great majority of cases one may substitute national surplus value, is shown again in the figures of the statistics of incomes.
In the United Kingdom in the financial year 1893-4 (^e last return to my hand) the number of persons with estimated incomes of ^150 and over, under Schedules D and E (incomes from business profits, higher official posts, etc.) amounted to J2J,27o.\ But to that must still be added those assessed on incomes taxed for ground and land (rents, farm rents), for houses let, taxable capital investments. These groups together pay almost as much duty as the abovenamed groups of taxpayers, namely, on 300 against 350 millions of pounds income. § That would nearly double the number of persons referred to of over ^150 income.
In the British Review of May 22nd, 1897, * [The number in existence in April, 1907, was 43,038, with a paid-up capital of ^2,061,010,586. — Ed.]
t In 1898 it was estimated that ^2,150,000,000 of English capital was invested abroad, and its yearly increase was on an average ^5,700, 000. [In 1908, the total was estimated at ^3,000,000,000. — Ed.]
X [In 1907 the number of persons with increases over § [The figures for 1907 are ^327,900,650 as against there are some figures on the growth of incomes in England from 1851 to 1881. According to those England contained in round numbers, in 1 85 1, 300,000 families with incomes from ^150 to;£i,ooo (the middle and lower bourgeoisie and the highest aristocracy of labour) and 990,000 in 1 88 1. Whilst the population in these thirty years increased in the ratio of 27 to 35, that is about 30 per cent., the number of families in receipt of these incomes increased in the ratio of 27 to 90, that is 233J per cent. Giffen estimates to-day there are 1,500,000 of these taxpayers.* Other countries show no materially different picture. France has, according to Mulhall, with a total of 8,000,000 families, 1,700,000 families in the great and small bourgeois conditions of existence (an average income of ^260), against 6,000,000 of the working class and 160,000 quite rich. In Prussia, in 1854, as the readers of Lassalle know, with a population of 16.3 millions, there were only 44,407 persons with an income of over 1,000 thaler. In the year 1894-5, with a total population of nearly 33,000,000, 321,296 persons paid taxes on incomes of over ^150. In 1897-8 the number had risen to 347,328. Whilst the population doubled itself the class in better circumstances increased more than sevenfold. Even if one makes allowance for the fact that the provinces annexed in 1866 show greater numbers of the * [Mr. Chiozza Money estimates that in 1903-4 there were 750,000 persons whose means were between ^160 and ^700 per annum. — Ed.]
well-to-do than Old Prussia and that the prices of many articles of food had risen considerably in the interval, there is at least an increased ratio of the better-off to the total population of far more than two to one.* The conditions are precisely the same in the most industrial state of Germany, namely, Saxony. There from 1879 to x^94 the number of persons assessed for income tax was as follows: — Income. I Proletarian incomes 994048 INCREASE Absolute. Per cent.
Total * The demonstrative value of the Prussian figures has been disputed on the ground that the principles of assessment had been considerably changed between 1854 and the end of the century. That this fact reduces their force of demonstration I have at once admitted. But let us take the figures of the Prussian income tax for 1892, the first year after the reform of taxation of 189 1, and for 1907 where the same system ruled. There we get the following picture: — Assessed Incomes. I 5000 and over INCREASE Absolute. Per cent.
IO444 IOO.
The increase of the population was slightly over 20 per cent. We see the whole section of the well-to-do go on quicker than the population, and the quickest rate is not in the group of the high magnates, but in that of the simply easy classes. As far as fortunes are concerned, there were, in 1895 (the ^rst vear °f tne tax °n fortunes), 13,600 with ^25,000 and over; in 1908 this number was in round figures 21,000, an increase of over 50 per cent. This shows how the capitalist clan grows.
4« The two capitalist classes, those with incomes above ^480, show comparatively the greatest increase.
Similarly with the other separate German states. Of course, not all the recipients of higher incomes are " proprietors/ ' i.e., have unearned incomes; but one sees that this is the case to a great extent because in Prussia for 1895-6, 1,152,332 persons with a taxable net amount of capital property of over ^300 were drawn upon for the recruiting tax. Over half of them, namely, 598,063, paid taxes on a net property of more than ^1,000, and 385,000 on one of over ^1,600.
It is thus quite wrong to assume that the present development of society shows a relative or indeed absolute diminution of the number of the members of the possessing classes. Their number increases both relatively and absolutely. If the activity and the prospects of social democracy were dependent on the decrease of the " wealthy,' ' then it might indeed lie down to sleep.* But the contrary is the case. The prospects of socialism depend not on the decrease but on the increase of social wealth.
Socialism, or the social movement of modern times, has already survived many a superstition, it will also survive this, that its future depends on the concentration of wealth or, if one will put it thus, on the absorption of surplus value by a diminishing group of capitalist mammoths.
* Karl Kautsky at the Stuttgart Congress of the German social democracy against the remark in my letter that the capitalists do increase and not decrease.
Whether the social surplus produce is accumulated in the shape of monopoly by 10,000 persons or is shared up in graduated amounts among half-a-million of men makes no difference in principle to the nine or ten million heads of families who are worsted by this transaction. Their struggle for a more just distribution or for an organisation which would include a more just distribution is not on that account less justifiable and necessary. On the contrary, it might cost less surplus labour to keep a few thousand privileged persons in sumptuousness than half-a-million or more in wealth.
If society were constituted or had developed in the manner the socialist theory has hitherto assumed, then certainly the economic collapse would be only a question of a short span of time. Far from society being simplified as to its divisions compared with earlier times, it has been graduated and differentiated both in respect of incomes and of business activities.
And if we had not before us the fact proved empirically by statistics of incomes and trades it could be demonstrated by purely deductive reasoning as the necessary consequence of modern economy.
What characterises the modern mode of production above all is the great increase in the productive power of labour. The result is a no less increase of production — the production of masses of commodities. Where are these riches? Or, in order to go direct to the heart of the matter: where is the surplus product that the industrial wage earners produce above 5o their own consumption limited by their wages? If the il capitalist magnates M had ten times as large stomachs as popular satire attributes to them, and kept ten times as many servants as they really have, their consumption would only be a feather in the scale against the mass of yearly national product — for one must realise that the capitalist great industry means, above all, production of large quantities. It will be said that the surplus production is exported. Good, but the foreign customer also pays finally in goods only. In the commerce of the world the circulating metal, money, plays a diminishing role. The richer a country is in capital, the greater is its import of commodities, for the countries to which it lends money can as a rule only pay interest in the form of commodities.* Where then is the quantity of commodities which the magnates and their servants do not consume? If they do not go in one way or another to the proletarians they must be caught up by other classes. Either a relatively growing decrease in the number of capitalists and an increasing wealth in the proletariat, or a numerous middle class — these are the only alternatives which the continued increase of production allows. Crises and unproductive expenses for armies, etc., devour much, but still they have latterly only absorbed a fractional part of the total surplus product. If the * England receives its outstanding interest paid in the form of surplus imports to the value of ^100,000,000; the greater part of which are articles of consumption.
5i working class waits till " Capital M has put the middle classes out of the world it might really have a long nap. " Capital " would expropriate these classes in one form and then bring them to life again in another. It is not " Capital M but the working class itself which has the task of absorbing the parasitic elements of the social body.
As for the proposition in my letter to the Stuttgart Congress that the increase of social wealth is not accompanied by a diminishing number of capitalist magnates but by an increasing number of capitalists of all degrees, a leading article in the socialist New York Volkszeitung taxes me with its being false, at least, as far as concerns America, for the census of the United States proves that production there is under the control of a number of concerns M diminishing in proportion to its amount. M What a reputation! The critic thinks he can disprove what I assert of the division of the classes by pointing to the divisions of industrial undertakings. It is as though someone said that the number of proletarians was shrinking in modern society because where the individual workman formerly stood the trade union stands to-day.
Karl Kautsky also — at the time in Stuttgart — took up the sentence just mentioned and objected that if it were true that the capitalists were increasing and not the propertyless classes, then capitalism would be strengthened and we socialists indeed should never attain our goal. But the word of Marx is still true:" Increase of capital means also increase of the proletariat. M That is the same confusion of issues in another direction and less blunt. I had nowhere said that the proletarians did not increase. I spoke of men and not of entrepreneurs when I laid emphasis on the increase of capitalists. But Kautsky evidently wras captured by the concept of " Capital," and thence deduced that a relative increase of capitalists must needs mean a relative decrease of the proletariat, which would contradict our theory. And he maintains against me the sentence of Marx which I have quoted.
I have elsewhere quoted a proposition of Marx* which runs somewhat different from the one quoted by Kautsky. The mistake of Kautsky lies in the identification of capital with capitalists or possessors of wealth. But I would like, besides, to refer Kautsky to something else which weakens his objection. And that is what Marx calls the organic development of capital. If the composition of capital changes in such a way that the constant capital increases and the variable decreases, then in the businesses concerned the absolute increase of capital means a relative decrease of the proletariat. But according to Marx that is just the characteristic form of modern evolution. Applied to capitalist economy as a whole, it really means absolute increase of capital, relative decrease of the proletariat.
* Capital, I., chapter xxiii., par. 2, where it is said that the number of capitalists grows " more or less " through partitions of capital and offshoots of the same, a fact later on left wholly out of account bv Marx.
The workers who have become superabundant through the change in the organic composition of capital find work again each time only in proportion to the new capital on the market that can engage them. So far as the point which Kautsky debates is concerned, my proposition is in harmony with Marx's theory. If the number of workers increase, then capital must increase at a relatively quicker rate — that is the consequence of Marx's reasoning. I think Kautsky will grant that without further demur.* So far we are only concerned as to whether the increased capital is capitalist property only when employed by the undertaker or also when held as shares in an undertaking.
If not, the first locksmith Jones, who carries on his trade with six journeymen and a few apprentices would be a capitalist, but Smith, living on his private means, who has several hundred thousands of marks in a chest, or his son-in-law, the engineer Robinson, who has a greater number of shares which he received as a dowry (not all shareholders are idle men) would be members of the non-possessing class. The absurdity of such classification is patent. Property is property, whether fixed or personal. The share is not only capital, it is indeed capital in its most perfect, one might say its most refined, form. It is the title to a share of the surplus product of the national or world-wide * Note to the English edition. — I am sorry to say Kautsky did not frankly admit his error. He carped at the statistics I have adduced and replied finally that indeed the idle capitalists increased, as if I had represented the capitalist class as a class of workers.
economy freed from all gross contact with the pettinesses of trade activities — dynamic capital, if you like. And if they each and all lived only as idle "rentiers, " the increasing troops of shareholders — we can call them to-day armies of shareholders — even by their mere existence, the manner of their consumption, and the number of their social retainers, represent a most influential power over the economic life of society. The shareholder takes the graded place in the social scale which the captains of industry used to occupy before the concentration of businesses.
Meanwhile there is also something to be said about this concentration. Let us look at it more closely.
(c) The Classes of Establishments in the Production and Distribution of Social Wealth.
General statistics are wanting of the classes of enterprises in industry as regards England which is considered the most advanced of the European countries in capitalist production. They exist only for certain branches of production placed under the Factory Laws and for individual localities.
In the factories and workshops coming under the Factory Laws there were engaged, according to the Factory Inspector's report for 1896, altogether 4,398,983 persons.* That is not * [It would serve no good purpose to give more recent statistics, and it is impossible in some of the cases given quite half the number given as actively engaged in industry according to the census of 1891. The number in the census, omitting the transport trade, is 9,025,902. Of the 4,626,919 remaining persons, we can reckon a fourth to a third as tradesmen in the branches of production referred to, and in some medium-sized and large businesses which do not come under the Factory Laws.
There remain in round numbers 3,000,000 employees and small masters in minute businesses. The 4,000,000 workers under the Factory Laws were distributed among 160,948 factories and workshops which yields an average of twenty-seven to twenty-eight workers per establishment.* If we deal with factories and workshops separately we get 76,297 factories with 3,743,418 employees and 81,669 workshops with 655,565 employees, on the average forty-nine workers to a factory and eight to a registered workshop.