III. The Historical Conditions of Accumulation

• • Preface
  • I. The Problem of Reproduction
  • II. Historical Exposition of the Problem
  • III. The Historical Conditions of Accumulation

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25. Contradictions Within the Diagram of Enlarged Reproduction

In the first section, we ascertained that Marx’s diagram of accumulation does not solve the question of who is to benefit in the end by enlarged reproduction. If we take the diagram literally as it is set out at the end of volume ii, it appears that capitalist production would itself realise its entire surplus value, and that it would use the capitalised surplus value exclusively for its own needs. This impression is confirmed by Marx’s analysis of the diagram where he attempts to reduce the circulation within the diagram altogether to terms of money, that is to say to the effective demand of capitalists and workers – an attempt which in the end leads him to introduce the ‘producer of money’ as a deus ex machina. In addition, there is that most important passage in Capital, volume i, which must be interpreted to mean the same.

‘The annual production must in the first place furnish all those objects (use-values) from which the material components of capital, used up in the course of the year, have to be replaced. Deducting these there remains the net or surplus-product, in which the surplus-value lies. And of what does this surplus value consist? Only of things destined to satisfy the wants and desires of the capitalist class, things which, consequently, enter into the consumption fund of the capitalists? Were that the case, the cup of surplus-value would be drained to the very dregs, and nothing but simple reproduction would ever take place.

‘To accumulate it is necessary to convert a portion of the surplus-product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour-process (i.e. means of production), and such further articles as are suitable for the sustenance of the labourer (i.e. means of subsistence). Consequently, a part of the annual surplus-labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.’

The following conditions of accumulation are here laid down:

1. The surplus value to be capitalised first comes into being in the natural form of capital (as additional means of production and additional means of subsistence for the workers).
2. The expansion of capitalist production is achieved exclusively by means of capitalist products, i.e. its own means of production and subsistence.
3. The limits of this expansion are each time determined in advance by the amount of surplus value which is to be capitalised in any given case; they cannot be extended, since they depend on the amount of the means of production and subsistence which make up the surplus product; neither can they be reduced, since a part of the surplus value could not then be employed in its natural form. Deviations in either direction (above and below) may give rise to periodical fluctuations and crises – in this context, however, these may be ignored, because in general the surplus product to be capitalised must be equal to actual accumulation;
4. Since capitalist production buys up its entire surplus product, there is no limit to the accumulation of capital.

Marx’s diagram of enlarged reproduction adheres to these conditions. Accumulation here takes its course, but it is not in the least indicated who is to benefit by it, who are the new consumers for whose sake production is ever more enlarged. The diagram assumes, say, the following course of events: the coal industry is expanded in order to expand the iron industry in order to expand the machine industry in order to expand the production of consumer goods. This last, in turn, is expanded to maintain both its own workers and the growing army of coal, iron and machine operatives. And so on ad infinitum. We are running in circles, quite in accordance with the theory of Tugan Baranovski. Considered in isolation, Marx’s diagram does indeed permit of such an interpretation since he himself explicitly states time and again that he aims at presenting the process of accumulation of the aggregate capital in a society consisting solely of capitalists and workers. Passages to this effect can be found in every volume of Capital.

In volume i, in the very chapter on The Conversion of Surplus-Value into Capital, he says:

‘In order to examine the object of our investigation in its integrity, free from all disturbing subsidiary circumstances, we must treat the whole world as one nation, and assume that capitalist production is everywhere established and has possessed itself of every branch of industry.’

In volume ii, the assumption repeatedly returns; thus in chapter 17 on The Circulation of Surplus-Value:

‘Now, there are only two points of departure: The capitalist and the labourer. All third classes of persons must either receive money for their services from these two classes, or, to the extent that they receive it without any equivalent services, they are joint owners of the surplus-value in the form of rent, interest, etc. ... The capitalist class, then, remains the sole point of departure of the circulation of money.’

Further, in the same chapter On the Circulation of Money in Particular under Assumption of Accumulation:

‘But the difficulty arises when we assume, not a partial, but a general accumulation of money-capital on the part of the capitalist class. Apart from this class, there is, according to our assumption – the general and exclusive domination of capitalist production – no other class but the working class.’

And again in chapter 20:

‘... there are only two classes in this case, the working class disposing of their labour-power, and the capitalist class owning the social means of production and the money.’

In volume iii, Marx says quite explicitly, when demonstrating the process of capitalist production as a whole:

‘Let us suppose that the whole society is composed only of industrial capitalists and wage workers. Let us furthermore make exceptions of fluctuations of prices which prevent large portions of the total capital from reproducing themselves under average conditions and which, owing to the general interrelations of the entire process of reproduction, such as are developed particularly by credit, must always call forth general stoppages of a transient nature. Let us also make abstraction of the bogus transactions and speculations, which the credit system favours. In that case, a crisis could be explained only by a disproportion of production in various branches, and by a disproportion of the consumption of the capitalists and the accumulation of their capitals. But as matters stand, the reproduction of the capitals invested in production depends largely upon the consuming power of the non-producing classes; while the consuming power of the labourers is handicapped partly by the laws of wages, partly by the fact that it can be exerted only so long as the labourers can be employed at a profit for the capitalist class.’

This last quotation refers to the question of crises with which we are not here concerned. It can leave no doubt, however, that the movement of the total capital, ‘as matters stand’, depends in Marx’s view on three categories of consumers only the capitalists, the workers and the ‘non-productive classes’, i.e. the hangers-on of the capitalist class (king, parson, professor, prostitute, mercenary), of whom he quite rightly disposes in volume ii as the mere representatives of a derivative purchasing power, and thus the parasitic joint consumers of the surplus value or of the wage of labour.

Finally, in Theories of Surplus Value, Marx formulates his general presuppositions with regard to accumulation as follows:

‘Here we have only to consider the forms through which capital passes during the various stages of its development. Thus we do not set out the actual conditions of the real process of production, but always assume that the commodity is sold for what it is worth. We ignore the competition of capitalists and the credit system; we also leave out of account the actual constitution of society which never consists exclusively of the classes of workers and industrial capitalists, and where there is accordingly no strict division between producers and consumers. The first category (of consumers, whose revenues are partly of a secondary, not a primitive nature, derived from profits and the wage of labour) is much wider than the second category (of producers). Therefore the manner in which it spends its income, and the extent of such income, effects very large modifications in the economic household, and especially so in the process of circulation and reproduction of capital.’

Speaking of the ‘actual constitution of society’, Marx here also considers merely the parasitic joint consumers of surplus value and of the wage of labour, i.e. only the hangers-on of the principal categories of capitalist production.

There can be no doubt, therefore, that Marx wanted to demonstrate the process of accumulation in a society consisting exclusively of workers and capitalists, under the universal and exclusive domination of the capitalist mode of production. On this assumption, however, his diagram does not permit of any other interpretation than that of production for production’s sake.

Let us recall the second example of Marx’s diagram of enlarged reproduction:

Here accumulation continues year after year without interruption, the capitalists in each case consuming half of the surplus value they have gained and capitalising the other half. In the process of capitalisation, the same technical foundation, that is to say the same organic composition or division into constant and variable capital and also the same rate of exploitation (always amounting to 100 per cent) is consecutively maintained for the additional capital as it was for the original capital. In accordance with Marx’s assumption in volume i of Capital, the capitalised part of the surplus value first comes into being as additional means of production and as means of subsistence for the workers, both serving the purpose of an ever expanding production in the two departments. It cannot be discovered from the assumptions of Marx’s diagram for whose sake production is progressively expanded. Admittedly, production and consumption increase simultaneously in a society. The consumption of the capitalists increases (in terms of value, in the first year it amounts to 500 + 112, in the second year to 542 + 158, in the third year to 586 + 171, and in the fourth year to 635 + 185); the consumption of the workers increases as well; the variable capital increasing year after year in both departments precisely indicates this growth in terms of value. And yet, the growing consumption of the capitalists can certainly not be regarded as the ultimate purpose of accumulation; on the contrary, there is no accumulation inasmuch as this consumption takes place and increases; personal consumption of the capitalists must be regarded as simple reproduction. Rather, the question is: if, and in so far as, the capitalists do not themselves consume their products but ‘practise abstinence’, i.e. accumulate, for whose sake do they produce? Even less can the maintenance of an ever larger army of workers be the ultimate purpose of continuous accumulation of capital. From the capitalist’s point of view, the consumption of the workers is a consequence of accumulation, it is never its object or its condition, unless the principles (foundations) of capitalist production are to be turned upside down. And in any case, the workers can only consume that part of the product which corresponds to the variable capital, not a jot more. Who, then, realises the permanently increasing surplus value? The diagram answers: the capitalists themselves and they alone. – And what do they do with this increasing surplus value? – The diagram replies: They use it for an ever greater expansion of their production. These capitalists are thus fanatical supporters of an expansion of production for production’s sake. They see to it that ever more machines are built for the sake of building – with their help – ever more new machines. Yet the upshot of all this is not accumulation of capital but an increasing production of producer goods to no purpose whatever. Indeed, one must be as reckless as Tugan Baranovski, and rejoice as much in paradoxical statements, to assume that this untiring merry-go-round in thin air could be a faithful reflection in theory of capitalist reality, a true deduction from Marx’s doctrine.

Besides the analysis of enlarged reproduction roughed out in Capital, volume ii, the whole of Marx’s work, volume ii in particular, contains a most elaborate and lucid exposition of his general views regarding the typical course of capitalist accumulation. If we once fully understand this interpretation, the deficiencies of the diagram at the end of volume ii are immediately evident.

If we examine critically the diagram of enlarged reproduction in the light of Marx’s theory, we find various contradictions between the two.

To begin with, the diagram completely disregards the increasing productivity of labour. For it assumes that the composition of capital is the same in every year, that is to say, the technical basis of the productive process is not affected by accumulation. This procedure would be quite permissible in itself in order to simplify the analysis, but when we come to examine the concrete conditions for the realisation of the aggregate product, and for reproduction, then at least we must take into account, and make allowance for, changes in technique which are bound up with the process of capital accumulation. Yet if we allow for improved productivity of labour, the material aggregate of the social product – both producer and consumer goods – will in consequence show a much more rapid increase in volume than is set forth in the diagram. This increase in the aggregate of use-values, moreover, indicates also a change in the value relationships. As Marx argues so convincingly, basing his whole theory on this axiom, the progressive development of labour productivity reacts on both the composition of accumulating capital and the rate of surplus value so that they cannot remain constant under conditions of increasing accumulation of capital, as was assumed by the diagram. Rather, if accumulation continues, c, the constant capital of both departments, must increase not only absolutely but also relatively to v+c or the total new value (the social aspect of labour productivity); at the same times constant capital and similarly the surplus value must increase relatively to the variable capital – in short, the rate of surplus value, i.e. the ratio between surplus value and variable capital, must similarly increase (the capitalist aspect of labour productivity). These changes need not, of course, occur annually, just as the terms of first, second and third year in Marx’s diagram do not necessarily refer to calendar years but may stand for any given period. Finally, we may choose to assume that these alterations, both in the composition of capital and in the rate of surplus value, take place either in the first, third, fifth, seventh year, etc., or in the second, sixth and ninth year, etc. The important thing is only that they are allowed for somewhere and taken into account as periodical phenomena. If the diagram is amended accordingly, the result of this method of accumulation will be an increasing annual surplus in the consumer at the expense of producer goods. It is true that Tugan Baranovski conquers all difficulties on paper: he simply constructs a diagram with different proportions where year by year the variable capital decreases by 25 per cent. And since this arithmetical exercise is successful enough on paper, Tugan triumphantly claims to have ‘proved’ that accumulation runs smoothly like clockwork, even if the absolute volume of consumption decreases. Even he must admit in the end, however, that his assumption of such an absolute decrease of the variable capital is in striking contrast to reality. Variable capital is in point of fact a growing quantity in all capitalist countries; only in relation to the even more rapid growth of constant capital can it be said to decrease. On the basis of what is actually happening, namely a greater yearly increase of constant capital as against that of variable capital, as well as a growing rate of surplus value, discrepancies must arise between the material composition of the social product and the composition of capital in terms of value. If, instead of the unchanging proportion of 5 to 1 between constant and variable capital, proposed by Marx’s diagram, we assume for instance that this increase of capital is accompanied by a progressive readjustment of its composition, the proportion between constant and variable in the second year being 6 to 1, in the third year 7 to 1, and in the fourth year 8 to 1 – if we further assume that the rate of surplus value also increases progressively in accordance with the higher productivity of labour so that, in each case, we have the same amounts as those of the diagram, although, because of the relatively decreasing variable capital, the rate of surplus value does not remain constant at the original 100 per cent – and if finally we assume that one-half of the appropriated surplus value is capitalised in each case (excepting Department II where capitalisation exceeds 50 per cent, 184 out of 285 being capitalised during the first year), the result will be as follows:

If this were a true picture of the accumulative process, the means of production (constant capital) would show a deficit of 16 in the second year, of 45 in the third year and of 88 in the fourth year; similarly, the means of subsistence would show a surplus of 16 in the second year, of 45 in the third year and of 88 in the fourth year.

This negative balance for the means of production may be only imaginary in part. The increasing productivity of labour ensures that the means of production grow faster in bulk than in value, in other words: means of production become cheaper. As it is use value, i.e. the material elements of capital, which is relevant for technical improvements of production, we may assume that the quantity of means of production, in spite of their lower value, will suffice for progressive accumulation up to a certain point. This phenomenon amongst others also checks the actual decline of the rate of profit and modifies it to a mere tendency, though our example shows that the decline of the profit rate would not only be retarded but rather completely arrested. On the other hand, the same fact indicates a much larger surplus of unsaleable means of subsistence than is suggested by the amount of this surplus in terms of value. In that case, we should have to compel the capitalists of Department II to consume this surplus themselves, which Marx makes them do on other occasions; in which case, and in so far as those capitalists are concerned, there would again be no accumulation but rather simple reproduction. Alternatively, we should have to pronounce this whole surplus unsaleable.

Yet would it not be very easy to make good this loss in means of production which results from our example? We need only assume that the capitalists of Department I capitalise their surplus value to a greater extent. Indeed, there is no valid reason to suppose, as Marx did, that the capitalists in each case add only half their surplus value to their capital. Advances in labour productivity may well lead to progressively increasing capitalisation of surplus value. This assumption is the more permissible in that the cheapening of consumer goods for the capitalist class, too, is one of the consequences of technological progress. The relative decrease in the value of consumable income (as compared with the capitalised part) may then permit of the same or even a higher standard of living for this class. We might for instance make goad the deficit in producer goods by transferring a corresponding part of surplus value I to the constant capital of this department, a part which would otherwise be consumed, since this surplus value, like all other products of the department, originally takes the form of producer goods; 11⁴/7 would then be transferred in the second year, 34 in the third year and 66 in the fourth year. The solution of one difficulty, however, only adds to another. It goes without saying that if the capitalists of Department I relatively restrict their consumption for purposes of accumulation, there will be a proportionately greater unsaleable residue of consumer goods in Department II; and thus it becomes more and more impossible to enlarge the constant capital even on its previous technological basis. If the capitalists in Department I relatively restrict their consumption, the capitalists of Department II must relatively expand their personal consumption in proportion. The assumption of accelerated accumulation in Department I would then have to be supplemented by that of retarded accumulation in Department II, technical progress in one department by regression in the other.

These results are not due to mere chance. The adjustments we have tried out on Marx’s diagram are merely meant to illustrate that technical progress, as he himself admits, must be accompanied by a relative growth of constant as against variable capital. Hence the necessity for a continuous revision of the ratio in which capitalised surplus value should be allotted to c and v respectively. In Marx’s diagram, however, the capitalists are in no position to make these allocations at will, since the material form of their surplus value predetermines the forms of capitalisation. Since, according to Marx’s assumption, all expansion of production proceeds exclusively by means of its own, capitalistically produced means of production and subsistence, – since there are here no other places and forms of production and equally no other consumers than the two departments with their capitalists and workers, – and since, on the other hand, the smooth working of the accumulative process depends on that circulation should wholly absorb the aggregate product of both departments, the technological shape of enlarged reproduction is in consequence strictly prescribed by the material form of the surplus product. In other words: according to Marx’s diagram, the technical organisation of expanded production can and must be such as to make use of the aggregate surplus value produced in Departments I and II. In this connection we must bear in mind also that both departments can obtain their respective elements of production only by means of mutual exchange. Thus the allocation to constant or variable capital of the surplus value earmarked for capitalisation, as well as the allotment of the additional means of production and subsistence (for the workers) to Departments I and II is given in advance and determined by the relations between the two departments of the diagram – both in material and in terms of value. These relations themselves, however, reflect a quite determinate technical organisation of production. This implies that, on the assumptions of Marx’s diagram, the techniques of production given in each case predetermine the techniques of the subsequent periods of enlarged reproduction, if accumulation continues. Assuming, that is to say, in accordance with Marx’s diagram, that the expansion of capitalist production is always performed by means of the surplus value originally produced in form of capital, and further – or rather, conversely – that accumulation in one department is strictly dependent on accumulation in the other, then no change in the technical organisation of production can be possible in so far as the relation of c to v is concerned.

We may put our point in yet another way: it is clear that a quicker growth of constant as compared with variable capital, i.e. the progressive metamorphosis of the organic composition of capital, must take the material form of faster expansion of production in Department I as against production in Department II. Yet Marx’s diagram, where strict conformity of the two departments is axiomatic, precludes any such fluctuations in the rate of accumulation in either department. It is quite legitimate to suppose that under the technical conditions of progressive accumulation, society would invest ever increasing portions of the surplus value earmarked for accumulation in Department I rather than in Department II. Both departments being only branches of the same social production – supplementary enterprises, if you like, of the ‘aggregate capitalist’ – such a progressive transfer, for technical reasons, from one department to the other of a part of the accumulated surplus value would be wholly feasible, especially as it corresponds to the actual practice of capital. Yet this assumption is possible only so long as we envisage the surplus value earmarked for capitalisation purely in terms of value. The diagram, however, implies that this part of the surplus value appears in a definite material form which prescribes its capitalisation. Thus the surplus value of Department II exists as means of subsistence, and since it is as such to be only realised by Department I, this intended, transfer of part of the capitalised surplus value from Department II to Department I is ruled out, first because the material form of this surplus value is obviously useless to Department I, and secondly because of the relations of exchange between the two departments which would in turn necessitate an equivalent transfer of the products of Department I into Department II. It is therefore downright impossible to achieve a faster expansion of Department I as against Department II within the limits of Marx’s diagram.

However we may regard the technological alterations of the mode of production in the course of accumulation, they cannot be accomplished without upsetting the fundamental relations of Marx’s diagram.

And further: according to Marx’s diagram, the capitalised surplus value is in each case immediately and completely absorbed by the productive process of the following period, for, apart from the portion earmarked for consumption, it has a natural form which allows of only one particular kind of employment. The diagram precludes the cashing and hoarding of surplus value in monetary form, as capital waiting to be invested. The free monetary forms of private capital, in Marx’s view, are first the money deposited gradually against the wear and tear of the fixed capital, for its eventual renewal; and secondly those amounts of money which represent realised surplus value but are still too small for investment. From the point of view of the aggregate capital, both these sources of free money capital are negligible. For if we assume that even a portion of the social surplus value is realised in monetary form for purposes of future investment, then at once the question arises: who has bought the material items of this surplus value, and who has provided the money? If the answer is: other capitalists, of course, – then, seeing that the capitalist class is represented in the diagram by the two departments, this portion of the surplus value must also be regarded as invested de facto, as employed in the productive process. And so we are back at immediate and complete investment of the surplus value.

Or does the freezing of one part of the surplus value in monetary form in the hands of certain capitalists mean that other capitalists will be left with a corresponding part of that surplus product in its material form? does the hoarding of realised surplus value by some imply that others are no longer able to realise their surplus value, since the capitalists are the only buyers of surplus value? This would mean, however, that the smooth course of reproduction and similarly of accumulation as described in the diagram would be interrupted. The result would be a crisis, due not to over-production but to a mere intention to accumulate, the kind of crisis envisaged by Sismondi.

In one passage of his Theories, Marx explains in so many words that he ‘is not at all concerned in this connection with an accumulation of capital greater than can be used in the productive process and might lie idle in the banks in monetary form, with the consequence of lending abroad’. Marx refers these phenomena to the section on competition. Yet it is important to establish that his diagram veritably precludes the formation of such additional capital. Competition, however wide we may make the concept, obviously cannot create values, nor can it create capitals which are not themselves the result of the reproductive process.

The diagram thus precludes the expansion of production by leaps and bounds. It only allows of a gradual expansion which keeps strictly in step with the formation of the surplus value and is based upon the identity between realisation and capitalisation of the surplus value.

For the same reason, the diagram presumes an accumulation which affects both departments equally and therefore all branches of capitalist production. It precludes expansion of the demand by leaps and bounds just as much as it prevents a one sided or precocious development of individual branches of capitalist production.

Thus the diagram assumes a movement of the aggregate capital which flies in the face of the actual course of capitalist development. At first sight, two facts are typical for the history of the capitalist mode of production: on the one hand the periodical expansion of the whole field of production by leaps and bounds, and on the other an extremely unequal development of the different branches of production. The history of the English cotton industry from the first quarter of the eighteenth to the seventies of the nineteenth century, the most characteristic chapter in the history of the capitalist mode of production appears quite inexplicable from the point of view of Marx’s diagram.

Finally, the diagram contradicts the conception of the capitalist total process and its course as laid down by Marx in Capital, volume iii. This conception is based on the inherent contradiction between the unlimited expansive capacity of the productive forces and the limited expansive capacity of social consumption under conditions of capitalist distribution. Let us see how Marx describes this contradiction in detail in chapter 15 on Unravelling the Internal Contradictions of the Law (of the declining profit rate):

‘The creation of surplus-value, assuming the necessary means of production, or sufficient accumulation of capital, to be existing, finds no other limit but the labouring population, when the rate of surplus-value, that is, the intensity of exploitation, is given; and no other limit but the intensity of exploitation, when the labouring population is given. And the capitalist process of production consists essentially of the production of surplus-value, materialised in the surplus-product, which is that aliquot portion of the produced commodities, in which unpaid labour is materialised. It must never be forgotten, that the production of this surplus-value – and the re-conversion of a portion of it into capital, or accumulation, forms an indispensable part of this production of surplus-value – is the immediate purpose and the compelling motive of capitalist production. It will not do to represent capitalist production as something which it is not, that is to say, as a production having for its immediate purpose the consumption of goods, or the production of means of enjoyment for the capitalists. (And, of course, even less for the worker. – R.L.) This would be overlooking the specific character of capitalist production, which reveals itself in its innermost essence. The creation of this surplus-value is the object of the direct process of production, and this process has no other limits than those mentioned above. As soon as the available quantity of surplus-value has been materialised in commodities, surplus value has been produced. But this production of surplus-value is but the first act of the capitalist process of production, it merely terminates the act of direct production. Capital has absorbed so much unpaid labour. With the development of the process, which expresses itself through a falling tendency of the rate of profit, the mass of surplus-value thus produced is swelled to immense dimensions. Now comes the second act of the process. The entire mass of commodities, the total product, which contains a portion which is to reproduce the constant and variable capital as well as a portion representing surplus-value, must be sold. If this is not done, or only partly accomplished, or only at prices which are below the prices of production, the labourer has been none the less exploited, but his exploitation does not realise as much for the capitalist. It may yield no surplus-value at all for him, or only realise a portion of the produced surplus-value, or it may even mean a partial or complete loss of his capital. The conditions of direct exploitation and those of the realisation of surplus-value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relations of the various lines of production and by the consuming power of society. This last-named power is not determined either by the absolute productive power or by the absolute consuming power, but by the consuming power based on antagonistic conditions of distribution, which reduces the consumption of the great mass of the population to a variable minimum within more or less narrow limits. The consuming power is furthermore restricted by the tendency to accumulate, the greed for an expansion of capital and a production of surplus value on an enlarged scale. This is a law of capitalist production imposed by incessant revolutions in the methods of production themselves, the resulting depreciation of existing capital, the general competitive struggle and the necessity of improving the product and expanding the scale of production, for the sake of self-preservation and on penalty of failure. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law independent of the producers and become ever more uncontrollable. This eternal contradiction seeks to balance itself by an expansion of the outlying fields of production. But to the extent that the productive power develops, it finds itself at variance with the narrow basis on which the conditions of consumption rest. On this self-contradictory basis it is no contradiction at all that there should be an excess of capital simultaneously with an excess of population. For while a combination of these two would indeed increase the mass of the produced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplus-value is produced and those under which it is realised.’

If we compare this description with the diagram of enlarged reproduction, the two are by no means in conformity. According to the diagram, there is no inherent contradiction between the production of the surplus value and its realisation, rather, the two are identical. The surplus value here from the very beginning comes into being in a natural form exclusively designed for the requirements of accumulation. In fact it leaves the place of production in the very form of additional capital, that is to say it is capable of realisation in the capitalist process of accumulation. The capitalists, as a class, see to it in advance that the surplus value they appropriate is produced entirely in that material form which will permit and ensure its employment for purposes of further accumulation. Realisation and accumulation of the surplus value here are both aspects of the same process, they are logically identical. Therefore according to the presentation of the reproductive process in the diagram, society’s capacity to consume does not put a limit to production. Here production automatically expands year by year, although the capacity of society for consumption has not gone beyond its ‘antagonistic conditions of distribution’. This automatic continuation of expansion, of accumulation, truly is the ‘law of capitalist production ... on penalty of failure’. Yet according to the analysis in volume iii, ‘the market must, therefore, be continually extended’, ‘the market’ obviously transcending the consumption of capitalists and workers. And if Tugan Baranovski interprets the following passage ‘this eternal contradiction seeks to balance itself by an expansion of the outlying fields of production’ as if Marx had meant production itself by ‘outlying fields of production’, he violates not only the spirit of the language but also Marx’s clear train of thought. The ‘outlying fields of production’ are clearly and unequivocally not production itself but consumption which ‘must be continually extended’. The following passage in Theorien über den Mehrwert, amongst others, sufficiently shows that Marx had this in mind and nothing else:

‘Ricardo therefore consistently denies the necessity for an expansion of the market to accompany the expansion of production and the growth of capital. The entire capital existing within a country can also be profitably used in that country. He therefore argues against Adam Smith who had set up his (Ricardo’s) opinion on the one hand but also contradicted it with his usual sure instinct.’

In yet another passage, Marx clearly shows that Tugan Baranovski’s notion of production for production’s sake is wholly alien to him:

‘Besides, we have seen in volume ii part iii that a continuous circulation takes place between constant capital and constant capital (even without considering any accelerated accumulation), which is in so far independent of individual consumption, as it never enters into such consumption, but which is nevertheless definitely limited by it because the production of constant capital never takes place for its own sake, but solely because more of this capital is needed in those spheres of production whose products pass into individual consumption.’

Admittedly, in the diagram in volume ii, Tugan Baranovski’s sole support, market and production coincide – they are one and the same. Expansion of the market here means extended production, since production is said to be its own exclusive market – the consumption of the workers being an element of production, i.e. the reproduction of variable capital. Therefore the limit for both the expansion of production and the extension of the market is one and the same: it is given by the volume of the social capital, or the stage of accumulation already attained. The greater the quantity of surplus value that has been extracted in the natural form of capital, the more can be accumulated; and the greater the volume of accumulation, the more surplus value can be invested in its material form of capital, i.e. the more can be realised. Thus the diagram does not admit the contradiction outlined in the analysis of volume iii. In the process described by the diagram there is no need for a continual extension of the market beyond the consumption of capitalists and workers, nor is the limited social capacity for consumption an obstacle to the smooth course of production and its unlimited capacity for expansion. The diagram does indeed permit of crises but only because of a lack of proportion within production, because of a defective social control over the productive process. It precludes, however, the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market.

26. The Reproduction of Capital and Its Social Setting

MARX’S diagram of enlarged reproduction cannot explain the actual and historical process of accumulation. And why? Because of the very premises of the diagram. The diagram sets out to describe the accumulative process on the assumption that the capitalists and workers are the sole agents of capitalist consumption. We have seen that Marx consistently and deliberately assumes the universal and exclusive domination of the capitalist mode of production as a theoretical premise of his analysis in all three volumes of Capital. Under these conditions, there can admittedly be no other classes of society than capitalists and workers; as the diagram has it, all ‘third persons’ of capitalist society – civil servants, the liberal professions, the clergy, etc. – must, as consumers, be counted in with these two classes, and preferably with the capitalist class. This axiom, however, is a theoretical contrivance – real life has never known a self-sufficient capitalist society under the exclusive domination of the capitalist mode of production. This theoretical device is perfectly admissible so long as it merely helps to demonstrate the problem in its integrity and does not interfere with its very conditions. A case in point is the analysis of simple reproduction of the aggregate social capital, where the problem itself rests upon a fiction: in a society producing by capitalist methods, i.e. a society which creates surplus value, the whole of the latter is taken to be consumed by the capitalists who appropriate it. The object is to present the forms of social production and reproduction under these given conditions. Here the very formulation of the problem implies that production knows no other consumers than capitalists and workers and thus strictly conforms to Marx’s premise: universal and exclusive domination of the capitalist mode of production. The implications of both fictions are the same. Similarly, it is quite legitimate to postulate absolute dominance of capital in an analysis of the accumulation of individual capitals, such as is given in Capital, volume i. The reproduction of individual capitals is an element in total social reproduction but one which follows an independent course, contrary to the movements of the other elements. In consequence it will not do simply to take together the individual movements of the respective capitals in order to arrive at the total movement of social capital, since the latter is essentially different. The natural conditions of reproducing individual capitals therefore neither conform with one another, nor do they conform to the relations of the total capital. Under normal conditions of circulation, every individual capital engages in the process of circulation and of accumulation entirely on its own account, depending upon others only in so far, of course, as it is compelled to find a market for its product and must find available the means of production it requires for its specific activities. Whether the strata who afford this market and provide the necessary means of production are themselves capitalist producers or not is completely immaterial for the individual capital, although, in theory, the most favourable premise for analysing the accumulation of individual capital is the assumption that capitalist production has attained universal and exclusive domination and is the sole setting of this process.

Now, however, the question arises whether the assumptions which were decisive in the case of individual capital, are also legitimate for the consideration of aggregate capital.

‘We must now put the problem in this form: given universal accumulation, that is to say provided that in all branches of production there is greater or less accumulation of capital – which in fact is a condition of capitalist production, and which is just as natural to the capitalist qua capitalist as it is natural to the miser to amass money (but which is also necessary for the perpetuation of capitalist production) – what are the conditions of this universal accumulation, to what elements can it be reduced?’

And the answer:

‘The conditions for the accumulation of capital are precisely those which rule its original production and reproduction in general: these conditions being that one part of the money buys labour and the other commodities (raw materials, machinery, etc.) ... Accumulation of new capital can only proceed therefore under the same conditions under which already existing capital is reproduced.’

In real life the actual conditions for the accumulation of the aggregate capital are quite different from those prevailing for individual capitals and for simple reproduction. The problem amounts to this: If an increasing part of the surplus value is not consumed by the capitalists but employed in the expansion of production, what, then, are the forms of social reproduction? What is left of the social product after deductions for the replacement of the constant capital cannot, ex hypothesi, be absorbed by the consumption of the workers and capitalists – this being the main aspect of the problem – nor can the workers and capitalists themselves realise the aggregate product. They can always only realise the variable capital, that part of the constant capital which will be used up, and the part of the surplus value which will be consumed, but in this way they merely ensure that production can be renewed on its previous scale. The workers and capitalists themselves cannot possibly realise that part of the surplus value – which is to be capitalised. Therefore, the realisation of the surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists. Strangely enough, all theorists who analysed the problem of accumulation, from Ricardo and Sismondi to Marx, started with the very assumption which makes their problem insoluble. A sure instinct that realisation of the surplus value requires ‘third persons’, that is to say consumers other than the immediate agents of capitalist production (i.e. workers and capitalists) led to all kinds of subterfuges: ‘unproductive consumption’ as presented by Malthus in the person of the feudal landowner, by Vorontsov in militarism, by Struve in the ‘liberal professions’ and other hangers-on of the capitalist class; or else foreign trade is brought into play which proved a useful safety valve to all those who regarded accumulation with scepticism, from Sismondi to Nikolayon. Because of these insoluble difficulties, others like v. Kirchmann and Rodbertus tried to do without accumulation altogether, or, like Sismondi and his Russian ‘populist’ followers, stressed the need for at least putting the dampers on accumulation as much as possible.

The salient feature of the problem of accumulation, and the vulnerable point of earlier attempts to solve it, has only been shown up by Marx’s more profound analysis, his precise diagrammatic demonstration of the total reproductive process, and especially his inspired exposition of the problem of simple reproduction. Yet he could not supply immediately a finished solution either, partly because he broke off his analysis almost as soon as he had begun it, and partly because he was then preoccupied, as we have shown, with denouncing the analysis of Adam Smith and thus rather lost sight of the main problem. In fact, he made the solution even more difficult by assuming the capitalist mode of production to prevail universally. Nevertheless, a solution of the problem of accumulation, in harmony both with other parts of Marx’s doctrine and with the historical experience and daily practice of capitalism, is implied in Marx’s complete analysis of simple reproduction and his characterisation of the capitalist process as a whole which shows up its immanent contradictions and their development (in Capital, vol.iii). In the light of this, the deficiencies of the diagram can be corrected. All the relations being, as it were, incomplete, a closer study of the diagram of enlarged reproduction will reveal that it points to some sort of organisation more advanced than purely capitalist production and accumulation.

Up to now we have only considered one aspect of enlarged reproduction, the problem of realising the surplus value, whose difficulties hitherto had claimed the sceptics’ whole attention. Realisation of the surplus value is doubtless a vital question of capitalist accumulation. It requires as its prime condition – ignoring, for simplicity’s sake, the capitalists’ fund of consumption altogether – that there should be strata of buyers outside capitalist society. Buyers, it should be noted, not consumers, since the material form of the surplus value is quite irrelevant to its realisation. The decisive fact is that the surplus value cannot be realised by sale either to workers or to capitalists, but only if it is sold to such social organisations or strata whose own mode of production is not capitalistic. Here we can conceive of two different cases:

1. Capitalist production supplies consumer goods over and above its own requirements, the demand of its workers and capitalists, which are bought by non-capitalist strata and countries. The English cotton industry, for instance, during the first two-thirds of the nineteenth century, and to some extent even now, has been supplying cotton textiles to the peasants and petty-bourgeois townspeople of the European continent, and to the peasants of India, America, Africa and so on. The enormous expansion of the English cotton industry was thus founded on consumption by non-capitalist strata and countries. In England herself; this flourishing cotton industry called forth large-scale development in the production of industrial machinery (bobbins and weaving-looms), and further in the metal and coal industries and so on. In this instance, Department II realised its products to an increasing extent by sale to non-capitalist social strata, and by its own accumulation it created on its part an increasing demand for the home produce of Department I, thus helping the latter to realise its surplus value and to increase its own accumulation.
2. Conversely, capitalist production supplies means of production in excess of its own demand and finds buyers in non-capitalist countries. English industry, for instance, in the first half of the nineteenth century supplied materials for the construction of railroads in the American and Australian states. (The building of railways cannot in itself be taken as evidence for the domination of capitalist production in a country. As a matter of fact, the railways in this case provided only one of the first conditions for the inauguration of capitalist production.) Another example would be the German chemical industry which supplies means of production such as dyes in great quantities to Asiatic, African and other countries whose own production is not capitalistic. Here Department I realises its products in extra-capitalist circles. The resulting progressive expansion of Department I gives rise to a corresponding expansion of Department II in the same (capitalistically producing) country in order to supply the means of subsistence for the growing army of workers in Department I.

Each of these cases differs from Marx’s diagram. In one case, the product of Department II exceeds the needs of both departments, measured by the variable capital and the consumed part of the surplus value. In the second case, the product of Department I exceeds the volume of constant capital in both departments, enlarged though it is for the purpose of expanding production. In both cases, the surplus value does not come into being in that natural form which would make its capitalisation in either department possible and necessary. These two prototypes continually overlap in real life, supplement each other and merge.

In this contest, one point seems still obscure. The surplus of consumer goods, say cotton fabrics, which is sold to non-capitalist countries, does not exclusively represent surplus value, but, as a capitalist commodity, it embodies also constant and variable capital. It seems quite arbitrary to assume that just those commodities which are sold outside the capitalist strata of society should represent nothing but surplus value. On the other hand, Department I clearly can in this case not only realise its surplus value but also accumulate, and that without requiring another market for its product than the two departments of capitalist production. Yet both these objections are only apparent. All we need remember is that each component of the aggregate product represents a proportion of the total value, that under conditions of capitalist production not only the aggregate product but every single commodity contains surplus value; which consideration does not prevent the individual capitalist, however, from computing that the sale of his specific commodities must first reimburse him for his outlay on constant capital and secondly replace his variable capital (or, rather loosely, but in accordance with actual practice: it must first replace his fixed, and then his circulating capital); what then remains will go down as profit. Similarly, we can divide the aggregate social product into three proportionate parts which, in terms of value, correspond to (1) the constant capital that has been used up in society, (2) the variable capital, and (3) the extracted surplus value. In the case of simple reproduction these proportions are also reflected in the material shape of the aggregate product: the constant capital materialises as means of production, the variable capital as means of subsistence for the workers, and the surplus value as means of subsistence for the capitalist. Yet as we know, the concept of simple reproduction with consumption of the entire surplus value by the capitalists is a mere fiction. As for enlarged reproduction or accumulation, in Marx’s diagram the composition of the social product in terms of value is also strictly in proportion to its material form the surplus value, or rather that part of it which is earmarked for capitalisation, has from the very beginning the form of material means of production and means of subsistence for the workers in a ratio appropriate to the expansion of production on a given technical basis. As we have seen, this conception, which is based upon the self-sufficiency and isolation of capitalist production, falls down as soon as we consider the realisation of the surplus value. If we assume, however, that the surplus value is realised outside the sphere of capitalist production, then its material form is independent of the requirements of capitalist production itself. Its material form conforms to the requirements of those non-capitalist circles who help to realise it, that is to say, capitalist surplus value can take the form of consumer goods, e.g. cotton fabrics, or of means of production, e.g. materials for railway construction, as the case may be. If one department realises its surplus value by exporting its products, and with the ensuing expansion of production helps the other department to realise its surplus value on the home market, then the fact still remains that the social surplus value must yet be taken as realised outside the two departments, either mediately or immediately. Similar considerations enable the individual capitalist to realise his surplus value, even if the whole of his commodities can only replace either the variable or the constant capital of another capitalist.

Nor is the realisation of the surplus value the only vital aspect of reproduction. Given that Department I has disposed of its surplus value outside, thereby starting the process of accumulation, and further, that it can expect a new increase in the demand in non-capitalist circles, these two conditions add up to only half of what is required for accumulation. There is many a slip twixt the cup and the lip. The second requirement of accumulation is access to material elements necessary for expanding reproduction. Seeing that we have just turned the surplus product of Department I into money by getting rid of the surplus means of production to non-capitalist circles, from where are these material elements then to come? The transaction which is the portal for realising the surplus value is also, as it were, a backdoor out of which flies all possibility of converting this realised surplus value into productive capital – one leads to the nether regions and the other to the deep sea. Let us take a closer look.

Here we use c in both Departments I and II as if it were the entire constant capital in production. Yet this we know is wrong. Only for the sake of simplifying the diagram have we disregarded that the c which figures in Departments I and II of the diagram is only part of the aggregate constant capital of society, that is to say that part which, circulating during one year, is used up and embodied in the products of one period of production. Yet it would be perfectly absurd if capitalist production – or any other – would use up its entire constant capital and create it anew in every period of production. On the contrary, we assume that the whole mass of means of production, for the periodical total renewal of which the diagram provides in annual installments – renewal of the used-up part – lies at the back of production as presented in the diagram. With progressing labour productivity and an expanding volume of production, this mass increases not only absolutely but also relatively to the part which is consumed in production in every case, together with a corresponding increase in the efficiency of the constant capital. It is the more intensive exploitation of this part of the constant capital, irrespective of its increase in value, which is of paramount importance for the expansion of production.

‘In the extractive industries, mines, etc., the raw materials form no part of the capital advanced. The subject of labour is in this case not a product of previous labour, but is furnished by Nature gratis, as in the case of metals, minerals; coal, stone, etc. In these cases the constant capital consists almost exclusively of instruments of labour, which can very well absorb an increased quantity of labour (day and night shifts of labourers, e.g.). All other things being equal, the mass and value of the product will rise in direct proportion to the labour expended. As on the first day of production, the original produce-formers, now turned into the creators of the material elements of capital – man and Nature – still work together. Thanks to the elasticity of labour-power, the domain of accumulation has extended without any previous enlargement of constant capital. – In agriculture the land under cultivation cannot be increased without the advance of more seed and manure. But this advance once made, the purely mechanical working of the soil itself produces a marvellous effect on the amount of the product. A greater quantity of labour, done by the same number of labourers as before, thus increases the fertility, without requiring any new advance in the instruments of labour. It is once again the direct action of man on Nature which becomes an immediate source of greater accumulation, without the intervention of any new capital. Finally, in what is called manufacturing industry, every additional expenditure of labour presupposes a corresponding additional expenditure of raw materials, but not necessarily of instruments of labour. And as extractive industry and agriculture supply manufacturing industry with its raw materials and those of its instruments of labour, the additional product the former have created without additional advance of capital, tells also in favour of the latter. – General result: by incorporating with itself the two primary creators of wealth, labour-power and the land, capital acquires a power of expansion that permits it to augment the elements of its accumulation beyond the limits apparently fixed by its own magnitude, or by the value and the mass of the means of production, already produced, in which it has its being.’

In addition, there is no obvious reason why means of production and consumer goods should be produced by capitalist methods alone. This assumption, for all Marx used it as the corner-stone of his thesis, is in conformity neither with the daily practice, and the history, of capital, nor with the specific character of this mode of production. In the first half of the nineteenth century, a great part of the surplus value in England was produced in form of cotton fabrics. Yet the material elements for the capitalisation of this surplus value, although they certainly represented a surplus product, still were by no means all capitalist surplus value, to mention only raw cotton from the slave states of the American Union, or grain (a means of subsistence for the English workers) from the fields of serf-owning Russia. How much capitalist accumulation depends upon means of production which are not produced by capitalist methods is shown for example by the cotton crisis in England during the American War of Secession, when the cultivation of the plantations came to a standstill, or by the crisis of European linen weaving during the war in the East, when flax could not be imported from serf-owning Russia. We need only recall that imports of corn raised by peasants – i.e. not produced by capitalist methods – played a vital part in the feeding of industrial labour, as an element, that is to say, of variable capital, for a further illustration of the close ties between non-capitalist strata and the material elements necessary to the accumulation of capital.

Moreover, capitalist production, by its very nature, cannot be restricted to such means of production as are produced by capitalist methods. Cheap elements of constant capital are essential to the individual capitalist who strives to increase his rate of profit. In addition, the very condition of continuous improvements in labour productivity as the most important method of increasing the rate of surplus value, is unrestricted utilisation of all substances and facilities afforded by nature and soil. To tolerate any restriction in this respect would be contrary to the very essence of capital, its whole mode of existence. After many centuries of development, the capitalist mode of production still constitutes only a fragment of total world production. Even in the small Continent of Europe, where it now chiefly prevails, it has not yet succeeded in dominating entire branches of production, such as peasant agriculture and the independent handicrafts; the same holds true, further, for large parts of North America and for a number of regions in the other continents. In general, capitalist production has hitherto been confined mainly to the countries in the temperate zone, whilst it made comparatively little progress in the East, for instance, and the South. Thus, if it were dependent exclusively, on elements of production obtainable within such narrow limits, its present level and indeed, its development in general would have been impossible. From the very beginning, the forms and laws of capitalist production aim to comprise the entire globe as a store of productive forces. Capital, impelled to appropriate productive forces for purposes of exploitation, ransacks the whole world, it procures its means of production from all corners of the earth, seizing them, if necessary by force, from all levels of civilisation and from all forms of society. The problem of the material elements of capitalist accumulation, far from being solved by the material form of the surplus value that has been produced, takes on quite a different aspect. It becomes necessary for capital progressively to dispose ever more fully of the whole globe, to acquire an unlimited choice of means of production, with regard to both quality and quantity, so as to find productive employment for the surplus value it has realised.

The process of accumulation, elastic and spasmodic as it is, requires inevitably free access to ever new areas of raw materials in case of need, both when imports from old sources fall or when social demand suddenly increases. When the War of Secession interfered with the import of American cotton, causing the notorious ‘cotton famine’ in the Lancashire district, new and immense cotton plantations sprang up in Egypt almost at once, as if by magic. Here it was Oriental despotism, combined with an ancient system of bondage, which had created a sphere of activity for European capital. Only capital with its technical resources can effect such a miraculous change in so short a time – but only on the pre-capitalist soil of more primitive social conditions can it develop the ascendancy necessary to achieve such miracles. Another example of the same kind is the enormous increase in the world consumption of rubber which at present (1912) necessitates a supply of latex to the value of £50,000,000 per annum. The economic basis for the production of raw materials is a primitive system of exploitation practised by European capital in the African colonies and in America; where the institutions of slavery and bondage are combined in various forms.

Between the production of surplus value, then, and the subsequent period of accumulation, two separate transactions take place – that of realising the surplus value, i.e. of converting it into pure value, and that of transforming this pure value into productive capital. They are both dealings between capitalist production and the surrounding non-capitalist world. From the aspect both of realising the surplus value and of procuring the material elements of constant capital, international trade is a prime necessity for the historical existence of capitalism – an international trade which under actual conditions is essentially an exchange between capitalistic and non-capitalistic modes of production.

Hitherto we have considered accumulation solely with regard to surplus value and constant capital. The third element of accumulation is variable capital winch increases with progressive accumulation. In Marx’s diagram, the social product contains ever more means of subsistence for the workers as the material form proper to this variable capital. The variable capital, however, is not really the means of subsistence for the worker but is in fact living labour for whose reproduction these means of subsistence are necessary. One of the fundamental conditions of accumulation is therefore a supply of living labour which can be mobilised by capital to meet its demands. This supply can be increased under favourable conditions – but only up to a certain point – by longer hours and more intensive work. Both these methods of increasing the supply, however, do not enlarge the variable capital, or do so only to a small extent (e.g. payment for overtime). Moreover, they are confined to definite and rather narrow limits which they cannot exceed owing to both natural and social causes. The increasing growth of variable capital which accompanies accumulation must therefore become manifest in ever greater numbers of employed labour. Where can this additional labour be found?

In his analysis of the accumulation of individual capital, Marx gives the following answer:

‘Now in order to allow of these elements actually functioning as capital, the capitalist class requires additional labour. If the exploitation of the labourers already employed does not increase, either extensively or intensively, then additional labour-power must be found. For this the mechanism of capitalist production provides beforehand, by converting the working class into a class dependent on wages, a class whose ordinary wages suffice, not only for its maintenance, but for its increase. It is only necessary for capital to incorporate this additional labour-power, annually supplied by the working class in the shape of labourers of all ages, with the surplus means of production comprised in the annual produce, and the conversion of surplus-value into capital is complete.’

Thus the increase in the variable capital is directly and exclusively attributed to the natural physical increase of a working class already dominated by capital. This is in strict conformity with the diagram of enlarged reproduction which recognises only the social classes of capitalists and workers, and regards the capitalist mode of production as exclusive and absolute. On these assumptions, the natural increase of the working class is the only source of extending the labour supply commanded by capital. This view, however, is contrary to the laws governing the process of accumulation. The natural propagation of the workers and the requirements of accumulating capital are not correlative in respect of time or quantity. Marx himself has most brilliantly shown that natural propagation cannot keep up with the sudden expansive needs of capital. If natural propagation were the only foundation for the development of capital, accumulation, in its periodical swings from overstrain to exhaustion, could not continue, nor could the productive sphere expand by leaps and bounds, and accumulation itself would become impossible. The latter requires an unlimited freedom of movement in respect of the growth of variable capital equal to that which it enjoys with regard to the elements of constant capital – that is to say it must needs dispose over the supply of labour power without restriction. Marx considers that this can be achieved by an ‘industrial reserve army of workers’. His diagram of simple reproduction admittedly does not recognise such an army, nor could it have room for it, since the natural propagation of the capitalist wage proletariat cannot provide an industrial reserve army. Labour for this army is recruited from social reservoirs outside the dominion of capital – it is drawn into the wage proletariat only if need arises. Only the existence of non-capitalist groups and countries can guarantee such a supply of additional labour power for capitalist production. Yet in his analysis of the industrial reserve Marx only allows for (a) the displacement of older workers by machinery, (b) an influx of rural workers into the towns in consequence of the ascendancy of capitalist production in agriculture, (c) occasional labour that has dropped out of industry, and (d) finally the lowest residue of relative over-population, the paupers. All these categories are cast off by the capitalist system of production in some form or other, they constitute a wage proletariat that is worn out and made redundant one way or another. Marx, obviously influenced by English conditions involving a high level of capitalist development, held that the rural workers who continually migrate to the towns belong to the wage proletariat, since they were formerly dominated by agricultural capital and now become subject to industrial capital. He ignores, however, the problem which is of paramount importance for conditions on the continent of Europe, namely the sources from which this urban and rural proletariat is recruited: the continual process by which the rural and urban middle strata become proletarian with the decay of peasant economy and of small artisan enterprises, the very process, that is to say, of incessant transition from non-capitalist to capitalist conditions of a labour power that is cast off by pre-capitalist, not capitalist, modes of production in their progressive breakdown and disintegration. Besides the decay of European peasants and artisans we must here also mention the disintegration of the most varied primitive forms of production and of social organisation in non-European countries.

Since capitalist production can develop fully only with complete access to all territories and climes, it can no more confine itself to the natural resources and productive forces of the temperate zone than it can manage with white labour alone. Capital needs other races to exploit territories where the white man cannot work. It must be able to mobilise world labour power without restriction in order to utilise all productive forces of the globe – up to the limits imposed by a system of producing surplus value. This labour power, however, is in most cases rigidly bound by the traditional pre-capitalist organisation of production. It must first be ‘set free’ in order to be enrolled in the active army of capital. The emancipation of labour power from primitive social conditions and its absorption by the capitalist wage system is one of the indispensable historical bases of capitalism. For the first genuinely capitalist branch of production, the English cotton industry, not only the cotton of the Southern states of the American Union was essential, but also the millions of African Negroes who were shipped to America to provide the labour power for the plantations, and who late; as a free proletariat, were incorporated in the class of wage labourers in a capitalist system. Obtaining the necessary labour power from non-capitalist societies, the so-called ‘labour-problem’, is ever more important for capital in the colonies. All possible methods of ‘gentle compulsion’ are applied to solving this problem, to transfer labour from former social systems to the command of capital. This endeavour leads to the most peculiar combinations between the modern wage system and primitive authority in the colonial countries. This is a concrete example of the fact that capitalist production cannot manage without labour power from other social organisations.

Admittedly, Marx dealt in detail with the process of appropriating non-capitalist means of production as well as with the transformation of the peasants into a capitalist proletariat. Chapter xxiv of Capital, vol.i, is devoted to describing the origin of the English proletariat, of the capitalistic agricultural tenant class and of industrial capital, with particular emphasis on the looting of colonial countries by European capital. Yet we must bear in mind that all this is treated solely with a view to so-called primitive accumulation. For Marx, these processes are incidental, illustrating merely the genesis of capital, its first appearance in the world; they are, as it were, travails by which the capitalist mode of production emerges from a feudal society. As soon as he comes to analyse the capitalist process of production and circulation, he reaffirms the universal and exclusive domination of capitalist production.

Yet, as we have seen, capitalism in its frill maturity also depends in all respects on non-capitalist strata and social organizations existing side by side with it. It is not merely a question of a market for the additional product, as Sismondi and the later critics and doubters of capitalist accumulation would have it. The interrelations of accumulating capital and non-capitalist forms of production extend over values as well as over material conditions, for constant capital, variable capital and surplus value alike. The non-capitalist mode of production is the given historical setting for this process. Since the accumulation of capital becomes impossible in all points without non-capitalist surroundings, we cannot gain a true picture of it by assuming the exclusive and absolute domination of the capitalist mode of production. Sismondi and his school, when they attributed their difficulties entirely to the problem of realising the surplus value, indeed revealed a proper sense for the conditions vital to accumulation. Yet the conditions for augmenting the material elements of constant and variable capital are quite a different matter from those which govern the realisation of surplus value. Capital needs the means of production and the labour power of the whole globe for untrammelled accumulation; it cannot manage without the natural resources and the labour power of all territories. Seeing that the overwhelming majority of resources and labour power is in fact still in the orbit of pre-capitalist production – this being the historical milieu of accumulation – capital must go all out to obtain ascendancy over these territories and social organizations. There is no a priori reason why rubber plantations, say, run on capitalist lines, such as have been laid out in India, might not serve the ends of capitalist production just as well. Yet if the countries of those branches of production are predominantly non-capitalist, capital will endeavour to establish domination over these countries and societies. And in fact, primitive conditions allow of a greater drive and of far more ruthless measures than could be tolerated under purely capitalist social conditions.

It is quite different with the realisation of the surplus value. Here outside consumers qua other-than-capitalist are really essential. Thus the immediate and vital conditions for capital and its accumulation is the existence of non-capitalist buyers of the surplus value, which is decisive to this extent for the problem of capitalist accumulation.

Whatever the theoretical aspects, the accumulation of capital as an historical process, depends in every respect upon non-capitalist social strata and forms of social organisation.

The solution to this problem which for almost a century has been the bone of contention in economic theory thus lies between the two extremes of the petty-bourgeois scepticism preached by Sismondi, v. Kirchmann, Vorontsov and Nikolayon, who flatly denied accumulation, and the crude optimism advocated by Ricardo, Say and Tugan Baranovski who believed in capital’s unlimited capacity for parthenogenesis, with the logical corollary of capitalism-in-perpetuity. The solution envisaged by Marx lies in the dialectical conflict that capitalism needs non-capitalist social organisations as the setting for its development, that it proceeds by assimilating the very conditions which alone can ensure its own existence.

At this point we should revise the conceptions of internal and external markets which were so important in the controversy about accumulation. They are both vital to capitalist development and yet fundamentally different, though they must be conceived in terms of social economy rather than of political geography. In this light, the internal market is the capitalist market, production itself buying its own products and supplying its own elements of production. The external market is the non-capitalist social environment which absorbs the products of capitalism and supplies producer goods and labour power for capitalist production. Thus, from the point of view of economics, Germany and England traffic in commodities chiefly on an internal, capitalist market, whilst the give and take between German industry and German peasants is transacted on an external market as far as German capital is concerned. These concepts are strict and precise, as can be seen from the diagram of reproduction. Internal capitalist trade can at best realise only certain quantities, of value contained in the social product: the constant capital that has been used up, the variable capital, and the consumed part of the surplus value. That part of the surplus value, however, which is earmarked for capitalisation, must be realised elsewhere. If capitalization of surplus value is the real motive force and aim of production, it must yet proceed within the limits given by the renewal of constant and variable capital (and also of the consumed part of the surplus value). Further, with the international development of capitalism the capitalisation of surplus value becomes ever more urgent and precarious, and the substratum of constant and variable capital becomes an ever-growing mass – both absolutely and in relation to the surplus value. Hence the contradictory phenomena that the old capitalist countries provide ever larger markets for, and become increasingly dependent upon, one another, yet on the other hand compete ever more ruthlessly for trade relations with non-capitalist countries. The conditions for the capitalisation of surplus value clash increasingly with the conditions for the renewal of the aggregate capital – a conflict which, incidentally, is merely a counterpart of the contradictions implied in the law of a declining profit rate.

27. The Struggle Against Natural Economy

CAPITALISM arises and develops historically amidst a non-capitalist society. In Western Europe it is found at first in a feudal environment from which it in fact sprang the system of bondage in rural areas and the guild system in the towns – and later, after having swallowed up the feudal system, it exists mainly in an environment of peasants and artisans, that is to say in a system of simple commodity production both in agriculture and trade. European capitalism is further surrounded by vast territories of non-European civilisation ranging over all levels of development, from the primitive communist hordes of nomad herdsmen, hunters and gatherers to commodity production by peasants and artisans. This is the setting for the accumulation of capital.

We must distinguish three phases: the struggle of capital against natural economy, the struggle against commodity economy, and the competitive struggle of capital on the international stage for the remaining conditions of accumulation.

The existence and development of capitalism requires an environment of non-capitalist forms of production, but not every one of these forms will serve its ends. Capitalism needs non-capitalist social strata as a market for its surplus value, as a source of supply for its means of production and as a reservoir of labour power for its wage system. For all these purposes, forms of production based upon a natural economy are of no use to capital. In all social organisations where natural economy prevails, where there are primitive peasant communities with common ownership of the land, a feudal system of bondage or anything of this nature, economic organisation is essentially in response to the internal demand; and therefore there is no demand, or very little, for foreign goods, and also, as a rule, no surplus production, or at least no urgent need to dispose of surplus products. What is most important, however, is that, in any natural economy, production only goes on because both means of production and labour power are bound in one form or another. The communist peasant community no less than the feudal corvée farm and similar institutions maintain their economic organisation by subjecting the labour power, and the most important means of production, the land, to the rule of law and custom. A natural economy thus confronts the requirements of capitalism at every turn with rigid barriers. Capitalism must therefore always and everywhere fight a battle of annihilation against every historical form of natural economy that it encounters, whether this is slave economy, feudalism, primitive communism, or patriarchal peasant economy. The principal methods in this struggle are political force (revolution, war), oppressive taxation by the state, and cheap goods; they are partly applied simultaneously, and partly they succeed and complement one another. In Europe, force assumed revolutionary forms in the fight against feudalism (this is the ultimate explanation of the bourgeois revolutions in the seventeenth, eighteenth and nineteenth centuries); in the non-European countries, where it fights more primitive social organisations, it assumes the forms of colonial policy. These methods, together with the systems of taxation applied in such cases, and commercial relations also, particularly with primitive communities, form an affiance in which political power and economic factors go hand in hand.

In detail, capital in its struggle against societies with a natural economy pursues the following ends:

1. To gain immediate possession of important sources of productive forces such as land, game in primeval forests, minerals, precious stones and ores, products of exotic flora such as rubber, etc.
2. To ‘liberate’ labour power and to coerce it into service.
3. To introduce a commodity economy.
4. To separate trade and agriculture.

At the time of primitive accumulation, i.e. at the end of the Middle Ages, when the history of capitalism in Europe began, and right into the nineteenth century, dispossessing the peasants in England and on the Continent was the most striking weapon in the large-scale transformation of means of production and labour power into capital. Yet capital in power performs the same task even to-day, and on an even more important scale – by modern colonial policy. It is an illusion to hope that capitalism will ever be content with the means of production which it can acquire by way of commodity exchange. In this respect already, capital is faced with difficulties because vast tracts of the globe’s surface are in the possession of social organisations that have no desire for commodity exchange or cannot, because of the entire social structure and the forms of ownership, offer for sale the productive forces in which capital is primarily interested. The most important of these productive forces is of course the land, its hidden mineral treasure, and its meadows, woods and water, and further the flocks of the primitive shepherd tribes. If capital were here to rely on the process of slow internal disintegration, it might take centuries. To wait patiently until the most important means of production could be alienated by trading in consequence of this process were tantamount to renouncing the productive forces of those territories altogether. Hence derives the vital necessity for capitalism in its relations with colonial countries to appropriate the most important means of production. Since the primitive associations of the natives are the strongest protection for their social organisations and for their material bases of existence, capital must begin by planning for the systematic destruction and annihilation of all the non-capitalist social units which obstruct its development. With that we have passed beyond the stage of primitive accumulation; this process is still going on. Each new colonial expansion is accompanied, as a matter of course, by a relentless battle of capital against the social and economic ties of the natives, who are also forcibly robbed of their means of production and labour power. Any hope to restrict the accumulation of capital exclusively to ‘peaceful competition’, i.e. to regular commodity exchange such as takes place between capitalist producer-countries, rests on the pious belief that capital can accumulate without mediation of the productive forces and without the demand of more primitive organisations, and that it can rely upon the slow internal process of a disintegrating natural economy. Accumulation, with its spasmodic expansion, can no more wait for, and be content with, a natural internal disintegration of non-capitalist formations and their transition to commodity economy, than it can wait for, and be content with, the natural increase of the working population. Force is the only solution open to capital; the accumulation of capital, seen as an historical process, employs force as a permanent weapon, not only at its genesis, but further on down to the present day. From the point of view of the primitive societies involved, it is a matter of life or death; for them there can be no other attitude than opposition and fight to the finish – complete exhaustion and extinction. Hence permanent occupation of the colonies by the military, native risings and punitive expeditions are the order of the day for any colonial regime. The method of violence, then, is the immediate consequence of the clash between capitalism and the organisations of a natural economy which would restrict accumulation. Their means of production and their labour power no less than their demand for surplus products is necessary to capitalism. Yet the latter is fully determined to undermine their independence as social units, in order to gain possession of their means of production and labour power and to convert them into commodity buyers. This method is the most profitable and gets the quickest results, and so it is also the most expedient for capital. In fact, it is invariably accompanied by a growing militarism whose importance for accumulation will be demonstrated below in another connection. British policy in India and French policy in Algeria are the classical examples of the application of these methods by capitalism.

The ancient economic organisations of the Indians – the communist village community – had been preserved in their various forms throughout thousands of years, in spite of all the political disturbances during their long history. In the sixth century B.C. the Persians invaded the Indus basin and subjected part of the country. Two centuries later the Greeks entered and left behind them colonies, founded by Alexander on the pattern of a completely alien civilisation. Then the savage Scythians invaded the country, and for centuries India remained under Arab rule. Later, the Afghans swooped down from the Iran mountains, until they, too, were expelled by the ruthless onslaught of Tartar hordes. The Mongols’ path was marked by terror and destruction, by the massacre of entire villages – the peaceful countryside with the tender shoots of rice made crimson with blood. And still the Indian village community survived. For none of the successive Mahometan conquerors had ultimately violated the internal social life of the peasant masses and its traditional structure. They only set up their own governors in the provinces to supervise military organisation and to collect taxes from the population. All conquerors pursued the aim of dominating and exploiting the country, but none was interested in robbing the people of their productive forces and in destroying their social organisation. In the Moghul Empire, the peasant had to pay his annual tribute in kind to the foreign ruler, but he could live undisturbed in his village and could cultivate his rice on his sholgura as his father had done before him. Then came the British – and the blight of capitalist civilisation succeeded in disrupting the entire social organisation of the people; it achieved in a short time what thousands of years, what the sword of the Nogaians, had failed to accomplish. The ultimate purpose of British capital was to possess itself of the very basis of existence of the Indian community: the land.

This end was served above all by the fiction, always popular with European colonisers, that all the land of a colony belongs to the political ruler. In retrospect, the British endowed the Moghul and his governors with private ownership of the whole of India, in order to ‘legalise’ their succession. Economic experts of the highest repute, such as James Mill, duly supported this fiction with ‘scientific’ arguments, so in particular with the famous conclusion given below.

As early as 1793, the British in Bengal gave landed property to all the zemindars (Mahometan tax collectors) or hereditary market superintendents they had found in their district so as to win native support for the campaign against the peasant masses. Later they adopted the same policy for their new conquests in the Agram province, in Oudh, and in the Central Provinces. Turbulent peasant risings followed in their wake, in the course of which tax collectors were frequently driven out. In the resulting confusion and anarchy British capitalists successfully appropriated a considerable portion of the land.

The burden of taxation, moreover, was so ruthlessly increased that it swallowed up nearly all the fruits of the people’s labour. This went to such an extreme in the Delhi and Allahabad districts that, according to the official evidence of the British tax authorities in 1854, the peasants found it convenient to lease or pledge their shares in land for the bare amount of the tax levied. Under the auspices of this taxation, usury came to the Indian village, to stay and eat up the social organisation from within like a canker. In order to accelerate this process, the British passed a law that flew in the face of every tradition and justice known to the village community: compulsory alienation of village land for tax arrears. In vain did the old family associations try to protect themselves by options on their hereditary land and that of their kindred. There was no stopping the rot. Every day another plot of land fell under the hammer; individual members withdrew from the family unit, and the peasants got into debt and lost their land.

The British, with their wonted colonial stratagems, tried to make it appear as if their power policy, which had in fact undermined the traditional forms of landownership and brought about the collapse of the Hindu peasant economy, had been dictated by the need to protect the peasants against native oppression and exploitation and served to safeguard their own interests. Britain artificially created a landed aristocracy at the expense of the ancient property-rights of the peasant communities, and then proceeded to ‘protect’ the peasants against these alleged oppressors, and to bring this illegally usurped land into the possession of British capitalists.

Thus large estates developed in India in a short time, while over large areas the peasants in their masses were turned into impoverished small tenants with a short-term lease.

Lastly, one more striking fact shows the typically capitalist method of colonisation. The British were the first conquerors of India who showed gross indifference to public utilities. Arabs, Afghans and Mongols had organised and maintained magnificent works of canalisation in India, they had given the country a network of roads, spanned the rivers with bridges and seen to the sinking of wells. Timur or Tamerlane, the founder of the Mongol dynasty in India, had a care for the cultivation of the soil, for irrigation, for the safety of the roads and the provision of food for travellers. The primitive Indian Rajahs, the Afghan or Mongol conquerors, at any rate, in spite of occasional cruelty against individuals, made their mark with the marvellous constructions we can find to-day at every step and which seem to be the work of a giant race. ‘The (East India) Company which ruled India until 1858 did not make one spring accessible, did not sink a single well, nor build a bridge for the benefit of the Indians.’

Another witness, the Englishman James Wilson, says:

‘In the Madras Province, no-one can help being impressed by the magnificent ancient irrigation systems, traces of which have been preserved until our time. Locks and weirs dam the rivers into great lakes, from which canals distribute the water for an area of 60 or 70 miles around. On the large rivers, there are 30 to 40 of such weirs ... The rain water from the mountains was collected in artificial ponds, many of which still remain and boast circumferences of between 15 and 25 miles. Nearly all these gigantic constructions were completed before the year 1750. During the war between the Company and the Mongol rulers – and, be it said, during the entire period of our rule in India – they have sadly decayed.’

No wonder! British capital had no object in giving the Indian communities economic support or helping them to survive. Quite the reverse, it aimed to destroy them and to deprive them of their productive forces. The unbridled greed, the acquisitive instinct of accumulation must by its very nature take every advantage of the ‘conditions of the market’ and can have no thought for the morrow. It is incapable of seeing far enough to recognise the value of the economic monuments of an older civilisation. (Recently British engineers in Egypt feverishly tried to discover traces of an ancient irrigation system rather like the one a stupid lack of Vision had allowed to decay in India when they were charged with damming the Nile on a grand scale in furtherance of capitalist enterprise.) Not until 1867 was England able to appreciate the results of her noble efforts in this respect. In the terrible famine of that year a million people were killed in the Orissa district alone; and Parliament was shocked into investigating the causes of the emergency. The British government has now introduced administrative measures in an attempt to save the peasant from usury. The Punjab Alienation Act of 1900 made it illegal to sell or mortgage peasant lands to persons other than of the peasant caste, though exceptions can be made in individual cases, subject to the tax collector’s approval. Having deliberately disrupted the protecting ties of the ancient Hindu social associations, after having nurtured a system of usury where nothing is thought of a 15 per cent charge of interest, the British now entrust the ruined Indian peasant to the tender care of the Exchequer and its officials, under the ‘protection’, that is to say, of those draining him of his livelihood.

Next to tormented British India, Algeria under French rule claims pride of place in the annals of capitalist colonisation. When the French conquered Algeria, ancient social and economic institutions prevailed among the Arab-Kabyle population. These had been preserved until the nineteenth century, and in spite of the long and turbulent history of the country they survive in part even to the present day.

Private property may have existed no doubt in the towns, among the Moors and Jews, among merchants, artisans and usurers. Large rural areas may have been seized by the State under Turkish suzerainty – yet nearly half of the productive land is jointly held by Arab and Kabyle tribes who still keep up the ancient patriarchal customs. Many Arab families led the same kind of nomad life in the nineteenth century as they had done since time immemorial, an existence that appears restless and irregular only to the superficial observer, but one that is in fact strictly regulated and extremely monotonous. In summer they were wont, man, woman and child, to take their herds and tents and migrate to the sea-swept shores of the Tell district; and in the winter they would move back again to the protective warmth of the desert. They travelled along definite routes, and the summer and winter stations were fixed for every tribe and family. The fields of those Arabs who had settled on the land were in most cases the joint property of the clans, and the great Kabyle family associations also lived according to old traditional rules under the patriarchal guidance of their elected heads.

The women would take turns for household duties; a matriarch, again elected by the family, being in complete charge of the clan’s domestic affairs, or else the women taking turns of duty. This organisation of the Kabyle clans on the fringe of the African desert bears a startling resemblance to that of the famous Southern Slavonic Zadruga – not only the fields but all the tools, weapons and monies, all that the members acquire or need for their work, are communal property of the clan. Personal property is confined to one suit of clothing, and in the case of a woman to the dresses and ornaments of her dowry. More valuable attire and jewels, however, are considered common property, and individuals were allowed to use them only if the whole family approved. If the clan was not too numerous, meals were taken at a common table; the women took it in turns to cook, but the eldest were entrusted with the dishing out. If a family circle was too large, the head of the family would each month ration out strictly proportionate quantities of uncooked food to the individual families who then prepared them. These communities were bound together by close ties of kinship, mutual assistance and equality, and a patriarch would implore his sons on his deathbed to remain faithful to the family.

These social relations were already seriously impaired by the rule of the Turks, established in Algeria in the sixteenth century. Yet the Turkish exchequer had by no means confiscated all the land. That is a legend invented by the French at a much later date. Indeed, only a European mind is capable of such a flight of fancy which is contrary to the entire economic foundation of Islam both in theory and practice. In truth, the facts were quite different. The Turks did not touch the communal fields of the village communities. They merely confiscated a great part of uncultivated land from the clans and converted it into crown land under Turkish local administrators (Beyliks). The state worked these lands in part with native labour, and in part they were leased out on rent or against payment in kind. Further the Turks took advantage of every revolt of the subjected families and of every disturbance in the country to add to their possessions by large-scale confiscation of land, either for military establishments or for public auction, when most of it went to Turkish or other usurers. To escape from the burden of taxation and confiscation, many peasants placed themselves under the protection of the Church, just as they had done in medieval Germany. Hence considerable areas became Church property. All these changes finally resulted in the following distribution of Algerian land at the time of the French conquest: crown lands occupied nearly 3,750,000 acres, and a further 7,500,000 acres of uncultivated land as common property of All the Faithful (Bled-el-Islam). 7,500,000 acres had been privately owned by the Berbers since Roman times, and under Turkish rule a further 3,750,000 acres had come into private ownership, a mere 12,500,000 acres remaining communal property of individual Arab clans. In the Sahara, some of the 7,500,000 acres fertile land near the Sahara Oases was communally owned by the clans and some belonged to private owners. The remaining 57,500,000,000 acres were mainly waste land.

With their conquest of Algeria, the French made a great ado about their work of civilisation, since the country, having shaken off the Turkish yoke at the beginning of the eighteenth century, was harbouring the pirates who infested the Mediterranean and trafficked in Christian slaves. Spain and the North American Union in particular, themselves at that time slave traders on no mean scale, declared relentless war on this Moslem iniquity. France, in the very throes of the Great Revolution, proclaimed a crusade against Algerian anarchy. Her subjection of that country was carried through under the slogans of ‘combating slavery’ and ‘instituting orderly and civilised conditions’. Yet practice was soon to show what was at the bottom of it all. It is common knowledge that in the forty years following the subjection of Algeria, no European state suffered so many changes in its political system as France: the restoration of the monarchy was followed by the July Revolution and the reign of the ‘Citizen King’, and this was succeeded by the February Revolution, the Second Republic, the Second Empire, and finally, after the disaster of 1870, by the Third Republic. In turn, the aristocracy, high finance, petty bourgeoisie and the large middle classes in general gained political ascendancy. Yet French policy in Algeria remained undeflected by this succession of events; it pursued a single aim from beginning to end; at the fringe of the African desert, it demonstrated plainly that all the political revolutions in nineteenth-century France centred in a single basic interest: the rule of a capitalist bourgeoisie and its institutions of ownership.

‘The bill submitted for your consideration’, said Deputy Humbert on June 30, 1873, in the Session of the National Assembly as spokesman for the Commission for Regulating Agrarian Conditions in Algeria, ‘is but the crowning touch to an edifice well-founded on a whole series of ordinances, edicts, laws and decrees of the Senate which together and severally have as the same object: the establishment of private property among the Arabs.’

In spite of the ups and downs of internal French Politics, French colonial policy persevered for fifty years in its systematic and deliberate efforts to destroy and disrupt communal property. It served two distinct purposes: The break-up of communal property was primarily intended to smash the social power of the Arab family associations and to quell their stubborn resistance against the French yoke, in the course of which there were innumerable risings so that, in spite of France’s military superiority, the country was in a continual state of war. Secondly, communal property had to be disrupted in order to gain the economic assets of the conquered country; the Arabs, that is to say, had to be deprived of the land they had owned for a thousand years, so that French capitalists could get it. Once again the fiction we know so well, that under Moslem law all land belongs to the ruler, was brought into play. Just as the English had done in British India, so Louis Philippe’s governors in Algeria declared the existence of communal property owned by the clan to be ‘impossible’. This fiction served as an excuse to claim for the state most of the uncultivated areas, and especially the commons, woods and meadows, and to use them for purposes of colonisation. A complete system of settlement developed, the so-called cantonments which settled French colonists on the clan land and herded the tribes into a small area. Under the decrees of 1830, 1831, 1840, 1844, 1845 and 1846 these thefts of Arab family land were legalised. Yet this system of settlement did not actually further colonisation; it only bred wild speculation and usury. In most instances the Arabs managed to buy back the land that had been taken from them, although they were thus incurring heavy debts. French methods of oppressive taxation had the same tendency, in particular the law of June 16, 1851, proclaiming all forests to be state property, which robbed the natives of 6,000,000 acres of pasture and brushwood, and took away the prime essential for animal husbandry. This spate of laws, ordinances and regulations wrought havoc with the ownership of land in the country. Under the prevailing condition of feverish speculation in land, many natives sold their estates to the French in the hope of ultimately recovering them. Quite often they sold the same plot to two or three buyers at a time, and what is more, it was quite often inalienable family land and did not even belong to them. A company of speculators from Rouen, e.g., believed that they had bought 50,000 acres, but in fact they had only acquired a disputed title to 3,425 acres. There followed an infinite number of lawsuits in which the French courts supported on principle all partitions and claims of the buyers. In these uncertain conditions, speculation, usury and anarchy were rife. But although the introduction of French colonists in large numbers among the Arab population had aimed at securing support for the French government, this scheme failed miserably. Thus, under the Second Empire, French policy tried another tack. The government, with its European lack of vision, had stubbornly denied the existence of communal property for thirty years, but it had learned better at last. By a single stroke of the pen, joint family property was officially recognised and condemned to be broken up. This is the double significance of the decree of the Senate dated April 22, 1864. General Allard declared in the Senate:

‘The government does not lose sight of the fact that the general aim of its policy is to weaken the influence of the tribal chieftains and to dissolve the family associations. By this means, it will sweep away the last remnants of feudalism [sic!] defended by the opponents of the government bill ... The surest method of accelerating the process of dissolving the family associations will be to institute private property and to settle European colonists among the Arab families.’

The law of 1863 created special Commissions, for cutting up the landed estates, consisting of the Chairman, either a Brigadier-General or Colonel, one sous-préfet, one representative of the Arab military authorities and an official bailiff. These natural experts on African economics and social conditions were faced with the threefold task, first of determining the precise boundaries of the great family estates, secondly to distribute, the ‘estates’ of each clan among its various branches, and finally to break up this family land into separate private allotments. This expedition of the Brigadiers into the interior of Africa duly took place. The Commissions proceeded to their destinations. They were to combine the office of judge in all land disputes with that of surveyor and land distributor, the final decision resting with the Governor-General of Algeria. Ten years’ valiant efforts by the Commissions yielded the following result: between 1863 and 1873, of 700 hereditary estates, 400 were shared out among the branches of each clan, and the foundations for future inequalities, between great landed estates and small allotments were thus laid. One family, in fact, might receive between 25 and 10 acres, while another might get as much as 250 or even 450 acres, depending on the size of the estate and the number of collaterals, within the clan. Partition, however, stopped at that point. Arab customs presented unsurmountable difficulties to a further division of family land. In spite of Colonels and Brigadiers, French policy had again failed in its object to create private property for transfer to the French.

But the Third Republic, an undisguised regime of the bourgeoisie, had the courage and the cynicism to go straight for its goal and to attack the problem from the other end, disdaining the preliminaries of the Second Empire. In 1873, the National Assembly worked out a law with the avowed intention immediately to split up the entire estates of all the 700 Arab clans, and forcibly to institute private property in the shortest possible time. Desperate conditions in the colony were the pretext for this measure. It had taken the great Indian famine of 1866 to awaken the British public to the marvellous exploits of British colonial policy and to call for a parliamentary investigation; and similarly, Europe was alarmed at the end of the sixties by the crying needs of Algeria where more than forty years of French rule culminated in wide-spread famine and a disastrous mortality rate among the Arabs. A commission of inquiry was set up to recommend new legislation with which to bless the Arabs: it was unanimously resolved that there was only one lifebuoy for them – the institution of private property; that alone could save the Arab from destitution, since he would then always be able to sell or mortgage his land. It was decided therefore, that the only means of alleviating the distress of the Arabs, deeply involved in debts as they were because of the French land robberies and oppressive taxation, was to deliver them completely into the hands of the usurers. This farce was expounded in all seriousness before the National Assembly and was accepted with equal gravity by that worthy body. The ‘victors’ of the Paris Commune flaunted their brazenness.

In the National Assembly, two arguments in particular served to support the new law: those in favour of the bill emphasised over and over again that the Arabs themselves urgently desired the introduction of private property. And so they did, or rather the Algerian land speculators and usurers did, since they were vitally interested in ‘liberating’ their victims from the protection of the family ties. As long as Moslem law prevailed in Algeria, hereditary clan and family lands were inalienable, which laid insuperable difficulties in the way of anyone who wished to mortgage his land. The law of 1863 had merely made a breach in these obstacles, and the issue now at stake was their complete abolition so as to give a free hand to the usurers. The second argument was ‘scientific’, part of the same intellectual equipment from which that worthy, James Mill, had drawn for his abstruse conclusions regarding Indian relations of ownership: English classical economics. Thoroughly versed in their masters’ teachings, the disciples of Smith and Ricardo impressively declaimed that private property is indispensable for the prevention of famines in Algeria, for more intensive and better cultivation of the land, since obviously no one would be prepared to invest capital or intensive labour in a piece of land which does not belong to him and whose produce is not his own to enjoy. But the facts spoke a different language. They proved that the French speculators employed the private property they had created in Algeria for anything but the more intensive and improved cultivation of the soil. In 1873, 1,000,000 acres were French property. But the capitalist companies, the Algerian and Setif Company which owned 300,000 acres, did not cultivate the land at all but leased it to the natives who tilled it in the traditional manner, nor were 25 per cent of the other French owners engaged in agriculture. It was simply impossible to conjure up capitalist investments and intensive agriculture overnight, just as capitalist conditions in general could not be created out of nothing. They existed only in the imagination of profit-seeking French speculators, and in the benighted doctrinaire visions of their scientific economists. The essential point, shorn of all pretexts and flourishes which seem to justify the law of 1873, was simply the desire to deprive the Arabs of their land, their livelihood. And although these arguments had worn threadbare and were evidently insincere, this law which was to put paid to the Algerian population and their material prosperity, was passed unanimously on July 26, 1873.

But even this master-stroke soon proved a failure. The policy of the Third Republic miscarried because of the difficulties in substituting at one stroke bourgeois private property for the ancient clan communism, just as the policy of the Second Empire had come to grief over the same issue. In 1890, when the law of July 26, 1873, supplemented by a second law on April 28, 1887, had been in force for seventeen years, 14,000,000 francs had been spent on dealing with 40,000,000 acres. It was estimated that the process would not be completed before 1950 and would require a further 60,000,000 francs. And still abolition of clan communism, the ultimate purpose, had not been accomplished. What had really been attained was all too evident: reckless speculation in land, thriving usury and the economic ruin of the natives.

Since it had been impossible to institute private property by force, a new experiment was undertaken. The laws of 1873 and 1887 had been condemned by a commission appointed for their revision by the Algerian government in 1890. It was another seven years before the legislators on the Seine made the effort to consider reforms for the ruined country. The new decree of the Senate refrained in principle from instituting private property by compulsion or administrative measures. The laws of February 2, 1897, and the edict of the Governor-General of Algeria (March 3, 1898) both provided chiefly for the introduction of private property following a voluntary application by the prospective purchaser or owner. But there were clauses to permit a single owner, without the consent of the others, to claim private property; further, such a ‘voluntary’ application can be extorted at any convenient moment if the owner is in debt and the usurer exerts pressure. And so the new law left the doors wide open for French and native capitalists further to disrupt and exploit the hereditary and clan lands.

Of recent years, this mutilation of Algeria which had been going on for eight decades meets with even less opposition, since the Arabs, surrounded as they are by French capital following the subjection of Tunisia (1881) and the recent conquest of Morocco, have been rendered more and more helpless. The latest result of the French regime in Algeria is an Arab exodus into Turkey.

28. The Introduction of Commodity Economy

The second condition of importance for acquiring means of production and realising the surplus value is the commodity exchange and commodity economy should be introduced in societies based on natural economy as soon as their independence has been abrogated, or rather in the course of this disruptive process. Capital requires to buy the products of, and sell its commodities to, all non-capitalist strata and societies. Here at last we seem to find the beginnings of that ‘peace’ and ‘equality’, the do ut des, mutual interest, ‘peaceful competition’ and the ‘influences of civilisation’. For capital can indeed deprive alien social associations of their means of production by force, it can compel the workers to submit to capitalist exploitation, but it cannot force them to buy its commodities or to realise its surplus value. In districts where natural economy formerly prevailed, the introduction of means of transport – railways, navigation, canals – is vital for the spreading of commodity economy, a further hopeful sign. The triumphant march of commodity economy thus begins in most cases with magnificent constructions of modern transport, such as railway lines which cross primeval forests and tunnel through the mountains, telegraph wires which bridge the deserts, and ocean liners which call at the most outlying ports. But it is a mere illusion that these are peaceful changes. Under the standard of commerce, the relations between the East India Company and the spice-producing countries were quite as piratical, extortionate and blatantly fraudulent as present-day relations between American capitalists and the Red Indians of Canada whose furs they buy, or between German merchants and the Negroes of Africa. Modern China presents a classical example of the ‘gentle’, ‘peace-loving’ practices of commodity exchange with backward countries. Throughout the nineteenth century, beginning with the early forties, her history has been punctuated by wars with the object of opening her up to trade by brute force. Missionaries provoked persecutions of Christians, Europeans instigated risings, and in periodical massacres a completely helpless and peaceful agrarian population was forced to match arms with the most modern capitalist military technique of all the Great Powers of Europe. Heavy war contributions necessitated a public debt, China taking up European loans, resulting in European control over her finances and occupation of her fortifications; the opening of free ports was enforced, railway concessions to European capitalists extorted. By all these measures commodity exchange was fostered in China, from the early thirties of the last century until the beginning of the Chinese revolution.

European civilisation, that is to say commodity exchange with European capital, made its first impact on China with the Opium Wars when she was compelled to buy the drug from Indian plantations in order to make money for British capitalists. In the seventeenth century, the East India Company had introduced the cultivation of poppies in Bengal; the use of the drug was disseminated in China by its Canton branch. At the beginning of the nineteenth century, opium fell so considerably in price that it rapidly became the ‘luxury of the people’. In 1821, 4,628 chests of opium were imported to China at an average price of £265; then the price fell by 50 per cent; and Chinese imports rose to 9,621 chests in 1825, and to 26,670 chests in 1830. The deadly effects of the drug, especially of the cheaper kinds used by the poorer population, became a public calamity and made it necessary for China to lay an embargo on imports, as an emergency measure. Already in 1828, the viceroy of Canton had prohibited imports of opium, only to deflect the trade to other ports. One of the Peking censors commanded to investigate the question gave the following report:

‘I have learnt that people who smoke opium have developed such a craving for this noxious drug that they make every effort to obtain this gratification. If they do not get their opium at the usual hour, their limbs begin to tremble, they break out in sweat, and they cannot perform the slightest tasks. But as soon as they are given the pipe, they inhale a few puffs and are cured immediately.

‘Opium has therefore become a necessity for all who smoke it and it is not surprising that under cross-examination by the local authorities they will submit to every punishment rather than reveal the names of their suppliers. Local authorities are also in some cases given presents to tolerate the evil or to delay any investigation already under way. Most merchants who bring goods for sale into Canton also deal in smuggled opium.

‘I am of the opinion that opium is by far a greater evil than gambling, and that opium smokers should therefore be punished no less than gamblers.’

The censor suggested that every convicted opium smoker should be sentenced to eighty strokes of the bamboo, and anybody refusing to give the name of his supplier to a hundred strokes and three years of exile. The pig tailed Cato of Peking concludes his report with a frankness staggering to any European official:

‘Apparently opium is mostly introduced from abroad by dishonest officials in connivance with profit-seeking merchants who transport it into the interior of the country. Then the first to indulge are people of good family, wealthy private persons and merchants, but ultimately the drug habit spreads among the common people. I have learnt that in all provinces opium is smoked not only in the civil service but also in the army. The officials of the various districts indeed enjoin the legal prohibition of sale by special edicts. But at the same time, their parents, families, dependants and servants simply go on smoking opium, and the merchants profit from the ban by increased prices. Even the police have been won over; they buy the stuff instead of helping to suppress it, and this is an additional reason for the disregard in which all prohibitions and ordinances are held.’

Consequently, a stricter law was passed in 1833 which made every opium smoker liable to a hundred strokes and two months in the stocks, and provincial governors were ordered to report annually on their progress in the battle against opium. But there were two sequels to this campaign: on the one hand large-scale poppy plantations sprang up in the interior, particularly in the Honan, Setchuan, and Kueitchan provinces, and on the other, England declared war on China to get her to lift the embargo. These were the splendid beginnings of opening China to European civilisation – by the opium pipe.

Canton was the first objective. The fortifications of the town at the main arm of the Perl estuary could not have been more primitive. Every day at sunset a barrier of iron chains was attached to wooden rafts anchored at various distances, and this was the main defence. Moreover, the Chinese guns could only fire at a certain angle and were therefore completely ineffectual. With such primitive defences, just adequate to prevent a few merchant ships from landing, did the Chinese meet the British attack. A couple of British cruisers, then, sufficed to effect an entry on September 7, 1839. The sixteen battle-junks and thirteen fire-ships which the Chinese put up for resistance were shot up or dispersed in a matter of forty-five minutes. After this initial victory, the British renewed the attack in the beginning of 1841 with a considerably reinforced fleet. This time the fleet, consisting in a number of battle-junks, and the forts were attacked simultaneously. The first incendiary rocket that was fired penetrated through the armour casing of a junk into the powder chamber and blew the ship with the entire crew sky high. In a short time eleven junks, including the flag-ship, were destroyed, and the remainder precipitately made for safety. The action on land took a little longer. Since the Chinese guns were quite useless, the British walked right through the fortifications, climbed to a strategic position – which was not even guarded – and proceeded to slaughter the helpless Chinese from above. The casualty list of the battle was: for the Chinese 600 dead, and for the British, 1 dead and 30 wounded, more than half of the latter having been injured by the accidental explosion of a powder magazine. A few weeks later, there followed another British exploit. The forts of Anung-Hoy and North Wantong were to be taken. No less than twelve fully equipped cruisers were available for this task. What is more, the Chinese, once again forgetful of the most important thing, had omitted to fortify the island of South Wantong. Thus the British calmly landed a battery of howitzers to bombard the fort from one side, the cruisers shelling it from the other. After that, the Chinese were driven from the forts in a matter of minutes, and the landing met with no resistance. The ensuing display of inhumanity – an English report says – will be for ever deeply deplored by the British staff. The Chinese, trying to escape from the barricades, had fallen into a moat which was soon literally filled to the brim with helpless soldiers begging for mercy. Into this mass of prostrate human bodies, the sepoys – acting against orders, it is claimed – fired again and again. This is the way in which Canton was made receptive to commodity exchange.

Nor did the other ports fare better. On July 4, 1841, three British cruisers with 120 cannon appeared off the island in the entrance to the town of Ningpo. More cruisers arrived the following day. In the evening the British admiral sent a message to the Chinese governor, demanding the capitulation of the island. The governor explained that he had no power to resist but could not surrender without orders from Peking. He therefore asked for a delay. This was refused, and at half-past two in the morning the British stormed the defenceless island. Within eight minutes, the fort and the houses on the shore were reduced to smouldering rubble. Having landed on the deserted coast littered with broken spears, sabres, shields, rifles and a few dead bodies, the troops advanced on the walls of the island town of Tinghai. With daybreak, reinforced by the crews of other ships which had meanwhile arrived, they proceeded to put scaling ladders to the scarcely defended ramparts. A few more minutes gave them mastery of the town. This splendid victory was announced with becoming modesty in an Order of the Day: ‘Fate has decreed that the morning of July 5, 1841, should be the historic date on which Her Majesty’s flag was first raised over the most beautiful island of the Celestial Empire, the first European flag to fly triumphantly above this lovely countryside.’

On August 25, 1841, the British approached the town of Amoy, whose forts were armed with a hundred of the heaviest Chinese guns. These guns being almost useless, and the commanders lacking in resource, the capture of the harbour was child’s play. Under cover of a heavy barrage, British ships drew near the walls of Kulangau, landed their marines, and after a short stand the Chinese troops were driven out. The twenty-six battle-junks with 128 guns in the harbour were also captured, their crews having fled. One battery, manned by Tartars, heroically held out against the combined fire of three British ships, but a British landing was effected in their rear and the post wiped out.

This was the finale of the notorious Opium War. By the peace treaty of August 27, 1842, the island of Hongkong was ceded to Britain. In addition, the towns of Canton, Amoy, Futchou, Ningpo and Shanghai were to open their ports to foreign commerce. But within fifteen years, there was a further war against China. This time, Britain had joined forces with the French. In 1857, the allied navies captured Canton with a heroism equal to that of the first war. By the peace of Tientsin (1858), the opium traffic, European commerce and Christian missions were admitted into the interior. Already in 1859, however, the British resumed hostilities and attempted to destroy the Chinese fortifications on the Peiho river, but were driven off after a fierce battle in which 464 people were wounded or killed.

After that, Britain and France again joined forces. At the end of August 1860, 12,600 English and 7,500 French troops under General Cousin-Montauban first captured the Taku forts without a single shot having been fired. Then they proceeded towards Tientsin and on towards Peking. A bloody battle was joined at Palikao, and Peking fell to the European Powers. Entering the almost depopulated and completely undefended city, the victors began by pillaging the Imperial Palade, manfully helped by General Cousin himself, who was later to become field marshal and Count of Palikao. Then the Palace went up in flames, fired on Lord Elgin’s order as an imposed penance.

The European Powers now obtained concessions to set up embassies in Peking, and to start trading with Tientsin and other towns. The Tchi-fu Convention of 1876 guaranteed full facilities for importing opium into China – at a time when the Anti-Opium League in England agitated against the spreading of the drug habit in London, Manchester and other industrial districts, when a parliamentary commission declared the consumption of opium to be harmful in the extreme. By all treaties made at that time between China and the Great Powers any European, whether merchant or missionary, was guaranteed the right to acquire land, to which end the legitimate arguments were ably supported by deliberate frauds

First and foremost the ambiguity of the treaty texts made a convenient excuse for European capital to encroach beyond the Treaty Ports. It used every loophole in the wording of the treaties to begin with, and subsequently blackmailed the Chinese government into permitting the missions to acquire land not alone in the Treaty Ports but in all the provinces of the realm. Their claim was based upon the notorious bare-faced distortion of the Chinese original in Abbé Delamarre’s official translation of the supplementary convention with France French diplomacy, and the Protestant missions in particular, unanimously condemned the crafty swindle of the Catholic padre, but nevertheless they were firm that the rights of French missions obtained by this fraud should be explicitly extended to the Protestant missions as well.

China’s entry into commodity exchange, having begun with the Opium Wars, was finally accomplished with a series of ‘leases’ and the China campaign of 1900, when the commercial interests of European capital sank to a brazen international dogfight over Chinese land. The description of the Dowager Empress, who wrote to Queen Victoria after the capture of the Taku forts, subtly underlines this contrast between the initial theory and the ultimate practice of the ‘agents of European civilisation’:

‘To your Majesty, greeting! – In all the dealings of England with the Empire of China, since first relations were established between us, there has never been any idea of territorial aggrandisement on the part of Great Britain, but only a keen desire to promote the interests of her trade. Reflecting upon the fact that our country is now plunged into a dreadful condition of warfare, we bear in mind that a large proportion of China’s trade, seventy or eighty per cent, is done with England; moreover, your Customs duties are the lightest in the world, and few restrictions are made at your sea-ports in the matter of foreign importations; for these reasons our amiable relations with British merchants at our Treaty Ports have continued unbroken for the last half century, to our mutual benefit. – But a sudden change has now occurred and general suspicion has been created against us. We would therefore ask you now to consider that if, by any conceivable combination of circumstances, the independence of our Empire should be lost, and the Powers unite to carry out their long-plotted schemes to possess themselves of our territory’ – (in a simultaneous message to the Emperor of Japan, the impulsive Tzu Hsi openly refers to ‘The earth-hungry Powers of the West, whose tigerish eyes of greed are fixed in our direction’) – ‘the results to your country’s interests would be disastrous and fatal to your trade. At this moment our Empire is striving to the utmost to raise an army and funds sufficient for its protection; in the meanwhile we rely on your good services to act as mediator, and now anxiously await your decision.’

Both during the wars and in the interim periods, European civilisation was busy looting and thieving on a grand scale in the Chinese Imperial Palaces, in the public buildings and in the monuments of ancient civilisation, not only in 1860, when the French pillaged the Emperor’s Palace with its legendary treasures, or in 1900, ‘when all the nations vied with each other to steal public and private property’. Every European advance was marked not only with the progress of commodity exchange, but by the smouldering ruins of the largest and most venerable towns, by the decay of agriculture over large rural areas, and by intolerably oppressive taxation for war contributions. There are more than 40 Chinese Treaty Ports – and every one of them has been paid for with streams of blood, with massacre and ruin.

29. The Struggle Against Peasant Economy

An important final phase in the campaign against natural economy is to separate industry from agriculture, to eradicate rural industries altogether from peasant economy. Handicraft in its historical beginnings was a subsidiary occupation, a mere appendage to agriculture in civilised and settled societies. In medieval Europe it became gradually independent of the corvée farm and agriculture, it developed into specialised occupations, i.e. production of commodities by urban guilds. In industrial districts, production had progressed from home craft by way of primitive manufacture to the capitalist factory of the staple industries, but in the rural areas, under peasant economy, home crafts persisted as an intrinsic part of agriculture. Every hour that could be spared from cultivating the soil was devoted to handicrafts which, as an auxiliary domestic industry, played an important part in providing for personal needs.

It is a recurrent phenomenon in the development of capitalist production that one branch of industry after the other is singled out, isolated from agriculture and concentrated in factories for mass production. The textile industry provides the textbook example, but the same thing has happened, though less obviously, in the case of other rural industries. Capital must get the peasants to buy its commodities and will therefore begin by restricting peasant economy to a single sphere – that of agriculture – which will not immediately and, under European conditions of ownership, only with great, difficulty submit to capitalist domination. To all outward appearance, this process is quite peaceful. It is scarcely noticeable and seemingly caused by purely economic factors. There can be no doubt that mass production in the factories is technically superior to primitive peasant industry, owing to a higher degree of specialisation, scientific analysis and management of the productive process, improved machinery, and access to international resources of raw materials. In reality, however, the process of separating agriculture and industry is determined by factors such as oppressive taxation, war, or squandering and monopolisation of the nation’s land, and thus belongs to the spheres of political power and criminal law no, less than with economics.

Nowhere has this process been brought to such perfection as n the United States. In the wake of the railways, financed by European and in particular British capital, the American farmer crossed the Union from East to West and in his progress over vast areas killed off the Red Indians with fire-arms and bloodhounds, liquor and venereal disease, pushing the survivors to the West, in order to appropriate the land they had ‘vacated’, to clear it and bring it under the plough. The American farmer, the ‘backwoodsman’ of the good old times before the War of Secession, was very different indeed from his modern counterpart. There was hardly anything he could not do, and he led a practically self-sufficient life on his isolated farm.

In the beginning of the nineties, one of the leaders of the Farmers’ Alliance, Senator Peffer, wrote as follows:

‘The American farmer of to-day is altogether a different sort of man from his ancestor of fifty or a hundred years ago. A great many men and women now living remember when farmers were largely manufacturers; that is to say, they made a great many implements for their own use. Every farmer had an assortment of tools with which he made wooden implements, as, forks and rakes, handles for his hoes and ploughs, spokes for his wagon, and various other implements made wholly out of wood. Then the farmer produced flax and hemp and wool and cotton. These fibres were prepared upon the farm; they were spun into yarn, woven into cloth, made into garments, and worn at home. Every farm had upon it a little shop for wood and iron work, and in the dwelling were cards and looms; carpets were woven, bed-clothing of different sorts was prepared; upon every farm geese were kept, their feathers used for supplying the home demand with beds and pillows, the surplus being disposed of at the nearest market town. During the winter season wheat and flour and corn meal were carried in large wagons drawn by teams of six to eight horses a hundred or two hundred miles to market, and traded for farm supplies for the next year – groceries and dry goods. Besides this, mechanics were scattered among the farmers. The farm wagon was in process of building a year or two; the material was found near the shop; the character of the timber to be used was stated in the contract; it had to be procured in a certain season and kept in the drying process a length of time specified, so that when the material was brought together in proper form and the wagon made, both parties to the contract knew where every stick of it came from, and how long it had been in seasoning. During winter time the neighbourhood carpenter prepared sashes and blinds and doors and moulding and cornices for the next season’s building. When the frosts of autumn came the shoemaker repaired to the dwellings of the farmers and there, in a corner set apart to him, he made up shoes for the family during the winter. All these things were done among the farmers, and a large part of the expense was paid with products of the farm. When winter approached, the butchering season was at hand; meat for family use during the next year was prepared and preserved in the smoke house. The orchards supplied fruit for cider, for apple butter, and for preserves of different kinds, amply sufficient to supply the wants of the family during the year, with some to spare. Wheat was threshed, a little at a time, just enough to supply the needs of the family for ready money, and not enough to make it necessary to waste one stalk of straw. Everything was saved and put to use. One of the results of that sort of economy was that comparatively a very small amount of money was required to conduct the business of farming. A hundred dollars average probably was as much as the largest farmers of that day needed in the way of cash to meet the demands of their farm work, paying for hired help, repairs of tools, and all other incidental expenses.’

This Arcadian life was to come to a sudden end after the War of Secession. The war had burdened the Union with an enormous National Debt, amounting to £1,200,000, and in consequence the taxes were considerably increased. On the other hand, a feverish development of modern traffic and industry, machine-building in particular, was encouraged by the imposition of higher protective tariffs. The railway companies were endowed with public lands on an imposing scale, in order to promote railroad construction and farm-settlements: in 1867 alone, they were given more than 192,500,000 acres, and so the permanent way grew at an unprecedented rate: In 1860 it amounted to less than 31,000 miles, in 1870 it had grown to more than 53,000 miles and in 1880 to more than 93,000 miles. (During the same period – 1870–1880 – the permanent way in Europe had grown from 80,000 miles to 100,000 miles.) The railways and speculations in land made for mass emigration from Europe to the United States, and more than 4½ million people immigrated in the twenty-three years from 1869 to 1892. In this way, the Union gradually became emancipated from European, and in particular from British industry; factories we set up in the States and home industries developed for the production of textiles, iron, steel and machinery. The process of revolutionary transformation was most rapid in agriculture. The emancipation of the slaves had compelled the Southern planters to introduce the steam plough shortly after the Civil War, and new farms had sprung up in the West in the wake of the railways, which from the very beginning employed the most modern machinery and technique.

‘The improvements are rapidly revolutionising the agriculture of the West, and reducing to the lowest minimum ever attained, the proportion of manual labour employed in its operations ... Coincident with this application of mechanics to agriculture, systematic and enlarged business aptitudes have also sought alliance with this noble art. Farms of thousands of acres have been managed with greater skill, a more economical adaptation of means to ends, and with a larger margin of real profit than many others of 80 acres.’

During this time, direct and indirect taxation had increased enormously. On June 30, 1864, during the Civil War, a new finance bill was passed which is the basis of the present system of taxation, and which raised taxes on consumption and income to a staggering degree. This heavy war levy served as a pretext for a real orgy of protective tariffs in order to offset the tax on home production by customs duties. Messrs. Morrill, Stevens and the other gentlemen who advanced the war as a lever for enforcing their protectionist programme, initiated the practice of wielding the implement of a customs policy quite openly and cynically to further private profiteering interests of all descriptions. Any home producer who appeared before the legislative assembly with a request for any kind of special tariff to fill his own pocket saw his demands readily granted, and the tariff rates were made as high as any interested party might wish.

‘The war’, writes the American Taussig, ‘had in many ways a bracing and ennobling influence on our national life; but its immediate effect on business affairs, and on all legislation affecting moneyed interests, was demoralising. The line between public duty and private interests was often lost sight of by legislators. Great fortunes were made by changes in legislation urged and brought about by those who were benefited by them, and the country has seen with sorrow that the honour and honesty of public men did not remain undefiled.’

This customs bill which completely revolutionised the country’s economic life, and remained in force unchanged for twenty years, was literally pushed through Congress in three days, and through the Senate in two, without criticism, without debate, without any opposition whatever. Down to the present day it forms the basis of US customs legislation.

This shift in US fiscal policy ushered in an era of the most brazen parliamentary log-rolling and of undisguised and unrestrained corruption of elections, of the legislature and the press to satisfy the greed of Big Business. ‘Enrichissez-vous’ became the catchword of public life after the ‘noble war’ to liberate mankind from the ‘blot of slavery’. On the stock exchange, the Yankee negro-liberator sought his fortunes in orgies of speculation; in Congress, he endowed himself with public lands, enriched himself by customs and taxes, by monopolies, fraudulent share and theft of public funds. Industry prospered. Gone were the times when the small or medium farmer required hardly any money, when he could thresh and turn into cash his wheat reserves as the need arose. Now he was chronically in need of money, a lot of money, to pay his taxes. Soon he was forced to sell all his produce and to buy his requirements from the manufacturers in the form of ready-made goods. As Peffer puts it:

‘Coming from that time to the present, we find that everything nearly has been changed. All over the West particularly the farmer threshes his wheat all at one time, he disposes of it all at one time, and in a great many instances the straw is wasted. He sells his hogs, and buys bacon and pork; he sells his cattle, and buys fresh beef and canned beef or, domed beef; as the case may be; he sells his fruit, and buys it back in cans. If he raises flax at all, instead of putting it into yarn and making gowns for his children, as he did fifty years or more ago, he threshes his flax, sells the seed, and burns the straw. Not more than one farmer in fifty now keeps sheep at all; he relies upon the large sheep farmer for the wool, which is put into cloth or clothing ready for his use. Instead of hating clothing made up on the farm in his own house or by a neighbour woman or country tailor a mile away, he either purchases his clothing ready made at the nearest town, or he buys the cloth and has a city tailor make it up for him. Instead of making implements which he uses about the farm – forks, rakes, etc. – he goes to town to purchase even a handle for his axe or his mallet; he purchases twine and rope and all sorts of needed material made of fibres; he buys his cloth and his clothing; he buys his canned fruit and preserved fruit; he buys hams and shoulders and mess pork and mess beef; indeed, he buys nearly everything now that he produced at one time himself, and these things all cost money. Besides all this, and what seems stranger than anything else, whereas in the earlier time the American home was a free home, unencumbered, not one case in a thousand where a home was mortgaged to secure the payment of borrowed money, and whereas but a small amount of money was then needed for actual use in conducting the business of farming, there was always enough of it among the farmers to supply the demand. Now, when at least ten times as much is needed, there is little or none to be obtained, nearly half the farms are mortgaged for as much as they are worth, and interest rates are exorbitant. As to the cause of such wonderful changes ... the manufacturer came with his woollen mill, his carding mill, his broom factory, his rope factory, his wooden-ware factory, his cotton factory, his pork-packing establishment, his canning factory and fruit preserving houses; the little shop on the farm has given place to the large shop in town; the wagon-maker’s shop in the neighbourhood has given way to the large establishment in the city where ... a hundred or two hundred wagons are made in a week; the shoemaker’s shop has given way to large establishments in the cities where most of the work is done by machines.’

Finally, the agricultural labour of the farmer himself has become machine work:

‘He ploughs and sows and reaps with machines. A machine cuts his wheat and puts it in a sheaf; and steam drives his threshers. He may read the morning paper while he ploughs and sit under an awning while he reaps.’

Sering estimated in the middle eighties that the necessary cash ‘for a very modest beginning’ of the smallest farm in the North West is £240 to £280.

This revolution of American agriculture after the ‘Great War’ was not the end. It was only the beginning of the whirlpool in which the farmer was caught. His history brings us automatically to the second phase of the development of capitalist accumulation of which it is an excellent illustration. – Natural economy, the production for personal needs and the close connection between industry and agriculture must be ousted and a simple commodity economy substituted for them. Capitalism needs the medium of commodity production for its development, as a market for its surplus value. But as soon as simple commodity production has superseded natural economy, capital must turn against it. No sooner has capital called it to life, than the two must compete for means of production, labour power, and markets. The first aim of capitalism is to isolate the producer, to sever the community ties which protect him, and the next task is to take the means of production away from the small manufacturer.

In the American Union, as we have seen, the ‘Great War’ inaugurated an era of large-scale seizure of public lands by monopolist capitalist companies and individual speculators. Feverish railroad building and ever more speculation in railway shares led to a mad gamble in land, where individual soldiers of fortune and companies netted immense fortunes and even entire counties. In addition a veritable swarm of agents lured the vast flow of emigrants from Europe to the USA by blatant and unscrupulous advertising, deceptions and pretences of every description. These immigrants first settled in the Eastern States along the Atlantic seaboard, and, with the growth of industry in these states, agriculture was driven westward. The ‘wheat centre’ which had been near Columbus, Ohio, in 1850, in the course of the subsequent fifty years shifted to a position 99 miles further North and 680 miles further West. Whereas in 1850 51.4 per cent of the total wheat crop had been supplied by the Eastern States, in 1880 they produced only 13.6 per cent, 71.7 per cent being supplied by the Northern Central and 9 per cent by the Western States.

In 1825, the Congress of the Union under Monroe had decided to transplant the Red Indians from the East to the West of the Mississippi. The redskins put up a desperate resistance; but all who survived the slaughter of forty Red Indian campaigns were swept away like so much rubbish and driven like cattle to the West to be folded in reservations like so many sheep. The Red Indian had been forced to make room for the farmer – and now the farmer in his turn was driven beyond the Mississippi to make way for capital.

Following the railway tracks, the American farmer moved West and North-West into the land of promise which the great land speculators’ agents had painted for him in glowing colours. Yet the most fertile and most favourably situated lands were retained by the companies who farmed them extensively on completely capitalistic lines. All around the farmer who had been exiled into the wilderness, a dangerous competitor and deadly enemy sprang up – the ‘bonanza farms’, the great capitalist agricultural concerns which neither the Old World nor the New had known before. Here surplus value was produced with the application of all the resources known to modern science and technology.

‘As the foremost representative of financial agriculture we may consider Oliver Dalrymple, whose name is to-day known on both sides of the Atlantic. Since 1874 he has simultaneously managed a line of steamers on the Red River and six farms owned by a company of financiers and comprising some 75,000 acres. Each one is divided into departments of 2,000 acres, and every department is again subdivided into three sections of 667 acres which are run by foremen and gang leaders. Barracks to shelter 50 men and stable as many horses and mules, are built on each section, and similarly kitchens, machine sheds and workshops for blacksmiths and locksmiths. Each section is completely equipped with 20 pairs of horses, 8 double ploughs, 12 horse-drawn drill-ploughs, 12 steel-toothed harrows, 12 cutters and binders, 2 threshers and 16 wagons. Everything is done to ensure that the machines and the living labour (men, horses and mules) are in good condition and able to do the greatest possible amount of work. There is a telephone line connecting all sections and the central management.

‘The six farms of 75,000 acres are cultivated by an army of 600 workers, organised on military lines. During the harvest, the management hires another 500 to 600 auxiliary workers, assigning them to the various sections. After the work is completed in the fall, the workers are dismissed with the exception of the foreman and 10 men per section. In some farms in Dakota and Minnesota, horses and mules do not spend the winter at the place of work. As soon as the stubble has been ploughed in, they are driven in teams of a hundred or two hundred pairs 900 miles to the South, to return only the following spring.

‘Mechanics on horseback follow the ploughing, sowing and harvesting machines when they are at work. If anything goes wrong, they gallop to the machine in question, repair it and get it moving again without delay. The harvested corn is carried to the threshing machines which work day and night without interruption. They are stoked with bundles of straw fed into the stoke hold through pipes of sheet-iron. The corn is threshed, winnowed, weighed and filled into sacks by machinery, then it is put into railway trucks which run alongside the farm, and goes to Duluth or Buffalo. Every year, Dalrymple increases his land under seed by 5,800 acres. In 1880 it amounted to 25,000 acres.’

In the late seventies, there were already individual capitalists and companies who owned 35,000–45,000 acres of wheat land. Since the time of Lafargue’s writing, extensive capitalist agriculture in America has made great strides in technique and the employment of machinery.

The American farmer could not successfully compete with such capitalist enterprises. At a time when the general revolution in the conditions of finance, production and transport compelled him to give up production for personal needs and to produce exclusively for the market, the great spreading of agriculture caused a heavy fall in the prices of agricultural products. And at the precise moment when farming became dependent on the market, the agricultural market of the Union was suddenly turned from a local one into a world market, and became a prey to the wild speculations of a few capitalist mammoth concerns.

In 1879, a notable year for the history of agricultural conditions in Europe as well as in America, there began the mass export of wheat from the USA to Europe.

Big Business was of course the only one to profit from this expanding market. The small farmer was crushed by the competition of an increasing number of extensive farms and became the prey of speculators who bought up his corn to exert pressure on the world market. Helpless in the face of the immense capitalist powers, the farmer got into debt – a phenomenon typical for a declining peasant economy. In 1890, Secretary Rusk of the US Department of Agriculture sent out a circular letter with reference to the desperate position of the farmers, saying:

‘The burden of mortgages upon farms, homes, and land, is unquestionably discouraging in the extreme, and while in some cases no doubt this load may have been too readily assumed, still in the majority of cases the mortgage has been the result of necessity ... These mortgages ... drawing high rates of interest ... have to-day, in the face of continued depression of the prices of staple products, become very irksome, and in many cases threaten the farmer with loss of home and land. It is a question of grave difficulty to all those who seek to remedy the ills from which our farmers are suffering. At present prices the farmer finds that it takes more of his products to get a dollar wherewith to buy back the dollar which he borrowed than it did when he borrowed it. The interest accumulates, while the payment of the principal seems utterly hopeless, and the very depression which we are discussing makes the renewal of the mortgage most difficult.’

According to the census of May 29, 1891, 25 million farms were deep in debt; two-thirds of them were managed by the owners whose obligations amounted to nearly £440,000.

‘The situation is this: farmers are passing through the “valley and shadow of death”; farming as a business is profitless; values of farm products have fallen 50 per cent since the great war, and farm values have depreciated 25 to 50 per cent during the last ten years; farmers are overwhelmed with debts secured by mortgages on their homes, unable in many instances to pay even the interest as it falls due, and unable to renew the loans because securities are weakening by reason of the general depression; many farmers are losing their homes under this dreadful blight, and the mortgage mill still grinds. We are in the hands of a merciless power; the people’s homes are at stake.’

Encumbered with debts and close to ruin, the farmer had no option but to supplement his earnings by working for a wage, or else to abandon his farm altogether. Provided it had not yet fallen into the clutches of his creditors like so many thousands of farms, he could shake from off his feet the dust of the ‘land of promise’ that had become an inferno for him. In the middle eighties, abandoned and decaying farms could be seen everywhere. In 1887, Sering wrote:

‘If the farmer cannot pay his debts to date, the interest he has to pay is increased to 12, 15 or even 20 per cent. He is pressed by the banker, the machine salesman and the grocer who rob him of the fruits of his hard work ... He can either remain on the farm as a tenant or move further West, to try his fortunes elsewhere. Nowhere in North America have I found so many indebted, disappointed and depressed farmers as in the wheat regions of the North Western prairies. I have not spoken to a single farmer in Dakota who would not have been prepared to sell his farm.’

‘The Commissioner of Agriculture of Vermont in 1889 reported a wide-spread desertion of farm-lands of that state. He wrote: “... there appears to be no doubt about there being in this state large tracts of tillable unoccupied lands, which can be bought at a price approximating the price of Western lands, situated near school and church, and not far from railroad facilities. The Commissioner has not visited all of the counties in the State where these lands are reported, but he has visited enough to satisfy him that, while much of the unoccupied and formerly cultivated land is now practically worthless for cultivation, yet very much of it can be made to yield a liberal reward to intelligent labour.”’

The Commissioner of the State of New Hampshire issued a pamphlet in 1890, devoting 67 pages to the description of farms for sale at the lowest figures. He describes 1442 farms with tenantable buildings, abandoned only recently. The same has happened in other districts. Thousands of acres once raising corn and wheat are left unfilled and run to brush and wood.

In order to resettle the deserted land, speculators engaged in advertising campaigns and attracted crowds of new immigrants – new victims who were to suffer their predecessors’ fate even more speedily.

A private letter says:

‘In the neighbourhood of railroads and markets, there remains no common land. It is all in the hands of the speculators. A settler takes over vacant land and counts for a farmer; but the management of his farm hardly assures his livelihood, and he cannot possibly compete with the big farmer. He tills as much of his land as the law compels him to do, but to make a comfortable living, he must look for additional, sources of income outside agriculture. In Oregon, for instance, I have met a settler who owned 160 acres for five years, but every summer, until the end of July, he worked twelve hours a day for a dollar a day at road-making. This man, of course, also counts as one of the five million farmers in the 1890 census. Again, in the County of Eldorado, I saw many farmers who cultivated their land only to feed their cattle and themselves. There would have been no profit in producing for the market, and their chief income derives from gold-digging, the felling and selling of timber, etc. These people are prosperous, but it is not agriculture which makes them so. Two years ago, we worked in Long Cañon, Eldorado County, living in a cabin on an allotment. The owner of this allotment came home only once a year for a couple of days, and worked the rest of the time on the railway in Sacramento. Some years ago, a small part of the allotment was cultivated, to comply with the law, but now it is left completely untilled. A few acres are fenced off with wire, and there is a log cabin and a shed. But during the last years all this stands empty; a neighbour has the key and he made us free of the hut. In the course of our journey, we saw many deserted allotments, where attempts at farming had been made. Three years ago I was offered a farm with dwelling house for a hundred dollars, but in a short time the unoccupied house collapsed under the snow. In Oregon, we saw many derelict farms with small dwelling houses and vegetable gardens. One we visited was beautifully made: a sturdy block house, fashioned by a master-builder, and some equipment; but the farmer had abandoned it all. You were welcome to take it all without charge.’

Where could the ruined American farmer turn? He set out on a pilgrimage to follow the wheat centre and the railways. The former had shifted in the main to Canada, the Saskatchewan and the Mackenzie River where wheat can still thrive on the 62nd parallel. A number of American farmers followed – and after some time in Canada, they suffered the old fate. During recent years, Canada has entered the world market as a wheat-exporting country, but her agriculture is dominated to an even greater extent by big capital than elsewhere.

In Canada, public lands were lavished upon private capitalist companies on an even more monstrous scale than in the United States. Under the Charter of the Canadian Pacific Railway Company with its grant of land, private capital perpetrated an unprecedented act of robbing the public. Not only that the company was guaranteed a twenty years’ monopoly of railway building, not only that it got a building site of about 713 miles free of charge, not only that it got a 100 years’ state guarantee of the 3 per cent interest on the share capital of £m. 20 – to crown it all, the company was given the choice of 25 million acres out of the most fertile and favourably situated lands, not necessarily in the immediate vicinity of the permanent way, as a free gift. All future settlers on this vast area were thus at the mercy of railway capital from the very outset. The railway company, in its turn, immediately proceeded to sell off 5 million acres for ready cash to the North-West Land Company, an association of British capitalists under the chairmanship of the Duke of Manchester. The second group of capitalists which was liberally endowed with public lands was the Hudson Bay Company, which was given a title to no less than one-twentieth of all the lands between Lake Winnipeg, the US. border, the Rocky Mountains, and Northern Saskatchewan, for renouncing their privileges in the North-West. Between them, these two capitalist groups had gained possession of five-ninths of all the land that could be settled. A considerable part of the other lands was assigned by the State to 26 capitalist ‘colonising companies’. Thus the Canadian farmer was practically everywhere ensnared by capital and capitalist speculation. And still mass immigration continued – not only from Europe, but also from the United States!

These are the characteristics of capitalist domination on an international scale. Having evicted the peasant from his soil, it drives him from England to the East of the United States, and from there to the West, and on the ruins of the Red Indians’ economy it transforms him back into a small commodity producer. Then, when he is ruined once more, he is driven from the West to the North. With the railways in the van, and ruin in the rear – capital leads the way, its passage is marked with universal destruction. The great fall of prices in the nineties is again succeeded by higher prices for agricultural products, but this is of no more avail to the small American farmer than to the European peasant.

Yet the numbers of farmers are constantly swelling. In the last decade of the nineteenth century they had grown from 4,600,000 to 5,700,000, and the following ten years still saw an absolute increase. The aggregate value of farms had during the same period risen from £150,240,000 to £330,360,000. We might have expected the general increase in the price of farm produce to have helped the farmer to come into his own. But that is not so; we see that the growing numbers of tenant farmers outstrip the increase in the farming population as a whole. In 1880, the proportion of tenant farmers amounted to 25.5 per cent of the total number of farmers in the Union, in 1890 it was 28.4 per cent, in 1900 35.3 per cent, and in 1910 37.2 per cent.

Though prices for farm produce were rising, the tenant farmer was more and more rapidly stepping into the shoes of the independent farmer. And although much more than one-third of all farmers in the Union are now tenant farmers, their social status in the United States is that of the agricultural labourer in Europe. Constantly fluctuating, they are indeed wage-slaves of capital; they work very hard to create wealth for capital, getting nothing in return but a miserable and precarious existence.

In quite a different historical setting, in South Africa, the same process shows up even more clearly the ‘peaceful methods’ by which capital competes with the small commodity producer.

In the Cape Colony and the Boer Republics, pure peasant economy prevailed until the sixties of the last century. For a long time the Boers had led the life of animal-tending nomads; they had killed off or driven out the Hottentots and Kaffirs with a will in order to deprive them of their most valuable pastures. In the eighteenth century they were given invaluable assistance by the plague, imported by ships of the East India Company, which frequently did away with entire Hottentot tribes whose lands then fell to the Dutch immigrants. When the Boers spread further East, they came in conflict with the Bantu tribes and initiated the long period of the terrible Kaffir wars. These god fearing Dutchmen regarded themselves as the Chosen People and took no small pride in their old-fashioned Puritan morals and their intimate knowledge of the Old Testament; yet, not content with robbing the natives of their land, they built their peasant economy like parasites on the backs of the Negroes, compelling them to do slave-labour for them and corrupting and enervating them deliberately and systematically. Liquor played such an important part in this process, that the prohibition of spirits in the Cape Colony could not be carried through by the English government because of Puritan opposition. There were no railways until 1859, and Boer economy in general and on the whole remained patriarchal and based on natural economy until the sixties. But their patriarchal attitude did not deter the Boers from extreme brutality and harshness. It is well known that Livingstone complained much more about the Boers than about the Kaffirs. The Boers considered the Negroes an object, destined by God and Nature to slave for them, and as such an indispensable foundation of their peasant economy. So much so that their answer to the abolition of slavery in the English colonies in 1836 was the ‘Great Trek’, although there the owners had been compensated with £3,000,000. By way of the Orange River and Vaal, the Boers emigrated from the Cape Colony, and in the process they drove the Matabele to the North, across the Limpopo, setting them against the Makalakas just as the American farmer had driven the Red Indian West before him under the impact of capitalist economy, so the Boer drove the Negro to the North. The ‘Free Republics’ between the Orange River and the Limpopo thus were created as a protest against the designs of the English bourgeoisie on the sacred right of slavery. The tiny peasant republics were in constant guerilla warfare against the Bantu Negroes And it was on the backs of the Negroes that the battle between the Boers and the English government, which went on for decades, was fought. The Negro question, i.e. the emancipation of the Negroes, ostensibly aimed at by the English bourgeoisie, served as a pretext for the conflict between England and the republics. In fact, peasant economy and great capitalist colonial policy were here competing for the Hottentots and Kaffirs, that is to say for their land and their labour power. Both competitors had precisely the same aim: to subject, expel or destroy the coloured peoples, to appropriate their land and press them into service by the abolition of their social organisations. Only their methods of exploitation were fundamentally different. While the Boers stood for out-dated slavery on a petty scale, on which their patriarchal peasant economy was founded, the British bourgeoisie represented modern large-scale capitalist exploitation of the land and the natives. The Constitution of the Transvaal (South African) Republic declared with crude prejudice: ‘The People shall not permit any equality of coloured persons with white inhabitants, neither in the Church nor in the State.’

In the Orange Free State and in the Transvaal no Negro was allowed to own land, to travel without papers or to walk abroad after sunset. Bryce tells us of a case where a farmer, an Englishman as it happened in the Eastern Cape Colony had flogged his Kaffir slave to death. When he was acquitted in open court, his neighbours escorted him home to the strains of music. The white man frequently maltreated his free native labourers after they had done their work – to such an extent that they would take to flight, thus saving the master their wages.

The British government employed precisely the opposite tactics. For a long time it appeared as protector of the natives; flattering the chieftains in particular, it supported their authority and tried to make them claim a right of disposal over their land. Wherever it was possible, it gave them ownership of tribal land, according to well-tried methods, although this flew in the face of tradition and of the actual social organisation of the Negroes. All tribes in fact held their land communally, and even the most cruel and despotic rulers such as the Matabele Chieftain Lobengula merely had the right as well as the duty to allot every family a piece of land which they could only retain so long as they cultivated it. The ultimate purpose of the British government was clear: long in advance it was preparing for land robbery on a grand scale, using the native chieftains themselves as tools. But in the beginning it was content with the ‘pacification’ of the Negroes by extensive military actions. Up to 1879 were fought 9 bloody Kaffir wars to break the resistance of the Bantus.

British capital revealed its real intentions only after two important events had taken place: the discovery of the Kimberley diamond fields in 1869–70, and the discovery of the gold mines in the Transvaal in 1882–5, which initiated a new epoch in the history of South Africa. Then the British South Africa Company, that is to say Cecil Rhodes, went into action. Public opinion in England rapidly swung over, and the greed for the treasures of South Africa urged the British government on to drastic measures. South Africa was suddenly flooded with immigrants who had hitherto only appeared in small numbers – immigration having been deflected to the United States. But with the discovery of the diamond and gold fields, the numbers of white people in the South African colonies grew by leaps and bounds: between 1885 and 1895, 100,000 British had immigrated into Witwatersrand alone. The modest peasant economy was forthwith pushed into the background – the mines, and thus the mining capital, coming to the fore. The policy of the British government veered round abruptly. Great Britain had recognised the Boer Republics by the Sand River Agreement and the Treaty of Bloemfontein in the fifties. Now her political might advanced upon the tiny republic from every side, occupying all neighbouring districts and cutting off all possibility of expansion. At the same time the Negroes, no longer protected favourites, were sacrificed. British capital was steadily forging ahead. In 1868, Britain took over the rule of Basutoland – only, of course, because the natives had ‘repeatedly implored’ her to do so. In 1871, the Witwatersrand diamond fields, or West Griqualand, were seized from the Orange Free State and turned into a Crown Colony. In 1879, Zululand was subjected, later to become part of the Natal Colony; in 1885 followed the subjection of Bechuanaland, to be joined to the Cape Colony. In 1888 Britain took over Matabele and Mashonaland, and in 1889 the British South Africa Company was given a Charter for both these districts, again, of course, only to oblige the natives and at their request. Between 1884 and 1887, Britain annexed St. Lucia Bay and the entire East Coast as far as the Portuguese possessions. In 1894, she subjected Tongaland. With their last strength, the Matabele and Mashona fought one more desperate battle, but the Company, with Rhodes at the head, first liquidated the rising in blood and at once proceeded to the well tried measure for civilising and pacifying the natives: two large railways were built in the rebellious district.

The Boer Republics were feeling increasingly uncomfortable in this sudden stranglehold, and their internal affairs as well were becoming completely disorganised. The overwhelming influx of immigrants and the rising tides of the frenzied new capitalist economy now threatened to burst the barriers of the small peasant states. There was indeed a blatant conflict between agricultural and political peasant economy on the one hand, and the demands and requirements of the accumulation of capital on the other. In all respects, the republics were quite unable to cope with these new problems. The constant danger from the Kaffirs, no doubt regarded favourably by the British, the unwieldy, primitive administration, the gradual corruption of the volksraad in which the great capitalists got their way by bribery, lack of a police force to keep the undisciplined crowds of adventurers in some semblance of order, the absence of labour legislation for regulating and securing the exploitation of the Negroes in the mines, lack of water supplies and transport to provide for the colony of 100,000 immigrants that had suddenly sprung up, high protective tariffs which increased the cost of labour for the capitalists, and high freights for coal – all these factors combined towards the sudden and stunning bankruptcy of the peasant republics.

They tried, obstinately and unimaginatively, to defend themselves against the sudden eruption of capitalism which engulfed them, with an incredibly crude measure, such as only a stubborn and hide-bound peasant brain could have devised: they denied all civic rights to the uitlanders who outnumbered them by far and who stood for capital, power, and the trend of the time. In those critical times it was an ill-omened trick. The mismanagement of the peasant republics caused a considerable reduction of dividends, on no account to be put up with. Mining capital had come to the end of its tether. The British South Africa Company built railroads, put down the Kaffirs, organised revolts of the uitlanders and finally provoked the Boer War. The bell had tolled for peasant economy. In the United States, the economic revolution had begun with a war, in South Africa war put the period to this chapter. Yet in both instances, the outcome was the same: capital triumphed over the small peasant economy which had in its turn come into being on the ruins of natural economy, represented by the natives’ primitive organisations. The domination of capital was a foregone conclusion, and it was just as hopeless for the Boer Republics to resist as it had been for the American farmer. Capital officially took over the reins in the new South African Union which replaced the small peasant republics by a great modern state, as envisaged by Cecil Rhodes’ imperialist programme. The new conflict between capital and labour had superseded the old one between British and Dutch. One million white exploiters of both nations sealed their touching fraternal alliance within the Union with the civil and political disfranchisement of five million coloured workers. Not only the Negroes of the Boer Republics came away empty handed, but the natives of the Cape Colony, whom the British government had at one time granted political equality, were also deprived of some of their rights. And this noble work, culminating under the imperialist policy of the Conservatives in open oppression, was actually to be finished by the Liberal Party itself, amid frenzied applause from the liberal cretins of Europe who with sentimental pride took as proof of the still continuing creative vigour and greatness of English liberalism the fact that Britain had granted complete self-government and freedom to a handful of whites in South Africa.

The ruin of independent craftsmanship by capitalist competition, no less painful for being soft-pedalled, deserves by rights a chapter to itself. The most sinister part of such a chapter would be out-work under capitalism; – but we need not dwell on these phenomena here.

The general result of the struggle between capitalism and simple commodity production is this: after substituting commodity economy for natural economy, capital takes the place of simple commodity economy. Non-capitalist organisations provide a fertile soil for capitalism; more strictly: capital feeds on the ruins of such organisations, and, although this non-capitalist milieu is indispensable for accumulation, the latter proceeds, at the cost of this medium nevertheless, by eating it up. Historically, the accumulation of capital is a kind of metabolism between capitalist economy and those pre-capitalist methods of production without which it cannot go on and which, in this light, it corrodes and assimilates. Thus capital cannot accumulate without the aid of non-capitalist organisations, nor, on the other hand, can it tolerate their continued existence side by side with itself. Only the continuous and progressive disintegration of non-capitalist organisations makes accumulation of capital possible.

The premises which are postulated in Marx’s diagram of accumulation accordingly represent no more than the historical tendency of the movement of accumulation and its logical conclusion. The accumulative process endeavours everywhere to substitute simple commodity economy for natural economy. Its ultimate aim, that is to say, is to establish the exclusive and universal domination of capitalist production in all countries and for all branches of industry.

Yet this argument does not lead anywhere. As soon as this final result is achieved – in theory, of course, because it can never actually happen – accumulation must come to a stop. The realisation and capitalisation of surplus value become impossible to accomplish. Just as soon as reality begins to correspond to Marx’s diagram of enlarged reproduction, the end of accumulation is in sight, it has reached its limits, and capitalist production is in extremis. For capital, the standstill of accumulation means that the development of the productive forces is arrested, and the collapse of capitalism follows inevitably, as an objective historical necessity. This is the reason for the contradictory behaviour of capitalism in the final stage of its historical career: imperialism.

Marx’s diagram of enlarged reproduction thus does not conform to the conditions of an accumulation in actual progress. Progressive accumulation cannot be reduced to static interrelations and interdependence between the two great departments of social production (the departments of producer and consumer goods), as the diagram would have it. Accumulation is more than an internal relationship between the branches of capitalist economy; it is primarily a relationship between capital and a non-capitalist environment, where the two great departments of production sometimes perform the accumulative process on their own, independently of each other, but even then at every step the movements overlap and intersect. From this we get most complicated relations, divergences in the speed and direction of accumulation for the two departments, different relations with non-capitalist modes of production as regards both material elements and elements of value, which we cannot possibly lay down in rigid formula. Marx’s diagram of accumulation is only the theoretical reflection of the precise moment when the domination of capital has reached its limits, and thus it is no less a fiction than his diagram of simple reproduction, which gives the theoretical formulation for the point of departure of capitalist accumulation. The precise definition of capitalist accumulation and its laws lies somewhere in between these two fictions.

30. International Loans

THE imperialist phase of capitalist accumulation which implies universal competition comprises the industrialisation and capitalist emancipation of the hinterland where capital formerly realised its surplus value. Characteristic of this phase are: lending abroad, railroad constructions, revolutions, and wars. The last decade, from 1900 to 1910, shows in particular the world-wide movement of capital, especially in Asia and neighbouring Europe: in Russia, Turkey, Persia, India, Japan, China, and also in North Africa. Just as the substitution of commodity economy for a natural economy and that of capitalist production for a simple commodity production was achieved by wars, social crises and the destruction of entire social systems, so at present the achievement of capitalist autonomy in the hinterland and backward colonies is attained amidst wars and revolutions. Revolution is an essential for the process of capitalist emancipation. The backward communities must shed their obsolete political organisations, relics of natural and simple commodity economy, and create a modern state machinery adapted to the purposes of capitalist production. The revolutions in Turkey, Russia, and China fall under this heading. The last two, in particular, do not exclusively serve the immediate political requirements of capitalism; to some extent they carry over outmoded pre-capitalist claims while on the other hand they already embody new conflicts which run counter to the domination of capital. These factors account for their immense drive, but at the same time impede and delay the ultimate victory of the revolutionary forces. A young state will usually sever the leading strings of older capitalist states by wars, which temper and test the modern state’s capitalist independence in a baptism by fire. That is why military together with financial reforms invariably herald the bid for economic independence.

The forward-thrusts of capital are approximately reflected in the development of the railway network. The permanent way grew most quickly in Europe during the forties, in America in the fifties, in Asia in the sixties, in Australia during the seventies and eighties, and during the nineties in Africa.

Public loans for railroad building and armaments accompany all stages of the accumulation of capital: the introduction of commodity economy, industrialisation of countries, capitalist revolutionisation of agriculture as well as the emancipation of young capitalist states. For the accumulation of capital, the loan has various functions: (a) it serves to convert the money of non-capitalist groups into capital, i.e. money both as a commodity equivalent (lower middle-class savings) and as fund of consumption for the hangers-on of the capitalist class; (b) it serves to transform money capital into productive capital by means of state enterprise-railroad building and military supplies; (c) it serves to divert accumulated capital from the old capitalist countries to young ones. In the sixteenth and seventeenth centuries, the loan transferred capital from the Italian cities to England, in the eighteenth century from Holland to England, in the nineteenth century from England to the American Republics and Australia, from France, Germany and Belgium to Russia, and at the present time [1912] from Germany to Turkey, from England, Germany and France to China, and, via Russia, to Persia.

In the Imperialist Era, the foreign loan played an outstanding part as a means for young capitalist states to acquire independence. The contradictions inherent in the modern system of foreign loans are the concrete expression of those which characterise the imperialist phase. Though foreign loans are indispensable for the emancipation of the rising capitalist states, they are yet the surest ties by which the old capitalist states maintain their influence, exercise financial control and exert pressure on the customs, foreign and commercial policy of the young capitalist states. Pre-eminently channels for the investment in new spheres of capital accumulated in the old countries, such loans widen the scope for the accumulation of capital; but at the same time they restrict it by creating new competition for the investing countries.

These inherent conflicts of the international loan system are a classic example of spatio-temporal divergencies between the conditions for the realisation of surplus value and the capitalisation thereof. While realisation of the surplus value requires only the general spreading of commodity production, its capitalisation demands the progressive supercession of simple commodity production by capitalist economy, with the corollary that the limits to both the realisation and the capitalisation of surplus value keep contracting ever more. Employment of international capital in the construction of the international railway network reflects this disparity. Between the thirties and the sixties of the nineteenth century, railway is building and the loans necessary for it mainly served to oust natural economy, and to spread commodity economy – as in the case of the Russian railway loans in the sixties, or in that of the American railways which were built with European capital. Railway construction in Africa and Asia during the last twenty years, on the other hand, almost exclusively served the purposes of an imperialist policy, of economic monopolisation and economic subjugation of the backward communities. As regards Russia’s railroad construction in Eastern Asia, for instance, it is common knowledge that Russia had paved the way for the military occupation of Manchuria by sending troops to protect her engineers working on the Manchurian railway. With the same object in view, Russia obtained railway concessions in Persia, Germany in Asia Minor and Mesopotamia, and Britain and Germany in Africa.

In this connection, we must deal with a misunderstanding concerning the capital investments in foreign countries and the demand of these countries for capital imports. Already in the early twenties of the last century, the export of British capital to America played an important part, being largely responsible for the first genuine industrial and commercial crises in England in 1825. Since 1824, the London stock exchange had been flooded with South American stocks and shares. During the following year, the newly defeated states of South and Central America raised loans in London alone for more than £20,000,000, and in addition, enormous quantities of South American industrial shares and similar bonds were sold. This sudden prosperity and the opening up of the South American markets in their turn called forth greatly increased exports of British commodities to the Latin Americas. British commodity exports to these countries amounted to £2,900,000 in 1821 which had risen to £6,400,000 by 1825.

Cotton textiles formed the most important item of these exports; this powerful demand was the impetus for a rapid expansion of British cotton production, and many new factories were opened. In 1821, raw cotton to the value of £m. 129 was made up in England and risen to £m. 167.

The situation was thus fraught with the elements of a crisis. Tugan Baranovski raises the question:

‘But from where did the South American countries take the means to buy twice as many commodities in 1825 as in 1821? The British themselves supplied these means. The loans floated on the London stock exchange served as payment for imported goods. Deceived by the demand they had themselves created, the British factory-owners were soon brought to realise by their own experience that their high expectations had been unfounded.’

He thus characterises as ‘deceptive’, as an unhealthy, abnormal economic phenomenon the fact that the South American demand for English goods had been brought about by British capital. Thus uncritically he took over the doctrine of an expert with whose other theories he wished to have nothing in common. The opinion had been advanced already during the English crisis of 1825 that it could be explained by the ‘singular’ development of the relations between British capital and South American demand. None other than Sismondi had raised the same question as Tugan Baranovski and given a most accurate description of events in the second edition of his Nouveaux Principes:

‘The opening up of the immense market afforded by Spanish America to industrial producers seemed to offer a good opportunity to relieve British manufacture. The British government were of that opinion, and in the seven years following the crisis of 1818, displayed unheard-of activity to carry English commerce to penetrate the remotest districts of Mexico, Columbia, Brazil, Rio de la Plata, Chile and Peru. Before the government decided to recognise these new states, it had to protect English commerce by frequent calls of battleships whose captains had a diplomatic rather than a military mission. In consequence, it had defied the clamours of the Holy Alliance and recognised the new republics at a moment when the whole of Europe, on the contrary, was plotting their ruin. But however big the demand afforded by free America, yet it would not have been enough to absorb all the goods England had produced over and above the needs of consumption, had not their means for buying English merchandise been suddenly increased beyond all bounds by the loans to the new republics. Every American state borrowed from England an amount sufficient to consolidate its government. Although they were capital loans, they were immediately spent in the course of the year like income, that is to say they were used up entirely to buy English goods on behalf of the treasury, or to pay for those which had been dispatched on private orders. At the same time, numerous companies with immense capitals were formed to exploit all the American mines, but all the money they spent found its way back to England, either to pay for the machinery which they immediately used, or else for the goods sent to the localities where they were to work. As long as this singular commerce lasted, in which the English only asked the Americans to be kind enough to buy English merchandise with English capital, and to consume them for their sake, the prosperity of English manufacture appeared dazzling. It was no more income but rather English capital which was used to push on consumption: the English themselves bought and paid for their own goods which they sell to America, and thereby merely forwent the pleasure of using these goods.’

From this Sismondi drew the characteristic conclusion that the real limits to the capitalist market are set by income, i.e. by personal consumption alone, and he used this example as one more warning against accumulation.

Down to the present day, the events which preceded the crisis of 1825 have remained typical for a period of boom and expansion of capital, and such ‘singular commerce’ is in fact one of the most important foundations of the accumulation of capital. Particularly in the history of British capital, it occurs regularly before every crisis, as Tugan Baranovski himself showed by the following facts and figures: the immediate cause of the 1836 crisis was the flooding of the American market with British goods, again financed by British money. In 1834, US commodity imports exceeded exports by £m. 12 but at the same time their imports of precious metal exceeded exports by nearly £m. 3.2. Even in 1836, the year of the crisis itself, their surplus of imported commodities amounted to £m. 10.4, and still the excess of bullion imported was £m 1. This influx of money, no less than the stream of goods, came chiefly from England, where US railway shares were bought in bulk. 1835/6 saw opening in the United States of sixty-one new banks with a capital of £m. 10.4, predominantly British. Again, the English paid for their exports themselves. The unprecedented industrial boom in the Northern States of the Union, eventually leading to the Civil War, was likewise financed by British capital, which again created an expanding market for British industry in the United States.

And not only British capital – other European capitals, also made every possible effort to take part in this ‘singular commerce’. To quote Schaeffle, in the five years between 1849 and 1854, at least £m. 100 were invested in American shares on the various stock exchanges of Europe. The simultaneous revival of world industry attained such dimensions that it culminated in the world crash of 1857. – In the sixties, British capital lost no time in creating similar conditions in Asia as well as the United States. An unending stream was diverted to Asia Minor and East India, where it financed the most magnificent railroad projects. The permanent way of British India amounted in 1860 to 844 miles, in 1870 to 4,802 miles, in 1880 to 9,361 miles and in 1890 to 16,875 miles. This at once increased the demand for British commodities. No sooner had the War of Secession come to a close, than British capital again flowed into the United States. It again paid for the greater part of the enormous railroad constructions in the Union during the sixties and seventies, the permanent way amounting in 1850 to 8,844 miles, in 1860 to 30,807 miles, in 1870 to 53,212 miles, in 1880 to 94,198 miles, and in 1890 to 179,005 miles. Materials for these railways were also being supplied by England – one of the main causes for the rapid development of the British coal and iron industries and the reasons why these industries were so seriously affected by the American crises of 1866, 1873 and 1884. What Sismondi considered sheer lunacy was in this instance literally true: the British with their own materials, their own iron etc., had built railroads in the United States, they had paid for the railways with their own capital and only forwent their ‘use’. In spite of all periodical crises, however, European capital had acquired such a taste for this madness, that the London stock exchange was seized by a veritable epidemic of foreign loans in the middle of the seventies. Between 1870 and 1875, loans of this kind, amounting to £m. 260, were raised in London. The immediate consequence was a rapid increase in the overseas export of British merchandise. Although the foreign countries concerned went periodically bankrupt, masses of capital continued to flow in. Turkey, Egypt, Greece, Bolivia, Costa Rica, Ecuador, Honduras, Mexico, Paraguay, Peru, St. Domingo, Uruguay, and Venezuela completely or partially suspended their payments of interest in the late seventies. Yet undeterred by this, the fever for exotic state loans burst out again at the end of the eighties – the South American states and South African colonies were lent immense quantities of European capital. In 1874, for instance, the Argentine Republic borrowed as much as £m. 10 and the loan had risen to £m. 59 by 1890.

England built railways with her own iron and coal in all these countries as well, paying for them with her own capital. In 1885, the Argentine permanent way had been 1,952 miles, in 1893 it was 8,557 miles. Exports from England were rising accordingly:

British total exports (mainly to the Argentine) amounted to £m. 47 in 1885 and to £m. 10.7 a mere four years later.

At the same time, British capital flowed into Australia in the form of state loans. At the end of the eighties the loans to the three colonies Victoria, New South Wales and Tasmania amounted to £m.112, £m. 81 of which were invested in railway construction. The permanent way of Australia extended over 4,900 miles in 1880, and over 15,600 miles in 1895.

Britain, supplying capital and materials for these railways, was also embroiled in the crises of 1890 in the Argentine, Transvaal, Mexico, Uruguay, and in that of 1893 in Australia.

The following two decades made a difference only in so far as German, French and Belgian capital largely participated with British capital in foreign investments, while railway construction in Asia Minor had been financed entirely by British capital from the fifties to the late eighties. From then on, German capital took over and put into execution the tremendous project of the Anatolian railway. German capital investments in Turkey gave rise to an increased export of German goods to that country.

In 1896, German exports to Turkey amounted to £m. 14, in 1911 to £m. 5.65. To Asiatic Turkey, in particular, goods were exported in 1901 to the value of £m. 0.6 and in 1911 to the value of £m. 1.85. In this case, German capital was used to a considerable extent to pay for German goods, the Germans forgoing, to use Sismondi’s term, only the pleasure of using their own products.

Let us examine the position more closely:

Realised surplus value, which cannot be capitalised and lies idle in England or Germany, is invested in railway construction, water works, Etc. in the Argentine, Australia, the Cape Colony or Mesopotamia. Machinery, materials and the like are supplied by the country where the capital has originated, and the same capital pays for them. Actually, this process characterises capitalist conditions everywhere, even at home. Capital must purchase the elements of production and thus become productive capital before it can operate. Admittedly, the products are then used within the country, while in the former case they are used by foreigners. But then capitalist production does not aim at its products being enjoyed, but at the accumulation of surplus value. There had been no demand for the surplus product within the country, so capital had lain idle without the possibility of accumulating. But abroad, where capitalist production has not yet developed, there has come about, voluntarily or by force, a new demand of the non-capitalist strata. The consumption of the capitalist and working classes at home is irrelevant for the purposes of accumulation, and what matters to capital is the very fact that its products are ‘used’ by others. The new consumers must indeed realise the products, pay for their use, and for this they need money. They can obtain some of it by the exchange of commodities which begins at this point, a brisk traffic in goods following hard on the heels of railway construction and mining (gold mines, etc.). Thus the capital advanced for railroad building and mining, together with an additional surplus value, is gradually realised. It is immaterial to the situation as a whole whether this exported capital becomes share capital in new independent enterprises, or whether, as a government loan, it uses the mediation of a foreign state to find new scope for operation in industry and traffic, nor does it matter if in the first case some of the companies are fraudulent and fail in due course, or if in the second case the borrowing state finally goes bankrupt, i.e. if the owners sometimes lose part of their capital in one way or another. Even the country of origin is not immune, and individual capitals frequently get lost in crises. The important point is that capital accumulated in the old country should find elsewhere new opportunities to beget and realise surplus value, so that accumulation can proceed. In the new countries, large regions of natural economy are open to conversion into commodity economy, or existing commodity economy can be ousted by capital. Railroad construction and mining, gold mining in particular, are typical for the investment of capitals from old capitalist countries in new ones. They are pre-eminently qualified to stimulate a brisk traffic in goods under conditions hitherto determined by natural economy and both are significant in economic history as mile-stones along the route of rapid dissolution of old economic organisations, of social crises and of the development of modern conditions, that is to say of the development of commodity economy to begin with, and further of the production of capital.

For this reason, the part played by lending abroad as well as by capital investments in foreign railway and mining shares is a fine sample of the deficiencies in Marx’s diagram of accumulation. In these instances, enlarged reproduction of capital capitalises a surplus value That has already been realised (in so far as the loans or foreign investments are not financed by the savings of the petty bourgeoisie or the semi-proletariat). It is quite irrelevant to the present field of accumulation, when, where and how the capital of the old countries has been realised so that it may flow into the new country. British capital which finds an outlet in Argentine railway construction might well in the past have been realised in China in the form of Indian opium. Further, the British capital which builds railways in the Argentine, is of English origin not only in its pure value-form, as money capital, but also in its material form, as iron, coal and machinery; the use-form of the surplus value, that is to say, has also come into being from the very beginning in the use-form suitable for the purposes of accumulation. The actual use-form of the variable capital, however, labour power, is mainly foreign: it is the native labour of the new countries which is made a new object of exploitation by the capital of the old countries. If we want to keep our investigation all on one plane, we may even assume that the labour power, too, has the same country of origin as the capital. In point of fact new discoveries, of gold mines for instance, tend to call forth mass emigration from the old countries, especially in the first stages, and are largely worked by labour from those countries. It might well be, then, that in a new country capital, labour power and means of production all come from the same capitalist country, say England. So it is really in England that all the material conditions for accumulation exist – a realised surplus value as money capital, a surplus product in productive form, and lastly labour reserves. Yet accumulation cannot proceed here: England and her old buyers require neither railways nor an expanded industry. Enlarged reproduction, i.e. accumulation, is possible only if new districts with a non-capitalist civilisation, extending over large areas, appear on the scene and augment the number of consumers.

But then, who are these new consumers actually; who is it that realises the surplus value of capitalist enterprises which are started with foreign loans; and who, in the final analysis, pays for these loans? The international loans in Egypt provide a classical answer.

The internal history of Egypt in the second half of the nineteenth century is characterised by the interplay of three phenomena: large-scale capitalist enterprise, a rapidly growing public debt, and the collapse of peasant economy. Until quite recently, corvée prevailed in Egypt, and the Wali and later the Khedive freely pursued their own power policy with regard to the condition of landownership. These primitive conditions precisely offered an incomparably fertile soil for the operations of European capital. Economically speaking, the conditions for a monetary economy had to be established to begin with, and the state created them by direct compulsion. Until the thirties, Mehemet Ali, the founder of Modern Egypt, here applied a method of patriarchal simplicity: every year, he ‘bought up’ the fellaheen’s entire harvest for the public exchequer, and allowed them to buy back, at a higher price, a minimum for subsistence and seed. In addition he imported cotton from East India, sugar cane from America, indigo and pepper, and issued the fellaheen with official directions what to plant and how much of it. The government again claimed the monopoly for cotton and indigo, reserving to itself the exclusive right of buying and selling these goods. By such methods was commodity exchange introduced in Egypt. Admittedly, Mehemet Ali also did something towards raising labour productivity. He arranged for dredging of the ancient canalisation, and above all he started the work of the great Kaliub Nile dams which initiated the series of great capitalist enterprises in Egypt. These were to comprise four great fields:

1. irrigation systems, in which the Kaliub works built between 1845 and 1853 take first place – quite apart from unpaid forced labour, they swallowed up £m. 2.5 and incidentally proved quite useless at first;
2. routes for traffic – the most important construction which proved ultimately detrimental to Egypt being the Suez Canal;
3. the cultivation of cotton, and
4. the production of sugar cane.

With the building of the Suez Canal, Egypt became caught up in the web of European capitalism, never again to get free of it. French capital led the way with British capital hard on its heels. In the twenty years that followed, the internal disturbances in Egypt were coloured by the competitive struggle between these two capitals. French capital was perhaps the most peculiar exponent of the European methods of capital accumulation at the expense of primitive conditions. Its operations were responsible for the useless Nile dams as well as for the Suez Canal. Egypt first contracted to supply the labour of 20,000 serfs free of charge for a number of years, and secondly to take up shares in the Suez Company to the tune of £m. 3.5, i.e. 40 per cent of the company's total capital. All this for the sake of breaking through a canal which would deflect the entire trade between Europe and Asia from Egypt and would painfully affect her part in this trade. These £m. 3.5 formed the nucleus for Egypt’s immense national debt which was to bring about her military occupation by Britain twenty years later. In the irrigation system, sudden transformations were initiated: the ancient sakias, i.e. bullock-driven water-wheels, of which 50,000 had been busy for 7 months in the year in the Nile delta alone, were partially replaced by steam pumps. Modern steamers now plied on the Nile between Cairo and Assuan. But the most profound change in the economic conditions of Egypt was brought about by the cultivation of cotton. This became almost epidemic in Egypt when, owing to the American War of Secession and the English cotton famine, the price per short ton rose from something between £30 and £40 to £200–£250. Everybody was planting cotton, and foremost among all, the Viceroy and his family. His estates grew fat, what with large-scale land robbery, confiscations, forced ‘sale’ or plain theft. He suddenly appropriated villages by the score though without any legal excuse. Within an incredibly short time, this vast demesne was brought under cotton, with the result that the entire technique of Egyptian traditional agriculture was revolutionised. Dams were thrown up everywhere to protect the cotton fields from the seasonal flooding of the Nile, and a comprehensive system of artificial irrigation was introduced. These waterworks together with continuous deep ploughing – a novel departure for the fellah who had until then merely scratched his soil with a plough dating back to the Pharaohs – and finally the intensive labours of the harvest made between them enormous demands on Egypt’s labour power. This was throughout the same forced peasant labour over which the state claimed to have an unrestricted right of disposal; and thousands had already been employed on the Kaliub dams and the Suez Canal and now the irrigation and plantation work to be done on the viceregal estates clamoured for this forced labour. The 20,000 serfs who had been put at the disposal of the Suez Canal Company were now required by the Khedive himself; and this brought about the first clash with French capital. The company was adjudged a compensation of £m. 3.35 by the arbitration of Napoleon III, a settlement to which the Khedive could all the more readily agree, since the very fellaheen whose labour power was the bone of contention were ultimately to be mulcted of this sum. The work of irrigation was immediately put in hand. Centrifugal machines, steam and traction engines were therefore ordered from England and France. In their hundreds, they were carried by steamers from England to Alexandria and then further. Steam ploughs were needed for cultivating the soil, especially since the rinderpest of 1864 had killed off all the cattle, England again being the chief supplier of these machines. The Fowler works were expanded enormously of a sudden to meet the requirements of the Viceroy for which Egypt had to pay.

But now Egypt required yet a third type of machine, cotton gins and presses for packing. Dozens of these gins were set up in the Delta towns. Like English industrial towns, Sagasis, Tanta, Samanud and other towns were covered by pails of smoke and great fortunes circulated in the banks of Alexandria and Cairo.

But already in the year that followed this cotton speculation collapsed with the cotton prices which fell in a couple of days from 27d. per pound to 15d., 12d., and finally 6d. after the cessation of hostilities in the American Union. The following year, Ismail Pasha ventured on a new speculation, the production of cane sugar. The forced labour of the fellaheen was to compete with the Southern States of the Union where slavery had been abolished. For the second time, Egyptian agriculture was turned upside down. French and British capitalists found a new field for rapid accumulation. 18 giant sugar factories were put on order in 1868–9 with an estimated daily output of 200 short tons of sugar, that is to say four times as much as that of the greatest then existing plant. Six of them were ordered from England, and twelve from France, but England eventually delivered the lion’s share, because of the Franco-German war. These factories were to be built along the Nile at intervals of 6.2 miles (10 km.), as centres of cane plantations of an area comprising 10 sq. km. Working to full capacity, each factory required a daily supply of 2,000 tons of sugar cane. Fellaheen were driven to forced labour on the sugar plantations in their thousands, while further thousands of their number built the Ibrahimya Canal. The stick and kourbash were unstintingly applied. Transport soon became a problem. A railway network had to be built round every factory to haul the masses of cane inside, rolling stock, funiculars, etc., had to be obtained as quickly as possible. Again these enormous orders were placed with English capital. The first giant factory was opened in 1872, 4,000 camels providing makeshift transport. But it proved to be simply impossible to supply cane in the quantities required by the undertaking. The working staff was completely inadequate, since the fellah, accustomed to forced labour on the land, could not be transformed overnight into a modern industrial worker by the lash of the whip. The venture collapsed, even before many of the imported machines had been installed. This sugar speculation concluded the period of gigantic capitalist enterprise in Egypt in 1873.

What had provided the capital for these enterprises? International loans. One year before his death in 1863, Said Pasha had raised the first loan at a nominal value of £m. 3.3 which came to £m. 2.5 in cash after deduction of commissions, discounts, etc. He left to Ismail Pasha the legacy of this debt and the contract with the Suez Canal Company, which was to burden Egypt with a debt of £m. 17. Ismail Pasha in turn raised his first loan in 1864 with a nominal value of £m. 5.7 at 7 per cent and a cash value of £m. 485 at 8¼ per cent. What remained of it, after £m. 3.35 had been paid to the Suez Canal Company as compensation, was spent within the year, swallowed up for the greater part by the cotton gamble. In 1865, the first so-called Daira-loan was floated by the Anglo-Egyptian Bank, on the security of the Khedive’s private estates. The nominal value of this loan was £m. 3.4 at 9 per cent, and its real value £m. 2.5 at 12 per cent. In 1866, Fruehling & Goschen floated a new loan at a nominal value of £m. 3 and a cash value of £m. 2. The Ottoman Bank floated another in 1867 of nominally £m. 2, really £m. 1.7. The floating debt at that time amounted to £m. 30. The Banking House Oppenheim & Neffen floated a great loan in 1868 to consolidate part of this debt. Its nominal value was £m. 11.9 at 7 per cent, though Ismail could actually lay hands only on £m. 7.1 at 13½ percent. This money made it possible, however, to pay for the pompous celebrations on the opening of the Suez Canal, in presence of the leading figures in the Courts of Europe, in finance and in the demi-monde, for a madly lavish display, and further, to grease the palm of the Turkish Overlord, the Sultan, with a new baksheesh of £m. 1. The sugar gamble necessitated another loan in 1870. Floated by the firm of Bischoffsheim & Goldschmidt, it had a nominal value of £m. 7.1 at 7 per cent, and its cash value was £m. 5. In 1872/3 Oppenheim’s floated two further loans, a modest one amounting to £m. 4 at 14 per cent and a large one of £m. 32 at 8 per cent which reduced the floating debt by one half, but which actually came only to £m 11 in cash, since the European banking houses paid it in part by bills of exchange they had discounted.

In 1874, a further attempt was made to raise a national loan of £m. 50 at an annual charge of 9 per cent., but it yielded no more than £m. 3.4. Egyptian securities were quoted at 54 per cent of their face value. Within the thirteen years after Said Pasha’s death, Egypt’s total public debt had grown from £m. 3.293 to £m. 94.110, and collapse was imminent.

These operations of capital, at first sight, seem to reach the height of madness. One loan followed hard on the other, the interest on old loans was defrayed by new loans, and capital borrowed from the British and French paid for the large orders placed with British and French industrial capital.

While the whole of Europe sighed and shrugged its shoulders at Ismail’s crazy economy, European capital was in fact doing business in Egypt on a unique and fantastic scale – an incredible modern version of the biblical legend about the fat kine which remains unparalleled in capitalist history.

In the first place, there was an element of usury in every loan, anything between one-fifth and one-third of the money ostensibly lent sticking to the fingers of the European bankers. Ultimately, the exorbitant interest had to be paid somehow, but how – where were the means to come from? Egypt herself was to supply them; their source was the Egyptian fellah–peasant economy providing in the final analysis all the most important elements for large-scale capitalist enterprise. He provided the land since the so-called private estates of the Khedive were quickly growing to vast dimensions by robbery and blackmail of innumerable villages; and these estates were the foundations of the irrigation projects and the speculation in cotton and sugar cane. As forced labour, the fellah also provided the labour power and, what is more, he was exploited without payment and even had to provide his own means of subsistence while he was at work. The marvels of technique which European engineers and European machines performed in the sphere of Egyptian irrigation, transport, agriculture and industry were due to this peasant economy with its fellaheen serfs. On the Kaliub Nile dams and on the Suez Canal, in the cotton plantations and in the sugar plants, untold masses of peasants were put to work; they were switched over from one job to the next as the need arose, and they were exploited to the limit of endurance and beyond. Although it became evident at every step that there were technical limits to the employment of forced labour for the purposes of modern capital, yet this was amply compensated by capital’s unrestricted power of command over the pool of labour power, how long and under what conditions men were to work, live and be exploited.

But not alone that it supplied land and labour power, peasant economy also provided the money. Under the influence of capitalist economy, the screws were put on the fellaheen by taxation. The tax on peasant holdings was persistently increased. In the late sixties, it amounted to £2 5s. per hectare, but not a farthing was levied on the enormous private estates of the royal family. In addition, ever more special rates were devised. Contributions of 2s. 6d. per hectare had to be paid for the maintenance of the irrigation system which almost exclusively benefited the royal estates, and the fellah had to pay 1s. 4d. for every date tree felled, 9d. for every clay hovel in which he lived. In addition, every male over 10 years of age was liable to a head tax of 6s. 6d. The total paid by the fellaheen was £m. 2.5 under Mehemet Ali, £m. 5 under Said Pasha, and £m. 8.15 under Ismail Pasha.

The greater the debt to European capital became, the more had to be extorted from the peasants. In 1869 all taxes were put up by 10 per cent and the taxes for the coming year collected in advance. In 1870, a supplementary land tax of 8s. per hectare was levied. All over Upper Egypt people were leaving the villages, demolished their dwellings and no longer tilled their land – only to avoid payment of taxes. In 1876, the tax on date palms was increased by 6d. Whole villages went out to fell their date palms and had to be prevented by rifle volleys. North of Siut, 10,000 fellaheen are said to have starved in 1879 because they could no longer raise the irrigation tax for their fields and had killed their cattle to avoid paying tax on it.

Now the fellah had been drained of his last drop of blood. Used as a leech by European capital, the Egyptian state had accomplished its function and was no longer needed. Ismail, the Khedive, was given his congé; capital could begin winding up operations.

Egypt had still to pay 394,000 Egyptian pounds as interest on the Suez Canal shares for £m. 4 which England had bought in 1875. Now British commissions to ‘regulate’ the finances of Egypt went into action. Strangely enough, European capital was not at all deterred by the desperate state of the insolvent country and offered again and again to grant immense loans for the salvation of Egypt. Cowe and Stokes proposed a loan of £m. 76 at 9 per cent for the conversion of the total debt, Rivers Wilson thought no less than £m. 503 would be necessary. The Crédit Foncier bought up floating bills of exchange by the million, attempting, though without success, to consolidate the total debt by a loan of £m. 91. With the financial position growing hopelessly desperate, the time drew near when the country and all her productive forces was to become the prey of European capital. October 1878 saw the representatives of the European creditors landing in Alexandria. British and French capital established dual control of finances and devised new taxes; the peasants were beaten and oppressed, so that payment of interest, temporarily suspended in 1876, could be resumed in 1877.

Now the claims of European capital became the pivot of economic life and the sole consideration of the financial system. In 1878, a new commission and ministry were set up, both with a staff in which Europeans made up one half. In 1879, the finances of Egypt were brought under permanent control of European capital, exercised by the Commission de la Dette Publique Égyptienne in Cairo. In 1878, the Tshiffiks, estates of the viceregal family, which comprised 431,100 acres, were converted into crown land and pledged to the European capitalists as collateral for the public debt, and the same happened to the Daira lands, the private estates of the Khedive, comprising 485,131 acres, mainly in Upper Egypt; this was, at a later date, sold to a syndicate. The other estates for the greatest part fell to capitalist companies, the Suez Canal Company in particular. To cover the cost of occupation, England requisitioned ecclesiastical lands of the mosques and schools. An opportune pretext for the final blow was provided by a mutiny in the Egyptian army, starved under European financial control while European officials were drawing excellent salaries, and by a revolt engineered among the Alexandrian masses who had been bled white. The British military occupied Egypt in 1882, as a result of twenty years’ operations of Big Business, never to leave again. This was the ultimate and final step in the process of liquidating peasant economy in Egypt by and for European capital.

It should now be clear that the transactions between European loan capital and European industrial capital are based upon relations which are extremely rational and ‘sound’ for the accumulation of capital, although they appear absurd to the casual observer because this loan capital pays for the orders from Egypt and the interest on one loan is paid out of a new loan. Stripped of all obscuring connecting links, these relations consist in the simple fact that European capital has largely swallowed up the Egyptian peasant economy. Enormous tracts of land, labour, and labour products without number, accruing to the state as taxes, have ultimately been converted into European capital and have been accumulated. Evidently, only by use of the kourbash could the historical development which would normally take centuries be compressed into two or three decades, and it was just the primitive nature of Egyptian conditions which proved such fertile soil for the accumulation of capital.

As against the fantastic increase of capital on the one hand, the other economic result is the ruin of peasant economy together with the growth of commodity exchange which is rooted in the supreme exertion of the country’s productive forces. Under Ismail’s rule, the arable and reclaimed land of Egypt grew from 5 to 6.75 million acres, the canal system from 45,625 to 54,375 miles and the permanent way from 256.25 to 1,638 miles. Docks were built in Siut and Alexandria, magnificent dockyards in Alexandria, a steamer-service for pilgrims to Mecca was introduced on the Red Sea and along the coast of Syria and Asia Minor. Egypt’s exports which in 1861 had amounted to 4,450,000 rose to £m. 14.4 in 1864; her imports which under Said Pasha amounted to £m. 1.2 rose under Ismail to between £m. 5 and £m. 5.5. Trade which recovered only in the eighties from the opening up of the Suez Canal amounted to £m. 8.15 worth of imports and £m. 12.45 worth of exports in 1890, but in 1900 the figures were £m. 144 for imports and £m. 12.25 for exports, and in 1911 – £m. 27.85 for imports and £m. 26.85 for exports. Thanks to this development of commodity economy which expanded by leaps and bounds with the assistance of European capital, Egypt herself had fallen a prey to the latter. The case of Egypt, just as that of China and, more recently, Morocco, shows militarism as the executor of the accumulation of capital, lurking behind international loans, railroad building, irrigation systems, and similar works of civilisation. The Oriental states cannot develop from natural to commodity economy and further to capitalist economy fast enough and are swallowed up by international capital, since they cannot perform these transformations without selling their souls to capital. Their feverish metamorphoses are tantamount to their absorption by international capital.

Another good recent example is the deal made by German capital in Asiatic Turkey. European capital, British capital in particular, had already at an early date attempted to gain possession of this area which marches with the ancient trade route between Europe and Asia.

In the fifties and sixties, British capital built the railway lines Smyrna–Aydin–Diner and Smyrna–Kassab–-Alasehir, obtained the concession to extend the line to Afyon Karahisar and also leased the first tract for the Anatolian railway Ada–Bazar–Izmid. French capital gradually came to acquire influence over part of the railway building during this time. In 1888, German capital appeared on the scene. It took up 60 per cent of the shares in the new merger of international interests, negotiated principally with the French capitalist group represented by the Banque Ottomane. International capital took up the remaining 40 per cent. The Anatolian Railway Company, a Turkish company, was founded on the 14th Redsheb of the year 1306 (March 4, 1889) with the Deutsche Bank for principal backer, to take over the railway lines: between Ada-Bazar and Izmid, running since the early seventies, as also the concession for the Izmid–Eskisehir–Angora line (25 miles). It was further entitled to complete the Ada–Bazar–Scutari line and branch lines to Brussa, in addition to building the supplementary network Eskisehir–Konya (278 miles) on the basis of the 1893 concession, and finally to run a service from Angora to Kaisari (264 miles). The Turkish government gave the company a state guarantee of annual gross earnings amounting to £412 per km. on the Ada-Bazar line and of £600 per km. on the Izmid–Angora lines. For this purpose it wrote over to the Administration de la Dette Publique Ottomane the revenue from tithes in the sandshaks of Izmid, Ertoghrul, Kutalia and Angora, with which to make up the gross earnings guaranteed by the government. For the Angora-Kaisari line the government guaranteed annual gross earnings of 775 Turkish pounds, i.e. £712 per km., and 604 Turkish pounds, i.e. approximately £550, provided, in the latter case, that the supplementary grant per km. did not exceed 219 Turkish pounds (£200 a year). The government was to receive a quarter of the eventual surplus of gross earnings over the guaranteed amount. The Administration de la Dette Publique Ottomane as executor of the government guarantee collected the tithes of the sandshaks Trebizonde and Gumuchhane direct and aid the railway company out of a common fund which was formed of all the tithes set aside for this purpose. In 1898, the Eskisehir–Konya maximum grant was raised from 218 to 296 Turkish pounds.

In 1899, the company obtained concessions to build and run a dockyard at Ada-Bazar, to issue writs, to build corn-elevators and storerooms for goods of every description, further the right to employ its own staff for loading and unloading and, finally, in the sphere of customs policy, the creation of a kind of free port.

In 1901, the company acquired a concession for the Baghdad railway Konya–Baghdad–Bazra–Gulf of Persia (1,500 miles) which connects with the Anatolian line by the Konya–Aregli–Bulgurlu line. For taking up this concession, a new limited company was founded which placed the order of constructing the line, at first to Bulgurlu, with a Building Company registered in Frankfort-on-the-Main.

Between 1893 and 1910, the Turkish government gave additional grants – £1,948,000 for the Ada-Bazar–Angora line and 1,800,000 Turkish pounds for the Eskisehir–Konya line – a total of £3,632,000. Finally, by the concession of 1907, the company was empowered to drain the Karavirar Lake and to irrigate the Konya plain, these works to be executed within six years at government expense. In this instance, the company advanced the government the necessary capital up to £780,000 at per cent interest, repayable within thirty-six years. In return the Turkish government pledged as securities:

1. an annual sum of 25,000 Turkish pounds, payable from the surplus of the tithes’ fund assigned to the Administration de la Dette Publique Ottomane to cover the railway grants and other obligations;
2. the residual tithes over the last years in the newly irrigated regions;
3. the net proceeds from the working of the irrigation systems, and
4. the price of all reclaimed or irrigated land that was sold.

For the execution of this work, the Frankfort company had formed a subsidiary company ‘for the irrigation of the Konya plain’ with a capital of £m. 5.4 to take this work in hand.

In 1908 the company obtained the concession for extending the Konya railway as far as Baghdad and the Gulf of Persia, again with inclusion of a guaranteed revenue.

To pay for this railway grant, a German Baghdad railway loan was taken up in three instalments of £m. 216, £m. 432 and £m. 476 respectively, on the security of the aggregate tithes for the vilayets Aydin, Baghdad, Mossul, Diarbekir, Ursa and Alleppo, and the sheep-tax in the vilayets Konya, Adana, Aleppo, etc.

The foundation of accumulation here becomes quite clear. German capital builds railways, ports and irrigation works in Asiatic Turkey; in all these enterprises it extorts new surplus value from the Asiatics whom it employs as labour power. But this surplus value must be realised together with the means of production from Germany, (railway materials; machinery, etc.) How is it done? In part by commodity exchange which is brought about by the railways, the dockyards, etc., and nurtured in Asia Minor under conditions of natural economy. In part, i.e. in so far as commodity exchange does not grow quickly enough for the needs of capital, by using force, the machinery of the state, to convert the national real income into commodities; these are turned into cash in order to realise capital plus surplus value. That is the true object of the revenue grants for independent enterprises run by foreign capital, and of the collateral in the case of loans. In both instances so-called tithes (ueshur), pledged in different ways, are paid in kind by the Turkish peasant and these were gradually increased from about 12 to 12.5 per cent. The peasant in the Asiatic vilayet must pay up or else his tithe would simply be confiscated by the police and the central and local authorities. These tithes, themselves a manifestation of ancient Asiatic despotism based on natural economy, are not collected by the Turkish government direct; but by tax-farmers not unlike the tax-collectors of the ancien régime; that is to say the expected returns from the levy in each vilayet are separately auctioned by the state to tax-farmers. They are bought by individual speculators or syndicates who sell the tithes of each sandshak (district) to other speculators and these resell their shares to a whole number of smaller agents. All these middlemen want to cover their expenses and make the greatest possible profit, and thus, by the time they are actually collected, the peasants’ contributions have swollen to enormous dimensions. The tax-farmer will try to recoup himself for any mistake in his calculations at the expense of the peasant, and the latter, nearly always in debt, is impatient for the moment when he can sell his harvest. But often, after cutting his corn, he cannot start threshing for weeks, until indeed the tax-farmer deigns to take his due. His entire harvest is about to rot in the fields, and the tax-farmer, usually a grain merchant himself, takes advantage of this fact and compels him to sell at a low price. These tax collectors know how to enlist the support of the officials, especially the Muktars, the local headmen, against complaining malcontents.

Along with the taxes on salt, tobacco, spirits, the excise on silk, the fishing dues, etc., the tithes are pledged with the Conseil de l’Administration de la Dette Publique Ottomane to serve as security for the railway grant and the loans. In every case the Conseil reserves to itself the right to vet the tax-farmers’ contracts and stipulates for the proceeds of the tithe to be paid directly into the coffers of its regional offices. If no tax-farmer can be found, the tithes are stored in kind by the Turkish government; the warehouse keys are deposited with the Conseil which then can sell the tithes on its own account.

Thus the economic metabolism between the peasants of Asia Minor, Syria and Mesopotamia on the one hand and German capital on the other proceeds in the following way: in the vilayets Konya, Baghdad, Bazra, etc., the grain comes into being as a simple use-product of primitive peasant economy. It immediately falls to the tithe-farmer as a state levy. Only then, in the hands of this latter, does it become a commodity, and, as such, money which falls to the state. This money is nothing but converted peasant grain; it was not even produced as a commodity. But now, as a state guarantee, it serves towards paying for the construction and operation of railways, i.e. to realise both the value of the means of production and the surplus value extorted from the Asiatic peasants and proletariat in the building and running of the railway. In this process further means of production of German origin are used, and so the peasant grain of Asia, converted into money, also serves to turn into cash the surplus value that has been extorted from the German workers. In the performance of these functions, the money rolls from the hands of the Turkish government into the coffers of the Deutsche Bank, and here it accumulates, as capitalist surplus value, in the form of promoters’ profits, royalties, dividends and interests in the accounts of Messrs. Gwinner, Siemens, Stinnes and their fellow directors, of the shareholders and clients of the Deutsche Bank and the whole intricate system of its subsidiary companies. If there is no tax-farmer, as provided in the concessions, then the complicated metamorphoses are reduced to their most simple and obvious terms: the peasant grain passes immediately to the Administration de la Dette Publique Ottomane, i.e. to the representatives of European capital, and becomes already in its natural form a revenue for German and other foreign capital: it realises capitalist surplus value even before it has shed its use-form for the Asiatic peasant, even before it has become a commodity and its own value has been realised. This is a coarse and straightforward metabolism between European capital and Asiatic peasant economy, with the Turkish state reduced to its real role, that of a political machinery for exploiting peasant economy for capitalist purposes, – the real function, this, of all Oriental states in the period of capitalist imperialism. This business of paying for German goods with German capital in Asia is not the absurd circle it seems at first, with the kind Germans allowing the shrewd Turks merely the ‘use’ of their great works of civilisation – it is at bottom an exchange between German capital and Asiatic peasant economy, an exchange performed under state compulsion. On the one hand it makes for progressive accumulation and expanding ‘spheres of interest’ as a pretext for further political and economic expansion of German capital in Turkey. Railroad building and commodity exchange, on the other hand, are fostered by the state on the basis of a rapid disintegration, ruin and exploitation of Asiatic peasant economy in the course of which the Turkish state becomes more and more dependent on European capital, politically as well as financially.

31. Protective Tariffs and Accumulation

IMPERIALISM is the political expression of the accumulation of capital in its competitive struggle for what remains still open of the non-capitalist environment. Still the largest part of the world in terms of geography, this remaining field for the expansion of capital is yet insignificant as against the high level of development already attained by the productive forces of capital; witness the immense masses of capital accumulated in the old countries which seek an outlet for their surplus product and strive to capitalise their surplus value, and the rapid change-over to capitalism of the pre-capitalist civilisations. On the international stage, then, capital must take appropriate measures. With the high development of the capitalist countries and their increasingly severe competition in acquiring non-capitalist areas, imperialism grows in lawlessness and violence, both in aggression against the non-capitalist world and in ever more serious conflicts among the competing capitalist countries. But the more violently, ruthlessly and thoroughly imperialism brings about the decline of non-capitalist civilisations, the more rapidly it cuts the very ground from under the feet of capitalist accumulation. Though imperialism is the historical method for prolonging the career of capitalism, it is also a sure means of bringing it to a swift conclusion. This is not to say that capitalist development must be actually driven to this extreme: the mere tendency towards imperialism of itself takes forms which make the final phase of capitalism a period of catastrophe.

Classical economics, in its period of storm and stress, had had high hopes of a peaceful development of the accumulation of capital and of a trade and industry which can only prosper in times of peace, evolving the orthodox Manchester ideology of the harmony of interests among the world’s commercial nations on the one hand, and between capital and labour on the other. These hopes were apparently justified in Europe by the short period of Free Trade in the sixties and seventies, which was based upon the mistaken doctrine of the English Free Traders that the only theoretical and practical condition for the accumulation of capital is commodity exchange, that the two are identical. As we have seen, Ricardo and his whole school identified accumulation and its reproductive conditions with simple commodity production and the conditions of simple commodity circulation. This was soon to become even more obvious in the practices of the common Free Trader. The special interests of the exporting Lancashire cotton manufacturers in Manchester determined the entire line of argument of the Cobden League. Their principal object was to get markets, and it became an article of faith: ‘Buy from foreign countries and thus in turn sell our industrial product, our cotton goods, on the new markets.’ Cobden and Bright demanded Free Trade and cheaper foodstuffs in particular in the interest of consumption; but the consumer was not the worker who eats the bread, but the capitalist who consumes labour power.

This teaching never expressed the interests of capitalist accumulation as a whole. In England herself it was given the lie already in the forties, when the harmony of interests of the commercial nations in the East were proclaimed to the sound of gunfire in the Opium Wars which ultimately, by the annexation of Hongkong, brought about the very opposite of such harmony, a system of ‘spheres of interest’. On the European Continent, Free Trade in the sixties did not represent the interests of industrial capital, because the foremost Free Trade countries of the Continent were still predominantly agrarian with a comparatively feeble development of industry. Rather, the policy of Free Trade was implemented as a means for the political reconstruction of the Central European states. In Germany, under Bismarck and Manteuffel, it was a peculiarly Prussian lever for ousting Austria from the Bund and the Zollverein and to set up the new German Empire under Prussian leadership. Economically speaking, the mainstays of Free Trade were in this case the interests both of commercial capital, especially in the Hansa towns to whom international trade was vital, and of agrarian consumers; among industry proper, it was otherwise. The iron industry was won over only with difficulty and in exchange for the abolition of the Rhine tolls. But the cotton industry in Southern Germany remained irreconcilable and clung to protective tariffs. In France, ‘most favoured nations’ clause’ agreements, the basis of the Free Trade system all over Europe, were concluded by Napoleon III without the consent, and even against the will, of parliament, industrialists and agrarians, who constituted an absolute majority, being in favour of protective tariffs. The government of the Second Empire only took the course of commercial treaties as an emergency measure – Britain accepted it as such – in order to get round political opposition in France and to establish Free Trade behind the back of the legislature by international action. The first principal treaty between England and France simply rode rough-shod over public opinion in France. Two imperial decrees abolished the old system of French protective tariffs which had been in force from 1853 to 1862. With scant observance of the formalities they were ‘ratified’ in 1863. In Italy, Free Trade was a prop of Cavour’s policy, depending as it did on French support. Under pressure of public opinion, an inquiry was made in 1870 which revealed that those most intimately concerned were hostile to the policy of Free Trade. In Russia, finally, the tendency towards Free Trade in the sixties was but the first step towards creating a broad basis for commodity economy and industry on a large scale, coming at the same time as the abolition of serfdom and the construction of a railway network.

Thus the very inception of an international system of Free Trade shows it to be just a passing phase in the history of capitalist accumulation, and it shows up the fallacy of attributing the general reversion to protective tariffs after the seventies simply to a defensive reaction against English Free Trade.

Such an explanation is vitiated by the fact that both in Germany and France the leaders in the reversion to protective tariffs were the agrarian interests, that the measures were directed not against British but against American competition, and that not England but Germany constituted the chief danger to the rising home industry in Russia, and France to that in Italy. Nor was Britain’s monopoly the cause for the world-wide depression which prevailed since the seventies and induced the desire for protective tariffs. We must look deeper for the reasons responsible for the change of front on the question of protective tariffs. The doctrine of Free Trade with its delusion about the harmony of interests on the world market corresponded with an outlook which conceived of everything in terms of commodity exchange. It was abandoned just as soon as big industrial capital had become sufficiently established in the principal countries of the European Continent to look to the conditions for its accumulation. As against the mutual interests of capitalist countries, these latter bring to the fore the antagonism engendered by the competitive struggle for the non-capitalist environment.

When the Free Trade era opened, Eastern Asia was only just being made accessible by the Chinese wars, and European capital had but begun to make headway in Egypt. In the eighties the policy of expansion became ever stronger, together with a policy of protective tariffs. There was an uninterrupted succession of events during the eighties: the British occupation of Egypt, Germany’s colonial conquests in Africa, the French occupation of Tunisia together with the Tonkin expedition, Italy’s advances in Assab and Massawa, the Abyssinian war and the creation of a separate Eritrea, and the English conquests in South Africa. The clash between Italy and France over the Tunisian sphere of interest was the characteristic prelude to the Franco-Italian tariff war seven years later, by which drastic epilogue an end was made to the Free Trade harmony of interests on the European Continent. To monopolise the non-capitalist areas at home and abroad became the war-cry of capital, while the free-trade policy of the ‘open door’ specifically represented the peculiar helplessness of non-capitalist countries in the face of international capital and the natural equilibrium which was aimed at by its competition in the preliminary stage of the partial or total occupation of these areas as colonies or spheres of interest. As the oldest capitalist Empire, England alone could so far remain loyal to Free Trade, primarily because she had long had immense possessions of non-capitalist areas as a basis for operations which afforded her almost unlimited opportunities for capitalist accumulation. Until recently, she had thus in fact been beyond the competition of other capitalist countries. These, in turn, universally strove to become self sufficient behind a barrier of protective tariffs; yet they buy one another’s commodities and come to depend ever more one upon another for replenishing their material conditions of reproduction. Indeed, protective tariffs have by now completely lost their use for technical development of the productive forces, all too often being the instrument for the artificial conservation of obsolete productive methods. The inherent contradictions of an international policy of protective tariffs, exactly like the dual character of the international loan system, are just a reflection of the historical antagonism which has developed between the dual interests of accumulation: expansion, the realisation and capitalisation of surplus value on the one hand, and, on the other, an outlook which conceives of everything purely in terms of commodity exchange.

This fact is evidenced particularly in that the modern system of high protective tariffs, required by colonial expansion and the increasing inner tension of the capitalist medium, was also instituted with a view to increasing armaments. The reversion to protective tariffs was carried through in Germany as well as in France, Italy, and Russia, together with, and in the interests of, an expansion of the armed services, as the basis for the European competition in armaments which was developing at that time, first on land, and then also at sea. European Free Trade, with its attendant continental system of infantry, had been superseded by protective tariffs as the foundation and supplement of an imperialist system with a strong bias towards naval power.

Thus capitalist accumulation as a whole, as an actual historical process, has two different aspects. One concerns the commodity market and the place where surplus value is produced – the factory, the mine, the agricultural estate. Regarded in this light, accumulation is a purely economic process, with its most important phase a transaction between the capitalist and wage labourer. In both its phases, however, it is confined to the exchange of equivalents and remains within the limits of commodity exchange. Here, in form at any rate, peace, property and equality prevail, and the keen dialectics of scientific analysis were required to reveal how the right of ownership changes in the course of accumulation into appropriation of other people’s property, how commodity exchange turns into exploitation and equality becomes class-rule.

The other aspect of the accumulation of capital concerns the relations between capitalism and the non-capitalist modes of production which start making their appearance on the international stage. Its predominant methods are colonial policy, an international loan system – a policy of spheres of interest – and war. Force, fraud, oppression, looting are openly displayed without any attempt at concealment, and it requires an effort to discover within this tangle of political violence and contests of power the stern laws of the economic process.

Bourgeois liberal theory takes into account only the former aspect: the realm of ‘peaceful competition’, the marvels of technology and pure commodity exchange; it separates it strictly from the other aspect: the realm of capital’s blustering violence which is regarded as more or less incidental to foreign policy and quite independent of the economic sphere of capital.

In reality, political power is nothing but a vehicle for the economic process. The conditions for the reproduction of capital provide the organic link between these two aspects of the accumulation of capital. The historical career of capitalism can only be appreciated by taking them together. ‘Sweating blood and filth with every pore from head to toe’ characterises not only the birth of capital but also its progress in the world at every step, and thus capitalism prepares its own downfall under ever more violent contortions and convulsions.

32. Militarism as a Province of Accumulation

MILITARISM fulfils a quite definite function in the history of capital, accompanying as it does every historical phase of accumulation. It plays a decisive part in the first stages of European capitalism, in the period of the so-called ‘primitive accumulation’, as a means of conquering the New World and the spice-producing countries of India. Later, it is employed to subject the modern colonies, to destroy the social organisations of primitive societies so that their means of production may be appropriated, forcibly to introduce commodity trade in countries where the social structure had been unfavourable to it, and to turn the natives into a proletariat by compelling them to work for wages in the colonies. It is responsible for the creation and expansion of spheres of interest for European capital in non-European regions, for extorting railway concessions in backward countries, and for enforcing the claims of European capital as international lender. Finally, militarism is a weapon in the competitive struggle between capitalist countries for areas of non-capitalist civilisation.

In addition, militarism has yet another important function. From the purely economic point of view, it is a pre-eminent means for the realisation of surplus value; it is in itself a province of accumulation. In examining the question who should count as a buyer for the mass of products containing the capitalised surplus value, we have again and again refused to consider the state and its organs as consumers. Since their income is derivative, they were all taken to belong to the special category of those who live on the surplus value (or partly on the wage of labour), together with the liberal professions and the various parasites of present-day society (‘king, professor, prostitute, mercenary’). But this interpretation will only do on two assumptions: first, if we take it, in accordance with Marx’s diagram, that the state has no other sources of taxation than capitalist surplus value and wages, and secondly, if we regard the state and its organs as consumers pure and simple. If the issue turns on the personal consumption of the state organs (as also of the ‘mercenary’) the point is that consumption is partly transferred from the working class to the hangers-on of the capitalist class, in so far as the workers foot the bill.

Let us assume for a moment that the indirect taxes extorted from the workers, which mean a curtailment of their consumption, are used entirely to pay the salaries of the state officials and to provision the regular army. There will then be no change in the reproduction of social capital as a whole. Both Departments II and I remain constant because society as a whole still demands the same kind of products and in the same quantities. Only v as the commodity of ‘labour power’ has changed in value in relation to the products of Department II, i.e. in relation to the means of subsistence. This v, the same amount of money representing labour power, is now exchanged for a smaller amount of means of subsistence. What happens to the products of Department II which are then left over? Instead of the workers, the state officials and the regular army now receive them. The organs of the capitalist state take over the workers’ consumption on the same scale exactly. Although the conditions of reproduction have remained stable, there has been a redistribution of the total product. Part of the products of Department II, originally intended entirely for the consumption of the workers as equivalent for v, is now allocated to the hangers-on of the capitalist class for consumption. From the point of view of social reproduction, it is as if the relative surplus value had in the first place been larger by a certain amount which is added on to the consumption of the capitalist class and its hangers-on.

So far the crude exploitation, by the mechanism of indirect taxation, of the working class for the support of the capitalist state’s officials amounts merely to an increase of the surplus value, of that part of it, that is to say, which is consumed. The difference is that this further splitting off of surplus value from variable capital only comes later, after the exchange between capital and labour has been accomplished. But the consumption by the organs of the capitalist state has no bearing on the realisation of capitalised surplus value, because the additional surplus value for this consumption – even though it comes about at the workers’ expense – is created afterwards. On the other hand, if the workers did not pay for the greater part of the state officials’ upkeep the capitalists themselves would have to bear the entire cost of it. A corresponding portion of their surplus value would have to be assigned directly to keeping the organs of their class-rule, either at the expense of production which would have to be curtailed accordingly, or, which is more probable, it would come from the surplus value intended for their consumption. The capitalists would have to capitalise on a smaller scale because of having to contribute more towards the immediate preservation of their own class. In so far as they shift onto the working class (and also the representatives of simple commodity production, such as peasants and artisans) the principal charge of their hangers-on, the capitalists have a larger portion of surplus value available for capitalisation. But as yet no opportunities for such capitalisation have come into being, no new market, that is to say, for the surplus value that has become available, in which it could produce, and realise new commodities. But when the monies concentrated in the exchequer by taxation are used for the production of armaments, the picture is changed.

With indirect taxation and high protective tariffs the bill of militarism is footed mainly by the working class and the peasants. The two kinds of taxation must be considered separately. From an economic point of view, it amounts to the following, as far as the working class is concerned: provided that wages are not raised to make up for the higher price of foodstuffs – which is at present the fate of the greatest part of the working class, including even the minority that is organised in trade unions, owing to the pressure of cartels and employers’ organisations – indirect taxation means that part of the purchasing power of the working class is transferred to the state. Now as before the variable capital, as a fixed amount of money, will put in motion an appropriate quantity of living labour, that is to say it serves to employ the appropriate quantity of constant capital in production and to produce the corresponding amount of surplus value. As soon as capital has completed this cycle, it is divided between the working class and the state: the workers surrender the state part of the money they received as wages. Capital has wholly appropriated the former variable capital in its material form, as labour power, but the working class retains only part of the variable capital in the form of money, the state claiming the rest. And this invariably happens after capital has run its cycle between capitalist and worker; it takes place, as it were, behind the back of capital, at no point impinging direct on the vital stages of the circulation of capital and the production of surplus value, so that it is no immediate concern of the latter. But all the same it does affect the conditions for the reproduction of capital as a whole. The transfer of some of the purchasing power from the working class to the state entails a proportionate decrease in the consumption of means of subsistence by the working class. For capital as a whole, it means producing a smaller quantity of consumer goods for the working class, provided that both variable capital (in the form of money and as labour power) and the mass of appropriated surplus value remain constant, so that the workers get a smaller share of the aggregate product. In the process of reproduction of the entire capital, then, means of subsistence will be produced in amounts smaller than the value of the variable capital, because of the shift in the ratio between the value of the variable capital and the quantity of means of subsistence in which it is realised, with the money wages of labour remaining constant, according to our premise, or at any rate not rising sufficiently to offset the increase in the price of foodstuffs. This increase represents the level of indirect taxation.

How will the material relations of reproduction be adjusted? When fewer means of subsistence are needed for the renewal of labour power, a corresponding amount of constant capital and living labour becomes available which can now be used for producing other commodities in response to a new effective demand arising within society. It arises from the side of the state which has appropriated, by way of tax legislation, the part wanting of the workers’ purchasing power. This time, however, the state does not demand means of subsistence (after all that has already been said under the heading of ‘third persons’, we shall here ignore the demand for means of subsistence for state officials which is also satisfied out of taxes) but it requires a special kind of product, namely the militarist weapons of war on land and at sea.

Again we take Marx’s second diagram of accumulation as the basis for investigating the ensuing changes in social reproduction:

I. 5,000c + 1,000v + 1,000s = 7,000 means of production II. 1,430c + 285v + 285s = 2,000 means of subsistence

Now let us suppose that, owing to indirect taxation and the consequent increase in the price of means of subsistence, the working class as a whole reduces consumption by, say, a 100 value units of the real wages. As before, the workers receive 1,000v + 285v = 1,285v in money, but for this money they only get means of subsistence to the value of 1185. The 100 units which represent the tax increase in the price of foodstuffs go to the state which receives in addition military taxes from the peasants, etc., to the value of 150 units, bringing the total up to 250. This total constitutes a new demand – the demand for armaments. At present, however, we are only interested in the 100 units taken from the workers’ wages. This demand for armaments to the value of 100 must be satisfied by the creation of an appropriate branch of production which requires a constant capital of 71.5 and a variable capital of 14.25, assuming the average organic composition outlined in Marx’s diagram.

71.5c + 14.25v + 14.25s = 100 weapons of war

This new branch of production further requires that 71.5 means of production be produced and about 13 means of subsistence, because, of course, the real wages of the workers are also less by about one-thirteenth. You could counter by saying that the profit accruing to capital from this new expansion of demand is merely on paper, because the cut in the actual consumption of the working class will inevitably result in a corresponding curtailment of the means of subsistence produced. It will take the following form for Department II:

71.5c + 14.25v + 14.25s = 100

In addition, Department I will also have to contract accordingly, so that, owing to the decreasing consumption of the working class, the equations for both departments will be:

I. 4,949c + 989.75v + 989.75s = 6,928.5 II. 1,358.5c + 270.75v + 270.75s = 1,900

If, by the mediation of the state, the same 100 units now call forth armament production of an equal volume with a corresponding fillip to the production of producer goods, this is at first sight only an extraneous change in the material forms of social production: instead of a quantity of means of subsistence a quantity of armaments is now being produced. Capital has won with the left hand only what it has lost with the right. Or we might say that the large number of capitalists producing means of subsistence have lost the effective demand in favour of a small group of big armament manufacturers.

But this picture is only valid for individual capital. Here it makes no difference indeed whether production engages in one sphere of activity or another. As far as the individual capitalist is concerned, there are no departments of total production such as the diagram distinguishes. There are only commodities and buyers, and it is completely immaterial to him whether he produces instruments of life or instruments of death, corned beef or armour plating.

Opponents of militarism frequently appeal to this point of view to show that military supplies as an economic investment for capital merely put profit taken from one capitalist into the pocket of another. On the other hand, capital and its advocates try to overpersuade the working class to this point of view by talking them into the belief that indirect taxes and the demand of the state would only bring about a change in the material form of reproduction; instead of other commodities cruisers and guns would be produced which would give the workers as good a living, if not a better one.

One glance at the diagram shows how little truth there is in this argument as far as the workers are concerned. To make comparison easier, we will suppose the armament factories to employ just as many workers as were employed before in the production of means of subsistence for the working class. 1,285 units will then be paid out a wages, but now they will only buy 1,185’s worth of means of subsistence.

All this looks different from the perspective of capital as a whole. For this the 100 at the disposal of the state, which represent the demand for armaments, constitute a new market. Originally this money was variable capital and as such it has done its job, it has been exchanged for living labour which produced the surplus value. But then the circulation of the variable capital was stopped short, this money was split off, and it now appears as a new purchasing power in the possession of the state. It has been created by sleight of hand, as it were, but still it has the same effects as a newly opened market. Of course for the time being capital is debarred from selling 100 units of consumer goods for the working class, and the individual capitalist considers the worker just as good a consumer and buyer of commodities as anyone else, another capitalist, the state, the peasant, foreign countries, etc. But let us not forget that for capital as a whole the upkeep of the working class is only a necessary evil, only a means towards the real end of production: the creation and realisation of surplus value. If it were possible to extort surplus value without giving labour an equal measure of means of subsistence, it would be all the better for business. To begin with indirect taxation has the same effects as if – the price of foodstuffs remaining constant – the capitalists had succeeded in depressing wages by a hundred units without detracting from the work performed, seeing that a lower output of consumer goods is equally the inevitable result of continuous wage cuts. If wages are cut heavily, capital does not worry about having to produce fewer means of subsistence for the workers, in fact it delights in this practice at every opportunity; similarly, capital as a whole does not mind if the effective demand of the working class for means of subsistence is curtailed because of indirect taxation which is not compensated by a rise in wages. This may seem strange because in the latter case the balance of the variable capital goes to the exchequer, while with a direct wage cut it remains in the capitalists’ pockets and – commodity prices remaining equal – increases the relative surplus value. But a continuous and universal reduction of money wages can only be carried through on rare occasions, especially if trade union organisation is highly developed. There are strong social and political barriers to this fond aspiration of capital. Depression of the real wage by means of indirect taxation, on the other hand, can be carried through promptly, smoothly and universally, and it usually takes time for protests to be heard; and besides, the opposition is confined to the political field and has no immediate economic repercussions. The subsequent restriction in the production of means of subsistence does not represent a loss of markets for capital as a whole but rather a saving in the costs of producing surplus value. Surplus value is never realised by producing means of subsistence for the workers – however necessary this may be, as the reproduction of living labour, for the production of surplus value.

But to come back to our example:

I. 5,000c + 1,000v + 1,000s = 7,000 means of production II. 1,430c + 285v + 285s = 2,000 means of subsistence

At first it looks as if Department II were also creating and realising surplus value in the process of producing means of subsistence for the workers, and Department I by producing the requisite means of production. But if we take the social product as a whole, the illusion disappears. The equation is in that case:

6,430c + 1,285v + 1,285s = 9,000

Now, if the means of subsistence for the workers are cut by 100 units, the corresponding contraction of both departments will give us the following equations:

I. 4,949c + 989.75v + 989.75s = 6,928.5 II. 1,358.5c + 270.75v + 270.75s = 1,900

and for the social product as a whole:

6,307.5c + 1,260.5v + 1,260.5s = 8,828.5

This looks like a general decrease in both the total volume of production and in the production of surplus value – but only if we contemplate just the abstract quantities of value in the composition of the total product; it does not hold good for the material composition thereof. Looking closer, we find that nothing but the upkeep of labour is in effect decreased. Fewer means of subsistence and production are now being made, no doubt, but then, they had had no other function save to maintain workers. The social product is smaller and less capital is now employed – but then, the object of capitalist production is not simply to employ as much capital as possible, but to produce as much surplus value as possible. Capital has only decreased because a smaller amount is sufficient for maintaining the workers. If the total cost of maintaining the workers employed in the society came to 1,285 units in the first instance, the present decrease of the social product by 171.5 – the difference of (9,000 − 8,828.5) – comes off this maintenance charge, and there is a consequent change in the composition of the social product:

6,430c + 1,113.5v + 1,285s = 8,828.5

Constant capital and surplus value remain unchanged, and only the variable capital, paid labour, has diminished. Or – in case there are doubts about constant capital being unaffected – we may further allow for the event that, as would happen in actual practice, concomitant with the decrease in means of subsistence for the workers there will be a corresponding cut in the constant capital. The equation for the social product as a whole would then be:

6,307.5c + 1,236v + 1,285s = 8,828.5

In spite of the smaller social product, there is no change in the surplus value in either case, and it is only the cost of maintaining the workers that has fallen.

Put it this way: the value of the aggregate social product may be defined as consisting of three parts, the total constant capital of the society, its total variable capital, and its total surplus value, of which the first set of products contains no additional labour, and the second and third no means of production. As regards their material form, all these products come into being in the given period of production – though in point of value the constant capital had been produced in a previous period and is merely being transferred to new products. On this basis, we can also divide all the workers employed into three mutually exclusive categories: those who produce the aggregate constant capital of the society, those who provide the upkeep for all the workers, and finally those who create the entire surplus value for the capitalist class.

If, then, the workers’ consumption is curtailed, only workers in the second category will lose their jobs. Ex hypothesi, these workers had never created surplus value for capital, and in consequence their dismissal is therefore no loss from the capitalist’s point of view but a gain, since it decreases the cost of producing surplus value.

The demand of the state which arises at the same time has the lure of a new and attractive sphere for realising the surplus value. Some of the money circulating as variable capital breaks free of this cycle and in the state treasury it represents a new demand. For the technique of taxation, of course, the order of events is rather different, since the amount of the indirect taxes is actually advanced to the state by capital and is merely being refunded to the capitalists by the sale of their commodities, as part of their price. But economically speaking, it makes no difference. The crucial point is that the quantity of money with the function of variable capital should first mediate the exchange between capital and labour power. Later, when there is an exchange between workers and capitalists as buyers and sellers of commodities respectively, this money will change hands and accrue to the state as taxes. This money, which capital has set circulating, first fulfils its primary function in the exchange with labour power, but subsequently, by mediation of the state, it begins an entirely new career. As a new purchasing power, belonging with neither labour nor capital, it becomes interested in new products, in a special branch of production which does not cater for either the capitalists or the working class, and thus it offers capital new opportunities for creating and realising surplus value. When we were formerly taking it for granted that the indirect taxes extorted from the workers are used for paying the officials and for provisioning the army, we found the ‘saving’ in the consumption of the working class to mean that the workers rather than the capitalists were made to pay for the personal consumption of the hangers-on of the capitalist class and the tools of their class-rule. This charge devolved from the surplus value to the variable capital, and a corresponding amount of the surplus value became available for purposes of capitalisation. Now we see how the taxes extorted from the workers afford capital a new opportunity for accumulation when they are used for armament manufacture.

On the basis of indirect taxation, militarism in practice works both ways. By lowering the normal standard of living for the working class, it ensures both that capital should be able to maintain a regular army, the organ of capitalist rule, and that it may tap an impressive field for further accumulation.

We have still to examine the second source of the state’s purchasing power referred to in our example, the 150 units out of the total 250 invested in armaments. They differ essentially from the hundred units considered above in that they are not supplied by the workers but by the petty bourgeoisie, i.e. the artisans and peasants. (In this connection, we can ignore the comparatively small tax-contribution of the capitalist class itself.)

The money accruing to the state as taxes from the peasant masses – as our generic term for all non-proletarian consumers – was not originally advanced by capital and has not split off from capital in circulation. In the hand of the peasant it is the equivalent of goods that have been realised, the exchange value of simple commodity production. The state now gets part of the purchasing power of the non-capitalist consumers, purchasing power, that is to say, which is already free to realise the surplus value for capitalist accumulation. Now the question arises, whether economic changes will result for capital, and if so, of what nature, from diverting the purchasing power of such strata to the state for militarist purposes. It almost looks as if we had come up against yet another shift in the material form of reproduction. Capital will now produce an equivalent of war materials for the state instead of producing large quantities of means of production and subsistence for peasant consumers. But in fact the changes go deeper. First and foremost, the state can use the mechanism of taxation to mobilise much larger amounts of purchasing power from the non-capitalist consumers than they would ordinarily spend on their own consumption.

Indeed the modern system of taxation itself is largely responsible for forcing commodity economy on the peasants. Under pressure of taxes, the peasant must turn more and more of his produce into commodities, and at the same time he must buy more and more. Taxation presses the produce of peasant economy into circulation and compels the peasants to become buyers of capitalist products. Finally, on a basis of commodity production in the peasant style, the system of taxation lures more purchasing power from peasant economy than would otherwise become active.

What would normally have been hoarded by the peasants and the lower middle classes until it has grown big enough to invest in savings banks and other banks is now set free to constitute an effective demand and an opportunity for investment. Further the multitude of individual and insignificant demands for a whole range of commodities, which will become effective at different times and which might often be met just as well by simple commodity production, is now replaced by a comprehensive and homogeneous demand of the state. And the satisfaction of this demand presupposes a big industry of the highest order. It requires the most favourable conditions for the production of surplus value and for accumulation. In the form of government contracts for army supplies the scattered purchasing power of the consumers is concentrated in large quantities and, free of the vagaries and subjective fluctuations of personal consumption, it achieves an almost automatic regularity and rhythmic growth. Capital itself ultimately controls this automatic and rhythmic movement of militarist production through the legislature and a press whose function is to mould so-called ‘public opinion’. That is why this particular province of capitalist accumulation at first seems capable of infinite expansion. All other attempts to expand markets and set up operational bases for capital largely depend on historical, social and political factors beyond the control of capital, whereas production for militarism represents a province whose regular and progressive expansion seems primarily determined by capital itself.

In this way capital turns historical necessity into a virtue: the ever fiercer ‘competition’ in the capitalist world itself provides a field for accumulation of the first magnitude. Capital increasingly employs militarism for implementing a foreign and colonial policy to get hold of the means of production and labour power of non-capitalist countries and societies. This same militarism works in a like manner in the capitalist countries to divert purchasing power away from the non-capitalist strata. The representatives of simple commodity production and the working class are affected alike in this way. At their expense, the accumulation of capital is raised to the highest power, by robbing the one of their productive forces and by depressing the other’s standard of living. Needless to say, after a certain stage the conditions for the accumulation of capital both at home and abroad turn into their very opposite – they become conditions for the decline of capitalism.

The more ruthlessly capital sets about the destruction of non-capitalist strata, at home and in the outside world, the more it lowers the standard of living for the workers as a whole, the greater also is the change in the day-to-day history of capital. It becomes a string of political and social disasters and convulsions, and under these conditions, punctuated by periodical economic catastrophes or crises, accumulation can go on no longer.

But even before this natural economic impasse of capital’s own creating is properly reached it becomes a necessity for the international working class to revolt against the rule of capital.

Capitalism is the first mode of economy with the weapon of propaganda, a mode which tends to engulf the entire globe and to stamp out all other economies, tolerating no rival at its side. Yet at the same time it is also the first mode of economy which is unable to exist by itself, which needs other economic systems as a medium and soil. Although it strives to become universal, and, indeed, on account of this its tendency, it must break down because it is immanently incapable of becoming a universal form of production. In its living history it is a contradiction in itself, and its movement of accumulation provides a solution to the conflict and aggravates it at the same time. At a certain stage of development there will be no other way out than the application of socialist principles. The aim of socialism is not accumulation but the satisfaction of tolling humanity’s wants by developing the productive forces of the entire globe. And so we find that socialism is by its very nature an harmonious and universal system of economy.