McCulloch’s rejoinder to Sismondi’s theoretical objections evidently did not settle the matter as far as Ricardo himself was concerned. Unlike that entrepreneurial “Scottish arch-humbug,” as Marx calls him,* Ricardo sought the truth and retained throughout the true modesty of a great thinker.137 That Sismondi’s polemic against him and his “pupils” made a deep impression on Ricardo is demonstrated by the latter’s decision to change tack in the question of the effects of machinery. It was precisely here that Sismondi, to his credit, had first confronted the advocates of the classical theory of harmony with the other side of the coin. In Book 4 of his Nouveaux Principes, in the chapter “On the Division of Labor and Machinery”138 and in another chapter significantly entitled: “Machinery Creates a Surplus Population,”139 Sismondi had attacked the theory, expounded at great length by Ricardo’s apologists, that mechanization always creates as many, if not more, jobs for wage-laborers as it takes away from them through the expulsion of living labor from the production process. Sismondi was acerbic in his criticism of this so-called theory of compensation. His Nouveaux Principes had appeared in 1819—two years after Ricardo’s magnum opus. Ricardo inserted a new chapter in the third edition of his Principles in 1821, after the polemic between McCulloch and Sismondi, in which he freely admits his error and states in accordance with Sismondi that “the opinion entertained by the laboring classes, that the employment of machinery is frequently detrimental to their interests, is not founded on prejudice and error, but is conformable to the correct principles of political economy.”† In so doing, Ricardo, much like Sismondi, is prompted to dispel any suspicion that he is agitating against technical progress; however, he is more equivocal on this question than Sismondi, and protects himself against any such accusations with the tergiversation that such evils will only occur gradually:
To elucidate the principle, I have been supposing, that improved machinery is suddenly discovered, and extensively used; but the truth is, that these discoveries are gradual, and rather operate in determining the employment of the capital that is saved and accumulated, than in diverting capital from its actual employment.‡
A further source of disquiet for Ricardo was the problem of crises and accumulation. In 1823, the last year of his life, he stayed in Geneva for a few days in order to discuss the subject with Sismondi, and these conversations bore fruit in the shape of Sismondi’s essay “On the Balance Between Consumption and Production,” published in the Revue Encyclopédique of May 1824.140
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*See Marx’s Theories of Surplus Value, in Marx and Engels Collected Works, Vol. 32, p. 354: “This is a brilliant example of the methods used by this humbug of a Scotsman.”
†David Ricardo, Principles of Political Economy, in The Works and Correspondence of David Ricardo, Vol. 1, edited by Piero Sraffa with the collaboration of M. H. Dobb (Indianapolis, IN: Liberty Fund, 2005), p. 393.
‡Ibid., p. 395.
In his treatment of this decisive question in his Principles, Ricardo had taken over wholesale from the vapid Say the theory of harmony in the relationship between production and consumption. In Chapter 21 he makes the following declaration:
M. Say has, however, most satisfactorily shown, that there is no amount of capital that may not be employed in a country, because demand is only limited by production. No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity that may be immediately useful to him, or that may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person.*
In his Nouveaux Principes, Sismondi had already launched a trenchant polemic against Ricardo’s conception, and the verbal debate between them revolved entirely around the above question. Ricardo could not deny the existence of the crisis that had recently engulfed the U.K. and other countries. The point of contention was rather how to explain the crisis. Noteworthy in this connection is the clear and precise formulation of the problem upon which Sismondi and Ricardo agreed as a prelude to their debate: both eliminated the question of foreign trade. Sismondi fully understood the significance and the necessity of foreign trade for capitalist production and its need to expand, and in this regard there was nothing to choose between him and the Ricardian free trade school.141 Indeed, he far surpassed the latter with his dialectical conception of this expansionist tendency of capital; he often pointed out that industry “is increasingly led to look for its vents on foreign markets where it is threatened by greater revolutions”;142 and, as has been shown, he anticipated the emergence of competition threatening European industry overseas, which in 1820 was no mean achievement and reveals his deep insight into capitalist relations at the level of the world economy. In this regard, Sismondi was far from making foreign trade the only possibility of salvation from the problem of the realization of surplus value—i.e. the problem of accumulation (a position attributed to him by subsequent critics). On the contrary, Sismondi is quite explicit in Chapter 6 of Volume 1:
In order to make these calculations with greater certainty and to simplify these questions, we have hitherto made complete abstraction from foreign trade and supposed an isolated nation; this isolated nation is human society itself, and what is true for a nation without foreign commerce, is equally true for mankind.143
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*Ibid., p. 290.
In other words, in taking the entire world market to be a society with exclusively capitalist production, Sismondi formulates his problem with exactly the same presuppositions that are a feature of Marx’s later treatment. These presuppositions are also shared by Ricardo, as Sismondi explains:
From the question that troubled us, we had each of us dismissed the instance of a nation that sold more abroad than it needed to buy there, that could command a growing external market for its growing internal production. In any case, it is not for us to decide whether fortunes of war or politics could perhaps bring forth new consumers for a nation—what is needed is proof that a nation can create these for itself simply by increasing its production.144
Here Sismondi astutely formulates the problem of the realization of surplus value in exactly the way that it still continues to confront economic theory to this day. Ricardo, on the other hand, follows Say’s lead in asserting that production creates its own market, as previously noted; this will be observed again in due course.
The thesis that Ricardo formulates in the controversy with Sismondi goes as follows:
Supposing that 100 workers produce 1,000 sacks of corn, and 100 weavers 1,000 yards woollen fabric. Let us disregard all other products useful to man and all intermediaries between them, and consider them alone in the world. They exchange their 1,000 yards against the 1,000 sacks. Supposing that the productive power of labor has increased by a tenth owing to a successive progress of industry, the same people will exchange 1,100 yards against 1,100 sacks, and each will be better clothed and fed; new progress will make them exchange 1,200 yards for 1,200 sacks, and so on. The increase in products always only increases the enjoyment of those who produce.145
It is deeply embarrassing to have to point out that the great Ricardo’s deductions in this instance are inferior to those of the “Scottish arch-humbug” McCulloch, if such a thing were possible. Once again the reader is invited to behold a harmonious and graceful country dance between sacks and yards, in which the very thing that is to be demonstrated—their proportionality—is simply presupposed. Worse still, all of the presuppositions that had previously been established in relation to the problem are now simply jettisoned. The problem or object of the controversy—to repeat it once more—consisted in the following question: Who are the consumers and purchasers of the surplus product that is generated when capitalists produce commodities beyond those which are for the consumption of their workers and for their own personal consumption—i.e. when capitalists capitalize a part of surplus value and use it for the extension of production and the expansion of capital? Ricardo responds without a single word on the expansion of capital. The picture he paints in the various stages of production is merely the incremental increase in the productivity of labor. According to his assumption, the same number of workers produces first 1,000 sacks and 1,000 yards of textiles, then 1,100 sacks and 1,100 yards, further 1,200 sacks and 1,200 yards, and so on in graceful progression. Quite apart from the tedious presentation, with both sides marching in step, military style, and even the numbers of objects to be exchanged precisely matching each other, there is no mention at all of the expansion of capital. The object being considered here is not expanded reproduction, but simple reproduction, in which it is merely the mass of use-values that grows, rather than the value of the total social product. Since it is not the quantity of use-values that matters in exchange, but ultimately their value-magnitude, which remains constant in Ricardo’s example, he effectively does not move an inch, even though he gives the impression of analyzing the progressive expansion of production. Ultimately, the categories of reproduction being considered here do not exist at all in Ricardo. McCulloch initially has his capitalists produce without surplus value and live on air alone, but he at least acknowledges the existence of workers and makes allowances for their consumption. Ricardo does not even mention workers, and the distinction between variable capital and surplus value does not exist at all for him. In comparison, it is less astonishing that Ricardo completely disregards constant capital (as do his pupils): Ricardo aims to solve the problem of the realization of surplus value and the expansion of capital without presupposing anything other than that there is a certain quantity of commodities that are exchanged against one another.
Although Sismondi did not notice that the whole terrain of battle had shifted, he made a sincere attempt to bring the fantasies of his famous guest and opponent back down to earth and to analyze them in terms of their latent contradictions, all the while complaining that their presuppositions “abstract from time and space, just as German metaphysicians are wont to do.”146 He grafts Ricardo’s hypothesis on to “society in its real organization, with unpropertied workers whose wage is fixed by competition and who can be dismissed the moment their master has no further need of their work … for”—remarks Sismondi so aptly, and yet with such modesty—“it is just this social organization to which our objection refers.”147
Sismondi then exposes the various difficulties and conflicts that are associated with increases in the productivity of labor under capitalist conditions. He demonstrates that the technical changes in the labor process that Ricardo assumes must entail the following alternative from the standpoint of society as a whole: either—a true reflection of contemporary society—the growth in productivity results in job losses for a corresponding proportion of workers, with an ensuing excess in products on the one hand and unemployment and misery on the other; or the excess product is used to sustain workers in a new branch of production, namely luxury production.
Having reached this point, Sismondi now soars up to a decisive position of superiority over Ricardo. He is suddenly reminded of the existence of constant capital, and he is now the one to subject the British classical economist to meticulous criticism:
For setting up a new industry for manufacturing luxuries, new capital is also needed; machines will have to be built, raw materials procured, and distant commerce brought into activity; for the wealthy are rarely content with enjoying what is immediately in front of them. Where, then, could we find this new capital that may perhaps be much more considerable than that required by agriculture? … Our luxury workers are still a long way from eating our laborers’ grain, from wearing the clothes from our common factories; they are not yet made into workers, they may not even have been born yet, their trade does not exist, the materials on which they are to work have not arrived from India. All those among whom the former should distribute their bread, wait for it in vain.148
Sismondi proceeds to consider constant capital not merely in luxury production, but also in agriculture, and further criticizes Ricardo as follows:
We must abstract from time, if we make the assumption that the cultivator, whom a mechanical discovery or an invention of rural industry enables to treble the productive power of his workers, will also find sufficient capital to treble his exploitation, his agricultural implements, his equipment, his livestock, his granaries: to treble the circulating capital that must serve him while waiting for his harvest.149
Here Sismondi breaks with the myth of the classical school that when capital expands, the entire additional capital is spent entirely on wages, i.e. on variable capital, and thus clearly distances himself from the Ricardian theory—although, incidentally, this did not prevent him from allowing all the errors on which that theory is based to pass without revision into the second edition of his Nouveaux Principes three years later. Sismondi thus emphasizes two decisive points against Ricardo’s facile doctrine of harmony: on the one hand, he points out the objective difficulties of the process of expanded reproduction, which in no way proceeds as beautifully smoothly in capitalist reality as in Ricardo’s absurd hypothesis, and on the other, he notes that each technical advance in the productivity of social labor is always imposed at the cost of the working class, and is obtained at the price of the latter’s suffering.
Sismondi also demonstrates his superiority over Ricardo in relation to a third important point: in contrast to the latter’s crudely blinkered vision, in which no other forms of society exist apart from the bourgeois economy, Sismondi represents the broad historical horizon of a dialectical approach. He declares,
Our eyes are so accustomed to this new organization of society, this universal competition, degenerating into hostility between the rich and the working class, that we no longer conceive of any mode of existence other than that whose ruins surround us on all sides. They believe to prove me absurd by confronting me with the vices of preceding systems. Indeed, as regards the organization of the lower classes, two or three systems have succeeded one another; yet, since they are not to be regretted, since, after first doing some good, they then imposed terrible disasters on mankind, may we conclude from this that we have now entered the true one? May we conclude that we shall not discover the besetting vice of the system of wage labor as we have discovered that of slavery, of vassalage, and of the guilds? A time will come, no doubt, when our descendants will condemn us as barbarians because we have left the working classes without security, just as we already condemn, as they also will, as barbarian the nations who have reduced those same classes to slavery.150
Sismondi gives evidence of his deep insights into historical relations with this judgment, in which he distinguishes the role of the proletariat in modern society from that of the proletariat in Roman society with epigrammatic acuity. No less profound is the way in which he analyzes the economic peculiarities of the slave system and the feudal economy as well as their relative historical significance in his polemic against Ricardo, or, finally, the way in which he establishes that the predominant general tendency of the bourgeois economy is “that it severs completely all kind of property from every kind of labor.”
As will be seen below, Sismondi’s second encounter with the classical school did no more to enhance the reputation of his opponents than the first.151