The second theoretical polemic around the problem of accumulation was also prompted by contemporary events. If Sismondi was spurred on to oppose the classical school by the first British crisis and the suffering this caused in the working class, it was the subsequent emergence of the revolutionary workers’ movement that provided the impulse for [Johann Karl] Rodbertus’s critique of capitalist production almost twenty-five years later. The uprisings of the Lyon silk weavers* and the Chartist movement in the U.K.† bellowed their critiques of the best of all possible forms of society into the ears of the bourgeoisie, proving that they were a different proposition altogether from the amorphous specters that the first crisis had summoned. The earliest socioeconomic writing of Rodbertus, which probably dates from the end of the 1830s and was written for the Augsburger Allgemeine Zeitung, although it was not accepted by this newspaper, bears the suggestive title “The Demands of the Working Classes,”174 and begins with the following: “What do the working classes want? Will the others be able to withhold it from them? Will what they want be the grave of modern civilization? Intellectuals have long realized that a time must come when history would put this question with great urgency. Now, the everyday world has discovered it, too, through the Chartist meetings and the Birmingham scenes.”‡ In France, soon afterwards in the 1840s, the ferment of revolutionary ideas led to the formation of the most varied secret societies and socialist schools—the Proudhonists, the Blanquists, the followers of [Étienne] Cabet, those of Louis Blanc, etc.§—and caused an epoch-making explosion of the contradictions latent within the womb of capitalist society. This explosion—the first general confrontation between the two worlds of capitalist society—took the form of the February revolution, the proclamation of the “right to work,” and the June days uprising.* As far as the other visible form of these contradictions—i.e. crises—is concerned, the data available at the time of the second controversy were incomparably more abundant than those of the early 1820s. The debate between Rodbertus and [Julius] von Kirchmann took place under the immediate impact of the crises of 1837, 1839, 1847, and the first world crisis of 1857† (Rodbertus wrote his interesting pamphlet, On Commercial Crises and the Mortgage Problem of the Landowners,175 in 1858). The internal contradictions of the capitalist economy thus enacted a piercing critique of the harmony doctrine of the British classical economists and their vulgarizers in the U.K. and on the continent before Rodbertus’s very eyes, in stark contrast with the conditions in which Sismondi first raised his voice.
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*The workers of the silk weaving industry and the artisans of Lyon had taken part in the first independent political uprisings against the bourgeoisie in 1831 and 1834. The emergent competition in the industry and the intensified exploitation by capitalist publishers and manufacturers led to a strike in the autumn of 1831 and to the uprising of the Lyon silk weavers, which was put down by government troops two weeks later. The second uprising of April 9 to 12, 1834, was likewise suppressed by the army.
†The Chartist movement in the U.K., an early form of the workers’ movement, was based on the first political workers’ organizations that arose in order to agitate for constitutional proposals. It represented one of the most mass-based and influential working class movements in British history. For a recent study, see David Black and Chris Ford, 1839: The Chartist Insurrection (London: Unkant, 2012).
‡On July 15, 1839, a popular uprising began in Birmingham after the House of Commons had rejected the first petition for the six-point People’s Charter with 1,250,000 signatures. The uprising was put down by the army and police on July 17, 1839. A wave of ferocious persecution of the Chartists ensued.
§The Proudhonists were supporters of the anarchist current and doctrine named after Pierre-Joseph Proudhon (1809–65), which sought to establish a society of independent commodity producers by reformist means. The Blanquists were followers of the revolutionary Louis-Auguste Blanqui (1805–81), who proposed the idea of a violent seizure of power through a conspiratorial organization and sought to establish a revolutionary dictatorship.
Incidentally, a quotation from Sismondi in Rodbertus’s first text indicates that the latter’s critique was directly influenced by that of the former. Rodbertus was probably familiar with the contemporary French literature opposing the classical school, but perhaps less so with the much more abundant British one; as is well known, it is this circumstance that provides the flimsy basis for the legend that is recounted in German professorial circles, according to which Rodbertus preceded Marx in the “foundation of socialism.” Accordingly, Professor [Karl] Diehl writes in his entry on Rodbertus in the Handwörterbuch der Staatswissenschaften:
Rodbertus must be considered the real founder of scientific socialism in Germany, since in his writings between 1839 and 1842, even before Marx and Lassalle, he provided a comprehensive socialist system, a critique of Adam Smith’s doctrine, a new theoretical foundation, and proposals for social reform.‡
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*During the 1848 revolution, the workers of Paris rose up against the dissolution of the National Workshops between June 23 and 26. The working class, which was isolated from its potential allies in the middle class and peasantry, was defeated by the army and the Garde Mobile.
†The crisis of 1837 was largely caused by a glut of overproduction. It especially impacted England and the U.S., causing production to sharply decline in heavy industry. The crisis of 1839 was a monetary crisis, triggered when the Bank of the U.S. underwent liquidation in 1839 as a result of the failure of its speculation with the monopoly in the cotton trade in Pennsylvania. In 1847, a general trade and industrial crisis broke out in Europe, exacerbated by a series of crop failures. Its epicenter was England and the large commercial exchanges associated with it. The first world economic crisis, which occurred from 1857 to 1859, spread from the U.S. to Europe and gripped the stock markets and the commodity-, money-, and credit-markets. It compelled the capitalists to move toward greater intensification in their methods of production and exploitation.
‡See Karl Diehl, “Rodbertus,” in Handwörterbuch der Staatswissenschaften, edited by Johannes Conrad, Ludwig Elster, Wilhelm Lexis, and Edgar Loening, Vol. 6, second edition (Jena: Verlag von Gustav Fischer, 1901), p. 451.
This example of pious, God-fearing righteousness figures in the second edition, published in 1901—after (and despite) everything that Engels, [Karl] Kautsky, and [Franz] Mehring had written to explode the myth propagated by the German professors. Indeed, not even the most convincing proof could cause these learned German economists to waver—for them it was self-evident that Rodbertus, the “socialist” with monarchist, nationalist, and Prussian leanings, who stood for communism 500 years from now, while advocating a steady exploitation rate of 200 percent for the present, deserved to be feted as the first founding father of socialism instead of that international subversive, Marx. It is another aspect of Rodbertus’s analysis that is of interest here, however. The very same Diehl continues his panegyric as follows:
Rodbertus was not only a pioneer of socialism; political economy as a whole owes much stimulation and advancement to him; economic theory in particular is indebted to him for the critique of the classical economists, for the new theory of the distribution of income, for the distinction between the logical and historical categories of capital, and so on.176
Here the focus will be on these latter achievements of Rodbertus, in particular with those coming under the category “and so on.”
The controversy between Rodbertus and von Kirchmann was sparked by the former’s seminal treatise, Toward the Understanding of Our Politico-Economic Conditions,177 published in 1842. Von Kirchmann responded with two articles in Demokratische Blätter: On the Social Aspects of Ground Rent and The Exchange Society;178 Rodbertus wrote a further rejoinder in 1850 and 1851 with his Letters on Social Problems.179 This discussion thus took place on the same theoretical terrain on which the polemic had been fought out thirty years previously between Malthus and Sismondi on the one hand and Say, Ricardo, and McCulloch on the other. In his first text, Rodbertus had already expressed the thought that, in contemporary society, the rising productivity of labor has the effect that wages represent an ever-decreasing proportion of the national product; he “claimed” this insight as his own, and from that time until his death some thirty years later he did nothing but reiterate and reformulate it in various ways. Rodbertus perceived this declining wage share as the common root of all evils in the contemporary economy, especially those of poverty and crises, which he describes as “the social question of our times.”
Von Kirchmann does not agree with this explanation. He attributes poverty to the effects of rising ground rents, but explains crises in terms of a lack of markets. In relation to the latter point especially, he argues that “the greatest part of social ills is caused not by defects of production but by a lack of markets for the products … the more a country can produce, the more means it has for satisfying every need, the more it is exposed to the danger of misery and want.” There are implications for the question of workers here, for “the notorious right to work ultimately reduces to the question of markets.” Von Kirchmann then concludes,
It can be seen that the social problem is almost identical with the problem of markets. Even the ills of much-maligned competition will vanish, once markets are secure; its advantages alone will remain. A competitive rivalry to supply good and cheap commodities will persist, but the life-and-death struggle, which is caused only by insufficient markets, will disappear.180
The difference between the respective standpoints of Rodbertus and von Kirchmann is striking. Rodbertus perceives the root of the problem to lie in a flawed distribution of the national product, whereas von Kirchmann locates it in the market constraints upon capitalist production. For all the confusion in von Kirchmann’s exposition, especially in his idyllic conception of capitalist competition reduced to a commendable rivalry in the race to produce the best and cheapest commodities, as well as in his reduction of the “notorious right to work” to the question of markets, he does in part show more of an understanding for the Achilles’ heel of capitalist production—its market constraints—than does Rodbertus, who remains fixated on the question of distribution. Thus it is von Kirchmann who now takes up the problem that Sismondi had originally put on the agenda. Nonetheless, he in no way agrees with the way in which Sismondi elucidates and solves the problem, siding rather with the latter’s opponents. Not only does von Kirchmann accept the Ricardian theory of ground rent, the Smithian doctrine that “the price of the commodity is composed of two parts only, of the interests on capital and the wages of labor” (von Kirchmann transforms surplus value into “interest on capital”); he also endorses the thesis of Say and Ricardo that products can only be bought with other products, and that production creates its own market, such that what appears to be overproduction on the one side is merely underproduction on the other. Von Kirchmann thus clearly follows in the footsteps of the classical economists, even if his is a somewhat “German edition of the classics”—with all manner of “ifs” and “buts.” Accordingly, he begins with the argument that Say’s law of the natural equilibrium between production and demand “fails to give a comprehensive picture of reality,” and adds:
Commerce involves yet further hidden laws that prevent the pure realization of these postulates. They must be discovered if we are to explain the present flooding of the market, and their discovery might perhaps also show us the way to avoid this great evil. We believe that there are three relations in the present system of society that cause these conflicts between Say’s indubitable law and reality.
These relations consist in the following: (1) “too inequitable a distribution of the products” (here, as can be seen, von Kirchmann leans toward Sismondi’s standpoint to a certain extent); (2) the difficulties presented by nature to human labor in the production of raw materials; and finally, (3) the imperfections of trade as a process mediating production and consumption. Without going further into the latter two “obstacles” to Say’s law, von Kirchmann’s line of argument can now be considered in relation to the first point:
“The first relation,” he explains, “can be stated more briefly as too low wages of labor, which is thus the cause of market stagnation. Those who know that the price of commodities is composed of two parts only, of the interest on capital and the wage of labor, might consider this a remarkable proposition; if wages of labor are low, prices are low as well; and if wages are high, so are prices.”
As can be seen, von Kirchmann accepts Smith’s doctrine even in its most perverse formulation: price is not resolved into wages + surplus value, but is composed of them as a simple sum—a formulation in which Smith strays furthest from his labor theory of value.
Von Kirchmann continues as follows:
Wage and price thus are directly related, they balance each other. The U.K. only abolished its corn laws, its tariffs on meat and other means of subsistence, in order to cause wages to fall and thus to enable its manufacturers to oust all other competitors from the world markets by means of still cheaper commodities. This, however, only holds good up to a point and does not affect the ratio in which the product is distributed among the workers and the capitalists. Too inequitable a distribution among these two is the primary and most important cause why Say’s law is not fulfilled in reality, why the markets are flooded although there is production in all branches.*
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*Luxemburg is quoting these lines of von Kirchmann as cited by Rodbertus in his Soziale Briefe.
Von Kirchmann gives a detailed example to illustrate this claim. Following the model of the classical school, he transports his readers to an imaginary, isolated society, which makes for an acquiescent, if ungrateful, object for experiments in political economy. They are to imagine a locality with exactly 903 inhabitants, comprising three entrepreneurs employing 300 workers each. The locality meets all the needs of its inhabitants through its own production, which takes place in three enterprises: the first supplies clothing, the second provides food, light, heating, and raw materials, and the third offers housing, furniture, and tools. In each of these three departments, the entrepreneur provides the “capital together with the raw materials.” Likewise, in each of the three enterprises, workers are compensated in such a way that they receive half of the annual product as wages, the entrepreneurs receiving the other half “as interest on capital and profits of the enterprise.” In all, the quantity of products supplied by each business is just sufficient to meet the needs of all 903 inhabitants. In this way, the locality has “all the conditions necessary for general well-being,” such that its inhabitants can set about their work with renewed vigor each day.* However, after a few days, contentment and felicity give way to a universal wailing and gnashing of teeth, as something has occurred on von Kirchmann’s Isle of the Blessed—something as unexpected as the sky falling in: a thoroughly modern industrial and commercial crisis has broken out! The 900 workers have only the barest essentials in clothing, food, and housing, whereas the warehouses of the three entrepreneurs are full of clothing and raw materials, and their houses stand empty; they complain that they cannot find a market for their wares, whereas the workers in turn bemoan the fact that their needs are not sufficiently satisfied. What is the cause of all this distress?† Is it, as Say and Ricardo assumed, that there are too many of some products and not enough of others? “Not at all!” answers von Kirchmann. Everything is available in the locality in well-proportioned quantities, just sufficient to meet all the needs of its inhabitants. What, then, has caused the obstruction, the crisis? The impediment, it is found, lies in distribution alone, and nowhere else—but this is worth savoring in von Kirchmann’s own words:
Nevertheless, the obstacle to smooth exchange lies solely and exclusively in the distribution of these products. They are not distributed equally among all, but the entrepreneurs retain half of them for themselves as interest and profit, and only give half to the workers. It is clear that the worker manufacturing clothing can exchange, against half of his product, only half of the food, lodging, etc., that has been produced, and it is clear that the entrepreneur cannot get rid of the other half since no worker has any more products to give in exchange. The entrepreneurs do not know what to do with their stocks, the workers do not know what to do for hunger and nakedness.
Nor, it might be added, does the reader know what to make of Herr von Kirchmann’s constructions. His example is in fact so infantile that each of its riddles leads to the next.
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*“[F]risch und mutig an die Arbeit.” Luxemburg makes an allusion here to Friedrich Schiller, Die Räuber: “Frisch also! Mutig ans Werk.” “Up then! And to thy work manfully.”
†In the original, “Woher illae lacrimae?”—Latin for “why the tears?” a phrase of Cicero’s.
First of all, it is completely unclear on which basis and to which end von Kirchmann assumes this tripartite division of production. If, in the analogous examples given by Ricardo and McCulloch, the tenant farmers are usually counterposed to the manufacturers, this presumably merely corresponds to the antiquated conception of social reproduction held by the Physiocrats—a conception that Ricardo adopted, despite the fact that it had been rendered meaningless by his theory of value, which was opposed to the Physiocratic one, and despite the significant preliminary steps already taken by Smith toward a consideration of the real material foundations of the social process of reproduction. In any event, it has been seen that the Physiocratic distinction between agriculture and industry as foundations for reproduction was traditionally retained in economic theory until Marx introduced his epoch-making distinction between the two departments of social production: the production of means of production, and the production of means of consumption. In contrast, von Kirchmann’s three departments make no sense whatever. Here, tools are lumped together with furniture, raw materials with food, while clothing forms a department of its own: this is a division dictated not so much by any material standpoint of reproduction as by pure caprice. The assumption might just as well be made that there is one department for food, clothing and construction, another for medicines, and a third for toothbrushes. Von Kirchmann’s intention was evidently to give a mere indication of the social division of labor and to presuppose the exchange of several types of products in similar quantities as far as possible. However, the very exchange around which the whole proof revolves plays no role at all in von Kirchmann’s example, since it is not value that is distributed, but quantities of products, masses of use-values as such. Moreover, in this fascinating place imagined by von Kirchmann, products are first distributed, and then, once this distribution has been carried out, general exchange occurs. By contrast, on the terra firma of capitalist production, it is exchange that sets in motion and mediates the distribution of the product, as is common knowledge. Thus the most peculiar things occur in von Kirchmann’s distribution: although the price of products, and thus that of the total social product, consists—“as we all know”—only of “wages and interest on capital,” i.e. only of v + s, and the total product is accordingly distributed without remainder among the workers and entrepreneurs, the hapless von Kirchmann has a faint recollection of the fact that for any production to take place, things such as tools and raw materials might be needed. Thus he smuggles raw materials into his imaginary “locality” among the food, and tools among the furniture; this now prompts the following question, however: to whom are these indigestible things allocated in the general distribution? To the workers as wages, or to the capitalists as profit of enterprise? It is not as if either party would receive them gratefully. Moreover, these are the preconditions for the highlight of the whole performance: the exchange between workers and entrepreneurs. The act of exchange that is fundamental for capitalist production—that between wage-laborers and capitalists—is transformed by von Kirchmann from an exchange between living labor and capital into an exchange of products! For the latter, the whole mechanism does not revolve around the first act of exchange (i.e. that between labor-power and variable capital), but the second one (i.e. the realization of wages received from variable capital); conversely, he reduces the entire exchange of commodities of capitalist society to this realization of wages! Yet the best is yet to come: this exchange between workers and entrepreneurs, which has been made the focal point of economic life, proves on closer inspection to be no exchange at all—it does not even take place. For after all workers have received their wages in kind (or, to be more precise, after they have received half of their own product as wages), exchange can now only take place between the workers themselves: the first group exchanges its wages consisting only of pieces of clothing, the second its wages consisting only of food, and the third its wages consisting only of furniture, such that each group realizes its wages as one-third food, one-third clothing, and one-third furniture. The entrepreneurs do not figure in this exchange at all; the three of them are left sitting on their surplus value, which consists in half of all the clothing, food, and furniture produced by the society, and, between them, they have not got a clue what to do with all this junk. Moreover, not even the most generous distribution of the product would be of any help in the face of the woes that von Kirchmann has induced. On the contrary, the greater the share of the social product that was allocated to the workers, the less they would have to do with the entrepreneurs in exchange: all that would occur is that the reciprocal exchange among the workers themselves would increase in volume correspondingly. Such a redistribution would indeed have the effect of reducing the piles of surplus product encumbering the entrepreneurs by a corresponding amount—not because it would now be easier for them to exchange this surplus product, however, but by virtue of the fact that surplus value itself would decrease. There would still be no exchange of the surplus product to speak of between workers and entrepreneurs. If truth be told, the number of puerilities and economic absurdities that are concentrated here in such a relatively small space surpasses what might be expected even from a Prussian public prosecutor (and a distinguished one at that: von Kirchmann was twice reprimanded in disciplinary proceedings against him).* Nevertheless, after these inauspicious preliminaries, von Kirchmann proceeds directly to the matter in hand. He concedes that the fact that the surplus value cannot be employed follows from his own premises—namely from the concrete use-form of the surplus product. He now has the entrepreneurs produce luxury commodities, rather than “ordinary commodities” for the workers, with half of the quantity of social labor that the former have appropriated as surplus value. The “essence of luxury goods being that they enable the consumer to use up more capital and labor power than in the case of ordinary commodities,” the three entrepreneurs manage by themselves to consume no less than half of the quantity of labor-performed in the society in laces, elegant carriages, and the like. Now nothing unsalable is left over, the crisis is happily averted, overproduction is rendered impossible once and for all, and capitalists and workers alike enjoy more secure conditions, all thanks to von Kirchmann’s miraculous remedy, which brings all these benefits and reestablishes the equilibrium between production and consumption. In what does this miraculous remedy consist? Nothing other than luxury! In other words, the advice given by this fine fellow to the capitalists, who have no idea what to do with their surplus value, is that they should consume it themselves. Von Kirchmann then admits that luxury is no recent discovery of capitalist society, and that crises continue to erupt in spite of this fact. What is the reason for this? “The answer can only be”—von Kirchmann enlightens his readers—“that in real life, market stagnation is entirely due to the fact that there are still not enough luxuries, or, in other words, that the capitalists, i.e. those who can afford to consume, still consume too little.”
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*In July 1844, the Prussian government issued a circular spelling out restrictions on the actions of the political opposition; as a result, von Kirchmann, a liberal member of the judiciary, was forcefully transferred from his post in Berlin to one in the provinces.
This inappropriate abstemiousness on the part of the capitalists derives from a vice that economists have misguidedly advocated—i.e. from the propensity of the former to save for purposes of “productive consumption.” To put it another way: crises are caused by accumulation. This is von Kirchmann’s main thesis. He demonstrates it once more by means of an example of touching simplicity; the reader is to assume a case “that the economists commend as being the most favorable,” i.e. the case in which the entrepreneurs take the following stance:
“We do not want to spend our revenues down to the last penny on fineries and luxury; we want to reinvest them productively.” What does this mean? Nothing other than founding all kinds of new productive enterprises that will furnish new products, whose sale will permit interest [von Kirchmann means profit—R. L.] to be gained on that capital that was saved from the unconsumed revenues of the three entrepreneurs, and reinvested. Accordingly, the three entrepreneurs resolve to consume only the product of 100 workers, thus restricting their luxury consumption significantly, and to employ the labor-power of the remaining 350 workers and the capital used by these in new productive enterprises. The question now becomes the following: in which productive enterprises are these funds to be invested?
Since, according to von Kirchmann’s assumption, constant capital is not reproduced and the total social product consists only of means of consumption, “the three entrepreneurs can only choose again between enterprises for the manufacture of ordinary commodities or for that of luxuries.”
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*Latin for “No third (possibility) is given.”
In this way, the entrepreneurs face the same dilemma as before: if they produce “ordinary commodities,” a crisis ensues, since the workers have no means with which to buy these additional means of consumption, having already been compensated with half of the value of the product; if the entrepreneurs produce luxury commodities, they must also consume them themselves. Tertium non datur.* Nor does external trade alter anything in relation to this dilemma, since it merely serves “to increase the range of commodities on the internal market” or to increase productivity.
These imported commodities are therefore either ordinary commodities, in which case the capitalist will not, and the worker, lacking the means, cannot buy them, or they are luxuries, which the worker, of course, is even less able to afford, and which the capitalist will not want either because of his endeavors to save.
With this line of argument, however primitive, von Kirchmann’s fundamental idea—the nightmare of political economists—is expressed with a beautiful clarity: in a society consisting only of workers and capitalists, accumulation proves impossible. Consequently von Kirchmann openly opposes accumulation and the “saving” and “productive consumption” of surplus value; he engages in fierce polemics against the classical economists’ advocacy of these misguided practices; and extols the virtues of increasing luxury, which is made possible by the rising productivity of labor, as the remedy against crises. It can thus be seen that if von Kirchmann presents a caricature of Ricardo and Say in his theoretical premises, it is rather Sismondi that he caricatures in his conclusions. Nevertheless, it was necessary to get a clear idea of von Kirchmann’s formulation of the problem in order to do justice to Rodbertus’s critique and to properly appreciate the outcome of the controversy.