Rodbertus digs deeper than von Kirchmann. He seeks out the root of the evil in the very foundations of social organization, and makes a grim declaration of war on the predominant free trade school. Admittedly, he does not take up arms against the system of unimpeded commodity circulation or against economic liberalization, which he fully supports, but against the Manchester doctrine* of laissez-faire within the internal social relations of the economy. In his time, following the Sturm und Drang† period of classical economics, an unscrupulous apologetics held sway, which found its most prominent expression in that legendary vulgarian and idol of all philistines, M. Frédéric Bastiat, and his “harmonies”; soon there would be a proliferation of various mewling, mediocre, middle-of-the-road, petty-bourgeois Germans offering pale imitations of the French prophet of harmony. Rodbertus aimed his criticism against these unscrupulous “peddlers of free trade.” In his first Letter on Social Problems,181 he issues the following clarion call:
Owing to the low level of their incomes, five-sixths of the population have not only been deprived thus far of most of the benefits of civilization, but they have also been subjected every now and then to the most terrible outbreaks of real distress, and are permanently exposed to this danger, to the threat of destitution. Yet they are the creators of all the wealth of the society. Their labor begins at dawn and ends at dusk, continuing even after night has fallen—but no exertion on their part can alter this fate; they cannot raise the level of their income, and only lose the remaining free time that ought to be left over for education and intellectual enrichment. It can be granted that all this suffering was necessary for the progress of civilization, but now that a series of the most wonderful discoveries and inventions have increased the productivity of human labor more than a hundredfold, new prospects of altering this grim necessity are suddenly revealed. As a result, the wealth and assets of a nation relative to its population increase exponentially. Could anything be more natural, I ask, or more justly demanded, than that this increase should also somehow benefit the creators of this old and new wealth? That their incomes should be raised or their working hours shortened, or that they might join in increasing numbers the ranks of the privileged, who have the preferential right to reap the fruits of labor? Yet public finance [Staatswirtschaft], or better, the economy [Volkswirtschaft] itself, has only achieved the opposite result. The increasing poverty of these classes goes together with the increasing wealth of the nation, there is even need of special legislation to prevent the extension of the working day, and, finally, the working classes are growing at a faster rate than the others. Even that is not enough! The hundredfold increase in the productivity of labor that was powerless to relieve five-sixths of the population, even periodically threatens the remaining sixth of the nation and thus society as a whole […] Such are the contradictions in the economic sphere in particular, and in the social sphere in general! The wealth of society is increasing, and this growth is accompanied by an increase in poverty. The efficiency of the means of production is increasing, and the consequence is that they lie idle. Social conditions demand that the material position of the working classes should be raised to the level of their political status, and economic conditions, by way of answer, degrade it further still. Society needs the unconfined growth of wealth, and contemporary managers of production are obliged to place restrictions upon it, so as not to cause further impoverishment. In a single respect alone is there harmony: the perversity of the conditions corresponds to that of the ruling stratum of society with its inclination to look for the root of the evil everywhere except in the right place. This egotism, which only too often is dressed up as morality, also accuses the vices of the workers of being the cause of poverty. The responsibility for the crimes committed against them by all-powerful facts is ascribed to their alleged inadequacies and inefficiency, and where even such egotism cannot close its eyes to their innocence, it invents a theory of the “necessity of poverty.” Unremittingly, it exhorts the workers only to work and to pray, impresses upon them the duty of abstinence and economy, and at best infringes upon their rights by the institution of compulsory saving, adding to the misery of the workers. It does not see that a blind force of commerce has transformed the prayer to find work into the cursing of enforced unemployment, that […] abstinence is impossible or cruel, and that, lastly, morals always remain ineffective if commended by those of whom the poet says that they drink wine in secret but preach water in public.182
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*This was a term for a strand within liberal economic policy that was oriented toward free trade and free competition as the precondition for capitalism, and that advocated the non-intervention of the state in the economy. Its name refers to Manchester, the English industrial city.
†German for “Storm and Stress.”
In themselves, bold words such as these could not lay claim to any groundbreaking significance, as they were written some thirty years after Sismondi and Owen, twenty years after the critiques made by the British socialists from the Ricardian school, and indeed after the Chartist movement, after the June Days Uprising of 1848, and, last but not least, after the publication of the Communist Manifesto. Yet, by the same token, it was now much more a question of the scientific grounding of these critiques. Here, Rodbertus offers an entire system, which can be condensed in the following brief propositions.
Together, the historically achieved level of the productivity of labor and the “institutions of positive law,” that is to say private property, have engendered a whole series of perverted and perverse phenomena in accordance with the laws of an economy left to its own devices:
1) Exchange value has taken the place of “normal,” “constituted value,” and accordingly today’s metallic money appears in place of a true “paper money” or “labor money”—i.e. a money that “corresponds to its idea.” “The first principle is that all economic goods are products of labor, or, as we might put it, that labor alone is productive. This proposition, however, does not imply that the value of the product must always equal the cost of labor, or, in other words, that labor can provide a measure of value at present.” The truth is rather that “that this still has not become an economic fact, but is only an idea of political economy.”183
If value could be constituted in accordance with the labor expended on the product, we might imagine a kind of money that would be, as it were, a leaf torn from the public account-book, a receipt written on the most inexpensive material, or rags, that everyone would receive for the value he has produced, and that he would realize as a voucher for an equivalent value-share of that part of the national product that is subsequently assigned for distribution […] If, in the meantime, it is impossible or not yet possible, for one reason or another, for value to be constituted, money must itself drag hither and thither the value it was supposed to liquidate, i.e. money must itself be of an equivalent value, or be a pledge or pawn of the same value—it must itself consist of a valuable good, such as gold or silver.184
As soon as capitalist commodity production has come into existence, however, everything is turned on its head: “the constitution of value must cease, since it can only be exchange value,”185 and “since value cannot be constituted, money cannot be purely money, it cannot fully conform to its idea.”186 “In an equitable exchange, the exchange value of the products would have to equal the quantity of labor needed for producing them, and an exchange of products would always mean an exchange of equal quantities of labor.” Even assuming, however, that everyone produces precisely the use-values required by someone else, “since we are here concerned with human cognition and human volition, there must always be a correct calculation, equalization, and specification of the labor quantities contained in the products for exchange, there must be a law to which exchangers conform.”187
As is well known, Rodbertus was at great pains to emphasize that he preceded Proudhon in the discovery of “constituted value”; this is something that can gladly be conceded to him. In The Poverty of Philosophy, Marx exhaustively demonstrated (as did Engels in his preface to the same) the extent to which this “idea” was a mere phantom that had already been theoretically elaborated and in practice discarded in the U.K. long before Rodbertus’s time, and the extent to which it was a utopian bastardization of Ricardo’s theory of value.* There is thus no need to dwell further on this “pie in the sky of the most infantile kind.”†
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*For Marx’s critique of the concept of “constituted value,” see Marx’s Poverty of Philosophy, in Marx and Engels Collected Works, Vol. 6 (New York: International Publishers, 1976), pp. 120–31.
†Literally “music of the future played on a children’s trumpet.” The reference is from Engels’s preface to the first German edition of Marx’s Poverty of Philosophy.
2) “Exchange” has resulted in a “degradation” of labor to a mere commodity; it has also resulted in the wage being determined by “cost-value” rather than as a fixed share of the product. With an audacious historical leap, Rodbertus derives his law of wages directly from slavery, and thus sees the specific character that capitalist commodity production stamps upon exploitation as mere deception and falsehood, and as something to be condemned from a moral standpoint:
So long as the producers themselves remained the property of non-producers, so long as slavery was in existence, it was the advantage of the “masters” alone that unilaterally determined the volume of this share [of the workers—R. L.]. Since the producers have attained full liberty of person, if nothing more as yet, both parties agree on the wage in advance. The wage, in modern terminology, is the object of a “free contract,” that is to say, an object of competition. Labor is therefore as a matter of course subjected to the same laws of exchange as its products: labor itself acquires exchange value; the size of the wage depends on the effects of supply and demand.
After turning things on their head in this way and deriving the exchange value of labor-power from competition, he then proceeds to derive its value from its exchange value:
“Under the laws of exchange value, labor, like produced goods, comes to have a kind of ‘cost value’ that exercises some magnetic effects upon its exchange value, the amount of the wage.” This is the particular level of wages that is necessary for the “maintenance of labor,” or, in other words, that provides it with the energy it needs to continue functioning, if only in the shape of the next generation of workers; it is the so-called “minimum of subsistence.” Once again, for Rodbertus, this is not a question of the identification of objective economic laws, but merely a matter of moral indignation. He describes as “cynical” the assertion of the classical school that “labor has no more value than the wages it receives,” and resolves to uncover the “series of errors” that have led to these “crass and unethical conclusions.”
It was a degrading notion to evaluate the wages of labor according to “necessary subsistence,” in the same way that costs of repairs to machines are assessed. Now that labor, the source of all goods, has itself become a commodity to be exchanged, it is no less degrading to speak of its “natural price,” of its “costs,” in the same way that the natural price and costs of its products are referred to, and to translate this natural price, these costs, into the amount of goods that is necessary for labor to reproduce itself constantly as a commodity to be brought to market.188
This commodity character of labor-power, however, and the corresponding determination of its value are for Rodbertus nothing but malicious misrepresentations on the part of the free trade school. Instead of referring to the contradiction within capitalist commodity production—i.e. the contradiction between the determination of the value of labor and the determination of value by labor—as the British followers of Ricardo had done,* Rodbertus, like the good Prussian that he is, impugns this contradiction of capitalist commodity production as infringing the obtaining constitutional law.
“There is an absurd and ineffable contradiction,” he exclaims, “in the conception of those economists who would grant the workers civil rights to participate in decisions over the fate of society, and would at the same time have these same workers, from an economic point of view, treated as mere commodities!”189
Now only the question remains as to why the workers acquiesce to such an absurd and flagrant injustice—this was the objection raised for example by [Friedrich] Hermann against Ricardo’s theory of value. Rodbertus gives the following answer:
What were the workers to do after their emancipation other than to acquiesce to these regulations? Imagine their position: when the workers were freed, they were naked or in rags, they had nothing but their labor-power. The abolition of slavery or serfdom, moreover, rescinded the master’s legal or moral obligation to feed them and care for their needs. Yet these needs remained, they still had to live. How, then, could their labor-power provide them with a living? Were they simply to take some of the capital existing in the society in order to produce their means of subsistence? The capital of society was already in the hands of other people, and the executors of the “law” would not have tolerated such a step.
What else could the workers have done?
Only these alternatives were before them: either to overthrow the legal constitution of society or to return, under roughly the same conditions as before, to their former masters, the owners of the land and of capital, and to receive as wages what was formerly doled out to them to keep them fed.190
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*This is a reference to such British socialist neo-Ricardians as William Thompson, John Gray, and John Francis Bray.
Fortunately for humankind and for the Prussian constitutional state, the workers were “wise enough not to throw civilization off its course,” preferring instead to show their heroism in complying with the malevolent impositions of their “former masters.” This marked the emergence of the capitalist system of wages and the law of wages as “a kind of slavery,” as a product of the abuse of power by the capitalists and of the precarious situation and meek acquiescence of the proletarians, if the groundbreaking theoretical explanations of the very Rodbertus whose theories Marx is supposed to have plagiarized are to be believed. In any case, Rodbertus’s precedence with regard to this theory of wages is uncontested, since the British socialists and other social critics had already analyzed the wages system in a far less crude and primitive fashion. What is original in Rodbertus’s conception is that, having invested so much energy in moral indignation over the emergence of the wages system and its economic laws, he refrains from calling, as a result, for the abolition of this abominable injustice, this “absurd and ineffable contradiction.”191 Perish the thought! He repeatedly assures his fellow citizens that his roaring condemnation of exploitation should not be taken too seriously: after all, he is no lion, but merely Snug the joiner.* The ethical theory of the law of wages is only necessary in order to draw the following conclusion from it:
3) The determination of the wage by the “laws of exchange value” has the consequence that as the productivity of labor increases, the share of the workers in the product decreases. The Archimedean point of Rodbertus’s “system” has now been reached. The “declining wage share” is the most important of his “original” ideas, which he reiterates from his first writing on social problems (probably in 1839) until his death, and which he claims as his own. This idea is in fact merely a simple corollary of Ricardo’s theory of value, and is actually implicit in the wage fund theory that was predominant in economics from the classical economists, right up to the publication of Marx’s Capital.† Nevertheless, Rodbertus believes that with his discovery he has become a kind of Galileo in economics, and he draws on his “declining wage share” as an explanation for all the evils and contradictions of the capitalist economy. From the declining wage share he thus derives immiseration, which, alongside crises, constitutes “the social question” for him. It would be appropriate to draw the careful attention of those contemporaries who would bury Marx to the fact that it was not the latter, but rather Rodbertus, a man far closer to them in spirit, who established a genuine theory of immiseration, and indeed did so in the crudest form, and that, in contrast to Marx, he made it the crux of the “social question,” rather than a mere epiphenomenon. Compare for instance his argument on the absolute immiseration of the working class in his first Letter on Social Problems to von Kirchmann. Furthermore, the “declining wage share” must serve as the explanation for the other fundamental manifestation of the “social question”: crises. Here Rodbertus engages with the problem of the equilibrium between consumption and production and touches upon the whole complex of contentious issues bound up with this question that had already been the focus of disputes between Sismondi and Ricardo’s school.
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*See William Shakespeare: A Midsummer Night’s Dream, Act 5, Scene 1.
†For more on the theory of the wage fund, see The Complete Works of Rosa Luxemburg, Vol. 1, pp. 509–20.
‡The Panic of 1819 was the first peacetime financial crisis in the U.S., caused by excessive speculation in real estate. It led to a recession that lasted until 1821. The crisis of 1825–26 in the U.K. was the first cyclical industrial crisis in the history of capitalism. Share prices fell, causing seventy provincial banks and numerous publicly listed companies, among others, to collapse; no English capital was exported until 1828. The economic crisis of 1836–37 was caused by the flooding of the markets in the U.S. with British commodities, resulting in a serious decline in commodity prices. The crisis of 1836 was spurred by a default on U.S. government debts and led to an economic downturn lasting four years. In 1846 a collapse in British financial markets led to an economic downturn.
Compared to Sismondi, Rodbertus was of course able to draw on a far greater wealth of data to inform his knowledge of crises. In his first Letter on Social Problems, he already gives a detailed account of the four crises of 1818–19, 1825, 1837–39, and 1847.‡ As his observations cover a longer period, Rodbertus is to a certain extent able to gain a deeper insight into the essential character of crises than his predecessors. Thus in 1850 he already establishes the periodicity of crises, noting that these recur at ever shorter intervals and with an ever-increasing intensity:
From each occurrence to the next, these crises have become more terrible in proportion with the increase in wealth, engulfing an ever-greater number of victims. The crisis of 1818–19 already caused panic in commerce and inspired misgivings in economic science, and yet it was insignificant when compared to the crisis of 1825–26. The latter crisis wiped out the U.K.’s capital assets to such an extent that the most famous economists doubted whether a complete recovery could ever be made. Yet it was eclipsed by the crisis of 1836–37. The crises of 1839–40 and 1846–47 wrought even greater devastation than previous ones … According to recent experience, however, the crises recur at ever-shorter intervals. There was a lapse of eighteen years between the first and the third crisis, of fourteen years between the second and the fourth, and of only twelve years between the third and the fifth. Already the signs are multiplying that a new disaster is imminent, though no doubt the events of 1848 have delayed its outbreak.192
Rodbertus then makes the observation that crises are regularly heralded by an extraordinary surge in production and great technological advances in industry: “Every one of [the crises] followed upon a period of outstanding industrial prosperity.”193
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*This legislation, known as the Peel Bank Act after its author, Robert Peel, was passed by the English Parliament between 1844 and 1845. The banks were subsequently divided into two independent departments, and legal limitations on their payment and credit operations were imposed, which then had to be temporarily suspended during economic crises with major currency shortages, in order to increase the quantity of banknotes that were not backed by gold.
Drawing on the history of crises, Rodbertus shows that “they occur only after a considerable increase of productivity.”194 He opposes the vulgar point of view that reduces crises to monetary and credit disturbances, and criticizes [Robert] Peel’s completely misguided currency legislation;* he argues these points in great detail in his essay On Commercial Crises and the Mortgage Problem, published in 1858. There he makes the following statement, among others:
We would therefore deceive ourselves if we were to regard commercial crises merely as crises of the monetary, banking, or credit system. This is merely their external manifestation when they first emerge.195
Also striking is Rodbertus’s keen appreciation of the significance of external trade in connection with the problem of crises. Like Sismondi, he registers the fact that capitalist production necessitates expansion, but also notes that this only means that the periodic crises must increase in scale.
“Foreign trade,” he says, “is related to commercial stagnation only as charity is related to poverty. Ultimately, they only enhance one another.”196 In the above-cited essay, On Commercial Crises and the Mortgage Problem, he elucidates further:
The only possible means of warding off further outbreaks of crises is the double-edged one of expanding foreign markets. The violent pursuit of such expansion is largely no more than a morbid irritation caused by a sickly organ. Since one factor on the home market, productivity, is ever increasing, and the other factor, purchasing power, remains constant for the overwhelming majority of the population, commerce must turn to the foreign market in an endeavor to boost purchasing power so that it is similarly unlimited.197
In this way, the irritation may be soothed and a new outbreak of the calamity at least delayed. Thus every foreign market opened defers the social problem in a like manner. Colonization of undeveloped countries has similar effects: Europe cultivates a market for itself where there was none previously. Yet this remedy would essentially do no more than palliate the affliction. As soon as the new markets are saturated, the problem will revert to its former state—a conflict between the two factors: limited purchasing power versus unlimited productivity. A new outbreak of crisis is warded off by the smaller-scale market only to reappear, in even greater dimensions and even more serious contingencies, on the larger-scale one. And since the earth is finite and the acquisition of new markets must eventually come to an end, the time will come when the question can no longer be simply deferred. Sooner or later, a definitive solution will have to be found.198
Rodbertus also identified the anarchy of capitalist private production as a crisis-inducing factor, although he considered it to be one cause among others, the source of a particular subcategory of crises, rather than seeing it as the actual cause of crises in general. Thus he makes the following comments on the outbreak of crisis in von Kirchmann’s imaginary locality:
I do not wish to claim that market stagnation of this kind does not occur in reality. Today’s market is large, there are many needs to be met and many branches of production, productivity is considerable and the data on demand are obscure and misleading. Individual entrepreneurs have no knowledge of the scale of production of others, and so it may easily happen that they will overestimate the demand for a certain commodity and overstock the market.
Rodbertus also states unequivocally that the only remedy for these crises is a planned economy, a “complete reversal” of contemporary property relations, and the unification of all means of production “in the hands of a single social authority.” Admittedly, he once again hastens to add—to set troubled minds at rest—that it remains to be seen whether such a scenario is possible, “yet this would be the only possible way to prevent market stagnation of this kind.” Thus he emphasizes here that he considers the anarchy of the present mode of production to be responsible only for a specific, partial form in which crises manifest themselves.
Rodbertus scornfully dismisses Say’s and Ricardo’s axiom of the natural equilibrium between consumption and production; like Sismondi, he places emphasis upon the purchasing power of society, and for him, as for Sismondi, this depends on the distribution of revenue. On the other hand, he in no way accepts Sismondi’s theory of crisis, especially the way that it is deduced, and indeed he sharply opposes it. More concretely, whereas Sismondi sees the root of all evil in the unrestrained expansion of production without any regard for the restrictions posed by revenue, and accordingly advocates the curbing of production, Rodbertus upholds the opposite—i.e. the most vigorous and unconfined expansion of production, of wealth, and of the productive forces. He argues that society has a need for an untrammeled increase in its wealth. Whoever condemns the wealth of society, also condemns the progress made using its power, and condemns this, its virtue; whoever throws obstacles in the way of the increase of this wealth, also obstructs the progress associated with it. Each increase in the knowledge, desires, and capacities of the members of society is linked to an increase in wealth.199 From this standpoint, Rodbertus was a keen advocate of the system of note issuing banks, which he considered to be the indispensable foundation for a rapid and unrestricted expansion of new company start-ups. Both his essay of 1858 on the mortgage problem and his treatise of 1845 on the Prussian currency crisis are devoted to demonstrating this point. He also polemicizes directly against the Sismondian type of warnings, approaching the matter in his usual ethical-utopian fashion:
“Entrepreneurs,” he proclaims, “are essentially civil servants of the economy. By the institution of property, they are indissolubly entrusted with the nation’s means of production. If they put these into operation, such that production occurs at full power, they do but their duty, since capital—let me repeat—exists entirely for the sake of production.” Now, however, he comes to the point:
Or would you have them (the entrepreneurs) turn acute afflictions into chronic ones by operating continuously and from the first at less power than they have at their disposal; are they to pay for a less severe form of the evil with its permanent duration? Even if anyone were foolish enough to give them this advice, they would not be able to follow it. How would the entrepreneurs of the world recognize this pathological limit of the market? Each of them engages in production without any knowledge of the others, in the most distant corners of the earth for a market hundreds of miles away, and produce with such vast forces that a month’s production already exceeds this limit. How could production—so fragmented and yet so powerful—conceivably gain an overview in advance of what will be required? Where, for instance, are the institutions, the agencies with up-to-date statistics and the like to help them in this task? What is worse, the only sensor indicating the position of the market is price, its rise and fall, but this is not like a barometer that predicts the temperature of the market, but more like a thermometer that merely measures it. If the price falls, the limit has been passed already, and the calamity is already at hand.200
This polemic, which was undoubtedly directed at Sismondi, shows that there were very substantial differences between the two of them. Thus, when Engels states in Anti-Dühring that the explanation of crises from underconsumption originates with Sismondi and is then borrowed from the latter by Rodbertus,* this is not strictly accurate. The only thing that Rodbertus and Sismondi have in common is their opposition to the classical school and to the explanation of crises in general from the distribution of revenue. Even here, however, Rodbertus formulates the problem in his own idiosyncratic manner. He argues that overproduction is not caused by the low level of the revenue of the working masses, nor by the capitalists’ restricted capacity for consumption, as it is for Sismondi; rather it is simply entailed by the fact that workers’ revenue represents an ever decreasing share of the value-product as productivity increases. Rodbertus explicitly demonstrates to his opponent that market stagnation does not arise from the low level in absolute terms of the share of the working classes: “Just imagine,” he instructs von Kirchmann,
This share to be so small as to ensure only a bare subsistence for those who are entitled to it. If this share is held constant as a proportion of the national product, it will constitute a constant “vessel for value” that can absorb ever-increasing contents, resulting in an ever-increasing prosperity of the working classes as well … And now imagine on the contrary as large a share for the working classes as you please, and, under the assumption of increasing productivity, let it become an ever-smaller fraction of the national product. Then, provided it is not reduced to the present low levels, this share will still protect the workers from undue privations since the amount of products it represents will still be considerably greater than it is today. Once this share begins to decline, however, there will be spreading discontent, culminating in a commercial crisis, simply due to the fact that the capitalists, without any blame on their part, will have determined the scale of production according to the given magnitude of these shares.
Thus the “declining wage share” is the actual cause of crises, and the only effective remedy against them is legislation determining a fixed and irrevocable share of the national product for the workers. It is necessary to adjust to the mindset behind this bizarre notion in order to do justice to the terms of its economic content.
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*See Frederick Engels, Herr Eugen Dühring’s Revolution in Science, in Marx and Engels Collected Works, Vol. 25 (New York: International Publishers, 1987), p. 273.