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Marxian Economics 



A Popular Introduction to the Three Volumes 
of Marx's "Capital" 



ERNEST UNTERMANN 



* 



CHICAGO 
CHARLES H. KERR ft COMPANY 



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Copyright igaj 

B; CHARLES H. KSRK ft COHPAHT 



JOHN F. H1GGINS 



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581 SST- OlJ 



CONTENTS. 



r FOREWORD 

L WHAT IS CAPITAL? 

_|L LABOR AND CAPITAL 

III. ANIMAL AND HUMAN SOCIETIES 

Pfr BIOLOGICAL AND ECONOMIC DIVISION OP 

LABOR 

V. SOCIETIES WITHOUT CAPITAL 

VL THE RISE OP COMMERCE 

VII. COMMODITIES AND MONET 

VIII. THE DEVELOPMENT OP MERCHANTS' CAPITAL 

DC MERCHANTS' CAPITAL IN PHENICIA AND 

GREECE. 

X. MERCHANTS' CAPITAL IN ROME 

XI. MERCHANTS' CAPITAL UNDER FEUDALISM... 
XII. THE RISE OF INDUSTRIAL CAPITALISM 

XIII. FROM ANCIENT TO CLASSIC ECONOMICS 

xrv. THE MARXIAN THEORY OF VALUE 

XV, THE MARXIAN THEORY OF SURPLUS VALUE. . 
XVL MERCHANTS" CAPITAL UNDER CAPITALISM.... 

XVII. GROUND RENT 

XVIH. PROFIT, INTEREST AND RENT UNDER 

CAPITALIST COMPETITION 

XIX. THE DRIFT OF INDUSTRIAL CAPITALISM 

XX. CLOSING REMARKS 



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MARXIAN ECONOMICS 

FOREWORD 

Since October, 1894, the complete economic theories 
of Karl Marx, as laid down by himself and his fellow 
worker Frederick Engels, in the three volumes of 
"CAPITAL," have been before the teachers and stu- 
dents of all classes. 

By that time, the contents of the first and second 
volumes of their work had been assimilated by hundreds 
of thousands. Especially volume I, which deals specific- 
ally with the relation between wage workers and capi- 
talists, had long become "The Bible of the Working 
Class," at least of the class-conscious portion of this 
class. Volume I has now been translated into all the 
principal languages, not only of Europe, but of the 
world, and has become the standard textbook of econom- 
ics for the vast majority of all revolutionary organiza- 
tions of the proletariat. 

This fact speaks convincingly for the soundness of 
the essential claims made by the Marxian theories. Nev- 
ertheless, when volume III appeared in Europe, the 
spokesmen of official political economy made the same 
blundering attempts to refute it, which they had made 
with so little success in the case of volumes I and II. 
The only tangible result of these attacks has been to 



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S MARXIAN ECONOMICS 

bring the Marxian theories to the attention of thou- 
sands, who would not have been reached by the prop- 
agandists of the working class. 

The best policy of the ruling classes in dealing with 
revolutionary literature has always been to kill it by 
silence. As soon as this policy is no longer practicable, 
every attempt to discredit the revolutionary theories by 
criticism becomes a means of making propaganda for 
them among circles that would otherwise remain in ig- 
norance of them. 

The Marxian theories derive their vitality out of the 
life of the working class itself. All the essential points 
of these theories are vindicated day by day through the 
experiences which the working class makes in its devel- 
opment under capitalist rule. 

It is evident, that theories so intimately reflecting the 
vital movements of the most essential class in modern 
society must spread in proportion as this class is pushed 
forward by historical development into the position which 
these theories foreshadow. A critique of its theories 
cannot stop such a movement any more than a critique 
of the Copemican theories could stop the Earth from 
revolving around the Sun. 

But the professors of the ruling class have never 
been able to distinguish between a scheme and a histor- 
ical process. They still flatter themselves that their 
learned proof for the unsoundness of Marxian econom- 
ics will dissolve the socialist parties. And although every 
new election deepens the grave of their hopes, they are 
still busy rescuing from the pernicious influence of Marx- 
ian ideas a social system, which lives only by under- 
mining its own foundation. 

The appearance of volume III of Marx's "CAPI- 

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FOREWORD 7 

TAL" seems to have been the signal for a concerted 
action on the part of all capitalist universities against 
the economics of Socialism. Even the United States 
have received the blessings of this awakening civilization 
in the shape of translations of the works of B6'hm-Ba- 
werk, Sombart, Schaffle, Le Bon, and others. In this way, 
the critiques of Marx's complete work have reached 
America before the work itself has been presented to 
American readers. For the great majority of Amer- 
ican professors and students are not familiar with the 
German language and have no opportunity to study the 
work, which some of those translations criticise so 
trenchantly. 

The second volume of "CAPITAL" was not published 
in the English language until July, 1907, and the third 
volume, although nearly completed in manuscript, will 
not be ready for publication before 1908. 

It is very thoughtful of those learned critics of Marx 
to acquaint their pupils at least with criticisms of his 
theories, so long as these theories themselves cannot be 
studied m the original or in epitomes. To any one fam- 
iliar with the "freedom of science" in universities con- 
trolled by the pocketbooks of American millionaires it is 
quite plain, that this speedy introduction of works crit- 
icising (and above all misrepresenting) the Marxian 
theories was dictated by the most disinterested motives. 

No doubt great masses of American teachers and 
students, who read these translated critiques, have be- 
come duly impressed with the importance of a work, 
which requires an acquaintance with its critics even be- 
fore the author himself is introduced. 

Since so high an authority as president Roosevelt has 
emphatically declared that every one is assured a "square 



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8 MARXIAN ECONOMICS 

deal" in this country, I have been haunted night and 
day by visions of American professors and students pro- 
testing strenuously against an unfair policy, which com- 
pels them to read a critique of a work without enabling 
them to judge of the merits of this work for themselves. 
It looks too much like paternalism of the patriarchal 
kind. 

In order to put an end to this unworthy and embaras- 
sing situation, I offer to American readers this popular 
synopsis of the complete Marxian economics, so that 
every one who is asked to read a critique of these the- 
ories may have an opportunity to see for himself what 
they really stand for. 

Of course, I cannot deny that my little volume will 
very likely be read by a few thousand working people. 
Indeed, I think it will be read by more working people 
than professors and university students. But why should 
that give pause to any one, so long as the belief pre- 
vails, that capitalist professors and students can stop the 
growth of proletarian class-consciousness by distorting 
Marxian theories? Armed with the power, which a dil- 
igent study of those critiques and of my little work will 
confer upon them, these professors and university stu- 
dents can go out among the working class and, by their 
superior intelligence, quickly undo all the harm caused 
by Marxian theories. I hope they will try it 

The third volume of "CAPITAL" has been a verit- 
able bugaboo for the economists of the ruling classes. 
When years passed without its appearance, it was hinted 
that this third volume did not exist at all but was only 
a subterfuge of Marx, by which he concealed his lack of 
scientific argument. Then, when it really did appear, it 
was claimed that it completely disavowed the theories 



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laid down in volumes I and II. And when some pupils 
of Marx demonstrated conclusively, that the Marxian 
theory of value and surplus-value was carried consist- 
ently through all three volumes, the old claim was re- 
vived, that these theories themselves were unsound. 
This last subterfuge derived additional strength from 
Eduard Bernstein's critique of Marxian theories. His 
critique, professedly undertaken in the interest and in 
defense of the Marxian theories, with a view to eliminat- 
ing some alleged inconsistencies from them, served nev- 
ertheless as a weapon against Marxism, contrary to the 
intentions of Bernstein, Still, even so, all the profes- 
sional efforts have redounded to the benefit of the prole- 
tarian revolution, and will do so in the future. 

Marx followed a consistent plan in his three volumes. 
But this is not apparent on the surface. What makes 
the study of the original so tedious for the untrained 
student is this: Marx develops his theories step by step 
from the simplest cell of capitalist economy, a com- 
modity, to the most complicated practical operations of 
capitalists under actual competition. We see the Marx- 
ian theories of value and surplus-value first in the mak- 
ing under assumed ideal conditions. Link by link we 
see them rising before our eyes. Occasionally we see 
some of these links compared with theories of some 
ancient or medieval or early capitalist economists. Then 
again the analysis pauses, in order to test or emphasize 
some point by illustrations from history. After that the 
analysis is spun further along to some other point, and 
so forth with variations, The illness and premature death 
of the author left the work in an unfinished condition. 
His comrade Engels completed it from notes left by the 
deceased. These circumstances give to the whole work 



10 MARXIAN ECONOMICS 

the air of crude and unpolished roughness, so long as 
only tts surface is touched. And more than that not one 
of the Marx critics has ever touched. 

But on closer scrutiny the logical . consistency and 
organic interrelation of the three volumes becomes palp- 
able. Volume I lays bare the secret mechanism of the 
sphere of production. Volume II discloses the main 
springs in the sphere of circulation. Volume III finally 
applies the results of the two preceding volumes to typ- 
ical conditions of capitalist industry and commerce, 
showing the interrelation between production and circu- 
lation. 

It is true that Marx modifies his theories in volume 
III. But he does not abandon them. And he modifies 
them only to the extent that he carries his argument 
from the assumed ideal conditions of volumes I and II 
nearer and nearer to the real conditions of capitalist in- 
dustry and commerce. In the same way, a scientist would 
modify his argument when analysing the law of gravity 
and passing from the ideal conditions of a vacum pump 
to the complicated conditions in the open air, under 
which the law of gravity operates on the surface of 
the earth. 

This analogy is often waved aside by our opponents 
with the assertion that the scientist experimenting on 
gravity does not abstract from any essential conditions 
of gravitation, while Marx, in abstracting from the act- 
ual conditions of capitalist production and circulation, 
eliminates all the essential elements which affect the 
value of commodities. Those who argue in this way ab- 
stract from all the essential elements of Marx's work 
and operate with an unessential abstraction of their own, 
which they label Marx's theory of value. 



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FOREWORD 11 

The 6rst volume of "CAPITAL" has been popular- 
ized by various writers. The most faithful epitome of 
that volume available in English is a translation of Ga- 
briel DeviUe's "THE PEOPLE'S MARX." This epi- 
tome adheres strictly to the arrangement of volume I 
and briefly summarizes chapter after chapter. The best 
popularization of volume I in the entire socialist litera- 
ture is, in my opinion, Karl Kautsky's little volume on 
"KARL MARX'S OEKONOMISCHE LEHREN," in 
which he utilized Deville's epitome and some earlier 
writings of Marx. Kautsky's work, however, is not yet 
translated into English. 

None of the existing popularizations of Marxian 
economics ts a presentation of the complete theories of 
all three volumes. So far as volume II and III have 
received any attention in subsequent editions of popular- 
izations of volume I, it has been done in a disconnected 
way. No popularization has so far presented an organ- 
ically complete outline of Marx's theories. Perhaps such 
an outline will yet be written by the man best equipped 
to do so, Karl Kautsky. There is decidedly a demand 
for such a popularization. The existing popularizations 
of volume I have certainly filled a useful place in our 
literature. But they do not appeal equally to all classes 
of students, because they dwell almost exclusively upon 
the purely theoretical side of the question, and leave the 
historical side largely in the background. 

It is the historical side, which appeals most strongly 
to a large class of students. For this reason I have not 
attempted in this little volume to write a summary of 
the Marxian analyses in the theoretical order followed 
by Marx. I have rather endeavored to develop the entire 
subject historically. This enables me to enliven the sub- 

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19 MARXIAN ECONOMICS 

ject and to appeal not only to the critical intellect, but 
also to the emotional side of the reader's reason. Yet 
this emotional style does not prevent me from adhering 
strictly to facts. 

I follow no subjective standard of sentimental feel- 
ing, nor do I judge historical events and personalities 
by any such standard. Neither do I judge of events and 
personalities by the light of a supposed eternal standard 
of supernatural right and justice. My estimate of the 
ethical value of things or processes is rather based upon 
a genetic and historical foundation. Just as in the evo- 
lution of animals and plants we have built up a genetic 
table of organic development, which enables us to com- 
pare the various forms, qualities, species, etc., and tell 
at a glance, whether any one of them represents a for- 
ward or backward step in the general line of organic 
advance, in other words, whether any one form is evolu- 
tionary or reactionary from the point of view of the en- 
tire scale, so in the history of mankind I use the method 
of dialectic monism and historical materialism to com- 
pare the ideas, or customs, laws, etc., of different epochs 
and to ascertain, to what extent they represent an evo- 
lution or a reaction in the general advance of mankind. 

The impression prevails in many circles, that the in- 
ductive and objective method of investigation, which is 
characteristic of historical materialism, forbids a sym- 
pathetic treatment of history. For my part, I do not see 
the logic of this assumption. It seems to me, rather, that 
at the bottom of it lies a confusion of ideas, .Certainly 
there is plenty of genuine feeling in all of Marx's and 
Engels' work, and it does not militate in the least against 
the soundness of their analyses and conclusions. To in- 
ject human feeling into a scientific work is not the same 

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FOREWORD 13 

as judging historical events and individuals by a senti- 
mental standard of subjective feeling. The individualist 
historians of the bourgeoisie have brought discredit upon 
human feeling by degrading it to a sniveling standard of 
sentimentalism. On the other hand, feeling based upon 
an inductively gained and objectively applied foundation 
cannot be sentimental, nor can it cloud the judgment, 
It can only add the force of enthusiasm or consciously 
aroused courage to the inductively acquired understand- 
ing. 

What Karl Kautsky and Eduard Bernstein wrote in 
their introduction to "Die Vorlaufer des Neueren So- 
zialismus" about the attitude of the modern socialist to- 
ward the precursors of the modern revolutionary move- 
ment, applies in my opinion to the attitude of the modem 
socialist toward all rebels of the laboring classes of all 
ages : "A deep sympathy must unite him with those, who 
wanted to accomplish similar things, and aspired to the 
same goal, as he. The fact that they aimed at socialist 
ideals at a time, when society did not yet develop out of 
itself the means to realize them, that they aimed at the 
impossible and failed, must rather strengthen his sym- 
pathies for them, for these sympathies are naturally on 
the side of all oppressed and downtrodden. And if he 
must see in addition, that the vanquished are insulted, 
maligned, and befouled, not only by die victors, but also 
by the partisan historians, to this day, then his ire and 
hatred against the slanderers will fan the flames of his 
sympathy for the slandered so much higher. But how- 
ever strong this may he and express itself, it does not 
stand in the way of a search for truth ; on the contrary, 
his great sympathy for those who went before him is 
for the modern socialist an additional reason to devote 



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14 MARXIAN ECONOMICS 

himself to a deep study of them ; and it is clear, that it 
will be easier for a socialist than for a bourgeois writer 
to grasp and understand the emotional and thought life 
of previous socialists." 

When we realize, why the laboring classes of the 
past attempted the impossible and failed, and when out 
of sympathy with them we think and speak as they them- 
selves thought and spoke, we need neither forget the 
peculiarities of their historical conditions nor overlook 
the wide chasm which separates our feelings and thoughts 
from theirs. We can then estimate the historical value 
of things, not on the impulse of subjective, but of class 
feeling, not by the light of sentimentalism, but of a nat- 
urally and historically developed situation, not in the 
blind passion, which fails to discriminate between the 
historically necessary and the subjectively possible, but 
with a full realization of both historical and subjective 
necessities and possibilities. The science of Socialism 
does not stand emotionless above but full of life within 
the class struggles, draws its vigor and power from the 
living process, and shares all its emotions with a full 
realization of their absolute and relative necessity. And 
for this reason my little work reflects not merely dry 
facts, but also the emotional side, which is as much a 
fact as all other inductively perceived facts of life, and 
which we interpret from the point of view of inductive 
science. 

The historical line of thought accounts for the pres- 
ence of several chapters and occasional passages, which 
are not ordinarily found in works on economics. These 
chapters and passages are nevertheless a dialectic neces- 
sity for one, who wishes to understand the growth of 
human societies out of animal beginnings and the inter- 



FOREWORD 15 

action of economic processes with thought processes. 
They touch upon points, which have been the subjects 
of much discussion among advanced thinkers, and which 
will occupy the center of scientific research for many 
years to come. 

The form of presentation is my own. The economic 
theories belong to Marx. The method applied is that of 
historical materialism, supplemented in essential points 
by the dialectic monism of Josef Dietzgen. 

In short, this little volume presents only the results 
of Marxian analyses. It does not epitomize these analyses 
themselves. Whoever wishes to find detailed proofs for 
the different positions taken here, must turn to the orig- 
inal work of Marx, 



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WHAT IS CAPITAL? 

Open any textbook on economics current in schools 
under the present system, and you will learn from it that 
the capital of a primitive savage consisted of a sharpened 
stick, a canoe, a spear, a bow and arrows, etc. Such a 
savage, we are told, became a capitalist by thrift, enter- 
prise, business ability, and other so-called virtues of the 
capitalist world. The others, who did not become capi- 
talists, were a shiftless lot, and their offspring have re- 
mained shiftless to this very day, and will still be shift- 
less when Gabriel's trumpet will call their souls to heaven 
— or to the other place. 

Take, for instance, the conception of capital in vogue 
among the followers of Henry George, who is acclaimed 
by many as a champion of the working class. 

A savage finds a fruit tree in full bearing. If he eats 
all the fruit, he merely satisfies his present needs. He 
is just a common savage. But if he eats only a part of 
the fruit, and, thinking of his future desires, plants an- 
other part of it, or exchanges it with other savages for 
other desirable things, he is a capitalist There you have 



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WHAT IS CAPITAL? 17 

Henry George's idea of capital and capitalists in a nut- 
shell* 

Or, take W. Roscher, a German economist, who at 
one time was considered a great authority on this sub- 
ject by the official world of Europe. His capitalist, like 
Henry Georges' does not even need as much "capital" 
as a sharpened stick. 

"Imagine a fishing people without private property in 
land and without capital, who live naked in caves and 
subsist on sea fish, which, being left behind by the reced- 
ing tide in pools, are caught with the bare hands. Let 
all laborers be equal here, and let each one catch 
three fishes per day and eat them. Now some pru- 
dent man reduces his consumption to two fishes per day 
for ioo days, and then utilizes the stored-up supply of 
ioo fishes to devote his whole labor-power for 50 days 
to the making of a boat and fishing net. By the help of 
this capital he catches from now on 30 fishes per day."t 

Has Roscher ever caught any fish and stored them in 
a cave for 100 days, or 150 days, in a climate where peo- 
ple go naked? Any American country boy can tell him 
that this "capital" would be a putrid mass in less than 
a week. Has Roscher ever subsisted on two fresh fishes 
per day? Has he ever tried to build a boat with his bare 
fists and to subsist on two rotten fishes, per day while 
building it? 

There is certainly one striking resemblance between 
this primitive "capitalist" and some modern capitalists. 
Roscher's savage capitalist makes capital out of rotten 
fish. Some modem capitalists make capital out of rotten 

•) The Science of Political Economy. By Henry George. 
New York, Doubleday & McClura. Co.. 189J, p. 294--S5. 

t) W. Boacher. QrunaMUBa der National)) konomle. Stutt- 
gart. 1874. I, p. 12S. 



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18 MARXIAN ECONOMICS 

beef, shoddy drygoods, poisoned groceries, etc In this 
respect Roscher has indeed shown a deep insight into 
the character of capitalists. But there is at least one re- 
deeming feature about Roscher's capitalist — he eats his 
rotten fish himself and does his own work into the bar- 
gain. 

Modern capitalists are not so crude. Civilization has 
taught them, that a truly refined capitalist does not 
consume his rotten goods, but labels them with fancy 
names and sells them to unsuspecting people at high 
prices. Neither does a civilized capitalist do his own 
work. He has surrounded himself with the halo of a 
representative of "The Almighty" and persuaded the 
working people that it is their mission to produce pro- 
fits for their superiors. 

Roscher, Henry George, and other vulgar econo- 
mists, as Karl Marx dubs them, look upon a primitive 
savage with the eyes of a nineteenth century Anglo- 
Saxon. They see parallels which never existed. And 
they very conveniently overlook distinctions, which are 
due to different epochs, different social conditions, dif- 
ferent stages of human development. Above all, they 
have not one word of explanation that would show to 
what different social conditions are due. 

To them, capitalists have existed from the days of 
the famous expulsion of Adam and Eve from paradise. 
And no matter what changes in tools, machinery, meth- 
ods of production may occur, there will be capitalists till 
the Golden Age shall establish the Brotherhood of Men. 

Taking them at their own word, how do George, 
Roscher, and others like them, explain the change from 
the self-supporting savage "capitalist" to the non-pro- 
ducing and parasitical captain of industry? 



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WHAT IS CAPITAL? ' •*?. . 1$ . 

Thrift, business ability, etc., etc The ridiculous rig- 
marole of business virtues explains it all. A man be- 
comes a capitalist because he wants to be one, and the 
others down to the billionth generation are poor and 
dependent through their own fault. And if you ask, what 
gives to one the will to be thrifty and enterprizing and 
to the other to be thriftless and lazy, you get the clinch- 
ing answer that "The Almighty" made them so. 

But then it isn't their own fault, is it? Well, er-er-ah, 
you see, The Almighty — 

Yes, I see. And I want to ask a few more questions. 

A savage finds a fruit tree. What kind of a savage, 
and what kind of a fruit tree? Does the tree belong to 
him, just because he finds it? Do the other savages 
respect his claim to the sole possession of that tree? And 
if they do, what have they to offer in exchange for his 
fruit? When and how did they conceive the idea of ex- 
change? On what basis do they exchange? 

The answers which you will get to these questions 
will end in some more er-er-ahs. 

Roscher's savage lives on rotten fish. He is naked. 
His only tools are his bare hands. 

Suddenly an inspiration comes to him, evidently from 
"The Almighty." He sees before his mind's eye a boat 
and a fishing net. He has never heard of these things 
before nor had an idea how they look. Now he suddenly 
resolves to lay aside one fish per day for loo days, and 
then to build a boat and knit a fishing net 

This is a queer savage. A naked savage with no 
other tools but his bare fists and living on raw fish would 
never think of storing any of them for 100 days. In the 
first place, he would know from experience that they 
won't keep so long. Here Roscher credits him with too 



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20 MARXIAN ECONOMICS 

little experience. In the second place, such a savage can- 
not count as far as ioo. Here Roscher credits him with 
too much experience. 

Furthermore, a savage living in such a low stage 
knows nothing of boats or fishing nets. Here Roscher 
credits him with a prophetic intelligence which reaches 
far beyond the horizon of this stage. 

Before a savage of this stage can conceive the idea 
of a boat, he must have at least fire and a sharp stone ax. 
But if he had these, he would not be obliged to eat his 
fish raw or to live naked in caves. 

Neither does a savage of this stage jump over night 
into a boat-and-fish-net stage. Boats and fishing nets are 
very complicated inventions. Before savages arrive at 
their conception, thousands of years of savagery have 
passed away. And if we attempt to find out, by what 
means the higher stages are reached, we must leave the 
sphere of speculative nursery tales and get down to 
searching historical study. 

The first thing we learn in this study is not only to 
see superficial similarities, or general resemblances, but 
also to make relative distinctions. We learn above all 
to discard the self-interested capitalist point of view, or 
the inherited and traditional prejudices, which block the 
way to an unbiased investigation of social problems. We 
no longer set up speculative theories before we have any 
tangible materials. We get the materials first, and out 
of the actual facts found by direct touch we make our 
theories. We fit our theories to actual things, and do not 
try to squeeze actual things into the strait-jacket of pre- 
conceived theories. 

We use the so-called inductive method of research. 
We proceed from concrete facts to abstract theories. 



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WHAT IS CAPITAL? 81 

Then we combine things dialeetkally. This means that 
we look upon the world and society as things in the 
making, not as fixed and rigid. We trace out the inter- 
relations of actual things side by side and successively 
in space and time, note their general similarities and 
typical differences, and draw general conclusions, or 
theories, from these interrelations. Then we apply these 
theories in their turn to the actual things, and in this 
way we test them continually as we would a multiplica- 
tion by the well-known division test 

The typical mark of dialectic thought is that it re- 
flects things in the making as a process of struggle for 
survival, in which the better adapted prevail over the less 
adapted and carry them forward to a higher form by 
overcoming and assimilating them. 

It is from this point of view that we look upon capi- 
tal and capitalist production. 

We want to know the typical marks of capital. The 
official economists give us vague answers that explain 
nothing, but rather require more explanations. These 
men simply repeat the current capitalist notions and 
build economic theories out of them. 

The one tells us that any tool is capital. In this way 
we learn that a savage of the Tertiary age, who cracked 
nuts with a stone, was a capitalist. But why stop at a 
savage? Monkeys also use stones for cracking nuts. In 
fact, mankind inherited the habit from monkeys. Mon- 
keys are therefore also capitalists. This sort of econom- 
ics is at best only monkey economics. 

Another tells us that capital is stored-up labor. In 
that case the bees and ants are also capitalists. Still an- 
other tells us that capital is the fruit of abstinence. Then 
we get down to the rotten fish of Roscher's capitalist. 



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23 MARXIAN ECONOMICS 

Others, again, teach that capital is wealth used to pro- 
duce more wealth. By wealth they mean any useful 
article, and by producing wealth they mean exchanging 
it for more than it is worth or for something that is 
worth more. This brings us to the cunning savage, 
who exchanges his fruit with other savages for things 
that are "worth more" to him, and this explanation ends 
in the story of that famous village, whose inhabitants 
became capitalists by cheating one another at bargains. 

Finally we meet the smartest of all economists, who 
knows that he is selling his brain, and who brings capital 
right home to us by demonstrating that brains, a good 
voice, a fine face, a good figure, are capital. This leads 
to the prostitute who uses her sex as capital and to the 
politician whose capital is his "honor." 

Clearly such explanations are only make-shifts dic- 
tated by embarassment. They explain neither the mean- 
ing of a tool, nor of a hoard, nor of wealth, nor of ex- 
change, nor of capital. They ignore, belittle, or under- 
value the main things, namely labor and the different 
social conditions under which it is applied. They are 
elusive and intangible abstractions, which impress the 
despairing student of economics with the settled convic- 
tion that economics is indeed "a dismal science." 

After reading his way through one hundred thou- 
sand pages of such economics, the student will still ex- 
claim doubtfully: "What is capital?" 



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CHAPTER -II. 

LABOR AND CAPITAL. 

"In the beginning was Work. . . ... . All things were 

made by it; and without it was not anything made that 
was made. In it was life ; and the life was the light of 
men." 

This is the gospel according to John. 

Oh, yes, I know that it doesn't read that way now. 
But I also know that John was a working man. And the 
gentlemen, who now claim the exclusive privilege of in- 
terpreting the scripture of John and other ancient work- 
ing men, whose leader was killed because he differed 
about the interpretation of some still more ancient scrip- 
tures of some still more ancient working men with the 
gentlemen of his time, have never been able to give me 
any satisfactory reason, why a modem working man like 
myself should not follow the good example of his ancient 
fellow workers and differ with the modern gentlemen 
interpreters. Until further notice I shall assume that a 
working man is more apt to understand another work- 
ing man, than the gentlemen are, especially when we 
both differ with the gentlemen interpreters about the 
meaning of the scriptures, because we differ with them 
about a question of privileges. I think I am all the more 



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34 MARXIAN ECONOMICS 

justified in taking this position, because the gentlemen 
interpreters have always shown a very remarkable ability 
for distorting the clerr statements of working people 
into obscure lies. And we have their own word for it, 
that John and his fellow workers noticed the same pecu- 
liarity in the gentlemen interpreters of their time. 

I have already indicated, that the gentlemen inter- 
preters of our time, here in the United States, have been 
suspiciously quick in distorting the clear statements of 
Marx after the illustrious model of the gentlemen inter- 
preters of Europe. They have been in an awful hurry 
to get distorted versions of Marxian theories before the 
American people. But not a finger have they raised to 
get Marx's own version of his theories into the hands of 
American readers, although they are continually prating 
about a "square deal." They have funds enough, but not 
one cent to spare for the publication of any work by 
Marx. On the contrary, they organize societies and spend 
millions of dollars for the purpose of giving the work- 
ing people the "double cross" instead of a "square deal." 
They have plenty of money to publish scab papers like 
"The Open Shop." They can spend millions for a Na- 
tional Economic League, a Corporations' Auxiliary Com- 
pany, a Citizen's Industrial Alliance, a National Civic 
Federation, all of which have but one purpose, the de- 
struction or emasculation of bona fide labor organiza- 
tions and the enslavement of the working class. 

Can you see through a brick wall, when there is a 
hole in it? There is a big hole in the reasoning of the 
gentlemen interpreters, a deep chasm between their pro- 
fessed love for you and their battle cry of the "Open 
Shop," a yawning abyss between their solicitude for your 
education and their frenzied efforts to prevent you from 

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LABOR AND CAPITAL 25 

learning the truth about the actual relations between 
your labor and their wealth. 

Ancient working people like John rose up against the 
idea, imported from priest-ruled Egypt, that work was 
the wage of sin. They declared that work was life, not 
death, a blessing, not a curse. They demanded that work 
should be shared by all, cot imposed as a divine curse 
upon the many by a few privileged, who claimed exemp- 
tion from it by the grace of divine will.* 

The modern working people rise up against the idea, 
inherited from ancient and medieval rulers, that work is 
an inferior and degrading activity, that another thing, 
called capital, is the superior of labor, that the producing 
class should be compelled to yield the largest and best 
part of their product to the idle owners of the thing 
called capital. They demand that work shall be shared 
by all, and that the thing called capital shall cease to 
exist 

If I wanted to use the confusing jargon of the gen- 
tlemen interpreters, I might feel tempted to say, that 
labor is the only righteous form of capital. 

But I won't. This is too beautifully mystic. It might 
be interpreted into the very opposite of what I mean. 
It isn't safe for a working man, who is struggling to get 
out of the ensnaring obscurity of traditional thought, to 
use such obscuring language. 

It would be the easiest thing in the world for one of 
those smart gentlemen interpreters, whose specialty it 



*) The above passage Is at variance with the interpretation, 
which some of the leading theoretical writers of scientific 
Socialism give of the character of the early Christian move- 
ment. I differ from them, not because I am careless in my 
application of historical materialism, or because I do not ap- 
preciate the typical differences of claHs movements under dif- 
ferent modes of production but because 1 have made some in- 
dependent atudles in thla field, which ralae doubts In my mind 
about the soundness of some claims of my comrades. 



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40 MARXIAN ECONOMICS 

is to twist snares for untrained minds, to distort this 
unity of labor-capital into a new sling for the unsuspect- 
ing- 

Has not the most ancient civilization in the world, 
the East Indian, been instrumental in distorting the nat- 
ural unity of the infinite universe into a mystic super- 
natural unity of a "world soul?" Has it not made of a 
simple and natural division of social labor a mystic di- 
vision of castes with different degrees of "souls?" Has it 
not attempted to perpetuate this graduation of "souls" 
infinitely and to secure a natural class rule on top of the 
economic one by breeding strains of these different 
"souls" and forbidding any intermixture of strains on 
penalty of death, or loss of caste worse than death ? Has 
it not attempted to pervert the natural law of sexual selec- 
tion into an instrument for damning all "inferior souls" 
to eternal slavery on earth ? Has it not devised the most 
effective plan for perpetually dividing an oppressed work- 
ing class against itself and rendering any united revolt 
of the exploited impossible? 

It is not necessary to believe in any conscious con- 
spiracy, in order to understand how it is that the Indian 
mystics at once hailed Emerson as one of their own, when 
he expounded their idealistic monism to American read- 
ers. Water will seek its level and affinities will meet. But 
let us be aware of the consequences. 

For half a century, the American followers of the 
Indian Brahmans have been planting the seeds of oc- 
cultism on this continent. Everywhere "new thought" is 
seeking touch with Oriental mysticism. Like the Brah- 
mans, the American mystics extol the unity of all things 
in theory, but use it in practice as a blanket by which 
to smother any widespread popular understanding of the 



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LABOR AND CAPITAL 27 

typical differences, which the ruling classes wish to per- 
petuate. Very opportunely for them, the immigration of 
hundreds of thousands of Orientals assists them in 
spreading the twilight of occultism, in which the ex- 
ploiters can safely ply their dark trade. Nothing is safe 
against their inroads, unless it is so clear and impreg- 
nable, that only downright misrepresentation can prevent 
the people from understanding it. 

How easily even revolutionary writers, who have not 
been careful to remove all possibility of being misunder- 
stood, may be adapted to reactionary uses, may now be 
observed in the case of Walt Whitman, whose work is 
serving as a convenient stamping ground to the disciples 
of the occult We hear this revolutionary singer sancti- 
fied as an American Vishnu, and his "Leaves of Grass" 
praised as a Vedantic glorification of the "World souL" 
A host of publications, radical on the surface, but reac- 
tionary in the core, disport themselves on this treacher- 
ous ground, and serve as sounding boards for the "art" 
of a motley crowd of Bohemian intellectuals, who flirt 
with the revolution, but eschew all direct contact with its 
proletarian elements for fear of rubbing the bloom off 
their refined sensibilities. But this caste-like exclusi- 
veness does not prevent them from aspiring to leadership 
in the proletarian revolution. 

Many otherwise class-conscious working people, par- 
ticularly the proletarian ized wing of the middle class, are 
lured into this mystic maze and induced to divide their 
energies between the spreading of socialist truths and 
the devotion to a mystic cult, behind whose hidden mean- 
ing lurks the betrayal of the proletarian revolution. 

What a feast this unity of labor-capital would be for 
them! I can hear them rapturously declaiming: "Capital 



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28 MARXIAN ECONOMICS 

is Labor, Labor is Capital. All is one, one is all. I am 
the doubter and the doubt, I am the capitalist and the 
laborer, I am the creditor and the debtor, I am the spleen 
and the spleeny, etc., etc." 

All of which is true enough, provided we understand, 
that this means at bottom nothing but that all these 
things go to make up the natural universe. 

But that is just what our mystic teachers and their 
friends of the ruling class don't want us to understand. 
Before long the National Economic League would issue 
a new book on the "Cosmic Unity of Capital and Labor." 

No, thank you. With all due respect for the unity of 
all things, I shall not forget that this unity is expressed 
in some very decided differences. I am not averse to a 
monistic reconciliation of Labor and Capital. On the 
contrary, I am working to bring it about But I beg my 
readers to make a note of the fact, that the first indis- 
pensable requirement for such a unity is the abolition of 
the relation between exploiters and exploited in general, 
and between capitalists and wage workers in particular. 

Eight there is the rub. Capital is not a mere thing. 
It is fundamentally an economic relationship between an 
exploiting and an exploited class. Without class rule, 
capital as an economic category has no existence. 

Land may be capital. Tools may be capital. Articles 
of consumption and raw materials may be capital. 

But none of these things are capital, unless they are 
stamped with the typical mark of capital That mark is 
that these things must be means to rob the laborer of 
the products of his toil. Labor, and labor-power, can 
never be capital in the hands of the laborer. So long as 
the relationship of capital and labor exists, labor is al- 
ways the exploited part. 



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LABOR AND CAPITAL 29 

It is very convenient for the exploiting class, to define 
capital as wealth used to produce more wealth. So long 
as you don't tell who produced the wealth and under 
what conditions it is produced, and who gets it, that 
phrase is harmless. 

It is equally harmless to define capital as stored up 
labor. The dangerous question is: Whose labor, and 
stored up for whose benefit and by what means ? 

In short, the things used as capital are not in them- 
selves capital. They may become capital only under cer- 
tain very definite social conditions, under which differ- 
ent economic classes struggle for the control of the pro- 
ducts of labor. 

It is on this rock that we split from the official econ- 
omists, who conceal the secret of capital by ignoring 
the main source from which it springs, the exploitation 
of the labor of the working classes. 

This is the source of capital. But the source alone is 
not enough to impress a thing with the trade mark of 
capital. Something else is needed. There have been 
epochs, in which working classes were exploited, and yet 
they were not exploited by capital. 

This other requirement is trade. The products of la- 
bor must be sold at a profit, in order that the means of 
exploitation may assume the character of capital. 

These two essential points are neglected by the of- 
ficial economists. And not satisfied with slighting two 
such typical marks, they further complicate matters by 
imagining that a man can create value and accumulate 
capital by mere buying and selling. This is the natural 
result of their mistake of overlooking the part played by 
the labor of the working classes in the creation of values. 

After having spread a protecting gloom over the 



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30 MARXIAN ECONOMICS 

secret source of capital and the methods by which value 
is realized in trade, economists like George and Roscher 
make confusion worse confounded by ignoring the his- 
torical and economic distinctions of capitals in various 
epochs and in different spheres. They apply conceptions 
belonging to one epoch to a different kind of capital in 
another epoch, or confound different kinds of capital 
working together in the same epoch by applying to all 
of them without distinction the same terms. 

In this way they make it impossible to find any clue 
to the fundamental causes of social development, and to 
trace the course of social advance along definite lines, 
which permit a scientific forecast of its future and out- 
come. 

Having spread gloom and confusion all along his 
path, muddled several generations of students, and 
plugged up the avenue to scientific results in political 
economy, a man like Henry George climbs upon a self- 
made pedestal, throws out his chest, and boasts of hav- 
ing "recast political economy." 

Recast, perhaps, but only in the same old mould which 
safeguards the interests of caste. 

The Marxian analyses, on the other hand, throw down 
all barriers, which obstruct the emancipation of the work- 
ing class from class rule. They open wide the gate of 
secure knowledge, which demonstrates that in the be- 
ginning was labor, not capital, and that in due time capi- 
tal will disappear again, leaving the field to work, the 
life and light of men. 



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CHAPTER III. 

ANIMAL AND HUMAN SOCIETIES. 

Uncounted thousands of years before the ancient 
prehistoric traditions of the Jewish tribes gave rise to 
the myths of Adam and Eve, bands of hairy man-like 
creatures were roving 1 through the primeval forests. 

These creatures resembled one another in their gen- 
eral physical structure and general modes of life. Yet 
they were different from one another in some particular 
peculiarities. 

Some built rough nests in tree tops. These passed 
all their lives in trees. Only on rare occasions did they 
come down on the ground. They hunted, ate, slept, 
married, propagated, and died in trees. They found all 
their necessities in trees. Various wild fruits, such as 
acorns, nuts, berries, were within the tree zone above 
the ground. So were young birds, birds' eggs, insects, 
young squirrels, lizards, etc Even water was found in 
broad-leaved parasitic plants growing on the branches of 
the trees, or in the axles of the branches, or in the hol- 
lows of their bark. 

These tree-dwelling creatures were very hairy. Even 
their faces and foreheads were covered with hajr. Their 
arms were very long, excellently adapted to the tree life 



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32 MARXIAN ECONOMICS 

and its gymnastic requirements. The overdevelopment 
of their arms and shoulders had resulted in an underde- 
velopment of their legs and hips. Their legs had but 
thin calves and thighs, and instead of feet they had 
hands, by which they could anchor themselves securely 
to the branches of trees while reaching with their long 
arms for food and for new support. 

Others used caves for shelter. These lived mostly 
on the ground, although they were also good climbers 
and had four hands like their tree-dwelling relatives. 
But their arms were not so monstrously long, and their 
hips and legs, were stronger and heavier than those of 
the tree-dwellers. They walked frequently erect, using 
sticks to balance themselves. They lived in groups, while 
the tree-dwellers lived generally in pairs. They had a 
wider range than the tree-dwellers. The tree-folk could 
only climb trees well, but were clumsy on the ground. 
The cave-dwellers could climb trees and also hunt on 
the ground and run. They used clubs and stones to kill 
small animals, such as snakes, ground hogs, rabbits, 
squirrels, birds. 

There were more and larger beasts of prey living on 
the ground than in the tree tops. The tree-dwellers were 
a match for nearly every animal, which they might meet 
on their rambles through the tree tops. They could move 
faster from branch to branch than any giant snake, and 
jump higher from tree to tree than any leopard. Swift- 
ness was their best defense against these beasts. And 
they were stronger than any of the smaller beasts of 
prey that lived on the trees. 

The cave-dwellers had to be on guard against all the 
large hunting beasts, such as lions, sabre-toothed tigers, 
bears. Some of these beasts also lived in caves or prowled 



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ANIMAL AND HUMAN SOCIETIES S3 

through them. The cave-dwellers could not live in any 
large cave, which did not offer plenty of narrow side 
lanes or ledges and nooks high out of reach of prowling 
beasts. Only swift running and jumping or climbing to 
a safe place out of reach of these beasts could save a 
surprised cave-dweller. But their group life made it 
easier for them to guard against surprises, and their 
numbers enabled them to defend themselves better and 
to scare beasts away. 

The wider range, of the cave-dwellers gave them a 
wider experience. It bred different qualities in them 
than in the tree-dwellers. Their different experiences ex- 
pressed themselves visibly in different physical marks. 
Their obvious likeness revealed a common descent Their 
differences showed that long adaption to different envir- 
onments had drawn them apart. 

Through the same locality, which these two hairy 
creatures inhabited, there roamed still another creature 
very much like them in many respects, and yet more 
different from them than the caveipeople were from the 
tree-folk. This third creature was also very hairy, but - 
its hair was so fine, that the skin showed through it every- 
where except on the top of the head, the back of the 
neck, the lower part of the face, the breast, and the lower 
part of the trunk. The forehead of this creature as well 
as his face were covered with such fine hair that the skin 
seemed quite naked. The hair on his head was very long 
and shiny. His limbs and body were even more propor- 
tionate than those of the cave-dwellers. Especially his 
legs were more symmetrically developed, with fleshier 
calves and thighs, and instead of the lower hands he had 
feet with toes instead of fingers. 

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84 MARXIAN ECONOMICS 

A modem naturalist comparing these three would at 
once call the first two apes and the third men. 

But they were more nearly alike, in spite of their 
marked differences, than men and apes are nowadays. 
The apes were more man-like. The men were more ape- 
like. Particularly the young of all three creatures re- 
sembled one another strikingly. 

Compared with modern Caucasians, those primitive 
men would be considered little better than apes. Yet 
they had all the essential marks, which distinguish men 
from apes. Only in one respect did their faces resemble 
those of the apes and differ from those of modern men. 
Like the apes, they had big bony bumps over the eye- 
brows. But their jaws and mouth were smaller and more 
delicate than those of the apes. 

Yet their peculiar physical differences from the apes 
carried with them peculiar differences in their modes of 
life. It was not so much the fact that tree-apes had 
long arms, cave-apes better proportioned arms and -legs, 
and men hands and feet, which differentiated the modes 
of life of men and apes most deeply, although these 
external physical differences were significant enough in 
their way. Nor was it the fact that both men and cave- 
apes were social, while the tree-apes were unsocial. It 
was rather the different capacity of their skulls and 
brains, which decided the relative superiority of these 
three types. 

Evidently the external physical differences were 
closely interwoven with the internal organization of 
their brains. What had at first been but a slight varia- 
tion between children of the same parents, and had pre- 
disposed each one of them for some particular mode of 
life or feat under the same material conditions, had 



ANIMAL AND HUMAN SOCIETIES 86 

gradually been sifted by natural selection and by a con- 
tinued use of these variations in their particular way, 
until three distinct types had been created. The selec- 
tion and continued use of long arms had resulted in the 
creation of the tree-type of apes. The more symmetrical 
arms and legs had created the cave-type of apes. And 
the larger brain capacity with a tendency to better de- 
veloped legs had created the man-type with feet instead 
of hind hands. 

The natural selection of brain qualities gave to cave- 
men an immense start over the apes, who differed from 
their ancestors only by an adaptation of some external 
organs to different environments. 

The brain is intimately connected with the nerve sys- 
tem and this is directly combined with the sex plasma. 
Brain, nerves, and sex-plasm are all of the same gen- 
eral plasmatic structure. They are the proto-plasmatic 
bridge over which all life energy passes on its way to 
and from other organs. 

Any changes sifted out by natural selection in any 
of them are directly transmitted to the offspring through 
the genetic processes. An uninterrupted exchange takes 
place between them. This intercourse is not stopped by 
the meeting of male and female sex-plasms at concep- 
tion, but rather intensified. It continues right in the 
mother's womb. It shapes the brain and other plasmatic 
processes within the mother while the child is taking on 
form in the womb. Whatever produces variations in the 
proto-plasmatic bridges of the mother exerts its influence 
also on the child's plasma during formation. Natural 
selection is thus directly at work on the plasma, even be- 
fore the child is born. 

The strongest impulse for plasmatic variations comes 

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36 MARXIAN ECONOMICS 

from the interaction of plasmatic processes themselves. 
The professors would say it requires atomic metabolism 
as well as molecular aggregation. This means it requires 
changes in quality as well as in quantity. We won't go 
into this more deeply here, because this is primarily a 
work on economics, and I mention these biological mat- 
ters only, because they have a definite bearing upon 
Marxian economics.* 

Of course, the plasmatic processes are also affected 
in quality and quantity by external influences, such as 
heat, cold, exertion, over-exertion (of the whole body 



*> Ever alnco Augusta Comte attempted to make of sociol- 
ogy a. sort of transcendental biology, Marxians have had to 
contend against a confusion of biological with economic laws 
of development, Particularly the advent of Darwin's natural 
election theory and of Spencer's theory of a social organ- 
m brought this tendency to the tore and crowded the market E 
with a multitude of works on biological sociology and soclo- 
" iglcal biology. Now the.se terms may signify a very import- 
nt and valuable contribution to science. But when they pur- 
port to be a bloloslcsl synthesis of Darwinism and Marxism, 
'■•■— meet with the Just opposition of Marxian scholars, be- 
_ they amount In practice to an attempt to conceal the 
ipeeiHc laws of social development and to a pretense that the 
loclal laws are identical with the laws of biological develop- 
ment. We want to understand that organic society and organic 
nature, while alike In general respects, have their own speci- 
fic laws of development. We must be clear In our minds about 
the differences of social laws from biological ones. Marx 
discovered the laws of social development, Darwin discovered 
' the law of natural selection one of tbe most significant 
ws of biological development, and Spencer elaborated the 
eory of general evolution In various aspects, but often with- 
it a clear comprehension of specific distinctions. We want 
give to Marxism Its dues as well as to Darwinism and 
lencerism. Of course, this does not prevent us from making 
dialectic synthesis of Marxism, Darwinism and Spencerlsm. 
fact, Marx, himself has done that here and there. But It 
ust be understood that a dialectic synthesis, unlike a blnlofc- 
■1 synthesis, does not confuse economic and biological laws, 
it distinguishes them and studies them in their mutual In- 
ractlons. A dialectic synthesis need not fear to take a hint 
om a biological law and use it in the study of economic 
inenomena, nor need it fear to take a hint from an economic 
iaw and use it in the study of biological phenomena. But 
whoever does so, must bo aware of the specific distinction* 
DTirt o-eneral similarities of Marxism, Darwinism, and proletar- 
:alectlcs, and must keep in mind the impression produced 
oy a careless interchange of these method* On a student not 
well conversant with either of them. 



ANIMAL AND HUMAN SOCIETIES 37 

or of certain organs). But these external processes do 
not produce as deep and as rapid changes as the internal 
processes themselves. 

The external processes merely assist or retard the 
distribution of proto-plasmatic quantities or the altera- 
tions in the quality of plasmatic processes, which are 
due to the mutual interaction of these processes them- 
selves. 

On the other hand, variations in bones, connective 
tissue, muscles (so-called somatic changes), while natur- 
ally influenced by plasmatic variations and by the circu- 
lation of nourishing juices, come mainly from the use or 
disuse of the affected organs under definite conditions. 
The lengthening of arms, the transformation of hands 
into feet, do not necessarily require any Change in the 
quality of the processes taking place within them, but 
may be accomplished by a simple change in the distribu- 
tion of the total energy and substances of the body. 
These somatic variations need not necessarily make 
such a deep impression upon the plasmatic substances 
to become permanent and transmissible to offspring. 
Whether they do become transmissible or not will depend 
mainly on the question, how long and how intensely the 
use or disuse of the affected organs will continue under 
the same conditions, or under changing conditions work- 
ing with them or against them. 

Unless the same or intensified causes continue for a 
long time, the somatic variations will not become plas- 
matic. Until they do become plasmatic, they are not 
transmitted to offspring. The offspring will not acquire 
these somatic variations before birth, but will at best 
inherit the germ of a tendency in that direction, and will 
develop this tendency only under the same conditions as 



38 MARXIAN ECONOMICS 

the parents by the necessity of using these organs in the 
same way as they. As soon as the pressure of condi- 
tions relieves these organs of their specific tasks and 
calls into play other organs, the offspring will acquire 
other variations than their parents, and the original 
' tendency to somatic variation will not get a chance to 
develop, but will be smothered by the new tendency, 
which is henceforth transmitted in the germ and even- 
tually developed after birth in the same direction. The 
extent of this somatic development depends more on ex- 
ternal conditions than on plasmatic variations. Only un- 
der exceptional circumstances, when the original condi- 
tions happen to recur, may the old tendency re-appear 
for a while.* 

For instance, the young of the tree-apes did not have 
as long arms as their parents. Before birth, the arms of 
these young tree-apes were not molded for their specific 
tree-tasks. But as the young grew up, their arms became 
longer and longer. The tendency to this variation was 
there and had been transmitted in the germ. But if the 
young should happen to be forced permanently into a 
cave-environment, and their offspring should have to 
continue living on the ground for a very long period, 



stlll"at lo gg erhe ads" about tho relation of somatic and plas- 
matic characters to heredity and environment. The confusion 
in this field has become bo great, that any attempt to straight- 
en it out will consume the life time of even the most en- 
cyclopedic reader. Some dwell onesldedly upon somatic, others 
upon plasmatic tendencies, some Insist on the general trans- 
mission of both somatic and plasmatic characters, soma make 
a distinction between environment and heredity without dialec- 
tic combination, others deny the existence of any Buch thing 
as heredity and harp only on environment. The discovery of 
mutation by Mendel and De Vrlee has added another confus- 
ing element to these discussions, The understanding of Josef 
Dletzgen's dialectic monism, which Is a very Important sup- 
plement to Marx's dialectic materialism, would be of great 
benefit to these naturalists. 



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ANIMAL AND HUMAN SOCIETIES 39 

the long arms would disappear. If later some of the off- 
spring of the deplaced tree-apes should be able to return 
to a tree-life, they would develop long arms faster than 
the offspring of cave-apes, if forced to live in the tree 
tops.* 

Evidently the ancestors of the tree-apes did not have 
any long arms. In this respect the cave-apes had varied 
less from the original ancestors than the tree-apes. 

On the other hand, the cave-men had acquired a plas- 
matic variation in their brains. It is true that this re- 
quired also a somatic variation of their skulls. But 
whether the original impulse was somatic or plasmatic 
is beyond our inquiry, for it is certain that this tendency 
did not begin with the apes. Plasmatic variations in the 
direction of a superior brain and nerve system begin 
very low down in the scale of animal organisms, and 
they continue until they reach their highest summit in 
the brain and nerve system of man. The apes also bore 
the evidence of this evolution in their brains. But natural 
selection had not accentuated this variation in their 
brains any further, while in the brains of men it had 
done so. This accounts for the fact that this variation 
was so much more vital and effective than the primarily 
somatic variations of external organs of apes. It accounts , 
for the biological backwardness and stability of the ape 
types. 

The brain variation gave to men a far better control 
over their natural environment than to apes. It opened 
greater possibilities of development for men than for 
apes. Natural selection placed men close to the line of 
progressive evolution, while it forced apes into a closed 

*) I leave aside here the consideration of the particular 
ways tn which natural selection works in such cases, be- 
cause this would carry me too far from my main topic 



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40 MARXIAN ECONOMICS 

alley by their somatic variations. The apes had to spend 
their surplus-energy in developing long arms, or legs 
fit for climbing and jumping, or they had to waste it in 
the inconsequential and meandering mode of life of their 
kind, to which their brain organization condemned them. 
It tended more to dissipate than to concentrate their 
brain power. But the surplus-energy of men found its 
typical and most effective outlet in the .concentration of 
brain faculties, a development which carried an evolution 
of millions of years' duration further forward. Every use 
of the specific adaptations of apes welded them but more 
firmly to their plane, while it took men more and more 
away from the ape level and lifted them more rapidly to 
the man plane. 

Of course, men did not always concentrate their 
minds, nor did they always use their brains in the direc- 
tion of further concentration^ On the contrary, they 
often relapsed into the inconsequential and incoherent 
ape-manner of thought, and we can notice this retrogres- 
sive tendency in many people even in our time. But 
looking over thousands of years of human development, 
we can plainly observe, that there has been a growing 
tendency to brain concentration and a greater and greater 
conscious effort to follow the line of understood devel- 
opment consistently.* 

Cave-men and cave-apes lived under practically the 
same conditions. But the possession of a larger brain 



*) The full significance of this point 1b not clearly brought 
out In any Darwinian works, because it cannot be realized 
without an under standing' of the effects of clsssconsciousnesa 
on. the mind of proletarian thinkers. On the other hand, no 
Marxian writer has so far shown the Importance of a clear 
grasp of the thread of phylogenetlc development for the ela- 
boration of a scientific outline of human ethics. The fact that 
ethics are based upon common needs and vary with social sys- 
tems has been sufficiently emphasized. It has also been shown, 
for instance by Karl Kautsky in his "Ethics and the Material- 



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ANIMAL AND HUMAN SOCIETIES 41 

capacity enabled the cave-men to make more of the same 
environment than the apes could. 

The cave-men could think better. They could remem- 
ber things better and learned to express their thoughts 
in articulated speech. This enabled them to compare 
their mutual experiences better and to use them more 
consciously than the apes for an improvement of their 
living conditions. 

The peculiar mental ability of the men was the orig- 
inal cause, which differentiated human societies from 
animal societies. But it did not remain the only one. 
It produced specific economic causes, which did not only 
intensify the differences between human and animal so- 
cieties, but which gave a still stronger impulse to the 
brain variation of men. 

The apes would pick up sticks and stones and use 
them as weapons. So would the men. But the men could 
think about these things longer, more deeply, and more 
connectedly. After handling sticks and stones for a long 
while, the men would find out that some sticks and stones 
were better suited for particular purposes than others. 
And they would select the sticks and stones best suited 
for their purposes, fit them together, and try experiments 
with them. They would take a forked stick and fasten 
a jagged stone in the fork by means of flexible fiber. 
They would dry the skins of animals and cut them into 
strips by means of sharp stones or shells. They would 
use these strips of skin as thongs to fasten differently 



1st Conception of History," that the biological origin of ethics 

must be Bought In animal Instincts. But the peculiar relation 
of train development to ethics and of a conscious adaptation 
to a scientific standard of etnlcs under different social systems 
has not been revealed so far. I can but Indicate this fact here, 
but this Is not the place to dwell further on it. For further 
Information on this point see my "Will Problem." 



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42 MARXIAN ECONOMICS 

shaped shells and stones to sticks and try them at various 
uses. They would take" a flexible bough, a strip of skin 
or animal guts, and make a bow of them. They would _ 
fasten a sharp pointed stone to a straight stick and make 
a spear or an arrow of them. They would take flexible 
grass or fiber and weave baskets and mats out of them. 
They would take clay or mud and plaster their baskets 
with it, so that they would hold water the same as gourds. 

The apes could use gourds. But they could not make 
any dishes. They could use sticks and stones, but they 
could not make a spear, a hatchet, a bow, or an arrow. 

The apes fled when lightning struck a tree and set the 
woods afire. The men fled also, when first such a thing 
happened in their experience. The apes would return 
out of curiosity to such spots and poke around in the 
hot ashes or glowing embers. So would the men. But 
the men would also pick up burning sticks, carry them 
to their shelters, and put more sticks on them, to keep 
the fire burning. They would warm their caves with the 
fire, drive the bear and the sabretooth out of their caves 
with it, and keep wild beasts away with it at night.* 
They would roast animals over the fire and put tubers 
into the hot ashes. They would build fire-places of stones 
or clay, and put clay-plastered wicker-work dishes over 
these fire-places to boil water and tubers. They would 
make animal skins, large leaves, or fiber, into wraps, 
aprons, or blankets. 
It is quite obvious, that the superioreconomic devel- 

•) I do not mean to 
only way In which Are 

waya. For Instance, It was Inevitable that nre snouia ae ac- 
cidentally kindled by drilling holes In wood, when making 
tools. Fire wu, morever, abundant In those early times, In 
■^■dimui lmro TaicBH utA. Tt is not bo much a question of dla- 
the art of using and making It 



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ANIMAL AND HUMAN SOCIETIES 43 

opment of the men was due primarily to their superior 
brain development. The apes were held within a nar- 
rower horizon by the shape of their skulls and the tex- 
ture and convolutions of their brains. Once that the 
physiological development, by force of natural selection, 
had taken this turn, there was no more escape from it. 
Natural selection and use would intensify it more and 
more. A tree-ape might be forced from a tree-life into 
a cave-life by some natural cataclysm, and this might 
lead to a more balanced development of arms and legs 
in his offspring, if the change of environment lasted long 
enough. But it would not alter the brain development of 
these apes so much that they would become men. On 
the other hand, a cave-man might be forced into a tree- 
life, yet this would not deprive him of his superior brain 
or of his technical inventions. It would simply compel 
him to put his brain to work devising different inven- 
tions. It would not depress his brain to the level of a 
tree-ape. 

It is equally, obvious, that this natural selection of a 
superior brain was due to biological development. It was 
not primarily due to any essential change in the material 
conditions of the common ancestors of these three types. 
The play of biological processes favored the external 
organs in one type and the internal organs in another. 
This development could well occur in three different chil- 
dren of the same parents conceived in successive years 
under practically the same material conditions, or among 
children of three different pairs of parents of the same 
type under the same material conditions. 

The biological development under normal conditions 
of existence for the parent types would account suffici- 
ently for such external and internal variations. A change 



. 



44 MARXIAN ECONOMICS 

in the flow of blood or lymph to particular parts, the 
general condition of health and activity of different or- 
gans at the time of conception, with normal nutrition, 
is sufficient to bring about numerous variations of somatic 
and plasmatic qualities. 

It is quite evident, then, that these three types did 
not represent any economic classes, but biological species. 
Nor do we find any trace of any economic class division 
within these three species. No amount of individual vari- 
ation within these species produced any economic classes. 

On the other hand, we see that biological develop- 
ment may, indeed, produce different economic environ- 
ments. 

Just in what respects biological and economic devel- 
opment differ, we may observe here, where they first 
become differentiated among the offspring of the same 
common ancestors. And at the same time, we may ob- 
serve, in what respect they are connected. 

We see on one hand that natural selection produces 
biological variations, and that these biological variations 
enable one species to produce economic variation by 
improving certain gifts of nature and making tools. 
We see on the other hand, that natural selection pro- 
duces biological variations, which prevent another spe- 
cies from making any tools. 

But the making of tools, and the transformation of 
modes of production by further changes in tools, is the 
main cause of all further social progress among human 
beings. It is not only the cause of social progress, but 
induces also further biological progress, or, in some 
cases, retards and reverses biological processes. It is 
the evolution o,f human tools and modes of production, 
which shapes the evolution of all other social institutions 

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ANIMAL AND HUMAN SOCIETIES 45 

among men and determines the general course of their 
mental development. In short, it is the evolution of tools 
and of the modes of production going with certain tools, 
which makes what we call human history.* 

It is absurd to look for any economic terms among 
animal societies, that have neither the ability to create 
things denoted by these terms nor the ability to express 
them. Where biological faculties dominate the social life 
more than the slight and rudimentary activity, which can 
be called economic only by an enormous stretch of the 
imagination, we need not look for any economic devel- 
opment in the sense that we use this term with reference 
to men. Picking up sticks and stones for immediate use, 
building nests, using 'gourds, building cells, etc., are 
activities, which do not appreciably alter the social life 
of the animals that perform them. These activities give 
no impulse to further activities, which may be in any 
way considered as technical progress or changes in the 
modes of production due to technical improvements. If 
we want to call such activities production, we must at 
least understand, that it is a production with natural 
means, not an economic production determined by tech- 
nical improvements, f 

•> Karl Marx, A Contribution to the Critique of Political 

Economy, preface, page 11.— Engels' preface to The Communist 
Manifesto, by Karl Marx and Frederick Engels.— Karl Kaut- 
aky. Ethics and the Materialist Conception of History V., 2: 
"It la not the production of articles of consumption, nor the 
use of tools, which distinguishes men from animals. What la 
peculiar to man la rather the production of tools, which serve 
as means of production, of defense, of attack. An animal may 
at best find a tool In nature; but it is unable to Invent one.... 
With the production of means of production begins the hu- 
man iaation of the animal -man." 

•) It Is true, that there la alao a transformation of social 
activities among social animals, but this Is primarily an effect, 
and only In a secondary wiiy a cause, of organic variation. 
The different orders found among ants, bees, etc, did not exist 
among their primeval ancestors but were produced by organic 
evolution. Amomr human being's, on the other hand, the tools 
-- 1 without any 



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46 MARXIAN ECONOMICS 

It is equally absurd to insist on a biological classi- 
fication of terms, which are derived from economic devel- 
opment and which denote things and processes, that are 
in essential respects different from biological ones. We 
need not deny that the same general laws permeate soci- 
ety as well as nature outside of it, and that therefore the 
same general terms may be applied to social and natural 
development. But where entirely new forces have grown 
up through technical improvements and have started a 
series of transformations, which are unique since they 
are not found anywhere else in the world than in human 
societies, no clear thinker will persist in ascertaining the 
laws of such social development by biological analyses.* 

But it is not enough to differentiate clearly between 
biological and economic laws. A one-sided cultivation 
of either side is disastrous. Men remain under the in- 
fluence of biological as well as economic laws, and only 
a close observation of their mutual interaction and of 
their relations to other natural laws in the entire cosmic 
process can give us a full understanding of all questions, 
which the human race must solve in its struggle for the 
mastery of the forces that determine its life and progress. 

*) "Just hh Darwin discovered the law Of development. In 
organic nature, so Marx discovered the law of development In 
human society." Frederick Engela at the open grave of Marx. 



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CHAPTER IV. 

BIOLOGICAL AND ECONOMIC DIVISION OF LABOB 

The first separation of the descendants of the same 
common ancestors into animal and human societies was 
due to biological development, as we have seen in chap- 
ter III. It was their biological superiority, which en- 
abled men to invent and fashion tools, thereby laying 
the foundation for the development of economic forces, 
which should widen the chasm between animal and hu- 
man societies. 

"Technical progress forms from then on the basis of 
the entire development of mankind." * 

Lewis H. Morgan, who revolutionized the study of 
anthropology by his masterly work "Ancient Society," 
divided the development of human societies into three 
great stages, Savagery, Barbarism, and Civilization, ac- 
cording to the technical improvements made by human 
beings. Savagery and Barbarism were subdivided by him, 
each into a lower, a middle, and a higher stage, accord- 
ing to new tools or technical inventions introduced by 
men. 

Important as this technical progress was for the up- 



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48 MARXIAN ECONOMICS 

lift of humanity from animaldom, yet ffii a long time it 
did not reach deeply enough down into the biological 
foundation of human society to make the economic forces 
dominant over the biological ones. 

All through the stage of savagery, for uncounted 
thousands of years, and well into the middle stage of 
barbarism, biological characters formed the natural basis 
for the most primitive differentiation of biological from 
economic division of labor. The sexual division between 
males and females became in human societies the basis 
for the first economic division of labor between men and 
women. 

This primitive division of labor between the two sexes 
is still found among human tribes living in the stages 
of savagery and barbarism. It existed among American 
Indians of those stages, when Columbus and his immedi- 
ate followers set foot upon the American continent. 

Frederick Engels, using the material furnished by 
Lewis H. Morgan, describes this economic division of 
labor between men and women in the Indian tribes of 
America in these words: "The division of labor was 
quite primitive. The work was simply divided between 
the two sexes. The men went to war, hunted, fished, 
provided the raw material for food and the tools neces- 
sary for these pursuits. The women cared for the house 
and prepared food and clothing. They cooked, weaved, 
sewed. Each sex was master of its own field of activity ; 
the men in the forest, the women in the house. Each sex 
also owned the tools made and used by it; the men were 
the owners of the weapons, of the hunting and fishing 
tackle, the women of the household goods and utensils'*.* 



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BIOLOGICAL AND ECONOMIC DIVISION OF LABOR 49 

This is the only form of economic division of labor 
in human societies, which is based upon biological char- 
acters. It gives way in the transition from the middle 
stage to the higher stage of barbarism to further eco- 
nomic divisions of labor, which are no longer based on 
biological, but on economic causes. To the extent that 
this primitive division of social labor yielded to other 
forms, the biological division of labor became subor- 
dinated to the economic division of labor, and the female 
sex jtself fell a victim of this shifting from a biological 
to an economic basis.* 

"Woman is the first human being, which fell into 
servitude. Woman became a slave, before any other slave 

existed All social dependence and oppression 

are rooted in economic dependence of the oppressed upon 
the oppressor." f 

The middle stage of barbarism begins with the dom- 
estication of animals. The care and breeding of cattle 
belonged to the sphere of the men. Since each sex owned* 
the things which it produced, the ownership of the herds 
gave to men an increasing amount of wealth, and with 
it greater power compared to the women. At the same 
time, the cattle needed wide areas for pastures, and the 
more herds increased, and the more at the same time the 
number of members of the families and other primitive 
organizations grew, the old territories of the tribes be- 
came too small for them. Men outgrew their primitive 
limits, and with them they also outgrew the primitive 
organizations. 

"The segregation of cattle raising tribes from the 
rest of the barbarians constitutes the first great division 



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SO MARXIAN ECONOMICS 

of social labor Out of the first great division of 

- social labor arose the first great division of society into 
two classes: masters and servants, exploiters and ex- 
ploited." * 

The transition stage from the middle to the higher 
form of barbarism, then, is that stage, in which human 
societies assume all those characters, which differentiate 
their economics most typically from these of animal so- 
cieties. Here, then, is the best opportunity to compare 
social division of labor among animals and men. 

Long before the separation of cattle raising tribes 
from other human tribes took place, other economic di- 
visions of labor had sprung up by the side of that between 
the sexes. But these other divisions of social labor had 
not touched the biological basis of the primitive division 
of social labor between the two sexes. 

For instance, when men learned to improve their 
crude stone tools by chipping and sharpening them, there 
were some individuals in the various tribes who devel- 
oped a special skill in this line and who wei>e assigned 
to this task and exempted from all other labor in the 
tribe. 

The arrowheads used by the American Indians were 
fashioned by special craftsmen. "Every tribe has its fac- 
tory in which these arrowheads are made, and in those 
only certain adepts are able or allowed to make them for 
the use of the tribe." f 

"They have some who follow only making of Bowes, 
some Arrows, some Dishes (and the women make all 



*> Frederick Enrols. I. c, p. H», IBB. 

tl Catlin, Last Rambles among the Indiana, New York, 
1867, p. 187. 



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BIOLOGICAL AND ECONOMIC DIVISION OF LABOR 61 

their earthen vessels), some follow fishing, some hunt- 
ing."* 

It is quite evident, that this specialization and divi- 
sion of labor, which takes place side by side with the 
division of labor between sexes and concerns only the 
men, is not based on any biological differentiation of 
men. It is not due to the fact that the arrowmakers, of 
fishers, or hunters, have developed different physiolog- 
ical organs, but to the fact that they have acquired a 
special skill in applying the same organs to different 
economic tasks. It is indeed a skill, in which biological 
faculties are called into play by economic conditions, but 
the economic element is here already assuming a greater 
significance than any biological organ. 

It is at this point, that divergences between animal 
and human divisions of labor become very palpable. In 
the lowest stage of human development, this divergence 
is not so plain. But even here we can plainly observe 
a distinction between the biological functions of the 
sexes, and the economic functions which fall on the 
shoulders of each sex. 

So far as sex distinctions carry with them different 
economic functions, economic and biological division of 
labor among animals is the same as that among human 
beings. In this respect, we have no reason to disagree 
with Haeckel, when he says : "The wild people, who have 
halted on the lowest stage to this day, lack culture as 
well as a division of labor, or it is limited, as among 
most animals, to the different occupations of the two 
sexes." f 

•) Roger Williams, A Key Into the Language of America. 

frovldence, 1827, "p- EG.— Reprint of the London edition of 1B4S. 
t) Ernst Haeckel, Ueher ArbelUthellung In Natur- ond 
Henachenleben. Gemelnverstlndllche Vortrlge und Abhand- 
lungen aua dem Oebiete der Hntwlckelungalehre. 2nd edition. 
Volume I„ p. 111. 



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S3 MAEXIAN ECONOMICS 

But right here this bourgeois spokesman of Darwin- 
ism begins to confuse sexual and economic division of 
labor and to build the most absurd analogies upon this 
confusion. Two pages further along we read: "There 
are many species of animals, among whom the division 
of labor of socially combined individuals, the same as 
among the lowest savages, is limited to its simplest form, 
to the different occupations and development of the two 
sexes, to marriage. But there are also many species of 
animals, among whom Jhe division of labor of the indi- 
viduals combined in societies goes much farther, and 
even leads to the organization of those higher social com- 
binations, which we designate by the term states." * 

Here we are left completely in the dark as to what 
is due to biological, and what to economic "occupation 
and development." The term "marriage" is made to 
serve for both. And this obliteration of typical distinc- 
tions in one term, which denotes primarily sexual func- 
tions, offers a convenient opportunity to extend the same 
vagueness to the term "states" and to wipe out all essen- 
tial marks of differentiation between human and animal 
societies — at least on paper. 

Now, the social division of labor among animals liv- 
ing in "states" is due to biological variation. Darwin 
has already pointed this out very clearly. "The advan- 
tage of diversification of structure in the inhabitants of 
the same region is, in fact, the same as that of the phy- 
siological division of labor in the organs of the same 
animal body. . . ." t All naturalists, who have made a 
special study of animal societies, have dwelt minutely On 



•) Ernst Haecfcel I. c, p. 124-126. 

t) Charles Darwin, Tbe Origin of Species, chapter XV* 
Divergence at Character. 



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BIOLOGICAL AND ECONOMIC DIVISION OF LABOR 53 

the organic differences, which are the basis of the social 
division of labor in them. 

Take for instance the leaf-cutting ants in central 
South America, called Oecodoma cephalotes. "The 
workers of this species are of three orders. The main 
body is formed by a small-sized order qf workers with 
small heads. The large workers are of two kinds, one 
having a smooth polished head, with ocelli upon the 
vortex (eyes upon the forehead) ; the other, subterran- 
ean, having no ocelli, and, according to Bates, fulfilling, 
in the depths of the colony, some unknown function...." * 

This unknown function, it is claimed by recent ex- 
plorers, consists in tending mushroom gardens. But this 
only by the way, for it does not affect the point in which 
we are interested here. 

What is true of these ants, applies to ants in general. 
And not only to ants, but to all insect societies having 
any social division of labor. Every textbook on natural 
history describes the different orders. For instance, the 
societies of bees are "monarchies," those of ants "repub- 
lics." But in either case, biological variation determines 
the form of these societies. Queen bees, drones, and 
workers are of organically different structure and 
equipped with different specialized organs. The queen 
bee is equipped only for the duties of conception and 
the laying of eggs. The drone cannot perform any other 
social function but that of fertilizing the queen. The 
worker alone has organs for gathering flower dust, 
honey, and manufacturing wax. 

Of course, Haeckel knows this better than I do. In 
fact, he says himself: "Divergence of character is called 



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64 MARXIAN ECONOMICS 

by Darwin, in the fourth chapter of his famous work on 
"The Origin of Species/ that mode of division of labor, 
which takes place between the individuals of one and the 
same species living together in the same locality, and 
which leads in their struggle for existence to the forma- 
tion of varieties and later to new species. This 'diverg- 
ence of character' among individuals rests as a morpho- 
logical process upon the physiological division of labor, 
just as does the so-called "differentiation of organs," 
which is the principal subject of anatomy." * And his 
work contains some beautifully clear illustrations show- 
ing precisely this organic difference of the orders in the 
animal division of labor. 

But he quotes no proof, either in words or in pic- 
tures, which would demonstrate, that economic classes in 
human societies, and human "states," are based on any 
physiological differentiation', which once for all assigns 
a definite task to human beings. A beggar has the same 
physiological organization as a king. It is a favorite 
trick of kings in fairy tales, to disguise themselves as 
beggars and win the love of a beggar's daughter. That 
could never happen in any ant or bee "state." A hu- 
man queen is not prevented by any physiological organi- 
zation from performing the same work as a washer 
woman. Whoever has been in Samoa, knows that he 
can get his clothes washed by some throneless queens. 
And various historians tell us that some modern washer 
women have become queens, even in Europe, and that 
the comparison has been by no means in favor of the 
queens of "royal" blood. We have but to look at the 
weakling on the Russian throne, the nervous Hohenzol- 
lern, the obese ruler of England, in order to know that 



*) Flrnest Shekel, I. c, p. 122-123, fopt-nots, 

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BIOLOGICAL AND ECONOMIC DIVISION OF LABOR 55 

these men do not hold their exalted position by virtue 
of any physiological superiority. Happy Hooligan and 
Uncle Tom are in many respects better men than they. 
Men like Rockefeller, Baer, Morgan, are by no means 
physically or mentally distinguished types. I can find 
thousands of better bodies and brighter minds among the 
white and colored workers of the United States. In fact, 
the only claim which Baer and his colleagues can ad- 
vance for their hold upon the natural and social forces 
is that they have a deed for them from "the Almighty." 
But not one of them has so far produced this wonderful 
document, signed by the Holy Ghost and countersigned 
by St. Peter. 

The human drones, like the bee drones, do indeed 
devote themselves mainly to the propagation of the spe- 
cies. But they cannot advance the same excuse for it 
as the bees. On the contrary, the human race would as 
a rule be much better off, if the human drones did not 
propagate their kind. Aside from the economic injuries, 
which they inflict upon human societies, they leave in 
their sexual trail a host of cripples, insane, congenital 
criminals, and monstrosities. 

A queen bee might with full justification call herself 
"the mother of the nation." She produces not only 
queens, but also drones and workers. On the other hand, 
some of the workers have the comfortable faculty of 
being able to propagate their kind without the help oi 
the males (drones). The human working women are 
not so fortunate, and the human queens are not so 
motherly. 

Haeckel does not only pass these palpable biological 
facts in silence, although he is well aware of them, but 
he further blemishes his Darwinian training by suppress- 



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66 MAliXIAN ECONOMICS 

ing the fact that the working bees have a revolution 
once a year, in which the drones do not fare as well as 
the human drones will fare, when the working people 
will have their revolution. Neither does it seem to oc- 
cur to him, that the queen bee discreetly leaves her hive, 
when the first young queen bee is about to be born, and 
that any queen bee born after the first one is at once 
killed by the first-born, if she does not succeed in quickly 
leaving the "state." Would that human queens were so 
considerate 1 

Not enough with overlooking all these physiological 
differences between human and animal division of labor, 
Haeckel fails completely to note the economic differ- 
ences, which give rise to classes and different economic 
systems in human societies. And he does not pay the 
least heed to the biological facts, which he himself men- 
tions and which should bring home to him, the Darwin- 
ian, the obvious fact, that such biological variations do 
not exist among human beings, and that, therefore, he 
should look for other than biological explanations. 

"There are, by the way, some species of ants, in which 
all workers have become soldiers, and which have thus 
realized the modern ideal of human culture, the modern 
military state. These military states are then compelled, 
either to let slaves perform the domestic work, or live 
only by robbery and pillage. This last is done, for in- 
stance, by the ill-famed South American robber ants of 
the genus Eciton. Here, again, we meet in each species 
with four different forms, with winged males and fe- 
males and two kinds of wingless workers of very differ- 
ent form and size. The smaller workers, who constitute 
the main body of the entire Eciton state, all serve as 
privates. But the larger workers, who are distinguished 



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BIOLOGICAL AND ECONOMIC DIVISION OF LABOR 67 

by a very large head and immense mandibles, command 
the army as officers. There is generally one officer to a 
company of thirty privates." (L. t, p. 12-130.) 

If the human officers did not carry padded uniforms 
and shoulder-straps, and if they were not backed up by 
the whole force of tradition and official power of the 
ruling class, they would neither distinguish themselves 
from the privates nor have any power to command. 

"Still far more remarkable than the military states of 
the Brasilian Ecitons are the slave states, or so-called 
Amazon states, formed by several of our indigenous spe- 
cies of ants, particularly by the bloodred and the blond 1 
ant {Formica rufa and Formica rufescens). Among 
these ants we find only three orders, namely, but one or- 
der of wingless workers besides the winged males and 
females. These workers do not labor themselves, but 
they rob from the nests of other species of ants (gen- 
erally smaller black ants) the pupae, which they raise 
and which have to perform all work in the nest of the 
strangers as slaves. . . Thus we find among the Amazon 
states of the German ants the same relation of slavery, 
which was ended only by the last war in the human 
states of North America." (L. c, p. 131-132.) 

Here we have a so-called Darwinian justification of 
human slavery on the ground that the slaves are of an 
"inferior race." But not an inkling of understanding for 
the economic causes, which alone made slavery possible 
among human beings and which abolished it. Not a 
sign of even a feeble glimmering of the truth, which 
Adam Smith had already known, that "in reality the dif- 
ference of natural talents ^between individuals is much 
less than is supposed. These dispositions so different, 
which seem to distinguish the men of. different profes- 



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68 MARXIAN ECONOMICS 

sions when they arrive at mature age, are not so much 
the cause as the effect of the division of labor." Not a 
whisper of the plain truth, which any one can see with- 
out being a Darwinian, and which Karl Marx expressed 
in the words : "In principle a porter differs less from a 
philosopher than a mastiff does from a greyhound. It 
is jthe division of labor which has placed an abyss be- 
tween the two." * And this division of labor is due to 
economic, not to biological variations. 

In the same way, in which Haeckel neglects the force 
of economic variations in human societies, does he slight 
the significance of their absence among animals. He 
throws all such specific distinctions to the dogs and sees 
only general similarities. 

"The history of civilization among human beings 
teaches us that the ascending development of civilization 
is connected with three different processes, namely, i) 
Association of the individuals in a community; 2) Divi- 
sion of labor (ergonomy) of the social persons and con- 
sequently their different development, or differentiation 
of forms (polymorphism) ; 3) Centralization, or integra- 
tion of the unified whole, strict organization of the com- 
munity. The same fundamental laws of sociology apply 
equally to all other formations of communities in the 
organic world ; also to the graduated development of in- 
dividual organs out of the tissues and cell clubs. The 
formation of human states immediately joins the forma- 
tion of herds among the mammals most related to them. 
The herds of monkeys and of hoofed animals, the packs 
of wolves and droves of horses, the flocks of birds, often 
ruled by a leader, show us the different stages of 'for 
mation of states' ; likewise the swarms of higher arthro- 

*) Karl Marx, The Poverty of Philosophy, p. 10>. 



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BIOLOGICAL AND ECONOMIC DIVISION OF LABOR 59 

pods (insects, crustaceans), particularly the states of 
ants, termites, the hives of bees, etc" * 

Association in herds, swarms, flocks or in nations, 
states, provinces, cities; division into organic orders or 
economic classes; division of labor between biological 
orders or economic classes and trades, in nests and 
hives or in factories and shops; slavery through phy- 
siological causes or slavery, feudalism, capitalism due to 
technical causes ; centralization of biological functions or 
of political and economic functions; organic community 
of interests or class antagonisms; fundamental laws of 
universal development and their specific form in biology 
and sociology,. . . what does all this matter to a bour- 
geois Darwinian, so long as he can use vague analogies 
to blindfold himself and others and shut out disagree- 
able facts? 

What would Haeckel say of a proletarian thinker, 
who would mix biological facts as recklessly together 
as he does economic facts? The limits of cognition of 
bourgeois Darwinians are reached as soon as human his- 
tory comes under discussion. 

Where bourgeois Darwinism fears to tread, and 
where bourgeois political economy has failed, there pro- 
letarian science takes up the thread and advances with- 
out fear of consequences. 

"The anatomy of civic society is to be sought in po- 
litical economy." t 

These words reveal a secret, which neither bourgeois 
political economists nor bourgeois Darwinists have 
grasped to this day. If bourgeois Darwinians make a 
pretense of looking down upon political economy and 

t, p. 190. 



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60 MARXIAN ECONOMICS 

denying that it is a science, they may settle that point 
with their bourgeois colleagues, to whom it applies. It 
ceased to be a fact, however, when Marx came upon the 
scene with his work. He made a science of political 
economy, and he based it upon so secure a foundation, 
that there is now less purely theoretical speculation and 
more certainty of results in this field than there is in 
that of biology and natural sciences in general, where 
scientists still operate with some very vague and un- 
proven theories. 

Bourgeois Darwinians may make a note of this. 

Marx discovered the specific laws of social develop- 
ment among human beings. He laid bare the specific 
distinction of economic division of labor from biological 
division of labor. But while doing this, it never occur- 
red to him to disregard the results of Darwin's work. 
On the contrary, he knew the art of combining Darwin's 
results with his own, without doing violence to either! 

Read, for instance, the following passage : ". . . . the 
conversion of fractional work into the life-calling of one 
man, corresponds to the tendency shown by earlier so- 
cieties, to make trades hereditary; either to petrify them 
into castes, or whenever definite historical conditions be- 
get in the individual a tendency to vary in a manner in- 
compatible with the nature of castes, to ossify them into 
guilds. Castes and guilds arise from the action of the 
same natural law, that regulates the differentiation of 
plants and animals into species and varieties, except that, 
when a certain degree of development is reached, the 
heredity of castes and the exclusiveness of guilds are or- 
dained as a law of society." * 



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BIOLOGICAL AND ECONOMIC DIVISION OP LABOR 61 

Marx says here in plain words, that the hereditary 
transmission of some special skill from generation to 
generation produced certain professional groups in the 
same way that natural selection transmits certain differ- 
entiations among animals and plants and creates new 
species or varities, and that, when this stage of develop- 
ment has been reached, a social law steps in and petri- 
fies these natural groups into castes or ossifies them into 
guilds. He makes a dialectic use of Darwinism and his 
own economic theories. 

Yet this passage, and similar ones, have been inter- 
preted by some bourgeois Darwinians as proofs for the 
biological basis of economics, and elaborated into the 
grotesque conception that economic classes, and even 
value and surplus-value, are "biological categories." 

So far as the above passage from Marx, and similar 
ones, offer any ground for reserve, they do so only on 
their biological, not on their economic side. And this 
is not the fault of Marxian, but of Darwinian theories. 
It is doubtful, whether technical skill is transmitted by 
heredity, or, if it is, Darwinism has not yet given a clear 
explanation of the interaction of plasmatic and somatic 
processes, by which this must be accomplished. 

But the economic theories of Marx have stood the 
test and have not been shaken in their fundamentals by 
any revisionism inside of the Socialist camp or bourgeois 
critics outside of it. That is more than bourgeois Dar- 
winism can claim for itself. 

No "biological synthesis" will ever show how eco- 
nomic classes are formed and economic systems trans- 
formed. Marx's economic theories, on the other hand, 
have clearly revealed the way, in which technical ad- 
vance transforms modes of production, creates new eco- 

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62 MARXIAN ECONOMICS 

nomic classes and new economic categories, produces dif- 
ferent political institutions, molds marriage relations and 
laws, and forces the entire physiological and thought life 
of mankind into definite directions. And so far as his 
work has been supplemented by some of his co-workers 
and followers, it has not been weakened, but strength- 
ened. 



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SOCIETIES WITHOUT CAPITAL 

It is an everlasting pity, that Henry George and 
Roscher never had an opportunity to test their theory of 
savage "capitalists" by actual experience among savages. 
It would have been as effective in demonstrating to them 
the difference between grey theory and green practice 
as the dull thud of a policeman's club upon the head of 
a striking laborer is in demonstrating the difference be- 
tween a sentimental identity of interests and an actual 
class-struggle. 

George would have discovered in a very short time, 
that savages may worship many fetishes, but that the 
fetish of private property in fruit trees, and of private 
property in natural wealth in general, was not one of 
them. 

Roscher would have found, that building a boat and 
knitting a fishing net with his bare hands, which implies 
getting the material for these things from the wilderness 
with his bare hands, is not as easy as sitting in his grand- 
father's easy-chair with felt slippers and a long pipe and 
writing about it. Of course, no savage would have 
asked him to "divide up" his "capital" of rotten fish with 



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64 MARXIAN ECONOMICS 

the rest of the tribe. But if Roscher could have accom- 
plished the miracle of building a boat and knitting a 
fishing net with his bare fists, it would have taken more 
than professorial flubdub to convince his savages, that 
the boat and net were not made for the whole tribe. 

George and Roscher might have shouted for the po- 
lice and for injunctions and militia till they were black 
in the face. The savages would have looked at them 
with pity and concluded that both George and Roscher 
had wheels in their heads. In this respect they would 
have been nearer the truth than most of their followers 
in modern times. 

No matter in what historical or pre-historical period 
we investigate the social life of men up to the middle 
stage of barbarism, we find that they knew no other 
private property but that in small personal belongings, 
but that even in this respect there was no strict attempt 
to prevent others from making use of another's weapons, 
skins, dishes, etc We find that land, boats, fishing nets, 
tents, etc., were common property, if not always in fact, 
then at least in principle, always subject to the common 
vote. 

But even if George would have been permitted to 
pick "his" fruit tree, and Roscher to manufacture and 
take charge of "his" boat and fishing net, they would 
have been convinced with lightning rapidity, and without 
any "recasting" of political economy, that this was by 
common consent merely a primitive form of division of 
labor. It would have meant simply that these were their 
particular jobs, assigned to them in consideration of their 
special skill, and that they were expected to "exchange" 
the fruit of their labor with that of the labor of other 
members of the tribe without any of that haggling and 

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SOCIETIES WITHOUT CAPITAL 6B 

*tean shenanigan which go with "capital." They might 
have continued this sort of exchange to the end of time 
without being able to save up a farthing of "capital." 

These are facts, which had been well established long 
before either George or Roscher swaggered upon the 
scene with all the bravado of scientific quacks. Any one 
aspiring to the right of being classed as an ordinary sci- 
entist, let alone one aspiring to the distinction of being 
the scientific economist, should have had these and simi- 
lar facts at his fingers' ends before opening his mouth* 
on the subject of political economy. And so long as their 
followers persist in bringing forward such claims, con- 
trary to all canons of fairness and equity assumed to be 
valid even in bourgeois ethics, their masters are fair 
game for those whose historical work is attacked or ob- 
structed by such bogus science. 

In primitive human societies, no man thinks of rent- 
ing any land, trees, caves, tents, tools, etc., to another. 
No one produces anything with the idea of selling it 
Above all, no man tries to make of production or ex- 
change a means of getting a "profit" out of any other 
member of his tribe. In the most primitive stages, the 
tribes did not even have any use for captured enemies. 
They had no use for them as slaves. They could only 
kill them or adopt them as equals in their sex organiza- 
tions (gentes). If Haeckel had paid just one wee mite 
of attention to this long known fact of anthropology, he 
would have had a glimpse of the truth, that mere phys- 
iological superiority is not always and everywhere a 
justification for making slaves of inferior types of peo- 
ple. And then his grotesque analogy between animal 
and human slave "states" would never have disgraced 
the pages of scientific literature. 

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66 MARXIAN ECONOMICS 

Within each tribe, land, tools, weapons, etc., were not 
capital, but just means of production. Caves, tents, huts, 
were not means of exploitation, but just shelter. Nuts, 
tubers, fish, venison, domestic animals, etc., were not 
commodities for sale, but articles of consumption or use. 
And so long as there was no production for sale based 
on the exploitation of one economic class by another, 
there was no capital. 

Society was then still on an overwhelmingly natural 
basis. The biological processes, and the division of so- 
cial labor based on sex division, overshadowed the pro- 
ductive activity, even when other forms of economic 
division of labor of men ran side by side with it, and 
the whole weight of the struggle against nature pressed 
upon this primitive social formation. Blood kinship was 
the red bond, which held the groups together, and no 
economic antagonism could arise on this primitive basis 
and disrupt the intimate bonds of social life. 

This is not a soil from which capital can spring. Be- 
fore any such relations as those of capital can arise, the 
bonds of blood kinship must be loosened and severed, 
the productivity of labor must be increased, and produc- 
tion for consumption must give way wholly or for the 
greater part to production for exchange at a profit. 

"Capital with its accompanying relations springs up 
from an economic soil that is the product of a long proc- 
ess of development. The productiveness of labor that 
serves as its foundation and starting point, is a gift, not 
of nature, but of a history embracing thousands of cen- 
turies." (Karl Marx, Capital, Vol. I, Part V, Chapter 
XVI, p. 5S2.) 

The annalists of the European nations, with their 
ephemeral records, never saw beyond the tips of their 



WITHOUT CAPITAL 87 

dust-sprinkled noses. That such a thing as a human 
development from a lower stage than civilization, and 
lasting hundreds of thousands of years before the time 
recorded by the Bible, should ever have existed, seemed 
preposterous to them. Yet the more we become familiar 
with the records of Oriental nations, the more we find 
that the facts now unearthed by geologists, ethnologists, 
anthropologists, palaeontologists, as the latest results of 
modern science, were known, even if only in a mythical 
form, to the historians of the Indians and Chinese. 

It is the fashion in certain circles to poohpooh the 
idea of a society of tree people and cave people as much 
as one million years ago. Even many modern scientists, 
who are considered great authorities in measuring his- 
torical periods, have tried to reduce this period to from 
200,000 to 100,000 years. Yet in the annals of the Chi- 
nese, men are supposed to have existed two millions of 
years before Confucius, who lived about 500 years before 
Christ. Among some modern scientists, the idea of tree 
people and fire people, which Lewis H. Morgan has first 
systematically classified, and which has since been more 
and more strengthened by the results of geological and 
ethnological discoveries, is still flouted as a scientific 
fable, in spite of all the palpable facts which establish 
these things well beyond the realm of mere theories. Yet 
these stages are chronicled in the form of legends in the 
Chinese annals, without the supernatural mysteries 
thrown about the early beginnings of man by the Jewish 
records. Yew-Chaou-She (The Nest-Having) is cred- 
ited with teaching people to build huts in trees, and Suy- 
Jin-She (The Fire-Producer), his successor, is credited 
with the discovery of fire. The discovery of iron and 
the invention of the plow are laid before the great flood 

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68 MARXIAN ECONOMICS 

by the Chinese historians. The only thing which shows 
the hand of the ruling class in these Chinese legends is 
that these discoveries and inventions are attributed to 
individual rulers, instead of to the common labor of con- 
sanguine clansmen. But they are not surrounded by 
that supernatural halo, which is stamped so offensively 
upon the pages of Occidental records. The great flood 
is recorded by the Chinese, not as a sentence inflicted by 
a vengeful god upon mankind for their sins, but as a 
natural inundation, and the draining off of the waters is 
credited to the genius of Yu the Great, who ascended the 
throne in 2205 B. C. 

What has been glorified for two milleniums of Chris- 
tian civilization as divine wisdom and a revelation of a 
supernatural love, is proclaimed as a natural doctrine of 
ethics in clear and undogmatical language in the writ- 
ings of Confucius. In fact, Confucius has not only an- 
ticipated Christ, but also the great materialist philoso- 
phers of the bourgeoisie. In many respects he was closer 
to what we are now compelled to defend as the positive 
outcome of philosophy and the epochmaking achievement 
of our revolutionary dialectic monist Josef Dietzgen, 
than most of the spokesmen of bourgeois materialism. * 

•) In his "Great Learning," Confucius has written a priml. 
live materialist conception of society, and anticipated the 
French materialists of the 18th century. In his "Doctrine ol 
the Mean." he has given a materialist outline of the mind and 
anticipated Hume and Kant. In hla "Analects," he has antici- 
pated Christ. "The teachings of Confucius are a system o( 
Individual, social, and political Ethics, not of Religion, in the 
ordinary acceptation of the term. Five centuries before Jesus 
appeared upon earth, Confucius save utterance to the precise 
thought of the Golden Rule, and In very nearly the same 
words. Having: been asked. "Is there not one word which may 
serve as a rule of practice for all one's life?" Confucius re- 
plied: "Is not Reciprocity such a word? What yon do noi 
lTnnt done to yourself do not do to others." (Analects, Book 
XV.) But there is nowhere any clear Indication that he recog- 
nized the existence of a Supreme Being, the Ruler of all things 
His philosophy, whether found in his own writings, or 



SOCIETIES WITHOUT. CAPITAL 69 

What the ancient Chinaman knew and expressed in 
language which a child can grasp, has been muddled and 
mutilated by the Indian mystics, Grecian idealist philos- 
ophers, Christian theologians and bourgeois philosophers. 
Everywhere the revamped edition of the Jewish Jehovah 
has left its blurring imprint, and so it is no wonder that 
we find it even in the pages of so sombre and dismal a 
science as bourgeois political economy. 

Capital is supposed to be a mystic something, which 
creates profit out of nothing by some alchemy of its own. 
The productivity of labor, this great impelling force of 
social progress, instead of being recognized as the cre- 
ator of capital, is regarded as the creature of capital 
The laborer, this veritable social creator, is hitched to 
the yoke of his own creation, and the drone, the capital- 
ist, rides supinely upon creator and creation as a ruler 
by supernatural grace. 

We will leave it to the bourgeois economists and an- 
thropologists to settle this difficulty among themselves. 
For us it does not exist any longer, thanks to the work 
of Marx. 

We know that wherever social organizations are 
founded upon blood kinship, where neither production 
for sale nor exchange for profit exists, there can be no 
capital. It cannot develop there, unless circumstances 
change, and even in the transition period to other social 
systems preceding modern capitalism it can develop only 
under exceptional circumstances and as a side-issue with- 
out any dominating power. And if we did not have all 

in the records of his oral teachings, aa handed down In the 
Analects, relates wholly to the life that now la." (The Rld- 
path Library of Universal Literature, vol. VI, p. 336-337.) Of 
course, all of the statements of Confucius are necessarily va- 
gue . and merely assertive without proof. But nevertheless 
they express very clearly a tendency to dwell on natural facts 
rather than Introspective speculations. 



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TO MARXIAN ECONOMICS 

the facts of history to prove it, we should still be backed 
up by the testimony of every bourgeois anthropologist, 
who studies primitive societies at first hand. Whether 
we look for proof in ancient records, or in modern scien- 
tific analyses, the result is always the same. There is 
no such thing as capital among them. 

Of course, whenever they have any sort of primitive 
division of labor aside from that between the two sexes, 
they also have exchange within the tribe or with other 
tribes. For such a division of labor always implies and 
carries with it an increase in the productivity of labor, 
which permits of the exemption of some members of 
each tribe from direct production of necessities of life, 
in order that they may serve the community by their 
special skill. But this primitive exchange lacks the 
typical feature of capitalist exchange, the sale of goods 
for profits. Particularly does it lack the whole basis of 
capitalist production and exchange, the "free" sale of 
labor-power. It is a direct exchange of goods for con- 
sumption or use, not a buying and selling for the purpose 
of making a profit and accumulating capital. 

The American Indians knew this primitive exchange 
well. For instance, in Georgia the tradition has been pre- 
served, "that among the Indians who inhabited the moun- 
tains, there was a certain number or class who devoted 
their time and attention to the manufacture of these darts 
(flint arrows). That as soon as they had prepared a 
general supply, they left their mountain homes and vis- 
ited the sea-board and intermediate localities, exchang- 
ing their spear and arrowheads for other articles not to 
be readily obtained in the region where they inhabited".* 

•) Charles C Jones, Indian Remains In Southern Georgia, 
Address delivered before the Georgia Historical Society, Sa- 
vannah, 1869, p. 19.— Mr, Jones Incidentally makes the Inter- 



SOCIETIES WITHOUT CAPITAL 71 

This same exchange for use is still found among 
many primitive peoples. Quite recently Professor Fred- 
erick Starr, of Chicago university, testified to its exist- 
ence among African tribes in the Congo. He had to 
barter- with the natives for whatever he wanted. "The 
best thing for small purchases," he said to a reporter of 
a daily, "is salt, and for large ones a piece of cloth. The 
cloth is in strips of eight yards, though the fathom is the 
unit used instead of a yard. The eight yard is a four 
fathom piece." 

But we need not go to the most primitive peoples in 
order to find societies without capital. We can find 
very highly developed societies in ancient and modern 
history, which had no capital, or in which capital was 
just in its first stages of development and played a very 
insignificant role, existing barely on sufferance. 

The developed states of Assyria, Babylonia, Egypt, 
of pre-Christian periods, were based on a co-operative 
production for direct use, and barter with other nations 
was overwhelmingly for use. The states of the Peruv- 
ian Incas, of the Mexican Aztecs, of the Natchez Indians 



eating discovery that "these persons never mingled In the 
excitements of war; that to them a free pass-port was at all 
times granted, even among tribes actually at variance with 
that of Which they were members; that their avocation was 
esteemed honorable, and they themselves treated with univ- 
ersal hospitality. If such was the case. It was surely a re- 
markable and Interesting recognition of the claims of the ma- 
nufacturer by an untutored race."— The primitive Indians rose 
SO per cent In the estimation of Mr, Jones, when he thought 
that they, like modern "civilized" Americana, honored the 
"manufacturer," who swapped arirfa and ammunition with 
friend and foe and proved hie patriotism by carefully Staying 
away from "the excitements of war" and manufacturing some 
more war materials for his private profit. Mr. Jonea merely 
overlooked the trifling clrcumatance, that the Indian was 
really a "manufacturer" In the strict meaning of the term, 
since he exchanged the products of his own labor. And he had 
to divide the proceeds of hie exchange with the other mem* 
hers of the tribe. The manufacturer of the Jonea type manu- 
factures only hot air and steals the products of the labor and 
bloody sacrifices of others. 

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?S MARXIAN ECONOMICS 

in the Mississippi Valley, were societies without capital, 
without private property in land and means of produc- 
tion. They were societies in the middle stage of Bar- 
barism, still held together largely by bonds of blood kin- 
ship. Wherever a conquered race had been assimilated 
by such societies and assigned the station of a general 
laboring class, the descendants of the oldest gentes had 
developed into an aristocratic hierarchy, but without any 
private ownership of land, laborers, or means of produc- 
tion. With all their division of social labor, they had 
not yet reached that stage, in which social division of 
labor separates town and country into antagonistic 
poles. 

Neither in the Grecian republic, nor in the Roman 
republics and empire, did anything like modern indus- 
trial capital exist. Where slave labor had become the 
universal basis of production, and where private prop- 
erty in land and means of production had become estab- 
lished, productivity increased sufficiently to give rise to 
commerce, and with it to merchants' capital and interest- 
bearing capital. But even so production remained over- 
whelmingly a production for direct use. 

All through the stage, of feudalism, until the begin- 
ning of the 16th century, all European states, with the 
exception of the rising merchant towns, were based on 
serf labor intended for direct use. The merchants and 
their capital were but froth on the surface of production 
for direct consumption. The medieval handicrafts in 
the cities acted as a check upon the development of mer- 
chants', and thus of industrial, capital. 

"The rales of the guilds, ... by limiting most strictly 
the number of apprentices and journeymen that a single 
master could employ, prevented him from becoming a 



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SOCIETIES WITHOUT CAPITAL 78 

capitalist. Moreover, he could not employ his journey- 
men in any other handicraft than the one in which he 
was a master. The guilds zealously repelled every en- 
croachment by the capital of the merchants, the only 
form of free capital with which they came in contact. 
A merchant could buy every kind of commodity, but 
labor as a commodity he could not buy." * And so long 
as he could not buy the labor power of dependent men, 
he could not become an industrial capitalist. 

It was not until the beginning of the 16th century 
that the conditions for the rise of industrial capital took 
shape, and it required the struggles of a century to pave 
the way for its supremacy over feudalism. 

Capital, then, has not always existed. On the con- 
trary, in the thousands of centuries of human history, it 
occupies but a comparatively insignificant number of 
centuries. And we shall see that its days are nearly num- 
bered, and that it will soon pass into the grave of oblivion. 

•) Karl Marr, Capital, vol. 1, chapter XXV, 4. p. SSi. 



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CHAPTER VI. 

THE RISE OF COMMERCE 

The primitive social organizations of men worked 
from hand to mouth, as it were. Only under very ex- 
ceptional circumstances could any surplus of necessities 
of life be secured. When food was scarce, shelter and 
clothing scanty, all members of the social group suffered 
equally. When life was easy, all had plenty. Under 
no circumstances could any private individual glut him- 
self at the expense of the others. A surplus of products 
could never mean lack of employment and starvation for 
any member of the group, as it does as a rule under cap- 
italist production for the great majority. 

Exchange of products could not assume any signifi- 
cance under such conditions. 

But gradually the productivity of these primitive 
groups increases in various ways, owing to the difference 
in natural resources, births, division of labor, geograph- 
ical and climatic changes. ". There springs up natur- 
ally a division of labor, caused by differences of sex and 
age, a division that is consequently based on a purely 
physiological foundation, which division enlarges its 
materials by the expansion of the community, by the in- 



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THE RISE OP COMMERCE 7& 

crease of population, and more especially by the con- 
flicts between different tribes, and the subjugation of one 
tribe by another. . . . Different communities find different 
means of production and different means of subsistence 
in their natural environment. Hence their modes of 
production, and of living, and their products are differ- 
ent. It is this spontaneously developed difference which, 
when different communities come in contact, calls forth 
the mutual exchange of products, and the consequent 
gradual conversion of these products into commodities."* 

Among the American tribes, this natural basis of the 
division of labor is outgrown, when the llama and the 
turkey have become domesticated and abundant, when 
corn and vegetables are cultivated regularly, when var- 
ious metals have been discovered and the art of fashion- 
ing them learned. Among the Indo-European races, a 
change comes through the domestication of cattle and 
horses, and segregation of stock raising tribes from the 
rest of the barbarians. 

"The segregation of cattle raising tribes from the 
rest of the barbarians constitutes the first great division 
of social labor This for the first time made a regu- 
lar exchange of products possible. In former stages, ex- 
change could only take place occasionally, and an excep- 
tional ability in manufacturing weapons and tools may 
have led to a transient division of labor. For example, 
unquestionable remains of workshops for stone imple- 
ments of the neolithic period have been found in many 
places. The artists who developed their ability in those 
shops most probably worked for the collectivity, as did 
the artisans of the Indian gentile order. At any rate, 
no other exchange than that within the tribe could exist 

*) Karl Marx, Capital, vol. I, chapter XIV, 4, p. SSS. 

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70 MARXIAN ECONOMICS 

in that stage, and even that was an exception. But 
after the segregation of the stock raising tribes we find 
all the conditions favorable to an exchange between 
groups of different tribes, and the further development 
of this mode of trading into a fixed institution." * 

Whether exchange with other tribes was, or was not, 
possible before the middle stage of barbarism, so much 
is certain that it was a still greater exception than ex- 
change within the tribe. It could not become the rule, 
in the Old World, until the division of labor between 
stock raising and other tribes had created the prerequi- 
sites for its establishment. * 

Exchange with consanguine relatives within the tribe* 
and exchange with strangers outside of the tribe, were 
two different propositions. To take an unfair advantage 
of a gentile brother was contrary to the consanguine 
code of morals. But it was another matter to get the 
best of strangers. They were considered more or less 
as enemies, according to the degree of friction that might 
exist between the tribes, and to cheat or rob them in 
peace or war was not only permitted, but a point of 
"honor." 

The trading ground was in these days always on a 
neutral ground between contiguous tribal territories. The 
Anglo-Saxon mark (still preserved in market) is de- 
rived from a root which means hunting ground, a place 
where wild animals lived. The traders met in these wild 
places, on neutral ground, away from their little village 
clearings, and transacted business with eyes alert and 
ears pricked, in the wild animal country. And they were 
no more watchful of wild animals than they were of one 



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THE RISE OP COMMERCE 7? 

another. It was a case of Greek meeting Greek, and 
often enough, when bargaining became too flagrantly a 
cheating match, or when no bargain could be struck on 
account of stubbornness on both sides, the peaceful mar- 
ket may have been suddenly transformed into a tumultu- 
ous arena, in which men fought as fiercely over the pos- 
session of their products as wild animals fight over their 
prey. 

The old English word monger, a term synonymous 
with dealer, is descended from an old Aryan root mean- 
ing to deceive, and it requires no deep penetration to 
realize that the cattle and horse trader of primitive times 
is the forbear of the modern horse swappers, who still 
have the reputation of being the most villainously un- 
scrupulous and callous cheats. 

The requirements of commerce have thus from the 
very outset played discordant melodies upon the heart- 
strings of the human soul. The primitive mark was the 
foretype of the modern international market, and com- 
merce is still a disguised state of war, in which the in- 
stincts of brotherhood, bred in men by the primitive 
blood kinship, give way to the cunning and fierce dis- 
trust of the struggle for existence. 

Modern civilization has not softened, but intensified 
these antagonisms. It has torn the bonds of kinship and 
turned the whole world, regardless of sexual relation- 
ships, into a mart, in which men, women, and children 
are taught by necessity to stifle all feelings of sympathy 
and to forget all the milder impulses, which religious 
creeds have carried down through thousands of years of 
history as faint echoes of a time, when at least some 
human beings could be kind companions amid a wilder- 
ness of enemies. 

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78 MARXIAN ECONOMICS 

Eugene V. Debs, speaking at a meeting in Hull 
House, in Chicago, some years ago, strikingly expressed 
this in the following words, to the great merriment of 
the fashionable ladies, who had come to hear the prole- 
tarian orator : "Look at two church deacons sitting side 
by side singing hymns on Sunday, and you would think 
they were the very soul of brotherhood. But you look 
at the same two deacons on Monday, when they are 
swapping horses, and you will get a different opinion 
of them. Each wants to do to the other what the other 
wants to do to him. That is the Golden Rule of busi- 
ness. And business it business." 

Business and the Golden Rule are antipodes. They 
are not on speaking terms. Everything is fair in Love 
and War — and in Business. So it was in primitive ex- 
change. It was never intended to be an exchange of 
equivalents. And it is not intended to be so today. All 
this twaddle of a fair profit is idle hypocrisy. The only 
fair exchange is an exchange of equivalents. And at that 
sort of exchange no profit can be made. None was made 
by any exchange within the tribe between consanguine 
relatives. But is was different in exchange on the mark, 
on the market, with strangers. 

With the development of exchange, in the wake of 
the great division of social labor between tribes with 
different kinds of production, the ax was laid at the root 
of all social institutions of primitive group life. 

How the development of exchange between different 
tribes led to the transformation of tribal business into 
private business and tribal property into private property, 
how other social divisions of labor followed in the wake 
of the first one, how particularly the great antagonism 
between agriculture and handicrafts, between country 

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THE RISE OF COMMERCE 79 

and city, arose, how slavery became an established insti- 
tution, how the gentile bonds were torn asunder and 
brothers of the same blood divided into rulers and ruled, 
how the oppressive state of ruling classes was formed, 
all this my be read in the classic description given by 
Engels in his "Origin of the Family." 

What interests us most here is that commerce was 
not, as generally represented by bourgeois historians, the 
great herald of peace, but on the contrary, the very prin- 
ciple which stimulated the most brutal passions in men 
and trod every gentler feeling under foot in the insati- 
able greed for plunder. The producing, not the trading, 
nations were really those, who were most interested in 
maintaining peace, and who bred the gentlest and most 
generous people. Even when slavery arose among them 
with its inherent cruelties, it was not merciless in its 
exploitation, because it served only the needs of direct 
use, and promoted exchange with outsiders only as an 
incident. And even such exchange was an exchange be- 
tween direct consumers. 

The Peruvians and Mexicans at the time of the con- 
quest are described as gentle and peaceful people, and 
they were so trusting, that they fell an easy prey to the 
treacherous conquistadores, those medieval imitators of 
the ancient Phoenician and Grecian merchants. 

It was when exchange, instead of serving the needs 
of direct consumers, fell into the hands of a class of 
parasitic middlemen, whose ruling passion was to get 
something for nothing by despoiling both sellers and buy- 
ers, that patriarchal servitude was turned into an instru- 
ment of torture, the patriarch transformed into a greedy 
tyrant, and the dawn of civilization inaugurated with 
such plundering, pillaging, ravishing, kidnapping, burn- 



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80 MARXIAN ECONOMICS 

ing, as had never been witnessed before by men. Com- 
pared to the monstrous destruction spread over the face 
of the globe by the civilized merchant, the border war- 
fare of the barbarian and savage tribes was mild,, It was 
sporadic, unwillingly waged under the pressure of in- 
creasing population. It had an element of straightfor- 
ward chivalry in it, which struck every close student of 
savage and barbarian peoples. 

But the civilized trader made it his business to turn 
the earth into a charnel house, to leave a trail of smok- 
ing ruins in his track, to take mean advantage of the 
gentle and chivalrous qualities of human nature. The 
ancient trader bequeathed his treacherous spirit to the 
ruling classes, who followed after him, and with it the 
principle of spoils, which is still the prime incentive of 
all the great princes of industry. 

The historical materialism of Marx has taught us that 
this was inevitable, and that no sentimental sniveling over 
things that might have been, or that might be, ever 
changed, or will ever change, the course of history by 
one hair's breadth. But in reply to the hypocritical and 
lying cant of the official historians' and schoolmen, we 
point to these irrefutable facts of history as it was, and 
as it is, and as it will be, so long as a ruling class, driven 
by the economic and political laws of its system, shall 
march with iron heels over the gentler instincts of our 
race. 



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CHAPTER Vn. 

COMMODITIES AND MONEY 

So long as human beings produced necessities (food, 
clothing, shelter), made tools, weapons, implements, do- 
mesticated and raised animals, only for direct consump- 
tion and use, no question could be raised concerning any 
commercial properties of things. Unless a thing served 
some human need, or at least ministered in some way to 
human comfort or pleasure, it was not taken from na- 
ture's storehouse nor produced by human labor. 

Neither could there be any doubt as to where all so- 
cial products came from. Nature created them and human 
labor modified them to suit man's requirements. Labor 
is their father and the earth their mother, as William 
Petty has it 

Things had a significance only as utilities, as use- 
values. And so far as human labor is creator of use- 
values, "it is a necessary condition, independent of all 
forms of society, for the existence of the human race; 
it is an eternal nature-imposed necessity, without which 
there can be no material exchanges between man and na- 
ture, and therefore no life." * 

*) Earl Marx. Capital, volume X, chapter J, t, p. 60. 

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83 MARXIAN ECONOMICS 

But when exchange arose, first as simple barter for 
use, later as commerce, that is, as buying for the sake 
of selling at a profit, the question had to be faced : "How 
much of my goods shall I give for those of another, and 
how much shall that other give me for mine?" 

And this question assumed an overwhelming import- 
ance, when commerce remained no longer a mere side- 
issue, compared to production for use, but when produc- 
tion rather became subordinate to commerce and was 
carried on primarily for the purposes of commerce, as it 
was when the bourgeois class gained control of European 
society to the extent that medieval feudalism was dis- 
solved. 

Now, this question concerned not so much the mere 
use-value of commodities, as their exchange-value. To 
be sure, things without use-value cannot be offered for 
sale as commodities, because no one will buy a thing, un- 
less he can use it. Even if the merchant himself does 
not care to use his commodities for his own consump- 
tion, but uses only their exchange-value, still some one 
must buy them for the sake of their use-value. 

In primitive exchange, where use-value was directly 
exchanged for use-value, by the producers themselves, 
the question of the exchange-value of the articles was not 
of such prime importance as it became when commerce 
had developed into a regular business. For the trading 
consumer, the use-value overshadowed the exchange- 
value. Here it was need pitted against need, and cunning 
against cunning, for the sake of getting as much use- 
value as possible for as little use-value as possible. 

The producers, who thus exchanged their own goods, 
knew very well that these things were products of their 
own labor. The sweat of their brows was impressed upon 



COMMODITIES AND MONEY 83 

these things and the memory of the toil expended upon 
them lingered with these producers. Therefore they were 
loath to part with their products on easy terms. What 
decided the point here was mainly the intensity of the 
mutual wants. Those who needed the offered goods 
most would naturally be compelled to yield a point and 
offer greater inducements to those who could afford to 
forego the coveted things without hardship. And since 
only such goods were offered in exchange, as were not 
needed to supply the home demand, and only such things 
taken in exchange, as could not be secured in the home 
territory, there were as many different standards of ex- 
change as there were trading territories. 

Since supply and demand thus pressed directly upon 
natural wants of peoples, it is quite natural that supply 
and demand should be considered by them as the power 
which determined the quantity of use-values given and 
taken in exchange. 

But the merchant was not in the same position as the 
trading producers. Wherever trading nations developed, 
they represented comparatively small parasitic communi- 
ties wedged in between large producing nations. And 
where the merchants developed within a producing na- 
tion as a class, they were mere leeches preying upon 
friend and foe in the same way as trading nations preyed 
upon their producing neighbors. Commodities, therefore, 
were not products of labor in the eyes of the merchants, 
but things secured by superior cunning, fraud, robbery, 
pillage. And these things were not secured for the sake 
of their use-value, but for the sake of their exchange- 
value. True, the use-value of things still manifested it- 
self, also to the merchants, since the supply of them or 
demand for them depended upon the producers and con- 



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84 MARXIAN ECONOMICS 

sumers who offered or wanted them. But the merchant 
himself cared only for the exchange-value of things. To 
him, therefore, supply and demand appeared as the pow- 
ers, which decided, not the quantity of use-value to be 
given or taken, but the quantity of exchange-value. 

With his eyes riveted upon the exchange-value of 
things, the merchant came to the conclusion, that this 
value was something mysterious, something inherent in 
the commodities themselves, something intrinsic to their 
nature. And since he did not himself labor in their pro- 
duction, but busied himself solely with their circulation, 
it seemed to him that their value, and his profit, oozed 
in some magic way out of their pores through his ability 
to strike hard bargains. 

Various circumstances combined to strengthen this 
conception still more in the merchant's mind. 

For to the extent that exchange became a regular so- 
cial activity, and extended its circles more and more, 
overflowing its primitive tribal boundaries, breaking the 
ancient social bonds, and connecting home markets and 
international markets, the various local standards of ex- 
change, here cattle, there salt, there shells, there metals, 
yielded more and more to universal commodities, which 
were taken as universal equivalents for all other com- 
modities. And in the same measure in which such a uni- 
versal equivalent became accepted, its use-value receded 
out of sight and its exchange-value seemed to be a spe- 
cial endowment of its material substance. 

The ancient local equivalents were known to be pro- 
ducts of social labor. But these new universal equival- 
ents concealed their social character behind an assumed 
mask of intrinsic value, which they seemed to have every-'' 
where regardless of social relations. 



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COMMODITIES AND MONEY 86 

In this way, a universal equivalent assumes the form 
of money. 

"The particular kind of commodity to which it sticks 
is at first a matter of accident. Nevertheless there are 
two circumstances whose influence is decisive. The 
money-form attaches itself either to the most important 
articles of exchange from outside, and these in fact are 
primitive and natural forms in which the exchange-value 
of home-products finds expressions; or else it attaches 
itself to the object of utility that forms, like cattle, the 
chief portion of indigenous alienable wealth. Nomad 
races are the first to develop the money-form, because all 
their worldly goods consist of movable objects and are 
therefore directly alienable; and because their mode of 
life, by continually bringing them into contact with for- 
eign communities, solicits the exchange of products.* 

The advent of the money-form of a universal equival- 
ent tended to deepen the mystery, which hung about the 
exchange-value of commodities. More than ever this 
value seemed to be innate in the things themselves, par- 
ticularly in the money-commodity. 

Still other causes accentuated this tendency. 

Not every commodity is equally well adapted for the 
functions of money. Bulky and unwieldy things, which 
cannot be easily passed from hand to hand and divided 
into suitable portions, will not be as serviceable as small 
and readily divisible things. Commodities, which wear 
out quickly will not be as acceptable for the services of 
money as durable ones. 

It was at this stage that the discovery of precious me- 
tals in large quantities filled a long felt want. Gold and 

•) Karl Max-*, Capitol. Volume I, chapter II, p. 101. 

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86 MARXIAN ECONOMICS 

silver have all the natural properties of an ideal universal 
equivalent. They are easily divided, easily weighed, dur- 
able, and may be circulated without difficulty. 

Gold and silver seemed natural money, and they grad- 
ually assumed this function to the exclusion of all other 
commodities. 

In order to serve as money, a commodity must unite 
in itself the functions of a measure of value and a medium 
of circulation. Gold and silver were naturally fitted for 
this. And they had one quality, which made them par- 
ticularly dear to the hearts of the merchants : they could 
be hoarded indefinitely without spoiling. 

The exchange-value of a commodity expressed in 
terms of money is its price. Formerly prices were ex- 
pressed in quantities of the different commodities that 
were exchanged for one another. In such primitive ex- 
change, some commodities had to be measured by num- 
ber, others by weight, others estimated in bulk. Gold and 
silver simplified the transactions of commerce, for these 
metals could be easily weighed in any desirable quantities 
required in trading, and a small weight of them repre- 
sented a large value. 

If the exchange-value of other commodities had as- 
sumed the mysterious form of intrinsic value in the eyes 
of the merchants, because the labor that created both 
their use-value and exchange-value took place outside of 
the merchants' sphere, is it a wonder that the exchange- 
value of gold and silver assumed this mystic form even 
with greater apparent force? Gold and silver were pro- 
duced in the bowels of the earth in a way unknown to 
man, brought to light and passed from man to man by 
methods which often had every reason to shun inquiry. 
These metals were therefore the mysterious powers of 

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COMMODITIES AND MONEY 87 

value par excellence, and the exchange-values of other 
commodities strove for incarnation in them. 

When slave labor became the established form of so- 
cial production, as it did in the ancient civilizaton on the 
borders of the Mediterranean Sea and in Asia, the mys- 
terious nature of value was shrouded in so much greater 
obscurity. For the slaves were not considered worthy of 
recognition as human beings, and their labor was' not 
measured in terms of any value. So the exchange-value 
of commodities, and particularly of gold and silver, was 
gradually accepted as its own mysterious product, not 
only by the merchants, but by the people in general. 

This was the state of affairs, when the desire to con- 
trol the movements of gold and silver and to facilitate 
their circulation gave rise to the coining of these metals. 
Hitherto they had been exchanged in bulk (as bullion, 
dust, ornaments). They had to be weighed in bulk. Now 
the authorities (and this meant generally the ruling po- 
tentates) stepped in and placed their hand upon the 
money by claiming the exclusive privilege of coining it. 

So long as these metals had to be weighed in bulk, 
there had been at least the possibility of making the rela- 
tion between the unit of price, the measure of value, and 
the values of commodities in general, open to inspection. 
So long as one ounce of gold was paid for so and so 
many ounces of other commodities, there was some uni- 
versally known mathematical relation between gold as a 
unit of price, gold as a measure of value, and between 
this measure of value and the values of other commo- 
dities. If one ounce of gold was the unit of price, two, 
three, four, or more ounces could easily be expressed in 
terms of this unit. And if 5 ounces of gold paid for .100 
pounds of dates, in other words, if the value of 100 



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88 MARXIAN ECONOMICS 

pounds of dates was an equivalent for the value of 5 
ounces of gold (by agreement if not in fact), than the 
value of 200 pounds of dates was measured by that of 
10 ounces of gold, and so forth. 

But with the coining of gold and silver, this open 
numerical relation between the value of gold and silver 
and the value of other commodities was abolished. The 
weight of gold and silver contained in each coin was 
arbitrarily fixed by the authorities, and a certain denomi- 
nation of coin passed for a certain value, no matter 
whether that coin was newly minted or worn flat. 

The unit of price was now a certain coin, and the 
weight of the metal in that coin bore no organic relation 
whatever to its value or to the value of the commodities 
for which it was exchanged. 

The notions produced in the brains of the merchants, 
and of buyers and sellers generally, by this state of things 
were accepted as correct explanations of the true con- 
ditions underlying these surface indications. These no- 
tions were handed down from generation to generation, 
without much inquiry into their soundness. When the 
bourgeoisie required a clearer grasp of the forces that 
shaped themselves to bring the capitalist class into 
power, bourgeois political economy took up these ques- 
tions and juggled with these superficial notions for three 
centuries, without ever getting to the bottom of the mys- 
tery. 

Then Marx came upon the scene in the middle of the 
19th century and declared that it was the business of 
science, not to accept surface indications as true expla- 
nations, but to go to the bottom of the matter and find 
the underlying causes of the notions, which had domi- 
nated the minds of men for centuries. And he went to 



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COMMODITIES AND MONEY 89 

work discovering these causes. What he discovered we 
shall see in subsequent chapters. 

But even after he had placed his discoveries before 
the world, the political economists of the ruling classes 
persisted in teaching the superficial and grotesque jug- 
glery of the so-called classic economists, and in propa- 
gating notions which had been the outcome of conditions, 
in which everything combined to obliterate the actual 
source of exchange-value, the labor of the producing 
workers. And to this day you will hear these notions 
dished up as great learning in the universities of the rul- 
ing classes, and you will see the gilded youths struggling 
laboriously to assimilate the ideas of a dead civilization, 
under the impression that they are being equipped to 
solve the problems of present society. 



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CHAPTER VIII. 

THE DEVELOPMENT OF MERCHANTS' CAPITAL 

Commodities and money were the materials out of 
which the merchants built their fortunes. These materi- 
als were permanently available for them, wherever the 
ancient forms of gentilism had given way definitely to 
private property in land and other means of production. 

Not all nations of antiquity, in which an aristocracy 
developed, opened equally favorable opportunities to 
the traders. Where division of labor was solidified into 
castes, as it was in Egypt and India, the social conditions 
did not offer as wide a field to the merchant as they did 
in Greece and Rome, with their widespread systems of 
free producers. 

Yet it did not matter what might be the form of pro-' 
duction, whether it were patriarchal, tribal, or carried on 
under a system of castes or of slavery, so long as there 
was a surplus of goods that were taken to the markets 
as commodities, the merchants found a way to make 
themselves at home and to establish themselves as lords 
of the markets. 

But they could not make themselves lords of produc- 
tion, so long as their activity remained wholly confined 



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THE DEVELOPMENT OF MERCHANTS' CAPITAL 91 

to the sphere of circulation. They could, indeed, exert 
a strong influence upon production, but this influence 
could never be a constructive one. It could only be de- 
structive. Throughout the whole long period of its ex- 
istence from primitive beginnings to the end of its in- 
dependent existence in the 16th century, merchants' ca- 
pital exerted essentially a dissolving influence upon the 
productive activities of peoples. 

In the beginning, the merchants' capital merely per- 
forms the role of a middle man between spheres of pro- 
duction, which it does not control. Even where large 
commercial cities or whole trading nations developed in 
antiquity, their commerce merely promoted exchange be- 
tween the barbarian producers that surrounded them. 

But to the extent, that commerce extends its sphere 
and gains in importance, it makes its corrosive influence 
felt in the productive spheres which it despoils. The mer- 
chant has only one aim — to make a profit by buying and 
selling. To buy cheaply and to sell dearly is the secret 
of his wealth. Therefore he cannot and will not exchange 
equivalents. He buys at an arbitrary price and sells at 
an arbitrary price. The producers on either side may 
know the labor-time, which their articles have cost them. 
But this labor-time does not express itself as a value in 
the price of these articles, when they become commodi- 
ties. The merchant does not take the labor-value of com- 
modities into consideration at all. He simply compares 
the prices which he pays with the prices at which he sells. 
These prices are controlled by his class, so long as mer- 
chants' capital is the prevailing form of capital. 

Yet even so, the merchant cannot fix prices wholly 
at his own sweet will. The control of the markets and 
of prices by his class is not a consciously directed and 

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92 MARXIAN ECONOMICS 

combined control. It is rather a result of the intermittent 
and undisciplined interaction of individuals following 
their own selfish ends and thereby exerting unconsci- 
ously a check upon each others' greed- 
Even at the earliest stages of commerce, the social 
character pf the commodities and of their own activities 
makes itself felt to the merchants. They may haggle over 
prices with producers and consumers, and imagine that 
there is no limit below which they cannot depress the 
price to the producers, and no limit above which they 
cannot raise the price to the buyer. But they become 
gradually aware, that there are certain average limits 
above and below, beyond which they dare not venture, 
except on rare occasions. The lowest average limit at 
which they can buy is the price fixed by competition 
among sellers. The highest average limit at which they 
can sell is the price fixed by competition among mer- 
chants themselves. A merchant may manage under ex- 
ceptional circumstances to make an extra profit by buy- 
ing below this average or selling above it, but he soon 
becomes aware of the fact that there are certain forces, 
over which he has no control and to which he must bow. 
The natural result of this experience is to strengthen 
still more his belief in the mysterious immanent powers 
of value in commodities. 

This social power makes itself felt to the merchant in 
proportion as commerce assumes its typical features under 
the various modes of production which he exploits. It will 
be more easily defied by the merchant in his dealings 
with such direct producers as nomadic tribes and patri- 
archal communes than with slave-holding aristocrats and 
despotic caste states. The latter have more or less the 
same end in view as the merchant, and look upon labor 

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THE DEVELOPMENT OF MERCHANTS' CAPITAL 93 

with still greater disdain than he does himself. Compared 
to them he is himself an inferior. Their dominant aim 
is the accumulation of wealth, not the exchange of com- 
modities for the sake of using them. The only things 
which they are likely to covet for their own use are ar- 
ticles of luxury, ornaments, spices, etc. On the other 
hand, the primitive producers exchange things primarily 
with a view to obtaining articles for direct consumption, 
and this makes it easier for the merchant to take advant- 
age of their needs and get the best of the bargains. 

Under these circumstances, the merchants themselves, 
by their own activity, will gradually acquire a fair esti- 
mate of the equivalent nature of the value which they 
exchange. And in proportion as the social character of 
commodities expresses itself in the prices paid and re- 
ceived by the merchants, the comparison of the different 
prices of different markets will easily make it possible to 
strike a certain average between them, which will assume 
the aspect of the equivalent around which prices fluctu- 
ate. This equivalent may, or may not, be very near the 
actual labor-value of the various commodities. But this 
is immaterial at this stage, because labor-power it not 
bought and sold as a regular commodity. Its price does 
not bear any relation to the prices of commodities even 
where slaves are bought and sold, because these slaves 
are generally captives, are bought and sold in bulk, with- 
out any possibility of measuring the value of their labor, 
and perform their labor under conditions, in which the 
money-value of their productivity cannot be easily ascer- 
tained. 

Where the social division of labor between agricul- 
ture and town handicrafts promotes commerce within 
certain nations, it is evident that trading will exert a far 



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94 MARXIAN ECONOMICS 

greater influence upon the productive activity than it will 
when it is merely performing the role of a middle man 
between different producing nations.' But in any case, 
its influence is always primarily negative, corrosive, de- 
structive. 

The extent to which commerce can exert its blighting 
influence depends largely on the stability and resistance 
of the various modes of production. It will not be able 
to reach deeply into such systems as the Egyptian and 
Indian castes and communes, while it transforms ordi- 
nary divisions of labor quickly into a system of slavery 
and tends to make of partriarchal slavery a system of 
slavery producing surplus-products. 

Hand in hand with this internal development of com- 
merce goes the development of usurers' capital. Once 
that private ownership in land has become firmly estab- 
lished, and commerce developed to the point where it does 
no longer skim the cream off occasional surplus-products, 
but stimulates the steady increase of surplus-production, 
the small land owners easily fall a prey to the money- 
lender. A crop failure, the death of a cow or horse, a 
war, suffice to deliver the small land owner gagged and 
bound to the money-lender. 

All through antiquity we see, therefore, that mer- 
chants' capital assumes the form of commercial and fi- 
nancial (money-lenders') capital. But we see no other 
form of capital. Nowhere do we see any capital based 
on the direct sale and exploitation of the labor of free 
laborers for profit. The surplus-products which reach 
the markets are always an excess of production over the 
requirements of direct consumption, and capital plays its 
role as' an exploiter of surplus-production wholly or over- 
whelmingly in the sphere of circulation. 



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THE DEVELOPMENT OF MERCHANTS' CAPITAL 98 

In proportion as this development proceeds, com- 
mence extends its rule over industry. "In the pre-capi- 
talist stages of society, comnjerce rules industry. The 
reverse is true of modern society. Of course, commerce 
will have more or less of a reaction on the societies, be- 
tween which it is carried on. It will subject production 
more and more to exchange-value, by making enjoyments 
and subsistence more dependent upon the sale than upon 
the immediate use of the products. Thereby it dissolves 
old conditions. It increases the circulation of money. It 
seizes no longer merely upon the surplus of production, 
but corrodes production itself more and more, making 
entire lines of production dependent upon it. However, 
this dissolving effect depends to a large degree on the 
nature of the producing society. So long as merchants' 
capital promotes the exchange of products between un- 
developed societies, commerce does not only assume the 
shape of outbargaining and cheating, but also arises 
largely from these methods. Leaving aside the fact that 
it exploits the difference in the prices of production* of 
the various countries (and in this respect it tends to level 
and fix the values of commodities), those modes of pro- 
duction bring it about that merchants* capital appropri- 
ates to itself the overwhelming portion of the surplus- 
■ product, either in its capacity as a mediator between so- 
cieties, which are as yet largely engaged in the product 
tiori of use-values and for whose economic organization 
the sale of a portion of its product, which is transferred 
to the circulation, or any sale of products at their value, 
is of minor importance ; or, because under those former 
modes of production, the principal owners of the sur- 

i Marx means the cost price plus 



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96 MARXIAN ECONOMICS 

plus-product, with whom the merchant has to deal, are 
the slave holder, the feudal lord, the state (for instance, 
the oriental despot), and they represent the wealth and 
luxury, which the merchant tries to trap, as Adam Smith 

has correctly scented Merchants' capital in its 

supremacy everywhere stands for a system of robbery, 
and its development, among trading nations of old and 
new times, is always connected with plundering, piracy, 
snatching of slaves, conquest of colonies. See Carthage, 
Rome, and later the Venetians, Portuguese, Dutch, etc.* 

The circulation of money is everywhere accompanied 
by an accumulation of money, and the hoarded money in 
its turn assumes its own peculiar forms of circulation 
as interest-bearing capital. Both commercial capital and 
interest-bearing capital, once that they have assumed 
their typical forms, pass through a long series of adap- 
tations to different forms of production, and finally fall 
under the sway of industrial capital, wherever the disso- 
lution of the old societies leads to the rise of the modern 
industrial capitalist. 

Merchants' capital as the ruler of the sphere of cir- 
culation, exploiting the surplus-production of producers 
outside of its direct control, and industrial capital as the > 
ruler of the sphere of production, buying the labor-power 
of its own employes in the open market like any other 
commodity, exploiting its employes directly in the sphere 
of production, carrying on production for the sole pur- 
pose of accumulating industrial capital by the subjuga- 
tion of the sphere of circulation to its control, these 
are two significant forms of capital, each of which marks 
different historical epochs and the prevalence of differ- 

*) Karl Max-j] Capital, vol. Ill, chapter XX 

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THE DEVELOPMENT OF MERCHANTS' CAPITAL 97 

ent social systems. But you will look in vain for a char- 
acterization of these typical differences in the conceptions 
which the vulgar economists of the ruling classes palm 
off as genuine science on the unsuspecting and gullible 
pupils, who come to them for information. 



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CHAPTER IX. 

MERCHANTS' CAPITAL IN FEENICIA AND GREECE 

The earliest merchants who played a significant role 
among the nations of antiquity on the eastern borders 
of the Mediterranean Sea, were of Jewish descent. They 
had developed out of primitive nomadic tribes living on 
the borderland between the great barbarian societies of 
Assyria and Egypt. Wandering back and forth with 
their flocks between the Euphrates and the Nile, they 
formed the first chain of communication between the 
East and West, and blazed the first caravan routes be- 
tween the great centers of population in Mesopotamia 
and Northeast Africa, 

At the time when Assyria-Babylon and Egypt were 
fully matured, about 1500 B. C, these trading tribes hatt 
separated into the Phoenicians on the small belt of coast 
land west of the Lebanon, the Jews in the valley of the 
Jordan, and the Arabs on the fringes of the Arabian 
desert. 

The influence of their different geographical environ- 
ments assigned to each one of these nations a peculiar 
place in the commercial life of that period. 

The Phenicians, jammed into a rocky strip of coast 
not more than fourteen miles wide and 150 miles long 

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MERCHANTS' CAPITAL IN PHENICIA AND GREECE 99 

at its best, cast off their primitive social organization 
with a rapidity which was equalled but rarely in history. 
In! all of ancient history, the Ionian tribes of Greece and 
Asia Minor, who about 500 years later developed into 
the strongest commercial competitors of the Phenicians, 
under similar surroundings, are the only parallel. Al- 
ready in the year 1000 B. C, the Phenicians had great 
and flourishing sea ports in the cities of Sidon, Tyre, 
and lesser towns along the coast, and not only dominated 
the sea trade, but also drew a large portion of the over- 
land eastern and southern trade into their control. 

The Arabs, crowded into the waste places near the 
desert, remained essentially nomadic. Their mode of 
living and social organization perpetuated itself almost 
unchanged from age to age, and even when at a later 
period the Arabian conquests carried some of these tribes 
into northern Africa and lifted some of them into a com- 
mercial city life, the desert tribes continued in their 
backward existence and organization. It is not until 
modern industrial capitalism expands into these out-of- 
the-way regions and grips them with its strangle hold, 
that even these fossil organizations are pressed into ser- 
vice, disrupted, or completely annihilated and extin- 
guished. This has taken place in our own time, quite 
recently, and is still going on. The British and French 
invaders found these tribes still in the same conditions, 
in which their primitive ancestors lived, when Sidon and 
Tyre were in their pride. Now, as then, they attended 
to the overland carrying trade with their "ships of the 
desert," acted as scouts and guards for caravans, and, 
last but not least, accumulated wealth by plundering each 
others' patrons or levying tribute upon merchants for 
protection. 



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100 MARXIAN ECONOMICS 

The Jews performed the function of a half-way sta- 
tion from the time of the early beginnings of Phenician 
commerce to the final destruction of Jerusalem by the 
Romans and the dispersion of the Jewish people. When 
the Phenician commerce and handicrafts had already well 
developed and divided the Phenician people into rulers 
and ruled under a political system governed by the privi- 
leged, the Jews were still overwhelmingly nomadic and 
agricultural in patriarchal families. Their exposed po- 
sition between restless commercial and predatory tribes, 
great barbarian societies based on agriculture and always 
expanding with the increase of population. North and 
South, and the geographical location of their territory, 
which left them no outlet East and West but the sea and 
the desert, was not calculated to encourage settled hab- 
its and city life. Only during the breathing spells of 
history, as it were, did the Jews enjoy a settled life, and 
as soon as they did, the commercial environment was 
always ready to exert its corrosive influence and promote 
the rise of a class of privileged in league with a select 
hierarchy, after the model of commercial Phenicia and 
of barbarian Egypt, Babylon, Assyria, Persia. What 
the incessant stream of caravans inaugurated in a gentle 
and imperceptible way by slow degrees, that was com- 
pleted at one fell blow, again and again, by the invading 
armies that tramped through this region from north to 
south, and south to north, as long as the Jews existed 
as a nation. In such an environment, only a privileged 
few could accumulate spoils and wealth, and even these 
could escape with their spoils only under exceptional cir- . 
cumstances. In short, only the crafty merchant could 
survive here. The Jews became a tramping race of ped- 
dlers and money lenders, spreading by stealth over the 



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MERCHANTS' CAPITAL IN PHENICIA AND GREECE 101 

entire face of the ancient and medieval world, and exist- 
ing only on sufferance, but developing for this very rea- 
son a craftiness and resourcefulness, which made some 
of them the secret rulers of the fate of nations by means 
of their underground accumulation of gold and silver. 
Runnymede might have told a different tale and pro- 
duced something else than a Magna Charta, if King John 
could have squeezed as much gold out of his Jews as he 
needed, and many a modern war might have taken a dif- 
ferent course, had the secret stream of gold from the cof- 
fers of certain Jews flowed in a different direction or 
stopped its flow at certain critical points. * 

The commerce and city life of the Phenicians, with 
its international intercourse and experience, and the im- 
possibility of agricultural production on such territory as 
theirs, rapidly concentrated the energies of this nation 
upon intellectual pursuits and handicrafts, so that scien- 
tific exploration, voyages of discovery, and technical skill 
distinguished the Phenicians above all other nations of 
their time. With the extension of the commercial rela- 
tions necessarily came a demand for way stations along 
their regular routes. In the course of the centuries, the 
Phenicians planted trading posts in Cyprus and Crete, on 
the islands of the Aegean Sea, on the northern coast of 
Africa, and in southern Spain. Vast emporiums were 
built up at the strategic points of the overland routes to 
Persia and Egypt, and in the borderlands l)ack of them. 
Wherever the merchant went, his armed guards went 



*) Or course, this doos not mean that mere merchants* 
capital made history of Itself. it ia always the mode of pro- 
duction and Its technical basis and productivity, which are the 
fundamental causes of historical processes, and merchants' 
capital plays Its role, however significant and far-reaching that 
may be, as a mere accessory to these fundamental forces. 



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102 MARXIAN ECONOMICS 

with him, and stole producers and products, if they could 
not buy them. A steady stream of captured slaves 
poured into and out of these great trading posts. The 
gold and pearls of the East, the ivory of Central Africa, 
copper from Cyprus, silver from Spain, tin from the 
British Isles, frankincense from the interior of Arabia, 
linen from Egypt, cutlery from Damascus, pottery and 
ornaments from Greece, leopard's, tigers', and lions' 
skins from India and Africa, all passed through the hands 
of the Phenician merchants, and all left a golden sou- 
venir in their hands. 

Very little of all this real wealth, which expressed 
itself as gold in the merchants' hands, came from the la- 
bor of the Phenician artisans. With the exception of 
purple dyes and fine cutlery, the overwhelming bulk of 
the merchandise was the spoils of looting and cheating. 
And the whole vast organization rested in the last anal- 
ysts on the practical or virtual slavery of the vast multi- 
tudes, who tended cattle, raised agricultural foods, spun, 
weaved, fashioned, dug and grubbed in caste seclusion, 
under hierarchic despotism, or under the supervision of 
armed overseers. Into this dark foundation of the bar- 
barian societies, which the Phenician merchant despoiled, 
his influence never reached far enough to alter the steady 
march of their productive forces. He could filch their 
surplus from them, or rob them even of their nec- 
essities, but the foundation of the whole social struct- 
ure was not touched thereby. He might corrupt 
such small and fluctuating nations as the Jews, and even 
exert at short intervals an overwhelming influence upon 
them, as happened at Solomon's time, but he could never 
move the stolid bulk of the great barbarian societies in 
their quiet transition to a form of civilization, which 



MERCHANTS' CAPITAL IN PHENICIA AND GREECE 108 

must be the inevitable outcome of their peculiar modes 
of production. 

Neither did the merchant always have things his own 
way. Often the biter became the bitten. The covetous- 
ness of the rich families sooner or later led to jealousies 
and internecine civil wars. That is the ever recurring 
story of merchant cities or merchant republics, no matter 
what mode of production they despoiled or in what per- 
iod they lived. Only the methods of warfare changed. 

Nor were the despoiled nations always quiet sufferers. 
The aristocratic families of the nations trading with the 
Phenicians realized easily enough, that the wealth piling 
up in Sidon and Tyre was filched from them and their 
laboring people, and they waited only for a favorable 
opportunity to fall upon the Phenician caravans, levy 
tribute upon them, or invade their country. 

Already in 800 E. C. the results of internal conflicts 
and the dread of the encroaching Assyrian power drove 
many wealthy families out of Phenicia and led to the 
foundation of Carthage. And when Sargon and Nebu- 
chadnezzar overwhelmed the Phenicians and dragged 
their best families, like those of the Jews, off to the 
fields of Mesopotamia, a few of the richest Phenician 
families fled to Carthage. Of those who survived and 
remained, many followed the same course later. After 
the downfall of the Babylonian rulers, Tyre became trib- 
utary to Persia, and the more the strength of the mother 
country waned, the higher rose the star of Carthage. 
When Alexander the Great swept through this region, 
he destroyed a large part of Tyre and gave the final blow 
to Phenician power in Asia Minor. Carthage assumed 
the supremacy of the Mediterranean commerce. 

But even before this time, other competitors had 



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104 MARXIAN ECONOMICS 

arisen on the borders of the Mediterranean Sea. While 
Sidon and Tyre were yet in the bloom of their prosper- 
ity, the Ionian Greeks began their rapid upward career 
to merchant power. And at the same time the Dorians 
had crossed over to Greece, one tribe to become the foun- 
ders of Athens, the other of Sparta. 

In this overwhelmingly insular and peninsular en- 
vironment, the merchant found his natural sporting 
ground. Here, as previously in Phenicia, he quickly 
slipped out of the shell of the gentile organizations and 
created a world after his own image, with slavery as the 
natural basis of production and commercial and financial 
capital as the skimming ladle. The mountain tribes, and 
the overwhelmingly agricultural Spartans, who disdained 
commerce, here represented the inert and heavy mass; 
which pulled backward just as the barbarian societies in 
Asia had hung to the heels of Phenicia. 

It must not be supposed that the destructive influence 
of merchants' capital was always a reactionary one. On 
the contrary. It was often a revolutionary power, and 
particularly in those early days of transition from a gen- 
tile constitution to a rule of privileged classes, mer- 
chants' capital, in spite of its destructive force, acted 
largely as the agent of social progress. 

Neither must it be supposed that there would have 
been no transition from gentile brotherhood to class rule 
without the intervention of merchants' capital. ' Such a 
transition was inevitable, and came fundamentally from 
changes in the technical forces. Merchants' capital has- 
tened or retarded such changes, under different circum- 
stances. 

In the transition from gentilism to class rule, among 
the ancient Grecian tribes, merchants' capital helped to 



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MERCHANTS' CAPITAL IN PHENICIA AND GREECE 106 

dissolve the old bonds faster and to strengthen the rising 
aristocratic families. Here it played a revolutionary role. 
Later, in the transition from feudal serfdom to capitalist 
manufacture, its position is reversed, and it resists, in a 
reactionary manner, the encroachments of industrial 
capital upon its domain. 

Not that it is ever wholly revolutionary or wholly re- 
actionary. Its peculiar position as a middle man compels 
it to be ever on the lookout for advantages on either 
side, and to utilize both reaction and revolution for its 
own ends. But when we compare long historical periods 
and observe the role played by merchants' capital during 
such long periods, we can clearly observe that its influ- 
ence was more revolutionary there, more reactionary 
here. But under all circumstances, it never was em- 
ployed by the merchants with a conscious under- 
standing and forecast of historical tendencies. That 
was impossible for them. Such a knowledge is the 
crowning outcome of very recent discoveries. The 
merchants were, and still are, veritable creatures of 
the moment, the incarnation of the policy of momentary 
advantages, and the wider results of their activity in the 
historical process were always unpremeditated, and often 
undesired, by them. * * 

About iooo years B. C, the old gentilism was still 
alive among the Grecian tribes. This was the heroic era 
of the Greeks. It was at the same time the era, in which 



*> In order to prevent a misinterpretation of this j 
I call the reader's attention to the fact that I make no attempt 
here either to condemn or to praise the merchants for any of 
their qualities. On the contrary, I present those qualities as 
simple facts, born of historical necessities. If the reader meets 
In this work with occasional passages, which seem to imply, 
that I Judge certain facts by a standard of feeling, I wish to 
say by way of explanation, that my standard Is neither a sub' 

S active nor a sentimental one, but a historical one, acquired 
■y the development of history Itself. Since we i """ 



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106 MARXIAN ECONOMICS 

new elements made themselves felt and undermined the 
old social organizations. Engels sums up these elements 
in the following words: "Paternal law and inheritance 
of property by the father's children, favoring an accumu" 
lation of wealth in the family and giving to the latter a 
power apart from the gens; influence of the difference 
of wealth on the constitution by the formation of the 
first rudiments of hereditary nobility and monarchy; 
. slavery, first limited to prisoners of war, but already pav- 
ing the way to the enslavement of tribal and gentile as- 
sociates ; degeneration of the old feuds between tribes in- 
to a regular mode of existing by systematic plundering 
on land and sea for the purpose of acquiring cattle, slaves, 
and treasures. In short, wealth is praised and respected 
as the highest treasure, and the old gentile institutions, 
are abused in order to justify the forcible robbery of 
wealth." * 

Even before this time, trade with different tribes on 
the borders of the Mediterranean had been well devel- 
oped, and the surplus products of the tribes of Greece 
circulated as commodities in the markets of Asia. The 
poems of Homer, which describe the Grecian society of 
this stage, mention improved iron tools, blacksmiths' 
forges with bellows, handmiils for grinding grain into 
flour, the potter's wheel, the preparation of oil and wine, 
artistic ornaments of precious metals and copper amalga- 



regard human existence and a normal human development aa 
the primal good, and everythlnr dangerous to human life and 
progress as bad, and since not all historical necessities are 
Kood In this sense, tt Is ev' '.ent that the application of the 
method Of historical materialism Itself enables us to get a 
birds-eye view of the prevailing gooa and bad tendencies of 
human development, and thereby to acquire a standard of ap- 
preciation, which la neither subjective, nor sentimental, but 
objectively historical and sclent Ifle. 

*) Frederick Engola, The Origin of the Family, etc, pages 
llt-lIO. 



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MERCHANTS' CAPITAL IN PHENICIA AND GREECE 107 

mations, wagons, war chariots, merchant and war ves- 
sels, marble architecture, fortified towns, luxurious in- 
teriors of aristocratic homes and temples. In short, all 
the conditions necessary for the development of mer- 
chants' capital were already present among the Greeks 
iooo years B. C, and since even at that time the gentile 
lands had been distributed among private families, there 
was also an opportunity for lending money on land and 
getting a grip on unfortunate debtors by means of in- 
terest-bearing capital in the form of mortgage on land. 
Also land began to be rented to colonists. Here, then, 
we find all the primitive forms of unearned income ex- 
isting, as profits on capital in commercial enterprises, or 
as interest on capital invested in loans on securities, or 
as rent for the use of land. But here, and all through 
the periods of ancient slavery and medieval feudalism, 
these forms of unearned returns on capital operate on 
different economic classes and in a different manner than 
they do when industrial capital becomes lord of circula- 
tion and production. Under slavery and feudalism, as 
historical systems of production, profit, rent, and interest 
assume far different forms and follow far different 
channels than they do when propertyless wage workers 
sell their labor-power as a commodity in the open mar- 
ket and produce surplus-value directly under the super- 
vision of the capitalist with capitalistically owned ma- 
chinery. 

Already 600 years B. C, commercial profit, and its 
companions usury and rent, had completely destroyed 
the independence of the farmers of Attica. 

"All the rural districts of Attica were crowded with 
mortgage columns bearing the legend that the lot on 
which they stood was mortgaged to such and such for 



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108 MARXIAN ECONOMICS 

so much. The fields that were not so designated had for 
the most part been sold on account of overdue mort- 
gages or interest and transferred to aristocratic usurers. 
The farmer could thank his stars, if he was granted 
permission to live as a tenant on one sixth of the product 
of his labor and to pay five sixths to his new master in 
the form of rent. Worse still, if the sale of the lot did 
not bring sufficient returns to cover the debt, or if such 
a debt had been contracted without a lien, then the debtor 
had to sell his children into slavery abroad in order to 
satisfy the claim of the creditor. The sale of the chil- 
dren by the father — that was the first fruit of paternal 
law and monogamy 1 And if that did not satisfy the 
bloodsuckers, they could sell the debtor himself into 
slavery. Such was the pleasant dawn of civilization 
among the people Attica." * 

Things soon became unbearable. The debtors re- 
volted. By the help of their political rights, they secured 
legislation, which defended their property against that of 
the creditors. It was Solon, who, in 594 B. C, declared 
all debts illegal and restored the land to the people. 

But he could not abolish the forces of social develop- 
ment. He could not even abolish the distinction of 
classes, which divided the people of Attica into rich and 
poor. He had to adapt his legislation to the existing 
conditions. And the best he could accomplish was to 
turn the course of development into other channels. 

Since he had made speculation in land on a large 
scale impossible, merchants' capital found another outlet 
for its energies. Instead of investing their money in 
land, the wealthy now invested in slaves, ships, commodi- 
ties of all sorts, in short, in movable property. This 
*) Frederick Hnffels, 1. c, p. 184. 



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merchants' capital in PHENICIA AND GREECE 109 



shifted the burden of exploitation from the citizens of 
Attica to the slaves and to outsiders, at least for a time. 
The new commercial nobility now became the revolu- 
tionary force in Athens. They wrested more and more 
of the supremacy out of the hands of the old gentile 
aristocracy, and finally overcame them by the revolution 
of Cleisthenes, in 509 B. C. The downfall of the gentile 
aristocracy at the same time completed the ruin of the 
old gentile constitution. 

By this time many foreign immigrants had become 
citizens of Athens, without however, having been 
adopted into the gentes. The new constitution divided 
all citizens regardless of gentile relations into townships 
according to geographical location. This definitely 
lifted the commercial 'democracy' into the saddle. But 
the great mass of free citizens soon made the experience, 
which the American laboring classes are just making to- 
day, and which culminates in the understanding that 
mere political democracy without industrial democracy 
amounts in practice to a virtual oligarchy. 

Under the old aristocratic rule, class antagonisms and 
distinctions in wealth had made themselves felt, indeed. 
But nevertheless all free citizens regardless of class in- 
terests had felt a strong interest in the welfare of the 
whole community. But from now on the last bonds be- 
tween the old community and its members were severed, 
and wealth regardless of nationality asserted its poorer. 

With the new state of affairs, merchants' capital ac- 
quired a greater power in Athens than it had ever pos- 
sessed before. The merchants rose to greater and 
greater influence. 

As in the case of Phenicia, so in that of commercial 
Greece the concentration of wealth into a few hands 



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110 MARXIAN ECONOMICS 

and the pressure of an increasing population against the 
national boundaries led to colonizing expeditions at an 
early stage. These colonies were either mere trading 
posts, over which the mother city retained full authority, 
or they were independent settlements, which might re- 
main in a friendly connection with the home country, but 
administered their own affairs. The oldest Greek settle- 
ment is generally supposed to have been Cumae, founded 
in the vicinity of the region now occupied by Naples, 
Italy, about the year 1050 B. C. Various Ionian settle- 
ments, such as Naxos and Catana, were founded on the 
eastern shore of Sicily, while the southern and south- 
western coast of this island was colonized by the Dor- 
ians. Syracuse was founded by Corinth in 734 E, C. 
The whole southern portion of the Italian peninsula, var- 
ious islands in the Adriatic Sea, the southeastern coast 
of France (for instance Marseilles), and parts of the 
eastern coast of Spain and the northern coast of Africa, 
were settled by Greek colonists. 

These colonists were in every essential respect the 
children of their mother country. They carried the 
mode of production, political institutions, and social cus- 
toms of the home country with them, and even if they 
started on a lower historical foundation, they planted the 
germs of the same evolution. Sooner or later they de- 
veloped the same general tendencies as the people at 
home. 

The general outcome was everywhere a pauperization 
of the great mass of free citizens, and their depression 
to a level, where their only chance of existence lay in 
competition with the despised slaves, or in begging and 
tramping. But it was considered ignominious for a free 
man to work, particularly to work under supervision. 



MERCHANTS CAPITAL IN PHENICTA AND GREECE 111 

The pauperization of the free citizens therefore spelled 
ruin to the whole community, and that meant the whole 
state. 

The political rights of the beggared freemen could 
not save them from such a fate. Their political power 
could not restore to them their economic independence. 
What had still been possible for the debtors at Solon's 
time, became impossible for the dispossessed under the 
new regime. 

People who love to speculate about things that might 
have been, may find an interesting puzzle in guessing, 
what might have happened, had the whole problem been 
simply one of internal development. We cannot follow 
them on this speculative excursion. We must limit our- 
selves to things that really happened. And for this rea- 
son we must keep in mind, that not a single one of the 
ancient Phenician and Grecian states and colonies lived 
out their own lives undisturbed by foreign interference. 
Whenever matters approached some climax, which might 
have inclined the scale of victory in favor of the op- 
pressed classes, some foreign complication interfered and 
gave new power and more room for expansion to the 
merchant class. * 

In Athens, a great turning point came with the at- 
tack of the Persian power on Greece. The revolt of the 
Ionian colonies in Asia Minor against Persia was the 
danger signal, which diverted the attention of warring 
factions and cities from their internal troubles and ral- 
lied them all for the defense against the common enemy. 
From 495 B. C. to 466 B. C, the struggle lasted and was 
finally decided in favor of Greece. Athens became the 
commercial ruler of the Aegean Sea. 

The economic result of this victory for the people oi 



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IIS MARXIAN ECONOMICS 

Attica was to make the rich still richer and the poor still 
poorer. The commercial interests soon imposed as 
heavy a yoke upon their own people as that of the hated 
Persians might have been. Athens became the center of 
looting sallies, by which nearly the entire population of 
the islands and coasts of the Aegean Sea was made trib- 
utary or subject to the commercial capital of that city. 
Spoils of war, slaves, and profits of commerce piled up 
as never before in Attica, the crowd of political heelers 
living at the public crib increased apace, and corruption 
spread at an alarming rate. 

A new contest between democracy and commercial 
aristocracy became inevitable. But again foreign influ- 
ences complicated the problem and came to the assistance 
of the plutocracy. 

It was at this stage, that the aristocratic constitution 
of Sparta, which had prevented the inroads of commer- 
cial capital among the free men of that state, asserted its 
reactionary influence and sent the Spartans to the aid of 
the aristocrats of Attica. The democratic elements, who 
controlled the politics of Athens and shifted the whole 
burden of taxation upon the shoulders of the aristocrats 
and rich, had long been the object of hatred among all 
exploiting classes, and now came an opportunity, to 
wreak vengeance. The money-bags of Athens showed 
their patriotism by conspiring with the Spartan nobles to 
overthrow the democracy of Athens. For thirty years 
(431-404 B. C.) the Peloponnesian war raged, and final- 
ly ended with the temporary downfall of the Athenian 
democracy and the rule of Spartan tools in Attica. 

And so the battle between democracy and aristocracy 
fluctuated back and forth. The economic result was al- 
ways the same: The commercial wealth and economic 



merchants' capital IN PHENICIA AND GREECE 113 

power was distributed between different ruling factions, 
the mass of the freemen bore the brunt of the fighting, 
and found themselves generally in a worse condition 
when peace was restored than before the outbreak of 
hostilities. The number of paupers increased. 

We need not dwell any further on the historical de- 
velopment of Grecian and Phenician states. The only 
purpose of this brief and rapid sketch has been to show 
the means by which merchants' capital rose to power in 
ancient slave societies, how it maintained itself through 
all vicissitudes, and how it survived. We have seen 
enough to understand, that it was essentially predatory, 
that it had no other practical means of increasing the 
productivity of labor than that of increasing the number 
of slaves, and that it was not constructive in periods of 
transition but principally destructive. It could make beg- 
gars of free men, but it could not make free productive 
laborers of them, so long as slavery remained the foun- 
dation of society. Neither had merchants' capital any 
power, to transform slavery into a form of production, 
which should be able to lift society out of its economic 
fetters into a freer level. It required forces outside of 
this society, to bring new life into it and to extricate 
merchants' capital out of the slings of its own making. 

Out of these historical conditions, it could not escape, 
until new forces made themselves felt All through the 
further development of ancient society, we see, therefore* 
merely a reproduction of the conditions, which we have 
just sketched. The continued struggles between the 
small Grecian states, the fight of Carthage and Syracuse 
for the commercial supremacy of the Mediterranean, the 
lise of Macedonia and Epirus, the growth and expansion 
of Rome into a world empire, all this takes place on a 



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114 MARXIAN ECONOMICS 

stage set with the same scenery, and everywhere mer- 
chants' capital plays the same role of the conscienceless 
and successful villain. 

It has been dinned into our ears again and again, that 
the merchant was the life and progressive force of an- 
cient society, that democracy was the ruin of Grecian 
civilization, and that all the high culture of that early 
- human development was inspired by the noble and public 
spirited trader. We have shown enough of the real 
state of things here to prove that it was not democracy, 
but slavery, which ruined the ancient culture, that 
merchants' capital had much to do with the increase of 
slavery, and that its progressive power was not due to 
■the progressive spirit and noble intentions of the mer- 
chants. A plague may also inspire progress, and a crim- 
inal may stimulate inventive genius to great exertions. 
Of this nature was the progressive influence of the mer- 
chants in ancient slave societies. 



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CHAPTER X. 

MERCHANTS' CAPITAL IK ROUE 

In the Roman empire, we may observe on a large 
scale, what we have just noticed on a smaller scale in the 
Phenician and Grecian states and colonies. Nowhere 
does the inertness of slavery, and the destructive influ- 
ence and constructive impotence of merchants' capital 
spring into view so strikingly as in the last centuries of 
the disintegrating Roman power. 

The early history of Rome, in its economic phases, 
is largely a counterpart of the Grecian, only modified by 
peculiar geographical and national conditions. The prim- 
itive transition from gentile to class organization shows 
little difference from that among the Dorian Greeks, only 
that the Roman gentes from the outset were under the 
necessity of mingling more freely with outsiders than the 
Greeks. 

This may have been an additional help to the forma- 
tion of aristocratic families, for the original gentes would 
naturally draw closer together under the necessity of 
maintaining their sway over the conquered Latin tribes, 
which remained outside of the Roman gentes. Very 
likely the commercial functions fell largely upon the 
shoulders of the outsiders. But in view of the absence 



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116 MARXIAN ECONOMICS 

of reliable data on this period, nothing definite can be 
said about the influence of commerce upon the primitive 
Roman organization. 

So much is certain, that here, as in Greece, the mer- 
chants' influence helped to break the old bonds and to cre- 
ate great differences in wealth, which finally led to an 
overthrow of the old gentile constitution and the enact- 
ment of laws, by which the wealthy gained control of 
the economic and political power. 

Within this constitution, all the struggles between 
plebs and patricians took place, and in these struggles 
the merchants' capital played the same role which it did 
in Greece. Here, as in Greece, the outcome was a com- 
plete pauperization of the masses. The free plebeians 
were first turned into debtors by means of heavy interest ' 
on money loans, then robbed of their land and trans- 
formed into slaves. 

"The same wars, by which the Roman patricians 
ruined the plebeians, by compelling them to serve as sol- 
diers and thus preventing them from reproducing the 
requirements of their productive activity and making 

paupers of them, filled the sheds and cellars of the 

patricians with looted copper, the money of that time. 
Instead of giving to the plebeians directly the necessary 
commodities, grain, horses, cattle, they loaned to them 
this copper, for which they had no use themselves, and 
availed themselves of this condition for the purpose of 
enforcing enormous interest by usury, thereby turning 

the plebeians into their debtor slaves In the Roman 

empire it happened frequently, that famines caused the 
sale of children or the voluntary sale of free men by 
themselves into slavery to the rich." * 

*) Karl Marx, Capital, vol. Ill, chapter XXXVL 



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merchants' CAPITAL IN ROME 117 

In the Roman empire, this form of usury qiuckly de- 
feated its own ends. In proportion as it turned freemen 
into slaves, it abolished farming on a small scale and in- 
troduced large scale fanning on latifundian estates by 
means of slaves. To the same extent did loaning money 
on land become unprofitable. For what usury squeezes 
out of the small independent producer, is the whole sur- 
plus product above his necessities of life (with the ex- 
ception of the small portion paid to the state in taxes). 
But it can never squeeze the whole surplus-product out 
of the slave owner, the feudal lord, or the modern indus- 
trial capitalist. From the exploiting classes, it cannot get 
more than a portion of the surplus-product. To what ex- 
tent usury will reach down into production itself, will, 
therefore, largely depend upon the mode of production. 
It can never overthrow the mode of production, which 
is under the control of an exploiting class. All it can 
do is to exist as a parasite, and to suck more or less 
of the surplus-product out of the exploiting classes, the 
same as commercial capital. Once slavery had become 
the prevailing basis of production in the Roman empire, 
commercial capital absorbed the lion's share of the spoils 
and usury lived on as a hunted and despised thing. 

Merchants' capital, however, does not fare any better 
in the long run. It undermines itself, the same as usury 
does, and languishes as soon as the mode of production 
reaches the end of its possibilities. In fact, all capital, 
no matter what its origin and methods, is its own worst 
enemy, its own limitation, its own grave digger. But it 
does not reach the end of its tether in the same way un- 
der different modes of production. Under ancient slav- 
ery and medieval feudalism, merchants' capital vegetates 
in nooks and byways, as soon as a critical period of tran- 



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118 MARXIAN ECONOMICS 

sition approaches, and adapts itself to new circumstances 
wherever it finds a little breathing room. Under modern 
industrial capitalism, both industrial capital and mer- 
chants' capital undermine their own foundation for good 
and destroy their possibilities of existence for ever. 

In Phenicia and Greece, merchants' capital always 
found new outlets among newly developing markets, 
when the old markets within a certain group or nation 
had become unprofitable. But in the Roman empire, 
merchants' capital ultimately found itself at the end of 
the resources of the whole international market of the 
European world. As the concentration of wealth and 
means of production proceeded, large masses of money 
were accumulated by a few financiers, but at the same 
time manufacture lost more and more of its market and 
fell finally far below its average level. The more of the 
independent artisans and farmers were expropriated, the 
larger became the mass of the paupers, who could not 
buy regularly. Just as usurer's capital loses its oppor- 
tunities to the extent that chattel slaves or wage slaves 
take the place of independent producers, so merchants' 
capital loses its opportunities to the extent that the mass 
of paupers increases. Usurers' capital thrives best at 
the expense of a large mass of small producers. 
Commercial capital thrives best at the expense of a 
large host of independent consumers. In the Ro- 
man empire, the introduction of slavery as the pre- 
vailing basis of production robbed both usurers' and 
merchants' capital of their best customers. And to the 
extent that the Roman power extended its scope and 
dragged more and more foreign nations into the whirl- 
pool of the Roman misery, the main springs of commerce 
ran dry and finally stopped flowing altogether, Only in 



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MERCHANTS' CAPITAL IN ROME 119 

the East, where the vast unconquered Persian and Ara- 
bian multitudes rubbed shoulders against the remnants of 
the antique Grecian people, a pitiful relic of the once 
flourishing commerce of that region continued to vege- 
tate. 

Slavery, with the vigorous assistance of merchants' 
and usurers' capital had- brought the Roman empire to 
the verge of ruin. Already at the beginning of the 
Christian era, the 6rst forebodings of the coming down- 
fall announced themselves, and as the centuries pro- 
ceeded, the evidences of internal decay accumulated. and 
broke out in leprous spots, which gradually spread over 
the entire complexion of that vast aggregation of na- 
tions. 

Never before or after has history erected such a stu- 
pendous monument to the innate impotence of capital. 
Never before has the historical process shown so plainly, 
that the laboring, not the exploiting classes, are the salt 
of the earth. And if the salt decays, wherewith shall so- 
ciety be salted? If nations were receptive for historical 
object lessons, the decline and fall of th Roman empire 
would be a milestone looming with piercing ruggedness 
out of the gloom of the past and pointing with granite 
fingers to the warning, that there is only one sound and 
undestructible basis for human societies the free la- 
bor of free producers on terms of economic equality for 
all without exception. 

But nations do not learn that way. History has left 
its milestones for a few to study and ponder over. These 
may carry the germs of historical object lessons from 
generation to generation. But these germs will not 
sprout and bear fruit, until the laws of social develop- 
ment force the laboring class itself to act in accord with 



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120 MARXIAN ECONOMICS 

historical laws and become the conscious element of its 
own 'emancipation. 

Under the conditions of the decaying Roman empire, 
such a consciousness could not develop among the labor- 
ing classes. We know, indeed, that the slaves were con- 
scious of their oppressed condition and chafed under it 
We know that they banded together in vast armies and 
fought bravely for their liberty. We have even unmis- 
takable evidence, that they had dreams of a free world. 
But we know also that these slaves could never succeed 
in abolishing slavery, could never gain control of the 
productive forces of their time. We know, furthermore, 
that the early Christian movement seized vast bodies of 
slaves and freemen, and rallied even Roman legions to 
the standard of the social revolution. We know that 
these Christians, like the revolutionary slaves before 
them, had also dreams of a free laboring world. But 
we know, that in spite of all this, their consciousness was 
not the class-consciousness of the modern proletarian 
revolutionist, was not the outcome of an understanding 
of their historical mission and of the means by which this 
mission must be fulfilled. 

Since neither commercial capital nor slave labor con- 
tained -within themselves the capacities for self-emanci- 
pation from their own degenerating effects, new life 
could come to the decrepit Roman empire only from the 
outside. It came in the shape of invasions of German 
tribes, whose barbarian organization was still full of the 
vigor and health of free men. These Germans were 
rattier hunters than agriculturists. But the conquest of 
Rome gave them control of vast estates, and they quickly 
adapted themselves to agricultural pursuits. 

As used to be their custom, the German tribes par- 



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merchants' capital in roue 131 

celed the former latifundian estates ' out among their 
members by gentes or families. They were not ashamed 
to work, for they had not known slavery and did not feel 
its degrading power. So the German tribes lifted the 
Roman power out of the slough into which slavery and 
merchants' capital had driven it But at the same time, 
the resurrection of agriculture and its prevalence as the 
essential mode of production signified a lower stage of 
industrial development than the Roman empire had for- 
merly enjoyed. 

We see here a fact, which has often been overlooked, 
namely, that mere industrial development in advance of 
people with lower industrial development does not nec- 
essarily imply supremacy over people in lower stages. 
In the scale of social evolution the Phenicians stood 
higher than the Persians, the Athenians higher than the ' 
Spartans, the Romans higher than the Germans. Yet 
the combined influence of the self-destructive tendencies 
of slavery and commercial capital, and of the superior 
vigor of barbarian institutions, gave to people with gen- 
>tile constitutions, or with vigorous relics of gentilism, 
the supremacy over the more highly developed societies 
of their neighbors. A high stage of industrial develop- 
ment does not always and everywhere signify a high de- 
velopment of the human body and mind, nor does it al- 
ways and everywhere signify an inevitable transition to 
a higher form of society. It may or may not, according 
to a multitude of other circumstances, which must be de- 
termined by careful research. 

The conquest of Phenicia by Persia carried with it 
a decline of the Phenician society. At the same time it 
insured the rise of Grecian society and its victory over 
Persia. The different elements in Grecian society in 



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122 MARXIAN ECONOMICS 

their turn carried Greece, first forward, then backward, 
and finally decreed its downfall and the supremacy of the 
socially lower Romans. The Romans in their turn went 
to pieces through the forces of their own society, and 
had to yield the floor to the barbarian Germans. The 
Germans carried new life into Rome, but were in their 
turn infected with the same destructive virus, which had 
ruined the Roman empjre. Yet so strong was the vigor 
of their barbarian organization, that they not only sur- 
vived the downward tendencies of their new environ- 
ment, but lifted it out of its depths and carried it for- 
ward into a higher stage of development This stage 
was feudalism. Just how this was accomplished, wc 
shall see in the next chapter. 



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CHAPTER XI. 
MERCHANTS' CAPITAL under feudalism. 

The German tribes, who took possession of the Roman 
empire, did not enjoy their new environment undisturbed. 
Hardly had they adapted themselves to the new economic 
conditions and settled down to agricultural pursuits, when 
they, in their turn, were attacked from all sides. From 
the North, the Normans fell upon them. Out of the 
East came the rush of the horsemen from the Hungarian 
and Russian plains. From the South and Southwest the 
Saracens crowded in. 

Farming was not a very prosperous occupation under 
these circumstances. Besides, the Germans were war- 
riors, more accustomed to the sword than to the plow. 
Fighting and farming dd not agree very welt The Ger- 
man communes took but gradually to regular farming 
and set aside a large portion of their lands for pastures 
and hunting forests. And when invasions of roving 
tribes disturbed these communes and compelled them to 
revert to the old barbarian mode of living, from time to 
time, communal farming often took second place and cat- 
tle raising and hunting had to make up for the losses in 
agriculture. 



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124 MARXIAN ECONOMICS 

While the development of communal agriculture pro- 
ceeded but slowly under these adverse conditions, the 
development of slavery was, on the other hand, prevent- 
ed by the same causes. In the first place, slavery did 
not agree with the gentile constitution of the German 
tribes. In the second place, communal agriculture signi- 
fied small scale production for immediate consumption, 
not for the market. Slavery as a basis of production 
thus became impossible. It did not disappear entirely, 
but it ceased to be practicable as a means for supplying 
a large market For the market was gone. 

Not that all trading ceased. But trade became once 
more mainly a simple barter of products for direct use. 
Money as a medium of exchange fell into desuetude 
among the German communes, particularly north of the 
Alps, where it had been barely introduced by the Roman 
merchants. Once again commune exchanged with com- 
mune only those things, which were not needed for home 
consumption, and home industry once more took the 
place of division of labor by industrial crafts. The Ger- 
man women performed most of the work formerly done 
by skilled Roman slaves. Skins and linen were, and re- 
mained, the prevalent clothing material among these 
tribes. Where wool was used, it fell to the lot of the 
women to clean and spin it. Even as late as the 8th cen- 
tury the daughters of emperor Charlemagne still had to 
spin wool for their father's household, and it was not un- 
til the middle of the nth century that wool spinning de- 
veloped into a manufacture outside of the house and 
family. This industry developed first in Flanders and 
Frisia, where it had already been in vogue under the Ro- 
man emperors, and where it continued to vegetate after 
the fall of Rome, until the social division of labor and the 



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MERCHANTS' CAPITAL UNDER FEUDALISM 125 

increase of population made a wool manufacture on an 
industrial scale possible. The transition of linen manu- 
facture from the hands of the women to those of male 
craftsmen took a still longer time. 

Commerce as a profitable business for capitalist mer- 
chants thus found very narrow limits in the transition 
period from Roman slavery to medieval feudalism. Only 
such luxuries as had become' indispensable to the wealthy 
under Roman civilisation were still brought in by mer- 
chants from the East Otherwise it was only the Christian 
church that stimulated other than intercommunal trade 
and created a demand for ornaments, wine, incense, fine 
draperies, and artistic dishes. 

Commercial capital could not assume any social 
significance in this environment. It lived its parasitic ex- 
istence in humble walks, and did not receive any en- 
couragement from the church. The communal system 
of production with is frugal habits and free landholders 
offered so little encouragement to the money lender, that 
interest on money was denounced as usury by all leading 
church men of this period. Yet the church was itself the 
main instrument of commercial expansion in those days. 
The missionaries were then, as now, the advance agents 
of commerce. They penetrated into the little known re- 
gions of the North of Europe, made geographical and 
ethnological discoveries, and established missionary sta- 
tions, which in due time became the centers of commerce. 
Very often the bishop became the chief merchant and 
banker of those places. For instance, Bremen was a mis- 
sionary station founded in 688 A. D., Hamburg another 
one founded in 811. The site of Lubeck was a trading 
post known even at the time of Ptolemy, in the second 
century of the Christian era. The coast of the Baltic was 



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126 MARXIAN ECONOMICS 

opened up to commerce by the exploration of the Knights 
Templar. In Africa, the same mission was fulfilled by 
Mohammedan missionaries, who penetrated into the in- 
terior and converted savage tribes, while they blazed ca- 
ravan routes, carried away slaves, and captured ivory 
and precious metals. 

The great merchant towns in the Mediterranean, 
which had played a prominent role in ancient Greece and 
Rome, did not lose their economic significance in this 
stage of transition. But their trade was reduced enorm- 
ously. Nevertheless, they remained centers of traffic as 
before. There was even sufficient trade between different 
sections of the European and African countries to permit 
of the growth of new merchant towns. Venice, for in- 
stance, was founded in 452 A. D. by Italian refugees, 
who left Padua when the invading hordes destroyed it. 
The Adriatic islands offered enough opportunities for 
coast trade to develop Venetian commerce as early as the 
6th century. 

But all this was in a desultory and uncertain stage. 
Invasion after invasion threatened the security of the 
merchant and destroyed the basis of his business, the 
peaceful communes that sheltered the wealthy families, 
his principal customers. 

In proportion as the continued fluctuations between 
settlers and warriors introduced new elements into the 
old communes and demanded a readjustment of their 
mutual relations, the tribal community of interests ex- 
pressed itself in new forms, which still retained much of 
the mutual duties and privileges between the members of 
the same commune, but at the same time shifted the bal- 
lance in favor of the privileges of the wealthy and prom- 
inent families. The continual wars left much land 



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merchants' capital under feudalism 127 

without any known owners. The invading tribes, if suc- 
cessful, redistributed this land in various proportions, 
according to the customs prevalent among them. Often 
the leaders received a larger share than the other mem- 
bers of the tribe. Where large masses of armed warri- 
ors had to be held ready, for the protection of those who 
cultivated the soil, it became the settled custom that the 
tillers had to feed the warriors and their chief. Where 
villages grew up around such armed camps, or around 
fortified churches and convents, the custom soon de- 
veloped to place the tillers under the protection of the 
armed men, or of fighting missionaries and monks, with 
the understanding that the tillers should supply the 
armed men and perform so many days of labor on the 
land of their chiefs. 

This was the primitive basis, upon which the relation 
between feudal lords and serfs grew up. The free peas- 
ants begot children, who in the course of the tendencies 
of this period found themselves depressed more and more 
to a level of dependence upon the lords. The armed 
retinue overawed them, the lord made arbitrary changes 
in the long established customs, enforced these changes 
against the resistance of the peasants by the help of his 
armed men, and squeezed more and more extra labor out 
of the serf. The church became an exploiter of the 
oppressed in the same way, in spite of its platonic remon- 
strances against the evils of class rule. 

While the serfs were a dependent class, yet they were 
not in the same position as the slaves of ancient civilisa- 
tion. The slaves were strangers and captives, without 
any shadow of civil right. The serfs were members of 
the same commune, and whatever might he the privileges 
of the lord, he had also certain duties towards his serfs, 



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128 MARXIAN ECONOMICS 

which he could not easily shirk. The feudal organisa- 
tion rested in the last analysis on the organisation of the 
serfs, and this enabled them to stem the encroachments of 
the nobility through class struggles, a thing which the 
ancient slaves could never accomplish. t 

Once this new relationship had become universal 
in the principal countries of Europe, and the invasion of 
barbarian hordes had become rare, the productivity of 
the serfs increased sufficiently to give rise to a surplus, 
which could be thrown upon the market and sold for 
money. Since not only agriculture, but also handicrafts 
were carried on by the serfs, the feudal villages were as 
self-supporting as the old mark communes and did not 
have much use for the services of the merchants. It was 
the kings, the nobles, the bishops, the well-to-do serfs, 
who could employ the unpaid labor of many, who gath- 
ered more goods than they and their non-producing re- 
tinue could consume, and who were thus able to throw 
a surplus of goods upon the market and trade them for 
luxuries and money. 

Commerce and the use of money could not, therefore, 
become general in Europe, until the number of wealthy 
grew and until the continued production of surplus goods 
made the establishment of regular market places possible. 
These market places gradually came into being through 
the development of particularly well situated villages, 
which were right in line with the natural courses of traf- 
fic, such as the Rhine, the Elbe, the Danube, and with 
the military roads built up by the Romans across the Alps 
and throughout the different regions of Germany and 
Gaul. Out of these market villages grew in due time the 
merchant towns, with their fortified walls and their spe- 
cialized handicrafts and trading lines. 



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merchants' capital under feudalism 129 

The dormant stage of commerce in the Occident dur- 
ing the fermenting stage of European society after the 
collapse of the Roman empire shifted the center of mer- 
cantile supremacy for several centuries to the Oriental 
countries, in which the .Arabian people had gradually 
pushed all other nations aside and assumed the position 
of the ruling nation. In 622 A. D. Mahomet began his 
crusade, and by 634 Syria, Egypt, Northern Africa, and 
Spain had fallen under the sway of the Mohammedans. 
Their further progress north out of the Pyrenean penin- 
sula was stopped by Charles Martel in 732, But they 
pushed their way across the Bosporus, captured Constan- 
tinople and gradually penetrated toward the Hungarian 
and Austrian countries, until they had control of the 
commercial lines of Eastern Europe and of Asia. With 
Constantinople as the key to the water routes of Eastern 
Europe and Asia Minor, with Bagdad as the center of the 
Mesopotamian land routes, with Cairo as the gate to the 
commerce of Eastern Africa and the various parts of 
North Africa and Spain, the Mohammedans were in a 
position to rule the Mediterranean and to hold the com- 
petition of the rising Italian merchant towns in check. In 
this evolution of Mohammedan commerce, the Jews 
played a very important role, as international agents and 
money-changers. When the demand for Oriental articles 
of commerce grew among the well-to-do classes of 
Europe, the various merchant towns became the natural 
emporiums for the transit of these goods, and the rulers 
of Europe were only too glad to enter into diplomatic 
negotiations with the hated Mohammedans for the purpose 
of making commercial treaties with them. As early as 
79J-, Charlemagne employed Jews as commercial agents 
between himself and Haroun-al-Rashid, and opened the 



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130 MARXIAN ECONOMICS 

port of Marseilles to the Mohammedan vessels. The 
Mohammedans, on the other hand, availed themselves of 
the services of such cities as Venice and Genoa, on a 
basis of mutual concessions, and thus exerted an indirect 
control over their European competitors, so long as the 
Eastern routes were under Mohammedan sway. They 
even played Genoa and Venice against each other, and 
paid them for their services to the Mohammedan cause 
with money, spoils and privileges. These Italian cities, 
on the other hand, true to trading instincts, made similar 
bargains with the European plundering expeditions, 
called crusades, and thus skinned wealth from both 
friend and foe after the manner of true capitalist patriots. 
Genoa retained its commercial offices in Constantinople 
even during the crusades, as shown by a letter of Emir 
Abd-Allah to the archbishop of Pisa, in 1157, and the 
evidence strongly pointed to the fact that the Genoese 
merchants assisted the Turcs against the Christian 
crusaders, in the interest of "civilization," 

In the course of the 13th century European conditions 
developed to a point, where commerce became flourishing. 
The little market villages of the 12th century had de- 
veloped in all central points into strong merchant towns, 
with definite privileges, which they defended against the 
encroachments of the nobility with all the fierceness of 
the money-lover. Along with commerce came the growth 
of a regular money business. The many different stand- 
ards of coinage, the insecurity of the trading routes, the 
difficulty of conveying large sums of money safely to far 
distant places, demanded the development of credit, the 
establishment of reliable money-exchanges, and the eman- 
cipation of credit from the exactions of usurers and 
money monopolists. From this time on 'banking in its 



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merchants' capital under feudalism 131 

various phases, and the handling of money for a con- 
sideration, became a permanent feature of commercial 
life. 

The old form of usury continued as it had under an- 
cient slavery. But the requirements of marine commerce 
and the wholesale trade demanded the emancipation of the 
merchant from the exactions of the money lender. Credit 
associations of merchants were the first forms by which 
the merchants secured for themselves a more flexible 
medium of circulation at rates of interest, which their 
business could bear. Out of these associations rose in 
due time the various state banks and the modem credit 
system. 

"The credit associations, which were established in the 
I2th and 14th centuries in Venice and Genoa, arose from 
the need of marine commerce and wholesome trade con- 
nected with it to emancipate themselves from the domi- 
nation of ancient usury and from the monopolists of the 
money business. The fact that the bona fide banks, which 
were founded in those city republics, assumed at the same 
time the shape of institutions for public credit, from 
which the state received loans on future tax revenues, is 
explained by the circumstance that the merchants form- 
ing such associations were the prominent men of those 
states and as much interested in emancipating their state 
as themselves from the exactions of usurers."*) 

Just as Mohammedan commerce had first dominated 
the Italian cities, so the Italian cities now extended their 
influence to the German and French markets. Along with 
the Jew came the Italian financier, established himself in 

•) Karl Marx. Capital, volume III, chapter XXXVL 

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138 MARXIAN ECONOMICS 

the chief markets of Europe, and for centuries played a 
prominent role in European finance. 

So long as small scale production for direct consump- 
tion had been unable to furnish any surplus, with which 
the parasitic classes could carry on their competitive 
struggle for wealth, the ban of the church on usury 
would not have been necessary at all, in order to make 
the lending of money at high rates of interest unpopular 
and socially unessential. The social, conditions them- 
selves were powerful enough to restrict usury to the 
dealings between money monopolists and wealthy spend- 
thrifts. And now, when social conditions opened large 
avenues of opportunity for the money lender, the ban of 
the church proved as ineffectual as it had once been un- 
necessary. This social power over more platonic church 
decrees asserted itself to such an extent, that the church 
itself became helplessly involved in the practices of the 
money lenders and accumulated immense riches through 
them. 

"The taking of interest had been forbidden by the 
church. But the sale of property for the purpose of 
getting out of a tight place had not been forbidden. It 
had not even been forbidden to transfer property for a 
certain period to the money lender as a security, until 
such time as the debtor should repay his loan, so that the 
money lender might have the use of the property as a 
reward for the absence of his money .... The church it- 
self and the various corporations and communes belong- 
ing to it derived much profit from this practice, par- 
ticularly during the period of the crusades. This brought 
a very large portion of the national wealth into the pos- 
session of the socalled "dead hand", all the more so be- 
cause the Jews were barred from engaging in such usury, 

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MERCHANTS' CAPITAL UNDER FF.UnAI.lSM 133 

the possession of such fixed lines not being concealable. . 
Without the ban on interest the churches and cloisters 
would never have become so rich.* 

- The wars of the various lords and princes created 
a steady demand for money, and yielded rich harvests of 
interest to financiers. The church corporations themselves 
were compelled to make use of banking facilities for the 
same reasons. The great religious orders could not get 
along without credit, and the assessment of taxes for 
church purposes and crusades inevitably demanded the 
credit and banking systems. It had become the custom 
in the middle ages to levy a tax of ioo td 100,000 florins 
for the privilege of clothing a man with the rank of bishop. 
Many candidates for this office were poor men, and they 
either had to borrow the money from some money lender 
and get it back out of their pious flocks, or to go without 
the honor. The collectors of the church often entrusted 
Italian or French bankers with the transfer of these sums, 
and the popes encouraged this practice. Transports of 
coin cost a great deal for armed escorts, and the safest 
way to escape taxation or loss at the hands of robber 
barons was to secure the services of a banker. Florence at 
one time had a monopoly of the papal money business. 
The Holy See itself had to back up the loans of its 
bishops, because the bishops often failed to pay their 
debts and the bankers refused to lend them money, unless 
the church endorsed the loan and promised to make good 
any loss incurred through bad debts. It happened not 
infrequently that the congregations were called upon to 
pay the debts of their bishops, and if the flock refused, 



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134 MARXIAN ECONOMICS 

they were excommunicated. The citizens of Cologne, 
called upon to pay the debts of their bishop, resisted the 
raising of their church taxes for this purpose, and a 
number of other towns came under the ban of the popes 
for the same reason. This led in September of 1246 to 
the decision of pope Innocent IV that in future the 
debts of bishops should be paid by their congregations 
only if the debts had been contracted for the benefit of 
the church. 

This was virtually an official declaration permitting 
the lending of money at interest It was an admission, that 
money could not be gotten without interest. The next 
step in this direction was a systematisation and facilitation 
of money lending to church people by the church itself. 
On October 25, 1288, pope Nicolas IV issued blanks to 
be used by church people in their transactions with 
money lenders. The debtor was permitted to bind himself, 
his successors in the bishop's office, and his church mem- 
bers, with their movable and immovable property. 
Interest was still under the ban officially, but the same 
effect was accomplished by various resorts which 
amounted in practice to a tacit sanction of usury. 

"The slyest tricks were resorted to in order to con- 
ceal the taking of interest. It was the custom at one time 
to call 1 the interest for the first six months a gift, for the 
second six months a gratuity. Grain and other products 
were taken in place of money."* 

Sometimes it was arranged that the debtor should 
return the capital and pay all incidental expenses, 
particularly expenses due to deferred payments. All 

•) Dr. Ad. Beer, Ge schlchte dsa Welthandett, I., p. 141. 



merchants' capital under feudalism 136 

this was nothing else but the payments of various rates 
of interest for the use of money. 

The rate of interest rose naturally in proportion as 
the taking 1 of interest was taboed and the money lender's 
business was risky. No general rate of interest existed 
during the middle ages. At the time of Charlemagne ioo 
pet. were the limit at which usury began, and from 10 
to 40 pet. were ordinary averages. Emperor Frederick 
II decreed that Jews should not charge more than 10 pet. 
He said nothing about the rate which Christian money 
lenders (or the church itself) might take. While Jews 
and heretics were murdered for their independent ideas 
concerning religious matters, the gold and valuables 
belonging to these unfortunates wandered into the 
coffers of the church. Both the Inquisition, and later 
the Reformation, and the numerous persecutions of the 
Jews, served as potent factors in concentrating money 
and wealth in general in the hands of the various re- 
ligious organisations. 

Aside from these financial transactions with the 
money lenders, the church had other means of amas- 
sing great sums of money. Pious souls hoped to earn 
salvation by making their fortunes over to the church. 
After committing all the deadly sins on the calendar, 
the rulers would buy their way into heaven by means 
of the wealth, which they had stolen and filched from 
the people. Others made bequests to the church in their 
life time and lived on a certain part of the interest. 
Sometimes the successors of these repentant sinners 
would break into the possessions of the church and 
take all they could get hold of, spend most of it in 
riotous living, and then crawl back at the end of their 
wanton lives with the remainder of the plunder and 



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136 MARXIAN ECONOMICS 

obtain forgiveness. There is more joy in heaven over 
the repentance of one sinner than over the upright lives 
of a thousand saints. 

The poor, on the other hand, often fled to the armed 
churches for protection : just as in Greece and Rome the 
temples were the refuge of the persecuted, so in the 
middle ages the cloisters and churches became the refuge 
of the oppressed. Whole villages sought protection from 
their oppressors in the church and delivered their wealth 
over to its keeping in exchange for this protection. 

With the establishment of the money system came 
also a juggling with the coinage and a speculation on 
future constellations of the money market.. All through 
this period of the middle age we meet with decrees of au- 
thorities to the effect that the laboring classes should be 
held within the place assigned to them by Divine 
Providence by paying them in depreciated coin. Already 
in the 14th century the legitimate fruits of money 
speculation were harvested in the form of bankruptcies 
of large firms, due to non-payment of interest and the 
confiscation of capitals by princes and church dignitaries. 
Boycotting became a favorite means of the town 
burghers to make life unpleasant for the robber barons, 
as early as the 13th century. And this was often more 
effective in money matters than armed guards. 

In 1253, the Westfalian towns of Dortmund, Soest, 
Minister and Lippstadt entered into an agreement for 
their mutual defense. The contract contains the follow- 
ing passage : "Whoever shall rob a burgher of these four 
towns, shall not be assisted by the towns through loans 
or any other means. The lord of the realm is held 
responsible for the conduct of his burg wardens and 
retinue. If any robber is arrested in any one of these 

Gooolc 



merchants' capital under feudalism 13? 

four towns, then the plaintiff accusing him shall enjoy 
the protection of the law in all the other towns, the same 
as native burghers. The towns protect the lives of all 
their burghers by giving them armed guards from town 
to town. A knight, who has' broken his word, shall be 
refused credit in all towns, untill he shall have met his 
obligations." 

The further development of the credit system and 
its gradual domination over the monetary system is 
closely linked with the religious wars of the Reformation, 
This development is but the reflex of economic transfor- 
mations, by which the merchant is gradually turned into 
an industrial capitalist, and by which not only the usurer, 
but the merchant capitalist himself becomes subject to 
the sway of the industrial capitalist. And with this dis- 
solution of old economic conditions comes at the same 
time a dissolution of religious organisations. 

"The monetary system is essentially Catholic, the 
credit-system essentially Protestant. 'The Scotch hate 
gold'. In the form of paper the monetary existence of 
commodities has only a social life. It is Faith that makes 
blessed. Faith in money-value as the immanent spirit of 
commodities, faith in the prevailing mode of production 
and its predestined order, faith in the industrial agents 
of production as mere personifications of self-expanding 
capital. But the credit system does not emancipate itself 
from the basis of the monetary sysem any more than 
Protestantism emancipates itself from the foundations of 
Catholicism."* 

The parasitic existence of a ruling class upon the 
shoulders of a laboring population, that is the historical 

*> Karl Mux, Capital, volume III, p. 183, German edition, 

DgiBzea ay G00gle 



188 MARXIAN ECONOMICS 

basis of all money relations as it is of all authoritative 
creeds. The feudal serfs, and the rising handicrafts men 
in the towns, these were the productive backbone of feu- 
dal society. This society did not fall into the dormant 
state of Roman civilization, because its productive mem- 
bers had from the outset retained some measure of liberty 
and rights due to their tribal origin. It was this persistent 
tribal strength which carried them through the entire 
middle ages and gave them power not only to lift ancient 
slavery into the greater productivity and vitality of feudal- 
ism, but also to carry feudalism forward, in spite of the 
depredations of the feudal lords, the machinations of the 
financiers, and the bickerings of the merchants, into a sy- 
stem of still higher productive power and still greater 
possibilities of development, the system of industrial 
capitalism. 



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CHAPTER XII. 

THE RISE OP INDUSTRIAL CAPITALISM 

The serfs and handicraftsmen of feudal days had one 
advantage in their struggles against the ruling classes — 
they were the owners of the essential requirements of 
production in their respective occupations. The serfs 
owned the soil which they tilled, (originally in communal 
ownership), the handicraftsmen the tools and materials 
of their trades. So long as they had this advantage, they 
could not become the helpless slaves of exploitation. 

Originally every feudal commune produced all its own 
necessities. The members of the mark communes pro- 
duced not merely agricultural crops, but fashioned also 
the raw materials into finished articles of use. Grain was 
made into flour, flour into bread ; flax was made into yarn, 
yarn into linen; wood was cut into timber, boards, tool 
handles, and used in building dwellings, churches, bams, 
stables. The serfs were farmers, builders, carpenters, 
joiners, smiths, all in one, and the various members of 
their families devoted themselves to different trades. 
Women and children all had to fulfill a useful function 
in this division of feudal labor. 

It was particularly the estates of the feudal lords. 



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140 MARXIAN ECONOMICS 

which afforded the greatest opportunities for the co-ope- 
rative division of labor, because the lord had the labor- 
power of the entire commune at his disposal for definite 
periods of time, and always kept many unfree servants, 
who had to be maintained by the taxes of the serfs. It 
was natural that a laborer who had acquired a high skill 
in some particular craft should be employed as a specialist 
in that line. In this way the first beginnings of handi- 
crafts were separated from the agricultural pursuits on 
the feudal estates. 

When the town life with its markets developed, and 
handicrafts found a wider field in this new environment, 
when the struggle between the merchant class, the future 
chiefs of industrial capitalism and the feudal nobility 
waxed fiercer, when the towns became centers of refuge 
for fugitive serfs, then many of the artisan serfs fled to 
these havens of peace and assisted the merchants against 
the feudal barons. From the nth to the 14th centuries 
this transfer of handicrafts from the feudal estates to the 
towns proceeded almost without interruption. 

As the population increased and the towns grew, there 
developed gradually a larger and larger market, not only 
for the products of industry, but also of agriculture. 
Since the towns were unable to supply all the needs of 
their own inhabitants, the farmers were enabled to carry 
much of their surplus-product to the town markets and 
thus to secure a thing which they had never handled in 
old feudal times, namely money. 

With the advent of money to the feudal commune and 
the lord's estate, a new spirit seized the old institutions. 
So long as the merchant had been the principal owner of 
money, the feudal barons had secured a part of his wealth 
by the very simple but effective method of waylaying and 



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THE RISE OF INDUSTRIAL CAPITALISM 141 

robbing him. Since the time of the crusades, this noble 
profession of highway robbery had been carried on exten- 
sively and it had been the only way to secure money, 
since the serfs paid their taxes to the lord only in kind. 

But when the market expanded and the power of the 
towns increased, waylaying became more dangerous and 
less profitable. Often enough the robber baron returned 
to his castle without the coveted treasures, and with less 
men and less buoyant body and mind than he sallied forth 
with. Some never returned at all. Particularly the in- 
vention of gunpowder and of guns was a sad blow to the 
gallant bearers of mailed armor. Knightly warfare be- 
came too much like work and lost all the attributes of 
sport, when bullets plunged through the best mailed shirt 
and iron balls razed the walls of their long impregnable 
castles. It became necessary to discover an easier and 
less dangerous, in short a more gentlemanly way of 
making a living. 

Sometimes a gentleman, or a knight, will learn even 
from a serf and a merchant, particularly if he has to. 
This is what the chevaliers did when the old method of 
making money had become obsolate. No sooner did" 
the serfs carry their surplus to the market and bring back 
to their homes the peaceably secured money of the mer- 
chants and other town people, than the knights adopted 
the same method and prospered. For who was in a bet- 
ter position to throw a large surplus of farm products on 
the markets than the feudal lord, who had at his beck and 
call the labor-power of whole communes? 

Once the use of money had been established in 
the hovel and the castle, the idea easily suggested itself to 
pay the feudal tithes in money instead of in kind. The 
serfs were in favor of this reform, because they thought 



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142 MARXIAN ECONOMICS 

it would make them more independent of the lords. The 
lords liked it, because it offered greater opportunities for 
securing the luxuries which had become dear to them af- 
ter they had once been introduced to them by the higher 
civilization of the Orient. Nor was it long before the 
lords discovered, that it was much easier to squeeze more 
money out of the serfs than to waylay and rob merchants. 

But when the serfs realized that the new reform, in- 
stead of freeing them more from their bonds to the lord, 
was turning into a means of oppressing them harder, they 
rebelled and fought for a century to escape from this new 
and more galling bondage. With varying success on both 
sides, this struggle between serfs and lords, which ran 
parallel to the struggle between merchants and lords, was 
carried on, but its final outcome was almost everywhere 
the gradual emancipation of the serfs from feudal chains. 

This compelled the lords to turn to means which 
should insure a greater productivity of their own estates. 
At the same time it resulted in the disruption of the old 
communal fraternity, by allying the well-to-do serfs a- 
gainst their poorer brothers. The more the population 
increased, the larger became the number of those who 
were excluded from the old commune and compelled to 
shift for themselves. Naturally these homeless and land- 
less ones gravitated toward the towns, where they were 
safe against the attacks of the lords and where the pro- 
spects of employment and living were more promising. 

Under these circumstances, the lords soon felt the 
need of productive laborers on their estates. The old 
armed retinues became a drag on them. Either the war- 
riors had now to exchange the sword for a plow, or they 
were cast adrift like the surplus population on the farms 
and compelled to seek new means of livelihood. These 



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THE RISE OF INDUSTRIAL CAPITALISM 143 

new homeless ones, like their fellow serfs, found largely 
a new home in the towns. But when this tendency he- 
came universal, it was not long before a vast multitude of 
tramps flooded western Europe, in the country districts 
as well as in the cities. And as the Reformation marched 
across Europe and disbanded many monasteries, the pro- 
perty owners had to resort to force and coercive laws for 
the protection of their holdings and wealth. 

But do what they might, neither the lords nor the new 
middle class of the towns could stem the tide of proieta- 
' rianization. While the middle class itself, at least the 
rising class of industrial masters, did nothing essential 
toward the increase of the proletariat, the lords did so 
much the more to increase the number of propertyless and 
homeless wanderers, and to supply the new capitalists 
with a plentiful harvest of wage workers. The greed 
for money had seized the nobles, and when their own 
estates were no longer able to yield all the money needed 
for their spendthrift habits, they banded together and 
drove the farmers from their lands and homes. 

The increase of the population intensified the suffer- 
ings of the homeless ones, and for two centuries, all 
through the 15th and 16th century, the exodus from the 
country to the town continued with ever renewed vigor. 

Hardly had the struggle between the middle class and 
the lords and between the serfs and the lords, reached a 
certain stage of continuity, when a new class struggle a- 
rose in the towns themselves. So long as the towns were 
in need of inhabitants, every productive newcomer had 
been welcomed and had at once enjoyed all dvic rights. 
But as this movement went its inevitable course, real 
estate and opportunities in the towns gradually fell into 
the hands of the elder or economically favored inhabit- 



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144 MARXIAN ECONOMICS 

ants, and more and more of the newcomers found them- 
selves without land and without a chance to labor at their 
trades. The wealthier and established towns people as- 
sumed the role of a privileged class, denied political 
rights to the new members of the town and proceeded to 
enforce prerogatives against them in much the same way 
as the feudal lords had done. This compelled the un- 
privileged citizens to organize themselves, in order to 
secure for themselves the same political rights, which the 
old inhabitants had enjoyed. As early as the 13th century, 
this new class struggle between town aristocrats and 
town unprivileged began, and led during the following 
centuries to the ascendency of the organized crafts, or 
guilds. At the end of the 15th century, these organiza- 
tions had succeeded in mo3t towns in securing their po- 
litical rights. 

But in the meantime the population of the towns had 
continued to increase. A larger and larger number flowed 
from the country to the town, particularly when the feu- 
dal lords began to dispossess the old mark communes and 
to turn the communal lands into sheep walks and deer 
parks. Already in the beginning of the 16th century most 
of the large towns counted a vast percentage of paupers 
among their inhabitants, some of the old chronicles regi- 
stering as high as 25 % of propertyless inside the town 
walls. 

The guilds themselves, instead of enlisting this pro- 
letariat in their fight against the town aristocracy, did 
everything in their power to increase the proletariat, from 
the moment that its members began to show signs of be- 
coming dangerous competitors of the guild masters. Al- 
ready in the 14th century we meet in many places with 
ordinances limiting the number of crafts masters in a cer- 

;,,.... ^Google 



TEE RISE OF INDUSTRIAL CAPITALISM 115 

tain town, assigning to each master a definite number of 
journeymen and apprentices, and forbidding competitive 
crafts of artisans outside of the guilds within a circuit of 
one ban mile all about the town. 

1- Under these, circumstances, the class struggles be- 
tween the above mentioned classes were soon accompa- 
nied by a new class struggle between journeymen and 
masters, and by the struggles of the propertyless prole- 
tarians against all other classes. 

t With the beginning of the 1 6th century, we see every- 
where a large class of more or less outlawed proletarians 
in the principal countries of Europe, wherever the middle 
class had developed into industrial capitalists and secured 
a certain degree of importance and recognition in econo- 
mic and political affairs. This proletariat was not only 
at the mercy of the feudal and industrial aristocracy, but 
also despised and shunned by the guilds and the better 
situated laboring classes. While the guilds, and later 
the organizations of the journeymen, succeeded here and 
there in sharing to a moderate extent In the increasing 
productivity of their labor, the general condition of the la- 
boring classes fell more and more below the level of the 
average standard of living, which had become established 
by feudal tradition. 

So long as the guildmaster was himself the principal 
laborer in his shop, employing only a few journeymen 
and apprentices to assist him, there was little danger of 
any attempt to prolong the working day beyond reason- 
able limits. But when the number of journeymen and 
apprentices increased, when the master was no longer the 
chief worker, but mainly a superintendent, then the 
struggles between masters and journeymen began to rage 
about questions of working hours, wages, treatment, etc. 



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146 MARXIAN ECONOMICS 

The proletariat, however, unorganized and unprotec- 
ted, did not and could not take part in these struggles, 
because the better situated laboring classes themselves 
excluded them from all participation in their affairs. It 
is not strange, therefore, that the protracted struggle be- 
tween masters and journeymen remained but a sporadic 
and fierce wrangle between a small number of people, and 
did not assume the form of a vast labor movement, which 
could become an overwhelming historical force and take 
part consciously in a transformation of social conditions 
in harmony with understood historical tendencies. Radi- 
cal as these journeymen were, their demands never went 
beyond the ordinary horizon of a willing laborer, who is 
ready to serve his master so long as he is fed and treated 
well. They had no revolutionary ideal, no wish to abo- 
lish master rule in every form. 

Like the ruling classes themselves, and like the well- 
to-do serfs, the guilds had to create the elements of their 
own downfall by promoting through their anti-progres- 
sive actions the formation of a new class of laborers, who 
should be compelled, through historical necessities, to an- 
tagonize not only the guild system and its policies, but the 
entire social order that had pushed them to the bottom of 
the social pit. All the classes of feudal society above 
the proletariat were thus continually engaged in laying 
the foundation, without which no industrial capitalism can 
exist, a large wage working proletariat. But of all clas- 
ses so engaged during this period, the future captains of 
industry, the merchants, contributed the smallest share to- 
ward the creation of their future objects of exploitation. 

The historical development set the table for them, as 
it were, and pushed them into the best seats almost with- 
out any exertion of their own. The other classes did 



5 lc 



THE RISE OF INDUSTRIAL CAPITALISM 147 

most of the work of undermining the old and building up 
the new system. The most essential part of all this work 
was the creation of a wage working proletariat, for with- 
out it capitalist industry was impossible. 

"The capitalist system presupposes the complete sepa- 
ration of the laborers from all property in the means by 
which they can realize their labor. As soon as capitalist 
production is once on its own legs, it not only maintains 
this separation, but reproduces it on a continually extend- 
ing scale. The process, therefore, that clears the way 
for the capitalist system, can be none other than the pro- 
cess which takes away from the laborer the possession of 
his means of production, a process that transforms, on 
the one hand, the social means of production and sub- 
sistence into capital, on the other the immediate producers 
into wage laborers. The socalled primitive accumulation, 
therefore, is nothing else than the historical process of 
divorcing the producer from the means of production. 
It appears as primitive, because it forms the prehistoric 
stage of capital and of the mode of production cor- 
responding to it. The economic structure of capitalistic 
society has grown out of the economic structure of 
feudal society. The dissolution of the latter set free 
the elements of the former. The immediate producer, 
the laborer, could only dispose of his own person after 
he had ceased to be attached to the soil and ceased to 
be slave, serf, or bondsman of another. To become a 
free seller of labor-power, who carries his commodity 
wherever he finds a market, he must further have 
escaped from the regime of the guilds, their rules for ap- 
prentices and journeymen, and the impediments of their 
labor regulations. Hence, the historical movement which 
changes the producers into wage workers, appears, on the 



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148 MARXIAN ECONOMICS 

one hand, as their emancipation from serfdom and from 
the fetters of the guilds, and this side alone exists for our 
bourgeois historians. But on the other hand, these new 
freedmen became sellers of themselves only after they had 
been robbed of aD their own means of production, and of 
all the guarantees of existence afforded by the old feudal 
arrangements. And the history of this, their expropria- 
tion, is written in the annals of mankind in letters of 
blood and fire. The industrial capitalists, these new po- 
tentates, had on their part not only to displace the guild 
masters of handicrafts, but also the feudal lords, the pos- 
sessors of the sources of wealth. In this respect the con- 
quest of social power appears as the fruit of a victorious 
struggle both against feudal lordship and its revolting 
prerogative, and against the guilds and the fetters they 
laid on the free development of production and the free 
exploitation of man by man."* 

The budding industrial capitalist, then, found an a- 
bundance of proletarians at hand. But these proletarians 
were not trained to suit the requirements of the mer- 
chants and financiers, who now started the period of in- 
dustrial capitalism by the first stages of manufacture. 
Manufacture was inaugurated in two ways. Either a num- 
ber of artisans of different trades were employed under 
the direction of one capitalist in the same workshop, and 
each contributed his share to the finished product. Or, 
artisans of the same trade were assembled by one capital- 
ist in one workshop and each artisan fashioned the same 
article from the first stages to the finished product. This 
required skilled laborers. But skilled laborers were 
scarce, and so long as manufacture offered plenty of op- 



THE RISE OF INDUSTRIAL CAPITALISM 149 

portunities for journeymen to become independent mas- 
ters, the skilled laborers were of an independent turn of 
mind, resented shop discipline, and gave the capitalists 
much trouble. The political power of the ruling clas- 
ses, the state, had to stop in and enforce the submission 
of the laborers to the requirements of capitalist produc- 
tion, 

"The proletariat created by the breaking up of the 
bands of feudal retainers and by the forcible expropria- 
tion of the people from the soil, this "free" proletariat, 
could not possibly be absorbed by the nascent manufac- 
tures as fast as it was thrown upon the world. On the 
other hand, these men, suddenly dragged from their 
wonted mode of life, could not as suddenly adapt them- 
selves to the discipline of their new conditions. They 
were turned en masse into beggars, robbers, vagabonds, 
partly from inclination, in most cases from stress of cir- 
cumstances. Hence at the end of the 15th and during 
the whole of the 16th century, throughout Western Eu- 
rope a bloody legislation against vagabondage. The fa- 
thers of the present working class were chastised for 
their enforced transformation into vagabonds and pau- 
pers. Legislation treated them as "voluntary" criminals, 
and assumed that it depended on their own good will to 
go on working under the old conditions that no longer 
existed."* 

While the proletariat was thus being prepared for its 
work under Capitalism, the new master class was gradu- 
ally slipping out of its embryonic form and assuming its 
typical capitalist character. The expropriation of the 
serfs from the soil had created the large landed proprie- 

*) Karl Marx, 1. c, Vol. I, chapter XXVIII, page S05-S0I. 



160 MARXIAN ECONOMICS 

tor. Among the serfs which remained on the lord's esta- 
tes, many developed later into renters and thence into 
farmers employing wage labor. The great financiers and 
merchants, whom the middle ages had produced, launch- 
ed out into industrial enterprises as soon as the feudal and 
corporate barriers, that had hedged them in during the 
old times, fell with the dissolution of the feudal commu- 
nes and the corporate guilds. Among the former guild 
masters, small independent trades people and journey- 
men, a good many had acquired enough wealth to enable 
them to hire wage workers and start in capitalist business 
on their own little scale. And so long as capitalist manu- 
facture absorbed the national industries only by slow and 
almost imperceptible degrees, the opportunities for the 
small capitalist were in no danger of being closed by his 
large competitors. 

With the dissolution of the feudal system of produc- 
tion and its patriarchal method of supplying all its wants 
by home labor, the production of commodities for sale be- 
came the predominant mode of supplying the needs of hu- 
man society. And it was not only the home market, 
which was thus opened for the operations of industrial 
capital. With the discovery of America, with the opening 
oft the sea route to India, China, and Japan, by the cir- 
cumnavigation of Capes Horn and Good Hope, by the dis- 
covery of the tropical islands in the Pacific ocean, vast 
new foreign markets were unlocked, and the looting of 
Mexico and Peru by the Spaniards, of East India by the 
English, of the Malay Archipelago by the Portuguese and 
Dutch, brought enormous quantities of gold and silver 
into the hands of the conquerors and dragged a great 
multitude of cheap laborers from their homes and fami- 
lies, pressing them into the servjee of industrial capital. 



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THE RISE OF INDUSTRIAL CAPITALISM 151 

"The discovery of gold and silver in America, the ex- 
tirpation, enslavement and entombment in mines of the 
aboriginal population, the beginning of the conquest and 
looting of the East Indies, the turning of Africa into a 
warren for the commercial hunting of blackskins, signal- 
ised the rosy dawn of the era of capitalist production. 
These idyllic proceedings are the chief momenta of prim- 
itive accumulation. On their heels treads the commer- 
cial war of the European nations, with the globe for a 
theater. It begins with the revolt of the Netherlands from 
Spain, assumes giant dimensions in England's anti-jaco- 
bin war, and continues in the opium wars against China, 
etc. The different momenta of primitive accumulation 
distribute themselves now, more or less in chronological 
order, particularly over Spain, Portugal, Holland, France 
and England. In England at the end of the 17th century, 
they arrive at a systematical combination, embracing the 
colonies, the national debt, the modern mode of taxation, 
and the protectionist system. These methods depend in 
part on brute force, for instance, in the colonial system. 
But they all enjoy the power of the State, the concen- 
trated and organized force of society, to hasten, hot- 
house fashion, the process of transformation of the feudal 
' mode of production into the capitalist mode, and to 
shorten the transition. Force is the midwife of every 
old society pregnant with a new one. It is itself an 
economic power."* 

*) Earl Marx. I. o., volume I, chapter XXXI, paces 823—88*.— 
The passage referring to force as the midwife of old societies 

pregnant with a new one. and as — — -" — 

been interpreted by anarchists am 
politicians as an apology of violet 

class struggle against the capital 

velopment does not exclude a cataclysmic 
above passage refers clearly to the organized 
represented Dy the state, and does not sanctl 
Of violent means outside of the organized a 



ogle 



US MARXIAN ECONOMICS 

In its infancy, the industrial capitalist class found a 
proletariat ready-made at hand, waiting to be exploited. 
The old feudal powers in nobility and guilds undermined 
their own economic foundation and paved the way for 
the political supremacy of the capitalist class. The work- 
ing classes fought the battles, which secured the political 
supremacy, or at least a share in it, to the capitalists. 
In its further growth, many new forces came to the aid 
of this class, notably steam and its untiring servant, ma- 
chinery.' ' Soon it was driving along with a speed never 
before equaled by men, like a new Phaeton driving the 
horses of the Sun. Like Phaeton too, it is rushing head- 
long to its doom as no other class before it. 

Ian conception of history, with tti emphatic recognition of the 

Eadual and genetic growth of social transformation, neeessar- 
lays the stress upon the peaceful and legal accomplishment 
of the proletarian alms, and admits of violent means only as 
exceptions under particularly abnormal conditions. In Which 
uncontrollable proletarian elements outside of the organised 
socialist movement rise In spontaneous rebellion against ths 
ruling classes and compel the Socialist Party for the sake of 

BrlncTple to side with the oppressed, as was the case In the 
arls Commune. Only after ttie proletariat has peacefully or- 
ganized a majority of the voters of a certain country and elect- 
ed li 



"legally" In defense and maln- 
__ ___e pro] tar Ian position. And In that case the enemies 
of the proletariat should not complain, for It will then simply 
v " - — s of tables turned and of weighing with the samo 



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CHAPTER XIII. 

FROM ANCIENT TO CLASSIC ECONOMICS 

Ever since commerce, money, merchants' capital, in- 
terest, profit, made their appearance in human society, 
there have been thinkers, who tried to treat of these 
matters in a scientific way. The first traces of a scientific 
conception of economic problems, which are known to 
us by fragments of literature on the subject, are found 
among the thinkers of ancient Greece, several hundred 
years before the Christian era. 

These men were not brought up in the Mosaic concep- 
tion, that Adam and Eve were thrown out of a paradise 
and compelled to work for a living, after they had made 
a very natural mistake. Nor were they brought up in 
the modern conception, that capitalists have always ex- 
isted and will always exist. In fact, they knew that 
capitalists were a very recent, and by no means welcome, 
addition to the national life. And they were inclined to 
egard these newcomers as a nuisance rather than a 
senefit to society. 

In their day, the efforts made by legislators like Solon 
to protect the property of the mass of the citizens against 
the greed of merchants and mercantile aristocrats were 



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154 MARXIAN ECONOMICS 

still vividly remembered. That the private property of 
a plutocratic minority should be held sacred, and the 
private property of the vast mass of laboring citizens left 
at the mercy of a plutocratic minority, did not seem as 
natural to the public men of Greece as it does to the sen- 
ators and congressmen of the United States or Rocke- 
feller. 

On the oilier hand, the vast body of laborers in 
Greece were slaves. Their labor-power and labor-time 
could not be measured in terms of commerce. Moreover, 
production was mainly for direct use, and commerce did 
not reach as deeply into the productive sphere as it did 
later under different systems of economy. 

Under these circumstances, the Grecian economists 
show neither the exalted reverence of modern partisan 
economists for the private property of capitalists, nor do 
they appreciate the vital importance of human labor in 
the problems of political economy. They deal more with 
effects than with causes, and puzzle their brains with 
schemes rather than historical processes. Nevertheless, 
they make very objective observations and utter many 
profound ideas, which the partisan economists of modern 
ruling classes might read with much profit. 

Plato, for instance, understood the vital significance 
of social division of labor for the constitution of the 
Grecian city. Aristotle realized that commodities have a 
use-value and an exchange-value. He recognized that 
money as a medium of circulation performs different 
functions than money as capital. He even analyzed 
money as a measure of value and correctly stated that 
the value of money must be determined by the same 
means as that of all other commodities. He was of the 
opinion that money as a mere medium of circulation owed 



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FROM ANCIENT TO CLASSIC ECONOMICS 156 

its existence to agreement or law, that it had no intrinsic 
value of its own, and that its usefulness as coin was 
merely an attribute of its function in the circulation. It 
was evident to him that the exchange-value of commodi- 
ties was at the bottom of their prices. And since com- 
modities compare their exchange-value only through their 
prices, he made them measureable through money al- 
though he held that the value of the different objects 
measured by money was really incommensurable. But 
for all practical purposes he thought that money could 
be used as a measure of what was in fact not measure- 
able. He was looking for a common unit of measure- 
ment But the basis of Grecian society, slave labor, pre- 
vented him very naturally from finding in average social 
labor time the common measure of all exchange-values. 

The Grecian economists went as far as they could 
under the historical circumstances under which they 
lived. So long as the social conditions did not offer them 
the materials necessary for a scientific solution of eco- 
nomic problems, the Grecian thinkers could not well be 
expected to arrive at a scientific solution. 

During the centuries following the 'dissolution of 
Grecian societies, the conditions were even less favorable 
for the development of a science of sociology. Intel- 
lectually the Roman civilization never rose to the in- 
tensity ano* perfection of the Grecian. The mental con- 
ception of the feudal era, which followed the disintegra- 
tion of the Roman empire, fell completely into the toils of 
a mode of thought which turned its eyes inward rather 
than outward and tried to arrive at objective truths, not 
by an inductive method of research, collecting and classi- 
fying experimental facts and making logical deductions 
from them, but by shutting out as much as possible of 



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156 MARXIAN ECONOMICS 

the actual reality and juggling with introspective specu- 
lations. 

It was only in astronomy, and its auxiliary mathe- 
matics, that exact methods of observation and reasoning 
enforced themselves. And these sciences did not extend 
their influence into the sphere of social relations. 

Wherever we meet with any thought touching upon 
social matters during the medieval period we find that it 
is either confined to denunciation of the natural results 
following from private ownership of land and means of 
production, with its attending class rule, or to dreamy 
Utopias, passionate revolts, despairing outcries. The op- 
pressed classes lived under conditions which prevented 
them from developing any consciously organized social 
movements of such character as would enable them to 
understand the course of historical evolution and adapt 
themselves to it as auxiliaries. They generally worked 
against the prevailing tendencies of social development, 
not with them. Their revolutions were either short, 
spasmodic outbreaks, or sentimental and resigned theo- 
retical crusades on the field of abstract ethics. 

In short, the requirements for the elaboration of sci- 
entific theories did not exist in ancient and medieval soci- 
eties. Even the best educated brains of those days were 
dominated by speculative conceptions, and naturally so. 
Besides, education was a privilege of the select. When- 
ever any particularly bright mind showed itself among 
the oppressed classes, it was generally taken in hand by 
the ruling classes and educated to serve the interests of 
caste. If such a man remained loyal to his class he 
was killed by the rulers. And such loyal leaders of 
the working class revolution were necessarily as much 
dominated by speculative fancies as the educated men of 



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FROM ANCIENT TO CLASSIC ECONOMICS 157 

the ruling class, for the conceptions of the ruling classes 
are the prevailing and dominating ones so long as their 
rule is assured by social evolution. 

The first modern attempts to introduce scientific 
methods into political economy were due to the efforts 
of the rising merchant towns of Central and Western 
Europe, from the twelfth to the sixteenth centuries, to 
overcome the money monopolies of the ruling princes 
and great financiers. While these efforts were really a 
struggle of one kind of monopoly against another, their 
theoretical reflection assumed the guise of a defense of 
natural laws against feudal laws. 

The laws of mercantile economy were defended as 
"natural" laws against the "unnatural" laws of feudal 
privilege, for the former were declared to be the expres- 
sion of "free" competition, while the feudal rights were 
assailed as artificial gifts of class privilege. This is the 
historical genesis of the distinction between natural and 
artificial monopolies, of which some modern would-be 
economists make so much in their frantic endeavors to 
defend the little exploiter against the inroads of the large 
exploiter, and which they proclaim as the theoretical 
basis of "natural" remedies against industrial and finan- 
cial trusts. 

Out of these first theoretical skirmishes between 
feudal power and merchants' needs arose the theoretical 
controversies of the mercantilists against the monetary 
system that was their mother. In these controversies the 
superficial notions arising in the brains of the merchants 
out of the surface indications of commercial processes 
were pitted against the superstitious speculations of the 
industrialized champions of feudal privileges, who be- 
lieved in the immanent mysterious powers of money as 

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158 MARXIAN ECONOMICS 

the sole source of social wealth. And since money was as 
much the idol of merchants as of the feudal powers, the 
entire controversy raged about the peculiar forms and 
functions of money as a medium of circulation, as a mea- 
sure of value, as a standard of price, as a hoard, as a 
means of payment, as interest-bearing and merchants* 
capital. 

The monetary privileges of princes and a few great 
financiers stood in the way of the merchants. The re- 
quirements of extending commerce demanded imperious- 
ly a greater flexibility of a ciculating medium.. This led 
as early as the twelfth century to the establishment of 
deposit banks in the Italian merchant towns, and in pro- 
portion as the center of commerce was shifted north- 
ward and westward, in the course of the following cen- 
turies, the same institutions appeared among the Dutch 
and the Hansa towns of Germany. 

These deposit banks, in their turn, acquired a mono- 
poly of money, and out of the struggles against bank mo- 
nopolies arose the credit system, which was in due time 
to exceed enormously the scope of the precious metals in 
the circulation of commodities. 

This entire controversy about money, dragging its 
weary length through several centuries; was at first na- 
turally confined to the sphere of circulation. It did not 
touch the sphere of production, because all the essential 
interests of the contending parties centered around the 
control of the medium of circulation. That the value of 
the metal in money itself was not due to any immanent 
powers of this medium of circulation, but rested in the 
last analysis upon the productive forces of society, was 
a conception that did not recommend itself at the outset 
to the parties most concerned in this controversy. And 



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FROM ANCIENT TO CLASSIC ECONOMICS 159 

so the whole theoretical discussion, from the historical 
point of view, began on a lower level than the speculations 
of the early Grecian economists. The reason for this 
state of things is easily found in the historical conditions 
leading up to these controversies. I need not dwell on 
this point any further here. 

With the further development of the merchant class 
into a class of industrial capitalists, the sphere of produc- 
tion gradually asserted it3 influence over the sphere of 
circulation, and this found expression also in the theo- 
retical discussions. Already in the transition years from 
the sixteenth to the seventeenth century political economy 
began to assume its modern aspect and delve into problems 
of value. In the person of William Petty, the founder of 
modern political economy, we come face to face with the 
passage from merchantilist to classic economist theories. 
He did not only reassert, in a more perfect form, Ari- 
stotle's theory of money and of the value of commodities 
in general, but he even declared definitely that "equal 
labor" was the common measure of all commodities. Buf 
owing to the incompleteness of his theoretical material, 
and to the undeveloped condition of the working prole- 
tariat, he remained in doubt about the practical means by 
which this common measure could be made serviceable. 

Petty's work served as a basis for the entire mer- 
cantilist literature during the next century and paved the 
way for all subsequent analyses of value. His emphasis 
upon exact methods of observation in sociology by means 
of statistical tabulation still stands as a lasting rebuke to 
all modern compilers of official statistics, which seem to 
be especially designed for the purposes of baffling un- 
biased sociological research, instead of encouraging and 
assisting it. 



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160 MARXIAN ECONOMICS 

Just as Petty 's work represents in England the first 
systematic theory of mercantilism, so Quesnay's work re- 
presents in France the first systematic presentation of 
capitalist production. Owing to the peculiar historical 
conditions, under which the bourgeois revolution devel- 
oped and succeeded in France, the physiocratic system of 
Quesnay considered the capitalist farmers as the typical 
representatives of industrial capital. For this reason this 
system remained onesided and limited in its application. 
But it brought out at least one very essential point, name- 
ly that it is fundamentally not a question of mere pro- 
duction, but of reproduction. In other words, the pro- 
blem is not merely to explain what capital is, but how if 
maintains itself intact and increases itself. 

The physiocratic character of Quesnay's system made 
it unintelligible to these economists, who developed the 
theory of industrial capital in England, where industrial- 
ism assumed its most typical features. Adam Smith, 
whose "Wealth of Nations" marks the definite repudia- 
tion of mercantilist conceptions in political economy, still 
gropes his way rather tentatively through the mazes of 
undifferentiated and undigested thought. He falls in 
many respects below Quesnay's level, particularly in his 
analysis of the process of reproduction. But nevertheless 
he shows his genius by seeking a solution of economic 
problems above all in the sphere of production, making 
determined efforts to ascertain the actual relations be- 
tween labor and capital, and examining the influence of 
the different component parts of capital on the process of 
reproduction. Here he is necessarily vague and falls in- 
to misleading conceptions, which became pitfalls for the 
next generation of economists. His greatest error in this 
respect was that he considered the distinction between 



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PROM ANCIENT TO CLASSIC ECONOMICS 161 

fixed and circulating capital, which relates in fact to the 
different manner in which various parts of capital are 
circulated, as a fundamental distinction in the process of 
production. This error barred his way to a solution of 
the problem of value and surplus-value. 

But in spite of this error, the most significant part of 
his work is the emphasis which he lays upon the pro- 
blems of value and surplus-value. Already some mer- 
cantilists had recognized that the increase of capital must 
be due to an increase in social values. Where does this 
increase come from! The greater part of the mercantil- 
ists imagined that surplus-value arose from arbitrary 
additions to the prices of commodities. But even Petty 
recognized that the surplus-value of the whole society 
cannot come from mere buying and selling. And Steu- 
art declared frankly that the gains and losses of people 
cheating one another in buying and selling must mutu- 
ally balance one another, so that the result is the same as 
though they had sold their commodities at normal prices. 
On the other hand, social laws cannot be studied by ex- 
amining a few exceptions, and so it will not do to explain 
the origin of the surplus-value of entire classes by oc- 
casional gains, which a few individuals may realize in 
commercial competition. 

Adam Smith re-asserted the theory of value, which' 
was developed in the germ by Petty. In the work of 
Smith, this theory is made the basis for his analysis, of 
surplus-value. But since he neither perfected Petty's 
theory of value, nor applied it consistently, he got 
no further than a frank declaration, that ground rent 
and capitalist profit are deductions from the product of 
productive laborers, who performed surplus-labor over 
and above the labor required for their own sustenance 

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162 MARXIAN ECONOMICS 

without receiving an equivalent for it This did not en- 
able him to discover the mechanism, by which particu- 
larly the industrial capitalist class secure control of the 
surplus-products of laborers and realize surplus-value on 
them in the shape of money. Neither did he separate 
surplus-value, as a general category, from the different 
forms which it assumes in industrial profit, merchants' 
profit, interest on capital, and ground rent. 

Adam Smith represents in classic political economy 
the transition period from manufacture to machinofac- 
ture, just as Petty represents theoretically the transition 
period from mercantilism to manufacture, and Quesnay 
the transition from agricultural to industrial capitalism. 

The next man, who marks in England a new histori- 
cal stage of production, is David Ricardo, whose most 
significant worlc falls into the first quarter of the nine- 
teenth century. He is the typical economist of machine 
production in industrial capitalism, and, therefore the ty- 
pical spokesman of bourgeois political economy in its 
modern form. 

Ricardo claimed that the new values added by the la- 
bor of the producing workers to the values already incor- 
porated by past labor in raw materials and machinery 
were divided into capitalist's profits and laborer's wages, 
and that ground rent was a deduction from the profits of 
the industrial capitalists. It followed, according to Ri- 
cardo, that wages and profit rise and fall in inverse ratio 
to one another, without directly affecting the general 
level of prices. So far as, prices were subject to fluctua- 
tion around the real values of commodities, Ricardo held 
that these fluctuations were regulated by supply and de- 
mand. 

All these claims were logical corollaries of his theory 



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FROM ANCIENT TO CLASSIC ECONOMICS 163 

of value, and in keeping with his idea, that the accumula- 
tion of capital and the proportional division of capital in- 
to fixed and circulating parts, might exercise an influ- 
ence on the relative values of commodities. But since he 
made no progress over Adam Smith in this respect, and 
failed to realize the distinction between the organic com- 
position of capital in the sphere of production and the 
different ways in which different parts of the value of 
capitals are circulated, he did not arrive at a consistent 
scientific solution of the problems of value and surplus-' 
value. Neither did he clearly separate surplus-value as 
a general category from its particular forms as capitalist 
profits, landlord's rent, banker's interest. Above all, he 
failed to draw the logical inferences from his theory of 
value with regard to the laborer's share in his own pro- 
duct. 

But there were others who did. In Ricardo's time 
the industrial proletariat in England had developed suf- 
ficiently to create its own theories, and the spokesmen of 
this proletariat at once proceded to combat the capitalist 
class with the theories of its own thinkers. 

Just as Petty's theories had been the pivot, around 
which had turned all mercantilist controversies after him 
for a century, so Ricardo's theories became the center of 
more than fifty years of theoretical discussion, and rem- 
nants of his theories survived in a more or less muddled 
form long after the Ricardian school itself had given up 
the ghost. It was particularly the middle strata of ca- 
pitalist society, who sought consolation in certain por- 
tions of Ricardo's theories. Either they clung desperate- 
ly to Ricardo's theory of value and prayed fervently for 
system of "free" competition, in which all commodities 
should be exchanged at their real value without all the 



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164 MARXIAN ECONOMICS 

other "unnatural" features of capitalist competition, 
which strike such cruel blows at the little exploiter. Or 
they resurrected a portion of Ricardo's theory of ground 
rent and built on it a scheme for the salvation of the 
middle class. An example of this last method is still 
languishing in American society in the shape of Henry 
George's single tax ideas, which are offered to the work- 
ing class in the hope that it may save the little exploiter 
from his inevitable fate. The grotesque irony of single 
tax is that it uses Ricardo's capitalist theory of ground 
rent as though it were a proletarian theory, that it gene- 
ralizes Ricardo's economic rent into an indistinct concep- 
tion of rent comprising many different forms of rent, and 
that it offers this muddled rehash of a capitalist theory 
in the interest of the middle class to a working class, 
whose interests demand the abolition of all exploiting 
classes. 

The early champions of the English proletariat paid 
little heed to such platonic expurgations of Ricardo's 
theories. They took the bull by the horns and assumed 
from the very outset an attitude of inplacable antagonism 
to all capitalist forms of exploitation. They met Ricar- 
do's theory of value with the following argument: If 
labor creates all exchange-values, as you say, then labor 
should get all it produces. If the exchange-value of a 
certain product is equal to the labor contained in it and 
measured by the labor-time consumed in its production, 
then the exchange-value of one day's labor should he 
equal to the value of its product. In other words, wages 
should be equal to the value of the product of labor. But 
this is not so in reality. It is well known that wages, 
the value of a definite quantity of labor, are always lower 
than the value of the product of labor. The socialists 

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FROM ANCIENT TO CLASSIC ECONOMICS 165 

invited the capitalists to draw the logical inferences from 
these facts and stop robbing the laborers. The Ricardian 
school was unable to solve this puzzle and refute by 
scientific argument this position of the early socialists. 
Neither were the early socialists able to prove by what 
means the mechanism of capitalist production managed 
to reproduce the capital and profits of the capitalists and 
the wages of the laborers. A new theory was necessary 
for the solution of this puzzle. Evidently this could be 
only a proletarian theory, for the champions of the 
capitalist class could not well be expected to formulate a 
theory, that would mean the self-destruction of the 
capitalist class. In short, a new historical class, the pro- 
letariat, required a theory of its own, which should re- 
present its own interests and erect its own milestone, just 
as the preceding stages of capitalist development had 
each erected its own milestone in economic theories. 

This new theory was the crowning work of the life 
of Karl Marx. 



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CHAPTER XIV. 

THE MARXIAN THEORY OF VALUE 

The classic bourgeois economists had freed them- 
selves of many of the superficial conceptions, which the 
owners of merchants' capital had handed down to them 
through the mercantilist theories. Classic bourgeois 
economy had abandoned the idea of the intrinsic value 
of money, had realized that the exchange-value of com- 
modities was determined by the quantity of labor realized 
in them, and had accepted labor instead of money as a 
measure of exchange-value. But there still remained 
some mercantilist superstition even in the most advanced 
minds of the bourgeois economists, and even when they 
had theoretically repudiated the mercantilist notions, 
some of these old ideas persistently recurred and marred 
the clear analysis of men like Adam Smith and Ricardo. 

One of the most persistent mercantilist notions, which 
clung very tenaciously to some bourgeois economists, 
was that supply and demand determined the exchange- 
value of commodities. Some of the classic bourgeois 
economists had indeed undertaken tq remove the rubbish 
of this theory of supply and demand, which again and 
again interfered with the consistent application of the 



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THE MARXIAN THEORY OF VALUE 167 

labor theory of value. But in spite of their efforts, this 
particular mercantilist notion clung grimly to bourgeois 
economy, and still clings to it to this day. 

Marx took up the argument, where the advanced 
classic economists had dropped it If labor determines 
the value of commodities, so Marx said, then supply and 
demand cannot determine it. Labor works its results in 
the sphere of production. Supply and demand work 
their results in the sphere of circulation. Evidently the 
commodities receive their value in the sphere of produc- 
tion, during the labor process. Then supply and demand 
enter into the problem, when the finished articles are 
circulated on the market. It is clear, therefore, that 
supply and demand cannot determine the value of com- 
modities, but at best only modify it But if supply and 
demand balance one another, then their influence is nil, 
and the question still remains, where the value of the 
commodities comes from in the labor-process. Supply 
and demand must, therefore, be eliminated from the 
problem of value, until this problem has been solved. 
What role they play in the sphere of circulation, through 
which the commodities pass after they have received their 
value in the sphere of production, remains to be as- 
certained in its proper place. 

In the mercantilist conception, there had been no 
explanation of the problem, how it is that supply and de- 
mand determine prices, when each individual seller is 
supposed to fix his own prices in order to make profits 
by selling his articles for more than he paid for them. 
Still less had there been any explanation of the question, 
where the additional values, which the merchants pock- 
eted, came from. In the labor theory of value of the 
classic economists, this same problem still remained un- 



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168 MARXIAN ECONOMICS 

solved. They acknowledged, that labor created all ex- 
change-values, but'they failed to explain, how labor did 
this. Neither had they shown, what kind of labor created 
exchange-value, nor how this labor was to be used as a 
measure of value, nor how the surplus-value assumed its 
different forms, nor how value itself was composed out 
of its different parts. It was not surprising under these 
circumstances, that the inconsistencies of the classic 
bourgeois economists should become insurmountable 
obstacles in their attempts to interpret the actual facts of 
capitalist life. 

Marx did not merely restate the classic bourgeois 
claim, that it was the business of scientific explorers to 
find out what really passed under capitalist production 
and circulation, and that it was a mistake to use the 
notions of the human agents in the movements of com- 
modities as a scientific basis. He also carried this idea 
through to its consistent conclusion and solved the 
questions, which the classic bourgeois economists had left 
unanswered. The problem was to find out, how value 
was created by human labor, how it was tranferred from 
the different elements of production to the finished 
articles, how it was modified by competition in the sphere 
of circulation, and how the human beings, who imagined 
they were fixing prices according to their individual 
liking were controlled against their will and unconsciously 
by the mechanical movements of capitalist production and 
circulation under the influence of the uncontrolled law of 
value. In other words, the problem was to find out, how 
the mechanical workings of the uncontrolled and little 
understood laws of the capitalist system enforced them- 
selves against the will and wishes of the human beings, 
who dreamed of being their free makers. 



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THS MARXIAN 13IOKY \tf VALUE 169 

The exchange-value of couuiaufiiied, and labor as a 
measure of this exchange-value had not been brought 
into a natural relation with one another by the classic 
bourgeoois economists. In actual life, the exchange- 
value of commodities expressed itself tangibly in their 
money-price. This price, and the money-price of labor- 
power, were not identical. What then was the funda- 
mental relation between money, labor, and the value of 
the articles produced by labor and circulated by means 
of money? And what was it, that interfered with this 
relation through the money-price, so that the law of 
value accomplished its results only through a long suc- 
cession of irregularities? 

Marx answered these questions and thereby opened 
the secret door, which led into the sacred mysteries of 
capitalist economy. 

Capitalist economy, said Marx, places upon the es- 
sential elements of social wealth the stamp of com- 
modities, of things made for sale first, for use incidental- 
ly. The useful quality of goods, which makes them ac- 
ceptable to the consumer who buys them, recedes out of 
sight for the producer who sells them, and yields the 
place of honor to the money-value, which goods 
represent for the seller. This significant mark of capital- 
ism is forced upon all things which come under its in- 
fluence. 

The most significant commodity on the capitalist 
market is the labor-power of the wage worker, that is, the 
brain and muscle power of those, who have no other 
means of existence but the sale of their power, of their 
own bodies, to some master for a stipulated sum. What 
the laborer sells to the capitalist is not labor, but the com- 
modity labor-power vested in his body. The laborer's 

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170 MARXIAN ECONOMICS 

body is the storage tank of his only marketable com- 
modity. This commodity, labor-power, is bought by the 
capitalist for the purpose of being consumed by him. He 
buys it at its market-price, as he does all other commodi- 
ties, and consumes it by putting it to work for his own 
benefit 

All other commodities are passive during consump- 
tion. They are cither consumed individually, as are food, 
clothing, shelter, luxuries, or productively, as are raw 
materials, machinery, labor-power. When consumed in- 
dividually, the commodities pass entirely out of existence, 
and with them passes their value. When consumed 
productively, their value is transferred to the product, 
into which their substance passes, or in the production of 
which their own substance wears away. 

But labor-power has one quality, by which it differs 
from all other commodities. When it is productively 
consumed by the capitalist, it does not merely produce 
other commodities, but it reproduces itself. A part of its 
product passes into the hands of the capitalist, is taken to 
the market and sold, and the money received for it is 
used to buy new raw materials, machinery, labor-power, 
and to pay the individual expenses of the capitalist. That 
portion, which is spent for the purchase of labor-power, 
passes into the hands of the laborer as wages and is used 
by him for the reproduction and conservation of his 
labor-power. The laborer buys with his wages necessities 
of life, builds up new labor-power, and offers it again to 
the same or to some other capitalist for renewed pro- 
ductive consumption.* 

* In his early works on economics, Marx did not mrke the 
distinction between labor and labor-power. In hfs "Poverty of 
Philosophy," and his pamphlets on "Wage Labor and Capital" 
and ""Value, Price and Profit," the term "Labor" ntlll has the 



THE MARXIAN THEORY OP VALUE 171 

Let us see, now, how the productive consumption of 
labor-power in the factory of the capitalist transforms the 
other elements of production, that is, raw materials, 
auxiliary materials, and machinery, into commodities and 
transfers their exchange-values to the finished articles. 

All the natural substances, which form the bodies of 
the raw and auxiliary materials and of the machinery, are 
grown by nature. Nature creates wealth, but no ex- 
change-values. The exchange-values, which natural 
materials have when they are brought to market, are due 
to the labor expended in taking them from the place 
where Nature grew them. Some of the natural materials 
have been worked up into partly finished articles, when 
they reach the factory. The machinery, likewise, has re- 
ceived its exchange-value through the labor Of the people 
who made it and carried it to the factory and installed it 
there. All these exchange-values form the constant 
capital of the capitalist. But this constant capital (raw 
and auxiliary materials and machinery) is of itself un- 
productive. It cannot either produce commodities or 
reproduce itself. It cannot create any new values. It 
lies unproductive and inert, until the labor-power of the 
wage laborer touches it with its creative force. In order 
to secure the use of this labor-power, the capitalist must 
pay the laborer a certain amount of wages. The money 
paid out for wages represents the value of the labor- 
power, in other words, represents the cost of the neces- 
sities required to maintain and reproduce the laborer's 



double meaning, which It has In the works of the classic 
■Ola economists. It may signify labor-power as well as the 
s of applying It. But In his ''Capital," Man has made this 
:iino very plain and used It as a basis tor bis theory of surplus- 
Bee next chapter. 



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173 MARXIAN ECONOMICS 

labor-power under the prevailing condition? of any period 
of Capitalism. 

It is only the labor-power of .the laborer which 
represents the productive force of Capitalism. It alone 
can conserve the value of the raw and auxiliary materials 
and machinery. It alone can create new values. It alone 
can increase the exchange-value in capitalist society. For 
this reason Marx calls the money invested in labor^power 
the variable capital of the capitalist 

The laborer applies his labor-power to the raw and 
auxiliary materials and sets the machinery in motion. 
While the machinery is running and working on the raw 
and auxiliary materials under the control of the laborer, 
it wears away a part of its substance and the value of 
this worn out portion passes over to the product. In like 
manner does the value of the raw and auxiliary materials 
pass over to the product in proportion as these materials 
are worked up. To the extent that the machinery wears 
away and the materials are worked up, the value of the 
constant capital re-appears in the finished product. This 
ts value which already existed, before the laborer touched' 
the elements of production. They have simply changed 
their form. Formerly the values existed in the raw ma- 
terials and machinery, now they exist in the finished 
product. But the capitalist does not care merely to re- 
produce the value of the constant capital. He buys 
labor-power, because he wants to secure new values and 
increase his capital. These new values are created by 
the laborer in the labor process. While he works, 
he adds to the value of the constant capital the 
value of his wages, which represent the variable capital 
of the capitalist In this way, the entire capital of the 
capitalist (constant and variable)' is reproduced by the 



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THE MARXIAN THEORY OF VALUE 173 

labor of the laborer. But this would not enable the capi- 
talist to make any profits. If only the capital of the capi- 
talist were continually reproduced, the exchange-value 
in capitalist society could not increase one whit. Some- 
thing more must be produced by the laborer while he 
works, something that existed neither in the value of the 
constant nor in the value of the variable capital. This 
new something is surplus-value. How it is produced we 
shall see in the next chapter. 

The question which interests us at this point is : What 
kind of labor is it that serves as a universal standard of 
measurement, and how is it measured? 

A farmer's labor is different from a joiner's, a car- 
penter's from a bricklayer's. How can they be compared 
in their capacity as creators of exchange-value ? 

Here Marx makes another step beyond the classic 
economists. The different kinds of labor as they appear 
to us in the various professions do not play any role in 
the formation of exchange-value any more than the use- 
ful substances which induce the buyer to purchase com- 
modities for individual consumption. The labor which is 
productively consumed and creates exchange-value must 
be regarded as simple human labor, quite apart from the 
particular form which it assumes in the various occupa- 
tions. Simple human labor (labor as a human ac- 
tivity without regard to its particular aim) is the stand- 
ard by which all kinds of exchange-value are rated. 

Does this mean that all labor is rated at the same 
value, no matter whether it be skilled or unskilled labor? 
No. It means that all labor producing exchange-value is 
measured by one and the same labor, and this is human 
labor considered a3 a simple human activity regardless" 
of its particular professional form. If complicated, or 



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174 MARXIAN ECONOMICS 

skilled labor is to be compared with simple labor, it 
can be done in the same way in which fractions of un- 
equal denominators are compared, that is, the same de- 
nominator is used for them all, and then they are com- 
pared as fractions with equal denominators. The common 
denominator of all social labor producing exhange-value 
is simple human labor. Three hours of simple labor may 
thus be an equivalent for one hour of complicated labor. 

How can simple labor serve as a standard of uni- 
versal measurement? The time during which it is em- 
ployed measures it and expresses the social exchange- 
value of its product. If it takes three hours to make one 
pair of shoes, then three hours is the value of that pair of 
shoes. If it takes six hours, then six hours is their ex- 
change-value. 

But in that case the product of the slowest or laziest 
man will be worth more than that of the rapid and in- 
dustrious worker? It pays to be lazy, then? No, that is 
not the meaning of the Marxian idea of exchange-value. 
There will be more labor expended on the product of the 
slow worker, but that will not make his product more 
valuable as a social commodity. From the point of view 
of human society only that part of a man's labor time 
counts as marketable exchange-value, which is equal to 
the average time required with the prevailing tools and 
methods of production for the completion of a certain 
commodity. If the prevailing mode of making shoes 
turns out one pair of shoes per hour, while a shoemaker 
working with obsolete methods requires three hours to 
make one pair of shoes, then one hour will be the ex- 
change-value of one pair of shoes and the slow shoe- 
maker will have worked two hours for nothing. It is not 
the individual labor which decides the point. It is the 



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THE MARXIAN THEORY OF VALUE 175 

average socially necessary to complete a certain commo- 
dity which determines its exchange-value. It is average 
human labor, considered as simple human labor, and 
measured by the time socially necessary to complete this 
particular commodity. 

But under Capitalism value is not measured by labor. 
It is measured by money. And the value of the metal in 
a coin has no genetic relation to the value of the coin as 
a standard of price, this being fixed by law. This leads 
the capitalist to imagine that money alone is the real 
measure of value. He does not understand, that the value 
of the precious metals, from which money is coined, is 
itself determined by the quantity of labor required for 
the production of these metals. If it takes much labor to 
produce a certain quantity of precious metals, then the 
value of these metals is high, they are "dear". If it takes 
little labor to produce these metals, then their value is 
low, they are "cheap". This law enforces itself upon 
money, even though legal enactment may decide arbi- 
trarily, how much metal a coin shall contain and how 
much value a coin shall represent. 

The universal law of value, then, is this : In propor- 
tion as the productivity of labor increases, the com- 
modities produced by it in a certain time carry less labor 
embodied in themselves. More commodities are pro- 
duced in the same time, and each commodity represents 
a smaller quantity of individual value. This must be so, 
because the same quantity of labor is spread over a 
larger quantity of commodities. 

This general law of value applies to all commodities 
and asserts itself in spite of the different contending 
elements that seek to circumvent or overthrow it in 
capitalist society. It holds good for the commodity 



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176 MARXIAN ECONOMICS 

labor-power as it does for the commodities gold and sil- 
ver. By means of it, once that it is understood, all the 
baffling problems, which tantalized the wise men of the 
bourgeoisie, may be traced to their . fundamental basis 
and solved. So long as the movements of the industrial 
process are little understood and uncontrolled by human 
beings save for the insignificant and unorganized control 
of the strongest competitors in the process, the law of 
value remains the hidden and mysterious power, which 
compels all capitalist agents in the industrial process to 
conform to its rule on penalty of elimination from the in- 
dustrial process. Since all the many elements contributing; 
to it are intimately interrelated and act upon one an- 
other as cause and effect, the results of this misunder- 
stood and misinterpreted interaction appear to the bour- 
geois mind as mysteries and are described in obscure and 
ambiguous language without being clearly explained. 

We shall see later, how specious and shallow were 
some of the professional explanations, which were ad- 
vanced by the bourgeois thinkers under the guise of scien- 
tific solutions of economic problems. But before we can 
discuss these problems intelligently, we must first under- 
stand the Marxian theory of surplus-value, which is the 
inseparable companion of his theory of value. 



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CHAPTER XV. 

THE MARXIAN THEORY OF SURPLUS VALUE 

Under the ancient method of barter, no surplus- 
value was produced. It is true that one trader could cheat 
another, or take advantage of his needs to get a larger 
share of the other's articles than was an equivalent for 
his own goods. But the total amount of articles produced 
on either side was not increased by this transaction. 

Take it that one trader had 10 head of cattle, another 
io tons of wheat, another 10 casks of wine. If one ton of 
wheat was the equivalent of one head of cattle, then the 
possessor of the wheat might be in a position to compel 
the owner of the cattle, through some stress of circum- 
stances, to give him two head, of cattle for one ton of 
wheat. And if one cask of wine was an equivalent of one 
ton of wheat, then the owner of the wheat might compel 
the owner of the wine, under similar conditions of duress, 
to give him two casks of wine for one ton of wheat. But 
at the end of this transaction, there would still be ten head 
of cattle, ten tons of wheat and ten casks of wine, only 
they would be differently distributed. The total wealth 
of these three traders would not have inceased. 

This transaction would only indicate, that the value of 



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178 MARXIAN ECONOMICS 

cattle and of wine had declined compared to the value of 
wheat. No surplus-value would have been produced. 
For surplus-value means an addition of new values to 
already existing ones over and above the cost of the total 
product to the capitalist class as a whole. 

It is also true, that the ancient merchants and 
financiers accumulated wealth by taking unfair advantage 
of the necessities of others, but even so their transactions 
did not increase the total wealth of their societies any 
more than the transactions between those primitive 
traders did. Such accumulations of wealth could not he 
accomplished in any other way than by a violation of the 
law of value. They could not be accomplished by means 
of it Under the capitalist system of production, on the 
other hand, the value regulates the accumulation of sur- 
plus-value. The problem is, then, to explain how the 
capitalist can accumulate surplus-value through the 
mechanical working of the law of value. Value is pro- 
duced only in production, and if any surplus-value is 
accumulated, it must first be produced in the sphere of 
production. Then it must be taken to the sphere of 
circulation, to the market and there it must be realized un- 
der conditions of competition, in which the value of com- 
modities, and the surplus-value contained in them, is 
modified and differently distributed between the various 
competitiors, but always under the influence of the law 
of value. It is true, that commodities are not sold, as a 
rule, at their exact labor value. In other words, value 
and prices are not always identical. But nevertheless, 
the deviation of the prices of commodities from this value 
cannot be explained by any other means than by the law 
of value. 

According to the Marxian law of value, labor-power 



' THE MARXIAN THEORY OF SURPLUS VALUE 179 

is the only commodity which can reproduce the existing 
values of a certain society and produce additional values. 
How does it accomplish that, and how does the capitalist 
get possession of the additional value? 

Since the laborer has no other commodity to sell 
but his labor-power, and since he cannot employ this labor- 
power in any other way than by being put to work by 
the owners of the instruments of production, it follows 
that he cannot consume his own labor-power, but must 
submit to having it consumed by the capitalist who 
employs him. He must sell his labor-power to the capital- 
ist at its average social value, that is, at the value of 
the necessities of life which are required to maintain and 
reproduce it. The value of these necessities, in their 
turn, is determined by the prevailing productivity of 
the labor employed in their production, and in the pro- 
duction of the machinery and raw materials required in 
the department of necessities. In other words, the value 
of the labor-power of the laborers employed in the pro- 
duction of the ordinary necessities of life determines the 
value of the labor-power of all other laborers. But this 
must not be understood to signify, that the value of 
labor-power, and the value of labor as an activity produ- 
cing value, are always identical. 

The laborers in the different countries are not 
living under the same conditions of existence. The 
standard of living varies in the different countries. Since 
capitalist production is international, the tendency is to 
bring the laborers of different countries into competition 
with one another and to equalize their standard of living 
as much as possible. 

Having bought the labor-power of his employes 
under these conditions, the capitalist puts it to work in 



oslc 



ISO MARXIAN ECONOMICS 

his factory. He compels it to produce useful articles with 
a view to realizing a profit by the sale of their exchange- 
values. 

Now let us assume, that the value of the necessities 
of life required to maintain the laborer's labor-power 
for one day and reproduce it for the next day is equivalent 
to six hours of socially necessary average labor. Let the 
money-value, or price, of six hours of this labor be $3.00. 
Then the value of one hour of this labor will be 50 ct. 

Our capitalist is a manufacturer of cotton yarn. He 
must have machinery to spin cotton into yarn. He must 
buy his raw material, cotton, in the competitive market 
He must supply his employes with this machinery and 
this cotton and set them to work spinning the cotton into 
yarn. 

Let us assume, for the sake of easy figuring, that 
one pound of cotton makes one pound of yarn, that 
two pounds of cotton are made into yarn in one hour, 
and that one spindle is worn out in the manufacture of 
100 pounds of yarn, that is, in 50 hours. Let the value of 
100 pounds of cotton be $5, equal to 10 hours of average 
labor socially necessary. Then one pound of cotton will 
be worth 5 ct., or 6 minutes of such labor. Let the 
spindles cost $10 each, or 20 hours of such labor. 

If 50 hours wear out one spindle, then one hour 
wears out one fiftieth of a spindle, 1 or 20 cts. worth of 
spindle. 

One hour's spinning turns out two pounds of yarn, 
hence six hour's spinning will tun out of 12 pounds of 
yarn. What will be the value of these 12 pounds of yarn 
under these circumstances ! 

The value of these 12 pounds of yarn will he com- 
posed of the value of the wornout portion of spindle 



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THE MARXIAN THEORY OF SURPLUS VALUE 181 

(six times 20 ct., or $1.20), of the value of the worked 
up cotton (12 pounds, worth 60 ct.), and of the value 
of the wages of the laborer, who spun the cotton into 
yarn, that is, $3.00. The value of the worn-out spindle 
and of the cotton, which existed before yarn was spun, 
has been transferred to the yarn, while the value of the 
six hours of labor, which are an equivalent for the wages 
of the spinner (or the variable capital of the capitalist) 
has been newly added in the labor-process and thus in- 
corporated in the yarn. The total value of these 12 
pounds of yarn is, therefore, $1.20 and $0.60 and 
$3.00 = $4.80. This is exactly the amount, which the 
capitalist has to pay for the production of this yarn. True, 
he will not pay the laborer his $ 3.00 until the yarn is 
produced, and in so far the laborer advances to the 
capitalist the wages which he will receive. But at any 
rate, the capitalist must pay these $ 3.00, and after he 
has paid them, he has no more value in his hands in the 
shape of yarn than he had when this value existed in 
the spindles, in the cotton, and in the labor-power of 
the spinner. The capitalist cannot make any profits in 
this way. For according to our theory of value, the 
surplus-value which the capitalist pockets as his profits 
under the capitalist system of production, aside from 
irregularities, which violate the law of value, must come 
from new values, which are added by the labor of the 
productive laborers to the already existing ones. It is 
indeed true, that such profits, as were made under the 
primitive modes of barter by cheating or taking advan- 
tage of the unfortunate situations of others, may still be 
made under the capitalist mode of production. But all 
capitalists cannot make profits by cheating one another, 
and such profits are not suplus-value as understood in 



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189 MARXTAN ECONOMICS 

the Marxian theory. The profits from surplus-value 
must, therefore be explained in some other way. Since 
there is no surplus-value in these 12 pounds of yarn, the 
capitalist cannot realize any profit on it, although he may 
be able to sell this yarn above its value and thus cheat 
some customor. But this is not capitalist profit as we 
understand it here, because cheating does not add any 
new values to the total values existing. If our capitalist 
wants to make such profits as we have in mind here, he 
must secure some yarn which costs him nothing for 
labor. How can he accomplish thisl 

Our capitalist is not worrying. He has bought the 
labor-power of his spinner at a price, which is equal to 6 
hours of socially necessary labor. The spinner has worked 
six hours and reproduced the outlay of the capitalist for 
machinery and raw materials used up in the manufacture 
of the yarn. He has furthermore produced his own wages 
and added their value to the yarn. He has performed 
labor equivalent to the price of his labor-power. Does the 
capitalist now pay the spinner off and dismiss himl By 
no means. The working day in our capitalist's factory 
has 12 working hours. The spinner must work six 
hours longer. In these additional six hours he spins up 
12 pounds of cotton more into 12 pounds of yarn and 
wears out another $1.20 worth of spindle. At the end of 
12 hours, the spinner has produced 24 pounds of yam. 

What is the value of these 24 pounds of yarn I 
Evidently it is composed of $240 for wear and tear of 
the spindle, $1.20 for cotton, and $6.00 as an equivalent 
for 12 hours of socially necessary average labor. The 
total value of these 24 pounds of yarn is therefore $9.60. 
But how much does the production of these 24 pounds 
of yarn cost our capitalist ! He has paid $ 2.40 for cot- 

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THE MARXIAN THEORY OF SURPLUS VALUE 183 

ton (provided he did not get these tilings on credit). 
He will have to pay the spinner $ 3.00 in wages (unless 
he compels him to yield up a part of his wages as fines). 
At the worst the total cost of these 24 pounds of cotton to 
the capitalist will be $ 6.60. The laborer has worked six 
hours for nothing and the capitalist pockets $3.00 of 
surplus-value (the value of six hours of surplus-labor) 
and calls it his profit, which he has "earned" by his 
superior ability and enterprise. He has consumed the 
labor-power of the spinner six hours longer than he has 
paid for it And even before he pays the spinner for the 
other six hours, the spinner has left in the hands of the 
capitalist the value of his wages in the shape of cotton. It 
is true, the capitalist may have to pay the spinner's wages, 
before this cotton is sold. But at any rate, whether the 
capitalist sells now or later, he has the value of the 
money which he pays for wages in his hands and will 
recover the money when he sells his yarn (irregularities 
always excepted). Nevertheless, Mr. Capitalist flatters 
himself, that he is keeping the laborer alive by giving 
him work, and is higly indignant, if the laborer refuses 
to see, that the working people would starve to death, if 
the capitalist did not employ and rob them. 

Of course, we do not intend to deny that some 
capitalists may also ■work, yes, that some of them may 
even work longer than is necessary to pay for the re- 
production of their labor-power. To the extent that they 
do so, they are producers of their own surplus-value. 
But in so far as they employ the labor of wage laborers at 
the same time, they are capitalists and pocket the value 
of the unpaid surplus-labor of their employes. 

We have seen that the value of the individual com- 
modities decreases in proportion as the productivity of 



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181 MARXIAN ECONOMICS 

labor increases, because more commodities are then pro- 
duced in the same time and each commodity contains less 
labor and, therefore, less value. In the same way, the 
amount of surplus-value contained in every individual 
commodity decreases in proportion as the productivity of 
labor increases, because each commodity then contains 
less surplus-labor. 

The productivity of labor never increases simultane- 
ously in the same proportion in all spheres of production. 
For this reason, it is important to understand the bearing 
of the distinction between the mere transfer of old 
values (in machinery and raw materials) to the product, 
and the creation of new values, by the labor process. Of 
course, both the old and the new values are transferred, 
or incorporated in the product. But whereas the old 
values are merely transferred from the machinery and 
raw materials to the finished product, the new values 
(variable capital and surplus- value) are transferred while 
in process of creation. It makes a difference in the value 
of the product, whether the productivity of labor in- 
creases in the spheres where raw materials and machinery 
are produced, or in the sphere where the finished article 
is made, or in the sphere where the necessities of life are 
made, which constitute an equivalent for the laborer's 
wages. If the productivity increases in the spheres where 
raw materials and machinery are made, while it remains 
the same in spheres, where the finished article and the 
necessities of life are created, then less constant value is 
transferred to the finished article (cotton yarn), but the 
same quantity of yarn will be turned out in the same time. 
The total product will have less value, but the surplus- 
value will remain the same, so long as the hours of 
surplus-labor remain unchanged. If the productivity of 



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THE MARXIAN THEORY OF SURPLUS VALUE 185 

labor increases in the manufacture of cotton yarnj while 
it remains unchanged in the departments of machinery, 
raw materials, and necessities, then more constant value 
will be transferred to the product in the same time, be- 
cause more cotton will be worked up and more spindles 
worn out. The total product ■will have more value, but 
the necessary and surplus-labor-time will remain the 
same, the same variable capital and the same surplus- 
value will be newly produced. For so long as the pro- 
portion between necessary and surplus-labor is not 
changed, the amount of variable capital and surplus-value 
will remain the same. 

It is understood, of course, that the value of one hour 
of socially necessary average labor (50c according to 
our example) will remain unaltered, even though the 
value of labor-power should vary. For if the value of 
the labor should fall in proportion as that of labor-power 
falls, then the ratio between necessary and surplus-labor 
would not be altered by such a variation in value and the 
production of surplus-value would not be increased. We 
will not investigate at this point, how it is possible that 
the value of the average labor socially necessary to pro- 
duce a certain commodity can remain the same, when the 
value of the labor-power, and thus of the necessary labor 
required to reproduce it, varies. It is enough to point 
out that thiE is the assumption on which Matx proceeds 
in his theory of surplus-value, and the reader must look 
for a detailed investigation of this point in Marx's work. 

Let one working hour (socially necessary average 
labor) be worth 50c, as before. Now let the productivity 
of labor in the department of necessities, and. in the de- 
partments producing machinery and raw materials for 
the department of necessities, be doubled. Then the value 
of necessities, according to the Marxian theory of value, 



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180 MARXIAN ECONOMICS 

will fall by one half, because twice the quantity of com- 
modities is produced in the same time. If this lasts 
permanently, or continues in the same direction, then the 
value of labor-power in general will follow the value of 
necessities. Formerly it required $3 worth of necessities, 
or six hours of socially necessary average labor, to re- 
produce the labor-power of the laborers worlring in the 
manufacture of cotton yarn. Now the same quantity of 
necessities can be bought for $1.50, the equivalent of 3 
hours of social necessary average labor. Therefore it 
will require only three hours of necessary labor in the 
manufacture of cotton yarn, to produce the variable 
capital, and nine hours instead of six will be surplus- 
labor, so that the surplus-value will be $4.50 instead of 
$3.00. But the total value of the product, 24 pounds df 
yarn, will be the same, as the following figures will show 
(assuming that the productivity of labor in all other de- 
partments has remained the same) : Wear and tear of 
spindle $2.40; cotton $1.20; necessary labor $1.50; 
surplus-labor $4.50'; total aalue $9.60. Cost to the 
capitalist $5.10. Surplus-Value $4.50. 

On the other hand, if the value of the socially neces- 
sary average labor should fall everywhere in proportion 
with the fall in the value of labor-power, then we should 
get the following result: Value of labor-power fallen by 
one half, in other words, value $1.50 instead of $3.00. 
Value of labor fallen by one half, in other words, one 
hour of socially necessary average labor worth 25c in- 
stead of 50c. Value of product: Wear and tear of 
spindle $1.20; cotton $0.60; necessary labor, 6 hours, or 
$1.50; surplus-labor, six hours, or $1.50; total value 
$4.80; surplus-value $1.50. All prices (or values) would 
have fallen by one half in the whole society, and the result 
for the surplus-value of the capitalist would be the same 



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THE MARXIAN THEORY OF SURPLUS VALUE 187 

as though no change had taken place at all because all 
values will then be reduced by one half. The Marxian 
theory of surplus-value necessarily, and logically, goes 
on the assumption that the value of the socially necessary 
average labor in the various departments does not 
simultaneously follow the variations in the value of labor- 
power, due to the change of productivity in the depart- 
ment of necessities (and the departments supplying this 
department with machinery and raw materials). 

"In order to effect a fall in the value of labor-power, 
the increase in the productiveness of labor must seize 
those branches of industry, whose products determine 
the value of labor-power, and consequently belong to the 
class of customary means of subsistence, or are capable 
of supplying the place of those means. But the value of 
a commodity is determined, not only by the quantity of 
labor which the laborer directly bestows upon that com- 
modity, but also by the labor contained in the means of 
production. For instance, the value of a pair of boots 
depends, not only on the cobbler's labor, but also on the 
value of the leather, wax, thread, etc. Hence, a fall in 
the value of labor-power is also brought about by an in- 
crease in the productiveness of labor, and by a cor- 
responding cheapening of commodities in those industries, 
which supply the instruments of labor and the raw ma- 
terial, that form the material elements of the constant 
capital required for producing the necessaries of life. But 
an increase in the productiveness of labor in those 
branches of industry which supply neither the necessaries 
of life, not the means of production for such necessaries, 
leaves the value of labor-power undisturbed."* 

*) Karl Marx, I. 
of Increasing the e 



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188 MARXIAN ECONOMICS 

It follows front the above, that the most significant 
activity of labor-power under Capitalism is not the trans- 
fer of the value of constant elements of production to the 
finished product, but rather the creation of new values 
(variable capital and surplus-value), and that only those 
changes in the productivity of labor have any direct in- 
fluence upon the production of surplus-value, which 
change the value of labor-power and at trie same time the 
proportion of necessary to surplus-labor. 

The value of labor-power cannot be changed in any 
other way than by altering the value of the necessities, 
and the proportion between necessary and surplus-labor 
can be changed (to the advantage of the capitalist) only 
by a prolongation of the working day beyond the average, 
so that the hours of surplus-labor will be increased, or 
by a reduction of the necessary labor compared to the 
surplus-labor while the working day remains unchanged. 

Mane calls surplus-value produced by a prolongation 
of the working day beyond the average length absolute 
surplus-lvalue. Surplus-value produced by an increase of 
the surplus-labor within limits of the average working 
day, that is, by a relative reduction of the necessary labor, 
is relative surplus-value. The production of relative sur- 
plus-value is the typical method of increasing the profits 
of the capitalist under industrial capitalism. What role 
this method plays specifically in the era of modern 
machine production, we shall see in another place. 

labor Is that Of intensifying the exploitation of labor. This 
means that more labor is performed, and thus more value 
created, In the same time or In less time, whereby the variable 
capital Is produced In ■ shorter time and more surplus -value 
created without a prolongation of the working day. Intensity 
of labor Increases the value of the product, whereas productiv- 
ity of labor permits of the production of a larger product with 
loss value In the same or In shorter time. On the role of In- 
tensity of labor In machlnofacture see the chapter on "The 
Drift of Industrial Capitalism" In the present work. 



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CHAPTER XVI. 

merchants' capital under capitalism 

After the commodities have been produced in the 
sphere of production and charged with a certain amount 
of value and surplus-value, they must be taken to the 
sphere of circulation and sold, in order that the value of 
the constant and variable capital may be recovered and 
the surplus-value in the commodities realized by their 
sale. The complete cycle of the total capital from the 
time of its entry into the process of production until the 
time of its return from the sphere of circulation to its 
point of departure is called the turn-over of capital. But 
each turn-over must bring back a certain amount of sur- 
plus-value, otherwise the process of rotation from the 
sphere of production via the sphere of circulation and 
back to the point of beginning has been in vain from the 
point of view of the capitalist. For the entire capitalist 
process is not merely a process of reproduction of invested 
capital, but a process of reproduction on an enlarged 
scale. The scale of production cannot be enlarged 
without the investment of some surplus-value. This en- 
larging of the scale of production is not due to the mere 
personal desire of the capitalist to realize more profits by 
the creation of more surplus-value, but an inevitable 



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190 MARXIAN ECONOMICS 

necessity under the lash of competition, which gives the 
palm of victory to those, whose capitals are best organized 
to increase the productivity of the labor in their depart- 
ment, to reduce the value of their commodities by this 
means and thus be able to undersell their competitors and 
still make the same or a greater profit than they. Only 
by this means is it possible, at the same time, to reduce 
the number of laborers and thus the amount of variable 
capital in proportion to the constant capital and still pro- 
duce as many or more commodities than with a greater 
number of laborers under the less productive methods. 

But the tum-over of Capital does not proceed as uni- 
formly as the capitalist might wish. All the different 
parts, of which the value of a commodity is composed, do 
not circulate together, nor do they return together to their 
point of departure. For instance, the whole constant 
capital is not turned over together, nor do the different 
elements of the constant capital circulate in the same way. 
Neither does the variable capital circulate in the same 
way as certain parts of the constant capital. 

Let us take a closer look at the different elements of 
value, for instance the different elements, of which the 
value of our 24 pounds of cotton yarn is composed. We 
have seen that 24 pounds of cotton yam, produced in 12 
hours of average social labor, at 50c per hour, had a 
value of $9.60 to wit, $240 wear and tear of a spindle, 
$1.20 cotton, and $6.00 labor (including $3.00 surplus- 
labor). The value of the whole spindle, or $10, is not 
transferred entirely to these 24 pounds of cotton yam. 
Only $240 worth of spindle are transferred. On the 
other hand, the value of the 24 pounds of cotton, which 
are made into 24 pounds of yarn, is entirely transferred to 
the yarn. The value of labor-power (or of the variable 



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merchants' capital under capitalism 191 

capital of the capitalist) is likewise transferred entirely 
to these 24 pounds of cotton yarn. But the capitalist can- 
not buy a spindle piecemeal unless he gets it on credit or 
pays for it on the instalment plan. He must pay for the 
whole spindle when he buys it. The whole spindle per- 
forms its service in the manufacture of 24 pounds of 
cotton, but only twelve fiftieths of the spindle are worn 
away in this work, and only that much of its exchange- 
value transferred to this yarn. The capitalist cannot re- . 
cover the entire value of this spindle by selling these 24 
pounds of yarn. He will have to sell 100 pounds of yarn, 
before he can recover the entire value of his spindle. 

What happens here on a small scale, happens on a 
large scale in every great industrial establishment. Large 
sums of money are tied up in machinery, and are re- 
covered only by degrees as the process of turn-over goes 
on. But if the capitalist desires to make profits without 
interruption, he must keep the process of reproduction 
running without interruption. And if he must pay out 
large sums of money in one bulk for machinery, but can 
recover this money only piecemeal after a long period of 
time, then he must have money in reserve in order to buy 
more machinery for the expansion of his business,. before 
he has recovered the full amount invested in the old 
machinery. 

This difference in the turn-over in the various ele- 
ments of a commodity's value plays a significant role in 
capitalist competition, as we shall see later. Marx calls 
the capital invested in machinery and circulated piecemeal 
Fixed constant capital, and the constant capital invested 
in raw materials, etc., and circulated all at one time 
Circulating constant capital. The variable capital is like- 
wise recovered in full by the sale of the commodities con- 

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192 MARXIAN ECONOMICS 

taining its value, and is to that extent a circulating 
capital in the same class with the circulating constant 
capital. 

Since a commodity is not produced from the point of 
view of the capitalist until he has sold it and received its 
value in money, the circulation of commodities is a neces- 
sary and important part of capitalist activity. The quicker 
the capitalist can sell his commodities, the sooner will he 
reproduce his capital and pocket his profits. But the 
selling of commodities requires time and expenses. If the 
manufacturing capitalist wants to be his own merchant 
and sell his own commodities, he must have a special de- 
partment in his establishment attending to the sales. For 
this purpose, he must invest a large portion of his capital 
unproductively and tie it up in the sales' department. 
Whatever he has tied up in this fashion, he cannot invest 
as productive capital. It will not produce any surplus- 
value. It is a dead expense to him. The labor of the wage 
workers in the sales' department is also unproductive 
ham the point of view of society, because it does not 
produce any new values, but only assists in the circulation 
of already existing values. Of course, the labor of these 
wage workers is socially necessary, because the product 
must be sold, before the capitalist can recover its value. 
But it is unproductive labor and belongs to the dead ex- 
pense of social production. So far as the relation of 
these wage workers to the capitalist is concerned, he pays 
them only for their labor-power, not for the time that he 
employs them, just as he does with the productive laborers 
who create value and surplus-value. To that extent the 
wage workers in the department of circulation are ex- 
ploited like the wage workers in the department of pro- 
duction. But they do not produce any surplus-value for 



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MERCHANTS* CAPITAL UNDER CAPITALISM 193 

the capitalist. They merely save some of the already pro- 
duced surplus-value for him in proportion as they work 
longer than they are paid for and thus sell more commo- 
dities and help to realize more of the already existing 
surplus-value for him than he could realize if they worked 
shorter hours. 

We see, then, that every industrial capitalist must 
have, not merely a certain amount of money, with which 
to buy machinery, raw materials, and labor-power for 
productive consumption and the creation of surplus- 
value, but also a reserve fund of money, with which to 
keep the turn-over of his capital in regular flow at points, 
where it would otherwise stop on account of the different 
modes of circulation of the various parts of constant and 
variable capital. He must, furthermore, have a reserve 
fund of money, with which to maintain a sales' depart- 
ment, if he wishes to be his own merchant. - 

One of the dearest wishes of the capitalist is to turn 
his capital over as fast as possible, or, as he puts it, to get 
quick returns on his money. But under Capitalism, things 
do not always run smoothly. Everything does not go to 
the liking of the capitalist. Where so many divergent 
interests are continually battling for supremacy, and 
where each one takes only his own interests into account 
regardless- of the injury he may inflict upon others and 
upon the whole social process, the capitalist often finds » 
himself thwarted by forces stronger than he, and the 
whole capitalist class meets occasionally with disaster due 
to the heedless manner of its business administration. 
Commodities do not always sell as easily as the capitalist 
would wish, money is not always ready at hand for run- 
ning expenses, and again and again the entire process 



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194 MARXIAN ECONOMICS 

threatens to come to a standstill and wreck the plans of 
the profit-hunter. 

So we find him continually scheming to circumvent 
the inexorable laws of capitalist production, which he 
cannot control, and to turn his capital over quickly by 
means, which give him temporary relief without a guaran- 
tee of success in the end. 

One way of getting rid quickly of his newly produced 
commodities is to sell them to somebody, who will under- 
take the risk of mere buying and selling, without going 
into the sphere of production. In this way, a division of 
labor arises between the industrial capitalist, who confines 
himself to the sphere of* production, and the merchant 
capitalist, who operates wholly in the sphere of circula- 
tion. Since the turn-over of industrial capital comprises 
the entire process of its reproduction, that is, both pro- 
duction and circulation, the easiest way of escaping the 
vicissitudes of the circulation is to let somebody else 
worry about them. But it is evident, that the merchant 
capitalist, who undertakes the risk of circulating the pro- 
ducts of the industrial capitalist, will not do so for 
pleasure, but will exact a certain reward from the in- 
dustrial capitalist for his risk. In other words, the in- 
dustrial capitalist must sell his commodities to the 
merchant capitalist at a lower figure than he would ask, 
if he sold them himself. He must yield up a portion of 
his profits to the merchant. 

In the minds of the merchant and the industrial 
capitalist, however, this transaction does not appear in 
this light The industrial capitalist thinks rather that he 
is adding his profit to his cost-price, and the merchant 
thinks he is adding his profit to the price which he paid 



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merchants' capital under capitalism 195 

to the industrial capitalist. But the law of value teaches us, 
that this is not the actual condition of things. 

"The capitalist must indeed 'sell dearer than he has 
bought', but he succeeds in doing so only because the 
capitalist process of production enables him to transform 
the cheaper commodity, which contains less value, into 
a dearer commodity with increased value. He sells 
dearer, not because he gets more than the value of his 
commodity, but because his commodity contains a greater 
value than that contained in the natural elements of its 
production."* 

In other words, this is the actual state of affairs in the 
transaction between industrial capitalists and capitalist 
merchants : The wage laborers of the industrial capitalist 
have produced a certain product, let us say cotton yarn. 
According to our example, 24 pounds of cotton yarn have 

* Karl Man, L. c. vol. IT, chapter TV, page 133.— In volumes 
I and II of his work, and In the first seven chapters of volume 
in, Marx assumed for the sake of simplicity, that all commodi- 
ties were sold at their average social value, because the Ir- 
regularities und deviations of price from value In the sphere of 
circulation could not be clearly explained, until he had analysed 
how things went. When everything passed off regularly. But his 
theory of value, when applied to the actual conditions of 
capitalist society, explains In fact how it Is that com modifies 
■re, u a rule, not sold at their values. Many of the younger 
students of Man. particularly In the United States (and now 
more so than the theorethlcal thinkers of the Socialist Labor 
Party, who claim to be the only true Marxians) have Interpreted 
the Marxian theory of value In the purely theoretical sense. 
In which It was tentatively developed by Marx as an Introduc- 
tion to a practical application of his theoretical findings In 
volume IH of his work. These mis Interpreters of Marx nave 
assumed, that the law of value operates with the exactness of 
a mathematical law, and have built upon this antl-Marxlan as- 
sumption long polemical articles against the writer. See, for 
instance, the articles of R H La M nte In the '"Chicago Social- 
ist" of March 4. 1905, and following Issues, and In "The Indus- 
trial Union Bulletin" for June 1907, A careful reading even of 
volume I Of Marx's main work should have sufficed to prevent 
Such a rigid interpretation of the law of value. In Europe 
this point has long beeen settled by the controversies between 
Karl Kautsky and the antagonists of Marx. Kautsky writes, 
for instance, In his "Karl Marx' Oekonomlsche I.ehren", chapter 
I, 2, page 2B: "Marx himself points out. that there are certain 
commodities, whose price Is not only temporarily, but perma- 
nently below their value. Gold and diamonds have probably 
never been paid at their full value. The commodity labor-power 

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196 MARXIAN ECONOMICS 

a value of $9.60, of which $3.00 ore surplus-value. In 
that case, 2,400 pounds of cotton yarn will have a value 
of $960, of which $300 are surplus-value. If the in- 
dustrial capitalist were to attempt to be his own merchant, 
he would have to invest a certain amount of money in a 
sales' department, and would have to wait for the return 
of his productively invested money (with a surplus- 
value) until he could sell the whole 2,400 pounds of cotton 
yarn. In that case, he would have to invest some reserve 
funds unproductively in a sales department and product- 
ively in the industrial department in order to keep 
his production running uninterruptedly, even on the 
same scale. But now suppose some merchant capital- 
ist offers to buy the whole output of 2,400 pounds 
of yarn in bulk. Of course this merchant wants 

may be permanently below Its value, under certain circum- 
stances. TBore even. Marx baa demonstrated, that under the 
capitalist mode of production, under the Influence of profit, tht. 
law of value la modified In such a way. that the prices of most 
commodities not only may, but nut be permanently above or 
below their value. Nevertheless the law of value remainH In 
force, for such deviations of prices from values can tie ex- 
plained only by means of the law of value."— Sea chapter XVIII 
of this work of mine for an explanation of the point referred 
to by Kautsky In the laHt sentence. The transactions between 
Industrial capitalists and merchants, which I am discussing in 
the present Chapter XVI, necessarily rest on the sale of com- 
modities below their value, because the profit of the merchants 
must com'e out of the surplus -value produced by the wage 
laborers In the sphere of production. On the other hand, after 
the wage workers have been exploited by the industrial capital- 
ists In the sphere of production, they may have to submit to 
a secondary exploitation on the hands of the merchant In the 
sphere of circulation, because the merchant may not only have 
to buy bis commodities from some Industrial capitalist, who 
sells his commodities above their price of production, but may 
himself make an extra profit under favorable market constella- 
tions by selling at a still higher price than he would ordinarily, 
quite aside from adulterations, etc., which permit him to sell a. 

Rroduct of small value at the price of the genuine articles. This 
i?t of secondary exploitation, which I maintain In harmony with 
Marx, has given to soma mlslnterpreters of Marx, for Instance 
to La Monte, an opportunity to claim, that the admission of this 
secondary exploitation would be equivalent to transforming the 
Socialist Party from a revolutionary organization into a re- 
form organization. This Is practically tue same faulty logic, 
which cannot reconcile the program of Immediate demands 
with the revolutionary platform of International Socialism, 



merchants' capital under capitalism 197 

to make a profit on this transaction. Aside from ir- 
regularities, which may enable him to make a profit 
even if he bought this yarn at its full value of $960, 
he cannot make any profits, unless the industrial capitalist 
sells him this yarn below its value and thus yields up a 
portion of the surplus-value contained in it. On the other 
hand, the industrial capitalist would not consent to giving 
up a portion of his surplus-value, unless he would lose 
less productive capital thereby than he would by being his 
own merchant and investing some unproductive capital 
himself. This unproductive capital is now invested by the 
merchant. The capital of the merchant cannot produce 
any surplus-value of itself, by mere buying and selling, 
although it may secure some extra profit by irregularities. 
The transfer of the commercial function from the in- 
dustrial capitalist to the merchant cannot make this un- 
productive function productive. Hence the industrial 
capitalist consents to selling his'yarn below its value, say 
at $810, yielding $150 of his $300 of surplus-value to the 
merchant. These $810 pay the industrial capitalist for 
his constant and variable capital ($660) and leave him 
a surplus-value of $150, a part of which he uses for the 
enlargement of his scale of production by buying with it 
more spindles, cotton, and labor-power, and the rest of 
which he spends for his own individual expenses. He 
can much better afford to yield up a portion of his sur- 
plus-value for the sake of recovering his productive 
capital quickly, than to invest a large amount of money 
unproductively in a sales' department, which wouL! 
permanently swallow a much larger share of surplus- 
value. 

On the other hand, the capitalist merchant has now 
commodities valued at $960, of which $150 represent 



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138 MARXIAN ECONOMICS 

surplus-value pocketed by the industrial capitalist and 
paid by the merchant, and $150 represent surplus-value 
yielded up by the industrial capitalist to the merchant and 
to be realized by the sale of the yarn. The merchant has 
invested a certain amount of money-capital in a store, 
equipment, and wage laborers (clerks, salesmen, etc.). 
These wage laborers are unproductive like the merchant 
himself although they work for him a longer time than 
he pays for. But their surplus-labor is as unproductive as 
the capital of the merchant. They merely realize the 
surplus-value for the merchant, which was produced in 
the sphere of production, and make profits for him so 
much quicker, the more their unproductive surplus-labor 
is extended and their necessary labor shortened. 

If the merchant now sells the yarn at its value, he 
realizes the surplus-value of $150 and pockets it as his 
profit* If he does not sell the yarn at its value, but 
makes an extra profit by selling it above its value, then 
the extra mon«f which he gets, say, from some wage 
worker, is not an additional value produced by society, 
but merely a larger portion taken out of the wages of this 
laborer, and these wages represent but a part of the 
variable capital of the industrial capitalist who employed 
him. From the point of view of capitalist production, 
this extra profit of the merchant is not additional surplus- 
value. But from the point of view of the laborer it is 
additional exploitation, because he could have bought 
more for the same money, had the merchant sold the 
yarn at its value. 

Looking at the question of extra profit in the circula- 
tion from the standpoint of the economist who views the 

*) Surplus -value la calculated on the variable capital, proflt 
Is calculated on the total capital (constant plus variable). The 
laborer calls surplus-value, what the capitalist calls proflt. 



merchants' capital under capitalism 199 

social process in its entirety, we can say with Marx : "If 
the commodities are sold at their values, then the magni- 
tude in the hands of the buyer and seller remains un- 
changed. Only the form of its existence is changed. If 
the commodities are not sold at their value, then the sum 
of tlie converted values remains the same; the plus on 
one side is offset by a minus in the other.* 

But it is evident, from the individual laborer's point 
of view, that he receives a smaller quantity of use-value 
and exchange-value, when he pay3 more than the value 
of the yam to the merchant, or buys shoddy under the 
impression that he is buying genuine cotton yam. And 
in that case, the above passage from Marx cannot mean 
anything else but that the plus on the side of the merchant 
is offset by a minus on the part of the laborer. 

We have already seen that the merchant's function, 
while unproductive, is socially necessary, because the 
process of reproduction includes and requires such an 
unproductive function. The same is true of the agent 
entrusted by the industrial capitalist with this function, 
or of the wage laborers, who perform the laboring part 
of this function for the merchant. They belong all of 
them to the unproductive expenses of the social labor pro- 
cess. They perform this unproductive task as a part of 
the social division of labor, but a division of labor cannot 
transform a previously unproductive function into a pro- 
ductive one by a mere transfer of this function from one 
to another. All expenses of circulation, which are due 
to the mere change of form, that is, which merely transfer 
values from one hand to another or one form to another, 
do not add any value to the commodities, even though 
such expenses are socially necessary. 

*) Karl Muz. I* c, volume II, chapter VI, page 147. 

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200 MARXIAN ECONOMICS 

But not all expenses of circulation are of this kind. 
There are certain expenses of circulation, which "may 
arise from processes of production, which are continued 
in circulation, the productive character of which is 
merely concealed by the form of the circulation. - Or, on 
the other hand, they may represent, from the standpoint 
of society, mere unproductive expenses of subjective or 
materialized labor, while for this very reason they may 
become productive of value for the individual capitalist, 
by making an addition to the price of his commodities."* 

This means that certain expenses may be dead ex- 
penses from the point of view of society, but may require 
additional labor, for which the capitalist has to pay, and 
this extra expense is added by him to the price of commo- 
dities and becomes a source of profit for him, to the extent 
that the unproductive laborers perform surplus-labor. 
The money for this extra profit comes out of the pockets 
of the buyers and represents a deduction from their 
earnings. 

Among the expenses of this class are those for storage 
and the formation of a normal supply of commodities 
large enough to keep the process of reproduction in un- 
interrupted flow. These expenses require the investment 
of unproductive capital, and are to that extent deductions 
from the productive capital of society. But for the in- 
dividual capitalist they represent additions to the price 
of his commodities, and since all labor which adds value 
also adds surplus-value, the capitalist may increase his 
profits through such labor, unproductive though it be 
from the point of view of society. But, the rule is that so 
long as such expenses are socially necessary to keep the 
process of reproduction going, the capitalist can add them 

•) Karl Marx, L, c, volume II, chapter VI, paga 1G6. 



merchants' capital under capitalism 801 

to the price of his commodities. But if they are expenses 
for more than the necessary supply of commodities under 
prevailing conditions of reproduction, the best and latest 
commodities take precedence over the older and poorer 
ones in the competitive struggle, and the capitalists with 
excessive expenses of circulation lose that much, because 
competition does not permit them to add more than the 
average to their prices for expenses. 

Among the expenses, which appear on the surface as 
mere expenses of circulation, but are in fact additions of 
value to the product, are the expenses of transportation. 
Marx classes the transportation industry as a connecting 
link between the sphere of production and circulation, and 
calls the capital invested in transportation productive 
capital. 

The expenses of circulation are not the only unpro- 
ductive expenditures of capitalist society. Merchants' 
capital is not merely commercial capital, but also financial 
capital, that is, money used as a means of accumulating 
surplus-value without taking any actual part either in the 
production or circulation of commodities in the hands of 
the person who owns it. 

The industrial capitalist may need money before he 
can recover his capital and reinvest it, or before he can 
realize all the surplus-value in his commodities and use 
it to enlarge the scale of his production. He may want 
to invest more capital before his own business has pro- 
duced it, on the assumption that he could make more 
profits, if he had more capital right away instead of 
waiting for it several months or longer. In that case he 
must borrow money from those, who make it their 
business to hoard it and lend it out at interest. Under the 
capitalist mode of production this business is over- 



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802 MARXIAN ECONOMICS 

whelmingly in the hands of bankers. If a man has $100, 
which he does not care to invest himself, but is willing to 
lend to some one who will invest it in a productive enter- 
prise, he practically holds in his hands a potential pro- 
ductive capital. If this enterprising man is willing to 
pay to the owner of the $100 a part of the surplus-value 
which he will produce by means of this sum, he pays for 
the use-value, which these $100 have in productive enter- 
prise. The amount paid by the user of borrowel money 
to its owner is called interest, and comes, like the profit 
of the merchant, out of the surplus-values produced by 
the productive laborers. 

Marx calls the profits, which remain after the deduc- 
tion of the interest, profits of enterprise. 

Under all circumstances both commercial and financial 
capital (or, generally speaking, merchants' capital) do 
not dominate the sphere of circulation any more as soon 
as industrial capital has become lord of production. 
Under the precapitalist modes of production, merchants' 
capital was lord in the sphere of circulation and invaded 
and corroded even the sphere of production. But when 
industrial capital has once captured the sphere of pro- 
duction, its turn-overs dominate also the turn-overs of 
all capitals invested in the sphere of circulation. 
Capitalist production thus subjects merchants' capital to 
the requirements of industrial capital, so that, in the last 
analysis, the merchants' profits as well as the bankers' in- 
terest are determined by the rate of profits harvested by 
the industrial capitalist And only when the profits of the 
industrial capitalist are explained, can the source and 
fluctuations of the merchants' profit and the bankers' 
interest be explained and their role in the turn-over of 
industrial capital understood. 

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CHAPTER XVIL 

GROUND BENT 

Private ownership of land, like private ownership of 
capital, has gone through many different forms. Before 
we discuss the peculiar form of ground rent, which is 
typical of the capitalist system of production, we will take 
a short glance at other forms, which preceded it in the 
historical order. 

tn ancient and medieval times, ground rent was paid 
in kind, that is, in labor, products of the soil, or cattle, 
not in money. Capitalist renters of the modem kind, that 
is, farmers investing capital in rented land and exploiting 
wage laborers on this land, did not exist in ancient or 
medieval time. Only in ancient Rome and Carthage, at 
a certain period of their most developed form, did large 
contractors rent land from the state and tilt this land by 
the help of paid laborers with a view to exporting their 
products. But these were rare and passing exceptions. 
Rent as a specific kind of surplus-value, as a surplus ex- 
ceeding the average capitalist profit and drawn by the 
owner of the soil out of the pockets of the productive 
capitalist, did not come into existence as the prevalent 
form until industrial capital became dominant 



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204 MARXIAN ECONOMICS 

The simplest and most primitive form of rent, which 
has persisted by the side of other forms of rent to this 
day, is rent paid in the form of labor. The privilege of 
tilling a certain piece of land is granted on condition that 
the laborer perform a certain amount of labor on the 
land of the owner. This kind of rent is still prevalent in 
a vast portion of the Southern states of North America. 

This was the typical form of rent in feudal times. The 
serf worked with his implements and animals so many 
days on the estate of the feudal lord, without receiving 
any equivalent in return for this labor. The remainder 
of the week the serf worked on his own land. Under 
such a system, rent and surplus-value are identical. The 
serf knows exactly how much surplus-labor he performs 
without an equivalent. 

If this labor rent is transformed into produce rent, it 
does not alter its economic character. Rent in kind, even 
when it has become the predominant form, is still a 
modified sort of labor rent, and often accompanied by 
direct survivals of labor rent, for instance, by forced 
labor for the lord or the state. 

Bent in kind is not paid by performing surplus-labor 
on the land of the lord but on the serf's own land and 
delivering the surplus-product of his land to the lord. 
This form of rent, like the more primitive ones preceding 
it and persisting by its side, is based on a mode of pro- 
duction, which combines agricultural and industrial 
family labor, and rent in kind is paid in both agricultural 
and industrial products. 

Under labor rent as well as under rent in kind, 
particularly under the latter, (as the predominating form 
of rent), the laborer may accumulate considerable wealth 
for himself, and may even rise to a point, which permits 

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GROUND RENT 306 

him to exploit other laborers working under his super- 
vision. This mode of production, resting on a technical 
basis which does not offer any great opportunities for 
deep-reaching changes of methods, is very stable and may 
become almost stationary, as it has in Asia for thousands 
of years. If a ruling class from a more advanced system 
of production, for instance of a commercial nation .in- 
vades such a system of rent in kind and seeks to exploit 
it for the purposes of commerce ,this form of rent may 
be carried to such extremes, that even the requirements 
of reproduction (sufficient seeds, cattle, crop rotation, 
systematic tillage) are endangered and millions exposed 
to periodical cycles of starvation. See, for instance, 
British East India. 

Rent in kind lends itself most easily to a transforma- 
tion of rent in money, the form next in the historical or- 
der. Money rent is conditioned on a considerable develop- 
ment of commerce, city industries, production for ex- 
change rather than use in general. This implies a general 
circulation of money as the typical medium of exchange. 
It implies that markets have become established, in which 
the average prices of commodities approach their social 
values, a thing which is not necessarily the case in pre- 
ceding stages. 

Money rent is a modified form of rent in kind. The 
producer pays to the land lord the money-price of the 
produce, instead of the produce itself. In other words, 
the producer must sell his products in the market, and 
deliver the money for his surplus-product to the land- 
lord. The tendency to bring this kind of rent into vogue 
indicates that feudalism is in the stage of transition to 
modern capitalism, that feudal production is losing its 
self-supporting character, and that the requirements of 



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a06 MARXIAN ECONOMICS 

commerce compel the feudal classes to get in touch with 
the new rising strata of society. 

Thi3 is the stage of the Wat Tyler rebellion, and its 
theoretical reflection brings forth such vague specula- 
tions as Wickliff's "theory of dominion", while the 
poetical reflex of the struggles and longings of the 
peasantry and small burghers is found in such dreamy 
appeals to individual righteousness as Langland's "Vision 
Concerning Piers the Plowman." At a more advanced 
stage of this form of rent, when its capitalist character 
has asserted itself and turned from a revolutionary 
ideal into a practical method of transforming farmers 
into debtors, centralizing money into the hands of ban- 
kers, and figuring interest at a compound rate, the dreamy 
poetry gives way to fierce denunciation and the sober 
reality dispels the "visions" and stalks with bloody heels 
through the wars of the Reformation. 

Money rent is the last of the historical forms of 
ground rent in which rent absorbs all the surplus- value 
of production. In its further development, money rent 
leads to the transfer of the land to the free ownership of 
the peasant, and to his exploitation by means of capitalist 
commerce, or else to the capitalist form of ground rent, 
that is, rent paid by a capitalist fanner to the owner of 
the soil. Along with and even before the transformation 
of natural rent into money rent, arises a class of landless 
farm hands, who work for hire. These laborers are 
mainly recruited from that class of serfs, who were 
employed by well-to-do serfs during the feudal regime, 
while the well-to-do 1 serfs develop into capitalist farmers. 
A typical form of this transition to capitalism and of the 
difficulties standing in its way is presented by France 



GROUND RENT 307 

before the great Revolution and has its theoretical spokes- 
man in Quesnay and the physiocrats. 

The capitalist theory of ground rent, however, is a 
specifically English product, and its historical cradle is 
very naturally found in England, for the reason that it 
was there that ground rent first passed over into a mode 
of production, which began to differentiate rent of land , 
from industrial profit and banker's interest. 

The capitalist mode of production is conditioned on 
the separation of the agricultural producer from his 
bonds to the feudal lord, and in general on the expropria- 
tion of the mass of the laboring people from the soil. 

"To this extent the monopoly of landed property is 
a historical premise, and remains the basis, of the capital- 
ist mode of production, just as it does of all other' modes 
of production, which rest on the exploitation of the mas- 
ses in one form or another. But that form of landed 
property, which the capitalist mode of production meets 
in its first stages, does not suit its requirements. It creates 
for itself that form of property in land, which is adapted 
to its requirements, by subordinating agriculture to the 
dominion of capital. It transforms feudal landed property, 
tribal property, small peasants' property of mark com- 
munes, whatever may be their legal form, into the 
economic form corresponding to the requirements of 
capitalism." *' 

Already Adam Smith demonstrated that the ground 
rent paid in the production of minor crops and cattle is 
determined by the ground rent paid in the production of 
such staples as wheat and corn. And he clearly distin- 
guished between capitalist's profits, landlord's rent, and 

•) Kail Marx, Capital, vol. Ill, chap. XXXVIL 

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208 MARXIAN ECONOMICS 

laborer's wages. He was one of the first to warn econo- 
mists against confounding these things and obliterating 
their economic significance by applying such terms as 
profit, rent, wages, indiscriminately to all surplus-value. 
But he was himself still struggling with the subject and 
suffering from the inconsistencies of his own position. 

In the form given to it by Ricardo, the classic 
theory of ground rent is still full of inconsistencies and 
errors. The gist of his theory is that economic rent 
"is always the difference between the produce ob- 
tained by the employment of two equal quantities 
of capital and labor", and that "whatever diminishes the 
inequality of the produce obtained on the same or on 
new land, tends to lower rent and whatever increases 
that inequality, necessarily produces an opposite 
effect, and tends to raise it". (Principles of Political 
Economy, pages 59 and 74.) In brief, his idea of rent 
is merely that capitals invested in lands of different pro- 
ductivity and working with the same amount of money 
and labor produce different amounts of surplus-value and 
that whatever exceeds the surplus-value produced on the 
least productive land constitutes the rent, which the capi- 
talist must hand over to the landlord. 

In this form, the theory of ground rent does not 
explain the principal difficulties of capitalist production in 
agriculture, auy more than Ricardo's theory of value 
was able to explain the difficulties of industrial surplus- 
value. It did not clearly define what kind of labor pro- 
duced value and measured it, nor by what methods sur- 
plus-value is produced. Much less did it explain the for- 
mation of an average rate of profit, and the relation of 
this average rate of profit to the surplus-profit paid in the 
form of ground rent. Ricardo's theory of ground rent 

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GROUND RENT 209 

fails particularly in its appreciation of the fact, that 
ground rent does not necessarily imply a gradual culti- 
vation of worse and worse land (an idea which Henry 
George copied without further ado) , but on the contrary, 
that ground rent is very well compatible with a continual 
increase in the productivity of agriculture or a cultivation 
of better and better and 'better land. 

Marx performed pioneer work on this ground just as 
he did in the field of industrial surplus-value. The Mar- 
xian theory of differential rent and absolute rent is the 
only really exhaustive and satisfactory theory, which 
exists in political economy. Only after the question of the 
value and surplus-value of industrial capital, and of the 
method of its realization in the circulation had been sol- 
ved, was it possible to arrive at a solution of the question 
whence the landlord received the money for his rent and 
what determined the rate of ground rent 

The basis of Marx's theory of ground rent is hi* 
theory of the average rate of profit. * The rate of 
agricultural profits under capitalism, according to him, 
is determined by the rate of industrial profit. Economic 
rent, in his sense of the term, means the surplus-profit 
made by the more productive agricultural capitals over 
and above the average profit realized by the least pro- 
ductive agricultural capital. The average price, at which 
the products of this least productive agricultural capital 
are sold, is equal to their price of production, that Is, 
equal to their cost-price plus the average rate of profit. 
This price of production of the least productive agricult- 
ural capital is the regulating market-price for the pro- 
ducts of all other kinds of land, whether they make more 

•) See chapter XTTOX 

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210 MARXIAN ECONOMICS 

or less than the average profit. The law of value works 
among these capitals in the following 1 general way : 

Take four agricultural capitals of 50 shillings each 
with different rates of productivity. Let A, the least 
productive, produce one quarter of wheat at 60 shillings, 
making 10 shillings of profit, or 20 pet ; let B produce 
two quarters of wheat, worth 120 shillings, making 70 
shillings of profit, or 60 shillings of surplus-profit ; let C 
produce 3 quarters of wheat, worth 180 shillings, 130 
shillings of profit or 120 shillings of surplus-profit; let 
D produce four quarters of wheat, worth 240 shillings, a 
profit of 190 shillings, or a surplus-profit of 180 shillings. 
The total market-price of these four yields of wheat is 
then 60 + 120+180 + 240 = 600 shillings for 10 quarters 
of wheat. But the total price of production of these ten 
quarters of wheat is only four times 60, or 240 shillings, 
since each capital has a cost-price of only 50 shillings, 
to which the average profit of 10 shillings is added to 
make up their price of production. The market-value of 
these products is, therefore, larger than their total price 
of production. And this is the effect of capitalist com- 
petition, the social method of determining the market- 
values of all products. 

This is but a general illustration of the way in which 
the rate of ground rent (or agricultural surplus-profit) 
is determined. Marx supplies in his work many other 
illustrations, dealing specifically with the different pos- 
sibilities of this problem. We need not go into such details 
here. It is sufficient here to make the reader familiar with 
the general idea. Whether this general idea is applied to 
different rates of productivity obtained one after another 
on the same land or simultaneously on different lands, this 
theorv will suffice for all practical purposes. We must not 



GROUND RENT 211 

lode for mathematical exactness in the working out of 
economic laws, any more than we can arrive at absolute 
exactness in the working out of algebraic formulae in 
higher mathematics. , 

The general rule following from Marx's theory of 
ground rent is that capitalist ground rent (surplus- 
profit) increases absolutely on all lands, although the 
increase is not proportional to the increase in the in- 
vested capital. Taking the entire capital invested pro- 
ductively in land (old and additional capital) as a basis of 
calculation, the rate of ground rent decreases; but the 
absolute mass of surplus-profit increases ; in like manner 
the decreasing rate of industrial profit is generally com- 
bined with an absolute increase of the mass of industrial 
profit. And this law holds good, with corresponding 
modifications, whether the prices of production of these 
capitals are rising or falling. 

The ground rent proceeding in the form of surplus- 
profits from productive capitals must not be confounded 
with other kinds of rent, which exist side by side with 
it. Capitalist ground rent is due primarily to the pro- 
ductivity of labor and of the soil. In the last analysis, it 
must be atributed to the fertility of the soil, for without it 
there would be no basis for any surplus-profit over and 
above the average rate of industrial profit, which is the 
foundation of the entire law of ground rent. 

The law of the average rate of industrial profit im- 
plies that industrial capitals get, as a rule, only the average 
profit, and that industrial surplus-profits are an excep- 
tion. The law of ground rent, on the other hand, implies 
that agricultural surplus-profits are the rule, and that 
no capital is invested in agriculture unless it pays at 
least the average profit sd that additional capital invested 



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313 MARXIAN ECONOMICS 

. must bring more than the average profit, otherwise no 
additional capital would be invested. This agricultural 
surplus-profit cannot be due, in the last analysis, to any 
other cause than the fertility of the soil, or natural 
powers such as waterpower, for which the capitalist pays 
nothing, any more than any capitalist pays anything for 
the average profit which he realizes. And the increasing 
fertility of the soil is as much a premise for the increase 
of the mass of agricultural surplus-profit, as the increase 
in the productivity of labor is a premise for the growth 
of the mass of average profit. 

This capitalist ground rent may be, and generally is, 
complicated with other forms of rent, which represent 
modified survivals of older forms. But these modified 
older forms are all subject to the movement of modern 
capitalist rent, and are in the last resort determined by it 

The price of land under capitalism is generally re- 
garded by bourgeois economists as a capitalization of 
land value, and its rent represents so much interest pn 
money invested in ownership. But the rate of prices is 
determined by the interest derived from the ownership 
of land, which is productively exploited and yields a 
surplus-profit, a capitalist ground rent Only when this 
capitalist ground rent is explained, can other forms of 
rent, such as money rent in the form of interest, be 
explained. Rent on land used unproductive!} - (as a site 
for a dwelling place or an office) is determined in the last 
analysis by the rent of productive land. To explain land 
values, or interest drawn from capitalized land values, by 
their own capitalization, as some would-be economists are 
trying to do is like explaining industrial profit by the 
self-capitalization of money. 

"The mistaking ground rent for the interest form, 

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GROUND RENT 213 

which it assumes for the buyer of land must lead to the 

most absurd conclusions. Since landed property is con- . 
sidered, in all old countries, as a particularly noble form 
of property, and its purchase also as an eminently safe 
investment of capital, the rate of interest at which ground 
rent is bought, is generally lower than that of other in- 
vestments of capital for a long time, so that a buyer of 
real estate draws, for instance, only 4 pet on his purchase 
price, whereas he would draw 5 pet for the same capital 
in other investments. In other words, he pays more capital 
for (he ground rent than he would for the same amount 
of income in other investments. This leads Mr. Thiers to 
conclude in his utterly valueless work on La Propriiti . . 
that ground rent is low, while it proves merely that it3 
purchase price is high. . To derive from the sale and 
purchase of ground rent a justification for its existence 
signifies to justify its existence by it3 existence." * 

While the worst land does not yield any ground 
rent, it may yield profits on capital. Since ground rent 
signifies here only the difference between the average 
profit and the surplus-profit realized in capitalist agricul- 
ture, it is based on the assumption, that the worst land 
must produce at least the average profit A capitalist 
farmer exploiting laborers on such land must reproduce 
his constant capital plus his variable capital plus the 
average profit and sell his product at the average price of 
production. But he will not make any surplus-profit, 
and the land will not yield any ground rent. 

But how can a capitalist farmer get access to such 
land without paying rent? 

In the first place, he may be the owner of such land 

•) Karl Marx. Capital, vol. HI, chap. xxxviL 

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211 MARXIAN ECONOMICS 

and exploit it with his own capital. Marx considers this 
as an exception under capitalism. 

In the second place, the capitalist farmer may pay 
ground rent for land, only a part of which actually yields 
a surplus-profit. But so long as he can make the average 
profit on the remainder of the land, he will cultivate this 
also. 

In the third place, a capitalist fanner may invest 
accumulated capital (additional capital)in land for which 
he pays ground rent, and this additional capital may yield 
only the average profit, while the reproduced original 
capital continues to yield a surplus-profit. He pays 
ground rent out of the proceeds of his original capital, 
but not of his additional capital. 

But such exceptions from the rule are a confirmation 
of Marx's theory of ground rent, not a refutation of it. 
They cannot be explained, unless the rule is first ex- 
plained. 

Neither is the Marxian theory of ground rent refuted 
by the fact that the products of land, whose productivity 
does not yield any economic rent, may be sold, under ex- 
ceptional market conditions above the average price of 
production, so that a surplus-profit is actually realized 
on them. For in the first place, this surplus-profit is not 
due to the productivity of the land, but to exceptional 
opportunities in circulation. In the second place, even 
such opportunities cannot be explained on any other basis 
but that of the Marxian theory of industrial profit and 
ground rent. Such exceptions are explained only by the 
rule, that the average price of production is actually the 
standard, around which all market prices fluctuate. 

If the regulating market price of the products of the 
soil is not the average price of production (cost-price of 



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GROUND RENT 215 

capitalist plus average profit), 1 but rather a price which 

is equal to the average price of production plus a certain 
amount for rent, then this rent is not economic rent in the 
strict meaning of this term, but "absolute" ground rent, 
derived from the ownership of the land itself. But even 
so, this absolute ground rent can be explained only by the 
law of differential rent, or ground rent proper. It signi- 
fies that the monopoly of land can enforce an increase of 
prices of production over and above the average which 
regulates differential rent. 

In practice this amounts to saying that agricultural 
products may be sold above their price of production and 
below their value, just as the price of production of in- 
dustrial commodities may be above or below their value 
and, as a rule, does not coincide with their value. 

All the complications, to which the capitalist mode of 
production gives rise by creating new forms of rent and 
transforming and dominating survivals of old forms, 
require for their theoretical solution the understanding of 
the "pure" form, through which capitalism expresses its 
typical tendencies and enforces its prevailing law, the law 
of value. 

Marx alone has found the key to all these problems. 

Once that we understand the Marxian law of value, 
and the significance of the different roles played by 
constant and variable capital in production, or by the 
circulation of value, we can readily grasp the fact, that 
fixed capital invested in the soil, unlike fixed capital in- 
vested in industrial machinery, etc., increases in value 
in proportion as the soil is treated scientifically, so that 
this fixed capital becomes, through the peculiar pro- 
ductivity of the soil, an element in yielding surplus-value 



216 MARXIAN ECONOMICS 

over and above the average and producing different forms 
of rent. 

There have been at all times thinkers, who have tried 
to conceal economic lines of cleavage by a sentimental 
reconcilation of antagonisms on paper. Economic theories 
are not free from such attempts. The Ricardian theory 
of ground rent, which laid bare the antagonism between 
industrial capitalists and landlords, was combatted by 
economists like Carey, who tried to represent rent as 
interest on capital, similar to interest on loaned money. 
This was equivalent to making capitalists of landlords 
and wiping out the line of economic cleavage between 
landlords and capitalists. But the bitter reality of 
capitalist development laughed Carey to scorn and called 
forth fierce struggles between these two economic classes. 

In modern times, Henry George has made a similar 
attempt by garbling the Ricardian theory of ground rent 
into an indefinite theory of land values, and making of 
this distorted classic theory a blanket, by which to cover 
the class-struggle between proletarians and capitalists. 
I do not mean to insinuate that this was Geeorge's open 
intention. But his theory practically works in this di- 
rection; It is evident that this attempt, like Carey's, must 
come to grief in proportion as the class-struggle goes its 
inexorable way and lights the revolutionary fires, which' 
must consume the economic foundations of both land- 
lordism and capitalism. 



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CHAPTER XVIII. 

PROFIT, INTEREST AND RENT UNDER CAPITALIST 
COMPETITION. 

Looking upon the process of industrial capitalism as 
one immense co-operative movement, we shall see that 
value and surplus-value are produced nowhere but in the 
sphere of production, including such other departments 
as act as intermediary links between production and 
circulation, for instance, the transportation industry. 
When the commodities, charged with their value and 
surplus-value, finally reach the circulation and have a 
certain money-price, an addition may, indeed, be made to 
their price in the shape of cost of handling, storing, etc., 
as we have seen in the preceding chapter. But this is an 
addition of value only from the point of view of the in- 
dividual capitalists who invest money and pay wage 
laborers in the processes of handling, storing etc. From 
the point of view of society as a whole, the addition of the 
cost of such unproductive labor to the price of com- 
modities is not a production of value, but an expenditure 
of unproductive labor and capital, even if it is an addition 
to the price of commodities, which is inevitable. At any 
rate H is evident, that any addition to the price of com- 



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218 MARXIAN ECONOMICS 

modities in the sphere of circulation, which is not due to 
productive labor, cannot add any value from the stand- 
point of the entire capitalist process, but merely increases 
the cost of commodities to the consumer and must be paid 
out of already existing value, such as the profits of the 
capitalist consumer or the wages of the working class 
consumer. 

Whether commodities are sold in the sphere of circu- 
lation at the values which they originally brought with 
them from the sphere of production, or at some other 
price, depends in no way on the caprice of the individual 
capitalist or merchant. On the market, competition sways 
the scale. And competition itself is subject to the law of 
value, as the capitalist would easily see, if he were inter- 
ested in economic problems sufficiently to bother his head 
about them. 

The capitalist calculates his profits on the total (con- 
stant and variable) capital invested by him in the produc- 
tion of a certain quantity of commodities. He figures both 
constant and variable capital as one lump sum of money, 
which he calls his cost-price. He does not consider the 
surplus-value at all, which the commodities contain, but 
adds to his cost-price a certain amount, which varies 
according to the latitude permitted to him by competition, 
and this addition to his cost-price he calls his profit. 
Where this profit comes from, he does not care. In* his 
opinion, society as a whole has at certain periods a definite 
amount of money at its disposal, and the more he can add 
to the cost-price of his commodities, the more of the 
available money-supply can he gather into his strongbox. 

But the scientific explorer cannot calculate in this 
manner. He cannot stick to the surface of things. He 
must probe the problems of economics to the very bottom. 



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PROFIT, INTEREST AND RENT *lfl 

So long as the law of value is accepted as the regulating 
force of capitalist production, we must find another ex- 
planation than that of the capitalist for his profits and 
lor the fact, that he cannot make his profits arbitrarily as 
high as he wants to. 

According to the Marxian theories of value and sur- 
plus-value, the price of commodities, as expressed in 
money, cannot be composed of anything but the value of 
the constant plus the value of the variable capital plus as 
much of the surplus-value as competition will permit the 
capitalist to realize in the shape of profit. If the com- 
modities are sold at the full value which they bring with 
them from the sphere of production then the capitalist's 
profit will be equal to te surplus-value contained in his 
commodities. If the commodities are sold above or be- 
low their full value, then the capitalist will realize more 
or less than the surplus-value contained in them. 

It is evident, that the composition of the value of a 
commodity must, under these circumstances, be dependent 
upon the composition of the capital with which it has 
been produced. If surplus-value is produced only by the 
labor of the productive workers, not by the dead labor 
incorporated in the instruments and materials bought 
with the constant capital, then the proportion of the 
variable to the constant capital must play a very im- 
portant role in the final struggle of the capitalist for the 
surplus-value taken to the sphere of circulation. The 
value of the commodities of the capitalist must fluctuate 
in proportion to the quantity of surplus-value which he 
can create by means of the variable capital invested in 
labor-power, and the quantity of machinery and raw 
materials, which this labor-power can consume pro- 
ductively in the labor process. 

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220 MARXIAN ECONOMICS 

The composition of capital includes both the value and 
the material substance of constant and variable capital. 
The value refers to the proportion between variable and 
constant elements of value, the material substance refers 
to the materials incorporated in means of production, raw. 
materials, and living labor-power." Marx calls the former 
the value-composition, the latter the technical composi- 
tion of capital. Both of these compositions are intimately 
related and influence one another. Marx calls their joint 
result the organic composition of capital. 

When the capitalist mode of production develops out 
of feudalism, it opens the way to capitals of widely vary- 
ing organic composition, Different capitalists, therefore, 
turn out products, whose value-composition differs from 
that of their competitors, because all of them work with 
varying quantities of material elements of value, and 
therefore, of surplus-value. 

The capitalists figure their socalled cost-price in 
money, not in the labor-cost, which is the real basis of 
all social exchange-values. But we know that the value 
of the metals in money is itself determined by the 
quantity of socially necessary average labor required to 
produce them. What we call the cost-price of commo- 
dities is, therefore, something different from the cost- 
price of the capitalist. We figure the cost-price of pro- 
ducts by the dead and living labor incorporated in them, 
while the capitalist figures merely the money which he 
spent in the production of his commodities. 

Our method of determining the value of commodities 
by their labor-cost enables us to find out just how much 
dead and living labor is incorporated in them and just 
how this proportion of dead and living labor in them 



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PROFIT, INTEREST AND RENT 321 

agrees with the average labor socially necessary to pro- 
duce a certain commodity. 

The average labor-cost necessary to produce a certain 
commodity is always the prevailing cost, which deter- 
mines the price of this commodity on the market. It 
represents the average value of the constant and variable 
elements of capital required under the prevailing condi- 
tions of production, and the surpluc-value turned out with 
them. It is found by taking the average of all individual 
compositions of capital in the sphere producing this com- 
modity. 

Let us assume that the average composition of capitals 
producing cotton yam is 80 constant plus 20 variable 
capital, and that the rate of surplus-value (calculated on 
the variable capital) is 100 per cent Then each 100 of 
these capitals will turn out a product, whose value will 
be composed of8oc + 2ov + 20s= 120. In other 
words, $20 of each 100 pay for labor-power, and $80 for 
wear and tear of machinery and raw materials. If one 
hour of average social labor is worth 50c, then $20 will 
pay for 40 hours of average social labor. But the 
laborers work 80 hours instead of 40, and the value of the 
40 hours of surplus-labor is likewise $20. The capitalist 
does not pay for this surplus-labor, but pockets its value 
in his profit. How much cotton yarn do these 80 hours 
of labor turn out? Let us assume for the sake of easy 
figuring, that the $80 for constant capital are composed 
of $10 for wear and tear of spindles, and $70 for cotton. 
Let one spindle be worth $10, then one spindle is worn 
out in 80 hours of labor. Let cotton be worth 10c a 
pound, then $70 will buy 700 pounds of cotton. These 
700 pounds of cotton make 700 pounds of yarn (we leave 
the question of waste out of consideration), so that 80 



228 MARXIAN ECONOMICS 

working hours turn out 700 pounds of yarn, at a value 
of $120. 

This is the average price at which cotton yarn is sold 
(at wholesale) under the prevailing conditions of yarn 
manufacture, and the capitalists working with capitals of 
this average composition make a profit of 20c on the 
dollar. 

Now let us assume that a few capitalists have invested 
capitals, which have a different composition than most 
other capitals in this industry. Let a few have a higher 
organic composition, and a few a lower one. 

Take it that the organic composition of the more 
highly organized capitals is 90 constant plus 10 variable 
capital, but that the rate of surplus-value is the same as 
that of all other capitals in the same industry, that is 
100 per cent., so that the laborers throughout the cotton 
yarn industry work one half of the time to produce their 
wages and the other half to produce surplus-value for 
the capitalists. Then the value of the product of these 
capitals will be ox>c-kiov+ios = no. Since one 
hour of this labor is worth 50c, $10 pay for 20 hours of 
it, and the laborers work 40 hours to work up $90 worth 
of machinery and raw materials. Let the proportion be- 
tween wear and tear and cotton be $10 worth of spindle 
and $80 worth of cotton. This means that these laborers, 
by the help of better machinery, work up 800 pounds of 
cotton in 40 hours, whereas the laborers of the capitalists 
with capitals of average composition work up only 700 
pounds of cotton in 80 hours. If the laborers of these 
capitalists with more productive l capitals worked 80 
hours, the same as the laborers of the other capitalists, 
they would turn out 1,600 pounds of cotton, and the value 
of this cotton would be $220, of which $20 would be 



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PROFIT, INTEREST AND RENT %HZ 

surplus-value. The total cost to the capitalists would be 
$200 during these 80 working hours, but their product 
would be 200 pounds of yarn more than that of the 
capitalists consuming $100 worth in 80 hours. But this is 
not the only advantage, which the favored capitalists get. 
Cotton yarn sells at 120 per 700 pounds. In that case 
the better situated capitalists have an advantage, whether 
demand and supply balance one onother or not If the 
demand for cotton is equal to the supply, so that all the 
yarn is taken which can be produced, then the favored 
capitalists can sell their yarn at $120 for 700 pounds, or 
$274.29 for 1,600 pounds, and pocket $74.29 of 
profits in the same time that their competitors 
with average capitals pocket $20. If the demand exceeds 
the supply, the situation will be the same. And if the 
supply of cotton yarn exceeds the demand for it, the 
capitalists with capitals of higher organic composition 
will be able to undersell their competitors to a point, 
where the less favored capitalists must either sell at a 
total loss, or stop producing cotton yarn. For instance, 
the favored capitalists could offer 1,600 pounds of cotton 
at a total price of $220, or 800 pounds of yam at a total 
price of $110, and still make a profit of $10 per 
each $100 invested, while the capitalists, who can offer 
only 700 pounds of yarn at a price of $120, if compelled 
to sell at the price of the favored capitalists, would not 
only lose their entire profit, but even a part of their in- 
vested capital. 

Take it, finally, that a few capitals in the manufacture 
of cotton yarn are still working with a capital of a lower 
than average composition, say with 60 c + 40 v, but that 
their laborers also work half of the day to produce their 
■wages, and half of the day to produce surplus-value. 



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224 MARXIAN ECONOMICS 

Then the value of their product (including surplus- 
value) would be 6oc + 4ov + 4os = 140. In other 
words, they must pay $40, or the equivalent of 80 hours 
of labor, for wages, their employes must work 160 hours 
to consume productively $60 worth of machinery and raw 
materials, and if the proportion between wear and tear 
and cotton were $10 for wear and tear of spindles .and 
$50 for cotton these laborers would work up only 500 
pounds of cotton in 180 hours, making goo pounds of 
yarn, and this yarn would have to be sold at the rate of 
$17.14 per hundred pounds even under the most favorable 
conditions, in which the demand would absorb all the 
yarn produced. They would have to sell their 500 
pounds of yarn for $85.70, whereas it has a value of $140 
and cost them $100 to produce that value. They would 
lose not only their entire profit of $40, but also $14.30 of 
their capital, and their employes would have worked 
twice as long as the laborers of the capitalists with 
capitals of average composition, and four times as long 
as those of the capitalists with capitals of higher than 
average composition. Under these circumstances the 
capitalists with capitals of lower than average composition 
would have to suspend operations. 

The same rule, which holds good for the capitals of 
a certain industry, prevails in society at large and subjects 
all capitals to the sway of the law of value. The capi- 
tals of average composition everywhere determine the 
average price at which commodities are to be sold, the 
capitals with higher than average composition can 
either make a greater profit than the average, or sell 
at the value of their own products and undersell alt 
competitors with more lowly organized capitals, while 
the capitals with a lower than the average composition 



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PROFIT, INTEREST AND RENT 225 

are ruled out of competition entirely. If the composition 
of the exceptional capitals with a higher organic con- 
stitution becomes general, then this is the average com- 
position, the prices of commodities fall, and new im- 
provements in machinery and productivity of labor are 
required to secure more than the average profit. It does 
not matter, how much surplus-value the individual capital- 
ist may produce. He does not share in the profits of the 
entire capitalist process in proportion to the surplus-value 
produced by his own working men, but in proportion to 
the total capital invested by him, and his capital is merely 
a definite percentage in the total capital of society. Com- 
modities are regulated on the market by the average 
price of production, that is, the cost-price (the value of 
constant plus variable capital) plus the average profit, 
and only capitals with a higher than an average com- 
position can secure a surplus-profit above the average, so 
long as they occupy this exceptional position (irregu- 
larities always excepted). In other words, commodities 
are, as a rule, not sold at their values. Only so long as 
the prevailing conditions of production permit the capitals 
of average composition to sell all their products, that 
is, so long as supply and demand balance one another or 
demand exceeds supply, do these capitals sell their pro- 
ducts at their value, while all others sell either above or 
below their value. And generally speaking, commodities 
are sold at their value only so long as we look upon so- 
ciety as a whole, and all capitals as one capital, because 
in that case the advantage of some is a loss to others, and 
the final result is merely a different distribution of values 
and surplus- values among different capitalists. But from 
the point of view of individual capitalists, or individual 
industries, commodities are almost never sold at their 



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226 MARXIAN ECONOMICS 

value. The law of value merely enforces itself through 
an endless series of fluctuations, whose average is never 
stable and can never be reduced to any mathematical 
exactness. *■ The competition of capitals of different 
organic composition, and the necessity of yielding a 
part of the industrial profits to merchants and bankers, 
continually strive to break through the law of value, and 
it maintains itself only through an indeterminable 
struggle of averages. 

Whether a capital 13 productively Invested in in- 
dustrial pursuits, or unproductively in stores, banks, or 
whether it is invested in agriculture or in real estate and 
buildings, it can, as a rule, secure only the average profit 
prevailing in society as a whole, and interest and rent 
must follow the fluctuations of this average profit. Where 
they do not follow these fluctuations, exceptional rates of 
interest and rent must be explained by the law of value, 
the same as the average profit itself. 

In short, so long as capitalist production lasts, the 
law of value cannot express itself normally, hut must en- 
force itself through fluctuations around a variable aver- 
age. Only under a socialist system of production tan 
the Marxian theory of value be consistently applied and 
used as a regulator of collective production. 



which forma under a developed capitalist modi 
the level, around which market-prices fluctuate under the in- 
fluence of demand and supply. The price of production, how- 



DiBitizedoy G00gle 



CHAPTER XIX. 

THE DRIFT OF INDUSTRIAL CAPITALISM 

So long as merchants' capital is the prevailing form 
of capital, and so long as the accumulation of money 
serves mainly as a lever for lifting more and more sur- 
plus-products out of the sphere of production without 
touching the mechanism of this sphere itself, the pre- 
capitalist foundations of human societies remain very 
stable. 

But the practices of the feudal aristocracy in co- 
operation with the manipulations of the merchants and 
financiers transform feudal peasants into proletarians 
with no other marketable property but their labor-power, 
separate the handicraftsmen from the feudal employes, 
widen the field of production for the better situated 
middle classes, and strengthen the hands of the city 
merchants more and more against the aggressions of the 
feudal aristocracy. 

When the crafttnaster, the well-to-do serf, the banker, 
the merchant, the lord, the churchman become manu- 
facturers, when the landless serf and journeyman become 
wage slaves, when capital in the form of money invades 
the sphere of production and wrenches it loose from its 



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288 MARXIAN ECONOMICS 

old foundations, then a new law of development seizes 
all forms of accumulanted money, turns the tide of 
history into new channels, and hastens the speed of its 
flow. 

Merchants' capital required thousands of years to 
extend its operations in the sphere of circulation from the 
narrow strip of the primitive mark to the intenrrban mart 
and the international emporium. Industrial capital en- 
gulfs both the spheres of production and circulation in 
less than three centuries. The nineteenth century alone, 
under the lash of industrial capitalism, has carried the 
human race over more ground than all the preceding 
millenniums, in which other forms of capital developed. 

The ancient and medieval forms of capital existed 
chiefly by virtue of the surplus thrown off by the sphere 
of production after the wants of the producers had been 
satisfied. Industrial capital starts out by making the 
producers subservient to its need of selfexpansion and 
placing the satisfaction of this need above the satisfaction 
of the wants of the produces. Man becomes the tool of 
capital. 

The market, once a place of minor importance for the 
productive basis of social life, now becomes the center 
of all productive activity. The whole world of organic 
and inorganic, movable and immovable things, love, vir- 
tue, honor, and eternal salvation* *-, are turned into com- 

•) These terms have a different meaning in the socialist 
philosophy than they have In bourgeois morality. The bourgeois 
moralist connects these terms with the Action of a free will, a 
supernatural soul, and the worship of the autocratic laws of a 
divine tyrant. The dialectic monism of the socialist philosophy 
connects them with the function of a natural Instrument of 
cognition, tlfe human faculty of thought, whose will Is deter- 
mined by Its uncontrolled environment, and which acquires an 
Increasing power over this environment in proportion as men 
unite and adapt themselves and their societies consciously to 
the understood drift of natural evolution. 



THE DRIFT OF INDUSTRIAL CAPITALISM 229 

modities and thrown upon the market in order to "make 
money". The profits of the capitalist, formerly a mere 
side issue from the point of view of social progress, be- 
come the all absorbing incentive and regulator of history. 
The accumulation of industrial money-capital, and the 
immanent law of its development, assume the role of 
social pilots and steer the ship of mankind over the reck- 
less course of profits coining more profits out of human 
flesh and blood. 

In the beginning of capitalism it is mainly the work- 
ing class that feels the inexorable hand of capitalist 
development. And it is this class which receives the 
hardest blows from the results of the capitalist law of 
accumulation, so long as capitalism lasts. But the ruling 
classes are by no means exempt from its uncontrolled 
fury. In proportion as capitalism develops, it is brought 
home with increasing persistence and directness even to 
the capitalist mind, that capital is stronger than the 
capitalist, and that capital in its turn is subject to laws 
of its own mechanical making which it cannot control. 

The farther capitalism proceeds upon its historical 
road, the more heavily do its uncontrolled laws fall upon 
the capitalist himself. They become dangerous to his 
existence, compel him to resist this danger by opposing 
the natural direction of the development from which they 
spring, and thereby to undermine capital itself and to 
hasten his own downfall. The same laws, which built 
up the structure of capitalism during its ascending period, 
turn during its descending curve into means of destroy- 
ing it and the capitalist class. 

To the same extent do these laws turn from de- 
structive enemies of the working class into constructive 
aids to its organization, education and supremacy, al- 



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330 MARXIAN ECONOMICS 

though they never cease to press hard upon the workers. 

Every capitalist wants to make as much profit as 
possible. In order to make profit, he must squeeze sur- 
plus-value out of his employes and sell the products con- 
taining it in the competitive market The more surplus- 
value he can filch from his employes, the greater will be 
his opportunity to gather profits from the sale of his 
commodities. Surplus-value cannot be increased by any 
other means than that of increasing the intensity of labor 
together with its productivity or of increasing the sur- 
plus-labor at the expense of the necessary labor, or of 
prolortguing the working day, or by using all these 
means together. 

Not all means of intensifying exploitation have the 
same value in the mechanical working of the turn-over 
of capital. The prolongation of the working day beyond 
its normal length, and thus the production of absolute 
surplus-value, are more typical of the beginnings of 
capitalist production, although they never disappear 
entirely even in the most advanced stages of capitalism, 
Later, when the proletariat has become sufficiently organ- 
ized to resist the exactions of the capitalists, this method 
of surplus-production is more and more narrowed down 
and used by the small capitalist rather than large in- 
dustrial corporations. It is more and more restricted and 
eclipsed by the production of relative surplus-value 
through the intensification" of the productive labor during 
the normal working day and the displacement of hand 
labor by machine labor. 

The most effective means of intensifying the pro- 
ductive power of labor within the limits of the normal 
working day is the introduction of improved machinery 
and the progressive increase of the speed of its revolu- 



5 lc 



THE DRIFT OF INDUSTRIAL CAPITALISM 231 

tions. This Is the most significant and characteristic 
method by which capitalism succeeds in increasing the 
surplus-labor compared to the necessary labor during the 
normal working day of a certain period. 

It is only the variable capital which is the really active 
capital under capitalism. But in order to increase the 
effectiveness of his variable capital, the industrial capital- 
ist must invest more and more money in productive 
machinery. In proportion as the accumulation of sur- 
plus-value proceeds, a relatively larger and larger portion 
of it is, therefore, invested in machinery, white a relative- 
ly smaller and smaller portion is added to the variabble 
capital. 

The variable and the constant capital both increase 
continually and with them increases the mass of surplus- 
value (calculated on the variable capital) and the mass 
of profits (calculated on the total constant plus variable 
capital). As a rule, the rate of surplus-value (rate of 
exploitation) increases at the same time. But the con- 
stant capital increases faster than the variable capital, 
and the difference between the mass of produced common 
dities and their value increases faster than that between 
the constant and variable capital. The inevitable result 
of this is that the rate of profit must have a tendency to 
fall, even though the rate of surplus-value is rising and 
the mass of profits increasing. 

Take for instance three different capitals of different 
organic composition, such as we compared in the pre- 
vious chapter. Let us assume, that instead of competing 
with one another all at the same period, they represent 
the average composition of the social capital at three 
different periods of capitalist development. 

Let the capital of 60 c + 40 v represent the rule in the 



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232 MARXIAN ECONOMICS 

beginning years of capitalism; let the capital of 80 c .,■ 
20 v be the average during the middle period of capital- 
ism ; and let the capital of 90 c + 10 v show the average 
composition of the social capital in the declining years of 
capitalism. Let us assume, for the sake of easy com- 
parison, that all these capitals work with the same rate 
of exploitation, and that all of them turn Over their en- 
tire constant and variable capital inside of one year. In 
reality this is hardly ever the case, but it will do for the 
present comparison. Then we get the following values 
for the product of these capitals, assuming the rate of 
surplus-value to be 100 per cent : 

6oc + 4ov + 4os= 140. 
8oc + 2ov + 2os = 120. ' 
9oc+iov+ios = no. 

In all of these cases, the rate of surplus-value; is 100 
percent. But the rate of profit declines in proportion as 
the constant capital increases over the variable capital. 
During the first period, the rate of profit is 40 per cent; 
during the second period it is 20 per cent; during the 
last period it is 10 per cent. We have already seen, how- 
ever, that this declining rate of profit may, and does, go 
hand in hand with a rise in the mass of profit, so that the 
capitalists pocket more profit, even though the rate of 
profit declines. 

Simple as these three formulas may appear, they are 
the handwriting on the wall, which presages the downfall 
of capitalism. Let us look at them a little closer. They 
reveal a good deal more than the first glance of them 
shows. 

In the first place, they show that the constant capital 
has a tendency to increase faster than the variable 
capital; in the second place they show that the rate of 



THE DRIFT OF INDUSTRIAL CAPITALISM 333 

profit declines; in the third place they indicate that the 
chances of employment do not increase as fast for the 
working class as the constant captial of the capitalist in- 
creases ; in the fourth place they reveal that capital is con- 
centrated, in other words, that the scale of production is 
continually expanded; in the fifth place they show that 
small capitals cannot stand the competition of large ones, 
because it requires plenty of money to increase the con- 
stant capital by buying improved machinery and large 
quantities of raw materials; and finally they show that 
concentration of capital goes hand in hand with a centrali- 
sation of capital, that is, with an elimination of small 
capitalists and the accumulation of larger and larger 
capitals in the hands of the surviving great capitalists. 

Concentration and centralisation of capital sound the 
doom of the middle class as a socially essential element 
in production, although this class never disappears en- 
tirely, but merely changes its character by being trans- 
formed from independent producers into dependent 
agents and employes of the great capitalists. In propor- 
tion as the middle class loses its importance in the pro- 
cess of soda! production, the great capitalists and the 
working proletariat become the typical representatives of 
capitalism. 

' The relative decrease in the chances of employment 
for the working class assumes on the surface the aspect 
of an increase of the working class population over the 
means of subsistence. A vaster and vaster unemployed 
problem thus threatens the security of the capitalist 
foundations. 

This is a direct result of the mechanism of capitalist 
production. But the mechanism of the sphere of circula- 



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234 MARXIAN ECONOMICS 

tion adds its share to complicate the situation for the 
ruling class. 

The competition of capitalists among themselves, and 
the elimination of the weaker capitalists, leads not only 
to a centralization of instruments of production, but also 
to a centralization of money in the hands of fewer and 
fewer magnates. To the extent that this centralization 
of means of production and money continues, the un- 
employed problem is intensified. It is true, that the in- 
crease of the mass of profits (despite the decrease of the 
r&e of profits) compels the successful capitalists tempo- 
rarily to enter new avenues of investment and thus to 
open more opportunities for employment to the reserve 
army of unemployed. But this merely defers the final 
reckoning, because the new fields of investment neces- 
sarily develop the same tendencies as the old ones, as 
monopolies in the hands of giant corporations gobble up 
the dispersed and formerly neglected lines of minor im- 
portance. The end cannot be anything else but still vaster 
unemployed problems. 

The permanent existence of an army of un- 
employed increases the competition of laborers for 
jobs, and this naturally tends to keep wages at the lowest 
level of subsistence, and to check the fall of the rate of 
profit, so that the question of the investment of the mass 
of new profits becomes ever more pressing for the capi- 
talists. On the other hand, the keeping of wages at the 
lowest level of subsistence threatens periodically to 
wreck the entire capitalist system, because the working 
people are the principal consumers, and they cannot begin 
to absorb the immense quantity of goods made by them 
as the productivity of labor increases, for the simple 
reason that their wages, even if permanently above the 



Sic 



THE DRIFT OF INDUSTRIAL CAPITALISM 235 

average (a thing which is as rare as an honest capitalist 
politician,) are an equivalent for but a small part of the 
total value of the social product. 

So long as capitalism is young, production is wholly 
planless and wild. And since the fixed portions of the 
constant capital differ in their tum-over from the cir- 
culating portions, production begins to lag, its wheels 
soon become clogged here and there, the markets are 
quickly glutted, and every few years a commercial crisis 
steps the 'Wheels of production. The capitalists cannot 
reproduce their capital, their machinery and raw materials 
deteriorate for want of the conserving and life-giving 
power of labor, their profits stop, and confusion reigns 
in the capitalist camp. Meanwhile the working people, 
thrown out of employment, stand hungry, shivering and 
ragged before mountains of wealth produced by them, 
waiting for the magic word, which shall recall them to 
their servitude and fill their stomachs. 

A period of stagnation follows the acute stage of a 
commercial crisis, the unemployed become troublesome, 
crime, suicide, disease and insanity are rampant, and the 
entire forces of capitalist suppression are feverishly busy 
at all points to punish the miserable for the sins of the 
capitalists and shield the capitalists from the evils of 
their own making. 
' " More and more labor saving machinery is produced, 
in the frenzied rush after more profits and a rapid turn- 
over of capital. Little do the capitalists realize, that the 
mere acceleration of the turn-over of capital does not 
increase their profits, unless other causes have first in- 
creased the intensity of exploitation and the creation of 
surplus-valde. They look astonished when confronted 
with the fact that a capital of $ 100, if turned over more 



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836 MARXIAN ECONOMICS 

quickly by underselling competitors, does not bring any 
more profits by such rapid turn-overs than the capital of 
a competitor turned over once in the same time and 
selling commodities at the average market price. 

Yet that is actually a fact. Take two capitals of $100 
each. Let the average rate of profit be 20 pet. Let the 
capital of A be turned over once in twelve months, and 
the capital of B ten times in twelve months. But how is 
this tenfold turn-over of B's capital possible ? B must un- 
dersell his competitor A. Each has $ 120 worth of com- 
modities. A sells his commodities at their average prjee 
of production, that is, at $120, and at the end of twelve 
months he has turned over his capital and pocketed $20 
Of profit. B sells his commodities below their price of 
production, in order to turn his capital over faster. He 
sells at $ 102, and turns over his capital once while A 
has sold only one tenth of his commodities. B reproduces 
his capital, manufactures another batch of commodities 
and sells again at $ 102. Now he has pocketed $4.00 of 
profit. And so on eight times more. At the end of ten 
turn-overs he has pocketed exactly $ 20 of profit, not a 
cent more than A with one turn-over per year realizes. 
Evidently a rapid turn-over of capital by itself does not 
make profits any higher. 

In reality the capitalist does not rely merely on a 
rapid turn-over of his capital. He rather tries to beat 
down the rate of wages, so that he can increase the 
creation of surplus-value. Along with the introduction of 
labor-saving machinery comes, therefore, the, employment 
of women and children instead of ablebodied men, and 
the lowering of the scale of wages to a point where even 
a child can barely keep flesh and bones together. 

As the world market widens, as production is better 



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THE DRIFT OF INDUSTRIAL CAPITALISM 237 

regulated by centralized control, the cycle of commercial 
crisis becomes longer and longer and is gradually length- 
ened into periods of protracted depression. When the 
home market becomes permanently unable, in spite of the 
increase of the population, to assimilate the overproduc- 
tion of commodities (overproduction, not because there is 
more than can be consumed, but because there is an under- 
consumption of goods on the part of the working class), 
the theater of capitalist competition spreads over the enti- 
re globe. Wild wars are undertaken for the conquest of 
new markets and new fields of production. 

Centralization of control over large industries may 
lessen the acuteness and frequency of commercial crises 
and financial panics, so far as they are due to the 
mechanical and spontaneous action of disorderly produc- 
tion and circulation. But it opens the way for the con- 
scious promotion of commercial crises and financial 
panics, because the control of vast fields of production 
and of the money supply enables the great corporations 
to close down their factories at will and lock out imnense 
armies of working people, to manipulate the money- 
market, and involve the entire nation in their squabbles 
over the control of special fields of exploitation. These 
conscious attempts at commercial crises and panics are no 
longer of such nature as to shake the entire foundation of 
capitalism and ruin large numbers of socially essential 
capitalists. They are rather maneuvers made with the in- 
tention of squeezing the little capitalists and stockhol- 
ders, who are more hangers on of the great capitalists 
than a socially independent and essential class. 

At the same time, the growth of vast labor organi- 
zations threatens to rend the whole society into two war- 
ring camps. The class struggle between the proletariat 



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838 MARXIAN ECONOMICS 

and the great capitalists gradually overshadows all the 
artificial issues, which the ruling classes have invented to 
divide the laboring classes among themselves. 

Monopolies in the hands of great corporations 
(trusts) may check the tendency of rate of profit to fall (1) 
by depressing wages below the average-value of labor- 
power ; * * X 2 ) by selling commodities above their value j 
(3) by systematizing all modes of adulteration and 
eliminating waste ; (4) by pressing upon the money- 
market, eliminating competition, and preventing the lo- 
wering of profits and interest through it ; (5) by suppres- 
sing new inventions, which would tend to cheapen com- 
modities, while the existing machinery is still able to 
supply more than the demands of the national and inter- 
national markets; (6) by fomenting wars and thereby 
putting new life into "prosperity". 

Yet at the same time monopolist corporations must 
bow to the dictates of international competition. They 
may temporarily dodge some of the worst "evils" which 
strike hard at capitalism ; they may circumvent in a grea- 
ter or lesser degree the law of value ; they may secure a 
short respite for themselves and their class from the 
social laws that have pronounced sentence upon them. 
But the end must be inevitably the same. The question, 
what to do with the increasing mass of profits, how to 
harmonize the working of collective production and 
distribution with the individual or class ownership of the 
essential sources of life, how to meet the demands of the 
increasing number of homeless, jobless, starving laborers, 
must finally be answered. The capitalist class has no 

•) Karl Marx, L. c volume III. chapter XTV, It: 'It it one 

of the most Important cause a which are an obstacle to tha tend- 
ency toward a falling rate of profit." 



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THE DRIFT OP INDUSTRIAL CAPITALISM 239 

satisfactory answer. Only the working class can solve 
this problem. 

The same general tendencies, which undermine the 
foundation of capitalism in industrial life, also appear in 
the development of agriculture under capitalism. Concen- 
tration and centralization of agricultural capital do not 
proceed in exactly the same way as they do in industrial 
production, but the result is the same. Land may not be 
monopolized to such an extent as the industrial means of 
production. Agricultural capitalism has not, so far, eli- 
minated the small farm or rendered it economically of 
minor significance, as industrial capitalism has done with 
the industrial middle class. The number of small farms, at 
least in the United States has rather increased, and with 
them the cumber of middle class farmers. So long as it 
pays the capitalists, who control the productive life of the 
nation, to leave the small farmer in virtual possession, if 
not in actual control, of his land and home, and to 
exploit him in the sphere of circulation rather than in the 
sphere of production, it will be done. Still the tendency is 
here also to transfer more and more of the productive 
functions from the farm to the industrial field, and to 
leave only such purely agricultural work in the hands of 
the tillers of the soil, as cannot be divorced from the 
land. The manufacture of butter, the distribution of 
milk, the skimming of cream, disappear from the farm. 
Improved machinery, which the farmer must have, if he 
would keep step with the demands of capitalist produc- 
tion, enable the manufacturer of farm implements and 
machinery to take large slices out of the farmer's income. 
The great transportation companies open their rapacious 
maws for him. Money lenders secure a strangle hold on 
htm. As a rule nothing remains for him but the exhausting 



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240 MARXIAN ECONOMICS 

toil in the fields and the illusion, that he is still his own 
boss and the master of his own fate.* 

So far as interest depends upon the industrial profit, 
and the rate of interest upon the rate of industrial 
profit, it is evident that the rate of interest will have 
a tendency to fall with the average rate of industrial 
profit. But since the productivity of labor in the mining of 
precious metals and the centralization of money into 
fewer and fewer hands, together with the concentration 
of industries, accumulates vast funds of loanable capital 
seeking investment at profitable rates, the plethora of 
money has by itself a tendency to lower the rate of in- 
terest, so long as competition is still in force, even with- 
out the influence of the average rate of profit, f 

Where ground rent assumes the form of interest on 
money, the same tendency will appear and it will require 
a larger and larger capital to secure possession of real 
estate with "a view to drawing a revenue or profit from it. 
The value of land will rise. So far as ground rent is a 



*) For a clear description of the way, In which concentra- 
tion ana centralization of capital transform the farmer from an 
Independent producer into a helpless victim of the great, capital- 
ists see A. M. Simons, Tne American Farmer, Charles H. Kerr 
A Co., Chicago. • 

) In studying the relation between the productivity of 
labor in sold mines, the rate of Interest, and prices of other 
commodities than gold and silver as expressed by money, It 
should be remembered that the Volume of production Is also 
continually Increasing. A rising rate of Interest with an In- 

lng supply of gold and an Increasing productivity of labor 

n " -■■'■- ■■ J -'• "- —'■-■-- •■--■ — -j position 

__-ts. Who- 

- ... , 1 Marx was wrong, and that his law of 

value does not apply In capitalist society, must prove that the 
ratio of Interest Is rising while the volume of gold production 
Increases faster than the volume of social production In general, 
and the productivity of the labor In gold mines Increases more 
rapidly than the Increase of productivity In social production 
at large. And even so he must prove that all conditions have 
remained unaltered as they were when Harx analysed thla 
problem, so that competition must still be the unchallenged reg- 
ulator of capitalist production. But In the United States at 
least, this Is no longer the case. The trusts and giant corpora- 
tions have practically killed competition In many fluids. Hera, 



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THE DRIFT OF INDUSTRIAL CAPITALISM 241 

surplus-profit above the average on capitals invested in 
agriculture, we have already seen that the average rate 
of profit controls its movements, so that here, likewise, 
more and more capital is required to secure the same 
ground rent and the value of land will rise. 

As the total population increases, the proportion 
between the different essential and unessential classes of 
society is gradually shifted. Speaking of classes as types 
of economic agents, the tendency is to increase the abso- 
lute number of members of all classes. But their relative 
proportions are altered in such a way, that the number 
of great capitalists increases very slowly compared to all 
other classes, while the typical middle class of early ca- 
pitalist society, composed of independent artisans, shop- 
keepers, little businessmen and small capitalists, gradually 
gives way to a different middle class which is largely 
dependent upon the great corporations. Only the agricul- 
tural middle class preserves much of its old historical 
character, although it, too, comes more and more under 
the sway of the great capitalists, like all other classes. 
The industrial proletariat increases faster than all other 



then, the law of value, which works out Its effects In the way 

theoretically Indicated by Marx only under conditions ol un- 
hampered competition, Is more or less circumvented. And If 
It Is argued that Marx's position on this problem Is wrong and 
the old Currency School right, because the rate ol Interest 
Is now higher In the United States than It was ten years ago. 
In spite of the fact that the produclvlty of labor In gold mines 
Is now much higher than ever, then such a deviation from the 
law of value does not prove that Marx was wrong. It proves 
merely that other conditions have arisen, which partly paralyse 
the action of the law of value. The gold standard and the 
centralization of money now permit a few financiers (who are, 
in the United States at least, at the same time the great cap- 
tains of Industry) to hoard vast amounts of gold, make money 
artificially scarce, raise the rate of Interest, and Increase prices 
In violation of the law of value, liven so the Marxian theories 
give a Arm balls for the explanation of such alterations In the 
mechanism of capitalist production. See also "Capital", VOL 
III. chap. XXX to, XXII, on the rise and fall of the rate of In- 
terest In the various phases of the Industrial cycle. 



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242 MARXIAN ECONOMICS 

Generally speaking, capitalist development increases 
the number of middle class capitalists, dependent trades 
people, capitalist farmers, faster than that of the great 
capitalists, bait decreases the influence of this new middle 
class in social production; the number of farming 
tenants increases faster than that of "free" farmers, and 
the number of mortgaged farms increases faster than the 
number of unencumbered farms ;* ■ and the industrial 
proletariat oustrips all other classes in growth of num- 
bers and economic influence. 

Bourgeois economists have struggled in vain to solve 
these problems. For centuries these questions have 
remained unanswered by them. Most of the bourgeois 
economists are still unable to answer them. Some have 
read their solution in Marx, but very few are willing to 
admit this, or to agree that Marx has solved these pro- 
blems. The greater number of university professors still 
answer the vexing problems of capitalist economics by 
the specious and embarrassed vagaries of their predeces- 
sors. Particularly is this the case, when the discussion 
broaches such questions as the relation of wages to 
profits, or of profits to the working population in general, 
or such problems as that of the influence of the pro- 
ductivity of labor in the production of precious metals 



railormatlon, like the controversy i 

'elODmeot of free and mortgaged farms, naa 

t any apparent decision. It 

ice can be placed upon any 

Ctlotl of capitalist govern - 

- ,.. — . j Of sources of production 

makes It practically Impossible to secure accurate data about 
the tendencies of capitalist development In these departments of 
social life. Should any one feel Inclined to challenge my pres- 
entation of these tendencies as given above, I would merely 
-*— '•'•" *- " - '"•— ' already eiistlng on this epntro- 



I the need of adding t 

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THE DRIFT OF INDUSTRIAL CAPITALISM 243 

on the prices of other commodities, particularly on the 
price of labor-power. 

When industrial capitalism had reached the stage, 
where a vast proletariat supplied a superabundant num- 
ber of wage workers to the capitalists and left an in- 
creasing army of hundreds of thousands unemployed du- 
ring a part or the entire length of the year, the bourge- 
ois economists searched for an explanation of this 
problem. 

Here are some of the explanations, which were pas- 
sed off as the acme of economist science for centuries. 
Some professors took their scientific ideas from the 
preachers and claimed that God had ordained, that so 
many proletarians should remain unemployed and starve 
to death or end as paupers in the treadmills or the jails. 
Another professor, a little shrewder and less clumsy than 
his pious colleague, declared that the amount of money 
available in a certain society for wages was unalterably 
. fixed, so that only a definite portion of the working people 
could be employed at a time. Then, at a later period, when 
the idea of social growth had forced itself upon the 
minds of the bourgeois thinkers, and when it was ap- 
parent to the dullest of them, that the amount of money 
available in a certain society for its various purposes was 
continually increasing, or fluctuating between increase 
and decrease in response to the requirements of national 
and international trade, Malthus invented his theory 
of overpopulation, or rather, plagiarized some of his 
smarter colleagues and dressed their ideas up as his 
own invention. He claimed, that the working peo; 
pie, improvident and shiftless as they are, were 
continually propagating themselves faster than the 
employed portion of society could produce means of 



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244 MARXIAN ECONOMICS 

subsistence. For this reason, Malthus says, there is 
always an overpopulation of working people, so that 
more of them need work than the good capitalists, can 
employ, and more of them want food, clothing and 
shelter than the co-operative efforts of the employed can 
produce. The result, according to Malthus, is a chronic 
unemployed problem, starvation, misery, and all the 
evils attenting such a condition. And this explanation was 
acclaimed as a great scientific discovery, at time when 
the granaries and stores were bursting with supplies, 
while thousands were crying for food and homes. 

No matter what kind of an explanation the bourgeois 
professors advanced, all of them agreed, that it was the 
fault of the working people themselves, if they were in 
a condition of want and misery, and some of them went 
so far as to proclaim openly, that war, pestilence, famine, 
and the wholesale butchering of rebellious and desperate 
wretches, were a scientific solution of the unemployed 
problem, because these scourges of mankind "thinned out 
the surplus-population". It was always the working 
people, who were superfluous, never the capitalists and 
aristocrats. 

The Marxian theory of value and capitalist accumu- 
lation explains the connection between variable capital, 
constant capital, profits, and an increasing population of 
unemployed so clearly and convincingly, that all but capi- 
talist professors will agree to it. We have already indi- 
cated this connection and need not repeat it here 

The relation of the precious metals to their role as 
money and to the value and price of all other commodities 
has caused the bourgeois professors no less headache. 
Even the analytical brain of a Ricardo broke down hope- 
lessly before the problem of the relation of currency to the 



THE DRIFT OF INDUSTRIAL CAPITALISM 245 

prices of commodities. Marx has treated this point fully in 
his "Critique of Political Economy" (page 236) and in 
volume III, chapter XXXIV of his "Capital". It interests 
us here only in its relation to the unemployed problem. 

The value of gold and silver, like that of all other 
commodities, is determined by the average labor socially 
necessary to produce mem under prevailing conditions. 
The value of gold and silver available in a certain country 
is, therefore, at any penod, a definite amount' determined 
by the social productivity of the laborers in these indus- 
tries under the existing technical conditions. This value 
is changed only when the average time socially necessary 
for the production of gold and silver is changed. Their 
price is changed when the production of gold does not 
keep step with the wear and tear of the gold in circula- 
tion, or when it exceeds this wear and tear, 01* by expor- 
tation and importation, of other causes that may create 
an appreciable disproportion between supply and demand. 
Not all gold enters into the circulation of commodities 
as coined money. By far the greater portion of the money 
used for the circulation of commodities is paper, checks, 
drafts, or credit The total amount of gold and silver in 
a certain country cannot, therefore, have any direct in- 
fluence upon the prices of other commodities, and it 
cannot have any influence at all upon the value 
of other commodities, because that value does not 
depend on the value, of gold, but on the neces- 
sary and surplus-labor incorporated in the com- 
modities themselves. Gold and silver serve as meas- 
ures of value only, because social labor is embodied in 
them, and this labor in gold and silver is compared with 
the labor in the other commodities. The relation, which 
bourgeois economists claimed to have discovered between 



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246 MARXIAN ECONOMICS 

the fall or rise in the value of gold, and the fall and 
rise in the value of other commodities, or the influence 
which they believed was exerted by the greater or smaller 
quantity of gold and silver in a certain, country upon the 
prices of all other commodities, do not exist in fact." 
Marx has supplied us with a convincing refutation 
of this old currency principle, which misled even the 
smartest bourgeois economists. He calls this principle 
"the old fib, which asserts that changes in the quantity of 
gold existing in a certain country, by increasing or re- 
ducing the quantity of the medium of circulation in that 
country, must raise or lower the prices of commodities in 
it". According to this currency principle, the prices of 
commodities were supposed to rise in that country, into 
which gold is imported, and this is supposed to enhance 
the value of the commodities exported from the gold ex- 
porting to the gold importing country. On the other 
hand, the value of the commodities exported from the 
goTd importing to the gold exporting country is supposed 
to fall in that case. But Marx has clearly demonstrated 



3 direct relation, which 
ct, but which w« deny. 



iey generally) t .. ._.. .. 

-.., „ ._lue. Hence, when money enterH on Its 

function as a measure of value, when It expresses prices, its 
value Is already determined. If now Its value fall, this fact Is 
first evidenced By a change In fhe prices of those commodities 
that are directly bartered for the precious metals at the sour- 
ces of their production. The greater part of all other com- 
modltles, especially In the imperfectly developed stage of civil 
society, will continue lor a long time to be estimated by the 
former antiquated and illusory value of the measure of value. 
Nevertheless one commodity Infects another through their com- 
mon value-relation, so that then- prices, expressed In gold or 
■liver, gradually settle down into the proportions determined 
by their comparative values, until Anally the values of all 
commodities are estimated in terms of the new value of the 
metal that constitutes money." Capital, volume I. chapter III, 
p. 133, American edition. 



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THE DRIFT OF INDUSTRIAL CAPITALISM 24? 

that the reduction of the quantity of gold in a certain 
country raises only the rate of interest, while an increase 
in the quantity of gold lowers this rate. And if the fluctu- 
ations of the rate of interest were not taken into account 
in the determination of the cost-price of commodities, or 
in the regulation of prices by demand and supply, there 
would not even be an indirect influence of the gold ex- 
ports and imports upon the prices of commodities in any 
country. 

It follows, therefore, that no matter how much or 
how little gold exists in a certain country, the unemployed 
are not concerned in it at all. The capitalist system of pro- 
duction requires a certain amount of circulating medium, 
or money, for the circulation of its commodities, and 
since there is never enough gold or silver in any country 
to supply the circulation, the missing amount is supplied 
by paper money, bank checks and credit. 

"So long as enlightened bourgeois economy treats of 
"Capital" in its ofnciat capacity, it looks down upon gold 
and silver with the greatest disdain, considering them as 
the most immaterial and useless forms of capital. But as 
soon as it treats of the banking system, everything is re- 
versed, and gold and silver become capital par excellence, 
for whose preservation every other form of capital and 
labor is to be sacrificed. But how are gold and silver 
distinguished from other forms of wealth? Not by the 
magnitude of their value, for this is determined by the 
quantity of labor materialized in them ; but by the fact 
that they represent independent incarnations, expressions 
of the social character of wealth. This social existence as- 
sumes the aspect of a world beyond, of a thing, matter, 
commodity, by the side of and outside of the real elements 
of social wealth. So long as production is in a state of 



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248 MARXIAN ECONOMICS 

flux, this is forgotten. Credit, likewise, in its capacity as a 
social fovm of wealth, crowds money out and usurps its 
place. It is the faith in the social character of production, 
which gives to the money-form of products the aspect of 
something disappearing and ideal. But as soon as credit is 
shaken — and this phase always appears of necessity in 
the cycles of modern industry — all the real wealth is to 
be actually and suddenly transformed into money, into 
gold and silver, a crazy demand, which, however, neces- 
sarily grows out of the system itself. And all the gold and 
silver, which is supposed to satisfy these -enormous de- 
mands, amounts to a few millions in the cellars of the 
banks!" * 

It is not the money question, but the question of the 
entire capitalist production with everything implied by it, 
that interests the working people. And the general effect 
of this system upon the working class can be summarized 
in the one phrase : Progressive proletarianization. 

Capital is not primarily prevented from developing by 
the demands of the working class. It is prevented from 
ruling the world for ever and holding down the working 
people for all eternity by its own immanent laws. It devel- 
ops through contradictions. It cannot get away from them,' 
because it is itself the greatest contradiction. It exists 
only in them and through them, and must finally fall 
through them. 

The antagonism between exploiters and exploited 
becomes more and more intense. It is transferred from 
the economic to the political field. Organized by the 
requirements of capitalist production itself, the proletariat 
adapts its economic organizations to the form of modern 

•J Earl Marx. L c, volume III, chapter XXXV. 



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THE DRIFT OF INDUSTRIAL CAPITALISM 249 

centralized industries, transforms its craft unions into 
industrial unions, unites its economic and political or- 
ganizations in a well-planned division of labor, conquers 
the political power, and enables its economic organiza- 
tions to take 1 hold of the great sources of production and 
distribution in the interest of the working class, which 
remains the only essential class in society. 

As soon as the working class controls the nation 
economically and politically, it inaugurates a system of 
collective production, in which the producers control 
their means of life, determine their own share in the co- 
operatively produced articles, and remove all obstacles to 
a full human development. Capitalism leaves the field to 
Socialism. 



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CHAPTER XXL 

CLOSING REMARKS 

We have followed labor and capital through their 
long journey from primitive times to the present day. We 
have seen, that human labor-power was the starting point, 
the mother and nurse, of capital, that capital grew and 
assumed. many different forms, by which, in its turn, it 
determined the conditions under which human labor- 
power should be applied. We have seen that the existence, 
perpetuation and maintenance of capital have always 
rested, and still rest, upon the unpaid products of labor 
and the increasing productivity of labor. 

The productive power of human labor has been, and 
still is, the impelling principle of social progress. Only by 
a distortion of historical facts and a disdain of palpable 
truths has the fiction of the benevolent role of capital 
arisen and maintained itself. But in proportion as capital 
approaches once more the critical stage, where produc- 
tion reaches the end of its possibilities under the prevail- 
ing system of class rule, -which precludes the possibility 
of any rescue from the rising tide of the proletarian revo- 



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CLOSING REMARKS 251 

lution by interference from outside, the actual state of 
affairs claims recognition, and human labor once again, 
and for the last time, asserts its historical rights against 
a ruling class. 

For thousands of years the ruling classes, the crea- 
tures of uncontrolled social laws, have ridden upon the 
backs of the producing classes. For thousands of years 
the rulers have driven the laboring classes and added to 
the natural spurs of human effort, to hunger and love, the 
lash and the whip. 

We do not curse them for their cruelty, their greed, 
their disregard of human feeling, their prodigality of hu- 
man lives. We know that the primal and unbridled 
forces of history molded them into masters with over- 
bearing natures, and that the struggle for survival with 
its inexorable power lashed them forward as it did our 
class. 

We know that the ruling classes have dpne much to 
increase the productivity of human labor. We realize 
that science and art have received much encouragement, 
if not inspiration, from them. But we do not close our 
eyes to the fact that the ruling classes produced all the 
progressive effects of their respective periods because 
they themselves had to have them. They wanted them, 
not for the purpose of benefiting "humanity," but of 
maintaining and enhancing their own position, and what- 
ever they wanted they had to want- because the historical 
forces behind them compelled them to want just those 
things. 

If we do not blame- them for their faults, neither do 
we praise them for their virtues. Natural and social 
conditions made them and compelled them to be what 
they were and are. 



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263 MARXIAN ECONOMICS 

But we, too, are the products of natural and social 
development We, too, act and think as we must. And 
we feel as we must. • 

And we cannot feel, or think, or act in any other way 
than a revolutionary one. We see that the clash between 
the deeds and words of our masters is at bottom but the 
clash between their social interests and ours. Behind 
their inconsistencies lurk the natural and social forces, 
which they have tried in vain to fathom and control, but 
which we shall fathom and control by the very develop- 
ment which take3 the ground from under the feet of the 
masters. 

Calmly and coolly we proclaim the doom of the capi- 
talist system and of the capitalist class. Firmly and 
unflinchingly we herald the coming of the co-operative 
commonwealth of economically equal workers. Our voice 
is the conscious voice of history itself. 

Let the masters take heed and prepare I Let them 
stop the wheels of history if they can I 



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