Theories of crisis, from Marx to the Communist International
In the period leading up to the First World War, then during the war itself, revolutionary Marxists were obliged not only to denounce the imperialist character of the war, but also to show that war was inevitable as long as capitalism remained the dominant mode of production in the world.
Against the pacifists who pined for a capitalism without wars, revolutionaries insisted that it was impossible to prevent imperialist wars without at the same time destroying capitalism itself. Rosa Luxemburg’s The Accumulation of Capital and Junius Pamphlet, as well as Lenin’s Imperialism, The Highest Stage of Capitalism, were written with essentially this objective. The methods of analysis in these works, as well as some of their conclusions, are different, but the underlying concern in them is the same: to hasten the revolutionary action of the international proletariat against capitalist barbarism.
Today, when a new open crisis of capitalism is once again conjuring up the threat of a world imperialist war, while at the same time creating the conditions for a new revolutionary offensive against capital on a world scale, revolutionaries must continue this work of analyzing capitalist society in the same spirit of militant intervention.
Whatever the university professors of marxology might think, Marxism isn’t a branch of political economy: it is the revolutionary critique of political economy. For revolutionaries, the analysis of the present crisis of capitalism can never be an academic speculation floating in the ethereal regions of economic analysis. It is simply a moment in an overall intervention whose aim is to prepare the weapons of the proletarian revolution. It’s not a pure interpretation of the capitalist world, but a weapon for destroying it.
Faced with the growing economic convulsions that capitalism is now going through, revolutionaries must underline that the perspective of revolutionary Marxism has been verified. They must do this by showing:
-- that the present crisis isn’t just a passing problem for capitalism, but a new mortal convulsion after more than half-a-century of decadence;
-- that, as in 1914 and 1939, decadent capitalism’s only ‘solution’ to the crisis is a new world war which, this time, puts the very existence of humanity at risk;
-- that the only way humanity can escape from this apocalyptic impasse is by abandoning and destroying all the relations of production which make up capitalism, and installing a society in which the factors which have led humanity to this situation will have disappeared: a society without commodities or exchange, without profit or wage labor, without nations or the state: a communist society;
-- that the only force capable of taking the initiative in such a transformation is the principal producer class itself: the world working class.
In order to be able to carry out this task, revolutionaries must be able to express the main foundations of the Marxist analysis of the internal contradictions of capitalism in terms that are clear and broadly verifiable through the reality of the crisis which the whole of society is living through, in particular the working class. To defend the idea of the necessity and possibility of destroying capitalism, without being capable of explaining clearly and simply the origins of the crisis of the system, is to condemn ourselves to appearing like university professors of economics, or utopian illuminati.1 And this necessity is all the more urgent today when everything indicates that, in contrast to the revolutionary movements of 1871, 1905, or 1917-23, the next revolutionary proletarian wave will break out not in the wake of a war but in response to an economic crisis. More and more, the debate on the causes of the crisis of capitalism will take place not just in the theoretical reviews of a few tiny revolutionary groups, but in assemblies of unemployed workers, in factory assemblies, in the very heart of a working class struggling against the growing attacks of a capitalist system that has reached the end of its tether. The task of communists in this domain is to know how to prepare themselves to be effective factors of clarification within this process.
Paradoxically, the question of the foundations of the crisis of capitalism the corner-stone of scientific socialism has been the object of numerous disagreements amongst Marxists, especially since the debate on imperialism.
All communist tendencies generally share the fundamental notion that the installation of a communist society becomes a necessity and a possibility on the historical agenda at the point where capitalist relations of production cease to be indispensable factors in the development of the productive forces, and transform themselves into fetters; or, to use the formulation in the Communist Manifesto, when “the conditions of bourgeois society are too narrow to comprise the wealth created by them.”
The disagreements arise when it comes to making more precise how this general contradiction becomes concrete, when it comes to defining the characteristics and timing of the economic phenomenon which transforms these conditions -- wage labor, profit, the nation, etc -- into definite fetters on the development of the productive forces, precipitating capitalism into crisis, bankruptcy, and decline.
These disagreements still exist today; very often they are the same divergences which divided revolutionaries at the beginning of the century.2 However, the extraordinary weakening of the revolutionary forces under the blows of fifty years of counter-revolution, the almost total organic break with the organizations of the past, as well as the extreme isolation communist groups have had to put up with for decades, all this has reduced the debate between revolutionaries on this question to virtual non-existence.
With the resurgence of proletarian struggle and the emergence of new revolutionary groups over the last ten years, there has been a certain revival in the discussion, spurred on by the need to understand the growing economic difficulties world capitalism is going through. But very often the debate has got going on a basis which makes it difficult for it to result in an enrichment of Marxist analysis.
It’s quite natural that the debate has re-emerged around the discussions left in suspense by the Marxist theoreticians at the beginning of the century and subsequently taken up by, among others groups like Bilan, Internationalisme, or the review Living Marxism. At the centre of the debate is the confrontation between the analysis of Rosa Luxemburg and those who, rejecting this analysis, defend the idea that it is the tendential fall in the rate of profit which provides the fundamental explanation of the contradictions of capitalism. But, unfortunately, up till now this debate has had the unfortunate tendency to get bogged down in an exegesis of the writings of Marx, one side trying to show that the theses of Rosa Luxemburg are “totally alien to Marxism” or at least a very poor interpretation of the works of the founder of scientific socialism, the other side attempting to show the Marxist continuity in the theses of The Accumulation of Capital.
Important as it is to define any ‘Marxist’ analysis in relation to Marx’s work, the debate will be condemned to a total impasse if it restricts itself to this preoccupation alone. It’s only in the confrontation with the reality that it claims to explain that a theory can be confirmed or refuted. Only in the crucible of the criticism of real events can a system of thought develop positively and find the means to become a material force.
If it is to develop with a constructive perspective, the present debate on the foundations of the crisis of capitalism must therefore
-- learn to look at the Marxist analyses of the past, including those of Marx himself, not as sacred books which leave us with the simple task of making an exegesis in order to explain all the economic phenomena of present-day capitalism, but as theoretical efforts which must, if they are to be taken up and understood, be placed in the context of the historic conditions under which they were elaborated;
-- make a concrete analysis of the concrete reality of capitalism’s evolution, confronting the different theories that claim adherence to Marxism with this reality.
It’s then and only then that we will be able to begin to really determine whether it’s Luxemburg or Grossmann-Mattick, to take an example, who have provided us with the most valuable instruments for developing the proletariat’s understanding of the objective conditions for its historic action. It’s in this way that we’ll really be able to contribute to the proletariat’s attempt to widen its consciousness of the general conditions of its revolutionary mission.
It therefore seems essential to us to:
1) place the main works of previous Marxists in their historic context, to get a better appreciation of their relevance to the present period;
2) confront these results with the only thing that can allow us to go forward in the debate, ie. the reality of capitalism both its evolution since the First World War and in its present crisis.
It was at the heart of the economic crisis of 1847-8, and with a view to intervening in the workers’ struggles engendered by that crisis, that Marx developed the main lines of his explanation of the crisis of capitalism, first at the Bruxelles conferences of the Association of German Workers (Wage Labor and Capital) and then in the Communist Manifesto. In a few simple but precise formulae, Marx uncovered the main specificity of the capitalist economic crisis compared to the economic crises of previous societies: in contrast to what happened in pre-capitalist societies where production was immediately geared towards consumption, under capitalism, where the capitalists’ objective is the sale of commodities and the accumulation of capital, and consumption is simply a by-product, the economic crisis doesn’t take the form of a shortage of goods, but of overproduction. The goods needed for subsistence, or the material conditions to produce them exist, but the mass of producers, who only receive from their masters the cost of their labor power, are deprived of the means and the money to buy the goods. What’s more, at the same time as the crisis hurls the producers into poverty and unemployment, the capitalists destroy the means of production that would allow this poverty to be palliated.
At the same time, Marx pointed to the underlying reason for these crises: living in a state of permanent competition amongst themselves, the capitalists can only live by developing their capital, and they can’t develop their capital if they don’t have new outlets at their disposal. This is why the bourgeoisie was compelled to invade the whole surface of the globe in search of new markets. But precisely by continuing this expansion, which was the only way it could overcome its crises, capitalism was narrowing the world market and thus creating the conditions for new, more powerful crises.
To sum up: by the very nature of wage labor and capitalist profit, capital cannot provide the wage-earners with the means of purchasing everything they produce. The buyers of those products that couldn’t be sold to the class it exploited were found by the bourgeoisie in sectors and countries that were not dominated by capitalism. But by selling its production to these sectors, it was forcing them to adopt the bourgeois mode of production, which would eliminate them as outlets and create in turn the need for new markets. As Marx wrote in the 1848 Manifesto:
“For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeoisie and of its rule. It is enough to mention the commercial crises that by their periodical return put on its trial, each time more threateningly, the existence of the entire bourgeois society. In these crises a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity -- the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, to much industry, too much commerce....”
“And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.” (our emphasis)
What did Marx and Engels mean by “the conquest of new markets”? The Manifesto answers as follows:
“The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere.”
“The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, ie, to become bourgeois themselves. In one word, it creates a world after its own image....”
“Just as it has made the country dependent on the towns, so it has made barbarian and semi-barbarian countries dependent on the civilized ones, nations of peasants on nations of bourgeois, the East on the West.”
How did this conquest of the world constitute the means whereby the bourgeoisie could overcome its crises while at the same time condemning it to “more extensive and more destructive crises”? In Wage Labor and Capital Marx replies: “as the mass of production grows, and consequently the need for extended markets, the world market becomes more and more contracted, fewer and fewer new markets remain available for exploitation, since every preceding crisis has subjected to world trade a market hitherto unconquered or only superficially exploited” (Our emphasis).
These formulations certainly represent a masterful summary of the Marxist theory of crises. It wasn’t by accident that Marx and Engels formulated them in the documents that they edited with the aim of presenting to the working class the quintessence of a communist analysis. Neither Marx, nor Engels subsequently put these formulations into question -- on the contrary. However, in Marx’s subsequent economic works, we don’t find a systematic and completed expose of these theses. There are two main reasons for this:
-- the first is connected to the way Marx wanted to organize his study of the economy. He always envisaged that the part devoted to the world market and world crises would be dealt with last. As we know, he died before he could complete his work on the economy;
-- the second reason, which partially explains the first, is connected to the historical conditions of the period Marx was living through.
The 19th century was the period in which the movement towards the constitution of the world market reached its zenith. The bourgeoisie was invading “the whole surface of the globe” and creating “a world after its own image” as Marx said. But the movement towards the constitution of the world market was not really completed. The movement through which capital “subjected to world trade a market hitherto unconquered or only superficially exploited”, the movement which meant that “the world market becomes more and more contracted”, the historic movement which meant that the bourgeoisie was “paving the way for more extensive and destructive crises, and ... diminishing the means whereby crises are prevented”, this movement had not yet reached the critical point where the world market was so narrow that the bourgeoisie no longer had any means left to prevent and overcome its crises. The contraction of the world market, the contraction of outlets, had not yet reached the level where the crisis of capitalism would become a permanent phenomenon.
The crises of the 19th century which Marx described were still crises of growth, crises which capitalism came out of strengthened. The commercial crises which, in Marx’s words, “by their periodical return put on its trial, each time more threateningly, the existence of the entire bourgeois society”, “were not yet capitalism’s death rattles” -- as Marx himself recognized a few years later in the preface to The Class Struggles in France -- but crises of development. In the 19th century, as Marx said, the bourgeoisie got over these crises “by the conquest of new markets and by the more thorough exploitation of the old ones”. This was possible because the world market was still being constituted. After each crisis, there were still new outlets to be conquered by the capitalist countries.
For example, between 1860 and 1900, Britain colonized another 7 million square miles of territory, inhabited by 164 million people (this tripled the surface and doubled the population of its Empire). France expanded its empire by 3.5 million square miles and 53 million inhabitants (this multiplied the extent of its colonies 18 times and of its population 16 times).
Marx was witnessing the evolution of the contradictions of capitalism and he defined the fundamental contradiction which on the one hand impulse this movement and on the other hand condemned it to an impasse. At the zenith of capitalism’s historical power, Marx diagnosed the sickness that would condemn it to death. But this sickness had not yet become mortal. And thus Marx was not able to study all aspects of it.
Just as, when you are measuring the resistance of a given material, you have to push it to breaking point; just as, when you are trying to understand all the effects of a nutritious substance on a living being, you have to deprive the creature of the substance to the point where the consequences of its absence can be seen most clearly, so we had to wait until the world market had contracted to the point of definitively blocking the expansion of capitalism before the fundamental contradictions of the system could be analyzed in all their complexity.
We had to wait until the beginning of the 20th century and the exacerbation of the antagonisms between capitalist countries over the conquest of new markets, up to the point where a world war was on the agenda, before the analysis of the problem could reach a new and higher level of understanding. This is what was done in the debates on imperialism.
All the same, Marx didn’t stop analyzing the internal contradictions of capitalism after the publication of the Manifesto. In Capital, we can find a number of detailed studies of the conditions of capitalist crises. But in nearly all his studies, he explicitly abstracted the world market, referring the reader to a later study that he proposed to make, Rather than drawing a total picture of the capitalist world, he analyzed the internal mechanisms of “the process of capital as a whole,” making an abstraction of all those sectors of the world market that he had called “new outlets” in the Manifesto.
This was particularly the case with the famous tendential fall in the rate of profit. This law, which he discovered, pointed to the mechanisms through which, in the absence of a certain number of counter-tendencies, the rise in the organic composition of capital (ie the growth of the productivity of labor through the introduction into the process of production of a growing proportion of dead labor -- machines in particular -- in relation to living labor), would lead to a fall in the capitalist’s rate of profit. It described the economic mechanisms which expressed, at the level of capital’s rate of profit, the contradiction between, on the one hand, the fact that capitalist profit can only be drawn from the exploitation of living labor (the capitalist can only rob the worker, not machines), and, on the other hand, the fact that the proportion of living labor contained in each capitalist commodity is continually diminishing in favor of the proportion of dead labor. In a world without workers where only machines produced, capitalist profit wouldn’t exist. The law of the tendential fall in the rate of profit describes how, by mechanizing and automating production more and more, the capitalist was forced to resort to a series of measures to prevent the tendency of the rate of profit to fall from becoming an effective fall.
Marx made a study of the measures which were aimed at counter-acting this fall, and which made it a tendential law, not an absolute one. Now, the main factors counter-acting this law were themselves dependent on capital’s capacity to extend the scale of its production, and thus on its capacity to procure new outlets.
Whether we are talking about the factors which compensate the fall in the rate of profit by increasing the mass of profit, or about factors which prevent this fall by intensifying the exploitation of the worker (raising the rate of surplus value) thanks to an elevation in social productivity (falling real wages, growing extraction of relative surplus value), these two kind of factors can only be effective if the capitalist is continuously discovering new outlets allowing him to increase the scale of his production and thus
1) augment the mass of profit
2) increase the extraction of relative surplus value.
This is why Marx insisted so much on the tendential and not the absolute character of this law. This is also why, in his expose on this law and the factors which counteracted it, he, on several occasions, refers the reader to a later study.
The law of the tendential fall in the rate of profit describes, in reality, the race between two parallel movements in the life of capitalism: on the one hand, the movement towards the growing mechanization and automation of the productive process, and, on the other hand, capitalism’s movement towards an ever-greater exploitation of the proletariat.3 If the mechanization of capitalist production develops more rapidly than capital’s capacity to intensify the exploitation of the proletariat, the rate of profit falls. If, on the other hand, the intensification of exploitation develops faster than the rhythm of the mechanization of production, the rate of profit tends to increase.
In describing this contradictory race, the law of the falling rate of profit highlights a real phenomenon. But it doesn’t in itself describe all the elements in this phenomenon, its causes and its limits. Take such questions as: what is it that determines the pace of each of these movements? What is it that engenders and maintains the race to modernize the process of production? What is it that permanently provokes the movement towards the intensification of exploitation? The law of the tendential fall in the rate of profit does not answer these questions and, what’s more, doesn’t pretend to. The response can be found in the basic historical specificity of capitalism: the fact that it is a universal system of commodity production.
Capitalism isn’t the first mode of production in history to have commodity exchange and money. In the slave mode of production as in feudalism, commodity exchange existed, but it only affected certain limited aspects of social production. What is specific to the capitalist system is its tendency to universalize exchange, not only across the whole planet, but also and above all across all the domains of social production, particularly labor power. Neither the slaves nor the serfs sold their labor power. The part of social production which went to them depended, on the one hand, on the amount of production carried out, and, on the other hand, on the prevailing rules regulating the distribution of the products.
Under capitalism the worker sells his labor power. The amount of social production that goes to him is determined by the law of wages, ie by the value of his labor power, which capitalism has transformed into a commodity. His ‘share’ is simply the equivalent of the cost of his labor power to the capitalist, and this only on condition that he is not unemployed (something that never happened to slaves or serfs). This is why capitalism can find itself in a situation unknown in history before: overproduction, ie a situation where the exploiters find themselves stuck with ‘too many’ products, ‘too much’ wealth, wealth that they are unable to reintroduce into the process of production.
This problem doesn’t pose itself to capital as long as it has at its disposal markets other than those made up by its own wage-earners. But this very fact means that the life of each capitalist depends on a permanent race for markets. Competition between capitalist, this essential characteristic of the life of capital, isn’t competition for honor or high ideals, but for markets. A capitalist without markets is a dead capitalist. Even a capitalist who managed to work the biological miracle of getting his workers to produce for nothing (thus realizing an infinitely huge rate of exploitation and so an enormously high rate of profit) would go bankrupt the moment he was unable to sell the commodities made by those he’s exploiting.
That’s why the life of capital is constantly faced with the choice: conquer markets or die.
This is the capitalist competition which no capital can escape from. It’s this competition for markets (those which exist already as well as those still to be conquered) which pitilessly compels each capitalist to try to produce at lower and lower costs. The low price of its commodities isn’t just the “heavy artillery” With which capital “batters down all the Chinese walls” that encircled the pre-capitalist sectors; it’s also the essential economic weapon in the competition between capitalist.
It’s this struggle to lower the price of their commodities in order to maintain or conquer markets which constitutes the motor-force of the two movements whose pace determines the rate of profit. The two principal means capital has at its disposal to lower the costs of its production are:
1) a greater mechanization of the productive apparatus
2) the diminution of labor costs, ie an intensification of exploitation.
A capitalist doesn’t modernize his factories because he has modernizing ideals, but because he’s forced to, on pain of death, by the competition for markets. It’s the same with the obligation to intensify the exploitation of the working class.
Thus, whether we look at the falling rate of profit from the point of view of the forces that provoke it, or whether we look at it from the point of view of the factors which moderate it and counter-act it, we are still dealing with a phenomenon which is dependent on capital’s struggle for new markets.
The economic contradiction expressed by this law, like all the other economic contradictions of the system, always boils down to the fundamental contradiction between, on the one hand, the necessity for capital to enlarge production more and more, and, on the other hand, the fact that it can never create within itself the outlets it needs for this expansion by giving its wage-earners the necessary purchasing power.
This is why, after describing the law of the falling rate of profit, Marx wrote, two sections further on, in the same 3rd volume of Capital:
“The workers’ power of consumption is limited partly by the laws of wages, partly by the fact that they are only employed as long as their labor is profitable to the capitalist class. The ultimate reason for all real crises is always the poverty and restricted consumption of the masses faced with the tendency of the capitalist economy to develop the productive forces as if they had no limit than society’s absolute power of consumption.” (Capital III, section 5, our emphasis)
As we have already said, and for the reasons which were already given (the death of Marx before he could complete his studies of the economy, the limits of the historical period he lived in), Marx wasn’t able to develop and systematize “the ultimate reason for all real crises”. But from the Manifesto to the 3rd Volume of Capital, his approach remained the same.
An under-consumptionist theory?
In order to make more precise what Marx actually said -- and at the risk of once again making concessions to exegitical discussions -- we should respond to one of the most recent arguments developed by one of the defenders of the idea that the ‘falling rate of profit’ was Marx’s only theory of crisis. According to Paul Mattick, in his book Crise et Theories des crise, Marx’s references to the problems of the market provoked by the inevitably restricted consumption of the workers were either “slips of the pen”, or concessions to under-consumptionist theories, especially Sismondi’s.
Marx criticized Sismondi’s under-consumptionist theory. But what Marx rejected in this theory wasn’t the idea that capitalism faced problems of the market because, even while it was enlarging its field of activity, it was permanently restricting the buying-power and consumption of the workers. What Marx rejected in the under-consumptionist theories was:
1) the fact that they envisaged the possibility of avoiding the ‘under-consumption’ of the workers within the framework of capitalism, through wage increases. Marx showed that, in reality, exactly the opposite was the case: the more the capitalists were faced with overproduction and a lack of markets, the more they reduced workers’ wages. For capitalism to be able to resolve its crises by raising wages, the competition which continuously obliged it to reduce its wage costs would have to disappear. In short, capitalism would have to stop being capitalism;
2) Sismondi was in fact an expression of the 19th century petty bourgeoisie, condemned to proletarianization by capitalism. What lay behind his theory was the demand for a capitalism that wouldn’t destroy the petty bourgeoisie. Sismondi’s under-consumptionist theory didn’t try to demonstrate the necessity for humanity to free itself from commodity relations, and thus wage labor, in order to permit the flowering of the productive forces in a communist society, he advocated a return to the past by putting limits on the capitalist growth that was sweeping aside all the pre-capitalist sectors of the petty bourgeoisie. Sismondi said that if capitalism could control its blind thirst for growth, there would be no problem of constantly having to find new markets... and the agricultural, artisan, and commercial petty bourgeoisie would be able to survive. It was this reactionary, utopian vision that Marx rejected, by showing that it ended up denying reality and dreaming of a capitalism that could not exist.
Summarizing Marx’s basic criticism of the underconsumptionists, one could say that he didn’t reject the economic problem they were posing, but 1) the way they posed it 2) the answers they came up with.
Marx’s theory of crisis places at the centre of its analysis the problem of capitalism’s inability to create all the outlets needed for its expansion, and thus the problem of the restricted consumption of the workers. But this doesn’t make it an ‘under-consumptionist’ theory.
From Marx to the debates on imperialism
The last quarter of the 19th century was without doubt the historical apogee of capitalism. Capitalist colonialism dominated practically the whole planet. Capitalism developed at an unprecedented rhythm, both in its outward extension and its internal production. The trade union and parliamentary struggles of the workers’ movement allowed it to wrest real, lasting reforms from capitalism. In the most developed countries the proletariat’s living conditions were substantially improved, while at the same time the formidable expansion of world capitalism seemed to have relegated the great economic crises to mere memories of the past.
This was when the workers’ movement saw the development of ‘revisionism’, ie tendencies which put into question Marx’s idea that capitalism was condemned to go through mortal crises, and which put forward the possibility of peacefully and gradually advancing towards socialism through progressive social reforms. In Bernstein’s words, “the movement is everything, the goal is nothing.”
In 1901, one of the principal ‘Marxist’ revisionists, the Russian professor Tugan-Baranowski published a book supporting the idea that the crises of capitalism derived not from a lack of salvable consumption in relation to capitalism’s capacity to extend its production, but simply from disproportionality between different sectors of the economy, a disproportionality that could be avoided through suitable government intervention. This was in fact a revival of one of the fundamental theories of bourgeois economy as formulated by JB Say, according to which capitalism could never have a real markets problem.
This thesis gave rise to a debate which led Social Democracy to return to the question of the cause of crises. It fell to Kautsky, who was then still the most widely recognized spokesman for Marx’s theories in the workers’ movement, to reply to Tugan-Baranowski. We cite here an extract from Kautsky’s reply, which shows that in this period there was still no doubt in the workers’ movement that the cause of capitalist crises resided in its inability to create the outlets needed for its expansion:
“Although capitalists increase their wealth and the number of exploited workers grows, they cannot themselves form a sufficient market for capitalist-produced commodities, as accumulation of capital and productivity grows even faster. They must find a market in those strata and nations which is still non-capitalist. They find this market, and expand it, but still not fast enough, since this additional market hardly has the flexibility and ability to expand of the capitalist process of production. Once capitalist production has developed large-scale industry, as was already the case in England in the nineteenth century, it has the possibility of expanding by such leaps and bounds that it soon overtakes any expansion of the market. Thus, any prosperity which results from a substantial expansion in the market is doomed from the beginning to a short life, and will necessarily end in a crisis.
This, in short, is the theory of crises which, as far as we can see, is generally accepted by ‘orthodox’ Marxists and which was set up by Marx.” (Neue Zeit, 1902, Quoted by Luxemburg in the Anti-critique)
Kautsky underlined the political significance of the debate when, in the same article, he wrote:
“It is no mere accident that revisionism attacks Marx’s theory of crises with particular vigor.... (revisionism wants to) change social democracy from a party of proletarian class struggle into a democratic party on the left wing of a democratic party of social reform.”
However, although this theory summarized “in short” by Kautsky was “generally accepted” in the Marxist workers’ movement, no one has tried to develop it in a more systematic way, as Marx had intended.
This is what Rosa Luxemburg tried to do during the debates on imperialism at the time of the outbreak of World War One.
The debates on imperialism
The beginning of the 20th century saw the completion of the contradictory tendencies Marx had described. Capital had effectively extended its rule across the whole world. There was hardly a square kilometer on the planet which wasn’t in the hands of one or other of the imperialist metropoles. The process of constituting the world market, ie the integration of all the economies of the world into the same circuit of production and exchange, had reached such a point that the struggle over the last non-capitalist territories had become a life or death question for all countries.
New powers like Germany, Japan, and the USA, were now able to compete with the all-powerful Britain on the industrial level, but at the same time they had little share in the colonial division of the world. In the four corners of the planet, the antagonisms, between all the powers got sharper. Between 1905 and 1913, five times these antagonisms led to incidents which seemed to make generalized war the only way that capitalism could divide up the world market. In the end, the outbreak of World War One, the greatest holocaust humanity had ever been through, showed quite clearly that capitalism couldn’t go on living in the old way. The capitalist nations could no longer go on developing in parallel to each other; letting free exchange and the initiative of explorers determine the extent of their domination. The world had become too narrow for too many capitalist appetites. Free exchange had to give way to war and explorers to cannons. One capitalist nation could only develop at the expense of one or several others. There was no longer any real possibility of enlarging the world market. Now, it could only be re-divided in different ways. Capitalism could therefore only live by wars and by preparing wars for these divisions and re-divisions.
“For the first time, the world is completely divided up, so that in the future only re-division is possible, ie territories can only pass from one ‘owner’ to another, instead of passing as ownerless territories to an ‘owner’” (Lenin -- Imperialism, The Highest Stage of Capitalism)
Without destroying world capitalism, humanity would be condemned to live in a semi-permanent state of war. “Socialism or barbarism” became the watchword of all revolutionaries.
The Third International was constituted in 1919 on the basis of a recognition and understanding of this change, this qualitative historical break. Thus, the first point in the platform of the Communist International declared:
“The contradictions of the capitalist system, which lay concealed within its womb, broke out with colossal force in a gigantic explosion, in the great imperialist world war.
…… A new epoch is born! The epoch of the dissolution of capitalism, of its inner disintegration. The epoch of the communist revolution of the proletariat”
With these formulations, the CI reaffirmed its break with the reformist and patriotic tendencies which had developed within the 2nd International and which had just led the proletariat into the inter-imperialist butchery, using their arguments in favor of the possibility of a continuous development of the productive forces, which would allow a peaceful passage from capitalism to socialism.
The CI clearly affirmed:
1) that the world war wasn’t a choice that capitalism could have avoided but an inevitable consequence of capitalism, the violent revelation of its internal contradictions, “which lay concealed in its womb”;
2) that this war wasn’t like previous capitalist wars. It marked the end of an era and the beginning of a new period, “the epoch of the dissolution of capitalism, of its inner disintegration”;
3) that the entry of capitalism in to this epoch of decline corresponded historically to the proletarian revolution coming onto the agenda, to the beginning of “the epoch of the communist revolution of the proletariat”.
Thus the whole Communist International recognized that the First World War was a manifestation of the fact that the internal contradictions of capitalism had reached a point of historical no-return.
However, while all revolutionary Marxists shared these conclusions, it was different when it came to analyzing the precise nature of these contradictions and of their development.
Within what had been the left of the 2nd International, there had been two main theories of imperialism and the economic contradictions in capitalism which gave rise to it. One was Rosa Luxemburg’s, as developed in The Accumulation of Capital (1912) then in The Crisis of German Social Democracy written in prison during the war; the other was that of Lenin in Imperialism, the Highest Stage of Capitalism (1916).
For these two theories, the analysis of imperialism and the analysis of the fundamental contradictions of capitalism were simply two aspects of the same question. Their works had been aimed at the patriotic Social Democrats who defended a superficial pacifism via the illusion that you could prevent imperialist war and imperialism itself through legal parliamentary struggle that could influence government policy. For Rosa Luxemburg as for Lenin, it was impossible to prevent war without destroying capitalism, because imperialism was simply the consequence of the internal contradictions of capitalism. To answer the question “what is imperialism” therefore implied answering this other question: ‘what is the fundamental contradiction that capitalism is trying to palliate through its imperialist policies?’
Rosa Luxemburg’s response
Rosa Luxemburg’s response saw itself -- correctly, we think -- continuing Marx’s work on the development of capitalism, by looking at it not in the abstract, simplified form of a pure system, operating in a world made up entirely of capitalists and workers, but in its concrete historic form, ie as the integral part of the world market. Her response is a systematic development of Marx’s analysis of crises, as he began to elaborate in the Communist Manifesto and Capital. In The Accumulation of Capital she undertook an analysis of the growth of capitalism in relationship with the rest of the world, the non-capitalist part. Using a thoroughly adept Marxist method, she examined the main historical stages in this growth, and the different theoretical approaches to the problem.
Her response to the question of imperialism was simply an actualization of the analysis in the Communist Manifesto, sixty years on. Capitalism could not create, within itself the outlets needed for its expansion. The workers, the capitalists and their direct agents could only buy a part of the total production. That part of production which they didn’t consume, ie that part of the profit which had to be reinvested in production, capital had to sell to someone outside of the agencies which were subjected to its direct domination, and which capital paid out of its own funds. These buyers could only be found in sectors that were still producing in a pre-capitalist manner.
Capital developed by selling its surplus products first to the feudal lords, then to the backward agricultural and artisan sectors, and finally to the ‘barbaric’ pre-capitalist nations which it colonized.
In so doing, capital eliminated the feudal lords, and transformed the artisans and peasants into proletarians. In the pre-capitalist nations it proletarianized part of the population and reduced the rest to poverty, destroying the old subsistence economies with the low price of its commodities.
For Rosa Luxemburg, imperialism was essentially the form of life that capitalism took on when the extra-capitalist markets were becoming too narrow for the expansion-requirements of a growing number of increasingly developed powers. The latter were thus forced into permanent and more and more violent confrontations to find a place in the division of the world market.
“Modern imperialism … is only the last chapter of its (capital’s) historical process of expansion, it is the period of universally sharpened world competition between the capitalist states for the last remaining non-capitalist areas on earth”. (Luxemburg, The Anti-critique)
The fundamental contradiction of capitalism, ie that which in the last instance determined the lines of action and the life of capitalism, was the contradiction between, on the one hand, the permanent need for the expansion of each national capital under the pressure of competition, and, on the other hand, the fact that by its very development, by generalizing wage labor, capitalism was restricting the outlets that were indispensible for this expansion.
“... by this process capital prepares its own destruction in two ways. As it approaches the point where humanity only consists of capitalists and proletarians, further accumulation will become impossible. At the same time, the absolute and undivided rule of capital aggravates class struggle throughout the world and the international economic and political anarchy to such an extent that, long before the last consequences of economic development, it must lead to the rebellion of the international proletariat against the existence of the rule of capital.”
Luxemburg points out that the final point of this theoretical contradiction will never be reached, “because capital accumulation is not just an economic but also a political process” (Anti-critique)
“Imperialism is as much a historical method for prolonging capital’s existence as it is the surest way of setting an objective limit to its existence as fast as possible. This is not to say that the final point need actually be attained. The very tendency of capitalist development towards this end is expressed in forms which make the concluding phase of capitalism a period of catastrophes.” (Accumulation of Capital)
The exacerbation of inter-imperialist antagonisms over the conquest of colonies at the end of the 19th and beginning of the 20th centuries obliged Luxemburg, more than Marx, to analyze the importance of the non-capitalist sectors in the growth of capitalism. The historical gap and the specificities of the period which separated her from Marx were at the basis of her conviction of the need to pursue the master’s analysis.
However, in developing her analysis, Luxemburg was compelled to make a critique of Marx’s work on enlarged reproduction (particularly the mathematical schemas) in the IInd Volume of Capital. This critique consisted above all in showing that this work was incomplete, despite the tendency to present it as definitive and final. At the same time she tried to show that the theoretical postulate upon which they were based -- studying the conditions for the enlarged reproduction of capital by making an abstraction of the surrounding non-capitalist milieu, ie considering the world as a purely capitalist world -- does not allow us to understand the totality of the problem.
The publication of Rosa Luxemburg’s work on the eve of the world war provoked is extremely violent and energetic reaction inside the official apparatus of German Social Democracy, generally hiding behind the pretext of wanting to ‘safeguard’ Marx’s work. Rosa, they said, had invented a problem where none existed; the problem of the market was a false problem; Marx had ‘demonstrated’ this with his famous schemas of enlarged reproduction etc. And, behind all these ‘official’ critiques, lay the basic thesis of the future patriots: imperialism isn’t inevitable under capitalism.
Lenin’s analysis in Imperialism, The Highest Stage of Capitalism, written in 1916, doesn’t refer to Luxemburg’s work and only deals with the question of the markets in passing. In order to show the inevitable character of imperialism in “decaying” capitalism, Lenin emphasized the phenomenon of the accelerated concentration of capital in the decades leading up to the war. Here his analysis took up Hilferding’s thesis in Finance Capital (1910), according to which this phenomenon of concentration was the essential element in the evolution of capitalism in this period. As Lenin wrote:
“If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism.”
Lenin defined five fundamental characteristics of imperialism:
“And so, without forgetting the conditional and relative value of all definitions in general, which can never embrace all the concatenations of a phenomenon in its complete development, we must give a definition of imperialism that will include the following five of its basic features: 1) the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; 2) the merging of bank capital with industrial capital, and the creation, on the basis of this “finance capital”, of a financial oligarchy; 3) the export of capital as distinguished from the export of commodities acquires exceptional importance; 4) the formation of international monopolist capitalist combines which share the world among themselves, and 5) the territorial division of the whole world among the biggest capitalist powers is completed.”
Of the five “basic features”, three relate to the growing concentration of capital at national and international level. For Lenin, the fundamental contradiction of capitalism, the one that led to the stage of imperialism and “decay”, was the contradiction between its tendency towards “monopolism”, which made capitalist production become more and more social, and the general conditions of capitalism (private property, commodity production, competition) which contradicted this tendency.
“Capitalism in its imperialist stage leads right up to the most comprehensive socialization of production; it, so to speak, drags the capitalist, against their will and consciousness, into some sort of a new social order, a transitional one from complete free competition to complete socialization. Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognized free competition remains, but the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable.”
Then, in the chapter on “The Parasitism and Decay of Capitalism”:
“.... the deepest economic foundation of imperialism is monopoly. This is capitalist monopoly, ie monopoly which has grown out of capitalism and exists in the general environment of capitalism, commodity production and competition, in permanent and insoluble contradiction to this general environment.”
This contradiction between the increasingly ‘social’ character which capitalist production acquires as it extends and becomes concentrated, and, on the other hand, the persistence of private capitalist appropriation, is a real contradiction of capitalism, which Marx frequently referred to. But in itself it doesn’t come near providing an explanation for imperialism and the collapse of capitalism.
The tendency towards ‘monopolism’ doesn’t explain why, at a certain degree of development, the capitalist countries were compelled to wage a fight to the death for colonies. On the contrary, it is the necessity to prosecute this increasingly bitter war over the colonies which explains the tendency within each capitalist nation towards the unification and concentration of the whole national capital. The capitalist powers which underwent the most rapid and extensive concentration weren’t those which possessed the biggest empires (Britain, France), but those which had to carve out a place on the world market (Germany, Japan).
By neglecting the problem of the markets, Lenin was led into taking for a cause of imperialism what in reality was a consequence -- like imperialism itself -- of the capitalists’ struggle for new outlets. Similarly he was led to see the export of capital as a fundamental phenomenon of imperialism (“as distinguished from the export of commodities”), whereas in reality the export of capital was simply one of the weapons in the struggle between the powers for markets to place their commodities (Lenin himself recognized this elsewhere in his book: “The export of capital abroad thus becomes a means for encouraging the export of commodities”. Chapter IV)
By taking as his starting point Hilferding’s work on monopolism, it was difficult to come to conclusions that were coherent with his premises. Hilferding was one of the theoreticians of the reformist wing of the 2nd International; behind the disproportionate emphasis which he gave to the phenomenon of the concentration of capital in finance capital, there was the attempt to show that it was possible to reach socialism by peaceful, gradual methods. (According to Hilferding, the growing concentration imposed by monopolism would make it possible to carry out, within capitalism, a series of measures that would progressively lay the foundations of socialism: elimination of competition, elimination of money, elimination of nations... even unto communism). The whole of Hilferding’s theoretical effort was aimed at trying to prove the falsity of the revolutionary road to communism. The whole of Lenin’s effort had the opposite intention. By borrowing from Hilferding the basis for his theory of imperialism, Lenin could only arrive at revolutionary conclusions by subjecting his theory to contradictory contortions.
The position of the Communist International
In its platform, the CI didn’t really take a position on the basics of the debate. However, its interpretation of the evolution of capitalism towards its “inner disintegration” refers explicitly to the monopolism and anarchy of capitalism, whereas the question of the markets is only mentioned as a partial explanation of imperialism:
“Capitalism tried to overcome its own anarchy by organizing production. Instead of numerous competing businessmen, powerful capitalist associations (syndicates, cartels, trusts) were formed; bank capital united with industrial capital; all economic life was dominated by the finance-capitalist oligarchy, who attained sole dominion by organizing on the basis of this power. Monopoly took the place of free competition. The individual capitalist became a trust-capitalist. Insane anarchy was replaced by organization.
But while in each country the anarchy of the capitalist mode of production was superseded by capitalist organization, the contradictions, the competitive struggle, and the anarchy in world economy grew ever sharper. The struggle between the largest organized robber States led with iron necessity to the monstrous imperialist world war. Greed for profits drove world capital to fight for new markets, new investment openings, new raw material sources, the cheap labor power of colonial slaves. The imperialist changed many millions of African, Asiatic Australian, and American proletarians and peasants into beasts of burden, had sooner or later to expose the true anarchist nature of capital in that tremendous conflict. This was the origin of the greatest of all crimes -- the predatory world war.
It would be difficult to draw from these formulations a really clear idea about the question of imperialism and of the fundamental contradictions of capitalism. To the question of the internal contradictions of the system, the CI replied, following Lenin and thus the influence of Hilferding, by pointing to the evolution of the system towards monopoly. And, like Lenin, it immediately affirmed the impossibility of a continuous evolution to the point where nations would be eliminated by successive international concentrations. Concentration at a national level meant that “the contradictions, the competitive struggle, and the anarchy in world economy grew ever sharper,” leaving it as read, as Lenin had done, that this tendency towards concentration was the cause and not the consequence of the exacerbation of “the contradictions, the competitive struggle, and the anarchy” at international level.
As for the imperialist policy of conquests, the CI simply talked about “greed for profits” pushing capital “to fight for new markets, new investment openings, new raw material sources, the cheap labor power of colonial slaves”. All this was correct, at the level of denouncing those ideologies which talked about imperialism as a means for spreading ‘civilization’ but at the economic level it’s just a description which doesn’t help you see in what way imperialism is linked to the fundamental contradiction of capitalism.
Finally, in its explanation for the First World War and the reasons for its outbreak, the CI like Lenin and Rosa referred to the fact that “the imperialist states... divided the entire world amongst themselves”, but they don’t say why this division, once completed, should lead inevitably to war, why this division could not be accompanied by a parallel development of the different powers.
As to the question of the crises of overproduction, the world market, its contraction, etc, which the Manifesto talked about, the CI didn’t say a word.
The Communist International as a whole was unable to come to an agreement on this question. What’s more, the Communist Parties in 1919 had much more urgent and important questions to discuss: the proletariat held power in Russia, the outbreak of the German revolution had been a confirmation of the communists’ view that the world war would provoke an international revolutionary movement. But the immediate defeat of this first revolutionary offensive in Germany posed the question of the real strength of this international movement. In such a situation, the question of knowing the theoretical reasons for the outbreak of the world war took a back seat. After the barbarism of war and the fires of revolution, history had already taken charge of sweeping aside all the theories about the continuous development of well-being under capitalism, and peaceful passage to socialism.
The war, the most violent form of human misery, was there. It had engendered and international revolutionary movement and it was inevitably the questions that directly related to the revolutionary struggle that came into the foreground.
But this isn’t the only reason why the CI didn’t reach an agreement on the foundations of the economic crisis of capitalism. The First World War took the form of a total war, ie a war which, for the first time, demanded the active participation not only of the soldiers at the front, but also the whole civil population that had become incarcerated in a state apparatus that was now the omnipresent organizer of the march to slaughter and of the industrial production of the instruments of death.
The monstrous reality of the war was based on factories ‘operating at full steam’, on the mass expenditure of human lives, in uniform or not; this made unemployment ‘disappear’. The first world holocaust, which cost humanity 24 million lives, hid beneath the roar of factories producing for destruction the fact that capitalism was no longer capable of producing. The under-production of armaments concealed the overproduction of commodities. The sales to the state for war purposes hid the fact that the capitalists had no other way selling. They had to sell to destroy because they could no longer produce to sell.
This was certainly the major reason behind the surprising fact that the platform of the CI doesn’t take a single comma from the Manifesto on the question of the crises of overproduction and the contraction of the world market.
In conclusion, we can say that the necessity to explain imperialism allowed for a development of the analysis elaborated by Marx. But the very conditions of this crisis (revolutionary proletarian movements which pushed economic-theoretical questions into the background; the recent character of the communists’ break with the 2nd International and the weight of the theories of Social Democratic reformists on the analyses of the revolutionaries; finally the fact that the war hid the fundamental specificities of the crisis of capitalism, in particular overproduction) stood in the way of the revolutionaries of the Communist International coming to an agreement about the causes of the crisis.
1 It wasn’t out of academic pretentiousness that the subtitle of Lenin’s Imperialism was ‘A Popular Outline’.
2 On this question, see the articles ‘Marxism and Crisis Theory’ in IR13, ‘Economics Theories and the Struggle for Socialism’ in IR16, ‘On Imperialism’ (Marx, Lenin, Bukharin, Luxemburg) in IR19, ‘Theories of Crisis in the Dutch Left’ in IR21.
3Using Marx’s abbreviations, the rate of profit, re the relationship between the profit obtained and the total capital expenditure, is written as follows where s represents the surplus value, the profit, c the constant capital expended, ie the cost to the capitalist of the machines and raw materials, v the variable capital, ie wage costs. By dividing the numerator and the denominator of this expression by v, the rate of profit become
ie the relationship of the rate of surplus value or rate of exploitation (s/v, or non paid work divided by paid work v) to the organic composition of capital (c/v or the capitalist expenditure on dead labour in proportion to living labour, the expression in value of the technical composition of capital in the process of production).