Crisis theory part 2
To go beyond capitalism: Abolish the wages system
Critique of Bukharin (Part 2)
(On N.Bukharin's critique of the theses of R. Luxemburg)
"To know what communism will be like, we must start by knowing what is wrong with the present society." In the previous article, we showed how, from a marxist viewpoint, one's conception of socialism depends on one's analysis of capitalism's internal contradictions. Behind the criticisms of Rosa Luxemburg's analyses of capitalist contradictions formulated by Bukharin, Bolshevik and ‘theoretician' of the Communist International, there appear the outlines of the theory of the possibility of socialism in one country, and the identification of state capitalism with socialism.
To demonstrate this, we have begun by rejecting some of Bukharin's main objections. We have thus replied to the argument that the basic problem Luxemburg poses - capitalism's inability to create its own outlets -- does not exist. We have recalled how and why crises of overproduction have been and remain an essential and inevitable fact of capitalism, and we have demonstrated the emptiness of the argument that the workers' consumption can constitute a large enough outlet to absorb capitalist overproduction.
In this second part, we aim to reply to one of the arguments most frequently used against Luxemburg. Bukharin expresses it in this way: "Rosa Luxemburg makes her analysis too easy. She singles out one contradiction -- that between the conditions of production of surplus-value and the conditions of its realization, the contradiction between production and consumption under capitalist conditions." (Imperialism and the Accumulation of Capital, Chap. 5).
Is there one contradiction within capitalism that is more decisive than others?
Like any living organism, the capitalist system of production has always been traversed by multiple contradictions, that is to say, mutually exclusive and opposing needs. Its life, its development, its impetuous march through history, overthrowing thousands of years of history in a few centuries and molding a world in its own image, were the product not of an idealist will to domination in itself, but of a permanent struggle to overcome its internal contradictions.
The great virtue of Marx's work was to show how and why these contradictions must one day lead capitalism, like previous societies (ancient slavery, feudalism), to go through a phase of decomposition, opening the way to the installation of new social relations, the arrival of a new society which can only be communism.
Marx shone a light on many of these contradictions. Bukharin, reproaching Rosa Luxemburg for "singling out one contradiction", cites several that Luxemburg neglects, according to him: "The contradiction between branches of production; the contradiction between industry and agriculture limited by land rent; the anarchy of the market and competition; war as a means of competition" (ibid),
Amongst the more important, we should add:
-- the contradiction between on the one hand, the ever more social character of production (technically speaking, the world tends to produce as one factory, each product containing labor from the four corners of the globe), and on the other the divided, limited, private nature of the appropriation of this production;
-- the contradiction in the fact that capital can only extract profit from the exploitation of living labor (the capitalist cannot "exploit" the machine), while at the same time, in the process of production, the share of living labor in relation to dead (machines) tends to fall as techniques progress (a contradiction expressed in the ‘tendency of the falling rate of profit');
-- lastly, and above all, the living contradiction that is exploitation itself -- the ever-sharper antagonism between the producers and capital.
All these contradictions as a whole, which for centuries worked as a stimulant to its expansion, are now driving capitalism to its decadence, suffocation, paralysis, and historic bankruptcy.
The object of the debate is not to decide whether or not these contradictions exist. It is first and foremost to know why, and at what given moment of their development these internal contradictions transform themselves from stimulants to hindrances on the productive process.
Rosa Luxemburg does indeed reply by "singling out" one contradiction: that between the conditions of production of surplus-value and the conditions of its realization on the world market; this is itself a product of the contradiction between use-value and exchange-value within the capitalist commodity.
The contradiction between the conditions of production and the conditions of realization of surplus-value stand above all capitalism's other contradictions
For Rosa Luxemburg, it is when capitalism can no longer enlarge its markets "in relation to the needs of expansion of existing capitalist enterprises" that all its internal contradictions tend to break out with the greatest clarity. The contradiction discovered by Marx, between the conditions of production of surplus-value (profit) and the conditions of its realization (realization in money form, sale of the surplus-value extracted) stands above all the others.
If the contradiction between the need to produce on an ever larger scale, and the need to reduce the share of production that returns to the mass of wage-laborers can be overcome, then all the other contradictions are attenuated, or even transformed into stimulants.
As long as capitalism can find markets, outlets on the same scale as the requirements of its expansion, then all its internal difficulties are smoothed over.
This is why crises break out when the market has become too restrictive, and are overcome once new outlets are discovered. All the mode of production's internal contradictions burst out, or are smoothed over at the level of the world market and its crises, This is Marx's meaning when he writes: "The crises of the world market must be seen as the real synthesis and the violent leveling out of all the contradictions of this economy, whose every sphere manifests the various aspects that are reunited in these crises." (Matriaux pour 1'Economie Ed La Pleiade T II p 476)
The nature of this contradiction, which determines all the others, appears clearly when we analyze the concrete conditions that exacerbate or attenuate other important contradictions. Let us examine the two contradictions most often highlighted by Rosa Luxemburg's critics: competition between capitalists, and the tendency for the rate of profit to fall.
Competition is a stimulant as long as there are adequate markets
All those who, like Bukharin, have tried in one way or another to theorize the existence of a ‘non-capitalist' system of production in the USSR have always given ‘inter-capitalist competition' pride of place among capitalism's internal contradictions.
The USSR said to be non-capitalist because it is supposed to have eliminated competition, and with it, anarchy in the productive process. And yet, we only have to analyze the reality of this competition to understand that its extent and character as a contradiction are strictly determined by the abundance of existing solvent markets.
Markets are the prize of inter-capitalist competition.
In the struggles between primitive cannibal tribes the prize was human bodies to devour; the city-states in ancient slave times fought for slaves, and to plunder the wealth of other populations; the feudal lords fought for land, serfs and cattle. But capitalists fight for something far more abstract and universal - markets. To be sure, they, like their ancestors, don't deprive themselves of plunder when they can get it, but is what is more specific to them is their ruthless confrontation, no holds barred, for control over markets.
Because of this, the sharpening of inter-capitalist competition and the intensity of its effects are strictly dependent on the size of the markets that are the objects of this competition. In periods where capital can dispose of adequate solvent outlets, competition plays a stimulating role in enlarging the productive process. With unlimited markets, ‘free competition' could appear as a mere sporting rivalry between capitalists. But as soon as those outlets are restricted, the capitalists tear each other apart in bloody confrontations, the survivors feeding on the corpses of the victims of the lack of markets. Competition then becomes a barrier to the development of capital and of society's productive forces in general. For more than half a century, capitalist competition has in this way thrown society into ever more destructive world wars, while in time of ‘peace' it has developed a growing burden of expenditure, not to increase or maintain production, but to "face up to the competition" -- the developing state bureaucracy, armaments, advertising, etc.
It is not competition that makes markets scarce, it is the lack of markets that exacerbates competition and makes it a destructive force.
It is capitalism's ability to push out the limits of the world market that determines the degree of exacerbation and ‘harmfulness' of capitalist competition.
The tendency of the rate of profit to decline takes effect when the market is inadequate
The same is true of the permanent tendency for the rate of profit to fall. This tendency, which Marx was the first to point out, is caused by:
1) Capitalism's permanent need to ‘modernize' production, constantly increasing the role of machines in the productive process, in relation to living labor;
2) The impossibility for capitalists to extract surplus labor from any source other than living labor itself.
But if this law is said to be a ‘tendency', this is precisely because it is constantly counteracted, restrained or compensated by other tendencies within the system.
Marx also clearly pointed out the factors that counteract it and those that compensate for its effects.
The tendency towards a fall in the rate of profit is itself restricted largely by the fall in the real cost of production (wages, machines, raw materials) provoked by the growth in labor productivity. Less labor time is needed to reproduce and maintain a worker, a machine, or a particular raw material.
The effects of the falling rate of profit itself tend to be compensated by a growth in the mass of profit. A rate of profit of 20% is less than 22%, but a profit of 20% on $2 million is far more than 22% on $1 million. But the capitalists ability to increase his productivity, and similarly to increase his mass of profit, are strictly dependent on his ability to produce on a larger scale, which in turn depends on his ability to ‘sell more' (this question is treated at greater length in the article already cited: ‘Crisis theory from Marx to the Communist International').
The tendency for the rate of profit to fall becomes real and destructive when the forces that ‘normally' counteract or compensate it are weakened. This happens essentially when it has become impossible to enlarge the productive process due to a lack of solvent markets where surplus-value can be realized. Like competition, the tendency for the rate of profit to fall is a contradiction which itself depends on the contradiction existing in the conditions for the realization of surplus-value.
Rosa Luxemburg does not single out one contradiction at random amongst the others. She emphasizes the one where the rest are concentrated, the one that translates the pressure and tensions of all capitalism's internal contradictions. And this allows us to see when those contradictions as a whole are transformed into a break on its development.
Bukharin, having affirmed that, in seeking to understand its crises, it is wrong to single out any one contradiction of capital, nonetheless finds himself confronted with the question: when do these contradictions become definitive limits? And the only answer he can gave is: "these limits are set by a definite degree of tension in capitalist contradictions". (Idem)
‘A definite degree?' But what degree?
What degree of ‘competition' must be reached? What is the minimum rate of profit? Bukharin does not answer those questions, because they cannot be answered without referring specifically to capitalism's ability to find outlets.
Luxemburg's analysis by contrast, makes it possible to determine in what way ‘these limits' are those of the world market, and in particular those of the extra-capitalist market
Is the contradiction highlighted by Rosa Luxemburg "external" to the process of capitalist production?
How -- according to Luxemburg -- has capitalism been able to overcome the contradiction between the need constantly to increase its outlets and constantly to reduce the exploited classes share of what is produced? By finding buyers outside the capitalist process of production. For the worldwide enterprise of capitalism, it is meaningless to buy products that it sells to itself. It must have ‘clients' outside the enterprise, to whom it can sell this surplus, this share of surplus that cannot be acquired either by the worker or the capitalist. As Luxemburg explains, capital at first found these clients, or ‘third buyers' essentially among the feudal lords.
During the period of the industrial revolution, it found them mainly in the agricultural and artisan sectors remaining outside its control and especially in the colonial territories that the great powers ended up fighting over in two world wars.
During its decadent phase, capitalism finds a momentary compensation for its lack of external outlets in the reconstruction of the industrial centers destroyed by war. And since the end of the ‘60's, that is to say, since the end of the reconstruction following World War II, capitalism has resorted to a headlong flight, through ever more massive credits, to under-developed countries and to the capitalist metropoles.
The introduction of this element -- the extra capitalist sectors -- into the analysis of capitalist contradictions and the widening of analysis' framework to embrace its fullest reality -- the world market -- is seen by Luxemburg's critics as a ‘heresy' against Marx, and a search for capitalism's contradictions outside the sphere of capitalist production. Thus for Bukharin, for example, the lack of clients unconnected with capitalist companies, of ‘third buyers' is supposedly not an ‘internal' contradiction. "Capitalism" he says, against Luxemburg "develops its internal contradictions. It is these, and not a lack of ‘third buyers' that finally bring about its demise." (Idem).
In other words, to understand capitalism's contradictions, we must limit ourselves to capitalist reality within the factory and ignore what goes on the world market: the world market is somehow supposed to be ‘external' to capitalism's deepest reality!
This critique of Luxemburg is given a particularly clear expression by Raya Dunayerskaya (who formerly collaborated with Trotsky) in an article written at the end of the Second World War on the analysis contained in Accumulation of Capital:
"For Marx, the fundamental conflict in a capitalist society is that between capital and labor: every other element is subordinated to it. If this is how it is in real life, the first necessity for theory, even more than in society, is to pose the problem as one between worker and capitalist, purely and simply. Hence the exclusion of ‘third buyers', and as he himself says on several occasions, the exclusion of the world market as having nothing to do with the conflict between workers and capitalists". (Raga Dunayerskaya: Analysis of R. Luxemburg's Accumulation of Capital published in 1967 as an appendix to the pamphlet State Capitalism and Marx's Humanism).
It is true that, to explain how the capitalist exploits the workers, it is not necessary to refer to the world market and to the extra-capitalist sectors in particular. But to understand the conditions that allow this exploitation to be prolonged and developed, or eventually to be blocked, a view of the overall process of capitalist reproduction and accumulation is indispensable. This can only be done on the same scale as capital's real existence -- on the scale of the world market.
The market constituted by the extra-capitalist sectors is not, in itself, the product of the exploitation of the worker by capital, but without it, this exploitation cannot be reproduced on an enlarged scale.
If capital has a vital need of this kind of markets to survive, it is because the relationship between worker and capital is such that neither the worker nor the capitalist can constitute a solvent demand capable of realizing that part of the profit that is destined for reinvestment. If the masses' consumption were not limited by their wages, if there were no exploitation of the worker by the capitalist, if the workers could directly or indirectly consume everything they produced, in short, if wage labor did not exist, then the problem of external markets would disappear; but then, so would capitalism.
The extension of the world market is only a limit for capitalism, to the extent that it is indispensable to the existence of capitalist reproduction in contradictory conditions.
In this sense, there is no contradiction between the supposedly ‘internal contradictions' of capitalism and its need for external outlets is not, any more than capitalism's inability to enlarge them to the point of integrating all humanity directly into the capitalist productive process, a phenomenon determined by forces or laws external to capitalism but by the contradictory nature of its internal laws.
To clarify further this aspect of the question, let us consider the convulsions at the end of the feudal mode of production.
For many bourgeois historians, the catastrophes that engulfed feudal society, during the 14th century in particular, are to be explained by the lack of cultivable land. The famines, epidemics and wars, the general stagnation or decline that covered Europe in the 14th century, are thus supposed to express a somehow ‘natural' limit.
It is true that feudalism in decline came up amongst other things, against the difficulty of extending the land-area under cultivation. But this was not due to ill will on the part of mother nature, but because the social relations of production did not permit the setting in motion of the human and technical methods necessary to undertake more difficult cultivation.
The feudal economy was too splintered into millions of fiefs, corporations and privileges to allow the concentration of productive forces that the situation demanded. The historical collapse of feudalism is not explained by ‘nature' but by its own inadequacies, its own internal contradictions.
Nature here is neither an ‘external' nor an ‘internal' contradiction. It is the environment within which and in face of which the system's contradictions are exacerbated.
The case of capitalism and the scarcity of extra-capitalist markets are somewhat similar. The life and expansion of capitalism is synonymous with the transformation of new men into proletarians and the replacement of the old productive forms by capitalist relations of production. A developing capitalist business is one that takes on more proletarians. A given business may take workers from another. But overall, world capitalism can only take on extra-capitalist workers. In order to live, capitalism must feed off the absorption of the non-capitalist world (artisans, small shopkeepers, peasants). But it is not only to procure its labor-power that capital lives at the expense of the non-capitalist sector.. As we have seen, it is essentially because this sector provides it with clients, a solvent demand for that part of the surplus product that it cannot buy itself.
Sadly for itself, capital cannot do business with its non-capitalist clients without ruining them. Whether it sells them consumer goods or means of production, it automatically destroys the precarious equilibrium of any pre-capitalist (and therefore less productive) economy. Introducing cheap clothes, building a railway, installing a factory, are enough to destroy the whole of pre-capitalist economic organization.
Capital likes its pre-capitalist clients just as the ogre ‘likes' children: it eats them.
The workers of a pre-capitalist economy who has had ‘the misfortune to have had dealings with the capitalists' knows that sooner or later, he will end up, at best proletarianized and at worst -- and this has become more and more frequent since capitalism's slide into decadence -- reduced to misery and bankruptcy in the now sterilized fields, or marginalized in the vast slums of urban conglomerations.
Capital is thus confronted with the following situation: on the one hand, it needs more and more outside clients to dispose of a part of its production; on the other hand, in conducting business with them, it ruins them. Imperialism, the decadence of capitalism, the cycle of crisis-war-reconstruction, are signs of the fact that for more than half a century non-capitalist outlets have been inadequate in relation to world capitals need to expand.
But, like nature in relation to feudal relations of production, the non-capitalist sector is neither an ‘internal' nor an ‘external' contradiction. It is part of the environment within and against which capital exists.
When he pronounces his critique of Luxemburg -- that it is capitalism's internal contradictions and not any lack of ‘third buyers' that will finally kill capitalism -- Bukharin is tilting at windmills. Luxemburg has no more claimed that pre-capitalist economies ‘killed' capitalism than that the pebbles of the European soil were behind the death of feudalism.
What she has done is to resituate capitalism's internal contradictions -- discovered not by her, but by Marx -- in their living environment: the world market.
Capital's environment is the world market
Like Raya Dunayerskaya, Bukharin claims to be able to understand capitalism's most fundamental mechanisms, those which lead it into crisis, without taking any notice of the environment the system lives in. One might as well try to understand the functioning of a fish, without taking into account the fact that it lives in water, or of a bird, without analyzing its relationship with the air. Not to understand the importance of the world market in analyzing capitalist crises comes down to not understanding the very nature of capitalism itself.
This is to forget that before being a producer, the capitalist is first and foremost a merchant, a trader.
In bourgeois mythology, the capitalist is always presented as a small producer who has become a large one thanks to his own industriousness. The small craftsmen of the middle ages are supposed to have become the great industrialists or State employees of our own days. The historical reality is quite otherwise.
In decomposing feudalism, it is not so much the craftsmen of the towns who develop into the capitalist class, but rather the merchants. Moreover, the first proletarians were often none other than the craftsmen forced to submit to capital's ‘formal domination'.
The capitalist is a merchant who trades mainly in labor-power. He buys labor in the form of labor-power as a commodity, and sells it in the form of products and services. His profit -- surplus value -- is the difference between the price of the commodity, labor-power, and the price of the goods it produces. The capitalist is obliged to concern himself with the productive process of which he is master, but he nonetheless remains a merchant. The world of a merchant is the market, and in the case of the capitalist, the world market.
The non-capitalist sector is part of the world market
Those who reject Rosa Luxemburg's analysis generally have a totally false vision of the world market -- when they finally admit its existence. It is considered simply as the sum of capitalists and the capitalists' wage laborers. This, however, makes it impossible to understand the reality of capitalist crises of the world market.
The sum of capitalists and wage-laborers makes up the market for the major part of capitalist production -- this is capitalism's ‘internal' market. But there are also the non-capitalist sectors -- the ‘external' market.
Here is how Rosa Luxemburg defines these two parts of the world market:
"The internal and external markets certainly occupy important and very different places in the pursuit of capitalist development; but these are notions, not of geography, but of social economy. From the standpoint of capitalist production, the internal market is the capitalist market, it is capitalist production in the sense that it buys its own products and supplies its own elements of production. The market external to capital is the non-capitalist social milieu that surrounds it, absorbs its products and supplies it with the elements of production and labor power".
The world market is this whole, and must be integrated as such into any analysis of its crisis.
Rosa Luxemburg's analysis allows a better understanding of why commodity production and therefore wage labor, are the bottom of all capitalism's contradictions
In Capital, Marx often leaves the world market out of consideration, since in this part of his work, he aimed essentially to analyze the internal relationships of the system's functioning. Certain epigones have seen here an argument against Rosa Luxemburg's analyses. In integrating this analysis into its more general and more concrete framework of the world market, Rosa Luxemburg was doing no more than developing Marx's uncompleted work, following the methodological path that he had set himself: "Rising from the abstract to the concrete."
Whether singled out or not, the contradiction between the condition of the production of surplus-value and of its realization, this ‘internal' antagonism discovered by Marx, cannot really be understood without knowing all the "conditions of its realization". Now, the realization of surplus-value implies the sale of a part of it to clients other than capitalists and their wage-laborers, ie. to the non-capitalist sector. By introducing the latter into the analysis of capitalism's contradictions, Rosa Luxemburg does not deny the capitalist mode of production's internal contradictions; on the contrary, she supplies the means for understanding them in all their concrete and historical reality.
But by singling out the contradiction between the production and the realization of surplus-value, she ‘singles out' the basic contradiction of capitalism: that between the use and exchange values of commodities in general and of the principal commodity in particular -- labor-power and its money price, wages. The very existence of wage-labor appears at the basis of the breakdown of capital.
The realization of surplus value, the metamorphosis into money of the commodities produced by the workers' surplus labor, is contradictory because wage-labor inevitably limits the consumption of the workers themselves.
In Theories of Surplus Value Marx wrote:
"...It is the metamorphosis of the commodity itself which encloses, as a developed movement, the contradiction -- implied in the unity of the commodity - between exchange value and use value, and then between money and commodity."
The contradiction between the use value of labor power and its exchange value, wages, is none other than that of the workers' exploitation by capital.
So it is only within the framework of Rosa Luxemburg's analysis that the elimination of wage-labor appears in a coherent way as the primary characteristic of the supersession of capitalism.
The question takes on its full political importance when it comes to a problem such as the evaluation of the class nature of the USSR ‘socialist' or ‘on the road to socialism' for the ‘Socialist' or ‘Communist' parties and all the parties of the centre and right; ‘degenerated workers' State' according to Trotsky and the Trotskyists. It was left to the ‘German Left' of the 1920's to produce a first analysis from the marxist standpoint of the USSR as state-capitalist. It is not an accident that this was one of the only currents in the workers' movement to know and share Rosa Luxemburg's analysis of crises.
In his pamphlet criticizing The Accumulation of Capital, Bukharin clearly affirms the non-capitalist nature of the USSR:
"To all the contradictions of the world capitalist system, there is added one cardinal contradiction: the contradiction between the capitalist world and the new economic system of the Soviet Union". (Idem, p.136)
Nor is this an accident. Whoever, in analyzing capitalism's crises, ‘singles out' contradictions such as "competition and capitalist anarchy", tends to see nationalizations, the development of state power and planning, as proofs of a break with capitalism. By ignoring the reality of the world market and its importance in the life of capitalism, this leaves the door wide open to the idea of a possible ‘socialism in one country'.
Through his theoretical criticism of Rosa Luxemburg's analysis, Bukharin laid the foundations for the theories which were to be used under Stalinism to present, in marxist verbiage, a regime of capitalist exploitation as socialism.
Understanding the economic problems of the transition period from capitalism to communism is strictly dependent on the analysis of capitalist crises. Tomorrow, we shall have to draw all the lessons from the practical experience of the Russian Revolution in this domain. This also means overcoming all the theoretical aberrations born of the revolution's degeneration.
Already appeared on crisis theory in the IR:
‘Marxism and Crisis Theory': no.13
‘Economic Theories and the Struggle for Socialism': no 16
‘On Imperialism': no.19
‘Crisis Theory, from.Marx to the CI': no.22
 IR 29. See also ‘Crisis Theories from Marx to the Communist International', in IR 22.
 N. Bukharin, ‘Imperialism and the Accumulation of Capital'.