Karl Marx

by Achille Loria

Noteworthy, in any case, are the investigations which aim at throwing light on the process in virtue of which there is effected the formation of metallic reserves which remain out of circulation for a longer or shorter period. If, says Marx, a certain commodity requires for its production six months of labour, and cannot be sold until two months after its production has been completed, the capitalist, if he is to continue the work of production during the period in which the commodity remains unsold, has need of additional capital which he could dispense with if the sale could be effected immediately after production. But when, at the close of the circulation period, the capitalist resumes possession of the capital first utilised and realises it in money, he has no immediate need of all this capital, but only of the quantity necessary to make good the additional capital which he has invested, that is to say, a quantity of capital equal to the difference between the primary capital and the supplementary capital; consequently the excess remains at liberty, and goes to constitute and to increase monetary reserves. These reserves are formed in addition, and by an analogous process, on account of the wear of machinery; for the portions of value transmitted by the machines to the product and correlative to the wear of these machines are pent up until the day of the complete destruction of the machines or of their necessary replacement. Thus the difference between the period of production and the period of exchange of the commodities, and the difference between the period of economic redintegration and the period of technical redintegration of the productive machinery, give rise to the formation of monetary or capitalistic reserves, which become in their turn the source of intricate developments and interesting complications.

The book likewise contains a masterly, though wordy and disconnected, account of the circulation of capital. But absolutely nowhere does it touch on or even hint at the theoretical enigma left unsolved in the first volume. Solely in Engels' preface do we find an announcement that the definitive solution will be furnished in a subsequent volume, and a suggestion that in the interim economists engage in a sort of academic debate, and bring forward their respective solutions. There actually took part in this strange competition, with varying success, Conrad Schmidt, Landé, Lexis, Skworzoff, Stiebeling, Julius Wolf, Fireman, Lafargue, Soldi, Coletti, Graziadei, and myself. At length, however, in 1894, appeared the third volume, which was to reveal to an impatient world the desired solution.

The solution reduces itself to this. It is true, says Marx, that the value commensurate to labour ends by assigning to the capitals respectively employed as constant and as variable, different rates of profit, and that this is radically incompatible with competition. But it is likewise true that products are not actually sold for their value, but for their price of production, which is equal to the capital consumed plus profit at the ordinary rate on the total capital employed. Certainly if we consider the mass of products sold, we find that their total price is precisely equal to their total value. But this integral value is not distributed among the various products in proportion to the quantity of labour incorporated in them, but in a lesser or greater proportion, according as the products themselves contain a greater or less proportion of the mean between the constant capital and the total capital; that is to say, the products containing a proportion of constant capital superior to the mean are sold at a price above their value in order to eliminate the deficiency of profit due to the preponderance of the capital which does not produce surplus value; whereas the products containing a proportion of constant capital inferior to the mean are sold at a price less than their value so as to eliminate the excess of profit due to the preponderance of the capital that produces surplus value; whilst only the products containing the mean proportion of constant capital and total capital are sold at a price precisely identical with their value.

But it soon becomes apparent that this so-called solution is little more than a play upon words, or, better expressed, little more than a solemn mystification. For when economists endeavour to throw light upon the laws of value, they naturally consider the value at which the commodities are actually sold, and not a fantastical or transcendental value, not a value which neither possesses nor can possess any concrete relationship to facts. It may well be that value as determined by abstract economic theory will not always correspond precisely with value as a concrete fact, for the complexities and the manifold vicissitudes of real life impose obstacles; it may well be, indeed, that to the rigidity of normal value, constituting the type of the relationship of exchange, we ought to counterpose the comparatively transient fluctuations of current value.

But it must be understood that no logical fact should stand in the way of the realisation of normal value, for this, conversely, ought to be derived by logical necessity from fundamental economic premises. Of a value, indeed, which not only is not realised, but is not logically capable of realisation, the economist neither can nor ought to take any account; he should show in what respect, instead of being the expression of what value is, it is the expression of what value is not and cannot be; he should point out the negation of every correct and positive theory of value. Now this value commensurate to labour, value as defined by Marx's theory, not merely has its realisation restricted or modified by the vicissitudes of reality, but further, as Marx himself is constrained to recognise, is not logically capable of realisation, seeing that it would give rise to results incompatible with the most elementary advantage of those who effect the exchange of commodities; consequently, it is not merely an abstraction remote from reality, but is incompatible with reality; not only is it an impossibility in the realm of fact, but further and above all it is a logical impossibility.

Thus, far from effecting the salvation of the threatened doctrine, this alleged solution administers a death-blow, and implies the categorical negation of what it professes to support. For what meaning can there possibly be in this reduction of value to labour, the doctrine dogmatically affirmed in the first volume, to one who already knows that the author is himself calmly prepared to jettison it? Is there any reason for surprise at Marx's hesitation to publish this so-called defence; need we wonder that his hand trembled, that his spirit quailed, before the inexorable act of destruction?

Despite all, however, genius will not be denied, and even this volume contains here and there masterly disquisitions, enriching the science of economics with new and fertile truths. It will be enough, in this connection, to refer to two theories. The first of these, the theory of the decline in the rate of profit, though not free from objection, is none the less inspired and profound. The second is the theory of absolute rent, a brilliant and acute deduction from the Marxist theory of value. This theory, indeed, as we saw just now, leads to the conclusion that value commensurate to labour furnishes an extra profit to the capital which produces commodities requiring for their production an above-average proportion of variable capital. Now, where free competition exists, such extra profit cannot continue, and must necessarily be eliminated by a reduction in the price of the product to a point below its value. But when competition is not fully free, there is no reason why such extra profit should not be permanent. Now agrarian production requires an abnormally high proportion of variable capital, and consequently agricultural produce, when sold for its value, furnishes an extra profit. But since land is a monopolised element, this extra profit can be permanently assigned to the owners of the soil, because there is no effective competition to prevent their continuing to draw it. There thus comes into existence an absolute land rent, in opposition to or in addition to the differential rent of Ricardo's theory. This absolute rent is not due to the varying cost of production in different areas; it is not the exclusive appanage of lands more favourably situated or of lands of better quality; it arises solely from the excess in the value of agrarian produce over its cost of production, and is a general attribute of land per se, in virtue of its quality as a monopolised element. Marx acutely studies the manifold varieties of this rent according as it is rendered in work, in produce, or in money; and with sound and far-reaching intuition he deduces from his theory explanations of the intricate agrarian relationships among the various peoples of the globe.

Nor is this the only gem with which the work is adorned. Very remarkable are the pages upon merchants' capital and moneylenders' capital, on their despotic predominance prior to the inauguration of the capitalist régime, and upon their inevitable dissolution after the advent of that régime. The closing pages, however, seem to breathe a vague weariness, and we find hardly any trace of masterly theoretical discussion of the class struggle, of its origin, of the instruments through which it operates, although this discussion, according to the author's original plan, was to be the monumental crown of the titanic work.

Thus, however fragmentarily, and thanks to the help of lieutenants and of disciples who were not always adequately instructed, the theoretical treatise, at once the pride and the torment of our prophet, at length arrived at completion. But the reader will not forget that to the positive treatment of his subject, Marx always counterposed a historico-critical investigation of the theories of his precursors, and in the more mature design of his work such an exposition was to follow upon the exposition of his own doctrines and to form their apt complement. It remained, therefore, to bring to light this last part of his researches, a duty which was faithfully discharged (after the death of Engels) by Karl Kautsky, with the publication of the History of the Theory of Surplus Value, which appeared in four volumes during the years 1905 to 1910. Substantially, though publishers have preferred to treat it as a work apart, this book is nothing other than the concluding section of Capital, announced in the preface to the first volume, where the author tells of a sequel to be devoted to the history of this theory.

In the posthumous work Marx traces the development of the theory of surplus value through its three essential stages, the prericardian, the Ricardian, and the postricardian. To the first of these phases belong the theories of the physiocratic school, whose essence Marx grasps with marvellous acuteness, maintaining that the theories in question were the doctrinal reflection of the interests of the rising capitalist class, constrained to pretend that its own economic claims were the logical expression of the advantage of the landed and feudalist classes then politically dominant. Particularly noteworthy are the comments on the teaching of Adam Smith. The second volume contains a searching criticism of the Ricardian system, and above all of Ricardo's theories of value and of profit. In the third section Marx passes judgment on the theories of Ricardo's successors, Malthus, Senior, and John Stuart Mill, for these writers, says Marx, follow the setting sun of bourgeois economic science, follow that science to its now inevitable doom.