The Accumulation of Capital

by Rosa Luxemburg

‘A solitary farmer in a distant colony on the border of the desert has reaped 100 sacks of corn this year; there is no market where to bring them; this corn, in any case, must be consumed within the year, else it will be of no value to the farmer; yet the farmer and his family eat only 30 sacks of it; this will be his expenditure, constituting the exchange of his income; it is not reproduced for anybody whatever. Then he will call for workers, he will make them clear woods, and drain swamps in his neighbourhood and put part of the desert under the plough. These workers will eat another 30 sacks of corn: this will be their expenditure; they will be in a position to afford this expenditure at the price of their revenue, that is to say their labour; for the farmer it will be an exchange: he will have converted his 30 sacks into fixed capital. In the end, he is left with 40 sacks. He will sow them that year, instead of the 20 he had sown the previous year; this constitutes his circulating capital which he will have doubled. Thus the 100 sacks will have been consumed, but of these 100 sacks 70 are a real investment for him, which will reappear with great increase, some of them at the very next harvest, and the others in all subsequent harvests.—The very isolation of the farmer we have just assumed gives us a better feeling for the limitations of such an operation. If he has only found consumers for 60 of the 100 sacks harvested in that year, who is going to eat the 200 sacks produced the following year by the increase in his sowing? His family, you might say, which will increase. No doubt; but human generations do not multiply as quickly as subsistence. If our farmer had hands available to repeat this assumed process each year, his corn harvest will be doubled every year, and his family could at the most be doubled once in 25 years.’[169]

Though the example is naïve, the vital question stands out clearly in the end: where are the buyers for the surplus value that has been capitalised? The accumulation of capital can indefinitely increase the production of the society. But what about the consumption of society? This is determined by the various kinds of income. Sismondi explains this important subject in chapter v of book ii, ‘The Distribution of the National Income Among the Various Classes of Citizens’, in a resumed effort to describe the components of the social product.

‘Under this aspect, the national income is composed of two parts and no more; the one consists in annual production ... the profit arising from wealth. The second is the capacity for work which springs from life. This time we understand by wealth both territorial possessions and capital, and by profit the net income accruing to the owners as well as the profit of the capitalist.’[170]

Thus all the means of production are separated from the national income as ‘wealth’, and this income is divided into surplus value and labour power, or better, its equivalent, the variable capital. This, then, though still far too vague, is our division into constant capital, variable capital and surplus value. But ‘national income’, it soon transpires, means for Sismondi the annual aggregate product of society:

‘Similarly, annual production, or the result of all the nation’s work in the course of a year, is composed of two parts: one we have just discussed—the profit resulting from wealth; the other is the capacity for work, which is assumed to equal the part of wealth for which it is exchanged, or the subsistence of the workers.’[171]

The aggregate social product is thus resolved, in terms of value, into two parts: variable capital and surplus value—constant capital has disappeared. We have arrived at Smith’s dogma that the commodity price is resolved into v + s (or is composed of v + s)—in other words, the aggregate product consists solely of consumer goods for workers and capitalists.

Sismondi then goes on to the problem of realising the aggregate product. On the one hand, the sum total of incomes in a society consists of wages, capital profits and rents, and is thus represented by v + s; on the other hand, the aggregate social product, in terms of value, is equally resolved into v + s ‘so that national income and annual production balance each other (and appear as equal quantities)’, i.e. so that they must be equal in value.

‘Annual production is consumed altogether during the year, but in part by the workers who, by exchanging their labour for it, convert it into capital and reproduce it; in part by the capitalists who, exchanging their income for it, annihilate it. The whole of the annual income is destined to be exchanged for the whole of annual production.’[172]

This is the basis on which, in the sixth chapter of book ii, ‘On Reciprocal Determination of Production and Consumption’, Sismondi finally sets up the following precise law of reproduction: ‘It is the income of the past year which must pay for the production of the present year.’[173]

If this is true, how can there be any accumulation of capital? If the aggregate product must be completely consumed by the workers and capitalists, we obviously remain within the bounds of simple reproduction, and there can be no solution to the problem of accumulation. Sismondi’s theory in fact amounts to a denial of the possibility of accumulation. The aggregate social demand being the bulk of wages given to the workers and the previous consumption of the capitalists, who will be left to buy the surplus product if reproduction expands? On this count, Sismondi argues that accumulation is objectively impossible, as follows: