The Accumulation of Capital

by Rosa Luxemburg

Here we shall deal with these latter achievements of Rodbertus, especially with the ‘and so on’.

Rodbertus’ decisive treatise, Towards the Understanding of Our Politico-Economic Conditions[232] of 1842, set the ball rolling. v. Kirchmann replied in Demokratische Blätter with two essays—On the Social Aspects of Ground Rent[233] and The Society of Barter[234] —and Rodbertus parried in 1850 with his Letters on Social Problems.[235] Thus the discussion entered the same theoretical arena where Malthus-Sismondi and Say-Ricardo-MacCulloch had fought out their differences thirty years earlier. In his earliest writings, Rodbertus had already expressed the thought that the wages of labour present an ever diminishing part of the national product in modern society where the productivity of labour is increasing. He claimed this to be an original idea, and from that moment until his death thirty years later he did nothing but reiterate it and formulate it in various ways. This ‘declining wage rate’ is for him the root of all evils to be found in modern society, in particular of pauperism and the crises, whose combination he calls ‘the social problem of our times’.

v. Kirchmann does not agree with this explanation. He traces pauperism back to the effects of a rising ground rent; crises, on the other hand, to a lack of markets. About the latter especially he says: ‘The greatest part of social ills is caused not by defects of production but by a lack of markets for the products ... the more a country can produce, the more means it has for satisfying every need, the more it is exposed to the danger of misery and want.’—The labour-problem is here included as well, for ‘the notorious right to work ultimately reduces to the question of markets’. ‘We see’, he concludes, ‘that the social problem is almost identical with the problem of markets. Even the ills of much-abused competition will vanish, once markets are secure; its advantages alone will remain. There will remain a spirit of rivalry to supply good and cheap commodities, but the life-and-death struggle will disappear which is caused only by insufficient markets.’[236]

The difference between the points of view of Rodbertus and v. Kirchmann is evident. Rodbertus sees the root of the evil in a faulty distribution of the national product, and v. Kirchmann in the limitations of the markets for capitalist production. Notwithstanding all the confusion in his expositions, especially in his idealist vision of a capitalist competition content with a laudable rivalry for better and cheaper commodities, and also in his conception of the ‘notorious right to work’ as a problem of markets, v. Kirchmann up to a point still shows more understanding for the sore spot of capitalist production, i.e. the limitations of its market, than Rodbertus who clings to distribution. Thus it is v. Kirchmann who now takes up the problem which Sismondi had originally put on the agenda. Nevertheless, he by no means agrees with Sismondi’s elucidation and solution of the problem, siding rather with the opponents of the latter. Not only does he accept Ricardo’s theory of ground rent, and Adam Smith’s dogma that ‘the price of the commodity is composed of two parts only, of the interests on capital and the wages of labour’ (v. Kirchmann transforms the surplus value into ‘interest on capital’); he also subscribes to the thesis of Say and Ricardo that products are only bought with other products and that production creates its own demand, so that if one side appears to have produced too much, it only means there was not enough production on the other. v. Kirchmann, we see, faithfully follows the classics, if in a somewhat ‘German edition’. He begins by arguing, e.g., that Say’s law of a natural balance between production and demand ‘still does not give a comprehensive picture of reality’, and adds:

‘Commerce involves yet further hidden laws which prevent this postulated order from obtaining in complete purity. They must be discovered if we are to explain the present flooding of the market, and their discovery might perhaps also show us the way to avoid this great evil. We believe that there are three relations in the modern system of society which cause these conflicts between Say’s indubitable law and reality.’

These relations are (1) ‘too inequitable a distribution of the products’—here, as we see, v. Kirchmann somewhat approximates to Sismondi’s point of view; (2) the difficulties which nature puts in the way of human labour engaged in production; and (3) finally, the defects of commerce as a mediator between production and consumption. Disregarding the last two obstacles to Say’s law, we shall now consider v. Kirchmann’s reasoning of his first point.

‘The first relation’, he explains, ‘can be put more briefly as too low a wage of labour, which is thus the cause of a slump. Those who know that the price of commodities is composed of two parts only, of the interest on capital and the wage of labour, might consider this a startling statement; if the wage of labour is low, prices are low as well, and if one is high, so is the other.’

(We see v. Kirchmann accepts Smith’s dogma even in its most misleading form: the price is not resolved into wage of labour and surplus value, but is composed of them as a mere sum—a view in which Adam Smith strayed furthest from his own theory of the value of labour.)

‘Wage and price thus are directly related, they balance each other. England only abolished her corn laws, her tariffs on meat and other victuals, in order to cause wages to fall and thus to enable her manufacturers to oust all other competitors from the world markets by means of still cheaper commodities. This, however, only holds good up to a point and does not affect the ratio in which the product is distributed among the workers and the capitalists. Too inequitable a distribution among these two is the primary and most important cause why Say’s law is not fulfilled in real life, why the markets are flooded although there is production in all branches.’

v. Kirchmann gives a detailed illustration of this statement. Using the classical method, he takes us, of course, to an imaginary isolated society which makes an unresisting, if thankless, object for the experiments of political economy. v. Kirchmann suggests we should imagine a place (Ort) which comprises 903 inhabitants, no more, no less, viz. three entrepreneurs with 300 workers each. Ort is to be able to satisfy all needs by its own production—in three establishments, that is to say, one for clothing, a second for food, lighting, fuel and raw materials, and a third for housing, furniture and tools. In each of these three departments, the ‘capital together with the raw materials’ is to be provided by the entrepreneur, and the remuneration of the workers is to be so arranged that the workers obtain as their wage one half of the annual produce, the entrepreneur retaining the other half ‘as interest on capital and profits of the enterprise’. Every business is to produce just enough to satisfy all the needs of the 903 inhabitants. Ort accordingly has ‘all the conditions necessary for general well-being’, and everybody can therefore tackle his work with courage and vigour. After a few days, however, joy and delight turn into a universal misery and gnashing of teeth: something has happened on v. Kirchmann’s Island of the Blessed which was no more to be expected than for the skies to fall: an industrial and commercial crisis according to all modern specifications has broken out! Only the most essential clothing, food and housing for the 900 workers has been produced, yet the warehouses of the three entrepreneurs are full of clothes and raw materials, and their houses stand empty: they complain of a lack of demand, while the workers in turn complain that their wants are not fully satisfied. What has gone wrong? Could it be that there is too much of one kind of produce and too little of another, as Say and Ricardo would have it? Not at all, answers v. Kirchmann. Everything available in Ort in well-balanced quantities, just enough to satisfy all the wants of the community. What, then, has thrown a spanner into the works, why the crisis? The obstruction caused by distribution alone—but this must be savoured in v. Kirchmann’s own words: