DOCUMENT 4 A Contribution to the Critique of Karl Marx's Economic System (1894)

Werner Sombart

Source: Werner Sombart, ‘Zur Kritik des okonomischen Systems von Karl Marx,’ Archivfursoziale Gesetzgebung undStatistik, Vol. vii, Berlin, 1894, pp. 555-94.

Karl Marx, Das Kapital.

Introduction by the Editors

Volume iii of Capital appeared in 1894, nine years after Volume 11. As with Volume ii, the third volume was laboriously edited and put together from Marx’s manuscripts by Frederick Engels. In his preface to the new volume, Engels recounted the difficulties he faced and the extent to which he had to supplement fragmentary manuscripts with his own commentary and inser­tions.¹ In addition to explaining these editorial challenges, Engels also dis­cussed the attempts of several writers, priorto the appearance ofVolume iii, to address the seeming contradiction between the law of value and the formation of an equal average rate of profit on capitals with different organic composi­tions. In that effort, he thought, Conrad Schmidt and Peter Fireman had made commendable efforts, but Wilhelm Lexis had distinguished himself as a ‘vul­gar economist’, and Achille Loria proved to be ‘a conscious sophist, paralogist, braggart and charlatan’. In light of those comments, it was with evident relief that Engels greeted the review ofVolume iii by Werner Sombart. In a supple­ment to Volume iii, from which we include three excerpts, Engels remarked that ‘Werner Sombart gives an outline presentation of Marx’s system which is quite excellent on the whole’.^{[426] [427]}

Readers will recall that when Illarion Kaufman reviewed Volume i of Capital in 1872, he struggled with the question of how Marx’s Hegelian terminology A CONTRIBUTION TO THE CRITIQUE OF MARX’S ECONOMIC SYSTEM (1894) 163 might be reconciled with his scientific analysis of factual material.

Sombart certainly did not mean that Marx was an empiricist. The new volume, he wrote, ‘does not deal with the phenomena of real economic activity’, for ‘“value” does not exist in the phenomenal world. value is not an empirical but a conceptualfact... the value-concept is a tool of our thinking, which we use to comprehend the phenomena of economic life; it is a logical fact’. As Engels pointed out, this statement was ‘too generalized’: before the arrival of capitalism, simple commodity producers had exchanged commodities at prices that generally approximated values. But apart from that reservation he was satisfied that Sombart had given a fair and worthy summary of Marx’s thinking.

The question that Sombart asked was whether there was an irreconcilable contradiction between the following two assertions: first, ‘that “value” in Marx is only a “tool of thought”’; and second, ‘that the “law of value”, as a “natural law”, ultimately determines the entire economic life of humankind’. His answer was: ‘I think not’. Although value does not exist in phenomenal terms, it remains the essence of price. In this connection Sombart quoted Marx: ‘all science would be superfluous if the form of the appearance of things directly coincided with their essence’, and therefore ‘it is one of the tasks of science to reduce the visible and merely apparent movement to the actual inner movement’.

Sombart saw that Marx’s method was the direct opposite of the ‘subjectivist tendency’ in economic theory, which undertakes to explain prices by starting from individual judgements of marginal utility - the same price theory that undergraduates begin with today in university economics departments.

It never occurred to him to look for the individual motives of the persons exchanging, or even to proceed from the cost-of-production calculation. No, his train of thought was this: prices are formed by competition... But competition itself is regulated by the rate of profit, the profit rate by the rate of surplus-value, and this by value, which is itself the expression of a socially determined fact, of the social productivity. [This succession] now presents itself in Marx's system in reverse order: value - surplus­value - profit - competition - prices, etc. If we wanted a catchphrase, we could say: the question for Marx is never the motivation, but always the limitation of the individual caprice of economic agents.

Marx spoke of the relation between value and price in terms of a ‘constant negation of the negation': market prices negate value, yet value in turn is the law of ‘motion' that governs the movement of prices, so that the immedi­acy of market prices is conceptually negated in what Marx called the ‘price of production', which reflects an average rate of profit that would prevail if capitalism were to accomplish the impossible, namely, a crisis-free state of equilibrium. Marx saw value as the axis about which market prices move in response to changing conditions of supply and demand.^[428] In Hegel's Logic, the contradiction between ‘essence' and ‘existence' was finally transcended in the Absolute Idea, or in thought absorbing into itself the alienated world of objects.

Friedrich Engels’s Comments on the Review by Werner Sombart

In Braun’s Archivfur soziale Gesetzgebung, vii, no. 4, Werner Sombart gives an outline presentation of Marx’s system which is quite excellent on the whole. This is the first time that a German university professor has managed to see by and large in Marx’s writings what Marx actually said, and he further declares that criticism of the Marxian system should consist not in a refutation (‘that can be left to someone with political ambition’), but rather in a further devel­opment. Sombart, too, is understandably preoccupied with our present subject. He discusses the significance of value in Marx’s system and arrives at the fol­lowing result. Value is not present at the phenomenal level, in the exchange relationship of capitalistically produced commodities; it does not dwell in the consciousness of the agents of capitalist production; it is not an empirical fact but an ideal or logical one; Marx’s concept of value, in its material specificity, is nothing more than the economic expression of the fact that the social pro­ductivity of labour is the basis of economic existence; the law of value is what ultimately governs economic processes in a capitalist economic order, and its general content for such an economic order is that the value of commodities is the specific historical form in which the productivity of labour, which ulti­mately governs all economic processes, has its determining effect.

With both Sombart and Schmidt... insufficient regard is paid to the fact that what is involved is not just a logical process but a historical one, and its explanatory reflection in thought, the logical following-up of its internal connections.^[431]

Marx’s law of value applies universally, as much as any economic laws do apply, for the entire period of simple commodity production, i.e. up to the time at which this undergoes a modification by the onset of the capitalist form of production. Up till then, prices gravitate to the values determined by Marx’s law and oscillate around these values, so that the more completely simple com­modity production develops, the more do average prices coincide with values for longer periods when not interrupted by external violent disturbances, and with the insignificant variations we mentioned earlier. Thus the Marxian law of value has a universal economic validity for an era lasting from the beginning of the exchange that transforms products into commodities down to the fifteenth century of our epoch. But commodity exchange dates from a time before any written history, going back to at least 3500B.c. in Egypt, and 4000 B.c. or maybe even 6000B.c. in Babylon; thus the law of value prevailed for a period of some five to seven millennia.^[432]

Werner Sombart’s Review of Karl Marx, Das Kapital. Kritik der politischen Oekonomie. Dritter Band, erster Teil, 8°, xxvιιι. und 448 s.; zweiter Teil, 422 S. Hamburg: Meissner 1894.

This journal's area of interest is limited to the discussion of social-policy and social-statistical issues, and it does not cover, among other things, economic theory.

If I thus agreed with the editor to publish in this journal my criticism of the third volume of Capital, and of some fundamental discussions tied up with it, I did so in the conviction that, in the face of a work of Capital's scope, the task of criticism cannot possibly be to have the final say a few months after its publication, or to ‘settle' the debate on the book. Although we have had plenty of time to go into Marx's train of thought, and although the newly published third volume frequently only confirmed the results to which our own thinking had led us on the basis of the earlier volumes, a system like Marxism,^[434] whose criticism almost entirely lacks any preparatory work, obviously requires a kind of assessment, both intensive and extensive, that differs from what a critical review was in a position to offer. I therefore consider my principal role at this point to consist only of the following: to describe the overall impression made on me by the third volume of Capital, to offer primarily a formal assessment of the work; then to report on its contents as concisely as possible, making constant reference to those problems whose discussion basically dominates the debate on Marx; and, finally, to attempt to outline for the future criticism of Marx some leading basic principles. This latter task requires an outline of the economic foundations of the Marxian system, which I believe are still misunderstood in their essence.

ι

In the preface to the first part of the third volume of Capital, Engels recounts the story of the passion of his editorial work, to the benefit and advantage of the reader, because from his description of Marx’s manuscript and the way in which it was edited we gain very useful clues for assessing the individual parts of the work. In general, the third volume was a still more imperfect manuscript than the one Marx left for the second volume. In Engels’s words: ‘There was only one draft, and even this contained very major gaps’.^[435] Nevertheless, Engels apparently did not change his editorial principle; he was inspired primarily by considerations of piety, not by the state of the material itself.

This time, too, Engels took care to use as many as possible of his friend’s remarks in their original form. He tells us with particular satisfaction that, even in the most difficult and least completed part (the fifth), he ‘finally managed to introduce into the text all of the author's statements that were in any way pertinent to the matter in hand'.¹¹

I do not know whether this method of editing has been the right one or, indeed, whether it was necessary even from considerations of piety. It has certainly hurt the general character of the work. Was it not Marx's intention rather to withhold from the world his unfinished work? Would it not have been better to single out the main features of the system and, after the corresponding editing, to present it to us in a more perfect form? Engels was capable of doing this like no other editor. As far as I am concerned, all the digressions, all the preliminary work found in Marx's manuscripts, could have been printed without abridgement in Die Neue Zeit. Now, everything is packaged in Capital: the finished passages next to the semi-finished ones, incidental arguments next to decisively important ones, details along with basic features. If Marx made pages-long extracts from parliamentary reports, he surely did that only to process them, not to publish them, as now has been done. If Part Five (on credit and banking) was the most imperfect part of the manuscript, it could have been quietly summarised in a few sentences, without doing any harm to the system, rather than publishing it without abridgement. But, in his editing of Marx's presentation, Engels also behaved, in my view, too carefully. He should have cut the eternal repetitions, which now occupy even more space in the third than in the second volume, and which often give the impression of hearing the colleague of a German professor. Everyone will agree that chapters devoted to mere calculations - such as 41, 42 and 43, whose results are not even readily utilisable (Engels himself felt compelled to set up another series of numbers)i² - also do not add to the book. But these statements come post festum [after the fact] and do not alter the accomplished facts?³ They are just meant to describe the general character of the work, particularly in its formal aspects. ^{[436] [437] [438]}

It is obvious that enjoyment of the third volume is significantly affected by the inconveniences highlighted above. The irregularities make themselves felt often enough; the reading is frequently tedious and sometimes downright unpleasant. Despite all this, the third volume of Capital is a standard work, which stands incomparably higher than the previous volume and compares favourably with the first. Admittedly, the fresh, wild originality of the first volume does not often appear in the third; it is permeated by a quieter spirit. Instead of the dramatic elan, the epic peace has come, but certainly not to the detriment of science. The third volume will yield only scant material for socialist agitation, but this proves advantageous for theory. What made the first volume of Capital such a rich treasure trove of slogans and catchphrases for agitating ‘comrades’, and what also made it seem palatable and worth reading to the average economist, spiteful of theory and seized by the ‘rage des faits’ [madness for facts] - the frequent descriptive and historical digressions, the presentation of English working conditions, the critical history of British labour legislation and the like - only interfered with the pleasure resulting from development of the system’s ideas. From the standpoint of theory, the third volume does not have that useless ballast. Therefore, the joy experienced by the theorist in reading the third volume, despite all the irregularities I previously mentioned, will be more pure and unsullied. For me, the new book was as endearing, in its own way, as the first volume. I can therefore only draw the conclusion that economic science should welcome the appearance of the third volume as a joyous event that made the literary autumn of 1894 an exceptionally fertile one for our profession. Whatever one’s position on the results of Marx’s studies, no one with the slightest theoretical interest will be able to contemplate the culmination of Marx’s system in the third volume of Capital without intellectual satisfaction.

Let us now try to acquaint ourselves with the contents of the third volume. I shall first sum up the author’s reasoning without further critique. If I do this in more detail than usual in scientific practice, it is with the knowledge that the top priority for such a systematically misunderstood author as Marx is a clear rendering of his ideas.

II

The overall task for the third volume was predetermined: if the first volume described the production process, and the second the circulation process of capital, the remaining task was to describe the process of capitalist production as a whole; in other words, the configuration of economic life organised in capitalist terms.

In their actual movement, capitals confront one another in certain con­crete forms, and, in relation to these, both the shape capital assumes in the immediate production process and its shape in the process of circula­tion appear merely as particular moments. The configurations of capital, as developed in this volume, thus approach step by step the form in which they appear on the surface of society, in the action of different capitals on one another, i.e. in competition, and in the everyday consciousness of the agents of production themselves.^[439]

It goes without saying that they ‘approach’ that form without ever reaching it. Also, the third book does not deal with the phenomena of real economic activ­ity. The doctrine of competition was explicitly excluded from the exposition.

The third volume is divided into seven ‘parts' with a total of 52 chapters.

Part one (chapters 1-7, pp. 117-238) deals with ‘the transformation of surplus­value into profit, and of the rate of surplus-value into the rate of profit.

This first part has to solve the essentially formal task of portraying value and surplus value in their empirical forms as cost-price and profit respectively. From the capitalist point of view, the commodity does not cost labour, but rather capital: the outlay that the capitalist has to make, in order to produce a given commodity, is for him an expenditure of capital and appears to him as ‘the cost' of that commodity; and the amount of capital expenditure determines the cost-price. But what the capitalist reaps as surplus value appears to him under the name of profit, as a result of his entire capital investment, not only of the amount of capital spent or, for instance, of the variable capital component alone. Next to cost-prices, therefore, appears the new category belonging to the capitalists' perception of the world, the economic category of profit. Thus c = c + v + s is transformed first into k + s and then into k + p: i.e. the value of commodities is transformed into cost-price plus profit.

Profit, as we are originally faced with it, is thus the same thing as surplus value, save in a mystified form, though one that necessarily arises from the

capitalist mode of production. Because no distinction between constant and variable capital can be recognised in the apparent formation of the cost-price, the origin of the change in value, which occurs in the course of the production process, is shifted from variable capital to the capital as a whole. Because the price of labour power appears at one pole in the transformed form of wages, surplus value appears at the other pole in the transformed form of profit.¹⁵

Since surplus value appears here in the form of profit, as an excess over the total capital (c), then the rate of profit is = s / c (as opposed to the rate of surplus value, s / v). That is to say:

In surplus-value, the relationship between capital and labour is laid bare. In the relationship between capital and profit, i.e. between capital and surplus-value as it appears on the one hand as an excess over the cost price of the commodity realized in the circulation process and on the other hand as an excess determined more precisely by its relationship to the total capital, capital appears as a relationship to itself, a relationship in which it is distinguished, as an original sum of value, from another new value that it posits?⁶

If we denote the rate of profit by p’ and the rate of surplus value by s', we obtain the equation:

The rate of profit is thus a function of several variables. It is determined by two main factors: the rate of surplus value and the value composition of capital. A separate chapter (3) is devoted to the purely mathematical analysis of how the changes in these variables affect the rate of profit, while another chapter (4) investigates the effect of the turnover on the rate of profit. Chapter 5, of the first part, describes ‘economy in the use of constant capital’ and its importance for the level of the rate of profit. Given that the rate of profit, assuming a given surplus value, can only be increased by reducing the constant capital required for commodity production, the investigation of the factors that bring about such a reduction in the value of c is important: in addition to perpetual

improvement of machinery and diminution of the value (and thus of the cost) of the means of production, it is economy in the use of constant capital that chiefly comes into consideration here. It includes: savings in the conditions of work at the workers' expense, economy in generating and transmitting power and in buildings (the speeding-up of machinery, etc.), utilisation of the leftovers of production, and economy through inventions.

Finally, in the sixth chapter of this preparatory part, the effect of changes in price on the rate of profit is examined, with particular regard to the cotton crisis in 1861-5, while the last chapter of the first part is a collection of fragments brought together under the title ‘supplementary remarks'.

The second part (chapters 8-12, pp. 241-313) deals with the ‘transformation of profit into average profit’. It is well known that this ‘transformation' has been considered the great mystery that the third volume of Capital was supposed to elucidate above all. The so-called ‘riddle' of the average rate of profit prompted a number of writers to search for solutions after Engels posited this as a ‘task' in the preface to the second volume. The resulting ‘prize essays', none of which will be granted the full prize, have now been subjected to thorough criticism by Engels in the preface to the third volume.^{[440] [441] The familiar problem is again clarified in chapter 8 of this volume: how does it happen that equal capitals yield identical profits, despite having unequal organic compositions, if the surplus value is created only in proportion to the variable capital?}

The (self-evident) ‘solution' is this: unequal rates of profit would emerge if the commodities were sold at their values, but this is not the case: while a part of the commodities, those produced by capitals with a higher than average composition, are sold above their values, another part, produced by capitals with a below-average composition, will be sold below their values in the same proportion. From this arises an average rate of profit, as the hypothetical table on the following page shows (s / v = 100 percent).

According to Marx:

The prices that arise when the average of the different rates of profit is drawn from the different spheres of production, and this average is added to the cost prices of these different spheres of production, are the prices ofproduction.1⁹

The price of production includes the average profit. And what we call price of production is in fact the same thing that Adam Smith calls ‘natural price’, Ricardo ‘price of production’ or ‘cost of production’ and the Physiocrats prix necessaire^,, though none of these people explained the difference between price of production and value.^{20 21}

Thus although the capitalists in the different spheres of production get back on the sale of their commodities the capital values consumed to produce them, they do not secure the surplus-value and hence profit that is produced in their own sphere in connection with the production of these commodities. What they secure is only the surplus-value and hence profit that falls to the share of each aliquot part of the total social capital, when evenly distributed, from the total social surplus-value or profit produced in a given time by the social capital in all spheres of production... The various different capitals here are in the position of shareholders in a joint-stock company, in which the dividends are evenly distributed for each 100 units, and hence are distinguished, as far as the individual capitalists are concerned, only according to the size of the capital that each of them has put into the common enterprise, according to his relative participation in this common enterprise, according to the number of his shares?¹

Total profit and total surplus value are thus identical, and therefore ‘the average profit can be nothing other than the total mass of surplus value, distributed

between the masses of capital in each sphere of production in proportion to their size’.^{[442] [443] [444] [445]}

The ‘difficult question’ - ‘How does this equalisation lead to a general rate of profit?’2³ - is answered in chapter 10.

Here Marx takes as his starting point a condition of commodity exchange in which there is no capitalist production. In this situation, the goods would, under certain conditions/⁴ be exchanged in proportion to their values, and moreover in the normal case, in which supply and demand coincide, according to their market values, i.e. according to the individual values of the commod­ities produced under the average conditions of a particular sphere of produc­tion/⁵ But the discussion on the formation of the market values, which in the capitalist economic order correspond to the market prices of production, and of the market prices that deviate from them as a result of a change in the rela­tionship between supply and demand, contains little of interest for the solution to the question of the formation of a general rate of profit; they merely prepare the ground for it.

The solution is rather to be found in pages 296-9, particularly in this para­graph:

If commodities were sold at their values, however, this would mean very different rates of profit in the different spheres of production, as we have already explained, according to the differing organic composition of the masses of capital applied. Capital withdraws from a sphere with a low rate of profit and wends its way to others that yield higher profit. This constant migration, the distribution of capital between the different spheres according to where the profit rate is rising and where it is falling, is what produces a relationship between supply and demand such that the average profit is the same in the various different spheres; and values are therefore transformed into prices of production.^[446]

These observations contain ambiguities, about which I shall speak in my criti­cism.

Part Three (chapters 13-15, pp. 317-48) develops in the most brilliant way the ‘law of the tendential fall in the rate of profit’, which follows from the value and surplus value theory as a natural consequence. ‘The progressive tendency for the general rate of profit to fall is thus simply the expression, peculiar to the capitalist mode of production, of the progressive development of the social productivity of labour’/^[447] because this development presents itself under capitalism as a ‘progressive decline in the variable capital in relation to the constant capital, and hence in relation to the total capital as well’/^[448] The same rate of surplus value must thus be expressed in a falling rate of profit.

It is obvious that an increase in the mass of profit can be connected with a falling rate of profit. Marx undertakes to prove that they have to be connected in the capitalist economic system because, since its whole development leads to accumulation and therefore also to an increase in the number of workers, the mass of applied, and accordingly of unpaid, labour must also grow/^[449]

The same development of the productivity of social labour, the same laws that are evident in the relative fall in variable capital as a proportion of the total capital, and the accelerated accumulation that follows from this - while on the other hand this accumulation also reacts back to become the starting-point for a further development of productivity and a further rel­ative decline in the variable capital - this same development is expressed, leaving aside temporary fluctuations, in the progressive increase in the total labour-power applied and in the progressive growth in the absolute mass of surplus-value and therefore in profit.^[450]

If, says Marx, one considers the enormous development of the productive forces of social labour only in the last 30 years, one can only wonder that the fall in the rate of profit was not much greater and faster. In order to explain this phenomenon, he is forced to assume that opposing influences are at play, which thwart and abolish the effect of the general law. Marx enumerates a series of such ‘counteracting factors' in chapter 14.

But the vital conclusions for the theory of economic development are drawn from the law of the rate of profit, for the first time, in the significant chapter 15, dealing with the ‘development of the internal contradictions of the law'. Here we come across, alongside old acquaintances from Antl-Duhrlng, in which Engels anticipated some of the ideas developed here, some totally new ways of thinking that have a decisive influence on the theory of development. The rate of profit, through whose action the capitalist mode of production will be driven to its end, is now placed at the centre of the theory as the driving force.^{[451] [452] Thus, even if the basic ideas of the evolutionary theory have remained the same,32 the partially new details, in order to be understood, require a more detailed explanation and assessment than can be offered here.}

Of outstanding importance for the understanding of Marx’s economic sys­tem are the whole of part four and the first chapter of the fifth part [on interest­bearing capital].

Part Four (pp. 379-457) shows the transformation of commodity capital and money capital into commercial capital and money-dealing capital. ‘Commercial capital, then, is nothing but the transformed form of a portion of this circu­lation capital which is always to be found on the market, in the course of its metamorphosis, and perpetually confined to the circulation sphere’.³³ Com­modity capital becomes commercial or merchant’s capital through the fact that the function of the capital located in the circulation process generally assumes an independent existence and becomes fixed as a special function of a spe­cific capital, as a function assigned by the division of labour to a special class of capitalists.3^[453] We know from the second volume what the pure functions of cap­ital are in the sphere of circulation. These ‘pure functions’ are ‘the operations which the industrial capitalist has to undertake firstly to realize the value of his commodities, and secondly to transform this value back into the commodit­ies’ elements of production, the operations for effecting the metamorphoses of commodity capital, C'-M-C, i.e. the acts of sale and purchase’.^[454] The reason for the independence of these functions is the economy in intermediary trade^[455]

It is important to remind ourselves of the results of the investigations in the second volume of Capital, which are now elaborated upon.

The pure functions of capital in the circulation sphere create neither value nor surplus-value... What applies to the metamorphosis of com­modity capital as such is naturally not changed in any way when a part of this capital assumes the form of commercial, commodity-dealing cap­ital, and the operations which effect the metamorphosis of commodity capital come to appear as the special business of a special section of cap­italists, or as the exclusive function of one portion of the money capital... Commercial capital, therefore, stripped of all the heterogeneous func­tions that may be linked to it, such as storage, dispatch, transport, distri­bution and retailing, and confined to its true function of buying in order to sell, creates neither value nor surplus-value, but simply facilitates their realization, and with this also the actual exchange of the commodities, their transfer from one hand to another, society’s metabolic process^{[456] [457]}

However, since commercial capital, in order to operate, asserts a claim to the average profit, the surplus value allotted to it in the form of profit can only be a part of the surplus value created by so-called productive capital. Merchant’s capital appropriates this value by entering pro rata [at the same rate] into the formation of the average rate of profit with the rest of the capital^⁸ This means

A CONTRIBUTION TO THE CRITIQUE OF MARX’S ECONOMIC SYSTEM (1894) 179 that the prices at which the commodities are sold by the industrial capitalist class, when we consider the totality of the commodities, are smaller than their values, so that now the real value or price of production can be denoted as k + p + h (where h is the commercial profit). ‘The merchant’s sale price is higher than his purchase price not because it is above the total value, but rather because his purchase price is below this total value’.^[458]

Now, it is interesting to note the consequence that must be drawn from this view of commercial profit for the wages of the commercial employees - namely, that these wages can, in fact, be nothing other than a part of the surplus value produced by industrial capital; because no matter how much money the mer­chant may make out of their labour, these clerks do not produce surplus value for him but only help him to appropriate a portion of the surplus value that the ‘productive’ workers created.^[459] I believe, therefore, that it is misleading for Marx to speak about ‘variable’ capital and ‘unpaid’ labour when referring to the commercial wage-workers^[460] These terms must necessarily have a com­pletely different meaning here than when they are applied to the industrial wage-workers, who directly produce values and surplus value.

Money-dealing capital (chapter 19) - which arises from the fact that the purely technical movements made by money in the circulation processes as­sume an independent existence as the function of a specific capital - is then described in a form totally analogous to the commercial capital.

Part Four closes with an economic-historical overview of the development of merchant’s capital - to be sure a mere sketch, which in many respects has been superseded by newer research, but one that is still rich enough in brilliant ideas to be read with interest and to be of benefit to anyone.

In the following Part Five, which deals with the division of profit into interest and profit of enterprise, and with interest-bearing capital, the first chapters (21, 22, and 23) must, above all, claim our liveliest interest. Here the theory of interest and profit of enterprise are discussed in principle.

The theory of interest naturally follows from the theory of surplus value and profit. Interest is a portion of the profit that is paid by the functioning capital

to the owners of [money] capital as compensation for relinquishing the use­value of capital, whose useful property consists of the fact that it can be used for the production of surplus value.^[461] The ‘natural’ rate of interest is regulated by the supply and demand between the two kinds of capitalists, and its level is not determined by any law^{[462] [463] [464]}

What is left to profit, after the payment of interest, appears in qualitative determination as net profit or profit of enterprise, which now seems to be the result of capital as function vis-a-vis the interest rate as a product of capital as property.44 If the capitalist himself manages his company, the profit can include the wages of supervision and management^ an amount that appears, completely separated from profits, as administrative wages, both in the work­ers’ cooperative factories and in the capitalist joint-stock companies. It is self- evident that this work of supervision and management can be considered pro­ductive labour only to the extent that it must be performed in every combined mode of production, and insofar as it is determined by the historical form of the capitalist production process as a valorisation process.^[465]

The stately remainder of Part Five (except for a very informative final chapter [chapter 36 on pre-capitalist relations] dealing with economic history) is ded­icated to presenting the theory of banking and credit. We already pointed out at the beginning that this section was the child of sorrow in every respect. I doubt that it will make many friends in its present clumsy form. Those interested in the theory of economic systems will probably find Marx’s views on eco­nomic crises interesting. Those views are quite rich, but they are buried under a mass of raw material - pages-long extracts from English banking inquiries of the 1840s. The rest should be reviewed by a specialist in the theory of money and credit. For our purpose, which essentially consists of properly identify­ing and organising the converging threads of the Marxian system in the third volume, we can dispense with a rendition of this part and limit ourselves to remarking that it includes no fewer than 11 chapters extending over 212 pages^[466]

Part Six brings us the doctrine of ground rent (‘transformation of surplus profit into ground-rent’)^[467] It is self-evident that here, too, the prerequisite for the analysis is a purely capitalist organisation: it is necessary ‘to consider all the specific relationships of production and exchange that arise from the investment of capital on the land’^[468] Ground rent is simply referred to as ‘the autonomous, specific economic form of landed property on the basis of the capitalist mode of production’.^[469]

Thus it is not peculiar to ground-rent that agricultural products develop into values and as values, i.e. that they confront other commodities as commodities themselves and that the non-agricultural products confront them as commodities, nor that they develop as particular expressions of social labour. What is peculiar is that with the conditions in which the agricultural products develop as values (commodities), and with the conditions of realization of their values, landed property also develops the power to appropriate a growing part of these values created without its assistance, and a growing part of the surplus-value is transformed into ground-rent.^{[470] [471] [472] [473]}

Marx distinguishes between differential ground rent and absolute ground rent. Differential rent is a surplus profit resulting from the excess of the general price of production of commodities over their individual price of production^² but it is different from other surplus profits because it does not spring from capital as such, but from the disposal over a natural force separate from capital that is limited in its scope and can be monopolised.5³ Differential rent appears in a twofold form: as rent from capital investments in more fertile soils vis-a-vis less fertile ones, and as rent from more productively invested capitals on soils of a given fertility (Differential rent I and ιι).

Although Marx, in his theory of differential rent, takes over a large stock of ideas from the classics, more so than in other parts of his system, his own theory is by no means a mere paraphrase of the classical theory of ground rent. Apart from the fact that its particulars are illuminated by the central sun of his system, it seems to me that Marx has also performed a considerable service in further developing the traditional ideas. If I had to point out where I see a significant advance over Ricardo and his successors, it would be in his attempt to offer a quantitative assessment and determination of the mass of rent, of the ‘total rental’, and in the derivation from it of a rate of rent and the like;5⁴ but above all in the detailed proof of the mutual dependence and conditionality of differential rent I and ii upon each other.^{[474] [475] [476] [477] [478] To go into details about this is not the task of this review.}

That Marx, on the basis of his general economic theory, would arrive (as does Rodbertus, whose ‘important text on rent’5⁶ he mentions approvingly) at the existence of an ‘absolute ground rent’, i.e. of a rent yielded by the worst class of soil, was to be expected from the outset: his basing of the configuration of economic life on historically established social-power relations necessarily leads to this conclusion.

Legal ownership of land, by itself, does not give the proprietor any ground­rent. It certainly does give him the power, however, to withdraw his land from cultivation until economic conditions permit a valorization of it that yields him a surplus, whether the land is used for agriculture proper or for other productive purposes such as building, etc. He can neither increase nor reduce the absolute quantity of this field of occupation, but he can affect the quantity of it on the market^⁷

Landed property presents itself as a ‘barrier that does not permit any new capital investment on formerly uncultivated or unleased land without levying a toll'.5⁸

Finally, in order to integrate ground rent into Marx’s system, let us recall that every normal ground rent can only be a component part of the surplus value produced by agricultural capital. Where it does not arise (as differential rent does) from the difference between the market price of production and the individual value of the commodity, it can be explained (as in the case of absolute ground rent) only on the basis of the difference between the higher rate of profit prevalent in the sphere of agricultural production in general and the [lower] general rate of profit^⁹

Part Seven, the final section of the work, called ‘The revenues and their sources’^[479] corresponds to the ‘doctrine of distribution' in Say's system. In ac­cordance with the whole arrangement of Capital, it can only be of a polemical character: the ‘distribution' of the social product is described by Marx in con­nection with the doctrine of production and circulation.

Marx first turns, in chapter 48, against the absurdity of what he calls the ‘trinity formula', i.e. the standard distribution scheme: capital-interest, land­rent, labour-wages. It would make some sense, he says, to regard capital, land and labour as claims entitling their owners to a share of the national income; but if they are treated, as often happens, as sources of the annually disposable wealth, one commits first the error of equating quite disparate things, because the alleged sources are related to each other as notary fees are to red turnips and music. And furthermore, one commits the second error of addressing certain things or social relations as sources of wealth, instead of the living productive power [of labour]^¹ Thus chapter 49 criticises the mistake, which has never totally disappeared since Adam Smith, of resolving the prices of commodities into ground rent, profit and wages, as their component parts. Chapter 50 seeks to disprove the theory of the price-forming property of ground rent, profit and wages, while chapter 51 contains an aperςu of the historically conditioned char­acter of the capitalist mode of production and distribution. Finally, chapter 52, entitled ‘Classes', includes only two pages, followed by the concluding words from Engels: ‘At this point the manuscript breaks off'.

How much more we could have learned! As it stands, Capital is only a power­ful torso, and not just because the manuscript breaks off, but also because the previous paragraphs are not, as we know, the last word that Marx had to say. The final part, which seems once more to draw in broad strokes the main fea­tures of the system, makes an especially tired impression; it reflects all too well a decrease in the tremendous force of the author. For all the admirers of this genius, there is something melancholic to be able to feel, in such a palpable way, how a great spirit slowly advances towards his end.

III

We have thus gained an overview of the contents of the third volume. The next question that presents itself to us is this: what does this new part mean, what does it accomplish for the Marxian system? As our summary has already shown, entire aspects of this system are affected by the third volume. However, what captures our attention quite naturally is the key question for Karl Marx’s economic system: the value- and surplus value-, hence capital-theory. This theory was supposed to find its completion in the third volume; all those who could not suppress their reservations about Marx’s statements, especially those contained in the first volume, were referred to the analyses here.

Among many other objections to Marx’s theory of capital, we know that the most significant one claimed that this theory left the fact of an equal [rate of] profit unexplained, because it saw variable capital - a part that is of relatively unequal size in different capitals - as the only value-creating component of capital. Does the third volume solve this so-called mystery? And will the prin­cipal objection to the Marxian theory of capital thus be swept away?

I believe that, for the majority of readers, the third volume will have the same effect as the responses of job candidates usually have on the board of examiners: a general shaking of the head!

What do we find in the first two parts of volume three? To put it in one word: an entire production-cost- and profit-theory, with slightly different words from those we are accustomed to hear, but otherwise in the framework a conceptual construction that is not entirely different from the traditional one.

What does that mean for the theory of value? Does it mean a retreat by the author? Does it mean an inconsistency in the system, or what? Those Marx- interpreters who thought they already saw, in the value and surplus value theory of the first volume, merely a disguised cost of production theory (!), a ‘variant of the cost theory’, will not be overly surprised by those strange first two parts of the third volume. The majority, however, will not be inclined to consider the ‘solution’ to the ‘average rate of profit puzzle’, as it is now given, as a ‘solution’ at all; they will think that the Gordian knot has been cut but by no means unloosed. For if now an ‘ordinary’ cost of production theory has suddenly emerged from obscurity, that means that the famous theory of value has fallen by the wayside; if I must ultimately have recourse to production costs in order to account for the profit, then why the whole cumbersome apparatus of value and surplus value theory?

Still others will judge differently. They will see in the comments of the third volume something completely self-evident that could not have been otherwise once the previous two volumes were written. For them, of course, no ‘mystery’ of any kind has ever existed.

Whence this striking difference of judgement? To me it seems to be due to the different views on value and surplus value in Marx. The whole ‘mystery’ has its origin in the confusion that exists almost universally today regarding the Marxian concept of value and surplus value.^[480]

We shall only be able to gain a proper appreciation of the investigations of capital now contained in the third volume, therefore, if we are certain beforehand concerning the significance of value in Marx’s economic system.

First, this is clear: what in the first volume was indicated only occasionally has now been often and explicitly expressed in the third volume: value does not appear in the exchange ratio of the capitalistically-produced commodities. It does not indicate, for example, the point around which market prices fluc­tuate, towards which they gravitate; and ‘average prices’ do not by any means correspond to values. Rather, it is precisely the characteristic feature of the cap­italist mode of production that the commodities are not generally exchanged at their values, i.e. in proportion to the amounts of labour contained in them, and that it is instead pure coincidence if prices are equivalent to values^[481] The

A CONTRIBUTION TO THE CRITIQUE OF MARX’S ECONOMIC SYSTEM (1894) 187 ‘normal’ prices, or the amounts of money given for a commodity, thus represent an amount of value (labour) consistently different from the amount contained in the commodity. It is therefore possible, and it occurs often enough, that a price, and thus an amount of value expressed in money, is given to things that have absolutely no value, that is, those things that have cost no labour, such as land, or that cannot be reproduced through labour, such as antiques, art works of certain masters, etc.^[482]

Further: value does not live in the consciousness of capitalist agents of produc­tion: it by no means governs the calculations of the capitalist. But it plays just as little a role, for instance, as a distribution factor in the allocation of soci­ety’s annual product. It is, therefore, by no means a fact of consciousness of the buyers and sellers of commodities. Thus it is, in a word, not a ‘condition of eco­nomic activity’, to use Gerlach’s well-chosen expression. Indeed, if ‘value’ does not exist in the phenomenal world of the capitalistically-moulded economic life, does it have no existence at all? This conclusion would be premature. There is obviously still a refuge for the value that has thus been done away with - in the thoughts of the economic theorist. In fact, if we want to characterise Marx’s economic system with a catchword, it would be that its value is not an empirical but a conceptualfact.^[483]

But, having said that, we are still far from finishing our investigation. For the time being we have completely abstracted from the question: what is the value of this value? A more precise determination of that formal characterisation is still necessary.

First, then, the value-concept is a tool of our thinking, which we use to comprehend the phenomena of economic life; it is a logical^[484] fact. What the value-notion does here is to make the commodities, which are qualitatively different as useful goods, appear for us in quantitative determination. It is clear that I am fulfilling this postulate by considering cheese, silk and shoe polish as mere products of abstract human labour, and by correlating them only quantitatively as amounts of labour, whose magnitudes are determined by an equal third [factor] contained in them, measurable in periods of time^[485] Conrad Schmidt has already commented similarly on the role of Marx's value: ‘This concept of value is essential to our thinking if we want to understand the qualitatively different commodities as commensurable magnitudes, i.e. as they operate in exchange processes'. When he continues, however, Schmidt seems to me to want to place the value-notion in the consciousness of the exchanging agents: ‘Only as a gelatinous mass of homogeneous abstract human labour do the commodities themselves appear to be comparable; only in that way is it understandable that they can be equated in the exchange process in certain proportions to each other'^[486]

Does this mean that the value-notion must be assumed to exist in the consciousness of the exchanging agents in order to explain the implementation of the act of exchange? But then value would be a ‘condition of economic activity', while it previously appeared as if Schmidt had conceived the concept of value only as a ‘condition of economic thought' (I choose this somewhat incorrect turn of phrase in order to bring out more clearly the antithetical character of Gerlach's expression).

In its day, however, this meritorious if not yet entirely clear allusion of Schmidt to the meaning of value in Marx was enough to elicit a very read­able reply from the pen of Hugo Lande, in which he rejected with indignation Schmidt's interpretation of value with these words: ‘The law of value is not, as Schmidt seems to think, a law of thought, indispensable to make the qualitat­ively different commodities appear to us as commensurable quantities. Rather, the law of value has a very real nature; it is a natural law of human action; it is nothing more than an aspect of the law of competition’.^[487] Despite the disput­able character of Lande’s subsequent comments, and despite the fact that the ideas now developed in the third volume of Capital are closer to Schmidt’s than to his own conception, Lande is decidedly right against Schmidt when he says that the ‘law of value’ in Marx’s system definitely plays the role of a ‘natural law’ (in the famous Marxian sense^{[488] [489] [490] [491] [492]), if not exactly of a natural law of human action. Compare the following places (I quote only from the third volume on purpose):}

Whatever may be the ways in which the prices of different commodities are first established or fixed in relation to one another, the law of value governs their movement?¹

What competition does not show, however, is the determination of values that governs the movement of production; that it is values that stand behind the prices of production and ultimately determine them.7²

It is only as an inner law, a blind natural force vis-a-vis the individual agents, that the law of value operates here and that the social balance of production is asserted in the midst of accidental fluctuations?³

Now, is there not an irreconcilable contradiction between these two assertions: that ‘value’ in Marx is only a ‘tool of thought’ and that the ‘law of value’, as a ‘natural law’, ultimately determines the entire economic life of humankind? I think not.

Let us look at the ‘value-concept’ more closely?⁴ It consists of the fact that we represent to ourselves the commodities in their quantitative determination and in their mutual relationship - not as hard and heavy bodies, but as products of labour. But it is by no means indifferent that we give our concept of values precisely that content, because by doing so we are saying that we regard the commodities as products of social labour, [and that this is] the objectively most relevant economicfact in them. Clearly, the economic life of people, their mater­ial culture, is determined by the quantity of economic goods that they are able to dispose of in a given period; but again, apart from all the accompanying cir­cumstances and assuming equal natural conditions,^{[493] [494] this depends mainly on the development of the social productivity of labour. Now, this is first of all only a technical fact, and thus both qualitatively and quantitatively determined: it expresses the fact that a particular kind of labour, i.e. concrete, individual labour, is able to produce an amount of qualitatively determined goods in a given interval of time. By means of the value notion, I now obliterate the qual­itative differences in productive labour. By conceiving the goods as the embodi­ment of undifferentiated, abstract social labour, I do nothing else but give to the technical concept of productivity, or productive power, an adequate economic form, thus making it suitable for economic thinking?6 In Marx, the concept of value in its material determination is nothing but the economic expression for the fact of the social productivity of labour as the basis of economic existence.}

What about the ‘law of value'? In its formal determination, this law reads as follows: the value of the commodities ‘ultimately' governs the economic processes - in a capitalist economic system, of course.

If we apply this new definition to value, then the law of value, as a law of the capitalist economic system in the most general sense, has this content: the value of the commodities is the specific historical form in which the social productivity of labour, determining all the economic processes, ultimately asserts itself. It is the degree of social productivity of labour, its changes, etc., which, without the agents of production or any economically active individual being aware of it,

ultimately ‘decides’ about prices and the rate of surplus value - in short, the overall structure of economic life, setting strict limits to individual caprice. One can only correctly understand Marx’s system if one realises that at its centre stands the concept of productivity, which finds its economic expression in the value-concept.^{[495] [496] [497]}

Thus, a balance seems to have been struck between the opposite views embodied in Schmidt and Lande. The ‘value-concept’ is, indeed, an auxiliary agent of thought, but by making the subject of value an objective fact, crucial for economic life - the productivity of labour in its social determination - the ‘law of value’ actually becomes a ‘law’ governing the entire economic life, or perhaps it would be more correct to call it a ‘regulating principle’. The significance of Marx’s theory of value should, therefore, be sought in the fact that it has found the adequate economic expression for a technological fact, objectively governing the economic existence of human society.

Thus, the apparent contradiction in Marx’s system, according to which the ‘value of commodities’ neither appears nor is present in the consciousness of the economically active individuals, and yet ultimately regulates and governs the economic processes, also solves itself. We ‘experience’ nothing from value; it fulfils its role in a ‘secret’ way; it is the ‘hidden basis’ [of economic phenom­ena]/⁸ the ‘law of value’ is ‘an inner law’/⁹ etc.

If we grasp in this way the concept of value and the law of value in Marx, we will be able to understand the nature of surplus value easily. In order to understand that, it is only necessary for us to adopt the standpoint of an economically active society. The starting point [in the determination of value] is the overall social labour-time, ‘the total amount of labour which society has at its disposal’.⁸⁰ This social labour-time is expressed in a given amount of product, which represents a certain value⁸¹ Surplus-value is now, in its formal determination, the value of that amount of product constituting an excess over the other part of the social product, which is somehow set aside (left over); it is an objectification of the ‘surplus-labour’ of society. ‘Surplus-labour’ would also have to be performed, for example, in a socialist society, ‘as labour beyond the extent of given needs’; it would be ‘required as insurance against accidents and for the progressive extension of the reproduction process that is needed to keep pace with the development of needs and the progress of population’⁸²

But the peculiarity of the capitalist economic system consists precisely of the fact that a certain amount of social labour is appropriated by capital. This quantity of social labour, appropriated by capital, is the total surplus-labour (surplus value) in the capitalist sense⁸³ The only question is: is this amount

of value operates here and that the social balance of production is asserted in the midst of accidental fluctuations’ (ibid.)].

80 Marx 1992, p. 1022.

81 That the annual value of the product [Produktenwert] is actually greater than the annual value product [Wertprodukt], because it includes past labour, can be left out of considera­tion here. To develop the distinction between necessary labour and surplus labour, which is the only issue under consideration here, the value product can be identified with the value of the product (cf. Lexis 1885).

82 Marx 1992, p. 958. [It is worth noting that Marx spoke of surplus labour in Ancient Greece, Rome and similar communities:

‘The survival of the commune is the reproduction of all its members as self-sustaining peasants, whose surplus time belongs precisely to the commune, the work of war, etc. The property in one’s own labour is mediated by property in the condition of labour - the hide of land, guaranteed in turn by the existence of the commune, and that in turn by surplus labour in the form of military service etc. by the commune members. It is not cooperation in wealth-producing labour by means of which the commune member reproduces himself, but rather cooperation in the communal interests (imaginary and real), for the upholding of the association inwardly and outwardly’ (Marx 1992, p. 476)].

83 See, for example, this passage: ‘The average profit of the individual capitalist, or of any particular capital, is determined not by the surplus labour that this capital appropriates first-hand, but rather by the total surplus labour that the total capital appropriates, from which each particular capital simply draws its dividends as a proportional part of the total capital’ (Marx 1992, p. 742).

of social labour appropriated by the capitalists quantitatively determinable? Marx replies: yes; it is all the labour in excess of the necessary labour required for the maintenance and reproduction of labour power.^[498] The value of the total social product therefore splits into two parts: one part presents itself in that amount of products that is necessary for the maintenance, etc. of the product­ive workers, the other in the rest of the products, which are appropriated by the capitalist class^[499] The surplus value is therefore to be understood only as a ‘social fact’.

Now comes the further question: how can the amount of ‘necessary’ labour in the above sense be defined more closely? Obviously, a twofold determination is required here: first, the concept of necessary worker, of the ‘productive’ part of the population, must be determined; and then it is necessary to determine the amount of labour that must necessarily be expended for these productive workers.

Who are ‘productive’ in Marx’s sense? Those who create (add) value. But this merely raises the further question: who adds values?

An embryonic criticism of Marx says: the manual workers. This is, of course, wrong. Already, in the first volume of Capital, it is specifically stated that not only manual labour but also the work of supervision and management is productive^[500] In the third volume we learn more precisely that, while the ‘poor’ hard-working bookkeepers and clerks do not create values, and therefore are not ‘productive’ workers, the perhaps royally paid directors, the industrial managers (whom Marx calls ‘the soul of our industrial system’⁸⁷ [as opposed to the industrial capitalists]) can be productive workers.

The answer to our question, which we could have given with the help of the second volume (see, for example, chapter 6: the costs of circulation), is therefore this: productive = value-creating labour is that labour that is socially necessary for the production of use-values in the amounts corresponding to the respective social needs, labour that is thus not simply contingent on the peculiar historical character of the capitalist mode of production.

All the persons employed in the actual labour process, from the last worker to the manager of the enterprise (whose labour now appears as the ‘collective worker’88), all the individuals active in the storage, transportation, forwarding and retail sale of the products constitute the ‘productive’ value-creating work­force. The value of the part of the social product made by them represents the

the actual manipulation of the object of labour. With the progressive accentuation of the co-operative character of the labour process, there necessarily occurs a progressive extension of the concept of productive labour, and of the concept of the bearer of that labour, the productive worker. In order to work productively, it is no longer necessary for the individual himself to put his hand to the object; it is sufficient for him to be an organ of the collective labourer, and to perform any one of its subordinate functions. The definition of productive labour given above, the original definition, is derived from the nature of material production itself, and it remains correct for the collective labourer, considered as a whole. But it no longer holds good for each member taken individually.

‘Yet the concept of productive labour also becomes narrower. Capitalist production is not merely the production of commodities, it is, by its very essence, the production of surplus-value. The worker produces not for himself, but for capital. It is no longer suf­ficient, therefore, for him simply to produce. He must produce surplus-value. The only worker who is productive is one who produces surplus-value for the capitalist, or in other words contributes towards the self-valorization of capital. If we may take an example from outside the sphere of material production, a school-master is a productive worker when, in addition to belabouring the heads of his pupils, he works himself into the ground to enrich the owner of the school. That the latter has laid out his capital in a teaching factory, instead of a sausage factory, makes no difference to the relation. The concept of a productive worker therefore implies not merely a relation between the activity of work and its useful effect, between the worker and the product of his work, but also a specifically social rela­tion of production, a relation with a historical origin which stamps the worker as capital’s direct means of valorization’ (Marx 1976, pp. 643-4). [Marx’s most extensive treatment of productive and unproductive labour occurs in Addendum 12 in Marx 1963, pp. 389-413].

87 (Marx 1992, p. 510) [Marx quotes Ure’s Philosophy of Manufactures].

88 Marx 1976, p. 458.

A CONTRIBUTION TO THE CRITIQUE OF MARX’S ECONOMIC SYSTEM (1894) 195 ‘necessary’ labour-time. The part falling to the other persons represents the surplus value; in it, therefore, participate first of all the ‘workers’ contingent upon the historical character of the mode of production - thus the executives and managers of the production process, in its form as a valorisation process; further, all those persons performing purely circulation functions that only realise values; then the generally non-working recipients of rent- and interest­payments; and finally, of course, the social functionaries, such as clerks, physi­cians, preachers, etc.

The question now arises: how is the ‘necessary’ labour required for the main­tenance and reproduction of the productive workers determined? If we con­sider the totality of the productive workers as the collective labour power of society (and this notion, in its social form, is necessary throughout to under­stand Marx), this question overlaps with another one: what is the value­magnitude of the labour power? Out of place as the theory of a minimum sub­sistence level is in Marx, it arises [as a necessary result] when we consider the problem in relation to the social collective worker - which is, in my opinion, the only way of posing the question in Marx’s sense.

To be sure, in Marx’s system there is no need to presuppose a fixed min­imum magnitude of ‘necessary’ labour [i.e. the amount of labour destined to the maintenance and reproduction of productive workers]. That there is a tend­ency in the capitalist system of production to limit the majority of the workers to a certain minimum of means of subsistence is a separate question, which is extraneous to the structure of the economic system of Marx. That, as I under­stand it, requires only that the value of the labour power, at a given period and in a given country, can be assumed to be of a certain magnitude.

Marx now says again, explicitly in the third volume of Capital, that this value,

i. e. the average wage (imagine, for example, the total sum of wages and man­agers’ salaries paid annually in Germany divided by the number of recipients) is higher or lower than the ‘minimum subsistence level’ (incidentally, a term rarely used by Marx himself). See, for example, this passage:

The worker, finally, as owner and seller of his personal labour-power, receives under the name of wages a part of the product; in this there is expressed the portion of his labour that we call necessary labour, i.e. labour necessary for the maintenance and reproduction of this labour­power, whether the conditions of this maintenance and reproduction are poorer or richer, more favourable or less.^s9

89 Marx 1992, p. 960.

And further:

The actual value of his labour-power diverges from this physical min­imum [the daily necessary means of subsistence]; it differs according to climate and the level of social development; it depends not only on phys­ical needs but also on historically developed social needs, which become second nature. In each country, however, this governing average wage is a given quantity at a given time.^[501]

That is the point.

Let us now remember our starting point: we started from the problematic relationship of value and surplus value theory to the production-cost and profit theory, and we said that relations between the two would be divested of their enigmatic character as soon as the essence of value and surplus value, as Marx intended them to be understood, was clarified. The question is whether we have accomplished the task we set ourselves and thus reached the correct standpoint to appreciate the statements contained in the third volume of Capital. It seems to me that we have.

The first objection that can be raised is probably this: that formally pro­duction costs have nothing to do with values, and profit has nothing to do with surplus value. Value and surplus value establish and make accessible to our understanding, to borrow a common expression in Marx, ‘social facts' (the social productivity of labour - the relationship between social surplus value and necessary labour). Production costs and profit, on the other hand, are intrinsically empirical facts of individual, private gainful activity, calculations of the actual agents of production.

Since the prevailing economic order is characterised by its capitalist char­acter, i.e. by the fact that production is managed at the instigation of private capitalists, it is obvious that, in the calculation of the expenditure required to produce a given commodity, and of the profits that can be made thereby, the capital spent - or more accurately, advanced - is the only magnitude taken into account. The expenditure of labour is as indifferent to the capitalists as the concrete form of their commodities as use-values. Their only interest is the valorisation of their capital; what concerns them is value and surplus value, obtaining lucrative prices and profit.

What the commodity costs the capitalist, and what it actually does cost to produce it, are two completely different quantities... The capitalist cost of the commodity is measured by the expenditure of capital, [whereas the actual cost of the commodity is measured by the expenditure of labour].^[502]

The purely empirical character of profit, living in the consciousness of the agents of production as the purpose and goal of all production, is excellently expressed in Malthus’s sentence, quoted by Marx: ‘The capitalist... expects an equal profit upon all the parts of the capital which he advances’^{[503] [504]}

It is obvious, therefore, that the surplus value generated by individual capit­alists stands in no formal relationship to their profit. I was never able to under­stand how a reasonably sane man (which Marx was, despite everything) could be capable of such an absurdity as connecting the individually generated sur­plus value with profits. It would not be just a false theory, but pure and simple nonsense, to postulate some kind of relationship between individual surplus value and profit and to want artificially, for instance, to relate the huge capital invested in a blast furnace or an electric lighting system with the paltry chunks of surplus value that only the handful of employed workers supply, according to the Marxian theory...

However, despite all this, the value and surplus value theory has more than a decorative character in Marx’s system, as our previous presentation has made abundantly clear. It renders, as we have seen, a double service to this system:

1. It is a necessary condition to make the phenomena of the economic world accessible to our understanding.

2. It is the regulatory and determining instance of the economic processes; by means of it Marx introduces, if I am right, conformity to law in eco­nomic life.

There is, therefore, certainly a very important link between production prices and values, profits and surplus value materially.

Prices are ultimately determined by the expenditure that is socially neces­sary to produce the commodities^³ their ‘value’, which appears directly in the influence of the changing productivity of labour on the rise and fall of prices, on their movement.

Profits are regulated by the ratio of surplus-labour to necessary labour: the total surplus value equals total profit. Why, therefore, the rate of profit at a given moment is 20 percent and not 200 percent or 2,000 percent, necessarily depends on the total surplus value of society, which is divided between the capitalists, etc. It cannot be the object of this sketch to describe in detail the conditionality^ of economic phenomena following from the law of value and surplus value, for that would mean reproducing the Marxian system, whose content consists of nothing more than showing this conditionality.

If one clearly realises the position of the law of value in Marx's system, as I have tried to show it, one will understand what he meant by the often-repeated but seldom-understood statement that he did not want to offer a theory of economic phenomena, but to uncover the ‘inner' conformity to law of the capitalist economic order.

Marx also posited for political economy the proposition that science begins where common sense stops. He recalled the words of Hegel: ‘What the com­mon human understanding finds irrational is in fact rational, and what it finds rational is irrational'.^{[505] [506] According to Marx, ‘all science would be superfluous if the form of appearance of things directly coincided with their essence'^[507] and therefore ‘it is one of the tasks of science to reduce the visible and merely apparent movement to the actual inner movement^[508] The goal of Capital is, accordingly, not to present ‘the actual movement of competition' but rather ‘the internal organization of the capitalist mode of production, its ideal aver­age, as it were'[509] All these (in part not completely clear) expressions boil down to the same basic idea, which I have previously tried to sift out of his economic system.}

It is in this sense, lately, that I have always developed the economic theory of Marx, whenever there was a chance. The third volume of Capital gave me, in general, a loud and clear confirmation that my interpretation has been the correct one. Only the reading of particular passages has raised certain concerns for me. I do not know whether it is my poor understanding or the presence of certain ambiguities in Marx that brought about these concerns. Sometimes I got the impression that Marx had done away with the strict distinction between surplus value and profit, and wanted to establish a close relation between the two. This occurs, for example, in some remarks on the theory of ground rent, which I do not discuss here in detail, but above all in the doctrine of the equalisation of the general rate of profit by competition." Here one can get the impression that Marx believed not only in theory, i.e. in the construction of the scientific system - where it is, of course, totally warranted - but also empirically (or, as Marx says, ‘historically’) that the surplus value in an individual sphere of production was the point from which capitalist production originates; as if actually, as a result of the unequal organic composition of the capitals, at first unequal profit rates had appeared according to the law of value, and then the unequal profits gradually balanced out through the outflow and inflow of capital, until they became an average profit as a result of the correspondingly reduced or increased prices. If this was Marx’s opinion, it would be based, in my view, on a big mistake. It would be equally wrong, both logically and empirically: logically, because it would be a genuine break from all the leading ideas of Capital to throw together the social fact of the production of surplus value with the individual fact of costs.^{[510] [511] But it would also be empirically false, because development has never taken place in the manner described, nor does it take place in that way today. If it did, it would certainly be seen in operation in the case of at least every new branch of business. If this idea were true, in considering historically the advance of capitalism, one would have to think of it as first occupying those spheres in which living labour preponderated and where, therefore, the composition of capital was below the average (with little constant and much variable), and then as passing slowly into other spheres, according to the degree to which prices had fallen in those first spheres in consequence of overproduction. In a sphere having a preponderance of means of production over living labour, capitalism would naturally, at the beginning, have realised so small a profit - being limited to the surplus value created by the individual - that it would have had no inducement to enter into that sphere. But capitalist production, at the beginning of its historical development, occurs even to some extent in branches of production of the latter kind, mining, etc. Capital would have had no reason to leave the sphere of circulation, in which it was prospering, and to go into the sphere of production, without the prospect of a ‘customary profit’, which, be it observed, existed in commercial profit prior to any capitalistic production. But we can also show the error of the assumption from the other side. If extremely high profits were obtained, at the beginning of capitalist production, in the spheres having a preponderance of living labour, it would imply that all at once capital had made use of the class of producers concerned (who had up to that time been independent), as wage-earners; that is, let us say, at half the compensation they had hitherto procured, and had put the difference in the prices of the commodities, corresponding directly to the values, in its own pocket. Furthermore, it presupposes an altogether unrealistic idea: that capitalist production began with declassed individuals in some branches of production, which were totally new creations, and was therefore able to fix prices immediately according to the amounts of capital invested.}

But if the assumption of an empirical connection between rates of profit and rates of surplus value is false historically, that is, false as regards the beginning of capitalism, it is even more so as regards conditions in which the capitalistic system of production is fully developed. Whether the composition of a capital, by means of which trade is carried on today, is ever so high or ever so low, the prices of its products and the calculation (and realisation) of the profits are based solely on the outlay of capital.

If at all times, earlier as well as today, capitals did, as a matter of fact, pass continually from one sphere of production into another, the main cause of this would certainly lie in the inequality of their profit rates. But this inequality most surely proceeds not from the organic composition of the capitals, but from some cause connected with competition. Those branches of production that today flourish more than any others are precisely those with capitals of very high composition, such as mining, chemical factories, breweries, steam mills, etc. Are these the spheres from which capitals have withdrawn and migrated until production has been proportionately limited and prices have risen?

No matter how one approaches this question, the assumption that profit rates have been formed in connection with the rates of surplus value, that they are somehow empirically connected, is against the actual development of things.

I repeat: such a hypothesis, which Marx seems to make in chapter 10 of the third volume of Capital - as I said, his language is not free from ambiguity - is not only unnecessary and useless for Marx's economic system: it would really mean a flaw in the system if we were to retain it. Theoretically, of course, we need to proceed from the rate of surplus value in order to reach the profit rate, but empirically we certainly do not have to do that. Those ‘equalisations' of high and low rates of profit, among capitals of different organic composition,

101 [Marx 1992, Chapter 10: The Equalization of the General Rate of Profit through Competi­tion. Market Prices and Market Values. Surplus Profit, pp. 273-301].

A CONTRIBUTION TO THE CRITIQUE OF MARX’S ECONOMIC SYSTEM (1894) 201 into an average rate of profit are mental operations, but no events of real life. I shall therefore assume that this was also Marx’s opinion, as long as Engels does not affirm the contrary.^[512] But, even in that case, I would see in this point an imperfection, an inconsistency in Marx’s train of thought, which he would probably have overcome had he been given the opportunity to complete his work.

ιv

At the beginning of this study, I already said that to offer right now a somehow exhaustive critique of the Marxian system would be an almost impossible task. At any rate, I do not consider myself at all appointed to do that at the moment.

Not that I believe that Marxism is not open to criticism in general. Certainly it lays itself open to attack on several fronts. But, in my opinion, this criticism should consist of a further development, not a ‘rebuttal’. That can be left to someone with political ambition; for the scholar, the question is surely not to ‘refute’ any well-grounded system. Have Quesnay, Smith, Ricardo and all the other leading thinkers been perhaps ‘refuted’? They have accomplished their task; they made a contribution to the development of science; their mistakes have been forgotten and their truths have been turned to account. The same will happen with Marx. Yes, we can look forward to the battle that will break out around Marxism, which is one of the most imposing systems of political economy. There will be a happy race; the spirits of the marginal utility theorists will finally awake from their slumber, they will even clash violently. But it is just excellent that there should be disputes in majorem scientiae gloriam [‘to the greater glory of science’].

There are some colleagues, especially among the elderly, who will be unable to suppress a smile at these words. They will ask whether it is really serious to bring back from the dead a long-buried ghost like Karl Marx, and to make his ten times ‘refuted’ system the object of criticism; indeed, to want to place it at the centre of scientific discussion. Well, we younger ones will see to it that their laughter passes away gradually. We believe that we are not at the end but precisely at the beginning of the Marx-critique. And we are not quite able to suppress our wonderment at the fact that people have already wanted to talk about a ‘criticism’ at all - before the system was completed!

Of course, if the incipient new critique of Marx is to acquire the positive character that every major dispute of scientific opinions has, a prior condition must necessarily be fulfilled: one should first correctly understand Marx and argue only over what he meant, not about what he might have meant. It is a very unpleasant and thankless task to have to establish, in every criticism, only the quid pro quos [misunderstandings] that the critic in question is guilty of in his representation of Marx's thought. I consider, therefore, a brief outline of the basic ideas of the economic system of Marx not to be superfluous.

If people take the trouble, before offering a criticism of Marx, of first going into the spirit of Marxism, we must hopefully expect that, to begin with, all the mostly false traditional objections raised against Marx, which for almost thirty years now have been adorning our textbooks, will recede into the realm of shad­ows. Now I shall review briefly a certain ‘well-known throng',^{[513] [514] hoping for its imminent downfall, and I sincerely urge the respective fathers or adoptive fath­ers of these wayward spiritual offspring not to miss any suitable opportunity to bury them as deeply as possible. For ease of reference, I quote several passages from the third volume of Capital, in which the necessary information about these ‘issues' can be obtained. I limit myself, as elsewhere in this study, to the economic system of Marx, leaving out of consideration both the philosophical foundations of Marxism and its peculiar theory of economic and social devel­opment.}

1. At the head [of the objections against Marx] marches a proposition that has almost become a dogma and has achieved vested rights in all the traditional histories of political economy: that Marx, like all the ‘scientific socialists', is indeed significant for the ‘criticism' of political economy but not for the ‘posit­ive development' of science.^ω41 could never quite understand this. In my view, in addition to the Austrian school, it is above all ‘scientific socialism' that comes precisely into consideration for the ‘positive development of economic theory'. At any rate, it has left behind a firmly established system...

This is obviously an issue that cannot be settled with a couple of quotations: I go into it here only because I consider it the πρωτου φευδος [first fallacy] of the traditional critique of Marx, from whose erroneous nature many misunder­standings have followed.

2. The assertion that Marx had no understanding of the benefits of capitalism, of the historical contingency and historical justification of the capitalist eco­nomic order and, therefore, of the personal ‘accomplishments’ of the capital­ists, can be even more briefly rejected. Have people never read the dithyrambic glorification of the historical mission of capitalism even in the Communist Manifesto? In the meantime, however, I just want to pick up a few passages from the third volume of Capital. Compare, for instance,^{[515] [516] [517] page 736, where credit is referred to as the means to absorb the best (!) people of the dominated classes into the dominant class (the bourgeoisie);W6}

It is one of the great results of the capitalist mode of production that on the one hand it transforms agriculture from a merely empirical set of proced­ures, mechanically handed down and practised by the most undeveloped portion of society, into a conscious scientific application of agronomy, in so far as this is at all possible within the conditions of private property^ω7

Thejustificationfor landed property, as that for all other forms of property, of a particular mode of production, is that the mode of production itself possesses a transitory historical necessity, and so too therefore do the relations of production and exchange that arise from it.^{[518] [519] [520] [521]}

[The title] was entirely created by the relations of production. Once these have reached the point where they have to be sloughed off, then the material source, the economically and historicallyjustified source of the title that arisesfrom the process of life’s social production, disappears, and with it all transactions based on it.^ω9

It is one of the civilizing aspects of capital that it extorts this surplus labour in a manner and in conditions that are more advantageous to social relations and to the creation of elements for a new and higher formation than was the case under the earlier forms of slavery; serfdom, etc.™

3. In dealing with technical development, Marx overlooked the great influence exerted by the ‘conformation of the market’ on modern economic life. If that is meant historically, it is based on an inaccurate knowledge of Marx. One need only think about the places in the Communist Manifesto where the influence on production of the enlargement of the market is discussed. Besides, one can now read, for instance, Chapter 20 of the third volume of Capital, entitled ‘Historical Material on Merchant’s Capital'. Certainly Marx has - I think quite correctly - pointed out with equal force that capitalist production itself, for the most part, creates the market. He literally describes the ‘establishment of the world market’ as one of the ‘three cardinal facts about capitalist production’.™ If, however, people with that objection want to refer to the peculiar conformation of the economic system, they are only saying that Marx intentionally left competition out of consideration. The question then arises: by what right did he do that? This question can only be answered in terms of the epistemological value of the method he followed.

We must now mention, among the traditional ‘objections’, those concerning the theory of value.

4. The theory of value is wrong because the commodities cannot, as has been proved, be exchanged in proportion to the amounts of labour contained in them; in a word, value is not empirical. On this issue see the remarks contained in this study.

5. Qualitatively different labours cannot be reduced to abstract labour. This problem sorts itself out as soon as people regard ‘value’ as a social fact, that is, as an economic expression of social productivity.

6. Marx asserts that only manual labour is ‘productive’. On this see the passages quoted above on manual labour.

7. The theory of value ‘abstracts’ from the use-value of the commodities. On this see now, among other passages:

This is in fact the law of value as it makes itself felt, not in relation to the individual commodities or articles, but rather to the total products at a given time of particular spheres of social production autonomized by the division of labour; so that not only is no more labour-time devoted to each individual commodity than necessary, but out of the total social labour­time only the proportionate quantity needed is devoted to the various types of commodity. Use-value still remains a condition.^[522]

The social need, i.e. the use-value on the social scale, here appears decis­ive for the quota of total social labour-time that falls to the share of the various particular spheres of production. But this is simply the same law that is already exhibited by the individual commodity, i.e. that its use­value is the precondition of its exchange-value and hence of its value^{[523] [524]}

Use-value is altogether the bearer of exchange-value but not its cause.ⁿ⁴ Most hard-pressed of all, I am afraid, will be those who want to refute the theory of value and capital for ‘moral’ reasons, because this objection is based on a seem­ingly ineradicable error: that the concepts of value, surplus value, exploitation, etc. have in Marx an ethical and not a purely economic content. Many blows will still have to be struck before this misunderstanding is definitely buried.

Perhaps the reading of the third volume of Capital will contribute signific­antly to a correct understanding of the nature of those categories. In order to illustrate the ‘ethical’ character of Marx's theory of surplus value, I shall content myself in the meantime by presenting to the reader a passage from the third volume, which indicates that it is not just the wage-workers who are shame­fully ‘exploited’ and vilely deprived of a part of what they ‘deserve’ but also - listen carefully - the capitalists!

Just as the functioning capitalist pumps out surplus labour from the worker, and thus surplus-value and surplus product in the form of profit, so the landowner pumps out a part of this surplus-value or surplus profit in turn from the capitalist in the form of rent, according to the laws developed earlier.^{[525] [526] [527] [528]}

But enough of that. It was not my intention to give here an exhaustive review of the previous criticism of Marx, any more than I can, or want to, offer my own criticism.

I simply intended to postulate, in connection with the review of the third volume of Capital, some perhaps not entirely superfluous principles for the future critique of Marx. In conclusion, therefore, I would like to make the following remarks.

We shall have to understand Marx methodologically better than before, not just ‘dogmatically’; i.e. we must be more clearly aware than before of the sharp contrast between Marx’s form of apprehension [Aufassungsweise], his ‘formulation of the problems’, and the dominant way of thinking.

What, then, did Marx have in mind when he constructed his economic sys­tem? He described the ‘ultimate aim’ of Capital as ‘to reveal the economic law of motion of modern society’.ⁿ⁶ For this purpose, he sought to uncover in his economic system the social relationships in which the individual economic existence is embedded - to reveal economically, as it were, the relations of dependency. For him, the question was to find the ‘economic conditions which are independent’^'' of the individual’s will, in order to determine what ‘goes on behind his back, by virtue of relations independent of him’.ⁿ⁸ In order to illus­trate this with an example, let us take Marx’s explanation of the formation of prices. It never occurred to him to look for the individual motives of the per­sons exchanging, or even to proceed from the cost-of-production calculation. No, his train of thought was this: prices are formed by competition; as to how,

A CONTRIBUTION TO THE CRITIQUE OF MARX’S ECONOMIC SYSTEM (1894) 207 that remains to be seen. But competition itself is regulated by the rate of profit, the profit rate by the rate of surplus value, and this by value, which is itself the expression of a socially determined fact, of the social productivity. [This suc­cession] now presents itself in Marx’s system in reverse order: value - surplus value - profit - competition - prices, etc. If we wanted a catchphrase, we could say: the question for Marx is never the motivation, but always the limitation of the individual caprice of economic agents.

This can be summarised in one word: Marx’s economic system is charac­terised by an extreme objectivism. Here, into the Marxian system, emptied the stream that emanated from Quesnay and continued to flow via Ricardo to Rodbertus: the strictly objectivist view of the economy, which has its starting point in the economically active society and (formally) returns to it, seeking to uncover the social connections that in the last (material) instance are decisive for the individual economic sectors^{[529] [530] and the economic processes.}

The subjectivist tendency is the opposite: it ultimately attempts to explain the processes of economic life from the psyche of economic subjects, and it looks to psychological motivation for the conformity of economic life to law. Its natural starting point is the needy, or exchanging, single man - Hasbach has nicely revealed to us the historical origins of this way of thinking in the natural­law doctrine of the society based on exchange - and its leading concept, if it is reasonably consistent, is utility. It is a stream that sprang up early, but whose most powerful flows ran through the systems of Turgot and Adam Smith; a cur­rent that incorporated almost the entire dominant political economy, even if it has experienced in the Austrians its most consistent development. The current state of economic theory seems to be essentially determined by the prevail­ing subjectivism, which naturally empties into psychologism?²⁰ Everywhere, the ‘motivation’ of the (individual) economic action occupies centre stage in their system. The question here is not to decide whether subjectivist econom­ics (described as historical, ethical, organic, abstract, traditional or otherwise) has a bright future, or whether it stands at the end of its development and is about to wind up, bequeathing its possessions now to history, now to psycho-

logy. It is only necessary to point out that two worlds of economic thought exist side by side, almost independently of each other; two kinds of scientific obser­vation, which have nothing more than the name in common. And it cannot be ruled out, I think, that all the partial and complete, more or less justified, more or less clear, more or less hackneyed contradictions in our schools, which have come up for discussion so often lately, will ultimately resolve themselves in this methodologically paramount opposition of objectivism and subjectivism.

Only full awareness of this contradiction will make a fruitful critique of Marx possible. Is it a coincidence that people have overlooked for so long this peculiarity of Marx's system - namely, the fact that he is a typical representative of objectivist political economy? For the most part, I think that the layout of Marx's Capital itself is to blame for that. People have overlooked its strictly objectivist core because it is presented in an extremely subjective dress! Let us recall the boisterous manner in which Marx lets the capitalist behave in the first volume as a ‘character',^{[531] [532] and we will find it understandable that his contemporaries, accustomed to subjectivist thinking, could see in his system nothing more than what the other presentations of political economy offered: an economic order developed out of the feelings, impulses, judgements, etc. of the subject.}

It is obvious that people could not thus reach their goal, either in their assessment or in their criticism of Marx's system, because the problems, on whose solution the decisions on further questions depended, were not posed. I think that one should try to offer an evaluation and critique of Marx's system in the following way: is the objectivist tendency in economic science entitled to be exclusive or complementary? If we choose the former answer,122 we should

A CONTRIBUTION TO THE CRITIQUE OF MARX’S ECONOMIC SYSTEM (1894) 209 further ask: is the Marxist method of quantitative determination of economic facts, through the intellectual tool of the concept of value, imperative? If so, is labour the correctly chosen content of the concept of value? In other words: is the social productivity, consequently analysed, just as much the principle of objectivist political economy as the utility of the subjectivists? If so, are Marx’s reasoning, the structure of his system, his inferences, etc. contestable? Only then can the individual parts of the theory be tested in the corresponding order.

If these lines contribute even a little to turn the critique of Marx into more orderly channels, their purpose will be fulfilled.

Appendix: Engels to Werner Sombart in Breslau, London, 11 March 1895

Source: Karl Marx and Frederick Engels, Selected Correspondence (Moscow: Progress Publishers, 1965, pp. 479-81).

Dear Sir,

Replying to your note of the 14th of last month may I thank you for your kindness in sending me your work on Marx; I had already read it with great interest in the issue of the Archιiv^va which Dr. H. Braun was good enough to send me, and was pleased for once to find such understanding of Capital at a German University. Naturally I can’t altogether agree with the wording in which you render Marx’s exposition. Especially the definitions of the concept of value which you give on pages 576 and 577 seem to me to be rather all­embracing: I would first limit them historically by explicitly restricting them to the economic phase in which alone value has up to now been known, and could only have been known, namely, the forms of society in which commodity exchange, or commodity production, exists; in primitive communism value was unknown. And secondly it seems to me that the concept could also be defined in a narrower sense. But this would lead too far, in the main you are quite right.

Then, however, on page 586, you appeal directly to me, and the jovial manner with which you hold a pistol to my head made me laugh. But you need not worry, I shall ‘not assure you of the contrary’. The logical sequence by which ^[533]

Marx deduces the general and equal rate of profit from the different values of s / c = s / (c + v) produced in various capitalist enterprises is completely foreign to the mind of the individual capitalist. Inasmuch as it has a historical parallel, that is to say, as far as it exists in reality outside our heads, it manifests itself for instance in the fact that certain parts of the surplus value produced by capitalist A over and above the rate of profit, or above his share of the total surplus value, are transferred to the pocket of capitalist B whose output of surplus value remains as a rule below the customary dividend. But this process takes place objectively, in the things, unconsciously, and we can only now estimate how much work was required in order to achieve a proper understanding of these matters. If the conscious co-operation of the individual capitalists had been necessary to establish the average rate of profit, if the individual capitalist had known that he produces surplus value and how much of it, and that frequently he has to hand over part of his surplus value, then the relationship between surplus value and profit would have been fairly obvious from the outset and would presumably have already been described by Adam Smith, if not Petty.

According to Marx's views all history up to now, in the case of big events, has come about unconsciously, that is, the events and their further consequences have not been intended; the ordinary actors in history have either wanted to achieve something different, or else what they achieved has led to quite dif­ferent unforeseeable consequences. Applied to the economic sphere: the indi­vidual capitalists, each on his own, chase after the biggest profit. Bourgeois eco­nomy discovers that this race in which every one chases after the bigger profit results in the general and equal rate of profit, the approximately equal ratio of profit for each one. Neither the capitalists nor the bourgeois economists, however, realise that the goal of this race is the uniform proportional distribu­tion of the total surplus value calculated on the total capital.

But how has the equalisation been brought about in reality? This is a very interesting point, about which Marx himself does not say much. But his way of viewing things is not a doctrine but a method. It does not provide ready-made dogmas, but criteria for further research and the method for this research. Here therefore a certain amount of work has to be carried out, since Marx did not elaborate it himself in his first draft. First of all we have here the statements on pages 153-6, iii, I,^[534] which are also important for your rendering of the concept of value and which prove that the concept has or had more reality than you ascribe to it. When commodity exchange began, when products gradually turned into commodities, they were exchanged approximately according to their value. It was the amount of labour expended on two objects which provided the only standard for their quantitative comparison. Thus value had a direct and real existence at that time. We know that this direct realisation of value in exchange ceased and that now it no longer happens. And I believe that it won’t be particularly difficult for you to trace the intermediate links, at least in general outline, that lead from directly real value to the value of the capitalist mode of production, which is so thoroughly hidden that our economists can calmly deny its existence. A genuinely historical exposition of these processes, which does indeed require thorough research but in return promises amply rewarding results, would be a very valuable supplement to Capital^²⁵

Finally, I must also thank you for the high opinion which you have formed of me if you consider that I could have made something better of volume iii. I cannot share your opinion, and believe I have done my duty by presenting Marx in Marx’s words, even at the risk of requiring the reader to do a bit more thinking for himself.

Yours very respectfully,

F. Engels

125 [Engels himself dealt with the subject in ‘Erganzung und Nachtrag zum iii. Buche des ‘Kapital’ I. Wertgezetz und Profitrate’ (‘Supplement to Capital, Volume Three, I. Law of Value and Rate of Profit’), which he wrote in the spring of 1895 (see Marx 1992, pp. 1028- 45)]∙