DOCUMENT 3 ‘The Poverty of Philosophy’ and ‘Capital’ (1886)

Karl Kautsky

Source: Karl Kautsky, ‘“Das Elend der Philosophic” und “Das Kapital’”, DieNeue Zeit, 4 (1886), H. 1-5, pp. 7-19,49-58,117-29,157-65 (Parts iii and ιv).

Introduction by the Editors

The second volume of Capital was published in 1885 and reviewed by Karl Kautsky in Die Neue Zeit, together with the first German edition of The Poverty of Philosophy, which had been translated from the original French edition by Kautsky and Eduard Bernstein.

What is peculiar in Marx's theory of value is not the reduction of value to labour but the presentation of value as an historical category, on the one hand, and as a social relation, on the other, which can only be derived from the social functions and not from the natural properties of the commodity. That is what nobody before Marx had done, and that is what we regard as the distinguishing trait peculiar to Marx.^[382]

Kautsky offered the following description of Marx's ‘characteristic method':

We clearly see in Capital his conception of economic categories as histor­ical, on the one hand, and as purely social relations, on the other, sharply distinguishing them from their underlying natural forms and deducing their peculiarities from the observation of their movement, their func­tions, not from their respective outward manifestations: in a word, his development of economic categories from the development and move­ment of social relations. As against the fetishism peculiar to bourgeois economics, which turns the social, economic character that things get stamped with in the social production process into a natural character springing from the material nature of those things, Marx declares: ‘What is at issue here is not a set of definitions under which things are to be sub­sumed.

Recapitulating Marx’s arguments in the first volume of Capital, Kautsky traced this twofold character of commodities to the twofold nature of the labour invested in producing them:

After Marx rigorously distinguished the social character of the commod­ity from the natural form of the good, he sets about to make an equally important distinction in labour itself: on the one hand the [concrete] labour that determines the natural form of the substance, and on the other hand [abstract] labour as a social element in its social context. Only in the latter sense does labour generate value.^[384]

Kautsky also emphasised that the development of economic categories in Marx follows both a logical and an historical order:

The development that he offers in Capital is not merely a logical but also an historical one. The simple, the expanded, the general form of value and finally money follow one another not only logically, but also historically.^[385]

Our translation of Kautsky’s essay begins with his review of the second volume of Capital, which Frederick Engels edited and published after Marx’s death in 1883. Working from Marx’s manuscripts, Engels completed the work as he believed Marx had intended, but he was also the first to admit that the second volume lacked the high drama of the first. In private correspondence, Engels commented that ‘The second volume is purely scientific, only dealing with questions from one bourgeois to another¹, that is, with the circulation of com­modities rather than with production. In 1885 he wrote in another letter: ‘The second volume will provoke great disappointment, being a purely scientific work with little in the way of agitation’.^[386]

Karl Kautsky shared Engels’s reaction. In his review he wrote that ‘the re­marks of the second volume leave us partly dissatisfied: they provide us with the solutions to many riddles, but at the same time they show us new problems.

Even those whom Marx primarily addressed in his writings, the workers, will not greet the second volume with the same enthusiasm as the first. The scene for the investigations of the first volume is the factory, that of the second is the comptoir [cashier’s desk]. The first volume dealt for the most part with conditions close to the workers, with which they are intim­ately familiar. The second volume deals with abstractions from facts that are distant from the workers, and which arouse in them relatively little interest.What they first of all experience is the way in which surplus-value is produced [the theme of the first volume]. The kind of transformations that surplus-value experiences, and how it is realised - these are ques­tions much closer to the capitalists than to the workers.

Kautsky, like many other readers, was particularly distressed by the fact that Volume ii did not address the problem of the transformation of surplus value into profit. This meant that the work was still written at a level of abstraction several steps removed from concrete capitalism. In terms of Marx’s comments on methodology, written when he was preparing his Contribution to the Critique ofPolitical Economy, Volume ii had yet to complete the journey ‘in the opposite direction’ - back from such fundamental categories as commodity, abstract labour and exchange-value to capitalism as a concrete whole.

Although Volume ii did not complete that journey, it did, as Kautsky was quite aware, set out the conceptual framework for doing so. Most import­antly, Marx’s analysis of the ‘metamorphoses’ and ‘turnover’ of capital provided numerous important insights into the causes and inevitability of cyclical cri­ses - a ‘welcome haven’, as Kautsky commented, in a book that otherwise ‘makes the greatest demands on the reader’s attention and power of abstrac­tion’.

Marx was the first to provide the elements of a systematic theory of the cap­italist business cycle, even though he did not ultimately tie them together in a single coherent work. His schemes of reproduction - in Section ill of the second volume of Capital, and particularly in chapter 21, dealing with ‘Accu­mulation and Reproduction on an Expanded Scale' - explained the require­ments for crisis-free reproduction of the total social capital and, by implication, the numerous possibilities of critical ‘disproportions' between capital's various components. In this context, Marx returned from exchange-value in general to the question of use-values, or what Kautsky described as ‘the natural proper­ties of the commodity'. Reproduction of the total social capital involved what is produced in different sectors of the economy and how the latter relate to one another, not simply the value of what is produced. While the analysis still dealt with values rather than prices, Volume ii had lasting effects that Kautsky could not anticipate.

Besides providing some of the essential tools for investigating cyclical cri­ses - see, for example, part iv of Rudolf Hilferding's Finance Capital^[387] - the second volume of Capital also provoked some of the great Marxist debates in the years preceding World War i. Lenin cited the reproduction schemes in his quarrel with Russian Narodniks over the development of capitalism in Russia. In the same debate, Lenin also anticipated the principal theme of one of the most famous contributions to the theory of imperialism, Rosa Luxemburg's The Accumulation of Capital (1913). Luxemburg's book originated in her own critique of Marx's argument, in the second volume of Capital, that it was theoretically possible to realise the entire social product within a self-contained capitalist whole, without reliance on ‘third parties' as non-capitalist sources of effective demand.^[388] Luxemburg denied that possibility and instead explained imperialist expansion in terms of capitalism's compulsive need to conquer new markets for the sale of commodities.

‘The Poverty of Philosophy' and ‘Capital' (Karl Kautsky)

III

Capital, as self-valorizing value, does not just comprise class relations, a definite social character that depends on the existence of labour as wage­labour. It is a movement, a circulatory process through different stages, which itself in turn includes three different forms of the circulatory pro­cess. Hence it can only be grasped as a movement, and not as a static thing.^[389]

This sentence, which is found in the second volume of Capital, is highly char­acteristic of the work. Here we find, in conformity with the subject matter, the peculiarities of the Marxian method expressed perhaps even more sharply than in the first volume. Everything is in constant flux, constant motion, and can only be seen as a movement.

But again, any economic movement can itself be understood only as a his­torically determined movement. The exchange of products (simple commodity circulation), mediated by money, developed commodity circulation, trade, and circulation of capital, are different processes with some common but also many quite different characteristics. Vulgar economy throws them all together. Just as it derives the functions of capital in the production process from the stock of the isolated imaginary savage, so it deduces the functions of capital in the circulation process from primitive exchange. Marx not only keeps these two functions of capital and simple commodity circulation strictly separate; in the second volume he also gives us the historical development and the historical tendencies of capital’s circulation process.

Logically and historically, the circulation process of capital developed from the circulation of commodities: in order to understand it, we must therefore go back to the third chapter of the first section of the first volume, which deals with the circulation of commodities. If we denote the commodity by c and money by M, we find its formula to be C-M-C. People sell one commodity to buy another.

Simple commodity circulation leads to developed commodity circulation, to trade. Now people no longer sell in order to buy, but buy in order to sell. The merchant buys commodities, such as grain, to sell them again. The formula for circulation is now M-C-M.

This formula seems pointless. In the circuit C-M-C the physical body of the commodity that concludes it is different from the one that begins it. The value of the latter is, under normal circumstances, the same as the former, but its use­value is different. ‘Consumption, the satisfaction of needs, in short use-value, is therefore the final goal' of this circuit.^[390] To this circuit applies, under certain conditions (namely when both parties buy goods from each other, so that everyone is both a buyer and a seller), what vulgar economics unconditionally asserts about every commodity circuit: that both buyers and sellers gain by it. Both sell commodities useless to them as use-values, and obtain goods that they need to use. It is otherwise, however, with the circuit M-C-M. I give away money and eventually get the money back. This operation is meaningless if the M at the end is not quantitatively different from the M at the beginning; the merchant buys cheap to sell dear. For the formula M-C-M not to be pointless, it must, therefore, strictly speaking, be m-c-m', where m' = M + g, the original sum of money plus an increment (Zuwachs: growth). This increment, which Marx, as is well known, called surplus value, turns the originally advanced amount of money M into capital.

m-c-m' is thus the formula of the circulation of money capital. Originally it was the formula of the merchant’s capital, which can only appropriate sur­plus value by purchasing under the value or selling above the value [of the commodities], i.e. by a violation of the law of value peculiar to commodity pro­duction. That is why Franklin said: ‘war is robbery, commerce is cheating’.^[391] But then a new commodity comes into the market, labour power, which during its activity not only reproduces its own value, but produces more surplus value. Whoever buys this commodity and productively consumes it, that is, applies it to the production of commodities, therewith has the opportunity to produce surplus value, even if everything takes place normally, that is, even if all com­modities, including the commodity labour power, are bought and sold exactly at their value. The surplus value no longer arises, as in commercial capital, by a violation of the basic law of commodity circulation and exchange, according to which equal values are exchanged against each other, but precisely on the foundations of that law. With the development of industrial capital, therefore, begins the kingdom of eternal justice and equality, after trade and usury defied it so disdainfully.

Here is the point where Marx, in the first volume of Capital, turns to invest­igate the production process of capital, the production of surplus value. He continues the investigation in the second volume, where he describes the cir­culation process of capital.

Marx again proceeds from the formula m-c-m', but this has now been expanded through the inclusion of the production process. c, the commodities which the money capitalist buys, are, if he is an industrial capitalist, L, labour power, and mp, means of production. Through their productive consumption in the production process p, there emerges a sum of new physical bodies of commodities c', whose value is equal to m + m, i.e. the value of the means of production and the labour power employed, plus the surplus value created by the latter. The formula for the circuit of money capital now reads:

This formula assumes that labour power is a commodity, otherwise the transac­tion m-l is impossible. The class relation between capitalist and wage-worker is not created by money, but the existence of this class relationship makes it pos­sible for a function of money to become a capital function.¹¹ Money does not ^{[392] [393]}

turn labour power into a commodity, but the commodity character of labour power turns money into capital. If money is not the cause of the class rela­tionship between capitalists and wage-workers, mere changes in the monetary system cannot bring about the abolition of this relationship.

But if money did not create the class relation between capital and labour, money capital is the form in which capital always confronts labour.

The normal form of advance for wages is payment in money; this process must be steadily repeated at short intervals, as the worker lives from hand to mouth. Hence the worker must constantly come face to face with the capitalist as money capitalist, and with his capital as money capital. Here there can be no question, as in the purchase of means of production and the sale of productive commodities, of a direct or indirect balancing of accounts.^{[394] [395] [396] [397]}

Thus it is understandable that money often appears to the workers, if they lack theoretical insight, to be the main cause of their oppression?³

But money also appears to the capitalists to be the driving force of the whole capitalist circulation process, if they regard it from the standpoint of the formula described above. Money-making, as the force driving the capitalists, appears most clearly in that formula; production seems to be only a neces­sary evil for that purpose. ‘All nations characterized by the capitalist mode of production are periodically seized by fits of giddiness in which they try to accomplish the money-making without the mediation of the production pro- cess^,.i⁴

The formula M-c... p... c'-M', considered as the exclusive formula of the circulation of capital, underlay the mercantile system, which put the main emphasis on m'. The more money came into the country and remained in it, the better. So [the mercantilist policy was] sell as much as possible, buy as little as possible.

We therefore find among the exponents of the Mercantile System (which is based on the formula M-c... p... c'-M') long sermons to the effect that the individual capitalist should consume only in his capacity as a worker, and that a capitalist nation should leave the consumption of its commodities and the consumption process in general to other more stupid nations, while making productive consumption into its own life’s work. These sermons are often reminiscent in both form and content of analogous ascetic exhortations by the Fathers of the Church.^[398]

The circuit of capital, however, does not take place just once; it is a constantly recurring circuit. If we posit the formula of the repeating circuit:

we see that it contains two other circuits, that of productive capital p... c'-M'. M-c... p, and that of commodity capital

Let us start by considering the first circuit. It denotes the production process as a recurrent one, as a reproduction process; it shows not a singular but a periodic production of surplus value. In the form m... m' the production process appears merely as an interruption of the circulation process, and the latter as the main thing. In the form p... p the circulation process appears only as an interruption of the production process, circulation being only a means to maintain ever- renewed production.

The acceptance of the formula m... m' as the exclusive form of the circuit of capital shows us the beginnings of the capitalist mode of production, when the merchant began to become an industrial capitalist and the production of commodities was for him a secondary matter. By contrast, as soon as the capitalist mode of production became more developed, it was natural to regard the formula p... p as the exclusive form of the circuit of capital. The main focus of the capitalist class was now directed to production; it seemed more important to produce surplus value than to realise it, to monetise it. This seems to us to be the reason (Marx did not touch on this question) why classical economics adopted the formula p... p, which includes the other forms of the circuit. Even if one is forced under certain circumstances, for the purposes of scientific investigation, to consider one of these forms on its own, we still must never forget their unity with the other two.

Each capital-value passes successively through the forms of money capital, productive and commodity capital. But each individual industrial capital is also simultaneously in all three forms. The production process of capital is necessarily, as much as possible, a continuous, uninterrupted one; it does not take place in fits and starts. The capitalist does not use his entire money capital at once to purchase means of production and labour power in order to produce commodities, and then stop production in order to go to market with the commodities and wait until they are sold, whereupon the circuit begins anew. Wherever possible he produces without interruption, constantly having a stock of produced commodities and just as constantly having a certain sum of money capital. And it is not up to him to decide the proportions between these three forms of capital, or what should be their magnitudes. They are determined not only by the technical conditions of production, but also by a series of conditions belonging to the circulation process.

The economists are very much inclined to overlook all that. ‘It is particularly the part always present as money capital that the economists forget, although precisely this circumstance is very necessary for the understanding of the bourgeois economy, and makes itself felt as such in practice as well’.¹⁶

The sums of money capital required for a particular operation are not all used at the same time. M-c is usually not a single purchase, but a sum of successive purchases, just as c'-M' is a sum of successive sales. Money must also be hoarded for the renewal and expansion of fixed capital, a subject to which we shall return later. Money must be ready as a reserve fund for adjusting to disturbances, such as, for instance, the disorders caused by an abnormal extension of the period c'-M'. These reasons and a number of others, discussed in the second volume in the further course of the investigation, ensure that the sum of money that the capitalists must temporarily accumulate as hoards increases as the capitalist mode of production develops. This is also one of the reasons why the function of the industrial capitalist turns increasingly into a monopoly of the big money capitalists. But this also makes the capitalists all the more inclined, instead of piling money up as a hoard until it is needed, to let their money participate in the circuit of other capitals, to invest it as interest­bearing capital. That is the reason for the development of the credit system.

Just as important and fundamental in this respect are the remarks, scattered throughout the second volume, concerning economic crises.

The economists assume that over-production is impossible because prod­ucts are always exchanged against other products, and thus every purchase

is a sale.^[399] But already in the first volume of Capital Marx pointed out that, although no one can usually sell without someone else buying, no one has to buy immediately after he has sold. Under certain circumstances, the capitalist mode of production forces the capitalist to hoard, i.e. not to buy after he has sold. On the other hand, he can sell products that are not immediately consumed.

The volume of the mass of commodities brought into being by capit­alist production is determined by the scale of this production and its needs for constant expansion, and not by a predestined ambit of supply and demand, of needs to be satisfied. Besides other industrial capitalists, mass production can have only wholesale merchants as its immediate purchasers. Within certain bounds, the reproduction process may pro­ceed on the same or on an expanded scale, even though the commodities ejected from it do not actually enter either individual or productive con­sumption. The consumption of commodities is not included in the circuit of the capital from which they emerge. As soon as the yarn is sold, for example, the circuit of the capital value represented in the yarn can begin anew, at first irrespective of what becomes of the yarn when sold. As long as the product is sold, everything follows its regular course, as far as the capitalist producer is concerned. The circuit of the capital value that he represents is not interrupted. And if this process is expanded (which includes an expansion of the productive consumption of the means of production), then this reproduction of capital can be accompanied by a more expanded individual consumption (and thus demand) on the part of the workers, since this is introduced and mediated by productive con­sumption. The production of surplus-value and with it also the individual consumption of the capitalist can thus grow, and the whole reproduction process find itself in the most flourishing condition, while in fact a great part of the commodities have only apparently gone into consumption, and are actually lying unsold in the hands of retail traders, thus being still on the market. One stream of commodities now follows another, and it finally emerges that the earlier stream had only seemed to be swallowed up by consumption. Commodity capitals now vie with each other for space on the market. The late-comers sell below the price in order to sell at all. The earlier streams have not yet been converted into ready money, while payment for them is falling due. Their owners must declare them­selves bankrupt, or sell at any price in order to pay. This sale, however, has absolutely nothing to do with the real state of demand. It has only to do with the demandfor payment, with the absolute necessity of trans­forming commodities into money. At this point the crisis breaks out. It first becomes evident not in the direct reduction of consumer demand, the demand for individual consumption, but rather in a decline in the number of exchanges of capital for capital, in the reproduction process of capital.^{[400] [401]}

We see here that Marx dos not explain crises by the under-consumption of the working class. Later, in another context, he explicitly rejects that theory. We would also like to quote that passage in full, because this crisis theory is currently kicking up a lot of dust.1⁹

It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption. The capitalist system does not recog­nize any forms of consumer other than those who can pay, if we exclude the consumption of paupers and swindlers. The fact that commodities are unsaleable means no more than that no effective buyers have been found for them, i.e. no consumers (no matter whether the commodities are ultimately sold to meet the needs of productive or individual con­sumption). If the attempt is made to give this tautology the semblance of greater profundity, by the statement that the working class receives too small a portion of its own product, and that the evil would be remedied if it received a bigger share, i.e. if its wages rose, we need only note that crises are always prepared by a period in which wages generally rise, and the working class actually does receive a greater share in the part of the annual product destined for consumption. From the standpoint of these advocates of sound and simple (!) common sense, such periods should rather avert the crisis. It thus appears that capitalist production involves certain conditions independent of people’s good or bad intentions, which permit the relative prosperity of the working class only temporarily, and moreover always as a harbinger of crisis.^{[402] [403]}

The more capitalist production develops, the more complex it becomes: oppor­tunities for disturbances become more frequent and increasingly noticeable. This historical tendency of the capitalist mode of production is examined more closely in a number of places of the second volume, especially in Parts Two and Three.

These remarks on crises, in their topicality and vitality, offer a welcome haven in the theoretical development of the book, which makes the greatest demands on the reader’s attention and power of abstraction. We sorely miss the fact that Marx did not have the opportunity to season the second volume with his comments, as he did with the first one.

Further passages dealing with crises and the foundations of the credit sys­tem, as well as the excellent comments in Part One on the three circuits of capital, reveal the historical character of [the analyses contained in] the second volume?¹ The other parts deal with the functions and movements of capital in their simultaneous action, rather than with their development.

Above all, we are confronted with the distinction between fixed and circu­lating capital. The distinction has long been common, but it has done little to further the knowledge of capital. On the contrary, it has only created confu­sion because bourgeois economists here, as elsewhere, randomly mix up the determinations resulting from natural forms with those caused by peculiar social functions. They declare machines, buildings, etc. - as such - to be fixed capital, on account of certain material properties, such as immobility, regard­less of the particular social form of the labour process, and all other capital, including money- and commodity-capital, to be circulating capital. Ricardo increased the confusion created by Adam Smith rather than putting an end to it, by mixing up fixed with constant capital, and variable with circulating cap­ital.^[404] Thus the discovery of the origin of surplus value was made impossible. The latter was derived from circulation, rather than from the production pro­cess. Naturally, the vulgar economists cling to this confusion; indeed, they have increased it as much as possible.

Marx not only provides a brilliant critique of the economists’ theories of fixed and circulating capital - incidentally contrasting Quesnay’s correct ap­proach with Smith’s and Ricardo’s - but also gives us, for the first time, a sharp and clear definition of fixed and circulating capital.

First, Marx clearly distinguishes circulating capital from circulation capital, i.e. money- and commodity-capital. The difference between fixed and circulat­ing capital may only spring from the sphere of production; it can only mean a distinction within productive capital. But this latter form of capital also splits up into constant and variable capital.

Constant capital is that productive capital, such as raw materials, tools, etc., whose value reappears unchanged in the product. Variable capital is that productive capital that not only transfers its own value to the product, but adds new value to it during the production process. There is only one type of capital that has this property: the labour power purchased by the capitalists. Labour power is a commodity as long as the wage-worker disposes of it. It is capital as soon as the capitalist buys it - in order to pay for it only after he has consumed it.

To illustrate the difference between fixed and circulating capital, we need to touch briefly on the turnover of capital. We have already considered the three forms of the circuit of capital. This circuit that includes production time and circulation time is called the turnover of capital if it is defined not as a singular but as a periodic process, as it actually is. The appropriate forms for investigating the turnover [of capital] are M... m', or p... p, but not c... c'. The year is the natural measure of the turnover of capital. The capitalist calculates how many turnovers his capital makes in a year. He proceeds in his calculations from M, the money capital he must advance. In this calculation, however, he finds that the number of turnovers made by the different parts of his capital during a year is very different. A portion of the capital value advanced by him, such as labour power, raw material, certain auxiliary materials - oil for lubrication, coal for heating, gas for lighting, etc. - goes totally into the product generated during a production period. Another part of the advanced capital value functions through several production periods in the same natural forms in which it is embodied (such as machines, buildings, etc.), transferring only a part of its value to the product in every production period. The turnover of the former capital value is naturally much more rapid than that of the second. The turnover of the latter includes several turnovers of the former. The first is circulating, the second is fixed capital.

The sharp distinction between fixed and circulating capital, according to their different behaviours as parts of the productive capital in terms of their turnover, on the one hand, and the distinguishing of both from constant and variable capital, on the other hand, is of the utmost importance in political economy in the explanation of the origin of surplus value. But if we are not mis­taken, this distinction is also important in the elucidation of the transformation of surplus value into profit, which will appear in the third volume of Capital.

According to the Ricardian law of value, (Engels wrote in this respect in his preface to the second volume), two capitals which employ the same amount of living labour at the same rate of pay, assuming all other circumstances to be also the same, produce in the same period of time products of the same value, and similarly the same amount of surplus­value or profit. If they employ unequal amounts of living labour, then they cannot produce the same surplus-value, or profit as the Ricardians say. However, the contrary is the case. In point of fact, equal capitals produce, on average, equal profits in the same time, irrespective of how much or how little living labour they employ. This contradiction to the law of value was already known to Ricardo, but neither he nor his followers were able to resolve it. Even Rodbertus could not ignore the contradiction, but instead of resolving it, he makes it one of the starting-points for his utopia (Zur Erkenntnis..., p. 131). Marx had already resolved this contradiction in his manuscript ‘Zur Kritikfⁱ in the plan of Capital, the solution is to be included in Volume 3.^{[405] [406]}

The Ricardian school could not solve this problem because of its identifica­tion of surplus value and profit. The preparation for this solution must therefore consist of singling out the factors that determine the differences between sur­plus value and profit.

The question seems to us to be touched upon already in the first volume, on the occasion of the investigation of the rate of surplus value. The latter can only be measured by comparing the magnitude of the surplus value with the magnitude of value of that part of capital which produces it, i.e. with variable capital. By contrast, the capitalist calculates profit by comparing the size of the realised surplus value - we abstract here from the differences between value and price - with the magnitude of the total capital advanced by him. This circumstance seems to us to determine, on the one hand, that equal rates of surplus value will yield different profit rates if different amounts of constant capital are employed, all other circumstances being equal; but it also makes it possible for different rates of surplus value to yield equal profit rates if, according to the different [rates of] exploitation of the labour power, different amounts of constant capital are used. Whether or not this fact plays a role in the equalisation of the profit rates, we do not dare to say.^[407]

Other circumstances determining a difference between the rate of surplus value and the rate of profit seem to us, on the one hand, to be the differences in the turnover time of individual capitals and, on the other hand, the all­important difference between advanced and employed capital. In addition, the circulation costs should also be noticed in particular. We get to know all this in the second volume.

If surplus value is created in the production process and does not originate in the circulation process, then only the amount of the variable capital employed in the former determines the mass of surplus value - assuming its rate is to be a fixed magnitude. But the capitalist calculates his rate of profit according to the ratio of the profit he made to the magnitude of the advanced capital.

However, the capital advanced and the capital employed in the produc­tion process are by no means identical magnitudes. In the second volume, Marx developed a number of circumstances that determine the ratio between employed and advanced capital.

In general, of course, one can say that under otherwise equal conditions, the amount of capital to be advanced is all the greater, the longer is its turnover. But the total turnover of the advanced capital is the average turnover of its various constituent parts. That total turnover comprises a period all the longer, the greater is the fixed capital in proportion to the circulating capital, and the longer is the lifespan of the former. In both respects - lifespan and magnitude of value - the fixed capital increases with development of the capitalist mode of production. But this also increases the turnover time of the advanced capital.

On this occasion, Marx makes a very interesting comment on the relation­ship of the turnover time of fixed capital with the ten-year period of the crises.

We can assume that, for the most important branches of large-scale industry, this life cycle [of fixed capital] is now on average a ten-year one. The precise figure is not important here. The result is that the cycle of related turnovers, extending over a number of years, within which the capital is confined by its fixed component, is one of the material found­ations for the periodic cycle in which business passes through successive periods of stagnation, moderate activity, overexcitement and crisis. The periods for which capital is invested certainly differ greatly, and do not coincide in time. But a crisis is always the starting-point of a large volume of new investment. It is also, therefore, if we consider the society as a whole, more or less a new material basis for the next turnover cycle.^{[408] [409]}

The physical lifespan of the fixed capital is, as I said, an ever longer one. But this tendency is offset by an opposite one: with the capitalist mode of production, technological advances also develop, with upheavals of the means of production, so that the latter often have morally come to the end of their life2⁷ and must be replaced, even though they still stand in very good physical condition.

The turnover time of fixed capital is determined by its physical and moral lifespan. The turnover time of circulating capital, by contrast, is determined by its production time and circulation time - here production time must not be understood as the time required to produce it, but as the time it must spend in the production process in order to supply a particular product. Not to be confused with the production time is the working period, which is a part of the former. ‘The working period... means the number of interrelated working days that are required, in a particular line of business, to complete a finished product’.^[410] How long the working period is depends partly on tech­nical and natural conditions, for products that constitute an independent unit in themselves (for example, ships, locomotives, buildings), or on social con­ditions, for products that do not constitute such a unit and whose weight and volume are, to a certain extent, divisible at will without losing their use­value (for instance yarn, coal, etc.). For such products, it is in particular the supply contracts and delivery dates that determine the length of the working period.

The production time must always be at least as long as the working period, but it can also be much longer. Many products require their production to be subjected to natural processes for longer or shorter periods of time, without the simultaneous intervention of the labour process. Thus wine must ferment, fabrics bleach, etc. During the time when the unfinished product is left to the working of natural processes, without going through the labour process, no sur­plus value is added to it. But this time also prolongs the turnover time, increas­ing the necessary amount of capital to be advanced and reducing profits. One of the keenest worries of the capitalists is therefore to reduce as much as pos­sible the production period during which no surplus value is added [to the product], for example, by replacing natural by chemical bleaching. This can usually be done only by increasing the fixed capital. Thus, shortening of the working period is also usually associated with an increase in the invested cap­ital (improvement and enlargement of the machinery and work space, increase in the number of workers, etc.). Where the excess of production time over the working period is very significant and cannot be artificially reduced, the operation is often unprofitable, the clearest example being forest husbandry. Forestry is not profitable; therefore, wherever capitalism penetrates, forests dis­appear.

Finally, the turnover time, and with it the magnitude of the advanced capital, is determined by the duration of the circulation time. The improvement of the means of transportation can abbreviate the duration of the turnover period, but generally it tends to prolong it because the improvement of the means of transportation entails the possibility and necessity of seeking ever more distant markets, both in order to sell the products and, on the other hand, to obtain raw materials.

The capitalist and the theoretical representatives of his interests usually really believe that capital continuously functions in the production process, that the capital employed in it and the advanced capital are equal magnitudes. However, this is not so. Let us take a case in which, for simplicity’s sake, we disregard all the complicating circumstances, the surplus value, fixed capital, etc.

The working period (which we assume coincides with the production time) amounts to nine weeks, the circulation time to three weeks. The weekly outlay on wages and raw and auxiliary materials amounts to 1,000 marks, so that the capitalist must advance 9,000 marks in order to keep the labour process going during the whole period. After nine weeks, this capital is transformed into commodity capital; before it is sold and new raw materials, etc. are purchased with the proceeds, three weeks pass by. But the capitalist production process does not tolerate an interruption. It can only continue during these three weeks by the application of an additional capital of 3,000 marks (we abstract here from the possibility of limiting production in order that the 9,000 marks might last for 12 weeks, because this case offers no new peculiarities). The advanced capital does not therefore amount to 9,000 marks but rather to 12,000 marks, without the scale of production having expanded. 1,000 marks are still used every week, and if we include the production of surplus value, the same amount of surplus value is generated every week as before. The shorter the circulation time, the more of his capital the capitalist can apply in the production process, and the more surplus value he can produce. The opposite applies when the circulation time is longer. The rate of surplus value may remain the same, compared to the variable capital employed in the production process, and yet change with respect to the variable capital advanced. Since the capitalist and the bourgeois economist are concerned only with the latter, it seems to them as if the process of circulation were the source from which surplus value flows.

But one more thing should be noted: the capitalist calculates his profits in proportion to the advanced capital not for each one of its turnovers, but for the whole year. Marx does not deal in the second volume, any more than in the first, with profit, but rather with surplus value. He therefore does not deal [in the second volume] with the annual rate of profit, but with the annual rate of surplus value, which has to be related to the advanced variable capital and not to the total capital.

Let us assume two capitalists, one of whom has a company with a turnover time of 5 weeks, thus making about 10 turnovers per year. The company of the other has a turnover time of one year; the number of its turnovers is thus equal to 1. Each one of the two applies the same amount of variable cap­ital; let us say 100 marks a week. Thus each one of them spends, assuming that the year has 50 weeks, 5,000 marks annually. The rate of surplus value amounts to 100 percent for both, so that each one of them will reap 5,000 marks in surplus value. But here a difference occurs: the capitalist whose cap­ital turns over only once must advance a variable capital of 5,000 marks, while the other has to advance merely 500 marks. The annual rate of sur­plus value of the first is 100 percent; that of the other 1,000 percent. This seems to show that the surplus value is derived from the sphere of circula­tion: in fact, both have used the same amount of labour power and yet have achieved two different annual rates of surplus value, because the number of turnovers of their capitals is different. However, this contradiction of the Marxist theory of value and surplus value is only apparent: it is generated by the difference between the employed and the advanced capital. Both have employed the same amount of capital and pocketed the same amount of sur­plus value.

Although the contradiction is only apparent, the Ricardian school could not solve it. Today it is one of the main arguments of Professor Lexis^{[411] [412] against the Marxian theory of value and surplus value in his review of the second volume of Capital published in the Jahrbucherfur Natlonalokonomle und Stat'istlk?0 But in making this objection, Mr. Lexis overlooks not only the difference between employed and advanced capital, but also the difference between surplus value and profit from capital.}

On this occasion, an error on the part of that critic should also be pointed out. On page 461, he assumes that Marx equated exchange-value with the average price of commodities. ‘If Marx wanted to say afterwards (probably in the third volume), that he means by the value of individual commodities not the monetary expression of their exchange-value, as it is normally formed in the existing economic order, but an ideal value that is not at all empirically expressed, he would thus contradict his earlier remarks, in a way making a mockery of his readers with his value secret'. Regarding this claim, it should be pointed out that in the first volume of Capital Marx already explicitly alluded to the fact that value and average price do not at all coincide. If he also wanted to keep them apart ‘afterwards’, the only people being mocked would be those for whom his value theory remained a mystery. But Marx is innocent of the charges levelled against him. He explicitly stated in a note to vol. I:

How can we account for the origin of capital on the assumption that prices are regulated by the average price, i.e. ultimately by the value of the commodities? I say ‘ultimately’ because average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe.^[413]

Marx also gives examples of commodities whose price is constantly below their value: ‘Jacob questions whether gold has ever been paid for at its full value. This applies still more to diamonds’^{[414] [415] Marx says this at the beginning of his investigation, as if to warn the reader not to confuse average price and value.}

One can perhaps ask: what is the use of such an ideal value, which does not necessarily coincide with the average price? One might just as well ask, and with even better reason: what is the value of a law of falling bodies that only takes into consideration the force of gravity, completely disregarding disturb­ing circumstances such as air resistance, the rotation of the earth around its axis, etc., and whose theoretical results are therefore never in accord with the ‘average’ results of the bodies’ fall? But the actual phenomena of falling can only be explained on the basis of the law of falling bodies, and average prices are only explained by the law of value.33

What Marx said about surplus value and profit also holds good for value and price:

We shall see in Volume 3 that the rate of profit is no mystery, when one knows the laws of surplus-value. But if one works in the reverse direction, one comprehends neither the one nor the other.^[416]

So much for the criticism from Professor Lexis and his assumption that Marx ‘made a mockery of his readers with his value secret'.

ιv

So far we have not, for reasons of brevity, adhered strictly in our review to the course of development of the original text, but have rather grouped together non-adjacent but objectively related sections, such as chapters 5, 14 and 15, dealing with the influence of the turnover time on the magnitude and self­valorisation of the advanced capital.

Following the same rule, we shall now deal for the first time with a chapter located at the beginning of the investigations of the second volume: chapter 6, dealing with the costs of circulation. There we find that the labour that goes into buying and selling, as well as into bookkeeping, creates no value. Wage­workers who are employed in these sectors can indeed yield surplus labour, but not surplus value. The expenses arising from bookkeeping and from buying and selling do not increase the value of the product; they must be paid out of the surplus value. The unpaid surplus labour of the wage-labourers employed on those activities creates no surplus value, but rather reduces the deduction from the surplus value of the capitalist caused by the circulation costs^[417]

According to the plan of his work, Marx will not deal with merchants' capital until the third volume. To anyone who knows these gentlemen, it will be no sur­prise that the academic and non-academic demagogues of the current edition of ‘true German socialism’ explained Marx’s previous disregard of merchants’ capital in terms of demagogic rather than scientific reasons. Furthermore, they could have found, had they wanted to, some places in the first volume where Marx did make mention of the merchant.

Since, however, it is impossible, by circulation alone, to explain the trans­formation of money into capital, and the formation of surplus-value, mer­chants’ capital appears to be an impossibility, as long as equivalents are exchanged; it appears, therefore, that it can only be derived from the two­fold advantage gained, over both the selling and the buying producers, by the merchant who parasitically inserts himself between them.^[418]

This applies to the pre-capitalist circulation of commodities. It is complemen­ted by the remarks in the second volume on the costs of circulation of capital. To be sure, Marx still abstracts here from the merchant as capitalist, but we already see the source from which his profit flows: the produced surplus value. Hence the moral indignation of the industrial capitalists, who produce the sur­plus value, concerning the immoral intermediaries with whom they must share it!

A more important item of the social overhead costs of the circulation of capital is formed by the cost of production and reproduction of money. Marx talks about it on page 112 [of the German edition] in connection with the circulation costs. But he also deals with this issue later and in another context, on pages 420-1. This passage seems to us particularly important. It says:

The sum of labour-power and social means of production that is spent in the annual production of gold and silver as instruments of circulation forms a heavy item of faux frais (overhead costs) for the capitalist mode of production, or more generally for a mode of production based on commodity circulation. It withdraws from social use a corresponding sum of possible additional means of production and consumption, i.e. of real wealth. To the extent that the costs of this expensive machinery of circulation are reduced, with the scale of production remaining the same, i.e. at a given level of its extension, the productive forces of social labour are correspondingly heightened. Thus in as much as the auxiliary means that develop with credit have this effect, they directly increase capitalist wealth, whether this is because a greater part of the social production and labour process is thereby accomplished without the intervention of real money, or because the capacity of the actually functioning quantity of money to fulfil its function is thereby increased.

This also disposes of the pointless question of whether capitalist pro­duction on its present scale would be possible without credit (even con­sidered from this standpoint alone), i.e. with a merely metallic circula­tion. It would clearly not be possible. It would come up against the limited scale of precious-metal production. On the other hand, we should not get any mystical ideas about the productive power of the credit system, just because this makes money capital available or fluid.^[419]

The overhead costs that arise from the labour of buying and selling and from bookkeeping are a burden on surplus value; by contrast, the overhead costs resulting from the production of gold and silver as means of circulation are a burden on society as a whole.

Due to considerations of space, we must pass over the investigation of the circulation costs arising from the storage and transportation of goods, and the circumstances under which they add value to the commodities or reduce the surplus value. We can already see, from the few indications we have given, that in the second volume of Capital a number of factors are investigated that have an influence on shaping the outward forms of surplus value. But the series of these factors is not yet complete; the volume does not deal, for instance, with ground rent; we have not received any indication of the way in which these different factors interact; even the goal of the investigation has so far been pointed out only a few times. No wonder that the remarks of the second volume leave us partly dissatisfied: they provide us with the solutions to many riddles, but at the same time they show us new problems. If the first volume is, in a sense, a self-contained whole, the second volume is just an introduction for the third, a fragment, a torso, which has many attractions but which also awakens the desire to get to know the whole.

The third volume of Capital will also be important for the theory of value, as the basis of the whole work.

Among those currently established in science, Marx's theory of value and surplus value is the only one that makes possible a sufficient explanation of economic processes. All other related theories either prove to be wrong from the outset or do not explain what they should explain. That is the case with the theory according to which prices are determined by supply and demand. Supply and demand can explain price fluctuations, not the conformity to law in the prices of the different commodities, which comes to light most clearly when demand and supply are balanced. It is the same with the theory accord­ing to which profit does not spring from the surplus value originating in the production process, but from a surcharge on the cost of the product. This view is defended by Mr. Lexis in the aforementioned review. But since nobody profits if everyone sells dearer than he bought, because when buying every­one loses what he gained on the sale, Mr. Lexis finds himself constrained to believe that the workers occupy an exceptional position. They are forced by cir­cumstances to sell their commodity (which he, like his colleagues, calls labour instead of labour power) as cheaply as possible, that is to say, without a sur­charge on its cost price. So they have to buy dearer than they sell. The ques­tion for Mr. Lexis, as he himself says, is to offer a justification of the interest on capital. What does he gain by his explanation? Marx’s theory explains the [origin of] surplus value itself under the assumption that the worker sells his labour power for its full value, in the same way as any other commod­ity owner sells his wares. Surplus value does not appear because the work­ers are cheated, but because of the peculiar nature of the commodity labour power, which is able to generate more value during its productive consump­tion than its own value amounts to. Mr. Lexis assumes, by contrast, that all capitalists cheat their neighbours, and that profits therefore come from the fact that workers are unable, for their part, to cheat the capitalists. And Mr. Lexis calls that a ‘justification of the interest on capital’! According to Marx’s theory, surplus value originates in a highly moral way - on the foundation of today’s ruling ethics of justice and equality, corresponding to a commodity­producing society, in which each commodity is exchanged for its value. Accord­ing to the theory of vulgar economy, improved upon by Lexis, profit has its source in a constant violation of the moral principles of commodity produc­tion, and the workers are the only moral people - though admittedly only out of necessity - for they are the only ones who do not cheat their fel­lows.

But aside from this strange ‘justification of interest on capital’, the scientific benefit of Lexis’s theory seems to us problematic. The cheating of the workers might explain where profit comes from, but definitely not its conformity to law. It does not explain why the surcharge on price should, under certain circumstances, be of a certain size. The theory that profit fluctuations are balanced out by the fact that in the more profitable lines of business more capital is invested, tells us no more about the laws regulating the magnitude of the rate of profit than the knowledge that the crest of the wave is higher than the wave trough, and that both have a tendency to level out, acquaints us with the depths of the sea.

Only the rate of surplus value, as Marx has developed it, offers a specific magnitude, out of which, under certain conditions, a specific rate of profit must develop. Likewise, only the value theory that Marx took over from Ricardo, developing and defining it more precisely, offers a definite foundation from which one can deduce the magnitude of prices. Marx's theory of value and surplus value is therefore today the only scientifically satisfactory one. Only one objection can still be raised against it, a single one. Marx has still not shown us the transformation of surplus value into profit; he has not yet proved how this development proceeds and how its necessary result conforms to the facts of experience.

There is, consequently, still an apparent contradiction (which we already touched upon above) between the surplus value developed by Marx and the actual profit. This argument is far from being a proof of the falsity of the Marxian theory, but it means that its correctness has not yet been proven with scientific certainty.

The third volume promises to solve this apparent contradiction, and thus to prove scientifically the accuracy of the theory of value and of the whole structure erected upon it, to the extent that we can speak of certainty in science in general. The revolution of political economy, [accomplished] by Marx, will then be completed. This science must then follow the path marked out by Marx, or else abdicate as a science and declare that it is nothing more than the spiritual bodyguard of the profit of capital - including ground rent.

We can see the importance that the third volume of Capital promises to have, as well as the significance of the second volume, which is so closely associated with the third. But the more we recognise this significance, the more important appear to be the problems - whose solution is partly continued from the first volume to the second and partly set out anew - and the greater is the desire to get to know Marx's last word on political economy.

The final section of the second volume deals with the reproduction and circulation of the total social capital. We see in the following passage the standpoint from which Marx sets out to do that:

In speaking of the social point of view, i.e. in considering the total social product, which includes both the reproduction of the social capital and individual consumption, it is necessary to avoid falling into the habits of bourgeois economics, as imitated by Proudhon, i.e. to avoid looking at things as if a society based on the capitalist mode of production lost its specific historical and economic character when considered en bloc, as a totality. This is not the case at all. What we have to deal with is the collective capitalist. The total capital appears as the share capital of all individual capitalists together. This joint-stock company has in common with many other joint-stock companies that everyone knows what they put into it, but not what they will get out of it.³⁸

Seen as a whole, the modern mode of production shows the same capitalist character as the process of reproduction of each individual capital. But in the social approach various factors come into play, whose operation could not be included in the course of the previous investigation - especially the use-value of the commodities produced. When considering the individual capitals, the natural forms of the products could be overlooked, so that only their magnitude of value was considered. Whether the capitalist produced shoe polish or prayer books or steam engines did not alter the laws of valorisation and circulation of individual capitals. In the societal perspective of the reproduction process of capital, however, we find that it is determined not only by the mutual value relation of the constituent parts of the social product, but also by their use­value, their material form. The capitalist process of production cannot take place if the means of production and the articles of consumption for workers and capitalists are not present in the proper proportions.

But the social perspective on the reproduction process of capital also shows us the worker in a new role. Until now we saw him only as commodity seller - the seller of his commodity, labour power. Now he is an important figure also as commodity buyer, as buyer of articles of consumption. For the capitalist mode of production to keep functioning, it is not only necessary for the workers to produce surplus value and to receive [the value of] their own labour power; it is also necessary for them to buy their share of the commodities from the capitalist, so that the money the capitalist gave them as wages flows back to him and can function again as capital in his hands.

On the other hand, the capitalists now appear not only as buyers of means of production, but also as buyers of means of consumption, as consumers of surplus value; and the way in which this happens turns out to be very important.

In our previous remarks we have already mentioned the division of the mass of products according to their natural form. According to this distinc­tion, production must also be divided into means of production and means of consumption. The value of the total product of each one of these branches of production is divided into a portion of value that represents constant capital c, which merely transfers its value to the product, then into the variable capital v and the surplus value s; the annual product is = c + v + s.

However, Adam Smith, together with the economists who followed him, assumed that the value of the annual product is equal to v + s, i.e. that the price of each product can be resolved in the last instance into wages and surplus value. Mr. Lexis also defends this view in the article mentioned above, in which he equates constant and fixed capital. That could only be justified if, in primeval production, only labour but no constant capital (tools, etc.) were involved. Mr. Lexis adds: ‘However, there is no impediment to continuing these series (of means of production, of which one contributes to generate the others) until we come to an initial state in which only labour and natural products - i.e. no fixed capital - were employed in the production of the first elements of constant capital’.^[420] There is ‘no impediment' to this reasoning, except the fatal fact that in the entire range of capitalist commodity production - and that is all we can be talking about if we speak about constant capital, wages and surplus value - a capitalist undertaking without means of production does not exist. Professor Lexis surely does not assume, for instance, that children looking for strawberries and flowers in the wild, in order to sell them, are the ones who furnish the elements of constant capital.^{[421] [422]}

Mr. Lexis’s view is nothing but a hazy reference to the law that labour is the source of all commodity values - a law against which Mr. Lexis fought so resolutely. The sum of the values newly created in a year, the annual value product [Wertprodukt desJahres], can certainly be resolved into v + s, but not the sum of the values of the products whose production was completed that year, the value of the annual product [ jdhrllchen Produktenwert]. The latter always contains value elements that were created in previous years, means of production, whose value reappears in the product?¹

So we must identify the value of the annual product, both in the category of means of production and in that of consumption, as being equal to c + v + s.

We shall consider only the simplest of the schemes underlying Marx’s invest­igations; that in which he disregards both the portion of value that is trans­ferred due to wear and tear from the fixed (not to be confused with constant) capital to the annual product, without being immediately replaced ln natura,

and the accumulation of surplus value. We assume that the latter is wholly con­sumed [by the capitalists].

Marx’s scheme is:

I. Means of production.

Capital: 4,000 c +1,000 v = 5,000

Commodity product: 4,000 c + 1,000 v + 1,000 s = 6,000

II. Means of consumption.

Capital: 2,000 c + 500 v = 2,500

Commodity product: 2,000 c + 500 v + 500 s = 3,000^[423]

The rate of surplus value is therefore assumed to be 100 percent. The total value of the annual product amounts to 9,000; the total value of variable capital and surplus value in both department amounts to 3,000 (let us say a million marks).

Wages and surplus value are spent on articles of consumption: the 500 v and 500 s of the second department are therefore spent within it. For purposes of this study, they need not be considered further. The constant capital c, which has been used up, must be replaced again in both departments. Department I produces the means of production required by both departments. The 4,000 c that this department requires, it has produced itself; they are sold within department I itself, so that here we can disregard them too.

1,000 v + 1,000 s of the first department must be converted into means of consumption. 2,000 c in means of production have been used up in the second department, and their value has passed to a corresponding portion of the annual product of means of consumption. For continuation of the production process, these 2,000 c in articles of consumption must be exchanged for 1,000 v + 1,000 c of the first department - sums of value that are embedded in a corresponding part of the annual product of means of production.

The capitalists of department I have paid 1,000 v in the form of money to their workers, after they used up 1,000 v in the form of labour power. With this 1,000 v in cash, the workers buy articles of consumption from the capitalists of department ii, equivalent to 1,000 c. In that way, the capitalists of department II acquire the money to buy 1,000 in means of production from the capitalists of department I. Thus a capital-value of 1,000 v is converted into cash by the cap­italists of department I, who can use it to buy labour power. The surplus value 1,000 s of department I is realised partly through the fact that the capitalists of department ιι (who possess money stocks as a condition for any capitalist production) throw money into circulation in order to purchase means of pro­duction, which converts into cash a part of the surplus value of department ι. That money is used by the capitalists of department I, who are also human beings and want to live, to purchase means of consumption for themselves. In that way it flows back to the capitalists of department ii. However, because the capitalist cannot always wait until he has sold his commodities in order to live from the realised surplus value, one of the requirements for being a capitalist is to have enough money not only to continue the production and circulation process, but also to be able to advance to himself as much as he needs for his own consumption, and as appears in accordance with the expected profit. The capitalists of department I thus advance money to buy means of consumption from department ii, and in that way they supply money to the capitalists of department ii, which in turn uses it to buy means of production from depart­ment I.

From these circumstances follows the law, later confirmed, which reads:

The general conclusion that follows, as far as concerns the money that the industrial capitalists cast into circulation to mediate their own com­modity circulation, is that whether this is advanced on the account of the constant value portion of their commodities, or on the account of the surplus-value existing in these commodities in so far as it is spent as rev­enue, the same amount flows back to the respective capitalists as they themselves advanced for the monetary circulation.^[424]

Similarly, only in a roundabout way, the money returns to the hands of the capitalists who spent it in the payment of wages.

The precondition for the whole circulation, however, is that v + s in depart­ment I = c in department ii.

Also, it is clear that no element can change in value, in any of the two depart­ments, without bringing about a change in the value dimension of all the other elements. The mechanism is even more complicated if we take into consider­ation the division of the articles of consumption into necessities and luxury goods, as well as the fact that fixed capital only transfers a fragment of its value to the annual product, while the worn out part of fixed capital must be entirely replaced [in kind]. If - all other circumstances being equal - the proportion of the value of the functioning fixed capital that annually becomes defunct, [rel-

ative] to the annual value transferred by the fixed capital to the product, is not constant, stoppages occur in the reproduction and circulation process. Finally, the accumulation of surplus value, the expansion of the production process, causes further complications. A wealth of new observations and remarks on the causes of crises can be found in the relevant sections, which, however, cannot be reproduced without entering into details, any more than the observations accompanying them about the role of money capital and the foundations of the credit system.

We hope to have the opportunity to come back to the third section and to compare it with Quesnay’s Tableau economique, which set itself a task similar to that of the third section of the second volume. The latter answers the question: ‘How is the capital consumed in production replaced in its value out of the annual product, and how is the movement of this replacement intertwined with the consumption of surplus-value by the capitalists and of wages by the workers?’.^[425] Quesnay’s Tableau economique also wanted to show the manner in which the annual total product circulates, on the one hand in order to keep the reproduction process going, and on the other hand to make possible the consumption of rents and wages. Quesnay assumed that only agricultural labour supplies a surplus, while the industrial workers merely add to the product as much value as they consume themselves. The surplus value goes first of all to the landowners in the form of ground rent; and finally, for Quesnay, the industrial capitalists and workers together constitute only a single class. As is well-known, Marx’s scheme proceeds, as regards these three points, from entirely different presuppositions. However, both Quesnay’s scheme and Marx’s have one thing in common: that the circuit c... c', not M... m' or p... p', underlies them both.

Quesnay’s system was the economic lodestar of the French Revolution of 1789, Mirabeau being its most important representative. The second volume of Capital deals with most of the questions to which Quesnay’s answer was so sig­nificant for the course of the French Revolution. But in Marx, in accordance with the changed circumstances, the capitalist industrialist steps to the fore­ground in place of the capitalist farmer.

Already these considerations clearly indicate that the volume under review deals with more than mere doctoral questions and barren subtleties. As scant and incomplete as our sketch of the content naturally has to be - given the strict logical structure of the work and Marx’s concise and compact language, which make it almost impossible to give a faithful reproduction of the content in abbreviated form - one still hopes that it has managed to show the importance of the problems whose solution is partly provided in the second volume or else partly initiated there.

But despite the significance of the volume under review, we believe that we are not mistaken if we assume that it is often very disappointing. It will disappoint all those who saw in Capital a handbook for social-democratic agitators; in the theory of value, the basis for a utopia; and in the theory of surplus value, a mere attempt to incite the proletariat against the capitalists, an appeal to eternal justice and equality. The second volume shows clearly that Capital has only one purpose: to further the knowledge of the mechanism of the capitalist mode of production. That is the only purpose of the study and its presentation.

But those who think it is impossible to write about political economy with­out demagogic and ulterior motives will not be the only ones disappointed. Even those whom Marx primarily addressed in his writings, the workers, will not greet the second volume with the same enthusiasm as the first. The scene for the investigations of the first volume is the factory, that of the second is the comptoir [cashier's desk]. The first volume dealt for the most part with conditions close to the workers, with which they are intimately familiar. The second volume deals with abstractions from facts that are distant from the workers, and which arouse in them relatively little interest. What they first of all experience is the way in which surplus value is produced. The kind of transformations that surplus value experiences, and how it is realised - these are questions much closer to the capitalists than to the workers.

Nevertheless, we expect the working class to greet the second volume of Cap­ital if not with the same enthusiasm, then at least with the same interest as the first. The workers, especially in Germany, know perfectly well how to appre­ciate the value of theoretical knowledge. And this appreciation of knowledge by no means contradicts the materialist conception of historical development, which they have accepted.

It is true that the labour movement is automatically generated by the cir­cumstances. Historical development is nowadays necessarily determined by the contradictions of interest between the different classes; and among these contradictions, the antagonism between capital and labour is daily becoming more decisive.

It is also true that the goal of the labour movement is not arbitrary, but is given by the circumstances.

But for the course of the labour movement and the way in which it reaches its goal, it is obviously not a matter for indifference whether it clearly understands this goal and always keeps it in mind, or whether it allows itself to be carried along by the circumstances, changing its direction according to the daily needs. In this field lies the task of the socialist parties. They can neither make the labour movement nor prescribe to it their own goal. They have to recognise that goal and to assume the leadership of the labour movement until it is reached. They can do that only on the basis of theoretical knowledge of the actual conditions, of the development, purpose and functioning of the capitalist mode of production. Wherever this knowledge is lacking, a socialist movement decays either into a doctrinaire utopianism or into opportunism, taking its momentary ideas and their ‘scientific’ foundations wherever it finds them and wherever they are cheapest.

The German workers have recognised this, and that is why they will study the second volume of Capital.