The Arsenal of Marxism

The Living Thoughts of Karl Marx

By Leon Trotsky

Part I

We are reprinting Trotsky’s introduction to this book in two parts, with the second and final part of the introduction in the next issue of this magazine. The full text of this book contains Trotsky’s selection of the most cogent sections of Marx’s Capital. It is still being transcribed and will appear in the electronic version of this magazine,, when completed.

—The Editors

Presenting Karl Marx What Is the Reader Offered?

This book compactly sets forth the fundamentals of Marx’s economic teaching in Marx’s own words. After all, no one has yet been able to expound the labor theory of value better than Marx himself.1

Certain of Marx’s arguments, especially in the first, the most difficult chapter, may seem to the uninitiated reader far too discursory, hair-splitting, or “metaphysical.” As a matter of fact, this impression arises in consequence of the want of habit to approach overly habitual phenomena scientifically. The commodity has become such an all-pervasive, customary, and familiar part of our daily experience that we do not even attempt to consider why men relinquish important objects, needed to sustain life, in exchange for tiny discs of gold or silver that are of no earthly use whatever.

The matter is not limited to the commodity. One and all of the categories of market economy seem to be accepted without analysis, as self-evident, as if they were the natural basis of human relations. Yet, while the realities of the economic process are human labor, raw materials, tools, machines, division of labor, the necessity to distribute finished products among the participants of the labor process, and the like, such categories as “commodity,” “money,” “wages,” “capital,” “profit,” “tax,” and the like are only semi-mystical reflections in men’s heads of the various aspects of a process of economy which they do not understand and which is not under their control. To decipher them, a thoroughgoing scientific analysis is indispensable.

In the United States, where a man who owns a million is referred to as being “worth” a million, market concepts have sunk in deeper than anywhere else. Until quite recently Americans gave very little thought to the nature of economic relations. In the land of the most powerful economic system economic theory continued to be exceedingly barren. Only the present deep-going crisis of American economy [1939], has bluntly confronted public opinion with the fundamental problems of capitalist society. In any event, whoever has not overcome the habit of uncritically accepting the readymade ideological reflections of economic development, whoever has not reasoned out, in the footsteps of Marx, the essential nature of the commodity as the basic cell of the capitalist organism, will prove to be forever incapable of scientifically comprehending the most important manifestations of our epoch.

Marx’s Method

Having established science as cognition of the objective recurrences of nature, man has tried stubbornly and persistently to exclude himself from science, reserving for himself special privileges in the shape of alleged intercourse with supersensory forces (religion), or with timeless moral precepts (idealism). Marx deprived man of these odious privileges definitely and forever, looking upon him as a natural link in the evolutionary process of material nature; upon human society as the organization of production and distribution; upon capitalism as a state in the development of human society.

It was not Marx’s aim to discover the “eternal laws” of economy. He denied the existence of such laws. The history of the development of human society is the history of the succession of various systems of economy, each operating in accordance with its own laws. The transition from one system to another was always determined by the growth of productive forces, i.e., of technique and the organization of labor.

Up to a certain point, social changes are quantitative in character and do not alter the foundation of society, i.e., the prevalent forms of property. But a point is reached when the matured productive forces can no longer contain themselves with the old forms of property; then follows a radical change in the social order, accompanied by shocks. The primitive commune was either superseded or supplemented by slavery; slavery was succeeded by serfdom with its feudal superstructure; the commercial development of cities brought Europe in the sixteenth century to the capitalist order, which thereupon passed through several stages. In his Capital Marx does not study economy in general, but capitalist economy, which has its own specific laws. Only in passing does he refer to other economic systems, to elucidate the characteristics of capitalism.

The self-sufficient economy of the primitive peasant family has no need of a “political economy,” for it is dominated on the one hand by the forces of nature and on the other by the forces of tradition. The self-contained natural economy of the Greeks or the Romans, founded on slave labor, was ruled by the will of the slave-owner, whose “plan” in turn was directly determined by the laws of nature and routine. The same might also be said about the medieval estate with its peasant serfs. In all these instances economic relations were clear and transparent in their primitive crudity.

But the case of contemporary society is altogether different. It destroyed the old self-contained connections and the inherited models of labor. The new economic relations have linked cities and villages, provinces and nations. Division of labor has encompassed the planet. Having shattered tradition and routine, these bonds have not composed themselves according to some definite plan, but rather apart from human consciousness and foresight.

The interdependence of men, groups, classes, nations, which follows the division of labor, is not directed by anyone. People work for each other without knowing each other, without inquiring about one another’s needs, in the hope, and even with the assurance, that their relations will somehow regulate themselves. And by and large they do, or rather, were wont to.

It is utterly impossible to seek the causes of the recurrences in capitalist society in the subjective consciousness—in the intentions or plans—of its members. The objective recurrences of capitalism were formulated before science began to think about them seriously. To this day the preponderant majority of men know nothing about the laws that govern capitalist economy. The whole strength of Marx’s method was in his approach to economic phenomena, not from the subjective point of view of certain persons, but from the objective point of view of the development of society as a whole, just as an experimental natural scientist approaches a beehive or an ant-hill.

For economic science the decisive significance is what and how people act, not what they themselves think about their actions. At the base of society is not religion and morality, but nature and labor. Marx’s method is materialistic, because it regards both nature and society as they evolve, and evolution itself as the constant struggle of conflicting forces.

Marxism and Official Science

Marx had his predecessors. Classical political economy—Adam Smith, David Ricardo—reached its full bloom before capitalism had grown old, before it began to fear the morrow. Marx paid to both great classicists the perfect tribute of profound gratitude. Nevertheless the basic error of classical economics was its view of capitalism as humanity’s normal existence for all time instead of merely as one historical stage in the development of society. Marx began with a criticism of that political economy, exposed its errors, as well as the contradictions of capitalism itself, and demonstrated the inevitability of its collapse.

Science does not reach its goal in the hermetically sealed study of the scholar, but in flesh-and-blood society. All the interests and passions that rend society asunder exert their influence on the development of science—especially of political economy, the science of wealth and poverty. The struggle of workers against capitalists forced the theoreticians of the bourgeoisie to turn their backs upon a scientific analysis of the system of exploitation and to busy themselves with a bare description of economic facts, a study of the economic past and, what is immeasurably worse, a downright falsification of things as they are for the purpose of justifying the capitalist regime.

The economic doctrine which is nowadays taught in official institutions of learning and preached in the bourgeois press, offers no dearth of important factual material, yet it is utterly incapable of encompassing the economic process as a whole and discovering its laws and perspectives, nor has it any desire to do so. Official political economy is dead.

In contemporary society man’s cardinal tie is exchange. Any product of labor that enters into the process of exchange becomes a commodity. Marx began his investigation with the commodity and deduced from that fundamental cell of capitalist society those social relations that have objectively shaped themselves on the basis of exchange, independently of man’s will. Only by pursuing this course is it possible to solve the fundamental puzzle—how in capitalist society, in which each man thinks for himself and no one thinks for all, are created the relative proportions of the various branches of economy indispensable to life.

The worker sells his labor power, the farmer takes his produce to the market, the money lender or banker grants loans, the storekeeper offers an assortment of merchandise, the industrialist builds a plant, the speculator buys and sells stocks and bonds—each having his own considerations, his own private plan, his own concern about wages or profit. Nevertheless, out of this chaos of individual strivings and actions emerges a certain economic whole, which, true, is not harmonious, but contradictory, yet does give society the possibility not merely to exist but even to develop. This means that, after all, chaos is not chaos at all, that in some way it is regulated automatically, if not consciously. To understand the mechanism whereby various aspects of economy are brought into a state of relative balance, is to discover the objective laws of capitalism.

Clearly, the laws which govern the various spheres of capitalist economy—wages, price, land rent, profit, interest, credit, the stock exchange—are numerous and complex. But in the final reckoning they come down to the single law that Marx discovered and explored to the end; that is, the law of labor value, which is indeed the basic regulator of capitalist economy.

The essence of the law is simple. Society has at its disposal a certain reserve of living labor power. Applied to nature, that power produces products necessary for the satisfaction of human needs. In consequence of division of labor among independent producers, the products assume the form of commodities.

Commodities are exchanged for each other in a given ratio, at first directly, and eventually through the medium of gold or money. The basic property of commodities, which in a certain relationship makes them equal to each other, is the human labor expended upon them—abstract labor, labor in general—the basis and the measure of value. Division of labor among millions of scattered producers does not lead to the disintegration of society, because commodities are exchanged according to the socially necessary labor time expended upon them.

By accepting and rejecting commodities, the market, as the arena of exchange, decides whether they do or do not contain within themselves socially necessary labor, thereby determines the ratios of the various kinds of commodities necessary for society, and consequently also the distribution of labor power according to the various trades.

The actual processes of the market are immeasurably more complex than has been here set forth in but a few lines. Thus, oscillating around the value of labor, prices fluctuate above and below their values. The causes of these deviations are fully explained in the third volume of Marx’s Capital, which describes the “process of capitalist production, considered as a whole.” Nevertheless, great as may be the divergences between the prices and the values of commodities in individual instances, the sum of all prices is equal to the sum of all values, for in the final reckoning only the values that have been created by human labor are at the disposal of society, and prices cannot break through this limitation, including even the monopoly prices of trusts; where labor has created no new value, there even Rockefeller can get nothing.

Inequality and Exploitation

But if commodities are exchanged for each other according to the quantity of labor invested in them, how does inequality come out of equality?

Marx solved this puzzle by exposing the peculiar nature of one of the commodities, which lies at the basis of all other commodities: namely, labor power. The owner of means of production, the capitalist, buys labor power. Like all other commodities, it is evaluated according to the quantity of labor invested in it, i.e., of those means of subsistence which are necessary for the survival and the reproduction of the worker. But the consumption of that commodity—labor power—consists of work, i.e., the creation of new values. The quantity of these values is greater than those which the worker himself receives and which he expends for his upkeep. The capitalist buys labor power in order to exploit it. It is this exploitation which is the source of inequality.

That part of the product which goes to cover the worker’s own subsistence Marx calls necessary-produce; that part which the worker produces above this, is surplus-produce. Surplus-produce must have been produced by the slave, or the slave-owner would not have kept any slaves. Surplus-produce must have been produced by the serf, or serfdom would have been of no use to the landed gentry. Surplus-produce, only to a considerably greater extent, is likewise produced by the wage worker, or the capitalist would have no need to buy labor power. The class struggle is nothing else than the struggle for surplus-produce. He who owns surplus-produce is master of the situation—owns wealth, owns the state, has the key to the church, to the courts, to the sciences, and to the arts.

Competition and Monopoly

Relations amongst capitalists, who exploit the workers, are determined by competition, which for long endures as the mainspring of capitalist progress. Large enterprises enjoy technical, financial, organizational, economic and, last but not least, political advantages over small enterprises. The greater amount of capital, being able to exploit a greater number of workers, inevitably emerges victorious out of a contest. Such is the unalterable basis of the concentration and centralization process of capital.

While stimulating the progressive development of technique, competition gradually consumes, not only the intermediary layers, but itself as well. Over the corpses and semi-corpses of small and middling capitalists emerges an ever-decreasing number of ever more powerful capitalist overlords. Thus, out of honest, democratic, progressivecompetition grows irrevocably harmful, parasitic, reactionarymonopoly. Its sway began to assert itself in the eighties of the past [19th]century, assuming definite shape at the turn of the present century. Now the victory of monopoly is openly acknowledged by the most official representatives of bourgeois society.2 Yet when in the course of his prognosis Marx had first deduced monopoly from the inherent tendencies of capitalism, the bourgeois world had looked upon competition as an eternal law of nature.

The elimination of competition by monopoly marks the beginning of the disintegration of capitalist society. Competition was the creative mainspring of capitalism and the historical justification of the capitalist. By the same token the elimination of competition marks the transformation of stockholders into social parasites. Competition had to have certain liberties, a liberal atmosphere, a regime of democracy, of commercial cosmopolitanism. Monopoly needs as authoritative a government as possible, tariff walls, “its own” sources of raw materials and arenas of marketing (colonies). The last word in the disintegration of monopolistic capital is Fascism.

Concentration of Wealth and the Growth of Class Contradictions

Capitalists and their advocates try in every way to hide the real extent of the concentration of wealth from the eyes of the people as well as from the eyes of the tax collector. In defiance of the obvious, the bourgeois press is still attempting to maintain the illusion of a “democratic” distribution of capital investment. The New York Times, in refutation of the Marxists, points out that there are from three to five million separate employers of labor. Joint-stock companies, it is true, represent greater concentration of capital than three to five million separate employers, yet the United States does have “half a million corporations.” This sort of trifling with lump sums and average figures is resorted to, not in order to disclose, but in order to hide things as they are.

From the beginning of the war [World War I] until 1923 the number of plants and factories in the United States fell from index figure 100 to 98.7, while the mass of industrial production rose from 100 to 156.3. During the years of sensational prosperity (1923-1929), when it seemed that everybody was getting rich, the number of establishments fell from 100 to 93.8, while production rose from 100 to 113. Yet the concentration of business establishments, bound by their ponderous material bodies, is far behind the concentration of their souls, i.e., ownership.

In 1929 the United States did actually have more than 300,000 corporations, as the New York Times correctly observes. It is only necessary to add that 200 of these, i.e., 0.07 percent of the entire number, directly controlled 49.2 percent of the assets of all the corporations. Four years later that ratio had already risen to 56 percent, while during the years of Roosevelt’s administration it has undoubtedly risen still higher. Inside these 200 leading joint-stock companies the actual domination belongs to a small minority.3

The same process may be observed in the banking and insurance systems. Five of the largest insurance companies in the United States have absorbed not only the other companies but even many banks. The total number of banks is reduced, chiefly in the form of so-called “mergers,” essentially by being absorbed. The extent of the turnover grows rapidly. Above the banks rises the oligarchy of super-banks. Bank capital merges with industrial capital into financial super-capital. Supposing that the concentration of industry and banks were to proceed at the same rate as during the last quarter of a century—as a matter of fact, the tempo of concentration is on the increase—in the course of the impending quarter century the monopolists will have garnered unto themselves the entire economy of the country, without leaving over as much as the widow’s mite.

The statistics of the United States are here resorted to only because they are more exact and more striking. Essentially the process of concentration is international in character. Throughout the various stages of capitalism, through phases of conjunctural cycles, through all the political regimes, through peaceful periods as well as through periods of armed conflicts, the process of the concentration of all the great fortunes into an ever decreasing number of hands has gone on and will continue without end.

During the years of the Great War, when the nations were bleeding to death, when the very bodies politic of the bourgeoisie lay crushed under the weight of national debts, when fiscal systems rolled into the abyss, dragging the middle classes after them, the monopolists were coining unprecedented profits out of the blood and muck. The most powerful companies of the United States increased their assets during the years of the war two, three, four and more times and swelled their dividends to 300, 400, 900 and more percent.

In 1840, eight years before the publication by Marx and Engels of the Manifesto of the Communist Party, the famous French writer Alexis de Tocqueville wrote in his book Democracy in America: “Great wealth tends to disappear, the number of small fortunes to increase.” That thought has been reiterated innumerable times, at first with reference to the United States, later with reference to those other young democracies, Australia and New Zealand. Of course, de Tocqueville’s view was already erroneous in his own day. Still, real concentration of wealth began only after the American Civil War, on the eve of which de Tocqueville died.

At the beginning of the present century two percent of the population of the United States already owned more than half of the entire wealth of the country; in 1929 the same two percent owned three-fifths of the national wealth. At the same time, 36,000 wealthy families had as great an income as 11,000,000 middling and poor families.

During the crisis of 1929-1933 monopolistic establishments had no need to appeal to public charity; on the contrary, they rose higher than ever above the general decline of national economy. During the ensuing rickety industrial revival on the yeast-cakes of the New Deal the monopolists again skimmed a lot of heavy cream. The number of the unemployed decreased at best from 20,000,000 to 10,000,000; at the same time the upper crust of capitalist society—no more than 6,000 adults—garnered fantastic dividends; this is what Solicitor General Robert H. Jackson proved with figures during his tenure as Anti-Trust Assistant Attorney General of the United States.

But, the abstract concept, “monopolistic capital,” is filled in for us with flesh and blood. What it means is that a handful of families,4 bound by ties of kinship and common interests into an exclusive capitalist oligarchy, dispose of the economic and political fortunes of a great nation. One must perforce admit that the Marxist law of concentration has worked out famously!

Has Marx’s Teaching Become Obsolete?

Questions of competition, concentration of wealth, and monopoly naturally lead to the question whether in our day Marx’s economic theory is merely of historic interest—as, for example, Adam Smith’s theory—or whether it continues to be of actual significance. The criterion for replying to that question is simple: if the theory correctly estimates the course of development and foresees the future better than other theories, it remains the most advanced theory of our time, be it even scores of years old.

The famous German economist, Werner Sombart, who was virtually a Marxist at the beginning of his career but later revised all the more revolutionary aspects of Marx’s teaching, countered Marx’s Capital with his own Capitalism, which probably is the best-known exposition of bourgeois economic apologetics in recent times. Sombart wrote: “Karl Marx prophesied: firstly, the increasing misery of hired workers; secondly, general ‘concentration,’ with the disappearance of the class of artisans and peasants; thirdly, the catastrophic collapse of capitalism. Nothing of the kind has come to pass.”

Against this erroneous prognosis Sombart counterposes his own “strictly scientific” prognosis. “Capitalism will continue,” according to him, “to transform itself internally in the same direction in which it has already begun to transform itself, at the time of its apogee: as it grows older, it will become more and more calm, sedate, reasonable.” Let us try to verify, if only along the basic lines, which of the two is right: Marx, with his prognosis of catastrophe, or Sombart, who in the name of all bourgeois economy promised that matters would be adjusted “calmly, sedately, reasonably.” The reader will agree that the question is worthy of notice.

A. ‘The Theory of Increasing Misery’

“Accumulation of wealth at one pole,” wrote Marx sixty years before Sombart, “is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole, i.e., on the side of the class that produces its product in the form of capital.”

That thesis of Marx’s, under the name of “The Theory of Increasing Misery,” has been subjected to constant attacks by democratic and social-democratic reformers, especially during the period 1896-1914, when capitalism developed rapidly and yielded certain concessions to the workers, especially to their upper stratum. After the World War, when the bourgeoisie, frightened by its own crimes and by the October Revolution, took to the road of advertised social reforms, the value of which was simultaneously nullified by inflation and unemployment, the theory of the progressive transformation of capitalist society seemed to the reformers and to the bourgeois professors fully warranted. “The purchasing power of hired labor,” Sombart assured us in 1928, “has increased in direct ratio to the expansion of capitalist production.”

As a matter of fact, the economic contradiction between the proletariat and the bourgeoisie was aggravated during the most prosperous periods of capitalist development, when the rise in the standard of living of certain strata of toilers, which at times were rather extensive, hid the decrease of the proletariat’s share in the national income. Thus, just before falling into prostration, the industrial production of the United States, for instance, increased by 50 percent between 1920 and 1930, while the sum paid out in wages rose only by 30 percent, which meant a tremendous decrease of labor’s share in the national income. In 1930 began an ominous growth of unemployment, and in 1933 a more or less systematic aid to the unemployed, who received in the form of relief hardly more than one half of what they had lost in the form of wages.

The illusion of the uninterrupted “progress” of all classes has vanished without a trace. The relative decline of the masses’ standard of living has been superseded by an absolute decline. Workers begin by economizing on skimpy entertainment, then on their clothes and finally on their food. Articles and products of average quality are superseded by shoddy ones, and the shoddy by the worst. Trade unions begin to look like the man who hangs on desperately to the handrail while going down in a rapidly descending escalator.

With six percent of the world’s population, the United States holds forty percent of the world’s wealth. Still, one third of the nation, as Roosevelt himself admits, is undernourished, inadequately clothed, and lives under subhuman conditions. What is there to say, then, for the far less privileged countries? The history of the capitalist world since the last war has irrefutably borne out the so-called “theory of increasing misery.”

The Fascist regime, which merely reduces to the utmost the limits of decline and reaction inherent in any imperialist capitalism, became indispensable when the degeneration of capitalism blotted out the possibility of maintaining illusions about a rise in the proletariat’s standard of living. Fascist dictatorship means the open acknowledgement of the tendency to impoverishment, which the wealthier imperialist democracies are still trying to disguise. Mussolini and Hitler persecute Marxism with such hatred precisely because their own regime is the most horrible confirmation of the Marxist prognosis.

The civilized world was indignant or pretended to be indignant when Goering, in the tone of the executioner and buffoon peculiar to him, declared that guns were more important than butter, or when Cagliostro-Casanova-Mussolini advised the workers of Italy to learn to pull in tighter the belts on their black shirts. But does not substantially the same take place in the imperialist democracies? Butter everywhere is used to grease guns. The workers of France, England, the United States learn to pull in their belts without having black shirts.

B. The Reserve Army and the New Sub-Class of the Unemployed

The industrial reserve army makes up an indispensable component part of the social mechanics of capitalism, as much as a supply of machines and raw materials in factory warehouses or of finished products in stores. Neither the general expansion of production nor the adaptation of capital to the periodic ebb and flow of the industrial cycle would be possible without a reserve of labor power. From the general tendency of capitalist development—the increase of constant capital (machines and raw materials) at the expense of variable capital (labor power)—Marx drew the conclusion: “The greater the social wealth...the greater is the industrial reserve army...the greater is the mass of a consolidated surplus-population...the greater is official pauperism. This is the absolute general law of capitalist accumulation.”

That thesis—indissolubly bound up with the “Theory of Increasing Misery” and for scores of years denounced as “exaggerated,” “tendentious,” and “demagogic”—has now become the irreproachable theoretical image of things as they are. The present army of unemployed can no longer be regarded as a “reserve army,” because its basic mass can no longer have any hope of returning to employment; on the contrary, it is bound to be swelled by a constant flow of additional unemployed. Disintegrating capitalism has brought up a whole generation of young people who have never had a job and have no hope of getting one.

This new sub-class between the proletariat and the semi-proletariat is forced to live at the expense of society. It has been estimated that in the course of nine years (1930-1938) unemployment has taken out of the economy of the United States more than 43,000,000 labor man-years. Considering that in 1929, at the height of prosperity, there were two million unemployed in the United States and that during those nine years the number of potential workers has increased by five million, the total number of lost man-years must be incomparably higher. A social regime ravaged by such a plague is sick unto death. The proper diagnosis of this malady was made nearly four score of years ago, when the disease itself was a mere germ.

C. The Decline of the Middle Classes

Figures which demonstrate the concentration of capital indicate therewith that the specific gravity of the middle class in production and its share of the national income have been constantly declining, while small holdings have either been completely swallowed up or reduced in grade and robbed of their independence, becoming a mere badge of unendurable toil and desperate want.

At the same time, it is true, the development of capitalism has considerably stimulated an increase in the army of technicians, managers, servicemen, clerks, attorneys, physicians—in a word, the so-called “new middle class.” But that stratum, the growth of which was already no mystery even to Marx, has little in common with the old middle class, who in the ownership of its own means of production had a tangible guarantee of economic independence. The “new middle class” is more directly dependent on the capitalists than are the workers. Indeed, the middle class is in large measure their taskmaster. Moreover, among it has been noticed considerable overproduction, with its aftermath of social degradation.

“Reliable statistical information,” states a person as remote from Marxism as the already-quoted former Attorney General of the United States Homer S. Cummings, “shows that very many industrial units have completely disappeared and that what took place was a progressive elimination of the small business man as a factor in American life.” But, objects Sombart, “general concentration, with the disappearance of the class of artisans and peasants,” has not yet taken place. Like every theoretician, Marx began by isolating the fundamental tendencies in their pure form; otherwise, it would have been altogether impossible to understand the destiny of capitalist society.

Marx himself was, however, perfectly capable of viewing the phenomena of life in the light of concrete analysis, as a product of the concatenation of diverse historical forces. Surely, Newton’s laws are not invalidated by the fact that the rate of speed in the fall of bodies varies under different conditions or that the orbits of planets are subjected to disturbances.

In order to understand the so-called “tenacity” of the middle classes, it is well to bear in mind that the two tendencies, the ruination of the middle classes and the transformation of these ruined ones into proletarians, develop neither at an even pace nor to the same extent. It follows from the increasing preponderance of the machine over labor-power that the further the process of the ruination of the middle classes proceeds, the more it outstrips the process of their proletarianization; indeed at a certain juncture the latter must cease altogether and even back up.

Just as the operation of the laws of physiology yields different results in a growing organism from those in a dying one, so the economic laws of Marxist economy assert themselves differently in a developing and a disintegrating capitalism. This difference is shown with especial clarity in the mutual relations of town and country.

The rural population of the United States, increasing comparatively at a slower rate than the total population, continued to increase in absolute figures until 1910, when it amounted to more than 32,000,000. During the subsequent twenty years, notwithstanding the rapid increase in the country’s total population, it fell to 30.4 millions, i.e., by 1.6 millions. But in 1935 it rose again to 32.8 millions, swelling in comparison with 1930 by 2.4 millions.

This turn of the wheel, astonishing at first glance, does not in the least refute either the tendency of the urban population to increase at the expense of the rural population, or the tendency of the middle classes to become atomized, while at the same time it demonstrates most pointedly the disintegration of the capitalist system as a whole.

The increase in the rural population during the period of the acute crisis of 1930-1935 is simply explained by the fact that well-nigh two million of urban population, or, speaking more to the point, two million of starving unemployed, moved into the country—to plots of land abandoned by farmers or to the farms of their kith and kin, so as to apply their labor-power, rejected by society, to productive natural economy and in order to drag out a semi-starved existence instead of starving altogether.

Hence, it is not a question of the stability of small farmers, artisans, and store-keepers, but rather of the abject helplessness of their situation. Far from being a guarantee of the future, the middle class is an unfortunate and tragic relic of the past. Unable to stamp it out altogether, capitalism has managed to reduce it to the utmost degree of degradation and distress. The farmer is denied, not only the rent due him for his plot of land and the profit on his invested capital, but even a goodly portion of his wages.

Similarly, the little fellows in town fret out their allotted span between economic life and death. The middle class is not proletarianized only because it is pauperized. In that it is just as hard to find as an argument against Marx as in favor of capitalism.

D. Industrial Crises

The end of the past and the beginning of the present century was marked by such overwhelming progress made by capitalism that cyclical crises seemed to be no more than “accidental” annoyances. During the years of almost universal capitalist optimism, Marx’s critics assured us that the national and international development of trusts, syndicates, and cartels introduced planned control of the market and presaged the final triumph over crises.

According to Sombart, crises had already been “abolished” before the war by the mechanics of capitalism itself, so that “the problem of crises leaves us today virtually indifferent.” Now, a mere ten years later, these words sound like hollow mockery, while only in our own day does Marx’s prognosis loom in the full measure of its tragic cogency.

It is remarkable that the capitalist press, which half-way tries to deny the very existence of monopolies, resorts to these same monopolies in order half-way to deny capitalistic anarchy. If sixty families were to control the economic life of the United States, the New York Times observes ironically, “it would show that American capitalism, so far from being ‘anarchic’ and ‘planless’ organized with great neatness.”

This argument misses the mark. Capitalism has been unable to develop a single one of its trends to the ultimate end. Just as the concentration of wealth does not abolish the middle class, so monopoly does not abolish competition, but only bears down on it and mangles it. No less than the “plan” of each of the sixty families, the sundry variants of these plans are not in the least interested in coordinating the various branches of economy, bur rather in increasing the profits of their own monopolistic clique at the expense of other cliques and at the expense of the entire nation. The crossing of such plans in the final reckoning only deepens the anarchy in the national economy.

The crisis of 1929 broke out in the United States one year after Sombart had proclaimed the utter indifference of his “science” to the very problem of crises. From the peak of unprecedented prosperity the economy of the United States was catapulted into the abyss of monstrous prostration. No one in Marx’s day could have conceived convulsions of such magnitude! The national income of the United States had risen for the first time in 1920 to 69 billion dollars, only to drop the very next year to 50 billion dollars, i.e., by 27 percent. In consequence of the prosperity of the next few years, the national income rose again, in 1929, to its highest point of 81 billion dollars, only to drop in 1932 to 40 billion dollars, i.e., by more than half! During the nine years 1930-1938 were lost approximately 43 million man-years of labor and 133 billion dollars of the national income, assuming the norms of labor and income of 1929, when there were “only” two million unemployed. If all this is not anarchy, what can possibly be the meaning of that word?

E. The ‘Theory of Collapse’

The minds and hearts of middle-class intellectuals and trade-union bureaucrats were almost completely enthralled by the achievements of capitalism between the time of Marx’s death and the outbreak of the World War. The idea of gradual progress (“evolution”) seemed to have been made secure for all time, while the idea of revolution was regarded as a mere relic of barbarism. Marx’s prognosis was countered with the qualitatively contrary prognosis about the more balanced distribution of the national income, about the softening of class contradictions, and about the gradual reformation of capitalist society. Jean Juarès, the most gifted of the Social Democrats of that classic epoch, hoped gradually to fill political democracy with social content. In that lay the essence of reformism. Such was the alternative prognosis. What is left of it?

The life of monopolistic capitalism in our time is a chain of crises. Each crisis is a catastrophe. The need of salvation from these partial catastrophes by means of tariff walls, inflation, increase of government spending, and debts lays the ground for additional, deeper, and more widespread crises. The struggle for markets, for raw materials, for colonies makes military catastrophes unavoidable. All in all, they prepare revolutionary catastrophes. Truly, it is not easy to agree with Sombart that aging capitalism becomes increasingly “calm, sedate, and reasonable.” It would be more apt to say that it is losing its last vestiges of reason. In any event, there is no doubt that the “theory of collapse” has triumphed over the theory of peaceful development.

The Decay of Capitalism

However expensive the control of the market has been to society, mankind up to a certain stage, approximately until the World War, grew, developed, and enriched itself through partial and general crises. The private ownership of the means of production continued to be in that epoch a comparatively progressive factor. But now the blind control by the law of value refuses to render further service. Human progress is stuck in a blind alley. Notwithstanding the latest triumphs of technical thought, the material productive forces are no longer growing. The clearest symptom of the decline is the world stagnation in the building industry, in consequence of the stoppage of new investments in the basic branches of economy. Capitalists are simply no longer able to believe in the future of their own system. Constructions stimulated by the government means a rise in taxation and the contraction of the “untrammeled” national income, especially since the main part of the new government constructions is directly designed for war purposes.

The marasmus has acquired a particularly degrading character in the most ancient sphere of human activity, the one most closely connected with the basic vital needs of man—in agriculture. No longer satisfied with the obstacles which private ownership in its most reactionary form, that of small landholdings, places before the development of agriculture, capitalist governments see themselves not infrequently called upon to limit production artificially with the aid of statutory and administrative measures which would have frightened artisans in the guilds at the time of their decline. It will be recorded in history that the government of the most powerful capitalist country granted premiums to farmers for cutting down on their planting, i.e., for artificially diminishing the already falling national income. The results are self-evident: despite grandiose productive possibilities, secured by experience and science, agrarian economy does not emerge from a putrescent crisis, while the number of the hungry, the preponderant majority of mankind, continues to increase faster than the population of our planet. Conservatives consider it sensible politics to defend a social order which has descended to such destructive madness and they condemn the Socialist fight against such madness as destructive Utopianism.

End of Part One

—From The Living Thoughts Library, Edited by Alfred O. Mendel, published by David McKay Company, 1939, Washington Square—Philadelphia.

1 The abridgement of the first volume of Capital—the foundation of Marx’s entire system of economics—was made by Mr. Otto Ruhle with profound understanding of his task. First to be eliminated were obsolete examples, then quotations from writings which today are only of historic interest, polemics with writers now forgotten, and finally numerous documents which, whatever their importance for understanding a given epoch, have no place in a concise exposition that pursues theoretical rather than historical objectives. At the same time, Mr. Ruhle did everything to preserve continuity in the development of the scientific analysis. Logical deductions and dialectic transitions of thought have not, we trust, been infringed at any point. It stands to reason that this extract calls for attentive perusal.

2 Competition as a restraining influence, complains the former Attorney General of the United States, Mr. Homer S. Cummings, is being gradually displaced and, in large fields, remains only “as a shadowy reminder of conditions that once existed.”

3 A committee of the United States Senate found out in February 1937, that for the past twenty years the decisions of twelve of the very largest corporations have been tantamount to directives for the greater part of American industry. The number of chairmen of the board of these corporations is about the same as the number of members in the cabinet of the President of the United States, the executive branch of the republic’s government. But these chairmen of the board are immeasurably more powerful than the cabinet members.

4 The American writer Ferdinand Lundberg who, for all his scholarly conscientiousness, is a rather conservative economist, wrote in his book, which created quite a stir: “The United States is owned and dominated today by a hierarchy of sixty of the richest families, buttressed by no more than ninety families of lesser wealth.” To these might be added a third tier of perhaps three hundred and fifty other families, with incomes in excess of a hundred thousand dollars a year. The predominant position there belongs to the first group of sixty families, who dominate not only the market but all the levers of government. They are the real government, “the government of money in a dollar democracy.”