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THE 
 THEORETICAL SYSTEM 
 
 OF 
 
 KARL MARX 
 
 m THE LIGHT OF RECENT CRITICISM 
 
 BY 
 
 LOUIS B. BOUDIN, LL.M. 
 
Copyright, 1907 
 By Chakles H. Kekr & Company 
 
PREFACE. 
 
 The present volume is substantially a reprint of a series 
 of articles which appeared in the International Socialist 
 Review from May, 1905, to October, 1906. > 
 
 It was my original intention to give in brief compass an 
 account of the causes which called forth the so-called Re- 
 visionist movement, the questions raised thereby, and its net 
 results, theoretical as well as practical. It soon became ap- 
 parent to me, however, that such task was impossible of 
 execution even within the. space of twice the number 
 (seven) of articles originally contemplated for the series, 
 because of the extreme poverty of the English literature of 
 the subject, and the consequent unpreparedness of our read- 
 ers for such discussion. In' treating of the causes of the 
 Revisionist movement, the Neo-Kantian movement in lat- 
 ter-day philosophy had to be touched upon, but no mere 
 reference or allusion to it would suffice because of the entire 
 unfamiliarity of the English reader with that subject. The 
 revision of Marxism could hardly be discussed with people 
 who had but a bowing acquaintance with the doctrines of 
 that famous system of thought. 
 
 I therefore concluded to present to the English reader, 
 instead of an account of the movement to revise Marxism, 
 an exposition of the teachings of Marx, and to draw upon 
 the literature of Revisionism only in so far as it may become 
 necessary or expedient in the course of such exposition, in 
 order to accentuate some of its points or differentiate them 
 from others with which they are likely to be confused. I 
 have therefore refrained from entering here into any con- 
 troversy with any revisionist Marx critic except in so far 
 as was absolutely necessary for nay jiurpfese.- And I hope at 
 
 iii . \- . 
 
 17B17 
 
JV PREFACE. 
 
 some future time to be able to resume the argument, when 
 I expect to take up the different critics and their criticisms 
 one by one and draw conclusions with them. 
 
 I have also refrained from entering into any detailed 
 statement of the Marxian economic theory as I did not in- 
 tend to make this volume a primer of philosophy and po- 
 litical economy according to Marx, but rather an outline of 
 the Marxian system of thought, with the accent on the sys- 
 tem, that is the relation of its different parts to each other 
 and the unity of the whole. It is not meant as a text-book 
 of the Marxian teaching, but as an introduction to the study 
 of Marx, and as an aid to the understanding of him. And 
 in this connection I wish to say that in stating what I con- 
 sidered to be the true Marxian doctrine I never relied on 
 isolated statements or expressions, but always looked to the 
 spirit pervading the whole of his work, for the explanation 
 of any dark point or the solution of any problem encoun- 
 tered. 
 
 In the arrangement of the matter I have followed the 
 suggestion of the great Master: I have treated the Ma- 
 terialistic Conception of History as merely introductory to 
 the study of the actual workings of the capitalist system. 
 I appreciate that the problems of the Materialistic Concep- 
 tion of History are many and manifold, but I do not believe 
 that it would have been wise to burden the reader at the 
 very beginning with long and abstruse philosophic discus- 
 sions. Besides, many of the problems of the Materialistic 
 Conception of History which are considered grave, are so 
 considered only because of the failure of many students of 
 the subject to perceive that these problems are not peculiar 
 to this particular philosophy, but are problems of philosophy 
 in general. 
 
 There is one respect, however, in which the Materialistic 
 Conception of History has a harder road to travel than 
 any other system of thought that I know of: the persistent 
 misrepreseiitaitifeiis ibff. ffrteM andtifd^.' I ih^ve therefore 
 deemed it ladyi^^W? to atta?!) two ; ^ppei^«|jces^ wherein are 
 
PREFACE. V 
 
 treated two points with respect to which these perversions 
 and misrepresentations are most frequent and at the same 
 time most glaring. 
 
 I hope that the volume herewith presented will give the 
 reader, if not an adequate presentation of the Marxian doc- 
 trines, at least an adequate beginning for such presentation, 
 and that it will serve as a stimulant towards an adequate 
 discussion among English-speaking people of the great 
 theoretical problems embraced within the realm of Marx- 
 ism. 
 
 L. B. BouDiN. 
 
 New York, February, 1907. 
 
CONTENTS 
 
 PAGE 
 
 Preface iii 
 
 Chapter I. Karl Marx and His Latter-Day Critics 9 
 
 Chapter II. Materialist Conception of History and 
 
 Class-Struggle 20 
 
 Chapter III. The Materialist Conception of History 
 
 AND Its Critics 31 
 
 Chapter IV. Value and Surplus Value 49 
 
 Chapter V. The Labor Theory of Value and Its 
 
 Critics 82 
 
 Chapter VI. The Great Contradiction in the Marx- 
 ian Theory of Value 119 
 
 Chapter VII. Economic Contradictions and the Pass- 
 ing of Capitalism 147 
 
 Chapter VIII. The Concentration of Capital and the 
 
 Disappearance of the Middle Class . 170 
 
 Chapter IX. The Proletariat and The Revolution . 215 
 
 Chapter X. The Social Revolution 230 
 
 Chapter XI. Conclusion 255 
 
 Appendix I 257 
 
 Appendix II 272 
 
THE THEORETICAL SYSTEM 
 OF KARL MARX. 
 
 CHAPTER I. 
 
 KARL MARX AND HIS LATTER-DAY CRITICS. 
 
 Marxism — that theoretical system of which Karl Marx 
 was the chief exponent, and which its adepts are wont to 
 term " Scientific Socialism '' — has reached a stage in its 
 existence which marks it as one of thos^ systems of thought 
 which in the history of the intellectual development of the 
 human race are epoch-making and stamp their character 
 upon the age the intellectual life of which they dominate. 
 While the fight for its existence is still raging, and it is 
 growing in intensity from day to day, the character of the 
 fight betrays the difference in its position. It no longer 
 fights for recognition, so to speak, but on the contrary, it 
 fights to maintain the position of an established doctrine, 
 one might say the established doctrine, a position which 
 it has assumed and occupied since the appearance of the 
 last volume of Capital in 1894. 
 
 Marx-criticism is not any the less frequent or any the 
 less vehement to-day than it was at any time during the 
 life of his doctrines. Quite the reverse: At no time since 
 the first foundations of the great system of thought which 
 bears his name were laid down by Karl Marx, more than 
 fifty years ago, have his assailants been so numerous or so 
 active as they are now. Marxism — opposition to Marxism 
 — is the moving cause, the burden of the song, the ever- 
 recurring Leit-motif, of every new book, pamphlet, and 
 
 9 
 
10 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 essay on philosophy, sociology, or political economy, that lays 
 any pretensions to being abreast of the modern current of 
 thought. There are now being published numerous pe- 
 riodicals — weekly, monthly, quarterly, etc. — devoted ex- 
 clusively, openly or covertly, to the fighting of Marxism. 
 This is itself, of course, one of the manifestations of the 
 dominating influence which the teachings of Marx and 
 his disciples have obtained over the minds of human kind : 
 it now requires the constant efforts of a great army of 
 intellectuals to combat, and that with very doubtful suc- 
 cess, the progress of the teaching which less than a quarter 
 of a century ago would have been passed by one of them as 
 a negligible quantity in the sum total of our intellectual 
 life. 
 
 Aside however from its volume, the tone of the anti- 
 Marx-literature of the present day shows the change in 
 the position of Marxism. The tone of personal hostility 
 towards Marx, the slighting estimate of his position in the 
 realm of thought, and of the importance of his system in 
 the development of ideas, — which were once common to 
 the majority of Marx critics — are almost entirely absent 
 from this literature. On the contrary, the distinguishing 
 feature of this anti-Marxian literature is the homage which 
 is paid by nearly everybody to Marx the man and the 
 thinker. More important, however, is the fact that most 
 of the new critics of Marxism do not treat it as a new-fan- 
 gled doctrine the correctness of which is yet to be proven, 
 but, on the contrary, as the old-established and accepted 
 doctrine which they attempt to prove false, in whole or 
 in part, and which, they claim, must therefore be revised, 
 supplemented or superceded. No one, however, dares 
 openly defend the theories which Marxism has supplanted. 
 Almost everyone admits expressly the justifiability of 
 Marx's criticism of the theories which predominated before 
 his advent, and that Marx's theories were correct at the time 
 they were first stated and a proper generalization of the 
 data then at hand. What they claim is, that later develop- 
 
KARL MARX AND HIS LATTER-DAY CRITICS. II 
 
 ments have shown that they were based on insufficient data, 
 and that our present knowledge requires the revision of 
 some of his tenets or the supplementing of them by some 
 qualifying truths, according to some, or that the whole sys- 
 tem be thrown overboard, it having been built on false foun- 
 dations, according to others. Most of the critics, however, 
 stop at revision. Hence, the name Revisionists, under which 
 most of the newer Marx-critics are known, and the term 
 Revisionism applied to their writings and teachings. 
 
 The most important feature, however, of modern anti- 
 Marx literature and that which in our opinion conclusively 
 establishes not only the pre-eminent position occupied to- 
 day by Marxism as the recognized and established sociolog- 
 ical doctrine, but also the fact that there is no doctrine ca- 
 pable of competing with it for establishment or even of 
 dividing honors with it, are the writings of those of the 
 critics of Marxism who claim that the whole system must 
 be thrown overboard as unscientific. These writings are the 
 most edifying sort of reading for a Marxist. I shall have 
 occasion, later on, to examine this literature more particu- 
 larly. Here I wish to say only this: These latter-day crit- 
 ics of Marx do not dare accept in its entirety any other 
 system which has been advocated before their advent; and 
 they do not, with some exceptions which are quite negligi- 
 ble, (of which I shall, however, and nevertheless, treat 
 later on), advance any system, wholly or partly original 
 with its authors, which would be capable of taking the place 
 of Marxism as an explanation of social phenomena. They 
 almost all, therefore, fall into what may well be termed 
 Nihilism, that is to say, they are led to deny the existence, 
 nay, even the possibility, of any social science. In other 
 words: Marxism is so much the scientific doctrine in its 
 sphere (which covers all the life of humanity in organized 
 society, including all its social and intellectual manifesta- 
 tions) that you cannot destroy it without at the same time 
 destroying all scientific knowledge of the subject. 
 
 It must be said, however, in justice to these writers, that 
 
12 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 this Nihilism is not confined to those who would destroy 
 Marxism root and branch. A leaning towards Nihilism is 
 discoverable also in most of those critics of Marxism who 
 go no further than revision, as is well exemplified in their 
 leader Eduard Bernstein, who attempted to prove the im- 
 possibility of scientific socialism, in a lecture delivered be- 
 fore a body of students at Berlin. 
 
 Of course, this Nihilism is not equally pronounced in all 
 of Marx's critics. But it is to be found as a more or less 
 conscious substratum of their criticism in all except those 
 who confine their criticism to some one phase or branch of 
 the Marxian system. These later critics, not dealing with 
 the system as a whole, naturally do not feel the void created 
 by the supposed demolition of the Marxian theory, and can 
 therefore run their course merrily without feeling con- 
 strained to either fill the void or account for its existence. 
 Those however who viewed and reviewed the system as a 
 whole could not but feel the aching void which would be 
 left if the Marxian system were demolished; they naturally 
 looked for another system to be reared in its place, and, that 
 task proving beyond their powers, they fell into Nihilism. 
 Thus the question whether Marxism is or is not science 
 turned into the question whether there is, or could be, any 
 social science. How keenly this was felt by some of the 
 critics of Marxism can be judged from the following state- 
 ment of Dr. Paul Weisengruen, one of the ablest critics of 
 Marxism and one of those who believe that the whole Marx- 
 ian system must be abandoned as being radically and basi- 
 cally false. He says, alluding. to the so-called "crisis" in^ 
 Marxism, by which term the Revisionist movement is some- 
 times designated — "The crisis in Marxism means a crisis 
 in the whole range of social science." 
 
 All this makes it absolutely imperative to re-state the 
 Marxian theory, in the light of this new criticism, examin- 
 ing the objections raised with a view of determining 
 whether and how far this criticism has led, or must needs 
 lead, to a revision, modification, or abandonment, of any 
 
KARL MARX AND HIS LATTER-DAY CRITICS. I3 
 
 of the subsidiary or tributary theories of Karl Marx; and 
 whether such revision, modification or abandonment, if any 
 be necessary, affects the Marxian system as a whole. 
 
 This is the only way in which the iatter-day critics of 
 Marxism can be properly answered. It is absolutely im- 
 possible to reply separately to every book and article writ- 
 ten by them. Besides, this would be a waste of energy even 
 if it were possible, for a good deal of this literature is mere 
 , repetition, or is based on the same assumptions of fact or 
 logical deduction. And it is also impossible to take one of 
 these writers, as typical of the whole movement, analyze 
 his arguments, and estimate the value of the whole move- 
 ment thereon, for the reason that Marx-critics are an ex- 
 tremely independent lot and it is therefore hard to find two 
 of them agreeing on all points. Not only does each of them 
 follow his own or what he at least thinks is his own line 
 of argument, and draw his own conclusions, but these argu- 
 ments and conclusions are very irreconcilable with one an- 
 other and often have a tendency to refute one another. 
 Furthermore, they do not very often agree with each other 
 as to what is Marxism, that is to say, as to what are the 
 essential elements of Marx's theoretical system. So that 
 among the critics of Marxism the rule seems to obtain that 
 not only does each tub of criticism stand on its own bot- 
 tom, but that every man constructs his own Marxism. 
 With some of these critics, of the cheaper sort, of course, 
 this method plays peculiar pranks. A Marxism is con- 
 structed, which, while easy of refutation, is so much differ- 
 ent from the doctrine of Karl Marx and his disciples that 
 nobody cares a whit as to what happens to it. 
 
 All of which goes to show that it would not be fair, and 
 well-nigh impossible, to treat any one of these critics as typ- 
 ical of them all. Each is entitled to a separate hearing, 
 if he is to be answered. This claim was expressly put forth 
 by one critic of Marxism. He argued that while Marxists 
 should be held responsible for one another, for the reason 
 that Marxism was a well-defined system of thought and 
 
14 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 body of doctrine to which all adepts of the school are ex- 
 pected to. adhere, the opponents of Marxism, and particu- 
 larly those of a nihilistic bent of mind, belong to no school, 
 believe in no particular system, in short are a lot of free 
 lances and must be treated accordingly. 
 
 This makes a systematic review of the Literature of An- 
 ti-Marxism — the only term which is comprehensive enough 
 to include all of the Marx-criticism — impossible. We will, 
 therefore, at this time, only briefly characterize its leading 
 features, and mention the most important authors, leaving 
 such discussion of any individual writer or argument as 
 may be necessary to the time when that particular part of 
 the Marxian system to which it may be most pertinent will 
 be taken up in the topical discussion which will follow. 
 
 The appearance, in 1894, of the third volume of Karl 
 Marx's chief work, Capital, naturally led to a revival of 
 Marx-criticism. But this revival was not^in any way gen- 
 eral, and nothing of importance in this line immediately 
 followed the publication of the third volume of Capital, 
 with the single exception of Boehra-Bawerk's essay on 
 " Marx and the close of his system,'' which, because of the 
 method in which the subject is treated really belongs to the 
 old rather than the new style of Marx-criticism. Boehm- 
 Bawerk's essay which deals with Marx's economic teachings 
 was followed, in 1896, by Professor Rudolph Stammler's 
 important work on the Materialistic Conception of History. 
 The real beginning, however, of the antf-Marxian literary 
 crusade dates froni the publication by Eduard Bernstein 
 in 1897 of his series of articles in the Neue Zeit, the organ 
 of the German Marxists, under the title " Socialist Prob- 
 lems,'' in which the first attempts at Revisionism manifested 
 themselves. Later, in discussing the net results of the new 
 Marx-criticism, we shall endeavor to explain the cause 
 which led Bernstein to a discussion of these "problems." 
 Here it is sufficient' to say that aside from the inherent im- 
 portance of the problems and the causes which led up to 
 and brought about their discussion the personality of Bern- 
 
KARL MARX AND HIS LATTER-DAY CRITICS. 15 
 
 Stein played an important part in the profound sensation 
 which his articles, and afterward his book " Die Vorausset- 
 sungen des Sosialismus,'' created. 
 
 It must be remembered that for years Eduard Bernstein 
 had been one of the recognized exponents of Marxism. He 
 was the editor of the Zurich " Social Democrat," the offi- 
 cial organ of the German Social Democracy during the 
 Bismarck anti-Socialist laws. He had for years been closely 
 associated with Frederick Engels, the co-worker of Karl 
 Marx and one of the fathers of " Marxism.'' He was, there- 
 fore, rightfully looked upon by both socialists and non- 
 socialists alike as one of the leading representatives of 
 scientific socialism. His demand, therefore, for a revisiott 
 of Marxism gave an impetus to Marx-criticism never 
 equalled before. Everything now made for Revisionism. 
 There was a general overhauling of old beliefs and accepted 
 doctrines. The old opponents of Marxism, both open and 
 covert, took heart and mustered again in battle array. 
 Most of them, however, changed their weapons: They 
 threw away the old stock arguments of the old and discarded 
 theoretical arsenals which had become obsolete and useless, 
 and had therefore been left to rest and rust, and took up 
 the more modern weapons of the Revisionists. JHence, the 
 Revisionist hue of all latter-day anti-Marxian literature. 
 
 The most important of the writers to be considered, be- 
 sides those g,lready mentioned, are: Werner Sombart, Th. 
 G. Masaryk, Paul Barth, Rudolph Wenckstern, Franz Op- 
 penheimer, Ludwig Woltman, Tugan-Baranowsky, and Jean 
 Jaures. Another Revisionist whose writings, although of 
 little intrinsic value, arrest our attention by the peculiar 
 reflection they cast upon Revisionism, is Dr. Alfred Nossig, 
 the only man who attempted to raise Revisionism to the 
 dignity of a system. 
 
 According to the manner in which they treat the subject, 
 the Marx-critics may be roughly divided into three classes: 
 First, the philosophers, who dwell principally on Marx's 
 philosophic system; secondly, the economists, who examine 
 
l6 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 his economic theories; and thirdly, the sociologists, that is 
 to say those who concern themselves chiefly with Marx's 
 theories of the laws which govern the development of the 
 capitalistic system of society. That does not mean that this 
 division is in any way strictly observed. To begin with, 
 there are those who, like Bernstein, treat of all the three 
 subdivisions of the subject, although separately from each 
 other. Then there are those who, while making one of the 
 divisions their chief topic permit their discussion to overlap 
 into the other provinces. 
 
 In order that the reader may have well in mind during the 
 following discussion the co-relation of the different parts of 
 the Marxian system, and particularly the inseparability of 
 his "philosophy" from his sociology and economic theory, 
 properly so-called, a brief outline of the system is herewith 
 given : 
 
 " In making their livelihood together men enter into 
 certain necessary involuntary relations with each other, in- 
 dustrial relations which correspond to whatever stage so- 
 ciety has reached in the development of its material produc- 
 tive forces. The totality of these industrial relations consti- 
 tutes the economic structure of society, the real basis upon 
 which the legal and political superstructure is built, and 
 to which definite foritis of sbcial consciousness correspond. 
 The method of producing the material livelihood determines 
 the social, political and intellectual life process in general. 
 It is not men's consciousness vvhich determines their life; 
 on the contrary, it is their social life which determines their 
 consciousness. 
 
 " ^t a certain stage of their development the material 
 productive forces of society come into conflict with the old 
 conditions of production, or, what is its legal expression, 
 with the old property relations under which these forces 
 have hitherto been exerted. From forms of development 
 of the productive forces these relations turn' into fetters 
 of production. Then begins an epoch of social revolution. 
 
KARL MARX AND HIS LATTER-DAY CRITICS. I7 
 
 With the change of the economic basis the whole vast super- 
 structure becomes slowly or rapidly revolutionized." 
 
 At any given stage of the development of society based 
 on the private ownership of property that social class which 
 owns the tools of production then in use dominates that 
 society politically. When the material productive forces 
 of society come into conflict with the old conditions of 
 production, a new class has arisen in that society, which 
 disputes the political supremacy of the old dominating class, 
 the class which owns- and controls the new material pro- 
 ductive forces, and a struggle for life and death then en- 
 sues between these two classes. In this struggle the new 
 class invariably comes out victorious. In the social revolu- 
 tion which follows the victory of the new class the new ma- 
 terial productive forces are unchained and are given free 
 scope to assert themselves, and the new class, controlling 
 these forces, becomes politically supreme. 
 
 " A form of society never breaks down until all the pro- 
 ductive forces are^ developed for which it affords room. 
 New and higher relations of production are never estab- 
 lished until the material conditions of life to support them 
 have been generated in the lap of the old society itself. 
 Therefore mankind always sets for itself only such tasks 
 as it is able to perform; for upon close examination it will 
 always be found that the task itself only arises where the 
 material conditions for its Solution are already at hand or 
 are at least in process of formation. 
 
 " The industrial relations arising, out of the capitalistic 
 method of production constitute the last of the antagonistic 
 forms of social production; antagonistic not in the sense 
 of an individual antagonism, but of an antagonism gtowing 
 out of the social conditions of individuals. But the pro- 
 ductive forces which are developed in the lap of the capi- 
 talistic society creat^ at the same time the material condi- 
 tions needed for the abolition of this antagonism. The cap- 
 italist form of society, therefore, brings to a close this pre- 
 lude to the history of human society." 
 
l8 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 The material conditions needed for the abolition of this 
 antagonism have matured in the lap of the capitalistic sys- 
 tem itself by the time it has reached that stage of develop- 
 ment when the material productive forces come into con- 
 flict with the old conditions of production, and these con- 
 ditions of production have become obstacles in the way of 
 production and lead to social revolution. 
 
 The breakdown of the capitalistic system of produc- 
 tion leading to social revolution will be brought about by 
 the inherent contradictions of the capitalistic system of 
 production itself. 
 
 The laws which govern the capitalistic form of pro- 
 duction will ultimately lead to the extinction of the middle 
 strata of society as independent, property-owning, classes, 
 and divide society into two classes: the very small minority 
 owning all the wealth of society, and the large mass of the 
 people, the working class, who own nothing, not even their 
 own bodies if they want to keep from starvation. At the 
 same time the development of machinery will continue to 
 throw more and more workingmen out of employment and 
 make the share of those workingmen who are employed in 
 the product produced by them grow continually smaller. 
 The productive forces of society will not only become fet- 
 tered, so that they will largely have to remain idle, but even 
 that portion which will not remain in enforced idleness will 
 be able to produce only with tremendous accompanying 
 waste and convulsive interruptions, until finally, a point will 
 be reached when, by the very conditions of capitalistic pro- 
 duction, because of the large portion of the working class 
 out of employment and the small share of the goods pro- 
 duced by them received by the employed workingmen in 
 return for their labor, there will accumulate such an enor- 
 mous mass of goods which the capitalists will be unable to 
 dispose o:^ that is to say find a market for, that production 
 will have to be indefinitely suspended, unless a new basis 
 of production be found. 
 
 Meanwhile the discontent of the working class has been 
 
KARL MARX AND HIS LATTER-DAY CRITICS. I9 
 
 growing, and the sense of the injustice done to it accumu- 
 lating. It has developed a code of ethics of its own. Hav- 
 ing no property themselves the workingmen have lost all 
 sense of the sacredness of private property. Most prop- 
 erty being owned by corporations having " no body to be 
 kicked and no soul to be damned," they fail to see the 
 necessity of private ownership or the usefulness of private 
 owners. They have nothing to lose, and they have grown 
 bold. They have forgotten their duties to their families, 
 for which they can do nothing and which are, for the most 
 part, their independent co-workers instead of dependents, 
 but their sense of duty to their class has been constantly 
 growing upon them during the long period of struggle pre- 
 ceding the final encounter. 
 
 The working class has been organized by the very proc- 
 ess of capitalistic production and exploitation. It has been 
 educated to understand its own powers and possibilities. It 
 is animated by the world-historic mission devolved upon 
 it. It contains within its own ranks all the elements neces- 
 sary for conducting the production of society on a higher 
 plane, so as to utilize all the productive powers of society. 
 The mechanical development of productive forces requires 
 production on a large co-operative basis. The working 
 class takes possession of the social machinery, and the real 
 history of human society begins — the co-operative com- 
 monwealth. 
 
CHAPTER II. 
 
 MATERIALISTIC CONCEPTION OF HISTORY AND CLASS STRUGGLE. 
 
 One of the most amusing features of modern Marx- 
 criticism is the grave discussion by the critics, of the ques- 
 tion whether or not Marx was a philosopher and whether 
 or not Marxism is a philosophy. Most divergent and con- 
 tradictory opinions are current among the many eminent 
 and learned critics. And not only this but the most contra- 
 dictory accounts are given by them as to what Marx himself 
 thought on the subject. The confusion is so great that 
 there seems to be no way out of it, — unless one turns to 
 Marx himself, or to Engels. . . . This, by the way, is 
 always the best way out when one finds himself in one of 
 the mazes of contradictory accounts of Marxism which 
 so abound in anti-Marxian literature. 
 
 A careful study of the writings of Marx and Engels 
 discloses the fact that in their opinion what used to be 
 known before their day as "philosophy" reached its cul- 
 minating' point and came to a close with Hegel; that 
 henceforth the place of philosophy is taken by science. Al- 
 ready Ludwig Feuerbach said: — "My philosophy is — no 
 philosophy," and Marx and 'Engels carried this statement 
 into effect by replacing abstract philosophy by concrete 
 science. Engels therefore saysi^ "This conception (the ma- 
 terialistic conception of history) puts an end to philosophy 
 on the historical field, just as the dialectic conceptibn. of 
 nature makes all natural philosophy unnatural and impos- 
 sible." Marxism is no abstract philosophy. It is just the 
 
 > Frederick Engels, Ludwig Feyerbach und der Ausgang der Klassischen 
 deutschen Philosophic. Stuttgart, 1895. 
 
 20 
 
HISTORICAL MATERIALISM AND CLASS STRUGGLE. 21 
 
 reverse, it is concrete science, and therefore the heir and 
 successor of all philosophy. 
 
 It is heir to all philosophy, because notwithstanding the 
 break with the old philosophy which the new method of 
 treating human society has effected, and the superceding of 
 philosophy by science, there is a continuity of thought run- 
 ning through philosophy and the science of human society 
 just as there is a continuity of human society itself not- 
 withstanding the changes in the form of its organization, 
 or just as there is continuity in the economic structure of 
 hunian society notwithstanding the different " economies " 
 which were prevalent at different stages of its development. 
 
 The Marxian science is the result and logical sequence 
 of the whole development of mankind. Marx found await- 
 ing him the component parts of his philosophy : the dialectic 
 or evolutionary method of contemplating the world, and 
 the materialistic view, the view that the material conditions 
 of the world being the only thing we know are therefore the 
 only thing we can take cognizance of. His was the new 
 combination and the method of application which, however, 
 were loudly demanded by the needs of the time. 
 
 In order, however, that we may come unbiased to the 
 study of this science which is variously known as " eco- 
 nomic materialism," " dialectic materialism," or " The. Mate- 
 rialistic Conception of History," we must rid ourselves of 
 some prejudices which cling to the name because of the 
 association of the words which represent the ideas forming 
 its component parts, in vulgar parlance, with certain ob- 
 jectionable moral and mental qualities. Dialectics is com- 
 monly associated with a certain mental trick by which a 
 shrewd debater seemingly proves something which may 
 be quitC' untrue; the reasoning by which the proof is pro- 
 duced contains a mental shuffling of cards. It is sometimes 
 used in the same sense as " sophistic," — another much- 
 abused term. But worse yet are the vulgar associations of 
 materialism. A materialist is commonly supposed to be a 
 man who is gross, mean and egotistical. A materialist phi- 
 
22 THE THEORBTICAL SYSTEM OF KARL MARX. 
 
 losopfaer, according to the common notion, is a man whose 
 ideas are chained to the gross pleasures of life, who always 
 has his eyes open to the main chance; a man who has 
 neither God in his thoughts nor humanity in his feelings; 
 a man to whose constitution any "ideal" or "higher" 
 motive is an absolutely foreign element. 
 
 This is, of course, fallacious. Philosophic idealism or 
 materialism have absolutely nothing in common with the in- 
 fluence of, or adherence to, ideal motives in practical life. 
 Idealism or materialism, in philosophy is simply the ques- 
 tion whether we must go beyond the world that we perceive 
 with our senses in order to get to the real world, that is to 
 say, to the world which has a full and independent existence, 
 and therefore contains in itself the laws of its own exist- 
 ence and development. The idealists or at least those of 
 them who are consistent insist that the world of matter 
 which surrounds us and includes us has no independent 
 existence at all; that certain non-material things, or ideas, 
 are the only things having an independent existence, and 
 therefore their own laws of development; and that the ma- 
 terial world merely follows the development of those ideas, 
 of which it is the shadow or manifestation. The mate- 
 rialists, on the other hand, declare that the only real world, 
 for us, is that material world which we perceive with our 
 senses; that, fufthermore, we know nothing beyond what 
 knowledge we gain by the help of our senses, that ideas 
 have not, and can not have any real independent existence, 
 but are merely the reflection of the material world as per- 
 ceived by us through the medium of the senses. 
 
 This is something different, and apart, from the precon- 
 ceived notions of idealism and materialism. It is now easy 
 to understand that the fact that one is a materialist in his 
 philosophic views cannot possibly prevent him from, or have 
 any bearing upon, his being an " idealist " in practical life. 
 Nor is this ehanged by adding "dialectics" to materialism, 
 that is to say by transferring the discussion to the histor- 
 ical fieldi because that is all that " dialectic method " really 
 
HISTORICAL MATERIALISM AND CLASS STRUGGLE, 23 
 
 means. In other words it simply means that we do not 
 look at the world as something dead and unchangeable, but 
 as something which is continually changing; as the great 
 Greek philosopher who first saw this great truth expressed 
 it: nothing is, everything becomes; or, to be more exact, 
 existence is a constant process of change or growth. If 
 we want to understand things we must understand their ap- 
 pearance and disappearance, their growth and decline. 
 
 This way of contemplating things in their movement, of 
 studying their birth, growth and decline, when applied to the 
 study of the history of human society by a materialist, that 
 is to say by one who knows that only material facts exist 
 and develop independently, and ideas only reflect the exist- 
 ence, and development of the material world, — is the Ma- 
 terialistic Conception of History, the foundation of the 
 Marxian Scientific System. In other words, the Material- 
 istic conception of history maintains that the evolution of 
 human society as a whole, and that of all human institu- 
 tions, is not, as the idealists insisted, the result of the 
 changes in men's ideas relative to the society they were liv- 
 ing in and its institutions, which changes are brought 
 about by the inherent law of development of the ideas; 
 but that, quite to the contrary, the development of society, 
 including men's ideas of human society and institutions, are 
 the result of the development of the material conditions 
 under which men live; that these conditions are the only 
 ones which have an independent existence and development ; 
 that the changes of the material conditions cause the in- 
 stitutions of human society to be changed to suit them ; and 
 that the ideas on all subjects relating to man in society, 
 including those of right and wrong between man and man 
 and even between man and his God, are changed by man 
 in accordance with and because of, those changed material 
 conditions of his existence. 
 
 As was stated before, both the component elements of 
 this philosophy, the materialistic " view " and the dialectic 
 " method," were, found by Marx ready to do service, and his 
 
24 THE THEORETICAL SYSTEM OF KATH. MARX. 
 
 great merit in this field was the combination of the two, 
 and the reduction of the combination to a clearly defined 
 system. 
 
 This, however, was not all, and perhaps not even the 
 most distinctive contribution of Marx to philosophy-sci- 
 ence. The mere statement of the philosophic doctrine still 
 left the course of human history unexplained, until Marx 
 applied his genius and transformed history, a sealed book 
 to his predecessors, into a science. A science which, if not 
 as exact, is just as useful, as any one of the exact sciences. 
 This he achieved by abandoning abstract speculation and 
 treating history scientifically. That is to say, he examined 
 history itself for the facts, in order to obtain from such 
 examination the laws of their evolution and relation to 
 each other. This was strictly in accordance with his mate- 
 rialistic " philosophy " which would not admit of any out- 
 side preconceived constructions, and insists that we get all 
 our knowledge and ideas from the existing "matter" it- 
 self. 
 
 His "Materialistic" conception gained, the next thing 
 for Marx to do was to determine what were the " material " 
 factors of history. His investigations led him to the be- 
 lief that the economic conditions were the prime movers of 
 history. Accordingly, he found it necessary to substitute 
 the term "economic" for the term "material." This com- 
 pleted Marx's conception of history and gave it that dis- 
 tinguishing characteristic which stamps it, and the whole 
 of it, as truly Marxian, notwithstanding the many claims 
 of priority; that characteristic which at once gives it its 
 scientific value and makes it the butt of all pseudo-scientific 
 criticism. 
 
 The great merit of this theory of history, is — that it 
 really explains the course of history, something which could 
 not be said- of the previous attempts at explaining history, 
 including those of " materialists " like Taine and Buckle. 
 
 Marx's insistence on the predominance of the economic 
 factor is not the result of any arbitrary predilection or any 
 
HISTORICAL MATERIALISM AND CLASS STRUGGLE, 2$ 
 
 preconceived schematic explanation brought into the study 
 of history from outside considerations. The economic fac- 
 tor is insisted on as THE material factor because it is the 
 only material factor that changes and develops, and conse- 
 quently is the only one which can cause change and devel- 
 opment in what Marx calls the " superstructure " of society. 
 It goes, of course, without saying, that something that does 
 not change can not produce any change. No mathemati- 
 cian has ever attempted to ascribe the change in the result 
 of a mathematical operation to the factors that remain con- 
 stant. It is the varying factors that produce changes in the 
 result. But all the material factors that have been men- 
 tioned beside the economic factor remain constant, or nearly 
 so. Such are race, geography, etc. To the extent, how- 
 ever, that these factors do change, and by their change 
 affect the course of human history, full credit is given them. 
 So in the study of primitive, undeveloped, society, where, 
 owing to the crude character of his tools, man is dependent 
 entirely upon nature and is directly affected by its least 
 changes, or where, as in the case of great discoveries, cer- 
 tain geographical features hitherto of no importance be- 
 come important, these factors are fully recognized and their 
 influence carefully studied and determined. 
 
 In other words, all the material factors, outside the eco- 
 nomic, are " taken into account," except that upon careful 
 account taken the influence of these factors appears to be 
 very small and tributary to the main, the economic, fac- 
 tor; and, (and this is most important of all) this influence 
 is constantly diminishing with the progress of mankind. 
 They may, therefore, be left out of account when outlining 
 the general scheme of the evolution of society. 
 
 The adherents of the Materialistic. Cohception of His- 
 tory therefore assert that production, and, next to produc- 
 tion, distribution of the product, is the basis of every social 
 order; that in every historic form of society the division 
 of the product of human labor produced by it, and with it 
 the social arrangement into classes or estates, depends on 
 
26 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 what and how is produced in that society, and how the prod- 
 uct is exchanged. -Accordingly, the last causes of all 
 social changes and political transformations are to be sought 
 not in the increasing insight of men into the laws of eter- 
 nal truth and justice, or some similar " ideas,'' but in the 
 changes of the methods of production and distribution — not 
 in the philosophy, but in the economics of the given epoch. 
 They are not to be sought in morality, because morality it- 
 self is changeable and is itself the result of circumstances 
 which lie deeper in the structure of human society. " Every 
 moral theory which has existed until now was, in last analy- 
 sis, the result of the economic conditions of the society in 
 which it prevailed. The awakening insight that the existing 
 social arrangements are unreasonable and unjust, that reason 
 became nonsense and charity torture, is only a sign of the 
 fact that the methods of production and forms of exchange 
 have been quietly undergoing such changes that the social 
 arrangements which have been cut to suit previous eco- 
 nomic conditions are now out of joint. It also betokens that 
 the means of remedying the discovered evils have already 
 to a more or less degree been evolved with the changed re- 
 lations of production." 
 
 The basis and superstructure of society of which Marx 
 speaks in his famous preface to his " Zur Kritik," a portion 
 of which was quoted in the preceding chapter, may there- 
 fore be formally constructed on something like the follow- 
 ing plan : The basis of the structure is a given state of the 
 development of the productive forces of society; this brings 
 about certain relations between the individuals com- 
 posing that society in the social process of production and 
 distribution, which determine the division of the product 
 among them; this, in its turn, results in a certain form of 
 society, certain social institutions, which express these 
 relations ; the society is then permeated by a condition of the 
 minds and a set of habits and customs which conform to the 
 social jEorms of that society; and all this culminates in the 
 philosophy, literature, and art of the society which will be 
 
HISTORICAL MATERIALISM AND CLASS STRUGGLE. 27 
 
 the result of the abilities, the tastes, and inclinations which 
 this condition of the minds, the habits and customs will pro- 
 duce. 
 
 The ideas which prevail in a given society exert a power- 
 ful influence on that society. These' ideas, however, have 
 their source in the social milieu of that society, which 
 milieu, in its turn, is the result of the economic relations 
 of that society. The ideas, therefore, whether political, 
 moral, religious, or otherwise, which prevail in a given 
 society, and which influence the conduct of men in that 
 society while they prevail, cease to prevail, and are grad- 
 ually discarded, when the economic conditions in which 
 they had their inception undergo a change. Furthermore, 
 in our society, which is divided into classes based on eco- 
 nomic interest, the ideas prevailing in it at any given time 
 will not only be the result of certain economic conditions, 
 but will in the main answer the needs, desires, or aspira- 
 tions, of some social class which was brought to the front 
 by those economic conditions. So that there may be, and 
 very often there is, more than one set of ideas current in 
 a given society at the same time ; that these ideas may be in 
 4irect conflict with each other; and they are held, respec- 
 tively, by those classes of that society whose interests they 
 give expression to. 
 
 Usually there is only one set of ideas prevailing in so- 
 ciety, and for the following reasons: In our society, that 
 is, a, society based on the private ownership of property, 
 there is always a class of persons having in their possession 
 or control the means wherewith, society produces the things 
 on which it subsists and from which it derives its comfort. 
 This class, by reason of its control of society's means of 
 production, carrying as this does with it the management 
 and supervision of society's production and exchange, 
 shapes the institutions and customs of society to suit its 
 interests and to insure its dominion in society. It has ab- 
 solute sway except that it must not disregard the law of. 
 its own existence. That is to say: its dominion must be 
 
28 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 exercised in canformity with and in furtherance of the 
 economic powers which created it, giving them full play, 
 so that their latent forces may fully develop and give to 
 society all the benefit there is contained in them. 
 
 This dominion of the class which controls the production 
 of society is due not only to the coercive power it posesses 
 over the other members of society by reason of such con- 
 trol, and of the control of society's means of subsistence 
 and comfort which result therefrom, but also to its persua- 
 sive powers. From the standpoint of interest it must be 
 admitted that its interests lie along the road of the progress 
 of society, and therefore coincide with the interests of so- 
 ciety as a whole. From the higher, " ideal," standpoint 
 its position is also impregnable: what it obtained by might 
 has in due course of time become its right by the rule of 
 prescription, (euphpneously known as "tradition,") the 
 greatest and most potent source of right, as it requires no 
 evidence of title and works itself into the very inner con- 
 sciousness of man and becomes co-extensive with his feel- 
 ings. To help and augment this natural feeling of its right, 
 the dominating class, which controls the spiritual food of 
 society along with the material, inculcates the ideas of its 
 rights into the members of society artificially. So that the 
 whole of society is usually permeated with the ideas of 
 the dominating class. 
 
 But "the world do move." Man, in his struggle with 
 nature for its domination, is very inventi-^e. His inventive- 
 ness (its tempo) will depend on many circumstances, but is 
 almost continual, resulting in an almost constantly progress- 
 ing change of the tools wherewith he exploits nature. With 
 the change of tools he changes the methods, and sometimes 
 the field of his exploitation. The change does not, however, 
 come suddenly. The new, improved, tools, and the new 
 methods which they bring with them, are being slowly per- 
 fected and brought into use, and slower still are the new 
 fields of exploitation becoming popular. But the march of 
 the new economic force embodied in the new tool is irresisti- 
 
HISTORICAL MATERIALISM AND CLASS STRUGGLE. 2^ 
 
 ble. Slow though its progress be at first, it gains in velocity 
 and momentum as it proceeds onward, like the falling stone, 
 until its slow progress is converted into a rushing torrent 
 sweeping along in its course all obstacles. 
 
 When a new tool makes its appearance, a new political 
 force is born into society. This force grows with the 
 growth of the importance of the new. tool in the economy 
 of society, and, in its turn, helps the new tool to unfold 
 itself properly, if it is hampered by artificial barriers from 
 asserting itself. This new political force, the class which 
 owns and controls the new tool, and consequently the prod-^ 
 uct which is produced by means thereof, enters into a 
 struggle with the then governing class, that is with the 
 class which owns and controls the old means of production, 
 and this struggle for the control of the organization of so- 
 ciety grows from day to day with the growth of the use of 
 the new tool. Each recruit to the new field of economic 
 activity becomes a soldier in the army of the class controll- 
 ing that field. 
 
 This struggle continues until the inevitable result is 
 reached: Economically, the new improved means of obtain- 
 ing society's goods becomes pre-eminent; politically, the 
 class which operates and controls those improved means 
 of production becomes predominant. Then a new order of 
 things is created ; if the new method of production is suffi- 
 ciently dififerent a new society is born; new political in- 
 stitutions, new religious beliefs, new moral notions, new 
 aesthetic tastes, new philosophic systems. So does History 
 run her course. The new of yesterday is the old of to- 
 day, and the new of to-day is the old of to-morrow. Each 
 order of things is in turn young and old; struggling for 
 existence and recognition first and then struggling for ex- 
 istence and the maintenance of its authoritative position 
 against the recogfnition of new elements which threaten to 
 undermine its existence. The progressive of to-day is the 
 reactionary of to-morrow. 
 
 In this struggle for existence between two economic 
 
30 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 forces and the two classes of society representing them, for 
 social dominion, force as well as persuasion is usually 
 used, the manner and proportion of their use being deter- 
 mined by local influences. The established opinion, whether 
 born of interest (class-interest) or received by tradition ex- 
 erts a powerful influence on society as a whole, as already 
 stated, until the new economic forces become strong enough 
 to formulate their own set of opinions, their own " ideol- 
 ogy," and inculcate them into the minds of men. The new 
 ideas formulate slowly, and make converts even more so. 
 But when the time has come, society has become sufficiently 
 revolutionized economically, these ideas become a revolu- 
 tionary factor in themselves and help destroy the old or- 
 der of things. Not only is the class whose interests lie 
 in the economic changes which gave birth to these ideas 
 fired by these ideas to such an extent that it often forgets 
 those economic interests themselves and is carried away by 
 the ideas alone, but neutral classes of society and even peo- 
 ple whose interests lie in the opposite direction are carried 
 away by the new ideas and enter the lists for the new order 
 of things. And this for the reason that the new ideas are 
 always the reflection of the economic changes which lie 
 along the progress of society as a whole. 
 
 New ideas, therefore, are always the result of new eco- 
 nomic conditions, produced sometimes directly and sometimes 
 indirectly; but they alvvays have an important place in the 
 struggle of the classes for the progress of human society, for 
 each new class fights for society as well as for itself. They 
 truly characterize the social forces engaged in the struggle. 
 
CHAPTER III. 
 
 THE MATERIALISTIC CONCEPTION OF HISTORY AND ITS CRITICS. 
 
 The first of the objections to the Materialistic Conception 
 of History advanced by the Marx-critics which we will con- 
 sider here is the so-called " philosophic " objection. We 
 will consider it first because of its great pretensions and 
 because of its old age, it being in reality merely a new edir 
 tion of the old idealistic philosophy with which Marx had 
 to deal as far back as 1845. In its pure, idealistic form 
 Marx squared his accounts with it in his own masterly 
 fashion in his book " Die^ Heilige Familie."' The account 
 was settled, the balance was struck, and no more was heard 
 of idealism. It now re-appears bashfully under cover of 
 a scientific theory of cognition and psychology. No mat- 
 ter what its garb, however,, it is essentially the same, ex- 
 cept that with the loss of its purity it has lost its logic. Pure 
 idealism, as represented by Hegel, for instance, is logically 
 a perfectly constructed edifice. It rests on false founda^ 
 tions. But its premises admitted, its logical construction is 
 impregnable. Not so with modern "philosophy." It is 
 idealistic without the logic of the finished idealistic struc- 
 ture. What is worse, however, it is reactionary, which is 
 not necessarily an attribute of idealism. Desiring. to avoid 
 the logical consequences of the development of philosophy, 
 in which the idealistic system of Hegel must inevitably be 
 followed by the materialism of Marx, its watchword is: 
 " Go back." And the further back the better. ... So 
 that we find Weisengruen, a leading light among tiiese 
 philosophers, throwing 'loving glances at Berkeley, who 
 was perhaps as much of an idealist as Hegel himself, but 
 
 31 
 
32 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 Utterly devoid of the historic sense which made Hegel a 
 truly great philosopher and his system a great step forward 
 in the development of philosophy. 
 
 Indeed, their aversion towards anything that has some 
 historic sense leads Weisengruen, otherwise a sane and 
 bright thinker, to declare that the real force that mak^s 
 History is the imagination or phantasy (Phantasie). To 
 use his own words : " Phantasy is the demi-urge of all 
 History.. . . . Not the developed intellect, but the ele- 
 mentary phantasy." ^ A discovery which is worthy to rank 
 with that of the charlatan Nossig, who, after posing as a 
 great scientific Marx-critic, gravely announced, with all the 
 pomp of pseudo-science, that he discovered a remedy to all 
 our social evils in the old Jewish custom of the Jubilee. 
 
 We cannot, however, go here into the details of the 
 philosophic objection and its numerous variants. Such dis- 
 cussions are only intended by their authors for German pro- 
 fessors and such others as enjoy the perusal of bulky vol- 
 umes. Under no circumstances are they meant for people 
 who have no time to spend on the verbiage of metaphysical 
 speculation. We will simply say, therefore, that the sum 
 and substance of all these arguments amounts to this : That 
 there is no way in which material conditions can be shown, 
 philosophically, to turn into ideas; consequently, that ideas 
 cannot be the result of economic conditions; and that, 
 therefore, the existence of ideas and their influence on 
 History not being denied, economic conditions cannot be the 
 prime movers of History. 
 
 The answer to ■ all of which is, again without going into 
 long and abstruse philosophic discussions, that, as Engels 
 puts it, the proof of the pudding is in the eating ; that if we 
 can prove by historic data that the development of ideas 
 did follow the development of economic conditions then we 
 need not worry over the " philosophic " question oi how the 
 transformation was accomplished. It will then be the 
 
 ^ Paul Weisengruen, Der Slarxismus und das Wesen der sozialen Frage. 
 Leipzig, 1900. 
 
MATERIALISTIC CONCEPTION OF HISTORY. 33 
 
 business of "philosophy" tq take care of itself and show 
 how it was done or frankly confess its impotency.- It is 
 clearly a case of those philosophers' own funeral. 
 
 It is true that the learned philosopljers, in the person of 
 Professor Masaryk/ strongly object to the introduction of 
 such vulgar " matters " as puddings into the discussion of 
 such lofty subjects. But the loftiness is all theirs; and we 
 who do not soar in the realms of phantasy can very well 
 afford to stick to the gross " material " facts. We, there- 
 fore, claim, with Engels, that the proof of the materialistic 
 conception of history is to be looked for in history itself. 
 
 But when it comes to actual history, these philosophers 
 must admit that the facts, or at least a good many of them, 
 happen to tally with the " unphilosophic " Materialistic Con- 
 ception of History. So says Weisengruen himself: 
 
 " For certain historical relations within certain periods oi 
 time this historical theory (The Materialistic Conception 
 of History) is a relatively correct, practical, explanatory 
 principle (Erkldrungsprincip) . We can, for instance, by 
 its aid drag out from historical obscurity the more hidden 
 economic forces which propelled the French Revolution. 
 We can, by its aid, I am convinced, throw more clear and 
 glaring light on the period of decline of the Roman Empire, 
 than could be done until now. Many phases of the Ger- 
 man middle ages may be understood by us with the aid of a 
 mild economic motivation. The powerlessness of the Ger- 
 man Bourgeoisie, particularly during the year 1848, may 
 be partly explained by purely economic causes.'' 
 
 As the reader will see, this great opponent of Marxism, 
 who in another place of his book insists that Marxism 
 must be thrown overboard, bag and baggage, is willing to 
 concede quite considerable to the Materialistic Conception 
 of History. In fact, he has nonchalantly conceded almost 
 all of European History since the beginning of the Christian 
 Era (the breaking up of the Roman Empire, the German 
 
 1 T. G. Masaryk, Die philosophischen und sociologischen Grundlagen des 
 Marxismus. Wien, 1899. 
 
34 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 middle ages, the French Revolution, the German Revolu- 
 tion), with the exception of the Renaissance, which he spe- 
 cifically exempts from the influences of material condi- 
 tions and reserves it, supposedly, for " higher " influences. 
 He then draws the general conclusion that some relations 
 (" Zusammenhange") and periods may be treated according 
 to the Materialistic Conception of History, and others may 
 not. Curious as it may seem for a philosopher to arrive at 
 such half-way conclusion about a purely philosophic mat- 
 ter, it is even more curious to observe that this same phi- 
 losopher and critic, instead of following up his conclusion 
 by an examination of the provinces and periods in which the 
 Materialistic Conception of History does apply and in which 
 it does not, turns around and declares that as far as we can 
 see, there are no historical laws at all, and that it is prac- 
 tically impossible to write or treat history scientifically; 
 in short, that there is no historical science. This Nihilism, 
 which, as we have said, is the last recourse of the oppo- 
 nents of Marxism if they want to keep at least the show of 
 being scientific, is very significant, as we meet with it not 
 only in the province of philosophy of history, but all along 
 the line of sociology, including political economy, as we 
 shall see later. 
 
 But it is not only the Nihilists amojig the Marx-critics 
 who do not follow up their criticism with the only decisive 
 proof, that mentioned by Engels, the proof of history. In- 
 stead, they indulge in generalities ; such, for instance, as : — 
 Marx gives " undue " " prominence " to the material factors 
 and disregards factors which ought to "be considered. Ex- 
 pressions that mean absolutely nothing, because of their 
 indefiniteness, and are absolutely incapable of verification, 
 by any method, except, perhaps, the "subjective" one of 
 everybody deciding for himself, according to his fancy, 
 which factor got its " due," and which did not. 
 
 The slowness on the part of Marx-critics to talk more 
 definitely is not due to any desire to be brief. These gen- 
 tlemen are usually quite voluble. It is simply a case of dis- 
 
MATERIALISTIC CONCEPTION OF HISTORY. 35 
 
 cretion. Whenever they do~say something definite it can 
 easily be shown that either the historic facts do not bear out 
 the critics or that Marx never said the things attributed to 
 him. It seems that most of the critics of Marxism suffer 
 with a singular malady which may be~ termed, " Confusion 
 of Terms and Ideas," which makes them attribute to Marx 
 and his disciples all sorts of things which neither Marx 
 nor his disciples said or could have said, as appears plainly 
 from their writings, with which these critics are very fa- 
 miliar.. So do, for instance. Professor Barth,^ Weisengruen 
 and other's, make what they evidently regard as a very 
 strong point against the Materialistic Conception of His- 
 tory by showing that the changes in the technical develop- 
 ment of the means of production can not, alone, explain all 
 the facts of History. In this they are undoubtedly right. 
 But, — and there is the rub, — the Marxists never claimed 
 any such thing. The assumption that the Marxists do claim 
 such a thing evidently rests on the confusion by the critics 
 of the terms " economic conditions," usually employed by the 
 Marxists with the term " technical development." A con- 
 fusion which does not do much credit to the faculty of dis- 
 crimination possessed by these gentlemen, and which seems 
 most surprising in such acute and astute thinkers. 
 
 It seems peculiar that such a simple matter should require 
 long explanations. But all Marx-critics seem to be so much 
 affected by the disease referred to, that it is pretty dan- 
 gerous business to take it for granted that they are able 
 without outside aid to see the most obvious distinctions and 
 differences. Be it therefore said here for the Nth time, that 
 while changes in the technical development of the means 
 of production usually go together with changes in the ma- 
 terial conditions of the people, they do not necessarily so 
 go together and are separate and distinct from each other. 
 While the- technical developments in the means of produc- 
 tion and distribution are the chief cause of changes in the 
 
 1 Paul Earth, Die Philosophic der Geschichte als Sociologie. Leipzig, 
 1897. 
 
36 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 material conditions of the people, they are not always so 
 and not necessarily so. There are other causes which 
 may affect the material conditions of the people, and there 
 are changes in the technical part of production and dis- 
 tribution which do not at all affect the material conditions 
 of the people. And the Marxists claim that it is the 
 changes in the " material conditions " that are the prime 
 movers of history, no matter what the causes of these 
 changes may be. The technical development only affects 
 the course of history indirectly and only in so far as it 
 causes changes in the material conditions under which peo- 
 ple live and work. 
 
 The same malady, — Confusion of Terms and Ideas, — 
 is the cause of another great objection to the Materialistic 
 Conception of History. This is advanced with great ve- 
 hemence by most critics of an " ethical " bent of mind, 
 among others, by the well-known English socialist, E. Bel- 
 fort Bax. It is to the following effect: People do not al^ 
 ways act out of self-interest. They are very often swayed 
 by ideal motives and then act .quite contrary to their own 
 interests. Hence, the fatal error of the Materialistic Con- 
 ception of History in making the "material inte^-ests" the 
 prime movers of History.^ 
 
 This objection has been partly answered already in a 
 preceding chapter, where it was pointed out that the Ma- 
 terialistic Conception of History has nothing to do with 
 the ' question of individual idealism. That it was not a 
 theory explaining the motives which impel individuals to 
 act, but a historical theory explaining the motive powers 
 which bring about those actions of the masses, the aggre- 
 gate of which make up what we call history; the powers 
 which are the " causes of the causes " of inciividual action. 
 A man may very well act against his own interest, even 
 sacrifice his life, for the sake of an ideal, and yet his ac- 
 
 ' E. Belfort Bax, Die Materialistische Geschichtsauffassung, in Die Zeit 
 
 (1896). Synthetische contra Neumarxistische Geschichtsauffassung. Die 
 
 Grenzen der Materialistischen Geschichtsauffassung, in Neue Zeit (1897). 
 
MATERIALISTIC CONCEPTION OF HISTORY. 37 
 
 tion may be the result of the material interests of a class 
 or group to which he belongs or which produced that ideal. 
 For example: The ruling class of Japan needs new mar- 
 kets for its expanding industries. Russia is in its way be- 
 cause the ruling classes of Russia for some reason or other 
 need the same markets. Japan and ^Russia go to war for 
 the control of these markets. This begets a high patriotic 
 fever in both countries, and thousands and tens of thou- 
 sands of people sacrifice their lives willingly for the high 
 ideal of " My country forever.'' Among those thousands 
 there are very few who are directly " interested " in the 
 issue of the war, and even these would probably never give 
 away their lives for those " interests " if it were put up to 
 them as a mere business proposition. Most of those who 
 will sacrifice their lives in this war for the " honor " of their 
 country will be people who have no " interest " in the war, 
 who may be even affected injuriously by the war, but they 
 sacrifice their lives for the high ideal born and begotten 
 of the interests of their class, or of the ruling class under 
 whose moral and intellectual tutelage their class stands. 
 While the actions of the individual participants in the war 
 are, therefore, the result of •ideal motives, the historic event 
 itself, the war, is the result of material interests, which are 
 in their turn the result of economic conditions. 
 
 Aside from the confusion, however, between the mo- 
 tives of individuals and the motive powers of History, this 
 objection also rests on the further confusion of " condi- 
 tions " with " interests." The Marxists never claimed that 
 material " interests " control the course of History. They 
 always use the expression, " material conditions " in formu- 
 lating their theory; and material conditions are something 
 entirely different from material interests. Material condi- 
 tions usually beget material " interests," which shape the 
 course of History, but not always and not necessarily so. 
 Sometimes material conditions will bring about historical 
 phenomena which are not the ^result of any " interest " in 
 
38 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 the usual sense of that word, but merely of the condition 
 itself. Karl Kautsky in a discussion with Belfort Bax used 
 this example: The turning away from all earthly interests, 
 the longing for death, of early Christianity may, — he says 
 — very well be explained by the material conditions of the 
 Roman Empire at that time. But it would, of course, be 
 monstrous to attribute the longing for death to some ma- 
 terial interest. 
 
 If the learned critics would only carefully refrain from 
 substituting other terms and ideas in' place of those used 
 and expressed by Marx and his disciples a good deal of 
 their criticism would fall of itself, and the rest could easily 
 be answered'. So, for instance, would a careful reading of 
 Marx and a clear comprehension of the terms used by him 
 do away with all the objections which admit that the eco- 
 nomic factor plays an important role in history but think 
 that " too much " is claimed for it, and tha:t other factors 
 are " not taken into account." 
 
 So do most of the critics talk of Marx's failure to " take 
 into account " such things as human nature, race, geography, 
 etc. Those of our readers who have read carefully the 
 preceding chapters will have seen that these things have all 
 been " taken into account " ; and that when the Marxists 
 still insist upon the economic factor as the determining fac- 
 tor of historical progress it is because this factor is the only 
 one which accounts for the movement of history, the prog- 
 ress of the human race from one state to another, as all the 
 other factors are comparatively stationary, and could there- 
 fore account perhaps for a condition of the human race but 
 not for its Progression. 
 
 That it was not any failure to " take " these things " into 
 account " that led Marx to proclaim the economic factor as 
 the material factor which moves history, a mere cursory 
 reading of Marx will show. In his work on Capital, he 
 says: 
 
 " Aside from the more or- less developed condition of so- 
 cial production, the productivity of labor depends on natu- 
 
MATERIALISTIC CONCEPTION OF HISTORY. 39 
 
 ral conditions. They are all reducible to the nature of 
 man himself, such as race, etc., and his natural surround- 
 ings. The outward natural conditions can be divided, eco- 
 nomically, into two great classes; natural wealth in the 
 means of subsistence, such as richness of soil, fish-abound- 
 ing waters, etc. ; and natural wealth in means of produc- 
 tion, such as usable water-falls, navigable rivers, woods, 
 metals, coal, etc. In a primitive community the first class 
 of natural wealth is of paramount importance, on a higher 
 plane of civilization it is the second class that is the most 
 important." 
 
 To insist after this on the " technical development " being 
 the only historical factor recognized by Marxists would 
 seem absurd. But Marx critics are a peculiar race. There 
 is nothing that they cannot do, or at least say. From what 
 was said in the preceding chapters it would seem clear that 
 Marx and his disciples not only recognize the influence of 
 ideas, but accentuate it, and that in their scheme of the 
 transition of the capitalist system into socialism, ideas play 
 a distinct and quite important role. And yet most of the 
 critics still tell the old yarn of the Marxists not admitting 
 the influence of ideas. Furthermore, they are not a bit 
 abashed when they are shown by quotations from Marx that 
 he thought just the other way. When they are caught 
 " with the goods on," they very coolly declare that Marx 
 is contradicting himself. That is, the Marx of " Capital " 
 and his other well-known works, is contradicting the Marx 
 which they put up for their readers' delectation. Indeed, 
 lately this business of " refuting Marx by Marx " has de- 
 veloped into a special industry, which would contribute a 
 good deal to the gayety of nations if they were only in the 
 mood for it. As it is, the " nations " which read these 
 things are worried too much by the subject-matter to be 
 amused. It will, however, be amusing to our readers, and 
 we shall attend to 'these " contradictions " in due time. We 
 must, however, defer this treat until the time when we will 
 come to consider the Marxian system in its entirety,. as a 
 
40 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 reward to our readers for their patience. Besides, it will 
 then be better appreciated. Here, we will mention only one 
 as an example: 
 
 The Russian critic Ludwig Slonimski finds this contra- 
 diction: Marx, — he says — put up the theory that eco- 
 nomic and class interests are the only motives of the politi- 
 cal and legislative activity of the State, and yet he himself 
 tells us of the praiseworthy activities of some factory in- 
 spectors, particularly Leonard Horner, who, he says, de- 
 served well of the working class for protecting their inter- 
 ests ! ^ 
 
 Is it not really surprising that Marx is stiU thought of 
 a good deal in some quarters, and that people generally re- 
 fuse to accept the decision of M. Slonimski who announces 
 that : " No matter how much the admirers and followers of 
 Marx who believe in the scientific character of his method 
 may protest, the truth is that he merely created a Utopia 
 which is vulgar in its nature and is only suited to the nar- 
 row horizon of ordinary workingmen and to the notions of 
 the imagination of those who see in the amount of pay they 
 receive for their labor the highest blessing?" 
 
 We will also leave for future consideration the question 
 of the " modification " of the Marxian theories at the hands 
 of their authors, of which there is so much talk in the 
 literature of Revisionism. These supposed "modifications" 
 are really nothing more than an attempt to make the sup- 
 posed contradictions plausible, and deserve to take their 
 place alongside of them. We will, therefore, limit our- 
 selves at this place to objections springing from mere con- 
 fusion of terms and ideas. We want to say again; however, 
 that the malady is so general with Marx-critics, and its rav- 
 ages so extensive that" it is absolutely impossible even to 
 recount them properly, not to say analyze them all, and we 
 will perforce be compelled to attend only to some shining 
 examples. There are some individual wl-iters who at least 
 
 " Ludwig Slonimski, Karl Marx' Nationaloekonomische Irrlehren. Ber- 
 lin, 1897. 
 
MATERIALISTIC CONCEPTION OF HISTORY. 4I 
 
 by volume, if by nothing else, have won for themselves a 
 place of honor in the roster of Marx-critics, and we will 
 have to return to them again when occasion offers. So, for 
 instance. Professor Masaryk, to whom we intend to pay our 
 respects later on. Here we only wish to add to the con- 
 fusionists already mentioned, our own Professor E. R. A. 
 Seligman of Columbia University, President of The Amer- 
 ican Academy of Political and Social Science, etc., etc., who 
 has written what our book-reviewers call " a very read- 
 able " little book entitled " The Economic Interpretation of 
 History." It must be admitted that Professor Seligman, be- 
 ing an American, believes in fair play, and that he is " emi- 
 nently fair " and even generous to Marx. With this, how- 
 ever, and perhaps, because of it, he is exceedingly super- 
 ficial, and scandalously confused. We shall return to the 
 gentleman at some future time in a discussion of the ques- 
 tion of " monism " in history, of which he treats. We do 
 not consider a discussion of that question properly within 
 the bounds of the present discussion, for the reason that 
 the question of " monism " is not one which affects the Ma- 
 terialistic Conception of History alone. It affects the ideal- 
 istic conception of history just as well. In other words, 
 it is a question that affects philosophy in general. As such 
 it also affects the materialistic conception of history, but it 
 is not an objection exclusively directed against Marxism, — 
 our present topic of discussion. Of course, all these ques- 
 tions are inter-dependent, particularly with the confused 
 mode of treatment pursued by most Marx-critics, who us- 
 ually serve up in their writings a Hungarian Gulash or an 
 American hash of objections of all sorts and kinds thrown 
 together. Here, therefore, is, for the present, a mere taste 
 of our American Marx-critic. We will serve the prepa- 
 ration in its original wrapper, and let the readers dissect or 
 analyze for themselves. He says: 
 
 " All human progress is at bottom mental progress ; all changes 
 m.ust go through the human mind. There is thus an undoubted ' 
 
42 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 psychological basis for all human evolution. The question, how- 
 ever, still remains : what determines the thought of humanity ? 
 . . ; This claim (that all sociology must be based exclusively 
 on economics, and that all social life is nothing but a reflex of 
 economic life) can not be countenanced for the obvious reason 
 that economics deals with only one kind of social relations and 
 that there are as many kinds of social relations as there are 
 classes of social wants. We have not only economic wants, but 
 also moral, religious, jural, political and many other kinds of 
 collective wants; we have not only collective wants, but indi- 
 vidual wants, like physical, technical, aesthetic, scientific, phil- 
 osophical wants. The term ' utility,' which has been appropri- 
 ated by the economist, is not by any means peculiar to him. 
 Objects may have not only an economic utility, but a physical, 
 aesthetic, scientific, technical, moral, religious, jural, political .or 
 philosophical utility. The value which is the expression of this 
 utility and which forms the subject-matter of economics is only 
 one subdivision of a far greater class. For all the world is 
 continually rating objects and ideas according to their aesthetic, 
 scientific, technical, moral, religious, jural, political or phil- 
 osophical value without giving any thought to their economic 
 value. So far as utility and value are social in character, that 
 is, so far as they depend upon the relation of man to xaan, they 
 form the subject-matter of sociology. Economics deals with 
 only one kind of social utilities or values, and can therefore not 
 explain all kinds of social utilities or values. The strands of ■ 
 human life are manifold and complex. 
 
 " In this aspect what is untrue of the individual can not be 
 true of the group of individuals. We have passed beyond the 
 time when it was incumbent to explain the fallacy lurking in 
 the phrase 'the economic man.' There is indeed an economic 
 life and an economic motive — the motive which leads every 
 human being to satisfy his wants with the least outlay of ef- 
 fort. But it is no longer necessary to show that the individual 
 is impelled by other motives than the economic one, and that 
 the economic motive itself is not everywhere equally strong, 
 or equally free from the admixture of other influences. A full 
 analysis of all the motives that influejice men, even in their eco- 
 nomic life, would test the powers of the social psychologist. 
 There is no 'economic man,' just as there is no 'theological 
 
^ MATERIALISTIC CONCEPTION OF HISTORY. 43 
 
 man.' The merchant has family ties just as the clergyman has 
 an appetite. ... 
 
 " In one sense, accordingly, there are as many methods of in- 
 terpreting history as there are classes of human activities or 
 wants. There isjiot only an economic interpretation of history, 
 but an ethical, an aesthetic, a political, a jural, a linguistic, a re- 
 ligious and a scientific interpretation of history. Every scholar 
 can thus legitimately regard past events form his own peculiar 
 standpoint." ^ 
 
 Has anybody ever been across a greater mix-up of truths, 
 half-truths, untruths, platitudes and meaninglessness ? 
 Whatever may be said as to whether or not " the strands of 
 human life are manifold and complex," one thing is quite 
 certain : Human life is too short for one man to attempt to 
 unravel all this nonsense. 
 
 If all changes (Changes of what? Of environment or of 
 environment into institutions or ideas?) must go through 
 the human mind but do not originate there, why is all hu- 
 man progress at bottom mental progress? Isn't the thing 
 which changes, and its changes which go through the hu- 
 man mind, at the bottom of human progress, and the mental 
 progress, the result of these changes going through the 
 human mind, only the top of Jiuman progress ? Is not Marx 
 right when he insists that the changes which go through the 
 human mind are the basis of all social progress ? 
 
 What does the learned professor mean by " social wants " 
 and " colle;ctive wants," and are these terms interchange- 
 able? And why does he slide down from social or collect 
 tive wants to individual wants? Does he mean to say that 
 the Materialistic Conception of History is incorrect because 
 it does not explain or " take into account " individual 
 wants ? What does he mean by " technical " want as an in- 
 dividual want? Does he mean to say that Physical and 
 Technical " wants " (whatever these may mean) are not 
 material wants? Are not technical relations exclusively so- 
 
 ' Edwin R. A. Seligiiian, The Economic Interpretation of History. The 
 Columbia University Press, 1903. ~ 
 
44 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 cial and economic relations ? Doesn't the learned professor 
 know that some Marx-critics, among them his distinguished 
 colleague Professor Barth, object to the Materialistic Con- 
 ception of History because the technical development alone 
 does not explain history ? And who is right ? Professor 
 Barth, according to whom the " technical development" is 
 all there is of Marx's explanation; or Professor Seligman, 
 who objects to Marx's explanation because it does not in- 
 clude the " technical wants ? " Will the gentleman kindly 
 vouchsafe an explanation of " scientific " want, " philoso- 
 phic" want, and "jural" want? What does he mean by 
 "jural" relations? Does he mean the social relations as 
 expressed in codes of positive law? If so, does not he know 
 that these laws deal almost exclusively with the property 
 relations of people, which are certainly material and eco- 
 nomic relations ; and that all the few exceptions " deal " in 
 "morality;" and that all jural relations are, therefore, nec- 
 essarily contained in the economic and moral relations, in- 
 deed, are their expression? 
 
 What does Professor Seligman mean by suddenly, with- 
 out warning or explanation, substituting " economics " for 
 economic interpretation of history, and in talking of " eco- 
 nomic," " economists," " utility," " value," as if the Ma- 
 terialistic Conception of History were an explanation of his- 
 tory by means of the special science known as political econ- 
 omy? Does he mean to say there there is any warrant in 
 Marx even for a suggestion of this kind, or does he sim- 
 ply speculate on the ignorance of his readers who probably 
 know nothing about Marx, except that he was a writer on 
 political economy?. And is that why he first changed the 
 Materialistic Conception of History into an " Economic In- 
 terpretation of History ? " Is it all intentional confusion, 
 or is he really so confused? And why does he tell the 
 Marxists "that it is no longer necessary to show that the 
 individual is impelled by other motives than the economic 
 one," have not they themselves reiterated this for the bene- 
 fit of their critics ad nauseam? And hasn't Marx himself 
 
MATERIALISTIC CONCEPTION OF HISTORY. 45 
 
 put the " economic man " to rest in his grave, from which 
 the opponents of Marx are now trying to raise him? As 
 an economist he ought, to know these things. But if the 
 demise of the " economic man," and the attempts at his re- 
 suscitation have not been noted in Professor Seligman's 
 statistical department, why didn't he inform himself of it 
 from his friend, Professor John B. Clark? 
 
 Again, what does he mean by a " linguistic " explanation 
 of history, and is that based on a " linguistic " relation 
 which is the result of a "linguistic" want? What does he 
 mean by a " religious " explanation of history, besides an 
 " ethical " one, (whatever that may mean) ? Does he mean 
 a creed or church explanation? And does he really mean 
 that a " scholar " can " thus legitimately " " regard past 
 events" from such a "^Istandpoint? " And does he really 
 think that notwithstanding all this, there is still room for d 
 "scientific" interpretation of history? 
 
 There are some other very interesting questions we might 
 ask Professor Seligman, but the strands of human life being 
 so manifold and complex, as Professor Seligman truly ob- 
 serves, and the Marx-critics being so many and so multi- 
 farious, we must leave him in peace, particularly as he 
 probably meant no harm. But before leaving him we must 
 ask him what has become of his quest for the cause which 
 " determines the thought of humanity," with which he 
 started out? Has he forgotten all about it? And yet, that 
 was the question under consideration ! 
 
 That was the question to be considered, if he was really 
 anxious to find a scientific explanation of history, or, rather, 
 if he wanted to treat history scientifically. But that is just 
 what modern Marx-critics are extremely anxious to avoid. 
 Hence, their plea for all sorts of " standpoints," " factors," 
 etc., etc., which they themselves do not define or explain, 
 but which serve the general purpose of making the scientific 
 treatment of history impossible. In this even such extremes 
 as Seligman and Weisengruen meet. Except that while the 
 superficial and democratic American is "easy" with the 
 
46 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 historians, and announces that any tommyrot, written from 
 any " standpoint," is as good science as anything else, the 
 thorough and conservative German makes the task of the 
 historian impossible of accomplishment by claiming that sci- 
 entific history must contain things which it is impossible for 
 it to contain, and which, if it were possible to put them there, 
 would make it absurd. 
 
 Weisengruen objects to the theory of the class-struggle. 
 But not because there is no such struggle. Oh, no! That 
 there is a struggle of the classes into which society is at 
 present divided he can no more deny than Seligman can 
 deny that the economic relations of society are the principal 
 motive-power of History. But just as Seligman finds other 
 " relations " which enable him to write history from all sorts 
 of " standpoints," so does Weisengruen find all sorts of strug- 
 gles which he claims must be " taken into account " by a 
 scientific historian. These struggles, which, according to 
 Weisengruen, go to make up real history, are not merely so- 
 cial struggles but also struggles between individuals, and are 
 of every nature and description. His demands upon scien- 
 tific history are, therefore, so many that they cannot all even 
 be recounted here. Here are some of them, as a sample: 
 
 The " scientific " historian must embrace, with an " intui- 
 tive" gaze, the real essence of the period of which he de- 
 sires to treat, and must at the same time be able to correctly 
 measure its "psychical range." He must know every oc- 
 currence, even the .smallest; and must be acquainted with 
 every document, even of the least importance. And in or- 
 der that the reader iriay not think lightly of this task, 
 Weisengruen takes care to warn him of the insuperable dif- 
 ficulties which will beset the scientific historian. And those 
 difficulties are indeed insuperable. For it must be remem- 
 bered that Weisengruen does not refer to social occurrences, 
 or public documents. No, he means every individual oc- 
 currence of any kind or description, and every private docu- 
 ment of whatever import. Quarrels between husband and 
 wife, neighborly gossip, love-letters, everything is here in- 
 
MATERIALISTIC CONCEPTION OF HISTORY. 47 
 
 eluded. And everything about everything. For our author 
 has suddenly grown very democratic, and insists that every- 
 body makes history. Nothing is so mean, nor is any station 
 in life so lowly, as not to influence the course of history. 
 In order that there be no mistake about it, he gives the fol- 
 lowing express instructions: "He (the historian) must 
 know all the persons {of the period he describes), their fam- 
 ily relations, their actual course of action, as well as the 
 opinions they held of each other. . . . All to the small- 
 est detail." 
 
 Then he must know everything about everything else in 
 creation: All sorts of relations between all sorts of groups 
 in society, covering all the social relations of the people, 
 the economic structure of society, the politicsj ideas, sci- 
 ences, etc., etc., and everything to the minutest detail. The 
 Marxists also demand knowledge of all these social matters 
 but Weisengruen does not mean it that way at all. No. 
 He is a thoroughgoing scientist, 3s we have already seen, 
 and therefore the historian's knowledge of social matters 
 which he demands must be on a par with his knowledge of 
 individuals and their relations as already hinted at. For 
 instance, the historian must not only be acquainted with the 
 tools, manner and processes of production in use, and the 
 things produced during the period of which he treats, but 
 he must have an actual inventory of all the "goods, wares 
 and merchandise," as well as of all the household furniture, 
 clothing and other worldly goods, possessed by each and 
 every person who lived during that period, with all of whom, 
 as we already know, the historian must be personally ac- 
 quainted. 
 
 If this is not materialism run mad, what is .it? 
 
 Of course, Weisengruen knows the absurdity of all this. 
 And this would never have been said if it were not for the 
 terrible plight in which he found himself in attempting to 
 disprove the claim of the Materialistic Conception of His- 
 tory to the sole and exclusive possession of the attribute 
 
48 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 science, in its own proper field. Weisengruen's madness 
 has method. All this moonshine is put up to us in all 
 seriousness for one purpose only. If all this is impossible, 
 and there is no denying that fact, then scientific treatment 
 of history is impossible until some dim and distant future 
 of which we can take no cognizance. And meanwhile, (and 
 there is the rub), there is no science, and anybody and 
 everybody has license to write any rot he pleases from any 
 " standpoint " he pleases. . . . 
 
 You see, we are at the same old game again. . . . 
 
 Weisengruen and Seligman, Masaryk and Slonimski,' and 
 the rest of the tribe, are essentially alike. , Whether by way 
 of ponderous philosophic moonshine, or elegant phrase- 
 mongering, the flow of objections to the Materialistic Con- 
 ception of History runs from the same source, and it wends 
 its course towards the same objective point. 
 
CHAPTER IV. 
 
 VALUE AND SURPLUS VALUE. 
 
 As was already pointed out, the Marxian theoretical 
 system is one solid structure and cannot be properly under- 
 Stood unless viewed as a whole from foundation-stone to 
 roof-coping. To criticize any of its parts as if it were a 
 complete structure in itself is, therefore, a mistake which 
 must necessarily lead to all sorts of fallacious conclusions; 
 and to accept any one of its parts and reject the others, as 
 many of the latter-day critics do, simply betrays ignorance 
 of the parts which are accepted and rejected alike. The 
 Marxian theoretical system must be examined as a whole, 
 and accepted or rejected in its entirety, at least as far as 
 its structural parts are concerned. 
 
 It is rather the fashion among Marx-critics to treat the 
 Marxian " philosophy " and " economics " as if they had ab- 
 solutely nothing whatever -to do with each other, and to ac- 
 cept one and reject the other according to the critic's fancy. 
 As a matter of fact, however, Marx's " philosophy " is noth- 
 ing more than a generalization deducted from the study of 
 the economic conditions of the human race during its en- 
 tire course of historical progress, and his " economics " is 
 merely an application of his general historical theory to 
 the particular economic structure known as the capitalist 
 system. 
 
 How Marx came to take up the studies which resulted in 
 
 the formulation by him of the theoretical system which 
 
 bears his name, and the course which those studies took, 
 
 is very illuminating in this respect, and his own account of 
 
 '"■'' ' ^- -49 ■ ■ 
 
so THE THEORETICAL SYSTEM OF KARL MAKX. 
 
 it, given in the preface to his " Critique of Political Econ- 
 omy," is of more than passing interest, and we shall there- 
 fore place it before our readers. 
 
 In 1842-43, Marx says, he found himself, as editor 'of the 
 " Rheinische Zeitung," the leading German radical paper of 
 the .time, embarrassed when he had to take part in dis- 
 cussions concerning so-called material interests, such as for- 
 est thefts, subdivision of landed property, free trade, and 
 the like, as his previous studies had been only in the do- 
 mains of philosophy, history, and jurisprudence. At the 
 same time he had to express an opinion on the French 
 schools of socialism of those days, with which he was also 
 unfamiliar. He therefore took advantage of his publishers' 
 desire to pursue a less aggressive course than his, and re- 
 tired to his " study-room," there to get the needed infor- 
 mation. 
 
 " The first work undertaken for the solution of the ques- 
 tions that troubled me," he says, " was a critical revision 
 of Hegel's ' Philosophy of Law ; ' the introduction to that 
 work appeared in the ' Deutsch Franzosische Jahrhiicher,' 
 published in Paris in 1844. I was led by my studies to the 
 conclusion that legal relations as well as forms of state 
 could neither be understood by themselves, nor explained 
 by the so-called general progress of the human mind, but 
 that they are rooted in. the material conditions of life, which 
 are summed up by Hegel after the fashion of the English 
 and French of the eighteenth century under the name ' civic 
 society ; ' the anatomy of the civic society is to be. sought 
 in political economy. The study of the latter which I had 
 taken up in Paris, I continued at Brussels whither I emi- 
 grated on- account of an order of expulsion issued by Mr. 
 Guizot. The general conclusions at which I arrived and 
 which, once reached, continued to serve as a leading thread 
 in my studies, may be briefly summed up as follows: " 
 
 Here follows the famous passage, already quoted by us in 
 the first chapter of this book, giving the whole Marxian sys- 
 
VALUE AND SURPLUS VALUE. 5 1 
 
 tem in a nut shell, and containing Marx's own formulation 
 of the Materialistic Conception of History. 
 
 It is amusing to see the evident surprise of some Marx- 
 critics at the fact that Marx, instead of writing an elaborate 
 treatise on the Materialistic Conception of History, rele- 
 gated its formulation to a short preface of a purely politico- 
 economic work. As a matter of fact, this is very significant, 
 but not surprising at all. This passage contains an epitome 
 of the whole Marxian system: Historical foundation, eco- 
 nomic structure and socialist result. The book itself was 
 to treat the economic structure of the capitalist system 
 exhaustively and in detail. The Socialistic conclusions 
 were not elaborated for the reason that Marx did not believe 
 in any Socialism that did not flow directly from an examina- 
 tion of the capitalist system, and therefore it had to be 
 merely indicated, leaving it to the reader to deduce his So- 
 cialism from the examination of the capitalist system con- 
 tained in the book itself. If that examination did not lead 
 to Socialism such an elaboration would be either useless or 
 unjustifiable or both. The historical point of view, how- 
 ever, from which the capitalist system was to be examined 
 had to be formulated, as without a clear understanding 
 thereof -the examination of the laws governing the capitalist 
 system of production and distribution would remain a book 
 sealed with seven seals. Marx, therefore, formulated his 
 historical theory in the preface, and then settled down to 
 the examination of the economic structure of our present 
 society and the laws governing its particular course of evo- 
 lution. 
 
 The opinions of the critics about Marx as an economist 
 are just as many and as divergent as are their opinions of 
 him as a philosopher. Slonimski and other critics think 
 that Marx has done absolutely nothing for the science of 
 economics; not only are his theories false but they have not 
 even any historical importance. From this view to that of 
 enthusiastic eulogy the opinions run all the way. He has, 
 of course, been denied originality. He is accused by some 
 
S2 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 critics of being a blind follower of the classical English 
 School of political economy, and particularly of Ricardo, 
 and again by others that he understood neither that school 
 in general nor Ricardo in particular. We shall not go into 
 th-t, for the reasons given before, except to say that while 
 many parts of his economic theory had been worked out be- 
 fore him, particularly by the English Classical school, the 
 system as such, the combination of the parts into a syste- 
 matic structure, the point of view from which the structure 
 was built, as well as the corner-stone of the structure, the 
 theory of surplus value, are all his own. We also wish to 
 say right here that Marx had to construct an economic the- 
 ory of his own for the reason that his historical point of 
 view placed him in opposition to the reigning classical 
 school which accepted our economic system as " natural," 
 that is to say: independent of historical development in its 
 origin, and final in its application. This offended Marx's 
 better historical understanding, his philosophy. The class- 
 ical school considering the capitalist system eternal, ana- 
 lyzed only the relations of its parts to one another, whereas 
 Marx, because of his peculiar point of view, looked not only 
 into the workings of its parts and their relations to each 
 other, but also into the changes effected by the relations of 
 the different parts of the capitalist system in each of those 
 parts and the changes in the whole system flowing there- 
 from. In other words, Marx examined the dynamics of 
 the capitalist system as a whole, and in the light so gained 
 re-examined its statics, already examined by the classical 
 school. His philosophy which placed him in opposition to 
 the classical English school of political economy, also pre- 
 vented him from drifting into any_ so-called psychological 
 theory. The underlying principle of all of these theories," 
 the attempt to explain social phenomena by individual mo- 
 tives, is entirely repugnant to his historico-sociological point 
 of view, requiring as that does, that social phenomena should 
 be explained in such a manner as to account for their origin. 
 
VALUE AND SURPLUS VALUE. 53 
 
 growth, and decline,, something which no psychologico-in- 
 dividualistic motivation of social phenomena can do. 
 
 When Marx came to examine the economic structure of 
 our social system, his problem consisted in finding scnswers 
 to the following questions: What are the sources of our 
 society's wealth, that is, of the means of subsistence and 
 comfort of the individuals composing it? How and in what 
 manner is it produced : what factors, circumstances and con- 
 ditions are necessary for its production, preservation and 
 accumulation? Ht)w, in what manner, and in accordance 
 with what principles, is it divided among the different 
 groups and individuals composing our society? How does 
 this division affect the relations of the groups and indi- 
 viduals participating in it, and how do these relations, and 
 the social phenomena which they produce, react upon the 
 production and distribution of wealth in this society? 
 What are the resulting laws governing the direction and 
 manner of its general movement? What are the. historical 
 limits of this economic organization? 
 
 A careful examination of our wealth discloses the re- 
 markable fact that, whereas, it consists, like all wealth, of 
 articles ministering to the wants of the individuals of the 
 society wherein it is produced, of whatever nature or char- 
 acter those wants may be, the amount of that wealth, from 
 our social point of view, does not depend on the amount or 
 number of those articles possessed by the individuals sep- 
 arately or society as a whole; that any individual member 
 of our society may be possessed of great wealth without 
 possessing any appreciable quantity of articles that would 
 or could minister either to his own wants or to those of any 
 -other member of our society; that, as a rule, a man's wealth 
 under our social system does not consist of articles which 
 minister to his own wants, but to those of other people, if 
 at all; and, furthermore, that a man's wealth may grow or 
 shrink without any addition to or diminution from the arti- 
 cles or substances of which his wealth is composed. 
 
 This is an entirely novel phenomenon historically consid- 
 
54 THE THEOKETlCAL SYSTEM OF KARL MARX. 
 
 ered and one showing our wealth to be radicafly different, 
 and possessed of attributes and qualities entirely unknown, 
 to wealth under former forms. Besides, these novel at- 
 tributes and qualities of our wealth are apparently in con- 
 travention of the " natural " order of things. At no time 
 prior to our capitalistic era was the subjective relation be- 
 tween a man and his wealth — that is the means of his. sub- 
 sistence and comfort — so entirely severed as it is now. At 
 ho time prior to this era did a man and his wealth stand in 
 such absolutely objective, non-sympathetic, relations as they 
 stand now. At no time prior to our era was a man's wealth 
 so thoroughly non-individual, so absolutely dependent on 
 social circumstances, so entirely a matter of social force, as 
 it is under capitalism. 
 
 What is the distinctive feature, the distinguishing mark 
 or characteristic of the capitalist system of production and 
 distribution of the means of subsistence and comfort which 
 wrought such changes in the attributes and qualities of 
 wealth and how were those changes brought about? 
 
 The distinctive feature of capitalist production, that 
 which gives it its character, is that under this system man 
 does not produce goods but commodities^ that is "wares and 
 merchandise." In other words he does not produce things 
 which he wants to use himself, and because he wants to use 
 them to satisfy some want of his, but things which he does 
 not want to use himself but which can be disposed of by him 
 to others, caring nothing whether and in what manner the 
 others will use them. Instead of producing goods for his 
 own use, as people used to do in former days, under other 
 systems of production, he produces commodities for the 
 market. Marx, therefore, begins his great investigation of 
 the capitalist mode of production with the following words: 
 " The wealth of those societies in which the capitalist mode 
 of production prevails, presents itself as ' an immense ac- 
 cumulation of commodities,' its unit being a single com- 
 modity. Our investigation must therefore begin with the 
 analysis of the commodity." It is the analysis of the com- 
 
VALUE AND SURPLUS VALUE. 55 
 
 modity that must furnish us the key to all the peculiarities of 
 character which we have noticed in our wealth under the 
 capitalist system of production, showing changes which have 
 placed our wealth in a purely objective relation to man and 
 given it purely social attributes and properties. > 
 
 The distinctive property, again, of a commodity, that qual- 
 ity of the thing which makes an ordinary good an arti- 
 cle of merchandise, is its exchange-value. That is to say, 
 the fact that in addition to the quality which it possesses of 
 being useful for consumption^ to the one who wants to use 
 it that way, it has the further quality of being exchange- 
 able, that is it can be useful for the purpose of exchange 
 by one who has no use for it as an article of consumption. 
 The exchange-value of an article therefore, while based on 
 the property of the article of being ultimately useful for 
 consumption, is something entirely different and apart from 
 this use-value and independent of it in its variations. In- 
 deed, the two qualities might be said to be antagonistic as 
 they exclude each other: a thing is exchange-value only to 
 the person who has no use-value in it, and it loses its ex- 
 change-value when its use-value asserts itself. It is its ex- 
 change-value that makes a thing a commodity, it remains 
 therefore a commodity only as long as it is intended for 
 exchange and loses that character when appropriated for 
 use in consumption. The use-value of a thing- is, on the 
 one hand, something inherent in its nature, in the very mode 
 of its existence, and does not depend on the social form of 
 its production; it remains the same use-value no matter how 
 produced. On the other hand, the use-value of a thing is 
 a purely subjective relation between the thing and the per- 
 son who uses it, and therefore any difference in the use- 
 value of a thing when used by different persons is purely 
 subjective with those persons. In neither of these aspects 
 does it come within the sphere of political economy, whose 
 object is the explanation of the peculiar phenomena of 
 wealth under the capitalist system of production, phenomena 
 which, as we have seen, are purely social in their nature. 
 
56 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 Both, the natural attributes of things and the individual 
 uses to which they are being put, have existed long before 
 the capitalist system of production without giving wealth 
 those properties of the capitalist-produced wealth which we 
 have "noted above. These qualities are the qualities of the 
 good, and these uses are the uses to which the good is being 
 put. They are not the qualities nor the uses of the com- 
 modity. They do not, therefore, an any way affect the ex- 
 change-value of the thing, that attribute which makes out 
 of the simple good the mysterious commodity with all its 
 peculiar faculties and attributes. Except that the good is 
 the substratum, the material substance, of the commodity; 
 and use-value is the substratum, the material substance, of 
 exchange-value. Historically, therefore, the good preceded 
 the commodity, and use-value preceded exchange-value. 
 
 Marx says, therefore : " Whatever the social form of 
 wealth may be, use-values always have a substance of their 
 own, independent of that form. One can- not tell by the 
 taste of wheat whether it has been raised by a Russian serf, 
 a French peasant, or an English capitalist. Although the 
 subject of social wants, and, therefore, mutually ^connected 
 in society, use-values do not bear any marks of the relations 
 of social production. Suppose we have a commodity whose 
 use-value is that of a diamond. We can not tell by look- 
 ing at the diamond that it is a commodity. ~ When it serves 
 as a use-value, aesthetic or mechanical, on the breast of a 
 harlot or in the hand of a glassctitter, it is a diamond and 
 not a commodity. It is the necessary pre-requisite of a 
 commodity to be a use-value, but it is immaterial to the use- 
 value whether it is a commodity or not. Use-value in this 
 indiiiference to the nature of its economic destination, i. e. 
 use-value as such, lies outside the sphere of investigation of 
 political economy. . . . But it forms the material basis 
 which directly underlies a definite economic relation which 
 we call exchange-value." 
 
 Our wealth, then, in those respects in which it is differ- 
 ent from the forms of wealth which preceded it, and which 
 
VALUE AND SURPLUS VALUE. 57 
 
 distinguish it as capitalistic wealth, is an aggregation of 
 exchange-values. In other words: our wealth, in so far as 
 it is not merely used for consumption, but retains its capital- 
 istic properties, is capital, is an aggregation of exchange- 
 values. We have already seen that exchange-value is not 
 something inherent in the thing itself as an element or con- 
 dition of its natural existence. We have also seen that it 
 bears no subjective relation to the person who uses it as 
 such, that it does not depend on anything he does or omits 
 to do, but is an objective attribute derived from some social 
 relation of the individuals within the society in which it is 
 produced. We must therefore conclude that capital, which 
 is an aggregation of exchange-values, is nothing more than 
 a social relation of individuals, and that its properties, which 
 it can only possess by virtue of its being such an aggrega- 
 tion of exchange-values, are merely the result of ^he social 
 relations of which it is the expression. 
 ' What are the social relations represented by exchange- 
 value, and its composite — capital? What are the proper- 
 ties of exchange- value and capital and the laws governing 
 their existence, and how are they derived from and gov- 
 erned by those social relations? The answering of these 
 questions is, according to Marx, the object of political econ- 
 omy, and to their critical examination his life-work was de- 
 voted. 
 
 Before entering, however, upon this examination we 
 must put before ourselves clearly the problem which con- 
 fronts us, and define clearly the questions which we are 
 called upon to answer. We have already, pointed out some 
 characteristics of our wealth which make it different from 
 the wealth possessed under any previous social system and 
 which show clearly that- our form of wealth is the product 
 of our peculiar social relations. These characteristics are, 
 however, not the only ones which require explanation. 
 Even a cursory examination of our economic system will 
 reveal the fact that our value-wealth is full of mysteries 
 
S8 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 which, if considered by themselves, defy all attempts at ex- 
 planation. 
 
 The mystery surrounding the origin of our wealth was al- 
 ready indicated above in showing the peculiar property of 
 our wealth to grow and shrink irrespective of any addition 
 to, or diminution from, the material substances of which it 
 consists. This mystery deepens the further we go into the 
 examination of the production of wealth in our society, and 
 even rnore so when we come to consider its distribution. 
 Only some of the more characteristic phenomena which puz- 
 zle the inquirer into the nature of the wealth of capitalistic 
 nations need be mentioned here in order to show the nature 
 of our problem. 
 
 While, as we have already stated, the amount of our 
 ■wealth may- grow or diminish irrespective of the growth or 
 diminution of the articles of which it consists, thus showing 
 clearly that our value-wealth is something extrinsic and 
 independent of the nature and uses of those articles, yet 
 there is something in the very independence of value-wealth 
 from its material substance which shows a close connection 
 between them. It is true that this connection is rather in the 
 nature of a hostility, partaking of the antagonism already 
 ■pointed out between use-value and exchange-value, but the 
 -connection is nevertheless clearly defined and resembles in its 
 character the connection of polarity, to borrow an example 
 from another field of scientific research. It has, namely, been 
 observed that there is a constantly growing difference be- 
 tween the accumulation of use-value and exchange-value, 
 a constantly growing difference between the amounts of our 
 value-wealth and the material substances of which it con- 
 sists. That is to say, it has been observed that with the 
 increase of the production of goods commodities diminish 
 in value, so that the larger the increase in our " natural " 
 wealth, that is in useful articles which go to make up the 
 stores of our social or value-wealth, the smaller the increase 
 of the latter. In other words the growth of our value- 
 wealth constantly and systematically falls behind the growth 
 
VALUE AND SURPLUS VALUE. 59 
 
 of the material substances of which it consists. This shows 
 clearly that while the value of a thing does not depend on 
 its natural qualities or the uses to which it may be put, so 
 that exchange-value is entirely independent of use-value, 
 there is a certain well-defined relation existing in their pro- 
 duction, at least. What is that relation? 
 
 While this question of our wealth-production is merely 
 mysterious, the questions of its distribution are puzzling and 
 perplexing in the extreme. A cursory survey of our social 
 system will show that there are very many persons in our 
 society who evidently do not produce any wealth and yet 
 have it in abundance. In fact, most of our wealth is found 
 in the possession of persons who have not produced it. 
 Where did they get it? The answer which suggests itself' 
 to this query is, that they got it from the persons who did 
 produce it. But then the question arises: How did they 
 get it? They did not take it by force, nor was it given to 
 them for love. How did they get it? 
 
 Ever since man has kept written records of his doings 
 there have been social classes composed of people who have 
 neither toiled nor labored and still managed to live on the 
 fat of the land. But the actions of these people have al- 
 ways been plain and above board. Everybody could see just 
 how they managed it. There was never any mystery as to 
 where their fat came from, nor how they got hold of it. 
 The division of the wealth between those who produced it 
 and those who didn't was done in the light of day and by a 
 very simple process, so that each article produced could be 
 traced into the hands of its ultimate possessor and each arti- 
 cle possessed could be traced back to its original source. A 
 child could tell the sources of wealth of an ancient slave- 
 holder ot medieval feudal baron. Not so with our non- 
 producing classes. The sources of the wealth of our mer- 
 chant-princes are shrouded in mystery. An honest mer- 
 chant is supposed to, and usually does, pay for his wares 
 what they are worth and sells them again for what they 
 are worth. Wherefrom, then, does he get his profit? Two 
 
60 ' THE THEORETICAL SYSTEM OF KARL MARX. 
 
 men make a bargain and exchange equal values, for they are 
 honest and would not cheat each other, and yet both make 
 a profit! Where does their profit come from? Some fool- 
 ish people think that merchants make their profits by buy- 
 ing in the cheapest market and selling in the dearest. In 
 other words, by cheating or taking advantage of each other. 
 This is evidently a mistake. A merchant may, of course, 
 make an extra profit by taking advantage of his neighbor. 
 In that event his neighbor loses as much as he has made. 
 But the regular profits of the merchant are realized when he 
 'buys and sells goods at their fair prices. That is why all 
 hands are making money. Otherwise the capitalists would 
 be preying on each other and one would gain just as much 
 as the other would lose. Wealth would merely circulate 
 among the different members of the class but there would 
 be' no net gain. What would the merchant class live on ? 
 They could no more live on each other's losses than they 
 could by taking in each other's washing. But the capitalist 
 class does manage to live and thrive and even accumulate 
 and amass large stores of wealth. Where, then, does the 
 capitalist class get it? 
 
 Other explanations offered are that the merchant by buy- 
 ing and selling enhances the value of the article sold and- 
 that the enhanced value is the merchant's profit ; or that the 
 merchant's profit is a reward for services as middle-man be- 
 tween producer -and consumer. This last proposition is be- 
 side the point for the reason that it is not a question of ethics 
 with which we are concerned, as to whether the merchant 
 deserves what he gets, but a pure question of mechanics: 
 how, and wherefrom, he gets it. Nor does the explanation 
 that the merchant " enhances'" the value of an article, that 
 is creates new value, by selling it, answer the question: 
 Where and how did he get it? How is the value of a 
 thing " enhanced " by a mere change of hands ? Its natural 
 qualities remain the same. The uses to which it can be put 
 remain the same. Where was this value before the mer- 
 chant got it? Who produced it, and why did its producer 
 
, VALUE AND SURPLUS VALUE. 6l 
 
 part with it? If a mere change of hands creates value, why 
 do some people foolishly toil in the sweat of their brows to 
 produce new articles in order to get values, when value can 
 be got by the much easier process of sending the articles 
 already on hand around the circuit? This brings us back 
 to the question: What is exchange-value, and how is it 
 produced or got? 
 
 We will see later in the course of the discussion how 
 Marx's theory of value and surplus-value answers all these 
 questions and unravels all these mysteries, and that it is the 
 only theory that answers the problem of political economy 
 satisfactorily, thus making political economy a real science. 
 We will also see the place of our economic system in the 
 string of economies which go to make up the history of the 
 human race until now, and what its further development 
 must or is likely to lead to. We will see, incidentally, how 
 entirely puerile is the talk of Bernstein and his followers 
 who, not understanding the essence of the Marxian theory 
 of value, and overawed therefore by the volume of criti- 
 cism levelled against it by the very learned economists, at- 
 tempt to hide behind the contention that this theory is not 
 an essential element of Marx's socialist system. We will 
 see, lastly, how utterly absurd is most of the criticism of 
 these learned critics from Boehm-Bawerk down or up. 
 
 II. 
 
 True to his method of " no philosophy," Marx set, about 
 his task of finding the true laws of exchange-value in the 
 most " unphilosophic," matter-of-fact way.. He argued that, 
 while the laws of value furnish the key to the understanding 
 of our economic system, those laws themselves can only be 
 derived from the observation of the actual every-day facts 
 of our production and distribution. In order, however, that 
 these facts may be properly understood and appreciated they 
 must be examined in their historical connection and in their 
 proper historical setting. 
 
62 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 The production and distribution of the capitalist system 
 can be best studied by an examination of a typical capital- 
 istic commodity: a Factory Product. While the capitalist 
 system has impressed itself upon every phase of life of every 
 society in which it prevails, so that nothing can escape it, 
 whether properly belonging within its domain or not, its 
 characteristic features, its vital elements, are contained in 
 their purity and simplicity only in its historic embodiment, 
 — the factory product. The factory product is. not only the 
 historic form of capitalist production, accompanying its ap- 
 pearance on the historical arena as its technical embodi- 
 ment, but it represents the vast majority of all the com- 
 modities of capitalist society. The factory product bears 
 the imprint of capitalism so deeply emblazoned upon it, and 
 is so free from entangling alliances with any forms of pro- 
 duction other than capitalistic, that there can be absolutely 
 no mistaking its origin and virtues. Not so with other prod- 
 ucts. Take, for instance, a farm product. You can not, by 
 the mere fact of its production as a farm product tell whether 
 it was produced under the capitalistic regime or not. This 
 is due to the fact that our form of ownership and cultivation 
 of land have to a great extent remained far behind the gen- 
 eral progress of our economy. We cannot, therefore, by 
 examining a farm product tell the characteristics of capi- 
 talist production, for we cannot tell which of the properties 
 of the farm product are the result of capitalism and which 
 are the survival of some prior mode of production. After 
 we shall have learned to know the characteristics of cap- 
 italist production, we shall see that these characteristics 
 are to be found also in the capitalistically produced farm 
 product. The examination of the farm product may, there- 
 fore, serve to find the limits of the laws , of capitalistic pro- 
 duction, but not these laws themselves. For that purpose 
 we must study the factory product. 
 
 It is well to remember in this connection that historically 
 the capitalist system has built its foundation on the ruins of 
 farming, and that their progress is usually in the inverse ra- 
 
VALUE AND SURPLUS VALUE. 63 
 
 tio to each other. It is one of the contradictions of capitalist 
 society,- that while it needs farm products in order to sus- 
 tain itself, farming does not fit into its scheme. In such 
 typically capitalistic countries as England, for instance, this 
 contradiction was solved by practically eliminating farm- 
 ing, and drawing its food supply from abroad. But as this 
 is an obviously impossible solution for the whole capitalistic 
 world, attempts have been made to capitalize farming. So 
 far, this has met with only indifferent success. That is 
 why thp " agrarian question " is now uppermost in all 
 economic discussions. From all this it is perfectly plain 
 that if we want to understand the capitalistic system we 
 must study the factory product. 
 
 The most characteristic feature of the factory product as 
 a natural phenomenon, that which marks its contrast to the 
 farm product, is its comparative independence of climatic 
 and other natural phenomena — an independence which 
 makes it practically reproducible at will. Unlike the farm 
 product, which depends for it's successful production on the 
 varying conditions of soil and climate (conditions usually 
 not subject to change at the hands of man) and is therefore 
 limited in its production by a force to which all men must 
 bow, the factory product knows no other superior but man 
 who reproduces it at will. The limimts of the production 
 of the factory product are not given by nature, but im- 
 posed by man; production of the factory product increases 
 or slackens in accordance with the demands of the 
 " market ; " that is to say, its limits are set by the relations 
 of the members of society in the distribution of the manu- 
 factured product among themselves. In this it typifies the 
 capitalist system. With the advent of the capitalist system 
 poverty and riches have ceased to he a natural condition; 
 they have become a social relation. 
 
 Let us, then, take the factory product and follow its 
 natural course in life; let us examine the manner of its 
 production, the course it takes in the circulation of goods 
 to the point of its ultimate destination, — consumption; let 
 
64 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 t 
 
 US see who are the persons participating in its production, 
 instrumental in its circulation and sharing in its distribution. 
 
 In thus writing the biography of any factory product we 
 will find that its life history will read as follows: 
 
 It was produced in a large factory building owned or 
 hired by the manufacturer. It was made by a large num- 
 ber of workingmen hired by the same manufacturer, who 
 paid them for their labor, out of materials provided for by 
 the manufacturer, and by means of machinery owned by 
 him. After our factory product was ready for use it was 
 shipped to a wholesale dealer, who bought it from the 
 manufacturer, and who, in turn, sold it to a retail dealer. 
 From the retail dealer it went to the consumer, who pur- 
 chased it from him. This is the usual course. There are, 
 however, variations of this course. The wholesale dealer 
 may, for instance, have been omitted, if the manufacturer 
 sells direct to the retailer; or, there may have been a good 
 deal more of buying and selling done in it before it finally 
 reached the consumer. One thing is sure, however, its 
 life-course led through these three stages: manufacture, 
 trade, consumption. 
 
 The persons whom it met in this, its life-course, who af- 
 fected its existence and its different changes, and who par- 
 ticipated in its distribution in one way or another, besides 
 those who participated in the production and distribution 
 of the raw material from which it was made, which may 
 itsdf have been a factory product, are: The laborer who 
 produced it and was paid for it; the manufacturer who 
 caused it to be produced, paid the cost of its production and 
 received the purchase price from the trader who bought 
 it from him; the merchant who bought it at one price and 
 re-sold it at another, pocketing the difference; and, finally, 
 the consumer, who paid for it and kept it for consumption, 
 either personal, non-productive, or impersonal, productive 
 consumption in the manufacture of some other factory prod- 
 uct. There may have been others: the manufacturer may 
 have paid rent for his premises to the landlord or interest 
 
VALUE AND SURPLUS VALUE. 65 
 
 for his capital to the banker; the trader may have paid 
 rent, interest, or for help; there may have been a lot of 
 time and labor spent in transporting it from place to place 
 until it finally reached its place of ultimate destination, the 
 consumer — and all of this had to be paid for. 
 
 AH these persons who participated in the production or 
 circulation of our factory product, and all those with whom 
 they must ■" divvy up," must share in our factory product, 
 that is to say,__in the price which the ultimate consumer 
 paid for it. Let us see how it is done. 
 
 We must, of course, as already pointed out above, as- 
 sume that each gets what is due him, under our present 
 system, as they are all presumed to be honest, the cases 
 of one getting advantage of the other are exceptional, and 
 they are all free agents working without compulsion. The 
 workingman is " free " to work or not to work, so is the 
 manufacturer and merchant to hire, buy and sell. The 
 capitalist system needs for its proper development, and we 
 therefore assume, absolute freedom, personal and commer- 
 cial. How, then, is the share of each determined, when is 
 it produced and when paid over? 
 
 It must always be temembered that none of those inter- 
 ested in the production, circulation and distribution of the 
 factory product, have any interest whatever in its existence, 
 or desire for its possession. None of them gets any share 
 of it physically. Their distributive share comes out of the 
 purchase price paid for it by its ultimate consumer, who 
 takes it out of the " market," converts it from a commodity 
 into an ordinary good possessing only its natural qualities 
 of a use-value. In other words, each of their distributive 
 shares comes of the exchange-value of the commodity which 
 is turned into the universal medium of exchange — money 
 — by its sale to the ultimate consumer. 
 
 This exchange-value first manifests itself when the manu- 
 facturer has the commodity ready for sale an3 places it on 
 the market for which it was produced. The manufacturer 
 produced it not for its use-value, — he never had any per- 
 
66 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 sonal use for it and never intended to use it, — but for its 
 exchange-value, and as soon as it is ready in exchangeable 
 form he offers it for sale or exchange. He sells it, again, 
 to somebody who has absolutely no personal use for it and 
 does not intend to use it himself, but buys it just as the 
 manufacturer manufactured it, because of the exchange- 
 value there is in it, and which, by the way, for some reason 
 or other, he expects to be more than what he pays for it. 
 
 On this first manifestation of the exchange-value of the 
 factory-produced commodity the manufacturer gets in ex- 
 change for it a certain sum of money or other commodities, 
 the price obtained on its sale or exchange. The exchange 
 value of the commodity has realized itself in his hands in 
 the form of its price. 
 
 We must not, however, confound price with value. Value 
 is something which the commodity possesses when placed 
 upon the market and before any price is paid for it, and it 
 is because of this value that the price is paid for it. The 
 value is the cause of the pr-ice. Furthermore, value and 
 price do not always coincide in amount. The price of an 
 article may be greater or less than its, value, according to 
 circumstances. The proof of this is the fact that things 
 may be bought " cheap " or " dear," that is to say, for a 
 price «bove or below their value. If the price of a thing 
 and its value were the same, nothing could be bought either 
 cheap or dear, because the price paid would be its value. 
 The fact that we speak of things as being bought or sold 
 " cheap " or " dear " proves that our valuation of the thing 
 is something outside of the price, and therefore something 
 with which the price may be compared and proved either 
 too high or too low. It is, therefore, manifest that value 
 and price are not only not identical in their nature, but that 
 they do not always even coincide in amount. And this, 
 notwithstanding the fact that value is the cause of price. 
 The reason for it is easily discovered. Value is a social 
 relation and is therefore determined by social conditions, 
 whereas price is an individual valuation and is therefore 
 
VALUE AND SURPLUS VALUE. 67 
 
 determined by individual motivation. Value being the cause 
 of price, the chief motive of the individual making the 
 price, will, of course, be the value of the thing priced. This 
 does not mean, however, the actual value of the thing, but 
 his opinion of its value. Whether this opinion will be a 
 correct estimate of the actual value of the thing depends, 
 of course, on a number of individual circumstances and 
 conditions. Besides this chief motive, again, there may be 
 a number of subsidiary motives, all being either directly 
 individual in their character, or individual estimates of 
 social conditions or relations. All this produces what is 
 called the " haggling of the market." As a result of this 
 haggling comes the price actually paid for the article", and 
 the average of the prices paid makes the market price. 
 
 This price is purely accidental within certain limits, be- 
 ing the result of individual volitions based on individual 
 estimation. It is so within certain limits . only, for it is 
 controlled by its primary cause — value — which sets the 
 standard by which it is measured and to which it naturally 
 tends to conform, and will conform the more the nearer to 
 the truth are the individual estimates of the social relations 
 and conditions, and the freer the individual motivations are 
 from purely personal considerations. Value is the norm 
 about which the " haggling " of the market takes place, and 
 the price which results from this "haggling" naturally 
 gravitates towards its norm-value. Price will be " cheap " 
 or "dear" according to whether it is, in the estimation of 
 the person making the valuation, below or above the actual 
 value of the thing. 
 
 What is this social element, this social relation, which 
 gives a commodity its value? A careful search will reveal 
 only one element common to all commodities, which is 
 social in its character and is capable of giving commodities 
 the value which will express the social relations of pro- 
 duction, and that is — Human Labor. The production of 
 the typically capitalist commodity, the factory product, is 
 wholly a question of the application of human labor, physical 
 
68 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 or mental, and its results merely a question of the quantity 
 and quality of the human labor expended. It is this labor 
 which gives the product its value. It is by the expenditure 
 of this labor that its value is measured. It is as the em- 
 bodiment of a certain quantity-quality of human labor 
 that the finished product is placed upon the market for sale, 
 and it is as such that it is exchanged for another com- 
 modity, or the universal commodity — money. In making a 
 sale or exchange the parties knowingly or unknowingly es- 
 timate the respective quantities of labor contained in the 
 articles exchanged or in the articles sold and the price given, 
 and if one finds them to be equal or to preponderate in his 
 own' favor he makes the bargain. The question of quality 
 is also regarded as a question of quantity, labor of a higher 
 nature being reduced to its simple form of ordinary aver- 
 age labor of which it represents a larger quantity. 
 
 It must be borne in mind, however, that, value being a 
 social phenomenon based on social conditions and relations, 
 it is not the labor which happens to be accidentally con- 
 .tained in any given commodity, as the result of some in- 
 dividual conditions or circumstances under which its pro- 
 ducer worked, that gives the commodity its value, but the 
 socially necessary labor therein contained. In other words, 
 the value of a commodity is not derived from the particular 
 labor actually put into its production, nor from the amount 
 of labor actually expended upon its production, but from 
 the amount of average Buman labor which it is necessary 
 for society to expend for its production. The mere ex- 
 penditure of labor on the production of any article does 
 not make that article a commodity having exchange value. 
 It is social expenditure of the labor, that is, its expenditure 
 for the purposes of social production, of the production for 
 society of things which are useful for it, that makes the 
 article produced a commodity having exchange- value. The 
 expenditure, therefore, in order to create value must be 
 necessary in accordance with the social relations and con- 
 ditions existing at the time the valuation is made. This in- 
 
VALUE AND SURPLUS VALUE. , 69 
 
 eludes a variety of considerations, only the most important 
 of which can be noted here. 
 
 To begin with, " socially necessary " labor must not be 
 confused with " average " labor. The average labor only 
 comes into play when the productive power of individual 
 producers working with the same tools- is under consider- 
 ation. Otherwise, " socially necessary " and " average " 
 may, and very often do, represent different. things. For in- 
 stance, the labor expended on the production of an article, 
 in order to create new value, must, in addition to having 
 been productive according to the average expenditure for 
 the production of such articles, have created something 
 which was necessary for society. In determining whether 
 an article is " necessary " for society or not, it is not merely 
 the general usefulness of the article and its actual neces- 
 sity for some of the members of society that is to be con- 
 sidered, but also whether, in the state of the society's 
 economy, the need for such articles has not already been 
 provided for sufficiently when compared with other needs, 
 and having due regard to the general conditions of pro- 
 duction and distribution in society. If too much of a cer- 
 tain commodity is produced, too much not absolutely, but 
 according to existing social conditions and relations, such 
 production does not create any additional value. It is so 
 much labor wasted. Of course, that does not mean that 
 any particular labor thus expended will create no value, or 
 that any particular article thus produced will have no value. 
 But, value being a social relation, all the labor expended 
 in the production of this class of articles in society will 
 produce less value proportionately, each article will have 
 so much less value, so that the aggregate of such articles 
 produced will have no more value than if that labor were 
 not expended and the additional article were not pro- 
 duced. 
 
 Again, — the tools of production in a certain industry may 
 be undergoing a change by which the amount of labor 
 necessary to be expended in the production of a certain 
 
70 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 article is reduced. During the period of transition the 
 " average " amount of labor expended in the production of 
 the article will be considerably above the amount necessary 
 for its production by means of the new tools and consider- 
 ably below that of the old, for the average is made up of 
 the articles produced by means of both the old and the new 
 tools in so far as they are being used. The value of the 
 commodities produced, however, will not be measured by 
 the average expenditure of labor, but either by that of the 
 old or that of the new method. If the new method has 
 not yet been sufficiently perfected, so that it can not as yet 
 supply the needs of society, or is the subject of a monopoly, 
 then the valuation will be in accordance with the old 
 method ; if it has been so perfected, and is free for use, then 
 in accordance with the new method. If, between the time 
 of the production of an article and its valuation in the 
 market, the new tools have attained the required degree of 
 efficiency, or the monopoly has been broken, the value of 
 this article, whether produced by the old or the new 
 method, will change from the valuation in accordance with 
 the old method, which was socially necessary at the time 
 of production, to that in accordance with the new method, 
 which is that now socially necessary. 
 
 In other words, the value of a commodity is determined 
 by the amount of labor which society will necessarily have 
 to expend for its production when it requires it; that is 
 to say, by the amount of labor socially necessary for its 
 reproduction. 
 
 III. 
 
 We have seen before that the value of a commodity 
 is determined by the amount of labor which society will 
 necessarily have to expend for its reproduction. This ap- 
 plies to all commodities, including that peculiar commodity 
 upon which the whole capitalist system rests — labor power. 
 All the mystery surrounding the production and distribu- 
 tion of the capitalist system, which we have noted above 
 
VALUE AND SURPLUS VALUE. 7I 
 
 is due to the presence of this peculiar commodity which was 
 absolutely unknown to any former system of society. In no 
 social system before the advent of capitalism was human 
 labor power an independent commodity which could be 
 trafficked in in the market. A man's labor-power was 
 deemed such an intimately personal attribute that it could 
 not be considered apart from the man himself. The man 
 himself might be free or unfree. If he was free his labor 
 power was his own, used by himself for himself. If- he 
 was unfree, he, including his labor-power and his other 
 personal attributes, belonged^ to his master. But in either 
 case his labor power was inseparable from his body, was 
 part and parcel of his personality as much as his personal 
 appearance, and went with it. 
 
 It was only with the advent of capitalism that a man's 
 labor power became separated from his body and person, 
 when his labor power was "abstracted'- from his person- 
 ality and gained an independent existence. Then human 
 labor power " as such," human labor power in the abstract, 
 human labor power unidentified by an individual character- 
 istic and severed from any personal relation, became an in- 
 dependent commodity to be trafficked in in the open market. 
 It is the appearance of this commodity historically that made 
 capitalism possible, and it is due to its peculiar nature that 
 so much mystery surrounds the workings of that system, 
 upon which it has indelibly stamped its own characteristics. 
 
 The new commodity of abstract human labor, bought and 
 sold in the open market, independent and irrespective of any 
 individual or personal relation, is; at the same time, part 
 and parcel of the commodities which constitute the stock- 
 on-hand of the capitalist world as well as the source of all 
 the other commodities on hand. It is also its own source 
 and creator, being the means of its own reproduction. As 
 the general source and creator of capitalistic commodities, 
 this abstract human labor is the source, and therefore, the 
 measure of the exchange value of those commodities. As 
 its own source and reproducer it is its own source and 
 
72 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 measure of value. That is to say, the measure of the value 
 of the caipitalist commodity " general human labor power " 
 is the amount of this labor power necessary for its repro- 
 duction under the social conditions of production existing 
 at the time when it is dealt in on the market. This dual 
 position of the commodity general human labor power is 
 what has mystified and baffled the investigators into the 
 laws o:^ production and distribution of wealth in capitalist 
 society. When this dual position is properly understood 
 the mystery vanishes, and the anatomy and physiology, as 
 well as the psychology of capitalist society are revealed to 
 the mind's eye, so that their construction and modus operandi 
 can be studied in detail. 
 
 We have seen already that the value of a commodity is de- 
 termined by the amount ' of labor which will necessarily 
 have to be expended in its reproduction. This amount of 
 labor will have to be bought in the open market by the pro- 
 ducer in the shape of labor power, potential labor, and he 
 will have to pay for it, barring accidents, its value. That 
 is to say, he will have to pay the value of the labor neces- 
 sary to produce this labor power, or, in other words," he will 
 haye to pay, in the form of wages, the amount of goods 
 which the laborer consumes while exerting his labor power. 
 This amount will vary, of course, with the productivity of 
 labor in general, and with the standard of living of the 
 workingmen. But it will invariably be less than the amount 
 of goods produced by the laborer in this exertion of his 
 labor power. This is a prerequisite not' only of capitalist 
 production, but of any social form of production wherein a 
 part only of the members of society are actively engaged 
 in the work of production. In other words, in our cap- 
 italist system, when a man sells his labor power to another 
 man for a certain number of hours every day in considera- 
 tion of a certain wage, the amount of labor necessary in 
 order to produce the product represented by his wage is al- 
 ways smaller than the total amount of labor which he sold 
 to. his . employer.. As general human labor can only be 
 
VALUE AND SURPLUS VALUE. 73 
 
 measured by the time during which the labor power was ex- 
 erted, it is the same thing as saying that the time required 
 to produce a man's wages is always shorter than the time 
 for which he was hired by the payment of these wages. 
 
 The amount of labor spent in reproducing the product 
 whi'ch goes to the laborer as his wages may be called 
 " necessary labor," for the reason that it is absolutely neces- 
 sary in order to make further production or even existence 
 itself on the same plane possible. The amount of labor, on 
 the other hand, which the laborer puts in above the " neces- 
 sary labor " we may call " surplus labor," for the reason 
 that it is an overplus or addition to the amount of " neces- 
 sary labor " which the laborer has already put in. The 
 product which is produced in the "necessary labor" time, 
 may for the same reasons be called "necessary" product, 
 and its value — " necessary " value ; and the product pro- 
 duced in the " surplus labor " time, and its value — " sur- 
 plus" product and value. In using the words "necessary" 
 and " surplus " in characterizing the different parts of labor, 
 product, or value, we do not intend to convey any meaning 
 of praise or justification in the case of the one, nor of con- 
 demnation or derogation in the case of the other. We use 
 them in their purely technical sense, with absolutely no 
 " ethical * or " appreciative " significance. 
 
 This surplus value being constantly produced by the com- 
 modity labor power which the capitalists engaged in produc- 
 tion constantly employ in their business, is the secret and 
 mysterious source of all the wealth and revenue which fall 
 to the share of those classes of capitalist society, which, 
 without producing themselves, and without either by force 
 or cunning appropriating to themselves what others pro- 
 duced, are still found in possession of quite a considerable 
 share of the worldly goods of our society. Because of the 
 peculiar faculty of the commodity labor power to produce 
 a surplus-product representing surplus-value, the capitalist 
 class is enabled to obtain a part of the annual product of 
 society without taking it from the producers. 
 
74 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 When, at the end of a day, week, month, or year, the 
 manufacturer is in possession of the finished product, that 
 product contains the " necessary " as well as the " surplus " 
 value. In the " necessary " value is included not only the 
 wages, paid to the workingmen but also the " capital " that 
 went into the product, or rather, that part of capital wliich 
 Marx calls " constant,'' that is to say, raw material, ma- 
 chinery charges, etc. Of course, all these things at one 
 time, when they were produced, represented " necessary " 
 as well as " surplus " value ; when they are used, however, 
 in production, that part of the product which simply re- 
 produces their value is " necessary " for the same reason 
 that the part representing the wages is " necessary." The 
 " surplus " which he finds himself thus possessed of is there- 
 fore a clear surplus over and above all his expenditures and 
 investment. It is pure revenue or profit. The amount of 
 the surplus-value produced, and therefore of the revenue or 
 profit derived by the manufacturer, depends, aside from the 
 mere length of the working day, as already stated, on the 
 state of the productivity of labor in general and the mode 
 of living of the workingmen; that is to say, on the pro- 
 portion of the " necessary " to the " surplus " in the labor 
 performed by the laborer during the period of his employ- 
 ment. The length of the work day given, the productivity 
 of labor and the mode of living of the workingmen affect 
 this proportion in opposite directions : a higher mode of liv- 
 ing increases the " necessary " part of the labor, and higher 
 productivity its "surplus" part. 
 
 After the surplus value is produced by the laborer in the 
 surplus time that he works, the fund from which the cap- 
 italist class as a class derives its revenue and " saves " its 
 wealth is ready for its use, and it becomes merely a ques- 
 tion of its distribution among the different members of the 
 class. This distribution is no simple matter, as it is done 
 for the most part without the participants meeting each 
 other, often without their knowledge, and always without 
 their consent. This distribution is accomplished by the laws 
 
VALUE AND SURPLUS VALUE. 75 
 
 governing capitalist production, and automatically. In so 
 far, of course;- as such distribution is according to rule, 
 normal. There is always, however, the possibility of one 
 capitalist getting the better of the other, and the individual 
 capitalist invariably attempts to do so. Whether or not 
 these attempts are successful makes, however, no difference 
 in this connection, as was already shown at length above. 
 It is the rule of capitalist society that we are concerned 
 with. The problem that confronts us, therefore, is: how 
 does part of the surplus value which, after its production 
 by the workingmen, is in the possession of the manufacturer, 
 find its way into the hands of the other members of the 
 capitalist class? 
 
 As was already indicated above, all value, and therefore 
 also surplus value, is not realized until the product which 
 is the embodiment of the value reaches its ultimate destina- 
 tion, the consumer, who takes it out of the market, disre- 
 gards its exchange-value and enjoys its use-value. Before 
 it has reached this, its ultimate destination, a commodity, 
 while possessing exchange va:lue possesses it only poten- 
 tially. Exchange value, not being soinething intrinsically 
 inherent in the commodity, but expressing merely a social 
 relation of production and distribution, may at any time 
 before its final realization, when it ceases to be exchange 
 value, be adversely 'affected by some social change. We 
 have already seen that the exchange value of a thing is the 
 amount of labor necessary for the reproduction, at the time 
 when it is needed, that is to say, when it reaches the con- 
 sumer. Before it has reached the consumer its exchange 
 value is always liable to change. There is therefore really 
 no telling what the surplus value contained in a commodity 
 is until it has reached the consumer. It cannot reach the 
 consumer, however, before it has gone through the process 
 of circulation in which it, is being bought and sold, that 
 is, exchanged. In all these transactions its exchange value, 
 as the same expresses itself in the price which it fetches. 
 
^6 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 is estimated upon the basis of its exchange value when it 
 finally reaches its economic goal. 
 
 In this process of circulation the surplus value contained 
 in the product, as far as the persons interested in its 
 division are concerned, is realized by piecemeal. Each 
 party concerned in the production and circulation of the 
 commodity until it fulfills its social mission gets his share 
 of the surplus value therein contained when it leaves his 
 hands, on a sale by him, and the purchase price which he 
 receives represents the " necessary " part of the value of 
 the commodity together with the share of the surplus value 
 thereof to which he and those who preceded him in the 
 process are entitled. In this way the surplus product con- 
 tained in a commodity when it is produced is gradually con- 
 verted into surplus value as it " circulates " along, and the 
 surplus value is taken up gradually as it is being realized, 
 share by share, along its course. The division of the sur- 
 plus value takes place in the circulation process, and ex- 
 presses itself in the different prices at which the commodity 
 is sold at the different stages of this process. 
 
 These different prices at which a commodity is sold at 
 different stages of the circulation process seemed to us in- 
 explicable before, and vexed us not a little. But they will 
 be readily understood when we know that the sharing up 
 of the surplus value takes place in this process. As each ' 
 stage of the process is passed a share of the surplus value 
 is realized and is added to the price. When the exchange 
 value of a commodity is first realized, when the manu- 
 facturer sells it, it is only that part of its exchange value 
 that is realized and is expressed in the price which the 
 manufacturer obtains for it, which represents the " neces- 
 sary" value of the commodity and that part of its surplus 
 value which the manufacturer receives as his profit. The 
 merchant pays his price to the manufacturer and enters into 
 the transaction because the full surplus value contained in 
 the commodity has not yet been realized and he expects to 
 realize a further share thereof for his own benefit upon a 
 
VALUE AND SURPLUS VALUE, "JJ 
 
 re-sale of the commodity to the retailer or consumer. This 
 does actually happen in the usual course of business. This 
 operation is repeated until the commodity passes the neces- 
 sary stages of its circulation and reaches its social desti- 
 nation — the consumer — when the full surplus value con- 
 tained in the commodity is realized in -the purchase price 
 paid by the consumer. This price represents the full value 
 of the commodity, " necessary " as well as " surplus." 
 
 The rules in accordance with which the different " in- 
 terests " share in the surplus-value, and in accordance with 
 which the different prices are paid for the commodity at the 
 successive stages of the circulation process are themselves 
 the result of the peculiar commodity of the capitalist system, 
 stamped upon it by the peculiar commodity which lies at its 
 foundation — labor power. The profit-sharing of the cap- 
 italist class is therefore absolutely impersonal. It also re- 
 quires absolute freedom of movement for the different ele- 
 ments which go into the process of production and 
 distribution. Wherever there is no absolute freedom of 
 movement the laws governing the division of the surplus- 
 value among the different capitalists are interfered with 
 arbitrarily and may even be abrogated. This is a necessary 
 corollary to the observation already made that all the laws 
 of value and consequently the production and realization of 
 the surplus-value require absolute freedom of movement. 
 
 The presence in the market of the laborer offering for sale 
 his labor power presupposes the presence in the same market 
 of the capitalist seeking employment for his capital. Labor 
 power as a commodity presupposes that the laborer who has 
 this power for sale is not in possession of the tools of pro- 
 duction necessary in order to exercise this power in the- 
 process of production. It presupposes a high state of 
 technical development of production; such a state of de- 
 velopment that the productivity of labor is considerably 
 above that stage where it can merely reproduce itself; it 
 must yield a surplus-value, and a portion of the surplus 
 value must have been "saved" for the purpose of being 
 
78 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 used as a means of future production. It also presupposes 
 that the "saved" portions of the surplus-value produced in 
 the past are not in the hands of the laborers who offer for 
 sale their labor-power. The possessors of these " saved " 
 portions of past surplus-values, the capitalists, use these 
 " savings," capital, in the production of further surplus- 
 value, by the aid of the labor power which they purchase 
 for part of it, in order to take it all to themselves. It is 
 not, however, the capitalist personally who acquires the sur- 
 plus-value. Capital, congealed and concentrated surplus- 
 profit, produced by labor power, is just as impersonal, just 
 as abstract, as its parent, labor power. It is capital as such, 
 irrespective of the capitalist who owns it, that gobbles up 
 all the surplus-value. The capitalist personally may some- 
 times by his ingenuity cause his capital to produce some 
 extra surplus-value which other, less ingenious, capitalists 
 could not do. In that event it goes to him personally as an 
 extra profit. The ordinary, regular profits, however, of 
 capitalist production and trade go to the credit of the capital 
 employed, not the capitalist personally. 
 
 In order to produce a certain commodity and realize its 
 value, that is bring it to the'ultimate consumer and obtain 
 from him its price, a certain amount .of capital must neces- 
 sarily be employed for a certain length of time. The 
 amount of capital necessary to be employed therein at the 
 different stages of the processes of production and circula- 
 tion, and the length of time for which it will have to be 
 employed at each stage will vary, of course, with the state 
 of development of the means of production and exchange, 
 including the means of transportation and communication 
 and other facilities for the circulation of commodities. But 
 under given conditions of production and circulation the 
 amounts of, and lengths of time for which, capital is neces- 
 sarily employed in order to produce a commodity and bring 
 it to the consumer remain the same. 
 
 We have already seen before that while all the surplus- 
 value contained in a commodity is produced in the process 
 
VALUE AND SURPLUS VALUE. 79 
 
 of the commodity's production while it is in the possession 
 of the manufacturer, this surplus-value is divided among 
 all the capitalists who are concerned in the production and 
 circulation of the commodity, while the same remains in 
 the circulation process. Strictly speaking, however, as has 
 been already observed, the surplus-value is not divided 
 among the different capitalists concerned in the production 
 and circulation of the commodity, but among the different 
 capitals employed in these two processes through which the 
 life-course of each commodity runs. The distributive share 
 of each of these capitals in the surplus-value is propor- 
 tionate to its own size and the length of time it was neces- 
 sarily employed in either the production or the circulation 
 of the commodity. That is to say, the total amount of cap- 
 ital, measured by a given unit, say a dollar, employed dur- 
 ing all the time, measured by a given unit, say a day, that 
 the commodity was necessarily in the process of production 
 and circulation, is fpoted up, and the amount of surplus- 
 value contained in the comhiodity is divided by that total, 
 giving a certain amount of surplus-value per unit of capital 
 per unit of time, which we will call the rate of profit. The 
 distributive sRare of each capital is, then, the product of its 
 own size X the time it was employed X the rate of profit. 
 When the manufacturer sells the commodity, at its first 
 appearance as a commodity and the first realization of its 
 value, the price which he receives and in which the value 
 is realized, is not its final price expressing its actual value 
 when it is ready to perform its full social function in the 
 hands of the consumer. It is merely an intermediate price ; 
 Marx calls it " Price of Production." This intermediary 
 price is based on the ultimate price of the commodity to be 
 received from the consumer in accordance with its value. 
 It is by this expected ultimate price representing its full 
 value that the amount of surplus-value contained in it is 
 ascertained. When the surplus-value of the commodity, is 
 given, the Price of Production is determined by the " neces- 
 sary " value contained in it plus the distributive share of 
 
8o THE THEORETICAL SYSTEM OF KARL MARX. 
 
 the manufacturer's capital in the surplus-value. The 
 " necessary " value contained in the commodity represents 
 the cost 'of its production to the manufacturer. That does 
 not mean, however, that the manufacturer simply gets a 
 return of what he has expended in the production of the 
 commodity. It is not the actual expense of production that 
 is represented in its " necessary " value, but the socially 
 necessary expense of producing the commodity at the time 
 the manufacturer sells it. If the actual cost of production 
 is above that the manufacturer loses the difference; if it is 
 below he pockets the difference as an extra profit. 
 
 The prices paid at any succeeding stage of the circulating 
 process are fixed in the same way. Each succeeding seller 
 gets in the price which he receives the necessary value of 
 the commodity plus the distributive share of the surplus- 
 value to which he and his predecessors in the process are 
 entitled in accordance with the rules formulated above. 
 Each of them gets his own distributive share of the sur- 
 plus-value in addition to what he has paid or laid out. Pro- 
 vided, of course, he bought and sold at its fair price. Other- 
 wise, one of them may get more than his due share and 
 another less. But all of the capitalists concerned, together, 
 get all the surplus-value produced in the process of pro- 
 duction, and no more. Unless, indeed, the workingmen did 
 not get their fair pay or the consumer was compelled to pay 
 an unfair price, in which event the capitalists immediately 
 concerned reaped an extra profit. Or the workingmen were 
 paid too much or the consumer paid too little, in which 
 event the capitalists immediately concerned suffered a loss. 
 
 It was assumed all through this discussion that each 
 capitalist worked with his own capital. If any one of them 
 did not, he had to give up all or part of his share of the 
 surplus-value, which he received in the form of profit, to 
 the person from whom he borrowed his capital, in the shape 
 of interest. This does not change the matter, however, and 
 we are not concerned with it here. We also left out of the 
 discussion the question of rent, and the question of ad- 
 
VALUE AND SURPLUS VALUE. 8l 
 
 ditional work which may have to be performed on the com- 
 modity in the circulation process, as these questions in no 
 wise affect the subject-matter of our investigation — the 
 laws governing the production of wealth in the capitalist 
 system and the manner of its distribution among the dif- 
 ferent classes of capitalist society. 
 
CHAPTER V. 
 
 THE LABOK THEORY OF VALDE AND ITS CRITICS. 
 I. 
 
 In our introductory chapter, in speaking of the criticism 
 and the critics of the Materialistic Conception of History, 
 we have observed that the discussion of the subject was very 
 much obscured by certain prejudices existing against that 
 theory, which prevent any unbiased examination of the sub- 
 ject on its merits. This must be repeated and even empha- 
 sized with reference to the criticism of Marx's theory of 
 value and surplus-value. It is safe to say that at least 
 one-half of the adverse criticism of this theory contained in 
 the literature of the subject is due to prejudice which ob- 
 scures the vision of the critics and puts their thinking ap- 
 paratus out of joint. This prejudice is not coniined to any 
 particular category of critics. It affects the dignified scholar 
 and the fighting publicist alike. The great Bohm-Bawerck, 
 head and front of the "scientific" Austrian school of po- 
 litical economy, and the prating " popular " Professor 
 Masaryk are both fair specimens of it. In his great work 
 on capital and interest,^ where more tljan one hundred 
 pages are devoted to the criticism of this theory, Bohm- 
 Bawerk starts out his examination of the theory by char- 
 acterizing it as the " theory of exploitation," and the whole 
 trend of his argument is directed towards one objective 
 point: — to prove that the supposedly main thesis of this 
 theory, that the income of the capitalists is the result of 
 exploitation, is untrue; that in reality the workingman is 
 
 * Eugen von Bohm-Bawerk, Capital und Capitalzins. Innsbruck, 1900. 
 Karl Marx and the close of his system. T. Fisher Unwin. 
 
 82 
 
THE LABOR THEORY 0?'-VALUE AND ITS CRITICS. 83 
 
 getting all that is due to him under the present system. 
 And the whole of his argument is colored by his conception 
 of the discussion as a controversy relative to the ethical 
 merits or demerits of the capitalist system. The same is 
 true of Masaryk. In his bulky book on Marxism his ex- 
 amination of the problem of value and surplus-value starts 
 out with the following introductory remarks: 
 
 " Sociologically the conception of surplus-value stands 
 foremost. Surplus-value is the economic expression of the 
 social conception of the classes and their mutual relations, 
 — of their struggle. The expression Surplus-value is in- 
 tended to characterize and condemn the whole capitalistic 
 order and civilization. It is obvious : Das Kapital is not a 
 positive theory of economy, but, as is indicated by the sub- 
 title, a critique of the science of economics to the present 
 time. Das Kapital presents the theory of capitalistic ex- 
 ploitation. It is a text-book of capitalistic extortion, and 
 at the same time its vehement denunciation. Das Kapital 
 is therefore at the same time the theory of the Socialist 
 revolution, — yes, it is the revolution itself. 
 
 " As already stated, we will concentrate our criticism on 
 the conception of value and surplus-value. We will in- 
 vestigate whether or not labor, the labor of the proletarians, 
 is the only source of economic value and surplus-value. 
 Such an investigation squarely presents the question whether 
 or not the social order of civilization really means the ex- 
 ploitation of the proletariat by the capitalist class — the 
 criticism of Capital will resolve itself into a further in- 
 vestigation of the doctrine of the Class Struggle.'' 
 
 We therefore advisedly stated in the last chapter that in 
 employing the adjectives " necessary " and " surplus " in 
 connection with labor or value, it is not intended to convey 
 any meaning of praise or justification in the case of the 
 one, nor of condemnation or derogation in the case of the 
 other. As a matter of fact, Marx repeatedly stated that the 
 capitalist was paying to the workingman all that was due 
 him when he paid him the fair market value of his labor 
 
84 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 power. In describing the process of capitalist production 
 Marx used the words, " necessary " and " surplus " in char- 
 acterizing the amounts of labor which are necessarily ^em- 
 ployed in reproducing what society already possesses and 
 that employed in producing new commodities or values. He 
 intended to tnerely state the facts as he saw them, and not 
 to hold a brief for anybody. If his theory of value and 
 surplus value and his condemnation of the capitalist system 
 stood in any causal relation (and the determination of this 
 question we will leave for the future), his theory of value 
 and surplus value was probably the cause, and his con- 
 demnation of the capitalist system the effect, rather than 
 the reverse. The statements of many of his critics, that 
 Marx was influenced in his examination of the question of 
 value and surplus value by a pre-determined thesis in favor 
 of which he intended to hold a brief, is absolutely false, 
 and the writings of these very critics contain abundant 
 proof of our assertion. At some future time we will dis- 
 cuss the so-called ethical theory of the Socialist move- 
 ment which is so much in vogue among many of the latter- 
 day Marx critics, and it will then appear beyond the possi- 
 bility of a doubt that it was only his intense craving for 
 the absolute and unalloyed truth that guided Marx in his 
 examination of the subject which led him to the formulation 
 of his theory of value and surplus value. 
 
 We saw in preceding chapters what the problem which 
 confronted Marx at the outset of his examination, and 
 which required solution at his hands was, — Is his solution 
 of that problem as contained in his theory of value and sur- 
 plus value a true one? That is, or at least should be, the 
 only question before us. Is Marx's theory of value and 
 surplus value, viewed without any bias or prejudice, cor- 
 rect? It is very much to be regretted that we cannot, for 
 the lack of space, preface our examination of the Marxist 
 theory of value and surplus value with an examination 
 of the other theories of this subject. Such an examination 
 and a juxtaposition of the different theories would be an 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 85 
 
 invaluable aid in arriving at a true answer to the question 
 before us, and it is the hope of the present writer that 
 he will at some future day be able to do this work, so that 
 the relative position of the Marxian theory may be fully ap- 
 preciated. In this present discussion, however, we will have 
 to be guided by, so to speak, absolute standards rather than , 
 relative ones, and other theories of value will only be gone 
 into in so far as is absolutely necessary to the discussion of 
 the main criticism levelled against the Marxian theory. 
 This particularly applies to the so-called " modern " theory 
 of value familiarly known as the Austrian, although by 
 origin and popularity England has as much claim upon it 
 as Austria. This " honorable mention " of the Austrian 
 theory of value is due not so much to its own originality 
 or importance, as to the fact that it seems to be the pre- 
 vailing one among the latter-day Marx criti'cs, Bohm- 
 Bawerk himself taking the lead in the particular field of 
 inquiry now under discussion. 
 
 While, as we have already stated in the introductory 
 chapter, each tub of anti-Marxian criticism lays claim to 
 and is entitled to stand upon its own bottom, in the discus- 
 sion of the Marxian theory of value and surplus value, we 
 will, to a great extent, have to limit ourselves to the argu- 
 ments advanced by Bohm-Bawerk. The reason for it is 
 two-fold: first, because Bohm-Bawerk is so far superior 
 to his comrades in arms, and his authority on the subject 
 is acknowledged by them to such an extent, that it can 
 hardly be claimed to be unfair to these critics, to ■ pick 
 Bohm-Bawerk as an example of them all. Second, because 
 there seems to be quite a good deal of unanimity among 
 these critics on this particular point, and* the arguments 
 advanced by the others are either directly borrowed from 
 Bohm-Bawerk, very often, with an acknowledgment of re- 
 ceipt, or are variations on the same tune deserving no par- 
 ticular attention. Where the variation is sufficiently dis- 
 tinct to make a difference, it will be duly noted, as will. 
 
86 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 certainly, all those arguments which have any claim to an 
 independent sdurce. 
 
 Bohm-Bawerk starts out by stating that all the prede- 
 cessors of Marx who have adhered either in whole or in 
 part to the labor theory of value, including such great lights 
 of the science as Adam Smith, David Ricardo, and, Karl 
 Rodbertus, have really " assumed " the labor theory of value 
 without even as much as attempting to prove it. It was 
 pure assertion on their part, without the semblance of an 
 argument to support it. Karl Marx was the first who not 
 merely asserted the labor theory of value but also attempted 
 to prove it. In this Bohm-Bawerk recognizes Marx's su- 
 periority to the great luminaries of the science of political 
 economy who have preceded him. But he does not like the 
 way Marx did it, and is not convinced by the proof offered 
 by Marx in support of his theory. Bohm-Bawerk, like 
 the good professor that he is, instructs us as to how Marx 
 should have gone about the job of proving his theory of 
 value and puts his emphatic disapproval on the way Marx 
 is supposed to have actually gone about it. He says that 
 there were two ways open to Marx: first, to analyze the 
 " pyschological motives " to which the process of exchange 
 is due ; or, second, to examine the actual " experiences " of 
 the relations of exchange. Instead of adopting either of 
 these two courses, he says, Marx adopted a third rather 
 peculiar one for the subject of this inquiry, namely, that of 
 purely logical deduction and dialectic argumentation. 
 
 That Marx did not go about the task of discovering the 
 true laws of exchange-value by way of an analysis of the 
 " psychological motives " of exchange is perfectly true. 
 And we have jriready seen in the preceding chapter the 
 reason for it. The problem by its very nature showed that 
 its solution lay in some social phenomenon and not in any 
 attribute of the individuals entering into the relation of ex- 
 change. The " psychological motives," therefore, of ex- 
 change, could not possibly have anything to do with the 
 problems that confronted Marx. Aside from tliat, it was 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 87 
 
 very evident that " psychological," as well as other " nat- 
 ural " motives or causes which remain unchanged through- 
 out the history of mankind, could not be the cause, nor 
 offer any explanation, of the phenomena of capitalist pro- 
 duction and distribution which are not common to all hu- 
 man society, but are strictly limited in time as well as in 
 place to only a small portion thereof. It is the same thing 
 that we have already observed in discussing the Materialistic 
 Conception of History: — a constant factor cannot possibly 
 be the cause of a change in the result of an operation. 
 
 At is not truej ho-wever, that Marx did not adopt the 
 course of examining the actual experiences of exchange 
 relation. Nor is it true that the course- he did adopt was 
 that of purely logical deduction. Marx, did make a thorough 
 examination of the actual happenings and " experiences " 
 of the exchange relation as Bohm-Bawerk would have him 
 do, although this job did not prove so very " simple " as 
 Bohm-Bawerk imagined it would. In order, however, 
 that he might learn something that was worth while from 
 the actual " experiences " of the exchange relation, he had 
 to put these " relations " to a very careful analysis. In 
 doing that he was certainly guilty of using some very 
 sharp and pure logical reasoning. In this he could not help 
 himself, as he was " naturally " so constituted that to what- 
 ever task he applied himself he could not help but use his 
 logic. And that was of the very purest sort. There were, 
 however, no purely logical constructions or abstractions 
 used by him in order to prove his theory of value or sur- 
 plus value. Those abstractions which he did make, and 
 they will be duly noted, one by one, in the course of the dis- 
 cussion, were not only justified, but required and demanded 
 by the subject matter itself. But he did not start out 
 with any purely logical notions or abstractions, nor did he 
 proceed to any purely logical constructions. On the con- 
 trary, he kept to his base all the time, and that was the 
 solid ground of the facts of capitalistic production and ex- 
 change. It is very significant that in the whole volume of 
 
88 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 Marx's economic writirlgs there is no mention of the 
 " economic man " or of his supposed attributes, " psycholog- 
 ical " or otherwise. Nor is any kind of an abstract man 
 part of his discussion. Throughout his entire work he 
 keeps strictly to his problem, and that' is the doings of the 
 real, live man in the real historic situation known as the 
 capitalist system. In this connection it is more than a mere 
 curiosity to compare the opening passage of Capital with 
 the opening passages in the works of some of his illustrious 
 predecessors and contemporaries. 
 
 Adam Smith's Wealth of Nations opens with the follow- 
 ing passage : " The annual labor of every nation is the 
 fund which originally supplies it with all the necessaries 
 and conveniences of life which it annually consumes, and 
 which consist always either in the immediate produce of 
 that labor, or in what is purchased with that produce from 
 other nations.'' 
 
 The opening passage of Ricardo's " Principles " reads as 
 follows: "The produce of the earth, — all that is derived 
 from its surface by the united application of labor, ma- 
 chinery and capital, is divided among three classes of the 
 community, namely, the proprietor of the land, the owner 
 of the stock or capital necessary for its cultivation, and 
 the laborers by whose industry it is cultivated. But in 
 different stages of society, the proportions of the whole 
 produce of the earth which will be allotted to each of these 
 classes, under the names of rent, profit, and wages, will 
 be essentially different, depending mainly on the actual 
 fertility of the soil, on the accumulation of capital and 
 population, and on the skill, ingenuity and instruments em- 
 ployed in agriculture." 
 
 Jevons, the English head of the " Austrian " school, opens 
 his book on the principles of political economy with the 
 following words : — " The science of political economy rests" 
 upon a few notions of an apparently simple character. 
 Utility, wealth, value, commodity, labor, land, capital, are 
 the elements of the subject; and whoever has a thorough 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 89 
 
 comprehension of their nature must possess or be soon able 
 to acquire a knowledge of the whole science. As almost 
 every economical writer has remarked, it is in treating the 
 simple elements that we require the most care and pre- 
 caution, since the least error of conception must vitiate all 
 our deductions. Accordingly, I have devoted the following 
 pages to an investigation of the conditions and relations of 
 the above-named notions." 
 
 And the opening passage of, Bohm-Bawerk's own book 
 on capital reads : — " He who possesses a capital is as a 
 rule in a position to derive from it a continued net income, 
 which income is known to science under the head of Rent 
 of Capital or Interest of Capital in the broader sense of the 
 term. This income possesses certain remarkable qualities. 
 It arises independently of any personal activity of the cap- 
 italist, — it eomes to him even though he never raised a 
 finger to create it, and seems therefore most truly to flow 
 from, or according to an ancient simile, to be generated 
 by capital." 
 
 All of these great luminaries of the science seem to be 
 ready to ' lay down general laws governing human society, 
 without regard to time and place. They all seem to be 
 oblivious of the fact that the laws which they are about 
 to explain have no universal application and are limited to 
 a certain form of- society, far from being universal in' 
 space, and further still from being perpetual in time. Not 
 one of them seems to have given the slightest thought to 
 the fact that the phenomena which he was about to describe 
 and examine were part of a certain historical situation and 
 the result of a certain historical development. History, 
 with its actual, real facts and relations does not exist for 
 them. All the nations, all the ages, and all stages of hu- 
 man development are subject to the laws which they lay 
 down. To one of them, and that one the great " modern " 
 Jevons, one of the great triumvirate of the "modern" 
 school (Jevons, — Menger, — Bohm-Bawerk), the laws of 
 political economy are not only extra-historic but extra 
 
90 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 everything else that has a semblance of reality, and reduce 
 themselves to a few purely logical " notions," a correct 
 " conception " of which gives one the key to the science of 
 political economy quite irrespective of the knowledge of the 
 facts of life, which seem to be an entirely negligible quan- 
 tity to our great " modern " scientist. 
 
 Contrast with all this the opening sentence of Marx's 
 Kapital : — " The wealth of those societies in which the cap- 
 italist mode of production prevails presents itself as an im- 
 mense accumulation of commodities." With one mighty 
 stroke of the pen all the conditions and limitations of the 
 problem are given, the picture put in its historical setting! 
 No soaring in the air, superior to space and time. No gen- 
 eralizations that may fit everything in general and nothing 
 in particular. But a real, live situation, with a definite 
 burning problem. No wonder that instead of losing him- 
 self in generalities or wasting himself on definitions of all 
 sorts of " conceptions " and " notions," he delves right into 
 the heart of the problem, and declares immediately that 
 " our investigation must therefore begin with the analysis 
 of a commodity." This he immediately proceeds to do. 
 And how he does it! 
 
 To be sure, he does not do it to the entire satisfaction of 
 his critics, but we shall see that this is due mainly to failure 
 on their part to understand his work, as is the claim of 
 Bohm-Bawerk about the supposed purely logical argument 
 employed by Marx. Where these critics do understand 
 Marx, their dissatisfaction with his argument is due to their 
 lack of knowledge of the subject itself. 
 
 Solonimski, for instance, objects to Marx's analysis for 
 the reason that in this analysis "the conception of labor 
 becomes independent of the purposes and necessities for 
 which it was undertaken," and the value created by labor 
 " becomes an independent quality inherent in the commodity 
 irrespective of its usefulness and exchange-value." Aside 
 from the evidently absurd statement that according to Marx 
 the exchange-value of a commodity is inherent in the com- 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 91 
 
 modity irrespective of its exchange-value (Marx knows of 
 only two kinds of value: use-value and exchange-value, 
 and wherever he says simply " value " he means exchange- 
 value), the statement contains some important inaccuracies. 
 
 To begin with, Marx never forgets the " purposes and 
 necessities " for which production is undertaken. Quite the 
 reverse: this thought is ever present in his mind, and it is 
 jdue to this very fact that Marx did not fall into some of 
 the grievous errors into which his critics, particularly the 
 "moderns," have fallen. These gentlemen talk of the 
 " psychological " motives of exchange as the cause and 
 measure of value, all the time forgetting that before a com- 
 modity can be exchanged it must be produced, and that 
 there must therefore be, first of all, " psychological " motives 
 of production which ought to be of some considerable inter- 
 est. Not so with Marx. He always remembers that in our 
 capitalistic system (be it remembered: Unlike his critics, 
 Marx never talks of eternity, but of the present capitalistic 
 system) production is undertaken for the purpose of profit. 
 This implies two things: First, that the producer does not 
 produce the thing for its use-value, he does not give a snap 
 for that, it is absolutely useless to him, and he will just as 
 soon manufacture chewing-gum as Bibles. — And, second, 
 that he knows in advance, or at least thinks he knows, the 
 value of the product he is going to produce ; in other words, 
 he knows that the value of his product will depend on some- 
 thing more substantial and rational than the whimsical 
 " desire " of the prospective purchaser based on some in- 
 dividual, " psychological " motivation. And this knowledge 
 on the part of Marx of the purposes of capitalistic produc- 
 tion had something to do with his abstracting from the useful 
 qualities of the particular commodities when examining their 
 exchange-value, as well as with his refusal to follow Bohm- 
 Bawerk's advice to arrive at the laws of exchange-value by 
 way of an examination of the "psychological" motives of 
 exchange. 
 
 It is also somewhat inaccurate to say that, according to 
 
92 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 Marx, exchange-value is inherent in a commodity, or. that 
 it is independent of its usefulness. Marx, as we have al- 
 ready seen, specifically says that exchange-value is not some- 
 thing inherent in a commodity, that it could not be inherent 
 in it, for it changes with social relations; that the whole 
 thing is merely the expression of a social relation and ap- 
 pears only under a certain social system. Marx also says 
 specifically, as also already stated, that no commodity can 
 have exchange-value without its having use-value, that use- 
 value is the substratum of exchange-value, although it is 
 neither its cause nor its measure. But then, — Marx con- 
 tradicts himself! Poor Marx! he contradicts himself so 
 much and so radically that one is forced to the conclusion 
 that he must have been a raving, maniac, and one is surprised 
 to see the big regiment of these very learned and clever 
 gentlemen bothering with the scribblings of such a poor 
 wretch. 
 
 Bohm-Bawerk, who thinks that Marx's was one of the 
 greatest minds that applied themselves to this subject, also 
 finds great comfort in Marx's supposed neglect of usefulness 
 as influencing the exchange-value of commodities. He does 
 not say that Marx contradicts himself, but he thinks that he 
 caught Marx in a mental faux pas. Indeed, this is one of 
 the greatest, if not the chief point, in his whole argument 
 against Marx's analysis of a commodity, by which he ar- 
 rives al; his labor theory of value. Marx says: 
 
 " The exchange-values of commodities must be capable 
 of being expressed in terms of something common to them 
 all, of which thing they represent a greater or less quantity. 
 This common " something " can not be either a geometrical, 
 a chemical, or any other natural property of commodities. 
 Such properties claim our attention only in so far as they 
 affect the utility of these commodities, make them use- 
 values. But the exchange of commodities is evidently an 
 act characterized by a total abstraction from use-value. 
 Then one use-value is just as good as another, provided, 
 only, it be present in sufficient quantity. ... As use- 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 93 
 
 values, commodities are, above all, of different qualities, but 
 as exchange-values they are merely different quantities and 
 consequently do not contain an atom of use-value. If, then, 
 we leave out of consideration the use-value of commodities, 
 they have only one common property left, that of being 
 products of labor. But even the product of labor itself has 
 undergone a change in our hands. If we make abstraction 
 from its use-value we make abstraction at the same time from 
 the material elements and shapes that make the product a 
 use-value; we see in it no longer a table, a house, yarn, or 
 any other useful thing. Its existence as a material thing 
 is put out of sight. Neither can it any longer be regarded 
 as the product of the labor of the joiner, the mason, the 
 spinner, or of any other definite kind of productive labor. 
 Along with the useful qualities of the products themselves, 
 we put out of sight both the useful character of the various 
 kinds of labor embodied in them, and the concrete forms 
 of th^t labor, there is nothing left but what is common to 
 them all; all are reduced to one and the same sort of labor, 
 human labor in the abstract." 
 
 To which Bohm-Bawerk: "How is that? Where is 
 the difference between labor and utility? While it is true 
 that in the exchange relation of commodities the particularly 
 useful qualities of the articles exchanged do not matter, 
 the general usefulness of the commodities is not abstracted 
 from. On the contrary, it remains common to them all. It 
 does not matter whether the commodity can be used as an 
 eatable, wearing-apparel, or for shelter, but it does matter 
 that it be of some use, of use in general. Why, then, is 
 utility rejected as a cause and measure of exchange-value, 
 why is it ' abstracted ' from ? Again, when considering 
 labor Marx is compelled to abstract from the particular kind 
 of labor contained in the commodity, so that what is left to 
 all commodities in common is general labor, labor in the ab- 
 stract. Just as there still remains in common to all of them 
 general usefulness, usefulness in the abstract. Why, then, 
 this partiality for labor as against usefulness? Where is 
 
94 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 the reason for the discrimination in favor of the one as 
 against the other, which mates the one the sole cause and 
 measure of value, and denies to the other any influence 
 whatever on this phenomenon ? " And all this with such 
 an amount of emphasis, that if it depended on that alone, the 
 whole Marxian theoretical edifice would be smashed to pieces, 
 which Bohm-Bawerk naively imagines that he does. 
 
 We do not presume to know whether Marx was ever em- 
 barrassed by these questions. But we venture to say that if 
 he ever were, and all the resources of logic failed him, he 
 had only to turn to the purposes of capitalistic production to 
 be relieved of any difficulty. Slonimski touched a sore spot 
 of anti-Marxism when he broached the subject of purposes 
 of production, which his more discreet colleagues usually 
 pass in silence. We have already dwelt on the subject at 
 some length, but it is of such paramount importance that 
 we cannot dwell upon it too much or recur to it too often. 
 
 Before commodities are exchanged, they are produced. 
 They are produced, however, with a view to their exchange, 
 and to the value to be realized on such exchange, and in the 
 exchange itself the question of how, and in what manner the 
 commodity was produced has a good deal to do with the 
 fixing of its value. It is not, however, the question of the 
 usefulness of the production that is considered. We have 
 already mentioned that a capitalist will just as soon manu- 
 facture chewing-gum as Holy Bibles. But more than that. 
 The purposes of the production of commodities being the 
 realization of a profit, a capitalist will just as willingly manu- 
 facture an absolutely useless article, if he will be assured of 
 a profit. He does not manufacture absolutely useless things, 
 because in order to get a purchaser it must be of some use 
 to somebody, but he personally does not care a rap whether 
 it really is useful or not. Again, when .the article is of 
 some use to somebody, that is, salable, he does not care a 
 bit about anything that goes to make it useful. This is 
 absolutely indifferent to him. He will manufacture any 
 shape, color, taste or other quality, and when he comes to 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 95 
 
 exchange it, — sell it — he will not be , concerned a bit 
 whether the commodity he produced and is about to ex- 
 change is white, black, orange, or any other color; whether 
 it is square, round, pointed or any other shape; sweet, sour, 
 fragrant or otherwise; hard or soft, or whether it possesses 
 any other quality which may determine its particular use- 
 fulness. But he will care how much labor it contains ! This 
 can readily be seen in our " advanced " methods of doing 
 business when goods are " ordered," that is, sold — ex- 
 changed — before they are produced. In making the sale- 
 exchange the producer will comply with any request as to 
 shape, color, taste, or any other natural quality which affects 
 the usefulness of the commodity with alacrity, as it is a mat- 
 ter of complete indifference to him. But he will stand 
 out against anything that will require him to put into the 
 commodity more labor. In taking your order — exchang- 
 ing in prospecto his goods for yours — he will " abstract " 
 from any and all natural qualities upon which the useful- 
 ness of the commodity depends, but he will absolutely refuse 
 to " abstract " from labor, and will doggedly insist on con- 
 sidering it when making valuations. Further, he will gladly 
 " abstract " from the kind of labor. If he is willing to give 
 you for a certain price the labor of, say, one hundred men 
 for ten dSys, he will just as soon give you the product of the 
 labors of tailors as of shoemakers. But he will make a 
 stand on the question of the quantity of labor. He wouldn't 
 give you any more than he can help. 
 
 These actual " experiences " of the exchange relation 
 which we have recounted are perfectly represented in 
 Marx's "logical " analysis, with which Bohm-Bawerk finds 
 fault. It is true that as regards both labor and usefulness, 
 we " abstract " in the exchange relation from the particu- 
 lar, the particular labor and the particular usefulness, and 
 leave only the general labor and the general usefulness. But 
 in abstracting from the particular utility we have abstracted 
 from the quality of the utility and have shown the exchange- 
 relation to be a purely quantitative relation. But general 
 
96 THE THEOSETICAL SYSTEM OF KARL MARX. 
 
 usefulness cannot be measured as to quantity. It is hard 
 to measure qualities unless they are of the same kind. But 
 it is absolutely impossible to measure the general, abstract 
 ■usefulness of different things. How do you find the dif- 
 ferent amount of. usefulness contained in a piano as com- 
 pared with a suit of clothes, of an extension-table as com- 
 pared with an engine-boiler? How do you measure general 
 usefulness? If you cannot measure it, it cannot serve as a 
 measure of value. And if it cannot serve as a measure of 
 value, it cannot be the cause of value, for we judge the 
 cause of value from the changes in value as shown by the 
 measure of value. We find the very existence of value only 
 because of its measure. Besides, the residuum of general 
 usefulness which remains after we abstract from tlje par- 
 ticular useful qualities, is not general usefulness to the par- 
 ties concerned in the exchange, and who fix the exchange- 
 value, but general usefulness to somebody, that is to society 
 at large. For the parties exchanging the commodity it has 
 no use-value whatsoever. 
 
 Not so with labor. When we abstract from the particular 
 labor contained in the commodity we abstract only from 
 the kind of labor, that is, from its quality, but not from its 
 quantity. And it is just the quantity that we want, as the 
 exchange of commodities is a quantitative relation. And 
 this quantitative relation of labor exists for these very peo- 
 ple who enter the exchange relation. Abstract, general, hu- 
 man labor can be measured quantitatively, and quantita- 
 tively only. That is why Marx's analysis is perfect. Ab- 
 stract human labor, irrespective of the particular quantities 
 of the labor employed to produce this commodity, abstract 
 human labor, whose only measure is time, is the cause and 
 measure of exchange-value. 
 
 Marx, however, never rests his case on a purely logical 
 argument. Logic is to him only an instrument to the proper 
 analysis and understanding of the actual facts of "experi- 
 ence." We have seen that, as a " logical " proposition, use- 
 fulness is entirely eliminated from value. But we have 
 
THE lABOR tHEORV OF VALUE AND ITS CRITICS. 97 
 
 seen from our examination of the " experiences " of the ex- 
 change relation that there is some residuum of usefulness, 
 general usefulness to society, which plays some role in it. 
 We have seen both as a matter of logic and of experience 
 that it is not, nor could it be, either the cause or the meas- 
 ure of value. What, then, is its role? True to himself, 
 Marx would not leave any actual fact unaccounted for. It 
 is absolutely untrue that Marx disregards usefulness as a 
 factor of value. Notwithstanding the fact that this is as- 
 sumed by every critic of the Marxian theory of value, it is 
 absolutely and unqualifiedly untrue, and is only one addi- 
 tional link in the long chain of proof that an absolute lack 
 of , understanding of the Marxian doctrine seems to be the 
 first qualification of a modern Marx-critic. 
 
 General, social usefulness has some influence; on exchange- 
 value. It is not its cause nor its measure. What is it? 
 It is its limitation. The facts of exchange, the " experi- 
 ences " of the " exchange-relation," prove that general, social 
 usefulness, the only usefulness which plays any part in the 
 exchange of commodities under our capitalistic system, is 
 neither the cause nor the measure of exchange-value, but 
 its limitation. And this is borne out by Marx's very " log- 
 ical " analysis, which so much aroused the ire and indigna- 
 tion of Bohm-Bawerk that he almost forgot the respectful 
 attitude which he usually assumes towards Marx. This 
 result of experience and analysis is one of the main features 
 of Marx's theory of value, that feature which more than any 
 other, stamps it as peculiarly his own. We have already 
 seen that, according to Marx, it is not every labor that cre- 
 ates value, but socially necessary labor. We have also seen 
 already that Marx's conception of " socially necessary " in- 
 cludes the general as well as the relative usefulness of the 
 commodity to society. That is why, according to the Marx- 
 ian theory, the value of a commodity is not measured by 
 the labor actually contained in a commodity, but the labor 
 socially necessary to reproduce it. In the last chapter we 
 have seen the historical basis of Marx's theoretical conclu- 
 
98 THE TaEORETICAL SYStEM Ot.KARt MARX. 
 
 sions, now we see their logical and " experimental " justifi- 
 cation. 
 
 Strange as it may seem, the very critics who are most 
 vehement in the denunciation of Marx's so-called abstrac- 
 tions as unwarranted, and his supposed disregard of the 
 " category " of usefulness as unpardonable, are at the same 
 time raising an outcry against Marx for his insistence that 
 only " socially necessary " labor is the cause and measure 
 of value ! With all their astuteness they cannot see the 
 very simple fact that Marx does include usefulness as a fac- 
 tor of value, and that this very inclusion, which they 
 loudly demand, accounts for the " socially necessary " which 
 they no less loudly abjure ! Indeed, none are so blind as 
 those who will not see. 
 
 II. 
 
 We have seen the baselessness of the chief objections to 
 Marx's analysis by which he comes to regard labor as the 
 " common something " of all the commodities which must 
 be the cause and measure of value. The objections noted, 
 while the most important, are not, however, the only ones. 
 There are other objections urged against this analysis by 
 Bohm-Bawerk himself as well as by the noted German 
 economist. Professor Carl Diehl, not to speak of our old ac- 
 quaintances, L. Slonimski and Professor Masaryk. We will 
 attempt to exhaust the list and to pay our respects to all of 
 them but one, who will be pointed out ; and that one will 
 not be considered here for the reason that certain other 
 phases of the Marxian theory must be explained before the 
 objection and the answer thereto can be properly appreciated. 
 This task will, therefore, be left for the next chapter, which 
 will be specially devoted to it. We refer to the so-called 
 " Great Contradiction " between the Marxian theory of 
 value and the theory of the Uniform Rate of Interest. In- 
 cidentally, we will have occasion to examine into the sup- 
 posed contradictions between the first and third volumes of 
 " Capital." 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 99 
 
 In discussing these objections we wni have to pursue the 
 course adopted by us of following more or less closely on the 
 heels of Bohm-Bawerk, except where others specially claim 
 our attention. 
 
 The first objection to be noted here is, that Marx's analysis 
 must, of necessity, be faulty, for the reason that the field of 
 his investigation was not broad enough; that he did not 
 take as the subject of his analysis all " goods " which may 
 be the subject of exchange, but only " commodities," that is, 
 goods created by labor. It is claimed that by thus limiting 
 his analysis from the outset to the products of labor only, 
 he prejudged the case and forced the result of leaving labor 
 as the only "common something," and that if the analysis 
 were to be made on all exchangeable " goods " the result 
 would be different. As Bohm-Bawerk puts it : — Marx pur- 
 posely puts into the sieve only those things which can get 
 through it. And he adds : — " Marx is careful not to give us 
 any explicit statement of the fact that, and the reason why, 
 he began his investigation, by excluding therefrom a part 
 of the goods possessing exchange-value." 
 
 It will be noticed that Bohm-Bawerk does not use the 
 word, " analysis," but " investigation." This is one in- 
 stance of the careless use of terms for which all Marx 
 critics are well noted. While seemingly a mere trifle, this 
 interchange of words is, in reality; a matter of quite some 
 importance. An analysis is a purely logical operation used 
 as a means to show the logical counterpart of some actual 
 phenomenon. It serves to formulate, by bringing into play 
 our powers of abstract reasoning, a general conception of 
 the mass of particular facts. While, therefore, analysis is a 
 helpful means in arriving at a generalization, it is no proof 
 of its correctness. On the contrary, it is the correctness of 
 the generalization that is usually the best proof of the f ault- 
 lessness of the analysis. The mastery of a subject will be 
 shown by the ability to recognize which phenomena are most 
 typical for the subject-matter under consideration. But this 
 can not be found out from the analysis itself, but must be 
 
100 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 gathered from outside sources. The best proof of the typ- 
 icalness of the phenomena selected for analysis is usually 
 obtainable only after the analysis has been completed, the 
 generalization obtained, and the stage of proving the gen- 
 eralization arrived at. The proof of the generalization, if 
 the same be correct, will itself reveal these typical phe- 
 nomena. 
 
 Any analysis will, therefore, be justifiable, which will 
 serve this purpose of arriving at a proper generalization. 
 In making the analysis, therefore, we must not be guided 
 by the "equitable" claims of diiiferent phenomena to be 
 analyzed, but merely by the one consideration: to find those 
 facts the analysis of which will best serve the purpose for 
 which the analysis is undertaken. Usually, it is not the 
 analysis of the greatest number of phenomena, but of the 
 most typical phenomena that will serve the purpose best. 
 
 We have already seen in a preceding section that Marx 
 had ample historical and logical 'justification and warrant 
 to assume that the factory product was the most typical of 
 the exchange-value-possessing commodities, and therefore, 
 the most proper subject for his analysis. Just as, to bor- 
 row an example from another province of scientific research, 
 in order to obtain exact knowledge of the chemical composi- 
 tion of water, we must not analyze as many sorts of water as 
 possible, but, on the contrary, only one sort of it, the most 
 typical, that is, pure unalloyed water. The proof, however, 
 of the correctness of his assumption is furnished by the same 
 facts which prove the generalization which is the result of 
 the analysis. For, as we have already stated beforie, Marx 
 does not depend on this analysis, nor on any other purely 
 logical operation, to prove his theory, but on the facts them- 
 selves. In order, however, that the facts should prove any- 
 thing, all the facts had to be examined and investigated. 
 And if Bohm^Bawerk's statement were true that Marx did 
 not include in his investigation all " goods "■ possessing ex- 
 change-value, his theory would remain unproven, — and if 
 the excluded " goods," upon investigation, would prove 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. lOI 
 
 something else than those included, his theory would be ab- 
 solutely refuted. 
 
 Fortunately for Marx, however, and unfortunately for 
 Bohm-Bawerk, Marx did thoroughly investigate these very 
 " goods," " which possess exchange-value although they are 
 not the product of labor," under which cloudy description is 
 meant the soil and other "natural" objects which are the 
 subjects of bargain and sale. Not only is Marx's inves- 
 tigation of this particular branch of the subject thorough 
 (it occupies about 200 pages of his book), but his theoretical 
 explanation thereof is so convincing, that none of his critics, 
 not even Bohm-Bawerk, have ever as much as attempted 
 to refute it. We think, therefore, that we are very char- 
 itable to Bohm-Bawerk when we assume that he really did 
 not mean to say that Marx excluded these particular 
 "goods" from his investigation, but merely from his analy- 
 sis; and that he simply fell a victim to the deplorable lack 
 of precision which seems inseparable from all Marx-crit- 
 icism. 
 
 We must add, however, that we dwelt at such length on 
 this point not merely because we were anxious to " show 
 up " the carelessness of terminology and lack of precision 
 of thought, in even the greatest of Marx-critics, important 
 as this may be, but because the subject-matter involved in 
 this objection is of great importance in the opinion of all 
 Marx-critics, as well as our own. It really amounts to this : 
 — that the labor-theory of value does not take "nature" 
 into account or consideration; " it denies the participation of 
 nature in the production of goods." Now, this, if true, is a 
 very serious charge. The denial of the participation of 
 nature in the production of " goods," or anything, for that 
 matter, is so manifestly absurd that it will vitiate any argu- 
 ment, analysis, or other logical operation, into which it 
 enters. Could Marx have been guilty of .anything like that? 
 Countless expressions of Marx show that he was not ig- 
 norant of the participation of nature 'in the production of 
 " goods," if proof is necessary that Marx knew of the exist- 
 
102 ■ THE THEORETICAL SYSTEM OF KARL MARX. 
 
 ence of nature, because that is what this charge amounts to. 
 How, then, did he deny it? How could he deny it? Well, 
 of course, he couldn't. And ... he didn't! We quote 
 Bohm-Bawerk: "That they (commodities) are just as 
 much the product of nature as of labor — nobody says more 
 explicitly than Marx himself when he says : — ' The bodies 
 of commodities are combinations of two elements, natural 
 matter and labor ; ' or, when he cites with approval Petty's 
 remark that: — 'Labor is the father (of material wealth), 
 and the earth is its mother.'" The guileless reader is evi- 
 dently puzzled. But there is really nothing to be puzzled 
 about. Marx is simply at his old game of contradicting 
 .himself in the most stupid manner imaginable. 
 
 If Bohm-Bawerk himself were not so careless and slov- 
 enly in his expressions, he would have noticed that when 
 Marx fipeaks of the " participation " of nature he always re- 
 fers to the " bodies " of commodities, or " wealth " ; and 
 when he speaks of labor as its source of measure, it is al- 
 ways exchange-value that he has reference to. Marx does 
 not claim that labor is the only source of wealth. On the 
 other hand, he does deny the " participation " of nature in 
 the creation of exchange-value. And rightfully so. Na- 
 ture, including all the material substances and forces which 
 go into the production of " goods," has always existed, and 
 remains unchanged. So has " wealth " (meaning in this con- 
 nection an aggregation of useful articles), at least as far as 
 we are concerned. Not so with exchange-value. Notwith- 
 standing the existence of " nature " from time immemorial, 
 and the application of labor thereto from the very beginning 
 of the human race, this combination has failed to produce 
 exchange-value, which makes a commodity out of a mere 
 " good," until the appearance of the capitalistic system. It 
 is evidently something connected with the capitalistic system, 
 and not " nature," that is responsible for this result and 
 should be called upon to " account " for it. That is why 
 Marx went in search' of the social phenomenon which distin- 
 guishes the capitalistic system from its predecessors, as was 
 
THE LABOR THEORY OF VAI-UE AND ITS CRITICS. IO3 
 
 already explained at length in a 'preceding section. It is 
 interesting to recall here, however, that we have encountered 
 the same trouble over Marx's supposed neglect of " nature " 
 when discussing the Materialistic Conception of History. 
 An additional proof of the monism of the Marxian System, 
 and of the opinion oft expressed here that all Marx-criticism 
 suffers from the same vices. 
 
 In justice, however, to the Marx-critics, it must be stated 
 right here that some of Marx's own adherents, or supposed 
 adherents, suffer from a good many of these vices. We 
 shall have occasion hereafter to treat this subject more at 
 length. Here we want to refer only to a historical inci- 
 dent, which is right in point, and at once illustrates the 
 prevalent carelessness in the choice of expressions, and 
 Marx's quickness to " sit on them " wherever they are 
 found, without any bias to friend or foe. In 1875 the social- 
 ists of Germany adopted a program at their national con- 
 gress, held at Gotha, the opening sentence of which read : 
 " Labor is the source of all wealth and of all culture." On 
 learning of the contents of the draft proposed by the lead- 
 ers Marx wrote a letter containing some annotations. He 
 started out by quoting the opening sentence quoted by us 
 above, and made it the occasion for the following remarks : 
 " Labor is not the source of all wealth. Nature is just as 
 much the source of use-values (and it is of these that ma- 
 terial wealth consists), as is labor, which is itself the mani- 
 festation of a natural force, — human labor power." 
 
 There are other objections to Marx's analysis. This time 
 not to what goes into the analysis, but as to its result. In 
 commenting on Marx's statement that aside from the use- 
 value of their bodies, commodities have only one common 
 property left, that of being products of labor, Bohm- 
 Bawerk asks : " Is that really the only common property 
 left? Have not the exchange-value-possessing "goods" 
 still left to them, for instance, the common property of be- 
 ing scarce in comparison with the want for them? Or, that 
 they are the subject of supjJy and demand? Or, that they 
 
104 THE THEORETICAL SYSTEM OF KARL MARX, 
 
 are appropriated? Or, that they are "natural" products? 
 And then he adds : " Why, then, could not the principle of 
 value lie just as well in any ong of these common prop- 
 erties, instead of that of their being the products of labor ? " 
 The last question, that of " Nature," has just been disposed 
 of by us. The one preceding it, that of " appropriation," is 
 a rather curious one to be broached by an anti-Marxist of 
 the Bohm-Bawerk type, for it suggests a lot of discission, 
 which may prove uncomfortable to those who have " appro- 
 priated" to themselves everything, and we may yet return 
 to this phase of the question. For the subject of our pres- 
 ent discussion, however, the question of " appropriation " 
 is beside the point. To begin with, being appropriated is not 
 a property but a condition or relation, and that not of the 
 " goods " themselves, but of men with reference to them, so 
 that being " appropriated " could evidently not be a common 
 property of the " goods." We will not stand, however, with 
 Bohm-Bawerk on small matters like that, for as we have 
 already seen, precision of expression is not part of his equip- 
 ment. But whether property, condition, or relation, or any- 
 thing else, " being appropriated " is no objection to Marx's 
 analysis. The "principle" of "value" of "goods" could 
 not "lie" in their "being appropriated," for the same rea- 
 sons that it could not be due to " nature." While " goods " 
 were not " being appropriated " for quite as long a time as 
 they were being produced by nature, they were so for suffi- 
 ciently long a time before the appearance either of the capi- 
 talistic system or exchange-value to settle the question. 
 
 Being " scarce " or being the subject of supply and de- 
 mand, can hardly be said to be something which all " goods " 
 possess in common. But as we have already stated, we 
 wouldn't stand with Bohm-Bawerk on such things as pre- 
 cision of expression and other requirements of logical rea- 
 soning. There is, however, something else about these two 
 questions to which we desire to call the attention of the 
 reader: These two questions are really one; being scarce 
 in comparison with a want is the same thing as being the 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. IO5 
 
 subject of supply and demand. Why, then, put this up as 
 two separate questions? This would be unimportant, but 
 because of the frequency with which, as we shall have oc- 
 casion to see later, Marx-critics employ this cheap manoeuvre 
 of " criticism.'' It is common practice among them to re- 
 peat the same matter in different ways, in such a manner as 
 if they were stating separate objections, in order to make a 
 " showing" by piling up a great quantity of objections. 
 
 Supply and demand is, as we have seen, not a property of 
 " good " but an accident of its existence. It is not some- 
 thing contained in it, nor is it anything in any way con- 
 nected with its production. Its qualities and properties as a 
 " good " are not in any way affected by the conditions of its 
 supply and demand. There is no " common something " in 
 goods which may be called their conditions of supply and 
 demand, for no good contains in itself the conditions of its 
 supply, and its demand can not only not be contained within 
 itself, but it presupposes its absence. Logically, therefore, 
 it could certainly not be said that being the subject of sup- 
 ply and demand could be the " common something " which 
 is the source and measure of value. There is another good 
 logical reason why supply and demand could be neither the 
 source nor the measure of value. The proposition that 
 value depends on supply and demand seems such a very sim- 
 ple one, so much a matter of " common sense," that few 
 take the trouble to inquire into its real meaning. A careful 
 examination of the matter will show, however, that this is 
 logically impossible. Let us see what it is: Supply and 
 demand work in inverse directions; whei} the supply in- 
 creases value diminishes, and when the supply diminishes 
 value increases; and the reverse is true of demand. Now, 
 let us suppose a condition (the ordinary condition for most 
 goods), where the supply and demand are normal, that is, 
 cover each other. What should the value of the commod-- 
 ity then be? Evidently, nil; for the two factors working 
 upon it in opposite directions, the supply and the demand be- 
 ing equal, neutralize each other, balance each other. But as 
 
I06. THE THEORETICAL SYSTEM OF KARL MARX. 
 
 we know that " goods," or at least some " goods," and that 
 the most characteristic, always have some value, there evi- 
 dently must be something which causes commodities to have 
 value when supply and demand balance each other, and 
 have, therefore, no influence. 
 
 This question of logic is best explained and tested by the 
 facts. Value is a relative term, and is ascertained by ex- 
 change. When we speak of the value of a commodity, we 
 compare it .with something else; in our highly developed 
 society, we compare it with the universal commodity — 
 money. When we make a sale or exchange we compare 
 the values of the things exchanged by exchanging them in 
 a certain proportion. Let us, therefore, take any two com- 
 modities, say, a chair and a table. Let us say that under 
 any given conditions of supply and demand equal for both, 
 say normal, they exchange at the ratio of two chairs to one 
 table. What fixes their relative value? The conditions of 
 supply and demand being the same for both, they ought to 
 exchange as one to one. Again, let us increase their sup- 
 ply equally, say fifty per cent. Their " value " will dimin- 
 ish, — in comparison with other articles whose supply was 
 not increased, — but their relative value to each other will 
 still remain the same. The same thing will happen if, in- 
 stead of increasing their supply we will diminish it; or, if 
 we will increase the demand or diminish it. In other words, 
 no matter under what conditions of supply and demand we 
 will place them, as long as those conditions are equal, they 
 will still retain their relative value of two to one. Evidently 
 there must be something in them which makes their rela- 
 tive value remain the same under all conditions of supply 
 and demand to which they may be alike subjected. What 
 is it? 
 
 It was to find this " common something " contained in 
 them, and which evidently is the source and measure of their 
 value irrespective of the conditions of supply and demand to 
 which they are subject, that Marx took up the analysis of ihe 
 commodity. It was, therefore, simply puerile to point to 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. lOJ 
 
 Supply and demand as the possible - common something " 
 " wherein may lie " their value. 
 
 Again, the same commodity, under the same conditions of 
 supply and demand, will have different values at different 
 times if the methods of its production have changed. A 
 fact which practically fills up the history of modern pro- 
 duction. 
 
 The reader might ask : " While it seems to be true that 
 supply and demand cannot be the source or measure of 
 value, it is still a matter of experience, — and appears in 
 the very examples examined here, — that the condition of 
 supply and demand does influence the ratio of exchange of 
 commodities, that is, their value. How do we account for 
 it ? " This consideration seems to be what led astray many 
 economists. In fact, the matter does seem extremely con- 
 fusing. It is evident that value must have some source out- 
 side of supply and demand, and yet there is no denying the 
 influence of the latter on the ratio of exchange which fixes 
 the relative values of commodities. This confusion is only 
 apparent, however, and not real. It is due to a failure to 
 distinguish between the value of commodities and the prices 
 which they bring on a particular sale in the market. 
 
 We have already explained at length in a preceding chap- 
 ter that value and price are different and distinct categories. 
 This distinction must always be kept in jnind, and a failure 
 to keep this in mind will result m no end of confusion. 
 When this distinction is borne in mind it will at once become 
 apparent that the seeming influence of supply and demand 
 on value is a mere optical illusion. What it does influence 
 is the -Price, which oscillates about the value as its normal 
 resting place, to which it constantly gravitates. That is 
 why, when supply and demand cover each other, the price is 
 not nil : it is then at its normal resting-place, — Value ; Price 
 and Value then coincide. That is why different articles will^ 
 under the same conditions of supply and demand, exchange 
 in an infinite number of ratios to each other, as the same 
 conditions of supply and demand will only result for all of 
 
I08 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 them in the same relation between Price and Value, but the 
 actual price of eaSh will depend on its own value which may, 
 of course, be different for each. That is, in fine, why the 
 same commodity will, under the same conditions of supply 
 and demand, have a different price at different times, if 
 there has been any change in the method of its production; 
 for its value depends on its production, and will be different 
 if different methods of production are employed, and the 
 equal conditions of supply and demand will on^y bring about 
 the same relation between Price and Value. 
 
 Many opponents of Marx make a point of the fact that 
 Marx's theory of value does not show the formation of 
 prices, is no guide to the actual_pTices paid for commodities. 
 But a theory of value need not show that, and, as a matter 
 of fact, could not. It would not be a theory of value if it 
 did. This is admitted even by one of Marx's greatest oppo- 
 nents. Professor Carl Diehl. He says : ^ 
 
 " It must be settled right at the outset that for Marx, as 
 for any other theorist on the subject of Value, there can be 
 no identity between Value and Price. This follows neces- 
 sarily from the radical difference between the two concep- 
 tions. The price of a commodity is a concrete quantitative 
 determination: it shows us the quantity of goods or money 
 which must be given in return for this commodity. Value, 
 on the other hand, is an, abstraction. When we speak of 
 the value of commodities, we mean the regulative principle 
 which lies at the basis of the formation of prices." This is, 
 in effect, what Marx says in the passage already quoted by 
 us. And the facts of experience, as we have seen, amply 
 justify his position. It is with this, as with other appeals 
 to the facts, some of which we have already disposed of, and 
 others are to be gone into hereafter, for Marx-critics never 
 tire of the assertion that the facts always and completely re- 
 fute Marx. 
 
 " Experience shows" — says Bohm-Bawerk, — " that the 
 
 1 Carl Diehl, Ueber das Verhaeltnis von Wert und Preis im Oekonomis- 
 cben System von Karl Marx. Jena, 189S. 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. ICQ 
 
 exchange value of goods stands in any relation to the amount 
 of labor expended in their production only in a portion of 
 them, and in that portion only incidentally. . . . We 
 shall see that the ' exceptions ' are so numerous that they 
 hardly leave anything for the ' rule.' " Then comes a long 
 list of " experiences " and " exceptions," which we will con- 
 sider one by one, so that none escape our attention. It must, 
 however, always be, borne in mind that Bohm-Bawerk is not 
 alone in these statements, assertions, objections and excep- 
 tions. On the contrary, he is ably supported by a large host 
 of comrades in arms, who do not tire of blowing the big 
 horn about what the facts are supposed to show. 
 
 And first of all " nature " looms up large again. We 
 have disposed of her logically, but she still remains there to 
 vex us in practical " experience." Not that any exchange- 
 value is claimed for nature as such. All the bounties of 
 nature are admitted to be as free as the air, provided there 
 is as much of them; but, it is claimed, when natural objects 
 are scarce, they have exchange-value, although no labor 
 whatever was expended on them. " How about the native 
 gold lump which falls down on the parcel of a landed pro- 
 prietor as a meteor ? or, the silver mine which he accidentally 
 discovers on his land ? " asks Bohm-Bawerk. " Will the 
 owner be unmindful of nature's gift, and let the gold and sil- 
 ver lay there, or throw them away, or give it away as a gift 
 again, only because nature gave them to him without his 
 exerting himself ? " " And why is it that a gallon of fine 
 Rhine wine is valued at many times the value of some cheap 
 grade of wine, although the work of producing them may be 
 the same?" And Professor Knies asks: when a quarter 
 of wheat is equivalent in exchange to a cord of wood, is 
 there any difference between the wood produced by human 
 labor in an artificial grove and that which grew wild in the 
 primeval forest?^ And Professor Masaryk chimes in: 
 " Why is virgin soil bought and sold ? " 
 
 As will have been noted, all the examples upon which 
 
 > Karl Knies. Das Geld, p. ISl. 
 
no THE THEORETICAL SYSTEM OF KARL MARX. 
 
 these objectors rely are drawn from the sphere of agricul- 
 ture, except, of course, when they are taken from the air, 
 like the golden meteor. Yet, they comprise two different 
 categories of objects. In the one category are to be placed 
 those objects whose attainment without labor is purely ac- 
 cidental, and in the other -those whose attainment without 
 laTbor is the only way in which they are attainable, for the 
 reason that they can not be produced by labor at all. The 
 value of the articles of the first category does not contradict 
 the general laws of value as they are laid down by Marx, 
 nor does it even form an exception to the rule. The gold- 
 lump accidentally found by a man will not be thrown away, 
 no matter whether it was lost by somebody who spent labor 
 for its production, or fell down from the clouds, for the 
 reason that it has just as much value as if he had obtained 
 it by hard labor. Its value, like that of all commodities, is 
 the socially necessary labor which must be spent in its repro- 
 duction. The clouds not being in the habit of showering 
 gold on us, and the necessarily prevailing method of obtain- 
 ing gold being by spending labor on its production (strictly 
 speaking, — on its extraction, as in the case of all products 
 of the extracting industries), this gold, if wasted, as sug- 
 gested by Bohm-Bawerk, could not be obtained again from 
 the clouds, but would have to be produced by labor. The 
 same is true of the silver found in the mine. Assuming, as 
 Bohm-Bawerk seems to, that the mine was of such a char- 
 acter that it did not require any labor to extract the silver 
 from it, the silver will still have the value represented by the 
 labor socially necessary for its reproduction, owing to the 
 fact that silver is usually obtained by working at its extrac- 
 tion. And it might as well be noted here, that, under the 
 laws of Value as laid down before, it is the least productive 
 silver mine necessarily in operation in order to satisfy the 
 wants of society, that will set the norm for the value of 
 silver, taking, of course, into consideration any by-product 
 which may be obtained from such mine while mining for 
 silver. The case of the wine is akin to that of the silver. 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. Ill 
 
 It must be remembered that " good " wine only has a greater 
 value than " cheap " wine where it |s wanted in society, — 
 just like silver. There are places where " good " wine is not 
 wanted ; and places where silver is not much in demand. In 
 
 .such places " good " wine will not be considered of any more 
 value than " cheap " wine ; nor will silver be more valuable 
 
 'than some "base" met^l. In societies where "noble" 
 metals and " good " wines are wanted, these become the 
 objects of special industries, respectively. And just as the 
 labor expended on its extraction in the least productive sil- 
 ver mine sets the value on silver, because this mine must 
 be used for reproduction, so will the labor expended on the 
 production of good wine by cultivation of the least adapted 
 soil necessarily employed therefore set the value on good 
 wine, and for the same reason. 
 
 The same principle applies to the wood question. Where 
 the " natural grown " wood of the primeval forests is in- 
 sufficient to satisfy the wants of society and it has to be 
 " raised," it is the labor expended on the " raised " wood 
 that will set the value on all wood, ancj the wood of the 
 primeval forest will have the same value as the wood arti- 
 ficially raised, for the reason that it can only be reproduced 
 by means of raising; the cost of its reproduction is, there- 
 fore, the social labor necessary to be expended for " raised " 
 wood. 
 
 It is entirely different, however, with the articles of the 
 second category, chief and most typical among which is 
 land. Why should land upon which no labor was spent for 
 its production, and upon which no labor need or can be spent 
 for reproduction have value? With all that, however, this 
 does not refute Marx's theory of value. We have already 
 stated before that Marx went into the examination of this 
 subject at length, and formulated a theory which none of 
 his critics have even attempted to refute. Indeed, singu- 
 larly enough, this branch of the Marxian theory has been 
 passed by his critics with little or no comment. This the- 
 ory, however, amounts to nothing less than this : — that land 
 
il^ THE THEORETICAL SYSTEM OF KARL MARX. 
 
 as well as all other objects which are not produced by labor 
 has no value. This may sound strange in face of the fabu- 
 lous prices that we know are sometimes paid for land. But 
 these very fabulous prices are proof that the price paid does 
 not represent the value of the land but something else en- 
 tirely. Marx proves conclusively that rent is not the result 
 of the value of the land, and the price of land is admittedly 
 merely a " capitalization " of the rent. Marx calls atten- 
 tion to the fact, which is also mentioned by Bohm-Bawerk, 
 who, however, fails to draw therefrom the proper conse- 
 quences, that the price of land is a multiple of the rent by a 
 certain number of years, the number depending on the pre- 
 vailing rate of interest. In other words, it is not the value 
 of the land that the price nominally paid for it represents, 
 but the price of the rent. The transaction which formally 
 and nominally appears as a sale of land, is in reality merely 
 the discount of the rent. It differs absolutely nothing in 
 character from the purchase of an annuity, which is not an 
 exchange of present values but a mere banking operation. 
 This is well known to real estate operators. 
 
 The best proof, however, of the theory that land has no 
 value, is the fact that any amount of land can always be had 
 on the largest portion of our Mother Earth without the 
 necessity of paying for it. The query of Professor Masaryk, 
 supposed to be a refutation of Marx by " the facts," — " why 
 is virgin soil bought and sold ? " is to be answered : The fact 
 is that virgin soil is not bought and sold. It is only after 
 the soil has been husbanded and raped and has given birth 
 to the bastard rent that it becomes the subject of purchase 
 and sale, not before. And this fact ought to give the quie- 
 tus, once and for all, to the claim that objects not produced 
 by labor may still have value. It is true that it is pretty in- 
 convenient for us to get to a place where land is obtainable 
 without price because of no value, and that as far as we are 
 concerned the argument of the places where land is free 
 seems, therefore, far fetched. But, first of all, it is certainly 
 no fault of the Marxian theory that our capitalistic class 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 113 
 
 has abducted from the people all the soil, so that there is 
 none left either in its virginity or in the possession of lawful 
 husbandmen. And, secondly, we might ask the great host of 
 Marx-critics to point out one place on the face of the globe, 
 where a. single article produced by labor can habitually be 
 obtained without giving an equivalent therefor. Not on 
 the whole face of this globe, nor even in the clouds or 
 among the stars where Bohm-Bawerk can get gold-lumps 
 free, can anybody find a place where chairs, coats or bicycles 
 can be gotten free. Evidently there is a difference which 
 the learned and astute Marx-critics failed to observe, but 
 which is nevertheless very interesting, and ought to be for 
 some people at least, very instructive. 
 
 There is another group of " commodities," which, al~ 
 though of a different character, is to be considered in this 
 connection. This group includes all those things which, al- 
 though produced by labor, are essentially the product of 
 some higher natural gift or power, and are, therefore, ir- 
 reproducible by mere labor. This includes all works of art 
 and the like. Not being the subject of production or re- 
 production by labor they are, naturally, not subject to the 
 laws of value. But some ingenious Marx-critics, the in- 
 domitable Bohm-Bawerk among them, find great cause for 
 rejoicing in this alleged " refutation " or " exception " to 
 the laws of value as laid down by Marx. Ever faithful to 
 their own confused nature and very consistently confusing 
 economics with everything alien to it under the sun, they 
 start out from their confusion of Value and Price, and add- 
 ing to it the confusion of economic price with the colloquial 
 application of the word price to every money-payment as a 
 consideration for something, they declare that the Marxian 
 theory of value must be false, for here are " goods " whose 
 " value " is evidently not determined by labor. It does one 
 good to see how these gentlemen who usually strut about like 
 peacocks parading their lofty " moral sense " and " ideal- 
 ism," and constantly berating the Marxists for their supposed 
 gross materialism and " levelling " tendencies, come down 
 
114 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 from their high perch and place their " ideal " wares on a 
 level with the grossest material things. Allured by the bait 
 of making a point against Marx, they insist that high works 
 of art embodying noble " ideas " are just as much " goods," 
 " wares and merchandise " to be trafficked in as anything else 
 that comes down the pike in " due course of trade." The 
 willingness of these gentlemen to do so does not, however, 
 make commodities of the works of genius, any more than 
 their hypocritical phrases change the. course of human prog- 
 ress. While the economic conditions of capitalist society re- 
 flect on the whole range of its ideas, creating there all sorts 
 of distorted and shapeless beings, nobody is crazy enough to 
 seriously apply the yardstick to these matters. While an 
 " art journal " may sometimes quote a price of a great work 
 of art because it " fetched " that much at a sale, no " dealer " 
 even will dare say that the Sistine Madonna is equal in value 
 to so many steam engines, or that a certain Raphael or 
 Rubens has risen in value since J. P. Morgan became an art 
 Macenas, thus augmenting the " demand." It is true that 
 the excesses of capitalism have tainted everything with a 
 mercenary spirit, and have made art the subject of traffic, 
 but this no more makes "wares" out of art-subjects than 
 the traffic in white slaves turns love and affection into mer- 
 chandise. Nor has the purchase-money paid for them any 
 more to do with the economic categories of price and value 
 than that paid to the harlot in compensation for her venal 
 favors. 
 
 A different situation is presented in the case of commodi- 
 ties which are the result of so-called skilled or, higher classes 
 of labor. Masaryk thinks it a complete refutation of the la- 
 • bor theory of value that one man's labor does not produce in 
 the same space of time as much value as that of any other 
 man's. And Bohm-Bawerk considers it awful theoretical 
 jugglery for Marx to say : " Skilled labor counts only as sim- 
 ple labor intensified, or rather, as multiplied simple labor, a 
 given quantity of skilled labor being considered equal to a 
 greater quantity of simple labor. Experience shows that this 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 11$ 
 
 reduction is constantly being made. A commodity may be the 
 product of the most skilled labor, but its value, by equating 
 it to the product of simple unskilled labor, represents a 
 (definite quantity of the latter labor alone. The different 
 proportions in which different sorts of labor are reduced to 
 unskilled labor as their standard, are established by a social 
 process that goes on behind the backs of the producers, and, 
 consequently appears to be fixed by custom." " If," says 
 Bohm-Bawerk, " the product of one day's labor of one man is 
 of the same value as that of another man's five days' fabor, 
 then, no matter how people consider it, it forms an exception 
 to the alleged rule, that the exchange-value of goods depends 
 on the amount of human labor incorporated in them." 
 
 These objections evidently proceed upon the theory that 
 Marx's " alleged rule " claims that the value of commodities 
 depends upon the amount of labor actually incorporated in 
 them in the process of their production. It is needless to 
 argue whether these objections would amount to anything 
 were this the " alleged rule," for the simple reason that no 
 such rule was ever " alleged " by Marx. We have already 
 seen, that Marx very specifically states that the value of a 
 commodity does not depend on the amount of labor actually 
 spent in its production. And this not only with reference to 
 skilled and unskilled laborj but even with reference 
 to unskilled labor itself. According to the Marxian 
 theory of value, as expounded by us above, it makes abso- 
 lutely no difference whatsoever, as far as its value is con- 
 cerned, how much labor, of any kind, was actually spent in 
 production of a commodity. The reason for this is, as al- 
 ready explained, that value, being a social phenomenon, de- 
 pends entirely on social conditions of production and dis- 
 tribution, and does not depend on anything relating exclu- 
 sively to the individual conditions of its production or ex- 
 change. This applies with equal force to the amount and 
 kind of labor it cost its individual producer, as well as to the 
 particular desires or wants of the persons immediately con- 
 cerned in any of its mutations during the circulation process. 
 
Il6 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 This being so, it is evidently absurd to make a point of the 
 fact that one day's work of a skilled laborer may produce as 
 much value as several days' work of an unskilled laborer, and 
 to consider skilled labor as an exception to the laws of value. 
 There is no exception, for there is no such rule except in the 
 perverted imagination of Marx-critics, and, perhaps, some 
 "alleged" Marxists. Were this "allegation" of the rule 
 correct, the exceptions would be too numerous to count. We 
 have already noted before one such important " exception," 
 for instance, in the case of the introduction of improved 
 methods of production before they are generally adopted, 
 or the retention of obsolete methods of production. In either 
 event the value of the commodities produced under the ex- 
 ceptional circumstances by ordinary unskilled labor will not 
 depend on the labor actually spent in their production. 
 Other " exceptions " will easily suggest themselves to the in- 
 telligent reader. The only trouble with all of them is that 
 they are exceptions only to an imaginary rule, and not to the 
 rule laid down in Marx's theory of value. It is, therefore, 
 very sad to see how some Marxists spend their energies in 
 making futile attempts to explain away these objections to 
 an imaginary Marxian theory. They would spend their time 
 with more profit to themselves and their readers if they 
 would leave" fancy theorizing and see to it that Marx's the- 
 ories are not misstated; the objections would then take care 
 of themselves. 
 
 The matter in itself is very simple. Skilled labor, whether 
 the skill be personal with the producer, acquired by study 
 and training, or impersonal, due to the use of better tools, 
 is more productive. A skilled laborer produces in a given 
 space of time more than the unskilled one. The value of a 
 commodity being equal to the labor which it would cost to 
 produce it, the value of the commodity will, in accordance 
 with the laws of value already explained by us, be the amount 
 of ordinary average labor necessary for its reproduction. 
 For it is by this labor that society will have to reproduce it, 
 the amount of skilled labor being by its very terms limited, 
 
THE LABOR THEORY OF VALUE AND ITS CRITICS. 117 
 
 and can not, therefore, be had in sufficient quantities to re- 
 produce the commodities as they are wanted. When this 
 labor becomes so common that it can be had in any quantity 
 for the purposes of production and reproduction of com- 
 modities, it ceases to be " skilled," and its product has no 
 more value than that of any other average labor. The point 
 to be remembered, -however, is that while the measure of 
 ordinary labor is the time during which it was expended, 
 the measure of the time expended on any particular given 
 commodity is the amount of product produced by its expendi- 
 ture. In other words, the value of a commodity does not 
 depend on the actual individual time spent in its production, 
 but on the social time necessary for its reproduction, as was 
 already stated at length before. When thus properly under- 
 stood, the fact that the product of skilled labor is more val- 
 uable than the product of unskilled labor is no more an objec- 
 tion or an exception to our law of value than the fact that 
 one man's unskilled labor produces more value than another 
 man's unskilled labor because of a difference in the in- 
 tensity of its application. 
 
 Another objection mentioned by Bohm-Bawerk, and the 
 last to be considered by us here, is Very characteristic of him 
 and of most Marx-critics. They seem to be impregno.bly 
 fortified in their utter ignorance of the Marxian theories 
 which they criticise. In their blissful ignorance they very 
 often prate like innocent children, so that one is often at a 
 loss as to whether they ought to be pitied or envied. Says 
 Bohm-Bawerk, very naively: 
 
 " The well-known and universally admitted fact that even 
 in the case of those goods whose exchange-value coincides 
 on the whole with the labor expended in their production, 
 this coincidence is not always preserved, forms another ex- 
 ception to the labor principle. Because of the oscillations 
 of supply and demand, the exchange-value of even such com- 
 modities is often pushed above or below the level of value 
 which corresponds to the amount of labor incorporated in 
 them. The latter forms only a gravitation point, not a fixed 
 
Il8 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 point of their exchange-value. It seems to me that the so- 
 cialistic followers of the labor principle make too light of 
 this objection. It is true that they state it, but they treat it 
 as a small, passing irregularity whose presence does' not in 
 any way militate against the great ' law ' of exchange-value." 
 The simplicity of soul displayed in this passage seems to 
 be of a higher world than ours. To ihtrude upon it with 
 gross earthly notions about accuracy and the like seems 
 almost criminal. It would also be rrianifestly futile to at- 
 tempt to explain the subtleties of Marxian thought to one 
 who, after a careful study of the Marxian system, has failed 
 to grasp the difference between Value and Price in that 
 system. To speak of the individual or actual Price (for 
 that is what Bohn-Bawerk refers to), which, according to 
 Marx, is usually different from Value, as an exception to 
 Value, reveals a constitutional inability to understand the 
 Marxian theory which ought to be admired, if not re- 
 spected, for its elemental purity. And yet this is the mind 
 whichi shows the way, and sets the pace, fo,r the hosts of 
 Marx-criticism ! 
 
CHAPTER VI. 
 
 THE GREAT CONTRADICTION IN THE MARXIAN THEORY OF 
 VALUE. 
 
 We have seen in the preceding chapters that the facts 
 relied on by Marx-critics to " refute " Marx fail them sig- 
 nally when put to the test. These facts rather tally with 
 the Marxian theory. While, however, this may be suffi- 
 cient to parry the attacks of these Marx-critics and work 
 the discomfiture of all those who should attempt to attack 
 Marx with the weapons of " logic " and " facts of experi- 
 ence," this does not furnish the highest kind of positive 
 proof of the correctness of the Marxian theory, the proof 
 demanded by Marx himself and his followers. Marx and 
 the Marxists have often been reproached for being too 
 strict and exacting. This they undoubtedly are. But first 
 of all, with themselves, Marx has often been accused of 
 being addicted to tedious repetitions in his writing, his 
 critics .being unable to see that Marx merely approached 
 his subject from all justifiable points of. view in order to 
 make sure 'that his conclusions were correct. We have 
 already stated before that he never rested his case on 
 purely logical deductions. These only served him" as a 
 means of grasping and explaining the fads which must in 
 each case supply the proof. But in looking to the facts 
 for his proofs, he was not content merely with the ordinary 
 facts of ■■ experience " in the sense in which his critics un- 
 derstand the term. Of course, these had to tally with his 
 conclusions before he adopted them, but they merely gave 
 him the prima facia proof. True to his historical ideas, the 
 real decisive proof he sought in the facts of history, or, 
 
 119 
 
120 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 rather, in the " facts of experience " considered in their 
 historical setting and conriection. 
 
 So it was with his theory of Value and Surplus- Value. 
 Considering that the question of value lies at the very 
 foundation of the capitalistic mode of production and dis- 
 tribution, he insisted that a, theory of value in order to be 
 accepted as correct, must not only be in accordance with 
 the facts as they are, but it must furnish a key to the un- 
 derstanding of capitalistic development^ to the understand- 
 ing of the facts of capitalism in their movement. It must 
 explain not only the statics of capitalism, but also its dynam- 
 ics. A theory of surplus-value, in order to be accepted as 
 correct must show the sources and volume of the profits 
 of the capitalist class not only as they exist to-day, but 
 throughout the entire historical epoch dominated by the 
 capitalistic mode of production and distribution. It must 
 account for the different variations in these profits, if any 
 be discovered. It must explain the development of profits. 
 
 And it is here that the Marxian theory has to record its 
 greatest triumph. In philosophy as well as in economics, 
 it is its historical character that gives the Marxian theory 
 its peculiar import, that forms its essence. What does the 
 history of capitalistic profits show? If there is anything 
 that is well established in connection with capitalistic 
 profits, it is the tendency of the rate of profit on capital to 
 diminish. With the development of capitalism and the 
 growth of the mass of capital, the return on capital in the 
 shape of profits is constantly becoming smaller. While the 
 gross amount of profits obtained by the capitalist class is 
 constantly increasing with the growth of the mass of capi- 
 tal, the amount of the profits in proportion to the whole 
 capital employed, and therefore, the rate of profit on a given 
 amount of capital, tends to constantly diminish. This is 
 known in political economy as the " law of the falling rate 
 of profit." Whence this law? How account for the falling 
 rate of profit? No theory of value before or after Marx 
 could give a satisfactory answer to these questions. As 
 
THE GREAT CONTRADICTION. 121 
 
 Marx said of the science of political economy as he found 
 it: — 
 
 " She saw the phenomenon (of the falling rate of profit) 
 and was agonized by attempts at conflicting explanations. 
 It may be said, however, that because of the great impor- 
 tance of this law for capitalistic production, this law forms 
 the great mystery about the solving of which the whole 
 science of political economy revolves ever since the days 
 of Adam Smith. And that the difference between the dif- 
 ferent schools of the science since Adam Smith consists in 
 the different attempts to solve this problem." 
 
 There is no such mystery, however, when the Marxian 
 theory of value sheds its light on the underlying basis of 
 the capitalistic mode of production, and the laws of its 
 development are exposed to the light of day. Not only does 
 the Marxian theory offer a satisfactory explanation, but 
 such explanation flows naturally and of necessity there- 
 from. And it is as simple and as clear as daylight. 
 
 The capital employed by a capitalist "producer" in his 
 business is divided into two parts : — One which he spends 
 for his place, fixtures, machinery, raw goods, etc.; and the 
 other which he spends in paying wages to his men, in " em- 
 ploying labor " as it is euphoniously styled. Let us call 
 the capital of the first category " constant " capital, and 
 that of the second category " variable " capital. The reason 
 for these appellations is that according to the Marxian the- 
 ory, the first kind of capital remains constant, unchanged 
 by the process of production, whereas the second kind of 
 capital varies, changes, to be more specific, increases in 
 that process. As was already shown, only labor creates 
 value, and the capitalist's profits come from the " sur- 
 plus " value. When a capitalist receives a profit out of 
 the process of production, — his capital increases in the 
 operation, — that variation is due to the capital invested in 
 paying for labor; the other part of his capital, the raw ma- 
 terials and other things can not vary themselves, they are 
 merely reproduced, they remain a constant quantity. Let 
 
122 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 US see how the development of capitalistic prodiiction af- 
 fects the two parts of capital, and what bearing this has 
 on the rate of profit. 
 
 John Brown, Sr., went into the business of manufactur- 
 ing shoes in the year of Our Lord, 1850. He started, out 
 with a capital of, let us say, $500.00, four hundred of 
 which he spent, in fixing up his plant and buying a stock 
 of raw material necessary in the business, and the remain- 
 ing one hundred he used in paying his labor. We will as- 
 sume, for the sake of simplicity, that he employed ten men, 
 paying each ten dollars per week, and that the " turn-over " 
 in his business was such that he cashed' in every week the 
 proceeds of his manufactured product, so that he did not 
 need to invest for labor any more than one week's wages. 
 Let lis further assume that the state of the productivity 
 of labor was such that the labor of one of our manufac- 
 turer's men during one week created a product of the value 
 of twenty dollars.. (In addition, of course, to the value of 
 the raw materials, etc., consumed in its production.) Un- 
 der these conditions the value of the product manufactured 
 by , John Brown, weekly, will be two hundred dollars, one 
 hundred of which will be "necessary" value (the amount 
 paid in wages), and one hundred, "surplus" value. This 
 will be his profit. (In order to simplify matters, we as- 
 sume that he deals with his consumers direct, thus cutting 
 out the middlemen's share of the profit.) The ratio of the 
 " necessary " to the " surplus " value, which we will call 
 the rate of surplus value or the rate of the exploitation of 
 labor, is that of i to i or 100, per cent. John Brown does 
 not figure that way, however. While he is interested in 
 paying his men as little as possible and make them produce 
 as much as possible, whether by foul means or fair, he is 
 not at all interested to know what proportion the surplus- 
 value they create bears to their wages. Good business 
 man that he is, he wants to know what return the capital 
 invested by him in the enterprise has brought him. He 
 finds that his investment of five hundred dollars has netted 
 
the" GREAT CONTRADICTION. 123 
 
 him a profit (consisting of the surplus-value), of one hun- 
 dred dollars, or 2a per cent, per week. 
 
 On such profits John Brown's business thrived, and he 
 accumulated a fortune. He is now resting in peace with 
 his forefathers, and his son and heir, John Brown, Jr., now 
 conducts the business. John Brown, Jr., upholds the tra- 
 ditions of the old house for making profits. But entirely 
 new methods and processes of manufacturing shoes are 
 now being used by him, as well as by everybody else wh6 
 is in the market to compete with him. New machinery 
 has been invented since the days when his sire started the 
 business. This machinery is " labor-saving " to a high de- 
 gree. That is to say, it increases the productivity of labor, 
 so that one man can do by its aid the work of several men 
 working without its aid. This machinery, however, is very 
 costly; and its employment requires a large outlay for raw 
 materials, since a man employs more raw materials in the 
 same proportion as the productivity of labor increases. 
 The "composition" of his capital, — that is to say, the pro-' 
 portionate shares thereof used as " constant " and " varia- 
 ble " capital, respectively, — is, therefore, different from the 
 composition of his father's capital, when the old man started 
 in business. John Brown, Jr., employs a capital of twenty 
 thousand dollars. Of this fully nineteen thousand are used 
 as constant capital, and only one thousand to pay for the 
 labor employed by him. This composition of capital, be- 
 cause it signifies a higher stage of the development of capi- 
 talism, we will call the higher composition, and the com- 
 position of the capital at the time the business was started 
 we will call the lower composition. Now let us see what 
 effect did the change in the composition of the capital have 
 on the profits of the business. 
 
 Let us assume that the firm still retains the old scale of 
 wages. Let us also assume that owing to the introduction 
 of the improved machinery (and allowing for the cheapen- 
 ing of the product in consequence), the value of the product 
 of a man's labor has increased two-fold. What will be the 
 
124 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 result? His variable capital amounting to one thousand 
 dollars, John Brown now employs one hundred men. The 
 value of the weekly product of each man is forty dollars, 
 and the value of the aggregate weekly product, four thou- 
 sand dollars. Out of this, one thousand dollars represents 
 the necessary value and three thousand is surplus value. 
 His profits have increased enormously, but yet not in pro- 
 portion to his capital. That is to say, while the gross 
 amount of his profits is enormous, the rate of his profits, 
 the percentage return of each dollar of capital, is consid-. 
 erably smaller. A profit of three thousand dollars on a 
 capital of twenty thousand makes only fifteen per cent., a 
 decrease of five per cent, as compared with the older days. 
 
 The different ways in which the business of the older and 
 the younger John Brown is organized, and the results flow- 
 ing from the different organizations of the business, are 
 typical of the development of capitalistic production in 
 general, and correctly exemplify it. It shows the fact 
 of the falling rate of profit, and also gives the explanation 
 therefor. The development of capitalist production con- 
 sisting in the increased productivity of labor, by reason of 
 which the composition of capital becomes higher, this de- 
 velopment must necessarily tend to lower the rate of inter- 
 est or profit ; for the profit is obtained only from the vari- 
 able part of capital, which is constantly being diminished as 
 compared with the constant part, whereas it is figured on 
 the whole capital. 
 
 Our example, does not, however, show the full effect of 
 the change of the composition of capital on the profit rate. 
 When left to itself," the change in the composition of capital 
 has a tendency to lower the rate of profit much more than 
 appears from our example. The reason for it is, that in 
 our example we did not present the workings of this law 
 in its purity, by changing the conditions of the problem. 
 In the first instance we represented the workingmen as re- 
 ceiving one-half of the value they produced, whereas in the 
 second we assumed that they received only one-quarteh 
 
i-HE GREAT CONTRADICTION. 125 
 
 Had we left the conditions of the problem the same in the 
 second instance as in the first, that is, one-half the labor 
 ' was necessary and one-half surplus, we would have had in 
 the second instance with even a somewhat lower composi- 
 tion of capital than that assumed by us, say of eighteen 
 thousand constant and two thousand variable, — a rate of 
 interest of only ten per cent, instead of fifteen per cent. 
 This would show the tendency in its purity. But it would 
 not show the actual facts of capitalistic development. Our 
 example does that — in outline, of course. For, with the 
 higher composition of capital, and the greater productivity 
 of labor which it represents, grows the surplus part of the 
 value produced, grows the rate of exploitation of labor. 
 And this quite irrespective of the fact whether the work- 
 ingmen are receiving poorer pay or not, or whether they 
 standard of living is becoming lower or not. They may 
 even receive in real wages, that is, in products, more than 
 they received before, and still the rate of exploitation will 
 grow. For with the productivity of labor commodities become 
 cheaper, so that for the same amount of money received 
 by them as wages the workingmen may buy a larger 
 amount of the products produced by them, and yet this 
 amount will necessarily become constantly smaller in pro- 
 portion to the amount retained by the capitalist as surplus- 
 product. In our example we have allowed for the cheap- 
 ening effect of the productivity of labor on commodities, 
 otherwise the increase in the value of the product would 
 have to be more than twice with such a high composition 
 of capital. The products consumed by them being cheaper, 
 the workingmen of John Brown, Jr., wrll get more prod- 
 ucts for their ten dollars per week than did their fore- 
 fathers who worked for John Brown, Sr., and yet their 
 share of the product produced will be one-half of that of 
 their forefathers, and the rate of exploitation of labor will 
 have increased threefold since the times of John Brown, 
 Sr. This is what actually happens in the course of the 
 development of capitalist production. 
 
126 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 The greater productivity of labor resulting from tne in- 
 troduction of improved machinery gives the capitalists the 
 possibility of increasing the rate of exploitation of labor, 
 and they are never too slow to grasp the opportunity. This 
 increases the mass of surplus-value, and consequently also 
 the rate of profit. We, therefore, have two cross tenden- 
 cies : — first, the tendency to lower the rate of profit by 
 raising the composition of capital, thus diminishing, pro- 
 portionately, the amount of variable capital which alone 
 produces surplus-value; and second; to increase the rate of 
 profit by increasing the rate of exploitation and thereby 
 increasing that part of the product produced by the variable 
 capital employed which goes to the capitalist as his surplus 
 or profit. As the variable part of capital diminishes in 
 proportion, the rate of exploitation grows. Of these two 
 tendencies, however, the first is necessarily stronger, and 
 the second can not overcome it for the simple reason that 
 a part can not be greater than, nor even as great as, the 
 whole. No matter to what proportions the rate of exploi- 
 tation should grow, it can never absorb the whole product. 
 In order that there should be a surplus-product or value, 
 there must necessarily be a necessary product or value. 
 Any diminution, therefore, of the proportionate part of the 
 capital employed by the capitalists as variable, must neces- 
 sarily lead to some diminution of the rate profit, be. it ever 
 so small. Hence, the resultant tendency of a falling rate of 
 profit. The actual extent of the fall will depend on the 
 co-operation of a number of factors, no mean part being 
 played by the success which the capitalists will meet 
 in their efforts to raise the rate of exploitation of labor in 
 order to counterbalance the effects of the change in the 
 composition of their capital. 
 
 This question of the rate of profits brings us to the so- 
 called Great Contradiction in the Marxian theory, and to the 
 question of the relation between the first and the third 
 volumes of Capital. Before, however, entering upon the 
 discussion of this question, the present writer desires to 
 
THE GREAT CONTRADICTION. 127 
 
 state that he intends in a later work to put before the 
 public some matters which will, in his opinion, put the 
 whole subject in a new light. Those matters are, however, 
 not specifically treated by Marx, and as the present work 
 is merely intended to present the Marxian theory as stated 
 by Marx, and the criticism of the theory as so stated, no 
 reference will be made to them here, except to say that 
 their net result does not in any way change the Marxiarf 
 theory as here outlined, but amplifies it. 
 
 The Contradiction was first formulated and placed before 
 the public in a somewhat sensational manner by Frederick 
 Engels himself. In his preface to the second volume of 
 Capital, published in 1884, after the death of Karl Marx, 
 Engels challenged those Marxian critics of that day who 
 had declared that Marx said nothing that was new, and 
 that all the wisdom contained in Capital had already been 
 promulgated before by Rodbertus (from whom Marx was 
 supposed bjtthem to have borrowed his theory of value), to 
 explain "how an equal average rate of profit can and must 
 be formed, not only without injury to the law of value, but 
 really by reason thereof." He argued that if Marx said 
 nothing new and his theory of value is no different than 
 that of Rodbertus, these critics ought to be able to do that 
 by the aid of Robertus' writings as supplemented by 
 Marx's. This had the effect of setting a host of men to 
 solving the problem. Most of those who attempted to ac- 
 complish the task were, however, not the Marx-critics to 
 whom the challenge was directed, but disciples of Marx 
 who went about the business not on the basis of Rodbertus' 
 writings, which had very little to offer towards the solu- 
 tion of the problem, but on the basis of the laws of value as 
 laid down by Marx in the first volume of Capital. It was 
 the ambition of these writers to forestall the solution which 
 Engels promised would be given by Marx himself in the 
 third volume. In his preface to the third volume, pub- 
 lished by him in 1894, Engels reviews the various efforts 
 at solving this problem, and comes to the conclusion that 
 
128 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 none of those who attempted it gave the correct solution, 
 although some of them came pretty near it, notably Dr. 
 Conrad Schmidt in his work on the subject which appeared 
 in 1889. The correct solution, Engels says, is contained 
 only in the third volume of Capital itself. 
 
 The solution of this problem, as given by Marx himself, . 
 in the third volume of Capital, and which is supposed to 
 explain the great contradiction, is as follows: — 
 
 Assuming that the rate of exploitation of labor is the 
 same in all the spheres of production in society, producing 
 an equal rate of surplus-value in all these spheres; that the 
 capitals employed in the different spheres of production 
 are of different degrees of composition, that is, of different 
 character as to their division into constant and variable 
 capital; and that nevertheless the rate of profit is equal in 
 all the spheres of production, the problem is: — how does 
 this come about, if the laws of value are as laid down by 
 Marx. If two capitals, one whose composition is 90 c. 
 plus 10 v. (90 per cent, constant and 10 per cent, variable), 
 and one whose composition is 10 c. and 90 v. (10 per cent, 
 constant and 90 per cent, variable), the rate of exploita- 
 tion being the same, produce the same rate of surplus-value 
 or profit, it is quite evident that the surplus-value, and 
 therefore, all value, must have some source entirely different 
 from labor. But that is just what is claimed by all. politi- 
 cal economists. It is assumed to be an established fact 
 that the rate of profits is equal at any given time in 
 all spheres of production or circulation of commodities, no 
 matter what the degree of the composition of the capital 
 employed in their production. In other words, Uiat at any 
 given time equaL capitals will give equal returns, irrespect- 
 ive of the particular branch of industry in which they are 
 employed and of the composition of the capital employed 
 in that branch. But, says Marx, the supposed fact that 
 equal amounts of capital bring equal returns, no matter 
 how employed, gives no indication whatever as to the 
 source of this profit. This, however, is really where the 
 
THE GREAT CONTRADICTION. 129 
 
 contradiction is supposed to lie. It is a contradiction of 
 the law of value that equal amounts of capital produce the 
 same amount of surplus-value irrespective of their com- 
 position. But it is no contradiction of the law of value that 
 possessors of equal amounts of capital receive equal profits 
 if it could be shown that the two capitals have produced 
 different amounts of surplus-value, but that for some rea- 
 sons, compatible with the law of value, part of the surplus 
 produced by the capital of lower composition was trans- 
 ferred to the owner of the capital with a higher composi- 
 tion. This, says Marx, is just what actually happens 
 wherever the law of equal return comes, to the surface. 
 
 In actual life capitals of different organic composition 
 produce different rates of surplus-value commensurate with 
 the amounts of variable capital contained in them. But we 
 have already seen before that the whole surplus-value pro- 
 duced by any given capital is not retained by the owner of 
 that capital as profit on his capital. We have seen that, 
 by reason of the social nature of capitalistic prodCiction and 
 of the category of exchange-value, this surplus-value is 
 distributed among a number of other capitalists, who are 
 concerned in bringing the produced commodity to its social 
 destination through the circulation process. All the capi- 
 tals employed in the course of the life-career of the com- 
 modity share in the surplus-value created in its production, 
 and their share is proportionate to their size, the rate of 
 profit for each being arrived at by a division of the sur- 
 plus-value by" the aggregate amount of capital- used in the 
 production and circulation of the commodity. This is ac- 
 complished through the laws of supply and demand by 
 means of the category which we have called Price of Pro- 
 duction, and at which commodities are actually sold at 
 certain stages of their existence instead of at their values. 
 
 We have seen already that it is in accordance with the 
 laws of value as understood by us that commodities are not 
 always sold at their values; are, in fact, habitually sold at 
 prices other than their values, by reason of and under cer- 
 
130 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 tain economic conditions; and that a capitalist may, and 
 under certain conditions usually does, receive as profits on 
 his capital surplus-value created by some capital other than 
 his own. The price of production at which commodities 
 are sold at a certain stage of their existence is always be- 
 low their value; and the capitalists engaged in the circula- 
 tion of commodities exclusively, the merchants, get as 
 profits on their capitals surplus-value not produced by them 
 but merely realized by them. The capitalists who produced 
 this surplus-value are forced to divide up with them by the 
 very economic conditions which permit them to retain their 
 own proportionate share. 
 
 This principle, whicli we have heretofore examined with 
 relation only to one sphere of production, must be extended 
 to all the spheres of production wherein the law of equal 
 return prevails. Where the law of equal return prevails in 
 spheres of production wherein the capital employed is of 
 different organic compositions, the prices at which the 
 commodities are finally sold are not their actual values, but 
 a sort of modified Prices of Production which may be either 
 above or below their value, and which will be above their 
 value in the branches of industry with a capital whose or- 
 ganic composition is above the average, and below their value 
 in the branches of industry with a capital whose or- 
 ganic composition is below the average. Just as in the 
 single commodity the surplus-value produced by one capital 
 had to be distributed among all the capitals engaged in its 
 production and circulation, so here the various amounts of 
 surplus-value produced in the different spheres of produc- 
 tion must be distributed ratably among the whole social 
 capital or that part thereof which enters into the equaliza- 
 tion process, that is, of those branches of industry where 
 the law of equal return prevails. The whole social capital 
 is regarded as one, and the whole amount of surplus-value 
 produced in the different spheres of production is dis- 
 tributed ratably among the different individual capitals, by 
 the formation of the price of production, and the goods in 
 
THE GREAT CONTRADICTION. I3I 
 
 each branch of industry being sold according to that price 
 of production which will ccyisist of the value of its cost 
 of prbduction together with a share of profit out of the 
 general fund of surplus- value in proportion " to the size of 
 the ciapital employed in its production and circulation. By 
 means of this price of production the excess of surplus- 
 value above the average rate produced in one sphere of 
 production by reason of the low organic composition of the 
 capital employed therein, will be transferred to that sphere 
 of production wherein the amount of surplus-value pro- 
 duced is below the average, by reason of the high organic 
 composition of its capital. In those branches of industry 
 where the organic composition of capital corresponds with 
 the average or social composition of capital, commodities 
 will be sold at their values, their prices of production will 
 coincide with their values; in those branches whose or- 
 ganic composition is above the average, the prices of pro- 
 duction will be above their values in proportion to the com- 
 position of their capital; and in the branches whose compo- 
 sition is below the average the prices of production will be 
 proportionately below their values. 
 
 The appearance in 1894 of the third volume of Capital 
 created a sensation in interested circles. While it does not 
 stand in any direct relation to the Revisionist move- 
 ment, it can hardly be denied that it made its formal ar- 
 gumentation more plausible. The solution of the Great 
 Contradiction contained in the third volume, and the rest 
 of the matter therein contained and intimately connected 
 with this solution, opened the door to no end of dis- 
 cussion as to the relation between the first and third vol- 
 umes of Capital. So that the problem to many has turned 
 into the question how to reconcile the supposedly opposed 
 doctrines taught in these two volumes of Marx's life work. 
 The Great Contradiction, in the opinion of many, was not 
 solved, but extended so as to embrace the whole Marxian 
 theory. This was confidently asserted by all the opponents 
 of Marxism, who drew breath. It was heralded from one 
 
132 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 end of their camp to the other, and it took its classic form 
 in Bohm-Bawerk's, " Karl Marx and the Close of his Sys- 
 tem." The opponents of Marx were not, however, alone 
 in this opinion. The discussion which has continued until 
 the present day has shown that a good many Marxists, of 
 different shades of orthodoxy, shared in this view. So 
 much so, that a Russian Marxist of some prominence and 
 of strict orthodox profession of faith, being unable to 
 reconcile the doctrines laid down in the two volumes, re- 
 spectively, denied, in his desperation, the genuineness of 
 the "unfortunate" third volume! He claimed that be- 
 cause the third volume was published long after his death, 
 and was compiled from unfinished manuscripts and ran- 
 dom notes, Marx appears therein as saying things which 
 he really never intended to say and which are in crass 
 contradiction to his real views, which are contained only in 
 the first volume. Engels' preface to the third volume is 
 sufficient to show the absurdity of this last assertion. So 
 that there was the great contradiction, which made plausi- 
 ble the assertion that Marx completely abandoned his own 
 theory of value, laid down by him in the first volume, and 
 returned to the theory of the cost of production, of the 
 economists dubbed by him "vulgar." The half-and-half 
 Marxists, a la Bernstein, would not go so far (timidity 
 and eclecticism being their specialty), and they tried to 
 minimize the discrepancies between the first and third vol- 
 umes, claiming that Marx did not abandon his theory of 
 value as laid "down in the first volume, but merely modified 
 it, on second thought, in the natural course of the evolu- 
 tion of his theory. Modification by evolution, or evolution 
 in modification became their favorite theme. 
 
 In discussing Marx's philosophico-historic views we al- 
 ready had occasion to refer to this favorite theme of Re- 
 visionism. The burden of the song is that Marx's the- 
 oretical ideas had passed .through an evolutionary process, 
 the main tendency of which was from " unscientific," hard 
 and fast monistic dogmas, at the outset, to mild and loose 
 
THE GREAT CONTRADICTION. I33 
 
 eclectic " science " at the conclusion. This they applied 
 equally, and with equal justification, to the whole Marxian 
 theoretical system, to his historico-philosophic and his eco- 
 nomic theories alike, although they failed to grasp the inner 
 relation between these theories. Their lack of discrimina- 
 tion proved to be their undoing. If they had stuck to 
 Marx's historico-philosophic views alone, they might per- 
 haps have been able to hold their ground, as Marx's views 
 on the subject are not contained in any treatise, are strewn 
 over the whole mass of his writings in a more or less frag- 
 mentary condition, and it requires an intimate acquaintance 
 with his theories to see the improbability of this claim. 
 Not so with his economic theories. He went into elaborate 
 discussions of all phases of the subject, and the dates of the 
 different manuscripts, with a few unimportant exceptions, 
 are well known. And these testify loudly to the whole 
 world to the absurdity of these assertions. It appears that 
 most of the third volume, and particularly those portions of 
 it which are supposed to modify the first volume, were 
 actually written down by Marx in its present form before 
 the publication of the -first volume! To speak in the face 
 of that of a modification, by Marx, in the third volume of 
 the doctrines laid down by him in the first is too palpable 
 an incongruity to merit any particular attention. So, and 
 even more so, would be the claim of an intentional aban- 
 donment in the third volume of the theory of value of the 
 first volume in favor of some other theory. We could then 
 well afford to let the matter rest where it is. It is not so, 
 however, with the question of a contradiction between the 
 two volumes. If there really is such a contradiction, -and 
 if the doctrine of the third volume is a virtual abandon- 
 ment of the labor theory of value, it makes, of course, very 
 little difference when the different portions of Marx's book 
 were written, or what he thought of one portion when 
 writing the other, except, of course, as an interesting study 
 of a great aberration of an extraordinary mind. 
 Professor Werner Sombart, the noted German economist, 
 
134 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 best known to English readers tthrough his graceful study 
 " Socialism in the 19th Century," opened the discussion on 
 the subject soon after the appearance of the third volume 
 in an essay entitled, " Some Criticism of the Economic 
 System of Karl Marx."^ In the introductory remarks of 
 that essay Professor Sombart observes that Marx was a 
 "most misunderstood author," and that an intelligent state- 
 ment of his assertions was the highest duty of a reviewer 
 of his work. Such a statement he undertakes to give, and 
 goes about it very conscientiously. It must be stated, how- 
 ever, that notwithstanding his conscientious efforts and 
 considerable acumen the execution fell short of the design. 
 His conclusion, therefore, that there was no contradiction 
 between the first and third volume can not be accepted as 
 final. 
 
 According to Sombart, the theory laid down in the third 
 volume of Capital is not mucli different from the traditional 
 theory of the cost of production. This does not conflict, 
 however, with the theory of value expounded in the first 
 volume, for the simple reason that the labor theory of value 
 was never intended by Marx to represent the actual facts, 
 or, as he puts it, " the (Marxian) value does not reveal 
 itself in the exchange relation of the capitalistically-pro- 
 duced commodities." Nor does it play any part in the dis- 
 tribution of the yearly product of society. It has no place 
 in real life. Its office is merely that of an aid to our think- 
 ing, by means of which we can understand the economic 
 phenomena, and its place is in the mental operations of the 
 economic theorist. In short, "it is not an empirical but a 
 mental fact." Value, thus banished from economic life 
 into the realms of pure thought, can no longer come into 
 conflict with the gross facts of this life. Its existence is 
 none the less real, at least to the mind of the German 
 scholar who must have been educated on the writings of 
 the great German idealist philosophers. ^ 
 
 Aside from the questionable value of such " value," the 
 
 ^ Archiv fur Soziale Gesetzgebung und Statistik, Vol. VII, No. 4. 
 
THE GREAT CONTRADICTION. 135 
 
 chief trouble with Sombart's conception of the Marxian 
 " vaFue " is, — that it is not Marxian. Marx never dreamt 
 of banishing his " value " from real life, from the facts of 
 actual, every-day, economic life. He not only insisted that 
 his theory of value had an application to the actual 
 economic life of capitaHst society, but claimed that the 
 laws of value as laid down by him controlled that life and 
 prescribed the course of its development. He claimed that 
 while Production Prices, and prices in general differed 
 from the values of commodities, they were always gov- 
 erned by the laws of value and were dictated, normally, 
 and in the last instance, by these laws. That all declina- 
 tion of these prices from the actual values, except acci- 
 dental and temporary, are governed by the very laws of 
 value which are supposed to be infringed thereby. Truly, 
 Marx was " a most misunderstood author.'' 
 
 We, therefore, agree for once, with Bohm-Bawerk, that, 
 whatever the merits of Sombart's conception of value, it 
 does not in any way remove the contradiction in the Marx- 
 ian theory of value as Marx stated it. Assuming, of 
 course, that there is such a contradiction, if Marx intende.l 
 his theory to represent the actual course of events of capi- 
 talistic production and distribution. That there is such a 
 contradiction is assumed, as we have seen, even by some 
 orthodox Marxists, and Marx-critics do not tire of pro- 
 claiming the fact. Says Bohm-Bawerk: 
 
 " In what relation does this doctrine of the third volume 
 stand to the celebrated law of value of the first volume ? 
 Does it contain the solution of the seeming contradiction 
 looked for with so much anxiety ? Does it prove ' how 
 not only without contradicting the law of value, but even 
 by virtue of it, an equal average rate of profit can and must 
 be created ? ' Does it not rather contain the exact oppo- 
 site of such a proof, viz., the statement of an actual, ir- 
 reconcilable contradiction, and does it not prove that the 
 equal average rate of profit can only manifest itself if, and 
 because, the alleged law of value does not hold good? 
 
136 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 "I see here no explanation and reconciliation of a con- 
 tradiction, but the contradiction itself. Marx's third vol- 
 ume contradicts the first. The theory of the average rate 
 of profit and of the price of production cannot be recon- 
 ciled with the theory of value. This is the impression 
 which must, I believe, be received by every logical thinker. 
 And it seems to have been very generally accepted. Loria, 
 in his lively and picturesque style, states that he feels him- 
 self forced to the ' harsh but just judgment ' that Marx, 
 ' instead of a solution has presented a mystification.' He 
 sees in the publication of the third volume 'the Russian 
 campaign ' of the Marxian system, its ' complete theoretic 
 bankruptcy,' a ' scientific suicide,' ' the most explicit sur- 
 render of his own teaching,' and the ' full and complete 
 adherence to the most orthodox doctrine of the hated 
 economists.' " 
 
 Bohm-Bawerk then quotes with approval the following 
 passage from Sombart: "Most of them (the readers of 
 the third volume) will not be inclined to regard 'the so- 
 lution ' of ' the puzzle of the average rate of profit ' as a 
 '-solution ; ' they will think that the knot has .been cut, 
 and by no means untied. For, when suddenly out of the 
 depths emerges a ' quite ordinary ' theory of cost of pro- 
 duction, it means that the celebrated doctrine of value has 
 come to grief. For, if I have in the end to explain the 
 profits by the cost of production, wherefore the whole cum- 
 brous apparatus of the theories of value and surplus- 
 value?" 
 
 Slonimski says : " Contrary to all expectations the the- 
 ory of surplus-value is repeatedly asserted (in the third vol- 
 ume) ; in reality, however, it is denied by its author and 
 replaced by the old theory with all the familiar elaborations 
 on the cost of production as the only regulators of value. 
 The equality of profits is derived from the phantastic as- 
 sumption that the capitalists amicably divide among them- 
 selves the incomes of the different undertakings, by equal- 
 izing the sums of surplus-value which they separately drew 
 
THE GREAT CONTRADICTION. 137 
 
 from wage-labor, and that this is accomplished either by 
 way of brotherly arrangement or through- competition. As 
 to the special surplus-value for which the rival capitalists 
 fight so mercilessly, why that is lost sight of and plays no 
 part either in the income of the individual capitalist, or in 
 the establishment of the rate of profits or in the formation 
 of prices. 
 
 " After Marx has led us in the course of two volumes 
 through an elaborate analysis by which he sought to prove 
 that surplus-value is produced by hired human labor-power, 
 he turns a somersault and admits that all his laws and 
 formulas are in direct conflict with reality, and cannot be 
 brought into harmony. That surplus-value in the form of 
 profits is yielded by every productive capital as such in 
 equal amount, even thougl* it be used in such a manner 
 that no wage-laborers are employed thereby. Instead, 
 therefore, of surplus-value, which we put to the credit of 
 unpaid labor appropriated by the capitalists, we are con- 
 fronted with the average rate of profits, which is condi- 
 tioned neither upon the number of workmen nor upon the 
 degree of their exploitation, nor is it influenced by either." 
 
 And Masaryk declares: " De facto we have in the third 
 volume the ordinary theory of cost of production, and the 
 law of supply and demand plays the decisive part." 
 
 " Bernstein " — says he — " admits the breach between the 
 third and first volumes. Marx has certainly modified his 
 theory. The theory of value of the first volume is incom- 
 plete, and therefore vulnerable, without the elaborations of 
 the third volume. Bernstein admits that the first volume 
 offers for the real economic relations a ' sea of generalities 
 without any shore,' and that the determination of value by 
 the quantity of labor is inadequate; a more specific measure 
 is necessary. Commodities are exchanged -not at their 
 value but at their cost of production, the exchange-value 
 of goods is directly determined by competition of capital, 
 and only indirectly by the law of value. I believe that 
 Bernstein correctly judges the Marxian teaching. The 
 
138 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 third volume speaks only too plainly against the first." And 
 he adds: 
 
 " These expressions (of the third volume) show the gen- 
 eral change in Marx's views. We have seen how Marx 
 modified in the third volume his older definition of historic 
 materialism — the whole third volume makes also by its 
 tone a different impression than the first. The first volume 
 is not so ripe .... Bernstein attempts another explanation 
 of the contradiction between the older and the newer doc- 
 trines, which contradiction, as we have seen, he unquali- 
 fiedly admits." 
 
 Yes, " we have seen." We have seen how absurd it is 
 to speak of a modification of the older unripe doctrine by 
 the newer and riper doctrine, when the supposed older doc- 
 trine was formulated after the supposedly new one 
 
 And this, as Masaryk himself says, applies to all of Marx's 
 views, whether historico-philosophic or economic. Yet, its 
 evident absurdity will not deter Marx-critics, particularly 
 of the milder and revisionist sort, from continually repeat- 
 ing this statement. 
 
 This, however, by the way. What does interest us just 
 now is the relation of the third to the first volume, incident 
 to Marx's solution of the " Great Contradiction."^ Singu- 
 larly enough, most of the Marx-critics are content with 
 merely stating ex cathedra their conclusions or assertions 
 that Marx has, in the third volume, " modified " or " aban- 
 doned " the theory stated by him in the first volume, that 
 he contradicts it, that he has adopted a new theory, without 
 giving themselves any particular pains to show the reader 
 just how they arrived at these conclusions, or what is the 
 basis of their assertions, except in the most general way. 
 Always excepting the methodical Bohm-Bawerk, who, be- 
 sides his general remarks, has also particular objections, 
 separately stated and numbered. We shall pay our respects 
 to them in due time, if there is anything left of them after 
 our general discussion. 
 
 Before entering, however, upon the discussion of the 
 
THE GREAT CONTRADICTION. I39 
 
 theoretical questions involved, we must call attention to 
 the circumstance that the facts themselves are not in dis- 
 pute here, but only their interpretation. Notwithstanding 
 the apparently unanimous verdict of the critics that the 
 Marxian theory is on this point " in direct conflict with 
 reality " and " opposed to the facts," there is really no 
 question here of facts, but merely of their interpretation. 
 The phenopienon itself which, as Marx asserts, brings the 
 Marxian law of value in harmony with the law of equal 
 rate of profit, that is to say: the alleged fact that the 
 products of labor in spheres of production with a higher 
 organic composition of capital are sold at higher prices 
 than the products of labor in spheres with a lower com- 
 position of capital, this fact itself, we say, is not disputed 
 by the Marx-critics. It is only as to the explanation of 
 this fact that they differ from Marx. Marx's explanation 
 is based, in the main, on the fact, undisputed by his critics, 
 that the same amount of labor results in a product which 
 will be sold for a higher or lower price according to the 
 higher or lower organic composition of capital in the sphere 
 in which it was employed. The difference between Marx 
 and his opponents is as to the reason for this alleged fact. 
 Marx says the reason is that in the spheres with a higher 
 composition of capital commodities are sold above their 
 value and in spheres with a lower composition of capital 
 below their value; and that the additional value included 
 in the higher price of commodities produced in the first 
 sphere is created in the other sphere and is transferred to 
 their possessor by the very sale of commodities produced 
 in the second sphere below their value. With this reason- 
 ing his critics disagree, as they undoubtedly have a right 
 to. But they have no right whatever to hide the circum- 
 stance that it is their reasoning that is opposed to Marx 
 and not the facts. It is a question of logic and not of fact. 
 Now, as to the logic of the matter. That there must 
 have been some very poor logic used by somebody can easily 
 be seen from the fact that all Marx-critics who agree that 
 
140 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 Marx in his " riper " judgment abandoned his theory of 
 value, also agree that even the Marx of the riper judgment 
 never knew that he was propounding in the third volume 
 an old and commonplace theory and was abandoning his 
 own theory, on the exposition of which he wasted the entire 
 first and second volumes of his life work. 
 
 In what does this abandonment consist according to the 
 Marx-critics? Stripped of their verbiage the statements 
 of these critics amount to this : In the first volume Marx said 
 (i) that the value of a commodity depends on the amount 
 of labor necessary for its (re) production, and that such 
 value was the point about which its price will oscillate; 
 (2) that the profits of the capitalist, therefore, come from 
 the. amount of surplus-value created by his workingmen; 
 and (3) that the cost of production has nothing to do with 
 the value or price of a commodity or the profits of the 
 capitalists. In the third volume, on the other hand, he 
 admits that (i) the price of a commodity may be, and 
 usually is, permanently fixed at, or oscillates about, a 
 point which is different from its value as measured by the 
 amount of labor necessary for its (re) production; (2) 
 that the amount of profits which a capitalist obtains from 
 his capital does not depend upon the amount of surplus- 
 value produced by his own workingmen; and (3) that the 
 old theory of cost of production as to value, price and 
 profit holds good. 
 
 We will discuss the last proposition first, for the reason 
 that it may throw some light on the whole subject. 
 
 Marx says nowhere in the third volume that the cost of 
 production of a commodity determines either its value or 
 its price, except to say that the old values which go into 
 its production in the shape of raw material, etc., are re- 
 produced in it and form part of its "value and consequently 
 of its price, a proposition which nobody will claim, is an 
 innovation of the third volume. Wherein does the " quite 
 ordinary" theory of cost of production of the third volume 
 then consist? Evidently in the theory of the Price of Pro- 
 
THE GREAT CONTRADICTION. I4I 
 
 duction developed in the third volume. But has the price 
 of production anything to do with the cost of production? 
 Have not the learned critics been misled by the similarity 
 of terms ? Let us see. What is the " ordinary " theory of 
 cost of production? That the value of a commodity is 
 equal to the cost of its production, plus the average rate of 
 profit on the capital invested in its production. Marx's 
 Price of Production consists of the costs of production 
 (that is, of the value of the different ingredients which go 
 into the production) plus the average rate of profit on the 
 capital invested in the production process. The two things 
 look so much alike to the uninitiated that one is not sur- 
 pr-ised to hear Sombart complain that if that is what we 
 were to come to in the end, wherefore the " cumbrous 
 apparatus " of value and surplus-value ? 
 
 Let us examine the matter a little closer, however. A 
 close examination will show, in the first place, that the 
 Marxian cost of production which forms a part of the 
 Price of Production, is determined . by its value according 
 to the labor theory of value, whereas the " ordinary " theory 
 of cost of production has no such determining element. 
 As a result, the "ordinary" cost of production theory re- 
 volves in a vicious circle: The value of a commodity is 
 determined by the cost of its production, the cost of its 
 production is determined by the value of the commodities 
 which go into its production, the value of these commodi- 
 ties is determined by the cost of their production, and so 
 on, and so forth, ad infinitum. In other words, the " ordi- 
 nary theory of cost of production can no more explain 
 either the value or the price of commodities than a man 
 can pull himself out of the mire by his own bootstraps. 
 
 This is not, however, the principal point; The " cum- 
 brous apparatus" of the Marxian theory of value and sur- 
 plus-value was necessary in order to attain the principal ob- 
 ject of the science of political economy, the discovery of the 
 laws governing the production and distribution of profits 
 in the capitalist system. We have already dwelt on this 
 
142 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 point at length in a preceding chapter. And this "cum- 
 brous apparatus" is still necessary, and is still the only- 
 means of attaining this object of political economy, all the 
 Marx-critics to the contrary notwithstanding. Neither the 
 ordinary nor any extra-ordinary theory of cost of pro- 
 duction even as much as attempts to solve this problem, 
 which is the problem of political economy. The theory of 
 cost of production, which even the " Marxist " Sombart 
 places on a level with the Marxian theory, tells us gravely 
 that the value of a commodity is equal to the cost of its 
 production plus "the average rate of profit." But what is 
 this " average rate of profit " ? By what is it determined ? 
 Where do profits, whether average or non-average, come 
 from? 
 
 In vain will the inquirer look to the theory of cost of 
 production for an answer. Buf these questions are all an- 
 swered by the Marxian theory, which our astute critics evi- 
 dently did not begin to understand. The first volume shows 
 the genesis and general laws of' profits; the second volume 
 shows the distribution of profits between the different cap- 
 italists, instrumental in the production and distribution of 
 commodities, and the influence of the circulation process 
 on profits; and the third volume shows the reciprocal in- 
 fluences of the different spheres of production and distribu- 
 tion of commodities in the yvhole capitalist system, and the 
 mode of distribution of all the profits netted to the capital- 
 ist class among its different members, the formation of the 
 average rate of profit: 
 
 Bf reason of the formation of an average rate of profits, 
 the profit of the individual capitalist does not depend on 
 the amount of surplus-value produced by his own working- 
 men. This, as we have seen, is the second point on which 
 the third volume is supposed to conflict with the earlier 
 volumes. This objection rests on the grossest misunder- 
 standing of the first and second volumes. Marx never said, 
 and could never have said, that every individual capitalist's 
 profits consist of the surplus-value created by his own 
 
THE GREAT CONTRADICTION. 143 
 
 workingmen, or that every capitalist pockets all the sur- 
 plus-value produced by his workingmen. Such a statement 
 would be absolutely repugnant to the spirit of the Marxian 
 doctrine as laid down in the first volume. The cardinal 
 difference between the Marxian theory of profits and the 
 theories which preceded it, is that according to Marx all 
 profits of the capitalist class are derived from the process 
 of production. It is with the exhaustive elaboration of this 
 doctrine that the first volume is chiefly concerned, and this 
 is supplemented in the second volume by showing the nega- 
 tive implied thereby, — that no profits are created in the 
 circulation process. But Marx certainly knew that profits 
 are made by the capitalists engaged in the circulation pro- 
 cess. It was this very knowledge that impelled him to 
 write so exhaustively in order to prove that while these 
 capitalists derive their profits from the circulation process, 
 they merely realize during this process, and by means there- 
 of, the profits which are created in the form of surplus- 
 values during the process of production. 
 
 Of course, this could only happen if some of the capital- 
 ists receive profits not created in the form of surplus-value 
 by their own workingmen; nay, notwithstanding the fact 
 that their workingmen created no surplus-value whatever, 
 or that they employed no workingmen at all. This, again, 
 could only happen if the capitalists engaged in the produc- 
 tion process did not retain all the surplus-value created by 
 their workingmen, but divided them with the capitalists en- 
 gaged in the circulation process. It is with the explanation 
 of these facts that the first and second volumes are filled. 
 Yet, some Marx-critics evidently missed even this ! 
 
 This disposes of the proposition placed first by us because 
 of the prominence given to it by Marx-critics. How could 
 all the surplus-value be produced in the production process 
 of commodities and yet part of it realized in the circulation 
 process, if goods are actually sold at their values? If the 
 value of commodities is the point about which their prices 
 oscillate at all stages of their existence, all the surplus- 
 
144 'the THEOREtlCAL SYSTEM OF KAtlL MARX. 
 
 value contained in them must evidently be realized as soon 
 as they are sold by the producer, and unless some new value 
 attaches to theni in the circulation process, the capitalist 
 engaged in that process cannot possibly make any profit. 
 Here was a contradiction greater than any that could result 
 from the supposed law of a common rate of profits, assum- 
 ing that Marx ever did say that the price of commodities 
 will always oscillate about their value. The " solution " 
 of this "Great Contradiction" is that Marx, as we have 
 repeatedly pointed out, never did say any such thing, and 
 the reading of such a thing into Marx is simply preposter- 
 ous. A careful reading of the first and second volumes 
 of Capital clearly shows that the price of commodities is 
 governed hy their value, but that it need not conform to it, 
 nor even always oscillate about it. Quite to the contrary. 
 Under given conditions, which are necessary at certain 
 stages of the existence of every commodity, its price will 
 remain constantly away from its value. Always, however, 
 subject to the general laws of value, and by reason of the 
 laws of value. The price formed under these conditions is 
 the Price of Production. 
 
 It is generally assumed that the category of the Price of 
 Production is an innovation introduced by Marx in the 
 third volume in an effort to solve the contradiction between 
 the law of value and the law of equal return. This is a 
 mistake. While the term "Price of Production" is first 
 used in the third volume (because there only are all the 
 conditions under which it forms discussed for the first 
 time) the principle itself is contained in the earlier vol- 
 umes, and has absolutely nothing to do with the particular 
 problem presented by the question of the equal fate of 
 profits. When Marx came to treat of that problem he sim- 
 ply applied to it a principle which already was part of his 
 system as expounded by him in the first and second vol- 
 umes. The only differeiice between , the category of Price 
 and Production as implied in the first and second volumes 
 and as expressed in the third volume is this: The condi- 
 
THE GREAT CONTRADICTION. I45 
 
 tions for the formation of this price discussed in the first 
 two volumes were such as made it always below the value 
 of commodities, whereas the conditions for its formation 
 discussed in the' third volume make it possible for the price 
 of production to be either below or above the value of the 
 commodity. But whether above or below value, whether 
 formed by reason of the average rate of profit or under the 
 conditions described in the first and second volumes, or 
 both, the price of production is governed by the value of 
 the commodity, and exists by reason therejyf and in con- 
 formity to its laws. In other words, notwithstanding the 
 fact that prices may, in the capitalist system of production 
 and distribution, be permanently at, or oscillate about, a 
 point different froin the value of commodities, the forma- 
 tion of these prices, and, consequently, their movement, is 
 governed by the laws of value. 
 
 This ought to be plain to all Marx students. But the 
 trouble with Marx-critics, in the economic branch of his 
 theory, as with those who treat of his historico-philosophic 
 ideas, is, that they cannot distinguish between the individ- 
 ual and social element and cannot see things in their mo- 
 tion. Because the profit of an individual capitalist does 
 not depend merely on the amount of surplus-value produced 
 by his workingmen, they conclude that the theory of sur- 
 plus-value does not explain the profits which the capitalists 
 get under the capitalist system. And because the price 
 of some commodities may be more or less permanently 
 above or below their value, they assert that the law of value 
 governing the formation and movement of prices in the 
 capitalist system is incorrect. They cannot see that before 
 the capitalist could get his profits at any given general rate, 
 that rate must have been established in society according 
 to some law; and that before the price could be at a certain 
 point, it had to be put there by some social law of value. 
 And they cannot therefore see how the individual and 
 statical cases, while apparently deviating from the general 
 laws in their movement, are actually governed by them. 
 
146 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 To borrow an example from another science, and an 
 " exact " one at that. The critics of the Marxian law of 
 value are exactly in the same situation as would be the critic 
 of the law of gravity, who would declare that law to be 
 false for the reason that bodies do not fall in actual ex- 
 perience in accordance with the rules formulated by it. 
 Indeed, such a critic would be in a better position than the 
 Marx-critics. For, while according to the laws of gravity 
 falling bodies acquire an acceleration of 981 centimeters per 
 second, and that irrespective of their nature, form or size, the 
 "facts of experience" prove conclusively that, not one body 
 in a million actually falls at that rate, and any child of 
 some intelligence will tell you that the nature, the form, and 
 the size of a falling object, make all the world of differ- 
 ence in the velocity which it can acquire. Yet, the law 
 of gravity is correct when properly understood. And the 
 Marxian law of value is no less correct. But it requires a 
 greater intelligence than that usually displayed by intelli- 
 gent children, observers of " facts of experience," and 
 some Marx-critics, to understand it properly. Therein lies 
 the whole trouble. 
 
CHAPTER VII. 
 
 ECONOMIC CONTRADICTIONS AND THE PASSING OF CAPITALISM. 
 
 In the preceding chapters we have endeavored to show 
 the purpose of Marx's inquiry into the laws of exchange- 
 value, and how those laws furnish the key to the under- 
 standing of the workings of the capitalist system of pro- 
 duction and distribution. 
 
 We have examined the capitalist system as it is, without 
 going into the question of its origin, except to note the fact 
 that it had an historic origin, that is to say, that it is not 
 eternal or even immemorial in its existence but is a his- 
 torical phenomenon having had its origin within the re- 
 corded memory of men. 
 
 We have examined some of the tendencies of its devel- 
 opment, but only within its confines. We have examined 
 some of the tendencies in the development and distribution 
 of the mass of surplus-value produced in the capitalist sys- 
 tem while it lasts. The question of its lasting, as to its 
 extent and form, we have not touched upon. We might of 
 course say, a priori, that since the capitalist system is only 
 a historic phenomenon it will certainly not last forever. 
 While this is true, it is of no importance whatsoever, unless 
 we can say with some degree of certainty that the passing 
 of this system is of such proximity that its end can be seen, 
 and this is only possible if its end is so near that we can 
 discern its form, or rather the form of the system which is 
 to succeed ^d supplant it. This again can only be de- 
 termined, if at all, from an examination of the tendencies 
 of the capitalist system, and the laws governing it, fol- 
 lowed out to their ultimate and logical results so as to see 
 
 147 
 
148 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 whether they lead beyond the capitalist system itself. And 
 if so, whither are we drifting? 
 
 Should a careful and exhaustive examination of the 
 tendencies of the capitalist system fail to lead to any be- 
 yond, then we must accept the capitalist system as unlim- 
 ited in duration for all practical purposes. For the social 
 system which is to succeed the capitalist form of society, 
 must be born and developed within the bowels of capitalism, 
 and it will come into existence only after the passing of 
 capitalism shall come about as the necessary and logical 
 result of the full development of the laws of its own being. 
 And it will be long before the end of the old system, and 
 the birth of the new one will come, that the signs of de- 
 caying old age and of the new germs of life will manifest 
 themselves to the intelligent observer. 
 
 The examination which Marx made of the capitalist sys- 
 tem has not only revealed to him the laws which govern 
 the production and distribution of wealth within the system, 
 but also the historical tendencies of its development which 
 show its place in history with reference to its origin as well 
 as its passing. His work, " Capital," is therefore not only 
 an explanation of the workings of the capitalist system, 
 but also an historical estimate, an appreciation thereof. 
 The sub-title of the work, " A Critique of Political Econ- 
 omy," refers not so much to the theories/ of the political 
 economists who preceded him with reference to the ex- 
 planation of the actual workings of the capitalist system, as 
 to their failure to appreciate the tendencies and the laws 
 of capitalism which will lead to its ultimate passing away. 
 According to Marx, the capitalist system of production 
 and distribution is so full of inherent contradictions, that 
 its own development, if the laws of its own existence are 
 permitted to freely assert themselves, will lead to its ulti- 
 mate and speedy destruction. For, not only are the laws 
 of capitalism inherently contradictory, but the developtnent 
 of capitalism has already reached that stage where the 
 contradictions upon which it rests make themselves felt to 
 
ECONOMIC CONTRADICTIONS. I49 
 
 its own detriment, and the forces and elements which are 
 to work its destruction and supplant it are maturing rapidly 
 before our very eyes. So does the system which is to take 
 the place of capitalism take definite shape and outline, so 
 that its general form and appearance stand clearly before 
 our vision inscribed: Socialism. 
 
 Before proceeding, however, any further with this ex- 
 amination, our attention is called to a question which might 
 interfere with the progress of our inquiry unless answered 
 right here. There is perhaps no question which leads to 
 as much discussion, and as contradictory opinions, since 
 the advent of Revisionism, as the question of the relation 
 between the theory of value and socialism in the Marxian 
 theoretical system. The cleavage of opinion is in the main 
 along the lines of orthodox and revisionist Marxism, the 
 former claiming an intimate relation and interdependence 
 between these parts of the Marxian theory, and the latter 
 denying it. This alignment on the present question is not 
 very strict, however; and absolutely irreconcilable opinions 
 on this subject are held by Marx-critics belonging to the 
 same camp. A glance into the discussion of this subject 
 will again reveal the almost hopeless state of ignorance of 
 the Marxian theory which prevails even among the ablest 
 of Marx-critics. 
 
 According to Tugan-Baranowsky ^ (who agrees in this 
 respect with most orthodox Marxists) Marx based his 
 socialism entirely on what he thought to be the laws of 
 capitalistic development resulting from the peculiarities of 
 the law of value which forms its keynote. Oppenheimer 
 and Simkhowitch,'' however, and a host of others, insist 
 that Marx's theory of value has nothing whatever to do 
 yi^ith his socialism. 
 
 * Michael Tugan-Baranowsky, Theoretische Grundlagen des Marxismus. 
 Leipzig, 1905. Der Zusammenbruch der Kapitalistischen Wirtschaftsord- 
 nung. In Archiv fiir Sozialwissenschaft und Sozialpolitik. Vol. 19. 
 
 ' Franz Oppenheimer, Das Grundgesetz der Marxschen Gesellschafts- 
 lehre. Berlin, 1903. V. G. Simkhowitch, Die Krisis der Sozialdemokratie. 
 In Jahrbiicher fiir Nationaloekonomie und Statistik (1899). 
 
ISO THE THEORETICAL SYSTEM OF KARL MARX. 
 
 Curiously enough, Tugan-Baranowsky on the one hand 
 and Oppenheimer and Simkhowitch on the other, all claim 
 one and the same passage in Engels as authority in support 
 of their respective positions; which adds no little to the 
 bewilderment of the simple-minded reader. The treatment 
 which this particular passage from Engels has received, 
 and the uses to which it has been put, is very characteristic 
 of up-to-date Marx-criticism, particularly of the Revisionist 
 brand: Detached passages, sentences and phrases, from 
 Marx and Engels are bandied about without the slightest 
 attention being paid to the particular context or connection 
 in which they were used, thus often making them yield an 
 entirely different meaning from that intended by the author. 
 The result is that everybody proves by Marx and Engels 
 themselves whatever opinions he pleases to ascribe to them, 
 a most fruitful field is provided for the adherents of the 
 theory of evolution in Marxism, and a plentiful harvest is 
 assured to the gatherer of Marxian contradictions. 
 
 V. G. Simkhowitch, who has to his credit one of the 
 wordiest essays on Marxism, published in one of the most 
 learned German magazines, says : " Marx's socialist de- 
 mands and his theory of value are genetically related, but 
 systematically considered there is no connection whatever 
 between them. In saying this I merely repeat something 
 which is self-evident to every philosophically educated per- 
 son who has grasped the Marxian philosophy ( Weltan- 
 schauung). .'Anybody who cares can find specific state- 
 ments to that effect in Marx and Engels. So says Engels 
 about the relation of Marx's socialism to his theory of 
 value: Marx therefore never based his communistic de- 
 mands thereon, but on the inevitable break-down of the 
 capitalistic mode of production which we daily see approach- 
 ing its end. And in the literature of Marxism this has 
 always been insisted on." 
 
 At the risk of being accounted philosophically uneducated 
 we shall have to disagree with our philosophic Marx-critic, 
 along with others, for reasons which will presently appear. 
 
ECONOMIC CONTRADICTIONS. IS^ 
 
 Just now however it is the passage quoted from Engels 
 that interests us. We must say most emphatically that 
 Engels never said any such thing as he is made to say by 
 our philosophically educated critic. Not that the words 
 quoted are not Engels'. The word§ were used by Engels, 
 surely enough. But their meaning is entirely different. For 
 Engels did not say this, ".About the relation of Marx's 
 socialism to his theory of value " as Simkhowitch (and 
 Oppenheiiher) seem to think, but about something else, 
 which exactly reverses the meaning of the passage. In his 
 preface to Marx's " Misery of Philosophy," Engels says 
 that long before Marx some socialists attempted to base 
 their socialism on the Ricardian theory of value, claiming 
 that since, according to Ricardo, labor is the source of all 
 value, the laborers are entitled to all the value produced, 
 which means to the whole social product. And then he 
 goes on to say : 
 
 " The above application of the Ricardian theory, namely, 
 that to the workingmen, as the only real producers, belongs 
 the entire social product, their product, leads directly to 
 communism. This application is, however, as Marx points 
 out in the passage quoted above, economically formally 
 false, for it is simply the application of ethics to economics. 
 According to the laws of capitalistic economics the greatest 
 portion of the product does not belong to the workingmen 
 who produced it. We may say: this is wrong, it must not 
 be. But that has nothing to do with economics. We 
 merely say by this, that this economic fact is opposed to our 
 moral feelings. 
 
 " Marx therefore never based his communistic demands 
 thereon, but on the inevitable break-down of the capitalist 
 mode of production which we daily see approaching its 
 end." 
 
 Our philosophically educated critic evidently got things 
 somewhat mixed. Marx never based his communistic de- 
 mands on the moral application of the Ricardian, or his 
 own, theory of value. Nor on any morality for that mat- 
 
152 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 ter. Therein he differed from the Utopian socialists who 
 preceded him and from such of those who followed him, 
 who, like Bernstein for instance, have returned to the 
 moral application of economic theories. That is why Bern- 
 stein and the rest of the Revisionists do not see the con- 
 nection between the Marxian theory of value and his social- 
 ism. Any theory of value will do for them as long as it 
 permits, or they think it permits, the moral application 
 which they are after. And as any theory might be made to 
 yield such a moral to those who look for it, they have be- 
 come indifferent to theories of value in general. Not so 
 with Marx. His socialism is scientific, as distinguished 
 from Utopian based on moral applications, in that it is the 
 result of " the inevitable break-down of the capitalistic mode 
 of production." But this inevitable break-down can only be 
 understood and explained by the aid of the Marxian theory 
 of value. That is why his theory of value and his social- 
 ism are so intimately connected in his system. Marx based 
 his socialism on his theory of value. But on its economic 
 results, not on its moral application. And it is due to the 
 lack of understanding on the part of his critics as to what 
 Marx conceived to be the economic results of his theory 
 of value, that the discussion of the relation between his 
 theory of value and his socialism is still going on, and his 
 and Engels' writings are still being put to all sorts of uses. 
 
 The law of value which lies at the basis of capitalism 
 contains within itself, according to Marx, a mass of con- 
 tradictions which lead in the development of capitalist 
 society to the formation of a series of antagonistic elements 
 which must ultimately result in its break-down. While 
 these contradictions and antagonisms are developed by the 
 same economic process, they are not all of a strictly eco- 
 nomic nature, and may have results of what is usually con- 
 sidered a moral character. 
 
 While the facts themselves which will lead to the dis- 
 placement of the capitalist system must be strictly economic 
 in their nature, that is to say the capitalist mode of pro- 
 
ECONOMIC CONTRADICTIONS. 153 
 
 duction and distribution must become a fetter upon pro- 
 duction before it can be overthrown, the actual power which 
 will overthrow it, or at least the form which this will assume 
 in the consciousness of the men who will do this work, may 
 be of a moral or ethical character. For man possesses the 
 peculiarity of placing absolute standards on relative mat- 
 ters, and he calls moral everything that accelerates his prog- 
 ress on any road which he may be travelling, and im- 
 moral everything that retards this progress. When he 
 finds, therefore, that any given arrangement is in his way 
 he declares it to be immoral and fights it with all the force 
 of his "moral nature," 
 
 He may, therefore, be depended upon to make a moral 
 issue of, and lead a crusade against, anything that will stand 
 in the way of his economic progress. It is to the economic 
 facts of capitalism that we must therefore look for the 
 basis of socialism. 
 
 In order to appreciate properly these facts, we -must go 
 back a little to the beginning of our examination of the 
 capitalist system. We have there noted the difference be- 
 tween the wealth of capitalistic society and that of the forms 
 of society which preceded it. We have noted that dif- 
 ference to be in the fact that capitalistic wealth is an ag- 
 gregation of commodities. This, as was also already noted, 
 is due to the circumstance that the purpose of capitalistic 
 production is different from that of any former mode of 
 production. - 
 
 This difference in the purpose of production, production, 
 for the market instead of for use, has wrought a change 
 in the process of distribution of the social product between 
 the different social elements which are to share therein. 
 Under former systems of production this process was a 
 very simple one, and the persons engaged in it were con- 
 scious and well aware of what they were doing. It was an 
 extra-economic process, in a way, the real economic pro- 
 cess being confined to the process of production. It was 
 in the capitalist system that the process of distribution first 
 
154 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 became an unconscious, " natural," and economic process, 
 by the addition of the circulation-process to the production- 
 process of commodities, as part of the general economic 
 process of society, and that part of it in which the distri- 
 bution of the produced commodities among those entitled 
 to them is to take place. 
 
 From the capitalist standpoint the circulation-process of 
 commodities is the most important of the economic pro- 
 cesses. Not, however, because it is .only by this process 
 that the produced commodities reach their social destina- 
 tion, the consumers, but because it is in this process that 
 all value, including the surplus-value, the cause and aim of 
 capitalist production, is realized. Until realized in the cir- 
 culation process, all value produced for the capitalist, 
 " necessary " as well as " surplus," is only potential value, 
 liable to be destroyed at any moment by some change in 
 the social conditions of its production or distribution. In 
 order that the capitalist class may obtain its surplus-value, 
 the whole value must not only be produced but consumed, 
 either absolutely or productively. And in order that the 
 individual capitalist may obtain his share of the fund of 
 surplus-value created for his class, the value in the pro- 
 duction or circulation of which he is economically engaged 
 must be consumed as far as he is concerned, that is to say, 
 it must reach his immediate consumer. 
 
 This process of the realization of value and of the dis- 
 tribution of the surplus-value in the circulation-process of 
 commodities is presided over by the God of capitalism — 
 Competition — who, as all the world knows, is " the life of 
 trade." The share of the surplus-value which each in- 
 dividual capitalist obtains depending on his success in this 
 competition, the source of all surplus-value has been lost 
 sight of, and the importance of the circulation process 
 grossly exaggerated. It has, however, a real and vital 
 importance to the capitalist class, for it is here that the 
 surplus-value produced elsewhere is actually realized. 
 
 The essentials of capitalism are therefore three. Private 
 
ECONOMIC CONTRADICTIONS. 155 
 
 Property; a free working class; and Competion. Private 
 property in the means of production is, of course, at the 
 foundation of the capitalist system as it is of all societies 
 divided into classes. In this it does not differ from other 
 class-societies which preceded it. Not so with the other 
 two elements. They were almost unknown to the social 
 systems which preceded it, but are absolutely essential to 
 capitalism. We have already seen how important a role 
 competition plays in the realization and distribution of the 
 surplus-value among the members of the capitalist class. 
 It also plays an important part in determining the relative 
 amount of the surplus in all the values that are produced, 
 as we shall have occasion to see later. 
 
 This however, depends on the third element, the free 
 working-class. The working-class in order to serve as an 
 efficient instrument of capitalist production must be ab- 
 solutely free. " Free," as Marx says, both from personal 
 bondage and from the ties of property. Were the work- 
 ingmen to be burdened with property the whole edifice of 
 capitalism would be impossible, for the commodity labor- 
 power would then be absent from the market and the 
 possession of the necessary and surplus-value would then 
 be united in the same person, which would extinguish all 
 difference between .them. Production of commodities would 
 also be next to impossible were the workingmen not free 
 personally so as to be able to sell their labor-power to the 
 highest bidder. Competition among the producers would 
 then be impossible. For competition irr\plies equality of 
 opportunity, whereas under such conditions the opportunity 
 of production would depend on the possession of working- 
 men. 'Besides, production or abstention from production 
 would then depend not on the choice of the capitalist but 
 on the number of workingmen he possessed. He could 
 not produce if he possessed none, and would be compelled 
 to produce if he possessed them. For it is of the essence 
 of a slave that he must be fed, and consequently worked. 
 The presence of these three elements together turns the 
 
156 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 means of production into " Capital/' and gives .the laws 
 of capitalism free play. Hence, free trade is the typical 
 policy of capitalism, as is the " free " employment of private 
 property, personal liberty and right to contract, with all 
 that it implies. And protection in any form, or the inter- 
 ference with property and liberty in any manner, is a sign 
 of either an imperfectly developed capitalism, or of capi- 
 talism in a stage of decay and tottering to its' fall. 
 
 What, then, are the tendencies of the development of 
 these elements of the capitalistic system? How do they in- 
 fluence one another in the course of their development? 
 And how is the production and realization of surplus-value, 
 the aim and purpose of capitalistic economic activity, 
 affected by the sum-total of these influences? 
 
 The growth of capitalism, in so far as it is not merely 
 expansion over an increased area, but development of force 
 and power, means the rapid accumulation of capital, more 
 particularly of machinery of production and circulation. 
 All our great accumulations of wealth consist of this ma- 
 chinery with the exception of some consisting of land, 
 which, as we have seen, gets its value from the reflex ac- 
 tion of this machinery. The accumulation of machinery 
 does not mean, however, the mere piling up of machinery 
 upon machinery; that is to say, it does not mean the mere 
 addition of machinery of the same kind to that which al- 
 ready exists. The process of accumulation starts out, of 
 course, by addition of machinery of the same kind. But it 
 does not proceed very far in that way. The real spring 
 of the process consists in the constant invention of ever 
 hewer and costlier machinery. The economic value of this 
 machinery (that is its value as an economic force) consists 
 in its labor-saving quality. , It is of the essence of every 
 new invention that it must be labor-saving in some way, 
 otherwise it is useless to capital. This mechanical law of 
 the accumulation of capital finds its economic expression 
 in the law of the rising organic composition of capital. 
 
 The essence of all new machinery introduced in the pro- 
 
ECONOMIC CONTRADICTIONS. I57 
 
 cess of accumulation of capital being its labor-saving qual- 
 ity, and the purpose of its introduction being the replacing 
 of costly live-labor- by a cheaper mechanical process, the 
 accumulation of capital is only possible by the constant re- 
 placement of live-labor by machinery, by the ever-recurring 
 forcing out of employment of great masses of labor. Thus, 
 this mechanical law of the accumulation of capital, which, 
 as we have seen, finds its economic" expression in the rising 
 organic composition of capital and therefore in the falling 
 rate of profits, finds its sociological expression in the capi- 
 talistic law of relative over-population. 
 
 That is to say, that under capitalism a country may be- 
 come over-populated with relation to the needs of capital 
 or of the capitalist class in laborers, and large masses of 
 its population may thereby lose their means of productive 
 employment and therefore their means of subsistence, while 
 the absolute needs as well as means of employment and 
 subsistence are quite suificient to provide for all its mem- 
 bers. The Malthusian law, whatever else may be said of 
 it, certainly has no application to the question of population 
 under th,e capitalist system of society. For aside from the 
 question whether there are any " natural " laws govern- 
 ing the growth of population and of the means of sub- 
 sistence, such laws, if there be any, would be quite super- 
 fluous and inoperative under capitalism. For the very pro- 
 cesses by which capital is being accumulated produce an 
 over-population long before the natural limit of population 
 could be reached, and that limit is therefore never reached 
 under capitalism. 
 
 The laborers who are continually being thrown out of 
 employment by the introduction of new, labor-saving, ma- 
 chinery, are thereafter absorbed in whole or in part by the 
 process of production, when the new capital, or the old 
 capital in its new form, has had sufficient time to expand 
 and accumulate on the new basis so as to need new 
 "hands." This process of absorption continues as long as 
 the accumulation proceeds on this new (soon to become 
 
158 THE THEORETICAL SYSTEM Off KARL MARX. 
 
 old) basis of production, and until it has sufficiently ac- 
 cumulated to require, and has actually found, a new basis 
 of production in the further invention of some newer ma- 
 chinery. When this occurs there is a new " freeing " of a 
 mass of workingmen from the bondage of employment, and 
 the process begins all over anew. 
 
 This constant hunt for additional surplus-value, here by 
 expanding the old processes of production by constantly 
 employing more labor and here by changing the processes 
 so as to narrow down its base of human labor, in short: 
 the process of accumulation of capital, requires, not only a 
 " free " but an elastic working class. It necessitates the 
 existence of a " reserve " army of workingmen beside the 
 active one. This it creates and augments by the repeated 
 displacements of live-labor by machinery, and it makes 
 use of it for the purposes of expansion when accumulation 
 glides along smoothly until the next " fitful " explosion. 
 The greater the accumulation of capital, the greater the 
 " reserve " army which it needs and creates, as compared 
 with the " active " army which it maintains. The " re- 
 ' serve " army is not identical with the " army of the un- 
 employed," but the greater the " reserve " the greater the 
 potential army of the unemployed. 
 
 The workingmen under capitalism being " free " and 
 equal, there is no actual line of division between the active 
 and reserve army of laborers. On the contrary they are 
 in continual flux, men on duty and reservists continually 
 changing place, and the same men sometimes being half 
 active and half reserve. The existence of the reserve army 
 and this relation between the active and reserve armies 'of 
 the working class have the most deplorable effect on wages, 
 and on the condition of the working class generally. Aside 
 from the destitution caused by the introduction of new ma- 
 chinery among those workingmen who are thereby thrown 
 out of employment and those directly dependent on them, 
 the presence in the market of this superfluous mass of la- 
 bor-power entering into competition with that part of the 
 
ECONOMIC CONTRADICTIONS. 159 
 
 working class which does find employment reduces the 
 price of that labor-power which is employed without there- 
 by gaining any employment for itself. While the value 
 of labor-power is determined by the amount of labor neces- 
 sary for its re-production, that is, the amount of necessaries 
 consumed by the workingmen, this amount is by no means 
 a fixed quantity. It depends on the standard of life of the 
 working class as it has developed in the course of its 
 historical existence in a given country. But this standard, 
 being a product of historical forces, may be raised or 
 lowered. The existence of the " reserve " army, the pro- 
 cess of the accumulation of capital which produced it, tends 
 to lower this standard and it needs hard fighting to keep 
 it up, not to speak of raising it. Besides, making, as it 
 does, the workingman the sport of every turn of the for- 
 tunes of capitalistic production, absolutely insecure in 
 whatever livelihood he does get by reason of the fierce 
 competition of his fellow-workers, and therefore dependent 
 on the whim and caprice of his capitalist employer, it tends 
 to degrade his morale, break in him all manifestations of 
 the spirit of independence, and to make of him a servile tool 
 of his capitalistic master. 
 
 But right here in its influence on its first requisite, a free 
 working-class, we encounter the contradictory nature of 
 capitalistic development. The very processes which tend 
 to reduce the workingman's wages, and to lower and de- 
 grade him, bring into life those conditions which enable him 
 to forge the weapons by which he can not only successfully 
 withstand the hurtful tendencies of capitalistic development, 
 but which are destined to work the wonders of his salvation 
 from wage-slavery, — the economic and political organiza- 
 tion of the working class. The introduction of those very 
 new machines which threw so many workingmen out of. 
 employment and so largely increased the " reserve " army, 
 has laid the physical foundation for the organization of 
 the working class by bringing great masses of working- 
 men together and by rubbing off all differences between 
 
l60 THE THEORETICAL SYSTEM OF KAKL MARX. 
 
 them. It has also laid the mechanical foundation for the 
 future greatness of the working class by changing the 
 methods of production from their narrow individual foun- 
 dation to a broad social base. 
 
 No less contradictory is the process of accumulation of 
 capital in its effects on the capitalist class, itself. As we 
 have already seen, the accumulation of capital is accom- 
 panied by a falling rate of profit. This naturally tends to 
 retard the progress of the process of accumulation, and 
 works in the nature of an automatic brake. This, however, 
 is not the only way in which the process of accumulation 
 counteracts its own tendencies thereby checking the tempo 
 of its growth. Every invention of a new machine, while 
 an evidence of growing accumulation of capital, and itself 
 a means to its increased accumulation, is at the same time 
 the means of an enormous destruction of existing capital. 
 As was already pointed out, our vast accumulations of wealth 
 consist in aggregations of machinery. But every invention 
 of a new machine makes useless the machine the place of 
 which the new one is to take, and the capital invested in the 
 old machines is thereby totally destroyed. The progress of 
 accumulation of capital is therefore accompanied by enor- 
 mous destruction of existing capital, which naturally retards 
 the growth of the sum-total of capital. Besides, the in- 
 vention of new machinery, by diminishing the time neces- 
 sary for the production of commodities, and thereby lower- 
 ing their values, lowers the value of all existing capital. 
 This, again, has a tendency to retard the process of ac- 
 cumulation, that is the growth of the sum-total valuation 
 of the machinery and other commodities of which the capi- 
 tal possessed by the capitalist class consists. 
 
 The capitalists as a class might regard with equanimity 
 these retarding tendencies or automatic checks in the ac- 
 cumulation of capital, for the net result of the contradictory 
 tendencies is still a rapid enough growth of the accumulated 
 mass of capital to suit even the most exacting of capitalists. 
 But the equanimity of the individual capitalists is disturbed 
 
ECONOMIC CONTRADICTIONS. l6l 
 
 by the details of the process which result from these con- 
 tradictory tendencies, and by the way those details affect 
 their individual fortunes. 
 
 For while the net result of the process, as far as the 
 whole mass of capital is concerned, is a pretty rapid growth, 
 this growth is not at all equally distributed among the 
 different individual capitals. Quite to the contrary: the 
 contradictions of the process manifest themselves largely 
 by the extreme rapidity of the growth of some of the in- 
 dividual capitals, and the equally extreme rapidity in the 
 shrinkage, or the total extinction, of some other individual 
 capitals, due to the fact that the benefits derived and the 
 losses incurred by reason of the contradictory elements of 
 the process are not. equally distributed among the individual 
 capitalists. Under a system based on competition they 
 could" not very well be. 
 
 The general process of accumulation of capital, by reason 
 of its mechanical basis alone, leads to the concentration of 
 capital and production, that is to the formation of economic 
 centers whereat are " run together " within comparatively 
 small space and under one guidance large amounts of value 
 in the shape of costly machinery and other means of pro- 
 duction, and large numbers of workingmen. And the par- 
 ticular way in which this process works its way, by bene- 
 ■ fiting some capitalists at the expense of others, leads to 
 the centralization of capital, that is the amassing of large 
 amounts of wealth in the same hands, by transferring the 
 capital of those capitalists who lose by the process to 
 those that come out winners. This leads to an increase in 
 the number of large capitalists, whose capital grows at the 
 expense of the general body of capitalists, whose number 
 constantly decreases. The few chosen capitalists fatten at 
 the expense of their fellows. 
 
 These two processes — the concentration and the cen-- 
 tralization of capital — accelerate each other. Particularly 
 does the concentration of capital become a powerful factor 
 in its centralization, by turning over to the control, and 
 
l62 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 ultimate ownership, of the winners in the game whatever 
 the losers manage to save from the wreckage, as well as 
 the belongings of those who have managed to keep their 
 wealth although they have lost their economic position. By 
 reason of the concentration of capital, those capitalists who 
 have saved part of their capital, and even those who have 
 managed to keep their capital intact, are unable to main- 
 tain their independence and to continue in the economic pro- 
 cess ^s independent operators.. First, because by reason of 
 the concentration of capital, that is to say, by reason of the 
 fact that, owing to the introduction of improved machinery, 
 a large outlay of capital is necessary in order to carry on 
 production on the new basis, the capital which formerly 
 enabled a capitalist to operate independently is now in- 
 sufficient for that purpose. So that even the capitalist who 
 still possesses the amount of capital which he formerly 
 possessed is unable to continue as an independent capitalist. 
 And secondly, even if the amount possessed by such capi- 
 talist should be sufficient for the technical needs of the 
 production-process on the new basis, he would still be un- 
 able to maintain an independent existence for the reason 
 that under the new circumstances, wjth the lower rate of 
 profit which follows, his capital would not yield sufficient 
 revenue to maintain him, and certainly not enough to per- 
 mit him to further accumulate. This creates what might 
 be called a " reserve " army of capitalists, or rather, half- 
 way capitalists, whose capitals go to swell the funds of the 
 real capitalists in time of the expansion of economic ac- 
 tivity, and these latter get most of the benefit derived there- 
 from. These supernumerary capitalists also usually furnish 
 the funds for all sorts of crazy speculative ventures, which 
 in their turn also accelerate the centralization of capital. 
 This " between the devil and the deep sea " class is re- 
 ceiving constant accretions from above owing to the con- 
 stant squeezing-out process of the devil on top by the con- 
 tinued accumulation of capital, and its numbers are as 
 constantly being depleted by its lower strata sinking into 
 
ECONOMIC CONTRADICTIONS. - 163 
 
 the deep sea of wage-slavery. If this process should be 
 permitted freely to work out its tendencies, it would result 
 in society being sharply divided into two unequal divisions: 
 a few enormously rich capitalists on top, ^fld the bulk of 
 society at the bottom. A stage would be reached when, by 
 reason of lack of numbers, the capitalists would really cease 
 to be a social class, as a social class presupposes a certain 
 minimum of numbers, and the loss in quantity would turn, 
 for the capitalists, into a loss of the quality of their posi- 
 tion as a social class. 
 
 Will this process work out these tendencies? And what 
 will be its effect on the future of the capitalist system? 
 According to Marx these tendencies of the capitalist sys- 
 tem must run their -fatal course, unless the system itself 
 breaks down before the process is at its end. For the con- 
 tradictions of the law of value which are at the basis of the 
 Capitalist system of production and distribution are such 
 that, aside from the sociological results to which they must 
 inevitably lead, enumerated by us above, its purely eco- 
 nomico-mechanical existence is put in jeopardy by the laws 
 of its own development. 
 
 The purely economico-mechanical breakdown of the capi- 
 talist system will result, according to the Marxian theory, 
 from the inherent contradictions of the law of value, unless 
 the development of capitalism is in some way arrested (or 
 unless the system breaks down earlier for some other rea- 
 son), in the following manner: 
 
 In. the fight for the market among the individual capi- 
 talists under the rules laid down by the God Competition, 
 each capitalist in order to survive and succeed must strive 
 to be able to sell his goods cheaper than his competitors in 
 the market, that is, he must be able to produce more cheaply 
 than the others so as to be able to undersell them and still 
 make a profit. There are various ways in which the cost 
 of production can be lowered. They all reduce themselves, 
 however, to one proposition : to make the share of the work- 
 ingman in the product produced by him as small as possible. 
 
164 . THE THEORETICAL SYSTEM OF KARL MARX. 
 
 This may be accomplished by directly reducing the wages 
 of the workingman, an expedient which cannot al- 
 ways be resorted to, for the reason that there is a limit 
 beyond which the wages of workingmen cannot be re- 
 duced. The more usual way, therefore, is the one which 
 we have already noted, that is by continually substituting 
 machinery in the place of live labor, by inventing labor- 
 saving machinery. The result, as far as the relation of the 
 workingman to the product produced by him, is the same 
 in both cases: his share therein becomes smaller. In the 
 latter case perhaps more so than in the former. An ad- 
 ditional reason why it is more often restored to. Hence the 
 constant rising composition of capital which we have al- 
 ready observed. 
 
 There is, however, another phase of this process which is 
 lost sight of by the individual capitalist, but which may 
 have dire results for the capitalist class and the whole capi- 
 talist system. Besides the desired result of cheapening com- 
 modities this process has the very undesirable result of 
 making the purchasing power of the laborer smaller in 
 proportion. In other words, the laborer ceases to be as 
 good a customer as he was before, and, as the capitalist 
 must have a customer to buy his products, whether cheap 
 or dear, and can not sell his products unless he has a 
 customer ready and able to pay for his products, he is evi- , 
 dently placed in this dilemma, — either he must give his 
 workingmen a larger share of the manufactured product in 
 the shape of wages (or at least refrain from cutting down 
 thj share which the workingmen receive) or destroy the 
 purchasing power of the workingmen, that is, of his future 
 customers. 
 
 This contradiction grows and is enhanced in potentiality 
 with the development of the capitalist system, for the rea- 
 son that the development of the capitalist system consists, 
 as we have seen, in this very cheapening of production 
 by the supplanting of the workingman through labor-saving 
 machinery. As the capitalist system develops, that portion 
 
ECONOMIC CONTRADICTIONS. I65 
 
 of capital which goes to pay the workingman's wages dimin- 
 ishes very rapidly in comparison with the whole capital 
 employed for the purposes of production. The result of 
 this is, .as we have seen, first, a falling rate of interest ; and 
 secondly, a growing army of unemployed, a relative over- 
 population. But the same law which creates a relative 
 over-population, an over-production of men, also creates an 
 increasing over-production of goods, as the larger the army 
 of the unemployed the smaller is the army of workingmen 
 purchasers. This will finally result in the disproportion 
 between that portion of the manufactured product which 
 goes to the workingman and the whole of the yearly prod- 
 uct of society becoming so great that the surplus-product, 
 that is to say, that part of the manufactured product which 
 will find no purchasers, will clog the wheels of production 
 and bring the whole economic machinery of society to a 
 stop. 
 
 The stock argument against this position of Marx is that 
 while the immediate effect of the introduction of machinery 
 is to throw out of employment the workingfman employed 
 in the branch of manufacture in which the new machines 
 are introduced, it at the same time of itself opens up new 
 employments. When sifted down, this amounts to the con- 
 tention that the workingmen who are thrown out of em- 
 ployment in the old industry wherein the new machinery 
 is introduced, are re-employed in the machinery-producing 
 industry wherein these very machines are produced. This 
 contention is, however, evidently untrue for the following 
 reasons: As we have already seen, the reason for intro- 
 ducing a new or improved machine is a desire to cheapen 
 the manufacture of a product. This cheapening can be 
 effected only by saving labor, and this saving must be a 
 very substantial one in order to make it profitable to the 
 capitalist to introduce the new machine, because this re- 
 quires a large outlay of capital. Workingmen are usually 
 paid by the week, so that the outlay in capital for the em- 
 ployment of a hundred workingmen will be the weekly wage 
 
l66- THE THEORETICAL SYSTEM OF KARL MARX. 
 
 of these one hundred workingmen. A new machine, how- 
 ever, which should dispense with the work of fifty of these 
 one hundred men usually requires the expenditure of a 
 large sum of money entirely out of proportion with the 
 weekly allowance of the fifty workingmen whose labor is 
 dispensed with. That is why modern capitalistic enter- 
 prises require such large amounts of capital properly to 
 carry them on. The new machine must therefore not only 
 cost in original price and expenses of keeping less than it 
 would cost to employ the fifty men during the time of 
 service of this machine, but it must also pay sufficient to 
 warrant the large investment of capital involved in its in- 
 troduction. In other words, the labor-saving quality of the 
 machine must be a very substantial one. A mere small 
 saving of labor will not warrant the introduction of costly 
 machinery, requiring, as it usually does, an entire change of 
 the system of production and large expenditures not only 
 in the buying of the machine itself but also in its accom- 
 modation in buildings, etc., and involving as it does, the 
 destruction of much old capital. 
 
 Now, if it were true that the workingmen who are thrown 
 out of employment by this machine can be re-employed in 
 the production of this very machine, that is to say, if it 
 required as much labor to produce this machine as it was 
 formerly required to produce the product which this ma- 
 chine is now to produce, there evidently will not only be 
 no cheapening of production, but on the contrary, produc- 
 tion will become more expensive for it will require the same 
 expenditure of work or labor (for the machine and the 
 product together), and a larger outlay of capital. Evi- 
 dently, this machine must not require in its production the 
 same amount or even nearly the same amount of labor 
 which would be required to produce the products which 
 it produces. 
 
 Of course, the same number of people may be employed 
 in producing this machine, but this machine should pro- 
 duce a vastly larger amount of product than was ever be- 
 
ECONOMIC CONTRADICTIONS. 167 
 
 fore produced without it; but tfien, the question presents 
 itself, — to whom shall this additional product be sold ? 
 The share of the workingman in this largely increased prod- 
 uct must be much smaller in proportion to what his share 
 was before the introduction of the new machinery, other- 
 wise production will not have been made cheaper. There 
 will, therefore, be a larger product to dispose of than there 
 ever was before, and the difficulty of finding customers be- 
 comes insuperable. 
 
 It may be argued that the additional product which the 
 workingmen will be unable to buy up will be taken up by 
 the capitalistSi This seems a, very simple way out of it, 
 and sounds very plausible. As a matter of fact, for long 
 centuries this is the way things usually adjusted themselves. 
 Under the old slave and feudal systems there never was 
 such a problem as over-production, for the reason that pro- 
 duction being for home consumption the only question that 
 ever presented itself was: how much of the product pro- 
 duced shall be given to the slave or serf and how much 
 of it should go to the slave-holder or feudal baron. When, 
 however, the respective shares of the two classes were de- 
 termined upon, each proceeded to consume its share wit!i- 
 out encountering any further trouble. In other words, tVe 
 question always was, how the products should be divide:!, 
 and there never was any question of over-production, for 
 the reason that the product was not to be sold in the rnarlct 
 but was to be consumed by the persons immediately con- 
 cerned in its production, either as master or slave. There 
 was no production for the market, and consequently no 
 overstocking of the market. When, by chance, production 
 increased out of all proportion, the product could simply 
 be stored away, and it never interfered with the proper 
 prosecution of the industries in the future. 
 
 Not so, however, with our modern capitalistic industry. 
 It is true that all of the product with the exception of that 
 portion which goes to the workingman goes, now as before, 
 to the master, now the capitalist. This, however, does not 
 
l68 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 settle the matter finally, for the reason that the capitalist 
 does not produce for himself but for the market. He does 
 not want the things that the workingman produced, but 
 he wants to sell them, and unless he is able to sell them 
 they are absolutely of no use to him. Salable goods in 
 the hands of the capitalist are his fortune, his capital, but 
 when these goods become unsalable they are worthless, and 
 his whole fortune contained in the stores of goods which 
 he keeps melts away the moment the goods cease to be 
 marketable. 
 
 Who then, will buy the goods from our capitalists who 
 introduced new machinery .into their production, thereby 
 largely increasing their output? Of course, there are other 
 capitalists who may want these things, but when the pro- 
 duction of society as a whole is considered, what is the capi- 
 talist class going to do with the increased output which 
 can not be taken up by the workingman? The capitalists 
 themselves can not use them, either by each keeping his 
 own manufactures or by buying them from each other. 
 And for a very simple reason. The capitalist class can not 
 itself use up all the surplus products which its working- 
 men produce and which they take to themselves as their 
 profits of production. This is already excluded by the very 
 premise of capitalistic production on a large scale, and the 
 accumulation of capital. Capitalistic production on a large 
 scale implies the existence of large amounts of crystallized 
 labor in the shape of great railroads, steamships, factories, 
 machinery and other such manufactured products which 
 have not been consumed by the capitalists to whom they 
 have fallen as their share or profit in the production of 
 former years. As was already stated before, all the great 
 fortunes of our modern capitalist kings, princes, barons 
 and other dignitaries of industry, titled and untitled, con- 
 sist of tools and machinery in one form or another, that 
 is to say, in an unconsumable form. It is that share of 
 the capitalist profits which the capitalists have " saved," 
 and therefore left unconsumed. If the capitalists would 
 
ECONOMIC CONTRADICTIONS. I69 
 
 consume all their profits there would be no capitalists in the 
 modern sense of the word, there would be no accumulation 
 of capital. In order that capital should accumulate the capi- 
 talist must not, under any circumstances, consume all his 
 profits. The capitalist who does, ceases to be a capitalist 
 and succumbs in the competition with his fellow capitalists. 
 In other words, modern capitalism presupposes the saving 
 habit of capitalists, that is to say, that part of the profits 
 of the individual capitalists must not be consumed but 
 saved in order to increase the already existing capital. 
 
 As a matter of f actj this saving habit, of which the apolo- 
 gists of capitalism make such a virtue, is really enforced 
 upon the capitalists. It is a sine qua non of capitalism it- 
 self. The very statement that improved machinery has 
 been introduced in any industry already implies the fact 
 that the capitalists of that industry have " saved " enough 
 out of their share of the product manufactured by the old 
 mode of production to be able to manufacture the new ma- 
 chinery or buy it from its manufacturers, and thereby in- 
 crease the capital employed in their business. The same 
 reason for " saving " which existed before the introduction 
 of the new and improved machinery and which caused its 
 introduction, namely, the competition of the market, which 
 compels each capitalist to accumulate capital out of his 
 profits, continues to exist and cause the further accumula- 
 tion of capital and the further introduction of new and im- 
 proved machinery. He cannot, therefore, consume all of. 
 his share in the manufactured product. It is evident, there^ 
 fore, that neither the workingman nor the capitalist can 
 consume the whole of the increased product of manufac- 
 ture? Who, then, will buy it- up? 
 
CHAPTER VIII. 
 
 THE CONCENTRATION OF CAPITAL AND THE DISAPPEARANCE 
 OF THE MIDDLE CLASS. 
 
 With the discussion, in the last chapter,- of the tendencies 
 of capitalistic development, we have entered upon the proper 
 domain of Revisionism. While it is true that the Revi- 
 sionists revise to a greater or less extent the accepted Marx- 
 ian philosophico-historic and economic theories, this is done 
 only as an incidental to their criticism of the Marxian con- 
 clusions as to the historic course and ultimate fate of capi- 
 talism. Moreover, wherever Revisionists attempt to criti- 
 cize the fundamentals of the Marxian system, they do so 
 usually only in so far as it is necessary in order to attack 
 that superstructure of conclusions with reference to the 
 capitalistic system which Marx erected on those funda- 
 mentals. This is to be seen not only from the nature of 
 the criticism itself which the Revisionists pass on the Marx- 
 ian theory, but also from the history of Revisionism. Re- 
 visionism, which was at one time, before it assumed its 
 •present proportions, known as Bernsteinianism, after Ed- 
 uard Bernstein, its foremost representative, began in a 
 very modest and unassuming way by questioning the ac- 
 curacy of some of the conclusions to which Marx arrived 
 as to the course and tempo of capitalist development. And 
 it was only after it appeared in the course of the discussion 
 that these conclusions were intimately related to the whole 
 structure of the Marxian theoretical system that the funda- 
 mentals of his system were first called. into question by Re- 
 visionists. But even then the true Revisionists did not at- 
 170 
 
CONCENTRATION OF CAPITAL. 17I 
 
 tempt to pass independent criticism on the philosophico- 
 historic or economic theories of Marx, but merely borrowed 
 this criticism from older and more outspoken opponents of 
 Marxism. The work of Revisionism proper still remained 
 the criticism of what may be conveniently, though rather 
 inaccurately, called the sociological theories of Marxism, 
 that is, the theories as to the probable future development 
 of our social system, which we have attempted to set forth 
 in the last chapter. It is, therefore, not to be wondered 
 at that Franz Oppenheimer puts at the head of his book 
 on Marxism the thesis that " the foundation pillar of Karl 
 Marx's social theory, the most important premise for all 
 its important conclusions, is ' the law of capitalistic ac- 
 cumulation.' " The center of gravity of Bernstein's book 
 " Die Voraussetzungen des Sozialismus," '^ the chief pro- 
 nunciamento of Revisionism, is what Bernstein has to say 
 on the tendencies of the development of modern capitalism, 
 although he criticizes both the philosophic and economic 
 theories of Marx. The discussion of those tendencies forms 
 the bulk of Revisionist literature. And in the forefront 
 of this discussion is the question: Does capital concentrate 
 and the middle-class disappear, and as rapidly, as Marx 
 predicted ? 
 
 In his now famous book Bernstein attempted to prove: 
 ist, that capital does not concentrate in the manner, and 
 certainly not with the rapidity, that Marx predicted; and 
 2nd, that the middle-class does not disappear. To substan- 
 tiate his assertions he cites some statistics to show that- 
 while there certainly is a tendency towards concentration, 
 and even rapid concentration, in some industries, this tend- 
 ency is not universal, and moreover, in the very industries 
 in which this tendency does exist it is in a measure neu- 
 tralized by the birth of new enterprises in the place and 
 stead of those which disappear owing to the process of con- 
 centration. The conclusion to which he arrives, therefore, 
 
 ' Eduard Bernstein, Die Voraussetzungen des Sozialistnusund die Aufgaben 
 der Sozialdemokratie. Stuttgart, 1899. 
 
172 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 is that, while concentration of capital undoubtedly takes 
 place, it does not take place in all the capitalist industries, 
 and is, on the whole, extremely slow. He also cites another 
 series of statistical data apparently showing that the tend- 
 ency in the distribution of incomes in modern society is 
 not, as is supposed to be assumed by Marxists, towards a 
 wiping out of moderate incomes, leaving only a small minor- 
 ity with large revenues and the bulk of society with only 
 workingmen's wages, but, on the contrary, the tendency 
 is towards an increase of the number of persons whose in- 
 come is derived from the possession of property. From 
 this he argues that the middle-class does not disappear, 
 but on the contrary is growing. 
 
 The likelihood of the growth of the middle-class in num- 
 bers while capital was undergoing a steady, though slow, 
 process of concentration, would seem of such doubtful 
 nature as to raise a suspicion as to the character of the 
 statistics. Bernstein saw this, and he, therefore, hastens 
 to allay our suspicions by the following observation: The 
 corporation — says he — tends to neutralize to a large ex- 
 tent the tendency towards centralization of wealth through 
 the concentration of undertakings. The corporation per- 
 mits of a widespread splitting up of already concentrated 
 capital, and makes superfluous the acquisition of capitals 
 by individual magnates for the purposes of the concen- 
 tration of industrial undertakings. Wherefore, he opines, 
 the opinion, " prevailing among socialists," that thie cen- 
 tralization of wealth runs parallel to the concentration of 
 industrial undertakings is erroneous. 
 
 In the book which Kautsky has written in reply to Bern- 
 stein, " Bernstein and the Social Democratic Program," ^ 
 he shows that Bernstein's statistics are unreliable and in- 
 complete, and that the conclusions he draws from them 
 are unjustified. We shall not enter here upon a detailed 
 discussion of these statistics, as this would be beyond the 
 
 'Karl Kautsky, Bernstein und das Sozialdemokratische Programm. 
 Eine Antikritik. Stuttgart, 1899. 
 
CONCENTRATION OF CAPITAL. I73 
 
 scope of the present work. Besides, we fully agree with 
 one Marx-critic, Oppenheimer, who, evidently disgusted 
 with the poor showing Bernstein made with his statistics, 
 declares that those who attempt to refute Marx by statis- 
 tics are on the wrong track. For, says he, you can only 
 beat Marx by his own method, and the Marxian method 
 is not at all statistical. Marx never relies on statistics to 
 prove his assertions. He uses statistics only for the pur- 
 poses of illustration. His proofs he gets from well-known 
 facts which may be recorded in the statistical tomes but do 
 not need any statistics to establish them. We will say here 
 only this: Since the disastrous attempt of Bernstein to 
 use statistics against the Marxian position, this weapon has 
 been almost entirely discarded by ■ Revisionists. On the 
 other hand it must be admitted that Marxists also resort 
 to statistics now with less confidence than formerly. It 
 seems that since the publication of their books in which the 
 same statistics are used by Bernstein on the one hand and 
 Kautsky on the other and such different conclusions ar- 
 rived at by each, people have become distrustful of statis- 
 tics. Oppenheimer voices this general distrust when he 
 says : " Statistics are an extremely pliable mass, as the 
 literary controversy between Bernstein and Kautsky has 
 shown. With a little dialectical dexterity you can prove al- 
 most anything statistically.'' 
 
 We disagree with the learned Marx-critic that you can 
 prove anything and everything by statistics. But we do 
 believe that you can prove nothing by statistics unless you 
 handle them intelligently. Of themselves statistics do not 
 prove anything. No more than facts of themselves prove 
 anything. If it were so there could hardly be two opinions 
 on most points which have been in controversy ever since 
 scientific research began. It requires intellect to read the 
 facts. It requires intelligence to read statistics. Further- 
 more, it requires great intelligence to gather statistics, and in 
 this respect statistics, which are mere records of facts, are 
 a poorer basis for scientific generalizations than facts of 
 
174 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 observation. Unfortunately our statistics are not gathered 
 by the people who are to use them, and as they are neces- 
 sarily not full and complete, they must be used with great, 
 care and. discrimination. Of course wrong or unintelligent 
 handling of statistics will not make them " prove " anything 
 that they really do not prove, as Oppenheimer seems to 
 think, but it will render them worthless. 
 
 Kautsky has proven that Bernstein's statistics do not 
 prove his assertions. The reason for it is that Bernstein 
 handles his statistics unintelligently. But even Kautsky's 
 intelligent handling could not make them yield any great 
 results because of the incompleteness of our statistics and 
 of the lack of intelligence in their gathering. Hence the 
 general dissatisfaction on both sides with statistics. We 
 will, therefore, follow here the Marxian method of making 
 only such facts the basis of our argument as require no 
 statistical tables to prove them, but merely to illustrate them. 
 
 Before pro.ceeding, however, to discuss these facts we 
 want to call attention to some significant circumstances in 
 connection with the Revisionist movement and its literature. 
 First in point of time and importance is the tone of early 
 Revisionist Marx-criticism. We have already called atten- 
 tion to the nihilistic character of this literature. Now we 
 desire to add that this nihilism was a gradual growth and 
 was forced on the revisionists by their own inability to 
 solve the problems which confronted them. At its inception 
 Revisionism was merely doubtful. Doubt is the leit-motif 
 of Bernstein's first literary attempts at revision. In the 
 second place is to be considered the inability of the old- 
 school Marxists to stem the flood of Revisionism, notwith- 
 standing their great efforts. While the flood of Revision- 
 ism is now at a standstill, if not subsiding, this is not due 
 to the efforts of the Marxian leaders on the theoretical 
 field, but to its own practical barrenness. And yet, there 
 was enough in what was written by Marxists to show the 
 utter untenableness of the revisionists' position. Kautsky's 
 book was a crushing blow to Bernstein's attempts at the- 
 
CONCENTRATION OF CAPITAL. I75 
 
 orizing. Yet it passed almost without any appreciable re- 
 sults : the question of Revisionism was not settled, although 
 it should have been if it were a question of soundness of 
 argument. Thirdly, we must notice the fact which we have 
 already mentioned as the reason for the failure of the Re- 
 visionist movement: the fact that notwithstanding its great 
 Kterary influence the Revisionist movement was absolutely 
 barren bf practical results as far as the socialist movement 
 was concerned. 
 
 All of these facts and circumstances is proof positive 
 that there must have been something in the development 
 of modern economic life which caused the appearance of 
 the revisionist movement as an intellectual endeavor to take 
 cognizance of and explain this development. It is also 
 clear that this development, whatever it may be, was not, 
 or at least not fully, reflected in our statistics, which ac- 
 counts for the fact that neither side could prove its case 
 conclusively by the aid of statistics, and the consequent 
 distrust of all statistics. What was that something in the 
 development of modern economic life, and how does it 
 affect the Marxian theory? 
 
 The trouble with Bernstein and the rest of the Revision- 
 ist writers is that they do not go below the surface of 
 things, and therefore do not know what " struck them," to 
 use an inelegant but adequate colloquialism. Bernsfein 
 talks of the " new middle-class," the " wide distribution of 
 incomes," the large number of stockholders in the big cor- 
 porations or "trusts," and the influence of corporations on 
 the centralization of wealth, but nowhere does he examine 
 these things systematically or in any way analyze them so 
 as to see their real significance in modern economic life, 
 or even their exact meaning. Nowhere does their connec- 
 tion with the theoretical system which he criticizes appear. 
 That is why his book makes the impression of the rambling 
 talk of a man who does not know his own mind. The truth 
 of the matter is he did not know his own problem. He 
 had a vague feeling that there was a problem demanding 
 
176 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 solution, but he did not understand what it was. Hence 
 his doubting tone, the lack of a clear and definite purpose, 
 or even the statement of a clearly defined problem for the 
 solution of others. Hence the overlooking of the problem 
 by those who took up the fight against him. Hence, lastly, 
 the endless discussion to no purpose. Yet there was a 
 definite problem, and had Bernstein understood it sufficiently 
 to enable him to state it clearly it would have found an 
 answer long ago. 
 
 At about the time Bernstein was writing his famous 
 book, the present writer stated the essential point of this 
 problem (which is in our opinion, together with the in- 
 ability to appreciate the scope of modern imperialism, at 
 the bottom of the whole Revisionist movement), in one 
 sentence in the course of an unassuming magazine article. 
 A good many have laid claim to the honor of being the 
 original Revisionist. It is not the intention of the present 
 writer to enter the lists as a contestant for this honor. This 
 incident is mentioned here only for the purpose of showing 
 that the air was then pregnant with certain questions which 
 required answering. The present writer specifically re- 
 nounces all claims to that high honor of being the Original 
 Revisionist, for as a matter of fact he never was a Revision- 
 ist. It is of the essence of Revisionism to see or feel the 
 problem and not to see its solution. The article referred 
 to, however, not only stated the essential point of the prob- 
 lem, but also indicated its solution. 
 
 The problem is to harmonize the Marxian teaching with 
 the development of corporate metliods of doing business. 
 We have already seen how Bernstein attempted to explain 
 the discrepancy between the statistics as to the concen- 
 tratioij of industrial undertakings on the one hand and as 
 to the accumulation of wealth on the other, by a reference 
 to the corporate methods of doing business. We shall see 
 later that Bernstein has mistaken the influence of the de- 
 velopment of corporations in that particular respect, and 
 in general it may be said that Bernstein's weakness con- 
 
CONCENTRATION OF CAPITAL. I77 
 
 sists in his failure to appreciate and develop the strong 
 point of his argfument — the development of corporations. 
 The fact, however, that Bernstein and the rest of the Re- 
 visionists failed to present it properly makes the phenom- 
 enon none the less real. 
 
 The Marxian analysis of the capitalist system and his 
 deductions as to the laws of its development proceed upon 
 the assumption of the absolute reign of the principle of 
 competition. It was on the basis of that assumption that 
 he declared that during the progress of capitalist develop- 
 ment " one capitalist kills off ten," thereby centralizing all 
 wealth in the hands of a steadily diminishing number of 
 persons, eliminating the middle classes and leaving society 
 divided into two classes only: capitalists and workingmen. 
 But what if competition should be abolished or checked? 
 What if the capitalists, large and small, should decide not to 
 compete any more with each other, or to restrict the area and 
 intensity of such competition, and divide profits amicably 
 instead of fighting with each other over their division, so 
 as to avoid the necessity of killing each other off? Evi- 
 dently the result would be the arrest of the processes de- 
 scribed by Marx in the event of the entire abolition of 
 competition, and a retarding of those processes in the event 
 of its mere checking. This is just what must happen ow- 
 ing to the development of corporations. The supplanting 
 of individual enterprise by that of corporate is merely an 
 attempt to avoid the results of competition, if not altogether 
 abolish it. The effectual abolition of competition by the 
 so-called Trusts, which are merely the logical result of the 
 ordinary corporation-enterprise, is notorious and, prac- 
 tically, undisputed. But it is not only the Trust that intef- 
 feres with competition. The primary, nay, the only pur- 
 pose of a legitimate corporation is to blunt the edge of 
 competition. It is designed either to nullify or suspend 
 the baneful effects of past competition, or to prevent or 
 diminish its ravages in the future. There can be only two 
 legitimate reasons for organizing corporations. Either tq. 
 
178 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 enable those whose capital is insufficient to keep abreast 
 of the latest requirements of production to remain in the 
 field from which they are individually forced out by .the 
 march of events, by combining their several insufficient 
 individual capitals into one sufficient to meet the new re- 
 quirements; or, to enable those whose capital is sufficient 
 to undertake independently to split up their large capitals ' 
 into many small ones, each to invest in many undertakings 
 and each undertaking to consist of many investments, in- 
 stead of each taking up one of the undertakings oiT his 
 own hook. In the first case it is an effort to beat fate by 
 those vanquished in competition. It is an effort by those 
 whom competition has forced out of the economic arena 
 to stay in, by representation at least. In the second case 
 it is an effort to limit the effects of competition in the 
 future by dividing up and limiting its risks and liabilities 
 (it should be remembered that the essence of a corporation 
 is limited liability), and by providing a sort of mutual in- 
 surance between capitalists and capitals. 
 
 Here, therefore, is a check to the development of the 
 capitalist system as outlined by Marx. A check which is 
 destined to arrest or at least retard that development. The 
 formula of centralization of wealth and of the disappear- 
 ance of the middle-class evidently needs revision. 
 
 The question of the disappearance or the non-disappear- 
 ance of the middle-class was complicated also by another 
 and minor phenomenon which apparently swells the num- 
 bers of the middle-class and particularly influences the dis- 
 tribution of incomes. We refer to the so-called " new " 
 or non-productive middle-class. This phenomenon is very 
 interesting in another aspect of modern capitalism, the as- 
 pect of waste and its uses in the capitalistic system. But 
 of that aspect of this phenomenon we shall treat later at 
 some length. Here we are interested only in the mere fact 
 of its existence. And we shall, therefore, merely say here 
 that the existence of this " new " middle-class, particularly 
 while its origin and character remained unexplained and 
 
CONCENTRATION OF CAPITAL. I79 
 
 undifferentiated from the ordinary middle-class, consider- 
 ably complicated the, in themselves, not very easy tasks of 
 ' determining the influence of the corporation on the destinies 
 of capitalism and the effect of this new departure in capi- 
 talism on the Marxian theoretical system. 
 
 Of course it can easily be seen that these matters do not 
 in any way affect Marx's analysis of the working of capi- 
 talism and the laws governing that system while it lasts.. 
 As we have seen before, competition is of the essence of 
 that system. This is recognized by the friends as well as 
 the foes of that system. It has been embodied in its written 
 as well as in its unwritten laws. " Restraint of trade," 
 which is, the legal term for restricting or abolishing compe- 
 tition, was illegal and punishable by the common law of 
 England, that classic land of capitalism. All our anti-trust 
 laws are based on the assumption that competition — which 
 is " the life of trade " — is the basis of capitalism, and, 
 therefore, one of the inalienable property-rights of every 
 man living in a capitalistic society. They ' are nothing 
 more than a statutory enactment of the common law of 
 capitalism that to interfere with competition is to interfere 
 with the life-blood of capitalism, and therefore mortal sin in 
 the eyes of capitalistic law. It is, therefore, not a refuta- 
 tion of the Marxian analysis of the capitalist system to 
 show that tendencies in the development of that system 
 which Marx said would continue to exist as long as capi- 
 talism lived, disappeared in whole or in part when the basic 
 principle of that system was abolished or modified.. Natu- 
 rally enough, the tendencies of capitalism cannot manifest 
 themselves in a society where there is no capitalism, nor 
 can they fully develop under limited capitalism if such a 
 thing be possible. 
 
 What may be affected by the phenomenon which we dis- 
 cussed above is not Marx's analysis of capitalism, nor even 
 his prediction that capitalism as it existed is going to de- 
 struction, — but his prediction that on the ruins of the capi- 
 talist system will be reared the edifice of a socialist so- 
 
l80 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 ciety. As we have seen, Marx's socialism is based en- 
 tirely on his conclusions as to the future development of 
 certain tendencies of capitalism. If those tendencies are 
 abolished, even though with the basic principle of capitalism 
 itself, or modified along with that principle, what warrant 
 have we to say that socialism is inevitable ? It is upon those 
 tendencies that we are dependent for the conditions which 
 are a prerequisite to socialism, according to Marx, and with 
 the abolition of those tendencies the conditions which will 
 bring socialism may neyer arise. The questions to be 
 answered, therefore, are: Is capitalism going to be sup- 
 planted by some other systemj or is it merely going to be 
 limited or modified ? And if it is to be supplanted what will 
 take its place? After Capitalism, what? 
 
 II. 
 
 In what relation does the existence or non-existence of 
 a middle class stand to the possibility or inevitability of 
 Socialism? It is generally assumed that, according to 
 Marx, all the middle class must disappear and society be- 
 come divided into a handful of capitalistic millionaires on 
 the one hand and poor workingmen on the other before a 
 socialist forrn of society can supplant our present capi- 
 talist system. There is, however, no warrant for such an 
 assumption. Marx nowhere says so expressly. Nor is 
 there anything in Marx's historico-philosophical views, that 
 is, in his Materialistic Conception of History, from which 
 such a conclusion could rightfully be drawn. All that that 
 theory implies is that the evolution of society depends en- 
 tirely on the development of its economic forces^ And j in 
 those passages of his great work where Marx speaks of the 
 evolution of society from Capitalism to Socialism, it is only 
 the social forces of production and distribution that claim 
 his attention. But Marx is no fatalist. He does not. be- 
 lieve that society develops automatically without the aid 
 of the human beings who compose it, or of the social classes 
 
CONCENTRATION OF CAPITAL. l8l 
 
 into which it is divided. He takes into consideration the 
 human beings with which these social forces work. This 
 is, in fact, the essence of his theory of the' class-struggle. 
 In this respect the different social classes have, according 
 to his theory, their bearings on the evolution of society. 
 
 In his analysis of the evolutionary tendencies of the capi- 
 talist system Marx notes and accentuates the presence of a 
 tendency - to eliminate the small bourgeois or middle-class 
 which he believes to be rapidly disappearing. He lays great 
 stress on this point, and evidently believes it to be a move- 
 ment of very great importance in the evolution of capi- 
 talism towards socialism. A careful reading of Marx, how- 
 ever, will not fail to disclose the fact that Marx did not 
 consider the complete disappearance of that class all-essen- 
 tial, and that it was only the disappearance of that par- 
 ticular middle-class of which he treated that he considered 
 of any importance at all. In other words, it was not the 
 entire absence of any middle-class or social stratum be- 
 tween the big capitalists and the workingmen, that he con- 
 sidered of importance for the realization of his socialist 
 ideals, but it is the presence of a certain particular class, 
 possessing certain particular characteristics (or at least its 
 presence in any such great numbers as would lend it social 
 strength) that he considered obnoxious to the movement 
 of society toward socialism. In order to understand 
 thoroughly the Marxian position on this question we must 
 consider his general estimate of the different classes or 
 strata of society as factors in the evolution of society from 
 capitalism to socialism. And. that, again, we can only un- 
 derstand if we consider them in the light of the Material- 
 istic Conception of History. This we shall now proceed 
 to do. 
 
 Our readers are already familiar with the Marxian phi- 
 losophy of history from the discussion in the early chapters 
 of this work. We have there shown the absurdity of the 
 claim that Marx and his. followers denied the influence of 
 ideas on the course of history. Here we want to go a step 
 
l82 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 further and say" that, in a sense, Marx was one of the most 
 idealistic of philosophers. And the sense in which we mean 
 this is in relation to this very question of the influence of 
 ideas. Marx believed in the reality of ideas, both as to 
 origin and influence. There were philosophers who, like 
 Hegel, did not believe in the reality of our material world. 
 They believed that the only real world was the world of 
 ideas, and that the material world was only a manifesta- 
 tion of the development of the absolute idea which de- 
 veloped according to laws of development contained within 
 itself. To such philosophers there could, of course, be no 
 question of the influence of ideas on the course of history. 
 To them there was nothing real in the whple course of 
 history except this development of the idea. These phi- 
 losophers are, of course, the real idealists (and, incidentally, 
 more deterministic than Marx). But of those philosophers 
 who believe in the materiality of the material world, Marx 
 is easily foremost in the reality which he ascribes to ideas. 
 According to Marx, ideas are firmly rooted in reality and 
 are therefore of abiding influence while they last, and not 
 easily susceptible of change. In this he radically differs 
 from whose to whom ideas have a mere aerial existence, com- 
 ing from the land of nowhere, without any particular rea- 
 son in our historic existence and, therefore, vanishing with- 
 out regard to our social environment, its needs or tribula- 
 tions. This Marxian esteem of ideas must always be borne 
 in mind when discussing the influence of the human be- 
 ing as a factor in the making of his own history. Let us, 
 therefore, keep 'it in mind in the following discussion. 
 
 What are the characteristics of the socialist system of 
 society in which it differs chiefly from our present capi- 
 talist system ? First, . the social ownership of the means of 
 production — • the absence of private property in them. Sec- 
 ondly, the carrying on of all industry on a co-operative basis 
 
 — the absence of industrial individual enterprise. Thirdly, 
 the management of all industrial enterprise democratically 
 
 — all " captains " of industry and all other industrial dig- 
 
CONCENTRATION OF CAPITAL. 183 
 
 nitaries to be elective instead of appointed by divine pre- 
 rogative, and to hold office by the consent and during the 
 pleasure of the governed. 
 
 Now let us see what classes of our present society are 
 suited to bring about such changes, and which are not. 
 The bearer of the socialist revolution is the modern Pro- 
 letariat. It is the class of the proletarians that has the 
 historic mission of tearing down the capitalist system of 
 society. Remember well: not the poor man, nor the work- 
 ingman, but the proletarian, is going to do this work. 
 There were poor men before, so were there workingmen. 
 But they were not proletarians. So may there be poor 
 now, and even poor workingmen, who are not proletarians. 
 The modern proletarian is not merely a poor man, nor is he 
 necessarily a poor man in the ordinary sense of the word. 
 Nor is he merely a workingman, although he necessarily is 
 one. He is a workingman — usually poor at that — under 
 peculiar historic conditions. Those conditions are that he 
 is not possessed of any property, that is, the only property 
 that counts socially, — means of production. By reason of 
 this condition he is placed in certain social relations, both 
 as to his own kind and as to his social betters, as well as to 
 the social machinery. Through this he acquires certain 
 characteristics of mind and body,_ a certain mentality and 
 psychology which make him peculiarly fitted for his historic 
 mission. 
 
 We will not attempt to give here an exhaustive descrip- 
 tion of his mental and psychological nature. We will only 
 denote his character by a contrast: he is in every way just 
 the reverse of the peasant. He had to be that, according to 
 Marx, in order to be a fitting instrument for the carrying 
 out of his historical mission. Marx's attitude towards the 
 peasant is most characteristic. The peasant was a positive 
 abhorrence to him, and he eliminated him <from his prom- 
 ised land. This had the peculiar consequence that in coun- 
 tries where the peasantry is now undergoing 'the process 
 of " capitalization," as in Russia, for instance, the Marx- 
 
184 THE THEORETICAL SYSTEM OF KAKL MARX. 
 
 ists have been accused by the peasant-loving Utopians of 
 all sorts of horrible designs against the poor peasants. Of 
 course, Marx and the Marxists have nothing but com- 
 passion for the poor peasant. But, besides seeing clearly 
 the hopelessness of their case, they recognize the fact that 
 the peasant, were he to exist, would be the greatest obstacle 
 in the way of socialism. First let us note his ideas as to 
 property. By reason of his occupation and the environ- 
 ment in which he and his forefathers have lived for ages, 
 he has contracted such a love for his land, his house, his 
 cattle, and everything else which he calls his own, that he 
 will find it more difficult to separate from them than a 
 millionaire from_ his millions. Their worthlessness has 
 nothing to do with the case: their value can hardly be 
 measured in money. This colors all his ideas about prop- 
 erty. He and his forefathers before him have lived on this 
 particular spot of land, and all his family history is con-, 
 nected with it. Here are buried the labors and sufferings 
 of generations. All his own woes, and his pleasant mem- 
 ories (if he has any) are intimately associated with this 
 patch of ground. Here he was born and here he hopes to 
 die. Every tree, every building, is the result of his own 
 and his family's great cares and labors. Every animal is 
 his friend and companion in toil and misery. Most of them 
 have been reared by him, even as were his own children. 
 He will not enter the promised land if he has to give up 
 his ruined, worthless, tax-eaten property for it. The " sac- 
 redness " of property rights to the peasant, the tenacity 
 with which he holds on to it, is well recognized by those 
 who have studied his character. This " idea " of his as to 
 private property, in view of his stolidity and immobility, 
 due to the immobility of his surroundings and the sameness 
 of the methods and nature of his work, would make him 
 an inveterate enemy of socialism and a stout upholder of 
 capitalism. But, aside from this, he is unfitted for a so- 
 cialist society, and particularly unfitted to make a fight for 
 it, because of his inability to co-operate with others. A 
 
CONCENTRATION OF CAPITAL. 185 
 
 peasant is the greatest individualist imaginable, at least as 
 far as boorishness, suspicion, opinionatedness, and the other 
 " individualist " virtues are concerned. For centuries he 
 has led an isolated and self-sufficient existence. He liyed 
 by his own toil without the help of others. He never came 
 into contact with others except to be robbed and oppressed 
 and occasionally to be cheated. No wonder he is such an 
 individualist. Nor has he been fitted by the countless gen- 
 erations of oppression which he has undergone, or by the 
 work to which he is accustomed, to the arduous and com- 
 plicated duties of a self-governed industrial community. 
 All this would make the old-fashioned peasant an inveterate 
 enemy of socialism, notwithstanding his great poverty and 
 ruined existence, if he were to survive. But he is not to 
 survive. We cannot enter here upon a discussion of the so- 
 called agrarian problem. One thing may be stated, how- 
 ever, without any fear of contradiction: the old peasant, as 
 Marx knew him, and the old economic surroundings and 
 social environment which produced him, are no more, ex- 
 cept in very backward countries, and there they are dis- 
 appearing before the onward march of capitalism. With 
 the old-fashioned peasant passes away the mainstay of 
 private property and the bulwark of reaction. There is no 
 other social class that could quite fill his place in this re- 
 spect. 
 
 The bourgeois has few of the characteristics of the peas- 
 ant. He is quick and always on the qui vive. His love 
 and attachment for property are not as pronounced as those 
 of the peasant. He has not the kind of property which 
 becomes individualized and may be personified. He has 
 himself produced none of it. He cannot form any lasting 
 friendship with his stock of goods or the machines used in 
 his manufactory. They are liable to constant change and 
 can be easily supplanted by others of their kind. In most 
 cases it is in their quick disposal that his chief advantage 
 lies, and he parts from them without regret. As a /natter 
 of fact he never cared about them: it is their money value 
 
l86 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 or equivalent that is dear to him. In other words, it is not 
 the property itself that he values or cares for, but the ad- 
 vantage derived from its possession; although in some 
 cases, particularly where business is done in the old-fash- 
 ioned way, and life is arranged correspondingly, there may 
 be some love of property as such with reference to some 
 kinds of property : usually the place of business or abode 
 and its furnishings and belongings. 
 
 With these characteristics the bourgeois is ill-adapted to 
 take the place of the peasant as a defender of property and 
 of reaction. Yet, Marx considers his disappearance of 
 considerable importance for the inauguration of the so- 
 cialist state. Why? 
 
 To the vulgar materialists who insist on calling them- 
 selves Marxists this question presents no difficulty. They 
 reduce the Materialist Conception of History to the simple 
 -formula: "everybody for his own pocket." And as the 
 pockets of the bourgeoisie are presumably goiog to be in- 
 jured by the transformation from capitalism to socialism, 
 that class must necessarily be against the change, and there- 
 fore it must be removed in some way in order to pave the 
 way for socialism. This perversion of the Materialistic 
 Conception of History is, unfortunately, very widespread, 
 and for good reason: It is a reproduction of the practice 
 and theory of capitalism. Of the " common " practice, of 
 course, but also of the very highest theory of which capi- 
 talism is capable. It is, in effect, a mere paraphrase of the 
 " intelligent egoism " — the greatest height to which the 
 capitalist intellect could rise. The fact that this theory 
 can easily be proven to be logically absurd and historically 
 false will not diminish its vogue as long as the condition 
 to which it owes its origin remains unchanged. Only gradu- 
 ally, following in the wake of the economic changes, and 
 at a distance at that, will a truer understanding force its 
 way. 
 
 Except in the case of seers like Marx. With all his dis- 
 like for the bourgeoisie Marx never believed that all bour- 
 
CONCENTRATION OF CAPITAL. 187 
 
 geois, or their intellectual and moral leaders, simply fol- 
 lowed the dictates of their pockets, personal or otherwise, 
 as can easily be seen from numerous passages scattered in 
 his many writings, and particularly in the " i8th of 
 Brumaire." 
 
 What makes the bourgeois character "unfit for socialist 
 co-operation, and his ideology one of the chief mainstays of 
 capitalism, is the independence which the possession of 
 property gives him. While he has no particular love for 
 his property, or, to be more exact, for the objects of his 
 property, he values very much the independent social status 
 which the possession of property gives him, no matter what 
 this property consists of. As a matter of fact it is not 
 the particular property that he is concerned about, but its 
 social exchange-value. For the purpose of his social status 
 it is not the actual objects of his property that count, but 
 the social attributes and possibilities which attach to all 
 property. That is why he stands up for the abstract prin- 
 ciple of private property, something which the peasant is 
 very little concerned about as long as its practical enjoy- 
 ment is not interfered with. The social existence of the 
 ■ old-fashioned bourgeois, his everyday economic life, make 
 him accustomed to strive for and cherish this independ- 
 ence founded upon the possession of property, and his 
 ideology becomes decidedly individualistic. In his foremost 
 intellectual representatives this crystallizes into some such 
 system as that of Herbert Spencer, and looks upon social- 
 ism as a form of slavery. The alertness and aggressive- 
 ness of the class only accentuate the craving of each in- 
 dividual for absolute economic freedom, for being let alone 
 to fight the battles of life. And the success of the class 
 only whets its appetite for further conquests, and makes 
 it impatient of any restraint, while its intellectual achieve- 
 ments give it one of the brightest weapons ever wielded by 
 a ruling class. 
 
 A good deal has been written and said about the sup- 
 posed great influence of force as a social factor, and again 
 
l88 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 the vulgar materialists have contributed their little share 
 to the general confusion. Of course brute force has been 
 and will be used j)y all ruling classes, both in acquiring 
 and maintaining their dominion. But brute force alone 
 never did, and never could, sustain a ruling class for any 
 considerable length of time. In order to see the correct- 
 ness of this assertion it is sufficient to bring to mind the 
 fact that the ruling class is always a minority, usually a 
 small one, of the population of a country, and that, taken 
 man for man, the members of the ruling class seldom 
 possess more physical strength than the members of the 
 subject class. The force of the ruling class is not nat- 
 ural but acquired, and is social in its character. It con- 
 sists in its organization, which permits it to use part of 
 the strength of the subject class, and sometimes the whole 
 of it, for the subjugation of that class. Sometimes the 
 mere fact of its own organized condition may be sufficient 
 to hold the superior but disorganized force of the sub- 
 ject-class in awe and trembling. But even then it is not 
 mere brute force, for organization itself is a moral and not 
 a physical force. This is evidenced by our language; we 
 speak of a physically superior force, which is incapable 
 of properly exerting itself for lack of proper organization 
 and discipline, as being " demoralized." This applies, 
 however, only in exceptional cases. Usually the ruling 
 class depends on something outside its own organization to 
 maintain its supremacy. This something is the social or- 
 ganization of the whole community or nation. It is by 
 using the power of the whole social system for its own 
 purposes that the ruling class is able to maintain its su- 
 premacy at a time when that is clearly against the gen- 
 eral interest or against the interest of large portions of the 
 subject class or classes. 
 
 The basis of this social power exercised by the ruling 
 class is usually the economic system in vogue, which makes 
 the subject-class economically necessarily dependent upon 
 the ruling class. But this does not always suffice. Very 
 
CONCENTRATION OF CAPITAL. 189 
 
 often, therefore, the ruHng class depends, to some ex- 
 tent at least, on purely moral suasion for the continuance 
 of its power. Religion was, therefore, from time imme- 
 morial, the handmaid of the temporal power, except where 
 it was itself a temporal power and thus united in itself 
 the functions of mistress and maid. With the waning of 
 religion and the passing of its influence, science and phi- 
 losophy" have taken its place, and usually perform the same 
 functions with equal alacrity and facility. That does not 
 mean, of course, that either religion or science and phi- 
 losophy were invented by the ruling classes in order to 
 keep the subject classes in bondage. The ruling classes 
 merely make use — sometimes proper and sometimes im- 
 proper — of a means which they find at hand. The point 
 is that usually the lower classes get their "ideas" — 
 their religion, science, art, philosophy — from the upper 
 classes, and these are apt to be such as express and repre- 
 sent — in short " idealize " — the mode of life of those 
 classes and the principles underlying the same. This is 
 always true when the lower class depends on the upper 
 for its economic existence. At such times the economic 
 virility of the ruling class expresses itself in a buoyant 
 and aggressive ideology which seems to, and often does, 
 express the interests and aspirations of society as a whole. 
 But no ruling class has ever had such a great opportunity 
 of exercising such great moral or ideal influence on its 
 subject class as has the bourgeoisie, owing to the great 
 and manifold development of the arts and sciences during 
 the time it held its sway. This unprecedented wealth of 
 ideas has had the remarkable effect, first of all, of making 
 the bourgeoisie itself drunk with its power and almost 
 mad in its desires and aspirations. No king has ever 
 believed himself more God-chosen to rule than has the 
 bourgeoisie, nor has any ruling class ever laid such pre- 
 tensions to the absoluteness and immutability of the laws of 
 its rule as does the bourgeoisie. Or, rather, we should 
 say, as did the bourgeoisie in the heyday of its power. 
 
190 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 And while it was in the heyday of its power the bourgeoisie 
 managed to permeate the working class with its ideals, 
 habits and modes of thought, perhaps more than any ruling 
 class ever influenced a subject class. This was due, on the 
 one hand, to the unprecedentedly large extent to which 
 the working class has been permitted to participate in the 
 benefits resulting from the general spread of knowledge, 
 and on the other hand to the peculiarly forcible way in 
 which the economic argument is brought home to the mod- 
 ern workingman. Under no preceding social system have 
 the economic woes of the ruling class been so quickly and 
 with such dreadful effect reflected to the subject-class. 
 We must never, therefore, forget the great importance 
 which the influence of the bourgeois ideology has on the 
 modern proletariat, particularly in the early stages of its 
 development, although, as we shall see later, during and 
 by virtue of its development it formulates an ideaology 
 of its own. ^ 
 
 The capitalistic " ideas " and habits of mind are in- 
 culcated into the working class by the capitalist class, in- 
 tentionally and unintentionally, by and through its lower 
 stratum, or what is usually called the " middle class." So 
 long as there is a large and virile middle class the work- 
 ing class •■will be largely under its domination and in- 
 fluence, morally and aesthetically. It is with this class 
 that the working class comes into immediate contact so- 
 cially. It is on this class that the workingman "fixes his 
 hopes and aspirations for the future. It is this class that 
 teaches him at kindergarten and at school, that preaches 
 to him at church and in " ethical " societies, and it is this 
 class that gathers and sifts for him the news of the world 
 and explains it to him in his daily newspaper, and gives him 
 his popular science, his art and his "literature." 
 
 It is because of those " ideal " characteristics of the 
 old-fashioned bourgeoisie, the old middle-class of capitalist 
 society, and even more so because of the " ideal " influ- 
 ences of that class on the working class, that Marx con- 
 
CONCENTRATION OF CAPITAL. I9I 
 
 r 
 
 sidered its disappearance of such great importance in the 
 movement of society towards socialism. That is, in so 
 far as he considered such disappearance of any moment 
 in itself, outside of its being a mere indication of the 
 movement of the economic forces of society. For it must 
 always be borne in mind that it is the development of the 
 economic forces that is the real power working for social- 
 ism, and any influence which any class or group of men 
 may have on that movement, except as an expression of 
 such development, is merely secondary. 
 
 III. 
 
 In the first section of this chapter we stated that the 
 development of corporate methods of doing business 
 brought a new factor into the development of capital- 
 ism which apparently worked at cross-purposes with 
 those tendencies of capitalistic development which, accord- 
 ing to Marx,,were to result in the destruction of the middle 
 classes of capitalist society. We also stated there that this 
 presented to Marx-students the problem of harmonizing the 
 Marxian prognosis as to the tendencies of development 
 of capitalism with this new factor, and that the Revision- 
 ists were not equal to the task, and therefore came to the 
 conclusion that Marx's prognosis was wrong. We inter- 
 rupted the argument in order to give in the second section 
 a characterization of the different social classes of the capi- 
 talist society which Manx had before him, in order to un- 
 derstand his position with reference to them. This was 
 necessary in order that the reader may get the full meaning 
 of the argument that we are going to present here in an 
 endeavor to show that the Marxian prognosis of the develop- 
 ment of capitalism and its ultimate fate, as well as the 
 delineation of the social system which is going to take its 
 place, need no revision, any more than any other part of his 
 theoretical system. We shall now,, therefore, return to our 
 revisionist frieiids, and particularly to their leader, Eduard 
 Bernstein. 
 
192 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 The main points of Bernstein's position on this subject, 
 as already stated, are: ist, that as a matter of fact the 
 concentration of capital is not as rapid as Marx or some 
 Marxists imagined or believed. 2d, that as a matter of 
 fact there is no centralisation of capital, that wealth does 
 not accumulate in few hands only^ to the exclusion of all 
 others, and that the middle class is, therefore, growing in- 
 stea'd of disappearing. And 3d, that the reason for the 
 divergence in the tendencies of the concentration of capital 
 on the one hand, and the centralization of wealth on the 
 other, is due to the development of the new social factor, 
 the corporation. 
 
 This being a purely theoretical discussion, the first point 
 can hardly be considered. Theoretically only the tendency 
 of the evolutionary phenomena is of any importance. What 
 may, therefore, have been of very great importance in the 
 discussion between Bernstein and Kautsky, which embraced 
 other than purely theoretical matters, may be of only second- 
 ary importance here. The length of time vWiich History 
 will take to complete the evolutionary process .outlined by 
 Marx is no part of the Marxian theoretical system. Marx 
 never stated it, and it could, therefore, only be surmised what 
 his opinion on this subject was. But even if he had ex- 
 pressly stated it, that would not, of itself, make it part of 
 his theoretical system. Besides, the ground is so well cov- 
 ered by Kautsky that one does not feel like doing less, and 
 can hardly do more, than reproduce the Kautsky argument 
 in full. And as considerations of space do not permit 
 us to do that, we must refer those of our readers who may 
 be interested in this phase of the discussion to the original. 
 
 As to whether, and how far, the second point made by 
 Bernstein is of any importance in the discussion of the Marx- 
 ian theory will be considered later. Here we will examine 
 the phenomenon supposed to have been noted by him. We 
 have already mentioned the fact that the only proof on 
 which Bernstein relies to establish his second proposition ara 
 certain statistics as to incomes. But right here the fallacy 
 
CONCENTRATION OF CAPITAL. ,193 
 
 of his statistical method becomes apparent. Aside from 
 the fact that there is no standard by which you can measure 
 the dififerent grades or divisions of incomes as high, middle 
 or low, and any such division rnust, therefore, necessarily be 
 arbitrary, and aside from the fact that such standard must 
 vary, not only from country to country, but even between 
 places in one country and even in close proximity with each 
 other, and (and that is of paramount importance) from time 
 to time, there is the cardinal defect that income, as such, is 
 no index whatever to either social or economic position. A 
 man's income does not, necessarily, place him in any social 
 position, and need not, necessarily, be the result of a cer- 
 tain economic condition, except under certain exceptional cir- 
 cumstances when, as Marx would put it, quantity passes into 
 quality. The mere statement of a man's income does not, 
 therefore, give his social position or economic condition, 
 unless it be first proven that certain incomes can only be 
 derived in a certain way, or from certain sources. Bern- 
 stein glides over carelessly from incomes to property, as- 
 suming that the derivation of a certain income implies the 
 possession of a certain amount of property. But this non- 
 chalance is due to an absolute lack of understanding of the 
 real questions at issue. As a matter of fact, a given amount 
 of income does not always, nor even in the majority of cases, 
 indicate the possession of a given amount of property. A 
 farmer, a manufacturer, a grocer, a teacher, an army officer 
 and a mechanical engineer, may all have the same income, 
 and yet their social position, their economic condition, and 
 the amount of property which each possesses may be entirely 
 and radically different. The question is, or should be, not 
 what is a man's income, but what does he derive it from? 
 And, under what conditions, and in what manner does he 
 do it. And this does not mean merely that the inquiry 
 should be directed to the amount of property he possesses, 
 or whether he possesses any at all, but also, if he does pos- 
 sess property, to the question of what it consists of and how 
 it is employed in order to yield the income. The importance 
 
194 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 of this last point will, immediately suggest itself if the reader 
 will recollect what we said in the second section of this 
 chapter on the psychological and ideological effects of the 
 different kinds of property and the different occupations, 
 put we shall discuss this more at length further below. 
 
 As we have already stated, however, in the first section 
 of this chapter, the real strength of Bernstein's argument 
 does not lie in the statistical data with which he attempts 
 to prove his alleged facts, but in the social phenomenon 
 which he observed and which seems to , counteract the evo- 
 lutionary tendencies of capitalism described by Marx. The 
 real meat of his argument lies in the third point mentioned 
 above. The real question is : how does the modern develop- 
 ment of that social economic factor, the substitution of cor- 
 porate in the place of individual economic action on the 
 part of the capitalists, react on the fortunes of that class. 
 Our inquiry must not, however, be limited to the question 
 of the division of income within that class, but also as to 
 how, in what manner and under what circumstances, this 
 division is being effected. We must find out not only how 
 much each capitalist gets as his share of surplus-value cre- 
 ated by the working class, but how his share is determined 
 and what he must do in order to get it. Into what relations 
 does his getting it, and the manner in which he gets it, bring 
 him to his fellow-capitalists, the other classes of society, and 
 society at large, that is, the social organization as a whole. 
 
 Bernstein says, in discussing the importance of the Marx- 
 ian theory of value, that the fact of the creation by the 
 working class of surplus-value, and its absorption by the 
 capitalist class being provable empirically as a fact (to his 
 satisfaction, of course) it makes no difference by what eco- 
 nomic laws it is brought about. This may be good enough 
 reasoning when one starts out from so-called " ethical " 
 premises, but is absolutely inadequate from the scientific his- 
 torico-economic point of view. We have already sufficiently 
 pointed out the great importance of the difference which does 
 exist, in its purely economic bearings, and now we wish to 
 
CONCENTRATION OF CAPITAL. I95 
 
 insist on it because of what might be termed its social or 
 ideological importance. For it is not the mere fact of the 
 creation by one class of surplus-value or a surplus-product 
 and its absorption by another class, but the way in which it 
 is done that gives . its character, including its ideology,^ to 
 society as a whole and to each and every class and subdi- 
 vision of a class therein. In examining, therefore, the in- 
 fluence of the development of the corporation on the fortunes 
 of the capitalist class, it is not only the effect upon its num- 
 bers, but also and mainly the effect upon its character that is 
 to be considered, for on the latter may depend the character 
 of the whole social system. Upon the latter may also de- 
 pend the durability of the social system and its speedy trans- 
 formation into another. We shall, therefore, examine the 
 question from both aspects. 
 
 And first as to numbers. Do^s the substitution of cor- 
 porate for individual effort arrest the shrinkage of the num- 
 bers of the capitalist class or develop a tendency to its ex- 
 pansion, as Bernstein asserts? Decidedly not. And even 
 Bernstein's empirical-statistical method, poor as it is, shows 
 this. Bernstein does not deny the absolute and relative 
 growth of the working class. And as the working class 
 and capitalist class can only grow, aside from their pro- 
 portional growth with the growth of population, at the ex- 
 pense of each other, they evidently cannot both grow at the 
 same tirne. But this is just what is evidently happening 
 if Bernstein is to be believed. Both the capitalist class and 
 the working class are simultaneously growing at the expense 
 of each other ! Only the uncritical handling of mere figures 
 could betray him into such an absurdity. A careful examina- 
 tion, on the other hand, of the actual phenomena under con- 
 sideration would have shown him that while the corporation 
 may arrest the rapidity of progress in the shrinking process 
 of the capitalistic ranks, it cannot do away with the process 
 itself. The capitalist class must shrink! 
 
 In this connection we must, in the first place, consider 
 the fact, already noted by Marx, that the corporation itself 
 
lg6 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 is a means towards the concentration of capital, with all 
 that it implies. By combining the smaller capitals of the 
 individual capitalists, and more particularly by turning over 
 to the big capitalists the small capitals of the middle class 
 and upper strata of the working class, either directly or in- 
 directly, by means of banking and savings institutions, such 
 tremendous concentrations of capital and industrial under- 
 takings" are made possible which otherwise could not, or 
 could only with great difficulty, take place. This places the 
 whole industrial system on a higher plane of capitalization 
 and must necessarily force out a lot of small capitalists by 
 making their capital inadequate for the undertakings in ■ 
 which they are engaged, and the return on their capital, ow- 
 ing to the increased falling of the rate of profits, insufficient 
 to sustain them. Thus, while on the one hand this form per- 
 mits these small people, or some of them, to combine their 
 capitals and thereby gain a new lease of life, long or short 
 as the case may be, it on the other hand giyes additional 
 impetus to the very forcing out process which makes their 
 individual independent position untenable. While in one 
 way it retards the shrinking process it, in another way, ac- 
 celerates it. 
 
 Another point to be considered in this connection is the 
 fact that the corporation is the chosen and well-adapted 
 means of all forms of dishonest and speculative undertak- 
 ings, by means of which the unscrupulous rich manage to 
 relieve the confiding, because helpless, poorer strata of the 
 capitalist class of whatever individual competition has left 
 to them. In times of " prosperity " all sorts of industrial 
 and commercial undertakings are organized which no one 
 would dream of organizing if he had to do it with his own 
 capital. But as the corporation form permits the " promo- 
 tion " of these schemes at the expense of the public, there 
 will always be found enough " promoters " who are willing 
 to " take a chance " with and at the money of the " general 
 public," which is composed of the lower strata of capitalismi 
 This " public " not being in a position economically to com- 
 
CONCENTRATION OF CAPITAL. I97 
 
 pete with the magnates of capital, are willing to nibble at 
 their schemes in the hope of finding some profitable em- 
 ployment for the remnants of their former fortunes or their 
 savings. 
 
 Then comes the panic or the " contraction " and all the 
 bubbles burst, leaving the field strewn with the corpses of the 
 small fry, the would-be-capitalists despite the fact that their 
 means were insufficient to give them standing as capitalists 
 individually. Another and very important aspect of this 
 phenomenon will be considered later in another connection. 
 Here we simply want to point out the fact that the corpo- 
 ration is not merely a means of permitting the small capital- 
 ists to participate in the economic undertakings which they 
 could not tackle on their own account, but also of relieving 
 them of their small capitals, and either wasting them or 
 transferring them to the large capitalists, directly or indi- 
 rectly. This was pointed out at the beginning of the dis- 
 cussion by Kautsky, and since then we have had abundant 
 proof of the great possibilities of this relieving process. 
 The exposures of Thomas W. Lawson have shown that the 
 very loftiest pillars of capitaldom engage in this relieving 
 process, not merely as an incident to the natural' " expan- 
 sion " and " contraction " of the commercial world, but de- 
 liberately, with malice aforethought, manufacturing to order 
 "expansion" and "contraction" in order to accelerate the' 
 relieving process. These exposures have also shown that 
 where the small fry do not nibble themselves in propria 
 persona, their bankers, savings banks and other depositaries 
 do it for them, as if they were vying with each other to 
 prove the correctness of the Marxian prognosis. 
 
 It must not be assumed, however, that this relieving 
 process is due entirely to dishonesty on the part of the big 
 sharks of capitalism in dealing with their weaker brethren. 
 On the contrary, the process itself is a natural one, due to 
 the natural workings of the corporation. This process is 
 only accelerated by the exposed " evils," by the abuses of the 
 corporate form of doing business, for there are natural, as 
 
"198 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 well as artificial, panics and contractions, and they all re- 
 sult in the transfer of the capitals of the small fry to the 
 big sharks, or .in their utter waste and destruction, as will 
 be seen later. 
 
 Aside, however, from the " evils " and " abuses " of the 
 corporation system, aside from the casual, although periodi- 
 cally recurring, waste of small capitals and their transfer to 
 the big magnates of capital in times of panics and contrac- 
 tions, the usual and necessary results of the corporation sys- 
 tem, its very uses and mode of operation are such as to make 
 it almost nugatory as a preservative of the numbers" oi the 
 "capitalist class — as a means of staying off the destruction 
 of the independent middle class. 
 
 The ordinary and usual course of corporation business 
 IS such that only a few i5ersons, the rich who organize and 
 control it, get most or all of the benefits derived there- 
 from. In order that we may clearly understand this point 
 we must bear in mind the difference between business and 
 loan capital. There is a difference between the return a 
 man gets from his capital when he employs it in business 
 himself and when he lends to another capitalist to be used 
 in the same business. In the first contingency he gets all 
 the profit that is made in the business, in the second only 
 .that part of the profit which is called interest. The amount 
 of interest is not always the same proportion of the amount 
 of profit realized, but it is always only a share and never 
 the whole thereof. In determining the proportionate share 
 of the owner of the capital and the undertaking capitalist^ 
 respectively, in the profits realized in the business, all other 
 things being equal, regard is had to the risk assumed or un- 
 idergone by the owner of the capital, the lowest proportion 
 being paid as interest where the owner of the capital takes 
 no risks whatever. This is interest proper. The balance of 
 the profit, whatever is left after the deduction of this in- 
 terest for the mere use of the capital with no risk attached, 
 remains in the hands of the capitalist, according to capital- 
 istic notions, for his work of supervision of the industrial 
 
CONCENTRATION OF CAPITAL. I99 
 
 undertaking and the risks involved in it. If a capitalist lends 
 his money on insufiticient security he gets higher interest. 
 But this higher interest is really not pure interest; it is in- 
 terest proper together with an additional premium (part of 
 the profit in its narrower sense) paid for the risk run by the 
 man who makes the loan. 
 
 In, a corporation the work of supervising the undertaking 
 engaged in by the concern is not done by the stockholders, 
 but by paid officers and employes. These officers and em- 
 ployes are always the rich who organize and control it, and 
 they not only eat up all that part of the profits which goes 
 to the capitalist for his work of supervision, but usually a 
 great deal more in the shape of high salaries and incidental 
 expenses. This part of the profit of all of the capital in- 
 terested goes to the big capitalists only, the small fry get 
 none of it. And if by some chance a small capitalist should 
 get this (which would' only be possible in the exceptional 
 case where all stockholders are small men) it would still 
 remain true that only one would get it, and the remaining 
 stockholders would not get that part of the profit which goes 
 to every independent capitalist. 
 
 There remains, therefore, to the stockholding capitalist 
 only the interest proper and that part of the profit whic'i 
 goes as compensation for risk. In this respect the stock- 
 holding capitalist is placed in the same position as theienj- 
 ing capitalist; the greater the risk involved in holding stock 
 in a certain corporation the greater will be his return (if he 
 gets any), and the smaller the risk the less his return, in 
 the shape of dividends. But the risks which he takes here 
 are not only' the risks of the business venture, but also 
 those of dishonest corporate management. Besides, even in 
 the question of the profitableness of the business there is the 
 possibility of fraud, for he is obliged to rely on the judg- 
 ment of others who may be interested only in the venture to 
 the extent of their ability to draw large salaries. The re- 
 sult of all this is that the prospective stockholder is desirous 
 of investing in a safe corporation, that is to say, in cor- 
 
200 THE THEORETICAL SYSTEM OF KARL MAEX. 
 
 porations at the head of which are big capitalists who hold 
 out some kinds of guaranty or promise as to results. But 
 the safer the corporation the more is the investor, not only 
 the bondholder but even the stockholder, reduced to the 
 position of a person who lends his money to it, at least as 
 far as the amount of profits he receives on his capital is 
 concerned. This can be seen any day on the stock exchange. 
 The safer the corporation the more is the dividend reduced 
 to the level of mere interest. In speaking of dividend 
 in this connection we mean, of course, the amount of the 
 dividend as a percentage on the capital invested. Sometimes 
 a very safe corporation pays very large dividends (although 
 this is unusual), but in such an event the value of the stock 
 will be so much above par as to bring the dividend down to 
 the proper level. The small capitalist who desires to invest 
 in a corporation is, therefore, between the Scylla of taking 
 all sorts of risks which are not present in the case of the 
 independent industrial undertaker, and the Charybdis of get- 
 ting no return on his capital except interest. 
 
 But as interest is only a share of the whole profit, and 
 usually a small one at that, it is very evident that not all, 
 and not even most, of the capitalists who possess sufficient 
 capital to furnish them an independent income at the pre- 
 vailing rates of profit, if they could remain independent un- 
 dertakers, will be able to derive such income as stockholders 
 of a corporation. A good many of them will necessarily 
 have to fall out at the bottom. Usually these are the peo- 
 ple who furnish the capital for all sorts of venturesome 
 schemes with alluring promises, which result disastrously. 
 Being unable to maintain their position as capitalists by 
 investing in safe corporations, they desperately risk their 
 small capitals in these undertakings, hoping to retrieve by a 
 stroke of luck what they lost by the force of economic evo- 
 lution. 
 
 But this is not yet all. Those smaller capitalists whose 
 capital is for the time being sufficient to maintain them as 
 rentiers of capitalism, as investors in safe corporations, are 
 
CONCENTRATION OF CAPITAL. 201 
 
 by no means sure of their position. We have already shown 
 that the rate of profit has a tendency to fall. With the fall- 
 ing of the rate of profit falls that portion of it which is paid 
 as interest, directly or in the shape of dividends, to bond 
 and stockholders of corporations. This makes a capital 
 which is sufficient to maintain a man independently to-day 
 insufficient for that purpose to-morrow. Thus the falling- 
 out-at-the-bottom process increases as capitalism progresses. 
 
 Some of the causes and processes noted above are slow in 
 their operation. But one thing is certain, they are there 
 and working their deadly havoc in the ranks of the capi- 
 talistic cohorts constantly and surely. The tendencies of 
 capitalistic development cannot, therefore, be mistaken. Not 
 only can not the capitalist class, that is," its lower stratum 
 which is commonly called the middle class, grow, but it 
 must surely and constantly diminish. 
 
 This diminishing process in the capitalist ranks, the pass- 
 ing from the capitalist- class into the proletariat, may, how- 
 ever, and, owing to certain circumstances which will be 
 considered later, frequently does assume such forms that the 
 whole process becomes veiled and not easily recognizable. 
 Here again the corporation plays a part, although not a very 
 important one. Its part here consists in furnishing some 
 additional folds for the veil which covers this process. 
 
 Some Marx critics, and Bernstein is among them, talk as 
 if Marx saw only one process, and that one the constant 
 passing of former capitalists of the middle class into the 
 ranks of the proletariat. No doubt there are some passages 
 to be found in Marx's writings which at first blush give such 
 impression. And as a general statement of a tendency this 
 is true too. But that does not necessarily exclude some 
 cross-current which may affect the original and prime tend- 
 ency described by him, although it cannot completely nega- 
 tive it. Hence the danger of relying on single passages in 
 Marx without careful examination as to their connection, 
 and the immediate purposes for which they are used in the 
 connection in -which they are found. Hence, also, the ease 
 
202 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 with which all sorts of contradictions are found in Marx, 
 according to his critics, as was already pointed out in an- 
 other connection. It took Marx several bulky volumes to 
 expound systematically his theoretical system, and then his 
 work remained unfinished. He could not at each point re- 
 count all the circumstances which might affect or modify the ' 
 tendencies or laws discussed, and which might be contained 
 in other parts of his work. He assumed that the reader 
 would remember them and read all the passages relating to 
 the same subject together. Sometimes he purposely gave 
 absolute form to a statement which he intended to qualify, 
 and made certain assumptions he himself did not believe in, 
 intending later to modify the absolute form of the statement 
 or show the iijccArrectness of the assumption, in order to 
 more clearly and systematically present his theory. 
 
 As regards the matter now under discussion there can 
 be ho doubt but that Marx did not mean to say that all 
 those who are reduced from the ranks of capitalism by the 
 progress of capitalism "become proletarians. Some of them 
 may, for a time at least, remain in the position of half capi- 
 talist, .half proletarian, in that they .may derive a part of 
 their income from their property and part thereof from 
 their labor. But even those who have lost all their prop- 
 erty may still become proletarians in the antique sense only, 
 that is, persons who possess nothing, but they may not be 
 proletarians in the modern sense of the word, that is, labor- 
 ers who are not in possession of their means of production. 
 They may cease to be capitalists and still not become labor- 
 ers ; they may live by their wits instead of by their labor, or 
 become mere sponges on their former co-classites. It is our 
 opinion that, with the progress of capitalism, the percentage 
 of this last mentioned class of people is growing larger 
 among those who lose caste by reason of the elimination 
 process of the middle class. 
 
 Hence the cry of the so-called " new middle class," raised 
 by the Revisionists. Hence, also, the peculiar features of 
 the statistics as to incomes. It is not because there is no 
 
CONCENTRATION OF CAPITAL. 2O3 
 
 process of Centralization of wealth accompanying the Con- 
 centration of capital, as Bernstein would have us believe, 
 that there is apparently a wide diffusion of small incomes 
 which are not the proceeds of wages. This phenomenon is 
 due, first, to the fact that with the concentration of capital 
 wage-slavery has been growing upwards, embracing con- 
 stantly new occupations, such as by their character arid re- 
 muneration were not properly within its domain on a lower 
 rung of capitalistic evolution. This class has been particu- 
 larly increased by the development of the corporation. And 
 secondly, to the increase of the class of people, who, although 
 not possessing any property, still manage to maintain them- 
 . selves in real or apparent independence and without com- 
 ing, formally at least, within the purview of wage-slavery. 
 
 This brings us to the question of the effect of the recent 
 economic development on the character of the middle class. 
 Before passing, however, to the examination of that ques- 
 tion, we desire to note the fact that much of the talk and 
 statistics about the supposed slowness of the process of the 
 concentration of industrial undertakings is due to the merely 
 apparent and formal independent existence of many under- 
 takings and undertakers that ' are really mere dependent 
 parts of a large, concentrated, industrial enterprise. And 
 we also desire to mention here the fact that Heinrich 
 Cunow, one of the ablest of the younger generation of so- 
 cialist writers in Germany, has done splendid service in 
 pointing this out. 
 
 But, one may ask, while it may be true that the processes 
 which you have described show that not all the members 
 of the present or former middle class can remain in their 
 position of small capitalists, deriving their income from 
 the possession of property, there still does remain this " new " 
 middle class which is not reduced to the position of pro- 
 letarians. This " new " middle class, while it possesses no 
 property, or not siifficient property to count economically, 
 is still a class distinct and apart from the proletariat, and if 
 numerous enough is a force to be reckoned with. And as to 
 
204 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 the great numbers of this class the income statistics are 
 certainly an indication. Those incomes which can not pos- 
 sibly be the result of wage-labor must be the incomes of this 
 " new " middle class, unless they are the incomes of the 
 property owning middle class, and the income statistics 
 therefore certainly prove at least one thing, and that is .that 
 the " new," property-less middle-class, together with the old- 
 propertied middle-class, certainly form at present quite a 
 formidable class and diminish only slowly. Where is the 
 (difference, as far as the subject that interests us. (the ap- 
 proaching transformation from capitalism to socialism), is 
 eoncernedj between the old and the new middle classes? 
 Isn't Bernstein right, after 'all, when he says that if the 
 coming of socialism were dependent on the disappearance 
 of the middle class the socialists might as well go to sleep, 
 for the time being at least? 
 
 In answer to such questions we will say: As already 
 pointed out, it is not part of the Marxian doctrine that all 
 middle classes must disappear before the advent of social- 
 ism, and the fact, therefore, that there may be developing 
 a new middle class is no warrant for the assertion that the 
 Marxian theory needs revision. Provided, of course, that 
 the new tniddle class is suflficiently different to make a dif- 
 ference. It was shown already that Marx's prognosis "as to 
 the centralization of wealth through the disappearance of 
 the property-owning middle-class is correct. And this is 
 one of the decisive moments in the evolution from capitalism 
 to socialism. It is not so much the merging of the persons 
 who compose the middle class into the proletariat that is re- 
 quired as their severance from their property. For the 
 passing of our society from its capitalistic form of produc- 
 tion to a socialistic form of production, that is, for the so- 
 cialization of the means of production, the only things that 
 are of paramount importance are, first, that these means of 
 production should be social in their character, and the more 
 social the better (the concentration of capital) ; and, second, 
 that these means of production should lend themselves to 
 
CONCENTRATION OF CAPITAL. ' 20$ 
 
 social management, that is, be in the hands of as few per- 
 sons as possible (the centralization of wealth). It is of 
 comparatively little importance how the surplus-value pro- 
 duced by the working class, the income of the capitalist class, 
 is distributed. The question^of this distribution is of any im- 
 portance only in two aspects: ist, in so far as it reacts on 
 the centralization of wealth by permitting greater or less 
 numbers to maintain their position as property-owners; and, 
 2d, in so far as it may affect the ideology of the different 
 classes of society. 
 
 In the first aspect, as we have already seen, the " new " 
 middle-class is harmless. Its existence does not retard the 
 process of the centralization of wealth, but, on the contrary, 
 is its direct result. It is, therefore, only in the second as- 
 pect that any significance whatever could be attached to it. 
 Let us see what it amounts to? 
 
 But before proceeding any further we must state that the 
 possession of capital, property, being of the essence of a 
 capitalistic cjass, the introduction of. this so-called " new " 
 property-less middle-class has created no end of confusion. 
 A very great proportion of what is termed new middle class, 
 and appears as such in the income statistics, is really a 
 part of the regular proletariat, and the ne.w middle class, 
 whatever it may be, is^ a good deal smaller than might be 
 supposed from the tables of incomes. • This confusion is 
 due, on the one hand, to the old and firmly-rooted prejudice, 
 according to which Marx is supposed to ascribe value cre- 
 ating properties only to manual labor, and on the other 
 to the severance of the function of superintendence from 
 the possession of property — effected by the corporation as 
 noted before. Owing to these circumstances large sections 
 of the proletariat are counted as belonging to the middle 
 class, that is, the lower strata of the capitalist class. This 
 is the case with almost all those numerous and growing occu- 
 pations in which the remuneration is termed " salary " in- 
 stead of "wages." All these salaried persons, no matter 
 what their salaries may be, who make up perhaps the bulk. 
 
206 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 and certainly a great portion, of the " new " middle class, 
 are in reality just as much a part of the proletariat as the 
 merest day-laborer. Except, of course, in those instances 
 where, by reason of the amount of their salary, they are in a 
 position to, and do, save and invest. In so far as such 
 investment takes place (as in the case of those who invest 
 the remnants of their capital while depending for their 
 support mainly on some useful occupation) they are on the 
 border line between capital and labor, and are akin in their 
 position to the ruined peasants who, before abandoning 
 their villages, attempt to^ remain farmers by doing " some- 
 thing on a side." These cases are, however, not very numer- 
 ous, and their condition is merely transitory. Another ex- 
 ception that should be noted is of those cases where the 
 salary is so large that it evidently exceeds the value of the 
 labor of the recipient. It will be found, however, in such 
 instances, that such salary is paid only to capitalists who 
 are really in contrx)l of the corporation which pays it to 
 them, and is part of the process by which the big capitalists 
 relieve the small ones of part of the profits coming to them. 
 With these negligible exceptions, salaried persons are really 
 part of the proletariat, no matter what they themselves 
 think about it. 
 
 It is true that by reason of their descent, associations, 
 habits and modes o'f thought these persons feel a certain 
 solidarity with the upper class rather than with the class 
 to which they belong. But this does not change their social- 
 economic status, and, so far as their usefulness for the 
 work for socialism, they present a problem which is only dif- 
 ferent in degree, but not in, kind, from the general problem 
 of the organization of the working class for its emancipa- 
 tion from wage-slavery. In the solving of the special prob- 
 lem, as well 3.5 in the general, the change in the character 
 of the middle class is of quite some importance. 
 
 1 And the character of the middle class has changed. Nay, 
 the character of the whole capitalist class has changed by 
 reason of this substitute of corporate undertakings in place 
 
CONCENTRATION OF CAPITAL. 20/ 
 
 of individual enterprise. And not only this, but the char- 
 acter of our whole social system is undergoing a change 
 of quite some importance by reason thereof. And these 
 changes have already wrought great changes in the ideology 
 of- the different classes composing our society, and are go- 
 ing to entirely revolutionize it. The famous' phrase of a 
 well-known English statesnian, " We are all socialists now," 
 was not as idle as some people supposed it to be. Of course 
 the gentleman who uttered it may not himself have quite 
 realized its full import, but the fact that he uttered it is one 
 of the proofs of its correctness, although he may have at-^ 
 tached to it an entirely different meaning from the one we 
 give it. Its real meaning is this: The philosophy of indi- 
 vidualism, the ideology of private ownership of property, 
 and particularly of individual enterprise, is doomed; and the 
 philosophy of collectivism, the ideology of the collective 
 ownership of the means of production and of the social 
 organization of human enterprise, is fast taking its place. 
 The change is taking place not only in the realm of juris- 
 prudence, which is the immediate expression of accomplished 
 economic facts, but also in the remoter fields of art and 
 philosophy. As yet there is chaos. None can mistake the 
 " breaking up of old ideals," but only very few can see the 
 whole meaning and import of it: that a new society, and a 
 new ideology to correspond, are forcing their way and mak- 
 ing rapid strides. 
 
 Spencerianism, that purest expression of capitalism, and 
 not so very long ago the reigning philosophy, is dead and 
 forgotten. And every new day surprises us by the official 
 throwing overboard of some remnant of that philosophy 
 which was still clung to the day before. Socialism is the 
 order of the day. But not merely the " menace of social- 
 ism," which simply reflects the growth of the organiza- 
 tion of the working class, but the recognition of coUectivist 
 principles and the expression of coUectivist ideas. The ses- 
 sion of the American Congress just closed gave remarkable 
 evidence of that. It is pot what was accomplished there, but 
 
20S THE THEORETICAL SYSTEM 6F KAfeL MARX. 
 
 what was conceded in principle that interests us here. It is- 
 not, therefore, the legislation or attempted legislation for 
 the benefit of the working class only that must be considered, 
 but all legislative attempts which show this change of ide- 
 ology. 
 
 In this coflnection we desire to state that there is some 
 basis of fact in the cry raised 'in some capitalist quarters 
 that Roosevelt is more " dangerous " as a socialist than 
 . Bryan. We do not think much of the socialism of either, 
 and believe that they are both quite " safe," but we really 
 think that Roosevelt is not quite as "sane" from the capi- 
 talist point of view. The difference between them is that 
 between reactionary and progressive capitalism. It is the 
 difference between anti-trust laws and railway rate legisla-^ 
 tion. Both classes of legislation are purely capitalistic measx 
 ures, designed to protect the small capitalists against the big 
 ones. But the methods adopted are based on fundamentally 
 different social principles. As was already mentioned in an 
 earlier part of this chapter, the anti-trust law is a capitalistic 
 measure pure and simple, based on the theory that the State 
 had only police duties to perform. Railway rate regu- 
 lation, on the other hand, proceeds upon the theory that 
 social means of production are there primarily for the benefit 
 of society as a whole, and are, therefore, subject to social 
 control. That does not mean that railway rate regulation 
 is of any importance in itself. Neither regulation nor even 
 ownership of railways by the capitalistic state are of any 
 importance. But the assumption of regulation, particularly 
 in a purely capitalistic country like the United States, is of 
 significance as showing the drift of ideas. It is also of 
 significance that attention is- diverted from incomes, the 
 Bryan mode of attacking capitalism, to 'the control of produc- 
 tion, the field on which the real battles for the reorganizar 
 tion of the social structure will have to be fought out. 
 
 These changes in ideology have not come about because 
 people have obtained a " better insight " into the true rela- 
 tion of things, but because the basis of all ideology, the eco- 
 
CONCENTRATION OF CAPITAL. 209 
 
 nomic relations within our society, have changed, are chang- 
 ing. The private ownership of the means of production is 
 the basis of capitalistic society, and therefore of all capital- 
 istic ideology. And by ownership is not meant merely the 
 derivation of revenue, but real ownership, that is, control. 
 A capitalistic class not owning any capital, as the so-called 
 " new " middle class, is a contradiction in terms, an anomaly. 
 But no less anomalous is the position of a capitalist who 
 owns but does not control his property. That wonderful 
 artist, Gorky, with the true insight of genius, has divined 
 this truth and has expressed it when he made one of his 
 characters say that the true importance of wealth is the 
 power of control that it gives one over other people. But 
 this power of control does not lie in the revenue which one 
 derives from wealth, but in the control of this wealth itself, 
 which in our society is synonymous with means of produc- 
 tion. 
 
 The truth is that the " new " property-less middle class is 
 not a capitalistic class. It is no middle class at all. It is 
 true that it stands in the middle between the capitalist class 
 and the working -class, and in this sense it is more of a 
 " middle " than the old middle class which was nothing but 
 the lower strata of the capitalist class. But it is no class. 
 A class is not merely an aggregation of individuals having a 
 rhore or less similar income obtained in a more or less simi- 
 lar way. In order that any aggregation of individuals 
 should really form a social class they must perform some 
 social-economic function. The existence of the " new mid— 
 . die class " is entirely too aerial to give it position as a so- 
 cial class. They are either merely "hangers on" of some 
 other class, or hang in the air entirely, where they obtain 
 their income from " wind." This " class " has none of the 
 characteristics and none of the ideas of the bourgeoisie 
 which we have described. It not only has no love for prop-^ 
 ertyas such, because it does hot possess any, but it has not 
 even that love of economic independence and individual en- 
 terprise which is the characteristic of the true bourgeois. 
 
210 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 It has no verjeration for property or property-rights, no love 
 of economic independence, and consequently no constitu- 
 tional abhorrence of " paternalism " or of socialism. All 
 this " class " cares for is its income, a!nd that is why its ide- 
 ologists, the social reformers of all grades and shades, put 
 so much stock in the question of income and always push it 
 to the foreground. To the old bourgeois, in control of his 
 property, it was a question of freedom and independence; he 
 looked upon socialism as upon the coming slavery, he ab- 
 horred it for its very comforts which everybody shared alike. 
 Not so with the new middle class. Any one of them is ready 
 at any moment to change his windy existence for a govern- 
 mental job, service of some corporation or any other occu- 
 pation, provided his income will not be diminished, or even 
 if it is diminished to a certain extent, provided it is assured 
 to him for any length of time. For it must be remembered 
 that this new middle class suffers just as miich from inse- 
 curity of income as the working class, if not more, to which 
 must be added insecurity of position. It is very natural 
 that a " class " so all up in the air should not form any 
 firmly rooted ideology of its own, that it should be drifting 
 all the time, and should, therefore, be almost worthless as a 
 social force either for or against the introduction of a new 
 order. But, on the other hand, it is, because of the very 
 nature of its social existence, extremely restless, ever ready 
 to change, and ever longing for a change which would finally 
 do away, or at least alleviate, its- iinsettledness, give it a 
 rest. " Governmental interference " has no terrors for it. 
 It feels the need of a stronger hand than that of the indi- ^ 
 vidual in arranging the field of battle for the struggle for 
 existence. If such a makeshift may be dignified into an ide- 
 ology, its ideology is State Socialism. 
 
 But it is not only the property-less, only-in-name, middle 
 . class that has lost its old bourgeois ideology. The rem- 
 nants of the old middle class, the stockholding small capi- 
 talists, have lost their ideology with the control of their 
 property. For it was that control, the individual enterprise, 
 
CONCENTRATION OF CAPITAL. 211 
 
 that was at the basis of it. Furtherftiore, with this class 
 as with the " new " middle class, it has become merely a 
 question of income. For property without control is again 
 a contradiction in terms. These people really have no prop- 
 erty, although they and others think they do. What they 
 have is a right to a certain income. 'They are nothing but 
 rentiers, annuitants, either of public or private corporations. 
 They are ready at any time to, and do,, exchange their sup- 
 posed property for more formal annuities and other rentes. 
 
 Robbed of its economic independence, deprived of the con- 
 trol of its property and of the opportunity of individual 
 enterprise, it has no other aspirations except to preserve its 
 comforts, its incomes. If it has any ideals at all, its ideals 
 may be said to be just the reverse of the old bourgeois mid- 
 dle class. By the very nature of its way of managing its 
 affairs the propriety, effectiveness, and, above all, the neces- 
 sity of socialization, is brought home to it. Furthermore, 
 being minority stockholders, the members of this class nat- 
 urally look upon the general government, the social organiza- 
 tion as a whole, as the protector of its rights against the 
 upscrupulous methods and the rapacipusness of the big capi- 
 talistic sharks. It is true their ideas in this respect are not 
 those of the revolutionary proletariat, it is not the social 
 organization of work that they dream of, but the social 
 organization of the distribution of gain. By a curious 
 mental process they fill the old forms of their ideology, ac- 
 cording to which the State was merely a policeman, with 
 an entirely new substance by extending the police powers 
 to fields which would have horrified their fathers had they 
 lived to see the thing. The ideology of this class, like that of 
 the new middle class, is a curious mixture of old and new 
 ideas, but one thing is clear in the midst of all this confusion, 
 that its antagonism to socialism is not a matter of principle 
 but of convenience. 
 
 Hence the "breaking up of ideals," the great . changes in 
 the ideology of capitalistic society which we have already 
 noted. Hence, also, the so many different fbrms of " social- 
 
212 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 ism " with which we»are blessed. Hence, lastly, the " social 
 unrest" in capitalistic quarters. 
 
 For it is a mistake to- think that the "social unrest" 
 comes wholly, or even mostly, from below. Of course there 
 are moments of unrest in the working-class.' But 'it will be 
 found, upon close examination, that a good deal of it is 
 merely the reflection of the unrest of the higher layers of 
 society. Furthermote, it will be found that the more the 
 working-class emancipates itself from the mental and moraf 
 tutelage of the upper class, the more it develops an ideology 
 of its own, as we shall see in the next chapter, and the less 
 the " unrest " in its midst : the more steady its thoughts and 
 actions become. Before the working-class ideology, is full- 
 grown, however, .and while it is yet under the tutelage of 
 the middle classes, the changes in the ideology of -those 
 classes which we have described are of great importance, and 
 even the very restlessness of that ideology and psychology 
 is of importance. For it first creates restlessness below, 
 thus calling out nervous activity, and when that nervous 
 activity has resulted in a firm and clear ideology it cannot 
 offer any effective resistance. 
 
 Whatever, therefore, has been saved of the middle class 
 by the corporation" with regard to numbers, has been de- 
 stroyed, and very largely by this very agency, as to char- 
 acter. What was saved from the fire has been destroyed by 
 water. The result is the same : the middle class, that middle 
 class which Marx had in view, the middle class which was a 
 factor obstructing the way towards socialism, is doomed. 
 
 This is not all, however. The corporation has not merely 
 failed to save the middle class. It is performing a positive' 
 and great service in the work of transformation of our so- 
 ciety from capitalism to socialism. That work is nothing 
 less than the abolition of private property and the substitu- 
 tion of collective property in the means of production; the 
 demolition of the basis of capitalism and the rearing of the 
 ground work of a socialist system. of society. It is hard 
 to think of our- capitalists as doing this work, but that is 
 
CONCENTRATION OF CAPITAL. 213 
 
 what they are doing nevertheless. In their frantic efforts to 
 save fhemselves, the capitalist class is doing nothing less 
 than undermining its very existence, cutting out the ground 
 from under its own feet, abolishing, not only the basis of 
 capitalism, but the basis of all class-society — private prop- 
 erty. This fact has not been noticed hitherto and given 
 the attention which it deserves, because, again, of the ques- 
 tion of income which has obstructed our vision. Because 
 our big capitalists get the benefits, the income, of our cor- 
 porations, it has not been noticed that they don't own the 
 property from which these incomes and benefits are derived. 
 In looking with rapturous gaze or hateful abhorrence at the 
 enormous fortunes of our kings, barons, and lesser gentry, 
 the startling fact has .been lost sight of that these fortunes 
 are mere titles to revenue and not to property. The law 
 recognizes this fact clearly. The great John D. Rockefeller, 
 ruler of the great Standard Oil and all its domain, has no 
 more title to any part of the property of the great corpora- 
 tion of which he is the master than the poorest elevator boy 
 employed in one of its buildings, and should he attempt to 
 appropriate a dollar's worth of it by using' it for himself, the 
 law will treat it as a case of conversion, or larceny, of some- 
 body else's property. 
 
 And let no one say that this is mere legal formality. 
 Legal forms always 'express economic realities. Sometimes 
 they survive their substance and become mere empty forms. 
 In such cases they are records of past economic realities. 
 When they are not records of the past they always express 
 present reality. In this case the form is full of substance. 
 It not only expresses a present reality, but, as it happens, 
 presages the future. As yet the collective form substituted 
 by the capitalists is crude and undeveloped as to form, and 
 the collective bodies are still "private," that is, the benefits 
 derived therefrom are enjoyed by private individuals. The 
 proper distribution of the benefits, that distribution which is 
 suited to the new form of ownership, which in itself is only 
 an expression of the new form of production, will follow as 
 
214 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 surely as 'harvest follows the planting of the see4- This 
 work of readjustment of the mode of distribution to the new' 
 mode of production and ownership, and the full development 
 of all the three processes to the limit of their capacities for' 
 the benefit of all members of society, will remain for the 
 fully developed, organized and educated working class. But 
 in the preparatory work of transition,' particularly in the 
 ruthless destruction of all the elements of the old social sys- 
 tem, our friends the enemy have rendered, and are rendering, ' 
 .signal service. -In their mad effort to escape their fate the 
 capitalists are only cheating the gallows by committing 
 suicide. 
 
CHAPTER IX. 
 
 THE PROLETARIAT AND THE REVOLUTION. 
 
 We now come to consider the active factor of the revolu- 
 tion from capitalism to socialism, — the Proletariat. It may 
 be stated without any fear of contradiction that this question 
 of the role of the proletariat in bringing about the trans- 
 formation from capitalism to socialism, and how and under 
 what circumstances it will execute this role, in which last 
 is included the question of the so-called breakdown of capi- 
 talism, is the real bone of contention between the so-called 
 old-school Marxists and the Revisionists; this being merely 
 the reverse side of the question of the Social Revolution, and 
 all other questions are only tributary to it. As was 
 already stated before, the purely theoretical questions of 
 philosophy and political economy are not the proper field of 
 Revisionism, and these theories are drawn into the discus- 
 sion only in so far as they have, or are believed to have, any 
 bearing on the present question. The paramount question of 
 revisionism is : Who is going to bring about the transforma- 
 tion from capitalism to socialism, and how will it be done? 
 Everything else is only interesting- in so far as it throws 
 some light on this subject. We have already shown in the 
 preceding chapters the role which some of our social ele- 
 ~ments, those which may be called passive, will play in this 
 transformation and how the ground will be prepared and 
 broken. Now we will consider the active factor, its de- 
 velopment and the conditions under which the work can be 
 successfully done by it. 
 
 Before proceeding any further, however, attention must 
 be called to a peculiar feature of the discussion on this^ sub- 
 
 215 
 
2l6 THE THEORETICAL SYSTEM OF ifARL MARX. 
 
 ject, which is the result of a basic misunderstanding of tlie . 
 Marxian theory. 
 
 Almost all of the Revisionists proceed upon the theory, 
 more or less clearly expressed, that Marx expects the trans- 
 formation from capitalism to socialism to be effected by at 
 least two independent causes : the economic breakdown of 
 the capitalist system, and the revolt of the proletariat against 
 capitalism. Some go even so far as to split up the second 
 cause ■ into two : the growing weight of the burden of capi- 
 talism on the working class, and the growth of the power 
 of the working class. Each of them therefore attempts to 
 argue against the allowance of that particular cause, the 
 admission of which he thinks would interfere with the 
 method of fighting for socialism which he believes to be the 
 best. Most of them are vehemently opposed to Marx's sup- 
 posed prediction of an economic breakdown of capitalism, 
 the so-called Zusammenhruchstheorie, and try to prove that 
 socialism will never be brought about by that " factor " and 
 that we must, therefore, look to other factors if we want 
 socialism. A good many of them are also opposed to the 
 ascribing of any great importance to the increasing burdens 
 of capitalism on the working class, the so-called Verelend- 
 ungstheorie. 
 
 It is sometimes really amusing to see how they argue 
 about these " factors " or causes as if these were absolutely 
 independent of each other and could exist one without the 
 other and without reference to each other. One of them, 
 Rudolph Goldscheid, the latest in the field, has even man- 
 aged to show that these various factors neutralize each other 
 by working in different directions. And none of them has 
 ever stumbled on the fact which is as clear as day-light to 
 those who can see, that Marx presents only one argument 
 showing only one cause for the transformation, from capital- 
 ism to sbcialism — the economic development of society 
 which evolves the economic conditions necessary for the 
 change, and produces the social forces which will bring it 
 about. The cause being one, its separate parts or aspects 
 
THE PROLETARIAT AND THE REVOLUTION. 21/ 
 
 must be considered with relation tp each other and with a 
 view to the whole, and cannot be understood unless so con- 
 sidered. Of course the different points involved may be 
 taken up one by one, but always bearing in mind the rest. 
 So when we will consider here any one of these points it 
 will always be with a view to what we have to say on the 
 points considered before or tp be considered later. 
 
 In order that we may bring out clearly before our readers 
 the different points made, we will consider them from two 
 points of view : first, as to how far Marx's description of the 
 tendencies of development of capitalist society, in so far as 
 they affect the conditions of the working class, is correct; 
 and, secondly, as to what conditions of the working class 
 must exist, according to Marx, in order to make it a proper 
 vehicle for carrying out the historic mission which Marx 
 ascribes to it. Before going into details, however, we desire 
 to place before our readers the- description of the trans- 
 formation from capitalism to socialism traced by Marx him- 
 self in one of the finest passages ever penned by rnortal 
 hand : 
 
 " As soon as the laborers are turned into proletarians, their 
 means of production into capital, as soon as the capitalist mode 
 of production stands on its own feet, then the further socializa- 
 tion of labor and the further transformation of the land and 
 other means of production into socially exploited and, therefore, 
 common means of production, as well as the further expropria- 
 ^tion of private proprietors, takes a new form. That which is 
 now to be expropriated is no longer the laborer working for 
 himself, but the capitalist exploiting many laborers. This ex- 
 propriation is accomplished by the action of the immanent laws 
 of capitalistic production itself, by the centralization of capital. 
 One capitalist always kills many. Hand in hand with this cen- 
 tralization, or this expropriation of many capitalists by few, 
 develop, on an ever-extending scale, the co-operative form of 
 tiie labor .process, the conscious technical application of sci- 
 ence, the methodical cultivation of the soil, the transformation 
 of the instruments qf labor into instruments of labor only usable 
 in common, the economizing of all means of production by 
 
2l8 THE THEORETICAL! SYSTEM. OF KARL MARX. 
 
 their use as the means of production of combined, socialized 
 labor, the entanglement of all peoples in the net of the world- 
 market, and with this, the international character of the capi- 
 talistic regime. Along with the constantly diminishing number 
 of the magnates of capital, who usurp and monopolize all the 
 advantages of this process of transformation, grows the mass 
 of misery, oppression, slavery, degradation, exploitation; but 
 with this too grows the revolt of the working class, a class al- 
 ways increasing in numbers, and disciplined, united, organized 
 by the very mechanism of the process of capitalist production it- 
 self. The monopoly of capital becomes a fetter upon the mode 
 of production, which has sprung up and flourished along with, 
 and under it. Centralization of the means of production and 
 socialization of labor at last reach a point where they become 
 incompatible with their capitalist integument. This integument 
 is burst asunder. The knell of capitalist private property sounds'. 
 The expropriators are expropriated." , 
 
 This passage which describes one process, clearly indi- 
 cates that Marx distinguished three moments of that process 
 which he evidently considered of importance: (i) The 
 technical, and, so to say, purely material side of the process, 
 the concentration and centralization of capital, which fur- 
 nishes the technical and material (in the more limited sense 
 of the word) basis of the future society; (2) The effect of 
 the technical and material side of the process on the mem- 
 bers of the society, particularly the working class, which 
 creates -the active force ready and able to make the change 
 from the present system to the future; and (3) The result- 
 ing conflict of the technical and material side of the process 
 and the needs of society in general and of the ' working 
 classes in particular, which necessitates the change. 
 
 The first moment was considered by us at length in the 
 preceding chapters, the third moment was already touched 
 upon by us in a preceding chapter, and will be treated at 
 length in the succeeding one; the second moment will be 
 considered here. 
 
 Does the mass of " misery, oppression, slavery, degrada- 
 tion and exploitation'' grow? The Revisionists- say : No; 
 
THE PROLETARIAT . AND THE REVOLUTION. 219 
 
 the condition of the working class is not getting worse but 
 improving. And furthermore, say they, Marx is wrong in 
 asserting that the growth of misery, etc., of the working 
 class is necessary for the transition from capitalism to social- 
 ism. How — they ask — can a miserable, oppressed, en- 
 slaved, degraded, and exploited working class fight the bat- 
 tle and win the victory for Socialism? In support of their 
 contention as to the actual condition of the working class 
 they point to the facts, or alleged facts, that the hours of 
 labor have shortened and the wages have increased since 
 the writing of that passage by Marx; that the working- 
 men' are better housed and better fed now than formerly and 
 that pauperism is on the wane rather than on the increase. 
 They make those assertions in a manner as if they were 
 stating undisputed facts which require no proof to support 
 them. As a matter of fact, however, these assertions are 
 very far from stating undisputed facts. It is sufficient to 
 mention some very recent literature on' the subject, such as 
 Hunter's " Poverty," Spargo's " The Bitter Cry of the Chil- 
 dren," and the articles of Theodor Rothstein,^ to show that 
 the question of poverty among the working class is as yet a 
 much mooted question. The truth is that appearances, par- 
 ticularly the appearances of statistical figures in certain re- 
 ports, on which the revisionists mainly base their conten- 
 tions, are very deceptive. 
 
 To begin with, there are intentional deceptions in a good 
 many of our official statistics. As an illustration in point 
 may be taken a statistical report or abstract sent out recently 
 from the Bureau of Statistics in Washington. It was to the 
 effect that during- the financial year closed June 30, 1906, 
 wages had increased one and a half per cent, in certain lead- 
 ing industries, whereas the cost of living had increased only 
 about one-half per cent. This report is false on its face, and 
 it does not require long research to find its falsity. It is 
 
 ' Robert Hunter, Poverty. Macmillan, 1905. John Spargo, The Bitter 
 Cry of the Children. Macmillan, 1906. Theodor Rothstein, in Neue Zeit 
 {1906). 
 
220 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 plainly based on false premises. To mention only one point : 
 In estimating the cost of living the learned statistician based 
 his conclusions on the prices of certain staples. It is no- 
 torious, however, that these staples form only a small part 
 of the cost of living. In New York, for instance, from one- 
 quarter to one-third of the cost of living is paid as rent. 
 Rent has increased tremendously in New York during that 
 period. And yet the increase of rent is not included by the 
 learned statistician. Yet such intentional deceptions are of 
 little importance when compared with the unintentional de- 
 ceptions, owing to the deceptiveness of the facts themselves. 
 The , comparative welfare of the working population of a 
 country is usually measured by the wages paid, where the 
 cost of living is the same. But the height of his wages are 
 by no means an index to a working-man's prosperity. 
 
 I shall not go into this question, however, now, for the rea- 
 son that, as the careful reader has undoubtedly observed, 
 Marx does not speak of the growth of the poverty of the 
 working class. The omission of any reference to poverty 
 is very significant in so careful a writer as Marx. This 
 alone would be sufficient warrant for us in assuming that 
 Marx did not consider the growing poverty of the working 
 class a necessary result of the evolution of capitalism, all 
 revisionist assertions to the contrary notwithstanding. But 
 Marx did not leave any room for speculation on the sub- 
 ject, for in another place in Capital he states clearly and 
 explicitly what he summarized here in a short sentence. 
 He says there: 
 
 " The law by which a constantly increasing quantity of means 
 of production, thanks to the advance in the productiveness of 
 social labor, may be set in movement by a progressively dimin- 
 ishing expenditure of human power, this law, in a capitalist so- 
 ciety — where the laborer does not employ the means of produc- 
 tion, but the means of production employ the laborer — under- 
 goes a complete inversion and is expressed thus : the higher the 
 productiveness of labor, the greater is the pressure of the la- 
 borers on the means of employment, the more precarious, there- 
 
THE PROLETARIAT AMD THE REVOLUTION. 221 
 
 fore, becomes their condition of existence, viz., the sale of their 
 own labor-power for the increasing of another's wealth, or 
 for the self-expansion of capital. The fact that the means of 
 production, and the productiveness of labor, increase more rap- 
 idly than the productive population, expresses itself, therefore, 
 capitalistically in the inverse form that the laboring population 
 always increases more rapidly than the conditions under which 
 capital can employ this increase for its own self-expansion. 
 
 " We saw in part IV., when analyzing the production of rela- 
 tive surplus value: within the capitalist system all methods for 
 raising the social productiveness of labor are brought about at 
 the cost of the individual laborer ;" all means for the develop- 
 ment of production transform themselves into means of domi- 
 nation over, and exploitation of, the producers; they mutilate 
 the laborer into a fragment of a man, degrade him to the level 
 of an appendage of a machine, destroy every remnant of charm 
 in his work and turn it into a hated toil; they estrange from 
 him the intellectual potentialities of the labor-process in the 
 same proportion as science is incorporated in it as an independ- 
 ent power; they distort the conditions under which he works, 
 "subject him during the labor-process to a despotism the more 
 hateful for its meanness; .they transform his life-time into 
 working-time, and "drag his wife and child beneath the wheels 
 of the Juggernaut of capital. But all methods for the produc- 
 tion of surplus-value are at the same time methods of accumu- 
 lation; and every extension of accumulation becomes again a 
 means for the development of those methods. It follows there- 
 fore that in proportion as capital accumulates, the lot of the 
 laborer, be his payment high or low, must grow worse. The law, 
 finally, that always equilibrates the relative surplus-population, 
 or industrial reserve army, to the extent and energy of accumu- 
 lation, this law rivets the laborer to capital more firmly than 
 the wedges of Vulcan did Pirometheus to the rock. It estab- 
 lishes an accumulation of misery, corresponding with accumu- 
 lation of capital. Accumulation of wealth at one pole 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 own 
 product in the form of capital." 
 
222 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 This is perfectly plain : the lot of the laborer, his general 
 condition as a member of society, must grow worse with 
 the accumulation of capital, no matter whether Ms wages are 
 high or low. His poverty, in the ordinary sense of that 
 word, depends on the amount of wages he gets, but not his 
 social condition. And for two reasons. In the first place, 
 because the social condition of any man or class can only 
 be determined by a comparison with the rest of the members 
 or classes of that society. It is not an absolute but a rela- 
 tive quantity. Even^the question of poverty is a relative one 
 and changes from time to time with the change of circum- 
 stances. But the question of social condition can never be 
 determined except by a reference to the other classes of 
 society. This is decided not by -the absolute amount of 
 worldly goods which the workingmen receive, but by the^ 
 relative share which they receive in all the worldly goods 
 possessed by society. Thus considered it will be found that 
 the gulf between the capitalist and the workingman is con- 
 stantly growing wider. This is admitted by all as an em- 
 pirical fact, and it has been proven by us in preceding chap- 
 ters as a matter of theory. 
 
 This circumstance, that the welfare or misery of the work-^ 
 ing class must be considered and determined with relation 
 to the wealth of society as a whole, and the share of the 
 different classes therein, has been pointed out by Kautsky 
 and Cunow. But Bernstein calls this "explaining away" . 
 the Marxian statements in Pickwickian manner, and points 
 to the fact that Marx speaks also of " slavery, degradation, 
 and exploitation." We confess that we cannot see the in- 
 congruity which Bernstein seems to see here. But we do 
 see here once more hovy incapable Marx-critics are of grasp- 
 ing even comparatively simple points of Marxian theory. 
 Franz Oppenheimer raises the point of the growing ""ex- 
 ploitation " of the working class in a theoretical way. Says 
 he : " Since Marx does not set a limit to the wages which 
 may be paid except the profit of the capitalists, nor the 
 depth to which the rate of profit of the capitalist may fall 
 
THE PROLETARIAT AND THE REVOLUTION. 223 
 
 except that it must permit the capitalist to accumulate, 
 it is quite possible that the wages should rise to such an ex- 
 tent that the rate of profit of the capitalist should fall from 
 say 10 to o.ooi per cent. In such an event" — he concludes 
 triumphantly what he evidently considers a great argument — 
 
 exploitation ' would, of course, be of no practical im- 
 portance, and the necessity of an economic revolution would 
 • be out of the question." One only marvels how a man of 
 ordinary intelligence, not to speak of such an undoubtedly 
 bright man like Oppenheimer, could have written down such 
 an absurdity. Oppenheimer seems to have been so much 
 impressed with the "fairness" of such a profit' as the in- 
 finitesimal o.ooi per cent, that he forgot the little circum- 
 stance that in order that the rate of profit should fall to 
 such an extent, and capitalistic "accumulation continue with 
 such a rate of profit, the amount of capital which a work- 
 ingman must be able to set in motion, and the surplus value 
 produced by him, must be so enormously large, that the " ex- 
 ploitation," as Marx understands the term, will not only be 
 of " practical " importance but will actually be very much 
 greyer than it is with a lo per cent, profit! This, by the 
 way, is an additional illustration of the oft-repeated truth 
 . that facts or figures in themselves are absolutely meaning- 
 less and get their meaning only from their relation to other 
 things. ■ 
 
 The second, and -chief reason, however, why the level of 
 wages received by the workingman does not determine his 
 social condition is that the high level of his wages does not 
 in any way carry with it the security of his employment. 
 And by this is not merely meant the fact that the weekly 
 wages which a laborer receives is no index to his yearly 
 earnings, by which alone his real income can be measured. 
 'Aside from this very important fact, which must always be 
 borne in mind, there is the still more important fact that, 
 no matter what the yearly income of the laborer is, the fact 
 that he does not earn it by steady employment at 1-52 part 
 of his yearly income, but by intermittent employment at 
 
224 THE THEORETICAL SYSTEM OF KARL -MARX. 
 
 irregular and never-to-be-foreseen intervals, has in itself 
 a determining influence on his social condition. It is this 
 fact that makes the means of production in' the hands of the 
 capitalist a means of domination over the working class ; it is 
 this fact that turns the accumulation of capital into the ac- 
 cumulation of "oppression, slavery and degradation" on 
 the side of the working class. The insecurity of the labor- 
 er's employment is the secret of the power of the capitalist 
 class over the " free " workingman, it is the source of the 
 mental and moral degradation of the working class which 
 makes of them willing and obedient slaves, ready to kiss the 
 hand that chastises them. For it gives the capitalist a far 
 greater power over the life and liberty of the '' free " work- 
 ingmeh than was ever enjoyed either by feudal baron over 
 his serf or by the slave-holder over his chattel-slave. 
 
 That is also the secret of the great power of attraction and 
 the great social and cultural importance of the labor-union. 
 It is not the intrease in wages which it may bring about 
 that makes it the great factor in the life of the working 
 class which it is. It is not for that that the great modern 
 battles between labor and capital are fought, no matter what 
 their ostensible purpose might be. It is the protection from 
 the grosser forms of arbitrariness on the part of the em- 
 ployer which it aifords its members, thus increasing their 
 security of employment, that forms the essence of the labor 
 union; and it is for this that the great sacrifices are under- 
 gone by the workingman in fighting for the " recognition 
 of the union " or in the " sympathetic strike," the two forms 
 of' fight most odious to, and least understood by, our " eth- 
 ical " peacemakers between labor and capital, who would 
 secure to each its '■ proper rights." Going out from the as- 
 sumption that the workingman is nothing more than the 
 beast of burden into which capitalism strives to convert him, 
 they cannot understand why he should kick when the fodder 
 in his trough is left undiminished. But the workingman 
 knows instinctively the secret power of the chains which 
 keep him in bondage, and he tries to break them, or at least 
 
THE PROLETARIAT AND THE REVOLUTION. 225 
 
 weaken them. He is not content to be converted into, or to 
 remain, a beast of burden; he wants to regain his moral 
 courage, his manhood; and he knows that this can only be 
 gained by organizing a social power which -w^ould do away 
 with or at least lessen the insecurity of his employment, the 
 source of his slavery. Heiice his fight for the union as such, 
 which the good people cannot understand. But the capi- 
 talists understand it, hence their savage fight just at this 
 point. They will pay higher wages, and work their men 
 shorter hours, and grant a lot of other "just and reasonable 
 demands," if necessary, but they want no union, or at least 
 the open shop, for they want to remain "master of their 
 own house." In other words, they are content to keep their 
 slaves a little '^ better, but they will fight to the last ditch 
 against the tampering with the chains of slavery, against the 
 installing of moral courage, the fostering of the spirit of 
 manhood in their slaves. 
 
 This struggle between capital and labor is the, other side 
 of the shield which Marx has described. It is the growing 
 revolt of the working class which, as Marx says, is disci- 
 plined, united, and organized by the very mechanism of the 
 process of capitalist production itself. This is not an inde- 
 pendent process working independently of the so-called " im- 
 poverishment " or, rather, increased-exploitation process 
 which we have described before, as some Revisionists seem 
 to think, but, on the contrary, accompanies it, and is partly 
 its result. Nor is its effect necessarily or even usually such 
 as to counteract the effects of the first, process, as some other 
 Revisionists, notably Rudolf Goldscheid, the latest writer 
 on this subject, think. While the growth of the discipline, 
 union and organization may do away with a good deal of the 
 poverty of the working class by forcing higher wages and 
 better conditions of labor, and would therefore have the 
 tendency of suspending in whole or in part the " impoverish- 
 ment " tendency of capitalistic accumulation, as that term 
 is used by the Marx critics, it can have no such effect on 
 the tendencies- described by Marx. That is to say, it cannot 
 
226 THE .THEORETICAL SYSTEM OP KARL MARX. 
 
 have the effect of removing the causes of the enslavement 
 process; it cannot secure employment for the working class; 
 it cannot suspend the operation of the economic laws which 
 create an over-population, a reserve army, although it can 
 organize rationally the distribution of the employment that 
 there is, thereby palliating somewhat the sharpness of the 
 economic process. But it can counteract the results of the 
 economic process on the psychology of the^ working class. 
 In the breast of the slave who is riveted to his master capi- 
 tal there still may develop the spirit of a freejnan and the 
 courage to fight for freedom. The discipline, union, and 
 organization of the working class cannot give him any free- 
 dom under capitalism because the economic conditions en- 
 slave him to capital, but they enable him to fight for some 
 liberties while in slavery and for better conditions of servi- 
 tude. This fight, however, in itself develops the desire for 
 ultimate freedom and educates the workingman to an under- 
 standing of the causes and the conditions of the struggle, 
 thus making of him an active and intelligent opponent of the 
 present order. At the same time the struggle must be grow- 
 ing more intense as time passes on. For the fight only 
 affecting the results of the downward tendency, and being 
 powerless to remove its cause, whatever gains are made can- 
 not be kept unless the fight for them is kept up, and the 
 fight must be intensified as the tendency increases. Hence 
 the growing revolt of the working class of which Marx 
 speaks. Hence, also, the absurdity of the passage quoted 
 below from Rudolf Goldschied's very recent booklet : " Im- 
 poverishment or Amelioration Theory?" which forms a new 
 departure in Revisionism. This latest manifestation of Re- 
 visionism is in effect an admission of the fiasco of the old- 
 style Revisionism, and proceeds in different manner. But 
 only the form has changed ; the substance, however, remained 
 the same. Particularly the metaphysical way of looking 
 at things from their formal, stagnant, so to say, separat:ist, 
 point of view, and the failure to see the inner connection 
 between them while in motion. So says Goldscheid: 
 
THE PROLETARIAT AND THE REVOLUTION. 227 
 
 " First of all there can be no doubt that, no matter how much 
 alike the purely economic tendencies and the psychological 
 counter-tendencies evoked by them may be in forcing the devel- 
 opment toward socialism, there still exists a certain antagonism 
 between them. It is quite possible, for instance, that during 
 long periods of time the psychological counter-tendencies may 
 not be strong enough to exert any considerable influence on the 
 purely economic tendencies, the concentration of .industrial un- 
 dertakings, the accumulation of capital, and the impoverishment 
 of the masses. Where the circumstances have thus shapecl 
 themselves the hope for socialism lies principally in the economic 
 tendencies. It is different, however, where the purely economic 
 process has an equally strong psychological process to counter- 
 balance it. There the growing accumulation of capital in the 
 hands of the capitalist class will be accompanied by the grow- 
 ing political and economic power of the working^ class. And 
 this growing political and economic power of the working class 
 will manifest itself by checking more or less effectively the 
 purely economic process of concentration and especially the 
 process of impoverishment. Whoever, therefore, desires to up- 
 hold the Marxian theory of concentration and accumulation to 
 its full extent in the face of the daily power of the organized 
 proletariat, does not realize that he has undertaken a quite 
 hopeless task : For he asserts that the purely economic tendency 
 of the capitalistic mode of production necessarily produces psy- 
 chological counter-tendencies, and at the same time denies to 
 these psychological counter-tendencies any real influence. It 
 is therefore evidently very unwise in the socialist theoreticians 
 to continue to expect the expropriation of the capitalists through 
 the independent action of the inherent laws of capitalist produc- 
 tion. On the contrary, the psychological counter-tendencies must 
 paralyze the purely economic process with increased vigor and 
 with the force of a natural law; that is to say, the breakdown 
 of the capitalist system by its own weight must be steadily re- 
 moved further and further from the realms of possibility." 
 
 The question of the breakdown of capitalism will be 
 treated later, as already stated. But we want to point out 
 here in addition to vvhat we have already said, the dualism of 
 the conception which regards the economic conditions and 
 
228 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 the psychological effects which these conditions produce 
 upon the workingman, as two independent motive powers, 
 working not only without each othet but neutralizing each 
 other; the inability to grasp the process in. its entirety and in 
 its oneness, to see the monism of the process. 
 
 We also want to call attention here to the fact that the 
 learned Marx critics who insist that by accumulation of mis- 
 ery as one of the tendencies of capitalistic accumulation, 
 Marx meant the accumulation of poverty, and then try to 
 disprove such tendency by pointing to the supposed amelio- 
 rated condition of the working class, fail to take into account 
 the fact that whatever amelioration there is was brought 
 about by the struggles of organized labor, which Marx also 
 predicted. The present condition of the working class is not 
 merely the result of the tendencies of capitalistic accumula- 
 tion, but of the tendencies of capitalist accumulation as modi- 
 fied by the struggle of organised labor against them. So 
 much for Marx's proper prognosis of the tendencies of capi- 
 talism. As to the effect of amelioration on the evolution 
 to socialism, such amelioration, if any there be, would only 
 be significant if Marx had expected the advent of socialism 
 from a net result of poverty, that is, if there were some- 
 thing in poverty itself which were favorable to socialism, 
 an idea which no Revisionist has so far ascribed to Marx. 
 But as we have seen, it is this very struggle for amelioration, 
 no matter what its immediate result during the progress of 
 the struggle, that is the most important factor from the 
 Marxian point of view in the final overthrow of capitalism, 
 in so far as the active force which is to do the work , is 
 concerfted. 
 
 While the spirit of revolt is growing and maturing in the 
 working class this class evolves a hew ideology. Living in 
 constant struggle with the capitalist class and capitalist in- 
 stitutions which must array themselves in the struggle on 
 the part of the capitalist class, the workingman learns to 
 hate these institutions and the whole ideology of the capi- 
 talist class. Being thrown on his own resources, he begins 
 
THE TROLETARIAT AilD THE REVOLUTION, 229 
 
 to think for himself, to form his own ideology. But every 
 ideology rnust have its base in the material conditions under 
 which it is formed. The new ideology is based on and is the 
 reflection of the new economic forces, the socialized means, 
 modes and methods of production and distribution, and the 
 growing collective control over them. His ideolpgy is col- 
 lectivism. In forming his ideology he is aided, on the one 
 hand, by the very form of his struggle against the old order, 
 which is the collective mass struggle,- and the benefits derived 
 therefrom which can only be enjoyed while acting collect- 
 ively and when organized in accordance with collective 
 principles, and the well organized and developed demo- 
 cratic forms of government and activity; and on the other 
 hand, by the dissolution of the old ideology in general, 
 and in particular by its abandonment by the middle class, 
 the class with which the working class comes into closest 
 contact. 
 
 At the same time the working class is steadily advancing 
 in economic power and independence in the sense that it 
 takes possession of more and more responsible positions in 
 the economic life of the nation, diverts to itself, by means 
 of the corporation and otherwise, all the growth of the 
 concentration and centralization of capital; and particu- 
 larly with the development of the corporate form of 
 economic activity, the capitalist class abdicates its func- 
 tions, the proper functions of a ruling class, those of eco- 
 nomic management, into the hands of the working class. 
 The working class thus not only becomes revolutionary in 
 its ideas, desires and aspirations, but it has the organised 
 power to carry the revolution into effect, and is fully 
 equipped to take hold of all social and economic activities 
 and functions the day after the revolution, and carry them 
 on successfully. 
 
CHAPTER X. 
 
 THE SOCIAL REVOLUTION. 
 
 We are now at the central point of Revisionism, the 
 point from which everything else in the theories of the 
 Revisionists radiates and to which everything in their argu- 
 ments gravitates. The casus belli which moves all their 
 hosts — the Social Revolution. The red flag of the social 
 revolution is the red cloth the sight of which none of them 
 can bear. Whatever their disagreements, -and they are not 
 few, they are all agreed that the social revolution wouldn't, 
 shouldn't and couldn't come. Struve proves it philo- 
 sophically, -Tugan-Baranowsky proves it economico-mathe- 
 matically, Oppenheimer proves it sociologically. Bernstein 
 proves it by a composite method which cannot easily be 
 classified, and the rest of them in any old way. 
 
 What is this social' revolution which has thus aroused 
 them? It is not, of course, the fact of the change from 
 the capitalist to the socialist ^ order. They all, or almost 
 all, believe in that, in some form or other. It is the par- 
 ticular form or manner in wh'ch it is to come about, ac- 
 cording to the Marxian teaching, to which they object. It 
 is the implication of the suddenness of the change, and the 
 violent manner in which it will be brought about as the cul- 
 mination of a struggle, that arouses their opposition. The 
 change could, should and would come in all imaginable 
 ways, but none of them will be sudden or violent. For 
 they are all violently opposed to violence. And not only 
 physical violence, but any kind of violence or disturbance. 
 Therefore, socialism will come, according to their notion, 
 as a gradual enlargement or a gradual diminution of capi- 
 
 230 
 
THE SOCIAL REVOLUTION. 23I 
 
 lalism, but never as an overthrow, more or less sudden, 
 more or less violent, physical, social or economic, as Marx 
 imagined it. 
 
 Marx says that the centralization of the means of pro- 
 duction and socialization of labor at last reach a point 
 where they become incompatible with their capitalist shell. 
 This shell is burst asunder. The knell of capitalist private 
 property sounds. " The expropriators are expropriated." 
 This, says Struve, is too sudden, and is philosophically 
 quite impossible. There is no philosophic way in which 
 the sudden transformation of one social order into another 
 could be explained, no logical method by which it could 
 be reasoned out. Hence it could not take place. " The 
 continuity of every change, even the most radical, is a 
 necessary cognito-theoretic and psychological postulate of 
 its comprehension. The evolutionary principle takes a po- 
 sition analogous to the law of causation: it is a universally 
 valid form in which we must picture to' ourselves the radi- 
 cal changes of things in order to comprehend them. Of the 
 content and the causality of the change the evolutionary 
 principle tells us nothing: it only gives us its form, and 
 this form is — continuity. The old maxim : natura non 
 facit saltus should, accordingly, be changed into: intellectus 
 non potitur saltus." ''■ All of which may or may not be true. 
 We are not sufficiently concerned in the subject to undertake 
 to decide that question here. For ourselves we hope it is 
 not true, but if it t)e true, let the theories of cognition and 
 psychology look out for themselves. The maxim : riatura 
 non facit. saltus, in so far as it is still part of our scien- 
 tific apparatus, simply means that nothing happens with- 
 out any cause, but when there is sufficient cause therefor 
 nature does leap. As a matter of fact sudden leaps are 
 almost as frequent in nature as are slow changes, and the 
 figure used by Marx, that of a bursting shell, may be con- 
 sidered its most common and most perfect example. Fur- 
 
 * Peter von Struve, Die Marx'sche Theorie der sozialen Entwicklung. 
 In Archiv fiir Soziale Gesetzgebung und Statistik (189$), 
 
232 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 therraore, it does not in any way interfere with the evo- 
 lutionary principle, to which Struve does, in our opinion, 
 great injustice by reducing it in reality to mere slowness, 
 for such violent leaps as the bursting of shells do not by 
 any means interfere with the continuity of the process, as 
 Struve seems to think. On the contrary these violent leaps 
 are part of the evolutionary process and constitute its cul- 
 minating point, as well as the starting point for a renewal 
 of this process, in all higher forms of life. The natural 
 sequence of events being such, a theory of cognition must 
 be able to explain it to our comprehension, and to say that 
 some theory which styles itself a theory of cognition can- 
 not do that is simply another way of saying that it is not 
 a theory of cognition. 
 
 Another "philosophical" objection which Struve ad- 
 vances is supposed to be based on the Materialistic Con- 
 ception of History, which he feels himself called upon to 
 protect against Marx. According to the Materialistic Con- 
 ception of History, says Struve, it is impossible that the 
 legal forms which make up the social system should be- 
 come so entirely incompatible or antagonistic to the forms 
 of production as to cause a breaking up of the whole sys- 
 tem. For, that theory, " properly understood, requires that 
 the legal forms should continually adjust themselves to the 
 material conditions, as they change, and it would be an in- 
 fringement on the power of the economic forces to sup- 
 pose that they should not change the legal forms as they 
 go along. We shall not enter here into a long discussion 
 to prove that Struve has not "properly understood" the 
 Materialistic Conception of History. We will simply say 
 that if Struve has understood it properly then the Material- 
 istic Conception of History is sadly in the wrong. For the 
 fact, of which there is abundant historical proof, is, that 
 legal forms become quite antagonistic and absolutely in- 
 compatible with economic conditions and that very serious 
 and violent disturbances result therefrom. No amount of 
 reverence for the "economic factor" can blind us to the 
 
THE SOCIAL REVOLUTION. 233 
 
 sad truth, that that much-abused worthy is not quite as all- 
 powerful as some of his would-be admirers would have us 
 believe, or, at any rate, that his influence is not quite as 
 direct, and therefore does not work quite as smoothly, as 
 they imagine. Besides, in his touching care for the Ma- 
 terialistic Conception of History, Struve has entirely for- 
 gotten the fact that, according to Marx, the economic con- 
 ditions of the capitalist system are themselves a mass of 
 contradictions, and could not therefore result in a smoothly 
 working legal of political system. 
 
 It was evidently with the intention of eliminating some of 
 the absurdities which the purely philosophic opponents of 
 the Social Revolution had to resort to in their argument, 
 that Rudolph Goldscheid constructed his theory of the so- 
 called " Sociological Wave." This theory is quite cleverly 
 constructed, and is evidently designed to present an argu- 
 ment against the possibility of the social revolution, with- 
 out the use of some of the grosser errors of his prede- 
 cessors. This theory recognizes most of the Marxian prem- 
 ises, and therefore sounds plausible. It consists in this: 
 
 The tendency of the accumulation of capital is, as Marx 
 says, towards increasing the misery of the working-class. 
 At the same time this accumulation has also the tendency 
 to organize the working-class, as Marx has also clearly 
 stated. This results in a struggle between organized labor 
 and the capitalists, the class struggle on which Marx lays 
 so much stress. In this struggle, the fortunes of war al- 
 ternate, giving victory now to the one side and how to the 
 other. When the tendency of capitalistic accumulation has 
 gone very far in reducing the condition of the working- 
 class, this engenders the revolutionary feeling of the prole- 
 tariat, who put up a strenuous fight until they gain a vic- 
 tory substantially bettering their condition, usually putting 
 them on a higher plane than they ever were before. This 
 better condition lasts for some time until the capitalists, 
 driven to it by the lash of competition, turn on the screws 
 and attempt to enforce the tendency of capitalistic accumula- 
 
234 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 tion and reduce the condition of the workingmen to the 
 former level. In this they succeed only partly, for whi 
 the workingmen have reached a higher level of well-beii 
 they utilize it to strengthen their organization, obtain mo 
 knowledge and intelligence, and the spirit of revolt 
 aroused in them long before the former low level of the 
 estate is reached. Their resistance is intensified, and ,tl 
 fight on their part does not slacken until they reach n 
 only the high level which they formerly occupied but uni 
 they niaike new conquests, . placing themselves on heigh 
 never y-et before reached; This they are enabled to c 
 because the spirit of revolt which is aroused in them by tl 
 pressure of economic tendencies succeeds in constantly lift 
 iting and checking the economic process and -diverting 
 from its natural course. So that " the social evolutic 
 moves in a wave-like course, which has this peculiarit; 
 No matter what relation the hill and dale may have to ea( 
 other, the crest of each succeeding wave reaches, as a rul 
 a higher level than any preceding one." The waves w: 
 finally run so high that their crests will reach into socia 
 ism: the prospect of a social revolution is successfully bai 
 ished. 
 
 The whole thing sounds so plausible, the argument i 
 much Marxian, and the picture of the rising- waves is i 
 beautiful, that one is almost tempted to overlook the fa 
 that there is absolutely no warrant iil the whole afgumei 
 for the assumption so unceremoniously made that the spii 
 of revolt engendered in the working class by the hardshi] 
 and misery of capitalistic accumulation succeeds in coi 
 stantly limiting and checking the economic process whi 
 the capitalist system lasts. And ypt it is on this assumptic 
 that the whole thing rests! With this assumption ou 
 the whole argument against the social revolution as Mai 
 conceivied it, with bursting of shell and all, falls to tl 
 ground. We are not disposed to quarrel with the author ( 
 the " sociological wave " in so far as the same does hot pi 
 forward any higher pretensions than to give us a descrij 
 
fHE SOCIAL kEVOLUtlON. 235 
 
 tion of the bettering of the condition of the working-class 
 under capitaHsm in so far as the same is possible under 
 the laws governing capitalist production and, accumulation. 
 That is to say in so far as it affects the question of the 
 impoverishment of the working-class. And in so far it does 
 not in any way contradict the Marxian theory. It is quite 
 different, however, when it comes to the abolition or limitr 
 ing of the economic laws by " psychological tendencies " 
 in the peaceful movement of the " sociological wave." Be- 
 fore we can accept his statements we must carefully ex- 
 amine into the question whether the tendencies of modern 
 development do or do not limit the laws of capitalist pro- 
 duction and accumulation, and if they do whether such 
 limitations can abolish the whole capitalist system by de- 
 grees and transform it into a socialist system without the 
 bursting of any shells. This brings us back to the purely 
 economic question of the possibilities of capitalistic devel- 
 opment, and the theories of the " expansion," " adapta- 
 tion " and " adjustment " of capitalism brought forward by 
 the Revisionists. 
 
 In an earlier chapter of this work we discussed at length 
 the economic contradictions of the capitalist system. We 
 concluded our examination with the statement that the 
 great problem of capitalist economics is the ■ disposition of 
 the surplus-product created continually under that system. 
 It is the inabiHty to dispose of that product that 'is the chief 
 cause of the temporary disturbances within its bowels, and 
 which will lead to its final breakdown and replacement by 
 the socialist mode of production and distribution. 
 
 The Revisionists with Bernstein at their head question 
 the correctness of these conclusions, both as regards the 
 crises within the capitalist system as well as with regard 
 to its ultimate breakdown. Bernstein has nothing definite 
 to say as to the cause of economic crises in the capitalist 
 system, except to inform us that much could be said and 
 has been said on either side, and that people who are inter- 
 ested in analogies might find very interesting analogies 
 
236 THE THEORETICAL SYSTEM OF KARL MARX; 
 
 between the theories pn this subject and some other inter- 
 esting subject. As to the Marxian theory of crises Bern- 
 stein has again nothing more definite or instructive to say 
 except that Marx, as usual, contradicts himself in the most 
 flagrant manner, and that the explanation of this contra- 
 diction is to be found, again as usual, in the fact that, as 
 is very usual, and, indeed, unavoidable, some time has 
 elapsed between the writing of the contradictory passages. 
 The only unusual thing about this very enlightening in- 
 formation is the correct statement that the passage con- 
 tained in the earlier volumes was written much later than 
 that contained in the third volume ; a statement which must 
 confound his friends who have been writing very learned dis- 
 quisitions on the development of the Marxian theory, based 
 on the contradictions between the earlier and later volumes 
 of Capital, which were to be explained by the fact that 
 the third volume was the fruit of Marx's later and riper 
 judgment. As to the subject-matter itself the reader is 
 left absolutely in the dark as to what either the Marxian 
 or the Bernsteinian theory of crises (if there be such) 
 may be. It is very evident, however, from what he does 
 say that he is himself very much in the dark on the sub- 
 ject. This does not prevent him, however, any more than 
 a similar groping in the dark prevents his friends, from 
 giving instruction on the- subject, and' from revising a the- 
 ory which he does not understand. 
 
 The sum and substance of the argument against the 
 Marxian conception of the tendencies of capitalist economic 
 development put forward by Revisionism, amounts to this: 
 The contradictions observed by Marx are not inherent in 
 capitalism, as Marx supposed, but are merely connected 
 with, and are the result of, a certain form of capitalism, 
 to wit: capitalism in its early stages, when private enter- 
 prise with its resultant anarchy of production were pre- 
 dominant. As soon, however, as the anarchy will be elimi- 
 nated from capitalistic production, and that anarchy will be 
 eliminated by the organization and systematization of pro- 
 
THE SOCIAL REVOLUTION. 237 
 
 duction through the modern trusts and other industrial 
 combinations, crises will be abolished, particularly in view 
 of the apparently boundless possibilities of the expansion 
 of capitalist markets by the aid of modern imperialism. 
 And as the final breakdown of capitalism, or social revo- 
 lution, is nothing more than a big crisis, the possible danger 
 of a revolution is averted the moment the cause of crises 
 is removed. The basis of fact for this argument is fur- 
 nished by the circumstance that the law of the periodical 
 recurrence of economic crises insisted on by Marx was 
 apparently broken through by the modern trusts with the 
 aid of Imperialism, and the crisis which was due at about 
 the beginning of this Century was successfully kept out by 
 them. 
 
 Before proceeding any further we shall have to examine 
 the Marxian theory of crises, and the connection in which 
 crises within the capitalist system, stand to the ultimate 
 breakdown of the system as a whole, and then examine the 
 facts of the latest developments of capitalism as to their 
 bearings on each. 
 
 According to Marx there are two distinct causes of 
 crises: One is the separation of the act of exchange of 
 commodities into two separate acts, the exchange of com- 
 modity A for money and then the exchange of that money 
 for commodity B, by the introduction of money as the 
 universal commodity and general repository of exchange- 
 value. By dividing the act of exchange into two separate 
 and independent acts, disconnected in point of time, the 
 possibility of crises is given. For,- should the interval be- 
 tween the two acts be too long the wheels of production 
 will stop, . the market will become overloaded with goods, 
 and a crisis will result. This possibility turns into a proba- 
 bility because of the peculiar character of money as the 
 universal commodity and special repository of exchange- 
 value which makes it a very much coveted good, as it is 
 only in that form that value is realized and remains real. 
 Of course, capital is anxious to fulfil its function, the ere- 
 
238 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 ation of surplus-value, and in its anxiety to create surplus- 
 value it takes the risk of having the value crystallized in 
 itself transformed into such form where the value realized 
 in it may again be called into question and be partly lost. 
 But with all that capital is essentially cowardly, and the 
 least disturbance frightens it and makes it withdraw into 
 its shell. And a disturbance arises each time there is a 
 disproportion of production, which is a common occur- 
 rence under our system of private production and com- 
 petition. This probability, again, is intensified by our 
 credit system, which on the one hand makes capital ex- 
 tremely sensitive to disturbances and increases its natural 
 cowardice, and on the other opens up great vistas of gain 
 by speculation and jobbery through panics and crises. 
 
 Such crises, that is crises chargeable to the circulation 
 process of commodities, are of course due to the "anarchy 
 of production," and will disappear with the disappearance 
 of that anarchy, assuming that the latter may disappear 
 while the capitalist system lasts. Assuming therefore that 
 the trusts and industrial combinations can abolish this 
 anarchy and regulate production, the Revisionists are quite 
 right in asserting that no commercial crisis will occur again 
 on that account. Their mistake lies in assuming that the 
 " anarchy of production " is, according to Marx, the only 
 cause of commercial crises. As a matter of fact the cause 
 mentioned by us above is not only not the only, but not even 
 the chief cause of crises according to Marx. This could 
 be determined as a mere matter of logic, that method of 
 determining economic and sociological questions which is 
 so dear to the heart of some Revisionists. For, the 
 " anarchy of production," in its very nature and essence 
 a:n irregular factor, could not possibly be the cause of regu- 
 larly recurring crises. But Marx does not leave any room 
 for doubt to^what isj in his opinion, the chief cause of crises 
 under capitalism. 
 
 This cause is the inherent contradiction of that system 
 which we have already pointed out before, the dual posi-' 
 
THE SOCIAL REVOLUTION. 239 
 
 don of the laborer as a seller of his labor-power and a pur- 
 chaser of the products of his labor-power, and the creation 
 of a surplus-product flowing therefrom which must result 
 in an over-production of commodities quite apart from the 
 " anarchy of production." It is to this constant factor, the 
 constantly accumulating surplus-product, that the constancy 
 with which crises recur is due. It is to this that the indus- 
 trial cycle, the periodical recurrence of prosperity and stag- 
 nation, is due. And this recurrence of prosperity and 
 stagnation, that is to say, the inability to continually carry 
 on production on that plane which the productive forces of 
 society permit and require, is the foundation of the Marxian 
 theory of crises. The fact, therefore, pointed to by Re- 
 visionists, that, as Tugan-Baranowsky has shown in his 
 History of Commercial Crises in England, the cycle has 
 now assumed another form, that instead of feverish ac- 
 tivity preparing the way for a sudden crash there is now 
 a gradual tide and ebb of prosperity and stagnation, is not 
 a refutation of Marx but a confirmation of the- correctness 
 of his analysis of capitalistic production. This fact, which 
 is ascribed to the regulative influence of the modern trusts 
 and combinations, proves conclusively that neither trusts 
 and combinations nor any other regulative influence can 
 abolish crises, because it cannot abolish the chief cause of 
 crises — overproduction, which does not depend on the lack 
 of regulation of production but is inherent in the capitalistic 
 mode of production. Trusts and combinations, if they can 
 do anything at all, can only, affect the form which the crises 
 may assume, whether they should be short and acute as 
 formerly or mild and long-drawn-out as now, but no more. 
 This is acknowledged even by Tugan-Baranowsky him- 
 self. 
 
 Some Marx-critics seem to derive some comfort from the 
 fact that, owing to the regulative influence of modern in- 
 dustrial combinations, crises have ceased to be as acute 
 as formerly. We fail to see wherein a long period of 
 stagnation is any better than an acute crisis. That is, 
 
i\b fltE THEORETICAL SYSTEM OF KARL MAR3t. 
 
 from the workingman's point of view. As Tugan-Baran- 
 owsky himself points out, the change in the character of the 
 industrial cycle has benefited only the capitalist class, and 
 the position of the working class has become much worse 
 for it. 
 
 Of course the chief reason for their exultation over this 
 change, or at least that of some of them, is their belief that 
 the doing away with the acuteness of crises does away 
 with the possibility of the occurrence of the great and 
 final crisis, the social revolution, which they cannot 
 imagine otherwise than as a sudden crash. But this cata- 
 clysmic conception of the breakdown of capitalism is not 
 part of the Marxian theory, and has, at any rate, nothing 
 to do with his theory of crises. The disappearance of the 
 acuteness of commercial crises does not in any way affect 
 ■their revolutionary influence, if their influence be necessary 
 for the coming of the social revolution. For the remedy 
 is worse than the disease as far as its influence on the con- 
 dition of the working class is concerned, except, of course, 
 to the minds of those who imagine the great revolution as 
 the work of a hungry and desperate mob driven to dis- 
 traction and destruction by the immediate lack of work, 
 food and shelter. The mildness of the change from one 
 phase of the industrial cycle to the other does not lessen 
 the mass of misery produced by it, nor does it indicate 
 any lessening of the contradictions of the capitalist system 
 of production; it does not therefore affect the probabilities 
 of a social revolution, except if we imagine it as a sudden 
 cessation of all economic activity. The real question 
 therefore is, not Whether crises have become less acute in 
 form but whether the economic contradictions which pro- 
 duce them have lost any of their acuteness. This brings us 
 to the question of the adaptability and expansiveness of the 
 capitalist system of production. 
 
 That capitalism has obtained a new lease of life by em- 
 barking on the sea of Imperialism is assured by the Re- 
 visionists, although none of them ever attempted to care- 
 
THE SOCIAt REVOLUTION. , 24I 
 
 fully examine into the question in order to ascertain 
 whether there was any basis of fact for such assumption, 
 and if the assumption was correct how long such new lease 
 would last. Bernstein declines at the decisive moment to 
 commit himself. Tirue to his nihilistic-opportunistic in- 
 stinct he leaves the question an open one, which does not, 
 however, prevent him and his friends from holding lan- 
 guage as if they had squarely met the issue and settled it. 
 
 A careful examination of the question will show, how- 
 ever, that, both as a matter of abstract reasoning and as a 
 matter of concrete fact. Imperialism cannot save the capi- 
 talist system, although it undoubtedly may prolong its ex- 
 istence. If the Marxian analysis of the capitalist system 
 of production is correct, and that system does suffer with 
 the inherent malady of ever increasing overproduction be- 
 cause of the ever increasing diminution of the share of 
 the workingman in the product of his labor, then it follows 
 as a logical conclusion that the mere extension of that sys- 
 tem to new fields cannot save it, for the system would then 
 carry with it its fatal malady to these new fiejds. And 
 it is J:o a mere extension of the capitalisf system that Im- 
 perialism reduces itself in the last analysis. For it must 
 be remembered that capitalism cannot open a new market 
 for its products without making the new territory part of 
 its own system of production. It is the curse of capitalism 
 that by the very processes with which it creates its new 
 customers for its goods it makes of them competitors in 
 the business of producing these goods. Therein lies the 
 difference between the old and the new forms of coloniza- 
 tion. That is why colonial dependencies, colonial empires 
 in the old sense of the word, are no longer possible, except 
 as a temporary and passing stage. Of course while this 
 stage lasts it is of some relief to the mother country suf- 
 fering from being heavy with surplus-product. But the 
 infant colonies grow very rapidly, and with the ripening 
 age of capitalism the offspring develop marvelous pre- 
 
242 THE THEORETICAL SYSTEM OP KARL MARX. 
 
 cociousness, and soon serve only to " extend " the serious- 
 ness of the situation. 
 
 The facts verify this reasoning. But before examining 
 the facts we must again pay our respects to that bright 
 light of anti-Marxian economic literature whom we have 
 already had occasion to mention before — Prof. Tugan- 
 Baranowsky. With, that insight of the true scholar which 
 so favorably distinguishes him from the rest of the Re- 
 visionist host he saw that the Marxian theory cannot be 
 overthrown by such indefinite and meaningless talk as that 
 of " adaption," " extension," or " expansion." That the 
 Marxian theoretical edifice is too solidly built and is too 
 finished a structure to be vulnerable to such mode of at- 
 tack. That it can be successfully attacked, if at all, only 
 at its foundation and only by using the methods employed 
 in its construction. He therefore attempts to show by an 
 analysis of capitalistic production that the Marxian con- 
 clusion of a necessary over-production does not follow. 
 The result of his efforts is a theory of "distribution" of 
 production, according to which if production is " regu- 
 lated " in such a way as to always produce a certain, ever 
 increasing, share of the total jcearly product in the form 
 of "means of production," then no over-production will 
 ever occur. I have somewhere else shown that this theory 
 is an utter absurdity. But nevertheless it cannot be de- 
 nied that this theory is the only scholarly attempt on the 
 part of any Revisionist to disprove the Marxian theory of 
 crises and over-production. That Tugan-Baranowsky failed 
 in his attempt was not his fault, but his fate. And the 
 fact that the theory so laboriously constructed by him is 
 sheer nonsense makes his fate the more tragical. For 
 Tugan-Baranowsky is not only an acute theoretician but 
 also a keen observer of the facts of life. But, as I have 
 stated somewhere else, he suffers with the malady of his 
 age : a sickly yearning for the " ethical," and a hysterical 
 hunt for the "' practical." The yearning for the " ethical " 
 drove him away from the "unethical" Marxian system. 
 
THE SOCIAL REVOLUTION. 243 
 
 and, left to drift without the sure guidance of an all em- 
 bracing theory, he clings to the isolated facts of existence 
 which obtrude themselves upon his keen vision. 
 
 The facts upon which Tugan-Baranowsky constructs his 
 theory are the same facts to which we alluded above as 
 confirming Our theory. They are : that the area of capital- 
 ism expands, and that production, in so far as the goods 
 produced are concerned, has so changed that 'the principal 
 goods produced no\y by the leading capitalist countries are 
 machinery and other " means of production," instead of 
 consumable goods as was formerly the case. From these 
 two facts Tugan-Baranowsky concludes that it is a law of 
 capitalistic development that the quota of consumable goods 
 in the yearly product of society should constantly grow 
 smaller and the quota of " means of production " as con- 
 stantly increase; and that if the proper proportion is al- 
 ways observed no over-production can ever occur. 
 
 Is this conclusion correct ? Most emphatically, no ! 
 Tugan-Baranowsky sees the immense masses of " means 
 of production " produced annually by the leading capitalist 
 countries, and he stands in awe of this great fact. A little 
 less respect for " fact " and a little more respect for theory 
 would have made him ask for the why and the wherefore. 
 It would also have made him look for the connection be- 
 tween this fact and other facts. And first of all he would 
 have taken notice of what was being done with these 
 " means of production." Had he done so he would have 
 observed that these immense masses of " means of pro- 
 duction," with some exceptions which will be noted later, 
 are not used in the capitalistic countries in which they'are 
 produced. They are produced in the capitalistic countries 
 and exported into countries which are only in the process 
 of capitalization, so to speak. He would then have under- 
 stood that the surplus-product in capitalistic countries has 
 so far not clogged the wheels of production permanently, 
 not because of the clever distribution of production into the 
 different spheres, not because of the change from the pro- 
 
244 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 « 
 
 duction of consumable goods to the production of " means 
 of production," but because the capitalistic countries have 
 so far, owing to the fact that some have developed capi- 
 talistically earlier than others, and there still remain capi- 
 talistically undeveloped countries, had an outside world 
 into which they could dump the products which they could 
 not themselves absorb, whether those products be cotton 
 or iron goods. This does not, by any means, mean that the 
 change from cotton to iron goods, as the leading product 
 of the foremost capitalistic countries, is of no significance. 
 On the contrary, it is of the greatest importance. But its 
 significance is entirely different from that ascribed to it by 
 Tugan-Baranowsky. It shows the beginning of the end of 
 capitalism. As long as the capitalist countries exported 
 goods for consumption there was hope for capitalism, within 
 those countries. There was no telling, then, how great the 
 capacity of the non-capitalistic outside world for the con- 
 sumption of capitalistically produced goods would be, nor 
 how long it would last. The growth of machinery in the 
 export from the foremost capitalistic countries at the ex- 
 pense of consumption-goods shows that spheres which 
 were formerly outside of capitalism, and therefore served 
 as a dumping-ground for its surplus-product, are drawn 
 into the world of capitalism. That as their own capitalism 
 (develops they produce their own consumption-goods. Now 
 that they are in the initial stages of their capitalistic devel- 
 opment, they need the capitalistically produced machinery. 
 But soon they will not need this either. They will produce 
 their own iron-goods just as they now produce their own 
 cotton or other consumption-goods. Then they will not 
 only cease to be a receptacle for the surplus-product of 
 the now only capitalistic countries, but they will produce 
 a surplus product of their own which they will find it hard 
 to dispose of. 
 
 There are other things which Tugan-Baranowsky ihight 
 have observed had his vision not been obstructed by the 
 details of capitalistic practice. Things, the observation of 
 
THE SOCIAL REVOLUTION. 245 
 
 which would have given him a glimpse of the " true in- 
 wardness " of the latest phase of capitalistic development. 
 He would have noticed, for instance, that a tremendous 
 amount of the " means of production " which are produced 
 in capitalistic countries and are not directly exported, is 
 used within those countries in such a manner, that is, in 
 effect, equal to export. Such are the building of trans- 
 continental railroads, interoceanic canals, and steamship 
 lines designed to serve as an incident to the export of 
 products from capitalism into the non-capitalistic or half- 
 cApitalistic world. Furthermore, in so far even as such 
 "public improvements" are used wholly within the limits 
 of capitalism (and a tremendous amount of the *' means of 
 production" is used for such purposes), they have the pe- 
 culiar effect of removing large quantities of surplus-product 
 from the marftet, at least temporarily. It is the peculiar 
 nature of such means of production that their usefulness 
 or uselessness can not be definitely ascertained until fully 
 completed and operated rfor some time. The result is that 
 immense masses of such "means of production" are con- 
 stantly produced without any actual necessity therefor, and 
 often for purely speculative purposes. While these 
 "means of production" are being produced, and it takes 
 years to complete them, the wheels of capitalistic pro- 
 duction revolve merrily, without hitch or stop, notwith- 
 standing the fact that the work may be absolutely useless 
 in whole or in part, and that the value supposed to be cre- 
 ated in their production, or at least a large part thereof, 
 will never be realized. The wiseacres of capitalism, like 
 Tugan-Barano^sky, listen to the siren-song of these mer- 
 rily revolving wheels, and draw in their imagination allur- 
 ing pictures of the endlessness of capitalism wound around 
 an endless chain of " means of production." Of course, 
 there is bound to come a rude awakening. The production 
 of these particular " means of production " turns out to be 
 
 the merest waste. But that is another story 
 
 In order to appreciate the importance of this point (and 
 
246 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 this point applies equally to " means of production " of this 
 nature, whether used within the limits of capitalism, or 
 exported for use outside of it), we need only refer to Tu- 
 gan-Baranowsky's own " History of Crises in England." 
 The facts brought together in that book, in so far as they 
 relate to the latest phase of capitalism, that now under 
 consideration, teach a remarkable lesson. This lesson can 
 not be missed by one who contemplates the whole picture 
 there represented, but could not be learned by Tugan- 
 Baranowskyi who saw only the details of the process by him 
 described. His theory of the "distribution of production" 
 is the result of his having missed the great lesson which 
 that book teaches, and that is, that the capitalist system 
 
 LIVES AND THRIVES BY WASTE. 
 
 In speaking of the first " modern " crisis, that of 1857, 
 Tugan-Baranowsky says in his History of Crises : — " The 
 peculiarities of the crisis of 1857 find their explanation in 
 the world-character of that crisis The char- 
 acteristic difference between the Aisis of 1857 and those 
 of 1825 and 1836 consisted also in the fact that this crisis 
 fell most heavily not on the cotton industry as the former 
 ones but on the iron industry. In this the new feature of 
 the capitalistic mode of production found its expression, — • 
 the .increased importance of the part played by means of 
 production on the world-market as well as in economic 
 life generally. The stagnation of trade usually moves the 
 industrialists to look for new markets for the disposition 
 of their goods. In this respect the crisis of 1857 had a 
 very strong effect. The exports from England to the 
 United States fell from nineteen million pounds sterling 
 (1857) to fourteen millions (1858); the exports from Eng- 
 land to the East. Indies, on the other hand, rose from 11.7 
 millions pounds (1857) to 16.8 millions pounds (1858). 
 In order to recuperate from the blows which it received on 
 the European and American markets English capital mi- 
 grated to Asia. In the East Indies began an epoch of rail- 
 road building, and of the improvement of inland ways of 
 
THE SOCIAL EEVOLUTION. 247 
 
 communication, which had the effect of increasing there 
 the demand for English goods." 
 
 We can not repeat here the detailed statement of the 
 crises that followed that of 1857 until the present day, but 
 a careful examination of this very interesting part of Tugan- 
 Baranowsky's' book will prove very instructive. Briefly 
 stated, all these crises were brought about by over-produc- 
 tion of "means of production," particularly of the most 
 lasting and staple means of production, those which it 
 takes longest to produce, means of communication and pub- 
 lic improvements. The typical crisis occurs in about the 
 following manner: 
 
 The starting-point is the preceding crisis. As Tugan-Ba- 
 ranowsky says in the passage just quoted : " The stagnation 
 of trade usually moves the industrialists to look for new mar- 
 kets- for the disposition of their goods." And as he has 
 also observed, these goods consist mostly of means of pro- 
 duction. In other words: after a crisis there is a super- 
 abundance, of capital which is seeking employment. As the 
 ordinary fields of occupation, particularly at home, are well 
 filled, the capitalists look for some new fields wherein their 
 capital could be profitably employed. Knowing that it 
 would be useless to manufacture some new consumption- 
 goods, or some machine for the purpose of manufacturing 
 such goods, for the reason that the capacity of our society 
 for consumption is limited, they start out to create new de- 
 mands by creating new civilization. Civilization has proved 
 a good customer, and capitalists turn to it instinctively 
 whenever hard pressed. So the iron threads of civilization 
 begin spinning at home and abroad, but mostly abroad, the 
 missionary spirit of capitalism being well known. This 
 creates a demand for vast amounts of capital and labor. 
 Things begin to hum, — the prospects are bright. The 
 markets are relieved of the surplus-product which clogged 
 the wheels of production, and trade has revived. An era 
 of prosperity has set in. The more crazy the "civilizing" 
 undertaking, particularly the longer it takes to finish it, 
 
248 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 and obtain results, the greater the prosperity and the longer 
 it lasts. But the undertaking has to be finished some day, 
 and the harvest must at last be gathered in. Then it is 
 discovered that the undertaking was a failure. The rail- 
 roads, it turns out, were not necessary where they were 
 built, for they have nothing to carry when they are ready 
 for business. The undertaking goes into liquidation. The 
 vast amounts of capital, the glorious piles or stretches of 
 ineans of production, now represent so much waste, for 
 capital which does not pay dividends is not capital accord- 
 ing to capitalistic laws. Then the crisis is on — things go 
 to smash all around. The crisis is not limited to those in- 
 terested in the particular undertaking. First, because the 
 ramifications of modern capitalistic undertakings are so ex- 
 tensive and complicated, particularly by reason of our 
 credit system, that no serious break can occur anywhere 
 but that the whole system will crumble to its foundations. 
 Secondly, because the large number of men employed in 
 producing the defunct " means of production " are now 
 thrown out of employment, thereby weighing heavily on 
 the labor-market and demanding charity from their mas- 
 ters. And thirdly, because the apparent prosperity incident 
 to the continued production of the large "means of pro- 
 duction," has caused a general rush of production to an 
 unwarranted extent, even in spheres which are not in any 
 way directly connected with the particular undertaking 
 
 which brought about the prosperity and the 
 
 crisis. 
 
 The deductions which, Tugan-Baranowsky himself makes 
 from these facts are very curious and furnish a good object 
 lesson in the mental pathology of our age. We can not, 
 however, pursue this branch of the discussion here any fur- 
 ther. We hope to resume this very interesting discussion 
 some other time. For the present we will try to make 
 some deductions on our own account, as far as they may 
 be pertinent to our subject proper. The first irrefutable 
 deduction which presents itself to our mind, not only from 
 
THE SOCIAL REVOLUTION. 249 
 
 the facts adduced by Tugan-Baranowsky, but also from his 
 own statements, is that his theory, the perpetuation of 
 capitalism by means of the proper " distribution " of pro- 
 duction, is the veriest rot. Prior to 1857 a change occurred 
 in the " distribution " of the production of the chief seat 
 of capitalism in those days, England. The production of 
 cotton goods (consumption goods), was relegated to the 
 background, and the front rank was assigned to iron-goods, 
 (means of production). In other words, Tugan-Baran- 
 owsky's advice of how to prevent a crisis because of over- 
 production was followed. But the crisis of 1857 did come, 
 notwithstanding the use of his patent remedy. The faith of 
 the capitalists in his remedy was evidently shaken a bit. 
 For, as he has told us, the capitalists, instead of continuing 
 the production of their means of production for the same 
 market, which, according to Tugan-Baranowsky's theory, 
 can never be over-stocked with means of production, 
 set about looking for new markets. The only thing in 
 which they followed him still was the " distribution " of 
 production; they still produced means of production by 
 preference. But the crises still continued to set in regu- 
 larly, driving the poor capitalists to distraction in their vain 
 hunt for new markets. In other words, the new markets 
 
 WERE ALSO SOON OVER-STOCKED WITH MEANS OF PRODUCTION. 
 
 And very naturally so: for means of production (and this 
 includes means of communication), are nothing more than 
 MEANS to the production of consumable goods. Where, 
 therefore, there is no demand for the consumable goods 
 ultimately to be produced by their means, their production 
 is over-production, and is so found to be when the ultimate 
 test is applied. The capitalists discovered this much sooner 
 than did Tugan-Baranowsky, owing to their healthy wolf- 
 instinct of capitalism, which can not be fed on fairy-talesj 
 but requires good dividends to appease its hunger. Seeing 
 that they are at, the end of their tether, that the reserve 
 of markets is giving out, while those under exploitation are 
 geting hopelessly over-stocked, they set about fighting each 
 
250 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 Other like wild cats in a scramble to get, each for himself, 
 as much as possible of what is left. Capitalism reversed 
 its time-honored policy of free-trade, and the era of wild 
 imperialism in which we live has set in. 
 
 Modern crises and modern imperialism _are very in- 
 structive studies. As Marx said, crises are mere symp- 
 toms of the contradictions working within the bowels of 
 capitalism, and. a means of relieving the diseased condition 
 when it becomes acute. They are not the malady itself, they 
 merely show the presence of the malady. So does im- 
 perialism. As a matter of fact, modern crises and modern 
 imperialism are manifestations of the same condition, and 
 are merely two phases of the same process. Among other 
 things, they show how the capitalist system is kept alive 
 by waste. 
 
 The waste of the capitalist system is of two kinds, ordi- 
 nary and extraordinary. The ordinary waste is the most 
 important, because the more extensive; it is, however, the 
 extraordinary waste that permits us to get a glimpse into 
 the vital forces of capitalism, and is, therefore, of greatest 
 interest- to us here. It is this extraordinary waste that 
 manifests itself in crises and in imperialism. We have 
 already stated how imperialism has been heralded as the 
 saviour of capitalism from crises and ultimate destruction by 
 providing new markets for its surplus-product. It was point- 
 ed to that the great crisis which was scheduled for the begin- 
 ning of this century did not come in, and this is claimed to 
 be due to the opening up of new markets by the imperialistic 
 policy of the modern capitalistic nations. In a way, this 
 is true; the effect of a crisis being the destruction of the 
 surplus-product which can not be absorbed by the social 
 organism, and the permission of the resumption of normal 
 production by removing the surplus-product from the mar- 
 ket, anything that will serve the same purpose may, for 
 the time being, take the place of a crisis. A great war, 
 for instance, may have the same effect. It has usually been 
 assumed that wars bring about crises. While it is true 
 
THE SOCIAL REVOLUTION. 25! 
 
 that under peculiar circumstances, particularly because of 
 credit relations, the declaration of a war may hasten on an 
 impending crisis, or even bring a financial one about, the 
 usual and general effect of a war is just the reverse. A 
 great war usually keeps a crisis out, for the reason that 
 economically it has the same effect as a crisis and can take 
 its place. After a great war an era of prosperity usually 
 sets in, for the same reason that great prosperity usually 
 follows a great crisis. The longer the war, the greater 
 the destruction of property, both actual and potential, the 
 greater the prosperity that will follow it. 
 
 A policy of imperialism, aside from the actual wars which 
 it may lead to, has in itself the same effects, and that is 
 why it is beneficial to capitalism. Among the economic 
 causes of the great popularity of imperialism must not only 
 be counted the desire for new markets and their actual at- 
 tainment, but the economic causes of the policy of hunting 
 for new markets itself. We will illustrate this by an ex- 
 ample. During the last presidential campaign in the 
 United States the anti-imperialists made very much of cer- 
 tain statistics compiled by the late Edward Atkinson, show- 
 ing that the expense to the United States in keeping and 
 governing the Philippines was greater than what the whole 
 trade of the United States with those islands amounted to. 
 The anti-imperialists argued that it was the height of folly 
 to pay more than a dollar for the opportunity of selling a 
 dollar's worth of goods. From their own shop-keeper's 
 point of view that is undoubtedly true. Not so from the 
 standpoint of the modern, means-of-production-producing 
 capitalism. There arise times when goods must be gotten 
 rid of at any expense. As these goods consist of means 
 of production they can not be given in charity to the,work- 
 ingmen, nor destroyed bodily the way the western and 
 southern farmers and planters destroy part of their crops, 
 when they are too plentiful, in order to keep up the prices. 
 These goods being capital, can only be gotten rid -of by 
 being sold or " invested." Hence this apparent craze for 
 
252 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 new markets. But this is not all. As far as the safety 
 of the capitalistic system is concerned, in so far as it affects 
 the " general prosperity of the country,'' as it is euphoni- 
 ously styled, the millions expended in the effort to sell 
 goods to the Philippines are not waste but gain. These mil- 
 lions represent so many millions worth of goods sold by the 
 capitalists of the United States for unproductive consump- 
 tion by military and civil employes and officials, a very 
 effective though not always profitable way of disposing of 
 a surplus-product which threatens to clog the wheels of 
 business. It is true that this is sheer waste. But it is on 
 waste that the capitalist system now depends for the con- 
 tinuance of its existence. 
 
 In this connection it must be added that it is not only 
 the moneys so expended directly that are wasted in that 
 manner and for that purpose, or at least with that effect. 
 To the direct expenses of colonies must be added the gen- 
 eral military and naval establishments of modern nations, 
 which are necessitated by this imperialistic policy. Every 
 dollar expended in the military and naval " needs '' of a 
 country are the purest waste, but it is at the same time 
 absolutely necessary for the preservation of the capitalistic 
 system. Furthermore, it is not only » the money expended 
 on these " needs," and included in the official budgets, that 
 must be taken into consideration. The big military and 
 naval establishments require men, besides money. These 
 men are taken away from ordinary production where they 
 would compete with other men in the labor-market, and - 
 where the products by them produced would swell the 
 masses of surplus-product to be disposed of in far-away 
 lands. The taking away of a man for military or naval 
 purposes (including administrative duties of all sorts), 
 relieves the labor-market by one man, and at the same time 
 creates a demand for the goods to be consumed by him 
 which are to be produced by those remaining at work at 
 some useful occupation. Hence our continued prosperity. 
 Waste is the safety-valve of capitalism. 
 
THE SOCIAL REVOLUTION. 253 
 
 How long will this last? Evidently not forever. If the 
 surplus-product can only be gotten rid of by waste, and 
 by the kind of waste described above, and if the surplus- 
 product which must be disposed of by such waste is always 
 increasing, we will evidently reach a stage when it will be 
 physically impossible to dispose of it. In saying "phys- 
 ically " we take, of course, into consideration human nature, 
 which is part of the " physics " of our social system. There 
 is, however, no warrant for assuming that according to 
 Marx capitalism would have to go on until such a "phys- 
 ical " catastrophe should occur. This theory of a final ca- 
 tastrophe which has been much exploited by Marx-critics 
 is the result of their woeful ignorance of the Marxian phi- 
 losophy and the connection it has with his economics. 
 Even Tugan-Baranowsky says that in order that the trans- 
 formation from capitalism to socialism should follow as 
 an economic necessity, according to the Marxian philoso- 
 phy, the impossibility of the continuance of production un- 
 der capitalism indefinitely must be proven. That is why 
 he exerts himself so much to prove that an absolute im- 
 possibility does not follow from an analysis of capitalistic 
 production. But this assumption is entirely wrong. The 
 Marxian philosophy does not require the arrival at an 
 economic impossibility. This is a figment of the imagina- 
 tion of those who understand under the Materialistic Con- 
 ception of History a Mechanical Conception of History. 
 
 Such is not the Marxian philosophy. It will be remem- 
 bered that in describing the causes for social revolution 
 generally, in outlining his philosophy of history, he says 
 that a revolution occurs whenever the superstructure of 
 laws, etc., turns from a means of helping production into 
 fetters of production. He does not say that production 
 under the old system must become impossible before a revo- 
 lution sets in, but it is according to his theory sufficient 
 that it becomes " fettered." And in speaking of the par- 
 ticular revolution now under discussion, that from capital- 
 ism to socialism, he says that the "knell of capitalist pri- 
 
254 THE THEORETICAL SYSTEM OP KARL MARX. 
 
 vate property sounds '' when " the monopoly of capital be- 
 comes a fetter upon the mode of production, which has 
 sprung up and flourished along with it, and under it." 
 When " centralization of the means of production and 
 socialization of labor at last reach a point where they be- 
 come incompatible with their capitalist integfument." Ac- 
 cording to the Marxian philosophy a system of production 
 can only last as long as it helps, or at least does not hinder, 
 the unfolding and full exploitation of the productive forces 
 of society, and must give way to another system when it 
 becomes a hindrance, a fetter, to production. That a sys- 
 tem has become a hindrance, and a fetter to production 
 when it has reached the point when it can only exist by 
 preventing production, and by wasting what it has already 
 produced, goes without saying. Such system cannot there- 
 fore last very long, quite irrespective of the purely mechan- 
 ical possibility or impossibility of its continuance. Such 
 a system has become historically impossible, even though 
 mechanically it may still be possible. As we have seen, 
 the capitalist system has reached that point: The capital- 
 ist system must go. 
 
CHAPTER XI. 
 
 CONCLUSION. 
 
 We have now capped the climax of the Miirxian argu- 
 ment, roofed the edifice of his theoretical structure, and it 
 stands before our eyes a finished whole — a monument of 
 the greatest thinker of the Nineteenth Century and a~ bea- 
 con-light to struggling humanity. It is not the magnifi- 
 cence of the structure, however, that interests us most, (for 
 it is not our task to extol the personal merit and genius 
 of Marx), but the character of this structure, the relation of 
 its parts to the whole. We stated early in our discussion 
 that the Marxian theoretical system is one solid structure 
 and cannot be properly understood unless viewed as a 
 whole; that it must be examined as a whole, and accepted 
 or rejected in its entirety. We hope that we have succeeded 
 in proving at least that proposition. Whatever our judg- 
 ment may be as to the merits of the Marxian theoretical 
 system, one thing we hope to have established beyond the 
 possibility of a doubt: like the stones under the head of 
 Jacob, so have the different elements which go to make up 
 the Marxian system been welded by superior power into one 
 whole. From the explanation of the hoary past, through 
 the appreciation of the contending forces of the present, to 
 the vision of the rising sun of the future — from the pref- 
 ace to Zur Kritik, declaring the laws of the historical 
 march of civilization, through the intricacies and subtleties 
 of the laws of value governing the capitalist system, to the 
 sounding of the bells ringing out the old and decrepit capi- 
 talist system and ringing in the new and vigorous socialist 
 society — the whole of the grandiose structure reared by 
 Marx is hewn from one stone. Its foundations lie in the 
 
 255 
 
256 THE THEORETICAL SYSTEM OF KASL MARX. 
 
 past, its frame work embraces the present, and its lofty 
 tower pierces the future. 
 
 Marx's sociaHsm is neither the result solely of his hatred 
 of the oppressors and love for the oppressed of the present 
 social system, nor is it the dream-like construction of his 
 fervid imagination; it is the logical conclusion of his read- 
 ing of the past and his understanding of the present of our 
 civilization. It iis equally, absurd to say, with Prof. Selig- 
 man, that Marx's interpretation of history has nothing to 
 do with his socialism, as it is to say, with Bernstein, that it 
 is immaterial to Marx's socialist predictions whether his 
 theory of value be sound or not. We have seen the cor- 
 rectness of Marx's interpretation of history; we have seen 
 the correctness and the precision of his analysis of the 
 workings of the capitalist system; and we have seen, above 
 all, the irresistible manner in which his socialist conclusions 
 flow from those premises, and the absolute necessity of those 
 premises for his socialist conclusions. We have seen, in 
 fine, what a great light the contemplation of the whole sheds 
 upon each and every part thereof. But even should the 
 reader disagree with us on that, he surely cannot deny the 
 justice of our claim that he can accept the Marxian system 
 as a whole or leave it as a whole, but he cannot take part 
 of it, and leave the rest, and above all he cannot take the 
 conclusions without admitting the premises. 
 
APPENDIX I 
 
 THE MATERIALISTIC CONCEPTION OF HISTORY AND PRACTICAL 
 IDEALISM. 
 
 The following essay was written over six years ago, and 
 appeared originally in the Haverhill Social Democrat. It is 
 reproduced here substantially without any change, except 
 that passages of a purely personal nature and containing al- 
 lusions which would not be readily understood by the gen- 
 eral reader were left out. Some of the statements would 
 be couched by the author in different language' now. But 
 there is no substantial difference between the views then ex- 
 pressed and those held by the author now. And as the 
 purpose of the essay was not to give an exposition of the 
 subject but to record the views held by the socialists, it was 
 deemed advisable to retain not only the substance but also 
 the form, and to bring it up to date by adding at the end 
 some opinions expressed since its first publication. 
 
 In the September, 1900, issue of the International Socialist 
 Review appeared an article by Comrade Robert Rives La- 
 Monte under the caption of " Science and Socialism," * in 
 which was treated, among other things, also of the ma- 
 terialistic conception of history. In a communication to 
 The People, printed October 28th, 1900, I took exception 
 to the views expressed by Comrade LaMonte in his article, 
 claiming that the article sinned against the truth in drawing 
 an analogy between Society and the Individual with respect 
 to the motives that impel him to action and in asserting 
 that the individual is prompted in his action by his own 
 material interests. I insisted, on the contrary, that there 
 was no analogy in this respect between Society and the 
 Individual; that the individual in his private conduct is not 
 always guided by his material interests; that with the best 
 
 * This issue of the Review is out of print, but the essay was reprinted in 
 a book by Comrade LaMonte, entitled Socialism, Positive and Negative, 
 Chicago. Charles H. Kerr Company, 1907, cloth, so cents. 
 
258 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 • 
 
 of men ideal motives are supreme; that the materialistic 
 conception of history applies to Society only, and to history 
 only, that is, to Society^ in the process of change ; that, 
 however, when we take society in a given moment detached 
 from what preceded it and what follows it, we find that even 
 in society as a whole, in this stationary cbndition, ideal 
 motives and not pecuniary interests play the leading role. 
 And that, notwithstanding this, the materialistic conception 
 of history is correct. And, furthermore, that because when 
 viewing society in its process of change, we find that the 
 ideas which play an important role in the activity of any 
 given society at any given moment, had their genesis in the 
 economic conditions of the time or of some time which pre- 
 ceded it, it follows that considering the history of society 
 philosophically, the economic factor is supreme in the evolu- 
 tion of society. 
 
 Speaking of the article generally, I characterized it as con- 
 fusing, because it is a mixture of correct Socialist doctrine 
 and the views just now criticized which are contradictory 
 to those doctrines, and as pernicious, because it plays into 
 the hands of the enemies of Socialism in lending a sem- 
 blance of authority to the perversions of the materialistic 
 conception of history, which our enemies have all along 
 tried to confuse with a grossly materialistic view of life, 
 and brand as opposed to practical idealism. 
 
 I particularly objected to the article because it assumed to 
 express not the individual views of Comrade LaMonte, but 
 the accepted doctrines of all authoritative Socialists, and all 
 those who " talk intelligently " of the materialistic concep- 
 tion of history. This communication of mine aroused the 
 ire of H. L. Slobodin. In quite a lengthy article (The 
 People, November 4, 1900), salted and peppered with per- 
 sonal abuse after the famous recipe of a late unlamented 
 master, he invokes heaven and earth, the shades of Hades 
 and the rhetorical figures in Brown's grammar, to a re- 
 lentless war against my " ignorance," " arrogance," and most 
 of all my " noble-mindedness." 
 
 The points he makes, as far as they appertain to the dis- 
 cussion, are, as follows: 
 
 1. I garbled LaMonte's article when I ascribed to La- 
 Monte the notion that pecuniary interests dominate the life 
 of the individual. 
 
 2. That, assuming LaMonte to have intended to say that 
 private material interests dominate the Iffe of the individual 
 in the same way as the economic factors dominate the his- 
 
APPENDIX. 259 
 
 tory of society, his position is still correct, as such views are 
 " much more akin to historic materialism than " my own 
 views as stated in my communication to the People. To 
 quote the whole passage : " Comrade Boudin distorts La- 
 Monte's proposition, attaching a meaning very remote from 
 it, namely, that by economic conditions LaMonte means 
 ' pecuniary interests.' But even in its garbled form, the 
 • proposition of LaMonte is much more akin to historic ma- 
 teralism than the ' noble-minded idealism of Boudin.' " I 
 have committed all manner of crime by saying that 
 Socialists are usually " idealists of the purest type " in 
 practical life. To use his own classical language : " I am 
 in doubt whether the Socialists will receive this as a flattery 
 or a libel. Myself, I am inclined to retort : ' Comrade 
 Boudin, you are another.' " 
 
 And I have sinned even more in stating that, in practical 
 life, men are moved by a sense of justice and by ideals. 
 
 It follows from the above that the questions now at issue 
 are : 
 
 First: Have I garbled Comrade LaMonte's article, or 
 distorted its meaning? 
 
 Second: Does the materialistic , conception of history ap- 
 ply to the conduct of individuals or are the factors that 
 impel the actions of individuals the same that move societies ? 
 More particularly, is the view that individuals are moved by 
 pecuniary interests only, " much more akin to historic ma- 
 terialism " than the veiw that the materialistic conception 
 of history has nothing to do with practical idealism, and that 
 Socialists may ' therefore be, and usually are, idealists in 
 practical life ? 
 
 I want to state right here that, for the purposes of the 
 present discussion, it is immaterial whether this position of 
 LaMonte is correct in itself or not. We may yet have a 
 chance to break a lance on that score. Here the only ques- 
 tion is whether what LaMonte and his friend say is what 
 authoritative Socialists mean when speaking of the ma- 
 terialistic conception of history. In my communication 
 to the People I expressly stated that I objected princi- 
 pally to LaMonte's article because he insisted that his 
 views were those of authoritative Socialists, and that in my 
 opinion that was not so, whatever the merits of those views 
 may otherwise be. And this is the only thing that I intend 
 to prove now. 
 
 Says Karl Kautsky, now the leader of Socialist thought 
 
26o THE THEORETICAL SYSTEM OF KARL MARX. 
 
 the world over (Neue Zeit, XV, I 215) : " I have pointed 
 out to Bax in my reply to his article in the Zeit, that he 
 commits the quite preposterous blunder of confusing material 
 conditions with material interests. And what does Bax 
 answer? Not enough that he confuses material conditions 
 with material interests, he actually sticks to this confusion, 
 aft^r-Jjis attention is called to the nonsensity of interchang- 
 ing these terms ! Does Bax really not know what is to be ' 
 understood under the material conditions of a society ? The 
 material conditions are the conditions of production, — this 
 word taken in its most comprehensive sense. How can one 
 insist that this is for the materialistic conception of history 
 quite the same as the material interests of classes and na- 
 tions? (We imagine Kautsky's surprise if he were to learn 
 that here are materialists who are not content with con- 
 fusing material conditions with the material interests of 
 classes and nations, but actually confuse it with the material 
 interests of individuals ! ) The difference between the two 
 words can be seen from the following consideration: It is 
 in my opinion possible to explain the aversion to earthly 
 things and the longing for death of Christianity by the ma- 
 terial conditions of the time of the Roman Empire. It were 
 however preposterous to try to find a material interest as a 
 cause of the longing for death ! " 
 
 And again : " Others, again, throw into the same pot the 
 animal organism and the social organism, the law of the 
 evolution of society and of the individual. and the species." 
 
 This hits the nail squarely on the head. The law of the 
 evolution of society is not, the same as the law of the evolu- 
 tion of the individual; and in the evolution of society even, 
 it is not the material interests of classes or nations that 
 is the moving power, but the material conditions, which is 
 something quite different. 
 
 As a logical corollary of the ignorance displayed by Kaut- 
 sky in the above, come his views about the role of the in- 
 dividual in history. Ignorant as he is of the great doctrine 
 of " economic determinism " announced by LaMonte, which 
 compels the individual to act in accordance with his ma- 
 terial interests, Kautsky has the " arrogance " of expressing 
 himself as follows on that point: "Here we come to the 
 question what role does Man, or if you like it better, Spirit, 
 the ' psychological impulse,' the Idea, play in history. To 
 " the idealistic philosopher the idea maf have an independ- 
 ent existence. To us the idea is only a function of the 
 brain, and the question whether . and how the idea can 
 
APPENDIX. 
 
 261 
 
 influence society is identical with the question whether and 
 how the individuals can do it. Bax will be much surprised 
 when I declare that I agree entirely with the proposition 
 laid down by him in seeming opposition to my views, 
 namely : ' Economic formations make history only in con^ 
 junction with the human spirit and will." 
 
 What a pity that Kautsky did not read a few books on 
 natural history or at least the article of LaMonte's Champ- 
 ion, because then he would not have talked such nonsense 
 about " Man " and the " human spirit," he would then have 
 known that there is nothing about man and human nature 
 to talk about; that " there is a species of small but ferocious 
 pig that aire known to deliberately " sacrifice themselves for 
 a friend. 
 
 As it is, however, Kautsky abides in ignorance, and 
 therefore proceeds in this wise : " On the other hand, 
 the selection of the problems to which he (the individual) 
 devotes himself, the view-point from which he approaches 
 their solution, the direction in which he looks for the solu- 
 tion, and finally the energy with which he goes to bat- 
 tle, for an explanation of these we cannot look to economic 
 conditions only. Alongside of these there also con}e into 
 play the peculiarities in which the individual has developed 
 owing to the peculiarities of his natural parts, and the 
 peculiarities of the particular circumstances in which he 
 found himself. All the above mentioned circumstances 
 exert an influence if not on the direction, then on the way 
 and manner in which the, after all inevitable, result is to 
 be. And in this respect single individuals can do much, 
 very much for their contemporaries . . . Some as 
 thinkers, by obtaining a deeper insight than those who sur- 
 round them, by freeing themselves more than those from 
 the inherited traditions and prejudices, by overcoming class- 
 stupidity." 
 
 It is clear from the above that Kautsky is of the opinion 
 that some people may, for no other reason but because 
 they think, accomplish very much for their contemporaries. 
 And in order to do such good they not only neglect their 
 own material interests, but they rise above the material 
 interests of their class, overcome the stupidity or narrow- 
 mindedness (Bornirtheit) of their class. 
 
 This last phrase about the class-stupidity (KlaSsen- 
 bornirtheit)is interesting. And Kautsky, who was evidently 
 aware that he was treading upon the corns of some so- 
 called Marxists, proceeds to elucidate his position thus: 
 
262 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 ■ " The last assertion may sound strange in the mouth 
 of a Marxist. Socialism is however, in fact, based on the 
 overcoming of class-stupidity. For the narrow-minded 
 (bornirt) bourgeois the social question consists of the prob- 
 lems how to keep the workingmen peaceful and their 
 necessities minimal; for the narrow-minded wage worker 
 it is only a question of stomach, the question of high wages, 
 short hours, and secure employment. We must overcome 
 the narrow-mindedness of the one as well as of the other, 
 before we can come to the understanding that the solu- 
 tion of the social problem of our times must embrace much 
 more, much that is only possible in a new form of society 
 . . . The thinker, who overcomes tradition and class- 
 stupidity, assumes a higher standpoint and thereby discov- 
 ers new truths, that is, comes nearer the real solution of 
 the problem than the average individual. He must notj 
 however, expect to be received with favor by all classes. 
 Only those classes will agree with him whose interests lie 
 in the same direction as the general evolution, — often not 
 even these when the thinker has raised himself too far 
 above his surroundings." 
 
 The question of the limits of the influence of economic 
 conditions, and the play of the influences in society, is more 
 fully discussed by Kautsky in his articles written in the 
 Neue Zeit in answer to Bernstein's famous book. In the 
 article on Materialism Kautsky says: 
 
 " But let us look a little closer at the different factors to 
 which Bernstein calls our attentioti: Here we have along- 
 side of the forces and circumstances of production, the 
 juridical and moral conceptions, and the historic and 
 religious traditions. But what are the traditions even ac- 
 cording to the 'more progressive' formulation of the 
 materialistic conception of history if not the product of 
 preceding social forms, consequently, also of preceding 
 forms of production ; and likewise the juristic and moral 
 conceptions, as far as they are traditional and do not arise 
 out of the social forms existing at that moment. . . . 
 
 " So we can upon closer scrutiny reduce the factors 
 which play a part on the surface of history, which Bern- 
 stein points out, to ultimate economic factors; and his de- 
 mand will simply mean that the history, of a given time 
 cannot be explained by its own economic history only, but 
 that we must ' take into account ' the whole economic de- 
 velopment preceding it, together with its heritage from 
 primitive times. . . . 
 
APPENDIX. 263 
 
 " Had Bernstein wanted to say that the materialistic con- 
 ception of history developed, in that, in the beginning, it 
 overestimated the direct influence of the form of production 
 prevalent at a given time, and undervalued the indirect 
 influence of pre-existing forms, then there would be room 
 for discussion. In fact, the progress of prehistoric re- 
 search, which was scarcely born at the time of the original 
 formulation of the materialistic conception of history has 
 materially influenced the latter. A development of the 
 theory in this sense is to be noticed, and it was stated as 
 a fact by the fathers of the materialistic conception of 
 history themselves." 
 
 The reader will have seen that in Kautsky's mind there 
 was absolutely no question that the juridical and moral 
 notions current in society have a great influence on that so- 
 ciety, because the changes in society are worked by the 
 agency of individuals, and individuals are admittedly (to 
 Kautsky's mind) influenced by their judicial and moral no- 
 tions. The debatable ground to him was, as to the origin of 
 these notions, whether they could be traced to economic con- 
 ditions directly by showing that they were the result of 
 the economic forces and circumstances of that society it- 
 self, or whether they could be traced to economic conditions 
 only indirectly, that is, by showing that although they were 
 inherited, and therefore not the result of the economic con- 
 ditions of the society over which they exert their influence, 
 they were originally the result of economic conditions, name- 
 ly, of the conditions of some previous society in which 
 they had their origin. And even as to that Kautsky says 
 (as we have heard him say before in his answer to Bax, 
 quoted above) that there is no question but that some ideal 
 influences can be traced only indirectly to economic condi- • 
 tions, and the question then reduces itself to one of the 
 relative strength of the ideal influences which can be ex- 
 plained by the economic conditions of the time, and those 
 which we have inherited from our fathers and can, there- 
 fore, be explained only by the economic conditions of some 
 former historical epoch. And as to the this latter question, 
 he says that, in the younger days of our materialistic 
 philosophy, we were prone to over-estimate the direct in- 
 fluences at the cost of the indirect, but that now we give 
 those influences which can be traced only indirectly to eco- 
 nomic conditions their full due, and this is done not in 
 opposition to the views of Marx and Engels^ the fathers 
 
264 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 of our modern materialist philosophy, but in conformity to 
 their views. 
 
 When we remember that so-called indirect influences of 
 economic conditions have absolutely nothing whatever to do 
 either with our economic or material interests, nor even 
 with our economic conditions, in the sense in which Kaut- 
 sky uses the word, — Kautsky's views reduce themselves to 
 the following: Not only are individuals prompted in their 
 actions by ideal motives, but moral (that hated word 
 "moral"), juridical, and other ideal influences which' are 
 not in any way connected with the economic conditions of 
 our own society, play an important role in it. 
 
 And in order to prove to Bernstein that it is pretty hard 
 to " improve " on Marx and Engels, and incidentally to 
 guard against confusionists who do not know the diiiference 
 between a theory of history and a code of practical ethics, 
 he uses the following example : " Suppose that a naturalist 
 had in one of his earlier works declared that the light and 
 heat of the sun were the ultimate moving powers of all 
 organic life on earth. In his later years he received an in- 
 quiry as to whether it were true that, according to his theory, 
 the growth of a tree depended solely on the quantity of 
 light and heat that it received directly from the sun. To 
 this he naturally answered, that it was nonsense; that his 
 theory must not be interpreted that way, that he knew very 
 well that the quality of the seed, the soil, the condition of 
 moisture and dryness, the direction and strength of the 
 winds, etc., have likewise an influence on the growth of 
 trees. And then comes a commentator, confuses the direct 
 influence of the sun on vegation with his being the ulti- 
 mate sole power-source on the earth, and declares, then, that 
 the theory of the naturalist must not be taken in its first, 
 one-sided, form, but in its last, qualified and therefore much 
 more scientific form. He overlooks entirely the circum- 
 stance that in this, form the theory ceases to be of scientific 
 importance; it becomes a commonplace, familiar to every 
 farmer during thousands of years." 
 
 Kautsky claims, and he is certainly right in doing so, that 
 when a great thinker announces a new theory he need not 
 go into lengthy explanations that it is not what other 
 people may think it is by absurdly perverting it, but he 
 may leave that to the common sense of those that follow 
 him. And yet, had Kautsky had a chance to read the 
 Socialist literature on this side of the ocean he would not 
 have scoffed so cruelly at Bernstein's painstaking state-. 
 
APPENDIX. 265 
 
 ments of the limitations of the materiaHstic conception of 
 history, as he would have seen that there are farmers here 
 who, after having heard of our naturalist's theory insist 
 on planting trees on brick walls as long as they are directly 
 against the sun. 
 
 That Kautsky is correct in his statement that Marx and 
 Engels never denied the influence of ideas in the history 
 of society, and gave quite a prominent place to indirect 
 influence of economic conditions, this even in the earlier 
 of their writings — is plain to every student of Marx and 
 Engels, who has studied their philosophy not from second 
 hand. Of course, there is, as far as I can remember now, 
 nowhere in their writings to be found a direct denial of the 
 absurdities of LaMonte & Co., for the reason stated by 
 Kautsky and quqted^above ; but there is abundant refutation 
 of it. I shall bring only one quotation from Marx and one 
 from Engels directly in support of Kautsky's views, and 
 when we bear in mind that Marx at least has never written 
 any book or even essay giving an exposition of his phil- 
 osophy, this will be enough to satisfy the most exacting. 
 , Says Marx in 1845: 
 
 " The teaching of the materialists (the ante-Marxian ma- 
 terialists, of course) that man is the product of circum- 
 stances and education (Erziehung), that changed men are, 
 therefore the product of different circumstances and changed 
 education, forgets that circumstances themselves are changed 
 by men, and that the educator himself must be educated." 
 Sapientis satis. 
 
 Engels is more circumstantial. Says he: 
 
 " Men make their history, whatever way this may turn 
 out, by each one pursuing the aims he consciously sets to 
 himself, and the resultant of these wills, in many different 
 directions working, and their manifolded influences on the 
 outer world, are just history. It is therefore also important 
 what these many individuals want. The will is determined 
 by passion or consideration. But the levers which in turn 
 directly determine the passions or considera^tions are of dif- 
 ferent kinds. Partly, these may be circumstances standing 
 outside the individual; partly, ideal motives, ambition, en- 
 thusiasm for truth and right, personal animosity, or even 
 purely individual whims of all sorts. But, in the first place, 
 we have seen that the many individual wills which are ac- 
 tive in the making of history produce mostly quite different, 
 often just opposite, results from those desired; their mo- 
 tives are therefore, also, for the collective result only of 
 
266 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 secondary importance. And, secondly, the question still re- 
 mains, what propelling forces are behind these motives, what 
 historical causes are they that form themselves in the minds 
 of the acting personages into these motives? 
 
 " This question the old materialisni never put to i:tself. 
 Its historical conception, so far as it had one at all, was 
 therefore in its essence pragmatical, judging everything 
 by the motives of the action ;"it divides the persons acting 
 in the historical process into noble and ignoble ones and 
 finds then that as a rule the noble ones are the conquered 
 and the ignoble the conquerors. Whence^it follows, for the 
 old materialism : — that the study of history is not very 
 edifying; and, for us, that on the historical field the old 
 materialism is untrue to itself, because it takes the ideal 
 motives which exert ther influence there as ihe last causes, 
 instead of examining what may be behind them, what are 
 the motives of these motives. Not in that lies the in- 
 consistency that ideal motives are acknowledged. But in 
 that that they are accepted as final, and are not reduced 
 to the causes that move them." 
 
 This is quite plain. No wonder LaMonte does not like 
 Engels and appeals from him to Deville (to whom, by the 
 way, he ascribes nice "distinctions," which do not right- 
 fully belong to him.) 
 
 The question as to whether those who believe in the 
 materialistic conception of history can be idealistic in prac- 
 tical life, have ideals the attainment of which they desire, 
 and' be actuated in their actions by ideals, has naturally 
 been discussed more or less by the leaders of Socialist 
 thought. As is also natural, such discussions were always 
 provoked by some opponent of Socialism trying to make 
 believe that the materialistic conception of history led its 
 followers to adopt " materialistic " views of life and ex- 
 cludes all ideals. This the Socialist theorists were not slow 
 to brand as malicious fabrications and imaginings born of 
 ignorance. 
 
 Franz Mehring, one of the brightest minds of the party in 
 Germanv, and one of those who are accused of being too 
 strict and " narrow-minded " materialists, has the following 
 to say on the subject (Lessing-Legende) : 
 
 ".We shall first dispose of two current objections to 
 historic materialism, which attach to the meanirjg of the 
 word. Idealism and materialism are two answers, in op- 
 position to each other, to the basis question of philosophy: 
 the relation between the understanding and reality, or to put 
 
APPENDIX. 267 
 
 it in a simpler way : the question as to the priority of mind or 
 matter. In themselves these two terms have nothing to do 
 with ethical ideas. A philosophical materialist may cherish 
 such ideals in the highest and purest degree, while the 
 philosophical idealist may be completely destitute of them. 
 However, the term materialism, owing to its being contin- 
 ually defamed by persons, has in time acquired something 
 suggestive of immorality which gradually made its way into 
 bourgeois literature. ' The Philistine understands under 
 materialism gluttony, drunkenness, lust, pride, rapacity, 
 greed, profit-hunting, etc., in short, all those repugnant 
 vices to which he is covertly subservient; and under idealism 
 he understands the firm belief in virtue, the brotherhood of 
 man, and generally a " higher world " of which he de- 
 claims, and in which he perhaps believes when he has to go 
 through all the misery which necessarily follows his " ma- 
 terialistic " excesses, chanting the refrain : What is man, 
 — half brute, half angel' (this quotation is from Engels). 
 If we are to use these words in this, secondary, sense, it 
 must be admitted that nowadays it requires a good deal of 
 ethical idealism to have the courage of professing historic 
 materialism, for it invariably carries with it poverty, perse- 
 cution and slander, while the profession of historic idealism 
 is the business of every heeler, for it offers the best pros- 
 pects to all earthly goods, to fat sinecures, orders, titles and 
 dignities." 
 
 As the reader sees, far from being horrified at the thought 
 that a Socialist may be an idealist, as LaMonte's Champion 
 is, Mehring says that it requires a lot of ethical idealism 
 to be a materialist, or, as I said, simply a Socialist. 
 
 So says also Sadi Gunter, perhaps the only man in Ger- 
 many who has the distinction of being acknowledged a 
 philosopher both by Socialists and bourgeois. In an article 
 which appeared in the Neue Zeit (1897-98, No. 41) he 
 makes use of the following language: 
 
 " There is a firmly rooted prejudice in the educated cir- 
 cles of the bourgeoisie that the materialistic conception of 
 history excludes all ideals. Even men who begin to advance 
 theoretically towards the materialistic conception of his- 
 tory, and do not dismiss it, like Dr. Barth, with- a few 
 phrases which only show a lack of understanding on the 
 part of those who use them, still find in that prejudice a 
 cause which prevents them from joining it entirely. . . . 
 We must however discuss more fully the second objection 
 which is based on that very widely accepted metaphysical 
 
268 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 error, that PRACTICAL IDEALS must have as their foun- 
 dation THEORETIC IDEALISM (all italics in the text). 
 Here we must prove that Stammler uses an untenable dou- 
 ble book-keeping in which the entries do not balance. And 
 this we must prove by a positive demonstration, — ist. That 
 and how the spiritual phenomena must work in the chain of 
 cause and effect; 2d, That and how in the historic material- 
 ism — which must be carefully distinguished from common 
 materialism — o practical idealism is not only possible, but 
 necessary. 
 
 " In such cases the ideal acquires in man a quite all- 
 powerful impetus. And it retains its power of a forward 
 motor even if the goal to be achieved cannot be reached 
 in the way looked for; because it enhances the powers and 
 impels to find other ways of solution, when those originally 
 hoped for prove inadequate. This is the reason why the 
 goal of Socialism, the emancipation from the yoke of cap- 
 italism and the establishment of a more harmonious social 
 order, could seize upon the masses so powerfully, impel 
 them forward and elevate them even while the present sys- 
 tem continues (heute bereits emporzuheben vermocht). 
 . . . This ideal in social life is the Socialistic ideal of 
 to-day. Socialism requires the nationalization of the means 
 of production not for the material reason that the proletarian 
 should be able to eat and to drink more comfortably; The 
 Erfurter Program, to which the whole German Party; ad- 
 heres, states most emphatically that the socialization, of the 
 means of production is necessary in order to transform the 
 capitalistic mode of production from a ' source of misery to 
 a source of the highest well-being and harmonious develop- 
 ment of man.' " 
 
 " We must not overlook the phrase ' harmonious develop- 
 ment.' ... If this be the case, it is evident that we 
 may require the nationalization of the means of production 
 only in so far as it serves our aim as a harmonious develop- 
 ment. This ' nationalization is a means only, and not an 
 end in itself. The ideal for the sake of which nationaliza- 
 tion is desirable, is human perfection. And this ideal is a 
 necessary motive power to further development, — a motive 
 power which is as well an effect of evolution as it is a 
 necessity to the further realization of our aim." . . . 
 
 "Not only is historical materialism, therefore, far from 
 destroying practical idealism, hut on the contrary, it raises 
 it- to such a power over the mind and clarities it to such a 
 
APPENDIX. 269 
 
 purity as no other system was hitherto able to attain for 
 it." ■ ■ ' 
 
 The point I wish to make here is in relation to the horror 
 with which the " sense of truth and justice," attributed by 
 me to the uncorrupted human nature, inspired my adver- 
 sary. If it were not for the fact that he probably con- 
 sidered himself among those whom I excepted from this 
 horrible imputation, he would have said that I was another. 
 . . . As it is, however, he limits himself to instructing 
 us about the nature of the celebrated "small but ferocious 
 pig," which is not exactly to the point, as I have never 
 harbored any designs upon the fair name and reputation of 
 my friend's protege, and informs us that an old writer is 
 quoted as saying : " A dog is the only thing on this earth 
 that loves you more than he loves himself." After having 
 thus exhausted the wells of vvjsdom of all the ages, and after 
 having cruelly enjoyed my humiliation, -he introduces a 
 " philosophical sow " to the utter discomfiture of all "ideal- 
 ists," whom my friend cordially hates. 
 
 However, one consolation still remains for me, discomfit- 
 ted as I am ; and that is that I am in quite good company. 
 There is for instance, J. Stern, a man who only recently was 
 held out by George Plechanoff, that " narrowest " of the 
 doctrinaires of materialism, as the model of a Socialist 
 philosopher. In his book on the philosophy of Spinoza, pub- 
 lished by the German party's publishing house. Stern takes 
 the position I do. But, finally, here is Kautsky again, to 
 share the odium of " noble-minded idealism." In his re- 
 sponse to Bernstein, he says: 
 
 "The ideologists ceased to be a ruling class. But they 
 have at the same time ceased to be a class altogether. They 
 ceased to present a compact class with separate class-inter- 
 ests. They form an aggregation of individuals and coteries 
 with the most widely different interests. As repeatedly said 
 before, these interests touch partly with those of. the Bour- 
 geoisie, and partly with those of the proletariat. At the 
 same time their education enables them the quicker to gain 
 a higher standpoint in the contemplation of social develop- 
 ment. Not actuated by pronounced class-interests, often 
 acting on the basis of a deeper insight into the interde- 
 pendence of social phenomena gained by mental work, the 
 representatives of the intellectual classes (Intelligenz) feel 
 themselves to be the representatives of the common interests 
 of the community as opposed to the class-interests, — the rep- 
 
270 THE THEORETICAL SYSTEM OF KARL MAUX. 
 
 resentatives of ideas that are independent of economic 
 motives. And the intelligent classes (Intelligenz) are con- 
 stantly growing. Therewith grows visibly the common-in- 
 terest as against the class-interests, grows the independence 
 of the arts, sciences and the ethical viewpoint of the- 
 economic forces. Only when we interpret Bernstein's words 
 to mean this, they become understandable (begreiflich) and 
 lose their mystical character; but then they also cease to 
 prove anything against the materialistic conception of his- 
 tory." 
 
 In a review of Anton Menger's book " Neue Sittenlehre," 
 in the Neue Zeit of October 14, 1905, Karl Kautsky says, 
 among other things : 
 
 " Political and social struggle is impossible without moral 
 indignation (sittliche Empoerung) against the opponent. 
 
 "The moral indignation against given political and social 
 conditions, against the material oppression of the social 
 powers, is therefore the first and the last, the basic form of 
 the manifestation of the class differences, the most primi- 
 tive and lasting mainspring (Triebfeder) of the class strug- 
 gle." 
 
 And then he states, referring to Menger's ethical theory 
 and the statements of some reviewers that it was identical 
 with the theory of ethics of the Matrialistic Conception of 
 History : 
 
 " To say that the conception of historical materialism, 
 that morality is generated by the material conditions of 
 society, is the same as Menger's conception that it is gene- 
 rated by material force is just as false and misleading as is 
 the oft-repeated confusion of material conditions with the 
 material interests of the individual, which reduces Marxism 
 to that low level of ethics according to which all morality 
 is reduced to egoism. People who so represent and propa- 
 gate the Materialistic Conception of History may consider 
 themselves . good Marxists, but they really belong to those 
 who reflect little credit on the Marxian teachings, who made 
 Marx shudder, and with whom he begged not to be con- 
 founded."* 
 
 And in his recent book : " Ethijcs and the Materialistic 
 Conception of History," Kautsky -says : 
 
 " While the growing contradiction between the changing 
 social conditions and the stagnating morality expresses it- 
 self in the conservative, that is in the ruling classes, in 
 growing immorality, hypocrisy and cynicism, which ofteii 
 
APPENDIX. 271 
 
 go" hand in hand with a weakening of the social instinct, 
 the effect upon the rising and exploited classes is entirely 
 different. The interests of those classes stand in direct 
 opposition to the social foundations which created the reign- 
 ing morality. They have not the slightest reason to defer to 
 it, and all the reasons to oppose it. With the growth of 
 their consciousness of their opposition to the existing social 
 order, grows their moral indignation, their opposition to 
 the old and arrtiquated morality, to which they oppose a 
 new morality, which they advocate as the morality of so- 
 ciety- as a whole. Thus there arises in the rising classes a 
 moral ideal, which grows in intensity with the growth of 
 the power of these classes. At the same time, as we have 
 already seen, the social instincts of these same classes gain 
 in strength and are particularly developed by the class- 
 strugg'le, so that with the intensity of the new moral ideal 
 grows also the enthusiasm for the same. Thus it is that 
 the same process of evolution which produces in the con- 
 servative and declining classes growing immorality, begets 
 in the rising classes in a steadily increasing number those 
 phenomena, the aggregation of which we describe as ethical 
 idealism, which must not, however, be confounded with 
 philosophical idealism. It is just the rising classes that 
 often incline towards philosophic materialism, which the 
 declining classes, on the other hand, oppose from the' mo- 
 ment that the fact begins to dawn upon them that the 
 natural course of evolution has sealed their doom, from 
 which they can only escape by the intervention of some su- 
 pernatural, divine, or ethical power." 
 
APPENDIX II. 
 
 THE MATERIALISTIC CONCEPTION OF HISTORY AND THE IN- 
 DIVIDUAL. 
 
 One of the points on which the Marxian interpretation of 
 history is being most persistently misrepresented, is the 
 question of the influence of the individual on the course of 
 history. It is one of the favorite occupations of the Marx- 
 critics of a certain sort to enlarge upon the supposed fact 
 that the Marxian historical theory preaches fatalism and 
 leaves no room for the activity of the individual with a 
 view to influencing the course of events. It is either ex- 
 pressly stated or tacitly assumed that Marx imagined or 
 represented History to be a sort of automatic machine run- 
 ning along a predestined and preordained course, pro- 
 pelled by a lever called economic factor, without regard or 
 reference to the will of the human beings whose intelli- 
 gence it was affecting and whose institutions and destinies 
 it was shaping. According to these gentlemen, Marx did 
 not care a whit as to what the human beings whose doings 
 fill up the pages of History thought or wanted with regard 
 to the things that they were doing or were about to do. They 
 assure us that according to Mairx and his disciples the 
 course of History is predetermined (although none of 
 them ever suggested by whom),— and "economic deter- 
 minism " is, therefore, their favorite appellation for the 
 Materialistic Conception of History. The course of History 
 being predetermined, and the " economic factor " being the 
 motive-power which propels the car of History on this 
 predetermined course, it follows of necessity that neither 
 each individual member of society separately, nor all of its 
 members collectively, can in any way, by anything he or 
 they might do, affect or influence this fatal course of His- 
 tory. Man must cease all intelligent effort to alter, accel- 
 lerate, or modify the course of History, and must patiently 
 await the inevitable which Fate has decreed for him, and 
 which will be brought about while he waits through the 
 agency of the Economic Factor. 
 
 272 
 
APPENDIX. 273 
 
 Having changed the Marxian conception of history into 
 " economic determinism," and having read fatalism into it, 
 they proceed to show their determined opposition to Marx- 
 ism on the ground that it is fatal to all intelligent human 
 activity, particularly of the " idealistic " kind. Of course, 
 it could easily be proven that neither Marx nor the Marxists 
 seem to have been affected by the supposed fatalism of their 
 doctrine, and have displayed an intelligent activity and an 
 active intelligence in all spheres of human thought and ac- 
 tion that are truly astonishing. Nay, the most astonishing 
 part of it is that this activity is usually of the most " ideal- 
 istic " kind imaginable ! But, then, the Marxists have never 
 been consistent. It behooves us, therefore, to see what 
 basis there is for the claim of fatalism, in the Materialistic 
 Conception of History, and what are, according to that 
 theory, the true possibilities and limitations of the individ- 
 ual member of society as a history-making factor. 
 
 And first of all as to determinism. It may be safely said 
 that there is absolutely no warrant in anything that Marx 
 himself wrote for the application of that term, in the sense 
 in which it is used in this connection, to his historical 
 theory. Neither the term itself, nor the idea for which it 
 stands, are to be found in any of his writings. Further- 
 more, the idea is entirely foreign to the whole spirit of his 
 theoretical system. While there is nothing in the idea of 
 determinism which would make it impossible to couple it 
 with materialism, it is nevertheless essentially part and 
 parcel of a purely idealistic system such as Hegel's, for in- 
 stance. 
 
 The same is doubly true about fatalism; to say that the 
 man who said : " Men make their own history " was a 
 fatalist is such an incongruity that the claim would hardly 
 merit attention were it not for the persistence with which 
 it is put forward. We need not depend, however, on any 
 stray utterance of Marx in order to determine his position 
 in the matter. We have already seen in the foregoing dis- 
 cussion in the body of this book, particularly in the chapter 
 on the Proletariat and the Revolution, the stupendous task 
 assigned to the working class in bringing about the trans- 
 formation of the present capitalist society into ~the socialist 
 society of the future. That this role ascribed to the prole- 
 tariat is entirely in keeping with the whole theoretical sys- 
 tem is perfectly evident to all who have examined his sys- 
 tem with any degree of care. There is 'absolutely nothing 
 in his explanation of the development of the economic con- 
 
274 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 ditions of capitalist society which would suggest the 
 possibility of the inauguration of the socialist system by 
 purely mechanical agencies. Quite to the contrary: as far 
 as the purely mechanical breakdown of capitalism is con- 
 cerned, as has been fully explained in the text, it is not a 
 physical breakdown, as would be necessary in order to ex- 
 clude the necessary intervention of conscious human ac- 
 tivity, but rather a moral bankruptcy. Certainly, there is 
 absolutely nothing in the capitalist system to prevent it 
 from relapsing into a sort of new feudalism or slavery, with 
 the collective ownership of the means of production by an 
 aristocracy of the capitalist class, instead of developing into 
 a socialist-democratic system. 
 
 But not only the transition from capitalism to socialism 
 requires the active agency of conscious and purposeful hu- 
 man effort. The whole Marxian theory of the evolution of 
 society through a series of class-struggles brought about by 
 a conflict of conditions of production with social institu- 
 tions is so conceived by Marx as to make the intervention 
 of human effort for the amelioration of society an absolutely 
 necessary and integral part of the " conflict." It is only 
 necessary- to remind the reader of the circumstance, pointed 
 out in the text, that Marx does not speak of the revolutions 
 as the result of the impossibility of continuing production 
 under the old institutions, but of production being " fet- 
 tered" by them, a condition implying a moral valuation and 
 volition of an active human agent. 
 
 That the Marxian theory was so understood by his dis- 
 ciples, can hardly be doubted. The opinions of the best 
 known among them on the subject of practical idealism, 
 quoted by us above in the first appendix, proves that be- 
 yond the possibility of a doubt. We will therefore refer 
 our readers to those expressions of opinion, in order to 
 avoid unnecessary repetition, as to the authors there quoted, 
 and will only add some expressions of opinion from the 
 pen of Marx's great Russian disciple, George Plechanoff. 
 We deem it of importance to offer this " cumulative evi- 
 dence" of Plechanoff not only because of the great esteem 
 in which his views are held among Marxists, but also be- 
 cause he is more circumstantial at this particular point 
 than any one of the authors already quoted by us, and 
 does not only show the mere fact that the Marxists admit 
 the " individual factor " in history but also the limitations 
 they place on it. 
 
 In the first place Plechanoff admits that there is some 
 
APPENDIX. 275 
 
 justification for the wide-spread opinion that Marxists deny 
 to the individual any influence on the course of History. 
 Not, of course, in anything contained in the writings of 
 Marx or his immediate disciples, but in some loose talk and 
 inaccurate expressions of some alleged Marxists. He says: 
 
 " While some subjectivists, in their efforts to magnify the role 
 of the ' individual ' in history, refused to acknowledge any his- 
 torical laws in the process of the social development of humanity, 
 some of their newest opponents, in their efforts to accentuate the 
 evolutionary process of this development, evidently forgot that 
 History is made by men, and that therefore the activities of the 
 individuals must necessarily influence it. They considered thp 
 individual quantite nigligeable. Theoretically, however, such a 
 view is no more permissible than that of the extreme subjec- 
 tivists." 
 
 And then, after going into a detailed examination of this 
 question and analyzing some historical examples which bear 
 upon the subject, he comes to the following conclusion : 
 
 " It follows, that -some individuals, owing to the peculiarities 
 of their character, may influence the historical course of events. 
 Sometimes this influence is quite considerable. But the possi- 
 bility of such influence, as well as its magnitude, are limited by 
 the organization of society, by the relation of its forces. The 
 character of the individual appears as a factor of social develop- 
 ment only in such places, at such times, and to such an extent, 
 where, when, and to the extent that, the social relations permit 
 
 " It will probably be suggested that the extent of the in- 
 fluence which an individual may exert on the course of history 
 depends also on the abilities of the individual. To this we may 
 readily accede. But the individual can display his abilities only 
 after he shall have assumed the necessary position in the social 
 organization. . . . It. is this organization, therefore, which 
 limits, at any given time, the role — and consequently the social 
 influence — which may fall to the lot of gifted or mediocre in- 
 dividuals." 
 
 The raising of the individual to the dignity of a histori- 
 cal factor raises the question of the influence of chance or 
 accident in history, which is intimately connected with it. 
 And he proceeds to elucidate it, thus : 
 
 " Hegel says that in all things finite there is an element of 
 chance. In science we have to do with the ' finite ' only ; it may 
 therefore be properly said that in all the processes which she 
 makes the objects of her study there is an element of the acci- 
 
276 THE THEORETICAL SYSTEM OF KARL MARX. 
 
 dental. Does this exclude the possibility of the scientific study 
 of phenomena? Not at all. Chance is a relative matter. It 
 appears only at the crossing of necessary processes. The ap- 
 pearance of the Europeans in America was a matter of accident 
 for the inhabitants of Mexico and Peru, in the sense that it 
 was not the result of the social development of those- countries. 
 But the passion for sea-voyages which took hold on the Euro- 
 peans towards the end of the Middle Ages was not a mere acci- 
 dent; nor was it a mere acident that the Europeans easily over- 
 powered the aborigines. Nor, again, were the results of the con- 
 quest of Mexico and Peru by the Europeans a mere matter of^ 
 accident. These results were in the last analysis caused by the 
 resultant of two forces: the economic conditions of the con- 
 quering nations on the one hand, and of the conquered nations 
 on the other. And these forces as well as their resultant, can 
 be fully investigated according to the laws of scientific re- 
 - search." , 
 
 Plechanoff then proceeds to show that aside from the fact 
 that the influence of the individual is limited by the inner 
 structure of the social organization and its relations to 
 other societies, in the sense that the role assigned to in- 
 dividuals, and the kind of individuals it is assigned to, de- 
 pend on the character of the social organization, there is 
 another limitation imposed upon the influence of the in- 
 dividual by the social organization, which means, in the last 
 analysis, by the economic relations of society. And that is, 
 that the direction of social development, the broad outlines 
 of the evolution of social institutions, cannot be affected by 
 the activity of any individual, or any set of individuals. 
 Speaking of the possibility of certain accidents of the French 
 Revolution not having occurred or others occurring, -and 
 the way such changes would have affected that great his- 
 torical event, he says : — 
 
 " All such changes in the current events might have influenced 
 to a certain extent the future political, and by means thereof 
 the economic, life of Europe. But the ultimate outcome of 
 the revolutionary movement would still not under any circum- 
 stances have been the reverse of what it actually was. Influen- 
 tial individuals, owing to peculiarities of mind and character, 
 may change the individual appearance of events and some of 
 their minor results, but they cannot change the general trend of 
 events, which is outlined by other forces." 
 
 Having thus circumscribed the sphere of the individual's 
 influence, having shown its limitations, Plechanoff then pro^ 
 ceeds to show the possibilities of the activity of the indiviji- 
 
APPENDIX. 277 
 
 ual within that sphere, and the real significance of his in- 
 fluence as thus limited. He says: — 
 
 " A great man is great not because his individual peculiarities 
 give individual form to great historical events, but because of 
 the fact that he possesses peculiarities which make him best 
 able to serve the great social needs of his time, needs which 
 have developed under the influence of general and special 
 causes. Carlyle, in his " Heroes and Hero Worship," calls great 
 men ' beginners.' This is a very apt appellation. A great man 
 is in fact a beginner, for he sees further than others and desires 
 more intensely than others. He solves the scientific problems 
 placed on the order of the day by the preceding intellectual de- 
 velopment of society; he uncovers new social needs created 
 by the preceding development of social relations; he takes upon 
 himself the task of beginning the satisfaction of those needs. 
 He is a hero. Not in the. sense that he can arrest or modify 
 the natural course of events, but in the sense that his activity is 
 the conscious and free expression of that necessary and uncon- 
 scious course. In that is his importance ; in that his power. 
 But that is a colossal importance, — a tremendous power." 
 
INDEX. 
 
 EARTH (Paul), 15; 35; 44- 
 
 BAX. (E. Belfort), 36; 38. 
 
 BERKELEY (George), 31. 
 
 BERNSTEIN (Eduard) : his personality, 14, 15; sensation 
 caused by his book, 15; his leaning towards nihilism, 12; 
 his treatment of the three subdivisions of Marxian theory, 
 16, 61, 137; main points of his " Voraussetzungen/' 171, 
 172, 192; his unintelligent handling of statistics, 174.- 
 
 BOEHM-BAWERK (Eugen v.): essay on "Marx and the 
 Close of his system," 14; 61-; 132; Marx's theory of value 
 a " theory of exploitation,'' 82 ; his criticism of the Marxian 
 theory of value, 93, 94 ; his lack of precision, 99, 100, loi, 
 102; his objections to Marx's analysis, 103, 104, loS, :09, 
 
 , - 114, 117; the Great Contradiction, 135, 136. 
 
 BRYAN (W. J.), 208. 
 
 BUCKLE (Henry Thomas), 24. 
 
 CAPITAL (" Das Kapital ") : eflfect of appearance of last vol- 
 ume on Marx-criticism, 14; Masaryk's characterization of, 
 -as a text-book of capitalist exploitation, 83; opening sen- 
 tence of first volume, 90; supposed contradiction between 
 first and third volume, 98, 126; the Great Contradiction 
 solved by third volume, 128, 129, 131 ; denial of genuine- 
 ness of third volume; 132. 
 
 CAPITAL: properties of, 57; "constant," 74; savings of past 
 surplus-values, 78; impersonal ^nd abstract character of, 
 78; distributive share of each individual capital, 79; dif- 
 ference between " constant " and " variable " capital, 121 ; 
 accumulation of, possible by constant replacement of live- 
 labor by machinery, 157; concentration and centralization 
 of, 161, 162, 163. 
 
 279 
 
280 INDEX, 
 
 CAPITALISM: laws governing the capitalist system, 51, 148; 
 distinctive feature of production under, 54; system built 
 on ruins of farming, 62, 63 ; made possible by appearance 
 of labor-power as a commodity, 71 ; essentials of, 154, 
 15s; breakdown of, 163, 216, 230, 231, 232; imperialism 
 may prolong its existence, 241,; beginning of the end, 244; 
 Bernstein's criticism of the "law of capitalistic accumu- 
 lation," 171, 172. 
 
 CARLYLE (Thomas), 277. 
 
 CIRCULATION: 63, -154. 
 
 CLARK (John B.) : 45. 
 
 CLASSES : division of society into, 27 ; based on economic in- 
 terest, 27 ; how the economically controlling class becomes 
 politically predominant, 29; class struggle, 30, i-8i, 233; 
 Weisengruen's objection to theory of, 46; source of 
 wealth of our non-producing classes, S9, 74; disappearance 
 of middle class, 181, 201, 212; peasants a bulwark of capi- 
 talism, 183, 184, 185; bourgeois character unfit for Social- 
 ist co-operation, 185, 186, 187 ; influence of corporations on 
 fortunes of capitalist class, 195; growth of working class, 
 19s ; " new " middle class and its influence on the process 
 of the centralization, 205; conditions for a social class, 
 209. 
 
 CLASS-STUPIDITY, 261. 
 
 CONSUMPTION: 55, 64. 
 
 CRISES: 235-239; crisis of 1857, 249. 
 
 CRITICS (Marx-) : their claim and characteristics, 10-16, 
 their "philosophic" objection to Marx, 31; lack of definite- 
 ness, 34 ; confusion of " economic conditions " with " tech- 
 nical development," 35 ; confusion of " economic material- 
 ism " with " individual materialism," 36 ; confusion of 
 " conditions " with " interests," 37 ; " refuting Marx by 
 Marx," 39; "'contradiction" found by Slominski, 40; an 
 American Marx-critic, 41-43; pleas for all sorts of 
 " standpoints " and " factors," 45 ; fashion to treat " eco- 
 nomics " and -" philosophy " separately, 49 ; failure to dis- 
 tinguish between individual and social element, 145 ; 228. 
 
 COMMODITIES : analysis of the single commodity, 54, 55, 
 94; factory product a typical capitalistic commodity, 62; 
 
INDEX. 281 
 
 human labor the element common to all, 67; the peculiar 
 commodity labor-power, 70, 71. 
 
 COMPETITION: 154, 179. 
 
 CUNOW (Heinrich) l 203, 222. 
 
 " DEUTSCH-FRANZOSISCHE JAHRBUCHER": 50. 
 
 DIALECTIC MATERIALISM: misconception of meaning, 
 21 ; what it really means, 22, 23. 
 
 "DIE HEILIGE FAMILIE": 31. 
 
 DIEHL (Karl) : 98; supports Marx on the relation between 
 Value and Price, 108. 
 
 DISTRIBUTION: 25. 
 
 ECONOMIC MATERIALISM: 21; economic condition dis- 
 covered as prime factor, 24; why economic factor is in- 
 sisted on as the chief material factor, 25, 38; other factors 
 taken into account, 38, 39. 
 
 ENGELS (Frederick): 2o;^proof of materialistic conception 
 of history according to, 32, 33 ; challenge to Marx-critics, 
 127, 128; 150. 
 
 ETHICS AND THE MATERIALISTIC CONCEPTION OF 
 HISTORY : 270. 
 
 EVOLUTION: Method of Marx in contemplating the world, 
 21 ; laws governing particular course of, in present society, 
 51; favorite theme of Marx-critics, 132; from capitalism 
 to socialism, 180. 
 -EXCHANGE- VALUE : distinctive property of a commodity, 
 55; something entirely different from use-value, 55, 56, 57, 
 58; close connection with use-value, 58; when exchange- 
 value first manifests itself in life-history of the factory 
 product, 65 ; may be adversely affected by some social 
 change, 75 ; nature does not participate in the creation of 
 exchange-value, 102. 
 
 FEUERBACH (Ludwig) : 20. 
 
 GOLDSCHEID (Rudolph) : 216, 225-227; 233. 
 
 GORKY (Maxim): 209. 
 
 HEGEL (G. W. F.) : "philosophy" came to a close with, 20; 
 his pure idealism, 31; 182; 273; 275. 
 
282 INDEX. 
 
 HISTORY : Made a science, 24 ; Weisengruen's denial of a his- 
 torical science, 34; prime movers of history, 36; historical 
 theory formulated by Marx, 51; history ignored by Marx- 
 critics, 89. 
 
 HUNTER (Robert): 219, 
 
 IDEALISM : what it means in philosophy, 22 ; how Marx dealt 
 with it, 31; how Hegel represented it, 31; practical ideal- 
 ism, 257, 271. 
 
 IDEAS : influence on society, 27'; their source, 27 ; their role 
 in the struggle of the classes, 30, 39 ; rooted in reality, 182 ; ■• 
 their control by dominating class, 28, 189, 190. 
 
 INDIVIDUAL, the materialistic conception of History and the,' 
 271-277. 
 
 INTEREST: 98, 198; 200. 
 
 JAURES (Jeaii), 15. 
 
 JEVONS (W. S.), 88. 
 
 KAUTSKY (Karl), 38; 172; 174; 192; 222; 259-271. 
 
 KNIES (Karl), 109. 
 
 LABOR (human) : the element common to all commodities, ■ 
 67, 92, 93; gives the commodity its value,. 68, 70, "socially 
 necessary" not to be confused with "average," 69; when 
 labor is wasted, 16; abstract human labor a measure of 
 the exchange-value of commodities, 71, go, 96; "necessary 
 labor " and " surplus labor," 73. 
 
 LABOR- POWER: separated under capitalism from man's body 
 and person, 71 ; source of all other commodities as well 
 as of its own reproduction, 71 ; dual character, 72 ; as a 
 commodity presupposes a high state of technical develop- 
 ment, 77. 
 
 LA MONTE (Robert R.), 257. 
 
 LAWSON (Thomas W.), 197. 
 
 LITERATURE: (anti-Marxian), 10; 14; 20; 40; 175. 
 
 LORIA (Achille), 136. 
 MANUFACTURER: 64, 65, 66; 74; 130., 
 MARXISM: scientific character of, 12; crisis in, 12; correla- 
 tion of the different parts of, 16; outline of the system, 
 
INDEX. 283 
 
 16-19; a concrete science, 20; the system in its entirety, 
 39, 49,__Si, 52. 
 
 MARX (Karl): dominating influence, 10; dispute whether a 
 philosopher, 20, 51; his method, 21, 87, 119, 133, 173, 202; 
 how he came to his theoretical system, 49, 50; his own 
 formulation of the materialistic conception of history, 51 ; 
 constructed an economic theory of his own, 52; his life- 
 work, 57; his motives, 84; Marx's letter on Goth a pro- 
 gram, 103; most idealistic of philosophers, 182. 
 
 MASARYK (Th. G.), 15; 33; 41; 48; 82; 98; 109, i37, 138. 
 
 MATERIALIST! CONCEPTION OF HISTORY: misconcep- 
 tion of term, 21, 186; what it really means, 23, 36, ZT> as 
 an explanation of human history, 24; and practical ideal- 
 ism, 257-271 ; and the role of the individual, 272-277. 
 
 MEHRING (Franz), on the Materialistic Conception of His- 
 tory and practical idealism, 266, 267. 
 
 MENGER (Karl), 89. 
 
 MONEY, 6s; 237. 
 
 MORALITY, 26, 44. 
 
 "NEUE ZEIT," 14; 260; 262; 267; 270. 
 
 NIHILISM: of Marx-critics, 11, 12; last recourse of the op- 
 ponents of Marx, 34; gradual growth, 174. 
 
 NOSSIG (Alfred), 15; Jewish jubilee as remedy of social evils, 
 32. 
 
 OPPENHEIMER, (Franz), 15, 149, 150; 171, 173; 222, 223; 
 230. 
 
 OVERPRODUCTION, 167. 
 
 PLECHANOFF (Georg), on the role of the individual in his- 
 tory, 27^^-277. 
 
 POLITICAL ECONOMY: object of, 57; classical school of, 
 52; Marx's relation to classical school of, 52. 
 
 PRICE: form in which exchange-value of commodity realizes 
 itself, 66, 75, 76, 77; controlled by value, 67, 144; influ- 
 enced by supply and demand, 107. 
 
 PRICE OF PRODUCTION: 79, 144; 130; different from cost 
 of production, 141 ; governed by value of commodity, 145. 
 
284 INDEX. 
 
 PRODUCTION: 25; technical development in the means of 
 production not always chief cause of change in material 
 conditions, 35, 36; distinctive feature of capitalist pro- 
 duction, 54; the factory product — how produced, 63, 64, 
 65 ; distribution of " surplus " accomplished by laws of 
 production, 74, 75; purpose of production, gi; "partici- 
 pation" of nature in, loi, 102; effect of production for 
 the market on distribution, 153; adaptability and ex- 
 pansiveness of the capitalist system of production, 240. 
 
 PROFIT: 59; 60; 74; rate of, 79; tendency of rate to dimin- 
 ish, 120, 124, 125; tendency to increase, 126. 
 
 PROLETARIAT: historic mission, 183, 214, 215; difference 
 between antique and modern, 202; salaried persons part of, 
 206; active factor of the Revolution, 215; evolves a new 
 ideology, 228, 229. 
 
 RENT: 80; III, 112. 
 
 RETAIL DEALER, 64. 
 
 REVISIONISM, 11; first manifestation of, 14; Bernstein's aid 
 to, 15; Dr. Nossig's attempt to raise it to the dignity of 
 a system, 15 ; tendencies of capitalistic development its 
 proper domain, 170, 171 ; barren of practical results, 175; 
 central point of revisionism, 215, 230. 
 
 REVISIONISTS: 11; 15, 131; methods employed by, 150, 173. 
 
 REVbLUl'lON (Social), 215, 230. 
 
 " RHEINISCHE ZEITUNG," 50. 
 
 RICARbO (David), 52; 86; 88. 
 
 ROCKEFELLER (John D.), 213. 
 
 RODBERTUS (Karl), 86; 127. 
 
 ROOSEVELT (Theodore), 208. 
 
 ROTHSTEIN (Theodore), 219. 
 
 SELIGMAN (E. R. A.): 41, 43; where he and Weisengruen 
 
 meet, 45, 48. 
 STERN (J.), 269. 
 SLOBODIN _(H. L.), 258. 
 SIMKOVITCH (V. G.),'i49, iSO. 
 ■SLOMINSKI (Ludwig), 40; 48; Si; Qo; 94; 98; 136; 137. 
 
INDE^. 285 
 
 SMITH (Adam), 86; 88. 
 
 SOCIALISM: Marx and- 51, 149; relation to theory 
 
 of value, 149, 151, 153; basis of, 180; the corporation as a 
 factor in the movement towards- 212. 
 
 SOCIETY, 26. 
 
 SOMBART (Werner), 15; 133, 134. 
 
 SPARGO (John), 219. 
 
 SPENCER (Herbert), 187; 207. 
 
 STAMMLER (Rudolph), 14. 
 
 STATE SOCIALISM, 210. 
 
 STRUVE (Peter), 230, 231, 232, 233. 
 
 SUPPLY AND DEMAND, 103, 196, 107. 
 
 SURPLUS- V ALUE : corner stone of Mafx's system, 52; mys- 
 terious source of all wealth shared by non-producing 
 classes, 73; by what its amount is determined, 72, 73, 74; 
 division of surplus value takes place in circulation process, 
 f6, 143, 144; realization of surplus value require -absolute 
 freedom of movement, 77 ; portion saved for fut-ure pro- 
 duction, 77, 78. (See also Value.). 
 
 TAINE (H. A.), 24. 
 
 TUGAN-BARANOWSKY (Michael), 15; 149, 150; 230; 239. 
 240; 242, 243, 244, 24s, 246, 247, 248, 249; 243. 
 
 UNION: essence of the Labor Union, 224. 
 
 USE- VALUE: subjective character of, 55; not within sphere 
 of political economy, 55. 
 
 VALUE : 61 ; not to be confounded with price, 66, 67, 107 ; by 
 what measured, 68, 92, 93; usefulness included as a fac- 
 tor, 97, 98; supply and demand neither source nor measure 
 of value, los; value a relative term, 106; place of theory 
 in Marxian system, 61 ; alleged exceptions to labor theory 
 of, 109-117; failure of Marx-critics to distinguish between 
 individual and social elements in, 145, 228. 
 See also SURPLUS-VALUE, EXCHANGE-VALUE, 
 USE-VALUE. 
 
 WAGES: amount of, 72; time taken in producing it, 73; ten- 
 dency to be lowered by "reserve" army, 159, 
 
286 INDEX. 
 
 WASTE: Capitalism lives and thrives by, 246, 248, 250; two 
 kinds of, 250; military and naval waste, 252. 
 
 WEALTH : nature of it under existing system, 53 ; dependent 
 on social circumstances, 54; an aggregation of exchange- 
 values, S7; mystery surrounding the origin of our wealth, 
 58; labor not the only source of wealth, 102, 105. 
 
 WEISENGRUEN (Paul), 12 — what he says of the crises in 
 Marxism, 12; leaning toward Berkeley,' 31; claim for 
 phantasy as maker of history, 32; gives rtiuch credit to 
 materialistic conception of history, 33 ; denies history is, a 
 science, 34; groundless point against Marx, 35; objection 
 to theory of class struggle, 46; materialism run mad, 47. 
 
 V/ENCKSTERN (Rudolph), 15. 
 
 WOLTMAN (Ludwig), 15. 
 
 WORKINGMEN : What is due them, 82, 83, 84.; rates of ex- 
 ploitation of, grows with higher composition of capital, 
 125; freedom from,,personal bondage and ties of property, 
 ISS; reserve army, 158; growing poverty of not a neces- 
 sary result of the evolution of capitalism, 220, 222. 
 
 "ZUR KRITIX," 26; so; 255.