‘Every society which grows must expand its productive apparatus every year. This will be a necessity for the future socialist society as much as it is for the present capitalist society, or as it was for the simple commodity-production and peasant economy of the past, which produced for its own need.’[1]
Here, in a nutshell, is Bauer’s solution to the problem of accumulation. In order to accumulate, capital needs a steadily increasing outlet to make the realization of surplus value possible. Where does the outlet come from? Bauer answers: the population in capitalist society grows, like that in any other society, thus increasing the demand for commodities and giving the foundation for accumulation in general. ‘In capitalist society there is a need for capital accumulation to adjust to population growth.’[2] From this central point Bauer deduces the characteristic movements of capital and its forms.
First is the state of equilibrium between production and population, i.e. the median around which the fluctuations take place.
Bauer assumes, for the sake of illustration, that the population grows by 5 per cent annually.
‘Variable capital must grow by 5 per cent if the equilibrium is to be maintained.’ Technological progress increases constant capital (dead means of production) at the expense of variable capital (wages for the labour force). To stress that fact, Bauer assumes that it grows twice as fast, i.e. by 10 per cent yearly. On this basis he constructs one of his ‘incontestable’ tables, which we already know about and which now only interest us for their economic content. In these tables Bauer entirely disregards the total social product. He reaches the conclusion., ‘The expansion of the field of production, which is a precondition of accumulation, is provided by population growth.’[3]
The vital point of this ‘state of equilibrium’ which allows undisturbed accumulation is conditional on variable capital growing at the same rate as the population. Let us take a short look at Bauer’s basic law of accumulation.
In his example, population grows at the rate of 5 per cent per annum, and so variable capital must also grow by 5 per cent. What does this mean? ‘Variable capital’ is an amount of value, the sum of wages paid to the workers, expressed in a certain amount of money. This can represent different totals of goods. In general, assuming technological progress and increasing productivity, a relatively decreasing sum of variable capital corresponds to a constant amount of means of consumption. If population grows by 5 per cent annually, variable capital has only to grow by, let us say, 4¾, 4½, 4¼, 4 per cent, etc., to provide an equal standard of living. And Bauer does indeed assume general technological progress; to express that, he presupposes a growth of constant capital which is twice as fast. Given this assumption, an increase of variable capital parallel with the growth of population is conceivable only in one situation: if, in spite of rapid technological progress in all branches of production – increasing productivity of labour – prices remain unchanged. But that would not only be theoretically the funeral of Marx’s theory of value, but also, in practice, incomprehensible from the capitalist point of view: since the lowering of prices is a weapon in the competition struggle, a stimulant for individual capital to become a pioneer of technological progress.
But wait! Must we think that money-wages remain unchanged in spite of increasing productivity and cheapening of provisions, as the workers’ standard of living rises with this progression? The social rise of the working class is taken into account in this. But if the rise in the workers’ standard of living is so strong that variable capital (sum of money-wages) must grow year after year in exactly the same proportion as the working population, then this means that all the technological progress is for the benefit of the workers alone. The capitalists could neither increase their standard of living nor the rate of surplus value. As we know, Bauer does assume a constant rate of surplus value. He claims that he only assumes it ‘for the sake of simplicity’ ... ‘to begin with’, to help us intellectual dimwits grasp the rung of his theory. But in reality this assumption is the economic foundation of Bauer’s theory, as we can now see, and the entire ‘state of equilibrium’ is dependent on it. Bauer admits this quite explicitly himself:
Our model (table IV) presupposes that (1) the working population grows by 5 per cent each year, (2) variable capital grows at the same rate as the working class, (3) constant capital (i.e. the cost of dead means of production) grows faster than variable capital to the degree required by technological progress: under these conditions it is not astonishing that there are no difficulties in the realization of surplus value.[4]
Yes, but these conditions themselves are quite ‘astonishing’. For as long as we are not wandering around in thin air but standing on the surface of this capitalist earth, what incentive do the capitalists have to make use of technological progress and to invest ever larger sums in constant capital if the whole benefit is only for the working class? According to Marx, the creation of ‘relative surplus value’, the increase in the rate of exploitation through the cheapening of the labour force, is the only objective reason for the capitalist class as a whole to promote technological progress; it is the real objective result of the competition of individual capitals, aiming unconsciously for extra profit. Bauer’s astonishing assumption is a pure economic impossibility as long as capitalism exists. If we proceed with him, assuming technological progress, i.e. a rise in the productivity of labour, it clearly follows that variable capital, the sum of wages, cannot possibly grow ‘at the same rate’ as the population. If population grows at a constant rate, variable capital can grow only at a steadily decreasing rate, Let us say at 45/6, 44/5, 4¾, 4½ per cent, etc. And in reverse: to make variable capital grow with the regularity of 5 per cent per annum, the population would have to grow at an increasing rate – let us say 5¼, 5½, 5¾, 6 per cent, etc.
Bauer’s law of ‘equilibrium’ collapses like a house of cards. His theory of ‘equilibrium’ is constructed on the dilemma of two economic absurdities, both contradicting the essence of capitalism and the purpose of accumulation – either technological progress does not lower commodity prices at all, or the lower prices are only for the benefit, not of accumulation, but of the workers!
Let us take a look at reality. Bauer’s assumption of a 5 per cent growth rate in the population is, of course, only theoretical. He could just as well have chosen 2 or 10 per cent. But real population growth is by no means immaterial, since, according to Bauer, capitalist development must adjust to it. On this basic principle rests his entire theory of accumulation. And what is the real population growth, for instance, in Germany?
Growth per annum, according to official statistics, was 0.96 per cent between 1816 and 1864, and 1.09 per cent between 1864 and 1910. Thus, in reality, the rate rose in almost a century from 0.96 to 1.09 per cent – a rise of 0.13 per cent. If we look at the period of large-scale capitalist development in Germany, the annual increase from 1871 to 1880 was 1.08 per cent; 0.89 per cent from 1880 to 1890; 1.31 per cent from 1890 to 1900; and 1.41 per cent from 1900 to 1910. Here, too, there is an increase of a third within forty years. How does that correspond to the rate of growth of German capitalism during the last quarter of the century?
If we look at other capitalist countries we see even better examples. According to the latest census figures the annual population growth is:
| per cent | ||
| Austro-Hungary | 0.87 | |
| European Russia | 1.37 | |
| Italy | 0.63 | |
| Rumania | 1.50 | |
| Serbia | 1.60 | |
| Belgium | 1.03 | |
| Netherlands | 1.38 | |
| England, Scotland and Ireland | 0.87 | |
| USA | 1.90 | |
| France | 0.18 |
One sees that the absolute figure of population growth, as well as the comparison of different countries, gives wonderful figures for the standpoint of the alleged basis of capital accumulation. To find Bauer’s hypothetical 5 per cent, just for fun, we would have to emigrate to warmer climates, somewhere like Nigeria or the Sunda archipelago. Indeed, the annual increase of population in the following countries is:
| per cent | ||
| Uruguay | 3.77 | |
| British Malaya | 4.18 | |
| South Nigeria | 5.55 | |
| North Borneo | 6.36 | |
| Hong Kong | 7.84 |
What a pity that those inviting luxurious pastures only exist where there is as yet no capitalist production, and these perspectives shrink to a barren field as soon as we come closer to the family seats of capitalism!
Let us take a closer look at the matter. Bauer says that capital accumulation is dependent on population growth. What about France, for instance? There population growth has steadily decreased; it is now only 0.18 per cent. The population growth is slowly coming to a standstill, perhaps even an absolute decrease is ahead. In spite of that, capital in France happily carries on accumulating: so well, that France can provide the whole world with its capital reserves. In Serbia population increases twice as fast as in England; but, as is well known, capital accumulation is much stronger in England than in Serbia. How does that make sense?
The answer to these doubts only points out our own obtuseness: Bauer’s theory is not related to individual countries and their populations. It looks at population in general. The growth of mankind in general is important. Excellent. But then there are even stranger riddles.
It is obvious that the annual increase of ‘mankind’ is relevant for capitalism only to the extent that mankind consumes capitalist commodities. There is no doubt that the encouraging growth of population in North Borneo or South Nigeria is of little relevance to the accumulation of capital in the near future. Is the increase in the number of customers for capitalism somehow connected to the natural growth of population? One thing is clear: if capital were to wait for the increase of its consumers through natural reproduction, it would still be, at best, in the swaddling clothes of its manufacturing period. In fact, capital does not dream of waiting. Rather, it uses other abbreviated methods to expand the basis of accumulation. Making use of all political means it attacks (1) barter economy, (2) simple commodity-producing economy. Gradually destroying both, it finds more and more consumers in all parts of the world. But these methods interfere drastically with population growth in the relevant countries and peoples.
The number of consumers can grow while the population decreases. In fact, the capitalist method of producing a world market goes hand-in-hand with decimation and even extermination of whole tribes. This process, still going on, has accompanied capitalist development since the discovery of America: the Spanish in Mexico and Peru in the sixteenth century, the English in North America in the seventeenth, in Australia in the eighteenth century, Dutch in the Malay Archipelago, French in North Africa, English in India in the nineteenth century, Germans in South West Africa in the twentieth century. The wars of European capital to ‘open up’ China have also led to periodic mass slaughter of the Chinese population, thus unavoidably slowing down their natural growth.
At the same time as the expansion of the base of accumulation in non-capitalist countries is linked with the partial extermination of the populations, it is accompanied by different variations in the population structure in those countries where capitalist production is already rooted.
In the two constituents of the latter (birth rate and death rate) we see two opposed movements in all capitalist countries. The birth rate is generally decreasing. Thus these were the figures for the birth rate in Germany per 1,000 inhabitants: 1871–80, 40.7; 1881–90, 38.2; 1891–1900, 37.3; 1901–10, 33.9; 1911, 29.5; 1912, 29.1. The same tendency is clear when one compares the highly developed countries with the underdeveloped ones. Per 1,000 in Germany there were born: (1911–12) 28.3; in England, 23.8; in France, 19.0; in Portugal, 39.5; in Bosnia and Herzegovina, 40.3; in Bulgaria, 40.6; in Rumania, 43.4; in Russia, 46.8. All statisticians, sociologists and doctors attribute this phenomenon to the effects of big city life, factories, insecurity of existence, cultural improvements, etc. – in short to the effects of capitalist culture.
At the same time, modern developments in science and technology and cultural improvements successfully combat the death rate. Thus in Germany per 1,000 inhabitants, per annum, there died: 1871-80, 28.8; 1881–90, 26.5; 1891–1900, 23.5; 1901–10, 19.7; 1911, 18.2; 1912, 16.4. Comparing highly developed with backward countries the same picture appears: deaths per 1,000 inhabitants (1911–12) in France, 17.5; in Germany, 15.6; in Belgium, 14.8; England, 13.3; Russia, 29.8; Bosnia and Herzegovina, 26.1; Rumania, 22.9; Portugal, 22.5; Bulgaria, 21.8. Depending on which of the two factors becomes stronger, population grows either faster or slower. But, in any case, it is the development of capitalism with its economic, social, physical and intellectual epiphenomena, it is capital accumulation, which influences the growth of population and not the other way round. In general, the influence of capitalist development leads, sooner or later, to a slowing down of the population growth. The examples of Hong Kong and Borneo, contrasted with Germany and England, and of Serbia and Rumania with France and Italy, are explicit enough.
After all this, the conclusion is at hand. Bauer’s theory stands the actual relationship on its head. By subordinating the accumulation of capital to population growth he negates the commonly known fact that capital shapes population: at one point it exterminates it en masse, soon it speeds up growth, soon it slows it down – with the general result: the faster the accumulation the slower thle growth of population.
A nice quid pro quo this for an historical materialist, forgetting to look at reality and to ask himself: yes, capital accumulation is dependent on population growth, but what does population growth itself depend on?
Friedrich Albert Lange[5] said in his History of Materialism:
We still have these days so-called philosophers in Germany, who write, in a sort of metaphysical clumsiness, great treatises on the origins of ideas – perhaps even claiming accurate observation by means of the inner sense – without even considering the fact that there are nurseries, perhaps even in their own homes, where one can observe the symptoms of the origin of ideas with one’s own eyes and ears.
I do not know whether there are still such ‘philosophers’ in Germany today. But the species of ‘metaphysical clumsiness’ which tries to solve social problems through exact schematic calculations by using the ‘inner sense’ and forgetting eyes and ears, the world and the nursery, seems to have found the competent ‘heirs of classical German philosophy’ among the ‘experts’ of official Marxism.
But things get even more beautiful. Up till now we have been considering the economic conditions of population growth because Bauer appears to be basing his theory of accumulation on this. In reality, his theory has a different basis. When he talks about ‘population’ and ‘population growth’ he really refers to the class of wage-workers in capitalist society, and to this alone.
The following quotations are sufficient to prove this: ‘We assume that the population grows by 5 per cent each year. If the balance (between production and social requirements) is to be maintained, then the variable capital (i.e. the amount of wages paid) must also grow by 5 per cent each year.’[6]
If the consumption by the population, on which production is calculated, is equal to the variable capital, i.e. the amount of wages paid, then this ‘population’ can only refer to the workers. But Bauer himself formulates this quite explicitly: ‘The acquisition of provisions for population growth is expressed through the increase in variable capital.’[7] He states this even more categorically in the following passage, which I have already cited:
Our model assumes, (1) that the working population grows by 5 per cent yearly, (2) variable capital grows at the same rate as the working class, (3) constant capital (i.e. the cost of dead means of production) grows faster than variable capital to the degree required by technological progress. Under these conditions it is not astonishing that there are difficulties in the realization of surplus value.[8]
Nota bene, according to Bauer’s assumption there are only two classes in society: workers and capitalists. ‘For in a society’, he says a few lines later, ‘which consists solely of capitalists and workers, there is no income for the unemployed proletarian other than earned income,’[9] etc. This assumption is by no means incidental; on the contrary, it is highly important for Bauer’s attitude to the problem: for his task, like that of the other ‘experts’, is to disprove me by showing that, according to the ‘model’, capital accumulation is possible and can proceed smoothly even in a society with exclusively capitalist production, consisting solely of capitalists and workers. Thus there are only two social classes in Bauer’s theory: capitalists and proletarians. But the growth of capital accumulation is related only to the class of proletarians. First Bauer reduces the population simply to workers and capitalists (with his explicit assumption), then he silently reduces it (with his operations) to workers. These are the ‘population’ to whose needs capital adapts. Thus, when Bauer takes an annual ‘population growth’ of 5 per cent as a basis for his schematic exposition, this means that only the population of workers grows annually by 5 per cent. Or perhaps we should see this increase in the proletarian class as only a part of the normal regular increase of 5 per cent annually in the total population? But that would be an entirely new discovery, and professional statisticians have long since proved that in present-day society each class follows its own population laws.
Bauer is not, in point of fact, thinking of a regular increase in the total population. At any rate, this is not valid for his capitalists whose annual growth rate, as can be easily proven, is nothing like 5 per cent.
On p.835 Bauer gives the following figures for the consumption stock in the four consecutive years: 75,000; 77,750; 80,539; and 83,374. If Bauer assumes that the workers’ wages rise with these numbers, then we are justified in assuming that the capitalists’ standard of living is at least faring no worse than the workers’; and that their income for consumption is keeping pace with their growth. If that is so, the following figures, follow in Bauer’s model from the capitalists’ consumption, for the resulting annual increase in the capitalist class in the corresponding four years; 5 per cent in the second year; 3.6 per cent in the third; 3.5 per cent in the fourth. If that were to continue, Bauer’s capitalists would soon start to die out, which would solve the problem of accumulation in the most peculiar way. But we are not concerned here with the individual fates of Bauer’s capitalists; the point here is to establish that Bauer always means growth of the working class when he talks about population growth as the basis of accumulation.
Bauer finally spells it out himself, by explaining on p.869:
‘It (the rate of accumulation) must continue to increase in this way until the equilibrium between the growth of variable capital and population growth has been restored.’
With equal clarity he lays down the general rule once again on p.871:
In capitalist society the accumulation of capital tends to adjust to population growth. This adjustment is complete as soon as variable capital (i.e. the amount of wages) increases at the same rate as the population of workers, but constant capital grows faster, at a rate required by the development of the productive forces.
Bauer puts it at its simplest at the end of his article, where he summarizes the main points:
To begin with (in an isolated capitalist society, like that on which his model is based) accumulation is limited by the increase of the working population. Since – with a given organic composition of capital – the amount of accumulation is determined by the increase in the number of available workers, etc.[10]
Thus the whole thing is brilliantly clear: under the pretext of the adjustment of capital accumulation to population growth, Bauer makes capital depend solely on the working class and its natural growth. We say natural growth expressly because in Bauer’s society, which knows no middle classes but only capitalists and proletarians, the proletariat is barred from recruiting from the petty-bourgeois and peasant strata and can thus only increase by natural reproduction. Bauer makes this very adjustment to proletarian population into the pivot of the capitalist business cycle. We must examine his theory from this point.
We have seen that the equilibrium between social production and consumption is reached when variable capital, i.e. that part of capital which is set aside for wages, grows as fast as the population. However, the mechanics of capitalist production are continually trying to upset this equilibrium, first downwards – to ‘under-accumulation’ – then upwards – to ‘over-accumulation’. Let us start by considering the first movement of the swing.
If the first ‘rate of accumulation’ is too weak, says Bauer, i.e. if the capitalists do not put aside enough new capital to be used in production, the growth of constant capital lags behind that of the number looking for work. ‘We can call the state which then appears the state of under-accumulation.’[11] Bauer then describes this state in more detail. The first effect of under-accumulation is the formation of an industrial reserve army. A section of the increased population is out of work. The unemployed proletarians exert pressure on the wages of the employed, wages sink, the rate of surplus value rises.
For in a society consisting solely of capitalists and workers there is no other income for the unemployed proletarians but wage income; wages must sink and the rate of surplus value must rise until the entire working class finds work despite the relatively reduced variable capital. The change which occurs because of this in the distribution of the product is brought about by the fact that, with the increasing organic composition of capital, which expresses technological progress, the value of the labour force has fallen and thus created relative surplus value.
This growth of surplus value provides fresh funds for the capitalists to employ in renewed and stronger accumulation, which results in a more energetic demand for labour: ‘Thus, the amount of surplus value which will be used to enlarge variable capital grows too.’ It will continue to grow like this ‘until the equilibrium between the growth of variable capital and population growth has been restored’.[12] In this way we are led out of under-accumulation and back to equilibrium. We have described here one half of the pendulum movement of capital; let us take a little more time over this, the first act of the performance.
The state of equilibrium means – let us remind ourselves once again – that the demand for labour and the growth of the proletarian population balance each other; thus the entire working class finds employment for its natural increase. Production is then thrown out of this equilibrium, the demand for work lags behind the growth of the proletariat. What throws it out of equilibrium? What makes the pendulum move past the centre-point of balance for the first time? Mere mortals find it somewhat difficult to discover this from Bauer’s learned gibberish. Fortunately, he comes to our aid with somewhat clearer language on the next page, where he says: ‘The progress towards the higher organic composition of capital always brings about underaccumulation.’[13]
At least that is clear and to the point. Technological progress, which supplants living labour power by machines and, therefore, periodically slows down the demand for workers, creates an industrial reserve army, lowers wages; in short, it brings about a state of ‘under-accumulation’.
Let us confront Bauer with Marx.
But there are more strange things to come in Bauer’s model.
Capitalist production lifts itself out of the valley of death of under-accumulation with a method which is as simple as it is abrupt: when wages are lowest, the capitalist can put aside new earnings (what Bauer, slightly misunderstanding the first volume of Capital, calls ‘relative surplus value’). They then provide a new fund for investments, to expand production and raise the demand for labour. Again, we are not on dry land, but adrift in Bauer’s ‘society’. These days, capital would have to scrape up all its little savings from a general lowering of wages before it dared to start new investments and enterprises! It must wait for wages to sink to their lowest level in order to get new investment capital to expand production! In Bauer’s dreamland speculations capitalism has reached the ultimate level of its development. All intermediate strata have been absorbed, only capitalists and proletarians are left. Nonetheless, in this society there are no capital reserves; it still lives from hand to mouth, as in the ‘good old days of Dr Aikin’ in sixteenth-century England. In that society there are obviously as yet no banks, which here on earth started accumulating huge capital reserves long ago, just waiting for opportunities to invest at all wage levels. The feverish accumulation on this highest level now taking place in all belligerent and neutral countries brings the bitter harvest of world war into their barns of easy profit. This is the most dramatic satire on the anaemic capital of Bauer’s fantasy, which relies on a periodic general depression of the labour force to its lowest level in order to pluck up courage for its adventurous accumulation. Bauer repeats himself when describing the ‘restoration of equilibrium’:
Under the pressure of the industrial reserve army, the rate of surplus value, and with it the rate of social accumulation, will rise until it is large enough to increase variable capital at the same rate as the working population, in spite of increasing organic composition. As soon as that point is reached, the industrial reserve army is absorbed (nota bene: for the second time, it was absorbed once before, when wages were at their lowest, i.e. in the most severe ‘under-accumulation’, – R.L.) and the equilibrium between accumulation and population growth is restored.[14]
The second swing of the pendulum now follows this restored ‘state of equilibrium’ – upwards, to ‘over-accumulation’. Bauer describes this process very simply:
‘If the rate of social accumulation rises (due to conscious pressure on wages!, – R.L.) the point will be reached where variable capital is growing faster than the population. We call this state the state of over-accumulation.’
That is all; Bauer tells us no more than that about ‘over-accumulation’. All we discover is that the rate of accumulation (i.e. formation of capital suitable for investment) ‘finally’ increases to the point where the demand for labour is greater than the supply. But why must it ‘finally’ reach this point? Does it follow a physical law of inertia because it is already in the process of rising? Let us envisage what initiated this rise! Wages fell under the pressure of unemployment, resulting in the growth of disposable (?) capital. This growth can only continue until all workers return to employment, and in Bauer’s strange society this happens when wages are at their lowest point. But once the entire working population is employed, wages stop falling even in this strange society and, as in real life, they actually start to rise again. And as soon as they begin to rise the rate of ‘accumulation’ which – according to Bauer – can only grow from that source, must stop increasing. How, then, can it continue to grow towards the ‘final’ stage of ‘over-accumulation’ once all the workers are employed? In vain do we wait for an answer.
The origin of over-accumulation remains hidden from us, and so does the last act of the performance: the process by which over-accumulation is overcome and the state of equilibrium restored.
‘If the rate of accumulation is too high (of course: in relation to the labour force and its growth – R.L.) then the reserve army is soon absorbed, wages rise, the rate of surplus value sinks.’ This results in an even more rapid fall in the rate of profit than would otherwise be the result of increasing organic composition of capital. This gives rise to ‘a disastrous crisis, large-scale unemployment of capital, mass destruction of values and a sudden slump in the rate of profit’, and once again we fall back into ‘under-accumulation’, since accumulation drops and ‘the growth of variable capital again falls behind the population growth’.[15]
But why on earth does the ‘disastrous crisis’ occur at the height of over-accumulation? For Bauer, over-accumulation means only that variable capital increases faster than the population. More simply: the demand for labour is greater than the supply. And that causes a crisis in industry and commerce? Bauer avoids explanation, bringing a quotation by Hilferding to his aid: the crisis occurs ‘when the previously described tendencies of a falling rate of profit grow stronger than the tendencies which have caused increases in prices and profits because of rising demand’. This quotation of Hilferding’s explains nothing as far as Bauer is concerned, since it is not an explanation, but a complicated description of the crisis – and it breaks into Bauer’s speculations like a fox into a chicken run.
Bauer never mentions a rising or falling ‘demand’ for commodities which might cause ‘increases in prices and profits’. Bauer only sees the interaction of two figures: variable capital and the proletariat, i.e. ‘population’. He never mentions demand for commodities or markets and their problems. Over-accumulation is nothing but a surplus of variable capital (i.e. demand for workers) in relation to its natural growth. This is the only ‘demand’ Bauer deals with. And that should cause a ‘disastrous crisis’? This trick we want to see!
Certainly also, on our plain earth the outbreak of a crisis follows a situation where demand for labour is very strong, and wages rise. But in reality this phenomenon is not the cause of the crisis, but only its ‘stormy petrel’, as Marx calls it in the second volume of Capital; it is a mere subsidiary factor to circumstance, the relationship between production and the market.
In whatever way one ‘tries to explain periodic crises theoretically, in reality they obviously stem from disproportions between production, i.e. the supply of commodities, and market, i.e. demand for commodities. The question of markets does not even exist for Bauer: his periodic crises stem from maladjustment between demand for labour force, and the natural multiplication of the working class. Because workers do not reproduce as rapidly as the increasing demand of capital requires, a ‘disastrous crisis’ occurs. The periodic lack of labour is the sole cause of economic crises – that, indeed, is one of the most astonishing discoveries of Nationalökonomie,[16] not merely since Marx but since William Petty.[17]
Now we have seen capital in all its phases, and Bauer proceeds to make this conclusion of harmony:
‘Capitalist production carries in itself the mechanism to bring up the retarded rate of accumulation to the level of population growth’ (i.e. growth of the working population).
And again he stresses:
Looking at the capitalist world economy as a whole, the tendency of accumulation to adjust with the growth of population appears as a cycle. Prosperity is over-accumulation, it destroys itself in the crisis. The following depression is a time of under-accumulation; it restores itself, as depression itself creates the conditions for a return to prosperity. The periodic return to prosperity, crisis and depression is the empirical expression of the fact that the capitalist mode of production automatically overcomes over- and under-accumulation, and accumulation of capital is again and again adjusted to the growth of population.[18]
There can no longer be any mistake. Bauer’s ‘mechanism’ rests simply on the following: at the centre of capitalist world economy is the working class. Economic life revolves around the axis of the working population and its natural growth. At one point variable capital is too small to employ all proletarians, and so it initiates growth through lower wages. At another time capital is over-extended and cannot find sufficient labour; it destroys itself in a crisis. In each case the entire movement of production is a constant effort to adjust to the number of workers and their natural reproduction.
That is the quintessence of Bauer’s ‘mechanism’, his complicated mathematical tricks and explanations.
The reader, well-read in Marxism, may already guess what Copernican effort hides behind Bauer’s theory of accumulation. But before we can fully appreciate this effort, we must see how Bauer can easily explain any feature of capitalist world economy:
The tendency of adjustment of accumulation to increases in population, controls international relations. Countries with a constant over-accumulation invest a large and growing part of their annual surplus value in foreign lands. Example: France and England. (Germany too, I hope – R.L.) Lands with constant under-accumulation draw capital from foreign countries and provide them with labour. Example: the agrarian countries of Eastern Europe.[19]
How well it all works, clear and to the point. One can almost see the smiling satisfaction with which Bauer, with the help of his newly won principle, solves, like a children’s game, the most entangled problems. Let us enter into this game by touching on a few points.
There are countries ‘with constant over-accumulation’ and countries ‘with constant under-accumulation’. But what is over-accumulation? What is under-accumulation? The answer follows on the next page: ‘prosperity is over-accumulation, under-accumulation is depression’. Therefore there are countries with constant prosperity: England, France, Germany; and states with constant depression, the agrarian countries of Eastern Europe. Is it not wonderful? Second try: what is the cause of under-accumulation? The answer is on the previous page: ‘The progress towards higher organic composition (simple: technological progress) leads to under-accumulation’. Countries with constant under-accumulation therefore must be the technologically most advanced-the agrarian countries of Eastern Europe. Countries with constant over-accumulation must be the countries with the slowest and weakest progress: England, France and Germany. Wonderful, is it not?
The crowning point of all seems to be North America. It has, at the same time, ‘constant over-accumulation’ and ‘constant under-accumulation’, energetic technological progress and slowest progress, constant prosperity and constant depression. It draws -what a miracle – capital and labour force, simultaneously and all the time, from other countries ...
Let us confront Bauer’s ‘mechanism’ with Marx.
The quintessence of Bauer’s theory is the adjustment of capital to the population and its growth. Over-accumulation means for Bauer that capital grows faster than does the proletariat; under-accumulation – that it grows slower. But what do we find in Marx? Bauer includes a paragraph from the third volume of Capital, where Marx deals with over-accumulation, in order to give the impression that his own theory is simply an ‘unobjectionable’ interpretation of Marx:
As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore when the increased capital produced just as much, or even less, surplus value than it did before its increase, there would be absolute over-production of capital; i.e. the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus labour to necessary labour.[20]
Bauer adds to this quotation: ‘This point is the absolute limit of accumulation. Once it is reached, the adjustment of accumulation to growth of population brings about a “disastrous crisis”,’ etc. He thus makes the average reader assume that Marx’s and his own theory are basically the same, only Bauer says it more concisely, using his own words.
Immediately before the passage quoted by Bauer Marx says: ‘This plethora of capital arises from the same courses as those which call forth relative over-population, and is, therefore, a phenomenon supplementing the latter, although they stand as opposite poles – unemployed capital at one pole and unemployed worker population at the other.’[21] Marx is saying quite the opposite to Bauer: surplus of capital and surplus of working population both at the same time – result from the same, third circumstance. In the same chapter from which Bauer took his quotation on pp.246-7, Marx says:
It is no contradiction that this over-production of capital is accompanied by more or less considerable relative over-population. The circumstances which increased the productiveness of labour, augmented the mass of produced commodities, expanded markets, accelerated accumulation of capital both in terms of its mass and its value, and lowered the rate of profit – these same circumstances have also created, and continuously create, a relative over-population, an over-population of labourers not employed by the surplus-capital owing to the low degree of exploitation at which alone they could be employed, or at least owing to the low rate of profit which they would yield at the given degree of exploitation.[22]
On the same page Marx says farther on
If capital is sent abroad, this is not done because it absolutely could not be applied at home, but because it can be employed at a higher rate of profit in a foreign country. But such capital is absolute excess capital for the employed labouring population and for the home country in general. It exists as such alongside the relative over-population, and this is an illustration of how both of them exist side by side, and mutually influence one another.[23]
That is clear enough. And what is the title of this chapter of Marx? Excess Capital and Excess Population (Capital, Vol.III, p.245).
And there Bauer has the idea of taking a quotation from that chapter and adding on a sentence in order to give the impression he was simply illustrating Marx’s thoughts. This chapter heading alone is strong enough to make Bauer’s edifice crumble. Bauer’s ‘over-accumulation’ and Marx’s over-accumulation are two quite different economic terms, in fact opposites.
Bauer’s over-accumulation is identical to prosperity, the highest demand for labour, the absorption of the industrial reserve army. Marx’s excess capital is equivalent to excess of workers, highest unemployment; over-accumulation means crisis and depression. Bauer declares: periodically there is too much capital, because there are too many workers. Marx says: periodically there is too much capital and as a result of that too many workers. In relation to what is there ‘too much’ of both? In relation to the market under ‘normal’ conditions. As the market for capitalist commodities periodically grows too small, capital must remain unemployed and consequently part of the labour force as well. The connexions of economic causes and effects are as follows: the market for capitalist goods is the starting point at all times. On this and its movements the amount of variable capital depends. And on that depends the number of unemployed workers. In the third volume of Capital Marx clarifies that repeatedly. Thus on p.240, where he deals with the ‘internal contradictions’ of capitalist production which adjusts itself ‘through expansion of the outlying field of production’. Bauer also cites ‘the expansion of the production field’ as essential for accumulation, and adds his idée fixe: ‘The field of production is expanded by the growth of population.’[24] But Marx clearly states what he considers to be ‘expansion of the outer field of production’. The ‘market must, therefore, be continually expanded’.[25] Again on p.250, after describing the crisis and its recovery: ‘And thus the cycle would run its course anew. Part of the capital, depreciated by its functional stagnation, would recover its old value. For the rest the same vicious circle would be described once more under expanded conditions of production, with an expanded market and increased productive forces.’
And as we saw, on pp.250-51:
The circumstances which increased the productiveness of labour, augmented the mass of produced commodities, expanded markets, accelerated accumulation of capital both in terms of its mass and its value and lowered the rate of profit – these same circumstances have also created and continuously create, a relative over-population, an over-population of labourers not employed by the surplus-capital ...
It is clear that ‘expansion of the outlying field of production’ means the market and not the growth of the working population. The expansion of the market is accompanied by excess of workers, increase of the army of the unemployed, shrinking of the purchasing power of the working class.
Again, on pp.251-2:
To say that there is no general over-production, but rather a disproportion within the various branches of production [then –] It furthermore amounts to demanding that countries in which capitalist production is not developed, should consume and produce at a rate which suits the countries with capitalist production.
Here Marx literally states that the crisis does not result from disproportionality in disposable capital and disposable labour force, but from the disproportionality of exchange between capitalist and non-capitalist countries. He even claims this exchange to be the natural basis for accumulation. And a few lines further on: ‘How could there otherwise be a shortage of demand for the very commodities which the mass of the people lack, and how would it be possible for this demand to be sought abroad, in foreign markets, to pay the labourers at home the average amount of necessities of life?’ Here he states very clearly that the rate of employment in capitalist countries depends on the possibility of finding ‘foreign markets’ for capitalist commodities.
All this says enough about Bauer using quotations from Vol.III. But he goes on to quote from Theories of Surplus Value, Vol.II, p.477; ‘Population increase appears as the basis of accumulation as a continuous process.’ Could that be Bauer’s theory in a nutshell? Well, again, he just picked a raisin out of the cake. The whole passage reads rather differently. Marx investigates here the conditions of the Transformation of Revenue into Capital, i.e. the productive investment of surplus value. He explains that the additional portion of capital must be converted into one larger part of constant capital and one smaller part of variable capital.
To begin with, a portion of the surplus value (and the corresponding surplus product in the form of means of subsistence) has to be transformed into variable capital, that is to say, new labour has to be bought with it. This is only possible if the number of labourers grows or if the labour time during which they work is prolonged.[26]
The latter happens when workers who are only employed for part of the time become fully employed, or when the working day is extended beyond its normal length. Also, additional strata of the proletariat, who have not yet worked productively, may be required: women, children, paupers.
Finally (says Marx), together with the growth of the population in general, the labouring population can grow absolutely. If accumulation is to be a steady continuous process, then this absolute growth in population – although it may be decreasing in relation to the capital employed – is a necessary condition.[27]
And now comes the little sentence extracted by Bauer:
‘An increasing population appears to be the basis of accumulation as a continuous process.’
This is what Marx says on the very same page of Theories of Surplus Value as Bauer brings on to the field as a classic witness for his ‘mechanism’. If there is anything the reader must immediately grasp from this quotation, it is that Marx’s reasoning is as follows: if accumulation, i.e. expansion of production, is to take place, then additional labour is also needed. Thus there can be no constant expansion of production without an increasing working population. Even the simplest worker can understand that. In this sense, ‘an increasing population appears to be the basis of accumulation’.
But Bauer’s question was not whether an increase in the working population was needed for accumulation (no one ever denied that), but whether it is a sufficient condition. Marx says: accumulation cannot take place without an increasing population. Bauer changes this to read: an increasing working population is sufficient for accumulation to take place. Here, Marx presupposes accumulation, he assumes the possibility of an easy market; what he is investigating are the forms in which accumulation occurs, and there he finds that the increasing labour force is, among other things, necessary. Bauer takes the increase in the number of workers as a given factor, on account of which and according to which production expands with no further concern about the market! This is the same inversion of Marx’s thought as in the classic quotations from the third volume of Capital.
But perhaps we are reading too much into Marx’s quotation; perhaps Bauer could give Marx’s words his own interpretation, or shall we say misinterpretation? And yet it is quite puzzling how anybody can misunderstand Marx on this point, providing they have read the chapter properly. For a few pages farther on he articulates his basic thought and the real problem of his analysis in the following clear words:
‘The question has now to be formulated thus: assuming general accumulation (Marx’s emphasis), in other words, assuming that capital is accumulated to some extent in all branches of production – this is in fact a condition of capitalist production ... – what are the conditions of this general accumulation, what does it amount to?’
And he answers: the conditions are ‘that labour power was bought with one part of the money capital and means of production with the other’.[28]
And at the same time, to clear up any doubt, as if he had a premonition of his ‘expert’ pupils, he adds:
We disregard here the case in which more capital is accumulated than can be invested in production, and for example lies fallow in the form of money at the bank. This results in loans abroad, etc., in short speculative investments. Nor do we consider the case in which it is impossible to sell the mass of commodities produced, crises, etc. This belongs to the section on competition. Here we examine only the forms of capital in the various phases of its process, assuming throughout that the commodities are sold at their value.[29]
Thus, Marx assumes the expansion of the market, the possibility of accumulation, and only investigates what follows from that. One result is the employment of new workers, and for that an increase in the working population is necessary. From this Bauer deduces: in order for accumulation to take place, it suffices that the working population grows, indeed accumulation takes place because the working population grows. The objective purpose and aim of accumulation and its ‘mechanism’ is to adjust to the growth in the working population.
Man has to breathe air as a condition of his existence. Conclusion à la Bauer: man lives on air, he lives in order to breathe air, his entire life process is nothing but the ‘automatic’ adjustment of his bodily mechanism to inhalation and exhalation. Such are the wonderful results reached by running about with one’s stick in the air of abstract stupidity!
But the fun ends here, for the matter is anything but funny. He is not dealing with little me and my book any more, but with the elementary concepts of Marx’s own teaching. We can now leave the steep and misty heights of the third volume and Theories of Surplus Value which, with a few exceptions, are unfortunately hardly known to the Marxist public. We return to the first volume of Capital, which has so far formed the actual economic basis of social democracy. Here every reader who is familiar with the first volume of Marx’s magnum opus can easily examine Bauer’s theory for himself: he need only open the twenty-fifth chapter to read on p.637:
‘For modern industry with its decennial cycles ... that would indeed be a beautiful law, which pretends to make the action of capital dependent on the absolute variation of the population, instead of regulating the demand and supply of labour by the alternate expansion and contraction of capital,’[30] i.e. according to its requirements. Marx means the old ‘dogma’ of bourgeois economy; the so-called wage fund. It took the available social capital as a quite specific, given amount and made the employed workers dependent on their natural growth. Marx polemicizes against this ‘dogma’ in detail, and in the process accidentally delivers one rebuke after another to his ‘expert’ pupil.
On p.640 he teaches him:
The demand for labour is not identical with increase of capital, nor supply of labour with increase of the working class. It is not a case of two independent forces working on one another. Les dès sont pipés. Capital works on both sides at the same time. If its accumulation, on the one hand, increases the demand for labour, it increases on the other the supply of labourers by the ‘setting free’ of them ...[31]
In Bauer’s ‘mechanism’ the industrial reserve army develops as a consequence of retarded, too slow, accumulation. He says categorically: ‘The first effect of under-accumulation is the formation of an industrial reserve army.’[32] The smaller the capital accumulation, the larger the reserve army. This is what Bauer says. Four pages after the above-cited quotation Marx teaches him:
The greater the social wealth, the functioning capital, the extent and energy of its growth, and, therefore, the absolute mass of the proletariat and the productiveness of its labour, the greater is the industrial reserve army. The same causes which develop the expansive power of capital, develop also the labour-power at its disposal.[33]
On the same page Marx says sarcastically:
‘The folly is now patent of the economic wisdom that preaches to the labourers the accommodation of their number to the requirements of capital. The mechanism of capitalist production and accumulation constantly effects this adjustment.’[34]
Which is the greater ‘folly’: the old bourgeois one, which preaches to the workers to adjust their reproduction to capital, or the new ‘Austro-Marxist’ one, which tells the workers that capital always adjusts to their numbers? I believe the latter is worse. The old ‘folly’ was only the incomprehending subjective reflection of real relations, while the new one turns reality upside down.
Throughout the chapter dealing with the labouring population and its growth Marx talks about ‘requirements’ of capital. Demand for labour, wage levels, prosperity or crisis all depend on these. What are these ‘requirements’ which Marx mentions all the time and Bauer not once in his entire ‘mechanism’?
In the same chapter Marx talks continuously about capital’s ‘sudden expansions’, to which he attributes primary importance in the movement of capital accumulation as well as that of the working population. Indeed, the sudden and limitless ability to expand is, according to Marx, a characteristic feature of modern industrial development. What are we to understand by these ‘sudden expansions’ of capital, which were so important for Marx and which Bauer does not even mention?
Marx gives a clear answer to both questions at the beginning of the same chapter [on p.613]:
‘... since lastly, under special stimulus to enrichment, such as the opening of new markets, or of new spheres for the outlay of capital in consequence of newly developed social wants, etc., the scale of accumulation may be suddenly extended ...’[35]
And again in more detail, on p.632:
With accumulation, and the development of the productiveness of labour that accompanies it, the power of sudden expansion of capital grows also; it grows, not merely because the elasticity of the capital already functioning increases, not merely because the absolute wealth of society expands, of which capital only forms an elastic part, not merely because credit, under every special stimulus, at once places an unusual part of this wealth at the disposal of production in the form of additional capital ... The mass of social wealth, overflowing with the advance of accumulation, and transformable into additional capital, thrusts itself frantically into old branches of production, whose market suddenly expands, or into newly formed branches, such as railways, etc., the need for which grows out of the development of the old ones. In all such cases, there must be the possibility of throwing great masses of men suddenly on the decisive points without injury to the scale of production in other spheres. Over-population supplies these masses.’[36]
Here Marx does not only explain how these sudden expansions of capital take place – namely, as a result of sudden expansion in the markets – but he also formulates the special function of the industrial reserve army: to be ‘available’ for those extraordinary sudden expansions of capital. Here Marx sees the most important, the actual function of the industrial reserve army, for which he calls it an existential condition of modern capitalist production. The formation of industrial over-population is ‘the lever of capitalistic accumulation, nay, a condition of existence of the capitalist mode of production ... The whole form of the movement of modern industry depends, therefore, upon the constant transformation of a part of the labouring population into unemployed or half-employed hands.[37] Marx formulates his opinion most clearly and concisely on p.450:
So soon, in short, as the general conditions requisite for prouuction by the modern industrial system have been established, this mode of production acquires an elasticity, a capacity for sudden extension by leaps and bounds that finds no hindrance except in the supply of raw material and in the disposal of the produce.[38]
How does Bauer deal with all this? There is no room for sudden expansions of capital in his ‘mechanism’, thus no room for its elasticity. There are two reasons for this: firstly, as production depends only on the working population and its growth, markets are of no importance. The population, growing through natural reproduction, of course shows no sudden expansion. The working population periodically causes rapid growth of the industrial reserve army, but for Bauer that happens in times of ‘under-accumulation’, of the slowest increase, of the shortage of disposable capital in relation to the working class.
Secondly, sudden expansion not only means sudden expansion of markets, but also of already accumulated disposable capital reserve, that reserve, which, as Marx says, ‘credit, under every special stimulus, at once places ... at the disposal of production in the form of additional capital’ ... Bauer excludes that possibility: in his ‘mechanism’ a recovery from the phase of ‘under-accumulation’ can only occur when the pressure from unemployment allows new accumulation by depressing wages!
As the sudden expansion of capital remains, like the outbreak of crises, inexplicable from Bauer’s standpoint, the industrial reserve army has no actual function in it. It appears as a product of technological progress, but has no role apart from that mentioned by Marx in his second plan: to depress wages by weighing down the employed. What makes it, according to Marx, an ‘existential condition’, the ‘lever’ of capitalist production, Bauer does not notice. The humorous process of being absorbed three times in the run of an industrial cycle proves that Bauer does not know what to do with the reserve army: first, at the lowest point of ‘under-accumulation’, then at the peak of ‘over-accumulation’, and again at the state of equilibrium.
These miracles have a simple reason: for Bauer the movement of the working population is not caused by capital and its requirements (as for Marx and in reality) but vice versa. The entire movement of capital revolves round the working population. According to Bauer, capital acts like the hare and the hedgehog: it is always gasping for breath behind the working population, sometimes overtaking it in the middle, at others falling behind it, and at the end always hearing: Hey, I got here before you!
For Marx, the theory that the working population completely adjusts to capital and its market prospects is the basic thought of the entire last section of the first volume. In forty pages, pp. 609-648, he carefully explains this important economic discovery. ‘That is the absolute general law of capital accumulation,’ he emphasizes in conclusion. Then ‘illustrations’ follow, filling another sixty-five pages. What does he show from the example of England as the typical and leading country of capitalist production? – while the annual growth of the population in England constantly decreased from 1811–61, the wealth, i.e. capitalist accumulation, expanded by leaps and bounds! Marx proves that with innumerable and varied statistical facts.
Perhaps Bauer will interject: This huge increase of nineteenth-century English industry was, of course, not calculated for the English population alone and must not be compared with it alone as the economic basis. Note the English sales to the North American Union, Central and South America; note the periodic crises in English industry between 1825 and 1867, following the expansion of markets in those countries! Brilliant! But if Bauer knows that, then he knows everything, then he also knows that this theory of the adjustment of accumulation to population growth is nonsense, then he knows what Marx wanted to prove in the first volume of Capital, that the working population adjusts to the accumulation of capital and its changing requirements. This is the culminating point of the first volume of Capital. Marx compiles the spirit of his theory of capitalist exploitation, the primary relation between capital and labour, and the special ‘law of population’ in the capitalist period.
Along comes Bauer, who turns this whole edifice upside down and tells the world that the entire movement of capital results from the tendency to adjust to the increase of the working population! In terms of content Bauer’s theory is a soap bubble.
Correct him by assuming with Marx a permanent formation of the industrial reserve army (whose function it is to satisfy the demands of capital even in times of the greatest prosperity), and his specific ‘over-accumulation’ is finished.
Correct him by assuming with Marx a constant relative decrease of variable capital in relation to the number of workers as a result of technological progress, and his ‘equilibrium’ is finished.
His theory vanishes into thin air. But more than the pretentiousness of this construction is the basic idea behind it: the alleged tendency of capital to adjust its movement to the working population. This casts the very spirit of Marx’s theory to the wind. And to think that this pedantically puzzled out system of hair-raising nonsense could be published in the official organ of Marxist theory! Eagerly fighting for a good cause – an insolent heretic was to be burnt – they did not notice that they were attacking somebody bigger! General control and public criticism keep watch over the natural scientists. Anyone who claimed to give the exact calculation for the movement of all stars around the earth, in order to explain modern astronomic systems, would not be taken seriously. Such an idea would not even come to the attention of the public, since no editor of a scientific journal would let such nonsense pass. Under the regime of the ‘Austro-Marxist’ diadoches[39] such things can easily happen. Pronounced from that rostrum, Bauer’s theory of accumulation is not a common error, such as can occur in the quest for scientific knowledge. It is, quite apart from its position towards my book, a disgrace to present official Marxism and a scandal for Social Democracy.
[1] Neue Zeit, 1913, No.23, p.834. {p.92}
[2] op. cit., No.24, p.871. {p.106}
[3] ibid., p.869. {p.104}
[4] op. cit., No.24, p.869. {p.104}
[5] [Friedrich Albert Lange. Nineteenth-century author of a History of Materialism. See Marx’s letter to Dr Kugelmann, 27 June 1870.]
[6] op. cit., No.23, p.835. {p.92}
[7] ibid., p. 834. {p. 92}
[8] op. cit., No.24, p.869. {p.104}
[9] loc. cit. {p.104}
[10] loc. cit., p.873. {p.109}
[11] ibid., p.869. {p.104}
[12] loc. cit., {p.104}
[13] loc. cit., p.870. {p.105}
[14] loc. cit., p.870. {p.105}
[15] ibid., p.871. {p.106}
[16] [Usually translated as ‘economics’, but the German term has certain connotations which make literal translation impossible – Ed.]
[17] [William Petty (1623-87). Called by Marx the founder of political economy. Born into a poor weaving family in Hampshire, he led a very varied career as seaman, hawker, physician, professor of anatomy and music. Educated partly in France at a Jesuit college and at Oxford. Wrote numerous works on political economy, e.g. Political Arithmetick, Political Anatomy of Ireland, A Treatise of Taxes and Contributions.]
[18] ibid., p.872. (All emphasis by Bauer.) {p.872}
[19] ibid., p.871. {p.107}
[20] Marx, Capital, Vol.III, pp.246-7.
[21] ibid., p.246.
[22] ibid., pp.250-51.
[23] ibid., p.251.
[24] Bauer, op. cit., p.872. {p.107}
[25] Marx, op. cit., Vol.III, p.240.
[26] Marx, Theories of Surplus Value, Vol.II, p.477.
[27] loc. cit.
[28] ibid., p.483.
[29] ibid., p.484. (My emphasis – R.L.)
[30] My emphasis – R.L.
[31] My emphasis – R.L.
[32] Bauer, op. cit., p.869. {p.104}
[33] Marx, op. cit., p.644. (My emphasis – R.L.)
[34] My emphasis – R.L.
[35] My emphasis – R.L.
[36] My emphasis – R.L.
[37] ibid., p.632-3. (My emphasis – R.L.)
[38] ibid., p.450.
[39] [successors.]
Last updated on: 16.12.2008