THE DEVELOPMENT OF
CAPITALISM IN RUSSIA

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    In the work here presented, the author has set himself the aim of examining the question of how a home market is being formed for Russian capitalism. As we know, this question was raised long ago by the principal exponents of Narodnik views (chief among them being Messrs. V. V. and N.- on[2]), and it will be our task to criticise these views. We have not considered it possible to limit ourselves in this criticism to examining the mistakes and misconceptions in our opponents' views; in answering the question raised it seemed to us that it was not enough to adduce facts showing the formation and growth of a home market, for the objection might be raised that such facts had been selected arbitrarily and that facts showing the contrary had been omitted. It seemed to us that it was necessary to examine the whole process of the development of capitalism in Russia, to endeavour to depict it in its entirety. It goes without saying that such an extensive task would be beyond the powers of a single person, were a number of limitations not introduced. Firstly, as the title itself shows, we treat the problem of the development of capitalism in Russia exclusively from the standpoint of the home market, leaving aside the problem of the foreign market and data on foreign trade. Secondly, we limit ourselves purely to the post-Reform period. Thirdly, we deal mainly and almost exclusively with data concerning the interior, purely Russian, gubernias. Fourthly, we limit ourselves exclusively to the economic aspect of the process. But even with all the limitations

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indicated the topic that remains is an extremely broad one. The author does not close his eyes at all to the difficulty, and even the danger, of dealing with so broad a topic, but it seemed to him that to elucidate the problem of the home market for Russian capitalism it was absolutely necessary to show the connection between, and interdependence of, the various aspects of the process taking place in all spheres of the social economy. We therefore limit ourselves to an examination of the main features of the process, leaving a more specific study of it to further investigations.

    The plan of our work is as follows: in Chapter I we shall examine, as briefly as possible, the basic theoretical propositions of abstract political economy on the subject of the home market for capitalism. This will serve as a sort of introduction to the rest of the work, the factual part of it, and will relieve us of the need to make repeated references to theory in our further exposition. In the three following chapters we shall endeavour to describe the capitalist evolution of agriculture in post-Reform Russia, namely, in Chapter II we shall examine Zemstvo statistical data on the differentiation of the peasantry; in Chapter III data on the transitional state of landlord economy, and on the replacement of the corvée system of this economy by the capitalist; and in Chapter IV data on the forms in which the formation of commercial and capitalist agriculture is proceeding. The next three chapters will be devoted to the forms and stages of the development of capitalism in our industry: in Chapter V we shall examine the first stages of capitalism in industry, namely, in small peasant (known as handicraft ) industry ; in Chapter VI data on capitalist manufacture and on capitalist domestic industry, and in Chapter VII data on the development of large-scale machine industry. In the last chapter (VIII), we shall make an attempt to indicate the connection between the various aspects of the process that have been described and to present a general picture of that process.

    P. S.[3] To our extreme regret we have not been able to use for this work the excellent analysis of "the development of agriculture in capitalist society" made by K. Kautsky in his book Die Agrarfrage (Stuttgart, Dietz, 1899; I. Abschn.

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"Die Entwicklung der Landwirtschaft in der kapitalistischen Gesellschaft"[*]).**

    This book (which we received when the greater part of the present work had already been set up in type) is, after Vol. III of Capital, the most noteworthy contribution to recent economic literature. Kautsky investigates the "main tendencies" in the capitalist evolution of agriculture; his purpose is to examine the diverse phenomena in modern agriculture as "particular manifestations of one general process" (Vorrede,[***] VI). It is interesting to note how far the main features of this general process in Western Europe and in Russia are identical, notwithstanding the tremendous peculiarities of the latter, in both the economic and non-economic spheres. For example, typical of modern capitalist agriculture in general is the progressive division of labour and the employment of machinery (Kautsky, IV, b, c), a phenomenon also noticeable in post-Reform Russia (see later, Chapter III, §§ VII and VIII; Chapter IV, particularly § IX). The process of the "proletarisation of the peasantry" (the heading of Chapter VIII of Kautsky's book) is manifested everywhere in the spread of wage-labour in every form among the small peasants (Kautsky, VIII, b); we see the parallel of this in Russia in the formation of a huge class of allotment-holding wage-workers (see later, Chapter II). The existence of a small peasantry in every capitalist society is due not to the technical superiority of small production in agriculture, but to the fact that the small peasants reduce the level of their requirements below that of the wage-workers and tax their energies far more than the latter do (Kautsky, VI, b; "the agricultural wage-worker is better off than the small peasant," says Kautsky repeatedly: S. 110, 317, 320); the same thing is also to be observed in Russia (see later, Chapter II, § XI, C[4]). It is natural, therefore, that West-European and Russian Marxists should agree in their appraisal of such phenomena as "agricultural outside employments," to use the Russian term, or the "agricultural wage-labour of migratory peasants,"

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as the Germans say (Kautsky, S. 192; cf. later, Chapter III, § X); or of such a phenomenon as the migration of workers and peasants from the villages to the towns and factories (Kautsky, IX, especially S. 343; and many other places. Cf. later, Chapter VIII, § II); the transplantation of large-scale capitalist industry to the rural districts (Kautsky, S. 187. Cf. later, VII, § VIII). This is quite apart from the same appraisal of the historical significance of agricultural capitalism (Kautsky, passim, especially S. 289, 292, 298. Cf. later, Chapter IV, § IX), from the same recognition of the progressive nature of capitalist relations in agriculture as compared with pre-capitalist relations [Kautsky, S. 382: "The ousting des Gesindes (of personally dependent farm labourers, servants) and der Instleute ("midway between the farm labourer and the tenant cultivator": the peasant who rents land, making payment by labour-service) by day labourers who outside of working hours are free men, would mark great social progress." Cf. later, Chapter IV, § IX, 4]. Kautsky categorically declares that the adoption by the village community of large-scale modern agriculture conducted communally "is out of the question" (S. 338); that the agronomists in Western Europe who demand the consolidation and development of the village community are not socialists at all, but people representing the interests of the big landowners, who want to tie down the workers by granting them patches of land (S. 334); that in all European countries those who represent the landowners' interests want to tie down the agricultural workers by allotting them land and are already trying to give legislative effect to the appropriate measures (S. 162); that all attempts to help the small peasantry by introducing handicraft industry (Hausindustrie ) -- that worst form of capitalist exploitation -- "should be most resolutely combated" (S. 181). We consider it necessary to emphasise the complete unanimity of opinion between the West European and the Russian Marxists, in view of the latest attempts of the spokesmen of Narodism to draw a sharp distinction between the two (see the statement made by Mr. V. Vorontov on February 17, 1899, at the Society for the Promotion of Russian Industry and Trade, Novoye Vremya [New Times ], No. 8255, February 19, 1899).[5]

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    This book was written in the period preceding the Russian Revolution, during the slight lull that set in after the outbreak of the big strikes of 1895-1896. At that time the working-class movement withdrew, as it were, into itself, spreading in breadth and depth and paving the way for the beginning in 1901 of the demonstration movement.

    The analyisis of the social-economic system and, consequently, of the class structure of Russia given in this work on the basis of an economic investigation and critical analysis of statistics, has now been confirmed by the open political action of all classes in the aourse of the revolution. The leading role of the proletariat has been fully revealed. It has also been revealled that the strength of the proletariat in the process of history is immeasurably greater than its share of the total Population. The economic basis of the one phenomenon and the other is demonstrated in the present work.

    Further, the revolution is now increasingly revealing the dual position and dual role of the peasantry. On the one hand, the tremendous survivals of corvée economy and all kinds of survivals of serfdom, with the unprecedented impoverishment and ruin of the peasant poor, fully explain the deep sources of the revolutionary peasant movement, the deep roots of the revolutionary character of the peasantry as a mass. On the other hand, in the course of the revolution, the character of the various political parties, and the numerous ideological-political trends reveal the inherently contradictory class structure of this mass, its petty-bourgeois character, the antagonism between the proprietor and the proletarian trends within it. The vacillation of the impoverished small master between the counter-revolutionary bourgeoisie and the revolutionary proletariat is as inevitable

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as the phenomenon existent in every capitalist society that an insignificant minority of small producers wax rich, "get on in the world," turn into bourgeois, while the overwhelming majority are either utterly ruined and become wage-workers or paupers, or eternally eke out an almost proletarian existence. The economic basis of both these trends among the peasantry is demonstrated in the present essay.

    With this economic basis the revolution in Russia is, of course, inevitably a bourgeois revolution. This Marxist proposition is absolutely irrefutable. It must never be forgotten. It must always be applied to all the economic and political problems of the Russian Revolution.

    But one must know how to apply it. A concrete analysis of the status and the interests of the different classes must serve as a means of defining the precise significance of this truth when applied to this or that problem. The opposite mode of reasoning frequently met with among the Right-wing Social-Democrats headed by Plekhanov, i.e., the endeavour to look for answers to concrete questions in the simple logical development of the general truth about the basic character of our revolution, is a vulgarisation of Marxism and downright mockery of dialectical materialism. Of such people, who from the general truth of the character of this revolution deduce, for example, the leading role of the "bourgeoisie" in the revolution, or the need for socialists to support the liberals, Marx would very likely have repeated the words once quoted by him from Heine: "I have sown dragon's teeth and harvested fleas."[7]

    With the present economic basis of the Russian Revolution, two main lines of its development and outcome are objectively possible:

    Either the old landlord economy, bound as it is by thousands of threads to serfdom, is retained and turns slowly into purely capitalist, "Junker" economy. The basis of the final transition from labour-service to capitalism is the internal metamorphosis of feudalist landlord economy. The entire agrarian system of the state becomes capitalist and for a long time retains feudalist features. Or the old landlord economy is broken up by revolution, which destroys all the relics of serfdom, and large landownership in the first place. The basis of the final transition from labour-service to

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capitalism is the free development of small peasant farming, which has received a tremendous impetus as a result of the expropriation of the landlords' estates in the interests of the peasantry. The entire agrarian system becomes capitalist, for the more completely the vestiges of serfdom are destroyed the more rapidly does the differentiation of the peasantry proceed. In other words: either -- the retention, in the main, of landed proprietorship and of the chief supports of the old "superstructure"; hence, the predominant role of the liberal-monarchist bourgeois and landlord, the rapid transition of the well-to-do peasantry to their side, the degradation of the peasant masses, not only expropriated on a vast scale but enslaved, in addition, by one or other kind of Cadet[8]-proposed land-redemption payments, and downtrodden and dulled by the dominance of reaction; the executors of such a bourgeois revolution will be politicians of a type approximating to the Octobrists.[9] Or -- the destruction of landlordism and of all the chief supports of the corresponding old "superstructure"; the predominant role of the proletariat and the peasant masses, with the neutralising of the unstable or counter-revolutionary bourgeoisie; the speediest and freest development of the productive forces on a capitalist basis, under the best circumstances for the worker and peasant masses at all conceivable under commodity production; -- hence, the establishment of the most favourable conditions for the further accomplishment by the working class of its real and fundamental task of socialist reorganisation. Of course, infinitely diverse combinations of elements of this or that type of capitalist evolution are possible, and only hopeless pedants could set about solving the peculiar and complex problems arising merely by quoting this or that opinion of Marx about a different historical epoch.

    The essay here presented to the reader is devoted to an analysis of the pre-revolutionary economy of Russia. In a revolutionary epoch, life in a country proceeds with such speed and impetuosity that it is impossible to define the major results of economic evolution in the heat of political struggle. Messrs. the Stolypins[10], on the one hand, and the liberals on the other (and not only Cadets ä la Struve, but all the Cadets in general), are working systematically, doggedly and consistelltly to accomplish the revolution

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according to the first pattern. The coup d'etat of June 3, 1907, that we have recently witnessed, marks a victory for the counter-revolution,[11] which is striving to ensure the complete predominance of the landlords in the so-called representative body of the Russian people. But how far this "victory" is a lasting one is another matter; the struggle for the second outcome of the revolution goes on. Not only the proletariat, but also the broad masses of the peasantry are striving, more or less resolutely, more or less consistently, and more or less consciously, for this outcome. However much the counter-revolution tries to strangle the direct mass struggle by outright violence, however much the Cadets try to strangle it by means of their despicable and hypocritical counter revolutionary ideas, that struggle, inspite of all, is breaking out, now here and now there, and laying its impress upon the policy of the "labour," Narodnik parties, although the top circles of petty-bourgeois politicians are undoubtedly contaminated (especially the "Popular Socialists" and Trudoviks[12]) with the Cadet spirit of treachery, Molchalinism[13] and smugness characteristic of moderate and punctilious philistines or bureaucrats.

    How this struggle will end, what the final result of the first onset of the Russian Revolution will be -- it is at present impossible to say. Hence, the time has not yet come (moreover, tho immediate Party duties of a participant in the working-class movement leave no leisure) for a thorough revision of this essay.* The second edition cannot overstep the bounds of a characterisation of Russian economy before the revolution. The author had to confine himself to going over and correcting the text and also to making the most essential additions from the latest statistical material. These are recent horse-census data, harvest statistics, returns of the 1897 census of the population of Russia, new data from factory statistics, etc.

July 1907

The Author

    The market is a category of commodity economy, which in the course of its development is transformed into capitalist economy and only under the latter gains complete sway and universal prevalence. Therefore, in order to examine basic theoretical propositions concerning the home market we must proceed from simple commodity economy and trace its gradual transformation into capitalist economy.

kinds of raw material to their final preparation for consumption. Under commodity economy heterogeneous economic units come into being, the number of separate branches of economy increases, and the number of economic units per forming one and the same economic function diminishes. It is this progressive growth in the social division of labour that is the chief factor in the process of creating a home market for capitalism. ". . . Where the basis is commodity production and its absolute form, capitalist production," says Marx, ". . . products are commodities, or use-values, which have an exchange-value that is to be realised, to be converted into money, only in so far as other commodities form an equivalent for them, that is, other products confront them as commodities and values; thus, in so far as they are not produced as immediate means of subsistence for the producers themselves, but as commodities, as products which become use-values only by their transformation into exchange values (money), by their alienation. The market for these commodities develops through the social division of labour ; the division of productive labours mutually transforms their respective products into commodities, into equivalents for each other, making them mutually serve as markets " (Das Kapital, III, 2, 177-178. Russ. trans., 526.[15] Our italics, as in all quotations, unless otherwise stated).

    It goes without saying that the above-mentioned separation of the manufacturing from the raw materials industry, of manufacture from agriculture, transforms agriculture itself into an industry, into a commodity-producing branch of economy. The process of specialisation that separates from each other the diverse varieties of the manufacture of products, creating an ever-growing number of branches of industry, also manifests itself in agriculture, creating specialised agricultural districts (and systems of farming)* and

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giving rise to exchange not only between the products of agriculture and industry but also between the various products of agriculture. This specialisation of commercial (and capitalist) agriculture manifests itself in all capitalist countries, in the international division of labour; this is true of post-Reform Russia as well, as we shall show in detail below.

    Thus, the social division of labour is the basis of the entire process of the development of commodity economy and of capitalism. It is quite natural, therefore, that our Narodnik theoreticians, who declare this process to be the result of artificial measures, the result of a "deviation from the path," and so on and so forth, have tried to gloss over the fact of thc social division of labour in Russia or to belittle its significance. Mr. V. V., in his article "Division of Agricultural and Industrial Labour in Russia" (Vestnik Yevropy [European Messenger ], 1884, No. 7), "denied" "the dominance in Russia of the principle of the social division of labour" (p. 347), and declared that in this country the social division of labour "has not sprung from the depths of the people's life, but has attempted to thrust itself into it from outside" (p. 338). Mr. N.-on, in his Sketches, argued as follows about the increase in the quantity of grain offered for sale: "This phenomenon might imply that the grain produced is more evenly distributed over the country, that the Archangel fisherman now consumes Samara grain, and that the Samara farmer supplements his dinner with Archangel fish. Actually, however, nothing of the kind is happening " (Sketches on Our Post-Reform Social Economy, St. Petersburg, 1893, p. 37). Without any data and contrary to generally known facts, the categorical assertion is bluntly made here that there is no social division of labour in Russia! The Narodnik theory of the "artificial character" of capitalism in Russia could only have been evolved by rejecting, or proclaiming as "artificial," the very foundation of all commodity economy, namely, the social division of labour.

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    In view of the fact that in the epoch preceding commodity economy, manufacturing is combined with the raw materials industry, and the latter is headed by agriculture, the development of commodity economy takes the shape of the separation from agriculture of one branch of industry after another. The population of a country in which commodity economy is poorly developed (or not developed at all) is almost exclusively agricultural. This, however, must not be understood as meaning that the population is engaged solely in agriculture: it only means that the population engaged in agriculture, also process the products of agriculture, and that exchange and the division of labour are almost non-existent. Consequently, the development of commodity economy eo ipso means the divorce ment of an ever-growing part of the population from agriculture, i.e., the growth of the industrial population at the expense of the agricultural population. "It is in the nature of capitalist production to continually reduce the agricultural population as compared with the non-agricultural, because in industry (in the strict sense) the increase of constant capital at the expense of variable capital goes hand in hand with an absolute increase in variable capital despite its relative decrease; on the other hand, in agriculture the variable capital required for the exploitation of a certain plot of land decreases absolutely; it can thus only increase to the extent that new land is taken into cultivation, but this again requires as a prerequisite a still greater growth of the non-agricultural population" (Das Kapital, III, 2, 177. Russ. trans., p. 526).[16] Thus one cannot conceive of capitalism without an increase in the commercial and industrial population at the expense of the agricultural population, and everybody knows that this phenomenon is revealed in the most clear-cut fashion in all capitalist countries. It need hardly be proved that the significance of this circumstance as regards the problem of the home market is enormous, for it is bound up inseparably both with the evolution of industry and with the evolution of agriculture; the formation of industrial centres, their

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numerical growth, and the attraction of the population by them cannot but exert a most profound influence on the whole rural system, and cannot but give rise to a growth of commercial and capitalist agriculture. All the more noteworthy is the fact that the exponents of Narodnik economics completely ignore this law both in their purely theoretical arguments and in their arguments about capitalism in Russia (we shall deal at length with the specific manifestations of this law in Russia later on, in Chapter VIII). The theories of Messrs. V. V. and N.-on regarding the home market for capitalism overlook a mere trifle -- the diversion of the population from agriculture to industry, and the influence exerted by this fact on agriculture.[*]

    So far we have dealt with simple commodity production. Now we pass to capitalist production, that is, we presume that instead of simple commodity producers we have, on the one hand, the owner of means of production and, on the other, the wage-worker, the seller of labour-power. The conversion of the small producer into a wage-worker presumes that he has lost the means of production -- land, tools, workshop, etc. -- i.e., that he is "impoverished," "ruined." The view is advanced that this ruin "diminishes the purchasing power of the population," "diminishes the home market" for capitalism (Mr. N.-on, loc. cit., p. 185. Also pp. 203, 275, 287, 339-340, etc. The same view is held by Mr. V. V. in the majority of his writings). We do not deal here with the factual data relating to this process in Russia -- they will be examined in detail in later chapters. At the moment the question is posed purely theoretically, i.e., it relates to commodity production in general where it is transformed into capitalist production. The writers mentioned also pose this question theoretically, i.e., from the mere

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fact of the ruin of the small producers they deduce a shrinkage of the home market. This view is absolutely incorrect, and its persistent survival in our economic literature can only be explained by the romantic prejudices of Narodism (see the article referred to in the footnote). It is forgotten that the "freeing" of one section of the producers from the means of production necessarily presumes the passage of the latter into other hands, their conversion into capital; presumes, consequently, that the new owners of these means of production produce as commodities the products formerly consumed by the producer himself, i.e., expand the home market; that in expanding production the new owners of the means of production present a demand to the market for new implements, raw materials, means of transport, etc., and also for articles of consumption (the enrichment of these new owners naturally presumes an increase in their consumption). It is forgotten that it is by no means the well-being of the producer that is important for the market but his possession of money; the decline in the well-being of the patriarchal peasant, who formerly conducted a mainly natural economy, is quite compatible with an increase in the amount of money in his possession, for the more such a peasant is ruined, the more he is compelled to resort to the sale of his labour-power, and the greater is the share of his (albeit scantier) means of subsistence that he must acquire in the market. "With the setting free (from the land) of a part of the agricultural population, therefore, their former means of nourishment were also set free. They were now transformed into material elements of variable capital" (capital spent on the purchase of labour-power) (Das Kapital, I, 776). "The expropriation and eviction of a part of the agricultural population not only set free for industrial capital the labourers, their means of subsistence, and material for labour; it also created the home market " (ibid., 778).[17] Thus, from the standpoint of abstract theory, the ruin of the small producers in a society of developing commodity economy and capitalism means the very opposite to what Messrs. N.-on and V. V. want to deduce therefrom; it means the creation and not the shrinkage of the home market. If the very same Mr. N.-on, who declares a priori that the ruin of the Russian small producers means the

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shrinkage of the home market, nevertheless cites the just quoted contrary assertions of Marx (Sketches, pp. 71 and 114), it only proves the remarkable ability of that writer to belabour himself with quotations from Capital.

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what is required is exchange between the department of social production that makes means of production and that which makes articles of consumption. It is this point that constitutes the whole difficulty of the problem, a difficulty unnoticed by our economists. Mr. V. V. presents the matter, generally speaking, as if the aim of capitalist production is not accumulation but consumption, advancing the profound argument that "into the hands of a minority flows a mass of material objects in excess of the consuming power of the organism" (sic !) "at the given stage of their development" (loc. cit., 149) and that "it is not the moderation and abstemiousness of the manufacturers which are the cause of the superfluity of products, but the limitations and insufficient elasticity of the human organism (!!), which fails to increase its consuming power at the rate at which surplus-value grows" (ibid., 161). Mr. N.-on tries to present the matter as though he does not regard consumption as the aim of capitalist production, as though he takes account of the role and significance of means of production in regard to the problem of realisation; as a matter of fact, however, he has no clear idea whatsoever about the process of the circulation and reproduction of the aggregate social capital, and has become entangled in a host of contradictions. We shall not stop to examine all these contradictions in detail (pp. 203-205 of Mr. N.-on's Sketches ); that would be too thankless a task (and one already performed in part by Mr. Bulgakov* in his book Markets Under Capitalist Production, Moscow, 1897, pp. 237-245), and furthermore, to prove the justice of the appraisal given here of Mr. N.-on's arguments, it will suffice to examine his final conclusion, namely, that the foreign market is the way out of the difficulty of realising surplus-value. This conclusion of Mr. N.-on's (essentially a mere repetition of the one drawn by Mr. V. V.) shows in most striking fashion that he did not in any way understand either the realisation of the product in capitalist society (i.e., the theory of the home market)

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or the role of the foreign market. Indeed, is there even a grain of common sense in this dragging of the foreign market into the problem of "realisation"? The problem of realisation is how to find for each part of the capitalist product, in terms of value (constant capital, variable capital and surplus-value) and in its material form (means of production, and articles of consumption, specifically necessities and luxuries), that other part of the product which replaces it on the market. Clearly, foreign trade must here be excluded, for dragging it in does not advance the solution of the problem one iota, but merely retracts it by extending the problem from one country to several. The very same Mr. N.-on who discovered in foreign trade "the way out of the difficulty" of realising surplus-value, argues about wages, for example, as follows: with the part of the annual product which the direct producers, the workers, receive in the shape of wages "only that part of the means of subsistence can be drawn from circulation which is equal in value to the sum total of wages" (203). How, the question arises, does our economist know that the capitalists of a given country will produce means of subsistence in just the quantity and of just the quality requisite for their realisation by wages? How does he know that in this connection the foreign market can be dispensed with? Obviously, he cannot know this, and has simply brushed aside the problem of the foreign market, for in discussing the realisation of variable capital the important thing is the replacement of one part of the product by another, and not at all whether this replacement takes place in one country or in two. With respect to surplus-value, however, he departs from this necessary premise, and instead of solving the problem, simply evades it by talking of the foreign market. The sale of the product in the foreign market itself needs explanation, i.e., the finding of an equivalent for that part of the product which is being sold, the finding of another part of the capitalist product that can replace the first. That is why Marx says that in examining the problem of realisation, the foreign market, foreign trade "must be entirely discarded," for "the involvement of foreign commerce in analysing the annually reproduced value of products can . . . only confuse without contributing any new element of the problem, or of its

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solution" (Das Kapital, 11, 469).[19] Messrs. V. V. and N.-on imagined that they were giving a profound appraisal of the contradictions of capitalism by pointing to the difficulties of realising surplus-value. Actually, however, they were giving an extremely superficial appraisal of the contradictions of capitalism, for if one speaks of the "difficulties" of realisation, of the crises, etc., arising therefrom, one must admit that these "diffculties" are not only possible but are necessary as regards all parts of the capitalist product, and not as regards surplus-value alone. Difficulties of this kind, due to disproportion in the distribution of the various branches of production, constantly arise, not only in realising surplus-value, but also in realising variable and constant capital; in realising not only the product consisting of articles of consumption, but also that consisting of means of production. Without "difficulties" of this kind and crises, there cannot, in general, be any capitalist production, production by isolated producers for a world market unknown to them.

total of commodities, the total annual social product, into the same parts and allocated them directly to the "revenue" of the two classes of society: the workmen and the capitalists (undertakers and landlords, as Smith calls them).[*]

    On what did he base his omission of the third component of value, constant capital? Adam Smith could not fail to observe this part, but he assumed that it also is made up of wages and surplus-value. Here is how he argued on this subject: "In the price of corn, for example, one part pays the rent of the landlord, another pays the wages or maintenance of the labourers and labouring cattle employed in producing it, and the third pays the profit of the farmer. These three parts seem either immediately or ultimately to make up the whole price of corn. A fourth part, it may perhaps be thought, is necessary for replacing the stock of the farmer, or for compensating the wear and tear of his labouring cattle, and other instruments of husbandry. But it must be considered that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts" (namely, rent, profit and wages). "Though the price of the corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself either immediately or ultimately into the same three parts of rent, labour and profit."** Marx calls this theory of Smith's "astonishing." "His proof consists simply in the repetition of the same assertion" (II, S. 366).[20] Smith sends us "from pillar to post" (I. B., 2. Aufl., S. 612***).[21] In saying that the price of farming instruments itself resolves into the same three parts, Smith forgets to add: and also into the price of the means of production employed in the making of these instruments. The erroneous exclusion by Adam Smith (and also by subsequent economists) of the constant part of capital from the price of the product is due to an erroneous conception of accumulation in capitalist economy, i.e., of the expansion of production, the transformation of surplus-value into capital. Here too Adam Smith omitted constant capital, assuming that the

accumulated part of surplus-value, the part converted into capital, is entirely consumed by the productive workers, i.e., goes entirely in wages, whereas actually the accumulated part of surplus-value is expended on constant capital (instruments of production, raw and auxiliary materials) plus wages. Criticising this view of Smith (and also of Ricardo, Mill and others) in Capital, Volume I (Part VII, "The Accumulation of Capital," Chapter 22, "Conversion of Surplus-Value into Capital," § 2, "Erroneous Conception, by Political Economy, of Reproduction on a Progressively Increasing Scale"), Marx there states that in Volume II "it will be shown that Adam Smith's dogma, inherited by all his successors, prevented political economy from understanding even the most elementary mechanism of the process of social reproduction" (I, 612).[22] Adam Smith committed this error because he confused the value of the product with the newly created value: the latter does indeed resolve itself into variable capital and surplus-value, whereas the former includes constant capital in addition. This error had been earlier exposed by Marx in his analysis of value, when he drew a distinction between abstract labour, which creates new value, and concrete, useful labour, which reproduces the previously existing value in the new form of a useful product.[23]

    An explanation of the process of the reproduction and circulation of the total social capital is particularly necessary to settle the problem of the national revenue in capitalist society. It is extremely interesting to note that, when dealing with the latter problem, Adam Smith could no longer cling to his erroneous theory, which excludes constant capital from the country's total product. "The gross revenue of all the inhabitants of a great country comprehends the whole annual produce of their land and labor; the neat revenue, what remains free to them after deducting the expense of maintaining; first, their fixed; and, secondly, their circulating capital; or what, without encroaching upon their capital, they can place in their stock reserved for immediate consumption, or spend upon their subsistence, conveniencies, and amusements" (A. Smith, Wealth of Nations, Book II. "Of the Nature, Accumulation, and Employment of Stock," Chapter II, Vol. II, p. 18. Russ. trans., II, p. 21). Thus, from

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the country's total product Adam Smith excluded capital, asserting that it resolves itself into wages, profit and rent, i.e., into (net) revenue; but in the gross revenue of society he includes capital, separating it from articles of consumption (= net revenue). This is the contradiction in which Marx catches Adam Smith: how can there be capital in the revenue if there was no capital in the product ? (Cf. Das Kapital, II, S. 355.)[24] Without noticing it himself, Adam Smith here recognises three component parts in the value of the total product: not only variable capital and surplus-value, but also constant capital. Further on, Adam Smith comes up against another very important difference, one of enormous significance in the theory of realisation. "The whole expense of maintaining the fixed capital," he says, "must evidently be excluded from the neat revenue of the society. Neither the materials necessary for supporting their useful machines and instruments of trade, their profitable buildings, etc., nor the produce of the labor necessary for fashioning those materials into the proper form, can ever make any part of it. The price of that labor may indeed make a part of it; as the workmen so employed may place the whole value of their wages in their stock reserved for immediate consumption." But in other kinds of labour, both the "price" (of labour) "and the produce" (of labour) "go to this stock, the price to that of the workmen, the produce to that of other people" (A. Smith, ibid.). Here we find a gleam of recognition of the need to distinguish two kinds of labour: one that produces articles of consumption which may enter into the "neat revenue," and another which produces "useful machines and instruments of trade . . . buildings, etc.," i.e., articles that can never be used for personal consumption. From this it is only one step to the admission that an explanation of realisation absolutely requires that two forms of consumption be distinguished: personal and productive (= putting back into production). It was the rectification of these two mistakes made by Smith (the omission of constant capital from the value of the product, and the confusing of personal with productive consumption) that enabled Marx to build up his brilliant theory of the realisation of the social product in capitalist society.

    As for the other economists, those between Adam Smith

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and Marx, they all repeated Adam Smith's error[*] and for that reason did not advance one step. Of the confusion that consequently reigns in the theories of revenue we shall speak later. In the controversy as to the possibility of a general overproduction of commodities that was waged by Ricardo, Say, Mill and others, on the one hand, and by Malthus, Sismondi, Chalmers, Kirchmann and others, on the other, both sides adhered to Smith's erroneous theory, and consequently, as Mr. S. Bulgakov justly remarks, "in view of the false premises and the wrong formulation of the problem itself, these controversies could only lead to empty and scholastic wordspinning" (loc. cit., p. 21. See an account of this wordspinning in Tugan-Baranovsky's Industrial Crises, etc., St. Petersburg, 1894, pp. 377-404).

    It follows automatically from what has been said that the fundamental premises on which Marx's theory is based are the following two propositions. The first is that the total product of a capitalist country, like the individual product, consists of the following three parts: 1) constant capital, 2) variable capital, and 3) surplus-value. To those who are familiar with the analysis of the process of production of capital given in Vol. I of Marx's Capital this proposition is self-evident. The second proposition is that two major departments of capitalist production must be distinguished, namely (Department I), the production of means of production -- of articles which serve for productive consumption, i.e., are to be put back into production, articles which are consumed, not by people, but by capital; and (Department II) the production of articles of consumption, i.e., of articles used for personal consumption. "There is more theoretical meaning in this division alone than in all the preceding

controversies over the theory of markets" (Bulgakov, loc. cit., p. 27). The question arises as to why such a division of products according to their natural form is now necessary to analyse the reproduction of social capital, when the analysis of the production and reproduction of individual capital dispensed with such a division and left the question of the natural form of the product entirely on one side. On what grounds can we introduce the question of the natural form of the product into a theoretical investigation of capitalist economy, which is based entirely on the exchange-value of the product? The fact is that when the production of individual capital was analysed, the question of where and how the product would be sold, and of where and how articles of consumption would be bought by the workers and means of production by the capitalists, was set aside as making no contribution to this analysis and as having no relation to it. All that had to be examined then was the problem of the value of the separate elements of production and of the results of production. Now, however, the question is: where will the workers and the capitalists obtain their articles of consumption, where will the capitalists obtain their means of production, how will the finished product meet all these demands and enable production to expand? Here, consequently, we have not only "a replacement of value, but also a replacement in material" (Stoffersatz. -- Das Kapital, II, 389),[25] and hence it is absolutely essential to distinguish between products that play entirely different parts in the process of social economy.

    Once these basic propositions are taken into account, the problem of the realisation of the social product in capitalist society no longer presents any difficulty. Let us first assume simple reproduction, i.e., the repetition of the process of production on its previous scale, the absence of accumulation. Obviously, the variable capital and the surplus-value in Department II (which exist in the form of articles of consumption) are realised by the personal consumption of the workers and capitalists of this department (for simple reproduction presumes that the whole of the surplus-value is consumed, and that no portion of it is converted into capital). Further, the variable capital and the surplus-value which exist in the form of means of production

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(Department I) must, in order to be realised, be exchanged for articles of consumption for the capitalists and workers engaged in the making of means of production. On the other hand, neither can the constant capital existing in the form of articles of consumption (Department II) be realised except by an exchange for means of production, in order to be put back again into production the following year. Thus we get variable capital and surplus-value in means of production exchanged for constant capital in articles of consumption: the workers and the capitalists (in the means of production department) in this way obtain means of subsistence, while the capitalists (in the articles of consumption department) dispose of their product and obtain constant capital for further production. Under simple reproduction, the parts exchanged must be equal: the sum of variable capital and surplus-value in means of production must be equal to the constant capital in articles of consumption. On the other hand, if we assume reproduction on a progressively increasing scale, i.e., accumulation, the first magnitude must be greater than the second, because there must be available a surplus of means of production with which to begin further production. Let us revert, however, to simple reproduction. There has been left unrealised one more part of the social product, namely, constant capital in means of production. This is realised partly by exchange among the capitalists of this same department (coal, for example, is exchanged for iron, because each of these products serves as a necessary material or instrument in the production of the other), and partly by being put directly into production (for example, coal extracted in order to be used in the same enterprise again for the extraction of coal; grain in agriculture, etc.). As for accumulation, its starting-point, as we have seen, is a surplus of means of production (taken from the surplus-value of the capitalists in this department), a surplus that also calls for the conversion into capital of part of the surplus-value in articles of consumption. A detailed examination of how this additional production will be combined with simple reproduction we consider to be superfluous. It is no part of our task to undertake a special examination of the theory of realisation, and the foregoing is enough to elucidate the error of the

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Narodnik economists and to enable us to draw certain theoretical conclusions regarding the home market.[*]

    On the problem of interest to us, that of the home market, the main conclusion from Marx's theory of realisation is the following: capitalist production, and, consequently, the home market, grow not so much on account of articles of consumption as on account of means of production. In other words, the increase in means of production outstrips the increase in articles of consumption. Indeed, we have seen that constant capital in articles of consumption (Department II) is exchanged for variable capital + surplus-value in means of production (Department I). According, however, to the general law of capitalist production, constant capital grows faster than variable capital. Hence, constant capital in articles of consumption has to increase faster than variable capital and surplus-value in articles of consumption, while constant capital in means of production has to increase fastest of all, outstripping both the increase of variable capital ( + surplus-value) in means of production and the increase of constant capital in articles of consumption. The department of social production which produces means of production has, consequently, to grow faster than that producing articles of consumption. For capitalism, therefore, the growth of the home market is to a certain extent "independent" of the growth of personal consumption, and takes place mostly on account of productive consumption. But it would be a mistake to understand this "independence" as meaning that productive consumption is entirely divorced from personal consumption: the former can and must increase

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faster than the latter (and there its "independence" ends), but it goes without saying that, in the last analysis, productive consumption is always bound up with personal consumption. Marx says in this connection: ". . . We have seen (Book II, Part III) that continuous circulation takes place between constant capital and constant capital. . ." (Marx has in mind constant capital in means of production, which is realised by exchange among capitalists in the same department). "It is at first independent of individual consumption because it never enters the latter. But this consumption definitely limits it nevertheless, since constant capital is never produced for its own sake but solely because more of it is needed in spheres of production whose products go into individual consumption" (Das Kapital, III, 1, 289. Russ. trans., p. 242).[27]

    This larger consumption of constant capital is nothing but a higher level of the development of the productive forces, one expressed in terms of exchange-value, because the rapidly developing "means of production" consist, in the main, of materials, machines, instruments, buildings and all sorts of other accessories for large-scale, especially machine, production. It is quite natural, therefore, that capitalist production, which develops the productive forces of society and creates large-scale production and machine industry, is also distinguished by a particular expansion of that department of social wealth which consists of means of production. . . . "In this case" (namely, the production of means of production), "what distinguishes capitalist society from the savage is not, as Senior thinks, the privilege and peculiarity of the savage to expend his labour at times in a way that does not procure him any products resolvable (exchangeable) into revenue, i.e., into articles of consumption. No, the distinction consists in the following:

    "a) Capitalist society employs more of its available annual labour in the production of means of production (ergo, of constant capital) which are not resolvable into revenue in the form of wages or surplus-value, but can function only as capital.

    "b) When a savage makes bows, arrows, stone hammers, axes, baskets, etc., he knows very well that he did not spend the time so employed in the production of articles

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of consumption, but that he has thus stocked up the means of production he needs, and nothing else" (Das Kapital, II, 436. Russ. trans., 333)[28] This "very good knowledge" of one's relation to production has disappeared in capitalist society owing to the latter's inherent fetishism, which presents the social relations of men as relations of products -- owing to the conversion of every product into a commodity produced for an unknown consumer and to be realised in an unknown market. And as it is a matter of the utmost indifference to the individual entrepreneur what kind of article he produces -- every product yields a "revenue," -- this same superficial, individual point of view was adopted by the economist-theoreticians in relation to the whole of society and prevented the process of the reproduction of the total social product in capitalist economy from being understood.

    The development of production (and, consequently, of the home market) chiefly on account of means of production seems paradoxical and lmdoubtedly constitutes a contradiction. It is real "production as an end in itself" -- the expansion of production without a corresponding expansion of consumption. But it is a contradiction not of doctrine, but of actual life; it is the sort of contradiction that corresponds to the very nature of capitalism and to the other contradictions of this system of social economy. It is this expansion of production without a corresponding expansion of consumption that corresponds to the historical mission of capitalism and to its specific social structure: the former consists in the development of the productive forces of society; the latter rules out the utilisation of these technical achievements by the mass of the population. There is an undoubted contradiction between the drive towards the unlimited extension of production inherent in capitalism, and the limited consumption of the masses of the people (limited because of their proletarian status). It is this contradiction that Marx records in the propositions so readily quoted by the Narodniks and which are supposed to corroborate their views on the shrinkage of the home market, the non-progressive character of capitalism, etc., etc. Here are some of these propositions: "Contradiction in the capitalist mode of production: the labourers as buyers of commodities are important for the market. But as sellers of their own

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commodity -- labour-power -- capitalist society tends to keep them down to the minimum price" (Das Kapital, II, 303).[29]

    ". . . The conditions of realisation are limited by the proportional relation of the various branches of production and the consumer power of society. . . . But the more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest" (ibid., III, 1, 225-226).[30] "The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move -- these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. . . . The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world market, and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production." (III, 1, 232. Russ. trans., p. 194).[31] "The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their outer limit"*

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(III, 2, 21. Russ. trans., p. 395).[33] These propositions all speak of the contradiction we have menlioned, namely, the contradiction between the unrestricted drive to expand production and limited consumption -- and of nothing else.[*] Nothing could be more senseless than to conclude from these passages in Capital that Marx did not admit the possibility of surplus-value being realised in capitalist society, that he attributed crises to under-consumption, and so forth. Marx's analysis of realisation showed that the circulation between constant capital and constant capital is definitely limited by personal consumption; but this same analysis showed the true character of this "limitedness,"[34] it showed that, compared with means of production, articles of consumption play a minor role in the formation of the home market. And, furthermore, there is nothing more absurd than to conclude from the contradictions of capitalism that the latter is impossible, non-progressive, and so on -- to do that is to take refuge from unpleasant, but undoubted realities in the transcendental heights of romantic dreams. The contradiction between the drive towards the unlimited expansion of production and limited consumption is not the only contradiction of capitalism, which cannot exist and develop at all without contradictions. The contradictions of capitalism testify to its historically transient character, and make clear the conditions and causes of its collapse and transformation into a higher form; but they by no means rule out either the possibility of capitalism, or its progressive character as compared with preceding systems of social economy.**

    Having outlined the main propositions of Marx's theory of realisation, we still have briefly to point to its enormous importance in the theory of national "consumption,"

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"distribution," and "income". All these problems, particularly the last, have hitherto been a veritable stumbling-block for economists. The more they have spoken and written about it, the greater has been the confusion caused by Adam Smith's fundamental error. We shall cite here some examples of this confusion.

    It is interesting to note, for example, that Proudhon repeated essentially the same error, except that he formulated the old theory somewhat differently. He said:

    "A (which stands for all property owners, entrepreneurs and capitalists) starts an enterprise with 10,000 francs, and with them makes advance payment to the workers, who must produce goods in return; after A has thus converted his money into commodities he must, at the end of the production process, at the end, say, of a year, convert the commodities again into money. To whom does he sell his commodities? To the workers, of course, for there are only two classes in society -- the entrepreneurs on the one hand, and the workers on the other. These workers, having for the product of their labour received 10,000 francs as pay, which covers their essential requirements of life, must now, how ever, pay more than 10,000 francs, that is, they must pay for the addition that A receives in the shape of the interest and other profits he counted on at the beginning of the year. The worker can cover these 10,000 francs only by borrowing, and, as a consequence, he sinks deeper and deeper into debt and poverty. One of two things must necessarily take place: either the worker may consume 9, although he produced 10, or he pays the entrepreneur only the amount of his wages, in which case the entrepreneur himself suffers bankruptcy and disaster, for he does not receive interest on capital, which he on his part, however, must pay." (Diehl, Proudhon, II, 200, quoted from the compilation "Industry." Articles from Handwörterbuch der Staatswissenschaften,* Moscow, 1896, p. 101.)

    As the reader sees, this is the same difficulty -- how surplus-value is to be realised -- that Messrs. V. V. and N.-on are fussing over. Proudhon only expressed it in a somewhat specific form. And this specific character of his formulation

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brings our Narodniks still closer to him: they too, like Proudhon, consider the "difficulty" to lie in the realisation of surplus-value (interest or profit, in Proudhon's terminology) and do not understand that the confusion they have acquired from the old economists prevents them from explaining the realisation not only of surplus-value, but also of constant capital, i.e., that their "difficulty" is in their not understanding the whole process of the realisation of the product in capitalist society.

    Regarding this "theory" of Proudhon's, Marx sarcastically observes:

    "Proudhon exposes his inability to grasp this" (namely, the realisation of the product in capitalist society) "in the ignorant formulation: l'ouvrier ne peut pas racheter son propre produit (the labourer cannot buy back his own product), because the interest which is added to the prix derevient (cost-price) is contained in the product" (Das Kapital, III, 2, 379. Russ. trans., 698, in which there are mistakes)[35]

    And Marx quotes the remark directed against Proudhon by a certain vulgar economist named Forcade, who "quite correctly generalises the difficulty put forward in so narrow a form by Proudhon." Forcade said that the price of commod ities contains not only something over and above the wages -- the profit -- but also the part that replaces constant capital. Hence, concludes Forcade in opposition to Proudhon, the capitalist is also unable to buy back commodities with his profit (not only did Forcade not solve the problem, he did not even understand it).

    Neither did Rodbertus make any contribution to the solution of the problem. While laying particular stress on the thesis that "ground-rent, profit on capital and wages are income,"* he proved quite unable to arrive at a clear understanding of the concept "income." Stating his view as to what the tasks of political economy would have been had it pursued "a correct method" (loc. cit., S. 26), he also speaks about the distribution of the national product. "It" (i.e.,

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the true "science of the national economy" -- Rodbertus's italics) "should have shown how out of the total national product one part always goes to replace the capital consumed in production or worn out, while the other, as national income, goes to satisfy the direct requirements of society and of its members" (ibid., S. 27). But although true science should have shown this, Rodbertus's "science" did nothing of the kind. The reader will see that he merely repeated Adam Smith word for word, evidently not even seeing that this is only the beginning of the problem. Which workers "replace" the national capital? How is their product realised? Not a word did ho say about this. Summing up his theory (diese neue Theorie, die ich der bisherigen gegenuberstelle,[*] S. 32) in the shape of separate theses, Rodbertus first speaks of the distribution of the national product as follows: "Rent" (by this, as we know, Rodbertus meant what is usually termed surplus-value) "and wages are, consequently, the parts into which the product resolves itself, in so far as it is income" (S. 33). This extremely important reservation should have suggested a very vital question to him: he had only just said that by income he meant articles which serve "to satisfy direct requirements"; hence, there are products that do not serve for personal consumption. How are they realised? But Rodbertus sees no unclarity here and soon forgets this reservation, speaking outright of the "division of the product into three parts " (wages, profit and rent) (S. 49-50 and others). Thus Rodbertus virtually repeated Adam Smith's theory together with his fundamental mistake and explained nothing at all regarding the question of income. The promise of a new, full and better theory of the distribution of the national product ** proved to be just empty talk. As a matter of fact, Rodbertus did not advance the theory

of this subject a single step. How confused were his conceptions of "income" is shown by his lengthy speculations in his Fourth Social Letter to von Kirchmann (Das Kapital, Berlin, 1884) about whether money should be included in the national income, and whether wages are taken from capital or from income -- speculations of which Engels said that they "belong to the domain of scholasticism" (Vorwort to Vol. II, Capital, S. XXI).[*][36]

    Utter confusion on the problem of the national income reigns supreme among economists to this day. For example, in his article on "Crises" in Handwörterbuch der Staatswissenschaften (the afore-mentioned compilation, p. 81), Herkner, speaking of the realisation of the product in capitalist society (§ 5, "distribution"), expresses the opinion that the speculations of K. H. Rau are "sound," although he merely repeats Adam Smith's mistake by dividing the whole product of society into incomes. R. Meyer, in his article on "income" (ibid., p. 283 and foll.), quotes the confused definitions of A. Wagner (who also repeats Adam Smith's error) and frankly admits that "it is difficult to distinguish income from capital," and that "the most difficult thing is to distinguish between returns (Ertrag ) and income (Einkommen )."

    We thus see that the economists who have discoursed at length on the inadequate attention paid by the classical economists (and Marx) to "distribution" and "consumption" have not been able to give the slightest explanation of the most fundamental problems of "distribution" and "consumption." That is understandable, for one cannot even discuss "consumption" unless one understands the process of the reproduction of the total social capital and of the replacement of the various component parts of the social product. This example once again proved how absurd it is to single out "distribution" and "consumption" as though they were independent branches of science corresponding to certain independent processes and phenomena of economic life. It is not with "production" that political economy deals,

    ". . . Viewing the income of the whole society, national income consists of wages plus profit plus rent, thus, of the gross income. But even this is an abstraction to the extent that the entire society, on the basis of capitalist production, bases itself on the capitalist standpoint and thereby considers only the income resolved into profit and rent as net income" (III, 2, 375-376. Russ. trans., pp. 695-696).[37]

    Thus, the explanation of the process of realisation also made clear the question of income and removed the main difficulty that had prevented the achievement of clarity on this question, namely: how does "income for one become capital for another"?, how can the product which consists of articles of personal consumption and resolves itself totally into wages, profit and rent, also include the constant part of capital, which can never be income? The analysis of realisation given in Capital, Volume II, Part III, gave a full answer to these questions, and in the concluding part of Volume III of Capital, which deals with "revenues," Marx had only to give names to the separate parts of the social product and refer the reader to the analysis given in Volume II.[*]

    It must be remembered that the analysis given of the realisation of the product in capitalist society proceeded from the assumption that there is no foreign trade: this assumption has already been mentioned above and it has been shown to be essential in such an analysis. Obviously, imports and exports would only have confused the issue, without in the

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least helping to clear up the problem. The mistake made by Messrs. V. V. and N.-on is that they bring in the foreign market to explain the realisation of surplus-value: while explaining absolutely nothing, this reference to the foreign market merely conceals their theoretical mistakes; that is one point. Another point is that it enables them, with the aid of these mistaken "theories," to avoid the need to explain the fact of the development of a home market for Russian capitalism.[*] The "foreign market" merely serves them as a pretext for obscuring the development of capitalism (and, consequently, of the market) inside the country -- a pretext all the more convenient in that it also relieves them of the need to examine the facts which show that Russian capitalism is winning foreign markets.[**]

    The need for a capitalist country to have a foreign market is not determined at all by the laws of the realisation of the social product (and of surplus-value in particular), but, firstly, by the fact that capitalism makes its appearance only as a result of widely developed commodity circulation, which transeends the limits of the state. It is therefore impossible to conceive a capitalist nation without foreign trade, nor is there any such nation.

    As the reader sees, this reason is of a historical order. And the Narodniks could not escape it with a couple of threadbare phrases about "the impossibility of the capitalists consuming surplus-value." Had they really wanted to raise the question of the foreign market, they would have had to examine the history of the development of foreign trade, the history of the development of commodity circulation. And having examined this history, they could not have, of course, depicted capitalism as a casual deviation from the path.

    Secondly, the conformity between the separate parts of social production (in terms of value and in their natural form) which was necessarily assumed by the theory of the

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reproduction of social capital, and which is actually established only as the average magnitude of a number of continual fluctuations -- this conformity is constantly disturbed in capitalist society owing to the separate existence of different producers working for an unknown market. The various branches of industry, which serve as "markets" for one another, do not develop evenly, but outstrip one another, and the more developed industry seeks a foreign market. This does not mean at all "the impossibility of the capitalist nation realising surplus-value," -- the profound conclusion so readily drawn by the Narodnik. It merely indicates the lack of proportion in the development of the different industries. If the national capital were distributed differently, the same quantity of products could be realised within the country. But for capital to abandon one sphere of industry and pass into another there must be a crisis in that sphere; and what can restrain the capitalists threatened by such a crisis from seeking a foreign market, from seeking subsidies and bonuses to facilitate exports, etc.?

    Thirdly, the law of pre-capitalist modes of production is the repetition of the process of production on the previous scale, on the previous technical basis: such are the corvée economy of the landlords, the natural economy of the peasants, the artisan production of the industrialists. The law of capitalist production, on the contrary, is constant transformation of the modes of production, and the unrestricted growth of the scale of production. Under the old modes of production, economic units could exist for centuries without undergoing any change either in character or in size, and without extending beyond the landlord's manor, the peasant village or the small neighbouring market for the rural artisans and small industrialists (the so-called handicraftsmen). The capitalist enterprise, on the contrary, inevitably out grows the bounds of the village community, the local market, the region, and then the state. Since the isolation and seclusion of the states have already been broken down by commodity circulation, the natural trend of every capitalist industry brings it to the necessity of "seeking a foreign market."

    Thus, the necessity of seeking a foreign market by no means proves that capitalism is unsound, as the Narodnik

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economists like to picture matters. Quite the contrary. This necessity demonstrates the progressive historical work of capitalism, which destroys the age-old isolation and seclusion of systems of economy (and, consequently, the narrowness of intellectual and political life), and which links all countries of the world into a single economic whole.

    From this we see that the two latter causes of the need for a foreign market are again causes of a historical character. In order to understand them one must examine each separate industry, its development within the country, its transformation into a capitalist industry -- in short, one must take the facts about the development of capitalism in the country; and it is not surprising that the Narodniks take the opportunity to evade these facts under cover of worthless (and meaningless) phrases about the "impossibility" of both the home and the foreign markets.

  [2] V. V. -- pseudonym of V. P. Vorontsov.
    N.-on or Nikolai-on, pseudonym of N. F. Danielson. Vorontsov and Danielson were the most prominent ideologists of liberal Narodism in the 80s and 90s of the 19th century.    [p.25]

  ^[3] In February or at the beginning of March 1899, when in exile, Lenin received a copy of Die Agrarfrage (The Agrarian Question ) by Kautsky, then still a Marxist. By then, the greater

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part of The Development of Capitalism in Russia had been set up in type, and so Lenin decided to make reference to Kautsky's work in the preface. On March 17 (29), 1899, Lenin sent a postscript to the preface. "If only it is not late," he wrote, "I would very much like to have it printed. . . . Maybe even if the preface is already set, it will still be possibie to add the postscript?" The addition to the preface got into the hands of the censor and was changed. In a letter dated April 27 (May 9), 1899, Lenin wrote of this: "Have heard that my P.S. to the preface was late, fell into the hands of the preliminary censor and 'suffered,' I think."
    [Transcriber's Note: For Lenin's brief review of Kaustky's book see Review -- Karl Kautsky's "Die Agrarfrage". For a lengthier discussion of the book, in the context of defending its main theses in the face of criticism, see Lenin's essay "Capitalism in Agriculture". -- DJR]    [p.26]

  ^[4] In the second edition of The Development of Capitalism in Russia the numbering of the sections was changed through Lenin's introduction of several additions. The item to which Lenin refers the reader is in Chapter II, § XII, C, p. 162 and p. 168.    [p.27]

  ^[5] On February 17, 1899, in the Society for the Promotion of Russian Industry and Trade, a discussion took place on a paper entitled "Is It Possible to Reconcile Narodism with Marxism?" Representatives of liberal Narodism as well as "Legal Marxists" took part in the discussion. V. P. Vorontsov (V. V.) said that those who represented the "modern trend of Marxism in the West" stood closer to Russian Narodism than to the Russian Marxists. A brief report of this meeting appeared on February 19 (March 3) 1899, in the reactionary St. Petersburg paper, Novoye Vremya (New Times ).    [p.28]

  ^[6] The second edition of The Development of Capitalism in Russia was published in 1908. An announcement of its publication appeared in March 1908, in Knizhnaya Letopis (Book Chronicle ), Issue No. 10.
    For the second edition Lenin went over the text, eliminated printer's errors made numerous additions and wrote a new preface, dated July 1907. In the second edition of The Development of Capitalism in Russia Lenin replaced the expressions "disciples," and "supporters of the working people," which he had employed so as to pass the censorship, by the forthright terms Marxists, Socialists. He also replaced allusions to "the new theory" by references to Marx and Marxism.
    Lenin made considerable additions, employing the very latest statistics. He introduced into the second chapter a new section (XI), devoted to an analysis of the results of the Army-Horse Censuses of 1896-1900. He cited new facts in confirmation of his previous conclusions about the development of capitalism in Russia, in particular new factory statistical material; gave an analysis of the results of the general population census of 1897, which provided a fuller picture of the class structure of Russia (see Chapter VII, § V, pp. 501-507, Addendum to second edition ).

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    In the second edition the results of the struggle against the so-called "Legal Marxists" on the basic problems dealt with in The Development of Capitalism in Russia are also summed up. The experience of the first Russian Revolution of 1905-1907 fully confirmed Lenin's description of the "Legal Marxists" as bourgeois liberals hiding behind the cloak of Marxism and attempting to use the working-class movement in the interests of the bourgeoisie.
    He introduced 24 new footnotes into the second edition (pp. 27, 45, 57, 157, 159, 163, 183, 206, 221, 274, 281, 389, 449, 451, 467, 499, 509, 523, 526, 533, 535, 550, 552, 575), 2 new sections (pp. 146-148 and 501-507), a new table (p. 512), wrote 8 paragraphs of new text and 3 big additions to previous paragraphs (pp. 300-303, 223-224, 225, 293-294), and made about 75 additions and alterations.
    Lenin did not cease working on his Development of Capitalism in Russia after the appearance of the second edition in 1908. This is shown by the additions, made by him in 1910 or 1911 to page 405 of a copy of the second edition, dealing with the division of factories and works into groups according to the number of workers employed in 1908 (see illustration on page 513 of the present volume).
    In the preface to the second edition Lenin speaks of the possibility of his revising the work in the future and indicates that in that case it would have to be divided into two volumes: -- volume 1 to be devoted to an analysis of Russian economy before the Revolution and volume 2 to a study of the results and achievements of the Revolution.
    A number of Lenin's other works, including The Agrarian Programme of Social-Democracy in the First Russian Revolution, 1905-1907, which was written at the end of 1907, were devoted to a study of the results and achievements of the 1905-1907 Revolution.    [p.31]

  ^[7] Marx cites Heine's expression relating to "yes-men": "Ich habs Drachenzähne gesät und Flöhe geerntet" (I have sown dragon's teeth and harvested fleas) in his book Karl Grün, "Die sozial Bewegung in Frankreich und Belgien " (Darmstadt, 1845) oder Die Geschichtschreibung des wahren Sozialismus [Karl Grun, "The Social Movement in France and Belgium " (Darmstadt, 1845), or The Historiography of True Socialism ] (Marx-Engles/Gesamtausgabe, Erste Abteil, B. 5, S. 495).    [p.32]

  ^[8] Cadets -- members of the Constitutional-Democratic Party, the chief party of the Russian imperialist bourgeoisie. The Cadet Party was founded in October 1905, its membership including representatives of the liberal-monarchist bourgeoisie, Zemstvo functionaries and bourgeois intellectuals who used hypocritical phrases about "democracy" to hide their real views and to win over the peasantry. The Cadet agrarian programme envisaged the possibility of part of the landed estates being turned over to the peasants on the basis of redemption payments, but at an

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exorbitant price. The Cadets favoured the retention of the monarchy and tried to persuade the tsar and the feudal landlords to share power with them; their main task, however, they considered to be the fight against the revolutionary movement. During the First World War the Cadets actively supported the tsarist government's foreign policy of conquest. During the bourgeois-democratic revolution of February 1917 they tried to save the monarchy. The Cadets in the bourgeois Provisional Government pursued a counter-revolutionary policy, opposed to the interests of the people but favourable to the U.S., British and French imperialists. Following the victory of the Great October Socialist Revolution the Cadets became irreconcilable enemies of Soviet power and participated in all the armed counter-revolutionary actions and campaigns of the interventionists. When the interventionists and whiteguards were defeated, the Cadets fled abroad, where they continued their anti-Soviet counter-revolutionary activity.    [p.33]

  ^[9] The Party of Octobrists (or Union of October Seventeenth ) represented the interests of the big industrial capitalists and of the big landlords who farmed their land on capitalist lines. The Octobrists claimed to stand by the tsar's Manifesto of October 17, 1905, in which, scared by the revolution, he promised the people civil rights; actually, however, the Octobrists had no intention of limiting the powers of tsarism, and fully supported both the home and the foreign policies of the tsar's government.    [p.33]

  ^[10] Stolypin, Pyotr Arkadyevich -- Chairman of the Council of Ministers, 1906-1911, an extreme reactionary. The suppression of the Revolution of 1905-1907 and the period of severe political reaction that followed are connected with his name.
    In an effort to provide the tsarist autocracy with a firm support in the countryside in the shape of the kulaks, Stolypin secured the adoption of a new agrarian law. By an edict of November 9, 1906, each peasant became entitled to withdraw from the village community and to have his allotment made his private property, with the ensuing right to sell it, mortgage it, etc., which until then had been forbidden. It was made the duty of the community to supply the peasant leaving its ranks with land in a single tract. The kulaks made use of this legislation to buy up the lands of the economically weak peasants for next to nothing. The laws of June 14, 1910, and of May 29, 1911, provided for a compulsory arrangement of land distribution that favoured the kulaks.    [p.33]

  ^[11] June 3, 1907, was the day on which the Second State Duma was disbanded and a new law was promulgated dealing with the elections to the Third State Duma, that ensured a majority for the landlords and capitalists in the Duma. The tsar's government treacherously violated thc Manifesto of October 17, 1905, did away with constitutional rights and had the Social

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Democratic group in the Second Duma arraigned and sentenced to hard labour. The so-called coup d'état of June 3 marked a temporary victory of the counter-revolution.    [p.34]

  ^[12] Popular Socialists -- members of the Popular Socialist Party, which separated from the right wing of the Socialist-Revolutionary Party (S.R.s) in 1906. They expressed the interests of the kulaks and stood for the partial nationalisation of landed estates on a redemption basis and the distribution of the land among the peasants according to the so-called labour norm. They favoured a bloc with the Cadets. Lenin called them "Social-Cadets," "petty-bourgeois opportunists," and "S.R. Mensheviks," who vacillated between the Cadets and the S.R.s, and he emphasised that this party "differs very little from the Cadets, since it has with drawn from its programme both the Republic and the demand for all the land." The leading figures in the party were A. V. Peshekhonov, N. F. Annensky, V. A. Myakotin, and others. Following the February (1917) bourgeois-democratic revolution the Popular Socialist Party participated in the bourgeois Provisional Government. Following the October Socialist Revolution the Popular Socialists participated in counter-revolutionary plots and armed actions against the Soviets. The party went out of existence during the Civil War.
    Trudoviks (from trud, "labour") -- a group of petty-bourgeois democrats in the Russian State Dumas, consisting of peasants and also of Narodnik-minded intellectuals. The Trudovik Group was constituted in April 1906 from the peasant deputies to the First State Duma.
    The demands of the Trudoviks included the abolition of all restrictions based on the social estates and on nationality, the democratisation of the Zemstvos and urban local government bodies, and universal suffrage in the elections to the State Duma. The Trudovik agrarian programme proceeded from the Narodnik principle of the equalitarian use of the land: the formation of a national fund made up of lands belonging to the state, the royal family, the tsar himself and the monasteries, and also of private estates where they exceeded the established labour norm, with provision for compensation in the case of confiscated private estates. In the State Duma the Trudoviks vacillated between the Cadets and the Bolsheviks, their vacillations being due to the very class nature of the peasants who are petty proprietors. In September 1906 Lenin pointed out that the Trudovik peasant "is not above trying to strike a deal with the monarchy and settling down on his patch of land within the framework of the bourgeois system. At the present time, however, his energies are mainly devoted to the struggle against the landlords for the land, to the struggle against the feudal state for democracy." (See present edition, Vol. 11, "An Attempt at a Classification of the Political Parties of Russia".) Since the Trudoviks represented the peasant masses, the tactics of the Bolsheviks in the Duma were to arrive at agreements with them on individual issues

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with a view to waging a joint struggle against the Cadets and the tsarist autocracy.
    In 1917 the "Trudovik Group" merged with the "Popular Socialist" Party.    [p.34]

  ^[13] Molchalinism -- a synonym for sycophancy, toadyism. Derived from the name Molchalin, a character in Griboyedov's play Wit Works Woe.    [p.34]

  ^[14] In the first edition of The Development of Capitalism in Russia (1899) this chapter was entitled "References to Theory."    [p.37]

  ^[15] Karl Marx, Capital, Moscow, 1959, Vol. III, p. 622. Throughout this book, references to Karl Marx's Das Kapital are to the following German editions: Vol. 1 -- 2nd edition, 1872; Vol. 2 -- 1885 edition; and Vol. 3 -- 1894 edition. References to the "Russian translation" of Capital are to the one by N. F. Danielson (1896).    [p.38]

  ^[16] Karl Marx, Capital, Vol. III, Moscow, 1959, p. 622.    [p.40]

  ^[17] Karl Marx, Capital, Vol. I, Moscow, 1958, pp. 745 and 747.    [p.42]

  ^[18] Here and elsewhere, footnotes indicated as Note to 2nd edition are those written by Lenin himself when he prepared the second, 1908 edition of this work.    [p.45]

  ^[19] Karl Marx, Capital, Vol. II, Moscow, 1957, p. 470.    [p.47]

  ^[20] Karl Marx, Capital, Vol. II, Moscow, 1957, p. 373.    [p.48]

  ^[21] Karl Marx, Capital, Vol. I, Moscow, 1958, p. 590.    [p.48]

  ^[22] Karl Marx, Capital, Vol. I, Moscow, 1958, Chapter XXIV, Section 2.    [p.49]

  ^[23] Karl Marx, Capital, Vol. I, Moscow, 1958, pp. 199-202.    [p.49]

  ^[24] Karl Marx, Capital, Vol. II, Moscow, 1957, pp. 363-64.    [p.50]

  ^[25] Karl Marx, Capital, Vol. II, Moscow, 1957, p. 394.    [p.52]

  ^[26] Karl Marx, Capital, Vol. II, Moscow, 1957, pp. 351-523.    [p.54]

  ^[27] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 299-300.    [p.55]

  ^[28] Karl Marx, Capital, Vol. II, Moscow, 1957, pp. 438-39.    [p.56]

  ^[29] Karl Marx, Capital, Vol. II, Moscow, 1957, p. 316.    [p.57]

  ^[30] Karl Marx, Capital, Vol. III, Moscow, 1959, pp, 239-40.    [p.57]

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  ^[31] Karl Marx, Capital, Vol. III, Moscow, 1959, p. 245.    [p.57]

  ^[32] E. Bernstein's Die Voraussetzungen des Sozialismus und die Aufgaben der Sozialdemokratie (The Premises of Socialism and thc Tasks of Social-Democracy ), which revised the principles of revolutionary Marxism in the spirit of bourgeois reformism, appeared in 1899. Lenin received a copy of it when the first edition of his The Development of Capitalism in Russia had appeared, so that it was only in the second edition that he was able to include his remarks on Bernstein's opportunist views.
    Lenin calls Bernstein "famous after the fashion of Herostratos." Tradition has it that Herostratos, a Greek who lived in the 4th century B. C., set fire to the noted temple of Artemis in his native town of Ephesus for the sole purpose of becoming known to posterity. The name of Herostratos has become an epithet applied to individuals who are ready to commit crime for the sake of winning fame.    [p.57]

  ^[33] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 472-73.    [p.58]

  ^[34] Karl Marx, Capital, Vol. III, Moscow, 1959, p. 299.    [p.58]

  ^[35] Karl Marx, Capital, Vol. III, Moscow, 1959, p. 822. Lenin's remark on errors in the translation of Capital refers to the translation by N.-on (Danielson), 1896.    [p.60]

  ^[36] Karl Marx, Capital, Vol. II, Moscow, 1957, Preface by Frederick Engels, p. 17.    [p.62]

  ^[37] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 818-819.    [p.64]

  ^[38] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 821-824.    [p.64]

  ^[39] Volgin -- pseudonym of G. V. Plekhanov. The work here cited is included in Vol. IX of his Works.    [p.65]