The second critic of 'populist' scepticism, S. Bulgakov, is no respecter
of Struve's 'third persons' and at once denies that they form the
sheet-anchor for capitalist accumulation.
'The majority of economists before Marx', he declares, 'solved the
problem by saying that some sort of "third person" is needed, as a _deus
ex machina_, to cut the Gordian knot, i.e. to consume the surplus value.
This part is played by luxury-loving landowners (as with Malthus), or by
indulgent capitalists, or yet by militarism and the like. There can be
no demand for the surplus value without some such extraordinary
mediators; a deadlock will be reached on the markets and the result will
be over-production and crises.'[300]
'Struve thus assumes that capitalist production in its development, too,
may find its ultimate mainstay in the consumption of some fantastic sort
of "third person". But if this great public is essentially characterised
as consuming the surplus value, whence does it obtain the means to
buy?'[301]
For his part, Bulgakov centres the whole problem from the first in the
analysis of the social aggregate product and its reproduction as given
by Marx in the second volume of _Capital_. He has a thorough grasp of
the fact that he must start with simple reproduction and must fully
understand its working in order to solve the question of accumulation.
In this context, he says, it is of particular importance to obtain a
clear picture of the consumption of surplus value and wages in such
branches of production as do not turn out goods for consumption, and
further, to understand fully the circulation of that portion of the
social aggregate product which represents used-up constant capital.
This, he argues, is a completely new problem of which economists had not
even been aware before Marx brought it up. 'In order to solve this
problem, Marx divides all capitalistically produced commodities into two
great and fundamentally different categories: the production of producer
and consumer goods. There is more theoretical importance in this
division than in all previous squabbles on the theory of markets.'[302]
Bulgakov, we see, is an outspoken and enthusiastic supporter of Marx's
theory. The object of his study, as he puts it, is thus a critique of
the doctrine that capitalism cannot exist without external markets. 'For
this purpose, the author has made use of the most valuable analysis of
social reproduction given by Marx in volume ii of _Capital_ which for
reasons unknown has scarcely been utilised in economic theory. Though
this analysis cannot be taken as fully completed, we are yet of opinion
that even in its present fragmentary shape it offers an adequate
foundation for a solution of the market problem that differs from that
adopted by Messrs. Nikolayon, V. V. and others, and which they claim to
have found in Marx.'[303]
Bulgakov gives the following formulation of his solution which he has
deduced from Marx himself: 'In certain conditions, capitalism may exist
solely by virtue of an internal market. It is not an inherent necessity
peculiar to the capitalist mode of production that the outside market be
able to absorb the surplus of capitalist production. The author has
arrived at this conclusion in consequence of his study of the
above-mentioned analysis of social reproduction.'
And now we are eager to hear the arguments Bulgakov has based on the
above thesis.
At first sight, they prove surprisingly simple: Bulgakov faithfully
reproduces Marx's well-known diagram of simple reproduction, adding
comments which do credit to his insight. He further cites Marx's equally
familiar diagram of enlarged reproduction--and this indeed is the proof
we have been so anxious to find.
'Consequent upon what we have said, it will not be difficult now to
determine the very essence of accumulation. The means-of-production
department I must produce additional means of production necessary for
enlarging both its own production and that of Department II. II, in its
turn, will have to supply additional consumption goods to enlarge the
variable capital in both departments. Disregarding the circulation of
money, the expansion of production is reduced to an exchange of
additional products of I needed by II against additional products of II
needed by I.'
Loyally following Marx's deductions, Bulgakov does not notice that so
far his entire thesis is nothing but words. He believes that these
mathematical _formulæ_ solve the problem of accumulation. No doubt we
can easily imagine proportions such as those he has copied from Marx,
and _if there is expanding production_, these _formulæ_ will apply. Yet
Bulgakov overlooks the principal problem: who exactly is to profit by an
expansion such as that whose mechanism he examines? Is it explained just
because we can put the mathematical proportions of accumulation on
paper? Hardly, because just as soon as Bulgakov has declared the matter
settled and goes on to introduce the circulation of money into the
analysis, he right away comes up against the question: where are I and
II to get the money for the purchase of additional products? When we
dealt with Marx, time and again the weak point in his analysis, the
question really of consumers in enlarged reproduction, cropped up in a
perverted form as the question of additional money sources. Here
Bulgakov quite slavishly follows Marx's approach, accepting his
misleading formulation of the problem without noticing that it is not
straightforward, although he knows perfectly well that 'Marx himself did
not answer this question in the drafts which were used to compile the
second volume of _Capital_'. It should be all the more interesting to
see what answer Marx's Russian pupil attempted to work out on his own.
'The following solution', Bulgakov says, 'seems to us to correspond best
to Marx's doctrine as a whole: The new variable capital in money-form
supplied by II for both departments has its commodity equivalent in
surplus value II. With reference to simple reproduction, we have already
seen that the capitalists themselves must throw money into circulation
to realise their surplus value, money which ultimately reverts to the
pocket of the very capitalist it came from. The quantity of money
required for the circulation of the surplus value is determined in
accordance with the general law of commodity circulation by the value
of the commodities that contained it, divided by the average amount of
money turnover. This same law must apply here; the capitalists of
Department II must dispose of a certain amount of money for the
circulation of their surplus value, and must consequently possess
certain money reserves. These reserves must be ample enough for the
circulation both of that portion of the surplus value which represents
the consumption fund and of that which is to be accumulated as capital.'
Bulgakov further argues that it is immaterial to the question how much
money is required to circulate a certain amount of commodities inside a
country, whether or not some of these commodities contain any surplus
value. 'In answer to the general question as to money sources inside the
country, however, our solution is that the money is supplied by the
producer of gold.'[304]
If a country requires more money consequent upon an 'expansion of
production', the production of gold will have to be increased
accordingly. So here we are again: the producer of gold is again the
_deus ex machina_, just as he had been for Marx. In fact, Bulgakov has
sadly disappointed us in the high hopes we had of his new solution. His
'solution' of the problem does not go a step beyond Marx's own analysis.
It can be reduced to three extremely simple statements as follows: (1)
Question: How much money do we need for the realisation of capitalised
surplus value? Answer: Just as much as is required in accordance with
the general law of commodity circulation. (2) Q.: Where do the
capitalists get the money for the realisation of capitalised surplus
value? A.: They are supposed to have it. (3) Q.: How did the money come
into the country in the first place? A.: It is provided by the producer
of gold. The extreme simplicity of this method of explanation is
suspicious rather than attractive.
We need not trouble, however, to refute this theory which makes the gold
producer the _deus ex machina_ of capitalist accumulation. Bulgakov has
done it himself quite adequately. Eighty pages on, he returns to the
gold producer in quite a different context, in the course of a lengthy
argument against the theory of the wages fund in which he got involved
for some mysterious reason. Here he suddenly displays a keen grasp of
the problem:
'We know already that there is a gold producer amongst other producers.
Even under conditions of simple reproduction, he increases, on the one
hand, the absolute quantity of money circulating inside the country, and
on the other, he buys producer and consumer goods without, in his turn,
selling commodities, paying with his own product, i.e. with the general
exchange equivalent, for the goods he buys. The gold producer now might
perhaps render the service of buying the whole accumulated surplus value
from II and pay for it in gold which II can then use to buy means of
production from I and to increase its variable capital needed to pay for
additional labour power so that the gold producer now appears as the
real external market.
'This assumption, however, is quite absurd. To accept it would mean to
make the expansion of social production dependent upon the expansion of
gold production. (Hear, hear!) This in turn presupposes an increase in
gold production which is quite unreal. If the gold producer were obliged
to buy all the accumulated surplus value from II for his own workers,
his own variable capital would have to grow by the day and indeed by the
hour. Yet his constant capital as well as his surplus value should also
grow in proportion, and gold production as a whole would consequently
have to take on immense dimensions. (Hear, hear!) Instead of submitting
this sophistical presumption to statistical tests--which in any case
would hardly be possible--a single fact can be adduced which would alone
refute this presupposition: it is the development of the institution of
credit which accompanies the development of capitalist economy. (Hear,
hear!) Credit has the tendency to diminish the amount of money in
circulation (this decrease being, of course, only relative, not
absolute); it is the necessary complement of a developing economy of
exchange which would otherwise soon find itself hampered by a lack of
coined money. I think we need not give figures in this context to prove
that the rôle of money in exchange-transactions is now very small. The
hypothesis is thus proved in immediate and evident disagreement with the
facts and must be confuted.'[305]
Bravo! Bravissimo! This is really excellent! Bulgakov, however, thus
'confutes' also his former explanation of the question, in what way and
by whom capitalised surplus value is realised. Moreover, in refuting his
own statements, Bulgakov has only explained in somewhat greater detail
what Marx expressed in a single word when he called the hypothesis of a
gold producer swallowing up the entire surplus value of
society--'absurd'.
Admittedly, Bulgakov's real solution and that of Russian Marxists in
general who deal extensively with the problem must be sought elsewhere.
Just like Tugan Baranovski and Ilyin [Lenin], Bulgakov underlines the
fact that the opposing sceptics made a capital error with respect to the
possibility of accumulation in analysing the value of the aggregate
product. They, especially Vorontsov, assumed that the aggregate social
product consists in consumer goods, and they all started from the false
premise that consumption is indeed the object of capitalist production.
This, as the Marxists now explain, is the source of the entire
misunderstanding--of all the imaginary difficulties connected with the
realisation of the surplus value, with which the sceptics racked their
brains.
'This school created non-existent difficulties because of this mistaken
conception. Since the normal conditions of capitalist production
presuppose that the capitalists' consumption fund is only a part of the
surplus value, and the smaller part at that, the larger being set aside
for the expansion of production, it is obvious that the difficulties
imagined by this (the _populist_) school do not really exist.'[306]
The unconcern with which Bulgakov here ignores the real problem is
striking. Apparently it has not dawned on him that the question as to
the ultimate beneficiaries, quite irrelevant so long as personal
consumption of the entire surplus value is assumed, only becomes acute
on the assumption of enlarged reproduction.
All these 'imaginary difficulties' vanish, thanks to two discoveries of
Marx's which his Russian pupils untiringly quote against their
opponents. The first is the fact that, in terms of value, the social
product is composed, not of _v + s_, but of _c + v + s_. Secondly, the
ratio of _c_ to _v_ in this sum continually increases with the progress
of capitalist production, and at the same time, the capitalised part of
the surplus value as against that part of it that is consumed, is ever
growing. On this basis, Bulgakov establishes a complete theory of the
relations between production and consumption in a capitalist society. As
this theory plays such an important part for the Russian Marxists in
general, and Bulgakov in particular, it will be necessary to get better
acquainted with it.
'Consumption,' Bulgakov says, 'the satisfaction of social needs, is but
an incidental moment in the circulation of capital. The volume of
production is determined by the volume of capital, and not by the amount
of social requirements. Not alone that the development of production is
unaccompanied by a growth in consumption--the two are mutually
antagonistic. Capitalist production knows no other than effective
consumption, but only such persons who draw either surplus value or
labour wages can be effective consumers, and their purchasing power
strictly corresponds to the amount of those revenues. Yet we have seen
that the fundamental evolutionary laws of capitalist production tend,
despite the absolute increase, to diminish the relative size of variable
capital as well as of the capitalists' consumption fund. We can say,
then, _that the development of production diminishes consumption_.[307]
The conditions of production and of consumption are thus in conflict.
Production cannot and does not expand to further consumption. Expansion,
however, is an inherent fundamental law of capitalist production and
confronts every individual capitalist in the form of a stern command to
compete. This contradiction is negligible in view of the fact that
expanding production as such represents a market for additional
products. "Inherent contradictions are resolved by an extension of the
outlying fields of production."'[308] (Bulgakov here quotes a saying of
Marx which he has thoroughly misunderstood; we shall later have occasion
to deal with it once more.) 'It has just been shown how this is
possible.' (A reference to the analysis of the diagram of enlarged
reproduction.) 'Evidently, the greater share of the expansion is
apportioned to Department I, to the production, that is to say, of
constant capital, and only a (relatively) smaller part to Department II
which produces commodities for immediate consumption. This change in the
relations of the two departments shows well enough what part is played
by consumption in a capitalist society, and it indicates where we should
expect to find the most important demand for capitalist
commodities.'[309] 'Even within the narrow limits of the profit motive
and the crises, even on this strait and narrow path, capitalist
production is capable of unlimited expansion, irrespective of, and even
despite, a decrease in consumption. The Russian literature frequently
points out that in view of diminishing consumption a considerable
increase of capitalist production is impossible without external
markets, but this is due to a wrong evaluation of the part played by
consumption in a capitalist society, the failure to appreciate that
consumption is not the ultimate end of capitalist production. Capitalist
production does not exist by the grace of an increase in consumption but
because of an extension of the outlying fields of production which in
fact constitute the market for capitalist products. A whole progression
of Malthusian investigators, discontented with the superficial harmony
doctrine of the school of Say and Ricardo, have slaved away at a
solution of the hopeless undertaking: to find means of increasing
consumption which the capitalist mode of production is bound to
decrease. Marx was the only one to analyse the real connections: he has
shown that the growth of consumption is fatally lagging behind that of
production, and must do so whatever "third persons" one might invent.
Consumption and its volume then should by no means be considered as
establishing the immediate limits to the expansion of production.
Capitalist production atones by the crises for deviating from the true
purpose of production, but it is independent of consumption. The
expansion of production is alone limited by, and dependent upon, the
volume of capital.'[310]
The theory of Bulgakov and Tugan Baranovski is here directly attributed
to Marx. In the eyes of the Russian Marxists, it is on the whole the
direct consequence of Marx's doctrine, of which it forms an organic
part. On another occasion Bulgakov says even more clearly that it is a
faithful interpretation of Marx's diagram of enlarged reproduction. Once
a country has embraced capitalist production, its internal movement
develops along the following lines:
'The production of constant capital makes up the Department I of social
reproduction, thereby instituting an independent demand for consumption
goods to the extent of both its own variable capital and the
consumption fund of its capitalists. Department II in its turn starts
the demand for the products of Department I. _Thus a closed circle is
already formed at the initial stage of capitalist production, in which
it depends on no external market but is self-sufficient and can grow, of
itself, as it were, by means of accumulation._'[311]
In the hands of the Russian Marxists this theory becomes the favourite
stick with which to beat their opponents, the 'populist' sceptics, in
the question of markets. We can only appreciate its daring to the full
when we look at its amazing discrepancy with everyday practice, with all
the known facts of capitalist economy. A thesis pronounced so
triumphantly as the purest Marxist gospel is even more deserving of our
admiration when we consider that it is grounded in an extremely simple
confusion. We shall have further occasion to deal with this confusion
when we come to the doctrine of Tugan Baranovski.
Bulgakov further develops a completely erroneous theory of foreign
commerce, based upon his misapprehension of the relations between
consumption and production in capitalist economy. A picture of
reproduction like the above in fact has no room for foreign commerce. If
capitalism forms a 'closed circle' in every country from the very
beginning, if, chasing its tail like a puppy and in complete
'self-sufficiency', it is able of itself to create an unlimited market
for its products and can spur itself on to ever greater expansion, then
every capitalist country as such must also be a closed and
self-sufficient economic whole. In but a single respect would foreign
commerce appear reasonable: to compensate, by imports from abroad, for
certain deficiencies due to the soil and the climate, i.e. the import of
raw materials or foodstuffs from sheer necessity. Completely upsetting
the thesis of the 'populists', Bulgakov in fact advances a theory of
international commerce among capitalist states which gives pride of
place to the import of agricultural products, with industrial exports
merely providing the requisite funds.
International traffic in commodities does not here seem to flow from the
character of the mode of production but from the natural conditions of
the countries concerned. This theory at any rate has not been borrowed
from Marx but from the economic experts of the German bourgeoisie. Just
as Struve took over from Wagner and Schaeffle his Three Empire Theory,
so Bulgakov adopts from the late List (_R.I.P._) the division of states
on the basis of 'agriculture' and 'mixed agriculture and manufacture',
or rather adapts it, in deference to the times, to the categories of
'manufacture' and 'mixed manufacture and agriculture'. Nature has
afflicted the first category with a deficiency in raw materials and
foodstuffs, making it thus dependent upon foreign commerce. The second
category has been liberally endowed with all it needs; here foreign
trade is of no account. The prototype of the first category is England,
of the second--the U.S.A. The stoppage of foreign commerce would mean
the economic death-blow to England, but only a temporary crisis in the
U.S.A. with a guarantee of full recovery.
'Production there is capable of unlimited expansion on the basis of the
internal market.'[312]
This theory, a hoary relic of German economics even now, has obviously
not the least grasp of the interrelations obtaining in an international
capitalist economy. It conceives of modern international trade in terms
that may have been appropriate to the times of the Phoenicians. Just
listen to the lecture of Professor Buecher:
'Although the liberalist era has greatly facilitated international
traffic, it would be a mistake to infer from this that the period of a
national economy is nearing its end, to be replaced by a period of
international economy.... Granted that we see in Europe to-day a number
of small countries that are not independent nations in respect of their
commodity supply, being compelled to import substantial amounts of their
foodstuffs and luxuries, while their industrial productivity is in
excess of the national needs and creates a permanent surplus for which
employment must be found in alien spheres of consumption. Yet although
countries of industrial production and those producing raw materials
exist side by side and depend upon one another, such "international
division of labour" should not be regarded as a sign that mankind is
about to attain to a higher stage of development which it would be
proper to contrast, under the label of world economy, with the ...
previous stages. No stage of economic development has ever permanently
guaranteed full autonomy in the satisfaction of wants. Every one of them
has left certain gaps which had to be filled in by some means or other.
So-called "international economy", on the other hand, has not, at any
rate so far, engendered any phenomena which are essentially different
from those of national economy, and we very much doubt that such
phenomena will appear in the near future.'[313]
As far as Bulgakov is concerned, this conception at any rate results in
an unexpected conclusion: his theory of the unlimited capacity for
development of capitalism is confined to certain countries with
favourable natural conditions. Capitalism in England is foredoomed
because the world market will be exhausted before long. In the U.S.A.,
India and Russia it can look forward to an unlimited development
because these countries are 'self-sufficient'.
Apart from these obvious peculiarities, Bulgakov's arguments about
foreign commerce again imply a fundamental misconception. Against the
sceptics, from Sismondi to Nikolayon, who believed that they had to take
recourse to outside markets for the realisation of capitalist surplus
value, he chiefly argues as follows:
'These experts obviously consider external commerce as a "bottomless
pit" to swallow up in all eternity the surplus value which cannot be got
rid of inside the country.'
Bulgakov for his part triumphantly points out that foreign commerce is
indeed not a pit and certainly not a bottomless one, but rather appears
as a double-edged sword, that exports always belong with imports, and
that the two usually counterbalance one another. Thus, whatever is
pushed out over one border, will be brought back, in a changed use-form,
over another. 'We must find room for the commodities that have been
imported as an equivalent of those exported, within the bounds of the
given market, and as this is impossible, _ex hypothesi_, it would only
generate new difficulties to have recourse to an external demand.'[314]
On another occasion he says that the way to realise the surplus value
found by the Russian 'populists', viz. external markets, 'is much less
favourable than that discovered by Malthus, v. Kirchmann and Vorontsov
himself when he wrote the essay _On Militarism and Capitalism_'.[315]
Although Bulgakov fervently copies Marx's diagram of reproduction, he
here exhibits no grasp whatever of the real problem towards which the
sceptics from Sismondi to Nikolayon were groping their way. He denies
that foreign commerce solves the difficulty as pretended, since it
again brings the surplus value that has been disposed of into the
country, although in a 'changed form'. In conformity with the crude
picture of v. Kirchmann and Vorontsov, he thus believes the problem to
be that of destroying a certain quantity of the surplus value, of wiping
it from the face of the earth. It simply does not occur to him that the
real problem is the realisation of the surplus value, the metamorphosis
of commodities, in fact the 'changed form' of the surplus value.
Bulgakov thus finally arrives at the same goal as Struve, though by a
different route. He preaches the self-sufficiency of capitalist
accumulation which swallows up its own product as Kronos swallows up his
children, and breeds ever more vigorously without help from outside. Now
only one further step is needed for Marxism to revert to bourgeois
economics, and this, as luck would have it, was taken by Tugan
Baranovski.