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The question of markets in capitalist society, it will be remembered, occupied a highly important place in the theory of the Narodnik economists headed by Messrs. V. V. and N.-on. It is, therefore, perfectly natural that economists who adopt a negative attitude towards the Narodnik theories should deem it essential to call attention to this problem and to explain, first and foremost, the basic, abstract-theoretical points of the "market theory." An attempt to offer such an explanation was undertaken by Mr. Tugan Baranovsky in 1894 in his book, Industrial Crises in Modern England, Chapter 1, Part 2, "The Market Theory"; last year, Mr. Bulgakov devoted his book, Markets under Capitalist Production (Moscow, 1897), to the same problem. The two authors are in agreement in their basic views; the central feature of both is an exposition of the noteworthy analysis, "the circulation and reproduction of the aggregate social capital," an analysis made by Marx in the third section of Volume II of Capital. The two authors agree that the theories propounded by Messrs. V. V. and N.-on on the market (especially the internal market) in capitalist society are completely erroneous and are due either to an ignoring or a misunderstanding of Marx's analysis. Both authors recognise the fact that developing capitalist production creates its own market mainly for means of production and not for articles of consumption; that the realisation of the product in general and of surplus-value in particular is fully explicable without the introduction of a foreign market; that the necessity of a foreign market for a capitalist country is not due to

 
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the conditions of realisation (as Messrs. V. V. and N.-on assumed), but to historical conditions, and so on. It would seem that Messrs. Bulgakov and Tugan-Baranovsky, being in such complete accord, would have nothing to argue about and that they could direct their joint efforts to a further and more detailed criticism of Narodnik economics. But in actual fact a polemic arose between these two writers (Bulgakov, op. cit., pages 246-57, et passim ; Tugan-Baranovsky in Mir Bozhy, 1898, No. 6, "Capitalism and the Market," apropos of S. Bulgakov's book). In our opinion both Mr. Bulgakov and Mr. Tugan-Baranovsky have gone a bit too far in their polemic and have given their remarks too personal a character. Let us try and discover whether there is any real difference between them and, if there is, which of them has the greater right on his side.

To begin with, Mr. Tugan-Baranovsky charges Mr. Bulgakov with possessing "little originality" and with liking too much jurare in verba magistri [*] (Mir Bozhy, 123). "The solution I set forth as regards the question of the role of the foreign market for a capitalist country," says Mr. Tugan-Baranovsky, "adopted in toto by Mr. Bulgakov, is not taken from Marx at all." We believe this statement to be untrue, for it was precisely from Marx that Mr. Tugan-Baranovsky took his solution to the question; Mr. Bulgakov no doubt also took it from the same source, so that the argument should not be about "originality" but about the understanding of a certain postulate of Marx, about the need to expound Marx in one way or in another. Mr. Tugan-Baranovsky says that Marx "does not touch at all on the question of the foreign market in the second volume" (loc. cit.). This is not true. In that same (third) section of the second volume, wherein he analyses the realisation of the product, Marx very definitely explains the relationship of foreign trade and, consequently, of the foreign market, to this question. He says the following:

"Capitalist production does not exist at all without foreign commerce. But when one assumes normal annual reproduction on a given scale one also assumes that foreign commerce only replaces home products [Artikel --

 
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goods][*] by articles of other use- or bodily form, without affecting value-relations, hence without affecting either the value relations in which the two categories 'means of production' and 'articles of consumption' mutually exchange, or the relations between constant capital, variable capital, and surplus-value, into which the value of the product of each of these categories may be divided. The involvement of foreign commerce in analysing the annually reproduced value of products can therefore only confuse without contributing any new element of the problem, or of its solution. For this reason it must be entirely discarded" (Das Kapital, II 1, 469.[15] Our italics). Mr. Tugan-Baranovsky's "solution of the question," namely, ". . . in any country importing goods from abroad there may be a surplus of capital; a foreign market is absolutely essential to such a country" (Industrial Crises, p. 429. Quoted in Mir Bozhy, loc. cit., 121) -- is merely a paraphrase of Marx's postulate. Marx says that in analysing realisation foreign trade must not be taken into consideration, since it only replaces one article by another. In analysing the question of realisation (Chapter I of the second part of Industrial Crises ), Mr. Tugan-Baranovsky says, that a country importing goods must export them, that is, must have a foreign market. One may ask, can it be said after this that Mr. Tugan-Baranovsky's "solution of the question" is "not taken from Marx at all"? Mr. Tugan-Baranovsky says further that "Volumes II and III of Capital constitute a far from finished rough draft" and that "for this reason we do not find in Volume III conclusions drawn from the splendid analysis given in Volume II" (op. cit., 123). This statement too is inaccurate. In addition to individual analyses of social reproduction (Das Kapital, III, 1, 289),[16] there is an explanation of how and to what extent the realisation of constant capital is "independent" of individual consumption and "we find in Volume III" a special chapter (the 49th, "Concerning the Analysis of the Process of Production") devoted to conclusions drawn from the splendid analysis given in Volume II, a chapter in which the results of the analysis

 
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are applied to the solution of the exceedingly important question of the forms of social revenue in capitalist society. Lastly, we must point out the equal inaccuracy of Mr. Tugan-Baranovsky's assertion that "Marx, in Volume III of Capital speaks in a quite different manner on the given question," and that in Volume III we "can even find statements that are decisively refuted by that analysis" (op. cit., 123). On page 122 of his article Mr. Tugan-Baranovsky quotes two such passages from Marx that allegedly contradict the basic doctrine. Let us examine them closely. In Volume III Marx says: "The conditions of direct exploitation, and those of realising it, are not identical. They diverge not only in place and time, but also logically. The first are only limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society. . . . The more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest" (III,1, 226. Russian translation, p. 189).[17] Mr. Tugan-Baranovsky interprets these words as follows: "The mere proportional distribution of national production does not guarantee the possibility of marketing the products. The products may not find a market even if the distribution of production is proportional -- this is apparently the meaning of the above-quoted words of Marx." No, this is not the meaning of those words. There are no grounds for seeing in them some sort of a correction to the theory of realisation expounded in Volume II. Marx is here merely substantiating that contradiction of capitalism which he indicated in other places in Capital, that is, the contradiction between the tendency toward the unlimited expansion of production and the inevitability of limited consumption (as a consequence of the proletarian condition of the mass of the people). Mr. Tugan-Baranovsky will, of course, not dispute the fact that this contradiction is inherent in capitalism; and since Marx points to this in the passage quoted, we have no right to look for some other meaning in his words. "The consumer power of society" and the "proportional relation of the various branches of production" -- these are not conditions that are isolated, independent of, and unconnected with, each other. On the contrary, a definite condition of consump-

 
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tion is one of the elements of proportionality. In actual fact, the analysis of realisation showed that the formation of a home market for capitalism owes less to articles of consumption than to means of production. From this it follows that Department I of social production (the production of means of production) can and must develop more rapidly than Department II (the production of articles of consumption). Obviously, it does not follow from this that the production of means of production can develop in complete independence of the production of articles of consumption and outside of all connection with it. In respect of this, Marx says: "As we have seen [Book II, Part III], continuous circulation takes place between constant capital and constant capital. . . . It is at first independent of individual consumption because it never enters the latter. But this consumption definitely (definitiv ) 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" (III, 1, 289. Russian translation, 242).[18] In the final analysis, therefore, productive consumption (the consumption of means of production) is always bound up with individual consumption and is always dependent on it. Inherent in capitalism, on the one hand, is the tendency toward the limitless expansion of productive consumption, toward the limitless expansion of accumulation and production, and, on the other, the proletarisation of the masses of the people that sets quite narrow limits for the expansion of individual consumption. It is obvious that we have here a contradiction in capitalist production, and in the above-quoted passage Marx simply reaffirms this contradiction.*

 
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The analysis of realisation in Volume II does not in any way refute this contradiction (Mr. Tugan-Baranovsky's opinion notwithstanding); it shows, on the contrary, the connection between productive and personal consumption. It stands to reason that it would be a serious error to conclude from this contradiction of capita]ism (or from its other contradictions) that capitalism is impossible or unprogressive as compared with former economic regimes (in the way our Narodniks like doing). Capitalism cannot develop except in a whole series of contradictions, and the indication of these contradictions merely explains to us the historically transitory nature of capitalism, explains the conditions and causes of its tendency to go forward to a higher form.

Summarising all that has been said above, we arrive at the following conclusion: the solution of the question of the role of the foreign market as expounded by Mr. Tugan-Baranovsky was taken precisely from Marx; there is no contradiction whatsoever on the question of realisation (or on the theory of markets) between Volumes II and III of Capital.

Let us proceed. Mr. Bulgakov accuses Mr. Tugan-Baranovsky of an incorrect assessment of the market theories of pre-Marxian economists. Mr. Tugan-Baranovsky accuses Mr. Bulgakov of uprooting Marx's ideas from the scientific soil in which they grew and of picturing matters as though "Marx's views had no connection with those of his predecessors." This last reproach is absolutely groundless, for Mr. Bulgakov not only did not express such an absurd opinion but, on the contrary, cited the views of representatives of various pre-Marxian schools. In our opinion, both Mr. Bulgakov and Mr. Tugan-Baranovsky, in outlining the history of the question, were wrong in paying too little attention to Adam Smith, who absolutely should have been treated in the greatest detail in a special exposition of the "market

 
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theory"; "absolutely" because it was precisely Adam Smith who was the founder of that fallacious doctrine of the division of the social product into variable capital and surplus-value (wages, profit and rent, in Adam Smith's terminology) which persisted until Marx and which, not only prevented the solution of the question of realisation, but did not even pose it correctly. Mr. Bulgakov says in all justice that "with incorrect premises and a false formulation of the problem itself, these disputes [on the market theory, that arose in economic literature] could only lead to empty, scholastic discussions" (op. cit., p. 21, note). The author, incidentally, devoted only one page to Adam Smith, omitting the brilliant, detailed analysis of Adam Smith's theory given by Marx in the 19th chapter of Volume II of Capital (§ II, S. 353-83),[23] and instead dwelt on the theories of the secondary and unoriginal theoreticians, J. S. Mill and von Kirchmann. As far as Mr. Tugan-Baranovsky is concerned, he ignored Adam Smith altogether and, as a result, in his outline of the views of later economists omitted their fundamental error (that of repeating Adam Smith's above-mentioned error). It goes without saying that under these circumstances the exposition could must be satisfactory. We shall confine ourselves to two examples. Having outlined his Scheme No. 1 that explains simple reproduction, Mr. Tugan-Baranovsky says: "But the case of simple reproduction assumed by us does not, of course, give rise to any doubts; the capitalists, according to our assumption, consume all their profits, so it is obvious that the supply of commodities will not exceed the demand" (Industrial Crises, p. 409). This is wrong. It was not at all "obvious" to former economists, for they could not explain even the simple reproduction of social capital, and, indeed, it cannot be explained unless it is understood that the value of the social product is divided into constant capital + variable capital + surplus-value, and in its material form into two great departments -- means of production and articles of consumption. For this reason even this case gave Adam Smith cause for "doubts," in which, as Marx showed, he got tangled up. If the later economists repeated Smith's error without sharing his doubts, this only shows that they had taken a step backwards in theory as far as the present ques-

 
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tion is concerned. It is likewise incorrect for Mr. Tugan-Baranovsky to state: "The Say-Ricardo doctrine is correct theoretically; if its opponents had taken the trouble to make numerical computations of the way commodities are distributed in capitalist economy, they would easily have understood that their refutation of this theory contains a logical contradiction" (loc. cit., 427). No. The Say-Ricardo doctrine is incorrect theoretically -- Ricardo repeated Smith's error (see his Works, translated by Sieber, St. Petersburg, 1882, p. 221), and Say put the finishing touches to it by maintaining that the difference between the gross and the net product of society is fully subjective. And however hard Say-Ricardo and their opponents had applied themselves to "numerical computations," they would never have reached a solution, because this is not merely a matter of figures, as Bulgakov has rightly remarked in respect of another passage in Mr. Tugan-Baranovsky's book (Bulgakov, loc. cit., p. 21, note).

We now come to another subject for dispute between Messrs. Bulgakov and Tugan-Baranovsky -- the question of numerical schemes and their significance. Mr. Bulgakov maintains that Mr. Tugan-Baranovsky's Schemes, "owing to their departure from the model [i.e., from Marx's Schemes, to a great extent lose their power of conviction and do not explain the process of social reproduction" (loc. cit., 248); and Mr. Tugan-Baranovsky says that "Mr. Bulgakov does not properly understand what such schemes are intended for" (Mir Bozhy, No. 6 for 1898, p. 125). In our opinion the truth in this case is entirely on Mr. Bulgakov's side. It is more likely that Mr. Tugan-Baranovsky "does not properly understand what the schemes are intended for" when he assumes that they "prove the deduction," (ibid.). Schemes alone cannot prove anything: they can only illustrate a process, if its separate elements have been theoretically explained; Mr. Tugan-Baranovsky compiled his own Schemes which differed from Marx's (and which were incomparably less clear than Marx's), at the same time omitting a theoretical explanation of those elements of the process that they were supposed to illustrate. The basic postulate of Marx's theory, that the social product does not consist of only variable capital + surplus-value (as Adam Smith, Ricardo, Proudhon, Rodbertus, and others thought), but of

 
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constant capital + the above two parts -- this postulate is not explained at all by Mr. Tugan-Baranovsky, although he adopted it in his Schemes. The reader of Mr. Tugan-Baranovsky's book is unable to understand this basic thesis of the new theory. Mr. Tugan-Baranovsky did not in any way show why it is essential to divide social production into two departments (I: means of production and II: articles of consumption), although, as Mr. Bulgakov justly remarked, "in this one division there is greater theoretical meaning than in all former arguments about the market theory" (loc. cit., p. 27). This is why Mr. Bulgakov's exposition of the Marxian theory is much clearer and more correct than Mr. Tugan-Baranovsky's.

In conclusion, examining Mr. Bulgakov's book in greater detail, we must note the following. About a third of the book is devoted to questions of the "differences in the turnover of capital" and of the "wages fund." The sections under these headings seem to us to be the least successful. In the first of these the author tries to add to Marx's analysis (see p. 63, note) and delves into very intricate computations and schemata to illustrate how the process of realisation takes place with differences in the turnover of capital. It seems to us that Mr. Bulgakov's final conclusion (that, in order to explain realisation with differences in the turnover of capital, it is necessary to assume that the capitalists in both departments have reserves, cf. p. 85) follows naturally from the general laws of the production and circulation of capital, so that there was no need to assume different cases of relations of the turnover of capital in Departments I and II and to draw up a whole series of diagrams. The same must be said of the second of the above-mentioned sections. Mr. Bulgakov correctly points out Mr. Herzenstein's error in asserting that he had found a contradiction in Marx's theory on this question. The author rightly says that "if the turnover period of all individual capitals is made to equal one year, at the beginning of the given year the capitalists will be the owners both of the entire product of the preceding year and of a sum of money equal to its value" (pp. 142-43). But Mr. Bulgakov was entirely wrong to take (p. 92, et seq.) the purely scholastic presentation of the problem by earlier economists (whether wages are derived

 
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from current production or from the production of the preceding working period); he created additional difficulties for himself in "dismissing" the statement by Marx, who "seems to contradict his basic point of view," "arguing as though" "wages are not derived from capital but from current production" (p. 135). But Marx did not pose the question in this way at all. Mr. Bulgakov found it necessary to "dismiss" Marx's statement because he tried to apply to Marx's theory a completely alien formulation of the question. Once it has been established how the entire process of social production takes place in connection with the consumption of the product by different classes of society, how the capitalists contribute the money necessary for the circulation of the product -- once all this has been explained, the question of whether wages are derived from current or preceding production loses all serious significance. Engels, publisher of the last volumes of Capital, therefore, said in the preface to Volume II that arguments like that of Rodbertus, for example, as to "whether wages are derived from capital or income, belong to the domain of scholasticism and are definitely settled in Part III of the second book of Capital " (Das Kapital, II, Vorwort, S. xxi).[24]

 
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^[15] Karl Marx, Capital, Vol. II, Moscow, 1957, p. 470 [Transcriber's Note: p. 474 -- DJR].    [p. 57]

^[16] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 299-300.    [p. 57]

^[17] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 239-40.    [p. 58]

^[18] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 299-300.    [p. 59]

^[19] Karl Marx, Capital, Vol. III, Moscow, 1959, p. 244.    [p. 59]

^[20] Karl Marx, Capital, Vol. III, Moscow, 1959, pp. 472-73.    [p. 59]

^[21] Karl Marx, Capital, Vol. II, Moscow, 1959, p. 316 [Transcriber's Note: 320, note 32. -- DJR].    [p. 60]

^[22] Novoye Slovo (New Word ) -- a monthly scientific, literary, and political magazine, published in St. Petersburg from 1894 by liberal Narodniks. Early in 1897 it was taken over by the "legal Marxists" (P. B. Struve, M. I. Tugan-Baranovsky, and others). Novoye Slovo published two of Lenin's articles when he was in exile in Siberia -- "A Characterisation of Economic Romanticism" and "About a Certain Newspaper Article." The magazine also

 
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presented writings by G. V. Plekhanov, V. I. Zasulich, L. Martov, A. M. Gorky, and others. It was closed down by the tsarist authorities in December 1897.    [p. 60]

^[23] Karl Marx, Capital, Vol. II, Moscow, 1957, pp. 363-89.    [p. 61]

^[24] Karl Marx, Capital, Vol. II, Moscow, 1957, pp. 17.    [p. 64]

^[25] Nauchnoye Obozreniye (Science Review ) -- a scientific magazine issued in St. Petersburg from 1894 to 1903 (when it became a literary magazine). It published Lenin's three articles: "A Note on the Question of the Market Theory" and "Once More on the Theory of Realisation" (see present volume, pp. 55-64, 74-93); and "Uncritical Criticism" (see present edition, Vol. 3, pp. 609-32).    [p. Title Page]