Reply to Ivo Vegter’s “Public Mass Transit Nobody Gets It Rights” Craig Thompson 6 August 2017



I really think Mr. Vegter is confused about a number of topics, and it is difficult to not get into a position of pointing out where he outwardly contradicts himself.


In opening paragraph, the statement is made “[p]ublic mass transit has rarely been a profitable proposition”. It’s not clear under what circumstances Mr. Vegter believes that public mass transit is supposed to be a profitable proposition, or that the purpose of public mass transit is about generating a profit. This confusion continues “and almost always, the taxpayer foots the bill for a constant drain on the public purse” and “[g]overnments around the world sink billions into their favourite transport systems” as though we’re talking about some kind of glory projected initiated by the CEO or Board of Directors of a company, and as though we were not talking about an entity, government, a large part of whose function is elements such as providing public transport to everyone, and all the downstream benefits that public transport brings to everyone citizen – there is a reality that citizens, actually people irregardless of their citizenship status, are entitled to the social, economic, cultural and so forth downstream benefits that transport provides and therefore have a right to public transport, and it is largely the function of governments to exercise, enable and move forward people’s rights and access to socio-economic opportunity. The fact that the ‘taxpayer’ (a nebulous concept, incidentally) ‘foots the bill’ is neither here nor there. The problem with arguing in this fashion, is that a number of arguments get put forward, none of them concretely, and none of them in anything like an organized fashion. Here are some of the arguments being made:


  • That public mass transit cannot (except rare instances) be made profitable: the underlying premise being that public mass transit should be operated on a profit-basis.
  • That public mass transit is only justifiable if it is operated on the basis that it is profitable: the underlying, broader principle, being that systems – in particular transport systems – are only justifiable in planning and implementation, if they are able to generate a profit, and non-profitable planning and implementation should not be sought on the basis of its profitability.
  • That propositions in terms of operations such as public mass transit must be justified to the taxpayer in terms of what they pay: the underlying broader premise being that because taxpayers, in virtue of the fact that they pay taxes, and on that basis alone, are entitled to a determination of what government should be spending or investing money into.


No doubt Mr. Vegter will not take issue with the premises as stated, although I suspect, coming from a sort of neo-liberalistic human-rights based orientation there may be some argument as to the nature of the premises that he is suppressing or using to formulate his arguments. In particular, the underlying premise of (3) above is particularly hard to square with any kind of rights-based language.


Let’s continue.


“In his article, he answered his own question: “Projected operational shortfalls of urban transport networks are well in excess of what most cities can afford”


One becomes very confused because this is not the conclusion that Ghalieb Dawood was making in general, and not certainly not what the conclusion he was drawing specifically. It’s as if Dawood’s words are being read with a specific view towards drawing a conclusion that has already been found, i.e. that public mass transit doesn’t get done right. Dawood’s words are somehow, in this context, holy writ to the effect of that conclusion. Let’s offer at least one opposing idea: perhaps, and in the context of what Dawood was actually stating, the conclusions that he was drawing, and without quoting him out of context and turn, what this statement does tell us is that (firstly) there is a financial funding problem with urban transport networks in the country, and that (secondly) there needs to be an operational readjustment, additional financing or the running of a financial reorganization process and (thirdly) that metropolitan’s cannot be expected to carry the operational burdens present because of urban transport networks, largely because, at present, the operational shortfall exceeds their ability to pay. It is difficult to see how these sorts of conclusions, which Dawood was himself drawing, can be turned into a complete repudiation of the system of public mass transit and the current models used.


“Clearly, then, we are not getting public transport right. A system that is a constant drain on the public purse, to the extent that it becomes unaffordable, is one that will inevitably decay and, if not bailed out, collapse.”


There are several problems here – let’s try to organize them and run through them:


  • The reasoning that because there is an operational shortfall that the cities/ metropolitan’s exceeds their affordability with regard to public transport is somehow directly translatable into a statement that the entire public transport system is not workable, is problematic and it’s a non sequitur.
  • There is a confusion here about what is meant by the ‘public purse’: are we talking about treasury? The fiscus? Are we separating out the metropolitan urban transport budgets, from the metropolitan budgets, from provincial budgets from the national budget? In what sense does all public transport get lumped together in this fashion? In what sense do we make statements to the effect that the ‘public purse’ is a big cash register of kinds in the government store? There is an additional confusion here about the fact that there seems to be some idea that government is some kind of super-consumer, supported by the household of taxpayers, that is charged with purchasing goods, services and utilities for this household, by itself and so forth. This is very simplistic economical understanding: government is not a consumer, or a household or anything of the kind. This kind of simplistic economical reasoning is not applicable to governments.
  • There is a problem here with the argument that if something is a ‘constant drain’ to the extent that it ‘becomes unafffordable’ then it will ‘inevitably decay’ and ‘collapse’. The issue that public transport represents what Mr. Vegter’s calls a ‘drain’ is neither here nor there and misses the point. The affordability of public transport is not the underlying rationale underlying the provision of public transport, and really it shows a failure to understand the role of government: government is not here to provide public transport on the basis of its affordability, which is again a completely moot point. Further to this, public transport is not a massive edifice, or building of some kind, but something that evolves, changes and requires constant funding and financing, ‘drained’ from the ‘public purse’. There is never going to be a scenario where public transport is not required to be funded on an ongoing basis, i.e. that it is never not a ‘drain’.
  • There is some equivocation here between the outlay costs of public transport, which are enormous, and between the operational costs of public transport, and there is some misunderstanding about how government budgeting takes place, how finance cycles work and so forth. At the time of implementation of the urban transport networks, notably the IRPTN systems, these systems were met a test for affordability that did assume that there would not be economic shrinkage, that there would be fewer divergences from and strains on treasury then we have experienced in the last few years, that a corporatization in management style would affect affordability positively, that tendering out most aspects of the urban transport networks to private enterprise would result in more positive affordability for these networks, and that the systems would have been built and implemented quicker than they have been. There has been economic shrinkage, treasury has become exceptionally strained and there has been no significant increase in the underlying revenue base for government since at least 2012, the corporatized public-management system put in place has not worked and has largely resulted in an explosion of corrupt activities (notably at PRASA), tendering has only served to escalate the costs incurred in running urban transport networks and there is an established pattern of collusive activities and actions on the part of corporate entities (least to say that there has been a system of monopolization put at work by these corporate entities), and finally, tendering out the building and implementation of urban transport networks has escalated the costs dramatically. It would be interesting to see what the result would be if government had been more interventionist with regard to the planning and implementation of these urban transport networks, if there was a more nuanced public administrative position taken with regard to the networks, and if corporates and private enterprise had been kept out of the process altogether.


“South African Airways is an infamous example. It extracts billions of rand in bailouts from government every few years. In return, we get an airline that has unaffordable fares on monopoly routes, and predatory fares on competitive routes in order to force out private rivals. Many valiant airlines have tried to offer better and cheaper services, but not being supported by lavish taxpayer bailouts, most have failed: 1Time, Flitestar, Nationwide, Sun Air, Velvet Sky.”


It is quite telling that SAA is always the example used in these sort of arguments, mainly because there is a very clear understanding that SAA is problematic. It’s interesting though that issues such as restructured loans, etc. are called ‘bailouts’, without there being an understanding that we’re talking about one aspect of overall government organization not only meeting general governmental responsibility and obligations with regard to ensuring the financial stability of internal enterprise, that purely in the name of credit viability and raising credit at any other point, government must ‘bailout’ such enterprises, and that the word ‘bailout’ completely misconstrues what is happening, as it is suggestive of paying out money because an enterprise failed to exercise complete financial diligence, instead of looking at SAA as what it is. SAA is not indicative of public transport, and is not indicative of urban transport networks. It is difficult to understand how one jumps around like this, making a set of unsupported claims, then jumping to SAA which is not part of the picture. SAA was never meant to be affordable or profitable, and the issue is that a large part of why SAA is kept functional is to ensure that there is a national air passenger carrier. In some respects it could even be regarded as a vanity project on the part of government in the name of creating a national identity and a ‘national image’, which of course, is an important part of issues that Mr. Vegter surely takes importantly like Foreign Direct Investment flows, which are affected by the image a country projects (which does undercut the argument that SAA is purely a vanity project). If we are going to say that the fares are unaffordable, what it is the basis for making such a statement? Unaffordable compared to what? If it is unaffordable, the argument isn’t clear: it’s unaffordable because it extracts ‘bailouts’ from government? What isn’t being addressed is that running on many of these ‘monopoly’ routes is simply not, and never going to be, affordable or profitable. If one talks about transport then one has to address a demand and supply side orientated form of transport. The issue here is not that SAA is unprofitable because it crowds out competition, or because it gets bailouts, but simply because it is operating in conditions in which it would never be profitable or affordable. If there was such a clear distinction between this completely inept and non-functional state entity and private competition, and private competition could operate these routes more effectively the profit and affordability margin would be great enough, if there is a point here, to entice and create competition. It’s not possible under current operating conditions to create this idealized competitive air passenger transport sector in South Africa, it has been tried and it has been a failure, and it’s unlikely to work. There’s also an issue here: SAA has unaffordable fares and yet predatory fares, and I do understand we’re talking about monopoly versus competitive routes, yet it’s not clear how this is actually the case. SAA operates on a fairly standard set of rates that are comparable route to route: the actual per-km fare from Johannesburg to Cape Town is within the same region of the actual per-km fare on, say, East London to Port Elizabeth. It’s not entirely clear here how some fares unaffordable and some are predatory. It’s also not clear who these private rivals are: the only comparable airline that operates in South Africa is British Airways and their associated brands, who operate under the same sort of regime as SAA in terms of their relationship to government. In fact, this national carrier and what Mr. Vegter mistakenly sees as monopolization is in fact a generally condition of how the international airline operates. With the exception of the United States, there are no private rivals to speak of in almost any airline sector anywhere. It’s not even clear what is meant by a competitive route within the context of a discussion on airline routes. Even to engage in this kind of argument is to suspend or ignore the fact that airlines are not meant to operate within the bounds of a profitability or affordability framework, that fulfilling the mandate inherent within the operation of these sorts of carriers inevitably leads to a ‘drain’ and ‘bailouts’ (it sits squarely within the preconditions of these sorts of operations), and the flat ignorance of the reality that there the problematic status of SAA is more tied into its management and operational issues.


I don’t understand how an airline competing against a national carrier, such as SAA, becomes ‘valiant’. By virtue of what? It’s valiant because it’s competing against something which isn’t supposed to be, or meant to be, held in a state of competition? One might say, ‘foolhardy’ instead of ‘valiantly’. It should also be made clear that these operations didn’t fail because they lacked government ‘bailouts’ but because they couldn’t compete in and of themselves. 1Time had planes that were falling apart, that, at one stage, could not get off the runway. The airlines discussed here actually operated on some of these ‘monopoly’ routes that Mr. Vegter talks about, and were unable to generate a profit.

“It is no different when governments or municipalities try to implement rail or bus networks. Most major international public mass transit systems do not run at a profit, and are heavily dependent on public funding. Meanwhile, they crowd out private competition.”


This paragraphs contains some of the most outrageous examples of the fallacy of equivocation at operation. ‘It is no different’ although there is almost every difference between SAA and the methodology and mechanisms under which rail or bus is operated by government and municipality. It is ridiculous to assert a claim regarding SAA and then advance the further claim that, because SAA operates in this conditions, ergo ipso facto, all governments and municipalities operate under the same mechanisms and the same manner as SAA, for a reason and rationale not provided. It is beyond any reasonable method of argument to make the jump that because SAA is problematic that, and that because SAA is a state enterprise, therefore, it runs that all public transport state enterprises are problematic. Note the use of the two suppressed premises here that if one state or government enterprise is problematic, therefore all government or state enterprises are problematic – it’s the same reasoning so that that if part of one apple on a tree is rotten then all the apples on the tree are rotten. The reason why using the logic in this way is that it shows how ridiculous the jump in premises here is. As for the next sentence, this error in understanding gets made again: namely the error that public transport is meant to be a profitable exercise, and the argument that runs behind this one is that ‘taxpayers’ are ‘investing’ in ‘government’ and should receive some sort of ‘dividend’ on their ‘investment’.


It’s as though Mr. Vegter believes that taxpayers are shareholders in government. There are two related lines of belief that are normally associated with this one: firstly, that taxpayers should receive services, goods etc. from government in proportion to the taxes that get paid, and secondly – in a similar fashion – that only taxpayers are entitled to make a determination around how government spends revenue originating from taxation.


Equally obnoxious is the line of reasoning that fiscal spending from government onto public transport somehow ‘crowds’ out competition, when in fact public transportation is not a sector that should be orientated and geared towards the market. It’s not clear from Mr. Vegter’s line of reasoning why public transport, in particular, should be subjected to competition and market forces. The argument that he seems to make is that:


  • Taxpayers should get value for their taxes in a direct manner;
  • That public transportation is a service offered that provides real value, both in terms of its own tangible value provision and its downstream value adding;
  • That whenever money is being provided to a service provider, those providing the money should see the maximum return on what is argued to be an investment;
  • Putting (1), (2) and (3) together, we get to the conclusion that because public transportation is a service and that taxpayers are providing the investment for that service, it should be as profitable as possible;
  • Competition as a particular form of economic activity is what generates the most effective set of conditions under which the greatest profit for investors can be obtained;
  • Therefore from (4) and (5), it follows that public transportation should be opened to competition in order to maximize profitability for the taxpayer.

We should also add the following premise in support of the above:

  • There are a number of private operations within the public sector transportation, so the leap towards privatizing the entire public transport sector is not to radically different from how certain sections of the public transport sector operate.


The problem here, is that if we apply this faulty reasoning elsewhere we run into what seem like crazy contradictions. Consider private security companies and the safety and security cluster: going through this argument, and assuming that its valid, leads us into a position where we would have to privatize the South African Police Service and the Metropolitan Police, ensure that the services they provide are open to competition, and maximize the profitability of enterprises concerned. This is of course a ridiculous conclusion, but the conclusion is reached at using the same form of argument and the same type of reasoning.


“Perhaps the most famous exception to the rule is the Hong Kong subway system, which turns a profit of $2-billion per year. However, this profit is built on an egregious subsidy from its majority owner, the government, in the form of free land. It receives parcels of land to build its stations and then has the right to develop the property above and around these stations. This makes the operator a major property developer with a competitive advantage that nobody can match. The subway system really acts as a loss leader for the profitable business of running malls and skyscrapers”


This is perhaps one of the most confused paragraphs in this article. The exception to the rule which was established in the previous paragraph is the Hong Kong Subway System, but, on closer inspection, it actually is subsidized, and thus doesn’t actually support the claim Mr. Vegter is putting forward. Making this sort of shaky argument that the subway system becomes profitable because of real estate development and effective land management is to miss the point: he was talking here about public transport. If we’re going to talk about introducing elements in this fashion around public transport, we can immediately pull out several local, South African examples, which are exceptions to Mr. Vegter’s rule: Intersite, a division of PRASA, carries an enormous operational surplus off land developed and managed by Intersite on behalf of PRASA – by extension of Mr. Vegter’s argument, PRASA (and by extension Metrorail) are exceptions to the rule. The various BRT systems, which form part of the IRTPN networks, in a similar fashion operate with operational surpluses once one takes into consideration the real property development and management associated with these public transport networks. So they are also exceptions. In fact, if we balance ACSA with SAA, we get the same conclusion that SAA is an exception to this rule. This rule is looking very shaky. Moreover, Mr. Vegter is a making a different argument here that before, and his argument is really one of two arguments: either he’s claiming that public transportation is a loss leader for real estate development, or that public transport cannot work without real estate development.


“Worldwide, there has been a fever for building new mass transit systems among those who advocate a “new urbanism” to combat sprawl and reduce pollution. Everywhere, their ideas appeal to politicians and their corporate cronies who have never been able to say no to multibillion dollar gravy trains.”


There is no justifiable evidence for this statement. New urbanism is a very old school of thought, which grew out of the 1960s. The model used in South Africa for the new BRT systems follows that of the Curitiba/Bogota model, which was built in the 1970s. It is also fallacious to argue that the reason that the building of new transit systems is taking place, and that they appeal to politicians is because they constitute ‘multibillion dollar gravy trains’. Let’s provide Mr. Vegter with some historical context:


  • The last mass public transport system built in South Africa was in the 1970s and constitutes what is today Metrorail. That system had, as of 2010, never been upgraded. The system had been built when entrenched Apartheid patterns of landuse were operation, and the primary purpose of the system built was to move workers into mining operations, industry and so forth, and then to move them out of the metropolitan areas as quickly as possible. There has been no major overhaul of the rail system to date, with the exclusion of the creation of vanity project stations for the 2010 FIFA World Cup. Most of the rolling stock, previously operated by SARCC, still uses a vacuum-breaking system, nearly half of the rolling stock is no longer operationally functional and the entire system is at the moment falling apart.
  • The major bus systems, such as PUTCO, Metrobus and Golden Arrow, were developed in the late 1980s when it was clear that the train rail system was not covering, and was no longer adequate to the areas it needed to cover in terms of its feeder routes and its delivery. But again, it was developed along entrenched Apartheid landuse patterns, and its primary purpose was to move workers out of and into very specific industrial operations. Beyond the purchasing of new road stock (e.g. busses) these systems have not, at the time of writing, been upgraded comprehensively.


These systems were not built in the name of providing a public transport service offering in any way: they were conveyor belts for moving black labour into and out of the sites were that labour was exercised, and became necessary because spatial architecture of metropolitans and the country was reconceived and rebuilt in such a manner that black labour was kept distinct and separate from the areas where the ruling white elite lived, and worked, in addition to being kept distinct and alienated from the sites where their labour was utilized. To continue:


  • The IRPTN’s were conceived as an attempt to provide a suitable public transport system on an equitable basis that did not treat transportation as a mere mechanism for the operation of moving labour for the purposes of satisfying the needs of large financial and industrial concerns. Due to the good urban road system that had been built in the 1970s and 1980s in most of the cities, the BRT model was selected over rail transport, as it was – and the calculations showed – would be more cost-effective. This took place, however, in a context in which there was to a sustained upgrading of the rail system.


I will talk on the mini-bus taxi industry later.


It is simply untrue to state that the implementation of mass transit systems is a new phenomenon (it’s not) driven by New Urbanism (which is a dead concept), in the name of reducing pollution and reducing sprawl (this are important considerations, but not the only considerations, and they certainly are not the most important considerations).


“Many successful public transit systems developed long ago, in symbiosis with the cities they served. They allowed workers to live closer to the country where the air was clearer and property was cheaper, while still being able to commute to work in the city. They supported property development along their routes, or did the property development themselves.”


There’s no context to any of these statements – which public transit systems are being talked about? What is the benchmark that Mr. Vegter is using? If he’s talking about public transit systems in South Africa, he’s completely mistaken as the older public transit systems were not designed in symbiosis with the cities, but in symbiosis with the needs of big capital. And the starry-eyed statement about workers being able to live in the country is ridiculous: what place is Mr. Vegter talking about – worker’s cannot afford to live in the ‘country’. Since the advent of the industrial revolution, worker’s have lived in cities, and often in the worst areas of cities if we use metrics such as air quality and property prices. Further, brutally, property development is beside the point and has nothing to do with public transport per se, except to utilize in some poorly thought through argument to the effect that it makes public transport more profitable.


“But governments could not leave well alone. They began to regulate public transit fares, and soon forced operators into bankruptcy. Most public transit systems ended up heavily subsidised or taken over by governments entirely.”


Now we have more children’s book narration. Every public transit system built in the last hundred years has been built and regulated by governments. The purpose of regulating public transit fares is not to drive operators into bankruptcy: it’s protect the public from predation by operators, its to ensure equitable access to the public transport service offering and the downstream, socio-economic and other forms of beneficiation it offers, it is stabilize pricing, and the demand/supply side equation, it makes long-term planning with regard to public transportation possible and its serves to operationally rationalize public transport. It is also not clear how governments regulating public transit fares leads operators into financial difficulties: that hasn’t been demonstrated in any way, and it is simply incorrect to assume that it’s a fact in the absence of any factual evidence. There is also a loop in the thinking here – one moment Mr. Vegter is saying that big bad government came along and regulated operators into bankruptcy because they were doing such a good job and it was regulation alone that brought them down; then Mr. Vegter says public transportation systems ended being subsidized or taken over by government, but then the question is how – what operational rationalization is there for government to pour subsidies into an industry unless those subsidies become needed or required – to put it in Mr. Vegter’s language, the operator’s required a ‘bailout’ in the form of subsidization? There’s a contradiction, unless the argument is that operators were regulated (and here regulation would be a compulsion to do something) into taking subsidies, which was then tanked them. It’s completely circuitous logic.


“Tacking a public mass transit system on to an existing city that developed without this symbiotic relationship is even more difficult than allowing a private system to develop and then annexing it to the government.”


What symbiotic relationship? And how exactly is engineering a solution that is specific to the problem, can be implemented on a large scale, has massive political will and public support driving it, is designed to have long-term sustainability, that is designed to build in further growth somehow less of an option that allowing a system that developed, because there was a lack of service provision, and that runs according to the dictates of who has money and where people are going to, wasn’t really developed, and constitutes an ad-hoc set of enterprises that were created reactively to urban development? The statement becomes even more bizarre when we just settle it onto the South African circumstances: rather than have a properly planned, design and engineered system grafted into an urban environment that has been developed to speak to that urban environment, especially in a country where public transportation has been geared towards the concerns of big financial, mining and industrial concerns, where private industry, such as the taxi industry, replicate those patterns of transport delivery, it is simply better to not address how public transport should work, that it is a powerful vehicle for re-shaping the economic, social and cultural landscape to maximize the dignity and rights of South Africans, and rather cleave to a solution that is fundamentally reactive in nature, is completely demand-side driven, which is subject to market fluctuations, that is not sustainable, that does not address people’s needs in an equitable fashion and so forth.


“Dawood mentions a common problem: transport distances in typical South African cities are long, especially between working-class townships and employment in the industrial or commercial hubs of cities. And because our cities did not develop around public transit corridors, in between there’s nothing worth stopping for.”


Mr. Vegter is missing the point here: the reason why public transport systems at the present time in South Africa run such high operational running costs is because of the reinforced spatial layout that the cities developed under Apartheid, which creates the long commuting times.


“To solve this problem, Dawood proposes “transit-oriented development” which would “create land use patterns that are able to drive a more sustainable demand for transport”. But that is absurdly ambitious. Redesigning cities, shuffling factories, offices, shops and residents around to better suit public transit would be an insanely expensive and disruptive undertaking. One might hope such a reorganisation would eventually happen organically, but if precipitating such a radical transformation in the short term is the price for effective mass transit, we will not have it for many decades to come”


Mr. Vegter seems to be living in some sort of bubble to believe that industry and commerce will naturally, organically, move in such a way that they will effectively reorientate towards the needs of workers and their long traveling times, is what is absurd. We come from a regime of a very particular form of spatial layout, that, despite extensive efforts, has largely remained unchanged. There is also strawmanning occurring here – no-one is talking about a radical, revolution in which transit-oriented development will take place tomorrow. It’s a formulation, an idea, about how development should have happened, and how it developed should be regeared in future. By emphasizing and support transit-orientated development, organic growth of the kind Mr. Vegter talks about, is what will happen in a gradualist manner. No one is talking about short-term transformation.


“Dawood cites other problems with new public transit systems. The government mandates requirements for buses and trains that make them very expensive. It also mandates low ticket prices, which improve affordability to the public, but makes these services hard for private contractors to operate profitably. This leads to operational cost shortfalls which inevitably get dumped upon the taxpayer.”


The government mandates that Dawood discusses are largely concerned with ensuring public safety. Which is perhaps an area that should be focused on. The second argument here, that ticket prices should be benched according to what becomes profitable for private operators, missing the point – again – about what public transportation is for. The operative word is ‘public’: public transport needs to be fairly available and accessible for the public. Whether it makes operating conditions difficult for private contractors is completely irrelevant. As for this idea of anything being dumped on the taxpayer, since 1994 government and parliament have never gone back to treasury to ask for further taxes to be levied to support operational cost shortfalls on public transportation. So how this is getting ‘dumped’ on the taxpayer is not clear, and it’s not true. Again this is the sort of stupid block-headed thinking that sees government as some sort of corporate entity and taxpayers as being shareholders. It’s also blatantly untrue.


“Low ticket prices have another effect: undermining the incredibly successful private taxi industry, which has been ferrying poor people between townships and jobs since apartheid first declared blacks to be third-class citizens and dumped them in the sticks without transport. It will also undermine metered taxis, and ride-sharing services such as Uber and Lyft which are rapidly increasing in popularity because they better meet the market’s needs. One might have an ideological or public planning preference for mass transit, but it isn’t right to use government force to destroy private businesses that were built with blood, sweat and tears, and sustain many workers and their families.”


There’s a big problem here: the ‘private taxi industry’ is heavily subsidized by government, and would not be able to operate without these subsidies. Let me remind the reader that the Toyota Quantum’s that have become such an integral part of what we now view as the mini-bus taxi industry were and are almost completely paid and subsidized by government. It’s incredibly successful because it’s such a heavily subsidized section of public transport. Not only that, but the mini-bus taxi industry does not operate, as a matter of course, in direct competition with rail and bus, but has become so successful by operating as a complementary service offering and on feeder routes to major bus and rail routes. This completely blows the argument that low ticket prices affect the taxi industry, not to mention that the fact that low ticket prices have a been a reality since these public transit systems were built, and the taxi industry has not been severely affected: one only has to use Rea Vaya as an example here. Uber and Lyft are successful because they meet a very specific market need, and there is no way that they could substitute for public mass transport: it’s an unthinkable line of reasoning, and it’s not clear how and why it gets introduced. Mr. Vegter needs to back up his statements here, that ‘government force’ has been used to ‘destroy private businesses’: give some examples. Show a consistent pattern. Show a causal, or at least a correlative link. It is doubtful that you will find one. “Blood, sweat and tears” is very melodramatic, and really is nothing about nothing, and is an attempt to utilize emotional arguments to substitute for intellectual and rational arguments. The last statement is also extremely misleading: mass public transport provides work to more workers than private transportation does, it moves more people into their places of employment, and creates a downstream valuation and beneficiation effect. Finally, it is not a question of ideological or public planning preference – this is also a complete non sequitur and it is misleading.


“Low fares for urban mass transit systems are designed to enable buses or trains to undercut minibus taxis, just as SAA exploits government subsidies to undercut its rivals. Yet Dawood notes: “Poor regulation and inadequate law enforcement allow illegal competition to undermine the urban transport system.” // In his eyes, private operators are the villains. But why should it be illegal for anyone to provide a transport service, provided that their vehicle is safe and their competence is assured? Instead of a profitable transport industry driven by entrepreneurs that go where the demand is, mass transit systems give us a loss-making public boondoggle that costs billions, forces customers to go where the supply is, and squashes private competitors like bugs.”


The first sentence here is simply untrue: low fares were not set up to under the minibus taxi industry: in fact, if the reader will recall, the taxi industry associations and the IRPTN and BRT planners spent a considerable amount of time negotiating and found a suitable compromise around fare structuring. Low fares are in place so people can use the public transport systems that we have. It is not a socialist conspiracy. Why the quotation from Dawood is put here is not entirely clear, as what Dawood seems to be suggesting is that further regulation and more adequate law enforcement is required to prevent illegal competition, not the reduction of fares, which undercuts Mr. Vegter’s entire argument here. It’s confusing. Further to this, no-one is villainizing private operators here. Does Mr. Vegter not understand issues such as managing supply-side economics with regard to transportation: that too many operators on a route causes an oversupply which then makes it difficult for private operators to generate a profit, and in turn them causes them to fail? Does Mr. Vegter not understand that there are strong public sector agreements with minibus taxi industry associations around the running of routes, agreements that also bind members to the decisions undertaken on their behalf by the associations, but which also ensure that government is able to effectively and efficiently subsidize this industry to ensure its viability? The illegality is not around whether it is right for someone who has a ‘safe’ vehicle and is ‘competent’ to drive, should be allowed to operate a transport service – that’s a complete misunderstanding of what this ‘illegal’ competition is, and that the provisions for illegal competition were largely put into place in order to ensure the viability and sustainability of the minibus taxi industry. This seems to be a deliberate, willful attempt to misunderstand reality. The last sentence here is more nonsense and non sequiturs, and one can tell it is nonsense by noting the half-backed emotional and adjectival rhetoric utilized – it’s a giveaway. There also a less than basic understanding of how demand and supply economics work: private transportation operators are purely demand driven, whereas the reality is that public mass transportation is designed in such a way that it meets high and middle priority public demand patterns, is sensitive to future developments in such demand patterns, and utilizes supply as a mechanism for achieving a gradualist, reformist change in spatial use patterns.


“Mass transit systems rarely work, even in rich countries. New York, for example, accounts for 40% of all US mass transit trips, despite trillions of dollars having been sunk into transit systems in other US cities. Expanding services, at huge public expense, does not appear to translate to expanding ridership. There is evidently a ceiling on how many people can be tempted onto mass transit. Expanding such systems merely turns them into financial liabilities, and makes any public policy their expansion might theoretically support – such as lower congestion, or lower pollution – unrealisable.”


There’s another area where Mr. Vegter appears to be confused here and that this his understanding that the functionality and effectiveness of public transport is whether or not it is profitable. The equation here is also not as simple as saying that increased financing leads, necessarily to increased ridership. That’s a false argument, and there’s no correlation that can be called upon. It is also telling that Mr. Vegter talks about the US, which has experienced a massive drain of ridership over the last thirty years, peaking about 10 years ago, away from utilizing mass public transportation offerings. There are also other factors at work here. Further, because of the unique circumstances surrounding US metropolitan public transport system implementation and upgrading, one cannot leap and compare, say, the South African situation in the same way. You cannot draw conclusions about how a system works in one country and apply it on the basis that it’s the same sort of system to another country. That’s very faulty reasoning. There’s another piece of reasoning here’s that also very confused: which is the idea that simply because something becomes a financial liability it means that other KPIs are immediately unrealizable, which is not the case. Further to that, why is Mr. Vegter not using any figures or facts here, instead relying on assertations and allegations without providing substance?


“You could argue the same thing for absolutely any government scheme. Consider the impact on the economy of a plan to dig a million holes and fill them in again. Such a project would employ lots of people, both in the digging and manufacturing of digging implements. Their wages in turn are spent on consumer goods and services, which boosts the economy around them. Economists would gleefully add their work to the gross domestic product. Yet they produce nothing of value. All this “economic impact” is just a mirage conjured up by wealth transferred from one group of citizens to another, for no economic benefit at all.”


The one problem here is that public transport and digging holes are not the same kind of thing, and you can’t compare the one with the other. This is a fundamental misunderstanding of what the purpose of public transportation is. The previous paragraph to this, which talks about the impacts of public transport are, is not from a terribly reliable source, is not peer-reviewed, and in any case, like of much Mr. Vegter reads, he reads incorrectly and cherry-picks, out of context and out of order, statements that support his bizarre arguments. In any case his argument about digging holes is completely fallacious: GDP only measures real production, and a million digging holes subsidized by government is not going to ever find its way onto into a GDP calculation.


“Not that the South African government would understand this argument. After all, they require road crews to employ thousands upon thousands of flag-wavers, despite the fact that people are vastly more expensive than flashing warning signs, and produce diddly-squat to justify their wages. If it was up to the government, they would consider the hole-digging project a great success, and would be excited to improve it even further by issuing workers with spoons instead of spades.”


Now, we’re really jumping around and Mr. Vegter is grasping at straws. These road crews that are being talked about, are operated by private enterprises who win tenders, and it is these companies, operating in a competitive environment, who have made a decision to utilize flag wavers and not flashing warning machines. They have obviously done so, because it generates more profitability. So it’s not clear what’s being argued here. Finally, the last sentence is completely asinine and is a cheap shot at a straw man.


“Reading Dawood’s article, it is clear that public mass transit systems in South Africa are unaffordable boondoggles, as they are around the world. And that’s before we even count the cost of all the fruitless and wasteful expenditure, maladministration, corruption or fraud that so often accompanies multibillion rand government projects.”


Frankly, this sort of paragraph is what happens when somebody reads an article such as the one written by Dawood, takes their own twisted and fallacious reasoning, applies, selectively, completely fails to understand what Dawood is actually saying, ignores his conclusions and then draws their own. Not only that, but Mr. Vegter is making much different claims and conclusions than Dawood is, and doesn’t justify them in any way.


The next few paragraphs here are just the kind of clap-trap that one reads throughout this entire article, and demonstrates the conclusions that Mr. Vegter has drawn, which are dubious at best, and supported by weak premises and unsupported and unconvincing arguments. Mr. Vegter, in his concluding paragraph, talks about the fiscal advice provided by the Financial and Fiscal Commission as being ‘inexplicable’ to him: perhaps its inexplicable to him because a very limited understanding of how economics works, how public transport works, is wedded to a neo-liberal agenda and is perhaps not very intelligent.




The Collapse of Capitalism (1922)

From the February 1922 issue of the Socialist Standard
There is a notion widely held in certain circles that capitalism is in a state of collapse, or at least, that its collapse is imminent; and this is interpreted to mean that the existing system of society will reach a point at which the production and distribution of commodities will cease, and the whole of the mechanism of Society will fail any longer to operate. Those who propagate this conception naturally accept the view that the tactics of the working class organisation must be framed with this collapse always in mind.
The illustration given recently by one of them—Mr. Palme Dutt—was the comparison of the present social order to a house admitted to be in a far from perfect condition. Of the occupants there was a section which considered redecoration and repair to be sufficient, while another section thought that nothing less than demolition and building anew would meet the needs of the situation. These sections represent the reformists and revolutionaries respectively. Now, however, the war and the Russian revolution have brought new factors to bear, and the dispute has been removed to another plane, the only question now being not whether to destroy, but how to rebuild. The house is said, in fact, to have collapsed about the ears of the dwellers through its own rottenness.
This sounds plausible indeed, but argument by analogy is dangerous. Has capitalism collapsed? and to what extent have the war and the Russian revolution altered, apart from having merely intensified, the previous structural defects?
The Third International lays it down that “The present is the period of the breakdown of Capitalism,” but does the evidence support this or do the “Third’s” adherents act as if it were true? The answer is decidedly no.
In America Max Eastman (Communist) says “This statement is not true of the United States in the same immediate sense that it may be true of Europe. We are not in the period of the breakdown of
Capitalism . . . ” (Liberator, October.)
He continues: “We (the American Communists) are employing tactics that could never be appropriate in any other period.” Now, the American Communist Party has “gone west,” and it is generally agreed that part, if not all, of the cause of their failure, was their attempt to apply a policy based on a condition of affairs which did not exist. Does that support the view that Capitalism is in collapse?
In Canada, which was wildly alleged to be on the verge of revolution at the time of the post-war Winnipeg strikes, a general election has just taken place which has led to the defeat of the conservative party by avowedly capitalist Liberals; the election having been fought on a tariff issue. There has not, apparently, been one Socialist returned.
In Australia, despite its heavy roll of unemployed, and its wage reductions, the “Proletarian” (Melbourne, 7th November) writes: “But until the full force of the present world depression reaches our shores the Australian working class will not be very susceptible to Communist propaganda.”
In Europe, where the full effect of the trade depression has been felt, does the economic system show any noticeable lack of vitality, or do the capitalists act in any but their accustomed aggressive manner towards the workers? In spite of the enormous amount of unemployment, curtailment of production, and relative overstocking of markets, are there any strikingly new factors to be considered after one has allowed for the expected after-war depression, the destruction of the war and the blockade, the new political frontiers and the chaos of the exchanges, all of them more or less normal phases of capitalism or the usual experiences after previous wars?
The struggle for markets may have been intensified, but does this call for new revolutionary tactics?
What of the Russian revolution? Here, again, the importance has been overestimated. The replacing of Czarist feudal Russia by a capitalistic republic even if the latter remains permanently under the Bolshevik Government, is the net result of the revolution, and it has only loomed so large because of the more or less accidental circumstances that it was the Bolsheviks who were brought into prominence by it.
If capitalism were in collapse would the Bolsheviks be relying on capitalist enterprise to rebuild Russia, a process which they admit will take decades at least? Would our own Communist Party feel the need to ally itself with the Labour Party to get the latter into power? The fact is the capacity of the capitalist system to recover from its depression has been under-rated and the Communists have in practice been forced to discard their theory. From the day when Marx and Engels wrote “There is a spectre haunting Europe—the spectre of Communism” there have continually been people who have under-estimated, as well as others like Hyndman, who never understood, but were always seeing revolution imminent in every momentary pause or set-back in capitalistic development.
In the minds, too, of some of its adherents, this theory of collapse is nothing but a failure to appreciate the Marxian viewpoint. The idea of an actual physical stoppage of production is not Marxian. Societies do not collapse like jerry-built houses. Marx wrote :—”The knell of capitalist private property sounds when the monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with it, and under it,” but as Boudin particularly points out (Theoretical System of Karl Marx) “He does not say that production under the old system must become impossible before a revolution sets in” and again, “as far as the purely mechanical breakdown of capitalism is concerned . . . it is not a physical breakdown, as would be necessary in order to exclude the necessary intervention of conscious human activity, but rather a moral bankruptcy. Certainly there is absolutely nothing in the capitalist system to prevent it from relapsing into a sort of new feudalism or slavery . . .  ” (p. 253). What Marx did mean, therefore, by the idea of the breakdown of Capitalism was the working-out of its inherent contradictions plus recognition by the workers that the continued existence of a system of society based on their exploitation is unnecessary and intolerable and that the class of exploiters no longer performs useful social functions. The moment of that recognition is the moment of the overthrow of class domination.
But it may be said “Capitalism can no longer employ its wage slaves, nor feed the unemployed.” But did it ever? Is unemployment new? and did Capitalism even in its days of most virile expansion and development provide an adequate standard of living for workers, employed or unemployed? Did the capitalists trouble about security for their victims? Everyone knows they did not: and yet the system survived.
It is of no use waiting for the system to collapse, nor preparing a new economic structure to replace it. It will not go until the workers determine that it shall go, and the pressing service revolutionary organisations can perform is to prepare the workers’ minds for the possibility of the immediate establishment of Socialism. To return to Palme Dutt’s analogy, we have not yet reached the stage of convincing the worker that there is anything wrong with the house at all; he still thinks it is the unneighbourliness of the people upstairs or in the house next door.
Edgar Hardcastle

Prohibition (1925)

Image: The Socialist Standard. [Source:]

From the December 1925 issue of the Socialist Standard
We are not opposed to the Prohibition— of swipes and adulterated water. Nor do we, like the brewer and his friends, pretend that Prohibition is a matter of vital concern to the workers. There is a Socialist view on this matter, but, like our views on all questions, it is in conflict with those of the reformer. The brewer endeavours to convince us that drinking is a noble and commendable act, for the same reason that the Nonconformist cocoa manufacturer boasts of the food value of his product and supports the Temperance movement. Profit greed determines what they think good for the dear worker, and the Temperance reformer with the anti-Prohibitionist reflect their interests. “Drink causes poverty! ” says the former, in his inverted reasoning. The fact is that the workers are born poor and must remain poor within the capitalist system because wages never provide more than a bare existence even to the life abstainer. “Without drink,” the reformer tells you, “money formerly so spent could be used to purchase things more necessary.” He incidentally plays upon a weak spot by the glad news that such alternative expenditure will mean more wor-r-r-k. In face of the ever-increasing army of unemployed, willing to accept a job at the lowest possible price, the idea that the workers would continue to receive the same wage after a lowered cost of living—is a joke. The sum spent on drink is an item in the average wage; if it should become no longer necessary, the abstainers’ previous advantage will disappear. As a result of Prohibition, those engaged in the brewing industry, including auxiliary workers, publicans, barmen, maids, cork and glass makers, sign writers, carmen, etc., would lose their employment. In actual practice this is the fate of the present unemployed whose numbers are in excess of the requirements of capitalistically produced wealth. Some claim that drink causes wretchedness, but the pathologist could prove quite the reverse. We know by experience that poverty surroundings cause depression. Drink is merely an attempt to counter its effects. In a city like Glasgow, where poverty and slumdom stalk naked and unashamed, the craving for stimulants almost becomes a disease with some of the very poor. Unable to afford ordinary spirits, they resort to methylated spirits as. a substitute. It is vile living conditions that cause people to become hopeless sots; it drives them to the glamour of the tavern. Whilst capitalism persists, most moderate drinkers will continue by habit to take to the present method as the line of easiest resistance to obtain a makeshift social intercourse and infuse a little colour into a grey world. As to the need in the future for alcoholic beverages, that can be safely left to a generation wise enough to realise that this earth provides the only opportunity that they will have to enjoy paradise. Those who produce the best will have the best, for with the coming of a sane system of society the cheap and nasty pleasures reserved the workers will be laid to rest with all the sordidness of the present system.

Social Reform or Revolution



Image: Rosa Luxemburg. [Source:]

Written: 1900, 1908
Source: Social Reform or Revolution, by Rosa Luxemburg
Publisher: Militant Publications, London, 1986 (no copyright)
First Published: 1900 (revised second edition 1908)
Translated: Integer
Online Version: Rosa Luxemburg Internet Archive ( 1999
Transcription/Markup: A. Lehrer

Reform or Revolution?

Image: Reform or Revolution? [Source:]



Chapter 1: The Opportunist Method

Chapter 2: The Adaptation of Capitalism

Chapter 3: The Realisation of Socialism Through Social Reforms

Chapter 4: Capitalism and the State

Chapter 5: The Consequences of Social Reformism and General Nature of Reformism

Chapter 6: Economic Development and Socialism

Chapter 7: Co-Operatives, Unions, Democracy

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Image: Reflections on resistance, reform, and revolution [Source:]

There are some good YouTube Videos that talk about Luxemburg’s “Social Reform or Revolution”:




Chapter VII Co-operatives, Unions, Democracy

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Image: The Hand That Will Rule the World – One Big Union. [Source:

Bernstein’s socialism offers to the workers the prospect of sharing in the wealth of society. The poor are to become rich. How will this socialism be brought about? His article in the Neue Zeit (Problems of Socialism) contain only vague allusions to this question. Adequate information, however, can be found in his book.

Bernstein’s socialism is to be realised with the aid of these two instruments: labour unions – or as Bernstein himself characterises them, economic democracy – and co-operatives. The first will suppress industrial profit; the second will do away with commercial profit.

Co-operatives – especially co-operatives in the field of production constitute a hybrid form in the midst of capitalism. They can be described as small units of socialised production within capitalist exchange.

But in capitalist economy exchanges dominate production. As a result of competition, the complete domination of the process of production by the interests of capital – that is, pitiless exploitation – becomes a condition for the survival of each enterprise. The domination of capital over the process of production expresses itself in the following ways. Labour is intensified. The work day is lengthened or shortened, according to the situation of the market. And, depending on the requirements of the market, labour is either employed or thrown back into the street. In other words, use is made of all methods that enable an enterprise to stand up against its competitors in the market. The workers forming a co-operative in the field of production are thus faced with the contradictory necessity of governing themselves with the utmost absolutism. They are obliged to take toward themselves the role of capitalist entrepreneur – a contradiction that accounts for the usual failure of production co-operatives which either become pure capitalist enterprises or, if the workers’ interests continue to predominate, end by dissolving.

Bernstein has himself taken note of these facts. But it is evident that he has not understood them. For, together with Mrs. Potter-Webb, he explains the failure of production co-operatives in England by their lack of “discipline.” But what is so superficially and flatly called here “discipline” is nothing else than the natural absolutist regime of capitalism, which it is plain, the workers cannot successfully use against themselves.

Producers’ co-operatives can survive within capitalist economy only if they manage to suppress, by means of some detour, the capitalist controlled contradictions between the mode of production and the mode of exchange. And they can accomplish this only by removing themselves artificially from the influence of the laws of free competition. And they can succeed in doing the last only when they assure themselves beforehand of a constant circle of consumers, that is, when they assure themselves of a constant market.

It is the consumers’ co-operative that can offer this service to its brother in the field of production. Here – and not in Oppenheimer’s distinction between co-operatives that produce and co-operatives that sell – is the secret sought by Bernstein: the explanation for the invariable failure of producers’ co-operatives functioning independently and their survival when they are backed by consumers’ organisations.

If it is true that the possibilities of existence of producers’ co-operatives within capitalism are bound up with the possibilities of existence of consumers’ co-operatives, then the scope of the former is limited, in the most favourable of cases, to the small local market and to the manufacture of articles serving immediate needs, especially food products. Consumers’ and therefore producers’ co-operatives, are excluded from the most important branches of capital production – the textile, mining, metallurgical and petroleum industries, machine construction, locomotive and ship-building. For this reason alone (forgetting for the moment their hybrid character), co-operatives in the field of production cannot be seriously considered as the instrument of a general social transformation. The establishment of producers’ co-operatives on a wide scale would suppose, first of all, the suppression of the world market, the breaking up of the present world economy into small local spheres of production and exchange. The highly developed, wide-spread capitalism of our time is expected to fall back to the merchant economy of the Middle Ages.

Within the framework of present society, producers’ co-operatives are limited to the role of simple annexes to consumers’ co-operatives. It appears, therefore, that the latter must be the beginning of the proposed social change. But this way the expected reform of society by means of co-operatives ceases to be an offensive against capitalist production. That is, it ceases to be an attack against the principal bases of capitalist economy. It becomes, instead, a struggle against commercial capital, especially small and middle-sized commercial capital. It becomes an attack made on the twigs of the capitalist tree.

According to Bernstein, trade unions too, are a means of attack against capitalism in the field of production. We have already shown that trade unions cannot give the workers a determining influence over production. Trade unions can determine neither the dimensions of production nor the technical progress of production.

This much may be said about the purely economic side of the “struggle of the rate of wages against the rate of profit,” as Bernstein labels the activity of the trade union. It does not take place in the blue of the sky. It takes place within the well-defined framework of the law of wages. The law of wages is not shattered but applied by trade-union activity.

According to Bernstein, it is the trade unions that lead – in the general movement for the emancipation of the working class – the real attack against the rate of industrial profit. According to Bernstein, trade unions have the task of transforming the rate of industrial profit into “rates of wages.” The fact is that trade unions are least able to execute an economic offensive against profit. Trade unions are nothing more than the organised defence of labour power against the attacks of profit. They express the resistance offered by the working class to the oppression of capitalist economy.

On the one hand, trade unions have the function of influencing the situation in the labour-power market. But this influence is being constantly overcome by the proletarianisation of the middle layers of our society, a process which continually brings new merchandise on the labour market. The second function of the trade unions is to ameliorate the condition of the workers. That is, they attempt to increase the share of the social wealth going to the working class. This share, however, is being reduced with the fatality of a natural process by the growth of the productivity of labour. One does not need to be a Marxist to notice this. It suffices to read RodbertusIn Explanation of the Social Question.

In other words, the objective conditions of capitalist society transform the two economic functions of the trade unions into a sort of labour of Sisyphus,[2] which is, nevertheless, indispensable. For as a result of the activity of his trade unions, the worker succeeds in obtaining for himself the rate of wages due to him in accordance with the situation of the labour-power market. As a result of trade union activity, the capitalist law of wages is applied and the effect of the depressing tendency of economic development is paralysed, or to be more exact, attenuated.

However, the transformation of the trade union into an instrument for the progressive reduction of profit in favour of wages presupposes the following social conditions; first, the cessation of the proletarianisation of the middle strata of our society; secondly, a stoppage of the growth of productivity of labour. We have in both cases a return to pre-capitalist conditions,

Co-operatives and trade unions are totally incapable of transforming the capitalist mode of production. This is really understood by Bernstein, though in a confused manner. For he refers to co-operatives and trade unions as a means of reducing the profit of the capitalists and thus enriching the workers. In this way, he renounces the struggle against the capitalist mode of production and attempts to direct the socialist movement to struggle against “capitalist distribution.” Again and again, Bernstein refers to socialism as an effort towards a “just, juster and still more just” mode of distribution. (Vorwärts, March 26, 1899).

It cannot be denied that the direct cause leading the popular masses into the socialist movement is precisely the “unjust” mode of distribution characteristic of capitalism. When the Social-Democracy struggles for the socialisation of the entire economy, it aspires therewith also to a “just” distribution of the social wealth. But, guided by Marx’s observation that the mode of distribution of a given epoch is a natural consequence of the mode of production of that epoch, the Social-Democracy does not struggle against distribution in the framework of capitalist production. It struggles instead for the suppression of the capitalist production itself. In a word, the Social-Democracy wants to establish the mode of socialist distribution by suppressing the capitalist mode of production. Bernstein’s method, on the contrary, proposes to combat the capitalist mode of distribution in the hopes of gradually establishing, in this way, the socialist mode of production.

What, in that case, is the basis of Bernstein’s program for the reform of society? Does it find support in definite tendencies of capitalist production? No. In the first place, he denies such tendencies. In the second place, the socialist transformation of production is for him the effect and not the cause of distribution. He cannot give his program a materialist base, because he has already overthrown the aims and the means of the movement for socialism, and therefore its economic conditions. As a result, he is obliged to construct himself an idealist base.

“Why represent socialism as the consequence of economic compulsion?” he complains. “Why degrade man’s understanding, his feeling for justice, his will?” (Vorwärts, March 26, 1899). Bernstein’s superlatively just distribution is to be attained thanks to man’s free will; man’s will acting not because of economic necessity, since this will is only an instrument, but because of man’s comprehension of justice, because of man’s idea of justice.

We thus quite happily return to the principle of justice, to the old war horse on which the reformers of the earth have rocked for ages, for the lack of surer means of historic transportation. We return to the lamentable Rosinate on which the Don Quixotes of history have galloped towards the great reform of the earth, always to come home with their eyes blackened.

The relation of the poor to the rich, taken as a base for socialism, the principle of co-operation as the content of socialism, the “most just distribution” as its aim, and the idea of justice as its only historic legitimisation – with how much more force, more with and more fire did Weitling defend that sort of socialism fifty years ago. However, that genius of a tailor did not know scientific socialism. If today, the conception tore into bits by Marx and Engels a half century ago is patched up and presented to the proletariat as the last world of social science, that too, is the art of a tailor but it has nothing of a genius about it.

Trade unions and co-operatives are the economic support for the theory of revisionism. Its principal political condition is the growth of democracy. The present manifestations of political reaction are to Bernstein only “displacement.” He considers them accidental, momentary, and suggests that they are not to be considered in the elaboration of the general directives of the labour movement.

To Bernstein, democracy is an inevitable stage in the development of society. To him, as to the bourgeois theoreticians of liberalism, democracy is the great fundamental law of historic development, the realisation of which is served by all the forces of political life. However, Bernstein’s thesis is completely false. Presented in this absolute force, it appears as a petty-bourgeois vulgarisation of results of a very short phase of bourgeois development, the last twenty-five or thirty years. We reach entirely different conclusions when we examine the historic development of democracy a little closer and consider, at the same time, the general political history of capitalism.

Democracy has been found in the most dissimilar social formations: in primitive communist groups, in the slave states of antiquity and in medieval communes. And similarly, absolutism and constitutional monarchy are to be found under the most varied economic orders. When capitalism began, with the first production of commodities, it resorted to a democratic constitution in the municipal-communes of the Middle Ages. Later, when it developed to manufacturing, capitalism found its corresponding political form in the absolute monarchy. Finally, as a developed industrial economy, it brought into being in France the democratic republic of 1793, the absolute monarchy of Napoleon I, the nobles’ monarchy of the Restoration period (1850-1830), the bourgeois constitutional monarchy of Louis-Philippe, then again the democratic republic, and against the monarchy of Napoleon III, and finally, for the third time, the Republic.

In Germany, the only truly democratic institution – universal suffrage – is not a conquest won by bourgeois liberalism. Universal suffrage in Germany was an instrument for the fusion of the small States. It is only in this sense that it has any importance for the development of the German bourgeoisie, which is otherwise quite satisfied with semi-feudal constitutional monarchy. In Russia, capitalism prospered for a long time under the regime of oriental absolutism, without having the bourgeoisie manifest the least desire in the world to introduce democracy. In Austria, universal suffrage was above all a safety line thrown to a foundering and decomposing monarchy. In Belgium, the conquest of universal suffrage by the labour movement was undoubtedly due to the weakness of the local militarism, and consequently to the special geographic and political situation of the country. But we have here a “bit of democracy” that has been won not by the bourgeoisie but against it.

The uninterrupted victory of democracy, which to our revisionism as well as to bourgeois liberalism, appears as a great fundamental law of human history and, especially, modern history is shown upon closer examination to be a phantom. No absolute and general relation can be constructed between capitalist development and democracy. The political form of a given country is always the result of the composite of all the existing political factors, domestic as well as foreign. It admits within its limits all variations of the scale from absolute monarchy to the democratic republic.

We must abandon, therefore, all hope of establishing democracy as a general law of historical development even within the framework of modern society. Turning to the present phase of bourgeois society, we observe here, too, political factors which, instead of assuring the realisation of Bernstein’s schema, led rather to the abandonment by bourgeois society of the democratic conquests won up to now.

Democratic institutions – and this is of the greatest significance – have completely exhausted their function as aids in the development of bourgeois society. In so far as they were necessary to bring about the fusion of small States and the creation of large modern States (Germany, Italy), they are no longer indispensable at present. Economic development has meanwhile effected an internal organic cicatrisation.

The same thing can be said concerning the transformation of the entire political and administrative State machinery from feudal or semi-feudal mechanism to capitalist mechanism. While this transformation has been historically inseparable from the development of democracy, it has been realised today to such an extent that the purely democratic “ingredients” of society, such as universal suffrage and the republican State form, may be suppressed without having the administration, the State finances, or the military organisation find it necessary to return to the forms they had before the March Revolution.[3]

If liberalism as such is now absolutely useless to bourgeois society it has become, on the other hand, a direct impediment to capitalism from other standpoints. Two factors dominate completely the political life of contemporary States: world politics and the labour movement. Each is only a different aspect of the present phase of capitalist development.

As a result of the development of the world economy and the aggravation and generalisation of competition on the world market, militarism and the policy of big navies have become, as instruments of world politics, a decisive factor in the interior as well as in the exterior life of the great States. If it is true that world politics and militarism represent a rising tendency in the present phase of capitalism, then bourgeois democracy must logically move in a descending line.

In Germany the era of great armament, began in 1893, and the policy of world politics inaugurated with the seizure of Kiao-Cheou were paid for immediately with the following sacrificial victim: the decomposition of liberalism, the deflation of the Centre Party, which passed from opposition to government. The recent elections to the Reichstag of 1907 unrolling under the sign of the German colonial policy were, at the same time, the historical burial of German liberalism.

If foreign politics push the bourgeoisie into the arms of reaction this is no less true about domestic politics – thanks to the rise of the working class. Bernstein shows that he recognises this when he makes the social-democratic “legend,” which “wants to swallow everything” – in other words, the socialist efforts of the working class – responsible for the desertion of the liberal bourgeoisie. He advises the proletariat to disavow its socialist aim so that the mortally frightened liberals might come out of the mousehole of reaction. Making the suppression of the socialist labour movement an essential condition for the preservation of bourgeois democracy, he proves in a striking manner that this democracy is in complete contradiction with the inner tendency of development of the present society. He proves, at the same time, that the socialist movement is itself a direct product of this tendency.

But he proves, at the same time, still another thing. By making the denouncement of the socialist aim an essential condition of the resurrection of bourgeois democracy, he shows how inexact is the claim that bourgeois democracy is an indispensable condition of the socialist movement and the victory of socialism. Bernstein’s reasoning exhausts itself in a vicious circle. His conclusion swallows his premises.

The solution is quite simple. In view of that fact that bourgeois liberalism has given up its ghost from fear of the growing labour movement and its final aim, we conclude that the socialist labour movement is today the only support for that which is not the goal of the socialist movement – democracy. We must conclude that democracy can have no support. We must conclude that the socialist movement is not bound to bourgeois democracy but that, on the contrary, the fate of democracy is bound up with the socialist movement. We must conclude from this that democracy does not acquire greater chances of survival, as the socialist movement becomes sufficiently strong to struggle against the reactionary consequences of world politics and the bourgeois desertion of democracy. He who would strengthen democracy should want to strengthen and not weaken the socialist movement. He who renounces the struggle for socialism renounces both the labour movement and democracy.

[2] The mythological king of Corinth who was condemned to roll a huge stone to the top of a hill. It constantly rolled back down against making his task incessant.

[3] The German revolution of 1848, which struck an effective blow against the feudal institutions in Germany.

Chapter VI Economic Development and Socialism

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Image: Panorama of the Lujiazui Finance and Trade Zone in Pudong, Shanghai. [Source:]

The greatest conquest of the developing proletarian movement has been the discovery of grounds of support for the realisation of socialism in the economic conditionof capitalist society. As a result of this discovery, socialism was changed from an “ideal” dreamt of by humanity for thousands of years to a thing of historic necessity.

Bernstein denies the existence of the economic conditions for socialism in the society of today. On this count his reasoning has undergone an interesting evolution. At first, in the Neue Zeit, he simply contested the rapidity of the process of concentration taking place in industry. He based his position on a comparison of the occupational statistics of Germany in 1882 and 1895. In order to use these figures for his purpose, he was obliged to proceed in an entirely summary and mechanical fashion. In the most favourable case, he could not, even by demonstrating the persistence of middle-sized enterprises, weaken in any the Marxian analysis because the latter does not suppose as a condition for the realisation of socialism either a definite rate of concentration of industry – that is, a definite delay of the realisation of socialism – or, as we have already shown, the absolute disappearance of small capitals, usually described as the disappearance of the petit bourgeoisie.

In the course of the latest development of his ideas Bernstein furnishes us, in his book, a new assortment of proofs: the statistics of shareholding societies. These statistics are used in order to prove that the number of shareholders increases constantly and as a result the capitalist class does not become smaller but grows bigger. It is surprising that Bernstein has so little acquaintance with his material. And it is astonishing how poorly he utilises the existing data in his own behalf.

If he wanted to disprove the Marxian law of industrial development by referring to the condition of shareholding societies, he should have resorted to entirely different figures. Anybody who is acquainted with the history of shareholding societies in Germany knows that their average foundation capital has diminished almost constantly. Thus while before 1871 their average foundation capital reached the figure of 10.8 million marks, it was only 4.01 million marks in 1871, 3.8 million marks in 1873, less than a million from 1882 to 1887, 0.52 million in 1891 and only 0.62 million in 1892. After this date the figures oscillated around 1 million marks, falling to 1.78 in 1895 and to 1.19 in the course of the first half of 1897. (Van de Borght: Handwörterbuch der Staatsswissenschaften, 1.)

Those are surprising figures. Using them, Bernstein hoped to show the existence of a counter-Marxian tendency for retransformation of large enterprises into small ones. The obvious answer to his attempt is the following. If you are to prove anything at all by means of your statistics, you must first show that they refer to the samebranches of industry. You must not show that small enterprises really replace large ones, that they do not. Instead, they appear only where small enterprises or even artisan industry were the rule before. This, however, you cannot show to be true. The statistical passage of immense shareholding societies to middle-size and small enterprises can be explained only by referring to the fact that the system of shareholding societies continues to penetrate new branches of production. Before, only a small number of large enterprises were organised as shareholding societies. Gradually shareholding organisation has won middle-size and even small enterprises. Today we can observe shareholding societies with a capital of below 1,000 marks.

Now, what is the economic significance of the extension of the system of shareholding societies? Economically, the spread of shareholding societies stands for the growing socialisation of production under the capitalist form – socialisation not only of large but also of middle-size and small production. The extension of shareholding does not, therefore, contradict Marxist theory but on the contrary, confirms it emphatically.

What does the economic phenomenon of a shareholding society actually amount to? It represents, on the one hand, the unification of a number of small fortunes into a large capital of production. It stands, on the other hand, for the separation of production from capitalist ownership. That is, it denotes that a double victory being won over the capitalist mode of production – but still on a capitalist base.

What is the meaning, therefore, of the statistics cited by Bernstein according to which an ever-greater number of shareholders participate in capitalist enterprises? These statistics go on to demonstrate precisely the following: at present a capitalist enterprise does not correspond, as before, to a single proprietor of capital but to a number of capitalists. Consequently, the economic notion of “capitalist” no longer signifies an isolated individual. The industrial capitalist of today is a collective person composed of hundreds and even of thousands of individuals. The category “capitalist” has itself become a social category. It has become “socialised” – within the frame-work of capitalist society.

In that case, how shall we explain Bernstein’s belief that the phenomenon of share-holding societies stands for the dispersion and not the concentration of capital? Why does he see the extension of capitalist property where Marx saw its suppression?

That is a simple economic error. By “capitalist,” Bernstein does not mean a category of production but the right to property. To him, “capitalist” is not an economic unit but a fiscal unit. And “capital” is for him not a factor of production but simply a certain quantity of money. That is why in his English sewing thread trust he does not see the fusion of 12,300 persons with money into a single capitalist unit but 12,300 different capitalists. That is why the engineer Schulze whose wife’s dowry brought him a large number of share from stockholder Mueller is also a capitalist for Bernstein. That is why for Bernstein the entire world seems to swarm with capitalists.

Here too, the theoretic base of his economic error is his “popularisation” of socialism. For this is what he does. By transporting the concept of capitalism from its productive relations to property relations, and by speaking of simple individuals instead of speaking of entrepreneurs, he moves the question of socialism from the domain of production into the domain of relations of fortune – that is, from the relation between Capital and Labour to the relation between poor and rich.

In this manner we are merrily led from Marx and Engels to the author of the Evangel of the Poor Fisherman. There is this difference, however. Weitling, with the sure instinct of the proletarian, saw in the opposition between the poor and the rich, the class antagonisms in their primitive form, and wanted to make of these antagonisms a lever of the movement for socialism. Bernstein, on the other hand, locates the realisation of socialism in the possibility of making the poor rich. That is, he locates it in the attenuation of class antagonisms and therefore in the petty bourgeoisie.

True, Bernstein does not limit himself to the statistics of incomes. He furnishes statistics of economic enterprises, especially those of the following countries: Germany, France, England, Switzerland, Austria and the United States. But these statistics are not the comparative figures of different periods in each country but of each period in different countries. We are not therefore offered (with the exception of Germany where he repeats the old contrast between 1895 and 1892), a comparison of the statistics of enterprises of a given country at different epochs but the absolute figures for different countries: England in 1891, France in 1894, United States in 1890, etc.

He reaches the following conclusion: “Though it is true that large exploitation is already supreme in industry today, it nevertheless, represents, including the enterprises dependent on large exploitation, even in a country as developed in Prussia, only half of the population occupied in production.” This is also true about Germany, England, Belgium, etc.

What does he actually prove here? He proves not the existence of such or such a tendency of economic development but merely the absolute relation of forcesof different forms of enterprise, or put in other words, the absolute relations of the various classes in our society.

Now if one wants to prove in this manner the impossibility of realising socialism one’s reasoning must rest on the theory according to which the result of social efforts is decided by the relation of the numerical material forces of the elements in the struggle, that is, by the factor of violence. In other words, Bernstein, who always thunders against Blanquism [See: Louis Blanqui], himself falls into the grossest Blanquist error. There is this difference, however. To the Blanquists, who represented a socialist and revolutionary tendency, the possibility of the economic realisation of socialism appeared quite natural. On this possibility they built the chances of a violent revolution – even by a small minority. Bernstein, on the contrary, infers from the numerical insufficiency of a socialist majority, the impossibility of the economic realisation of socialism. The Social-Democracy does not, however, expect to attain its aim either as a result of the victorious violence of a minority or through the numerical superiority of a majority. It sees socialism come as a result of economic necessity – and the comprehension of that necessity – leading to the suppression of capitalism by the working masses. And this necessity manifests itself above all in the anarchy of capitalism.

What is Bernstein’s position on the decisive question of anarchy in capitalist economy? He denies only the great general crises. He does not deny partial and national crises. In other words, he refuses to see a great deal of the anarchy of capitalism; he sees only a little of it. He is – to use Marx’s illustration – like the foolish virgin who had a child “who was only very small.” But the misfortune is that in matters like economic anarchy little and much are equally bad. If Bernstein recognises the existence of a little of this anarchy, we may point out to him that by the mechanism of the market economy this bit of anarchy will be extended to unheard of proportions, to end in collapse. But if Bernstein hopes to transform gradually his bit of anarchy into order and harmony while maintaining the system of commodity production, he again falls into one of the fundamental errors of bourgeois political economy according to which the mode of exchange is independent of the mode of production.

This is not the place for a lengthy demonstration of Bernstein’s surprising confusion concerning the most elementary principles of political economy. But there is one point – to which we are led by the fundamental questions of capitalist anarchy – that must be clarified immediately.

Bernstein declares that Marx’s law of surplus value is a simple abstraction. In political economy a statement of this sort obviously constitutes an insult. But if surplus value is only a simple abstraction, if it is only a figment of the mind – then every normal citizen who has done military duty and pays his taxes on time has the same right as Karl Marx to fashion his individual absurdity, to make his own law of value. “Marx has as much right to neglect the qualities of commodities till they are no more than the incarnation of quantities of simple human labour as have the economists of the Böhm-Jevons school to make an abstraction of all the qualities of commodities outside of their utility.”

That is, to Bernstein, Marx’s social labour and Menger’s abstract utility are quite similar – pure abstractions. Bernstein forgets completely that Marx’s abstraction is not an invention. It is a discovery. It does not exist in Marx’s head but in market economy. It has not an imaginary existence, but a real social existence, so real that it can be cut, hammered, weighed and put in the form of the money. The abstract human labour discovered by Marx is, in its developed form, no other than money. That is precisely one of the greatest of Marx’s discoveries, while to all bourgeois political economists, from the first of the mercantilists to the last of the classicists, the essence of money has remained a mystic enigma.

The Boehm-Jevons abstract utility is, in fact, a conceit of the mind. Or stated more correctly, it is a representation of intellectual emptiness, a private absurdity, for which neither capitalism nor any other society can be made responsible, but only vulgar bourgeois economy itself. Hugging their brain-child, Bernstein, Böhm and Jevons, and the entire subjective fraternity, can remain twenty years or more before the mystery of money, without arriving at a solution that is different from the one reached by any cobbler, namely that money is also a “useful” thing.

Bernstein has lost all comprehension of Marx’s law of value. Anybody with a small understanding of Marxian economics can see that without the law of value, Marx’s doctrine is incomprehensible. Or to speak more concretely – for him who does not understand the nature of the commodity and its exchange the entire economy of capitalism, with all its concatenations, must of necessity remain an enigma.

What precisely was the key which enabled Marx to open the door to the secrets of capitalist phenomena and solve, as if in play, problems that were not even suspected by the greatest minds of classic bourgeois economy? It was his conception of capitalist economy as an historic phenomenon – not merely in the sense recognised in the best of cases by the classic economists, that is, when it concerns the feudal past of capitalism – but also in so far as it concerns the socialist future of the world. The secret of Marx’s theory of value, of his analysis of the problem of money, of his theory of capital, of the theory of the rate of profit and consequently of the entire existing economic system is found in the transitory character of capitalist economy, the inevitability of its collapse leading – and this is only another aspect of the same phenomenon – to socialism. It is only because Marx looked at capitalism from the socialist’s viewpoint, that is from the historic viewpoint, that he was enabled to decipher the hieroglyphics of capitalist economy. And it is precisely because he took the socialist viewpoint as a point of departure for his analysis of bourgeois society that he was in the position to give a scientific base to the socialist movement.

This is the measure by which we evaluate Bernstein’s remarks. He complains of the “dualism” found everywhere in Marx’s monumental Capital. “The work wishes to be a scientific study and prove, at the same time, a thesis that was completely elaborated a long time before the editing of the book; it is based on a schema that already contains the result to which he wants to lead. The return to the Communist Manifesto (that is the socialist goal! – R.L.), proves the existence of vestiges of utopianism in Marx’s doctrine.”

But what is Marx’s “dualism” if not the dualism of the socialist future and the capitalist present? It is the dualism of Capitalism and Labour, the dualism of the bourgeoisie and the proletariat. It is the scientific reflection of the dualism existing in bourgeois society, the dualism of the class antagonism writhing inside the social order of capitalism.

Bernstein’s recognition of this theoretic dualism in Marx as “a survival of utopianism” is really his naïve avowal that he denies the class antagonisms in capitalism. It is his confession that socialism has become for him only a “survival of utopianism.” What is Bernstein’s “monism” – Bernstein’s unity – but the eternal unity of the capitalist regime, the unity of the former socialist who has renounced his aim and has decided to find in bourgeois society, one and immutable, the goal of human development?

Bernstein does not see in the economic structure of capitalism the development that leads to socialism. But in order to conserve his socialist program, at least in form, he is obliged to take refuge in an idealist construction placed outside of all economic development. He is obliged to transform socialism itself from a definite historical phase of social development into an abstract “principle.”

That is why the “co-operative principle” – the meagre decantation of socialism by which Bernstein wishes to garnish capitalist economy – appears as a concession made not to the socialist future of society but to Bernstein’s own socialist past.

Chapter V The Consequences of Social Reformism and General Nature of Reformism

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Image: Capitalism is NOT Working. [Source:]

In the first chapter we aimed to show that Bernstein’s theory lifted the program of the socialist movement off its material base and tried to place it on an idealist base. How does this theory fare when translated into practice?

Upon the first comparison, the party practice resulting from Bernstein’s theory does not seem to differ from the practice followed by the Social Democracy up to now. Formerly, the activity of the Social-Democratic Party consisted of trade union work, of agitation for social reforms and the democratisation of existing political institutions. The difference is not in the what, but in the how.

At present, the trade union struggle and parliamentary practice are considered to be the means of guiding and educating the proletariat in preparation for the task of taking over power. From the revisionist standpoint, this conquest of power is at the same time impossible or useless. And therefore, trade union and parliamentary activity are to be carried on by the party only for their immediate results, that is, for the purpose of bettering the present situation of the workers, for the gradual reduction of capitalist exploitation, for the extension of social control.

So that if we don not consider momentarily the immediate amelioration of the workers’ condition – an objective common to our party program as well as to revisionism – the difference between the two outlooks is, in brief, the following. According to the present conception of the party, trade-union and parliamentary activity are important for the socialist movement because such activity prepares the proletariat, that is to say, creates the subjective factor of the socialist transformation, for the task of realising socialism. But according to Bernstein, trade-unions and parliamentary activity gradually reduce capitalist exploitation itself. They remove from capitalist society its capitalist character. They realise objectively the desired social change.

Examining the matter closely, we see that the two conceptions are diametrically opposed. Viewing the situation from the current standpoint of our party, we say that as a result of its trade union and parliamentary struggles, the proletariat becomes convinced, of the impossibility of accomplishing a fundamental social change through such activity and arrives at the understanding that the conquest of power is unavoidable. Bernstein’s theory, however, begins by declaring that this conquest is impossible. It concludes by affirming that socialism can only be introduced as a result of the trade-union struggle and parliamentary activity. For as seen by Bernstein, trade union and parliamentary action has a socialist character because it exercises a progressively socialising influence on capitalist economy.

We tried to show that this influence is purely imaginary. The relations between capitalist property and the capitalist State develop in entirely opposite directions, so that the daily practical activity of the present Social Democracy loses, in the last analysis, all connection with work for socialism. From the viewpoint of a movement for socialism, the trade-union struggle and our parliamentary practice are vastly important in so far as they make socialistic the awareness, the consciousness, of the proletariat and help to organise it as a class. But once they are considered as instruments of the direct socialisation of capitalist economy, they lose out not only their usual effectiveness but also cease being means of preparing the working class for the conquest of power. Eduard Bernstein and Konrad Schmidt suffer from a complete misunderstanding when they console themselves with the belief that even though the program of the party is reduced to work for social reforms and ordinary trade-union work, the final objective of the labour movement is not thereby discarded, for each forward step reaches beyond the given immediate aim and the socialist goal is implied as a tendency in the supposed advance.

That is certainly true about the present procedure of the German Social Democracy. It is true whenever a firm and conscious effort for conquest of political power impregnates the trade-union struggle and the work for social reforms. But if this effort is separated from the movement itself and social reforms are made an end in themselves, then such activity not only does not lead to the final goal of socialism but moves in a precisely opposite direction.

Konrad Schmidt simply falls back on the idea that an apparently mechanical movement, once started, cannot stop by itself, because “one’s appetite grows with the eating,” and the working class will not supposedly content itself with reforms till the final socialist transformation is realised.

Now the last mentioned condition is quite real. Its effectiveness is guaranteed by the very insufficiency of capitalist reforms. But the conclusion drawn from it could only be true if it were possible to construct an unbroken chain of augmented reforms leading from the capitalism of today to socialism. This is, of course, sheer fantasy. In accordance with the nature of things as they are the chain breaks quickly, and the paths that the supposed forward movement can take from the point on are many and varied.

What will be the immediate result should our party change its general procedure to suit a viewpoint that wants to emphasise the practical results of our struggle, that is social reforms? As soon as “immediate results” become the principal aim of our activity, the clear-cut, irreconcilable point of view, which has meaning only in so far as it proposes to win power, will be found more and more inconvenient. The direct consequence of this will be the adoption by the party of a “policy of compensation,” a policy of political trading, and an attitude of diffident, diplomatic conciliation. But this attitude cannot be continued for a long time. Since the social reforms can only offer an empty promise, the logical consequence of such a program must necessarily be disillusionment.

It is not true that socialism will arise automatically from the daily struggle of the working class. Socialism will be the consequence of (1), the growing contradictions of capitalist economy and (2), of the comprehension by the working class of the unavoidability of the suppression of these contradictions through a social transformation. When, in the manner of revisionism, the first condition is denied and the second rejected, the labour movement finds itself reduced to a simple co-operative and reformist movement. We move here in a straight line toward the total abandonment of the class viewpoint.

This consequence also becomes evident when we investigate the general character of revisionism. It is obvious that revisionism does not wish to concede that its standpoint is that of the capitalist apologist. It does not join the bourgeois economists in denying the existence of the contradictions of capitalism. But, on the other hand, what precisely constitutes the fundamental point of revisionism and distinguishes it from the attitude taken by the Social Democracy up to now, is that it does not base its theory on the belief that the contradictions of capitalism will be suppressed as a result of the logical inner development of the present economic system.

We may say that the theory of revisionism occupies an intermediate place between two extremes. Revisionism does not expect to see the contradictions of capitalism mature. It does not propose to suppress these contradictions through a revolutionary transformation. It wants to lessen, to attenuate, the capitalist contradictions. So that the antagonism existing between production and exchange is to be mollified by the cessation of crises and the formation of capitalist combines. The antagonism between Capital and Labour is to be adjusted by bettering the situation of the workers and by the conservation of the middle classes. And the contradiction between the class State and society is to be liquidated through increased State control and the progress of democracy.

It is true that the present procedure of the Social Democracy does not consist in waiting for the antagonisms of capitalism to develop and in passing on, only then, to the task of suppressing them. On the contrary, the essence of revolutionary procedure is to be guided by the direction of this development, once it is ascertained, and inferring from this direction what consequences are necessary for the political struggle. Thus the Social Democracy has combated tariff wars and militarism without waiting for their reactionary character to become fully evident. Bernstein’s procedure is not guided by a consideration of the development of capitalism, by the prospect of the aggravation of its contradictions. It is guided by the prospect of the attenuation of these contradictions. He shows this when he speaks of the “adaptation” of capitalist economy.

Now when can such a conception be correct? If it is true that capitalism will continue to develop in the direction it takes at present, then its contradictions must necessarily become sharper and more aggravated instead of disappearing. The possibility of the attenuation of the contradictions of capitalism presupposes that the capitalist mode of production itself will stop its progress. In short, the general condition of Bernstein’s theory is the cessation of capitalist development.

This way, however, his theory condemns itself in a twofold manner.

In the first place, it manifests its utopian character in its stand on the establishment of socialism. For it is clear that a defective capitalist development cannot lead to a socialist transformation.

In the second place, Bernstein’s theory reveals its reactionary character when it refers to the rapid capitalist development that is taking place at present. Given the development of real capitalism, how can we explain, or rather state, Bernstein’s position?

We have demonstrated in the first chapter the baselessness of the economic conditions on which Bernstein builds his analysis of existing social relationships. We have seen that neither the credit system nor cartels can be said to be “means of adaptation” of capitalist economy. We have seen that not even the temporary cessation of crises nor the survival of the middle class can be regarded as symptoms of capitalist adaptation. But even though we should fail to take into account the erroneous character of all these details of Bernstein’s theory we cannot help but be stopped short by one feature common to all of them. Bernstein’s theory does not seize these manifestations of contemporary economic life as they appear in their organic relationship with the whole of capitalist development, with the complete economic mechanism of capitalism. His theory pulls these details out of their living economic context. It treats them as disjecta membra (separate parts) of a lifeless machine.

Consider, for example, his conception of the adaptive effect of credit. If we recognise credit as a higher natural stage of the process of exchange and, therefore, of the contradictions inherent in capitalist exchange, we cannot at the same time see it as a mechanical means of adaptation existing outside of the process of exchange. It would be just as impossible to consider money, merchandise, and capital as “means of adaptation” of capitalism.

However, credit, like money, commodities and capital, is an organic link of capitalist economy at a certain stage of its development. Like them, it is an indispensable gear in the mechanism of capitalist economy, and at the same time, an instrument of destruction, since it aggravates the internal contradictions of capitalism.

The same thing is true about cartels and the new, perfected means of communication.

The same mechanical view is presented by Bernstein’s attempt to describe the promise of the cessation of crises as a symptom of the “adaptation” of capitalist economy. For him, crises are simply derangements of the economic mechanism. With their cessation, he thinks, the mechanism could function well. But the fact is that crises are not “derangements” in the usual sense of the word. They are “derangements” without which capitalist economy could not develop at all. For if crises constitute the only method possible in capitalism – and therefore the normal method – of solving periodically the conflict existing between the unlimited extension of production and the narrow limits of the world market, then crises are an organic manifestation inseparable from capitalist economy.

In the “unhindered” advance of capitalist production lurks a threat to capitalism that is much greater than crises. It is the threat of the constant fall of the rate of profit, resulting not only from the contradiction between production and exchange, but from the growth of the productivity of labour itself. The fall in the rate of profit has the extremely dangerous tendency of rendering impossible any enterprise for small and middle-sized capitals. It thus limits the new formation and therefore the extension of placements of capital.

And it is precisely crises that constitute the other consequence of the same process. As a result of their periodic depreciation of capital, crises bring a fall in the prices of means of production, a paralysis of a part of the active capital, and in time the increase of profits. They thus create the possibilities of the renewed advance of production. Crises therefore appear to be the instruments of rekindling the fire of capitalist development. Their cessation – not temporary cessation, but their total disappearance in the world market – would not lead to the further development of capitalist economy. It would destroy capitalism.

True to the mechanical view of his theory of adaptation, Bernstein forgets the necessity of crises as well as the necessity of new placements of small and middle-sized capitals. And that is why the constant reappearance of small capital seems to him to be the sign of the cessation of capitalist development though it is, in fact, a symptom of normal capitalist development.

It is important to note that there is a viewpoint from which all the above-mentioned phenomena are seen exactly as they have been presented by the theory of “adaptation.” It is the viewpoint of the isolated (single) capitalist who reflects in his mind the economic facts around him just as they appear when refracted by the laws of competition. The isolated capitalist sees each organic part of the whole of our economy as an independent entity. He sees them as they act on him, the single capitalist. He therefore considers these facts to be simple “derangements” of simple “means of adaptation.” For the isolated capitalist, it is true, crises are really simple derangements; the cessation of crises accords him a longer existence. As far as he is concerned, credit is only a means of “adapting” his insufficient productive forces to the needs of the market. And it seems to him that the cartel of which he becomes a member really suppresses industrial anarchy.

Revisionism is nothing else than a theoretic generalisation made from the angle of the isolated capitalist. Where does this viewpoint belong theoretically if not in vulgar bourgeois economics?

All the errors of this school rest precisely on the conception that mistakes the phenomena of competition, as seen from the angle of the isolated capitalist, for the phenomena of the whole of capitalist economy. Just as Bernstein considers credit to be a means of “adaptation,” to the needs of exchange. Vulgar economy, too, tries to find the antidote against the ills of capitalism in the phenomena of capitalism. Like Bernstein, it believes that it is possible to regulate capitalist economy. And in the manner of Bernstein, it arrives in time at the desire to palliate the contradictions of capitalism, that is, at the belief in the possibility of patching up the sores of capitalism. It ends up by subscribing to a program of reaction. It ends up in an utopia.

The theory of revisionism can therefore be defined in the following way. It is a theory of standing still in the socialist movement built, with the aid of vulgar economy, on a theory of capitalist standstill.

Chapter IV Capitalism and the State

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Image: State Capitalism: How It Works. [Source:]

The second condition of the gradual realisation of socialism is according to Bernstein, the evolution of the State in society. It has become a commonplace to say that the present State is a class State. This, too, like referring to capitalist society, should not be understood in a rigorous absolute manner, but dialectically.

The State became capitalist with the political victory of the bourgeoisie. Capitalist development modifies essentially the nature of the State, widening its sphere of action, constantly imposing on it new functions (especially those affecting economic life), making more and more necessary its intervention and control in society. In this sense, capitalist development prepares little by little the future fusion of the State to society. It prepares, so to say, the return of the function of the state to society. Following this line of thought, one can speak of an evolution of the capitalist State into society, and it is undoubtedly what Marx had in mind when he referred to labour legislation as the first conscious intervention of “society” in the vital social process, a phrase upon which Bernstein leans heavily.

But on the other hand the same capitalist development realises another transformation in the nature of the State. The present State is, first of all, an organisation of the ruling class. It assumes functions favouring social developments specifically because, and in the measure that, these interests and social developments coincide, in a general fashion, with the interests of the dominant class. Labour legislation is enacted as much in the immediate interest of the capitalist class as in the interest of society in general. But this harmony endures only up to a certain point of capitalist development. When capitalist development has reached a certain level, the interests of the bourgeoisie, as a class, and the needs of economic progress begin to clash even in the capitalist sense. We believe that this phase has already begun. It shows itself in two extremely important phenomena of contemporary social life: on the one hand, the policy of tariff barriers, and on the other, militarism. These two phenomena have played an indispensable, and in that sense a progressive and revolutionary role in the history of capitalism. Without tariff protection the development of large industry would have been impossible in several countries. But now the situation is different.

At present, protection does not serve so much to develop young industry as to maintain artificially certain aged forms of production.

From the angle of capitalist development, that is, from the point of view of world economy, it matters little whether Germany exports more merchandise into England or England exports more merchandise into Germany. From the viewpoint of this development it may be said that the blackamoor has done his work and it is time for him to go his way. Given the condition of reciprocal dependence in which the various branches of industry find themselves, a protectionist tariff on any commodity necessarily results in raising the cost of production of other commodities inside the country. It therefore impedes industrial development. But this is not so from the viewpoint of the interests of the capitalist class. While industry does not need tariff barriers for its development, the entrepreneurs need tariffs to protect their markets. This signifies that at present tariffs no longer serve as a means of protecting a developing capitalist section against a more advanced section. They are now the arm used by one national group of capitalists against another group. Furthermore, tariffs are no longer necessary as an instrument of protection for industry in its movement to create and conquer the home market. They are now indispensable means for the cartelisation of industry, that is, means used in the struggle of capitalist producers against consuming society in the aggregate. What brings out in an emphatic manner the specific character of contemporary customs policies is the fact that today not industry, but agriculture plays the predominant role in the making of tariffs. The policy of customs protection has become a tool for converting and expressing the feudal interests in capitalist form.

The same change has taken place in militarism. If we consider history as it was – not as it could have been or should have been – we must agree that war has been an indispensable feature of capitalist development. The United States, Germany, Italy, the Balkan States, Poland, all owe the condition or the rise of their capitalist development to wars, whether resulting in victory or defeat. As long as there were countries marked by internal political division or economic isolation which had to be destroyed, militarism played a revolutionary role, considered from the viewpoint of capitalism. But at present the situation is different. If world politics have become the stage of menacing conflicts, it is not so much a question of the opening of new countries to capitalism. It is a question of already existing European antagonisms, which, transported into other lands, have exploded there. The armed opponents we see today in Europe and on other continents do not range themselves as capitalist countries on one side and backward countries on the other. They are States pushed to war especially as a result of their similarly advanced capitalist development. In view of this, an explosion is certain to be fatal to this development, in the sense that it must provoke an extremely profound disturbance and transformation of economic life in all countries.

However, the matter appears entirely different when considered from the standpoint of the capitalist class. For the latter militarism has become indispensable. First, as a means of struggle for the defence of “national” interests in competition against other “national” groups. Second, as a method of placement for financial and industrial capital. Third, as an instrument of class domination over the labouring population inside the country. In themselves, these interests have nothing in common with the development of the capitalist mode of production. What demonstrates best the specific character of present day militarism is the fact that it develops generally in all countries as an effect, so to speak, of its own internal, mechanical, motive power, a phenomenon that was completely unknown several decades ago. We recognise this in the fatal character of the impending explosion which is inevitable in spite of the complete impending explosion which is inevitable in spite of the complete indecisiveness of the objectives and motives of the conflict. From a motor of capitalist development militarism has changed into a capitalist malady.

In the clash between capitalist development and the interest of the dominant class, the State takes a position alongside of the latter. Its policy, like that of the bourgeoisie, comes into conflict with social development. It thus loses more and more of its character as a representative of the whole of society and is transformed, at the same rate into a pure class state. Or, to speak more exactly, these two qualities distinguish themselves more from each other and find themselves in a contradictory relation in the very nature of the State. This contradiction becomes progressively sharper. For on one hand, we have the growth of the functions of a general interest on the part of the State, its intervention in social life, its “control” over society. But on the other hand, its class character obliges the State to move the pivot of its activity and its means of coercion more and more into domains which are useful only to the class character of the bourgeoisie and have for society as a whole only a negative importance, as in the case of militarism and tariff and colonial policies. Moreover, the “social control” exercised by this State is at the same time penetrated with and dominated by its class character (see how labour legislation is applied in all countries).

The extension of democracy, which Bernstein sees as a means of realising socialism by degrees, does not contradict but, on the contrary, corresponds perfectly to the transformation realised in the nature of the State.

Konrad Schmidt declares that the conquest of a social-democratic majority in Parliament leads directly to the gradual “socialisation” of society. Now, the democratic forms of political life are without a question a phenomenon expressing clearly the evolution of the State in society. They constitute, to that extent, a move toward a socialist transformation. But the conflict within the capitalist State, described above, manifests itself even more emphatically in modern parliamentarism. Indeed, in accordance with its form, parliamentarism serves to express, within the organisation of the State, the interests of the whole society. But what parliamentarism expresses here is capitalist society, that is to say, a society in which capitalist interests predominate. In this society, the representative institutions, democratic in form, are in content the instruments of the interests of the ruling class. This manifests itself in a tangible fashion in the fact that as soon as democracy shows the tendency to negate its class character and become transformed into an instrument of the real interests of the population, the democratic forms are sacrificed by the bourgeoisie, and by its State representatives. That is why the idea of the conquest of a parliamentary reformist majority is a calculation which, entirely in the spirit of bourgeois liberalism, pre-occupies itself only with one side – the formal side – of democracy, but does not take into account the other side, its real content. All in all, parliamentarism is not a directly socialist element impregnating gradually the whole capitalist society. It is, on the contrary, a specific form of the bourgeois class State, helping to ripen and develop the existing antagonisms of capitalism.

In the light of the history of the objective development of the State, Bernstein’s and Konrad Schmidt’s belief that increased “social control” results in the direct introduction of socialism is transformed into a formula that finds itself from day to day in greater contradiction with reality.

The theory of the gradual introduction of socialism proposes progressive reform of capitalist property and the capitalist State in the direction of socialism. But in consequence of the objective laws of existing society, one and the other develop in a precisely opposite direction. The process of production is increasingly socialised, and State intervention, the control of the State over the process of production, is extended. But at the same time, private property becomes more and more the form of open capitalist exploitation of the labour of others, and State control is penetrated with the exclusive interests of the ruling class. The State, that is to say the politicalorganisation of capitalism, and the property relations, that is to say the juridical organisation of capitalism, become more capitalist and not more socialist, opposing to the theory of the progressive introduction of socialism two insurmountable difficulties.

Fourier’s scheme of changing, by means of a system of phalansteries, the water of all the seas into tasty lemonade was surely a fantastic idea. But Bernstein, proposing to change the sea of capitalist bitterness into a sea of socialist sweetness, by progressively pouring into it bottles of social reformist lemonade, presents an idea that is merely more insipid but no less fantastic.

The production relations of capitalist society approach more and more the production relations of socialist society. But on the other hand, its political and juridical relations established between capitalist society and socialist society a steadily rising wall. This wall is not overthrown, but is on the contrary strengthened and consolidated by the development of social reforms and the course of democracy. Only the hammer blow of revolution, that is to day, the conquest of political power by the proletariat can break down this wall.

Chapter III The Realisation of Socialism through Social Reforms

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Image: Social Democratics in Canada. [Source:]

Bernstein rejects the “theory of collapse” as an historic road toward socialism. Now what is the way to a socialist society that is proposed by his “theory of adaptation to capitalism”? Bernstein answers this question only by allusion. Konrad Schmidt, however, attempts to deal with this detail in the manner of Bernstein. According to him, “the trade union struggle for hours and wages and the political struggle for reforms will lead to a progressively more extensive control over the conditions of production,” and “as the rights of the capitalist proprietor will be diminished through legislation, he will be reduced in time to the role of a simple administrator.” “The capitalist will see his property lose more and more value to himself” till finally “the direction and administration of exploitation will be taken from him entirely” and “collective exploitation” instituted.

Therefore trade unions, social reforms and, adds Bernstein, the political democratisation of the State are the means of the progressive realisation of socialism.

But the fact is that the principal function of trade unions (and this was best explained by Bernstein himself in Neue Zeit in 1891) consists in providing the workers with a means of realising the capitalist law of wages, that is to say, the sale of their labour power at current market prices. Trade unions enable the proletariat to utilise at each instant, the conjuncture of the market. But these conjunctures – (1) the labour demand determined by the state of production, (2) the labour supply created by the proletarianisation of the middle strata of society and the natural reproduction of the working classes, and (3) the momentary degree of productivity of labour – these remain outside of the sphere of influence of the trade unions. Trade unions cannot suppress the law of wages. Under the most favourable circumstances, the best they can do is to impose on capitalist exploitation the “normal” limit of the moment. They have not, however, the power to suppress exploitation itself, not even gradually.

Schmidt, it is true, sees the present trade union movement in a “feeble initial stage.” He hopes that “in the future” the “trade union movement will exercise a progressively increased influence over the regulation of production.” But by the regulation of production we can only understand two things: intervention in the technical domain of the process of production and fixing the scale of production itself. What is the nature of the influence exercised by trade unions in these two departments? It is clear that in the technique of production, the interest of the capitalist agrees, up to a certain point, with the progress and development of capitalist economy. It is his own interest that pushes him to make technical improvements. But the isolated worker finds himself in a decidedly different position. Each technical transformation contradicts his interests. It aggravates his helpless situation by depreciating the value of his labour power and rendering his work more intense, more monotonous and more difficult.

Insofar as trade unions can intervene in the technical department of production, they can only oppose technical innovation. But here they do not act in the interest of the entire working class and its emancipation, which accords rather with technical progress and, therefore, with the interest of the isolated capitalist. They act here in a reactionary direction. And in fact, we find efforts on the part of workers to intervene in the technical part of production not in the future, where Schmidt looks for it, but in the past of the trade union movement. Such efforts characterised the old phase of English trade unionism (up to 1860), when the British organisations were still tied to medieval “corporative” vestiges and found inspiration in the outworn principle of “a fair day’s wage for a fair day’s labour,” as expressed by Webb in his History of Trade Unionism.

On the other hand, the effort of the labour unions to fix the scale of production and the prices of commodities is a recent phenomenon. Only recently have we witnessed such attempts – and again in England. In their nature and tendencies, these efforts resemble those dealt with above. What does the active participation of trade unions in fixing the scale and cost of production amount to? It amounts to a cartel of the workers and entrepreneurs in a common stand against the consumer and especially rival entrepreneurs. In no way is the effect of this any different from that of ordinary employers’ associations. Basically we no longer have here a struggle between Labour and Capital, but the solidarity of Capital and Labour against the total consumers. Considered for its social worth, it is seen to be a reactionary move that cannot be a stage in the struggle for the emancipation of the proletariat, because it connotes the very opposite of the class struggle. Considered from the angle of practical application, it is found to be a utopia which, as shown by a rapid examination, cannot be extended to the large branches of industry producing for the world market.

So that the scope of trade unions is limited essentially to a struggle for an increase of wages and the reduction of labour time, that is to say, to efforts at regulating capitalist exploitation as they are made necessary by the momentary situation of the old world market. But labour unions can in no way influence the process of production itself. Moreover, trade union development moves – contrary to what is asserted by Konrad Schmidt – in the direction of a complete detachment of the labour market from any immediate relation to the rest of the market.

That is shown by the fact that even attempts to relate labour contracts to the general situation of production by means of a system of sliding wage scales have been outmoded with historic development. The British labour unions are moving farther and farther away from such efforts.

Even within the effective boundaries of its activity the trade union movement cannot spread in the unlimited way claimed for it by the theory of adaptation. On the contrary, if we examine the large factors of social development, we see that we are not moving toward an epoch marked by a victorious development of trade unions, but rather toward a time when the hardships of labour unions will increase. Once industrial development has attained its highest possible pint and capitalism has entered its descending phase on the world market, the trade union struggle will become doubly difficult. In the first place, the objective conjuncture of the market will be less favourable to the sellers of labour power, because the demand for labour power will increase at a slower rate and labour supply more rapidly than at present. In the second place, the capitalists themselves, in order to make up for losses suffered on the world market, will make even greater efforts than at present to reduce the part of the total product going to the workers (in the form of wages). The reduction of wages is, as pointed out by Marx, one of the principal means of retarding the fall of profit. The situation in England already offers us a picture of the beginning of the second stage of trade union development. Trade union action is reduced of necessity to the simple defence of already realised gains, and even that is becoming more and more difficult. Such is the general trend of things in our society. The counterpart of this tendency should be the development of the political side of the class struggle.

Konrad Schmidt commits the same error of historic perspective when he deals with social reforms. He expects that social reforms, like trade union organisations, will “dictate to the capitalists the only conditions under which they will be able to employ labour power.” Seeing reform in this light, Bernstein calls labour legislation a piece of “social control,” and as such, a piece of socialism. Similarly, Konrad Schmidt always uses the term “social control” when he refers to labour protection laws. Once he has thus happily transformed the State into society, he confidently adds: “That is to say, the rising working class.” As a result of this trick of substitution, the innocent labour laws enacted by the German Federal Council are transformed into transitory socialist measures supposedly enacted by the German proletariat.

The mystification is obvious. We know that the present State is not “society” representing the “rising working class.” It is itself the representative of capitalist society. It is a class state. Therefore its reform measures are not an application of “social control,” that is, the control of society working freely in its own labour process. They are forms of control applied by the class organisation of Capital to the production of Capital. The so-called social reforms are enacted in the interests of Capital. Yes, Bernstein and Konrad Schmidt see at present only “feeble beginnings” of this control. They hope to see a long succession of reforms in the future, all favouring the working class. But here they commit a mistake similar to their belief in the unlimited development of the trade union movement.

A basic condition for the theory of the gradual realisation of socialism through social reforms is a certain objective development of capitalist property and of the State. Konrad Schmidt says that the capitalist proprietor tends to lose his special rights with historic development, and is reduced to the role of a simple administrator. He thinks that the expropriation of the means of production cannot possibly be effected as a single historic act. He therefore resorts to the theory of expropriation by stages. With this in mind, he divides the right to property into (1) the right of “sovereignty” (ownership) – which he attributes to a thing called “society” and which he wants to extend – and (2) its opposite, the simple right of use, held by the capitalist, but which is supposedly being reduced in the hands of the capitalists to the mere administration of their enterprises.

This interpretation is either a simple play on words, and in that case the theory of gradual expropriation has no real basis, or it is a true picture of judicial development, in which case, as we shall see, the theory of gradual expropriation is entirely false.

The division of the right of property into several component rights, an arrangement serving Konrad Schmidt as a shelter wherein he may construct his theory of “expropriation by stages,” characterised feudal society, founded on natural economy. In feudalism, the total product was shared among the social classes of the time on the basis of the personal relations existing between the feudal lord and his serfs or tenants. The decomposition of property into several partial rights reflected the manner of distribution of the social wealth of that period. With the passage to the production of commodities and the dissolution of all personal bonds among the participants in the process of production, the relation between men and things (that is to say, private property) became reciprocally stronger. Since the division is no longer made on the basis of personal relations but through exchange, the different rights to a share in the social wealth are no longer measured as fragments of property rights having a common interest. They are measured according to the values brought by each on the market.

The first change introduced into juridical relations with the advance of commodity production in the medieval city communes, was the development of absolute private property. The latter appeared in the very midst of the feudal juridical relations. This development has progressed at a rapid pace in capitalist production. The more the process of production is socialised, the more the process of distribution (division of wealth) rests on exchange. And the more private property becomes inviolable and closed, the more capitalist property becomes transformed from the right to the product of one’s own labour to the simple right to appropriate somebody else’s labour. As long as the capitalist himself manages his own factory, distribution is still, up to a certain point, tied to his personal participation in the process of production. But as the personal management on the part of the capitalist becomes superfluous – which is the case in the share-holding societies today – the property of capital, so far as its right to share in the distribution (division of wealth) is concerned, becomes separated from any personal relation with production. It now appears in its purest form. The capitalist right to property reaches its most complete development in capital held in the shape of shares and industrial credit.

So that Konrad Schmidt’s historic schema, tracing the transformation of the capitalist “from a proprietor to a simple administrator,” belies the real historic development. In historic reality, on the contrary, the capitalist tends to change from a proprietor and administrator to a simple proprietor. What happens here to Konrad Schmidt, happened to Goethe:

What is, he sees as in a dream.
What no longer is, becomes for him reality.

Just as Schmidt’s historic schema travels, economically, backwards from a modern share-holding society to an artisan’s shop, so, juridically, he wishes to lead back the capitalist world into the old feudal shell of the Middle Ages.

Also from this point of view, “social control” appears in reality under a different aspect than seen by Konrad Schmidt. What functions today as “social control” – labour legislation, the control of industrial organisations through share holding, etc. – has absolutely nothing to do with his “supreme ownership.” Far from being, as Schmidt believes, a reduction of capitalist ownership, his “social control,” is, on the contrary, a protection of such ownership. Or, expressed from the economic viewpoint, it is not a threat to capitalist exploitation, but simply the regulation of exploitation. When Bernstein asks if there is more or less of socialism in a labour protective law, we can assure him that, in the best of labour protective laws, there is no more “socialism” than in a municipal ordinance regulating the cleaning of streets or the lighting of street lamps.

Chapter II The Adaptation of Capital

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Image: Sim City. [Source:]

According to Bernstein, the credit system, the perfected means of communication and the new capitalist combines are the important factors that forward the adaptation of capitalist economy.

Credit has diverse applications in capitalism. Its two most important functions are to extend production and to facilitate exchange. When the inner tendency of capitalist production to extend boundlessly strikes against the restricted dimensions of private property, credit appears as a means of surmounting these limits in a particular capitalist manner. Credit, through shareholding, combines in one magnitude of capital a large number of individual capitals. It makes available to each capitalist the use of other capitalists’ money – in the form of industrial credit. As commercial credit it accelerates the exchange of commodities and therefore the return of capital into production, and thus aids the entire cycle of the process of production. The manner in which these two principle functions of credit influence the formation of crises is quite obvious. If it is true that crises appear as a result of the contradiction existing between the capacity of extension, the tendency of production to increase, and the restricted consumption capacity of the market, credit is precisely, in view of what was stated above, the specific means that makes this contradiction break out as often as possible. To begin with, it increases disproportionately the capacity of the extension of production and thus constitutes an inner motive force that is constantly pushing production to exceed the limits of the market. But credit strikes from two sides. After having (as a factor of the process of production) provoked overproduction, credit (as a factor of exchange) destroys, during the crisis, the very productive forces it itself created. At the first symptom of the crisis, credit melts away. It abandons exchange where it would still be found indispensable, and appearing instead, ineffective and useless, there where some exchange still continues, it reduces to a minimum the consumption capacity of the market.

Besides having these two principal results, credit also influences the formation of crises in the following ways. It constitutes the technical means of making available to an entrepreneur the capital of other owners. It stimulates at the same time the bold and unscrupulous utilisation of the property of others. That is, it leads to speculation. Credit not only aggravates the crisis in its capacity as a dissembled means of exchange, it also helps to bring and extend the crisis by transforming all exchange into an extremely complex and artificial mechanism that, having a minimum of metallic money as a real base, is easily disarranged at the slightest occasion.

We see that credit, instead of being an instrument for the suppression or the attenuation of crises, is on the contrary a particularly mighty instrument for the formation of crises. It cannot be anything else. Credit eliminates the remaining rigidity of capitalist relationships. It introduces everywhere the greatest elasticity possible. It renders all capitalist forces extensible, relative and mutually sensitive to the highest degree. Doing this, it facilitates and aggravates crises, which are nothing more or less than the periodic collisions of the contradictory forces of capitalist economy.

That leads us to another question. Why does credit generally have the appearance of a “means of adaptation” of capitalism? No matter what the relation or form in which this “adaptation” is represented by certain people, it can obviously consist only of the power to suppress one of the several antagonistic relations of capitalist economy, that is, of the power to suppress or weaken one of these contradictions, and allow liberty of movement, at one point or another, to the other fettered productive forces. In fact, it is precisely credit that aggravates these contradictions to the highest degree. It aggravates the antagonism between the mode of production and the mode of exchange by stretching production to the limit and at the same time paralysing exchange at the smallest pretext. It aggravates the antagonism between the mode of production and the mode of appropriation by separating production from ownership, that is, by transforming the capital employed in production into “social” capital and at the same time transforming a part of the profit, in the form of interest on capital, into a simple title of ownership. It aggravates the antagonism existing between the property relations (ownership) and the relations of production by putting into a small number of hands immense productive forces and expropriating large numbers of small capitalists. Lastly, it aggravates the antagonism existing between social character of production and private capitalist ownership by rendering necessary the intervention of the State in production.

In short, credit reproduces all the fundamental antagonisms of the capitalist world. It accentuates them. It precipitates their development and thus pushes the capitalist world forward to its own destruction. The prime act of capitalist adaptation, as far as credit is concerned, should really consist in breaking and suppressing credit. In fact, credit is far from being a means of capitalist adaptation. It is, on the contrary, a means of destruction of the most extreme revolutionary significance. Has not this revolutionary character of credit actually inspired plans of “socialist” reform? As such, it has had some distinguished proponents, some of whom (Isaac Pereira in France), were, as Marx put it, half prophets, half rogues.

Just as fragile is the second “means of adaptation”: employers’ organisations. According to Bernstein, such organisations will put an end to anarchy of production and do away with crises through their regulation of production. The multiple repercussions of the development of cartels and trusts have not been considered too carefully up to now. But they predict a problem that can only be solved with the aid of Marxist theory.

One thing is certain. We could speak of a damming up of capitalist anarchy through the agency of capitalist combines only in the measure that cartels, trusts, etc., become, even approximately, the dominant form of production. But such a possibility is excluded by the very nature of cartles. The final economic aim and result of combines is the following. Through the suppression of competition in a given branch of production, the distribution of the mass of profit realised on the market is influenced in such a manner that there is an increase of the share going to this branch of industry. Such organisation of the field can increase the rate of profit in one branch of industry at the expense of another. That is precisely why it cannot be generalised, for when it is extended to all important branches of industry, this tendency suppresses its own influence.

Furthermore, within the limits of their practical application the result of combines is the very opposite of suppression of industrial anarchy. Cartels ordinarily succeed in obtaining an increase of profit, in the home market, by producing at a lower rate of profit for the foreign market, thus utilising the supplementary portions of capital which they cannot utilise for domestic needs. That is to say, they sell abroad cheaper than at home. The result is the sharpening of competition abroad – the very opposite of what certain people want to find. That is well demonstrated by the history of the world sugar industry.

Generally speaking, combines treated as a manifestation of the capitalist mode of production, can only be considered a definite phase of capitalist development. Cartels are fundamentally nothing else than a means resorted to by the capitalist mode of production for the purpose of holding back the fatal fall of the rate of profit in certain branches of production. What method do cartels employ for this end? That of keeping inactive a part of the accumulated capital. That is, they use the same method which in another form is employed in crises. The remedy and the illness resemble each other like two drops of water. Indeed the first can be considered the lesser evil only up to a certain point. When the outlets of disposal begin to shrink, and the world market has been extended to its limit and has become exhausted through the competition of the capitalist countries – and sooner or later that is bound to come – then the forced partial idleness of capital will reach such dimensions that the remedy will become transformed into a malady, and capital, already pretty much “socialised” through regulation, will tend to revert again to the form of individual capital. In the face of the increased difficulties of finding markets, each individual portion of capital will prefer to take its chances alone. At that time, the large regulating organisations will burst like soap bubbles and give way to aggravated competition.

In a general way, cartels, just like credit, appear therefore as a determined phase of capitalist development, which in the last analysis aggravates the anarchy of the capitalist world and expresses and ripens its internal contradictions. Cartels aggravate the antagonism existing between the mode of production and exchange by sharpening the struggle between the producer and consumer, as is the case especially in the United States. They aggravate, furthermore, the antagonism existing between the mode of production and the mode of appropriation by opposing, in the most brutal fashion, to the working class the superior force of organised capital, and thus increasing the antagonism between Capital and Labour.

Finally, capitalist combinations aggravate the contradiction existing between the international character of capitalist world economy and the national character of the State – insofar as they are always accompanied by a general tariff war, which sharpens the differences among the capitalist States. We must add to this the decidedly revolutionary influence exercised by cartels on the concentration of production, technical progress, etc.

In other words, when evaluated from the angle of their final effect on capitalist economy, cartels and trusts fail as “means of adaptation.” They fail to attenuate the contradictions of capitalism. On the contrary, they appear to be an instrument of greater anarchy. They encourage the further development of the internal contradictions of capitalism. They accelerate the coming of a general decline of capitalism.

But if the credit system, cartels, and the rest do not suppress the anarchy of capitalism, why have we not had a major commercial crisis for two decades, since 1873? Is this not a sign that, contrary to Marx’s analysis the capitalist mode of production has adapted itself – at least, in a general way – to the needs of society? Hardly had Bernstein rejected, in 1898, Marx’s theory of crises, when a profound general crisis broke out in 1900, while seven years later, a new crisis beginning in the United States, hit the world market. Facts proved the theory of “adaptation” to be false. They showed at the same time that the people who abandoned Marx’s theory of crisis only because no crisis occurred within a certain space of time merely confused the essence of this theory with one of its secondary exterior aspects – the ten-year cycle. The description of the cycle of modern capitalist industry as a ten-year period was to Marx and Engels, in 1860 and 1870, only a simple statement of facts. It was not based on a natural law but on a series of given historic circumstances that were connected with the rapidly spreading activity of young capitalism.

The crisis of 1825 was in effect, the result of extensive investment of capital in the construction of roads, canals, gas works, which took place during the preceding decade, particularly in England, where the crisis broke out. The following crisis of 1836-1839 was similarly the result of heavy investments in the construction of means of transportation. The crisis of 1847 was provoked by the feverish building of railroads in England (from 1844 to 1847, in three years, the British Parliament gave railway concessions to the value of 15 billion dollars). In each of the three mentioned cases, a crisis came after new bases for capitalist development were established. In 1857, the same result was brought by the abrupt opening of new markets for European industry in America and Australia, after the discovery of the gold mines, and the extensive construction of railway lines, especially in France, where the example of England was then closely imitated. (From 1852 to 1856, new railway lines to the value of 1,250 million francs were built in France alone). And finally we have the great crisis of 1873 – a direct consequence of the firm boom of large industry in Germany and Austria, which followed the political events of 1866 and 1871.

So that up to now, the sudden extension of the domain of capitalist economy, and not its shrinking, was each time the cause of the commercial crisis. That the international crisis repeated themselves precisely every ten years was a purely exterior fact, a matter of chance. The Marxist formula for crises as presented by Engels in Anti-Dühring and by Marx in the first and third volumes of Capital, applies to all crises only in the measure that it uncovers their international mechanism and their general basic causes.

Crises may repeat themselves every five or ten years, or even every eight or twenty years. But what proves best the falseness of Bernstein’s theory is that it is in the countries having the greatest development of the famous “means of adaptation” – credit, perfected communications and trusts – that the last crisis (1907-1908) was most violent.

The belief that capitalist production could “adapt” itself to exchange presupposes one of two things: either the world market can spread unlimitedly, or on the contrary the development of the productive forces is so fettered that it cannot pass beyond the bounds of the market. The first hypothesis constitutes a material impossibility. The second is rendered just as impossible by the constant technical progress that daily creates new productive forces in all branches.

There remains still another phenomenon which, says Bernstein, contradicts the course of capitalist development as it is indicated above. In the “steadfast phalanx” of middle-size enterprises, Bernstein sees a sign that the development of large industry does not move in a revolutionary direction, and is not as effective from the angle of the concentration of industry as was expected by the “theory” of collapse. He is here, however, the victim of his own lack of understanding. For to see the progressive disappearance of large industry is to misunderstand sadly the nature of this process.

According to Marxist theory, small capitalists play in the general course of capitalist development the role of pioneers of technical change. They possess that role in a double sense. They initiate new methods of production in well-established branches of industry; they are instrumental in the creation of new branches of production not yet exploited by the big capitalist. It is false to imagine that the history of the middle-size capitalist establishments proceeds rectilinearly in the direction of their progressive disappearance. The course of this development is on the contrary purely dialectical and moves constantly among contradictions. The middle capitalist layers find themselves, just like the workers, under the influence of two antagonistic tendencies, one ascendant, the other descendant. In this case, the descendent tendency is the continued rise of the scale of production, which overflows periodically the dimensions of the average size parcels of capital and removes them repeatedly from the terrain of world competition.

The ascendant tendency is, first, the periodic depreciation of the existing capital, which lowers again, for a certain time, the scale of production in proportion to the value of the necessary minimum amount of capital. It is represented, besides, by the penetration of capitalist production into new spheres. The struggle of the average size enterprise against big Capital cannot be considered a regularly proceeding battle in which the troops of the weaker party continue to melt away directly and quantitatively. It should be rather regarded as a periodic mowing down of the small enterprises, which rapidly grow up again, only to be mowed down once more by large industry. The two tendencies play ball with the middle capitalist layers. The descending tendency must win in the end.

The very opposite is true about the development of the working class. The victory of the descending tendency must not necessarily show itself in an absolute numerical diminution of the middle-size enterprises. It must show itself, first in the progressive increase of the minimum amount of capital necessary for the functioning of the enterprises in the old branches of production; second in the constant diminution of the interval of time during which the small capitalists conserve the opportunity to exploit the new branches of production. The result as far as the small capitalist is concerned, is a progressively shorter duration of his stay in the new industry and a progressively more rapid change in the methods of production as a field for investment. For the average capitalist strata, taken as a whole, there is a process of more and more rapid social assimilation and dissimilation.

Bernstein knows this perfectly well. He himself comments on this. But what he seems to forget is that this very thing is the law of the movement of the average capitalist enterprise. If one admits that small capitalists are pioneers of technical progress, and if it true that the latter is the vital pulse of the capitalist economy, then it is manifest that small capitalists are an integral part of capitalist development, which can only disappear together with it [capitalist development]. The progressive disappearance of the middle-size enterprise – in the absolute sense considered by Bernstein – means not, as he thinks, the revolutionary course of capitalist development, but precisely the contrary, the cessation, the slowing up of development. “The rate of profit, that is to say, the relative increase of capital,” said Marx, “is important first of all for new investors of capital, grouping themselves independently. And as soon as the formation of capital falls exclusively into a handful of big capitalists, the revivifying fire of production is extinguished. It dies away.”