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 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.”