Lenin examines the process of primary capital accumulation and subsequent concentration and centralisation of capital that leads up to this expropriation of the expropriators, and creation of socialised capital. Its perhaps also worth describing, here, why this process proceeds first with the development of capitalist production in industry, in the towns, and only moves subsequently into agriculture. Considering Marx's Law of the Tendency for the Rate of Profit to Fall, as the organic composition of capital rises, the opposite might be thought to be true, but further consideration shows why that cannot be, and was also demonstrated in Lenin's earlier table. Firstly, of course, as Marx shows, the law does not operate in agriculture/primary production, because of the existence of landed property, and the fact that surplus profits simply are appropriated as rent.
There are three basic requirements for capitalist production. Firstly, there must be an accessible market into which commodities are sold. Second, that market must be of a sufficient size to justify production on a large-scale that justifies an extended division of labour, and use of machines. Thirdly, there must be sufficient available wage labour to be employed by capital. Markets exist prior to capitalist production. As Marx and Engels describe, commodity production and exchange goes back 10,000 years, and markets arise as the places where these exchanges occur. Peasant producers may produce the bulk of their own food requirements, initially selling only the part of their surplus product required to pay rents and taxes plus the small number of other commodities they do not provide themselves, for example, to pay a blacksmith, to buy wine or beer, and so on.
Under these conditions, no peasant producer can become a capitalist. Some may be able to produce more efficiently than others, and, on the basis of it, enjoy a higher standard of living. They may have a larger surplus product, which they sell and acquire money, which may enable them to buy additional animals and so on. But, none of this constitutes capital. There is no point in them expanding their agricultural surplus product significantly, because no market for it exists. Such a market depends upon peasant producers not producing the food they require, and having to buy it. The market itself, therefore, is constrained in size, because it depends on there being consumers who must buy food, rather than being able to produce it for themselves. Some peasants may be less efficient, and so produce less than others, but it does not prevent them still being self-sufficient. In an economy of direct producers, all of them can produce food for themselves, and so do not need to go into the market to buy it from the richer peasants, who may have large surpluses. The richer peasants can only raise production to raise their own living standards, not to accumulate capital. Even where the direct producers begin to concentrate on producing commodities, i.e. products in which they have some particular comparative advantage, this remains the case.
If peasant A gives up producing potatoes, because they have a comparative advantage in producing carrots, they will only buy the potatoes required for their consumption, and give up carrots in a corresponding proportion. Even this commodity production, here, is still really direct production, because the peasant merely produces one use value they can produce efficiently, in order to obtain some other use value they can either not produce, or can only produce less efficiently. It continues to be production for the purpose of obtaining use values for consumption C – M – C. In order for capitalist production to commence, the demand for a commodity must be sufficiently great that it makes it possible for a capitalist producer to produce on such a scale, and by employing wage labour that they can sell all of their output, and, thereby, realise the surplus value produced by their workers, as profit.
As Marx points out, this is in those lines of industry that develop in the towns. The craft guilds producing industrial products that the agricultural producer cannot produce for themselves tend to make large profits, particularly where they can be sold to the landlords. In part, these profits derive from unequal exchange between town and country. But, it is this condition that is then required to enable capitalist production to develop in the towns. First, it is the individual craft producer who goes under for a variety of reasons. The master craftsman, or else the merchant who previously sold materials to, and bought the final product of, the craft producer now takes over their means of production, and employs the craft producer as a wage worker alongside others. It may take the form of the Putting Out System, or the creation of a handicraft workshop or manufactory, where these workers are brought together. But, now, the means of production have been turned into capital.
That is why capitalist production must always begin in industry, and so in the towns, and not in agriculture. Its only when this capitalist production in the towns develops, expanding the market for its commodities as it goes, that this industrial production also undercuts the traditional domestic production that had previously been undertaken in the peasant's cottage, alongside their agricultural production. As soon as the peasant's domestic production is undermined, they are unable to produce the revenues required to cover rents, taxes, and their requirements for other commodities. So, now, too, the poor peasant, in order to obtain these revenues, must also sell their labour-power. They must become a wage worker, at least for part of the week. Now, at last, the money accumulated by the richer peasant can be turned into capital. They can, at last, buy labour-power itself, and extract surplus value from it. The longer the poor peasant must work as a wage labourer, the less time they have to produce even their own food, which they also must now buy in the market.
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