Lenin gives Sismondi's description of how the development of capitalist agriculture, and introduction of machines, led to the ruination of millions of peasant farmers, in Britain. Sismondi, in Book VII “On The Population, Ch. VII “On the Population Which Has Become Superfluous Owing to the Invention of Machines.” also describes the same fate befalling the small producers in the towns.
“The question is: what does Sismondi’s theory that the home market shrinks with the development of capitalism amount to? To the fact that its author, who had hardly attempted to look at the matter squarely, avoided analysing the conditions that belong to capitalism (“commercial wealth” plus large-scale enterprise in industry and agriculture, for Sismondi does not know the word “capitalism.” Identity of concepts makes this use of the term quite correct, and in future we shall simply say “capitalism”), and replaced an analysis by his own petty-bourgeois point of view and his own petty-bourgeois utopia. The development of commercial wealth and, consequently, of competition, he says, should leave intact the average, uniform peasantry, with its “moderate prosperity” and its patriarchal relations with its farm servants.” (p 139)
But, for the reasons already elaborated, such a course of development was impossible. Commodity production for the market entails competition. Competition entails winners and losers. Winners grow larger, losers are ruined. The losers are taken on as wage labourers so that the means of production now become capital, and surplus value is extracted from the labourers as profit. The profits are accumulated as additional capital, which employs and exploits additional workers.
“It goes without saying that theoretical political economy, which in its further development joined that of the classical economists, established precisely what Sismondi wanted to deny—that the development of capitalism in general, and of capitalist farming in particular, does not restrict the home market, but creates it.” (p 139)
And, this applies also to the expansion of capitalism into those pre-capitalist societies. The development of the market in those societies, also leads to the development of capitalist production, which, in turn, leads to further development of their home market, and so on.
Commodity production and exchange has existed for 10,000 years. Even under direct production, the independent producers specialise in producing certain commodities for which they have a comparative advantage, but they produce and exchange them only to better obtain the other other use values required for their own consumption, i.e. C – M – C. But, capitalist production massively expands this production of commodities for the market, and its purpose is not C – M – C, but P … C` - M`. M – C … P. That is it advances a certain value of commodities (means of production, labour-power) to production, only in order to create a surplus value, in production, which it then seeks to realise in the sale of these commodities. The value of this advanced capital is greater than the value of the commodities of which it is composed, precisely because of its nature as capital, the capacity of being self-expanding value. But, it does not seek to realise this additional value as money for its own sake, as does the miser, but only in order to expand the mass of commodities it can again now throw into production. Again, it does not seek to exchange one set of commodities for another in order to meet its consumption needs, as does the petty-commodity producer, but only to expand its physical capital, i.e. to expand not its personal, but its productive consumption.
“The development of capitalism proceeds simultaneously with the development of commodity economy, and to the extent that domestic production gives way to production for sale, while the handicraftsman is superseded by the factory, a market is created for capital. The “day labourers” who are pushed out of agriculture by the conversion of the “peasants” into “farmers” provide labour-power for capital, and the farmers are purchasers of the products of industry, not only of articles of consumption (which were formerly produced by the peasants at home, or by village artisans), but also of instruments of production, which could not remain of the old type after small farming had been superseded by large-scale farming.” (p 139-40)
So, both constant and variable capital is created by this process. And, Lenin points out that this last point is important because Sismondi, having adopted Smith's “absurd dogma” that the value of commodities resolves entirely into revenues, completely ignores the question of productive consumption, i.e. the consumption of means of production by capital.
“And again we must note that it is precisely this mistake, which, as we shall soon see, Sismondi borrowed from Adam Smith, that our Narodnik economists took over in toto.” (p 140)
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