A Characterisation of Economic Romanticism, Chapter 2 - Part 2 of 16

For the romantic, crises are unnatural, rather than being a normal part of the functioning of the system and its development. Sismondi sought to avoid crises, by holding back the development of the productive forces, by constraining them, and the expansion of supply, by the existing bounds of demand, determined by a slowly expanding population. But, the entire basis of the progressive nature of capitalism in rapidly developing the productive forces, and in sharply raising living standards, is the fact that it does not expand supply and demand proportionately, but expands supply faster than demand, and, in the process, not only expands demand, but creates the surplus production out of which rapid accumulation can be undertaken, raising productivity and freeing labour and capital to be used in ever new spheres of production. It is the Civilising Mission of Capital.

Yet, as Marx describes in The Poverty of Philosophy, out of this competition also comes monopoly at a higher level, and then competition between these monopolies is also raised to a higher level. As Marx and Engels describe, this development of the productive forces, of monopolistic competition also drives forward the need to create single markets much larger than that of the nation state, whose borders now act as fetters on further capitalist development. At the same time, it leads to the need for regulation and planning, and the involvement of the state to create the framework for such regulation on an ever larger scale.

“In the trusts, free competition changes into monopoly and the planless production of capitalist society capitulates before the planned production of the invading socialist society. Of course, this is initially still to the benefit of the Capitalists.”

(Anti-Duhring, p 358)

These new conditions mean that, increasingly, for these mammoth capitals, they invest and produce on the basis of plans, themselves based upon projections of future demand, and economic expansion. As Engels put it,

“What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.”

(Critique of The Erfurt Programme)

For decades, now, the largest producers have shifted the burden of risk to large retailers, only producing to orders submitted by the latter, and now, the retailers, using instant information, from Electronic Point of Sale (EPOS) systems, submit those orders based upon real, live data on demand. As Simon Clarke put it, even thirty years ago,

“Indeed it would be fair to say that the sphere of planning in capitalism is much more extensive than it is in the command economies of the soviet bloc. The scope and scale of planning in giant corporations like Ford, Toyota, GEC or ICI dwarfs that of most, if not all, of the Soviet Ministries. The extent of co-ordination through cartels, trade associations, national governments and international organisations makes Gosplan look like an amateur in the planning game. The scale of the information flows which underpin the stock control and ordering of a single Western retail chain are probably greater than those which support the entire Soviet planning system.”

(Capital and Class, Winter 1990)

Lenin continues,

“Mr. N.–on’s phrases about the “instability” of capitalist economy, about the lack of proportion in the development of exchange, about the disturbance of the balance between industry and agriculture, between production and consumption, about the abnormality of crises, and so forth, testify beyond all doubt to the fact that he still shares the viewpoint of romanticism to the full. Hence, the criticism of European romanticism applies word for word to his theory too.” (p 214)

What distinguishes Marx from Sismondi or Proudhon, or Danielson, Lenin says, is that,

“he places the question of the instability of capitalism (which all these three authors admit) on a historical plane and regards this instability as a progressive factor. In other words: he recognises, firstly, that existing capitalist development, which proceeds through disproportion, crises, etc., is necessary development, and says that the very character of the means of production (machines) gives rise to the desire for an unlimited expansion of production and the constant anticipation of demand by supply. Secondly, he recognises elements of progress in this development, which are: the development of the productive forces, socialisation of labour within the bounds of the whole of society, increased mobility of the population and the growth of its consciousness, and so forth.” (p 216)

The failure of Sismondi and Proudhon to understand that this instability is inherent, in respect of capitalism and commodity economy, is what leads them to Utopianism. Their failure to understand the progressive elements inherent in the instability is what makes their theories reactionary. Lenin makes an important distinction, here, between the theories and the individuals that propose them.

“This term is employed in its historico-philosophical sense, describing only the error of the theoreticians who take models for their theories from obsolete forms of society. It does not apply at all to the personal qualities of these theoreticians, or to their programmes. Everybody knows that neither Sismondi nor Proudhon were reactionaries in the ordinary sense of the term. We are explaining these elementary truths because, as we shall see below, the Narodnik gentlemen have not grasped them to this day.” (Note *, p 217)

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A Characterisation of Economic Romanticism, Chapter 2 - Part 1 of 16

Chapter 2
The Character of the Romanticists’ Criticism of Capitalism

Part I - The Sentimental Criticism of Capitalism

Lenin, in this chapter, turns from an analysis of Sismondi's theoretical objections to capitalism, to an analysis of his practical objections and alternative prescriptions. As Lenin puts it, from his head to his heart. Lenin begins with a series of quotes from Sismondi to set out this stall of Sismondi's general attitude. In the process, Lenin points to the same moralistic and romantic evaluation of the Narodniks. Having provided these quotes to establish what it is he is analysing, Lenin summarises Sismondi's position, and that of the romantic in general.

“The arguments we have quoted may be summed up as follows: 1) money economy is condemned for destroying the small producers’ security and the close relations among them (in the shape of the nearness of the artisan to his customers, or of the tiller to other tillers, his equals); 2) small production is extolled for ensuring the independence of the producer and eliminating the contradictions of capitalism.

Let us note that both these ideas constitute an essential part of Narodism, and endeavour to probe their meaning.” (p 212-3)

Sismondi, and the Narodniks bemoaned the fact that, under capitalism, industry develops faster than agricultural production, seeing in this an unsustainable contradiction. The same objection is raised, today, by environmentalists and petty-bourgeois romantics. They see in this contradiction unreality and unsustainability. But, it is inevitable, not only that capitalist production arises first in industry, and only later in agriculture, but also that industry continues to develop faster than agriculture, on the basis of increasing social division of labour.

“As capitalism develops, agriculture always and everywhere, lags behind commerce and industry, it is always subordinate to them and is exploited by them and it is always drawn by them, only later on, onto the path of capitalist production.” (Note *, p 210)

A characteristic of romanticism is its failure to recognise that contradiction is inherent in reality, and forms the basis of movement, and development. They see in contradictions, crises and so on something disturbing and unnatural. As I wrote in the preface to my book, “Marx and Engels Theories of Crisis”, in fact, throughout Nature, we see such contradiction and crises, not as something unnatural, but the very opposite. An earthquake, for example, is the result of contradiction, as two opposing plates release the friction that has built up between them, in the form of a sudden movement – a crisis. There is nothing unnatural in this. It is the consequence of plate tectonics, of the fact that the Earth is a living planet. Without such periodic crises, it would mean the Earth was no longer a living planet, undergoing continual development.

“This argument is a repetition of the typical error of romanticism, namely: the conclusion that since capitalism is torn by contradictions it is not a higher form of social organisation. Does not capitalism, which destroys the medieval village community, guild, artel and similar ties, substitute others for them? Is not commodity economy already a tie between the producers, a tie established by the market? The antagonistic character of this tie, which is full of fluctuations and contradictions, gives one no right to deny its existence.” (p 213)

The romantic sees competition at the heart of this contradiction. Indeed, that competition does lead to division and destruction. It divides producers one against another, it destroys the old paternalistic social relations, and monopolies. At the same time, it unites, and creates new, superior, social forms. In place of the parochialism of feudalism and the village economy, it creates the nation state, and then much larger federations of states, such as the EU. It unites thousands of workers, based upon cooperative, socialised labour, in place of the individual labour of the artisan or peasant, within the factory, and it unites millions of workers, on the same basis, across the globe, on the basis of globalisation, of a global social division of labour.

“And we know that it is the development of contradictions that with ever-growing force reveals the strength of this tie, compels all the individual elements and classes of society to strive to unite, and to unite no longer within the narrow limits of one village community, or of one district, but to unite all the members of the given class in a whole nation and even in different countries. Only a romanticist, with his reactionary point of view, can deny the existence of these ties and their deeper importance, which is based on the common role played in the national economy and not upon territorial, professional, religious and other such interests.” (p 213-4)

When, for example, we saw the opposition to the creation of a European Super League, for football, it was an expression of this same reactionary nationalism and romanticism. Indeed, the arguments used reflected not just a collapse into reactionary nationalism, but into the same kind of reactionary parochialism as that set out by Sismondi and the Narodniks. We saw arguments based upon the same kind of romantic idealisation of the village, but now in the form of defining the fans of football clubs as only those tiny proportion that physically attend the matches of the clubs from their home town! The reality, of course, is that, in today's global village, the top teams number fans in the hundreds of millions, spread across the Earth's surface.  And, when Newcastle United faced the reality of thee economics of modern football, any consideration of such parochialism disappeared in a puff of smoke as they turned to the good graces of the feudalists of Saudi Arabia to take over ownership of the club!

“If arguments of this kind earned the name of romanticist for Sismondi, who wrote at a time when these new ties engendered by capitalism were still in the embryo, all the more do our Narodniks deserve such an estimation; for today, the enormous importance of these ties can only be denied by those who are totally blind.” (p 214)

And, in today's globalised economy, those that still deny these ties, and their progressive nature, even more deserve the description romantic, and reactionary. The romantic and reactionary, sees in such competition only uncertainty and instability. It is why they seek refuge in various forms of protectionism, as with Brexit, opposition to the creation of the ESL, etc. But, it is precisely in this instability that the Marxist sees the progressive nature of capitalism, arising out of that competition, and when capitalism itself develops further, and is led itself towards monopoly, then as Marx sets out in The Poverty of Philosophy, it is not the same as the old feudal or guild monopoly, but monopoly at a higher level, a level which creates the basis of the transition to Socialism.

“Attacks of this kind betray the romanticist who fearfully condemns precisely that which scientific theory values most in capitalism: its inherent striving for development, its irresistible urge onwards, its inability to halt or to reproduce the economic processes in their former, rigid dimensions. Only a utopian who concocts fantastic plans for spreading medieval associations (such as the village community) to the whole of society can ignore the fact that it is the “instability” of capitalism that is an enormously progressive factor, one which accelerates social development, draws larger and larger masses of the population into the whirlpool of social life, compels them to ponder over its structure, and to “forge their happiness” with their own hands.” (p 214)

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Adam Smith's Absurd Dogma - Part 8 of 52

“The annual value-product contained in the annual product consists therefore of but two elements: namely, the equivalent of the annual wages received by the working-class, and the surplus-value annually provided for the capitalist class. Now, the annual wages are the revenue of the working-class, and the annual quantity of surplus-value the revenue of the capitalist class; hence both of them represent the relative shares in the annual fund for consumption (this view is correct when describing simple reproduction) and are realised in it. There is, then, no room left anywhere for the constant capital-value, for the reproduction of the capital functioning in the form of means of production. And Adam Smith states explicitly in the introduction to his work that all portions of the value of commodities which serve as revenue coincide with the annual product of labour intended for the social fund for consumption:” (p 380)

In other words, the value created by labour, during the year, divides into these two components, of v and s, and this is value added to the value of materials processed by these workers, materials already in existence, and whose value is already in existence, prior to any new labour being undertaken. It is value created by labour in previous years, in the creation of these materials (Marx describes as raw material anything that is processed in some latter stage of production).

“Now Adam Smith’s first mistake consists in equating the value of the annual product to the newly produced annual value. The latter is only the product of labour of the past year, the former includes besides all elements of value consumed in the making of the annual product, but which were produced in the preceding and partly even earlier years: means of production whose value merely re-appears — which, as far as their value is concerned, have been neither produced nor reproduced by the labour expended in the past year. By this confusion Adam Smith spirits away the constant portion of the value of the annual product.” (p 381)

Smith's confusion results from his failure to distinguish between concrete labour, which produces use-values, and abstract labour, which produces value. This same confusion is what leads to the use value of constant capital (intermediate production) being confused with the value of constant capital. In other words, use values that comprise elements of constant capital for Department II, undoubtedly comprise the intermediate production, but none of the value of these use values is itself comprised of constant capital. It is comprised entirely of the value of Department I (v + s), i.e. revenues. It is the basis of Smith's confusion arising from the observation that what is revenue for one is capital for another. An observation, as Marx points out applies only to Department II, not to Department I.

“The total quantity of the commodities fabricated annually, in other words, the total annual product is the product of the useful labour active during the past year; it is only due to the fact that socially employed labour was spent in a ramified system of useful kinds of labour that all these commodities exist; it is due to this fact alone that the value of the means of production consumed in the production of commodities and reappearing in a new bodily form is preserved in their total value. The total annual product, then, is the result of the useful labour expended during the year; but only a part of the value of the annual product has been created during the year; this portion is the annual value-product, in which the quantity of labour set in motion during the year is represented.” (p 381)

In short, the concrete labour preserves the value of the constant capital/materials produced last year, but consumed in production this year. It does not create or reproduce that value, and nor could it. As Marx explains, it does not matter how much current labour is expended, when it comes to the preservation of that value. If 100 kilos of cotton has a value of £100 then this value is preserved whether it takes 10 hours of current labour to process it into yarn, or 20 hours. The amount of current labour only determines the amount of new value added to it.

“Hence, if Adam Smith says in the passage just cited:

“The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, etc.,”

he takes the one-sided standpoint of solely useful labour, which has indeed given all these means of subsistence their consumable form. But he forgets that this was impossible without the assistance of instruments and subjects of labour supplied by former years, and that, therefore, the “annual labour,” while it created value, did not create all the value of the products fabricated by it; that the value newly produced is smaller than the value of the product.” (p 381-2)

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A Characterisation of Economic Romanticism, Chapter 1 - Part 73

Postscript

In 1905, Kautsky's inadequate edition of Theories of Surplus Value appeared in Russian. In 1908, Lenin wrote a Postscript to this chapter, referring to Theories of Surplus Value, Chapter 9, and Marx's comments in respect of Ricardo's scientific objectivity as against Sismondi's moralism. Lenin ends the Postscript saying,

“It goes without saying that this appraisal applies only to a definite period, to the very beginning of the nineteenth century.” (p 208)

But, its not clear which appraisal this refers to. Does it refer to the appraisal of Ricardo's scientific method? If so then why only to that period, because, as Marx's comments, quoted by Lenin, makes clear, this concept applies to all societies, and is the basis of the theory of historical materialism. Indeed, if we consider Marx and Engels comments in Anti-Duhring, about the way primitive communes dissolved, as certain individuals/families were able to take advantage of changed conditions to promote their own separate interests, develop private property, etc., it is clear that the same kinds of material conditions enable certain individuals/families/groups to promote their own interests, and restore private property, in a post-capitalist society, unless society itself prevents them. The existence of Stalinism, and every other bureaucratic stratum illustrates that.

Of course, what Lenin fails to highlight, in quoting this paragraph, is the sentence that Sismondi was right as against Ricardo, in relation to the contradictions of capitalism and potential for crises of overproduction of commodities. That would have undermined a lot of Lenin's previous argument, which also followed Ricardo and Say's Law, in denying any such potential. A look at Theories of Surplus Value, Chapter 17 illustrates that. So, is Lenin, in this sentence, covering himself by suggesting that the appraisal referred to is Ricardo's acceptance of Say's Law, and that production for production's sake creates its own market/consumption?

Possibly, given that no generalised crises of overproduction occurred prior to 1825. But, then an analysis of this tends to support Sismondi not Ricardo. In Theories of Surplus Value, Chapter 17, Marx sets out that the potential for such crises arises with commodity production and exchange itself, more than 7,000 years ago. In other words, as soon as production and consumption are separated, supply and demand, value and use value become opposing poles of a single whole. What is produced by A may not be demanded by B, or vice versa. As soon as such trade arises, the development of money as an indirect measure of value inevitably follows, and then takes the form of a money commodity, followed by money tokens and credit.

Once money arises, the potential for production and consumption, supply and demand to fall apart is increased. A may sell a commodity to B, in exchange for money, but now holds on to the money, rather than exchanging it for B's commodity, or the commodity of some other producer. And, there are a variety of combinations, as Marx sets out, in Theories of Surplus Value, Chapter 20. In other words, A may exchange some money for part of B's production; A may be prepared to buy all of B's output, but only at a price below its value.

The reason this potential for commodities to be overproduced does not result in a generalised crisis – though repeatedly results in the ruin of individual commodity producers – is the scale of commodity production, and limits of the market, compared to direct production and consumption. The individual commodity producer only produces commodities to sell if they believe they can sell them. Commodity production, for them, is a means of obtaining money, which supplements their own direct production – as Engels describes in his Supplement to Capital III. If they cannot sell these commodities, they can hold on to them, and wait for the next market day. They do not buy additional means of production, and simply halt production. In the meantime, their own direct production enables them to subsist.

Even when there is capitalist production, it takes the form of the Putting Out System, or the handicraft workshop/manufactory. The labour undertaken continues in much the same way as under handicraft production by independent producers. The capitalist only expands that production in line with the growth of the market, and the market grows along with the growth of commodity production and an increasing social division of labour. So, in fact, these are the conditions Sismondi describes of preventing crises of overproduction, by production not expanding faster than consumption.

Unfortunately, for Sismondi, this process inevitably leads to each producer seeking to capture market share, by producing more efficiently, and to produce more efficiently means production on a larger scale, and to replace labour with machines. And, such large-scale machine production must then be undertaken both in advance of known sales, and continuously. Where the small, independent producer can stop production until their output is sold, the large scale machine capitalist cannot. And, so it is no surprise that, when a high price of labour, in the 18th century, promotes the introduction of machines, to replace labour, and when those machines no longer depend on the motive force of human or animal muscles, or of the wind or water, but can be driven, in large numbers, by steam, that productive capacity expands at a rapid pace, much faster than the capacity of the market to consume it.

If the appraisal that Lenin is referring to is Ricardo's appraisal of the impossibility of overproduction, then its correct to say that it ceased to apply after 1825, when the first such crisis occurs. But, this appraisal only applies to the inevitability of such crises under large-scale capitalist machine production. It does not change the fact that Say's Law is wrong, in relation to all commodity production, not just capitalist production. The potential for such overproduction arises with all commodity production and exchange in a money economy.

This argument was to be taken up later between Pigou and Keynes.

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Adam Smith's Absurd Dogma - Part 7 of 52

Capital II, Chapter 19, Section 2) Adam Smith Resolves Exchange Value into v + s 

“Let us now see how Adam Smith tries to spirit the constant part of the capital-value away from the commodity-value.” (p 377)

Marx then quotes Smith's account of the value of corn. Smith again includes the element of rent, which Marx has shown is already covered within the surplus value, s. Smith sets out that a further part pays the wages of the labourers and “labouring cattle”, with a third part going as profit to the farmer. Marx quotes Smith.

“These three parts seem” [they seem indeed] “either immediately or ultimately to make up the whole price of corn.”

This entire price, i.e., the determination of its magnitude, is absolutely independent of its distribution among three kinds of people.

“A fourth part, it may perhaps be thought, is necessary for replacing the stock of the farmer, or for compensating the wear and tear of his labouring cattle, and other instruments of husbandry. But it must be considered that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts: the rent of the land upon which he is reared, the labour of tending and rearing him, and the profits of the farmer who advances both the rent of this land, and the wages of this labour. Though the price of the corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself either immediately or ultimately into the same three parts of rent, labour” (he means wages), “and profit.” (Book I, Ch. 6, p. 42.)” (p 377-8)

But, as Marx points out this amounts merely to an assertion not proof or a rational argument. For any of the items of constant capital that Smith defines, its value does not resolve merely into these revenues, but also itself into an element for the constant capital consumed in its own production.

“This is verbatim all that Adam Smith has to say in support of his astonishing doctrine. His proof consists simply in the repetition of the same assertion. He admits, for instance, that the price of corn does not only consist of v + s, but also of the price of the means of production consumed in the production of corn, hence of a capital-value not invested in labour-power by the farmer. But, he says, the prices of all these means of production resolve themselves into v + s, the same as the price of corn. He forgets, however, to add: and, moreover, into the prices of the means of production consumed in their own creation. He refers us from one branch of production to another, and from that to a third.” (p 378)

Smith's assertion would not represent such a “hollow subterfuge” if he could show that any of the elements of constant capital he refers to could be traced back to something in which only labour was involved, but he can't even do that. Smith had put forward the Scottish pebble collectors as an example of production where only labour was involved, but Marx notes,

“Adam Smith himself did not believe that he had furnished such a proof by his example of the collectors of Scotch pebbles, who, according to him 1) do not generate surplus-value of any description, but produce only their own wages, and 2) do not employ any means of production (they do, however, employ them, such as baskets, sacks, and other containers for carrying the pebbles).” (p 378)

Moreover, its quite clear that the labour undertaken by the labourers only replaces the value of their labour-power, and the profit of the capitalist, and can replace nothing more, i.e. the value of the constant capital. This was the argument discussed in Capital Vol. I over Senior's Last Hour, in which the argument of Senior and those opposing the shortening of the working-day required workers not only to replace their wages, but also the value of the consumed constant capital, rather than that value merely being preserved by their labour, and transferred into the value of the final product.

“That is all they accomplish, and all they can accomplish. And what is true of the industrial labour of one day is true of the labour set in motion by the entire capitalist class during one year. Hence the aggregate mass of the annual value produced by society can resolve itself only into v + s, into an equivalent by which the labourers replace the capital-value expended for the purchase of their own labour-power, and into an additional value which they must deliver over and above this to their employers.” (p 378-9)

In other words, they produce revenues, and these revenues find their equivalent in consumption goods, not in the reproduction of the consumed constant capital.

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A Characterisation of Economic Romanticism, Chapter 1 - Part 72

As Lenin says, Sismondi and the Narodniks did not want to accept the connection between small-scale capitalist production and large-scale capitalist production. They certainly did not want to accept the progressive nature of the latter vis a vis the former.

“Well, what about our modern romanticists? Do they think of denying the reality of the “money power”? Do they think of denying that this power is omnipotent not only among the industrial population, but also among the agricultural population of any “village community” and of any remote village you like? Do they think of denying that there is a necessary connection between this fact and commodity economy? They have not even attempted to subject this to doubt. They simply try not to talk of it. They are afraid of calling things by their real names.” (p 206)

Today, the “anti-capitalists” who propose “anti-monopoly alliances” are of the same order. They seek to focus their critique purely in moralistic terms on the iniquities of large-scale capital, thereby, denying its progressive nature, whilst staying quiet about the more reactionary forms of small scale capital. The “anti-imperialists” deny any progressive role for large-scale multinational capital, in developing the economies of the world, and indeed see the development of globalisation, of a global economy, as something to oppose. They equate imperialism only with military intervention, colonialism and neo-colonialism.

As I wrote some time ago, Michael Roberts, in his account of the development of capitalism, follows a similar course. He is unable to accept the development of capitalism as arising out of simple commodity production and exchange carried on in the towns that expanded during the Middle Ages. That requires an acceptance of the fact that the first industrial capitalists arose, partly, from amongst the commercial and financial capitalists, who began to use their money-capital as productive-capital, but also from amongst the small independent commodity producers themselves, who, for whatever reason, enjoyed the ability to produce commodities, and sell them, at prices below their competitors. They were able to grab market share, accumulate money, so as to improve their means of production, and then to convert that money into productive-capital by buying up the means of production of their failed competitors, and employing those former competitors as wage labourers.

As Engels explains in his Supplement to Capital III, this process explains why, in the formation of capital, it is in those cases where the organic composition of capital is high that capitalist production arises first, even though, theoretically, it would be thought that the opposite would be the case. In other words, when a handicraft producer fails, what is it that they cannot reproduce? It is their means of production. Most were still able to reproduce their labour-power, because they continued to have some small plot of land, even in the towns, to grow fruit and vegetables, and even have some livestock.

What they could not buy was the required raw materials, for which they needed money, and the greater the amount of raw material required, and/or the greater the cost of their raw materials, the less likely it was they could buy them. That is why its in those spheres where the organic composition of capital is high that capital arises first, as the merchants that sold it to the producers now supply it for free, in return for obtaining the end product in exchange for what amounts only to a wage paid to the producer. In those conditions, those independent commodity producers that produce below the market value, also reproduce their constant as well as their variable capital, and are able to accumulate surplus value as productive-capital.

As Lenin notes in the next chapter,

“As capitalism develops, agriculture always and everywhere, lags behind commerce and industry, it is always subordinate to them and is exploited by them and it is always drawn by them, only later on, onto the path of capitalist production.” (Note *, p 210)

As with Sismondi, the Narodniks, or today's “anti-capitalists” and “anti-imperialists” this reality, of the connection between small-scale commodity production and capital, of the fact that the capitalists themselves arise out of the class of producers/labourers rather than being some alien class force that imposes itself upon them, seems to offend Roberts' moral sensibilities. Consequently, like Sismondi and the Narodniks, he is led to define industrial capitalism only as that large-scale machine production that develops rapidly after 1800, and to purvey the myth that capital somehow arises first in agriculture after 1400, as evil feudal landlords take it into their heads to become evil capitalist landlords instead, and to start evicting peasants from the land for that purpose.

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Labour's VAT Proposal Is Nonsense

In the face of a global surge in energy prices, partly caused by the sharp rebound in the global economy, and partly caused by the vast oceans of liquidity that central banks have pumped into it that has devalued currencies, and led to an inevitable inflation, Labour is proposing that the 5% VAT on energy bills be reduced to zero for six months. The proposal is typical opportunist nonsense, and economically illiterate.

The proposal does nothing to either increase energy supply, or to reduce the cost of production of energy. It the equivalent of the Tories measures to keep house prices propped up, by subsidising demand, whilst maintaining all of the restrictions of supply that flow from the monopoly of land ownership, the functioning of the Green Belt, and so on. As Jonathan Portes pointed out, this morning, it is a particularly idiotic measure, if you are also committed to reducing energy consumption, as part of reaching net zero carbon emissions. Portes was also correct in saying that people do not worry about paying their energy bills – rather they worry about paying their bills in total, hence heating or eating.

The idea of fuel poverty, food poverty, housing poverty and so on, is a result of opportunist politics, and the creation of a whole gamut of special interest groups that spring up like mushrooms around these issues, often providing well paid jobs, or routes into politics and other spheres, for middle-class people. For opportunist politicians, always on the look out for where they might be able to scrounge the odd vote, jumping on a bandwagon to address the needs of this or that group, is always an easier option than having to argue for principled political solutions for the problems of workers overall. The reality is that there is no such thing as fuel poverty, food poverty, or housing poverty etc., there is just poverty, or more correctly a lack of adequate incomes.

Its true that people who have inadequate incomes are also led to have to use inefficient forms of energy, as well as to tend to rely more heavily on more costly fast food, to have to live in expensive rented accommodation, to depend on inefficient and expensive public transport, and so on. All of that puts them in an even worse position, but the cause of all that, in the first place, is inadequate income overall. Deal with that problem, and the other problems disappear along with it. The question then is, how to deal with that problem.

Portes suggested that rather than subsidising energy prices, by cutting the VAT on energy (which in any case would probably simply be absorbed by energy providers able to raise their own prices, just as house builders absorbed subsidies by continuing to raise house prices) a better measure would be to reverse the £20 a week cut in Universal Credit. In part, that is right, but, because UC is a benefit paid also to those in work, it too, acts as a subsidy to low paying employers, who are usually those that are inefficient, and have low levels of productivity, and whose profits rest on continuing to pay low wages, subsidised by the state. If anything, the words spoken by Boris Johnson's Tories, about wanting to create a higher wage economy, by raising productivity, are far more progressive than what is coming out of the mouths of Labour politicians. The trouble is, of course, that, for the last 40 years, the Tories have done the very opposite, of feeding the interests of the inefficient small businesses, of facilitating a low wage, low productivity economy, and no one can believe their words now.

And, of course, as both Marx and Lenin pointed out, within the context of capitalism, the road to this higher productivity, higher wage economy is not without its pain. The higher productivity, by definition, means that the same amount is produced with fewer workers, and so it means that some workers lose their jobs. How many do so, and for how long, depends on a range of other factors, about the state of the economy at the particular time. As Marx points out, this reduction in employment is always relative rather than absolute. If 10 workers are employed and produce 100 units, whereas 20 workers are employed and produce 300 units, this 50% increase in productivity has resulted in 10 workers, who otherwise would have been employed, being unemployed. Nevertheless, the absolute number of workers has increased by 100% in absolute terms, and as Marx points out in Theories of Surplus Value, this cannot be divorced from the fact that the increase in productivity means that the rate of surplus value rises, the value of labour-power falls, and capital is released that can be used for additional accumulation in existing or new spheres, thereby, increasing the levels of employment overall.

Increasing, UC simply subsidises the low paying employers, who can continue to pay low wages, and provide poor conditions, whereas what actually needs to happen is that those employers have to either raise their wages, or else go out of business, enabling capital in those spheres to be rationalised, so that productivity is raised. And, those subsidies come from taxes paid from the surplus value produced by bigger more efficient capitals, thereby slowing down their own expansion.  In the meantime, rather than subsidising these low paying employers, the resources should be used to provide better benefits for the unemployed. That is particularly the case currently when everywhere there are large labour shortages forcing employers to have to bid for labour, and push up wages. This is a time when the burden should be lifted from the taxes paid by workers, and instead be placed squarely on the profits of capital.

When Lenin and the Russian Marxists pointed out this reality at the end of the 19th century, in relation to the inevitable consequence that a large number of poor peasants would lose their land, as they failed to be able to compete, the Nardodniks snarled that the Marxists wanted to deprive the peasants of their land, so as to encourage the development of capitalism. But, as Lenin responded, it was of course, not true that that was what the Marxists wanted. The Marxists wanted to go beyond the capitalists solutions, and to move to socialism as swiftly as possible. But, that swift movement forwards to socialism, particularly in a backward economy such as that of Russia, did not flow from trying to hold back the development of capitalism itself, which would only have made that situation even worse, and further delayed the possibility of Socialism. As he put it a few years later,

“And from these principles it follows that the idea of seeking salvation for the working class in anything save the further development of capitalism is reactionary. In countries like Russia, the working class suffers not so much from capitalism as from the insufficient development of capitalism. The working class is therefore decidedly interested in the broadest, freest and most rapid development of capitalism. The removal of all the remnants of the old order which are hampering the broad, free and rapid development of capitalism is of decided advantage to the working class.”

(Two Tactics of Social Democracy)

Lenin pointed out that contrary to the Narodnik assertions, the Marxists sought the transition to Socialism, not simply trying to hold back capitalist development, which was taking place in any case, and which, in the case of Russia's backward economy was a necessary means of transforming the means of production so as to make Socialism possible. And, the same is true, now, in relation to the measures that are in the interests of workers. Tinkering with taxes and benefits, in ways that subsidise low-paying employers, and so hold back the process by which those inefficient businesses are weeded out, leaving capital to be used where it can be efficient, and pay higher wages, does no favours to workers.

Unlike Russia, Britain already has means of production developed to a stage at which Socialism is possible, the dominant form of that capital is large-scale socialised capital, in the form of cooperatives and joint stock companies (corporations), which are the collective property of the workers within those companies. But, control of that capital has been snatched from the hands of those workers, and handed to shareholders, who do not own that property. That is an unjustifiable, and unsustainable position. But, for so long as that position is sustained, and so capitalism persists, we have to deal with the reality, and not with some idealised, but non-existent reality. And, that reality, also includes the fact that, in relation to the large majority of those small inefficient businesses, they are not made up of these socialised capitals, but continue to be of the form of small private capitals of the type the liberals idolise, and which were typical of the early days of industrial capital, in the 18th and early 19th century. As far as these primitive capitals are concerned, the process of their concentration and centralisation, the need to weed them out, so that a few large socialised capitals replace them, is still a reality. It is a reality that Marxists do not seek to hold back, for the simple reason, as Lenin pointed out to the Narodniks, is one that itself leads to the conditions required for Socialism.

And, whilst, the means of production in Britain, have long since reached a stage in which Socialism becomes theoretically possible, it is also the case that the world does not stand still. If Britain today only had the same means of production, the same levels of productivity it had in 1900, then any idea of constructing “Socialism In One Country”, would be as ludicrous as was that idea for Russia in 1924. The development of the means of production is always relative, and to even begin the process of socialist construction, an economy needs to be able to compete on at least an even level with the capitalist economies that surround it. The reality is that Socialism In One Country is a reactionary fantasy, because capitalism has raised the productive forces, and living standards based upon them, to the level it has, as a result of a high level of development of international trade, and a global division of labour. That has to be the starting point for Socialism, which seeks to go beyond it.

It is why Brexit is such a stupid and reactionary development. It can only slow down the development of capitalism in Britain, leaving it trailing other capitalist powers, particularly those of its most immediate competitors in Europe, and so slowing down the potential for socialist transformation. Even in terms of a rational, progressive social-democracy that sought to develop the large scale industrial capital more rationally, quickly and effectively, Brexit is stupid, as any such development requires at least something the size of the EU. If Labour really wanted to provide even a progressive social-democratic solution, then instead of these ridiculous, populist proposals such as scrapping VAT on energy, and other similar gimmicks seeking to scrounge votes from this or that sectional interest, they should scrap their existing reactionary pro-Brexit position, and begin to mobilise for a return to the EU; they should commit to a minimum wage of at least £600 per week; they should commit to industrial democracy, by removing the voting rights of shareholders, and giving democratic control of businesses to workers.

Adam Smith's Absurd Dogma - Part 6 of 52

This is the basis of all factor cost theories of value.

“All other revenue is ultimately derived from some one or other of these.” (Book I, Ch. 6, p. 48.)” (p 376)

Smith argues, here, that the revenues of anyone else is wholly derivative from these revenues. But, Marx shows this is wrong, and he illustrates this at greater length in Theories of Surplus Value, Chapter 4, in examining productive labour. Productive labour is that which exchanges with capital and produces surplus value, but that does not mean that unproductive labour dos not itself produce new value, and so contribute to society's social product. A prostitute may not be a productive labourer in the sense of not being employed by capital and producing surplus value (though they may if employed by a capitalist brothel) just as with a tutor who provides education in return for payment, but the labour of the prostitute and the tutor creates new value, it is value creating labour, and it is for that value, embodied in the use value of the labour-service they provide that the buyer hands over the equivalent in exchange-value. It is an exchange of revenue with revenue.

“To that extent their revenues are materially derived from wages (of the productive labourers), profit, and rent, and appear therefore as derivative vis-à-vis those primary revenues. But on the other hand the recipients of these revenues, derived in this sense, draw them by virtue of their social functions — as a king, priest, professor, prostitute, soldier, etc., and they may, therefore, regard these functions as the original sources of their revenue.” (p 376)

This is important in considering questions of total social product and GDP, today. A few years ago there were revisions of GDP, because it was realised that a lot of revenues going to sex workers were not being captured in official data. There is also the question of the continued large amount of new value created by household labour.

“and here Adam Smith’s ridiculous blunder reaches its climax. After starting by correctly defining the component parts of the value of the commodities and the sum of the value-product incorporated in them, and then demonstrating how these component parts form so many different sources of revenue, after thus deriving the revenues from the value, he proceeds in the opposite direction — and this remains the predominant conception with him — and turns the revenues from “component parts” into “original sources of all exchangeable value,” thereby throwing the doors wide open to vulgar economy.” (p 376-7)

Engels, as editor, makes the following note.

“I reproduce this sentence verbatim from the manuscript, although it seems to contradict, in its present context, both what precedes and immediately follow. This apparent contradiction is resolved further down in No. 4: Capital and Revenue in Adam Smith.”

What Engels refers to is that Marx, in this later section, shows that Smith's argument is correct if only society's consumption fund is considered, and then only in the specific conditions of capitalism. Marx's main consideration, here, was to show Smith's blunder in unconsciously moving from his labour theory of value, in which the value of commodities is determined objectively by labour-time, with this value then resolving into revenues, to the reverse, where he starts with revenues – which he further identifies with natural prices or necessary prices, required by the owners of these factors of production to bring them to market – and then adding them together to produce the value of the commodity.

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Either Vaccines Work Or They Don't!

I have always been a big believer in vaccination, but all the renewed demands for lock-downs, lockouts, and other restrictions, are undermining my faith in the COVID vaccines.  Either they work, and according to all of the research and information they are supposed to work very well, in which case, with more than 70% of people jabbed twice, and boosters being rolled out, there is no reason for continued restrictions, or else, if the restrictions are required, someone is not telling the truth about the efficacy of the vaccines!  You can't have it both ways.

When I was a kid, there were still many diseases rampant that were far more serious than COVID.  Large numbers of people continued to die, or be disabled for life, from Polio, Measles, Diphtheria, Smallpox, and so on.  For adults, things like Mumps were still a major concern, and people were still suffering from T.B., as well as pneumonia, which I had twice as a kid.  When I was about six, one of my friends' younger brothers died from meningitis.  I had mumps, chickenpox, and other childhoods diseases, as a kid, which, given I also suffered with chronic bronchial-asthma, was not good.  So, the roll-out of vaccines for a range of diseases, during that time, I saw as one of the great achievements of modern science.

One of the first great reliefs was being able to get the polio vaccine, and later at secondary school, the jabs against smallpox and T.B.  In the years after, I made sure my kids got their jabs, as soon as possible.  As soon as annual flu jabs became available, I made sure we all got them, and, later, when a pneumonia jab became available, my wife and I got that too.

So, it was obvious to me that the longer-term solution to COVID was going to be similar vaccination, probably on an annual basis.  My concern was that, having failed to build up natural herd immunity amongst the 80% of populations not at serious risk from COVID, and the economic and social damage the stupid decision to go for lockouts and lockdowns instead was causing, the development and roll-out of vaccines could be rushed, corners cut, and any problem resulting from that would inevitably fuel all of the resistance to vaccines amongst some sections of the population, encouraged by all of the lunatic conspiracy theories of the anti-vaxxers.

In fact, the rapid development of vaccines, although there is evidence of corners being cut, in terms of testing, was highly successful in developing not just one, but a whole range of vaccines, by different companies.  What is more, if the data on these vaccines is to be believed, they are even more effective in preventing ill-health than even are the flu vaccines.  And, as a life-long believer in vaccines, I have, until now, had no reason to doubt what we have been told by scientists, and government about this efficacy of the anti-COVID vaccines.

We are told that the vaccines are more than 90% effective in preventing infection with COVID.  That should really be in preventing that infection from being able to multiply in the body, as vaccines never prevent the body from being infected with a virus or bacteria, but simply enable the body's immune system to respond to that infection quickly, and destroy it before it can multiply to any degree.  Even amongst the small proportion who do become ill, after being vaccinated, the data says that none of them become seriously ill, let alone die.  The exceptions appear to be those like Colin Powell, who also have other serious illnesses, and immune systems that have been seriously compromised.

What is more, we are told that, in Britain, more than 70% of the population have now had both jabs, providing them with this very high level of protection.  On top of that, we know that an even larger proportion of the population - between 80-90+ percent - also have COVID antibodies, as a result of natural herd immunity in addition to those who have been vaccinated.  So, if everything that has been said about the efficacy of vaccines, and about the proportion of the population with such immunity is true, then the risk of serious illness, let alone death, for all these people is tiny.  So, why then are the media, some scientists, and others once again demanding restrictions on the population, who, having put up with lockouts and lockdowns for nearly two years, did their bit by getting jabbed, and who were told that this was going to be the answer, and the means of their protection?  That is simply not rational.  It does not add up.

Either the vaccines work, and more than 70% of the population has immunity, or not.  If we are being told that the problem is the proportion of the population who have not been jabbed, then I'm sorry, but penalising the vast majority to appease this irrational minority makes no sense, and is not supportable.  In fact, on the basis that around 90% of the population has COVID antibodies, it makes even less sense.  If 10% of the population refuse to get jabbed, they should not hold the rest of society to ransom, by their actions.  Children are unaffected by COVID, so they can be taken out of the numbers, other than for that tiny proportion, who have immune deficiencies.  But, for adults, all of whom have the option to get vaccinated, they have the choice as I said recently to either get jabbed, isolate themselves, or take the risk of being ill or dying.  The burden does not lie on the rest of us to appease their irrationality.  The damage to society, and of the economy, resulting from lockdowns and lockouts, which will last for years to come, is far greater on a much larger number of people, than any benefits to a tiny minority might provide.

That the media continue to demand lock downs and lockouts, and so on all over again is no surprise, because that has been the gift that keeps on giving as far as they are concerned in terms of sensationalist news stories.  That some opposition politicians, and trades unions demand it as an opportunist means of attacking the government, and seeking to mobilise hostility towards it, especially on the basis of the inevitable economic distress that would result, is also understandable.  That crude socialists like the SWP, who see any economic weakness as undermining capitalism, being somehow beneficial, is also understandable.  But, why are scientists also joining that bandwagon demanding renewed restrictions?  Either, they are covering their rear from any possible criticism, or it is again a matter of them being pressured into such an irrational stance by the pressure of media and public opinion.

Alternatively, it means that what we have been told about the efficacy of the vaccines is not true, and that would be a devastating truth for all of us who place such great faith in them.  It would be the biggest single boost for the idiot anti-vaxxers, the conspiracy theorists and so on that could be imagined.  It would undermine faith in vaccinations for decades to come.  So I hope that that is not true, but I have to say that I am having great difficulty reconciling the facts that scientists are giving us on the one hand about the efficacy of the vaccines, the extent of vaccination within populations, and yet their renewed demands for restrictions.

The data seems to confirm the efficacy of the vaccines.  The media, of course, continue to focus on the number of infections, rather than the number of people being hospitalised or dying.  They also focus on rates of growth of infections rather than the actual number of infections.  If one person is infected, and that goes to two, that is a 100% rate of increase, but if 100 people are infected and it goes to 110, that is only a 10% rate of increase.  It doesn't change the fact that the latter is a much bigger problem than the former.  The way the media present the data, in terms of time comparisons, also exaggerates, both the level of infections, and of deaths compared to the past, and that is what is to be expected from a 24 hour media, dependent upon sensationalising every news item.  The same is true about the fact that they continue to present deaths of people WITH COVID as being deaths of people FROM COVID.  As I pointed out months ago, the ONS data shows that, in fact, only around 13,000 people out of the 130,000, have died FROM Covid, the other 117,000 having died from something else, whilst having also had a positive COVID test.  Many of them actually contracted COVID after having gone into NHS hospitals for treatment of these other conditions.

Virtually all of the people currently becoming ill or dying WITH Covid, are people who have not been jabbed.  That the number of people dying at this time of year should increase is no surprise, for the simple reason that the number of people who die from all causes, at this time of year, begins to rise, and continues to increase during the Winter.  It why the number of deaths is far more correlated to the time of year than it is to whether there is lockdowns or no lockdowns.  So, again, I find it hard to understand why, given the actual data about such deaths, there is a support for lockdowns and other restrictions.  On the one hand, that is not going to stop the normal increase in deaths of particularly elderly and sick people that happens every Winter, and nor is it of any relevance to everyone else, who has protected themselves by getting jabbed.  Rather than calling for such restrictions, the emphasis should be on insisting that those not jabbed get jabbed, or take their chances.

Again, there has been a lot of talk about the situation in the South-West of England, where the existence of just one large NHS hospital means that any sharp increase in admissions cannot be dealt with.  Well its supposed to be a NATIONAL Health service, not a regional, or county health service, so the simple immediate answer to that is for patients to be sent to other hospitals.  More significantly it speaks against the policy of building overly large centralised single hospitals at the expense of a larger number of small hospitals, a decision made years ago, and which was done in the interests of the NHS bureaucracy, and its empire building tendencies, and of the medical-industrial complex, at the expense of patient care.  Of course, any great calamity, would pose the same problems for the South-West, showing that the issue itself has nothing to do with COVID.

COVID has simply been a useful distraction for many issues, be it this fact that the NHS is not fit for purpose, that the UK's infrastructure is collapsing as a result of decades of under investment, or that Brexit has been a calamity for Britain on an epic scale.  The demands for further lockdowns and restrictions again play into that as all of these facts begin to assert themselves once more, with widespread shortages and breakdowns.

So, I continue, for now, to believe that what we have been told about the efficacy of vaccines is true, and that, provided boosters are rolled out effectively for those that need them, we should continue to enjoy protection from the virus in the coming months.  But, in that case, I cannot understand the calls from scientists for further restrictions; either the vaccines work, and its simply a question of rolling them out further, or they don't.  The more the demands for further restrictions are made, the less confidence I have that what we have been told about that efficacy is true.  In which case, that would mean that billions of Pounds spent on them was wasted, just as billions was wasted on useless testing and tracing systems that simply fed the profits of companies, many of which were linked to the Tories. 

A Characterisation of Economic Romanticism, Chapter 1 - Part 71

Lenin is quite right that distribution has no independent existence, and before the question of demand and supply can be examined, the relation of distribution to production relations must be examined, but, as Marx explains in The Grundrisse, production is consumption and consumption is production. The worker produces labour-power by consuming commodities required for their own reproduction. Labour-power is consumed in the labour process in producing commodities. Commodities, in the form of fixed capital and raw and auxiliary materials, are consumed in the production process. Lenin makes the mistake of the Ricardians of wanting to make consumption entirely and automatically determined by production, and of not seeing that production itself, or more correctly reproduction is simultaneously conditioned by consumption.

“Supply and demand determine the market-price, and so does the market-price, and the market-value in the further analysis, determine supply and demand. This is obvious in the case of demand, since it moves in a direction opposite to prices, swelling when prices fall, and vice versa. But this is also true of supply. Because the prices of means of production incorporated in the offered commodities determine the demand for these means of production, and thus the supply of commodities whose supply embraces the demand for these means of production. The prices of cotton are determinants in the supply of cotton goods.

To this confusion — determining prices through demand and supply, and, at the same time, determining supply and demand through prices — must be added that demand determines supply, just as supply determines demand, and production determines the market, as well as the market determines production.”

(Capital III, Chapter 10)

Without consumption, the circuit of capital cannot be completed. Indeed, as Marx sets out, in Capital II, unless consumption occurs within a given amount of time, after production, the circuit of capital is broken, and reproduction cannot occur. In other words, Lenin, in his justifiable desire to oppose the petty-bourgeois moralism of Sismondi and the Narodniks, has fallen into the same errors as the Ricardians.

Sismondi attacked Ricardo for presenting an analysis of society on scientific principles. In other words, he dealt with what is, rather than the moralist approach of what ought to be. The same is seen today with those moral socialists who bemoan the actions of the capitalist state, rather than explaining honestly, and scientifically, why it is inevitable that this state, as a class state, acts in the ways they object to. In large part, that is down to the fact that these petty-bourgeois socialists are themselves statists. They have abandoned all perspective of working-class self-activity and self-government, and instead place their faith in the state itself performing the historic tasks of the proletariat. That was the same perspective of Sismondi and the Narodniks. But, to hold this perspective is then to abandon the Marxist analysis of the state as a class state. It requires a belief that the state, often confused with government, is class neutral, an empty vessel waiting to be filled with class content, or, worse still, waiting simply to be filled with the ideas required to advance the interests of “the nation”, ideas that are somehow, objectively true, and simply waiting for the intelligentsia to discover.

“We fully understand their fear: the frank admission of reality would completely cut the ground from under the sentimental (Narodnik) criticism of capitalism. It is not surprising that they so ardently rush into battle before they have had time to clean the rusty weapon of romanticism. It is not surprising that they are unscrupulous in their methods and want to present hostility towards sentimental criticism as hostility towards criticism in general. After all, they are fighting for their right to existence.” (p 206)

And, so too with today's romanticists. Its not that Marxists reject criticism of capitalism/imperialism, but that we reject the petty-bourgeois, moralistic criticism of it – and the same applies to the criticism of Stalinism and the deformed workers' states. That moralistic criticism is inevitably reactionary, unable to provide any realistic way forward from the reality of capitalism/imperialism/Stalinism, it inevitably points backwards to a former state of things, in which such morally objectionable phenomenon are thought not to exist – but, of course, other, often worse, morally objectionable phenomena, in reality, accompany those past conditions, and even more so when an attempt to return to them is made when the world has moved on.

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Adam Smith's Absurd Dogma - Part 5 of 52

Marx – Capital II, Chapter 19 

“Adam Smith’s dogma that the price, or “exchangeable value,” of any single commodity — and therefore of all commodities in the aggregate constituting the annual product of society (he rightly assumes capitalist production everywhere) — is made up of three “component parts,” or “resolves itself into” wages, profit, and rent, can be reduced to this: that the commodity-value is equal to v + s, i.e., equal to the value of the advanced variable capital plus the surplus-value. And we may undertake this reduction of profit and rent to a common unit called s with the express permission of Adam Smith, as shown by the following quotations, in which we at first leave aside all minor points, i.e., any apparent or real deviation from the dogma that commodity-value consists exclusively of those elements which we call v + s.”

(Capital II, Chapter 19, p 374)

Marx then quotes Smith's Book 2, Chapter 3, p 221 to that effect. The value of he wages, Smith says, is reproduced by the worker, in the labour they undertake for the capitalist, along with the profit of the capitalist.

“Though the manufacturer (worker AB) has his wages advanced to him by his master, he, in reality, costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed.” (p 374)

In agriculture, Smith says the labourer besides

“the reproduction of a value equal to their own consumption, or to the [variable] capital which employs them, together with its owners’ profits ...” — furthermore, “over and above the capital of the farmer and all its profits regularly occasion the reproduction of the rent of the landlord.” (Book II, Ch. 5, p. 243.)” (p 374)

But, Marx points out that, before the rent passes to the landlord, it is first appropriated by the capitalist farmer, and so the basic division of the new value created by labour remains that into v + s. And, it is this division that Adam Smith claims characterises the division of the entire product of society.

“The dogma that the price of all commodities (hence also of the annual commodity-product) resolves itself into wages plus profit plus ground-rent, assumes even in the intermittent esoteric constituents of Smith’s work the form that the value of every commodity, hence also that of society’s annual commodity-product, is equal to v + s, or equal to the capital-value laid out in labour-power and continually reproduced by the labourers, plus the surplus-value added by the labourers through their work.

This final result of Adam Smith reveals to us at the same time — see further down — the source of his one-sided analysis of the component parts into which the value of a commodity resolves sources of revenue for different classes engaged in production has nothing to do with the determination of the magnitude of each of these component parts and of the sum of their values.” (p 376)

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A Characterisation of Economic Romanticism, Chapter 1 - Part 70

It is quite correct, as Lenin says, that distribution is a function of production, but this does not at all mean that revenues, having been distributed in accordance with the relations established in production, automatically flow back as demand for the specific use values produced! That is precisely Marx's point in his criticism of Say's Law, and of the Ricardians, as set out in Theories of Surplus Value, Chapter 20.

Lenin's comment,

“Once relations in production have been explained, both the share of the product taken by the different classes and, consequently, “distribution” and “consumption” are thereby explained.” (p 202)

is clearly wrong, because, whilst it explains distribution, it does not at all explain consumption, for the reasons Marx has described in the above quotations. Indeed, as he says, demand/consumption is determined by entirely different laws to those that determine supply.

“Here a great confusion: (1) This identity of supply, so that it is a demand measured by its own amount, is true only to the extent that it is exchange value = to a certain amount of objectified labour. To that extent it is the measure of its own demand -- as far as value is concerned. But, as such a value, it first has to be realized through the exchange for money, and as object of exchange for money it depends (2) on its use value, but as use value it depends on the mass of needs present for it, the demand for it. But as use value it is absolutely not measured by the labour time objectified in it, but rather a measuring rod is applied to it which lies outside its nature as exchange value.”

(The Grundrisse)

That measuring rod, is of course, the ability to meet the needs of the buyer, i.e. its utility for that buyer. Supply is determined by exchange-value, whereas demand is determined by use-value. Physical production has to be continually expanded to reduce individual value below market value, but Marx points out that just because producers supply increased physical quantities to market, consumers have no reason to consume these increased physical amounts, just because they represent the same amount of value, i.e. he understands elasticity of demand.

In fact, in pursuing this line of argument, Lenin rules out the possibility of crisis altogether, which is the position that Ricardo was in, having adopted Say's Law. As Marx says, in Capital III.

“Let us suppose that the whole of society is composed only of industrial capitalists and wage-workers...Then, a crisis could only be explained as the result of a disproportion of production in various branches of the economy, and as a result of a disproportion between the consumption of the capitalists and their accumulation.”

(Capital III, Chapter 30)

Lenin rules out any such disproportion, because he accepts Say's Law that supply creates its own demand, confusing value with use value.

Indeed, Lenin provides no theory of crisis, here. If we take Ricardo's position, he was only aware of financial crises of the types seen in the 18th century. Some still see this as the basis of crises, arising from a separation of the currency from gold and so on. The Miseans propose such a theory of the crack up boom. Sam Williams also has a similar theory of crisis. But, Marx shows that whilst this can be a cause of purely financial crises, it is not the cause of crises of overproduction of commodities or of capital, and rather is a symptom of them.

“These are the formal possibilities of crisis. The form mentioned first is possible without the latter—that is to say, crises are possible without credit, without money functioning as a means of payment. But the second form is not possible without the first— that is to say, without the separation between purchase and sale. But in the latter case, the crisis occurs not only because the commodity is unsaleable, but because it is not saleable within a particular period of time, and the crisis arises and derives its character not only from the unsaleability of the commodity, but from the non-fulfilment of a whole series of payments which depend on the sale of this particular commodity within this particular period of time. This is the characteristic form of money crises.

If the crisis appears, therefore, because purchase and sale become separated, it becomes a money crisis, as ‘soon as money has developed as means of payment, and this second form of crisis follows as a matter of course, when the first occurs.”

(Theories of Surplus Value 2, p 514)

This is why theories of crisis based on the role of credit, as money and means of payment, are wrong because, although this potential can be the spark that ignites a specific crisis, and can exacerbate any actual crisis, the real potential lies elsewhere, in the separation of production and consumption.

“In investigating why the general possibility of crisis turns into a real crisis, in investigating the conditions of crisis, it is therefore quite superfluous to concern oneself with the forms of crisis which arise out of the development of money as means of payment. This is precisely why economists like to suggest that this obvious form is the cause of crises. (In so far as the development of money as means of payment is linked with the development of credit and of excess credit the causes of the latter have to be examined, but this is not yet the place to do it.)”

(Theories of Surplus Value 2, p 514-5)

As for economic crises, Ricardo could only see it in terms of some denouement for capitalism itself, as a consequence of Malthus' population theory, and his own theory of diminishing returns in agriculture, resulting in profits disappearing. But, on both these points, Ricardo was seriously wrong, and no such denouement was going to happen.

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