Towards a theory of the development of the world market and the world economy

Isaak Dashkovskii
Under the Banner of
(№ 1, 1927)

Translated by Noa Rodman with light edits by Ross Wolfe. Still waiting on a full copy of the Russian to go over some of the rougher sections. English is not Noa’s first language, to my knowledge. He’s a mysterious figure in general, who sometimes comments on my blog and occasionally Chris Cutrone’s, while also haunting the LibCom forums. Anyway, I’ve done what I can to clean it up.

First of three articles. Under the Banner of Marxism, 1927, № 1 , 86-117. See part two and three.1

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The most fundamental and dominant facts of modern economic life are the world market and the world economy. This is observed in countless written works, devoted to recent history of the economy and its modern situation. Even those authors, who, like [Werner] Sombart, tend to defend the paradoxical idea, that “the single national economy increasingly is becoming a completed microcosmos, and the internal market gradually outweighs for all industries the significance of the foreign market,”2 nevertheless have to recognize, that an essential condition for the growth of the domestic market is a “permanent and continuous extensive expansion of world economic relations.”

The development of international economic relations is a kind of dialectical process. As is known, exchange and trade historically occur “on the margins of social organisms.” International, intertribal trade is the starting point of the development of exchange, with which the capitalist economy also develops. 3 Later on capitalism gradually clears for itself a required “field of exploitation” inside the country, disintegrating the remnants of the natural order, paving the way of commodity economy throughout and transforming the latter into capitalist economy. During this period there occurs an intensive “formation of the internal market” for capitalism. When this work is done in enough depth and breadth, there comes the turn again of international exchange, on no longer primitive foundations, but on the basis of large-scale production and manufacture technology. Capitalism “pulls” all nations one after the other into the world economic orbit. The epoch of world economy arrives.

As troubadours of this international exchange act always the economists of those countries, which occupy a dominant position in the world market. Since the era of development of bourgeois political economy coincided with the dominance of England in the world market, it is only natural that the theory of the classics became the fighting banner of bourgeois “cosmopolitanism,” which essentially was the only adequate form of expression of the national interests of British capital. In the development of the “cosmopolitan” theory one can mention two stages: the first period associated with the names of Smith and Ricardo, characterizing the predominance of the interests of international trade in the strict sense, i.e., in terms of export of goods. Praising the benefits of international exchange both Smith and Ricardo refer negatively to the tendency to transfer capital and entrepreneurship abroad.

But in relation to this already Mill takes a step forward, pointing out that the export of capital is a powerful force for expanding the field of employment of remaining capital. It is quite fair to say that the more, to a certain extent, we will send capital out, the more we will have it and the greater the amount of it we will be able to keep in the fatherland.4 This evolution of the classical theory was closely related to changes in the economic environment. From export of goods British capital turned, after the Napoleonic Wars, to the export of capital. The pursuit of higher profits got the better over “attachment to the fatherland,” and Mill only registered a fait accompli. True, he has not yet completely done away with the old ideology and proves the benefits of export of capital by the consideration that the export contributes to increasing the amount of capital remaining in the fatherland. But this was already a simple tribute to prejudices, from which the later generation of economists managed to entirely escape.

In the theory of international economic relations as well as in all other matters of political economy, the classics remained true to their main method — to issue the specific laws of bourgeois economy to a natural order of things, to a pre-established harmony. The moving force of the development of world trade they saw in physical conditions of production, and not in the social form, which they take under capitalism. International trade spreads the frame of the division of labor, increasing its productivity. Growth of productivity is a simple consequence of technical factors — the division of labor, which therefore is the most natural order of things. Natural laws inevitably must forge a way through the artificial barriers created by the wrong policies of social organizations — the state, etc. Therefore the development of international trade is inevitable.

From the natural order of things proceeded, incidentally, also a prominent opponent of the classical school on the continent of Europe — Friedrich List. But he, in contrast to the classics, argued that the greatest economic benefits are obtained not from the division of labor between countries, but from the conjunction of labor within the same country, in particular from the conjunction of industrial and agricultural production. A clear case of how the meaning of “natural laws” is modified when they need to express opposing interests of different groups of bourgeoisie, in this case the bourgeoisie of England and Germany in the first half of the 19th century. True, also List did not depart from “cosmopolitanism” in relation to more or less distant future, when circumstances permit “universal” struggle. He also considered it necessary to flirt with “universal” considerations. “That the civilization of all nations, the culture of the whole globe is the mission of mankind, is a consequence of those immutable laws of nature, according to which civilized nations are driven by irresistible power to carry over their productive forces to the less civilized countries.”5

“Natural laws” unconsciously for their interpreters spoke in the purest language of bourgeois categories in those cases, for example, when the benefits of the international exchange strengthened arguments on the profit rate or wages. But since these categories in the representation of bourgeois economy had “antediluvian existence,” these same forces of development of the world market appeared independent of any form of social organization. They were rooted in the “immutable laws of nature.”

In his comments on Ricardo Diehl correctly notes that “​​Ricardo’s idea about foreign trade policy is closely connected with his theory of distribution of national income; he is in favor of free trade because it has the most favorable influence upon the distribution of wealth within the national economy” (K. Diehl, Erläuterungen, Bd. III, II Theil, 326 p.).

Only Marx put the question of the world market on a real scientific ground. He showed that the creation of the world market was not a function of “laws of nature” as such, but a function of capital, and moved, in this way, study on the ground of social laws, peculiar to a determined era. “What is free trade under the present condition of society?” Marx asks. “Freedom of capital. When you have overthrown the few national barriers which still restrict the progress of capital, you will merely have given it complete freedom of action.”6

And further, revealing the essence of protectionism, Marx finds it in a strong growth, despite the apparent contrast, with the system of free trade:

The protectionist system is nothing but a means of establishing large-scale industry in any given country, that is to say, of making it dependent upon the world market, and from the moment that dependence upon the world market is established, there is already more or less dependence upon free trade.

In this way, both seemingly mutually exclusive, systems of economic policy, lead, according to Marx, to the same result: the expansion of the scope of capital’s activity, the expansion of world economic relations.

A theory of the world market had no fortune in Marxist literature. Marx himself assumed to devote a significant part of his research to the analysis of foreign trade, international market and international economy. He mentions this in the first lines of his Contribution to the Critique of Political Economy: “I examine the system of bourgeois economy in the following order: capital, landed property, wage-labor; the State, foreign trade, world market.” The incompleteness of Capital is reflected precisely in the last three parts of Marx’s plan. In particular the theory of international economic relations is represented there only in the form of passing remarks, which, however, are themselves of an enormous scientific worth and allow in general outlines to build a system of Marx’s views on this question.

Regarding post-Marxian economic literature, although questions of world economy also were and are paid a lot of attention, a general theory of international exchange remained poorly developed. The dispute about the importance of foreign markets for capitalism between Marxists and populists, renewed in our days around the theory of Rose Luxemburg, revolves mainly around the problem of realization, or the complication of specific questions of modern imperialism, involving the highly advanced monopolization of important sectors of the world economy, the strong influence of “supra-economic” factors , etc., conditions interfering with the economic laws of capitalism “in its pure form.” Meanwhile, without a “pure theory” of the global market one cannot understand the real binding of global economic phenomena, just as without a “pure theory” of commodity and capitalist economy one cannot understand the general course of economic life, relations, classes, etc. The theory of “realization” is only a part of this pure theory. The question about realization of surplus value cannot be separated from the question about prices, for it is only through prices that potential surplus value is converted into real profit. The formation of price in international exchange is impossible to understand, without having a general theory of international exchange, and international exchange is part of a wider field of international economic relations (including the migration of capitals, the so-called “exchange of services,” the movement of labor forces, etc.). In short, here is an untouched region of theoretical research, in which Marxist science has made only first steps.

The lack of a developed theory in this domain is shown primarily in the insufficient research of the reasons for the emergence of the modern world market and its development. Hitherto in the literature, which with some reserve can be called Marxist, views figured according to which the development of world economy is not a specific function of the capitalist forms of economy, but a result of a “redistribution of productive forces” caused by “the law of diminishing returns” (See Maslov’s The Science of National Economy [Наука о народном хозяйстве, 1923]). In essence, this is a return to the classical school.

Not found either hitherto is a definite attitude towards the existing classifications — “single economy,” “national economy,” “world economy.”

We begin therefore with an attempt to systematize on these questions Marx’s views, which provide rich material especially on the first question, so that on the basis of the extracted results a more confident navigation in questions of international exchange exists.



First towards the formulation of the question. Analysis of the conditions of the world market, properly speaking, is a matter of economic history, which must take the question in all its concreteness. With this formulation the history of world economy arises with the history of capitalism, which originated in a particular historical soil, and not at all as the result of some kind of “self-deployment of world reason.” But we are interested here not in history, but the theory of the problem, i.e., we need to find the specific features of capitalist economy, that prompted the world expansion, which led to the world economy. With this we again, stay on the basis of “pure capitalism,” not “defiled” by monopolies, imperialism, etc. fruits of sinful reality. Of course, we regard this only as a methodological approach, as a first approximation to the problem.

Speaking about the development of the world market and the world economy, as one of the specific functions of capital, we do not at all oppose this statement with another position, according to which the emergence of the world economy is the result of the influence of material, technical, geographical or, generally speaking, natural factors. In the final light also capitalism itself, if consistently descend to its historical roots and origins, includes among its driving power “natural” factors. But these factors affect social development only through determined forms of social relations. The more significant works produced by bourgeois economic thought, on issues of territorial location and territorial connections of national economy — the works of Thünen in the domain of agriculture and Alfred Weber in the domain of industry also just therefore gave serious result, because they did not limit analysis to material elements of economy. Thünen studies the dependence of agricultural culture in conditions of market exchange. Weber emphasizes the impact of the capitalist form of economy on production allocation, for example, in the domain of so-called “worker orientated” businesses, the impact of rent relations etc. We do not mention that the very possibility of a statement of the problems of rational allocation of sectors of the economy already demands, as a precondition, the full penetration in economic life of the law of value and commercial calculation, characteristic only for a certain stage of development of social forms.

That is why we start with an analysis of the impact of these forms and their respective economic categories. In this way we’ll more truly reach also to “natural” factors and be able to establish their rightful place in the economic processes.

The most general “cause” is included already in the contradictions of the commodity form of the product. Commodity production is based on the bifurcation of products of labor on the line of use value and value, in which the latter takes exclusive importance for capitalism. Capitalism first introduced on a large scale in economic life the rational start, according to the definition of Sombart, of the ability to count. But a comprehensive economic account is conceivable only in abstract units, which must reduce to a common denominator all the variety of commodities of the world. The ground for this was prepared together with the advent of the abstract form of wealth — money, the incarnation of the universal form of value. But value itself in its opposition to use value, could develop only where the product of labor was finally turned in a commodity sans phrase, in a comprehensively alienated thing, and this was made possible only through the expansion of the foreign sphere of exchange. “It is only in the markets of the world that money acquires to the full extent the character of the commodity whose bodily form is also the immediate social incarnation of human labour in the abstract. Its real mode of existence in this sphere adequately corresponds to its ideal concept.”7

If to this expansion of foreign markets pushes already the simple fact of the split of the commodity in use value and value, a fact common for simple commodity and for capitalist economy, then all the more significance the trend to increase must be given in a proper capitalist economy, where the specific problem arises of production of surplus value as an end-in-itself. In a simple commodity economy the product of labor was still connected directly with the producers, to which it belongs, and with the consumer, inasmuch as the latter gets it to meet their need. The useful form of this product, its use value retains still its entire meaning under exchange. In contrast, under capitalism, where the primary purpose of buying and selling is a simple continuous production and increase of value, as such, the form the product, its useful properties become indifferent. For the industrial capitalist the use value of his commodities is only an inevitable “evil,” inasmuch as without these properties cannot be realized value and surplus value. For the capitalist owner, inasmuch as he gets means of production, the beneficial properties of purchased goods are again not considered in terms of meeting needs, but in terms of their suitability for the production of value. Only in this sense, the capitalist pays attention to quality and properties. The dominance of the abstract form of wealth over particular, the dominance of value over use value, surplus value over value, all these characteristic features of capitalism can, however, get their full development, if there continuously occurs a growth in the variety of commodities, traded on the capitalist market. A peculiar contradiction has effect here in that that same society, where needs are subordinated to the production of value and surplus value, the most significance acquires the variety of goods, serving the goal of satisfying the ever growing diversity of demands. “If surplus labour or surplus-value were represented only in the national surplus product, then the increase of value for the sake of value and therefore the exaction of surplus labour would be restricted by the limited, narrow circle of use-values in which the value of the (national) labour would be represented. But it is foreign trade which develops the surplus product’s real nature as value by developing the labour embodied in it as social labour which manifests itself in an unlimited range of different use-values, and this in fact gives meaning to abstract wealth.”8

The greatest uniformity of needs, the greatest uniformity of products served to satisfy them, dominates, thus, there, where the principle to serve needs is the basis of economic life in primitive natural economy. Conversely, there where production ignores needs, the latter most loudly assert their rights and demand a larger and larger dose of “differentiation” for increasing the strength of sensation.

The growth of the diversity of demands and means to meet them may happen in the extensive and intensive manner, which intertwine among themselves. Usually, new demands appear first under the impact of contact with the foreign environment, which delivers unknown or rare for such time products. The development of capitalist technology, emerging precisely on the basis of exchange with the foreign world, then increases the variety of products with the help of the own resources. Here one can observe the intersection of the most difficult interactions. The increasing diversity of consumer goods, going hand in hand with intensification of needs, enhances the field of exchange and the expansion of labor processes in all sorts of shapes and forms. Therewith, as exchange proliferates in depth and breadth, ever greater masses of people are pulled out from a situation of local restrictions, are involved in the leveling circulation of capitalist production, which levels their habits, tastes, needs, and means to satisfy them. On this ground grows mass production, which assumes a more rapid growth of technology and ever increasing frequency of changes therein. But frequently changing technology by itself already creates extremely fragile and fickle demand. (This most stable character of life existed only in the Middle Ages, with the domination of tradition and guilds in craft production). Thus grows the intensity of exchange within a given socio-economic unit, operating at the same time an even more intense production of commodities.

The necessity of their sale pushes in its turn to the search of foreign markets, to the artificial introduction of products of the civilized world among backward peoples.

In any case territorially different spheres of commodity economy represent, on the one hand, a necessary condition for the emergence and development of capitalism, and on the other its result. It finds its natural borders in the “limits of earth.” Still in 1858 Marx believed this process roughly finished, although subsequent facts showed that it was the beginning and not the end. “The particular task of bourgeois society is the establishment of the world market, at least in outline, and of production based on it. Since the world is round, this seems to have been completed by the colonisation of California and Australia and the opening up of China and Japan.”9

Ever-growing variety of “wealth, seeking pleasures,” variety of consumer values ​​assumes a variety of spheres of production and hence a comprehensive supply of capitalist society’s means of production. Hence the ever increasing demand for raw materials, for old branches, requiring continuous increase in the number of raw materials, as also for new types of industrial activity, for which the necessary raw materials must be specially cultivated.

An expanding sphere of exchange resolves also this issue. Thanks to it capitalist production and capitalist accumulation become completely independent of the natural form of products of labor of a given country and is transformed in pure production of value. That is why Marx considers it allowed, when analyzing the circulation of social capital, to distract from foreign trade.

Thanks to foreign trade, capital accumulation in a country may occur in any material form: the country can prosper exclusively on production of luxuries, though in themselves these items not only cannot promote the growth of production, but, on the contrary, in most cases represent a simple waste of productive forces. This defining fact exists in many countries, which are representatives of so-called monoculture. “It determines the whole social pattern of backward nations — for example, the slave-holding states in the United States of North America (see Cairnes) or Poland, etc. which are associated with a world market based on capitalist production. No matter how large the surplus product they extract from the surplus labour of their slaves in the simple form of cotton or corn, they can adhere to this simple, undifferentiated labour because foreign trade enables them [to convert] these simple products into any kind of use-value.”10

Such “monoculture” is linked by its existence to capitalism not only in the sense that it forms for it a sales market, but also in another respect:

By constantly making a part of the hands “supernumerary,” modern industry, in all countries where it has taken root, gives a spur to emigration and to the colonization of foreign lands, which are thereby converted into settlements for growing the raw material of the mother country; just as Australia, for example, was converted into a colony for growing wool. A new and international division of labour, a division suited to the requirements of the chief centres of modern industry springs up, and converts one part of the globe into a chiefly agricultural field of production, for supplying the other part which remains a chiefly industrial field. This revolution hangs together with radical changes in agriculture…The economic development of the United States is itself a product of European, more especially of English modern industry. In their present form (1866) the States must still be considered a European colony.11

True, it was a peculiar colony, against which in short time the European metropolis had to defend with the introduction of a series of protective duties on American products. To raise, in the expression of Parvus, a “rebellion” against its colonies. Nevertheless, capitalist development of the US is a prime result of European capitalism.

P. Maslov, following his idée fixe — the “law” of falling labor productivity in agriculture, depicts this process in his own way:

In the world economy redistribution of production forces occurs in such a way — since under sparse population higher labor productivity is given, then from there also begins the export of products of agriculture. There where there is more dense population, there is lower labor productivity and there agricultural products are imported. Since the productivity of labor determines the cost of production, then there develops manufacturing industry. Meaning, under the partition of the world economy, a redistribution of the productive forces on the world market occurs, in which from sparesly populated areas bread begins to come on the world market. Therewith a tendency is noticed that delivery on the world market, mainly cereals and livestock, is increasingly moving away from the world market.12

According to Maslov, the very emergence of manufacturing industry in countries of a dense population is the result of the fall of productivity of agricultural labor in them. The migration from these countries into the colonies is influenced by absolute overpopulation, because the means of existence grow slower then the number of workers employed in agriculture. We do not have to dwell on the fact that this theory resembles Malthus’ theory — from which Maslov in the same book takes distance in words — as two peas in a pod. It has nothing in common with Marx’s theory of population. So it is only appropriate ask the following question: If in countries with dense population a decrease of labor productivity occurs, then from where is the capital there taken to create and powerfully develop the manufacturing (as well as mining, e.g., coal) industry? And why do these countries of “low productivity” find the possibility to export their excess capital to where already without this the land flows with milk and honey? Presuming to create on the basis of the notorious “law” his theory of the world economy, Maslov completely ignores the existence, e.g., of such facts of the world economy, as the immigration in countries of high population, labor forces for the work in industry, as the export of agricultural products from highly populated agricultural countries (from India, for example), etc. The theory of falling productivity, must inevitably lead Maslov to the Ricardian viewpoint, according to which capital is exported from the country of lesser labor productivity to the country of greater labor productivity, mixing the law of the falling rate of profit with the fall of the “productivity of capital.” This is the inevitable result of the neglect of social forms in the analysis of social phenomena. To these issues we hope to return in the following article.

In order to compensate its products with products of other material form capitalism does not at all require that these latter were necessarily made by capitalist methods. It finds and takes them in any sphere, under any socio-economic formations. A huge mass of raw materials and other materials for capitalist production still is delivered by the non-capitalist sphere, the “third person.” These products are converted into capital after its exclusion, in the hands of the capitalist. Inasmuch as capitalist industry demands constant renewal of these stocks, it thereby falls into the well-known dependence of the non-capitalist sphere. “In this sense the capitalist mode of production is conditional on modes of production lying outside of its own stage of development. But it is the tendency of the capitalist mode of production to transform all production as much as possible into commodity production. The mainspring by which this is accomplished is precisely the involvement of all production into the capitalist circulation process. And developed commodity production itself is capitalist commodity production. The intervention of industrial capital promotes this transformation everywhere, but with it also the transformation of all direct producers into wage-laborers.”13

A brilliant illustration of this process by which the “introduction” of underdeveloped countries to the benefits of capitalist civilization takes place was given, as is known, by Rosa Luxemburg. However, the conclusions of Marx are the direct opposite of the conclusions of Rosa Luxemburg. Liquidation of non-capitalist environment should, according to Luxemburg, place capitalist society in the impossibility to exist. In contrast, for Marx regarding the sustenance of the capitalist production process by products of the non-capitalist environment, the decomposition of the latter, its transformation into a capitalist sphere provides a more regular reproduction of raw materials than available in pre-capitalist forms of economy.

The inclusion of all countries in the network of world exchange assumes, of course, an international division of labor. It’s known what importance free-traders attached to free exchange, which should give each country the possibility to focus on the production of those goods for which it has most favorable natural conditions.

As in other areas of the economy, so also in the division of labor bourgeois economy sees, firstly, the natural expression of human nature, and secondly, the intervention of absolute reason. Adam Smith, e.g., the first to systematically investigate the question of division of labor (in manufacture), understood the connection which exists between the degree of division of labor and the size of the market, but still as a final cause proposed “human nature, which exhibits an irresistible propensity to (e.g.) exchange.”14 The nature of bourgeois society was declared thereby a model natural character. Not far from Smith went also later economists, including Friedrich List, who, based on the same general requirements of human nature, pointed to the particular importance of the problems of conjugated labor, industrial and agricultural, within one and the same country. Marx approached the issue of division of labor from a historical perspective, linking it with the bases of the capitalist mode of production. First, he pointed out that the division of labor does not constitute in itself a sort of permanent, but a changing place together with altering economic conditions. Craft division of labor does not resemble manufacture, manufacture does not resemble the division of labor in the era of machine production. “The development of the division of labour supposes the assemblage of workers in a workshop.”15 But such assemblage already assumes capitalist production. Thus, the “progress” of the division of labor is not the result of the self-deployment of natural reason, but a consequence of capitalism. “The foundation of every division of labour that is well developed, and brought about by the exchange of commodities, is the separation between town and country. It may be said, that the whole economic history of society is summed up in the movement of this antithesis. We pass it over, however, for the present.”16 But when then emerges this basic form of division of labor? Only with the development of a mechanized production. “Only machinery, the lasting basis of capitalistic agriculture, expropriates radically the enormous majority of the agricultural population, and completes the separation between agriculture and rural domestic industry, whose roots — spinning and weaving — it tears up. It therefore also, for the first time, conquers for industrial capital the entire home market.”17 But the same methods conquer also the external market. Destructive action of capital, armed with machine technology, affects far beyond the country’s borders. “The cheapness of the articles produced by machinery, and the improved means of transport and communication furnish the weapons for conquering foreign markets. By ruining handicraft production in other countries, machinery forcibly converts them into fields for the supply of its raw material. In this way East India was compelled to produce cotton, wool, hemp, jute, and indigo for Great Britain.”18

Along with the development mechanic industry foreign trade generally starts to take the advantage over domestic trade. “The invention of machinery brought about the separation of manufacturing industry from agricultural industry. The weaver and the spinner, united but lately in a single family, were separated by the machine. Thanks to the machine, the spinner can live in England while the weaver resides in the East Indies. Before the invention of machinery, the industry of a country was carried on chiefly with raw materials that were the products of its own soil; in England – wool, in Germany – flax, in France — silks and flax, in the East Indies and the Levant — cottons, etc. Thanks to the application of machinery and of steam, the division of labour was about to assume such dimensions that large-scale industry, detached from the national soil, depends entirely on the world market, on international exchange, on an international division of labour.”19 Such dependence very often carries the heavy blows of industry, if it fails to decompose fast enough the pre-capitalist relations in the colonial and backward countries. Thus Marx repeatedly stands still on the efforts which British work costs to transform India and China into an Hinterland of capitalist industry. “It exerted a revolutionary influence on these communities and tore them apart only in so far as the low prices of its goods served to destroy the spinning and weaving industries, which were an ancient integrating element of this unity of industrial and agricultural production. And even so this work of dissolution proceeds very gradually. And still more slowly in China, where it is not reinforced by direct political power. The substantial economy and saving in time afforded by the association of agriculture with manufacture put up a stubborn resistance to the products of the big industries, whose prices include the faux frais of the circulation process which pervades them.”20

The method by which capitalism overcomes these obstacles is well known: they entirely copy the first era of “primitive accumulation” — which thus not only precedes the rise of the capitalist system, but is its constant satellite, accompanying its victorious procession on the globe. Rosa Luxemburg devoted brilliant pages of her work describing these methods, but she gave only an additional illustration to the provisions, long before her formulated by Marx.

The division of labor between members of one and the same society — crafts, manufacture etc. — has its original starting point in natural gender and age differences in the limits of family and kinship. Arisen on a natural basis, it is in its further evolution already entirely subordinate to laws of social development.

The same applies also to the system of international division of labor. Initially, it exists as a natural difference in natural forms of production and the existence of self-reliant communities, that depend on differences in the natural environment. Exchange arising between communities, finds these differences, as ready historical fact and only binds between itself these diverse areas of production, thus turning each of them in a dependent part of the total social production. The further fate of this intertribal, international division of labor depends already not so much on natural environment, as on the conditions of economic development. Attempts to reduce the diverse international division of labor in the modern era to natural, geographical, racial, etc. conditions Marx cruelly castigated and ridiculed, calling them flat tautologies and commonplaces (see his Introduction to the Critique of Political Economy).

For instance, we are told that free trade would create an international division of labor, and thereby give to each country the production which is most in harmony with its natural advantage. You believe, perhaps, gentlemen, that the production of coffee and sugar is the natural destiny of the West Indies.

Two centuries ago, nature, which does not trouble herself about commerce, had planted neither sugar-cane nor coffee trees there. And it may be that in less than half a century you will find there neither coffee nor sugar, for the East Indies, by means of cheaper production, have already successfully combatted this alleged natural destiny of the West Indies.21

How true this prophecy proved, is shown by the clear fact of the changing role of the United States — the most important part of the “West-Indies” — in the world economy. As for sugar production, the “natural vocation” to this occupation was revealed in Europe itself, after the prevalence beet got in agricultural culture, which it had to defend by protective duties from competition of American cane, itself summoned to life by the same Europe.

In some respects Europe perfectly managed to throw off that dependence, in which her colonies put her, inasmuch as it could only from them receive certain products. If one once zealously searched for exotic products for the European market and European industry; then now one is no less zealously trying to create in Europe local surrogates of colonial products. Sugar-cane is replaced by beet, indigo replaced by chemical color; one is beginning to sow potatoes in Europe, and it achieves here colossal distribution; although on a smaller scale, but for all that one successfully begins to cultivate in Europe also tobacco. Among this series, further, one begins consuming new products that are brought from overseas. First place among them takes petroleum (kerosene). As is known, it went extremely fast into general use throughout Europe. But with no less speed and success gas and electricity started to compete with it. As object of use at the end of the nineteenth century cocoa was fairly wide spread; as raw material for industrial purposes jute and rubber began to spread. However cocoa together with coffee already also now must lead an uphill battle against the competition of various surrogates of coffee, and to the extent that rubber finds more application in industry, industrial technology more zealously tries to find surrogates for it. Such a situation is given: on the one hand, Europe no longer needs the colonies, as suppliers of purely colonial goods, on the other the foreign lands import more products, which Europe itself produces since ancient times: cereal bread and wool.22

Natural-historical, racial, and other conditions, of course, have their importance in the system of international division of labor. But a huge step forward made by Marxist economics was to prove that the natural differences increasingly land on the back burner compared to differences of a cultural-historical order. The latter continuously are being smoothed out in the general course of capitalist development, become just a function of capital, and at the same time reappear due to uneven capitalist development in different countries. On this basis there is a continuous movement and transfer of geographical centers of production and exchange. The world market is a stronger determinant than climate, soil, race, etc. In listing the conditions which determine the degree of labor productivity, Marx assigns natural conditions last place:

The productive power of labor is determined by many different circumstances such as, amongst others, the average amount of skill of the workmen, the state of science, and the degree of its practical application, the social organization of production, the extent and capabilities of the means of production, and by physical conditions.23

But therewith one must bare in mind that natural conditions also themselves do not remain constant. “The man, who is engaged with social production, also already changes nature (eg, forces of nature, converted into organs of his own activity.”24 But even when the natural conditions do not change, their employment by man depends on the cultural development of the country. “The external physical conditions fall into two great economic classes: natural wealth in means of subsistence, i.e., a fruitful soil, waters teeming with fish, etc., and natural wealth in the instruments of labour, such as waterfalls, navigable rivers, wood, metal, coal, etc. At the dawn of civilization, it is the first class that turns the scale; at a higher stage of development, it is the second.”25 On the other hand, those natural conditions which can be counted as subjective elements of production — racial characteristics, also in most cases are subordinated to social laws. “All people do not have the same predisposition towards capitalist production. Some primitive peoples, such as the Turks, have neither the temperament nor the inclination for it. But these are exceptions. The development of capitalist production creates an average level of bourgeois society and therefore an average level of temperament and disposition amongst the most varied peoples. It is as truly cosmopolitan as Christianity.”26

The change of the natural sphere, of the inherited cultural-historical particularities all the same are bound by conditions of space and time. People

are not free to choose their productive forces — upon which their whole history is based — for every productive force is an acquired force, the product of previous activity. Thus the productive forces are the result of man’s practical energy, but that energy is in turn circumscribed by the conditions in which man is placed by the productive forces already acquired, by the form of society which exists before him, which he does not create, which is the product of the preceding generation. The simple fact that every succeeding generation finds productive forces acquired by the preceding generation and which serve it as the raw material of further production, engenders a relatedness in the history of man, engenders a history of mankind, which is all the more a history of mankind as man’s productive forces, and hence his social relations, have expanded.27

The presented extract thus establishes those reasons, which cause a certain hierarchy in position of different countries and nations. It is inheriting the cultural-historical sphere, which is based on a certain state of the productive forces. But the more the accumulation of these forces unfolds, the more they contribute to the convergence of different nations and countries, the more the history of the nations is unified in a general history of man. In particular, as we found earlier, this mission the capitalist system fulfills, revolutionizing all forms of economy, destroying any historical hurdles. Very frequently the change of countries on the stairs of the division of labor occurs, amongst others, under the influence of the development of means of transport, completely changed dislocation of centers of production and exchange (cf. Handelspolitik und Sozialdemokratie). Of course, without a doubt the point is to eliminate, or at any rate, to hugely weaken the opposition between industrial and agrarian countries, in the sense of a convergence of economic types. However, to expect that therewith the division of labor is reduced to the “natural boundaries” is not necessary. Firstly, these natural conditions themselves are continuously changing, partly by themselves, partly under the influence of cultural alteration. And, secondly, even within the limits of a single type of economy in any given period of time specialization is possible and inevitable in one or more directions, emerging from its socioeconomic, cultural, everyday particularities. The content, direction, forms may change, the “attachment” of individual countries to special branches disappears, but the “continuous” specialization remains, because it is difficult to imagine a simultaneous and synchronous everywhere similar rate also in one and the same forms of economic development. “Needs of groups change, new needs cause new tastes, new tastes change the distribution of productive energy and attach importance to new parts of the earth” (Hobson). With regard to the specific conditions of capitalism, then here acts a whole binding of contradictory trends, from which one contributes to convergence of economic types, another creates new oppositions. Most of them are related to the law of the tendency of the falling rate of profit and its opposing factors, among which not in the last instance counts the Weberian theory of “agglomeration” of industrial production. However a consideration of all these issues relates to the following.”28



We treated until now the processes of the development of the world market from the viewpoint of those driving forces, which are due to the contradiction between use value and exchange value of commodities. But in connection with the contradiction, inherent to these basic categories of commodity economy, also appears another contradiction between production and consumption, which forms another group of forces, leading to the development of world exchange. We regard this contrast between production and consumption not in the sense which Rosa Luxemburg gave it. Luxemburg came to the conclusion that the contrast absolutely excludes the possibility of accumulation in capitalist society, and, hence, the possibility of existence of the latter — because without accumulation capitalist economy is unthinkable. The saving zone for capitalism should be the non-capitalist sphere. Thus, one of the main contradictions of capitalism, that in Marx’s system is the moving force of its development, in the hands of Rosa Luxemburg is turned into a flat contradiction, making capitalism simply impossible, i.e. appears devoid of any dialectical content.

Already in polemics with Proudhon, complaining that the distribution of social wealth doesn’t correspond, with what it needed to be “in theory” — with the size of production, Marx wrote:

In English society the working day thus acquired in 70 years a surplus of 2,700 per cent productivity; that is, in 1840 it produced twenty-seven times as much as in 1770. According to M. Proudhon, the following question should be raised: why was not the English worker of 1840 twenty-seven times as rich as the one of 1770? In raising such a question one would naturally be supposing that the English could have produced this wealth without the historical conditions in which it was produced, such as: private accumulation of capital, modern division of labour, automatic workshops, anarchical competition, the wage system — in short, everything that is based upon class antagonism. Now, these were precisely the necessary conditions of existence for the development of productive forces and of surplus labour. Therefore, to obtain this development of productive forces and this surplus labour, there had to be classes which profited and classes which decayed…Wipe out these relations and you annihilate all society, and your Prometheus is nothing but a ghost without arms or legs; that is, without automatic workshops, without division of labour — in a word, without everything that you gave him to start with in order to make him obtain this surplus labor.29

Thus, the antagonism of production and consumption for Marx is a forward-moving contradiction. For Rosa Luxemburg it is the deadlock of capitalist economy. Marx says: destroy this antagonism and you destroy the very existence of capitalist society. Rosa flipped this formula upside down: the presence of this contradiction destroys the possibility that capitalist society might exist. If it nevertheless exists, then only because it exists merely in part, inasmuch as beside it there still is the availability of the “third person.” The viewpoint, of mutually excluding each other, of Rosa here has a clear bias towards a metaphysical or formal-logical formulation of the question: yes-yes, no-no.

We will not stand still here on the well-known controversy about the theory of Rosa Luxemburg. Our task is to give the characteristics of the Marxist understanding of the antagonism of production and consumption. For Marx the contradiction lies not in the point that surplus value in conditions of extended reproduction in general cannot be realized within the limits of the domestic consumer market, but in the point that production has a constant tendency to outrun even the expansion of consumption connected with it, because the goal of capitalist production is not at all the meeting of needs. “It is a false abstraction to regard a nation whose mode of production is based upon value, and furthermore is capitalistically organized, as an aggregate body working merely for the satisfaction of the national wants.”30

Capital is self-expanding value, value, which, firstly, is in constant motion, secondly, completely “emancipated from the forces generating the value” — from the labor forces, and consequently the needs of this workforce. Capitalism has a constant tendency to expand production to the limits due to the size of available productive forces: “to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labour with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to pay.”31 On the other hand it has a no less constant tendency to reduce the demand of the working masses to only the necessary minimum.

“The mass of the producers remain tied to the average level of needs, and must remain tied to it according to the nature of capitalist production.”32 The evolution of the demands of these layers of the population consists, mainly, of the fact that the increase of their versatility takes place with the growth of diversity in production. But the general size of value, designed to meet these needs, changes little, and all the greater dissatisfaction is felt.

The increase of productivity of labor, which is a constant companion of capitalism, even more confronts these polar tendencies. “With the same amount of products the country is richer, the lower its productive population in comparison to the non-productive population. Therefore the relatively small productive population would be only another expression of the relatively high labor productivity.”33 If the working population does not decrease, if it even grows, then all the same the rate of production grows even faster, meanwhile as “the average number of population can never consume more than the average means of subsistence, hence, its consumption does not grow correspondingly with the increase of productivity of labor.” Here is given the general condition of overproduction. However, this is not chronic overproduction, because there “are no permanent crises.” It should accrue to a significant magnitude, in order to break out, as crisis, after which comes a temporary underproduction.

The balance between production and consumption, arising from the objective laws of economy, which must, in the final light, obeys also the capitalist form of production, exists only, as a sort of abstract middle line, representing itself the resultant continuous deviations, distortions, explosions and catastrophes.

Capitalist production periodically meets with the limitations of the market and with the same frequency experiences the need to extent its geographical boundaries:

The market is limited externally in the geographical sense, the internal market is limited as compared with a market that is both internal and external, the latter in turn is limited as compared with the world market, which however is, in turn, limited at each moment of time, (though) in itself capable of expansion. The admission that the market must expand if there is to be no overproduction, is therefore also an admission that there can be overproduction. For it is then possible — since market and production are two independent factors — that the expansion of one does not correspond with the expansion of the other; that the limits of the market are not extended rapidly enough for production, or that new markets — new extensions of the market — may be rapidly outpaced by production, so that the expanded market becomes just as much a barrier as the narrower market was formerly. Ricardo is therefore consistent in denying the necessity of an expansion of the market simultaneously with the expansion of production and growth of capital.34

In other words: if the market and production were, as Ricardo thinks, two sides of the same whole, represented an exclusive moment of unity, then there would be no need to expand the market. But, according to Marx, between “market” and production a more complex relationship exists. Although they also represent a unity in the sense that producers, meeting on the market, in the final light, work for each other, but a unity, of formally torn into independent moments: because producers operate independently of each other, and, in addition, market exchange takes place with the help of money, and not in the form of natural exchange. Consequently, the sum of purchases and sales of one and the other of these participants of trade, which is mathematically identical with the direct exchange (which also forms the moment of unity), under monetary exchange does not match in every given moment. Unity here does not exist under each act of exchange, but only as a statistical average of many acts over a long period of time. Secondly, under capitalist commodity circulation the independent movement of production and the market gets not only a different character, movements not coinciding with themselves, but movements of contradictions, of opposites: the production factually is unlimited, the market (understood as a sales market of produced commodities) is bounded in every given moment.

The resolution of this contradiction happens either by violent means of crisis or by means of geographical expansion of the market, which also in most cases happens by force. And then the contradiction is reproduced on an enlarged scale, on a wider territory.

An expansion of the market to the limits of the world market, helping to resolve the contradiction arisen on the narrow base of national production, reproduces these contradictions on a wider scale on the world arena for three reasons:

1. Overproduction arises on the basis of disproportions between various sides of the process of social circulation of capital. This disparity is due to the uneven development of various sectors of the economy, unevenness of production and consumption, etc. But the expansion of the world market, places countries in dependence on each other, found at different stages of economic development, increasing tenfold this unevenness. Marx stressed this, ridiculing Say’s theory of the impossibility of general overproduction by the example of a small “international” illustration.

England has not over-produced but Italy has under-produced. There would have been no over-production, if in the first place Italy had enough capital to replace the English capital exported to Italy in the form of commodities; and secondly if Italy had invested this capital in such a way that it produced those particular articles which are required by English capital— partly in order to replace itself and partly in order to replace the revenue yielded by it. Thus the fact of the actually existing overproduction in England — in relation to the actual production in Italy — would not have existed, but only the fact of imaginary underproduction in Italy; imaginary because it presupposes a capital in Italy and a development of the productive forces that do not exist there, and secondly because it makes the equally utopian assumption, that this capital which does not exist in Italy, has been employed in exactly the way required to make English supply and Italian demand, English and Italian production, complementary to each other. In other words, this means nothing but: there would be no overproduction, if demand and supply corresponded to each other.35

Such uniformity is utopian within the limits of one country, and doubly utopian in the world market. The world market increases, thus, the scale of contradictions tearing capitalist society apart, arising from uneven development.

2. The world market promotes enlargement of the scale of production, a further specialization and division of labor, that would be impossible within the narrow scale of the national market.

This fact by itself, not to mention the increased rate of profit and accumulation due to foreign trade (on this topic in the following), even further enhances the “scissors” between the scale of production and dimension of consumption. And this even strengthens more the desire to expand beyond the limits of the existing market, revolutionizing industry, strengthening its concentration and specialization. And then industry revolutionizes trade. That’s the reason why dominance on the global market shifted from trading nation (Netherlands) to industrial nation (England).

3. Confronted on the world market with pre-capitalist forms of economy, peasant, etc., still in condition of subsistence existence, capitalism must first of all solve the problem of creating a market, destroying the natural system and turning it into a commodity, and then capitalist economy. But the path to this lies through destruction of the peasantry:

One of the necessary corollaries of grande industrie that it destroys its own home market by the very process by which it creates it. It creates it by destroying the basis of the domestic industry of the peasantry. But without domestic industry the peasantry cannot live. They are ruined as peasants; their purchasing power is reduced to a minimum; and until they, asproletarians, have settled down into new conditions of existence, they will furnish a very poor market for the newly-arisen factories.36

As is known, this was the main argument of populists in favor of the theory of the inevitability of the non-capitalist evolution of Russia, about the “artificiality” of the capitalism we have, about the lack of a domestic market.

The populists were mistaken in the same sense as Rosa Luxemburg: they “proved” more than was necessary. From the certain fact of destruction of peasantry, reducing the purchasing power of the population, etc. they concluded the “impossibility” of capitalism, while in fact these symptoms showed only growing throes of growth that accompanied everywhere the first steps of the capitalist mode of production.

However there is no doubt that in those phenomena, that accompany the penetration of capitalism in backward countries of the modern world, there exist new elements, making crisis much more acute.

First, the initial development of capitalism in the old countries of capitalist production began with manufacture, which, on the one hand, occurred as a very slow process replacing craft and peasant forms of economy, and on the other hand, itself operated on them. In addition, already in its character of predominantly manual production, manufacture required more workers hands, then is appropriate of the scale of mechanized production. Thus, the transition from subsistence economy through ruin into the ranks of the proletariat, despite tremendous disaster, which accompanied it for the masses, happened all the same safely from the standpoint of social production in general. In contrast, in modern countries of small production capitalism “screws” immediately with the help of railroads and products of developed mechanized industry. The “dissolving” effect of machines is something different from the effect of manufacture. This is evidenced by at least the fact that history does not know riots against manufacture, while workers’ struggle with the machine is a necessary step in the capitalist development of each country. The destructive effect of modern industry on small production of backward countries is immeasurably sharper. It plunges into horrifying poverty immediately tens of millions.

Second, in European countries the change of craft to capitalist production, the separation of industry from agriculture occurred in such a way that manufacture, and then also machine production appeared in the same place, in the same country, where the old forms of economy were breaking up. In contrast, the penetration of capitalism in Asian countries, in countries of Eastern Europe, etc. are not expressed in the form of organization of capitalist production there (at least in the beginning), but in the form of organization of sales of capitalist manufactured goods, whose centers of production were in Europe. China, India, and others received as their share all disasters of the initial period of development of capitalism, without acquiring its positive results.

Third: European capitalism, even in the form of manufacture, received its first impetus from world commerce and from the demands of the colonial markets. They created for it a broad foundation for the expansion of production,independent of the demands of the domestic market. “The demands of the new colonial markets could not be satisfied owing to the relatively small number of town operatives handed down from the middle ages, and the manufactures proper opened out new fields of production to the rural population, driven from the land by the dissolution of the feudal system.”37 In contrast, capitalist production, if it is even organized in new countries, not only hasn’t these perspectives in front of it, but is under tremendous competitive pressure of the more advanced capitalist countries, taking over its domestic market.

In countries of old capitalism the law operates of the relative reduction of variable capital, employed in production, with an absolute growth of the number of workers. This absolute growth is due to the expansion of capital — in particular the expansion of branches producing means of production. But for those more backward countries that are just getting involved in the process of capitalist production, this growth of the magnitude of the proletariat is closed on half or three quarters of the way. Initially they receive finished goods from highly developed countries. Only gradually they move on to their own production of goods. But the production of instruments is not found in their hands. Asian countries until now still haven’t come out of the Marxist second department of capital: production of consumer goods. Heavy industry, which in higher degree absorbs labor forces, doesn’t take root here, but in the metropoles. “Like toy trains and ships with motor serve as Christmas tree gifts in the present day, so railways bring to Asia whole cotton-mills.”38

All these factors determine the general character of the catastrophe, accompanying the expanding capitalist market, but cannot, of course, either suspend this extension, or prevent the development of capitalist relations and capitalist production wherever these relations take root. Proof is the development of Japan, China, India, etc. in our epoch. If the listed by us condition opposes this process, then it is nevertheless a strongly active means of promoting it, and among them the most important is the export of capital, about which, however, discussion will be elsewhere.

From our analysis it is clear that the market of sales of capitalist produced goods, spreading more and more breadthwise, in new territories, necessarily must make the market smaller and smaller, decrease in its relative capacity. This is a very important factor, which, I think, was insufficiently emphasized so far in the literature, and the underestimation of which entails substantial gaps in the analysis of the causes of imperialism, etc. Very often, for example, one refers to the grandiosity of the spaces and the number of people, which provide, supposedly, unlimited scope for further expansion of capitalism on a broader base. Such indications are most often made by bourgeois apologists and their helpers from the camp of the Second International. Indeed: India, China accommodate nearly half the world’s population, a population barely affected by capitalist economy. What need is there to worry about markets, etc. We give on this subject a somewhat long extract from the same letter of Engels to Nikolai — the one that we already cited above:

Capitalist production being a transitory economical phase, is full of internal contradictions which develop and become evident in proportion as it develops. This tendency to destroy its own market at the same time it creates it, is one of them. Another one is the insoluble situation to which it leads, and which is developed sooner in a country without a foreign market, like Russia, than in countries which are more or less capable of competing on the open world market. This situation without an apparent issue finds its issue, for the latter countries, in commercial revulsions, in the forcible opening of new markets. But even then the cul-de-sac stares one in the face. Look at England. The last new market which could bring on a temporary revival of prosperity by its being thrown open to English commerce is China. Therefore English capital insists upon constructing Chinese railways. But Chinese railways mean the destruction of the whole basis of Chinese small agriculture and domestic industry, and as there will not even be the counterpoise of a Chinese grande industrie, hundreds of millions of people will be placed in the impossibility of living. The consequence will be a wholesale emigration such as the world has not yet seen, a flooding of America, Asia and Europe by the hated Chinaman, a competition for work with the American, Australian and European workman on the basis of the Chinese standard of life, the lowest of all – and if the system of production has not been changed in Europe before that time, it will have to be changed then.39

Here’s the true source of the “catastrophe” of our epoch, insofar as it regards the interrelations with the “third persons.” It is precisely the huge number of those masses that capitalism sets in motion, preventing their possibility of life, bankrupting them, as peasants, and not being able to immediately turn them into proletarians — precisely this is the main reason of the fact that capitalism began to choke. The colossal Asian “reserves” — are not reserves of capital, but reserves of its gravedigger — the proletariat.

Comrade Bukharin notes one side of the question, 40 given by the “third person”: surplus profits and its monopolistic capture by the strongest capitalist powers, which generates mutual struggle for the limits, etc. This, undoubtedly, is a circumstance of colossal significance, but taken alone, it is unable to fully explain the modern epoch. It is necessary to add the contradiction, so brightly noted by Engels and which, amongst others, in the best way explains the reasons of the special revolutionizing of young countries of capitalism. It is also entirely in harmony with the views of Lenin on the reasons, by which capitalism “bursts” first of all in backward countries.

However we will yet return to this subject in another connection.

The role of world capitalist monopolies, having decisive significance for the fate of capitalism, should not overshadow in our eyes the action of other destructive forces, springing to life by the modern system of capitalism and independent from this or the other forms of the latter. It must be remembered that in the period of monopolies laws continue to operate, described by Marx in capitalism’s epoch of free competition.

On the other hand, the very fact of such exceptionally fast capture of the whole earth, the division of the whole world by a few large imperialist countries, which occurred in a period of around thirty odd years (from 1880 to 1914) must make us search the reason of this historically unprecedented phenomenon in the special conditions of the capitalism of our era. Such extraordinary extension breadthwise becomes necessary when there exists a special difficulty, preventing the extension inland. Expansion replaces in this case the intensive dissociation of old forms.

In many respects the modern epoch resembles on a global scale the period of late 17th and early 19th century in Europe. Then capitalism broke the old forms in Europe, causing on a smaller scale the same phenomenon, which now is observed on the global scale. Also then “workers excluded from big industry (manufacture and crafts, etc.) are placed by it in a still worse situation than the workers in big industry itself.”41 In the working class this period with a series of outbreaks of the revolutionary movement, caused acute struggle against the machine, and in bourgeois economy this epoch affected the flowering of Malthusianism, seeing the source of all troubles in excessive procreation of people. History repeats itself. The most prominent representatives of modern bourgeois science, as, e.g., Keynes, again are turning to Malthusianism for an explanation of the reasons of modern disasters. Recently Keynes expressed in that sense, that unemployment in England is caused by her excessive population. But the same idea in a more general form he stated already in his first book, devoted to the Versailles treaty. He pointed then to the overpopulation of the whole of Europe, as the cause of her suffering. In the same spirit he explained also the Russian revolution:

The great events of history are often due to secular changes in the growth of population and other fundamental economic causes, which, escaping by their gradual character the notice of contemporary observers, are attributed to the follies of statesmen or the fanaticism of atheists. Thus the extraordinary occurrences of the past two years in Russia, that vast upheaval of Society, which has overturned what seemed most stable — religion, the basis of property, the ownership of land, as well as forms of government and the hierarchy of classes — may owe more to the deep influences of expanding numbers than to Lenin or to Nicholas; and the disruptive powers of excessive national fecundity may have played a greater part in bursting the bonds of convention than either the power of ideas or the errors of autocracy.42

The appeal to “laws of population” indicates only the powerlessness of modern capitalism to cope with its contradictions, that have become contradictions of a global scale and cannot be eliminated by simple extension of the “external field of exploitation” as it was in the nineteenth century.



If the original soil on which originated the world market and international economic relations was different consumer goods, created on the premise of this same exchange and value, then the driving forces of this process in its final phase become the difference of value production of one and the same commodities in different points of the globe and the resulting from it variety of profit rates. The law of value as before remains the basic spring of the movement. But the nature of its actions changed, originally it was expressed in the contradictions inherent in the commodity form of economy, the contradiction between use-value and value. Later it turned into contradiction between conditions of production of value and conditions for its realization under capitalism. Then it turns into conflict between the level of development of productive forces and the level of accumulation, resulting in a difference of values ​​and margins of profit in different countries. It goes without saying that the domination of one of these forms does not override the others. There exists tendency, binding complicates together with the growth of the world market. But the era of color gives usually one of these forms of the law of value. The latest period of capitalism, characterized by a predominance of export of capital is nothing but the expression of dominance of the third form of contradiction, which causes not only the movement of the mass of commodities, but also the transfer of the very productive forces between countries.

We turn now to a more complex and less studied problem of the world economy — to the analysis of value relations in international exchange.

However beforehand we need to clarify some concepts, with which we operated until now like passing terms (“external market,” “world economy,” “national economy,” etc.), although different authors put a different content in them. We need to resolve here two questions: 1. What should be understood by the terms “external market” or “external sphere” in relation to the given economic system? and 2. What meaning should be given to the classifications — “single economy,” ” national economy,” “world economy”?

As is known, the concept of “external market” is used in economic literature in a double meaning. Most often it is given a purely geographical or politico-geographical interpretation. External market is the market, lying beyond the borders of a given organic territory, the market of another country, another state. Exclusively in this sense foreign markets are treated in bourgeois literature. Insofar as we are talking about such international relations, which are defined by a variety of products, produced in different countries, by a variety of consumer goods, creating the foundation of exchange and value — such a definition of the external market is entirely enough. External market, is a market delivering products of other consumer forms, than those that are delivered in a given country. But also such a foreign market does not have to fully coincide with political borders.

The other raises the question of the external market in terms of the problem of the realization of surplus value. From the viewpoint of Rosa Luxemburg’s theory, this realization is only possible on the external markets, having a precapitalist economic structure. It’s impossible in pure capitalist society. From the Marxist viewpoint such external market is not a theoretical necessity for capitalism, but in practice it significantly eases the problem of realization. In any case, the market from this viewpoint must be not simply external in the geographical sense, but also in the economic sense, other in its organic-economic structure, the market of the “third person.” Geographical understanding is replaced by economic.

However when we come to the question of value relations in the world economy, it turns out, that the concept of the foreign market in terms of this problem must be distinguished from the first two. The magnitude of value changes from country to country not only in dependence on the different types of economic structure, but primarily in dependence on the average level of labor productivity in every country, on the level of productive forces. The degree of development of productive force, may be different in countries belonging to the same economic type. To this difference between countries Marx attached great importance. We know that the basic premise of the labor theory of value is similarity of producers and similarity of labor.

The total labor power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is needed on an average, no more than is socially necessary.43

But this average labor represents itself a size, given only for a determined society in determined conditions of time and place. “Simple average labour, it is true, varies in character in different countries and at different times, but in a particular society it is given.”44

With even more determination, Marx speaks on this in the chapter on national differences of wage.

Differences of this kind represent themselves, in our opinion, a decisive mark, on which one has to make the economic split in internal and external, since the in our epoch most potent factor of international relations is the difference of value, due to the different situation of productive forces in different countries. An external market is, thus, the market of a country, standing on another stage of development of the productive forces. It is self-evident, that by determined conditions of productive forces it can be a matter only about average statistical observations.

When comparing the level of productivity in different countries some difficulty may arise, which, however, is of minimal hindrance. Labor productivity is natural, and not an indicator of value. It serves only as a basis for measuring value. From this it follows that a comparison of labor productivity is possible only within strictly homogeneous branches of production. Meanwhile the economy of an entire country is a plexus of various branches of production. What coefficient can express the relation of productivity in two or more countries? Modern statistics easily cope with this task by bringing to a common denominator diverse phenomena with the help of index averages. It is enough to know the relationship by separate branches, in order with their help to construct an abstract coefficient (total index), which expresses the ratio of productivity of groups of branches of the economy in two or more countries. So is measured, for example, the movement of productivity of a national economy over time. This method is not applicable, however, in cases where a particular branch is represented in one country and is not represented in the other. We think that it is much more convenient to use another “total index,” introduced in economic science by Marx, namely, the average organic composition of social capital. The capital structure is in Marx a tool comparing the relative productivity of labor, not only within homogeneous branches, but also between different branches, for example, between industry and agriculture. Of modern statisticians to this issue M. Smith pays great attention (see, e.g., her Principles of Statistical Methodology [Основы статистической методологии, 1923], Economic Principles of Calculation [Экономические основы калькуляции, 1926], etc). It’s necessary here to note in passing, that in this method of comparison the concept of “organic composition of capital” bares also on those forms of agriculture that are not capitalist in the strict sense (peasant, artisan, etc.). This does not at all contradict Marxism. Marx says in one place, under the domination of the capitalist economic system categories, the features of the latter, get a reflection also in precapitalist forms, although they here serve with other social content. This gives the right, with a certain reserve, to extend the application of capitalist categories beyond the limits of capitalist relations, inasmuch as the matter is limited to a narrow-special question.

It can be argued that our proposed distinction of internal and external market in terms of productivity represents a step backwards compared with the former division by social-economic structure, because it replaces a social by a technical approach. This admonition is wrong for two reasons. First, the division by organic composition of social capital is an economic, and not a technical division (i.e., it includes in itself a moment of social relations). Marx frequently uses this feature, comparing advanced and colonial countries. Productivity of labor itself is a function of social relations. Second, it is wrong to think that the division of economic forms by structure is only possible in the type of solid oppositions of “capitalism” — “feudalism,” the “natural-patriarchal” system, etc. Inside each of these systems are in turn various stages and degrees, characterized by a diverse nature of social relations. “Commercial,” “industrial,” “financial” capital are profoundly different from each other forms of social relations, within the same broad concept of “capitalism.” Meanwhile, the old division of the market along the line of “capitalist market” and “market of third person” is clearly insufficient to cover the difference of this second order. The interrelation between a modern country of financial capital and an “industrial” (in the narrow sense of the word) country is almost as heterogeneous, as the relation with the third person. That is why we believe, that the classification by the level of development of productive forces is able to better embrace the diversity of the phenomena of international economic relations, than a classification by structural features. It goes without saying that the latter classification hereby does not disappear. For some purposes it may be quite suitable.

In this way we find the key to solve the question about the relations between the single, national and world economy. In economic literature there is a tendency to reduce this threefold division into a twofold. Some economists (mainly, representatives of the German historical school — Bücher, Schmoller, Sombart, etc.) simply obliterate world economy, not recognizing for it any right to exist. They recognize the world exchange as a secondary thing from the perspective of the national economy. The world market is called on only to fill “gaps” in the national economic organism. “National economy” — that is the center, around which the world turns…and the historical school of national economy. A somewhat vaguer than the former point of view Richard Calwer defends. The world economy, in his opinion, is not an “autonomous organism,” existing alongside national economic organisms, since it lacks existential features of an organism: strict partition and closely interrelated parts. Individual national economies are still too autonomous in order that they can be considered as members of a world economic organism. Therefore one can more likely talk about a “world market economy” [Weltmarktwirtschaft], than about a world economy. That different countries are dissimilarly embroiled in world economic circulation — this is true (this different degree of participation springs in the eye, if one takes the percentage of external exchange of each country in relation to its total commodity exchange). But after all also inside national economies there are large differences in the “marketability,” for example, between peasant and factory production. Moreover a small percentage of internal exchange in respect to all commodity circulation can prove to be very big for individual important branches of industry, drawn into the world economy. On the other hand, the larger the national-economic unit, the larger will be the share of its internal circulation, compared with external circulation under any conditions. From this, however, it does not at all follow, that the the stronger countries are the less important members of the world economy. Finally, inasmuch as the world market expands under the influence of increased production, it’s always necessary to remember, that also under expanded reproduction the greatest part of products fits into the frame of simple reproduction. From this fact that profit is a comparatively small share relative to the entire annual products, only a crude ignoramus can make a conclusion about the negligible meaning of profit in the system of capitalist economy. The same can be said about the argument, denying the existence of the world economy on the basis that the share of foreign trade is less than the share of domestic trade in national-economic circulation. To recognize the existence of a world market, as an economic necessity, and at the same time deny the existence of the world economy — is doubly ridiculous.

Rosa Luxemburg exposed this, if one may say, “theory” to caustic and cruel (but deserved) ridicule in her Introduction to Political Economy. However, she herself also holds the standpoint of a twofold formula with the only difference that instead of world economy she considers it necessary to cross out “national economy.” “Is there, we have to ask first of all, in fact that what we call a national economy? Does every nation lead a sort of separate economy, a sort of closed economic life?” Rosa asks. She answers both these questions in the negative.

Finally, in the Russian literature Bukharin reduces the threefold division to a twofold by removing the single economy. “Every one of the capitalistically advanced ‘national economies’ has turned into some kind of a ‘national trust’,” he writes.45 Even more determinedly Bukharin speaks out in his Economics of the Transition Period:

The units, constituting the system of the modern world economy, are not individual enterprises, but complex sets, “state capitalist trusts.”…The capitalist “national economy” has turned from an irrational system into one of rational organization; it went from an economy without subjects into an economic subject…But neither the anarchy of capitalist production in general, nor the competition of capitalist commodity-producers, has disappeared.

These phenomena are not only still present, but they have also deepened, reproduced in the frame of the world economy…The commodity economy here in no way disappears completely, although internally it either dies or significantly is reduced, making room for an organized distribution. The commodity market effectively becomes a world market, and ceases to be “national.46

In the bourgeois literature, recognizing the existence of world economy, attempts are made to bring between national and world economy not an economic, but a juridical border. To phenomena of the world economy relate only those group relations which undergo regulation and are regulated on the basis of international agreements, conventions etc. It’s understood, that the chief exponent of this position must be a German professor, who in general cannot imagine any relation without sanction from above. This is Bernard Harms. Here is his definition: “The world economy is the set of interrelations and interactions between the individual economies of the globe, arising from highly developed means of communication and regulated and uphold by international agreements.” About the general mindset of Harms this statement is enough evidence: “We need to keep away of grounding the science of world economy on the foundation of “capitalism,” no matter how comprehensible it may seem.”

There is still another point of view in economic literature, which, recognizing the existence of the world economy along with the national economy, denies however therewith the existence of any specific features in the world economy, which would require the creation of a special economic theory of international relations. The problem of “international exchange,” from this point of view, exists only, inasmuch as questions of policy are mixed to economic issues, inasmuch as “international” relations are at one and the same time also “inter-governmental” relations. In Russian literature the advocate of these views is Struve. The case is, however, “quite the contrary.” Precisely when questions of international economy are approached in terms of political borders, the very problem disappears. From an economic point of view, resolutely nothing has changed from the fact that, for example, the Ruhr and Lorraine, were included before the war in one and the same political body, now are separated by a border. A theory of economic relations between different economic organisms acquires meaning only if these organisms represent different economic types or different stages of economic development. We shall see later, that set on such foundation, this theory, is not an opposition of the common theory of exchange and value, requires, however, in order to agree with the latter, some extension, refinement and modification of concepts, established in the economic literature. it is correct to indicate that also inside one or other country, between different territories there is a relation, resembling the so-called “international” relation. We also count them as “international” (in the conventional sense, it is difficult to pick up another term).47 The one is so little studied theoretically, as the other. This circumstance does not narrow the frame of theory, but, on the contrary, opens up for it a rich field.

Our brief overview shows what discordance exists in this matter. Risking to multiply this discordance, we believe it is necessary to discard all previous attempts to simplify the classification and stay with to the old division.

As concerns Rosa Luxemburg, she, in our opinion, was a little too quick to abolish the “national economy” on the grounds that nations do not currently lead a separate economy. This is insufficient evidence. After all in the same way one can “prove,” that also “single economies” have disappeared, inasmuch as they are even less isolated from other economies.

True, the principal distinction between “national economy” taken in relation to the world economy, and individual economies taken in relation to the national economy, is that the first relation is a relation of two anarchic systems (“pseudo-economies” in the terminology of Struve), and the second is a relation of organized units to a non-organized whole.

But this distinction lies on another plane and in this connection is irrelevant.

It is important to state, that lack of distinction does not yet mean the elimination of a given economic complex. Only in such case the economy would cease to exist, when the development of world economic relations finally erased any differences between countries, whether it is the differences in the structure of economic relations, or in the situation of the productive forces. But both these and other differences continue to exist, tho they have a tendency to weaken as capitalism becomes the universal form of the economy (we have in mind here the ascending line of development of capitalism, and not the epoch of its decline), — but “in proportion as capitalist production is developed in a country, in the same proportion do the national intensity and productivity of labour there rise above the international level.”48 For the present these differences exist, the “national economy” exists, as a real aggregate, distinct from other economic complexes and at the same time found with them in regular economic relations of exchange, etc.

Original title: К теории развития мирового рынка и мирового хозяйства — И. Дашковский. Под Знаменем Марксизма



1. This article is part of a work ready for print. [It was also translated in La Revue Marxiste, Mars 1929 — Numéro 2; J. Dachkowski: Contribution à la théorie du marché mondial. In all likelihood the translator was Norbert Guterman.]
2. Werner Sombart Die deutsche Volkswirtschaft in neunzehnten Jahrhundert und im Anfang des 20 Jahrhunderts, 4 Auflage, p. 387.
3. “The modern history of capital dates from the creation in the 16th century of a world-embracing commerce and a world-embracing market ” Capital, Volume 1, p. 116 (1920 edition [Russian]).
4. J.-S. Mill, Principles of Political Economy. 1898, p. 651.
5. Fr. List, Das nationale System der Politische Oekonomie, Vierte Auflage, p. 213.
6. Marx, “Speech on Free Trade.”
7. Marx. Capital, Vol 1, page 116, 1920.
8. Marx. Theories of Surplus Value, Part 3, p. 210.
9. K. Marx to F. Engels, Letters, translation Adoratsky. State. Ed. p. 74. (8 October 1858)
10. The Theory of Surplus Value, Part 1, p. 201.
11. Capital, Volume 1, p. 449-460.
12. P. Maslov (Пётр Павлович Маслов), Influence of distance on the distribution of produces forces, 1926 Moscow, p. 19-20. (Влияние расстояния на распределение производительных сил.)
13. Capital, Volume 2, page 84.
14. I quote from the German edition: Ad. Smith, Wesen und Ursachen des Volkswohlstandes, p 19.
15. The Poverty of Philosophy, p 111.
16. Capital, Volume 1, p 343.
17. Ibid., p. 772-773.
18. Ibid., p. 449.
19. The Poverty of Philosophy, p. 112-113.
20. Capital Vol 3 part 1, p. 318.
21. Marx, “Speech on Free Trade.”
22. Parvus, Colonial Policy and the Collapse of the Capitalist System, page 124. [Die Kolonialpolitik und der Zusammenbruch. Колониальная политика и крушение капиталистического строя. Some sections were translated in Discovering Imperialism (2011), p. 331: “Colonies and Capitalism in the Twentieth Century.”]
23. Capital, Volume 1.
24. Theories of Surplus Value, Part 3, p. 245.
25. Capital, Volume 1, page 514.
26. Ibid. page 351.
27. Marx, Letter to Annenkov, Letters, Marx and Engels, p. 7.
28. Kautsky points out, that the modern division of labor among members of the world market is based, on the one hand. on natural differences, on the other emerges from socio-economic conditions. To exclusive influence of capitalism should be attributed the separation countries in industrial and agricultural types, although the natural conditions do not call forth the necessity of such harmful specialization. But capitalism itself is preparing the conditions conducive to the destruction of this division, industrializing agrarian countries. Kautsky believes that the socialist system brings the international division of labor to a frame due only to the natural-historical character of different countries (see his “Handelspolitik und Sozialdemokratie”). Of course, without a doubt the point is to eliminate, or at any rate, to hugely weaken the opposition between industrial and agrarian countries, in the sense of a convergence of economic types. However, to expect that therewith the division of labor is reduced to the “natural boundaries” is not necessary. Firstly, these natural conditions themselves are continuously changing, partly by themselves, partly under the influence of cultural alteration. And, secondly, even within the limits of a single type of economy in any given period of time specialization is possible and inevitable in one or more directions, emerging from its socio-economic, cultural, everyday particularities. The content, direction, forms may change, the “attachment” of individual countries to special branches disappears, but the “continuous” specialization remains, because it is difficult to imagine a simultaneous and synchronous everywhere similar rate also in one and the same forms of economic development. “Needs of groups change, new needs cause new tastes, new tastes change the distribution of productive energy and attach importance to new parts of the earth” (Hobson). With regard to the specific conditions of capitalism, then here acts a whole binding of contradictory trends, from which one contributes to convergence of economic types, another creates new oppositions. Most of them are related to the law of the tendency of the falling rate of profit and its opposing factors, among which not in the last instance counts the Weberian theory of “agglomeration” of industrial production. However a consideration of all these issues relates to the following.
29. The Poverty of Philosophy, page 86.
30. Marx. Capital, Volume 3, part 2, p. 389.
31. Theories of Surplus Value, Volume III, part 2, p. 199.
32. Ibid., p. 200.
33. Theories of Surplus Value, part 1, p. 220.
34. Theories of Surplus Value, vol 2, 2, page 192.
35. Theory of Surplus Value, Vol 2, 2, p. 197.
36. Letter from Engels to Nikolai Danielson,” Marx-Engels Letters, p. 300.
37. Capital, Volume 1, p. 426.
38. Parvus, Colonial Policy and the Collapse of the Capitalist System, [1908 Russian] translation Е. Грау, p. 150.
39. Letters Marx Engels, p. 301.
40. Cf. N. Bukharin, Imperialism and Capital Accumulation, p. 124.
41. Archives of Marx and Engels, Vol 1: Marx Engels on Feuerbach, page 241.
42. Keynes, The economic consequences of the Versailles peace.
43. Capital, Volume 1, p. 5.
44. Ibid., p. 11.
45. Bukharin, World Economy and Imperialism, p. 68.
46. N. Bukharin, Economics of the Transition, p. 14.
47. In Russian “inter-regional” seems to be only a recent term [межрегиональный or междурегиональный].
48. Capital, Volume 1, p. 566.

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