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

Isaak Dashkovskii
Under the Banner of
Marxism
(№ 1, 1927)
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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. Continue reading