I. The Period of Decline of “Normal” Capitalism

The Communist International adopted its last theses concerning the economic position of the world on the occasion of the Third Congress.

Three years have passed since then. During these three years the proletariat has suffered big defeats in several countries that are very important from the viewpoint of the revolution, viz., in Italy, Bulgaria, and Germany. The bourgeoisie has succeeded throughout the world—barring, of course, Russia—in establishing its hegemony anew. Under these circumstances the question must be raised whether the position taken by the Communist International in its theses has proven to be sound or unsound.

The fundamental idea of the theses was this, that the crisis which followed the short, speculative post-war “boom” was no ordinary crisis of “normal” capitalism, but rather the beginning of a period of crises for capitalism. Within this period of crises the course of business progresses in cycles, just as it did under the normal capitalism of pre-war days: periods of booms alternate with periods of crises. The principal question is that of placing an estimate upon the whole period, and not upon the phases of which it is made up.

In the brochure written for the Fourth Congress of the Communist International we made an attempt to sketch the difference between the “normal” capitalism of pre-war times and the capitalism of the period of decline more sharply. We wrote there (page 8) concerning pre-war capitalism:

“The capitalist form of production expanded geographically; new countries were increasingly opened up to capitalism.

“Capitalism extended its sphere of operation in the capitalist countries themselves by drawing the pre-capitalist strata of society into its vortex. The gold standard, which considerably facilitates the exchange of goods on a capitalist basis, found favour in a growing degree. Foreign trade increased in weight and value.

“Large accumulations of capital formed the basis of these developments, since the falling rate of profit in the highly developed capitalist countries—the effect of the steadily growing higher organic composition of capital—was compensated for by the export of capital to less developed capitalist countries, with higher rates of surplus value and profit. The centralisation of capital into monopolist forms of production, covering the whole economic field of a country, reduced the cost of capitalist management.

“The result was that, apart from the periodic crises, the level of production rose steadily in the world at large as well as in each particular country. The standard of life of the proletariat rose slowly. The credit system and the small company shares permitted the working men and the lower middle class to participate, with their savings, in the appropriation of the surplus value. The number of people who had an interest, or who believed to have an interest, in maintaining the capitalist system, was on the increase. The proletariat of the imperialist countries received from Capital a small share of the surprofits which it got out of colonial exploitation. The upper stratum of the proletariat, the aristocracy of Labour, got separated from the mass of the working people and became subservient to Capital All classes submitted to the leadership of Capital. The great landowners turned into capitalists, and the capitalists invested money in land; the tendency of financial capital was to amalgamate all possessing sections of the nation with one another. The crises were transitory phases within an upward development—the effects of the anarchy of the capitalist form of production, and caused but superficial disturbances in the structure of capitalism. The system as a whole, however, lost nothing of its equilibrium.”

The whole system of capitalist world economics formed a dynamic whole! The alternating phases of booms and of crises recurred in all capitalistic countries at about the same time. The waves of booms and crises were rapidly transmitted from one capitalistic state to another. Even the larger tendencies of the capitalistic mode of production—concentration and centralisation of capital, etc.—were noticeable in practically the same manner in all capitalistic states.

On the other hand, capitalistic world business did not form a component whole geographically. The individual states had reached very different stages of capitalistic development. (This is true even to-day, although in a somewhat less degree.) There was a highly developed centre in Western Europe: England, Germany, Belgium, and, less important, France, Holland, Czecho-Slovakia, Italy, etc. This centre, “the industrial workshop of the world,” was characterised by the following:—

(1) It was connected much more closely than other countries with the division of labour obtaining in the world business, i.e., a much greater part of the annual values produced was exported into foreign countries in the form of manufactured goods, and large quantities of foodstuffs and raw materials were imported.

(2) These countries annually sent newly accumulated values in the form of new investments into countries capitalistically less developed.

(3) These countries annual1y received large values in the form of profits derived from their investments throughout the world and as the gain of the political extension of wide colonial areas, without their having to render any service in return.

Outside of Europe there were two other, fully developed, capitalistic countries: the United States of America and Japan. Also, there were numerous countries in Europe and the other parts of the world that were only just developing along capitalistic lines; furthermore, colonies and semi-colonies that served as sources of food and of raw materials under the dominion of the various highly capitalistic countries.

The equilibrium of this system was always an unstable one; disturbances were overcome by periodically recurring crises. That an equilibrium nevertheless existed, on the whole, is proven by the stability of the exchanges.

In the most highly developed countries capital assumed more and more the form of financial capital, which was intimately connected with the heavy industries. Internal development and the tendency toward a decreasing rate of profit forced the capital in these countries to secure for the export of its investments opportunities made secure by monopolies.

In the course of technical development the organic concentration of capital—especially in the heavy industries—becomes ever higher, the realisation on industrial capital ever slower, the rate of profit ever lower. To this must be added another circumstance of the nineteenth century. Thanks to its stronger organisation, the proletariat is gaining for itself an improvement of its standard of living. “The historical moment,” which helps to determine “the extent of the so-called essential necessities and the manner of satisfying them” (Capital, 1. 134) creates a tendency in the direction of increasing the wages. In other words, necessary labour is extended at the expense of overtime labour. The rate for surplus values decreases. When variable capital has reached a certain size, there results an acceleration of the falling tendency of the rate of profit.

Capital employs different means for combating the falling tendency in the rate of profit. One of these is organic combination, whereby capital combined in a trust reduces the faux frais of the sphere of circulation, lays claim to a part of the profit of trade capital, and raises its own rate of profit by fixing monopoly prices at the expense of other strata of society. The principal means, however, is the exportation of capital to countries where the time involved in labour is shorter and the rate of profit and for overtime is a higher one. To make possible the exploitation of these areas, they must be subservient to the condition imposed by capital in general; i.e., they must be subjugated. Capital in every highly developed, capitalistic country is compelled, in order to retard the decrease in the rate of profit, to subjugate larger colonial areas.

Essentially, the world war was a conflict of the imperialistic Powers for the control of colonies and spheres of influence, carried on with the most modern instruments and methods of mass murder. It ended by reducing the number of imperialistic world powers to four: England, France, the United States, and Japan; with the transformation of the rest of the world—excepting the Soviet Republics—into dependencies of the imperialistic Great Powers; with the new dividing up of the world among them.

The direct economic consequences of the war were the separation of the world into spheres of relative over-production and absolute under-production. This condition was partly overcome during the last six years by the “imminent tendency” of capitalistic world economics, by its mechanism for “automatic steering,” although it still manifests itself by the “dearth of credit” or of capital in these countries.

The general crisis in world business during the years 1920 and 1921 was followed by a phase that is economically difficult to define and that is not at all uniform. There was a great boom in the United States; on the other hand a slow crisis in Europe with indications that a betterment of conditions was in sight—a betterment which, however, did not synchronise in the various countries with that of the rest of the countries and that did not lead to a general betterment within the whole capitalistic world.