I.

As was already pointed out, the Marxian theoretical system is one solid structure and cannot be properly understood unless viewed as a whole from foundation-stone to roof-coping. To criticize any of its parts as if it were a complete structure in itself is, therefore, a mistake which must necessarily lead to all sorts of fallacious conclusions; and to accept any one of its parts and reject the others, as many of the latter-day critics do, simply betrays ignorance of the parts which are accepted and rejected alike. The Marxian theoretical system must be examined as a whole, and accepted or rejected in its entirety, at least as far as its structural parts are concerned.

It is rather the fashion among Marx-critics to treat the Marxian “philosophy” and “economics” as if they had absolutely nothing whatever to do with each other, and to accept one and reject the other according to the critic's fancy. As a matter of fact, however, Marx's “philosophy” is nothing more than a generalization deducted from the study of the economic conditions of the human race during its entire course of historical progress, and his “economics” is merely an application of his general historical theory to the particular economic structure known as the capitalist system.

How Marx came to take up the studies which resulted in the formulation by him of the theoretical system which bears his name, and the course which those studies took, is very illuminating in this respect, and his own account of it, given in the preface to his “Critique of Political Economy,” is of more than passing interest, and we shall therefore place it before our readers.

In 1842-43, Marx says, he found himself, as editor of the “Rheinische Zeitung,” the leading German radical paper of the time, embarrassed when he had to take part in discussions concerning so-called material interests, such as forest thefts, subdivision of landed property, free trade, and the like, as his previous studies had been only in the domains of philosophy, history, and jurisprudence. At the same time he had to express an opinion on the French schools of socialism of those days, with which he was also unfamiliar. He therefore took advantage of his publishers' desire to pursue a less aggressive course than his, and retired to his “study-room,” there to get the needed information.

“The first work undertaken for the solution of the questions that troubled me,” he says, “was a critical revision of Hegel's ‘Philosophy of Law;’ the introduction to that work appeared in the ‘Deutsch Französische Jahrbücher,’ published in Paris in 1844. I was led by my studies to the conclusion that legal relations as well as forms of state could neither be understood by themselves, nor explained by the so-called general progress of the human mind, but that they are rooted in the material conditions of life, which are summed up by Hegel after the fashion of the English and French of the eighteenth century under the name ‘civic society;’ the anatomy of the civic society is to be sought in political economy. The study of the latter which I had taken up in Paris, I continued at Brussels whither I emigrated on account of an order of expulsion issued by Mr. Guizot. The general conclusions at which I arrived and which, once reached, continued to serve as a leading thread in my studies, may be briefly summed up as follows:”

Here follows the famous passage, already quoted by us in the first chapter of this book, giving the whole Marxian system in a nut shell, and containing Marx's own formulation of the Materialistic Conception of History.

It is amusing to see the evident surprise of some Marx-critics at the fact that Marx, instead of writing an elaborate treatise on the Materialistic Conception of History, relegated its formulation to a short preface of a purely politico-economic work. As a matter of fact, this is very significant, but not surprising at all. This passage contains an epitome of the whole Marxian system: Historical foundation, economic structure and socialist result. The book itself was to treat the economic structure of the capitalist system exhaustively and in detail. The Socialistic conclusions were not elaborated for the reason that Marx did not believe in any Socialism that did not flow directly from an examination of the capitalist system, and therefore it had to be merely indicated, leaving it to the reader to deduce his Socialism from the examination of the capitalist system contained in the book itself. If that examination did not lead to Socialism such an elaboration would be either useless or unjustifiable or both. The historical point of view, however, from which the capitalist system was to be examined had to be formulated, as without a clear understanding thereof the examination of the laws governing the capitalist system of production and distribution would remain a book sealed with seven seals. Marx, therefore, formulated his historical theory in the preface, and then settled down to the examination of the economic structure of our present society and the laws governing its particular course of evolution.

The opinions of the critics about Marx as an economist are just as many and as divergent as are their opinions of him as a philosopher. Slonimski and other critics think that Marx has done absolutely nothing for the science of economics; not only are his theories false but they have not even any historical importance. From this view to that of enthusiastic eulogy the opinions run all the way. He has, of course, been denied originality. He is accused by some critics of being a blind follower of the classical English School of political economy, and particularly of Ricardo, and again by others that he understood neither that school in general nor Ricardo in particular. We shall not go into that, for the reasons given before, except to say that while many parts of his economic theory had been worked out before him, particularly by the English Classical school, the system as such, the combination of the parts into a systematic structure, the point of view from which the structure was built, as well as the corner-stone of the structure, the theory of surplus value, are all his own. We also wish to say right here that Marx had to construct an economic theory of his own for the reason that his historical point of view placed him in opposition to the reigning classical school which accepted our economic system as “natural,” that is to say: independent of historical development in its origin, and final in its application. This offended Marx's better historical understanding, his philosophy. The classical school, considering the capitalist system eternal, analyzed only the relations of its parts to one another, whereas Marx, because of his peculiar point of view, looked not only into the workings of its parts and their relations to each other, but also into the changes effected by the relations of the different parts of the capitalist system in each of those parts and the changes in the whole system flowing therefrom. In other words, Marx examined the dynamics of the capitalist system as a whole, and in the light so gained re-examined its statics, already examined by the classical school. His philosophy, which placed him in opposition to the classical English school of political economy, also prevented him from drifting into any so-called psychological theory. The underlying principle of all of these theories, the attempt to explain social phenomena by individual motives, is entirely repugnant to his historico-sociological point of view, requiring as that does, that social phenomena should be explained in such a manner as to account for their origin, growth, and decline, something which no psychologico-individualistic motivation of social phenomena can do.

When Marx came to examine the economic structure of our social system, his problem consisted in finding answers to the following questions: What are the sources of our society's wealth, that is, of the means of subsistence and comfort of the individuals composing it? How and in what manner is it produced: what factors, circumstances and conditions are necessary for its production, preservation and accumulation? How, in what manner, and in accordance with what principles, is it divided among the different groups and individuals composing our society? How does this division affect the relations of the groups and individuals participating in it, and how do these relations, and the social phenomena which they produce, react upon the production and distribution of wealth in this society? What are the resulting laws governing the direction and manner of its general movement? What are the historical limits of this economic organization?

A careful examination of our wealth discloses the remarkable fact that, whereas, it consists, like all wealth, of articles ministering to the wants of the individuals of the society wherein it is produced, of whatever nature or character those wants may be, the amount of that wealth, from our social point of view, does not depend on the amount or number of those articles possessed by the individuals separately or society as a whole; that any individual member of our society may be possessed of great wealth without possessing any appreciable quantity of articles that would or could minister either to his own wants or to those of any other member of our society; that, as a rule, a man's wealth under our social system does not consist of articles which minister to his own wants, but to those of other people, if at all; and, furthermore, that a man's wealth may grow or shrink without any addition to or diminution from the articles or substances of which his wealth is composed.

This is an entirely novel phenomenon historically considered and one showing our wealth to be radically different, and possessed of attributes and qualities entirely unknown, to wealth under former forms. Besides, these novel attributes and qualities of our wealth are apparently in contravention of the “natural” order of things. At no time prior to our capitalistic era was the subjective relation between a man and his wealth— that is the means of his subsistence and comfort— so entirely severed as it is now. At no time prior to this era did a man and his wealth stand in such absolutely objective, non-sympathetic, relations as they stand now. At no time prior to our era was a man's wealth so thoroughly non-individual, so absolutely dependent on social circumstances, so entirely a matter of social force, as it is under capitalism.

What is the distinctive feature, the distinguishing mark or characteristic of the capitalist system of production and distribution of the means of subsistence and comfort which wrought such changes in the attributes and qualities of wealth and how were those changes brought about?

The distinctive feature of capitalist production, that which gives it its character, is that under this system man does not produce goods but commodities that is “wares and merchandise.” In other words he does not produce things which he wants to use himself, and because he wants to use them to satisfy some want of his, but things which he does not want to use himself but which can be disposed of by him to others, caring nothing whether and in what manner the others will use them. Instead of producing goods for his own use, as people used to do in former days, under other systems of production, he produces commodities for the market. Marx, therefore, begins his great investigation of the capitalist mode of production with the following words: “The wealth of those societies in which the capitalist mode of production prevails, presents itself as ‘an immense accumulation of commodities,’ its unit being a single commodity. Our investigation must therefore begin with the analysis of the commodity.” It is the analysis of the commodity that must furnish us the key to all the peculiarities of character which we have noticed in our wealth under the capitalist system of production, showing changes which have placed our wealth in a purely objective relation to man and given it purely social attributes and properties.

The distinctive property, again, of a commodity, that quality of the thing which makes an ordinary good an article of merchandise, is its exchange-value. That is to say, the fact that in addition to the quality which it possesses of being useful for consumption to the one who wants to use it that way, it has the further quality of being exchangeable, that is it can be useful for the purpose of exchange by one who has no use for it as an article of consumption. The exchange-value of an article therefore, while based on the property of the article of being ultimately useful for consumption, is something entirely different and apart from this use-value and independent of it in its variations. Indeed, the two qualities might be said to be antagonistic as they exclude each other: a thing is exchange-value only to the person who has no use-value in it, and it loses its exchange-value when its use-value asserts itself. It is its exchange-value that makes a thing a commodity, it remains therefore a commodity only as long as it is intended for exchange and loses that character when appropriated for use in consumption. The use-value of a thing is, on the one hand, something inherent in its nature, in the very mode of its existence, and does not depend on the social form of its production; it remains the same use-value no matter how produced. On the other hand, the use-value of a thing is a purely subjective relation between the thing and the person who uses it, and therefore any difference in the use-value of a thing when used by different persons is purely subjective with those persons. In neither of these aspects does it come within the sphere of political economy, whose object is the explanation of the peculiar phenomena of wealth under the capitalist system of production, phenomena which, as we have seen, are purely social in their nature.

Both, the natural attributes of things and the individual uses to which they are being put, have existed long before the capitalist system of production without giving wealth those properties of the capitalist-produced wealth which we have noted above. These qualities are the qualities of the good, and these uses are the uses to which the good is being put. They are not the qualities nor the uses of the commodity. They do not, therefore, an any way affect the exchange-value of the thing, that attribute which makes out of the simple good the mysterious commodity with all its peculiar faculties and attributes. Except that the good is the substratum, the material substance, of the commodity; and use-value is the substratum, the material substance, of exchange-value. Historically, therefore, the good preceded the commodity, and use-value preceded exchange-value.

Marx says,therefore:

“Whatever the social form of wealth may be, use-values always have a substance of their own, independent of that form. One cannot tell by the taste of wheat whether it has been raised by a Russian serf, a French peasant, or an English capitalist. Although the subject of social wants, and, therefore, mutually connected in society, use-values do not bear any marks of the relations of social production. Suppose we have a commodity whose use-value is that of a diamond. We can not tell by looking at the diamond that it is a commodity. When it serves as a use-value, aesthetic or mechanical, on the breast of a harlot or in the hand of a glasscutter, it is a diamond and not a commodity. It is the necessary pre-requisite of a commodity to be a use-value, but it is immaterial to the use-value whether it is a commodity or not. Use-value in this indifference to the nature of its economic destination, i.e. use-value as such, lies outside the sphere of investigation of political economy. . . . But it forms the material basis which directly underlies a definite economic relation which we call exchange-value.”

Our wealth, then, in those respects in which it is different from the forms of wealth which preceded it, and which distinguish it as capitalistic wealth, is an aggregation of exchange-values. In other words: our wealth, in so far as it is not merely used for consumption, but retains its capitalistic properties, is capital, is an aggregation of exchange-values. We have already seen that exchange-value is not something inherent in the thing itself as an element or condition of its natural existence. We have also seen that it bears no subjective relation to the person who uses it as such, that it does not depend on anything he does or omits to do, but is an objective attribute derived from some social relation of the individuals within the society in which it is produced. We must therefore conclude that capital, which is an aggregation of exchange-values, is nothing more than a social relation of individuals, and that its properties, which it can only possess by virtue of its being such an aggregation of exchange-values, are merely the result of the social relations of which it is the expression. What are the social relations represented by exchange-value, and its composite— capital? What are the properties of exchange-value and capital and the laws governing their existence, and how are they derived from and governed by those social relations? The answering of these questions is, according to Marx, the object of political economy, and to their critical examination his life-work was devoted.

Before entering, however, upon this examination we must put before ourselves clearly the problem which confronts us, and define clearly the questions which we are called upon to answer. We have already pointed out some characteristics of our wealth which make it different from the wealth possessed under any previous social system and which show clearly that our form of wealth is the product of our peculiar social relations. These characteristics are, however, not the only ones which require explanation. Even a cursory examination of our economic system will reveal the fact that our value-wealth is full of mysteries which, if considered by themselves, defy all attempts at explanation.

The mystery surrounding the origin of our wealth was already indicated above in showing the peculiar property of our wealth to grow and shrink irrespective of any addition to, or diminution from, the material substances of which it consists. This mystery deepens the further we go into the examination of the production of wealth in our society, and even more so when we come to consider its distribution. Only some of the more characteristic phenomena which puzzle the inquirer into the nature of the wealth of capitalistic nations need be mentioned here in order to show the nature of our problem.

While, as we have already stated, the amount of our wealth may grow or diminish irrespective of the growth or diminution of the articles of which it consists, thus showing clearly that our value-wealth is something extrinsic and independent of the nature and uses of those articles, yet there is something in the very independence of value-wealth from its material substance which shows a close connection between them. It is true that this connection is rather in the nature of a hostility, partaking of the antagonism already pointed out between use-value and exchange-value, but the connection is nevertheless clearly defined and resembles in its character the connection of polarity, to borrow an example from another field of scientific research. It has, namely, been observed that there is a constantly growing difference between the accumulation of use-value and exchange-value, a constantly growing difference between the amounts of our value-wealth and the material substances of which it consists. That is to say, it has been observed that with the increase of the production of goods commodities diminish in value, so that the larger the increase in our “natural” wealth, that is in useful articles which go to make up the stores of our social or value-wealth, the smaller the increase of the latter. In other words the growth of our value-wealth constantly and systematically falls behind the growth of the material substances of which it consists. This shows clearly that while the value of a thing does not depend on its natural qualities or the uses to which it may be put, so that exchange-value is entirely independent of use-value, there is a certain well-defined relation existing in their production, at least. What is that relation?

While this question of our wealth-production is merely mysterious, the questions of its distribution are puzzling and perplexing in the extreme. A cursory survey of our social system will show that there are very many persons in our society who evidently do not produce any wealth and yet have it in abundance. In fact, most of our wealth is found in the possession of persons who have not produced it. Where did they get it? The answer which suggests itself to this query is, that they got it from the persons who did produce it. But then the question arises: How did they get it? They did not take it by force, nor was it given to them for love. How did they get it?

Ever since man has kept written records of his doings there have been social classes composed of people who have neither toiled nor labored and still managed to live on the fat of the land. But the actions of these people have always been plain and above board. Everybody could see just how they managed it. There was never any mystery as to where their fat came from, nor how they got hold of it. The division of the wealth between those who produced it and those who didn't was done in the light of day and by a very simple process, so that each article produced could be traced into the hands of its ultimate possessor and each article possessed could be traced back to its original source. A child could tell the sources of wealth of an ancient slave-holder or medieval feudal baron. Not so with our non-producing classes. The sources of the wealth of our merchant-princes are shrouded in mystery. An honest merchant is supposed to, and usually does, pay for his wares what they are worth and sells them again for what they are worth. Wherefrom, then, does he get his profit? Two men make a bargain and exchange equal values, for they are honest and would not cheat each other, and yet both make a profit! Where does their profit come from? Some foolish people think that merchants make their profits by buying in the cheapest market and selling in the dearest. In other words, by cheating or taking advantage of each other. This is evidently a mistake. A merchant may, of course, make an extra profit by taking advantage of his neighbor. In that event his neighbor loses as much as he has made. But the regular profits of the merchant are realized when he buys and sells goods at their fair prices. That is why all hands are making money. Otherwise the capitalists would be preying on each other and one would gain just as much as the other would lose. Wealth would merely circulate among the different members of the class but there would be no net gain. What would the merchant class live on? They could no more live on each other's losses than they could by taking in each other's washing. But the capitalist class does manage to live and thrive and even accumulate and amass large stores of wealth. Where, then, does the capitalist class get it?

Other explanations offered are that the merchant by buying and selling enhances the value of the article sold and that the enhanced value is the merchant's profit; or that the merchant's profit is a reward for services as middle-man between producer and consumer. This last proposition is beside the point for the reason that it is not a question of ethics with which we are concerned, as to whether the merchant deserves what he gets, but a pure question of mechanics: how, and wherefrom, he gets it. Nor does the explanation that the merchant “enhances” the value of an article, that is creates new value, by selling it, answer the question: Where and how did he get it? How is the value of a thing “enhanced” by a mere change of hands? Its natural qualities remain the same. The uses to which it can be put remain the same. Where was this value before the merchant got it? Who produced it, and why did its producer part with it? If a mere change of hands creates value, why do some people foolishly toil in the sweat of their brows to produce new articles in order to get values, when value can be got by the much easier process of sending the articles already on hand around the circuit? This brings us back to the question: What is exchange-value, and how is it produced or got?

We will see later in the course of the discussion how Marx's theory of value and surplus-value answers all these questions and unravels all these mysteries, and that it is the only theory that answers the problem of political economy satisfactorily, thus making political economy a real science. We will also see the place of our economic system in the string of economies which go to make up the history of the human race until now, and what its further development must or is likely to lead to. We will see, incidentally, how entirely puerile is the talk of Bernstein and his followers who, not understanding the essence of the Marxian theory of value, and overawed therefore by the volume of criticism leveled against it by the very learned economists, attempt to hide behind the contention that this theory is not an essential element of Marx's socialist system. We will see, lastly, how utterly absurd is most of the criticism of these learned critics from Böhm-Bawerk[a] down or up.