V. I.

Lenin

(Apropos of the Polemic of Messrs. Tugan-Baranovsky and Bulgakov)

Thequestion of markets in capitalist society, it will be remembered,
occupied a highly important place in the theory of the Narodnik economists
headed by Messrs. V. V. and N.—on. It is, therefore, perfectly
natural that economists who adopt a negative attitude towards the
Narodnik theories should deem it essential to call attention to this
problem and to explain, first and foremost, the basic, abstract-theoretical points of the “market theory.” An attempt to
offer such an explanation was undertaken by Mr. Tugan Baranovsky in 1894
in his book, Industrial Crises in Modern England , Chapter 1, Part
2, “The Market Theory”; last year, Mr. Bulgakov devoted his
book, Markets under Capitalist Production (Moscow, 1897), to the
same problem. The two authors are in agreement in their basic views; the
central feature of both is an exposition of the noteworthy analysis,
“the circulation and reproduction of the aggregate social capital,”
an analysis made by Marx in the third section of Volume II of
Capital. The two authors agree that the theories propounded by
Messrs. V. V. and N.—on on the market (especially the internal
market) in capitalist society are completely erroneous and are due either
to an ignoring or a misunderstanding of Marx’s analysis. Both authors
recognise the fact that developing capitalist production creates its own
market mainly for means of production and not for articles of consumption; that the realisation of the product in general and of
surplus-value in particular is fully explicable without the introduction
of a foreign market; that the necessity of a foreign market for a
capitalist country is not due to the conditions of realisation (as Messrs. V. V. and N.—on assumed),
but to historical conditions, and so on. It would seem that
Messrs. Bulgakov and Tugan-Baranovsky, being in such complete accord,
would have nothing to argue about and that they could direct their joint
efforts to a further and more detailed criticism of Narodnik
economics. But in actual fact a polemic arose between these two writers
(Bulgakov, op. cit., pages 246-57, et passim; Tugan-Baranovsky in
Mir Bozhy , 1898, No. 6, “Capitalism and the Market,” apropos of S. Bulgakov’s book). In our opinion both Mr. Bulgakov and
Mr. Tugan-Baranovsky have gone a bit too far in their polemic and have
given their remarks too personal a character. Let, us try and discover
whether there is any real difference between them and, if there is, which
of them has the greater right on his side.

Tobegin with, Mr. Tugan-Baranovsky charges Mr. Bulgakov with possessing
“little originality” and with liking too much jurare in verba magistri [1] ( Mir Bozhy , 123). “The solution I set forth as regards
the question of the role of the foreign market for a capitalist country,”
says Mr. Tugan Baranovsky, “adopted in toto by
Mr. Bulgakov, is not taken from Marx at all.” We believe this statement to
be untrue, for it was precisely from Marx that
Mr. Tugan-Baranovsky took his solution to the question; Mr. Bulgakov no
doubt also took it from the same source, so that the argument should not
be about “originality” but about the understanding of a
certain postulate of Marx, about the need to expound Marx in one way or in
another. Mr. Tugan-Baranovsky says that Marx “does not touch at all
on the question of the foreign market in the second volume”
(op. cit.). This is not true. In that same (third) section of the
second volume, wherein he analyses the realisation of the product, Marx
very definitely explains the relationship of foreign trade and,
consequently, of the foreign market, to this question. He says the
following:

“Capitalistproduction does not exist at all without foreign commerce. But
when one assumes normal annual reproduction on a given scale one also assumes
that foreign commerce only replaces home products
[ Artikel — goods] [2] by articles of other use- or bodily form , without affecting
value-relations, hence without affecting either the value-relations in
which the two categories ’means of production’ and ’articles of
consumption’ mutually exchange, or the relations between constant capital,
variable capital, and surplus-values into which the value of the product
of each of these categories may be divided. The involvement of foreign
commerce in analysing the annually reproduced value of products can
therefore only confuse without contributing any new element of the
problem, or of its solution. For this reason it must be entirely
discarded” (Das Kapital , II’,

469.  [5]

Our italics). Mr. Tugan-Baranovsky’s “solution of the question,” namely,
"... in any country importing goods from abroad there may be a
surplus of capital; a foreign market is absolutely essential to such a
country” (Industrial Crises , p. 429. Quoted in Mir Bozhy, op. cit. , 121)—is merely a paraphrase of Marx’s
postulate. Marx says that in analysing realisation foreign trade must not
be taken into consideration, since it only replaces one article by
another. In analysing the question of realisation (Chapter 1 of the second
part of Industrial Crises ), Mr. Tugan-Baranovsky says, that a
country importing goods must export them, that is, must have a foreign
market. One may ask, can it be said after this that Mr. Tugan-Baranovsky’s
“solution of the question” is “not taken from Marx at all”?
Mr. Tugan-Baranovsky says further that “Volumes II and III of
Capital constitute a far from finished rough draft” and
that “for this reason we do not find in Volume III conclusions drawn
from the splendid analysis given in Volume II” (op. cit., 123). This
statement too is inaccurate. In addition to individual analyses of social
reproduction (Das Kapital , III, 1, 289), [6] there is an explanation
of how and to what extent the realisation of constant capital is
“independent” of individual consumption and “we find in
Volume Ill” a special chapter (the 49th, “Concerning the
Analysis of the Process of Production”) devoted to conclusions drawn from
the splendid analysis given in Volume II, a chapter in which the results
of the analysis are applied to the solution of the exceedingly important question of the
forms of social revenue in capitalist society. Lastly, we must point out
the equal inaccuracy of Mr. Tugan-Baranovsky’s assertion that “Marx,
in Volume Ill of Capital speaks in a quite different manner on
the given question,” and that in Volume Ill we “can even find
statements that are decisively refuted by that analysis” (op. cit.,
123). On page 122 of his article Mr. Tugan-Baranovsky quotes two such
passages from Marx that allegedly contradict the basic doctrine. Let us
examine them closely. In Volume III Marx says: “The conditions of
direct exploitation, and those of realising it, are not identical. They
diverge not only in place and time, but also logically. The first are only
limited by the productive power of society, the latter by the proportional
relation of the various branches of production and the consumer power of
society.... The more productiveness develops, the more it finds itself at
variance with the narrow basis on which the conditions of consumption
rest” (Ill, 1, 226. Russian translation,

p. 189). [7]
Mr. Tugan-Baranovsky interprets these words as follows: “The mere
proportional distribution of national production does not guarantee the
possibility of marketing the products. The products may not find a market
even if the distribution of production is proportional—this is
apparently the meaning of the above-quoted words of Marx.” No, not this is
the meaning of those words. There are no grounds for seeing in them some
sort of a correction to the theory of realisation expounded in
Volume II. Marx is here merely substantiating that contradiction of
capitalism which he indicated in other places in Capital , that
is, the contradiction between the tendency toward the unlimited
expansion of production and the inevitability of limited
consumption (as a consequence of the proletarian condition of the mass of
the people). Mr. Tugan-Baranovsky will, of course, not dispute the fact
that this contradiction is inherent in capitalism; and since Marx
points to this in the passage quoted, we have no right to look for some
other meaning in his words. “The consumer power of society” and the
“proportional relation of the various branches of production”—these are not conditions that are isolated, independent
of, and unconnected with, each other. On the contrary, a definite
condition of consumption is one of the elements of proportionality. In actual fact, the analysis of
realisation showed that the formation of a home market for capitalism owes
less to articles of consumption than to means of production. From this it
follows that Department I of social production (the production of means of
production) can and must develop more rapidly than Department II (the
production of articles of consumption). Obviously, it does not follow from
this that the production of means of production can develop in complete independence of the production of articles of consumption
and outside of all connection with it. In respect of this, Marx
says: “As we have seen [Book II, Part III], continuous circulation
takes place between constant capital and constant capital.... It is at
first independent of individual consumption because it never enters the
latter. But this consumption definitely (definitiv ) limits it
nevertheless, since constant capital is never produced for its own sake
but solely because more of it is needed in spheres of production whose
products go into individual consumption” (III, 1, 289. Russian
translation, 242). [8]
In the final analysis, therefore, productive consumption (the consumption of means of production) is always bound up
with individual consumption and is always dependent on it. Inherent in
capitalism, on the one hand, is the tendency toward the limitless
expansion of productive consumption, toward the limitless expansion of
accumulation and production, and, on the other, the proletarisation of the
masses of the people that sets quite narrow limits for the expansion of
individual consumption. It is obvious that we have here a contradiction in
capitalist production, and in the above-quoted passage Marx simply
reaffirms this contradiction. [3]

The analysis of realisation in Volume II does not in any way refute this
contradiction (Mr. Tugan-Baranovsky’s opinion notwithstanding); it shows,
on the contrary, the connection between productive and personal
consumption. It stands to reason that it would be a serious error to
conclude from this contradiction of capitalism (or from its other
contradictions) that capitalism is impossible or unprogressive as compared
with former economic regimes (in the way our Narodniks like
doing). Capitalism cannot develop except in a whole series of
contradictions, and the indication of these contradictions merely explains
to us the historically transitory nature of capitalism, explains the
conditions and causes of its tendency to go forward to a higher form.

Summarisingall that has been said above, we arrive at the following conclusion:
the solution of the question of the role of the foreign market as expounded by
Mr. Tugan-Baranovsky was taken precisely from Marx; there is no contradiction
whatsoever on the question of realisation (or on the theory of markets) between
Volumes II and III of Capital .

Letus proceed. Mr. Bulgakov accuses Mr. Tugan-Baranovsky of an incorrect
assessment of the market theories of pre-Marxian economists. Mr. Tugan-Baranovsky accuses Mr. Bulgakov of uprooting Marx’s
ideas from the scientific soil in which they grew and of picturing matters
as though “Marx’s views had no connection with those of his
predecessors.” This last reproach is absolutely groundless, for
Mr. Bulgakov not only did not express such an absurd opinion but, on the
contrary, cited the views of representatives of various pre-Marxian
schools. In our opinion, both Mr. Bulgakov and Mr. Tugan-Baranovsky, in
outlining the history of the question, were wrong in paying too little
attention to Adam Smith, who absolutely should have been treated in the
greatest detail in a special exposition of the “market theory”; “absolutely” because it was precisely Adam
Smith who was the founder of that fallacious doctrine of the division of
the social product into variable capital and surplus- value (wages, profit
and rent, in Adam Smith’s terminology), which persisted until Marx and
which, not only prevented the solution of the question of realisation, but
did not even pose it correctly. Mr. Bulgakov says in all justice that
“with incorrect premises and a false formulation of the problem
itself, these disputes [on the market theory, that arose in economic
literature] could only lead to empty, scholastic discussions”
(op. cit., p. 21, note). The author, incidentally, devoted only one page
to Adam Smith, omitting the brilliant, detailed analysis of Adam Smith’s
theory given by Marx in the 19th chapter of Volume II of Capital
(§ II,

S. 353-83), [9]
and instead dwelt on the theories of the secondary and unoriginal theoreticians, J. S. Mill and von Kirchmann. As
far as Mr. Tugan-Baranovsky is concerned, he ignored Adam Smith altogether and, as a result, in his outline of the views of later
economists omitted their fundamental error (that of repeating
Adam Smith’s above-mentioned error). It goes without saying that under
these circumstances the exposition could not be satisfactory. We shall
confine ourselves to two examples. Having out lined his Scheme No. I that
explains simple reproduction, M . Tugan-Baranovsky says: “But the
case of simple reproduction assumed by us does not, of course, give rise
to any doubts; the capitalists, according to our assumption, consume all
their profits, so it is obvious that the supply of commodities will not
exceed the demand” (Industrial Crises , p. 409). This is
wrong. It was not at all “obvious” to former economists, for
they could not explain even the simple reproduction of social capital,
and, indeed, it cannot be explained unless it is understood that the value
of the social product is divided into constant capital +variable
capital+surplus-value, and in its material form into two great
departments—means of production and articles of consumption. For
this reason even this case gave Adam Smith cause for “doubts,” in
which, as Marx showed, he got tangled up. If the later economists repeated
Smith’s error without sharing his doubts , this only shows that they had taken a step backwards in theory as far as the present
question is concerned. It is likewise incorrect for Mr. Tugan Baranovsky to state:
“The Say-Ricardo doctrine is correct theoretically; if its opponents
had taken the trouble to make numerical computations of the way
commodities are distributed in capitalist economy, they would easily have
under stood that their refutation of this theory contains a logical
contradiction” (loc. cit. , 427). No. The Say-Ricardo doctrine is incorrect theoretically—Ricardo repeated Smith’s error
(see his Works , translated by Sieber, St. Petersburg, 1882,
p. 221), and Say put the finishing touches to it by maintaining that the
difference between the gross and the net product of society is fully
subjective. And however hard Say-Ricardo and their opponents had applied
themselves to “numerical computations,” they would never have
reached a solution, because this is not merely a matter of figures, as
Bulgakov has rightly remarked in respect of another passage in
Mr. Tugan-Baranovsky’s book (Bulgakov, loc. cit. , p. 21, note).

Wenow come to another subject for dispute between Messrs. Bulgakov and
Tugan-Baranovsky—the question of numerical schemes arid their
significance. Mr. Bulgakov maintains that Mr. Tugan-Baranovsky’s Schemes,
“owing to their departure from the model [i.e., from Marx’s Scheme],
to a great extent lose their power of conviction and do not ex plain the
process of social reproduction” (loc. cit. , 248); and
Mr. Tugan-Baranovsky says that “Mr. Bulgakov does not properly
understand what such schemes are intended for” (Mir Bozhy ,
No. 6 for 1898, p. 125). In our opinion the truth in this case is entirely
on Mr. Bulgakov’s side. It is more likely that Mr. Tugan-Baranovsky
“does not properly under stand what the schemes are intended
for” when he assumes that they “prove the deduction” (ibid.). Schemes alone can not prove anything: they can only
illustrate a process, if its separate elements have been theoretically explained . Mr. Tugan-Baranovsky compiled his own
Schemes which differed from Marx’s (and which were incomparably less clear
than Marx’s), at the same time omitting a theoretical explanation of those
elements of the process that they were supposed to illustrate. The basic
postulate of Marx’s theory, that the social product does not consist of
only variable capital+surplus-value (as Adam Smith, Ricardo, Proudhon,
Rodbertus, and others thought), but of constant capital+the above two parts—this postulate is not
explained at all by Mr. Tugan-Baranovsky, although he adopted it in his
Schemes. The reader of Mr. Tugan-Baranovsky’s book is unable to understand this basic thesis of the new theory. Mr. Tugan-Baranovsky
did not in any way show why it is essential to divide social production
into two departments (I: means of production and II: articles of
consumption), although, as Mr. Bulgakov justly remarked, “in this
one division there is greater theoretical meaning than in all former
arguments about the market theory” (loc. cit. , p. 27). This
is why Mr. Bulgakov’s exposition of the Marxian theory is much clearer and
more correct than Mr. Tugan Baranovsky’s.

Inconclusion, examining Mr. Bulgakov’s book in greater detail, we must
note the following. About a third of the book is devoted to questions of
the “differences in the turn over of capital” and of the
“wages fund.” The sections under these headings seem to us to be the
least successful. In the first of these the author tries to add to Marx’s
analysis (see p. 63, note) and delves into very intricate computations and
schemata to illustrate how the process of realisation takes place with
differences in the turnover of capital. It seems to us that Mr. Bulgakov’s
final conclusion (that, in order to explain realisation with differences
in the turnover of capital, it is necessary to assume that the capitalists
in both departments have reserves, cf. p. 85) follows naturally from the
general laws of the production and circulation of capital, so that there
was no need to assume different cases of relations of the turnover of
capital in Departments I and II and to draw up a whole series of
diagrams. The same must be said of the second of the above mentioned
sections. Mr. Bulgakov correctly points out Mr. Herzenstein’s error in
asserting that he had found a contradiction in Marx’s theory on this
question. The author rightly says that “if the turnover period of
all individual capitals is made to equal one year, at the beginning of the
given year the capitalists will be the owners both of the entire product
of the preceding year and of a sum of money equal to its value”
(pp. 142-43). But Mr. Bulgakov was entirely wrong to take (p. 92, et seq.)
the purely scholastic presentation of the problem by earlier economists
(whether wages are derived from current production or from the production of the preceding working
period); he created additional difficulties for himself in
“dismissing” the statement by Marx, who “seems to contradict his basic point of view, arguing as though” “wages
are not derived from capital but from cur rent production”
(p. 135). But Marx did not pose the question in this way at
all. Mr. Bulgakov found it necessary to “dismiss” Marx’s
statement because he tried to apply to Marx’s theory a completely alien
formulation of the question. Once it has been established how the entire
process of social production takes place in connection with the
consumption of the product by different classes of society, how the
capitalists contribute the money necessary for the circulation of the
product—once all this has been explained, the question of whether
wages are derived from current or preceding production loses all serious
significance. Engels, publisher of the last volumes of Capital ,
therefore, said in the preface to Volume II that arguments like that of
Rodbertus, for example, as to “whether wages are derived from
capital or income, belong to the domain of scholasticism and are
definitely settled in Part III of the second book of Capital ”
( Das Kapital , ii, Vorwort , S . xxi). [10]