The Capitalist Class. By Karl Kautsky (continued)

[Continued from January issue]

Specially translated for the Socialist Party of Great Britain and approved by the Author.


Although the general insecurity of both classes is under ordinary conditions already great, it is enormously aggravated by crises, which the production of commodities from a certain point of development necessarily calls forth from time to time.

Considering the importance which crises have in the last few decades assumed in relation to our economic conditions, and in view of the want of understanding of the causes of crises on the part of a great many persons, we feel justified in entering further into the question.

The great modern crises, which now rule the world market, arise from over-production, and are the consequence of the anarchy necessarily connected with the production of commodities.

Over-production in the sense that more is produced than is required can take place under any system of production. But, of course, it can do no harm if the producers produce for their own use. If, for instance, a primitive peasant-family harvest more corn than they require, they store up the surplus for times of bad harvest, or in the case of their barns being full, they feed their cattle with it, or at the worst leave it on the field.

It is different in the case of the production of commodities. This production (in its developed form) presupposes that nobody produces for himself, but everybody for others. Everybody has to buy what he requires. But the entire production is by no means organised according to a plan; on the contrary, it is left to each producer to guess the extent of the demand for the goods he produces. On the other hand no one under commodity production (so soon as it has gone beyond the first stage of exchange) can purchase until he has sold. These are the two causes from which crises arise.

Let us for the purpose of amplification take tie simplest case. On one market there meet together a possessor of money—say a gold-digger with a pound’s worth of gold—a wine-grower with a little barrel of wine, a linen-weaver with a piece of linen, and a miller with a sack of flour. Let each of these commodities be of the value of one pound—a different supposition would make the case only more complicated without in any way affecting the result. Let those four commodity-owners he. the only ones on the market. Let us now suppose that each has calculated the requirements of the others correctly: the wine-grower sells his wine to the gold-digger, and buys with the pound which he receives for it, the piece of linen from the linen-weaver. Finally, the latter uses the proceeds of his linen for acquiring the sack of flour, and each one returns contented from the market.

In a year’s time the four again came together, each one expecting. to dispose of his commodity as before, and while the possessor of money does not dispise the wine of the wine-grower, the wine-grower, unfortunately, has no need for linen, or perhaps requires the money for the payment of a debt, and therefore prefers to go about in a torn shirt rather than purchase linen. The wine-grower keeps the pound in his pocket and goes home. The linen-weaver now waits in vain for a buyer, and the miller waits likewise. The family of the weaver may be hungry and covet the sack of flour, but the weaver has produced linen for which there was no demand, and as the linen was not required, there is no call for the flour. Weaver and miller have no money, and hence cannot buy what they want; and what they have produced is now “over-produced,” as is also what has been produced for them, for instance—in order to continue with the example—the table which the cabinet-maker expected would be purchased by the miller.

The most significant phenomena of an economic crisis are already given in the foregoing illustration. Of course, it does not take place under such simple conditions. At the beginning of commodity production each establishment still produces more or less for its own consumption: commodity production with each family forms merely part of its entire production. The linen-weaver and the miller we referred to for example possess each a piece of land and some cattle, and are both in a position to complacently wait until a buyer for their commodities puts in an appearance. If it comes to a pinch they can live without him. But in the beginning of commodity production the market is still small and easily surveyed, and production and consumption, and the entire social life, move, year in and year out, in the same rut. In the small communities of olden times one knew the other, his needs and his purchasing power, quite well. The economic fabric scarce changed the number of producers : the productivity of labour, the amount of products, the number of consumers, their needs, the sum of money at they; disposal, all changed but slowly, and each change was immediately discovered and taken into account.

But things take a different form with the advent of commerce. Under its influence production for self-consumption decreases continually, the individual producers of commodities, and still more the dealers in commodities, are getting ever more exclusively dependent upon the sale of their commodities, and particularly upon the quickest possible sale. Delay in or prevention of the sale of a commodity becomes ever more fatal to its owner, and may in certain circumstances lead to his economic ruin. At the same time the possibilities for depressions in commerce increase.

Through commerce the many different markets lying apart from each other are brought into communication; the entire market is thereby greatly extended, but also made less accessible to survey. And that development is furthered still more by the appearance of one or several intermediaries between producer and consumer, commerce making this necessary. At the same time it becomes easier to move commodities because of commerce and the development of the system of transit, and a small incentive suffices to concentrate them on one spot in large quantities.

An estimation of the demand for, and the existing supply of, commodities now becomes ever more uncertain. The development of statistics does not remove this uncertainty : it only makes it possible to estimate at all, which, from a certain stage of commodity production, would be impossible without statistics. The entire economic life becomes more and more dependent upon commercial speculation, which becomes ever more venturesome.

The merchant is a speculator from the start: speculation has not been invented on the Exchange. And speculating is a necessary function of the capitalist. By speculating, that is to say, by estimating the prospective demand; by buying his commodities where they are cheap (that is, where they are plentiful) and selling them where they are dear (that is, where they are scarce), the merchant helps to bring order into the chaos of the planless production of the private concerns which are independent of each other. But in his speculation he may also make mistakes, the more so as he has not much time for reflection, not being the only merchant in the world. Hundreds of thousands of competitors are waiting, like him, to make use of every favourable opportunity : whoever gets the first glimpse of it reaps the greatest advantage. That means one has to be quick, not to ponder long, not to make many enquiries, but to venture—nothing venture nothing have! But he may also lose. If on any market there is a great demand for a commodity, large quantities of it scon accumulate there, until there is more of it than the market can digest. Then the prices fall, the merchant has to sell cheap, and often with a loss, or to find another and better market for his goods. His losses at that game may be so great that they may ruin him.

Under the domination of developed commodity production on a market there are always either too many or too few commodities about. The bourgeois economists declare that to be a very wise and admirable ordinance, but we think differently : anyhow, it is inevitable,so long as commodity-production, from a certain stage onwards, exists. But this wise ordinance may in certain circumstances, and in the event of an exceptionally strong incentive, mean that the overloading of a market with commodities becomes so uncommonly great, that consequent losses of the merchants assume large proportions, and a great many of their number cannot meet their liabilities and become bankrupt. That means already a commercial crisis in its best form.

The development of the system of transit on the one hand, and of the system of credit on the other, facilitates the sudden flooding of a market with commodities, but in doing so it also furthers crises, and enhances their devastating effect Commercial crises had always to be limited in extent so long as petty enterprise was the prevalent form of production. It was not possible that under the influence of any incentive the amount of products produced for the entire market rapidly increased. Production under the domination of handicraft, like petty enterprise, is not capable of rapid extension. It cannot be enlarged by an increase in the number of workers, as at ordinary periods it already employs all the efficient members of the grade of population devoted to it. It can only be extended by adding to the labour-burden of the individual by prolonging the hours of labour, encroaching on Sunday rest, etc. But in the good old times the handicraftsman or peasant working on his own account, when he had not yet to contend with the competition of the large concern, showed no liking for such extension. Even if he consented to work overtime that was of little use, as the productivity of labour was not considerable.

That productivity changes with the advent of capitalist large concerns. As a means of enabling commerce to rapidly flood the market with commodities, it develops a hitherto unthought of capacity, not only extending the market to a world market, embracing the entire globe and increasing the number of intermediaries between producer and consumer, but also enabling production to follow every incentive of commerce and to expand by leaps and bounds.

Already the circumstance that the workers are now completely at the mercy of the capitalist; that he can increase their hours of labour, and interfere with their Sunday (and night) rest, enables the capitalist to extend production more quickly than was possible before. But one hour of surplus labour signifies to-day, with the great productivity of labour, quite a different extension of production to that at the time of handicraft. And the capitalists are also able to extend their concerns rapidly. Capital is a very elastic, pliable quantity, especially owing to the credit system. Flourishing conditions of business increase confidence, induce investments, shorten the period of circulation of a part of capital, and thus increase its scope and power. But the most important fact remains that there is always an industrial reserve army of workers at the disposal of capitalism. In that way the capitalist is in a position to extend his concern at any time, to engage new workmen, to increase production rapidly, and to make thoroughly good use of a favourable state of the market.

[To be continued]

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