Capitalism-and-Its-Critics-A-History-From-the

Luxemburg dismissed this possibility, saying it treated the capitalist economy as a “never-ending merry-go-around in mid air.”38 She asked who would buy all the new machinery—lathes, blast furnaces, stamping plants, and the like—that Department I churned out year after year. The natural answer was the capitalists in Department II, who would need the new equipment to expand their output of consumer goods. But this raised another question, Luxemburg pointed out: Who would buy all the additional consumer goods? Relying on the workers surely wasn’t an option: they earned less than they produced, and their purchasing power was strictly limited. Another possibility was that the capitalists in Department I and Department II could continually expand their consumption. Although this was mathematically possible, it ran counter to the empirical reality that capitalists reinvested or saved much of the surplus value they expropriated. Luxemburg argued that it also ignored “the profound and fundamental antagonism between the respective capacities for production and consumption of capitalist society—an antagonism that is precisely the consequence of the accumulation of capital, that periodically erupts in crisis, and that drives capital constantly to expand its markets.”39

Like Sismondi and Hobson before her, Luxemburg was zeroing in on the problem of overproduction and a shortfall of demand. But she addressed it from within the Marxian framework, and she argued that the only way for capitalism to survive and expand over the long term was for it to find an external source of demand. “The decisive fact,” she wrote, “is that the surplus value cannot be realised by sale either to workers or to capitalists, but only if it is sold to such social organisations or strata whose own mode of production is not capitalistic.” That was where imperialism came into the picture. By turning previously undeveloped areas into new markets and their inhabitants into new consumers, colonialism effectively acted as a Department III, which absorbed some of the additional output produced in the other two sectors and helped to keep them in balance. “Historically speaking, the accumulation of capital is a process of metabolism occurring between capitalist and precapitalist modes of production,” Luxemburg explained. “The accumulation of capital cannot proceed without these precapitalist modes of production, and yet accumulation consists in this regard precisely in the latter being gradually swallowed up and assimilated by capital.” She went on: “Accordingly, capital accumulation can no more exist without noncapitalist formations, than these are able to exist alongside it. It is only in the constant and progressive erosion of these noncapitalist formations that the very conditions of the existence of capital accumulation are given.”40 And again: “Accumulation is not merely an internal relation between the branches of the capitalist economy—it is above all a relation between capital and its non-capitalist milieu.”41

The Communist Manifesto had described how the desire for new markets “chases the bourgeoisie over the entire surface of the globe.”42 In Capital, however, Marx had largely confined his theoretical analysis to a closed economy. Luxemburg was arguing that this approach couldn’t explain the long-run dynamics of capitalism, including the lurch to imperialism.

Another distinctive feature of The Accumulation of Capital was the emphasis it placed on the damage that capitalism and imperialism did to Indigenous peoples and societies. In volume I of Capital, Marx had described the “extirpation, enslavement and entombment in mines” of the Indigenous peoples of the Americas, the “turning of Africa into a warren for the commercial hunting of blackskins,” and the great starvation in Bengal, where “the English manufactured a famine by buying up all the rice and refusing to sell it again, except at fabulous prices.” 43 Luxemburg acknowledged some of these passages, but she went on: “It should be noted, however, that all this is merely treated from the point of view of so-called ‘primitive accumulation.’ In Marx’s account, the processes specified here merely illustrate the genesis of capital, the moment that it comes into the world—they constitute the birth pangs as the capitalist mode of production emerges from the womb of feudal society.”44

Whether this was an accurate description of Marx’s views can be debated. What is beyond question is that Luxemburg insisted imperialism and the violent exploitation of Indigenous peoples were a permanent and necessary feature of capitalist development. This wasn’t just an issue of expanding the markets for goods, she argued. Echoing Hobson, she pointed out that colonies and underdeveloped countries generally also provided an invaluable outlet for surplus capital. Gaining access to raw materials and potential workers was also vital: “Capital cannot do without the means of production and labor-power of the entire planet—it requires the natural resources and labor-power of all territories for its movement of accumulation to proceed unimpeded. Since these are in actual fact overwhelmingly bound by the precapitalist forms of production … capital is characterized by a powerful drive to conquer these territories and societies.”45

Given the needs of capital, Luxemburg argued, the violent subjugation of native peoples was inevitable. Wherever Western colonialists went, they encountered an ancient “natural economy” with socialistic features, such as commonly owned property, powerful village associations, and communal agriculture. Because these institutions and customs represented a barrier to capitalist development, the colonialists were obliged to destroy them. “Each new colonial expansion is accompanied by capital’s relentless war on the social and economic interrelations of the indigenous inhabitants and by the violent looting of their means of production and their labor-power,” Luxemburg wrote. “Capital knows no other solution to the problem than violence, which has been a constant method of capital accumulation as a historical process, not merely during its emergence, but also to the present day.”46

In three chapters near the end of her book, Luxemburg described how this process had played out around the world. During the great westward expansion of the United States, the Indigenous people who stood in its path had been subjected to the “carnage of forty wars waged on them,” and the survivors were “swept away like bothersome detritus, like herds of buffalo, and penned like wild game into ‘reservations.’”47 Turning to China, she detailed how, during the Opium Wars, Britain and France had forced the weakened Qing dynasty to provide access to European drug traders, noting: “Each of the more than forty Chinese Treaty Ports was paid for with streams of blood, carnage, and destruction.”48

Where Marx had pointed to some incidental economic benefits of British rule in India, such as the import of scientific knowledge, Luxemburg described it as an unmitigated disaster for the Native population. “The

British were the first conquerors of India to show a gross indifference toward the works of civilization that formed its public utilities and economic infrastructure,” she wrote. “Arabs, Afghans and Mongols alike had initiated and maintained magnificent works of canalization, they had provided the country with a network of roads, built bridges across its rivers, and sunk wells.”49 For the British, by contrast, “it was not a question of ensuring the survival of the Indian community or supporting it economically, but rather of destroying it in order to seize its productive forces.”50 Luxemburg was equally critical of the French colonists in Algeria. Their “systematic and deliberate elimination and parcelization of communal property” had two goals, she insisted: to “shatter the power of the Arab clans as forms of social organization and thus to break their stubborn resistance to the French yoke”; and “to seize the land held by the Arabs for a millennium and to transfer it into the hands of French capitalists.”51

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After analyzing the causes and consequences of imperialism, Luxemburg argued that it was leading the industrial powers into confrontation, conflict, and ultimately, self-destruction. “As much as imperialism is a historical method to prolong the existence of capital, objectively it is at the same time the surest way to bring this existence to the swiftest conclusion,”52 she wrote. The more forcefully the system uses militarism “to assimilate the means of production and labor-power of non-capitalist countries and societies,” the more “the day-to-day history of capital accumulation on the world stage is transformed into a continuous series of political and social catastrophes and convulsions, which together with the periodic economic cataclysms in the form of crises, will make it impossible for capital accumulation to continue, and will turn the rebellion of the international working class against the rule of capital into a necessity, even before the latter has come up against its natural, self-created economic constraints.”53

In making this catastrophist argument, Luxemburg was again challenging the socialist revisionists. But given her other divergences from Marxist orthodoxy, this wasn’t sufficient to produce a positive reception for The Accumulation of Capital. In Vorwärts, Gustav Eckstein, an Austrian associate of Kautsky, said Luxemburg had misinterpreted Marx and presented contradictory arguments. In Die Neue Zeit, Otto Bauer, another Austrian theorist, made a similar argument. Lenin, who had been living in the Polish city of Kraków, which was then part of the Austro-Hungarian Empire, was also highly critical. He described Luxemburg’s argument that sustained accumulation and growth was impossible within a closed economy as “a fundamental error.”54 He was similarly unimpressed by her chapters on how imperialism impacted undeveloped societies. “The description of the torture of negroes in South Africa is noisy, colourful and meaningless,” he wrote. “Above all it is non-Marxist.”55

At the moment when Lenin read The Accumulation of Capital, he was having one of his periodic disputes with Luxemburg about revolutionary tactics. She believed that spontaneous mass action was the key to success; Lenin insisted that the workers needed a disciplined party to lead and guide them. This argument may well have colored his attitude to Luxemburg’s book. Still, the question of whether her theoretical arguments held together was to be an enduring one. In his 1942 monograph The Theory of Capitalist Development, Paul Sweezy, a Harvard-trained Marxist economist, argued that Luxemburg had made a basic error. In criticizing Marx’s reproduction schemes, she had assumed that as the economy expanded, the overall level of demand remained constant. In fact, Sweezy pointed out, when capitalists invest in more capital goods and add extra capacity to their factories, they typically hire more workers, who spend their incomes, and this raises the level of demand throughout the economy. Once this is recognized, he argued, Luxemburg’s entire theory “collapses like a house of cards.”56

But Luxemburg’s argument would also find some prominent defenders. In 1951 Joan Robinson, a former student of Keynes at Cambridge University and a major theoretician in her own right, composed a foreword to a new edition of The Accumulation of Capital. Robinson conceded that Luxemburg had gotten some theoretical details mixed up, but she insisted that errors were easily outweighed by her recognition that Western industrial capitalism needed an external outlet for the surplus capital and goods it produced. “Few would deny,” she wrote, “that the extension of capitalism into new territories was the mainspring of what an academic economist has called the ‘vast secular boom’ of the last two hundred years.”57 She conceded that Luxemburg had got some theoretical details mixed up, but she insisted that these errors were outweighed by the importance of the recognition that Western capitalism needed an external outlet for the surplus capital and goods it produced. “For all its confusions and exaggerations, this book shows more prescience than any orthodox contemporary could claim,” Robinson concluded.58

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Almost immediately after the publication of The Accumulation of Capital, Luxemburg started work on a rebuttal of her critics. The outbreak of World War I in July 1914 interrupted her work. On August 4, a week after the ruinous conflict between the Allies and Central Powers began, SPD deputies in the Reichstag voted unanimously to approve war credits—a boost in military spending authority—for the imperial government of Chancellor Theobald von Bethmann Hollweg. Luxemburg was devastated. Together with Clara Zetkin and Karl Liebknecht, an antiwar deputy who had reluctantly acceded to the SPD’s policy of voting unanimously in the Reichstag, she formed the International Group within the party to oppose further war financing. They worked feverishly to recruit more deputies to publicly oppose the war, but when a big military funding bill came up for a vote in December 1914, Liebknecht was the only SPD deputy to vote against it.

As the German political class lined up behind the war effort, the government cracked down on antiwar activists; Liebknecht was conscripted into the military. From February 1915 to February 1916 (and again from July 1916 to November 1918), Luxemburg was held in prison, where she continued to write. “After two weeks I got my books and permission to work—they didn’t have to tell me twice,” she wrote to a friend from Barnimstrasse, a women’s prison in Berlin.59 In a pamphlet entitled The Crisis of German Social Democracy, which she wrote in 1915 under the pseudonym Junius, a reference to a Republican hero of ancient Rome, Luxemburg lambasted the SPD’s leadership for supporting the war. She noted that the popular enthusiasm that greeted the war’s outbreak had already been replaced by fretful faces, “shrapnel, drills, ammunition bags, marriage bureaus for war widows.”60

Some antiwar activists blamed the elite Prussian Junker class or the perfidious British for leading Europe to disaster, but Luxemburg placed the responsibility squarely on capitalism and imperialism. “The events that bore the present war did not begin in July 1914 but reach back for decades,” she wrote. “Thread by thread they have been woven together on the loom of an inexorable natural development, until the firm net of imperialist world politics has encircled five continents.”61 The war represented the apotheosis of this process: “Here capitalism reveals its death’s-head, here it betrays that it has sacrificed its historic right of existence, that its rule is no longer compatible with the progress of humanity.”62 In such a disastrous conflict, Luxemburg insisted, there was nothing to be gained by a victory for either side: the only hope was for the workers of all the participant countries to come to their senses, reject the war, and overthrow the system that had produced it. “This madness will not stop,” she declared, “until the workers of Germany, of France, of Russia and of England will wake up out of their drunken sleep; will clasp each other’s hands in brotherhood and will drown the bestial chorus of war agitators and the hoarse cry of capitalist hyenas with the mighty cry of labor, ‘Proletarians of all countries unite!’”63

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The Junius Pamphlet, as it came to be known, was arguably Luxemburg’s most powerful piece of writing. With the Great War dragging on, she wasn’t the only leftist thinker who tried to make sense of the carnage. In Zurich, where he was living in exile with his wife, Nadezhda Krupskaya, Lenin was researching a book about the economics of imperialism. He read John Hobson’s 1902 volume on the subject and also studied the work of Rudolf Hilferding, an Austrian Marxist economist whose 1910 book Das Finanzkapital (Finance Capital) emphasized two distinguishing characteristics of modern capitalism: the melding of industrial and financial capital through the banking system, and the emergence of monopolies and cartels. Hilferding argued that this new monopolistic capitalism was even more exploitative than the old competitive version, but he also pointed out a potential upside for socialists who wanted to transcend the system: “Once finance capital has brought the most important branches of production under its control, it is enough for society, through its conscious executive organ—the state conquered by the working class—to seize finance capital in order to gain immediate control of these branches of production.”64

Hobson and Hilferding provided the intellectual foundations for Lenin’s treatment of imperialism. Despite having read and criticized Luxemburg’s The Accumulation of Capital, he didn’t refer to it. His intellectual foil was Kautsky, who in 1914 had enraged him by refusing to break with the SPD leadership. More recently, Kautsky had also contested the argument—subscribed to by Lenin, Luxemburg, and many other Marxists—that the war heralded the death throes of the imperialist order. Writing in Die Neue Zeit, the socialist journal he had founded thirty years earlier, Kautsky suggested that after the conflict ended, a new system of “ultra-imperialism” could emerge—one in which a “holy alliance of imperialists,” rather than fighting with each other, would peacefully divide up world markets, much as trusts and cartels divided up national markets.65 “The longer the War lasts, the more it exhausts all the participants and makes them recoil from an early repetition of armed conflict, the nearer we come to this last solution, however unlikely it may seem at the moment,” Kautsky concluded. To Lenin, this was heresy piled on top of betrayal.

Lenin wrote his tract in the spring of 1916. (It was published a year later in St. Petersburg.) Its basic thesis was contained in its title: Imperialism, the Highest Stage of Capitalism. Lenin started out by acknowledging his debts to the non-Marxist Hobson, whose book he described as “a very good and comprehensive description of the principal political and economic features of imperialism.”66 After also acknowledging the influence of Hilferding, he argued that this ultimate form of capitalism encompassed five basic elements:

1. The concentration of production and capital developed to such a high stage that it created monopolies that play a decisive role in economic life.

1. The merging of bank capital with industrial capital, and the creation, on the basis of this “finance capital,” of a financial oligarchy.

1. The export of capital, which becomes extremely important, as distinguished from the export of commodities.

1. The formation of international capitalist monopolies that share the world among themselves.

1. The territorial division of the whole world among the greatest capitalist powers is completed.67

As examples of monopolization, Lenin pointed to cartels in Germany and trusts in the United States. He singled out the Tobacco Trust; Rockefeller’s Standard Oil, which the US Supreme Court had ordered broken up several years earlier; and US Steel, which J. P. Morgan had assembled in 1901. These were all monopolies in the textbook sense of a single business that controls an entire market and dictates prices. But when Lenin used the term monopoly, he was also referring to what economists now call an “oligopoly”—a market dominated by a few huge firms. He cited the German chemical industry, on which BASF, Bayer, and Hoechst had a firm grip. In monopolistic markets, he wrote, an “approximate estimate of the capacity of markets is also made, and the combines divide them up amongst themselves by agreement.” Also, “skilled labor is monopolized, the best engineers are engaged; the means of transport are captured; railways in America, shipping companies in Europe and America. Capitalism in its imperialist stage arrives at the threshold of the most complete socialization of production.”68

As monopolization proceeded within capitalist countries, Lenin argued, competition intensified at the international level for natural resources and new markets: “The more feverishly the hunt for raw materials proceeds throughout the whole world, the more desperate becomes the struggle for the acquisition of colonies.”69 After citing Cecil Rhodes’s claim that empire was “a bread-and-butter question,” he mocked Kautsky’s suggestion that capitalist enterprises could obtain raw materials in the free market, remarking that such a thing was “becoming more and more a thing of the past: monopolist syndicates and trusts are restricting it with every single day.”70 Following Hobson (and Luxemburg), Lenin also identified colonies as a necessary outlet for surplus capital. In some leading countries, he noted, “capitalism has become ‘overripe’ and (owing to the backward state of agriculture and the poverty of the masses) capital cannot find a field for ‘profitable’ investment.”71

If Lenin’s description of imperialism followed Hobson pretty closely, his analysis of “finance capital” owed more to Hilferding, whom he cited extensively. In Germany, he pointed out, six big banks had representatives on the board of directors of 344 industrial companies and 407 other companies, which operated in industries ranging from insurance to transport to hospitality. As finance capital tightened its grip on the economy, it “exacts enormous and ever-increasing profits from the floating of companies, issue of stock, state loans, etc., tightens the grip of financial oligarchies and levies tribute upon the whole of society for the benefit of monopolists.”72 He also emphasized the growing importance of joint-stock companies, in which the ownership and management of capital were distinct, with professional managers running companies on behalf of their stockholders: “Imperialism, or the domination of finance capital, is that highest stage of capitalism in which this separation reaches vast proportions.”73

Turning to the political foundations of imperialism, Lenin challenged the consensus on the left that it was entirely an elite-driven phenomenon, with the working classes being passive observers or dupes for a jingoistic media. Underlying this analysis was an assumption that imperialism didn’t deliver anything of value to the masses. Lenin rejected this claim. Some members of the working class had shared the spoils of imperialist ventures, he insisted, and this explained their support for imperialist politicians. “The receipt of high monopoly profits by the capitalists,” he wrote, “… makes it economically possible for them to bribe certain sections of the workers, and for a time a fairly considerable minority of them, and win them to the side of the bourgeoisie of a given industry or given nation against all others.”74 He pointed to Britain as a country where this had been happening for decades. Ultimately, however, even the “opportunism” of parts of the labor movement couldn’t prevent the inevitable conflicts between rival national capitals. Kautsky’s vision of a peaceful “ultra-imperialism” was permeated with a spirit “absolutely irreconcilable with Marxism.”75 And “one will find nothing in it except reaction and bourgeois reformism.”76

In presenting his arguments about how capitalism had developed since Marx’s time, Lenin backed them up with statistics drawn from official reports and academic studies. With an eye for the tsarist censors, perhaps, he rationed his revolutionary rhetoric, saving most of his vitriol for Kautsky and other “opportunists” in the labor movement. Ironically, however, while some of Lenin’s economic analysis would stand the test of time, history would also confirm parts of Kautsky’s thesis. It would take another ruinous world war and the defeat of fascism to bring the major capitalist countries together. Eventually, though, they would conclude that international agreements that kept world markets open to their corporate exporters and investors were preferable to military warfare. From a leftist perspective, Kautsky’s “holy alliance of imperialists” would come to fruition.