Anton Pannekoek: The economic necessity of imperialism (1916)

I
[The importance of a theory of imperialism]

When it is said that the collapse of the socialist labor movement at the outbreak of the world war was primarily a result of a lack of understanding of imperialism, this seems to be a strong overestimation of the meaning of theoretical insight. But the entire history of the workers’ movement shows how closely theoretical insight and practical action are always connected. Of course the theory in the heads is not the primary force which drives the social movements; in the material conditions, the economic structure, the conjuncture, the class relations lies the force which, bubbling up from the unconscious depth of instinctive feeling, drives the masses to action. But a distinction must be made between class and party. The socialist party history is not this history of mass actions itself; it is the conscious part of it; the “party” tries to carry out as a conscious, concerted act of organization what, according to its insight, must be carried out by the class. It then fulfills its task in ideal perfection, when it is always at the forefront,, when it shows the way to the masses by its action, and when it does not allow itself to be confused there where they either resign themselves apathetically, or mistakenly believe in winning everything by a single rush, or when they go wrong ways. This would be possible if it were guided by perfectly clear insight. In reality, there is much missing here: the party is also subject to the same unconsciously working influences, and its narrower party interests can bring it in opposition to the great class interests. But in any case: for its actions it is clear that theoretical insight is one of the most important primary forces which determine practice.

The chain of causes and consequences in today’s catastrophe of the workers’ movement is indeed clear enough. Primordial in the mass mood was the disruptive effect of prosperity, which banned all action in the quiet riverbed of parliamentary and orderly professional struggles. This had its rebound on the party as an aversion to greater struggle, belief in continuous improvement and rapprochement with the bourgeoisie. The interest of the party as an organization brought along that it did not endeavor in a live-and-death mass struggle against the state power. In this environment there was now a lack of theoretical insight into imperialism. As a result, the leaders lacked all understanding that they were facing a heavy and inevitable struggle; foolish utopias were propagated as means against militarism; there was no preparation at all; and when the war came, it found the party unprepared to take vigorous action against it. Its powerlessness drove large masses to the side of the bourgeoisie, made its imperialist-minded faction (1) take the lead, and made the defeat a catastrophe and a destruction.

And now again we see the importance of the theory no less strongly. The former social democrats are fiercely opposed to each other; one incites the workers to irreconcilable new struggles against imperialism, the other urges them to cooperate with the bourgeoisie, the third tries to meet their emerging dissatisfaction by a superficial appearance of opposition. Each one tries to win over the masses, that is to say, first of all, only the leaders among the masses, by proving his right; this is only possible by theory. In the theoretical struggle about the meaning and essence of imperialism, the weapons are forged, which are to serve in the struggle of the various tendencies in the workers’ movement. A clear theoretical position is necessary in order to show the way for the practical struggle; theoretical discussion is necessary in order to see where the fundamental wrongness of the other positions lies.

However, the curious fact occurs that apparently the borderlines between the practical and the theoretical struggles do not coincide. On the one hand, we see Rosa Luxemburg, who agrees with the extreme social imperialists, whom she fights most fiercely and vigorously, in the theoretical view that imperialism is an economic necessity for capitalism; her former supporter Lensch has therefore become one of the most zealous defenders of war solidarity between the bourgeoisie and the proletariat, alongside the man-of-the-center Cunow. Her theoretical presentation was not only challenged by Otto Bauer, who is closest to Kautsky, but also by the author of this article, who was on her side in the practical fight against imperialism. Such a confusion in the theoretical-practical orientations of struggle proves, of course, that in every tendency there is still a lack of clarity about the theoretical foundations on which it must build its tactics.

II
[Rosa Luxemburg and Marx’s reproduction diagrams]

In her work “The accumulation of capital. A contribution to the economic explanation of imperialism” Rosa Luxemburg starts from the diagrams in which Marx simplified the reproduction process of capital. She had found that there was a mistake in it, a problem which had escaped Marx’s notice and the solution of which precisely provided an explanation for the tremendous expansionism of modern capitalism. In a discussion of this work in the “Bremer Bürgerzeitung” of 29-30 January 1913 we have shown extensively, and in the “Neue Zeit” of 28 February we briefly pointed out, that her calculations and reasoning are completely wrong. Shortly afterwards Otto Bauer pointed out the same in the “Neue Zeit” in a slightly different way. We will have to explain the main points here again, and we will not be able to avoid the use of the reproduction diagrams altogether. They do exert the same influence on the common reader as geometrical figures do on the non-mathematician: he takes it as too academic; and especially when pages of calculations are built up on these diagrams, there is no convincing effect of self-understanding, at the most a believing-on-authority. Anyone, however, who takes the trouble to study these diagrams in their simplest form, will see how the most important fundamental laws of capitalism are shown by them. So here we present the simplest diagrams by Marx.

The value of the product of a capitalist company (for instance over a year) can be divided into three parts; one part is the value of the raw materials and the wear and tear of machines, which is reappearing in the value of the product (Marx calls this constant capital, c); the remainder, the new value added by labor, can be divided into 1) the value that the workers themselves have used for a living and that the capitalist thus pays them as wages, (Marx calls this variable capital, v) and 2) what remains, the surplus value, from which the profit of the capitalist is formed. If the whole of society is capitalist, then both the raw materials and machines (as they wear out) as well as the food for the workers must be for sale as products of capitalist companies. If we assume that the surplus value is completely digested, then consumables are also bought from this. But then, should everything be right, there must also exist a certain proportion between all branches of industry.

If (on average in all companies) e.g. the wear and tear on machines is 1/6 of the value of the total product, the value of raw materials half of it, the value of wages and the surplus value each 1/6, then also half of the total production must be production of raw materials, the sixth part production of machines, the third part production of consumables. Then it is possible to buy everything that is needed, and every enterprise can sell its product.

Marx distinguishes two areas: the production of means of production (I) and the production of consumables (II). If the total product is 9,000, the value of raw materials and machines is 6,000, labor is 1,500 and surplus value is 1,500. It must then be possible to buy consumables for 3,000 and means of production for 6,000. So we have: (2)

in I:  4,000  m.o.pr. + 1,000 wgs. + 1,000 s.v. = 6,000 means of production.
in II: 2,000  m.o.pr. +    500 wgs. +    500 s.v. = 3,000 consumables.

The capitalists in I sell to each other for 4,000 means of production, and to the other group for the remaining 2,000, who need them.
The capitalists in II sell for 1,000 of their consumables to the workers in I, for 1,000 to the capitalists in I, for 500 to the workers in II, for 500 to each other. So, in this simple case, this must be the ratio, so that no one gets stuck with their goods unsold and everyone can get what he needs. The capitalist production then is a cycle, an endless repetition, a reproduction always on the same scale of the same process.

Of course this is such an abstractly simple case, that it does not occur in practice. For example, the ratio of the value of the means of production to the wage will not be the same in the two departments; but the figures can easily be changed in such a way that this will be taken into account. More important is the fact that the capitalists do not digest all their surplus value; a part of it is raised in order to expand their business or to invest in new enterprises. As a result, the size of capitalist production becomes ever greater; reproduction takes place on an ever broader basis, the cycle is constantly widening. What needs to be changed in the production diagrams? Marx’s dealings with this matter (3) is imperfect and confusing; but it is easy to see, that in any case the size of I in relation to II must be greater than in our first supposition.

If, in each production area, one knows the ratio of wages and surplus value to the value of the means of production, and one knows, which part of the surplus value each is accumulating, then it can be calculated from this, what the size of both areas should be. Assuming, for example, that in I the wage is 1/4 of the value of the means of production, in II it is half, that in both surplus value = wage, and that the capitalists in I accumulate half, in II 30% of their surplus value, then one finds that the masses of products in I and II should relate as 33 : 16. That this is the case, is shown in the following diagram.

In I:   4,400 m.o.pr. + 1,100 wgs. + 1,100 s.v. = 6,600 product.
In II:  1,600 m.o.pr. +    800 wgs. +    800 s.v. = 3,200 product.

Of the surplus value 1,100, 550 is digested and 550 accumulated, invested as capital, i.e. 440 is earmarked for means of production and 110 for labor; of the surplus value 800, 560 is digested and 240 accumulated, i.e. 160 is earmarked for the purchase of means of production and 80 for labor. Thus, 4,400 + 440 (in I) + 1600 + 160 (in II) = 6,600 means of production are needed, and 1,100 + 550 + 110 (in I) + 800 + 560 + 80 (in II) = 3,200 consumables: exactly as much as was produced. The next year production takes place on a 10% larger scale: all figures are 10% larger: society has consumed less than it produced.

In I:   4,840 m.o.pr. + 1,210 wgs. + 1,210 s.v. = 7,260 product.
In II:  1,760 m.o.pr. +    880 wgs. +    880 s.v. = 3,520 product.

This is the point that triggers Rosa Luxemburg’s critique. Probably confused by a miscalculation, she expresses her doubts, whether the will to accumulate is sufficient. “In order for accumulation to really take place, i.e. for production to be extended, a further condition is required: an extension of the solvable demand for commodities. Where does this continually increasing demand come from, which forms the basis of the progressive extension of production in Marx’s diagram?” (4) Where do the products go, whose value represents the accumulated, that is, the unconsumed part of the surplus value? Department I produces more means of production. Who needs them? The diagram answers: Department II, to produce more consumables. “Who however needs the additional consumables? Department I, of course – replies the diagram – because it now employs a greater number of workers. We are evidently running in circles. From the capitalist point of view it is absurd to produce more consumer goods merely in order to maintain more workers, and to turn out more means of production merely to keep this surplus of workers occupied.” In addition, this diagram does not take into account the increasing productivity of labor – Rosa Luxemburg gives a diagram of this kind, where this does not succeed and where on one side there is a deficit and on the other an excess – and all kinds of other factors are not taken into account. In short: the diagrams don’t balance and show that somewhere there must be a demand with sufficient purchasing power in order to make them balance.

That is to say: a capitalist society, producing on an ever-increasing scale, cannot exist on its own, alone in the world. The surplus value would not be realized, the capital therefore could not be accumulated, for lack of an ever-expanding demand for goods. Capitalist production on an expanding scale is unthinkable without a surrounding world in which it sells its products and which thus constitutes the demand necessary to balance the production diagrams. This is the deepest economic reason for the never-ending expansion of capital; the violent expansion of capitalism throughout the world, meaning the policy of imperialism, finds its economic necessity here. It is thus an absolute, as it were a mechanical necessity, a coercive law of capitalist reproduction, which compels the bourgeoisie to go the way of imperialism.

III
[Two mistakes by Luxemburg]

This is the rationale of Rosa Luxemburg’s work. It seeks to expose the economic foundations and the economic necessity of imperialism. But it is precisely in this main point – despite meritorious descriptions of details – that it fails. It gives two reasons, why a capitalist society cannot exist on its own. Of these, one rests on a calculation error and the other on a reasoning error. As to the first, it is not true that the diagrams do not balance; if one calculates well, it appears every time that such proportions can be chosen that it works out, including in more complicated cases. In order to demonstrate this, we have, at the time, worked out the case of a slow increase in the productivity of labor in our review in the “Bremer Bürgerzeitung”. (5)

Of course, in its infinite complexity, real capitalism never exactly corresponds to a computational diagram, however broadly designed this may be; in reality, here too much is produced, there too little, and all sorts of commodities remain unsold. But that is of little relevance here; the question is not whether practical coincidences sometimes prevent it from balancing, but whether it is theoretically-necessary impossible to balance. And in this, Rosa Luxemburg’s affirmative answer turns out to be incorrect.

The second reason why capitalism, in spite of balanced computational diagrams, would not be able to exist by itself, without outward sales, is contained in the quoted sentences from page 104 [see the foregoing]. To this, however, there is an answer: what the author calls an absurdity from the capitalist viewpoint – always producing more consumables in order to provide more workers with livelihood, who can then produce more and more means of production needed to produce the more consumables – only seems to be a purposeless movement circling around, because the driving force of that process is not mentioned. To produce more and more means [to add] more and more surplus value, to make and accumulate more and more profit; but that accumulated profit can only fulfill its purpose if it is constantly thrown back into the maelstrom of production. The goal of capital is profit, the goal of profit is new, bigger capital: that is the driving force in the seemingly aimless cycle. Call it absurdity; but that is the life, the essence of capitalism; it clearly shows once more that in capitalism production is not the goal but the means in the service of the higher goal, profit.

To the question: who are the buyers of the products in which the accumulated surplus value is contained? the diagram gives an immediate answer: all commodities listed as products after the = sign are listed somewhere before the = sign as necessary elements of production that must be bought. A capitalist society can exist without the need for buyers or markets outside this society. One simply buys everything from each other.

This applies to an ever-increasing production under accumulation as well as to a production that remains at the same size. Of course it is assumed that the material conditions for expanding production exist. The raw materials must be available in such unlimited quantities that no shortage can occur, for then further expansion would be impossible; and there must also be a sufficient reservoir of humans so that, as the number of workers continues to increase, no shortage will occur. It also goes without saying that a capitalist society, which already includes all people, cannot expand any further. Theoretically, this demands that capitalism expands into a much larger human world, from which it can take the required workers according to need, who previously had nothing to do with capitalism as producers for their own use. These are then included in the cycle, as producers and consumers at the same time. (6)

Reality differs from this simple picture in that capitalism is mixed with and surrounded by a large area of small production for the market. While the people producing for their own use mean nothing to capitalism but a reservoir for any workers needed, the small producers are in commodity trade with capitalism. They provide commodities to capitalism (mostly raw materials) and receive commodities (mostly consumables). Capitalism does not satisfy itself. This is not a theoretical, economic necessity, as Rosa Luxemburg thought she could deduce, but simply a practical fact based on the historical emergence and growth of capitalism. In the production diagrams rows must be added for the production and consumption of the small producers: together with them the total of production in each sphere of production must correspond to the total of consumption. If capitalism is constantly expanding (because relatively more means of production are produced and paid for with a part of the surplus value, which is thereby accumulated), then the small-scale production with which it interacts must also expand, which is partly compensated for by the fact that in all spheres of production capitalist production replaces small-scale production as technically more perfect. That is why the expansion of markets must be worked on constantly; that is why the expansion of markets is such an important basic element in the development.

This expansion of capitalism is not a new phenomenon; the elements of its growth: more raw materials, more workers, more sales among small producers, demanded ceaseless expansion. Capitalism was always expansion, both internally and outwards . Internally by the replacement of own production and small-scale production by industry, by the penetration of capital into agriculture, by concentrating human masses in industrial centers; outwards by world traffic, which supplies and transports raw materials, by the colonization or subjugation of the productive areas in other parts of the world, by the penetration of capital into the production of tropical or mineral raw materials, by the opening up of the large reservoir of colored races of men. All this is therefore also part of modern imperialism. But it is still not imperialism itself.

[For the remainder of the article (sections IV – VI) click the next page number below)]

Notes:

1 [Verbatim: “its imperialist-minded part”.]

2 [Legend: m.o.pr. = means of production; wgs. = wages; s.v. = surplus value.]

3 Karl Marx, Das Kapital, Vol. II, p. 487. (A.P.)

4 Rosa Luxemburg, Die Akkumulation des Kapitals, p. 104 (A.P.) 

6 Bauer, in his critique of Rosa Luxemburg’s work, takes the natural growth of the population as the basis of the expansion of production. In doing so, he unnecessarily and artificially restricts the issue; practically, the expansion of capitalism takes place much faster than the growth of the population. (A.P.)

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