I.2. The Adaptation of Capitalism

The most important means that, according to Bernstein, bring about the adaptation of the capitalist economy are the credit system, improved means of communication and employers’ organisations.

To begin with credit: it has manifold functions in the capitalist economy, but its most important, as is well known, consists in enlarging the capacity of production to expand, and in mediating and easing exchange. Where the inner tendency of capitalist production towards unlimited expansion comes up against the barriers of private property, the limited size of private capital, credit appears as the means of overcoming these barriers in a capitalist way: of fusing many private capitals into one (joint-stock companies), and of granting one capitalist the disposal of other people’s capital (industrial credit). On the other hand, as commercial credit it speeds up the exchange of commodities, and so the return of capital to production, and so the whole cycle of the production process. The effect these two most important functions of credit have on the formation of crises is easy to see. If crises arise, as is known, from the contradiction between the capacity and tendency of production to expand and the limited capacity of consumption, then credit, from what has been said, is precisely the specific means of bringing this contradiction to an outbreak as often as possible. Above all it raises the capacity of production to expand enormously, and forms the inner driving force that constantly pushes it beyond the limits of the market. But it strikes in two directions. Once it has helped, as a factor of the production process, to call up overproduction, then during the crisis, in its capacity as the mediator of the exchange of commodities, it knocks down all the more thoroughly the productive forces it has itself called into being. At the first signs of stagnation credit shrinks, abandons exchange just where it would be necessary, proves ineffective and pointless where it is still on offer, and so during the crisis reduces the capacity of consumption to a minimum.

Besides these two most important results, credit acts on the formation of crises in many other ways. It offers not only the technical means of putting other people’s capital at a capitalist’s disposal, but at the same time spurs him to a bold and reckless use of other people’s property, that is, to risky speculation. As a treacherous means of the exchange of commodities it not only sharpens the crisis but eases its onset and its spread, by turning the whole of exchange into an extremely complex and artificial machinery with a minimum of metallic money as its real basis, so that the slightest occasion brings about its disruption.

So credit, far from being a means of removing crises or even of alleviating them, is on the contrary a particular and powerful factor in their formation. Nor could it be otherwise. The specific function of credit (to put it quite generally) is nothing other than to banish the last remnant of stability from all capitalist relations and to introduce everywhere the greatest possible elasticity, to make all capitalist forces extensible, relative and sensitive to the highest degree. That crises, which are nothing other than the periodic collision of the contradictory forces of the capitalist economy, can only be facilitated and sharpened in this way is obvious.

But this at the same time leads us to the other question: how credit can appear at all as a “means of adaptation” of capitalism. In whatever relation and in whatever form the “adaptation” by means of credit is conceived, its essence can evidently consist only in some antagonistic relation of the capitalist economy being equalised, some one of its contradictions abolished or blunted, and so free play being given at some point to forces that are hemmed in. Yet if there is one means in the present capitalist economy of raising all its contradictions to the highest pitch, it is precisely credit. It intensifies the contradiction between the mode of production and the mode of exchange by straining production to the utmost while paralysing exchange at the slightest occasion. It intensifies the contradiction between the mode of production and the mode of appropriation by separating production from ownership, by turning the capital in production into social capital, but a part of the profit into the form of interest on capital, that is, into a pure title of ownership. It intensifies the contradiction between relations of property and relations of production by uniting enormous productive forces in a few hands through the expropriation of many small capitalists. It intensifies the contradiction between the social character of production and capitalist private property by making the intervention of the state in production necessary (the joint-stock company).

In a word, credit reproduces all the cardinal contradictions of the capitalist world, drives them to extremes, and hastens the course by which that world rushes towards its own destruction: towards collapse. The first means of adaptation for capitalism with regard to credit would therefore have to consist in abolishing credit, in undoing it. As it is, it is not a means of adaptation but a means of destruction, with a most revolutionary effect. Indeed, it is precisely this revolutionary character of credit, pointing beyond capitalism itself, that has even led to reform plans with a tinge of socialism, and that has made great representatives of credit, such as Isaac Péreire in France, appear, as Marx says, half prophets, half scoundrels.

On closer examination the second “means of adaptation” of capitalist production, employers’ associations, proves just as untenable. According to Bernstein they are to check anarchy and prevent crises by regulating production. The development of cartels and trusts is, to be sure, a phenomenon whose many-sided economic effects have not yet been studied. It is still a problem, one that can be solved only with the help of Marx’s theory. But this much at any rate is clear: there could be talk of capitalist anarchy being curbed by employers’ cartels only to the extent that cartels, trusts and the like were to become, approximately, a general, dominant form of production. But precisely this is ruled out by the nature of cartels themselves. The final economic aim and effect of employers’ associations consists in influencing, by excluding competition within a branch, the distribution of the mass of profit realised on the commodity market so as to increase the share of this branch of industry in it. Organisation can raise the rate of profit in one branch of industry only at the expense of the others, and for that very reason it cannot possibly become general. Extended to all the more important branches of production, it cancels its own effect.

But even within the limits of their practical application, employers’ associations act in exactly the opposite direction to the removal of industrial anarchy. Cartels as a rule obtain the increase in the rate of profit just mentioned on the home market by having the surplus portions of capital, which they cannot use for home needs, produce for abroad at a much lower rate of profit; that is, they sell their goods abroad much more cheaply than at home. The result is sharpened competition abroad and increased anarchy on the world market: exactly the reverse of what is intended. The history of the international sugar industry offers an example of this.

Finally, taken as a whole, as a form in which the capitalist mode of production appears, employers’ associations may well be regarded only as a transitional stage, a particular phase of capitalist development. Indeed! Looked at in the last resort, cartels are really a means by which the capitalist mode of production holds back the fatal fall of the rate of profit in particular branches of production. But what method do the cartels use for this purpose? At bottom it is nothing other than leaving part of the accumulated capital idle, that is, the same method that is applied in another form in crises. Such a remedy, however, resembles the disease as one egg resembles another, and can count as the lesser evil only up to a certain point. When the market begins to contract, because the world market has been developed to the utmost and exhausted by the competing capitalist countries (and it evidently cannot be denied that such a moment will come sooner or later), then the forced partial idling of capital also takes on such dimensions that the medicine itself turns into disease, and capital, already strongly socialised through organisation, changes back into private capital. With the diminished ability to find a little place for itself on the market, every private portion of capital prefers to try its luck on its own account. The organisations must then burst like soap bubbles and make way once again for free competition, in heightened form.

On the whole, then, cartels too, like credit, appear as particular phases of development which in the last resort only increase the anarchy of the capitalist world further and bring all its inner contradictions to expression and to maturity. They sharpen the contradiction between the mode of production and the mode of exchange by driving the struggle between producers and consumers to extremes, as we see especially in the United States of America. They further sharpen the contradiction between the mode of production and the mode of appropriation by confronting the workers with the superior power of organised capital in its most brutal form, and so raising the antagonism between capital and labour to the utmost.

Finally, they sharpen the contradiction between the international character of the capitalist world economy and the national character of the capitalist state, since they are accompanied by a general tariff war and so drive the antagonisms between the individual capitalist states to extremes. To this must be added the direct and most revolutionary effect of the cartels on the concentration of production, technical improvement and so on.

Thus in their final effect on the capitalist economy, cartels and trusts appear not only as no “means of adaptation” that blurs its contradictions, but positively as one of the means it has itself created to increase its own anarchy, to fight out the contradictions it contains, and to hasten its own downfall.

But if the credit system, cartels and the like do not remove the anarchy of the capitalist economy, how is it that for two decades, since 1873, we had no general commercial crisis? Is this not a sign that the capitalist mode of production has, at least in the main, actually “adapted” itself to the needs of society, and that Marx’s analysis has been superseded?

The answer followed hard on the heels of the question. Scarcely had Bernstein thrown Marx’s theory of crises on the scrap heap in 1898 when, in 1900, a violent general crisis broke out, and seven years later, in 1907, a renewed crisis came sweeping over the world market from the United States. So the theory of the “adaptation” of capitalism was struck down by the loud-spoken facts themselves. At the same time this proved that those who gave up Marx’s theory of crises merely because it had failed on two supposed “due dates” had confused the core of this theory with an inessential external detail of its form: with the ten-year cycle. The formulation of the cycle of modern capitalist industry as a ten-year period was, however, for Marx and Engels in the 1860s and 1870s a simple statement of the facts, and these facts for their part did not rest on any laws of nature but on a series of definite historical circumstances connected with the leap-like expansion of the sphere of activity of young capitalism.

In fact, the crisis of 1825 was a result of the great investments in road-building, canals and gasworks that had been made in the preceding decade, chiefly in England, where the crisis itself also broke out. The following crisis of 1836–39 was likewise a result of colossal company promotions in the building of new means of transport. The crisis of 1847, as is well known, was brought on by the feverish promotion of English railways (from 1844 to 1847, that is, in three years alone, Parliament granted concessions for new railways worth some 1½ milliard thalers!). In all three cases, then, it was different forms of the reconstitution of the economy of capital, of the laying of new foundations under capitalist development, that brought crises in their train. In 1857 it was the sudden opening of new markets for European industry in America and Australia as a result of the discovery of the gold mines, and in France in particular the founding of railways, in which France followed in England’s footsteps (from 1852 to 1856 new railways worth 1¼ milliard francs were founded in France). Finally, the great crisis of 1873 was, as is well known, a direct consequence of the reconstitution, the first onrush of large-scale industry in Germany and Austria, which followed the political events of 1866 and 1871.

So it was each time the sudden extension of the domain of the capitalist economy that has until now given rise to commercial crises. That those international crises repeated themselves precisely every ten years is in itself a purely external, accidental phenomenon. The Marxian scheme of the formation of crises, as Engels gave it in Anti-Dühring and Marx in the first and third volumes of Capital, applies to all crises in so far as it uncovers their inner mechanism and their deep-lying general causes, whether these crises repeat themselves every ten years, every five, or alternately every twenty and every eight. But what most strikingly convicts Bernstein’s theory of its inadequacy is the fact that the latest crisis, in 1907/08, raged most violently in precisely the country where the famous capitalist “means of adaptation” (credit, the news service and the trusts) are most highly developed.

In general, the assumption that capitalist production could “adapt” itself to exchange presupposes one of two things: either that the world market grows without limit and to infinity, or, conversely, that the productive forces are checked in their growth so that they do not rush beyond the limits of the market. The first is a physical impossibility; the second is contradicted by the fact that at every step technical revolutions are taking place in all fields of production and calling new productive forces into being every day.

According to Bernstein, there is one more phenomenon that contradicts the course of capitalist affairs described above: the “almost unshakeable phalanx” of medium-sized enterprises, to which he draws our attention. He sees in it a sign that the development of large-scale industry does not have the revolutionising and concentrating effect that should have been expected according to the “theory of collapse”. But here too he becomes the victim of his own misunderstanding. It would in fact mean understanding the development of large-scale industry quite wrongly to expect that medium-sized enterprises would gradually disappear from the surface in the process.

In the general course of capitalist development, precisely on Marx’s assumptions, small capitals play the role of pioneers of the technical revolution, and in two respects: with regard to new methods of production in old, established, firmly rooted branches, and with regard to the creation of new branches of production not yet exploited at all by big capitals. The idea that the history of the capitalist medium-sized enterprise runs in a straight line downwards to gradual extinction is completely false. The actual course of development is here too purely dialectical and moves constantly between opposites. The capitalist middle class, just like the working class, is under the influence of two opposing tendencies, one raising it and one pushing it down. The depressing tendency is in this case the constant rise in the scale of production, which periodically outgrows the size of medium capitals and so throws them out of the competition again and again. The raising tendency is the periodic depreciation of existing capital, which again and again lowers the scale of production for a time (in terms of the value of the minimum capital required), as well as the penetration of capitalist production into new spheres. The struggle of the medium enterprise against big capital is not to be thought of as a regular battle in which the troops of the weaker side melt away directly and quantitatively more and more, but rather as a periodic mowing down of small capitals, which then rapidly spring up again, only to be mown down once more by the scythe of large-scale industry. Of the two tendencies that play ball with the capitalist middle class, it is in the last resort the depressing tendency that wins, in contrast to the development of the working class. But this need not show itself at all in an absolute numerical decrease of medium enterprises; it shows itself, first, in the gradually rising minimum of capital needed for a viable enterprise in the old branches, and secondly in the ever shorter span of time during which small capitals enjoy the exploitation of new branches on their own account. From this follows for the individual small capital an ever shorter lifespan and an ever more rapid change of methods of production and kinds of investment, and for the class as a whole an ever more rapid social metabolism.

Bernstein knows the latter very well, and he states it himself. But what he seems to forget is that this gives the very law of motion of capitalist medium-sized enterprises. If small capitals are the vanguard of technical progress, and if technical progress is the pulse of life of the capitalist economy, then small capitals are evidently an inseparable accompaniment of capitalist development, which can disappear only together with it. The gradual disappearance of medium-sized enterprises, in the sense of the absolute summary statistics with which Bernstein is concerned, would mean not, as Bernstein thinks, the revolutionary course of development of capitalism, but just the opposite: its stagnation, its falling asleep. “The rate of profit, that is, the relative increment of capital, is above all important for all new offshoots of capital seeking to group themselves independently. And as soon as the formation of capital were to fall exclusively into the hands of a few established great capitals . . . the vital fire of production would be altogether extinguished. It would fall into a dormant state.”