Socialism - A Summary and Interpretation of Socialist Principles
by John Spargo
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The immediate effect of the revolutionary judicial decision in England was to arouse the workers to the necessity for class-conscious political action. The cry went up that the unions must adopt a policy of independent political action. There is no doubt whatever that the tremendous advance of the Socialist movement in England during the past few years began as a result of the attack made upon the funds of the labor unions. From the moment of the Taff Vale decision the Socialist movement in England took rapid strides. A similar process is going on in this country, gathering momentum with every injunction against organized labor, every hostile enactment of legislatures, and every use of the judicial and executive powers to defeat the workers in their struggle against capitalism. The workers are being educated to political Socialism by the stern experiences resulting from capitalist rule. Underneath the thin veneer of party differences, the worker sees the class identity of the great political parties, and cries out, "A plague on both your houses!" The Socialist argument comes to him with a twofold force: not only does it show him how he is enslaved and exploited as a producer, but it convinces him that as a citizen he has it in his power to control the government and make it what he will. He can put an end to government by injunctions, to the use of police, state, and federal troops to break strikes, and to the sequestration of union funds by hostile judges. He can, if he so decides, own and control the government, and, through the government, own and control the essentials of life: be master of his own labor, his own bread, his own life.

If we take for granted that the universal increase of Socialist sentiment, and the growth of political Socialism, as measured by its rapidly increasing vote, presage this great triumph of the working class; that the heretofore despised and oppressed proletariat is, in a not far distant future, to rule instead of being ruled, the question arises, will the last state be better than the first? Will society be bettered by the change of masters?

The very form of the question must be denied. It is not a movement for a change of masters. To regard this struggle of the classes as one of revenge, of exploited masses ready to overturn the social structure that they may become exploiters instead of exploited, is to misread the whole movement. The political and economic conquest of society by the working class means the end of class divisions once and forever. A social democracy, a society in which all things essential to the common life and well-being are owned and controlled by the people in common, democratically organized, precludes the existence of class divisions in our present-day economic and political sense. Profit, through human exploitation, alone has made class divisions possible, and the Socialist regime will abolish profit. The working class, in emancipating itself, at the same time makes liberty possible for the whole race of man, and destroys the conditions of class rule.


[116] The Communist Manifesto, Kerr edition, page 8.

[117] In Centralization and the Law: Scientific Legal Education, An Illustration, edited by Melville M. Bigelow.

[118] See, for instance, The Coal Mine Workers, by Frank Julian Warne, Ph.D. (1905).

[119] Adam Smith, The Wealth of Nations, Vol. I, Book I, Chapter VIII.

[120] The Common Sense of Socialism, by John Spargo, page 131 (1908).

[121] See, for instance, The American Farmer, by A. M. Simons, page 130; Agrarfrage, by Karl Kautsky, pages 305-306.

[122] Mr. Ghent's excellent work, Mass and Class, and Karl Kautsky's Ethics and the Materialistic Conception of History, may be named as excellent examples of what Socialists have done in this direction.

[123] In The Worker (New York), March 25, 1905.

[124] Cf., for instance, The Labor History of the Cripple Creek District, by Benjamin McKie Rastall (1908), and Senate Document No. 122, being A Report on Labor Disturbances in the State of Colorado, from 1880 to 1904, Inclusive, by Carroll D. Wright (1905), for evidence of this from sources not specially friendly to the miners.

[125] Mass and Class, page 101.

[126] Message to Congress, January, 1906.

[127] Mass and Class, page 53.

[128] Vide War of the Classes, by Jack London, page 17.

[129] Organized Labor, by John Mitchell, page ix.

[130] The remainder of this chapter is largely reproduced from my little pamphlet, Shall the Unions go into Politics?

[131] This aspect of the exploitation of the laborers has been brought to the front very dramatically by the many recent "strikes" against high rents and high prices for meat and other commodities. Rent strikes and riots against high prices have become common events in our large cities.

[132] Organized Labor, by John Mitchell, page 324.

[133] See Report of Commission of Investigation, Senate Ex. Doc. No. 7, Fifty-third Congress, third session.

[134] Particulars are taken from a pamphlet by five members of the New York Bar and issued by the Social Reform Club, New York, in 1900.

[135] See the article by Judge Seabury, The Abuses of Injunctions, in The Arena, June, 1903.

[136] See the New York daily papers, January 31, 1906.




The first approach to a comprehensive treatment by Marx of the materialistic conception of history appeared in 1847, several months before the publication of the Communist Manifesto, in "La Misere de la Philosophie,"[137] the famous polemic with which Marx assailed J. P. Proudhon's La Philosophie de la Misere. Marx had worked out his theory at least two years before, so Engels tells us, and in his writings of that period there are several evidences of the fact. In "La Misere de la Philosophie," the theory is fundamental to the work, and not merely the subject of incidental allusion. This little book, all too little known in England and America, is therefore important from this historical point of view. In it, Marx for the first time shows his complete confidence in the theory. It needed confidence little short of sublime to challenge Proudhon in the audacious manner of this scintillating critique. The torrential eloquence, the scornful satire, and fierce invective of the attack, have rather tended to obscure for readers of a later generation the real merit of the book, the importance of the fundamental idea that history must be interpreted in the light of economic development, that economic evolution determines social life. The book is important for two other reasons. First, it was the author's first serious essay in economic science—in the preface he boldly and frankly calls himself an economist—and, second, in it appears a full and generous recognition of that brilliant coterie of English Socialist writers of the Ricardian school from whom Marx has been unjustly, and almost spitefully, charged with "pillaging" his principal ideas.

What led Marx to launch out upon the troubled sea of economic science, when all his predilections were for the study of pure philosophy, was the fact that his philosophical studies had led him to a point whence further progress seemed impossible, except by way of economics. The Introduction to "A Contribution to the Critique of Political Economy" makes this perfectly clear. Having decided that "the method of production in material existence conditions social, political, and mental evolution in general," a study of economics, and especially an analysis of modern industrial society, became inevitable. During the year 1845, when the theory of the economic interpretation of history was absorbing his attention, Marx spent six weeks in England with his friend Engels, and became acquainted with the work of the Ricardian Socialists already referred to.[138] Engels had been living in England about three years at this time, and had made an exhaustive investigation of industrial conditions there, and become intimately acquainted with the leaders of the Chartist movement. His fine library contained most of the works of contemporary writers, and it was thus that Marx came to know them.

Foremost of this school of Socialists which had arisen, quite naturally, in the land where capitalism flourished at its best, were William Godwin, Charles Hall, William Thompson, John Gray, Thomas Hodgskin, and John Francis Bray. With the exception of Hall, of whose privately printed book, "The Effects of Civilisation on the People of the European States," 1805, he seems not to have known, Marx was familiar with the writings of all the foregoing, and his obligations to some of them, especially Thompson, Hodgskin, and Bray, were not slight. While the charge, made by Dr. Anton Menger,[139] among others, that Marx took his surplus value theory from Thompson is quite absurd, and rests, as Bernstein has pointed out, upon nothing but the fact that Thompson used the words "surplus value" frequently, but not at all in the same sense as that in which Marx uses them,[140] we need not attempt to dispute the fact that Marx gleaned much of value from Thompson and the two other writers. While criticising them, and pointing out their shortcomings, Marx himself frequently pays tributes of respect to each of them. His indebtedness to any of them, or to all of them, consists simply in the fact that he recognized the germinal truths in their writings, and saw far beyond what they saw.

Godwin's most important work, "An Inquiry Concerning Political Justice," appeared in 1793, and contains the germ of much that is called Marxian Socialism. In it may be found the broad lines of the thought which marks much of our present-day Socialist teaching, especially the criticism of capitalist society. Marx, however, does not appear to have been directly influenced by it to any extent. That he was influenced by it indirectly, through William Thompson, Godwin's most illustrious disciple, is, however, quite certain. Thompson wrote several works of a Socialist character, of which "An Inquiry into the Principles of the Distribution of Wealth most Conducive to Human Happiness, Applied to the newly proposed System of Voluntary Equality of Wealth," 1824, and "Labour Rewarded. The Claims of Labour and Capital Conciliated, or How to Secure to Labour the Whole Products of its Exertions," 1827, are the most important and best known. Thompson must be regarded as one of the greatest precursors of Marx in the development of modern Socialist theory. A Ricardian of the Ricardians, he states the law of wages in language that is almost as emphatic as Lassalle's famous Ehernes Lohngesetz, which Marx made the butt of his satire.[141] Accepting the view of Ricardo,—and indeed, of Adam Smith and other earlier English economists, including Petty,—that labor is the sole source of exchange value,[142] he shows by cogent argument the exploitation of the laborer, and uses the term "surplus value" to designate the difference between the cost of maintaining the laborer and the value of his labor product, assisted, of course, by machinery and other capital, which goes to the capitalist. By a most labored argument, Professor Anton Menger has attempted to create the impression that Marx took, without acknowledgment, his theory of the manner in which surplus value is produced from Thompson, simply because Thompson frequently used the term itself.[143] Marx never claimed to have originated the term. It is to be found in the writings of earlier economists than Thompson even, and Marx quotes an anonymous pamphlet entitled The Source and Remedy of the National Difficulties. A Letter to Lord John Russell, published in London in 1821, in which the phrase "the quantity of the surplus value appropriated by the capitalist" appears.[144] Nor did Marx claim to be the first to distinguish surplus value. That had been done very clearly by many others, including Adam Smith.[145] What is original in Marx is the explanation of the manner in which surplus value is produced.

John Gray's "A Lecture on Human Happiness," published in 1825, has been described by Professor Foxwell as being "certainly one of the most remarkable of Socialist writings,"[146] and the summary of the rare little work which he gives amply justifies the description. Gray published other works of note, two of which, "The Social System, a Treatise on the Principle of Exchange," 1831, and "Lectures on the Nature and Use of Money," 1848, Marx subjects to a rigorous criticism in "A Contribution to the Critique of Political Economy." Thomas Hodgskin's best-known works are "Labour Defended against the Claims of Capital," 1825, and "The Natural and Artificial Right of Property Contrasted," 1832. The former, which Marx calls "an admirable work," is only a small tract of thirty-four pages, but its influence in England and America was very great. Hodgskin was a man of great culture and erudition, with a genius for popular writing upon difficult topics. It is interesting to know that in a letter to his friend, Francis Place, he sketched a book which he proposed writing, "curiously like Marx's 'Capital,'" according to Place's biographer, Mr. Wallas,[147] and from which the conservative old reformer dissuaded him. John Francis Bray was a journeyman printer about whom very little is known. His "Labour's Wrongs and Labour's Remedy," published in Leeds in 1839, Marx calls "a remarkable work," and in his attack upon Proudhon he quotes from it extensively to show that Bray had anticipated the French writer's theories.[148]

The justification for this lengthy digression from the main theme of the present chapter lies in the fact that so many critics have sought to fasten the charge of dishonesty upon Marx, and claimed that the ideas with which his name is associated were taken by him, without acknowledgment, from these English Ricardians. As a matter of fact, no economist of note ever quoted his authorities, or acknowledged his indebtedness to others, more generously than did Marx, and it is exceedingly doubtful whether even the names of the precursors whose ideas he is accused of stealing would be known to his critics but for his frank recognition of them. No candid reader of Marx can fail to notice that he is most careful to show how nearly these writers approached the truth as he conceived it.


When the February revolution of 1848 broke out, Marx was in Brussels. The authorities there compelling him to leave Belgian soil, at the request of the Prussian government, he returned to Paris, but not for a long stay. The revolutionary struggle in Germany stirred his blood, and with Engels, Wilhelm Wolf, the intimate friend to whom he later dedicated the first volume of "Capital," and Ferdinand Freiligrath, the fiery poet of the movement, Marx started the New Rhenish Gazette. Unlike the first Rhenish Gazette, the new journal was absolutely free from control by business policy. Twice Marx was summoned to appear at the Cologne assizes, upon charges of inciting the people to rebellion, and each time he defended himself with superb audacity and skill, and was acquitted. But in June, 1849, the authorities suppressed the paper, because of the support it gave to the risings in Dresden and the Rhine Province. Marx was expelled from Prussia and once more sought a refuge in Paris, which he was allowed to enjoy only for a very brief time. Forbidden by the French government to stay in Paris, or any other part of France except Brittany, which, says Liebknecht, was considered "fireproof," Marx turned to London, the mecca of all political exiles, arriving there toward the end of June, 1849.

His removal to London was one of the crucial events in the life of Marx. It became possible for him, in the classic land of capitalism, to pursue his economic studies in a way that was not possible anywhere else in the world. As Liebknecht says: "Here in London, the metropolis (mother city) and the center of the world, and of the world of trade—the watch tower of the world whence the trade of the world and the political and economical bustle of the world may be observed, in a way impossible in any other part of the globe—here Marx found what he sought and needed, the bricks and mortar for his work. 'Capital' could be created in London only."[149]

Already much more familiar with English political economy than most English writers of his time, and with the fine library of the British Museum at his command, Marx felt that the time had at last arrived when he could devote himself to his long-cherished plan of writing a great treatise upon political economy as a secure basis for the theoretical structure of Socialism. With this object in view, he resumed his economic studies in 1850, soon after his arrival in London. The work proceeded slowly, however, principally owing to the long and bitter struggle with poverty which encompassed Marx and his gentle wife. For years they suffered all the miseries of acute poverty, and even afterward, when the worst was past, the principal source of income, at times almost the only source in fact, was the five dollars a week received from the New York Tribune, for which Marx acted as special correspondent, and to which he contributed some of his finest work.[150] There are few pictures more pathetic, albeit also heroic, than that which we have of the great thinker and his devoted wife struggling against poverty during the first few years of their stay in London. Often the little family suffered the pangs of hunger, and Marx and a group of fellow-exiles used to resort to the reading room of the British Museum, weak from lack of food very often, but grateful for the warmth and shelter of that hospitable spot. The family lived some time in two small rooms in a cheap lodging house on Dean Street, the front room serving as reception room and study, and the back room serving for everything else. In a diary note, Mrs. Marx has herself left us an impressive picture of the suffering of those early years in London. Early in 1852, death entered the home for the first time, taking away a little daughter. Only a few weeks later another little daughter died, and Mrs. Marx wrote concerning this event:—

"On Easter of the same year—1852—our poor little Francisca died of severe bronchitis. Three days the poor child was struggling with death. It suffered so much. Its little lifeless body rested in the small back room; we all moved together into the front room, and when night approached, we made our beds on the floor. There the three living children were lying at our side, and we cried about the little angel, who rested cold and lifeless near us. The death of the dear child fell into the time of the most bitter poverty ... (the money for the burial of the child was missing). In the anguish of my heart I went to a French refugee who lived near, and who had sometimes visited us. I told him our sore need. At once with the friendliest kindness he gave me two pounds. With that we paid for the little coffin in which the poor child now sleeps peacefully. I had no cradle for her when she was born, and even the last small resting place was long denied her. What did we suffer when it was carried away to its last place of rest!"[151]

The poverty, of which we have here such a graphic view, lasted for several years beyond the publication of the "Critique," on to the appearance of the first volume of "Capital." When this struggle is remembered and understood, it becomes easier to appreciate the life work of the great Socialist thinker. "It was a terrible time, but it was grand nevertheless," wrote Liebknecht years afterward to Eleanor Marx. As this is the last place in which the personality of Marx, or his personal affairs, will be discussed in this volume, and in view of constant misrepresentations on the part of unscrupulous opponents of Socialism, a further word concerning his family life may not be out of place. Those persons who regard Socialism as being antagonistic to the family relation, and fear it in consequence, will find no suggestion of support for that view in either the life of Marx or his teaching. The love of Marx and his wife for each other was beautiful and idyllic. A true account of their love and devotion would rank with the most beautiful love stories in literature. Their friends understood that, too, and there is a world of significance in the one brief sentence spoken by Engels, when told of the death of his friend's beautiful wife, who was likewise his own dear friend: "Mohr [Negro, a nickname given to Marx by his friends when young, on account of his mass of black hair and whiskers] is dead too," he said simply. He knew that from this blow Marx could not recover. It was indeed true. Though he lingered on for about three months after her death, the life of Marx really ended when the playmate of his boyhood, and the lover and companion of all the years of struggle, died with the name of her dear "Karl" upon her lips.

Marx was an ideal father as well as an ideal husband. Always passionately fond of children, he could not resist the temptation to join the games of children upon the streets, and in the neighborhoods where he lived the children soon learned to regard him as their friend. To his own children he was a real companion, always ready to amuse and to be amused by them.


The studious years spent in the reading room of the British Museum complete the anglicization of Marx. "Capital" is essentially an English work, the fact of its having been written in German, by a German writer, being merely incidental. No more distinctively English treatise on political economy was ever written, not even "The Wealth of Nations." Even the method and style of the book are, contrary to general opinion, much more distinctly English than German. I do not forget his Hegelian dialectic with its un-English subtleties, but against that must be placed the directness, vigor, and pointedness of style, and the cogent reasoning, with its wealth of concrete illustrations, which are as characteristically English. Marx belongs to the school of Petty, Smith, and Ricardo, and their work is the background of his. "Capital" was the child of English industrial conditions and English thought, born by chance upon German soil.

Toward the middle of the nineteenth century, English economic thought was entirely dominated by the ideas and methods of Ricardo, who has been described by Senior, not without justice, as "the most incorrect writer who ever attained philosophical eminence."[152] So far as such a sweeping criticism can be justified by looseness in the use of terms, it is justified by Ricardo's failing in this respect. That he should have attained the eminence he did, dominating English economic thought for so many years, in spite of the confusion which his loose and uncertain use of words occasioned, is not less a tribute to Ricardo's genius than evidence of the poverty of political economy in England at that time. In view of the constant and tiresome reiteration of the charge that Marx pillaged his labor-value theory from Thompson, Hodgskin, Bray, or some other more or less obscure writer of the Ricardian school, it is well to remember that there is nothing in the works of any of these writers connected with the theory of value which is not to be found in the earlier work of Ricardo himself. In like manner, the theory can be traced back from Ricardo to the master he honored, Adam Smith. Furthermore, almost a century before the appearance of "The Wealth of Nations," Sir William Petty had anticipated the so-called Ricardian labor-value theory of Smith and his followers.

Petty, rather than Smith, is entitled to be regarded as the founder of the classical school of political economy, and Cossa justly calls him "one of the most illustrious forerunners of the science of statistical research."[153] He may indeed fairly be said to have been the father of statistical science, and was the first to apply statistics, or "political arithmetick," as he called it, to the elucidation of economic theory. He boasts that "instead of using only comparative and superlative Words, and intellectual Arguments," his method is to speak "in Terms of Number, Weight, or Measure; to use only Arguments of Sense; and to consider only such Causes, as have visible Foundations in Nature; leaving those that depend upon the mutable Minds, Opinions, Appetites, and Passions of particular Men, to the Consideration of others."[154] The celebrated saying of this sagacious thinker that "labor is the father and active principle of wealth; lands are the mother," is more Marxian than Ricardian. Petty divided the population into two classes, the productive and non-productive, and insisted that the value of all things depends upon the labor it costs to produce them. This is, as we shall see, entirely Ricardian, but not Marxian. But these are the ideas Marx is supposed to have borrowed, without acknowledgment, from comparatively obscure followers of Ricardo, in spite of the fact that he gives abundant credit to the earlier writer. It has been asked with ample justification whether these critics of Marx have read either the works of Marx or his predecessors.

Adam Smith, who accepted the foregoing principles laid down by Petty, followed his example of basing his conclusions largely upon observed facts instead of abstractions. It is not the least of Smith's merits that, despite his many digressions, looseness of phraseology, and other admitted defects, his love for the concrete kept his feet upon the solid ground of fact. With his successors, notably Ricardo and John Stuart Mill, it was far otherwise. They made political economy an isolated study of abstract doctrines. Instead of a study of the meaning and relation of facts, it became a cult of abstractions, and the aim of its teachers seemed to be to render the science as little scientific, and as dull, as possible. They set up an abstraction, an "economic man," and created for it a world of economic abstractions. It is impossible to read either Ricardo or John Stuart Mill, but especially the latter, without feeling the artificiality of the superstructures they created, and the justice of Carlyle's description of such political economy as the "dismal science." With a realism greater even than Adam Smith's, and a more logical method than Ricardo or John Stuart Mill, Marx restored the science of political economy to its old fact foundations.


The superior insight of Marx is shown in the very first sentence of his great work. The careful reader at once perceives that the first paragraph of the book strikes a keynote which distinguishes it from all other economic works comparable to it in importance. Marx was a great master of the art of luminous and exact definition, and nowhere is this more strikingly shown than in this opening sentence of "Capital": "The wealth of those societies in which the capitalist mode of production prevails presents itself as an immense accumulation of commodities, its unit being a single commodity."[155] In this simple, lucid sentence the theory of social evolution is clearly implied. The author repudiates, by implication, the idea that it is possible to lay down universal or eternal laws, and limits himself to the exploration of the phenomena appearing in a certain stage of historical development. We are not to have another abstract economic man with a world of abstractions all his own; lone, shipwrecked mariners upon barren islands, imaginary communities nicely adapted for demonstration purposes in college class rooms, and all the other stage properties of the political economists, are to be entirely discarded. Our author does not propose to give us a set of principles by which we shall be able to understand and explain the phenomena of human society at all times and in all places—the Israel of the Mosaic Age, the nomadic life of Arab tribes, Europe in the Middle Ages, and England in the nineteenth century.

In effect, the passage under consideration says: "Political economy is the study of the principles and laws governing the production and distribution of wealth. Because of the fact that in the progress of society different systems of wealth production and exchange, and different concepts of wealth, prevail at different times, and at various places at the same time, we cannot formulate any laws which will apply to all times and all places. We must choose for examination and study a certain form of production, representing a particular stage of historical development, and be careful not to attempt to apply any of its laws to other forms of production, representing other stages of development. We might have chosen to investigate the laws which governed the production of wealth in the ancient Babylonian Empire, or in Mediaeval Europe, had we so desired, but we have chosen instead the period in which we live."

This that we call the capitalist epoch has grown out of the geographical discoveries and the mechanical inventions of the past three hundred years or so, especially of the seventeenth and eighteenth centuries. Its chief characteristic, from an economic point of view, is that of production for sale instead of direct use as in earlier stages of social development. Of course, barter and sale are much older than this epoch which we are discussing. In all ages men have exchanged their surplus products for other things more desirable to them, either directly by barter or through some medium of exchange. In the very nature of things, however, such exchange as this must have been incidental to the life of the people engaging in it, and not its principal aim. Under such conditions of society wealth consists in the possession of useful things. The naked savage, so long as he possessed plenty of weapons, and could get an abundance of fish or game, was, from the viewpoint of the society in which he lived, a wealthy man. In other words, the wealth of pre-capitalist society consisted in the possession of use-values, and not of exchange-values. Robinson Crusoe, for whom the possibility of exchange did not exist, was, from this pre-capitalist viewpoint, a very wealthy man.

In our present society, production is carried on primarily for exchange, for sale. The first and essential characteristic feature of wealth in this stage of social development is that it takes the form of accumulated exchange-values, or commodities. Men are accounted rich or poor according to the exchange-values they can command, and not according to the use-values they can command. To use a favorite example, the man who owns a ton of potatoes is far richer in simple use-values than the man whose only possession is a sack of diamonds, but, because in present society a sack of diamonds will exchange for an almost infinite quantity of potatoes, the owner of the diamonds is much wealthier than the owner of the potatoes. The criterion of wealth in capitalist society is exchangeable value as opposed to use-value, the criterion of wealth in primitive society. The unit of wealth is therefore a commodity, and we must begin our investigation with it. If we can analyze the nature of a commodity so that we can understand how and why it is produced, and how and why it is exchanged, we shall be able to understand the principle governing the production and exchange of wealth in this and every other society where similar conditions prevail, where, that is to say, the unit of wealth is a commodity, and wealth consists in an accumulation of commodities.


The visit to America, in 1907, of a distinguished English critic of Socialism, Mr. W. H. Mallock, had the effect of thrusting into prominence a common misconception of Marxian Socialism, and it is highly significant that, except in the Socialist press, none of the numerous comments which the series of university lectures delivered by that gentleman occasioned, called attention to the fact that they were based throughout upon a misstatement of the Marxian position. Briefly, Mr. Mallock insisted that Marx believed and taught that all wealth is produced by manual labor, and that, therefore, it ought to belong to the manual workers. In order that there may be no misstatement of our amiable critic's position, it will be best to quote his own words. He says, in Lecture I: "The practical outcome of the scientific economics of Marx is summed up in the formula which is the watchword of popular Socialism. 'All wealth is due to labor; therefore all wealth ought to go to the laborer'—a doctrine in itself not novel, but presented by Marx as the outcome of an elaborate system of economics"[156] (page 6). The careful reader will notice that Mr. Mallock does not profess to give the exact words of Marx, nor refer to any particular passage, but says that the formula quoted by him is the "practical outcome" of the economic system of Marx, "presented by Marx" as such. But to quote again: "Wealth, says Marx, not only ought to be, but actually can be distributed amongst a certain class of persons, namely, the laborers.... Because these laborers comprise in the acts of labor everything that is involved in the production of it" (page 7). Again: " ... Marx makes of his doctrine that labor alone produces all economic wealth" (page 7). Also: " ... that theory of production which the genius of Karl Marx invested with a semblance, at all events, of sober, scientific truth, and which ascribes all wealth to that ordinary manual labor which brings the sweat to the brow of the ordinary laboring man" (page 12).[157] All the foregoing passages are taken from a single lecture, the first of the series. We will take only a few from the others: " ... the doctrine of Marx that all productive effort is absolutely equal in productivity" (Lecture III, page 46); "Marx based the ethics of distribution on what purported to be an analysis of production" (Lecture IV, page 61); " ... Count Tolstoy, ... like Socialists of the school of Marx, declares that ordinary manual labor is the source of all wealth" (Lecture IV, page 76). "One is the attempt of Marx and his school, which represents ordinary manual labor as the sole producer of wealth" (Lecture IV, page 81); " ... the Marxian doctrine ... that manual labor is the sole producer of wealth" (Lecture V, page 115). It would be easy to add many other quotations very similar to these, but it is unnecessary. From the quotations given we can gather Mr. Mallock's conception of what Marx taught regarding the source of wealth.

It will be seen that Mr. Mallock alleges: (1) That Marx believed and taught that all wealth is produced by ordinary manual labor; (2) that he held, as a consequence, that all wealth ought to belong to the manual laborers, thus basing an ethic of distribution upon production; (3) that he taught that all productive effort is absolutely equal in productive value, in other words, that ten hours' work of one kind is economically as valuable as ten hours' of any other kind, so long as the labor is productive.

It is not easy to command the necessary self-restraint to reply with dignity to such wholesale misrepresentation as this. There is not the slightest scintilla of a foundation in fact for any one of the three statements. Not a single passage can be quoted from Marx which justifies any one of them. As we shall see, Marx specifically repudiated each one of them, a great deal more forcefully than Mr. Mallock does. That such misrepresentations of Marx should have been permitted to pass unchallenged in so many of our great colleges and universities is to our national shame. We will briefly consider the teaching of Marx under each of the three heads.

First, the source of wealth. It is true that such phrases as "Labor is the source of all wealth" are constantly met with in the popular literature of Socialism, but so far as that is the case it is not due to the teaching of Marx, but rather in spite of it. In the writings of the early Ricardian Socialists these phrases abound, but nowhere in all the writings of Marx will such a statement be found. For many years the opening sentence in the Programme of the German party contained the phrase "Labor is the source of all wealth and of all culture," but it was adopted in spite of the protest of Marx. The Gotha Programme was adopted in 1875. A draft was submitted to Marx and he wrote of it that it was "utterly condemnable and demoralizing to the party." Of the passage in question, he wrote: "Labor is not the source of all wealth. Nature is just as much the source of use-values (and of such, to be sure, is material wealth composed) as is labor, which itself is but the expression of a natural force, of human labor-power."[158] That the clause was adopted was a bitter disappointment to Marx, and was due to the insistence of the followers of Ferdinand Lassalle. To say that Marx held labor to be the sole source of wealth is to misrepresent his whole teaching.[159]

But while the Lassallians, and before them the Ricardians, used the phrase, it is evident that they assumed the inclusion of what Marx calls "Nature." They know very well that labor, mere exertion of physical strength, could produce nothing. If, for instance, a man were to spend all his strength trying to lift the pyramids, alone and unaided by mechanical power, it is quite evident to the meanest intellect that his exertions would not produce a single atom of wealth. It is equally obvious that if we take any use-value, whether it be an exchange-value or not being immaterial, we cannot eliminate from it the substance of which it is composed. Take, for example, the canoe of a savage, which is a simple use-value, and a meerschaum pipe, which is a commodity. In the canoe we have part of the trunk of a tree taken from the primeval forest, one of Nature's products. But without the labor of the savage it would never have become a canoe. It would have remained simply part of the trunk of a tree, and would not have acquired the use-value it has as a canoe. But it is likewise true that without the tree the canoe could not have existed. So with our meerschaum pipe. It is not simply a use-value: it is also an article of commerce, an exchange-value, a commodity. Its elements are, the silicate mineral which Nature provided and the form which human labor has given it. We can apply this test to every form of wealth, whether simple use-values or commodities, and we shall find that, in Mill's phrase, wealth is produced by the application of human labor to appropriate natural objects.

This brings us to the second point in Mr. Mallock's criticism, namely, that Marx held that only "ordinary manual labor" is capable of producing wealth, and that, therefore, all wealth ought to go to the manual laborers. One looks in vain for a single passage in all the writings of Marx which will justify this criticism. It may be conceded at once that if Marx taught anything of the kind, the defect in Marxian theory is fatal. But it must be proven that the defect exists—and the onus probandi rests upon Mr. Mallock. One need not be a trained economist or a learned philosopher to see how absurd such a theory must be. Suppose we take, for example, a man working in a factory, at a great machine, making screws. We go to that man and say: "Every screw here is made by manual labor alone. The machine does not count; the brains of the inventors of the machine have nothing to do with the making of screws." Our laborer might be illiterate and unable to read a single page of political economy with understanding, but he would know that our statement was foolish and untrue. Or, suppose we take the machine itself and say to the laborer: "That great machine with all its levers and wheels and springs working in such beautiful harmony was made entirely by manual workers, such as molders, blacksmiths, and machinists; no brain workers had anything to do with the making of it; the labor of the inventors, and of the men who drew the plans and supervised the making, had nothing to do with the production of the machine"—our laborer would rightly conclude that we were either fools or seeking to mock him as one.

Curiously enough, notwithstanding the frequent reiteration of this criticism of Marx by Mr. Mallock, he himself, in an unguarded moment, provides the answer by which Marx is vindicated! Thus, speaking of the great classical economists, Adam Smith, Ricardo, and John Stuart Mill, he points out that they included "all forms of living industrial effort, from those of a Watt or an Edison down to those of a man who tars a fence, grouped together under the common name of labor" (Lecture I, page 16). And again: "At present the orthodox economists and the socialistic economists alike give us all human effort[160] tied up, as it were, in a sack, and ticketed 'human labor'" (Lecture I, page 18). Now, if the Socialist includes in his definition of labor "all human effort," it stands to reason that he does not mean only "ordinary manual labor" when he uses the term. Thus Mallock answers Mallock and vindicates Marx!

Of course, Marx, like all the great economists, includes in his concept of labor every kind of productive effort, mental as well as physical, as Mr. Mallock, to the utter destruction of his disingenuous criticism, unconsciously—we must suppose—admitted. Take, for example, this definition: "By labor power or capacity for labor is to be understood the aggregate of those mental and physical capabilities existing in a human being, which he exercises when he produces a use-value of any description."[161] As against this luminous and precise definition, it is but fair to quote that of Mr. Mallock himself. He defines labor as "the faculties of an individual applied to his own labor"[162]—a meaningless jumble of words. The fifty-seven letters contained in that sentence would mean just as much if put in a bag, well shaken, and put on paper just as they happened to fall from the bag.

Marx never argued that the producers of wealth had a right to the wealth produced. The "right of labor to the whole of its produce" was, it is true, the keynote of the theories of the Ricardian Socialists. An echo of the doctrine appeared in the Gotha Programme of the German Socialists to which reference has already been made, and in the popular agitation of Socialism in this and other countries it is echoed more or less frequently. Just in proportion as the ethical argument for Socialism is advanced, and appeals made to the sense of justice, the rich idler is condemned and an ethic of distribution based upon production becomes an important feature of the propaganda. But Marx nowhere indulges in this kind of argument. Not in a single line of "Capital," or his minor economic treatises, can any hint of the doctrine be found. He invariably scoffed at the "ethical distribution" idea. In the judgment of the present writer, this is at once his great strength and weakness, but that is beside the point of this discussion. Suffice it to say, though it involves some reiteration, that Marx never took the position that Socialism ought to take the place of capitalism, because the producers of wealth ought to get the whole of the wealth they produce. His position was rather that Socialism must come, simply because capitalism could not last.

Finally, we come to the charge that Marx taught that "all productive effort is absolutely equal in productivity." Incredible as it may seem, it is nevertheless a fact that everything Marx has to say upon the subject is directly opposed to this notion, and that, as we shall see later on, his famous theory of value is not only not dependent upon a belief in the equal productivity of all productive effort, but would be completely shattered by it. Not only Marx, but also Mill, Ricardo, and Smith, his great predecessors, recognized the fact that all labor is not equally productive. Of course, it requires no special genius to demonstrate this. That a poor mechanic with antiquated tools will produce less in a given number of hours than an expert mechanic with good tools, for example, is too obvious for comment. The Marx assailed by Mr. Mallock, and numerous critics like him, is a myth. The real Marx they do not touch—hence the futility of their work. The Marx they attack is a man of straw, not the immortal thinker. Endowed

"With just enough of learning to misquote,"

their assaults are vain.


Having thus disposed of some of the more prevalent criticisms of Marx as an economist, we are ready for a definite, consecutive statement of the economic theory of modern Socialism. First, however, a word as to the term "scientific" as commonly applied to Marxian Socialism. Even some of the friendliest of Socialist critics have contended that the use of the term is pretentious, bombastic, and altogether unjustified. From a certain narrow point of view, this appears to be an unimportant matter, and the vigor with which Socialists defend their use of the term seems exceedingly foolish, and accountable for only as a result of enthusiastic fetish worship—the fetish, of course, being Marx.

Such a view is very crude and superficial. It cannot be doubted that the Socialism represented by Marx and the modern political Socialist movement is radically different from the earlier Socialism with which the names of Fourier, Saint-Simon, Cabet, Owen, and a host of other builders of "cloud palaces for an ideal humanity," are associated. The need of some word to distinguish between the two is obvious, and the only question remaining is whether or not the word "scientific" is the most suitable and accurate one to make that distinction clear; whether the words "scientific" and "utopian" express with reasonable accuracy the nature of the difference. Here the followers of Marx feel that they have an impregnable position. The method of Marx is scientific. From the first sentence of his great work to the last, the method pursued is that of a painstaking scientist. It would be just as reasonable to complain of the use of the word "scientific" in connection with the work of Darwin and his followers, to distinguish it from the guesswork of Anaximander, as to cavil at the distinction made between the Socialism of Marx and Engels and their followers, and that of visionaries like Owen and Saint-Simon.

Doubtless both Marx and Engels lapsed occasionally into Utopianism. We see instances of this in the illusions Marx entertained regarding the Crimean War bringing about the European Social Revolution; in the theory of the increasing misery of the proletariat; in Engels' confident prediction, in 1845, that a Socialist revolution was imminent and inevitable; and in the prediction of both that an economic cataclysm must create the conditions for a sudden and complete revolution in society. These, I say, are Utopian ideas, evidences that the founders of scientific Socialism were tinctured with the older ideas of the Utopists, and even more with their spirit. But when we speak of "Marxism," what mental picture does the word suggest, what intellectual concept is the word a name for? Is it these forecasts and guesses, and the exact mode of realizing the Socialist ideal which Marx laid down, or is it the great principle of social evolution determined by economic development? Is it his naive and simple description of the process of capitalist concentration, in which no hint appears of the circuitous windings that carried the actual process into unforeseen channels, or the broad fact that the concentration has taken place and that monopoly has come out of competition? Is it his statement of the extent to which labor is exploited, or the fact of the exploitation? If we are to judge Marx by the essential things, rather than by the incidental and non-essential things, then we must admit his claim to be reckoned with the great scientific sociologists and economists.

After all, what constitutes scientific method? Is it not the recognition of the law of causation, putting exact knowledge of facts above tradition or sentiment; accumulating facts patiently until sufficient have been gathered to make possible the formulation of generalizations and laws enabling us to connect the present with the past, and in some measure to foretell the outcome of the present, as Marx foretold the culmination of competition in monopoly? Is it not to see past, present, and future as one whole, a growth, a constant process, so that instead of vainly fashioning plans for millennial Utopias, we seek in the facts of to-day the stream of tendencies, and so learn the direction of the immediate flow of progress? If this is a true concept of scientific method, and the scientific spirit, then Karl Marx was a scientist, and modern Socialism is aptly named Scientific Socialism.


[137] An English edition of this work, translated by H. Quelch, was published in 1900 under the title The Poverty of Philosophy.

[138] Cf. F. Engels, Preface to La Misere de la Philosophie, English translation, The Poverty of Philosophy, page iv.

[139] The Right to the Whole Produce of Labour, by Anton Menger, 1899.

[140] Edward Bernstein, Ferdinand Lassalle as a Social Reformer, page ix.

[141] Criticism of the Gotha Programme, from the posthumous papers of Karl Marx.

[142] It should perhaps be pointed out here, to avoid misunderstanding, that Ricardo hedged this doctrine about with important qualifications—not always observed by his followers—till it no longer remained the simple proposition stated above. See Dr. A. C. Whitaker's History and Criticism of the Labour Theory of Value in English Political Economy, page 57, for a suggestive treatment of this point.

[143] The Right to the Whole Produce of Labour.

[144] Cf. Capital, Vol. I, page 644, and Vol. II, page 19, Kerr edition.

[145] Cf., for instance, The Wealth of Nations, Vol. I, Chapter VI.

[146] Introduction to Menger's The Right to the Whole Produce of Labour.

[147] The Life of Francis Place, by Graham Wallas, M.A., London, 1898, page 268.

[148] For this brief sketch of the works of these Ricardian Socialist writers I have drawn freely upon Menger's The Right to the Whole Produce of Labour, and Professor Foxwell's Introduction thereto.

[149] Karl Marx: Biographical Memoirs, by Wilhelm Liebknecht, translated by E. Untermann, 1901, page 32.

[150] Much of this work has been collated and edited by Marx's daughter, the late Mrs. Eleanor Marx-Aveling, and her husband, Dr. Edward Aveling, and published in two volumes, The Eastern Question and Revolution and Counter-Revolution.

[151] The note is quoted by Liebknecht, Memoirs of Marx, page 177, and in the Introduction to Revolution and Counter-Revolution, by the editor, Eleanor Marx-Aveling.

[152] Political Economy, page 115.

[153] Luigi Cossa, Guide to the Study of Political Economy, English translation, 1880.

[154] The Economic Writings of Sir William Petty, edited by Charles Henry Hull, Vol. I, page 244.

[155] The italics are mine.—J. S.

[156] All quotations from Mr. Mallock are taken from the volume containing the text of his lectures, entitled Socialism, published by The National Civic Federation, New York, 1907.

[157] The italics are mine.—J. S.

[158] Letter on the Gotha Programme, by Karl Marx, published in the collection of the posthumous writings of Marx and Engels, edited by Mehring, 1902. See a translation of the letter by Dr. Harriet E. Lothrop, International Socialist Review, May, 1908.

[159] I note that my friend, Mr. J. R. Macdonald, M.P., "Whip" of the Labour Party in the British House of Commons, so misrepresents Marx in his admirable little book, Socialism, page 54.

[160] Italics mine.—J. S.

[161] The italics are mine. The passage occurs on page 186, Vol. I, of Capital, Kerr edition. In the last of the series of lectures printed in his book, Mr. Mallock attempts a reply to the criticism of an American Socialist, Mr. Morris Hillquit who quoted this passage from Marx to show that Mr. Mallock was in error in saying that Marx regarded manual labor as the sole source of wealth. He evades the real point, namely, that Marx clearly included mental as well as physical labor in his use of the term, and with an ingenuity equaled only by the disingenuousness of the argument, seeks refuge in the fact that it does not cover the special "directive ability" which is a special function, "a productive force distinct from labor." The trick will not do. The fact is that Marx clearly and precisely covers that point in another place. The reader is referred to Chapter XIII of Part IV, Vol. I, of Capital, pages 363-368, Kerr edition, for a brilliant and honest treatment of the whole subject of the place of the "directing few" in modern industry. We shall treat the matter briefly later on.

[162] Italics mine.—J. S. The passage occurs in Lecture III, page 36.




The geist of social and political evolution is economic, according to the Socialist philosophy. This view of the importance of man's economic relations involves some very radical changes in the methods and terminology of political economy. The philosophical view of social and political evolution as a world-process, through revolutions formed in the matrices of economic conditions, at once limits and expands the scope of political economy. It destroys on the one hand the idea of the eternality of economic laws and limits them to particular epochs. On the other hand, it enhances the importance of the science of political economy as a study of the motive force of social evolution. With Marx and his followers, political economy is more than an analysis of the production and distribution of wealth; it is a study of the principal determinant factor in the social and political progress of society, consciously recognized as such.

The sociological viewpoint appears throughout the whole of Marxian economic thought. It appears, for instance, in the definition of a commodity as the unit of wealth in those societies in which the capitalist mode of production prevails. Likewise wealth and capital connote special social relations or categories. Wealth, which in certain simpler forms of social organization consists in the ownership of use-values, under the capitalist system consists in the ownership of exchange-values. Capital is not a thing, but a social relation between persons established through the medium of things. Robinson Crusoe's spade, the Indian's bow and arrow, and all similar illustrations given by the "orthodox" economists, do not constitute capital any more than an infant's spoon is capital. They do not serve as the medium of the social relation between wage-worker and capitalist which characterizes the capitalist system of production. The essential feature of capitalist society is the production of wealth in the commodity form; that is to say, in the form of objects that, instead of being consumed by the producer, are intended to be exchanged or sold at a profit. Capital, therefore, is wealth set aside for the production of other wealth with a view to its exchange at a profit. A house may consist of certain definite quantities of bricks, timber, lime, iron, and other substances, but similar quantities of these substances piled up without plan will not constitute a house. Bricks, timber, lime, and iron become a house only in certain circumstances, when they bear a given ordered relation to each other. "A negro is a negro; it is only under certain conditions that he becomes a slave. A certain machine, for example, is a machine for spinning cotton; it is only under certain defined conditions that it becomes capital. Apart from these conditions, it is no more capital than gold per se is money; capital is a social relation of production."[163]

This sociological principle pervades the whole of Socialist economics. It appears in every economic definition, practically, and the terminology of the orthodox political economists is thereby often given a new meaning, radically different from that originally given to it and commonly understood. The student of Socialism who fails to appreciate this fact will most frequently land in a morass of confusion and difficulty, but the careful student who fully understands it will find it of great assistance. Take, as an illustration, the phrase "the abolition of capital" which frequently occurs in Socialist literature. The reader who thinks of capital as consisting of things, such as machinery, materials of production, money, and so on, finds the phrase bewildering. He wonders how it is conceivable that production should go on if these things were done away with. But the student who fully understands the sociological principle outlined above comprehends at once that it is not proposed to do away with the things, but with certain social relations expressed through them. He understands that the "abolition of capital" no more involves the destruction of the physical things than the abolition of slavery involved the destruction of the slave himself. What is aimed at is the social relation which is established through the medium of the things commonly called capital.


In common with all the great economists, Socialists hold that wealth is produced by human labor applied to appropriate natural objects. This, as we have seen, does not mean that labor is the sole source of wealth. Still less does it mean that the mere expenditure of labor upon natural objects must inevitably result in the production of wealth. If a man spends his time digging holes in the ground and filling them up again, or dipping water from the ocean in a bucket and pouring it back again, the labor so expended upon natural objects would not produce wealth of any kind. Nor is the productivity of mental labor denied. In the term "labor" is implied the totality of human energies expended in production, regardless of whether those energies be physical or mental. In modern society wealth consists of social use-values, commodities.

We must, therefore, begin our analysis of capitalist society with an analysis of a commodity. "A commodity," says Marx, "is, in the first place, an object outside us, a thing that by its properties satisfies human wants of some sort or another. The nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference. Neither are we here concerned to know how the object satisfies these wants, whether directly as means of subsistence, or indirectly as means of production."[164] But a commodity must be something more than an object satisfying human wants. Such objects are simple use-values, but commodities are something else in addition to simple use-values. The manna upon which the pilgrim exiles of the Bible story were fed, for instance, was not a commodity, though it fulfilled the conditions of this first part of our definition by satisfying human wants. We must carry our definition further, therefore. In addition to use-value, then, a commodity must possess exchange-value. In other words, it must have a social use-value, a use-value to others, and not merely to the producer.

Thus, things may have the quality of satisfying human wants without being commodities. To state the matter in the language of the economists, use-values may, and often do, exist without economic value, value, that is to say, in exchange. Air, for example, is absolutely indispensable to life, yet it is not—except in special, abnormal conditions—subject to sale or exchange. With a use-value that is beyond computation, it has no exchange-value. Similarly, water is ordinarily plentiful and has no economic value; it is not a commodity. A seeming contradiction exists in the case of the water supply of cities where water for domestic use is commercially supplied, but a moment's reflection will show that it is not the water, but the social service of bringing it to a desired location for the consumer's convenience that represents economic value. Over and above that there is, however, the element of monopoly-price which enters into the matter. With that we have not, at this point, anything to do. Under ordinary circumstances, water, like light, is plentiful; its utility to man is not due to man's labor, and it has, therefore, no economic value. But in exceptional circumstances, as in an arid desert or in a besieged fortress, a millionaire might be willing to give all his wealth for a little water, thus making the value of what is ordinarily valueless almost infinite. What may be called natural use-values have no economic value. And even use-values that are the result of human labor may be equally without economic value. If I make something to satisfy some want of my own, it will have no economic value unless it will satisfy the want of some one else. So, unless a use-value is social, unless the object produced is of use to some other person than the producer, it will have no value in the economic sense: it will not be exchangeable.

A commodity must therefore possess two fundamental qualities. It must have a use-value, must satisfy some human want or desire; it must also have an exchange-value arising from the fact that the use-value contained in it is social in its nature and exchangeable for other exchange-values. With the unit of wealth thus defined, the subsequent study of economics is immensely simplified.[165]

The trade of capitalist societies is the exchange of commodities against each other, through the medium of money. Commodities utterly unlike each other in all apparent physical properties, such as color, weight, size, shape, substance, and so on, and utterly unlike each other in respect to the purposes for which intended and the nature of the wants they satisfy, are exchanged for one another, sometimes equally, sometimes in unequal ratio. The question immediately arises: what is it that determines the relative value of commodities so exchanged? A dress suit and a kitchen stove, for example, are very different commodities, possessing no outward semblance to each other, and satisfying very different human wants, yet they may, and actually do, exchange upon an equality in the market. To understand the reason for this similarity of value of dissimilar commodities, and the principle which governs the exchange of commodities in general, is to understand an important part of the mechanism of modern capitalist society.

This is the problem of value which all the great economists have tried to solve. Sir William Petty, Adam Smith, David Ricardo, John Stuart Mill, and Karl Marx developed what is known as the labor-value theory as the solution of the problem. This theory, as developed by Marx, not in its cruder forms, is one of the cardinal principles in Socialist economic theory. The Ricardian statement of the theory is that the relative value of commodities to one another is determined by the relative amounts of human labor embodied in them; that the quantity of labor embodied in them is the determinant of the value of all commodities. When all their differences have been carefully noted, all commodities have at least one quality in common. The dress suit and the kitchen range, toothpicks and snowshoes, pink parasols and sewing-machines, are unlike each other in every other particular save one—they are all products of human labor, crystallizations of human labor-power. Here, then, say the Socialists, as did the great classical economists, we have a hint of the secret of the mechanism of exchange in capitalist society. The amount of labor-power embodied in their production is in some way connected with the measure of the exchangeable value of the commodities.

Stated in the simple, crude form, that the quantity of human labor crystallized in them is the basis and measure of the value of commodities when exchanged against one another, the labor theory of value is beautifully simple. At least, the formula is simplicity itself. At the same time, it is open to certain very obvious criticisms. It would be absurd to contend that the day's labor of a coolie laborer is equal in productivity to the day's labor of a highly skilled mechanic, or that the day's labor of an incompetent workman is of equal value to that of the most proficient. To refute such a theory is as beautifully simple as the theory itself. In all seriousness, arguments such as these are constantly used against the Marxian theory of value, notwithstanding that they do not possess the slightest relation to it. Marxism is very frequently "refuted" by those who do not trouble themselves to understand it.

The idea that the quantity of labor embodied in them is the determinant of the value of commodities was held by practically all the great economists. Sir William Petty, for example, in a celebrated passage, says of the exchange-value of corn: "If a man can bring to London an ounce of silver out of the earth in Peru in the same time that he can produce a bushel of corn, then one is the natural price of the other; now, if by reason of new and more easy mines a man can get two ounces of silver as easily as formerly he did one, then the corn will be as cheap at ten shillings a bushel as it was before at five shillings a bushel, caeteris paribus."[166]

Adam Smith, following Petty's lead, says: "The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and labor which it can save to himself, and which it can impose on other people.... Labor was the first price, the original purchase money, that was paid for all things.... If among a nation of hunters, for example, it usually costs twice the labor to kill a beaver which it does to kill a deer, one beaver would naturally be worth or exchange for two deer. It is natural that what is usually the produce of two days' or two hours' labor, should be worth double of what is usually the produce of one day's or one hour's labor."[167]

Benjamin Franklin, whose merit as an economist Marx recognized, takes the same view and regards trade as being "nothing but the exchange of labor for labor, the value of all things being most justly measured by labor."[168] From the writings of almost every one of the great classical economists of England it would be easy to compile a formidable and convincing volume of similar quotations, showing that they all took the same view that the quantity of human labor embodied in commodities determines their value. One further quotation, from Ricardo, must, however, suffice. He says:—

"To convince ourselves that this (quantity of labor) is the real foundation of exchangeable value, let us suppose any improvement to be made in the means of abridging labor in any one of the various processes through which the raw cotton must pass before the manufactured stockings come to the market to be exchanged for other things; and observe the effects which will follow. If fewer men were required to cultivate the raw cotton, or if fewer sailors were employed in navigating, or shipwrights in constructing, the ship in which it was conveyed to us; if fewer hands were employed in raising the buildings and machinery, or if these, when raised, were rendered more efficient; the stockings would inevitably fall in value, and command less of other things. They would fall because a less quantity of labor was necessary to their production, and would therefore exchange for a smaller quantity of those things in which no such abridgment of labor had been made."[169]

It is evident from the foregoing quotations that these great writers regarded the quantity of human labor crystallized in them as the basis of all commodity values, and their real measure. The great merit of Ricardo lies in his development of the idea of social labor as against the simple concept of the labor of particular individuals, or sets of individuals. In the passage cited, he includes in the term "quantity of human labor" not merely the total labor of those immediately concerned in the making of stockings, from the cultivation of the raw cotton to the actual making of stockings in the factory, but all the labor indirectly expended, even in the making and navigating of ships, and the building of the factories. One does, indeed, find hints of the social labor concept in Adam Smith, but it is Ricardo who first clearly develops it. Marx further developed this principle, and all criticisms of the labor-value theory in Marxian economic theory which are based upon the assumption that quantity of labor means the simple, direct labor embodied in commodities fall of their own weight.

Thus, if we take any commodity, we shall find that it is possible to ascertain with tolerable certainty the amount of direct labor embodied in it, but that it is equally as impossible to ascertain the amount of the indirect expenditure of labor power which entered into its making. In the case of a table, for example, it may be possible to trace with some approximation to accuracy the labor involved in felling the tree and preparing the lumber out of which the table was made; the labor directly spent in bringing the lumber to the factory, and the direct labor expended in making out of the lumber a finished table; allowance may also be made for the labor embodied in the nails, glue, stain, and other articles used in making the table. So we have a fairly accurate statement of the direct labor embodied in the table. But what of the labor used to make the tools of the men who felled the trees and prepared the lumber? What of the coal miner and the iron miner and the tool maker? And what of the numerous and incalculable expenditures of labor to make the railroads, the railway engines, and to provide these with steam-power? What, also, of the machinery in the factory, and of the factory buildings themselves, and, back of them, again, the tool makers and the providers of raw materials? It is obvious that no human intellect could ever unravel the tangled skein of human labor, and that in actual exchange there can be no calculation of the respective labor content of commodities. If the law of value holds good, it must operate mechanically, automatically. And this it does, through the incidence of bargaining and the law of supply and demand.

We have noted elsewhere the variations in human capacity and productiveness. Superficial critics still frequently charge Marx with having overlooked this very obvious fact, whereas it has not only been fully treated by him, but was actually covered by Smith and Ricardo before Marx! With these writers and their followers it is the law of averages which solves the difficulties arising from variations in individual capacity and productivity. It is the average amount of labor expended in killing the beaver which counts, not the actual individual labor in a specified case. Nor did these writers overlook the important differentiation between simple, unskilled labor and labor that is highly skilled. If A in ten hours' labor produces exactly double the amount of exchange-value which B produces in the same time devoted to labor of another kind, it is obvious that the labor of B is not equal in value to that of A. Quantity of labor cannot, therefore, be measured, in individual cases, by time units. Despite a hundred passages which, detached from their context, seem to imply the contrary, Adam Smith recognized this very clearly, and attempted to solve the riddle by a differentiation of skilled and unskilled labor in which he likens skilled labor to a machine; and insists that the labor and time spent in acquiring the skill which distinguishes skilled labor must be reckoned.[170]

Another frequent criticism of the Marxian theory has not only been answered by Marx himself—is, in fact, ruled out by the terms of the theory itself—but was amply replied to by Ricardo.[171] The criticism in question consists in the selection of what may be called "unique values," or scarcity values, articles which cannot be reproduced by labor, and whose value is wholly independent of the quantity of labor originally necessary to produce them. Such articles are unique specimens of coins and postage stamps, autograph letters, rare manuscripts, Stradivarius violins, Raphael pictures, Caxton books, articles associated with great personages—such as Napoleon's snuffbox—great auks' eggs, and so on ad infinitum. No possible amount of human labor could reproduce these articles, reproduce, that is to say, the exact utilities in them. Napoleon's snuffbox might be exactly duplicated so far as its physical properties are concerned, but the association with Napoleon's fingers, the sentimental quality which gives it its special utility, is not reproducible. But the trade of capitalist society does not consist in the manufacture and sale of these things, which, after all, form a very insignificant part of the exchange-values of the world.


Marx saw the soul of truth in the labor-value theory, as propounded by his predecessors, especially Ricardo, and devoted himself to its development and systematization. He has been accused of plagiarizing his theory from the Ricardians, but it is surely not plagiarism when a thinker sees the germ of truth in a theory, and, separating it from the mass of confusion and error which envelops it, restates it in scientific fashion with all its necessary qualifications. This is precisely what Marx did. He developed the idea of social labor which Ricardo had propounded, disregarding entirely individual labor. He recognized the absurdity of the contention that the value of commodities is determined by the amount of labor, either individual or social, actually embodied in them. If two workers are producing precisely similar commodities, say coats, and one of them expends twice as much labor as the other and uses tools and methods representing twice the social labor, it is clearly foolish to suppose that the exchange-value of his coat will be twice as great as that of the other worker, regardless of the fact that their utility is equal. Labor, Marx pointed out, has two sides, the qualitative and the quantitative. The qualitative side, the difference in quality between specially skilled and simply unskilled labor, is easily recognized, though the relative value of the one compared with the other may be somewhat obscured. The secret of that obscurity lies hidden in the quantitative side of labor. Here we must enter upon an abstract inquiry, that part of the Marxian theory which is most difficult to comprehend. Yet, it is not so very difficult, after all, to understand that the years devoted to learning his trade, by a mechanical engineer, for instance, during all of which years he must be provided with the necessities of life, must be reckoned somewhere and somehow; and that when they are so reckoned, his day's labor may be found to contain, concentrated, so to speak, an amount of labor time equivalent to two or even many days' simple unskilled labor time. It may be, and in fact is, quite impossible to set forth mathematically the relation of the two, for the reason that the process of developing skilled labor is too complex to be unraveled. Of the fact, however, there can be no doubt.

The real law of value, then, according to Marx, is as follows: Under capitalism, in free competition, the value of all commodities, other than those unique things which cannot be reproduced by human labor, is determined by the amount of abstract labor embodied in them; or, better, by the amount of social human labor power necessary, on the average, for their production. We may conveniently illustrate this theory by a concrete example. Let us, therefore, return to our coat-makers. Now, always assuming their equal utility, no one will be willing to pay twice as much for the coat produced by the slow worker with poor tools as for the other. If the more economical methods of production employed by the man who makes his coats in half the time taken by the other man are the methods usually employed in the manufacture of coats, and the time he takes represents the average time taken to produce a coat, then the average value of coats will be determined thereby, and coats produced by the slower, less economical process will command only the same price in the market, the fact that they may embody twice the amount of actual labor counting for nothing. If we reverse the order of this proposition, and suppose the slower, less economical methods to be those generally prevailing in the manufacture of coats, and the quicker, more economical methods to be exceptional, then, all other things being equal, the exchange-value, of coats will be determined by the amount of labor commonly consumed, and the fortunate producer who adopts the exceptional, economical methods will, for a time, reap a golden harvest. Only for a time, however. As the new methods prevail, competition being the impelling force, they become less and less exceptional, and, finally, the regular, normal methods of production and the standard of value.

It is this very important qualification, fundamental to the Marxian theory, which is most often lost sight of by the critics. They persist in applying to individual commodities the test of comparing the amounts of labor-power actually consumed in their production, and so confound the Marxian theory with its crude progenitors. In refuting this crude theory, they are quite oblivious of the fact that Marx himself accomplished that by no means difficult feat. To state the Marxian theory accurately, we must qualify the bald statement that the exchange-value of commodities is determined by the amount of labor embodied in them, and state it in the following manner: The exchange-value of commodities is determined by the amount of average labor at the time socially necessary for their production. This is determined, not absolutely in individual cases, but approximately in general, by the bargaining and higgling of the market, to adopt Adam Smith's well-known phrase.

Now, this theory applies to those things, exclusive of the category of "unique values," which cannot be made by labor and are commonly supposed to owe their value to their rarity. For example, we may take diamonds. A man walking along the great wastes of the African karoo comes across a little stream. As he stoops to drink, he sees in the water a number of glittering diamonds. To pick them out is the work of a few minutes only, but the diamonds are worth many thousands of dollars. The law of value above outlined applies just as much to them as to any other commodity. The value of diamonds is determined by the amount of labor expenditure necessary on an average to procure them. If the normal method of obtaining diamonds were simply to go to the nearest stream and pick them out, their value would fall, possibly to zero:—

"When we have nothing else to wear But cloth of gold and satins rare, For cloth of gold we cease to care— Up goes the price of shoddy."


Most writers do not distinguish between price and value with sufficient clearness, using the terms as if they were synonymous and interchangeable. Where utilities are exchanged directly one for another, as in the barter of primitive society, there is no need of a price-form to express value. In highly developed societies, however, where the very magnitude of production and exchange makes direct barter impossible, and where the objects to be exchanged are not commonly the product of individual labor, a medium of exchange becomes necessary; a something which is generally recognized as a safe and stable commodity which can be used to express in terms of its own weight, size, shape, or color, the value of other commodities to be exchanged. This is the function of money. In various times and places wheat, shells, skins of animals, beads, powder, tobacco, and a multitude of other things, have served as money, but for various reasons, more or less obvious, the precious metals, gold and silver, have been most favored.

In all commercial countries to-day, one or other of these metals, or both of them, serves as the recognized medium of exchange. They are commodities also, and when we say that the value of a commodity is a certain amount of gold, we equally express the value of that amount of gold in terms of the commodity in question. As commodities, the precious metals are subject to the same laws as other commodities. If gold should be discovered in such abundance that it became as plentiful and easy to obtain as coal, its value would be no greater than that of coal. It might, conceivably, still be used as the medium of exchange, but it would—unless protected by legislation or otherwise from the operation of economic law, and so given a monopoly-price—have an exchange-value equal to that of coal, a ton of the one being equal to a ton of the other—provided, of course, that its utility remained. Since the scarcity of gold is an important element in its utility valuation, creating and fostering the desire for its possession, that utility-value might largely disappear if gold became as plentiful as coal, in which case it would not have the same value as coal, and might cease to be a commodity at all.

Price, then, is the expression of value in terms of some other commodity, which, generally used for that purpose of expressing the value of other commodities, we call money. It is only an approximation of value, and subject to a much greater fluctuation than value itself. It may, for a time, fall far below or rise above value, but in a free market—the only condition in which the operation of the law may be judged—sooner or later the equilibrium will be regained. Where monopoly exists, the free market condition being non-existent, price may be constantly elevated above value. Monopoly-price is an artificial elevation of price above value, and must be considered separately as the abrogation of the law of value.

Failure to discriminate between value and its price-expression, or symbol, has led to endless difficulty. It lies at the bottom of the naive theory that value depends upon the relation of supply and demand. Lord Lauderdale's famous theory has found much support among later economists, though it is now rather unpopular when stated in its old, simple form. Disguised in the so-called Austrian theory of final utility, it has attained considerable vogue.[172] The theory is plausible and convincing to the ordinary mind. Every day we see illustrations of its working: prices are depressed when there is an oversupply, and elevated when the demand of would-be consumers exceeds the supply of the commodities they desire to buy. It is not so easy to see that these effects are temporary, and that there is an automatic adjustment going on. Increased demand raises prices for a while, but it also calls forth an increase in supply which tends to restore the old price level, or may even force prices below it. In the latter case, the supply falls off and prices find their real level. The relation of supply to demand causes an oscillation of prices, but it is not the determinant of value. When prices rise above a certain level, demand slackens or ceases, and prices are inevitably lowered. Prices may and do fall with a decreased demand, but it is clear that unless the producers can get a price approximately equal to the value of their commodities, they will cease to produce them, and the supply will diminish or cease altogether. Ultimately, therefore, the fluctuations of price through the lack of equilibrium between supply and demand adjust themselves, and prices must tend constantly to approximate values.

Monopoly-price is, as already observed, an artificial price in the sense that the laws of free market exchange do not apply to it. The "unique utilities," things not reproducible by human labor, command what might be termed natural monopoly-prices. There are many other commodities, however, the price of which is not regulated by the quantity of social human labor necessary to produce them, but simply by the desire of the purchasers and the means they have of gratifying it and the power of the sellers to control the market and exclude effective competition. Since Karl Marx wrote, the exceptions to his law of value have become more numerous, as a result of the changes in industrial and commercial conditions. The development of great monopolies and near-monopolies has greatly increased the number of commodities which, for considerable periods, are placed outside the sphere of the labor-value theory, their price depending upon their marginal utility, irrespective of the labor actually embodied in them or necessary to their reproduction. It may, in the opinion of the present writer, be said in criticism of the followers of Marx that they have not carried on his work, but largely contented themselves with repeating generalizations which, true when made, no longer fit all the facts. But that is not a criticism of Marx, or of his work. What he professed to make was an analysis of the methods of production and exchange in competitive capitalist society. His followers have largely failed to allow for the enormous changes which have taken place, and go on repeating, unchanged, his phrases.

Professor Seligman has pointed out that Ricardo's contention that value is determined by the cost of production, and the contention of Jevons that value is determined by marginal utility, are not mutually exclusive, but, on the contrary, complementary to each other.[173] The present writer has long contended that the marginal utility theory and the Marxian labor-value theory are likewise not antagonistic but complementary.[174] This is not the place to enter into the elaborate discussion which this contention involves. Only a brief indication of the argument for the claim is here and now possible. First, as we have seen, Marx is very careful to insist that utility is essential to value, and that the utility must be a social utility. But social utility does not come of itself, from the skies or elsewhere. It is, so far as the vast majority of commodities is concerned, the product of labor. It is true that the value of a thing is never independent of its social utility; it is likewise true that this is determined by the social labor necessary to the reproduction of that utility. To regard the two theories as antagonistic, it seems to be necessary to say either (1) that the quantity of social labor necessary to produce certain commodities determines their value, utterly regardless of the amount of their social utility, or (2) that we estimate the social utility of commodities, estimate what we are willing to pay for them, utterly regardless of the labor necessary, on an average, for their reproduction. The latter contention would be absurd, and the former would involve the abandonment of the initial premises of the Marxian theory, contained in his definition of a commodity. In so far as the basis of social utility is the social labor necessary for its production, the labor-value theory of Marx may be said, I think, to include the marginal utility law, as one of the forms in which it operates.


Labor, the source and determinant of value, has, per se, no value. Only when it is embodied in certain forms has it any value. If a man labors hard digging holes and refilling them, his labor has no value. What the capitalist buys is not labor, but labor-power. Wages in general is a form of payment for a given amount of labor-power, measured by duration and skill. The laborer sells brain and muscle power, which is thus placed at the temporary disposal of the capitalist to be used up like any other commodity that he buys. The philosopher Hobbes, in his "Leviathan," clearly anticipated Marx in thus distinguishing between labor and laboring power in the saying, "The value or worth of a man is ... so much as would be given for the Use of his Power." The power to labor assumes the commodity form, being at once a use-value and an exchange-value. At first sight it appears that piecework is an exception to the general rule that the capitalist buys labor-power and not labor itself. It seems that when piece-wages are paid it is not the machine, the living labor-power, but the product of the machine, labor actually performed, that is bought. Superficially, this is so, of course, but it does not affect the principle laid down, because, as a matter of fact, the piecework system is only one of the means used to secure a maximum of labor-power. The average output of pieceworkers in a trade always tends to become the standard output for the time-workers, and, on the other hand, the average wage of pieceworkers tends to keep very near the standard of time-wages.

Now, as a commodity, labor-power is subject to the same laws as all other commodities. Its price, wages, fluctuates just as the price of all other commodities does, and bears the same relation to its value. It may be temporarily affected by the preponderance of supply over demand, or of demand over supply; it may be made the subject of monopoly in certain cases. There is, therefore, no such thing as an "iron law" of wages, any more than there is an "iron law" of prices for other commodities. Lassalle took the Ricardian law of wages and, by means of his characteristic exaggeration, distorted it out of all semblance to truth. Says Ricardo: "The natural price of labor, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the laborer and his family. With a rise in the price of food and necessaries, the natural price of labor will rise; with the fall in their price, the natural price of labor will fall."[175] This Lassalle made the basis of his famous "iron law," according to which 96 per cent of the wage-workers were precluded from improving their economic position. Lassalle's chief fault lay in that he made no allowance whatever for either state interference, or the organized influence of the workers themselves. He also attaches too little importance to what Marx calls the traditional standards of living.[176] It is nevertheless true that the price of labor-power, wages, tends to approximate its value, just as the price of all other commodities tends, under normal conditions, to approximate their value.

And just as the value of other commodities is determined by the amount of social labor necessary on an average for their reproduction, so the value of labor-power is likewise determined. Wages tend to a point at which they will cover the average cost of the necessary means of subsistence for the workers and their families, in any given time and place, under the conditions and according to the standards of living generally prevailing. Trade union action, for example, may force wages above that point, or undue stress in the competitive labor market may force wages below it. While, however, a trade union may bring about what is virtually a monopoly-price for the labor-power of its members, there is always a counter tendency in the other direction, sometimes even to the lowering of the standard of subsistence itself to the minimum of things required for physical existence.

To class human labor-power with pig iron as a commodity, subject to the same laws, may at first seem fantastic to the reader, but a careful survey of the facts will fully justify the classification. The capacity of the worker to labor depends upon his securing certain things; his labor-power has to be reproduced from day to day, for which a certain supply of food, clothing, and other necessities of life is essential. Even with these supplied constantly, the worker sooner or later wears out and dies. If the race is not to be extinguished, a certain supply of the necessities of life must be provided for the children during the years of their development to the point where their labor-power becomes marketable. The average cost of production in the case of labor-power includes, therefore, the necessities for a wife and family as well as for the individual worker. Far from being the iron law Lassalle imagined, this law of wages is one of considerable elasticity. The standard of living itself, far from being a fixed thing, determined only by the necessities of physical existence, varies according to occupational groups; to localities sometimes, as a result of historical development; to nationality and race, as a result of tradition; to the general standard of intelligence, and the degree in which the workers are organized for the promotion of their economic interests. The advance in the culture of the people as a whole, expressing itself in legislation for compulsory education, the abolition of child labor, improvement of housing and general sanitary conditions, and so on, tends to raise the standard of living. Finally, the fluctuations in the price of labor-power due to the operation of the law of supply and demand are much more important than Lassalle imagined.

This living commodity, labor-power, differs in one remarkable way from all other commodities, in that when it is used up in the process of the production of other commodities in which it is embodied, it creates new value in the process of being used up, and embodies that new value in the commodity it assists to produce. In the case of raw materials and machinery this is not so. In the manufacture of tables, for example, the wood used up is transformed into tables, embodied in them, but the wood has added nothing to its own value. The same is true of machinery. But with human labor-power it is otherwise. The capitalist buys from the laborer his labor-power at its full value as a commodity. But the laborer, in embodying that labor-power in some concrete form, creates more value than his wages represents. For the commodity he sells, his power to labor, he has been paid its full value, namely, the social labor-cost of its production; but that power may be capable of producing the equivalent of twice its own cost of production. This is the central idea of the famous and much-misunderstood Marxian theory of surplus-value, by which the method of capitalism, the exploitation of the wage-workers, and the resulting class antagonisms of the system are explained. This theory becomes the groundwork of all the social theories and movements protesting against and seeking to end the exploitation of the laboring masses. To understand it is, therefore, of paramount importance.


As we have seen in an earlier chapter, Marx was not the first to recognize that the secret of capitalism, the object of capitalist industry, is the extraction of surplus-value from the labor-power of the worker. Nor was he the first to use the term. By no means a happy term, since it adds to the difficulty of comprehending the meaning and nature of value, Marx took it from the current economic discussion of his time as a term already fairly well understood. What we owe to the genius of Marx is an explanation of the manner in which surplus-value is extracted by the capitalist from the labor-power of the worker, and the part it plays in capitalist society.

The essence of the theory can be very briefly stated, but its demonstration involves, naturally, a more extensive study. Under normal conditions, the worker will produce a value equivalent to his means of subsistence, or to the wages actually paid to him, in a very small number of hours. If he owned and controlled the means of production,—land, machinery, raw materials, and so on,—he would, therefore, need to work only so many hours as the production of the necessities of life for himself and his family required. But the laborer in capitalist society does not own the means of production, that condition being quite incompatible with machine production upon a large scale. A separation of the worker from the ownership of the means of production has taken place as one of the inevitable results of industrial evolution. So the laborer must sell the only commodity he has to sell, namely, his labor-power. He sells the utility of that commodity to the capitalist for its exchange-value, or market price. Like any other commodity, the utility of labor-power, its use-value, belongs to the purchaser, the capitalist. It is his to use as he sees fit. He has it used to produce other commodities which he in turn hopes to sell—has the labor-power used up in the manufacture of other commodities, just as he has the raw materials used up. He buys, for example, the labor-power of the workers for a day of ten hours. In five hours, say, the worker creates value equivalent to his wages, but he does not cease at that point. He goes on working for another five hours, thus producing in a day double the amount of his wages, the exchange-value of the labor-power he sold the capitalist. Thus the capitalist, having paid wages equivalent to the product of five hours, receives the product of ten hours. This balance represents the surplus-value (Mehrwerth).

This takes place all through industry. If the capitalist employs a thousand workers under these conditions, each day he receives the product of five thousand hours over and above the product actually paid for. This constitutes his income. If the capitalist owned the land, machinery, and raw materials, absolutely, without incumbrances of any kind, the whole of that surplus-value would, naturally, belong to him. But as a general rule this is not the case. He rents the land and must pay rent to the landlord, or he works upon borrowed capital and must pay interest upon loans, so that the surplus-value extracted from the laborer must be divided into rent, interest, and profit. But how the surplus-value is divided among landlords, moneylenders, creditors, speculators, and actual employers is a matter of absolutely no moment to the workers as a class. That is why such movements as that represented by the followers of Henry George fail to vitally interest the working class.[177] The division of the surplus-value wrung from the toil of the workers gives rise to much quarrel and strife within the ranks of the exploiting class, but the working class recognizes, and vaguely and instinctively feels where it does not clearly recognize, that it has no interest in these quarrels. All that interests it vitally is how to lessen the extent of the exploitation to which it is subjected, and how ultimately to end that exploitation altogether. That is the objective of the movement for the socialization of the means of life.

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