MARXIST ECONOMIC THEORY Volume One by ERNEST MANDEL TRANSLATED BY BRIAN PEARCE (@ NEW YORK AND LONDON Copyright 1(:11962, 1968 by Ernest Mandel Translation copyright 1968 by The Merlin Press, London All Rights Reserved Library of Congress Catalog Card Number: 68-13658 First Modern Reader Paperback Edition 1971 Monthly Review Press 62 West 14th Street, New York, N.Y. 1001 l 47 Red Lion Street, London WCIR 4PF Manufactured in the United States of America IO 9 8 7 6 PREFACE TO ENGLISH EDITION THE manuscript of the French original of this work was completed in 1960, and the French edition appeared in the spring of 1962. The English edition thus reaches the reader seven years after the com­ pletion of the French manuscript. The author would have liked to bring the documentation of the book up to date and embody in it the conclusions of a number of important works which have been pub­ lished since 1960, but he has not had the time to do this. He has con­ fined himself to rewriting Chapter 15, devoted to the Soviet economy, so as to be able to include in it a critical analysis of the important changes that have taken place during the period which has elapsed. He has made slight amendments to some other chapters and extended some of the series of statistics given. Nevertheless, the English edition constitutes a revised and corrected edition, as compared with the original one, more especially because of the corrections which have been made to printers' errors and mistakes in the references. ERNEST MANDEL CONTENTS OF VOLUME I INTRODUCTION Paradox of Marxism today 13 Responsibility of the Marxists 14 Economic theory and empirical facts 15 Economic theory and economic history 16 Method 17 The value and power of attraction of Marxism 19 Living Marxism: a promise 20 CHAPTER ONE LABOUR, NECESSARY PRODUCT, SURPLUS PRODUCT Labour, society, communication, language, consciousness, humanity 23 Necessary product 24 Beginning of the social division of labour 25 First appearance of a social surplus product 26 The neolithic revolution 28 Co-operative organisation of labour 30 Primitive occupation of the soil 33 The cultivation of irrigated land, cradle of civilisation 36 The metallurgical revolution 37 Production and accumulation 39 Is there an "economic surplus"? 42 CHAPTER TWO EXCHANGE, COMMODITY, VALUE Simple exchange 49 Silent barter and ceremonial gifts 50 Developed exchange 53 Trade 54 Production for use and production of commodities 57 Co-operatively organised society and society based 1.;m economy of labour-time 59 Exchange-value of commodities 63 Petty commodity production 65 Law of value in petty commodity production 67 7 8 CONTENTS CHAPTER THREE MONEY, CAPITAL, SURPLUS-VALUE Need for a universal equivalent 72 Evolution of the universal equivalent 74 Money 76 Evolution of social wealth and different functions of money 78 Circulation of commodities and circulation of money 79 Surplus-value emerging from the circulation of commodities 82 Surplus-value arising from commodity production 85 Capital, surplus-value and social surplus product 88 Law of uneven development 91 CHAPTER FOUR THE DEVELOPMENT OF CAPITAL Forms of agricultural surplus product 95 Accumulation of use-values and accumulation of surplus-value 98 Usurer's capital 100 Merchant capital 102 The commercial revolution 106 Domestic industry 110 Manufacturing capital 113 Creation of the modern proletariat 116 The Industrial Revolution 118 Special features of capitalist development in Western Europe 119 Capital and the capitalist mode of production 125 CHAPTER FIVE THE CONTRADICTIONS OF CAPITALISM Capital thirsting for surplus-value 132 The lengthening of the working day 135 Growth in the productivity and intensity of labour 136 Human labour-power and machine production 140 Forms and evolution of wages 143 Additional note on the theory of absolute impoverishment 150 Dual function of labour-power 154 Equalisation of the rate of profit in pre-capitalist society 156 Equalisation of the rate of profit in the capitalist mode of production 158 Price of production and value of commodities 160 Centralisation and concentration of capital 162 Tendency of the average rate of profit to fall 166 Supreme contradiction of the capitalist system 170 Free labour and alienated labour 172 Class struggle 174 CONTENTS 9 CHAPTER SIX TRADE Trade, outcome of uneven economic development 182 Production and realisation of surplus-value 184 Annual amount of surplus-value and annual rate of profit 186 Commercial capital and commercial profit 189 Commercial capital and labour-power engaged in distribution 191 The concentration of commercial capital 192 Capital invested in transport 198 International trade 199 Costs of distribution 201 The Tertiary Sector 204 CHAPTER SEVEN CREDIT Mutual aid and credit 210 Origin of banking 211 Credit in pre-capitalist society 214 Supply and demand of money capital in the epoch of commercial capital 217 Supply and demand of money capital in the epoch of industrial capitalism 219 Interest and rate of interest 222 Circulation credit 226 Investment credit and the finance market 228 The Stock Exchange 230 Joint-stock companies and the evolution of capitalism 233 Consumer's credit 236 Credit and the contradictions of capitalism 237 CHAPTER EIGHT MONEY The two functions of money 242 Value of metallic money and price movements 243 Circulation of metallic money 244 Origins of private fiduciary currency 246 Origins of public fiduciary currency 248 Creation of public fiduciary currency: First source: discounting 250 Creation of public fiduciary currency: Second source: advances on current account (overdrafts) 251 Creation of public fiduciary currency : Third source: public expenditure 253 10 CONTENTS Socially-necessary stock of currency 254 Circulation of inconvertible paper money 255 Balance of payments 259 Central banks and bank credit 261 Currency manipulations 262 Three forms of inflation 264 Purchasing power, circulation currency and rate of interest 266 CHAPTER NINE AGRICULTURE Agriculture and commodity production 271 Pre-capitalist rent and capitalist ground-rent 272 Origins of capitalist ground-rent 273 Differential ground-rent 276 Absolute ground-rent 278 Ground-rent and the capitalist mode of production 280 Price of land and evolution of ground-rent 282 Landed property and the capitalist mode of production 286 Production-relations and property-relations in the countryside 288 Concentration and centralisation of capital in agriculture 290 The wretched lot of the agricultural worker 293 From the theories of Malthus to agricultural Malthusianism 294 Ground-rent and the marginal theory of value 298 CHAPTER TEN REPRODUCTION AND GROWTH OF THE NATIONAL INCOME New value, new income and transferred income 305 The State, surplus-value and social income 310 The sharing-out of surplus-value 312 Social product and social income 314 Distribution of incomes and realisation of commodities 317 Production and reproduction 320 Simple reproduction 322 Expanded reproduction 324 Expanded reproduction and the laws of development of capitalism 327 Expanded reproduction, economic growth and social accounting 329 Contracted reproduction 331 War economy 332 Redistribution of national income by the State 335 CONTENTS 11 CHAPTER ELEVEN PERIODICAL CRISES Pre-capitalist and capitalist crises 342 General possibility of capitalist crisis 343 Law of markets 344 Cyclical progress of capitalist economy 345 Internal logic of the capitalist cycle 349 Extension of the basis of capitalist production 358 Under-consumption theories 361 Critique of "under-consumption" models 363 Theories of disproportionality 366 Outline of a synthesis 368 Conditions of capitalist expansion 371 No growth without fluctuations? 373 INTRODUCTION THE attitude of the academic world towards Marxist economic theory is ruled by a strange paradox. Half a century ago, this theory was the subject of increasing theoretical interest and of fervent discussions in university circles, but it was said to lack all practical significance: a socialist economy "is impracticable", said the economists. 1 Today nobody denies that Marxist theory is capable of inspiring, and not unsuccessfully, the economic policy of states both large and small; but in academic circles it now meets only with indifference or con­ tempt.* If it sometimes figures as the subject of more thorough studies, this happens not for its own sake but in so far as it is a sub-branch of the new "science" called "sovietology'', or is included within a still stranger discipline, "marxology" ... Whoever regards as valid the Marxist method of investigation and the mass of results which it has produced-and the writer is un­ reservedly of that opinion-might obviously retort that there is noth­ ing to be surprised at here. Is not academic science "in the service of the ruling class"? Is not the capitalist world "engaged in a fight to the death" with the "socialist camp"? Is not Marxist theory an essential weapon of this "camp"? Are not the servants of capitalism obliged to discredit systematically whatever is of service to their class foes? From this standpoint the discredit cast upon Marxism in the West is merely a manifestation of the class struggle itself, indirectly confirming the validity of the Marxist propositions. This method of reasoning runs the risk of producing the sort of dialogue between people who are impervious to each other's arguments which is what the exchange of "technical" invective between Marxist and psycho­ analysts amounts to. We shall not, of course, deny that there is a grain