Bernstein and the Marxism of the Second International - Great Deppression
Bernstein and the Marxism of the Second International
T H E ' G R E A T D E P R E S S I O N '
For economists, the last quarter of the nineteenth century has for some time now come to assume the significance of a crucial phase in the history of capitalism. The period is marked by a long-drawn-out economic crisis, which has become known as the 'Great Depression', lasting from 1873 to 1895, though punctuated by two moments of recovery.[18] During this crisis, which began with a violent slump but soon adopted a milder, but exhaustingly lengthy movement (which helped many contemporaries to fail to identify it as a real crisis in the classical sense of the term), all the fundamental categories of Marx's analysis came fully into play: the tendency for the rate of profit to fall due to the increased 'organic composition' of capital; stagnation and partial saturation of outlets for investment; unimpeded action of competition, which, apart from affecting profit margins, resulted in a spectacular fall in prices.
In his edition of the third volume of Capital, Engels inserted a lengthy note into Marx's discussion of joint-stock companies, in which he referred to the Depression then taking place in the following terms:
The daily growing speed with which production may be enlarged in all fields of large-scale industry today, is offset by the ever-greater slowness with which the market for these increased products expands. What the former turns out in months, can scarcely be absorbed by the latter in years. . . . The results are a general chronic over-production, depressed prices, falling and even wholly disappearing profits; in short, the old boasted freedom of competition has reached the end of its tether and must itself announce its obvious, scandalous bankruptcy.[19]
The insistence in this text on the 'ever-greater slowness' with which the market expands refers in particular to an essential feature of this period, to which Engels frequently drew attention: the end of the British industrial monopoly of the world and the beginning of international struggle for markets -- not, of course, for the export of commodities, but for the export of capital. It was indeed precisely during the Great Depression period that German and American industry, which embarked on the process of centralization earlier and more fully than British industry, began to contest British economic world supremacy.[20]
This end to the 'British industrial monopoly' acquired great significance in Engels's thinking in his last years. He refers to it in his Preface of 1892 to the Condition of the Working Class in England : the breakdown of this monopoly, he wrote, must entail the loss of the 'privileged position' of the British working class and hence 'there will be socialism again' in Britain. It would seem that the effects of the depression and the 'bankruptcy' of free competition reinforced to some extent in Engels -- and even more clearly in the case of his disciples -- the sensation that the system was rapidly moving towards the final settlement of accounts.
Kautsky later recalled:
At the time of my third stay in London (1885), Engels unceasingly affirmed that the British workers' rejection of socialism was connected with the monopoly position of British industry over the world market, which allowed the capitalists to concede extraordinary favours to the Trade Unions. But now, with the rise of powerful industries in other countries, this monopoly would end; with its demise the opposition between organized labour and capital would become more acute even in Britain.
And Kautsky added:
Indeed, we expected much more from the crisis at that time. . . . Not only the revival of the socialist movement in Britain, but the breakdown (Zusammenbruch ) of capitalism throughout the world. This hope proved illusory. Capitalism survived the crisis, despite its considerable extension in space and time and its inordinate intensity. A new phase of capitalist prosperity ensued. But what emerged was an entirely altered capitalism. The older form of capitalism had been eclipsed.[21]
This is perhaps the crucial point. The long crisis passed and capitalism survived. Indeed it overcame the crisis by transforming itself. Learning from the drastic effects of competition on prices and profit margins, capitalism reacted by decisively adopting the path of monopolistic development.[22] Capitalism entered the Great Depression in the classical nineteenth-century form of a competitive economy; it emerged at the end of the century with a radically altered physiognomy. The old banner of laisser-faire was rolled up. Unlimited competition was restricted; faith in the providential self-regulating virtues of the system gave way to agreements on prices and production quotas. Until the 1870s free competition went almost uncontested; by the end of the century, cartels had already become one of the bases of economic life. The great business upswing after 1895 and the new crisis of 1900-3 took place, for the first time, at least in the mining and iron-and-steel industries, entirely under the sign of monopolistic cartelization.
Free trade gave way steadily to protectionism: but with the difference that, while the initial task of protectionism had been that of safeguarding growing national industries from the unequal competition of more advanced industrial countries, its function was now altered, indeed inverted. It was transformed, 'from a means of defence against the conquest of the home market by foreign industry' into 'a means of conquering overseas markets on behalf of home industries; . . . from a defensive weapon of the weak' into 'an offensive weapon of the strong'.[23]
Similarly profound mutations occurred in the field of colonial policy.
In the classic period of free trade, the colonial system had fallen into such discredit that, as Lenin remarked, even after 1860 'the leading British bourgeois politicians were opposed to colonial policy and were of the opinion that the liberation of the colonies, their complete separation from Britain, was inevitable and desirable'.[24] From 1880 onwards, on the contrary, a new feeling awakened for the economic value of colonies. Hobson in his book on imperialism marks out the period from 1884 to 1900 as that of the maximum territorial expansion of the major European powers. Africa, only a tenth of whose total area had been annexed by 1876, was by 1900 nine-tenths under foreign rule.
The effects of this deep and substantial change in capitalist development were a decisive factor in the 'crisis of Marxism' which erupted at the turn of the century. The system, which seemed to have entered a period of prolonged coma since the 1870s, beyond which -- imminent and palpable -- seemed to be visible the collapse of bourgeois society and the advent of socialism, now enjoyed a sudden upswing; the result was a profound shift in the European and world picture, destroying the expectations of an imminent 'breakdown' of the old society which had seemed to rest upon unbreakable and inevitable 'natural necessity'. As Labriola wrote, on the outbreak of the Bernstein-Debatte :
Behind all the din of battle, in fact, there lies a deep and crucial question. The ardent, energetic and precocious hopes of several years ago -- the prediction of the details, the over-precise itineraries -- have now come up against the more complex resistance of economic relations and the ingenuity of political contrivances.[25]
A new epoch of capitalist prosperity began. Capitalism sprang from its ashes, its physiognomy profoundly altered. And even if the Great Depression came to be characterized by later economists as 'forming a watershed between two stages of capitalism: the earlier vigorous, prosperous and flushed with adventurous optimism; the latter more troubled, more hesitant, and some would say, already bearing the marks of senility and decay,'[26] the dominant impression for many contemporaries was that of entering into a new epoch, governed by only partially explored mechanisms, bristling with unforeseen problems.
Labriola was not alone in sensing this. In the issue of Die Neue Zeit in which, for the first time, he stated explicitly his disagreement with Bernstein, Kautsky observed that the political and economic changes of the past twenty years had revealed characteristics which were still hidden at the time of the Manifesto and Capital. 'A re-examination, a revision of our positions had therefore become necessary.' Even if he did not share the method, or results, which had hitherto emerged from Bernstein's articles, at least he granted them the merit of having posed the problem.[27]
The state of unease and uncertainty in the face of the newly emerging situation was all the more acute for the incautious, credulous optimism of several years before. For the older generation it was complicated by the disarray caused by the recent loss of Engels's guidance. 'All this is only part of the difficulties which have burdened us through the death of Engels', Adler wrote to Bebel: 'the Old Man would also have made the "revision" easier, to the extent that it is needed'.[28] Shortly after, in a letter to Kautsky, he added: 'You [Bernstein and Kautsky himself] should both have done this work, which was or rather still is needed, to bring the party up from the 1847 viewpoint to that of 1900.'[29]
In the course of a few years, then, the economic and social situation emerged in a new light; what had shortly before seemed the immediate prelude to the 'final crisis' now unexpectedly assumed the profile of a new epoch. As always, at moments of crossing a critical watershed, minor differences between closely related positions are enough to reveal globally different outlooks. In 1895, in the Introduction to the new edition of The Class Struggles in France, Engels optimistically saw capitalism moving ineluctably towards its rapid decline 'by the end of the century', while the rise of Social Democracy to power seemed to proceed 'as spontaneously, as steadily, as irresistibly and at the same time as tranquilly as a natural process'. Everything, in short, seemed to conspire towards the imminent ruin of the existing order, even the 'legality' the bourgeoisie had provided for itself. In 1896, on the other hand, we are confronted by Bernstein's doubts, 'disappointment' and confusion; by now he could only see the 'tactics', the everyday routine of the 'movement', and no longer saw the meaning of the 'final goal' (das Endziel ).
Both perceived the same phenomena, both recorded the birth of cartels and trusts. But in their arguments, these same phenomena acquired radically opposed significances. In the long note, already discussed, which Engels inserted in Marx's treatment of joint-stock companies in the third volume of Capital, he wrote of 'new forms of industrial enterprises . . . representing the second and third degree of stock companies'. In each country, he wrote, 'the big industrialists of a certain branch [join] together in a cartel for the regulation of production. A committee fixes the quantity to be produced by each establishment and is the final authority for distributing the incoming orders. Occasionally, even international cartels were established, as between English and German iron industries.'[30]For Engels this monopolistic cartelization and resultant 'regulation' of production was the final process of involution, the imminent extinction of the system, the 'bankruptcy' of free competition as the basic principle of the capitalist system. Bernstein, on the contrary, as Kautsky acutely observed,[31] overlooked cartels when they spoke in confirmation of the real occurrence of capitalist concentration, and hence 'to Marx's advantage', only referring to them where they could serve as evidence 'against' Marx. In his view, cartels and the slight degree of 'regulation' of production they allowed signified the opposite: the advent of a new, so to speak, regenerated capitalism which had learned to correct its old faults (anarchy) by 'regulating itself' and hence was capable of indefinite survival.
This difference of viewpoints stems essentially from a different perception of the historical moment. In this respect, in his awareness that times were changing, it must be conceded that Bernstein was in advance of Engels, Kautsky and all the rest. His advantage and strength lay in his consciousness that he was facing a new historical situation. His actual attempt to cast light on the phenomena of the most recent capitalist development was irrelevant from a scientific standpoint, but this foresight explains why it is that, despite the archaism of so much of his argument, he nonetheless appears in some respects -- in his prompt intuition of the new course of development, obviously, rather than in the interpretation he gave of it -- nearer to the generation of a Lenin and a Hilferding than to that of a Kautsky and a Plekhanov. Stock companies, the development of cartels and trusts, the separation of 'ownership' and 'control', the growing 'socialization of production', the 'democratization of capital', etc., all themes which are central to Bernstein's argument, are also the themes of Hilferding's Finance Capital and Lenin's Imperialism. That is why the most effective answers to Bernstein can be found in these texts.
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