Once More on the Theory of Realization

A work written by Lenin to refute the distortions and “criticisms” of Marx’s economic theory by the “legal Marxists”. It was written in March 1899 and published in the Russian journal Scientific Review, issue No. 8, August 1899. The Chinese translation is included in Vol. 4 of the second edition of Complete Works of Lenin.

“A Note on the Question of the Market Theory (Apropos of the Polemic of Messrs. Tugan-Baranovsky and Bulgakov)” was followed by P. B. Struve’s article “Markets under Capitalist Production (Apropos of Bulgakov’s Book and Ilyin’s Article)”. Struve “rejects, to a considerable extent, the theory proposed by Tugan-Baranovsky, Bulgakov, and Ilyin” of his article and expounded his own conception of Marx’s theory of realization. To refute the misconceptions of Struve, Lenin wrote the essay “Once More on the Theory of Realisation”.

Lenin pointed out that Struve committed two basic mistakes: In the first place, Struve confuses the market theory of bourgeois economists who taught that products are exchanged for products and that production, therefore, should correspond to consumption. Secondly, Struve confuses the abstract theory of realization (with which his opponents dealt exclusively) with concrete historical conditions governing the realization of the capitalist product in a certain country and in a certain epoch.

To clarify these misunderstandings, Lenin argued that Adam Smith must be present when recounting the realization theory. Stuart Loewe, on the other hand, argues that “then we should not stop at Smith but at the physiocrats.” Lenin pointed out that it was precisely Adam Smith who did not confine himself to admitting the truth (known also to the physiocrats) that products are exchanged for products but raised the question of how the different component parts of social capital and the product are replaced (realized) according to their value.

Lenin supported the views held by Bulgakov in his debate with Struve on commodity circulation. According to Bulgakov, that bourgeois economists confuse simple commodity circulation with capitalist commodity circulation, whereas Marx established the difference between them, which Lenin considered to be completely correct. However, Struve argues that the above assertion made by Bulgakov is based on a misunderstanding because Marx cannot be regarded as a champion of that theory of realisation according to which the product can be realised inside the given community, because Marx “made a sharp distinction between simple commodity circulation and capitalist circulation”. But that is precisely what Mr. Bulgakov said. It can be seen that Struve is refuting Bulgakov by repeating Bulgakov’s arguments, a misunderstanding of Struve himself.

Lenin disagreed with Struve’s views mainly in the following ways:

(1) Giving the theory of realization the name of the theory of proportional distribution. It is inaccurate and must inevitably lead to misunderstandings. The theory of realization is an abstract theory that shows how the reproduction and circulation of the aggregate social capital takes place. The essential premises of this abstract theory are, firstly, the exclusion of foreign trade, of the foreign markets. But, by excluding foreign trade, the theory of realization does not, by any means, postulate that a capitalist society has ever existed or could ever exist without foreign trade. Secondly, the abstract theory of realization assumes and must assume the proportional distribution of the product between the various branches of capitalist production. But, in assuming this, the theory of realization does not, by any means, assert that in a capitalist society products are always distributed or could be distributed proportionally. Thus, there is no basis for calling the theory of realization a theory of proportional distribution.

(2) Regarding the statement that “Marx justly accused Ricardo of repeating Adam Smith’s error.” Lenin, by quoting a large number of facts—including Ricardo’s original words, Marx’s relevant discussion in Capital, etc.—pointed out that Ricardo inherited Smith’s mistake: Ricardo divided the whole product of land and labor into three parts: piece-rate wages, profits and ground rents, wrongly leaving out constant capital, which was precisely the mistake made by Adam Smith. Marx’s evaluation of Ricardo’s doctrine was fair. According to Lenin, Struve blamed Marx because he completely failed to understand the significance of Marx’s division between constant capital and variable capital for the realization theory. Lenin elaborated that products that replace variable capital must be exchanged, in the final analysis, for articles of consumption for the workers and meet their usual requirements. The products that replace constant capital must, in the final analysis, be exchanged for means of production and must be employed as capital for fresh production. For this reason, the differentiation between constant and variable capital is absolutely essential for the theory of realization. After all, the theory of realization aims to show how the reproduction and circulation of the aggregate social capital take place.

(3) The statement that “the abstract theory of realization can be well explained by the most varied methods of dividing the social product”. Lenin points out that this is a cliché of Struve’s that the theory of realization can be illustrated by the exchange of products. It is because of this misunderstanding that Struve comes to the erroneous conclusion that, for example, “The role played by these masses of commodities [those being realised] in production, distribution, etc., whether they represent capital and what sort of capital, constant or variable, is of absolutely no significance to the essence of the theory under discussion.” It is of no significance to Marx’s theory of realization, a theory that consists in the analysis of the re-production and circulation of the aggregate social capital.

(4) On the view that “What is the real significance of the theory of realisation?” Lenin states: “Capitalist production is increasing throughout the world,” says Mr. Bulgakov. “This argument,” objects Struve, “is quite groundless. The fact is that the real ’expansion of capitalist production’ is not by any means effected in that ideal and isolated capitalist state which Bulgakov presupposes and which, by his assumption, is sufficient unto itself, but in the arena of world economy where the most differing levels of economic development and differing forms of economic existence come into collision”. Lenin pointed out that the problem of realization is an abstract problem that is related to the general theory of capitalism. Whether we take one country or the whole world, the basic laws of realization, revealed by Marx, remain the same. The problem of foreign trade or of the foreign market is an historical problem, a problem of the concrete conditions of the development of capitalism in some one country and in some one epoch. Moreover, the all-other laws of capitalism, revealed by Marx, also depict only the ideal of capitalism and not its reality. The theory of realization has exactly the same value as have all the other postulates of Marx’s abstract theory. The scientific value of Marx’s theory is its explanation of the process of the reproduction and circulation of the aggregate social capital. Further, Marx’s theory pointed out the contradictions inherent in capitalism and, not only does not restore the apologetic bourgeois theory, but, on the contrary, provides a most powerful weapon against apologetics.

(5) The point that “in relation to an ideal or isolated, self-sufficing capitalist society, extended reproduction would be impossible, since the necessary additional workers can nowhere be obtained.” Lenin pointed out that Struve has not proved, and it cannot be proved, that it is impossible to obtain additional workers from the reserve army. Struve evaded the question, using historical and practical conditions as an excuse. In fact, there are innumerable historical and practical conditions mentioned by Stilwell which are and will certainly lead capitalism to extinction, without turning modern capitalism into ideal capitalism. But Lenin argued that there were no theoretical grounds for denying the possibility of extended reproduction in such a society.

Lenin also explained how to view “bears the obvious stamp of the polemical nature of Marx’s whole system in general,” that “it is tendentious”. “Marx’s system” is of a “polemical nature,” not because it is “tendentious,” but because it provides an exact picture, in theory, of all the contradictions that are present in reality. “Struve says: ‘Bulgakov makes the very subtle remark that no difference in principle can be discerned between the home and the foreign market for capitalist production.’ I fully agree with this remark: in actual fact a tariff or political frontier is very often quite unsuitable as a line drawn between the ‘home’ and ‘foreign’ markets. But for reasons lust indicated I cannot agree with Struve that “the theory asserting the necessity for third persons ... arises out of this.” Lenin was in full agreement with this opinion but disagreed with Struve’s reasoning. Lenin argued, firstly, that Struve’s reference to the peasantry as a “third persons” was inappropriate and could lead to misunderstandings. Secondly, it merely pointed out that in analyzing the problems concerning capitalism, one should not stop at the traditional division between the domestic and home markets. This division is not strictly theoretically valid, and it is even less applicable to countries like Russia. It can be replaced by another division, for example, by the formation and development of capitalist relations within the bounds of a certain fully populated and occupied territory; the expansion of capitalism to other territories. Moreover, Lenin points out that this division is appropriate because it clearly defines the scope of the problems included in the realization theory.

In conclusion, Lenin’s criticism of Struve on the theory of realization is an important guide for us to recognize the error of “legal Marxism” and adhere to the basic principles of the Marxist political economy. As Lenin pointed out at the end of his article, it is important to uphold the “orthodoxy” of Marxism and not to dogmatize it, but rather to promote its further development and refinement.