Reply to Selgin on the Origin of Electrum Coinage, Part 2

This is part 2 of my response to George Selgin’s post here:

George Selgin, “‘Lord Keynes’ contra White on the Beginnings of Coinage,” Alt-M Ideas for an Alternative Monetary Future, August 30, 2017.

Selgin refers to various new data from the past 20 years or so, and much of the new evidence was presented at a conference called “White Gold: Revealing the World’s Earliest Coins,” held from 25–26th June, 2012 (International Congress at Israel Museum, Jerusalem).

Wartenberg (2017), for instance, refers to the edited proceedings of this conference: White Gold: Studies in Early Electrum Coinage (edited by Peter Van Alfen and Ute Wartenberg). But this book will not be published until December 31, 2017, so I can hardly evaluate the evidence there, but have to go on published summaries of the papers.

The new data can be described as follows:

(1) new archaeological work on the Artemisium of Ephesus discussed in Cahill and Kroll (2005) demonstrates that electrum coins already existed in the last quarter of the 7th century BC (625–601 BC), which confirms the older dating of the invention of coins to the period around 630 BC (de Callataӱ 2013: 13).

(2) recent investigation of electrum coins with advanced scientific techniques indicates to some scholars that these early electrum coins were minted from combining gold and silver, and so were not minted from natural electrum alloys (de Callataӱ 2013: 9).

Wartenberg (2017) reports that laser ablation inductively coupled plasma mass spectrometry (LAICP-MS) analysis of early electrum coins shows that their gold-to-silver content was more uniform than previously thought: e.g., a panther or lion head series had a gold-to-silver ratio of 55–45%, with 1–2% copper. A striated coin series (which might be a later series) has a gold-to-silver ratio of about 60–40% ratio.

Wartenberg also concludes that LAICP-MS analysis shows that early electrum coins were not minted in naturally occurring electrum, but deliberately minted by “combining pure gold and silver, which was previously refined” to achieve stable gold-to-silver ratios, even in the late 7th century (Wartenberg 2017: 27).

(3) there is much more evidence for lower denomination coins in the early electrum series, even down to 1/192 of a stater (Wartenberg 2017: 27), though it remains true that many higher denomination coins were also minted.

Datum (1) does not refute older interpretations.

Datum (2) and (3) do provide evidence against the some versions of the orthodox Chartalist hypothesis that individual early electrum coins (supposedly minted from natural electrum) had a much more variable gold-to-silver content (Price 1983: 5), and so were fiduciary to the extent that the gold content varied between individual coins, and was not always the same as the face value.

But do these data provide good evidence that private agents were the innovators in coining electrum coins, under the Mengerian theory of the emergence of money? The answer is: not really.

First, let us re-state some important points. The first coins were minted in the second half of the 7th century BC (650–600 BC) in what is now western Turkey (what was called “Asia Minor” by the Classical Greeks) in ancient Lydia, and in the Greek colonies in Ionia.

Both the ancient writers Xenophanes (as cited in Pollux, Onom. 9.83) and Herodotus (Histories 1.94) report this. This region was dominated by the ancient kingdom of Lydia, with the royal capital at Sardis, which was populated by an Indo-European speaking people, and the extent of the Lydian kingdom can be seen in this map:

The earliest coins consisted of stamped pieces of electrum, an alloy of gold and silver with trace amounts of copper, but with a roughly uniform weight. Here is an example of an early Lydian electrum coin with lion-head:

Ancient Lydia was rich in electrum, which was panned from the rivers, as well as mined. It is established that Lydian alluvial electrum (that is, electrum taken from the rivers) had a natural variable gold content from about 65% to 85% (Konuk 2012: 44; Meeks 2000: 145–148).

However, natural electrum was peculiarly unsuited to be the most saleable commodity that emerged as the general money commodity in line with Menger’s theory of the origin of money. We can review why this is the case.

For one thing, small-sized electrum and electrum dust could not be easily tested for purity (Kroll 2012: 38):

“When offered in a transaction, the quality of the [sc. electrum] metal first had to be tested visually from the color of streaks made on a touchstone (No. 16), and while such testing presented no problems with larger lumps of electrum, it would have been practically impossible to test a bagful of dozens of small nuggets and crumbs of the metal. Even if each small piece were separately tested, it would have been exceedingly difficult to determine with any accuracy the value of an entire bag of pieces, each with a different weight and fineness. Over time, as the complexities and unreliability of electrum bullion became widely recognized, Lydians and their Greek and Carian neighbors who had accumulated large stocks of this metal must have found it increasingly difficult to utilize it in payments that others would accept.”
Kroll, John H. “The Coins of Sardis,” Sardisexpedition.org
http://www.sardisexpedition.org/en/essays/latw-kroll-coins-of-sardis

In light of this, natural electrum can hardly have been Menger’s “most saleable commodity,” since many people will have required small size electrum or electrum dust for ordinary, low-value transactions in trade and in the market-place (or in the agora, as the Greeks called it).

The average percentage of gold in natural electrum was probably about 70–75% (Konuk 2012: 44), whereas, as we have seen, the most recent analysis of the early lion-head electrum coin series (likely from Lydian kings) shows that they tended to have a stable but lower percentage of gold at about 54% with about 2% copper (Cowell and Hyne 2000: 170–171; Keyser and Clark 2001: 114). Another panther or lion-head series (probably early Lydian coins), analysed with laser ablation inductively coupled plasma mass spectrometry (LAICP-MS), had a gold-to-silver ratio of 55–45%, with 1–2% copper (Wartenberg 2017: 26; see also Velde 2012: 19).

So whoever was minting these coins struck them with an alloy in which the gold content – although consistent – was lower than the average found in natural electrum (Konuk 2012: 44).

The stable gold content gave these coins a definite consistent colour, and, along with their standard weight, can be seen as part of the process of standardising them. Perhaps copper was even added to give them a colour like that of electrum with a higher gold content.

Unless they were explicitly given a face value at the monetary value of the gold-to-silver content, early electrum coins would still have been fiduciary to some extent if the issuing authority tried to give them a value at the average gold content of electrum, and if the public expected them to contain the average gold content of natural electrum (about 70–75%). However, in reality the early coins clearly did not have that gold value, since they had a relatively stable but lower gold content of 54%.

Many modern scholars – and probably a majority – continue to argue that the actual exchange value of the early electrum coins was larger than their intrinsic metallic value, perhaps by as much as 20% (Le Rider 2001: 94–95; Cahill and Kroll 2005: 612–613; Kroll 2008: 21; Konuk 2012: 44; Kroll 2012: 39; Furtwängler 2011: 17; for older views on the overvaluation of electrum coins, see Bolin 1958: 11–45, who saw it as a secret fraud by the Lydian kings).

So, in view of this, the Chartalist view is hardly refuted by the discovery of a more stable gold content in the early coins, since the Lydian kings may well have accepted them in payment at the higher face value.

In short, if the Lydian kings deliberately minted early electrum coins with a gold content of 54%, but gave them a conventional face value in line with the average 70% gold value of natural electrum, and then accepted the coins back again in taxes, fines or other payments, then they could still have been fiduciary coins, to some extent, in a closed monetary system in Lydia and its subject Greek city-states (Rider 2001: 94–95, 116).

The Lydian kings would have had substantial expenditures, since they fought major wars and engaged in huge building programs at Sardis, their capital (on the archaeology of Lydia, see Roosevelt 2009; Greenewalt 2011; Roosevelt 2012), so that they surely made payments to soldiers, labourers, and artisans on a large scale.

Price (1983) suggested that the early electrum coins were intended as gifts that only later became monetised, but the discovery of many more smaller denomination electrum coins than previously thought in the early issues strongly suggests that these coins were intended for exchange and monetary transactions.

The Lydian kings are still the best candidates for the inventors of the coins, since (1) the Lydian kings had large stocks of the necessary electrum, (2) could accept the coins back as payment as taxes or obligations (if they were intended as money), and (3) had many large-scale payments to make.

Furtwängler (2011: 18) argues that – over time – the Lydo-Milesian standard electrum coins with their 54% gold content (below the average gold content of natural electrum) did not win widespread acceptance in the Greek city-states outside the Lydian empire (see also Kroll 2012: 39). Croesus – perhaps as much for political as for economic reasons – implemented a currency reform around 560 BC (or perhaps even earlier if his accession was around c. 585 BC, as argued by Wallace 2016), and recalled his electrum coins, and, by cementation techniques, used them to mint a new pure gold and silver coinage to restore confidence (Furtwängler 2011: 18).

Evidence for the higher face value of the older electrum coins has been adduced from peculiar data about Croesus’ new gold stater issues.

During the reign of the last Lydian king Croesus (who ruled from c. 585 or 560–546 BC), the king minted a new pure gold and silver coinage called “Croeseids” (and recent archaeological evidence proves that this coinage reform had been implemented by the time of Croesus, and not later under the Persians as some scholars have argued; see Cahill and Kroll 2005).

But the weight and two specific issues of the new gold staters are suggestive:

(1) probably at first, the new gold staters (sometimes called “Heavy Croeseids”) were issued and struck with 10.8 grams of gold. Given the value of gold to silver was probably about 1:13.3 in this period, the new gold stater of 10.8 grams would have been equivalent to an electrum stater of 14.15 grams, but only if the electrum staters were artificially overvalued at the gold content of natural electrum (which stood at about 70–75% gold). Since the value of the electrum staters had been partly fiduciary and possibly confidence in them was in question by this period, this exchange ratio with the new gold coins would have maintained the government guarantee of accepting them at their artificial face value. This was intended to recall the old electrum coins (Konuk 2012: 50; Cahill and Kroll 2005: 612–613; Kroll 2001b: 201–202).

(2) however, at some point – presumably when a large quantity of electrum coins had been recalled – Croesus minted a new pure gold stater with a reduced size, and struck at 8.1 grams (the so-called “Light Croeseids”). This reflected the value of the actual gold content of the old electrum coins, whose gold content had been fixed at about 54% and 44% silver (Konuk 2012: 50; Cahill and Kroll 2005: 612–613; Walburg 1991). The Lydian kings now abandoned their experiment with overvalued electrum coins, perhaps for political as much as economic reasons, and instead minted a pure gold and silver stater coinage, along with smaller denominations of each gold and silver stater type.

The fact that Croesus’ “Heavy Croeseids” (presumably minted before the light kind) seem to match the postulated artificial value of the early electrum coins is considered by many scholars to be strong evidence that they really had been overvalued by state guarantee, and this seems to be the best explanation of the data.

Finally, the absence of electrum coins from the list of precious metal revenue on a lead tablet dated to the period around 600 BC from the Artemisium temple of Ephesus – before Ephesus was conquered by the Lydian king Croesus and politically subject to Lydian suzerainty – suggests that the early Lydian electrum coins were not accepted at the temple, probably because they were understood to be overvalued (Kroll 2008: 18–21).

So, all in all, the case for a qualified Chartalist interpretation of the earliest electrum coinage of Lydia is still strong.

Furthermore, recent analysis of the electrum coinage of Samos has established that the gold content of Samian coins was much more variable, and ranged from 46 to 86%, and the electrum coinage of Phocaea also had a highly variable gold content (Konuk 2005; Wallace 2013: 2359; Avaldi et al. 1984). In short, both the Samian and Phocaean electrum coinage can still be explained by means of a Chatalist explanation too.

But let us assume – for the sake of argument – that the early Lydian electrum coins were given a face value equal to their real gold-to-silver content (so making the Chartalist explanation false), does this rule out the Lydian kings as the inventors of coinage? Again, the answer is: not at all.

The Lydian kings may well have struck these coins as prestigious payment objects for their soldiers, mercenaries and other employees and guaranteed a stable metal content consistent with market value, just as they – and numerous Greek city-states – later struck pure gold and silver coins.

We know that the most common type of early electrum coins shows the lion-head or lion paw, which is the royal symbol of the Lydian kings (Wartenberg 2017: 15 and 24; Konuk 2012: 45; Spier 1998), which in turn strongly suggests that most of these coins were stamped with the symbol of the Lydian state.

Bresson (2009: 3–4) points out that the Lydia kings conquered or forced the political submission of a large number of Greek city-states on the coast of Asia Minor, and that consequently that Lydian kings may well have established a monetary union with their electrum coins being a standard. The Lydo-Milesian (or often simply called the “Milesian”) standard was based on the stater with a weight of about 14.30–14.40 grams. The Lydian kings would then have set up this standard and demanded it of their subject Greek city-states, so that it was the state that was driving force behind a monetary standard, and that allowed the elimination of transaction costs such as heavy exchange fees between coins of a different standard.

Bresson (2009: 3, citing Cowell et al. 1998: 529–530 and Cowell and Hyne 2000: 169–174) also puts the gold content of early Lydian electrum coins at about 53% with most coins not deviating more than 1% from this.

Under this view of Bresson, the state weighed, standardised, and guaranteed the value and weight of electrum coins to reduce transaction costs for private individuals who no longer had to engage in the expensive process of checking the value of the coins (Bresson 2006; Bresson 2009).

The fact that the Lydo-Milesian standard was adopted in areas under the political domination of the Lydian kings does not suggest that the standard was a spontaneous development from the private sector. So, even if we assume that electrum coins were given a monetary value consistent with their gold content, the evidence that the private sector was the driving force behind this is still feeble.

As we seen, however, most scholars do still think that the early electrum coins were overvalued, and a qualified Chartalist explanation is still convincing.

Let us now turn to the final section: a critical review of the arguments made by those who contend that private sector agents first invented coins.

The Evidence for the Private Sector as Inventor of Electrum Coins is still Feeble
Modern defenders of the private sector as the inventor of electrum coins make the following arguments. They contend that the early coins seem to have had a large number of series with different obverse types and reverse punches, perhaps as many as 250–300 (van Alfen 2014: 2–3). Peter van Alfen takes this as evidence of many private elite issuers, such as goldsmiths, bankers or merchants (van Alfen 2014: 2–3, 3, n. 11).

But we know for a fact that later state-issued coinage by Greek city states like Cyzicus, Mytilene and Phocaea did regularly change their obverse types, and as often as once a year (which van Alfen 2014: 3, n. 11 himself admits; Price 1983: 4). The multiplicity of obverse types is not a strong argument for private sector coining at all, since there is no reason why both the Lydian kings and early Greek city-states could not have minted large numbers of obverse types with different symbols and insignia (de Callataӱ 2013: 11).

Peter van Alfen (2014) argues that the early coinages were minted by wealthy elite individuals who, he thinks, owned mines and had large-scale access to metals, and that the Lydian kings only gradually displaced private issuers and then gained a near monopoly on coin issue by the time of Croesus (who ruled Lydia from c. 585 or 560–546 BC) (see van Alfen 2014: 21).

Unfortunately, many of van Alfen’s claims about private wealth in Lydia are based on data in Roosevelt (2009) from the later Persian and Hellenistic periods (as admitted by van Alfen 2014: 19, n. 64 and 20, n. 68 himself), not the relevant period of the pre-Persian Lydian kingdom.

Moreover, the earliest coins minted from 650 to 600 BC were made of electrum, which was a naturally occurring alloy in ancient Lydia (Kroll 2008: 17–18).

Sardis – the Lydian capital – was dominated by the king’s palace and archaeological evidence seems to show that the processing of gold was dominated by the king, not private merchants (Hanfmann 1983: 73, 76, 83, 85, 246, n. 87). The evidence shows that the Lydian kings either controlled the mines in their kingdom directly (Koray and Lorber 2012: 13; Briant 2002: 400), and/or levied taxes on mining or extraction of metals. Indeed, a certain Lydian called Pythius under the later Persian empire, who owned a number of mines in Lydia, may have been a descendant of the Lydian royal family who had inherited these mines as private family property (Briant 2002: 401). Did private agents really have access to this type of wealth when the kings controlled mining and panning of precious metals?

It follows that, if the Lydian kings extracted and owned much of the silver, gold and electrum (mined or panned from the rivers), it is most probable that the kings also minted the first electrum coinage too, since a very large quantity of this metal was needed for the many coin issues over many years.

Despite Selgin, this is not a non sequitur. It is an inductive argument, on the basis of empirical evidence, and does not claim to yield a certain conclusion, only a probabilistic one.

Finally, let us now review the evidence adduced by the Free Bankers and defenders of the private sector as the inventors of early electrum coinage, and the counterarguments:

(1) Larry White in his original post here argued that:

“Once sovereigns monopolized the mints they took advantage of the propaganda value of stamping their own faces on the coins, of course. But as far as we know coins were already in use among merchants before that happened. Very early coins from ancient Lydia, in what is now Turkey, were not inscribed with human faces but rather animal figures. The Ancient History Encyclopedia states: ‘It appears that many early Lydian coins were minted by merchants as tokens to be used in trade transactions. The Lydian state also minted coins.’”
Larry White, “Why the ‘State Theory of Money’ doesn’t explain the Coinage of Precious Metals,” Alt-M Ideas for an Alternative Monetary Future, August 24, 2017.

But the assumption here is incorrect: early monarchs did not put their images on coins. For a very long time in the ancient world, coins did not carry any images of living human rulers, and rarely carried writing, and there may well have been a superstitious taboo against depicting living people on coins.

In light of this, there is no reason why the kings would have bothered to put their images or names on the coins when people at the time knew perfectly well that they had been minted by the state. Early coins of the state, even produced by kings, mostly depicted gods, seals or other symbols. In Western civilization, one of the first kings to be depicted on coins was Alexander the Great in the 4th century BC, even though it was probably the kings who ruled after him who first put his explicit image on coins (Shipley 2000: 69). But this was centuries after the first electrum coins had been invented.

Notably, Selgin does not seem to dispute this. I assume that on this point Free Bankers will concede White is wrong?

(2) some few early Lydian coins do carry inscriptions, in the Lydian script and language, and refer to .WALWE. (also read as walwet) and .KALI. (Schaps 2004: 96). However, the question of who or what these names refers to is not settled with certainty, though interesting – even plausible – suggestions have been made.

That the coins themselves were of the Lydian kings is strongly suggested by the lion symbol which appears on them – the symbol of the Lydian royal house (Schaps 2004: 96), so that already the notion that private sector agents independently minted them is shaky (although Furtwängler 2011: 16–17 regards them as the names of private electrum coin producers under the Lydian kings). Both coin types are linked by a common punch mark, so that they are likely to be by the same issuer (Wallace 2016: 176–177; Koray and Lorber 2012: 15).

The .WALWE. inscription has been read as Walwetalim, which can be linked to the Lydian king whom the Greeks called “Alyattes” (Karwiese 1991: 8–14; Wallace 2006). Koray and Lorber (2012: 15) state the walwet is now “usually interpreted” as the name of the Lydian king Alyattes. If so, then this is a coin explicitly minted by the king.

In addition, some have read .KALI. as KUKALIM and identified this with the Lydian name “Gyges” (Wallace 2006), and even if this does not refer to the first king of the dynasty, it may well refer to a royal prince during the reign of Alyattes in the late 7th century BC who was also allowed to issue coinage, as argued by Wallace (2006).

Furthermore, Howgego (1995: 3) suggests that the names may be those of mints, not of individuals, and Wallace (1988) argued that walwe could be the Lydian name for “lion” and be a simple noun referring to the lion symbol on the coins.

Finally, even if the inscriptions do not refer to Lydian kings and princes, they could be individuals who minted the coins for the Lydian kings as mint masters (Wallace 1987: 393, n. 51).

But there are good arguments for thinking these coins do name Lydian kings or members of the royal family, as demonstrated by Wallace (2006).

(3) it is true we have about four coins with the Greek inscription Φάνεως ειμί σήμα, which can be translated as “I am the badge of Phanes.” Though they do not carry the Greek inscription, there are supposedly some 250 pieces in the same series in smaller denominations with the same stag symbol (Wartenberg 2017: 17).

If “I am the badge of Phanes” is the correct translation of the inscription, it is unclear who this Phanes was. Peter van Alfen (2014: 23) assumes “Phanes” was an elite private Greek who minted coins, but there is little evidence to support this.

There is a reasonable discussion of the complexities of the issue here.

Konuk (2012: 45–47) makes a good case that the stag emblem on these coins is associated with the goddess Artemis at Ephesus (and Kastner 1986 had already suggested that the name “Phanes” may have been that of a god, not a human being; see Howgego 1995: 4). If the stag symbol is an official emblem of Ephesus, then the coin series in question is likely to have been an official coin issue of the city, since the same symbol reappears in later coin issues of Ephesus (Velde 2012: 10; Velde 2012: 10 also states “There is no consensus on whether Phanes is the name of an individual or refers to Artemis”; cf. Koray and Lorber 2012: 15). The name “Phanes,” far from being that of a human being, may be some cult name or word associated with the cult of Artemis at Ephesus.

By contrast, if “Phanes” is a human being, he is perhaps an official at Ephesus who minted or was responsible for the minting of the coins. Howgego (1995: 4) speculates that, even if Phanes was the name of a human being, he might have been an unknown local tyrant or ruler.

So, as in my original post, I once again conclude that the evidence for the private sector being the inventor, or driving force, behind the creation of the first electrum coinage is feeble.

We have also seen that the new evidence adduced by Selgin does not refute the older interpretation that the earliest electrum coins were overvalued.

Finally, as can be seen from a large sample of modern scholarship here, there is a majority view that the earliest electrum coins were invented by the Lydian kings.

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The Mass Immigration Debate within the Socialist Party of America from 1910–1912, Part 2

In part 1 here, the debate within the Socialist Party of America on mass immigration at their national convention in Chicago from 15–21 May 1910 was examined.

In 1912, the Socialist Party of America held another national convention from 12–18 May in Indianapolis.

Once again, the issue of mass immigration was discussed, and once again the committee on the immigration question produced a majority report.

Remarkably, the majority report of 1912 was even more opposed to mass immigration than that of 1910. Furthermore, the authors were not afraid to examine the issue of how racial feelings and animosities were exacerbated by mass immigration and also exploited by capitalists.

The full text of the majority report is as follows:

MAJORITY REPORT OF COMMITTEE ON IMMIGRATION
At the national congress of the Socialist Party in 1910, the Committee on Immigration presented a majority report signed by Ernest Untermann, Joshua Wanhope and Victor L. Berger, and a minority report signed, by John Spargo.

The majority report declared that the interests of the labor unions and of the Socialist Party of America demanded the enforcement of the existing exclusion laws which keep out the mass immigration or importation of Asiatic laborers.

The minority report declared that the danger from Asiatic labor immigration or importation was more imaginary than real and that, therefore, the Socialist Party should content itself with an emphasis upon the international solidarity of all working people regardless of nationality or race. The minority report did not state whether the Socialist Party should demand the repeal of the existing exclusion laws. When asked during the debate whether he favored the repeal of these laws, Comrade Spargo declined to commit himself to a definite answer.

In the course of the discussion, Comrade Morris Hillquit introduced a substitute for both reports. This substitute evaded the question for or against the existing exclusion laws, merely demanding that the mass of importation of contract laborers from all countries should be combated by the Socialist Party.

An amendment to this substitute, demanding a special emphasis upon the fact that the bulk of the Asiatic immigration was stimulated by the capitalists and for this reason should be excluded, was offered by Comrade Algernon Lee.

After a debate lasting nearly two days, the congress adopted Hillquit’s substitute by a vote of 55 against 50.

This close vote induced the congress to recommit the question for further study to a new committee on immigration with instructions to report to the national convention of 1912.

In this new committee the same alignment immediately took place. After a fruitless effort of the chairman to get unanimous action, the majority decided to act by itself and let the minority do the same.

Continued study and the developments on the Pacific Coast during the last two years convinced the majority of this committee more than ever that the existing exclusion laws against Asiatic laborers should be enforced and be amended in such way that they can be more effectively enforced. The details of the necessary amendments should be worked out by our representatives, or by our future representatives, in Congress and submitted for ratification to the Committee on Immigration, which should be made permanent for this purpose.

It does not matter whether Asiatic immigration is voluntary or stimulated by capitalists. There is no room for doubt that the capitalists welcome this immigration, and that its effect upon the economic and political class organizations of the American workers is destructive.

It is true that all foreign labor immigration lowers the standard of living, increases the unemployed problem and supplies the capitalists with uninformed and willing tools of reaction. But of all foreign labor immigration, the Asiatic element, owing to its social and racial peculiarities, is the most difficult to assimilate and mold into a homogeneous and effective revolutionary body. It is all the more dangerous to the most advanced labor organizations of this nation, because it adds to and intensifies the race issue which is already a grave problem in large sections of this country.

In the European countries the labor unions and the Socialist Party are not confronted by the task of educating, organizing and uniting vast masses of alien nationalities and races with the main body of the native class-conscious workers. Where alien immigration enters into the European labor problem, it plays but an insignificant role compared to the overwhelming mass of native workers. America is the only country in which the labor unions and the Socialist Party are compelled to face the problem of educating, organizing and uniting not only the native workers but a continually increasing army of foreign nationalities and races who enter this country without any knowledge of the English language, of American traditions, of economic and political conditions. The disappearance of the Western frontier has intensified the difficulties of labor organizations and Socialist propaganda to such a degree that it has become an unavoidable task to decide whether restrictive measures shall or shall not be demanded in the interests of the labor unions and of the Socialist Party. Since the race issue enters most prominently into this problem and has for years been the central point of restrictive legislation, the Socialist Party has been compelled to take notice of it.

Race feeling is not so much a result of social as of biological evolution. It does not change essentially with changes of economic systems. It is deeper than any class feeling and will outlast the capitalist system. It persists even after race prejudice has been outgrown. It exists, not because the capitalists nurse it for economic reasons, but the capitalists rather have an opportunity to nurse it for economic reasons because it exists as a product of biology. It is bound to play a role in the economics of the future society. If it should not assert itself in open warfare under a Socialist form of society, it will nevertheless lead to a rivalry of races for expansion over the globe as a result of the play of natural and sexual selection. We may temper this race feeling by education, but we can never hope to extinguish it altogether. Class-consciousness must be learned, but race-consciousness is inborn and cannot be wholly unlearned. A few individuals may indulge in the luxury of ignoring race and posing as utterly raceless humanitarians, but whole races never.

Where races struggle for the means of life, racial animosities cannot be avoided. Where working people struggle for jobs, self-preservation enforces its decrees. Economic and political considerations lead to racial fights and to legislation restricting the invasion of the white man’s domain by other races.

The Socialist Party cannot avoid this issue. The exclusion of definite races, not on account of race, but for economic and political reasons, has been forced upon the old party statesmen in spite of the bitter opposition of the great capitalists.

Every addition of incompatible race elements to the present societies of nations or races strengthens the hands of the great capitalists against the rising hosts of class-conscious workers. But the race feeling is so strong that even the majority of old party statesmen have not dared to ignore it.

From the point of view of the class-conscious workers it is irrational in the extreme to permit the capitalists to protect their profits by high tariffs against the competition of foreign capital, and at the same time connive at their attempts to extend free trade in the one commodity which the laborer should protect more than any other, his labor power.

It is still more irrational to excuse this self-destructive policy by the slogan of international working class solidarity, for this sentimental solidarity works wholly into the hands of the capitalist class and injures the revolutionary movement of the most advanced workers of this nation, out of ill-considered worship of an Asiatic working class which is as yet steeped in the ideas of a primitive state of undeveloped capitalism.

A proper consideration of working class interests, to which the Socialist Party is pledged by all traditions and by all historical precedent, demands that our representatives in the legislative bodies of this nation should reduce the tariff protection of the capitalists and introduce a tariff, or tax, upon unwholesome competitors of the working class, regardless of whether these competitors are voluntary or subsidized immigrants. Real protection of American labor requires a tariff on labor power and the reduction and gradual abolition of the tariff on capital. Such labor legislation already exists in British Columbia and has proved effective there.

The argument that the menace of Asiatic labor immigration is more imaginary than real overlooks the obvious fact that this menace has been minimized and kept within bounds by the existing exclusion laws, and that it can be eliminated altogether by a strict enforcement and more up-to-date amendment of these laws.

The majority of this committee realize of course, that the development of capitalism in China, India and Japan will necessarily tend to bring the American laborer into competition with the Asiatic laborer, even if the Asiatic does not come to the shore of this country. But the exclusion of the Asiatic from the shores of this country will at least give to the American laborer the advantage of fighting the Asiatic competition at long range and wholly through international commerce, instead of having struggle with the Asiatic laborer for jobs upon American soil. This will tend to abolish the labor of children and women in American factories, to maintain a rational standard of living and to reduce the unemployed problem for adult male workers.

International solidarity between the working people of Asia, Europe and America will be the outcome of international evolution, not of sentimental formulas. So long as the mind of the workers of nations and races are separated by long distances of industrial evolution, the desired solidarity cannot be completely realized, and while it is in process of realization, the demands of immediate self-preservation are more imperative than dreams of ideal solidarity.

The international solidarity of the working class can be most effectively demonstrated, not by mass immigration into each others’ countries, but by the international co-operation of strong labor unions and of the national sections of the International Socialist Party.

Socialism proves itself a science to the extent that it enables us to foretell the actual tendencies of future development.

This is the general principle that guided us in the struggle against the capitalist classes of the world. We work for the transformation of capitalist into Socialist society, not so much because sentiment, longing, dogma or argument drive us, but because we are convinced that the dominant tendencies of capitalism work in the direction of Socialism.

This point of view has been almost wholly overlooked in the discussion and practice of these ‘immediate’ policies which serve as our conscious steps in the direction of Socialism.

In our general propaganda and party organization, we work for the prophesied outcome of capitalist development and shape our actions in harmony with the foreseen probable course which the majority of the citizens will be compelled to adopt during the revolution of the human mind towards a Socialist consciousness.

Not so in discussing and acting upon, questions of immediate policy, such as the exclusion of Asiatic laborers from the United States. Instead of clearly foretelling the inevitable policy which the majority of the voters of this nation will be compelled to adopt in this particular instance, we are supposed to shape our actions in response to sentimental, Utopian or dogmatic arguments dictated by the personal likes or dislikes of a few individuals.

Instead of scientifically foretelling the inevitable logic of events, we are supposed to listen to a logic inspired by the sophistry of the advocates of unrestricted immigration.

Those who affirm the sentimental solidarity of the working classes the world over and at the same time demand a restriction of the stimulated mass importation of contract laborers admit unwillingly that this ideal solidarity is really impossible. And while they thus contradict their own sentimental assertion, they evade the real issue by an exaggerated reverence for a Utopian race solidarity.

The common sense Socialist policy under these circumstances is to build up strong national labor unions and strong national Socialist parties in the different countries and work toward more perfect solidarity by an international co-operation of these labor unions and parties. To this end the Socialist Party of America should consider above all the interests of those native and foreign working class citizens whose economic and political class organizations are destined to be the dominant elements in the social revolution of this country.

In the United States this means necessarily the enforcement of the existing exclusion laws against Asiatic laborers, and the amendment of these laws in such a way that the working class of America shall fortify its strategic position in the struggle against the capitalist class.

The majority of this committee are not opposed to the social mingling of races through travel, education and friendly association upon terms of equality. But we are convinced that the mass of the voters with the growth of social consciousness, will rather eliminate more and more those warring elements of social development which interfere with an orderly and systematic organization of industrial and political democracy. They will not be anxious to intensify the unemployed problem and the race issue, but will strive to transform the international working class solidarity from a Utopian shibboleth into a constructive policy. They will use their collective intelligence to reduce the evils growing out of unemployment and race feeling, until we shall be able to eliminate those evils altogether and strip race feeling at least of its brutalities.

This tendency is so plainly evident to the majority of this committee that we can afford to dispense with appeals to passion. This question will not be solved by a repetition of phrases, but by a conscious and instructive policy which will enforce itself as an inevitable step in the direction of working class solidarity and Socialism all world over.

ERNEST UNTERMANN, Chairman.
JOSHUA WANHOPE,
J. STITT WILSON,
ROBERT HUNTER.” (Spargo 1912: 209–211).

As we can see, the majority report of 1912 fully endorsed government legislation implementing large-scale mass immigration restriction into America.

Notably, they thought that preventing large-scale mass immigration of people with differing cultural and racial backgrounds into the United States would actually reduce racial tensions and racial prejudice. This view is rather similar to the progressive Liberal idea of that era of national self-determination as a way to reduce ethnic and national tensions.

The majority report view is stated again here:

“International solidarity between the working people of Asia, Europe and America will be the outcome of international evolution, not of sentimental formulas. So long as the mind of the workers of nations and races are separated by long distances of industrial evolution, the desired solidarity cannot be completely realized, and while it is in process of realization, the demands of immediate self-preservation are more imperative than dreams of ideal solidarity.

The international solidarity of the working class can be most effectively demonstrated, not by mass immigration into each others’ countries, but by the international co-operation of strong labor unions and of the national sections of the International Socialist Party. ….

The common sense Socialist policy under these circumstances is to build up strong national labor unions and strong national Socialist parties in the different countries and work toward more perfect solidarity by an international co-operation of these labor unions and parties. To this end the Socialist Party of America should consider above all the interests of those native and foreign working class citizens whose economic and political class organizations are destined to be the dominant elements in the social revolution of this country.” (Spargo 1912: 210–211).

How times have changed in modern Marxism, socialism and Social Democracy, where the fanatical support for open borders and mass immigration is now a religion.

BIBLIOGRAPHY
Spargo, John (ed.). 1912. Proceedings. National Convention of the Socialist Party, held at Indianapolis, Ind., May 12 to 18, 1912. The Socialist Party, Chicago, Ill.
https://archive.org/details/nationalconvention00soci

Marx’s Capital, Volume 1, Chapter 15: A Critical Summary, Part 2

Chapter 15 of volume 1 of Capital is called “Machinery and Large-Scale Industry” and examines the role of machines in developed capitalist production in the 19th century.

Part 1 of this review is here. This is Part 2.

Marx divides the chapter into ten sections:

(1) The Development of Machinery

(2) The Value transferred by the Machinery to the Product

(3) The Most Immediate Effects of Machine Production on the Worker

(4) The Factory

(5) The Struggle between Worker and Machine

(6) The Compensation Theory, with Regard to the Workers displaced by Machinery

(7) Repulsion and Attraction of Workers through the Development of Machine Production, Crises in the Cotton Industry

(8) The Revolutionary Impact of Large-Scale Industry on Manufacture, Handicrafts and Domestic Industry

(9) The Health and Education Clauses of the Factory Acts.

(10) Large-Scale Industry and Agriculture.

Critical summaries of the chapter sections (6) to (10) follow.

(6) The Compensation Theory, with Regard to the Workers displaced by Machinery
Marx disputes that machines allow a freeing up of capital to employ displaced workers and argues that new jobs making machines will not compensate for the loss of jobs by the use of such machines (Marx 1990: 565–566).

As Marx sees it, the actual state of affairs is as follows:

“The labourers that are thrown out of work in any branch of industry, can no doubt seek for employment in some other branch. If they find it, and thus renew the bond between them and the means of subsistence, this takes place only by the intermediary of a new and additional capital that is seeking investment; not at all by the intermediary of the capital that formerly employed them and was afterwards converted into machinery. And even should they find employment, what a poor look-out is theirs! Crippled as they are by division of labour, these poor devils are worth so little outside their old trade, that they cannot find admission into any industries, except a few of inferior kind, that are over-supplied with underpaid workmen. 1 Further, every branch of industry attracts each year a new stream of men, who furnish a contingent from which to fill up vacancies, and to draw a supply for expansion. So soon as machinery sets free a part of the workmen employed in a given branch of industry, the reserve men are also diverted into new channels of employment, and become absorbed in other branches; meanwhile the original victims, during the period of transition, for the most part starve and perish.” (Marx 1906: 481–482).

The catastrophic nature of machinery is summed up in this way:

“Since therefore machinery, considered alone, shortens the hours of labour, but, when in the service of capital, lengthens them; since in itself it lightens labour, but when employed by capital, heightens the intensity of labour; since in itself it is a victory of man over the forces of nature, but in the hands of capital, makes man the slave of those forces; since in itself it increases the wealth of the producers, but in the hands of capital, makes them paupers—for all these reasons and others besides, says the bourgeois economist without more ado, it is clear as noonday that all these contradictions are a mere semblance of the reality, and that, as a matter of fact, they have neither an actual nor a theoretical existence.” (Marx 1906: 482).

However, Marx admits that new workers are employed in making machines and providing the raw materials for the increased production by automation (Marx 1990: 570–571).

The division of labour is also increased:

“In proportion as machinery, with the aid of a relatively small number of workpeople, increases the mass of raw materials, intermediate products, instruments of labour, &c., the working-up of these raw materials and intermediate products becomes split up into numberless branches; social production increases in diversity. The factory system carries the social division of labour immeasurably further than does manufacture, for it increases the productiveness of the industries it seizes upon, in a far higher degree.” (Marx 1906: 486).

Marx’s final paragraphs in this section are shot through with severe problems.

According to Marx, large-scale industry tends mainly to increase the production of luxury goods:

“The immediate result of machinery is to augment surplus-value and the mass of products in which surplus-value is embodied. And, as the substances consumed by the capitalists and their dependants become more plentiful, so too do these orders of society. Their growing wealth, and the relatively diminished number of workmen required to produce the necessaries of life beget, simultaneously with the rise of new and luxurious wants, the means of satisfying those wants. A larger portion of the produce of society is changed into surplus produce, and a larger part of the surplus produce is supplied for consumption in a multiplicity of refined shapes. In other words, the production of luxuries increases. The refined and varied forms of the products are also due to new relations with the markets of the world, relations that are created by Modern Industry. Not only are greater quantities of foreign articles of luxury exchanged for home products, but a greater mass of foreign raw materials, ingredients, and intermediate products, are used as means of production in the home industries. Owing to these relations with the markets of the world the demand for labour increases in the carrying trades, which split up into numerous varieties.” (Marx 1906: 486).

We have here another travesty of history. As real wages soared and the purchasing power of workers rose even in the 19th century, much capitalist production was also devoted to producing commodities for the working class: mass consumer goods. So again Marx’s presentation of capitalism is a grossly unfair and one-sided caricature.

While industrial development increases the demand for public infrastructure (such as canals, docks, tunnels, bridges, etc.), Marx thinks that the total employment in this sector is “far from important” (Marx 1906: 487).

What is the most pronounced effect of large-scale industry? For Marx, it is the explosion in domestic service, which he sees as a form of slavery:

“Lastly, the extraordinary productiveness of modern industry, accompanied as it is by both a more extensive and a more intense exploitation of labour-power in all other spheres of production, allows of the unproductive employment of a larger and larger part of the working class, and the consequent reproduction, on a constantly extending scale, of the ancient domestic slaves under the name of a servant class, including men-servants, women-servants, lackeys, &c. …. If we deduct from this population all who are too old or too young for work, all unproductive women, young persons and children, the ‘ideological’ classes, such as government officials, priests, lawyers, soldiers, &c.; further, all who have no occupation but to consume the labour of others in the form of rent, interest, &c.; and, lastly, paupers, vagabonds, and criminals, there remain in round numbers eight millions of the two sexes of every age, including in that number every capitalist who is in any way engaged in industry, commerce, or finance. All the persons employed in textile factories and in mines, taken together, number 1,208,442 ; those employed in textile factories and metal industries, taken together, number 1,039,605; in both cases less than the number of modern domestic slaves. What a splendid result of the capitalist exploitation of machinery!” (Marx 1906: 487–488).

For Marx, domestic servants, government officials, priests, lawyers, soldiers etc. are all unproductive workers. This is an important point: a vast swathe of labour in modern capitalism, such as in the service industries, is dismissed by Marx as “unproductive.” Nevertheless, such service sector industries produce a profit and intangible output commodities.

So what is missing in Marx’s analysis is the explosion of middle class professionals, self-employed, and other service workers, which, owing to soaring real per capita GDP, often had high-paying jobs and also rising real wages. Also strangely missing are the growing class of skilled or semi-skilled self-employed workers such as tradesmen, who, if they run and work alone in their own businesses, cannot be subject to strict Marxist exploitation.

There is also another crucial point: if capitalism needs fewer and fewer industrial workers and creates more and more service workers (and not necessarily in domestic service), it does not follow that the aggregate effect of machines is to merely increase the suffering, exploitation and intensity of labour, for, as industrial labour is reduced, new middle class jobs available to the children of working class families given the opportunity to be educated in state schools are opened up. Even in the 19th century, a considerable amount of domestic service in wealthy upper class or middle class households was less dangerous and less difficult than exploitative factory work.

In any case, the long-run trend of capitalism has been a collapse in domestic service, given the advent of so many labour-saving machines and the creation of other professions, so Marx’s implied prediction that capitalism would merely see an explosion in domestic service “slavery” has been falsified. The idea that increasing domestic service employment is a major outcome of capitalist development also sits uncomfortably with the view that machines produce a large and endlessly growing reserve army of labour.

(7) Repulsion and Attraction of Workers through the Development of Machine Production, Crises in the Cotton Industry
Expansion of production by machinery can increase the number of workers employed in factories if their scale of production is expanded (Marx 1990: 577).

Capitalism also affects the world market:

“On the one hand, the immediate effect of machinery is to increase the supply of raw material in the same way, for example, as the cotton gin augmented the production of cotton. On the other hand, the cheapness of the articles produced by machinery, and the improved means of transport and communication furnish the weapons for conquering foreign markets. By ruining handicraft production in other countries, machinery forcibly converts them into fields for the supply of its raw material. In this way East India was compelled to produce cotton, wool, hemp, jute, and indigo for Great Britain. By constantly making a part of the hands ‘supernumerary,’ modern industry, in all countries where it has taken root, gives a spur to emigration and to the colonization of foreign lands, which are thereby converted into settlements for growing the raw material of the mother country; just as Australia, for example, was converted into a colony for growing wool. A new and international division of labour, a division suited to the requirements of the chief centres of modern industry springs up, and converts one part of the globe into a chiefly agricultural field of production, for supplying the other part which remains a chiefly industrial field.” (Marx 1906: 492–493).

However, as has been shown by Bairoch here and here, the West was largely self-sufficient in raw materials right up until the early 20th century and colonial exploitation of the Third World was by no means a necessary precondition or consequence of capitalism per se.

The idea that capitalism forces large-scale emigration is also plainly untrue, since the capitalist development in the United States, Canada, Australia and New Zealand happened despite massive immigration, not emigration. Nor was there large-scale emigration from Japan, South Korea or Taiwan during their industrial development.

Marx understands the rudiments of the business cycle:

“The enormous power, inherent in the factory system, of expanding by jumps, and the dependence of that system on the markets of the world, necessarily beget feverish production, followed by over-filling of the markets, whereupon contraction of the markets brings on crippling of production. The life of modern industry becomes a series of periods of moderate activity, prosperity, over-production, crisis and stagnation. The uncertainty and instability to which machinery subjects the employment, and consequently the conditions of existence, of the operatives become normal, owing to these periodic changes of the industrial cycle. Except in the periods of prosperity, there rages between the capitalists the most furious combat for the share of each in the markets. This share is directly proportional to the cheapness of the product. Besides the rivalry that this struggle begets in the application of improved machinery for replacing labour-power, and of new methods of production, there also comes a time in every industrial cycle, when a forcible reduction of wages beneath the value of labour-power, is attempted for the purpose of cheapening commodities.” (Marx 1906: 495–496).

So here, in Marx’s thinking, is another tendency in capitalism to reduce real wages: during depressions capitalists attempt to cut wages below subsistence level, and this must be another powerful force that keeps wages down to the value of the maintenance and reproduction of labour-power. Unfortunately, Marx was wrong here too. By the 1880s, nominal wage rigidity was becoming a stark reality of the advanced capitalist world even in recessions – and this was a powerful force that maintained real wages and allowed them to increase in expansions of the business cycle.

Marx also grossly overestimates the importance of foreign markets and exports in capitalist development, since not all capitalist economies need be export-led models.

(8) The Revolutionary Impact of Large-Scale Industry on Manufacture, Handicrafts and Domestic Industry
It is important to remember that even in the 19th century Marx saw an economy with multiple sectors: large-scale factory manufacturing, handicraft systems, domestic “sweat shop” labour systems, and old-style manufacture. But developed capitalism tended to make them compete and caused the destruction of old-style manufacture and handicraft labour, as the factory system triumphed.

(a) Overthrow of Co-operation based on Handcrafts and on the Division of Labour
Sometimes machines can expand handicraft industries which persist temporarily, but usually as a transition to the factor system (Marx 1990: 589).

(b) The Impact of the Factory System on Manufacture and Domestic Industries
The factory system can also outsource some of its production to domestic industries carried on at home:

“In contrast with the manufacturing period, the division of labour is thenceforth based, wherever possible, on the employment of women, of children of all ages, and of unskilled labourers, in one word, on cheap labour, as it is characteristically called in England. This is the case not only with all production on a large scale, whether employing machinery or not, but also with the so-called domestic industry, whether carried on in the houses of the workpeople or in small workshops. This modern so-called domestic industry has nothing, except the name, in common with the old-fashioned domestic industry, the existence of which presupposes independent urban handicrafts, independent peasant farming, and above all, a dwelling-house for the labourer and his family.” (Marx 1906: 504).

This “sweat shop” labour in homes can be even more exploitative than in the factories (Marx 1990: 591).

(c) Modern Manufacture
In this section, Marx gives various examples of exploitation in the factory system.

(d) Modern Domestic Industry
Marx covers here the exploitation in sweat shop domestic work in homes, such as lace-making and straw-plaiting.

(e) Transition from Modern Manufacture and Domestic Industry to Large-Scale Industry
Marx discusses the introduction of machinery into the British apparel industry:

“The decisively revolutionary machine, the machine which attacks in an equal degree the whole of the numberless branches of this sphere of production, dressmaking, tailoring, shoe-making, sewing, hat-making, and many others, is the sewing-machine.

Its immediate effect on the workpeople is like that of all machinery, which, since the rise of modern industry, has seized upon new branches of trade. Children of too tender an age are sent adrift. The wage of the machine hands rises compared with that of the house-workers, many of whom belong to the poorest of the poor. That of the better situated handicraftsmen, with whom the machine competes, sinks. The new machine hands are exclusively girls and young women. With the help of mechanical force, they destroy the monopoly that male labour had of the heavier work, and they drive off from the lighter work numbers of old women and very young children. The overpowering competition crushes the weakest of the manual labourers.” (Marx 1906: 516).

Paradoxically the Factory Act accelerated the use of machines:

“This industrial revolution which takes place spontaneously, is artificially helped on by the extension of the Factory Acts to all industries in which women, young persons and children are employed. The compulsory regulation of the working day as regards its length, pauses, beginning and end, the system of relays of children, the exclusion of all children under a certain age, &c, necessitates on the one hand more machinery and the substitution of steam as a motive power in the place of muscles. On the other hand, in order to make up for the loss of time, an expansion occurs of the means of production used in common, of the furnaces, buildings, &c.; in one word, greater concentration of the means of production and a correspondingly greater concourse of workpeople. The chief objection, repeatedly and passionately urged on behalf of each manufacture threatened with the Factory Act, is in fact this, that in order to continue the business on the old scale a greater outlay of capital will be necessary. But as regards labour in the so-called domestic industries and the intermediate forms between them and Manufacture, so soon as limits are put to the working day and to the employment of children, those industries go to the wall. Unlimited exploitation of cheap labour-power is the sole foundation of their power to compete.” (Marx 1906: 519–520).

Even though Marx paints this as an unmitigated evil, the actual increasing use of machinery reduces the number of workers being exploited (see Marx 1990: 606, n. 2).

(9) The Health and Education Clauses of the Factory Acts.
Marx examines here the consequences of the Factory Acts, including the Factory Acts Extension Act (15 August, 1867), and the Workshops Regulation Act (21 August, 1867). Marx admits a number of positive effects (Marx 1990: 611–615).

But large-scale industry breaks down stable employment:

“Modern Industry never looks upon and treats the existing form of a process as final. The technical basis of that industry is therefore revolutionary, while all earlier modes of production were essentially conservative. By means of machinery, chemical processes and other methods, it is continually causing changes not only in the technical basis of production, but also in the functions of the labourer, and in the social combinations of the labour-process. At the same time, it thereby also revolutionizes the division of labour within the society, and incessantly launches masses of capital and of workpeople from one branch of production to another. But if Modern Industry, by its very nature, therefore necessitates variation of labour, fluency of function, universal mobility of the labourer, on the other hand, in its capitalistic form, it reproduces the old division of labour with its ossified particularisations. We have seen how this absolute contradiction between the technical necessities of Modern Industry, and the social character inherent in its capitalistic form, dispels all fixity and security in the situation of the labourer; how it constantly threatens, by taking away the instruments of labour, to snatch from his hands his means of subsistence, and, by suppressing his detail-function, to make him superfluous. We have seen, too, how this antagonism vents its rage in the creation of that monstrosity, an industrial reserve army, kept in misery in order to be always at the disposal of capital; in the incessant human sacrifices from among the working class, in the most reckless squandering of labour-power, and in the devastation caused by a social anarchy which turns every economical progress into a social calamity.” (Marx 1906: 532–533).

Part of the evil is that parents too exploit their children (Marx 1990: 620).

But even here Marx admits the effectiveness of state intervention:

“The necessity for a generalization of the Factory Acts, for transforming them from an exceptional law relating to mechanical spinning and weaving—those first creations of machinery—into a law affecting social production as a whole, arose, as we have seen, from the mode in which Modern Industry was historically developed. In the rear of that industry, the traditional form of manufacture, of handicraft, and of domestic industry, is entirely revolutionised; manufactures are constantly passing into the factory system, and handicrafts into manufactures; and lastly, the spheres of handicraft and of the domestic industries become, in a, comparatively speaking, wonderfully short time, dens of misery in which capitalistic exploitation obtains free play for the wildest excesses. There are two circumstances that finally turn the scale: first, the constantly recurring experience that capital, so soon as it finds itself subject to legal control at one point, compensates itself all the more recklessly at other points; 1 secondly, the cry of the capitalists for equality in the conditions of competition, i.e., for equal restraint on, all exploitation of labour.” (Marx 1906: 536–537).

Marx now turns to the consequences of the Factory Acts Extension Act (15 August, 1867), and the Workshops Regulation Act (21 August, 1867), and argues that their enforcement was often lax (Marx 1990: 626).

Far from improving working conditions and making capitalism more humane and more stable, Marx came to the paradoxical conclusion that the legislation to regulate working conditions will only hasten the proletarian revolution:

“If the general extension of factory legislation to all trades for the purpose of protecting the working class both in mind and body has become inevitable, on the other hand, as we have already pointed out, that extension hastens on the general conversion of numerous isolated small industries into a few combined industries carried on upon a large scale; it therefore accelerates the concentration of capital and the exclusive predominance of the factory system. It destroys both the ancient and the transitional forms, behind which the dominion of capital is still in part concealed, and replaces them by the direct and open sway of capital; but thereby it also generalises the direct opposition to this sway. While in each individual workshop it enforces uniformity, regularity, order, and economy, it increases by the immense spur which the limitation and regulation of the working day give to technical improvement, the anarchy and the catastrophes of capitalist production as a whole, the intensity of labour, and the competition of machinery with the labourer. By the destruction of petty and domestic industries it destroys the last resort of the ‘redundant population,’ and with it the sole remaining safety-valve of the whole social mechanism. By maturing the material conditions, and the combination on a social scale of the processes of production, it matures the contradictions and antagonisms of the capitalist form of production, and thereby provides, along with the elements for the formation of a new society, the forces for exploding the old one.” (Marx 1906: 552).

But Marx’s proletarian revolution did not happen.

In the 4th German edition of Capital, an embarrassed Engels pointed out in an addendum that the British Factory and Workshop Act of 1878 was “by far the best [sc. law] on this subject” (Marx 1906: 552 n. 1).

(10) Large-Scale Industry and Agriculture
Use of machinery in the countryside for agricultural production eliminates human labour in a far more intense manner (Marx 1990: 637).

But once again Marx sees almost wholly negative effects:

“In the sphere of agriculture, modern industry has a more revolutionary effect than elsewhere, for this reason, that it annihilates the peasant, that bulwark of the old society, and replaces him by the wage labourer. Thus the desire for social changes, and the class antagonisms are brought to the same level in the country as in the towns. The irrational, old fashioned methods of agriculture are replaced by scientific ones. Capitalist production completely tears asunder the old bond of union which held together agriculture and manufacture in their infancy. … Capitalist production, by collecting the population in great centres, and causing an ever increasing preponderance of town population, on the one hand concentrates the historical motive-power of society; on the other hand, it disturbs the circulation of matter between man and the soil, i.e., prevents the return to the soil of its elements consumed by man in the form of food and clothing; it therefore violates the conditions necessary to lasting fertility of the soil. By this action it destroys at the same time the health of the town labourer and the intellectual life of the rural labourer. …. In modern agriculture, as in the urban industries, the increased productiveness and quantity of the labour set in motion are bought at the cost of laying waste and consuming by disease labour-power itself. Moreover, all progress in capitalistic agriculture is a progress in the art, not only of robbing the labourer, but of robbing the soil; all progress in increasing the fertility of the soil for a given time, is a progress towards ruining the lasting sources of that fertility. The more a country starts its development on the foundation of modern industry, like the United States, for example, the more rapid is this process of destruction. Capitalist production, therefore, develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth—the soil and the labourer.” (Marx 1906: 554–556).

Totally missing is the observation that the tremendous productivity of capitalist production broke the Malthusian population trap and allowed the transfer of labour to other industries; the huge increase in agricultural output improved the living standards of workers and society at large. Another cutting observation is that, even though environmental degradation has been a feature of capitalist production, the Communist regimes of the 20th century also had a horrendous record on pollution and environmental degradation as well.

External Links
Harry Cleaver, Study Guide to Capital Volume I, Chapter 15.
http://la.utexas.edu/users/hcleaver/357k/357ksg15.htm
https://libcom.org/chapter-15-machinery-and-modern-industry

BIBLIOGRAPHY
Brewer, Anthony. 1984. A Guide to Marx’s Capital. Cambridge University Press, Cambridge.

Harvey, David. 2010. A Companion to Marx’s Capital. Verso, London and New York.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1990. Capital. A Critique of Political Economy. Volume One (trans. Ben Fowkes). Penguin Books, London.

Marx’s Capital, Volume 1, Chapter 1: A Critical Summary, Part 2

Chapter 1 of volume 1 of Capital is called “The Commodity,” and presents Marx’s theory of the commodity and labour value.

Chapter 1 is divided into four sections:

(1) The Two Factors of the Commodity: Use Value and Value

(2) Dual Character of the Labour embodied in Commodities

(3) The Value-Form, or Exchange-Value

(4) The Fetishism of the Commodity and its Secret.

A summary of the first two sections is here. Below is a critical summary of the last two sections.

(3) The Value-Form, or Exchange-Value
A commodity has a dual nature: a use value (natural form) and a bearer of labour value (value form) (Marx 1990: 138). Commodities have heterogeneous use values (natural forms), but a common value-form in their money-forms (Marx 1990: 139).

According to Marx, in early stages of human society (so it would appear) commodities do not exchange for equal labour values, but merely use value for use value:

“But to be equated to linen, and again to iron, is to be as different as are linen and iron. This form, it is plain, occurs practically only in the first beginning, when the products of labour are converted into commodities by accidental and occasional exchanges. …. ” (Marx 1906: 75).

A full exposition of how Marx sees the origin of commodities and money does not appear until Chapter 2, however. Marx appears to argue that as commodity production becomes a major form of production within a community labour values come to dominate exchange value.

The labour value is a social phenomenon, not a physical one:

“The value of commodities is the very opposite of the coarse materiality of their substance, not an atom of matter enters into its composition. Turn and examine a single commodity, by itself, as we will. Yet in so far as it remains an object of value, it seems impossible to grasp it. If, however, we bear in mind that the value of commodities has a purely social reality, and that they acquire this reality only in so far as they are expressions or embodiments of one identical social substance, viz., human labour, it follows as a matter of course, that value can only manifest itself in the social relation of commodity to commodity. In fact we started from exchange value, or the exchange relation of commodities, in order to get at the value that lies hidden behind it.” (Marx 1906: 55).

By defining labour value in this way, Marx seems committed to defending the labour theory as an empirical concept.

Marx now turns to the question of the origins of prices or money-forms (Marx 1990: 139). He gives the following example:

20 yards of linen = 1 coat, where
linen (relative form of value) = coat (equivalent) (Marx 1906: 56).

The linen is in “relative form” and the coat is its equivalent in terms of value (Marx 1990: 140). Marx argues as follows:

“… in the value relation nothing is seen but the proportion between definite quantities of two different sorts of commodities that are considered equal to each other. It is apt to be forgotten that the magnitudes of different things can be compared quantitatively, only when those magnitudes are expressed in terms of the same unit. It is only as expressions of such a unit that they are of the same denomination, and therefore commensurable.” (Marx 1906: 57).

Marx’s argument here follows the initial one in Section 1 of Chapter 1, but he does not prove that labour value is the common quantitative unit underlying commodity exchange.

Marx’s argument continues:

“If we say that, as values, commodities are mere congelations of human labour, we reduce them by our analysis, it is true, to the abstraction, value; but we ascribe to this value no form apart from their bodily form. It is otherwise in the value relation of one commodity to another. Here, the one stands forth in its character of value by reason of its relation to the other.

By making the coat the equivalent of the linen, we equate the labour embodied in the former to that in the latter. Now, it is true that the tailoring, which makes the coat, is concrete labour of a different sort from the weaving which makes the linen. But the act of equating it to the weaving, reduces the tailoring to that which is really equal in the two kinds of labour, to their common character of human labour. In this roundabout way, then, the fact is expressed, that weaving also, in so far as it weaves value, has nothing to distinguish it from tailoring, and, consequently, is abstract human labour. It is the expression of equivalence between different sorts of commodities that alone brings into relief the specific character of value-creating labour, and this it does by actually reducing the different varieties of labour embodied in the different kinds of commodities to their common quality of human labour in the abstract.

There is, however, something else required beyond the expression of the specific character of the labour of which the value of the linen consists. Human labour-power in motion, or human labour, creates value, but is not itself value. It becomes value only in its congealed state, when embodied in the form of some object. In order to express the value of the linen as a congelation of human labour, that value must be expressed as having objective existence, as being a something materially different from the linen itself, and yet a something common to the linen and all other commodities. The problem is already solved.” (Marx 1906: 58–59).

“The body of the commodity that serves as the equivalent, figures as the materialization of human labour in the abstract and is at the same time the product of some specifically useful concrete labour. This concrete labour becomes, therefore, the medium for expressing abstract human labour. If on the one hand the coat ranks as nothing but the embodiment of abstract human labour, so, on the other hand, the tailoring which is actually embodied in it, counts as nothing but the form under which that abstract labour is realised. In the expression of value of the linen, the utility of the tailoring consists, not in making clothes, but in making an object, which we at once recognise to be Value, and therefore to be a congelation of labour, but of labour indistinguishable from that realised in the value of the linen. In order to act as such a mirror of value, the labour of tailoring must reflect nothing besides its own abstract quality of being human labour generally.” (Marx 1906: 67).

It is only when commodities with labour value exchange for other such commodities that abstract labour is compared and made commensurable.

Marx thinks that Aristotle was the first to show that commodity exchange constitutes an equality, but was prevented from moving to a labour value theory because of slavery:

“There was, however, an important fact which prevented Aristotle from seeing that, to attribute value to commodities, is merely a mode of expressing all labour as equal human labour, and consequently as labour of equal quality. Greek society was founded upon slavery, and had, therefore, for its natural basis, the inequality of men and of their labour powers. The secret of the expression of value, namely, that all kinds of labour are equal and equivalent, because, and so far as they are human labour in general, cannot be deciphered, until the notion of human equality has already acquired the fixity of a popular prejudice. This, however, is possible only in a society in which the great mass of the produce of labour takes the form of commodities, in which, consequently, the dominant relation between man and man, is that of owners of commodities. The brilliancy of Aristotle’s genius is shown by this alone, that he discovered, in the expression of the value of commodities, a relation of equality. The peculiar conditions of the society in which he lived, alone prevented him from discovering what, ‘in truth,’ was at the bottom of this equality.” (Marx 1906: 69).

But this does not answer the question: does a product made by slave labour have a labour value in Marx’s terms? (Harvey 2010: 36 seems to imply that it would not).

But, to resume the main argument, Marx states that changes in the socially necessary labour time required to produce commodities will continue to determine exchange values (Marx 1990: 145).

Marx also makes it clear that a commodity can only have a labour value if it actually obtains an exchange value on the market (a view he repeats in Chapters 2 and 3 and as stated by Harvey 2010: 37):

“When, at the beginning of this chapter, we said, in common parlance, that a commodity is both a use-value and an exchange value, we were, accurately speaking, wrong. A commodity is a use-value or object of utility, and a value. It manifests itself as this two-fold thing, that it is, as soon as its value assumes an independent form—viz., the form exchange value. It never assumes this form when isolated, but only when placed in a value or exchange relation with another commodity of a different kind.” (Marx 1906: 70).

By the end of section 3, Marx touches on the origin of money, but almost wholly in an abstract, theoretical way (an empirical analysis is provided in Chapter 2):

“The expanded form of value comes into actual existence for the first time so soon as a particular product of labour, such as cattle, is no longer exceptionally, but habitually, exchanged for various other commodities.

The third and lastly developed form expresses the values of the whole world of commodities in terms of a single commodity set apart for the purpose .... By this form, commodities are, for the first time, effectively brought into relation with one another as values, or made to appear, as exchange values.

The two earlier forms either express the value of each commodity in terms of a single commodity of a different kind, or in a series of many such commodities. In both cases, it is, so to say, the special business of each single commodity to find an expression for its value, and this it does without the help of the others. These others, with respect to the former, play the passive parts of equivalents. The general form of value C, results from the joint action of the whole world of commodities, and from that alone. A commodity can acquire a general expression of its value only by all other commodities, simultaneously with it, expressing their values in the same equivalent; and every new commodity must follow suit. It thus becomes evident that, since the existence of commodities as values is purely social, this social existence can be expressed by the totality of their social relations alone, and consequently that the form of their value must be a socially recognised form.” (Marx 1906: 70).

If we were to choose linen as a “universal equivalent,” Marx argues, then the following would be true:

“The general form of relative value, embracing the whole world of commodities, converts the single commodity that is excluded from the rest, and made to play the part of equivalent—ere the linen—into the universal equivalent. The bodily form of the linen is now the form assumed in common by the value of all commodities; it therefore becomes directly exchangeable with all and every of them. The substance linen becomes the visible incarnation, the social chrysalis state of every kind of human labour. Weaving, which is the labour of certain private individuals producing a particular article, linen, acquires in consequence a social character, the character of equality with all other kinds of labour. The innumerable equations of which the general form of value is composed, equate in turn the labour embodied in the linen to that embodied in every other commodity, and they thus convert weaving into the general form of manifestation of undifferentiated human labour. In this manner the labour realised in the values of commodities is presented not only under its negative aspect, under which abstraction is made from every concrete form and useful property of actual work, but its own positive nature is made to reveal itself expressly. The general value-form is the reduction of all kinds of actual labour to their common character of being human labour generally, of being the expenditure of human labour power.” (Marx 1906: 77).

“… a particular kind of commodity acquires the character of universal equivalent, because all other commodities make it the material in which they uniformly express their value. (Marx 1906: 78).

Money, then, as a commodity with a labour value expresses its value in a potentially infinite series of exchange values (where labour value is equal) with other commodities (Marx 1990: 161).

It was gold that won out as the universal equivalent:

“Gold is now money with reference to all other commodities only because it was previously, with reference to them, a simple commodity. Like all other commodities, it was also capable of serving as an equivalent, either as simple equivalent in isolated exchanges, or as particular equivalent by the side of others. Gradually it began to serve, within varying limits, as universal equivalent. So soon as it monopolises this position in the expression of value for the world of commodities, it becomes the money commodity, … .” (Marx 1906: 81).

The expression of a commodity in terms of gold is its “price form” (Marx 1990: 163).

(4) The Fetishism of the Commodity and its Secret
Curiously, this section was moved from a mere appendix in the first German edition of Capital (1867) to the concluding part of Chapter 1 in later editions (Harvey 2010: 38).

Marx states that the commodity has a certain metaphysical or mystical nature, but this does not consist in its use value or the concrete labour used to produce it (Marx 1990: 163–164). Experience of the commodity as a use value gives no access to its nature as a labour value (Harvey 2010: 39).

According to Marx, capitalist society seems to hide the social character of labour through the act of exchange of commodities:

“Whence, then, arises the enigmatical character of the product of labour, so soon as it assumes the form of commodities? Clearly from this form itself. The equality of all sorts of human labour is expressed objectively by their products all being equally values; the measure of the expenditure of labour-power by the duration of that expenditure, takes the form of the quantity of value of the products of labour; and finally, the mutual relations of the producers, within which the social character of their labour affirms itself, take the form of a social relation between the products.

A commodity is therefore a mysterious thing, simply because in it the social character of men’s labour appears to them as an objective character stamped upon the product of that labour; because the relation of the producers to the sum total of their own labour is presented to them as a social relation, existing not between themselves, but between the products of their labour. This is the reason why the products of labour become commodities, social things whose qualities are at the same time perceptible and imperceptible by the senses.” (Marx 1906: 82–83).

“As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other. The sum total of the labour of all these private individuals forms the aggregate labour of society. Since the producers do not come into social contact with each other until they exchange their products, the specific social character of each producer’s labour does not show itself except in the act of exchange. In other words, the labour of the individual asserts itself as a part of the labour of society, only by means of the relations which the act of exchange establishes directly between the products, and indirectly, through them, between the producers.” (Marx 1906: 83–84).

The enigmatic nature of the commodity consists in being the “social character of men’s labour” as manifested in labour values through exchange. Commodities are “social” things, and the social relations between people as labourers, consumers and capitalists occur through commodity exchange, even though this very process disguises those relations (Harvey 2010: 39).

Marx’s theory has a strange incoherence. On the one hand, exchange values are governed by labour value. But these labour values are apparently a secret or hidden phenomenon determining exchange values:

“The character of having value, when once impressed upon products, obtains fixity only by reason of their acting and re-acting upon each other as quantities of value. These quantities vary continually, independently of the will, foresight and action of the producers. To them, their own social action takes the form of the action of objects, which rule the producers instead of being ruled by them. It requires a fully developed production of commodities before, from accumulated experience alone, the scientific conviction springs up, that all the different kinds of private labour, which are carried on independently of each other, and yet as spontaneously developed branches of the social division of labour, are continually being reduced to the quantitative proportions in which society requires them. And why? Because, in the midst of all the accidental and ever fluctuating exchange-relations between the products, the labour-time socially necessary for their production forcibly asserts itself like an over-riding law of nature. The law of gravity thus asserts itself when a house falls about our ears. The determination of the magnitude of value by labour-time is therefore a secret, hidden under the apparent fluctuations in the relative values of commodities. Its discovery, while removing all appearance of mere accidentally from the determination of the magnitude of the values of products, yet in no way alters the mode in which that determination takes place.” (Marx 1906: 86–87).

How such a secret and hidden phenomenon can determine individual exchange values is not explained by Marx in this Chapter, though by Chapter 3 we have a fuller description.

When commodities are related to units of money (the universal equivalent commodity) the producers can understand how their own labour relates to the labour of society:

“Consequently it was the analysis of the prices of commodities that alone led to the determination of the magnitude of value, and it was the common expression of all commodities in money that alone led to the establishment of their characters as values. It is, however, just this ultimate money form of the world of commodities that actually conceals, instead of disclosing, the social character of private labour, and the social relations between the individual producers. When I state that coats or boots stand in a relation to linen, because it is the universal incarnation of abstract human labour, the absurdity of the statement is self-evident. Nevertheless, when the producers of coats and boots compare those articles with linen, or, what is the same thing with gold or silver, as the universal equivalent, they express the relation between their own private labour and the collective labour of society in the same absurd form.” (Marx 1906: 87).

A use-value of a thing can be realised by a direct relation between the thing and a human being, but labour value is realised in exchange of commodities (Marx 1990: 177).

BIBLIOGRAPHY
Harvey, David. 2010. A Companion to Marx’s Capital. Verso, London and New York.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1990. Capital. A Critique of Political Economy. Volume One (trans. Ben Fowkes). Penguin Books, London.