Socialist Studies Socialist Studies

Reconstituted Socialist Party of Great Britain (1991) Summer School Lecture 2009 - The “Long Depression”.

From Free Trade to Protectionism

In the first half of the 19th century Capitalism developed rapidly both in the United States and in Europe. This notable achievement by the capitalist class was commented on by Marx and Engels in THE COMMUNIST MANIFESTO:

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than all preceding generations together. Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalization of rivers, whole populations conjured out of the ground - what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour” (COMMUNIST MANIFESTO - AND THE LAST 100 YEARS Socialist Party of Great Britain pamphlet pp. 64-64).

In Britain, the development of capitalism was more marked than in other countries. The economist, E. K. Hunt wrote that as a free trade nation Britain increased her capital goods over this period from 11 percent to 22 per cent and exports of coal, iron and steel also sharply rose in tonnage

And he continued:

Between 1830 and 1850, England experienced a railroad-building boom in which some 6000 miles of railroad were constructed…between 1850 and 1880, the production of pig iron increased from 2.25,000 to 7,750,000 tons per year; steel production went up…coal increased…The capital goods industries also prospered…Production of machines, ships, chemicals and other important capital goods employed twice as many men in 1881 as in 1851” ((PROPERTY AND PROPHETS E. K. Hunt p89-90).

The period from the mid-1840’s to 1873 (the year that marked the beginning of the Long Depression in the United States and Europe) has been called by the economist, Dudley Dillard “the golden age” of competitive free trade capitalism (ECONOMIC DEVELOPMENT OF THE NORTH ATLANTIC COMMUNITY 1967 p. 363).

Of course, it was no “golden age” for the working class, where women were forced down the mines and children made up a large composition of the workforce in the mills. The average life span of the working class actually fell between 1821 and 1851: in 1821, 37 per cent died by the age 19, and 70 per cent by age 44; in 1851, 46 per cent by age 19, 78 per cent by age 44 (Eric Hobsbawn, INDUSTRY AND EMPIRE, 1968, page 277).

Through the enclosure Acts peasants were forced off the land into cities. However it was largely the children of the working class who were to be exploited in the new textile factories and generate the profits which lay the foundations for the “golden age” of capitalism.

Many working class parents were unwilling to allow their children to work in these new textile factories. To overcome this labour shortage factory owners had to find other ways of obtaining workers. One solution to the problem of labour scarcity was to buy children from orphanages and workhouses. The children became known as “pauper apprentices”, the stuff of OLIVER TWIST. This involved the children signing contracts that essentially made them the property of the factory owner.

The historian John Simkins recently wrote of the use of pauper apprentices in the early development of capitalism:

Pauper apprentices were cheaper to house than adult workers. It cost Samuel Greg who owned the large Quarry Bank Mill at Styal, a £100 to build a cottage for a family, whereas his apprentice house, that cost £300, provided living accommodation for over 90 children.

The same approach was taken by the owners of silk mills. George Courtauld who owned a silk mill in Braintree, Essex, took children from workhouses in London. Although offered children of all ages he usually took them from "within the age of 10 and 13". Courtauld insisted that each child arrived "with a complete change of common clothing". A contract was signed with the workhouse that stated that Courtauld would be paid £5 for each child taken. Another £5 was paid after the child’s first year
”.

And he went on to conclude:

The children also signed a contract with Courtauld that bound them to the mill until the age of 21. This helped to reduce Courtauld's labour costs. Whereas adult males at Courtauld's mills earned 7s. 2d., children under 11 received only 1s. 5d. a week”. (http://www.spartacus.schoolnet.co.uk/IRworkhouse.children.htm).

Capitalists who owned the major textile mills purchased great numbers of children from workhouses in all the large towns and cities. By the late 1790s about a third of the workers in the cotton industry were pauper apprentices. Child workers were especially predominant in large factories in rural areas. For example, in 1797, of the 310 workers employed by Birch Robinson & Co in the village of Back barrow, 210 were parish apprentices. However, in the major textile towns, such as Manchester and Oldham, parish apprenticeships were fairly uncommon and it was the use of adult male and female labour which was favoured by the employers (J. Rule, THE LABOURING CLASSES IN EARLY INDUSTRIAL ENGLAND, 1750-1850 1986)

This is the basis for the “golden age of capitalism”. As Marx was to retort: “capitalism came into being dripping with blood from every head and pore” (CAPITAL VOL. 1)
[For other accounts see Child Labour and British Industrialisation, Sara Horrell and Jane Humphries, in A THING OF THE PAST, CHILD LABOUR IN THE NINETEENTH AND TWENTIETH CENTURIES ed. M Lavalette1999, for contemporary sketches of the miserable life of the working class see Engels’ CONDITION OF THE WORKING CLASS (1845) and Meyhews’s LONDON LABOUR AND THE LONDON POOR 1848-50].

In THE COMMUNIST MANIFESTO, Marx saw through the utopianism of the free traders and their “golden age” of capitalism. This is what he wrote;

To sum up, what is free trade, what is free trade under the present condition of society? It is freedom of capital. When you have overthrown the few national barriers which still restrict the progress of capital, you will merely have given it complete freedom of action. So long as you let the relation of wage labor to capital exist, it does not matter how favorable the conditions under which the exchange of commodities takes place, there will always be a class which will exploit and a class which will be exploited. It is really difficult to understand the claim of the free-traders who imagine that the more advantageous application of capital will abolish the antagonism between industrial capitalists and wage workers. On the contrary, the only result will be that the antagonism of these two classes will stand out still more clearly (N THE QUESTION OF FREE TRADE MECW vol. 6 p. 450).

And he continued:

Modern bourgeois society…, is like the sorcerer, who is no longer able to control the powers of the nether world whom he has called up by his spells (loc cit).

There was to be no self-adjusting market harmony and no free trade capitalist utopia meeting the needs of all society. Instead capitalism generated class struggle and a trade cycle in which:

…previously created productive forces, are periodically destroyed…they bring disorder into the whole of bourgeois society… (COMMUNIST MANIFESTO).

Adam Smith’s invisible hand which was supposedly guiding the market to a harmonious end was, instead, attached to the arm of a wild-eyed market anarchist who justified class exploitation on the one hand and violent social disorder, social pain and dislocation on the other.

In a letter to Bernstein written in 1882, Engels underscored Marx’s point made in THE COMMUNIST MANIFESTO when he wrote that crises created powerful political upheavals whose resolution led to political reaction (LETTERS ON CAPITAL pp. 209-10). And the political reaction in the late Nineteenth century was racism; a crude popular racism and jingoism pursued by the Tories and DAILY MAIL against the Jews and a more systematic racism in the hands of the eugenicists like Sir Francis Galton.
Engels was writing at the mid-point of what was called “the Long Depression”. The Long Depression coincided with the end of British industrial monopoly. There was a heightened International competition by Britain with the US and Germany particularly over exports of agriculture. In the US, for example, the development of transport systems like the railways and technological inventions in farming meant cheap exports of wheat and meat.

The optimism of capitalism and free trade for many emerging capitalist countries gave way to an economic retrenchment associated with protectionism and tariffs. In the late 19th century while Britain still maintained a policy of free trade her main competitors adopted tariff barriers. As early as the 1870’s the newspapers were claiming that Britain’s industrial supremacy was a thing of the past (see J. E. Tyler, THE STRUGGLE FOR IMPERIAL UNITY, 1868-95 1938 p. 12).

And in a footnote to CAPITAL VOLUME 3, Engels was to write:

…protective tariffs are nothing but preparations for the ultimate general industrial war, which shall decide who has supremacy on the world-market. Thus every factor, which works against a repetition of the old crises, carries within it the germ of a far more powerful future crisis (477-8n).

Many British capitalists used the existence of cheap imports like meat and wheat to keep wages down. Not all employers agreed. The exporters increasingly wanted tariffs to be placed on cheap imports from foreign competitors. The threat from foreign competition, particularly Germany, led to calls for “fair trade” and “protectionism” with the publication of pamphlets like “MADE IN GERMANY” by E. Williams.

Williams wrote:

In all our industries you find a steady slowing-down…it is Germany who is in for the “marvellous progress” now. England made hers when and because she had command of the world’s markets (1896 p.5)

Other pamphlets were more sinister. One pamphlet entitled “GERMANIAN ESSE DELENDAM” was published by The Saturday Review in 1897 at the end of the Long Depression. The author, who knew his Classics, drew on the writings of the Roman senator, Cato the Elder who, during Rome’s Punic Wars with Carthage, had demanded after every debate in the Senate: “In my opinion Cathage must be destroyed” (“Ceterum censeo Catharage esse delendam”).

This is what the 19th century author wrote:

Is there a mine to exploit, a railway to build, a native to convert from bread-fruit to tinned meat, from temperature to trade gin, the German and the Englishman are struggling to be first. A million petty disputes build up the greatest cause of war the world has ever seen, If Germany were extinguished tomorrow, the day after tomorrow there is not an Englishman in the world who would not be richer. Nations have fought for years over a city or a right of succession; must they not fight for two hundred and fifty million pounds sterling of yearly commerce (quoted from R. J. S. Hoffman, GREAT BRITAIN AND THE GERMAN TRADE RIVALRY, 1875-1914 1933, p. 281).

The destruction by the Romans of the City of Carthage led to 145,000 deaths with 50,000 men, women and children sold into slavery (BLOOD AND SOIL: A WORLD HISTORY OF GENOCIDE AND EXTERMINATION FROM SPARTA TO DARFUR B. Kiernan p. 49 2002). By the end of the First World War, some seventeen years after The Saturday Review article was written, there were 37 million dead across the battlefields of Europe.

The Long Depression affected much of the world from the early 1870s until the mid-1890s. The economist W. W. Rostow said that it led capitalists “to search for an escape” from the reduced profit margins “in the insured foreign markets of positive imperialism, in tariffs, monopolies, employers’ associations” (BRITISH ECONOMY IN THE NINETEENTH CENTURY, OUP 1948. p. 89). Increasingly, Social Darwinism was used to describe the competition between the capitalist nations in terms of economic and national survival of the fittest.

In the middle of The Long Depression, in 1884, the Tory leader, Lord Randolph Churchill, a protectionist, had this to say:

We are suffering from a depression of trade extending as far back as 1874, ten years of trade depression, and the most hopeful either among our capitalists or among our artisans can discern no sign of revival.

He listed all the industries that were, in his words, dead or dying –coal, iron, ship building, silk, wool, and cotton. He ended: “Turn your eyes where you like, you will find signs of mortal disease” (“LORD RANDOLPH CHURCHILL” by Winston Churchill M.P., Pub., MacMillan & Co., Ltd London, 1906, Vol. 1, page 291).

The Parliamentary Committee of 1886 attributed the crisis to the belief that British capitalists “had gone far beyond their rivals in the rashness with which factories have been multiplied” (Lord Brassy, Papers and Addresses, 1894, pp. 214-15 in THE RISE AND FALL OF ECONOMIC LIBERALISM: THE MAKING OF THE ECONOMICAL GULAG, F. F. Clairmont 1996 ed).

In the United States, Railways was a key issue in the first phase of the crisis. Overly complicated bonds promising fixed returns went bust. Jay Cooke, a famous financier of the railways, couldn’t payoff his debts and went bankrupt. During the crisis hundreds of banks closed, unemployment rapidly increased and fortunes were lost through bankruptcy; very much like today.

The crisis of 1873 led to a five year depressed market. Small businesses suffered, and the likes of John D. Rockefeller or Andrew Carnegie came in to buy up the bankrupt competition. Only the truly wealthy with capital liquidity and foresight could grow; a confirmation of Marx’s tendency of capitalist accumulation to concentrate and centralize into fewer and fewer hands.

Not that these capitalists saw it as a tendency for capital to centralize and concentrate. As Rockefeller explained to a Sunday school class:

The growth of large business is merely the survival of the fittest…The American Beauty rose can be produced in the splendour and fragrance that bring cheer to its beholder only by sacrificing the early buds which grow up around it.

And he then went on to draw an analogy between the rose and Standard Oil Company:

This is not an evil tendency in business. It is merely working out of a law of nature and of God, (Hofstadter, SOCIAL DARWINISM IN AMERICAN THOUGHT, p. 45).

The rise of Social Darwinism during the Long Depression and the vast fortunes as a consequence of large capitalists killing little capitalists is not a coincidence. Social ideas do not exist in a vacuum. And the very rich, like the Vanderbilt’s and Rockefellers’ saw little of the hardship of the depression experienced by tens of thousands of the working class.

During the Long Depression the rich built large and expensive manorial-styled houses in Newport. Mrs. Williams K. Vanderbilt gave her $250,000 ball in 1883 at the height of the depression while the Bradley Martins gave an even more expensive ball at the old Waldorf Astoria at its end. One guest appeared in a suit of gold-armour valued at an estimated $10,000 (THE AFFLUENT SOCIETY J. K. Galbraith p. 73).

What of the working class?

Industrial communities such as the immigrant populated New York City saw a marked rise in crime, gang warfare and abject poverty. Construction in the City was cut in half, both in terms of number of new buildings and their value.

One hundred thousand people were thrown out of work, nearly one-quarter of the city's labour force. Ten thousand homeless roamed the city's streets. Those who still had work suffered a severe drop in wages, roughly 30 percent across the board. In January of 1874, unemployed workers marched to demand that the city find them work but the event culminated in a savage police attack on the marchers in Tompkins Square.

In the period from 1893 to 1896 America suffered another severe economic crisis and depression that was surpassed only by the Great Depression that followed four decades later. The cause of crises, denied at the time by capitalist economics, as Marx showed in CAPITAL, was the anarchy of commodity production and exchange for profit. During the crisis there was a public panic to cash in paper currency for gold, a subsequent depletion in the country's gold reserve and bankers calling in their loans to private industry as the value of the dollar continued to decline.

A domino effect resulted as major companies such as the Northern Pacific Railway, the Union Pacific Railroad, and the Atchison, Topeka and Santa Fe declared bankruptcy. An estimated 15,000 companies failed. The price of farm products plummeted, forcing many farmers to loose their farms and their livelihood. The crash of so many defaulted loans led some 500 banks to close their doors – taking their depositors' life savings with them. Unemployment soared.

America’s roads and railways were filled with the unemployed searching for employment. They became hoboes, making their way across the country in search of a job. Among them was eighteen-year-old Jack London. He went on to write THE PEOPLE OF THE ABYSS, a journey through the degradation and squalor of the East End of London in 1903. A later generation of unemployed hobos would spawn folk singers of the likes of Woody Guthrie.

The Long Depression confirmed Marx’s comments on crises and depressions which he had set out in CAPITAL, published just as the Long Depression was getting under way. Marx wrote:

The life of modern industry becomes a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation, (CAPITAL VOLUME 1 p. 495 Kerr ed.)

Marx and the Economic crisis

Marx argued that the failure of some products of industry to find buyers, which produces a crisis, is not due to any overall shortage of purchasing power but it is due to the failure of capitalists to exercise their power to purchase commodities at a crucial time.

Marx explained crises in his answer to the economist J. B. Say.

J. B. Say argued that a serious depression should not take place because “every seller brings a buyer to market”: by which he meant that every producer of commodities who sells his products then has the cash with which he can at once buy other products and so keep industry busy.

Marx dealt with it in CAPITAL VOL. 1, Chapter III, section 2. He accepted Say’s argument with, however, one qualification. He agreed that the sellers have the cash with which they can go at once out and buy some other commodity, but he pointed out that “no one is forthwith to purchase because he has just sold”.

He may choose not to do so and if the interval of time between the sale and the purchase is too great, the result is “a crisis”.

The question to be answered then is why this failure to buy commodities takes place. Say has disregarded the fact that part of capitalist expenditure which is investment (as distinct from the capitalists’ purchase of necessities and luxuries for personal consumption) has as its sole purpose making a profit, and if there is no prospect that a profit can be made the capitalist refrains from buying although he has the means to buy.

Using their surplus cash to provide jobs for the unemployed is not what the capitalists are in business to do. When the economic conditions improve and there is a prospect of making a profit, companies are only too willing to invest.

Yet contra his critics Marx did not hold a collapse theory of capitalism. No where did he ever write that capitalism would collapse by the weight of its own contradictions. He said in THEORIES OF SURPLUS VALUE that there were no permanent crises.

And it is important to note that Marx, by the time he came to write CAPITAL certainly had fundamentally broken with the notion of a final crisis of capitalism.

When Danielson, his Russian translator, asked in 1879 when he could finally expect the sequel to the first volume of CAPITAL Marx answered that he had to wait for the end of the then-present crisis. Marx stated that the crisis and subsequent long depression showed a series of distinctive features which he wanted to examine and to incorporate into his work.

And Marx remarked in conclusion:

However the course of this crisis might develop itself — although most important to observe in its details for the student of capitalist production and the professional théoricien — it will pass over, like its predecessors, and initiate a new ‘industrial cycle’ with all of its diversified phases of prosperity, etc. (MARX-ENGELS COLLECTED WORKS VOLUME 45, p.355).

In Marx’s mature writings there was no theory of permanent crisis. He did not believe that crises would get worse and worse any more than he believed capitalism would collapse.

Engels and Economic Crises.

If Marx thought that there were no permanent crises this was not the case with Engels.

In 1885 Engels, while accepting a “chronic depression” believed that there would still be a violent and general crisis.

In a letter to Danielson he wrote:

By thus delaying the thunderstorm which formerly cleared the atmosphere every ten years this continued chronic depression must prepare a crash of a violence and extent such as we have never known before” (loc cit 13. 11. 85).

And according to Kautsky he and Engels believed capitalism would suffer a “breakdown” (in German; “Zusammenbruch” see F. Engels Correspondence with K. Kautsky pp 174-5)

Of course, these are private letters. However, Engels’s comment in the Preface to the English edition of CAPITAL VOLUME 1 gave the impression that he believed that stagnation would continue indefinitely.

He wrote:

the decennial cycle of stagnation, prosperity, overproduction and crisis, ever recurrent from 1825 to 1867, seems indeed to have run its course; but only to land us in the slough of despond of a permanent and chronic depression (p 112-3 penguin ed).

Engels went on to state:

…and we can almost calculate the moment when the unemployed, losing patience, will take their own fate into their own hands… ( p. 113)

Engels erroneous comments on crises and the unemployed were to affect the views of both the Social Democratic Federation and The Socialist League:

Here, for example, is William Morris when a speaker for The Socialist League:

For do not deceive yourselves: the Depression in Trade in this country is not accidental or transitory, nor is its cause hard to find: the overweening hopes of our capitalists 30 years ago were founded on the assumption that England was to be for ever the one serious manufacturing country in the world, supplying all other countries with manufactured goods and receiving from them raw materials for the non-human machines and food for the human ones to be constantly worked up into fresh goods: the market was to be unlimited, the expansion of production unchecked; changes had happened in the constitution of society before but could never happen again: the heaven of the well-to-do middle class was realized here in England

And Morris concluded:

I cannot express better the desperate condition of those who see nothing before us but ever fresh development of our capitalist system than by quoting the words of the great Socialist economist F[rederick] Engels from the March [1885] number of the Commonweal: "Here is the vulnerable place, the heel of Achilles for capitalist production: its very basis is the necessity for constant expansion, and this constant expansion is now become impossible. It ends in a deadlock; every year England is brought nearer face to face with the question; either the country must go to pieces, or capitalist production must: which is it to be?" (THE DEPRESSION OF TRADE, 1885, Lectures given to the Socialist League, William Morris internet Archives. William Morris Society).

In the Preface of 1892 to his CONDITION OF THE WORKING CLASS IN ENGLAND, Engels believed that the end of British monopoly would cut the strings between the British capitalist class and the working class and allow Socialism to develop.

As British capitalism came out of the Long Depression, The Socialist Party of Great Britain was established in 1904, a year that saw an appreciably high rate of unemployment (10%). It is doubtful if Engels meant the Socialism of the SPGB whose founder members had been in the SDF. He had previously written off the SDF as a “sect” who had vulgarised Marxism and he had little time for the Socialist League. He attributed Hyndman’s ability to “reap the harvest” to the “stupidity of the Socialist League” which would not “concern itself with the living movement” (MARX AND ENGELS, SELECTED CORRESPONDENCE, 1846-1895 1942 p, 442).

Engels most probably had in mind a British equivalent of the German SDP who he considered was concerned “with the living movement”.

In a letter (May 12th 1894) to A. Sorge, Engels wrote:

The Social Democratic Federation here shares with your German-American Socialists the distinction of being the only parties who have contrived to reduce Marxist Theory of development to a rigid orthodoxy, which the workers are not to reach as a result of their class consciousness, but which, like an article of faith, is to be forced down their throats at once and without development. That is why both remain mere sects and, as Hegel says, come from nothing through nothing to nothing… (MARX-ENGELS CORRESPONDENCE 1976 p. 448

In his later life Engels looked at the success of the German SDP in gaining mass votes, trade union support and becoming a large and powerful Party with M. P’s voted into the Reichstag. Engels’s, although unhappy with the SDP’s Erfurt Programme, never distanced himself from it.

The Erfurt programme contained the seeds of social democracy’s destruction. Reforms were offered in the Erfurt Programme (later adopted by the other social democratic parties) as stepping stones towards Socialism attracting non-socialist workers but, after Bernstein, these reforms increasingly became objects in their own right and the Socialist goal was either submerged, forgotten or relegated to unimportance.

After the First World War, when the SDP finally took power, they attracted support from a non-Socialist working class and ended up trying to run capitalism more efficiently through reform measures rather than persuading the workers to become Socialists. The politics of the post 1919 SDP was an utter disaster and a contributing factor to the rise of Adolph Hitler.

As for periodical crises it is true that they did increase working class dissatisfaction but it was an uninformed discontent. Some of the social democratic parties managed to gain non-socialist support during a crisis only to lose these members once capitalism moved into more favourable economic circumstances.

The same applied to conditions after the war, particularly in the defeated countries. Discontent was mistaken for socialist consciousness. Millions of workers who had just been killing each other a few months previously on the battle fields of Europe were not of the frame of mind to suddenly set about establishing Socialism.

The Soviets which appeared over Europe during 1918- 1920 had nothing to do with the establishment of common ownership of the means of production and distribution by all of society and these ill-considered uprisings, including the deaths of Luxemburg and Liebknecht, were usually crushed often by politicians who had been pre-1914 Social Democrats.

One lesson the SPGB can offer the working class - but is a hard and sobering lesson is this: there are no short cuts to Socialism.

The “Breakdown Theory”.

Once capitalism began to recover from the Long Depression some argued that the new conditions of trade would mean crises were a thing of the past. One such supporter of this view was Engels’s one-time friend Eduard Bernstein.

Bernstein believed Marx held a “break-down” theory of capitalism (see THE PRECONDITIONS OF SOCIALISM, Bernstein, ed. H. Tudor CUP 1993 and Bernstein and the Marxism of the Second International by L. Colletti in FROM ROUSSEAU TO LENIN NLB 1972).

His main target was Kautsky’s supposed belief in overproduction as the basis of a general economic crisis over all areas of commodity production leading to the establishment of Socialism. (Bernstein’s Challenge-Reform or Revolution in MARX'S THEORY OF CRISIS, S. Clarke, 1994 pp. 29 -33). What Bernstein denied was a general crisis of capitalism.

Nevertheless, Bernstein misread Marx. Bernstein took the “break-down” of capitalism to mean remarks made by Marx in Capital particularly the historical tendency of capitalist accumulation top concentrate into fewer hands.

What, for Marx, was a tendency of capital concentration and accumulation to concentrate into the hands of fewer and fewer capitalists was held as inevitable by Social democratic parties. But Marx was discussing the rise of the working class, socialist revolution and the establishment of Socialism not a breakdown of capitalism.
Here is Marx:

In the chapter on primitive accumulation, my sole aim is to trace the path by which the capitalist economic order in Western Europe emerged out of the womb of the feudal economic order. Hence it follows the movement which divorced the producer from his means of production, transforming the former into a wage-earner (a proletarian, in the modern sense of the word) and the latter into capital.

And he continued:

In this history, “every revolution marks an era which serves as a lever in the advancement of the capitalist class in the process of its formation. But the basis of the evolution is the expropriation of the tiller of the soil”. At the end of the chapter, I deal with the historical tendency of accumulation and I assert that its last word is the transformation of capitalist property into social property. I supply no proof of this at that point for the good reason that this assertion itself is nothing but the succinct summary of prolonged developments previously presented in the chapters on capitalist production. (MARX-ENGELS LETTERS, Marx to Otechestvenniye Zapiski November 1877 p. 29).

According to Bernstein, Social Democracy believed that a violent crisis would sooner or later produce conditions of acute poverty that would turn workers against capitalism, convincing them of the impossibility of continuing under commodity production and exchange for profit. There would be a generalised crisis of society only concluded by the establishment of socialism.

Bernstein was supported in this view by the Conferences of the SPD and the Congress of the Second International. At the 1891 SPD Congress, Bebel claimed that:

Bourgeois society is working so vigorously towards its own destruction that we need only wait for the moment when we can pick up the power which has already dropped from its hands (W.L. Gutman, THE GERMAN SOCIAL DEMOCRATIC PARTY, 1875-1933, 1981, p. 274)

A resolution of the London Congress of the Socialist International of 1896 stated that:

…economic development has now reached the point where crisis could be imminent.

And the resolution went on to call for workers to be:

…in a position to take over the management of production (loc cit p. 29).

However for Bernstein this violent crisis had never materialised and nor would it. Capitalism has survived the long-depression. There was, he said, more diversity rather than greater concentration of capital while the development since Marx’s death of large cartels, credit and improved systems of communication meant that capitalism was more regulated and prone less and less to disequilibrium and crisis. His revisionism and reform politics came out of this changing social reality and informed the reformist politics of the parties who would dominate the Twentieth Century.

The response against Bernstein was led by Rosa Luxemburg. In SOCIAL REFORM OR REVOLUTION (1898) she stated that Bernstein “not merely rejects a certain form of the collapse. He rejects the very possibility of collapse”. She was to later develop a theory of break-down in THE ACCUMULATION OF CAPITAL (1913) in which she mis-understood Marx’s plans of capital reproduction in Volume II of Capital.

In Section IX of SOCIAL REFORM OR REVOLUTION, entitled “Collapse” Luxemburg wrote:

Bernstein began his revision of the Social-Democracy by abandoning the theory of capitalist collapse. The latter, however, is the corner-stone of scientific socialism. By rejecting it Bernstein also rejects the whole doctrine of socialism. In the course of his discussion, he abandons one after another of the positions of socialism in order to be able to maintain his first affirmation.

Without the collapse of capitalism the expropriation of the capitalist class is impossible. Bernstein therefore renounces expropriation and chooses a progressive realization of the “co-operative principle” as the aim of the labour movement
.

Luxemburg influenced other theorists like the American, Louis Boudin.

Boudin wrote:

…the great problem of capitalist economics is the disposition of the surplus-product created continually under that system. It is the inability of to dispose of that product that is the chief cause of the temporary disturbances in its bowels, and which will lead to its final breakdown and replacement by the socialist mode of production and distribution. P. 235 (THE THEORETICAL SYSTEM OF KARL MARX, 1909)

Boudin’s overproduction theory, common in the Social Democratic parties, relates to exports. It is argued that the population in a country can afford to buy only a part of what is produced so that the only way of disposing of the unsold surplus is to export it. It was a form of “under-production” theory of crises which was rejected by the Socialist Party of Great Britain in the 1930’s in its pamphlet “CAPITALISM WILL NOT COLLAPSE” (1932).

To dispose of the Luxemburg-Boudin argument we only need to consider the following example. For Britain in 1989 the amount of goods and services exported was £118,000 million. In 2000 it was £200,000 million. If in this export took place because there was no purchasing power in Britain to buy the goods how was it possible for there to be £137,000 million of imports of goods and service in 1989 and £233,000 million in 2000? Who paid for them and how?
If the problem is looked at on a world basis the theory is shown to be wrong. The exports from one country have to be the imports into some other country. So the total of world imports is exactly the same as the total of world exports. However, Louis Boudin, in his SOCIALISM AND WAR, published in 1916 (pages 66-68) attempted to justify a version of Luxemburg’s under-consumptionist theory.

He argued that in developed capitalist countries:

…the working class produces not only more than it consumes, but more than society as a whole consumes.

There is therefore a surplus product which has to be exported to countries “of a lower order of development”. Being of a lower order of development, these countries could, he said, “absorb the products absolutely” and not merely take them “in exchange for other goods of as high an industrial order”. Boudin included in his areas that could “absorb” the surplus products of the industrialized countries the backward agricultures still existing in some developed countries.

Boudin admitted that the situation as it existed at the time he formulated his theory (1914) “cannot last forever”, because, as he said, inevitably the backward countries and backward agricultures themselves develop, so that every country in the world has a larger and larger surplus to get rid of and nowhere to place it. The whole trade and production of the world would come to a halt.

Nothing of this kind happened in the three-quarters of a century since Boudin made his forecast. The passage of time has proved him wrong.

All the 190 or so countries in the world now have their developed industries and agriculture. All are exporting, yet total world production and world exports are immensely greater than they were in 1914. It is not true that the working class produces more than society consumes. As Marx argued in THE COMMUNIST MANIFESTO: “capitalism is a fetter on production”. The profit system deliberately underproduces to markets and buying customers not in meeting human need.

What does happen is that some industries periodically produce more than their particular markets can absorb at profitable prices; but that is another matter.

This brief account of one aspect of the theoretical collapse of the Second International only serves to remind Socialists today that the Bernstein’s critique was only possible because Social Democracy had lost its revolutionary content; if, indeed, it ever had one.

At the end of the long depression the politics of The Second International was reflected in cataclysmic crises, in support for reforms and by September 1914 an almost universal support for a capitalist war. By then a revolutionary politics had been re-established by the Socialist Party of Great Britain which stood for Socialism and only Socialism and shaped a socialist politics which not only had a more realistic attitude to economic crises but was to oppose all war in capitalism on the basis of working class interests.

19th Century Unemployment, Imperialism, and Racism

Unemployment

The Social Democratic Federation came into existence in the Long Depression. Hyndman, a former Tory businessman, believed the conditions existed for a great social revolution which he set out in his article “London Leads” (JUSTICE Oct 1885 p. 4).

Hyndman also wrote COMMERCIAL CRISIS OF THE NINETEENTH CENTURY in 1892 (republished in 1932, the same year as the SPGB pamphlet CAPITALISM WILL NOT COLLAPSE).

Hyndman’s book is a descriptive account of the crises which occurred throughout the 19th century. No account is given of why crises occur. Marx gets one mention. However it is the remedies which distance the SDP from whom founder members of the SPGB were to be expelled in 1904. Hyndman believed that to abolish crises and collapse of trade required state intervention:

to establish an equilibrium between production, consumption, and the general distribution for the benefit of all” p. 164.

Hyndman believed erroneously, as did other leading members of Social Democracy that crises were caused by underconsumption. This had been dealt with by Marx in VOLUME II OF CAPITAL.

Marx wrote:

"But if one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and "simple" (!) common sense, such a period should rather remove the crisis. It appears, then, that capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis" (CAPITAL VOLUME II).

And this is borne out in all crises. In a boom workers are in fact receiving more wages and are buying more commodities. Yet a crises still takes place rendering under-consumptionist theories ineffectual. How can State intervention as proposed by Hyndman prevent crises? It can’t.

One of the first economists to consider and propose an under-consumptionist theory and a general theory of crises was the Swiss economist de Sismondi (1773-1842).

Sismondi worked within the economic tradition started by the economists Adam Smith (WEALTH OF NATIONS 1777) and David Ricardo (ON THE PRINCIPLES OF POLITICAL ECONOMY, 1817). But as the social problems of an emerging capitalism became clear to him, Sismondi broke with free trade and economic liberalism to become one of its trenchant critics.

Marx considered Sismondi, alongside Ricardo, to be the last of the classical economists. According to Marx, after Ricardo and Sismondi there was only vulgar economics on the one hand and a socialist critique of political economy on the other. A useful introduction to Sismondi can be found in A HISTORY OF ECONOMIC THOUGHT by I.I. Rubin (Chapter 37 Sismondi as a Critic of Capitalism, pp. 335-346 Pluto Press 1980) and in Rosa Luxemburg’s THE ACCUMULATION OF CAPITAL Section II, ch. 10-15 pp 145-194, 1913).

Apparently, there is no English translation of Sismondi’s Nouveaux Principes d’economie Politique (1819) although a selection of his writings can be found in POLITICAL ECONOMY AND THE PHILOSOPHY OF GOVERNMENT: A SERIES OF ESSAYS SELECTED FROM THE WORKS OF M. DE SIMONDI WITH A HISTORICAL NOTICE OF HIS LIFE AND WRITINGS by M. Mignet (London: John Chapman, 1847). The free market on-line Library of Liberty has a collection of Sismondi’s works from the aforementioned publication.

A candidate for a vulgar and apologetic economics was Parson Malthus. He offered a theory of under-consumption in his PRINCIPLES OF POLITICAL ECONOMY (1820). He believed that there could never be effective demand for commodities because workers were unable to consume all they produced. He wrote: “the very existence of a profit upon any commodity presupposes a demand exterior to that of the labour which has produced it” (cited by Marx in THEORIES OF SURPLUS VALUE Part 3, p. 57). Malthus opposed any increase in wages which would be expected from a defender of the ruling class.

Marx retorted:

Malthus is interested not in concealing the contradictions of bourgeois production, but on the contrary, in emphasizing them, on the one hand, to prove the working classes is necessary (as it is, indeed, for this mode of production) and, on the other hand, to demonstrate to the capitalists the necessity for a well-fed Church and state hierarchy in order to create an adequate demand for the commodities they produce..” (loc. cit op, 57).

For Sismondi, Capitalism not only encouraged the development of the forces of production but was steadily impoverishing the emerging working class within the cities and the peasants in the country-side, a class who formed the great majority of the population in Europe at the time. The introduction of machinery and the overall growth in the productivity of labour, as well as the ruin of the peasants and small artisan producers, was producing what Marx called the industrial reserve army of the unemployed. The unemployed were, in turn, driving down the wages of the employed workers to the barest subsistence.

Sismondi believed that as capitalism developed, industrial production without limit was bound to collide with the limits placed on effective demand arising from the growing impoverishment of the great majority of the population. This contradiction, Sismondi thought, would lead to an economic crises caused by a general overproduction of commodities. He called them “gluts”.

During the first decade of the 19th century, the economic crises that hit British capitalism were still explained from external causes. Reasons were given by economists for economic crises such as the disruption of trade with continental Europe caused by the wars between post-revolutionary France and Britain. And the existence of mass unemployment in Britain after the end of the Napoleonic war in 1815 was explained away by economists as the result of the curtailment of military production.

Ricardo referred to these phenomena as a sudden change in the channels of trade and nothing to do with commodity production and exchange for profit and the workings of the market. However, in opposition to Sismondi, Ricardo and his capitalist supporters insisted that under peaceful conditions of capitalist development a “general glut” of commodities could not occur.

This belief in the market was to become for James Mill and J. B. Say (A TREATISE ON POLITICAL ECONOMY, 1803) the maxim “that every seller bought a buyer to the market”. For Ricardo and the capitalists who used his ideas against the working class, capitalism production and exchange were seen as harmonious and self-adjusting.

Marx criticized Ricardo and his supporters for attempting to “reason away” the contradictions of capitalism, locating the source of their error to the way in which they conveniently ignored the very process of commodity production and exchange for profit, with the important distinctions between use-value and exchange value and between the commodity and money (THEORY OF SURPLUS VALUE Part 2 pp 495 and 502). Marx was also to dispose of Say’s Law in the first volume of CAPITAL where he wrote:

but no one is forthwith bound to purchase, because he has just sold…if the split between the sale and the purchase becomes to pronounced, the intimate connection between them, their owners, asserts itself by producing – a crisis” (CAPITAL VOL. 1 Ch. III, pp. 113-4).

Later, Marx was to dismiss Ricardo’s argument with this reply:

When , for instance, the market is glutted by shoes or calicoes, or wines or colonial products, does this perhaps mean that four-sixths of the nation have more than satisfied their needs in shoes, calicoes etc? What after all has over-production to do with absolute needs? It is only concerned with demand that is backed by the ability to pay. It is not the question of absolute over-production –over-production as such in relation to the absolute need or the desire to possess commodities. In this sense there is no partial nor general over-production; and the one is not opposed to the other” (THEORIES OF SURPLUS VALUE Part II, chapter XVII page 506).

In 1825, two years after the death of Ricardo, Sismondi was vindicated when the first global economic crisis broke out that could not be traced to a war, blockade, crop failure or to some other non-economic “external shock.” Twelve years later, in 1837, a second similar crisis broke out that had even more devastating effects than the first crisis.

By the time Marx began to study political economy there had been numerous economic crises which led him to remark that capitalism’s passes through an industrial cycle: “… a state of quiescence, growing animation, prosperity, overtrade crisis and stagnation” (Marx, WAGES PRICE AND PROFIT in SW1, p. 440) had begun.

Marx criticized Sismondi’s theory of under-consumption to explain the crisis. Nevertheless, he acknowledged that Sismondi was aware of the contradictions of capitalist production; the unrestricted development of the productive forces and the restriction imposed on consumption of the working class by the profit motive (THEORIES OF SURPLUS VALUE Part II, page 57-58). Marx went on to praise Sismondi for arguing against Ricardo that crises were not “accidents” but “essential outbreaks...” (loc cit)

Sismondi’s under-consumption ideas related to his “solutions” to the economic crisis; the first, for the government to intervene to bring the forces of production in line with capitalist relations of production, second, for the State to increase effective demand in relation to the level of the productive forces and third, to increase distribution in relation to production.

Marx makes this final point against Sismondi:

He forcefully criticises the contradictions of bourgeois production but does not understand them, and consequently does not understand the process whereby they can be resolved” (loc cit p. 56).

And that would be the conscious and political abolition of capitalism by the working class.

The SDF concentrated their propaganda on the unemployed. They believed that the crises would be so great that the unemployed would revolt and a government formed along Socialist lines. Of course “a socialist government” is an oxymoron; you cannot have socialism where there is a government and governments only exist where there is class rule.

Hyndman was of this view.

He wrote:

It is quite possible that during this very crisis, which promises to be long and serious, an attempt will be made to substitute collective for capitalist control. Ideas move fast; the workers are coming together” (JUSTICE, January 1884).

Later on he suggested 1889 as the probable date for the revolution (See “THE RISE AND DECLINE OF SOCIALISM” by J. Clayton, pub 1926 p. 14).

In a letter to Sorge (29. 11.1886), Engels remarked that it was only the SDF who were taking notice of the unemployed:

…who constitute a fairly numerous group each winter during the chronic stagnation of business and suffer very acute hardships…”(loc cit p. 375).

Nevertheless, Engels criticised the SDF for its political adventurism with the unemployed.

After one riot he wrote that the crowd consisted of:

masses of poor devils of the east end who vegetate in the borderland between working class and lumpenproletariat, and a sufficient admixture of roughs and ‘arrays to leaven the whole into a mass ready for any “lark” up to a wild riot a propos de rien” (ENGELS - LAFARGUE CORRESPONDENCE Moscow 1959 vol. 1 p.334).

THE TIMES editorial noted the crowd after smashing shops and looting made its way back to the East End singing “Rule Britannia” (quoted in OUTCAST LONDON, G S Jones p. 345 1984)

What of the expression “unemployment”? Unemployment as a word did not become associated with political economy until the 1880’s when it appeared in the Oxford Dictionary of 1888. This is because the ruling class and its political agents preferred to use the word “idle”. Loss of employment according to political economists was the result of personal instability or character abnormalities. Where mass unemployment took place it was the result of “natural forces”.

Hyndman pointed out that in the US, there was a belief, again still held today by some politicians and free market economists, that a worker was never unemployed “except by his own fault, and that a vagrant is to all intents and purposes a criminal”. And he concluded “America is a hard place for a poor man during a trade depression” (COMMERCIAL CRISES IN THE 19TH CENTURY p.119). It still is.

In his book KEYWORDS, Raymond Williams rightly points out, with support from E. P. Thompson’s study of unemployment in THE MAKING OF THE ENGLISH WORKING CLASS, that the expression “unemployed” had been used in trade union and Owenite circles during the 1820’s and 1830’s.
Marx used the phase “the industrial reserve army of the unemployed” in CAPITAL to demonstrate that capitalism causes periodic high levels of unemployment not the size of the working class.

taking them as a whole, the general movements of wages are exclusively regulated by the expansion and contraction of the industrial reserve army, and in turn corresponds to the periodic alterations of the industrial cycle” (Ch 25 p. 790).

And

The industrial reserve army, during periods of stagnation and average prosperity, weighs down the active army of workers; during the periods of over-production and feverish activity, it puts a curb on their pretension” p. 792

Nevertheless by the end of the 1880’s “unemployment” was being used in ruling class circles. In no less an establishment publication, THE TIMES, there appeared the following:

…unemployment is the fundamental problem of society (1888 quoted in NEW OXFORD HISTORY OF ENGLAND p. 79).

And although detailed unemployment figures were not kept by government departments and those that were available related to unemployed trade unionists; the severity of unemployment has been calculated by academics.

Unemployment rates

1874

1.6

 
 

1885

9.3

 
 

1886

10.2

 
 

1887

4.9

 
 

1889

2.1

 
 

1892

6.3

 
 

1894

6.9

 

(B R Mitchell BRITISH HISTORICAL STATISTICS CUP 1988 p. 124)


A word of caution about academic debates concerning the Long Depression; they should carry a health warning.

The depression was most notable in Western Europe and North America, but this is in part because good figures are most readily available in those parts of the world. Britain is often considered the hardest hit by the Great Depression, and during this period it lost much of its large industrial lead over the economies of Continental Europe. At the time:

The explanatory comments ranged from an emphasis on “overproduction”, unfair competition, the abrupt transformation in the production and circulation of the whole world”, “the inflammable condition of international affairs” and the like down to “the excessive expenditure on alcoholic beverages and the general improvidence of the working class. The low price of German vinegar and the immigration of Polish Jews” (Rosenberg loc cit p. 60)

Economic Liberals do not believe the Long Depression actually occurred, and consider that it was rather a series of smaller unconnected downturns in the economy. Data from this period is not ideal and it is difficult to get exact figures, which contributes to the on-going debate. The problem for economic liberals is that this was a time of Free Trade and free Markets, conditions which they claimed should have meant sustained and continued growth. They could not blame trade unions, governments, outside factors like war, sun spots and bad harvests for the economic crisis and trade depression so they do the next best thing and deny its existence.

Economists see trade crises as an aberration which should not happen at all. Economic text books all have chapters on the Business Cycle Theory with nods of obsequiousness towards Schumpeter and Krondiev

…long cycle theory presents one of the central mysteries of economic history. It proposes the notion that the global industrial economy …has fluctuated from its earliest inception to an identifiable and protracted rhythm. As the second millennium drew to its close, the subject was revisited by a notable concentration of research…” (Clive Trebilcock: Surfing the Wave; The long Cycle in Industrial Countries in THE FUTURE OF THE PAST: BIG QUESTIONS IN HISTORY” ed. P. Martland 2002).

None of these economic surfers riding Krondriev’s waves saw the current economic Tsunami; neither did the supporters of Schumpeter or Mandel. From a Marxian perspective, economic crises are not an aberration; capitalism has not gone wrong when there are bankruptcies, high levels of unemployment and idle machinery. Nor is there a problem with the contradiction that to get out of a crises capital, in effect, destroys or de-values capital.

Economists believe that if the cause of crises can be discovered then adequate economic policies will result in crises not occurring again. Capitalism would then live on in permanent equilibrium and constant growth.

As a result most of the academic writings on the Long depression are superficial. Economists claim that the immediate cause, and the date that is often used as the start of the Depression, was the collapse of the Vienna Stock Exchange on May 9, 1873. Others have argued the depression was rooted in the Franco-Prussian War that hurt the French economy and forced them to make large reparations payments to Germany much like Ricardo and his followers did the end of the Napoleonic War.

Monetarists believe that the depression was caused by a world shortage of gold that undermined the gold standard.

All the reasons given are to deflect attention away from Marx’s critique of capitalism and the location of crises in the anarchy of commodity production and exchange for profit. The result is that economic theories of crises are intellectually bankrupt. They cannot accept that crises are inherent to capitalist production. The market is prone to periodic failure.

Like the Great Depression the Long Depression saw many countries resort to protectionism to shore up faltering industries. Both Germany and France abandoned free trade.

Ironically, when Chamberlin launched his tariff offensive his most ardent backers were capitalists from the Midlands and the North once areas of dogmatic laissez faire. There are echoes of this today with once free trade enthusiasts in the US car industry wanting State assistance to stop them going bankrupt.

It was generally believed by the capitalist class that it was not the government's role to intervene in the economy, and thus little was done. The absence of a welfare state also meant that depressions had a far smaller effect on government costs than today for they were not obliged to assist those in need.

The consequence for the 19th century unemployed was charity, the work house or out-door-relief (SOCIAL WELFARE IN BRUITAIN 1885-1985 a collection of primary sources; ed Pope, Pratt and Hoyle).

Here is one account of the hardship of unemployment at the end of the Long Depression

Mother had sold most of her belongings. The last thing to go was her trunk of theatrical costumes…Like sand in an hour glass our finances ran out, and hard times again pursued us. Mother sought other employment, but there was little to be found. Problems began mounting. Installment payments were behind; consequently mother’s sewing machine was taken away. And father’s payment’s of ten shillings a week had stopped…There was no alternative: she was burdened with two children, and in poor health; and so she decided that the three of us should enter the Lambeth workhouse, [and] there we were made to separate, Mother going in one direction to the woman’s ward and we were in another to the children’s”.

That account was written by Charlie Chaplin (MY AUTOBIOGRAPHY 1966 quoted in Barker, ed., Long March of Everyman, p. 157)

The Long Depression was not a particularly deep one, unlike the Great Depression of the 1930’s. The period saw a number of years of growth, but more years of contraction. Throughout the period prices fell and production grew more slowly when compared to earlier and later eras.

Agriculture remained in a depressed state until 1914. Output fell, particularly in areas that produced cereal crops. Stock breeders were less severely hit, and there was a shift to higher cost, high quality produce such as fruit and vegetables, and high quality meat. Farmers took land out of production and they laid-off labourers (400,000 jobs were lost in farming between 1870 and 1900). The result was difficulties for agricultural labourers, and Joseph Arch formed the National Agricultural Labourer’s Union in 1872 (the first of its kind), although it collapsed in 1896 after opposition from farmers.

Marx noted that the wages of the agricultural labourers are always reduced to a minimum by the constant latent population. He concluded that the agricultural labourer “…always stands with one foot already in the swamp of pauperism”. (CAPITAL VOLUME 1 P. 796)

Without Distinction of Race or Sex

The new minority Tory government introduced the Reform Act in 1867 which almost doubled the electorate, giving the vote even to working class males. THE 1884 BILL and the 1885 REDISTRIBUTION ACT tripled the electorate again, giving the vote to most agricultural labourers. The last two acts were enacted during the Long Depression. The Tories were confident that the working class was no revolutionary threat. In 1872 Disraeli gave two speeches; one at Manchester the other at Crystal Palace.

Speaking of the working class he said:

[they] are English to the core. They repudiate cosmopolitan principles. They adhere to national principles. They are for maintaining the greatness of the kingdom and the Empire, and they are proud of being subjects of our Sovereign and members of such an Empire. (Hugh Cunningham, quoted in POLITICS AND IDEOLOGY, ed. J. Donald and S. Hall p. 147).

This was borne out by general working class support for Imperialism and the Boer War.

The Long Depression corresponded with the Expansion into Africa (1870 – 1900) and the rise of ideas within social democratic parties about “imperialism”.

The special attraction of Africa and Asia were that they offered many of the raw materials needed by the multiplying factories of Europe: including cotton, silk, rubber, vegetable oils, and the rarer minerals.

Imperialism bought with it a racist set of ideas and beliefs justifying the inferiority of the inhabitants of the continent of Africa (see RULES OF DARKNESS: BRITISH LITERATURE AND IMPERIALISM by P. Brantinger Part 6 p. 173-198 1990).

The Imperialist expansion also bought war over strategic points of influence, raw materials and trade routes. Most of the wars were against indigenous natives like the Zulu Wars. Towards the end of the Great Depression the main conflict arose between the Boers and the British. There were two Boer Wars one from 16 December 1880 - 23 March 1881 and the second from 9 October 1899 - 31 May 1902 both between the British and the settlers of Dutch origin who lived in South Africa. These wars put an end to the two independent republics that they had founded.

Joseph Chamberlain was to write:

If you will for a moment consider the history of this country, say, the present century, or, I would say, during the present reign, you will find that every war, great or small, in which we have been engaged, has had at bottom a colonial interest, that is to say, either of a colony or else of a great dependency like India. This is absolutely true and is likely to be true to the end of the chapter” (THE RISE AND FALL OF ECONOMIC LIBERALISM loc cit p. 197)

Imperialism found its way into Hyndman’s ENGLAND FOR ALL where he praised the Empire as a bulwark against foreign atrocities (1881, esp. pp. 4, 101, 116, 129, 132, 152-3, 162-3). Eventually in 1884 a majority of the governing body of the SDF were to leave to form the Socialist league because of Hyndman’s Imperialism and autocratic behaviour.

The SDF opposed the Boer War which included Hyndman (later to support British capitalism in the First World War) who took part in the anti-war demonstration at Trafalgar square, a demonstration which was broken up by a pro-war mob (see R. Price AN IMPERIAL WAR AND THE BRITISH WORKING CLASS, London 1972 157-68). By 1901 the SDF were split again over the Boer War (THE “IMPOSSIBILIST” REVOLT IN BRITAIN” International review of Social History no1, 1956 C. Tsuzuki p. 381).

Political Racism

Hyndman was to blame the Boer war on “Jewish financiers” an accusation that was to be made in Germany some forty years later about the case of the First World War. The Long Depression saw the rise of political racism; used by politicians to gain support from a non-socialist working class.

By the 1880’s there was an openly racist antagonism in the East End of London to Jewish immigration. Between 1887 and 1888 there were racist attacks against the Jewish “threat”. In 1892 the Tories agreed to an Aliens Bill as a means to get working class votes.

Racist groups like the British Brother’s League held packed meetings in Stepney in 1901 culminating in the Aliens Bill of 1905 which empowered the Home secretary to expel any aliens found to be criminal, vagrant, impoverished, or who had lived “under insanitary conditions due to overcrowding” (THE ALIEN INVASION: THE ORIGINS OF THE ALIENS ACT OF 1905 Gainer 1972).

Of course, Jews were mostly poor. And it was the poor Jewish workers, fleeing the pogroms in Eastern Europe, who were the first victims of British immigration laws. Shamefully The Aliens Act was supported by some of the trade unionists. The official trade union movement repeatedly blamed immigrant workers for the growing levels of unemployment within the British economy and from 1892 onwards the TUC called for a complete halt to immigration. Meanwhile in London Ben Tillett, the dockers' leader, told migrant workers at a speech on Tower Hill:

Yes, you are our brothers, and we will do our duty by you. But we wish you had not come. (www.ukwatch.net/article/migrants_and_wages).

Anti-Semitism filtered into the workers’ and social democratic movements. “Jewish bankers” were blamed for a crisis which showed a complete misunderstanding of the cause of crises within capitalism. A resolution was passed at the 1900 SDF Annual Conference to put a stop to anti-Semitism within the Party (JUSTICE Aug 11th 1900). In Germany, Bebel stated that racism was “the socialism of idiots”, a rather awkward phrase when racism, like nationalism would better be described as “the politics of idiots”; a means used by capitalist politicians to divide the working class against itself.

Engels was aware of the rise of political anti-Semitism associated with the Long Depression. Engels explained that anti-Semitism in this modern form:

…is merely a reaction of declining medieval social strata and wage-laborers, so that all it serves are reactionary ends under a purportedly socialist cloak; it is a degenerate form of feudal socialism and we can have nothing to do with that.”

Noting that the modern Socialist movement is “deeply indebted to the Jews,” Engels concluded his letter as follows:

Leaving aside Heine and Borne, Marx was a full-blooded Jew; Lassalle was a Jew. Many of our best people are Jews. My friend Victor Adler, who is now atoning in a Viennese prison for his devotion to the cause of the proletariat, Eduard Bernstein, editor of the London Sozialdemokrat, Paul Singer, one of our best men in the Reichstag—people whom I am proud to call my friends, and all of them Jewish! After all, I myself was dubbed a Jew by the GARTENLAUBE [a right-wing magazine] and, indeed, if given the choice, I’d as lief be a Jew as a ‘Herr von’.” (COLLECTED WORKS, vol. 27, pp. 50-51)

In Central and Eastern Europe, the economic conditions were even harder. Many politicians blamed the crisis on a combination of foreign banks and Jews. Nationalistic political leaders (or agents of the Russian czar) embraced a new, sophisticated brand of anti-Semitism that proved appealing to thousands who had lost their livelihoods in the crisis and depression. Anti-Jewish pogroms followed in the 1880s, particularly in Russia and Ukraine.

Another development linked to national efficiency which came out of the long depression was Eugenics. Francis Galton founder of hereditary health care coined the term “eugenics” in 1883 and set out a programme to improve the quality of the human race. His ideas were used by Herbert Spencer and others to defend capitalism as the process of the “survival of the fittest”.

One important development came out of this which has not been seriously studied; the relationship between eugenics, race theory and the SDP.

Alfred Grotiahn was a race theorist with links to the German SDP and he owed his appointment as professor of social hygiene at Berlin University in 1920 to the Party. He advocated a combination of environmental improvement; isolation and sterilization as a means of “amortizing” those elements that did not fit social democracy’s profile of the respectable working class. This included the “insane”, the “work shy”, people with sexually transmitted diseases, alcoholics, accident victims and so on (loc cit THE RACIAL STATE: GERMANY 1933 -1945 p. 32-3).

The Socialist Party of Great Britain’s 1904 Clause 4 of its OBJECT AND DECLARATION OF PRINCIPLES came out of founder members experience in the SDF of the Boer War, the racism associated with unemployment and Hyndman’s imperialism. The establishment of Socialism, the SPGB stated, would emancipate all mankind “without distinction of race or sex”.

Socialism or Barbarism?

In May 1939, just months before the outbreak of the Second World War, the historian Arnold Toynbee gave the annual Hobhouse lecture at the London School of Economics and political Science (LSE). The lecture was called “The Downfall of Civilization”. All the evidence, he said, suggested that modern capitalism would “break down and disintegrate and finally dissolve” (THE MORBID AGE: BRITAIN BETWEEN THE WARS”, Richard Ovary 2009). What would be left, he suggested, would be anarchy and barbarism.

The belief in the collapse of capitalism or civilization into a new barbarism is not new. Similar sentiments to the ones expressed by Toynbee were to be found in the latter decades of the 19th century.

Although barbarism has its origins in ancient Greece, its modern relevance is the discussion barbarism played in the writings on Morgan and Engels.

The use by Morgan and Engels of the word “Barbarism” as a stage in human social development never had a moral or negative characteristic associated with it. Lewis Morgan described Barbarism in neutral terms in his ANCIENT SOCIETY (1877) where it was identified in three stages of human social evolution; lower barbarism with the manufacture of pottery; middle barbarism with domestication of animals in the Eastern hemisphere, irrigation and the use of adobe-brick and stone in architecture in the Western hemisphere; and upper barbarism with the manufacture of iron and the invention of the phonetic alphabet

Likewise with Engels in THE ORIGIN OF THE FAMILY, PRIVATE PROPERTY AND THE STATE (1884), where he called Barbarism:

…a stage (where)… (T)he characteristic feature of the period of barbarism is the domestication and breeding of animals and the cultivation of plants…(p. 89).

The use of barbarism as a contrast to civilization is found in THE COMMUNIST MANIFESTO in a section of the pamphlet where Marx and Engels discuss crises.

“In these crises there breaks out an epidemic that in all earlier epochs would have seemed an absurdity –the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation has cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce” (COMMUNIST MANIFESTO page 18).

And

…and how does the bourgeoisie get over these crises? On the one hand by the enforced destruction of a mass of productive forces, on the other by the conquest of new markets and by the more through exploitation of old ones (pages 18 & 19 of THE COMMUNIST MANIFESTO).

Here barbarism is being used by Marx and Engels as an analogy not an actual state of social existence. Note the use of the word “appears” to describe the crises in terms of famine, war and devastation when the reality the social relations of production have reined in the forces of production; a peculiarity wholly associated with capitalism.

Engels also used the term “barbarism” in the context of a future European War. Here there is a direct comparison between barbarism and war based upon historical precedence. Engels thought a major war would break-out leading either to Socialism or barbarism. In this context “barbarism” was a “universal bankruptcy” equivalent to the social anarchy found during and after the Thirty Years War.

During the Thirty Years War, the mortality rate was perhaps about 15 to 20 percent of the population with deaths due to armed conflict, famine and disease. Much of the devastation of civilian lives and property was caused by the destructive action of mercenary soldiers. The war caused serious dislocation to both the economy and population of central Europe and was one of the principal factors why capitalism was able to be established in Britain rather than mainland Europe.

Here is Engels writing at the end of 1887:

… finally, the only war left for Prussia-Germany to wage will be a world war, a world war, moreover, of an extent and violence hitherto unimagined. Eight to ten million soldiers will be at each other's throats and in the process they will strip Europe barer than a swarm of locusts.

Engels continued:

The depredations of the Thirty Years' War compressed into three to four years and extended over the entire continent; famine, disease, the universal lapse into barbarism, both of the armies and the people, in the wake of acute misery; irretrievable dislocation of our artificial system of trade, industry and credit, ending in universal bankruptcy; collapse of the old states and their conventional political wisdom to the point where crowns will roll into the gutters by the dozen and no one will be around to pick them up; the absolute impossibility of foreseeing how it will all end and who will emerge as victor from the battle.

And he concluded:

Only one consequence is absolutely certain: universal exhaustion and the creation of the conditions for the ultimate victory of the working class. That is the prospect for the moment when the systematic development of mutual one-upmanship in armaments reaches its climax and finally brings forth its inevitable fruits (F Engels, 'Introduction' to Sigismund Borkheim's pamphlet, IN MEMORY OF THE GERMAN BLOOD-AND-THUNDER PATRIOTS 1806-1807, in K Marx and F Engels, op cit, vol. XXVI, p451).

However, despite the millions dead and the destruction of vast amounts of fixed capital, there was no “universal exhaustion” and there were no new conditions to speed on the working class to establish Socialism. The victor was not the working class. Capitalism remained intact. There was one unanticipated event that was to cast a shadow over the 20th century; and that was the 1917 coup d’état in Russia by a Bolshevik minority Bolshevik whose ideas and beliefs were to be exported to the rest of Europe with negative consequences for the growth of Socialism.

As the First World War engulfed Europe, Engels’ remarks had a profound effect on Rosa Luxemburg.

Luxemburg wrote:

'Friedrich Engels once said: "Capitalist society faces a dilemma, either an advance to Socialism or a reversion to barbarism"... We have read and repeated these words thoughtlessly, without a conception of their terrible import. At this moment [1915] one glance about us will show us what a reversion to barbarism in capitalist society means...we stand today, as Friedrich Engels prophesied more than a generation ago, before the awful proposition.' R. Luxemburg, The Crisis in the German Social Democracy (New York, 1919, p18).

And in the JUNIUS PAMPHLET she continued this argument:

Friedrich Engels once said: "Bourgeois society stands at the crossroads, either transition to socialism or regression into barbarism." What does "regression into barbarism" mean to our lofty European civilization? Until now, we have all probably read and repeated these words thoughtlessly, without suspecting their fearsome seriousness. A look around us at this moment shows what the regression of bourgeois society into barbarism means. This world war is a regression into barbarism. The triumph of imperialism leads to the annihilation of civilization.

And she concluded:

At first, this happens sporadically for the duration of a modern war, but then when the period of unlimited wars begins it progresses toward its inevitable consequences. Today, we face the choice exactly as Friedrich Engels foresaw it a generation ago: either the triumph of imperialism or the collapse of all civilization as in ancient Rome, depopulation, desolation, degeneration--a great cemetery. Or the victory of socialism, that means the conscious active struggle of the international proletariat against imperialism and its method of war. This is a dilemma of world history, an either/or; the scales are wavering before the decision of the class-conscious proletariat.

In December 1918, a month before she was murdered following the defeat of the Sparticists uprising, Luxemburg wrote an article entitled “What Do the Sparticists Want?” She declared that a choice presented itself: “Socialism or barbarism.” If the latter—the continuation of capitalist relations—persisted, history would entail new wars, famine, and disease.

The dominant classes throughout history, she wrote “all shed streams of blood, they all marched over corpses, murder, and arson, instigated civil war and treason, in order to defend their privileges and their power.” The ongoing development of capitalist barbarism promised to be more brutal and treacherous, threatening to turn much of the world “into a smoking heap of rubble.”

Socialism,” Luxemburg concluded, “has become necessary not merely because the proletariat is no longer willing to live under conditions imposed by the capitalist class but, rather, because if the proletariat fails to fulfill its class duties, if it fails to realize socialism, we shall crash down together in a common doom” (THE ROSA LUXEMBURG READER, pp. 349–52, 364).

The fate that “barbarism” represented for Luxemburg was Marx’s “common ruin of the contending classes.” (THE COMMUNIST MANIFESTO)

Nothing more is said about "the common ruin of the contending classes" in the MANIFESTO, most likely because Marx and Engels did not consider it a likely outcome of the class struggle under capitalism. They were confident that the working class, despites ups and downs, disappointments and set-backs would eventually act in their class interests and politically establish Socialism.

Capitalism is barbaric; it is a social system of brutal behaviour and terrorism. The philosopher Jonathan Glover recently remarked that: “War killed an average of over a hundred people an hour throughout the 20th century," (HUMANITY: A MORAL HISTORY OF THE 20TH CENTURY, 2006).

In his book ON HISTORY (Barbarism: A User’s Guide p 338-339, 1997) the historian and apologist for Stalin, Eric Hobsbawn, noted that acts of barbarism had been on the increase throughout the 20th century. He believed the First World War began the decent into Barbarism but he had not studied in detail the barbarism associated with the American Civil War –where much of the form of technological slaughter for the 1914-1918 war was anticipated nor the Boer War which preceded it; a war heralding the concentration camps.

Hobsbawn goes on to give three other reasons for this descent into barbarism; the period of world crisis from the breakdown of 1917-20 to that of 1944-7, the four decades of the Cold War and lastly the breakdown of civilization over large parts of the world; a moral degeneracy if you like.

However, commodity production and exchange for profit has not been so severely damaged by war and periodic trade crises that it has posed a threat to the ownership of the means of production by the capitalist class. There has not been a reversal to a previous social system of barbarism as Engels believed; all that has happened is that capitalism has become more destructive and unpleasant. Capitalism shows no tendency towards the common ruin of the contending classes. We are not on the edge of a “smoking heap of rubble”. True, capitalism has the potential to use nuclear weapons in a future war but the likelihood is that it will just move from one economic crisis to the next despoiling the planet in the process.

Capitalism has the apparent capacity to survive great destruction of the means of production. It can survive the death in war of the working class from whom it gets its profit. And in the space of 10 years, from 1939 to 1945 capitalism lost the potential exploitation of some 50 million persons and still survived to this day.

There has been no return to previous social systems like those found after the fall of Rome. For the working class it is either capitalism or socialism and while workers support capitalism the profit system with all its social misery will continue.

Much of what Luxemburg wrote on barbarism came out of a dark pessimism which she experienced at the outbreak of the 1914 war; the Social Democratic leadership sided with their respective nations, the membership of the social democratic parties in terms of principled socialists was shown to be hollow and the trade unions and working class supported the war.

In Britain only the Socialist Party of Great Britain took a principled stand against the war on the basis of working class interest. The SPGB declared its opposition to the war on the grounds that it was purely a capitalist conflict. Immediately war broke out the Executive Committee passed a resolution declaring that anyone who supported the war was unfit for membership.

And in the SOCIALIST STANDARD the party printed a Manifesto on the War entitled “The War and the Socialist Position” in which it concluded:

…having no quarrel with the working class of any country, we extend to our fellow workers of all lands the expression of our goodwill and Socialist fraternity, and pledge ourselves to work for the overthrow of capitalism and the triumph of Socialism” (printed in the pamphlet “THE COMMON MANIFESTO - AND THE LAST ONE HUNDRED YEARS” page 32).

One of the political characteristics of the SPGB is its measured and sober analysis of capitalism. Romantic or overexcited propaganda has not been a feature of the Party’s case against Capitalism. Yes, we condemn capitalism in the way it deforms, exploits and destroys the working class but we do not believe the working class can be scared into becoming socialists any more than they can be forced to become Socialists or have Socialism imposed upon them. Socialists use facts and reason working within the framework of the OBJECT AND DECLARATION OF PRINCIPLES which sets out the Socialist case against capitalism.

The working class is compelled by the economic law acting on commodity production and exchange for profit to finally face with sober senses its real conditions of life under capitalism. A realistic assessment of the workers’ class interests have to be thought through.

Marx and Engels set this train of thought in motion from the publication of The COMMUNIST MANIFESTO in 1848 to the three volumes of CAPITAL published from the 1860’s to the 1890’s. That is, they set out a scientifically rigorous argument for the working class to establish Socialism based upon the materialist conception of history, the labour theory of value and the political concept of the class struggle.

Socialists, under equally difficult conditions, are still continuing this work today.

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