The Lessons of the Crisis
No. 7, Iskra, August 1901.
Collected Works, Volume 5, pages 89-94.
The commercial and industrial crisis has already dragged on for almost two years. Apparently it is still growing, spreading to new branches of industry and to new districts, and is becoming more acute as a result of the failure of more banks. Every issue of our newspaper since last December has in one form or another shown the development of the crisis and its disastrous effects. The time has come to raise the general question of the causes and the significance of this phenomenon. For Russia, it is a comparatively new phenomenon, as new as Russian capitalism. In. the old capitalist countries—i.e., in the countries where the greatest part of the goods is produced for sale, and where the majority of the workers own neither land nor tools, but sell their labour-power to employers, to the owners of property, to those to whom the land, the factories, the machinery, etc., belong—in the capitalist countries, crises are an old phenomenon, recurring from time to time, like attacks of a chronic disease. Hence, crises may be predicted, and when capitalism began to develop with particular rapidity in Russia, the present crisis was predicted in Social-Democratic literature. The pamphlet The Tasks of the Russian Social-Democrats, written at the end of 1897, stated: “We are apparently now passing through the period in the capitalist cycle [a rotation, in which the same events repeat themselves like summer and winter] when industry is ’prospering’, when business is brisk, when the factories are working at full capacity, and when countless new factories, new enterprises, joint-stock companies, railway enterprises, etc., etc., are springing up like mushrooms. One need not be a prophet to foretell the inevitable and fairly sharp crash that is bound to succeed this period of industrial ’prosperity’. This crash will ruin masses of small owners, will throw masses of workers into the ranks of the unemployed...." And the crash came with a severity unparalleled in Russia. What is the cause of this horrible, chronic disease of capitalist society, which recurs so regularly that its coming can be forecast?
Capitalist production cannot develop otherwise than by leaps and bounds—two steps forward and one step (and sometimes two) back. As we have said, capitalist production is production for sale, the production of commodities for the market. Production is conducted by individual capitalists, each producing on his own and none of them able to say exactly what kind and what amount of commodities will be required on the market. Production is carried on haphazardly; each producer is concerned only in excelling the others. Quite naturally, therefore, the quantity of commodities produced may not correspond to the market demand. This probability becomes particularly great when the enormous market is suddenly extended to new huge, unexplored territories. This was precisely the situation at the beginning of the industrial “boom” we experienced not so long ago. The capitalists of all Europe stretched out their paws towards that part of the globe inhabited by hundreds of millions of people, towards Asia, of which until recently only India and a small section of the coastal regions had been closely connected with the world market. The Transcaspian Railway began to “open up” Central Asia for the capitalists; the “Great Siberian Railway” (great, not only because of its length, but because of the unrestricted plunder of the Treasury by the contractors and the unrestricted exploitation of the workers who built it) opened up Siberia. Japan began to develop into an industrial nation and strove to make a breach in the Chinese Wall, opening the way to a choice morsel into which the capitalists of England, Germany, France, Russia, and even Italy immediately plunged their teeth. The construction of gigantic railways, the expansion of the world market, and the growth of commerce, all stimulated an unexpected revival of industry, an increase of new enterprises, a wild hunt for commodity markets, a hunt for profits, the floating of new companies, and the attraction to industry of masses of fresh capital, which consisted partly of the small savings of small capitalists. It is not surprising that this wild world-hunt for new and unknown markets led to a terrific crash.
To obtain a clear idea of the nature of this hunt for markets and profits, we must remember what giants took part in it. When we speak of “separate enterprises” and “individual capitalists”, we sometimes forget that, strictly speaking, these terms are inexact. In reality, only the appropriation of profit has remained individual but production itself has become social. Gigantic crashes have become possible and inevitable, only because powerful social productive forces have become subordinated to a gang of rich men, whose only concern is to make profits. We shall illustrate this by an example from Russian industry. Recently the crisis has spread to the oil industry, in which such enterprises as the Nobel Brothers Oil Company are engaged. In 1899 the company sold 163,000,000 poods of oil products to the value of 53,500,000 rubles, while in 1900 it sold 192,000,000 poods to the value of 72,000,000 rubles. In one year, a single enterprise increased the value of its output by 18,500,000 rubles! This “single enterprise” is maintained by the combined labour of tens and hundreds of thousands of workers engaged in extracting oil and refining it; in delivering it by pipeline, railways, seas, and rivers; and in making the necessary machinery, warehouses, materials, lighters, steamers, etc. These tens of thousands of workers work for the whole of society, but their labour is controlled by a handful of millionaires, who appropriate the entire· profit earned by the organised labour of this mass of workers. (In 1899 the Nobel Company made a net profit of 4,000,000 rubles, and in 1900 the figure was 6,000,000 rubles, of which the shareholders received 1,300 rubles per 5,000-ruble-share, with five members of the board of directors receiving bonuses to the amount of 528,000 rubles!) When several such enterprises fling themselves into the wild chase for a place in an unknown market, is it surprising that a crisis sets in?
Furthermore, for an enterprise to make profit, its goods must be sold, purchasers must be found. The purchasers of these goods must comprise the entire population, because these colossal enterprises produce whole mountains of goods. But nine-tenths of the population of all capitalist countries are poor; they are workers who receive extremely miserable wages and peasants who, in the main, live even worse than the workers. Now, when, in the period of a boom, the large industrial enterprises set out to produce as vast a quantity of goods as possible, they flood the market with such a huge quantity of goods that the majority of the population, being poor, cannot pay for them. The number of machines, tools, warehouses, railroads, etc., continues to grow. From time to time, however, this process of growth is interrupted be cause the masses of the people for whom, in the last analysis, these improved instruments of production are intended, remain in a state of poverty that verges on beggary. The crisis shows that modern society could produce immeasurably more goods for the improvement of the living conditions. of the entire working people, if the land, factories, machines, etc., had not been seized by a handful of private owners, who extract millions of profits out of the poverty of the people. The crisis shows that the workers should not confine themselves to the struggle for individual concessions from the capitalists. While industry is in upswing, such concessions may be won (the Russian workers on more than one occasion between 1894 and 1898 won concessions by energetic struggle); but when the crash comes, the capitalists not only withdraw the concessions they made, but take advantage of the helpless position of the workers to force wages down still lower. And so things will inevitably continue until the army of the socialist proletariat over-throws the domination of capital and private property. The crisis shows how near-sighted were those socialists (who call themselves “Critics”, probably because they borrow uncritically the doctrines of the bourgeois economists) who two years ago loudly proclaimed that crashes were becoming less and less probable.
The lessons of the crisis, which has exposed the absurdity of subordinating social production to private, property, are so instructive that even the bourgeois press is now demanding stricter supervision—e.g., over the banks. But no supervision will prevent the capitalists from setting up enterprises in times of boom which must inevitably become bankrupt later on. Alchevsky, the founder of a land and a commercial bank in Kharkov, both now bankrupt, acquired millions of rubles by fair means or foul for the purpose of establishing and maintaining mining and metallurgical enterprises that promised wealth beyond the dreams of avarice. A hitch in industry wrecked these banks and mining and metallurgical enterprises (the Donets-Yuryev Company). But what does the “crash” of enterprises mean in capitalist society? It means that the smaller capitalists, capitalists of the “second magnitude”, are eliminated by the big millionaires. The place of Alchevsky, the Kharkov millionaire, is taken by the Moscow millionaire, Ryabushinsky, who, being a richer capitalist, will bring greater pressure to bear on the workers. The supplanting of smaller capitalists by big capitalists, the increased power of capital, ruination of masses of small property-owners (e.g., small investors, who lose all their property in a bank crash), the frightful impoverishment of the workers—all this is brought about by the crisis. We recall also cases described in Iskra of capitalists lengthening the working day and discharging class-conscious workers in an effort to replace them by more submissive people from the villages.
The effect of the crisis in Russia is, in general, ever so much greater than in any other country. Stagnation in industry is accompanied by famine among the peasantry. Unemployed workers are being sent out of the towns to the villages, but where can the unemployed peasants be sent? By sending the workers to the villages, the authorities desire to clear the cities of the discontented people; but perhaps those sent out will be able to rouse at least part of the peasantry from its age-long submission and induce it, not only to request, but to demand. The workers and peasants are being drawn closer to each other, not only by unemployment and hunger, but also by p6lice tyranny, which deprives the workers of the possibility of uniting to defend their own interests and prevents even the aid of well-disposed people from reaching the peasantry. The heavy paw of the police is becoming a hundred times heavier for the millions of people who have lost all means of livelihood. The gendarmes and the police in the towns, the rural superintendents and the village policemen in the rural districts, see clearly that hatred against them is growing, and they are beginning to fear, not only the food-kitchens, set up in the villages, but even advertisements in the newspapers appealing for funds. Afraid of voluntary contributions! In truth, the thief fears his own shadow. When the thief sees a passer by offering alms to the man he has robbed, he begins to think that the two are shaking hands in a pledge to settle accounts with him.