which was at the time mainly articulated by Malthus (although it is surprising that Marx doesn’t reference Malthus’s key text on the matter, Principles of Political Economy) (264–5). Malthus argued that there was a definite tendency toward a deficiency of aggregate demand in the market for the surplus commodities that capitalists produce in order to procure surplus-value. Who has the purchasing power to buy the commodities? The capitalists are reinvesting, so they are not consuming as much as they could. The workers cannot consume the totality of the product, because they are being exploited. So Malthus concluded that there was an important role for a class of landowners—or as Marx would call them, bourgeois parasites of all kinds—who did the benevolent thing of consuming as much as they could in order to keep the economy stable. Malthus thereby justified the perpetuation of a nonproductive consuming class (in the face of the Ricardian critique that also dismissed them as nonproductive parasites).
Malthus modified his argument somewhat by suggesting that this class of consumers could also be outside the nation—and that foreign trade and even foreign tribute (silver payments to an imperial power, for example) would also help solve the problem. This latter is one of Rosa Luxemburg’s major arguments, that the necessary effective demand in a capitalist system (which she felt Marx hadn’t sufficiently addressed in Capital) ultimately can only be guaranteed by establishing some relationship to the outside—in short, by imposing imperialist extractions of tribute. The British imperialist logic that led to the Opium Wars reflected this: there was a lot of silver in China, so the idea was to sell Indian opium to the Chinese, get all that silver out in that lucrative sale, and thereby pay for all the goods that were being produced in Manchester and sent to India. When the Chinese resisted opening their doors to the opium trade, the British response was to knock them down with military force.
Marx delivers a scathing dismissal of the idea that there is a class of consumers somewhere or other who get their value from God-knows-where, and who can somehow generate the surplus-value from within or from outside the system of capitalist social relations. Everyone (even members of the parasitic classes) within capitalism, he says, has to get their value from somewhere, and if they get their value from within the system then it is from appropriating values from others (like capitalists or workers) who are responsible for its production. The problem of surplus-value production cannot be solved by appeal to the market, and we most certainly cannot justify for this reason the perpetuation of a nonproductive class of consumers. Nor, in the long run, can foreign trade do the trick; at some point, the principle of equivalence has to prevail (265).
These passages on effective demand are problematic in certain respects, and Rosa Luxemburg provides a compelling challenge to Marx on this point, arguing that imperialism directed against noncapitalist social formations provided a partial answer to the effective demand problem.4 There has been debate over these issues ever since. But in these passages Marx is simply concerned with how surplus-value is produced, not with how it might be paid for and realized through consumption. The surplus-value has to be produced before it can be consumed, and we cannot appeal to processes of consumption in order to understand its production.
So these ideas on effective demand cannot explain how surplus-value is produced, particularly if we “keep within the limits of the exchange of commodities, where sellers are buyers, and buyers are sellers.” Now, at first blush this seems an odd remark, given his earlier dismissal of Say’s law. Nor does it seem to help when he adds that “our perplexity may perhaps have arisen from conceiving people merely as personified categories, instead of as individuals” (265), though we will see why he takes this path shortly. It is here, I think, that we encounter a real tension in Marx’s text between his reliance on critique of the utopian tendencies of classical political economy and his desire to understand and illuminate for us the nature of actually existing capitalism. Marx is, in effect, saying that we have to seek an answer to the surplus-value origin problem in a geographically closed and perfected capitalist mode of production; in that ideal state, appeals to parasitic classes, consumerism or foreign trade have to be ruled out. He will later be explicit about these assumptions in Capital; here he tacitly invokes them by rejecting all external solutions. He dismisses effective-demand issues in general as irrelevant at this point in the analysis because here, in Volume I, he is concerned with production alone. Only in Volume II will he take up the problems of realization of values in the market and the world of consumption.
All this rules out any examination at this point in the analysis of geographical expansions, spatial fixes, imperialism and colonialism socially necessary to the survival of capitalism. He simply assumes a perfected and closed capitalist system, and it is on these terms alone that the origin of surplus-value is to be explained. While this assumption restricts the range of his theoretical capacity (particularly with respect to understanding the actual historical and geographical dynamics of capitalism), it deepens and sharpens his analysis. As I have shown elsewhere—particularly in The Limits to Capital and Spaces of Capital5—these broader questions were of deep concern to Marx when he sought to address the grander project of understanding the state, foreign trade, colonialism and the construction of the world market. But at this point in Capital, he is solely concerned to show that the production of surplus-value cannot arise out of market exchange regardless of what historical or geopolitical conditions may prevail. Some other way has to be found to solve the contradiction of how to produce a non-equivalence (i.e., the surplus-value) from the exchange of equivalents.
This adoption of such a narrow focus also explains why Marx momentarily switches to looking at individuals rather than social roles. Individuals can indeed best others by selling above value, and this indeed can and does happen all the time. But when looked at systemically and in aggregate social terms, the effect is simply to rob Peter to pay Paul. An individual capitalist may cheat another and get away with it, but then somebody’s gain is somebody else’s loss, and there is no aggregate surplus-value. A way must therefore be found for all capitalists to gain surplus-value. A healthy or properly functioning economy is one in which all capitalists earn a steady and remunerative rate of profit.
However much we twist and turn, the final conclusion remains the same. If equivalents are exchanged, no surplus-value results, and if non-equivalents are exchanged, we still have no surplus-value … It can be understood, therefore, why, in our analysis of the primary form of capital, the form in which it determines the economic organization of modern society, we have entirely left out of consideration its well-known and so to speak antediluvian forms, merchants’ capital and usurers’ capital. (266)
It may have been historically true, as Benjamin Franklin observed, that “war is robbery, commerce is cheating” (267). Clearly, in the origins of capitalism, there was a lot of predation, fraud, robbery and stealing of surplus-values from around the world. And Marx does not deny the historical significance of that. The same applies to usurers’ capital even in the face of long-standing and in some instances ultra-strict taboos against charging interest. Islamic law, for example, forbids charging interest. Probably not so well known, but up until the mid-nineteenth century, the Catholic Church had a prohibition on charging interest, and this had tremendous significance. For instance, at that time in France, conservative Catholics often compared investment houses to bordellos and viewed financial operations as a form of prostitution. There are some great political cartoons from that era that satirize this. One I used in Paris: Capital of Modernity depicts a young woman trying to entice this older and quite horrified man into this investment house, saying, “My rate of return is good for whatever amount you wish to invest. I’ll treat you very gently.”6
So merchant’s capital and usurers’ capital (or interest-bearing capital) both had important historical roles. But, Marx concludes,
in the course of our investigation, we shall find that both merchants’ capital and interest-bearing capital are derivative forms, and at the same time it will become clear why, historically, these two forms appear before the modern primary form of capital. (267)
These forms of capital circulation, he is saying, had a historical existence before industrial capital arrived on the scene. But, as we’ll see, industrial capital is going to be the form of capital that defines a capitalist mode of production in its pure state. And once that industrial capital becomes dominant, it needs the merchant to sell the product, and it