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1967. Ernest Mandel: Marx's theory of primitive accumulation and industrialisation of the Third World

4 April 2023
Harvest of sugar cane in Suriname, 1928


An amazing reproach made to Marx's economic theory is that of Josef Schumpeter.i According to him, Marx's theory would be unable to develop a theory of the primitive accumulation of capital that corresponds to his 'interest' (i.e. surplus-value) theory.ii In reality, it is one of the most important achievements of Marx's economic theory that it achieved an integration of theory and history, not only because Marx started from the understanding of the historically transitory, i.e. socially determined, character of the so-called 'categories of political economy', but also because his mode of investigation was a genetic one, it conceived of the emergence, expansion and withering away of these categories as a historial process. And precisely in the context of this method of investigation, Marx placed special emphasis on the historical and economic origin of capital and on the historically specific forms of surplus value, which, depending on whether we are dealing with a pre-capitalist or a capitalist society, emerges either from circulation or is produced in the process of production.iii

Marx's theory of capital (capital is surplus value producing value) is based on a dialectical understanding of the economic process of exchange. In simple commodity production, which arises in a society still predominantly based on natural economy, a process of simple commodity circulation (C - M - C), carried out by artisans and peasants, and a process of money circulation (C - M - C'), which allows the first forms of surplus value - based on unequal exchange and embodied in usury and merchant capital - to develop side by side. The first stage of the primitive accumulation of capital - the primitive accumulation of money capital - which in Europe took place in the early Middle Ages, means appropriation of surplus value by capital, effected through the expropriation of other social classes: feudal lords and kings exchange natural interest for usury capital; backward areas or foreign peoples exchange goods for less money than the proceeds of these goods in European markets. The origin of capital lies in this unequal exchange, that, with the expanding money economy, encompasses more and more strata of society, until a general indebtedness of the population to money capital is created.iv

In the capitalist mode of production, this process is transformed into its opposite. Now the exchange of equal values is the rule: extortion becomes the exception and takes place on the fringes of economic life. The appropriation of surplus value (M - C - M') no longer takes place in simple circulation, but the entire production process is involved. In the circulation process, money is turned into capital only when it is spent for the purchase of machines, raw materials, etc. (constant capital) and for the purchase of labour power (variable capital). It then transforms into produced commodities through productive valorization in the production process and finally, after the sale of these commodities, it crystallises into reconstituted capital incorporating the realised surplus value.

However, if the valorization of productive capital in the capitalist production process based on the exchange of equal values produces surplus value, this is not equal exchange. The exchange of capital and labour (the purchase of labour power by capital) is an unequal exchange of equal values: for capital, labour power has the special use value to create more value than it itself costs.v Moreover, in capitalist world trade, a process of exchange of unequal values takes place, which is determined by the different productivity levels of the different nations trading with each

In the light of Marx's economic theory therefore the historical process of the creation and appropriation of surplus value constitutes a dialectical unity of three distinct moments: unequal exchange, resting on unequal values; equal exchange, resting on equal values; unequal exchange, resting on equal values. Only by taking these three historical moments into account is it possible to answer the question, how capital formed, grew and expanded in the Western world. At two points we encounter a specific relationship between Western capital and the so-called developing countries, both in the case of unequal exchange in the pre-capitalist period and in the case of unequal exchange in present-day world trade. This specific relationship will be dealt with in the course of this essay.


We know that before the expansion of the capitalist mode of production, capital appropriated surplus value mainly through unequal exchange. Usury and merchant capital in the Middle Ages were only the preliminary stage of this; they explain how, in a society characterised almost entirely by natural economy and the greatest shortage of money and capital, the accumulation and expansion of larger masses of money and capital could nevertheless take place. More recent historical research certainly confirms the decisive role that - to quote Marx - 'violent plunder, maritime robbery and theft of slaves' played in the initial development of Italian cities around the 9th and 10th centuries. As early as the Middle Ages, a pre-capitalist competition of capital existed in the field of merchant and bank capital, even involving a certain equalisation of profit rates.vii

However, these processes largely take place at the fringes of economic life, i.e. outside production and the circulation directly involved in production. Usury, royal credits and wholesale trade in foreign and luxury goods are the main areas in which this capital moves. Although on occasion there may also be fairly large accumulations of capital in the course of such activity, in the still predominantly feudal social relations capital never becomes the controller of the economy, of production. Politically capital remains subject to feudal large land ownership or to the protectionist rule of urban guilds.

Only in the second phase of primitive accumulation emerging at the end of the 15th and the beginning of the 16th century - the primitive accumulation of industrial capital - does capital finally conquer its supremacy in economy and society. The tremendous expansion of commercial capital with the emergence of the first large joint-stock companies, the emergence of modern public debt and stock exchanges, the development of the first modern banks, the intrusion of capital into industrial and agricultural production (such as in the development of the 'nouvelle draperie', publishing, manufacturing and modern agriculture in Belgium, northern Italy, northern France and later England) - these are the well-known stages of the advance of western capital in the period of 'primitive accumulation' proper, which preceded the industrial revolution in the mid-18th century and largely made it possible in the first place.

The economic problem raised by this historical transformation is vast and complex: where did the sudden tremendous accumulation of capital, demanding productive application, come from,? How did the rapid change in social relations that made this onslaught successful come about? What shift in the political relationship of forces was at the basis of the change? How did feudalism in the countryside and the guild system in the city hold up under the pressure of the new transformative force? What technical changes - not only in production technology, but also in sales and finance technology, especially in accounting - enabled and facilitated this transformation?

In the famous twenty-fourth chapter of the first volume of Capital, which is devoted to 'so-called primitive accumulation', Marx puts particular emphasis on the essential social conditions of this accumulation of capital (in the first place, the violent separation of a large number of producers from traditional access to production and foodstuffs, mainly to land and soil) and on the economic origin of accumulated capital in plunder: plunder of foreign countries (the colonial system), plunder of the population at home (tax tenure and a system of protection) and plunder of the state (system of state debt), as we might put it, using a remark by Engels on the ancient Asian mode of production.viii Thereby, the emphasis is very clearly on unequal exchange, of which unconcealed robbery and plunder are only the ultimate expression.

In the light of the contemporary problems of the so-called developing countries, it is useful to quantify at least roughly the contribution these countries were forced to make to the 'primitive accumulation' of European industrial capital. When Marx writes: 'The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the indigenous population, the beginning of the conquest and plunder of India, and the conversion of Africa into a preserve for the commercial hunting of blackskins, are all things which characterize the dawn of the era of capitalist production. These idyllic proceedings are the chief moments of primitive accumulation',ix current research has proved him absolutely right. Indeed, one might even say that Marx still underestimated the significance of the plunder of the Third World for the accumulation of industrial capital in Western Europe. 

We have tried elsewherex to calculate the main items of this plundering of the colonies through direct robbery, slave trade and 'normal' trade in the period from 1500 to 1750:

(a) E.J. Hamilton estimates the value of gold and silver brought to Europe from North and South America by the Spanish between 1503 and 1660 at 500 million gold pesos.

(b) Colenbrander estimates the booty taken by the Dutch United East India Company from Indonesia at 600 million gold guilders for the period from 1650 to 1780.

(c) Father Rinchon estimates the profits, which accrued to French capital solely from slave trade in the 18th century, at nearly half a billion French gold guilders, without adding the profits from slave labour on the West Indies plantations, which are a multiple of the former.

(d) According to H. V. Wisemann and the Cambridge History of the British Empire, the income drawn from slave labour in the British West Indies amounted to at least 200 to 300 million gold pounds.

(e) Finally, the plunder of India alone in the period from 1750 to 1800 brought Britain's ruling class between 100 and 150 million gold pounds.xi

When we add up these sums, we get more than a billion gold pounds, i.e. more than the value of combined invested capital in all European industrial enterprises around 1800. The influx of these gigantic amounts of capital into the trading nations of Europe between the 16th and late 18th centuries not only created a favourable atmosphere for capital investment and 'entrepreneurial spirit', it directly financed, as can be shown from many cases, the large manufacturing and factory establishments that helped initiate the industrial revolution.xii

A historical parallel can explain the extent of this international concentration of wealth, which is at the beginning of the industrial revolution. It is well known that around the beginning of our era, throughout the entire ancient cultural area between Sahara, Rhine-Danube, Black Sea and India, the treasures accumulated successively by the Egyptian, Babylonian, Persian and Alexandrian empires converged to Rome and for several centuries financed the military power of the Roman empire and the luxury of its ruling class. A similar international concentration of wealth took place between the late 15th and late 18th centuries. Large quantities of precious metals found in the five continents (excluding China and Japan) flowed into Western Europe, where they were multiplied by the proceeds from slave trade, slave labour and a world trade based on unequal exchange.

The emergence of usury and merchant capital in a society still predominantly based on natural economy is not a typical European phenomenon. It occurred in classical antiquity, in Byzantium, in the Muslim empire, in India and Indonesia, China and Japan (before they came into contact with the European conquerors), yes even in the pre-Columbian Aztec empire on the eve of the appearance of the 'conquistadores'. The economic mechanism of this process was on the whole the same as that in the European Middle Ages: appropriation of a share of land rent and of state income (respectively of state treasures) by the usurious, banking and merchant bourgeoisie. The original accumulation of money capital was substantial and numerically often more important than in Europe.xiii The technical basis for the industrial revolution (i.e. technical knowledge, manufacturing system, possible marketing in trade with distant countries, etc.) occurred in some cases even earlier in those cultures than in Europe.

It is no coincidence, however, that the industrial revolution nevertheless occurred in Europe and not elsewhere. Marx indicated the causes of this in the Grundrisse, but not fully elaborated on them. They must be sought in the differences in the relationship between state power and the bourgeois class: there one is predominant, the other weak; here one is weak, the other predominant. Over there, this resulted in a discontinuous accumulation of capital there, but over here a continuous one. Ultimately, the uneven development of capital in the East and West depends on the divergent nature of agriculture and the divergent nature of the relationship between land, water and the number of people. In the east, this led to irrigation-based agriculture with a strong centralisation of the societal surplus product, but in Europe to an agricultural economy based on many smaller plots of land and a stronger decentralisation of the social surplus.xiv

Nevertheless, one should not overestimate the unevenness of the accumulation of money capital in the different societies. At least one case, that of Japan, proves that despite a lag of several centuries, which in the 16th century some societies had as compared to Western European capital formation, the leap from the original accumulation of money capital to the original accumulation of industrial capital was indeed possible. In other words, it would have been possible, if not precisely from the beginning of the 16th century on the international concentration of capital had suddenly started.

The double tragedy of the developing countries consists in the fact that they not only became victims of this international concentration process, but later still had to try to undo their industrial backwardness, i.e. to carry through the original accumulation of industrial capital when the developed industries of the West world had already flooded the world with industrial commodities. In other words, while the world market and the world economy gave a tremendous boost to the industrialisation of the West between the 16th and 19th centuries, mainly through the influx of raw resources and of money capital into Western Europe, where it became one of the main sources of the original accumulation of industrial capital, the world market and the world economy have been, since the end of the 19th century, among the main obstacles to the industrialisation of the Third World, and this precisely to the extent in which they blocked the original accumulation of industrial capital. 


The resources for the primitive accumulation of industrial capital which were at hand in the Western European societies of the late Middle Ages and the early Renaissance, have existed since the 19th century in numerous, since the 20th century in practically all developing countries. The slow dissolution of classical tribal and village communities by the intrusion of the money economy and commodity production and the gradual separation of the peasant from land and soil, whether by violent expulsion, debt or by increasing population pressure on the land, can be observed in all so-called developing countries. Landlords, merchants, usurers, and corrupt politicians extort from the peasantry what they can. The main source of original capital accumulation flows abundantly in most Third World countries; this means growing peasant misery, periodic or chronic famine, significant unemployment and increasing rural flight, leading to the cancerous growths of the 'slums', 'bidonvilles' and 'favellas' in the major cities of developing countries.xv

If we take the example of India, we can see how 'in the history of primitive accumulation, all revolutions are epoch-making that act as levers for the capital class in the course of its formation'; 'above all, those moments when great masses of men are suddenly and forcibly torn from their means of subsistence, and hurled on to the labour-market as free, unprotected and rightlkess proletarians. The expropriation of the agricultural producer, of the peasant, from the soil, is the basis of the whole process.'xvi Professor Bonné estimates that the proportion of the adult male population in the Indian village which no longer owns a piece of land, rose from 7.5 million in 1822 to 35 million in 1933 and 68 million in 1944.xvii How much this dispossession is accelerating is also evidenced by the fact that between the years 1950/51 and 1956/57, the percentage of farmworker families in India, who are completely dispossessed, rose from 50 per cent to 57 per cent, and at the same time, the percentage of indebted farmworkers rose from 45 per cent to 64 per cent.xviii It has to be borne in mind, that the mass of farmworkers constitutes more than 1/3 (and almost 2/5) of the total male village population. 59 per cent of agricultural 'enterprises' have less than 5 'acres' of land (l acre = over 0.4 ha), i.e. they are on the brink of ruin.xix

In Western Europe, this process led on the one hand to the bankruptcy and impoverishment of peasants, indeed to mass proletarianisation, on the other hand it led to the formation of industrial capital and an uninterrupted growing of the number of industrial companies. In the developing countries, only one side of the process has fully repeated itself: the other is repeated only partially and to an entirely insufficient extent. So the reasons must be examined, why the rapidly rising primitive accumulation of money capital does not, or only to an inadequate extent, result in a real industrialisation of the Third World. Only an examination of the overall social and economic structure of the Third World, as well as the specific form of its integration into the capitalist world market, makes it possible to answer this question.

The inclusion of developing countries in the world market took place on the initiative of Western capital, which, however, in most cases had neither the opportunity - the lack of demand in the Third World - nor an interest - reluctance to create competition for its own industry - in building a modern manufacturing industry there. The market for which it wanted to manufacture commodities in the developing countries was mainly outside these countries themselves. Thus, it came only to that kind of investment, which corresponded to or complemented Western capitalist industry: the production of mineral and vegetable raw materials and of foodstuffs.'xx

This created a specific division of labour in the world market, which has little to do with geographical or climatic conditions and essentially corresponded only to Western needs for capital valorization at a certain level of historical development.xxi The limitation of the 'modern' economic sector of the so-called developing countries to plantations, mines and petroleum resources leads to the infamous phenomenon of 'monoculture' or 'monoproduction', which makes the Third World dependent on world market price fluctuations and on the major commodity trusts that control their national resources.xxii

This one-sided international division of labour ensures, on the one hand, that a major source of primitive accumulation of industrial capital in the so-called developing countries dries up: namely, most of the surplus value produced in the country. This is realised on the world market and either does not return to the country at all (if, for example, the trusts manage to implement sophisticated legal forms of profit-sharing between production, transport and sales companies, all of which are subsidiaries of the same financing group), or after its provisional return it flows back to the West in the form of dividends, bonuses, interest, fees for banking and insurance, etc.xxiii

On the other hand, this division of labour is the precondition for a structure of world trade, based on unequal exchange according to the pattern, classically analysed by Marx in the third volume of Capital: 'Capitals invested in foreign trade can yield a higher rate of profit, firstly, because it competes with commodities produced by other countries with less developed production facilities, so that the more advanced country sells its goods above their value, even though still more cheaply than its competitors (. ...) The privileged country receives more labour in exchange
for less, even though this difference, the excess, is pocketed by a particular class, just as in the exchange between labour and capital in general.'xxiv

The contemporary analysis of the destructive effect of the negative development of the terms of trade for the so-called developing countries, provides empirical confirmation of this theoretical diagnosis. Because, from the point of view of the developing countries, what does the deterioration of the terms of trade mean other than that more and more of their labour, crystallised in colonial commodities, has to be exported in order to buy an equal quantity of processed manufactured commodities? International trade between nations at different levels of industrial development in addition also relies on an exchange of unequal values, with industrialised nations appropriating a share of the surplus value produced in the poor countries.xxv

Thus, before the money owner appears on the scene in Third World countries, already a significant part of the potential accumulation fund from these countries has flowed abroad and been lost for its actual accumulation process. That this loss is significantly higher than all the 'development aid' allocated to the Third World, and that this 'development aid' therefore does not serve industrial development at all, but only the financing of exports of the industrial states in the so-called developing countries (as well as the financing of a certain social insurance policy against social revolutions), need not be elaborated in detail. The numbers speak a clear language.xxvi If, in spite of everything, part of such 'development aid' is used for new manufacturing industries, this can only be considered a by-product of general policy, a by-product, which, moreover, meets with increasingly sharp criticism from Western funding circles.

But now the money owners in Third World countries are appearing on the scene. We know that the primitive accumulation of money capital continues uninterrupted. However, part of this capital (or of the values, which take form outside the country in additional capital) is lost to the national economy. What remains, however is still sufficient to enable an accelerated process of industrialisation. If this nevertheless does not take place, then this is only because under the given social and economic conditions, local money holders have no interest in converting their money capital into industrial capital.

To understand this state of affairs, a brief reference to two factors is indispensable: to the risks and potential for profit of industrial capital in developing countries, on the one hand, and to the risks and potential profit of other types of capital investment in these countries, on the other.

The main constraints to the rapid development of a profitable private industry are the country's high poverty level, the relative narrowness of demand, the fact that large groups of the population live on the fringes or completely outside the money economy (the so-called 'modern sector' of the economy), the competition from cheaper and better-made mass production from the industrialised countries, the lack of a modern communication and trade network that would link the village with industrial mass production, etc. Under such conditions, establishing industry not only entails a certain risk, it is virtually impossible without government support and protection.xxvii

On the other hand, however, there are capital investments, which yield much higher and more certain returns than the establishment of industrial enterprises. This applies primarily to land buying and land speculation, respectively. The tremendous pressure of overpopulation and under employment in the countryside lead to a continuous rise in land rents. Rural migration and the rapid expansion of big cities determine an equally continuous rise in urban land rent. Moreover, the incipient capitalist agriculture in the countryside generates large returns,xxviii meaning that as long as current social relations continue, the returns on capital thus invested will exceed those of new industrial enterprises many times over - with the money owner also, unlike industry, running almost no risk at all.

Similar opportunities open up for the money-holder of the so-called developing countries in import-export business, in money lending and banking, not to mention the surreptitious trade and decidedly shady practices of the rather influential 'lumpen bourgeoisie' in the Third World. Indeed, the risk here is higher than in the real estate business or when buying arable land; but the high returns neutralise the risk and potentially enable a quick transition to a legitimate business. Such relationships no doubt also existed in Western Europe at the time of the primitive accumulation of industrial capital; they existed even more strongly in Eastern Europe and in the Mediterranean in the 19th and early 20th centuries, but the overall social situation here favoured the transition from 'lumpen bourgeoisie' to industrial barons, at least in the Western European area. In the developing world today they work exactly opposite.

The difference between Marx's and Schumpeter's conception of capitalist industrialisation is here clearly expressed. When considering economic development in capitalism in general as well as when considering the industrial cycle, both place the main emphasis on the role of productive investment. This means both put the capitalist at the centre of their investigations. But by emphasising above all else the moment of 'innovation' and elevating it to the central factor of economic development,xxix Schumpeter tears one aspect of the entrepreneur's activity out of the overall coherence of capital accumulation and thereby runs the risk of ending up in the dead-end of trying the explain economic developments by ''psychological'' factors. 

Countless treatises were devoted to the topic of why this or that people were more or less 'disposed' to the entrepreneur's pursuits, in order to 'explain' in this way the increasingly obvious slowdown in the industrialisation of numerous countries. To what miraculous results such 'explanations' must lead, best shows the example of China, where we are dealing with a people, who literally for centuries have supplied numerous East Asian countries with the bulk of their merchant class, whose industriousness and technical prowess became proverbial, whose industrial initiatives in cases like Hong Kong and Hawaii was significant, and yet at the time, when the Sino-Japanese war broke out, had not yet made the slightest attempt to industrialise its own country. To explain this delay by a 'lack of entrepreneurial spirit' is patently Only an examination of those socio-economic conditions, which favour primitive accumulation of money capital but not of industrial capital, is capable of explaining the failure to thoroughly industrialise the Third World.




In the chapters of modern economic theory dealing with the economic growth of developing countries, the problem of primitive capital accumulation appears in the form of the 'vicious circle of poverty' thesis. The low per capita income of those countries would allow only a low savings rate, so that the low level of investment activity determined by it would not allow a significant increase in per capita income. This is supposedly why developing countries find it so difficult to get out of poverty.xxxi This thesis runs into the tautology that developing countries are poor because they are poor, which cannot be considered very illuminating. After it was already questioned by Nurkse, Paul A. Baran made the main attack on this thesis. Nurkse had shown that poverty in the developing countries can be traced mainly to unemployment - more correctly, to quantitative and qualitative unemployment.xxxii One of the keys to an effective strategy for rapid economic development was thereby discovered. Baran added an equally important one to Nurke's discovery by observing that the 'surplus' - we would prefer to use the Marxian term 'social surplus product' - in developing countries usually constitutes not a lower but a higher percentage of national income than in industrialised countries.xxxiii The real difficulty for the industrialisation of developing countries does not consist in a lack of resources - in other words, in lack of money capital - but in the socio-economic conditions which thwart the mobilisation and productive use of the available social surplus product.

A synthesis of the theses of Nurkse and Baran can easily be made in terms of Marx's theory of the primitive accumulation of capital. Primitive accumulation of money capital turns into primitive accumulation of industrial capital only when the dissolution of the natural economy in the countryside, the generalisation of commodity production, the political power of the bourgeois class and the role of the state as a means of defence of this class against foreign competitors (nowadays primarily against already industrialised states) form a socio-economic whole that favours industrialisation. If such a socio-economic whole does not exist, then the most likely possibility is that sometimes huge money capitals seep away into all sorts of side channels. The opportunity for industrialisation is there, the necessary means are available, but there is no social class that in the framework of the existing order has the necessary power and compelling interest to attempt a breakthrough in this direction. If this order is overcome and the working class, relying on the poor peasantry and the urban intelligentsia, takes political power, it is certainly capable of mobilising and centralising the available, partly unused, labour power and the available, partly wasted, social surplus product that would make an acceleration of industrialisation possible. Nothing has changed regarding economic resources available, only the social relations were overturned. This confirms, that the main obstacle on the road to industrialisation lies not in economic backwardness or poverty, but rather in the social structure.

Rostow's investigations into the conditions of industrial 'take-off' take some of these factors into account but underestimate other and arrive at an inadequate conclusion: a concentration, at least in the first phase, on 'those who want to modernise the economy'.xxxiv The central question, whether under the given social conditions and the given relation to the capitalist world market, the profits of these 'modernisers' are used mainly for the establishment of industry or are lost in the construction of modern flats and hotelsxxxv, in the establishment of modern importing firms, in the purchase of large goods for agriculture, if not disappear into Swiss banks, remains unanswered.

Rostow accuses Marx of 'one-sidedness' in his view of human beings; Marx supposedly sees them as exclusively guided by rationality and profit-seeking, while his - Rostow's - theory sees people primarily as coveting power, leisure, adventure, a continuity of existence and security.xxxvi Marx, of course, never intended to make general anthropological statements about human's 'appetite for profit'. He only observed that in bourgeois society the generalised money and commodity economy led to a general hunt for material wealth which then became the main determinant of the behaviour of capital owners. These were forced to follow the commandment of 'accumulate, accumulate!' if they did not want to risk being crushed under the wheel of competition.

We do not want to discuss here whether such an analysis of bourgeois society, which Marx wanted to abolish precisely because of the general pursuit of material wealth, which seemed to him to be inhuman, or at least led to inhuman consequences, corresponds to the historical picture of society in the 19th century and to the sociological picture of the 20th century. What Rostow does not seem to have understood is the fact that, if not for each individual, at least for the bourgeois class as a whole, 'power, leisure, adventure, continuity of existence and security' coincide mainly, though not exclusively, with capital accumulation and private wealth.

There are certainly different paths to modern industry: Russia and China have proven this. And there are paths still unknown to us, which may be entered onto tomorrow by some developing countries. But one thing is certain: in an economy dominated by social classes whose power rests on the private ownership of the means of production and the accumulation of personal wealth, industrialisation is possible only if the overall socio-economic situation imposes on these classes a compelling interest in industrialisation. Marx described the whole connection, in which the leap from the accumulation of money capital to the accumulation of industrial capital takes place, in the following way: 'At first, trade is the precondition for the transformation of guild and rural domestic crafts into capitalist businesses, not to mention feudal agriculture. It develops the product into a commodity, partly by creating a market for it, partly by supplying new commodity equivalents and new raw and ancillary materials for production, and thereby opening new branches of production that are based on trade from the very beginning – both on production for the market and world market, and on conditions of production that derive from the world market'.xxxvii

If the process depicted in the last sentence does not take place or - as a result of, among other things, competition from foreign commodities and excessive restriction of the domestic market remains insufficient, then the accumulation process in industry is paralysed or proceeds so slowly that one can no longer speak of an effective industrialisation. If the ruling social classes face a greater obstacle and at the same time have numerous fallback optionsxxxviii, then 'modernisation' and the breakdown of the semi-feudal or communitarian tribal social and economic structure will lead to the primitive accumulation of money capital, but not to that of industrial capital. This difference is experienced by many peoples and today by more than a billion people. Marx's economic theory described it over a century ago.


i Translation of: 'Die Marxsche Theorie der ursprünglichen Akkumulation und die Industrialisering der Dritten Welt'. This essay first appeared in Folgen einer Theorie. Essays über 'Das Kapital' von Karl Marx (Frankfurt am Main, 1967), a collection published on the occasion of the centenary of the publication of the first volume of Capital

ii Josef Schumpeter, Business Cycles, vol. I (New York, 1939), p. 229.

iii The main passages in which Marx develops his theory of primitive accumulation are: Capital, vol. I (London, 1976), chapter 4: The General Formula for Capital, part eight: So-Called Primitive Accumulation, partly also Chapter 11: The Rate and Mass of Surplus-Value and Chapter 25: The General Law of Capitalist Accumulation. Capital, Vol. III, (London, 1981), Chapter 20: Historical Material on Merchant's Capital, and Grundrisse (London, 1973): The Chapter on Money as Capital, pp. 239-50 and the first part of The Production Process of Capital (pp. 251-252) and Original Accumulation of Capital, pp. 459-71, pp. 836-851, 872-880 and partly 471-516.

iv Fraud in exchange is the basis of trade such as it appears independently. Grundrisse, p. 859. 'When commercial capital exchanges the products of undeveloped communities, commercial profit not only appears as defrauding and cheating but to a large extent does derive precisely from this. Capital, vol. III, p. 448.

v In The Theories of Surplus-Value (Moscow, 1975), Marx, citing Adam Smith and Richard Jones, distinguishes the exchange of labour for capital from the exchange of labour for revenue. What is decisive here is whether labour is absorbed in the production of commodities. The difference between these two forms of exchange 'expresses the whole difference between capitalist and non-capitalist modes of production', p. 432.

vi 'The more intense national labour, therefore, as compared with the less intense, produces in the same time more value, which expresses itself in more money. But the law of value is yet more modified in its international application by the fact that, on the world-market, national labour which is more productive also counts as more intense, as long as the more productive nation is not compelled by competition to lower the selling price of its commodities to the level of their value.' Capital, vol. I, 702. Also see: vol. III, p. 310-313

vii See the article by R. Lopez, 'The trade of Medieval Europe', in the second volume of the Cambridge Economic History of Europe (Cambridge, 1952), p. 334 ff.

viii 'And an Oriental government never had more than three departments: finance (plunder at home), war (plunder at home and abroad), and public works (provision for reproduction). Date: 6 June, 1853, Karl Marx and Friedrich Engels, Correspondence 1846-1895 (London, 1934), p. 67, selected correspondence

ix Capital, vol. I, 915.

x Ernest Mandel, Marxist Economic Theory (London, 1977), 443-445.

xi Sources: E.J. Hamilton, American Treasure and the Price Revolution in Spain (Cambridge, 1934), pp. 34, 37, 38; Dr. H.T. Colenbrander, Koloniale Geschiedenis (Den Haag, 1925), II, pp. 247; R.P. Rinchon, Le trafic négrier (Bruxelles, 1938), pp. 22, 129, 130, 211, 304; H.V. Wisemann, A short History of the British West-Indies (London, 1950), pp. 50, 58; The Cambridge History of the British Empire (Cambridge, 1929), I, p. 380; Sir Percival Griffiths, The British Impact on India (London, 1952), pp. 374, 375, 402, 403.

xii Quoted from Gaston Martin, Histoire de l'Esclavage dans les Colonies françaises (Paris ,1948), pp. 90-91. 'Each return (of the ships, which traded slaves - E.M.) led in the course of the 18th century to the establishment of manufactures, refineries, cotton dyeing factories, dyeing plants, confectioneries, whose growing number proves the expansion of commodity circulation and industry. For example, in Nantes in the 18th century, 15 refineries, five cotton manufactures (...), two large dyeing factories, two confectioneries were established ...'. On the relationship of the 'original' plunder of India to the beginnings of the Industrial Revolution in England, see Brooks Adams, La loi de la civilisation et de la décadence (Paris, 1899), pp. 375-380.

xiii A few examples: The widow of Muhassin, minister to Caliph Muqtadir, had to pay her ruler 700,000 gold dinars, and after this still possesed a considerable amount. Reuben Levy, The Social Structure of Islam (Cambridge, 1962), p. 307); the imperial prince Hsia, who died in the year 144 BC, is said to have left a treasure of 400,000 'catties' of gold - a 'cattie' corresponded to about 600 gr. Lien Sheng-Yang, Money and Credit in China (Cambridge MA, 1952), p. 4.

xiv See Grundrisse, pp. 473 – 479.

xv In his The New Economics, Yevgeni Preobrazhensky made it clear as early as 1925 that even after the socialisation of the means of production in underdeveloped countries, the unequal exchange between urban and rural areas (between the socialist sector in industry and the private sector in agriculture) was the main basis for 'primitive socialist accumulation'. He added, however, that this would be accompanied not by impoverishment of the peasants, but by an increase in their standard of living, insofar as the basis of the process must be a rising productivity of labour in agriculture, the fruits of which would then be shared between peasant and city. Because Stalin implemented the accelerated industrialisation (including the construction of the first tractor factory) with delay, but collectivisation of agriculture with too much haste, he destroyed these necessary proportions and caused massive impoverishment of the peasants and a sudden drop in agricultural labour productivity, which meant unnecessary sacrifices for the Soviet economy and population for almost 3 decades.

xvi Capital, vol. I, p. 876.

xvii Prof. Alfred Bonné, Studies in Economic Development (London, 1957), p. 173.

xviii V.K.R.V. Rao (ed.), Agricultural Labour in India (Bombay, 1962), pp. 29, 52.

xix A.R. Desai, Rural Sociology in India (Bombay, 1959), p. 125.

xx Compare the prediction by Marx that the British bourgeoisie by developing the production of cotton in other countries would free itself from the annoying dependence on the southern states of the USA (Review: May-October 1850, Neue Rheinische Zeitung Revue, online: []. This prediction was confirmed by the development of cotton cultivation in India and Egypt.

xxi Today, however, these interests may change in such a way that the exports of the industrialised powers increasingly consist of machinery and industrial equipment, whose imports into developing countries in part has the industrialisation of these countries as a precondition. Thus a contradiction develops between the interests of the machinery and finished goods industries in Western countries in relation to 'development aid'.

xxii There is a rich literature on this theme. Here, we give only one example: Stacy May and Galo Plaza, The United Fruit Company in Latin America (Austin, 1958).

xxiii How heavily the weight of current debt services can weigh on a developing country's balance of payments is strikingly illustrated by the example of India: in 1966, this service already amounted to 20 per cent of India's total export value; by the end of the fourth Five-Year Plan, it will absorb as much as 28 per cent of this amount.

xxiv Capital, Vol. III, pp. 345, 346.

xxv We say 'industrialised nations' and not 'capitalist countries' because countries with socialised means of production also apply this unequal exchange, insofar as they trade at so-called world market prices.

xxvi In the period from 1950 to 1960 alone, the developing countries' share of world trade fell from 30 to 20.4 per cent, mainly as a result of the evolution of the terms of trade that was negative for them (United Nations Department of Economics and Social Affairs, World Economics Survey 1962, I, The Developing countries in World Trade, pp. 2-3). In 1962, crude prices were on average 38 per cent below 1954 levels, representing a loss of $11 billion for developing countries - compared with about $8 billion of 'development aid' they had received in that year.

xxvii The same was also partly true of the beginnings, if not of big industry proper, at least of industrial manufacturing in many Western countries. Only with the important difference, that this 'new' industry of the developing countries today faces an already saturated world market.

xxviii The so-called 'new food supply strategy' devised by the Indian government after the 1966 famine is focused entirely on the development of intensive agriculture by rich farmers.

xxix Joseph A. Schumpeter, The Theory of Economic Development (New York, 1961), pp. 65-94.

xxx The example of Japan is also very illuminating. When government holdings were sold off around 1880, it was a part of the old feudal nobility who used the proceeds of compensation for lost property and state loans to buy up these holdings, thus providing the decisive impetus for the growth of Japanese capitalism.

xxxi W.W. Rostow, The Stages of Economy Growth (Cambridge, 1962), p. 39. Rostow even defines 'take-off' as an increase in the investment rate of 5 to 10 per cent. However, see W. Arthur Lewis, Theory of Economy Growth (London, 1963), p. 236, who also rejects the theory of the 'vicious circle of poverty'.

xxxii Ragnar Nurkse, Problems of Capital Formation in Underdeveloped Countries (Oxford, 1953), pp. 35-38.

xxxiii Paul A. Baran, The political Economy of Growth (New York, 1957), pp. 227.

xxxiv W.W. Rostow, The Stages of Economic Growth, p. 58. See also W.A. Lewis, Theory of Economy Growth, p. 235: 'This means, that the basic explanation of some 'industrial revolution', i.e. a sudden acceleration in the degree of capital formation, consists in a sudden increase in the ability to make money.' Lewis commits here the same error of equating the accumulation of money with that of industrial capital. After all, what happens, when this 'sudden possibility of making more money', takes place precisely outside the industrial sector?

xxxv There are numerous, even empty, flats and hotels in Beirut, in which Arab oil sheikhs 'safely' invest their money. Even indirectly, hardly any large industrial companies have emerged from such investments.

xxxvi Rostow, The Stages of Economic Growth, p. 149.

xxxvii Capital, vol. III, p. 454.

xxxviii Paul Bairoch devoted several works (e.g. Diagnostic de l'évolution économique du tiers-monde 1900-1966 (Paris, 1967) to the theme that a rapid increase in agricultural productivity, i.e. real 'agrarian revolution' must precede the actual industrial revolution as it actually did in the West. This corresponds perfectly to Marx's view (compare Capital, vol. I, pp. 838-840). Bairoch sees the main weakness of the Third World economy in the fact that its average agricultural productivity is only about 50 per cent of that which the West had achieved on the eve of the Industrial Revolution (Diagnostic de l'évolution économique 63). If this is true and from this follows an additional compelling reason why capital there flows to agriculture rather than industry, it only confirms our argument. Clearly, such capital investments eliminate jobs rather than establishing new ones, thus adding to the Third World's misery not only in relative but also in absolute terms. Actually, after the agrarian reforms of the Indian Congress Party's were implemented, the real income of farm workers fell, not rose, partly because these reforms gave rich farmers more resources for modern agricultural technology.

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