‘Labour’s deposits in the savings banks are only a sort of reserve fund that is consumed as fast as it accumulates. These deposits are saved for old age, for sickness and accident, and for funeral expenses. The savings bank deposit is simply a piece of the loaf put back on the shelf to be eaten next day. No, labour consumes all of the total product that its wages will buy back.
‘Two billions are left to capital. After it has paid its expenses, does it consume the remainder? Does capital consume all of its two billions?’
Ernest stopped and put the question point blank to a number of the men. They shook their heads.
‘I don’t know,’ one of them frankly said.
‘Of course you do,’ Ernest went on. ‘Stop and think a moment. If capital consumed its share, the sum total of capital could not increase. It would remain constant. If you will look at the economic history of the United States, you will see that the sum total of capital has continually increased. Therefore capital does not consume its share. Do you remember when England owned so much of our railroad bonds? As the years went by, we bought back those bonds. What does that mean? That part of capital’s unconsumed share brought back the bonds. What is the meaning of the fact that today the capitalists of the United States own hundreds and hundreds of millions of dollars of Mexican bonds, Russian bonds, Italian bonds, Grecian bonds? The meaning is that those hundreds and hundreds of millions were part of capital’s share which capital did not consume. Furthermore, from the very beginning of the capitalist system, capital has never consumed all of its share.
‘And now we come to the point. Four billion dollars of wealth is produced in one year in the United States. Labour buys back and consumes two billions. Capital does not consume the remaining two billions. There is a large balance left over unconsumed. What is done with this balance? What can be done with it? Labour cannot consume any of it, for labour has already spent all its wages. Capital will not consume this balance, because, already, according to its nature, it has consumed all it can. And still remains the balance. What can be done with it? What is done with it?’
‘It is sold abroad,’ Mr Kowalt volunteered.
‘The very thing,’ Ernest agreed. ‘Because of this balance arises our need for a foreign market. This is sold abroad. It has to be sold abroad. There is no other way of getting rid of it. And that unconsumed surplus, sold abroad, becomes what we call our favourable balance of trade. Are we all agreed so far?’
‘Surely it is a waste of time to elaborate these A B C’s of commerce,’ Mr Calvin said tartly. ‘We all understand them.’
‘And it is by these A B C’s I have so carefully elaborated that I shall confound you,’ Ernest retorted. ‘There’s the beauty of it. And I’m going to confound you with them right now. Here goes.
‘The United States is a capitalist country that has developed its resources. According to its capitalist system of industry, it has an unconsumed surplus that must be got rid of, and that must be got rid of abroad.2 What is true of the United States is true of every other capitalist country with developed resources. Every one of such countries has an unconsumed surplus. Don’t forget that they have already traded with one another, and that these surpluses yet remain. Labour in all these countries has spent its wages, and cannot buy any of the surpluses. Capital in all these countries has already consumed all it is able to according to its nature. And still remain the surpluses. They cannot dispose of these surpluses to one another. How are they going to get rid of them?’
‘Sell them to countries with undeveloped resources,’ Mr Kowalt suggested.
‘The very thing. You see, my argument is so clear and simple that in your own minds you carry it on for me. And now for the next step. Suppose the United States disposes of its surplus to a country with undeveloped resources like, say, Brazil. Remember this surplus is over and above trade, which articles of trade have been consumed. What, then, does the United States get in return from Brazil?’
‘Gold,’ said Mr Kowalt.
‘But there is only so much gold, and not much of it, in the world,’ Ernest objected.
‘Gold in the form of securities and bonds and so forth,’
Mr Kowalt amended.
‘Now you’ve struck it,’ Ernest said. ‘From Brazil the United States, in return for her surplus, gets bonds and securities. And what does that mean? It means that the United States is coming to own railroads in Brazil, factories, mines, and lands in Brazil. And what is the meaning of that in turn?’
Mr Kowalt pondered and shook his head.
‘I’ll tell you,’ Ernest continued. ‘It means that the resources of Brazil are being developed. And now, the next point. When Brazil, under the capitalist system, has developed her resources, she will herself have an unconsumed surplus. Can she get rid of this surplus to the United States? No, because the United States has herself a surplus. Can the United States do what she previously did—get rid of her surplus to Brazil? No, for Brazil now has a surplus too.
‘What happens? The United States and Brazil must both seek out other countries with undeveloped resources, in order to unload the surpluses on them. But by the very process of unloading the surpluses, the resources of those countries are in turn developed. Soon they have surpluses, and are seeking other countries on which to unload. Now, gentlemen, follow me. The planet is only so large. There are only so many countries in the world. What will happen when every country in the world, down to the smallest and last, with a surplus in its hands, stands confronting every other country with surpluses in their hands?’
He paused and regarded his listeners. The bepuzzlement in their faces was delicious. Also, there was awe in their faces. Out of abstractions Ernest had conjured a vision and made them see it. They were seeing it then, as they sat there, and they were frightened by it.
‘We started with A B C, Mr Calvin,’ Ernest said slyly. ‘I have now given you the rest of the alphabet. It is very simple. That is the beauty of it. You surely have the answer forthcoming. What, then, when every country in the world has an unconsumed surplus? Where will your capitalist system be then?’
But Mr Calvin shook a troubled head. He was obviously questing back through Ernest’s reasoning in search of an error.
‘Let me briefly go over the ground with you again,’ Ernest said. ‘We began with a particular industrial process, the shoe factory. We found that the division of the jointproduct that took place there was similar to the division that took place in the sum total of all industrial processes. We found that labour could buy back with its wages only so much of the product, and that capital did not consume all of the remainder of the product. We found that when labour had consumed to the full extent of its wages, and when capital had consumed all it wanted, that there was still left an unconsumed surplus. We agreed that this surplus could only be disposed of abroad. We agreed, also, that the effect of unloading this surplus on another country would be to develop the resources of that country, and that in a short time that country would have an unconsumed surplus. We extended this process to all the countries on the planet, till every country was producing every year, and every day, an unconsumed surplus, which it could dispose of to no other country. And now I ask you again, What are we going to do with those surpluses?’
Still no one answered.
‘Mr Calvin?’ Ernest queried.
‘It beats me,’ Mr Calvin confessed.
‘I never Dreamed of such a thing,’ Mr Asmunsen said. ‘And yet it does seem clear as print.’
It was the first time I had ever heard Karl Marx’s3 doctrine of surplus value elaborated, and Ernest had done it so simply that I, too, sat puzzled and dumbfounded.
‘I’ll tell you a way to get rid of the surplus,’ Ernest said. ‘Throw it into the sea. Throw every year hundreds of millions of dollars’ worth of shoes and wheat and clothing and all the commodities of commerce into the sea. Won’t that fix it?’
‘It will certainly fix it,’ Mr Calvin answered. ‘But it is absurd for you to talk that way.’
Ernest was upon him like a flash.
‘Is it a bit more absurd than what you advocate, you machine-breaker, returning to the antediluvian ways of your forefathers? What do you propose in order to get rid of the surplus? You would escape the problem of the surplus by not producing any surplus. And how do you propose to avoid producing a surplus? By returning to a primitive method of production, so confused and disorderly and irrational, so wasteful and costly, that it will be impossible to produce a surplus.’