Excerpts from


V. I. Lenin




This book was written in the period preceding the Russian Revolution, during the slight lull that set in after the outbreak of the big strikes of 1895-1896..

 …. the revolution is now increasingly revealing the dual position and dual role of the peasantry. On the one hand, the tremendous survivals of corvée economy and all kinds of survivals of serfdom, with the unprecedented impoverishment and ruin of the peasant poor, fully explain the deep sources of the revolutionary peasant movement, the deep roots of the revolutionary character of the peasantry as a mass. On the other hand, in the course of the revolution, the character of the various political parties, and the numerous ideological-political trends reveal the inherently contradictory class structure of this mass, its petty-bourgeois character, the antagonism between the proprietor and the proletarian trends within it.   

With this economic basis the revolution in Russia is, of course, inevitably a bourgeois revolution. This Marxist proposition is absolutely irrefutable. It must never be forgotten. It must always be applied to all the economic and political problems of the Russian Revolution. But one must know how to apply it.

With the present economic basis of the Russian Revolution, two main lines of its development and outcome are objectively possible:

  • Either the old landlord economy, bound as it is by thousands of threads to serfdom, is retained and turns slowly into purely capitalist, "Junker" economy.

  • Or the old landlord economy is broken up by revolution, which destroys all the relics of serfdom, and large landownership in the first place.


C H A P T E R  I



The market is a category of commodity economy, which in the course of its development is transformed into capitalist economy and only under the latter gains complete sway and universal prevalence. Therefore, in order to examine basic theoretical propositions concerning the home market we must proceed from simple commodity economy and trace its gradual transformation into capitalist economy





The basis of commodity economy is the social division of labour. … Thus, the development of commodity economy leads to an increase in the number of separate and independent branches of industry; the tendency of this development is to transform into a special branch of industry the making not only of each separate product, but even of each separate part of a product -- and not only the making of a product, but even the separate operations of preparing the product for consumption. Under natural economy society consisted of a mass of homogeneous economic units (patriarchal peasant families, primitive village communities, feudal manors), and each such unit engaged in all forms of economic activity, from the acquisition of various kinds of raw material to their final preparation for consumption. Under commodity economy heterogeneous economic units come into being, the number of separate branches of economy increases, and the number of economic units per forming one and the same economic function diminishes. It is this progressive growth in the social division of labour that is the chief factor in the process of creating a home market for capitalism. ". . .

It goes without saying that the above-mentioned separation of the manufacturing from the raw materials industry, of manufacture from agriculture, transforms agriculture itself into an industry, into a commodity-producing branch of economy.

Thus, the social division of labour is the basis of the entire process of the development of commodity economy and of capitalism. It is quite natural, therefore, that our Narodnik theoreticians, who declare this process to be the result of artificial measures, the result of a "deviation from the path," and so on and so forth, have tried to gloss over the fact of the social division of labour in Russia or to belittle its significance… The Narodnik theory of the "artificial character" of capitalism in Russia could only have been evolved by rejecting, or proclaiming as "artificial," the very foundation of all commodity economy, namely, the social division of labour.





… the development of commodity economy takes the shape of the separation from agriculture of one branch of industry after another. The population of a country in which commodity economy is poorly developed (or not developed at all) is almost exclusively agricultural. This, however, must not be understood as meaning that the population is engaged solely in agriculture: it only means that the population engaged in agriculture, also process the products of agriculture, and that exchange and the division of labour are almost non-existent. Consequently, the development of commodity economy eo ipso means the divorcement of an ever-growing part of the population from agriculture, i.e., the growth of the industrial population at the expense of the agricultural population. …




…Now we pass to capitalist production, that is, we presume that instead of simple commodity producers we have, on the one hand, the owner of means of production and, on the other, the wage-worker, the seller of labour-power. The conversion of the small producer into a wage-worker presumes that he has lost the means of production -- land, tools, workshop, etc. -- i.e., that he is "impoverished," "ruined." The view is advanced that this ruin "diminishes the purchasing power of the population," "diminishes the home market" for capitalism ….. At the moment the question is posed purely theoretically, i.e., it relates to commodity production in general where it is transformed into capitalist production. The writers mentioned also pose this question theoretically, i.e., from the mere  fact of the ruin of the small producers they deduce a shrinkage of the home market. This view is absolutely incorrect, and its persistent survival in our economic literature can only be explained by the romantic prejudices of Narodism … It is forgotten that the "freeing" of one section of the producers from the means of production necessarily presumes the passage of the latter into other hands, their conversion into capital; presumes, consequently, that the new owners of these means of production produce as commodities the products formerly consumed by the producer himself, i.e., expand the home market; that in expanding production the new owners of the means of production present a demand to the market for new implements, raw materials, means of transport, etc., and also for articles of consumption (the enrichment of these new owners naturally presumes an increase in their consumption). It is forgotten that it is by no means the well-being of the producer that is important for the market but his possession of money; the decline in the well-being of the patriarchal peasant, who formerly conducted a mainly natural economy, is quite compatible with an increase in the amount of money in his possession, for the more such a peasant is ruined, the more he is compelled to resort to the sale of his labour-power, and the greater is the share of his (albeit scantier) means of subsistence that he must acquire in the market… Thus, from the standpoint of abstract theory, the ruin of the small producers in a society of developing commodity economy and capitalism means the very opposite to what Messrs. N.-on and V. V. want to deduce therefrom; it means the creation and not the shrinkage of the home market. ….




 The next question in the theory of the home market is the following. We know that the value of a product in capitalist production resolves into three parts: 1) the first part replaces the constant capital, i.e., the value that existed previously in the shape of raw and auxiliary materials, machines and instruments of production, etc., and that is merely reproduced in a certain part of the finished product; 2) the second part replaces the variable capital, i.e., covers the maintenance of the worker; and, lastly, 3) the third part constitutes the surplus-value, which belongs to the capitalist. It is usually granted (we state the question in the spirit of Messrs. N.-on and V. V.) that the realization (i. e., the finding of a corresponding equivalent, sale in the market) of the first two parts presents no difficulty, because the first part goes into production, and the second into consumption by the working class. But how is the third part -- surplus-value -- realized? It cannot, surely, be consumed in its entirety by the capitalists! So our economists come to the conclusion that "the way out of the difficulty" of realizing surplus-value is "the acquisition of a foreign market" …. The writers mentioned explain the need for a capitalist nation to have a foreign market by the suggestion that the capitalists cannot realize their products in any other way. The home market in Russia, they say, is shrinking because of the ruin of the peasantry and because of the impossibility of realizing surplus-value without a foreign market, while the foreign market's closed to a young country that enters the path of  capitalist development too late -- and so, it is declared as proven that Russian capitalism has no basis, is still-born, a claim founded on mere a priori (and, moreover, theoretically incorrect) assumptions! …




Let us now sum up the theoretical propositions examined above, which have a direct bearing on the problem of the home market.

   1) The basic process of the formation of a home market (i.e., of the development of commodity production and of capitalism) is the social division of labour. This consists of various forms of processing raw materials (and various operations in this processing) separating from agriculture one after another and becoming independent branches of industry, which exchange their products (now commodities ) for the products of agriculture. Thus, agriculture itself becomes industry (i.e., produces commodities), and the same process of specialisation takes place in it.

 2) A direct conclusion from the preceding proposition is the law governing all developing commodity economy, and the more so capitalist economy -- the industrial (i.e., non-agricultural) population grows faster than the agricultural and diverts an ever-growing part of the population from agriculture to manufacturing industry.

   3) The separation of the direct producer from the means of production, i.e., his expropriation, signifying the transition from simple commodity production to capitalist production (and constituting the necessary condition for this transition), creates the home market. The process of this creation of the home market proceeds in two directions: on the one hand, the means of production from which the small producer is "freed" are converted into capital in the hands of their new owner, serve to produce commodities and, consequently, are themselves converted into commodities. Thus, even the simple reproduction of these means of production now requires that they be purchased (previously, these means of production were reproduced in greater part in the natural form and partly were made at home), i.e., provides a market for means of production, and then the product now produced with the aid of these means of production is also converted into a commodity. On the other hand, the means of subsistence of the small producer become the material elements of the variable capital, i.e., of the sum of money expended by the employer (whether a landowner, contractor, lumber-dealer, factory owner, etc., makes no difference) on hiring workers. Thus, these means of subsistence are now also converted into commodities, i.e., create a home market for articles of consumption.

  4) The realisation of the product in capitalist society (and, consequently, the realisation of surplus-value) cannot be explained without clearing up the point -- 1) that the social product, like the individual product, resolves itself in terms of value into three parts and not two (constant capital + variable capital + surplus-value, and not only into variable capital + surplus-value, as taught by Adam Smith and the entire school of political economy that came after him and before Marx), and 2) that in its natural form it must be divided into two big departments: means of production (consumed productively) and articles of consumption (consumed personally). By establishing these main theoretical propositions, Marx fully explained the process of realisation of the product in general and of surplus-value in particular in capitalist production, and revealed that it is utterly wrong to drag the foreign market into the problem of realisation.

    5) Marx's theory of realisation also threw light on the problem of national consumption and income.     From what has been said above, it follows automatically that the problem of the home market as a separate, self-sufficient problem not depending on that of the degree of capitalist development does not exist at all. That is why Marx's theory does not anywhere or ever raise this problem separately. The home market appears when commodity economy appears; it is created by the development of this commodity economy, and the degree to which the social division of labour is ramified determines the level of its development; it spreads with the extension of commodity production from products to labour-power, and only in proportion as the latter is transformed into a commodity does capitalism embrace the entire production of the country, developing mainly on account of means of production, which occupy an increasingly important place in capitalist society. The "home market" for capitalism is created by developing capitalism itself, which deepens the social division of labour and resolves the direct producers into capitalists and workers. The degree of the development of the home market is the degree of development of capitalism in the country. To raise the question of the limits of the home market separately from that of the degree of the development of capitalism (as the Narodnik economists do) is wrong.

That is why the question of how a home market is being formed for Russian capitalism reduces itself to the following: How and in what direction are the diverse aspects of the Russian national economy developing? What constitutes the connection between and interdependence of these diverse aspects?




OK Economics was designed and it is maintained by Oldrich Kyn.
To send me a message, please use one of the following addresses:

okyn@bu.edu --- okyn@verizon.net

This website contains the following sections:

General  Economics:


Economic Systems:  


Money and Banking:


Past students:


Czech Republic


Kyn’s Publications


 American education


free hit counters
Nutrisystem Diet Coupons