The revolutionary Rosa Luxemburg, born 150 years ago, led the battle for socialism during the 1918 German Revolution.
An anti-capitalist and anti-imperialist, Luxemburg fought for a workers’ state through revolution.
She lived at a time when momentous struggles were breaking out across Europe. Yet many people on the left accepted reformist ideas, arguing that life could be transformed for workers within the capitalist system. And some said full socialism could be achieved through parliament.
Luxemburg consistently argued with reformists, including those in her own Social Democratic Party (SPD).
At the time it was the world’s biggest socialist party, and Marxist in name. It focused on elections to bring change within the system, not struggle by ordinary people to transform the system.
Reformists argued that capitalism had changed from its early years and had become more stable.
She looked to develop the work of the revolutionary Karl Marx, who said that capitalism was built on contradictions and would face repeated crises.
Marx’s theory of accumulation had explained how competition pushes bosses to make profit for its own sake, constantly accumulating more wealth.
Luxemburg developed this theory, and also tried to advance Marx’s analysis of imperialism to explain why society was on the brink of world war.
She wrote The Accumulation of Capital: A Contribution to the Economic Explanation of Imperialism, in 1913. It looked at how the expansion of capitalism into new territories affects the system.
Marx had said that the competition ingrained in the system pushes capitalists to spread across the world in a search for greater profits.
Luxemburg did not agree that this was simply down to a hunt for new profits. She argued that capitalism was forced to expand into non-capitalist countries in order to exist.
Luxemburg said that a “deep and fundamental antagonism between the capacity to consume and the capacity to produce” drives this expansion.
In the main centres of capitalism, she argued, capitalists could not endlessly expand production because there would not be the markets to consume it.
Luxemburg argued that capitalism depends on non-capitalist markets to sell its products to, and forces them into its system by colonial conquest. In the process, these countries’ economies, resources and labour power are taken over and exploited. States then export cheap materials to these countries to make more profit.
Luxemburg showed how capital accumulation provides “the economic roots of imperialism”.
Imperialism is “the political expression of the accumulation of capital in its competitive struggle for what remains still open of the non-capitalist environment”.
“Only the continuous and progressive disintegration of non-capitalist organisations makes accumulation of capital possible,” she argued.
Luxemburg believed that, once all non-capitalist countries had been pulled into the capitalist system, capitalism would face collapse.
The prosperity that imperialism generates for the dominant nation would be temporary. An end to capitalism would be brought about as under-consumption—creating more commodities than there is demand for them—takes hold.
Yet capitalism has today spread to encompass the world—and it has not met its end. Luxemburg was wrong to argue that the system would naturally collapse in this way. But her writings are still valuable.
Luxemburg taught political economy at the SPD’s school of activists from 1906-1913 while writing a pamphlet on Marxist economics called Introduction to Political Economy.
It explored how production had been organised for centuries under common ownership in pre-capitalist societies, called “primitive communism”.
But when writing she found what she saw as a problem with Marx’s formulation of accumulation in Volume Two of his work, Capital.
Luxemburg analysed how capitalism reproduces itself. Bosses sell commodities, but they don’t keep all of the profit for themselves. Instead, they reinvest part of the profit for future production.
For the system to work, there has to be the right balance between what is produced. There has to be enough commodities to sell and make profits. And there has to be enough of the equipment needed to continue production.
Marx explained this in Capital Volume Two by creating two theoretical departments.
Department One produced goods needed for production—such as tools or machinery. Department Two produced commodities for consumption—such as cars or clothing.
Luxemburg argued that there is a limited market for commodities and that this restricts capitalism’s growth.
So the system could expand and produce more goods. But there wouldn’t be enough people to buy the goods unless demand increased.
Luxemburg believed that the flaw she had found in Marx’s theory was over where increased demand would come from.
Surplus value, which Marx said was the source of profit, is the difference between what workers are paid and the value of what they produce.
Bosses have to reinvest some of it, or the system would grind to a halt.
But Luxemburg said that the “realisation of surplus value for accumulation is impossible in a society in which there are only capitalists and workers”—a society that Marx had laid out.
She said there would be under-consumption because workers wouldn’t have the wages to consistently buy luxury goods. And capitalists can’t simply sell commodities to each other, otherwise no surplus would be put back into the system.
For instance, capitalists could buy the means of production, such as machines or equipment, from each other. But Luxemburg said this would create “a merry-go-round which revolves around itself in empty air”.
“That is not capitalist accumulation, i.e. heaping up money capital, but the opposite,” she said. “Production for the sake of production is, from the standpoint of capital, utter nonsense.”
So imperialism was necessary to create new markets where extra commodities could be sold. But this was ultimately limited, and would produce crises in the system.
Unlike Luxemburg, Marx did not reject the idea of “production for the sake of production”.
He explained that production under capitalism is not aimed at meeting people’s needs. Instead it is geared towards exchange and consumption to make profit.
Critics pointed out that Luxemburg’s theory confuses the priorities of individual capitalists with capitalism as a whole. Capitalists do exchange commodities to increase their ability to produce.
The system will always find a way to make profit so long as there is demand from somewhere—even from workers and capitalists. And it finds ways to create markets, commodifying anything from relationships to necessities.
Also although some capitalist firms might go under, others will feed on their resources and markets as new forms of profit.
Luxemburg did not develop a theory explaining boom, crisis and slump.
In Volume Three of Capital Marx theorises how the drive to accumulate profit leads to the rate of profit to fall, rather than to under-consumption. Marx said that individual capitalists are pushed to invest in the means of production to increase their productivity across the system.
But this means less investment in the actual source of profits—workers’ labour. This theory of crisis shows how capitalism’s contradictions harm the system.
Other Marxists have expanded on the relationship between capitalism and imperialism.
Luxemburg, for instance, didn’t explore the role of monopoly capitalism in the drive towards overseas colonisation.
The Russian revolutionary Nikolai Bukharin understood clearer how the concentration and centralisation of capital led to closer ties between capital and nation-states—leading to imperialism. Despite some problems with her theories, Luxemburg added vital analysis. She showed how capitalism depends on state violence to expand.
She believed that as militarism between capitalist states was inevitable, the fight against imperialism was necessary to fight capitalism. She said that spending on arms “is in itself a province of accumulation”.
This crucially laid the basis for explaining the growth of the economy based on the role of the arms economy following the Second World War.
Luxemburg reiterated the central idea behind Marxism—that surplus value is produced by the exploitation of workers.
And she reinforced Marx’s theory of capitalism by concluding it “proceeds by assimilating the very condition which alone can ensure its own existence”.
Her understanding of how capitalist operates and stops human progress led her to dedicate, and give, her life to the fight against war and imperialism.