RICARD'S METHOD RE-EXAMINED: MARX VS. RICARDO ON Method

TAKAHISA OISHI
Professor of Economics
Takushoku University
Tokyo, Japan

INTRODUCTION

Marx's Poverty of Philosophy (1847; hereafter POVERTY) is a methodological and theoretical critique of political economy and socialism. It is a demonstration of Marx's dialectical method of a critique of economic categories in order to explain the genesis--or the origin--of economic categories.The point we would like to make here concerns Marx's dialectical method in Chapter 2 of POVERTY, with special reference to his methodological critique of political economy. Marx's theoretical critique of political economy in POVERTY will be expounded in the next paper.
Capitalist society, the sum total of capitalist relations of production and commerc, yields wealth on the one hand and poverty on the other, each of which is represented by political economists and socialists. Thus Proudhon declared in his System of Economic Contradictions, or Philosophy of Poverty (1846; hereafter SYSTEM) that he established 'a revolutionary theory' in order to abolish capitalist society by transcending both political economists and socialists. SYSTEM is a critique of political economy.
Consequently, Marx's POVERTY, directed against SYSTEM, is not only a critique of Proudhon but also a critique of political economy and socialism. The methodological insufficiency of political economy, i.e. the unhistorical understanding of economic categories, is a premise for both Proudhon and Marx. The core of the controversy between Proudhon and Marx is how to transcend the insufficiency of political economy, i.e. the method of a critique of economic categories. The core of Marx's critique of Proudhon is that Proudhon, in a roundabout way, arrived at the standpoint of political economists, i.e. the unhistorical understanding of economic categories. The quotation from On Proudhon below demonstrates this to the full:

There [in POVERTY] I showed,...how in this roundabout way he [Proudhon] arrived once more at the standpoint of bourgeois economy [of making economic categories eternal] (italics mine)[1].

The point here is that political economists, as well as Proudhon and Hegel, are methodologically and theoretically criticised by Marx for their unhistorical understanding of economic categories, thus of capitalist society. This is the reason why Marx states as follows:

The decisive points of our view [of his critique of political economy] were first scientifically, although only polemically, indicated in my work [POVERTY] published in 1847 and directed against Proudhon[2].

Marx's POVERTY is not the work in which Marx defended political economy from Proudhon's attack but the work in which he expounded how political economy is to be criticised. Thus, in this sense, Marx's methodological critique of Proudhon in Chapter 2 of his POVERTY is also directed against political economy, including Ricardo[3]. Added to this, a careful investigation of Chapter 1 will reveal that the Ricardian value theory is also criticised, albeit indirectly, with regard to the historical understanding of economic categories.
Methodologically speaking, 'the decisive points' indicated in POVERTY can be summarised as follows:
1. Capitalist relations of production and commerce are historical, transitory.
2. They form a sum total by coexisting simultaneously and supporting one another.
3. Economic categories are only the theoretical expressions of capitalist relations. Thus each economic category must represent the historical character of capitalist relation which it expresses and the intrinsic connection with other relations.
4. Understanding economic categories from the twofold aspects is explaining the genesis, or the origin, of each economic category, i.e. what, how and by what means each category is yielded. This is the crux of Proudhon's and Marx's methodological critique of political economy, i.e. of their unhistorical understanding of categories.
5. Economic categories should be presented in accordance with their genesis, i.e. in 'the order in which they engender one another' (Marx-Engels Collected Works, Vol.6, p.169; hereafter cited as 6 MEC 169) which was later termed the 'genetical presentation' of economic categories[4].
In Chapter I we examine the general character and limitations of both political economists' and Marx's method. Chapter II and III expound the historical character and the intrinsic connection between economic categories. Chapter IV investigates Marx's genetical presentation of economic categories.

RICARDO VS. MARX ON METHOD

THE CHARACTER AND LIMITATIONS OF
RICARDO'S AND MARX'S METHOD

The method of political economy is logically termed the 'analytical method'. Political economists analysed capitalist relations of production and commerce, and abstracted their essences. For example, they reduced capital and commodity to labour. Also they analysed fluctuation in prices and abstracted central price from it. They called it 'natural price' (Smith) or 'cost of production' (Ricardo) and defined the value of a commodity accordingly. It is this analytical method which made their economics scientific and led them to the formation of labour theory of value.
The analytical method, however, is inadequate to comprehending historical organisms which pass the process of formation development resolution: On the one hand, the method cannot clarify the historical character of capitalist relations. It reduces the substance of commodity, capital, rent etc., but does not demonstrate historical conditions which transform the substance, i.e. labour, into capital or commodity. The "First Observation" of POVERTY says:

Economists explain how production takes place in the above-mentioned relations, but what they do not explain is how these relations themselves are produced, that is, the historical movement which gave them birth (Marx-Engels Collected Works, Vol.6, p.162; hereafter sited as 6 MEC 162).

On the other hand, the method is inadequate to comprehend the intrinsic connection between capitalist relations of production and commerce. Capitalist relations form a sum total by coexisting simultaneously and supporting one another. They form the social structure in which each relation forms a limb. The intrinsic connection between the relations shows the structure and the relative stability in their process of formation development resolution: Capitalist relations spontaneously emerged from feudal relations and exist now as an historical stage and will evolve into higher levels.In the "Third Observation", Marx emphasises the interrelation of capitalist relations:

The different limbs of society are converted into so many separate societies [by Proudhon], following one upon the other. How, indeed, could the single logical formula of movement, of sequence, of time, explain the structure of society, in which all relations co-exist simultaneously and support one another(6 MEC 167).

In short, the analytical method is inadequate to comprehend the following two aspects of capitalist relations: the historical character and the intrinsic connection.
Both Proudhon and Marx attempt to explain the origin of economic categories in order to transcend those insufficiencies of political economy by using a dialectical method[5]. Although Proudhon does not analyse the real movement--process--of capitalist production, Marx's dialectical method is a method of comprehending capitalist relations from the two aspects of capitalist relations based on an anlysis of the real capitalist relations. In this sense, the analytical method of political economy provides the basis for Marx's critical analysis of economic categories. The general character and limitations of the analytical method,thus of political economists, is observed in Marx's Manuscripts of 1861-63 as follows:

Classical economy is not interested in elaborating how the various forms come into being, but seeks to reduce them to their unity by means of analysis, because it starts from them as given premises. But analysis is the necessary prerequisite of genetical presentation, and of the understanding of the real, formative process in its different phases[6].

As he was once an Hegelian, Marx has been critical on the analytical method since his first encounter with political economy in 1843[7]. For example, Marx writes in his Economic Philosophic Manuscript of 1844 (hereafter EPM) as follows:

Political economy proceeds from the fact of private property [the right of ownership]; it does not explain it to us. It grasps the material process of private property, the process through which it actually passes, in general and abstract formulae which it then takes as laws. It does not comprehend these laws, i.e. it does not show how they arise from the nature of private property (3 MEC 270-271).

As a matter of fact, in the passage which follows the quotation above, Marx sets himself the task of comprehending economic laws of political economists from the 'general nature of private property'[8] with the help of the two concepts: 'private property' and 'estranged labour' (3 MEC 281). This reminded us of Marx's Manuscripts of 1861-63 [9] and should have been understood as his first plan of the genetical presentation of economic categories, but this has been interpreted as evidence of immaturity of the 'early Marx'.
Å@It is also noteworthy that Marx's "On Proudhon" quoted partly in INTRODUCTION is preceded by a critique of the Hegelian speculative dialectics, a method of understanding organisms from two aspects: the historical character and the intrinsic connection. Here this can be mentioned only briefly but the point is that in the Hegelian dialectics categories and abstract ideas produce real social relations, as Marx writes in his Preface to the Second Edition of Capital [10].

Marx's dialectical method, however, is only the dialectic of description, no more and no less than that. It is said to be a systematic description for comprehending capitalist relations from the two aspects: the historical character and the intrinsic connection. Therefore, his dialectic is, unlike Hegel's, not the self-development or selfcreation of concepts themselves. The movement of categories in Marx's dialectical presentation is not 'the real act of production' of categories but, in fact, 'a product of thinking and comprehending'[11]. In short, the limitation of Marx's dialectical method is that it is only but 'the working- up of observation and conception into concepts'[12]. This can be observed in Marx's critique of Proudhon's made-up dialectics. In the "Fifth Observation' Marx states: '...now we have M. Proudhon reduced to saying that the order in which he gives the economic categories is no longer the order in which they engender one another' (6 MEC 169). To read it the other way round, Marx presents categories in the order in which they do engender one another.

RICARDO VS. MARX ON VIEW OF ECONOMIC CATEGORIES

Political economists reduce the various forms of wealth to their inner unity, but they do not explain the real formative process in its different phases. This is a necessary result of their method. The idea of explaining the genesis of economic categories never came into their minds. As Marx states in the "First Observation": 'what they ... do not explain is how these relations themselves are produced' (6 MEC 162).
To take a couple of examples, they reduce 'commodity' to 'labour', but they are not concerned with why, how and by what means the 'labour' appears in the 'value' of a product in capitalist condition. Similarly, they do not explain 'natural price' 'production cost' from 'value' nor the possibility and necessity for the historical abolition of commodities. They concentrate instead on the quantitative analysis of economic relations, i.e. average, highest and lowest rates. The deficiency of political economists in this respect is a necessary result of their analytical method. Consequently, Ricardo is not an exception.
It would be clear from these examples that political economists do not understand capitalist relations, or economic categories, as historical, because their method necessarily abstracts all characteristics distinctive of capitalist relations. At least in theory, political economists do not understand economic categories as theoretical reflections of capitalist relations of production and commerce. They do not directly assert that capitalist relations are eternal, but they say so indirectly. In the "First Observation" Marx remarks: 'Economists express the relations of bourgeois production, the division of labour, credit, money, etc., as fixed, immutable, eternal categories' (6 MEC 162).
On the other hand, Marx understands: 'Economic categories are only the theoretical expressions,the abstractions of the social relations of production' (6 MEC 165). What concerns Marx is the historical conditions which transform 'labour' into the 'value' of a commodity or into 'capital'. In other words, the genesis of economic categories are explained, as Marx states in the "First Observation": Economists explain how production takes place in the above-mentioned relations, but what they do not explain is how these relations themselves are produced, that is, the historical movement which give them birth' (6 MEC 162). By 'the historical movement' in the quotation, we should not understand history qua history. Once capitalist relations are established, they are produced every day before our eyes. Furthermore, by 'movement' Marx means 'process'. The point here is that economic laws are grasped from the 'very nature of private property' through this genetical presentation of economic categories. Comprehending economic laws as necessary laws of private property is the other side of explaining the gnesis of economic categories. This requires a critical analysis of capitalist relations which even Ricardo had never thought of. Thus for Marx's genetical presentation of economic categories, the arrival-point of political economists serves, at most, only as the starting-point.
For example, Marx points out that the followings must be examined minutely: what are men's 'respective needs, their productive forces, their mode of production, the raw materials of their production in short, what [are] the relations between man and man which resulted from all these conditions of existence' (6 MEC 170).
This leads us to the definition of economic categories from the two aspects. As the theoretical expression of capitalist relations: each category must express the stage in the development of productive forces to which it corresponds. In the "Second Observation" Marx writes that 'Social relations are closely bound up with productive forces' (6 MEC 166); each category, on the other hand, must reflect the interconnection with other relations, which coexist simultaneously and support one another.
There are a couple of things worth mentioning in regard to Marx's dialectical method. First, economic categories 'are truths only insofar as those relations continue to exist' (38 MEC 100). Marx specifies that Proudhon's and Hegel's dialectics have to be speculative because they do not 'pursue the historical movement of production relations, of which the categories are but the theoretical expression'(6 MEC 162). As we shall see later, this concerns the order in which economic categories should be presented.
Secondly, capitalist relations must be separated from feudal or mere transitional relations through critical analyses of the movement of capitalist production and consumption. The term 'capital', for example, has been used from ancient times. It is, however, careless to jump from this simple fact to the conclusion that capitalism is as old as the term. As Marx points out in "$4. PROPERTY OR RENT" of "Chapter 2", 'property has developed differently and under a set of entirely different social relations' (6 MEC 197). Confusing modern capital with that in ancient times, e.g. the cattle, will lead us to a complete misunderstanding of our society based on large-scale industry.
In the following two chapters, let us examine further the point we have been considering with special reference to the Ricardian rent theory.

RICARDO VS. MARX ON THE 'HISTORICAL CHARACTER'

Let us take up Marx's critical analysis of rent in POVERTY and demonstrate how the historical character of rent is grasped by Marx. Proudhon declares himself incapable of understanding the economic origin of rent by saying that it is 'so to speak, extra-economic'; Though he referrs to the Ricardian rent theory as to the average rent. To begin with, Marx summarises Ricardo's rent theory as follows:
(1) 'In agricultural industry, ... it is the price of the product obtained by the greatest amount of labour which regulates the price of all products of the same kind' (6 MEC 199).
(2) 'Then, as population increases, land of an inferior quality begins to be exploited, or new outlays of capital, proportionately less productive than before, are made upon the same plot of land. In both cases a greater amount of labour is expended to obtain a proportionately smaller product' (6 MEC 199).
(3) 'As competition levels the market price,the product of the better soil will be paid for as dearly as that of the inferior. It is the excess of the price of the products of the better soil over the cost of their production that constitutes rent' (6 MEC 200).
After this summary, Marx points out that the Ricadian rent theory partly shows the economic origin of rent.

Rent, in the Ricardian sense, is property in land in its bourgeois state, that is, feudal property which has become subject to the conditions of bourgeois production (6 MEC 199).

In contrast with Proudhon, Marx rates the Ricardian rent theory as a scientific analysis of real production relations. However, it should also be noted that Marx points out the insufficiency of Ricardo's analysis of rent as an historical, or a production relation.
For example,Marx names the followings as the historical conditions of the Ricardian doctrine:
(1) that 'capital should be freely applicable to different branches of industry';
(2) that 'a strongly developed competition among capitalists should have brought profits to an equal level';
(3) that 'the farmer should be no more than an industrial capitalist claiming for the use of his capital on inferior land a profit equal to that which he would draw from his capital it were applied in any kind of manufacture';
(4) that 'agricultural exploitation should be subjected to the regime of large-scale industry'; and finally,
(5) that 'the landowner himself should aim at nothing beyond the money return' (6 MEC 200).
In a succeeding paragraph, with regard to the subjective essence of rent, Marx counts the followings as 'the different relations expressed by rent':
(1) 'The abasement of the labourer, reduced to the role of a simple worker, day labourer, wage-earner, working for the industrial capitalist';
(2) 'the intervention of the industrial capitalist, exploiting the land like any other factory';
(3) 'the transformation of the landed proprietor from a petty sovereign into a vulgar usurer' (6 MEC 201).
It would be clear from these that Marx grasps rent as a capitalist production relation by analysing historical conditions which rent expresses. This analysis, on the other hand, separates rent relation from other feudal, transitional or untypical relations. The following serves as an example:

Farm rent can imply again, apart from rent proper, the interest on the capital incorporated in the land. In this instance the landowner receives this part of the farm rent, not as a landowner but as a capitalist; but this is not the rent proper that we are to deal with (6 MEC 205).

It is well-known that Ricardo determines rent by the following two factors: (1) the different 'situation' of land to market; and (2) the different 'degrees of fertility of soil'. Marx argues against this determination. Since the two factors are unhistorical, this determination makes his rent unhistorical and unsocial. In this sense, his rent theory illustrates the insufficiency as well as the scientific aspect of the Ricardian economics. Marx writes:

Ricardo, after postulating bourgeois production as necessary for determining rent, applies it [the conception of rent: in the German ed.], nevertheless, to the landed property of all ages and all countries. This is an old trick [error: in the German ed.] common to all the economists, who represent the bourgeois relations of production as eternal categories [relations: in the German ed.] (6 MEC 202).

Although he had not yet finished his own rent theory in POVERTY, basic points of Marx's view have already become clear. For example, he asserts: 'Rent results from the social relations in which the exploitation of the land takes place' (6 MEC 205). Rent should express those social relations. However, this is beyond the analytical method.

RICARDO VS. MARX ON THE 'INTRINSIC CONNECTION'

Capitalist relations of production coexist simultaneously, support one another and form a whole. They are all interconnected, accordingly economic categories must express the intrinsic connection between capitalist relations. To 'give an exposition of all the social relations of bourgeois production' is 'to define bourgeois property' (6 MEC 197). On the other hand, unless the 'bonds' are shown, each capitaist relation is understood as independent of the others.
In his SYSTEM, Proudhon gives property an independent chapter (Chapter 11 Property). Furthermore, as a matter of fact, there he investigates only rent. In the opening paragraph of "Chapter 2 $4 Property or Rent", Marx criticises this.

To try to give a definition of property as of an independent relation, a category apart, an abstract and eternal idea, can be nothing but an illusion of metaphysics or jurisprudence (6 MEC 197).

However, this criticism can be applied to political economy too. The Ricardian rent theory provides an example. He deals with rent in relation to 'value' (Chapter 2 On Rent), but his point of view is limited to whether rent is a component of natural price or a result of it. Rent, especially average rent, is already presupposed in his determination of value (Chapter 1). Rent is not explained as a 'particular and developed expression' (3 MEC 281) of value. Similarly, the intrinsic connection between value, profit, rent or cost of production (including profit) are not grasped nor developed from value by Ricardo.
Thus, from Marx's point of view or from the standpoint of the genetical presentation of economic categories, Ricardo does not grasp the connection between the categories nor explain anything. His presentation of economic categories is nothing but a tautology. This is also a necessary result of his analytical method.
Another notable example occurs in Chapter 1 of POVERTY. Marx investigates money as 'a social relation' (6 MEC 145) closely connected with a whole chain of other economic relations.Although the criticism is directed against Proudhon, it should be understood as a critique of the Ricardian money theory because he does not differ much from Proudhon in money theory. This is the reason why Ricardo is not contrastd with Proudhon any longer. Anyway, Marx's critique of Proudhon's money theory can be completely applied to Ricardo's.
Marx's critique can be summarised as follows: Proudhon does not distinguish money itself from its functions forms and grasps money only in its concrete functions, i.e. only as means of exchange. He presupposes the necessity for money a special agent of exchange rather than explains it. He explains only a secondary question, i.e. 'why this particular function [a special agent of exchange] has developed upon gold and silver rather than upon any other commodity' (6 MEC 146). He does not realise that 'this [the money] relation corresponds to a definite mode of production neither more nor less than does individual exchange' (6 MEC 146). Gold and silver are commodities and also have the capacity of being the universal agent of exchange. Thus the first question to be asked is, 'why, in exchanges as they [the values] are actually constituted, it has been necessary to individualise exchangeable-value, so to speak, by the creation of a special agent of exchange' (6 MEC 145). Commodity production and commodity exchange require and perpetually produce money. The necessity for the creation of money is in the determination of value itself. This is, however, beyond Ricardo's comprehension. Marx specifies this in his Manuscripts of 1861-63 by saying:

But Ricardo does not examine the form the peculiar characteristic of labour that creates exchange-value or manifests itself in exchange-value the nature of this labour. Hence he does not grasp the connection of this labour with money or that it must assume the form of money. Hence he completely fails to grasp the connection between the determination of the exchange-value of the commodity by labour time and the fact that the devlopment of commodities necessarily leads to the formation of money[13].

As we have examined above, the Ricardian theory of rent and money do not comprehend the intrinsic connection with other capitalist relations, or economic categories. Understanding money as a means of exchange does not necessarily mean comprehending it as 'a production relation' (6 MEC 145). Marx, on the other hand, comprehends the connection between commodities and money from the social substance of value[14].
So far, we have examined the inadequacy of the Ricardian method from three points of view: the view on economic categories, the historical character of capitalist relations and the connections between them. Those limitations are necessary results of his analytical method. They are not three different things, but three aspects of the same thing, i.e. the analytical method. In the next chapter we would give readers the full particulars of Marx's methodological confrontation with Ricardo in POVERTY by unifying those three aspects.

MARX'S PRESENTATION OF ECONOMIC CATEGORIES

The "First Observation" in Chapter 2 specifies that the crux of the Proudhonian and Marxian methodological critique of political economy is the historical understanding of economic categories by explaining the genesis of them, i.e. a dialectical method. Their point of diverging is whether they pursue the real movement of capitalist production and commerce or not,or whether their critique of political economy is a critique of economic categories or not.
Proudhon does not analyse the real movement. He does not examine the historical conditions nor the interrelation of capitalist relations which the categories express. He explains their origins by introducing a person, like a deus ex machina [15], who makes the proposition to other persons to establish the relation in question. Thus for Proudhon, economic categories do not express the historical conditions of them nor their interrelation. He presents economic categories in the order classified by an outside principle, i.e. 'equality'. In this sense, Proudhon's critique of political economy is not a critique of economic categories.
Marx, on the other hand, analyses the movement of capitalist production from the following two aspects in order to explain their genesis: the historical character and the intrinsic connection. Economic categories are presented accordingly in the order which is shown by the intrinsic connection between the categories. Marx later calls this method of presenting economic categories the 'genetical presentation', because it explains the genesis of economic categories, thus, of the capitalist relations which they express. It is through this presentation, the logical necessity for capitalist society, i.e. of formation - development - resolution, is grasped by the twofold determination of economic categories too[16]: the historical character of capitalist relations corresponding to a certain stage in the development of productive forces; the intrinsic connection between capitalist relations coexisting simultaneously and supporting one another.In this sense Marx's critique of political economy is a critique of economic categories.
With regard to this, it should be noted that Proudhon's attempt at explaining the genesis of economic categories as such is rated highly by Marx in the "First Observation"[17]. Unfortunately, not all economic categories are presented in POVERTY because of its polemical nature, but the outline of Marx's genetical presentation can be read between the lines such as:

The same men who establish their social relations in conformity with their material productivity, produce also principles, ideas and categories, in conformity with their social relations (6 MEC 166).
Now that he has to put this dialectics into practice, his reason in default. M. Proudhon's dialectics runs counter to Hegel's dialectics, and now we have M. Proudhon reduced to saying that the order in which he gives the economic categories is no longer the order in which they engender one another. Economic evolutions are no longer the evolutions of reason itself (6 MEC 169; italics added).

Here we should note that the so-called return journey from abstract to concrete[18] is suggested by the emphasised sentence. Taking into account his critical analysis of rent in POVERTY and his plans in the works preceding POVERTY[19], it would be safe to say that Marx plans to develop economic categories in the following order: from the abstract to the concrete; from the simple to the aggregate; from those of production process to those of circulation process. For example, commodities and money before capital, profit and average profit before rent. The term 'engender' in the above quotation indicates the 'premise - development' relation between the categories.
It is worth mentioning the 'spontaneity' of economic categories. The following passage in POVERTY may mislead us unless we keep it within its context.

Indeed, from the moment the process of the dialectic movement is reduced to the simple process of opposing good to bad, of posing problems tending to eliminate the bad, and of administering one category as an antidote to another, the categories are deprived of all spontaneity; the idea 'no longer function'; there is no life left in it. It is no longer posed or decomposed into categories (6 MEC 169).

It is careless to jump from this to the interpretation that Marx's categories have spontaneity or life in themselves. On the contrary, the quotation above indicates the inadequacy of Proudhon's made-up dialectics even as speculative.
First: Proudhon does not 'pursue the historical movement of production relations, of which the categories are but the theoretical expression' (6 MEC 162). He inverts the relationship between economic categories, just as in Hegel's speculative dialectics.
Secondly: however,Proudhon's dialectics differs from Hegel's. Contradictions produce other categories in Hegel's dialectics, but not in Proudhon's. Because, for Proudhon, 'the dialectic movement is the dogmatic distinctions between good and bad' (6 MEC 168). His contradictions are not real contradictions but mere distinctions.
Thirdly: consequently, in Proudhon's speculative dialectics, unlike Hegel's, categories have to be developed through the power of other categories, i.e. other categories must be presupposed. For example, 'to arrive at the constitution of value, which for him is the basis of all economic evolutions, he could not do without division of labour, competition, etc.' (6 MEC 166). Thus the quotation above is followed by:

The sequence of categories has become a sort of scaffolding. Dialectics has ceased to be the movement of absolute reason. There is no longer any dialectics but only, at the most, absolutely pure morality (6 MEC 169).

In contrast to that, Marx's genetical presentation is the dialectic of description and merely 'the working-up observation and conception into concept'. It must be based on the analysis of 'the historical movement of production relations' (6 MEC 162). Consequently, however his presentation of economic categories may appear as the self-development or self-creation of 'concept', it is not a dogma. As Marx warns us 'the subject, society, must constantly be kept in mind as the premise from which we start' [20] in the whole process of his presentation.
From all the observations above, we may conclude that Marx suggests the 'genetical presentation of economic categories' in POVERTY.

CONCLUSION

In the early 1840s Marx faced the so-called material problem and the problem of the abolition of capital. At the time when capital was establishing itself and causing friction with feudal property in Germany, the abolition of capital was acclaimed by socialists and communists in England and France. Thus it was an anachronism for Marx to deal with the German domestic problems, because they had already been solved in England and France. The first step he took to solve the problem was a critical investigation of Hegel's Philosophy of Right which is an exceptional critique of capitalist society in England.
Through that work, Marx realised that the separation of civil society and political state has its root in civil society, i.e. in the separation of individuals into citizen (citoyen )and bourgeois. Consequently, he formulates that human emancipation will be accomplished only when: 'the real, individual man ... in his particular work ... has reorganised and organised his "forces propres" as social forces, and consequently no longer separates social powers from himself' (3 MEC 168).In this way, Marx comes to the conclusion that a critical analysis of capitalist relations of production is necessary for him to clarify material conditions for it.
For Marx the real question is: Can 'Germany attain a practice à la hauteur des principes, i.e. a revolution which will raise not only to the official level of the modern nations but to the height of humanity which will be the near future of these nations' (3 MEC 182)? As I have already clarified in my preceding paper Individual, Social and Common Property", Marx tackles this question by separating out the general essence (Wesen ) of private property through a twofold analysis of the capitalist production process in EPM.
Capitalist society, i.e. the sum total of capitalist relations, develops antagonistically by producing wealth on one hand and poverty on the other. A controversy between political economists and socialists follows.
Political economists are a fatalist school and represent a bourgeoisie which works only ... to increase the productive forces and to give a new upsurge to industry and commerce' (6 MEC 176). They understand capitalist society as eternal by conceptualising capitalist relations into unhistorical categories. They do not comprehend how economic laws arise from the very nature (Wesen ) of capital nor demonstrate economic laws as necessary laws of capital. This is a necessary result of their analytical method. Socialists, on the other hand, are on the workers' side and try to reform society, especially distribution relations,without abolishing capitalist production relations. Neither economists nor socialists comprehend capitalist society as an historical, transitory society corresponding to a certain stage in the development of productive forces.
Proudhon claimed in his SYSTEM that he had transcended both political economy and socialism.Therefore, Marx in POVERTY is directly concerned with Proudhon, but indirectly, concerned with political economy and socialism. The methodological inadequacy of Ricardo's analysis was presupposed by Proudhon and Marx in 1846. The core of the problem is the new method required to transcend the inadequacy of the analytical method of political economy, including Ricardo. As we have seen, the point is how to understand economic categories by explaining the genesis of them. Marx's critique of Proudhon's made-up dialectical is only his methodologi-cal critique of Ricardo from the following two aspects: the historical character of economic categories; and the intrinsic connection between those categories. This brings us to another point which is going to be made in the succeeding paper, i.e. Marx's critique of the Ricardian concept cost of production' in Chapter 1 of POVERTY.

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[1]. ÅgOn Proudhon" (Marx's letter to J. B. Schweitzer dated 24 January 1865), Karl MarxÅ|Fredrick Engels Selected Works in three volumes, Vol.2 (Progress Publishers, 1977), p.26.

[2]. The Preface to A Critique of Political Economy (1859), in: David McLellan, Karl Marx Selected Writings (Oxford, 1977), p.390.

[3]. In POVERTY, Marx contrasts Ricardo, Bray and Hegel with Proudhon. This is neither to defend them from Proudhon's attacks nor to criticise Proudhon by using their theories. It is to illustrate that Proudhon has not transcended Ricardo the economist or Bray the Ricardian socialist. It is expressed best in the following quotation:

Å@ He [Proudhon] wants to be the synthesis.... He wants to soar as the Å@ man of science above the bourgeois and the proletarians; he is Å@Å@Å@ merely the petty bourgeois, continually tossed back and forth Å@Å@Å@ between capital and labour, political economy and communism (6 Å@Å@ MEC 178).

Stressing the scientific aspect of the Ricardian value theory in Chapter 1 and the methodological critique of him in Chapter 2 of POVERTY, albeit indirectly, do not contradict each other. On the contrary, a careful investigation of Chapter 1 reveals that the Ricardian value theory opposed to Proudhon is not his but the reread by Marx; surprisingly few studies have clarified this. They have analysed the two chapters of POVERTY separately. As a result, Marx's methodological and theoretical critique of Ricardo's Åecost of production' has been completely overlooked. The interpretation follows that in POVERTY Marx Åeaccepted' or Åeaffirmed' the Ricardian value theory. I would like to argue against this undialectical interpretation of Marx's formation process in the next paper. The point is that Chapter 1 of POVERTY is to be understood with regard to his methodological critique of Ricardo in Chapter 2.
Similarly, Bray is contrasted with Proudhon in order to show that Proudhon has no originality as a utopian interpreter of the Ricardian value theory. Likewise, Hegel is opposed to Proudhon, albeit his dialectics has nothing to do with Hegel's, in order to rail against methodological confusion. Marx illustrates on the one hand, that Proudhon's dialectics has the same speculative structure as Hegel's; i.e. he understands economic categories as eternal by inverting the relationship between categories and real relations; on the other, that Proudhon's dialectics is fatal as a speculative dialectics. Since his categories have no life in themselves, they need help for development from the outside.

[4]. MEGA2, Ö+-3, Teil 4, S.1499. Theories of Surplus Value, Part Öo (Progress Publishers, 1971), p.500.

[5]. See Marx's letter to J.B. Schweitzer dated on 24 January 1865, in: KARL MARXÅ|FREDRICK ENGELS SELECTED WORKS in three volumes, Vol. 2 (Progress Publishers, Moscow, 1977), p.26. Marx came into personal contact with Proudhon in 1844 in Paris and Åeinfected him to his great injury with Hegelianism'. Both Marx and Proudhon attempt to criticise private property in the form of a critique of political economy by using a dialectical method. However, since Proudhon does not pursue the real movement of capitalist production, his dialectics has to be speculative just like the Hegelian. In other words his critique of political
economy is not a critique of economic categories.

[6]. MEGA2, Ö+-3, Teil 4, S.1499. Theories of Surplus Value, PartÖo (Progress Publishers, Moscow, 1971), p.500.

[7]. See, e.g. my ÅgMarx's First Critique of Political Economy", The Review of Takushoku University, No.190 (1991). To ignore this fact is to misunderstand the whole of Marx's formation process.

[8]. As to this concept, see Chapter Öc of my paper ÅgIndividual, Social and Common Property", The Review of Takushoku University, No. 199 (1992).

[9]. MEGA2, Ö+-3, Teil 4, S.1389. Theories of Surplus Value, PartÖo, pp.258-259.

[10]. Capital, Vol. 1, Pelican ed., pp.102-103. As Marx asserts in the ÅgFirst Observation", this is a necessary result of not pursuing Åethe historical movement of production relations' (6 MEC 162).

[11]. Grundrisse, Pelican ed., p.101.

[12]. Ibid., p.101.

[13]. MEGA2, Ö+-3, Teil 3, S.816. Theories of Surplus Value, PartÖ+, p.164. See also Footnotes 33, 34 and 35 of Capital, Vol.1, Pelican ed., pp.173-176.

[14]. This brings us to the point I would like to make in the next paper: Marx's critique of Ricardo's value theory in POVERTY. What we should notice here, with regard to this, is Marx's following remark:

There is no ready-constituted Åeproportional relation' [of supply to demand], but only a constituting movement (6 MEC 134).

[15]. See Editor's Note b on 6 MEC 198. As to how Proudhon explains the genesis of economic categories, see 6 MEC 198-199 and 112.

[16]. See Preface to the Second Edition of Capital, Vol. 1, Pelican ed., p.103.

[17]. See, e.g. 6 MEC 111 and 162.

[18]. See Grunrisse, Pelican ed., pp.100-101.

[19]. See, for example, EPM (3 MEC 281, 289) and Notes on James Mill (3 MEC 221-222).

[20]. Grunrisse, Pelican ed., p. 102.