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Marx's verdict is damning, yet one cannot but acknowledge that Proudhon, in spite of his obvious insufficiency, had endeavoured, honestly and zealously, to extricate himself from Capitalism as well as from Utopianism, and to outline a scheme for an economic order, in which men, such as he had found them, might lead a free, industrious, and righteous life. The task which Proudhon had set himself was the same as that which engaged the attention of Marx, the criticism of political economy and of the sentimental Utopian Socialism. That is the key-note of Proudhon's system, and it is sounded in almost every chapter. He lacked, however, the requisite knowledge and the historical sense which alone could have made him equal to his task. The whole of his criticism consists virtually in the complaint that riches and poverty accumulate side by side, and that the economic categories—use value, exchange value, division of labour, competition, monopoly, machinery, property, ground rent, credit, tax, etc.—manifest contradictions. Proudhon's special problem was the following: "The workers of any country produce yearly goods to the value, let us say, of 20 milliards. But if the workers, as consumers, wish to buy back these goods they have to pay 25 milliards. The workers are thus cheated out of a fifth. That is a terrible contradiction."—("What is Property?" Chap. IV.; "Economic Contradictions," Vol. I., pp. 292-93.) This statement of the problem shows that Proudhon had no inkling of the essential features of the question of value, in spite of the fact that he cites Adam Smith, David Ricardo, etc., whom he must therefore have read. [30]Had he really understood these economists and taken up his critical attitude towards them from the standpoint of justice, he would have stated the problem somewhat as follows: "The workers of any country produce yearly goods to the value, say, of 20 milliards. For their work, however, they receive as wages a quantity of goods of the value of only 10 or 12 milliards. Is that just?" Only this way of stating the question could possibly have revealed to him the nature of wages, of value, of profit, of capital and its contradictions. Proudhon sees the perpetration of fraud or robbery in the sphere of exchange and not in that of production, and he does not ask himself how, if labour produces goods to the value of only 20 milliards, they can be exchanged at a value of 25 milliards, and what is responsible for the increase of five milliards. The other contradictions which he brings forward are not indeed new, but they are ingeniously treated. For example: the essence of exchange-value is labour, which creates wealth; but the more the wealth produced, the less becomes its exchange-value. Or this: the division of labour is, according to Smith, one of the most effective means of increasing wealth, but the further the division of labour proceeds the lower sinks the workman, being reduced to the level of an unintelligent automaton engaged in the performance of a fractional operation. The same thing holds good for machinery. So, too, competition stimulates effort, but brings much misery in its train by leading to adulteration, sharp practices, and strife between man and man. Further, taxation should be proportional to riches, in reality it is proportional to poverty. Or again, private ownership of land ought to increase productivity; in practice [31]it deprives the farmer of the land. In this way he runs to earth the contradictions in political economy, and so we find everywhere the words thesis and anti-thesis or antinomies (contradictions between two well-established propositions). And out of this contradiction springs poverty. The solution or the synthesis is the creation of an economic order which shall preserve the good elements in this category and eliminate the bad ones, and so satisfy the demands of justice. And that is what Socialism cannot do. "For the economic order is based upon calculations of an inexorable justice and not upon those angelic sentiments of brotherhood, sacrifice, and love which so many well-meaning Socialists of the present time are endeavouring to awake in the people. It is useless for them to preach, after the example of Jesus Christ, the necessity for sacrifice, and to set an example of it in their own lives: selfishness is stronger than they and can only be restrained by rigid justice and immutable economic law. Humanitarian enthusiasm may cause upheavals which are conducive to the progress of civilisation, but such emotional crises, like the fluctuations in value, simply result in the establishing of law and order on a more rigid and more restricted basis. Nature or the Deity planted mistrust in our hearts, having no faith in the love of man for his fellow men; and though I say it to the shame of the human conscience (for our hypocrisy must be confronted with it sooner or later), every disclosure which science has made to us concerning the designs of providence with respect to the progress of society points to a deeply rooted hatred of mankind on God's part."—("System of Economic Contradictions or the Philosophy of Poverty," Vol. I., p. 107.) Just as [32]severely does he denounce the institution of Trade Unionism and its methods of warfare, together with State politics, as indeed the working of class organisation and of the State generally. The only way to realise social justice is to create a society of producers who exchange their goods among one another according to their equivalents in labour and carry on work in adequate relationship to the production of wealth, or, to put it clearly, to establish an order where supply and demand balance one another.

Marx's answer to the "Philosophy of Poverty" is indicated at once by the title "The Poverty of Philosophy." He deals first of all with the economic details of Proudhon's work, and proves with documentary evidence that the theses and antitheses it contains partly spring from a half-understood reading of English and French political economists, and in part have been taken direct from the English Communists. Marx already displays in this section an extensive knowledge of economic literature. Then he confronts Proudhon's philosophical and social theories with his own deductions and gives many positive results. Marx's main object was to induce the Socialists to give up their Utopianism and think in terms of realism, and to regard social and economic categories in their historical setting:

"Economic categories are only the theoretical expressions, ideal conceptions of the conditions of production obtaining in society.... Proudhon has grasped well enough that men manufacture cloth, linen, etc., under certain conditions of production. But what he has not grasped is that these social conditions themselves are just as much human products as cloth, linen, etc. Social conditions are [33]intimately bound up with productive power. With the acquisition of new productive power men change their methods of production, and with the change in the methods of production, in the manner of obtaining a livelihood, they change their social conditions. The hand-mill gives rise to a society with feudal lords, the steam-mill to a society with industrial capitalists. But the same men who shape the social conditions in conformity with the material means of production, shape also the principles, the ideas, the categories in conformity with their social conditions. Consequently these ideas, these categories, are just as little eternal as are the conditions to which they give expression. They are the transitory and changing products of history. We are living in the midst of a continuous movement of growth in productive power, of destruction of existing social conditions, of formation of ideas."—("Poverty of Philosophy," Stuttgart, 1885, pp. 100-101.)