Law of Accumulation and Breakdown of the Capitalist System

by Henryk Grossmann

Overview

'First published in German in 1929, this is essential reading for anyone with an interest in the development of Marxian economic theory.' Science

Product Details

ISBN-13:	9780745304595
Publisher:	Pluto Press
Publication date:	05/20/1992
Edition description:	New Edition
Pages:	240
Product dimensions:	5.40(w) x 8.50(h) x 0.50(d)

About the Author

Douglas Dowd is a widely respected academic and political activist. He has taught at Cornell University, Johns Hopkins University, University of California, Berkeley, and San Jose State University and is currently teaching at the University of Modena in Italy. He is the author of Capitalism and its Economics (Pluto, 2004).

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CHAPTER 1

The Downfall of Capitalism in the Existing Literature

The point at issue

Already prior to Marx certain representatives of political economy had a clear presentiment of the historically ephemeral character of the bourgeois mode of production. Jean C L Simonde de Sismondi was the first to uphold it against David Ricardo. He argued that in the course of time every mode of production becomes 'intolerable' and 'the social order, continually threatened, can only be maintained by force' (cited Grossmann, 1924, pp. 63–4). However, in terms of capitalism, this conclusion was based not on an economic analysis of its mode of production but purely on historical analogies. Therefore Marx was right to say that:

at the bottom of his [Sismondi's] argument is indeed the inkling that new forms of the appropriation of wealth must correspond to productive forces and the material and social conditions for the production of wealth which have developed within capitalist society; that the bourgeois forms are only transitory and contradictory forms. (1972, p. 56)

A quarter of a century after Sismondi, Richard Jones developed the same insights when he described capitalism 'as a transitional phase in the development of social production' (cited Marx, 1972, p. 428). But like Sismondi, Jones gained his insight into the historically transitory character of capitalism through a mainly historical-comparative analysis of successive forms of economy.

The development of the productive power of social labour is the driving force of historical evolution. When the earliest modes of production proved unable to develop the productive forces of society any further, they were bound to disintegrate:

Hence the necessity for the separation, for the rupture, for the antithesis of labour and property (by which property in the conditions of production is to be understood). The most extreme form of this rupture, and the one in which the productive forces of social labour are also most powerfully developed, is capital. (Marx, 1972, p. 423)

Elsewhere Marx writes:

It is one of the civilising aspects of capital that it enforces this surplus-labour in a manner and under conditions which are more advantageous to the development of the productive forces, social relations and the creation of the elements for a new and higher form than under the preceding forms of slavery, serfdom, etc. (1959, p. 819)

At a certain point in its historical development capitalism fails to encourage the expansion of the productive forces any further. From this point on the downfall of capitalism becomes economically inevitable. To provide an exact description of this process and to grasp its causes through a scientific analysis of capitalism was the real task Marx posed for himself in Capital. His scientific advance over Sismondi and Jones consisted precisely in this. But how did Marx carry through this analysis? He says, at a certain stage: The monopoly of capital becomes a fetter upon the mode of production

which has flourished alongside with and under it. Centralisation of the means of production and the socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. (1954, p. 715)

Marx refers to an antagonism between the productive forces and their capitalist shell. What is this, however? There is nothing more erroneous than the prevalent identification of the development of productive forces with the growth of c in relation to v. This simply confuses the capitalist shell in which human productivity obtains a form of appearance with the essence of that productivity itself. The development of productivity has in itself nothing to do with the capitalist valorisation process which, as a process of formation of values, has its roots in abstract human labour. The antagonism that Marx refers to is between the forces of production in their material shape as elements of the labour process – as means of production and labour power – and these same forces in their specifically capitalist shell, in the shape they assume as values c and v in the valorisation-process. In Capital Volume Three Marx attacks:

the confusion and identification of the process of social production with the simple labour-process ... To the extent that the labour-process is simply a process between man and nature, its simple elements remain common to all social forms of development. But each specific historical form of this process further develops its material foundations and its social forms. Whenever a certain stage of its maturity has been reached, the specific historical form is discarded and gives way to a higher one ... A conflict then ensues between the material development of production and its social form. (1959, pp. 883–4)

The form of the productive forces peculiar to capitalism, their capitalist shell (c:v) becomes a fetter on the form they share in common with all modes of production (M:L). The solution of this problem forms the specific task of this book.

It is quite characteristic of the intellectual crisis, even decay, of contemporary bourgeois economics that it denies that there is any such problem as accumulation. The apologetic optimism of bourgeois economics has simply extinguished all interest in a deeper understanding and analysis of today's mechanism of production. Economists like J B Clark (1907) and Alfred Marshall (1890) imagine that the psychological and individual motivations driving capitalists to 'save' account for the entire problem of the accumulation of capital. They do not bother to ask if there are objective conditions that determine the scope, the tempo and finally the maximal limits of the accumulation of capital. If accumulation is purely a function of the subjective propensities of individuals and the number of these individuals grows constantly, how do we explain the fact that the tempo of accumulation shows periodically alternating phases of acceleration and slow down? How do we account for the fact that the tempo of accumulation in the advanced capitalist countries is often slower than that in the less developed, although the number of those individuals is obviously greater in the former?

Elsewhere Marshall tries to explain things with the banal observation that the extent of the demand for capital depends on the level of the rate of interest. But Marshall breaks off his analysis where the real problems begin. Prior to the First World War the USA was massively in debt to Europe despite high domestic interest rates. On the other hand, in 1927 the USA exported capital sums totalling 14.5 billion dollars, and this export of capital showed no signs of abating, although the rate of interest at home had already fallen to 3.5 per cent. This also contradicts the analogous view of G Cassel that the 'low rate of interest that prevails during a depression obviously acts as a powerful stimulus to the expanded production of fixed capital' (1923, p. 570).

Why, despite the low rate of interest in the USA, did the expansion of production come to a halt in that country, or why was capital exported and not invested at home? If one answers that higher rates of interest prevailed abroad, the problem is only displaced. For why did the rate of interest fall in the USA? Because of an 'oversupply' of capital there? Then under what conditions does such an oversupply of capital arise?

This brings us back to the problem that is completely ignored in contemporary economics. In this respect Marx was closer to classical economy in the way he posed the problem. But whereas classical economy presumed the possibilities of an unlimited accumulation of capital, Marx predicted insuperable limits to the development of capitalism and its inevitable economic downfall.

How did Marx conduct this proof? This brings us to the well-known debate regarding the form in which Marx grounded the 'necessity of socialism'. K Diehl tells us that 'Marx's theory of value never formed the fundamental basis of his socialistic principles' (1898, p. 42). According to him, Marx's socialism is grounded not in the Marxist law of value, but in his materialist conception of history. As proof of the argument that the labour theory of value contains little that is specifically socialist, Diehl cites the case of Ricardo who likewise saw in labour the most suitable measure of value. For Diehl the moral postulate of a just distribution of income forms the only possible link between socialism and the law of value. However, as there is no such postulate in Marx, Diehl rejects the idea that Marx himself draws any such connection.

This widespread conception is totally false. Under capitalism the entire mechanism of the productive process is ruled by the law of value, and just as its dynamic and tendencies are only comprehensible in terms of this law its final end, the breakdown, is likewise only explicable in terms of it. In fact Marx provided such an explanation.

The idea that capitalism 'creates its own negation with the inexorability of a natural process' was already enunciated in Capital Volume One in the section on the historical tendency of capitalist accumulation (1954, pp. 713–15). But Marx did not explicitly state how this negating tendency asserts itself, how it must lead to breakdown of capitalism or through what immediate causes the system meets its economic downfall. If we then turn to the corresponding chapter of Capital Volume Three dealing with the 'law of the tendency of the rate of profit to fall', we are immediately disappointed (1959, pp. 207–26). The very causes that affect the process of accumulation also produce the fall in the rate of profit. But is this fall a symptom of the breakdown tendency? How does this tendency work itself out? Methodologically speaking, this is where Marx should have demonstrated the breakdown tendency. Indeed Marx does ask, 'Now what must be the form of this double-edged law of a decrease in the rate of profit and a simultaneous increase in the absolute mass of profit arising from the same causes?'. We feel now the decisive answer will come. But it does not.

Already in 1872 a Petersburg reviewer of Capital Volume One wrote: 'The scientific value of such an inquiry lies in the disclosing of the special laws that regulate the origin, existence, development and death of a given social organism and its replacement by another, higher one' (Marx, 1954, p. 28). Citing these words with the comment that they provide 'a striking description' of his own method, Marx says about the dialectical method that:

it includes in its comprehension and affirmative recognition of the existing state of things, at the same time also, the recognition of the negation of that state, of its inevitable breaking up; because it regards every historically developed social form as being in fluid movement, and therefore takes into account its transient nature not less than its momentary existence, (p. 29)

In this sense Eduard Bernstein was perfectly right in saying, against social democracy's views about the end of capitalism: 'If the triumph of socialism were truly an immanent economic necessity, then it would have to be grounded in a proof of the inevitable economic breakdown of the present order of society' (Vorwarts, 26 March 1899). However Bernstein himself believed that such a proof was impossible and that socialism could not therefore be deduced from any economic compulsions. In Marx's theory of the 'negation of the negation' Bernstein could see only the 'pitfalls of the dialectical method of Hegel', a product 'of one of the residues of Hegel's dialectic of contradictions', a 'schema of development constructed on Hegelian lines' (Bernstein, 1899, p. 22). The theory of breakdown was, according to him, a 'purely speculative anticipation' of a process that had barely sprouted. This critique was based exclusively on the empirical fact that the material position of certain strata of the working class had improved. For Bernstein this was proof that 'the actual development had proceeded in a quite different direction' to that predicted by Marx. As if Marx had ever denied the possibility of such improvements in the position of the working class at specific stages of capitalist development.

How did Karl Kautsky answer Bernstein's critique? If Kautsky had tried to show that relative wages may fall even while real wages (measured in product terms) rise, and that even in this favourable situation the social misery and dependence on capital of the working class increase, he would have contributed to deepening Marx's theory. But Kautsky simply rejected the theory of breakdown, arguing that 'a special theory of breakdown was never proposed by Marx or by Engels' (1899, p. 42). Kautsky rejected the notion that the Marxist theory of breakdown establishes a tendency for the position of the working class under capitalism ultimately to deteriorate, in the strong sense of an absolute worsening of its situation, an absolute growth of its economic misery.

In fact Kautsky proposed the very opposite idea. According to him Marx and Engels were distinguished from the other currents of socialism by the circumstance that apart from the tendencies that depress the proletariat, they also foresaw, unlike other socialists, positive tendencies that elevate its position. They foresaw 'not simply an increase in its misery ... but also an increase in its training and organisation, its maturity and power' (p. 46). 'The notion that the proletariat increases in maturity and power is not only an essential part of Marx's theory of the breakdown of capitalism, it is its defining part' (p. 45). Thus Kautsky quietly ignored Bernstein's argument that for the triumph of socialism to be an immanent economic necessity it would have to be traced to underlying economic causes.

Yet the same Kautsky, who in dealing with Marx's theory one-sidely accentuated the tendencies that elevate the working class, would observe some years later that from a certain stage on these positive tendencies come to a standstill, that a retrograde movement gains the upper hand: 'The factors that led to an increase in real wages in the last few decades have already been wiped out' (1908, p. 54). Kautsky analyses these various factors. He shows that the trade unions have been continuously pushed back on the defensive while the capitalists, united in various associations, have enormously expanded in strength:

All of which means that the period of rising real wages for one stratum of the working class after another has come to an end, and many sections will even face a period of wage cuts. This holds true not only for periods of temporary depression, but even for periods of prosperity, (p. 549)

A year later (1909) Kautsky noted that:

It is remarkable that already in the last few years of prosperity, when industry worked continuously and there was a constant complaint of labour-shortage, workers proved unable to increase their real wages, and that they even fell. For various strata of the German working class this has been proved in unofficial studies. In America there is an official acknowledgement of this fact for the entire working class. (1909, p. 87)

Kautsky sees the facts, but his description does not go beyond this purely empirical level. Having rejected Marx's theory of breakdown, he finds it impossible to account for them in terms of Marxist theory. What deeper causes govern the movements of wages and what their fundamental tendency is he does not explain. Thus in the famous 'debate on revisionism' there was no real dispute about the theory of the economic breakdown of capitalism because both Kautsky and Bernstein abandoned Marx's theory of breakdown; the debate itself revolved around less important issues that were partly terminological.

This remarkable result of the Bemstein-Kautsky debate was not the only consequence of the fateful omissions in the exposition of Capital Volume Three. Right down to today there rules an absolute chaos of conflicting views, quite irrespective of whether the individuals concerned are bourgeois writers or belong to the radical or moderate wing of the workers' movement. Both the 'revisionist' professor M Tugan-Baranovsky and the 'Marxist' Rudolf Hilferding rejected the idea of a breakdown of capitalism – of absolute, unsurpassable limits to the accumulation of capital – replacing it with the theory of a possible unlimited development of capitalism. It was a great historical contribution of Rosa Luxemburg that she, in a conscious opposition to the distortions of these 'neo-harmonists' adhered to the basic lesson of Capital and sought to reinforce it with the proof that the continued development of capitalism encounters absolute economic limits.

Frankly Luxemburg's effort failed. According to her exposition, capitalism simply cannot exist without non-capitalist markets. If this line of reasoning were true, the breakdown tendency would have been a constant symptom of capitalism from its very inception, and it would be impossible to explain either periodic crises or the characteristic features of the latest stage of capitalism called 'imperialism'. Yet Luxemburg herself had the feeling that the breakdown tendency and imperialism only appear at an advanced stage of accumulation and find their sole basis in this stage. 'There is no doubt that the explanation for the economic roots of imperialism must be deduced from the laws of capital accumulation' (Luxemburg, 1972, p. 61).

(Continues…)

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Table of Contents

Foreword TONY KENNEDY, ix,
Henryk Grossmann and the Theory of Capitalist Collapse TONY KENNEDY, 1,
Introduction by Henryk Grossmann, 29,
1 The Downfall of Capitalism in the Existing Literature, 35,
2 The Law of Capitalist Breakdown,
3 Modifying Countertendencies,
Bibliography, 202,
Index, 206,

Editorial Reviews

'First published in German in 1929, this is essential reading for anyone with an interest in the development of Marxian economic theory.' --Science

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