Academic economists have recently returned from the elaboration of static equilibrium to the classical search for a dynamic model of a developing economy. Rosa Luxemburg, neglected by Marxist and academic economists alike, offers a theory of the dynamic development of capitalism which is of the greatest interest. The book is one of considerable difficulty (apart from the vivid historical chapters), and to those accustomed only to academic analysis the difficulty is rendered well-nigh insurmountable by the Marxist...
Academic economists have recently returned from the elaboration of static equilibrium to the classical search for a dynamic model of a developing economy. Rosa Luxemburg, neglected by Marxist and academic economists alike, offers a theory of the dynamic development of capitalism which is of the greatest interest. The book is one of considerable difficulty (apart from the vivid historical chapters), and to those accustomed only to academic analysis the difficulty is rendered well-nigh insurmountable by the Marxist terminology in which it is expressed. The purpose of this preface is to provide a glossary of terms, and to search for the main thread of the argument (leaving the historical illustrations to speak for themselves) and set it out in simpler language.
The result is no doubt too simple. The reader must sample for himself the rich confusion in which the central core of analysis is imbedded, and must judge for himself whether the core has been mishandled in the process of digging it out.
Our author takes her departure from the numerical examples for simple reproduction (production with a constant stock of capital) and expanded reproduction (production with capital accumulating) set out in volume ii of Marx’s Capital. As she points out, Marx completed the model for simple reproduction, but the models for accumulation were left at his death in a chaos of notes, and they are not really fit to bear all the weight she puts on them (Heaven help us if posterity is to pore over all the backs of old envelopes on which economists have jotted down numerical examples in working out a piece of analysis). To follow her line of thought, however, it is necessary to examine her version of Marx’s models closely, to see on what assumptions they are based (explicitly or unconsciously) and to search the assumptions for clues to the succeeding analysis.
To begin at the beginning—gross national income (for a closed economy) for, say, a year, is written c + v + s; that is, constant [Pg 14] capital, variable capital and surplus. Variable capital, v, is the annual wages bill. Surplus, s, is annual rent, interest, and net profit, so that v + s represents net national income. (In this introduction surplus is used interchangeably with rent, interest and net profit.) Constant capital, c, represents at the same time the contribution which materials and capital equipment make to annual output, and the cost of maintaining the stock of physical capital in existence at the beginning of the year. When all commodities are selling at normal prices, these two quantities are equal (normal prices are tacitly assumed always to rule, an assumption which is useful for long-period problems, though treacherous when we have to deal with slumps and crises). Gross receipts equal to c + v + s pass through the hands of the capitalists during the year, of which they use an amount, c, to replace physical capital used up during the year, so that c represents costs of raw materials and wear and tear and amortisation of plant. An amount, v, is paid to workers and is consumed by them (saving by workers is regarded as negligible ). The surplus, s, remains to the capitalists for their own consumption and for net saving. The professional classes (civil servants, priests, prostitutes, etc.) are treated as hangers-on of the capitalists, and their incomes do not appear, as they are not regarded as producing value. Expenditure upon them tends to lessen the saving of capitalists, and their own expenditure and saving are treated as expenditure and saving out of surplus.
In the model set out in chapter vi there is no technical progress (this is a drastic simplification made deliberately ) and the ratio of capital to labour is constant (as the stock of capital increases employment increases in proportion). Thus real output per worker employed is constant (hours of work per year do not vary) and real wages per man are constant. It follows that real surplus per man is also constant. So long as these assumptions are retained Marxian value presents no problem. Value is the product of labour-time. Value created per man-year is constant because hours of work are constant. Real product per man year being constant, on the above assumptions, the value of a unit of product is constant. For convenience we may assume money wages per man constant. Then, on these assumptions, [Pg 15] both the money price of a unit of output and the value of a unit of money are constant. This of course merely plasters over all the problems of measurement connected with the use of index numbers, but provided that the technique of production is unchanging, and normal prices are ruling, those problems are not serious, and we can conduct the analysis in terms of money values. (Rosa Luxemburg regards it as a matter of indifference whether we calculate in money or in value. )