Luxembourg and pre-capitalist markets

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Luxembourg and pre-capitalist markets
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I have been trying to get to grips with economic theories of Luxembourg  and of the Falling Rate of Profit just lately which led me to read Accumulation of Capital  and I have a few comments and queries about the basic foundations of  Luxembourg’s theory

The interpretation of c+v+s seems to be a key issue.   It is an wonderful abstraction which works because it provides a valid model of  capitalism whether in the form of simple or enlarged reproduction, for a individual capitalist, total capital and state capitalism, capitalism in 1850 and today.  Whilst it is a very simple model of capitalism, it is perhaps not simple to relate it to actual financial and economic development.  It does not of itself  aim to model, competition, money supply, market processes, financial markets,  production planning, demand management, international trade and so forth.  Is it not correct to state that it is a model, which along with wage labour and commodity production, defines a mode of production and hence how capitalism creates value and the class relationships hidden in c and v and s.  Is this not achievement enough?  Of course there is a need to explain the way markets actually operate, but of itself , can c+v+s be interpreted to explain how the market brings about sufficient amounts of the correct types of c  or v for that matter?

In terms of capital accumulation,  Luxembourg says that simple reproduction is ok as far as it goes but is not reality because it only allows for replacement of existing constant capital.  Enlarged reproduction as a model works out OK again but for total capital it does not apply to reality because it the model does not identify where the demand specifically for capital replacement (ie the growth over and above simple reproduction) comes from – as far as I can see because it is a complex demand requiring predetermined range of products and services which make the machinery to meet the right demand for products.  It is because she suggests that capitalism cannot meet its own demand in this way she looks elsewhere for that demand, so this is a key point therefore.

My 2nd question is therefore why this demand cannot be met by some element of capitalism?  She tries to apply enlarged reproduction to reality but in a rather narrow or selective way.  Surely when considering total capital, all elements of c+v+s require a demand to enable that enlargement to be made and all come about in a complex process in the anarchy of the market.  I cannot see that one element of that overall demand can be separated and said to be incapable of being satisfied within capitalism while the rest is ok.

 

The focus of Luxembourg’s theory is that ALL accumulation and growth in the total capital is dependant on trade with pre-capitalist markets. Without pre-capitalist markets Luxembourg says there can be NO accumulation. Her argument appears to be reducable to the idea that in each ‘cycle’ of production growth is taking place.  Capital accumulates -  becomes larger than it was at the start of the cycle, hence there must have been and always is overproduction in the market relative to the amount of capital in circulation originally.   The size of total capital grows in that cycle, so as capitalism cannot magic this demand and growth into being, Luxembourg  questions where the demand for the additional capital comes from.  This growth is what enables the recapitalisation of existing capital and cannot come from within capitalism,.   Her theory, because it is based on limits placed on enlarged reproduction and, is absolute and clear cut in rejecting all means at capitalism disposal to enable accumulation.  This certainly appears to be the logic of her argument.

My 3rd question is therefore is really then whether this is a correct interpretation of Luxembourg’s theory?   Capitalism grows and continues to accumulate during decadence so her theory seems to imply that there must be large amounts of pre-capitalist markets still available and also that a total collapse of capitalism  (maybe stagnation is a better term here) will occur when all pre-capitalist markets are incorporated into capitalism.

I am concerned that some of these issues I have raised could be translation related, so please could someone clarify if there are other interpretations of these core points in Luxembourg’s theory.  To be honest, I am quite worried because whilst intending to be critical, I expected to find an explanation of others' arguments and did not expect to raise so many questions

 

 

Alf
on Luxemburg's economic theory

 

Welcome to this forum, Link. Raising questions is nothing to worry about – on the contrary, it is essential, and raising them about Luxemburg is as valid as the fact that Luxemburg herself raised questions about Marx. Certainly the questions you pose go to the heart of the debate she provoked within the workers’ movement, and it doesn’t seem to me that translation is an issue here.

I am not altogether sure why you begin with c ₊ v₊s (constant capital plus variable capital plus surplus value) because it relates to the point in the debate which is shared by all marxists – the basic process of capitalist production/exploitation, from the initial outlay of constant capital and wages to the extraction of unpaid labour. In itself, it doesn’t get us past the problem of realising that surplus value on the market. 

What you do note more than once is that Luxemburg is attempting to look at this problem from the standpoint of capital as a totality. The problem of finding outlets for production outside the relation between capital and labour only arises at this level. An individual capitalist can realise surplus value by selling to other capitalists (generally if he is producing capital goods or luxuries) or to workers (generally if he is producing consumer goods), but if you look at this operation from the point of view of capital as a whole capital can’t realise more value than what it has already put into the process in the form of constant capital or variable capital: our ‘total capitalist’ has sold to himself and there will always be an unsold fraction of surplus value at the end of this (total) process. This is why Luxemburg questioned Marx’s reproduction schema in Capital Volume Two, which theoretically posits a world made up of capitalists and workers and  argues that all the surplus value can be absorbed within the different departments of capital itself. For her this seemed to be at odds with Marx’s frequent statements about the inadequacy of the demand coming from the workers and about the fact that the problem of realisation cannot be solved by the capitalists selling each other their own production (these problems are dealt with at some length in the article in International Review 149: http://en.internationalism.org/internationalreview/201206/4992/critique-book-dynamics-contradictions-and-crises-capitalism-part-2). Marx therefore affirmed the need for the market to constantly expand, to penetrate into “outlying fields” of production, which could only mean the then very considerable areas of human economic activity which lay outside the immediate domination of capital.

The problem for our total capitalist is that by expanding into formerly pre-capitalist economies, he pulls them into his own orbit and converts them into capitalist economies. So while this problem of realisation is a powerful stimulus to the global expansion of capitalism in its ascendant phase, it also sets definite limits to that ascent.

At what point do those limits plunge capitalism into what Luxemburg described as an “age of catastrophe”? This is perhaps one of the most important questions posed in your post. It is often wrongly argued that for Luxemburg capital had already reached the objective limits of its potential for expansion at the time she wrote The Accumulation of Capital, a year or so before the outbreak of the First World War. The war certainly confirmed for Luxemburg, and for many other revolutionaries who did not share her economic analysis, that the system had entered into its epoch of decline; but in Luxemburg’s view this was not identical with the total exhaustion of pre-capitalist markets. Indeed she saw imperialism as an attempt to prolong the life of capitalism by accelerating the annexation of the remaining extra-capitalist ‘regions’, which she still saw as considerable at the time, even though in value terms already extremely diminished in proportion to the accumulation needs of capital. However, the resulting intensification of imperialist rivalries precipitated capitalism into a historic crisis long before it had reached any ‘objective’ limits to expansion.

But this historic crisis also has a history. The period of stagnation you mention was most evident in the period between 1914 and 1945, leading some, like Trotsky, to identify decadence with a complete halt in the development of the productive forces, above all after the crisis of 1929, which was proving so different from the crises of the pervious epoch in that it did not act as a spur to a new phase of expansion.

The war of 1939-45 allowed for a return to growth rates which were at some levels quite spectacular. This certainly needs explaining and has provoked debates in the ICC, with different comrades putting forward various explanations, both from inside and outside Luxemburg’s theoretical premises. In my view, the post-war boom is explained best by a combination of two principal factors: the integration of the remaining pre-capitalist markets made possible by the global imperialist reorganisation after 1945; and the increasing resort to the artificial market created by debt, a policy inseparable from the intervention of the capitalist state. This policy served to postpone the crisis without resolving the contradictions that underlie it, and we are now seeing its chickens coming home to roost in the shape of the ‘debt crisis’. We have for some decades been living in a situation where the bourgeoisie has been trying to distort the ‘natural rules’ of the capitalist market, to use its own state and financial mechanisms to overrule the law of value, but where the impossibility of doing this indefinitely is being exposed more and more overtly.

This is by no means an attempt to answer all the questions you raise but my post is already rather long and I hope that other comrades will make their own contributions to the debate, and from various theoretical perspectives.    

Demogorgon
"An individual capitalist can

"An individual capitalist can realise surplus value by selling to other capitalists (generally if he is producing capital goods or luxuries) or to workers (generally if he is producing consumer goods), but if you look at this operation from the point of view of capital as a whole capital can’t realise more value than what it has already put into the process in the form of constant capital or variable capital: our ‘total capitalist’ has sold to himself and there will always be an unsold fraction of surplus value at the end of this (total) process."

I think this is the root of the problem with Luxemburg's theory.

There are two ways to interpret "total capitalism". Firstly, as an abstraction and acknowledging that total capital contains numerous capitalists trading with each other. In this model, surplus value extracted by capitalist A can be exchanged with surplus value extracted by capitalist B. No inherent problem here, as long as both capitalist produce equal amounts of surplus value. (Marx actually used this assumption in his reproduction schemas, splitting his capitalists into producers of producer and consumer goods.)

The second interpretation is a literal one, i.e. there is just one capitalist. Obviously, such a capitalist cannot exchange with another capitalist in this scenario. But this doesn't prove any inherent lack of demand within capitalism as far as I can see. Why can't our hypothetical sing capitalist simply directly consume the surplus value it has extracted from its proletariat?

I think it's also worth pointing out that while you appear confused why Link would mention the basic process of c + v + s, it's actually part of the problematic here. This is because you work on the assumption that the total "demand" in the economy is c + v, while the total product is c + v + s. But what is actually the basis for this assumption? We've already seen the "s" component can be exchanged within the total capital or consumed by a hypothetical single capitalist. So there's really no problem at all.

Alf
maths

Maths - never been my strongpoint. But I don't think Marx's equation is supposed to describe the whole accumulation process. You've got your plant and all the machines, you've set aside your money for wages, you've got your workers slaving away for 8 hours a day (if they're lucky), but you've only paid them for four. So you've got four hours times however many days and workers worth of surplus value in the form of cars, machines that make other machines, or phones. But you've got to sell the stuff before it's any use to you whatever. That's why producing a surplus not for consumption (as in previous societies) but for sale becomes a problem. That's why our hypothetical total capitalist (an abstraction to be sure, and not really a single capitalist at all, but the mystical more than the sum of all his parts and yet always riven by competition) can't directly consume all his extra surplus value, because that would be some weird new form of despotism (which is something Bukharin actually theorised in reply to Luxemburg). The capitalists do regularly burn off unrealised surplus value by chucking food into the sea or blowing up harder stuff in wars, but this has not proved to be an actual solution either. I'm going to try to wait for others to chip in now. 

Demogorgon
On the point about despotism,

On the point about despotism, I think this is a tricky argument to use. Firstly, because it raises all sorts of implications about the development of state capitalism. Even in a situation of "total" state capitalism, as Engels pointed out, the capitalist relations ( "the workers remain wage-workers - proletarians") remain as does commodity production. Labour, in particular, is still a commodity and exchange occurs between capital and labour on that basis as well as labour purchasing consumer goods.

Moreover, in terms of real-life political positions, it raises the question about the "capitalist" nature of the USSR. We always rejected the idea that it represented a "new" social order of some kind but insisted it was capitalist. Suggesting that a single "total" capitalist wouldn't be capitalist has obvious implications for this position.

You're also mixing up our definitions. Firstly, you acknowledge the abstraction of total capitalism as riven by competition, i.e. it assumes more than one capitalist (and I already pointed out that accepting this interpretation dissolved the problem because these capitalists can exchange their surplus value with each other). But you then conflate this interpretation with a single total capitalist consuming all "his" surplus value. It's because your theoretical model of total capital isn't consistent that it leads you into contradictions and creating problems that don't exist.

On the "more than the sum of its parts" issue, that's fine, but we should take great care with fallacies of composition. I believe you're falling into this fallacy because you're assuming that total capital has the same quality that individual capitalists have - that is the need to sell their goods. I hope I've shown that there is no a priori reason why a total capitalist has to have this quality at all.

I think it would be useful for Link to come back and say whether he feels we've understood his question properly and whether our debate mirrors the internal one he seems to be having. We could be like the proverbial angel and devil sitting on his shoulders ... but which is which?

Link
luxembourg and accumulation

 

Thank you Alf for the detailed explanations.  It is much appreciated.  I feel like I’m trying to reassess some basic assumptions (like Luxembourg is always right)  and it is worth clarifying basics.   You raised 2 issues and I would just like to respond this time to your analysis of growth after  WW2  and i'll come back shortly on the question of the meaning of c+v+s shortly because that seems to require more detail

As you say ' from the point of view of capital as a whole capital can’t realise more value than what it has already put into the process in the form of constant capital or variable capital: our ‘total capitalist’ has sold to himself and there will always be an unsold fraction of surplus value at the end of this (total) process.'   Luxembourg argues that because of this  growth can only come about because of input into the system from pre-capitalist markets. 

I find it interesting that you are implying in your response then that there are countertendencies to the dependence on pre-capitalist markets but I don’t think this answered my point that Luxembourg’s theory does not appear to allow for countertendencies.  She expresses it as an absolute and I would say that this is the correct logic of her argument. 

Luxembourg is saying that growth can ONLY come from external demand ie pre-cap markets.  All the strategies that Capital tries to use to enable growth are produced by the values in c and v and  that part of s for capitalists own consumption; they are contained within capitalism itself.  They therefore can only represent a juggling of values between these elements and cannot enable growth and accumulation for total capital.   The logic of her argument is faultless and means that the 2 examples you give of  strategies enabling the period of reconstruction after WW2 ie war and credit cannot be reconciled with her theory.  War at this stage of decadence is not going to work because if you destroy constant capital, you still need to rebuild which means growth and capital can only do that if pre-capitalists markets exist.  Destroying constant capital does not recreate pre-capitalist markets if anything it reinforces capitalism and destroys pre-capitalist markets by enforcing a world market on them. (okay as you say there is still some capacity to grow using pre-cap markets but I would have thought it is too limited to explain the massive growth in the past war period?)  Credit also cannot contribute because its loans from one capitalist to another and therefore in terms of total capital not a growth but a redistribution again. 

I do think this is  Luxembourg’s logic and it appears to be faultless logic.  Its just not reality and you are correct to suggest these countertendencies.   

Where does that leave us or me anyway? Questioning the validity of  luxembourg’s theory.  

 

 

 

Link
using c+v+s to model accumulation

 

I am a little concerned by the idea of having Alf and Demogorgon sitting on my shoulders and I don’t believe in devils or angels anyway.  Funnily enough, I’ve just been to a physio (called  Zena believe it or not) to sort out one of them and I really don’t want her good work undone!

As I suggested I want to go back to c+v+s.  I started with it previously because it is at root of all explanations of the economy and is as you say fundamental to all Marxists.  I am a bit unsure about whether all agree on its meaning however but maybe that’s me.    Re-reading I do think I should have explained myself more on this one though.   c+v+s breaks down the component values in both individual capitalists products and total social product and certain things can be said based on this abstraction eg falling rate of profit and I think overproduction too (in terms of total capital  it affirms the growth of capital from a previous position over time). 

It worries me that this abstraction is being used to try to explain things that it cant explain ie demand, competition, financial growth etc.  So I do think both of you are right in different ways. Alf says this formula is not meant to explain the whole accumulation process, but I think Luxembourg does try to do so in her theory and demogordon is right to question the application and interpretation of this formula

I don’t object to the concepts of an individual capitalist or total capital although I don’t think it helps to think of a total capitalist because the ‘total’ capital has to represent the idea of a market and production process as well as the physicality of the capital itself.

With regard to the individual capitalist c+v+s could be said to apply to unrealised capital as well as realised. It still appears to work.  But for total capital is it not correct to say that c+v+s can only represent realised capital?. If c+v+s represents unrealised capital when applied to total capital, I cant see that it can model anything about value creation or accumulation.  It cannot include waste production, unsold commodities and unused savings etc because these are not actually capital and are not contributing to capital accumulation.

So if the formula just represents realised total capital surely it has to be assumed that there is a demand present at any given time; these products have already been through the market and been turned into a form to be employed as capital in the next cycle.  What happened in terms of growth previously and in the next period is not relevant surely.  This is a snapshot at the given point in time  (It also appears to apply to those among the FROP adherents who argue that production is primary issue and the market is separate and of  secondary importance)

Why is there therefore a question about demand not being present in c+v+s?   Surely Luxembourg’s  uses c+v+s wrong here?

So the formula for simple reproduction works but its just not reality as capitalism always grows.  Enlarged reproduction works because we can see it in practice;  Luxembourg says the formula works out mathematically, but it does not explain the actual demand growth process in capitalism even if it explains the value growth of capital.  Okay this seems reasonable again, but Luxembourg jumps to the conclusion that the formula should explain these things and that the only conclusion is that that demand for the part of the surplus value earmarked for recapitalization ie growth is missing and that this can only come from outside capitalism.  However at  the level of total capital surely the need/demand for c and v and the other part of s is actually in place; capital wants to make a profit and expand

Luxembourg furthermore says its not about money but where the demand comes from.  But demand is comprised of both money and need.   So perhaps it is just about where the money capital for investment comes from after all?

Alf
growth

Just one point to help clarify the terms we are using. I think it's important to distinguish 'growth' from accumulation, or at least to recognise that they don't always coincide. The accumulation of capital is a spiral of expanding value. But, above all in decadence, actual growth in production can mean a destruction of value. The clearest case is the war economy, such as in the period of the 30s and 40s. There you saw the absorption of unemployment, a huge growth in the extraction of raw materials, dizzying factory production figures, investment in new plant and machinery.... most of it financed by the state which was incurring gigantic losses, even if individal capitalist firms profited from state contracts. The (state) victors in the war could hope to get back some of this vast loss by milking the vanquished, but the overall balance sheet for capitalism is negative. I think the same can be said for debt-financed growth in general. There is 'physical' growth but we are seeing a vast operation of cheating on the law of value. Capitalism in this period tends towards its own negation not only in the physical sense but also in the sense of operating in conflict with its own laws. The bourgeoisie, through the state, tries to impose its will on economic life - this is one more sign that communism has become a material necessity - because allowing capitalism to function according to its 'classic' laws (even if the latter were never purely or universally operative, even in ascendancy) would greatly accelerate the tendency towards collapse.  

jk1921
I don't know what this adds

I don't know what this adds to the argument, but I think the point about pre-captialist markets being "exhausted," is not that pre-captialist markets cease to exist entirely, but that they become insufficient to realize the surplus value produced in the system. This necessitates all kinds of adaptions of state captialism to attempt to cheat the law of value as Alf pointed out above: mostly debt and financial manipulations, but also hiding unemployment, etc.

I don't think we should get too hung-up on an exegesis of Luxemburg's logic--its almost one hundred years old (sounds like a good time for a review article though!), but instead try to draw out its basic implications for undertstanding the current state of the captialist system. In that sense, I think Alf's argument that there were still sufficient pre-capitalist markets to, in part, account for the post-WWII growth is risky. I think this opens the door to a questioning the decadent nature of the captialist system since World War One--or at the very least it opens the door to moving the "trigger" for decadene from the economic realm of accumulation to the political confrontation between imperialist states. This raises the entire discussion of the "two logics" of the modern captialist world system: captial accumulation and state formation that I am not sure we have adequately addressed.

Demogorgon
In response to Alf, I see no

In response to Alf, I see no reason why "debt-financed" growth should be seen as cheating the law of value. Loan capital is still capital - it accumulates according to the same laws, with the only real difference being the distribution of the surplus product (e.g. interest). Of course, it all ends in tears - but crisis is the inevitable product of the accumulation process in any case so there's no reason to believe this reveals anything "special" about credit other than that it functions as a mediator in the accumulation cycle.

The war economy is a different question - although we should note that the ICC disagrees with Luxemburg on this! - and certainly represents a destruction of capital. But I'm of the opinion that this form of destruction is also a mediation of the crisis tendency (which also destroys capital), one specific to decadence.

In response to JK, the whole point of the debate about Luxemburg is to assess whether her model is useful for understanding the current system. If her method is flawed, it's of little use. Even if her underlying logic is sound, it can still be falsified by empirical reality. In fact, I think both have more or less been shown to be the case.

This doesn't mean Luxemburg's efforts were worthless. For example, as Rodolsky points out, it was Luxemburg, despite her misunderstandings, who first demonstrated that introducing factors such as technical changes would destabilise the reproduction schemas and introduce the crisis tendency despite the fantasies of the revisionists. Further, it also elucidated a firmly grounded basis for understanding how the deepening contradictions of the system pose the question of its ultimate end, even if Luxemburg herself was only able to pose the question rather than solve it.

jk1921
I think there are a lot of

I think there is a strong argument to be made that "empirical reality" has only validated Luxemburg's model. In a more or less "healthy" captialism, debt may be a "mediator" of the accumulation process, but when debt and financial manipulation are used as a subsitute for the consumption of pre-captialist social formations, then the system is prone to all kinds of problems and crises.

There is an argument to be made that this is exactly what the last twenty-five years have demonstrated. State capitalism has been using debt driven consumption to displace an inevitable realization crisis through time, but the recent financial crisis with all the talk of moral hazard, etc. has posed the question of the continued viability of this model. Debt is being more and more revealed as a mirage: banks are bailed out, but this only displaces the crisis to states. The entire system continues to rely on the United States as the consumer of last resort; yet it is completely broke--kept operational only by the willingness of bond holders to continue to believe in the mirage that the American engine will never burn-out (just like they used to believe home prices only go up). It almost seems like the perfect Luxemburgian scenario, except that nobody wants to be one to pull the plug on the U.S. and admit the party is over. Still, things that can't go on forever, don't.

The real question today, I think is the issue of time scale. How much longer can they keep this up? I heard on the news yesterday, that the recent German court decision allowing Germany to provide funds for the Euro stabilization measures has "solved" the Euro crisis for now. Still, when asked how long these measures will put the question of the Euro on the back burner, the economic expert under interview would only commit to two years. Similarly, in the U.S. the Democrats are campaigning that their Medicare plan will extend the life of the program by a full-on 8 years! 8 entire years is the most they can promise! Well, for some I guess that is better than the Republicans who would destroy it, but 8 years is not a very long period of time by any measure.

Demogorgon
"I think there is a strong

"I think there is a strong argument to be made that "empirical reality" has only validated Luxemburg's model. In a more or less "healthy" captialism, debt may be a "mediator" of the accumulation process, but when debt and financial manipulation are used as a subsitute for the consumption of pre-captialist social formations, then the system is prone to all kinds of problems and crises."

Strange, I think empirical reality conclusively repudiates Luxemburg's model. If we accept decadence as beginning roughly around the beginning of the 19th century, then whatever model we use has to explain not only how capitalism has survived for over 100 years (not just 25). You imply that it's already been settled that "debt and financial manipulation" can be used "as a subsitute for the consumption of pre-captialist social formations" within Luxemburg's framework. In fact, this is precisely the question that is under discussion! As Link has already pointed out quite adequately, the mechanisms given by Alf (reconstruction, debt) cannot be reconciled with Luxemburg's theory. So far, no rebuttal has been offered on this point.

So how did capitalism keep going if Luxemburg was right? Alf has also suggested vestiges of pre-capitalist markets existed - essentially enough to keep the system limping along but not without generating problems. But you yourself have already voiced disquiet with this notion - it poses the question as to whether capitalism has actually entered decadence at all.

I'm assuming I don't need to demonstrate the empirical lack of these extra-capitalist markets in today's world and that we all think capitalism is in its decadent phase. Which brings us back to our central problem - if the only mechanism of growth allowed in Luxemburg's theory is extra-capitalist markets, then how has the system kept going?

As far I can see, Luxemburg's theoretical framework offers no solution to this connundrum. In the absence of pre-capitalist markets, it predicts a halt to accumulation. But accumulation has continued. As far as I can see, this leaves us with only two possible conclusions: either the extra-capitalist markets still exist and capitalism has yet to truly enter its decadent period or Luxemburg's theory is fatally flawed.

The existence of crisis over the past 25 years (and the ICC claims the present crisis has actually been going on for over 40 years incidentally) doesn't provide any solace either. To my knowledge, no-one is claiming that capitalism has ceased accumulating entirely in that time-frame so the same problems remain.

jk1921
I think this is the reason

I think this is the reason why I cautioned against too close of a focus on Luxemburg's text. She obviously did not foresee the development of debt and financialization as a substitute for the consumption of pre-captialist social formations. I don't think the argument is that once pre-capitalist social formations can no longer provide sufficient markets to realize surplus value that accumulation comes to a full stop, its that captialism becomes decadent. It transforms into state captialism and develops various ways of "cheating the law of value." Primary among these is the flight into debt--which provides an artificial market through which consumption takes places--but it is in a sense "fictional consumption." I think the last twenty-five years shows this to be precisely the case--consumers' wages stagnated or even declined, yet the extension of consumer debt allowed consumption to continue (for a time), until it eventually blew up. In a sense, credit cards and fictitious home values acted like a pre-captialist market, consumption power coming from outside the system--because it was essentially made-up. But cheaters eventually get caught and this is what happened in the aftermath of 2008. Even many bourgeois economists, like Robert Reich and Thomas Krugman, regularly acknowledge that the problem with the economy today is a lack of consumption power. The question is where does it come from? Everyone is still waiting for the much vaunted Chinese internal market to take over for the debt ridden American consumer, but its unclear if that will ever happen.

Demogorgon
"I think this is the reason

"I think this is the reason why I cautioned against too close of a focus on Luxemburg's text."

We're not. We're also focusing on the modifications made to her theory by the majority in the ICC. But those modifications start from the false premises derived from her theory and are also inconsistent with that theory. To boil it down, to be logically consistent accepting those premises means rejecting the modifications. Conversely, accepting those modifications means rejecting those premises.

"I don't think the argument is that once pre-capitalist social formations can no longer provide sufficient markets to realize surplus value that accumulation comes to a full stop, its that captialism becomes decadent. It transforms into state captialism and develops various ways of "cheating the law of value."

It's true that supporters of Luxemburg accept accumulation continues but this another of the contradictions that their theory forces them into. The problem is that if you actually accept her theory, accumulation cannot continue in the absence of extra-capitalist markets. So that argument is inconsistent with Luxemburg's theory. That's why few defenders of Luxemburg actually make the argument there are no extra-capitalist markets left at all, just that they're "insufficient". But what exactly are they "insufficient" for? If they're insufficient for accumulation, then how does accumulation continue? And thus we return to square one.

Again you mention state capitalism and "cheating the law of value". But you haven't demonstrated, against Link's arguments, that such "cheating" can have any effect on the problems raised by Luxemburg.

"Primary among these is the flight into debt--which provides an artificial market through which consumption takes places--but it is in a sense "fictional consumption." I think the last twenty-five years shows this to be precisely the case--consumers' wages stagnated or even declined, yet the extension of consumer debt allowed consumption to continue (for a time), until it eventually blew up."

From 1989 to 2004, the world economy grew, on average and according to the PPM measure of GDP, at an average rate of 3.3% per year. If you prefer the market-exhange-rate measure used by the World Bank, it averaged at 2.7%. Now, an economy growing at 3% a year will double in size in 24 years. That kind of growth is not simply built on "fictional consumption".

If this "essentially made up" consumption has now come to an end and is "blowing up", you're talking about a global contraction of 50%. And yet, capitalism has somehow managed to keep the system limping along with nothing like that occuring. How?

Why could capitalism avoid complete catastrophe in 2001 and the dot.com crash; 2000 and the collapse of Argentina; the crisis in Russia in 1998; the Asian Crisis in 1997; the Tequila Crisis in 1994; the global recession of the early 90s? The growth mentioned above occured in spite of all these crises.

We know they've pumped in loads of credit - but the entire reason for the crisis was that the debt already accumulated could not be repaid. So why does more credit help? And, if it does help, does that mean the bourgeoisie can always get out of the crisis? If not, why not? If there's a limit beyond which more credit won't help, what is it that constitutes that limit?

The problems get even worse when you realise that we're not talking just about the last 25 years but the whole history of decadence i.e. around a hundred years! Incidentally, at average 3% annual growth an economy would be 20 times larger in a hundred years ...

"Even many bourgeois economists, like Robert Reich and Thomas Krugman, regularly acknowledge that the problem with the economy today is a lack of consumption power."

Of course they do. Bourgeois economics sees consumption as the driver of the economy. Abandoning the labour theory of value, they place central importance on the market. So it's not a case of "even" bourgeois economists say this, it's the bedrock of their flawed economics.

slothjabber
debt and growth

I've been puzzling over some of these same questions, as Link and I are also discussing these questions off the forum; but the issue of debt here seems a crucial one.

 

Current debt, I was reading the other day, stands at $238 trillion. But the global economy is only worth about $58 trillion. In the UK, $9 trillion of debt is 400% of the GDP. So 4 or 5 times as much money is owed, as actually exists. UK banks were permitted to loan out, I believe, 8 times more money than they held in assets. How can this not be regarded as 'fictitious' growth?

 

Accumulation is continuing on the basis that non-existant money is used to finance further loans. When what is being accumulated is not 'wealth' as such but merely the empty promise that someday, paper or blips will be worth something as long as no-one blinks, how can this relate to real economic 'development'?

 

25 years of 3% growth would increase growth by 100%... how many years would it take to increase growth by 450%? I reckon about 40.The cumulative effect of 3% artificial growth over 40 years (according to my rough calculations, start with 100 and multiply it by 1.03, 40 times) would produce a world economy that 'looked' 4.5 times bigger than it really was. As, currently, levels of debt seem to be in this order of magnitude, it suggests that this might be what has really happened. Fictional growth has been used as a guarantee of money that doesn't really exist, which is 'invested' and then in turn fuels more growth - which ultimately turns out to be fictional, even when things actually happen (like factories are built, and then things are made in them).

 

Credit, of orders of magnitude larger than the real economy, is not real growth. If there were a mass calling-in of debts tomorrow, every organisation on the planet pretty much would be bankrupt because the money to pay those debts just doesn't exist. Which implies that the 'growth' that produced those debts doesn't exist either, doesn't it? I think this may be the very 'fictional consumption' that JK is referring to.

 

 

jk1921
Good questions

Demogorgon wrote:

"I think this is the reason why I cautioned against too close of a focus on Luxemburg's text."

We're not. We're also focusing on the modifications made to her theory by the majority in the ICC. But those modifications start from the false premises derived from her theory and are also inconsistent with that theory. To boil it down, to be logically consistent accepting those premises means rejecting the modifications. Conversely, accepting those modifications means rejecting those premises.

"I don't think the argument is that once pre-capitalist social formations can no longer provide sufficient markets to realize surplus value that accumulation comes to a full stop, its that captialism becomes decadent. It transforms into state captialism and develops various ways of "cheating the law of value."

It's true that supporters of Luxemburg accept accumulation continues but this another of the contradictions that their theory forces them into. The problem is that if you actually accept her theory, accumulation cannot continue in the absence of extra-capitalist markets. So that argument is inconsistent with Luxemburg's theory. That's why few defenders of Luxemburg actually make the argument there are no extra-capitalist markets left at all, just that they're "insufficient". But what exactly are they "insufficient" for? If they're insufficient for accumulation, then how does accumulation continue? And thus we return to square one.

Again you mention state capitalism and "cheating the law of value". But you haven't demonstrated, against Link's arguments, that such "cheating" can have any effect on the problems raised by Luxemburg.

"Primary among these is the flight into debt--which provides an artificial market through which consumption takes places--but it is in a sense "fictional consumption." I think the last twenty-five years shows this to be precisely the case--consumers' wages stagnated or even declined, yet the extension of consumer debt allowed consumption to continue (for a time), until it eventually blew up."

From 1989 to 2004, the world economy grew, on average and according to the PPM measure of GDP, at an average rate of 3.3% per year. If you prefer the market-exhange-rate measure used by the World Bank, it averaged at 2.7%. Now, an economy growing at 3% a year will double in size in 24 years. That kind of growth is not simply built on "fictional consumption".

If this "essentially made up" consumption has now come to an end and is "blowing up", you're talking about a global contraction of 50%. And yet, capitalism has somehow managed to keep the system limping along with nothing like that occuring. How?

Why could capitalism avoid complete catastrophe in 2001 and the dot.com crash; 2000 and the collapse of Argentina; the crisis in Russia in 1998; the Asian Crisis in 1997; the Tequila Crisis in 1994; the global recession of the early 90s? The growth mentioned above occured in spite of all these crises.

We know they've pumped in loads of credit - but the entire reason for the crisis was that the debt already accumulated could not be repaid. So why does more credit help? And, if it does help, does that mean the bourgeoisie can always get out of the crisis? If not, why not? If there's a limit beyond which more credit won't help, what is it that constitutes that limit?

The problems get even worse when you realise that we're not talking just about the last 25 years but the whole history of decadence i.e. around a hundred years! Incidentally, at average 3% annual growth an economy would be 20 times larger in a hundred years ...

"Even many bourgeois economists, like Robert Reich and Thomas Krugman, regularly acknowledge that the problem with the economy today is a lack of consumption power."

Of course they do. Bourgeois economics sees consumption as the driver of the economy. Abandoning the labour theory of value, they place central importance on the market. So it's not a case of "even" bourgeois economists say this, it's the bedrock of their flawed economics.

 

You raise a lot of good questions Demo and I agree with you about the recourse in the ICC to the "there are still extra-captialist markets" device. However, I don't think any of the difficulties you raise necessitate an abandonement of Luxemburg's model. They can all be "answered" within that paradigm. I don't have the energy to go into it here, but it would certainly be good to try to continue this debate in a more sustained fashioned. Of course, this debate has already been raging for almost one hundred years. It seems like one of those interminable debates--a clash of absolutes, that we wil perhaps still be discussing well after the revolution. 

To do a bit of intellectual history: I think its clear that Luxemburg's model is very attractive to those who posit that captialism is decadent, historically bankrupt, etc., because it provides a rather clear objective explanation for how this can be. It has often been said that those who defend the Grossman/Mattick thesis of TRPF cannot provide a convincing objective mechanism for how capitalism becomes decadent. This of course is no reason to accept Luxemburg's model uncritically, but it is perhaps an explanation for why so many in the ICC defend it, even if they are starting to modify it in ways that might ultimately call decadence itself into question.

Demogorgon
Ah, slothjabber, so it's

Ah, slothjabber, so it's really your fault I've been breaking my brain over economics all weekend. You owe me a drink!

You're correct that debt is a crucial issue. It represents the fault-line over which the world economy is delicately poised; it represents the potential for a massive economic crisis; and, ultimately, is an expression of the impasse of the capitalist mode of production. I want to make it clear that I am in no way dismissing its importance.

Nonetheless, I don't see it as evidence of the correctness of the theories of Rosa Luxemburg. Why? Firstly, because Marx adequately explained the formation of ficticious capital without recourse to external markets - it's a mechanism that can be explained within the confines of the capitalist system. Secondly, and most importantly, no-one has yet explained how debt, a transfer of capital internal to the capitalist system (i.e. from one capitalist to another), can create an artificial market that substitutes in any way shape of form either long-term or temporary for the external demand her theory says is essential to accumulation.

There are also some secondary problems with your post:

  • I think you're confusing GDP (which is annual output) with the total amount of capital assets in the economy. The total assets of the UK in 2009 were estimated at around £7 trillion not £1.5 trillion (roughly) of annual GDP. I suspect your $58 trillion figure for the global economy is also GDP, not a measure of total assets. So we're not necessarily talking about debt "of orders of magnitude larger than the real economy".
  • Although factually true, your scenario of a "mass calling-in of debts tomorrow" could never occur. It would violate the most basic premise of the credit system, i.e. that debts are repaid over time. Such an action would destroy even a healthy capitalist system. So it proves nothing in itself.
  • You mention that "UK banks were permitted to loan out, I believe, 8 times more money than they held in assets". This may have been true of some banks but not of the banking system as a whole. The reason banks were loaning out more money than they had assets was because they were themselves borrowing and then re-lending money on an epic scale! Rather unwise as it turned out, but that's not the same as simply magicking up money from thin air, as you seem to be suggesting. This doesn't mean there isn't a ficticious aspect to the accumulation of debt but that can be explained via Marx's aforementioned concept of ficticious capital.

But even if you were right on all these points, it doesn't help us to get over the internal contradictions in modern Luxemburgist economics.

Demogorgon
"However, I don't think any

"However, I don't think any of the difficulties you raise necessitate an abandonement of Luxemburg's model. They can all be "answered" within that paradigm."

I wish someone would tell me what they are!

"Of course, this debate has already been raging for almost one hundred years. It seems like one of those interminable debates--a clash of absolutes, that we wil perhaps still be discussing well after the revolution."

I'm not sure it's actually that much of a debate. The Luxemburgist position is very much in a minority even within the internationalist camp. Only the ICC officially defend it and - as you can see - not all of us agree with it.

In the wider study of "Marxist" economics, it's more or less totally discredited. That's not to say "underconsumptionism" itself doesn't exist now, just as it did before Luxemburg (e.g. Kautsky's idea of "secular overproduction"), but very few base themselves on Luxemburg's specific arguments that I know of.

"To do a bit of intellectual history: I think its clear that Luxemburg's model is very attractive to those who posit that captialism is decadent, historically bankrupt, etc., because it provides a rather clear objective explanation for how this can be. It has often been said that those who defend the Grossman/Mattick thesis of TRPF cannot provide a convincing objective mechanism for how capitalism becomes decadent. This of course is no reason to accept Luxemburg's model uncritically, but it is perhaps an explanation for why so many in the ICC defend it, even if they are starting to modify it in ways that might ultimately call decadence itself into question."

I think this is certainly part of the equation. And yet Grossman, for example, didn't see himself as attacking Luxemburg, for all his acerbic critique of her specific argument. On the contrary, he thought "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 ofCapital and sought to reinforce it with the proof that the continued development of capitalism encounters absolute economic limits."

He thought Luxemburg had failed and saw himself a completing and correcting her project. But he also used Luxemburg as a vector to attack Varga, Stalin's economic advisor at the time, who's theory was supposedly Luxemburgist in all but name.

Needless to say, I don't agree with you about the FROP not explaining decadence but you don't elaborate your objections so it's difficult to know what to say. While far from agreeing with the ICT on everything, in the past they've presented a coherent theory of decadence on the basis of Grossman and Mattick's theory.

jk1921
Academic Marxism

Demogorgon wrote:

Needless to say, I don't agree with you about the FROP not explaining decadence but you don't elaborate your objections so it's difficult to know what to say. While far from agreeing with the ICT on everything, in the past they've presented a coherent theory of decadence on the basis of Grossman and Mattick's theory.

Can you elaborate on the basics of that position? I am not saying this is my position, but I have heard it argued many times. Its true that Luxemburg's theory is "discredited" in academic Marxism, but then again so is "decadence."

Link
Yes i blame slothjabber too for being too interesting

 

 

"Since the accumulation of capital becomes impossible in all points  without non-capitalist surroundings, we cannot  gain a true picture of it by assuming the exclusive and absolute domination of the capitalist mode of production"  Luxembourg Accumulation of Capital, chap 26

Luxembourg emphasises in chapter 7 that capitalist and workers cannot realise any more than the surplus value allocated to them and therefore rejects as sources of demand which can realise surplus value landowners, state officials, liberal professions, prostitutes royalty and soldiers. She correctly rejects them as they can only be drains on the system not sources of accumulation. Foreign trade also in as much as all to total capital is creates nothing just redistributes. So as c+v represents the wealth of capitalism who buys the surplus value that is created, she asks.   What she does do however in chapter 32 is suggest that arms production (not miliarism per se) is a source of accumulation, in fact a pre-eminent one because the state can determine its level.  Perhaps this is also the cheating or disguising of themselves as pre-cap markets that people are referring to??  I do think Luxembourg is actually struggling with the role of state capitalism here and whilst rejecting the state as anything other than a drain on capitalism is trying to get to grips with state owned manufacturing.

Nevertheless unless you wish to follow up this argument that military production by the state does represent capital accumulation, you cannot distort Luxembourg’s argument that pre-cap markets are the only source of accumulation because she creates an entirely logical development from premise to conclusion as I suggested before.  It is disappointing to read that mechanisms by capitalism for managing its economy are  ‘behaving like’ or ‘masquerading as’  pre-cap markets or ‘cheating’??  I would suggest to jk surely it is essential to return to the theory and test it against reality to judge its validity.  We cant just guess or change what was said by Luxembourg (or Marx or Lenin or whoever) to fit reality even if we have to interpret and judge.

Where is she right and where is she wrong?

Again, because nobody has really responded to that particular point, I want to say that I find the interpretation and use to which  she puts c+v+s to be rather dubious in relation to the identification of a lack of demand for the recapitalisation of constant capital.   If she is right then the ONLY source of accumulation is pre-cap markets and we should not be making up alternatives that could replace pre-cap markets.  If she is wrong then say so and find a better theoretical framework for  the use of credit and other policies by capitalism. 

I do think she is correct in recognising the concept of overproduction as a valid interpretation of c+v+s: an argument that could therefore have been better developed more strongly. It seems to me that she and many others at the time were understandably struggling with how to interpret the change of era and hence the decadence of capitalism. Contrarily enough then Luxembourg’s arguments on the importance of pre-cap markets would seem more appropriate as a counter tendency to overproduction and the falling rate of profit (which she does links as counterparts to each other) and hence as an important feature of ascendancy and its turn into decadence rather than an explanation of the collapse of capitalism.

 It is interesting that the discussion here has brought in the issue of decadence. Partly this is because of the issue just raised of the level of pre-cap markets that exist today and in decadence generally.  Has that been dealt with in more depth in an article by ICC previously?? It would be good to see this to put luxembourg's argument into a context

Mainly though, because Marx and  then Luxembourg, Bukharin, Grossman Mattick et al were all writing as capitalism concluded its ascendant period.   Only then was the economics of the system being revealed.  The impact of imperialism and WW1 saw a widespread discussion of theories of the collapse of capitalism (including non-collapse if you will).  They were all struggling with the concept and made projections of basis of their knowledge to that time.  Perhaps it is time for someone to complete a balance sheet here as demogordon suggests because we do have much more experience of capitalism. 

It seems to me that a lot of this discussion about decadence is still about whether there will be an absolute collapse or not.   A hundred years ago this was because revolutionaries were arguing with social democracy that reformism was not possible and there was therefore a need to focus on the argument that capitalism could not be made to accumulate indefinitely to the benefit of all.  This argument posed the possibility of revolution.  We have now had a century of decadence (2014 should give some interesting opportunities for anniversaries!!)  and the need is different, although I note  that there is still a focus on this issue of collapse of not.  ICC and luxembourgism tends to emphasise collapse (decomposition) and FROPism (?)  does recognise decadence but tends to emphasise the continuity of capitalism through the periods.   Maybe this is still a valid or rather unsettled discussion.

What is most important is the concept of decadence itself. It’s a product of the material conception of history, this view of modes of production and their progression

Capitalist is different in that it has enabled the analysis of the economics of modes of production but whilst internal economics  of each system is the driving force of that system, it is not the direct driving force of this historical progression.  Decadence is not necessarily dependant on it but is most certainly affected by it.

I remain unconvinced that economics of capitalism (whether Luxembourgism or FROP)  needs to define the decadence or the collapse of capitalism as decadence is primarily a social relationship – the contradiction of the productive forces to the social relations of production.  In capitalism’s case, the rise of imperialism seems to have defined for everybody a change of epoch rather than %ages of precap markets or @ages of profit rates.   The closer the social situation gets to a revolutionary situation, the less significant the discussion of the economics becomes, other issues will be much more important. Only in retrospect will we really understand what’s been happening.  But it also seems to me (I guess?) that it is relevant to the building of a communist society  because there will be a need to be able to make decisions about accounting procedures, production planning, supply and demand etc that create a total escape from the control by economic systems.

Demogorgon
Not directly related to

Not directly related to recent posts, but something which I vaguely remember from another debate in the dim and distant past ...

If we're using the c + v + s model to demonstrate that "accumulation" can't work we're also confronted with the problem that it makes it impossible even for simple reproduction and exploitation to work.

If demand is limited by the value of c + v, and we reject the idea that total capital can realise the s component "internally" by exchange or by direct consumption, the question becomes how does capitalism even manage to realise "s" that's destined for the consumption of capitalists.

Doesn't any exploitation (regardless of whether it involves accumulation or not) become impossible in that case without the existence of external markets?

I'll try and consider some of the other issues as time permits.

jk1921
Demo, it seems to me that you

Demo, it seems to me that you do not appreciate the qualitative change in the nature of credit and debt from ascendance to decadence. Yes, in ascendance debt emerges as a normal mechanism of captialist accumulation. But in decadence, when precapitalist markets have largely dried up, debt takes on a different role. From a facilitator of accumulation, it begins to act like a pre-captialist market, a source of demand that is largely outside the system.

It is tempting to resort to a microeconomic exmaple to demonstrate: An overburdended family uses their credit cards to supplement their insufficient income. However, as its debt piles up, it resorts to using more credit cards to make the payments on the debt it already has. It is possible to carry on this illusion for a while--during which time the family still looks like a healthy consumer on the surface, despite its looming bankruptcy. In a sense, said family has a totally fictious income even if it takes a while for the market to "discover" that fact. If one family can carry on this illusion for months or perhaps even years--its not imposssible to imagine that the entire captialist system could carry it on for decades or even longer. Still, in the end a crisis looms.

I don't get your point about simple reproduction. Capitalism always existed in the context of pre-captialist markets, until the end of ascendance.

I doubt this will convince you and I imagine these points have been made to you before in previous discussions. It is indeed a difficult discussion, especially when we don't agree with what "empirical reality" shows.

Demogorgon
"Demo, it seems to me that

"Demo, it seems to me that you do not appreciate the qualitative change in the nature of credit and debt from ascendance to decadence. Yes, in ascendance debt emerges as a normal mechanism of captialist accumulation. But in decadence, when precapitalist markets have largely dried up, debt takes on a different role. From a facilitator of accumulation, it begins to act like a pre-captialist market, a source of demand that is largely outside the system"

JK, with the greatest of respect, you are simply repeating assertions. At no point have you attempted to justify the idea that debt can take on a different role or that it can act like a pre-capitalist market. That's the very point that we're disputing. As I've said repeated in one form or another: debt exists within the system - it cannot act like a pre-capitalist market because it's internal to capitalism. And if it could take on that role then it means Luxemburg was wrong about demand within capitalism being insufficient. The theory is caught in a contradiction that it cannot escape.

Your microeconomic example strikes me as being somewhat bizarre since Luxemburg justified (albeit mistakenly) her arguments from the point of view of totality of capitalism. Your family with the overextended credit card is borrowing the money from another entity - the credit card company. If this family is meant to represent the total capital, who exactly does this total capital borrow the money from in the real world? If it doesn't represent total capital, then all it does it demonstrate that debtors can be overextended. That point was never in dispute.

"I don't get your point about simple reproduction. Capitalism always existed in the context of pre-captialist markets, until the end of ascendance."

The point about simple reproduction wasn't directly related to the recent discussion, but more back to Alf's implication that demand in the economy is limited to capital's initial outlay in plant and wages. If demand really is limited in this way then there is no way the "s" component can be realised according to that model - and this remains true regardless of whether the "s" component is treated as revenue or funds for accumulation.

The "problem" Luxemburg is usually regarded as identifying is the problem of accumulation i.e. extended reproduction. For her, simple reproduction wasn't a problem. My point being is that if my interpretation of Alf's interpretation accurately reflects Luxemburg then even simple reproduction cannot take place without external markets. In other words, Luxemburg was wrong about the implications of her own theory.

The question is whether pre-capitalist markets are necessary for accumulation (and simple reproduction), not whether they exist. Until we establish the former, we cannot understand the significance of the latter.

Demogorgon
"Mainly though, because Marx

"Mainly though, because Marx and  then Luxembourg, Bukharin, Grossman Mattick et al were all writing as capitalism concluded its ascendant period."

This may be true for Marx and Luxemburg, but I think it's problematic regarding Bukharin and Grossman (who published his most famous work on the subject just months before the Wall Street Crash). As for Mattick, his most signicant contributions were made in the 60s and 70s (Marx & Keynes, Economic Crisis & Crisis Theory) and gave us the most significant analysis of state capitalism prior to the emergence of the ICC. The CWO (later part of the IBRP, now ICT) based its economic analysis on Mattick's work, while Battaglia Communista developed a very similar analysis albeit (I believe) independently of Mattick. Comrades from the ICT can elaborate this better than I.

"Again, because nobody has really responded to that particular point, I want to say that I find the interpretation and use to which  she puts c+v+s to be rather dubious in relation to the identification of a lack of demand for the recapitalisation of constant capital."

Okay, but later you say "I do think she is correct in recognising the concept of overproduction as a valid interpretation of c+v+s". Overproduction and lack of demand are simply two sides of the same coin, as far as I can see. Is there something different about them? Why is C + V + S correct for explaining overproduction but not a lack of demand? I don't get it.

Are you saying something specific about constant capital? By recapitalisation do you mean simple replacement or actual accumulation? And why the accumulation of constant capital rather than variable capital?

I'm confused but I might be confusing myself wink

jk1921
Demo, you say I am just

Demo, you say I am just repeating assertions and haven't explained how credit can perform the function of pre-captialist social formations. What type of explanation are you looking for? I have said more than once that credit and debt allow the temporal displacement of the realization problem through time. That's the simple answer.

Credit and debt arise from within the system but  they act as a pre-captialsit social formation because in decadence they have a tendency to become completely fictional. My hypothetical family doesn't so much borrow money as it is extended credit on a completely hollow promise to pay, it is invented, made up. They are essentially giving things away for free to this family. This is precisely how the entire captialist system tends to function in decadence. The realization problem is deferred through time by credit and debt--it is not overcome.

I don't know how to explain it any better than that. It seems that we are now debating the metaphysics of internal/external rather than the veracity of Luxemburg's system. 

Link
Response to Demogorgon - Mainly though....

 

Luxembourg uses a definition of overproduction that is simply based on the idea  that c+v+s breaks down the value of total capital at the end of one production cycle.  By the end of the next cycle, surplus value has been created and total capital is now larger. She sees overproduction therefore as this growth over a period of time; the level of value in total capital at the end of one cycle is larger than the size of the level of total capital at the start of the cycle ie the demand available.  This seems to be a reasonable use the abstration that is c+v+s in the same  way as the FROP analsysis.  Luxembourg sees overproduction as the counterpart of the FROP.

You said earlier in this thread that if it is possible to realise the demand for that element of s relating to capitalist consumption why should it not be be possible to realize the recapitalization** element of s.   I would agree with this and extend it because in terms of total capital I cannot either see how demand for c and v is realized either.  In relation to total capital Luxembourg somehow differentiates between the types of demand but if she is considering the practicalities of creating a specific demand then it ought to apply to the other elements of the formula.   My problem with how c+v+s is being used by Luxembourg here is that I cannot see that it can be made to explain the actual processes of demand in the market of the real world.  It is an abstraction which enables a model of  value creation and provides an analysis of the value created for individual capitalists product or total capital. 

Re your question and constant and variable capital.   Variable capital is consumed so whilst it must grow with population growth, it cannot be accumulated whereas constant capital is accumulated to be reused in production process.  This makes sense to me but then I am confused as to what is means for the DeptI and Dept II models that everyone uses.  Perhaps you could explain that one for me as it seems to require more reading.

** recapitalization is enlarged reproduction that enables the replacement of worn out constant capital.  Simple reproduction just includes repairs to constant capital and its depreciation costs

Link
fake pre-cap markets

If I could comment of this particular point by jk please, could i had not expected what is being said here.  I presume everybody would understand and agree with you about credit and the way it mortgages future production to enable current demand.  I was expecting this to be explained as type of  countertendency to the lack of pre-cap markets which is where some of my earlier analysis of luxembourg's ideas was directed.  What i dont understand is how something that is a function of the capitalist markets ie banking and loans, can be said to operate like pre-cap markets.  Yes it may not be genuine realisation of capital but it is clearly a process of the capitalist economy. Further both credit facilities or pre-cap markets exist in the real world, they are not fictional, they perform a real role.  I cant see how precap markets can be described as having a fictional role in the market 

Are there any other strategies that mimic pre-cap markets in this way?

It occurs to me that if credit is a pre-cap market that there are in fact different types of credit.  For the family  you mention the credit is clearly a loan within capitalism and juggles the allocation of  sv.  For the state, credit can often have more to do with the printing of money than simply borrowing from another capitalist. Money supply or in todays language "quantative easing"(!!) would seem a fertile extension of your argument as money is created out of nothing, its fictional if you like.  It is just a process of printing money at heart, so if this also mimics the role of precap markets, is it not inexhaustable?

 

Demogorgon
JK, I'm going to make a more

JK, I'm going to make a more detailed attempt to explain my position on credit. Hopefully, this will show you in more detail the thinking behind my objections to Luxemburgism and may be more productive than a point-by-point exchange which, at the moment, seems to be foundering on mutual misunderstanding.

The reason why credit cannot create demand ex nihilo is very simple. Let's assume we have a mass of capital of £1250.

It doesn't really matter how we divide this up within the economy, but in order for credit to be generated, we have to, so:

Finance Capitalist = £500
Industrial Capitalist = £500
Workers = £250

The finance capitalist can lend half his money to the industrial capitalist and half to the workers.

Finance Capitalist = £0
Industrial Capitalist = £750
Workers = £500

Total = £1250!

At no point has the total aggregate capital yet expanded and, therefore, nor has the total aggregate demand expanded. No matter how the capital circulates, it does not expand by circulation alone. This is the fetishism of bourgeois economics which Marx was at pains to demolish.

Now - and this is the fundamental point - Luxemburg's theory states that the total demand of £1250 is already inadequate. In her vision, there must be an external source of demand. No matter how credit or debt (and both these terms are ultimately terms for capital) circulate can this lack of external demand be overcome within the system. The only way aggregate demand can be expanded in a closed capitalist system (i.e. one without recourse to external markets) is through the expansion of capital, i.e. accumulation.

Fictitious capital complicates the picture, however. My understanding of fictitious capital is something along these lines. A finance capitalist loans out £1000 for 10 years with an annual interest rate of 1%. He now has a claim on capital worth £1104.62. He can sell that immediately to another capitalist for £1104.62. He now has £1104.62 that he can loan out again and repeat the process. On the face of it this seems to expand capital "out-of-nothing" and can, to a certain degree, increase demand. Although it's ultimately dependent on another capitalist being able to afford to buy the loan, so I think it's questionable as to whether it does actually do this but I need to think about this more.

Anyway, even assuming that it does do this, the irony is that this is exactly how capital is able to square the circle regarding the "problem" of effective demand and the "realisation problem" (see Harvey, The Limits of Capital). Mattick also gives a similar explanation of how capitalism resolves the difficulty in Chapter 3 of Economic Crisis and Crisis Theory. And, as long as capital can extract enough surplus value to valorise all this capital, the process will continue. Nonetheless, there are limits to this process - if the mass of fictitious capital grows so large that it's impossible for the system to generate enough surplus value to support it. The credit-system thus potentially allows capitalism to over-reach itself and generates a tendency to crisis, which then destroys the unsupportable fictitious capital.

This has nothing to do with the "fictitious growth" engendered from "artificial" markets. In that scenario all the growth not directly derived from external markets is fictitious and on course for destruction when a crisis hits. Nor does the "artificial markets" theory offer any real explanation for why these markets can keep the economy going at one moment and not the next.

In the scenario I've just given, "real" growth also occurs for as long as surplus value meets the valorisation requirements of capital. We're not confronted with any ridiculous requirement for contractions in the order of 50%, even if very serious contractions can still occur depending on how massively the credit bubble is inflated. It also provides a conceptual mechanism (the extraction of surplus value) that show why the process has limits. It also shows why, with each successive cycle, that the growing mass of real capital creates the potential for more fictitious capital, thus posing the question of ever-more serious crises.

Naturally, what I've presented here is not a complete theory. I've made no attempt for example to integrate the classical FROP crisis theory, relating to organic composition, etc. It also remains extremely abstract - although that's no different to any of the other presentations so far in this debate.

But what it does do is demonstrate that external markets are not a necessary condition for the expansion of capital. Therefore, Luxemburg is wrong.

d-man
role of gold

Here are 3 articles on Luxemburg, and here is one on limits of credit. Just as a background to some of the issues being raised on the thread (I agree with Demogorgon).

I think for the first time in 2 decades the gold reserves of central banks have risen. China is now the biggest miner (and importer) of gold. Here is an interesting news-piece, but you can see everywhere reports of course. Just some factoids I'd throw in, carry on cool

 

 

jk1921
Unfortunately Demo, you

Unfortunately Demo, you demand a level of "explanation" that I am not able to provide without going back and rereading this literature, something I have no ability to do at the moment. You do raise good points and you should get better answers, but I doubt I can do any better than I have, which is clearly inadequate. This is very embarrasing for me as I once spend much time on this issue. Clearly you have a strong and fresh familiarity with the details of this debate, so it is difficult to respond on your level.

Demogorgon
Ok JK1921, I do appreciate

Ok JK1921, I do appreciate your efforts so far and perhaps we can take this up at another time when you feel more prepared. I wish my grasp of the debate was as strong as you seem to think; I would get fewer migraines when thinking about it.

jk1921
Math

Demogorgon wrote:

Ok JK1921, I do appreciate your efforts so far and perhaps we can take this up at another time when you feel more prepared. I wish my grasp of the debate was as strong as you seem to think; I would get fewer migraines when thinking about it.

 

OK, I have an instinctual fear of numbers, so when you start doing math, my natural reaction is to run and hide. laugh

slothjabber
does credit really have to relate to existing capital?

I'm working on a longer and more detailed reply (and I'm pretty sure Link doesn't agree with me here), but in the interim, can I say that I don't agree that 'credit' need represent any real capital at all; it seems it can be entirely manufactured and therefore doesn't have to have any relationship to 'the total aggregate capital'. If it doesn't have to represent 'the total aggregate capital' it doesn't have be regarded as coming from 'inside the system' as no-one has to generate it through capitalist production.

 

It can therefore promote demand exterior to the worker-capitalist relationship. It seems to me therefore that it can be seen as an 'extra-capitalist market'.

 

Is that too much logic-chopping? Or am I just wrong in believing that credit doesn't have to (somehow) relate to real capital?

jk1921
Agree

slothjabber wrote:

I'm working on a longer and more detailed reply (and I'm pretty sure Link doesn't agree with me here), but in the interim, can I say that I don't agree that 'credit' need represent any real capital at all; it seems it can be entirely manufactured and therefore doesn't have to have any relationship to 'the total aggregate capital'. If it doesn't have to represent 'the total aggregate capital' it doesn't have be regarded as coming from 'inside the system' as no-one has to generate it through capitalist production.

 

It can therefore promote demand exterior to the worker-capitalist relationship. It seems to me therefore that it can be seen as an 'extra-capitalist market'.

 

Is that too much logic-chopping? Or am I just wrong in believing that credit doesn't have to (somehow) relate to real capital?

 

Its the argument I have been trying to make, but I haven't been too successful.

Demogorgon
On credit, Paul Mattick can

On credit, Paul Mattick can put it much better than me: "If credit is only partially covered by bank reserves, it is nevertheless generally guaranteed by capital owned by the borrowers. Where there is no capital equivalent at hand, there is also no credit, which thus relates not to the money on hand but to the existing capital."

In other words, nearly all credit (certainly in the commercial world) is secured against collatoral i.e. capital. Naturally this isn't necessarily the case with unsecured loans (but these are only a small proportion of personal lending; in the UK it's around 10%).

Even "unsecured" credit ultimately has its expression in the goods people purchase on their plastic. The TV that has been "given away for free" in JK's argument can be taken back again when the bailiffs come to call.

ernie
_I think this is one of best

_I think this is one of best discussions we have had on this question and it is i j hopefully making all of us think about how we understand and defend our positions.
I am in agreement with Link and demo, but i think jk and slothjaber have been making a very thoughtful defense of Rosa's and our position,
That said so far neither comrade or alf have explained how credit can enable capital to generate the demand that luxemurg says it is impossible to generate without reducing the nature of accumulation to the simple piling up of factories and machinary which is what rosa and we reject,
The mature of accumulatiom is the central difference betseen marx and luxemburg and is the central question here.

jk1921
What's an explanation?

ernie wrote:
_I think this is one of best discussions we have had on this question and it is i j hopefully making all of us think about how we understand and defend our positions. I am in agreement with Link and demo, but i think jk and slothjaber have been making a very thoughtful defense of Rosa's and our position, That said so far neither comrade or alf have explained how credit can enable capital to generate the demand that luxemurg says it is impossible to generate without reducing the nature of accumulation to the simple piling up of factories and machinary which is what rosa and we reject, The mature of accumulatiom is the central difference betseen marx and luxemburg and is the central question here.

 

I hesistate to get back into this thread, but what exactly counts as an "explanation" here? The explanation is that credit and debt "resolve" the realization problem temporarily by producing a fictional market. It displaces the realization problem through time. That's it. If you need equations and time series--I can't give that. Credit and debt, in decadence, have been transformed from a means of facilitating accumulation to a completely empty promise to repay.

Its true that TVs can be repossessed, but they rarely are (at least in the U.S.). Homes can be foreclosed upon (but they aren't always) and cars taken back, but consumer goods rarely are, even in bankruptcy proceedings. Similary, you can't repossess medical procedures or graduate degrees. Student Loan debt in the United States is now the largest form of consumer debt (well over a trillion dollars) and most of it will never ever be repaid. Medical debt is right up there also. The state is basically subsidizing young people well into their 30s in some cases, on a completely hollow promise to repay. Where is this money coming from? Its coming from China, which loans money to the U.S. to finance the purchase of its own consumer goods. Its a completely circular, Russian doll-like situation, where debt is backed up by more debt, backed up by even more debt. If one were to trace this back through time, I don't know where it would end up, but probably some point back in the post-war reconstruction.

ernie
This does not answe the

This does not answe the queation od how can this take place when whem luxemburg said capitalism could not produce the internal demand needed foraccuation to take place? Which was Links original question which asfar as I can see no one has amswered yet.
Re the function of credit Marx was very clear that capitalism could not function without it because it enabled capitalism to go beyond its barriers. For marx credit has always played acrucial role the total development of capitalism in all its aspects. It is one rosa's greatest theoretical weakness that she did not investigate the role of credit in capitalism.
K
May be before discissing the role of credit in decadence weneed to discuss it role in ascendency.
In relation to this wholediscussion i would recommend that they read The apotheosis of money; the structual limits of capital valorization, casino capitalism and tje global financial crisis by Robert Katz which is an articlewhich takes up the question of the role of credit in decsdence. It has certainly made think about this whole question at a much deeper level amd also about the importance of Rosa's contribution.

Demogorgon
"Credit and debt, in

"Credit and debt, in decadence, have been transformed from a means of facilitating accumulation to a completely empty promise to repay."

I think this overstates the case. Take, for example, delinquency rates on credit cards. (The standard definition for deliquency is having payments 3 months or more overdue.) This series shows the peak for cards issued by the top 100 banks in the US was in 2009 and was 6.65%. That's the highest rate since 1991 and it's since fallen to around 3%. To put it another way, in the midst of the worst economic crisis since the Great Depression, 93% of the legendarily indebted US consumers were managing to service their credit card debts.

Now, while not wishing to state that this is a complete picture of either the credit card realm (it only deals with the top 100 banks who probably deal with more affluent customers) it does show that the lurid picture sometimes painted of how debts are not and cannot ever be repaid is simply not true.

Again, to avoid misunderstandings, I feel compelled to repeat the point I made earlier: "debt is a crucial issue. It represents the fault-line over which the world economy is delicately poised; it represents the potential for a massive economic crisis; and, ultimately, is an expression of the impasse of the capitalist mode of production."

But the neo-Luxemburgist framework, for me at least, is incapable of capturing the true subtlety of the nature of credit or the accumulation-crisis cycle in decadent capitalism.

Alf
headaches

I too am suffering from headaches, even if this is a very thought-provoking discussion as Ernie says. We do however seem to be arguing across each other all the time. The way Demo set out the problem of credit was very good because it tried to present it in the simplest possible terms. But underlying the sums he presented there seems to be an assumption that capitalism is still playing by the rules, that it's playing fair and ultimately balancing the books. Jk and myself are saying that this is no longer how it operates, that it's distorting the law of value to breaking point but it still bounces back and hits it in the face. Credit that can never be repaid or even counted and which constantly feeds itself in an insane spiral is no longer playing the same role as credit in ascendant capitalism (which Rosa does write about in works like Reform or Revolution). It's also necessary to connect this to state capitalism and the war economy, which Demo agreed is an expression of the destruction of value. The policy of bottomless debt is a state capitalist policy, whether or not the state is actually printing money.

 

d-man
Ernie refers to an essay by

Ernie refers to an essay by Robert Kurz, and I take the opporunity again to mention the article on credit romanticism, which goes much in the same direction. The theoretical opponents of this direction would be those who reject the idea of decadence or speak of a new, more socially coordinated, phase of capitalism (for example Hilferding is often regarded as the apologetic theoretician of organized capitalism). Those who favor Luxemburg today are mostly post-Keynesians, who like Hilferding abandon Marx's theory of commodity-money, and try to use Luxemburg in order to promote a credit theory of money. An example is Bellofiore, but also people like Graeber. They are the dominant trend in leftist academia. Instead of the idea of external market they put credit, reject Luxemburg's adherence to commodity-money theory, and reject decadence, so of course this is a "defence" of Luxemburg only in a very broad sense of the word.

Luxemburg's idea about external market derives from an earlier idea advanced by Kautsky about the relation of industry and agriculture, which Luxemburg comes to identify with capitalism and non-capitalism. In the link of my previous post you find this is mentioned in the text by Motylev, in which he quotes Kautsky's explanation of Luxemburg's confusion:

Kautsky wrote:
Industry constitutes the real domain of capitalist production. In agriculture, capitalist production has penetrated only a little, even in highly-capitalist countries. Involuntarily by capitalist production one [i.e. Rosa Luxemburg] always understands industry, and on the other hand by agriculture one has always pre-capitalist forms in mind. This is the train of thought which unconsciously underlines the point of view of Luxemburg. The wholly undeniable fact that industry can not do without agriculture, that industrial accumulation requires an expansion of production of the agricultural areas connected with industry, has taken in her the form, that capitalist production is impossible without connection with precapitalist areas, and its expansion always presupposes the extension of the pre-capitalist areas ruled by it.

I think this makes it much easier to accept that Luxemburg was wrong (by understanding how she made the mistake). Also one of the ICC texts makes this mistake, by counting agriculture in post-second world war France as non-capitalist. FWIW, there are furter references to Kautsky in the text by Motylev (who disagrees with Kautsky's idea of the relation of industry and agriculture and in turn sees it as false explanation of imperialism, but that's another story).

 

 

LoneLondoner
The power of Luxemburg

I confess that I hesitate to dip my toe in the water on this one, if only because such a very complex subject is very hard to deal with in a forum discussion without getting bogged down in detail. I can't pretend to answer everything that is said here, but I would like to make some general points to explain why I for one continue to find Luxemburg's ideas stimulating and useful in understanding the present situation.

In doing so, it is useful to keep in mind something Lenin said in "Letters on Tactics": "it is essential to grasp the incontestable truth that a Marxist must take cognisance of real life, of the true facts of reality, and not cling to a theory of yesterday, which, like all theories, at best only outlines the main and the general, only comes near to embracing life in all its complexity". Marx's schemas, in particular, are abstractions: their usefulness lies not in their exact application but in how they can provide pointers to understanding.

Somewhere towards the beginning of this thread, DemoGorgon asks "Why can't our hypothetical single capitalist simply directly consume the surplus value it has extracted from its proletariat?". I think there is a simple answer to that: if the capitalist class were to consume all the surplus product extracted from the proletariat, we would not be in capitalism. All class societies extract a surplus product from the exploited class, but what is specific about capitalism is precisely that the exploiting class does not consume the surplus, it reinvests it - whereas the feudal aristocracy spends it in conspicuous consumption.

It is worth remembering that the first chapter in Capital is titled "Commodities" and that long before we get to "c+v+s" we have the movement "C-M-C" (Commodity-Money-Commodity). The circulation of commodities through the money form is absolutely fundamental to capitalism - again this is not the case in feudal societies.

Just as an aside, this is why it is perfectly justified to describe a large part of French agriculture post-WWII as non capitalist (not "agriculture" as such, because there was of course an industrialised agriculture in France), but the small peasant economy which to a large extent operated quite independently of the capitalist economy. And Kautsky's idea that d-man cites, that Luxemburg confused agriculture with the pre-capitalist economy, is IMHO simply nonsense: you need only read her description of the development of industrialised cotton production in C19 Egypt in her Introduction to political economy (sadly not available in English as far as I know) to see that she was perfectly capable of making such a distinction.

Comrades on this thread who defend the "FROP" thesis have insisted repeatedly that capitalism can expand "within its own sphere" so to speak. This raises a question for me: if that is the case, then how do you explain the fact that capitalism is the most dynamic social form humanity has ever produced? Does historical reality show us a capitalism constantly expanding in its own sphere? Absolutely not - and Marx already pointed this out in the Manifesto: "The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connexions everywhere".

In this sense, Luxemburg is absolutely faithful to the core of marxist theory and she provides a clear basis for understanding not only why capitalism was irresistibly dynamic, but also understanding why it is essentially imperialist, and why WWI broke out when it did. It's fair to say that the ICC has not always been very clear about this and has sometimes tended to equate the beginning of decadence with a complete exhaustion of extra-capitalist markets. In fact this is not the case: World War I breaks out with almost mathematical precision as capitalism reaches the point where the whole planet is under the domination of the capitalist powers and they can only find expand at the expense of their rivals. It remains a mystery to me how FROP theorists explain the outbreak of WWI - which is THE critical event (along with 1917 of course) dividing capital's ascendancy from "the epoch of wars and revolutions".

It's also worth remembering that, although these debates over the years have concentrated almost exclusively on the question of markets, Luxemburg's view was more general in that she saw capitalism's expansion depending on its ability to absorb a world outside itself and identified three aspects to this: markets, labour, and raw materials.

This brings me to the period post-WWI. IMHO again, it is absolutely impossible to understand this period (whether you call it decadence or not) by limiting yourself to "pure" economics and not referring to the question of militarism and strategic considerations. Luxemburg is prescient in the extreme here: the last chapter of Accumulation, on the question of militarism and state control of the economy, written prior to WWI, offers us clues to understanding the development of the economy and the universal change to state capitalism.

Here again, the debate in the ICC on the reconstruction boom has led me to reconsider our attitude to Luxemburg's view of militarism as a field for accumulation. We have tended to say that military spending is purely destructive, but in reality - in the context of total war - this is not necessarily true. A huge amount of military spending in WWII went on capital and infrastructure that converted directly to civilian use: the aluminum, aircraft, and food processing industries to name but three were all radically transformed during WWII (Australia's status as a major food exporter dates from the war). This is a big question and I don't propose to go into it any further here.

A final word on credit. Again a huge question, but I think jk1921 is basically right in the way he poses it. And I think DG's example is fundamentally mistaken in how credit works (at least as I understand it).

DemoGorgon wrote:

Finance Capitalist = £500
Industrial Capitalist = £500
Workers = £250

The finance capitalist can lend half his money to the industrial capitalist and half to the workers.

Finance Capitalist = £0
Industrial Capitalist = £750
Workers = £500

Total = £1250!

But in reality this is not what happens, because the financial capitalist lends out the SAME money several times over, so we get:

Finance Capitalist: Reserves = £500
Industrial Capitalist 1 = £500
Industrial Capitalist 2 = £500
Workers = £250

Total: £1750

The finance capitalist can lend on the basis of his reserves multiple times, so if he lends £250 to the workers and £500 to each of the industrial capitalists, we get:

Finance Capitalist: Reserves = £500
Industrial Capitalist 1 = £1000
Industrial Capitalist 2 = £1000
Workers = £500

Total = £3000 - it's like magic!

Moreover, the Finance Capitalist is now credited with Assets of £1250 at an interest rate of n% pa over 10 years (you can work out the compound interest rate yourself).

This all works fine as long as the market can expand enough to soak up all the new surplus value produced. When it can't, then basically the only way out is to add more debt on top of debt - and since credit depends on confidence that it will be repaid there must eventually come a time when the whole thing crashes (and you get bank runs, because the people whose savings are the finance capitalist's reserves actually want to get at their money, which they cannot do of course because it has already been loaned several times over to other people). Exactly what that means and implies is a whole other discussion...

baboon
I remember reading something

I remember reading something by rosa about the importance of credit for oiling the wheels of capitalism. Credit, and lots of if was essential to the expansion of the system. But its nature has changed profoundly since the onset of the 60s and it has been used to dope the system by creating a false market. I don't think the fact that 93% of US credit card holders of the top 100 US banks have paid back their loans says anything about the growing extension of credit and the piling up of unrepayable debts, particularly the public debts -  as they're more and more becoming. The lurid picture regarding debt is that of Greece today and it was the same picture that underlined the profound development of the economic crisis in 2007/8. As the nature of capitalism has changed so has the nature, both quantitatively and qualitatively, of debt.

slothjabber
just what is 'extra-capitalist' and how?

LoneLondoner wrote:
...

It is worth remembering that the first chapter in Capital is titled "Commodities" and that long before we get to "c+v+s" we have the movement "C-M-C" (Commodity-Money-Commodity). The circulation of commodities through the money form is absolutely fundamental to capitalism - again this is not the case in feudal societies.

Just as an aside, this is why it is perfectly justified to describe a large part of French agriculture post-WWII as non capitalist (not "agriculture" as such, because there was of course an industrialised agriculture in France), but the small peasant economy which to a large extent operated quite independently of the capitalist economy. And Kautsky's idea that d-man cites, that Luxemburg confused agriculture with the pre-capitalist economy, is IMHO simply nonsense: you need only read her description of the development of industrialised cotton production in C19 Egypt in her Introduction to political economy (sadly not available in English as far as I know) to see that she was perfectly capable of making such a distinction...

 

This is related to a point I was relating off-list with Link (which, again, he disagrees with me over), and which I'm still trying to work into a reply on-list that is both coherent and comprehensive - the role of artisan/petit-bourgeois/self-emplyed production.

 

According to Rosa, as I understand her argument, what is 'internal to capitalism' is the worker-capitalist relationship. Not buying and selling of commodities per se, but the extraction of surplus value through paying wages for labour-power as a commodity. Labour, to artisan producers, even though operating inside a capitalist system, is in fact more like a form of capital - but not one 'internal to capitalism'.

 

This, it seems to me, is similar to Bordiga's argument about the economy of the Soviet Union - no matter what its internal structure, it is capitalism because it relates to other capitalist economies on the world market; likewise, artisan/peasant commodity production for the market is 'capitalist' in that it involves the sale of commodities, no matter what its productive basis - which in this case, is not conditioned by the worker-capitalist relationship.

 

Therefore, those who exploit their own labour power are 'extra-capitalist' producers. Their products enter the market unmediated by the extraction of surplus labour - thus the 'c+v+s' equation does not hold.

 

They thus provide a constantly-emerging 'extra-capitalist market'. Now, whether in any instance that 'extra-capitalist market' is sufficient to provide the external market necessary for capitalism to develop according to Rosa's theory, is another question; but extra-capitalist markets (rather than 'pre-capitalist markets') must always be emerging to a greater or lesser extent - if my understanding of the relationship between waged labour, and artisan production, is correct.

 

I'd like to support most of what LL says in the remainder of his post too!

Until this bit:

 

LoneLondoner wrote:
...

A final word on credit. Again a huge question, but I think jk1921 is basically right in the way he poses it. And I think DG's example is fundamentally mistaken in how credit works (at least as I understand it).

DemoGorgon wrote:

Finance Capitalist = £500
Industrial Capitalist = £500
Workers = £250

The finance capitalist can lend half his money to the industrial capitalist and half to the workers.

Finance Capitalist = £0
Industrial Capitalist = £750
Workers = £500

Total = £1250!

But in reality this is not what happens, because the financial capitalist lends out the SAME money several times over, so we get:

Finance Capitalist: Reserves = £500
Industrial Capitalist 1 = £500
Industrial Capitalist 2 = £500
Workers = £250

Total: £1750

The finance capitalist can lend on the basis of his reserves multiple times, so if he lends £250 to the workers and £500 to each of the industrial capitalists, we get:

Finance Capitalist: Reserves = £500
Industrial Capitalist 1 = £1000
Industrial Capitalist 2 = £1000
Workers = £500

Total = £3000 - it's like magic!

Moreover, the Finance Capitalist is now credited with Assets of £1250 at an interest rate of n% pa over 10 years (you can work out the compound interest rate yourself).

This all works fine as long as the market can expand enough to soak up all the new surplus value produced. When it can't, then basically the only way out is to add more debt on top of debt - and since credit depends on confidence that it will be repaid there must eventually come a time when the whole thing crashes (and you get bank runs, because the people whose savings are the finance capitalist's reserves actually want to get at their money, which they cannot do of course because it has already been loaned several times over to other people). Exactly what that means and implies is a whole other discussion...

I think there's a problem, here, because it's not clear what the finance capitalist is doing. Rather than using LL's example, which introduces another industrial capitalist (because at the moment I'm not sure if our 'industrial capitalist' personifies the whole of productive capital or not) I'll go back to DG's original figures:

 

DemoGorgon wrote:

Finance Capitalist = £500
Industrial Capitalist = £500
Workers = £250

The finance capitalist can lend half his money to the industrial capitalist and half to the workers.

Finance Capitalist = £0
Industrial Capitalist = £750
Workers = £500

Total = £1250!

 

But like LL I don't believe that this is what happens.

 

The finance capitalist (really can we call this the 'bank'?) may only have £500. He can, however, lend £500 to industrial capitalist, and £250 to the owner. How? By securing his loan with their capital, rather than his own. so instead of

 

Finance Capitalist = £500
Industrial Capitalist = £500
Workers = £250

>>>

Finance Capitalist = £0
Industrial Capitalist = £750 (500 + 500/2)
Workers = £500  (250 + 500/2)

Total = £1250!

 

we instead get

 

Finance Capitalist = £500
Industrial Capitalist = £500
Workers = £250

>>>

Finance Capitalist = £0
Industrial Capitalist = £1000 (500 + 500)
Workers = £500  (250 + 250)

Total = £1500!

If the industrial capitalist defaults, the bank takes the value of his guaranteed loan, the industrial capitalist's original £500; if the workers default, the bank takes their original £250. If neither defaults, the bank can get its money back

 

But furthermore, if the bank takes its guarantee on the basis that it is expectation of future profit that will repay the loan, we could see this:

 

Finance Capitalist = £500
Industrial Capitalist = £500
Workers = £250

>>>

Finance Capitalist = £0
Industrial Capitalist = £1250 (500 + 500 secured on capital + 250 secured on future profit)
Workers = £750  (250 + 250 secured on current capital + 250 secured on future wage rises)

Total = £2000!

 

And i completely agree with LL that as long as the system is going 'up' this can continue, but like holding onto a rope attached to a rising ballon, the risk when it goes wrong is increasingly severe. It is a speculative bubble that relies on the guarantee of future returns. The money the bank promises needen't exist, as long as the expectation that it could exist in the future is generally held.

 

Demogorgon: I don't think it's credit cards, primarily, that are the issue here, but banking loans to industry and governments, which I suspect are many orers of magnitude larger than all the world's credit card debts. But I definitely will buy you a pint next time I see you.

 

 

 

jk1921
Pint

slothjabber wrote:

 

Demogorgon: I don't think it's credit cards, primarily, that are the issue here, but banking loans to industry and governments, which I suspect are many orers of magnitude larger than all the world's credit card debts. But I definitely will buy you a pint next time I see you.

 

Are you going to charge that pint? cool

Demogorgon
The previous posts, one way

The previous posts, one way or another, seem either to be referring to fractional reserve banking or repeating points I myself made (albeit in a different form) regarding the formation of fictitious capital. It's quite clear in the case of the latter, that none of the implications I pointed to have been understood. This is really quite disheartening and the irony is - for reasons I will elucidate later - that every effort made by Luxemburgists in this area is just a further demolition of their own arguments.

It does seem, however, that I do need to make some comments about fractional reserve banking because this seems to be at the root of LoneLondoner's claim that "financial capitalist lends out the SAME money several times over". I didn't address FRB previously for several reasons. Firstly, it's a distraction from the fact that the Luxemburgists still haven't proved their core thesis as originally questioned by Link. Until they do this, all the subsequent discussion is irrelevant. Secondly, it only increases the confusion between the operation of value and discussions of money, the latter of which is very complex (I make no claim to fully understanding it). Unfortunately, though, this confusion between money and value is shot through Luxemburg's conceptual framework so its no accident they will replicate it here. And, thirdly, and perhaps most importantly, FRB doesn't create demand.

Fractional reserve banking works like this. A bank starts with £1000. If the reserve limit is set to 10% he can lend out 90% of his funds i.e. £900. The £900 is, the argument goes, then redeposited in the banking system and £810 can be loaned again. The total amount of actual money (in economic parlance, M1) in the system never goes above £1000. The amount of loans and deposits this generates (M3) is naturally more but - and this is incredibly important! - no loan generates demand until it is actually spent.

The generation of M3 i.e. the redepositing of money is predicated on the money not being spent. By the end of the process all the money (no more than £1000!) is sitting in the bank, not generating demand! Even if all the money is eventually spent, it can purchase no more than £1000 worth of commodities and once this happens it leaves the FRB chain.

That's not to say the final recipient of the funds can't himself spend, thus generating demand. That's simply the normal way capitalism operates. He may also desposit it in the bank but this simply returns us to the original issue that money deposited is not money actually facilitating the circulation of commodities.

This brings us back to the fundamental point - credit allows capital to circulate through the banking system until it finally reaches someone who will actually spend it. It doesn't create money out of nothing and nor does it create demand. It mobilises potential demand which is already present in the economy (state capitalism works in largely the same way). But (and it feels like I'm repeating this for nth time) Luxemburg's theory already designates this demand from within the system as inadequate.

I have some other general points to make, but I'll save those for another post.

LoneLondoner
Fractional Reserve Banking

Thanks for the clarification DG... I don't pretend to have a very clear understanding of how the modern banking system works.

Of course you are right that credit is part of the normal operation of capitalism, however it does seem to me that the modern credit system has provided a means for capitalism to project what is in effect an artificial market into the future... until it crashes.

There is an article on Wikipedia on FRB which does seem to indicate that it allows for a "multiplier effect" (though not indefinitely), and that commercial banking does in effect create new money... whose destiny is in the end to be spent of course.

Demogorgon
I know the article in

I know the article in question. It doesn't counter any of what I've said. In addition, becoming obsessed with M3 money supply puts us in the same camp as the monetarists.

In any case, if we're unable to resolve the debate on the basis of value (i.e. using Marx's method of assuming products trade at value and eliding specific questions of the money supply) we can never have a sound basis for discussing the more arcane aspects of economic theory.

"Of course you are right that credit is part of the normal operation of capitalism, however it does seem to me that the modern credit system has provided a means for capitalism to project what is in effect an artificial market into the future... until it crashes."

This is basically repetition of what you claimed (in more detail) here: "This all works fine as long as the market can expand enough to soak up all the new surplus value produced. When it can't, then basically the only way out is to add more debt on top of debt - and since credit depends on confidence that it will be repaid there must eventually come a time when the whole thing crashes."

It's more or less the same assertion that's been repeated by others on the thread in various forms. But look at what you're actually saying! If everything works fine as long as the "market can expand" then what's the problem? If credit expands the market as you've tried to demonstrate and the only limit to the emission of credit is the expansion of the market, then the emission of yet more credit will surely solve the problem. Your self-referential circle poses no limits whatsoever to the emission of credit. If the banking system can magically create credit from nothing as your model implies why can't it just generate more when people ask for their money back?

The moment you divorce the emission of credit from the actual production of capital and surplus value you're left with no way to determine, even in theory, what the limits of credit might actually be. Of course, you know there must be limits because the appearance of crisis demonstrates that there are, but this is simply a brute fact which offers you no methodological coherance. In many ways, your theory leads to a mirror image of bourgeois consciousness that Lukacs describes thusly: "The facts and the situations which induce this panic force something into the consciousness of the bourgeoisie which is too much of a brute fact for its existence to be wholly denied or repressed. But equally it is something that the bourgeoisie can never fully understand." Naturally, although you can't explain crisis it doesn't worry you in the way it does the bourgeoisie - for you it's continued accumulation that's the "brute fact" that perplexes you.

This is no accident. It's part-and-parcel of the neo-Luxemburgist conception that capitalism is somehow "cheating the law of value" (that's Alf's phrase, not yours, but as far as I know you share his views). But it's not capitalism that's "cheating" (at least not in the way you propose) but your own abandonment of the methodological framework of the law of value that's the problem here.

The neo-Luxemburgist position thus leads to a whole host of contradictions and problems, not limited to the following:

  • If you prove that capitalism cannot generate sufficient internal demand, you prove Luxemburg true. But this disproves your assertion that capitalism can survive without external markets because this requires you prove capitalism can ... generate sufficient internal demand!
  • The law of value operates when you need to prove that capitalism in crisis ... but it's suspended ("cheated") when you need to explain why capitalism isn't in crisis (e.g. post-war boom).
  • Credit can be spewed out and used to pay back previously contracted debts ... except when the debts can't be paid back!

The first contradiction is the most serious. It is logically impossible to defend both positions at the same time. This is what you need to understand and answer. As for the other assertions, no mechanism or conceptual framework is offered as to why each of these contradictory conditions prevails at any particular moment because any serious attempt to do so forces you to confront the untenable foundation of your position.

I don't think any of this is down to "bad faith" on the part of comrades. I have defended many of these positions myself in the past. It might also be possible that a more effective defence of neo-Luxemburgists positions can be mounted but I think there are serious issues with the way the organisation defends the question every time it comes up.

jk1921
Demo, is the answer, not,

Demo, is the answer, not, somewhere in LL's previous post, the fact that the expansion of credit and debt is a fucntion of confidence that the system will continue to expand? Isn't this the nature of any "bubble"?--Greenspan's much discussed "irrational exuberance"? At some point, this confidence erodes as it is finally grapsed that the expansion is illusory, that the amount of credit that has been extended cannot ever be fully repaid? Isn't this the nature of the crisis that broke out in 2008? Or is this "explanation" too psychological for you?

I am still concerned about the entire business of what counts as an "explanation" and what is merely an "unsupported assertion." It seems we can trade accusations on this point all day and not make much progress. At some point, this seems to degenerate into a discussion of truth, truth claims and the nature of what counts as evidence.

Demogorgon
It's not a matter of trading

It's not a matter of trading "accusations". What I'd like to see is a mechanism that can explain the limits of credit, as I described above, even if it's only functional within its own terms. I'm not asking for equations, I just want a conceptual framework based on Marxism.

If you want to appeal to confidence then how does this differentiate you from the psychological theories of the market that dominate the bourgeoisie? I don't want to dismiss psychological factors entirely to the operation of the crisis in the real world, but such factors are derived from underlying economic mechanisms. It is those mechanisms we need to understand. It's my contention that you're forced to end up using confidence as a substitute for a mechanism because you've unwittingly abandoned the framework of the law of value.

I honestly don't know how I can explain it more clearly although I suspect that's my failure rather than yours.

jk1921
I think the law of value

I think the law of value comes into play, because the debt can no longer be paid back and the system has finally "realized this," hence the inevitable crash. Yes, theoretically it is possible, I suppose for you to argue, "What prevents them for extending more credit to pay back the previously issued debt?" In the short term, the answer does seem to be "confidence." Nobody wants to be the idiot to lend more money that can't be paid back.Thus, the necessity for state captialist measures.

This does raise the issue of what are the ultimate limits of this? I don't know. I wish I did. It is something I have been critical of elsewhere. In many articles, it seems the ICC thinks this limit has been reached or will be reached very soon, but this seems like a bit of an exaggeration. Still, there seems strong evidence that in the aftermath of 2008, the system is being kept going on the basis of a misplaced confidence that the American consumer will somehow pull out of the doldrums. It is indeed a curious situation, in which China must continue to subsidize its main rival, lest it risk losing the central market for its consumer goods.

I don't think that this explanation "abandons" the law of value. This criticism seems unfair. Why is "confindence" any less of an economic "mechanism" than anything else? Isn't the economy a social relation after all?

d-man
limits of credit

I highly recommend the article about the limits of credit:

http://libcom.org/library/credit-romanticism-golden-pincers-zachary-atlas

Faced with the question of money in general, you can see the antinomies of bourgeois thought in operation (and didn't Lukacs write that they can only be solved by proletarian revolution).

This also isn't directly connected with Luxemburg's main argument, but small scale mining allegedly counts for 12% of world gold production (source: http://www.youtube.com/watch?v=KLpHQGExt68 - you see that the miners are paid in dirt, which if they're lucky contains some gold); of course the point is not that they can't absorb all the surplus, but that the basis of capitalism "in the final instance" rests on real money - gold, though this seems no longer to be the case with the first world war (or closing of the gold window by Nixon), i.e. the decay of capitalism.

 

 

baboon
credit and debt

A bit out of my depth here, but here goes:

I generally agree with jk and his analysis that the extension of debt is both the creation of a phoney market - within capitalism and its structures of course - and a further exacerbation of the fundamental  contradictions of the system. I don't agree with what I see as Demo's position that the extension of credit is the same old, same old and nothing much has changed in this respect regarding production.

I think that there is a fundamental difference between the extensions of credit and debt from capitalism's ascendent period to its decadence and particularly the period of the recessions, one following the other, from the end of the 1960s until now, where every recession, in general, was overcome by capitalism by the further extension of credit and debt. In capitalism's rise credit, as Marx and Rosa says, oiled the wheels of production enabling it to expand further. The profits that were being made were enormous - the East India Company for example was making profits of hundreds of per cent - and credit was easily paid back and debt settled possibly for the next round of borrowing. The limits of the market, the relative saturation of the markets, effectively underlined by World War I, didn't bring production to a standstill but profoundly changed the nature of capitalism as the ICC has analysed through state capitalism, imperialism and the war economy. Constant credit financed expansion was no longer possible but capitalism turned to credit in a big way at the end of the sixties in order to attenuate the worst effects of the crisis.

By the 90s, the unrestricted extension of credit became a way of life for capitalism and it was this in the west that, along with ferocious exploitation, underlined and facilitated the whole "Chinese economic miracle". This clearly couldn't go on and 2007/8 showed that it couldn't go on and now, as a result of it, the US and China are locked in an economic dance of death where they have to support each other but cant. I don't know that there's any mechanical chart where one can plot that "enough's enough" but,  as jk, suggests, elements of the bourgeoisie must be aware of it. I don't know how many times now the US has had to raise its debt ceiling but it must do so again soon - so there's an awareness of the problem and this itself causes problems in US/Chinese econic and imperialist relations. Also the elements of the bourgeoisie that matter seem to be clear that lending to Spain for example reaches a very definite level of interest from which it is impossible to pay back. Similar must apply to other, growing eurozone public debt which Germany cannot possibly afford to underwrite. Sixteen trillion dollars of US debt is one of the lower estimates and 8 trillion of the eurozone, the repayment of a great of which must be questionable. I think that this is a qualitatively different situation than that of the credit extended to finance capitalist expansion during its ascendent period.

I don't know where it quite fits in but a quote from RI's website from an article on the economic crisis quotes Global Europe Anticipation saying that to generate a dollars' worth of growth the US needs to borrow 8 dollars. If this is only half correct - and this situation probably also applies in general to other national capitals - it would be contrary to the situation of capitalism's rise showing the profound change in the nature of credit.

 

jk1921
In terms of what the limits

In terms of what the limits to debt and credit are, one thing that is part of the equation I think is the political decomposition of the ruling class, which manifests itself more and more as a crisis of state capitalism. Right now, this is expressed most acutely in the U.S., where there was actually a serious threat that part of the bourgeoisie would actually prevent the debt ceiling from being raised in order to make an ideological point about the deficit. There was no immediate "economic" barrier for the US to raise the debt ceiling (its credit rating was at that point still AAA and the Chinese were more than willing to get out the check book), but at least part of the bourgeoisie has got it in their heads that the national debt is such a threat to the nation that they were willing to provoke an international economic calamity to make their point.

Similarly, there has been no additional stimulus coming from the US (whatever the attempts of the Federal Reserve to act on its own) preceiely due to the political deadlock US state captialism finds itself. Sometimes, it is necessary to look at the system as a whole, rather than focus on a narrow economic model.

On another point, I think it is necessary to point out: that in the theories which posit debt as an "articifical market," it is generally argued that credit and debt proper become the central mechanisms for continuing acculumation only in the period following the end of the post-war "boom". Debt may have played a role prior to this, but in earlier periods of decadence it is necessary to examine the war economy, military spending, the destruction of the war, etc. Credit and debt have only become the central mechanisms for continuing accumulation in the present period, because the bourgeoisie has been unable to enact its preffered solution to the economic crisis--generalized war. We can argue why this is the case: undefeated proletariat, lack of conditions for a general imperialist war, or some other explanation (I think one group on the milieu has argued in the past that this is caused by MAD--mutally assurred destruction--in the nuclear age), but the point remains that credit and debt become a palliative in the abscence of the ability to conduct a more generalized reconstruction of the system.

I think this all makes much more sense when we look at history, rather than an abstract economic model. Breaking the period of decadence down into roughly 25 years periods, then the "neo-Luxemburgian" thesis looks much more plausible.

slothjabber
I'm not at all sure where

I'm not at all sure where this discussion is heading, which may be a good thing or a bad one, I really don't know; but yesterday, in company with Link, a comrade of the ICC and four comrades of the CWO, I was lucky enough to attend  session of the Commune day school where theories of the crisis were being discussed; and afterwards, the Left Communist contingent debated this (and other questions) at the pub, and then round a table in a restaurant, before Link and I had to get our train, where we continued to debate it for half an hour, and then for another hour in the car. So, apart from a few brief interludes to do with more beer or a chiken bhuna v a mushroom biriyani, Link and I were discussing crisis theory for approximately 8 hours, along with a bunch of very knowledgeable people. So there has been a large amount of talk about Luxemburg, the faling rate of profit, the role of credit and the state, and the relative merits of Grossman, Mattick Sr and Jr, and and as a result some things have become clearer, to me at least.

 

Firstly, I think we need to tighten up on the idea that Luxemburg was only discussing pre-capitalist markets. She's talking about extra-capitalist markets. These can indeed be 'pre-capitalist' in that capitalism has not yet arrived in the territories which constitute these extra-capitalist markets. For Marx, who merely discusses 'foreign markets', it might be taken to imply that outside of Britain in the 1850s and '60s, everywhere was an extra-capitalist market because it was all pre-capitalist. So in this sense, when Luxemburg was writing in the early 20th century, because capitalism takes over these economies in time and space (obviously, capitalism developed enormously between 1850 and 1910) 'foreign=pre-capitalist=extra-capitalist' no longer applies.

 

However, Luxemburg also refers to internal extra-capitalist markets. These aren't temporally- or spatally-seperated markets, away in time or location. They are, for Luxemburg, 'here and now' in advanced capitalism. So how can 'extra-capitalist' markets exist in a capitalist economy?

 

If they are not geographically and temporally outside of an expanding capitalist system, Luxemburg must be refering to capitalism as a relationship, between workers and capitalists; in other words, extra-capitalist markets are those not based on commodity production and wage labour. So peasant and artisan production, which does involve commodity production and also the creation of value (but not surplus value), is strictly in this case not 'capitalism' for Luxemburg. Of course it is capitalism, in that commodities reveal their nature when they are exchanged, and these commodities are trading on the market; but the actual process of producing these artisan or peasant commodities does not involve the exploitation of surplus value through wage labour. Incidently, this raised the question of whether 'mercantile capitalism' was really capitalism at all, not being based on wage labour and the exploitation of surplus value.

 

Luxemburg talks about how these extra-capitalist formations have been exhausted in Britain, but persist to a greater or lesser extent in the rest of the world. I would suggest that she over-estimated their exhaustion even in Britain; but, furthermore, she also I suspect did not see so clearly that artisan production would never entirely stop even in the most advanced capitalisms. New generations of value-producing, non-exploiting producers would actually be born continually from developed capitalism. They may be small, but they still constitute an 'extra-capitalist market', I would argue, given the interpretation of what an 'extra-capitalist' seems to mean to Rosa, and even in Britain these extra-capitalist formations persist, or rise anew, even today.

 

Now, whether it's possible to say that any such 'extra-capitalist market' is sufficient in itself to keep capitalism alive, but insufficient to make it healthy, is another thing. DG thinks that the argument of 'insufficiency' is not in itself sufficient, but it seems to me fairly clear that a large extra-capitalist sector is one thing, and absent extra-capitalist sector is the opposite thing, and in between a small extra-capitalist sector would produce different results still - a scenario where the spectacular growth of the early period was not possible, but the entire system has not ground to a halt. However, as the whole of the capitalist system is predicated on growth, in a situation where growth is difficult (not necessarily completely impossible in all cases, but certainly difficult) one can reasonably talk about 'crisis', 'insufficiency' etc. It seems to me anyway.

 

On the role of debt - I thank DG for trying to patiently explain such relatively arcane topics as fractional reserve banking. If, as DG asserts, all credit really does have to be backed up by real money somewhere, real actually existing capital that has been created by workers and expropriated by capitalists, then I withdraw the contention that bankers can conjour money until the point someone panics. In this case, obviously credit (as a form of transferable capital) must be created somewhere inside the worker-capitalist relationship and probably can't function as an extra-capitalist market.

 

However, one of the comrades discussing yesterday advanced the proposition that the state itself is an extra-capitalist market. The argument would be that the purpose of the state is precisely to buy up excess production, to put the useless capital of the capitalists to some good use, to prop up production without becoming a producer. In this sense, it would fulfill Luxemburg's 'extra-capitalist market' role, being neither a creator of surplus-value, nor a direct extractor of surplus value. Instead it is a conumer, without being producer. 

 

I can't go along with this, at this point. It seems to me that the purchasing power of the state is no more than the organisation of the purchasing power that all of the capitalists would have individually should they chose to excercise it, and therefore must reside in the same worker-capitalist relationship that constitutes the strict definition of capitalism. No individual capitalist could possibly devote their excess capital to supporting unproductive capital I would argue, because this would make them vulnerable to their competitiors (while they might strangthen capitalism as a whole they would paradoxically weaken themselves within that stronger system - only their competitors would benefit); instead, the state acts as an organ of collective capitalist security, I think, a guarantee that all capitalists are been individually weakened by the same amount that the system as a whole is being strengthened, but it does not escape the basic closed system of the worker-capitalist relationship.

 

The implication must be also I think that if it is accepted that the state's role is the buyer of unproductive capitalt, then credit surely must fulfill the same function - though the comrade who advanced the notion that the state acted as an extra-capitalist market didn't accept this link. i don't accept the basic arguent about the state, but it seems to me that if one does there isn't a deal of difference between seeing the state as an extra-capitalist market and debt as an extra-capitalist market (which as I say I don't accept, if as DG says all credit is ultimately backed up by real capital somewhere).

 

My final point for the moment is about the conflation of the individual capitalist and the total capitalist. For the Luxemburgists, the total capitalist is the totality of the individual capitalists. It's a simple process of addition. One capitalist and one group of workers is insufficient to purchase all of the product necessary for expanded reproduction; therefore two capitalists and two groups of workers are also insufficient (insufficient W1 and insufficient C1, added to insufficient W2 and insufficient C2, makes a lot of insufficient Ws and Cs). I suppose, what I don't understand of the non-Luxemburgist position, is how the addition of two insufficencies can suddenly make sufficiency? If insufficient W1 and insufficient C1 meets insufficient W2 and C2, somehow sufficient totalW and sufficient totalC results. How, exactly? I understand that C1 can buy production of C2 and vice versa, but this seems to me to mean that as C1 buys the products of C2, he must decrease the quantity of his own products that he can consume. And the problem of the 'third buyer' merely re-asserts itself, as in effect C1 and C2 are still only two halves of the second buyer.

 

That seems a good enough place to stop, I think.

 

Alf
some areas for clarification

 

 

I am also not sure how to take the discussion forward but I will indicate some possible areas for clarification.

 - clearly the whole issue of debt and fictitious capital needs to be deepened. The issue is not limited to the debate between ‘Luxemburgists’ and others. There are numerous disagreements in the wider milieu about what Marx meant by fictitious capital, how it operates in today’s crisis and so on. Personally I remain unconvinced that all the capital circulating today actually corresponds to ‘real’ value. Certainly the growing disjuncture between value and the amount of money in circulation is the source of enormous inflationary pressures which are threatening to come to the surface. This has been a feature of decadence since the first world war, although not always at the same level and certainly never at the same level as today. But as I say this requires a lot more reflection and like many other comrades I find it extremely difficult to get to grips with.

 - I certainly agree with Slothjabber that ‘extra-capitalist’ is a much clearer term than pre-capitalist and that Luxemburg did indeed mean that there could be forms of artisan or peasant production within the already capitalist nations. Indeed this was still a very strong feature of many of these nations when she was writing.

 - another point raised earlier on by Link (and echoed in post by Fred elsewhere) needs to be taken up: where Link writes  that “I remain unconvinced that economics of capitalism (whether Luxembourgism or FROP)  needs to define the decadence or the collapse of capitalism as decadence is primarily a social relationship – the contradiction of the productive forces to the social relations of production”. I don’t agree with this separation between the economic and the social because capital is nothing except a social relation. The relations of production based on wage labour and commodity production are precisely what have entered into conflict with the productive forces engendered by the present system. The debate about crisis theory is not a separate one from this.

 - I do not see how we can advance our understanding of the problem posed by Luxemburg without ‘returning to Marx’. Demo, who defends the Mattick/Grossman thesis, acknowledges, with Grossman, that Luxemburg made a contribution to marxism at least in so far as she posed the question of breakdown against the revisionists. But Grossman, in my reading at least, appears to see little or no value in her efforts to pose the problem of realisation, of the contradiction between production and the market – he even says at one point that there is “no trace in Marx” of a problem of insufficient market outlets. The law of accumulation and breakdown of the capitalist system, 1992 abridged English edition, Pluto Press. p128n

In an article in the new series on decadence, we tried to show that for Marx the problem of realisation, the necessity for an ever-expanding market, was not at all a secondary problem for capitalism, but a primary one, alongside the falling rate of profit, with which it is intimately linked. I am not going to weigh this post down with a surfeit of quotes – comrades can refer to the text. http://en.internationalism.org/ir/139/decadence.  But I will cite a few which seem worth referring to because they indicate that for Marx (and Engels) not only was this a theoretical problem but that, like Luxemburg, capital’s contradictions in this sphere indicated how it was concretely beginning to reach the end of its progressive phase. First, on the more abstract level, :

"However, the mere admission that the market must expand with production, is, on the other hand, again an admission of the possibility of over-production, for the market is limited externally in the geographical sense, the internal market is limited as compared with a market that is both internal and external, the latter in turn is limited as compared with the world market, which however is, in turn, limited at each moment of time, [though] in itself capable of expansion.  The admission that the market must expand if there is to be no over-production, is therefore also an admission that there can be over-production." Theories of Surplus Value, Part Two, chapter XVII, 13, p 524.

Of course these general observation can be interpreted in various ways, although they certainly confirm the importance to Marx of the polemic against the bourgeois economists who thought that overproduction in relation to the market was not at all a fundamental problem for capitalism. But in another passage, connected to the discussion about the nature of the envisaged revolution in Russia, Marx saw this ‘geographical’ expansion in very concrete terms – although I think that for him this expansion is not purely geographical but was connected to the conquest of the remaining abundant (and obviously extra-capitalist) markets of the globe: "The proper task of bourgeois society is the creation of the world market, at least in outline, and of the production based on that market. Since the world is round, the colonisation of California and Australia and the opening up of China and Japan would seem to have completed this process. For us, the difficult question is this: on the Continent revolution is imminent and will, moreover, instantly assume a socialist character. Will it not necessarily be crushed in this little corner of the earth, since the movement of bourgeois society is still, in the ascendant over a far greater area? Marx to Engels, 8 October 1858, Collected Works, Vol. 40, p.347, Lawrence and Wishart). Marx clearly, as on many other occasions, was underestimating the imminence of revolution in the central countries and the ‘completion’ of the process of creating the world market and of the production based on that market (i.e., a world capitalist economy). The point however is that, in his view, it is precisely this ‘completion’ of a global capitalist  economy which coincides with the advent of the epoch of revolution and thus with the decadence of the system.

When Luxemburg in The Accumulation of Capital focused on the problem of overproduction in relation to the limits of the market she did not think that she was saying anything particularly new. Following everything she had read in Marx, there was also the work of Engels, who, in describing the extension of capitalism to Russia and China in the last part of the 19th century, provides us with a very evident anticipation of the arguments in The Accumulation of Capital.

"For it is one of the necessary corollaries of grande industrie that it destroys its own home market by the very process by which it creates it. It creates it by destroying the basis of the domestic industry of the peasantry. But without domestic industry the peasantry cannot live. They are ruined as peasants; their purchasing power is reduced to a minimum; and until they, as proletarians, have settled down into new conditions of existence, they will furnish a very poor market for the newly-arisen factories.

"Capitalist production being a transitory economical phase, is full of internal contradictions which develop and become evident in proportion as it develops. This tendency to destroy its own market at the same time it creates it, is one of them. Another one is the insoluble situation to which it leads, and which is developed sooner in a country without a foreign market, like Russia, than in countries which are more or less capable of competing on the open world market. This situation without an apparent issue finds its issue, for the latter countries, in commercial revulsions, in the forcible opening of new markets. But even then the cul-de-sac stares one in the face. Look at England. The last new market which could bring on a temporary revival of prosperity by its being thrown open to English commerce is China. Therefore English capital insists upon constructing Chinese railways. But Chinese railways mean the destruction of the whole basis of Chinese small agriculture and domestic industry, and as there will not even be the counterpoise of a Chinese grande industrie, hundreds of millions of people will be placed in the impossibility of living. The consequence will be a wholesale emigration such as the world has not yet seen, a flooding of America, Asia and Europe by the hated Chinaman, a competition for work with the American, Australian and European workman on the basis of the Chinese standard of life, the lowest of all--and if the system of production has not been changed in Europe before that time, it will have to be changed then.

"Capitalistic production works its own ruin, and you may be sure it will do so in Russia too...." Letter to Nikolai Danielson, Sept 22 1892.

It is possible, of course, that Luxemburg’s attempt to develop this line of analysis was mistaken, but it was certainly not a regression to bourgeois ‘underconsumptionism’ as so many economic experts have argued. She was taking up key questions posed by Marx and Engels and  - in her view and mine – not fully resolved by them.  

jk1921
On the question of

On the question of "abandoning the law of value." I think it is not so much the proponent of Luxemburg's views who abandon it, as it is captialism itself which is trying its best to abandon it. The problem that is dogging Demo and others seems to be that there must be some penalty, some "mechanism" that would punish the bourgeoisie for attempting to cheat the law of value through credit and debt, yet it is hard to see what that is. Certainly, at least in the US, where bankruptcy laws have been very liberal--its has ben largely possible for individuals and certain businesses to escape any real punishment for profligacy. One can run up debts, file bankruptcy, get a discharge and start all over again--but someone has to eat all that discharged debt somewhere. Someone has to "pay" for it.

However, in 2008, we saw something rather new--the entire idea of "systemic risk." How one firm's bankruptcy, or more recently one state's, could pose a risk to the entire system. This necessitated massive state capitalist intervention (something, which in the U.S. almost failed politically), which now poses the question of "moral hazard." If there are no consequences for indiscriminate profligacy, the system faces precisely the kind of breakdown in the law of value that Demo fears. It becomes less and less possible to "keep an honest balance sheet," even if it is intended. It is more and more difficult to figure out who owes what to whom and just where "real value" lies. I think this preceisly the condition the system finds itself in today. In order to understand all this, to come to grips with it, perhaps what we need in this discussion is a little less Mattick, Grossman and Luxemburg and a little more Matt Taibi.

ernie
I think alf is wrog to say

I think alf is wrog to say that rosa was not saying anything different to marx not even rosa thought that she openely critised marx's theory of accumulation and his method of looking at a pure capitalist market,
In response to slothjaabners point about capitalism being able to generate sufficient demand I suggest reading the chapter a critique of ricardo's theory of accumulation in thetheories of surplus value vol 2 where marxpatiently how capitalists reinvestment gnerates demand.
On the question of the world market marx saw it expanding in a multitude of ways not simply byabsorbing extracap markets: new branches of industry newindustries better use of exising ones.marx was explicit that non cap mArkets offered no solution. He also stressed the vital role of development of heavy industry
You cannot sqaure rosa's theory of accumulation with thatof marx and rosa was clear about that
For marx the vital question was the law of value not the market we turn marx' s theoryof accumation on its head by placing the market first.
We also tend to ignore the theory of the rate ofprofit in a recent article explaining the cause of the crisis we do not mention it once despitesaying elsewhere tjat we think the falling rate of profit is important!!!!p

d-man
extra-capitalism?

There is a good article on Marx's views on crisis, money, credit here. Do check out the previous texts I posted as well.

It seems the notion of an "extra-capitalist" mode of production should also include the recently opened up 'socialist' states (i.e. globalisation), otherwise Kautsky is right that she just confuses pre-capitalist production with non-modernized sectors like agriculture (or artisanry). So if we take "extra-capitalism" seriously, then through globalisation, accordingly, we should see a renewed breathing space for  capitalism, and not as the ICC claims a period of decomposition (I don't know if agriculture in Russia even today is really modernized).

(also Alf, nobody is saying that her mistake is bourgeois ‘underconsumptionism’.)

jk1921
I don't understand the

I don't understand the distinction between "pre-capitalist" and "extra-capitalist"? Surely, artisan production, etc. is reflective of a pre-captialist form of labor utilisation?

Didn't Stalin "modernize" Soviet agriculture through collectivization?

I think the point, once again, is not that pre-capitalist or extra capitalist social formations cease to exist in decadence; its that they are insufficeint to realize all the surplus value produced in the system. Its true that in many parts of the third world we are seeing a return to pre-capitalist forms, non-commoditized forms of social life, but if you ask me, this is a result of decomposition, the very breakdown in the law of value discussed above, not some new market for captialism to expand into.

I am curious for the comrades that reject Luxemburg, etc. what accounts for the massive explosion of debt that is a clear feature of the captialist system today? Why has debt become such a central feature, and such a clear problem, if it is only a means for greasing the wheel of accumulation?

d-man
rediscovering America

It's a precision made by the posters here trying to defend Luxemburg's side, so thank them for the clarification. About Russian agriculture I suspect pre/extra-capitalist forms of social life even increased as a result of end of the cold war, but if the health of capitalism becomes a matter of having sufficient extra-capitalist markets, then why can't these areas boost capitalism (imagine the number of iphones you can sell to all those isolated small farmers) and doesn't this contradict the ICC claim of decomposition (not that I share it, but for the sake of a coherent ICC analysis)?

For the question about debt I seriously recommend reading the article On credit romanticism.

The 'deepening' of Luxemburg's theory by focus on credit instead of her pre-capitalist buyer, is attempted by many (e.g. by Bellofiore, which I linked previously), but they are coupled with rejection of decadence. Some awareness and response to that whole literature is always helpful (in order not to rediscover America).

 

 

slothjabber
the accumulation of mutual incomprehensions

d-man wrote:

It seems the notion of an "extra-capitalist" mode of production should also include the recently opened up 'socialist' states (i.e. globalisation), otherwise Kautsky is right that she just confuses pre-capitalist production with non-modernized sectors like agriculture (or artisanry)...

 

Why? They were economies characterised by capitalist production, where surplus value was generated through the exploitation of wage labour. Russia became substantially capitalist in the 1880s, and spent the next 130 years as a capitalist state, except for a brief period after the revolution when the economy broke down.

 

jk1921 wrote:

I don't understand the distinction between "pre-capitalist" and "extra-capitalist"? Surely, artisan production, etc. is reflective of a pre-captialist form of labor utilisation?

 

In industrial capitalism, wage labour is the general form of the creation of value but it isn't the only one. Wage labour existed in feudalism and antique slavery too (not so much of it but it existed), and other forms of creation of value also exist in capitalism - artisan and peasant production, slavery etc. Someone who goes from being employed to being self-employed (who is not, therefore, generating surplus-value for a capitalist through the exploitation of wage-labour) is not going back to a previous, pre-capitalist economic form.

For Luxemburg, it seems to me, 'capitalism' relates to the worker-capitalist relationship. Other formations, whether before, during or after the existence of any particular bit of capitalism, are 'extra-capitalist' not 'pre-capitalist'. They are outside of capitalist economic relations (at least as far as production is concerned). This was my point, that capitalism continually generates 'extra-capitalist formations'. Surely it's not 'pre-capitalist' if it happens after or at the same time as capitalism.

I think calling them 'pre-capitalist' markets and formations obscures the fact that they are also generated inside capitalism. We wouldn't call wage labour in Ancient Greece a 'post-feudal formation', even though it is a form of labour that characterises an economy that won't exist for another 2,000 years. It was still generated inside antique slave society.

As I say, it seems reasonable to equate Marx's 'foreign markets' with 'pre-capitalist markets' - because in the majority of the world, capitalism was not the main mode of production in the mid-19th century - and with 'extra-capitalist markets' - because before the completion of the world market, there were still markets geographically beyond the establishment of capitalist economy.

But once the world market is established there is no 'pre-capitalist' anything. What Luxemburg seems to be discussing is something that exists outside of the worker-capitalist relationship, and there is no particular reason why that has to precede capitalism. The rising number of self-employed in the UK, for instance (currently up to 4 million or so, about 13% of the workforce, according to this report: http://www.thisismoney.co.uk/money/news/article-2074426/Number-self-employed-hits-20-year-high-jobless-accidental-entrepeneurs.html ) it doesn't mean we're going back to feudalism. Obviously, a lot of those self-employed are merely doing the same job and it's only their technical status that's different - their surplus-labour is still being exploited in other words, they still exist as workers in the same worker-capitalist relationship - but some genuinely are outside of that relationship and exist as independant producers.

jk1921 wrote:

Didn't Stalin "modernize" Soviet agriculture through collectivization?

...

 

Partly. Wasn't Russian agriculture capitalist before collectivisation? I think the drive was more to modernize technologically (tractors, larger fields, more productive techniques) than economically as such (by extending wage-labour).

d-man
law of value

So in your "extra-capitalism" that includes the self-employed, small farmers, artisan gold-miners in Zimbabwe, etc. the law of value doesn't apply or is modified (because otherwise the fact that the law of value operated, pehaps in a modified way, in the 'socialist' states wouldn't be an objection to designating them as extra-capitalist), but it's not immediately clear what this has to do with Luxemburg and decadence, not that it has to mind you. Btw here is an interesting couple of articles on the law of value.

Fred
What exactly is this thread

What exactly is this thread trying to achieve? How does it relate to class struggle? Link says this same debate has been around for a hundred years ( and got nowhere?) and I think there was a similar debate a couple of years ago, on lib com, which lasted for two years (should've checked) involved some of the participants above, but didn't go anywhere conclusive either. The thread is a bit like one of those pieces of music by Charles Ives where opposing sections of the orchestra play different and conflicting music in a glorious (revolutionary?) cacophony. But this is "art" of course; the cacophony here comes out more like "the accumulation of mutual incomprehension" as sloth jabber calls it above ;)

Is there some kind of unasked question that participants are seeking to answer here? Or is there some kind of unspoken fear at work here? This might be to the effect that capitalism may still have tricks up it's sleeves,and may still pull some sort of white-rabbit recovery out of the hat, no matter how small, temporary or even phony this might be. Is that what worries comrades, or is everyone just having a fling?

Meanwhile, in another part of the forest, teachers in Chicago have been on strike for the first time in 35 years. Messed up by the unions of course. But that it happened at all is good.

jk1921
Fred, the elephant in the

Fred, the elephant in the room in this thread is the question of the decadence of captialism. Is capitalism really decadent? If so, how? If Luxemburg is wrong, captialism might not really be decadent and then the revolution is impossible. But perhaps there is an alternative theory of economic crisis that can explain decadence--the Tendency for the Rate of Profit to Fall (TROPF). Of course, those who support Luxemburg's theories can't find an explanation for decadence there, so we go around in circles.

Is it a fruitless academic debate? Can't we see the evidence of captialism's decadence or even its decomposition all around us? Should we be focusing on the class struggle? Are these your concerns?

Fred
I think jk you've hit my nail

I think jk you've hit my nail on the head.

"Is it a fruitless academic debate?" ( Possibly) "Can't we see the evidence of captialism's decadence or even its decomposition all around us?" (We certainly can.) " Should we be focusing on the class struggle?" (We certainly should.) " Are these your concerns?" (They certainly are.)

But I hope you haven't led me astray, and hit me on the head too jk!

slothjabber
extra-capitalism as a social relationship

d-man wrote:

So in your "extra-capitalism" that includes the self-employed, small farmers, artisan gold-miners in Zimbabwe, etc. the law of value doesn't apply or is modified...

 

I was involved in a discussion recently about how to combat the arguments of 'Libertarians' who claimed that wages were a fair contract because workers would make something which was 'sold' to their employer. I make 50 items, which I sell to you for $1.00 each (so $50 = my 'wages'), and you sell them for $1.50 each and make $75 which is your $50 overhead plus a legimate $25 profit. Of course, that's not true, because the worker doesn't own the product of his or her labour. If Zimbabwean gold miners can say 'actually I don't want to sell you the gold, I'll just take home the product of my labour thank you, and sell it on the open market tomorrow', then they're independent producers. If they can't, then whatever their legal status, they're employees and part of the worker-capitalist relationship.

 

So I'm not really sure why you think it's 'my' extra-capitalism (I'm at this stage merely trying to work out what 'extra-capitalist' means for Rosa), nor why you think all those categories should be included in it. It seems to me that "the self-employed" in general, and I'd suspect "artisan gold-miners in Zimbabwe" are actually workers. It's true that small farmers, and in general artisan producers, would be outside of the worker-capitalist relationship, if they neither work for wages, nor employ others; if they have control over the products of their labour, if they're not being paid wages by a capitalist (person or corporation) who controls the exploitation of surplus value, if they don't in turn exploit the surplus-labour of others, they are outside of that worker-capitalist relationship, even if they are still producing commodities for the world market.

 

d-man wrote:

(because otherwise the fact that the law of value operated, pehaps in a modified way, in the 'socialist' states wouldn't be an objection to designating them as extra-capitalist)

 

I don't even understand why you should say this. Workers and capitalists, as in the Soviet Union, do not escape the worker-capitalist relationship. Commodity production and wage labour is capitalism, under any definition. Capitalism is not equal to extra-capitalism. So, they are neither 'socialist', nor 'extra-capitalist', they are capitalist, arguably more capitalist than the 'capitalist' countries of the West which probably had higher proportions of 'extra-capitalist' (ie independent) producers, though I'm not going to push this point.

 

d-man wrote:

but it's not immediately clear what this has to do with Luxemburg and decadence, not that it has to mind you.

 

I'm trying to get at what Luxemburg means by 'extra-capitalist'. Do independent poducers count, for Rosa, as 'extra-capitalist', given that they stand outside the worker-capitalist relationship, but not outside the capitalist market? If they do, that has implications for how we understand the notion of the exhaustion of extra-capitalist markets.

 

It seems logical to me that in the 'pre-capitalist' markets, those that have not yet been subjected to capitalism (so, in the mid-late-19th century) what makes them 'extra-capitalist' is not that capitalist countries don't control them, nor that the market hasn't arrived, but that they do not produce by wage labour. When all countries are capitalist, when all areas have been subjected (at least in outline!) to the world market, when the globe has been divided into competing imperialist blocs, there are still for Rosa 'extra-capitalist' forms. So geography doesn't make something 'extra-capitalist' and time doesn't make something 'extra-capitalist' and even relative (lack of) integration into the world market doesn't make something 'extra-capitalist'; so it is the quality of the productive relationship that makes it 'extra-capitalist', surely.

d-man wrote:

Btw here is an interesting couple of articles on the law of value.

Thanks.

ernie
"In response to jk o to

"In response to jk o to points
The idea of decadence of capitalism is the inheritence of the communist left but it the report on the iternational situation from the 2nd congress of the Communist International or the CWO excellent pamphlet on decadence from the 1970s (it is a shame it is no longer available).
On credit the roleof credit for marx is multiform: enablig capitalism to go beyond and at same time expand its contradictions, emabling the process of the socialisation of capital, the distristribution of surplus value between those saving to reinvest and those investing. Credit is integral to the whole process of accumulatiom. today its role in allowing capitalism to cotinue has take on truely insane levels of dislocation between the market and production.
A very interesting discussion on what is meant by extra capitalist. I think Katz's analysis of weight of non productive production has a role here. Whoever i am not sure the trying to define what is extra cap really solves the cunundrum of how capitslism is finding enough such markets to stop it grinding to halt!

d-man
Slothjabber, you write that

Slothjabber, you write that you don't know if independent producers count as extra-capitalist, so this blurry academic category doesn't help us at all to "defend" Luxemburg. The self-employed don't earn wages afaik (don't sell their labor-power to a capitalist), so into the 'extra-capitalist' category with them, like the Zimbabwean artisan gold-miners (report). You said yourself that wage-labour existed in other modes of production, so also in the soviet union, it doesn't prove it is capitalist (workers wages can't be used to buy freely so its not really money, afaik factories didn't sell their products on a market, etc.). Another example; workers engaged in unproductive labor (e.g. Chicago teachers) wouldn't belong in the capitalist category if you judge based on the fact they aren't employed by a capitalist, but on the other hand they do belong to it if you judge based on them receiving wages.

 

 

 

slothjabber
the necessity for clarity

d-man wrote:

Slothjabber, you write that you don't know if independent producers count as extra-capitalist, so this blurry academic category doesn't help us at all to "defend" Luxemburg...

 

It's not a 'blurry academic category' at all, it's a vital component of Rosa's theory. If we misunderstand what she means, we misunderstand her theory; getting a precise view on the other hand means have the correct tools to understand what she's talking about.

 

d-man wrote:
...The self-employed don't earn wages afaik (don't sell their labor-power to a capitalist), so into the 'extra-capitalist' category with them, like the Zimbabwean artisan gold-miners (report). You said yourself that wage-labour existed in other modes of production, so also in the soviet union, it doesn't prove it is capitalist (workers wages can't be used to buy freely so its not really money, afaik factories didn't sell their products on a market, etc.)...

 

Yes, the artisan miners in Zimbabwe are extra-capitalist because they own their own production, they don't sell their labour power. And likewise other independent producers.

 

I would disagree, however, that this means the Soviet Union was extra-capitalist. The economy of the Soviet Union was characterised by wage labour and commodity production. I can't see why that's not capitalism. In other periods, wage labour and commodity production existed, they just weren't generalised. Capitalism (industrial capitalism that is) is the generalisation of wage labour and commodity production, and surely that's what existed in the Soviet Union? There were surely fewer independent producers in the USSR than almost anywhere else.

d-man wrote:
...

Another example; workers engaged in unproductive labor (e.g. Chicago teachers) wouldn't belong in the capitalist category if you judge based on the fact they aren't employed by a capitalist, but on the other hand they do belong to it if you judge based on them receiving wages.

 

The state is a capitalist. It's a collective capitalist.

 

However, as I explained in an earlier post, the state can be regarded as extra-capitalist. I don't think it is because the capital it uses is derived from the worker-capitalist relationship, rather than outside it; but one of the comrades on Saturday was arguing that the state was extra-capitalist, on the basis that the purpose of the state was to consume without producing.

baboon
china

Wasn't the proletarianised Chinese peasantry an extra-capitalist market that, along with the unprecedented extension of credit in the west, produced the relatively short-lived Chinese "economic miracle"?