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
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.