Can the falling rate of profit explain decadence?

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MH
Can the falling rate of profit explain decadence?
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A short note on Grossman's theory, focusing specifically on the question of whether it can explain decadence; not that his is the only such theory but given his influence on Mattick and later the CWO etc. it may be best to deal with it first.

The Law of Accumulation and Breakdown, Pluto, 1992.

Grossman bases this theory on the simplified model of capitalist reproduction constructed by Bauer, which was intended to prove his own thesis that, as long as the expansion of capitalism is proportional to the growth of population, capitalism can create its own market and thus continue to expand the productive forces indefinitely.

By keeping all of Bauer’s assumptions but extending the model's timescale, Grossman  demonstrates that the portion of surplus value reserved for capitalist consumption eventually disappears because it is all required to expand production.

From this Grossman argues that “It follows that the system must break down. The capitalist class has nothing left for its own personal consumption because […] all existing means of subsistence have to be devoted to accumulation … If this state persisted it would mean a destruction of the capitalist mechanism, its economic end.” (p76)

Since one of the assumptions of Marx’s original models is that supply and demand coincide, this theory is not based on his analysis in Capital Volume Three of capital’s inherent problem of realising surplus value, ie. its in-built tendency towards overproduction. For Grossman, the problem for capital is not that it produces too much surplus value, but too little.

In reality capital's final breakdown is averted by counteracting or modifying tendencies which have the effect of restoring the valorisation of capital. For Grossman periodic crises are the means by which the breakdown tendency is temporarily interrupted and prevented from realising itself completely.

But at a certain point these countertendencies, which include increasing the rate of exploitation and technological improvements, cease to operate and the breakdown tendency “gains the upper hand and asserts itself in the absolute form as the final crisis” (p85).In this sense, capitalism’s final breakdown is nothing but a temporary crisis that is not interrupted by countertendencies.

It is not clear why or at what point these countertendencies must cease to operate. Nor is it clear why the ‘final crisis’ is in reality final for capital, especially as he argues, in an almost throwaway line, that to preserve the existing economic order the bourgeoisie will do anything necessary to try to restore profitability:

the class of industrialists …  is directly interested in preserving the existing economic order and tries, in every conceivable way, to find means of ‘boosting’ the economy, of bringing it back into motion through restoring profitability.” (p133, my emphasis)

So far this theory is at the abstract level of the simplified models of reproduction, which are based on a purely hypothetical situation where capitalism is the exclusive mode of production and comprises only capitalists and workers. Gorssman fully recognises that this must be verified by examining the concrete circumstances of capitalist accumulation. This demands an analysis of the rise of imperialism and the intensified struggle between the advanced capitalist states which culminates in the first world war.

He agrees with Luxemburg that the rise of imperialism must be seen as a symptom of the growing crisis of capitalist accumulation: it is “a striving to restore the valorisation of capital at any cost, to weaken or eliminate the breakdown tendency” (p122). Intensified competition for a share of the world market leads to “an ever more destructive struggle among capitalist states” (p172).

This “ever more destructive struggle” of course culminates in WW1. But instead of pursuing his line of argument to conclude that capitalism has now entered into its decadent phase, he reverts instead to his schema of economic crises as a temporary interruption of the breakdown tendency, arguing that “the destructions and devaluations of war are a means of warding off the imminent collapse, of creating a breathing space for the accumulation of capital” (p157).

In this schema, wars - even global imperialist ones - are simply phases in a cycle of temporary economic crises caused by a fall in the rate of profit, leading to the devaluation of capital, followed by a new upsurge of accumulation.

In this way, despite his insights into the significance of imperialism, Grossman abstracts from his theory the very phenomena that are essential to understanding the historic change in the conditions for accumulation at the end of the 19thC: the growing crisis of accumulation; the struggle for control of markets and intensified imperialist conflicts leading to world war.

So is capitalism decadent or not? Logically in Grossman's theory 1929 rather than 1914 would be the key turning point in terms of profitability but of course the Great Depression proved not to be capital's 'final crisis' - which is in any case not the same thing as decadence, ie. the definitive fettering of the productive forces. 

Elsewhere he suggests that the post-WW1 economic offensive against the working class is proof that capitalism has 'outlived itself' but ultimately it remains unclear whether capitalism is decadent or not. 

Nor does Grossman’s theory appear to be confirmed by empirical evidence of capitalism’s evolution in the 20th century:

-       The decade before WW1 is not preceded by a significant fall in the rate of proft (with the exception of Germany, which may indeed be a factor in the outbreak of war)

-       WW1 is not followed by a significant upsurge of economic activity in the core capitalist countries. Instead, after temporarily stabilizing, profit rates plunge to new depths in the Great Depression

-       Profit rates are already rising in the decade before the unprecedented destruction of WW2

-       After WW2 profit rates fall instead of rise, declining throughout the post-war boom before temporarily stabilizing in the 1980s (see below).

 

(Source: http://www.leftcom.org/files/2015-08-07-profit-graph-2.png. There are obviously all sorts of problems in measuring the ROP but this graph is cited by the CWO in support of its own arguments.)  

All this is not at all to deny the importance of the falling rate of profit; the graph above is a clear demonstration that it is proof of the historically transitory nature of capitalism; the fact that the more accumulation accelerates, the more the rate of profit falls, threatening the continuation of the production process. The FROP is also a key factor in capitalism's crisis, especially since the 1980s, as we can see from the fact that the bourgeoisie has indeed tried "in every conceivable way, to find means of ‘boosting’ the economy, of bringing it back into motion through restoring profitability”. 

The question here is whether it can be the decisive factor in explaining the entry of capitalism into decadence. Grossman's theory appears deeply flawed but are these flaws specific to his particular 'theory of breakdown' or are they more general to theories of decadence based on the FROP?

 

 

 

Demogorgon
Plot twist?

I will need time before providing a detailed response, but one thing occurs to me immediately.

The real problem in the graph MH shows is not the FROP's relationship with decadence, but its relationship with the cyclical crisis. I don't think this is fatal to Grossman, though, who regarded the mass of profit as the deciding factor of an entry into crisis.

For example:

  • To think as Boudin that a fall in the rate of profit ‘naturally interrupts the advance of the accumulation process and acts like an automatic brake’(1909, p. 169) is to understand nothing of Marx’s system. I have shown that it is not only not natural that accumulation should slow down with a fall in the rate of profit but that, on the contrary, it can proceed at an accelerated pace.” - http://www.marxists.org/archive/grossman/1929/breakdown/ch02.htm
  • ‘Rate of profit’ and ‘mass of profit’ have entirely different meanings for theory, despite the close connection between them. Several writers like Charasoff, Boudin and others felt that the central point of Marx’s theory was contained here. But they could not demonstrate the necessary breakdown of capitalism because they confined their attention to the fall in the rate of profit. Breakdown cannot be derived from this. How could a percentage, a pure number such as the rate of profit produce the breakdown of a real system? Table 2 showed that the capitalist system can survive despite the fall in the rate of profit and that the final breakdown in year 35 has nothing to do with the falling rate of profit as such. We cannot explain why in year 34, with a rate of profit of 9.7 per cent, the system survives and why in the next year, with a rate of profit of 9.3 per cent, it breaks down. An explanation is only possible when we relate the breakdown not to the rate of profit, but to its mass: ‘accumulation depends not only on the rate of profit but on the amount of profit’ (Marx, 1969, p. 536).” - http://www.marxists.org/archive/grossman/1929/breakdown/ch02.htm

However, the graph shows a clear secular trend for a declining ROP. Even if the FROP is not the proximate cause of a particular crisis, what it does indicate is a growing secular overaccumulation of capital, exactly as Grossman predicted. This results in a trend towards greater fragility in the economic structure, making capitalism more vulnerable to crises, even though it is not necessarily the immediate cause. In a peculiar plot twist, MH seems to demonstate the opposite of what he intended: FROP doesn't explain cyclical crises, but does explain decadence!

The underlying problem, I think, with MH's approach is he is seeking a decisive point when capitalism becomes decadent. Decadence is posed as an either/or equation: "is capitalism decadent or not?" that must have a "key turning point". We often criticise the anti-decadence brigade for mocking the idea that before 1914 capitalism was fine, but afterwards it was decadent.

MH is far too erudite to be that crude, but I think there is still an element of this perspective in his presentation here. World War One was a tipping point in the sense that the contradictions in the economic sphere exploded in spectacular fashion in the political sphere. But, the key elements of decadence - the end of parliamentary struggle, the trade unions, national struggles, etc. - had already become increasingly reactionary long before World War One!

In the late 19th century, capitalism had already experienced the Long Depression, an extended period of stagnation. Nationalism had already shown its exhaustion as a radical force, when a patriotic uprising during a national war ended in the proletarian revolution of the Paris Commune. The revisionism of Social Democracy showed that parliamentary struggles were now a corrupting force in the workers' movement, while the first Soviets in 1905 showed the limits of trade union struggle and how to move beyond it.

WW1, and the revolution and counter-revolution that followed, revealed these factors in an orgy of spectacular brutality, but they didn't appear out of the air. In reality, capitalism was decadent in many senses, long before 1914, just as it retained some of its progressive character afterwards. Indeed, the state-managed economic revival in the mid-30s capitalism was able to "raise the rate of exploitation while at the same time conceding wage increases, paid holidays, reductions in the working day" (Vercesi, Bilan 43), a factor significant enough to confuse the Italian Left.

In my opinion, decadence is best understood as a process by which the secular trends of capitalism lead capitalism's self-destructive tendencies to increasingly outweigh its progressive elements. The process isn't linear nor is it always obvious. Sometimes it expresses itself spectacular historical events, but the process causing those events takes place below the surface in the day-to-day real-life functioning of capitalist social relations - quite literally, in our day jobs.

Taking this back to MH's graph, I would ask him this question. Taking the long view, which ROP is more likely to motivate and allow capitalism to increase the productive forces: the one of 1880 or the one of 1980? Which one is more likely to present a barrier to that development? And which capitalism is likely to suffer more from the development that does occur?

Tagore2
Excuse me to come back to

Excuse me to come back to this question but: what is the unit of measure of profit?

I have the impression that we are talking about the "growth of a gas" without specifying whether it is the growth of its volume, its mass or its pressure.

If it is the value, its measure is the amount of work, and its unit is the hour, day, week, month, year of work of an average worker.

I do not see how we can speak seriously of profit without having rigorously defined its measure and its units.

Otherwise, I agree with the idea that "the expansion of capitalism is proportional to the growth of population" (under the empire of capitalism). Since: "The total labor power of society ... is embodied in the total sum of commodities produced by society ..." it makes sense.

On the question of measurement, see the other thread:

http://en.internationalism.org/forum/1056/tagore2/14519/calculation-gdp-value

jk1921
Measure of Profit

Tagore2 wrote:

Excuse me to come back to this question but: what is the unit of measure of profit?

Why wouldn't the unit of measure of profit be the rate of return on capital invested? What am I missing?

jk1921
Contextualization

Demogorgon wrote:

In my opinion, decadence is best understood as a process by which the secular trends of capitalism lead capitalism's self-destructive tendencies to increasingly outweigh its progressive elements. The process isn't linear nor is it always obvious. Sometimes it expresses itself spectacular historical events, but the process causing those events takes place below the surface in the day-to-day real-life functioning of capitalist social relations - quite literally, in our day jobs.

Taking this back to MH's graph, I would ask him this question. Taking the long view, which ROP is more likely to motivate and allow capitalism to increase the productive forces: the one of 1880 or the one of 1980? Which one is more likely to present a barrier to that development? And which capitalism is likely to suffer more from the development that does occur?

Can we still say that this process reached a sort of tipping point in the early twentieth century using this criteria? I don't see a problem with the way this is presented here, which may allow us to better contextualize empirical phenomena like the growth of the world proletariat in recent decades (China, South Asia, etc.). This is generally seen as empirical evidence against decadence: how can capitalism be decadent if it is still developing the proletariat? But if we situate this growth with increasing immiseration of the proletariat elsewhere in the world system, the growth of the means of destruction, environmental peril, other features of decomposition, etc. the overall global picture looks different.

On the ROP, Harvey argues that anything less than 3 percent growth is unacceptable for capital and the history of the last several decades can best be understood as capital and the state's varying effort to ensure at least a 3 percent return on investment through various mechanisms that serve as countervailing tendencies declining rate of profit, although I think in this literature these mechanisms are understood as more of a political project of the state than intrinsic countervailing features of accumulation itself. This seems consistent with our theory of state capitalism.

Tagore2
A unit of measure is a

A unit of measure is a standard like the kilogram, the second, and so on.

What is the unit of measurement on this chart? How is all this measured?

I wonder how they could calculate profit rates as huge as 50% in the 19th century, or even 12% in the 21th. Where do these numbers come from? How to redo the calculation?

Demogorgon
Tipping points

Quote:
Can we still say that this process reached a sort of tipping point in the early twentieth century using this criteria?

Yes, I think we can, because it was at this point that the process began to directly manifest in new forms of war, crisis and class struggle that promised devastating consequences for humanity in the former and hope in the latter.

But, I don't think we can tie it down to a date that fits neatly on a chart matching a fluctuation in the FROP. I doubt we could do it with Luxemburg's theory either, for that matter, especially if we use the version that argues that ECMs still exist in the world today enabling accumulation.

In a sense, both theories are like climate change. You can't (at least with current science) directly link specific extreme weather events to climate change, but you can certainly say that the latter makes the former more likely.

On Harvey, I'm not familiar with what you're saying here, so I can't comment directly on the argument. But I see no problem with the concept of state capitalism trying to impose counter-tendencies against the FROP - indeed, it must somehow do this to be effective at all. Exactly how those mechanisms work, of course, is a puzzle that has eluded me for some time.

Demogorgon
Statistics

Tagore, I'm not quite sure what you're trying to say or quite how it relates to the discussion.

Is it a statistical question? If so, I'm not sure anyone here is competent to critique Maito's figures or get into deep discussions on how the ROP is calculated in the "real world". Kliman discusses this a little in his book on The Failure of Capitalist Production, and Mattick makes some methodological points about the relationship between Marx's categories and the empirical world in Economic Crisis and Crisis Theory.

Is that the real question of this thread, though?

jk1921
It took me some time to

It took me some time to understand the argument, but I think in Demo's presentation decadence does not emerge as the result of some kind of objective economic mechanism of a new kind (the elimination of extra-capitalist markets on a world scale) that capitalism never experienced before in the period of ascendancy, but as the cumulative effect of capitalism's secular crises of accumulation--crises which had been factors of capitalist development since its inception and were in fact at one point moments in the growth and extension of capitalist relations.

I think Demo's point is that even in decadence these crises continue to be spurs to growth, but their attendant civilzational consequences (war, environmental destruction, and eventually social decomposition etc.) began to outweigh their benefits at some point in history, which he still situates around the turn of the twentieth century. Unless I overlooked it somewhere though, It still seems to me that this is missing an historical explanation of why the turning point occurs at the dawn of the twentieth century--oddly around the same period the Luxemburgists suggest the new historical crisis of global overproduction resulting from the completion of the world market and the destruction of extra capitalist markets (at least in sufficient strength to realize surplus value produced in the core) breaks out marking a definitive qualitative change in the nature of capitalist development. Growth and secular crises may continue to occur, but only in a system that is in a sense "historically illegitimate" and is really only functional to the extent that it can be propped up by all kinds of state capitalist mechanisms to cheat the law of value (not Luxemburg's formulation necessarily, but certainly the ICC's).

So to MH's question about the FROP and decadence: There seems potentially two questions here that might not be entirely the same: 1) Can you get a consistent theory of decadence out of FROP (a series of "secular crises" [quantitative?] leading to a qualitative change) and 2.) Can FROP empirically account for a qualitative change in the nature of the capitalist world system at the dawn of the twentieth century?

jk1921
Simplified

Demogorgon wrote:

On Harvey, I'm not familiar with what you're saying here, so I can't comment directly on the argument. But I see no problem with the concept of state capitalism trying to impose counter-tendencies against the FROP - indeed, it must somehow do this to be effective at all. Exactly how those mechanisms work, of course, is a puzzle that has eluded me for some time.

I'd have to go back and check, but simplified I think his argument is that below 3 percent return, capital will go on an investment strike--expressed today as a reluctance to engage in productive investment and preference for all kinds of financial speculation.

Tagore2
Quote:Is it a statistical

Quote:
Is it a statistical question? If so, I'm not sure anyone here is competent to critique Maito's figures or get into deep discussions on how the ROP is calculated in the "real world".

Yes, this is a statistical question. We canot take numbers of someone, and discuss on them without understanding them. In addition, it is not really complicated. Mathematically, it just requires mastering cross-multiplication. See the quoted tread for calculation of value.

--

Since you understand that capital, notwithstanding few adjustments, is growing at the same rate as the proletariat, and that the downward trend in the rate of profit is purely tendential, that is to say, the rate of profit is rising again at the end of each crisis, you are more interested in the concrete objective factors that lead to the crises, and no longer in a magical mathematical operation that would lead to the collapse of capitalism.

For example, with regard to the First and Second World Wars, I wrote an article (unpublished) on the importance of the energy transition at that time, from coal to oil, and on the need to completely recast the industrial substrat and seize new territories according to this new source of energy.

A number of researchers believe that the First World War was determined in particular by the coal production's Hubert peak in Britain, while coal production continued to grow in Germany, which threatened the domination of Britain on Europe thanks to its exports; while World War II was largely determined by the search for oil.

The brutality of Germany was in turn determined by the fact that the United States was sitting on an ocean of oil, and that Germany had no oil: the conquest of the Baku reserves in the USSR becoming a fundamental long-term strategic goal.

It is the objective factors like the energy transition, the development of new technologies based on exotic raw materials that determine the large-scale wars. The cyclical but sustainable decline in the rate of profit is a consequence of this kind of deep geo-economic movement.

MH
Explaining the 'tipping point'

Demogorgon wrote:
In reality, capitalism was decadent in many senses, long before 1914, just as it retained some of its progressive character afterwards … World War One was a tipping point in the sense that the contradictions in the economic sphere exploded in spectacular fashion in the political sphere.

Leaving aside for the moment the idea that capitalism “retained some of its progressive character” after WW1, which I think is confused, I don’t think there is any disagreement that the signs of capitalism’s approaching decadence were already apparent before WW1; as far I know  this is broadly the position the ICC has always defended, despite all the feeble jokes about decadence beginning at 3pm on August 4th 1914…

So the idea of WW1 as a ‘tipping point’ in itself is not problematic. 

But this doesn’t seem to get us very far in terms of explaining decadence.

jk1921 wrote:
Unless I overlooked it somewhere though, It still seems to me that this is missing an historical explanation of why the turning point occurs at the dawn of the twentieth century--oddly around the same period the Luxemburgists suggest the new historical crisis of global overproduction resulting from the completion of the world market and the destruction of extra capitalist markets (at least in sufficient strength to realize surplus value produced in the core) breaks out marking a definitive qualitative change in the nature of capitalist development.

Yes I agree.

The evolution of the FROP in the graph clearly shows the ‘ageing process’ of capitalism at work from the moment of its birth, just as Marx described. But the question posed here is: is the FROP sufficient on its own to explain these “contradictions in the economic sphere” that exploded in such a spectacular fashion in WW1?

 

 

Link
Decadence and crisis theory

I am not quite sure of the point MH wants to make here.  I don’t think the FROP provides a determination of the onset of the decadence although generally speaking it acts both  as a stimulant and product of growth in the economy.   It is therefore relatively easy to relate it to the onset of imperialism as colonisation on pre cap markets becomes dominant. But there again that is what markets theory say too.  I cannot see either FROP or any version of RL’s  markets theory actually determining the onset of decadence or somehow creating it.  However we have had this discussion before and I thought there was a general agreement that decadence was not an economic or crisis issue per say but a political and social issue ie a consequence of  the contradiction between the development of forces of production and relations of production.  We should not therefore be looking for a specific rate of  profit or a measure of the relative level of pre-cap markets as being determinant.

 

Both Luxemburg and Lenin (and others) are to be respected for their vision in seeing the change of period taking place at the turn of the 20th Century and posed analysis for the change.  Both were highly insightful as some of RL quoted by MH proves.  Both saw the new phase beginning as the final phase of capitalism, a phase of increasing catastrophy.  Both however were not totally correct in their theories however (indeed, the ICC now rather sees that phase only starting in 1990) .   At that point in time it was just too early to theorise well as they did not and could not have experience of decadence and sorry I mean to include Grossman and Mattick in that statement too.  I think now it a good time to reevaluate the process of decadence without personally feeling up to that task. 

 

For me it is sufficient to link the achievement of the world market (ie the achievement rather than a theory linking accumulation and pre cap markets)  and the onset of imperialism to completion of capitalisms historic task  and then try to understand the process that constriction places on economic factors?  This seems to be the logic of this discussion, preparing the ground for looking at crisis during the 100 years of decadence.

 

Lastly could somebody respond to my post 85 on the other thread in that I am looking to understand better a  strong point made by both Alf and MH

baboon
I got involved in this

I got involved in this discussion over the texts in the International Review regarding the economic causes of decadence. I still bear the mental scars of that trauma - and trauma it was because the more I read of comrade's position,over hours, days and weeks, the less I understood about the point they were making in arguing against the fundamental problem of capitalism's overproduction. I can understand Marx's position on overproduction that he took up from bourgeois economists, particularly, Malthus but I don't understand the position that the falling rate of profit alone is responsible, or indeed can be shown to be responsible for the decadence of capitalism. Of course this expression didn't happen overnight and the seeds of decadence were sown long before 1914 - they were already there in the heights of capitalism's ascendency, as Capital shows. The trade unions, parliament and national liberation were becoming reactionary but there was nothing definitive about that prior to the first world war. And it's this war that marks the beginning of capitalism's relative decay and the hobbling of the potential of the productive forces; a war to fight for the finite markets giving rise to full-blown imperialism. Capitalism retained some positive aspects? Where could the working class align itself with progressive elements of the bourgeoisie who were based on or expressed these positive aspects?

Demogorgon
Tipping points again

I think much is hinging here on what is expected of a theory of decadence. I agree that there is not necessarily a mechanical link between the FROP and decadence in the sense that once the ROP falls below a certain point, capitalism becomes decadent. (Interestingly, Grossman makes this point with the breakdown tendency in general, which he argues cannot be explained solely in terms of the ROP.)

But is it actually reasonable to demand this of a theory? I don't think RL's theories have any more success here than the FROP. When does capital become decadent in here schema? When markets are completely exhausted? Or as the point of exhaustion is approached - but when exactly is that? How is that point quantified? And how does it relate to the timing of World War 1?

I also think there's a problem with how you precis Grossman's theory.

MH wrote:
This “ever more destructive struggle” of course culminates in WW1. But instead of pursuing his line of argument to conclude that capitalism has now entered into its decadent phase, he reverts instead to his schema of economic crises as a temporary interruption of the breakdown tendency, arguing that “the destructions and devaluations of war are a means of warding off the imminent collapse, of creating a breathing space for the accumulation of capital” (p157).

In this schema, wars - even global imperialist ones - are simply phases in a cycle of temporary economic crises caused by a fall in the rate of profit, leading to the devaluation of capital, followed by a new upsurge of accumulation.

In this way, despite his insights into the significance of imperialism, Grossman abstracts from his theory the very phenomena that are essential to understanding the historic change in the conditions for accumulation at the end of the 19thC: the growing crisis of accumulation; the struggle for control of markets and intensified imperialist conflicts leading to world war.

You pose a false dilemma here, suggesting there are two theories at work here, contradicting each other:

  • a historical one that takes in phenomena relating to decadence;
  • an abstract one, related to the cyclical crisis, where each crises overcomes the problems of accumulation.

But, in fact, these two aspects are not in contradiction at all but work as a unity. Grossman makes the point that even the cyclical crisis has a historical dimension: "I have shown how the course of capital accumulation is punctuated by an absolute overaccumulation which is released, from time to time, in the form of periodic crises and which is progressively intensified through the fluctuations of the economic cycle from one crisis to the next."

Yes, each crisis is a "temporary interruption of the breakdown tendency", but nowhere does he imply that a crisis resets capitalism to, for sake of argument, Year 1 in the reproduction schemas. All he says is that a crisis alters the value structure of capital sufficiently to make accumulation possible again. There is no suggestion at all that capitalism can continue in an eternal cycle.

On the contrary, the mass of historically accumulated capital remains, even after crises. That is why Grossman can say that even in spite of crises and counter-tendencies: "At an advanced stage of accumulation it reaches a state of capital saturation where the overaccumulated capital faces a shortage of investment possibilities and finds it more difficult to surmount this saturation. The capitalist mechanism approaches its final catastrophe with the inexorability of a natural process."

It is precisely this secular overaccumulation that leads to the phenomena Grossman goes onto describe: imperialism, war, speculation, etc. Again, these phenomena act as counter-tendencies – like crises they prevent the breakdown tendency from becoming absolute. In other words, they become essential for capitalism’s continued survival and, worse, they must intensify (just as crises do) as capitalism continues its historic accumulation process.

This doesn't mean that it is possible to empirically determine the precise moment that, say,  trade unions become wholly reactionary, in relation to the rate-of-profit any more than you can with regard to extra capitalist markets, except after the fact.

Demogorgon
Quote:The trade unions,

Quote:
The trade unions, parliament and national liberation were becoming reactionary but there was nothing definitive about that prior to the first world war. And it's this war that marks the beginning of capitalism's relative decay and the hobbling of the potential of the productive forces; a war to fight for the finite markets giving rise to full-blown imperialism.

This shows the problem of how we relate decadence to its immediate phenomena. The war was a product of the hobbling of the productive forces and the way the bourgeoisie attempted to respond to that problem.

Quote:
Capitalism retained some positive aspects? Where could the working class align itself with progressive elements of the bourgeoisie who were based on or expressed these positive aspects?

You're confusing two separate issues. Capitalism has absolutely maintained a progressive element in that it has continued to develop the productive forces. As I pointed out, the Italian Left observed that the war economy was raising the wages of the workers that worked in it, especially in the democracies. Wages and living standards rose during the post-war boom, as well. Are any of these points in dispute?

But progressive elements do not a progressive system make; any more than the awful violence of colonialism and immiseration of 19th century capitalism, meant capitalism never had any revolutionary force.

The point is that as capitalism develops, the price for achieving these advances grows more and more: as long capitalism exists, it subordinates the creation of use-value to the creation of surplus value. As this becomes more problematic, the creation of new use values is dependent on the mass destruction of old ones.

Also, I made no claim there was any basis for alignment with any faction of the bourgeoisie, when the price of progress in their system is the gas chamber and Hiroshima.

MH
Reply to Link

Link wrote:
I think now it a good time to reevaluate the process of decadence without personally feeling up to that task. 

 For me it is sufficient to link the achievement of the world market (ie the achievement rather than a theory linking accumulation and pre cap markets) and the onset of imperialism to completion of capitalisms historic task and then try to understand the process that constriction places on economic factors?  This seems to be the logic of this discussion, preparing the ground for looking at crisis during the 100 years of decadence.

 Lastly could somebody respond to my post 85 on the other thread in that I am looking to understand better a strong point made by both Alf and MH.

This seems a good starting point Link. After all, for Marx the creation of the world market was one of what he called three ‘cardinal points’ of capitalism (the others being the concentration of capital and the socialisation of labour), so the achievement of this clearly had great significance for him in terms of whether capitalism had completed its historic tasks – although I don’t think this is made explicit.

So this may a good point to try to summarise where we think we are with this whole discussion.

You began the thread on Luxemburg by raising the whole issue of economic growth in decadence, which for you posed a basic problem for her theory: it showed this growth could not be dependent on pre-capitalist markets. For you: “The overall implications it seems to me are that the FROP theory is given justifying factors whereas Luxemburg’s pre capitals markets theory is not”.

I felt this was based on a misunderstanding of what Luxemburg actually wrote. I summarised my own interpretation of her theory in my post #84.

For me this shows that economic growth in decadence is far from ruled out in Luxemburg’s theory but it takes on an increasingly catastrophic character at the social and political as well as the economic levels.

On the FROP itself there were also differences. You felt that:

In terms of the falling rate of profit, I don’t think there is anything in the (FROP) theory that says there must be a lower rate of profit in decadence than in ascendancy.”

I argued that for supporters of the FROP like the CWO by definition the ROP must be lower in decadence.

The point here is it seems to me we cannot really clarify the issue of growth in decadence without first understanding the two main theories of decadence: Luxemburg and the FROP. This is very schematic I know but...

So the point I am trying to make when I began the thread on the FROP is that while I now believe Luxemburg’s theory provides a coherent explanation of decadence, I am yet to be convinced that the theory of the FROP does, although so far I have only dealt with Grossman’s theory, on the grounds that it is a major influence, not only on Mattick but also on groups of the Communist Left like the CWO.  

So that’s where I think we are, but there is also some convergence of viewpoints to acknowledge, which I think is apparent in your post above, as well as from Demo on the reality of decadence.

PS As far as I am aware Marx’s arguments about capitalism’s inherent contradictions and the problem of realisation are in Capital Vol 3, Chapters 13-15, and also Theories of Surplus Value Ch 17, but other comrades may be able to add to this.

 

 

 

 

MH
Reply to Demo on Grossman

Demogorgon wrote:
On the contrary, the mass of historically accumulated capital remains, even after crises. That is why Grossman can say that even in spite of crises and counter-tendencies: "At an advanced stage of accumulation it reaches a state of capital saturation where the overaccumulated capital faces a shortage of investment possibilities and finds it more difficult to surmount this saturation. The capitalist mechanism approaches its final catastrophe with the inexorability of a natural process."

You’re absolutely right of course he does say that, although immediately prior to that he also says that eventually as a result of the FROP “accumulation comes to a standstill” which surely can’t be right - except in the most abstract sense, in the same way that Luxemburg talks about the 'impossibility' of accumulation without non-capitalist surroundings?

But more significantly for me Grossman’s argument leads not to the conclusion that capitalism enters into its decadent phase  but that it eventually faces a 'final crisis' due to the impossibility of further accumulation. The two are not the same thing.

What I find completely puzzling about Grossman is his determined avoidance of the conclusion that capitalism is decadent. I mean he’s writing in 1929! He must have been completely aware of the positions taken up by the left and the early CI on the 'new epoch', etc. He even argues against Bukharin who defends the position that capitalism is decadent.

But whatever the reasons, and whatever insights he may have had into the economic mechanisms of capitalism’s historically transitory nature, for me his ‘theory of collapse’ is fundamentally, structurally, not a theory of decadence.

 

 

Demogorgon
Determined Avoidance

MH wrote:
You’re absolutely right of course he does say that, although immediately prior to that he also says that eventually as a result of the FROP “accumulation comes to a standstill” which surely can’t be right - except in the most abstract sense, in the same way that Luxemburg talks about the 'impossibility' of accumulation without non-capitalist surroundings?

Where does he say that? Do you mean what he says in the opening paragraph of my quote, where he says: "Afterwards accumulation comes to a standstill because, at a more advanced stage of accumulation, and due to the very process of accumulation, profit necessarily declines."

He doesn't mention the rate of profit, just that profit declines. It seems clear, to me at least, that he is referring to the breakdown tendency, which he identifies as a shortage in the mass of profit, which although linked to ROP is not identical with it.

The breakdown tendency is abstract only in the sense that, in reality, it is prevented from asserting itself absolutely by the presence of counter-tendencies. It still manifests in the temporary form of crisis - which is far from abstract, but directly experienced in reality. As these counter-tendencies are progressively realised with the historical development of capitalism, it is possible to conceive of some sort of absolute breakdown occuring, although what form this would take is anyone's guess. (see also below)

Similarly, with Luxemburg, I'm not sure why you're arguing that her "impossibility" is purely abstract? It is the very core of her argument. For her, the presence of extra-capitalist markets is a counter to that absolute impossibility, but again there's no a priori reason why this couldn't happen in reality. I think you need to explain why it can't.

MH wrote:
But more significantly for me Grossman’s argument leads not to the conclusion that capitalism enters into its decadent phase  but that it eventually faces a 'final crisis' due to the impossibility of further accumulation. The two are not the same thing.

I've already countered this line of argument in post #15. It is true that Grossman does not provide a clear account of decadence  is the sense that he never says "here is my theory of decadence", and especially not how we understand that term today. But I think you'd be hard-pressed to find that in Marx, or even in Luxemburg.

However, all the necessary elements are necessary: the secular tendencies of accumulation lead to more and more difficulties in the accumulation process; this generates more and more violent and destructive counter-tendencies (crises, wars, speculation); the fetters on the productive forces inherent in capitalism are more and more intensified.

In Grossman's schema, it is always possible for a "final" crisis to be transformed into a temporary one - this can only be determined in the actual historical evolution of any particular crisis. What is absolutely clear is that any such survival is predicated on ever greater historical catrastrophes - economic, social and political - that may directly threaten the survival of the system in their own right, even though they are essential for its continuation. The final limits of the system and the way it meets its end are thus social - war, revolution, disintegration - not purely economic.

It also seems inconsistent to criticise Grossman for a "final crisis" while defending Luxemburg, whose theory has exactly the same logical result.

Quote:
He even argues against Bukharin who defends the position that capitalism is decadent.

Again, where does he actually do this? He sharply criticises Bukharin for shoddy analysis and locating the breakdown tendency in war, rather than locating it in the economic base. Breakdown and collapse cannot be derived from war, because war acts a counter-tendency to the breakdown tendency:

"Bukharin’s statement that it is a fact that we have entered a period of the breakdown of capitalism may very well be true, but it is precisely a question of explaining this fact causally, of establishing by way of theory, the necessity for a tendency to break down under capitalism ... his hopes about the breakdown of capitalism are shifted on to a ‘second round’ of imperialist wars and the gigantic destruction of productive forces caused by war.

So according to Bukharin, the collapse of capitalism flows from the destruction of the economic base. But this latter is not grounded in economic forces, in inexorable economic laws of the capitalist mechanism itself, but in war, in a force that exists outside the economy and which exerts a disintegrating influence on the apparatus of production from the outside. It would be useless to search Bukharin for any other cause of the breakdown of capitalism than the ravages created by war. The breakdown flows from transcendental causes whereas, for Marx, it is an immanent consequence of the very laws that regulate capitalism.

If, like Bukharin, we expect the breakdown of capitalism to flow from a second round of imperialist wars, then it is necessary to point out that wars are not peculiar to the imperialist stage of capitalism. They stem from the very essence of capitalism as such, during all its stages, and have been a constant symptom of capital from its historical inception. Later I shall show that far from being a threat to capitalism, wars are a means of prolonging the existence of the capitalist system as a whole The facts show precisely that after every war capitalism has entered on a period of new upsurge."

I will say that I think Grossman bends the stick too far in this critique, where he suggests that war is not a threat to capitalism. The reality is much more nuanced, in my opinion. Bukharin ignores the fact that war, like crisis, can revitalise the system (although this is not inevitable) but he is right about its fundamentally destructive element, one that does threaten the system, a threat which intensifies over time. The point is that these phenomena are linked to the secular tendencies of the economic base and the underlying breakdown tendency.

His criticism of Lenin is much more muted - no doubt due to political realities at the time - but the fundamentals are similar:

"Lenin was right in saying that highly developed capitalism is characterised by an inherent ‘tendency to stagnation and decay’. But Lenin linked this tendency to the growth of monopolies. That there is such a connection is indisputable, but a mere statement is not enough. After all one is not dealing simply with phenomena of stagnation. The very same British capitalism that has reached a state of decay economically, shows an extremely aggressive character in other aspects. It is this aggressive character or unusual energy that gives to it the peculiar stamp of so-called ‘imperialism’.

Imperialism is characterised both by stagnation and by aggressiveness. These tendencies have to be explained in their unity; if monopolisation causes stagnation, then how can we explain the aggressive character of imperialism? In fact both phenomena are ultimately rooted in the tendency towards breakdown, in imperfect valorisation due to overaccumulation. The growth of monopoly is a means of enhancing profitability by raising prices and, in this sense, it is only a surface appearance whose inner structure is insufficient valorisation linked to capital accumulation.

The aggressive character of imperialism likewise necessarily flows from a crisis of valorisation. Imperialism is a striving to restore the valorisation of capital at any cost, to weaken or eliminate the breakdown tendency. This explains its aggressive policies at home (an intensified attack on the working class) and abroad (a drive to transform foreign nations into tributaries). This is the hidden basis of the bourgeois rentier state, of the parasitic character of capitalism at an advanced stage of accumulation. Because the valorisation of capital fails in countries at a given, higher stage of accumulation, the tribute that flows in from abroad assumes ever increasing importance. Parasitism becomes a method of prolonging the life of capitalism."

Again, nowhere does he dispute that Lenin's characterisation of modern capitalism is one of decay, in fact he agrees with him. The issue - as with Bukharin - is that this remains at the level of mere assertion and description without developing a theoretical explantion.

It is also worth examining how Grossman introduces the question of RL's contribution:

"It was a great historical contribution of Rosa Luxemburg that she, in a conscious opposition to the distortions of these ‘neo-harmonists’ adhered to the basic lesson of Capital and sought to reinforce it with the proof that the continued development of capitalism encounters absolute economic limits:

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

However Luxemburg herself provided no such deduction and even made no attempt in this direction. Her own deduction of the necessary downfall of capitalism is not rooted in the immanent laws of the accumulation process, but in the transcendental fact of an absence of non-capitalist markets. Luxemburg shifts the crucial problem of capitalism from the sphere of production to that of circulation."

I think the charge that Grossman engages in "a determined avoidance of the conclusion that capitalism is decadent" is demonstrably false. On the contrary, he begins from the basic premises that Lenin, Bukharin and Luxemburg begin with - that the current age is one of imperialism, of breakdown, what we call decadence today. The problem is that the explainations offered by these luminaries are theoretically flawed and inconsistent and are unable to account for their own conclusions. Grossman's mission is to correct these misunderstandings.

Even were the charge true, it is perfectly possible to construct a theory of decadence from Grossman, as I've already sketched.

Link
  Both Alf and MH have

 

Both Alf and MH have suggested pointed to the importance of the wage labour relationship to the problem of realisation when criticising those arguing for the FROP.  Neither have actually explained that argument and MH’s response was a reference to Capital Vol3 Chapters 13-15.  However these chapters are actually an explanation of the tendency for the rate of profit to fall and its countertendencies and I cant see that they provide any justification for the ICCs theory about extra cap markets.

 

In fact in these chapters Marx identifies a range of countertendencies to the FROP : increased exploitation, cheapening of constant capital, relative overpopulation, increase of stock capital and foreign trade

 

“Since foreign trade partly cheapens the elements of constant capital, and partly the necessities of life for which the variable capital is exchanged, it tend to raise the rate of profit by increasing the rate of surplus value and lowering the value of constant capital.”  Capital Vol 3 Chap 14 Section V

 

The investment in higher tech capital that this enables however  eventually leads to a decline in ROP as the balance of constant to variable capitals changes again.  This is the contradiction expressed by the tendency of the ROP to fall – it acts as a stimulation initially but must rebound on capital and reduce the ROP in the long term.   He then goes onto some discussion of trade with colonial countries which I assume includes pre cap markets but unfortunately its not exhaustive, as he admits.  My view is that he is here expressing foreign trade with lesser developed economies (whether capitalist or feudal/peasant economies) as a product of the capitalism’s need to expand accumulation and as a countertendency to a falling rate of profit but not as the central element creating  accumulation.

 

I would like to add to Demo summary in the previous post. From reading the Accumulation of Capital, I find it absolutely clearcut that she is presenting the idea of constant capital accumulation being entirely a product of trade with pre-capitalist economies as the very core of her book and I don’t understand how MH can so lightly dismiss this interpretation in the way that he does. 

 

OK, There are certainly statements by her about imperialism and the world market which are very clear and we would all agree with now with as they base a theory of decadence on the achievement of a capitalist world market but it appears to me that MH draws most of these from other writings and only takes very selective quotes from AofC.     It may well be reasonable to pull together these selected quotes into an alternate theory  but they are not the theoretical focus of AofC. 

 

For me then I do not see the point of MHs argument that the FROP is not a theory of decadence.  I presume he is arguing this because there is no specific rate of profit that can indicate the onset of decadence.  Whereas the level of pre capitalist markets is relevant but the actual percentage is not important,  it is the relative completion of a world market  brings about the imperialist competition between all nation states which is the key indicator of this new period of ‘wars and revolutions’

 

So I think this ought to be the starting point for understanding decadence.  Its isn’t an economic crisis caused by the lack of capacity to accumulate nor by a lack of surplus value  but it is a period the contradictions are laid bare. Neither the FROP nor RL’s theory of accumulation can explain  the onset of decadence.   What does identify decadence is the domination of capitalism over the world market (and yes the integration of pre cap markets )  which leads to a phase where imperialist relationships between national capitals take over economic and political relationships.  This is a political and social relationship and independent of the level of the ROP and the level of accumulation. 

Non ex hoc mundi
Typical leftcom shite present here.

Guys, this is a great pointless argument and all.

But it's pretty fucking obvious the most dangerous "breakdown tendency" is the total destruction of nature.

I presume the ICC will still be around debating the FROP when the oceans are dead and it's too hot to grow cereal grains?

Link
Not disputing that it is a

Not disputing that it is a theoretical discussion but it does have implications for understanding the state of capitalism today.  This is obviously a goal you have no interest in as youve decided what the main problem is already.  What a clever thing you are to spout the usual leftist drivel about saving the world without getting rid of capitalism first.

Demogorgon
Not interested?

Not interested, NEHM ? That's fine. You clearly have no real interest in discussion on this site, but some people are and there's no need for you to insult them or attempt to derail threads. If you have an intelligent critique to make, make it. Otherwise refrain.

MH
growth in decadence

Link, maybe we go back to look at the issue of growth in decadence, which is where you came in in the first place on the Luxemburg thread?

Some brief points/thoughts:

-       Luxemburg’s theory does not deal directly with the question of economic growth in decadence but instead emphasises the increasingly catastrophic consequences of capitalism’s continued survival at the economic, political and social levels

-       Luxemburg’s theory poses the question of the continuing role of pre-capitalist areas in explaining growth in decadence, with two possible interpretations:

1. Decadence is the result of the insufficiency of pre-capitalist areas for the needs of global accumulation. If they are insufficient in 1914 by definition they cannot play a role in explaining growth, which then poses the question of the causes of the post-war boom (see the ICC’s internal debate on this)

2. Pre-capitalist areas can continue to play a significant role in explaining growth in decadence (this is the argument of the ‘extra-capitalist markets’ thesis in the ICC discussion, which presented some empirical evidence to support it. For the record I don't think I agree with it).

-       The FROP does not deal directly with the question of economic growth in decadence but it is based on the cycles of capitalist crises and for this reason it inherently accepts the appearance of growth leading inexorably towards the objective limits of capitalist accumulation (see Maito graph)

-       Empirical evidence of the FROP in decadence (Maito, Kliman, etc) appears to show that on its own it is not able to explain the pattern of growth in decadence, in particular the post-war boom (however this obviously depends a lot on intepretation of graphs and statistical data, etc).

Re-reading the above it seems to point towards explanations other than/additional to the two main theories?

I think inevitably we will need to refer to the ICC debate on the post-war boom which raised a lot of the relevant issues here, but of course remained unconcluded. I don;t think i have anything further to add, although I veer towards the 'war economy and state capitalism' explanation on the basis of what I've read so far.  

 

(edited)

 

 

Link
Interesting points made there

Interesting points made there MH.  And yes I think that development during decadence are key as they will provide new insights into theories which were after all developed during  latter part of ascendancy.

I certainly agree that RLs theory doesn’t deal with economic growth in decadence and I am generally inclined to think when I read her material that she saw that period of war and revolution as an ongoing catastrophe rather than the estended periods of war reconstruction crisis that we have seen.   That’s interpretation however. 

I am glad you agree that if precap markets are insufficient in 1914 then that lack cannot explain periods of growth in decadence.  I think this also led me to question how you have defined decadence ie as a result of the 'insufficiency of pre cap areas for the needs of global accumulation'.  Rather, can we  put it another way round.  Clearly precap markets played a role in the ascendance of capitalism because that is the process of taking over from feudal economic structures (and absorbing its resources) but it is the completion of a world market that defines the onset of decadence ie the (relative) completion of capitalism’s dominion over the world.    From then on, it is clear that, as you expressed so well before, the crisis in decadence is the distinction between what is and what could be rather than an absolute lack of something.

I agree with you that the FROP theories don’t deal directly with decadence again as it was developed in ascendancy (those chapters in Vol 3 are excellent for this).  It is based on cycles as you say and I think these are ongoing through ascendance and decadence but I do think it provides a framework which adapts to understanding conditions in decadence as well using Marx’s original explanations.  Im not sure what you see therefore in the empirical data that says it cant explain periods of growth.   I think one problem here is that FROP figures must be  the end results of a process -  only interpretations of the context can identify what factors act  to reduce or increase the ROP at any given time.   Whilst the basic abstraction is simple,  Marx’s explanation of the simple theory and what happens to it in the real world are very complex let alone when he gets into the countertendencies.

I am interested in how to develop the discussion of  towards a better explanation than the 2 main theories.  I think there is common ground as although I have argued against RL’s analysis I do see markets are relevant.  The ROP is calculated on realised capital which means a market is presupposed and must be influential in the process.   I also don’t agree that it can simply be said that production is the core of capitalism (FROP theorists tend to)  because capitalism is defined as production for the market place and in fact markets and finances had to be in place before capitalist production could develop.  I want to argue here that accumulation/FROP and market growth/restriction are two sides of the same coin but I don’t really know how to take that forward.

I was going to post something relating the 2 theories to development in decadence but  I will have another look at it  after your last post MH, in particular the point about how FROP explains pattern of growth

Non ex hoc mundi
Theoretical activism

Link wrote:
...getting rid of capitalism first.

How's that working out for you? I agree we save the world by stopping capitalism, by eventually stopping industrial civilization. But no matter how irrelevant I appear, or how important the FROP theories are, none of us can actually "do" anything. So I'm honestly wondering why the FROP debate matters when life as we know it on this biosphere will never be the same. How is the FROP more important? It's an issue of priorities. Can't have a worker's movement without a planet to live on.

Demogorgon
Quote:I am interested in how

Quote:
I am interested in how to develop the discussion of towards a better explanation than the 2 main theories. I think there is common ground as although I have argued against RL’s analysis I do see markets are relevant. The ROP is calculated on realised capital which means a market is presupposed and must be influential in the process. I also don’t agree that it can simply be said that production is the core of capitalism (FROP theorists tend to) because capitalism is defined as production for the market place and in fact markets and finances had to be in place before capitalist production could develop. I want to argue here that accumulation/FROP and market growth/restriction are two sides of the same coin but I don’t really know how to take that forward.

Is what we're talking about here the formal and real domination of capital?

Certainly, markets, commodities, finance, etc. are all necessary for capitalism and predated it. In its early phases capitalism was dependent on the means of production and social structures that existed in its immediate environment. This phase certainly would have had dependency on external markets and produced largely for them.

But once capitalism proper develops around socialised labour and especially machinery, the labour process itself begins to change. This is the moment when the distinctively capitalist nature of production comes to the fore.

Capitalists no longer maintain profits merely by adjusting production in response to supply and demand. Rather, they obtain larger profits by cheapening the costs of production through more efficient means of production. Living labour is displaced by dead labour; absolute surplus value by relative surplus value; use value by exchange value. The successful capitalist expands his market by undercutting his competitors.

As the process accelerates, overproduction becomes permanent and systemic. This is not yet a crisis of overproduction. This is experienced by each individual capitalist as the pressure of competition, which further compels them to revolutionise their own productive bases.

Production more and more takes on the appearance of production for production's sake, as capitalists now revolutionise the productive forces without regard for the market. Although this is true even before capitalism fully develops, it becomes the very core of its operation once it does so.

Marx, The Direct Process of Production wrote:
Admittedly, “production for production’s sake” — production as an end in itself — already enters the picture with the formal subsumption of labour under capital; it does this as soon as it generally becomes the direct purpose of production to produce as much surplus value, and as large a surplus value, as possible, as soon as, in general, the exchange value of the product becomes the decisive purpose. And yet this tendency, which is immanent in the capital-relation, is first realised in an adequate manner — and itself becomes a necessary condition, even technologically — when the specifically capitalist mode of production has developed, and with it the real subsumption of labour under capital.

This subordination of the market to production, where the latter becomes the driving force of the economy and all social life, is the distinctive feature of capitalism in contrast to simple commodity production. Because it is now production that determines consumption, the origins of market success and failure are to be found in the productive relations of the labour process. However, because all products ultimately have to find a buyer, this immanent barrier of the system can only be expressed in the market (in overproduction, competition, and finally a crisis of overproduction), even though its origins are elsewhere.

That, to me, is the correct way of approaching the unity between production and the market.