Reply to the IBRP, Part 2: Theories of Capitalism's Historic Crisis

In the series Crisis Theories

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IR83, 4th Quarter 1995

The International Bureau for the Revolutionary Party (IBRP) has replied in International Communist Review no.13 to our polemical article "The IBRP's Conception of decadence in capitalism" which appeared in our International Review no.79. In International Review no.82 we published the first part of this article, which demonstrated the negative implications of the IBRP's conception of imperialist war as a means for the devaluation of capital and the renewal of the cycles of accumulation. In this second part we are going to analyse the economic theory that sustains this conception: the theory of the tendential fall in the rate of profit.

1- The explanation of the historic crisis of capitalism in the Marxist movement

Bourgeois economists, ever since the classics (Smith, Ricardo, etc), have based themselves on two dogmas:

1. The worker is a free citizen who sells his labour power in exchange for a wage. The wage is his share of the social income from which the employer is also paid his profit.

2 Capitalism is an eternal system. Its crises are temporary and conjunctural, due to the disproportion between the different branches of production, disequilibrium in distribution or bad management. Nevertheless, in the long term, there is no problem with the realisation of commodities; production always finds a market, advancing the balance between supply (production) and demand (consumption).

Marx fought these dogmas of bourgeois economics to the day he died. He demonstrated that capitalism is not an eternal system: "At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or - this merely expresses the same thing in legal terms-  with the property relations within  the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution" (Marx: A Contribution to the Critique of Political Economy, page 21, English edition, 1971). This period of the historic crisis, of the irreversible decadence of capitalism, opened up with the First World War. The survival of capitalism, following the defeat of the attempted world revolution by the proletariat between 1917-23, has cost humanity oceans of blood (hundreds of millions killed in imperialist wars between 1914-68, sweat (a brutal increase in the exploitation of the working class) and tears (the terror of unemployment, barbarity of every type, the dehumanisation of social relations).

However, this fundamental analysis, the common tradition of the Communist Left, is not explained in the same way in the present revolutionary political milieu: two theories exist for explaining the decadence of capitalism, the theory of the tendency of the rate of profit to fall and that which is called the "market theory" based essentially on the work of Rosa Luxemburg.

The IBRP adhere to the first theory while we prefer the second [1]. In order for a polemic on both theories to be fruitful it is necessary to base it on an understanding of the evolution of the debate in the Marxist movement.

Marx lived in the period of the ascent of capitalism. Although the historic crisis of the system was not posed as dramatically as it is today, he was able to see in its periodic cyclical crises a manifestation of its contradictions and an announcement of the convulsions that would lead to ruin: "Marx pointed to two basic contradictions in the process of capitalist accumulation: two contradictions that lay at the root of the cyclical crises of growth capitalism went through in the nineteenth century, and which would, at a given moment, impel the communist revolution onto the agenda. These two contradictions are the tendency of the rate of profit to fall, given the inevitability of an ever higher organic composition of capital and the problem of overproduction, capital's innate disease of producing more than its market can absorb" ("Marxism and Crisis Theory" International Review no.13, page 27, our emphasis).

From this we can see that: "Though he developed a framework in which these two phenomena were intimately linked, Marx never completed his examination of capitalism, so that, in different writings, more or less emphasis is given to one or the other as the underlying cause of the crisis... It is the unfinished character of this crucial area of Marx's thought - something, as we have said, determined not merely by Marx's personal inability to finish Capital, but by the limitations of the historic period in which he was living" (idem. Page 27).

At the end of last century, the conditions of capitalism began to change: imperialism as a policy of robbery and confrontation between the powers developed in great strides. On the other hand, capitalism was expressing growing signs of illness (inflation, growth in exploitation) that contrasted strongly with a growth and prosperity, which had been uninterrupted since 1890. In this context there appeared inside the 2nd International an opportunist current that called into question the Marxist thesis of the collapse of capitalism and put forward a gradual transition to socialism through successive reforms of capitalism that would "alleviate these contradictions". The theoreticians of this current concentrated their artillery precisely against the second of the contradictions pointed out by Marx: the tendency to overproduction. Thus, Bernstein said: "Marx contradicts himself when he sees the ultimate cause of crises in the limitation of the consumption of the masses. In reality, Marx's theory about the crisis is not much different from the underconsumptionism of Rodbertus" [2] (Bernstein: Theoretical Socialism and Social Democratic Practice).

In 1902, Tugan Baranovsky, a Russian revisionist, attacked Marx's theory of the crisis of capitalism denying that there could be a problem of the market and demonstrating that the crisis is due to "disproportionality" between different sectors.

Tugan Baranovsky went even further than his German revisionist colleagues (Bernstein, Schmidt, Vollmar, etc). He went back to the dogmas of bourgeois economics, concretely returning to the ideas of Say [3] (openly criticised by Marx) based on the thesis that "capitalism doesn't have a problem of realisation beyond some temporary disturbances". There was a very firm response in the 2nd International on the part of Kautsky, who was then still in the ranks of the revolution: "Although capitalists increase their wealth and the number of exploited workers grows, they cannot themselves form a sufficient market for the capitalist produced commodities, as accumulation of capital and productivity grow even faster. They must find a market in those strata and nations which are still non-capitalist... this additional market hardly has the flexibility and ability to expand the capitalist process of production... This, in short, is the theory of crises which, as far as we can see, is generally accepted by ‘orthodox' Marxists and which was set up by Marx" (Quoted by Rosa Luxemburg in her book The Accumulation of Capital an Anti-critique, Modern Reader edition, 1972, page 79. The emphasis is Rosa Luxemburg's).

However, this polemic was radicalised when Rosa Luxemburg published her book The Accumulation of Capital. In this book, Rosa Luxemburg tried to explain the dizzy growth of imperialism and the increasingly profound crisis of capitalism. In the book she demonstrated that capitalism developed historically through expanding its relations of production based on wage labour into non-capitalist regions and sectors, that it would reach its historic limits when it had embraced the whole planet, and that it was already failing to find the new territories that were necessary for the expansion demanded by the growth of productivity of labour and the organic composition of capital: "Thus capitalism expands because of its mutual relationship with non-capitalist social strata and countries, accumulating at their expense and at the same time pushing them aside to take their place. The more capitalists participate in this hunt for areas of accumulation, the rarer the non-capitalist places still open to the expansion of capital become and the tougher the competition; its raids turn into a chain of economic and political catastrophes: world crises, wars, revolution" (Rosa Luxemburg: Anti-critique, page 60.)

Rosa Luxemburg's critics denied that capitalism has a problem of realisation, which is to say, they forget the contradiction of the system that Marx vigorously defended against the bourgeois economists and which constituted the base of "the crisis theory founded by Marx" as Kautsky had recalled some years before against the revisionist Tugan-Baranovsky.

Rosa Luxemburg's detractors set themselves up as the "orthodox and unconditional" defenders of Marx, and particularly, of his schemas of expanded reproduction put forward in Vol.2 of Capital. That is to say, they nullified Marx's thinking by exaggerating a passage from his work [4]. Their arguments were very varied: Eckstein said there was no problem of realisation because in the tables of expanded reproduction Marx had explained "perfectly" that there was no part of production that could not be sold. Hilferding revived the theory of "disproportionality between sectors" saying that the crisis was due to the anarchy of production and that the tendency towards the concentration of capitalism reduced this anarchy and therefore the crisis. Finally, Bauer said that Rosa Luxemburg had pointed out a real problem but that this had a solution under capitalism: accumulation followed the growth of population.

During this period only one editor of a local socialist newspaper opposed the theory of the tendency of the rate of profit to fall to that of Rosa Luxemburg's, thus: "...we are left with the somewhat oblique comfort provided by a little ‘expert' from the Dresdener Volkszeitung who, after thoroughly destroying my book, explains that capitalism will eventually collapse ‘because of the falling rate of profit'. One is not too sure exactly how the dear man envisages this: whether the capitalist class will at a certain point commit suicide in despair at the low rate of profit, or whether it will somehow declare that business is so bad that it is simply not worth the trouble, whereupon it will hand the key over to the proletariat? However that may be, this comfort is unfortunately dispelled by a single sentence by Marx, namely the statement that "large capitals will compensate for the fall in the rate by mass production". Thus there is still some time to pass before capitalism collapses because of the falling rate of profit, roughly until the sun burns out". (Rosa Luxemburg Anti-critique, page 76.).

Lenin and the Bolsheviks did not take part in this polemic [5]. Certainly, Lenin had fought the Populist theory of markets, an underconsumptionist theory in continuity with the errors of Sismondi. However, Lenin never denied the problem of the market: in his analysis of imperialism, despite placing the main emphasis on Hilferding's theory about the concentration in finance capital [6], he did not forget that this took place under the pressure of the saturation of the world market. Thus, in Imperialism the Highest Stage of Capitalism, responding to Kautsky, he emphasized that "It is the tendency to the annexation not only of the agrarian regions, but also the most industrial that precisely characterises imperialism, thus, the already completed division of the world demands it proceeds to a new division, to extend its hand towards all types of territory".

In the period of the degeneration of the 3rd International, Bukharin in his book Imperialism and the Accumulation of Capital, attacked the thesis of Rosa Luxemburg in the development of a theory that opened up the doors to the triumph of Stalinism: the theory of the "stabilization" of capitalism (which presupposed the revisionist thesis that the crisis could be overcome) and the "necessity" that the USSR "coexist" for a prolonged period with the capitalist system. Bukharin's fundamental critique of Rosa Luxemburg was that she was limited to giving a privileged place to the contradiction related to the market forgetting all the others, amongst them, the theory of the tendency of the rate of profit to fall [7].

At the end of the 20's and at the beginning of the 30's, "Paul Mattick of the American Council Communists took up Henryk Grossman's criticisms of Luxemburg and his contention that capitalism's permanent crisis emerges when the organic composition of capital reaches such a magnitude that there is less and less surplus value to fuel the process of accumulation. This basic idea - though further elaborated on a number of points - is today defended by revolutionary groups like the CWO, Battaglia Comunista and some of the groups emerging in Scandinavia". ("Marxism and Crisis Theory" in International Review no.13, page 28).

2. The theory of the crisis is not based uniquely on the tendency of the falling rate of profit

It must remain clear that the contradiction that capitalism suffers in respect of the realisation of surplus value plays a fundamental role in the Marxist theory of the crisis and that the revisionist tendencies attacked this thesis with particular rage. The IBRP claim the contrary. Thus, in their response they tell us that "For Marx the source of all real crises lay within the capitalist system itself, within the relationship between capitalists and workers. He sometimes expressed this as a crisis created by the limited capacity of the workers to consume the product of their own labours...He went on to add that this was not because of overproduction per se... And Marx goes on to explain that the crisis arises out of the falling rate of profit...The crises devalue capital and allow a new cycle of accumulation to begin" (The IBRP's response, pages 32-33). Their confidence is such that it permits them to add that, "The "schematic cycles of accumulation" in which we are happy to be imprisoned happens to be what Marx left us with" (The IBRP's response, page 32).

It is a deformation of Marx's thought to say that the historic crisis of capital is explained solely by the theory of the tendency of the rate of profit to fall. For three reasons:

1. Marx placed emphasis on the two contradictions

* He established that capitalist production has two parts, production properly speaking and its realisation. Put simply, the profit inherent in exploitation means nothing either to the individual capitalist nor to capitalism in its totality, if the commodities they produce are not sold: "The total mass of commodities, the total product, must be sold, both that portion which replaces constant capital and variable capital and that which represents surplus-value. If this does not happen, or happens only partly, or only at prices that are less than the price of production, then although the worker is certainly exploited, his exploitation is not realised as such for the capitalist". (Capital Vol.3, page 352, Penguin edition. Our emphasis).

* He demonstrated the vital importance of the market in the development of capitalism: "The market, therefore must be continually extended, so that its relationships and the conditions governing them assume ever more the form of a natural law... The internal contradiction seeks resolution by extending the external field of production" (idem, page 353). Further on, he asks: "How else could there be a lack of demand for those very goods that the mass of the people are short of, and how could it be that this demand has to be sought abroad, in distant markets, in order to pay the workers back home the average measure of the necessary means of subsistence? It is because it is only in this specific, capitalist context that the surplus product receives a form in which its proprietor can make it available for consumption as soon as it has been transformed back into capital for himself" (idem, page 366).

* He condemned without any hesitations Say's thesis that there was no problem of realisation in capitalism: "The conception... adopted by Ricardo from the tedious Say... that overproduction is not possible or at least that no general glut of the market is possible, is based on the proposition that products are exchanged against products, or as Mill puts it, on the ‘metaphysical equilibrium of sellers and buyers', and this led to the conclusion that demand is determined only by production." (Theories of Surplus Value Vol.2, page 493, Moscow edition).

* He insisted that permanent overproduction expressed the historical limits of capitalism: "...the mere admission that the market must expand with production is, on the other hand, an admission of the possibility of overproduction, for the market is limited externally in the geographical sense... it is then possible... that the limits of the market are not extended rapidly enough for production, or that new markets - new extensions of the market - may be rapidly outpaced by production, so that the expanded market becomes just as much a barrier as the narrower market was formerly" (idem, page 524-5).

2. Secondly, Marx established the whole of the causes that counteract the tendency of the rate of profit to fall: in Chapter XIV of Vol.3 of Capital he analysed six factors that counteract this tendency: more intense exploitation of labour, reduction of wages below their value, reduction in the cost of constant capital, the relative surplus population, foreign trade, the growth of share capital.

* He saw the tendency of the rate of profit to fall as an expression of the constant increase in the productivity of labour, a tendency that capitalism developed to a level never seen in previous modes of production: "With the progressive decline in variable capital in relation to constant capital, this tendency leads to a rising organic composition of the total capital, and the direct result of this is that the rate of surplus-value, with the level of exploitation of labour remaining the same or even rising, is expressed in a steadily falling general rate of profit... The progressive tendency of the general rate of profit to fall is thus simply the expression, peculiar to the capitalist mode of production, of the progressive development of the social productivity of labour" (Capital, Vol.3, pages 318-19. Emphasis in the original).

* Marx made clear that this is not an absolute law but a tendency that contained a whole series of counteracting forces (as shown above) that it gives rise to: "We have shown in general, therefore, how the same causes that bring about a fall in the general rate of profit provoke counter-effects that inhibit this fall, delay it and in part even paralyse it. These do not annul the law, but they weaken its effects. If this were not the case, it would not be the fall in the general rate of profit that was incomprehensible, but rather the relative slowness of this fall. The law operates therefore simply as a tendency, whose effect is decisive only under certain particular circumstances and over long periods" (idem, page 346).

* In relation to the tendency of the rate of profit to fall he posed the primordial importance of "foreign trade" and above all the continual search for new markets: "...this same foreign trade develops the capitalist mode of production at home, and hence promotes a decline in variable capital as against constant, though it also produces overproduction in relation to the foreign country, so that it again has the opposite effect in the further course of development" (idem, page 346).

3. Finally, contrary to what the comrades think, Marx did not see the devaluation of capital as the only means that capitalism has for overcoming the crisis, he also insisted about the other means: the conquest of new markets: "How does the bourgeoisie get over these crises? On the one hand by the enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones" (The Communist Manifesto, in The Revolutions of 1848, page 73, Penguin Books). "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 as it creates it, is one of them. Another is the "hopeless situation" to which it leads, and which is developed sooner in a country without a foreign market, like Russia, than in countries which more or less are capable of competing on the open world market. This situation without an apparent issue finds its issue, for the latter countries, in commercial convulsions, 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" (Engels to Danielson, 1892. Letters on Capital, page 274, New Park).

3. The problem of accumulation

However, the comrades give us another "weighty" argument: "As we have pointed out before, this theory [they are referring to that of Rosa Luxemburg] makes nonsense of Capital since Marx carried out his analysis assuming a closed capitalist system that was already devoid of "third buyers" (and yet he still found a crisis mechanism)" (The IBRP's response, page 33).

It is quite true that Marx pointed out that; "To bring foreign trade into an analysis of the value of the product annually reproduced can therefore only confuse things, without supplying any new factor either to the problem or to its solution" (Capital Vol.2, page 546, Penguin edition). It is true that Marx, in the final chapter of Vol.2, in trying to understand the mechanism of capitalism's expanded reproduction, says that it is necessary to omit "exterior elements", that it is necessary to assume that there are only capitalists and workers, and on this basis he elaborates the tables of capital's expanded reproduction. These famous tables have served as the revisionists' "bible" in order "to demonstrate" that "Marx's illustrations in the second volume of Capital were a sufficient and exhaustive explanation of accumulation; the models there proved quite conclusively that capital could grow excellently, and production could expand, if there was no other mode of production in the world than the capitalist one; it was its own market, and only my complete inability to understand the ABC of Marx's models could persuade me to see the problem here" (Rosa Luxemburg: Anti-critique, page 62.).

It is absurd to pretend that the explanation of the crisis of capitalism is contained within the famous tables of reproduction. The centre of Rosa Luxemburg's critique is precisely the assumption on which this is based: "...the realisation of surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists" (Luxemburg. The Accumulation of Capital, page 350. Monthly Review Press). With this as a starting point, she demonstrates its inconsistency: "...if and in so far as, the capitalists do not themselves consume their products but ‘practise abstinence', i.e. accumulate, for whose sake do they produce? Even less can the maintenance of an ever larger army of workers be the ultimate purpose of the continuous accumulation of capital. From the capitalist point of view, the consumption of the workers is a consequence of accumulation, it is never its object... Who, then, realises the permanently increasing surplus value? The diagram answers: the capitalists themselves and they alone [8]. - And what do they do with this increasing surplus value? - The diagram replies: They use it for an ever greater expansion of their production. These capitalists are thus fanatical supporters of an expansion of production for production's sake. They see to it that ever more machines are built for the sake of building - with their help - ever more new machines. Yet the upshot of all this is not accumulation of capital but an increasing production of producer goods to no purpose whatever. Indeed one must be as reckless as Tugan Baranovsky, and rejoice as much in paradoxical statements, to assume that this untiring merry-go-round in thin air could be a faithful reflection in theory of capitalist reality, a true deduction from Marx's doctrine" (idem, page 335).

Therefore, she concludes that: "The whole of Marx's work, volume 3 particularly, contains a most elaborate and lucid exposition of his general views regarding the typical course of capitalist accumulation. If we once fully understand this interpretation, the deficiencies of the diagram at the end of volume 2 are immediately evident. If we examine critically the diagram of enlarged reproduction in the light of Marx's theory, we find various contradictions between the two." (idem, page 335)

For its historical development, capitalism depended on a surrounding pre-capitalist milieu with which to establish a relationship. This comprised three indissoluble elements: trade (the acquisition of raw materials and the exchange of manufactured goods), destruction of these social forms (the annihilation of the natural subsistence economy, separation of the peasants and artisans from their means of labour) and integration into capitalist production (the development of wage labour and all the capitalist institutions).

This relationship of trade-destruction-integration spans the long process of the formation of the capitalist system (the 16th - 18th centuries), summit (the 19th century) and decadence (the 20th century) and constituted a vital necessity for the whole of the relations of production: "The interrelations of accumulating capital and non-capitalist forms of production extend over values as well as over material conditions, for constant capital, variable capital and surplus value alike. The non-capitalist mode of production is the given historical setting for this process. 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" (idem, page 365).

For Battaglia Comunista this historic process that unfolds at the level of the world market is nothing but the reflection of a much more profound process: "Although we may start with the market, and the contradictions which appear there (production-distribution, imbalance between supply and demand), we must return to the mechanisms governing accumulation to get a more correct vision of the problem. As a productive - distributive unity, capital demands that we consider what happens on the market as a consequence of the ripening of contradictions lying at the base of the relations of production, and not the reverse. It is the economic cycle and the necessity for the valorisation of capital which condition the market. Only by starting with the contradictory laws which rule the process of accumulation is it possible to explain the ‘laws of the market'"

(2nd Conference of groups of the Communist Left, volume 1 preparatory texts, page 10).

The realisation of surplus value, the famous "salto mortale of the commodity" as Marx called it, constitutes the "surface" of the phenomena, the "sounding box" of the contradictions of accumulation. This vision with its airs of "profundity" contains nothing else than profound idealism: the "laws of the market" are the "external" result of the "internal" laws of the process of accumulation. This is not the view of Marx, for whom the two moments of capitalist production (production and realisation) are not the reflection one of the other, but two inseparable parts of the global unity that is the historical evolution of capitalism: "...the commodity enters the sphere of circulation not just as a particular use-value, eg, a ton of iron, but as a use-value with a definite price... The price while on the one hand indicating the amount of labour-time contained in the iron, namely its value, at the same time signifies the pious wish to convert the iron into gold... If this transformation fails to take place then the iron ceases to be not only a commodity but also a product; since it is a commodity only because it is not a use-value for its owner, that is to say his labour is only really labour if it is useful labour for others, and it is useful for him only if it is abstract general labour. It is therefore the task of the iron or its owner to find that location in the world of commodities where iron attracts gold. But if the sale actually takes place, as we assume in this analysis of simple circulation, then this difficulty, the salto mortale of the commodity, is surmounted" (Marx: A Contribution to the Critique of Political Economy, Chapter 2, Page 88, Moscow edition).

Any attempt to separate production from realisation impedes the understanding of the historical movement of capitalism which led to its summit (the formation of the world market) and its historical crisis (chronic saturation of the world market): "... the capitalists are compelled to exploit the already existing gigantic means of production on a larger scale...as the mass of production, and consequently the need for extended markets, grows, the world market becomes more and more contracted, fewer and fewer new markets remain available for exploitation, since every preceding crisis has subjected to world trade a market hitherto unconquered or only superficially exploited" (Marx and Engels: Wage Labour and Capital. Selected Works, page 93, Moscow edition). Only in the framework of this unity is it possible to coherently integrate the tendency for the continual increase of the productivity of labour: "Capital does not consist in accumulated labour serving living labour as a means for new production. It consists in living labour serving accumulated labour as a means for maintaining and multiplying the exchange value of the latter" (idem, page 81).

When Lenin studied the development of capitalism in Russia he used the same method: "What is important is that capitalism cannot exist and develop without constantly expanding the sphere of its domination, without colonising new countries and drawing old non-capitalist countries into the whirlpool of world economy. And this feature of capitalism has been and continues to be manifested with tremendous force in post-Reform Russia" (Lenin: "The Development of Capitalism in Russia". Collected Works Vol 3, page 594).

4.- The historical limits of capitalism

The comrades of the IBRP think, however, that Rosa Luxemburg insisted on looking for "external" causes to the crisis of capitalism: "Initially Luxemburg supported the idea that the cause of crises was to be found in the value relations inherent in the capitalist mode of production itself...But in the fight against revisionism inside German Social Democracy seems to have led her in 1913 to search for another economic theory with which to counter the revisionist assertion that the law of the tendency of the rate of profit to fall was no longer valid. In The Accumulation of Capital she concluded that there was "a flaw in Marx's analysis" and she decided that the cause of capitalist crisis lay outside capitalist relations". (The IBRP's response, page 33).

The revisionists throw in Rosa Luxemburg's face the accusation that she was posing a problem that didn't exist, according to them, Marx's tables of expanded reproduction had "demonstrated" that all surplus value was realised within capitalism. The comrades of the IBRP don't appeal to these tables but their method amounts to the same thing: for them Marx with his schemas of the cycles of accumulation has given the solution. Capital goes on producing and developing until the rate of profit falls and production is blocked which then brings about the tendency to "objectively" resolve itself through a massive depreciation of capital. After this depreciation, the rate of profit is restored and the process begins again and thus successively. It is true that the comrades admit that historically this evolution is much more complicated due to the growth in the organic composition of capital and the tendency to the concentration and centralisation of capital: that in the 20th century this process of concentration, means that the necessary devaluations of capital cannot be limited to strictly economic means (closure of factories and laying off workers) but requires the enormous destruction of world war (see the first part of this article).

This explanation is, in the majority of cases, a description of the conjunctural movements of capitalism but does not allow an understanding of the global, historical movement of capitalism. It provides us with a very unreliable thermometer (we have explained, following Marx, the counteracting causes of the law) for the convolutions and progress of capitalism but it doesn't allow us to understand, nor even begin to pose, the reason, the profound cause for the illness. With the additional burden of decadence (see our articles in International Review, nos. 79 & 82) accumulation is profoundly blocked and its mechanisms (including therefore the tendency of the rate of profit to fall) have been altered and perverted by massive state intervention.

The comrades remind us that for Marx the causes of the crisis are internal to capitalism.

Do the comrades want something "more internal" to capitalism than the imperious necessity to constantly expand production beyond the limits of the market? Capitalism's aim is not the satisfaction of the needs of consumption (unlike feudalism whose aim was the consumption of the nobles and priests). Neither is it a system of simple production of commodities (such methods could be seen in Antiquity or up to a certain point in the 14th-15th centuries). Its aim of production is a constantly increasing surplus value arising from value relations based on wage labour. This demands that it permanently searches for new markets: why? In order to establish a régime of simple exchange of commodities? For robbery and the taking of slaves? No, although these methods have accompanied the development of capitalism, they don't constitute its internal essence, which resides in the necessity to increasingly extend its relations of production based on wage labour: "Sadly for itself, capital cannot do business with its non-capitalist clients without ruining them. Whether it sells them consumer goods or means of production, it automatically destroys the precarious equilibrium of any pre-capitalist (and therefore less productive) economy. Introducing cheap clothes, building railways, installing a factory, are enough to destroy the whole of pre-capitalist economic organisation. Capital likes it pre-capitalist clients just as the ogre ‘likes' children: it eats them. The workers of a pre-capitalist economy who have the ‘misfortune to have had dealings with the capitalists' know that sooner or later, he will end up, at best proletarianised and at worst - and this has become more and more frequent since capitalism's slide into decadence - reduced to misery and bankruptcy" (Critique of Bukharin, part 2 in International Review no 30)

In the ascendant period, in the 19th century, this problem of realisation appeared to be secondary given that capitalism constantly found new pre-capitalist areas which to integrate into its network and therefore to sell its commodities to. However, the problem of realisation has become decisive in the 20th century where the pre-capitalist territories have increasingly become less significant in relation to the needs of expansion. Therefore we say that Rosa Luxemburg's theory: "... provides an explanation for the historically concrete conditions determining the onset of the permanent crisis of the system: the more capitalism integrated the remaining non-capitalist areas of the economy into itself, the more it created a world in its own image, the less it could constantly extend the market and find new outlets for the realisation of that portion of surplus value which could be realised neither by the capitalists nor the proletariat. The inability of the system to go on expanding in the old way brought about the new epoch of imperialism and inter-imperialist wars, signalling the end of capitalism's progressive historical mission and threatening humanity with a relapse into barbarism" ("Communism is not a nice idea but a material necessity" part VII in International Review no.76, page 24).

We do not deny the tendency of the rate of profit to fall: we see it working as part of capitalism's historical evolution. This is affected by a whole series of contradictions; the contradiction between the social character of production and the private character of appropriation, between the incessant growth in the productivity of labour and the decreasing portion of living labour, the already mentioned tendency of the rate of profit to fall... However, these contradictions could be a stimulant to the development of capitalism as far as it had the possibility of extending its system of production on the world scale. When capitalism reached its historical limits, these stimulating contradictions, were converted into heavy chains, into factors that accelerated the difficulties and convulsions of the system.

5 - The growth of production in the decadence of capitalism

The comrades of the IBRP make a really startling objection: "If the markets were already saturated in 1913, if all pre-capitalist outlets had been exhausted no new ones could be re-recreated (short of a trip to Mars). If capitalism goes beyond the level of growth of the previous cycle how could it possibly do it in Luxemburg theory?" (The IBRP's response, page 33).

While our polemical article in International Review no.79 made clear the nature and composition of the "economic growth" experienced after World War 2, the comrades criticise us in their response by saying that there had been a "real economic growth of capitalism in decadence" and faced with our defence of Rosa Luxemburg's positions they go on: "We have already seen how the ICC resolve the dilemma - by empirically denying that there has been real growth"(idem, page 33).

We can't repeat here an analysis of the nature of the "growth" since 1945. We invite comrades to read the article "Understanding the decadence of capitalism (part VI)" in International Review no.56, which makes clear that as regards: "...the rates of growth in the period following 1945 (the highest in capitalism's history)...we will demonstrate that this momentary upsurge is the product of a doped growth, which is nothing other than the desperate struggle of a system in its death-throes. The means that have been used to achieve it (massive debts, state intervention, growing military production, unproductive expenditure, etc) are wearing out, opening the way to an unprecedented crisis." What we want to deal with is something fundamental to marxism: the quantitative growth of production does not necessarily signify the development of capitalism.

The chronic, unending, problem that capitalism has in decadence is the absence of the new markets that are demanded by the increases in production due to the constant growth of labour productivity and the organic composition of capital. This constant increase aggravates still more the problem of the already increasing overproduction of accumulated labour (constant capital) in relation to living labour (variable capital, the workers' means of life).

The whole history of the survival of capitalism in the 20th century after the defeat of the 1917-23 revolutionary wave, is of a desperate effort to manipulate the law of value, through debt, hyper-inflation of unproductive costs and the monstrous development of armaments in order to alleviate the chronic absence of new markets. And history shows that these efforts have done nothing but aggravate the problems and stoke up decadent capitalism's tendencies towards self-destruction: the aggravation of the chronic crisis of capitalism accentuating the permanent tendencies to imperialist war, to generalised destruction (see the first part of this article in International Review no.82).

In reality this "fabulous" growth of production that dazzles the comrades so much illustrates the insuperable contradiction imposed on capitalism by its tendency to the unlimited development of production beyond the market's capacity of absorption. These figures, far from undermining Rosa Luxemburg's theories fully confirm them. When we see the uncontrolled and runaway growth of debt, without comparison in human history, when we see the existence of structural and permanent inflation, when we see that since the abandoning of the Gold Standard capitalism has recklessly eliminated any guaranteed backing for money (presently Fort Knox only covers 3% of the dollars circulating in the United States), when one recognises the massive intervention by the state in order to shore up the economic edifice (and this for more than 50 years) any minimally serious Marxist has to reject this "fabulous growth" as a bluff and conclude that it is a question of doped and fraudulent growth.

The comrades, instead of confronting this reality, prefer speculating about the "new realities" of capitalism. Thus, in their response they put forward: "The restructuring (and, dare we say it, growth) of the working class, the tendency for capitalist states to be economically dwarfed by the volume of world trade and the amount of capital which is controlled by world financial institutions (which is now at least four times the budget of all the states put together) have produced a further extension of the world economy of Bukharin and Luxemburg's day into a globalised economy." (The IBRP's reply, page 35).

When there are 820 million unemployed in the world (figures from ILO, December 1994), the comrades talk about the growth of the working class! When there is an irreversible growth in temporary work, the comrades, like modern Don Quixotes, see the windmills of the "growth" and "reconstruction" of the working class. When capitalism draws ever closure to a financial crisis of incalculable proportions, the comrades merrily speculate about the "global economy" and "capital controlled by the financial institutions". Once more, in their dreams they see their Dulcinea del Toboso of the "world economy" whose prosaic reality consists of the desperate efforts of these - "increasingly childlike" - states to control the scale of speculation provoked precisely by the saturation of the markets; these giants constituted by the "capital controlled by the financial institutions" are balloons monstrously inflated by the very speculation that could unleash a catastrophe upon the world economy.

The comrades announce: "All of the above has to be subjected to a rigorous Marxist analysis which takes time to develop" (the IBRP's reply, page 35). Isn't it more appropriate for the militant work of the Communist Left for the comrades to dedicate their time to explaining the phenomena that demonstrate the paralysis and mortal illness of accumulation throughout capitalist decadence? Marx said the mistake was not in the answer but in the question itself. Posing such questions as the "global economy" and the "restructuring of the working class" is to sink into the quicksand of revisionism, while there are "other questions" such as the nature of mass unemployment, indebtedness, that help to confront the fundamental problems in the understanding of capitalist decadence.

6 - Militant conclusions

In the first part of this article we insisted on what united us with the comrades of the IBRP: the intransigent defence of the Marxist position on the decadence of capitalism, the bedrock of the necessity of the Communist Revolution. It is fundamental to defend, coherently understand, and take the implications of this position to the end. As we explained in "Marxism and Crisis Theory" (International Review no.13) it is possible to defend the position on the decadence of capitalism without fully sharing our theory of the crisis based on Rosa Luxemburg's analysis [9]. However, such a posture contains the danger of not coherently holding this position, of "holding it together with tape". The militant sense of our polemic is precisely this: the comrades' inconsistencies and deviations lead them to weakening the class position on the decadence of capitalism.

With its innate and sectarian rejection of Rosa Luxemburg's (and Marx's) thesis on the question of the markets, the comrades' analysis opens the door to the revisionist ideas of Tugan-Baranovsky, et al: "Cycles of accumulation are inherent to capitalism and they explain why, at different moments, capitalist production and capitalist growth can be higher or lower than in the preceding periods" (the IBRP's reply, page 31). With this they take up an old affirmation made by BC during the International Conferences of the Groups of the Communist Left: "The market is not a physical entity existing outside the capitalist system of production, which puts the brakes on the productive system once it is filled in; on the contrary, it is an economic reality within the system and outside it which dilates and contracts following the contradictory course of the process of accumulation" (2nd Conference of the Groups of the Communist Left, Preparatory Texts, page 13).

Do the comrades understand that this "method" enters fully into Say's world where, outside of conjunctural disproportionalities, "All that is produced is consumed and all that is consumed is produced"? Do the comrades comprehend that with this analysis all that happens is they go back to the merry-go-round of "proving" that the market: "dilates or contracts according to the rhythm of accumulation" and that this explains absolutely nothing about the historical evolution of capitalist accumulation? Don't the comrades see that they are falling into the very same errors that Marx criticised: "The metaphysical equilibrium of purchases and sales is confined to the fact that every purchase is a sale and every sale a purchase, but this is poor comfort to the possessors of commodities who unable to make a sale cannot accordingly make a purchase either" (Marx: A Contribution to the Critique of Political Economy, page 97).

This door that the comrades leave ajar to revisionist theories explains the propensity they have to lose themselves in sterile and absurd speculations about the "reconstruction of the working class" or the "global economy". They should also be aware of a tendency to allow themselves to be pulled in by the siren calls of the bourgeoisie: first there was the "technological revolution". Then the fabulous markets of the East, later there was the "business" of the Yugoslavian war. Certainly, the comrades corrected these absurdities under the weight of the ICC's criticism and the crushing evidence of facts. This demonstrates their responsibility and their firm links with the Communist Left. But will the comrades agree with us that these errors demonstrate that their position on the decadence of capitalism is not sufficiently consistent, that it's a patchwork, and that they have to establish themselves on much firmer ground.

The comrades concur with the revisionist adversaries of Rosa Luxemburg in their refusal to take the problem of realisation seriously, but radically diverge from them by rejecting their vision of the tendency to the amelioration of the contradictions of capitalism. On the contrary, and with full justice, the comrades see that each crisis phase of the cycle of accumulation means a much greater and more profound aggravation of capitalism's contradictions. The problem lies precisely in the periods in which, according to them, capitalist accumulation is fully restored. Confronted with these periods, while only considering the tendency of the rate of profit to fall and refusing to see the chronic saturation of the market, the comrades forget or relativise the revolutionary position on the decadence of capitalism.

Adalen 16.6.95.


[1] We have developed our position in numerous articles in our International Review: we want to point out "Marxism and Crisis Theory" (no.13), "Economic Theories and the Struggle for Socialism" (no.16), "Crisis Theory from Marx to the CI" (no.22), "Critique of Bukharin" (nos 29 & 30) part VII of the series "Communism is not a nice idea but a material necessity" (no.76). The comrades in their response say that the ICC has not continued its critique of their positions announced in the article " Marxism and Crisis Theory" International Review no.13. The simple enumeration of the previous list of articles makes clear that this is a mistake.

[2] Rodbertus was a bourgeois socialist from the middle of the last century who formulated his "law" of the diminishing share of wages. According to him the crisis of capitalism was due to this law and due to this he proposed state intervention in order to increase wages as a remedy to the crisis. The revisionists in the 2nd International accused Marx of having given into Rodbertus' thesis, calling him an "underconsumptionist" and later repeating the same accusation against Rosa Luxemburg.

Today, many trade unionists and also certain leftist currents of capital are unrecognised followers of Rodbertus, affirming that capitalism is primarily interested in improving the workers living as a way of overcome its crises.

[3] Say was a bourgeois economist from the beginning of the 19th century who in his apologia for capitalism insisted that there is not a problem of the market since, according to him, "production creates its own market". Such a theory is equivalent to proposing capitalism as an eternal system without any possibility of crises beyond temporary convulsions provoked by "bad management" or by "disproportion between different productive sectors". Thus we can see that the bourgeosie's present messages about the "recovery" are nothing new!

[4] This technique of opportunism has long been  adopted by Stalinism and Social Democracy and other forces of the left of capital (particularly the leftists) who brazenly use this or that passage of Lenin, Marx, etc, in order to endorse  positions that had nothing to do with them.

[5] It is important to point out that in this polemic unleashed by Rosa Luxemburg's book, Pannekoek, who was neither an opportunist nor a revionist in that epoch but who on the contrary was on the left wing of the 2nd International, was against Rosa Luxemberg's thesis.

[6] We have explained many times that Lenin, faced with the problem of the First World War and particularly in his book Imperialism the Highest Stage of Capitalism, correctly defended the revolutionary position on the historic crisis of capitalism (which he called the crisis of decomposition and parasitism of capital) and the necessity of the world proletarian revolution. This is the essential. However, he did support Hilferding's erroneous theories on finance capital and the "concentration of capital", which particularly in the hands of his epigones, weakened the force and coherence of his position against imperialism. See out critique in International Review no.19 "On Imperialism".

[7] For a critique of Bukharin see International Review no 29 & 30, the article "To go beyond capitalism: Abolish the wage system".

[8] In Capital Vol.3 Marx points out that "to say that it is only possible for the capitalists to exchange and consume their commodities amongst themselves is to completely forget that it is a question of the realisation of capital, not of its consumption" (Section 3, Chapter XV).

[9] The Platform of the ICC says that comrades can defend the explanation of the crisis based on the tendency of the rate of profit to fall.