Correspondence on Crisis Theories and Decadence, Part 1: Our reply
IR105, 2nd Quarter 2001
The economic convulsions and avalanche of job losses that are sweeping over workers throughout the world and principally in the most industrialised countries are casting a clear shadow of doubt over the endless propaganda about the “good health” and “bright future” of this social system and generating a justified concern about the future.
Given this situation, it is of great importance to discuss the theories that exist in the revolutionary movement and to see which gives the most coherent explanation of the present state of things and the perspectives. The correspondence that we are publishing here is part of this process. The comrade does not have any doubts about the decadence of capitalism. The starting point for the comrade is the fundamental position put forward by the 1st Congress of the Communist International: “A new system has been born. Ours is the epoch of the breakdown of capital, its internal disintegration, the epoch of the Communist revolution of the proletariat…the present period is that of the decomposition and collapse of the whole of the world capitalist system and this will mean the collapse of European civilisation in general if capitalism and its insoluble contradictions are not destroyed”. The comrade also shares the political positions derived from this historical analysis: “The impossibility of authentic reforms and national self-determination, the imperialist nature of all nations, the reactionary nature of all the fractions of the bourgeoisie, the worldwide nature of the proletarian revolution”. The comrade is also very clear that “ The principle strength of Bukharin’s, Luxemburg’s, Bilan’s, Paul Mattick’s, the Communist Left of France and the ICC is that they recognise the global nature of capitalist decadence”. The comrade insists that it is essential to see capitalism in its totality and not partially or abstractly and makes clear that despite the critique he directs at us: “above all else it is the rigour and the coherence of the political programme of the Current that has the determinant influence on the clarity and insight of its analysis”.
It is within this framework that the comrade rejects Rosa Luxemburg’s thesis concerning the theoretical explanation of the capitalist crisis, the comrade believes that the ICC falls into dogmatism about this question and asserts that Marx: “explained the capitalist crisis only in terms of the fall in the rate of profit because this encompasses the total process of capitalist accumulation”.
Our reply will not take up all the questions that are posed. We will limit ourselves to taking up the concrete problems responded to by the two main theories that have developed within the Marxist movement in order to explain the historic crisis of capitalism (the tendency for the rate of profit to fall and the tendency towards overproduction). We will try to demonstrate that they are not contradictory and that from the global and historic point of view it is precisely the second, which emerges from the work of Marx and was later developed by Rosa Luxemburg , that provides a clearer explanation, which moreover coherently integrates the tendency for the rate of profit to fall. In the same way, we intend to deal with a series of misunderstandings that exist about Rosa Luxemburg’s analysis.
tendency towards a falling rate of profittc
"The tendency towards a
falling rate of profit"
Capitalism has led to the prodigious development of the productivity of human labour in every domain of social activity. For example transport, which under feudalism was limited to the slow and uncertain methods of horse, cart and sail, has been increased to once unthinkable speeds by capitalism; successively by the railways, steam ships, aeroplanes or high-speed trains. The Communist Manifesto takes note of this enormous dynamism of the capitalist system: “It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts and Gothic cathedrals; it has conducted expeditions that put in the shade all the former exoduses of nations and crusades (…) The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of reactionists, it has drawn from under the feet of industry the national ground on which it stood (…) The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilisation. The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. Therefore, whilst “the conservation of the old modes of production was the prime conditions of existence of all the proceeding classes”, the bourgeoisie on the contrary “cannot exist without constantly revolutionising the instruments of production and, thereby, the relations of production and with them the whole relations of society” (idem)
The adorers of capital unilaterally highlight this feature of the system attributing it to the “enterprise spirit”, to the impetuous “innovator”, which “freedom of trade” has supposedly liberated in the individual. Marx clearly recognised the historic contribution of capitalism, but he also exposed these siren songs.
Firstly, he showed the material base of these prodigious transformations. Capitalism contains a permanent tendency for Constant Capital (machines, buildings, installations, raw materials etc.) to grow proportionately much more than Variable Capital (workers’ labour). The first is constituted by the coagulation of previously realised labour, that is to say, dead labour, whilst the second sets in motion the means for creating new products, that is living labour. Under capitalism the weight of dead labour tends to progressively increase to the detriment of living labour. That is, Constant Capital (dead labour) increases proportionately much more than Variable Capital (living labour). This is the dominant tendency in the growth of the organic composition of Capital.
What are the social and historical consequences of this tendency? Marx exposed the dark and destructive side of what the propagandists of capital unilaterally present as Progress, with a capital “P”. In the first place, it engendered a permanent tendency towards unemployment, which in the decadence of capitalism has tended to become chronic . But furthermore, he demonstrates that the increase in the organic composition of capital means that globally the mass of exploited living labour tends to diminish and with it the capitalists’ source of surplus value also diminishes: the surplus value extracted from workers thus, as Mitchell showed in the above cited work, “ONE CONSUMPTION ALONE excites its interest and passion, stimulates its energy and its will, gives it reason to exist: the CONSUMPTION OF LABOUR POWER!” (International Review no102, page 10).
In the words of Marx: “this gradual growth in the constant capital, in relation to the variable, must necessarily result in a gradual fall in the general rate of profit, given that the rate of surplus-value, or the level of exploitation of labour by capital remain the same” (Capital Vol. 3, Part 3, Chapter 13: “The Law Itself”, emphasis in the original, page 318, Penguin Books, 1981). That is to say, the development of the productivity of labour which is translated into an increase in the organic composition of capital has as it counterpart the law of the tendency of the rate of profit to fall. Therefore, Mitchell affirms that “ the law of the tendency of the rate of profit to fall generates cyclical crisis and will be a potent ferment of the decomposition of the decadent capitalist economy” .
Limits to the tendency towards a falling rate of profittc "Limits to the tendency towards a falling rate of profit"
In the historic epoch of the expansion and apogee of capitalism (the 19th century), where humanity underwent an amazing succession of endless inventions and developments that transformed every aspect of social life, Marx was able to see in this progress, in a rigorously scientific way, the factors of the historic crisis and decomposition of a system which was then at its peak. He was the first to discover this law and systemise its possible historical consequences. But it was precisely his rigour and meticulousness that led him to also see its limitations, the factors that counter-acted it and its own contradictions: “If we consider the enormous development in the productive powers of social labour over the last 30 years (…) then instead of the problem that occupied previous economists, the problem of explaining the fall in the rate of profit, we have the opposite problem of explaining why this fall is not greater or faster. Counteracting influences must be at work, checking and cancelling the effect of the general law and giving it simply the character of a tendency” (Capital vol. 3, Part 3, chapter 14: “The counteracting factors”, page 338).
This question heads up Chapter XIV of Part 3 of Vol. 3 of Capital, which is titled “Counteracting Factors”. In this chapter Marx enumerates six “counteracting factors”:
a) more intense exploitation of labour
b) reduction of wages below their value
c) cheapening of the elements of constant capital
d) the relative surplus population
e) foreign trade
f) the increase in share capital.
Within the limited framework of this reply we cannot make a profound analysis of these counteracting factors, their range and validity. But we must highlight the most important: while the rate of profits falls, the mass of surplus-value tends to increase  that is, the capitalists try to compensate for the fall in the rate of profit by increasing workers’ exploitation. In response to the self-interested thesis of the bourgeoisie, trade-unionists and economists according to which the technical progress and productivity diminish exploitation, Marx showed that “The tendential fall in the rate of profit is linked with a tendential rise in the rate of surplus-value, i.e. in the level of exploitation of labour. Nothing is more absurd, then, than to explain the fall in the rate of profit in terms of a rise in wage rates, even though this too may be an exceptional case. Only when the relationships that form the rate of profit have been understood will statistics be able to put forward genuine analyses of wage-rates in different periods. The rate of profit does not fall because labour becomes less productive but rather because it becomes more productive”. (page 347, idem).
This is the reality of the whole of the 20th century where capitalism has intensified the exploitation of the working class in an incredible manner: “It is necessary to note that, despite a certain fall in relation to the last century, the present rate of profit has remained at around 10% - a level that is essentially due to the formidable increase in the rate of exploitation suffered by the workers: for the same working day of 10 hours; if the workers of the 19th century worked 5 hours for himself and 5 for the capitalist (figures frequently reported by Marx) today the worker works 1 hour for himself and 9 for the boss ”( “The crisis, are we heading for a new 1929?”, which appeared in Révolution Internationale old series n°6 and 7).
Thus “this theory of crisis [i.e. which explains them by the tendency for the rate of profit to fall] seeks to put forwards the transitory character of the capitalist mode of production and the growing seriousness of the crisis shaking bourgeois society. With this vision one can thus partially interpret the qualitative change that has taken place between the 19th and 20th centuries in the nature of the crisis: the growing gravity of this crisis would be explained by the aggravation of the tendency of the rate of profit to fall. However this vision is not enough, in our opinion, to explain everything and particularly to provide a satisfactory answer to two questions:
- Why do crises take the form of market crises?
- Why, once a certain point has been reached, do crises lead to war, when previously they could be resolved peacefully?”.
The role of the markettc "The role of the market"
Capitalism is not only characterised by its capacity for increasing the productivity of labour. In reality its essential feature is the generalisation of commodity production: “Although commodities have existed in nearly all societies, the capitalist economy is the first to be fundamentally based on the production of commodities. Thus the existence of an ever-increasing market is one of the essential conditions for the development of capitalism. In particular the realisation of surplus-value which comes from the exploitation of the working class is indispensable for the accumulation of capital which is the essential motor-force of the system” (Point 3 of the ICC Platform). Capitalism was not born from the artisan’s intelligence, nor from the inventor’s genius, but from the merchant class. The bourgeoisie arose as a class of traders and throughout its history it has resorted, and continues to resort, to forms of labour of very low productivity:
- until well into the 19th century slavery was still used;
- today there is massive use of forced labour by prisoners, for example in the main industrial concentration in the world: the USA6;
- the continuing exploitation of domestic labour;
- throughout large epochs diverse forms of forced labour have been used;
- today child labour is increasingly widespread;
Capitalism’s driving force is to maximise profit and this finds its global framework in the market. However, when we talk about the “market” and “commodity production” it is necessary to be precise. Bourgeois economists present the market as a world of “producers and consumers”, as if capitalism were a regime of simple interchange of commodities where each sells in order to buy the necessities of life. The basis of capitalism is wage labour, i.e. the exploitation of a special commodity, labour power, with the aim of obtaining the largest profit. This determines a specific form of exchange characterised by the following features:
- the wide scale breaking up of the narrow local or even national framework;
- the losing of all links with barter or the simple exchange of the commodities of more or less self-sufficient small local communities, in order to take a universal form based on money;
- it is at the service of the formation and accumulation of capital;
- it needs, as a condition of its existence, to constantly expand, without ever reaching a point of equilibrium.
It is certain that the market is not the aim of capitalist production. Manufacture is not carried out to satisfy the needs of solvent buyers but rather, in order to obtain surplus-value on an ever-increasing scale. However, surplus-value can only be materialised through the market and there is no other means of obtaining ever growing surplus value apart from through the expansion of the market.
Within the revolutionary movement those who explain the crisis exclusively by the tendency of the rate of profit to fall, as is the case with the comrade, tend to play down or purely and simply deny the role of the market in the crisis of capitalism. They claim that the market is nothing but the reflection of what takes place in the sphere of production. According to them, the proportional relations between the distinct departments of capitalist production (essentially, department 1 is the means of production and department 2 is the means of consumption) are expressed by an equilibrium or disequilibrium in the market.
This abstract schema totally bypasses the historical conditions in which capitalism has grown and developed. If the market could be compared to a medieval fair where the producers offer their crops or their craft production to consumers who are seeking to obtain or barter for what they need to sustain themselves, then indeed, “the market is a reflection of what happens in the sphere of production”. However, the capitalist market is nothing like this deformed image. Its main foundation is the expropriation of the producers by separating them from their means of livelihood and production, transforming them into proletarians and progressively subjecting them on this basis to the regime of commodity exchange. This struggle against pre-capitalist forms was carried out in the market and for the market and could expand itself without meeting decisive obstacles whilst existing within territories of sufficient size that had not been fully subjected to capitalist production.
and the question of the markettc
"Marx and the question
of the market"
Those who support the “falling rate of profit” explanation usually say that Marx did not consider the question of the market when analysing the cause of the crisis of capitalism. A brief analysis of what Marx really said in Capital and other works shows that this is not the case.
1. He begins by asserting the necessity for commodities to be sold in order for surplus value to be realised and capital valorised. “With the development of this process as expressed in the fall in the profit rate, the mass of surplus-labour thus produced swells to monstrous proportions. Now comes the second act in the process. The total mass of commodities, the total product, must be sold, both the portion which replaces constant and variable capital and that which represents surplus-value” (Capital, Vol. 3, Chapter 15 “The development of the law’s internal contradictions”, page 352, our emphasis). He went on to say that: “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 and may even not involve any realisation of the surplus-value extracted, or only a partial realisation; indeed, it may even mean a partial or complete loss of his capital” (idem).
The extraction of surplus value does not finish the process of capitalist production; commodities have to be sold in order to realise the surplus value and to be able to valorise capital. This second part Marx called “The somersault of commodities”, in Volume 1. The extraction of surplus-value (which determines the average rate of profit on the basis of the organic composition of capital) forms a unity with the realisation of surplus-value whose determinant is the general situation of the world market.
2. He defines the market as the global framework for the realisation of surplus value. What are the conditions of this market? Is it merely an external manifestation, a superficial form of an internal structure determined by the proportionality between the different branches of production and general organic composition? This is the idea defended by those who talk of “Marx’s abstract method” and who brand as “empiricism” any efforts to talk about the “market” and such prosaic things as “selling” commodities. But Marx’s response does not go in that direction: “The conditions for immediate exploitation and for the realisation of that exploitation are not identical. Not only are they separate in time and space, they are also separated in theory. The former is restricted only by society’s productive forces, the latter by the proportionality between the different branches of production and by society’s power of consumption” (idem).
3. He made it clear that the capitalist relations of production, based on wage labour, determine the historical limits of the capitalist market. What determines ‘society’s power of consumption’? “This is determined neither by the absolute power of production nor by the absolute power of consumption but rather by the power of consumption within a given framework of antagonistic conditions of distribution, which reduce the consumption of the vast majority of society to a minimum level, only capable of varying within more or less narrow limits” (idem).
Capitalism is a society of commodity production based on wage labour. This determines a certain limit to the capacity of consumption of the great majority of society – the wage earners: wages have to oscillate more or less around the cost of the social reproduction of labour power. Therefore Marx affirmed clearly in Capital that “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses, in the face of the drive of capitalist production to develop the productive forces as if only the absolute consumption capacity of society set a limit to them” (Capital Vol. 3, part 5, Chapter 30 “Money capital and real capital: 1”, page 615). The masses’ capacity to consume is “further restricted by the drive for accumulation, the drive to expand capital and produce surplus-value on a larger scale. This is the law governing capitalist production, arising from the constant revolutions in methods of production themselves, from the devaluation of the existing capital which is always associated with this, and from the general competitive struggle and the need to improve production and extend its scale, merely as a means of self-preservation, and on the pain of going under” (Capital Vol. 3, part 3, Chapter 15, “The law of the tendential fall in the rate of profit”, page 352).
4. He understood the necessity for the constant expansion of the market within the perspective of the formation of the world market. Marx saw the constant expansion of the market as inevitable, and as an essential condition of capitalist accumulation: “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 independent of the producers and becomes ever more uncontrollable. The internal contradiction seeks resolution by extending the external field of production. But the more productivity develops, the more it comes into conflict with the narrow basis on which the relations of consumption rest. It is in no way a contradiction, on this contradictory basis, that excess capital coexists with a growing surplus population; for although the mass of surplus-value produced would rise if these were brought together, yet this would equally heighten the contradiction between the conditions in which this surplus-value was produced and the conditions in which it was realised” (idem page 353).
He saw the formation of the world market as the fundamental historical task of capitalism: “The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere” (Communist Manifesto). In the same sense, Lenin said that: “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 the world economy” (“The Development of Capitalism in Russia”. Collected Works Vol. 3, page 594).
5. He gave great importance to the market in the development of the crisis. Due to its own relations of production based on wage labour this tendency leads to the aggravation of its contradictions at the same time: “If the capitalist mode of production is therefore a historical means for developing the material powers of production and for creating a corresponding world market, it is at the same time the constant contradiction between this historical task and the social relations of production corresponding to it” (Marx, Capital Vol. 3, page 359).
Therefore, the evolution of the market is central to the explosion of the crisis: “However, the mere admission that the market must expand with production, is, on the other hand, again an admission of the possibility of over-production, for the market is limited externally in the geographical sense (…) For it is then possible – since the market and production are two independent factors - that the expansion of one does not correspond with the expansion of the other; 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” (Marx, Theories of Surplus Value, Vol. 2, pages 524-25. Lawrence & Wishart, London, 1969).
In the Communist Manifesto he puts the question: “In these crises there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity – the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilisation, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them. How does the bourgeoisie get over these crises? On the one hand by 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. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented” (The Revolutions of 1848, The Pelican Marx Library, 1978, page 73).
The latter element is very important for understanding the causes of the historic crisis of capitalism, its irreversible decadence. Whereas in previous modes of production the crises were due to under-production (starvation, droughts, epidemics) the crises of capitalism, for the first time in history, have the character of crises of overproduction. The poverty of the majority is not born from the lack of the means of consumption but from their excess. Unemployment and factory closures are not due to the lack of stores or the lack of machinery, but from their abundance. Destruction, stagnation and the threat of the collapse of humanity into barbarity, arise from over-production. This shows us the basis of communism, the task of the new society: to direct the forces of production towards the full satisfaction of human needs freed from the yoke of wage labour and the market.
contribution of Rosa Luxemburgtc
"The contribution of
Marx analysed the two sides of the coin of the capitalist system as a totality. On one side is the production of surplus value, this determines the rate of profit, the development of productivity of labour and the tendency for the rate of profit to fall. The other side is the realisation of surplus value and it is on this side of the scales that the market intervenes: the limits of production imposed by capitalism’s relations based on wage labour and the necessity to conquer new markets in order as much to realise surplus value as to obtain new sources of labour (the separation of the producers from their means of production and life and their incorporation into wage labour).
These two sides or to put it more precisely these two contradictions, contain the premises for the convulsions that led capitalism to its decadence and the necessity for the working class to destroy it and to establish communism. Overall, Marx developed a more elaborate formulation of the first “side” but, as we have seen, he did give the second great importance.
One can easily understand this imbalance if one analyses the historical conditions in which Marx lived and struggled. Between 1840 and 1880, the period in which Marx developed his militant activity, the dominant feature of capitalist production was the prodigious acceleration of its technical discoveries, the increasingly vast development of industry. After the exaggerations of 1848 when the Manifesto foresaw a practically definitive crisis, Marx and Engels developed a more circumspect analysis, taking into consideration all factors and beginning a large-scale investigation of the social structure.
On the one hand, the main political battle against the economists and ideologues of the bourgeoisie had two axes: to demonstrate the material bases of production – the exploitation of the workers, the extraction of surplus value - and to demonstrate the historical limits to capitalist production. In relation to the latter aspect, they concentrated on demonstrating that the tendency that the supporters of capitalism praised most – the progress of the productive force of labour- contained within it the germ of the crisis and the decisive convulsions of the system – the tendency for the rate of profit to fall.
On the other hand, the problem of the realisation of surplus value, although it raised its head during the cyclical crises, was not directly presented as the decisive historical problem. In 1850 only 10% of the world population lived under the capitalist regime, the system’s capacity for expansion appeared infinite and vast and each cyclical crisis unleashed a new extension of the capitalist terrain. Despite this, Marx understood the gravity of the dynamic contained within these conditions and he highlighted the underlying contradiction between capitalism’s tendency to unlimited production and the inherent necessity of its own social structure to confine the consumption of the great majority of the population within narrow limits.
The situation changed radically at the end of the 19th century and the first decades of the 20th. The phenomenon of imperialism and worsening imperialist wars appeared and led to the terrible slaughter of 1914. With this, the fundamental theoretical question for understanding the historical crisis of capitalism became the realisation of surplus-value and not simply its production: “it is certain that the overwhelming tendency of capitalist production to penetrate into the non-capitalist countries has acted, since it first set foot on the historical stage, as an incessant spur throughout its development, increasingly gaining in importance, until finally in the phase of imperialism, it has become the predominant and decisive factor in social life for the last quarter of a century” (Rosa Luxemburg: The Accumulation of Capital, an Anti-critique).
Rosa Luxemburg used an historical method to elaborate this problem. She did not pose it – as her critics say - as a circumstantial question – how to find “third persons” distinct from capitalists and workers in order to find markets for the commodities they could not sell – but as a global question: what are the historical conditions for capitalist accumulation? Her answer was that: “Capitalism arises and develops historically amidst a non-capitalist society. In Western Europe it is found at first in a feudal environment from which it in fact sprang - the system of bondage in rural areas and the guild system in the towns - and later, after having swallowed up the feudal system, it exists mainly in an environment of peasants and artisans, that is to say in a system of simple commodity production both in agriculture and trade. European capitalism is further surrounded by vast territories of non-European civilisation ranging over all levels of development, from the primitive communist hordes of nomad herdsmen, hunters and gatherers to commodity production by peasants and artisans. This is the setting for the accumulation of capital” (Rosa Luxemburg The Accumulation of Capital, page 368, Modern Reader Paperbacks, 1968).
She distinguishes three parts to this process: “the struggle against natural economy, the struggle against commodity economy, and the competitive struggle of capital on the international stage for the remaining conditions of accumulation” (idem, page 368). Although these three parts are present throughout the life of capitalism, nevertheless one of them has more preponderance in each of its historical phases. Thus in the phase of primitive accumulation – the genesis of English capital between the 16th and 17th centuries so brilliantly studied by Marx – the dominant feature was the struggle against the natural economy. The period from the 17th century to the first third of the 19th century was generally dominated by the second aspect – the struggle against commodity economy. In the last thirty years of the 19th century the crucial factor was the third aspect: the worsening competition over the division of the planet.
With this analysis she underlined that: “The existence and development of capitalism requires an environment of non-capitalist forms of production, but not every one of these forms will serve its ends. Capitalism needs non-capitalist social strata as a market for its surplus value, as a source of supply for its means of production and as a reservoir of labour power for its wage system” (idem).
From this historical and global point of view she put forwards a critique of the schemas of expanded reproduction that Marx had used in order to represent the regular process of capitalist production. She did not question their validity in relation to the concrete and immediate aim that Marx had given them. Marx demonstrated against Adam Smith and the classical bourgeois economists that expanded reproduction was possible and exposed the error that they committed in denying the existence of constant capital. In effect, not recognising the existence of constant capital makes it impossible to understand the continuity of production and the role of accumulated labour in this and consequently the accumulation of capital.
Neither did she criticise Marx’s schemas because they do not represent immediate reality – in contrast to what the comrade thinks when he attributes a “basic error” to Rosa Luxemburg. She understood perfectly well the legitimacy of the abstract model that Marx developed with the concrete aim of demonstrating that expanded reproduction was possible.
What Luxemburg criticises is the assumption that all the extracted surplus value is consumed within the ambit formed by the capitalists and workers. This assumption could be valid if you only wanted to explain that the accumulation of capital is possible in a general way, but it does not help if you are trying to understand the process of historical development and consequently the general crisis of the capitalist system.
Therefore, Rosa Luxemburg argued that there was a fraction of the total surplus-value extracted from the workers that is not consumed by the capitalists and explained that its realisation took place through the struggle to incorporate pre-capitalist territories into the commodity system and capitalist wage labour. In this way she was trying to respond to a very concrete reality of capitalism in its climactic period (1873-1914): “If capitalist production constituted a sufficient market for itself and allowed the expansion of the total of accumulated value, it would mean that another phenomenon of modern development – the struggle for distant markets and for the exportation of capital, that are such significant expressions of imperialism – are totally incomprehensible. Why so much ruin? Why conquer the colonies and why the present struggles for the swamps of the Congo and the deserts of Mesopotamia? It would be much more convenient for capital to stay at home and lead the good life. Krupp could produce happily for Thyssen, Thyssen for Krupp, they would not have to worry about anything but investing capital at one time or another in their operations and mutually expanding indefinitely. The result is that the historical movement of capital is simply incomprehensible and with it, present-day imperialism” (Rosa Luxemburg, The Anti-critique).
Marx posed exactly the same problem when he wrote: “to say that only the capitalists can exchange and consume their commodities amongst themselves is to completely forget the character of capitalist production and to forget that it is a question of the valorisation of capital, not consuming it” (op cit).
It is necessary to make it clear that Rosa Luxemburg did not see the pre-capitalist territories as the “third persons” that the capitalists need in order to get rid of their surplus commodities as some of her critics reproach her for:
“In detail, capital in its struggle against societies with a natural economy pursues the following ends:
1. to gain immediate possession of important resources of productive forces such as land, game in primeval forests, minerals, precious stones and ores, products of exotic flora such as rubber, etc
2. to ‘liberate’ labour power and to coerce it into service.
3. to introduce a commodity economy.
4. to separate trade and agriculture” (The Accumulation of Capital, page 369)
The apologists for the capitalist system pretend that it is a system based on the regular exchange of commodities, which depends on a gradual equilibrium of sale and demand that develops with the growing economy. In response to this Rosa Luxemburg pointed out that: “…capitalist accumulation as a whole, as an actual historical process, has two different aspects. One concerns the commodity market and the place where surplus value is produced – the factory, the mine, the agricultural estate. Regarded in this light, accumulation is a purely economic process, with its most important phase a transaction between the capitalist and wage labourer. In both its phases, however, it is confined to the exchange of equivalents and remains within the limits of commodity exchange. Here, in form at any rate, peace, property and equality prevail, and the keen dialects of scientific analysis were required to reveal how the right of ownership of other people’s property, how commodity exchange turns into exploitation and equality becomes class-rule” (op cit chapter XXXI, page 452).
The exposing of this ultimate aspect – to reveal the world of violence and destruction that the simple regular exchange of commodities contained - was Marx’s aim in Capital, but faced with the imperialist epoch and the entry of the system into its decadence it was essential to polarise around: “The other aspect of the accumulation of capital [that] concerns the relations between capitalism and the non-capitalist modes of production which start making their appearance on the international stage. Its predominant methods are colonial policy, an international loans system – a policy of spheres of interest - and war. Force, fraud, oppression, looting are openly displayed” (idem).
In the second part of this correspondence, we will publish a further letter that we have received from the comrade, containing his explanation of the reconstruction periods and his criticism of the ICC’s dogmatism on economic questions. Our reply will further develop our defence of Luxemburg’s analyses, and respond to these criticisms.
 The contribution made by Mitchell in Bilan “Crisis and cycles in the economy of dying capitalism” International Review, n°102 and 103, is also important.
 See International Review no 93 and our supplement Manifesto on Unemployment.
 See “Crises and cycles in the economy of dying capitalism” International Review, numbers 102 and 103
 The distinction between the rate of surplus-value and the rate of profit that Marx makes is very important from the point of view of the evolution of capitalism:
· Rate of surplus-value = p / v (p = surplus-value and v = variable capital or the total mass of wages)
· Rate of profit = p/ (c + v) (c = constant capital),
 It is not the aim of this article to rebut the idea according to which the ”modern” worker is much less exploited than his predecessor in the 19th century. This mystification which is repeated daily in order to falsify the reality of exploitation. For a response to this see amongst other articles “Who can change the world?” International Review numbers 73 and 74 and the series “Reply to doubts about the working class” which has appeared in various territorial publications of the ICC.