Correspondence on Crisis Theories and Decadence, Part 2
IR106, 3rd Quarter 2001
We are publishing below the second part of the correspondence begun in the previous issue of the Review, sent to us by one of our contacts in disagreement with our position on the economic explanation for capitalism’s decadence.
Following the letter, we publish the second part of our reply begun in the previous issue, and which is concerned above all with the method for coming to grips with this debate. In fact, we do not deal directly with the questions and criticisms that the comrade addresses to us. We will return to this in a future article, in particular to respond on the question of the post-war reconstruction during the 1950s and 60s. This cannot be explained purely by the devalorisation of constant capital and the increase in variable capital’s share in the organic composition of capital, despite what the comrade and the CWO (Communist Workers Organisation) may think. We agree that this is an important question to discuss and to clarify.
We will also return to the comrade’s view of our vision of the “economic interest” of imperialist war. We are far from rejecting the existence of an economic factor in imperialist wars during capitalist decadence. The question is: at what level does this factor operate? At the immediate level of the conquest of territories and markets, or in more general and historical terms? Above all, what is its role in exacerbating and unleashing imperialist antagonisms? And what is the determining factor in the dynamic of these rivalries? To be more concrete, why is it for example that imperialist and economic rivalries did not match during the period between 1945 and 1989 when the US imperialist bloc – which regrouped the world’s main economic powers and rivals – confronted the Russian imperialist bloc?
Apart from their theoretical aspects, the answers to these questions determine different analyses of the concrete situation, different approaches, and above all different interventions by revolutionaries, as we saw during the wars in Chechnya and Kosovo. Hence the importance of these debates that we present for discussion and criticism.
The Falling Rate of Profit, Imperialist War and the Reconstruction Periodtc "The Falling Rate of Profit, Imperialist War and the Reconstruction Period"
How Marx’s falling rate of profit analysis explains the reconstruction period was convincingly shown by the CWO in its essay ‘War and Accumulation’ in Revolutionary Perspectives n°16 (Old Series), pp.15-17. (N.B. The CWO’s crisis theory eclectically combines Marx’s analysis of the falling rate of profit with that of Grossmann-Mattick. In this discussion, however, the CWO exclusively follows Marx’s analysis).
“During a war - we speak here of 20th century total wars - the existing mass of capital is devalued simply by being run into the ground and not replaced by new capital; in volume terms the productive apparatus is the same as that prior to the war, but in value terms it is not, due to age and over use. The direction of all production to the war effort ensures this; the production of Department I factories is switched from, e.g. machine tools, to armaments, and ageing machinery which is technically obsolete before all its value C is used up, is run into the ground, at a great saving for capital. In peacetime, capitalists who don’t keep raising this composition of their capital are driven to the wall, but NOT in wartime. State control of the economy and the war effort introduce such a limitation on competition, and such a system of guaranteed orders, that the capitalist has no incentive, and no obligation to constantly re-equip and improve his productive apparatus…
But not only was the existing mass of capital of less value in 1949 than it had been in 1939 (mainly due to devaluation than destruction), but the composition of capital had also fallen in the war years, due to the introduction of the reserve army of labour (unemployed, women) into production, usually on the basis of the widespread introduction of three shift working and the six day week; the composition of capital fell since the same C was utilised by a larger labour force, i.e. V rose…
On the basis of this high rate and mass of profit, the gradual re-equipment of the productive forces took place after World War 2 (…) In a situation where a mass of devalued capital existed, any re-equipment of the productive forces (even with similar machinery of no increased value) would lead to phenomenal increases in productivity. If this rises faster than the composition of capital, then the rate of profit will NOT fall, instead, it will rise (…) Therefore, the bourgeoisie didn’t have the problem of wondering why they should bother to accumulate in the 1950’s; the war had solved that problem for them by re-establishing the basis for profitable production”.
This clear explanation by the CWO demolishes the ICC’s muddled critique of the falling rate of profit as an explanation of capitalist reconstruction.
“The problem is that it’s never been proven that during the recoveries that have followed world wars, the organic composition of capital is lower than what it was before the war. In fact the contrary is the case. If you look at the Second World War, for example, it is clear that, in the countries affected by the destructions of the war, the average productivity of labour and thus the relationship between constant and variable capital very quickly (i.e. by the beginning of the 50’s), reached what it had been in 1939. Indeed, the productive potential that was reconstituted was much more modern than the one that had been destroyed. However, the period of ‘prosperity’ which accompanied the reconstruction went on long after that (in fact up to the mid-60’s), i.e. well after the point where the pre-war productive capacity had been reconstituted, taking the organic composition to its previous level” (“Rejecting the notion of Decadence demobilises the Proletariat in the face of War”, International Review n°77, pp.20.)
The real ‘problem’ is that the ICC, like its mentor Rosa Luxemburg, does not understand Marx’s analysis of falling rate of profit.
Economic Confusions of the ICCtc
"The Economic Confusions
of the ICC"
The ICC finds itself in a quandary because, on the one hand, it defends the Marxist position that decadence does not mean a total halt to the growth of the productive forces, but on the other, defends a crisis theory whose logical and inescapable conclusion is just this result. (In Rosa Luxemburg’s crisis theory pre-capitalist markets are the sine qua non of capitalist accumulation. Therefore, when these markets are exhausted capitalist accumulation has reached its absolute economic limit. Indeed, the ongoing destruction of pre-capitalist markets means that the total capital not only cannot exceed this limit but also must necessarily diminish.)
The ICC, however, ignores the blatant contradiction between the actual development of capitalism and the logical outcome of her economic analysis that there is a ceiling on capitalist growth, that there is an absolute economic limit to capitalist accumulation. (This is also the logical conclusion to Henryk Grossmann’s analysis.)
This contradiction forces the ICC into a ludicrous conclusion about the nature of imperialist war; it believes that imperialist war does not have an economic function for decadent capitalism . The sheer absurdity of this idea is bewildering, on a par with the Bordigists’ ‘Invariance of the Programme’.
In other words, the ICC is saying that the Marxist position that in decadence capitalism ceases to fulfil a progressive function (economic, or otherwise) for humanity is identical with the position with that imperialist war does not have an economic function for capitalism. The ICC further confuses matters by also equating the latter view with the false notion of the IBRP that every war in decadence has an immediate economic motive .
(The view that imperialist war does not have an economic function for capitalism is consistent with the ICC’s Luxemburgist pre-capitalist markets crisis theory. After all, in this theory, once pre-capitalist markets are exhausted, further accumulation at the level of total capital becomes impossible. And if capitalist accumulation has reached its absolute limit, then nothing, not even imperialist war can reverse the situation. Hence imperialist war cannot have an economic function.)
The ICC argues that imperialist war does not have an economic function. But if imperialist war does not have an economic function, what accounts for the reconstruction periods of capital, which the ICC believes happened, and which, in the case of that after World War II, it recognises as having led to an economic expansion that greatly exceeded that of pre-World War II capitalism?
Why is it that the ICC, which has the most coherent political program and practice of all the groups in the Communist Left, which is free of the sectarianism, opportunism and centrism that marks the IBRP and the Bordigists, descends into such profound confusion in the realm of economics? The answer is its Luxemburgist economics. Contrary to the illusions of the ICC, Rosa Luxemburg developed her alternative crisis theory because she misunderstood the method of Capital; in particular, she mistakenly thought that the reproduction schemes in vol. II of Capital were intended as a direct picture of concrete capitalist reality. The apparent contradiction between the schemes and historical reality led her to believe that the schemes were faulty. But what was at fault was the partial empiricism of her viewpoint; for her ‘discovery’ that capitalism could not accumulate without pre-capitalist markets derives from her mistakenly adopting the viewpoint of the individual capitalist. Her concessions to empiricism prevented her from grasping the validity of Marx’s falling rate of profit analysis, and caused her to arrive at a mechanistic, death crisis interpretation of capitalist accumulation.
I regard Rosa Luxemburg’s and Henryk Grossmann’s specific economic explanations of capitalist decadence as revisionist economics because they are based on a flawed understanding of the method of Capital:
“Orthodoxy in questions of Marxism relates rather exclusively to the method. It is only in the sense of its founder that this method can be expanded, extended and deepened. And this conviction rests on the observation that all attempts to overcome or ‘improve’ that method have led, and necessarily so, only to triteness, platitudinizing and eclecticism…”.
Of course, despite their revisionist economics there was a class line separating Rosa Luxemburg and Henryk Grossmann: the former was a revolutionary Marxist owing to her political positions; Henryk Grossmann was a Stalinist reactionary.
The Dogmatism of the ICCtc "The Dogmatism of the ICC"
“There can be no dogmatism where the supreme and sole criterion of a doctrine is its conformity to the actual process of social and economic development” .
The ICC refuses to acknowledge that because pre-capitalist markets are the sine qua non of capitalist accumulation in Luxemburg’s economics, this has specific and unavoidable consequences for the development of capitalism were it true. In other words, her crisis theory makes specific predictions about capitalist development. However, the “actual process of social and economic development” has shown unequivocally the falsity of these predictions and thus the falsity of her economics. Yet the ICC continues to defend the validity of these economics. This is DOGMATISM.
Furthermore, what else but dogmatism explains why the ICC continues to treat Henryk Grossmann’s analysis of the falling rate of profit as identical to that of Marx in Capital, when it has long been familiar with the critique of Henryk Grossmann in Anton Pannekoek’s The Theory of the Collapse of Capitalism , which clearly shows the fundamental differences between the two. Moreover, this article and the writings of the IBRP, particularly those of the CWO, should have made it clear to the ICC that the IBRP eclectically combines Grossmann’s crisis theory with that of Marx.
The ICC refers to the numerous articles it has written on economic theory as a sign of its commitment to clarity on this issue . However, in practice this has meant that the ICC merely repeats the same faulty arguments over and over again, ignoring and evading the cogent criticisms against its economics by other communist currents. It is true that the ICC responds with criticisms of these currents that are often correct per se, but are irrelevant to the validity of the specific criticisms that these currents raised in the first place. (For example, the ICC correctly observes that the IBRP and especially the Bordigists have a tendency to analyse capitalism from the point of view of each nation taken in isolation.)
That the ICC still defends its manifestly flawed Luxemburgist economics 25 years after its formation suggests that it has an internal political climate that discourages, or at least does not encourage, a theoretical deepening on the economic foundations of decadence. Its one thing to assert, as does the ICC, and rightly so, that differences over economic theory should not be a barrier to political unity and regroupment. However, for the ICC this has meant in practice avoiding maximum clarity on this issue; it has meant theoretical stagnation.
Quite frankly, the ICC, in defending its Luxemburgist economics, displays the same disregard for accuracy and rigour that the IBRP and the Bordigists do to justify their sectarian, centrist and opportunist political practice. Needless to say, the ICC’s impoverished economics lends credence to the attacks on its political program by the IBRP and the Bordigists, as many of the criticisms these currents make against the ICC’s economics are valid.
The ICC’s dogmatic devotion to Rosa Luxemburg’s economics, which I find reminiscent of the Bordigists’ idolatrous attitude to Lenin, blinds the organisation to the disparity between her political insights into imperialism and her revisionist economics .
If the ICC wishes to have a coherent Marxist economic foundation for its political program, then it MUST abandon Rosa Luxemburg’s fatally flawed crisis theory and replace it with that of the analysis of the falling rate of profit in Capital.
Eclecticism in the Crisis Theories of the IBRP and the ICCtc "Eclecticism in the Crisis Theories of the IBRP and the ICC"
As the CWO observed on the eclectic approach of the ICC to economics:
“Like Luxemburg, their references to the falling rate of profit are merely to explain away the facts (such as why capitalism sought markets further away from the metropoles during the period of primitive accumulation) or to explain elements of the development of capitalism which a purely markets approach cannot (e.g. why capital concentration preceded the rush for colonies or that the vast bulk of trade was carried on in this period between the advanced capitalist powers)” .
However, the IBRP themselves arrive at an eclectic and confused theory as they combine Henryk Grossmann’s crisis theory with that of Marx. Indeed, they believe that Grossmann’s “contribution was to show the significance that the mass of surplus value played in determining the exact nature of the crisis” . The IBRP fails to grasp that this so-called insight of Grossmann is inextricably linked to his mechanistic and one-sided conception of capitalist accumulation. In contrast to Marx, he examines the falling rate of profit solely in terms of the production of surplus value, ignoring the role of the circulation and distribution of surplus value. As a result, he reaches the erroneous conclusion that capital is exported to foreign nations not, as Marx argued, for the maximisation of surplus value, but because of the “lack of investment opportunities at home”  (which is the false view that capital is exported “because it absolutely could not be applied at home”  that Marx criticised in vol. III of Capital), and thus to his mechanistic conception of a death crisis of capitalism.
The eclectic approach of both currents allows them to pick and choose from their crisis theories as if from a smorgasbord. However plausible this may seem, in reality they are defending two diametrically opposed perspectives: the mechanistic viewpoint of the bourgeoisie and the dialectical viewpoint of the proletariat. (It is true that the ICC and the IBRP criticise certain features of the crisis theories of Rosa Luxemburg and Grossmann-Mattick, respectively. But as they continue to defend the core economic analyses of these theories they therefore continue to defend the mechanistic conceptions on which they are based).
 “The function of imperialist war”, in “The Nature of Imperialist War”, International Review n°82, pp. 21-23.
 Georg Lucazs [sic], Geschichte und Klassenbewusstein, quoted in Paul Mattick, The Inevitability of Communism: A Critique of Sidney Hook’s Interpretation of Marx, Polemic Publishers, New York, 1935, p.35.
 Lenin, V.I., Collected Works, vol.1, p.298, Foreign Languages Publishing House, Moscow, 1960.
 Anton Pannekoek in Capital and Class 1, London (Spring 1977).
 For a comprehensive list see International Review n°83.
 The ICC assumes that Rosa Luxemburg’s understanding of the political consequences of capitalist decadence, namely that the global nature of imperialism destroys the material basis for national self-determination, guarantees the validity of her specific economic explanation of decadence.
 “Imperialism - The Decadent Stage of Capitalism”, Revolutionary Perspectives n°17 (Old Series), p.16.
 Private correspondence from CWO to author.
 Quoted in Anton Pannekoek, Grossmann versus Marx, ibid., p.73.
 Quoted in Anton Pannekoek, ibid.