The New Silk Road and Luxemburg's Explanation of Accumulation

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The New Silk Road and Luxemburg's Explanation of Accumulation
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Ive started a new thread to ask a few questions about luxemburg’s thesis rather than continue the discussion on the decomposition thread.

Alf wrote: ‘A final word about Rosa Luxemburg's analysis. Link seems to imply that we have sidelined Luxemburg's thesis, or at least jettisoned its more "dogmatic" aspects. On the contrary, the self-critical discussions we have been having about crisis and decadence have led us towards a deeper understanding of Luxemburg's theory, not least a rejection of the idea that the extra-capitalist milieu was exhausted in 1914, which was not at all the thesis of The Accumulation of Capital. And as the recent contribution on the Silk Road also reminds us, capitalism's dynamic rapport with the extra-capitalist milieu is not only a question of markets, but also of the exploitation of new sources of labour power and natural resources, and their integration into the capitalist system’

Of course its not wrong to revise and re-interpret what Luxemburg said as Alf suggests, but the article mentioned by Alf, The New Silk Road, suggests that only now is capitalism exhausting extra capitalist markets:

“In principle, however, once the producers outside capitalism have been transformed into proletarians or capitalists, they constitute part of the existing capitalist market, no longer providing new outlets for capitalist expansion ... This is why capitalism cannot expand and accumulate eternally. At the latest when the great majority of humankind has been turned into either wage labourers or their “employers”, the system reaches its expansion limits. This is not yet completely the case today at the planetary level. But the “leveling off” of the expansion of China today is a clear sign that, although this expansion has not yet reached this limit, it is coming close enough to it to markedly slow things down”

This is quite an amendment to luxemburg’s thesis and may itself be thought to question the basis of decadence?

 

So first question on population

China’s population in 1914 was about 430m, 1950 was 540m whereas the population now is 1.4bn. World pop in 1914 was 1.6bn, in 1950 2.5bn, and in 2020 7.8bn

Why am I quoting figures again? Population growth doesn’t happen independently to the economy. To indicate the increase in market size obviously but if it is being said that the growth of the economy during decadence is related to the exploitation of new extra-capitalist markets then it appears that its not extra capitalist markets that have been around since 1914 but that they have been expanding and particularly since 1950,

Is this what the ICC is theorising or do you have a different interpretation?

This is an expansion at a far greater rate than the pre-capitalist economies achieved even at their height. . In fact if it is considered that the growth of China is a tumour, a product of the decomposition of capital, then presumable the theory must be that decadence is causing extra-capitalist markets to grow in order to enable capitalism to grow further. In itself that sounds extremely clever organisation, not really decomposition.

 

Second question on economic growth.

I think its correct to say that in The Accumulation of Capital Luxemburg did not suggest the extra capitalist markets were exhausted in 1914, but she does say this:

"Imperialism is the political expression of the accumulation of capital in its competitive struggle for what remains still open of the non-capitalist environment. Still the largest part of the world in terms of geography, this remaining field for the expansion of capital is yet insignificant as against the high level of development already attained by the productive forces of capital; witness the immense masses of capital accumulated in the old countries which seek an outlet for their surplus product and strive to capitalize their surplus value, and the rapid change-over to capitalism of the pre-capitalist civilisations.”

and in The Junius Pamphlet she goes further:

“Reduced to its objective historic significance, the present world war as a whole is a competitive struggle of fully developed capitalism for world supremacy, for the exploitation of the last remnant of non-capitalist world zones.” The Junius Pamphlet

World gdp % increase in period

1870-1913                        147

1913-1950                        97

1950-1970                        158

1970-2010                        282

These figures on economic growth also suggests that the extra capitalist markets must have been growing rather than diminishing as Luxemburg expected. This also poses the question, how has capital been able to achieve far higher growth rates in decadence, during the imperialist phase of decadence than in the ascendant phase when there were clearly far more extra cap markets available? Doesn’t this suggests economic growth is in fact dependant on something other than extra capitalist markets?

 

Last but not least, a question on Luxemburg’s theoretical basis.

Luxemburg states in The Accumulation of Capital:

In real life the actual conditions for the accumulation of the aggregate capital are quite different from those prevailing for individual capitals and for simple reproduction. The problem amounts to this: If an increasing part of the surplus value is not consumed by the capitalists but employed in the expansion of production, what, then, are the forms of social reproduction? What is left of the social product after deductions for the replacement of the constant capital cannot, ex hypothesi, be absorbed by the consumption of the workers and capitalists— this being the main aspect of the problem—nor can the workers and capitalists themselves realise the aggregate product. They can always only realise the variable capital, that part of the constant capital which will be used up, and the part of the surplus value which will be consumed, but in this way they merely ensure that production can be renewed on its previous scale. The workers and capitalists themselves cannot possibly realise that part of the surplus value which is to be capitalised. Therefore, the realisation of the surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists."

Would someone please explain what this means? I genuinely cannot work out the rationale for her conclusion here.

This is one of the 2 key points of Luxemburg’s thesis. However, we know that the money in circulation is only a small percentage of actual value of physical and financial assets so how does it matter how much money is in existence in order to be able to purchase/realise the whole of the surplus value? Ok, its correct that the element of surplus value destined to increase production shouldn’t by purchased by workers or capitalists for their own personal subsistence, but why on earth cannot the growth element of surplus value be purchased by productive industry and services or even the state. Why can it only be sold/realised in extra-capitalist markets?

Without this factor, her whole thesis falls down, so it is actually very important.

d-man
Not to be glib (or just a

Not to be glib (or just a little), but in response to "we know that the money in circulation is only a small percentage of actual value of physical and financial assets so how does it matter how much money is in existence in order to be able to purchase/realise the whole of the surplus value?" - if the amount of money doesn't matter at all, I could retort, that then 1 ounce of gold, or 1-dollar note, should suffice to realise the entire (surplus-)value. Perhaps just an exageration. Or if your point is that only a little money is essential to keep the entire economy chruning, then conversely, only a little shortage in essential money can make all the difference.

btw, for interest of Luxemburgist friends (access it via the sci-hub site):

Golden Howlers: Grossmann's Attack on Luxemburg

Alf
Marx and Luxemburg

 

Link's question:

 

Last but not least, a question on Luxemburg’s theoretical basis.

Luxemburg states in The Accumulation of Capital:

“In real life the actual conditions for the accumulation of the aggregate capital are quite different from those prevailing for individual capitals and for simple reproduction. The problem amounts to this: If an increasing part of the surplus value is not consumed by the capitalists but employed in the expansion of production, what, then, are the forms of social reproduction? What is left of the social product after deductions for the replacement of the constant capital cannot, ex hypothesi, be absorbed by the consumption of the workers and capitalists— this being the main aspect of the problem—nor can the workers and capitalists themselves realise the aggregate product. They can always only realise the variable capital, that part of the constant capital which will be used up, and the part of the surplus value which will be consumed, but in this way they merely ensure that production can be renewed on its previous scale. The workers and capitalists themselves cannot possibly realise that part of the surplus value which is to be capitalised. Therefore, the realisation of the surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists."

Would someone please explain what this means? I genuinely cannot work out the rationale for her conclusion here.

 

Rosa Luxemburg was convinced that “her” theory was entirely in continuity with Marx’s theory of overproduction, even if she felt that the reproduction tables in Volume 2 of Capital seemed to contradict Marx’s own thinking on this point. We have written at least two articles which also argue that Rosa’s theory of accumulation is essentially the same as Marx’s[1]: that because capitalism is the production and realisation of surplus value, it must constantly extend the market; if we take as a starting point total capital, capitalism as a whole, and not simply a part of the working class or the individual capitalist, this could only mean extension into the surrounding non-capitalist milieu. Marx, in a number of passages, insists that neither the working class nor the capitalists (again, taken as a whole) can realise all the surplus value produced. The passage from Vol 3 of Capital, below, seems particularly clear about this, and is also interesting because it touches on the relationship between the falling rate of profit and the problem of overproduction:

 

[1] https://en.internationalism.org/content/2639/marxism-and-crisis-theory

https://en.internationalism.org/ir/139/decadence

 

 

 

"On the other hand, a fall in the rate of profit connected with accumulation necessarily calls forth a competitive struggle. Compensation of a fall in the rate of profit by a rise in the mass of profit applies only to the total social capital and to the big, firmly placed capitalists. The new additional capital operating independently does not enjoy any such compensating conditions. It must still win them, and so it is that a fall in the rate of profit calls forth a competitive struggle among capitalists, not vice versa. To be sure, the competitive struggle is accompanied by a temporary rise in wages and a resultant further temporary fall of the rate of profit. The same occurs when there is an over-production of commodities, when markets are overstocked. Since the aim of capital is not to minister to certain wants, but to produce profit, and since it accomplishes this purpose by methods which adapt the mass of production to the scale of production, not vice versa, a rift must continually ensue between the limited dimensions of consumption under capitalism and a production which forever tends to exceed this immanent barrier. Furthermore, capital consists of commodities, and therefore over-production of capital implies over-production of commodities. Hence the peculiar phenomenon of economists who deny over-production of commodities, admitting over-production of capital. To say that there is no general over-production, but rather a disproportion within the various branches of production, is no more than to say that under capitalist production the proportionality of the individual branches of production springs as a continual process from disproportionality, because the cohesion of the aggregate production imposes itself as a blind law upon the agents of production, and not as a law which, being understood and hence controlled by their common mind, brings the productive process under their joint control. It amounts furthermore to demanding that countries in which capitalist production is not developed, should consume and produce at a rate which suits the countries with capitalist production. If it is said that over-production is only relative, this is quite correct; but the entire capitalist mode of production is only a relative one, whose barriers are not absolute. They are absolute only for this mode, i.e., on its basis. How could there otherwise be a shortage of demand for the very commodities which the mass of the people lack, and how would it be possible for this demand to be sought abroad, in foreign markets, to pay the labourers at home the average amount of necessities of life? This is possible only because in this specific capitalist interrelation the surplus-product assumes a form in which its owner cannot offer it for consumption, unless it first reconverts itself into capital for him. If it is finally said that the capitalists have only to exchange and consume their commodities among themselves, then the entire nature of the capitalist mode of production is lost sight of; and also forgotten is the fact that it is a matter of expanding the value of the capital, not consuming it. In short, all these objections to the obvious phenomena of over-production (phenomena which pay no heed to these objections) amount to the contention that the barriers of capitalist production are not barriers of production generally, and therefore not barriers of this specific, capitalist mode of production. The contradiction of the capitalist mode of production, however, lies precisely in its tendency towards an absolute development of the productive forces, which continually come into conflict with the specific conditions of production in which capital moves, and alone can move".

Link
Thanks Alf for the reading. I

Thanks Alf for the reading. I have found the source of the Marx quote to read round it and I continued looking through chapters of theories of surplus value and accumulation

In doing so I found this quote:

“With accumulation, and the development of the productiveness of labour that accompanies it, the power of sudden expansion of capital grows also; it grows, not merely because the elasticity of the capital already functioning increases, not merely because the absolute wealth of society expands, of which capital only forms an elastic part, not merely because credit, under every special stimulus, at once places an unusual part of this wealth at the disposal of production in the form of additional capital; it grows, also, because the technical conditions of the process of production themselves — machinery, means of transport, &c. — now admit of the rapidest transformation of masses of surplus-product into additional means of production” Capital 1 chapt 25

I can see the point of the quote you were making but the one above seems to be saying something quite different. My problem with them both is that Marx is making assertions in the course of going into detailed explanations about intricate functions of capital but he is not here providing an explanation of the question I posed. Both quotes seem to me to be therefore rather superficial in this respect

I come back therefore to my original point that still needs explanation. If I may rewrite sections of the long quote I used from Luxemburg in the first contribution:

- capitalists can capitalise that part of sv to be used to replaced used and worn capital, ie depreciation

- workers can realise that variable capital and that part of sv which will increase vc

- capitalists can realise the part of sv to be used for their own subsistence.

And finally

- The workers and capitalists themselves cannot possibly realise that part of the surplus value which is to be capitalised and accumulated

Well we know workers can’t by definition realise that part of sv due to expand capital otherwise it would be part of vc and capitalist can’t use all the remaining sv for their own subsistence, that would just make a nonsense of what capitalism is and does. However why cannot this remaining part of sv that is destined to increase capital be realised by capitalist firms?

I havent found anything in the Accumulation of Capital to explain or justify this further and the texts from the ICC that your referenced simply accept the statement on face value. So can I ask if you have anything more in Marx that gets to grips with this precise problem?

MH
Luxemburg or Marx?

Link wrote:
Ok, its correct that the element of surplus value destined to increase production shouldn’t by purchased by workers or capitalists for their own personal subsistence, but why on earth cannot the growth element of surplus value be purchased by productive industry and services or even the state. Why can it only be sold/realised in extra-capitalist markets?

Link, I'm puzzled, if the capitalists can in effect sell to each other, if that is what you are arguing, what happens to the inherent problem of overproduction identified by Marx, in the section quoted from by Alf?  

“If it is finally said that the capitalists have only to exchange and consume their commodities among themselves, then the entire nature of the capitalist mode of production is lost sight of; and also forgotten is the fact that it is a matter of expanding the value of the capital, not consuming it."

And if there is an inherent limit to the consumption of both capitalists and workers, as Marx surely argues, doesn't this point to the need for consumers outside of capitalist relations of production? In other words, the basic problem was posed by Marx even before Luxemburg’s thesis?

Link
I dont think overproduction

I dont think overproduction need to come into the issue here MH. It exists obviously but for me you seems to be suggesting that there is no overproduction without extra capitalist markets just as there is no accumulation without extra capitalist markets.

Growth in production is driven by the falling rate of profit and overproduction comes in when the ROP is low and the scale of production is so high as firms compete for profit that the markets cannot absorb it. I have no problem with that although I would agree there remain issues to analyse here. But I don’t see it relevant to the issue of accumulation as described by luxemburg and as you say by Marx in that quote. In simple terms of how does capital accumulates (even before overproduction is reached),my question still remains to be answered.

So, dare I say it, is this Marx quote correct or clear and is it relevant to how accumulation takes place.

I agree there is a limit to the personal consumption ie subsistence of capitalist and workers. Isnt there are confusion here though between the capitalist as a consumer and the capitalist as a producer. I mean limited companies have been around for centuries so the capitalist as a business has separate accounting to capitalist as a private consumer. Surely we should distinguish these 2 ‘purchasers’ when it comes to the division of surplus value?

MH
What is the starting point for this discussion?

Link wrote:

I dont think overproduction need to come into the issue here MH. It exists obviously but for me you seem to be suggesting that there is no overproduction without extra capitalist markets just as there is no accumulation without extra capitalist markets.

 

Growth in production is driven by the falling rate of profit and overproduction comes in when the ROP is low and the scale of production is so high as firms compete for profit that the markets cannot absorb it. I have no problem with that although I would agree there remain issues to analyse here. But I don’t see it relevant to the issue of accumulation as described by luxemburg and as you say by Marx in that quote. In simple terms of how does capital accumulates (even before overproduction is reached),my question still remains to be answered.

Link, when we have discussed Luxemburg before, we were forced to acknowledge a certain amount of mutual incomprehension, which I think led me eventually to joke that ‘FROPists seem to be from Mars and Luxemburgists are from Venus…’

I know you want to discuss Luxemburg’s theory but I am more than ever convinced that first we have to understand what Marx actually argued.

Since capitalism produces for profit of course production is related to the rate of profit. But you seem to be saying –and correct me if I’m wrong – that overproduction only occurs in specific conditions: “when the ROP is low and the scale of production is so high as firms compete for profit that the markets cannot absorb it”.

And Marx indeed describes this scenario, “when there is an over-production of commodities, when markets are overstocked”. But he appears to identify a more fundamental problem:

Since the aim of capital is not to minister to certain wants, but to produce profit, and since it accomplishes this purpose by methods which adapt the mass of production to the scale of production, not vice versa, a rift must continually ensue between the limited dimensions of consumption under capitalism and a production which forever tends to exceed this immanent barrier”.

So it is the limited dimensions of consumption under capitalism that constitutes the “imminent barrier” here, and why is consumption limited in this way? Because of the specific conditions of capitalist production, ie. the appropriation of unpaid labour, which determines that the working class can never consume the full value of what it produces. It is this specific condition of capitalist production that underlies the rate of profit and thus determines the problem of overproduction.

So Marx, it seems to me, and obviously to the ICC as well, is saying that the phenomenon of overproduction is inherent in capitalism:

In short, all these objections to the obvious phenomena of over-production (…) amount to the contention that the barriers of capitalist production are not barriers of production generally, and therefore not barriers of this specific, capitalist mode of production.”

If we can agree with Marx on this, then hopefully we can better understand the problem Luxemburg was trying to address?

(all quotes from Ch 15, Capital Vol 3)

Link
MH, i do agree that this

MH, i do agree that this mutual incomprehension is a real thing and a real problem.  Also  am quite happy to follow your lead on what Marx had to say to see what you are getting at.

However could i first ask what you mean by overproduction ie back to basics.  Do you mean to say that capitalism always overproduces at all times because that seems to follow from what u have said as well as fom the Marx quote a rift between limits on comsumption and an expanding production?  Alternatively does overproduction only come into play on the occasions when there is a crisis of markets being overstocked? 

Re the question in yr last paragraph, I guess i should make it clear that i am not objecting to the concept of overproduction.  But my problem particularly regarding the quotes Alf and both of us have used,  is that they are statements within a general discussion without specific evidence and explanations as proof.   If you can find quotes that give detailed support that would be great.   Otherwise i can give simple quotes like my earlier response to Alf which the creation of surplus value is sufficient to grow capital. 

Also are you agreeing that the TROPF drives the need for more profit and hence production growth so this is also one side of the drive for overproduction and has to be taken into account.

d-man
What relegates overproduction

What relegates overproduction, in your view Link, to an occasional phenomenon, I guess would be the mechanism of a crisis or destruction of capital (such as war or other event). That is, a devaluation on the "supply side", whereas for Luxemburg it would seem the "demand side" has to expand. Perhaps it just depends from what standpoint you prefer to look at it, and both mechanisms somehow are at play (not to adopt a New-Agy mindset, particle-wave duality).

d-man
What relegates overproduction

dp

Link
Its a genuine question dman,

Its a genuine question dman, becuase i dont think i ever thought to ask myself let alone others.  Its was raised for my by MH so if you have a opinion on overproduction as a permanent or an occasional phenomenon please say.  As supply side or demand side theories, well id be quite happy to incorporate both and in fact Luxemburg says something about ROP and markets being just the other side of the same coin.  In fact cant we see a demand side problem today with the impact of the coronavirus whereas technological change would be considered a supply side issue.   But as you can see ive not be happy with Luxemburgs theory as a standalone theory.   Ive set time aside today to look at Marx and accumulation in accordance with MH so if you have something to contribute on that id be grateful

d-man
Allow me another small kick

Allow me another small kick against the shins dear Link: suppose the point is correct, that capitalist themselves can realise surplus from each other, would it not follow, that non-capitalist markets can't buy any capitalists goods, because there are no capitalist goods left for sale (since all capitalist goods are already realised by the workers and capitalists themselves)?

As to the so-called "move" of Western industries to non-capitalist areas, does it mean an actual "displacement" (from one place to another, of the same factory) or are additional factories build? If it's the latter, the explanation often given is the attraction by a higher profit rate. However, at least Grossman did not hold this view; he saw the reason for capital export in its overaccumulation/overproduction domestically (see also his later essay on Playfair, reprinted in Henryk Grossman Works, Volume 1: Essays and Letters on Economic Theory).

Link
Thank you for your

Thank you for your affectionate tap on the shins dman.

Regarding your first question, I dont see such a distinction between capitalist and pre capitalist markets, its not an either/or situation. They both exist and capitalist producers sell to whomever they can and this is likely to depend on the nature of their products and the potential profits. Non-capitalist markets were likely to consist of feudal aristocracy and traders/colonists from the developed world. The former bought stuff and eventual absorbed capitalist production values, the latter took capital assets with them or bought them to enable their exploitation of local assets. This is not process of using an excess of capital that cant be used in the developed world nor is it something that absorbs all surplus value from the developed world. Id suggest this was a method of making greater profits than at home or a greater opportunity at a greater risk. I dont think Luxemburg was wrong to point out the value of extra capitalist markets but just that she says accumulation can only happen because of them. Its not a logical inference.

I suppose my answer to yr second question is similar, its not an either/or situation. I remember reading that the Chinese firm that bought Rover eventually moved the production equipment to China for example. Whereas there are multitudes of new factories that have been built by western firms in the east asian markets let alone the factories owned by Korean, Malaysian, Taiwanese, Singaporean, Indonesian and Chinese entrepreneurs that sell products back to the west. When the shops reopen just look at the amount of asian household consumer goods that are sold here now. There clearly has been a major shift of production eastwards and whilst I dont at all rule out overproduction as a cause I think you have to see cheaper labour, materials and production costs are a key factor too.

Now I would like to return yr affectionate jab, sweetness. Ive tried to answer yr questions, how about having a go at mine?

d-man
Your question, if I

Your question, if I understand it, was about overproduction being either "a permanent or an occasional phenomenon". It's permanent, but kept in check by factors, and when those lessen or dry up, there are at first occasional manifestions of the underlying permanent overproduction, and as the factors fail to check overproduction more often or to a lesser extent, those occasions acquire a worse character. Was that your queston? As to your reply to mine:

Quote:
This is not process of using an excess of capital that cant be used in the developed world nor is it something that absorbs all surplus value from the developed world. Id suggest this was a method of making greater profits than at home or a greater opportunity at a greater risk

As to "greater profits" abroad, unless you elaborate, this phrase seems to be a variation on a higher rate of profit abroad (again, an explanation which Grossman rejects). You assert all the surplus capital could be used in the developed world, however, given that it wasn't, my first point was, that the buyers in the developing world consumed less than they could have, ie some capitalists looking to buy means of production faced the fact that these were sold/transferred abroad (to colonies, non-capitalist markets), and an implication here would be eg, that the domestic accumulation/investment was slowed-down.

Quote:
I remember reading that the Chinese firm that bought Rover eventually moved the production equipment to China for example 

In case of bankrupcty, the physical capital may be sold off but it's not an investment decision by Rover to relocate itself to China. If of any interest, perhaps the question would be whether the bankruptcy was due to lack of sales or due to the "too high" British wages.

Quote:
there are multitudes of new factories that have been built by western firms in the east asian markets

To the extent that this is a significant phenomenon, I wondered whether you assume the opening of these new factories goes together with the closure of the old ones in the West (recall the above-mentioned implication of slowing-down of domestic production), or whether the assumption is, one which would be more relevant to the controversy, these new factories represent only the available surplus, and thus the old factories in the West continue to exist.

Quote:
let alone the factories owned by Korean, Malaysian, Taiwanese, Singaporean, Indonesian and Chinese entrepreneurs that sell products back to the west. When the shops reopen just look at the amount of asian household consumer goods that are sold here now. There clearly has been a major shift of production eastwards and whilst I dont at all rule out overproduction as a cause I think you have to see cheaper labour, materials and production costs are a key factor too.

Of course factories owned by Chinese entrepreneurs don't need to shift eastwards to China for the sake of cheaper labour or materials, since they're already there. If your point here is that Chinese enterpreneurs are a proof that they have enough capital to establish their own factories, this elides our dispute about reasons of a "move" of Western capital. If your point is that the West is the one consuming/realising Chinese capitalist surplus, I'd respond that the form of those commodities matters: raw materials, food, consumer goods, or (advanced) means of production. Probably it's about the latter, and then I'd say your real point would be about the "shift" of Chinese capital Westwards. Do you think Chinese move investment to Europe? And do you think it is because wages are lower in Europe, or cheap raw materials? And if they move to Africa, is it because African cheap wages, or do they not bring with them Chinese workers (that would otherwise remain unemployed in China)?

zimmerwald1915
d-man wrote: Your question,

d-man wrote:
Your question, if I understand it, was about overproduction being either "a permanent or an occasional phenomenon". It's permanent, but kept in check by factors, and when those lessen or dry up, there are at first occasional manifestions of the underlying permanent overproduction, and as the factors fail to check overproduction more often or to a lesser extent, those occasions acquire a worse character.

You seem to be describing overproduction as a permanent tendency that manifests as an imanent phenomenon only occasionally and when the interplay of certain material "factors" permits. That is, you seem to be describing overproduction as a phenomenon signifying open, acute capitalist economic crisis. It would seem, therefore, that for any mechanism, whether the assimilation of extra-capitalist markets or measures to prop up the rate of profit, to act as an engine of accumulation, it must operate on a more or less continual basis and in response to and in conjunction with the tendency, and not its mere phenomenal manifestations.
d-man
It's over 9,000!!!

Speaking of periodisation (and this perhaps also relates to definitions of the "permanent" and the "occasional"), the figures Link gave in the OP are not for equal periods. If extrapolated, between 1950 and 1970 world GDP is higher than between 1970 and 2010. The argument is that China bucks that trend, so let's look at the statistics of China: https://en.wikipedia.org/wiki/Historical_GDP_of_China

During 1952-1970 there were 7 individual years with real growth above 15%. After 1970, there is only one year above 15%, namely 1984, but despite only a single year above 15% real growth, from 1979 until 2010, "based on the current price", the country's average annual GDP growth in these 32 years was 15.8%... "reaching an historical high of 36.41% in 1994" (real growth was 13%). What figures to take...

Between 1952 and 1970 Chinese GDP (in dollars) more than tripled; stretching 1952 to 1984 it was 10-fold (ie within a 32 year period). The next period of similar length (a bit shorter: 30 years), GDP increased 30x (from 1984 to 2014). Could anyone predict this (apparent acceleration), if they were writing in 1984, on the basis of the growth they saw? Btw, starting from 1952 it took 45 years, by 1997, to reach a 30-fold GDP dollar figure, so one can say that in the period 1984-2014 Chinese GDP grew by as much (namely x30) as it did in 1952-1997. Writing in 1984 someone would, assuming the same trend, say that, to see the same 10-fold increase, it would take about 32 years, that is until 2016. In reality this was reached sooner, by 2006-7. So the prediction would be off by 9-10 years. Do not economists often make such errors about the future? Let's relativise the matter.

Taking per capita GDP (dollars) there is a 6-fold increase between 1952 and 1980 (a 28 year period), and over the next period 1980-2005 (of similar length; 25 years) it's atually the same (6x), so there is no difference in growth for approximately the quarter century pre and post 1980. Between 2004-2018 (14 year period) there is a 6-fold increase, as much the increase between 1980-2005 (25 years). If someone was in 2004-5, they would on the basis of previous trend of per capita GDP, predict per capita GDP would be 6-fold at the earliest in 2030, whereas in reality it was already in 2018: so an error of 12 years. And yet such a "huge" error would still be made with data available from 1980-2005, unlike the ICC when it was writing in 1989 (or our hypothethical forecasters living in 1984) which has no such data.

MH
Implications of overproduction

Link, just to recap, I’m trying to respond here to one of your original questions:

Link wrote:
Ok, its correct that the element of surplus value destined to increase production shouldn’t by purchased by workers or capitalists for their own personal subsistence, but why on earth cannot the growth element of surplus value be purchased by productive industry and services or even the state. Why can it only be sold/realised in extra-capitalist markets?

Hopefully I’m also providing a fuller explanation of Alf’s response to you, emphasising the continuity of Luxemburg’s theory with Marx.

So I’m going to stick doggedly to my attempt to clarify Marx’s view of overproduction and I should stress I am doing this as much for my own benefit, to understand Marx’s basic position better.

So…

Marx is saying that over-production is inherent in capitalism due to the limits of the very nature of the wage labour relation which restricts the consumption of both capitalists and workers.

Over-production arises precisely from the fact that the mass of the people can never consume more than the average quantity of necessaries, that their consumption therefore does not grow correspondingly with the productivity of labour.” (Theories of SV, Ch 16 on Ricardo’s explanation for the FRP) 

This problem is exacerbated by the inbuilt drive of capital to expand itself and produce an ever-expanding mass of surplus-value under the compulsion of the tendency of the rate of profit to fall.

In summary:

Over-production is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labour with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to pay…” (TSV, Ch 17)  

The implication of this for Marx is that: “The market must, therefore, be continually extended ... But the more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest”. (CapitalVol 3 Ch 15, my emphasis)

And:

"If it is finally said that the capitalists have only to exchange and consume their commodities among themselves, then the entire nature of the capitalist mode of production is lost sight of; and also forgotten is the fact that it is a matter of expanding the value of the capital, not consuming it. (Capital Vol 3, Ch 15)

So does it seem reasonable to conclude from this that for Marx a world consisting of only capitalists and workers cannot by definition provide a sufficient market for the realisation of the ever-expanding mass of commodities produced? 

baboon
I agree with the direction of

I agree with the direction of MH's above post in what clearly is a very complex question.

 Marx addressing this problem in "The Chapter on Capital" in Grundrisse, insists that production without realisation (overproduction) is not turned into value. A capitalism whose production and realisation is in harmony is the "unity" that capitalism can only dream of. Marx denounces "This nonsense about the impossibility of overproduction "(in other words, the assertion of the immediate identity of capital's process of realisation)"... Capitalism is driven to produce as though there is no limit to its capacities - again this is the dream of capitalism - but runs up against these limits even in the theoretical world of just workers and capitalists. These limitations and contradictions appear to be more obvious when applied to markets outside of capitalism but the fundamentals are similar.

Marx quotes Malthus approvingly here that the very existence of profit on any commodity pre-supposes "a demand exterior to that of the labourer that has produced it" and therefore "the demand of the labourer itself can never be an adequate demand". To counter this problem Proudhon ( who "hears bells ringing but never knows where") proposed creating artificial money in order to mop up the overproduction but that of course does nothing to alter the fundamental drive of capitalism to produce without limits and does nothing to overcome the contradiction involved here in production and realisation: "March, march" as Marx says of its driving force. Proudhon's scheme just kicks the can briefly down the road and the bourgeoisie has heavily resorted to the creation of "artificial money" in the massive debt it is racking up today.

Proudhon himself agrees "that the worker cannot buy back his product" but Marx argues further that this is not the origin of overproduction because this view (Proudhon's) sees interest and profits already added to the price of the product  or a top-up "overcharge" which alters everything and in which price and value are mixed up in a confused fashion.

Link
implications of capital growth

I too want to discuss these issues further for my own benefit too so dont worry about the uncertainties cos I will also be stretching what I really know of issues

I do not disagree with the idea that capitalism overproduces on an ongoing basis and ive clarified my own question that its not an occasional event, in fact, I read somewhere Marx talking of a tendency to overproduce which makes sense to me. So your quotes makes sense to me. The last one I can see you in particular relying upon to support Luxemburg’s theories. However this quote talks of consumption rather than accumulation in general and I think he is here arguing against capitalism not depending on growth and against not overproducing ie as baboon mentioned ‘the nonsense of the impossibility of overproduction’. For me it is suggesting that personal consumption by capitalist and workers is insufficient to enable growth, which we can agree on as completely correct. It doesn’t actually suggest that accumulation or growth is dependant on extra cap markets.

So I dont agree that you have proved that Marx was supporting the idea of realisation being solely dependant on extra cap markets.

Can I be clear, that I am not arguing that extra cap markets do not have an influence on capitalism itself. They clearly do and clearly must allow for the release of some of that overproduction. I think they allow, at some point in the process, for additional if not super profits for investments, new resources and new sales opportunities for capitalist products.  This would also have been more significant to capitalism during the ascendant period.

It this idea that capital growth is solely dependant on extra cap markets that I would have wanted to see supported in your material from Marx.

However I think we can agree with what causes overproduction in that you mention the FROP driving the search for profits and hence growth. This growth outstrips the capacity to realise the capital and commodities produced.

My concern or query about this is just how does that accumulation/growth take place and im not sure that Marx tackles this in a single focussed way. He talks about overproduction and foreign markets but also about internal growth as per this:

Now, this growth of the means of production includes the growth of the working population, the creation of a working population, which corresponds to the surplus-capital, or even exceeds its general requirements, thus leading to an over-population of workers. A momentary excess of surplus-capital over the working population it has commandeered, would have a two-fold effect. It could, on the one hand, by raising wages, mitigate the adverse conditions which decimate the offspring of the labourers and would make marriages easier among them, so as gradually to increase the population. On the other hand, by applying methods which yield relative surplus-value (introduction and improvement of machinery) it would produce a far more rapid, artificial, relative over-population, which in its turn, would be a breeding-ground for a really swift propagation of the population, since under capitalist production misery produces population. It therefore follows of itself from the nature of the capitalist process of accumulation, which is but one facet of the capitalist production process, that the increased mass of means of production that is to be converted into capital always finds a correspondingly increased, even excessive, exploitable worker population. As the process of production and accumulation advances therefore, the mass of available and appropriated surplus-labour, and hence the absolute mass of profit appropriated by the social capital, must grow. Capital 3 Chap 13

 

This doesnt at all contradict the idea that workers and capitalists cannot consume all surplus value generated and cannot be responsible for all capital realised but it does suggest the capacity for ‘internal’ growth.

The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and the purpose of production; that production is only production for capital and not vice versa, the means of production are not mere means for a constant expansion of the living process of the society of producers. The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move — these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. The means — unconditional development of the productive forces of society — comes continually into conflict with the limited purpose, the self-expansion of the existing capital. The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world-market and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production.….. Capital 3 Chap 15

If capital is sent abroad, this is not done because it absolutely could not be applied at home, but because it can be employed at a higher rate of profit in a foreign country. But such capital is absolute excess capital for the employed labouring population and for the home country in general. It exists as such alongside the relative over-population, and this is an illustration of how both of them exist side by side, and mutually influence one another. Capital 3 Chap 15

 

He also discusses colonisation and pre cap markets without any reference to them supporting accumulation other than in a generalised way that capitalism can grow. In fact in one section he describes the fact that colonists, in some circumstances, do not generate surplus value at all because they do everything for themselves ie they become self dependant.

The colonies secured a market for the budding manufactures, and, through the monopoly of the market, an increased accumulation. The treasures captured outside Europe by undisguised looting, enslavement, and murder, floated back to the mother-country and were there turned into capital. Holland, which first fully developed the colonial system, in 1648 stood already in the acme of its commercial greatness chapter 31 capital 1

The English East India Company, as is well known, obtained, besides the political rule in India, the exclusive monopoly of the tea-trade, as well as of the Chinese trade in general, and of the transport of goods to and from Europe. But the coasting trade of India and between the islands, as well as the internal trade of India, were the monopoly of the higher employés of the company. The monopolies of salt, opium, betel and other commodities, were inexhaustible mines of wealth

chapter 31 capital 1

Do you agree, that in none of these quotes will you find anything that suggests the absolute necessity of colonial markets for any realisation of capital?  In fact these last quotes about colonies would support my view that there is more than one method of accumulation.

MH
I've started...

Link I can see you have already raised some questions about Luxemburg's interpretation of Marx in what we have covered so far. If it's ok I'd just like to finish off my attempt to summarise the basic problem of overproduction that I think  she is trying to address, then I (and hopefully others) can come back to these.

I know this will be familiar to you but anyway...

So Luxemburg’s starting point in The Accumulation of Capital is Marx’s abstract model of capitalist reproduction in Capital Volume Two, which appears to show that in a world consisting solely of capitalists and workers, the entire mass of commodities produced can be consumed (Chapter 25).

But if there is no apparent restriction on the power of society to consume, this appears to contradict Marx’s own analysis of capitalism’s inherent contradictions in Volume Three of Capital, which as we have seen leads him to conclude that over-production is inherent in capitalism due to the limits of the very nature of the wage labour relation that restricts the consumption of both capitalists and workers.

Criticisms of Luxemburg’s theory often focus on her objections to the abstract models of capitalist reproduction in Volume Two and whether she has misunderstood them, given them too much prominence, etc. But this is at best secondary given that the whole point of her theory is to prove the correctness of Marx’s analysis of capital’s internal contradictions in Volume Three, ie. to defend his identification of “the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market” (Ch25).

Luxemburg of course concludes that the realisation of the ever-expanding mass of surplus value produced by capital requires above all the existence of buyers outside of capitalist society, but her basic thesis that “the realisation of the surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists” is anticipated by Marx, as I think we agree?. 

I don't think in fact that this is necessarily incompatible with your argument that Marx was not talking about realisation being solely dependent on extra-capitalist markets, but that's for discussion....

Link
MH, in the previous post i

MH, in the previous post i was just trying to point out that Marx talked about accumulation taking place not dependant on extra cap markets.   So yes i agree that overproduction exists as an ongoing problem and as a driving force for capitalism but your last 2 paragraphs contradict each other so i dont think that it is compatible to say 'its impossible for for a society of solely workers and capitalists to accumulate capital'.  I think this is not an interpretaion you can get from the quotes i put up from Marx.  So while I dont agree its impossible for a society of solely workers and capitalists to accumulate, but i agree that accumulation must take place in the right type of commerce (excuse that quible, im just thinking of Marx talking about colonists reverting to production for self) with extra cap markets but how significant that is perhap remains to be discussed.

I think we are probably agreeing here so im just trying to make certain.

 

 

Link
I found this quote whilst

I found this quote whilst looking over accumulation and over production  sections. Its is Capital 2 Chapter 2 Section 3

We dont really discuss circulation issues nowadays altho marx goes into it a lot and the issue of money hoards is the main focus of chapter 2.  Do you think this is because these topics were more relevant in Marx’s time and today this role of the hoard as a step in preparation for capital investment and even the whole question of money source and circulation problems has been simplified by easy access to credit?

The form of a hoard is simply the form of money not in circulation, of money whose circulation has been interrupted and which is therefore fixed in its money-form. As for the process of hoarding, it is common to all commodity production and figures as an end in itself only in the undeveloped, pre-capitalist forms of this production. In the present case, however, the hoard appears as a form of money-capital and the formation of a hoard as a process which temporarily accompanies the accumulation of capital because and so far as the money here figures as latent money-capital; because the formation of a hoard, the state of being a hoard, in which the surplus-value existing in money-form finds itself, is a functionally determined preparatory stage gone through outside of the circuit described by the capital and required for the transformation of the surplus-value into really functioning capital.

d-man
Link, the appendix to the

Link, the appendix to the book Discovering Imperialism (eds. Richard Day, Daniel Gaido) is a critique of Luxemburg. There the point is made that prior to the full recovery of the investment, necessary to repair/maintain the capital, a "hoard" forms, or what I'd guess is called the depreciation fund, which however is lend out, so this money is used (by other capitalists to buy stuff). It seems that's the point you're thinking of.

Just btw, I'd say technically it's not a "hoard" (as in gold withdrawn from circulation), and second, commercial credit (bills of exchange), rather than gold, was predominant "in Marx's time". 

Link
Dman. I checked and Marx was

Dman. I checked and Marx was using the term hoard to mean money capital put away for future capital investment not about gold. I know nowadays in english that the word hoard relates more to something stowed away and lost like pirate treasure but I suspect the term has been poorly translated from german

Link
Marx and overproduction

MH, I think you will be pleased with me today taking my 3 volumes of Capital outside to read up on overproduction in the sun. I realised as I did that I had been hunting and reading chapters more about accumulation so it occurred to me to look up overproduction in the indexes. I was very surprised with what I found though. There is just so very little about overproduction! Nothing in Vol 1, One mention in Vol 2 and, in Volume 3,  a couple of brief references, one of which is how credit helps overcome the restrictions of overproduction and one section of 6 pages which is where i have already quoted from and which doesnt relate the issue to pre cap markets.

I understand the clarity of the quotes you have produced and dont intend as I said before to question the issue of overproduction but these quotes  do not seem to be the products of a significant investigation and analysis. In fact so little mention in Capital suggests to me that he didnt see the issue as that significant on its own.

I end up thinking that there is little here to say that Luxemburgs theory is based on Marx’s theories.  So not only was I actually expecting more justification for the link between them on the issue, but i now doubt there is more that could be used to support the argument

MH
Impressive but...

Link, I’m impressed, naturally.

Of course I also seem to remember one Fabio Damen of the PCInt pointing out that the word ‘decadence’ doesn’t appear in the 3 volumes of Capital. It’s true, but then the word ‘capitalism’ doesn’t appear much either. From this of course I conclude that Marx didn’t consider these concepts very important …

I suggest the next time the sun is shining, pull down your volumes of the ‘Theories of Surplus Value’ and check out the chapter on Marx's critique of Ricardo’s theory of profit. I think you’ll find the title of section 14 particularly illuminating…

“The Contradiction Between the Impetuous Development of the Productive Powers and the Limitations of Consumption Leads to Overproduction.  The Theory of the Impossibility of General Over-production Is Essentially Apologetic in Tendency”

;-)

MH
dp

dp

Link
Capitalism

Hi MH.  Maybe the sun got to me but i think you are definitely wrong about the term Capitalism not appearing very much and to be fair on poor old Marx he lived during ascendancy so couldnt really discuss decadence.  Being fair to me too, i wasnt questioning the quotes you produced.  I will of course head to the link on Theories of Surplus Value as my next port of call but can i say at this point, I am still hoping for more  to defend your hypothesis that Luxemburgs ideas were founded in Marx?

Alf
On method

The discussion on this thread about Luxemburg’s theory of accumulation has made some progress, in that Link now seems convinced that the problem of overproduction arises directly from the wage labour relationship. Regarding his hesitations about whether markets outside this relationship are necessary for accumulation, I want to make a couple of methodological points.

1. Luxemburg’s Accumulation of Capital begins by posing the problem of accumulation from the standpoint of the total social capital, not from the standpoint of the individual capitalist, who can certainly accumulate without the existence of non-capitalist markets. The essay by Lukacs, “The Marxism of Rosa Luxemburg” (1922) insists that Luxemburg’s critics, most of whom have argued that Luxemburg’s entire book was based on a non-problem, have forgotten that

"It is not the primacy of economic motives in historical explanation that constitutes the decisive difference between Marxism and bourgeois thought, but the point of view of totality. The category of totality, the all-pervasive supremacy of the whole over the parts is the essence of the method which Marx took over from Hegel and brilliantly transformed into the foundations of a wholly new science. The capitalist separation of the producer from the total process of production, the division of the process of labour into parts at the cost of the individual humanity of the worker, the atomisation of society into individuals who simply go on producing without rhyme or reason, must all have a profound influence on the thought, the science and the philosophy of capitalism. Proletarian science is revolutionary not just by virtue of its revolutionary ideas which it opposes to bourgeois society, but above all because of its method. The primacy of the category of totality is the bearer of the principle of revolution in science".

Our article “Rosa Luxemburg and the limits to capitalist expansion” (https://en.internationalism.org/ir/142/luxemburg), part of a longer series in defence of the notion of capitalist decadence, develops further on Lukacs’ response to Luxemburg’s critics.

2. Secondly, Luxemburg, again following Marx, approaches this problem not as a mathematical abstraction, but in its historical dynamic. The Marx quote I used previously ends like this “The contradiction of the capitalist mode of production, however, lies precisely in its tendency towards an absolute development of the productive forces, which continually come into conflict with the specific conditions of production in which capital moves, and alone can move".

I want to emphasise the term “move” here. Elsewhere Marx talks about capital as “the moving contradiction” I think that the critics of Rosa Luxemburg frequently fall into a reified vision of capitalism as a machine, a static system in which every seller (or producer) has a buyer - a notion which Marx explicitly rejected in his critique of the bourgeois economists who dismissed the problem of overproduction:

"The conception...adopted by Ricardo from the tedious Say...that overprod¬uction is not possible or at least that no general glut of the market is poss¬ible, is based on the proposition that products are exchanged against products, or as Mill puts it, on the ‘meta¬physical equilibrium of sellers and buyers', and this led to the conclusion that demand is determined only by prod¬uction, or also that demand and supply are identical." (Theories of Surplus Value, Volume II, p.493)

But we know that capitalism can only be an organism in constant expansion, and it is Luxemburg’s merit to have deepened one of the key insights of the Communist Manifesto: that capitalism must penetrate every corner of the earth, must create a world in its own image, continually extend the market, as well as engage in a ceaseless hunt for cheaper raw materials and cheaper labour power. Thus it does not and cannot establish a new static equilibrium in which it trades peacefully with non-capitalist zones and thus relieves itself of the constipation of overproduction in the “home market” (ie, capital taken as a whole).It has to integrate them into its own circuit of production and realisation, which ultimately means destroying them as non-capitalist markets. But in doing so, as Engels already insisted, it enters into an even greater spiral of contradictions:

“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 it creates it, is one of them. Another one is the insoluble situation to which it leads, and which is developed sooner in a country without a foreign market, like Russia, than in countries which are more or less capable of competing on the open world market. This situation without an apparent issue finds its issue, for the latter countries, in commercial revulsions, 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. Therefore English capital insists upon constructing Chinese railways. But Chinese railways mean the destruction of the whole basis of Chinese small agriculture and domestic industry, and as there will not even be the counterpoise of a Chinese grande industrie, hundreds of millions of people will be placed in the impossibility of living. The consequence will be a wholesale emigration such as the world has not yet seen, a flooding of America, Asia and Europe by the hated Chinaman, a competition for work with the American, Australian and European workman on the basis of the Chinese standard of life, the lowest of all--and if the system of production has not been changed in Europe before that time, it will have to be changed then. Capitalistic production works its own ruin, and you may be sure it will do so in Russia too...” (Letter to Nikolai Danielson, Sept 22 1892).

This process led to what Luxemburg described as the “age of catastrophe” (ie decadence) long before the purely economic expansion of capitalism had reached its limits. In fact, we can still see the process at work today, as the article on the Silk Road argues, mainly in relation to China, which was by no means fully capitalised by the beginning of the 20th century. We can also see Rosa’s description of the different stages of capitalist world expansion summed up in the Amazon today; first, deport or exterminate the primitive communist tribes who are a pure obstacle to “development” if they can’t be enslaved; use petty bourgeois strata like independent goldminers or loggers as foot-soldiers in the next phase of the conquest; then pave the way for roads, timber factories, agri-business, in sum the growing capitalisation of the rainforest. In Bolsonaro’s dreams, this will make Brazil into a major player on the world market. In reality, it will intensify the problem of global overproduction. And in the process, it unearths a new source of catastrophe that Luxemburg could not yet fully grasp: the destruction not only of primitive and pre-capitalist economies, but of what Marx called “man’s extended body”, the natural environment without which no human society is possible. That’s another story, but one that is certainly not divorced from the basic problem of accumulation.

d-man
I stumbled on 2 soviet pieces

I stumbled on 2 soviet pieces related to Luxemburg (they're in Russian, but if you're an enthusiast, you can copy-paste the texts into google-translate). One from 1933 by a certain B. Kazanskij is a critique of Bukharin's critique of Luxemburg ('N. Bukharin as a critic of Luxemburg'). Another from 1932 by a certain L. Ziman is titled 'On the question of the fate of the "third person" under capitalism', which argues, perhaps ironically, that Luxemburg failed to understand that imperialism was a decaying capitalism and does not automatically/progressively convert everything into the capitalist production, but rather preserves the "third person" (which involves varies relations, feudalism, petty production, etc.). Ziman talks about peasantry in all capitalist countries (England, but especially France and Japan), and about the colonies (against Rosa's notion of decolonisation/industrialisation). Ziman (p. 131ff.) also comes to speak of Central-Asia (Turkestan) in particular (also a footnote on China), so it's a bit connected to the ICC discussion about New Silk Road. Ziman finally goes to some length to criticize Trotsky on the Chinese revolution.

Link
Theories of Overproduction?

Why do I feel that it is assumed that because I dont agree with Luxemburg’s hypothesis about pre cap markets, then I must also disagree with the idea of overproduction?. As I said previously the one thing does not automatically mean the other. What I do now perceive with this discussion is that there is actually a range of different interpretations as to what overproduction means.

I will quickly summarise what I think these ‘theories of overproduction’ are:

1 That overproduction means that pre cap markets must be the source of capital accumulation, that capital expands solely because of pre cap markets. That overproduction is basically measured in relation to the size of the internal market

2 That pre capitalist markets are the prime source for the accumulation of capital

3 That in order to satisfy the drive to expand and compensate for overproduction, , capitalism creates additional pre cap markets to enable this expansion

4 That the FROP leads to overproduction and drives capitalism to make full use of markets, both internal and external, and that both have a role to play in expanding the production of capital

5 That overproduction is a question of production expansion driven by the FROP and capitalism creates its own markets to try to keep up with that expansion.

6 That overproduction is already so strong that markets are saturated and have limited growth available

These are brief paraphrases obviously so please don’t take them as precise, thought out definitions. Some may well overlap but I do think they show enough to confirm variations in the meaning of the term overproduction.

MH and Alf provide a range of quotes from Marx such as:

Over-production is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labour with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to payTSV 17-14

 

This is important I absolutely agree, it lays the basis for the recognition of overproduction as a major problem for capitalism and Marx says this is particularly an issue in crises that emerge including when the FROP has drive profit down to crisis levels. It lays the basis for overproduction being a continual issue for capital at all times in its life

Again:

‘... the bourgeois mode of production contains within itself a barrier to the free development of the productive forces, a barrier which comes to the surface in crises and, in particular, in over-production—the basic phenomenon in crises. TSV 17-14’

 

All I want to point out is that there surely remains a discussion to clarify what we all mean by overproduction. Marx made significant points about overproduction that may well have influenced Luxemburg to investigate BUT I don’t see that he can be basis for Theory 1 above which links overproduction to the idea that extra cap markets are the sole source of accumulation. There are just too many steps in between. In fact I think it more reasonable to follow Luxemburg’s view that her starting point was what she saw as an error in Marx.

Alf mentioned the article in IR on Luxemburg and the Limits to Capital Expansion and this is interesting as it situates the work of Kautsky and Boudin as far closer predecessors to her theory

Marx laid the groundwork for an understanding of overproduction but he also suggested that the hoarding of money capital was one way in which capital enabled accumulation, that credit also could play a role here and that capital by itself laid the basis for further accumulation and the growth of population and both internal and external markets. As can be seen below that this still would never be able to compensate for overproduction ultimately:

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, the internal market is limited as compared with a market that is both internal and external, the latter in turn is limited as compared with the world market, which however is, in turn, limited at each moment of time, [though] in itself capable of expansion’.TSV17-13

This latter quote indeed comes from that Chapter of Theories of Surplus Value from which MH quotes the section title of TSV 17-14 and suggests it is significant:

“The Contradiction Between the Impetuous Development of the Productive Powers and the Limitations of Consumption Leads to Overproduction.  The Theory of the Impossibility of General Over-production Is Essentially Apologetic in Tendency”.

However if you if you read the section it is, in fact, a criticism of various bourgeois concepts, particularly from Ricardo, that reject overproduction as a general feature of total social capital but the section does not aim to explain or define what overproduction actually is and does not at all link accumulation to pre cap markets. It seems to me that short quotes keep being taken out of context to justify a link to Luxemburg, a very superficial link.

So the sole point I am trying to make here is that whilst Luxemburg’s interpretation of Marx’s statement:

“the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market”

leads her directly to the conclusion that the realisation of the ever-expanding mass of surplus value produced by capital requires above all the existence of buyers outside of capitalist society and her basic thesis that “the realisation of the surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists’

I cannot see the one in any way proves the other, despite MH assertions that they do.

I take Marx’s view to mean that he saw overproduction as an automatic process within capitalism and as Alf says that the problem of overproduction arises directly from the wage labour relationship.

He (Ricardo) cannot therefore admit that the bourgeois mode of production contains within itself a barrier to the free development of the productive forces, a barrier which comes to the surface in crises and, in particular, in over-production—the basic phenomenon in crises.’ TSV 17-14

Over-production is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labour with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to pay; and this is carried out through continuous expansion of reproduction and accumulation, and therefore constant reconversion of revenue into capital, while ||726| on the other hand, the mass of the producers remain tied to the average level of needs, and must remain tied to it according to the nature of capitalist production.TSV 17-14

I take Marx’s explanation here to be focussed on how capitalism itself expands and accumulates and grows its markets, all as part of the core processes of production and circulation.

For it is then possible—since 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.’ TSV chap 17 -13

His identification of overproduction was linked to crises and the contradictions faced by capitalism growing.. It seems to me that on this issue of overproduction, 2 things can be taken from Marx for certain, firstly that he saw overproduction as important and secondly that he did not suggest that accumulation can only come from pre cap markets. The rest is open to interpretation.

I quite readily admit that this of course does not mean the latter theory is incorrect., so in my next contribution on this thread I aim to discuss more about Alf’s most recent contribution and Luxemburg’s hypothesis

Link
Re Alf's Post 24

I would like to take up points made by Alf about accumulation in Post 29 in that I was surprised by the idea that accumulation can take place at an individual level but not for the capitalism as a whole. I would understand that Total social capital is certainly the starting point for any analysis of the way capitalism works and I can see that the generalisations taking place at a global level will strip off complications at the level of the individual capitalist. But accumulation?? I need a lot more explanation of that because I cant see how individual enterprises can realise surplus value, invest in new machinery and thereby accumulate new capital without this counting towards global accumulation of capital. I can see in a small firm this figure might be negligible but not how this can be the case for the totality of firms!

Alf
Perhaps we are

Perhaps we are misunderstanding each other Link, but your response calls to mind another quote from Marx (Grundrisse, the Chapter on Capital, Notebook 4), which we also used in our article “Rosa Luxemburg and the limits to capitalist expansion” (https://en.internationalism.org/ir/142/luxemburg) to illustrate the point that Lukacs  made in his defence of Luxemburg’s analysis (see our post number #29)

 

"The relation of one capitalist to the workers of another capitalist is none of our concern here. It only shows every capitalist's illusion, but alters nothing in the relation of capital in general to labour. Every capitalist knows this about his worker, that he does not relate to him as producer to consumer, and he therefore wishes to restrict his consumption, i.e. his ability to exchange, his wage, as much as possible. Of course he would like the workers of other capitalists to be the greatest consumers possible of his own commodity. But the relation of every capitalist to his own workers is the relation as such of capital and labour, the essential relation. But this is just how the illusion arises - true for the individual capitalist as distinct from all the others - that apart from his workers the whole remaining working class confronts him as consumer and participant in exchange, as money spender, and not as worker. It is forgotten that, as Malthus says, ‘the very existence of a profit upon any commodity pre-supposes a demand exterior to that of the labourer who has produced it', and hence the demand of the labourer himself can never be an adequate demand. Since one production sets the other into motion and hence creates consumers for itself in the alien capital's workers, it seems to each individual capital that the demand of the working class posited by production itself is an ‘adequate demand'. On one side, this demand which production itself posits drives it forward, and must drive it forward beyond the proportion in which it would have to produce with regard to the workers; on the other side, if the demand exterior to the demand of the labourer himself disappears or shrinks up, then the collapse occurs."

 

In your last post you pose the question: “I can’t see how individual enterprises can realise surplus value, invest in new machinery and thereby accumulate new capital without this counting towards global accumulation of capital. I can see in a small firm this figure might be negligible but not how this can be the case for the totality of firms!”

But isn’t this the point: it’s not that the individual capitalist’s accumulation doesn’t count towards global accumulation, it’s precisely when you do begin to pose the problem from the standpoint of total social capital that the problem arises, since then you are inevitably faced with the relationship between this mode of production and its surrounding milieu . It seems to me that you are still looking at things from the somewhat “illusory” standpoint of the individual capitalist, or, more precisely, from a standpoint which sees total social capital as no more than the sum of its parts.

Link
Alf's and total social capital

Apologies for restating this quote from luxemburg. It is fundamentally what Alf is following at the end of his last contribution BUT is it correct to say that Luxemburg is here actually considering global or aggregate capital when she starts discussing what workers and capitalists can do? I don’t think so. She talks about aggregate capital then keeps refering, ie not just in this quote, to her belief that capitalists cannot themselves realise the product to be capitalised.

Luxemburg states in The Accumulation of Capital:

“In real life the actual conditions for the accumulation of the aggregate capital are quite different from those prevailing for individual capitals and for simple reproduction. The problem amounts to this: If an increasing part of the surplus value is not consumed by the capitalists but employed in the expansion of production, what, then, are the forms of social reproduction? What is left of the social product after deductions for the replacement of the constant capital cannot, ex hypothesi, be absorbed by the consumption of the workers and capitalists— this being the main aspect of the problem—nor can the workers and capitalists themselves realise the aggregate product. They can always only realise the variable capital, that part of the constant capital which will be used up, and the part of the surplus value which will be consumed, but in this way they merely ensure that production can be renewed on its previous scale. The workers and capitalists themselves cannot possibly realise that part of the surplus value which is to be capitalised. Therefore, the realisation of the surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists."

So I hoping Alf you will come back and explain how you ‘define’ total social capital as distinct from what individual capitalists can do. Ive been puzzling over this since your post and I cant see how to set rules to distinguish the 2 - apart from saying we establish a generalised or simplified framework theorem at the global level based on interpretation of whats important in what all individuals do generally. So I still cant see how you can say accumulation, a very important element of what capitalism is, can take place for every single capitalist but not for global capital? It’s not like Ive suggested something irrelevant like large offices or marketing depts can lead to accumulation because every business has them

 

Perhaps another maybe better example of what I mean is when Marx explains how surplus value is generated. For all of us c+v+s = TC is clearly a abstraction at the level of total social capital. It works as a simplification but it completely ignores issues of circulation of money within the cycle but thats not a problem, its correct to do so. However it absolutely depends on the idea that wages for every single worker are paid in accordance with a contract that is established in advance.  Thats not a generalisation, its what all capitalists do to workers.  So my point is that elements that take place for every single capitalist can be relevant to total social capital.

In terms of the milieu surrounding capital, i agree it has an impact of how capitalism develops and grows, but that is no proof that accumulation depends upon it at the aggregate level.

MH
what is the problem for capital as a whole?

Link wrote:

So I hoping Alf you will come back and explain how you ‘define’ total social capital as distinct from what individual capitalists can do. Ive been puzzling over this since your post and I cant see how to set rules to distinguish the 2 - apart from saying we establish a generalised or simplified framework theorem at the global level based on interpretation of whats important in what all individuals do generally. So I still cant see how you can say accumulation, a very important element of what capitalism is, can take place for every single capitalist but not for global capital?

Luxemburg’s whole theory is intended to answer the question of how capital as a whole reproduces itself. Let’s be clear, a lot of this can and does involve individual capitalists buying from each other; new machinery, supplies for additional workers etc, in fact this makes up the majority of what is involved in reproduction but … it still leaves a portion to be realised.

An ICC article on this subject states that in fact this portion is “very small in relation to the total mass”, which is intriguing because obviously it would be helpful for this discussion if we could quantify the size of the problem, but it doesn’t expand on this.

So capital must realise this portion if it is to expand production. If the capitalists as a whole purchase this portion – ie. if it is in effect exchanged among the capitalists – the effect, in Luxemburg’s words, can only be to throw an even bigger amount of commodities on to the market the following year, only for the same question to reappear: where does capital find the consumers for this even greater amount of commodities? In other words, where is the effective demand to be found? (see Ch 1, Anti-C)

So here’s the problem I'm struggling with – if the effect of capital’s failure to realise the total surplus value outside of the capitalists and workers is ‘simply’ to produce an even larger mass of commodities in the next round, and the next, why is this such an apparently existential problem for capitalism? For Luxemburg it is an 'absurdity' but isn’t it a description of capital's inherent problem of overproduction? 

In other words, non-capitalist buyers may play a vital role for the development of capitalist reproduction but on the basis of the above their absence does not appear to make accumulation impossible, it just exacerbates the problem of overproduction, which in fact is a pretty good summary of decadence. 

MH
An answer to my own question?

With tongue only slightly in cheek I would say that my view at the moment is that Luxemburg’s theory is absolutely valid…except for the bit about capital needing external buyers for accumulation to take place.

To be more serious, I think we need to separate out the two different aspects of her theory:

  1. At the abstract level, based very much on Marx’s diagram of enlarged reproduction, capital needs buyers outside of the two main classes in order to realise surplus value
  2. At the level of accumulation as a real historical process the development of capitalism is dependent on its non-capitalist surroundings not only for buyers but also raw materials and living labour.

The second aspect I believe remains absolutely valid as a coherent explanation of the economic roots of imperialism and the onset of capitalism’s decadence with WW1 (although there is still a debate to be had about other factors and causes of imperialism aside from the need for non-capitalist zones).

But the first I now see as problematic. The question Luxemburg is trying to answer is: how does capital as a whole reproduce itself? This leads her to the same problem identified by Marx: the need of capital not only to produce surplus value but also to realise it, to sell for moeny, in order for production to resume on an expanded basis, the basic problem being the conflict between capital’s unlimited expansion of the productive forces and the limited capacity of society to consume.

This is why I believe it was important to deal with the issue of overproduction here before going on to examine Luxemburg’s theory. The problem with many previous critiques of Luxemburg’s theory (for example, this one by the CWO), is that they either reject or do not see the significance of this issue.   

There is an extended quote from Capital Vol 3 Ch 15 in the Accumulation of Capital which in many ways I believe is the key to understanding the whole question. It will be fairly familiar to some comrades .

For Marx, the production of surplus value is only the ‘first act’ of the capitalist production process; in the second act the total mass of commodities produced ­­­- which, driven by the tendency for the rate of profit to fall, swells to “immense proportions” - must be sold. But this second act of capitalist production is restricted not only by capital’s drive to continually expand the mass of surplus value produced but also by society’s power to consume it based on “antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits”:

This is a law of capitalist production imposed by incessant revolutions in the methods of production themselves, the resulting depreciation of existing capital, the general competitive struggle and the necessity of improving the product and expanding the scale of production, for the sake of self-preservation and on penalty of failure. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law independent of the producers and become ever more uncontrollable. This eternal contradiction seeks to balance itself by an expansion of the outlying fields of production. But to the extent that the productive power develops, it finds itself at variance with the narrow basis on which the conditions of consumption rest.”     (Vol 3 Ch 15)

Marx’s insistence that the market must be continually extended “obviously”, for Luxemburg, transcends the consumption of the capitalists and workers. 

She also vehemently insists that Marx’s reference to the “expansion of the outlying fields of production”, “clearly and unequivocally” refers to consumption, “and nothing else”.

But the sense of Marx’s argument seems perfectly clear; capital’s constant drive to expand production, due to its problem of realisation, necessitates the continual extension of the market, which in turn only leads to the further development of production…

So the answer to her question - how does capital as a whole reproduce itself? – is in front of her all along. Capital as a mode of production based on inherent limits to consumption must reproduce itself by continually extending the market and further developing production. 

Do external buyers play a vital role in this process? Absolutely, the existence of non-capitalist societies and environments mitigates capitalism’s inherent problem of overproduction and accelerates its development as a real and historical process.

Are they necessary for accumulation to take place, ie. is accumulation impossible without external buyers? No, their absence (or rather their insufficiency given capital’s needs) exacerbates overproduction, which is precisely what we see in decadence.  

At least this is my tentative conclusion, which I throw open to discussion. Now I really need to go back over Link's questions and points in the light of this. 

 

Link
MH, I would pretty much agree

MH, I would pretty much agree with the judgments you  make about the 2 aspects of Ls theory that you identify. Although maybe I would call No 1 invalid rather than problematic. 

I have however been reading further in Luxemburg texts to answer some of the questions raised and in particular the issue that Alf raised in Post 33. As i said i didnt understand his point but i think ive found the source of her argument for the ideas (1) that individual capitalist can accumulate within capitalism but (2) re total social capital, the aggregrate capitalist can only accumulate from sales to pre cap markets.

When Luxemburg talks of total social capital, she considers that Marx’s diagram of accumulation, ie c+v+s= tc, is invalid and what is needed is external demand specifically for commodities that can be capitalised. The explanation of this key idea lies in Chapter 4 of AoC where she is discussing the differences between simple reproduction and enhanced reproduction.

"Here we come up against palpable differences between the individual capitalist and the total capitalist. The manner in which the former always reproduces his constant and variable capital as well as his surplus value is such that all three parts are contained in the same material form within his homogeneous product, that this material form, moreover, is completely irrelevant and may have different qualities in the case of each individual capitalist. The ‘total capitalist’, for his part, reproduces every component of the value of his annual product in a different material form, c as means of production, v as provisions for the workers, and s as provisions for the capitalist. In the case of the reproduction of individual capitals, there is no discrepancy between relations of value and material points of view. Besides, it is quite clear that individual capital may concentrate on aspects of value, accepting material conditions as a law from heaven, as self-evident phenomena of commodity-exchange, whereas the ‘total capitalist’ has to reckon with material points of view. If the total c of society were not reproduced annually in the form of an equal amount of means of production, every individual capitalist would be doomed to search the commodity market in vain with his c realised in cash, unable to find the requisite materials for his individual reproduction. From the point of view of reproducing the total capital, the formula c + v + s is inadequate". (AoC Chap 4)

She follows this up in AC with this statement:

“The total capitalist, like each individual capitalist, cannot plan to enlarge production until he has exchanged his quantity of commodities” (AC Chap 3)

In other words whilst the value element of enhanced reproduction may be valid, the material content of the total stock cannot be appropriate because basically the total stock is determined at the start of a cycle of production and at the end of that cycle sits on the shelf awaiting buyers. Any capitalists buying from this stock can only buy subsistence items because there just wont be any commodities available for capitalisation. Because this material stock is wrong she believes that the whole concept of enhanced reproduction is invalid.

Anyway her basic idea is that the lack of the correct total stock prevents accumulation at the level of total social capital which i presume is why she says that even if capitalists had the money they cannot create the demand.

This doesnt convince me at all im afraid. It just seems like a thorough misunderstanding of Marx’s formula as an abstraction and how to apply it to the real world.

Link
A Critical Summary of Luxemburg’s Theory of Accumulation

Luxemburg considers Marx’s diagram of total social capital to be invalid. In the Accumulation of Capital she spends many chapters investigating Marx’s diagram of c+v+s=tc and explaining how the 2 departments of capital and subsistence manufacture function only to conclude that they don't explain enhanced reproduction.

She believes that Marx’s diagram of accumulation works only for simple reproduction (ie when capital only reproduces itself and doesn't grow or accumulate new capital) but not for enhanced reproduction when capital is actually accumulating.

This is not something that Luxemburgists pay much attention too but just why does she consider Marx’s key abstraction about how capitalism works to be so wrong that she concludes that capital cannot accumulation on its own, that it requires external demand to enable it to grow?

The explanation of this key idea in her theory lies in Chapter 4 of AoC where she is discussing the differences between simple reproduction and enhanced reproduction.

"Here we come up against palpable differences between the individual capitalist and the total capitalist. The manner in which the former always reproduces his constant and variable capital as well as his surplus value is such that all three parts are contained in the same material form within his homogeneous product, that this material form, moreover, is completely irrelevant and may have different qualities in the case of each individual capitalist. The ‘total capitalist’, for his part, reproduces every component of the value of his annual product in a different material form, c as means of production, v as provisions for the workers, and s as provisions for the capitalist. In the case of the reproduction of individual capitals, there is no discrepancy between relations of value and material points of view. Besides, it is quite clear that individual capital may concentrate on aspects of value, accepting material conditions as a law from heaven, as self-evident phenomena of commodity-exchange, whereas the ‘total capitalist’ has to reckon with material points of view. If the total c of society were not reproduced annually in the form of an equal amount of means of production, every individual capitalist would be doomed to search the commodity market in vain with his c realised in cash, unable to find the requisite materials for his individual reproduction. From the point of view of reproducing the total capital, the formula c + v + s is inadequate." (AoC Chap 4)

In a nutshell, her contention is that c+v+s is valid for individual capitalists in both value terms and material product content but, according to the above, it cannot be correct in terms of the material content of total stock and therefore accumulation is not possible

Problem 1. Can Luxemburg possibly be correct in rejecting Marx diagram of accumulation c+v+s=tc?

The abstraction c+v+s=tc is a simplified way of looking at how value generation works in capitalism and is needed because the world is just so complicated that starting with the detail makes no sense. So it strips out issues of money generation, social wage, unproductive labour and manufacturing, waste expenditure, errors in demand for subsistence commodities, raw materials, component manufacture and fixed asset manufacture, unsold products and unrealised capital values in general, unprofitable and over-profitable businesses, foreign trade, supply and demand variations and I dare say many other facets of real world activity. It really is just the manufacturing process and the relations of production stripped to the bare minimum.

However this simplification does not mean that the formula does not take account all these elements, they are just not necessary to understand the key features of value creation and capital accumulation. The abstraction assumes demand creation and supply processes function in the markets created by capital as well as trade with the converting pre-capitalist markets too.

This theorisation of total social capital is based on the idea that the commodities produced in a given cycle of accumulation are determined at the start of that cycle and the aggregate capitalist cannot determine the commodities that can be used to advance production until the end of the cycle.This leads to her seeing not just a disparity in the content of available capital commodities to that which is actually required but to the total absence of any usable capital commodities. For Luxemburg this means Marx’s theory enhanced reproduction doesn't work at all.

Therefore capitalism cannot provide the demand for capital assets that are to be used to enhance production ie to increase it in size or to adopt new technologies

Problem 2. Why are the commodities that are required to enhance production any different to the commodities required to replace worn capital assets and subsistence requirements? Luxemburg suggests that they are different simply because they do not exist in the diagram of simple reproduction but this is itself a fiction and never actually existed?

This is quite explicitly stated in the Anti Critique:

“The total capitalist, like each individual capitalist, cannot plan to enlarge production until he has exchanged his quantity of commodities” (Anti Critique Chap 3)

She therefore treats the material content of the total stock at the end of the last cycle as fixed and does not include anything other than commodities to be sold as subsistence

Problem 3. Aren’t the markets for all commodities estimated in advance of production by capitalist enterprises? It is the anarchy of competition and the markets that cause the problems for their realisation. All are produced by the same relations of production so why should there be a distinction in how they are planned for, manufactured and circulated.

The consequence is that she ends up embracing the paradox that all individual capitalists can accumulate but, at the level of the total social, capital the aggregate capitalist cannot.

It is from this point that her theory about the importance of pre-capitalist markets starts to emerge. The following quote presents a clear explanation of her conclusion that neither capitalist nor workers could provide the demand that would enable the capitalisation of new capital assets.

“All this time, it appears, Marx has been tackling the problem from a wrong approach. No intelligent purpose can be served by asking for the source of the money needed to realise the surplus value. The question is rather where the demand can arise—to find an effective demand for the surplus value. If the problem had been put in this way at the start, no such long-winded detours would have been needed to show whether it can be solved or not. On the basis of simple reproduction, the matter is easy enough: since all surplus value is consumed by the capitalists, they themselves are the buyers and provide the full demand for the social surplus value, and by the same token they must also have the requisite cash in hand for circulation of the surplus value. But on this showing it is quite evident that under conditions of accumulation, i.e. of capitalisation of part of the surplus value, it cannot, ex hypothesi, be the capitalists themselves who buy the entire surplus value, that they cannot possibly realise it. True, if the capitalised surplus value is to be realised at all, money must be forthcoming in adequate quantities for its realisation. But it is quite impossible that this money should come from the purse of the capitalist class itself. Just because accumulation is postulated, the capitalists cannot buy their surplus value themselves, even though they might, in abstracto, have the money to do so. But who else could provide the demand for the commodities incorporating the capitalised surplus value?” (AoC Chapter 9)

Problem 4. How is it possible for all individual capitalists to accumulate but not the aggregate capitalist at the level of total social capital? Luxemburg’s assertion here rests entirely on her view that the material content of total social stock will not allow enhanced reproduction. Not only is this questionable but she appears to contradict herself in this last quote which suggests that even individual capitalists cannot accumulate even if they had the money to do so!

This leads Luxemburg to the most famous element in her theory. She has decided capitalism cannot capitalise itself, so ‘who else can’ she asks. Capitalism is growing within an environment of pre-capitalist markets so for Luxemburg it clearly must be these pre-capitalist markets that must demand and purchase the enhanced technology, it is these markets that must provide the investment in enhanced capital equipment.

Now it must be accepted that these markets can facilitate accumulation in that they open up access to new resources and labour and new areas for the expansion of capitalism but Luxemburg asserts now that accumulation becomes impossible without them and that only these pre capitalist markets can capitalise those commodities intended to enhance production.

Since the accumulation of capital become 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 more of production” (AoC ch 26)

Problem 5. How is it possible to justify the idea that pre-capitalist markets can provide a market for enhanced production equipment? Luxemburg suggests she is relating the accumulation issue to the real world but in this real world can pre-capitalist formation actually purchase and use the latest technology and the machinery that I individual firms require to expand their production base?

 

MH
the basic question at issue?

I'm also strugglnig with the problem of how capital realises surplus value through exchanging commodities with non-capitalist buyers; if as Luxemburg says capital requires a strata of buyers who are outside capitalism but who produce commodities and have a need to exchange them; if the need of the capitalist is to sell for money how is this achieved? Does the capitalist emake the exchange and then sell the commodity on to a buyer within capitalism? Or is the exchange made in gold or an equivalent? Unfortunately I don't have the historical knowledge to understand how this worked in practice.

I think Link's questions above are reasonable ones to pose about Luxemburg's theory, but having pored over the Accumulation I also think it's important to step back and try to answer the basic question which I think boils down to: is it possible for capital to realise the entire amount of surplus value within a capitalist society? Tantalisingly, ICC articles in the past have asserted that "For the most part", capitalist production creates its own market; capitalism can buy back most of the surplus value produced from itself, and that the remaining portion to be realised is "very small" (IR 29).  This at least gets closer to quantifying the size of the problem.

If we answer yes, it is theoretically possible for all of the surplus value produced to be realised within capitalist society, then of course that is Luxemburg's central thesis blown out of the water but imv it still very much leaves her historical analysis of capitalist development and the role of its non-capitalist surroundings  intact, even strengthened. 

It's also important to understand , I think, that a 'yes' answer does not automatically place anyone in the same boat as Say, Sismondi and all the revisionists who believed that capital could create its own market indefinitely; capital is based on overproduction due to the inherent limits of society to consume its ever-growing mass of commodities. This is why its doomed.  It always produces too much for the existing market.  Luxemburg was perfectly right to home in on the inherent problem of realising surplus value.

 

d-man
MH wrote:

MH wrote:

I'm also strugglnig with the problem of how capital realises surplus value through exchanging commodities with non-capitalist buyers; if as Luxemburg says capital requires a strata of buyers who are outside capitalism but who produce commodities and have a need to exchange them; if the need of the capitalist is to sell for money how is this achieved? Does the capitalist emake the exchange and then sell the commodity on to a buyer within capitalism? Or is the exchange made in gold or an equivalent? Unfortunately I don't have the historical knowledge to understand how this worked in practice.

... imv it still very much leaves her historical analysis of capitalist development and the role of its non-capitalist surroundings  intact, even strengthened.

I imagine both happen:

A non-capitalist producer buys capitalist commodities indeed with their gold, whereby the "excess" surplus-value of capitalist commodities gets realised. Considering the capitalist re-invests the received gold, ie needs to buy a greater amount of raw commodities, etc. to expand production, a second exchange would happen. Here the capitalist could pay the gold (that he just received) "back" to the non-capitalist producers (eg for raw materials).

Let's suppose the non-capitalist producer in the first exchange was an artisanal gold miner. A next question could be whether he payed equal/lesser/more value (for capitalist commodities), than the non-capitalist producer of regular commodities received "back" (through the intermediary of the capitalist). Suppose the artisanal gold miner bought commodities from the capitalist, that are also produced by non-capitalists. Then the non-capitalists lost a customer (in the person of the artisanal gold miner); on the other hand, they gained a customer in the person of the capitalist.

The claim that the capitalist market can expand by itself I think entails the assumption, that first the capitalists already somehow have realised surplus-value, and this realised surplus-value (profit) then enables them to buy more (ie to invest the profit, expand their production), whereby the market (ie the amount of buyers of raw materials, etc.) is expanded. That is true, but the assumption is that profit first was already realised.

 

 

MH
d-man wrote:

d-man wrote:

The claim that the capitalist market can expand by itself I think entails the assumption, that first the capitalists already somehow have realised surplus-value, and this realised surplus-value (profit) then enables them to buy more (ie to invest the profit, expand their production), whereby the market (ie the amount of buyers of raw materials, etc.) is expanded. That is true, but the assumption is that profit first was already realised.

Ok that makes sense to me (and thanks for your explanation of how commodity exchange might work) but I suppose it only prompts the question as to whether they can already have 'somehow' realised that surplus value by selling to other capitalists or to workers or whether by definition it must be to a buyer external to capitalism? I'm wondering if this implies Luxemburg's theory must be correct or whether there is another solution to the problem consistent with Marx's analysis of capital's inherent contradictions? 

 

d-man
Just a precision on the IR 29

Just a precision on the IR 29 article that you mentioned before. You misunderstood the passage that "for the most part" capitalist production creates its own market. The claim is that the whole surplus-value is "very small" in relation to the c+v.

"that part of the surplus product that the capitalists ... do not consume, so as to be able to increase their capital, to engage not just in ‘simple' reproduction to renew the productive cycle, but in ‘enlarged' reproduction. This part of production is very small in relation to the total mass."

We could suppose that the whole surplus-value incorporated into a product is no bigger than 10%. Suppose during the 19th century this was the percentage, then, in order for the whole capitalist surplus-value to be bought by the non-capitalists, an "export" of only 10% of total capitalist production to non-capitalists would suffice to realise surplus-value (without any reliance on capitalist buyers).

MH
d-man wrote:

d-man wrote:

Just a precision on the IR 29 article that you mentioned before. You misunderstood the passage that "for the most part" capitalist production creates its own market. The claim is that the whole surplus-value is "very small" in relation to the c+v.

But the quote you used actually refers specifically to that part of the surplus value the capitalists need to enlarge production?

ICC wrote:

But a part of what is produced remains to be sold: that part of the surplus product that the capitalists -- unlike feudal lords or the slave-owners of antiquity who personally consumed all their profit -- do not consume, so as to be able to increase their capital, to engage not just in ‘simple' reproduction to renew the productive cycle, but in ‘enlarged' reproduction. This part of production is very small in relation to the total mass. But capitalism depends on its ‘realization', that is, its sale, to continue its enlarged accumulation.

Or are we at cross-purposes?

d-man
Your formulation that

Your formulation that "capitalism can buy back most of the surplus value produced from itself" was a misreading, since when the ICC wrote that "This part of production is very small in relation to the total mass", this "total mass" refers to the total product – not to total surplus value (as you seem to have misunderstood). This is the stronger point in my opinion, and which could open a (difficult) research-path to quantify the required percentage of the total product for sale to non-capitalists in order to realise the entire (productively invested) surplus value.

But you're right that the text also specifies that part of surplus value that is productively invested. And you can discover in the ICC passage an admission that some part (but not most) of the surplus value can be realised by capitalist personal consumption. This latter claim is open to doubt in my opinion. Like I said before, it assumes what needed to be proved; it entails the assumption that first the surplus-value "somehow" is already entirely realised, and then afterwards some part of it can be expended non-productively (and so constitute additional market demand). Sometimes the example is given of taxes, that allegedly would free the capitalists from the need to find buyers of a part of their products: – again, this presupposes that the capitalists already have "somehow" realised/monetised their entire surplus-value (since the state deducts a tax on the already realised profit, unless you assume taxes are paid in kind, ie simply appropriate goods and services).

 

MH
d-man wrote:

d-man wrote:

Your formulation that "capitalism can buy back most of the surplus value produced from itself" was a misreading, since when the ICC wrote that "This part of production is very small in relation to the total mass", this "total mass" refers to the total product – not to total surplus value (as you seem to have misunderstood). This is the stronger point in my opinion, and which could open a (difficult) research-path to quantify the required percentage of the total product for sale to non-capitalists in order to realise the entire (productively invested) surplus value.

You're right, the article slides from talking about product to value. But I think the basic question remains the same: does capital need to sell a portion of what it produces, however small, to non-capitalist buyers in order to continue expanded production? You suggest this needs to be quantified, which also suggests you are not opposed outright to Luxemburg's thesis. I'd be interested in your view.

(edited)

d-man
If we can quantify surplus

If we can quantify surplus-value as percentage in the total product (presumably based on a calculation of the rate of profit), and if we could establish the percentage of sale to non-capitalists in total sales, then, supposing the empirical facts happen to be such, that the entire surplus-value is sold to non-capitalists –  I wonder if that would settle the dispute. Because after all, in theory it is possible that capitalism can expand by itself. In order to disprove this assertion, facts wouldn't seem to matter.

Link
I think Link's questions

I think Link's questions above are reasonable ones to pose about Luxemburg's theory, but having pored over the Accumulation I also think it's important to step back and try to answer the basic question which I think boils down to: is it possible for capital to realise the entire amount of surplus value within a capitalist society? Tantalisingly, ICC articles in the past have asserted that "For the most part", capitalist production creates its own market; capitalism can buy back most of the surplus value produced from itself, and that the remaining portion to be realised is "very small" (IR 29).  This at least gets closer to quantifying the size of the problem.

Thanks MH for the first bit but I am not sure I agree with the rest. Firstly, I would not try to argue that capitalism can realise the entire amount of surplus value because, following on from previous points in the thread, the issue of overproduction is always something that generates unrealised capital, whatever position is taken re accumulation through pre cap markets.

Secondly I think I read in Luxemburg somewhere that she said the amount to be realised in pcm was large but I cannot find the quote. Anyway recognise where I might have got this from??

Regarding the discussion about mass or value, I am confused but I am not sure it is relevant. If we start from the formula c+v+s=tc then it only applies to capital that is already realised so why is the issue of mass being raised? Could the original not be talking about a mass of value?? I can see no meaning to the phrase ‘the mass of products’ frankly because volume is irrelevant and with quantity it would be absurd to equate 5 railway engines to 5 shovels. Value is the only common factor.

Also dman’s point about 10% of products being sold outside capitalism is I think deceptive. Even if the figure is on the small side as the IR29 and dman are saying, this figure must be increasing both absolutely and percentage wise through every cycle of production as constant capital grows and, frankly, 10 % of total capital produced say every year is nowadays an enormous absolute figure. I could understand 10% being a reasonable figure in the 19th Century as capitalism was small relative to the size of pre cap areas. But today I cant see that as possible as it would be equivalent to the total of Germany and Japan’s GDP. As I understand it, world GDP is about 120tr dollars of which the largest 20 countries contribute approx 80% of world GDP and the remaining 173 contribute only 20%. It does not seem likely to me that whatever is left of pre cap markets today can realised such a large proportion of world GDP

 

Lastly, are we coming up against a contradiction in Luxemburg’s analysis re the capacity for capitalism to realise some parts of surplus value. Going from her statement that accumulation is impossible without pcm then that implies to me that she is saying that only simple reproduction is possible within a pure capitalism ie that means no growth in variable capital, ruling class subsistence, replacement and repair of existing constant capital and no ability to invest in new and enhanced constant capital. This means capital can only realise the same values of subsistence that was already in existence prior to any given cycle of production and all growth would have to come from realisation in pre cap markets.. However the statement from IR29 - and I think that I have also read this in Luxemburg - is that capitalism can accumulate on its own those parts of sv that include the growth in ‘variable capital, ruling class subsistence, replacement and repair of existing constant capital’ and that only ‘the new and enhanced constant capital’ need be realised by pre cap markets.

Which of these is correct? Im not sure and need to go away and check on this unless someone can confirm it as one way or another.

d-man
Link wrote:

Link wrote:

Also dman’s point about 10% of products being sold outside capitalism is I think deceptive. Even if the figure is on the small side as the IR29 and dman are saying, this figure must be increasing both absolutely and percentage wise through every cycle of production as constant capital grows and, frankly, 10 % of total capital produced say every year is nowadays an enormous absolute figure. I could understand 10% being a reasonable figure in the 19th Century as capitalism was small relative to the size of pre cap areas. But today I cant see that as possible as it would be equivalent to the total of Germany and Japan’s GDP. As I understand it, world GDP is about 120tr dollars

If annual GDP growth is say 5%, then, if GDP is supposed to serve as an indication of value, does this mean that every year 5% more labour hours are expended according to you?

As far as I know American labour participation isn't rising, but US GDP doubled between 2002 and 2017. Do you believe that annual US labour power total expenditure (ie hours worked) doubled in this period?

Link
Dman, he point i was

Dman, he point i was responding to was yours about the 10% of total product:

"We could suppose that the whole surplus-value incorporated into a product is no bigger than 10%. Suppose during the 19th century this was the percentage, then, in order for the whole capitalist surplus-value to be bought by the non-capitalists, an "export" of only 10% of total capitalist production to non-capitalists would suffice to realise surplus-value (without any reliance on capitalist buyers)."

I dont understand the connection to asking  about increases in labour cost and/or hours worked?  Generally though constant capital increases at a faster rate than variable capital as labour productivity increases.

d-man
You bring up the GDP figure,

You bring up the GDP figure, so I'm wondering what does that tell about value. Suppose 10% surplus value represents 10 labour hours, and c+v represent 90 hours, so total product has a value of 100 hours. You point out that the following year GPD will increase, say by 5%. So does it mean that the total product in this following year incorporates 105 hours (and the surplus value has grown to represent 10,5 hours)?

Link
No normally it wouldnt.  I

No normally it wouldnt.  I stil dont understand what you are getting at?

d-man
If the annual gross product's

If the annual gross product's value as an "absolute" figure in terms of labour hours does not increase, but in terms of GDP (prices) it does, it seems to indicate that there is no connection between value and price of the gross product. How can the total price rise, if it doesn't incorporotate/represent more labour hours?

Why even is a rise in GDP taken as an indicator of  accumulation – shouldn't rising productivity rather translate into a price fall of the individual commodity, and then a fall in GDP? Say after some period that the 90 hours of c+v can be reproduced in 45 hours, with s remaining 10 hours throughout the period, then, doesn't this mean that the gross product's value would fall from 100 to 55 hours, even though the absolute mass of surplus value stays the same, and the rate of profit even rises (from 11,1% to 22,2%)?

d-man
Another thought on

Another thought on "accumulation", given that sometimes perhaps it is regarded in simple physical terms. Annually the cost/value of total tangible assets (such as equipment) of corporations rises. This signifies that this value is not actively used-up/incorporated/transferred into new commodities, ie this total figure isn't diminished despite depreciation. The source of these total tangible assets was previous surplus-value. This invested surplus-value is not wholly being reproduced.

MH
"impossibility" of accumulation - or overproduction?

Looking back over this thread I have been rather pedantically insisting that we cannot deal with Luxemburg's theory before we have first come to a consensus on whether she is addressing a real problem - ie. the problem of capital realising surplus value. This led me to copy and paste a veritable 'greatest hits' of quotes from Marx about overproduction and the inherent limits on consumption in capitalist society imposed by the laws of accumulation.  

I have now concluded that I was right - but not in the way that I expected. Due in a large part to Link's calm and continuous prompting and questioning, I now believe that if we base ourselves on Marx's analysis of capital's inherent contradictions we must conclude  Luxemburg's theory is wrong.  

The inherent limits on consumption in capitalist society lead not to the need for non-capitalist buyers in order to accumulate but to the inevitability of overproduction.

The 'light bulb' moment for me came when I was re-reading the Anti-Critique where she describes the - to her - obvious absurdity of capital continuing to throw ever-greater quantities of commodities onto the market in pursuit of consumers: 

"After we have assumed that accumulation has started and that the increased production throws an even bigger amount of commodities on to the market the following year, the same question arises again: where do we then find the consumers for this even greater amount of commodities? Will we answer: well, this growing amount of goods will again be exchanged among the capitalists to extend production again, and so forth, year after year? Then we have the roundabout that revolves around itself in empty space. That is not capitalist accumulation, i.e. the amassing of money capital, but its contrary: producing commodities for the sake of it; from the standpoint of capital an utter absurdity. If the capitalists as a class are the only customers for the total amount of commodities, apart from the share they have to part with to maintain the workers – if they must always buy the commodities with their own money, and realize the surplus value, then amassing profit, accumulation for the capitalist class, cannot possibly take place." (Ch 1, my emphasis)

Of course Luxemburg is right to insist that capitalism is not simply production for production's sake - it must accumulate, and in order to do that it must realise the surplus value produced - sell for money. But hang on - doesn't what she is describing sound a lot like the reality of a system that must inherently overproduce?

Of course I find I am not the first to question this. Pannekoek in his own review of Luxemburg's book says:

"What she calls an absurdity from a capitalist point of view because it would present an aimless circular motion - to produce more and more means of consumption in order to feed more workers, who would produce more and more means of production that serve for the production of those means of consumption - only appears to be absurd because the decisive factor was left out of consideration. The goal of producing more and more is to extract and accumulate more and more surplus value, but those accumulated masses of capital can only fulfil their goal of producing new surplus value by being thrown again and again into the whirlpool of production. The self-valorisation of capital in the creation of profit, the transformation of profit into new capital, is the driving force giving sense and a goal to that alleged absurdity: the apparently aimless, always expanding circuit of production. This 'absurdity' shows the inner nature of capitalism, which exists not for the purpose of production but rather uses production as a means in order to produce surplus value and capital.(in 'Discovering Imperialism', Haymarket, 2012, my emphasis)

So in a nutshell I have changed my view as a result of this discussion and I have written a longer (but not too long) text further explaining my position on the Breath and Light website here.  

There is still much I don't understand, and plenty of 'unknown unknowns'. I till can't answer a lot of Link's specific questions. Poring over The Accumulation of Capital made my head hurt. But the discussion so far has, I believe, been fruitful; after all this issue has divided the Communist left for at least the last 40 years. If we can just possibly move even a short way from entrenched positions and maybe suggest a framework for future discussions - one which places overproduction at the heart of capital's contradicitons - it will have been worth it.   

 

Link
I agree with the conclusions

I agree with the conclusions that MH is drawing from the discussions we have had although we have tackled this discussion from different starting points and with different emphases. MH has always addressed the analysis of Luxemburg’s theory from the perspective of Marx’s analysis of overproduction and I believe is correct in drawing the conclusions that she sees a problem that is simply not there.

I started my investigation of Luxemburg’s theory from the point that she makes a totally inadequate explanation in The Accumulation of Capital that because pre cap markets exist as the environment for capitalism’s growth then they must be the source of all accumulation. This is clearly an poor or limited explanation of her theory in chapters 26 and 27, however I assumed there must be more justification to this and prompted by MH to look at the criticisms Luxemburg has of Marx ive have been going back over Accumulation of Capital and Marx for something more substantial to justify her argument.

The next aspect of her argument was for me was a recognition that she argues that not all surplus value can be found a market within capitalism and that it is only the capital products that either expand existing constant capital or enhance the technology of existing constant capital that capitalism that she says cannot be realised by workers or capitalists. This is not an argument that Marx presented as far as I can see, he saw the possibility of the expansion of capital accumulation within markets it creates and expands – although that must include pre cap markets too as is explained by MH.

Overall I would suggest that Luxemburg’s arguments in relation to this issue are surprisingly full of misunderstandings and misjudgments and downright errors.. MH points out her view that increasing production just to feed workers is an absurdity but this is just a twist on what capitalism actually does do, it produces to gain surplus value to accumulate and gain more surplus value. Its not an absurdity at all, it is capitalism. I also think her use of abstraction is wrong. The abstraction itself works if it keeps remaining relevant; when you strip out complications to find your abstraction you are not ignoring them you are incorporating them into that abstraction. Her supposed conflict between total social capital and individual capitalists is therefore entirely incorrect

However this argument that only products intended for the enhanced of constant capital can be found a market within capitalism is again not the source of her argument, and just poses a question why again? I do think I have found where she derives her argument from and hence the ultimate source of her theory that only pcm can accumulate capital growth. Its back in chapter 4 of The Accumulation of Capital where she compares simple and enhanced reproduction. Here she describes that simple reproduction works because for the single firm that accumulation of sv is achieved by the selling of a single product but enhanced reproduction, she argues, fails because the total social capital produced cannot in physical terms match the needs of the total capitalist for the next cycle of production. Unfortunately she is also ignoring the anarchistic nature of capital and its markets. Firstly capitalist do estimate the needs of the market for their upcoming cycle of production but they always face the anarchy of the market in terms of product realisation; its not and never was a planned market place in any shape or form. Luxemburg seems to believe that pre cap markets can solve that anarchy whereas they are simple part of the market anarchy.

Ultimately MH and I agree that the Accumulation of Capital is a poorly put together book with many red herrings provided and tangents explored. It just does not present a cohesive focus to explain her theory so its hard work to follow. Its no wonder that comrades don’t actually understand what she says and simply assume she knows what she is talking about – just as we did previously.

d-man
Might be interesting to check

Might be interesting to check Mário Pedrosa's A Crise Mundial do Imperialismo e Rosa Luxemburgo (Rio de Janeiro: Civilização Brasileira, 1979, 161 pp.), if possible. Apparently he had been in Paris and knew Lucien Laurat there (French translator of Luxemburg's books).

Alf
a false dichotomy?

Clearly this is a long discussion and we will all need time to reflect on the implications of what different comrades are putting forward. For now just some questions and observations.

MH’s text on Breath and Light is a serious attempt to understand the questions posed by Luxemburg’s theory of accumulation. In order to avoid any misunderstandings, we have to clarify exactly what MH is saying.

Towards the end of the part dealing with Luxemburg’s “theoretical” approach, MH supplies a number of quotes from Marx which appear to support the idea that neither the capitalists nor the workers constitute a sufficient market for all the surplus value produced.  MH summarises these quotes thus:

“In other words, the workers must by definition produce more than they can themselves consume, otherwise there would be no profit; Marx is again pointing to the inherent limits on consumption which must result in overproduction”.

 

From this he immediately concludes:

 

“The conclusion from all this seems inescapable: if we are to fully accept Marx’s analysis of capital’s inherent problem of realising surplus value which inevitably results in overproduction then we must reject Luxemburg’s conclusion that “the realisation of surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists” as an incorrect interpretation of this analysis”.

 

MH however does not show why this conclusion is “inescapable”. Luxemburg’s whole thesis is based on Marx’s own recognition that overproduction is indeed inevitable in capitalist society. But we have to remind ourselves that for her a society composed “solely of workers and capitalists” did not exist in her day and in her view would never exist, since other “political” factors would intervene to put an end to capitalism well before such a point was reached – above all the proletarian revolution, but also a possible slide into barbarism through a spiral of imperialist wars. Her concern was to show that overproduction – which can only make sense as the crisis of overproduction, a term which MH doesn’t use in his text – would become an increasing barrier to capital the more it exhausted the possibility of extending its market into the “outlying fields of production” (Marx).

In other words, the crises of overproduction point to an eventual (or if you prefer, “theoretical”) impossibility of accumulation. I think that MH, whose text is entitled “’Impossibility’ of accumulation or overproduction”, is posing a false dichotomy here. But it is quite possible that I have misunderstood his argument, so it would be good if he explained it further.

While rejecting Luxemburg’s “theoretical” conclusion, MH still sees great value in her historical account of how capitalism spread across the world, destroying the remnants of pre-capitalist economy and integrating them into the capitalist market. Indeed this part of his text still seems to be very close to Luxemburg’s “theoretical” view that this process could only result in capitalism entering its epoch of catastrophe or decadence. 

However, according to the last post by Link, “Ultimately MH and I agree that the Accumulation of Capital is a poorly put together book with many red herrings provided and tangents explored”. This judgment does not at all accord with MH’s text, which as I have said acknowledges the seriousness of Luxemburg’s survey of the imperialist conquest of the globe.

To dismiss her contribution as poorly put together and full of red herrings seems to echo an all-too familiar denigration and dismissal of Luxemburg’s work which goes back at least to the days of the degenerating Communist International and which has been unfortunately continued in much of today’s proletarian milieu. This attitude will not help us take the discussion forward.

 

 

 

MH
Response to Alf

Alf’s latest contribution is very welcome. Before I respond to his request for clarification I think it’s worth commenting on the nature of this debate.

As far as I know the defence of Luxemburg’s theory is not an official position of the ICC or in any way a requirement for membership. The argument that it is erroneous and must be rejected is therefore not a criticism of the ICC in the same way as, for example, my criticisms of the confused and contradictory positions adopted at its 23rd Congress.

Also, I believe my argument is implicitly just as much a criticism of those like the CWO who in the past have rejected Luxemburg’s theory while remaining apparently ambivalent about the centrality of capital’s inherent tendency towards overproduction in Marx’s analysis.

Nevertheless, it would be naïve to underestimate the significance of Luxemburg’s theory for the ICC given its whole history; it is part of its perceived political inheritance from the Italian Left and particularly the Gauche Communiste de France via the role played by Marc Chirik in its formation. At its 21st Congress the ICC was forced to note its “lack of mastery” of this theory, a “reductionist and schematic understanding” which had led to errors in its analyses of the capitalist crisis, and Alf has referred in this forum to ICC discussions leading it “towards a deeper understanding of Luxemburg's theory” – which doesn’t suggest a fundamental questioning of the basis for it by the majority of the organisation.

A question implicitly posed by this debate therefore is whether the ICC can truly deepen its understanding of Luxemburg’s contribution to explaining the roots of capitalist decadence - and therefore of capitalist decadence itself - without first clearly acknowledging that her economic theory is erroneous. 

With all this in mind, let me respond to Alf.

Alf asks me to clarify my arguments, which I’m happy to do, but in fact they are Marx’s and Luxemburg’s arguments not mine.

What is noticeable in Alf’s response is a failure to engage with what Luxemburg’s thesis actually is. He tells us that “Luxemburg’s whole thesis is based on Marx’s own recognition that overproduction is indeed inevitable in capitalist society”. You might think so if you approach it from an already sympathetic viewpoint. I used to think so too. But it’s not (in fact overproduction hardly gets a mention in The Accumulation of Capital - try doing a word search). 

It’s true Luxemburg’s thesis is based on the problem for capital identified by Marx of realising surplus value – the so-called ‘second act’ of the capitalist production process. This is a problem fundamentally because of the contradiction between capital’s drive towards the unlimited development of the productive forces, propelled by the tendency for the rate of profit to fall and the goad of competition – and the inherent limits on the consumption of capitalists and workers imposed by the laws of accumulation.

Marx’s thesis is that as a result of these inherent limits, overproduction is inevitable. This is an irresolvable contradiction of the mode of production that capital can only try to resolve by continually extending the market. But this can never keep up with the expansion of production; the more productiveness develops, the more capital finds itself confronting the limits to consumption due to its own social relations and in this way it is driven inexorably towards its doom.

Luxemburg’s whole thesis on the other hand is that as a result of these inherent limits accumulation is impossible unless there are non-capitalist buyers. For her, Marx’s admission that the market must be continually extended is proof, not that overproduction is inevitable, but that there must be another group of consumers, outside of the capitalists and workers, who provide the ‘effective demand’ that is missing from his hypothetical model of capitalist reproduction, and who must exist in reality otherwise we are faced with the patent absurdity of ever-greater masses of commodities being thrown onto the market year after year…

You could argue therefore that her whole thesis rejects the inevitable appearance of overproduction and this point is made by Pannekoek in his critique (see my post above).

Alf wrote:
I think that MH, whose text is entitled “’Impossibility’ of accumulation or overproduction”, is posing a false dichotomy here.

No. The dichotomy isn't mine. Luxemburg says accumulation is impossible without non-capitalist buyers. Without them it can’t work. Full stop. That’s her thesis.

the realisation of the surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists.” (AofC)

Whereas Marx consistently argues that accumulation in such a society must lead to overproduction.

And that’s it really.

Except that I can’t resist asking, tongue in cheek – is it really credible to conclude that in all four volumes of Capital, not to mention the Grundrisse, Marx would not at some point have said the equivalent of, “oh and by the way, none of this works without non-capitalist buyers”…?

PS Alf criticises Link’s comments about Luxemburg. I don’t speak for Link and he doesn’t speak for me but after a considerable work of research he has posed five key problems with her theory. I would be very interested to read a serious response from someone who is able to answer them.

Link
I think Alf is wrong with his

I think Alf is wrong with his criticism of my judgment on Accumulation of Capital. All I made was a criticism of this one book, it was not a personal attack nor a rejection of the rest of her writings, nor of her as one of the foremost theoreticians of the workers movement.

I did not intend to make a detailed review of the book itself, however if Alf wishes to do so then please do present a different view. For me, The best section of AoC is the excellent section on the struggles against natural and peasant economies, although I dont think it actually supports her argument for the necessity of pre cap buyers to enable capital accumulation. AoC is quite simply hard work to read and her explanation of why accumulation is impossible without pre capitalist markets is hard to work out.

My recommendation to comrades is that if you wish to read about Luxemburg’s theory of accumulation read The Anti-Critique. It is a far more focussed and cohesive presentation of her argument although I daresay you will probably end up dipping back into to AoC.

To take the discussion forward, what I would prefer to see, as MH says, is responses by Alf or other members of the ICC to the more important criticisms that have been made. In my post 38 I put several questions that need answering because as far as I can see they have never been addressed in ICC texts - especially the point regarding the material content of total capital.

I would also add that Alf’s post 33 made a significant point about total social capital. I assure you it was not without trepidation and a lot of thought that I disagreed with Alf (in post 38 again) as it is serious issue about method in the use of abstraction. It would be very interesting to see a response to this too.

Alf’s response to MH seems to encapsulate the ICCs understanding of Luxemburg. It implies that simply that because capitalism overproduces it is not possible for a world of workers and capitalists to provide the demand for the accumulation of capital goods therefore accumulation can only happen because of pre-capitalist markets.

For example from IR142 RL and the Limits to Capitalist Expansion

“..if simply the capitalist drive to accumulate in itself generated the constantly expanding demand needed to realise the whole of the surplus value, then how could marxists argue against the revisionists that capitalism was indeed fated to enter a phase of catastrophic crisis that would provide the objective foundations of the socialist revolution?

Luxemburg's answer was that it was necessary to move away from abstract schemes and situate capitalism's ascent in its real historical context. The whole history of capitalist accumulation could only be grasped as a constant process of inter-action with the non-capitalist economies that surrounded it. The most primitive communities which lived by hunting and gathering and had not yet generated a marketable social surplus .... But the economies which had developed a marketable surplus and in particular where commodity production was already internally developed (such as the great civilisations of India and China) provided not only raw materials but enormous markets for the production of the capitalist metropolises, enabling capitalism in the heartlands to overcome its periodic glut of commodities …”

This is not what Marx said about what enables accumulation as MH argues and its not even the central idea of Luxemburg's theory either.

It is however a deceptively easy argument to make but it is nevertheless a superficial explanation of her theory. The theory is actually dependant on far more complex justifications that Luxemburg herself presented and which are usually ignored. It is those justifications that I have attempted to criticise

The starting point is to ask ‘Why does Luxemburg believe it is not possible for capitalists to accumulate without selling to feudal buyers?‘ The answer is not overproduction as i pointed out in my post 38.

Link
double post again

double post again

jk1921
MH wrote:

MH wrote:

Luxemburg’s whole thesis on the other hand is that as a result of these inherent limits accumulation is impossible unless there are non-capitalist buyers. For her, Marx’s admission that the market must be continually extended is proof, not that overproduction is inevitable, but that there must be another group of consumers, outside of the capitalists and workers, who provide the ‘effective demand’ that is missing from his hypothetical model of capitalist reproduction, and who must exist in reality otherwise we are faced with the patent absurdity ofever-greater masses of commodities being thrown onto the market year after year…

So for Marx, overproduction is real and inevitable, but it is not a bar to accumulation as capitalism can "extend the market'? But extend it into what? What can the market be extended into, if it is not some pre-existing non capitalist source of demand? This brings to mind the kinds of metaphysical questions, people ask about the Big Bang? Into what, pary tell, does the universe expand, if the universe is all that exists? Similary, one could ask, if capitalism is a closed system, into what can it expand? Similarly, a closed capitalist system that must expand, but which with nothing to expand into could be seen as a logical inconsistency.

Luxemburg's theory is both a theory of the economic funtion of capitalist reproudction, but it is also a theory of history or capitalist development. It shows how capitalism interacts with other modes of production, ultimately transcending them, but at the cost of depriving itself of the necessary outlets for surplus value, as contact with capital inevitably transforms the pre-capitalist markets in a way that mirrors capitalism.

This then raises the historical/empirical question of how this has been conceptualized by the ICC. If pre-capitalist markets necessary to effectively realize the surplus value produced in the capitalist core were exhausted sometime in the early twentieth century, what accounts for the continued expansion and growth and development of the world capitalist system since? We have two choices if we are going to preserve the theory: Admit we may have ben wrong about the extent to which pre-capitalist markets had been exhausted or contemplate that capital may have found ways to "cheat the law of value," through military and other unproductive expeditures, the flight into debt, "creative destruction," Keynsiano-Fordist management, etc. Of course, these measures are seen as temporary stop gaps that only further deepen the underlying realization crisis of the logical inconsistency that is decadent capitalism.

Link
jk1921 wrote:

jk1921 wrote:

 

 

So for Marx, overproduction is real and inevitable, but it is not a bar to accumulation as capitalism can "extend the market'? But extend it into what? What can the market be extended into, if it is not some pre-existing non capitalist source of demand?

 

I dont think you read my last post jk as i tried to explain this argument and why it is so weak.  Overproduction means capitalism is dependant on pre cap markets!!   This was not said by Marx  and its not even what Luxemburg's theory actually said.  

Marx's writing on how capitalism works are based on the idea that accumulation can extend the market ie accumulation is intrinsic to the system.  Luxemburg rejected the Marx's model that c+v+s= total capital.  If you are agreeing that this model does not work then what is capitalism?   If accumulation isnt intrinsic what is capitalism?

‘To accumulate it is necessary to convert a portion of the surplus product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour process (i.e. means of production), and such further articles as are suitable for the sustenance of the labourer (i.e. means of subsistence). Consequently, a part of the annual surplus-labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus-value is convertible into capital solely because the surplus-product, whose value it is, already comprises the material elements of new capital.’ ( Marx, Capital Volume 1 Chapter 24)

This is the core idea which Luxemburg rejected in favour of the her belief that new capital cannot be purchased/realised by capitalists.  Whereas Marx was simply described a process that takes place in the real world ie that capitalist can buy new means of production.  In Marx's day he could see the obvious - that capitalists buy steam engines, railways, factories, production lines, blast furnaces and engineering machinery etc and not feudal lords.  Today it is capitalists that buy atomic power stations, computer systems, AI systems, biogenetics equipment, pharmaceutical equipment etc etc not feudal peasants (i cant see many feudal lords left in existence).  In terms of markets this means that capital itself created the markets for computers, power stations, CAM, biogenetics, satellites let alone the household goods like we see today eg central heating controllers, video door bells, laptops, facebook, twitter etc. These sort of goods do not  find markets among feudal peasants!  I cant for the life of me see how Luxemburg could deny this process takes place!

Link
Additional quote from marx on internal growth

Jk, I could have included this quote in the above contribution to show Marx saw capital as able to create its own markets but he did not suggest that this meant limitless unhindered growth.  

'The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and the purpose of production; that production is only production for capital and not vice versa, the means of production are not mere means for a constant expansion of the living process of the society of producers. The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move — these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. The means — unconditional development of the productive forces of society — comes continually into conflict with the limited purpose, the self-expansion of the existing capital. The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world-market and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production.….. ' Marx Capital 3 Chap 15

Can i also add that this does not mean that capitalism is a closed system as you suggest it does. Clearly the pre capitalist markets were being integrated into capitalism and this will have aided capitalisms growth, my argument is just that growth is not totally dependant on pre cap markets.

jk1921
The debate about whether or

The debate about whether or not capitalist production creates its own markets is an old one. It is true that Marx used the "Reproduction Schema" in Vol. 2 of Capital to ostensibly demonstrate that a society of only workers and capitalists can reproduce itself. I don't really intend to intervene in this debate as much of its minutiae and intricacies were lost on me long ago. My post was intended to highlight the value of Luxemburg's theory as not only an economic anaysis of capitalist growth, but also as an historical explanation of capitalist development, which I now see coincides with arguments put forward by the ICC earlier.

It may or may not be the case that Marx demonstrated how a society of only workers and capitalists can reproduce itself, but it is also the case that this hypothetical society has never existed--capitalism in its ascendant phase developed within the bosom of previous modes of society, not just feudalism, but other pre-capitalist modes of production. We could also broach the issue of slavery and its historical relationship to capitalist accumulation here, as MH has bravely done elsewhere. Could it be that Luxemburg's approach is an attempt to explain the development of capitalism in the real world up to that point in history? Whether or not Marx was right or wrong, capitalist development must have been shaped in some meaningful way by its relationship to other modes of production, i.e. imperialism, slavery, etc.

We can also raise the issue to what extent Luxemburg's theory holds water for the decadent era and the theoretical maneuovers necessary in order for it to maintain its premises in the face of continued capitalist growth and even societal development, but its still the case that even today we do not inhabit the imaginary world of only workers and capitalists.

Link
Jk I agree that Luxemburg put

Jk I agree that Luxemburg put a historical perspective onto our view of capitalism and its growth. I agree with what you that capitalist development must have been impacted by its relationship to other modes of production in its growth, im not sure what u mean by a meaningful way though as that sounds loaded to me. Luxemburg clearly added this issue of a relationship with pre cap markets to a view of ascendancy but having noted that these pre cap markets exist why does she say that all accumulation is dependant up them. That for me is a leap in logic that is unjustified. Why not simply say that they facilitated faster growth in capitalism? That sounds far better logic. To say that is they are essential to growth is very specific and needs justification not the assumptions you are presenting.

For example I would like to use an analogy which is always fraught I know but please accept I mean it as a somewhat humorous illustration and not the absolute equivalent.

Luxemburg says that pre cap markets are the environment for the growth of capitalism and, as above, draws the conclusion that they are essential to growth.

But another element of the environment for the growth of capitalism is the sea!! It surrounds all land and all early international trade was conducted by ship. Also lots of the large populated/industrialised areas in the world lie on a coastline and even inland areas like the West Midlands began life dependant on the link to the sea that the river severn provided (the ruhr is another example). Why not therefore say that capital accumulation is totally dependant of the sea? Its the same logic processed involved but ….

So if I may paraphrase you, even though Luxemburg is wrong in her theory, it is still possible to say that capitalist development must have been shaped in some way by its relationship to other modes of production. So my argument remains, that the reason why she said that accumulation of capital is totally dependant of pre cap markets must be justified by an analysis of much greater depth than the assumption its true because overproduction exists!

jk1921
Link wrote:

Link wrote:

But another element of the environment for the growth of capitalism is the sea!! It surrounds all land and all early international trade was conducted by ship. Also lots of the large populated/industrialised areas in the world lie on a coastline and even inland areas like the West Midlands began life dependant on the link to the sea that the river severn provided (the ruhr is another example). Why not therefore say that capital accumulation is totally dependant of the sea? Its the same logic processed involved but ….

Wasn't this in effect Braudel's argument--that capitalist development was shaped by linking the globe through sea lanes and coastal ports? That is probably true, but what exactly is being linked (no pun!) if it is not the centers of accumulation with its periphery? That may be another way at getting some of the issues here. To what extent is the language of core-periphery valid in understanding the history of capitalist development? What makes some place "core" and some other places "periphery"?

d-man
The sub-title of Rosa's book

The sub-title of Rosa's book was: 'an economic explanation of imperialism'. So first, do we even agree upon the 'necessity' of imperialism? Because some argue that imperialism wasn't necessary, and that from the general capitalist viewpoint it was a net negative, irrational or harmful to the capitalist system.

You can propose the falling rate of profit as the motive for capital export/imperialism, but there are other counteracting factors to the TRPF, and so imperialism wouldn't be the sole indispensable, prime one. Imperialism might still be a benefitial option (higher rate of profit abroad), but you admit it's not really a necessity, in order for accumulation (at a somewhat profitable rate) to continue.

Also, once you reject the 'necessity' of the non-capitalist sphere, many alternatives can follow for its status (as "shock-absorber" etc), in diminishing order;

1) the non-capitalist sphere is still highly regarded, as an option boosting accumulation beyond its ordinary pace.

2) it maintains accumulation at its ordinary pace, when occasional crises threaten disruption.

3) it fails to maintain the ordinary pace, ie fully overcome crises, but merely lessens the severity of crises.

4) it has no effect on lessening the severity of crises, or restoring accumulation.

5) it decreases the pace of accumulation, given that less capital is invested at home.

6) from the social capital (not individual) viewpoint it creates new capitalist competitors abroad, who will not just decrease (or make more difficult) domestic accumulation, but threaten to wipe out domestic accumulation.

Again, some say that from the viewpoint of social capital, imperialism is not just not benefitional/rational to it, but even actively harmful. I'm not even quickly condemning this as Kautskyianism, it merits consideration.

The puzzle/paradox (or perhaps dialectics) would lie in trying to prove why something that is irrational, is still a necessity (or real).

d-man
Sputnik kommunista

In the journal/organ of the Moscow oblast party committee, Спутник коммуниста, there was a pro-Luxemburg piece by a certain M. Schwartz (М . Шварц), apparently in No. 22 (of 1923), titled Проблема накопления капитала и империализм ('The problem of accumulation of capital and imperialism'). It's not online, but in it apparently Schwartz criticised Dvolajtskij's anti-Luxemburg position (because the latter responded in Vestnik Komm. Akademii 1923 No. 5, which is online).

I try to discover who this "M. Schwartz" was.

In issue no. 25 (1923) Schwartz wrote 'At the turn (or 'on the edge') (overview of the economic situation in the USSR)' [На рубеже (обзор хозяйственного положения СССР)].

The following year (1924) in issue No. 26 of the same journal Schwartz wrote 'Primitive socialist accumulation' (in backward countries and Russia) (Первоначальное социалистическое накопление). 

Later I'm not sure it's the same person, but I found a short brochure by an M. Schwartz (Достижения и задачи кредита в СССР), as well as an article in War and revolution (issue 1 of 1928) on the civil war ( К постановке вопроса исследования Гражданской войны 1917 -1921 гг. //Война и революция. 1928. - № 1. - С. 48-60):

Quote:
The methodological setting given by M. Schwartz suggested pushing the "official" military history into the background. Put the socio-historical content of the phenomena of the Civil War at the forefront. This was explained by the fact that "the Civil War has its own 'nuances', which are cramped within the framework of military-historical traditions" 30. The author was worried about how the experience of armed struggle can be distinguished from the experience of the entire complex of "October phenomena". He saw the answer as “that the military history of the Civil War of 1917-1921 can be understood only as a military department of the entire history of the October Revolution, as its inseparable part. " In short, all aspects of the Civil War should be illuminated only through the prism of class analysis.

In that same journal there appears moreover in 1929 a critical review by Schwartz (of a book on the activity of the 16th army in Berzina during the civil/Polish war).

I don't know if these later articles are by the same Schwartz as the 1923 pro-Luxemburg article.

I don't know what the initial 'M' stand far (perhaps Mikhail?).

It's certainly crazy to speculate, but Trotsky's son Lev Sedov (born 1906) apparently sometimes signed his letters by the pseudonym 'N. Schwartz'; and he grew up in Moscow, and was a precocious student (though still, if by the age of 17/8 he would already start writing theoretical articles in a journal, it seems a bit of a stretch). Anyway, I do not seem to find info about what, if any, was the nature of Sedov's literary activity in the 1920s in Russia.

Kamerling
Producing commodities for the sake of it

In Post#54 MH writes the following:

“The inherent limits on consumption in capitalist society lead not to the need for non-capitalist buyers in order to accumulate but to the inevitability of overproduction. The ‘light bulb’ moment for me came when I was re-reading the Anti-Critique where she describes the - to her - obvious absurdity of capital continuing to throw ever-greater quantities of commodities onto the market in pursuit of consumers: 

“After we have assumed that accumulation has started and that the increased production throws an even bigger amount of commodities on to the market the following year, the same question arises again: where do we then find the consumers for this even greater amount of commodities? Will we answer: well, this growing amount of goods will again be exchanged among the capitalists to extend production again, and so forth, year after year? Then we have the roundabout that revolves around itself in empty space. That is not capitalist accumulation, i.e. the amassing of money capital, but its contrary: producing commodities for the sake of it; from the standpoint of capital an utter absurdity. If the capitalists as a class are the only customers for the total amount of commodities, apart from the share they have to part with to maintain the workers – if they must always buy the commodities with their own money, and realize the surplus value, then amassing profit, accumulation for the capitalist class, cannot possibly take place.” (Chapter 1, my emphasis)

"Of course Luxemburg is right to insist that capitalism is not simply production for production's sake - it must accumulate, and in order to do that it must realise the surplus value produced - sell for money. But hang on - doesn't what she is describing sound a lot like the reality of a system that must inherently overproduce? Of course I find I am not the first to question this. Pannekoek in his own review of Luxemburg's book says:

“What she calls an absurdity from a capitalist point of view because it would present an aimless circular motion - to produce more and more means of consumption in order to feed more workers, who would produce more and more means of production that serve for the production of those means of consumption - only appears to be absurd because the decisive factor was left out of consideration. The goal of producing more and more is to extract and accumulate more and more surplus value, but those accumulated masses of capital can only fulfill their goal of producing new surplus value by being thrown again and again into the whirlpool of production. The self-valorisation of capital in the creation of profit, the transformation of profit into new capital, is the driving force giving sense and a goal to that alleged absurdity: the apparently aimless, always expanding circuit of production. This 'absurdity' shows the inner nature of capitalism, which exists not for the purpose of production but rather uses production as a means in order to produce surplus value and capital.”  (in ‘Discovering Imperialism’, Haymarket, 2012, my emphasis)"

But what MH forgets to tell us is that for Pannekoek overproduction is not absolute inevitability, which is clearly shown in the sentence preceding the above quoted paragraph: “If these capitalists and workers buy all products, as the diagram shows, then there are no longer any products for which demand has to be sought elsewhere. So there is no problem at all that should be solved.” (De economische noodzakelijkheid van het imperialisme; 1916)

According to Pannekoek crises occur because of the greed for profit by the capitalists and by the anarchy of the market. “The basic cause of the crises lies in the fact that the capitalists, driven by their greed for profit, try to use their income as producing capital instead of spending it unproductively.” (Die Ursache der Krisen, Anton Pannekoek, 1908)

Economists expected “that cartels and trusts, monopolising as they do large branches of industry, would bring a certain amount of organisation into the anarchy of production and smooth its irregularities. They did not take into account that the primary cause, the yearning for profit, remains, driving the organised groups into a fiercer competition. The incapacity of modern capitalism to cope with its anarchy was shown in a grim light by the world crisis of 1930.”  (Workers’ Councils; Pannekoek)

Forumteam
summary of the discussion so far

The New Silk Road and Luxemburg's Explanation of Accumulation (MH, Link, jk1921, Alf and others)

 

The discussion on this thread has been very rich.  It started with three question posed by Link (1).

  • Does the growth of the world population since 1914 not indicate the increase of the market size and the expansion of the extra-capitalist markets in the 20th century?
  • These figures on economic growth do they suggest that the extra capitalist markets must have been growing rather than diminishing as Luxemburg expected?
  • Why can’t the workers and capitalists by themselves realise that part of the surplus value which is to be capitalized?

 

In the course of the thread there were contributions of several comrades but the main contributions were those of Link, MH and jk1921 and Alf. All comrades were consistent in the defence of their positions. One remarkable moment on this thread was the announcement of MH in #54 that, on the basis of what he had read and the arguments that had been put forward, he had come to another conclusion: I have now concluded that I was right - but not in the way that I expected. (…)  I now believe that if we base ourselves on Marx's analysis of capital's inherent contradictions we must conclude Luxemburg’s theory is wrong.” 

 

Capitalism developed in a non-capitalist environment

 

All comrades agreed that, historically, capitalism develops within and on the basis of a non-capitalist environment

 

  • We can agree with the general notion that “Historically, the accumulation of capital is a kind of metabolism between capitalist economy and … pre-capitalist methods of production” and that “capitalism needs non-capitalist social organisations as the setting for its development”. (MH; Debate on Luxemburg's theory: "Impossibility" of accumulation or overproduction? https://markhayes9.wixsite.com/website/post/debate-on-luxemburg-impossib...)
  • “Capitalism is growing within an environment of pre-capitalist markets. (Link#38) The capitalist development must have been impacted by its relationship to other modes of production in its growth.” (Link #65)
  • “Capitalism in its ascendant phase developed within the bosom of previous modes of society, not just feudalism, but other pre-capitalist modes of production.” (Jk1921#64)

 

The comrades agree that overproduction is inevitable

 

A second point is that all comrades agree on is the fact that overproduction is inevitable within capitalism

 

  • “We are to fully accept Marx’s analysis of capital’s inherent problem of realising surplus value which inevitably results in overproduction.” (MH; Debate on Luxemburg's theory)
  • I absolutely agree that overproduction is “a major problem for capitalism and Marx says this is particularly an issue in crises that emerge including when the falling rate of profit has driven profit down to crisis levels. It lays the basis for overproduction being a continual issue for capital at all times in its life.”  (Link#31)
  • “So for Marx, overproduction is real and inevitable, but it is not a bar to accumulation.” (Jk1921#61)
  • “Luxemburg’s whole thesis is based on Marx’s own recognition that overproduction is indeed inevitable in capitalist society.” (Alf#57)

 

The explanation of the historical dimension by Luxemburg is correct, the theoretical isn’t

 

“Luxemburg's theory is both a theory of the economic function of capitalist reproduction, but it is also a theory of history or capitalist development. It shows how capitalism interacts with other modes of production, ultimately transcending them.” (jk1921#61)

 

  • “There are two different aspects or dimensions to Luxemburg’s theory as set out in The Accumulation of Capital (1913):
  • a theoretical aspect: capital needs non-capitalist buyers in order to accumulate;
  • a historical aspect: the accumulation of capital depends on non-capitalist social strata and forms of social organisation.” (MH; Debate on Luxemburg's theory) (2)

 

  • “Luxemburg's theory is both a theory of the economic function of capitalist reproduction, but it is also a theory of history or capitalist development. It shows how capitalism interacts with other modes of production, ultimately transcending them.” (jk1921#61)

 

  • “Her [Rosa Luxemburg] historical analysis is a significant contribution to the understanding of capital’s dependence on its non-capitalist surroundings for its development.” (MH; Debate on Luxemburg's theory)
  • “We must continue to reject the theoretical assumption underlying Luxemburg’s whole historical vision of this relationship that “capital cannot accumulate without the aid of non-capitalist organisations”.” (MH; Debate on Luxemburg's theory)

 

  • Alf draws here the right conclusion that: “While rejecting Luxemburg’s “theoretical” conclusion, MH still sees great value in her historical account of how capitalism spread across the world.” (Alf#57)

 

  • Link doesn’t make an explicit distinction between the historical and theoretical dimension in the explanation of Rosa Luxemburg of capitalist accumulation. He does not express his agreement with MH that Rosa Luxemburg’s historical account of capitalism’s expansion over the globe still has great value. He just affirms that he is in agreement with the position of MH. However in his response to the post of MH he implicitly acknowledges both the historical and theoretical dimension in Luxemburg’s theory where he writes that: “she makes a totally inadequate explanation in The Accumulation of Capital that because pre-capitalist markets exist as the environment for capitalism’s growth then they must be the source of all accumulation”. (Link#55)

 

Extra-capitalist markets are no absolute necessity for capitalism to accumulate.

 

From #54 on MH defends the position that extra-capitalist markets are not an absolute necessity for capitalism to accumulate. His conclusion in #54 was not a complete surprise, because in #35 he had already wrote that

  • “Non-capitalist buyers may play a vital role for the development of capitalist reproduction but (…) their absence does not appear to make accumulation impossible, it just exacerbates the problem of overproduction.” (MH#35)
  • But it is only in #54 and in particular in his text on his own blog: “Debate on Luxemburg's theory: “Impossibility” of accumulation or overproduction?” that the comrades draws the full implications of his different view. In this text he explains the consequences of the “insufficiency of non-capitalist surroundings”, which can only exacerbate all its contradictions, leading to the onset of its decay or decadence, “the final phase of capitalism” which she [Rosa Luxemburg] presciently characterises as a “period of catastrophe”. (MH; Debate on Luxemburg's theory)

 

On the other hand Alf and jk1921 were quite clear in their positions on the need of extra-capitalist markets for capitalism to accumulate:

  • “For Rosa Luxemburg a society composed “solely of workers and capitalists” did not exist in her day and in her view would never exist.” (Alf#57)
  • “Luxemburg’s whole thesis on the other hand is that as a result of these inherent limits accumulation is impossible unless there are non-capitalist buyers.” (jk1921#61)

 

Link is not clear on this question since he defends different positions and since it is not clear either if he has changed position in the course of the discussion on this thread:

  • “I don’t agree it’s impossible for a society of solely workers and capitalists to accumulate.” (Link#21)
  • Pre-capitalist markets are the prime source for the accumulation of capital” (Link #31) and even “extra-capitalist markets are the sole source of accumulation.” (Link #31)
  • “My argument is just that growth is not totally dependent on pre-capitalist markets.” (Link#63)

 

 

 

Decadence of capitalism does not mean an absolute insufficiency of the pre-capitalist markets

 

Comrade MH is right “that the insufficiency of the remaining non-capitalist environment in 1914 leads – along with other factors – to inter-imperialist warfare and the onset of capitalist decadence”.  But when he says that the theory of Rosa Luxemburg must be rejected because this historical fact (“the insufficiency or the remaining non-capitalist environment”) has not prevented capitalism “to survive for over 100 years of decadence” (MH; Debate on Luxemburg's theory), he seems to be overlooking something.

 

For we should realise that, even if there may not be a theoretical problem for capitalism to accumulate, on the level of the historical evolution there exists a problem that even the comrade recognizes: one way or another (it may be overproduction and/or the falling rate of profit) the capitalist mode of production leads at a certain stage of its development to the onset of “its decay or decadence” and to “a period of catastrophe”.

 

If the extra-capitalist markets are not sufficient at a certain moment to ensure the same rhythm of accumulation of capital as in the period of ascendance, this does not mean that they don’t exist anymore or that there are no longer potential, not yet explored extra-capitalist zones on the globe. In this sense “the insufficiency of the remaining non-capitalist environment” is relative and not absolute. (3) Regarding this point at least three interventions have been made on the thread:

 

  • In the framework of the 21st Congress “The self-critical discussions we have been having about crisis and decadence have led us towards a deeper understanding of Luxemburg's theory, not least a rejection of the idea that the extra-capitalist milieu was exhausted in 1914”. (Alf#30; Issues and problems with decomposition; Link#1)
  • The extra-capitalist markets are probably “not an absolute given, but tend to expand with the development of the productive forces and with the further technical means of capitalist production to explore and exploit them.” (Link#1)
  • “We may have been wrong about the extent to which pre-capitalist markets had been exhausted or contemplate that capital may have found ways to "cheat the law of value," through military and other unproductive expenditures, the flight into debt, "creative destruction," Keynsiano-Fordist management, etc.” (jk1921#61)

 

In her Anti -Critique (4) Rosa Luxemburg gives another very important argument how it is possible that, while all the potentialities of capitalist accumulation have not been exhausted, capitalism has already entered its period of decadence. What she says in fact is that capitalism enters its period of revolution and imperialist wars long before capitalism has come to its “economic end” (which will actually never happen!). According to Marx, the rebellion of the workers, the class struggle, is only the ideological reflex of the objective historical necessity of socialism, resulting from the objective impossibility of capitalism in a certain economic stage. Of course, that does not mean to say that the historical process has to be, or even could be, exhausted to the very limit of this economic impossibility. Long before this moment, the objective tendency of capitalist development towards that goal is sufficient to produce such a social and political sharpening of the contradictions in society and the untenability of the conditions.” (Rosa Luxemburg, Anti-Critique). So World War I occurred way before the first global economic crisis in the period of the decadence broke out.

 

The ICC defends the position that the period of catastrophes started at the beginning of the 20th century, precisely from the moment insufficient extra-capitalist markets were left for capital to accumulate without leading to a qualitative sharpening of the contradictions. From that moment “the ‘push’ of capitalist production towards the rest of the world accelerated. Instead of competition between individual capitals for markets within the national framework, the emphasis was now on competition between national capitals for the remaining non-capitalist areas of the globe”. (Nation or Class?; 1. Communists and the national question; Luxemburg's critique of the Bolsheviks) (5)

 

Remarkable – but maybe logical - in this framework is the fact the MH, even when he denies that the insufficiency of the extra-capitalist markets is the decisive factor for capitalism entering in the period of its decadence (since it still succeeded “to survive for over 100 years of decadence”), he seems to recognize the accelerating tendency transforming the competition between individual capitals for markets within the national framework into the outright competition between national capitals when he writes that “the competitive struggle of the advanced capitalist powers for what remains open of the non-capitalist environment in the late 19th century is undoubtedly a major factor in explaining the phenomenon of imperialism.” (MH; Debate on Luxemburg's theory). The comrade is completely right when he adds that this tendency continues to exist in the whole 20th and even in the 21st century.

 

Conclusion

 

The last words on this item have not been said. Throughout the past ten years there have been several threads on the forum already dealing with similar questions such as “Decadence After 1968”; “Issues with Decadence Theory”; “How does the "Century of Decadence" explain this?”; “Can the falling rate of profit explain decadence?”; “Economic Growth Rates and the Luxemburg Theory of Pre-capitalist markets”; “Luxemburg and pre-capitalist markets”. And there will certainly be started more threads to on this or similar subjects, as we can already see with the thread: “India and China” At least the ICC intends to come back to the discussion on this thread and to develop a public reply to the questions posed here.

 

Notes

 

(1) In #38 Link posed five questions that have not been fully answered on the thread and would require a lot of work to reply to, probably in the form of articles:

  1. Can Luxemburg possibly be correct in rejecting Marx diagram of accumulation C+V+S=TC?
  2. Why are the commodities that are required to enhance production any different to the commodities required to replace worn capital assets and subsistence requirements?
  3. Aren’t the markets for all commodities estimated in advance of production by capitalist enterprises?
  4. How is it possible for all individual capitalists to accumulate but not the aggregate capitalist at the level of total social capital?
  5. How is it possible to justify the idea that pre-capitalist markets can provide a market for enhanced production equipment?

 

(2) In a later post MH poses the following question: “whether the ICC can truly deepen its understanding of Luxemburg’s contribution to explaining the roots of capitalist decadence – and therefore of capitalist decadence itself – without first clearly acknowledging that her economic theory is erroneous.” (MH#58)

 

(3) The entry of capitalism in its period of decadence “did not mean that capitalism had rid itself of all remnants of pre-capitalist modes of production and classes, that it had exhausted the last pre-capitalist market.” (Understanding the decadence of capitalism; International Review no. 112) In the 1930s, even if the remaining pre-capitalist markets could no longer allow for the 'peaceful' expansion of the system, there still remained large areas ripe for capitalist development (in Russia, Africa, Asia, etc.).” (Resolution on the international situation (2002) International Review no. 110)

 

(4) “It will outlive me, it is much more mature than Accumulation”, she wrote in a letter to Hans Diefenbach.

 

(5) This was the essence of imperialism, which is simply the expression of “normal” capitalist competition on an ‘international’ scale, in search for what Marx called the still existing “outlying fields”, backed up of course by the armed state power.

 

 

 

 

 

Link
Forumteam, thank you for the

Forumteam, thank you for the response to the questions being raised about Luxemburg. As you say, this is more an attempt at a summary than an analysis of arguments but I do hope that this latter approach will be forthcoming.

 

At this point I would just like to correct some misinterpretations of my contributions and apologise if I have not been clear enough.

 

You say ‘Link is not clear on this question since he defends different positions and since it is not clear either if he has changed position in the course of the discussion on this thread’ and then list 3 quotes which are said to conflict.

 

The first one form Link#21 is correct – I disagree with Luxemburg. The 2nd bullet point lists 2 quotes from Link#31 but these are absolutely not statements of my views. In this contribution I was listing the various alternative interpretations of overproduction that I had come across in discussions. The 3rd bullet point is also correct quote but may not be clear. To put it another way, capitalism is not dependent on pre cap markets for the realisation of capital products as Luxemburg suggested but it made gains that facilitated growth through the general trading relationships established with wealthy colonies and with capitalist enterprises being established in the colonies.

 

Another reference to me states: The extra-capitalist markets are probably “not an absolute given, but tend to expand with the development of the productive forces and with the further technical means of capitalist production to explore and exploit them.” (Link#1) I cannot find this quote in Link#1 and I dont believe this is something I would say unless, again, I was attributing this position to the ICC.

 

To summarise my position at present:

 

  • Luxemburg’s hypothesis that accumulation is dependant on pre cap markets is wrong

  • Pre cap markets may have facilitated the expansion of capitalism during its ascendant period but not by the sale of manufacturing equipment

  • Capitalisms growth in 20th Century has not been in any way dependent on pre capitalist markets

  • There are no significant extra capitalist markets in the 3rd world today and I dont think there have been any since the mid 20th century.

  • The growth of gdp and population in 20th Century (as mentioned at the start of the forumteam's contribution) proves the failure of luxemburgs hypothesis.  To defend Luxemburgism is to defend the idea that pre cap markets must be growing.

  • My questions that you include in Note 1 are important as they relate to the theoretical arguments that Luxemburg raises to support her theory. I have not seem them addressed by the ICC before.

  • The tendency to overproduction is a contradiction within capitalism and is completely unrelated issue to pre cap markets

  • I have come to the view that the problem of overproduction is actually the problem of the over-accumulation of constant capital

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