This text is not an attempt to deal with all the problems of the Marxist theory of crisis. It is aimed simply at providing a framework to the debate now opening up in the international revolutionary movement; it does not claim to be an ‘objective' view of the debate, to the extent that it is committed to a particular interpretation of the origins of capitalist decadence, but it will hopefully be able to lay down certain guidelines which will allow the discussion to proceed in a constructive manner.The context of the debate
In a general sense, the renewal of discussion about the crisis of capitalism is a response to the material reality which has been with us since the end of the 1960s: the irrefutable descent of the world capitalist system into a condition of chronic economic crisis. The warning signs of the mid-sixties, which took the form of a dislocation of the international monetary system, have been superseded by the symptoms of acute distress affecting the very heart of capitalist production: unemployment, inflation, falling rates of profit, slow-down in output and trade. Not one country in the world -- including the so-called ‘socialist' regimes -- has escaped the deadly effects of this crisis.
During the 1950s and 1960s, many elements in the tiny revolutionary movement which managed to maintain a precarious existence through those long years of class quiet and economic growth were dazzled by the apparent ‘success' of the capitalist economy in the post-war period. Socialisme ou Barbarie, the Situationist International and others took this phase of relative prosperity at face value and declared that capitalism had resolved its economic contradictions, so that the preconditions for a revolutionary upheaval could no longer be sought in the objective limitations of the system, but purely and simply in the subjective ‘refusal' of the exploited class. The very premises of Marxism were called into question, and those groups who went on insisting that the capitalist system could not and would not escape a new round of open economic crisis were brusquely dismissed as ‘relics' of the outmoded communist left, vainly clinging to a fossilized Marxist orthodoxy.
Nevertheless a few small currents, descendants of the communist left, such as Internationalisme in France in the 1940s and 1950s, Mattick in the USA, Internacionalismo in Venezuela in the 1960s, doggedly stuck to their guns. They saw that the post-war boom was exactly that -- a product of the cycle of crisis, war, and reconstruction which characterizes capitalism in its epoch of decay. They identified the tremors of the mid-sixties as the first shocks of a new economic earthquake, and they understood that the resurgence of workers' struggles after 1968 was not the simple expression of ‘order-takers' refusing to take any more orders, but the first response of the proletariat to the economic crisis and the deterioration of its living standards. A few years after 1968 it became impossible to deny that there was indeed a new world-wide economic crisis. The debates that took place after that were not, therefore, about whether or not there was a crisis, but about what this new crisis meant: was it, as some maintained, a purely temporary disequilibrium, a product of the need for a ‘restructuration' of the productive apparatus, of oil price rises, or of workers' wage demands -- or was it, as the direct precursors of the ICC argued, an expression of the irreversible, historic decline of capitalism, a new outbreak of capital's death agony which could only lead to world war or world revolution?
The inexorable deepening of the crisis, the recognition by the bourgeoisie itself that this is no mere temporary fluctuation, but something deeper and more disturbing, has settled this debate for the most advanced elements in the revolutionary movement. A process of decantation has taken place in which currents that attempted to deny that today's crisis is an expression of the decadence of capitalism have fallen by the wayside. For example, groups like the GLAT (Groupe de Liason pour L'Action des Travailleurs) in France, which has drifted into the most refined form of academicism, though not before quietly abandoning the idea that the crisis is caused by the class struggle.
Today the debate is no longer about whether the crisis is a sign of the decadence of capitalism. It is about the economic foundations of decadence itself; and in this sense is already an expression of a whole process of clarification that has been going on over the last few years. The very fact that the debate is being approached at this level is the product of real progress in the revolutionary movement.The importance of the debate
The understanding that capitalism is a decadent social system is absolutely crucial to any revolutionary practice today. The impossibility of reforms and of national liberation, the integration of the unions into the state, the meaning of state capitalism, the perspective facing the working class today -- none of these fundamental points can be understood without locating them in the context of the historic period in which we are living. But while no coherent revolutionary group can do without the concept of decadence, the immediate importance of the debate about the economic foundations of decadence is less clear. We will try to deal with this question during the course of this text, but for the moment we want to deal with some of the mistakes that can be made here. Broadly speaking, it is possible to fall into three errors:
a. Denying the relevance of the question as being ‘academic' or ‘abstract'. One example of this can be seen in the old Workers' Voice group in Liverpool, which regrouped with Revolutionary Perspectives to form the Communist Workers' Organization (CWO) in 1975 and split away again a year later. One of the weaknesses of this group -- though not the most important in itself -- was its lack of concern with or understanding of the problem of decadence, beyond a vague affirmation that capitalism was in decline. This laid the group open to dangerous confusions; while still in the CWO, various elements in Liverpool began to develop a completely un-materialist, moralistic view of the class struggle, while others quickly succumbed to illusions about the significance of local sectional strikes. In general, such attitudes of contempt for theory go hand in hand with an activist approach to political work.
b. Exaggerating the importance of the debate. At present this is a danger facing many groups in the communist movement, so we will deal with it at somewhat greater length. An example of this error is tile CWO, who not only considers that the tendency for the rate of profit to fall is the only explanation for capitalist decadence, but also relate all the alleged political errors of other groups to the fact that they explain decadence in a different way. For example, they consider that the activism of Pour Une Intervention Communiste(PIC) is a direct result of its ‘Luxemburgist' analysis (see ‘Text for the meeting of CWO and PIC' in Revolutionary Perspectives, no. 8), while as for the ICC, a whole host of its political shortcomings -- from its analysis of and relationship to the left to its errors on the transition period -- are the result of its defense of Luxemburg's theory of the crisis. Since political conclusions are seen to directly flow not merely from the concept of decadence, but the economic explanations for it, the CWO has developed the position that it is virtually impossible to regroup with organizations that analyze decadence in a different way. At the same time, an enormous emphasis is given in the work of the CWO to writing about ‘economics' to the detriment of other areas of concern for revolutionaries.
A similar tendency can be found in certain discussion circles emerging in different parts of the world, particularly in Scandinavia. For many of these comrades, regular political activity and organization is impossible until one has a total grasp of the entire scope of Marx's critique of political economy. Since this is impossible, political activity is postponed indefinitely in favor of Capital study sessions or keeping up with the latest productions of the academic ‘Marxism' which is nourished by the universities of Scandinavia, Germany and elsewhere.
The perspective held by the comrades who over-emphasize the significance of economic analysis is based on a faulty understanding of what Marxism actually is. Marxism is not a new system of ‘economics' but a critique of bourgeois political economy from the standpoint of the working class. In the last analysis, it is this class viewpoint which makes it possible to have a clear grasp of the economic processes of capitalism -- and not the other way round. To think that either political clarity and a proletarian class viewpoint can be derived from an abstract and contemplative study of ‘economics', or that it is possible to separate the Marxist critique of political economy from a partisan world view, is to abandon the fundamental premise of Marxism that being precedes consciousness and that collective class interests determine one's view of economy and society. It is to fall into an idealist caricature of Marxism as a pure ‘science' or academic discipline which exists in an area of abstraction far removed from the sordid, vulgar world of politics and the class struggle.
Just as Marx's critique of bourgeois political economy uncovered the fact that bourgeois economic theories were, in the end, an apologia for the class interests of the bourgeoisie, so Marx's critique was ail expression of the class interests of the proletariat. The understanding of capital's imminent tendency towards collapse which appears in Capital and other works is an elaboration of the practical consciousness which flows from the historic being of the proletariat as the last exploited class in history, the bearer of a higher, classless mode of production. Only from the standpoint of this class can the transitory nature of capitalism, and communism as the resolution of capital's contradictions, be grasped. Hence the proletariat preceded and produced Marx; and the general insights of the Communist Manifesto, with its ‘vulgar' political positions and polemics, preceded and laid the ground for the more developed reflections of Capital. And Capital itself, "this economic shit" as Marx called it, was seen as only the first part of a magnum opus which would deal with every aspect of social and political life under capitalism. Those who think that you must first understand every dot and comma of Capital before being able to understand or actively defend proletarian class positions are turning Marxism and history on their heads.
In Marx, there is no distinction between ‘political' and ‘economic' analyses, the one is a partisan, practical approach to the world, the other an ‘objective', ‘scientific' approach which can be applied by anyone -- leftist guru or academic professor -- who is clever enough to read through the volumes of Capital. This was the conception Kautsky and other theoreticians of the IInd International had of Marxism -- a neutral science developed by bourgeois intellectuals and brought to the proletariat ‘from outside'. For Marx, however, communist theory is an expression of the proletarian movement itself:
"Just as the economists are the scientific representatives of the bourgeoisie, so the socialist and communist are the theorists of the proletariat." (Poverty of Philosophy)
Capital, like all Marx's work, is the militant, polemical product of a communist, a fighter in the proletarian movement. It can be understood only as a weapon in the arsenal of working class struggle, a contribution to the self-clarification and self-emancipation of the class. How could Marx, who criticized radical bourgeois philosophy, like all philosophy, for merely interpreting the world, produce any other kind of work?
For Marx, the study of political economy was necessary to give a firmer basis, a more coherent framework to the political perspectives which derived from the struggles and experience of the working class. It was never seen as an alternative to political activity (indeed Marx was constantly breaking off his studies to help organize the International), or as the unique fountainhead of revolutionary positions; it could not take the place of that which gave it its real substance: the historic consciousness of the proletariat.
Just as political clarity is based primarily on an ability to assimilate the content of working class experience, so political confusions mainly express an inability to do so, or the actual intrusion of bourgeois ideology. Thus, the confusions of a Bernstein about the possibility of capitalism surmounting its crises were not simply the result of Bernstein's inability to understand how the law of value worked; it reflected the growing ideological subordination of Social Democracy to the interests of capital. And the revolutionary critique of reformism developed by Luxemburg and others was not based on the fact that the revolutionaries were ‘better at economics' than the reformists, but on their ability to maintain a proletarian class perspective against the encroachments of capitalist ideology.
c. Closely linked to the second error is the idea that the debate on economics either has been or will be finally resolved. This again implies that the economic processes of capitalism can all be understood providing one is intelligent or scientific enough or devotes enough time to them. In fact, beyond certain fundamental ideas, particularly those which flow directly from the nature and experience of the proletariat, such as the reality of exploitation, the inevitability of crisis, the concrete significance of decadence, many of the ‘economic' problems of Marxism can never be decisively settled, precisely because they do not all stand and fall by the actual experience of the class in struggle. This applies to the question about the driving force behind the decay of capitalism: the future experience of the class will not be enough to determine whether decadence began as a result primarily of the falling rate of profit, or the saturation of the market. This contrasts with other ‘unsettled' questions of today, like the exact nature of the state in the period of transition, which will indeed be resolved in the coming revolutionary wave.
This should be enough to confirm that the debate on the actual ‘causes' of decadence cannot be declared closed, but it is also important to point out that Marx himself never elaborated a completed theory about the historic crisis of capitalism, and in fact it would be ahistorical to expect him to have done so, since he could not have grasped all the phenomena of a decaying capitalism in a period when it was still expanding across the globe. Marx put forward some general indications, some vital insights, but above all a methodology for approaching the problem. Revolutionaries today must take up this method, but -- precisely because Marxism is not a fixed doctrine but a dynamic analysis of a changing reality -- they cannot do so by laying false claims to an ‘orthodox Marxism' which has long spoken the last word on all aspects of revolutionary theory. In the end, such an attitude can only lead to a distortion of what Marx himself actually said. The CWO, for example, in their attempt to show that an analysis of decadence based on the falling rate of profit is the only Marxist one, have fallen into the trap of branding virtually any concern with the problem of overproduction of'commodities, of the market, as having nothing to do with Marx, and of being a variety of underconsumptionism and other confusions put about by the likes of Sismondi and Malthus. But, as we shall see, the problem of overproduction is central to Marx's theory of crisis. If the debate on decadence is to be a fruitful one, it must abjure sectarian claims to orthodoxy and seek, first of all, to define the general framework in which a Marxist approach to the discussion can be undertaken.The two crisis theories
There are not 1001 theories of crisis in the Marxist tradition. The decline of capitalism is not the product of capitalist greed, or the ‘triumph of socialism on one sixth of the planet', or of the exhaustion of natural resources. There are basically two explanations for the historic crisis of capitalism in this century, because Marx pointed to two basic contradictions in the process of capitalist accumulation: two contradictions which lay at the root of the cyclical crises of growth capitalism went through in the nineteenth century, and which would, at a given moment, impel the historic decline of capitalism, plunge it into a death crisis which would put the communist revolution on the agenda. These two contradictions are the tendency of the rate of profit to fall, given the inevitability of an ever higher organic composition of capital and the problem of overproduction, capital's innate disease of producing more than its market can absorb. Though he developed a framework in which these two phenomena were intimately linked, Marx never completed his examination of capitalism, so that, in different writings, more or less emphasis is given to one or the other as the underlying cause of the crisis. In Capital Volume III, Part 3, the falling rate of profit is presented as a fundamental barrier to accumulation, though the problem of the market is also dealt with here (see below); in his polemic against Ricardo in Theories of Surplus Value Volume II, the overproduction of commodities is seen as "the basic phenomenon in crises" (p.528). It is the unfinished character of this crucial area of Marx's thought -- something, as we have said, determined not merely by Marx's personal inability to finish Capital, but by the limitations of the historic period in which he was living -- which has led to controversy within the workers' movement about the economic foundations of capitalism's decline.
The period following the death of Marx and Engels was characterized by relative economic stability in the capitalist metropoles, and the headlong rush of the imperialist powers to annex the remaining unconquered parts of the globe. The question of the specific origins of capitalist crises tended to be pushed into the background by the heated debates between the revolutionaries and the reformists in the IInd International, the latter denying that capitalism had any fundamental barriers to its expansion, the former beginning to understand imperialism as a symptom of the termination of its ascendant phase. At that time, the ‘orthodox' Marxist theory of crisis, as defended by Kautsky and others, tended to concentrate on the problem of the market, but this was not systematized or related to the actual decadence of capital until Rosa Luxemburg published The Accumulation of Capital in 1913. This text remains the most coherent exposition of the thesis that capitalist decadence is, first and foremost, brought on by its inability to continually expand the market. Luxemburg argued that since the entire surplus value of total social capital cannot, by its very nature, be realized within the social relations of capital, capitalism's growth was dependent on its continual conquest of pre-capitalist markets; the relative exhaustion of these markets towards the end of the nineteenth and the beginning of the twentieth centuries, hurl the entire world capitalist system into a new epoch of barbarism and imperialist wars.
World War I brought home the reality of this new epoch, and the understanding that capitalism had entered a new stage, "the epoch of the disintegration and collapse of the entire capitalist world system" (Invitation to the First Congress of the Communist International, January 1919), was an axiom of the whole revolutionary movement of that time; but the CI did not adopt a unanimous position on the specific causes of capitalism's disintegration. The main theorists of the CI, like Lenin and Bukharin, criticized Luxemburg and placed more emphasis on the falling rate of profit, but Lenin in particular was also influenced by the vagaries of Hilferding's theory of concentration, which is a kind of blind alley of Marxist thought, and the CI never elaborated a complete theory of decadence. On the contrary, the CI's analysis of the new epoch was flawed by its inability to see that the entire world capitalist system was decadent, so that there could be no room for bourgeois revolutions or national liberation in the colonial regions.
The most coherent revolutionary minorities of that period, and in the period of defeat which followed, the left communists of Germany and Italy, tended to be partisans of Luxemburg's theory of crisis. This tradition links the KAPD, Bilan, Internationalisme, and the ICC today. At the same time, during the 1930s, Paul Mattick of the American Council Communists took up Henryk Grossman's criticisms of Luxemburg and his contention that capitalism's permanent crisis emerges when the organic composition of capital reaches such a magnitude that there is less and less surplus value to fuel the process of accumulation. This basic idea -- though further elaborated on a number of points -- is today defended by revolutionary groups like the CWO, Battaglia Comunista and some of the groups emerging in Scandinavia (though elements in the ICC also hold similar views). It can thus be seen that the debate going on today has real historic roots that go all the way back to Marx.Marx, the market and the rate of profit
Two basic questions are posed by the debate on the economic foundations of decadence: are the ‘two theories' mutually exclusive; and do they lead to different political conclusions? We will look at the second question later on, but for the moment we have to examine a particular aspect of the first question: the denial by holders of the Mattick theory that Luxemburg's analysis has anything to do with Marx. If this is true, then to talk of a debate between the two positions is somewhat of an exaggeration.
In the last few years, the ‘rate of profit' theory has been taken up by a number of newly emerging revolutionaries, and one reason for this is that, at first sight, explanations based on the falling rate of profit seem to be more in line with what Marx put forward in Capital. Surely Marx was concerned with locating the crisis in ‘production' not ‘circulation'? Isn't it the bourgeoisie who are concerned with the ‘market problem'? Many of the comrades who pose these questions also take up the old war-cry of the ‘epigones' who attacked Luxemburg in 1913: Luxemburg's whole theory is based on a ‘misunderstanding' of Marx's scheme of expanded reproduction in Volume II of Capital. The problem of realization of surplus value posed by Rosa is a non-problem. A particularly virulent variety of this is in the text in Revolutionary Perspectives, no.6, where with their customary sectarianism the CWO accuse Luxemburg of totally abandoning Marxism.
The ICC will be answering this text at greater length soon, but for the moment we simply want to show why we consider Luxemburg's theory to be fully in line with Marx's thought, and why an explanation of decadence based solely on the falling rate of profit obscures some crucial aspects of Marx's analysis. We can best enter this discussion through a quote from the text in RP, no.6, p.11. According to the CWO,
"Marx did not say that there would not be crises caused by temporary disproportionalities between departments... but he did show that the central contradiction of the capitalist mode of production, its historical contradiction, could not be found in the process of circulation."
This statement entirely misses the point about what Marx had to say about crises. The idea that crises of overproduction are caused by ‘disproportionality' between departments -- that they are not rooted in the underlying social relations of capital but are merely temporary and contingent disruptions between supply and demand -- is precisely the thesis of Say and Ricardo which Marx attacks in Theories of Surplus Value Volume II. According to these bourgeois theorists, capitalist production perpetually creates its own market, so that general overproduction is impossible. In Marx's words:
"The conception...adopted by Ricardo from the tedious Say...that overproduction is not possible or at least that no general glut of the market is possible, is based on the proposition that products are exchanged against products, or as Mill puts it, on the ‘metaphysical equilibrium of sellers and buyers', and this led to the conclusion that demand is determined only by production, or also that demand and supply are identical." (Theories, Volume II, p.493)
Or, as Marx puts it later, the Ricardians explain:
"...overproduction in one field by underproduction in another field... (which) means merely that if production were proportionate, there would be no overproduction." (ibid, p. 532)
Marx denounces this as "a fantasy" and insists that "the theory of the impossibility of general overproduction is essentially apologetic in tendency" (p.527). For Marx, overproduction is not merely a temporary interruption in an otherwise smooth process of accumulation. Such a harmony between supply and demand is, perhaps, theoretically possible in a society of simple commodity production, but not in a society based on the class relations of capitalism, on the production of surplus value. In fact:
"Overproduction is specifically conditioned by the general law of the production of capital: to produce by the limit set by the productive forces, that is to say, to exploit the maximum amount of labor 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 the continuous expansion of reproduction and accumulation, and therefore constant reconversion of revenue into capital, while, on the other hand, the mass of producers remain tied to the average level of needs, and must remain tied to it according to the nature of capitalist production." (ibid pps.534-5)
Marx elaborates further on the inherent limits of the capitalist market when he points out that:
"The mere relationship of wage-laborer and capitalist implies:
1. That the majority of producers (the workers) are non-consumers (non-buyers) of a very large part of their product, namely, of the means of production, and the raw material;
2. that the majority of producers, the workers, can consume an equivalent for their product only so long as they produce more than this equivalent, that is, so long as they produce surplus-value or surplus-product. They must always be overproducers, producers over and above their needs, in order to be able to be consumers or buyers within the limits of their needs." (ibid p.520)
Because of this ‘internal' limitation in the capitalist market, the ‘external market' must be continually expanded if capitalism is to avoid overproduction:
"... the mere admission that the market must expand with production is, on the other hand, an admission of the possibility of overproduction, for the market is limited externally in the geographical sense, 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 as each moment of time, (though) in itself capable of expansion. The admission that the market must expand if there is to be no overproduction is therefore an admission that there can be overproduction. 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.
Ricardo is therefore consistent in denying the necessity of an expansion of the market simultaneously with the expansion and growth of capital." (ibid. pps.524-5)
Marx returns to this point in the section dealing with the falling rate of profit in Capital Volume III:
"The creation of this surplus-value is the object of the direct process of production, and this process has no other limits than those mentioned above. As soon as the available quantity of surplus-value has been materialized in commodities, surplus-value has been produced. But this production of surplus-value completes but the first act of the capitalist process of production -- the direct production process. Capital has absorbed so and so much unpaid labor. With the development of the process, which expresses itself in a drop in the rate of profit, the mass of surplus-value thus produced swells to immense dimensions. Now comes the second act of the process. The entire mass of commodities, ie the total product including the portion which replaces constant and variable capital, and that representing surplus value, must be sold. If this is not done, or done only in part, or only at prices below the prices of production, the laborer has indeed been exploited, but his exploitation is not realized as such for the capitalist...The conditions of direct exploitation, and those of realizing it, are not identical. They diverge not only in place and time, but also logically. The first are only limited by the productive power of society, the latter by the proportional relation of the various production branches and the consumer power of society. But this last-named is not determined either by the absolute productive power, or the absolute consumer power, but by the consumer power based on antagonistic conditions of distribution, which reduces the consumption of the bulk of society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce surplus value on an extended scale. This is law for capitalist production, imposed by incessant revolutions in the methods of production themselves, by the depreciation of existing capital always bound up with them, by the general competitive struggle and the need to improve production and expand its scale merely as a means of self-preservation and under penalty of ruin. 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 working independently of the producer, and become ever more uncontrollable. This internal contradiction seeks to resolve itself through expansion of the outlying fields of production. But the more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest. It is no contradiction at all on this self-contradictory basis that there should be an excess of capital simultaneously with a growing surplus of population. For while a combination of these two would, indeed, increase the mass of produced surplus value, it would at the same time intensify the contradiction between the conditions under which this surplus value is produced and those under which it is realized." (Capital, Volume III, pps. 244-5, our emphasis)
Now, as Luxemburg explains in Accumulation when Marx talks about "expanding the outlying fields of production", or "foreign trade", he means expansion into and trade with non-capitalist areas, since, simply for the sake of his abstract model of accumulation, Marx treats the entire capitalist world as one nation, composed exclusively of workers and capitalists. Contrary to the assumptions of the CWO, who can't see how surplus value can be realized by such trade (Revolutionary Perspectives, no.6, pps.15-16), Marx clearly recognized the possibility of such trade:
"Within its process of circulation, in which industrial capital functions either as money or as commodities, the circuit of industrial capital, whether as money capital or as commodity capital, crosses the commodity circulation of the most diverse modes of social production. No matter whether commodities are the output of production based on slavery, of peasants (Chinese, Indian ryots), of communes (Dutch East Indies), of state enterprises (such as existed in former epochs of Russian history on the basis of serfdom) or of half-savage hunting tribes, etc -- as commodities and money they come face-to-face with the money and commodities in which the industrial capital presents itself and enter as much into its circuit as into that of the surplus value borne in the commodity capital, provided the surplus value is spent as revenue; hence they enter into both branches of circulation of commodity capital. The character of the process from which they originate is immaterial." (Capital, Volume II, p.113)
Marx not only accepts the possibility of such trade; he also glimpses its necessity, since the process of trading with, destroying, and absorbing pre-capitalist markets is none other than the way capitalism "continually expanded its market" during the ascendant phase.
"As soon as act M-MP is completed, the commodities (MP) cease to be such and become one of the modes of existence of industrial capital in its functional form of P, productive capital. Thereby however their origin is obliterated. They exist henceforth only as forms of existence of industrial capital, are embodied in it. However it still remains true that to replace them they must be reproduced and to this extent the capitalist mode of production is conditional on modes of production lying outside its own stage of development. But it is the tendency of the capitalist mode of production to transform all production as much as possible into commodity production. The mainspring by which this is accomplished is precisely the involvement of all production into the capitalist circulation process. And developed commodity production is capitalist commodity production. The intervention of industrial capital promotes this transformation everywhere, but with it also the transformation of all direct producers into wage laborers." (ibid. first emphasis ours).
Indeed, Marx had already shown in the Communist Manifesto how the very extension of the world capitalist market, while resolving its crises in the short term, only deepened the problem of overproduction in the long term:
"The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and destructive crises, and by diminishing the means whereby crises are prevented."
It can thus be seen that the problem of realization which Luxemburg analyzed in Accumulation was not a ‘non-problem', a misreading of Marx; on the contrary Luxemburg's thesis is in essential continuity with a central theme in Marx's theory of crisis: viz, that capitalist production has inherent limitations to its own market and must therefore continually expand into new markets if it is to avoid a general crisis of overproduction. Luxemburg showed that the model of expanded reproduction in Volume II of Capital is in contradiction to this understanding to the extent that it assumes the possibility of accumulation creating its own market. But Luxemburg also points out that this model is valid as a theoretical abstraction used to illustrate certain aspects of the process of circulation. It was not intended to be seen as a model for real historical accumulation, or as an explanation of crises, and certainly not to ‘solve' the problem of overproduction. Nevertheless, Marx does appear to get caught in certain inconsistencies in the use he makes of this diagram, and Luxemburg points these out. But the main point is that both Marx and Luxemburg were aware of the difference between abstract models and the real process of accumulation. Nothing could be further from the spirit of Marx than Otto Bauer's sterile attempt to prove ‘mathematically' that accumulation can proceed without any inherent barriers in the realm of the market, and that Rosa was mistaken because she hadn't done her sums properly. When it comes to misunderstanding Marx's diagram of expanded reproduction, it is those who take it literally and ‘liquidate' the problem of realization who are departing from Marx's underlying concern, not Luxemburg. There is no getting away from the fact that, to take the diagram literally means that capitalism can indefinitely create its own market, something Marx specifically denied.
This lands many of Luxemburg's critics in a contradictory position. Mattick for example sees further into the problem of realization than the CWO. In his Crises and Theories of Crises (French edition, p.97), he points out that:
"...in the capitalist system there can be no proportionality between the diverse sectors of production, nor a perfect concord between production and consumption."
But, in the end, Mattick denies this insight, by arguing that capitalism does not have a fundamental problem of realization, because accumulation creates its own market:
"Commodity production creates its own market in so far as it is able to convert surplus value into new capital. The market demand is a demand for consumption goods and capital goods. Accumulation can only be the accumulation of capital goods, for what is consumed is not accumulated but simply gone. It is the growth of capital in its physical form which allows for the realization of surplus value outside the capital-labor exchange relations. So long as there exists an adequate and continuous demand for capital goods, there is no reason why commodities entering the market should not be sold." (Marx and Keynes, p.76)
Mattick is clearly wishing away the problem here. "In so far as it is able to convert surplus value into new capital..."; "so long as there exists an adequate and continuous demand...". The question where this continuous demand is to come from is not answered, and Mattick is caught on the "merry go round" of "production for production's sake" which Rosa points out in Accumulation (p. 335). Luxemburg's critics often cite Marx saying that capitalist production is production for its own sake, but this passage has to be taken in context. Marx did not mean that capitalist production could solve its problems by investing in a huge pile-up of capital goods without any concern for society's capacity to consume the goods they will turn out:
"Besides, we have seen in Volume II, Part III that a continuous circulation takes place between constant capital and constant capital (even without considering any accelerated accumulation), which is in so far independent of individual consumption, but which is nevertheless definitely limited by it, because the production of constant capital never takes place for its own sake, but solely because more of this capital is needed in those spheres of production whose products pass into individual consumption." (Capital, Volume III, p, 359 of Chicago translation)
According to Mattick, there is no problem of an unrealizable fraction of surplus value, since ‘investment' in further accumulation of constant capital absorbs everything in the fullness of time. The crisis results only from an over-accumulation of constant in relation to variable capital, ie from the falling rate of profit. But as Rosa already pointed out in Accumulation:
"From the capitalist's point of view, the consumption of the workers is a consequence of accumulation, it is never its object or condition...And in any case, the workers can only consume that part of the product which corresponds to the variable capital, not a jot more. Who then realizes the permanently increasing surplus value? The diagram answers: the capitalists themselves and they alone. And what do they do with this increasing surplus value? The diagram replies: they use it for an ever greater expansion of their production. These capitalists are thus fanatical supporters of an expansion of production for production's sake...the upshot of all this is not accumulation of capital but an increasing production of producer goods to no purpose whatsoever." (Accumulation of Capital, p.335)
This "purpose" of producing more producer goods must be a continuous expansion of the market for all the products of capital. Otherwise, by arguing that ‘investment' for its own sake solves the market problem, one is turning to the false solutions criticized by Marx in Capital:
"If it is finally said that the capitalists have only to exchange and consume their commodities amongst themselves, then the entire nature of the capitalist mode of production is lost sight of...In short, all these objections to the phenomena of overproduction...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." (Volume III, p.257)
Those who say that accumulation of constant capital solves the problem of accumulation are merely repeating the idea that the capitalists can simply exchange their products among themselves, even though they do it for the ‘future' as it were, and not for immediate consumption. Sooner or later the constant capital they invest in must be able to find a real market for the goods it turns out, or the cycle of accumulation will break down. Because there is no way of avoiding this problem, we would argue that Luxemburg's insistence that the entire surplus value cannot be realized within the social relations of capitalist society is the only conclusion that can be drawn from Marx's rejection of the idea that capitalist production creates its own market; that it is the only alternative to the Ricardian theory that overproduction crises are simply accidental disruptions of a basically harmonious cycle of reproduction. The partisans of Matticki's ‘rate of profit' theory are with Marx when they emphasize the importance of the falling rate of profit as a factor in the capitalist crisis, but they are with Say and Ricardo when they deny that the problem of realization is fundamental to the capitalist process of accumulation.
Two theories or one?
From what we have argued above, it is plain that there can be no Marxist analysis of the crisis which ignores the problem of the market as a fundamental factor in the capitalist crisis. Even the argument, put forward by Mattick and others, that the overproduction of commodities is a real problem, but only as a secondary effect of the falling rate of profit, avoids the real question posed by Marx and Luxemburg: the market for capitalist production being limited by the very wage labor-capital relationship. Both the falling rate of profit and the problem of the market are primary contradictions in capitalism. At the same time the two contradictions are closely linked, and mutually determine each other in a number of ways. The question is, what is the best framework for understanding how these two phenomena interact with one another?
We would argue that Mattick's analysis cannot provide such a framework to the extent that it denies the problem of the market; whereas Luxemburg's theory does not reject the falling rate of profit. It is true that in Accumulation she puts forward a model -- a purely abstract one, it should be noted -- which allows for the falling rate of profit to be "cancelled out" (p.338), and that in the Anticritique she says "there is still some time to pass before capitalism collapses because of the falling rate of profit, roughly until the sun burns out". These could be said to be expressions of Luxemburg's underestimation of the problem, but there is nothing in her basic approach which rejects it; and indeed the Accumulation gives several examples of how the fall in the rate of profit interacts with the problem of realization (see below).
The reason why Luxemburg emphasized the markets problem as lying at the roots of decadence is not hard to find. As Marx pointed out, as a factor in capitalist crises the falling rate of profit is an overall tendency which expresses itself over long periods and has a number of counteracting influences; whereas the problem of realization is something which can clog up the process of accumulation in a more immediate and direct way. This applies both to the conjunctural crises of the last century and the historic crisis of capitalism, since the absorption of the pre-capitalist milieu which had provided the soil for the continual extension of the market was a barrier which capital came up against well before its organic composition had swelled to such proportions that profitable production could no longer be maintained. But, as the Platform of the ICC points out:
"...the growing difficulty encountered by capital in finding a market for the realization of surplus value accentuates the fall in the rate of profit...from being a mere tendency, the fall in the rate of profit has become more and more concrete; this has become an added fetter on the process of capital accumulation and thus on the operation of the entire system."
The saturation of the market both aggravates the falling rate of profit (for example, increased competition over a shrinking market forces capitalists to renew plant before all its value has been used up), and removes one of its most important counteracting influences: compensating for a fall in the rate of profit by increasing its mass, that is by expanding the volume of commodities produced. This can only be a compensation as long as the expansion of the market can keep pace with this increased mass of commodities. When it can no longer do so, this compensation only makes matters worse, aggravating both the fall in the rate of profit and the problem of realization. A great deal of work and study needs to be done in this area, but while Luxemburg certainly did not solve all the problems here, the framework she elaborated does allow for the role of the falling rate of profit to be grasped more completely.
But perhaps the problem goes deeper? Perhaps, in the end, there is a basic contradiction in Marx's own thought? At first sight it would appear that the idea that the crisis results from too much unrealizable surplus value cannot be reconciled with the idea that the crisis is caused by a dearth of surplus value.
Although Marx never finally resolved this problem, there are elements in his work which enable us to see that the two contradictions are indeed parts of a dialectical whole. To begin with:
"Capital consists of commodities, and therefore overproduction of capital implies overproduction of commodities. Hence the peculiar phenomenon of economists who deny overproduction of commodities, admitting overproduction of capital." (Capital volume III, p.256)
Once this has been grasped, it can be seen that the two contradictions necessarily act together in capitalist crises: on the one hand the overproduction of capital calls forth a decline in the profit rate because it involves an increase in the ratio between constant and variable capital; on the other hand this huge mass of constant capital produces a plethora of commodities which more and more exceeds the consuming power of this relatively diminishing variable capital (ie the working class). Goaded on by competition over a restricted market, capital and its capacity to spew out commodities grows huge and swollen, while the masses become poorer and poorer in relation to it; less and less profit is embodied in each commodity, less and less commodities can be sold. The rate of profit and the capacity for realization sink together, and the one aggravates the other. The seeming contradiction between having ‘too much' and ‘too little' surplus value disappears when it becomes clear that we are talking about capital as a whole, and that we are talking in relative, not absolute terms. For capital as a whole, there is never an absolute saturation of markets, nor does the rate of profit sink to an absolute zero which dries up all available surplus value. In fact, as Luxemburg pointed out, at a certain moment in the concentration of capital, the ‘excess' and ‘dearth' of surplus value can be the same thing viewed from a different standpoint:
"If capitalization of surplus value is the real motive force and aim of production, it must yet proceed within the limits given by the renewal of constant and variable capital (and also of the consumed part of the surplus value). Further, with the international development of capitalism the capitalization of surplus value becomes ever more urgent and precarious, and the substratum of constant and variable capital becomes an ever-growing mass -- both absolutely and in relation to the surplus value. Hence the contradictory phenomena that the old capitalist countries provide ever larger markets for, and become increasingly dependent upon, one another, yet on the other hand compete ever more ruthlessly for trade relations with non-capitalist countries. The conditions for the capitalization of surplus value clash increasingly with the conditions for the renewal of the aggregate capital -- a conflict which, incidentally, is merely a counterpart of the contradictions implied in the law of a declining profit rate." (The Accumulation of Capital, p.367)
In other words, relatively less and less of the mass of surplus value produced is destined for capitalization, but this is still ‘excessive' in relation to the effective demand. And this ‘less and less' surplus value (over and above the value which merely replaces the initial capital outlay) is the result of the ever higher organic composition of capital.
It thus becomes clearer that the two contradictions traced by Marx do not exclude each other but are two sides of one overall process of value production. This ultimately makes it possible for the ‘two' theories of crisis to become one.Political consequences
We have tried to indicate that, in the final analysis, the ‘rate of profit' and the ‘market' problems can be theoretically reconciled, although the Grossman-Mattick approach cannot do this as long as it ignores or downplays the problem of realization of surplus value. The weaknesses of Mattick's theory at the ‘economic' level also has, or rather implies, certain inadequacies at the level of political conclusions which derive from it. Although we must restrict ourselves here to a brief mention of these weaknesses, and although we repeat our warning against mechanistically deriving political positions from economic analyses, this does not mean that there are simply no political consequences involved. These consequences take the form of tendencies rather than iron laws, and they are more pronounced in some than in others, but nevertheless, certain common characteristics do appear to be shared by the different currents who take up Mattick's economic theory.
Beginning from an analysis of the falling rate of profit alone, it is extremely difficult to define the historical course of the capitalist crisis. This applies both to the retrospective identification of the onset of the decadent period, and to the analysis of the perspectives for the development of the crisis today. We would say that this is because Mattick's theory leaves a number of basic questions unanswered or answered inadequately, for example: if the falling rate of profit is the only real problem for capital, why should the division of the world amongst the imperialist powers and the creation of a world capitalist economy have plunged capitalism into its historic crisis? At what point did the organic composition of capital on a global scale reach a level when the counter-tendencies to the falling rate of profit could no longer be offset? When in the future will the rate of profit be too low to prevent capital continuing to accumulate without another war? And why indeed has war become the mode of survival of capital in this era? We would say that none of these questions can be answered without bringing in the question of the market. But, failing to do this, Mattick can only give vague answers to these questions. There is no real consistency in his understanding of the present epoch. In the 1930s his writings indicate an understanding that the permanent crisis of capital was an immediate reality and that it could only be offset by world war. In his postwar writings, however, he seems to question whether capitalism had really entered a new epoch at the time of the Russian Revolution, implying sometimes that the historic crisis only began in 1929, while at other times hinting that the falling rate of profit will only create major problems for capital around the year 2000, so perhaps capitalism is not yet decadent at all! In short, with Mattick there is no consistent awareness of decadence as the period of crisis-war-reconstruction decisively inaugurated by World War I, or of today's crisis as the direct manifestation of that historical cycle and not just a temporary hiccough in a period of growth. This lack of clarity about what decadence actually is leads him to underestimate the gravity of the present crisis and reinforces his tendency towards academicism, which goes all the way back to the 1940s. Since, in his view, the ‘real' crisis is a long way away, the prospect of major outbreaks of class struggle at the present time is not very bright. There can be little point, therefore, in engaging in militant political activity today.
The CWO, despite their reliance on Mattick's economic theory, have a much clearer understanding of decadence, the present crisis, and the political conclusions flowing from them. They have tried to demonstrate how the period opened up by World War I can be explained with reference to the falling rate of profit (especially in ‘The Economic Foundations of Capitalist Decadence' in Revolutionary Perspectives, no.2). This is a serious effort which requires a more detailed critique than can be attempted here. Such a critique would have to centre round certain crucial questions, such as: how coherent is their application of Mattick's economics to the framework of decadence they use? How far can decadence be analyzed on the basis of the falling rate of profit without bringing in the markets problem; and how coherent would the CWO's view of decadence be if they had not been influenced by other tendencies -- notably the ICC -- who do consider the problem of the market as fundamental in the explanation of decadence? In other words: how far is the CWO's analysis of decadence a consistent continuation of Mattick's theory, and how much is it implicitly or explicitly molded by a more unitary theory of decadence. What we have written above about the impossibility of ignoring the realization problem already indicates what our answer to these questions will be.
More important, perhaps, is to point out that, while not necessarily following Mattick into the extremes of academic withdrawal, the ‘falling rate of profit' school share a tendency to see the ‘real' crisis as being a long way away; since some of these comrades also exhibit a somewhat mechanistic conception of the link between levels of crisis and levels of class struggle, they generally conclude that the prospects for class struggle and revolutionary regroupment are also somewhat distant. Thus Battaglia Comunista only saw the present crisis emerge in 1971, and for them the resurgence of the international organization of the class will only take place sometime in the future; the CWO see both capital's preparations for imperialist war and the workers' preparation for class war as something ‘for tomorrow', when the crisis will have reached a new level. The regroupment of revolutionaries is postponed in a similar way. Many of the Scandinavian comrades, closer to Mattick and still cocooned to some extent by the ‘prosperity' of Scandinavia, continue to see the tasks of revolutionaries as ‘study' and reflection divorced from any militant activity. We don't think these ‘attentist' attitudes are accidental. They are linked to the shortcomings of the Mattick theory, which finds it hard to show that decadence is indeed a permanent crisis, the result of the disappearance of the conditions which allowed for healthy capital expansion in the nineteenth century. The ‘Luxemburg' theory, by showing the diseased nature of all accumulation in this epoch, makes it easier to show the limitations of the period of reconstruction, and to understand that the crisis, the war economy and the class struggle are all very much realities of today. In fact we would say that the response of the class is already lagging behind the development of the crisis and the bourgeoisie's preparations for war. This does not mean that the crisis has hit rock bottom, or that war or revolution are on the immediate agenda, and that therefore we should embark upon a course of frenzied activism (like the PIC, whose innate activism is reinforced by a faulty application of Luxemburg's crisis theory). Capital still has mechanisms for staving off the crisis, and a whole series of economic and social processes have to unfold before the crisis resolves itself in either war or revolution. Nevertheless, it is important to see that these processes are already underway, so that the tasks facing revolutionaries today are extremely urgent and cannot be put off until ‘tomorrow'. As Bilan put it, "Can tomorrow be anything else than the development of what is happening today?" (Bilan, no.36)
As Lukacs pointed out in his essay ‘The Marxism of Rosa Luxemburg', the validity of Luxemburg's accumulation theory as a contribution to the proletarian world view lies in the fact that it is based on the "category of totality", the specifically proletarian category of perception. The problem of accumulation investigated by Luxemburg is only a problem at the level of total or global capital; the vulgar economists who depart from the standpoint of the individual capital were unable to see that there was a problem at all. This ‘vulgarity' can be applied to Mattick to some extent; since he has a strong tendency to view each national capital in isolation .This distorted perspective leads to a number of errors:
-- ambiguities about the possibility of national liberation, since small nations according to Mattick, can withdraw from the world market into autarky or the protection of the so-called ‘state capitalist bloc';
-- parallel to this, Mattick has asserted that Russia, China, etc are not wholly regulated by the law of value and are not really imperialist, having no inner compunction to expand onto the world market. He has even called them ‘state socialist' societies.
These mistakes very much derive from an inability to see these nations as part of the whole capitalist world market. On this question again the CWO among others have gone well beyond Mattick, affirming the impossibility of national liberation and that Russia and China are capitalist economies regulated by the law of value. Even so, their analysis contains a number of weaknesses which can be connected to their economic theory. Finding it hard to analyze particular phenomena from the standpoint of the whole, they show a certain inability to see state capitalism and the war economy as fundamentally determined by the national capital's need to compete on the world market; for them state capitalist measures are primarily a response to the falling rate of profit in particular industries whose high organic composition makes it necessary for the state to bail them out. But this is only a partial explanation, since the stake does this precisely to increase the competivity of the entire national capital. In a similar vein is the CWO's idea that Russia, China etc can be termed ‘integral' state capitalisms whose development proves that "capital accumulation is possible in a closed system" (Revolutionary Perspectives, no.1, p.13). This ‘fact' allegedly refutes Luxemburg's economics, while the notion of ‘integral' state capitalism still leaves room for the idea that these economies are somehow ‘different' and need to be explained in a particular way. And the explicit or implicit claim that autarkic development is possible could have various political ramifications. On the national question, for example, the CWO has the right political conclusions, but it is worth asking how consistent their conclusions are with their economic analysis. Is Mattick's idea that underdeveloped nations could grow on the basis of their own internal market a more logical consequence of his economic theory?
We are not implying that the CWO has any fundamental confusions on the national question, nor that their explanation for the impossibility of national liberation does not have a coherence of its own. But any inconsistency today can open the doors to real errors tomorrow. And we would add that there are already noticeable weaknesses in the CWO's approach to the national question: a difficulty in seeing the voracious imperialist appetites of all national capitals today, even the smallest; and a pronounced pessimism about the perspective for the class struggle in the Third World. On the first point, they argue that only Russia and America can ‘really' act as imperialisms today, other national capitals being only potentially or tendentially imperialist. This obscures the reality of local inter-imperialist rivalries which have a role to play within the overall confrontation between the blocs, a reality strikingly confirmed by the recent conflicts in the Horn of Africa and South East Asia. On the class struggle in Third World countries, the CWO regularly make statements like "we can only expect positive developments...when the workers in the advanced countries have taken the revolutionary road, and given a clear lead" (Revolutionary Perspectives, no.6). Such a view belittles the importance of the present struggles of the Third World workers in the international development of class consciousness, and makes a rigid separation between today and tomorrow, advanced and backward capitals, which can only obscure our understanding. These inadequate analyses of imperialism and the class struggle are both rooted in the economic analysis which argues that only countries with a high organic composition of capital are genuinely imperialist, and only the proletariat in such countries has much importance. On both counts, we see a tendency to fragment both world capital and the world proletariat.
This tendency of the ‘rate of profit' theorists to view the problem from the standpoint of the individual and not global capital could have implications for the discussion on the period of transition. Thus, if capital accumulation can proceed in one country, then why not envisage autarkic ‘communist' economies as well? At any rate, the CWO believes that proletarian bastions that have withdrawn from the world market can, temporarily at least begin building a communist mode of production. This misconception can only be coherently criticized from a perspective which sees capital and the world market as a totality; again we would say that Luxemburg's framework provides us with the theoretical tools for seeing why such isolated bastions could in no way escape the effects of the world market.
Having pointed these things out, we must make two important qualifications:
-- that these erroneous positions are linked mainly to a unilateral ‘falling rate of profit' theory like Mattick's or the CWO's;
-- that even then they do not flow directly and inexorably from an erroneous economic framework.
When we look at the errors of a revolutionary group, it is important to examine the totality of their history and political positions. Many of the errors mentioned above have their roots in more fundamental experiences and misunderstandings: Mattick's academicism, for example, is based on a whole experience of the counter-revolution, which led him into a deep pessimism about the perspectives for class struggle, and a serious underestimation of the need for revolutionary organization. The CWO's errors on regroupment and the present period are also to a large extent the result of their difficulty in appreciating the question of organization, while their errors on the transition period are very largely due to an inability to learn the lessons of the Russian Revolution. Equally, in the ‘Luxemburgist' context, the PIC's activism, we would argue, is much more the result of a deep confusion about the role of revolutionaries than of their economic analysis. We would say that errors on the level of economics tend to reinforce errors deriving from the totality of a group's politics. Any incoherence in a group's analysis can open the door to confusions of a more general kind; but we are not dealing in irrevocable fatalities. Comrades who hold the ‘falling rate of profit' analysis do not necessarily have to assimilate all the organizational confusions of Mattick, the CWO, or Battaglia Comunista, or their misreading of the Russian Revolution. At the same time, organizational or other confusions -- like the sectarianism of the CWO -- can actually accentuate weaknesses in economic analysis. It is not hard to see, for example, that, the CWO's growing effort to deny the problem of overproduction is connected to their need to distinguish themselves from certain other groups who hold a different view of decadence...Comrades who depart from a ‘falling rate of profit' analysis can and must be able to develop a more global view which does not deny the problem of the market. Of course, we think that, in the end, this will lead them to become ‘Luxemburgists', but only an open and constructive debate can really clarify this.
This allows us to come to a general conclusion about the importance of this debate. The debate is of considerable importance, because just as economic weaknesses can pave the way to or reinforce more general political errors, so a coherent analysis of the economic foundations of decadence will make our understanding of decadence and the political conclusions which derive from it that much stronger. The issue, therefore, must be discussed as part of the totality of communist politics.
Having understood its importance as part of a more general coherence, the debate can be put in the correct perspective. Since an analysis of the economic foundations of decadence is part of a more global proletarian standpoint, a standpoint which demands an active commitment to ‘change the world', the discussion can never stand in the way of organized revolutionary activity. And since the political conclusions defended by revolutionaries do not derive in a mechanical way from a particular analysis of economics, the discussion can never be a barrier to regroupment. As the ICC has always maintained, the debate can and must proceed within a unified revolutionary organization. Different economic theories have not prevented revolutionaries in the past from joining together, and they need not do so today or in the future. Indeed, this is one of the questions that we shall probably still be debating some time after the proletariat has wiped capitalism off the face off the earth...
C D Ward.