Decadence of Capitalism (x): For revolutionaries, the Great Depression confirms the obsolescence of capitalism

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There was no real recovery of world capitalism after the devastation of the First World War. Most of the economies of Europe stagnated, never really solving the problems posed by the disruption of war and revolution, by outdated plant and massive unemployment. The plight of the once powerful British economy was typified by the situation in 1926 when it resorted to direct wage cuts in a vain attempt to restore its competitive edge on the world market, provoking the 10-day General Strike in solidarity with the miners whose wages and conditions were the central target of the attack. The only real boom was in the USA, which benefited both from the sorrows of its former rivals and the accelerated development of mass production symbolised by the Detroit assembly lines churning out the Model T Ford. America’s coronation as the world’s leading economic power also made it possible to pull German capital from the floor thanks to the injection of massive loans. But all the din of the “Roaring Twenties” in the US and in pockets elsewhere could not hide the fact that this recovery was not founded on any substantial extension of the world market, in marked contrast to the massive growth in the last decades of the 19th century. The boom, already largely fuelled by speculation and bad debts, was laying the ground for the shattering crisis of overproduction which broke out in 1929, rapidly engulfed the world economy and buried it in the deepest depression it had ever known (see first article in the series, in International Review n° 132).

This was not a return to the “boom and bust” cycle of the 19th century, but an entirely new disease: the first major economic crisis of a new era in the life of capitalism. It was a confirmation of what the vast majority of revolutionaries had concluded in response to the war of 1914: the bourgeois mode of production had become obsolete, a system in decay. The Great Depression of the 1930s was interpreted by nearly all the political expressions of the working class as a further confirmation of this diagnosis, not least because as the years passed it became increasingly evident that there would be no spontaneous recovery and that the crisis was pushing the system closer and closer to a second imperialist carve-up.

But this new crisis did not give rise to a new wave of revolutionary struggles, even if there were important class movements in a number of countries. The working class had suffered a historic defeat following the strangling of revolutionary attempts in Germany, Hungary, Italy and elsewhere, and the agonising death of the revolution in Russia. With the triumph of Stalinism in the Communist parties, the surviving revolutionary currents had shrunk to small minorities struggling to clarify the reasons for this defeat and unable to exert any major influence within the working class. Nevertheless, understanding the historical trajectory of capitalism’s crisis was a crucial element in guiding these groups through this gloomy period. 

Responses from the proletarian political movement: Trotskyism and anarchism

The left opposition current around Trotsky, regrouping itself into a new Fourth International, published its programme in 1938, with the title The Death Agony of Capitalism and the Tasks of the 4th International. In continuity with the Third International, it affirmed that capitalism was in irremediable decay. “The economic prerequisite for the proletarian revolution has already in general achieved the highest point of fruition that can be reached under capitalism. Mankind’s productive forces stagnate…All talk to the effect that historical conditions have not yet ‘ripened’ for socialism is the product of ignorance or conscious deception. The objective prerequisites for the proletarian revolution have not only ‘ripened’; they have begun to get somewhat rotten.” This is not the place for a detailed critique of the “transitional programme” as it has come to be known. Despite its marxist starting point, it presents a view of the relationship between objective and subjective conditions which veer off into both vulgar materialism and idealism: on the one hand, it tends to present the decadence of the system as an absolute halt to the development of the productive forces; on the other, the reaching of this objective dead-end means that only the correct leadership is required to transform the crisis into revolution. The opening words of the document state that “The world political situation as a whole is chiefly characterised by a historical crisis of the leadership of the proletariat”. Hence the voluntarist attempt to form a new International in a period of counter-revolution. Indeed for Trotsky, the defeat of the proletariat is precisely why the proclamation of the new International is required: “Sceptics ask: But has the moment for the creation of the Fourth International yet arrived? It is impossible, they say, to create an International ‘artificially’; it can arise only out of great events, etc etc….The Fourth International has already arisen out of great events: the greatest defeats of the proletariat in history”. In all these calculations, the actual level of class consciousness in the proletariat, its capacity to affirm itself as an independent force, is more or less placed in the margins. This approach is not unrelated to the semi-reformist and state capitalist content of many of the “transitional demands” contained in the programme, since they are viewed less as real solutions to the constriction of the productive forces than as a sophisticated means of enticing the proletariat from the pen of its present, corrupt leadership and shepherding it towards the correct one. The transitional programme is thus built on a complete disjuncture between the analysis of capitalist decay and its programmatic consequences.  

Anarchists have often disagreed with marxists about the latter’s insistence on basing the prospects of revolution on the objective conditions attained by capitalist development. In the 19th century, capitalism’s epoch of ascent, anarchists like Bakunin tended to argue that the uprising of the masses was possible at any moment, accusing the marxists of postponing the revolutionary struggle to some distant future. Consequently, in the period that followed the First World War there was little attempt by the anarchist currents to draw out the consequences of capitalism’s entrance into its decadent phase, since for many of them nothing much had changed. Nevertheless, the sheer scale of the economic crisis in the 1930s also convinced some of its best elements that capitalism had indeed reached its epoch of decline. The exiled Russian anarchist Maximoff, in My Social Credo, published in 1933, asserts that “this process of decline dates from the time just after the First World War, and it has assumed the form of increasingly acute and growing economic crises, which during recent years, have sprung up simultaneously in the countries of the victors and the vanquished. At the time of writing (1933-1934) the crisis has attacked nearly every country in a veritable world crisis of the capitalist system. Its prolonged nature and its universal scope can in no way be accounted for by the theory of periodical political crises”. He goes on to show how capitalism’s efforts to pull itself out of the crisis through protectionist measures, wage cuts and state planning are only deepening the contradictions of the system: “capitalism, which has given birth to a new social scourge, is unable to get rid of its own evil offspring without killing itself in the process. The logical development of this trend must unavoidably bring about the following dilemma: either a complete disintegration of society, or the abolition of capitalism and the creation of a new, more progressive social system. There can be no other alternative. The modern form of social organisation has run its course and is proving, in our times, an obstacle to human advance, as well as a source of social decay. This outworn system is therefore due to be relegated to the museum of social evolutionary relics”. Maximoff, it is true, sounds very much like a marxist in this text, as he does when he argues that capitalism’s inability to extend itself will prevent the crisis from resolving itself in the old way: “In the past, capitalism would have saved itself from deadly crisis by seizing colonial markets and those of the agrarian nations. Nowadays, most of the colonies are themselves competing in the world market with the metropolitan countries, while the agrarian lands are proceeding in the direction of intensive industrialisation”. Similar clarity on the characteristics of the new period can be found in the writings of the British group, the Anti-Parliamentary Communist Federation, although here the influence of the marxists of the German/Dutch communist left was much more direct.[1]

The Italian/Belgian communist left

This was no accident: it was the communist left which was the most rigorous in analysing the historic significance of the economic depression as an expression of the decadence of capitalism and in seeking to locate the roots of the crisis in the marxist theory of accumulation. The Italian and Belgian Fractions of the Communist Left, in particular, consistently founded all of their programmatic positions on the recognition that the crisis of capitalism was historic and not merely cyclical: for example the rejection of national struggles, and of democratic demands, which clearly distinguished this current from the Trotskyists, was based not on any abstract sectarianism but on an insistence that the changed conditions of world capitalism had rendered these aspects of the proletariat’s programme obsolete. This same search for coherence prompted the comrades of the Italian and Belgian left to plunge into a profound study of the inner dynamics of the capitalist crisis. Inspired also by the recent translation into French of Rosa Luxemburg’s The Accumulation of Capital, this study gave rise to the articles penned by Mitchell, “Crises and cycles of capitalism in agony”, published in Bilan n°s 10 and 11 in 1934 (republished in International Reviews n°s102 and 103).        

Mitchell’s articles go back to Marx to examine the nature of value and the commodity, the process of exploitation of labour, and the fundamental contradictions of the capitalist system that reside in the production of surplus vale itself. For Mitchell, there was a clear continuity between Marx and Rosa Luxemburg in recognising the inability of the entirety of the surplus value to be realised by the combined consumption of workers and capitalists. Regarding Marx’s schemas of reproduction, which are at the heart of the controversy sparked by Luxemburg’s book, Mitchell has this to say:

it seems to us that if Marx, in his schemas of enlarged reproduction, hypothesised an entirely capitalist society where the only opposition was between capitalists and proletarians, this was precisely in order to demonstrate the absurdity of a capitalist society one day achieving an equilibrium and harmonious with the needs of humanity. This would mean that the surplus value available for accumulation, thanks to the expansion of production, could be realised directly, on the one hand by the purchases of new means of production, on the other by the demand of the extra workers (and where would they be found?) and that the capitalists would have been transformed from wolves into peaceful progressives.

Had Marx been able to continue the development of his schemas, he would have ended with this opposing conclusion: that a capitalist market which can no longer be extended by the incorporation of non-capitalist milieus – which is impossible historically – would mean an end to the process of accumulation and the end of capitalism itself. Consequently, to present these schemas (as some ‘marxists’ have done) as the image of capitalist production able to continue without imbalance, without overproduction, without crises, is consciously to falsify marxism”.[2]

But Mitchell’s text does not remain at the abstract level. It takes us through the main phases of the ascent and decline of the whole capitalist system, from the cyclical crises of the 19th century, in which he attempts to show the interaction between the problem of realisation and the tendency for the rate of profit to fall, the development of imperialism and monopoly, and the end of the cycle of national wars after the 1870s. While highlighting the growing role of finance capital, he criticises Bukharin’s tendency to see imperialism as a product of finance capital rather than a response of capital to its inner contradictions. He analyses the hunt for colonies and the growing competition between the major imperialist powers as the immediate factors behind the First World War, which marks the entry of the system into its crisis of senility. He then identifies some of the main features of capitalism’s mode of life in this new era: the increasing recourse to debt and fictitious capital, the massive interference of the state in economic life, typified by fascism but expressing a more general tendency, the growing divorce between money and real value symbolised by the abandoning of the gold standard. Capitalism’s short-lived recovery after the first world war is explained with reference to a number of factors: the destruction of hypertrophied capital, the demand generated by the need to reconstruct shattered economies, the unique position of the USA as the new powerhouse of the world economy – but above all to the ‘”fictitious prosperity” created by credit: this post-war growth was not based on a real expansion of the global market and was therefore very different from the recoveries of the 19th century. By the same token, the world crisis that broke out in 1929 was not like the cyclical crises of the 19th century: not simply in scale but because of its irresolvable nature, which guaranteed that there would be no automatic or spontaneous shift from bust to boom. Capitalism would henceforward survive by increasingly flouting its own laws: “If we consider the determining factors of capitalism’s general crisis, we can understand why the world crisis cannot be absorbed by the ‘natural’ action of capitalism’s economic laws, and why on the contrary these laws have been emptied out by the combined power of finance capital and the capitalist state, which have compressed all manifestations of particular capitalist interests”.[3] Thus, if the manipulations of the state permitted an increase in production, this was devoted largely to the military sector and preparations for a new war. “wherever it turns, however it tries to escape the grip of the crisis, capitalism is pushed irresistibly towards its destiny of war. Where and how the war the war will break out is impossible to determine today. What is important to say and to state clearly is that it will explode over the division of Asia and that it will be world wide”.[4]

 Without going further into the strengths, and some of the weaker points, of Mitchell’s analysis,[5] this text is a remarkable one by any standards, one of the communist left’s first attempts to provide a coherent, unified and historical analysis of the process of capitalism’s rise and descent.       

The German/Dutch communist left

In the tradition of the German-Dutch left, which had been severely decimated by counter-revolutionary repression in Germany itself, the “Luxemburgist” analysis was still adhered to by a number of groups. But there was also a major trend in another direction, in particular within the Dutch left and the US group around Paul Mattick. In 1929 Henryk Grossman published a major work on the theory of crisis: The Law of Accumulation and Breakdown of the Capitalist System. The Groep van Internationale Communisten (GIC) in Holland declared it to be “remarkable”[6], while in 1934 Paul Mattick published a summary (and development) of Grossman’s ideas in “The Permanent Crisis – Henryk Grossman’s Interpretation of Marx’s Theory of Capitalist Accumulation” in International Council Correspondence, Volume 1, n° 2. This text explicitly acknowledged Grossman’s contribution while developing his thesis on certain points. Despite Grossman’s status as a sympathiser of the KPD and other Stalinist parties, and despite his assessment of Mattick as a “sectarian” politically speaking,[7] he and Mattick maintained a correspondence for some time, largely around the issues posed by Grossman’s book.  

Grossman’s book was therefore published in advance of the outbreak of the world crisis, but it certainly inspired a number of revolutionaries to apply his thesis to the concrete reality of the Great Depression. At the heart of Grossman’s book was his insistence that the theory of capitalist breakdown is absolutely central to Marx’s Capital, even if Marx was not able to draw it to a conclusion. The revisers of marxism - Bernstein, Kautsky, Tugan Baranowski, Otto Bauer and others – had all rejected the notion of capitalist collapse and this was entirely consistent with their reformist politics. For Grossman, it was axiomatic that socialism would come about not simply because capitalism was an immoral system but because the historical evolution of capitalism itself would plunge it into insurmountable contradictions, turning into a fetter on the further growth of the productive forces: “At a certain point in its historical development capitalism fails to encourage the expansion of the productive forces any further. From this point on, the downfall of capitalism becomes economically inevitable. To provide an exact description of this process and to grasp its causes through a scientific analysis of capitalism was the real task Marx posed for himself in Capital.[8] On the other hand, “if there is no economic reason why capitalism must necessarily fail, then socialism can replace capitalism on purely extra-economic – political or psychological or moral – grounds. But in that case we abandon the materialist basis of a scientific argument for the necessity of socialism, the deduction of this necessity from the economic movement”.[9]

Thus far Grossman agreed with Luxemburg who had led the way in reaffirming the centrality of the notion of collapse, and on this point he sided with her against the revisionists. However, Grossman considered that Luxemburg’s theory of crisis was deeply flawed, based on a misunderstanding of the method Marx had tried to develop in his use of the reproduction schema: “instead of testing Marx’s reproduction scheme within the framework of his total system and especially of his theory of accumulation, instead of asking what role it plays methodologically in the structure of his theory, instead of analysing the schema of accumulation down to its ultimate conclusion, Luxemburg was unconsciously influenced by them (the revisionist epigones). She came around to believing that Marx’s schemes really do allow for unlimited accumulation”.[10] As a result, he argued, she shifted the problem from the primary sphere of the production of surplus value to the secondary sphere of circulation. Grossman re-examined the scheme of reproduction that Otto Bauer had adapted from Marx in his critique of The Accumulation of Capital.[11] Bauer’s aim here had been to disprove Luxemburg’s contention that capitalism would be faced with an irresolvable problem in the realisation of surplus value once it had eliminated all “external” markets; for Bauer, the demographic growth of the proletariat would be sufficient to absorb all the surplus value needed to maintain accumulation. It should be emphasised (because this accusation has been made, particularly by Pannekoek, whose critique of Grossman we shall come back to) that Grossman did not make the mistake of regarding Bauer’s schema as a real description of capitalist accumulation:

I shall show that Bauer’s scheme reflects and can reflect only the value side of the reproduction process. In this sense it cannot describe the real process of accumulation in terms of value and use value. Secondly, Bauer’s mistake lies in his supposing that the scheme is somehow an illustration of the actual processes in capitalism, and in forgetting the simplifications that go together with it. But these shortcomings do not reduce the value of Bauer’s scheme”.[12] Grossman’s intention in following up Bauer’s schema to their “mathematical” conclusion was to show that even without a problem of realisation, capitalism would inevitably run up against insuperable barriers. Taking into account the rising organic composition of capital and the resulting tendency for the rate of profit to fall, the global enlargement of capital would culminate in a point where the absolute mass of profit would be insufficient to fund further accumulation, and the system would be faced with collapse. In Grossman’s hypothetical treatment of Bauer’s schema, this point is reached after 35 years: from this point on, “any further accumulation of capital under the conditions postulated would be quite meaningless. The capitalist would be wasting effort over the management of a productive system whose fruits are entirely absorbed by the share of workers. If this state persisted it would mean a destruction of the capitalist mechanism, its economic end. For the class of entrepreneurs, accumulation would not only be meaningless, it would be objectively impossible because the over-accumulated capital would lie idle, would not be able to function, would fail to yield any profits”.[13]

This led some of Grossman’s critics to argue that he thought he could predict with absolute certainty the point when capitalism would become impossible. However, this was never his aim. Grossman was simply trying to re-appropriate Marx’s theory of collapse by explaining why Marx considered the tendency towards the fall in the rate of profit to be the central contradiction in the accumulation process. “This fall in the rate of profit at the stage of over-accumulation is different from the fall at earlier stages of the accumulation of capital. A falling rate of profit is a permanent symptom of the progress of accumulation through all of its stages, but at the initial stages of accumulation it goes together with an expanding mass of profits and expanded capitalist consumption. Beyond certain limits however the falling rate of profit is accompanied by a fall in the surplus value earmarked for capitalist consumption and soon afterwards of the portion of surplus value destined for accumulation. ’The fall in the rate of profit would then be accompanied by an absolute decrease in the mass of profit’ Marx, Capital Vol. 3,chap XV, p 252.[14]

For Grossman the crisis came about not, as Rosa Luxemburg argued, because capitalism was faced with “too much” surplus value, but because it would end up with too little value extracted from the exploitation of the workers to make further investment in accumulation profitable for the capitalists. Overproduction crises did occur but they were fundamentally a result of the over-accumulation of constant capital: “The ensuing overproduction of commodities is a consequence of imperfect valorisation due to over-accumulation. The crisis is not caused by disproportionality between expansion of production and lack of purchasing power – that is, by a shortage of consumers. The crisis intervenes because no use is made of the purchasing power that exists. This is because it does not pay to expand production any further since the scale of production makes no difference to the amount of surplus value now obtainable. So on the one hand purchasing power remains idle. On the other, the elements of production lie unsold.”[15]

Grossman’s book is very much a return to Marx and he does not hesitate to criticise “eminent” marxists like Lenin and Bukharin for failing to analyse capitalism’s crises or its imperialist drives as expressions of its inner contradictions, for focusing instead on outward manifestations (in Lenin’s case, for example, the existence of monopolies as a “cause” of imperialism). In the Introduction to his book, Grossman explains the methodological premise underlying this criticism: “I have tried to show how the empirically ascertainable tendencies of the world economy which are regarded as defining characteristics of the latest stage of capitalism (monopolistic organisations, export of capital, the struggle to divide up the sources of raw materials, etc) are only secondary surface appearances that stem from the essence of capital accumulation as their primary basis. Through this inner connection it is possible to use a single principle, the Marxian law of value, to explain clearly all the appearances of capitalism without recourse to any ad hoc theories, and to throw light on its latest stage – imperialism. I do not labour the point that this is the only form in which the tremendous consistency of Marx’s economic system can be clearly drawn out”.

Continuing in the same vein, Grossman then defends himself in advance from the charge of “pure economism”:

Because I deliberately confine myself to describing only the economic presuppositions of the breakdown of capitalism in this study, let me dispel any suspicion of ‘pure economism’ from the start. It is unnecessary to waste paper over the connection between economics and politics; that there is a connection is obvious. However, whilst Marxists have written extensively on the political revolution, they have neglected to deal theoretically with the economic aspect of the question and have failed to appreciate the true content of Marx's theory of breakdown. My sole concern here is to fill in this gap in the Marxist tradition”.[16]

This should be kept in mind when Grossman is charged with portraying the final crisis of the system as a simple inability of the economic machine to function any longer. However, leaving aside the impression created by many of his abstract formulations about capitalist collapse, there is a more fundamental problem about Grossman’s attempt to “throw light on (capitalism’s) latest stage – imperialism”. Unlike Mitchell, for example, he does not explicitly argue that his work is aimed at clarifying the conclusions reached by the Third International, i.e. that the First World War had ushered in the epoch of capitalist decline, the epoch of “wars and revolutions”. In some passages, for example in taking Bukharin to task for seeing (world) war as proof that the epoch of breakdown has arrived, he tends to downplay the significance of world war as an unmistakeable sign of the senility of the capitalist mode of production. It’s true that he accepts that it “might very well be the case” that the epoch of breakdown has arrived, and that his main objection to Bukharin’s argument is the suggestion that war is the “cause” of the decline and not its symptom; but Grossman also argues that “far from being a threat to capitalism, wars are a means of prolonging the existence of the capitalist system as whole. The facts show precisely that after every war capitalism has entered on a period of new upsurge.[17]This represents a serious underestimation of the menace that capitalist war holds for the survival of humanity and does strengthen the idea that for Grossman the “final crisis” will be a purely economic one. Furthermore, although Grossman’s book contains a number of efforts to concretise his economic analysis – showing the inevitable increase in inter-imperialist competition brought about by the tendency towards breakdown – his emphasis on the inevitability of a future “final crisis” that would compel the working class to overthrow the system leaves it unclear whether the historical epoch of proletarian revolution has already arrived.

Mattick and the epoch of permanent crisis

In this sense, Matticks’ text is more explicit than Grossman’s book in locating the crisis of capitalism in the general context of historical materialism and thus against the background of the rise and fall of different modes of production. Thus the starting point in the document is the affirmation that “Capitalism as an economic system had the historical mission of developing the productive forces of society to a much greater extent than was possible under any previous system. The motive force in the development of the productive forces in capitalism is the race for profit. But for that very reason this process of development can continue only as long as it is profitable. From this point of view capital becomes a barrier to the continuous development of the productive forces as soon as that development comes into conflict with the necessity for profit”. For Mattick there is no doubt that the epoch of capitalist decline has arrived and that we are now in a phase of “permanent crisis” as the title argues – even though there can be temporary booms brought about capitalist counter-measures, such as the increase in absolute exploitation, this is a “boom in the death crisis, a gain that does not indicate development but decay”. Again, perhaps more plainly than Grossman, Mattick does not argue for an “automatic” collapse once the rate of profit has declined beyond a certain level: he shows capitalism’s reaction to its historic impasse by increasing the exploitation of the working class, to wring out the last drops of surplus value needed for accumulation, and by marching towards world war to appropriate cheaper raw materials, conquer markets and annex new sources of labour power; at the same time wars, like the economic crisis itself, are seen as “gigantic devaluations of constant capital by violent destruction of value as well as of use value forming its material base. These twin drives towards increased exploitation and world war will in Mattick’s view provoke a reaction from the working class that will open up the perspective of proletarian revolution. Already the Great Depression is “the greatest crisis in capitalist history” but “whether it will be the last for capitalism, as well as for the workers, depends on the action of the latter”.

Mattick’s work is thus clearly in continuity with prior attempts by the Communist International and the communist left to understand the decadence of the system. And while Grossman had already looked into the limits of the counter-tendencies to the fall in the rate of profit, Mattick again made these more concrete by looking at the actual unfolding of the world capitalist crisis in the period opened up by the 1929 crash.

In our view, despite Mattick’s concretisations of Grossman’s theory, there remains an area of abstraction in this general approach. We are baffled by Grossman’s view that there is “no trace in Marx” of a problem of insufficient market outlets.[18] It is certainly not the case that the problem of realisation or “circulation” lies outside the accumulation process but is an indispensable part of it. By the same token, Grossman’s seems to dismiss the problem of overproduction as a mere by-product of the fall in the rate of profit, ignoring those passages in Marx which clearly root it in the fundamental relationship between wage labour and capital.[19] And while Luxemburg, developing on these elements, provides a coherent framework for understanding why the very triumph of capitalism as a global system should propel it into its era of decline, it is harder to grasp at what point the rising organic composition of capital reaches a level where the counter-tendencies are used up and decline sets in. Indeed, in explaining foreign trade as one of these counter-tendencies, Mattick himself sounds a little Luxemburgist when he argues that the conversion of the colonies into capitalist countries removes this vital option: “Foreign trade as a counter-tendency eliminates itself by turning capital-importing countries into capital exporting countries, by forcing their industrial development through a hot house growth. As the force of the counter-tendencies is stopped, the tendency of capitalist collapse is left in control. Then we have the permanent crisis, or the death-crisis of capitalism. The only means left for the continued existence of capitalism is then the permanent, absolute and general pauperisation of the proletariat”. In our opinion this is an indication that the problem of realisation – the necessity for the permanent extension of the global market to offset the inner contradictions of capital - cannot be removed from the equation so easily.[20]

However, the aim of this chapter is not to delve again into the arguments for or against Luxemburg’s theory, but to show that the “alternative” explanation for the crisis contained in the Grossman-Mattick theory is also entirely framed in an understanding of the decline of capitalism. This however is not the case for the principal criticism of the Grossman-Mattick thesis made within the communist left in the 1930s – Pannekoek’s “The theory of capitalist collapse”, first published in. Ratekorredspondenz in June 1934.[21]

Pannekoek’s critique of the “theory of collapse”

In the 1930s Pannekoek was working very closely with the Groep van Internationale Communisten, and his text wasno doubt written in response to the growing popularity of Grossman’s theories inside the council communist current: it mentions the fact that the theory had already been integrated into the manifesto of Mattick’s United Workers Party. The opening paragraphs of the text hint at what may have been a perfectly justified concern – to avoid the mistakes made by a number of German communists at the time of the revolutionary wave, when the idea of a “death crisis” was taken to imply that capitalism had already exhausted all options and only needed the slightest push to topple it utterly, a standpoint that was often mixed up with voluntarist and adventurist actions. However, as we have argued elsewhere,[22] the essential flaw in the argument of those who put forward the notion of the death crisis in the post-war period was not the notion of capitalist collapse – which is better understood as a process that may last for many decades than as a sudden crash apparently coming from nowhere - but the conflation of two distinct phenomena: the historic decline of capitalism as a mode of production and the conjunctural economic crisis – however profound – that the system may pass through at a given moment. In polemicising against the idea of capitalist collapse as something immediate and expressed purely on the economic level, Pannekoek fell into the trap of repudiating the notion of capitalist decline altogether - a view consistent with other positions he adhered to at the time, such as the possibility of capitalist revolutions in the colonial regions and the “bourgeois role of Bolshevism” in Russia.

Pannekoek begins by criticising Rosa Luxemburg’ theory of collapse. He repeats familiar criticisms of her theories – that they were based on a non-problem and that the mathematics of Marx’s reproduction schemas shows that there is no fundamental problem of realisation for capitalism. However, the main target of Pannekoek’s text was Grossman’s theory.

Pannekoek takes Grossman to task on two main levels: the lack of congruence between Marx’s crisis theory and Grossman’s; and the tendency to see the crisis as an automatic factor in the advent of socialism which will require little in the way of self-conscious action by the working class. A number of Pannekoek’s detailed criticisms of the use of Bauer’s tables suffer from a flawed starting point – i.e. that he accuses Grossman of taking Bauer’s tables literally. We have shown this to be false. More serious is his accusation that Grossman misunderstands and even consciously “rewrites” Marx on the relation between the fall in the rate of profit and the rise in the mass of profit. Pannekoek insists that since an increase in the mass of profit always accompanied the fall in the rate, Marx never envisioned a situation where there would be an absolute dearth of surplus value: “Marx speaks of over-accumulation precipitating a crisis, of there being too much accumulated surplus value which is not invested and which depresses profits. But Grossman’s collapse comes about through there being too little accumulated surplus value.

These criticisms are difficult to follow: there is no contradiction between talking about overaccumulation and a dearth of surplus value: if “overaccumulation” is another way of saying that there is an excess of constant capital, this will necessarily mean that the commodities produced will contain less surplus value and thus less potential profit for the capitalists. It’s true that Marx considered that a fall in the rate of profit would be compensated by a rise in the mass of profit: this depends in particular on the possibility of selling an ever greater amount of commodities and thus takes us back to the problem of the realisation of surplus value, but we don’t intend to examine this further here.

However, the main issue here is the basic notion of capitalist collapse and not the specific theoretical explanations for it. The idea of a purely economic collapse - even if it is far from clear that Grossman and Mattick actually adhered to such a view -  would indeed reflect a very mechanical approach to historical materialism, one in which human action plays little or no role; and for Pannekoek, Marx always saw the end of capitalism as being brought about by the conscious action of the working class. This question was central to Pannekoek’s critique of theories of collapse, because he felt that all such theories tended to underestimate the necessity for the working class to arm itself in struggle, to develop the consciousness and organisation needed for the immense task of overthrowing capitalism, which would certainly not fall like a ripe fruit into its hands. Pannekoek accepts that Grossman did consider that the advent of the “final crisis” would provoke the class struggle, but he says that the saw this struggle in purely economist terms.  Whereas, for Pannekoek, “Socialism comes not because capitalism collapses economically and men, workers and others, are forced by necessity to create a new organisation, but because capitalism, as it lives and grows, becomes more and more unbearable for the workers and repeatedly pushes them to struggle until the will and strength to overthrow the domination of capitalism and establish a new organisation grows in them, and then capitalism collapses. The working class is not pushed to act because the unbearableness of capitalism is demonstrated to them from the outside, but because they feel it generated within them.

Actually, a passage from Grossman already anticipates many of Pannekoek’s criticisms: “The idea of breakdown, necessary on objective grounds, definitely does not contradict the class struggle. Rather, the breakdown, despite its objectively given necessity, can be influenced by the living forces of the struggling classes to a large extent and leaves a certain scope for active class intervention...Only now is it possible to understand why, at a high level of capital accumulation, every serious rise in wages encounters greater and greater difficulties, why every major economic struggle necessarily becomes a question of the existence of capitalism, a question of political power.... The struggle of the working class over everyday demands is thus bound up with its struggle over the final goal. The final goal for which the working class fights is not an ideal brought into the workers’ movement ‘from outside’ by speculative means, whose realisation, independent of the struggles of the present, is reserved for the distant future. It is, on the contrary, as the law of capitalism’s breakdown presented here shows. A result of immediate everyday struggles and its realisation can be accelerated by these struggles.[23]

But for Pannekoek, Grossman was a “bourgeois economist who has never had practical experience of the struggle of the proletariat and who is consequently not in a position to understand the essence of Marxism”. And although Grossman admittedly criticised aspects of the “old workers” movement (social democracy and “party communism”), he really had nothing in common with what the council communists called the “new workers’ movement”, which was genuinely independent from the old. Pannekoek thus insists that if for Grossman there is a political dimension to the class struggle, this essentially comes from the action of a “Bolshevik” type party. Grossman remained an advocate of the planned economy, and the transition from the more traditional and anarchic form of capital to the state-run variety could happily dispense with any intervention by a self-organised proletariat; all it required was the firm hand of a “revolutionary vanguard” at the moment of final crisis.

It is not altogether accurate to accuse Grossman of being nothing but a bourgeois economist with no practical experience of the workers’ struggle: prior to the war he had been deeply involved in the Jewish workers’ movement in Poland, and although in the wake of the revolutionary wave he remained a sympathiser of the Stalinist parties (and was in later years, shortly before his death, employed by the university of Leipzig in Stalinist East Germany) he always retained an independence of mind, so that his theories cannot be dismissed as a mere apologia for Stalinism. As we have seen, he did not hesitate to criticise Lenin; he maintained a correspondence with Mattick; and for a brief period in the early 30s he had been attracted to the Trotskyist opposition. It is certainly true that he did not spend the best part of his life, as Rosa, Mattick or Pannekoek had done, as a revolutionary communist but it is reductionist to see the whole of Grossman’s theory as a direct reflection of his politics.[24]

Pannekoek sums up the argument in “Theories of capitalist collapse” as follows:“The workers’ movement has not to expect a final catastrophe, but many catastrophes, political — like wars, and economic — like the crises which repeatedly break out, sometimes regularly, sometimes irregularly, but which on the whole, with the growing size of capitalism, become more and more devastating. So the illusions and tendencies to tranquillity of the proletariat will repeatedly collapse, and sharp and deep class struggles will break out. It appears to be a contradiction that the present crisis, deeper and more devastating than any previous one, has not shown signs of the awakening of the proletarian revolution. But the removal of old illusions is its first great task: on the other hand, the illusion of making capitalism bearable by means of reforms obtained through Social Democratic parliamentary politics and trade union action and, on the other, the illusion that capitalism can be overthrown in assault under the leadership of a revolution-bringing Communist Party. The working class itself, as a whole, must conduct the struggle, but, while the bourgeoisie is already building up its power more and more solidly, the working class has yet to make itself familiar with the new forms of struggle. Severe struggles are bound to take place. And should the present crisis abate, new crises and new struggles will arise. In these struggles the working class will develop its strength to struggle, will discover its aims, will train itself, will make itself independent and learn to take into its hands its own destiny, viz., social production itself. In this process the destruction of capitalism is achieved. The self-emancipation of the proletariat is the collapse of capitalism.

There is much in this view that is correct, above all the necessity for the class as a whole to develop its autonomy from all the capitalist forces that pose as its saviours. Pannekoek does not however explain why the crises should become more and more devastating – he merely offers capitalism’s size as a factor.[25] But he also fails to ask the question: how many devastating catastrophes can capitalism go through before it actually destroys itself and the possibility of a new society? In other words, what’s missing here is the sense of that capitalism is a system limited historically by its own contradictions and that it was already confronting humanity with the choice between socialism and barbarism. Pannekoek was perfectly correct in his insistence that economic collapse would by no means lead automatically to socialism. But he tended to forget that a declining system that was not overthrown by the revolutionary working class could and would destroy itself and all possibilities for socialism. The very opening lines of the Communist Manifesto hold open the possibility that if the oppressed class is not able to carry through its transformation of society, the advancing contradictions of the mode of production can end up simply in the mutual ruin of the contending classes. In this sense, capitalism is indeed condemned to deteriorate to the point of its “final crisis”, and there is no guarantee that communism lies on the further shore of this debacle. This realisation, however, does not diminish the importance of the working class acting decisively to bring about its own solution to capitalism’s collapse. On the contrary, it makes the conscious struggle of the proletariat, and the activity of revolutionary minorities within it, all the more urgent and indispensable.  

Gerrard, 28/6/11.



[1]. For example: the APCF paper Advance, in May 1936, published an article by Willie McDougall, entitled “Capitalism must go”, explaining the economic crisis in terms of overproduction, the article concludes that:
 “[Capitalism's] historic mission - the superseding of feudalism - has been accomplished.  It has raised the level of production to heights undreamed of by its own pioneers, but its peak point has been reached and decline set in.  
Whenever a system becomes a fetter to the expansion or proper functioning of the forces of production, a revolution is immanent and it is doomed to make way for a successor.  Just as feudalism had to give way to the more productive system of capitalism, so must the latter be swept from the path of progress to make way for socialism.

[2]. Bilan n° 10.

[3]. Bilan n° 11.

[4]. Ibid.

[5]. In particular the paragraphs dealing with the destruction of capital and labour in war. See the introduction to the debate on the factors behind the “Thirty Glorious Years” in IR n° 133 and footnote 2 to the second part of the Mitchell article in IR n° 103.

[6]. PIC, Persdinst van de Groep van Internationale Communisten no.1, January 1930 “Een marwaardog boek”, cited in the ICC’s The Dutch and German Communist Left, 2001, p 271

[7]. Rick Kuhn, Henryck Grossman and the Recovery of Marxism, Chicago 2007, p 184

[8]. The law of accumulation and breakdown of the capitalist system, 1992 abridged English edition, Pluto Press, p36.

[9]. Ibid. p56.

[10]. Ibid. p125.

[11]. Bauer, “The accumulation of capital”, Die Neue Zeit, 1913. An English translation was published in History of Political Economy, n°18:1, 1986.

[12]. Grossman, op. cit., p.69.

[13]. Ibid. p76.

[14]. Ibid. p.76-77.

[15]. Ibid. p.132.

[16]. Ibid. p.32-33.

[17]. Ibid. pp. 49-50.

[18]. Grossman, op. cit. P. 128n.

[19]. See a previous article in this series, “The mortal contradictions of bourgeois society”, in International Review n°139

[20]. In a later work, Economic Crises and Crisis Theory (1974), Mattick returns to this problem, and recognises that Marx did effectively see the problem of overproduction as being not merely a consequence of the falling rate of profit, but a contradiction in its own right, deriving in particular from the restricted “consuming power” of the working class. In fact his intellectual honesty leads him to pose an uncomfortable question: “Here we find ourselves facing the question raised earlier, whether Marx had two crisis theories, one deriving crisis from the theory of value as the falling rate of profit, and the other deriving it from the insufficient consumption of the workers”(from chapter 3, “The Epigones”. The answer he puts forward, in fact, is that Marx’s “underconsumptionist” formulations must be imputed to “either an error of judgement or unclear writing” (chapter 2. “Marx’s Crisis Theory”).

[21]. English translation by Adam Buick in Capital and Class, Spring 1977

[22]. “The Age of Catastrophes” in International Review n° 143

[23]. Kuhn, op. cit., p. 135-6, quoting from the full German edition of The law of accumulation, 601-3

[24]. This is a somewhat similar error to the one Pannekoek made when he argued in Lenin as Philosopher that the bourgeois influences on Lenin’s philosophical writings demonstrated the bourgeois class nature of Bolshevism and the October revolution

[25]. See our book on the German/Dutch left, p 273, where a similar point is made about the position of the GIC as a whole: “in rejecting the somewhat fatalistic conceptions of Grossman and Mattick, the GIC abandoned the entire heritage of the German left’s crisis theory. The crisis of 1929 was seen, not as a generalised crisis expressing the decline of the capitalist system, but as a cyclical crisis. In a pamphlet published in 1933, the GIC asserted that the Great Crisis was ‘chronic’ rather than permanent, even since 1914. Capitalism was like the legendary phoenix, endlessly reborn from its ashes. After each ‘regeneration’ by the crisis, capitalism reappeared ‘greater and more powerful than ever’ But this ‘regeneration’ wasn’t eternal, since ‘ the flames threaten the whole of social life with an increasingly violent death’ Finally, only the proletariat could give the capitalist phoenix the ‘death blow’, and transform a cycle of crisis into a final crisis. This theory was thus contradictory, since, on the one hand, it was a vision of cyclical crises as in the 19th century, with capitalism constantly expanding, in permanent ascendancy; on the other hand, it described a cycle of increasingly lethal destructions and reconstructions” The pamphlet in question was De beweging van het kapitalitisch bedrifsleven.


Historic events: 


Political currents and reference: 

Development of proletarian consciousness and organisation: 


Decadence of Capitalism