Shigeru Aihara

Henryk Grossmann's "Reconstruction"


Japanese title: “Henryk Grossmann no "saiken";
Source: Aihara's 1949 book Chikuseki to kyōkō (Accumulation and Crisis);
Translated: for marxists.org by Michael Schauerte;
CopyLeft: Creative Commons (Attribute & ShareAlike) marxists.org 2006.


Frankfurt University professor Henryk Grossmann's The Law of Accumulation and the Breakdown of the Capitalist System is a large book with large ambitions that appeared just as the world crisis was beginning in 1929. The reader might feel a sense of expectation from the following statement from Grossmann in his introduction to this 600-page work:

The results of my research are twofold: (1) for the first time ever the method underlying Capital has been subjected to a reconstruction and (2) on this basis important areas of Karl Marx's system of theory have been presented from a fundamentally new perspective [1].

One is stunned, however, after reading the actual content of the book. Grossmann's view of, at least its fundamental aspects, turns out to be not only simple but downright meager.

According to Marx's method of investigation, which Grossmann claims to have uncovered, various simplified assumptions must first be established because of the complexity of the concrete phenomenal world being examined, and it is upon this basis that we can understand the "inner structure" of the object under investigation; but this cognition has a provisional character because it is remote from reality and must be followed by a subsequent process of modification. In other words, for cognition to draw closer to the concrete phenomenal world, we must take into account elements that were initially disregarded. Grossmann says that Marx, within "pure capitalism," deals with "impact of the accumulation of capital with its resulting tendency towards breakdown"[2]; then, after having looked at the pure shape of the law of breakdown, he returns to "empirical capitalism" to deal with the factors that modify the law, thereby seeking to "establish a certain basic consistency between the actual reality of capitalism and the law of its pure operation" [3]. In the case of pure capitalism, accumulation is accompanied by a fall in the rate of profit, and upon reaching a certain level, insufficient profit renders the continuation of accumulation impossible. The cessation of accumulation means the breakdown of capitalism, but in actual capitalism the breakdown tendency is mitigated or averted by countertendencies that are particularly forceful during such an emergency, so that the end result is a periodic crisis. These countertendencies, however, gradually grow weaker with the absolute increase in accumulation, eventually losing their power to resist the breakdown tendency, with the result being that capitalism collapses without any resumption in accumulation. At a certain point, therefore, the economic impasse of capitalism based on the automatic cessation of capital accumulation is demonstrated, which means that the breakdown of capitalism is a pure economic inevitability. Grossmann, in other words, believes that this corresponds to his contention that capitalism will inevitably collapse from economic, not political, factors [4]. We need to look at the idea that forms the core of his entire argument, namely the notion that capitalist production will halt because of a fall in the rate of profit -- or more precisely, the idea that a quantitative lack of profit will render the continuation of capital accumulation impossible.

In order to clarify the mechanism of the falling rate of profit, which the Classical economists long ago perceived with unease, and to argue that it represents the final blow to capitalism, Grossman's tool -- indeed his only proof -- is the reproduction scheme. Through a peculiarity of fate, the reproduction scheme in Grossmann's hands becomes tasked with indicating the movement of the rate of profit and the mass of profit. He makes use of the reproduction scheme of Otto Bauer, who "succeeded in constructing a reproduction scheme which, apart from some mistakes, matches all the formal requirements that one could impose on a schematic model of this sort" [5]. Bauer's scheme, which countered Rosa Luxemburg's view, incorporates the rising organic composition and consequent falling profit rate that accompanies the progress of accumulation, and Grossman finds this scheme to provide ample evidence regarding the direction of accumulation.

Bauer's reproduction scheme, which he calculated up to the fourth year, would in fact undergo a change if extended to year 34. That is, under the conditions assumed by Bauer -- where constant capital augments by ten percent and variable capital by five percent per annum, and the rate of surplus-value is 10 percent -- everything is fine through year 33, but in year 34 a serious situation arises. In that year, the surplus-value produced is not sufficient for the accumulation necessary for year 35. The quantity of value that must be accumulated for the following year is inadequate. This can be called an "insufficiency" or "deficiency" in surplus value. The quantity of value for the capitalist's individual consumption would of course not exist, and there would also arise a lack of additional variable capital (consumption materials for workers); therefore part of the additional constant capital (means of production) would remain idle.

In this way, Bauer's assumptions would not be maintainable and collapse. What is confronted here, says Grossmann, is the absolute limit of over-accumulation (=insufficient valorization). This means that accumulation proceeding beyond this point would be pointless as far as capitalists are concerned and objectively impossible. If this cessation of accumulation were to continue, it would mean the dissolution of the structure of capitalism.

However, this breakdown in Bauer's schema, a curse for capitalism, only applies to "pure" capitalism. For better or worse, this type of capitalism does not exist in reality. As Grossmann says, "the conditions of capitalism conceived in its pure formcand those of the system in its empirical manifestationscare by no means identical" [6]. In the case of what he calls "empirical" capitalism, there are modifying countertendencies, which do not appear in pure capitalism, that halt the organizational crisis that has begun to appear, transforming it into a mere periodic crisis.

What are these countertendencies? Given the fact that the tendency towards breakdown is the outcome of insufficient valorization, the countertendencies have to be those circumstances that restore valorization. As Grossmann writes:

The circumstances through which the crises can be overcome vary enormously. Ultimately however, they are all reducible to the fact that they either reduce the value of the constant capital or increase the rate of surplus value. In both cases the valorization of capital is enhanced -- the rate of profit rises. Such circumstances lie both within production and in the sphere of circulation, and pertain both to the inner mechanism of capital as well as to its external relations to the world market[7].

The following examples of countertendencies can be listed: Decline in the cost of constant capital through the development of productive power and decline in the cost of variable capital for the same reason, an advance in the rate of surplus-value (rate of exploitation), establishment of new production spheres with lower organic composition, elimination of commercial profit, temporary continuation of an unchanged technical base, decline in the cyclical value of existing capital, occurrence of war, increase in joint-stock capital, and expansion of population base (all of which restore profitability domestically ); and foreign trade in general, monopolies on raw materials and monopoly profit, and export of capital (all of which restore profitability in the world market ).

The various "countertendencies" that Grossman lists up?whose detailed description he does not go into?are said to always exist within "empirical" capitalism, where they are said to constantly exert a modifying effect on the breakdown tendency, operating with particular force when a breakdown has begun to appear (such as the heightened rationalization, foreign investment, and elimination of intermediary businesses during a crisis). The result is that a breakdown situation is interrupted and culminates instead in a temporary crisis, making it possible for accumulation to resume on a new basis and continue until the next manifestation of the tendency towards breakdown. Grossmann notes:

I shall confine myself to presenting only the most important of [the "countertendencies that hinder the complete working out of the breakdown"] and to showing how the operation of these countertendencies transforms the breakdown into a temporary crisis so that the movement of the accumulation process is not something continuous but takes the form of periodic cycles. We shall also see how, as these countertendencies are gradually emasculated, the antagonisms of world capitalism become progressively sharper and the tendency towards breakdown increasingly approaches its final form of an absolute collapse[8].

Grossmann's view is basically as outlined thus far. His fundamental point, which is exceedingly simple, is that under accumulation the organic composition of capital is raised, accompanied by a fall in the rate of profit and the relative reduction in the mass of profit to a certain limit. The result is that the mass of profit is insufficient to the assumed rate of accumulation, rendering valorization is impossible and thus signifying a breakdown or crisis.

I think that words are adequate to discuss this problem, and that there is no real need to utilize a grandiose mathematical formula, but such a mathematical "explanation" is of course possible as well. We can set up the equation c + v + s to express the allocation of value, and then assume that c and v augment, with the augmentation of c exceeding that of v. Given a constant rate of surplus-value, s (which has its source in v) would decline at the same pace as the relative decline of v. We have the opportunity, then, to numerically represent the expected result. Grossman made use of this opportunity. He patiently calculates all the way up to year 34, criticizing Bauer for stopping after four years and Tugan-Baranovsky for only going as far as the third year.

But anyone -- not just those two men -- would be reluctant to engage in such calculation. If for some reason or another the assumptions were to change, so that, for example, the rate of augmentation of c would be closer to that of v, or the rate of surplus-value were to be enhanced to match "all the formal requirements that one could impose on a schematic model of this sort," [9] then one would have no idea the point at which such a calculation would come to an end. But the main problem with his approach is not in choosing year 35 rather than some other year. The problem, rather, is that he tries to use the reproduction scheme to indicate this matter in the first place.

The reproduction scheme, just as in the case of its original model in Quesnay's tableau economique , indicates the manner in which the social product that renders possible reproduction year after year is "distributed by means of the circulation"[10], and as the issue concerns "realization" the conditions for analysis are a partition into two main departments and equilibrium between them. But in the case of Grossmann, for whom the problem of "realization" does not exist as a whole, these assumptions do not play any role at all. Grossmann forcefully calls on the reproduction scheme to deal with problems for which it is of no use, trying to make it indicate the mass of profit or the change in the value quantity of c + v + s. In the first volume of Capital "all that had to be examinedcwas the problem of the value of the separate elements of production and of the results of production"[11].I'm not sure what Grossmann is trying to say in his introduction, when he asserts that the "reproduction schemescalready underlie the arguments of Capital volume one," and this seems unfathomable. He has shifted the content that the production scheme should indicate, from volume one to volume two.

In relation to this, Grossman also did not grasp the significance of the fall in the profit rate. It was a correct approach to connect breakdown and crisis with the fall in the profit rate, but because this was solely carried out from the perspective of the first volume of Capital , he was unable to extend this to the unfolding of the internal contradictions of the law of the falling rate of profit. This was handled in volume three in the form of the fall in the general rate of profit. The activity between capitals is assumed because there is a general rate of profit, and the antithetical counteracting law of a lowering rate of profit simultaneous to an increase in the mass in profit -- where the increase in the quantity of profit (effort to create super-profits) results in a decline in the general profit rate; while the declining general profit rate spurs the efforts to increase the augmentation of the mass of profit -- leads to a collision between the unlimited development of productive power and the valorization of existing capital; whereas all of this trajectory is setout of consideration.

A person who speaks of the ominous operation of the fall in the profit rate, while setting aside the development of this contradiction, will end up like Grossmann by viewing the fall in the rate of profit as nothing more than an index of the relative decline of the mass of profit. He speaks of "the breakdown of capitalism due to a relative decline in the mass of profits" and says that "a decline in the rate of profit is simply the external expression of this fact" [12] The fall in the rate of profit is simply replaced by a relative decline in the mass of profit, and its almost self-evident changes are strictly calculated using the reproduction scheme in an incorrect place. Granted, in the first volume of Capital the general law of capital accumulation is discussed, and upon this basis the "downfall" of capitalism is announced. And Grossman attempts to provide a logical, mathematical basis for the law of breakdown. In other words, instead of following the construct of Marx, by unfolding this general law within the reality of capitalist production, within the unity in opposition between production process and circulation process (expanded possibility of crisis), and within the collision between the development of productive power and the capitalistic form (necessity of crisis), Grossman instead makes precise calculations within an "economic coordinate system." Thus, clearly indicated in a "mathematical-quantitative" manner are the "absolute economic limits" of capitalism, but the so-called mechanical downfall theory based on this view -- i.e. the thought that completely severs the tie linking politics and economics -- hardly merits criticism in the first place.

There is also not that much need to discuss the "method of Marx" that Grossman has claimed to have "reconstructed." The simplification of Marx is based the position of the primary subject determined by strict logic and the particular connections. This is not a stage-based epistemology. Grossmann makes a distinction between "pure" and "empirical" capitalism, and then places the elements most favorable to collapse (such as the rise in organic composition) in "pure" capitalism and those elements unfavorable to collapse (such as a rise in the rate of surplus-value) in "empirical" capitalism, even though it should be treated the same way as the favorable elements. This is a feat that Marx did not accomplish. This method, according to Grossmann, is something that no one has perceived before, and certainly we will grant that he was the first to have perceived this. Still, there is no question that this is not the "method of Marx." Grossman's "reconstruction," in short, comes down to the idea of a mechanical breakdown of Rosa Luxemburg who sought to elucidate in purely economic terms how capitalism could not continue, and the mistaken method of Tugan-Baranovsky who sought to demonstrate the fate of capitalism using a schema., Grossman favorably views the struggles of Luxemburg against Tugan-Baranovsky and the other harmonists, but he says that she ended up Luxemburg was "unconsciously influenced" by those she sought to overcome. But this expression applies to Grossmann himself.

Tugan-Baranovsky sets aside volume three, and sticks to the second volume, whereas Luxemburg did the opposite, setting aside volume two for three; and Grossmann then turns away from volumes two and three to rely solely on the first volume. But all three misunderstood the position and role of the reproduction scheme, and this was the outcome of not correctly understanding the structure of Marx's theory of accumulation which corresponds to the logical linkage of all three volumes. The reproduction scheme, directly speaking , does not offer any conclusion at all that deals with the fate of capitalism -- whether affirmative or negative -- nor can a conclusion be drawn from it. "Schemes alone can not prove anything: they can only illustrate a process, if its separate elements have been theoretically explained." And the reproduction scheme only illustrates the process for the first time after the entire theoretical explanation of volume two of Capital --e.g. the detailed explanation of the metamorphosis and turnover of capital, the relation between the constant capital part that appears in the circulation of the total social capital and the income part, a review of the ideas of Quensay, Smith and others, the division into two production departments and into c + v + s and the exchange between the departments and internal exchange, etc. ? and at the same time, this illustration of this plays a major role in the investigation of reproduction=accumulation.

By using with the reproduction scheme while ignoring its limits and position, Grossmann strips it of its original important significance and ends up destroying the totality of Marx's theory of accumulation.


Endnotes

1. Henryk Grossmann, The Law of Accumulation and the Breakdown of the Capitalist System(London: Pluto Press, 1992) p. 29.

2. Grossmann, p. 31.

3. Grossmann, p. 32.

4. Grossmann seeking the collapse of capitalism solely in its economic factors, and says that to speak of collapse it is essential to grasp its "economic inevitability." In the first chapter of his book, which considers the "existing literature," Grossmann considers a number of theorists, but the main focus of his criticism is to search for the standpoint of the theorists regarding the downfall of capitalism. He finds that Tugan-Baranovsky, Bauer, Kautsky and others have nothing in common with the idea of the economic impossibility of capitalism, whereas Rosa Luxemburg "adhered to the basic lesson of Capital and sought to reinforce it with the proof that the continued development of capitalism encounters absolute economic limits." (Grossmann, p. 41)

5. Grossmann, p. 67.

6. Grossmann, p. 130.

7. Grossmann, p. 133.

8. Grossmann, p. 134.

9. Grossmann, p. 67.

10. Karl Marx, Capital, vol. 2, chapter 19.

11. V.I. Lenin, The Development of Capitalism in Russia, chapter 1.

12. Grossmann, p. 103.